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Scientific Games (SGMS) Q3 Loss Widens, Revenues Rise Y/Y
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Shares of Scientific Games Corporation plunged 17% on Nov 9 following dismal third-quarter 2018 results. Notably, the stock has lost 56.8% compared with the industry’s decline of 3% on a year-to-date basis.
Scientific Games reported third-quarter 2018 loss of $3.85 per share compared with the year-ago quarter’s loss of 66 cents.
Revenues increased 6.8% from the year-ago quarter to $821 million.
The Zacks Consensus Estimate for earnings and revenues was pegged at a loss of 18 cents and $825 million, respectively.
Quarter Details
Gaming Segment (54.6% of total revenues) revenues declined 1.5% year over year to $447.9 million. The company’s popular franchise James Bond underperformed in the reported quarter due to strict state approvals.
Gaming operations declined 9.5% due to an unfavorable $4.5 million impact from revenue recognition accounting, effective from 2018.
Gaming Systems and Gaming Machine Sales increased 12.4% and 2.5%, respectively. However, Table Products sales witnessed a decline of 3.2% from the year-ago period due to lower product sales in the quarter under review.
The increase in Gaming System revenues was due to ongoing system installations in Canada, along with an increase in hardware sales, primarily iVIEW4. Gaming machine average sales price increased 3% to $18,199, which was a positive.
Lottery Segment (25.2% of total revenues) revenues were up 1.9% from the prior-year quarter to $206.8 million. The company continues to benefit from higher denomination ticket sales and constant innovations, including the launch of SCiQ instant games lottery technology.
Revenues from Lottery Systems increased 7.6% due to domestic organic growth, while Instant products declined 0.5% from the year-ago quarter. Additionally, new lottery system installations in Maryland and Kansas and new investment in Keno in Pennsylvania increased revenues.
Social Segment (12.8% of total revenues) revenues increased 10.5% year over year to $105.1 million. Notably, revenues from daily active users in the third quarter increased significantly. Average daily revenue per daily active user increased by a penny from the year-ago quarter.
Moreover, the company benefited from “growing popularity” of Bingo Showdown apps as well as the new MONOPOLY Slots-themed social casino app launched recently. Significant growth in core apps including Jackpot Party Social Casino also benefited the company.
Digital Segment (7.5% of revenues) revenues grew to $61.2 million compared with $16.3 million in the year-ago quarter, of which $46.5 million comes from NYX Gaming Group Limited.
In the quarter, Scientific Games entered into a partnership with Gaming Capital Group to distribute slot related products in the state of Oklahoma, which will enable the company to grow its market share. Additionally, the company also launched gaming content across 12 new client sites and signed eight new customers on the OGS platform.
Scientific Games Corp Price, Consensus and EPS Surprise
Attributable earnings before interest, taxes, depreciation and amortization (AEBITDA) increased 8.9% from the year-ago period to $325.7 million. AEBITDA margin increased 80 basis points (bps) to 39.7%.
Gaming AEBITDA increased 5.1% year over year to $232.5 million. Gaming AEBITDA margin surged 330 bps to 51.9%.
Lottery AEBITDA increased 3.5% from the year-ago quarter to $92.3 million. Lottery AEBITDA margin increased 70 bps to 44.6%. Social AEBITDA increased 34.3% to $27 million and margin expanded 460 bps to 25.7%.
Digital AEBITDA surged 284% from the year-ago period to $11.9 million and margin increased 40 bps to 19.4%.
Selling, general and administrative (SG&A) increased 6.9% year over year to $169.7 million in the reported quarter. Research & development (R&D) expenses rose almost 3.6% to $49.5 million.
The company witnessed a significant increase in restructuring expenses to $338.7 million compared with $7.8 million in the year-ago quarter. This includes a $310 million charge related to the verdict in the Shuffle Tech legal matter.
As a result, the company incurred operating loss of $204.5 million against an operating income of $90.6 million in the year-ago quarter.
Balance Sheet & Cash Flow
Scientific Games exited the quarter with cash and cash equivalents of $113.5 million compared with $118.6 million in the previous quarter. The company’s long-term debt remained almost stable at $8.73 billion compared with the previous quarter.
Cash flow from operations was $223.5 million compared with $109.5 million in the previous quarter. This increase was due to improvement in the company’s operating results and enhancement in the working capital.
Scientific Games targets an initial public offering (IPO) of a minority interest in its social gaming business in fiscal 2019 and the cash proceed from the same will be used to repay the company’s debt.
Zacks Rank & Stocks to Consider
Scientific Games currently carries a Zacks Rank #3 (Hold).
Long-term earnings growth rate for CACI International, NetApp and Twitter is projected to be 10%, 14.1% and 22.1%, respectively.
