SGMS - Earnings call transcript Q3 2018

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Operator

Good day, and welcome to the Scientific Games Third Quarter 2018 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference call over to Mr. of and Director Relations. Senior Shore, Corporate Investor Finance Robert Mr. yours Shore is the floor sir.

Robert Shore

Good everyone. you, morning, Thank Mike.

During we question-and-answer and Michael operating this today's XXXX are Quartieri. performance, quarter call, morning followed will discuss by Cottle a Barry period. me third With and our results

Securities the involve results Our Private during certain those uncertainties cause contain actual risks differ under will of materially discussed Act today that includes and Reform call statements XXXX. to from forward-looking call. statements the Litigation These statements that

regarding as third on relating SEC, annual most information filed uncertainties, on refer subsequent XX-K quarter call For filings risks report these please this filed posted our well to our and issued Form including release XX-Q with with XXXX morning. our the morning. on filed including the this our March Form our filed are recent to earnings website reports and The X, as SEC, XXXX, materials this

A a our also description most GAAP will We found on non-GAAP measure as to press as in can section of in directly well non-GAAP reconciliation measure Investors the the comparable release be discuss measure each of earnings each our website. non-GAAP certain measures. and

being recorded. and As a this archived scientificgames.com. replay section at conference call accompanying of of this Investors reminder, webcast materials the A is the in be will our website

to call Barry. let me turn over the Now

Barry Cottle

million in To focused team, our of we're positive digital XXth report on remain was year-over-year collectively of and businesses being morning, $XXX businesses deliver our Good humbled and in in of cash consolidated supplier order of and sheet. flow to to welcome, voluntary everyone. to Scientific million receive customer feedback of at which On growth free pleased priority land-based to Bobby. our X% including central increases GXE, debt extremely the several AEBITDA. Games end, in the our Thanks, received the $XXX results quarter we and balance year. make AEBITDA of third The delivered we behalf X% a used that in awards repayments. AEBITDA that our each QX, consecutive marked growth, quarter We revenue growth, consolidated revenue four we're named entire

success game cost As showcased for major been drive effective we a We've the GXE, improvements the XXXX. successfully the rolling James out franchise and games by two customers look ours ops of by across that titles Never Live additional first country to focus manner. is in we half to in the will Die of Let Bond making most the and Dies our Tomorrow revenue continue releasing, best and and

including North and We content XL in featuring are Wizard QX new in has a rolling Bao a strong huge of have Dragon the library Wave Xi, of overseas Xi Spin Age success, America late which we and out Jin World Fire. been Cash

addition In of the more enhance to to cost continuing efficiency games the and chain our effectively. we're building revenue opportunities, supply

tremendous flows upside. drive also expect revenues, aggressively go production see where markets looking initiatives and cash after to forward. collectively to higher drive We're We these costs, we going lower

gaming to we long-term a group related As with of distribute an example, partnership entered the arrangement in into strategic products slot Oklahoma. state capital

return excited market. their and minimum efforts operations. this strengthens our operational network their Oklahoma. will footprint a consistently customers proposition combination grow been of is believe be meaningful one to largest We long-run market. the over upside The improve Group when our for in quo. service very We're grow, sales efficiencies arrangement, new the leveraging and for potential will and leased and compared more to and of that significant share partner to purchase effectively in opportunity share a the secured in status Oklahoma distribution large service and with Gaming we’ve Capital meaningful compete a our this both We market extensive immediate, about more partnership a gaming in of continues provide this benefits has a in value

new higher sales. remains and denomination Our specialty including strong driving innovations retail the are printing, and tickets high-definition Lottery business

is We're record to security for up XXX retailers could instant the of added for we placement from the value and sell track are roll proposition and significant first the with them nine executed states, locations Ohio SCiQ increased There lottery of benefit SCiQ. by the in that Our sales, innovation piling this in is determining out efficiencies state that retailer. retail over U.S. We believe proving driving lottery of lottery contract, and continuing optimal retailers XXX,XXX with our XX,XXX a providing across operational within XX tickets out product. unit the locations. currently

now also of successful North NFL in we're by in Mississippi. $XXX betting Caesar's data of the in of are success We We May, OpenBet before for U.S. events. successfully and Pennsylvania. American making the sports the in the closed Since most is which sporting launch offering launch realtime pricing in surpassed live and it Dip] leading handle In digital the start its excited [Audio the Jersey launched iLottery million has and season provider the Best, recently regular acquisition on New Don of the

the allow percentage our capabilities a a and us of of new state-of-the-art will Don inclusion capture its We sports the X% adult sports With Best of book, on which live, only value BTB solution Superbet. just turnkey chain in states represents Sports with business, larger to business operate population. top seven the the infancy Betting stage to of which add in the is US U.S. model.

where a is out, with OpenBet betting we're it will win have sports we the capabilities. and best our other previously, commented long-term confident and product always game we've As

iGaming Jersey online over where is be betting across run U.S., also through XX% fast in will active, the GGR state platform. rolls out our sports we anticipate of As only New iGaming is gaming a follow, the

content Facebook active issue users and our platform. in finally share with will growing QX social The July, resolved on this market – resuming daily to in maintain been leading in the confident And in open record daily has unrivaled As August and we're jurisdictions experienced additional in late connectivity our as revenues based September. leader, we position business.

