Scientific Games Enjoys Prosperous Second Quarter Thanks to Their Social Casino Initiative
New York- listed gaming supplier and social casino operator, Scientific Games Corp., has reported an increase in revenue in the second quarter of the year, Q2 of 2017. The company reported revenues of USD $766.3 million for the three months starting 1st April 2017. This reflected a 5 per cent year over year increase compared to the same time last year. The period also marked the seventh consecutive quarter of year over year growth for the company.
The growth of the company was driven once again by Scientific Games’ Interactive division. Their business to customer (B2C) social gaming sector recorded a 32 per cent year over year increase in revenue. It was the largest driving force behind the successful quarter.
Growth was also noted for the company’s Gaming division. However, the Lottery sector of the business saw a marginal decline in revenue. Not to mentioned that foreign exchange impacted around USD $8.0 million in income. Operating income doubled this year to USD $117.3 million for Q2 of 2017. Not too long ago the company suffered 21 quarters of consecutive loss. This stretched on till Q1 of 2012. The recent profits for Scientific Games Corp. have, therefore, helped the company reduce their net loss down to USD $39.1 million.
Kevin Sheehan, the Chief Executive for Scientific Games Corp. reiterated that the Q2 2017 growth in revenues marked the seventh quarter of year over year growths for the company. He also mentioned that this success could be attributed to the continued efforts in the gaming, lottery and interactive departments of the company.
He said, “Second quarter results represent our seventh quarter of consecutive year-over-year growth, including $169m of cash flow from operating activities, as a result of ongoing improvements in our gaming, lottery and interactive operations.”
He went on to list the areas where the company saw profits in the quarter.
Sheehan said, “We achieved year-over-year revenue growth in global gaming machine sales, gaming systems, table products and interactive; as well as in US instant games revenue.”
Sheehan added that the company will now focus on strategies that will best help the them to capture their opportunities.
He said, “Across the company, we are maintaining a laser focus on executing our strategies and capitalising on our many opportunities.”
He concluded by thanking the company’s many employees who have made it such a big global success.
He said, “I am proud of all of our dedicated team members who daily commit themselves to empower our customers with the best gaming and lottery experiences in the world, while remaining focused on delivering our financial goals.”
Breakdown of Q2 2017 Revenue
Scientific Games’ activities can primarily be divided into Gaming, Lottery and Interactive services. The company saw year over year gains in the Gaming and interactive sectors but a small loss for their lottery operations. The company took in a total of USD $766.3 million in Q2 of 2017, compared to USD $729.2 million that they collected during the same time last year. this marked a year over year gain of USD $37.1 million, which also reflected a growth of 5.1 per cent.
Revenue from Gaming was reported at USD $457.2 million for the second quarter of the year, Q2 of 2017. This marked a year over year increase of 3.5 per cent or USD $15.3 revenue for Q2 of 2016 was reported at USD $441.9 million.
Gaming operation revenues were reported at USD $178.4 million for Q2 of 2017, compared to USD $186.0 million that was recorded in the same time last year, Q2 of 2016. This marked a USD $7.6 or 4.1 per cent year over year decline.
Gaming Machine sales reported revenues of USD $163.3 million for Q2 of 2017. Revenues for the same time last year, Q2 of 2016, was reported at USD $154.4 million. This reflected a year over year growth of USD $8.9 million or 5.8 per cent. This primarily reflected an increase in shipments of US and Canadian replacement machines and video gaming terminals (VGTs) in Illinois. The numbers were further affected because of the combined effect of the rise in the average sales price to USD $17,550 per unit.
Gaming Systems reported revenue of USD $67.1 million for the quarter, Q2 of 2017, compared to USD $59.5 million that was reported last year in Q2 of 2016. This marked a USD $7.6 million or 12.8 per cent year over year growth. The growth in Gaming Systems revenue could easily be attributed to an increase in software and hardware sales.
