Scientific Gaming: Q3 2020 results

Scientific Gaming just released its much anticipated third quarterly results of 2020. These results were always going to be enthralling given the current situation of the entire globe still reeling from the ongoing coronavirus health pandemic.

Many industries have been negatively affected by the virus including chiefly such industries as air travel, tourism and hospitality services. With so many people staying at home either by law as a consequence of government-mandated lockdowns and quarantines, or else choosing to do so to keep their family and loved ones safe via the practicing of social distancing, it is no wonder that those industries mentioned above have been hard hit in terms of revenue by the pandemic. Did Scientific Gaming have setbacks due to the pandemic?

Gambling industry

Naturally, the gambling industry was always going to be vulnerable to a strange social landscape in which people have had to stay home and refrain from congregating in social spaces. Casinos and gambling halls across most countries on Earth shuttered for at least part of the Spring and Summer when the first wave hit, and now as Winter approaches further lockdowns are being instituted in countries like Canada, the UK, and several states in the USA.

While physical gambling locations such as casinos and resorts are unquestionably threatened by the current circumstances, the pattern for digital casinos safely available to their patrons online, has been less predictable. Many hypothesized that businesses operating online casinos would see huge growth during a time when many were stuck in their homes, yet others predicted that the financial anxiety and economic depression invariably looming would dampen player activity thus reducing revenues. As it transpires, results have been mixed across the globe, seemingly in large part due to the local regulatory systems with regards to online gambling.

For example, in the UK internet search traffic for online casinos peaked during their first lockdown, with consequent boosts to profits for businesses operating these digital platforms. Meanwhile in Sweden, where the government has both a historical and contemporary far more limiting relationship to online gambling, had one of its worst quarters in living memory. This variation in market response to the pandemic and people’s changed behaviours therefore contributed to a great deal of suspense ahead of the Australian-linked Scientific Gaming, providers of much-renowned Megaways slot games, releasing its most recent quarterly report as they will likely be interpreted as indicative of the gambling market in Australia overall. This is of particular interest in the context of recent confusion and revision of Australia’s Interactive Gambling Act, the legislation through which the Australian Government seeks to manage the activity of online casinos.

Scientific Gaming

So how did Scientific Gaming fare during their third quarter this year? Well, as it turns out they followed in the Swedish market’s footsteps rather than the British, albeit not quite to the same degree. Their own assessment is that “[…] third quarter results were adversely impacted by the COVID-19 disruptions primarily in the Gaming business unit during the quarter, affecting comparability to the prior year period”. In other words – their more negative results than recent years may reasonably have the blame ascribed to the coronavirus pandemic, and furthermore comparison to previous years cannot be considered genuinely valid given these extraordinary circumstances.

Indeed, as it turns out, the company experienced a net loss of $111 million during the quarter – a stark contrast to the $18 million net income of last year. Their gaming revenue dropped by just about 50% while their lottery revenue increased by 10%. Nevertheless, the company retains an available liquidity of about $1.2 billion, meaning that they are unlikely to be at any serious risk of long-term damage in the near-, or even longer-term future.

While the report ends by noting that “[over] 90% of domestic casinos have reopened including New York commercial casinos a large market that opened in mid-September”, the company will surely look with a blend of discomfort and apprehension at the upwards-trending curve of the coronavirus pandemic across the globe as numbers begin to rise once again for its second or third waves around the world. Developing an innovative strategy to manage the impact of the coronavirus will be key for Scientific Gaming moving forwards into what will otherwise be an equally disappointing Q4.