LAS VEGAS, Nov. 8, 2018 /PRNewswire/ -- Scientific Games
Corporation (NASDAQ: SGMS) ("Scientific Games" or the "Company")
today reported results for the third quarter ended September 30, 2018.
Third Quarter 2018 Financial Highlights:
- Third quarter revenue rose 7 percent to $821.0 million, up from $768.9 million in the year ago period, reflecting
$46.5 million in revenue from NYX,
along with growth in our Lottery and Social businesses.
- Net loss was $351.6
million compared to $59.3
million in the prior year period, primarily driven by
$338.7 million in restructuring and
other charges. The restructuring and other charges are inclusive of
$309.6 million recorded during the
quarter related to the verdict in the Shuffle Tech legal matter,
which did not result in any cash outflow as the verdict is subject
to post-trial motions and the appeal process.
- Consolidated Attributable EBITDA
("Consolidated AEBITDA"), a non-GAAP financial measure defined
below, increased 9 percent to $325.7
million from $299.0 million in
the prior year period, primarily driven by higher revenue and
continued operational efficiencies. Consolidated AEBITDA margin, a
non-GAAP financial measure defined below, was 39.7 percent,
compared to 38.9 percent in the prior year period.
- Net cash provided by operating activities
increased to $223.5 million from
$109.5 million in the year ago period
driven primarily by improvements in operating results, working
capital and timing of interest payments resulting from the
February 2018 refinancing. Free cash
flow, a non-GAAP financial measure, increased by $95.4 million from the year ago period to
$123.0 million. Our net debt leverage
ratio, a non-GAAP financial measure, was down 0.3x from the prior
quarter to 6.7x as a result of lower debt and higher LTM
AEBITDA.
- The Company is considering a possible initial public offering
of a minority interest in its social gaming business in 2019. The
social gaming business continues to experience rapid growth and has
reached significant scale. The Company believes an IPO would
provide greater flexibility to pursue additional growth initiatives
specifically designed for its social gaming business, as well as
unlocking additional value for Scientific Games stakeholders. The
Company anticipates that the proceeds from the IPO would primarily
be used to repay debt.
Barry Cottle, CEO and
President of Scientific Games, said "We are very pleased with
the growth we are seeing across our businesses as we continue to
lead our industry into the future. Our investments in digital,
sports betting, and new games are producing the most innovative and
engaging products in the market and we are excited about the
customer response here in the U.S. and around the world. For our
rapidly growing social business, an IPO would give us greater
flexibility to pursue growth for the business and drive value for
stakeholders. We remain focused on delivering for our customers and
running our business efficiently and effectively to drive revenue,
reduce costs and continue to build momentum across the
Company."
Michael Quartieri, Chief
Financial Officer of Scientific Games, added, "This quarter
marks our twelfth consecutive quarter of year over year growth in
revenue and Consolidated AEBITDA. Our focus on generating cash
flows provides us a clear avenue to strengthen our balance
sheet."
SUMMARY CONSOLIDATED RESULTS
|
Three Months Ended
September 30,
|
|
($ in
millions)
|
2018
|
|
2017
|
|
Revenue
|
$
|
821.0
|
|
|
$
|
768.9
|
|
|
Net loss
|
(351.6)
|
|
|
(59.3)
|
|
|
Net cash provided by
operating activities
|
223.5
|
|
|
109.5
|
|
|
Capital
expenditures
|
92.6
|
|
|
73.9
|
|
|
|
|
|
|
|
Non-GAAP Financial
Measures(1)
|
|
|
|
|
|
|
|
|
Consolidated
AEBITDA
|
$
|
325.7
|
|
|
$
|
299.0
|
|
|
Consolidated AEBITDA
margin
|
|
39.7%
|
|
|
|
38.9%
|
|
|
Free cash
flow
|
$
|
123.0
|
|
|
$
|
27.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Measures
|
As of Sept 30,
2018
|
|
As of Dec 31,
2017
|
|
Cash and cash
equivalents
|
$
|
113.5
|
|
|
$
|
788.8
|
|
|
Principal face value
of debt outstanding (2)
|
|
8,951.1
|
|
|
|
8,869.4
|
|
|
Available
liquidity
|
|
663.3
|
|
|
|
1,009.4
|
|
|
|
|
|
|
|
|
|
|
|
(1) The financial
measures "Consolidated AEBITDA", "Consolidated AEBITDA margin",
and "free cash flow" are non-GAAP financial measures defined
below under "Non-GAAP Financial Measures" and reconciled to the
most directly comparable GAAP measures in the accompanying
supplemental tables at the end of this release.
|
(2) Principal face
value of outstanding 2026 Secured Euro Notes and 2026 Unsecured
Euro Notes are presented at the constant foreign exchange rate at
issuance of these notes.
|
GAMING HIGHLIGHTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018
|
Three Months Ended
September 30,
|
|
Increase/(Decrease)
|
($ in
millions)
|
2018
|
|
2017
|
|
Amount
|
|
%
|
Revenue
|
|
|
|
|
|
|
|
Gaming
operations(1)
|
$
|
159.2
|
|
|
$
|
176.0
|
|
|
$
(16.8)
|
|
(10)
|
%
|
Gaming
machine sales
|
167.2
|
|
|
163.1
|
|
|
4.1
|
|
3
|
%
|
Gaming
systems
|
69.7
|
|
|
62.0
|
|
|
7.7
|
|
12
|
%
|
Table
products
|
51.8
|
|
|
53.5
|
|
|
(1.7)
|
|
(3)
|
%
|
|
$
|
447.9
|
|
|
$
|
454.6
|
|
|
$
(6.7)
|
|
(1)
|
%
|
|
|
|
|
|
|
|
|
|
AEBITDA
|
$
|
232.5
|
|
|
$
|
221.2
|
|
|
$
11.3
|
|
5
|
%
|
AEBITDA
margin
|
|
51.9%
|
|
|
|
48.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Gaming
operations includes $4.5 million in WAP jackpots as a reduction to
revenue in 2018, compared to the
2017 presentation in which $5.5 million of WAP jackpots was
classified as cost of services. This change in
classification has no impact on AEBITDA.
|
- Total gaming revenue decreased $6.7 million, including an unfavorable
$4.5 million impact on Gaming
operations from revenue recognition accounting effective in 2018,
and AEBITDA increased 5 percent, or $11.3 million, to $232.5
million, primarily reflecting a 320 basis point improvement
in the AEBITDA margin to 51.9 percent.
- Gaming operations revenue declined $16.8 million in the third quarter 2018,
inclusive of the negative impact from the new revenue recognition
accounting. Our WAP, premium and participation ending installed
base decreased sequentially by 1,554 units. This ending installed
base decrease is reflective of a strategic long-term relationship
entered into during the quarter that converted a number of units
that were on lease to product sales in Oklahoma and also to a lesser degree the
redeployment of lower yielding Oregon VLT units. The installed base
of other leased and participation games increased sequentially by
152 units with average daily revenue down $0.98, which reflects the replacement in the
installed base of higher yielding U.K. units with lower yielding
units in Greece.
- Gaming machine sales revenue increased $4.1 million year over year, benefiting from our
new strategic long-term relationship. The average sales price
increased 3 percent to $18,199,
reflecting the benefit of the premium received from the strategic
relationship described above and a more favorable mix of gaming
machines.
- Gaming systems revenue increased $7.7 million to $69.7
million, primarily due to ongoing system installations in
Canada, coupled with increased
hardware sales, primarily the iVIEW®4. The
Canadian systems deployments are expected to continue throughout
2018, and beyond.
- Table products revenue decreased
$1.7 million to $51.8 million, reflecting strength in recurring
utility products, which was offset by lower product sales as the
prior year featured a large international expansion.