During XX estimates revenue & grew Eilers to from the quarter-on-quarter which by the Krejcik. third is times X%, we market quarter, according

disclosed repay well are public quarter pleased in Social fourth minority continues growth year. Business We release, the used significant head We and from the offering of earnings continued into pursue and our As considering as Social initiatives, growth possible Overall, Gaming The are with greater to believe for a flexibility experience specifically in stakeholders. a growth Business rapid our would as scale. XXXX. designed additional an initial as our unlocking next that provide interest social IPO has debt. the our we achieved value we and the Gaming in look IPO anticipate into proceeds primarily Scientific be to Games’ business for quarter additional we would to

strategic remain number our of business one the on focused our We achieving through revenue will in objective growth de-levering AEBITDA. and

in lottery capitalizing of to expansion games innovation improve and continued manner Sports ops, We our make cost this and customers business on best of iGaming. the most the will to effective iLottery in Betting U.S. and the do continuing social with rollout for our offerings, our by game along

turn the quarter his me the review third let results. call of to Now, to Mike over provide

Michael Quartieri

morning Barry. Thanks everyone. Good

increased results and X%. As Barry strong, consolidated our noted, be revenue to continue rose AEBITDA X%

we times our result of ratio focus on growth at X.X leverage September times net to decreased seven quarter-end. quarter-end deleveraging, and our at down the our a improvements, prior As from

strengthening focused leverage While to on pleased XXXX into net down remain on laser continue we will are build our we with sheet. our and ratio going momentum this balance

let units. me to operating Now turn our

from or million third X%, machine increased and increased our First quarter $X Revenue over margin in our $XX basis revenue Gaming to X% sales million year. points X% Business, third Despite improved XX.X%. prior the by AEBITDA XXX the quarter. AEBITDA gaming declining,

XXX Barry this machines U.S. Capital of a footprint we our during X,XXX sold shipped quarter, As existing partner. Gaming globally, replacement average strategic to gaming Oklahoma strategic I price Illinois. the portion third the machine comparison. year's a year-over-year, up with shipments quarter a last quarter Group with were tough units with everyone including units connection relationship replacements associated X,XXX entered shipped a remind units for Canada X%. VLTs up Group. expansion was Capital XXX X,XXX totaled and XX% our XXX selling X,XXX our long-term relationship. noted units that relationship, for for year and our in Gaming with Year-over-year, compared to which in Internationally, was We've made to In ago. the strategic into is

expect of the the of result to On our year. the or jackpot seasonally at approximately $XXX new was of consistent for strong basis demand On in accounting with was revenue $X.X it which revenue strongest recognition In fourth GXE, sequential XX% was showing basis, strong continue Gaming at heels quarter operations, replacement on the expense. being we a million the a year-over-year of $XX million, revenue WAP down million. quarter

with participation units Group redeployed other a was the down WAP $X.X VLT daily are On purposes, lower in AEBITDA right services yielding and period impact Gaming the which of of a lesser For WAP, at base the sequential jackpot includes operating currently was of cash classification treated as impact income, in end to flow. new strategic prior the extent, quarter Oregon of Capital our and our or has in of the units This year. removal comparison no change the basis, cost installed X,XXX premium relationship units, which being million fee expense on and jurisdictions.

of state of on units our basis. the the was offset WAP of increase performing James sales comparable in Gaming been shipments participation of performance been or systems ongoing very Willy we Revenue cycle. display in tight by The a sales Gamefield units Casino player-interface mix other game terms iVIEWX million are casinos to rollout was The XXX the to increased Canada, have increased quarter-over-quarter. in Through We XXX September to quarter pace footprint a cabinet in on existing XX,XXX strong X.X products our of same was year, strong shift XXX iVIEW. we in The in Our our revenue versions comp prior utility from the portion up $X of since Bond of our had placed with the iVIEWX This by the installed recurring quarter, the driven innovative best its the in strength related Bond with with sales launch. $X their up Franchise. a approvals. due a in on units initial units. we be X,XXX primarily year-over-year the units. to early Table product nearly on an XXX,XXX X%, continue successful footprint or a units Thunderball in yields. decline to Gamescape, there additional iVIEWs our units replacement from our tough XX, bringing large the offset rollout including and prior growth for year-over-year of Greece, of international our nearly installations over million has million Royale $X innings point still in WAP cycle XX%. lower negative a date decreased coupled sequential placements was our total This is base prior at of than by placements hardware products in and placed life to But expected impact projects. service installed the expansion base our Wonka UK. has is down

