Gambling in the USA
Scientific Games Reports Fourth Quarter Results and Full Year 2018 Results
Operating results provide strong finish to year with path set for growth and deleveraging in 2019
Scientific Games Corporation today reported results for the fourth quarter and year ended December 31, 2018.
Fourth Quarter 2018 Financial Highlights:
- Fourth quarter revenue rose 8 percent to $885.7 million, up from $823.0 million in the year ago period, reflecting $51.7 million in revenue from NYX, along with growth in our Lottery and Social businesses.
- Net income was $206.8 million compared to a net loss of $43.1 million in the prior year period, driven by improvement in operating income and due to a $183.1 million reversal of 55% of the previously established reserve related to the Shuffle Tech legal matter.
- Consolidated Adjusted EBITDA (“Consolidated AEBITDA”), a non-GAAP financial measure defined below, increased 6 percent to $343.5 million from $324.5 million in the prior year period, primarily driven by higher revenue and continued operational efficiencies. Consolidated AEBITDA margin, a non-GAAP financial measure defined below, was 38.8 percent, compared to 39.4 percent in the prior year period reflective of a shift in revenue mix primarily driven by NYX.
- Net cash (used in) provided by operating activities decreased to ($9.8) million from $118.1 million in the year ago period, driven primarily by making a $151.5 million payment to resolve the Shuffle Tech legal matter.
- Social Gaming IPO Filing: On December 17, 2018, our Social gaming business confidentially submitted a draft registration statement on Form S-1 to the Securities and Exchange Commission (“SEC”) relating to a possible initial public offering of a minority interest in our Social business (the “contemplated IPO”). The Company anticipates that the proceeds from the contemplated IPO would primarily be used to repay debt. On February 14, 2019, our Social gaming business confidentially submitted Amendment No. 1 to its draft registration statement on Form S-1.
Full Year 2018 Financial Highlights:
- Revenue increased 9 percent, or $279.6 million, year over year to $3,363.2 million.
- Net loss was $352.4 million compared to a net loss of $242.3 million a year ago, driven by $253.4 million in restructuring and other charges primarily consisting of the $151.5 million payment to resolve the Shuffle Tech legal matter and $27.5 million for contingent consideration associated with the higher-than-expected results from the 2017 acquisition of Spicerack.
- Consolidated AEBITDA, a non-GAAP financial measure as defined below, increased 9 percent to $1,329.7 million compared to $1,224.9 million in the prior year.
- Net cash provided by operating activities was $346.1 million compared to $507.1 million in the prior year, reflective of the $151.5 million payment to resolve the Shuffle Tech legal matter and a $52.4 million unfavorable change in accrued interest, due to the timing of our interest payments, which were modified in connection with our refinancing transactions.
Barry Cottle, CEO and President of Scientific Games, said, “This is a very exciting time for Scientific Games. We’re focused on developing the best games and the most innovative platforms to deliver outstanding gaming experiences wherever and whenever players choose to play. We are building momentum and continuing to grow our business while at the same time operating more efficiently. The entire organization is enthused about 2019 and focused on helping our customers win, which will drive our free cash flow and create meaningful value for our shareholders.”
Michael Quartieri, Chief Financial Officer of Scientific Games, added, “We continue to grow our top line driven by the strength of our products. We believe there are opportunities for further growth in 2019, both on a top line and bottom line basis as we are firmly committed to maximize free cash flow and delever our balance sheet.”
