Published: August 1, 2018

Scientific Games Reports Second Quarter 2018 Results

Barry Cottle, CEO and President of Scientific Games, said, "I'm very pleased with our accomplishments this quarter and particularly proud that all four businesses continued to experience growth this quarter and are accelerating our financial momentum. Our core businesses are strong and ready to capitalize on the significant opportunities in the marketplace to drive growth by delivering great games and robust platforms and systems that enable them. We remain focused on delivering results, maintaining our financial discipline and strategically investing in our future to maximize shareholder return."

Growth achieved across every business reflects continued momentum

LAS VEGAS, Aug. 1, 2018  /PRNewswire/ -- Scientific Games Corporation (NASDAQ: SGMS) ("Scientific Games" or the "Company") today reported results for the second quarter ended June 30, 2018.

Second Quarter 2018 Financial Highlights:

  • Second quarter revenue rose 10 percent to $844.7 million, up from $766.3 million in the year ago period, reflecting $50.6 million in revenue from NYX, along with growth in all of our businesses. Gaming and Lottery revenue includes a $10.0 million negative impact from applying the new revenue recognition accounting.
  • Net loss decreased to $5.8 million compared to $39.1 million in the prior year period, primarily driven by higher revenue and more efficient business processes throughout the organization and reflective of $33.5 million in restructuring and other charges offset by a $34.5 million gain on remeasurement of Euro denominated debt.
  • Consolidated Attributable EBITDA ("Consolidated AEBITDA"), a non-GAAP financial measure defined below, increased 8 percent to $340.4 million from $314.8 million in the prior year period, primarily driven by higher revenue and more efficient business processes throughout the organization. Consolidated AEBITDA margin, a non-GAAP financial measure defined below, was 40.3 percent.
  • Net cash provided by operating activities decreased to $102.5 million from $168.5 million in the year ago period driven primarily by the timing of interest payments resulting from the February 2018 refinancing.

Barry Cottle, CEO and President of Scientific Games, said, "I'm very pleased with our accomplishments this quarter and particularly proud that all four businesses continued to experience growth this quarter and are accelerating our financial momentum. Our core businesses are strong and ready to capitalize on the significant opportunities in the marketplace to drive growth by delivering great games and robust platforms and systems that enable them. We remain focused on delivering results, maintaining our financial discipline and strategically investing in our future to maximize shareholder return."

Michael Quartieri, Chief Financial Officer of Scientific Games, added, "This quarter marks our eleventh consecutive quarter of year over year growth in revenue and AEBITDA. We have clear momentum across all of our global businesses. The improvement in our operating results, along with lower interest costs, provides us with a clear path of increasing cash flows, deleveraging, and strengthening our balance sheet."

SUMMARY CONSOLIDATED RESULTS

     
           

($ in millions)

Three Months Ended June 30,

 

2018

 

2017

Revenue

$

844.7

 

$

766.3

Net loss

(5.8)

 

(39.1)

Net cash provided by operating activities

102.5

 

168.5

Capital expenditures

112.5

 

78.9

       

Non-GAAP Financial Measures(1)

         

Consolidated AEBITDA

$

340.4

 

$

314.8

Consolidated AEBITDA margin

 

40.3%

   

41.1%

Free cash flow 

$

(71.0)

 

$

101.0

           
           

Balance Sheet Measures

As of June 30, 2018

 

As of Dec 31, 2017

Cash and cash equivalents

$

118.6

 

$

788.8

Principal face value of debt outstanding

 

9,073.5

   

8,869.4

Available liquidity

 

558.6

   

1,009.4

           

(1)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 are reconciled to the most directly comparable GAAP measures in the accompanying supplemental tables at the end of this release.

