New-look Scientific Games takes shape amid buoyant Q3 trading

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Scientific Games Corporation has told investors that they will quickly see the shape, pace and agility of the company following the announced divestitures of its lottery and sports betting businesses.

The prediction was made amid the firm’s Q3 results for the period ended September 30, 2021, during which it reported growth across all key metrics and strong progress on its strategic pillars.

Third quarter consolidated revenue was $539m compared to $432m, up 25% compared to the prior year period. The Gaming business demonstrated continued momentum in North America with gains in Gaming Ops, Game Sales and the Tables business. 

Revenue also benefited from growth in igaming, driven by strong gains in US revenues, up 109%, and US market share growing 200bps to 27%.

Net income from continuing operations was $100m compared to a net loss of $187m in the prior year period. This was due to a $181m income tax benefit as a result of the partial reversal of SG’s valuation allowance on deferred taxes and strong revenues in the Gaming business segment, which were significantly impacted by COVID-19 disruptions in the prior year period. 

The prior year period also included temporary austerity measures that were implemented due to COVID-19 disruptions and certain Gaming business segment inventory and credit loss charges, none of which recurred in the current year period.

Consolidated Q3 AEBITDA from continuing operations was $203m compared to $117m, up 74% year-on-year, driven by triple-digit AEBITDA growth in Gaming and double-digit AEBITDA growth in iGaming.

Net debt leverage ratio also declined as the firm paid down $635million of debt since October 2020, including a voluntary $135m payment subsequent to quarter end on the revolving credit facility, reducing debt outstanding to $8,846m at the end of the 3rd quarter. 

Net debt leverage declined to 6.6x, a reduction of 4 turns, down from 10.5x since the beginning of the year.

Gaming revenue, said the firm, increased to $339m, up 47% compared to the prior year period, primarily driven by strong growth in Gaming operations due to an increase in its premium installed base as well as growth in Game Sales and Table Games business. 

AEBITDA grew 123% from the prior year driven by strong growth in revenues coupled with lower allowance for credit loss and inventory valuation charges. 

SciPlay revenue was $147m, a slight decrease from the prior year period due primarily to a temporary event, isolated in Jackpot Party Casino, which has since been addressed, partially offset by strong monetization metrics and record growth at Gold Fish Casino. “We expect SciPlay to return to growth both year over year and sequentially in the fourth quarter,” noted SG. 

iGaming revenue increased 6% and AEBITDA grew 13% from the prior year period with performance driven by the strength of original content, elevated US GGR and an increase in US market share partially offset by seasonal trends, historically. US revenue grew 109% compared to the prior year and US share increased 200bps to 27% in the quarter. 

Since the third quarter of 2019, wagers processed through SG’s igaming platform have increased from $9bn to $16.9bn.

Barry Cottle, President and CEO, said: “In just the last few months we have made tremendous progress on our strategic pillars, delivering on our promises, and rapidly advancing our vision to be the leading cross-platform global game company. 

“With the sale of our Lottery and Sports Betting businesses we are transforming our company, raising $7bn which will significantly de-lever the balance sheet and enable us to invest for growth. 

“With our streamlined organization we have all of the pieces in place, and are singularly focused on building games fully cross-platform. Operationally we also made great strides in the quarter, further cementing the turnaround at our Gaming business, strengthening our leadership position in iGaming and making great progress expanding in Casual at SciPlay.”

Connie James, Executive VP and CFO, added: “We have an exciting path ahead of us as we move rapidly to unlock significant value. With the announced sale of Lottery and Sports Betting businesses as well as organic investments and key acquisitions like Authentic, Lightning Box and Koukoi, you are quickly getting to see the shape as well as the pace and agility of our new organization. 

“The divestitures put us on a clearly defined path to materially de-lever while providing us with the ability to invest. Our momentum continued this quarter with strong top and bottom line growth and with strong quarterly cash flow as the teams continued to be laser-focused on productivity. 

“We are seeing our company come together and coalesce around a high-performance culture that embraces our bright future as we pursue our new vision and I can’t thank our employees enough for their dedication and enthusiasm.”