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Deutschland LAS VEGAS, Aug. 1, 2019 /PRNewswire/ -- Scientific Games Corporation (NASDAQ: SGMS) ("Scientific Games," "SGC" or the "Company") today reported results for the second quarter ended June 30, 2019.
Second Quarter 2019 Financial Highlights:
- Second quarter revenue was $845 million consistent with the prior year period. Growth in Lottery, SciPlay, and Digital was offset by Gaming revenue down due to fewer casino openings and systems launches compared to last year, as well as lower replacement sales.
- Net loss was $75 million compared to $6 million in the prior year period, primarily driven by a $60 million debt financing expense related to the successful notes offering that lowered cash interest costs and extended debt maturities. This quarter also included a $3 million loss on remeasurement of Euro denominated debt versus a $34 million gain in the prior year period.
- Consolidated Adjusted EBITDA ("Consolidated AEBITDA"), a non-GAAP financial measure defined below, decreased 1 percent to $335 million from $340 million in the prior year period, driven by the factors impacting Gaming revenue described above.
- Net cash provided by operating activities was $95 million compared to $102 million in the year ago period, driven by the factors impacting Gaming revenue described above.
- Free cash flow, a non-GAAP financial measure, increased by $109 million from the year ago period to $38 million. Net debt, a non-GAAP financial measure, was $8.6 billion ($9 billion in face value of debt outstanding less $369 million of cash and cash equivalents) at quarter end. Net debt leverage ratio, a non-GAAP financial measure, decreased to 6.5x on a $308 million decrease in net debt. The company is targeting net debt leverage of approximately 5.5x by the end of 2020.
- In the second quarter, the Company completed the initial public offering of an 18.0% minority interest in its Social gaming business, SciPlay Corporation ("SciPlay"). The total proceeds to Scientific Games including the partial exercise of the over-allotment option were $342 million, of which $30 million was used by SciPlay for IPO fees and general corporate purposes, and the balance enables us to further reduce our debt.
"We are pleased with the growth we are continuing to see across Lottery, Digital, and SciPlay while also stabilizing gaming operations driven by the successful launches of several new games. The second quarter really highlights the diversity of our business and the many avenues we have to generate revenue across the globe," said Barry Cottle, President and Chief Executive Officer of Scientific Games. "The entire organization is laser focused on strengthening our core business and capturing market share in emerging digital markets while making our business more efficient. These key focus areas will allow us to deliver the greatest returns for our stakeholders, set ourselves up for profitable growth, and generate significant cash flow to continue on our deleveraging path."
Michael Quartieri, Chief Financial Officer of Scientific Games, added, "This quarter, we paid down another $155 million in debt bringing our year to date total to $300 million, and the SciPlay IPO proceeds will continue to enable us to make substantial payments on our debt as we work toward our deleveraging goal."
SUMMARY CONSOLIDATED RESULTS | ||||||||
($ in millions) | Three Months Ended June 30, | |||||||
2019 | 2018 | |||||||
Revenue | $ | 845 | $ | 845 | ||||
Net loss | (75) | (6) | ||||||
Net cash provided by operating activities(1) | 95 | 102 | ||||||
Capital expenditures | 65 | 112 | ||||||
Non-GAAP Financial Measures(2) | ||||||||
Consolidated AEBITDA | $ | 335 | $ | 340 | ||||
Consolidated AEBITDA margin | 40 | % | 40 | % | ||||
Free cash flow | $ | 38 | $ | (71) | ||||
Balance Sheet Measures | As of June 30, 2019 | As of December 31, 2018 | ||||||
Cash and cash equivalents | $ | 369 | $ | 168 | ||||
Principal face value of debt outstanding(3) | 9,016 | 9,219 | ||||||
Available liquidity | 1,082 | 439 | ||||||
(1) The three months ended June 30, 2019 and 2018 include a $49 million and $66 million unfavorable change, respectively, in accrued interest due to refinancing transactions. The three and six months ended June 30, 2019 include approximately $20 million of payments related to contingent acquisition considerations. The six months ended June 30, 2018 includes approximately $35 million of payments related to NYX transaction costs (including NYX assumed liabilities). | ||||||||
(2) 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. | ||||||||
(3) 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 June 30, 2019 were 1.24 and 1.14, respectively, resulting in a $58 million adjustment increasing the principal face value of debt outstanding presented above. Additionally, principal face value excludes $10 million in proceeds received from transactions completed in 2018 which are presented as debt. |
BUSINESS SEGMENT HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2019 | ||||||||||||||||||||||||||||||||||||
($ in millions) | Revenue | AEBITDA | AEBITDA Margin | |||||||||||||||||||||||||||||||||
2019 | 2018 | $ | % | 2019 | 2018 | $ | % | 2019 | 2018 | PP Change(2) | ||||||||||||||||||||||||||
Gaming | $ | 427 | $ | 471 | (44) | (9) | % | $ | 215 | $ | 236 | (21) | (9) | % | 50 | % | 50 | % | — | |||||||||||||||||
Lottery | 231 | 207 | 24 | 12 | % | 103 | 99 | 4 | 4 | % | 45 | % | 48 | % | (3) | |||||||||||||||||||||
SciPlay (1) | 118 | 100 | 18 | 18 | % | 33 | 23 | 10 | 44 | % | 28 | % | 23 | % | 5 | |||||||||||||||||||||
Digital | 69 | 67 | 2 | 3 | % | 12 | 13 | (1) | (8) | % | 17 | % | 19 | % | (2) | |||||||||||||||||||||
PP - percentage points. | ||||||||||||||||||||||||||||||||||||
(1) As a result of the initial public offering of a minority interest in SciPlay and starting with the first quarter of 2019, we changed the calculation of SciPlay AEBITDA, which now reflects intercompany charges for corporate services and certain royalties paid for by SciPlay to other segments or to Corporate. SciPlay information for the prior comparable period has been recast to reflect these changes. | ||||||||||||||||||||||||||||||||||||
(2) As calculations are made using whole dollar numbers, actual results may vary compared to calculations presented in this table. |
Key Highlights vs. Second Quarter 2018
- Gaming operations - U.S. and Canadian revenue was flat sequentially driven by a $0.52 increase in average daily revenues from the prior quarter, while the installed base decreased by 902 units from the removal of older machines and the closure of a racino in the Northeast. Total gaming operations revenues decreased by $2 million sequentially as international operations revenue was slightly impacted, as anticipated, by the implementation of the £2 max bet limit in April.
