Out-of-period adjustment hurts fourth-quarter results for SciPlay; results miss forecasts

February 20, 2020 5:49 PM
  • Matthew Crowley, CDC Gaming Reports
February 20, 2020 5:49 PM
  • Matthew Crowley, CDC Gaming Reports

SciPlay Corp., the mobile games unit spun off from Scientific Games Corp. in May 2019, posted Wall Street forecast-missing earnings per share and revenue.

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The company said an out-of-period adjustment hurt results.

In a statement issued after stock markets closed Tuesday, Las Vegas-based SciPlay, said net income was $4.4 million, or 19 cents per share, for the three months ended Dec. 31, down from net income of $18.7 million, or 82 cents per share, a year earlier. Analysts polled by Seeking Alpha had forecast earnings of 22 cents per share in the latest quarter.

Adjusted earnings per share, a cash flow measure that excludes one-time costs, was $32.1 million, up 31 percent from $24.5 million.

Fourth-quarter revenue fell 0.7% to $112.9 million from $113.7 million. Seeking Alpha-polled analysts had expected revenue of $121.1 million.

SciPlay shares sold off Wednesday, dropping 53 cents, or 5.12% to close at $9.83 on the Nasdaq. The share price has fallen 20.7% in 2020 and 35.5% since the company’s May initial public stock offering.

In a conference call Tuesday with analysts and journalists, SciPlay Chief Financial Officer Michael Cody said the company examined its analytics engine and discovered a script issue that resulted in “immaterial errors” in revenue that averaged about $200,000 per quarter from 2012 until discovery in 2019’s fourth quarter.

CEO Joshua Wilson touted growth in mobile revenue on the call, which topped $390 million to set a record, and the growing popularity of the company’s apps. He said all seven of SciPlay’s core games are in the top 200 grossing mobile games across Apple’s iOS and Google Play. Wilson added that SciPlay’s Jackpot Party became the No. 11 highest-grossing mobile game on Google’s Android operating system and the No. 18 highest-grossing mobile game on iOS, according to Eilers & Krejcik’s December 2019 social gaming monitor report.

SciPlay’s company’s social casino games include Jackpot Party Casino, Gold Fish Casino, Hot Shot Casino and Quick Hit Slots; its casual games include Monopoly Slots, Bingo Showdown and 88 Fortunes Slots.

Looking forward, Wilson said, SciPlay is updating games, enhancing analytics and doing international pilot testing.

“We remain firmly committed to our goal to be the top casual mobile gaming company in the world,” he said. “We believe we are in the very early stages of a multiyear revenue growth and earnings expansion cycle.”

Some analysts have been bullish on SciPlay. RBC Capital analyst Shweta Khajuria kept his “buy” rating on the stock this week and in January, DA Davidson initiated coverage, rating SciPlay “overweight.”

“Our bullish multiyear outlook on SciPlay is based on best-in-class margins, an attractive game portfolio aimed squarely at the interesting social casino gaming market, and the possibility of organic and inorganic expansion of geographic regions and genres,” DA Davidson analyst Franco Granda said in the note, highlighted by cnbc.com. “All in, we believe this growth story is still in its early innings and expect a meaningful revenue and profitability ramp in the years ahead.”

For the 12 months ended Dec. 31, SciPlay had net income of $32.4 million, or $1.43 per diluted share, down from net income of $39 million, or $1.72 per diluted share.

Twelve-month adjusted EBITDA rose 30.1% to $122.3 million from $94 million; 12-month revenue rose 11.9% to $465.8 million from $416.2 million.

Follow Matthew Crowley on Twitter @copyjockey.