Scientific Games Corp.
) posted a loss of 1 cent per share in the fourth quarter of
2013, which was well behind the Zacks Consensus Estimate of
earnings of 5 cents. The quarterly loss was however narrower than
a loss of 15 cents per share reported in the year-ago quarter.
Revenues surged 62.8% year over year to $401.9 million and
convincingly beat the Zacks Consensus Estimate of $340.0 million.
The year-over-year increase in revenues can be attributed to
strong growth across all the segments.
During the quarter, Scientific Games completed the acquisition of
WMS Industries. The company realigned its operating structure
into three groups, Lottery operations (comprises instant products
and lottery systems), Interactive gaming group (social gaming,
real money online gaming, content publishing and distribution)
and Gaming group (Williams Interactive and legacy Scientific
Games UK, Mexico, Caribbean server based gaming businesses and
video gaming business).
Gaming segment revenues jumped to $181.9 million from $43.7
million in the year-ago quarter attributable to the revenues
earned from WMS Gaming acquisition ($145.0 million). Services
contributed $110.1 million of the revenue while product sales
chipped in with the remnant $71.8 million.
Instant Products Group revenues increased 8.3% year over year to
$140.3 million. The results were primarily driven by an increase
in revenues from the company's licensed properties business and
cooperative services and the percentage of sales customers. Out
of the total Instant Products Group revenue, about $137.0 million
came from Instant Games while the remnant $ 3.3 million was the
contribution of Product Sales.
Lottery Systems Group revenues increased 8.4% year over year to
$79.7 million, reflecting higher sports betting revenues and
revenues from new customers, including the launch of iGaming for
the Delaware Lottery. Services chipped in with $57.2 million of
the revenue while Product sales contributed the remnant $22.5
Instant ticket sales of the company's U.S. customers increased
over 4.3% in the quarter. Retail sales of Instant games in
Italy declined 1.2% year-over-year.
During the quarter, Scientific Games entered into contracts to
begin providing instant games in Panama and the Dominican
Republic. Also, it terminated the contract to operate in online
gaming site in Belgium as well as divested certain non-core
assets which included the selling of its investment in Sportech.
Attributable earnings before interest, taxes, depreciation and
amortization (EBITDA) increased from $89.9 million in the
year-ago quarter to $130.5 million in the reported quarter.
Depreciation & amortization (D&A) expense increased 83.0%
year over year to $91.3 million in the quarter. Selling, general
& administrative expense (SG&A) increased from $48.9
million in the year-ago quarter to $127.3 million in the reported
Research & development expense increased from $1.5 million to
$21.3 million year over year while restructuring expense
increased from $0.8 million in the year-ago quarter to $22.4
million in the reported quarter.
Operating loss was $67.5 million compared to income of $10.1
million in the year-ago quarter. Scientific Games reported a net
loss of $3.5 million compared with net loss of $24.7 million in
the year-ago quarter.
Balance Sheet & Cash Flow
Scientific Games exited the quarter with $153.7 million in cash
and cash equivalents compared with $73.5 million in the prior
quarter. Total debt increased to $3.2 billion from $1.45 billion
at the end of the previous quarter.
Scientific Games reported decent fourth quarter 2013 results,
with a narrower year over year loss and revenues exceeding the
Zacks Consensus Estimate.
The domestic lottery industry is undergoing a transition, which
involves increasing involvement of private vendors in state
lottery management, higher prize payouts and the introduction of
tiered pricing for national jackpot games. All these are expected
to add impetus to the sagging U.S. lottery industry. We believe
that Scientific Games is well positioned to benefit from these
transitions, going forward.
However, the company faces stiff competition from the likes of
Computer Sciences Corp.
Bally Technologies Inc.
), which is expected to hurt profitability, going forward.
Currently, Scientific Games has a Zacks Rank #3 (Hold).
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SCIENTIFIC GAME (SGMS): Free Stock Analysis
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