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
|
susan.cartwright@scientificgames.com
|
|
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)
|
|
Net loss before
income taxes
|
(68)
|
|
|
(6)
|
|
|
(88)
|
|
|
(202)
|
|
Income tax
expense
|
(7)
|
|
|
—
|
|
|
(11)
|
|
|
(6)
|
|
Net loss
|
(75)
|
|
|
(6)
|
|
|
(99)
|
|
|
(208)
|
|
Less: Net income
attributable to noncontrolling interest
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Net loss attributable
to SGC
|
$
|
(77)
|
|
|
$
|
(6)
|
|
|
$
|
(101)
|
|
|
$
|
(208)
|
|
Basic and diluted net
loss attributable to SGC per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.83)
|
|
|
$
|
(0.06)
|
|
|
$
|
(1.09)
|
|
|
$
|
(2.29)
|
|
Diluted
|
$
|
(0.83)
|
|
|
$
|
(0.06)
|
|
|
$
|
(1.09)
|
|
|
$
|
(2.29)
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares used in per share calculations:
|
|
|
|
|
|
|
|
|
|
Basic
shares
|
93
|
|
|
91
|
|
|
93
|
|
|
91
|
|
Diluted
shares
|
93
|
|
|
91
|
|
|
93
|
|
|
91
|
|
|
|
(1) Excludes
depreciation and amortization.
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited,
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
2019
|
|
2018
|
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
369
|
|
|
$
|
168
|
|
Restricted
cash
|
|
44
|
|
|
39
|
|
Accounts receivable,
net
|
|
616
|
|
|
599
|
|
Notes receivable,
net
|
|
120
|
|
|
114
|
|
Inventories
|
|
238
|
|
|
216
|
|
Prepaid expenses,
deposits and other current assets
|
|
198
|
|
|
233
|
|
Total current
assets
|
|
1,585
|
|
|
1,369
|
|
|
|
|
|
|
Restricted
cash
|
|
12
|
|
|
13
|
|
Notes receivable,
net
|
|
42
|
|
|
40
|
|
Property and
equipment, net
|
|
532
|
|
|
547
|
|
Operating lease
right-of-use assets
|
|
113
|
|
|
—
|
|
Goodwill
|
|
3,279
|
|
|
3,280
|
|
Intangible assets,
net
|
|
1,660
|
|
|
1,809
|
|
Software,
net
|
|
265
|
|
|
285
|
|
Equity
investments
|
|
273
|
|
|
298
|
|
Other
assets
|
|
171
|
|
|
77
|
|
Total
assets
|
|
$
|
7,932
|
|
|
$
|
7,718
|
|
|
|
|
|
|
Liabilities and
Stockholders' Deficit:
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
45
|
|
|
$
|
45
|
|
Accounts
payable
|
|
201
|
|
|
225
|
|
Accrued
liabilities
|
|
487
|
|
|
477
|
|
Total current
liabilities
|
|
733
|
|
|
747
|
|
|
|
|
|
|
Deferred income
taxes
|
|
108
|
|
|
108
|
|
Operating lease
liabilities
|
|
95
|
|
|
—
|
|
Other long-term
liabilities
|
|
312
|
|
|
334
|
|
Long-term debt,
excluding current portion
|
|
8,802
|
|
|
8,992
|
|
Total stockholders'
deficit(1)
|
|
(2,118)
|
|
|
(2,463)
|
|
Total liabilities and
stockholders' deficit
|
|
$
|
7,932
|
|
|
$
|
7,718
|
|
|
(1) Includes $94
million in noncontrolling interest as of June 30,
2019.
