SCIENTIFIC GAMES CORP (Form: 10-Q, Received: 05/02/2018 17:29:25)

Receivables

Contract Assets ⁽¹⁾

Opening balance, January 1, 2018

Closing balance, March 31, 2018

(1) Contract assets are included primarily within prepaid expenses, deposits and other current assets in our March 31, 2018 consolidated balance sheet.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-13063

SCIENTIFIC GAMES CORPORATION

(Exact name of registrant as specified in its charter)



Nevada		81-0422894
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

6601 Bermuda Road, Las Vegas, Nevada 89119

(Address of principal executive offices)

(Zip Code)

(702) 897-7150

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer ý		Accelerated filer ¨

Non-accelerated filer ¨		Smaller reporting company ¨
(Do not check if a smaller reporting company)

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The registrant has the following number of shares outstanding of each of the registrant's classes of common stock as of April 30, 2018 :

Common Stock: 90,738,314

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

INDEX TO FINANCIAL INFORMATION

AND OTHER INFORMATION

THREE MONTHS ENDED MARCH 31, 2018



		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)	6

	Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2018 and 2017	6

	Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017	7

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49

Item 4.	Controls and Procedures	49

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	50

Item 1A.	Risk Factors	50

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 3.	Defaults Upon Senior Securities	50

Item 4.	Mine Safety Disclosures	50

Item 5.	Other Information	50

Item 6.	Exhibits	51



Glossary of Terms
The following terms or acronyms used in this Quarterly Report on Form 10-Q are defined below:
Term or Acronym	Definition
2017 10-K	2017 Annual Report on Form 10-K filed with the SEC on March 1, 2018
2018 Notes	8.125% senior subordinated notes due 2018 issued by SGC
2020 Notes	6.250% senior subordinated notes due 2020 issued by SGI
2021 Notes	6.625% senior subordinated notes due 2021 issued by SGI
2022 Secured Notes	7.000% senior secured notes due 2022 issued by SGI
2025 Secured Notes	5.000% senior secured notes due 2025 issued by SGI
2026 Secured Euro Notes	3.375% senior secured notes due 2026 issued by SGI
2026 Unsecured Euro Notes	5.500% senior unsecured notes due 2026 issued by SGI
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
B2C	business to consumer model
CSP	Cooperative Services Program
D&A	depreciation, amortization and impairments (excluding goodwill)
FASB	Financial Accounting Standards Board
Guarantor Subsidiaries	substantially all of SGC’s 100%-owned U.S. subsidiaries other than SGC’s 100%-owned U.S. Social gaming subsidiaries
LNS	Lotterie Nazionali S.r.l.
Non-Guarantor Subsidiaries	SGC’s U.S. subsidiaries that are not Guarantor Subsidiaries and SGC’s foreign subsidiaries
Note	a note in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, unless otherwise indicated
NYX	NYX Gaming Group Limited
NYX acquisition	the acquisition of 100% of the ordinary shares of NYX by SGC on January 5, 2018
Participation	with respect to our Gaming business, refers to gaming machines provided to customers through service or leasing arrangements in which we earn revenues and are paid based on: (1) a percentage of the amount wagered less payouts; (2) fixed daily-fees; (3) a percentage of the amount wagered; or (4) a combination of (2) and (3), and with respect to our Lottery business, refers to a contract or arrangement in which we earn revenues and are paid based on a percentage of retail sales
POS	percentage of retail sales
PPU	price-per-unit
PTG	proprietary table games
R&D	research and development
RFP	request for proposal
RMG	real-money gaming
RSU	restricted stock unit
SEC	Securities and Exchange Commission
Secured Notes	refers to the 2022 Secured Notes, 2025 Secured Notes, and 2026 Secured Euro Notes, collectively
SG&A	selling, general and administrative
SGC	Scientific Games Corporation
SGI	Scientific Games International, Inc., a wholly-owned subsidiary of SGC
Shufflers	various models of automatic card shufflers, deck checkers and roulette chip sorters
Subordinated Notes	refers to the 2020 Notes and 2021 Notes, collectively
Unsecured Notes	10.000% senior unsecured notes due 2022 issued by SGI
U.S. GAAP	accounting principles generally accepted in the U.S.
U.S. jurisdictions	the 50 states in the U.S. plus the District of Columbia and Puerto Rico
VGT	video gaming terminal
VLT	video lottery terminal
WAP	wide-area progressive

Intellectual Property Rights

FORWARD-LOOKING STATEMENTS

Throughout this Quarterly Report on Form 10-Q, we make "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. The forward-looking statements contained in this Quarterly Report on Form 10-Q are generally located in the material set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" but may be found in other locations as well. 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 under Part I, Item 1A "Risk Factors" in our 2017 10-K. 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 forward-looking statements whether as a result of new information, future events or otherwise.

You should also note that this Quarterly Report on Form 10-Q 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. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information is not guaranteed. 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. In general, we believe there is less publicly available information concerning the international gaming, lottery, and digital gaming industries than the same industries in the U.S.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, in millions, except per share amounts)



	Three Months Ended
	March 31,
	2018			2017
Revenue:
Services	$	437.5		$	362.5
Product sales	224.1			222.7
Instant products	150.2			140.2
Total revenue	811.8			725.4
Operating expenses:
Cost of services ⁽¹⁾	121.9			103.3
Cost of product sales ⁽¹⁾	105.1			106.6
Cost of instant products ⁽¹⁾	69.7			70.1
Selling, general and administrative	171.6			140.7
Research and development	53.8			42.4
Depreciation, amortization and impairments	188.1			165.1
Restructuring and other	52.2			9.2
Operating income	49.4			88.0
Other (expense) income:
Interest expense	(154.8		)	(159.4		)
Earnings from equity investments	7.3			9.5
Loss on debt financing transactions	(93.2		)	(29.7		)
Loss on remeasurement of debt	(1.1		)	—
Other (expense) income, net	(3.2		)	7.5
Total other expense, net	(245.0		)	(172.1		)
Net loss before income taxes	(195.6		)	(84.1		)
Income tax provision	(6.2		)	(16.7		)
Net loss	$	(201.8	)	$	(100.8	)
Other comprehensive income (loss):
Foreign currency translation gain	50.9			33.6
Pension and post-retirement loss, net of tax	(0.7		)	(0.3		)
Derivative financial instruments unrealized gain, net of tax	1.9			2.8
Other comprehensive income	52.1			36.1
Comprehensive loss	$	(149.7	)	$	(64.7	)

Basic and diluted net loss per share:
Basic	$	(2.24	)	$	(1.14	)
Diluted	$	(2.24	)	$	(1.14	)

Weighted average number of shares used in per share calculations:
Basic shares	90.1			88.2
Diluted shares	90.1			88.2
(1) Exclusive of D&A.

See accompanying notes to condensed consolidated financial statements.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions, except par value)



	March 31, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	109.9		$	788.8
Restricted cash	34.1			29.0
Accounts receivable, net	554.1			540.9
Notes receivable, net	132.2			143.5
Inventories	231.2			243.1
Prepaid expenses, deposits and other current assets	249.7			131.1
Total current assets	1,311.2			1,876.4
Non-current assets:
Restricted cash	15.7			16.3
Notes receivable, net	44.8			52.8
Property and equipment, net	505.3			568.2
Goodwill	3,372.5			2,956.1
Intangible assets, net	1,903.0			1,604.6
Software, net	327.8			339.4
Equity investments	179.4			253.9
Other assets	77.5			57.6
Total assets	$	7,737.2		$	7,725.3

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt	$	50.4		$	40.3
Accounts payable	186.0			190.4
Accrued liabilities	519.9			509.1
Total current liabilities	756.3			739.8
Deferred income taxes	143.3			73.1
Other long-term liabilities	239.7			203.1
Long-term debt, excluding current portion	8,794.0			8,736.3
Total liabilities	9,933.3			9,752.3
Commitments and contingencies (see Note 15)
Stockholders' deficit:
Common stock, par value $0.001 per share ⁽¹⁾ : 199.3 shares authorized; 107.9 and 107.1 shares issued and 90.7 and 89.9 shares outstanding, respectively	1.1			1.1
Additional paid-in capital	799.3			807.8
Accumulated loss	(2,673.7		)	(2,461.0		)
Treasury stock, at cost, 17.2 shares	(175.2		)	(175.2		)
Accumulated other comprehensive loss	(147.6		)	(199.7		)
Total stockholders' deficit	(2,196.1		)	(2,027.0		)
Total liabilities and stockholders' deficit	$	7,737.2		$	7,725.3
(1) Following the consummation of the reincorporation merger on January 10, 2018, each authorized, issued and outstanding share of Class A common stock of SGC, par value $0.01 per share automatically converted into one share of common stock of the surviving corporation, par value $.001 per share. The change in par value had no impact on total number of authorized, issued and outstanding shares.

See accompanying notes to condensed consolidated financial statements.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)



	Three Months Ended
	March 31,
	2018			2017
Cash flows from operating activities:
Net loss	$	(201.8	)	$	(100.8	)
Adjustments to reconcile net loss to cash provided by operating activities	308.5			201.8
Changes in working capital accounts, net of acquisitions	(77.5		)	7.0
Changes in deferred income taxes and other	0.7			3.0
Net cash provided by operating activities	29.9			111.0
Cash flows from investing activities:
Capital expenditures	(88.0		)	(61.3		)
Acquisitions of businesses and assets, net of cash acquired	(274.1		)	(21.5		)
Distributions of capital from equity investments	1.5			1.3
Other	—			2.0
Net cash used in investing activities	(360.6		)	(79.5		)
Cash flows from financing activities:
Borrowings under revolving credit facility	—			125.0
Repayments under revolving credit facility	(295.0		)	(170.0		)
Proceeds from issuance of senior notes and term loans	2,512.4			1,762.4
Repayment of senior notes and term loans (inclusive of redemption premium)	(2,210.3		)	(1,693.4		)
Repayment of assumed NYX debt	(288.2		)	—
Payments on long-term debt	(1.8		)	(1.5		)
Payments of debt issuance and deferred financing costs	(38.5		)	(27.2		)
Payments on license obligations	(6.5		)	(9.8		)
Net redemptions of common stock under stock-based compensation plans and other	(17.7		)	(0.6		)
Net cash used in financing activities	(345.6		)	(15.1		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1.9			2.5
(Decrease) increase in cash, cash equivalents and restricted cash	(674.4		)	18.9
Cash, cash equivalents and restricted cash, beginning of period	834.1			156.9
Cash, cash equivalents and restricted cash, end of period	$	159.7		$	175.8

Supplemental cash flow information:
Cash paid for interest	$	161.3		$	113.5
Income taxes paid	7.1			5.7
Supplemental non-cash transactions:
Non-cash rollover and refinancing of Term loans (see Note 11)	3,274.6			2,747.6
Non-cash interest expense	5.6			8.2
Non-cash additions to intangible assets related to license agreements	—			28.1
NYX non-cash consideration transferred (inclusive of 2017 acquisition of ordinary shares) (see Note 1)	93.2			—

See accompanying notes to condensed consolidated financial statements.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in USD, table amounts in millions, except per share amounts)

(1) Description of the Business and Summary of Significant Accounting Policies

Description of the Business

We are a leading developer of technology-based products and services and associated content for the worldwide gaming, lottery, social, and digital gaming industries. Our portfolio of revenue-generating activities primarily includes supplying gaming machines and game content, casino-management systems, and table game products and services to licensed gaming entities; providing instant and draw-based lottery games, lottery systems, and lottery content and services to lottery operators; providing social casino solutions to retail consumers and regulated gaming entities as applicable; and providing a comprehensive suite of digital RMG and sports betting solutions, distribution platforms, content, products and services. We also gain access to technologies and pursue global expansion through strategic acquisitions and equity investments. Beginning in the first quarter of 2018, we report our operations in four business segments—Gaming, Lottery, Social and Digital, with prior periods being recast to align with the current presentation.

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The accompanying condensed consolidated financial statements include the accounts of SGC and its wholly owned subsidiaries, and those subsidiaries in which we have a controlling financial interest. Investments in other entities in which we do not have a controlling financial interest but we exert significant influence are accounted for in our condensed consolidated financial statements using the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, we have made all adjustments necessary to present fairly our consolidated financial position, results of operations and comprehensive loss and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2017 10-K. Interim results of operations are not necessarily indicative of results of operations to be expected for a full year.

Significant Accounting Policies

There have been no changes to our significant accounting policies described within the Notes of our 2017 10-K other than adoption of ASC 606 described in Note 2.

Computation of Basic and Diluted Net Loss Per Share

Basic and diluted net loss per share were the same for all periods presented as all common stock equivalents would be anti-dilutive. We excluded 2.8 million and 3.0 million of stock options from the diluted weighted-average common shares outstanding for the three months ended March 31, 2018 and 2017 , respectively. We excluded 3.1 million and 5.0 million of RSUs from the calculation of diluted weighted-average common shares outstanding for the three months ended March 31, 2018 and 2017 , respectively.

Acquisition of NYX Gaming Group Limited and Preliminary Purchase Price Allocation

On January 5, 2018 , we completed the acquisition of all outstanding ordinary shares of NYX, creating a leading digital provider of sports betting, iGaming and iLottery technologies, platforms, content, products and services. We paid $665.8 million in cash to acquire ordinary shares and other securities and to redeem NYX's outstanding debt inclusive of $91.9 million paid during the fourth quarter of 2017 to acquire NYX ordinary shares and other securities. The fair value of our NYX non-controlling equity interest held immediately before the acquisition date was $90.4 million .

We accounted for this acquisition using the acquisition method of accounting allocating the total consideration transferred to acquired tangible and intangible assets and assumed liabilities based on estimated fair values. The fair value determination of the acquired assets and assumed liabilities (including the related determination of estimated lives of depreciable and amortizable tangible and intangible assets) requires significant judgments and estimates. The estimated fair values of the acquired assets and assumed liabilities and resulting goodwill are subject to adjustment as we finalize our purchase price accounting, and such adjustments could be material.

We incurred $7.7 million of NYX acquisition-related costs which were recorded in Restructuring and other for the three months ended March 31, 2018.

The following table summarizes the preliminary allocation of the purchase price expected to be finalized by the end of 2018:



	January 5, 2018
Cash, cash equivalents and restricted cash	$	23.3
Accounts receivable and other current assets ⁽¹⁾	55.2
Property and equipment and other non-current assets ⁽¹⁾	22.1
Goodwill	376.4
Intangible assets	350.0
Total assets	$	827.0
Current liabilities ⁽²⁾	$	82.0
Deferred income taxes	66.3
Assumed debt and other liabilities	299.7
Total liabilities	$	448.0
Total consideration transferred	$	379.0
(1) Inclusive of $43.0 million and $12.9 million of receivables and contract assets, respectively.
(2) Inclusive of $15.7 million of contract liabilities.

Cash, cash equivalents and restricted cash, accounts receivable and other current assets and most liabilities (other than as primarily related to deferred income taxes) were valued at the existing carrying values which approximated the estimated fair values. The estimated preliminary fair value of deferred income taxes was determined by applying the applicable enacted statutory tax rate to the temporary differences that arose on the differences between the financial reporting value and tax basis of the acquired assets and assumed liabilities.

The fair value of intangible assets that have been preliminarily identified was determined using a combination of the relief from royalty method and the excess earnings method using level 3 inputs in the hierarchy as established by ASC 820. The discount rates used in the valuation analysis ranged between 10% and 14% , and the royalty rate used was 0.5% . The following table details the intangible assets that have been preliminarily identified:



	Fair Value		Weighted Average Useful Life (Years)
Customer relationships	$	214.0	7-10
Intellectual property ⁽¹⁾	126.5		7
Trade names	9.5		7
(1) Primarily consists of core technology and content.

The factors contributing to the recognition of acquisition goodwill are based on enhanced financial and operational scale, market diversification, expected synergies, assembled workforce, and other strategic benefits. None of the resultant goodwill is expected to be deductible for income tax purposes.

NYX revenue and net loss since the acquisition date and through March 31, 2018 included in the consolidated statement of operations and comprehensive loss were $49.2 million and $7.4 million , respectively. The acquired NYX business was combined with our Interactive business, excluding our Social gaming business, forming the new Digital business segment.

The following unaudited pro forma financial information for the three months ended March 31, 2018 and 2017 give effect to the NYX acquisition as if it had been completed on January 1, 2017:



	Three Months Ended
	March 31, 2018		March 31, 2017
Revenue	$	811.8	$	768.7
Net loss	194.1		115.9

The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of what the operating results actually would have been if the NYX acquisition had taken place on January 1, 2017, nor is it indicative of future operating results. The pro forma amounts include the historical operating results of Scientific Games Corporation and NYX prior to the acquisition, with adjustments factually supportable and directly attributable to the NYX acquisition, primarily related to the effect of fair value adjustments and related depreciation and amortization, acquisition-related fees and expenses, interest expense related to additional borrowings used to complete the acquisition, and the effect of repayments of NYX historical debt as a result of the acquisition.

Other Acquisitions

On January 23, 2018, we acquired privately held Tech Art, Inc., Tech Art of New Jersey, Inc. and Tech Art Manufacturing, Inc. (collectively, "Tech Art") for $9.6 million cash consideration. The transaction was accounted for as an asset acquisition, with substantially all of the cash consideration transferred allocated to intellectual property, which was assigned a 15 -year useful life. Tech Art is a part of our Gaming business segment.

New Accounting Guidance - Recently Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers . ASU 2014-09 combined with all subsequent amendments (collectively ASC 606) provides guidance outlining a single comprehensive revenue model in accounting for revenue from contracts with customers. ASC 606 supersedes existing revenue recognition guidance, including industry-specific guidance, and replaces it with a five-step revenue model with a core principle that "an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services." This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. We adopted this guidance on January 1, 2018 using a modified retrospective application approach. See our 2017 10-K Note 1 for the anticipated annual impact on our consolidated financial statements and Note 2 in this Quarterly Report on Form 10-Q for our revenue recognition policy and the quarterly impact of our adoption of ASC 606.

The FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business in 2017. The new guidance clarifies the definition of a business in order to allow for the evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses. We adopted this guidance on January 1, 2018, and this adoption did not have a material effect on our consolidated financial statements.

The FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost in 2017. We adopted this guidance beginning January 1, 2018. This guidance requires an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of operating income, if one is presented, which for us means that certain immaterial amounts will be classified within interest expense as compared to the previous classification within SG&A. We are also required to describe which line items are used to present the other components of net benefit cost if such financial statement line items are separately presented; otherwise, we must disclose the line items in which such costs are presented.

The FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities in 2017 . We early adopted this guidance during the first quarter of 2018, which simplifies the application of hedge accounting guidance, and creates greater transparency for results presented on the face of the financial statements and footnotes. Our adoption did not have a material effect on our consolidated financial statements.

New Accounting Guidance - Not Yet Adopted

T he FASB issued ASU No. 2016-02, Leases (Topic 842 ) in 2016. The amended guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and

disclosing key information about leasing arrangements. The adoption of this guidance is expected to result in a significant portion of our operating leases, where we are the lessee, to be recognized on our consolidated balance sheet. The guidance requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier adoption permitted. We are currently evaluating the impact of adopting this guidance.

The FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) in 2016. The new guidance replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The new guidance will be effective for us beginning January 1, 2020, with early adoption permitted beginning January 1, 2018. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of adopting this guidance.

We do not expect that any other recently issued accounting guidance will have a significant effect on our consolidated financial statements.

(2) Revenue Recognition

As described in Note 1, on January 1, 2018, we adopted ASC 606 using the modified retrospective method, which was applied to customer contracts that were not completed as of January 1, 2018. In accordance with the modified retrospective transition method, our results of operations beginning with the first quarter of 2018 are presented in accordance with ASC 606, while prior periods continue to be reported in accordance with the historical revenue recognition guidance as disclosed in our 2017 10-K.

The following table disaggregates our revenues by type within each of our business segments:



	Three Months Ended March 31,
	2018		2017
Gaming
Gaming operations	$	161.3	$	172.4
Gaming machine sales	144.8		156.2
Gaming systems	75.0		61.5
Table products	61.9		49.9
Total	$	443.0	$	440.0

Lottery
Instant products	$	150.2	$	141.7
Lottery systems	51.5		47.4
Total	$	201.7	$	189.1

Social
Social gaming	$	97.4	$	80.2
Total	$	97.4	$	80.2

Digital
Sports and platform	$	25.9	$	—
Gaming and other	43.8		16.1
Total	$	69.7	$	16.1

General

We evaluate the recognition of revenue and rental income based on the criteria set forth in ASC 606 or ASC 840, as appropriate. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. This condition normally is met when the product has been delivered or upon performance of services. Revenue is reported net of incentive

rebates and discounts. We made an accounting policy election to exclude from the measurement of the transaction price sales taxes and all other items of a similar nature, and also elected to account for shipping and handling activities as a fulfillment of our promise to transfer the goods. Accordingly, shipping and handling costs are included in cost of sales.

Our credit terms are predominately short term in nature. We also grant extended payment terms under certain contracts, primarily where the sale is secured by the related equipment sold, and generally only in certain Gaming segment contracts with customers. For these contracts with customers for which the financing component is determined to be significant to the contract, the contract transaction price is adjusted for the effect of a financing component (time value of money). We have not applied the significant financing component guidance to transactions with financing terms of 12 months or less.

Any sales commissions associated with the sale or placement of our products and services are expensed as incurred as contracts associated with sales commissions are generally completed within a one-year period.

The primary types of revenue impacted by the adoption of ASC 606 were Gaming operations and Lottery instant products. Each of these is described separately below. We had other balance sheet adoption impacts that, combined with the preceding, resulted in a net increase to opening accumulated loss of $10.9 million as of January 1, 2018. As part of the adoption of ASC 606, we increased contract liabilities by $9.7 million primarily associated with Lottery instant products licensing and player loyalty contracts for which we determined that the promises in the related contracts were part of a single performance obligation under ASC 606. In addition, we reduced previously recorded deferred costs net of newly established contract assets by $11.4 million related to licensing in certain customized lottery software contracts for which we concluded that we were unable to recognize revenue for delivered elements under ASC 985-605 due to the lack of vendor-specific objective evidence for undelivered elements and for which we were required to estimate the standalone selling price of delivered performance obligations under ASC 606. Combined, we expect all other adoption impacts other than Gaming operations and Lottery instant products to have less than a $10.0 million impact on revenue and operating income in the aggregate for the remainder of 2018.

Contracts with Customers with Multiple Promised Goods and Services

We enter into contracts with customers that include multiple promises (such as gaming machines, gaming systems hardware and software, installation, service and maintenance, product support or lottery systems and hardware, installation and maintenance bundled promises). For such contracts, the transaction price is allocated to each distinct performance obligation using an estimate of stand-alone selling price. The stand-alone selling price is generally based on observable prices or a cost plus margin approach. We also use the residual method when observable prices are uncertain or highly variable, primarily with respect to certain of our software licenses. The establishment of stand-alone selling price requires judgment as to whether there is a sufficient quantity of items sold or substantively renewed on a stand-alone basis and those prices demonstrate an appropriate level of concentration to conclude that a stand-alone selling price exists.

The guidance in ASC 606 requires that we apply judgments or estimates to determine both the performance obligations and the stand-alone selling prices of identified performance obligations. Contracts with multiple promised goods and services described above will often involve significant judgment in determining whether each promise is distinct or should be combined with other promises in such contracts in concluding on the distinct performance obligations for such contracts. Such judgment generally requires an assessment of the level of integration and interdependency between individual components particularly in our gaming systems and certain digital contracts with customers. Associated with these same contracts, we also apply significant judgment to determine the stand-alone selling prices of the identified performance obligations. In certain contracts with customers, we bundle the selling price for multiple promised goods or services or we may license systems for which the solutions we provide are highly customized and therefore the prices we charge are either uncertain, highly variable, or both.

Gaming Operations

Gaming operations revenues are generated by providing customers access to proprietary land-based gaming equipment, table game products and VLTs under a variety of recurring operating, service, or rental contracts, for which consideration is based upon a percentage of Coin-in, a percentage of Net win, or a fixed daily/monthly fee, with variability generally resolved in the reporting period. For these contracts with customers, we generally transfer control and recognize revenue or rental income over time based on the amount we expect to receive as described and classify such revenue or rental income as services revenue. Payments from customers under these contracts are typically due on a monthly basis. Jackpot expense for our WAP services is recorded as a reduction to revenue, which decreased revenue and cost of services by $4.4 million for the three months ended March 31, 2018. This change in classification has no impact on operating income or net loss. There was $7.0 million of such amounts presented as cost of services for the three months ended March 31, 2017.

Gaming Machine Sales

These contracts with customers include the sale of gaming machines, including game content, electronic table game products and parts (including game themes and conversion kits). We transfer control and recognize revenue from the sale of gaming machines at a point in time upon delivery of gaming machines to our customers or distributors pursuant to the terms of the contract. If the sale of gaming machines includes multiple promised goods and services, these contracts are accounted for as described in the "Contracts with Customers with Multiple Promised Goods and Services" section above. Our credit terms are predominately short term in nature.

Gaming Systems

Gaming systems contracts with customers can include a comprehensive suite of technology solutions provided to gaming operators, including perpetual licenses to core system solutions and non-core system solutions and other applications and tools. Gaming systems products also include the iVIEW ^® touch screen display, which facilitates the player experience, bonus features, customer service, and employee functions and ongoing hardware and software maintenance services and upgrades.

Determination of performance obligations and timing of the transfer of control varies by contract. Generally, these contracts contain multiple promised goods and services, including the following: (i) core system software license; (ii) non-core system software license(s); (iii) professional services; (iv) system-based hardware; (v) in-game hardware products; and (vi) software and hardware maintenance and product support.

Control transfers and we recognize revenue from the sale of perpetual gaming systems licenses and various hardware products at a point in time when the gaming system is available for use by a customer which is no earlier than the commencement of the license term, and for the hardware products upon delivery. For contracts that include new core gaming system installations, control is not considered transferred until control of the core gaming system license is transferred as the additional promises are generally highly dependent on the core gaming system. Software and hardware maintenance and product support services are considered stand-ready obligations, therefore control transfers and revenue is recognized over time over the term of the maintenance and support period. If a gaming systems contract includes multiple promised goods and services, these contracts are accounted for as described in the "Contracts with Customers with Multiple Promised Goods and Services" section above.

Table Products

Table products revenue is generated from supplying and maintaining or selling table game products, primarily including automatic card shufflers, deck checkers, table roulette chip sorters and other land-based table gaming equipment. We transfer control and recognize revenue from the sale of table products at a point in time upon delivery to our customers or distributors pursuant to the terms of the contract. Supply and maintenance contracts, for which consideration is primarily based on a fixed monthly fee, are considered stand-ready obligations, therefore control transfers and revenue is recognized over time over the term of the supply and maintenance period. Such contracts are generally short-term in nature. We also license our proprietary table games content, for which revenue is recognized at a point in time under the licensing of intellectual property guidance as such licenses are functional licenses.

Lottery Instant Products

Our instant products revenue is primarily generated under long-term contracts to supply instant products and provide related services to our Lottery customers. For instant products that are sold on a PPU and POS basis, we generally have a single performance obligation of a promise to supply the instant products. Control transfers and we recognize revenue from the sale of such instant products when the lotteries have taken delivery of shipments of instant products pursuant to the terms of the contract. For instant products that are sold on a POS basis, we are compensated based on retail sales, therefore the timing difference between the recognition of revenue, the billing of our customers and the receipt of payments depends on retail sales. Contract assets resulting from these contracts remain until we have the contractual ability to invoice and collect from customers (which occurs upon retail sales).

For our CSP contracts in which we perform all of the services necessary to operate the associated lottery’s integrated instant product operations and for which we are compensated based on retail sales, our single performance obligation is a promise to perform a series of stand-ready services to operate and manage instant gaming programs for the lotteries in their entirety. Revenue is recognized over time as measured by an appropriate measure of progress toward satisfying our

performance obligation, which we have determined to be when a lottery retailer activates any associated instant tickets, as this is the point at which we have transferred control over the associated instant tickets and perform no more services related to such instant tickets.

The guidance in ASC 606 requires that we apply judgment to determine the timing of control transfer of performance obligations in our Lottery instant products contracts. For instant products that are sold under POS contracts, we generally have a single performance obligation of a promise to supply the instant products. The determination of when control transfers requires significant judgment because lotteries take delivery of shipments of instant products, but we retain the risk of such inventory until retail sales of such tickets takes place. We have determined control transfers upon delivery to a lottery-controlled warehouse, because we do not have the ability to direct the use of such instant products subsequent to delivery.

There was an $8.1 million increase in revenue in the three months ended March 31, 2018 associated with instant products sold on a POS basis, a $6.3 million increase in operating income and a corresponding decrease in net loss due to adopting the new revenue recognition guidance. Revenue from any tickets sold under these arrangements that were in the lottery distribution channel at December 31, 2017 will not be recognized as retail sales occur, as both the revenue value of such tickets and the historical cost of such inventory at December 31, 2017 was reflected directly into shareholders’ deficit at adoption. The adoption of ASC 606 related to inventory in the distribution channel at December 31, 2017 resulted in an increase to contract assets (included in Prepaid expenses, deposits and other current assets) totaling $52.0 million , a reduction to inventory totaling $33.0 million and a decrease to accumulated net loss totaling $19.0 million . The impact of ASC 606 on our March 31, 2018 consolidated balance sheet was a $38.3 million decrease to inventories and a $47.9 million increase to contract assets included in prepaid expenses, deposits and other current assets.

Lottery Systems

Our Lottery business segment offers our customers a number of related, value-added services as part of an integrated product offering. These services include lottery systems, including point-of-sale terminals and other equipment, software, data communication services and support and instant game validation systems, and software, hardware and related services for sports wagering and keno systems.

For our integrated lottery systems service contracts (described above), our single performance obligation is a promise to perform a series of stand-ready services to operate a fully-functional draw lottery. Revenue is recognized over time in an amount generally based on a percentage of sales of the related games, which represents our measure of progress toward satisfying our performance obligation.

For our perpetual licensing of customized lottery software contracts, we generally recognize revenue over time using costs incurred to date relative to total estimated completion costs to measure progress toward satisfying our performance obligations, which we believe best depicts the transfer of control to the customer.

Maintenance on lottery software and lottery terminals is considered a stand-ready obligation, with control transferring and revenue being recognized over time ratably over the maintenance and support period. If a lottery systems contract includes multiple promised goods and services, these contracts are accounted for as described in the "Contracts with Customers with Multiple Promised Goods and Services" section above.

Social Gaming

Social gaming revenues are generated from the sale of virtual coins, chips or bingo cards (collectively referred to as "virtual currency"), which players can use to play casino-style slot and table games or bingo games (i.e., spin in the case of slot games, bet in the case of table games and use of bingo cards in the case of bingo games). Control transfers and we recognize revenues from player purchases of virtual currency as the virtual currency is consumed for game play, which is based on a historical data analysis. Because we have control over the content and functionality of games before they are accessed by the end user, we have determined we are the principal and, as a result, revenues are recorded on a gross basis. Payment processing fees paid to platform providers (such as Facebook, Apple, Amazon and Google) on a revenue participation basis are recorded within cost of services.

Digital

Digital revenue is generated from professional services related to highly customized software design, development, licensing, maintenance and support services associated with a comprehensive suite of technology solutions, including sports books and betting markets across both fixed-odds and pari-mutuel betting styles. Additionally, through our integrated suite of

various platform and technology solutions, we provide gaming operators optional portals for reporting and administrative functions, and access to a wide portfolio of content, including casino, lottery and bingo style games.

Determination of performance obligations and timing of the transfer of control vary based on the nature of the contract. Generally, these contracts contain multiple promises, including the following: (i) implementation of customized software solution and the associated software license; (ii) support services and unspecified software updates; (iii) professional development services; and (iv) access to the game content. Generally control transfers and we recognize revenue from the implementation of a customized software solution and the associated software license over time using costs incurred to date relative to total estimated completion costs to measure progress toward satisfying our performance obligations, which we believe best depicts the transfer of control to the customer. Support services and unspecified software updates are considered stand-ready obligations, therefore control transfers and revenue is recognized over time ratably over the term of the support period. Professional development services generally relate to post-go live development, and control transfers and revenue is recognized over time as services are rendered.

We also generate revenue from various content aggregation platforms, remote gaming servers, our SG Universe ^® platform and various other platforms, which deliver a wide spectrum of internally developed and branded games and popular third-party provided games to gaming operators. We provide daily access to these platforms and are typically compensated based on variable consideration, such as a percentage of net gaming revenue with variability generally resolved in the reporting period. All Digital revenue is classified as services revenue.

Contract Liabilities and Other Disclosures

The following table summarizes the activity in our contract liabilities for the reporting period:



	Three Months Ended March 31,
	2018
Contract liability balance, beginning of period ⁽¹⁾	$	88.2
Liabilities recognized during the period	36.4
Amounts recognized in revenue from beginning balance	(25.0		)
Contract liability balance, end of period ⁽¹⁾	$	99.6
(1) Contract liabilities are included within accrued liabilities and other long-term liabilities in our consolidated balance sheet.

The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on our consolidated balance sheet. Other than contracts with customers with financing arrangements exceeding 12 months, revenue recognition is generally proximal to conversion to cash, except for Lottery instant products sold under percentage of sale contracts. As disclosed in "Lottery Instant Products" above, revenue is recognized for such contracts upon delivery to our customers, while conversion to cash is based on the retail sale of the underlying ticket to end consumers. As a result, revenue recognition under ASC 606 does not approximate conversion to cash in any periods post-adoption. Total revenue recognized under such contracts was $34.2 million in the three months ended March 31, 2018. The following table summarizes our opening and closing balances in these accounts (other than contract liabilities disclosed above):

Other than acquired contract assets and receivables and assumed contract liabilities resulting from the NYX acquisition (described in Note 1), we did not have any changes in these balances other than normal, recurring activity during the interim period ended March 31, 2018.

As of March 31, 2018, other than as described above, we did not have material unsatisfied performance obligations for contracts expected to be long-term or contracts for which we recognize revenue at an amount other than for which we have the right to invoice for goods or services delivered or performed.

(3) Business Segments

In connection with the NYX acquisition (see Note 1), in the first quarter of 2018, we reviewed our operating and business segments in light of certain changes in the organizational and operational structure of the Company, including changes in financial information regularly reviewed by management, including our chief operating decision maker (CODM), who is also our Chief Executive Officer. Based on this review, we determined that our Social gaming business, previously included in our Interactive business segment, should be disclosed as a separate business segment and the remaining Interactive business integrated with the acquired NYX business, collectively forming the new Digital business segment. Business segment information for the three months ended March 31, 2017 has been recast to reflect these changes.

As a result of the above changes and starting with the first quarter of the 2018 reporting period, we report our operations in four business segments—Gaming, Lottery, Social and Digital—representing our different products and services. A detailed discussion regarding the products and services from which our Gaming and Lottery business segments generally derive their revenue is included in our 2017 10-K Note 2. Our Social business segment provides social gaming services through our own B2C applications. Our Digital business segment provides highly customizable software design, development, licensing, maintenance and support services from a comprehensive suite of technology solutions to enable our customers to operate sports books, including betting markets across both fixed-odds and pari-mutuel betting styles, a distribution platform, full gaming process support services, brand and player management, including SG Universe services, and RMG services to online casino operators through our remote game servers. The products and services from which each reportable segment derives its revenues are further discussed in Note 2.

In evaluating financial performance, operating income (loss) is our segment measure of profit or loss. The accounting policies of our business segments are the same as those described within the Notes in our 2017 10-K and in Note 1 and Note 2 (for revenue recognition) in this Quarterly Report on Form 10-Q. The following tables present our segment information:



	Three Months Ended March 31, 2018
	Gaming		Lottery		Social			Digital			Corporate ⁽¹⁾			Total
Total revenue	$	443.0	$	201.7	$	97.4		$	69.7		$	—		$	811.8
D&A	139.4		14.2		6.6			16.0			11.9			188.1
Restructuring and other	1.4		0.8		18.1			5.7			26.2			52.2
Operating income (loss)	72.1		61.1		(0.2		)	(4.5		)	(79.1		)	49.4
Interest expense														(154.8		)
Earnings from equity investments														7.3
Loss on debt financing transactions														(93.2		)
Loss on remeasurement of debt														(1.1		)
Other expense, net														(3.2		)
Net loss before income taxes														(195.6		)

Assets as of March 31, 2018	$	5,321.3	$	1,104.3	$	202.6		$	918.3		$	190.7		$	7,737.2
(1) Includes corporate amounts not allocated to the business segments.



	Three Months Ended March 31, 2017
	Gaming		Lottery		Social		Digital		Corporate ⁽¹⁾			Total
Total revenue	$	440.0	$	189.1	$	80.2	$	16.1	$	—		$	725.4
D&A	123.3		13.9		2.6		1.4		23.9			165.1
Restructuring and other	4.2		0.3		0.8		—		3.9			9.2
Operating income (loss)	77.5		56.1		13.5		3.7		(62.8		)	88.0
Interest expense												(159.4		)
Earnings from equity investments												9.5
Loss on debt financing transactions												(29.7		)
Other income, net												7.5
Net loss before income taxes												(84.1		)

Assets as of December 31, 2017	$	5,401.6	$	1,070.6	$	219.1	$	61.2	$	972.8		$	7,725.3
(1) Includes corporate amounts not allocated to the business segments.