SUMMARY CONSOLIDATED RESULTS
|
Three Months Ended December 31, |
||||||||
|
($ in millions)  |
2018 |
2017 |
||||||
|
Revenue |
$ |
885.7 |
$ |
823.0 |
||||
|
Net income (loss) |
206.8 |
(43.1) |
||||||
|
Net cash (used in) provided by operating activities |
(9.8) |
(1) |
118.1 |
|||||
|
Capital expenditures |
97.7 |
79.6 |
||||||
|
Non-GAAP Financial Measures (2) |
||||||||
|
Consolidated AEBITDA |
$ |
343.5 |
$ |
324.5 |
||||
|
Consolidated AEBITDA margin |
38.8% |
39.4% |
||||||
|
Free cash flow |
$ |
(229.2) |
(3) |
$ |
9.7 |
|||
|
Balance Sheet Measures |
As of Dec 31, 2018 |
As of Dec 31, 2017 |
||||||
|
Cash and cash equivalents |
$ |
168.2 |
$ |
788.8 |
||||
|
Principal face value of debt outstanding (4) |
9,218.8 |
8,869.4 |
||||||
|
Available liquidity |
438.7 |
1,009.4 |
||||||
|
(1) Includes a $151.5 million payment to resolve the Shuffle Tech legal matter. |
||||||||
|
(2) The financial measures “Consolidated AEBITDA”, “Consolidated AEBITDA margin”, and “free cash flow” are non-GAAP financial measures defined below under “Non-GAAP Financial Measures” and reconciled to the most directly comparable GAAP measures in the accompanying supplemental tables at the end of this release. |
||||||||
|
(3) Includes a $151.5 million payment to resolve the Shuffle Tech legal matter, $104.2 million for the final LNS concession funding contribution, and an approximate $49.5 million change in accrued interest. |
||||||||
|
(4) Principal face value of outstanding 2026 Secured Euro Notes and 2026 Unsecured Euro Notes are presented at the constant foreign exchange rate at issuance of these notes. |
||||||||
GAMING HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2018
|
Three Months Ended December 31, |
Increase/(Decrease) |
|||||||||||||
|
($ in millions) |
2018 |
2017 |
Amount |
% |
||||||||||
|
Revenue |
||||||||||||||
|
Gaming operations(1) |
$ |
151.4 |
$ |
169.2 |
$ |
(17.8) |
(11) |
% |
||||||
|
Gaming machine sales |
166.7 |
189.8 |
(23.1) |
(12) |
% |
|||||||||
|
Gaming systems |
91.6 |
83.5 |
8.1 |
10 |
% |
|||||||||
|
Table products |
60.1 |
50.0 |
10.1 |
20 |
% |
|||||||||
|
$ |
469.8 |
$ |
492.5 |
$ |
(22.7) |
(5) |
% |
|||||||
|
AEBITDA |
$ |
233.2 |
$ |
237.8 |
$ |
(4.6) |
(2) |
% |
||||||
|
AEBITDA margin |
49.6% |
48.3% |
||||||||||||
|
(1) Gaming operations includes $6.8 million in WAP jackpots as a reduction to revenue in 2018, compared to the 2017 presentation in which $5.4 million of WAP jackpots was classified as cost of services. This change in classification has no impact on AEBITDA. |
||||||||||||||
- Total gaming revenue decreased $22.7 million, including an unfavorable $6.8 million impact on Gaming operations from revenue recognition accounting effective in 2018. AEBITDA decreased 2 percent, or $4.6 million, to $233.2 million, but reflects a 130 basis point improvement in the AEBITDA margin to 49.6 percent driven by product mix shift in the comparable quarter to higher margin table products and gaming systems.
- Gaming operations revenue declined $17.8 million in the fourth quarter of 2018, including the negative impact from the new revenue recognition accounting. Our WAP, premium and daily-fee participation ending installed base was impacted on a year over year basis by the long-term strategic relationship we entered into in Oklahoma in the third quarter. On a quarterly sequential basis, we experienced a 111 unit increase in the installed base and a $1.65 increase in average revenue per day. Our installed base on a quarterly sequential basis of other leased and participation games increased by 121 units with average daily revenue down $0.34, which reflects additional lower yielding units in Greece.
- Gaming machine sales revenue decreased $23.1 million year over year. The prior year included 884 units for new opening and expansion units and 700 VLT units to Canada versus only 286 units in this year’s quarter for new openings and expansions. The average sales price was $16,113, in the fourth quarter reflecting a greater mix of lower priced units.
- Gaming systems revenue increased $8.1 million to $91.6 million, primarily due to ongoing systems installations in Canada, coupled with increased hardware sales, primarily the iVIEW®4.
- Table products revenue increased $10.1 million to $60.1 million, reflecting strong global demand for shufflers and table products.
LOTTERY HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2018
|
Three Months Ended |
Increase/(Decrease) |
|||||||||||||
|
($ in millions) |
2018 |
2017 |
Amount |
% |
||||||||||
|
Revenue |
||||||||||||||
|
Instant products |
$ |
150.2 |
$ |
151.1 |
$ |
(0.9) |
(1) |
% |
||||||
|
Lottery systems (1) |
80.5 |
66.1 |
14.4 |
22 |
% |
|||||||||
|
$ |
230.7 |
$ |
217.2 |
$ |
13.5 |
6 |
% |
|||||||
|
AEBITDA |
$ |
105.0 |
$ |
94.6 |
$ |
10.4 |
11 |
% |
||||||
|
AEBITDA margin |
45.5% |
43.6% |
||||||||||||
|
(1) Lottery systems revenue includes $20.4 million in product sales revenue, compared to $21.5 million in 2017. |
||||||||||||||
- Total lottery revenue increased $13.5 million, or 6 percent, to $230.7 million. AEBITDA increased 11 percent to $105.0 million, compared to $94.6 million in the prior year, with AEBITDA margin improving to 45.5 percent, primarily reflecting the increased margins on domestic lottery systems revenue.