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited,
in millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net loss
|
$
|
(75)
|
|
|
$
|
(6)
|
|
|
$
|
(99)
|
|
|
$
|
(208)
|
|
Adjustments to
reconcile net loss to cash provided by operating
activities
|
261
|
|
|
173
|
|
|
440
|
|
|
482
|
|
Changes in working
capital accounts, net of effects of acquisitions
|
(92)
|
|
|
(60)
|
|
|
(86)
|
|
|
(138)
|
|
Changes in deferred
income taxes and other
|
1
|
|
|
(5)
|
|
|
7
|
|
|
(4)
|
|
Net cash provided by
operating activities
|
95
|
|
|
102
|
|
|
262
|
|
|
132
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
(65)
|
|
|
(112)
|
|
|
(132)
|
|
|
(200)
|
|
Acquisitions of
businesses and assets, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
(274)
|
|
Distributions of
capital from equity investments
|
15
|
|
|
21
|
|
|
18
|
|
|
23
|
|
Additions to equity
method investments
|
(1)
|
|
|
(75)
|
|
|
(1)
|
|
|
(75)
|
|
Net cash used in
investing activities
|
(51)
|
|
|
(166)
|
|
|
(115)
|
|
|
(526)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Payments of long-term
debt, net of proceeds
|
(1,206)
|
|
|
88
|
|
|
(253)
|
|
|
93
|
|
Repayment of assumed
NYX and other acquisition debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(288)
|
|
Payments of debt
issuance and deferred financing and offering costs
|
(9)
|
|
|
—
|
|
|
(23)
|
|
|
(39)
|
|
Net proceeds from
issuance of SciPlay's common stock
|
342
|
|
|
—
|
|
|
342
|
|
|
—
|
|
Payments on license
obligations
|
(6)
|
|
|
(7)
|
|
|
(13)
|
|
|
(14)
|
|
Sale of future
revenue
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
Net redemptions of
common stock under stock-based compensation plans and
other
|
(6)
|
|
|
(4)
|
|
|
(7)
|
|
|
(21)
|
|
Net cash (used in)
provided by financing activities
|
(885)
|
|
|
77
|
|
|
57
|
|
|
(269)
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
—
|
|
|
(5)
|
|
|
1
|
|
|
(3)
|
|
(Decrease) increase
in cash, cash equivalents and restricted cash
|
(841)
|
|
|
8
|
|
|
205
|
|
|
(666)
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
1,266
|
|
|
160
|
|
|
220
|
|
|
834
|
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
425
|
|
|
$
|
168
|
|
|
$
|
425
|
|
|
$
|
168
|
|
|
|
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
|
|
|
|
Cash paid for
interest
|
$
|
190
|
|
|
$
|
205
|
|
|
$
|
270
|
|
|
$
|
366
|
|
Income taxes
paid
|
8
|
|
|
8
|
|
|
18
|
|
|
15
|
|
Distributed earnings
from equity investments
|
18
|
|
|
18
|
|
|
22
|
|
|
19
|
|
Supplemental non-cash
transactions:
|
|
|
|
|
|
|
|
Non-cash rollover and
refinancing of Term loans
|
—
|
|
|
—
|
|
|
—
|
|
|
3,275
|
|
Non-cash interest
expense
|
6
|
|
|
6
|
|
|
13
|
|
|
12
|
|
NYX non-cash
consideration transferred
|
—
|
|
|
—
|
|
|
—
|
|
|
93
|
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
RECONCILIATION OF
NET LOSS ATTRIBUTABLE TO SGC TO CONSOLIDATED ADJUSTED
EBITDA
|
AND SUPPLEMENTAL
BUSINESS SEGMENT DATA
|
(Unaudited,
in millions)
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Reconciliation of
Net Loss Attributable to SGC to Consolidated Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
