|Scientific Games Second Quarter Revenues Up 21% to $240 Million|
Wednesday August 2, 4:45 pm ET
Earnings per diluted share of $0.26 net of stock compensation expense and convertible debenture shares; $0.30 excluding stock compensation expense and convertible debenture shares
NEW YORK, Aug. 2 /PRNewswire-FirstCall/ -- Scientific Games (Nasdaq: SGMS) today reported second quarter 2006 revenues of $239.6 million, up 21 percent from $197.4 million in the second quarter of 2005. Net income was $25.0 million or $0.26 per diluted share, net of $4.9 million of stock compensation expense, compared to $24.8 million or $0.27 per diluted share in the second quarter of 2005. Non-GAAP adjusted net income before stock compensation expense and excluding convertible debenture shares was $28.5 million or $0.30 per diluted share, up 11 percent from the second quarter of 2005.
EBITDA (see the following EBITDA definition and reconciliation) for the second quarter of 2006 was $69.6 million, up 20 percent from the second quarter of 2005. Excluding the stock compensation expense, adjusted EBITDA for the second quarter of 2006 was $74.6 million, or approximately 29 percent ahead of adjusted EBITDA of $57.8 million for the second quarter of 2005.
For the six months ending June 30, 2006, revenues were $447.8 million, compared to $382.0 million for the six months ending June 30, 2005, an increase of 17 percent. Net income was $47.3 million or $0.50 per diluted share, compared to $45.8 million or $0.50 per diluted share in 2005. EBITDA increased to $127.4 million, compared to $108.6 million in 2005. Excluding stock compensation expense, adjusted EBITDA increased 28 percent to $138.5 million.
This is the second quarter in which Scientific Games has reported through its three new reporting segments: Printed Products, Lottery Systems and Diversified Gaming. The acquisition of EssNet, which closed in March 2006, was consolidated into the Lottery Systems Group, and accounted for $9.8 million in revenue in the second quarter of 2006. The acquisition of Global Draw in April 2006 accounted for $20.8 million of revenue in the second quarter of 2006, and was consolidated into the Diversified Gaming Group for the full quarter.
"As expected, total instant ticket service revenue accelerated in the second quarter, growing at 21 percent. Excluding contribution of $3.6 million from new contracts, 'same-store' sales growth was approximately 16 percent," said Lorne Weil, Chairman and CEO of Scientific Games. "We benefited from continued growth in our licensed properties and cooperative services businesses."
"The Lottery Systems Group experienced strong service revenue growth of 32 percent, largely due to new contracts and the EssNet acquisition," added Weil. "Despite 'jackpot fatigue' from the two large Powerball jackpots during the first quarter, 'same store' on-line lottery revenues grew approximately 4 percent. Recovery from the 'jackpot fatigue' seems to be underway in the current quarter with the current Powerball jackpot of $178 million this week."
"The acquisition of EssNet has strengthened our position as a leader in the European lottery market," added Weil. "The integration has been a very smooth process, as evidenced by our recent contract wins in Norway and Hessen, which were existing EssNet customers. EssNet's margins in the second quarter were well below our historical margins in the lottery systems business, accounting for more than half of the year to year decline in the lottery systems gross margins. As we continue to integrate EssNet with our existing lottery operations, these margins are steadily improving and we expect that during 2007, they will reach a level consistent with our historical experience."
The Diversified Gaming Group revenue grew 53 percent in the second quarter. Excluding the Global Draw and Shoreline acquisitions, Diversified Gaming Group revenues were slightly down, but the division experienced an EBITDA margin improvement of approximately 20 percent due to cost-cutting initiatives and technology upgrades. Weil commented, "Global Draw contribution exceeded expectations, and we see Diversified Gaming contributing meaningfully to future earnings, especially when the group expands to Video Lottery Terminal (VLT) jurisdictions outside of the UK. During the quarter, a number of exciting sports betting opportunities came closer to maturity and we hope to report on these developments in the coming months."
Business development in the quarter included the award of the primary instant ticket contract in New Hampshire, an electronic bingo game in Michigan, a sports betting system in Norway, and an internet system in Hessen, Germany.