The following table presents our recast quarterly selected segment financial data for 2017 and 2016:



	Recast Quarterly Segment Financial Data
	2017								2016
	March 31		June 30		September 30		December 31		March 31		June 30		September 30		December 31
Total revenue
Social	$	80.2	$	91.1	$	95.1	$	95.5	$	60.2	$	69.1	$	70.3	$	74.8
Digital	16.1		15.7		16.3		17.8		12.4		14.3		14.9		16.8
Previous Interactive Segment	$	96.3	$	106.8	$	111.4	$	113.3	$	72.6	$	83.4	$	85.2	$	91.6

Total operating income
Social	$	13.5	$	17.5	$	12.2	$	14.4	$	11.0	$	13.4	$	8.1	$	11.9
Digital	3.7		1.3		0.7		1.1		0.5		0.3		1.5		1.8
Previous Interactive Segment	$	17.2	$	18.8	$	12.9	$	15.5	$	11.5	$	13.7	$	9.6	$	13.7

(4) Restructuring and other

Restructuring and other 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. The following table summarizes pre-tax restructuring and other costs for the periods presented:



	Three Months Ended March 31,
	2018		2017
Employee severance ⁽¹⁾	$	5.1	$	2.7
Acquisitions and related costs ⁽²⁾	7.8		3.4
Contingent consideration adjustment ⁽³⁾	18.0		—
Legal and related	16.0		—
Restructuring, integration and other	5.3		3.1
Total	$	52.2	$	9.2
(1) Inclusive of employee severance and termination costs associated with restructuring and integration activities.
(2) Three months ended March 31, 2018 includes $7.7 million related to the NYX acquisition.
(3) Represents contingent consideration fair value adjustment based on remeasurement as of March 31, 2018 (see Note 12).

(5) Accounts and Notes Receivable and Credit Quality of Receivables

Accounts and Notes Receivable

The following table summarizes the components of current and long-term accounts and notes receivable, net:



	March 31, 2018			December 31, 2017
Current:
Accounts receivable	$	566.0		$	551.5
Notes receivable	154.7			164.1
Allowance for doubtful accounts and notes	(34.4		)	(31.2		)
Current accounts and notes receivable, net	$	686.3		$	684.4
Long-term:
Notes receivable, net of allowance of $0.1 and $0.2	44.8			52.8
Total accounts and notes receivable, net	$	731.1		$	737.2

Credit Quality of Receivables

The interest rates on our outstanding receivables bearing interest ranged from 3.0% to 10.4% at March 31, 2018 and December 31, 2017 .

We have certain concentrations of outstanding accounts and notes receivable in international locations that impact our assessment of the credit quality of those receivables. We monitor the macroeconomic and political environment in each of these locations in our assessment of the credit quality of our receivables. We have not identified changes in the aforementioned factors during the three months ended March 31, 2018 that require a reassessment of our receivable balances. The international locations with significant concentrations (generally deemed to be exceeding 10% ) of our accounts and notes receivable are as follows:


•	Mexico - Our notes receivable, net, from certain customers in Mexico at March 31, 2018 was $25.1 million . We collected $10.1 million of outstanding receivables from these customers during the three months ended March 31, 2018 .


•	Peru - Our notes receivable, net, from certain customers in Peru at March 31, 2018 was $17.3 million . We collected $3.1 million of outstanding receivables from these customers during the three months ended March 31, 2018 .


•	Argentina - Our notes receivable, net, from customers in Argentina at March 31, 2018 was $26.3 million denominated in USD. Our customers are required to, and have continued to, pay us in pesos at the spot exchange rate on the date of payment. We collected $8.4 million of outstanding receivables from customers in Argentina during the three months ended March 31, 2018 .

In addition to the macroeconomic and political factors noted above, we also evaluated recent payments, receivables aging, any additional security or collateral we had (bills of exchange, pledge agreements, etc.) and other facts and circumstances relevant to our customers' ability to pay.

The following summarizes the components of total notes receivable, net:



	March 31, 2018			Balances over 90 days past due			December 31, 2017			Balances over 90 days past due
Notes receivable:
Domestic	$	78.7		$	9.2		$	93.5		$	9.2
International	120.9			32.3			123.6			33.2
Total notes receivable	199.6			41.5			217.1			42.4

Notes receivable allowance
Domestic	(4.9		)	(4.9		)	(4.0		)	(4.0		)
International	(17.7		)	(17.7		)	(16.8		)	(16.8		)
Total notes receivable allowance	(22.6		)	(22.6		)	(20.8		)	(20.8		)
Notes receivable, net	$	177.0		$	18.9		$	196.3		$	21.6

At March 31, 2018 , 10.7% of our total notes receivable, net, was past due by over 90 days, compared to 11.0% at December 31, 2017 .

We evaluate our exposure to credit loss on notes receivable on both a collective and individual basis. In addition, we evaluate such notes receivable on a geographic basis and take into account any other factors (such as general economic conditions, other macroeconomic considerations, etc.) that could impact our collectability of notes receivable individually or in the aggregate. Accordingly, notes receivable may be evaluated under multiple methodologies, and the resulting allowance is not determined based on one specific methodology taking all factors into consideration. The activity in our allowance for notes receivable for each of the three month periods ended March 31, 2018 and 2017 is as follows:



	Three Months Ended March 31,
	2018			2017
Beginning allowance for notes receivable	$	(20.8	)	$	(15.0	)
Provision	(2.6		)	(1.7		)
Charge-offs and recoveries	0.8			0.4
Ending allowance for notes receivable	$	(22.6	)	$	(16.3	)

The fair value of notes receivable is estimated by discounting expected future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and remaining maturities. As of March 31, 2018 and December 31, 2017 , the fair value of notes receivable, net, approximated the carrying value due to contractual terms of notes receivable generally being under 24 months.

(6) Inventories

Inventories consisted of the following as of the dates presented below:



	March 31, 2018		December 31, 2017
Parts and work-in-process	$	132.0	$	128.7
Finished goods	99.2		114.4
Total inventories	$	231.2	$	243.1

Parts and work-in-process include parts for gaming machines, lottery terminals and instant lottery ticket materials, as well as labor and overhead costs for work-in-process associated with the manufacturing of instant lottery games and lottery terminals. Our finished goods inventory primarily consists of gaming machines for sale, instant products primarily for our Participation arrangements and our licensed branded merchandise.

(7) Property and Equipment, net

Property and equipment, net consisted of the following:



	March 31, 2018			December 31, 2017
Land	$	20.8		$	35.7
Buildings and leasehold improvements	122.2			183.6
Gaming and lottery machinery and equipment	992.3			962.2
Furniture and fixtures	33.5			33.2
Construction in progress	30.9			27.7
Other property and equipment	242.6			236.9
Less: accumulated depreciation	(937.0		)	(911.1		)
Total property and equipment, net	$	505.3		$	568.2

Depreciation expense is excluded from Cost of services, Cost of product sales, Cost of instant products and Other operating expenses and is separately presented within D&A.



	Three Months Ended
	March 31,
	2018		2017
Depreciation expense	$	53.1	$	66.9

Assets Held For Sale

As of March 31, 2018 we had $55.1 million of assets held for sale, and none as of December 31, 2017. Assets held for sale primarily relate to our Gaming business segment and consist of certain properties in Las Vegas, Nevada and Chicago, Illinois that are in the process of being sold as a result of our recent facility rationalization and integration activities. These assets held for sale are included within Prepaid expenses, deposits and other current assets and are reported at the lower of the carrying value or fair market value, less expected costs to sell. We measured the fair value of assets held for sale under a market approach and have categorized such measurements as Level 3 in the fair value hierarchy. Based on our fair value measurement as of March 31, 2018, the book value related to our assets held for sale was reduced by approximately $19.0 million , which was recorded within D&A.

(8) Intangible Assets, net and Goodwill

Intangible Assets, net

The following tables present certain information regarding our intangible assets as of March 31, 2018 and December 31, 2017 .



	March 31, 2018							December 31, 2017
	Gross Carrying Value		Accumulated Amortization			Net Balance		Gross Carrying Value		Accumulated Amortization			Net Balance
Amortizable intangible assets:
Customer relationships	$	1,101.8	$	(237.4	)	$	864.4	$	881.4	$	(214.8	)	$	666.6
Intellectual property	938.3		(368.4		)	569.9		788.1		(332.7		)	455.4
Licenses	419.7		(222.1		)	197.6		419.5		(206.9		)	212.6
Brand names	125.8		(50.1		)	75.7		125.7		(46.5		)	79.2
Trade names	108.8		(16.6		)	92.2		98.7		(14.7		)	84.0
Patents and other	21.4		(12.4		)	9.0		27.1		(14.5		)	12.6
	2,715.8		(907.0		)	1,808.8		2,340.5		(830.1		)	1,510.4
Non-amortizable intangible assets:
Trade names	96.3		(2.1		)	94.2		96.3		(2.1		)	94.2
Total intangible assets	$	2,812.1	$	(909.1	)	$	1,903.0	$	2,436.8	$	(832.2	)	$	1,604.6

The following reflects intangible amortization expense included within D&A:



	Three Months Ended
	March 31,
	2018		2017
Amortization expense	$	77.1	$	61.9

Goodwill

Following the NYX acquisition, in the first quarter of 2018, we revised our operating segments as described in Note 3.

As a result of our resegmentation, we reviewed our operating segments in accordance with ASC 350 to determine if additional reporting units exist within our operating segments based on the availability of discrete financial information that is regularly reviewed by segment management. We determined that we have nine reporting units as of March 31, 2018: Instant Products, U.S. Lottery Systems, International Lottery Systems, SG Gaming, legacy U.K. Gaming, Casino Management Systems, Table Products, Social Gaming, and SG Digital. The change in our reporting units resulted in a reallocation of $116.9 million of Interactive reporting unit (reporting unit existent prior to the change) goodwill balance to the Social Gaming reporting unit with the remaining $7.5 million allocated to the SG Digital reporting unit, which allocation was determined based on a relative fair value approach in accordance with ASC 350.

The table below reconciles the change in the carrying value of goodwill by business segment for the period from

December 31, 2017 to March 31, 2018 .



Goodwill	Gaming		Lottery		Interactive			Social		Digital		Totals
Balance as of December 31, 2017	$	2,475.5	$	356.2	$	124.4		$	—	$	—	$	2,956.1
Reporting unit reallocation adjustment	—		—		(124.4		)	116.9		7.5		—
Acquired goodwill ⁽¹⁾	—		—		—			—		376.4		376.4
Foreign currency adjustments	20.3		1.5		—			—		18.2		40.0
Balance as of March 31, 2018	$	2,495.8	$	357.7	$	—		$	116.9	$	402.1	$	3,372.5
(1) Tentative and preliminary based on our preliminary purchase price allocation as described in Note 1.

(9) Software, net

Software, net consisted of the following:



	March 31, 2018			December 31, 2017
Software	$	1,026.3		$	1,003.2
Accumulated amortization	(698.5		)	(663.8		)
Software, net	$	327.8		$	339.4

The following reflects amortization of software included within D&A:



	Three Months Ended
	March 31,
	2018		2017
Amortization expense	$	38.9	$	36.3

(10) Equity Investments

Equity investments total ed $179.4 million and $253.9 million as of March 31, 2018 and December 31, 2017 , respectively. We received distributions and dividends totaling $2.5 million and $3.7 million during the three months ended March 31, 2018 and 2017 , respectively.

(11) Long-Term and Other Debt

February 2018 Refinancing Transaction

On February 14, 2018, we successfully completed a series of financing transactions, including a private offering of an additional $900.0 million principal amount of our 2025 Secured Notes, €325.0 million of new 2026 Secured Euro Notes and €250.0 million of new 2026 Unsecured Euro Notes, and an amendment to our credit agreement to refinance our existing term loan B-4 facility and increase the term loans outstanding by $900.0 million under a new term loan B-5 facility (collectively referred to as the "February 2018 Refinancing"). We used the net proceeds of the February 2018 Refinancing to redeem $2,100.0 million of our outstanding 2022 Secured Notes, prepay a portion of our revolver borrowings under our credit agreement and pay accrued and unpaid interest thereon plus related premiums, fees and expenses. In connection with the amendment to our credit agreement, the interest rate on our term loans was decreased from LIBOR plus 3.25% to LIBOR plus 2.75% . We also increased the amount of the revolving credit agreement by $24.0 million to $620.2 million through October 18, 2018, with a step-down in availability at that time to $445.7 million until the extended maturity on October 18, 2020.

In connection with the February 2018 Refinancing, we capitalized $25.8 million in financing costs presented primarily as a reduction to long-term debt.

Outstanding Debt and Capital Leases

The following table reflects our outstanding debt:



	As of
	March 31, 2018											December 31, 2017
	Final Maturity	Rate(s)		Face value		Unamortized debt discount/premium and deferred financing costs, net			Book value			Book value
Senior Secured Credit Facilities:
2018 Revolver, varying interest rate	2018	variable		$	14.9	$	—		$	14.9		$	100.5
2020 Revolver, varying interest rate	2020	variable		40.1		—			40.1			249.5
Term Loan B-4	2024	variable		—		—			—			3,193.6
Term Loan B-5	2024	variable		4,174.6		(80.9		)	4,093.7			—
Senior Notes:
2022 Secured Notes	2022	7.000	%	—		—			—			2,130.7
2025 Secured Notes ⁽²⁾	2025	5.000	%	1,250.0		(18.9		)	1,231.1			343.7
2026 Secured Euro Notes ⁽³⁾	2026	3.375	%	403.3		(5.7		)	397.6			—
Unsecured Notes	2022	10.000	%	2,200.0		(28.4		)	2,171.6			2,170.1
2026 Unsecured Euro Notes ⁽³⁾	2026	5.500	%	310.3		(4.4		)	305.9			—
Subordinated Notes:
2020 Notes	2020	6.250	%	243.5		(1.5		)	242.0			241.8
2021 Notes	2021	6.625	%	340.6		(4.4		)	336.2			336.0
Capital lease obligations, 3.9% as of March 31, 2018 payable monthly through 2019	2019	3.900	%	11.3		—			11.3			10.7
Total long-term debt outstanding				$	8,988.6	$	(144.2	)	$	8,844.4		$	8,776.6
Less: current portion of long-term debt									(50.4		)	(40.3		)
Long-term debt, excluding current portion									$	8,794.0		$	8,736.3
Fair value of debt ⁽¹⁾				$	9,130.0

(1) Fair value of our fixed rate and variable interest rate debt is classified within level 2 in the fair value hierarchy and has been calculated based on the quoted market prices of our securities.

(2) In connection with the February 2018 Refinancing, we entered into certain cross-currency interest rate swap agreements to achieve more attractive interest rates by effectively converting a portion of the fixed-rate, $460.0 million U.S. Dollar-denominated 2025 Secured Notes, including the semi-annual interest payments through October 2023, to a fixed-rate Euro-denominated debt, with a fixed annual weighted average interest rate of approximately 2.946% . These cross-currency swaps have been designated as a hedge of our net investment in certain subsidiaries.

(3) We designated a portion of our 2026 Secured Euro Notes as a net investment non-derivative hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the change in foreign currency exchange rates of the Euro relative to the U.S. Dollar (see Note 12 for additional information).

We were in compliance with the financial covenants under our debt agreements as of March 31, 2018 .

Term Loan B-5

The new term B-5 loans that were entered into as part of the February 2018 Refinancing mature in August 2024 and will amortize in quarterly installments in an amount equal to 1.00% per annum of the stated principal amount thereof, with the remaining balance due at final maturity. The applicable margin for the new term B-5 loans is 2.75% per annum for eurocurrency (LIBOR) loans and 1.75% per annum for base rate loans, compared to 3.25% per annum for eurocurrency (LIBOR) loans and 2.25% per annum for base rate loans under the previous term B-4 loan facility.

2026 Secured and Unsecured Euro Notes

In connection with the February 2018 Refinancing, SGI issued €325.0 million aggregate principal amount of its new 2026 Secured Euro Notes and €250.0 million aggregate principal amount of its new 2026 Unsecured Euro Notes. Interest on both of these notes is payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2018. Both issuances were made at a price equal to 100.0% of the principal amount.

The 2026 Secured Euro Notes were issued pursuant to an indenture dated as of February 14, 2018 (the "2026 Secured Notes Indenture"). SGI may redeem some or all of the 2026 Secured Euro Notes at any time prior to February 15, 2021 at a redemption price equal to 100% of the principal amount of the 2026 Secured Euro Notes plus accrued and unpaid interest, if any, to the date of redemption plus a "make whole" premium. SGI may redeem some or all of the 2026 Secured Euro Notes at any time on or after February 15, 2021 at the prices specified in the 2026 Secured Notes indenture.

The 2026 Secured Euro Notes are senior secured obligations of SGI and are equally and ratably secured with SGI’s obligations under the credit agreement and the 2025 Secured Notes. The 2026 Secured Euro Notes are equal in rank to all of SGI’s existing and future senior debt and rank senior to all of SGI's existing and future senior subordinated debt. The 2026 Secured Euro Notes are guaranteed on a senior secured basis by SGC and all of its wholly owned U.S. subsidiaries (other than SGI, the unrestricted social gaming business entities and immaterial subsidiaries). The 2026 Secured Euro Notes are structurally subordinated to all of the liabilities of our non-guarantor subsidiaries.

The 2026 Unsecured Euro Notes were issued pursuant to an indenture dated as of February 14, 2018 (the "2026 Unsecured Notes Indenture"). SGI may redeem some or all of the 2026 Unsecured Euro Notes at any time prior to February 15, 2021 at a redemption price equal to 100% of the principal amount of the 2026 Unsecured Euro Notes plus accrued and unpaid interest, if any, to the date of redemption plus a "make whole" premium. SGI may redeem some or all of the 2026 Unsecured Euro Notes at any time on or after February 15, 2021 at the prices specified in the 2026 Unsecured Notes indenture.

The 2026 Unsecured Euro Notes are senior unsecured obligations of SGI and rank equally to all of SGI’s existing and future senior debt and rank senior to all of SGI's existing and future senior subordinated debt. The 2026 Unsecured Euro Notes are guaranteed on a senior unsecured basis by SGC and all of its wholly owned U.S. subsidiaries (other than SGI, the unrestricted social gaming business entities and immaterial subsidiaries). The 2026 Unsecured Euro Notes are structurally subordinated to all of the liabilities of our non-guarantor subsidiaries.