LOTTERY HIGHLIGHTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018
($ in
millions)
|
Three Months Ended
September 30,
|
|
Increase/(Decrease)
|
Revenue
|
2018
|
|
2017
|
|
Amount
|
|
%
|
Instant
products
|
$
|
142.0
|
|
|
$
|
142.7
|
|
|
$
|
(0.7)
|
|
|
-
|
%
|
Lottery
systems (1)
|
64.8
|
|
|
60.2
|
|
|
4.6
|
|
|
8
|
%
|
|
$
|
206.8
|
|
|
$
|
202.9
|
|
|
$
|
3.9
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
AEBITDA
|
$
|
92.3
|
|
|
$
|
89.2
|
|
|
$
|
3.1
|
|
|
3
|
%
|
AEBITDA
margin
|
44.6%
|
|
|
44.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Lottery
systems revenue includes $9.3 million in product sales revenue,
compared to $9.8 million in 2017.
|
- Total lottery revenue increased $3.9 million, or 2 percent, to $206.8 million, and AEBITDA increased 3
percent to $92.3 million, compared to
$89.2 million in the prior year, with
AEBITDA margin improving to 44.6 percent, primarily reflecting the
revenue increase and a more profitable revenue mix.
- Instant products revenue of $142.0 million was flat from the prior year
driven by a 3 percent decrease in U.S. revenue, offset by a 10
percent increase internationally.
- Lottery systems revenue increased $4.6 million, or 8 percent to $64.8 million driven largely by domestic organic
growth.
SOCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018
|
Three Months Ended
September 30,
|
|
Increase/(Decrease)
|
($ in
millions)
|
2018
|
|
2017
|
|
Amount
|
|
%
|
Revenue
|
|
$
|
105.1
|
|
|
$
|
95.1
|
|
|
$
|
10.0
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AEBITDA
|
|
$
|
27.0
|
|
|
$
|
20.1
|
|
|
$
|
6.9
|
|
|
34
|
%
|
AEBITDA
margin
|
|
25.7%
|
|
|
21.1%
|
|
|
|
|
|
- Social revenue grew 11 percent to $105.1 million, reflecting the ongoing popularity
of Bingo Showdown™ and the success of the
recently launched MONOPOLY themed casino app along with continued
growth in our core apps including Jackpot Party® Social
Casino.
- AEBITDA rose 34 percent to $27.0 million, and AEBITDA margin increased to
25.7 percent, primarily reflecting the continued growth in revenue
and improved operating leverage.
DIGITAL HIGHLIGHTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018
($ in
millions)
|
Three Months Ended
September 30
|
|
Increase/(Decrease)
|
Revenue(1)
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
Sports
and platform
|
|
$
|
20.8
|
|
|
$
|
-
|
|
|
$
|
20.8
|
|
|
nm
|
|
Gaming
and other
|
|
|
40.4
|
|
|
|
16.3
|
|
|
|
24.1
|
|
|
148
|
%
|
|
|
$
|
61.2
|
|
|
$
|
16.3
|
|
|
$
|
44.9
|
|
|
275
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AEBITDA
|
|
$
|
11.9
|
|
|
$
|
3.1
|
|
|
$
|
8.8
|
|
|
284
|
%
|
AEBITDA
margin
|
|
19.4%
|
|
|
19.0%
|
|
|
|
|
|
nm - not
meaningful
|
(1) Includes the
results of NYX since the completion of its acquisition on January
5, 2018.
|
|
|
|
|
|
|
- Total digital revenue increased to $61.2 million, primarily reflecting $46.5 million of revenue from NYX.
- AEBITDA was $11.9 million
and AEBITDA margin was 19.4 percent, both reflecting the addition
of NYX.
- On November 1, 2018 we completed
the acquisition of Don Best Sports Corporation and DBS Canada
Corporation (together "Don Best"), enhancing our offerings by
adding a leading global supplier of real-time betting data and
pricing of North American sporting events.
LIQUIDITY
|
Three Months Ended
September 30,
|
|
Increase/
|
($ in
millions)
|
2018
|
|
2017
|
|
(Decrease)
|
Net
loss(1)
|
$
(351.6)
|
|
|
$
(59.3)
|
|
|
$
(292.3)
|
|
Non-cash adjustments
included in net loss
|
183.8
|
|
|
181.6
|
|
|
2.2
|
|
Non-cash
interest
|
6.6
|
|
|
4.1
|
|
|
2.5
|
|
Changes in deferred
income taxes and other
|
4.1
|
|
|
0.1
|
|
|
4.0
|
|
Distributed earnings
from equity investments
|
5.4
|
|
|
1.6
|
|
|
3.8
|
|
Change in legal
reserves
|
309.6
|
|
|
-
|
|
|
309.6
|
|
Changes in working
capital accounts
|
65.6
|
|
|
(18.6)
|
|
|
84.2
|
|
Net cash provided by
operating activities
|
$
|
223.5
|
|
|
$
|
109.5
|
|
|
$
|
114.0
|
|
(1) Inclusive of a
$309.6 million legal reserve charge.
|
- During the quarter ended September 30,
2018, the Company made net payments of $122.2 million on its debt, including
$110.0 million of voluntary net
repayments under its revolving credit facility and $12.2 million in mandatory amortization of its
term loans, as well as payments to reduce capital leases.
- Net cash provided by operating activities increased
$114.0 million to $223.5 million, principally related to
improvements in operating results, working capital and a
$63.4 million favorable change in
accrued interest.
- Capital expenditures totaled $92.6
million in the third quarter of 2018, compared with
$73.9 million in the prior-year
period. The increase from the prior year was related to several
long-term and highly accretive projects including ongoing platform
development in Digital for expansion in U.S. and around the world,
lottery systems installations in Maryland and Kansas and the acceleration of our installed
base of participation games and WAP games, including the successful
rollout of our James Bond franchise.
For 2018, we continue to expect capital expenditures will be within
a range of $360-$390 million, based on existing contractual
obligations, planned investments and the inclusion of
NYX.
- Subsequent to quarter end, we sold a real estate asset for
$40.0 million in proceeds.
Earnings Conference Call
Scientific Games
executive leadership will host a conference call on Thursday, November 8, 2018, at 8:30 a.m. EST to review the Company's third
quarter results. To access the call live via a listen-only webcast
and presentation, please visit
http://www.scientificgames.com/investors/events-presentations/ and
click on the webcast link under the Investor Information section.
To access the call by telephone, please dial: +1 (412) 317-5420
(U.S. and International) and ask to join the Scientific Games
Corporation call. A replay of the webcast will be archived in the
Investors section on www.scientificgames.com.
About Scientific Games
Scientific Games Corporation (NASDAQ: SGMS) is the world leader in
offering customers a fully integrated portfolio of technology
platforms, robust systems, engaging content and services. The
Company is the global leader in technology-based gaming systems,
digital real-money gaming and sports betting platforms, table
games, table products and instant games, and a leader in
products, services and content for gaming, lottery and social
gaming markets. Scientific Games delivers what customers and
players value most: trusted security, creative entertaining
content, operating efficiencies and innovative technology. For more
information, please visit www.scientificgames.com, which is updated
regularly with financial and other information about the
Company.
The information contained on, or that may be accessed through,
our website is not incorporated by reference into, and is not a
part of, this document.
COMPANY CONTACTS
Media Relations
Susan
Cartwright +1 702-532-7981
Vice President, Corporate Communications
susan.cartwright@scientificgames.com
Investor Relations
Michael Quartieri +1 702-532-7658
Executive Vice President and Chief Financial Officer
All ® notices signify marks registered in the United States. © 2018 Scientific Games
Corporation. All Rights Reserved.
