Good morning. Yesterday the supply side took the limelight.

• Scientific Games picks a new name: Light & Wonder.

• A slight miss on earnings sees IGT’s share ship 12% on the day.

• Everi confirms its previously announced record performance.

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Scientific Games Q4

• “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.”

I saw the light: Barry Cottle said on the earnings call that Scientific Games was previously “essentially functioning as a holding company”.

Cottle: “There was no clear and coherent argument for investments.”

I heard wonders: But following the shedding of the lottery and sports-betting businesses and the ensuing restructuring of the balance sheet, the firm was no longer “hamstrung by debt”. With 90% of the $5bn proceeds from the sale of the lottery division (completing this month) going towards paying down debt, LNW would be “liberated” according to executive vice chair Antonia Korsanos.

Jamie Odell, chairman: “Bad debt reduction means we can write a new chapter in this company's history.”

• Datapoint: The board has also authorized a $750m share buyback programme.

Odell: “We’ve vastly exceeded our expectations in terms of our ability to get cash for those great assets. And so that's actually accelerated our position even further than we thought originally.”

Sound and vision: Korsanos said the opportunity to refashion the business came when previous majority shareholder MacAndrews & Forbes exited their shareholding in Sep20. She added that the management team had executed a similarly successful turnaround at Aristocrat and were following a “similar playbook”.

Odell: “We could see that this business was worth so much more than the sum of the parts.”

I’m a wonderful thing baby: The initial situation at Scientific Games was, however, “stronger”.

Korsanos: “The assets were here, the IP was here, the talent was here (but) the business couldn't invest.”

• I shall be released: Odell said “we are fortunate to make games for a living”.

By the numbers: Continuing operations revenue rose 21% to $580m while adj. EBITDA was up 67% to $216m. Full-year revenues from continuing operations rose 27% to $2.15bn and adj. EBITDA was up 112% to $793m. Truist said the Q4 figures were a ”strong beat” which had been overshadowed by the “sizable transformation” of the business.

Truist: “The new LNW will present a content-led portfolio with strong recurring revenues - 75%+ in 2021 - and a growing digital mix - 40% in 2021, company eyeing 50%.”

Blinded by the light: Odell said on the call that further igaming in the US was inevitable and that it would eventually be legal “everywhere that gaming is”. “Number one it is what players want,” he said. “Second, igaming actually outperformed sports betting by 2x to 3x, which means 2x to 3x the state tax that's available to the state government.”

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SciPlay

• Revenues up 20.8% to $580m, adj EBITDA up 67.4% to $216m.

• Company acquiring 80% of ‘hyper-casual’ games studio Alictus for $100m.

In-app: SciPlay had its own big news with the acquisition of the Turkish-based Alictus for cash. Truist noted the business is nearly 100% in-app advertising-based. “Alictus is profitable, though the company has not yet disclosed anything on revenue run-rate, growth rate, or margins,” they added. 

Note: SciPlay will conduct its Q4 earning call at 8.30 ET today.

IGT Q4

• Q4 revenues rose 19% to $1.05bn, adj. EBITDA rose 31% to $387m.

• Lottery was up 9% to $687m, gaming rose 44% to $321m and digital gaming and sports-betting was up 44% YoY to $165m.

• FY revenues rose 31% to $4.1bn, adj. EBITDA up 67% to $1.7bn.

• Net debt reduced by $1.4bn to a leverage multiple of 3.5x, the lowest in the company’s history.

• Guidance for 2022 unchanged at $4.1-$4.3bn, Q122 guidance set at $1-$1.1bn.

Paydown: CEO Vince Sadusky reiterated the cash generated by the sale of the Italian payments business announced yesterday would go towards driving down IGT’s debt levels, down to $5.9bn before the payments sale. 

The big pent: The gaming machine business enjoyed a record 2021 with revenues of $2.81bn and Sadusky said there were “encouraging” signs of pent-up demand, despite the impact of the omicron variant.

Sadusky: “Casinos want to invest in slots, the challenge is delivery and supply chain issues: components, parts, shipping factors; clients are aware of all that. We’re working as hard as possible to offset what we believe are short term issues, even if none of us really knows at the moment.”  

It could be you: Unlike its rival above, IGT still sees a future in lottery. “The broad appeal and high entertainment value of lottery games is clear,” said Sadusky.

Digital dreams: The separation of IGT’s digital gaming and sports-betting units as standalone divisions made “perfect sense, but it takes time,” said Sadusky. He added that IGT had “done a great job” of moving its land-based games into the online environment. 

Sadusky: “The velocity of having games into markets is something we want to improve and could look at help from M&A on the technology and content side to do that.” 

• As for targets, Sadusky said IGT had “done a great job of not writing checks to unprofitable businesses”. “Going forward the markets will have to become much more reasonable,” he added.  