Effective April 30, 2018, the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes are listed on the Official List of The International Stock Exchange, and we expect that they will remain listed through their maturity.

2025 Senior Secured Notes

In connection with the February 2018 Refinancing, SGI issued $900.0 million in aggregate principal amount of additional 2025 Secured Notes under the existing indenture governing the 2025 Secured Notes. Therefore the additional 2025 Secured Notes have the same terms as the previously issued $350.0 million in aggregate principal amount of 2025 Secured Notes initially issued in October 2017 except for the issue date and offering price. The additional 2025 Secured Notes and the initial 2025 Secured Notes are treated as a single series of debt securities for all other purposes under the indenture governing the 2025 Secured Notes.

For additional information regarding terms of our credit agreement and 2025 Secured Notes, see Note 16 (Long-Term and Other Debt) in our 2017 10-K.

Loss on Debt Financing Transactions

The following are components of the loss on debt financing transactions resulting from debt extinguishment and modification accounting for the three months ended March 31, 2018 and 2017 :



	Three Months Ended March 31,
	2018			2017
Repayment and cancellation of principal balance at premium	$	110.3		$	—
Unamortized debt (premium) discount and deferred financing costs, net	(29.8		)	25.8
Third party debt issuance fees	12.7			3.9
Total loss on debt financing transactions	$	93.2		$	29.7

(12) Fair Value Measurements

The fair value of our financial assets and liabilities is determined by reference to market data and other valuation techniques as appropriate. We believe the fair value of our financial instruments, which are principally cash and cash equivalents, restricted cash, accounts receivable, other current assets, accounts payable and accrued liabilities, approximates their recorded values. Our assets and liabilities measured at fair value on a recurring basis are described below.

Derivative Financial Instruments

We record derivative financial instruments on the balance sheet at their respective fair values. As described in Note 1, during the first quarter of 2018, we adopted ASU 2017-12. As of March 31, 2018, we held the following derivative instruments that were accounted for pursuant to ASC 815:

Interest Rate Swap Contracts

We currently use interest rate swap contracts as described below to mitigate gains or losses associated with the change in expected cash flows due to fluctuations in interest rates on our variable rate debt. Our interest rate swaps that we held as of December 31, 2017 expired in January 2018.

In February 2018, we entered into interest rate swap contracts to hedge a portion of our interest expense associated with our variable rate debt to effectively fix the interest rate that we pay. These interest rate swap contracts are designated as cash flow hedges under ASC 815. We pay interest at a weighted-average fixed rate of 2.4418% and receive interest at a variable rate equal to one-month LIBOR. The total notional amount of interest rate swaps outstanding was $800.0 million as of March 31, 2018 . These hedges mature in February 2022.

These hedges are highly effective in offsetting changes in our future expected cash flows due to the fluctuation in the one-month LIBOR rate associated with our variable rate debt. Going forward, we expect to qualitatively monitor the effectiveness of these hedges on a quarterly basis in accordance with ASU 2017-12. As a result of the effective matching of the critical terms on our variable rate interest expense being hedged to the hedging instruments being used, we expect these hedges to remain highly effective.

All gains and losses from these hedges are recorded in Other comprehensive income (loss) until the future underlying payment transactions occur. Any realized gains or losses resulting from the hedges are recognized (together with the hedged transaction) as interest expense. We estimate the fair value of our interest rate swap contracts by discounting the future cash flows of both the fixed rate and variable rate interest payments based on market yield curves. The inputs used to measure the fair value of our interest rate swap contracts are categorized as Level 2 in the fair value hierarchy.

The following table shows the gains and interest expense recognized on our interest rate swap contracts:



	Three Months Ended
	March 31,
	2018			2017
Gains recorded in accumulated other comprehensive loss, net of tax	$	(2.6	)	$	(2.8	)
Interest expense recorded related to interest rate swap contracts	0.5			2.1
Ineffectiveness recorded in interest expense	—			0.6

We do not expect to reclassify material amounts from accumulated other comprehensive loss to interest expense in the next twelve months.

The following table shows the effect of interest rate swap contracts designated as cash flow hedges on the consolidated statements of operations and comprehensive loss:



	Three Months Ended
	March 31,
	2018
	Interest expense
Total amounts of expense line item presented in the statements of operations and comprehensive loss in which the effects of cash flow hedges are recorded	$	(154.8	)
Hedged item	(1.6		)
Derivative designated as hedging instrument	1.1

Cross-Currency Interest Rate Swaps

In connection with the February 2018 Refinancing (see Note 11), we entered into certain cross-currency interest rate swap agreements to achieve more attractive interest rates by effectively converting $460.0 million of our fixed-rate U.S. Dollar-denominated 2025 Secured Notes, including the semi-annual interest payments through October 2023, to fixed-rate Euro-denominated debt, with a fixed annual weighted average interest rate of approximately 2.946% . We have designated these cross-currency interest rate swap agreements as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the changes in foreign currency exchange rates of the Euro relative to the U.S. Dollar.

We use the spot method to measure the effectiveness of our net investment hedge. Under this method, for each reporting period, the change in the fair value of the $460.0 million cross-currency interest rate swaps is reported in foreign currency translation gain (loss) in Accumulated Other Comprehensive Loss. The cross-currency basis spread (along with other components of the cross-currency swap's fair value excluded from the spot method effectiveness assessment) are amortized and recorded to interest expense. We evaluate the effectiveness of our net investment hedge at the beginning of each quarter.

The following table shows the fair value of our hedges:



	Balance Sheet Line Item	March 31, 2018		December 31, 2017
Interest rate swaps ⁽¹⁾⁽³⁾	Other assets/(accrued liabilities)	$	2.6	$	(0.2	)
Cross-currency interest rate swaps ⁽²⁾⁽³⁾	Other long-term liabilities	20.8		—
(1) The respective gain of $2.6 million for the quarter ended March 31, 2018 is reflected in Derivative financial instrument unrealized gain, net of tax in Other comprehensive income. (2) The respective loss of $20.8 million for the quarter ended March 31, 2018 is reflected in Foreign currency translation loss in Other comprehensive income. (3) The inputs used to measure the fair value of our interest rate swap contracts are categorized as Level 2 in the fair value hierarchy.

Net Investment Non-derivative Hedge - 2026 Secured Euro Notes

In February 2018, we designated $125.0 million of our 2026 Secured Euro Notes as a net investment non-derivative hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our results caused by the changes in foreign currency exchange rates of the Euro relative to the U.S. Dollar.

We use the spot method to measure the effectiveness of our net investment non-derivative hedge. Under this method, for each reporting period, the change in the hedged portion of the carrying value of the 2026 Secured Euro Notes due to remeasurement is reported in foreign currency translation gain (loss) in Other comprehensive income, and the remaining remeasurement change is recognized in Loss on remeasurement of debt in our consolidated statements of operations and comprehensive loss. We evaluate the effectiveness of our net investment non-derivative hedge at the beginning of each quarter and the inputs used to measure the fair value of this non-derivative hedge are categorized as Level 2 in the fair value hierarchy.

Contingent Considerations

In connection with our 2017 acquisitions, we have recorded certain contingent considerations, of which the values are primarily based on reaching certain earnings-based metrics, with a maximum payout of up to $38.5 million . The related liabilities were recorded at fair value on the acquisition date as part of the consideration transferred and are remeasured each reporting period. The inputs used to measure the fair value of our contingent considerations are categorized as Level 3 in the fair value hierarchy.

Based on the first quarter of 2018 remeasurement and as a result of changes in significant unobservable inputs primarily consisting of projected earnings-based measures and probability of achievement (categorized as Level 3 in the hierarchy as established by ASC 820), we increased the fair value of certain long-term contingent consideration by $18.0 million , which change was included in Restructuring and other. Contingent considerations as of March 31, 2018 and December 31, 2017 were $25.5 million and $7.5 million , respectively, and are primarily included in other long-term liabilities.

We did not have assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2018 other than those acquired as a part of the NYX acquisition (see Note 1) and the fair value of assets held for sale (see Note 7).

(13) Stockholders' Deficit

Stock Based Compensation

The following reflects total stock-based compensation expense recognized under all programs:



	Three Months Ended
	March 31,
	2018		2017
Related to stock options	$	1.4	$	0.2
Related to RSUs	7.4		5.7
Total	$	8.8	$	5.9

(14) Income Taxes

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Based upon the evaluation of all available evidence, and considering the projected U.S. pre-tax losses for 2018, a valuation allowance has been maintained for the U.S. operations as of March 31, 2018. We maintained other valuation allowances for certain non-U.S. jurisdictions with cumulative losses.

The effective income tax rates for the three months ended March 31, 2018 were (3.2)% , and (19.9)% for the three months ended March 31, 2017 and were determined using an estimated annual effective tax rate after considering any discrete items for such periods. Due to a valuation allowance against our U.S. deferred tax assets, the effective tax rate for the three months ended March 31, 2018 does not include the benefit of the current year U.S. tax losses. In the three months ended March 31, 2017, we recorded an overall tax expense due to the application of a full valuation allowance against the U.S. pre-tax losses coupled with a tax expense on foreign pre-tax earnings. The change in the effective tax rates relates primarily to the overall mix of income in our foreign jurisdictions.

As disclosed in our 2017 10-K Note 21, our accounting for the Tax Cuts and Jobs Act (the "Tax Act") is incomplete; however, we were able to reasonably estimate certain effects, and consequently we recorded provisional adjustments associated with: (1) impact on deferred tax assets (DTAs) and deferred tax liabilities (DTLs) from reduction of U.S. federal corporate income tax rate; (2) the deemed repatriation transition tax; and (3) impact on valuation allowances. Additionally, as disclosed in

our 2017 10-K Note 21, we were not yet able to reasonably estimate the effects of the Tax Act for the Global Intangible Low Income Tax (GILTI). There were no changes to these items during the first quarter of 2018, as we continue to evaluate the impacts of the Tax Act.

Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, we are allowed to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into our measurement of deferred taxes (the “deferred method”). Our selection of an accounting policy related to the new GILTI tax rules will depend, in part, on analyzing projections of our global overall mix of income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, the expected impact. Because whether we expect to have future U.S. inclusions in taxable income related to GILTI depends on a number of different aspects of our estimated future global overall mix of income, we are not yet able to reasonably estimate the long-term effects of this provision of the Tax Act; therefore, we have not recorded any potential deferred tax effects related to GILTI in the consolidated financial statements and have not made a policy decision regarding whether to record deferred taxes on GILTI or to use the period cost method. We expect to complete our accounting within the prescribed measurement period.

(15) Litigation

We are involved in various routine and other specific legal proceedings, including the following which are described in Note 22 within our 2017 10-K: Colombia litigation and SNAI litigation . There have been no material changes to these matters since the 2017 10-K was filed with the SEC, except as described below.

We record an accrual for legal contingencies when it is both probable that a liability has been incurred and the amount or range of the loss can be reasonably estimated (although, as discussed below, there may be an exposure to loss in excess of the accrued liability). We evaluate our accruals for legal contingencies at least quarterly and, as appropriate, establish new accruals or adjust existing accruals to reflect (1) the facts and circumstances known to us at the time, including information regarding negotiations, settlements, rulings and other relevant events and developments, (2) the advice and analyses of counsel and (3) the assumptions and judgment of management. Legal costs associated with our legal proceedings are expensed as incurred. We had accrued liabilities of $20.3 million and $4.7 million for all of our legal matters that were contingencies as of March 31, 2018 and December 31, 2017 , respectively.

Substantially all of our legal contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss involves a series of complex judgments about future events. Consequently, the ultimate outcomes of our legal contingencies could result in losses in excess of amounts we have accrued. We may be unable to estimate a range of possible losses for some matters pending against us or our subsidiaries, even when the amount of damages claimed against us or our subsidiaries is stated because, among other things: (1) the claimed amount may be exaggerated or unsupported; (2) the claim may be based on a novel legal theory or involve a large number of parties; (3) there may be uncertainty as to the likelihood of a class being certified or the ultimate size of the class; (4) there may be uncertainty as to the outcome of pending appeals or motions; (5) the matter may not have progressed sufficiently through discovery or there may be significant factual or legal issues to be resolved or developed; and/or (6) there may be uncertainty as to the enforceability of legal judgments and outcomes in certain jurisdictions. Other matters have progressed sufficiently that we are able to estimate a range of possible loss. For those legal contingencies disclosed in Note 22 in our 2017 10-K and this Note 12 as well as those related to the previously disclosed settlement agreement entered into in February 2015 with SNAI S.p.a., as to which a loss is reasonably possible, whether in excess of a related accrued liability or where there is no accrued liability, and for which we are able to estimate a range of possible loss, the current estimated range is up to approximately $14.9 million in excess of the accrued liabilities (if any) related to those legal contingencies. This aggregate range represents management’s estimate of additional possible loss in excess of the accrued liabilities (if any) with respect to these matters based on currently available information, including any damages claimed by the plaintiffs, and is subject to significant judgment and a variety of assumptions and inherent uncertainties. For example, at the time of making an estimate, management may have only preliminary, incomplete, or inaccurate information about the facts underlying a claim; its assumptions about the future rulings of the court or other tribunal on significant issues, or the behavior and incentives of adverse parties, regulators, indemnitors or co‑defendants, may prove to be wrong; and the outcomes it is attempting to predict are often not amenable to the use of statistical or other quantitative analytical tools. In addition, from time to time an outcome may occur that management had not accounted for in its estimate because it had considered that outcome to be remote. Furthermore, as noted above, the aggregate range does not include any matters for which we are not able to estimate a range of possible loss. Accordingly, the estimated aggregate range of possible loss does not represent our maximum loss exposure. Any such losses could have a material adverse impact on our results of operations, cash flows or financial condition. The legal proceedings underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate.

Shuffle Tech Matter

In April 2015, Shuffle Tech International, LLC, Aces Up Gaming, Inc. and Poydras-Talrick Holdings LLC brought a civil action in the United States District Court for the Northern District of Illinois against the Company, Bally Technologies, Inc., and Bally Gaming, Inc., alleging monopolization of the market for card shufflers in violation of federal antitrust laws, fraudulent procurement of patents on card shufflers, unfair competition and deceptive trade practices. Specifically, the plaintiffs claim that the defendants used certain shuffler patents in a predatory manner to create and maintain a monopoly in the relevant shuffler market. The plaintiffs’ complaint seeks no less than $100.0 million in compensatory damages (which is subject to trebling), attorneys’ fees and costs, as well as injunctive and declaratory relief. In June 2015, the defendants filed a motion to dismiss. In October 2015, the district court dismissed all of the plaintiffs’ claims against the defendants with prejudice, except for the claims of violation of antitrust laws related to the fraudulent procurement of patents on card shufflers. In September 2017, the district court denied defendants’ motion for summary judgment, and the matter was scheduled for trial for May 2018. On April 23, 2018, a court-ordered settlement conference before a magistrate judge was held, but no settlement was reached. On April 25, 2018, plaintiffs filed with the U.S. District Court an itemization of claimed damages, pursuant to which the plaintiffs, at trial, will seek to recover compensatory damages ranging from $105.2 million to $139.5 million (which is subject to trebling), and also their reasonable attorneys’ fees and costs. Trial continues to be scheduled for May 22 - June 8, 2018. We are unable at this time to estimate a range of reasonably possible losses above the amount we have accrued for this matter due to the complexity of the plaintiffs’ claims, and the unpredictability of the outcome of the proceedings in the district court, and on any appeal therefrom.

Washington State Matter

On April 17, 2018, plaintiff Sheryl Fife filed a putative class action against Scientific Games Corporation in the United States District Court for the Western District of Washington. In her complaint, plaintiff seeks to represent a putative class of all persons in the State of Washington who purchased and allegedly lost chips playing Scientific Games’ online social casino games, including but not limited to Jackpot Party ^® Social Casino and Gold Fish ^® Casino . The complaint asserts claims for alleged violations of Washington's Recovery of Money Lost at Gambling Act, Washington's consumer protection statute, and for unjust enrichment, and seeks unspecified money damages (including treble damages as appropriate), the award of reasonable attorneys’ fees and costs, pre- and post-judgment interest, and injunctive and/or declaratory relief.

For additional information regarding our pending litigation matters, see Note 22 in our 2017 10-K.

(16) Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries

We conduct substantially all of our business through our U.S. and foreign subsidiaries. As of March 31, 2018, SGI's obligations under the 2020 Notes, the 2021 Notes, the 2025 Secured Notes, the 2026 Secured Euro Notes, the Unsecured Notes and the 2026 Unsecured Euro Notes were fully and unconditionally and jointly and severally guaranteed by SGC and the Guarantor Subsidiaries other than SGI. We redeemed all of the outstanding 2022 Secured Notes during the first quarter of 2018, which were previously issued by SGI and fully and unconditionally and jointly and severally guaranteed by SGC and the Guarantor Subsidiaries other than SGI. The guarantees of our 2022 Secured Notes were released in connection with the redemption of the 2022 Secured Notes. We redeemed all of the outstanding 2018 Notes on March 17, 2017, which were previously issued by SGC and fully and unconditionally and jointly and severally guaranteed by the Guarantor Subsidiaries. The guarantees of our 2020 Notes, 2021 Notes, 2025 Secured Notes, 2026 Secured Euro Notes, Unsecured Notes, and 2026 Unsecured Euro Notes will terminate under the following customary circumstances: (1) the sale or disposition of the capital stock of the guarantor (including by consolidation or merger of the guarantor into another person); (2) the liquidation or dissolution of the guarantor; (3) the defeasance or satisfaction and discharge of the notes; (4) the release of the guarantor from any guarantees of indebtedness of SGC and SGI; and (5) the proper designation of the guarantor as an unrestricted subsidiary pursuant to the indenture governing the respective Notes.

Presented below is condensed consolidating financial information for (1) SGC, (2) SGI, (3) the Guarantor Subsidiaries and (4) the Non-Guarantor Subsidiaries as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017. The condensed consolidating financial information has been presented to show the nature of assets held, results of operations and cash flows of SGC, SGI, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries assuming the current guarantee structures of the 2018 Notes, the 2020 Notes, the 2021 Notes, the 2022 Secured Notes, the Unsecured Notes, the 2025 Secured Notes, the 2026 Secured Euro Notes, and the 2026 Unsecured Euro Notes were in effect at the beginning of the periods presented.