Table Products saw revenues of USD $48.4 million in Q2 of 2017, compared to Q2 of 2016, when the same sector took in USD $42.0 million. This marked a USD $6.4 million growth compared to last year, it also marked a 15.2 per cent year over year growth. This growth was the result of increase in leased shufflers, proprietary table games, and progressives system. The numbers were further enhanced due to the acquisition of DEQ Systems that happened earlier this year in January.
The Gaming division was responsible for generating 60 per cent of the company’s overall revenue in Q2 of 2017, despite the decline in gaming operations. This impacted a decrease in the installed base of WAP, premium and daily- fee participation machines to 20,956.
Total revenue for Lottery services for the quarter, Q2 of 2017, fell by a small USD $1.6 million compared to the same time last year, Q2 of 2016. This marked a 0.8 per cent year over year decline. Revenue for the quarter was reported at USD $202.3 million, while that from the equivalent period from last year was recorded at USD $203.9 million.
Instant Lottery Gamers sales were also down. The sector collected USD 149.4 million in Q2 of 2017, compared to USD $150.9 million the year before, Q2 of 2016. This reflected a year over year decline of USD $1.5 million or 1 per cent.
Lottery services also took in less money this quarter compared to last year. Revenues reported for Q2 of 2017 were USD $41.2 million, while those recorded the year before, Q2 of 2016, was USD $44.1 million. This reflected a year over year decline of 4.3 per cent or USD $1.9 million.
Lottery Product sales, on the other hand was up compared to last year. Revenues for the sector were recorded at USD $11.7 million Q2 of 2017, while those for the year before, Q2 of 2016 were recorded at USD $8.9 million. This marked a USD $2.8 million or 31.5 per cent.
While the increase in lottery product sales helped offset some of the losses in the other areas, the overall results for the lottery sector were impacted on by a USD $2.2 million unfavourable foreign exchange impact.
Total revenue from the company’s Interactive division increased by 28 per cent or USD $23.4 million. The sector collected a total of USD $106.8 million in Q2 of 2017, compared to USD $83.4 million the year before in the second quarter, Q2 of 2016.
Social Gaming or B2C revenues were up by USD $22.0 million. The revenues reported for the sector in Q2 of 2017 was USD $91.1 million, compared to Q2 of 2016, when revenues were reported at USD $69.1 million. This also marked a 31.8 per cent year over year growth.
Business to business (B2B) revenues also saw a growth in Q2 of 2017. They collected a total of USD $15.7 million for the sector in the three month period. This marked a USD $1.4 million growth for the sector compared to Q2 of 2016, when they collected USD $14.3 million. This reflected a year over year gain of 9.8 per cent.
Scientific Games Corp. also highlighted that the Interactive division benefited from the continued popularity of its social casino apps, which includes Jackpot Party Social Casino. the launch of 88 Fortunes in Q1 of this year, together with the acquisition of Spicerack Media and its Bingo Showdown app in April 2017 also added to their profit margins.
The company also reported that average daily active users (DAUs) increased by 4 per cent to 2.5 million in the quarter. However, at the same time, month active users (MAUs) dropped by 6 per cent to 7.5 million users. Average daily revenue per DAU rose 30 per cent to USD $0.40. Mobile penetration was now up to 72 per cent, compared to 67 per cent a year ago.
Comparative Fiscal Figures for Q2 and H1 of 2017 and 2016
While the company saw a healthy growth in revenues for the second quarter, Q2 of 2017 and first half, H1 of 2017, of the year, the company still observed a net loss for both the quarter and the half year.
Operating expenses for the quarter, Q2 of 2017, was USD $21.1 million less than Q2 of 2016. This quarter the expenses were reported at USD $649.0 million, while it was reported at USD $670.1 million for the same time last year. This meant, Scientific Games managed to reduce their operating costs by 3.2 per cent compared to the same time last year.
