LAS VEGAS, Feb. 18, 2020 /PRNewswire/ -- Scientific
Games Corporation (NASDAQ: SGMS) ("Scientific Games," "SGC" or the
"Company") today reported results for the fourth quarter and year
ended December 31, 2019.
Fourth quarter 2019 Financial Highlights:
- Fourth quarter revenue was $863
million compared to $886
million in the prior year period. This was largely driven by
lower Gaming revenue primarily due to fewer systems launches in
Canada compared to last year and
lower machine unit sales.
- Net loss was $37 million
compared to net income of $207
million in the prior year period. This quarter included a
$40 million loss on a debt financing
transaction related to the notes offering and a $12 million loss on remeasurement of Euro
denominated debt. The prior year included a $183 million reversal of a reserve related to
resolving the Shuffle Tech legal matter and a $14 million gain on remeasurement of Euro
denominated debt.
- Consolidated Adjusted EBITDA ("Consolidated AEBITDA"), a
non-GAAP financial measure defined below, was $328 million compared to $343 million in the prior year period driven by
lower Lottery and Gaming AEBITDA, which was partially offset by
Digital AEBITDA of $21 million,
representing a 75% increase.
- Net cash provided by operating activities increased by
$153 million from the prior year
period to $143 million. The prior
year included a $152 million payment
to resolve the Shuffle Tech legal matter.
- Free cash flow, a non-GAAP financial measure, increased
$286 million to $56 million versus the prior year period, which
included a $104 million payment for
our instant ticket concession in Italy and resolution of the Shuffle Tech legal
matter.
- The company remains committed to deleveraging its balance sheet
targeting to be at 6.0x or below by the end of 2020, 5.5x in 2021
and continuing to reduce beyond those levels into the future.
Full Year 2019 Financial Highlights:
- Revenue increased $37
million to $3.4 billion
compared to the prior year.
- Net loss was $118 million,
an improvement of $234 million. The
prior year included a $152 million
charge related to resolving the Shuffle Tech legal matter.
- Consolidated AEBITDA, a non-GAAP financial measure
defined below, increased to $1,334
million from $1,330 million in
the prior year, driven by growth in our Lottery, SciPlay and
Digital segments largely offset by Gaming.
- Net cash provided by operating activities increased
$200 million to $546 million compared to the prior year, which
included resolution of the Shuffle Tech legal matter.
- Free cash flow, a non-GAAP financial measure, increased
by $483 million from the year ago
period to $243 million. Net debt, a
non-GAAP financial measure, was $8.6
billion ($8.9 billion in face
value of debt outstanding less $313
million of cash and cash equivalents) at year end. Net debt
leverage ratio, a non-GAAP financial measure, decreased to 6.4x on
a $464 million decrease in net
debt.
- In March and November 2019, we
completed refinancings that lowered our cash interest costs and
extended our debt maturities.
- In May 2019, SciPlay completed an
IPO for an 18.0% minority interest in our Social gaming business,
after giving effect to the underwriters' partial exercise of their
over-allotment option on June 4,
2019. We received $312 million
in net proceeds from the offering (net of $30 million used by SciPlay to pay the IPO fees
and balance retained by SciPlay for general corporate purposes)
which has enabled us to make substantial payments to reduce our
debt.
- On November 20, 2019, we entered
into an amendment to refinance the revolving credit facility under
our credit agreement and provide for an aggregate of $650 million of revolving credit commitments
through 2024.
Barry Cottle, CEO and
President of Scientific Games, said, "This past year, we made
great strides in developing the best games, attracting industry
leading talent, and improving our capital structure. I'm confident
we have the right team in place to reach our goal to be the market
leader across land-based gaming, lottery, sports and digital gaming
driven by leading content and the platforms that enable play
anywhere and anytime. Our recent contract and deal wins
across our businesses, and the globe, highlight that we are on the
right path."
Michael Quartieri, Chief Financial Officer of Scientific Games, added, "We
reduced our net debt by over $460
million in 2019, while successfully completing two
refinancing transactions that will significantly reduce our cash
interest costs going forward and extended our maturities. Our
overarching commitment remains delevering through organic growth,
new market opportunities, and driving further enhancements to our
free cash flow."