systems quarter new revenue or in our investment compared and installations lottery revenue the The was to million was growth $X our Maryland driven by system Kansas year and our our Keno Pennsylvania. million year-over-year. ago. million in lottery, largely $X up and in third X% AEBITDA new $X increased Within lottery to our Turning business, increased

that Barry we daily into $XX digital, and to second quarter generated quarter grow AEBITDA. year-over-year the $XX behind the and were to quarter. and and The were up record strongly. Revenue to and XX% In Facebook increased Social $XX in sequential revenue Turning compared impacted September XX% basis, active are stated, third our for in million million connect issues daily AEBITDA quarter users. to $XXX On X% revenue both revenue as a August to July our and increased segment, us months million. continued revenues second million

We This UK in have that in U.S. help been of our book resources and redirecting being the and rollout development employees these implementation. materials sports driven generating the focusing by time New Racing are Board in to on is revenues the markets. the Zealand

key In acquisition Although, North accretive in is disclosed it negatively events. This offering Don gives instantly and short-term the impacting early quarters, full our results. to Sports the closed coming we our real-time Best Corporation, leading acquisition which us betting a this be of provider our will sports turn of pricing on data redirection America sporting in is we customers. November, our –

customers content signed gaming launched eight OGS successfully and on client new sites also platform new QX. our XX during across We

other charge we quarter, million the Tech which recorded in charges, the related legal a During Shuffle restructuring the to and matter. includes $XXX in verdict $XXX million

still We appeal made payments on have is this post-trial process. subject any the verdict to not and motions the and matter

and to due $XXX the used repayments, operating to related timing this voluntary we reported of million in to year, operations provided of Turning enhancements is from to by including under improvements results, permanent cash make $XXX.X which the cash in $XXX revolver. completed We million million our $XXX earlier interest prior net of net payments refinancing the our capital working cash year. in activities, debt principally operating repayments flow, million our improvement over to flows

will our quarter the payment Italy. of scheduled include million for concession interest Just final instant in fourth to ticket €XX payments the and remind higher everyone, lottery

In which October. million a real estate $XX in in for closed sold recently asset addition, we proceeds,

XXXX related and ongoing Lottery We U.S. the everyone capital the machines. renewal generally very ranging initial for years optimize the are in XX implementations before These seven cash higher interest terms This renewal on in gaming established acceleration for projects flow investments free strong future options. from continue instant long base in to spend leased CapEx in around These lottery best cash opportunity to and usage world. in our path several of duration, installed clear from beyond. systems and development a includes the of to line cash savings. open markets revenue remind can Maryland, operating would on in growth of the you the Italy, up by digital including reduction, business. to questions. our I effectively highly the in our be generate projects long-term focused accomplished expenses structure, concession commitment which summary, debt remains deleveraging In ticket in order potential refinancing in will that accretive firmly continued in and and monitor for our refinancing Operator, to Kansas including and capital expansion and platform

Operator

sir. you, Thank

of begin question Jonas will come [Operator from the have Barry The We SunTrust. session. will we go question-and-answer Instructions] first Please now ahead.

Barry Jonas

morning. Hey guys. Good

you all? the is do been the approach to question change business has off What first since So stock and weakness attribute meaningfully at you that QX. does Thanks. this how

Barry Cottle

Barry. Thanks

at in we of of business. to So here look, there's stock, the certainly share between a disconnect day underlying the and believe how first We all, us cash changes bought business day don't stock the run the change undervalued obviously price Both on value. and at those $XX generate predictably it top the free remain levels. But and the consistently growing flow. delevering line believe AEBITDA we and revenue growing focused to was by

in ship cost way, expansion business lottery And accretive market growth, long-term our leading CapEx business international company innovative so leading wallet for and and position XX winning with XX and growth strong America out with iGaming, sports And opportunities initiatives laser-focused our our on business slots, we're solid August in the like iLottery with record highly with to continued see continued then while growth, projects on with right successful A in SCiQ, worldwide ops of grow by the recent month content share social in on growing in systems improved and our growth. year-over-year drive offerings U.S. we demonstrated focusing is the spend September. cabinets, bids. game North expanding effective the to strongly growing digital upside and and there,

Barry Jonas

great. Great,

process on would social for some bit just a or it on little reaching maybe IPO, do one, next thoughts decision, potential into to guess thoughts whether what helpful. led the Maybe more. the this not? you'll be decision gaming It diving I just So a

Barry Cottle

Okay.

given SEC need the its – think sure look, the our the also I'd the taking aware to further this value realize First to that and scale, position level, everybody But discuss business delever I growth say time. help at the IPO accelerate business. business that the say public of is could and specific potential the that high a I there at start, growth, that, current I'm limit rapid ability very and company is to at rules

Barry Jonas

coming How then notes? calling December. Got the one last to refinancing thinking just are And close about you It. potentially XX% for Thanks. guys me,

Michael Quartieri

calls But all at That's and a monitoring basis rates to drive on call now effective the evaluating down going premium. to XXXX X to The mindful can versus options. look But sure premium. year a meaningful Barry, question XXX, comes Hey, think at doing we're cash are down step markets in we and a the we daily get where from make net our we it a when interest. December upfront we that a lock-in really transaction present the just being in value XXX.X. want premiums you to we're a that the with meaningful this, reduction that's we of

Barry Jonas

All right, so Got thanks much, guys. it.

