Scientific Games Reports Second Quarter 2021 Results

in Finance

READ THIS ENTIRE REPORT CLICK HERE 

Webcast
Q2 2021 Scientific Games Corporation Earnings Conference Call
Aug 9, 2021
at 8:00 AM EDT

Supporting Materials

 

Scientific Games Reports Second Quarter 2021 Results

Consolidated Revenue Up 63% Year Over Year with Strong Sequential Growth Across All Businesses
Well-Progressed on Intended Divestitures of Lottery and Sports Betting Businesses
Disciplined Cost and Balance Sheet Management, Generated $149 Million of Net Cash Provided by Operating Activities and $133 Million of Free Cash Flow in the Quarter
Reduced Leverage Substantially in Six Months, Paid Down Over $500 Million in Debt Since October

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

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

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

STRATEGIC PILLAR PROGRESS

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

SUMMARY CONSOLIDATED RESULTS

 

($ in millions)

Three Months Ended June 30,

 

2021

 

2020

Revenue(1)

$

880

   

$

539

 

Net income (loss)(1)

113

   

(198)

 

Net cash provided by operating activities(1)

149

   

52

 

Capital expenditures

53

   

39

 
       

Non-GAAP Financial Measures(2)

     

Consolidated Adjusted EBITDA ("AEBITDA")(1)

$

383

   

$

121

 

Free cash flow(1)

133

   

(3)

 
       

Balance Sheet Measures

As of June 30, 2021

 

As of December 31, 2020

Cash and cash equivalents

$

932

   

$

1,016

 

Total debt

9,019

   

9,303

 

Available liquidity(3)

1,435

   

1,269

 
       

(1) The three months ended June 30, 2021, includes $38 million U.K. FOBT recovery ("the FOBT recovery") received from certain Gaming business
segment U.K. customers related to a 2020 U.K. court ruling associated with overcharging of value-added tax for gaming operators that consequently
reduced our net gaming revenues related to these customers and arrangements.

(2) These non-GAAP financial measures are defined below and are reconciled to the most directly comparable GAAP financial measure in the
accompanying supplemental tables at the end of this release.

(3) Available liquidity is calculated as cash and cash equivalents plus remaining revolver capacity, including the SciPlay Revolver.

Second Quarter 2021 Financial Highlights:

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

 

BUSINESS SEGMENT HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2021

 

($ in millions)

Revenue

 

AEBITDA

 

AEBITDA Margin(1)

 

2021

 

2020

 

$

 

%

 

2021

 

2020

 

$

 

%

 

2021

 

2020

 

PP Change(1)

Gaming

$

367

   

$

91

   

276

   

303

%

 

$

196

   

$

(31)

   

227

   

732

%

 

53

%

 

(34)

%

 

19

 

Lottery

266

   

209

   

57

   

27

%

 

138

   

97

   

41

   

42

%

 

52

%

 

46

%

 

6

 

SciPlay

154

   

166

   

(12)

   

(7)

%

 

48

   

60

   

(12)

   

(20)

%

 

31

%

 

36

%

 

(5)

 

Digital

93

   

73

   

20

   

27

%

 

31

   

20

   

11

   

55

%

 

33

%

 

27

%

 

6

 
                                           

PP - percentage points.

 

(1) Segment AEBITDA Margin is calculated as segment AEBITDA as a percentage of segment revenue.

(2) As calculations are made using whole dollar numbers, actual results may vary compared to calculations presented in this table.

Key Highlights

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