Scientific Games Reports 2019 Growth Despite Tough Q4

The Las Vegas-headquartered Scientific Games has surprisingly announced a rise in its year-on-year revenue and a reduction of the reported 2019 net loss, despite having a tough Q4 with falling gaming and social revenue.

Revenue

The 12 months through to 31 December 2019 reportedly generated revenue of 1.2% higher than the previous period, with $3.4 billion and $3.36 billion, respectively, and although SG did not disclose full details about the full-year revenue results but only an overarching view of the performance of the company, its services revenue numbers have gone up 2.3% compared to 2018, amounting to $1.82 billion, with product sales revenue unchanged year-on-year at $994 million but the instant product sales slightly down from $592 million in 2018 to $587 million in 2019.

Spending

Spending-wise, SG made significant cost reductions, as total operating expenses went down to $2.85 billion, 8.1% decrease, due to cutting costs across various areas of the business, with selling, general and administrative costs down 1.4% compared to the previous year, $707 million and $697 million, respectively, and cost of product sales down 1.9% to $457 million.

Cost of services, though, went up from $505 million to $538 million and so did instant product costs, rising to $289 million, with $284 million for the year before.

Another significant area of cost reduction Scientific Games noted was its depreciation, amortization and impairments costs that were 6.2% down at $647 million for the year.

Operating Income

The combination of slightly higher revenue and noticeable cost cutting resulted into a 105.1% year-on-year increase in the operating income, $546 million, with net loss before taxation going down from $339 million to $108 million. After tax, net loss was at $130 million, compared to $352 million in 2018, but the company noted that a $152 million charge related to a legal matter with Shuffle Tech was included in the 2018 report.

Q4 Details

The increase for the full year revenue number was surprising at the background of the negative end to the year, with Q4 revenue down 2.6% year-on-year to $863 million, due to gaming revenue down 5.3% to $445 million, with lottery revenue slightly up to $233 million, and digital revenue slightly increased to $72 million, unlike revenue from the SciPlay social gaming that fell 0.9% to $113 million.

SG operating expenses in the fourth quarter spiked 25.8% year-on-year to $711 million even though last year’s number contained a $171 million benefit due to internal restructuring, and operating income fell sharply by 52.7% to $152 million, and together with $187 million in other financial expenses, led to a net $35 million loss before income tax, $214 million for 2018 Q4.

The net loss standing at $43 million, after income taxes of $2 million and adding a $6 million profit from from non-controlling interests,   signifies a bigger drop compared to the $207 million profit for the same period in 2018.