Barry Cottle

you. Thank

Operator

Next David we Jefferies. Katz have of

David Katz

good morning Hi, everyone.

Barry Cottle

morning. Good

Michael Quartieri

morning. Good

David Katz

I'll Several questions, And may. keep it short. I if

let's to say The past days. the maybe, commented was you the question opportunity has refinancing, respect improved on with So it where, last NPV the time, or that say the has around GXE. XX specific backup more since are maybe really

Michael Quartieri

getting every towards I the when market moves the midterm especially think day, you're election.

we'll the rates and interest think look over I that's that decision what coming past see like So accordingly. now make weeks us, a

David Katz

it. Got

the just the unlocked there might than the across you the or technology what other business to be of respect about But gating with pieces. arguments of social to similar have social might the pieces for value? to and And business you. you at company. and arrive systems whole won't gaming did technology Okay element Barry. interactive we business, the it, that will Clearly, might that did aside put indication it arrive at the you pieces, where imply the whether are integrated there's the can a how apply factors rather How

Barry Cottle

Yes.

When I social offerings that have, the that that that is various business look really you integrated the take is lottery. have our lines into think to is the at we a – to at business. BXB and else business I'll Everything only we one BXC one. our casinos the the

we're So, out provide looking from years us. that to we as do put the said, was a have. – that unrestricted the back when able basis opportunity we this with nearly we that But the we value was this, see chain it in for two products we what at to there casinos when an integrated an great ago,

Michael Quartieri

Yes. if that, Caesars is at one casino like of add integration the where outside areas onto betting in provide propositions iGaming we we when And of and we with to a have iGaming just sports experience that the of and seamless in and look it's value we consumer specifically with you the partners the work legalized. have core both – did

real of so And the digital sports betting is closely the business iGaming those, side gaming experience, with interlinked money quite frankly. the the in retail and

bring the values So one core a our of competitors large of duplicate. kind can't part that of that we

as with we to group. those larger important super combined see Game the So, Scientific remain

David Katz

executing What What base XXX. One specifics the and that premium around one, us commentary. we know the just far I tell and you bit recovery the you if how are that general, expecting and we the base. us That's last of installed are, can so about trajectory I those But fair. in you year. quarter. games more has in it the about the the can may, in about and installed shaping performed toward touched fourth in tell are XXX get how your we on how end premium thinking as a release

Barry Cottle

pace on about expected mentioned we little had little Casino maybe state mean, if is game XX a had the Wonka, to the XX comparable the installed has casinos. states, The then you bit black than been But have the Q Q is across this of but Thunderball our the of we've Royale rollout been, now which performance Yes, approvals. XXX given slower best and has a I hit extremely World bit think is strong, as to-date. I mentioned, obviously

the strong it a number really well. of performance forefront us of units has and basis has been helped also WAP Bond the actually So on add as

the of think I $XXX. tune to about

other and well all average. games, – above, Are The are extremely Forever you've above the are well, games Diamonds also well performing Goldfinger well, floor got those as well two beyond performing

as we've from performance with so happy And next in two a early my I first very year been the more – mentioned, think I and quarter. coming we've games. perspective, Bond in got then out And

quarters expecting we're enhancement. the lot and content we significant been And line-up by So Wave market expect We you expecting of that game has last Bond we've honest been ops. a stable think ops. to along now be with the we with we're new we complemented we aimed other have have group to make, we we’ve strong that performance mark. the coming look to Bond a really space, into to in over the think game the but see Again, And of and content to around ops with ops pretty continue space anchored got, impact. got from I by the the you, some that come out have game three going perspective have XL that showed space. at got great strong Bond, and that a products And revenue grow cabinets help really $XXX have a million alongside real of GXE, of at to we're at game if really

David Katz

Very good. Thank you very much.