SUMMARY CONSOLIDATED RESULTS
($ in
millions)
|
Three Months Ended
December 31,
|
|
2019
|
|
2018
|
Revenue
|
$
|
863
|
|
|
$
|
886
|
|
Net (loss)
income
|
(37)
|
|
|
207
|
|
Net cash provided by
(used in) operating activities(1)
|
143
|
|
|
(10)
|
|
Capital
expenditures
|
78
|
|
|
98
|
|
|
|
|
|
Non-GAAP Financial
Measures(2)
|
|
|
|
Consolidated
AEBITDA
|
$
|
328
|
|
|
$
|
343
|
|
Consolidated AEBITDA
margin
|
38
|
%
|
|
39
|
%
|
Free cash
flow
|
$
|
56
|
|
|
$
|
(230)
|
|
|
|
|
|
Balance Sheet
Measures
|
As of December 31,
2019
|
|
As of December 31,
2018
|
Cash and cash
equivalents
|
$
|
313
|
|
|
$
|
168
|
|
Principal face value
of debt outstanding(3)
|
8,900
|
|
|
9,219
|
|
Available
liquidity
|
906
|
|
|
439
|
|
|
(1) The three
months ended December 31, 2019 includes a $23 million unfavorable
change in accrued interest due to refinancing transactions and
approximately $3 million of payments related to contingent
acquisition consideration. The three months ended December 31, 2018
includes a $50 million unfavorable change in accrued interest due
to refinancing transactions and a $152 million payment to resolve
the Shuffle Tech legal matter.
|
(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 December 31, 2019 were 1.24 and 1.12, respectively, resulting
in a $68 million adjustment increasing the principal face value of
debt outstanding presented above. Additionally, principal face
value excludes $10 million in proceeds received from transactions
completed in 2019 which are presented as debt.
|
BUSINESS SEGMENT HIGHLIGHTS FOR THE THREE MONTHS ENDED
DECEMBER 31, 2019
($ in
millions)
|
Revenue
|
|
AEBITDA
|
|
AEBITDA
Margin
|
|
2019
|
|
2018
|
|
$
|
|
%
|
|
2019
|
|
2018
|
|
$
|
|
%
|
|
2019
|
|
2018
|
|
PP
Change(2)
|
Gaming
|
$
|
445
|
|
$
|
470
|
|
(25)
|
|
(5)
|
%
|
|
$
|
209
|
|
$
|
233
|
|
(24)
|
|
(10)
|
%
|
|
47
|
%
|
|
50
|
%
|
|
(3)
|
Lottery
|
233
|
|
231
|
|
2
|
|
1
|
%
|
|
98
|
|
105
|
|
(7)
|
|
(7)
|
%
|
|
42
|
%
|
|
45
|
%
|
|
(3)
|
SciPlay
(1)
|
113
|
|
114
|
|
(1)
|
|
(1)
|
%
|
|
32
|
|
24
|
|
8
|
|
33
|
%
|
|
28
|
%
|
|
21
|
%
|
|
7
|
Digital
|
72
|
|
71
|
|
1
|
|
1
|
%
|
|
21
|
|
12
|
|
9
|
|
75
|
%
|
|
29
|
%
|
|
17
|
%
|
|
12
|
|
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. Fourth Quarter 2018
- Gaming operations - the installed base of U.S. and
Canadian machines was flat from the prior quarter reflecting a new
casino opening and increased placements in the Northeast, which
offset the removal of older machines.
- Gaming machine sales – total new unit shipments in the
U.S. and Canada decreased due to
lower replacement units. International units decreased due to a
large sale in the prior year of lower priced units to a U.K. arcade
operator, which was partially offset by strong sales in the
Australian market. The average selling price increased 7% to
$17,268.
- Table games continued to grow, increasing 8% from the
prior year period to $65 million on
strength internationally.
- Gaming systems revenue was down due to the winding down
of the large Canadian systems implementations.
- Lottery systems revenue was $4
million higher driven by increased sales of our hardware
solutions primarily in international markets.
- Instant products revenue was $2
million lower than the prior year due to rate changes to
some of our domestic contracts.
- SciPlay mobile penetration increased 300 basis
points to 84%. AEBITDA increased 33% to $32
million and ARPDAU grew 9% to $0.50.
- Digital AEBITDA increased 75% or $9 million from the prior year. We have been
selected by Flutter Entertainment ("Flutter") to provide the sports
betting platform for FanDuel, the market leading sports betting
operator in the U.S. We are also pleased to announce the extension
of our partnerships with William
Hill and GVC Holdings.