Forward-Looking Statements
In this press
release, Scientific Games makes "forward-looking statements" within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. Forward-looking statements describe future expectations,
plans, results or strategies and can often be identified by the use
of terminology such as "may," "will," "estimate," "intend," "plan,"
"continue," "believe," "expect," "anticipate," "target," "should,"
"could," "potential," "opportunity," "goal," or similar
terminology. These statements are based upon management's current
expectations, assumptions and estimates and are not guarantees of
timing, future results or performance. Therefore, you should not
rely on any of these forward-looking statements as predictions of
future events. Actual results may differ materially from those
contemplated in these statements due to a variety of risks and
uncertainties and other factors, including, among other things:
competition; U.S. and international economic and industry
conditions; slow growth of new gaming jurisdictions, slow addition
of casinos in existing jurisdictions, and declines in the
replacement cycle of gaming machines; ownership changes and
consolidation in the gaming industry; opposition to legalized
gaming or the expansion thereof; inability to adapt to, and offer
products that keep pace with, evolving technology, including any
failure of our investment of significant resources in our R&D
efforts; inability to develop successful products and services and
capitalize on trends and changes in our industries, including the
expansion of internet and other forms of interactive gaming; laws
and government regulations, including those relating to gaming,
data privacy, and environmental laws; legislative interpretation
and enforcement, regulatory perception and regulatory risks with
respect to gaming and sports wagering; reliance on technological
blocking systems; expectations of shift to regulated online gaming
or sports wagering; dependence upon key providers in our Social
gaming business; inability to win, retain or renew, or unfavorable
revisions of, existing contracts, and the inability to enter into
new contracts; protection of our intellectual property, inability
to license third party intellectual property, and the intellectual
property rights of others; security and integrity of our
products and systems; reliance on or failures in information
technology and other systems; security breaches and cyber-attacks,
challenges or disruptions relating to the implementation of a new
global enterprise resource planning system; failure to maintain
adequate internal control over financial reporting; natural events
that disrupt our operations or those of our customers, suppliers or
regulators; inability to benefit from, and risks associated with,
strategic equity investments and relationships; failure to achieve
the intended benefits of our acquisitions, including the NYX
acquisition and the Don Best acquisition; the ability to
successfully integrate our acquisitions, including the NYX
acquisition and the Don Best acquisition; incurrence of
restructuring costs; implementation of complex new accounting
standards; changes in estimates or judgments related to our
impairment analysis of goodwill or other intangible assets;
fluctuations in our results due to seasonality and other factors;
dependence on suppliers and manufacturers; risks relating to
foreign operations, including anti-corruption laws and fluctuations
in foreign exchange rates, possibility that the renewal of LNS'
concession to operate the Italian instant games lottery is not
finalized (including as the result of a protest or any right of
appeal on a court ruling on a protest); restrictions on the payment
of dividends from earnings, restrictions on the import of products
and financial instability, including the potential impact to our
business resulting from the affirmative vote in the U.K. to
withdraw from the EU, and the potential impact to our instant
lottery game concession or VLT lease arrangements resulting from
the economic and political conditions in Greece; changes in tax laws or tax rulings
(including the recent comprehensive U.S. tax reform) or the
examination of our tax positions; the imposition of tariffs,
dependence on key employees; difficulty predicting what impact, if
any, new tariffs imposed by and other trade actions taken by the
U.S. and foreign jurisdictions could have on our business;
litigation and other liabilities relating to our business,
including litigation and liabilities relating to our contracts and
licenses, our products and systems, our employees (including labor
disputes), intellectual property, environmental laws and our
strategic relationships; level of our indebtedness, higher interest
rates, availability or adequacy of cash flows and liquidity to
satisfy indebtedness, other obligations or future cash needs;
inability to reduce or refinance our indebtedness; restrictions and
covenants in debt agreements, including those that could result in
acceleration of the maturity of our indebtedness; influence of
certain stockholders, including decisions that may conflict with
the interests of other stockholders; stock price volatility; the
possibility that the contemplated initial public offering of a
minority interest in our social gaming business (the "contemplated
IPO") will not be pursued or completed; and the risk that the
anticipated benefits of the contemplated IPO are not realized or
that we may not be able to utilize the proceeds of the contemplated
IPO as expected.
Additional information regarding risks and uncertainties and
other factors that could cause actual results to differ materially
from those contemplated in forward-looking statements is included
from time to time in our filings with the SEC, including the
Company's current reports on Form 8-K, quarterly reports on Form
10-Q and its latest annual report on Form 10-K filed with the SEC
on March 1, 2018 (including under the
headings "Forward Looking Statements" and "Risk Factors").
Forward-looking statements speak only as of the date they are made
and, except for our ongoing obligations under the U.S. federal
securities laws, we undertake and expressly disclaim any obligation
to publicly update any forward-looking statements whether as a
result of new information, future events or otherwise.
No Offer
No registration statement relating to
the contemplated IPO has been filed with the Securities and
Exchange Commission. This press release does not constitute an
offer to sell, or a solicitation of an offer to purchase, any such
securities. Any securities to be offered in any such offering
may not be sold nor may offers to buy be accepted prior to the time
a registration statement becomes effective.
Segment Performance Measures
As a result of our Chief
Executive Officer change, who is our chief operating decision maker
(CODM), and starting with the second quarter of the 2018 reporting
period, we changed our business segment performance measure of
profit or loss from operating income (loss) to Attributable EBITDA.
This change was made in order to align our external financial
reporting with how our CODM evaluates the operating results and
performance of our business segments. Attributable EBITDA as a
business segment performance measure of profit or loss is
consistent with the definition of Attributable EBITDA described
below. Business segment information for the prior comparable
periods has been recast to reflect this change.
Non-GAAP Financial Measures
The Company's
management uses the following non-GAAP financial measures in
conjunction with GAAP financial measures: Consolidated AEBITDA,
Consolidated AEBITDA margin, free cash flow, EBITDA from equity
investments, net debt and net debt leverage ratio (each, as
described more fully below). These non-GAAP financial measures are
presented as supplemental disclosures. They should not be
considered in isolation of, as a substitute for, or superior to,
the financial information prepared in accordance with GAAP, and
should be read in conjunction with the Company's financial
statements filed with the SEC. The non-GAAP financial measures used
by the Company may differ from similarly titled measures presented
by other companies.
Specifically, the Company's management uses Consolidated AEBITDA
to, among other things: (i) monitor and evaluate the performance of
the consolidated Company's business operations; (ii) facilitate
management's internal and external comparisons of the Company's
consolidated historical operating performance; and (iii) analyze
and evaluate financial and strategic planning decisions regarding
future operating investments and operating budgets. In addition,
the Company's management uses Consolidated AEBITDA and Consolidated
AEBITDA margin to facilitate management's external comparisons of
the Company's consolidated results to the historical operating
performance of other companies that may have different capital
structures and debt levels.
The Company's management uses EBITDA from equity investments to
monitor and evaluate the performance of the Company's equity
investments. The Company's management uses net debt and net debt
leverage ratio in monitoring and evaluating the Company's overall
liquidity, financial flexibility and leverage.
The Company's management believes that each of these non-GAAP
financial measures are useful as they provide management and
investors with information regarding the Company's financial
condition and operating performance that is an integral part of
management's reporting and planning processes. In particular, the
Company's management believes that Consolidated AEBITDA is helpful
because this non-GAAP financial measure eliminates the effects of
restructuring, transaction, integration or other items that
management believes is less indicative of the Company's ongoing
underlying operating performance and are better evaluated
separately. Management believes Consolidated AEBITDA margin is
useful for analysts and investors as this measure allows an
evaluation of the performance of our ongoing business operations
and provides insight into the cash operating income margins
generated from our business, from which capital investments are
made and debt is serviced. Moreover, management believes EBITDA
from equity investments is useful to investors because the
Company's Lottery business is conducted through a number of equity
investments, and this measure eliminates financial items from the
equity investees' earnings that management believes has less
bearing on the equity investees' performance. Management believes
that free cash flow provides useful information regarding the
Company's liquidity and its ability to service debt and fund
investments. Management also believes that free cash flow is useful
for investors because it provides them with an important
perspective on the cash available for debt repayment and other
strategic measures, after making necessary capital investments in
property and equipment and necessary license payments to support
the Company's ongoing business operations and taking into account
cash flows relating to the Company's equity investments. Management
believes that net debt and net debt leverage ratio are useful for
investors in evaluating the Company's overall liquidity.