Net loss attributable
to SGC
|
|
$
|
(77)
|
|
|
$
|
(6)
|
|
|
$
|
(101)
|
|
|
$
|
(208)
|
|
Net income
attributable to noncontrolling interest
|
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Net loss
|
|
(75)
|
|
|
(6)
|
|
|
(99)
|
|
|
(208)
|
|
Restructuring and
other(1)
|
|
6
|
|
|
34
|
|
|
13
|
|
|
86
|
|
Depreciation,
amortization and impairments
|
|
170
|
|
|
173
|
|
|
335
|
|
|
361
|
|
Other (income)
expense, net
|
|
(4)
|
|
|
1
|
|
|
(2)
|
|
|
7
|
|
Interest
expense
|
|
147
|
|
|
146
|
|
|
301
|
|
|
301
|
|
Income tax
expense
|
|
7
|
|
|
—
|
|
|
11
|
|
|
6
|
|
Stock-based
compensation
|
|
10
|
|
|
15
|
|
|
24
|
|
|
24
|
|
Loss on debt
financing transactions
|
|
60
|
|
|
—
|
|
|
60
|
|
|
93
|
|
Loss (gain) on
remeasurement of debt
|
|
3
|
|
|
(34)
|
|
|
(2)
|
|
|
(33)
|
|
EBITDA from equity
investments(2)
|
|
18
|
|
|
16
|
|
|
35
|
|
|
35
|
|
Earnings from equity
investments
|
|
(7)
|
|
|
(5)
|
|
|
(13)
|
|
|
(12)
|
|
Consolidated Adjusted
EBITDA
|
|
$
|
335
|
|
|
$
|
340
|
|
|
$
|
663
|
|
|
$
|
660
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Business Segment Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Business segments
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
Gaming(3)
|
|
$
|
215
|
|
|
$
|
236
|
|
|
$
|
430
|
|
|
$
|
454
|
|
Lottery
|
|
103
|
|
|
99
|
|
|
207
|
|
|
193
|
|
SciPlay(3)
|
|
33
|
|
|
23
|
|
|
58
|
|
|
46
|
|
Digital
|
|
12
|
|
|
13
|
|
|
25
|
|
|
30
|
|
Total business
segments Adjusted EBITDA
|
|
363
|
|
|
371
|
|
|
720
|
|
|
723
|
|
Corporate and
other(4)
|
|
(28)
|
|
|
(31)
|
|
|
(57)
|
|
|
(63)
|
|
Consolidated Adjusted
EBITDA
|
|
$
|
335
|
|
|
$
|
340
|
|
|
$
|
663
|
|
|
$
|
660
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Consolidated Adjusted EBITDA margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Adjusted
EBITDA
|
|
$
|
335
|
|
|
$
|
340
|
|
|
$
|
663
|
|
|
$
|
660
|
|
Revenue
|
|
845
|
|
|
845
|
|
|
1,682
|
|
|
1,657
|
|
Consolidated Adjusted EBITDA margin
|
|
40
|
%
|
|
40
|
%
|
|
39
|
%
|
|
40
|
%
|
|
(1) Refer to
Consolidated AEBITDA definition for a description of items included
in restructuring and other.
|
|
(2) The Company
received $33 million and $40 million in cash distributions and
return of capital payments from its equity investees for the three
and six months ended June 30, 2019, respectively, and $40 million
and $42 million in cash distributions and return of capital
payments from its equity investees for the three and six months
ended June 30, 2018, respectively.
|
|
(3) As a result of
an IP License Agreement effective as of May 7, 2019, our Gaming
business segment AEBITDA no longer benefits from related royalties
and/or fees for use of intellectual property charges, while our
SciPlay business segment AEBITDA increased proportionately. The
total amount of such IP charges for the three and six months ended
June 30, 2019 were $3 million and $10 million,
respectively, and for the three and six months ended June 30, 2018
were $6 million and $13 million,
respectively.
|
|
(4) Includes
amounts not allocated to the business segments (including corporate
costs) and other non-operating expenses (income).