LIQUIDITY
($ in
millions)
|
Three Months Ended
December 31,
|
|
|
|
2019
|
|
2018
|
|
Increase /
(Decrease)
|
Net (loss)
income
|
$
|
(37)
|
|
|
$
|
207
|
|
|
$
|
(244)
|
|
Non-cash adjustments
included in net loss
|
200
|
|
|
135
|
|
|
65
|
|
Non-cash
interest
|
6
|
|
|
7
|
|
|
(1)
|
|
Changes in deferred
income taxes and other
|
(23)
|
|
|
(34)
|
|
|
11
|
|
Distributed earnings
from equity investments
|
2
|
|
|
9
|
|
|
(7)
|
|
Change in legal
reserves
|
—
|
|
|
(334)
|
|
|
334
|
|
Changes in working
capital accounts
|
(5)
|
|
|
—
|
|
|
(5)
|
|
Net cash provided by
operating activities
|
$
|
143
|
|
|
$
|
(10)
|
|
|
$
|
153
|
|
- Free cash flow, a non-GAAP financial measure defined below,
increased $286 million to
$56 million, due to lower capital
expenditures, and the prior period included a $104 million payment related to the extension of
the instant ticket concession in Italy and the $152
million payment related to the Shuffle Tech legal
matter.
- In November 2019, we completed an
offering, which was comprised of $700
million of 7.000% senior unsecured notes due 2028 and
$500 million of 7.250% senior
unsecured notes due 2029. We used the net proceeds of the offering
together with cash on hand and borrowings under our credit facility
to redeem the remaining $1.2 billion
of 10.000% 2022 senior unsecured notes and all $244 million of the outstanding 2020 senior
subordinated notes and pay accrued and unpaid interest thereon plus
related premiums, fees, and costs.
- In 2019, we decreased our net debt balance by $464 million to $8.6
billion.
- Total liquidity at year end 2019 was $906 million, which is up $467 million from year end 2018.
- Capital expenditures totaled $78
million in the fourth quarter, compared to $98 million in the prior year period. For 2020,
the Company expects capital expenditures will be in the range of
$300-$330
million based on existing contractual obligations, planned
strategic investments and contemplated successful contract
renewals.
Earnings Conference Call
Scientific Games executive leadership will host a conference
call on Thursday, February 18, 2020,
at 4:15 pm. EST to review the
Company's fourth 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.
COMPANY CONTACTS
Media
Relations
|
Investor
Relations
|
Susan Cartwright +1
702-532-7981
|
Trent Kruse +1
702-532-7641
|
Vice President,
Corporate Communications
susan.cartwright@scientificgames.com
|
Senior Vice
President, Investor Relations
|
All ® notices signify marks registered in the United States. © 2020 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
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenue:
|
|
|
|
|
|
|
|
Services
|
$
|
451
|
|
|
$
|
463
|
|
|
$
|
1,819
|
|
|
$
|
1,777
|
|
Product
sales
|
263
|
|
|
273
|
|
|
994
|
|
|
994
|
|
Instant
products
|
149
|
|
|
150
|
|
|
587
|
|
|
592
|
|
Total
revenue
|
863
|
|
|
886
|
|
|
3,400
|
|
|
3,363
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Cost of services
(1)
|
137
|
|
|
135
|
|
|
538
|
|
|
505
|
|
Cost of product sales
(1)
|
124
|
|
|
130
|
|
|
457
|
|
|
466
|
|
Cost of instant
products (1)
|
78
|
|
|
76
|
|
|
289
|
|
|
284
|
|
Selling, general and
administrative
|
172
|
|
|
182
|
|
|
707
|
|
|
697
|
|
Research and
development
|
46
|
|
|
50
|
|
|
188
|
|
|
202
|
|
Depreciation,
amortization and impairments
|
150
|
|
|
163
|
|
|
647
|
|
|
690
|
|
Restructuring and
other
|
4
|
|
|
(171)
|
|
|
28
|
|
|
253
|
|
Total operating
expenses
|
711
|
|
|
565
|
|
|
2,854
|
|
|
3,097
|
|
Operating
income
|
152
|
|
|
321
|
|
|
546
|
|
|
266
|
|
Other (expense)
income:
|
|
|
|
|
|
|
|
Interest
expense
|
(142)
|
|
|
(149)
|
|
|
(589)
|
|
|
(597)
|
|
Earnings from equity
investments
|
7
|
|
|
9
|
|
|
24
|
|
|
25
|
|
Loss on debt
financing transactions
|
(40)
|
|
|
—
|
|
|
(100)
|
|
|
(93)
|
|
(Loss) gain on
remeasurement of debt
|
(12)
|
|
|
14
|
|
|
9
|
|
|
43
|
|
Other income,
net
|
—
|
|
|
19
|
|
|
2
|
|
|
17
|
|
Total other expense,
net
|
(187)
|
|
|
(107)
|
|
|
(654)
|
|
|
(605)
|
|
Net (loss) income
before income taxes
|
(35)
|
|
|
214
|
|
|
(108)
|
|
|
(339)
|
|
Income tax
expense
|
(2)
|
|
|
(7)
|
|
|
(10)
|
|
|
(13)
|
|
Net (loss)
income
|
(37)
|
|
|
207
|
|
|
(118)
|
|
|
(352)
|
|
Less: Net income
attributable to noncontrolling interest
|
6
|
|
|
—
|
|
|
12
|
|
|
—
|
|
Net (loss) income
attributable to SGC
|
$
|
(43)
|
|
|
$
|
207
|
|
|
$
|
(130)
|
|
|
$
|
(352)
|
|
|
|
|
|
|
|
|
|
Basic and diluted net
(loss) income attributable to SGC per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.46)
|
|
|
$
|
2.25
|
|
|
$
|
(1.40)
|
|
|
$
|
(3.87)
|
|
Diluted
|
$
|
(0.46)
|
|
|
$
|
2.21
|
|
|
$
|
(1.40)
|
|
|
$
|
(3.87)
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares used in per share calculations:
|
|
|
|
|
|
|
|
Basic
shares
|
93
|
|
|
92
|
|
|
93
|
|
|
91
|
|
Diluted
shares
|
93
|
|
|
93
|
|
|
93
|
|
|
91
|
|
|
|
|
|
|
|
|
|
(1) Excludes
depreciation and amortization.
