LAS VEGAS, May 11, 2020 /PRNewswire/ -- Scientific Games
Corporation (NASDAQ: SGMS) ("Scientific Games" or the "Company")
today reported results for the first quarter ended March 31,
2020. The Company's first quarter results were adversely impacted
by the COVID-19 disruptions late in the quarter.
First Quarter 2020 Financial Highlights:
- First quarter revenue decreased 13 percent to
$725 million, down from $837 million in the year ago period. The
Company's Gaming revenue was negatively impacted by the COVID-19
disruptions that resulted in temporary closures of casino
operations in jurisdictions globally. Lottery revenue was lower as
the prior year included significant equipment sales.
- Net loss was $155 million
compared to $24 million in the prior
year, due to lower revenue and the effects of COVID-19. 2020 Net
loss includes a $54 million goodwill
impairment charge related to our legacy U.K. Gaming reporting unit
and a negative impact of $37 million
related to Gaming business segment receivable credit allowances and
inventory write-down charges, all driven by COVID-19
disruptions.
- Consolidated Adjusted EBITDA ("Consolidated AEBITDA"), a
non-GAAP financial measure defined below, decreased 39 percent to
$200 million from $328 million in the prior year period, driven by
the previously mentioned $37 million
charge related to receivables credit allowances and inventory
write-down charges and the time between the sudden drop in revenue
from COVID-19 and the benefits of the cost savings measures
implemented late in the quarter.
- Net cash provided by operating activities was
$120 million versus $167 million in the year ago period.
- Operational and capital cost-savings measures are
expected to improve quarterly cash flows in the second quarter by
over $150 million. The Company
implemented these cost-savings measures as a result of the COVID-19
disruptions. The cost reductions are related to lower capital
expenditures, workforce related savings, and reduced expenses.
- Second quarter projected consolidated net cash outflow,
a non-GAAP financial measure defined below, is expected to be
approximately $70 million -
$90 million. The COVID-19 impact
accelerated in the latter half of March
2020 and the Company expects this trend to reach its peak in
the second quarter.
- Available liquidity, including SciPlay at quarter-end
was $967 million.
Barry Cottle, President and
Chief Executive Officer of Scientific Games, said, "We are
working around the clock to take care of our employees, customers,
shareholders and other key stakeholders in these difficult times,
while providing uninterrupted products and services to those
customers who continue to operate. I am confident that the measures
we are implementing now will allow us to take advantage of
opportunities to strengthen our business and prepare us to come out
of the crisis even stronger than before. We have a diverse
portfolio of assets, products and services, and our previous
investments in digital gaming technologies uniquely position us to
navigate and ultimately excel, as we emerge from this challenging
environment."
Michael Quartieri, Chief
Financial Officer of Scientific Games, added, "We have made
swift and meaningful reductions to our cost structure in response
to the current environment. We believe these changes in conjunction
with our available liquidity provide us the tools to withstand the
impact from COVID-19. I'm confident that our streamlined cost
structure will allow for accelerated cash flow generation and
deleveraging in the future."
SUMMARY
CONSOLIDATED RESULTS
|
($ in
millions)
|
Three Months Ended
March 31,
|
|
2020
|
|
2019
|
Revenue
|
$
|
725
|
|
|
$
|
837
|
|
Net loss
|
155
|
|
|
24
|
|
Net cash provided by
operating activities(1)
|
120
|
|
|
167
|
|
Capital
expenditures
|
53
|
|
|
67
|
|
|
|
|
|
Non-GAAP Financial
Measures(2)
|
|
|
|
Consolidated
AEBITDA
|
$
|
200
|
|
|
$
|
328
|
|
Consolidated AEBITDA
margin
|
28
|
%
|
|
39
|
%
|
Free cash
flow
|
$
|
59
|
|
|
$
|
96
|
|
|
|
|
|
Balance Sheet
Measures
|
As of March 31,
2020
|
|
As of December 31,
2019
|
Cash and cash
equivalents
|
$
|
334
|
|
|
$
|
313
|
|
Principal face value
of debt outstanding(3)
|
8,851
|
|
|
8,900
|
|
Available
liquidity
|
967
|
|
|
906
|
|
|
|
|
|
(1) The three
months ended March 31, 2020 includes a $10 million favorable change
in accrued interest due to refinancing transactions and
approximately $4 million of payments related to contingent
acquisition consideration.