The condensed consolidating financial information reflects the investments of SGC in SGI and in the Guarantor Subsidiaries and Non-Guarantor Subsidiaries using the equity method of accounting. They also reflect the investments of the

Guarantor Subsidiaries in the Non-Guarantor Subsidiaries. Net changes in intercompany due from/due to accounts are reported in the accompanying Supplemental Condensed Consolidating Statements of Cash Flows as investing activities if the applicable entities have a net investment (asset) in intercompany accounts and as a financing activity if the applicable entities have a net intercompany borrowing (liability) balance.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

As of March 31, 2018



	SGC (Parent)			SGI (Issuer ¹ )			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Assets
Cash and cash equivalents	$	40.7		$	—		$	—	$	74.8	$	(5.6	)	$	109.9
Restricted cash	—			0.7			29.2		4.2		—			34.1
Accounts receivable, net	—			65.0			190.3		300.0		(1.2		)	554.1
Notes receivable, net	—			—			115.2		17.0		—			132.2
Inventories	—			28.0			91.2		135.4		(23.4		)	231.2
Prepaid expenses, deposits and other current assets	11.7			63.5			95.4		80.3		(1.2		)	249.7
Property and equipment, net	26.9			94.8			228.1		182.6		(27.1		)	505.3
Investment in subsidiaries	3,063.8			902.7			1,106.4		—		(5,072.9		)	—
Goodwill	—			240.2			1,886.0		1,246.3		—			3,372.5
Intangible assets, net	13.3			34.7			1,299.0		556.0		—			1,903.0
Intercompany balances	—			5,832.2			—		—		(5,832.2		)	—
Software, net	65.0			31.0			180.3		51.5		—			327.8
Other assets ⁽²⁾	234.7			421.1			54.5		214.6		(607.5		)	317.4
Total assets	$	3,456.1		$	7,713.9		$	5,275.6	$	2,862.7	$	(11,571.1	)	$	7,737.2
Liabilities and stockholders' (deficit) equity
Current portion of long-term debt	$	—		$	41.7		$	—	$	8.7	$	—		$	50.4
Other current liabilities	87.8			180.0			230.7		245.3		(37.9		)	705.9
Long-term debt, excluding current portion	—			8,791.4			—		2.6		—			8,794.0
Other long-term liabilities	128.3			30.9			620.9		202.3		(599.4		)	383.0
Intercompany balances	5,436.1			—			59.7		336.4		(5,832.2		)	—
Stockholders' (deficit) equity	(2,196.1		)	(1,330.1		)	4,364.3		2,067.4		(5,101.6		)	(2,196.1		)
Total liabilities and stockholders' (deficit) equity	$	3,456.1		$	7,713.9		$	5,275.6	$	2,862.7	$	(11,571.1	)	$	7,737.2

(1) Issuer of obligations under the 2020 Notes, the 2021 Notes, the 2022 Secured Notes, which were redeemed in March 2018, the Unsecured Notes, the 2025 Secured Notes, which were issued in October 2017, and the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes, which were issued in February 2018. (2) Includes $15.0 million and $0.7 million in non-current restricted cash for Guarantor Subsidiaries and Non-Guarantor Subsidiaries, respectively.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2017



	SGC (Parent)			SGI (Issuer ¹ )			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Assets
Cash and cash equivalents	$	732.6		$	—		$	—	$	59.4	$	(3.2	)	$	788.8
Restricted cash	—			0.6			28.3		0.1		—			29.0
Accounts receivable, net	0.4			68.1			192.6		279.8		—			540.9
Notes receivable, net	—			—			121.1		22.4		—			143.5
Inventories	—			40.7			91.8		131.8		(21.2		)	243.1
Prepaid expenses, deposits and other current assets	6.5			30.3			41.6		52.7		—			131.1
Property and equipment, net	28.8			91.5			295.6		179.9		(27.6		)	568.2
Investment in subsidiaries	3,098.7			867.9			987.7		—		(4,954.3		)	—
Goodwill	—			240.3			1,880.4		835.4		—			2,956.1
Intangible assets, net	15.7			34.9			1,335.3		218.7		—			1,604.6
Intercompany balances	—			5,889.8			—		222.5		(6,112.3		)	—
Software, net	67.2			24.7			199.0		48.5		—			339.4
Other assets ⁽²⁾	234.4			388.8			62.0		270.3		(574.9		)	380.6
Total assets	$	4,184.3		$	7,677.6		$	5,235.4	$	2,321.5	$	(11,693.5	)	$	7,725.3
Liabilities and stockholders' (deficit) equity
Current portion of long-term debt	$	—		$	32.8		$	—	$	7.5	$	—		$	40.3
Other current liabilities	67.6			199.0			254.2		206.4		(27.7		)	699.5
Long-term debt, excluding current portion	—			8,733.0			—		3.3		—			8,736.3
Other long-term liabilities	68.8			11.3			650.3		110.9		(565.1		)	276.2
Intercompany balances	6,074.9			—			37.4		—		(6,112.3		)	—
Stockholders' (deficit) equity	(2,027.0		)	(1,298.5		)	4,293.5		1,993.4		(4,988.4		)	(2,027.0		)
Total liabilities and stockholders' (deficit) equity	$	4,184.3		$	7,677.6		$	5,235.4	$	2,321.5	$	(11,693.5	)	$	7,725.3

(1) Issuer of obligations under the 2020 Notes, the 2021 Notes, the 2022 Secured Notes, the 2025 Secured Notes and the Unsecured Notes. (2) Includes $16.1 million and $0.7 million in non-current restricted cash for Guarantor Subsidiaries and Non-Guarantor Subsidiaries, respectively.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended March 31, 2018



	SGC (Parent)			SGI (Issuer ¹ )			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	129.6		$	386.9		$	368.9		$	(73.6	)	$	811.8
Cost of services, cost of product sales and cost of instant products ⁽²⁾	—			86.3			118.4			153.1			(61.1		)	296.7
SG&A	37.8			10.9			57.4			78.8			(13.3		)	171.6
R&D	—			0.4			22.9			30.5			—			53.8
D&A	9.2			7.6			126.1			48.4			(3.2		)	188.1
Restructuring and other	26.1			0.8			1.5			23.8			—			52.2
Operating (loss) income	(73.1		)	23.6			60.6			34.3			4.0			49.4
Interest expense	—			(154.4		)	—			(0.4		)	—			(154.8		)
Loss on debt financing transactions	—			(93.2		)	—			—			—			(93.2		)
Other income (expense), net	15.6			136.1			(132.9		)	(15.8		)	—			3.0
Net (loss) income before equity in income of subsidiaries and income taxes	(57.5		)	(87.9		)	(72.3		)	18.1			4.0			(195.6		)
Equity in (loss) income of subsidiaries	(83.9		)	3.6			10.4			—			69.9			—
Income tax (expense) benefit	(60.4		)	33.2			25.3			(4.3		)	—			(6.2		)
Net (loss) income	$	(201.8	)	$	(51.1	)	$	(36.6	)	$	13.8		$	73.9		$	(201.8	)

Other comprehensive income	52.1			(17.1		)	22.4			73.1			(78.4		)	52.1
Comprehensive (loss) income	$	(149.7	)	$	(68.2	)	$	(14.2	)	$	86.9		$	(4.5	)	$	(149.7	)

(1) Issuer of obligations under the 2020 Notes, the 2021 Notes, the 2022 Secured Notes, which were redeemed in March 2018, the Unsecured Notes, the 2025 Secured Notes, which were issued in October 2017, and the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes, which were issued in February 2018. (2) Exclusive of D&A.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31, 2017



	SGC (Parent)			SGI (Issuer ¹ )			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	118.0		$	399.8		$	264.6		$	(57.0	)	$	725.4
Cost of services, cost of product sales and cost of instant products ⁽²⁾	—			82.9			123.7			121.8			(48.4		)	280.0
SG&A	29.7			9.5			48.8			62.4			(9.7		)	140.7
R&D	0.5			1.4			34.2			6.3			—			42.4
D&A	20.3			7.5			111.9			27.8			(2.4		)	165.1
Restructuring and other	3.8			0.2			4.2			1.0			—			9.2
Operating (loss) income	(54.3		)	16.5			77.0			45.3			3.5			88.0
Interest expense	(4.5		)	(154.6		)	—			(0.3		)	—			(159.4		)
Loss on early extinguishment of debt	(1.1		)	(28.6		)	—			—			—			(29.7		)
Other (expense) income, net	(20.8		)	50.7			(25.5		)	12.6			—			17.0
Net (loss) income before equity in income of subsidiaries and income taxes	(80.7		)	(116.0		)	51.5			57.6			3.5			(84.1		)
Equity in income of subsidiaries	4.7			17.3			15.4			—			(37.4		)	—
Income tax (expense) benefit	(24.8		)	43.4			(20.6		)	(14.7		)	—			(16.7		)
Net (loss) income	$	(100.8	)	$	(55.3	)	$	46.3		$	42.9		$	(33.9	)	$	(100.8	)

Other comprehensive (loss) income	36.1			4.0			21.5			29.5			(55.0		)	36.1
Comprehensive (loss) income	$	(64.7	)	$	(51.3	)	$	67.8		$	72.4		$	(88.9	)	$	(64.7	)

(1) Issuer of obligations under the 2020 Notes, the 2021 Notes, the 2022 Secured Notes, which were redeemed in March 2018, the Unsecured Notes and the 2025 Secured Notes, which were issued in October 2017. (2) Exclusive of D&A.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended March 31, 2018



	SGC (Parent)			SGI (Issuer ¹ )			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net cash (used in) provided by operating activities	$	(32.0	)	$	(25.4	)	$	34.3		$	55.4		$	(2.4	)	$	29.9
Cash flows from investing activities:
Capital expenditures	(7.9		)	(17.1		)	(44.5		)	(18.5		)	—			(88.0		)
Acquisitions of businesses and assets, net of cash acquired	—			—			(9.6		)	(264.5		)	—			(274.1		)
Distributions of capital from equity investments	—			—			—			1.5			—			1.5
Other, principally change in intercompany investing activities	—			74.0			—			—			(74.0		)	—
Net cash (used in) provided by investing activities	(7.9		)	56.9			(54.1		)	(281.5		)	(74.0		)	(360.6		)
Cash flows from financing activities:
Proceeds net of payments on long-term debt	—			7.1			—			(1.8		)	—			5.3
Repayment of assumed NYX debt	—			—			—			(288.2		)	—			(288.2		)
Payments of debt issuance and deferred financing costs	—			(38.5		)	—			—			—			(38.5		)
Payments on license obligations	(6.5		)	—			—			—			—			(6.5		)
Net redemptions of common stock under stock-based compensation plans and other	(15.9		)	—			(1.8		)	—			—			(17.7		)
Other, principally change in intercompany financing activities	(629.6		)	—			21.9			533.7			74.0			—
Net cash (used in) provided by financing activities	(652.0		)	(31.4		)	20.1			243.7			74.0			(345.6		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			—			1.9			—			1.9
(Decrease) increase in cash, cash equivalents and restricted cash	(691.9		)	0.1			0.3			19.5			(2.4		)	(674.4		)
Cash, cash equivalents and restricted cash, beginning of period	732.6			0.6			43.9			60.2			(3.2		)	834.1
Cash, cash equivalents and restricted cash end of period	$	40.7		$	0.7		$	44.2		$	79.7		$	(5.6	)	$	159.7

(1) Issuer of obligations under the 2020 Notes, the 2021 Notes, the 2022 Secured Notes, which were redeemed in March 2018, the Unsecured Notes, the 2025 Secured Notes, which were issued in October 2017, and the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes, which were issued in February 2018.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended March 31, 2017



	SGC (Parent)			SGI (Issuer ¹ )			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net cash (used in) provided by operating activities	$	(62.2	)	$	(20.9	)	$	104.3		$	94.3		$	(4.5	)	$	111.0
Cash flows from investing activities:
Capital expenditures	(9.3		)	(4.7		)	(26.2		)	(21.1		)	—			(61.3		)
Acquisition of business, net of cash acquired	—			—			(21.5		)	—			—			(21.5		)
Distributions of capital from equity investments	—			—			—			1.3			—			1.3
Changes in other assets and liabilities and other	—			—			—			2.0			—			2.0
Other, principally change in intercompany investing activities	—			(221.9		)	—			(60.6		)	282.5			—
Net cash used in investing activities	(9.3		)	(226.6		)	(47.7		)	(78.4		)	282.5			(79.5		)
Cash flows from financing activities:
Net payments of long-term debt including proceeds and repurchases of senior notes and term loans	(250.0		)	274.0			—			(1.5		)	—			22.5
Payments of debt issuance and deferred financing costs	—			(27.2		)	—			—			—			(27.2		)
Payments on license obligations	(9.2		)	—			(0.6		)	—			—			(9.8		)
Net redemptions of common stock under stock-based compensation plans	(0.6		)	—			—			—			—			(0.6		)
Other, principally change in intercompany financing activities	336.4			—			(53.9		)	—			(282.5		)	—
Net cash provided by (used in) financing activities	76.6			246.8			(54.5		)	(1.5		)	(282.5		)	(15.1		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			—			2.5			—			2.5
Increase (decrease) in cash, cash equivalents and restricted cash	5.1			(0.7		)	2.1			16.9			(4.5		)	18.9
Cash, cash equivalents and restricted cash, beginning of period	32.7			1.7			41.0			82.6			(1.1		)	156.9
Cash, cash equivalents and restricted cash end of period	$	37.8		$	1.0		$	43.1		$	99.5		$	(5.6	)	$	175.8

(1) Issuer of obligations under the 2020 Notes, the 2021 Notes, the 2022 Secured Notes, which were redeemed in March 2018, the Unsecured Notes and the 2025 Secured Notes, which were issued in October 2017.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to enhance the reader's understanding of our operations and current business environment and should be read in conjunction with the description of our business included under Part I, Item 1 "Condensed Consolidated Financial Statements" and Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q and under Part I, Item 1 "Business," Item 1A "Risk Factors" and Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our 2017 10-K.

This "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be read in conjunction with the disclosures and information contained and referenced under "Forward-Looking Statements" and "Risk Factors" included in this Quarterly Report on Form 10-Q and "Risk Factors" included in our 2017 10-K. As used in this MD&A, the terms "we," "us," and "our" mean SGC together with its consolidated subsidiaries.

BUSINESS OVERVIEW

We are a leading developer of technology‑based products and services and associated content for the worldwide gaming, lottery, social and digital gaming industries. Our portfolio of revenue-generating activities primarily includes supplying gaming machines and game content, casino management systems, and table game products and services to licensed gaming entities; providing instant and draw‑based lottery games, lottery systems, and lottery content and services to lottery operators; providing social casino solutions to retail consumers and regulated gaming entities as applicable; and providing a comprehensive suite of digital RMG and sports betting solutions, distribution platforms, content, products and services. We also gain access to technologies and pursue global expansion through strategic acquisitions and equity investments.

Recent Events


•	Successfully completed the NYX acquisition.

•

Successfully completed a series of financing transactions, including a private offering of an additional $900.0 million principal amount of our 2025 Secured Notes, €325.0 million of new 2026 Secured Euro Notes and €250.0 million of new 2026 Unsecured Euro Notes, and an amendment to our credit agreement to refinance our existing term loan B-4 facility and increase the term loans outstanding by $900.0 million under a new term loan B-5 facility (collectively referred to as the "February 2018 Refinancing"). We used the net proceeds of the February 2018 Refinancing to redeem $2,100.0 million of our outstanding 2022 Secured Notes and prepay a portion of our revolver borrowings under our credit agreement and pay accrued and unpaid interest thereon plus related premiums, fees and expenses. These actions have lowered our annual cash interest cost by approximately $69.0 million at current interest rates and extended the maturity of $2,100.0 million of our debt from 2022 out to 2024, 2025 and 2026.

Segments

Beginning in the first quarter of 2018 (see Note 1), we report our operations in four business segments — Gaming, Lottery, Social and Digital — representing our different products and services. See "Consolidated Results" below and Note 3 for additional business segment information.

Foreign Exchange

Our results are impacted by changes in foreign currency exchange rates used in the translation of foreign functional currencies into USD and the re-measurement of foreign currency transactions or balances. The impact of foreign currency exchange rate fluctuations represents the difference between current rates and prior-period rates applied to current activity. Our exposure to foreign currency volatility on revenue is as follows:



	Three Months Ended
	March 31,
	2018				2017
($ in millions)	Revenue		% Consolidated Revenue		Revenue		% Consolidated Revenue
Foreign Currency:
British Pound Sterling	$	83.3	10.3	%	$	51.4	7.1	%
Euro	54.2		6.7	%	33.1		4.6	%
Australian Dollar	24.7		3.0	%	23.9		3.3	%

We also have foreign currency exposure related to certain of our equity investments, cross-currency interest rate swaps, and Euro-denominated debt. See "Risk Factors" under Item 1A and "Consolidated Results — Other Factors Affecting 2017 Net Loss Comparability — Foreign exchange" under Item 7 in our 2017 10-K and Item 3 "Quantitative and Qualitative Disclosures about Market Risk" in this Quarterly Report on Form 10-Q. Foreign currency had a positive impact of $12.1 million on revenue for the three months ended March 31, 2018 .

CONSOLIDATED RESULTS



	Three Months Ended March 31,						Variance
($ in millions)	2018			2017			2018 vs. 2017
Total revenue	$	811.8		$	725.4		$	86.4		12	%
Total operating expenses	762.4			637.4			125.0			20	%
Operating income	49.4			88.0			(38.6		)	(44	)%
Net loss before income taxes	(195.6		)	(84.1		)	(111.5		)	133	%
Net loss	$	(201.8	)	$	(100.8	)	$	(101.0	)	100	%

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

Revenue



	Three Months Ended March 31,				Variance
($ in millions)	2018		2017		2018 vs. 2017
Gaming	$	443.0	$	440.0	$	3.0	1	%
Lottery	201.7		189.1		12.6		7	%
Social	97.4		80.2		17.2		21	%
Digital	69.7		16.1		53.6		333	%
Total revenue	$	811.8	$	725.4	$	86.4	12	%

Gaming revenue slightly increased primarily due to higher gaming systems and table products sales, partially offset by lower unit sales of gaming machines combined with a decrease in WAP and premium game service revenue. A decrease in WAP and premium game service revenue is largely due to ASC 606 adoption, as the three months ended March 31, 2018 reflects $4.4 million in jackpot expense for our WAP services recorded as a reduction to revenue, which was reflected as a cost of services in the prior-year comparable period. The Gaming revenue increase included a favorable foreign currency impact of $9.1 million in the three months ended March 31, 2018 .

Lottery revenue increased primarily due to higher instant products revenue and to a lesser extent higher lottery systems revenue. The increase in instant products revenue is reflective of ASC 606 adoption as instant products sold on a POS basis are now recognized when the lotteries have taken delivery of shipments of instant products pursuant to the terms of the contract. The ASC 606 instant products sold on a POS basis adoption change represented $8.1 million of the revenue increase. Lottery revenue increases included a favorable foreign currency impact of $3.0 million for the three months ended March 31, 2018 .