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited,
in millions)
|
|
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
2019
|
|
2018
|
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
313
|
|
|
$
|
168
|
|
Restricted
cash
|
|
51
|
|
|
39
|
|
Accounts receivable,
net
|
|
649
|
|
|
599
|
|
Notes receivable,
net
|
|
106
|
|
|
114
|
|
Inventories
|
|
244
|
|
|
216
|
|
Prepaid expenses,
deposits and other current assets
|
|
252
|
|
|
233
|
|
Total current
assets
|
|
1,615
|
|
|
1,369
|
|
|
|
|
|
|
Restricted
cash
|
|
11
|
|
|
13
|
|
Notes receivable,
net
|
|
53
|
|
|
40
|
|
Property and
equipment, net
|
|
500
|
|
|
547
|
|
Operating lease
right-of-use assets
|
|
105
|
|
|
—
|
|
Goodwill
|
|
3,280
|
|
|
3,280
|
|
Intangible assets,
net
|
|
1,516
|
|
|
1,809
|
|
Software,
net
|
|
258
|
|
|
285
|
|
Equity
investments
|
|
273
|
|
|
298
|
|
Other
assets
|
|
198
|
|
|
77
|
|
Total
assets
|
|
$
|
7,809
|
|
|
$
|
7,718
|
|
Liabilities and
Stockholders' Deficit:
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
45
|
|
|
$
|
45
|
|
Accounts
payable
|
|
226
|
|
|
225
|
|
Accrued
liabilities
|
|
495
|
|
|
477
|
|
Total current
liabilities
|
|
766
|
|
|
747
|
|
|
|
|
|
|
Deferred income
taxes
|
|
91
|
|
|
108
|
|
Operating lease
liabilities
|
|
88
|
|
|
—
|
|
Other long-term
liabilities
|
|
292
|
|
|
334
|
|
Long-term debt,
excluding current portion
|
|
8,680
|
|
|
8,992
|
|
Total stockholders'
deficit(1)
|
|
(2,108)
|
|
|
(2,463)
|
|
Total liabilities and
stockholders' deficit
|
|
$
|
7,809
|
|
|
$
|
7,718
|
|
|
|
|
|
|
(1) Includes $104
million in noncontrolling interest as of December 31,
2019.
