Scientific Games Corp.
) posted earnings of 5 cents per share, which beat the Zacks
Consensus Estimate by a penny in the third quarter of 2013.
Earnings per share improved significantly from a loss of 22 cents
per share reported in the year-ago quarter.
Revenues increased 4.4% year over year to $234.4 million, but
lagged the Zacks Consensus Estimate of $239.0 million. The
year-over-year increase in revenues can be attributed to
improvement in the sales and Instant Ticket segment.
Instant ticket revenues increased 4.2% year over year to
$129.7 million. Instant ticket sales of the company's U.S.
customers increased over 4.0% in the quarter, while sales of
draw-based games grew nearly 8.0% compared with the year-ago
During the quarter, Scientific Games also secured a number of
contract extensions which include Florida Lottery and Missouri
Lottery, wherein the company will continue to serve as the
primary instant game provider. Moreover, the company announced a
new contract with Ladbrokes.
Segment-wise, Printed Products Group revenues increased 4.2%
year over year to $132.7 million. The results were primarily
driven by an increase in revenues from the company's licensed
properties business along with revenue growth from the company's
cooperative services and percentage of sales customers.
Lottery Systems Group revenues increased 11.5% year over year
to $69.0 million, reflecting higher international hardware and
software sales while the increase in service revenues can be
attributed to higher international revenues in Powerball
Gaming revenues declined 7.3% year over year to $32.7 million.
The year-over-year decline was primarily due to lower sales of
Attributable earnings before interest, taxes, depreciation and
amortization (EBITDA) margin increased 256 basis points (bps)
from the year-ago quarter to 39.2%.
Depreciation & amortization (D&A) expense declined
1.2% year over year to $35.2 million in the quarter. Selling,
general & administrative expense (SG&A) increased 7.4%
year over year to $46.9 million.
Operating margin was 10.9% compared with 7.3% in the year-ago
quarter due to lower depreciation & amortization expense.
Scientific Games reported net income of $3.9 million compared
with net loss of $19.6 million in the year-ago quarter.
Balance Sheet & Cash Flow
Scientific Games exited the quarter with $73.5 million in cash
and cash equivalents compared with $78.1 million in the prior
quarter. Total debt declined to $1.45 billion from $1.46 billion
at the end of the previous quarter.
Scientific Games reported mixed third quarter 2013 result,
with earnings exceeding zacks consensus, while revenue lagging
behind the same.
The domestic lottery industry is undergoing a transition,
which involves increasing involvement of private vendors in state
lottery management, higher prize payouts and introduction of
tiered pricing for national jackpot games to add impetus to the
sagging U.S. lottery industry. We believe that Scientific Games
is well positioned to benefit from these transitions, going
However, the company faces stiff competition from the likes of
International Game Technology
and Bally Technologies Inc.
), which is expected to hurt profitability, going forward.
Currently, Scientific Games has a Zacks Rank #3 (Hold).
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INTL GAME TECH (IGT): Free Stock Analysis
SCIENTIFIC GAME (SGMS): Free Stock Analysis
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