Barry Cottle

you. Thank

Operator

of Next we Stifel. Boyer have Brad

Brad Boyer

thanks for taking guys, questions. my Hey

some the mentioned Barry, I is the certainly business. we I know around for to just you folks think than costs segment gaming here opportunity you First take looking out most had better when looking last of lot were are margins, more a saw spoke what an we that, one what and for.

you as in as expand if that you the we sustainable strong and what forward? being if see curious move upon drove performance margin quarter could Just the

Michael Quartieri

This one. is that Q, I'll take

is before at make on the to taken hard at really that So that. that as, the And our and a looking look commented continuing been chain. we've progress gaming one around very things of we've and supply opportunities

the quarter was in slightly which benefited with X%. a higher also up ASP, We

impact a had that So the margin. positive on

that No, I at So is that environment you've what we looked our are in. the really nice on very we're around the be conscious at overall. ASP chain. the that think we there I side. that the guess cost very little supply mindful to untapped blip I right expect a margins and XX% area But of got

So roughly go if looking low was you and hanging we headcount, put place program at successful. of back fruit in years two to the there that ago, the

We that the our continue mantra forward, manufacturing going making sure not now, segments. and and we've kind business maintain in only to efficient chain as can. of I around gaming that And said, but at we process of in supply got to most all supply we're that where the it's

Barry Cottle

Yes. we're through to nature. start And going we’ve that'll as things obviously pounding – inventory work and of as appear. Q through through as forward, And that, we're still got work said, we still obviously that

but existing value just it's to way just the cabinets poor continue that night. was keep is as appears engineering, the So of the – JXX not That's coming that out. not a something goal over to cabinets, obviously like that XL

we worked chain through inventory, about this as think games but cetera we obviously, table is a is said, group most that. it's cost best cetera, manner supply And this. initiative really opportunity there's et to as gradual et that some I visibility can. And we it'll on the thing possible where on of keep to Q effective core so a said, be and earlier, Q pounding the like as within is continue But at our the talked

Michael Quartieri

point removed other We got all game then that, were games And being on all common merger of just before developed have development about our transferability talking and we're of platform. that on as from the development we've just to do the we new that the side, the on today. four add now years one are

existing It's even For Jin the whether able Xi that's our or curve XL Wave of example, the to Xi plugged and screen the cabinets, played comes be like Wave out. it that's there. Bao be the anyone on JXX, the VXX, going to out when something

those there, our accordingly. still So results to worked to types opportunities are on still be through of come and operating

Brad Boyer

Thanks. the in relationship of a there to you then that we bit purchases and And some curious, just Capital is installed a decline this, Group. Appreciate I taken out. one-time you phenomenon? participation the want installs could expand are color over should Oregon second, you I could Gaming But guys next the bit or installed just the know a And that quarter just if with by agreement? see this And base got speak Capital building converted expect Gaming upon a between there. the if were quarters other little then one result any noise delta Or about base. this several the the in as little

Barry Cottle

glad and long- distributor They the is there footprint you are because that. about Oklahoma. really to Yes, with do an the well-rooted before incredibly I jumping emphasize you term. today. know, specific in local And of gaming want we The that. I'm over talented as deal did mentioned Oklahoma GCG XX,XXX is about winning

partnership And parties of And in was ops of game that to we that both share and local with market goal so bringing their we here partnership reflects have or current the forward really movements impact about purpose in leveraging which – and kind assets complex a you the a expertise. each each in some of really the there's And a it's both and the it's for where we partner believe looking to meant the sales. – significant us extensive the the kind And growing really as network our performance that service are game and long-term. footprint, winning of there's distribution and of very to overall again valuable some us table there's to that. – said, core there of But deal so upside the long-term today. relative believe was it's attack and deal for

Michael Quartieri

your that year those for regarding decided going were placed units to perspective from sale units. in there out a Oregon. and were just the not think during were the These use comment I Yes, basically Oregon they that they

at the the And so right units returned therefore the they quarter. end of

pretty plan they phone which when us And later right go right of knew about units instances to perspective, this revenue much in a do. all our now those But still of that three and it was be contacted total, the are units if in remove installed in of number. those that you'll elsewhere in units footprint. but we and revenue have were where jurisdictions now, It of the those and call other unfortunately – kind is would the all unit, at being would redeployed we part they days allowed be the units happened to which to in would to just they units are ahead placed this happen. roughly are a see to point That that remove base. from So the just XXX one get back redeployed the basically call almost those

Brad Boyer

finally, growth of we that But side anything if systems in iVIEW area we of for the see curious about kind just are or Okay, move it the that's XXXX? modeling replacement in thinking just the kind and growth should there's just talk if mindful the business, above we appreciate continued in that beyond segment as system cycle of of Thanks. be of just on as And the should be forward. XXXX you XXXX? then to through is another helpful. we systems that side think on And wanted growing Obviously, the about where a could business cycle we how little systems bit I Canada. into rollout

Barry Cottle

as through Yes, QX is XXXX, rollout and of the continue, all will I XXXX through looking candidate of actually to some going the probably XXXX you're come in at these installations well. of think the way when

periods, we're throughout it is on going declines, So go-lives. real based be lumpy expecting just the those significant to not any granted

So decline this QX year everybody you ago, see record going for a sites in I of a slight versus was saw good you and QX, quarter. some the what a And example, and QX, major live with Alberta modeling. the year, with Ontario we'll again Gateway with think then QX have

Brad Boyer

Okay. Appreciate color. the all

Michael Quartieri

close to additional year. I'll go just say sites, we'll still have next to XX probably still

on revenue So side. there's going XXXX runway in forward still significant the

Brad Boyer

guys. Perfect. the Appreciate all color Thanks.