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited,
in millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
|
(37)
|
|
|
$
|
207
|
|
|
$
|
(118)
|
|
|
$
|
(352)
|
|
Adjustments to
reconcile net (loss) income to cash provided by operating
activities
|
208
|
|
|
151
|
|
|
805
|
|
|
829
|
|
Changes in working
capital accounts, net of effects of acquisitions
|
(5)
|
|
|
(334)
|
|
|
(125)
|
|
|
(98)
|
|
Changes in deferred
income taxes and other
|
(23)
|
|
|
(34)
|
|
|
(16)
|
|
|
(33)
|
|
Net cash provided by
(used in) operating activities
|
143
|
|
|
(10)
|
|
|
546
|
|
|
346
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
(78)
|
|
|
(98)
|
|
|
(285)
|
|
|
(391)
|
|
Acquisitions of
businesses and assets, net of cash acquired
|
—
|
|
|
(22)
|
|
|
—
|
|
|
(297)
|
|
Distributions of
capital from equity investments
|
5
|
|
|
5
|
|
|
23
|
|
|
30
|
|
Acquisitions and
additions to equity method investments
|
—
|
|
|
(104)
|
|
|
(1)
|
|
|
(180)
|
|
Proceeds from asset
sales and other
|
—
|
|
|
40
|
|
|
—
|
|
|
40
|
|
Net cash used in
investing activities
|
(73)
|
|
|
(179)
|
|
|
(263)
|
|
|
(798)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Payments of long-term
debt, net of proceeds
|
(89)
|
|
|
268
|
|
|
(397)
|
|
|
238
|
|
Repayment of assumed
NYX and other acquisition debt
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(290)
|
|
Payments of debt
issuance and deferred financing and offering costs
|
(20)
|
|
|
—
|
|
|
(44)
|
|
|
(38)
|
|
Net proceeds from
issuance of SciPlay's common stock
|
—
|
|
|
—
|
|
|
342
|
|
|
—
|
|
Payments on license
obligations
|
(14)
|
|
|
(23)
|
|
|
(40)
|
|
|
(45)
|
|
Sale of future
revenue
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
Net proceeds
(redemptions) of common stock under stock-based compensation plans
and other
|
5
|
|
|
3
|
|
|
(1)
|
|
|
(21)
|
|
Net cash (used in)
provided by financing activities
|
(118)
|
|
|
246
|
|
|
(129)
|
|
|
(156)
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
2
|
|
|
(3)
|
|
|
1
|
|
|
(6)
|
|
(Decrease) increase
in cash, cash equivalents and restricted cash
|
(46)
|
|
|
54
|
|
|
155
|
|
|
(614)
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
421
|
|
|
166
|
|
|
220
|
|
|
834
|
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
375
|
|
|
$
|
220
|
|
|
$
|
375
|
|
|
$
|
220
|
|
Supplemental cash
flow information:
|
|
|
|
|
|
|
|
Cash paid for
interest
|
$
|
158
|
|
|
$
|
191
|
|
|
$
|
549
|
|
|
$
|
633
|
|
Income taxes
paid
|
13
|
|
|
8
|
|
|
41
|
|
|
33
|
|
Distributed earnings
from equity investments
|
2
|
|
|
9
|
|
|
26
|
|
|
33
|
|
Cash paid for
contingent consideration included in operating
activities
|
3
|
|
|
—
|
|
|
26
|
|
|
—
|
|
Supplemental non-cash
transactions:
|
|
|
|
|
|
|
|
Non-cash rollover and
refinancing of Term loans
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,275
|
|
Non-cash interest
expense
|
6
|
|
|
7
|
|
|
25
|
|
|
25
|
|
Non-cash net
additions to intangible assets related to license
agreements
|
—
|
|
|
138
|
|
|
—
|
|
|
138
|
|
NYX non-cash
consideration transferred
|
—
|
|
|
—
|
|
|
—
|
|
|
93
|
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
RECONCILIATION OF
NET (LOSS) INCOME ATTRIBUTABLE TO SGC TO CONSOLIDATED ADJUSTED
EBITDA
|
AND SUPPLEMENTAL
BUSINESS SEGMENT DATA
|
(Unaudited,
in millions)
|
|
Three Months
Ended
December
31,
|
|
Year
Ended
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Reconciliation of
