Scientific Games Q2 Loss Lower Than Expected, Sales Beat

Scientific Games Corp. (NASDAQ:SGMS) reported second-quarter 2016 loss of 59 cents a share, which compared favorably with the Zacks Consensus Estimate of a loss of 82 cents. In the prior-year quarter, the company’s adjusted loss per share was 79 cents.

Despite better-than-expected results, the company’s shares fell over 14% in Friday’s trading session. Apparently, investors were not happy with the management shuffle.

Quarterly Details

The company’s revenues of $729.2 million were better than the Zacks Consensus Estimate of $710 million and also the prior year quarter’s revenues of $691.5 million.

Gaming Segment– Revenues decreased 1.7% year over year to $441.9 million. Revenues from gaming operations fell 2% year over year to $186 million, while machine sales revenues increased 11.3% from the year-ago quarter to $154.4 million. Gaming systems sales declined 23.3% to $59.5 million while table products revenues increased 3.7% to $42 million, respectively.

Lottery Segment – Revenues increased 7.2% year over year to $203.9 million. The segment benefited from strength in Instant games, which saw a revenue increase of 11.4% year over year to $150.9 million. Product sales also improved 1.1% year over year to $8.9 million. However, this was partly offset by a decline of 3.9% year over year in revenues from Services ($44.1 million).

Interactive Group– Revenues increased 61.6% year over year to $83.4 million. This was primarily due to 68% year-over-year increase in social gaming revenues.

In the reported quarter, the company’s attributable earnings before interest, taxes, depreciation and amortization (AEBITDA) were $279.7 million. AEBITDA from the gaming segment came in at $201.3 million. The same for Lottery Systems was $95.2 million while that for the Interactive segment was $18.2 million.

Balance Sheet & Cash Flow

Scientific Games exited the quarter with $101.4 million in cash and cash equivalents compared with $128.7 million as on Dec 31, 2015. The company’s long-term debt was $8.1 billion compared with $8.2 billion as of Dec 31, 2015.

Cash flow from operations was $90.8 million in the quarter compared with $36.6 million in the prior-year quarter.

Management Update

Along with the earnings release, the company announced that it has appointed Kevin M. Sheehan, as its CEO and President. Sheehan was formerly the CEO of former Norwegian Cruise Line Holdings. Gavin Isaacs who was serving as the CEO and President of the company has taken up the role of Vice Chairman of the board of directors.

Zacks Rank & Stocks to Consider

Currently, Scientific Games has a Zacks Rank #4 (Sell). Better-ranked stocks in the same space are CSG Systems International Inc. (NASDAQ:CSGS) , Forrester Research Inc. (NASDAQ:FORR) and ManTech International Corporation (NASDAQ:MANT) . All three stocks have a Zacks Rank #2 (Buy).

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