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Scientific Games Reports Fourth Quarter Results and Full Year 2018 Results

George Miller

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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

George Miller started his career in content marketing and has started working as an Editor/Content Manager for our company in 2016. George has acquired many experiences when it comes to interviews and newsworthy content becoming Head of Content in 2017. He is responsible for the news being shared on multiple websites that are part of the European Gaming Media Network.

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Sycuan Awarded Best Casino Buffet from 2019 Best of Mission Times Courier

George Miller

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Sycuan Awarded Best Casino Buffet from 2019 Best of Mission Times Courier
Reading Time: 2 minutes

 

Sycuan Casino Resort announced today that the organization has been awarded Best Casino Buffet from the San Diego Community News Network’s 2019 Best of Mission Times Courier.

Each year, Mission Times Courier releases the Best of Mission Times Courier issue, which puts a spotlight on those who are doing the very best in a variety of categories. Hundreds of nominations from local residents are submitted and tallied and the winners are announced.

“We are honored to be voted Best Casino Buffet by the readers of the Mission Times Courier,” said Dan Morales, vice president of marketing at Sycuan Casino Resort. “The Buffet is one of our most popular dining venues amongst our guests and features everything from seafood to prime rib to many international dishes.”

The Buffet at Sycuan is open seven days a week and serves up a variety of different cuisines. The lunch buffet features a full spread as well as a made-to-order burger bar and malt shop with nine different handcrafted milkshakes and malts. The dinner buffet features hundreds of items including slow-roasted prime rib, crab legs, shrimp cocktail, specialty international foods and a delectable dessert bar.

 

About Sycuan Casino Resort:

Sycuan Casino Resort began as a humble Bingo Palace in 1983. Now more than 35 years later, it has become a community landmark and one of San Diego’s premier casino and resort destinations. Sycuan recently completed a $260M expansion, which includes a 12-story luxury hotel tower with over 300 guest rooms and 57 suites. Guests can enjoy a wide range of onsite amenities including a variety of new restaurants from fast-casual to fine dining, meeting and event space, a full-service spa, fitness center and a state-of-the-art pool and gardens area with a lazy river and swim-up bar. Sycuan also boasts a newly expanded casino floor for a total of 2,800 slot machines and 54 table games in a variety of gaming options. Sycuan is open 24 hours a day, seven days a week. For more information visit www.sycuan.com or call 619-445-6002.

SOURCE Sycuan Casino Resort

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Sports Betting Bill of Michigan Moves Forward

Niji Narayan

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Sports Betting Bill of Michigan Moves Forward
Reading Time: 1 minute

 

A sports betting bill would allow organised sports betting in Michigan casinos and online was passed out of a state house committee. State Representative Brandt Iden of Kalamazoo is sponsoring the legislation.

“Because this is already going on in the market place so we can protect those people who want to play and want to play legally, and we can, you know, make the state a little bit of money, which I think is also a positive,” Iden said.

Iden hopes the bill continues to make its way through the legislature and onto Governor Gretchen Whitmer’s desk before Superbowl season.

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Gambling in the USA

Gaming Innovation Group extends Hard Rock’s sportsbook in Iowa

George Miller

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Gaming Innovation Group extends Hard Rock's sportsbook in Iowa
Reading Time: 2 minutes

 

We found in a new press release that

Gaming Innovation Group Inc. (GiG) has reached an agreement with its partner, Hard Rock International (Hard Rock), to support its market entry with sports betting in the US state of Iowa. The sportsbook will initially launch with an over-the-counter solution on the casino floor at the Hard Rock Hotel & Casino Sioux City in Iowa. This will be followed by the launch of online and mobile sports betting in Iowa, expected in Q4 2019.

In Iowa, Hard Rock will offer a similar seamless and engaging betting experience for its consumers as it has already delivered in New Jersey, with an omni-channel sportsbook solution based on GiG’s modern and flexible technology.

For GiG, this means the Company will be able to leverage its platform in the US adding more scale to its network and revenues to the business. GiG already has the groundwork done in New Jersey after a successful proof of concept suitable and relevant to the American audience.

Iowa is one of the 12 states in the US legalising sports wagering since the US Supreme Court overturned the federal sports wagering ban in 2018. In August this year, the Iowa Racing and Gaming Commission (IRGC) authorised the 19 casinos in the state to offer statewide retail, online and mobile sports betting to consumers aged 21 or over. Iowa has approximately 3.2 million inhabitants and should also benefit with visitors from neighboring states such as Nebraska and Minnesota. It has an estimated mature sports betting market valued at revenues of around $160 million based on the total amount of money wagered by consumers. The tax rate on the sports betting revenue is 7.5%.

GiG expects this agreement to have limited impact on its revenues in 2019, with an increasing contribution from the launch of online and mobile betting in 2020 onwards.

Kresimir Spajic, Senior Vice President of Online Gaming at Hard Rock International says, “We’re excited to extend our partnership with GiG to support sports betting in Iowa, and further grow our sportsbook portfolio.”  

“Offering sports betting through GiG provides our players and guests a new level of engagement – we couldn’t be more thrilled to be launching in Iowa,” Jim Franke, General Manager of Hard Rock Hotel & Casino Sioux City.

Richard Brown, acting Chief Executive Officer of GiG says, “After a successful launch in New Jersey, I am delighted to further deepen the relationship with Hard Rock, delivering on our strategy to grow with our partner by entering a new state in the US with our sportsbook. The agreement is both a testament to our know-how and prowess to lead a land-based casino into the digital world of betting, and a strong validation of GiG’s commercial and product delivery capabilities. We are looking forward to growing with our partner long term. We have mutual ambitions to entertain consumers with a safe and exciting first-class sports betting experience.”

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