|
|
(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, which was 1.24 Euro to USD. As of March
31, 2020 the Euro to USD exchange rate was 1.10. As a result, the
principal face value of debt outstanding presented above is $82
million higher than the amount currently presented in long-term
debt on our balance sheet. Additionally, principal face value
excludes $8 million in proceeds received from transactions
completed in 2018 which are presented as debt.
|
BUSINESS SEGMENT
HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2020
|
($ in
millions)
|
Revenue
|
|
AEBITDA
|
|
AEBITDA
Margin
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
2020
|
|
2019
|
|
PP
Change(1)
|
Gaming
|
$
|
318
|
|
|
$
|
422
|
|
|
(104)
|
|
|
(25)
|
%
|
|
$
|
96
|
|
|
$
|
215
|
|
|
(119)
|
|
|
(55)
|
%
|
|
30
|
%
|
|
51
|
%
|
|
(21)
|
|
Lottery
|
212
|
|
|
227
|
|
|
(15)
|
|
|
(7)
|
%
|
|
78
|
|
|
104
|
|
|
(26)
|
|
|
(25)
|
%
|
|
37
|
%
|
|
46
|
%
|
|
(9)
|
|
SciPlay
|
118
|
|
|
118
|
|
|
—
|
|
|
—
|
%
|
|
35
|
|
|
25
|
|
|
10
|
|
|
40
|
%
|
|
30
|
%
|
|
21
|
%
|
|
9
|
|
Digital
|
77
|
|
|
70
|
|
|
7
|
|
|
10
|
%
|
|
23
|
|
|
13
|
|
|
10
|
|
|
77
|
%
|
|
30
|
%
|
|
19
|
%
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PP- percentage
points.
|
|
(1) As
calculations are made using whole dollar numbers, actual results
may vary compared to calculations presented in this
table.
|
Key Highlights
- SciPlay AEBITDA increased 40% from the prior year to
$35 million driven by lower marketing
expense and the elimination of internal IP payments. SciPlay
generated record monthly revenue in April, up over 20% compared to
March.
- Digital AEBITDA increased 77% from the prior year to
$23 million. Online casino revenue
was up 4% from the prior year. We expanded our iGaming partnership,
added sports wagering with Golden Nugget, extended our partnership
with William Hill and partnered with
Betfred to launch sports betting in Pennsylvania.
- Gaming revenues decreased as COVID-19 disruptions
resulted in temporary closures of casino operations in various
jurisdictions globally. Other factors impacting revenues included
the completion of certain Canadian systems launches that we
benefited from in the prior year.
- Gaming machine sales included 525 historical racing
machines, which represented our first sales into this emerging
market. From a comparison perspective, the prior year included two
large new casino openings.
- Lottery was recently awarded key contracts for the
lottery system in Iowa, technology
in Germany, instant tickets in
Connecticut and the SGEP program
South Carolina. The Company is now
the primary supplier to all of the top 10 performing instant game
lotteries in the world.
- Lottery systems revenue was $11
million lower as the prior year was a tough comp due to
significant equipment sales. Lottery AEBITDA was down 25% on lower
JV contributions related to the COVID-19 impact in Italy and Greece, lower margin on equipment sales in
2020, and the impact of contract repricing for renewals.
LIQUIDITY
|
($ in
millions)
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
2019
|
|
Increase /
(Decrease)
|
Net loss
|
$
|
(155)
|
|
|
$
|
(24)
|
|
|
$
|
(131)
|
|
Non-cash adjustments
included in net loss
|
234
|
|
|
168
|
|
|
66
|
|
Non-cash
interest
|
5
|
|
|
7
|
|
|
(2)
|
|
Changes in deferred
income taxes and other
|
7
|
|
|
6
|
|
|
1
|
|
Distributed earnings
from equity investments
|
4
|
|
|
4
|
|
|
—
|
|
Changes in working
capital accounts
|
25
|
|
|
6
|
|
|
19
|
|
Net cash provided by
operating activities
|
$
|
120
|
|
|
$
|
167
|
|
|
$
|
(47)
|
|
- As of March 31, 2020, we had
$967 million in available liquidity,
which included SciPlay's revolving credit facility. On April 9, 2020, we borrowed $480 million under SGI's revolving credit
facility, which was substantially all of the remaining availability
thereunder.
