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Scientific Games expects revenue for SG Lottery to pass $1bn in 2021


Scientific Games expects its lottery division to break $1bn in revenue this year, after accelerating plans to divest the business unit.

The gaming giant has released detailed information regarding SG Lottery’s performance and future opportunities to interested parties, in connection with its previously announced intention to divest the business as part of a strategic review.

In June, it said it wanted to spin off its lottery and sports betting arms in an effort to position the company for “sustainable growth”. This will see it focus on gaming products and services across online and digital channels.

In today’s (September 15) update, the group said SG Lottery revenue is forecast to rise at a two-year compound annual growth rate of 13.6% to fiscal year 2022, building on the $919.0m achieved in fiscal year 2020. It forecasts revenue of $1.04bn in 2021 and $1.18bn in 2022.

Scientific Games said the market-leading position it holds, and infrastructure-like characteristics of its lottery division are expected to lead to sustainable revenue. It has a 69% global share of instant game retail sales and strong momentum across other segments, including a 17% US market share in terminal-generated games.

The group said it expects significant growth underpinned by even faster growth in the US market with 19 additional states expected to legalize ilottery by 2025. This is likely to increase the US ilottery market from sales of $3bn to $12bn by 2025, it added.

Other growth initiatives include Scientific Games Enhanced Partnership (SGEP) conversions, which are more lucrative than traditional deals via a comprehensive service of products and technology-driven analysis and insight.

The group also anticipates expanding market share in systems and retail solutions and enhanced access to capital to pursue B2C and M&A activity.

Scientific Games said instant lottery participation-based revenue growth for fiscal year 2021 is estimated to be 14% in the US and 23% internationally, with further growth expected through digital content provided by August’s acquisition of online instant win studio SidePlay.

Despite an increase in costs related to new business, earnings are expected to rise considerably in the coming years. Earnings before interest, taxes, depreciation, and amortization (EBITDA) of $303.0m was achieved in 2019, but this should rise to $398.0m in 2021 and $433.0m in 2022.

During fiscal year 2021, SG Lottery expects significant contractual capital expenditures to occur primarily as a result of winning the contract with the Pennsylvania lottery systems. In total, SG Lottery expects to spend $55m in incremental expenditures on contract extensions and renewals. In addition, SG Lottery expects to spend $21m on capital expenditures to support existing customer growth during 2021.

In announcing its Q2 results last month, Scientific Games said it is “well-progressed” in its intention to divest the lottery and betting divisions. In its Q2 results for 2021, the SG Lottery division contributed $266m towards the group’s total revenue of $880m.

At the time, Michael Eklund, executive vice president and chief financial officer, said: “In concert with our board, we announced a strategic action plan to transform our company and unlock value. We are taking decisive steps to optimize our portfolio, de-lever our balance sheet and invest to grow.

“I am very encouraged by the interest and discussions we are having around our proposed divestitures, and we are making great progress as we move quickly to unlock shareholder value.”