Scientific Games Corporation has published its Q4 and full year results for the 12 months to December 31, 2018. The firm finished 2018 with a flourish thanks to a strong performance in the fourth quarter, but there was no hiding the $151m hit on what were otherwise positive full-year results arising from the now closed off legal matter with Shuffle Tech. On a bright note for its digital business, total revenue increased to $71.5m, due in part to $51.7m of revenue from NYX.
Headline figures from Q4 included revenue growth of eight per cent to $885.7m, up from $823m year-on-year, reflecting the contribution from NYX, along with improved performance in the firm’s lottery and social businesses. Net income was $206.8m for the quarter compared to a net loss of $43.1m in the corresponding period in 2017, driven by improvement in operating income and due to a $183.1m reversal of 55 per cent of the previously established reserve related to the Shuffle Tech legal matter.
In terms of full year highlights, revenue increased nine per cent, or $279.6m, year-on-year to $3,363.2m. Net loss was $352.4m compared to a net loss of $242.3m a year ago. The firm cited $253.4m restructuring costs and other charges primarily comprising the Shuffle Tech legal matter and $27.5m for contingent consideration associated with the higher-than-expected results from the 2017 acquisition of Spicerack.
Barry Cottle, CEO and President, 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, 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 deliver our balance sheet.”
Turning to gaming revenue, SG reported a fall of $22.7m, including an unfavorable $6.8m impact on gaming operations from revenue recognition accounting effective in 2018. AEBITDA decreased two per cent, or $4.6m, to $233.2m, but reflected 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, meanwhile declined $17.8m in the fourth quarter of 2018, including again 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,” said the company, adding: “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.”
There was a drop, too, in gaming machine sales revenue to the tune of $23.1m year-on-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, however, increased $8.1m to $91.6m, primarily due to ongoing systems installations in Canada, coupled with increased hardware sales, primarily the iVIEW®4. Table products revenue increased $10.1m to $60.1m reflecting, said the firm, strong global demand for shufflers and table products.