Bally integration on track at Scientific Games

US gambling group Scientific Games Corporation posted its Q4 and FY 2014 results Wednesday, reporting that the integration of recently acquired Bally Technologies, Inc. is on track.

The numbers for the 2014 fourth quarter and full year include the results of operations of Bally for the 40 days following the closing of the acquisition on November 21, 2014.

Group financial numbers included:

* Revenue in Q4 up at $565.8 million (2013 Q4: $401.9 million);

* FY 2014 revenue $1.786 billion (FY2013: $1.09 billion);

* Operating loss greater in Q4 at – $156.4 million (Q4 2013: -$67.5 million);

* FY2014 operating loss -$172.7 million (FY2013: -$18.3 million);

* Q4 net loss at -$47.1 million (Q4 2103: -$3.5 million);

* FY 2014 net loss of -$234.3 million (FY2013: -$30.2 million);

* Net loss per share in Q4 of -55 cents (Q4 2013: -4 cents);

* Attributable EBITDA in Q4 of $173.3 million (Q4 2013: $130.5 million);

* FY 2014 attributable EBITDA $556.4 million (FY 2013: $382.5 million);

* Available cash as at end December 2014 was $171.8 million (end Dec 2013: $153.7 million);

* Debt of $8.51 billion at end 2014 (end 2013: $3.19 billion);

* The company incurred an additional $18.5 million of non-cash charges in the 2014 fourth quarter, consisting of $6.2 million of impairment charges associated with the Monopoly Millionaires Club game.

Interactive division highlights included:

The interactive division of the company delivered revenues of $43 million, up 43.3 percent on the previous year, with average monthly users up 71.4 percent at 7.2 million, and daily average users up 50 percent at 1.8 million, although average revenue per daily active user was down 15 percent at 22 cents.

The division launched its iGaming and Mobile Platform with Carnival Corporation, which enables on-board guests to wager on their mobile devices throughout the ship while the ship is in international waters.

Real money gaming products were also launched with eight new customers for desktop and nine new customers for mobile.  These launches include a library of premium slot games on the bwin.party online real money gaming platform in New Jersey, which includes the BorgataCasino.com and nj.partypoker.com sites.

Commenting on the overall group performance, president and CEO Gavin Isaacs said:

“With the combination of Scientific Games and Bally, we are focused on becoming the partner of choice for gaming, lottery and interactive customers.”

“To this end, we plan to launch an exciting array of new products across our Bally, WMS, Shuffle Master, Williams, Barcrest and lottery brands throughout the world in 2015. At the same time, as we continue to invest in developing innovative new products and services to help our customers grow their businesses, we also are just as committed to quickly implement our integration plans to realize targeted cost savings and generate growing free cash flow.

“We believe that our planned new product and service introductions will demonstrate that no other company can match the breadth and depth of our differentiated solutions to address the needs of gaming, lottery and interactive customers. The diversity of our products and services and the scale of our operations uniquely position Scientific Games to effectively serve our customers and achieve long-term growth.”

Scott Schweinfurth, executive VP and CFO of the group, gave an update on the integration of new acquisitions and the potential future benefits, commenting:

“Our operating teams are making meaningful progress toward achieving the goals of improving our overall cost structure, while simultaneously enhancing our ability to further support our customers and their operations.”

“The following significant integration initiatives have already begun:

“A reduction in the Company’s worldwide headcount and open positions of 5 percent by December 31, 2014, that has driven approximately $42 million in annualized savings, primarily in selling, general and administrative and research and development expenses through elimination of duplicative positions and redundancies in the Gaming and Interactive business segments.

“Relocation of our corporate headquarters to Nevada and the closure of our New York office.

“The ongoing transition and consolidation of our primary U.S. gaming machine production in Nevada (expected to be completed this summer) and the planned closure of the WMS production facility.

“Selection of the operating system software platform expected to power the next-generation gaming content for all of the Bally, WMS and Shuffle Master branded gaming machines.

“In addition to $14.6 million of restructuring costs related to the Bally acquisition incurred in the 2014 fourth quarter, the company expects to incur $30 million to $35 million of additional operating costs to achieve anticipated cost savings and $15 million to $25 million of capital expenditures related to integration efforts in 2015. In 2016, the company expects to incur $15 million to $25 million in additional operating costs to achieve anticipated cost savings and $15 million to $25 million in additional integration-related capital expenditures.

“We are on track to implement actions expected to yield 80 percent of the targeted $235 million in annualized cost savings related to the Bally merger by the end of 2015. We expect to complete our WMS integration efforts later this year, which we continue to believe will result in $115 million in annual cost savings. Additionally, the integration of Bally’s acquisition of SHFL entertainment, Inc. in late 2013 has been completed, yielding $42 million in annual cost savings.”

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