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Scientific Games returns to profit in Q3 as revenue climbs 24.8%


Scientific Games has revealed that a 24.8% year-in-year increase in revenue during the third quarter of its 2021 financial year helped it return to a net profit during the period.

Revenue for the three months to September 30 from continuing operations amounted to $539m, up from $432m in the corresponding period last year.

Scientific Games put this increase mainly down to growth within its gaming segment, where revenue jumped 46.8% to $339m, as the supplier reported a rise in its premium installed base, as well as growth in game sales and its table games business.

Revenue also edged up 6.0% to $53m in the igaming segment, driven by original content, elevated US gross gaming revenue and an increase in US market share, though partially offset by seasonal trends.

However, revenue from the SciPlay social and casual games business fell 2.7% to $147m due to what the supplier described as a “temporary event” in Jackpot Party Casino that has since been addressed. Scientific Games added that it expects SciPlay to return to growth in Q4.

In July, Scientific Games set out plans to acquire the outstanding shares of SciPlay, in a deal with an implied enterprise value of $1.9bn. A special committee of the SciPlay board related to the proposal was announced in August.

Other M&A activity in Q3 included Scientific Games included agreeing a deal to acquire instant content studio Sideplay Entertainment, as well as completing the purchase of gaming content studio Lightning Box.

After the end of Q3, Scientific Games also signed a definitive agreement to acquire the PlayOn cashless gaming solution from ACS and purchased casino solutions provider Authentic Gaming.

In addition, the supplier struck an agreement to sell its Lottery business to private equity company Brookfield Business Partners for $6.05bn, having announced plans to divest the business in June in order to position the company for “sustainable growth”.

At the end of the quarter, the business also agreed to sell its sports betting division OpenBet to global talent and media agency holding company Endeavor Group for $1.20bn.

“In just the last few months we have made tremendous progress on our strategic pillars, delivering on our promises, and rapidly advancing our vision to be the leading cross-platform global game company,” Scientific Games president and chief executive Barry Cottle said.

“With the sale of our lottery and sports betting businesses we are transforming our company, raising $7bn, which will significantly de-lever the balance sheet and enable us to invest for growth. With our streamlined organization we have all of the pieces in place and are singularly focused on building games fully cross-platform.”

Looking at spending for Q3, operating expenses were 9.3% higher at $505m, while other costs, including interest expenses, totalled $106m.

These costs meant SG’s pre-tax loss amounted to $72m, an improvement on $184m at the same point last year, while adjusted earnings before interest, tax, depreciation and amortization (EBTIDA) hiked 73.5% to $203m.

Scientific Games received $172m in tax benefits during Q3, which – after also including $87m in profit from discontinued operations, net of tax – and a $5m loss from non-controlling interests, meant it ended the quarter with a net profit of $182m, compared to a $117m loss last year.

In terms of year-to-date performance, revenue for the nine months through to the end of September was 29.0% higher at $1.57bn.

Operating costs were marginally higher at $1.47bn and other expenses were down 25.6% to $308m, leaving a pre-tax loss of $202m, compared to $649m last year.

Scientific Games received $164m in total tax benefit during the period and after accounting for $329m in profit from discontinued operations, plus a $15m loss from non-controlling interests, this left a net profit of $267m, a significant improvement on a $479m loss posted in 2020.

“We have an exciting path ahead of us as we move rapidly to unlock significant value,” Scientific Games’ executive vice president and chief financial officer Connie James said.

“With the announced sale of lottery and sports betting businesses as well as organic investments and key acquisitions like Authentic, Lightning Box and Koukoi, you are quickly getting to see the shape as well as the pace and agility of our new organization.

“Our momentum continued this quarter with strong top and bottom-line growth and with strong quarterly cash flow as the teams continued to be laser-focused on productivity.

“We are seeing our company come together and coalesce around a high-performance culture that embraces our bright future as we pursue our new vision and I can’t thank our employees enough for their dedication and enthusiasm.”