Scientific Games Posts Annual Net Loss

One of iGaming industry's top-tier solution developers and platform providers, Scientific Games, has published the annual financial report for 2018...

...that shows both the good and the bad of business dealings during this 12-month period that numerous other companies have experienced as well: namely, the great discrepancy between growth in revenue and rising personnel costs and other expenditures.

Despite a very steady, decent growth in year-on-year GGR of 9.1%, the brand recorded a total net loss of $352.4 million.

Tough Realities of Business

A positive turnaround in social and digital segments managed to offset a minor decline in gaming revenue that totaled $1.8 billion for the entire year. Specifically, profits in social gaming rose by 14.9 million (to $415.9m)...

...whereas income in digital tripled owing to a major boost that was last January's purchase of NYX Gaming Group– the final revenue outcome in this division stood at $269.6 million.

Operating costs have substantially inflated as well:

Services expenses increased 21.2% to a total of $505.6 million, while expenditures related to restructuring amounted to $253.4 million, which is $45.9m more than in 2017.

Play of Setbacks and Gains

Even so, consolidated adjusted earnings before interest, tax, depreciation and amortization rose 9% to $1.3 billion. However:

Annual operating profits took a sharp fall of 32.4% to $265.6 million! The company also posted a pre-tax loss of $339.3 million as well yearly net loss of $352.4 million (45.4% more than last year).

Fourth quarter of the year posed a bit of a relief for the company, as revenue increased 7.6% year-on-year compared to same period in 2017, with social segment being specially prominent during this time with a 19.1% leap in income.

The core gaming division's revenue decline of 4.7% is explained by company's analysts with a new revenue recognition accounting that was implemented last year, leading to a $6.8 million nosedive in operations.

With that said, the most dramatic fall happened in the machine sales segment – during 2018's Q4, only 286 units were sold, compared to 884 in fourth quarter of prior year, along with 700 video lottery terminals that were sent to the Canadian market.

Course For 2019 Already Established

Summing up the entire year, Barry Cottle – Scientific Games' CEO – called it a very exciting time for the business and said of the challenges ahead:

"We’re focused on developing the best games and the most innovative platforms to deliver outstanding gaming experiences wherever and whenever players choose to play. We are building momentum and continuing to grow our business while at the same time operating more efficiently.”

He went on to add that the entire group is very much looking forward to 2019 in which it will “help their customers win,” drive free cash flow and create value for shareholders...

...to which finance chief, Michael Quartieri, remarked that opportunities to further growth have been already been identified.

Source:

“Scientific Games publishes Q4 and full-year financials”, Chris Murphy, sbcamericas.com, February 21, 2019.