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
SUPPLEMENTAL
INFORMATION - SEGMENTS KEY PERFORMANCE INDICATORS AND SUPPLEMENTAL
FINANCIAL DATA
|
(Unaudited,
in millions, except unit and per unit data)
|
|
Three Months
Ended
|
|
June
30,
|
|
June
30,
|
|
March
31,
|
|
2019
|
|
2018
|
|
2019
|
Gaming Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Revenue by line of
business:
|
|
|
|
|
|
Gaming
operations
|
$
|
150
|
|
|
$
|
160
|
|
|
$
|
152
|
|
Gaming machine
sales
|
148
|
|
|
168
|
|
|
136
|
|
Gaming
systems
|
67
|
|
|
84
|
|
|
74
|
|
Table
products
|
62
|
|
|
59
|
|
|
60
|
|
Total
revenue
|
$
|
427
|
|
|
$
|
471
|
|
|
$
|
422
|
|
|
|
|
|
|
|
Gaming Operations
Revenue:
|
|
|
|
|
|
U.S. and
Canadian:
|
|
|
|
|
|
Installed base at
period end
|
32,056
|
|
|
35,170
|
|
|
32,958
|
|
Average daily revenue
per unit
|
$
|
38.98
|
|
|
$
|
38.75
|
|
|
$
|
38.46
|
|
|
|
|
|
|
|
International:
|
|
|
|
|
|
Installed base at
period end
|
34,112
|
|
|
33,329
|
|
|
33,950
|
|
Average daily revenue
per unit
|
$
|
11.24
|
|
|
$
|
11.75
|
|
|
$
|
11.43
|
|
|
|
|
|
|
|
Gaming Machine Sales
Revenue:
|
|
|
|
|
|
U.S. and Canadian new
unit shipments
|
4,671
|
|
|
5,749
|
|
|
4,801
|
|
International new
unit shipments
|
2,730
|
|
|
2,492
|
|
|
2,083
|
|
New unit
shipments
|
7,401
|
|
|
8,241
|
|
|
6,884
|
|
Average sales price
per new unit
|
$
|
17,436
|
|
|
$
|
17,699
|
|
|
$
|
17,140
|
|
|
|
|
|
|
|
Gaming Machine Unit
Sales Components:
|
|
|
|
|
|
U.S. and Canadian
unit shipments:
|
|
|
|
|
|
Replacement
units
|
3,443
|
|
|
4,388
|
|
|
3,194
|
|
Casino opening and
expansion units
|
1,228
|
|
|
1,361
|
|
|
1,607
|
|
Total unit
shipments
|
4,671
|
|
|
5,749
|
|
|
4,801
|
|
|
|
|
|
|
|
International unit
shipments:
|
|
|
|
|
|
Replacement
units
|
2,674
|
|
|
2,492
|
|
|
2,083
|
|
Casino opening and
expansion units
|
56
|
|
|
—
|
|
|
—
|
|
Total unit
shipments
|
2,730
|
|
|
2,492
|
|
|
2,083
|
|
|
|
|
|
|
|
Lottery Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Instant products
revenue by geography:
|
|
|
|
|
|
United
States
|
$
|
102
|
|
|
$
|
108
|
|
|
$
|
93
|
|
International
|
48
|
|
|
42
|
|
|
47
|
|
Instant products
revenue
|
$
|
150
|
|
|
$
|
150
|
|
|
140
|
|
|
|
|
|
|
|
Lottery systems
revenue by financial statement line item:
|
|
|
|
|
|
Services
revenue
|
$
|
54
|
|
|
$
|
49
|
|
|
$
|
54
|
|
Product sales
revenue
|
27
|
|
|
8
|
|
|
33
|
|
Total Lottery systems
revenue
|
$
|
81
|
|
|
$
|
57
|
|
|
87
|
|
|
|
|
|
|
|
Digital Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Revenue by Lines of
Business:
|
|
|
|
|
|
Sports and
platform
|
$
|
26
|
|
|
$
|
20
|
|
|
$
|
30
|
|
Gaming and
other
|
43
|
|
|
47
|
|
|
40
|
|
Total
revenue
|
$
|
69
|
|
|
$
|
67
|
|
|
70
|
|
|
|
|
|
|
|
Wagers processed
through OGS (in billions)
|
$
|
9.3
|
|
|
$
|
9.2
|
|
|
$
|
8.9
|
|
|
|
|
|
|
|
SciPlay Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Revenue by
Platform:
|
|
|
|
|
|
Mobile
|
$
|
98
|
|
|
$
|
77
|
|
|
$
|
97
|
|
Web and
other
|
20
|
|
|
23
|
|
|
21
|
|
Total
revenue
|
$
|
118
|
|
|
$
|
100
|
|
|
118
|
|
|
|
|
|
|
|
Mobile
penetration(1)
|
83
|
%
|
|
77
|
%
|
|
82
|
%
|
Average
MAU(2)
|
8.1
|
|
|
8.2
|
|
|
8.4
|
|
Average
DAU(3)
|
2.7
|
|
|
2.6
|
|
|
2.7
|
|
ARPDAU(4)
|
$
|
0.48
|
|
|
$
|
0.42
|
|
|
$
|
0.48
|
|
|
(1) Mobile
penetration is defined as the percentage of B2C SciPlay revenue
generated from mobile platforms.
|
|
(2) MAU = Monthly
Active Users is a count of visitors to our sites during a month. An
individual who plays two different games or from two different
devices may, in certain circumstances, be counted twice. However,
we use third-party data to limit the occurrence of double
counting.
|
|
(3) DAU = Daily
Active Users is a count of visitors to our sites during a day. An
individual who plays two different games or from two different
devices may, in certain circumstances, be counted twice. However,
we use third-party data to limit the occurrence of double
counting.
|
|
(4) ARPDAU =
Average revenue per DAU is calculated by dividing revenue for a
period by the DAU for the period by the number of days for the
period.
