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US – Scientific delivers five per cent revenue increase in second quarter

By - 8 August 2016

The news of Gavin Isaacs stepping down as CEO and President of Scientific dominated the headlines for Scientifics’ second quarter where the company delivered a five per cent revenue increase to to US$729.2m.

Revenue increased five per cent, or $37.7m, year over year to $729.2m, despite the impact from $5.3m of unfavorable currency translation and $6.6m due to the previously disclosed January 2016 expiration of the Chinalottery validation contract. Revenue growth included a 62 per cent increase in Interactive revenue, an 11-percent increase in gaming machine sales revenue, and an 11 per cent increase in instant games revenue.

Outgoing CEO Gavin Isaacs said: “Thanks to the hard work of the entire Scientific Games team, we delivered our third consecutive quarter of year-over-year increases in revenue, operating income and cash flow from operating activities. We’re on a roll — executing on our business strategies, delivering improved results, and paying down debt. Our performance demonstrates the ongoing success of our business and the value from our diverse revenue streams. Our Interactive division is on fire, gaming machine sales were strong, and the Lottery segment’s instant games revenue turned in an exceptional performance. We remain focused on driving innovation and fiscal discipline to support future cash flow growth to create meaningful and sustained long-term shareholder value.”

Operating income increased to $59.1m from essentially breakeven in the year-ago quarter, reflecting the higher revenue, the benefit of cost synergies from 2015 integration initiatives, lower costs associated with integration and restructuring activities, and lower impairment charges. Net loss declined 49 per cent to $51.7m, reflecting the improved operating income as well as a $25.2mgain on early extinguishment of debt, compared to a net loss of $102.2m in the prior-year period.

Scientific Games continued to de-lever in the second quarter with a $79.8m reduction in the principal face value of its debt, which included the repurchase of $65.9m aggregate principal face value of the Company’s subordinated 6.250 per cent Notes due 2020 and 6.625% Notes due 2021 at a discount.

Cash and availability under our revolving credit facility was $558.8m as of June 30, 2016.

Michael Quartieri, Scientific Games Executive Vice President and Chief Financial Officer, said:”Across our global operations, we continue to manage costs and execute on our strategies to deliver consistent revenue growth. Our ongoing implementation of process improvements is generating operating efficiencies which, combined with fiscal discipline in our capital spending and a focus on improving our core working capital, is leading to higher cash flow and reducing our leverage. Since closing on the Bally acquisition in 2014, our total debt has been reduced by more than $250m.”

Total Lottery revenue increased $13.7m, despite the unfavorable impact of $6.6m due to the expiration of the China Sports Lottery validation contract and $1.2m of unfavorable currency translation.
Instant games revenue of $150.9m increased $15.4m, or 11 percent, reflecting our continued market leadership in the instant games business. Performance was primarily driven by a 17-percent increase in U.S. instant games revenue with particular strength reflected in the retail sales growth at customers with participation contracts, as well as revenue from licensed games, multi-games and loyalty programs.

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