Scientific Games Reports Third Quarter 2020 Results

LAS VEGAS, Nov. 4, 2020 /PRNewswire/ -- Scientific Games Corporation (NASDAQ: SGMS) ("Scientific Games," "SGC" or the "Company") today reported results for the third quarter ended September 30, 2020. The Company's third quarter results were adversely impacted by the COVID-19 disruptions primarily in the Gaming business unit during the quarter, affecting comparability to the prior year period.

Third Quarter 2020 Financial Highlights:

• Third quarter revenue was $698 million compared to $855 million in the prior year period and an increase from $539 million in the second quarter. The Company's Gaming revenue was negatively impacted by the COVID-19 disruptions that has resulted in continued reduced operations of casino operators globally. Our Lottery, SciPlay and Digital businesses grew in the quarter, highlighting the strategic investments we have made in the Digital space and the breadth of our portfolio.
• Net loss was $111 million compared to net income of $18 million in the prior year period, due to lower revenue and the effects of COVID-19. Results were also impacted by a $24 million loss on remeasurement of debt compared to a $19 million gain in the prior year period.
• Consolidated AEBITDA, a non-GAAP financial measure defined below, was $235 million largely driven by COVID-19 disruptions, which affect prior year comparability. Our Lottery, SciPlay and Digital business all increased AEBITDA by 10% or more with our Digital business up nearly 50% and SciPlay up over 50% from the prior year.
• Net cash provided by operating activities was $140 million consistent with the year ago period.
• Free cash flow, a non-GAAP financial measure defined below (which further adjusts our previously presented measure of free cash flow), increased $11 million from the prior year to $62 million driven primarily by working capital improvements.
• Available liquidity, including SciPlay, at quarter-end was $1.2 billion. On October 8, 2020, subsequent to quarter-end, the Company amended its credit agreement that extended the Covenant Relief Period under its revolving credit facility through the first quarter of 2022 and made a $100 million voluntary payment.

Barry Cottle, President and Chief Executive Officer of Scientific Games, said, "As a result of our team's focus on our strategy, our diverse portfolio and our commitment to cost management, we delivered strong cash flow in the third quarter. I really am excited around all the great games, products and solutions we have to help our partners navigate the current environment and provide innovative solutions for the future. I'd also like to welcome the proven industry leaders to our board who will augment our focus on de-levering our balance sheet and will help the company prudently and thoughtfully shape our corporate strategy."

Michael Eklund, Executive Vice President, Chief Financial Officer of Scientific Games, added, "The team did a great job driving cash flow improvements this quarter, and we will continue to diligently evaluate additional opportunities to increase cash flow and de-lever. Looking ahead, our team will remain highly focused on driving operational efficiencies, further bolstering our liquidity and strengthening our balance sheet. My overarching focus is to improve the balance sheet through operational and business process improvements."

Key Highlights

• SciPlay AEBITDA increased by 54% from the prior year to $49 million primarily driven by revenue growth of 30%.
• Digital AEBITDA increased nearly 50% from the prior year to $25 million. Domestic iGaming revenue grew nearly 150% from the prior year period driven primarily by strong growth in New Jersey. During the quarter we announced new and extended partnerships with Hard Rock, Flutter and Wynn Resorts among others.
• Gaming revenue decreased 49% as COVID-19 disruptions resulted in continued reduced operations of casino operators in various jurisdictions globally. Over 90% of domestic casinos have reopened including New York commercial casinos a large market that opened in mid-September.
• Gaming operations coin-in for turned on units were up double-digits reflecting the popularity of our games and game franchises like Dancing Drums Explosion.
• Gaming product sales received strong ship share reflecting the breadth of our product offerings for commercial and tribal openings this quarter.
• Lottery instant ticket sales are up over 20% for instant game retail sales in the most recent twelve-week period compared to the same period last year.
• Lottery revenue and AEBITDA were both 10% higher than the prior year. The revenue growth was driven by domestic instant tickets and international product sales.

• As of September 30, 2020, we had $1.2 billion in available liquidity, which included SciPlay's revolving credit facility.
• On October 8, 2020, the Company and requisite lenders under the Company's revolving credit facility entered into a Credit Agreement Amendment that extended the Covenant Relief Period established in the May 8, 2020 amendment, by an additional three quarters. Compliance with the consolidated net first lien leverage ratio in the Credit Agreement will now resume with the quarter ending March 31, 2022.
• On October 9, 2020 the Company made a voluntary payment of $100 million against the balance drawn on the revolving credit facility, demonstrating the confidence we have in our diversified business model.
• Capital expenditures totaled $50 million in the third quarter of 2020, compared to $75 million in the prior-year period. For 2020, the Company now expects capital expenditures will be $210 million - $225 million, which is lower than the prior range of $210 million - $240 million.
• Year to date through September 30, 2020, the Company generated free cash flow, a non-GAAP financial measure, of $114 million, including $62 million of positive free cash flow in the third quarter due to the strength of our diverse portfolio. We continue to expect to be free cash flow positive for the full year 2020.

Completion of MacAndrews & Forbes Transaction

• Long-term institutional investors have completed their acquisition of a 34.9% stake in the Company from MacAndrews & Forbes Incorporated ("MacAndrews & Forbes"). The Stockholders Agreement with MacAndrews & Forbes is now terminated and all rights held by MacAndrews & Forbes, other than registration rights, are no longer in effect.
• The reconstituted board will review all strategic options to improve and maximize shareholder value with an objective to de-lever the balance sheet. This broader review of strategy will be supported by operational improvements along with renewed focus on working capital management. This was demonstrated by the solid financial results, improvements in working capital activities, and strong free cash flow this quarter.

Announcing Hamish McLennan to Serve As New Independent Member of the Board of Directors

• Mr. McLennan chairs several Australian Securities Exchange-listed companies including REA Group Limited, a $15 billion global digital advertising company, and HT&E Limited, a media and entertainment company operating radio, digital and outdoor businesses, and is Deputy Chairman of Magellan Financial Group, a globally-focused equity fund with approximately $100 billion worth of investments under management. Mr. McLennan is also Chairman of Rugby Australia Limited, the governing body of rugby union in Australia, and a director of Claim Central Consolidated, a global digital claims solutions business. Mr. McLennan is an experienced media and marketing executive, previously serving as Executive Chairman and Chief Executive Officer at Network Ten Holdings, an Australian entertainment and news content company, Executive Vice President for News Corporation, a global diversified media and information services company, in Sydney and New York, and Global Chairman and Chief Executive Officer of Young & Rubicam, a division of WPP, the world's largest communications services group.

Earnings Conference Call

Scientific Games executive leadership will host a conference call on Wednesday, November 4, 2020, at 4:15 pm. ET 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. 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).

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