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
(Unaudited,
in millions, except for ratio)
|
CALCULATION OF NET
DEBT LEVERAGE RATIO
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended
|
|
Twelve Months
Ended
|
|
|
June 30,
2019
|
|
June 30,
2018
|
Net loss attributable
to SGC
|
|
$
|
(246)
|
|
|
$
|
(310)
|
|
Net income
attributable to noncontrolling interest
|
|
2
|
|
|
—
|
|
Net loss
|
|
(244)
|
|
|
(310)
|
|
Restructuring and
other
|
|
181
|
|
|
121
|
|
Depreciation,
amortization and impairments
|
|
664
|
|
|
703
|
|
Other (income)
expense, net
|
|
(16)
|
|
|
17
|
|
Interest
expense
|
|
597
|
|
|
600
|
|
Income tax
expense
|
|
18
|
|
|
(2)
|
|
Stock-based
compensation
|
|
43
|
|
|
39
|
|
Loss on debt
financing transactions
|
|
60
|
|
|
102
|
|
Gain on remeasurement
of debt
|
|
(12)
|
|
|
(33)
|
|
EBITDA from equity
investments
|
|
67
|
|
|
73
|
|
Earnings from equity
investments
|
|
(26)
|
|
|
(26)
|
|
Consolidated Adjusted
EBITDA
|
|
$
|
1,332
|
|
|
$
|
1,284
|
|
|
|
|
|
|
|
|
|
|
Principal face value
of debt outstanding(1)
|
|
$
|
9,016
|
|
|
$
|
9,074
|
|
Less:
Cash and cash equivalents
|
|
369
|
|
|
119
|
|
Net debt
|
|
$
|
8,647
|
|
|
$
|
8,955
|
|
Net debt leverage
ratio
|
|
6.5
|
|
|
7.0
|
|
|
(1) 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.
|
|
|
|
|
|
CALCULATION OF
FREE CASH FLOW
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net cash provided by
operating activities(1)
|
|
$
|
95
|
|
|
$
|
102
|
|
|
$
|
262
|
|
|
$
|
132
|
|
Less: Capital
expenditures
|
|
(65)
|
|
|
(112)
|
|
|
(132)
|
|
|
(200)
|
|
Add:
Distributions of capital from equity investments
|
|
15
|
|
|
21
|
|
|
18
|
|
|
23
|
|
Less: Additions to
equity method investments (2)
|
|
(1)
|
|
|
(75)
|
|
|
(1)
|
|
|
(75)
|
|
Less: Payments on
license obligations
|
|
(6)
|
|
|
(7)
|
|
|
(13)
|
|
|
(14)
|
|
Free cash
flow
|
|
$
|
38
|
|
|
$
|
(71)
|
|
|
$
|
134
|
|
|
$
|
(134)
|
|
|
(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 (inclusive of NYX assumed
liabilities).
|
|
(2) The three and
six months ended June 30, 2018 include $74 million (€60 million) in
LNS contributions representing our second pro-rata concession
funding payment.