- On May 8, 2020, we amended our
credit agreement to obtain relief on the net first lien leverage
ratio covenant through and including Q1 2021. We will be required
to maintain a minimum liquidity of at least $275 million (excluding SciPlay) through the
covenant relief period, with a potential step-down in minimum
liquidity to $200 million in Q2 2021.
The amendment imposes additional limitations on restricted
payments, debt and liens incurrence and investments during the
covenant relief period.
- Net cash provided by operating activities was $120 million versus $167
million in the year ago period due to a $67 million decrease in earnings after noncash
adjustments in net loss, partially offset by a $20 million favorable change in working capital
accounts and other.
- Free cash flow, a non-GAAP financial measure defined below, was
$59 million compared to $96 million in the year ago period.
- Capital expenditures totaled $53
million in the first quarter of 2020, compared to
$67 million in the prior-year period.
For 2020, the Company now anticipates that capital expenditures
will be in the range of $210 million
- $240 million, due to capital
liquidity-saving measures implemented as a result of the COVID-19
disruptions, as compared to the $300
million - $330 million
estimate set forth in our fourth quarter 2019 earnings
release.
Earnings Conference Call
Scientific Games executive leadership will host a conference
call on Monday, May 11, 2020, at
4:15 p.m. EDT to review the Company's
first 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
|
Christina Karas +1
702-532-7986
|
Trent Kruse +1
702-532-7641
|
Director, Corporate
Communications
media@scientificgames.com
|
Senior Vice
President, Investor Relations
trent.kruse@scientificgames.com
|
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
|
|
March
31,
|
|
2020
|
|
2019
|
Revenue:
|
|
|
|
Services
|
$
|
422
|
|
|
$
|
459
|
|
Product
sales
|
168
|
|
|
238
|
|
Instant
products
|
135
|
|
|
140
|
|
Total
revenue
|
725
|
|
|
837
|
|
Operating
expenses:
|
|
|
|
Cost of
services(1)
|
130
|
|
|
133
|
|
Cost of product
sales(1)
|
91
|
|
|
107
|
|
Cost of instant
products(1)
|
73
|
|
|
67
|
|
Selling, general and
administrative
|
198
|
|
|
186
|
|
Research and
development
|
51
|
|
|
49
|
|
Depreciation,
amortization and impairments
|
138
|
|
|
165
|
|
Goodwill
impairment
|
54
|
|
|
—
|
|
Restructuring and
other
|
22
|
|
|
7
|
|
Total operating
expenses
|
757
|
|
|
714
|
|
Operating (loss)
income
|
(32)
|
|
|
123
|
|
Other (expense)
income:
|
|
|
|
Interest
expense
|
(124)
|
|
|
(154)
|
|
(Loss) earnings from
equity investments
|
(2)
|
|
|
6
|
|
Gain on remeasurement
of debt
|
10
|
|
|
5
|
|
Other expense,
net
|
(3)
|
|
|
—
|
|
Total other expense,
net
|
(119)
|
|
|
(143)
|
|
Net loss before income
taxes
|
(151)
|
|
|
(20)
|
|
Income tax
expense
|
(4)
|
|
|
(4)
|
|
Net loss
|
(155)
|
|
|
(24)
|
|
Less: Net income
attributable to noncontrolling interest
|
4
|
|
|
—
|
|
Net loss attributable
to SGC
|
$
|
(159)
|
|
|
$
|
(24)
|
|
|
|
|
|
Basic and diluted net
loss attributable to SGC per share:
|
|
|
|
Basic
|
$
|
(1.69)
|
|
|
$
|
(0.26)
|
|
Diluted
|
$
|
(1.69)
|
|
|
$
|
(0.26)
|
|
|
|
|
|
Weighted average
number of shares used in per share calculations:
|
|
|
|
Basic
shares
|
94
|
|
|
92
|
|
Diluted
shares
|
94
|
|
|
92
|
|
|
|
|
|
(1) Excludes
depreciation and amortization.
