Despite continuing COVID-19 headwinds, Scientific Games (SG) announced better year-end community trading, affecting the efficiency of its global commercial pipeline.
The Nasdaq gambling technology company posted combined sales of US$762 million in Q4 2020, down 11.7 percent year over year but 8.4 percent higher than Q3 revenue of US$698 million.
Growth in SciPlay, Digital and Lottery sectors
When comparing Q4 2019 results to corresponding Q4 2019 results, the SciPlay, Digital, and Lottery sectors all experienced growth.
SciPlay’s sales grew by 30 percent, with Consolidated Adjusted EBITDA (AEBITDA) rising by 41 percent, while Digital Revenue increased by 1 percent to $73 million, and Lottery earnings increased by over $18 million.
Overall sales for the fourth quarter of 2020 was $762 million, down from $863 million the previous year. This was followed by a net loss of $84 million, compared to $37 million in 2019, largely due to a COVID-related downturn in the operator’s Gaming business, which was affected by the closing of land-based casinos in a variety of countries.
Because of the temporary absence of these venues, net cash flow created by operational operations dropped $75 million to $471 million, though this was partly offset by increased working capital, reduced capex, and lower interest payments.
Gaming division fee
A $15 million Gaming division fee due to receivable credit allowances interrupted activities in addition to the COVID-19 restrictions. While SG has admitted that this ‘improved sequentially’ due to Gaming enhancements, AEBITDA for the fourth quarter was $244 million, down from $328 million the previous year.
This sector’s sales improved from the previous year, while overall handle increased from the previous year. The release of many new games on the Kascada gaming cabinet, as well as stable initial play speeds, have been cited as the primary drivers of these gains.
The losses, however, is mirrored in the operator’s total combined income for the full year, which was $2.7 billion, while 2019 earnings are forecast to be $3.4 billion. In addition to the above New and Lottery advances, which SG has attributed to player monetisation, the fall was accompanied by a 25 percent rise in SciPlay’s sales.
Rise in liquidity
Despite reduced sales and higher net losses, SG’s gross liquidity rose to $1,269 million in the fourth quarter of 2019, up $363 million from the previous quarter.
Despite the decrease in operating cash flow, general net cash flow increased by $20 million to $72 million, which the operator attributed to “improvements in working capital and lower capex partially offset by lower revenue.” The total amount of free cash flow generated for the full trading year was $186 million, according to SG, which was “driven by disciplined cost management and improvements to working capital activities.”
Barry Cottle, CEO and President of Scientific Games said: “While 2020 certainly had unforeseen challenges, I couldn’t be more proud of our team for successfully navigating through them. The strong execution coupled with the diversity of our business enabled positive cash flow.”
Despite its improving results, SG’s ‘Gaming’ segment appears to be plagued by ‘COVID disruptions,’ which have affected the firm’s largest business unit’s revenue, which has risen by 36 percent year over year to $286 million.
Borrowing and repayment
Borrowing and related repayments dominated the year, with the corporation borrowing $530 million under its revolving credit line and making $190 million in payments. This involved a £100 million voluntary redemption, and that was achieved again in February 2021 under the same facility.
Following its funding modifications, the Nasdaq business group corporation currently has $9.3 billion of long-term operating debt on the balance sheet, and £1.26 billion in total cash access reserves.
The operator has defined a variety of factors that may have an impact on sales and activities in 2021. The UK’s regulations on stakes on fixed odds betting terminals (FOBT) was illustrated, as well as the COVID-19 pandemic’s continuing possible repercussions.
The UK’s departure from the European Union, foreign economic and business conditions, and SGC’s own amount of debt, as well as ‘higher interest rates, availability or adequacy of cash flows and liquidity to satisfy indebtedness,’ are all listed as additional threats.
Cottle concluded: “As we start off the year, I am truly excited about the team, products, and game franchises that should enable share gains, deal wins, and opportunities to enter new genres. The executive team and our Board are working purposefully to transform our Company, capitalize on the evolving industry trends and deliver outsized returns to our Shareholders.”