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Scientific Games Rides on Deal Wins & International Growth

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Scientific Games (SGMS - Free Report) is having a terrific 2019, thanks to new lottery and gaming contract wins and international expansions.

In the nine months of 2019 ended Sep 30, Lottery segment revenues increased 10% year over year and accounted for 26.7% of total revenues, driven by equipment sales and organic domestic growth coupled with an increase in instant product revenues.

Additionally, the company’s expanding iLottery business has been a key catalyst in driving digital revenues, which accounted for 8% of total revenues and grew 3% over the same time frame.

Moreover, the company recently won a contract for iLottery online/mobile games from the Pennsylvania Lottery after going through a highly competitive procurement process that reflects its portfolio strength.

Per the new contract, Scientific Games will continue providing iLottery technology, online/mobile games and services for seven years, with three additional one-year renewal options.

The company 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.


International Expansions to Aid Growth in 2020

As mentioned above, international expansion has been a driving factor for Scientific Games in 2019 and is expected to remain the same in 2020.

Notably, this year, the company launched New Zealand Racing Board’s (NZRB) sportsbook, powered by the OpenBet technology.

Additionally, Scientific Games’ 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 recently announced an agreement with Norsk Tipping, Norway’s only Video Lottery Terminal (VLT) operator, to supply 3,000 to 4,500 VLTs in approximately 1,000 venues, beginning late 2020.

Expanding Lottery Footprint: A Key Catalyst

Scientific Games have also won contracts from state lotteries throughout 2019.

The company recently announced that California State Lottery will continue availing its offerings like instant games and services. The parties 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, till November 2022, with optional extensions through 2025.

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

Additionally, Ohio Lottery awarded the company a 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.

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 - Free Report) and ManTech International (MANT - Free Report) . While Perficient sports a Zacks Rank #1 (Strong Buy), both CACI International and ManTech 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 ManTech is pegged at 11.8%, 10% and 8%, respectively.

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