Social revenue increased primarily due to continued growth in our Social gaming business, reflecting the ongoing popularity of Jackpot Party Social Casino and the success of more recent apps, such as the introduction of the 88 Fortunes ^® app in the first quarter of 2017, as well as the impact of the acquisition of Spicerack, which closed in April 2017, and its Bingo Showdown ^TM social gaming app.

Digital revenue increased primarily due to the impact of the NYX acquisition completed on January 5, 2018, which comprised $49.2 million in revenue.

Operating expenses



	Three Months Ended March 31,				Variance
($ in millions)	2018		2017		2018 vs. 2017
Operating expenses:
Cost of services	$	121.9	$	103.3	$	18.6		18	%
Cost of product sales	105.1		106.6		(1.5		)	(1	)%
Cost of instant products	69.7		70.1		(0.4		)	(1	)%
SG&A	171.6		140.7		30.9			22	%
R&D	53.8		42.4		11.4			27	%
D&A	188.1		165.1		23.0			14	%
Restructuring and other	52.2		9.2		43.0			467	%
Total operating expenses	$	762.4	$	637.4	$	125.0		20	%

Cost of revenue

Total cost of revenue increased due to: (1) an $18.6 million increase in cost of services largely due to the impact of the NYX acquisition coupled with a higher Social business segment cost of services, partially offset by $4.4 million in jackpot expense for our WAP services recorded as a reduction to revenue previously reflected as a cost of services in the prior-year comparable period; partially offset by (2) a $1.5 million decrease in cost of products driven by lower unit sales of gaming machines.

SG&A

The increase in SG&A is largely due to a $12.1 million increase due to the impact of the NYX acquisition coupled with higher compensation and benefits costs, legal fees and various other individually insignificant increases.

R&D

The increase in R&D was primarily attributable to the impact of the NYX acquisition.

D&A

The increase in D&A was primarily due to: (1) a $12.6 million increase due to the impact of the NYX acquisition; (2) a $19.0 million impairment charge related to our assets held for sale (see Note 7); partially offset by (3) certain Gaming segment acquired intangible assets becoming fully depreciated during 2017.

Restructuring and other

The increase in Restructuring and other is primarily due to: (1) an $18.0 million non-cash fair value contingent consideration remeasurement charge (see Note 12); (2) a $15.0 million legal reserve for a certain legal matter; and (3) $7.7 million in NYX related acquisition costs, with no comparable expenses in the prior-year period.

Other Factors Affecting Net Loss Comparability



	Three Months Ended March 31,						Factors Affecting Net Loss
(in millions)	2018			2017			2018 vs. 2017
Interest expense	$	154.8		$	159.4		Lower cash interest costs primarily resulting from 2017 and 2018 refinancing transactions, partially offset by higher outstanding debt principal balances (further discussed in “Liquidity, Capital Resources and Working Capital” and Note 11).
Loss on debt financing transactions	93.2			29.7			Loss on debt financing transactions from our refinancing transactions consummated during the 2018 first quarter, inclusive of a $110.3 million premium charge associated with the redemption of the 2022 Secured Notes (see Note 11).
Other (expense) income, net	(3.2		)	7.5			This increase includes foreign currency impacts, the change being primarily due to strengthening of the British Pound Sterling and the Euro.
Income tax provision	(6.2		)	(16.7		)	The reduction is primarily due to the overall mix of income in our foreign jurisdictions.

See "Business Segments Results" below for a more detailed explanation of the significant changes in our components of revenue within the individual segment results of operations.

BUSINESS SEGMENTS RESULTS

GAMING

Our Gaming business segment designs, develops, manufactures, markets and distributes a comprehensive portfolio of gaming products and services. We provide our Gaming portfolio of products and services to commercial casinos, Native American casinos, wide-area gaming operators such as LBOs, arcade and bingo operators in the U.K. and continental Europe, and government agencies and their affiliated operators.

We generate Gaming revenue from both services and product sales. Our services revenue includes revenue earned from WAP, premium and daily-fee Participation gaming machines, other leased gaming machines (including VLTs and electronic table games), supplied table products and services (including Shufflers), casino management technology solutions and systems, and other services revenues. Our product sales revenue includes the sale of new and used gaming machines, electronic table games, VLTs and VGTs, casino-management technology solutions and systems, table products, PTG licensing, conversion kits (including game, hardware or operating system conversions) and spare parts. For additional information, refer to the Gaming primary business activities summary included within "Business Segment Results" under Item 7 of our 2017 10-K.

Current Year Update

We expect to continue to face pricing pressure in our Gaming business segment. We anticipate that demand for our gaming systems products and services could increase due to several Canadian contracts and related new system implementations anticipated during 2018; however, timing can fluctuate based on timing of installations of the solutions. We believe we have begun to stabilize the erosion in the installed base of WAP, premium and daily-fee Participation gaming machines. In 2017, we demonstrated a significant breadth and depth of innovative new products that we expect to launch during 2018 to support our target of growing the overall category. These products were headlined by three JAMES BOND themed games showcased on our new Gamefield ^TM 2.0 , TwinStar J43 ^TM iReels , and Twinstar ^® V75 cabinets.

Results of Operations and Key Performance Indicators for Gaming



	Three Months Ended March 31,				Variance
($ in millions)	2018		2017		2018 vs. 2017
Total revenue	$	443.0	$	440.0	$	3.0		1	%
Total operating expenses	370.9		362.5		8.4			2	%
Operating income	$	72.1	$	77.5	$	(5.4	)	(7	)%

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

Revenue



	Three Months Ended March 31,					Variance
($ in millions)	2018		2017			2018 vs. 2017
Revenue:
Gaming operations	$	161.3	$	172.4		$	(11.1	)	(6	)%
Gaming machine sales	144.8		156.2			(11.4		)	(7	)%
Gaming systems	75.0		61.5			13.5			22	%
Table products	61.9		49.9			12.0			24	%
Total revenue	$	443.0	$	440.0		$	3.0		1	%

F/X impact on revenue	$	9.1	$	(5.1	)

KPIs:
WAP, premium and daily-fee Participation units:
Installed base at period end	20,663		21,143			(480		)	(2	)%
Average daily revenue per unit (exclusive of WAP jackpot expense)	$	50.01	$	51.22		$	(1.21	)	(2	)%

Other Participation and leased units:
Installed base at period end	47,911		47,454			457			1	%
Average daily revenue per unit	$	14.45	$	14.96		$	(0.51	)	(3	)%

Gaming machine unit sales:
U.S. and Canadian new unit shipments	4,667		5,862			(1,195		)	(20	)%
International new unit shipments	2,201		2,497			(296		)	(12	)%
Total new unit shipments	6,868		8,359			(1,491		)	(18	)%
Average sales price per new unit	$	17,722	$	17,015		$	707		4	%

Gaming Operations

Gaming operations revenue decreased primarily due to: (1) $4.4 million in jackpot expense for our WAP services recorded as a reduction to revenue as a result of ASC 606 adoption; (2) a 480 -unit decrease in the ending installed base of WAP, premium and daily-fee Participation gaming machines; and (3) a decrease in the average daily revenue per WAP, premium and daily-fee Participation units.

These decreases were partially offset by higher Other Participation and leased units revenue, primarily resulting from a 457 -unit increase in the ending other installed base for Other Participation and leased units.

Gaming Machine Sales

Gaming machine unit sales decreased primarily due to lower unit sales resulting from fewer casino openings and expansions during the current year. The decrease in unit sales was partially offset by a 4% increase in the average sales price per unit to $17,722, reflecting a more favorable mix of gaming machines. The following table summarizes the change in Gaming machine unit sales:



	Three Months Ended March 31,		Variance
	2018	2017	2018 vs. 2017
U.S. and Canadian unit shipments:
Replacement units	3,743	3,139	604		19	%
Casino opening and expansion units	924	2,723	(1,799	)	(66	)%
Total unit shipments	4,667	5,862	(1,195	)	(20	)%

International unit shipments:
Replacement units	1,940	2,073	(133	)	(6	)%
Casino opening and expansion units	261	424	(163	)	(38	)%
Total unit shipments	2,201	2,497	(296	)	(12	)%

Gaming Systems

Gaming systems revenue increased primarily due to increased hardware sales, driven by placements of the iView 4 player-interface display units.

Table Products

Table products revenue increased primarily due to increased Shuffler sales, coupled with the impact of the acquisition of Tech Art, which closed in January 2018.

Operating income

The decrease in operating income was primarily attributable to higher D&A of $16.1 million primarily due to an assets held for sale impairment charge (see Note 7), which was partially offset by higher revenue coupled with a more profitable revenue mix, primarily due to an increase in Gaming systems sales.

LOTTERY

Our Lottery business segment is primarily comprised of our instant products business and our systems-based services and product sales business. Our instant products business generates revenue from the manufacture and sale of instant products, as well as the provision of value-added services such as game design, sales and marketing support, specialty games and promotions, inventory management, warehousing, fulfillment services, as well as full instant product category management. In addition, we provide licensed games, promotional entertainment and internet-based marketing services to the lottery industry. These revenues are presented as instant products revenue.

Our systems-based services and product sales business provides customized computer software, software support, equipment and data communication services, and keno to lotteries. In the U.S., we typically provide the necessary point-of-sale terminals and equipment, software and maintenance services on a Participation basis under long-term contracts that typically have an initial term of at least five years. Internationally, we typically sell terminals and/or computer software to lottery authorities and may provide ongoing fee-based systems maintenance and software support services. Refer to the Lottery primary business activities summary included within "Business Segment Results" under Item 7 of our 2017 10-K.

Our equity investments in LNS and other less significant equity investments are included in our Lottery business segment.

Current Year Update

We believe we will continue to face intense price-based competition in our Lottery business in 2018. In the near term, we also expect to see an increase in the number of jurisdictions that seek to privatize or outsource lottery operations and to face strong competition from both traditional and new competitors with respect to these opportunities. In addition, we anticipate that lottery RFPs, specifically those for private management agreements and certain of our international customers, could increasingly include terms that expose us to increased risk, such as requiring the guarantee of specific income thresholds or significant upfront payments.

Results of Operations and Key Performance Indicators for Lottery



	Three Months Ended March 31,				Variance
($ in millions)	2018		2017		2018 vs. 2017
Total revenue	$	201.7	$	189.1	$	12.6	7	%
Total operating expenses	140.6		133.0		7.6		6	%
Operating income	$	61.1	$	56.1	$	5.0	9	%

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

Revenue



	Three Months Ended March 31,						Variance
($ in millions)	2018			2017			2018 vs. 2017
Revenue:
Instant products	$	150.2		$	141.7		$	8.5	6	%
Lottery systems	51.5			47.4			4.1		9	%
Total revenue	$	201.7		$	189.1		$	12.6	7	%

F/X impact on revenue	$	3.0		$	(2.0	)

KPIs:
Change in retail sales of U.S. lottery instant products customers ⁽¹⁾⁽²⁾	4.4		%	2.2		%	2.2pp		nm

Change in retail sales of U.S. lottery systems contract customers ⁽¹⁾⁽³⁾	6.2		%	(12.9		)%	19.1pp		nm

Change in Italy retail sales of instant products ⁽¹⁾	2.9		%	(0.9		)%	3.8pp		nm

nm = not meaningful.

pp = percentage points.

(1) Information provided by third-party lottery operators.

(2) U.S. instant products customers' retail sales include only sales of instant products.

(3) U.S. lottery systems customers' retail sales primarily include sales of draw games, keno and instant products validated by the relevant system.

Primary factors affecting total higher Lottery revenue in the current year period were: (1) an $8.5 million increase in instant product revenue, driven by higher revenue in domestic Participation contracts; and (2) a $4.1 million increase in lottery systems revenue, driven by higher revenue multi-state games coupled with higher domestic and international terminal and to a lesser extent software sales. The ASC 606 instant products sold on a POS basis adoption change represented $8.1 million of the revenue increase. Lottery revenue included favorable foreign currency impact (primarily in the U.K.) totaling $3.0 million for the three months ended March 31, 2018 .

Operating income

Operating income increased primarily due to a more profitable revenue mix and higher overall revenue (described above), partially offset by a related increase in cost of revenue.

SOCIAL

Our Social business segment generates revenue from the sale of virtual coins, chips or bingo cards, which players can use to play slot, table games or bingo games (i.e., spin in the case of slot games, bet in the case of table games and use of bingo cards in the case of bingo games). The games are primarily our WMS ^® , Bally ^® , Barcrest ^® , SHFL ^® , Dragonplay ^® and Bingo Showdown branded games. We offer both third-party branded games and original content. All of our Social revenue is comprised of B2C transactions.

Our apps include Jackpot Party Social Casino, Gold Fish Casino Slots, Quick Hit ^® Slots and Hot Shot Casino ^® , Dragonplay Slots ^® , Dragonplay Poker ^® , Blazing 7s Slots ^® and Bingo Showdown on various platforms which include: Facebook, Apple, Google Play, Amazon Kindle and Microsoft Windows.

Current Year Update

We continue to pursue our multi-product strategy in our Social gaming business. A new MONOPOLY themed casino app, featuring a new innovative style of play characteristics, was launched subsequent to the first quarter of 2018.

Results of Operations and Key Performance Indicators for Social



	Three Months Ended March 31,					Variance
($ in millions)	2018			2017 ⁽¹⁾		2018 vs. 2017
Total revenue	$	97.4		$	80.2	$	17.2		21	%
Operating expenses	97.6			66.7		30.9			46	%
Operating (loss) income	$	(0.2	)	$	13.5	$	(13.7	)	(101	)%
(1) Business segment information has been recast to reflect current segments - see Note 3.

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

Revenue



	Three Months Ended March 31,						Variance
($ in millions)	2018			2017 ⁽¹⁾			2018 vs. 2017
Revenue:
Social gaming	$	97.4		$	80.2		$	17.2	21	%

KPIs:
Social gaming:
Mobile Penetration ⁽²⁾	75.0		%	72.0		%	3.0pp		nm
Average MAU ⁽³⁾	8.1			7.7			0.4		5	%
Average DAU ⁽⁴⁾	2.4			2.4			—		0	%
ARPDAU ⁽⁵⁾	$	0.45		$	0.37		$	0.08	22	%
nm = not meaningful. pp = percentage points. (1) Business segment information has been recast to reflect current segments - see Note 3. (2) Mobile penetration as defined by percentage of B2C social gaming revenue generated from mobile platforms. (3) MAU = Monthly Active Users, a count of unique visitors to our sites during a month. (4) DAU = Daily Active Users, a count of unique visitors to our sites during a day. (5) ARPDAU = Average daily revenue per DAU is calculated by dividing revenue for a period by the DAU for the period by the number of days for the period.

The increase in revenue is primarily attributable to the ongoing popularity of our Quick Hits Slots , 88 Fortunes and Goldfish Casino Slots apps and the impact of the April 2017 acquisition of Spicerack and its Bingo Showdown game.

Operating (loss) income

The decrease in operating income is primarily due to an $18.0 million non-cash fair value contingent consideration remeasurement charge (see Note 12), partially offset by revenue growth.

DIGITAL

Our Digital segment provides a comprehensive suite of digital gaming solutions and services, including digital RMG and sports betting solutions, distribution platforms, content, products and services. A portion of our Digital revenue consists of professional services related to highly customizable software design, development, licensing, maintenance and support services, which are derived from a comprehensive suite of technology solutions. These technology solutions allow our customers to operate sports books, which can offer sport (or non-sport) events and betting markets across both fixed-odds and pari-mutuel betting styles. We also provide the Open Platform System (OPS) which offers a wide range of reporting and administrative functions and tools providing operators full control over all areas of digital gaming operations. Additionally, we derive revenue from our content aggregation platforms, including Open Gaming System (OGS), remote gaming servers, SG Universe platform and various other platforms, which can deliver a wide spectrum of internally developed and branded casino-

style games and popular third-party provider casino-style games to gaming operators. Generally, we host the play of our game content on our centrally-located servers that are integrated with the online casino operators' websites.

Current Year Update

We believe we are well-positioned for future growth in the digital gaming industry due to our game content, platform technology, and distribution capabilities, which provide best-of-breed solutions for our customers. With established brand-name customers already using our products and services powered by the integrated content and technology, our platform is capable of further deployment with large operators and technology providers and the expansion into new jurisdictions, including the U.S. sports book market if it should become regulated more broadly.

During the first quarter of 2018, we successfully launched our gaming content across 5 new client sites and signed 3 new customers. We believe that our revenue pipeline remains strong.

Results of Operations for Digital



	Three Months Ended March 31,					Variance
($ in millions)	2018			2017 ⁽¹⁾		2018 vs. 2017
Total revenue	$	69.7		$	16.1	$	53.6		333	%
Operating expenses	74.2			12.4		61.8			498	%
Operating (loss) income	$	(4.5	)	$	3.7	$	(8.2	)	(222	)%
(1) Business segment information has been recast to reflect current segments - see Note 3.

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

Revenue



	Three Months Ended March 31,				Variance
($ in millions)	2018		2017 ⁽¹⁾		2018 vs. 2017
Revenue:
Sports and platform	$	25.9	$	—	$	25.9	nm
Gaming and other	43.8		16.1		27.7		172	%
Total revenue	$	69.7	$	16.1	$	53.6	333	%
(1) Business segment information has been recast to reflect current segments - see Note 3.
nm = not meaningful.

The increase in revenue is primarily attributable to the NYX acquisition, which contributed $49.2 million in revenue for the three months ended March 31, 2018.

Operating (loss) income

The decrease in operating income is primarily due to the NYX acquisition and related operating expenses.

RECENTLY ISSUED ACCOUNTING GUIDANCE

For a description of recently issued accounting pronouncements, see Note 1.

CRITICAL ACCOUNTING ESTIMATES

For a description of our policies regarding our critical accounting estimates, see "Critical Accounting Estimates" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2017 10-K.

Other than the application of business combinations policy for the NYX acquisition and the adoption of ASC 606 described below, there have been no significant changes in our critical accounting estimate policies or the application of those

policies to our condensed consolidated financial statements from those presented in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2017 10-K.

Business Combinations

We account for business combinations in accordance with ASC 805. This standard requires the acquiring entity in a business combination 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.

Determining the fair value of assets acquired and liabilities assumed requires management judgment, the utilization of independent valuation experts and often involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash inflows and outflows, discount rates, market prices and asset lives, among other items. Any changes in the underlying assumptions can impact the estimates of fair value by material amounts, which can in turn materially impact our results of operations. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these fair values, we could record impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate D&A expense. If our estimates of the economic lives change, D&A expense could be accelerated or slowed. See Note 1 for Acquisition of NYX and Preliminary Purchase Price Allocation completed during the first quarter of 2018, which is subject to adjustment as we finalize our purchase price accounting, and such adjustments could be material.

