Scientific Games Reports First Quarter 2018 Results
Growth reflects strength and diversity of global technology offerings
LAS VEGAS, May 2, 2018 /PRNewswire/ -- Scientific Games Corporation (NASDAQ: SGMS) ("Scientific Games" or the "Company") today reported results for the first quarter ended March 31, 2018.
First Quarter 2018 Financial Highlights:
- First quarter revenue rose 12 percent to $811.8 million, up from $725.4 million in the year ago period, reflecting the inclusion of $49.2 million in revenue from the NYX Gaming Group Limited ("NYX") acquisition completed on January 5, 2018 (the "NYX acquisition"), along with seven percent growth in lottery revenue and 21 percent growth in social revenue. Gaming revenue increased one percent from the prior year, reflecting a 30 percent increase in gaming machine replacement unit shipments offset by the impact from far fewer new casino openings globally.
- Operating income in the first quarter was $49.4 million compared to $88.0 million in the prior year period, reflecting $52.2 million in restructuring and other charges that included an $18.0 million accrual for contingent consideration associated with higher-than-anticipated results from the 2017 acquisition of Spicerack, a $15.0 million charge related to certain litigation costs, and $13.5 million of acquisition and integration costs related to the NYX acquisition, as well as the unfavorable impact of higher depreciation and amortization expense, inclusive of a $19.0 million facilities impairment charge. These costs were partially offset by the benefit from higher revenue, the inclusion of NYX results and more efficient business processes. Net loss increased to $201.8 million from $100.8 million in the prior year, reflecting the impact of a $93.2 million loss incurred on debt financing transactions associated with our February 2018 refinancing and the change in operating income.
- Attributable EBITDA ("AEBITDA"), a non-GAAP financial measure defined below, increased 12 percent to $320.1 million from $286.6 million in the prior year period, primarily driven by higher revenue, the inclusion of NYX and more efficient business processes throughout the organization.
- Net cash provided by operating activities decreased to $29.9 million from $111.0 million in the year ago period. The change included the impact of $49.5 million associated with a change in accrued interest due to the timing of our February 2018 refinancing and $30.2 million related to the NYX acquisition, including transaction fees and net assumed liabilities.
- In the 2018 first quarter, the Company completed refinancing transactions that resulted in an approximately $69 million reduction in annualized cash interest costs at thenprevailing interest rates and extended a portion of its debt maturities from 2022 to 2024, 2025 and 2026.
"Our first quarter results reflect our strength as a global diversified gaming technology provider," said Kevin Sheehan, CEO and President of Scientific Games. "Our results reflect the significant success our team achieved during the quarter such as the inclusion of NYX and our refinancing, as well as the underlying robust business fundamentals, such as the 30 percent increase in gaming machine replacement sales. With improving momentum across all our businesses, we are excited by the prospects and opportunities to smartly grow our revenue and AEBITDA during the remainder of 2018 and beyond."
Michael Quartieri, Chief Financial Officer of Scientific Games, said, "Our continued growth in revenue and AEBITDA, coupled with the lower interest costs resulting from our recent refinancing, establishes a solid platform for increased cash flows. We remain committed to our path of increasing cash flow, de-levering and strengthening our balance sheet."
SUMMARY CONSOLIDATED RESULTS
|Net loss before income taxes||(195.6)||(84.1)|
|Net cash provided by operating activities||29.9||111.0|
|Capital expenditures (2)||88.0||61.3|
|Non-GAAP Financial Measures(1)|
|Free cash flow(2)(3)||$(63.1)||$41.2|
|Balance Sheet Measures:||As of Mar 31, 2018,||As of Dec 31, 2017|
|Cash and cash equivalents||$109.9||$788.8|
|Principal face value of debt outstanding||8,988.6||8,869.4|
(1) The financial measures "AEBITDA", "AEBITDA margin", "free cash flow", and "EBITDA from equity investments" (disclosed in the tables below) 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.
(2) The increase in capital expenditures was related primarily due to the ongoing accelerated replacement of our installed base of participation games, the timing of lottery systems installations in Maryland and Kansas and the inclusion of NYX.
(3) Free cash flow in the first quarter of 2018 includes an unfavorable change in working capital, primarily due to a $49.5 million impact associated with a change in accrued interest due to the timing of our February 2018 refinancing and $30.2 million related to the NYX acquisition, including transaction fees and net assumed liabilities.
About Scientific Games (www.scientificgames.com)
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.
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 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: 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; 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, including those relating to gaming, data privacy, and environmental laws; legislative interpretation and enforcement, regulatory perception and regulatory risks with respect to gaming and sports wagering; reliance on technological blocking systems; expectations of shift to regulated online gaming or sports wagering; dependence upon key providers in our social gaming business; 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; reliance on or failures in information technology and other systems; security breaches and cyber-attacks, challenges or disruptions relating to the implementation of a new global enterprise resource planning system; failure to maintain adequate internal control over financial reporting; natural events that disrupt our operations or those of our customers, suppliers or regulators; inability to benefit from, and risks associated with, strategic equity investments and relationships; failure to achieve the intended benefits of our acquisitions, including the NYX acquisition; the ability to successfully integrate our acquisitions, including the NYX acquisition; incurrence of restructuring costs; implementation of complex revenue recognition standards or other new accounting standards; changes in estimates or judgments related to our impairment analysis of goodwill or other intangible assets; fluctuations in our results due to seasonality and other factors; dependence on suppliers and manufacturers; risks relating to foreign operations, including anti-corruption laws, fluctuations in F/X 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 affirmative vote in the U.K. to withdraw from the EU, and the potential impact to our instant lottery game concession or VLT lease arrangements resulting from the economic and political conditions in Greece; possibility that the renewal of LNS' concession to operate the Italian instant games lottery is not finalized (including as the result of a protest); changes in tax laws or tax rulings (including the recent comprehensive U.S. tax reform) or the examination of our tax positions; dependence on key employees; 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; 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; influence of certain stockholders, including decisions that may conflict with the interests of other stockholders; and stock price volatility.
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 March 1, 2018 (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 obligation to publicly update any forwardlooking statements whether as a result of new information, future events or otherwise.
Vice President, Corporate Communications
Telephone: +1 702-532-7981
Executive Vice President and Chief Financial Officer
Telephone: +1 702-532-7658