Scientific games report Q2 results

Scientific Games Corporation turned in a strong performance in terms of revenue but incurred a net loss of US$72.4 million attributed to the early extinguishment of debt and high expenses.

Key performance highlights for the quarter ending June 30, 2014 include:

–           Group revenue increased to $416.9 million (Q2/2013: $235.0 million), up 77 percent
–           Attributable EBITDA increased $47.6 million (Q2/3013: $132.1 million).
–           Net loss of $72.4 million attributed to the early extinguishment of debt (Q2/2013: $12.4 million)

“Our second quarter revenue of $416.9 million reflected contributions from the WMS acquisition, which substantially expanded our gaming business, and a 7 percent year-over-year increase in lottery revenue,” said Gavin Isaacs, President and Chief Executive Officer.

“Although our second quarter results continued to reflect challenging gaming industry conditions, we saw sequential quarterly revenue growth across our businesses and benefits from our ongoing integration initiatives, which contributed to a $9.3 million sequential quarterly increase in attributable EBITDA. While we have made significant progress across our worldwide organization with our integration efforts, we believe there are additional opportunities to grow our business and further strengthen performance.”

Speaking about Scientific Games’ acquisition of Bally Technologies, Isaacs said: We believe the combination will provide opportunities to cross-utilize the companies’ content and technology across lottery, gaming and interactive distribution channels and platforms, further diversify our revenue streams, and increase our cash flows allowing us to meaningfully reduce our leverage.”

Scientific Games’ integration of WMS is advanced and the company expects plans to reduce costs by $100 million. “Even as we continue our integration initiatives, we are focused on identifying additional process improvements to eliminate redundancies and unneeded costs that should further improve our operating margins and increase free cash flow,” said Scott D. Schweinfurth, Executive Vice President and Chief Financial Officer. “Significantly, we believe Scientific Games’ acquisition of Bally would provide an important opportunity to realize an incremental $220 million in cost savings.”

Key financial highlights for the quarter ending June 30, 2014 in Scientific Games’ Gaming Segment include:

–   Gaming segment revenue increased $168.5 million principally due to $169.6 million of revenue from WMS
–   Gaming segment services revenue increased $92.8 million, reflecting $93.0 million of revenue from WMS.
–   Interactive services revenue was $32.3 million reflecting the acquisition of WMS.
–   Growth in revenue from the social gaming business in DAU was 1.4 million, reflecting a significantly larger player base and growth in players using mobile.
–   Operating loss improved by $6.6 million to a loss of $1.8 million, reflecting the acquisition of WMS, associated integration-related savings and an improved UK Gaming cost structure.
–   Selling, general and administrative expense increased $37.9 million primarily from WMS
–   Research and development expense increased $23.7 million primarily from WMS
–   Employee termination and restructuring costs reflected $2.2 million of charges associated with integration-related cost savings initiatives
–   Depreciation and amortization increased $45.4 million, of which $53.2 million was from WMS.

Highlights over the quarter include the launch of the Gold Fish Social Slots app and five new game content agreements with online operators.