Scientific Games Corporation has published its financials for the first quarter ended March 31, 2018 with revenue ahead by 12 per cent to $811.8m, from $725.4m for the corresponding period in 2017. The growth, said the firm, reflects the inclusion of $49.2m in revenue from the acquisition of NYX Gaming Group which was completed in January this year, along with a seven per cent growth in lottery revenue and 21 percent growth in social revenue. Gaming revenue increased one per cent from the prior year, reflecting a 30 per cent increase in gaming machine replacement unit shipments offset by the impact from far fewer new casino openings globally.
Less positive was SG’s operating income which fell to $49.4m from $88m in Q1 2017. Instrumental to the fall was $52.2m in restructuring and other charges that included an $18m accrual for contingent consideration associated with higher-than-anticipated results from the 2017 acquisition of Spicerack, a $15m charge related to certain litigation costs.
Additionally there were $13.5m of acquisition and integration costs related to the NYX acquisition, as well as the unfavourable impact of higher depreciation and amortisation expense, inclusive of a $19m facilities impairment charge. According to SG, these costs were partially offset by higher revenue, the inclusion of NYX results and more efficient business processes.
Net loss increased to $201.8m from $100.8m in the prior year, reflecting the impact of a $93.2 million loss incurred on debt financing transactions associated with our February 2018 refinancing and the change in operating income.
Kevin Sheehan, CEO and president, said: “Our fourth quarter results were strong across each of our business segments and marked our ninth consecutive quarter of year-over-year increases in revenue, operating income and attributable EBITDA. Our team is achieving solid results and our momentum continues to strengthen.
“In gaming our revenue was driven by the incredible strength of game shipments – a record breaking shipment of 10,249 units. Following a very strong third quarter performance our replacement unit shipments in the US and Canada were up 23 per cent over the prior year. Also contributing to the game growth was a 31 per cent increase in gaming systems revenue reflecting the beginning of the systems roll out to casinos across Alberta, Canada.”
But SG’s most exciting accomplishment, said Sheehan, was the completion of the NYX acquisition on January 5 which bodes well for the company in relation to the hotly anticipated changes to US sports betting regulation. “NYX adds a leading capability in sports wagering and online real money gaming platforms to our own strengths in online gaming content,” he noted. “In addition to building on our own solid track record of growth globally we believe we are also well positioned to participate in any liberalisation of sports betting and online gaming. I’ve been part of many acquisitions over the years and it is rare to find a transaction that is both highly strategic in nature and financially compelling in year one. And NYX checks both boxes.”
Michael Quartieri, chief financial officer, commented: “Our continued growth in revenue and AEBITDA, coupled with the lower interest costs resulting from our recent refinancing, establishes a solid platform for increased cash flows. We remain committed to our path of increasing cash flow, de-levering and strengthening our balance sheet.”
In a Q&A session post publication of SG’s financials, he explained more about NYX and confirmed the company’s stance on operating sports betting. “The product (sports betting) is available to us now through NYX as a full suite – not only is it the back end system that supports everything in the betting process, it also has all the analytical tools around it. It has the user interface so it allows our customers to operate a fully functional sports book system. In no instances are we going to be the actual operator of a sports book. We are the system provider on B2B basis to the operator itself.”