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited,
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2020
|
|
2019
|
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
334
|
|
|
$
|
313
|
|
Restricted
cash
|
|
55
|
|
|
51
|
|
Receivables, net of
allowance for credit losses of $61(1) and $36,
respectively
|
|
624
|
|
|
755
|
|
Inventories
|
|
248
|
|
|
244
|
|
Prepaid expenses,
deposits and other current assets
|
|
235
|
|
|
252
|
|
Total current
assets
|
|
1,496
|
|
|
1,615
|
|
|
|
|
|
|
Restricted
cash
|
|
11
|
|
|
11
|
|
Receivables, net of
allowance for credit losses of $9(1) and $-,
respectively
|
|
48
|
|
|
53
|
|
Property and
equipment, net
|
|
474
|
|
|
500
|
|
Operating lease
right-of-use assets
|
|
98
|
|
|
105
|
|
Goodwill
|
|
3,162
|
|
|
3,280
|
|
Intangible assets,
net
|
|
1,429
|
|
|
1,516
|
|
Software,
net
|
|
248
|
|
|
258
|
|
Equity
investments
|
|
263
|
|
|
273
|
|
Other
assets
|
|
229
|
|
|
198
|
|
Total
assets
|
|
$
|
7,458
|
|
|
$
|
7,809
|
|
|
|
|
|
|
Liabilities and
Stockholders' Deficit:
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
45
|
|
|
$
|
45
|
|
Accounts
payable
|
|
215
|
|
|
226
|
|
Accrued
liabilities
|
|
475
|
|
|
495
|
|
Total current
liabilities
|
|
735
|
|
|
766
|
|
|
|
|
|
|
Deferred income
taxes
|
|
87
|
|
|
91
|
|
Operating lease
liabilities
|
|
81
|
|
|
88
|
|
Other long-term
liabilities
|
|
293
|
|
|
292
|
|
Long-term debt,
excluding current portion
|
|
8,620
|
|
|
8,680
|
|
Total stockholders'
deficit (2)
|
|
(2,358)
|
|
|
(2,108)
|
|
Total liabilities and
stockholders' deficit
|
|
$
|
7,458
|
|
|
$
|
7,809
|
|
|
|
|
|
|
(1) March 31, 2020
balance reflects an impact of $6 million related to the
implementation of ASC 326. Effective January 1, 2020, we changed
our receivables presentation and combined accounts receivable and
notes receivable into a single line item on our balance sheets due
to their similar characteristics and have reclassified the prior
period balances to conform to the current year
presentation.
|
|
(2) Includes $108
million and $104 million in noncontrolling interest as of March 31,
2020 and December 31, 2019, respectively.
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited,
in millions)
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
Net loss
|
$
|
(155)
|
|
|
$
|
(24)
|
|
Adjustments to
reconcile net loss to cash provided by operating
activities
|
243
|
|
|
179
|
|
Changes in working
capital accounts, net of effects of acquisitions
|
25
|
|
|
6
|
|
Changes in deferred
income taxes and other
|
7
|
|
|
6
|
|
Net cash provided by
operating activities
|
120
|
|
|
167
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(53)
|
|
|
(67)
|
|
Distributions of
capital from equity investments
|
—
|
|
|
3
|
|
Proceeds from sale of
asset and other
|
22
|
|
|
—
|
|
Net cash used in
investing activities
|
(31)
|
|
|
(64)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
long-term debt, net of payments
|
(50)
|
|
|
953
|
|
Payments of debt
issuance and deferred financing costs
|
—
|
|
|
(14)
|
|
Payments on license
obligations
|
(8)
|
|
|
(7)
|
|
Sale of future revenue
and other
|
(1)
|
|
|