- Gaming machine sales – total new unit shipments in the U.S. and Canada decreased due to lower replacement units, while international units increased. The company launched the new Twinstar Wave XL cabinet on a for sale model with six themes and the entire library of content from the Twinstar J43.
- Gaming systems revenue was down due to fewer Canadian systems launches.
- Table games continued to grow with revenue up $3 million from the prior year to $62 million on continued strength in the business.
- Lottery systems revenue was $24 million higher primarily related to equipment sales as part of a recent award of a 10-year sports betting contract in Turkey.
- Instant products revenue was flat reflecting growth in international business offset by a decline domestically related to the anniversary of the Willy Wonka linked game.
- SciPlay revenue increased 18%, which was more than twice the rate of market growth. The growth was driven by increased monetization of paying players, with ARPDAU up 14% to $0.48.
- Digital casino platform reliably processed over $9 billion in total wagers. The company was awarded platform of the year at the EGR 2019 B2B Awards for Open Gaming System (OGS) and Open Platform System (OPS). Currently launching mobile sports in Pennsylvania, Indiana, and Iowa with more on the horizon.
LIQUIDITY | ||||||||||||
($ in millions) | Three Months Ended June 30, | |||||||||||
2019 | 2018 | Increase / (Decrease) | ||||||||||
Net loss | $ | (75) | $ | (6) | $ | (69) | ||||||
Non-cash adjustments included in net loss | 237 | 149 | 88 | |||||||||
Non-cash interest | 6 | 6 | — | |||||||||
Changes in deferred income taxes and other | 1 | (5) | 6 | |||||||||
Distributed earnings from equity investments | 18 | 18 | — | |||||||||
Changes in working capital accounts | (92) | (60) | (32) | |||||||||
Net cash provided by operating activities | $ | 95 | $ | 102 | $ | (7) | ||||||
- Free cash flow, a non-GAAP financial measure defined below, was $38 million compared to a cash usage of $71 million, due to lower capital expenditures, and the prior year included a $75 million payment related to the extension of the instant ticket concession in Italy.
- In April 2019, we used the net proceeds of our 2026 Unsecured Notes offering to redeem $1 billion of outstanding 2022 Unsecured Notes and pay accrued and unpaid interest thereon plus related premiums, fees, and costs.
- The Company made debt repayments of $155 million, including $145 million of voluntary repayments under its revolving credit facility and $10 million in mandatory amortization of its term loans.
- Capital expenditures totaled $65 million, compared to $112 million. For 2019, the company now expects capital expenditures will be in the range of $340-$360 million.
Earnings Conference Call
Scientific Games executive leadership will host a conference call on Thursday, August 1, 2019, at 5:30 pm. EST to review the Company's second 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 | Investor Relations |
Susan Cartwright +1 702-532-7981 | Michael Quartieri +1 702-532-7658 |
Vice President, Corporate Communications | Executive Vice President and Chief Financial Officer |
All ® notices signify marks registered in the United States. © 2019 Scientific Games Corporation. All Rights Reserved.
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
(Unaudited, in millions, except per share amounts) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue: | |||||||||||||||
Services | $ | 457 | $ | 438 | $ | 916 | $ | 876 | |||||||
Product sales | 238 | 257 | 476 | 481 | |||||||||||
Instant products | 150 | 150 | 290 | 300 | |||||||||||
Total revenue | 845 | 845 | 1,682 | 1,657 | |||||||||||
Operating Expenses: | |||||||||||||||
Cost of services(1) | 135 | 124 | 268 | 246 | |||||||||||
Cost of product sales(1) | 111 | 121 | 218 | 226 | |||||||||||
Cost of instant products(1) | 75 | 71 | 142 | 141 | |||||||||||
Selling, general and administrative | 174 | 174 | 360 | 346 | |||||||||||
Research and development | 46 | 49 | 95 | 103 | |||||||||||
Depreciation, amortization and impairments | 170 | 173 | 335 | 361 | |||||||||||
Restructuring and other | 6 | 34 | 13 | 86 | |||||||||||
Total operating expenses | 717 | 746 | 1,431 | 1,509 | |||||||||||
Operating income | 128 | 99 | 251 | 148 | |||||||||||
Other (expense) income: | |||||||||||||||
Interest expense | (147) | (146) | (301) | (301) | |||||||||||
Earnings from equity investments | 7 | 5 | 13 | 12 | |||||||||||
Loss on debt financing transactions | (60) | — | (60) | (93) | |||||||||||
(Loss) gain on remeasurement of debt | (3) | 34 | 2 | 33 | |||||||||||
Other income (expense), net | 7 | 2 | 7 | (1) | |||||||||||
Total other expense, net | (196) | (105) | (339) | (350) |
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