Shares of Scientific Games Corp. (NASDAQ:SGMS) fell as much as 19.3% in trading on Thursday after the company reported second-quarter results. At 3:15 p.m. EDT, shares were still down 13.3% on the day.
Revenue was up 10% to $844.7 million, helped by $50.6 million in revenue from the NYX acquisition. Net loss declined from $39.1 million a year ago to $5.8 million, or $0.06 per share. The loss was in line with estimates, but revenue fell short of the $852.3 million that analysts expected, and that's why shares are down today.
Scientific Games is highly leveraged with $9.1 billion in debt, so any disappointment in earnings is going to be magnified. The revenue miss may not have been big, but it brings into question how long it will take before the company can generate a profit, and how large investors' returns will be. I would still be hesitant to jump into Scientific Games just based on the debt alone, but watch for margin improvement and higher revenue growth as signs that the stock may be ready to recover today's losses.