10
|
|
Net cash (used in)
provided by financing activities
|
(59)
|
|
|
942
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
(5)
|
|
|
1
|
|
Increase in cash,
cash equivalents and restricted cash
|
25
|
|
|
1,046
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
375
|
|
|
220
|
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
400
|
|
|
$
|
1,266
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
Cash paid for
interest
|
$
|
110
|
|
|
$
|
80
|
|
Income taxes
paid
|
6
|
|
|
10
|
|
Distributed earnings
from equity investments
|
4
|
|
|
4
|
|
Supplemental non-cash
transactions:
|
|
|
|
Non-cash interest
expense
|
$
|
5
|
|
|
$
|
7
|
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
RECONCILIATION OF
NET LOSS TO CONSOLIDATED ADJUSTED EBITDA
|
AND SUPPLEMENTAL
BUSINESS SEGMENT DATA
|
(Unaudited,
in millions)
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2020
|
|
2019
|
Reconciliation of
Net Loss Attributable to SGC to Consolidated Adjusted
EBITDA
|
|
|
|
Net loss attributable
to SGC
|
$
|
(159)
|
|
|
$
|
(24)
|
|
Net income attributable
to noncontrolling interest
|
4
|
|
|
—
|
|
Net loss
|
(155)
|
|
|
(24)
|
|
Restructuring and
other(1)
|
22
|
|
|
7
|
|
Depreciation,
amortization and impairments
|
138
|
|
|
165
|
|
Goodwill
impairment
|
54
|
|
|
—
|
|
Other expense,
net
|
4
|
|
|
2
|
|
Interest
expense
|
124
|
|
|
154
|
|
Income tax
expense
|
4
|
|
|
4
|
|
Stock-based
compensation
|
10
|
|
|
14
|
|
Gain on remeasurement
of debt
|
(10)
|
|
|
(5)
|
|
EBITDA from equity
investments(2)
|
7
|
|
|
17
|
|
Loss (earnings) from
equity investments
|
2
|
|
|
(6)
|
|
Consolidated Adjusted
EBITDA
|
$
|
200
|
|
|
$
|
328
|
|
|
|
|
|
Supplemental
Business Segment Data
|
Business segments
Adjusted EBITDA
|
|
|
|
Gaming
|
$
|
96
|
|
|
$
|
215
|
|
Lottery
|
78
|
|
|
104
|
|
SciPlay
|
35
|
|
|
25
|
|
Digital
|
23
|
|
|
13
|
|
Total business
segments Adjusted EBITDA
|
232
|
|
|
357
|
|
Corporate and
other(3)
|
(32)
|
|
|
(29)
|
|
Consolidated Adjusted
EBITDA
|
$
|
200
|
|
|
$
|
328
|
|
|
|
|
|
Reconciliation to
Consolidated Adjusted EBITDA margin
|
Consolidated Adjusted
EBITDA
|
$
|
200
|
|
|
$
|
328
|
|
Revenue
|
725
|
|
|
837
|
|
Net loss
margin
|
(21)
|
%
|
|
(3)
|
%
|
Consolidated Adjusted
EBITDA margin (Consolidated AEBITDA/Revenue)
|
28
|
%
|
|
39
|
%
|
|
(1) Refer to
Consolidated AEBITDA definition for 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 $4 million and $7 million in cash distributions and return
of capital payments from its equity investees for the three months
ended March 31, 2020 and 2019, respectively.
|
|
(3) Includes
amounts not allocated to the business segments (including corporate
costs) and other non-operating expenses (income).
|
SCIENTIFIC GAMES
CORPORATION AND SUBSIDIARIES
|
SUPPLEMENTAL
INFORMATION - SEGMENT KEY PERFORMANCE INDICATORS AND SUPPLEMENTAL
FINANCIAL DATA
|
(Unaudited,
in millions, except unit and per unit data)
|
|
Three Months
Ended
|
|
March
31,
|
|
March
31,
|
|
December
31,
|
Gaming Business
Segment Supplemental Financial Data:
|
2020
|
|
2019
|
|
2019
|
Revenue by line of
business:
|
|
|
|
|
|
Gaming
operations
|
$
|
119