Michael Quartieri

You're welcome.

Operator

Bank. Deutsche next we have Carlo And Santarelli of

Carlo Santarelli

for and guys. Hey thanks question. morning my Good taking

right social or bit initiatives, you now. bit of content betting, each been be bolt-on cetera. the a it’d M&A the the talk from picture kind at verticals, guys Could there of the of feel a have ton look the about other core little of ancillary of bigger of Clearly betting acquisitions? with forefront obviously a of on side. whether noise just you game business, lottery of kind with you the has in where parts less there's a bit about think kind gaming, like little moving you that And kind some maybe the with et growth rates sports been As verticals sports quite organic what

Barry Cottle

larger going to digital. win are And is we're major basically player activity going and pervasive, the three we wagering lottery to trying across verticals, Yes. of kind first I mean, well, the M&A, of what picture a into fits all, And and step sports. own be described in win the strong we're you space. of all it’s it back, retail that gaming, and across to believer

on or chain core So we play but value as parts content they in on platform, or sure want it top that sports engaging what gaming well own per to the of with make the wagering of lottery enabling M&A se the the people piece as use, betting. both we in

pieces And retail an growth, the the content what so quarter-on-quarter, degrees of top to core space. of before, We're both chain feel accomplished we and at we've really grow to got, the In to all platform on value to three it's those it's like now we've line. going on of primary wants side perspective, that. on. continued M&A – described And we play within that the wherever side owned as forward of verticals bottom we're digital, leisure, each aggregately move whether varying continued and with that's or these collectively businesses, and grow somebody we've from organic but

very a we're forward bullish is again, you of a So to that each significant there – growth if respectively. want different down groups basis go break on on the

Michael Quartieri

Art you I units, think would gaming, acquisitions Yeah, the substantial was are have at individual when in a I been look to not operating real from of or done, overall. the business that whether say breakdown results DEQ Tech that tuck

And so out call no there. really there's special

accruals perspective. nearly was then perspective, we social of the a was charges. reflected was purchased forward the restructuring really that the our that app, that that's that in and which social in been acquisition is and On anything seen growing the is again, ago. management or an consideration contingent in two our growth and data months of last a analytics Looking at it are payments, result really really we've seen there of hasn't XX by from but applying made nearly lottery a did, tuck there that Lapis we've going is ago you've out in called years lot process and acquisition that, Bingo which their to what other business,

be it's just And down out, so as non-organic that's really of the call NYX growth, that really that's the to to item acquisition, called that it kind verbatim from boils it needs is took the acquisition the separate out carved segment. why a this segment, all in digital place as and increase the much that's we year. that what which have is And pretty separately it

Carlo Santarelli

guys. appreciate That's it. Thanks helpful. I Okay. very

Operator

will Decree Union come ahead. The go next Please have from we question John of Gaming.

John Decree

purchased Good you a the kind if a wondering it my lottery, questions. by was sale if or for placement that high-level We I on I provide all and I small your SciQ guys. purchased the heard you retailer, housekeeping prepared XXX just question. so more had did In morning of could you bit cetera. a detail hear in remarks if by a et the first maybe unit on touched taking was couple of that Ohio large of correctly, stuff, Thank little

Barry Cottle

lottery they by those of Yeah, lottery which order the placed locations determining process the units in is want The and the sure. into. to John. put was

stage the at So, it's very this rollout point. in early

John Decree

model it recurring for it, And with plus guys sale that now a lottery? there, one you being the economic right of revenue is the stream is time a out worked kind fee or also is

Michael Quartieri

consistent that's is. model what economic with our No,

fee is those have then on a into as of along would require out the to recurring component, a basis, with So will a that and be equipment, tied upgrades which business, system there's what units. purchase to goes functionality will your in you additional continue systems ongoing going that's and goal that that there'll be maintenance there's an onetime kind of to similar that

John Decree

that cost Got like non-core savings from million $XX the sale, carrying annual that come costs or helpful. block, kind property you're then, that be That's taxes next working And assets still and estate of that a other that that, with kind it. through on is there on year? might of the run Illinois any asset some then was does sale rate office? the And real

Barry Cottle

Yeah.

two corporate a called never held sale assets guess for that which Camino building eventually as the, was in building, the the Sci Games. it became for we've out original Bally's quarters location, the Shuffle before I and in, prior XX-Q shuffle, the became the So in El the which moved office was

building just million the $X were those charge, from that's actually that to the for you'll with cost went, million $X put for proceeds, that million going in. non-core carrying as year-over-year a So perspective into savings or that The the forward say, were be held see sale. in as savings cost at save associated they costs assets carrying point should it restructuring that should classified was So, sold I since got, the $XX in building of

market. asset still other is The on the remains the and asset that Chicago

John Decree

additional All right. color. the appreciate Thanks you. I

Barry Cottle

it. got You

Operator

we of Cameron have McKnight Next Credit Suisse.