Consolidated AEBITDA
Consolidated AEBITDA, as
used herein, is a non-GAAP financial measure that is presented as
supplemental disclosure and is reconciled to net income (loss) as
the most directly comparable GAAP measure, as set forth in the
schedule titled "Reconciliation of Net Loss to Consolidated
Attributable EBITDA" below. Consolidated AEBITDA should not be
considered in isolation of, as a substitute for, or superior to,
the consolidated financial information prepared in accordance with
GAAP, and should be read in conjunction with the Company's
financial statements filed with the SEC. Consolidated AEBITDA
may differ from similarly titled measures presented by other
companies.
Consolidated AEBITDA is reconciled to consolidated net income
(loss) in the following table and includes net loss with the
following adjustments: (1) restructuring and other, which includes
charges or expenses attributable to: (i) employee severance; (ii)
management changes; (iii) restructuring and integration; (iv)
M&A and other, which includes: (a) M&A transaction costs,
(b) purchase accounting, (c) unusual items (including certain
litigation), and (d) other non-cash items; and (v) cost savings
initiatives; (2) depreciation and amortization expense and
impairment charges (including goodwill impairment charges); (3)
change in fair value of investments and remeasurement of debt; (4)
interest expense; (5) income taxes expense (benefit): (6)
stock-based compensation; and (7) loss (gain) on debt financing
transactions. In addition to the preceding adjustments, we exclude
earnings from equity method investments and add (without
duplication) our pro rata share of EBITDA of our equity
investments, which represents our share of earnings (whether or not
distributed to us) before income tax expense, depreciation and
amortization expense, and interest (income) expense, net of our
joint ventures and minority investees. Attributable EBITDA is
presented exclusively as our segment measure of profit or loss.
Consolidated AEBITDA Margin
Consolidated AEBITDA
margin, as used herein, represents our Consolidated AEBITDA (as
defined above) for the three-month and nine-month periods ended
September 30, 2018 and 2017, each
calculated as a percentage of revenue. Consolidated AEBITDA margin
is a non-GAAP financial measure that is presented as supplemental
disclosures for illustrative purposes only and is reconciled to net
loss, the most directly comparable GAAP measure, in a schedule
below.
Free Cash Flow
Free cash flow, as used herein,
represents net cash provided by operating activities less total
capital expenditures (which includes lottery and gaming systems
expenditures and other intangible assets and software
expenditures), less payments on license obligations, less additions
to equity method investments plus distributions of capital from
equity investments. Free cash flow is a non-GAAP financial measure
that is presented as supplemental disclosure for illustrative
purposes only and is reconciled to net cash provided by operating
activities in a schedule below.
EBITDA from Equity Investments
EBITDA from
equity investments, as used herein, represents our share of the
EBITDA (i.e., earnings (whether or not distributed to us) plus
income tax expense, depreciation and amortization expense
(inclusive of amortization of payments made to customers for LNS)
and interest (income) expense, net of other of our joint ventures
and minority investees. EBITDA from equity investments is a
non-GAAP financial measure that is presented as supplemental
disclosure for illustrative purposes only and is reconciled to
earnings from equity investments in a schedule below.
Net Debt and Net Debt Leverage Ratio
Net debt is
defined as total principal face value of debt outstanding less cash
and cash equivalents. Net debt leverage ratio, as used herein,
represents net debt divided by Consolidated AEBITDA (as defined
above) for the trailing twelve-month period.
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenue:
|
|
|
|
|
|
|
|
|
Services
|
|
$
438.9
|
|
$
386.7
|
|
$
1,314.5
|
|
$
1,135.0
|
Product
sales
|
|
240.2
|
|
240.6
|
|
720.8
|
|
694.4
|
Instant
products
|
|
141.9
|
|
141.6
|
|
442.2
|
|
431.2
|
Total revenue
|
|
821.0
|
|
768.9
|
|
2,477.5
|
|
2,260.6
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Cost of services
(1)
|
|
124.4
|
|
105.5
|
|
370.5
|
|
307.7
|
Cost of product
sales(1)
|
|
109.9
|
|
116.9
|
|
335.4
|
|
332.2
|
Cost of instant
products(1)
|
|
67.0
|
|
68.4
|
|
208.0
|
|
209.8
|
Selling, general and
administrative
|
|
169.7
|
|
158.8
|
|
515.2
|
|
445.4
|
Research and
development
|
|
49.5
|
|
47.8
|
|
152.5
|
|
138.3
|
Depreciation,
amortization and impairments
|
|
166.3
|
|
173.1
|
|
527.1
|
|
513.2
|
Restructuring and
other
|
|
338.7
|
|
7.8
|
|
424.4
|
|
18.1
|
Total
operating expenses
|
|
1,025.5
|
|
678.3
|
|
2,533.1
|
|
1,964.7
|
Operating (loss) income
|
|
(204.5)
|
|
90.6
|
|
(55.6)
|
|
295.9
|
Other (expense)
income:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(147.4)
|
|
(148.9)
|
|
(448.3)
|
|
(459.5)
|
Earnings from equity
investments
|
|
4.3
|
|
7.5
|
|
16.2
|
|
20.1
|
Loss on debt
financing transactions
|
|
-
|
|
(8.4)
|
|
(93.2)
|
|
(38.1)
|
(Loss) gain on
remeasurement of debt
|
|
(4.0)
|
|
-
|
|
29.4
|
|
-
|
Other (expense)
income, net
|
|
(0.4)
|
|
(4.3)
|
|
(1.9)
|
|
1.3
|
Total other
expense, net
|
|
(147.5)
|
|
(154.1)
|
|
(497.8)
|
|
(476.2)
|
Net loss before
income taxes
|
|
(352.0)
|
|
(63.5)
|
|
(553.4)
|
|
(180.3)
|
Income tax
benefit (expense)
|
|
0.4
|
|
4.2
|
|
(5.8)
|
|
(18.9)
|
Net loss
|
|
$
(351.6)
|
|
$
(59.3)
|
|
$
(559.2)
|
|
$
(199.2)
|
|
|
|
|
|
|
|
|
|
Basic and diluted net
loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
(3.85)
|
|
$
(0.66)
|
|
$
(6.15)
|
|
$
(2.24)
|
Diluted
|
|
$
(3.85)
|
|
$
(0.66)
|
|
$
(6.15)
|
|
$
(2.24)
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares used in per share calculations:
|
|
|
|
|
|
|
Basic
shares
|
|
91.4
|
|
89.6
|
|
90.9
|
|
88.9
|
Diluted
shares
|
|
91.4
|
|
89.6
|
|
90.9
|
|
88.9
|
|
|
|
|
|
|
|
|
|
(1) Exclusive of
depreciation and amortization.
