Scientific Games driven by lottery and social growth in Q1

8 May 2019

Scientific Games has cited growth across its lottery and social businesses as key drivers of a year-on-year increase in revenue during the first quarter, while the supplier was also able to slash its net loss for the period.

Revenue in the three months through to March 31, 2019, amounted to $837m (£640.6m/€746.8m), up from $812m in the corresponding quarter last year.

Lottery revenue in Q1 was up by 12% year-on-year to $227m, primarily due to equipment hardware sales and new lottery contracts in Maryland and Kansas.

Social gaming revenue also increased 22% to $118m as a result of the increased monetisation of paying players. Incidentally, Scientific Games has since launched an initial public offering for its SciPlay social gaming arm, which the supplier has said will help pay down debt.

Digital revenue in Q1 remained level at $70m but the gaming segment, the main source of income for Scientific Games, saw revenue slip by 5% year-on-year to $422m.

Meanwhile, Scientific Games was able to cut its total operating expenses from $763m in Q1 of 2018 to $714m this year, with savings across almost all areas of the business.

Cost of services dipped from $122m to $133m, while cost of instant products fell from $70m to $67m and research and development costs from $54m to $49m. The supplier also noted a decline in depreciation, amortisation and impairments from $188m to $165m.

The only areas where Scientific Games spent more were in terms of product sales, where costs increased from $105m to $107m, and selling, general and administrative expenses, which climbed from $172m to $186m.

Higher revenue and lower costs allowed Scientific Games to post an improved operating income of $123m, up from $49m in Q1 last year, while the supplier also saw net loss shorten from $202m to $24m.

Revenue growth also meant Scientific Games was able to report higher adjusted earnings before interest, tax, depreciation and amortisation, with this total up 3% from $320m to $328m.

Barry Cottle, president and CEO of Scientific Games, said that he is proud of the Q1 performance, prising the supplier for continuing to build on its momentum.

“We are focused on effectively operating our businesses, reducing costs and building upon the strong foundation for profitable growth that we see today,” Cottle said.

“Last week, we successfully took SciPlay public as a new company, which accelerates our ability to pay down debt. All of these actions support our steadfast commitment to smartly grow our business, drive free cash flow and create meaningful value for our stakeholders.”

Michael Quartieri, chief financial officer at Scientific Games, also highlighted the impact that the SciPlay IPO will have on the wider business, saying this will help to improve cash flow.

"This quarter, we paid down $145m in debt and completed a major refinancing that lowered our borrowing costs and extended our debt maturities," he said. “As a result of the SciPlay IPO, we expect to continue our deleveraging path and the efficient deployment of our resources to generate the returns needed to enhance our free cash flow.”