Scientific Games (SGMS) Posts Earnings in Q3, Revenues Miss

Scientific Games Corporation SGMS reported earnings of 15 cents per share in third-quarter 2019. The company had reported a loss of $3.85 per share in the year-ago quarter. The Zacks Consensus Estimate for earnings was pegged at 2 cents.

Revenues came in at $855 million, up 4% year over year. The reported figure, however, missed the Zacks Consensus Estimate by 0.2%.

Services revenues increased 3% to $452 million. Product sales were up 6.3% to $255 million. Instant product revenues were $148 million, up 4.2%.

Quarter Details

Gaming revenues (53.1% of revenues) increased 1.3% year over year to $454 million.

Lottery revenues (25.7% of revenues) were up 6.3% year over year to $220 million. The company was selected as the exclusive supplier to the joint venture operating the Turkey National Lottery. Scientific Games was also selected as the exclusive terminal hardware partner to Sisal in Italy.

Moreover, in early October, the Florida Lottery selected Scientific Games as its primary instant games’ provider through 2027.

SciPlay revenues (13.6% of revenues) jumped 10.5% year over year to $116 million. This upside was driven by increased monetization of paying players, with ARPDAU up 9% to $0.47.

Digital (7.6% of revenues) revenues climbed 6.6% year over year to $65 million.

Consolidated adjusted EBITDA (AEBITDA) increased 5.5% year over year to $344 million. AEBITDA margin expanded 50 basis points (bps) to 40.2%.

Gaming AEBITDA decreased 3% year over year to $226 million. However, the Gaming AEBITDA margin shrunk 220 bps to 49.8%.

Lottery AEBITDA increased 7.6% from the year-ago quarter to $99 million. Moreover, Lottery AEBITDA margin expanded 60 bps to 45%.

SciPlay AEBITDA jumped 33.3% to $32 million. In addition, AEBITDA margin expanded 470 bps to 27.6%.

Further, Digital AEBITDA jumped 41.7% from the year-ago quarter to $17 million. Digital AEBITDA margins expanded 650 bps on a year-over-year basis to 26.2%.

Selling, general and administrative expenses flared up 2.9% year over year to $175 million. However, research & development expenses declined 6% to $47 million.

Scientific Games Corp Price, Consensus and EPS Surprise

Scientific Games Corp Price, Consensus and EPS Surprise

Scientific Games Corp price-consensus-eps-surprise-chart | Scientific Games Corp Quote

Balance Sheet & Cash Flow

As of Sep 30, 2019, cash and cash equivalents were $363 million compared with $369 million as on Jun 30, 2019.

Net debt was $8.6 billion ($9 billion in face value of debt outstanding less $363 million of cash and cash equivalents) at the end of the third quarter.

Net debt leverage ratio was 6.4 times. Scientific Games is aimed at achieving net debt leverage of approximately 5.5 times by the end of 2020.

Cash from operating activities was $141 million compared with the prior quarter’s $95 million. Free cash flow was $53 million compared with the $38 million recorded in the previous quarter.

Zacks Rank & Other Stocks to Consider

Scientific Games currently carries a Zacks Rank #2 (Buy).

Cadence Design Systems CDNS, Microsoft MSFT and MSCI MSCI are some other similar-ranked stocks in the same sector. All three stocks hold a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Long-term earnings growth rate for Cadence, Microsoft and MSCI is currently pegged at 10.5%, 11.9% and 10%, respectively.

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