|
|
|
$
|
152
|
|
|
$
|
146
|
|
Gaming machine
sales
|
92
|
|
|
136
|
|
|
157
|
|
Gaming
systems
|
55
|
|
|
74
|
|
|
77
|
|
Table
products
|
52
|
|
|
60
|
|
|
65
|
|
Total
revenue
|
$
|
318
|
|
|
$
|
422
|
|
|
$
|
445
|
|
|
|
|
|
|
|
Gaming Operations
Revenue:
|
|
|
|
|
|
U.S. and
Canada:
|
|
|
|
|
|
Installed base at
period end
|
30,469
|
|
|
32,958
|
|
|
31,486
|
|
Average daily revenue
per unit
|
$
|
31.28
|
|
|
$
|
38.46
|
|
|
$
|
38.43
|
|
International:(1)
|
|
|
|
|
|
Installed base at
period end
|
34,372
|
|
|
33,950
|
|
|
34,370
|
|
Average daily revenue
per unit
|
$
|
8.23
|
|
|
$
|
11.43
|
|
|
$
|
9.69
|
|
|
|
|
|
|
|
Gaming Machine
Sales:
|
|
|
|
|
|
U.S. and Canada new
unit shipments
|
2,890
|
|
|
4,801
|
|
|
4,510
|
|
International new unit
shipments
|
2,003
|
|
|
2,083
|
|
|
3,266
|
|
New unit
shipments
|
4,893
|
|
|
6,884
|
|
|
7,776
|
|
Average sales price per
new unit
|
$
|
15,872
|
|
|
$
|
17,140
|
|
|
$
|
17,268
|
|
|
|
|
|
|
|
Gaming Machine Unit
Sales Components:
|
|
|
|
|
|
U.S. and Canada
unit shipments:
|
|
|
|
|
|
Replacement
units
|
1,744
|
|
|
3,194
|
|
|
3,501
|
|
Casino opening and
expansion units
|
1,146
|
|
|
1,607
|
|
|
1,009
|
|
Total unit
shipments
|
2,890
|
|
|
4,801
|
|
|
4,510
|
|
|
|
|
|
|
|
International unit
shipments:
|
|
|
|
|
|
Replacement
units
|
1,827
|
|
|
2,083
|
|
|
3,228
|
|
Casino opening and
expansion units
|
176
|
|
|
—
|
|
|
38
|
|
Total unit
shipments
|
2,003
|
|
|
2,083
|
|
|
3,266
|
|
|
|
|
|
|
|
Lottery Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Instant products
revenue by geography:
|
|
|
|
|
|
United
States
|
$
|
92
|
|
|
$
|
93
|
|
|
$
|
96
|
|
International
|
44
|
|
|
47
|
|
|
52
|
|
Instant products
revenue
|
$
|
136
|
|
|
$
|
140
|
|
|
$
|
148
|
|
|
|
|
|
|
|
Lottery systems
revenue by financial statement line item:
|
|
|
|
|
|
Services
revenue
|
$
|
52
|
|
|
$
|
54
|
|
|
$
|
56
|
|
Product sales
revenue
|
24
|
|
|
33
|
|
|
29
|
|
Total Lottery systems
revenue
|
$
|
76
|
|
|
$
|
87
|
|
|
$
|
85
|
|
|
|
|
|
|
|
Digital Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Revenue by Line of
Business;
|
|
|
|
|
|
Sports and
platform
|
$
|
38
|
|
|
$
|
30
|
|
|
$
|
34
|
|
Gaming and
other
|
39
|
|
|
40
|
|
|
38
|
|
Total
revenue
|
$
|
77
|
|
|
$
|
70
|
|
|
$
|
72
|
|
|
|
|
|
|
|
Wagers processed
through OGS (in billions)
|
$
|
9.9
|
|
|
$
|
8.9
|
|
|
$
|
9.2
|
|
|
|
|
|
|
|
SciPlay Business
Segment Supplemental Financial Data:
|
|
|
|
|
|
Revenue by
Platform:
|
|
|
|
|
|
Mobile
|
$
|
101
|
|
|
$
|
97
|
|
|
$
|
98
|
|
Web and
other
|
17
|
|
|
21
|
|
|
15
|
|
Total
revenue
|
$
|
118
|
|
|
$
|
118
|
|
|
$
|
113
|
|
|
|
|
|
|
|
Mobile
penetration(2)
|
85
|
%
|
|
82
|
%
|
|
84
|
%
|
Average
MAU(3)
|
7.5
|
|
|
8.4
|
|
|
7.6
|
|
Average
DAU(4)
|
2.6
|
|
|
2.7
|
|
|
2.6
|
|
ARPDAU(5)
|
$
|
0.49
|
|
|
$
|
0.48
|
|
|
$
|
0.50
|
|
|
(1) Excludes the
impact of game content licensing revenue.
|
|
(2) Mobile
penetration is defined as the percentage of SciPlay revenue
generated from mobile platforms.
|
|
(3) 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.
|
|
(4) 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.
