Scientific Games saw revenue decline 13.0% to $725m and losses increase to $159m as the novel coronavirus (Covid-19) hit the business in terms of both lower revenue and higher impairment costs.
The supplier made $422m through gaming services, down 8.1% year-on-year, while product sales fell 29.5% to $168m. Instants contributed a further $135m, down 3.6%.
Of its $725m in revenue, Scientific Games made $318m through its land-based division SG Gaming down 25%. This decline in gaming revenue was largely due to the effects of Covid-19, which led to casino closures across the globe.
Gaming operations revenue fell 22.7% to $119m, gaming machine sales fell 32.4% to $97m, gaming systems sales declined 25.7% to $55m while table product revenue came to $52m, down 13.3%.
The business shipped 4,893 new gaming machines during the quarter and operated 64,841 machines by the end of the quarter.
SG Lottery, meanwhile, saw revenue fall 7% to $212m. This was largely down to Q1 2019 including “significant equipment sales”, meaning current year performance suffered in comparison.
Within lottery revenue, $136m came from instant products, $92m in the US and $44m elsewhere, while $76m was made from lottery systems.
Revenue from SG Digital increased 10% to $77m while social gaming arm SciPlay’s revenue remained flat at $118m.
Within SG Digital, sports and platform sales grew 26.7% to $38m while digital gaming revenue declined slightly to $39m. In total, $9.9bn worth of wagers and stakes were processed through SG Digital.
From SciPlay, $101m of revenue came from mobile gaming, up 4.2% and $17m from web gaming, down 19.1%.
Meanwhile, Scientific Games’ operating expenses grew 6.0% to $757m.
Costs of services declined 2.3% to $130m, while costs of product sales fell 15.0% to $91m. Costs of instant products, however, increased despite the decline in revenue from this product, growing 9.0% to $73m.
Selling, general and administrative expenses came to $198m, up 6.5%. Research and development costs grew 4.0% to $51m.
Depreciation and amortisation costs fell 16.4% to $138m. However, the business incurred a further $54m expense in goodwill impairment costs. This cost was related to Scientific Games’ legacy UK Gaming reporting unit, and was was “driven by Covid-19 disruptions”.
In addition, restructuring and other costs grew 214.6% to $22m.
After all of these costs were accounted for, Scientific Games posted an operating loss of $32m, down from a profit of $123m in 2019.
The supplier’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) meanwhile, came to $200m, down 39.0%.
SG Gaming EBITBA fell 55% to $96m, while lottery EBITDA declined 25% to $78m. SciPlay EBITDA grew 40% to $35m and SG Digital EBITDA grew 77% to $23m.
The supplier’s financial expenses came to $119m, down 16.8%.
The business paid a further $124m in interest expenses, down 19.5%, and made a $2m loss in equity investments. The business also gained $10m through remeasurement of debt, but lost $3m through other costs.
As a result, Scientific Games’ pre-tax loss came to $155m, more than six times 2019’s loss.
After paying $4m in tax, the supplier lost $159m, compared to a loss of $24m in 2019.
The business said it has made substantial cost-cutting measures in response to Covid-19, which did not have time to take effect in the quarter. Scientific Games said it expects these to improve quarterly cash flows in the second quarter by over $150m.
Scientific Games’ workforce will have hours and pay reduced to preserve as many jobs as possible, while workers in support roles that have seen a significant decrease in work will be furloughed.
“We have made swift and meaningful reductions to our cost structure in response to the current environment,” Scientific Games chief financial officer Michael Quartieri said. “We believe these changes in conjunction with our available liquidity provide us the tools to withstand the impact from COVID-19.
“I’m confident that our streamlined cost structure will allow for accelerated cash flow generation and deleveraging in the future.”
Scientific Games president and chief executive Barry Cottle added that he believed the business would emerge as a stronger entity once the crisis had subsided.
“I am confident that the measures we are implementing now will allow us to take advantage of opportunities to strengthen our business and prepare us to come out of the crisis even stronger than before,” Cottle said.
“We have a diverse portfolio of assets, products and services, and our previous investments in digital gaming technologies uniquely position us to navigate and ultimately excel, as we emerge from this challenging environment.”