Scientific Games Posted Third Quarter Net Loss of $111M

Gaming equipment and technology provider Scientific Games (SG) released Wednesday its results for the third quarter of 2020, noting its quarter financial performance was adversely impacted by the coronavirus disruptions within the casino industry.

Casino Operation Disruptions and Debt Re-Measurement

Scientific Games posted for the three months ended September 30 revenue of $698 million, 18.4% drop compared to the same period in 2019, but 29% up compared to the $539 million for the second quarter. The Q3 result was impacted by the reduced operations of casino operators globally, due to the adverse effect from the virus outbreak and the imposed restrictions on certain businesses among which gaming and hospitality.

The decrease in revenue year-on-year led to a net loss of $111 million, compared to net income of $18 million for Q3 in 2019. Another impact on SG’s profitability came from a re-measurement of debt which resulted into a $24 million loss, compared to a $19 million gain for the period in the year before.

During the third quarter, SG’s Lottery, SciPlay and Digital verticals performed well and posted growth, justifying the strategic investments the company made in the digital space and to broad its portfolio of products. Operating activities of the company for the quarter accounted for $140 million, consistent with the result from the prior year.

“As a result of our team’s focus on our strategy, our diverse portfolio and our commitment to cost management, we delivered strong cash flow in the third quarter. I really am excited around all the great games, products and solutions we have to help our partners navigate the current environment and provide innovative solutions for the future.”

Barry Cottle, President and CEO, Scientific Games

Increased Cash Flow and Improved Liquidity

Driven mainly by capital improvements, SG increased its free cash flow by $11 million, to $62 million, compared to Q3 in 2019. Total available liquidity at the quarter-end was $1.2 billion. In October, SG renegotiated its revolving credit agreement to further extend with three operational quarters the Covenant Relief Period, initially amended in March, and made a $100 million voluntary payment.

“The team did a great job driving cash flow improvements this quarter, and we will continue to diligently evaluate additional opportunities to increase cash flow and de-lever. Looking ahead, our team will remain highly focused on driving operational efficiencies, further bolstering our liquidity and strengthening our balance sheet. My overarching focus is to improve the balance sheet through operational and business process improvements.” Michael Eklund, Executive VP and CEO, Scientific Games

Adjusted earnings before interest, tax, depreciation and amortization (AEBITDA) from SciPlay increased by 54% year-on-year, to $49 million, boosted by a 30% growth in revenue. Digital AEBITDA jumped nearly 50%, to $25 million, driven mainly by the strong growth in New Jersey, where SG entered into strategic partnership deals with Hard Rock, Flutter Entertainment and Wynn Resorts.

Gaming revenue sank 49% due to the industry-wide coronavirus disruptions which led to reduced casino operations. Operations coin-in for turned on units posted double-digits and outlined the popularity of SG’s games. Retail sales from instant lottery tickets were up nearly 20% for the quarter, compared year over year, and lottery AEBITDA was up 10%.