 

GAMING HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2018

                   

($ in millions)

Three Months Ended June 30,

 

Increase/(Decrease)

 

2018

 

2017

 

Amount

 

%

Revenue

         

   Gaming operations (1)

$

159.9

 

$

178.4

 

$    (18.5)

 

(10)

%

   Gaming machine sales

167.6

 

163.3

 

4.3

 

3

%

   Gaming systems

84.3

 

67.1

 

17.2

 

26

%

   Table products

58.9

 

48.4

 

10.5

 

22

%

 

$

470.7

 

$

457.2

 

$      13.5

 

3

%

             

AEBITDA

$

235.7

 

$

226.9

 

$        8.8

 

4

%

AEBITDA margin

 

50.1%

   

49.6%

         
                         

(1) Gaming operations includes $6.5 million in WAP jackpots as a reduction to revenue in 2018, compared to the 2017 presentation in which $5.3 million of WAP jackpots was classified as cost of services. This change in classification has no impact on AEBITDA.

 

 

  • Total gaming revenue increased $13.5 million, despite an unfavorable $6.5 million impact on Gaming operations revenue from the new revenue recognition accounting effective in 2018, and AEBITDA increased 4 percent, or $8.8 million, to $235.7 million, primarily reflecting a 50 basis point improvement in the AEBITDA margin to 50.1 percent reflecting more efficient business processes.
  • Gaming operations revenue declined $18.5 million in the second quarter 2018, inclusive of the $6.5 million reduction from the new revenue recognition accounting. On a quarterly sequential basis, we experienced an 8-unit increase in the installed base of Wide-Area Progressive ("WAP") and premium participation gaming machines and a $0.30 increase in average revenue per day, and our installed base of other leased and participation games increased by 80 units with average daily revenue down $0.29, which reflects the additional placements of lower yielding units in Greece.
  • Gaming machine sales revenue increased $4.3 million year over year, driven by strong replacement and new opening demand in the U.S. and Canada, which was offset by lower international sales. Replacement units in the U.S. and Canada increased 16 percent year over year to 4,388 units, due to ongoing demand for the TwinStar family of cabinets. The average sales price increased 1 percent to $17,699, reflecting a more favorable mix of gaming machines.
  • Gaming systems revenue increased $17.2 million to $84.3 million, primarily due to ongoing installations of a new system to casinos in the provinces of Alberta and Ontario, coupled with increased hardware sales, reflecting shipments of innovative iVIEW®player-interface display units. The deployment of the new system to additional casinos across Alberta and Ontario is expected to continue throughout 2018, and beyond.
  • Table products revenue increased $10.5 million to $58.9 million, reflecting increased sales of utility products.

 

LOTTERY HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2018

     
                       

($ in millions)

Three Months Ended June 30,

 

Increase/(Decrease)

Revenue

2018

 

2017

 

Amount

 

%

   Instant products

$

150.1

 

$

151.3

 

$

(1.2)

 

(1)

%

   Lottery systems  (1)

57.0

 

51.0

 

6.0

 

12

%

 

$

207.1

 

$

202.3

 

$

4.8

 

2

%

               

AEBITDA

$

99.4

 

$

95.6

 

$

3.8

 

4

%

AEBITDA margin

48.0%

 

47.3%

       
                             

(1) Lottery systems revenue includes $8.3 million in product sales revenue, compared to $9.8 million in 2017.

  

  • Total lottery revenue increased $4.8 million, or 2 percent, to $207.1 million, and AEBITDA increased 4 percent to $99.4 million, compared to $95.6 million in the prior year, with AEBITDA margin improving to 48.0 percent, primarily reflecting the revenue increase and a more profitable revenue mix partially offset by higher selling, general and administrative expenses.
  • Instant products revenue of $150.1 million was driven by a 2 percent increase in U.S. revenue, partially offset by 8 percent decrease internationally.
  • Lottery systems revenue increased as a result of a $6.0 million, or 12 percent increase in services. The increase in services revenue was driven largely by organic growth domestically.

 

 

SOCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2018

                         

($ in millions)

Three Months Ended June 30,

 

Increase/(Decrease)

   

2018

 
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