Operating expenses for the first half of the year, H1 of 2017, were reported at USD $1,286.4 million, while that from the first half of last year, H1 of 2016, was reported at USD $1,301.8 million. This marked a year over year change of USD $15.4 million or 1.2 per cent.
Operating income for the second quarter of the year, Q2 of 2017, was reported at USD $117.3 million. This showed a 98.5 per cent year over year increase compared to Q2 of 2016, when operating income was reported at USD $59.1 million.
The half year operating income for H1 of 2017 was reported at USD $205.3 million. This also marked a 87.7 per cent year over year increase compared to H1 of 2016, when figures were reported at USD $109.4 million.
Other expenses for Scientific Games Corp. had gone up this year compared to last year. Operating income for Q2 of 2017 was reported at USD $150.0 million, compared to USD $130.4 million in Q2 of 2016. This marked a USD $19.6 million or 15 per cent year over year increase.
For the first half year of 2017, H1 of 2017, other expenses for Scientific Games was reported at USD $322.1 million. This was a USD $29.9 million or 10.2 per cent year over year increase compared to the year before, when it was reported at USD $292.2 million.
The company paid income taxes of USD 19.6 million in Q2 of 2016, however, they received tax provisions of USD $6.4 million in the second quarter of 2017.
The first half of 2016, H1 of 2016, also saw Scientific Games pay taxes of USD $38.8 million, while this year in H1 of 2017 they received tax benefits of USD $23.1 million.
Over all the company incurred a net loss in Q2 of 2017 of USD $39.1 million. However, that still marked a year over year improvement. Last year in the second quarter, Q2 of 2016, Scientific Games amassed losses of USD $51.7 million.
The first half of the year, H1 of 2017, also saw the company in net losses. The company reported net loss if USD $139.9 million compared to last year, when in H1 of 2016, the company recorded losses of USD $292.2 million.
The company also reported that services and sales went up by 1 per cent in Q2 of 2017 to USD $278.9 million. Selling, general and administrative expenses were also up 1 per cent. It was reported at USD $145.9 million. Research and development expenses for the company fell this quarter by a full 7 per cent. It was reported at USD $48.1 million for Q2 of 2017. Depreciation, amortization and impairments saw a year over year decrease of 9 per cent compared to a year ago. It was reported at USD $175.0 million for Q2 of 2017. Additionally, their net loss for the quarter was accounted for partially by the interest expenses of USD $151.2 million.
When the fiscal figures for the second quarter and first half of 2017 were announced, Scientific Games also revealed their plans to take advantage of favourable market conditions to refinance a portion of its debt. This is expected to lower their cash interest costs, extend debt maturities, and generally reduce the cost of their capital.
The company will initiate a process to amend and extend its existing term loans, with the stated purpose of reducing cash interest cost and extending the maturity out to 2024.
On the last day of Q2 of 2017, the 30th of June 2017, the company held cash and cash equivalents of USD $198.2 million. This reflected a 72.2 per cent year over year increase compared to the year before, when the company held cash and cash equivalent of USD $115.1 million. The principal face value of debt outstanding amount this year was USD $8.18 billion compared to last year, when the amount was USD $8.24 billion.
Shares in Scientific Games Corp. were trading at USD $26.85 per share at close of trade in New York Friday, the 22nd of July 2017.
Scientific Games Corporation
Scientific Games Corp. is an American gambling provider that trades with all the top organisations across the globe. The company is headquartered in Enterprise, Nevada. They provide products such as instant lottery games, lottery gaming systems, terminals and services, internet applications, server- based interactive gambling terminals, and gambling control systems.
Scientific Games introduced the first secure, instant lottery ticket in 1974. Today they provide lottery retailers with secure point of sale systems that securely print tickets for major national lotteries, such as the Mega Millions and Powerball.
Over the last ten years, Scientific Games has introduced rewards for customer loyalty. These have been added through Scientific Gaming websites. Players are now able to use these sites to earn points and prizes on non- winning tickets that are bought at retail.