Former director at Scientific Games Corp
- Key trends and developments in the gaming industry
- Headwinds from the novel coronavirus pandemic and impact of casino operators' potential CAPEX trims
- Sports betting demand and regulatory challenges
- Long-term outlook for industry competitive dynamics — Scientific Games (NASDAQ: SGMS) and International Game Technology (NYSE: IGT)
Could you outline the key trends or developments you’ve been following in the gaming industry? How would you summarise what’s been happening amid the coronavirus pandemic?
Are there any ancillary revenue streams to consider against lost revenues vs deferred revenues for 2020?
How low can the broader industry, or Scientific Games, take CAPEX?
Were there any challenges from industry incumbents to highlight as problematic ahead of the casino closures? Were any underlying issues magnified by the casino closures?
You’ve highlighted some of the challenges for Scientific Games amid the coronavirus crisis. What other challenges have been similarly faced by market players?
How are you assessing the variable vs fixed cost structure mix for some of Scientific Games’ business segments? To what extent could costs be trimmed within gaming and lottery?
You say the biggest challenge is how industry players will rebound. What lag time between new orders and incoming cash would you expect? How quickly should gaming become profitable again once casinos reopen?
Scientific Games has announced furloughs and pay cuts. How do you assess the risk of losing some key talent amid some of these trims?
How much do you expect the casinos might trim CAPEX in 2020?
How would you rank the gaming equipment and services businesses’ positions in today’s environment? Could you outline the competitive dynamics and how those players rank in the sector currently?
Who are the smaller players slowly gaining market share from? What are the implications for the top three players? Who is winning or losing market share to the smaller ones, or even to each other?
How are the customers across Scientific Games’ business segments – for example, systems, recurring, sales vs tables – likely to react to today’s environment amid the coronavirus crisis? What is the likely impact for Scientific Games vs its peers?
What should we fundamentally understand about the four individual segments’ cost structures?
Could you further outline the dynamics of slot spend and participation vs acquired cabinets?
We discussed how Scientific Games’ leverage concerns predated the coronavirus pandemic. How should we think of additional levers at its disposal? In the last earnings call, Scientific Games’ management targeted leverage at about 5.5x by the end of 2020. How might that need to be reconsidered?
What percentage of the portion of Scientific Games’ revenues is directly tied to casino revenues via revenue-share agreements vs tied to selling machines in general?
Which pieces of the business might Scientific Games consider selling, and why might they be the most promising assets? Who do you think would be some likely buyers?
What is the likelihood of the whole company being sold?
Do you have any thoughts about potential support from Ron Perelman, for example? How involved is he in this business?
How might Scientific Games or IGT’s growth trajectory change if we consider that operators may look to expand in markets such as Georgia, Virginia or even Texas? In a previous casino industry Interview [see US Casino Operators – Coronavirus Impact & Long-term Outlook – 25 March 2020], the specialist noted that during a pandemic, some local governments could be more constructive towards opening doors to casino operators.
What key metrics or leading indicators should investors follow to evaluate the future of the gaming industry? Is any government relief in play here?
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