Las Vegas-based Scientific Games Corp. endured a $201.8 million net loss in its first quarter as it transitions from being a gaming equipment supplier to a company that will also provide sports wagering technology.
The company reported results from the quarter that ended March 31 after the close of the market Wednesday and executives discussed them in a conference call with investors early Thursday.
Much of the loss was attributed to costs and interest payments stemming from the company’s $630 million acquisition of NYX Gaming Group, developer of the OpenBet sports-betting platform. OpenBet handles 80 percent of sports-betting transactions in the United Kingdom, the largest online gaming market in the world.
Scientific Games is counting on a large U.S. market that could be created with the repeal of the Professional and Amateur Sports Protection Act that may lead to legalized sports wagering nationwide.
But the company’s outgoing CEO, Kevin Sheehan, told investors on Thursday’s call that while most have been focused on the volume of the U.S. market, the NYX transaction will help the company grow market share worldwide.
“We have so much business, we can’t even handle it at this point,” he said. “That’s really exciting. We’re looking for more mathematicians and technology scientists and engineers from other parts of the planet so that we can get more of this business up and running. That’s all without the Supreme Court ruling.
“As we’ve said from the beginning, we bought this wonderful business based on the metrics that it had in place on the day we bought it. This is all gravy and it could be very exciting,” he said.
The company announced Wednesday that Sheehan would be replaced as president and CEO in June by Barry Cottle, currently CEO of SG Interactive. Sheehan will stay on as a senior adviser.
The company also announced that Tim Bucher, previously senior vice president and general manager of the Consumer Solutions Group at Seagate Technology, has been named executive vice president and chief product officer across all Scientific Games’ business divisions.
“There’s been a process that’s been going for a while and we evaluated whether we should go out and get someone from the outside or do we take a proven commodity that’s in-house,” Sheehan said on the call. “Barry’s background is striking. He’s ready, seeing what he’s done with the social business for the last number of years. He’s a very strategic thinker.”
In addition to the NYX opportunities, Scientific Games is anticipating growth with the third-quarter release of a series of new James Bond-themed slot machines as well as new machine sales resulting from the opening of Hard Rock Atlantic City and MGM Springfield later this year.
Scientific had an 11.9 percent increase in revenue for the quarter, but Wall Street analysts were disappointed with the 63-cent loss attributed to extinguishing debt and restructuring costs. Four analysts surveyed by Zacks Investment Research anticipated that loss at 23 cents a share.
Scientific stock shares have risen 5 percent since the beginning of 2018 and doubled in value over the last year.
On Thursday, the stock closed down $1.85, 3.4 percent, to $51.85 a share — $2.10 off its 52-week high — on more than double the average volume of trading.
Scientific Games Corp.
First-quarter revenue and earnings for Las Vegas-based Scientific Games Corp. (Nasdaq: SGMS).
2018: $811.8 million
2017: $725.4 million
Change: +11.9 percent
2018: ($201.8 million)
2017: ($100.8 million)
Change: -50 percent
(Loss) per share
Change: -49.1 percent