Scientific Games surges on better than expected Q3

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Stock in Nasdaq-listed gaming technology giant Scientific Games leapt more than 25 per cent as third-quarter results exceeded analysts’ rather pessimistic expectations.

Shares in SG climbed by more than a quarter, closing on $26.74, on the news that like-for-like losses were better than anticipated, with an “adjusted loss” of $0.14 per share for the three months to September 30, less than the $0.18 loss predicted.

 

Revenue was up seven per cent in Q3, to $821m, including $46.5m from NYX, along with growth in SG’s lottery and social businesses.

Net loss was $351.6m compared to $59.3m in the corresponding period in 2017, thanks mostly to a hefty $338.7m bill for restructuring and other charges, including $309.6m in relation to the verdict in the Shuffle Tech legal matter – an anti-trust lawsuit relating to patent infringement.

Consolidated attributable EBITDA increased nine per cent to $325.7m, up from $299m, a rise SG said was primarily driven by higher revenue and “continued operational efficiencies”. The consolidated AEBITDA margin was 39.7 per cent in the period, up slightly from 38.9 per cent in Q3 2017.

Social gains

The company is also considering a possible initial public offering of a minority interest in its social gaming business sometime next year. The social gaming business continues to experience rapid growth and has reached significant scale. SG said it believes an IPO would “provide greater flexibility to pursue additional growth initiatives specifically designed for its social gaming business, as well as unlocking additional value for Scientific Games stakeholders”. The company anticipates that the proceeds from the IPO would primarily be used to repay debt.

Barry Cottle, CEO and president of SG, said in a statement: “We are very pleased with the growth we are seeing across our businesses as we continue to lead our industry into the future.

“Our investments in digital, sports betting, and new games are producing the most innovative and engaging products in the market and we are excited about the customer response here in the US and around the world. For our rapidly growing social business, an IPO would give us greater flexibility to pursue growth for the business and drive value for stakeholders.

“We remain focused on delivering for our customers and running our business efficiently and effectively to drive revenue, reduce costs and continue to build momentum across the company.”

SG CFO Michael Quartieri added: “This quarter marks our 12th consecutive quarter of year-over-year growth in revenue and consolidated AEBITDA. Our focus on generating cash flows provides us a clear avenue to strengthen our balance sheet.”

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