|
|
|
|
|
|
|
|
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited,
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2018
|
|
2017
|
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
113.5
|
|
$
788.8
|
Restricted
cash
|
|
37.1
|
|
29.0
|
Accounts receivable,
net
|
|
526.7
|
|
540.9
|
Notes receivable,
net
|
|
124.4
|
|
143.5
|
Inventories
|
|
238.4
|
|
243.1
|
Prepaid expenses,
deposits and other current assets
|
|
269.7
|
|
131.1
|
Total
current assets
|
|
1,309.8
|
|
1,876.4
|
|
|
|
|
|
Restricted
cash
|
|
15.2
|
|
16.3
|
Notes receivable,
net
|
|
40.2
|
|
52.8
|
Property and
equipment, net
|
|
542.4
|
|
568.2
|
Goodwill
|
|
3,308.2
|
|
2,956.1
|
Intangible assets,
net
|
|
1,725.7
|
|
1,604.6
|
Software,
net
|
|
301.2
|
|
339.4
|
Equity
investments
|
|
206.0
|
|
253.9
|
Other
assets
|
|
80.2
|
|
57.6
|
Total
assets
|
|
$
7,528.9
|
|
$
7,725.3
|
|
|
|
|
|
Liabilities and
Stockholders' Deficit:
|
|
|
|
|
Current portion of
long-term debt
|
|
$
46.8
|
|
$
40.3
|
Accounts
payable
|
|
215.4
|
|
190.4
|
Accrued
liabilities
|
|
810.2
|
|
509.1
|
Total
current liabilities
|
|
1,072.4
|
|
739.8
|
|
|
|
|
|
Deferred income
taxes
|
|
140.0
|
|
73.1
|
Other long-term
liabilities
|
|
200.1
|
|
203.1
|
Long-term debt,
excluding current portion
|
|
8,735.0
|
|
8,736.3
|
Total stockholders'
deficit
|
|
(2,618.6)
|
|
(2,027.0)
|
Total
liabilities and stockholders' deficit
|
|
$
7,528.9
|
|
$
7,725.3
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited,
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
(351.6)
|
|
$
(59.3)
|
|
$
(559.2)
|
|
$
(199.2)
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
195.8
|
|
187.3
|
|
678.0
|
|
589.4
|
Changes in
working capital accounts, net of effects of
acquisitions
|
|
375.2
|
|
(18.6)
|
|
236.9
|
|
(6.0)
|
Changes in
deferred income taxes and other
|
|
4.1
|
|
0.1
|
|
0.2
|
|
4.8
|
Net cash
provided by operating activities
|
|
223.5
|
|
109.5
|
|
355.9
|
|
389.0
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
(92.6)
|
|
(73.9)
|
|
(293.1)
|
|
(214.1)
|
Acquisitions of
businesses, net of cash acquired
|
|
-
|
|
(5.6)
|
|
(274.1)
|
|
(57.7)
|
Distributions
of capital from equity investments
|
|
1.4
|
|
1.5
|
|
24.6
|
|
23.9
|
Additions to
equity method investments
|
|
(1.0)
|
|
-
|
|
(76.2)
|
|
-
|
Other
|
|
-
|
|
-
|
|
-
|
|
10.0
|
Net cash used
in investing activities
|
|
(92.2)
|
|
(78.0)
|
|
(618.8)
|
|
(237.9)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Payments on
long-term debt, net of proceeds
|
|
(122.2)
|
|
(1.7)
|
|
(29.6)
|
|
10.9
|
Repayment of
assumed NYX debt
|
|
-
|
|
-
|
|
(288.2)
|
|
-
|
Payments of
debt issuance and deferred financing costs
|
|
-
|
|
(24.6)
|
|
(38.5)
|
|
(52.3)
|
Payments on
license obligations
|
|
(8.3)
|
|
(9.5)
|
|
(22.3)
|
|
(29.0)
|
Net redemptions
of common stock under stock-based compensation plans and
other
|
|
(2.8)
|
|
1.2
|
|
(24.3)
|
|
(2.7)
|
Net cash used
in financing activities
|
|
(133.3)
|
|
(34.6)
|
|
(402.9)
|
|
(73.1)
|
Effect of
exchange rate changes on cash, cash equivalents and restricted
cash
|
|
0.4
|
|
2.0
|
|
(2.5)
|
|
4.8
|
(Decrease)
increase in cash, cash equivalents and restricted
cash
|
|
(1.6)
|
|
(1.1)
|
|
(668.3)
|
|
82.8
|
Cash, cash
equivalents and restricted cash, beginning of
period
|
|
167.4
|
|
240.8
|
|
834.1
|
|
156.9
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
165.8
|
|
$
239.7
|
|
$
165.8
|
|
$
239.7
|
|
|
|
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
|
|
|
|
|
Cash paid for
interest
|
|
$
76.3
|
|
$
138.2
|
|
$
441.8
|
|
$
423.1
|
Income taxes
paid
|
|
9.5
|
|
9.1
|
|
24.9
|
|
27.8
|
Distributed
earnings from equity investments
|
|
5.4
|
|
1.6
|
|
24.3
|
|
20.3
|
Supplemental non-cash
transactions:
|
|
|
|
|
|
|
|
|
Non-cash
rollover and refinancing of Term loans
|
|
-
|
|
3,282.8
|
|
3,274.6
|
|
6,030.4
|
Non-cash
interest expense
|
|
6.6
|
|
4.1
|
|
18.8
|
|
17.4
|
Non-cash net
additions to intangible assets related to license
agreements
|
|
-
|
|
-
|
|
-
|
|
28.1
|
NYX non-cash
consideration transferred (inclusive of 2017 acquisition of
ordinary shares)
|
|
-
|
|
-
|
|
93.2
|
|
-
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
RECONCILIATION OF
NET LOSS TO CONSOLIDATED ATTRIBUTABLE EBITDA
|
AND SUPPLEMENTAL
BUSINESS SEGMENT DATA
|
(Unaudited,
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Reconciliation of
Net Loss to Consolidated Attributable EBITDA
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
(351.6)
|
|
$
(59.3)
|
|
$
(559.2)
|
|
$
(199.2)
|
Restructuring and
other(1)
|
|
338.7
|
|
7.8
|
|
424.4
|
|
18.1
|
Depreciation,
amortization and impairments
|
|
166.3
|
|
173.1
|
|
527.1
|
|
513.2
|
Other expense,
net
|
|
2.4
|
|
6.4
|
|
9.3
|
|
4.4
|
Interest
expense
|
|
147.4
|
|
148.9
|
|
448.3
|
|
459.5
|
Income tax (benefit)
expense
|
|
(0.4)
|
|
(4.2)
|
|
5.8
|
|
18.9
|
Stock-based
compensation
|
|
9.4
|
|
7.5
|
|
33.8
|
|
20.5
|
Loss on debt
financing transactions
|
|
-
|
|
8.4
|
|
93.2
|
|
38.1
|
Loss (gain) on
remeasurement of debt
|
|
4.0
|
|
-
|
|
(29.4)
|
|
-
|
EBITDA from equity
investments (2)
|
|
13.8
|
|
17.9
|
|
49.1
|
|
47.0
|
Earnings from equity
investments
|
|
(4.3)
|
|
(7.5)
|
|
(16.2)
|
|
(20.1)
|
Consolidated
Attributable EBITDA
|
|
$
325.7
|
|
$
299.0
|
|
$
986.2
|
|
$
900.4
|
|
|
|
|
|
|
|
|
|
Supplemental
Business Segment Data
|
|
|
|
|
Business segments
Attributable EBITDA
|
|
|
|
|
|
|
|
|
Gaming
|
|
$
232.5
|
|
$
221.2
|
|
$
686.3
|
|
$
657.8
|
Lottery
|
|
92.3
|
|
89.2
|
|
285.8
|
|
270.1
|
Social
|
|
27.0
|
|
20.1
|
|
78.4
|
|
59.9
|
Digital
|
|
11.9
|
|
3.1
|
|
42.3
|
|
10.9
|
Total business
segments Attributable EBITDA
|
|
363.7
|
|
333.6
|
|
1,092.8
|
|
998.7
|
Corporate and
other(3)
|
|
(38.0)
|
|
(34.6)
|
|
(106.6)
|
|
(98.3)
|
Consolidated
Attributable EBITDA
|
|
$
325.7
|
|
$
299.0
|
|
$
986.2
|
|
$
900.4
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Consolidated Attributable EBITDA margin
|
|
|
|
|
Consolidated
Attributable EBITDA
|
|
$
325.7
|
|
$
299.0
|
|
$
986.2
|
|
$
900.4
|
Revenue
|
|
821.0
|
|
768.9
|
|
2,477.5
|
|
2,260.6
|
Consolidated Attributable EBITDA margin
|
|
39.7%
|
|
38.9%
|
|
39.8%
|
|
39.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Refer to
Consolidated AEBITDA definition for description of items included
in restructuring and other.
