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Scientific Games Reports Fourth Quarter Results and Full Year 2018 Results

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Scientific Games Reports Fourth Quarter Results and Full Year 2018 Results
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Operating results provide strong finish to year with path set for growth and deleveraging in 2019

 

Scientific Games Corporation today reported results for the fourth quarter and year ended December 31, 2018.

Fourth Quarter 2018 Financial Highlights:

  • Fourth quarter revenue rose 8 percent to $885.7 million, up from $823.0 million in the year ago period, reflecting $51.7 million in revenue from NYX, along with growth in our Lottery and Social businesses.
  • Net income was $206.8 million compared to a net loss of $43.1 million in the prior year period, driven by improvement in operating income and due to a $183.1 million reversal of 55% of the previously established reserve related to the Shuffle Tech legal matter.
  • Consolidated Adjusted EBITDA (“Consolidated AEBITDA”), a non-GAAP financial measure defined below, increased 6 percent to $343.5 million from $324.5 million in the prior year period, primarily driven by higher revenue and continued operational efficiencies. Consolidated AEBITDA margin, a non-GAAP financial measure defined below, was 38.8 percent, compared to 39.4 percent in the prior year period reflective of a shift in revenue mix primarily driven by NYX.
  • Net cash (used in) provided by operating activities decreased to ($9.8) million from $118.1 million in the year ago period, driven primarily by making a $151.5 million payment to resolve the Shuffle Tech legal matter.
  • Social Gaming IPO Filing: On December 17, 2018, our Social gaming business confidentially submitted a draft registration statement on Form S-1 to the Securities and Exchange Commission (“SEC”) relating to a possible initial public offering of a minority interest in our Social business (the “contemplated IPO”). The Company anticipates that the proceeds from the contemplated IPO would primarily be used to repay debt. On February 14, 2019, our Social gaming business confidentially submitted Amendment No. 1 to its draft registration statement on Form S-1.

Full Year 2018 Financial Highlights:

  • Revenue increased 9 percent, or $279.6 million, year over year to $3,363.2 million.
  • Net loss was $352.4 million compared to a net loss of $242.3 million a year ago, driven by $253.4 million in restructuring and other charges primarily consisting of the $151.5 million payment to resolve the Shuffle Tech legal matter and $27.5 million for contingent consideration associated with the higher-than-expected results from the 2017 acquisition of Spicerack.
  • Consolidated AEBITDA, a non-GAAP financial measure as defined below, increased 9 percent to $1,329.7 million compared to $1,224.9 million in the prior year.
  • Net cash provided by operating activities was $346.1 million compared to $507.1 million in the prior year, reflective of the $151.5 million payment to resolve the Shuffle Tech legal matter and a $52.4 million unfavorable change in accrued interest, due to the timing of our interest payments, which were modified in connection with our refinancing transactions.

Barry Cottle, CEO and President of Scientific Games, said, “This is a very exciting time for Scientific Games. We’re focused on developing the best games and the most innovative platforms to deliver outstanding gaming experiences wherever and whenever players choose to play. We are building momentum and continuing to grow our business while at the same time operating more efficiently. The entire organization is enthused about 2019 and focused on helping our customers win, which will drive our free cash flow and create meaningful value for our shareholders.”

Michael Quartieri, Chief Financial Officer of Scientific Games, added, “We continue to grow our top line driven by the strength of our products. We believe there are opportunities for further growth in 2019, both on a top line and bottom line basis as we are firmly committed to maximize free cash flow and delever our balance sheet.”

SUMMARY CONSOLIDATED RESULTS





















Three Months Ended December 31,



($ in millions)

2018



2017



Revenue 

$

885.7





$

823.0





Net income (loss)

206.8





(43.1)





Net cash (used in) provided by operating activities 

(9.8)

(1)



118.1





Capital expenditures 

97.7





79.6















Non-GAAP Financial Measures (2)

















Consolidated AEBITDA 

$

343.5





$

324.5





Consolidated AEBITDA margin 



38.8%







39.4%





Free cash flow 

$

(229.2)

(3)



$

9.7









































Balance Sheet Measures

As of Dec 31, 2018



As of Dec 31, 2017



Cash and cash equivalents

$

168.2





$

788.8





Principal face value of debt outstanding (4)



9,218.8







8,869.4





Available liquidity 



438.7







1,009.4























(1) Includes a $151.5 million payment to resolve the Shuffle Tech legal matter.

