Scientific Games Expects SG Lottery Revenue to Exceed $1B in 2021
September 15, 2021
Scientific Games expects its lottery division to break US$1 billion in revenue this year after accelerating plans to divest the business unit.
The company had announced in June that it would be spinning off its lottery and sports betting arms in an effort to position the company for “sustainable growth”. This will see it focus on gaming products and services across online and digital channels.
In its September 14 update, the group said SG Lottery revenue is forecast to rise at a two-year compound annual growth rate of 13.6 per cent to fiscal year 2022, building on the US$919m achieved in fiscal year 2020. It forecasts revenue of US$1.04bn in 2021 and US$1.18bn in 2022.
Scientific Games said the market-leading position it holds, and infrastructure-like characteristics of its lottery division, are expected to lead to sustainable revenue. It has a 69 per cent global share of instant game retail sales and strong momentum across other segments, including a 17 per cent U.S. market share in terminal-generated games.
The group said it expects significant growth underpinned by even faster growth in the U.S. market with 19 additional states expected to legalize iLottery by 2025. This is likely to increase the U.S. iLottery market from sales of US$3bn to US$12bn by 2025, it added.
Scientific Games said instant lottery participation-based revenue growth for fiscal year 2021 is estimated to be 14 per cent in the U.S. and 23 per cent internationally, with further growth expected through digital content provided by August’s acquisition of online instant win studio SidePlay.
Despite an increase in costs related to new business, earnings are expected to rise considerably in the coming years. Earnings before interest, taxes, depreciation, and amortization (EBITDA) of US$303m was achieved in 2019, but this should rise to US$398m in 2021 and $433.0m in 2022.
During fiscal year 2021, SG Lottery expects significant contractual capital expenditures to occur primarily as a result of winning the contract with the Pennsylvania lottery systems.
In announcing its Q2 results last month, Scientific Games had said it was “well-progressed” in its intention to divest the lottery and betting divisions. In its Q2 results for 2021, the SG Lottery division contributed US$266m towards the group’s total revenue of US$880m.
At the time, Michael Eklund, executive vice president and chief financial officer, said: "In concert with our board, we announced a strategic action plan to transform our company and unlock value. We are taking decisive steps to optimize our portfolio, de-lever our balance sheet and invest to grow. I am very encouraged by the interest and discussions we are having around our proposed divestitures, and we are making great progress as we move quickly to unlock shareholder value."