Revenue Recognition

As described in Note 1, on January 1, 2018, we adopted ASC 606 using the modified retrospective method, which was applied to customer contracts that were not completed as of January 1, 2018. Our revenue recognition policies described fully in Note 2 require us to make significant judgments and estimates. The guidance in ASC 606 requires that we apply judgments or estimates to determine the performance obligations, the stand-alone selling prices of our performance obligations to customers, and the timing of transfer of control of the respective performance obligations. The evaluation of each of these criteria in light of contract specific facts and circumstances is inherently judgmental, but certain judgments could significantly affect the timing or amount of revenue recognized if we were to reach a different conclusion than we have. The critical judgments we are required to make in our assessment of contracts with customers that could significantly affect the timing or amount of revenue recognized are:

•

Contracts with Multiple Promised Goods and Services - because we enter into contracts with customers that involve promises to transfer multiple products and services, the determination of the distinct performance obligations in contracts with multiple promises requires significant judgment. Our total gaming systems, lottery systems and digital revenue that often contain multiple promised goods and services was $119.5 million for the three months ended March 31, 2018, or approximately 15 percent of consolidated revenue, a portion of which would not be recognized if we had reached a different conclusion.

•

Determination of stand-alone selling prices - the guidance in ASC 606 requires that we determine the stand-alone selling price for our goods and services as a basis for allocating the transaction price to the identified distinct performance obligations in our contracts with customers. Because we often bundle the selling price for multiple promised goods or services or we may license systems for which the solutions we provide are highly customized and therefore the prices we charge are either uncertain, highly variable, or both, the determination of a stand-alone selling price or the relative range requires significant judgment. Our total gaming systems, lottery systems and digital revenue that could be subject to this judgment and thus allocated to distinct performance obligations differently was a portion of $119.5 million for the three months ended March 31, 2018, or approximately 15 percent of consolidated revenue.

•

Transfer of control in Lottery POS contracts - the guidance in ASC 606 requires that we recognize revenue when or as control over a performance obligation transfers to a customer. In instant products contracts under POS terms, instant products are delivered to lottery customers but we retain the risk of such inventory until retail sales of such tickets takes place. Because those shipments are to a lottery-controlled warehouse and we do not have the ability to direct the use of such instant products subsequent to this delivery, we have determined that control transfers upon delivery. This conclusion requires the use of judgment. If we concluded that control transferred upon retail sales when the end customer obtained control over the instant tickets, revenue would decrease by $8.1 million for the three months ended March 31, 2018.

LIQUIDITY, CAPITAL RESOURCES AND WORKING CAPITAL

Sources of Liquidity

As of March 31, 2018 , our principal sources of liquidity, other than cash flows provided by operating activities, were cash and cash equivalents and amounts available under our revolving credit facility discussed below under "Credit Agreement and Other Debt."

On February 14, 2018, we successfully completed a series of financing transactions, including a private offering of an additional $900.0 million principal amount of our 2025 Secured Notes, €325.0 million of new 2026 Secured Euro Notes and €250 million of new 2026 Unsecured Euro Notes, and an amendment to our credit agreement to refinance our existing term loan B-4 facility and increase the term loans outstanding by $900.0 million under a new term loan B-5 facility (collectively referred to as the "February 2018 Refinancing"). We used the net proceeds of the February 2018 Refinancing to redeem $2,100.0 million of our outstanding 2022 Secured Notes, prepay a portion of our revolver borrowings under our credit agreement and pay accrued and unpaid interest thereon plus related premiums, fees and expenses. In connection with the amendment to our credit agreement, the interest rate on our term loans was decreased from LIBOR plus 3.25% to LIBOR plus 2.75% . We also increased the amount of the revolving credit agreement by $24.0 million to $620.2 million through October 18, 2018, with a step-down in availability at that time to $445.7 million until the extended maturity on October 18, 2020.

Cash and Available Revolver Capacity



	As of
($ in millions)	March 31, 2018			December 31, 2017
Cash and cash equivalents	$	109.9		$	788.8
Revolver capacity	620.2			596.2
Revolver capacity drawn or committed to letters of credit	(80.7		)	(375.6		)
Total	$	649.4		$	1,009.4

The amount of our available cash and cash equivalents fluctuates principally based on borrowings or repayments under our credit facilities, investments, acquisitions and changes in our working capital position. The borrowing capacity under our revolving credit facility will depend on the amount of outstanding borrowings and letters of credit issued and on us remaining in compliance with the covenants under our credit agreement, including a maintenance covenant based on consolidated net first lien leverage. We were in compliance with the covenants under our credit agreement as of March 31, 2018 .

We believe that our cash flow from operations, available cash and cash equivalents and available borrowing capacity under our existing or anticipated financing arrangements will be sufficient to meet our liquidity needs for the foreseeable future; however, we cannot assure that this will be the case. We believe that substantially all cash held outside the U.S. is free from legal encumbrances or similar restrictions that would prevent it from being available to meet our global liquidity needs.

Total cash held by our foreign subsidiaries was $71.3 million as of March 31, 2018 .

Our Gaming Participation and Lottery systems businesses generally require significant upfront capital expenditures, and we may need to incur additional capital expenditures in order to retain or win new contracts. Our ability to make payments on and to refinance our indebtedness and other obligations depends on our ability to generate cash in the future. We may also, from time to time, repurchase or otherwise retire or refinance our debt, through our subsidiaries or otherwise. In the event we pursue significant acquisitions or other expansion opportunities, we may need to raise additional capital. If we do not have adequate liquidity to support these activities, we may be unable to obtain financing for these cash needs on favorable terms or at all. For additional information regarding our cash needs and related risks, see Item 1A "Risk Factors" in our 2017 10-K.

In addition, Lottery customers in the U.S. generally require service providers to provide performance bonds in connection with the relevant contract. As of March 31, 2018 , our outstanding performance bonds totaled $224.8 million . Our ability to obtain performance bonds on commercially reasonable terms is subject to our financial condition and to prevailing market conditions, which may be impacted by economic and political events. Although we have not experienced difficulty in obtaining such bonds to date, we cannot assure that we will continue to be able to obtain performance bonds on commercially reasonable terms, or at all. For additional information regarding our surety or performance bonds in connection with our contracts, see Item 1A "Risk Factors" in our 2017 10-K.

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

Cash Flow Summary



	Three Months Ended March 31,						Variance
($ in millions)	2018			2017			2018 vs. 2017
Net cash provided by operating activities	$	29.9		$	111.0		$	(81.1	)
Net cash used in investing activities	(360.6		)	(79.5		)	(281.1		)
Net cash used in financing activities	(345.6		)	(15.1		)	(330.5		)
Effect of exchange rates on cash, cash equivalents and restricted cash	1.9			2.5			(0.6		)
(Decrease) increase in cash, cash equivalents and restricted cash	$	(674.4	)	$	18.9		$	(693.3	)

Cash flows from operating activities



	Three Months Ended March 31,						Variance
($ in millions)	2018			2017			2018 vs. 2017
Net loss	$	(201.8	)	$	(100.8	)	$	(101.0	)
Adjustments to reconcile net loss to cash flows from operations	308.5			201.8			106.7
Changes in working capital accounts	(77.5		)	7.0			(84.5		)
Changes in deferred income taxes and other	0.7			3.0			(2.3		)

Net cash provided by operating activities for the three months ended March 31, 2018 decreased primarily due to changes in working capital accounts, partially offset by a $5.7 million increase in incremental net earnings after reconciling adjustments. Unfavorable change in our working capital accounts was primarily due to the change in accrued interest due to the February 2018 Refinancing, higher NYX acquisition related payments, coupled with higher Restructuring and other charges during the first quarter of 2018. The changes in our working capital accounts during the three months ended March 31, 2018 were primarily driven by the following:


•	$109.0 million decrease in accounts payable and accrued liabilities as a result of timing and amount of expenditures, inclusive of expenditures associated with the NYX acquisition;


•	$26.1 million net increase in contract assets and other current assets and liabilities, inclusive of an impact of ASC 606 adoption; partially offset by


•	$57.6 million decrease in accounts and notes receivables due to strong collections during the three-month period primarily driven by our Gaming and Lottery business segments.

Cash flows from investing activities

Net cash used in investing activities increased primarily due to the NYX and Tech Art acquisitions described in Note 1, coupled with higher capital expenditures driven by our Lottery segment associated with the new lottery contracts and capital expenditures attributable to the NYX operations. Capital expenditures are composed of investments in systems, equipment and other assets related to contracts, property and equipment, intangible assets and software.

Cash flows from financing activities

Net cash used in financing activities increased primarily due to repayment of assumed NYX debt of $288.2 million , higher payments of deferred financing fees associated with the February 2018 Refinancing and higher net redemptions of common stock under stock-based compensation plans.

Credit Agreement and Other Debt

For additional information regarding our credit agreement and other debt, interest rate risk and interest rate hedging instruments, see Notes 16 and 17 and Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in our 2017 10-K, as well as Note 11 in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

As of March 31, 2018 , we did not have any significant off-balance sheet arrangements.

Contractual Obligations

Other than completion of the NYX and Tech Art acquisitions described in Note 1 and the February 2018 Refinancing described in Note 11, there have been no material changes to our contractual obligations disclosed under Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity, Capital Resources and Working Capital — Contractual Obligations" in our 2017 10-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign exchange rates and commodity prices. The following are our primary exposures to market risks:

Interest Rate Risk

As of March 31, 2018, the face value of long term debt was $8,988.6 million , including $4,229.6 million of variable-rate obligations. Assuming a constant outstanding balance for our variable-rate long term debt, a hypothetical 1% change in interest rates would decrease/increase interest expense by approximately $42.3 million . All of our interest rate sensitive financial instruments are held for purposes other than trading purposes.

We have attempted to limit our exposure to interest rate risk by using interest rate swap contracts to mitigate interest rate risk associated with a portion of our variable rate debt instruments. The objective of our interest rate swap contracts, which are designated as cash flow hedges of the future interest payments, is to eliminate the variability of cash flows attributable to the LIBOR component of interest expense to be paid on a portion of our variable rate debt.

Cross-Currency Interest Rate Swaps

In connection with the February 2018 Refinancing (see Note 11), we entered into certain cross-currency interest rate swap agreements to achieve more attractive interest rates by effectively converting $460.0 million of our fixed-rate U.S. Dollar-denominated 2025 Secured Notes, including the semi-annual interest payments through October 2023, to a fixed-rate Euro-denominated debt, with a fixed annual weighted interest rate of approximately 2.946% . We have designated these cross-currency interest rate swap agreements as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar.

As of March 31, 2018, if these cross-currency interest rate swap agreements were ineffective, the fluctuations in the exchange rates between the Euro and the U.S. Dollar would impact the amount of U.S. Dollars that we would require to settle the Euro-denominated debt at maturity of these agreements. A hypothetical 10% change in the U.S. Dollar in comparison to the Euro exchange rate upon inception of the cross-currency interest rate swap would have increased/decreased our obligation to cash settle the exchanged principal portion in U.S. Dollars by approximately $46.0 million .

Net Investment Non-derivative Hedge - 2026 Secured Euro Notes

In February 2018, we designated a portion of our 2026 Secured Euro Notes as a net investment non-derivative hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar.

Fluctuations in the exchange rates between the Euro and the U.S. Dollar will impact the amount of U.S. Dollars that we will require to settle the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes at maturity. A hypothetical 10% change in U.S. Dollar in comparison to the Euro as of March 31, 2018, would have increased/decreased our obligation to cash settle the principal portion of the 2026 Secured and Unsecured Euro Notes in U.S. Dollars by approximately $71.4 million .

For additional information regarding interest rate swap contracts, cross-currency interest rate swaps and net investment non-derivative hedges see Note 12.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

During the first quarter of 2018, we implemented changes to our internal controls to address the adoption of ASC 606, including controls to enable the preparation of financial information. We also implemented internal controls over accounting for net investment hedge transactions described in Note 12. In January 2018, we completed the NYX acquisition (see Note 1). We

are in the process of integrating NYX and our internal controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be revised.

Except as noted above, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of our legal proceedings, see Note 15 in this Quarterly Report on Form 10-Q and Note 22 in our 2017 10-K.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed under Item 1A "Risk Factors" included in our 2017 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There was no stock repurchase activity during the three months ended March 31, 2018 .

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit Number		Description
3.1(a)		Articles of Merger filed with the Secretary of State of the State of Nevada on January 10, 2018 (incorporated by reference to Exhibit 3.3 to Scientific Games Corporation’s Current Report on Form 8-K filed on January 10, 2018).

3.1(b)		Certificate of Merger filed with the Secretary of State of the State of Delaware on January 10, 2018 (incorporated by reference to Exhibit 3.4 to Scientific Games Corporation's Current Report on Form 8-K filed on January 10, 2018).

3.1(c)		Amended and Restated Articles of Incorporation of Scientific Games Corporation, filed with the Secretary of State of the State of Nevada on January 10, 2018 (incorporated by reference to Exhibit 3.1 to Scientific Games Corporation’s Current Report on Form 8-K filed on January 10, 2018).

3.2		Amended and Restated Bylaws of Scientific Games Corporation, effective as of January 10, 2018 (incorporated by reference to Exhibit 3.2 to Scientific Games Corporation’s Current Report on Form 8-K filed on January 10, 2018).

4.1		Supplemental Indenture, dated as of January 10, 2018, by and among Scientific Games International, Inc., the subsidiary guarantors party thereto, Scientific Games Corporation and Deutsche Bank Trust Company Americas, as successor trustee, relating to the Indenture, dated as of August 20, 2012, as amended and supplemented, relating to the 6.250% Senior Subordinated Notes due 2020 (incorporated by reference to Exhibit 4.4 to Scientific Games Corporation's Current Report on Form 8-K filed on January 10, 2018).

4.2		Supplemental Indenture, dated as of January 10, 2018, by and among Scientific Games International, Inc., the subsidiary guarantors party thereto, Scientific Games Corporation and Deutsche Bank Trust Company Americas, as trustee, relating to the Indenture, dated as of June 4, 2014, as amended and supplemented, relating to the 6.625% Senior Subordinated Notes due 2021 (incorporated by reference to Exhibit 4.5 to Scientific Games Corporation's Current Report on Form 8-K filed on January 10, 2018).

4.3		Supplemental Indenture, dated as of January 10, 2018, by and among Scientific Games International, Inc., the subsidiary guarantors party thereto, Scientific Games Corporation and Deutsche Bank Trust Company Americas, as trustee, relating to the Indenture, dated as of November 21, 2014, as amended and supplemented, relating to the 10.000% Senior Unsecured Notes due 2022 (incorporated by reference to Exhibit 4.7 to Scientific Games Corporation's Current Report on Form 8-K filed on January 10, 2018).

4.4		Supplemental Indenture, dated as of January 10, 2018, by and among Scientific Games International, Inc., the subsidiary guarantors party thereto, Scientific Games Corporation and Deutsche Bank Trust Company Americas, as trustee and collateral agent, relating to the Indenture, dated as of November 21, 2014, as amended and supplemented, relating to the 7.000% Senior Secured Notes due 2022 (incorporated by reference to Exhibit 4.6 to Scientific Games Corporation's Current Report on Form 8-K filed on January 10, 2018).

4.5		Amended and Restated Rights Agreement, dated as of January 10, 2018, between Scientific Games Corporation and American Stock Transfer & Trust Company, LLC which includes the Form of Certificate of Designation of Series A Junior Participating Preferred Stock of Scientific Games Corporation as Exhibit A, the Form of Right Certificate as Exhibit B, the Summary of Rights to Purchase Shares of Preferred Stock of Scientific Games as Exhibit C and a the Form of Consent to Jurisdiction as Exhibit D (incorporated by reference to Exhibit 4.3 to Scientific Games Corporation's Current Report on Form 8-K filed on January 10, 2018).

4.6		Supplemental Indenture, dated as of February 14, 2018, among Scientific Games International, Inc. as issuer, Scientific Games Corporation and the other guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee and collateral agent, relating to the indenture, dated as of October 17, 2017, among Scientific Games International, as issuer, Scientific Games Corporation and the other guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee and collateral agent, relating to the 5.000% Senior Secured Notes due 2025 (incorporated by reference to Exhibit 4.1 to Scientific Games Corporation's Current Report on Form 8-K filed on February 14, 2018).

4.7		Indenture, dated as of February 14, 2018, among Scientific Games International, Inc., as issuer, Scientific Games Corporation and the other guarantors party thereto, Deutsche Bank Trust Company Americas, as trustee and collateral agent, and Deutsche Bank AG, London Branch, as paying agent, relating to the 3.375% Senior Secured Notes due 2026 (incorporated by reference to Exhibit 4.2 to Scientific Games Corporation's Current Report on Form 8-K filed on February 14, 2018).



4.8		Collateral Agreement, dated as of February 14, 2018, among Scientific Games International, Inc., Scientific Games Corporation and the other guarantors party thereto and Deutsche Bank Trust Company Americas, as collateral agent, relating to the 3.375% Senior Secured Notes due 2026 (incorporated by reference to Exhibit 4.3 to Scientific Games Corporation's Current Report on Form 8-K filed on February 14, 2018).

4.9		Indenture, dated as of February 14, 2018, among Scientific Games International, Inc., as issuer, Scientific Games Corporation and the other guarantors party thereto, Deutsche Bank Trust Company Americas, as trustee, and Deutsche Bank AG, London Branch, as paying agent, relating to the 5.500% Senior Unsecured Notes due 2026 (incorporated by reference to Exhibit 4.4 to Scientific Games Corporation's Current Report on Form 8-K filed on February 14, 2018).

10.1		Amendment No. 4, dated as of February 14, 2018, among Scientific Games International Inc., as the borrower, Scientific Games Corporation, as a guarantor, the several banks and other financial institutions or entities from time to time party thereto and Bank of America, N.A., as administrative agent, collateral agent, issuing lender and swingline lender, which amended and restated the Credit Agreement, dated as of October 18, 2013 (as amended, supplemented, amended and restated or otherwise modified from time to time, including without limitation, by that certain Amendment No. 1, dated as of October 1, 2014, Amendment No. 2, dated as of February 14, 2017, and Amendment No. 3, dated as of August 14, 2017) (incorporated by reference to Exhibit 10.1 to Scientific Games Corporation's Current Report on Form 8-K filed on February 14, 2018).