Net (Loss) Income Attributable to SGC to Consolidated Adjusted
EBITDA
|
|
|
|
|
|
|
|
Net (loss) income
attributable to SGC
|
$
|
(43)
|
|
|
$
|
207
|
|
|
$
|
(130)
|
|
|
$
|
(352)
|
|
Net income
attributable to noncontrolling interest
|
6
|
|
|
—
|
|
|
12
|
|
|
—
|
|
Net (loss)
income
|
(37)
|
|
|
207
|
|
|
(118)
|
|
|
(352)
|
|
Restructuring and
other(1)
|
4
|
|
|
(171)
|
|
|
28
|
|
|
253
|
|
Depreciation,
amortization and impairments
|
150
|
|
|
163
|
|
|
647
|
|
|
690
|
|
Other expense
(income), net
|
1
|
|
|
(17)
|
|
|
7
|
|
|
(7)
|
|
Interest
expense
|
142
|
|
|
149
|
|
|
589
|
|
|
597
|
|
Income tax
expense
|
2
|
|
|
7
|
|
|
10
|
|
|
13
|
|
Stock-based
compensation
|
4
|
|
|
10
|
|
|
37
|
|
|
44
|
|
Loss on debt
financing transactions
|
40
|
|
|
—
|
|
|
100
|
|
|
93
|
|
Loss (gain) on
remeasurement of debt
|
12
|
|
|
(14)
|
|
|
(9)
|
|
|
(43)
|
|
EBITDA from equity
investments(2)
|
17
|
|
|
18
|
|
|
67
|
|
|
67
|
|
Earnings from equity
investments
|
(7)
|
|
|
(9)
|
|
|
(24)
|
|
|
(25)
|
|
Consolidated Adjusted
EBITDA
|
$
|
328
|
|
|
$
|
343
|
|
|
$
|
1,334
|
|
|
$
|
1,330
|
|
Supplemental
Business Segment Data
|
|
|
|
|
|
|
|
Business segments
Adjusted EBITDA
|
|
|
|
|
|
|
|
Gaming(3)
|
$
|
209
|
|
|
$
|
233
|
|
|
$
|
865
|
|
|
$
|
920
|
|
Lottery
|
98
|
|
|
105
|
|
|
404
|
|
|
391
|
|
SciPlay(3)
|
32
|
|
|
24
|
|
|
122
|
|
|
94
|
|
Digital
|
21
|
|
|
12
|
|
|
63
|
|
|
54
|
|
Total business
segments Adjusted EBITDA
|
360
|
|
|
374
|
|
|
1,454
|
|
|
1,459
|
|
Corporate and
other(4)
|
(32)
|
|
|
(31)
|
|
|
(120)
|
|
|
(129)
|
|
Consolidated Adjusted
EBITDA
|
$
|
328
|
|
|
$
|
343
|
|
|
$
|
1,334
|
|
|
$
|
1,330
|
|
Reconciliation to
Consolidated Adjusted EBITDA margin
|
|
|
|
|
|
|
|
Consolidated Adjusted
EBITDA
|
$
|
328
|
|
|
$
|
343
|
|
|
$
|
1,334
|
|
|
$
|
1,330
|
|
Revenue
|
863
|
|
|
886
|
|
|
3,400
|
|
|
3,363
|
|
|
|
|
|
|
|
|
|
Net (loss) income
margin
|
(4)
|
%
|
|
23
|
%
|
|
(4)
|
%
|
|
(10)
|
%
|
Consolidated Adjusted
EBITDA margin (Consolidated AEBITDA/Revenue)
|
38
|
%
|
|
39
|
%
|
|
39
|
%
|
|
40
|
%
|
|
(1) Refer to
Consolidated AEBITDA definition for a description of items included
in restructuring and other.
|
(2) EBITDA from
equity investments is a non-GAAP financial measure reconciled to
the most directly comparable GAAP measure in the accompanying
supplemental tables at the end of this release. The Company
received $7 million and $49 million in cash distributions and
return of capital payments from its equity investees for the three
and twelve months ended December 31, 2019, respectively, and $14
million and $63 million in cash distributions and return of capital
payments from its equity investees for the three and twelve months
ended December 31, 2018, respectively.
|
(3) As a result of
the 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, while our SciPlay
business segment AEBITDA increased proportionately. While there
were no IP charges for the three months ended December 31, 2019,
the twelve months ended December 31, 2019 included $10 million
of IP charges. The three and twelve months ended December 31, 2018
included IP charges of $7 million and $26 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
|
|
December
31,
|
|
December
31,
|
|
September
30,
|
|
2019
|
|
2018
|
|
2019
|
Gaming Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Revenue by line of
business:
|
|
|
|
|
|
Gaming
operations
|
$
|
146
|
|
|
$
|
151
|
|
|
$
|
149
|
|
Gaming machine
sales
|
157
|
|
|
167
|
|
|
168
|