|
|
|
|
|
|
RECONCILIATION OF
EARNINGS FROM EQUITY INVESTMENTS
TO EBITDA FROM EQUITY INVESTMENTS
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
EBITDA from equity
investments:
|
|
|
|
|
|
|
|
|
Earnings from equity
investments
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
13
|
|
|
$
|
12
|
|
Add: Income tax
expense
|
|
2
|
|
|
1
|
|
|
5
|
|
|
3
|
|
Add: Depreciation and
amortization
|
|
8
|
|
|
10
|
|
|
16
|
|
|
19
|
|
Add: Interest income,
net and other
|
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
EBITDA from equity
investments
|
|
$
|
18
|
|
|
$
|
16
|
|
|
$
|
35
|
|
|
$
|
35
|
|
Forward-Looking Statements
In this press release, Scientific Games makes "forward-looking
statements" within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. Forward-looking statements describe
future expectations, plans, results or strategies and can often be
identified by the use of terminology such as "may," "will,"
"estimate," "intend," "plan," "continue," "believe," "expect,"
"anticipate," "target," "should," "could," "potential,"
"opportunity," "goal," or similar terminology. These statements are
based upon management's current expectations, assumptions and
estimates and are not guarantees of timing, future results or
performance. Therefore, you should not rely on any of these
forward-looking statements as predictions of future events. Actual
results may differ materially from those contemplated in these
statements due to a variety of risks and uncertainties and other
factors, including, among other things: competition; U.S. and
international economic and industry conditions; slow growth of new
gaming jurisdictions, slow addition of casinos in existing
jurisdictions and declines in the replacement cycle of gaming
machines; ownership changes and consolidation in the gaming
industry; opposition to legalized gaming or the expansion thereof
and potential restrictions on internet wagering; inability to adapt
to, and offer products that keep pace with, evolving technology,
including any failure of our investment of significant resources in
our R&D efforts; inability to develop successful products and
services and capitalize on trends and changes in our industries,
including the expansion of internet and other forms of interactive
gaming; laws and government regulations, both foreign and domestic,
including those relating to gaming, data privacy and security,
including with respect to the collection, storage, use,
transmission and protection of personal information and other
consumer data, and environmental laws, and those laws and
regulations that affect companies conducting business on the
internet, including online gambling; the continuing evolution of
the scope of data privacy and security regulations, and our belief
that the adoption of increasingly restrictive regulations in this
area is likely within the U.S. and other jurisdictions; significant
opposition in some jurisdictions to interactive social gaming,
including social casinos and how such opposition could lead these
jurisdictions to adopt legislation or impose a regulatory framework
to govern interactive social gaming or social casinos specifically,
and how this could result in a prohibition on interactive social
gaming or social casinos altogether, restrict our ability to
advertise our games, or substantially increase our costs to comply
with these regulations; legislative interpretation and enforcement,
regulatory perception and regulatory risks with respect to gaming,
especially internet wagering, social gaming and sports wagering;
reliance on technological blocking systems; expectations of shift
to regulated online gaming or sports wagering; expectations of
growth in total consumer spending on social casino gaming;
SciPlay's dependence on certain key providers; inability to win,
retain or renew, or unfavorable revisions of, existing contracts,
and the inability to enter into new contracts; protection of our
intellectual property, inability to license third-party
intellectual property and the intellectual property rights of
others; security and integrity of our products and systems;
reliance on or failures in information technology and other
systems; security breaches and cyber-attacks, challenges or
disruptions relating to the implementation of a new global
enterprise resource planning system; failure to maintain adequate
internal control over financial reporting; natural events that
disrupt our operations or those of our customers, suppliers or
regulators; inability to benefit from, and risks associated with,
strategic equity investments and relationships; risks related to
the initial public offering of a minority interest in our Social
gaming business via the SciPlay initial public offering, including
the possibility that the anticipated benefits of the initial public
offering are not realized; incurrence of restructuring costs;
implementation of complex new accounting standards; changes in
estimates or judgments related to our impairment analysis of
goodwill or other intangible assets; changes in demand for our
products; fluctuations in our results due to seasonality and other
factors; dependence on suppliers and manufacturers; risks relating
to foreign operations, including anti-corruption laws, fluctuations
in currency rates, restrictions on the payment of dividends from
earnings, restrictions on the import of products and financial
instability, including the potential impact to our business
resulting from the considerable uncertainty around the U.K.'s
withdrawal from the European Union ("EU") and the possibility of
the British parliament's failure to approve the U.K.'s withdrawal
from the EU, resulting in a "hard Brexit" or "no deal Brexit";
possibility that the renewal of LNS' concession to operate the
Italian instant games lottery is not finalized (including as the
result of a protest or any right of appeal on a court ruling on a
protest); the impact of the new U.K. legislation approving the
reduction of fixed-odds betting terminals maximum stakes limit;
changes in tax laws or tax rulings, or the examination of our tax
positions; difficulty predicting what impact, if any, new tariffs
imposed by and other trade actions taken by the U.S. and foreign
jurisdictions could have on our business; dependence on key
employees; litigation and other liabilities relating to our
business, including litigation and liabilities relating to our
contracts and licenses, our products and systems, our employees
(including labor disputes), intellectual property, environmental
laws and our strategic relationships; level of our indebtedness,
higher interest rates, availability or adequacy of cash flows and
liquidity to satisfy indebtedness, other obligations or future cash
needs; inability to reduce or refinance our indebtedness;
restrictions and covenants in debt agreements, including those that
could result in acceleration of the maturity of our
indebtedness; influence of certain stockholders, including
decisions that may conflict with the interests of other
stockholders; and stock price volatility.