|
(2) The Company
received $6.8 million and $48.9 million in cash distributions and
return of capital payments from its equity investees for the three
and nine months ended September 30, 2018, respectively,
and $3.1 million and $44.1 million in cash distributions and return
of capital payments from its equity investees for the three and
nine months ended September 30, 2017,
respectively.
|
(3) Includes
amounts not allocated to the business segments (including corporate
costs) and other non-operating expenses (income).
|
SELECTED SEGMENT
DATA AND SUPPLEMENTAL FINANCIAL DATA
|
(Unaudited,
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2018
|
|
|
Gaming
(5)
|
|
Lottery
|
|
Social
|
|
Digital
|
|
Corporate and
Other (3)
|
|
Total
Consolidated (4)
|
Total
Revenue
|
|
$
447.9
|
|
$
206.8
|
|
$
105.1
|
|
$
61.2
|
|
$
-
|
|
$
821.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
(1)
|
|
31.1
|
|
31.9
|
|
38.9
|
|
22.5
|
|
-
|
|
124.4
|
Cost of product sales
(1)
|
|
100.3
|
|
9.6
|
|
-
|
|
-
|
|
-
|
|
109.9
|
Cost of instant
products (1)
|
|
-
|
|
67.0
|
|
-
|
|
-
|
|
-
|
|
67.0
|
Selling, general and
administrative
|
|
58.1
|
|
18.0
|
|
33.2
|
|
18.2
|
|
42.2
|
|
169.7
|
Research and
development
|
|
32.3
|
|
1.6
|
|
6.9
|
|
8.7
|
|
-
|
|
49.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AEBITDA
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA from equity
investments (2)
|
|
1.9
|
|
11.9
|
|
-
|
|
-
|
|
-
|
|
13.8
|
Other expense,
net
|
|
1.9
|
|
-
|
|
-
|
|
-
|
|
0.1
|
|
2.0
|
Stock-based
compensation
|
|
2.6
|
|
1.7
|
|
0.9
|
|
0.1
|
|
4.1
|
|
9.4
|
AEBITDA
|
|
$
232.5
|
|
$
92.3
|
|
$
27.0
|
|
$
11.9
|
|
$
(38.0)
|
|
$
325.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected financial
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
amortization and impairments
|
|
$
119.3
|
|
$
15.0
|
|
$
2.5
|
|
$
16.2
|
|
$
13.3
|
|
$
166.3
|
Restructuring and
other
|
|
3.8
|
|
2.9
|
|
9.0
|
|
4.4
|
|
318.6
|
|
338.7
|
Earnings from equity
investments
|
|
2.1
|
|
2.2
|
|
-
|
|
-
|
|
-
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2018
|
|
|
Gaming
(5)
|
|
Lottery
|
|
Social
|
|
Digital
|
|
Corporate and
Other (3)
|
|
Total
Consolidated (4)
|
Total
Revenue
|
|
$
1,361.6
|
|
$
615.6
|
|
$
302.2
|
|
$
198.1
|
|
$
-
|
|
$
2,477.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
(1)
|
|
93.2
|
|
94.7
|
|
112.1
|
|
70.5
|
|
-
|
|
370.5
|
Cost of product sales
(1)
|
|
315.8
|
|
19.6
|
|
-
|
|
-
|
|
-
|
|
335.4
|
Cost of instant
products (1)
|
|
-
|
|
208.0
|
|
-
|
|
-
|
|
-
|
|
208.0
|
Selling, general and
administrative
|
|
184.2
|
|
50.0
|
|
94.9
|
|
56.3
|
|
129.8
|
|
515.2
|
Research and
development
|
|
98.8
|
|
5.4
|
|
19.1
|
|
29.2
|
|
-
|
|
152.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AEBITDA
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA from equity
investments (2)
|
|
5.2
|
|
43.9
|
|
-
|
|
-
|
|
-
|
|
49.1
|
Other expense,
net
|
|
5.5
|
|
-
|
|
-
|
|
-
|
|
1.9
|
|
7.4
|
Stock-based
compensation
|
|
6.0
|
|
4.0
|
|
2.3
|
|
0.2
|
|
21.3
|
|
33.8
|
AEBITDA
|
|
$
686.3
|
|
$
285.8
|
|
$
78.4
|
|
$
42.3
|
|
$
(106.6)
|
|
$
986.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected financial
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
amortization and impairments
|
|
$
379.7
|
|
$
43.1
|
|
$
15.6
|
|
$
48.9
|
|
$
39.8
|
|
$
527.1
|
Restructuring and
other
|
|
6.7
|
|
0.5
|
|
27.6
|
|
14.5
|
|
375.1
|
|
424.4
|
Earnings from equity
investments
|
|
3.2
|
|
13.0
|
|
-
|
|
-
|
|
-
|
|
16.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Exclusive of
depreciation and amortization.
|
(2) The Company
received $6.8 million and $48.9 million in cash distributions and
return of capital payments from its equity investees in the three
and nine months ended September 30, 2018,
respectively.
|
(3) Includes
amounts not allocated to the business segments (including corporate
costs) and other non-operating expenses (income).
|
(4) For
reconciliation of Consolidated AEBITDA (a non-GAAP measure), see
"RECONCILIATION OF NET LOSS TO CONSOLIDATED AEBITDA AND
SUPPLEMENTAL BUSINESS SEGMENT DATA" appearing on a
preceding schedule.
|
(5) For
disaggregation of gaming revenue by product vs. service, see
"SUPPLEMENTAL INFORMATION- SEGMENT KEY PERFORMANCE INDICATORS AND
SUPPLEMENTAL REVENUE METRICS" appearing on a
subsequent schedule.