|
Gaming
systems
|
77
|
|
|
92
|
|
|
77
|
|
Table
products
|
65
|
|
|
60
|
|
|
60
|
|
Total
revenue
|
$
|
445
|
|
|
$
|
470
|
|
|
$
|
454
|
|
|
|
|
|
|
|
Gaming Operations
Revenue:
|
|
|
|
|
|
U.S. and
Canada:
|
|
|
|
|
|
Installed base at
period end
|
31,486
|
|
|
33,585
|
|
|
31,509
|
|
Average daily revenue
per unit
|
$
|
38.43
|
|
|
$
|
38.21
|
|
|
$
|
38.85
|
|
|
|
|
|
|
|
International:
|
|
|
|
|
|
Installed base at
period end
|
34,370
|
|
|
33,744
|
|
|
33,663
|
|
Average daily revenue
per unit
|
$
|
9.92
|
|
|
$
|
10.84
|
|
|
$
|
9.73
|
|
|
|
|
|
|
|
Gaming Machine
Sales:
|
|
|
|
|
|
U.S. and Canada new
unit shipments
|
4,510
|
|
|
4,733
|
|
|
5,530
|
|
International new
unit shipments
|
3,266
|
|
|
4,290
|
|
|
2,731
|
|
New unit
shipments
|
7,776
|
|
|
9,023
|
|
|
8,261
|
|
Average sales price
per new unit
|
$
|
17,268
|
|
|
$
|
16,113
|
|
|
$
|
17,500
|
|
|
|
|
|
|
|
Gaming Machine Unit
Sales Components:
|
|
|
|
|
|
U.S. and Canada
unit shipments:
|
|
|
|
|
|
Replacement
units
|
3,501
|
|
|
3,788
|
|
|
4,152
|
|
Casino opening and
expansion units
|
1,009
|
|
|
945
|
|
|
1,378
|
|
Total unit
shipments
|
4,510
|
|
|
4,733
|
|
|
5,530
|
|
|
|
|
|
|
|
International unit
shipments:
|
|
|
|
|
|
Replacement
units
|
3,228
|
|
|
4,184
|
|
|
2,631
|
|
Casino opening and
expansion units
|
38
|
|
|
106
|
|
|
100
|
|
Total unit
shipments
|
3,266
|
|
|
4,290
|
|
|
2,731
|
|
|
|
|
|
|
|
Lottery Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Instant products
revenue by geography:
|
|
|
|
|
|
United
States
|
$
|
96
|
|
|
$
|
96
|
|
|
$
|
104
|
|
International
|
52
|
|
|
54
|
|
|
46
|
|
Instant products
revenue
|
148
|
|
|
150
|
|
|
150
|
|
|
|
|
|
|
|
Lottery systems
revenue by financial statement line item:
|
|
|
|
|
|
Services
revenue
|
$
|
56
|
|
|
$
|
60
|
|
|
$
|
50
|
|
Product sales
revenue
|
29
|
|
|
21
|
|
|
20
|
|
Total Lottery systems
revenue
|
$
|
85
|
|
|
$
|
81
|
|
|
$
|
70
|
|
|
|
|
|
|
|
Digital Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Revenue by Lines of
Business:
|
|
|
|
|
|
Sports and
platform
|
$
|
34
|
|
|
$
|
33
|
|
|
$
|
29
|
|
Gaming and
other
|
38
|
|
|
38
|
|
|
36
|
|
Total
revenue
|
$
|
72
|
|
|
$
|
71
|
|
|
$
|
65
|
|
|
|
|
|
|
|
Wagers processed
through OGS (in billions)
|
$
|
9.2
|
|
|
$
|
8.9
|
|
|
$
|
9.0
|
|
|
|
|
|
|
|
SciPlay Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Revenue by
Platform:
|
|
|
|
|
|
Mobile
|
$
|
98
|
|
|
$
|
91
|
|
|
$
|
97
|
|
Web and
other
|
15
|
|
|
23
|
|
|
19
|
|
Total
revenue
|
$
|
113
|
|
|
$
|
114
|
|
|
$
|
116
|
|
|
|
|
|
|
|
Mobile
penetration(1)(5)
|
84
|
%
|
|
81
|
%
|
|
84
|
%
|
Average
MAU(2)(5)
|
7.6
|
|
|
8.4
|
|
|
7.8
|
|
Average
DAU(3)(5)
|
2.6
|
|
|
2.7
|
|
|
2.7
|
|
ARPDAU(4)(5)
|
$
|
0.50
|
|
|
$
|
0.46
|
|
|
$
|
0.47
|
|
|
(1) Mobile
penetration is defined as the percentage of 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 multiple games or from multiple devices may,
in certain circumstances, be counted more than once. However, we
use third-party data to limit the occurrence of multiple
counting.
|
(3) DAU = Daily
Active Users is a count of visitors to our sites during a day. An
individual who plays multiple games or from multiple devices may,
in certain circumstances, be counted more than once. However, we
use third-party data to limit the occurrence of multiple
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.
|
(5) Key
performance indicators include results from current period players
only.