|
|
(5) 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
CONSOLIDATED AEBITDA AND NET DEBT LEVERAGE RATIO
|
|
|
|
|
|
Twelve Months
Ended
|
|
|
March 31,
2020
|
|
March 31,
2019
|
|
|
|
|
|
Net loss attributable
to SGC
|
|
$
|
(265)
|
|
|
$
|
(174)
|
|
Net income attributable
to noncontrolling interest
|
|
16
|
|
|
—
|
|
Net loss
|
|
(249)
|
|
|
(174)
|
|
Restructuring and
other
|
|
43
|
|
|
208
|
|
Depreciation,
amortization and impairments
|
|
620
|
|
|
667
|
|
Goodwill
impairment
|
|
54
|
|
|
—
|
|
Other expense (income),
net
|
|
9
|
|
|
(11)
|
|
Interest
expense
|
|
559
|
|
|
596
|
|
Income tax
expense
|
|
10
|
|
|
11
|
|
Stock-based
compensation
|
|
33
|
|
|
49
|
|
Loss on debt financing
transactions
|
|
100
|
|
|
—
|
|
Gain on remeasurement
of debt
|
|
(14)
|
|
|
(49)
|
|
EBITDA from equity
investments
|
|
57
|
|
|
65
|
|
Earnings from equity
investments
|
|
(16)
|
|
|
(24)
|
|
Consolidated Adjusted
EBITDA
|
|
$
|
1,206
|
|
|
$
|
1,338
|
|
|
|
|
|
|
|
|
As
of
|
|
|
March 31,
2020
|
|
March 31,
2019
|
Principal face value
of debt outstanding(1)
|
|
$
|
8,851
|
|
|
$
|
10,172
|
|
Less: Cash and cash
equivalents(2)
|
|
334
|
|
|
1,213
|
|
Net debt
|
|
$
|
8,517
|
|
|
$
|
8,959
|
|
Net debt leverage
ratio
|
|
7.1
|
|
|
6.7
|
|
|
(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 March 31, 2020 were 1.24 and 1.10, respectively, resulting in
an $82 million adjustment increasing the principal face value of
debt outstanding presented above. Additionally, the 2020 and 2019
principal face values exclude $8 million and $11 million,
respectively, in proceeds received from transactions completed in
2019 which are presented as debt.
|
|
(2) Cash and cash
equivalents as of March 31, 2019 include $1 billion principal
balance of the 2022 Unsecured Notes that were redeemed on April 4,
2019 using the proceeds from the March 2019 issuance of 2026
Unsecured Notes.
|
|
|
|
|
|
CALCULATION OF
FREE CASH FLOW
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Net cash provided by
operating activities(1)
|
|
$
|
120
|
|
|
$
|
167
|
|
|
|
|
|
|
Less: Capital
expenditures
|
|
(53)
|
|
|
(67)
|
|
Add:
Distributions of capital from equity investments
|
|
—
|
|
|
3
|
|
Less: Payments on
license obligations
|
|
(8)
|
|
|
(7)
|
|
Free cash
flow
|
|
$
|
59
|
|
|
$
|
96
|
|
|
(1) The 2020 and
2019 first quarters include a $10 million and a $66 million
favorable change, respectively, in accrued interest due to the
February 2018 refinancing.
|
|
RECONCILIATION OF
(LOSS) EARNINGS FROM
EQUITY INVESTMENTS TO EBITDA FROM EQUITY
INVESTMENTS
|
|
Three Months Ended
March 31,
|
|
2020
|
|
2019
|
EBITDA from equity
investments:
|
|
|
|
(Loss) earnings from
equity investments
|
$
|
(2)
|
|
|
$
|
6
|
|
Add: Income tax
expense
|
1
|
|
|
3
|
|
Add: Depreciation,
amortization and impairments
|
7
|
|
|
8
|
|
Add: Interest income,
net and other
|
1
|
|
|
—
|
|
EBITDA from equity
investments
|
$
|
7
|
|
|
$
|
17
|
|
|
|
|
|
|
RECONCILIATION OF
CONSOLIDATED NET LOSS
MARGIN TO CONSOLIDATED AEBITDA MARGIN
|
|
Three Months Ended
March 31,
|
|
2020
|
|
2019
|
Consolidated AEBITDA
Margin
|
|
|
|
Net loss
margin(1)
|
(21)
|
%
|
|
(3)
|
%
|
Restructuring and
other(2)
|
3
|
%
|
|
1
|
%
|
Depreciation,
amortization and impairments
|
19
|
%
|
|
20
|
%
|
Goodwill
impairment
|
7
|
%
|
|
—
|
%
|
Stock-based
compensation and other expense, net
|
2
|
%
|
|
2
|
%
|
Interest
expense
|
17
|
%
|
|
18
|
%
|
Income tax
expense
|
1
|
%
|
|
1
|
%
|
Gain on remeasurement
of debt
|
(1)
|
%
|
|
(1)
|
%
|
Equity
investments
|
1
|
%
|
|
1
|
%
|
Consolidated AEBITDA
Margin
|
28
|
%
|
|
39
|
%
|
|
|
|
|
(1) Calculated as
net loss as a percentage of revenue.
