Scientific Games Corporation (NASDAQ: SGMS) (“Scientific Games” or the “Company”) is providing the following information with respect to its lottery business (“SG Lottery”) to certain interested parties in connection with Scientific Games’ previously announced evaluation of strategic alternatives for the intended divestiture of SG Lottery.

SG Lottery is pursuing growth via the following four initiatives:

__________________________

 

 

 

 

During fiscal year 2021, SG Lottery expects significant contractual capital expenditures to occur primarily as a result of winning the contract with the Pennsylvania lottery systems. In total, SG Lottery expects to spend $55 million in incremental expenditures on contract extensions and renewals. In addition, SG Lottery expects to spend $21 million on capital expenditures to support existing customer growth during fiscal year 2021.

____________________________

² Per H2GC

The financial information contained in this communication has been prepared by the Company and SG Lottery solely for purposes of disclosure to certain interested parties in connection with the evaluation of strategic alternatives for SG Lottery. Such information may not be appropriate for any other purpose.

SG Lottery’s historical and forecast financial performance:

Statement of Financial Performance

1.

Denotes a non-GAAP financial measure.  See Non-GAAP Financial Measures below for additional information.

2.

EBITDA is earnings before interest, tax, depreciation and amortization.

3.

EBIT is earnings before interest and tax.

4.

Calculated as net income as a percentage of revenue.

5.

EBITDA from equity investments represents SG Lottery’s share of EBITDA from its joint ventures through which it conducts operations.

6.

Adjusted EBITDA (“AEBITDA”) is EBITDA less the following: (1) restructuring and other expense, which includes charges or expenses attributable to: (i) employee severance; (ii) management restructuring and related costs; (iii) restructuring and integration; (iv) cost savings initiatives; (v) major litigation; and (vi) acquisition costs and other unusual items; (2) impairment charges (including goodwill impairments); (3) stock-based compensation; and (4) other expense (income), net, including foreign currency (gains) and losses. In addition to the preceding adjustments, SG Lottery excludes earnings (loss) from equity method investments and adds (without duplication) its pro rata share of EBITDA of its equity investments, which represents its share of earnings (whether or not distributed to SG Lottery) before income tax expense, depreciation and amortization expense, and interest (income) expense, net of joint ventures and minority investees.

7.

AEBITDA margin is calculated as AEBITDA as a percentage of revenue.

8.

AEBITDA growth represents the percentage increase/(decrease) in period-over-period AEBITDA.

9.

AEBITDA is reconciled to net income margin as follows:

Statement of Financial Position

Historical Financial Information Basis of Presentation: The financial information contained in this communication with respect to SG Lottery is not and does not purport to be prepared on a basis consistent with the basis of preparation of the Company’s previously disclosed financial information of its lottery segment. Rather, the historical financial information of SG Lottery has been derived from the consolidated financial statements and accounting records of the Company using the historical results of operations and historical cost basis of the assets and liabilities as if SG Lottery operated on a stand-alone basis during the periods presented, and was prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The historical financial information of SG Lottery includes the assets, liabilities, revenues and expenses that are specifically identifiable to SG Lottery. In addition, the historical financial information of SG Lottery includes certain costs that have been allocated from the Company, which relate to certain corporate functions and shared services performed by the Company. These expenses have been allocated to SG Lottery on the basis of direct usage when identifiable, with the remainder allocated on the basis of revenues, operating expenses, headcount or other relevant measures.

Forecast Financial Information: In preparing the forecast financial information for FY21 and FY22, SG Lottery has made a number of specific and general assumptions, including, but not limited to:

The forecast financial information of SG Lottery contained in this communication is not fact, and investors are cautioned not to place undue reliance on the forecast financial information. Investors should be aware that the timing of actual events and the magnitude of their impact might differ from that assumed in preparing the forecast financial information and that this may have a material impact on SG Lottery’s actual financial performance, cash flows and financial position. Accordingly, none of the Company, SG Lottery, their respective management or any other person can give any assurance that the outcomes disclosed in the forecast financial information will arise and none of them undertakes any obligation, except as required by law, to update the forecast financial information to reflect circumstances existing after the date on which they were generated.

In this communication, Scientific Games makes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “will,” “may,” “expect,” “intended,” “forecast,” and “should.” 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, uncertainties and other factors, including those factors described in our filings with the Securities and Exchange Commission (the “SEC”), including Scientific Games’ 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, 2021 (including under the headings “Forward-Looking Statements” and “Risk Factors”). In particular, you are strongly cautioned not to place undue reliance on forward-looking statements, in light of the current economic uncertainties and disruption caused by the outbreak of COVID-19. A number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements, including, but not limited to, the risks and uncertainties related to the ongoing impact of COVID-19. Forward-looking statements speak only as of the date they are made and, except for Scientific Games’ ongoing obligations under the U.S. federal securities laws, Scientific Games undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

You should also note that this communication may contain references to industry market data and certain industry forecasts. Industry market data and industry forecasts are obtained from publicly available information and industry publications. Although we believe industry information to be accurate, it is not independently verified by us and we do not make any representation as to the accuracy of that information.

The non-GAAP financial measures included in this communication are presented as supplemental disclosures with respect to SG Lottery. They should not be considered in isolation of, as a substitute for, or superior to, the financial information prepared in accordance with GAAP, and should be read in conjunction with the Company’s financial statements. The non-GAAP financial measures contained in this communication have not been previously presented by the Company and have not been derived from the GAAP financial statements included in the Company’s other filings with the SEC.  The definitions of these non-GAAP financial measures may differ from similarly titled measures presented by other companies or those that the Company has presented in other contexts.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there by any sale of securities in any jurisdiction in which any such offer, solicitation or sale would be unlawful. Securities may not be offered or sold, directly or indirectly, in the United States unless they have been registered under the U.S. Securities Act of 1933 (U.S. Securities Act) or are offered and sold pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and any other applicable state securities laws.

The information contained in this communication comprises both incomplete and draft information. It does not purport to be all inclusive or to contain all information required to provide a complete view of the performance, prospects or financial condition of SG Lottery.