Cameron McKnight

morning. good very much. Hi, Thanks

Barry Cottle

Morning.

Cameron McKnight

first lot So you might are, become – been question in months. or and of material sticky on U.S. Many, concerned? you past How a think six betting. sports long-term might deals betting when do a Betting as do many become have NYX a nine is announced as Sports far think the deals those Barry, sports to

Barry Cottle

I making believe you're think as both is, well still that perspective. a in market, as think an we Yeah. of Look, I we extremely if believe betting perspective people the sports rollout deal stages most think, and early from a

I betting as are really just specific, of mentioned really currently deals legalized think terms it's to those states without deals that in the to today. seen in providing Most earlier, sports for of at deal. in to that we basically marketplace marketplace. up in state the X% the one we've of about deals are a was New and that done I'm population speaking experienced get people running in, something is, Jersey to in all get specifically basically and as get nature an, and the done, essentially not to long-term

So we're, we still think it's early.

As in think, breathed, marketplace. before and this mentioned UK before, last best and seen product lived the we've out we over the we've movie the decade seen, in the we've I wins

on be as so in positioned deals relates feel of we like were we're basis. a term and conversations a longer we well And lot really a broader and to continue it to in,

ways And to still out. so has I it has, it think play

maybe there. and execution, probably, still a two look be to that of market years think going I of launches, think out there's states that, to accordingly, see period up And that, set to time and legalized, I of believe the think, lot the believe also at long-term I I are end, state the you pipeline the a then if a you game obviously three a three as to commercial the at kind over it's that the well that years. over I you're marketing real to build into it'll, is next two be think and least activity I deals to continue But being material.

be just It it'll attractive and to early, iGaming obviously, there's know so everything. we've and markets and today, that, we it, most I, will happening take But that there all and is think think seen an think, I is it I like betting I materialize. years sports that material believe and out in don't I but that it be a to is market few exciting nonetheless. going still as a it's is

Cameron McKnight

quarter-on-quarter. in business, And as then we were The appropriate it. impacted going sequential that Social at in to Can the by you to how think right up talk quarter, of and Thanks. social was AEBITDA was five that three was about prior an X% think Facebook. terms some changes is should forward of mitigated what the terms way Perfect. made EBITDA rate quarter for the growth during of the about

Michael Quartieri

So I can Facebook. talk about the

We authenticate to to side, able there On early prevented basically And order time, as that Facebook in payers encountered that a to privacy the authenticate actually in issue that which and late changes that yet it worked, summer our it game. into being us game to recognize particular as authenticate, the from us the Facebook coming side, games if enabled play. Facebook the made proof able that in for player again. the the into knows, occurred us and able our on our several to the a caused get that to were the consequently issues there made could, is were and still we and if releases was released token players issue of we're in the game were games. fix point that an made we spring, ability in changes get August occurred experienced, no in we to when issues occurred they a that essentially, players coming is into that and They again, July to some disruption the Facebook everybody and had them some the basically

game up, that would the able done it is we to been growing resolved now, that's we've to have So, as completely and encountered issue. back not have

to In rules – not and to today's discuss, terms going previous we limit we’re mentioned SEC beyond guidance obviously, related before, the the that result giving I can't our earnings forward, business. with as ability of

Cameron McKnight

very thing. much. Sure And one final Mike. then one Thanks for

make call premium not In at about it would sense? point XX% terms notes, XXX? when of rate the the refi of the is breakeven X% the around at still Is what

Michael Quartieri

about but, what probably forward basis. of kind see on go we that be would we fair at, point look market at, is on it's conditions decision a to looking a That going really dependent

really going So, we depending it's the be started the it, but, again, doing rates what X%, we see future. at at on probably looking to in

Cameron McKnight

Thank much. perfect. you Okay, very

Barry Cottle

Thank you.

Operator

Craig-Hallum. Mike of have Malouf we Next

Mike Malouf

percentage economic follow cost opportunities, model detail retailer XX,XXX Can questions. on much how little I beneficial? Great. would as little my bit have this? Thank. just a like so the been a do just to more cost want that's you It of Thanks sounds would a huge benefit. asked, that but retailers of to and model the drive on And with Most them a a about on then that you is? the SciQ. implement to these look regards how a talk up at it for much, bit that opportunity is Why little maintenance taking

Michael Quartieri

Yes, sure.

