Scientific Games’ leadership was full of good news for investors when it met with Truist Securities analyst Barry Jonas.
Its Kascada game cabinet, launched at Global Gaming Expo, was described as the fastest-selling cabinet in Scientific’s history, double the numbers of the predecessor J43. Indeed, the premium-game sector of SGMS products was seeing what were characterized as record numbers and an overall return to 2019 sales levels was predicted for between December 2022 and the end of 2023.
In pursuit of double-digit profit margins, Scientific is concentrating on its lucrative Games division, whose share of the slot-happy Australian market has escalated to 14 percent from eight percent in 2020. Management iterated that it was tops in the table-game sector, “which has moved to a more recurring revenue model with the Vault subscription program,” Jonas added.
Having shed its sports betting and lottery divisions, Scientific is newly focused on internet casino games, “as they believe every jurisdiction with land-based gaming will eventually legalize igaming.”
Scientific holds a 27 percent share of business-to-business igaming trade in the U.S., much of that spurred by their own product. Market penetration in Europe (15 percent) is more modest, but not so in Canada (50 percent). A point of pride was Scientific’s OGS platform, which supports more than 3,500 games, 600 of them generated by the company itself.
“Importantly,” Jonas chronicled, “SGMS stressed the benefit of cross-platform development, marketing, and launches (with the introduction of Coin Combo in August 2021 and Gold Fish expected in early 2022). In our view, SGMS’s OGS provides unique insights for game development and creates a natural M&A funnel.”
While on the subject of acquisitions, Jonas applauded Scientific’s late-breaking purchase of ELK Studios, writing that it would benefit the latter by obtaining wider distribution in Europe, sitting atop the Scientific platform.
Not that Scientific was completely satisfied with its igaming offerings. It conceded that it lacked live-dealer games and that this was a gap in its line. The recent purchase of Authentic Gaming is intended to address this lack.
Of its $22 billion total addressable market, Scientific expects it to be 30 percent live-dealer-driven. Such games will probably go online in the second half of next year. Scientific spent $50 million to obtain Authentic and is investing $30 million on production values of its live-dealer presentation.
Added Jonas, “We think SGMS’s proprietary table content should give it a unique content edge in the nascent U.S. live-dealer market.”
As for social gamers and casual players, Scientific’s stated intent is to target them when there is an overlap with its core igaming demographics. The company finds enough similarities in the attributes of social gaming that it believes it can leverage those to develop casual games that draw social players. The real money is in casual gaming ($20 billion total addressable market) rather than social play ($8 billion total addressable market), not to mention a “higher underlying growth rate” for casual gaming, although social players were described as ‘sticky’ (a favorite industry term) with a 100 percent retention rate.
“SGMS expects to launch one to two casual games annually going forward,” Jonas reported.
