Scientific Games Reports Third Quarter 2019 Results

LAS VEGAS, Nov. 7, 2019 /PRNewswire/ -- Scientific Games Corporation (NASDAQ: SGMS) ("Scientific Games," "SGC" or the "Company") today reported results for the third quarter ended September 30, 2019.

Third Quarter 2019 Financial Highlights:

• Third quarter revenue rose 4 percent to $855 million, up from $821 million in the year ago period. The growth was achieved across every business segment.
• Net income was $18 million compared to a net loss of $352 million in the prior year period. Net income was driven by growth in revenue and a $19 million gain on remeasurement of Euro denominated debt versus a $4 million loss in the prior year period. The prior year period included $339 million in restructuring and other charges primarily related to the verdict in the Shuffle Tech legal matter.
• Consolidated Adjusted EBITDA ("Consolidated AEBITDA"), a non-GAAP financial measure, increased 6 percent to $344 million from $326 million in the prior year period, primarily driven by higher revenues and business improvements.
• Net cash provided by operating activities was $141 million compared to $223 million in the year ago period, primarily due to a $48 million change in the timing of interest payments and an increase in receivables driven by higher game sales and the timing of collections throughout the quarter.
• Free cash flow, a non-GAAP financial measure, was $53 million. Net debt, a non-GAAP financial measure, decreased $50 million sequentially to $8.6 billion at quarter end ($9 billion in face value of debt outstanding less $363 million of cash and cash equivalents). Net debt leverage ratio, a non-GAAP financial measure, decreased to 6.4x. The company is targeting net debt leverage of approximately 5.5x by the end of 2020.

Barry Cottle, President and Chief Executive Officer of Scientific Games, said, "Each of our business segments is growing on both the top and bottom line, enabling us to continue on our path to 5.5x net debt leverage by the end of 2020.  We showcased our great games and products at G2E which demonstrated our industry leading position as a one-stop solution across platforms and key content. This positioning will allow us to enhance partner operations, grow in existing markets and win in emerging markets."

Michael Quartieri, Chief Financial Officer of Scientific Games, added, "Our products grew the top-line, and operating leverage was driven by business improvements. We believe there are a number of avenues for further growth driven by share gains and new market opportunities. We remain firmly committed to maximize cash flows and delever our balance sheet."

SUMMARY CONSOLIDATED RESULTS

BUSINESS SEGMENT HIGHLIGHTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

Key Highlights vs. Third Quarter 2018

• Gaming machine sales - total new unit shipments in the U.S. and Canada increased 10% due to continued strong demand for the Twinstar J43 and momentum in the Twinstar Wave XL cabinet. U.S. and Canadian replacements units increased 24% excluding units from a strategic long-term relationship entered into in Oklahoma in the prior year. Openings and expansion units increased by over 600 units driven by strong sales into Illinois and a new opening in California.
• Gaming operations - total gaming operations revenues decreased by $1 million sequentially. The U.S. and Canadian installed base decreased 547 units sequentially from the removal and convert to sale of some low fee per day machines. International gaming operations revenue increased driven by strength in the Europe, Middle East, and Africa (EMEA) region offsetting the anticipated removal of machines in the U.K.
• Gaming systems revenue was higher due to growth in maintenance and services revenue from existing systems.
• Table Products continued to grow with revenue up $8 million from the prior year period to $60 million on continued strength in the business.
• Lottery awarded multiple long-term contracts including being named the exclusive supplier to the joint venture operating the Turkey National Lottery and the exclusive terminal hardware partner to Sisal in Italy. In early October, the Florida Lottery selected Scientific Games as its primary instant games provider through 2027, continuing a more than 30-year partnership.
• Lottery systems revenue was $5 million higher primarily related to hardware sales as part of a recent award of a 10-year sports betting contract in Turkey.
• Lottery instant products revenue was $8 million higher with strength both domestically and internationally.
• SciPlay revenue increased 11%, which exceeded the market rate of growth. The growth was driven by increased monetization of paying players, with ARPDAU up 9% to $0.47.
• Digital revenue increased 7% and AEBITDA increased 42%. Received the Digital Product of the Year prize at the Global Gaming Awards 2019 for OpenSports, our end-to-end sports betting product suite, for the second consecutive year.

LIQUIDITY

• Net cash provided by operating activities was $141 million compared to $223 million in the year ago period, primarily due to a $48 million change in the timing of interest payments and an increase in receivables driven by higher game sales and the timing of collections throughout the quarter.
• Free cash flow, a non-GAAP financial measure defined below, was $53 million compared to$122 million in the prior year period.
• The Company made voluntary debt repayments of $45 million and $10 million in mandatory amortization of its term loans.
• Available liquidity totaled $1,121 million compared to $439 million at year end 2018.
• In November 2019, the Company received commitments from some of its revolving lenders to extend approximately $600 million of commitments under the existing revolving credit facility for a five-year period. The Company is still in discussions with other lenders regarding potential additional extended revolver commitments.
• Capital expenditures totaled $75 million, compared to $93 million in the prior year period. For 2019, the Company now expects capital expenditures will be $295-$315 million, which is lower than the prior range of $340-$360 million.

 Earnings Conference Call

Scientific Games executive leadership will host a conference call on Thursday, November 7, 2019, at 4:15 pm. 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.

You can access our filings with the SEC through the SEC website at www.sec.gov or through our website, and we strongly encourage you to do so. We routinely post information that may be important to investors on our website at www.scientificgames.com/investors/, and we use our website as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of the SEC's Regulation Fair Disclosure (Reg FD). 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, and shall not be deemed "filed" under the Securities Exchange Act of 1934, as amended.

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