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
(Unaudited,
in millions, except for ratio)
|
|
CALCULATION OF NET
DEBT LEVERAGE RATIO
|
|
Year
Ended
|
|
Year
Ended
|
|
December 31,
2019
|
|
December 31,
2018
|
Consolidated Adjusted
EBITDA(1)
|
$
|
1,334
|
|
|
$
|
1,330
|
|
|
|
|
|
Principal face value
of debt outstanding(2)
|
$
|
8,900
|
|
|
$
|
9,219
|
|
Less:
Cash and cash equivalents
|
313
|
|
|
168
|
|
Net debt
|
$
|
8,587
|
|
|
$
|
9,051
|
|
Net debt leverage
ratio
|
6.4
|
|
|
6.8
|
|
|
(1) Refer to the
reconciliation of Consolidated Adjusted EBITDA included in the
table titled "Reconciliation Of Net (Loss) Income Attributable To
SGC To Consolidated Adjusted EBITDA."
|
(2) 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 December 31, 2019 were 1.24 and 1.12, respectively, resulting
in a $68 million adjustment increasing the principal face value of
debt outstanding presented above. The Euro to USD exchange rate as
of December 31, 2018 was 1.14, resulting in a $54 million
adjustment increasing the 2018 principal face value of debt
outstanding presented above. Additionally, the 2019 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
December
31,
|
|
Year Ended
December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net cash provided by
(used in) operating activities(1)
|
$
|
143
|
|
|
$
|
(10)
|
|
|
$
|
546
|
|
|
$
|
346
|
|
Less: Capital
expenditures
|
(78)
|
|
|
(98)
|
|
|
(285)
|
|
|
(391)
|
|
Add:
Distributions of capital from equity investments
|
5
|
|
|
5
|
|
|
23
|
|
|
30
|
|
Less: Additions to
equity method investments (2)
|
—
|
|
|
(104)
|
|
|
(1)
|
|
|
(180)
|
|
Less: Payments on
license obligations
|
(14)
|
|
|
(23)
|
|
|
(40)
|
|
|
(45)
|
|
Free cash
flow
|
$
|
56
|
|
|
$
|
(230)
|
|
|
$
|
243
|
|
|
$
|
(240)
|
|
|
|
|
|
|
|
|
|
(1) The three
months ended December 31, 2019 and 2018 include a $23 million
unfavorable change and $50 million unfavorable change,
respectively, in accrued interest due to refinancing transactions.
The three and twelve months ended December 31, 2019 include
approximately $3 million and $26 million, respectively, of payments
related to contingent acquisition consideration. The twelve months
ended December 31, 2018 includes approximately $35 million of
payments related to NYX transaction costs (including NYX assumed
liabilities) and a $52 million unfavorable change in accrued
interest due to refinancing transactions. The three and twelve
months ended December 31, 2018 includes a $152 million payment to
resolve the Shuffle Tech legal matter.
|
(2) The three and
twelve months ended December 31, 2018 include $104 million and $179
million, respectively, in LNS concession
contributions.
|
|
|
RECONCILIATION OF
EARNINGS FROM EQUITY INVESTMENTS TO EBITDA FROM EQUITY
INVESTMENTS
|
|
Three Months
Ended
December
31,
|
|
Year Ended
December 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
EBITDA from equity
investments:
|
|
|
|
|
|
|
|
Earnings from equity
investments
|
$
|
7
|
|
|
$
|
9
|
|
|
$
|
24
|
|
|
$
|
25
|
|
Add: Income tax
expense
|
2
|
|
|
3
|
|
|
9
|
|
|
7
|
|
Add: Depreciation and
amortization
|
8
|
|
|
8
|
|
|
33
|
|
|
36
|
|
Add: Interest income,
net and other
|
—
|
|
|
(2)
|
|
|
1
|
|
|
(1)
|
|
EBITDA from equity
investments
|
$
|
17
|
|
|
$
|
18
|
|
|
$
|
67
|
|
|
$
|
67
|
|
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 casino gaming and how such opposition could lead
these jurisdictions to adopt legislation or impose a regulatory
framework to govern interactive social gaming or social casino
gaming specifically, and how this could result in a prohibition on
interactive social gaming or social casino gaming 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, including the impact of any security
breaches or cyber-attacks; reliance on or failures in information
technology and other systems; 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; inability to achieve some or all of
the anticipated benefits of SciPlay being a standalone public
company; 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
continuing uncertainty around the U.K.'s withdrawal from the
European Union ("EU"); possibility that the renewal of LNS'
concession to operate the Italian instant games lottery is not
finalized (including as the result of a pending third-party protest
against the renewal of the concession or any appeal from existing
court rulings relating to such third-party protest); the impact of
U.K. legislation approving the reduction of fixed-odds betting
terminals maximum stakes limit on LBO operators, including the
related closure of certain LBO shops; 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; the discontinuation or replacement of LIBOR,
which may adversely affect interest rates; 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.
Due to rounding, certain numbers presented herein may not
precisely agree or add up on a cumulative basis to the totals
previously reported.
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) Income 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 (loss)
income and includes net (loss) income 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; (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
twelve-month periods ended December 31,
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 16 of the Company's Annual Report on Form 10-K for the year
ended December 31, 2018, but 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).
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SOURCE Scientific Games Corporation