Supplier News
US – Scientific reports record quarter in gaming as full year increases by seven per cent
By Phil - 2 March 2018
Scientific games reported growth across all three of its business segments with overall revenues for 2017 up by seven per cent to US$$3,083.6m.
Fourth quarter revenue increased nine per cent to $823m, up from $752.2m in the year ago period.
In the gaming segment revenue increased seven per cent to a quarterly record $492.5m, driven by global shipments of 10,249 new gaming machines. The lottery segment saw revenue rise nine per cent to $217.2m led by a quarterly record level of instant games revenue; and the interactive segment generated ongoing strong revenue growth of 24 per cent to $113.3m.
“Our results in the fourth quarter 2017 reflect the improvements achieved in revenue, operating income and AEBITDA growth by each of our business segments,” said Kevin Sheehan, CEO and President of Scientific Games. “For 2018, we believe the company is well positioned to continue to grow and build on the success attained in the past year. In gaming, revenue was driven by the exceptional strength of our gaming machines shipments, a record breaking quarterly shipment of 10,249 units. Following a very strong third quarter performance, our replacement unit shipments in the US and Canada were up 23 per cent over the prior year. Also contributing to the game growth was 31 per cent increase in gaming systems revenue, reflecting the beginning of the systems rollout to Casinos across Alberta, Canada.”
The increase in the US and Canada was driven by the strong performance of the TwinStar family of gaming machines, along with continued strong sales of the Pro Wave cabinet. The increase in replacement units more than offset the impact from lower global sales related to fewer new casino openings and expansions. The average sales price increased to $16,858 from $16,268 in the prior year, reflecting a more favorable mix of gaming machines. U.S. and Canadian shipments totaled 5,840 gaming machines, including 4,421 replacement units, 884 units for new casino openings and expansions and 535 VGTs for the Illinois market. In the prior-year period, U.S. and Canadian shipments totaled 5,115 units, which comprised 3,604 replacement units, 1,229 units for new casino openings and expansions and 282 VGTs for the Illinois market. Total international shipments increased 290 units, or 7 percent, to 4,409 units, including 208 units for new casino openings, compared with 4,119 units in the prior year, which had included 404 units for new casino openings.
Canadian replacement gaming machines that Gaming systems revenue increased $19.6m, or 31 per cent, to $83.5m, primarily due to the initial installations of a new system to casinos in the province of Alberta, coupled with increased hardware sales, reflecting shipments of innovative new iVIEW4 player-interface display units. The rollout of the new system to additional casinos across Alberta is expected to continue throughout 2018, as well as the ongoing deployment of a new system to casinos across Ontario.
Looking forward into 2018, Michael Quartieri, Chief Financial Officer of Scientific Games, said: “We fully expect to get our fair share with the expected openings of the Hard Rock Atlantic City and MGM Springfield Massachusetts casinos whereas we had no new large openings in the second or third quarters of 2017. And of course, we also fully expect to get our fair share of the numerous casino expansions within tribal and commercial operator that will occur throughout the year.
“We expect to continue replacing our older units on Casino floors over the remainder of 2018, driven by the steady introductory pace of new products, including the new B75 extra large curve screen cabinet and the innovative new TwinStar J43 iReels cabinet with launch only at the end of Q4. With the introduction of our highly anticipated James Bond themed games, which are expected to launch mid-year, we expect our pace and performance and incremental machine placements to accelerate in the second half of 2018.”
Total lottery revenue meanwhile increased by $17.5m, or nine per cent, inclusive of a $2.7m favorable foreign exchange impact compared to the year-ago period.
Mr. Sheehan explained: “In our lottery business, our customer centric focus helped our US lottery customers grow retail sales of instant games in the fourth quarter by seven per cent year-over-year, including a record level of instant games’ quarterly revenue. We did this by providing our customers with a broad offering of instant games, including a wide selection of holiday themed games. Adding to that, we offer our customers expansive supporting services and advanced technology, including our leading iLottery and mobile capabilities. In fact, today one in four US lotteries have an SG global lottery app.”
Mr. Quartieri added: “Our improved performance and strong future prospects enabled us to successfully refinance a portion of our capital structure in 2017 and 2018 that significantly lowers our cost of capital and increases future cash flow. We believe there is potential to achieve further improvements in 2018 and beyond, and we remain committed to our path of deleveraging and growing our business.”
Elsewhere, table products revenue decreased $4.9m to $50m reflecting a decline in sales of new shufflers and other table game products from the record sales level a year ago to casinos primarily in international markets, while revenue generated by the installed base of shufflers, proprietary table games and progressives increased by $5.9m.
Total interactive revenue grew 24 per cent to $113.3m, primarily reflecting a 28 per cent increase in social gaming B2C revenue due to the ongoing popularity of the Jackpot Party Social Casino and Quick Hit Slots apps, coupled with the growing success of more recent apps, such as the 88 Fortunes app launched in the first quarter of 2017, and the contribution of the Bingo Showdown app, acquired in April 2017.
Mr Sheehan added: ”Our interactive segment continues to roll along with solid growth and improvement. Segment results were a 24 per cent increase in revenue and a 37 per cent increase in attributable EBITDA year-over-year, including a 28 per cent increase in revenue in our social business. In the first quarter this year, we took another step forward with the reintroduction of a new and improved Jackpot Party social casino app. This enhanced player engaging version is evidence of our strategy of continue focus on providing the best player experience. And that leads me to a most exciting accomplishment, which is the completion of the NYX acquisition on January 5.
“NYX has a leading capability in sport wagering and online real money gaming platforms to our own strengths in line gaming content,” he added. “In addition to building on their own solid track record of growth globally, we believe we are also well positioned to participate in any liberalization of sports setting and online gaming. I’ve been part of many acquisitions over the years, and it is rare to find a transaction that is both highly strategic in nature and financially compelling in year one. And NYX checks both boxes. We began our integration efforts following the completion of the transaction and are off to an excellent start.”
