Scientific Games Reports First Quarter 2019 Results

LAS VEGAS, May 7, 2019 /PRNewswire/ -- Scientific Games Corporation (NASDAQ: SGMS) ("Scientific Games" or the "Company") today reported results for the first quarter ended March 31, 2019.

First Quarter 2019 Financial Highlights:

• First quarter revenue rose 3 percent to $837 million, up from $812 million in the year ago period, reflecting growth in our Lottery and Social businesses.
• Net loss was $24 million compared to $202 million in the prior year period, driven by higher operating income, partly attributable to a $45 million reduction in restructuring and other expenses. The prior year net loss also included a $93 million charge related to our February 2018 refinancing.
• Consolidated Adjusted EBITDA ("Consolidated AEBITDA"), a non-GAAP financial measure defined below, increased 3 percent to $328 million from $320 million in the prior year period, reflecting the revenue growth.
• Net cash provided by operating activities increased to $167 million from $30 million in the year ago period driven by the improved operating results, lower restructuring and other expenses and a $66 million favorable change in accrued interest.
• On May 7, 2019, the Company completed the initial public offering of a 17.4% minority interest in its Social gaming business, SciPlay Corporation ("SciPlay"). SciPlay is trading on The NASDAQ Global Select Market under the ticker symbol "SCPL". Scientific Games received $301 million in proceeds from the offering, which enables us to make substantial payments to reduce debt. The Company believes the offering provides SciPlay greater flexibility to pursue additional growth initiatives.

Barry Cottle, President and Chief Executive Officer of Scientific Games, said, "We are incredibly proud that we have continued to build on our momentum and are looking forward to the year ahead. We are focused on effectively operating our businesses, reducing costs and building upon the strong foundation for profitable growth that we see today. Last week, we successfully took SciPlay public as a new company, which accelerates our ability to pay down debt. All of these actions support our steadfast commitment to smartly grow our business, drive free cash flow and create meaningful value for our stakeholders."

Michael Quartieri, Chief Financial Officer of Scientific Games, added, "This quarter, we paid down $145 million in debt and completed a major refinancing that lowered our borrowing costs and extended our debt maturities. As a result of the SciPlay IPO, we expect to continue our deleveraging path and the efficient deployment of our resources to generate the returns needed to enhance our free cash flow."

SUMMARY CONSOLIDATED RESULTS

BUSINESS SEGMENT HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2019

Key Highlights

• Gaming operations – revenues increased slightly on a quarter sequential basis as our international operations average daily revenue per unit increased $0.59 and the installed base increased 206 units, while our U.S. and Canadian operations average daily revenues increased $0.25 and the installed based decreased by 627 units.
• Gaming machine sales – total new unit shipments in the U.S. and Canada increased to 4,801 compared to 4,667 in the prior year due to increased shipments for new openings and expansions, partly from Encore Boston Harbor. We recently launched our new Wave XL cabinet on a for sale model with three of our top internal brands. This cabinet is the successor to our highly successful Pro Wave that revolutionized the look and feel of casino floors.
• Gaming systems – revenue was flat from the prior year reflecting fewer major site installations than the prior year, which was offset by strong maintenance revenue.
• Lottery systems revenue was $35 million higher than the prior year primarily related to equipment hardware sales and new lottery contracts in Maryland and Kansas from the prior year period.
• Domestic instant product revenue was down 11% related to a change in the mix shipment volumes among our contract types
• Social gaming revenue increased 22% from the prior year, which was twice the rate of market growth according to estimates from Eilers and Krejcik. The growth was driven by increased monetization of our paying players, with ARPDAU up 14%, while our average DAU also increased to 2.7 million from 2.6 million in the prior year.
• Our Digital casino platform reliably processed nearly $9 billion in total wagers in the first quarter. In April 2019, we announced a partnership with Wynn Resorts to support their launch of both iGaming and sports in the U.S.

LIQUIDITY

• Net cash provided by operating activities increased to $167 million from $30 million in the year ago period driven by the improved operating results and lower restructuring and other expenses and a $66 million favorable change in accrued interest.
• Free cash flow, a non-GAAP financial measure defined below, was $96 million compared to a cash usage of $63 million in the year ago period, due to the operating cash flow increase and lower capital expenditures.
• During the quarter ended March 31, 2019, the Company made debt repayments of $145 million, including $135 million of voluntary repayments under its revolving credit facility and $10 million in mandatory amortization of its term loans.
• On March 19, 2019, we successfully completed a private offering of $1.1 billion in aggregate principal amount of new 8.250% senior unsecured notes due 2026 and redeemed $1.0 billion of our 10.000% senior unsecured notes due 2022 in April 2019. We also used the proceeds to pay accrued and unpaid interest plus related premiums, fees and costs, and pay offering related fees and expenses. This transaction extended our maturities and lowered our interest rates.
• Capital expenditures totaled $67 million in the first quarter of 2019, compared to $88 million in the prior-year period. For 2019, we continue to expect capital expenditures will be within a range of $345-$375 million.

Earnings Conference Call

Scientific Games executive leadership will host a conference call on Tuesday, May 7, 2019, at 4:30 p.m. EST to review the Company's first 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.

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