Acquisitions

12 Months Ended

Dec. 31, 2022

We account for business combinations in accordance with ASC 805, which requires us to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination, with certain exceptions for contract assets and contract liabilities in accordance with ASC 606. Certain provisions of this standard prescribe, among other things, the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration) and the exclusion of transaction and acquisition related restructuring costs from acquisition accounting. If the assets acquired do not meet the definition of a business under the acquisition method of accounting, the transaction is accounted for as an acquisition of assets rather than a business combination. In an asset acquisition, we allocate the cost of the group of assets acquired to the individual assets acquired or liabilities assumed based on the relative fair values of net identifiable assets acquired and no goodwill is recorded.

2022 Acquisitions

In March 2022, SciPlay acquired 80% of all issued and outstanding share capital of privately held Alictus Yazilim Anonim Şirketi (“Alictus”), a Turkey-based hyper-casual game studio for approximately $108 million cash consideration, net of cash acquired. The remaining 20% will be acquired ratably for potential additional consideration payable annually based upon the achievement of specified revenue and earnings targets by Alictus during each of the five years following the acquisition date. Any future payments associated with the acquisition of the remaining 20% will represent a redeemable non-controlling interest, with a minimum payout of $0 million and a maximum payout of $200 million. The Alictus acquisition expands SciPlay’s business in the casual gaming market, growing its game pipeline and diversifying its revenue streams as it advances its strategy to be a diversified global game developer. Alictus has been included in our SciPlay business segment.

In April 2022, we acquired Playzido Limited (“Playzido”), a dynamic content creation platform provider and game supplier, which is expected to accelerate the pace at which we can partner with game studios and operators to expand our iGaming content offering. Playzido has been included in our iGaming business segment.

In October 2022, we acquired substantially all of the assets of House Advantage, LLC (“House Advantage”), a leading loyalty and marketing software and technology provider, which expands our Gaming systems offering with enhanced loyalty capabilities. House Advantage has been included in our Gaming business segment and was accounted for as an asset acquisition.

The following table summarizes an aggregate disclosure related to acquisitions completed during the year ended December 31, 2022:


Total consideration		Cash paid, net of cash acquired(1)		Contingent consideration/Redeemable non-controlling interest(2)		Allocation of purchase price to Intangible assets, net(3)		Weighted average useful life of acquired intangible assets		Excess purchase price allocated to Goodwill(4)
$	171	$	133	$	25	$	64	6	Years	$	101


(1) Exclusive of $6 million acquired in short term investments.
(2) Fair values were determined using an income approach primarily based on reaching certain revenue and earnings-based metrics, with discount rates ranging between 2% and 16% and a maximum payout of up to $213 million.
(3) Intangible assets primarily consist of intellectual property, consisting of games technology and content platforms, and trade names. For those acquired in business combinations, the fair value of these intangible assets was determined using an income approach method and level 3 inputs in the hierarchy as established by ASC 820. The discount rates used in the valuation analyses ranged between 16% and 18%. Royalty rates used for the trade names as well as acquired game content and related technology ranged between 1% and 3% and 20% and 21%, respectively.
(4) The factors contributing to the recognition of acquisition goodwill are based on game portfolio and platform diversification, expected synergies, assembled workforce and other strategic benefits. None of the resultant goodwill is expected to be deductible for income tax purposes.

2021 Acquisitions

Acquisitions Related to Continuing Operations

In July 2021, SciPlay acquired privately held Koukoi Games Oy (“Koukoi”), a developer and operator of casual mobile games. Koukoi has been included in our SciPlay business segment and was accounted for as an asset acquisition.

In August 2021, we acquired privately held Lightning Box Games (“Lightning Box”), an iGaming content studio. Lightning Box has been included in our iGaming business segment.

In October 2021, we signed a definitive agreement to acquire Automated Cashless Systems, Inc.’s (“ACS”) table game solution PLAYON™ (“PlayOn™”), a cashless product line that provides players with a debit solution at live table games. PlayOn was re-named to “Access To On Demand Money” (“ATOM™”) and is included in our Gaming business segment.

In November 2021, we acquired Authentic Gaming, a premium provider of live casino solutions, which has been included in our iGaming business segment.

In December 2021, we acquired ELK Studios, a leading European games developer, which has been included in our iGaming business segment.

Acquisitions Related to Discontinued Operations

In May 2021, we acquired SportCast Pty, Limited (“SportCast”), a privately held sports-betting content and player engagement technology and platform supplier, which was included in the Sports Betting Business.

In September 2021, we acquired Sideplay Entertainment, a digital “e-instant” content studio, which was included in the Lottery Business.

The following table summarizes an aggregate disclosure related to acquisitions completed during the year ended December 31, 2021:


	Total consideration		Cash paid, net of cash acquired		Contingent consideration(1)		Allocation of purchase price to Intangible assets, net(2)		Weighted average useful life of acquired intangible assets		Excess purchase price allocated to Goodwill(3)
Acquisitions related to continuing operations	$	252	$	186	$	45	$	52	6.4	Years	$	191
Acquisitions related to discontinued operations(4)	106		18		25		35		6	Years	77
Aggregate total	$	358	$	204	$	70	$	87			$	268

(1) Contingent acquisition consideration values are primarily based on reaching certain earnings-based metrics and were determined by fair value and included in the consideration transferred. The fair value was primarily determined using an income approach method and level 3 inputs in the hierarchy as established by ASC 820.
(2) Intangible assets primarily consist of technology-based and customer relationship intangible assets. The fair value of these intangible assets was determined using an income approach method and level 3 inputs in the hierarchy as established by ASC 820. The discount rates and royalty rates used in the valuation analyses ranged between 15% and 29% and 1% and 52%, respectively.
(3) The factors contributing to the recognition of acquisition goodwill are based on customer offering diversification, expected synergies, assembled workforce and other strategic benefits. None of the resultant goodwill is expected to be deductible for income tax purposes.

(4) The SportCast acquisition’s total consideration transferred included a $63 million increase in fair value of the option agreement to acquire SportCast, which resulted in a $63 million gain recorded in Net income from discontinued operations, net of tax, in our consolidated statements of operations for the year ended December 31, 2021. The fair value of the option was determined using an income approach method and level 3 inputs in the hierarchy as established by ASC 820. The discount rate used in the valuation analyses was 15%.

2020 Acquisitions

In June 2020, SciPlay completed the acquisition of all of the issued and outstanding capital stock of privately held mobile and social game company Come2Play, Ltd. for the total purchase consideration of $18 million, which has been included in our SciPlay business segment.

The revenue and earnings associated with all of the above acquisitions were not significant to our consolidated financial statements.