Additional information regarding risks and uncertainties and
other factors that could cause actual results to differ materially
from those contemplated in forward-looking statements is included
from time to time in our filings with the SEC, including the
Company's current reports on Form 8-K, quarterly reports on Form
10-Q and its latest annual report on Form 10-K filed with the SEC
on February 28, 2019 (including under
the headings "Forward Looking Statements" and "Risk Factors").
Forward-looking statements speak only as of the date they are made
and, except for our ongoing obligations under the U.S. federal
securities laws, we undertake no and expressly disclaim any
obligation to publicly update any forward-looking statements
whether as a result of new information, future events or
otherwise.
Non-GAAP Financial Measures
The Company's management uses the following non-GAAP financial
measures in conjunction with GAAP financial measures: Consolidated
AEBITDA, Consolidated AEBITDA margin, free cash flow, EBITDA from
equity investments, net debt and net debt leverage ratio (each, as
described more fully below). These non-GAAP financial measures are
presented as supplemental disclosures. They should not be
considered in isolation of, as a substitute for, or superior to,
the financial information prepared in accordance with GAAP, and
should be read in conjunction with the Company's financial
statements filed with the SEC. The non-GAAP financial measures used
by the Company may differ from similarly titled measures presented
by other companies.
Specifically, the Company's management uses Consolidated AEBITDA
to, among other things: (i) monitor and evaluate the performance of
the consolidated Company's business operations; (ii) facilitate
management's internal and external comparisons of the Company's
consolidated historical operating performance; and (iii) analyze
and evaluate financial and strategic planning decisions regarding
future operating investments and operating budgets.
In addition, the Company's management uses Consolidated AEBITDA
and Consolidated AEBITDA margin to facilitate management's external
comparisons of the Company's consolidated results to the historical
operating performance of other companies that may have different
capital structures and debt levels.
The Company's management uses EBITDA from equity investments to
monitor and evaluate the performance of the Company's equity
investments. The Company's management uses net debt and net debt
leverage ratio in monitoring and evaluating the Company's overall
liquidity, financial flexibility and leverage.
The Company's management believes that each of these non-GAAP
financial measures are useful as they provide management and
investors with information regarding the Company's financial
condition and operating performance that is an integral part of
management's reporting and planning processes. In particular, the
Company's management believes that Consolidated AEBITDA is helpful
because this non-GAAP financial measure eliminates the effects of
restructuring, transaction, integration or other items that
management believes is less indicative of the Company's ongoing
underlying operating performance and are better evaluated
separately. Management believes Consolidated AEBITDA margin is
useful for analysts and investors as this measure allows an
evaluation of the performance of our ongoing business operations
and provides insight into the cash operating income margins
generated from our business, from which capital investments are
made and debt is serviced. Moreover, management believes EBITDA
from equity investments is useful to investors because the
Company's Lottery business is conducted through a number of equity
investments, and this measure eliminates financial items from the
equity investees' earnings that management believes has less
bearing on the equity investees' performance. Management believes
that free cash flow provides useful information regarding the
Company's liquidity and its ability to service debt and fund
investments. Management also believes that free cash flow is useful
for investors because it provides them with an important
perspective on the cash available for debt repayment and other
strategic measures, after making necessary capital investments in
property and equipment and necessary license payments to support
the Company's ongoing business operations and taking into account
cash flows relating to the Company's equity investments. Management
believes that net debt and net debt leverage ratio are useful for
investors in evaluating the Company's overall liquidity.
