Scientific Games Reports Third Quarter 2021 Results

in Finance

Barry Cottle, President and Chief Executive Officer of Scientific Games, said, "In just the last few months we have made tremendous progress on our strategic pillars, delivering on our promises, and rapidly advancing our vision to be the leading cross-platform global game company. With the sale of our Lottery and Sports Betting businesses we are transforming our Company, raising $7 billion which will significantly de-lever the balance sheet and enable us to invest for growth. With our streamlined organization we have all of the pieces in place, and are singularly focused on building games fully cross-platform. 

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Consolidated Revenue From Continuing Operations of $539 Million Up 25% Year Over Year, Combined Revenue Including Discontinued Operations of $824 Million Up 18% Year Over Year

Accelerating Strategy and Path to Rapidly De-Levering with Sale of Lottery and Sports Betting for $7 Billion
Disciplined Cost and Balance Sheet Management Enabled Generation of $187 Million of Net Cash Provided by Operating Activities and $130 Million of Combined Free Cash Flow
Reduced Leverage Substantially, Paid Down $635 Million in Debt Since October 2020

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

 Scientific Games Corporation  

Barry Cottle, President and Chief Executive Officer of Scientific Games, said, "In just the last few months we have made tremendous progress on our strategic pillars, delivering on our promises, and rapidly advancing our vision to be the leading cross-platform global game company. With the sale of our Lottery and Sports Betting businesses we are transforming our Company, raising $7 billion which will significantly de-lever the balance sheet and enable us to invest for growth. With our streamlined organization we have all of the pieces in place, and are singularly focused on building games fully cross-platform. Operationally we also made great strides in the quarter, further cementing the turnaround at our Gaming business, strengthening our leadership position in iGaming and making great progress expanding in Casual at SciPlay. I want to thank all of our teams around the world for their hard work and commitment and for what they have enabled us to accomplish."

Barry Cottle, President and Chief Executive Officer of Scientific Games, said, "In just the last few months we have made tremendous progress on our strategic pillars, delivering on our promises, and rapidly advancing our vision to be the leading cross-platform global game company. With the sale of our Lottery and Sports Betting businesses we are transforming our Company, raising $7 billion which will significantly de-lever the balance sheet and enable us to invest for growth. With our streamlined organization we have all of the pieces in place, and are singularly focused on building games fully cross-platform. Operationally we also made great strides in the quarter, further cementing the turnaround at our Gaming business, strengthening our leadership position in iGaming and making great progress expanding in Casual at SciPlay. I want to thank all of our teams around the world for their hard work and commitment and for what they have enabled us to accomplish."

Connie James, Executive Vice President and Chief Financial Officer of Scientific Games, added, "We have an exciting path ahead of us as we move rapidly to unlock significant value. With the announced sale of Lottery and Sports Betting businesses as well as organic investments and key acquisitions like Authentic, Lightning Box and Koukoi, you are quickly getting to see the shape as well as the pace and agility of our new organization. The divestitures put us on a clearly defined path to materially de-lever while providing us with the ability to invest. Our momentum continued this quarter with strong top and bottom line growth and with strong quarterly cash flow as the teams continued to be laser-focused on productivity. We are seeing our Company come together and coalesce around a high-performance culture that embraces our bright future as we pursue our new vision and I can't thank our employees enough for their dedication and enthusiasm." 

STRATEGIC PILLAR PROGRESS

  • Overall, we have made tremendous progress executing on our three strategic pillars and delivering on our promises as we accelerate our strategies and unlock significant shareholder value to achieve our vision of becoming the leading cross-platform global game company.
  • Optimizing our portfolio, with the announced sale of both our Lottery and Sports Betting businesses for $7 billion, streamlining our organization with a singular focus on building great games fully cross-platform.
  • Investing in our largest growth opportunities, both organically and inorganically, in content and digital markets to accelerate growth. Evidenced by the acquisition of Authentic Gaming, enabling us for the first time to enter the Live Casino market and previously announced acquisitions of Lightning Box and Koukoi. Organic investment includes content R&D, advancing our platforms, our Las Vegas iGaming studio and high-return capital investment.
  • Significantly de-levering, transforming the balance sheet with meaningful progress organically. We have paid down $635 million of debt since October of last year, including the $135 million payment in October of 2021, fully paying down our revolver. Our net debt leverage ratio has declined by 4 turns to 6.6x since the beginning of this year. With the sale of Lottery and Sports Betting businesses for $7 billion, we will radically and quickly transform our balance sheet, with expected closing in the second quarter of 2022.

SUMMARY RESULTS

We have reflected our Lottery and Sports Betting businesses as discontinued operations, for all periods presented. Unless otherwise noted, amounts, percentages and discussion included below reflect the results of operations and financial condition from the Company's continuing operations which includes its Gaming, SciPlay and iGaming businesses.

Third Quarter 2021 Financial Highlights:

  • Third quarter consolidated revenue was $539 million compared to $432 million, up 25% compared to the prior year period. Our Gaming business demonstrated continued momentum in our North American market including gains in Gaming Ops, Game Sales and our Tables business. Revenue also benefited from growth in our iGaming business driven by strong gains in the U.S. revenues, up 109%, and U.S. market share growing 200bps to 27%.
  • Net income from continuing operations was $100 million compared to a net loss of $187 million in the prior year period due to a $181 million income tax benefit as a result of the partial reversal of our valuation allowance on deferred taxes and strong revenues in the Gaming business segment, which were significantly impacted by COVID-19 disruptions in the prior year period. The prior year period also included temporary austerity measures that were implemented due to COVID-19 disruptions and certain Gaming business segment inventory and credit loss charges, none of which recurred in the current year period.
  • Consolidated AEBITDA from continuing operations, a non-GAAP financial measure defined below, was $203 million compared to $117 million, up 74% as compared to the prior year period, driven by triple-digit AEBITDA growth in Gaming and double-digit AEBITDA growth in iGaming.
  • Net cash provided by operating activities from continuing operations was $89 million compared to $32 million in the prior year period on improved operating results, and $187 million on the combined basis.
  • Combined Free cash flow, a non-GAAP financial measure defined below, was $130 million, which includes both continuing and discontinued operations. This represents strong improvement from the prior quarter, excluding the U.K. FOBT recovery of $38 million in the 2nd quarter of this year.
  • Net debt leverage ratio, a non-GAAP financial measure defined below, declined as we paid down $635 million of debt since October 2020, including a voluntary $135 million payment subsequent to quarter end on the revolving credit facility, reducing debt outstanding to $8,846 million at the end of the 3rd quarter. Net debt leverage declined to 6.6x, a reduction of 4 turns, down from 10.5x since the beginning of the year.

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