Market reaction: The share price reaction - down 12% on the day - confused analysts, despite EBITDA missing forecasts particularly on the lottery side. “The reality, in our view, is that very little has changed,” said Deutsche Bank. Jefferies said the payment business sale “should be considered an important marker” with the prospects for “more to come”. “Our focus also remains on the North American slot business, which has demonstrated uneven success,” they added.

Earnings in brief

Everi Q4: Jefferies noted the patterns of “modest beat and raise” quarters for the gaming machine to fintech business “has become the norm”. Revenues of $180.4m were above Street estimates, with better-than-expected gaming revenues making up for a slight shortfall on the payments provider side. Adj. EBITDA came in at $88.8m. Truist said the company highlighted the recent acquisition of Australian-based Atlas Gaming would enable entry into the gaming machine market there as well as the historical horse racing (HHR) gaming market.

Melco Resorts Q4: Revenues dropped 9% to $480.6m in Q4 due to a “softer performance in the rolling chip segment” and “COVID-related travel restrictions”, the group said. Adj. property EBITDA was up to $94m vs. $53.4m in Q420. Net loss was down to $159.9m from $199.7m in 2020. Chairman and CEO Lawrence Ho said: “Our investment commitment remains unwavering. In Macau, Studio City announced fresh rounds of debt and equity financing in February and we continue our efforts to complete the construction of Studio City Phase 2 by Dec22.” 

Better Collective analyst update

A shave and a haircut: Analysts at Redeye in Stockholm said they were “trimming” their 2022-2024 EBITDA targets after what they suggested was “somewhat weaker” guidance for this year. Noting the company’s commentary on the strong start to the year, particularly with sign-ups in New York, they said this would settle down to an organic growth rate of 15-25% for the year.

Funding news - WSC Sports 

100 club: Sports highlights provider WSC Sports has announced a $100m Series D funding round that was led by ION Crossover Partners and featured WSC investors Intel Capital, Detroit Venture Partners and O.G. Tech. WSC creates sports highlights packages that it sells to broadcasters, sports leagues and bookmakers. 

OSB moves: WSC has more than 200 clients, including most of the major US and European sports leagues. In Jun21 it signed an agreement to provide Sportradar with live video highlights to be delivered to mobile apps via push notifications. It also recruited ex-888 head of sports betting Yuval Benyamini to head up its OSB sales division. 

#StandWithUkraine

Pulling the plug: The NHL has ended its partnership with the Russian-facing sportsbook Liga Stavok. The partnership was agreed in Sep21 and according to reports, the league has severed all ties with Russian businesses, including one it had with the country’s largest search engine and its broadcast partner Yandex, in the wake of the Russian military's invasion of Ukraine.

Organizations and individuals involved in the betting and gaming sector have launched a GoFundMe to help support efforts in Ukraine.

Click here if you wish to donate.

Macau Feb update

Remember Covid? February’s GGR of ~$971m was 22.7% ahead of the prior month but was 69% down on Feb19. But looking at the rising rate of Covid infections in Hong Kong and new outbreaks in Guangdong, Jefferies noted the month would likely be a “near-term peak”. Moreover, the next national holiday isn’t until Labour Day in May.

Newslines

Red promotion: Red Rock Resorts has appointed Scott Kreeger as its new president. Kreeger was RRR’s senior vice president of development prior to his new role. 

Ocean launch: Elys Game Technology has gone live with Ocean Casino Resort’s mobile betting app following approval from the New Jersey Division of Gaming Enforcement. 

Beach life: Bragg Gaming has been granted an online casino license in the Bahamas. The group is also set to launch its icasino products in Ontario, Pennsylvania, Michigan and New Jersey.

Festival reel: Spotlight Sports Group will produce a live daily show throughout the 2022 Cheltenham Festival for Paddy Power called Good Morning Cheltenham. It will be released at 8.30 every morning on the Racing Post YouTube and Facebook platforms. 

What we’re writing

On Wagers.com: Flutter’s earnings highlight FanDuel advantage.

What we’re reading

Line of sight: The gaming industry can’t bury its head on crypto any longer.

Crown is served: Australia’s financial crimes watchdog has initiated civil penalty proceedings against Crown Resorts.

On social

Ben Fawkes @BFawkes22

Running list of top 10 U.S. states in sports betting handle, Jan. '22: 1. New York: $1.69 BILLION 2. New Jersey: $1.35 BILLION 3. Nevada: $1.11 BILLION 4. PA: $793.7 mil 5. CO: $573.7 mil 6. MI: $532.7 mil 7. IN: $500 mil 8. VA: $485.5 mil 9. TN: $386 mil 10. Iowa: $303.3 mil

March 1st 2022

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Calendar

• Mar 2: Rush Street Interactive Q4

• Mar 3: Entain Q4, DraftKings investor day

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