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Scientific Games & California Lottery Ink Instant Games Deal

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Scientific Games SGMS recently announced that California State Lottery will continue availing the company’s offerings like instant games and services.

The parties recently inked a three-year contract extension, under which Scientific Games will continue to provide the #3 instant game lottery in the world (2018 total sales, La Fleur's Almanac) to California Lottery.

Apart from the instant game, services will include product and player research, game design, game portfolio planning, integrated marketing programs and retailer account management.

Scientific Games will continue to provide the service till November 2022, with optional extensions through 2025.


Contract Wins: A Key Catalyst

Scientific Games has been winning contracts regularly, which is expected to drive the top line.

Recently, the Massachusetts Lottery awarded a new contract for a lottery retail management system to the company. Scientific Games provides similar advanced retail management technology to lotteries in Arizona, Kansas and Maryland.

Moreover, Ohio Lottery awarded the company a new four-year contract for the Scientific Games Enhanced Partnership (SGEP) to manage all aspects of its instant “Scratch Off” games.

In October, Florida Lottery selected the company as its primary instant games provider through 2027.

Notably, in the last reported quarter, Lottery revenues (25.7% of revenues) grew 6.3% year over year to $220 million.

Sports Betting & iGaming Aid Prospects

Scientific Games continues to bolster its sports betting portfolio, supported by the OpenBet technology. This technology is widely used in the betting and gaming industry and helps the company secure contracts.

In 2019, Scientific Games launched New Zealand Racing Board’s (NZRB) sportsbook, powered by the OpenBet technology.

Additionally, the company’s joint venture with Sans Girisim (Sans Digital) secured a 10-year sports betting contract in Turkey, which is one of the world's largest sports markets. Per the contract, the company offers its sports betting solutions to Turkish bettors at retail shops and via mobile.

The company also expanded partnership with Nederlandse Loterij (NLO) to power new digital sports betting solutions in the Netherlands, ahead of the country’s liberalized online gambling market launch in 2021.

Further, Scientific Games partnered with Wynn Resorts to support the launch of Wynn Resorts' unique digital sports betting and iGaming applications in the United States.

Scientific Games is expected to benefit from expanding opportunities in the emerging digital market worth $20 billion. The distribution network intends to become a pre-eminent player in the iGaming market in the long haul.

The company’s digital segment consists of iGaming, B2B interactive and sports betting. In third-quarter 2019, digital revenues and AEBITDA increased 7% and 42% year over year, respectively, on growth in existing accounts and new deal wins.

Zacks Rank & Key Picks

Scientific Games currently carries a Zacks Rank #3 (Hold).  

Better-ranked stocks in the same industry are Perficient (PRFT - Free Report) , CACI International CACI and LogMein LOGM. While Perficient sports a Zacks Rank #1 (Strong Buy), both CACI International and LogMein carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Perficient, CACI International and LogMein is pegged at 11.8%, 10% and 5%, respectively.

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