|
|
(2) Refer to
Consolidated AEBITDA definition for description of items included
in restructuring and other.
|
|
|
|
|
|
RECONCILIATION OF
PROJECTED CONSOLIDATED
NET CASH OUTFLOW
|
|
For the Three
Months Ending June 30, 2020
|
|
Range
|
|
Low
|
|
High
|
Projected net cash
flows(1)
|
$
|
410
|
|
|
$
|
390
|
|
Less: Net cash
borrowings under SGI revolving credit facility
|
(480)
|
|
|
(480)
|
|
Projected
consolidated net cash outflow(2)
|
$
|
(70)
|
|
|
$
|
(90)
|
|
|
(1) Calculated as
projected consolidated net cash flows from operating, investing and
financing activities as presented in our condensed consolidated
statements of cash flows.
|
|
(2) Projected
consolidated net cash outflow is a non-GAAP financial measure
reconciled to the most directly comparable GAAP measure in the
table above. Refer to projected consolidated net cash outflow
definition for description of this non-GAAP measure at the end of
this release.
|
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, including, but not limited to, those related to the
Company's expected operating performance for the second quarter of
2020, projected consolidated net cash outflow, trends in the
Company's operations, the effects of COVID-19 disruptions and the
Company's mitigation efforts, 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:
- the impact of the COVID-19 pandemic and any resulting
unfavorable social, political, economic and financial conditions,
including the temporary closure of casinos and lottery operations
on a jurisdiction-by-jurisdiction basis;
- natural events and health crises that disrupt our operations or
those of our customers, suppliers or regulators;
- incurrence of restructuring costs;
- changes in demand for our products and services;
- dependence on suppliers and manufacturers;
- dependence on key employees;
- goodwill impairment charges including changes in estimates or
judgements related to our impairment analysis of goodwill or other
intangible assets;
- 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;
- stock price volatility;
- 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;
- 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;
- implementation of complex new accounting standards;
- fluctuations in our results due to seasonality and other
factors;
- 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;
- possibility that the renewal of Lotterie Nazionali S.r.l.
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;
- 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; and
- influence of certain stockholders, including decisions that may
conflict with the interests of other stockholders.
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 18, 2020 (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, and
projected consolidated net cash outflow (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 uses projected consolidated net cash outflow in
monitoring, evaluating and managing the Company's cash expenditures
and available liquidity in the response to the disruptions
resulting from the COVID-19 pandemic.
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. Management
believes that projected consolidated net cash outflow is useful for
investors in evaluating the Company's expected cash expenditures
and available liquidity during the period of market disruptions
caused by the COVID-19 pandemic.
Consolidated AEBITDA
Consolidated AEBITDA, as used herein, is a non-GAAP financial
measure that is presented as supplemental disclosure and is
reconciled to net 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 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
restructuring and related costs; (iii) restructuring and
integration; (iv) cost savings initiatives; (v) major litigation;
and (vi) acquisition costs and other unusual items; (3)
depreciation and amortization expense and impairment charges
(including goodwill impairments); (4) change in fair value of
investments and remeasurement of debt; (5) interest expense; (6)
income tax 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, which is included in our
calculation of Consolidated AEBITDA to align with the provisions of
our long-term debt arrangements. 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 month periods
ended March 31, 2020 and 2019, each
calculated as a percentage of revenue. Consolidated AEBITDA margin
is a non-GAAP financial measure that is presented as supplemental
disclosure for illustrative purposes only and is reconciled to net
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, the most
directly comparable GAAP measure, 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, 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 15 of the Company's Annual Report on Form 10-K for the year
ended December 31, 2019, but it does
not include long term obligations under financing leases or
$8 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).
Projected Consolidated Net Cash Outflow
Projected consolidated net cash outflow, as used herein,
represents projected consolidated net cash flows from operating,
investing and financing activities (as presented in our condensed
consolidated statements of cash flows), the most directly
comparable GAAP measure, less net cash borrowings under the SGI
revolving credit facility for the three months ending June 30, 2020.
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SOURCE Scientific Games Corporation