Scientific Games Corporation reported in its fourth-quarter earnings call that while the company experienced a net loss for the quarter and the year, revenues were up and both costs and debt were down.
Fourth-quarter revenue rose to $737 million (a 10 percent increase over the third quarter), driven by 8,990 gaming units shipped globally, including 5,366 units to North American customers (a 46 percent increase over the third quarter), and an increase in Interactive revenue to $60 million (an 18 percent increase over the third quarter). 2015 revenue increased to $2.8 billion.
Fourth-quarter attributable EBITDA (AEBITDA) increased to $293 million and fourth-quarter AEBITDA margin increased to 40 percent, driven by higher revenue and lower costs due to integration actions implemented earlier in the year. 2015 AEBITDA increased to $1.075 billion.
Fourth-quarter net loss was $128 million, including the impact from $137 million of unusual pre-tax charges ($86 million after-tax) composed of a $68 million non-cash goodwill impairment charge, $62 million of non-cash long-term asset and other asset impairment charges, and $7 million of restructuring, integration and legal contingencies and settlements costs, partially offset by the favorable effect of integration cost synergies.
Full year 2015 net loss was $1.394 billion, including the impact from $1.271 billion of unusual pre-tax charges ($1.144 billion after-tax). According to the company, 2015 annual results benefited from $231 million of implemented annualized cost synergies.
Total debt, as of December 31, 2015, declined by $33 million from September 30, 2015, including $20 million of voluntary payments made on the company’s revolving credit facility in the fourth quarter, while cash and cash equivalents increased by $27 million from September 30, 2015. As of December 31, 2015, the company’s cash and availability under the revolving credit facility totaled $583 million.
Fourth-quarter net cash provided by operating activities rose to $159 million compared to a $30 million use of cash in the prior year period. 2015 net cash provided by operating activities rose to $414 million compared to $204 million for 2014.
“2015 was a transformational year for Scientific Games, culminating in a strong finish for our fourth-quarter operating results,” said Scientific Games President and CEO Gavin Isaacs on the call. “We completed the heavy lifting of integration, benefited from $231 million of implemented annualized cost synergies, and built a strong foundation for our future. We are one company, with one mission and three strong businesses, offering the broadest product portfolio in the industry.”
“Fiscal discipline, strengthening cash flow and operational excellence are key strategic priorities for Scientific Games,” added Michael Quartieri, the company’s executive vice president, corporate secretary designee and chief financial officer. “We made meaningful progress during 2015, as evidenced by the improved margins and cash flow achieved in the second half of the year. After incurring costs associated with accelerating implementation of integration actions early in the year, in the second half of 2015, we increased AEBITDA margin to 40 percent and reduced debt by $105 million.
“Moving forward, we will remain diligent in reviewing our operational practices to identify additional opportunities for continuous improvement and to drive shareholder value.”
In a research note to investors before the earnings call, Union Gaming Group analyst Christopher Jones said concerns about Scientific Games’ defaulting on its debt are unfounded.
“The challenge here is that given the current environment, it doesn’t appear to be enough to do much beyond treading water,” Jones said. “While there is no immediate fear of default, it’s difficult to see a path for Scientific Games that allows it to escape the challenges of a highly levered balance sheet.”