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
SELECTED SEGMENT
DATA AND SUPPLEMENTAL FINANCIAL DATA
|
(Unaudited,
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2017
|
|
|
Gaming
(6)
|
|
Lottery
|
|
Social
(1)
|
|
Digital
(1)
|
|
Corporate and
Other (4)
|
|
Total
Consolidated (5)
|
Total
Revenue
|
|
$
454.6
|
|
$
202.9
|
|
$
95.1
|
|
$
16.3
|
|
$
-
|
|
$
768.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
(2)
|
|
35.0
|
|
28.4
|
|
35.3
|
|
6.8
|
|
-
|
|
105.5
|
Cost of product sales
(2)
|
|
103.6
|
|
13.3
|
|
-
|
|
-
|
|
-
|
|
116.9
|
Cost of instant
products (2)
|
|
-
|
|
68.4
|
|
-
|
|
-
|
|
-
|
|
68.4
|
Selling, general and
administrative
|
|
64.3
|
|
16.9
|
|
36.0
|
|
4.7
|
|
36.9
|
|
158.8
|
Research and
development
|
|
36.4
|
|
3.6
|
|
5.3
|
|
2.0
|
|
0.5
|
|
47.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AEBITDA
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA from equity
investments (3)
|
|
2.2
|
|
15.7
|
|
-
|
|
-
|
|
-
|
|
17.9
|
Other expense,
net
|
|
1.9
|
|
-
|
|
-
|
|
-
|
|
0.2
|
|
2.1
|
Stock-based
compensation
|
|
1.8
|
|
1.2
|
|
1.6
|
|
0.3
|
|
2.6
|
|
7.5
|
AEBITDA
|
|
$
221.2
|
|
$
89.2
|
|
$
20.1
|
|
$
3.1
|
|
$
(34.6)
|
|
$
299.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected financial
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
amortization and impairments
|
|
$
129.8
|
|
$
10.0
|
|
$
5.7
|
|
$
2.2
|
|
$
25.4
|
|
$
173.1
|
Restructuring and
other
|
|
0.3
|
|
(0.1)
|
|
0.6
|
|
(0.1)
|
|
7.1
|
|
7.8
|
Earnings from equity
investments
|
|
1.8
|
|
5.7
|
|
-
|
|
-
|
|
-
|
|
7.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2017
|
|
|
Gaming
(6)
|
|
Lottery
|
|
Social
(1)
|
|
Digital
(1)
|
|
Corporate and
Other (4)
|
|
Total
Consolidated (5)
|
Total
Revenue
|
|
$
1,351.8
|
|
$
594.3
|
|
$
266.4
|
|
$
48.1
|
|
$
-
|
|
$
2,260.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
(2)
|
|
107.9
|
|
79.8
|
|
99.4
|
|
20.6
|
|
-
|
|
307.7
|
Cost of product sales
(2)
|
|
303.9
|
|
28.3
|
|
-
|
|
-
|
|
-
|
|
332.2
|
Cost of instant
products (2)
|
|
-
|
|
209.8
|
|
-
|
|
-
|
|
-
|
|
209.8
|
Selling, general and
administrative
|
|
188.5
|
|
44.9
|
|
93.7
|
|
13.0
|
|
105.3
|
|
445.4
|
Research and
development
|
|
109.0
|
|
6.4
|
|
17.1
|
|
3.9
|
|
1.9
|
|
138.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AEBITDA
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA from equity
investments (3)
|
|
5.5
|
|
41.5
|
|
-
|
|
-
|
|
-
|
|
47.0
|
Other income,
net
|
|
4.7
|
|
-
|
|
-
|
|
-
|
|
1.0
|
|
5.7
|
Stock-based
compensation
|
|
5.1
|
|
3.5
|
|
3.7
|
|
0.3
|
|
7.9
|
|
20.5
|
AEBITDA
|
|
$
657.8
|
|
$
270.1
|
|
$
59.9
|
|
$
10.9
|
|
$
(98.3)
|
|
$
900.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected financial
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
amortization and impairments
|
|
$
389.1
|
|
$
37.2
|
|
$
11.4
|
|
$
4.9
|
|
$
70.6
|
|
$
513.2
|
Restructuring and
other
|
|
4.8
|
|
(0.9)
|
|
1.6
|
|
-
|
|
12.6
|
|
18.1
|
Earnings from equity
investments
|
|
5.4
|
|
14.7
|
|
-
|
|
-
|
|
-
|
|
20.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Business
segment information for the three and nine months ended September
30, 2017 has been recast to reflect the new separate Social and
Digital business segments, previously included in our Interactive
business segment.
|
(2) Exclusive of
depreciation and amortization.
|
(3) The Company
received $3.1 million and $44.1 million in cash distributions and
return of capital payments from its equity investees in the three
and nine months ended September 30, 2017,
respectively.
|
(4) Includes
amounts not allocated to the business segments (including corporate
costs) and other non-operating expenses
(income).
|
(5) For
reconciliation of Consolidated AEBITDA (a non-GAAP measure), see
"RECONCILIATION OF NET LOSS TO CONSOLIDATED AEBITDA AND
SUPPLEMENTAL BUSINESS SEGMENT DATA" appearing on a
preceding schedule.
|
(6) For
disaggregation of gaming revenue by product vs. service, see
"SUPPLEMENTAL INFORMATION- SEGMENT KEY PERFORMANCE INDICATORS AND
SUPPLEMENTAL REVENUE METRICS" appearing on a
subsequent schedule.
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
|
(Unaudited,
in millions, except for ratio)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALCULATION OF NET
DEBT LEVERAGE RATIO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
|
|
|
September 30,
2018
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
(602.3)
|
|
$
(310.0)
|
|
|
|
|
|
Restructuring and
other
|
|
452.2
|
|
121.3
|
|
|
|
|
|
Depreciation,
amortization and impairments
|
|
696.7
|
|
703.5
|
|
|
|
|
|
Other expense,
net
|
|
13.5
|
|
17.5
|
|
|
|
|
|
Interest
expense
|
|
598.5
|
|
600.0
|
|
|
|
|
|
Income tax expense
(benefit)
|
|
1.4
|
|
(2.4)
|
|
|
|
|
|
Stock-based
compensation
|
|
40.5
|
|
38.6
|
|
|
|
|
|
Loss on debt
financing transactions
|
|
93.2
|
|
101.6
|
|
|
|
|
|
Gain on remeasurement
of debt
|
|
(29.4)
|
|
(33.4)
|
|
|
|
|
|
EBITDA from equity
investments
|
|
69.2
|
|
73.3
|
|
|
|
|
|
Earnings from equity
investments
|
|
(22.8)
|
|
(26.0)
|
|
|
|
|
|
Consolidated
Attributable EBITDA
|
|
$
1,310.7
|
|
$
1,284.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal face value
of debt outstanding(1)
|
|
$
8,951.1
|
|
$
9,073.5
|
|
|
|
|
|
Less:
Cash and cash equivalents
|
|
113.5
|
|
118.6
|
|
|
|
|
|
Net
debt(2)
|
|
$
8,837.6
|
|
$
8,954.9
|
|
|
|
|
|
Net debt leverage
ratio
|
|
6.7
|
|
7.0
|
|
|
|
|
|
(1) Principal face
value of outstanding 2026 Secured Euro Notes and 2026 Unsecured
Euro Notes are translated at the constant foreign exchange rate
at
issuance of these notes. Euro to USD exchange rates at issuance and
as of September 30, 2018 were 1.24 and 1.18, respectively,
resulting in $36.1 million
adjustment increasing the principal face value of debt outstanding
presented above.
|
|
|
|
(2) September 30,
2018 and June 30, 2018 net debt balance is inclusive of incremental
debt associated with the NYX acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALCULATION OF
FREE CASH FLOW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities(1)
|
|
$
223.5
|
|
$
109.5
|
|
$
355.9
|
|
$
389.0
|
|
|
|
|
|
|
|
|
|
|
|
Less: Capital
expenditures
|
|
(92.6)
|
|
(73.9)
|
|
(293.1)
|
|
(214.1)
|
|
Add:
Distributions of capital from equity investments
|
|
1.4
|
|
1.5
|
|
24.6
|
|
23.9
|
|
Less: Additions to
equity method investments(2)
|
|
(1.0)
|
|
-
|
|
(76.2)
|
|
-
|
|
Less: Payments on
license obligations
|
|
(8.3)
|
|
(9.5)
|
|
(22.3)
|
`
|
(29.0)
|
|
Free cash
flow(3)
|
|
$
123.0
|
|
$
27.6
|
|
$
(11.1)
|
|
$
169.8
|
|
(1) The nine
months ended September 30, 2018 includes approximately $34.7
million of payments related to NYX transaction costs (inclusive of
NYX assumed liabilities). The three
months ended September 30, 2018 includes an approximate $63.4
million favorable change in accrued interest due to the February
2018 refinancing and timing of interest payments.
|
|
|
(2) The nine
months ended September 30, 2018 includes $74.3 million (€60
million) in LNS contributions representing our second pro-rata
concession funding payment.
