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Scientific Games (SGMS) Incurs Q4 Loss on Lower Y/Y Revenues

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Scientific Games Corporation SGMS reported a loss of 95 cents per share for fourth-quarter 2020. The company had reported earnings of 10 cents per share in the year-ago quarter.

Revenues came in at $762 million, down 11.7% year over year. The decline primarily resulted from lower Gaming revenues due to continued reduced operations of casino operators globally as a result of coronavirus-led business disruptions.

Notably, the Zacks Consensus Estimate for earnings and revenues was pegged at a loss of 39 cents per share and $719 million, respectively.

Services revenues decreased 4.2% to $432 million. Product sales were down 32.7% to $177 million. Meanwhile, Instant product revenues came in at $153 million, up 2.7%.

Scientific Games Corp Price and EPS Surprise

Scientific Games Corp Price and EPS Surprise
Scientific Games Corp Price and EPS Surprise

Scientific Games Corp price-eps-surprise | Scientific Games Corp Quote

Quarter Details

Gaming revenues (37.5% of revenues) decreased 35.7% year over year to $286 million. The company’s Gaming revenues were negatively impacted by COVID-19 disruptions that resulted in continued reduced operations of casino operators in various jurisdictions globally.

On Nov 12, Scientific Games announced the launch of Lightning Box’s games in Pennsylvania, marking the slot provider’s entry into the Keystone State. The company has rolled out two titles, Lightning Horseman and Respin Rhino, via the Open Gaming System, with players across the state now able to access these popular online games.

Meanwhile, Lottery revenues (33.6% of revenues) increased 9.9% year over year to $256 million driven by higher international product sales.

During the quarter, Scientific Games announced the launch of its advanced SYMPHONY lottery gaming systems technology. The system now powers Lotto Baden-Württemberg and its network of more than 3,000 licensed retailers.

Moreover, the company announced that it will supply and deploy lottery instant games, e-instant digital games, and WAVE lottery retailer terminals to SISAL S.p.A. in Morocco.

SciPlay revenues (19.3% of revenues) rose 30.1% year over year to $147 million driven by improved payer conversion, which outpaced industry growth.

Moreover, average revenue per daily active user (ARPDAU) increased 26% to 63 cents. Moreover, SciPlay mobile penetration increased 300 basis points (bps) to 87%.

Digital (9.6% of revenues) revenues increased 1.4% year over year to $73 million. On Nov 23, Scientific Games announced the integration of BlueRibbon’s customizable jackpot solution into its OpenGaming ecosystem. This new partnership strengthens Scientific Games’ OpenGaming, providing partners across regulated markets with the ability to create bespoke jackpots within games through BlueRibbon’s software.

Consolidated adjusted EBITDA (AEBITDA) decreased 25.6% year over year to $244 million. AEBITDA margin, as a percentage of revenues, contracted 600 bps to 32% in the reported quarter.

Gaming AEBITDA decreased 49.8% year over year to $105 million while Lottery AEBITDA increased 7.1% from the year-ago quarter to $105 million. Further, Lottery AEBITDA margin expanded 240 basis points (bps) to 13.9%.

SciPlay AEBITDA surged 40.6% to $45 million. In addition, AEBITDA margin expanded 220 bps to 5.9%.

Digital AEBITDA declined 4.8% from the year-ago quarter to $20 million. Digital AEBITDA margin expanded 20 bps to 2.6%.

Selling, general and administrative expenses increased 9.3% year over year to $188 million. Meanwhile, research & development expenses declined 6.5% to $43 million.

Balance Sheet & Cash Flow

As of Dec 31, cash and cash equivalents were $1.01 billion compared with $1.04 billion as of Sep 30, 2020.

Net debt was $8.29 billion as of Dec 31 compared with $8.47 billion as of Sep 30.

As of Dec 31, the company had $1.2 billion in available liquidity, which included SciPlay’s revolving credit facility.

On Oct 8, the company amended its credit agreement that extended the Covenant Relief Period under its revolving credit facility through the first quarter of 2022 and made a $100 million voluntary payment. In February 2021, the company made a $100 million voluntary repayment under SGI's revolving credit facility.

Net debt leverage ratio was 10.5 times as of Dec 31.

Cash from operating activities was $159 million compared with the prior quarter’s $140 million. Free cash flow was $72 million compared with $62 million in the previous quarter.

Zacks Rank & Stocks to Consider

Scientific Games currently carries a Zacks Rank #4 (Sell).

Culp, Inc. CULP, Golden Entertainment, Inc. GDEN and Select Interior Concepts, Inc. SIC are some better-ranked stocks in the broader computer and technology sector. Each carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

Culp, Golden Entertainment and Select Interior Concepts will report fourth-quarter 2020 results on Mar 2, Mar 11 and Mar 15, respectively.

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Scientific Games Corp (SGMS) : Free Stock Analysis Report

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