SciPlay Corp., the mobile games unit spun off from Scientific Games the past spring, reported growing revenue and market-exceeding income growth for its third quarter. But both figures missed Wall Street forecasts.
In a statement issued after stock markets closed Thursday, SciPlay, which develops free-play mobile casino games and had its initial public offering in April, said net income was $25 million, or 9 cents per share, in the three months ended Sept, 30, up from net income of $9.2 million, or 41 cents per share, a year earlier.
The latest results fell far short of the 41 cents per share consensus estimate of analysts polled by Zacks Investment Research.
Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that filters out nonrecurring costs, rose 35% to $32 million from $23.7 million.
Revenue rose 10.5% to $116.4 million from $105.3 million. In a statement accompanying the results, SciGames that growth rate exceeded the market’s average 7% growth rate, as gauged by Eilers and Krejcik.
Nevertheless, the latest revenue missed the $121.7 million in earnings Zacks-polled analysts had forecast.
SciPlay said mobile revenue rose 18% to $97.7 million, reflecting strength from its Jackpot Party, Casino, Bingo Showdown, 88 Fortunes and Monopoly Slots games. As The Motley Fool’s Eric Volkman noted in April, SciPlay’s games are popular generally well-reviewed. Monopoly Slots ranks No. 52 in popularity on Apple’s deep list of casino games.
“We have a number of exciting game updates that will lead to continued growth in our evergreen franchises as we explore opportunities in new geographies, new games and new genres,” SciPlay CEO Josh Wilson said.
In his April article, Volkman said SciPlay stood to benefit from closeness to Scientific Games, which holds all of SciPlay’s Class B stock and in April agreed to partner with Wynn Resorts Ltd. on sports betting and mobile games initiatives.
The benefits will also go the other way in fees. SciPlay pays an annual fee to Scientific Games to access license games themed on superspy James Bond and the The Godfather movie series.
Nevertheless, Bank of America Merrill Lynch in September downgraded SciPlay to “underperform” from “buy” and cut its price target for the stock to $12 from $17.
In a note posted on Seeking Alpha, the firm said it lacks “any significant visibility” into SciPlay’s pipeline with a lack of new game catalysts and analyst Ryan Gee said the company’s mobile casino games could face regulation and its slot machine games face competitive pressures.
SciPlay’s stock price has fallen 34.8% since debuting at $15.25 after its IPO; shares rose 9 cents, or 0.91%, Thursday, to close at $9.93 on the Nasdaq and dipped after hours, falling 8 cents, or 0.81%, to close at $9.85.
Several law firms, including Schall Law Firm, a Los Angeles shareholder rights litigation firm, have sued SciGames and called for an investigation into whether the company issued “false or misleading statements” or failed to disclose information related to the IPO.
“The company has suffered from poor performance and low growth,” Schall Law Firm said in a Nov. 1 statement, “causing shares of SciPlay to trade as much as 47 percent lower than its IPO price.”
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