- Instant products revenue of $150.2 million was essentially flat from the prior year.
- Lottery systems revenue increased $14.4 million, or 22 percent, to $80.5 million, driven by a combination of organic growth, higher multi-state jackpot activity in the quarter, a new contract in Kansas and the addition of keno in Pennsylvania.
SOCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2018
|
($ in millions) |
Three Months Ended |
Increase/(Decrease) |
|||||||||||||
|
Revenue |
2018 |
2017 |
Amount |
% |
|||||||||||
|
Mobile |
$ |
91.2 |
$ |
72.0 |
$ |
19.2 |
27 |
% |
|||||||
|
Web and other |
22.5 |
23.5 |
(1.0) |
(4) |
% |
||||||||||
|
$ |
113.7 |
$ |
95.5 |
$ |
18.2 |
19 |
% |
||||||||
|
AEBITDA |
$ |
28.3 |
$ |
21.8 |
$ |
6.5 |
30 |
% |
|||||||
|
AEBITDA margin |
24.9% |
22.8% |
|||||||||||||
- Social revenue grew 19 percent to $113.7 million, reflecting the ongoing popularity of Bingo ShowdownTM, the success of the recently launched MONOPOLY themed casino app and continued growth in Jackpot Party® Social Casino from new game features on our mobile platform.
- AEBITDA rose 30 percent to $28.3 million, and AEBITDA margin increased to 24.9 percent, primarily reflecting our continued scalable growth in revenue.
DIGITAL HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2018
|
Three Months Ended |
Increase/(Decrease) |
||||||||||||||
|
($ in millions) |
2018 |
2017 |
Amount |
% |
|||||||||||
|
Revenue(1) |
|||||||||||||||
|
Sports and platform |
$ |
33.3 |
$ |
– |
$ |
33.3 |
nm |
||||||||
|
Gaming and other |
38.2 |
17.8 |
20.4 |
115 |
% |
||||||||||
|
$ |
71.5 |
$ |
17.8 |
$ |
53.7 |
302 |
% |
||||||||
|
AEBITDA |
$ |
11.8 |
$ |
5.1 |
$ |
6.7 |
131 |
% |
|||||||
|
AEBITDA margin |
16.5% |
28.7% |
|||||||||||||
|
nm – not meaningful |
|||||||||||||||
|
(1) Includes the results of NYX since the completion of its acquisition on January 5, 2018. |
|||||||||||||||
- Total digital revenue increased to $71.5 million, due in part to $51.7 million of revenue from NYX.
- AEBITDA was $11.8 million and AEBITDA margin was 16.5 percent, reflecting the addition of NYX and the investment we are making in our domestic and international sports and platform business.
LIQUIDITY
|
Three Months Ended |
Increase/ |
|||||||||||||
|
($ in millions) |
2018 |
2017 |
(Decrease) |
|||||||||||
|
Net income (loss) |
$ |
206.8 |
$ |
(43.1) |
$ |
249.9 |
||||||||
|
Non-cash adjustments included in net income (loss) |
136.0 |
169.7 |
(33.7) |
|||||||||||
|
Non-cash interest |
6.6 |
3.8 |
2.8 |
|||||||||||
|
Changes in deferred income taxes and other |
(33.5) |
(9.6) |
(23.9) |
|||||||||||
|
Distributed earnings from equity investments |
8.5 |
12.9 |
(4.4) |
|||||||||||
|
Change in legal reserves (1) |
(334.6) |
– |
(334.6) |
|||||||||||
|
Changes in working capital accounts |
0.4 |
(15.6) |
16.0 |
|||||||||||
|
Net cash (used in) provided by operating activities (2) |
$ |
(9.8) |
$ |
118.1 |
$ |
(127.9) |
||||||||
|
(1) Includes reversal of a portion of the previously established legal reserve. |
||||||||||||||
|
(2) Includes a $151.5 million settlement payment to resolve the Shuffle Tech legal matter. |
||||||||||||||
- Net cash (used in) provided by operating activities decreased to ($9.8) million from $118.1 million in the year ago period, principally related to the $151.5 million payment to resolve the Shuffle Tech legal matter and a $49.5 million impact from the timing of our interest payments, which were modified in connection with our refinancing transactions.
