Scientific Games returns to net profit in FY21 as revenue jumps 26.7%

Scientific Games – which is set to rebrand to ‘Light & Wonder’ – was able to return to a net profit of $371m (£279m/€334m) during its 2021 financial year after revenue increased 26.7% year-on-year.

Revenue from continuing operations for the 12 months to 31 December 2021 amounted to $2.15bn, up from $1.70bn in the previous financial year.

Services accounted for $1.64bn of all revenue, an increase of 30.4% on 2021, while product sales revenue reached $511m, up 16.1% year-on-year.

Breaking this performance down further, gaming remained by far the group’s core business, generating $1.32bn during the year, up 42.7% year-on-year. Scientific Games said this was primarily due to growth within its North America premium gaming operations business, as well as market recovery following the novel coronavirus (Covid-19) pandemic.

Revenue from the SciPlay social gaming division edged up 4.1% to a record $606m, helped by what the group described as a “strong core business”, while igaming revenue also hit a new record of $226m, up 18.3% due to a strong performance in the US.

The 2021 financial year proved to be a busy 12 months for Scientific Games, with the stand-out event coming in October when the the group entered a definitive agreement to sell its lottery business to private equity company Brookfield Business Partners for $6.05bn.

Should the deal go through as expected, this will mean Scientific Games will divest its entire lottery business, which includes instant and terminal-generated lottery games, sports betting, lottery systems and retail technology and online lottery market, and shift to a focus on gaming.

Also in 2021, Scientific Games agreed to divest its sports betting division OpenBet to global talent and media agency holding company Endeavor Group.

Other key events included the purchases of einstant content studio Sideplay Entertainment, the PlayOn cashless gaming solution from ACS, casino solutions provider Authentic Gaming and Swedish games developer Elk Studios.

After the end of the period, Scientific Games withdrew its all-stock offer to acquire the remaining 19% equity interest in its SciPlay division, having tabled the proposal in July 2021.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations was $493m, up 47.4% on the previous year.

Turning to costs for the year, total operating expenses were 5.3% higher at $2.04bn. Finance-related costs reached $404m, down 27.7% year-on-year, after $478m of interest expense was partially offset by a $41m gain on remeasurement of debt and $33m in other income.

After also accounting for interest expenses, pre-tax losses hit $294m, an improvement on the $804m loss posted in the previous year. However, Scientific Games received $318m in tax benefits, which meant its net profit from continuing operations was $24m, compared to an $801m loss in 2021.

When including $366m in net profit from discontinued operations, and also accounting for a $19m loss attributable to non-controlling interests, this meant overall net profit attributable to Scientific Games was $371m, in contrast to a $569m loss in the previous year.

Looking at the final quarter of the year, revenue for the three months to 31 December was $580m, up 20.8% year-on-year. Gaming revenue climbed 30.1% to $372m, while revenue from SciPlay increased 4.8% to $154m and igaming revenue 14.9% to $54m, while total adjusted EBITDA from continuing operations was 67.4% higher at $216m.

Operating costs were 17.8% higher at $577m while net financial costs were $95m, leaving a pre-tax loss of $92m, compared to $155m in the previous year.

Tax benefit for the quarter was $154m, which meant net profit from continuing operations reached $62m, in contrast to a $143m loss in Q4 of 2020.

When also including $37 in net profit, net of tax, from discontinued operations, as well as a $34m loss attributable to non-controlling interest, overall net profit attributable to Scientific Games was $95m, compared to a $90m loss in the previous year.

“I want to thank our teams for a tremendously successful 2021; we would not be where we are today without their hard work and dedication that has enabled our transformative journey,” Scientific Games president and chief executive Barry Cottle said.

“Operationally, we are very pleased with the strong performance we achieved in the quarter which capped what was an outstanding year, as we grew double-digits on both top and bottom line and generated substantial cash flow while laying the foundation for future growth.

This week, it was also announced that the business would rebrand as ‘Light & Wonder’ in order to reflect the group’s shift to a focus on gaming services.

“As we begin this new chapter we have chosen a new name, Light & Wonder,” Cottle said. “A name that evokes the kind of feelings we want to capture in the work we do every day, excitement, inspiration, imagination and maybe even a little bit of magic and certainly a lot of fun.

“As we embark on this next phase, we’re grateful to be able to focus our energy on creating those experiences for our players.”

In related news, the SciPlay division has acquired Alictus, a global developer and publisher of popular, casual mobile games, in an all-cash transaction.

SciPlay will pay $100m to purchase an 80% stake in the business and over the next five years acquire the remaining 20% of Alictus in equal installments, which will range from, in aggregate, $0 to $200 million.

Founded in 2013 and based in Turkey, Alictus has developed and published a portfolio of games that have generated more than 300 million total downloads to date, including ‘Candy Challenge 3D’, ‘Rob Master 3D’ and ‘Deep Clean Inc.’

Alictus will continue to be led by its existing management team, including its co-founders, Emre Taş and Ecem Baran. SciPlay also said it expects to retain Alictus’s headquarters and studio in Turkey.

“We are incredibly excited to continue our expansion in the casual space and partner with a proven leader like Alictus that boasts an impressive, unique culture and an extraordinary track record of delivering chart-topping games,” SciPlay chief executive Josh Wilson said.

“The hyper-casual market is a natural expansion for SciPlay with game mechanics and player demographics that are similar to those across casual genres in which we already operate and are growing our presence.

“This acquisition provides SciPlay an entry point into this market with a highly talented team and a robust pipeline of hyper-casual games, helping us to diversify into the in-app advertising business model and participate in the massive and fast-growing mobile advertising market.”

Alictus chief executive and co-founder Taş added: “Alictus has built one of the leading hyper-casual game businesses in the world, and together with my co-founder and COO Ecem Baran, we are thrilled to be joining forces with SciPlay at this important point in our growth trajectory.

“With SciPlay’s best-in-class live services capabilities, data analytics platform and resources, we will be able to accelerate the development of hit games while attracting a whole new universe of players.”

Author: Raymond Fleming