(2) The financial measures “Consolidated AEBITDA”, “Consolidated AEBITDA margin”, and  “free cash flow” are non-GAAP financial measures defined below under “Non-GAAP Financial Measures” and reconciled to the most directly comparable GAAP measures in the accompanying supplemental tables at the end of this release.

(3) Includes a $151.5 million payment to resolve the Shuffle Tech legal matter, $104.2 million for the final LNS concession funding contribution, and an approximate $49.5 million change in accrued interest.

(4) Principal face value of outstanding 2026 Secured Euro Notes and 2026 Unsecured Euro Notes are presented at the constant foreign exchange rate at issuance of these notes.

GAMING HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2018



Three Months Ended December 31,



Increase/(Decrease)

($ in millions)

2018



2017



Amount



%

Revenue















   Gaming operations(1)

$

151.4





$

169.2





$

(17.8)



(11)

%

   Gaming machine sales

166.7





189.8





(23.1)



(12)

%

   Gaming systems

91.6





83.5





8.1



10

%

   Table products

60.1





50.0





10.1



20

%



$

469.8





$

492.5





$

(22.7)



(5)

%



















AEBITDA

$

233.2





$

237.8





$

(4.6)



(2)

%

AEBITDA margin 



49.6%







48.3%











































(1) Gaming operations includes $6.8 million in WAP jackpots as a reduction to revenue in 2018, compared to the 2017 presentation in which $5.4 million of WAP jackpots was classified as cost of services. This change in classification has no impact on AEBITDA.

  • Total gaming revenue decreased $22.7 million, including an unfavorable $6.8 million impact on Gaming operations from revenue recognition accounting effective in 2018. AEBITDA decreased 2 percent, or $4.6 million, to $233.2 million, but reflects a 130 basis point improvement in the AEBITDA margin to 49.6 percent driven by product mix shift in the comparable quarter to higher margin table products and gaming systems.
  • Gaming operations revenue declined $17.8 million in the fourth quarter of 2018, including the negative impact from the new revenue recognition accounting. Our WAP, premium and daily-fee participation ending installed base was impacted on a year over year basis by the long-term strategic relationship we entered into in Oklahoma in the third quarter. On a quarterly sequential basis, we experienced a 111 unit increase in the installed base and a $1.65 increase in average revenue per day. Our installed base on a quarterly sequential basis of other leased and participation games increased by 121 units with average daily revenue down $0.34, which reflects additional lower yielding units in Greece.
  • Gaming machine sales revenue decreased $23.1 million year over year. The prior year included 884 units for new opening and expansion units and 700 VLT units to Canada versus only 286 units in this year’s quarter for new openings and expansions. The average sales price was $16,113, in the fourth quarter reflecting a greater mix of lower priced units.
  • Gaming systems revenue increased $8.1 million to $91.6 million, primarily due to ongoing systems installations in Canada, coupled with increased hardware sales, primarily the iVIEW®4.
  • Table products revenue increased $10.1 million to $60.1 million, reflecting strong global demand for shufflers and table products.

LOTTERY HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2018



Three Months Ended

December 31, 



Increase/(Decrease)

($ in millions)

2018



2017



Amount



%

Revenue





























   Instant products 

$

150.2





$

151.1





$

(0.9)





(1)

%

   Lottery systems  (1)

80.5





66.1





14.4





22

%



$

230.7





$

217.2





$

13.5





6

%

















AEBITDA 

$

105.0





$

94.6





$

10.4





11

%

AEBITDA margin

45.5%





43.6%









































(1) Lottery systems revenue includes $20.4 million in product sales revenue, compared to $21.5 million in 2017.

  • Total lottery revenue increased $13.5 million, or 6 percent, to $230.7 million. AEBITDA increased 11 percent to $105.0 million, compared to $94.6 million in the prior year, with AEBITDA margin improving to 45.5 percent, primarily reflecting the increased margins on domestic lottery systems revenue.
  • Instant products revenue of $150.2 million was essentially flat from the prior year.
  • Lottery systems revenue increased $14.4 million, or 22 percent, to $80.5 million, driven by a combination of organic growth, higher multi-state jackpot activity in the quarter, a new contract in Kansas and the addition of keno in Pennsylvania.

SOCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2018

($ in millions)

Three Months Ended

December 31,



Increase/(Decrease)

Revenue



2018



2017



Amount



%

   Mobile



$

91.2





$

72.0





$

19.2





27

%

   Web and other 





22.5







23.5







(1.0)





(4)

%





$

113.7





$

95.5





$

18.2





19

%

































AEBITDA



$

28.3





$

21.8





$

6.5





30

%

AEBITDA margin



24.9%





22.8%











  • Social revenue grew 19 percent to $113.7 million, reflecting the ongoing popularity of Bingo ShowdownTM, the success of the recently launched MONOPOLY themed casino app and continued growth in Jackpot Party® Social Casino from new game features on our mobile platform.
  • AEBITDA rose 30 percent to $28.3 million, and AEBITDA margin increased to 24.9 percent, primarily reflecting our continued scalable growth in revenue.

DIGITAL HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2018



Three Months Ended

December 31,



Increase/(Decrease)

($ in millions)

2018



2017



Amount



%

Revenue(1)































   Sports and platform



$

33.3





$





$

33.3





 nm 



   Gaming and other 





38.2







17.8







20.4





115

%





$

71.5





$

17.8





$

53.7





302

%

































AEBITDA



$

11.8





$

5.1





$

6.7





131

%

AEBITDA margin



16.5%





28.7%











































nm – not meaningful

(1) Includes the results of NYX since the completion of its acquisition on January 5, 2018.



  • Total digital revenue increased to $71.5 million, due in part to $51.7 million of revenue from NYX.
  • AEBITDA was $11.8 million and AEBITDA margin was 16.5 percent, reflecting the addition of NYX and the investment we are making in our domestic and international sports and platform business.

LIQUIDITY



Three Months Ended

December 31,



Increase/

($ in millions)

2018



2017



(Decrease)

Net income (loss) 

$

206.8





$

(43.1)





$

249.9



Non-cash adjustments included in net income (loss)

136.0





169.7





(33.7)



Non-cash interest

6.6





3.8





2.8



Changes in deferred income taxes and other

(33.5)





(9.6)





(23.9)



Distributed earnings from equity investments

8.5





12.9





(4.4)



Change in legal reserves (1)

(334.6)









(334.6)



Changes in working capital accounts 

0.4





(15.6)





16.0



Net cash (used in) provided by operating activities (2)

$

(9.8)





$

118.1





$

(127.9)



























(1) Includes reversal of a portion of the previously established legal reserve.

(2) Includes a $151.5 million settlement payment to resolve the Shuffle Tech legal matter.

  • Net cash (used in) provided by operating activities decreased to ($9.8) million from $118.1 million in the year ago period, principally related to the $151.5 million payment to resolve the Shuffle Tech legal matter and a $49.5 million impact from the timing of our interest payments, which were modified in connection with our refinancing transactions.
  • Capital expenditures totaled $97.7 million in the fourth quarter of 2018, compared to $79.6 million in the prior-year period. The increase from the prior year was related to several long-term and highly accretive projects, including ongoing platform development in Digital, the acceleration of our installed base of participation games and WAP games, including the successful rollout of our James Bond franchise, and our 7-year contract extension with Ladbrokes Coral in the U.K.
  • For 2019, we expect capital expenditures to be below 2018 and within a range of $345$375 million, based on existing contractual obligations and planned strategic investments that we believe will be highly accretive to our future cash flow generation.

 

 

About Scientific Games:

Scientific Games Corporation (NASDAQ: SGMS) is a leading developer of technology-based products and services and associated content for the worldwide gaming, lottery, social and digital gaming industries. Our portfolio of revenue-generating activities primarily includes supplying gaming machines and game content, casino-management systems and table game products and services to licensed gaming entities; providing instant and draw-based lottery products, lottery systems and lottery content and services to lottery operators; providing social casino solutions to retail consumers and regulated gaming entities, as applicable; and providing a comprehensive suite of digital RMG and sports wagering solutions, distribution platforms, content, products and services. We also gain access to technologies and pursue global expansion through strategic acquisitions and equity investments.

 

 

Source: Scientific Games Corporation

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Gambling in the USA

Gaming Americas Weekly Roundup – November 11-17

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Welcome to our weekly roundup of American gambling news again! Here, we are going through the weekly highlights of the American gambling industry which include the latest news and new partnerships. Read on and get updated.

Latest News

Golden Entertainment Inc. reported financial results for the third quarter ended September 30. The Company reported third quarter revenue of $161.2 million, net income of $5.2 million and Adjusted EBITDA of $34.0 million. In addition, on November 5, the Company’s Board of Directors authorised the Company’s recurring quarterly cash dividend of $0.25 per share of the Company’s outstanding common stock payable on January 7, 2025 to shareholders of record as of December 20, 2024.