- Capital expenditures totaled $97.7 million in the fourth quarter of 2018, compared to $79.6 million in the prior-year period. The increase from the prior year was related to several long-term and highly accretive projects, including ongoing platform development in Digital, the acceleration of our installed base of participation games and WAP games, including the successful rollout of our James Bond franchise, and our 7-year contract extension with Ladbrokes Coral in the U.K.
- For 2019, we expect capital expenditures to be below 2018 and within a range of $345–$375 million, based on existing contractual obligations and planned strategic investments that we believe will be highly accretive to our future cash flow generation.
About Scientific Games:
Scientific Games Corporation (NASDAQ: SGMS) is a leading developer of technology-based products and services and associated content for the worldwide gaming, lottery, social and digital gaming industries. Our portfolio of revenue-generating activities primarily includes supplying gaming machines and game content, casino-management systems and table game products and services to licensed gaming entities; providing instant and draw-based lottery products, lottery systems and lottery content and services to lottery operators; providing social casino solutions to retail consumers and regulated gaming entities, as applicable; and providing a comprehensive suite of digital RMG and sports wagering solutions, distribution platforms, content, products and services. We also gain access to technologies and pursue global expansion through strategic acquisitions and equity investments.
Source: Scientific Games Corporation
Gambling in the USA
Bitline and Everi Announce Crypto Liquidity for Choctaw Casinos & Resorts in Industry First Development
Bitline, the only provider for casino chip access directly from cryptocurrency, has announced its first major collaboration in the U.S. casino market, teaming up with Choctaw Casinos & Resorts through its collaboration with Everi, a premier provider of financial technology and gaming solutions. This collaboration introduces cryptocurrency and digital assets as a new source of liquidity for casino patrons and marks the first time that such a functionality has been enabled within the American gaming industry.
Leveraging Everi’s CashClub’s comprehensive payment infrastructure, Bitline’s solution is able to efficiently board, screen and verify patrons looking to leverage their digital assets whilst also allowing patrons to move screened assets into custody within minutes. Bitline’s integration with Everi Cash Club, the leading financial access services suite for casino payments, will enable the technology for the benefit of Choctaw Casinos & Resorts, and is the first time that such a functionality has been possible in the U.S. regulated casino market.
Catering to the growing demand for greater cryptocurrency and digital asset integration within the casino industry, the collaboration between Bitline and Everi’s forms a transferable blueprint that offers casino operators and their patrons an alternative way to manage funds, access liquidity, and leverage the benefits of cryptocurrency and other digital assets.
This milestone reflects a strategic shift in how casino operators view and manage financial interactions with their guests. The introduction of cryptocurrency as a liquidity solution provides additional options for guests and lays the foundation for Choctaw Casinos & Resorts as it looks to the future of gaming sector finance, setting a new standard in financial accessibility and convenience.
“Working with Choctaw Casinos & Resorts and Everi to make this a reality is a historical moment for both the casino and blockchain industries. Bitline was conceptualized to advance the gaming sector and offer a wider variety of financial options for the casino industry,” said Richard Jones, CEO at Bitline. “We’re entering an era where digital assets can fundamentally enhance the gaming experience, providing casino operators with a future-ready financial framework that can expand and evolve as the industry does. This collaboration is just the beginning of our vision to modernize casino payment capabilities on a global scale.”
Victor Newsom, SVP Product Management, Payments Solutions at Everi comments “This unique integration combines BitLine’s additional payment accessibility options with Everi’s ability to enable seamless, secure, and regulatory compliant financial transactions for casino patrons. Designed from the ground up to exceed the rigorous compliance demands of the industry as well as the discerning expectations of gaming VIPs around the world, Choctaw’s patrons are now no longer limited to the access, times, amount, and speed constraints of the legacy financial systems. This also significantly reduces risk for our casino customers, such as Choctaw.”
“We are excited to be the first casino in North America to offer our guests another way to play,” said Thomas McDonald, Senior Director of Cage and Credit at Choctaw Casinos & Resorts. “Through our long-term relationship with Everi, a leader in fintech solutions, we will continue to invest in innovative offerings that provide the discerning gaming VIP access to funds in a safe and secure manner.”
The Choctaw Casinos & Resorts integration represents only the first phase of Bitline’s broader mission to bring cryptocurrency solutions to casinos and casino patrons worldwide. As cryptocurrency and digital assets continue to gain traction in the gaming sector, Bitline’s easy to integrate and patented payment model stands poised to become a key player in transforming gaming finance. Future plans include expanding services across other major casinos and gaming markets, both domestically and internationally, establishing cryptocurrency as a new standard feature of the gaming experience.