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It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
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Scientific Games (SGMS) Q3 Loss Widens, Revenues Rise Y/Y
Shares of Scientific Games Corporation plunged 17% on Nov 9 following dismal third-quarter 2018 results. Notably, the stock has lost 56.8% compared with the industry’s decline of 3% on a year-to-date basis.
Scientific Games reported third-quarter 2018 loss of $3.85 per share compared with the year-ago quarter’s loss of 66 cents.
Revenues increased 6.8% from the year-ago quarter to $821 million.
The Zacks Consensus Estimate for earnings and revenues was pegged at a loss of 18 cents and $825 million, respectively.
Quarter Details
Gaming Segment (54.6% of total revenues) revenues declined 1.5% year over year to $447.9 million. The company’s popular franchise James Bond underperformed in the reported quarter due to strict state approvals.
Gaming operations declined 9.5% due to an unfavorable $4.5 million impact from revenue recognition accounting, effective from 2018.
Gaming Systems and Gaming Machine Sales increased 12.4% and 2.5%, respectively. However, Table Products sales witnessed a decline of 3.2% from the year-ago period due to lower product sales in the quarter under review.
The increase in Gaming System revenues was due to ongoing system installations in Canada, along with an increase in hardware sales, primarily iVIEW4. Gaming machine average sales price increased 3% to $18,199, which was a positive.
Lottery Segment (25.2% of total revenues) revenues were up 1.9% from the prior-year quarter to $206.8 million. The company continues to benefit from higher denomination ticket sales and constant innovations, including the launch of SCiQ instant games lottery technology.
Revenues from Lottery Systems increased 7.6% due to domestic organic growth, while Instant products declined 0.5% from the year-ago quarter. Additionally, new lottery system installations in Maryland and Kansas and new investment in Keno in Pennsylvania increased revenues.
Social Segment (12.8% of total revenues) revenues increased 10.5% year over year to $105.1 million. Notably, revenues from daily active users in the third quarter increased significantly. Average daily revenue per daily active user increased by a penny from the year-ago quarter.
Moreover, the company benefited from “growing popularity” of Bingo Showdown apps as well as the new MONOPOLY Slots-themed social casino app launched recently. Significant growth in core apps including Jackpot Party Social Casino also benefited the company.
Digital Segment (7.5% of revenues) revenues grew to $61.2 million compared with $16.3 million in the year-ago quarter, of which $46.5 million comes from NYX Gaming Group Limited.
In the quarter, Scientific Games entered into a partnership with Gaming Capital Group to distribute slot related products in the state of Oklahoma, which will enable the company to grow its market share. Additionally, the company also launched gaming content across 12 new client sites and signed eight new customers on the OGS platform.
Scientific Games Corp Price, Consensus and EPS Surprise
Scientific Games Corp Price, Consensus and EPS Surprise | Scientific Games Corp Quote
Operational Details
Attributable earnings before interest, taxes, depreciation and amortization (AEBITDA) increased 8.9% from the year-ago period to $325.7 million. AEBITDA margin increased 80 basis points (bps) to 39.7%.
Gaming AEBITDA increased 5.1% year over year to $232.5 million. Gaming AEBITDA margin surged 330 bps to 51.9%.
Lottery AEBITDA increased 3.5% from the year-ago quarter to $92.3 million. Lottery AEBITDA margin increased 70 bps to 44.6%. Social AEBITDA increased 34.3% to $27 million and margin expanded 460 bps to 25.7%.
Digital AEBITDA surged 284% from the year-ago period to $11.9 million and margin increased 40 bps to 19.4%.
Selling, general and administrative (SG&A) increased 6.9% year over year to $169.7 million in the reported quarter. Research & development (R&D) expenses rose almost 3.6% to $49.5 million.
The company witnessed a significant increase in restructuring expenses to $338.7 million compared with $7.8 million in the year-ago quarter. This includes a $310 million charge related to the verdict in the Shuffle Tech legal matter.
As a result, the company incurred operating loss of $204.5 million against an operating income of $90.6 million in the year-ago quarter.
Balance Sheet & Cash Flow
Scientific Games exited the quarter with cash and cash equivalents of $113.5 million compared with $118.6 million in the previous quarter. The company’s long-term debt remained almost stable at $8.73 billion compared with the previous quarter.
Cash flow from operations was $223.5 million compared with $109.5 million in the previous quarter. This increase was due to improvement in the company’s operating results and enhancement in the working capital.
Scientific Games targets an initial public offering (IPO) of a minority interest in its social gaming business in fiscal 2019 and the cash proceed from the same will be used to repay the company’s debt.
Zacks Rank & Stocks to Consider
Scientific Games currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector include CACI International, Inc. (CACI - Free Report) , NetApp, Inc. (NTAP - Free Report) and Twitter, Inc. . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Long-term earnings growth rate for CACI International, NetApp and Twitter is projected to be 10%, 14.1% and 22.1%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>