Snoqualmie Casino has announced its rebranding to Snoqualmie Casino & Hotel, reflecting an exciting new chapter in the venue’s history as it embarks on a much-anticipated expansion. Set for completion in mid-2025, this project promises to elevate the guest experience, making Snoqualmie Casino & Hotel a premier destination for entertainment, relaxation and culinary excellence. The cornerstone of the expansion is the construction of a luxurious hotel, which will offer guests unparalleled comfort and stunning views of the Snoqualmie Valley and Mount Si.

Galaxy Gaming Inc., the world’s largest independent developer and distributor of casino table games and technology announced, at a special meeting of its stockholders held on November 12, 2024 (the Special Meeting), Galaxy Gaming stockholders voted to approve the Company’s acquisition by Evolution Malta Holding Limited (Evolution), Evolution AB (publ)’s wholly owned subsidiary. Galaxy Gaming will file a Form 8-K with the U.S. Securities and Exchange Commission reporting the final voting results of the Special Meeting.

Caesars Virginia has announced that its highly anticipated opening date will be Thursday, Dec. 12, 2024. The resort will welcome its first guests beginning at noon. Additional details on the opening festivities will be announced at a later date. Caesars Virginia is a 587,000 square foot casino resort with more than 90,000 square feet of gaming space.

Partnerships

NGX has entered into a strategic partnership with Sportradar, a global leader in sports integrity solutions, which collaborates with more than 180 sports federations and leagues. The agreement aims to support the Brazilian football federations of Rio Grande do Sul, Paraná and Pará, providing detailed reports to ensure the integrity of sporting events and combat fraud.

EvenBet Gaming has announced the launch of its advanced poker solutions in partnership with JugaMax, one of the largest and most respected casino operators in Paraguay. This strategic collaboration marks EvenBet’s debut in the Paraguayan iGaming market, solidifying the company’s expansion within Latin America. The newly established partnership enables the integration of EvenBet Gaming’s poker offering on the JugaMax platform.

Jackpocket, the leading lottery app in the US, and Barstool Sports announced a new collaboration naming Jackpocket as the “Exclusive & Official Digital Lottery Partner of Barstool Sports”. The deal with Barstool follows Jackpocket’s parent company, DraftKings, announcing a similar agreement with the media company in February 2024. This collaboration centers around the integration of Jackpocket in Barstool’s content. Fans can participate in the lottery alongside some of Barstool’s biggest names such as Dave Portnoy, Big Cat & PFT from Pardon My Take – the leading sports podcast in America, Wallo & Gillie from Million Dollaz Worth of Game and more.

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Gambling in the USA

Gaming Americas Weekly Roundup – November 4-10

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Welcome to our weekly roundup of American gambling news again! Here, we are going through the weekly highlights of the American gambling industry which include the latest news and new partnerships. Read on and get updated.

Latest News

PENN Entertainment and ESPN announced that account linking between ESPN BET and ESPN is now available for customers, creating an even more deeply integrated media and betting experience. By linking accounts, fans now have the ability to seamlessly track upcoming, live and settled bets within the ESPN app and on ESPN.com. With this product enhancement, ESPN BET will soon bring fans more personalised bets and timely promotions based on their favourite sports, teams, players and fantasy rosters.

Accel Entertainment Inc. has announced that it has completed the acquisition of 85% of the ownership interests of Toucan Gaming LLC and LSM Gaming LLC, two Louisiana-based route operators and owners of multiple licensed video poker establishments (collectively, “Toucan”), for approximately $40 million. The combined business will operate as Toucan Gaming throughout Louisiana and will be led by Stan Guidroz, an industry-leading gaming executive and current CEO of Toucan Gaming. Mr. Guidroz owns the remaining 15% of Toucan’s ownership interests and will lead the Accel team supporting Toucan’s continued growth.

INTRALOT S.A. has announced the undertaking of a new project between the British Columbia Lottery Corporation (BCLC), the sole lottery operator for the Government of British Columbia in Canada, and INTRALOT, its US subsidiary, for the provision of an online lottery platform. The project also includes the digitalisation of the existing land-based network. The solution will be based on the Player X platform, part of the Lotos X ecosystem, and adds to the company’s overall partnership with BCLC, which has been extended until 2028.

BetMGM Poker has become the third US operator to offer multi-state online poker. The company has merged its player pools in Michigan and New Jersey. Both states are a part of the Multi-State Internet Gaming Agreement, which allows online poker networks to share liquidity and players in participating markets. The two-state network went live Wednesday afternoon after morning maintenance.

