Scientific Reports Dismal 3Q Results

Scientific Games SGMS reported dismal third-quarter results as all three of the firm's major business lines declined in revenue. Consolidated revenue declined 8% to $221 million compared to the year-ago quarter. Revenue in the printed products group declined 3% to $117 million due to weak instant ticket and phone card sales globally. Sales in the lottery systems group suffered the worst, as revenue declined 19% to $53 million versus the prior-year quarter due to lower hardware and software sales, less favorable pricing terms, and contract losses in New Hampshire, Vermont, and South Dakota. More surprising was a 5% decline in retail sales in China where the firm is facing stronger competition from the China Welfare Lottery. Revenue in the diversified gaming group fell more modestly to $51 million, a 3% decline, due to lower service revenue. Operating margins declined almost 300 basis points to 10% due primarily to unfavorable operating leverage as revenue declined, coupled with a mix shift toward less profitable business lines.