Scientific Games hails NYX contribution as revenue grows 7% in Q3

Scientific Games hails NYX contribution as revenue grows 7% in Q3

Friday, November 9, 2018 Posted by News Team
Scientific Games
Net loss widens to $351.6m after company hit by damages ruling in court case

Scientific Games has credited its acquisition of NYX Gaming Group for driving a 7% increase in net revenue during the third quarter of 2018, though the company also saw its net loss widen during the period. 

Group revenue grew to $821.0m, bolstered by a $46.5m contribution from NYX and supported by growth from the lottery and social divisions. 

Social revenue was up 11% year-on-year to $105.1m, with with division boosted by the strong performance of Bingo Showdown, acquired in April 2017, and the successful launch of the Monopoly-branded social casino app. This complemented the continued strong performance of the company’s flagship Jackpot Party Social Casino product. 

Scientific Games is now exploring the possibility of an initial public offering to spin off the social division to drive future growth.

Lottery, meanwhile, saw revenue grow 2% to $206.8m, with a decline in instant product sales to $142.0m offset by an 8% increase in systems revenue to $64.8m. 

The digital division saw the fastest growth, thanks to the NYX acquisition, with revenue jumping from $16.3m in Q3 2017 to $61.2m. This comprised $20.8m from the sports and platform division, and a $40.4m contribution from gaming. 

However the land-based gaming business segment, Scientific Games’ largest division, reported a 1% year-on-year fall in revenue to $447.9m in Q3. The sharpest decline was seen in the gaming operations unit, for which revenue was down 10% at 159.2m. This was blamed on the negative impact of new accounting principles on results, as well as a lower installed base of wide area progressive and premium leased games. Table product sales were also down, as a result of lower product sales during the quarter. 

These declines were offset by an increase in gaming machine sales, which grew 3% to $167.2m as a result of new customer agreements. The deployment of gaming systems in the Canadian market helped systems revenue grow to $69.7m. 

“We are very pleased with the growth we are seeing across our businesses as we continue to lead our industry into the future,” Scientific Games chief executive Barry Cottle said. “Our investments in digital, sports betting, and new games are producing the most innovative and engaging products in the market and we are excited about the customer response here in the US and around the world.”

Adjusted earnings before interest, tax, depreciation and amortisation rose 9% to $325.7m, largely as a result of the growth in revenue and continuing operational efficiencies.

“This quarter marks our twelfth consecutive quarter of year over year growth in revenue and Consolidated Adjusted EBITDA,” Scientific Games chief financial officer Michael Quartieri said. “Our focus on generating cash flows provides us a clear avenue to strengthen our balance sheet.”

Operating expenses for the quarter climbed 51% to $1.03bn, primarily as a result of restructuring expenses of $338.7m. This includes a $309.6m charge stemming from a lawsuit launched by Scientific Games against automatic card shuffling machine manufacturer Shuffle Tech. 

The solutions giant was ruled to have launched a frivolous suit, the judge in the case said, in order to control the US automatic card shuffling market. It was ordered to pay damages of $105m, which was automatically trebled to $315m under US anti-trust laws. However, Scientific Games has leave to appeal, and is yet to pay out the sum set aside in the results. 

This saw the company report an operating loss of $204.5m, which widened to $351.6m as a result of interest expense of $147.4m.

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