Scientific Games Reports Fourth Quarter and Full Year 2019 Results

in Finance

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."

Scientific Games Reports Fourth Quarter and Full Year 2019 Results

READ THIS ENTIRE RELEASE HERE

Company Leading in Lottery and Digital with Big Contract Wins in the Largest Markets in the U.S. and Around the World and New Premier Partnerships with the Industry Leaders in Sports Betting and iGaming

SciPlay Beat the Market Growth Rate by Nearly 1.5x with Mobile Revenue Setting a Quarterly Record

Great Content, Enhanced Management Team and Successful Refinancing provide avenue for improved growth and delevering in 2020 and Beyond

NEWS PROVIDED BY

Scientific Games Corporation 

Feb 18, 2020, 16:01 ET

 

LAS VEGASFeb. 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.