|
|
(3) The nine
months ended September 30, 2018 cash flows includes $262.5 million
related to the acquisition of NYX and $38.5 million in costs
related to the refinancing transactions
reflected in investing and financing activities,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF
EARNINGS FROM EQUITY INVESTMENTS TO EBITDA FROM EQUITY
INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
EBITDA from equity
investments(1):
|
|
|
|
|
|
|
|
|
|
Earnings from equity
investments
|
|
$
4.3
|
|
$
7.5
|
|
$
16.2
|
|
$
20.1
|
|
Add: Income tax
expense
|
|
0.8
|
|
1.0
|
|
4.3
|
|
4.7
|
|
Add: Depreciation and
amortization
|
|
9.1
|
|
9.1
|
|
28.1
|
|
26.2
|
|
Add: Interest
(expense) income, net
|
|
(0.4)
|
|
0.3
|
|
0.5
|
|
(4.0)
|
|
EBITDA from equity
investments
|
|
$
13.8
|
|
$
17.9
|
|
$
49.1
|
|
$
47.0
|
|
(1) EBITDA from
equity investments includes results from the Company's
participation in LNS, RCN, ITL, CSG, Beijing Guard Libang
Technology Co., Ltd., Northstar Illinois,
Northstar New Jersey Lottery Group, LLC and Hellenic
Lotteries.
|
|
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
SUPPLEMENTAL
INFORMATION - SEGMENT KEY PERFORMANCE INDICATORS AND SUPPLEMENTAL
REVENUE METRICS
|
(Unaudited, in
millions, except unit, per unit data and
ARPDAU)
|
|
The table below
presents certain key performance indicators and supplemental
revenue metrics. The information set forth in the table below
should be read in conjunction with the historical financial
statements of the Company that are included in the Company's Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with
the SEC.
|
|
|
Three Months
Ended
|
|
September
30,
|
|
September
30,
|
|
June
30,
|
Gaming Revenue -
Supplemental Revenue Metrics
|
2018
|
|
2017
|
|
2018
|
Revenue by
Statement of Operations line item:
|
|
|
|
|
|
Services
|
$
222.4
|
|
$
231.0
|
|
$
222.5
|
Product
sales
|
225.5
|
|
223.6
|
|
248.2
|
Gaming
revenue
|
$
447.9
|
|
$
454.6
|
|
$
470.7
|
|
|
|
|
|
|
Gaming
operations:
|
|
|
|
|
|
Wide-area
progressive, premium and daily-fee participation revenue
|
$
90.7
|
|
$
99.8
|
|
$
88.1
|
Other leased,
participation and services revenue
|
68.5
|
|
76.2
|
|
71.8
|
Gaming operations
revenue
|
$
159.2
|
|
$
176.0
|
|
$
159.9
|
|
|
|
|
|
|
Gaming
systems:
|
|
|
|
|
|
Hardware,
software and services revenue
|
$
41.9
|
|
$
34.9
|
|
$
57.3
|
Maintenance
revenue
|
27.8
|
|
27.1
|
|
27.0
|
Gaming systems
revenue
|
$
69.7
|
|
$
62.0
|
|
$
84.3
|
|
|
|
|
|
|
Table
products:
|
|
|
|
|
|
Table products
sales revenue
|
$
12.2
|
|
$
16.8
|
|
$
21.3
|
Supplied table
products revenue
|
39.6
|
|
36.7
|
|
37.6
|
Table products
revenue
|
$
51.8
|
|
$
53.5
|
|
$
58.9
|
|
|
|
|
|
|
Gaming
Revenue - Key Performance Indicators
|
|
|
|
|
|
Gaming
Operations
|
|
|
|
|
|
Wide-area
progressive, premium and daily-fee participation units:
|
|
|
|
|
|
Installed base at
period end
|
19,117
|
|
21,061
|
|
20,671
|
Average daily revenue
per unit (exclusive of WAP jackpot expense)
|
$
50.52
|
|
$
51.59
|
|
$
50.31
|
|
|
|
|
|
|
Other participation
and leased units:
|
|
|
|
|
|
Installed base at
period end
|
48,143
|
|
48,633
|
|
47,991
|
Average daily revenue
per unit
|
$
13.18
|
|
$
14.64
|
|
$
14.16
|
|
|
|
|
|
|
Gaming Machine
Sales
|
|
|
|
|
|
U.S. and
Canadian new unit shipments
|
5,038
|
|
4,662
|
|
5,749
|
International
new unit shipments
|
2,625
|
|
2,940
|
|
2,492
|
New unit
shipments
|
7,663
|
|
7,602
|
|
8,241
|
Average sales price
per new unit
|
$
18,199
|
|
$
17,643
|
|
$
17,699
|
|
|
|
|
|
|
Gaming Machine
Unit Sales Components:
|
|
|
|
|
|
U.S. and Canadian
unit shipments:
|
|
|
|
|
|
Illinois
VGT
|
549
|
|
730
|
|
448
|
Replacement
units
|
4,266
|
|
3,932
|
|
4,388
|
Casino opening
and expansion units
|
223
|
|
-
|
|
913
|
Total unit
shipments
|
5,038
|
|
4,662
|
|
5,749
|
International unit
shipments:
|
|
|
|
|
|
Replacement
units
|
2,414
|
|
2,910
|
|
2,492
|
Casino opening
and expansion units
|
211
|
|
30
|
|
-
|
Total unit
shipments
|
2,625
|
|
2,940
|
|
2,492
|
|
|
|
|
|
|
Lottery Revenue -
Supplemental Revenue Metrics
|
|
|
|
|
|
Instant products
revenue by geography:
|
|
|
|
|
|
United
States
|
$
99.4
|
|
$
102.9
|
|
$
107.7
|
International
|
42.6
|
|
38.7
|
|
42.4
|
Instant products
revenue
|
$
142.0
|
|
$
141.6
|
|
$
150.1
|
|
|
|
|
|
|
Services revenue by
geography:
|
|
|
|
|
|
United
States
|
$
37.0
|
|
$
32.2
|
|
$
35.4
|
International
|
13.3
|
|
12.1
|
|
13.3
|
Services
revenue
|
$
50.3
|
|
$
44.3
|
|
$
48.7
|
|
|
|
|
|
|
Lottery Revenue -
Key Performance Indicators
|
|
|
|
|
|
Change in retail
sales of U.S. lottery instant games customers (1)(2)
|
4.4%
|
|
6.4%
|
|
5.1%
|
Change in retail
sales of U.S. lottery systems contract customers (1)(3)
|
(5.6)%
|
|
5.8%
|
|
3.0%
|
Change in Italy
retail sales of instant games (1)
|
(0.9)%
|
|
4.8%
|
|
2.4%
|
|
|
|
|
|
|
Social Revenue -
Key Performance Indicators
|
|
|
|
|
|
Average
monthly active users (4)
|
8.4
|
|
7.9
|
|
8.2
|
Average daily
active users (5)
|
2.7
|
|
2.5
|
|
2.5
|
Average daily
revenue per daily active user (6)
|
$
0.43
|
|
$
0.42
|
|
$
0.44
|
Mobile
penetration (7)
|
79%
|
|
72%
|
|
77%
|
(1) Information
provided by third-party lottery operators.
|
(2) U.S. instant
games customers' retail sales include only sales of instant
games.
|
(3) U.S. lottery
systems customers' retail sales primarily include sales of draw
games, keno and instant games validated by the relevant
system.
|
(4) Monthly Active Users (MAU) and is a
count of unique visitors to our site during a
month.
|
(5) Daily
Active Users (DAU) and is a count of unique visitors to our site
during a day.
|
(6) Average daily
revenue per DAU is calculated by dividing revenue by the DAU by the
number of days in the period.
|
(7) Mobile
penetration = percentage of B2C social gaming revenue derived from
mobile platforms.
|
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SOURCE Scientific Games Corporation