The solution is to be formally rolled out on March 7, 2025, with the first transaction taking place at Choctaw’s Durant, Oklahoma, location.
The Michigan Gaming Control Board (MGCB) has taken decisive action against five offshore online casinos, sending cease-and-desist letters for violating state gaming laws. These websites offer a variety of casino games, such as slots, poker, blackjack, Keno, bingo, and game show games, in addition to sports betting.
The following unlicensed operators are now under scrutiny following the MGCB’s action:
BetWhale Casino, Curaçao
Black Lotus Casino, owned by TD Investments Ltd., Belize
Coins Game Casino, Curaçao
Love2play Casino, Curaçao and Costa Rica
Orion Stars 777 Players, Sichuan Province, China
“These illegal platforms not only violate Michigan’s gaming regulations but also put consumers at risk by offering unreliable withdrawal options and lacking essential consumer protections. Our top priority is safeguarding Michigan residents by ensuring that all online gaming activities are conducted legally and safely. These operators must stop their activities or face additional legal consequences,” MGCB Executive Director Henry Williams said.
Investigations into these illegal activities have revealed that the operators are in violation of multiple Michigan state laws.
Despite offering various payment options like Visa, MasterCard, PayPal, and cryptocurrencies (e.g., Bitcoin and Ethereum), these illegal operators impose strict withdrawal conditions, often requiring players to wager their initial deposits multiple times before they can access their winnings.
The MGCB has given these operators 14 days from the date of receipt of the cease-and-desist letters to halt their illegal activities.
Cryptocurrency
Bitline and Everi Announce Crypto Liquidity for Choctaw Casinos & Resorts in Industry First Development
Bitline, the only provider for casino chip access directly from cryptocurrency, has announced its first major collaboration in the U.S. casino market, teaming up with Choctaw Casinos & Resorts through its collaboration with Everi’s CashClub, the leading financial access services suit for casino payments. This collaboration introduces cryptocurrency and digital assets as a new source of liquidity for casino patrons and marks the first time that such a functionality has been enabled within the American gaming industry.
Leveraging Everi’s CashClub’s comprehensive payment infrastructure, Bitline’s solution is able to efficiently board, screen and verify patrons looking to leverage their digital assets whilst also allowing patrons to move screened assets into custody within minutes. Bitline’s integration with Everi’s CashClub, will enable the technology for the benefit of Choctaw Casinos & Resorts, and is the first time that such a functionality has been possible in the U.S. regulated casino market.
The collaboration works to cater to the growing demand for greater cryptocurrency and digital asset integration within the casino industry. The collaboration between Bitline and Everi’s CashClub forms a transferable blueprint that offers casino operators and their patrons an alternative way to manage funds, access liquidity, and leverage the benefits of cryptocurrency and other digital assets.
This milestone reflects a strategic shift in how casino operators view and manage financial interactions with their guests. The introduction of cryptocurrency as a liquidity solution provides additional options for guests and lays the foundation for Choctaw Casinos & Resorts as it looks to the future of gaming sector finance, setting a new standard in financial accessibility and convenience.
“Working with Choctaw Casinos & Resorts and Everi’s CashClub to make this a reality is a historical moment for both the casino and blockchain industries. Bitline was conceptualized to advance the gaming sector and offer a wider variety of financial options for the casino industry,” said Richard Jones, CEO at Bitline. “We’re entering an era where digital assets can fundamentally enhance the gaming experience, providing casino operators with a future-ready financial framework that can expand and evolve as the industry does. This collaboration is just the beginning of our vision to modernize casino payment capabilities on a global scale.”
“We are excited to be the first casino in North America to offer our guests another way to play,” said Thomas McDonald, Senior Director of Cage and Credit at Choctaw Casinos & Resorts. “Through our long-term relationship with Everi, a leader in fintech solutions, we will continue to invest in innovative offerings that provide the discerning gaming VIP access to funds in a safe and secure manner.”
The Choctaw Casinos & Resorts integration represents only the first phase of Bitline’s broader mission to bring cryptocurrency solutions to casinos and casino patrons worldwide. As cryptocurrency and digital assets continue to gain traction in the gaming sector, Bitline’s easy to integrate and patented payment model stands poised to become a key player in transforming gaming finance. Future plans include expanding services across other major casinos and gaming markets, both domestically and internationally, establishing cryptocurrency as a new standard feature of the gaming experience.
The solution is to be formally rolled out on March 7, 2025, with the first transaction taking place at Choctaw’s Durant, Oklahoma, location.
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