Shares of Scientific Games surged as much as 13 percent as the company beat revenue forecasts and said it is moving ahead with an initial public offering of its social business to deleverage.
CEO Barry Cottle told Wall Street analysts Thursday that the company is “moving along” with its plans to sell shares in its social casino division. Scientific Games intends to “primarily” use the money raised from the initial public offering to pay down debt, Cottle said.
The company had roughly $9.2 billion in net debt outstanding on Dec. 31, which is nearly seven times its operating cash flow for the year of $1.33 billion.
Scientific Games will also pay down debt as its investment needs decline in 2019 to a maximum of $375 million. Jefferies anticipated Scientific Gaming to invest $480 million this year.
The Las Vegas-based maker of slots and lottery machines reported revenue rose 8 percent to $886 million as its lottery, social and digital segments continued to advance, offsetting a decline from gaming. The average revenue forecast of six Wall Street analysts was $874 million, according to Zachs Investment Research.
Revenue at its digital segment rose more than three-fold, to $72 million, driven by the acquisition of NYX in the first quarter, the company said in a statement. It’s social segment gained 19 percent to $114 million as its mobile games, including Bingo Showdown and Monopoly, continue to enjoy popularity.
Lottery revenue rose 6 percent to $231 million driven in part to a new contract in Kansas and the addition of Keno in Pennsylvania.
Gaming, its largest segment, saw revenue decline 5 percent to $470 million as there were fewer new casino openings in the fourth quarter compared with the same period last year.
The company said it expects gaming to rebound this year as Jin Ji Bao Xi and James Bond slots enjoy strong demand. Bond is generating two to three times the floor average, “which is exceptional,” CEO Barry Cottle told investors during a conference call on Thursday.
Scientific Games posted net income of $207 million, compared with a loss of $43.1 million during the same period last year. The reversal in net income was nearly entirely driven by a smaller legal settlement with Shuffle Tech International. Scientific Games agreed in December to pay Shuffle $152 million versus the $335 million it set aside for the suit.
Scientific Games’s adjusted cash flow rose 6 percent to $343 million driven by the revenue gain and cost cutting.
Shares of Scientific Games rose $2.54, or 9.7 percent, to $28.74.