Betsson Group has celebrated its success at the SBC Awards Latinoamérica 2024, winning two prestigious awards: Sportsbook Operator of the Year and Leader of the Year, which was awarded to Kevin Saliba, Commercial Director (Business Development) for Latin America. This marks the second consecutive year Betsson has earned the Leader of the Year accolade, following Andrea Rossi’s win in 2023 – an achievement that underscores Betsson’s consistent leadership in the region.

Partnerships

Play’n GO has announced a new operator partnership with renowned gaming brand Hard Rock Digital for their top-rated Hard Rock Bet online casino platform in New Jersey. The Hard Rock brand is synonymous with entertainment worldwide, and this partnership will see Hard Rock Bet players in New Jersey gain access to hit Play’n GO titles such as Piggy Blitz, Book of Dead and Rise of Olympus 100.

SCCG Management, a global leader in gaming innovation and advisory, has announced a strategic partnership with Chata.AI, a technology provider specialising in self-service, proactive analytics that enables businesses to access real-time insights without requiring extensive technical expertise. This partnership introduces Chata.AI’s technology to the gaming industry, providing operators with powerful tools to streamline decision-making and increase operational efficiency.

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Gambling in the USA

Gaming Americas Weekly Roundup – October 28-November 3

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Welcome to our weekly roundup of American gambling news again! Here, we are going through the weekly highlights of the American gambling industry which include the latest news and new partnerships. Read on and get updated.

Latest News

Elray Resources Inc. has announced a significant milestone in the company’s growth strategy. The company has completed the sale of proprietary technology to 180 Life Sciences Corp. (NASDAQ:ATNF), a NASDAQ-listed company in exchange for preferred stock convertible into a 40% stake in ATNF and warrants to purchase 3 million shares of ATNF common stock, the conversion/exercise of which is subject to stockholder approval. The technology stack contained within Elray’s technology package will assist ATNF in launching an iGaming Blockchain casino.

PrizePicks, the largest daily fantasy sports operator in North America, has announced that it has been awarded Daily Fantasy Sports Operator Licenses in Delaware and Missouri. The company will launch Arena, its innovative peer-to-peer fantasy sports contest, in both states. With these new state launches, Arena will now be available in 15 states across the US.

The Pennsylvania Gaming Control Board (Board) unanimously voted to renew the Category 2 stand-alone casino license of Wind Creek Bethlehem LLC, operator of Wind Creek Bethlehem casino in Northampton County. In making the decision, the Board determined that Wind Creek Bethlehem LLC had fulfilled the obligations under its previously approved casino operator’s license and therefore qualified to have its license renewed for an additional five-year period.

Aristocrat announced that the company was the first international slot and online technology company to be granted a Gaming-Related Vendor license by The General Commercial Gaming Regulatory Authority (GCGRA), the federal entity overseeing commercial gaming activities in the United Arab Emirates (UAE). This announcement grants Aristocrat the ability to provide the company’s land-based electronic gaming machines (EGMs) and online games and technology solutions to commercial gaming operators licensed by the GCGRA.

Partnerships

SCCG Management, a leading global advisory and consulting firm in the gambling industry, has entered into a strategic partnership with Slot Machines Unlimited, a premier provider of refurbished slot machines and gaming equipment. The partnership between SCCG Management and Slot Machines Unlimited leverages both companies’ strengths: Slot Machines Unlimited’s expertise in refurbished gaming equipment and SCCG’s deep industry insight, global network and strategic growth capabilities. The collaboration will enhance Slot Machines Unlimited’s international sales and service operations, ensuring gaming establishments worldwide have access to high-quality slot machines and support.

Galaxy Gaming Inc. has announced that the Galaxy Operating System (GOS) is now live on over 50 ships worldwide with Carnival Corporation & PLC, the world’s largest leisure travel company. Since the installation, tables powered by GOS have awarded over $5 million in jackpot payouts to players. GOS is the jackpot progressive system for all Carnival Corporation ships, including Carnival Cruise Line, Holland America Line and Princess Cruises. Launched in 2024, GOS is the next-generation game management system developed by the industry’s leading table game experts.

The hottest new game from Aristocrat Gaming, Phoenix Link, is now live on casino floors, with Yaamava’ Resort & Casino being the first in North America to offer the highly-anticipated game. As the next evolution of the international hit game, Dragon Link, Phoenix Link features player-favourite mechanics from top games with all-new themes, features and bonuses.

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