Consolidated AEBITDA
Consolidated AEBITDA, as used herein, is a non-GAAP financial
measure that is presented as supplemental disclosure and is
reconciled to net income (loss) as the most directly comparable
GAAP measure, as set forth in the schedule titled "Reconciliation
of Net Loss Attributable to SGC to Consolidated Adjusted EBITDA,"
Consolidated AEBITDA should not be considered in isolation of, as a
substitute for, or superior to, the consolidated financial
information prepared in accordance with GAAP, and should be read in
conjunction with the Company's financial statements filed with the
SEC. Consolidated AEBITDA may differ from similarly titled measures
presented by other companies.
Consolidated AEBITDA is reconciled to consolidated net income
(loss) and includes net loss attributable to SGC with the following
adjustments: (1) net income attributable to noncontrolling
interest, (2) restructuring and other, which includes charges or
expenses attributable to: (i) employee severance; (ii) management
changes; (iii) restructuring and integration; (iv) M&A and
other, which includes: (a) M&A transaction costs, (b) purchase
accounting, (c) unusual items (including certain litigation), and
(d) other non-cash items; and (v) cost savings initiatives; (3)
depreciation and amortization expense and impairment charges
(including goodwill impairment charges); (4) change in fair value
of investments and remeasurement of debt; (5) interest expense; (6)
income taxes expense (benefit): (7) stock-based compensation; and
(8) loss (gain) on debt financing transactions. In addition to the
preceding adjustments, we exclude earnings from equity method
investments and add (without duplication) our pro rata share of
EBITDA of our equity investments, which represents our share of
earnings (whether or not distributed to us) before income tax
expense, depreciation and amortization expense, and interest
(income) expense, net of our joint ventures and minority investees.
AEBITDA is presented exclusively as our segment measure of profit
or loss.
Consolidated AEBITDA Margin
Consolidated AEBITDA margin, as used herein, represents our
Consolidated AEBITDA (as defined above) for the three and six-month
periods ended June 30, 2019 and 2018,
each calculated as a percentage of revenue. Consolidated AEBITDA
margin is a non-GAAP financial measure that is presented as
supplemental disclosures for illustrative purposes only and is
reconciled to net income (loss) attributable to SGC, the most
directly comparable GAAP measure, in a schedule above.
Free Cash Flow
Free cash flow, as used herein, represents net cash (used in)
provided by operating activities less total capital expenditures
(which includes lottery, gaming and digital systems expenditures
and other intangible assets and software expenditures), less
payments on license obligations, less additions to equity method
investments plus distributions of capital from equity investments.
Free cash flow is a non-GAAP financial measure that is presented as
supplemental disclosure for illustrative purposes only and is
reconciled to net cash provided by operating activities in a
schedule above.
EBITDA from Equity Investments
EBITDA from equity investments, as used herein, represents our
share of earnings (whether or not distributed to us) plus income
tax expense, depreciation and amortization expense (inclusive of
amortization of payments made to customers for LNS), interest
(income) expense, net, and other non-cash and unusual items from
our joint ventures and minority investees. EBITDA from equity
investments is a non-GAAP financial measure that is presented as
supplemental disclosure for illustrative purposes only and is
reconciled to earnings from equity investments, the most directly
comparable GAAP measure, in a schedule above.
Net Debt and Net Debt Leverage Ratio
Net debt is defined as total principal face value of debt
outstanding, the most directly comparable GAAP measure, less cash
and cash equivalents. Principal face value of debt outstanding
includes the face value of debt issued under Senior Secured Credit
Facilities, Senior Notes and Subordinated Notes, all described in
Note 11 of the Company's Report on Form 10-Q for the second
quarter, accordingly it does not include long term obligations
under financing leases or $10 million
in proceeds received from transactions completed in 2018 which are
presented as debt. In addition, principal face value of debt
outstanding with respect to the 2026 Secured Euro Notes and 2026
Unsecured Euro Notes are translated at the constant foreign
exchange rate at issuance of these notes as those amounts remain
payable at the original issuance amounts in Euro. Net debt
leverage ratio, as used herein, represents net debt divided by
Consolidated AEBITDA (as defined above) for the trailing
twelve-month period.
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SOURCE Scientific Games Corporation