Scientific Games CEO change, solid 16Q2 results

Scientific Games Corp on Friday announced Kevin M. Sheehan as the company’s new CEO and president. He will also serve on the company’s board of directors, according to the filing.

The current Scientific Games CEO and president Gavin Isaacs will become Vice Chairman of the Board of Directors.

While Deutsche Bank said the change of CEO was “abrupt and shocking.”

“While the change was shocking, we believe most investors will have some level of familiarity with Mr. Sheehan, from his time with NCLH. That said, Mr. Sheehan’s background will for sure leave questions for investors given his lack of experience in the gaming industry….Furthermore, gaming, especially the equipment sales side of the business, is a relationship business and we believe Mr. Isaacs was influential to operations, even in his CEO role, to gaming product sales.”

According to the filing, Sheehan served as CEO and president of Norwegian Cruise Line for seven years, leading the development and expansion of the company, presiding over strong sales and EBITDA growth and the company’s initial public offering (IPO), one of the most successful IPO’s in 2013.

“This is an exciting time to join Scientific Games,” said Sheehan. “Scientific Games is the worldwide leader in gaming, lottery and interactive innovation and I look forward to building on that momentum to drive continued growth across the company. Scientific Games offers an unrivaled comprehensive suite of products and services for our customers around the world and is well positioned to continue to grow.”

On Friday, Scientific Games reported solid results for the second quarter of 2016. According to its filing, operating income increased to $59.1 million, reflecting the higher revenue, the benefit of cost synergies from 2015 integration initiatives, lower costs associated with integration and restructuring activities, and lower impairment charges.

Net loss declined 49 percent to $51.7 million, reflecting the improved operating income as well as a $25.2 million gain on early extinguishment of debt, compared to a net loss of $102.2 million in the prior-year period, while revenue for the quarter increased 5 percent year-on-year to $729.2 million.

“Across our global operations, we continue to manage costs and execute on our strategies to deliver consistent revenue growth. Our ongoing implementation of process improvements is generating operating efficiencies which, combined with fiscal discipline in our capital spending and a focus on improving our core working capital, is leading to higher cash flow and reducing our leverage,” said Michael Quartieri, Scientific Games chief financial officer, in a statement.

However, Deutsche Bank analysts said while “the results in and of themselves were roughly in line to modestly better than expected, but certainly not indicative of a swift improvement.”