Scientific Games 2nd Quarter Consolidated Revenue up 63% YOY

LAS VEGAS, Aug. 9, 2021 /PRNewswire/ -- Scientific Games Corporation (NASDAQ: SGMS) ("Scientific Games," "SGC" or the "Company") today reported results for the second quarter ended June 30, 2021.

Barry Cottle, President and Chief Executive Officer of Scientific Games, said, "I am very pleased that we continue to make tremendous progress on all of our key strategic pillars while also driving significant growth in the quarter. We have emerged from the pandemic a much stronger Company with significant momentum. All of our businesses grew sequentially on both the top and bottom lines in the quarter. Gaming delivered its highest revenue quarter since the fourth quarter of 2019, Lottery and Digital achieved record results and SciPlay delivered its second highest revenue quarter in its history.  Following our strategic review, we will be singularly focused on becoming a leading cross-platform global game company with focus on content and digital markets. We are moving rapidly to transform our company and I have never been more optimistic about our path forward."

Michael Eklund, Executive Vice President and Chief Financial Officer of Scientific Games, added, "In concert with our Board, we announced a strategic action plan to transform our company and unlock value. We are taking decisive steps to optimize our portfolio, de-lever our balance sheet and invest to grow. I am very encouraged by the interest and discussions we are having around our proposed divestitures, and we are making great progress as we move quickly to unlock shareholder value.  We are proud of the team as they continue to execute during this exciting time, delivering a quarter with strong revenue, profit and cash flow growth. The team is laser focused on maintaining discipline to drive balance sheet strength and operational efficiency and we are energized for the future."

STRATEGIC PILLAR PROGRESS

• Overall, the Company is moving rapidly to execute on its vision with a singular focus to become a leading cross-platform global game company, accelerating efforts to de-lever and invest for sustainable growth.
• Optimizing our portfolio, moving quickly on planned divestitures of both the Lottery and Sports Betting businesses.
• Investing in our largest growth opportunities, both organically and inorganically, in content and digital markets to accelerate growth. Evidenced by the organic investments in content R&D and a new Las Vegas iGaming studio, as well as the targeted acquisitions of Lightning Box and Koukoi Games.
• Significantly de-levering and transforming the balance sheet with meaningful progress organically. Reduced net debt leverage ratio by nearly a third to 7.2x since the beginning of the year. Confident on further meaningful de-levering as we pursue strategic alternatives for the Lottery and Sports Betting businesses.

Second Quarter 2021 Financial Highlights:

• Second quarter consolidated revenue was $880 million compared to $539 million, up 63% compared to the prior year period. Our Gaming business delivered over 300% growth compared to the prior year period and 50% growth compared to the prior quarter driven by the strength of our new product roadmap, record gross gaming revenue ("GGR") in the U.S. and a rebound in the U.K. and Europe. Gaming revenue and AEBITDA also benefited by $38 million due to the FOBT recovery. The Lottery and Digital businesses both delivered record quarters fueled by strong instant sales and our original content offering respectively.
• Net income was $113 million compared to a net loss of $198 million in the prior year period primarily due to strong revenues in the Gaming business segment, which were significantly impacted by COVID-19 disruptions in the prior year period, coupled with $63 million non-cash gain associated with the SportCast acquisition. The prior year period also included temporary austerity measures that were implemented due to COVID-19 disruptions.
• Consolidated AEBITDA, a non-GAAP financial measure defined below, was $383 million compared to $121 million, up 217% as compared to the prior year period, driven by double-digit AEBITDA growth in Gaming, Lottery and Digital. Consolidated AEBITDA in the quarter was the highest in the Company's history.
• Net cash provided by operating activities was $149 million compared to $52 million in the prior year period primarily driven by improved operating results, partially offset by an unfavorable change in working capital accounts.
• Free cash flow, a non-GAAP financial measure defined below, was $133 million in the quarter, inclusive of the $38 million FOBT recovery.
• Net debt leverage ratio, a non-GAAP financial measure defined below, decline to 7.2x, down from 10.5x since the beginning of the year.

Key Highlights

• Gaming revenue increased, compared to the prior year period, to $367 million, primarily driven by strong growth in Gaming operations and Gaming machine sales. AEBITDA grew from the prior year driven by increased revenues coupled with lower allowance for credit loss and inventory valuation charges. Both revenue and AEBITDA benefited from the FOBT recovery.
• Gaming Operations revenue increased, driven by success of the Kascada ™ cabinet, growth in the installed base and average daily revenue per unit, significant COVID-19 disruptions in the prior year and from the FOBT recovery. The North American Premium installed base and average daily revenue per unit in the quarter exceeded 2019 levels.
• Lottery revenue increased 27% and AEBITDA increased 42% compared to the prior year period, another record quarter, driven by instant retail game sales as more consumers are playing instant lottery than ever before and average selling prices are achieving all-time highs. Strong draw games performance and continued momentum in iLottery also contributed to the quarter. Lottery was announced the winner of the Pennsylvania instant games and lottery systems contracts for the next 10 years, and has secured a number of  international contract wins, strengthening our global leadership position.
• Lottery Instant product revenue was $42 million higher than the prior year period primarily driven by record instant retail game sales in the U.S. and a number of markets globally and continued strong performance of Scientific Games Enhanced Partnership lotteries.
• Digital revenue increased 27% and AEBITDA grew 55% from the prior year period with record iGaming and Sports Betting revenues. Performance was driven by the strength of our original iGaming content, record iGaming GGR and the launch of new U.S. sports books.
• SciPlay revenue was $154 million, its second highest revenue quarter in its history, versus a  COVID-19 enhanced prior year quarter.
• SciPlay merger proposal submitted on July 15th to acquire the remaining 19% equity interest that the Company does not currently own, in an all-stock transaction.
• Koukoi Games acquired by SciPlay on July 2nd. A Finland-based developer of casual games will build a new casual game concept for SciPlay.
• Lightning Box acquired on August 4th. A Sydney-based slot developer, with a proven track record for creating feature-rich, land-based inspired games that deliver exciting experiences for online slot players worldwide.
• Las Vegas iGaming studio recently launched, which will be focused on developing games from our land-based franchises. 

Earnings Conference Call

As previously announced, Scientific Games executive leadership will host a conference call on Monday, August 9, 2021, at 8:00 a.m. EDT 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 (877) 842-4249  for U.S. or +1 (412) 317-5420 for 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).