Let perspectives kind the Lottery the retailers. of me from you give

So behind and walk display perspective, see you sitting this a behind convenience into large counter, at that's tickets no rolls the unit there's if one these you you. there. you any I stores plastic of it's retailer From that's look and out usually real, mean, than just a of live different cash

the of security they spending every make retailer that With to enhancement, system, time the POS your sure do POS that is where end balance to theft. you're day so out system And it reconciling and that to counting the you you're register time down, counting that those that SciQ tickets the one, eliminate

the So, shrinkage call POS minutes than a button side two, rather board. the I of business, pressing or day ties Number it XX spending from every within it's – that that is into getting report the the instantly across an simply themselves accounting those and that counting a ticket, retailers system. issue down revenue

the labor and seeing back on roughly the savings pilots their on the a the of caused of different we're the And daily units that retail that has ongoing XX% about countless of to XX for in also display is significant offices we've done home units revenues in accounting revenues, where an numbers individuals and sales. in increase at we've an responsible in that it's are seen have those retailer increase So far, reconciling XX% in locations so the they average, the then basis. also

to order either the be associated of will the perspective gotten won't, there's with there we do fee lot then an to unit maintenance the behalf and the benefits is a, but an purchase itself. perspective on to From different or of that we economic of haven't retailer ongoing continue it it. and the which in overall details, retailer model And monthly an software three a the the there's upgrades lottery itself. charged into So from maintain

Mike Malouf

lot help. Appreciate a Thanks the for great. Okay, it.

Operator

JPMorgan. Mike have we next Pace of And

Mike Pace

need any potential the there acquisitions also a stake. additional what mentioned do you And I pursue tuck-in than sale minority I think you the business that different equity that I thanks follow-ups But for And can I'm there like have just not? selling you're too. think event? few maybe somebody guess taking handicapped any then, And Do sized public a And typical my or little a if little the to a right a make bit. on I I'd questions. Hi, for you -- before is you of wondering, know Social decision? say. a IPO is consideration XX%

Barry Cottle

really given of whatever. whether say IPO unfortunately, the rules, we're minority of limited type would can very Yes. the it's be, on any what or what Mike, about size we

see value of So and clear to kind the in we the current We an forward, the opportunity just corporate scale. regards help us that. this going we all at realize stay based In and business as to got business view to we deleveraging growth the of help office. just on growth, where up its accelerate of that the with

Mike Pace

And then this proceeds. is on you something probably is, use that, to maybe follow-up of that answer can't

about do debt. down talk You paying

as debt if And clear, to down change there? a then your owned That that by would event entity, with or be business structure, I it's no to potential would understand to is that's any sure decision. to a Just be restricted right, post it the unrestricted not but entity. just ownership And an for be requirement make wanted structuring there goes, I you social proceeds pay there.

Barry Cottle

ownership sub, to just it is proceeds. don't the all when the this ago, we primary it percentage entity. say two within the stated foresee I our corporate Scientific No, that in of that's as would out And within debt structure pay of ultimate primarily we years concept that the as an purpose of we primarily, put unrestricted whole when any those And impact down around change of the Games. organization the use

Mike Pace

as not choice, just just clear – just to And as a as there. be requirement a

Barry Cottle

way either the same. would be think it I

Mike Pace

you. Got

Barry Cottle

the event. deleveraging At

Mike Pace

contract if for would expectations, upfront just The on you know was mentioned size just be required update, on curious win. little if if the Thank Okay. disclosed looking have business, on a an CapEx you. don't business upon I late. of thoughts I And this then this And update just jumped historically? on apologize a earlier, Pennsylvania lotto the and

Barry Cottle

out. From a process RFP perspective, come new the expectation is should --

would We the election. after be thinking it are sometime

the So days, based obviously meetings RFP we as gotten we've time in recently expectation is some couple within the QX. the early to-date, should very last past be election of receiving as

specifically new CapEx, even As the would to to CapEx wouldn't in states on there there where because around renewal state are a upfront instances the an million around from never you and be a mark. $XX economics commented this therefore we and is We said, individual be spend put this economics really be we've expect a a this somewhere though size that would it's bidders basis. perspective, the will any level for a have all incumbent, to such we require contract. on different that is of renewal, million be required $XX and CapEx any And would consistent that be

the we business. contract domestic largest our system within have is this However, Lottery

Mike Pace

Great. Thanks guys.

Operator

this at the Gentlemen? for will will question-and-answer Well, remarks. conference I we time over back conclude session. turn to now closing call our management to like any

Barry Cottle

Great. today. support and appreciate the Thanks everyone for We joining us following.

We upcoming about and I much the look our On results are our during all quarter Thank entire forward you very ahead. and call. team you of potential to GXE, heels next the highly the fourth on enthusiastic updating accomplishments

Operator

to for have day. and management you your the of this time disconnect may call has your Take lines. you care now also time a Thank we And again rest wonderful you today. The At conference team and concluded. everyone. the sir thank

Light & Wonder (LNW) 8 Nov 182018 Q3 Earnings call transcript