10.2		Consulting Agreement, dated as of February 26, 2018, by and between Scientific Games Corporation and Richard Haddrill.*(†)

10.3		Omnibus Amendment of Compensation and Benefit Plans, effective January 10, 2018, to amend the Compensation and Benefit Plans, as defined therein, to reflect the merger of Scientific Games Corporation, a Delaware corporation (“Parent”) into SG Nevada Merger Company, a Nevada corporation and a wholly owned subsidiary of Parent.*(†)

10.4		Amendment to Employment Agreement, effective as of April 9, 2018, between Larry Potts and Scientific Games Corporation.*(†)

10.5		Letter Agreement, dated February 21, 2018, by and between Scientific Games Corporation and Stephen Richardson.*(†)

31.1		Certification of the Chief Executive Officer of Scientific Games Corporation pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (†)

31.2		Certification of the Chief Financial Officer of Scientific Games Corporation pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (†)

32.1		Certification of the Chief Executive Officer of Scientific Games Corporation pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (†)

32.2		Certification of the Chief Financial Officer of Scientific Games Corporation pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (†)

99.1		Terms and Conditions of Equity Awards to Key Employees under the Scientific Games Corporation 2003 Incentive Compensation Plan.*(†)

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Definition Label Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

(†) Filed herewith.

*Management contracts and compensation plans and arrangements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		SCIENTIFIC GAMES CORPORATION
		(Registrant)

		By:	/s/ Michael A. Quartieri
		Name:	Michael A. Quartieri
		Title:	Executive Vice President, Chief Financial Officer, Treasurer and Corporate Secretary

		By:	/s/ Michael F. Winterscheidt
		Name:	Michael F. Winterscheidt
		Title:	Chief Accounting Officer
Dated:	May 2, 2018

CONSULTING AGREEMENT

This Consulting Agreement is entered into as of February 26, 2018 (this “ Agreement ”) by and between SCIENTIFIC GAMES CORPORATION, with offices located at 6601 Bermuda Road, Las Vegas, NV 89119 (the “ Company ”), and Richard Haddrill, an individual, 10 Ridge Blossom Road, Las Vegas, NV 89135 (the “ Consultant ” and, together with the Company, the “ Parties ”).

RECITALS

WHEREAS, the Company seeks to engage the Consultant as an independent contractor in a manner consistent with the Company’s commitment to ethics and in compliance with all applicable Laws (as defined below); and

WHEREAS, the Consultant was employed by the Company under the terms of an Employment Agreement dated December 8, 2014, as amended (the “ Employment Agreement ”) which expired on December 31, 2017;

WHEREAS, the Consultant continued his employment with the Company after the Employment Agreement expired until February 25, 2018;

NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties made herein and intending to be legally bound, the Parties hereto agree as follows:

Section 1 Interpretation

1.1 Certain Terms . As used herein, the following terms have the following meanings:

“ Affiliate ” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified Person. A Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise.

“Code” means the Internal Revenue Code of 1986, as amended.

“ Confidential Information ” means all non-public information concerning the Company or any of its Affiliates or their respective equity investments (whether prepared by the Company or otherwise, whether oral or written, in whatever form or data storage medium and whether or not specifically identified as “confidential”), including financial and accounting information, product-related information, plans and strategies, computer programs, code and software, technical drawings and schematics, technical expertise, know-how, processes, ideas, inventions (whether patentable or not), agreements and reports (together with all analyses, compilations, forecasts, studies, summaries, notes, data and other documents and materials, in whatever form maintained and whether prepared by the Company, the Consultant or other Persons, which contain or reflect, or are based on or generated from, in whole or in part, any such information).

“ Governmental Authority ” means any national, supranational, foreign, federal, state, provincial, tribal, peripheral, regional, municipal or local government or any agency, instrumentality or political subdivision thereof, including any legislative, executive, judicial, regulatory or other governmental board, department, agency, authority, commission, administration, court or other body, or any official of any of the foregoing (including any gaming- or lottery-related Governmental Authority).

“ Law ” means any order, writ, injunction, decree, judgment, law, ordinance, decision, opinion, ruling, policy, statute, code, rule, regulation or administrative or other requirement of any Governmental Authority, in each case, as may be amended from time to time.

“ Person ” means any individual (including the heirs, beneficiaries, trusts, executors, legal representatives or administrators thereof), corporation, partnership, joint venture, trust, limited liability company, limited partnership, joint stock company, unincorporated association or other entity. For the avoidance of doubt, the term includes a Government Authority.

“ Representative ” means, with respect to any Person, any director, officer, employee, partner, member, manager, owner, agent, lawyer, accountant, auditor, professional advisor, consultant or other representative.

1.2 Incorporation . The Annexes to this Agreement are incorporated by reference into, and form an integral part of, this Agreement.

Section 2 Engagement

2.1 Services . Upon the terms and subject to the conditions of this Agreement, the Company hereby engages the Consultant, and the Consultant hereby accepts such engagement, as an independent contractor to provide the services set forth in Annex A (collectively, the “ Services ”). Unless otherwise expressly specified in Annex A , the Consultant shall furnish, at Consultant’s own expense, any equipment, supplies and other materials necessary or advisable to perform the Services. Subject to the provisions of this Agreement, the Company shall not control the manner or means by which the Consultant performs the Services.

2.2 Relationship of Parties . The Consultant is an independent contractor of the Company, and this Agreement shall not be construed to create any association, partnership, joint venture, employee or agency relationship between the Consultant and the Company (or any of its Affiliates) for any purpose. Except to the extent specifically authorized in advance by the Company in writing, the Consultant (a) shall have no authority (and shall not hold himself out as having authority) to bind or act on behalf or in the name of the Company or any of its Affiliates, (b) shall not make any agreements or representations on behalf of the Company or any of its Affiliates and (c) without limiting the generality of the foregoing, shall not represent the Company or any of its Affiliates as a lobbyist or agent to any Governmental Authority. Without limiting the generality of the foregoing, the Consultant will not be eligible to participate in any vacation, group medical or life insurance, disability, profit sharing or retirement benefits or any other fringe benefits or benefit plans offered by the Company or any of its Affiliates to its employees, and the Company will not make any insurance contributions, including unemployment or disability, or obtain worker's compensation insurance on behalf of the Consultant. Any Persons employed by the Consultant in connection with the performance of the Services shall be the employees of the Consultant and the Consultant shall be fully responsible for them. The Consultant may not utilize any subcontractor or engage any other Person in connection with the performance of the Services without the Company’s prior written consent. The Consultant shall be fully responsible for any such subcontractors or other Persons and in no event shall the Consultant be relieved of his obligations under this Agreement as a result of his use or engagement of any such subcontractors or other Persons.

Section 3 Compensation

3.1 Fees . As full consideration for the provision of Services and the rights granted to the Company under this Agreement, the Company shall pay the Consultant the consulting fee set forth in Annex B (pro-rated for any partial period).

3.2 Expense Reimbursement . The Company agrees to reimburse the Consultant for reasonable and appropriately documented out-of-pocket expenses actually incurred and paid by the Consultant but only to the extent (a) directly related to the Consultant's performance of the Services and (b) incurred in accordance with the Company's expense reimbursement policies.

3.4 Taxes and Internal Revenue Code 409A . The Company makes no representations or warranties and shall have no responsibility regarding the tax implications of the compensation and benefits to be paid to the Consultant under this Agreement, including under Section 409A of the Code, and applicable administrative guidance and regulations (“ Section 409A ”). Section 409A governs plans and arrangements that provide “nonqualified deferred compensation” (as defined under the Code) which may include, among others, nonqualified retirement plans, bonus plans, stock option plans, employment agreements and severance agreements. The Company reserves the right to pay compensation and provide benefits under this Agreement in amounts, at times and in a manner that minimizes taxes, interest or penalties as a result of Section 409A. In addition, in the event any benefits or amounts paid to the Consultant hereunder are deemed to be subject to Section 409A, the Consultant consents to the Company adopting such conforming amendments as the Company deems necessary, in its reasonable discretion, to comply with Section 409A. To the extent any payments of money or other benefits due to the Consultant hereunder could cause the application of an accelerated or additional tax under Section 409A, such payments or other benefits may be deferred if deferral will make such payment or other benefits compliant under Section 409A, or otherwise such payments or other benefits shall be restructured, to the extent permissible under Section 409A, in a manner determined by the Company that does not cause such an accelerated or additional tax. To the extent any reimbursements or in-kind benefits due to the Consultant under this Agreement constitute deferred compensation under Section 409A, any such reimbursements or in-kind benefits shall be paid to the Consultant in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv). Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A.

For purposes of Section 409A, references herein to the Consultant’s termination of services shall refer to his separation of services with the Company within the meaning of Treas. Reg. Section 1.409A-1(h). Anything in this Agreement to the contrary notwithstanding, if at the time of the Consultant’s separation from service within the meaning of Section 409A of the Code this Agreement is covered by Section 409A and the Company determines that the Consultant is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Consultant becomes entitled to under this Agreement on account of the Consultant’s separation from service would be considered deferred compensation, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (i) six months and one day after the Consultant’s separation from service, or (ii) the Consultant’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.

Section 4 Certain Agreements

4.1 Restrictive Covenants. The Consultant acknowledges that he has continuing obligations to the Company as set forth in Section 5 of his Employment Agreement, which continue in full force and effect after his separation from employment with the Company according to their terms.

4.2 Confidentiality . The Consultant shall (and, if applicable, shall cause his employees to) (a) hold the Confidential Information in confidence and protect it in accordance with the same degree of care with which he protects his own confidential information of like importance which he does not wish to disclose, but in no event less than reasonable care, (b) use the Confidential Information solely to the extent necessary in the performance of the Services and not for any other purpose, (c) not disclose any Confidential Information to any Person (other than the Company and its Affiliates), (d) upon the request of the Company, promptly return all Confidential Information to the Company (or, at the election of the Company, destroy such Confidential Information) without retaining any copies thereof (and provide certification of his compliance with this clause (d)) and (e) not reverse engineer, decompile, test or analyze the Confidential Information without the prior written consent of the Company. In the event that the Consultant is requested or required by law, judicial or governmental order, deposition, interrogatory, request for documents, subpoena, civil investigative demand or other legal process to disclose any of the Confidential Information, the Consultant must first provide the Company with prompt written notice of such requirement so that the Company (or any of its Affiliates) may seek an appropriate protective order, unless, as confirmed by the opinion of the Consultant’s counsel, providing such notice would itself constitute a violation of law. If the Consultant is nevertheless legally required (as confirmed by the opinion of the Consultant’s counsel) to disclose Confidential Information, then the Consultant shall only disclose that portion of the Confidential Information that is legally required to be disclosed (as confirmed by the opinion of the Consultant’s counsel). In such an event, the Consultant shall take reasonable efforts to obtain assurance that confidential treatment will be accorded to that portion of the Confidential Information being disclosed. In no event shall the Consultant oppose action by the Company (or any of its Affiliates) to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information.

Notwithstanding anything herein to the contrary, nothing in this Agreement or any other agreement with the Company shall (i) prohibit Consultant from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) require notification or prior approval by the Company of any reporting described in clause (i).

4.3 Regulatory Compliance . The Consultant acknowledges that the Company and/or its Affiliates are subject to gaming, lottery or similar licensing requirements of various jurisdictions. The Consultant shall cooperate fully with the Company and its Affiliates in providing to them any information of whatever nature that any of them deems necessary or appropriate in assuring itself that the Consultant possesses the good character, honesty, integrity, and reputation applicable to those engaged in the gaming and lottery industries. If, during the Term, the Company (or any of its Affiliates) is notified (formally or informally) by any Governmental Authority that the engagement of, or conducting business with, the Consultant may or will jeopardize any license or ability to be licensed of the Company (or any of its Affiliates) or if the Company (or any of its Affiliates) concludes that the Consultant may fail to meet the above criteria (or the compliance committee of the Company or any of its Affiliates otherwise raises an objection with respect to the Consultant), the Company may immediately terminate this Agreement upon written notice to the Consultant. The Consultant also acknowledges his obligations set forth in Annex C and Annex D attached hereto.

Section 5 Termination

5.1 Term of Agreement . The term of this Agreement shall commence on February 26, 2018 and shall continue until December 31, 2018, unless earlier terminated by the Company in accordance with Section 5.2 (the “ Term ”). The Term can be extended if agreed to by both parties in writing.

5.2 Early Termination by Company . The Company may terminate this Agreement early if the Consultant breaches the restrictive covenants referenced in Section 4.1 of the Agreement.

5.3 Effect of Termination . Notwithstanding the foregoing, (a) Sections 1, 2.2, 4.3, 5 and 6 and any other Sections of this Agreement that expressly or by implication are intended to continue in effect after the expiration or earlier termination of this Agreement, shall continue in effect after the expiration or earlier termination of this Agreement in accordance with their terms, and (b) any termination of this Agreement shall not affect any accrued rights or liabilities of either Party.

5.4 Payments Upon Early Termination . In the event that the Company terminates this Agreement pursuant to Section 5.2, all future payments due hereunder shall cease as of the date of such termination.

Section 6 Miscellaneous

6.1 Notice . All notices, approvals and other communications required or contemplated under this Agreement shall be in writing and shall be deemed to have been duly given (a) when received if delivered personally, (b) when sent by cable, telecopy, telegram or facsimile (which is confirmed by the intended recipient), and (c) when sent by overnight courier service or when mailed by certified or registered mail, return receipt requested, with postage prepaid, to the Parties at the following addresses:

In the case of Consultant: to the address set forth in the preamble of this Agreement

In the case of the Company: Scientific Games Corporation

6601 Bermuda Road

Las Vegas, NV 89119

Attention: Chief Legal Officer

or such other persons or addresses as either Party may from time to time designate by notice to the other.

6.2 Assignment; Binding Effect . No Party shall assign or transfer or purport to assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the other Party; provided , however , that the Company shall be permitted to (a) assign or transfer any of its rights or obligations hereunder to any Affiliate of the Company and (b) pledge its rights or interest under this Agreement. This Agreement shall inure to the benefit of the Parties and their respective permitted successors and assigns and is binding upon the Parties and their respective successors and assigns.

6.3 Amendment; Waiver . This Agreement may be amended, changed or supplemented only by a written agreement executed and delivered by the Parties. Any waiver of, or consent to depart from, the requirements of any provision of this Agreement shall be effective only if it is in writing and signed by the Party giving it, and only in the specific instance and for the specific purpose for which it has been given. Except as otherwise provided by this Agreement, no failure on the part of any Party to exercise, and no delay in exercising any right under this Agreement shall operate as a waiver of such right except to the extent that such failure including the failure to provide notice as and when required by this Agreement, has prejudiced

the rights and remedies of the other Party. No single or partial exercise of any such right shall preclude any other or further exercise of such right or the exercise of any other right.

6.4 Entire Agreement . This Agreement (including the Annexes) constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, negotiations, discussions and understandings, written or oral, between the Parties with respect to such subject matter. The parties acknowledge that this Agreement does not supersede any terms of the Employment Agreement that continue after such agreement's termination, or any releases entered into between Consultant and the Company, including the provisions thereof related to the effectiveness of this Agreement.

6.5 Severability . If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. The Parties shall negotiate in good faith to amend this Agreement to give effect to the purpose and intent of the provision found to be invalid, illegal or unenforceable.

6.6 Governing Law; Dispute Resolution . This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada applicable to agreements made and to be wholly performed within that State, without regard to its conflict of laws provisions. The parties agree that any controversy or claim not resolved by the Parties arising out of or relating to this Agreement shall be settled by arbitration in accordance with the Rules of the American Arbitration Association. Venue for the conduct of the arbitration shall be Las Vegas, Nevada, except that, at the direction of the arbitral tribunal or with the consent of the Parties, particular hearings in aid of such arbitration may be held in other places. Judgment upon any award rendered by the arbitrator(s) may be entered in any court having jurisdiction there. The Parties agree that the factual findings of the arbitral tribunal shall be final absent manifest or material error and rulings on questions of Law or mixed questions of fact and Law shall be reviewed under the “clearly erroneous” standard of review and not under a “manifest disregard of the law” or other standard, notwithstanding any Law concerning such standard to the contrary. Except as contemplated by Section 6.8, the remedies expressly provided herein shall constitute the parties’ sole and exclusive remedies, and all other remedies which might be otherwise available under the Law of any jurisdiction are hereby waived by both parties.

6.7 Costs . Except as otherwise provided in this Agreement, each Party is responsible for its own costs and expenses incurred in connection with performing and observing its obligations and covenants under this Agreement.

6.8 Remedies . The Consultant expressly acknowledges and agrees that the terms of this Agreement are reasonable and necessary for the protection of the legitimate business interests of the Company. The Consultant acknowledges and agrees that the Company would be irreparably harmed by a breach of this Agreement by the Consultant and that money damages are an inadequate remedy for an actual or threatened breach of this Agreement. Therefore, the Consultant agrees to the granting of specific performance of this Agreement and injunctive or other equitable relief in favor of the Company as a remedy for any such breach, without proof of actual damages, and the Consultant further waives any requirement for the securing or posting of any bond in connection with any such remedy. Such remedy shall not be deemed to be the exclusive remedy for any such breach, but shall be in addition to all other remedies available at Law or equity to the Company.

6.9 Counterparts . This Agreement may be executed in any number of counterparts which, taken together, constitute one and the same agreement.

6.10 No Third Party Beneficiaries . Except as expressly contemplated by this Agreement, nothing in this Agreement shall confer any rights upon any Person other than the Parties and their respective successors and permitted assigns.

6.11 October 29, 2015 Letter Agreement . Consultant acknowledges and agrees that this Agreement and the fees paid hereunder satisfies in full the requirement of a post-expiration consulting agreement described in the letter agreement between Consultant and the Company amending the Employment Agreement dated October 29, 2015.

IN WITNESS WHEREOF, the Company and the Consultant have each caused this Agreement to be duly executed pursuant to due authorization, all as of the day and year first above written.

SCIENTIFIC GAMES CORPORATION

By: /s/Michael Quartieri

Name: Michael Quartieri

Title: Executive Vice President & Chief Financial Officer

RICHARD HADDRILL

By: /s/Richard Haddrill

Name: Richard Haddrill

Title:

Annex A

Services

The Consultant will serve as Vice Chairman of the Company while elected as a director by the shareholders of the Company and Vice Chairman by the board of directors of the Company (the “ Board ”). In addition, the Consultant will provide limited consulting services to the Company during the Term, subject to Consultant’s reasonable availability, as requested by the Company’s Board or Chief Executive Officer.

During the Term, the Consultant shall dedicate no more than thirty-four (34) hours a month on average for the performance of the Services hereunder. The Company and the Consultant intend and anticipate that (i) as of February 25, 2018, the Consultant had a “separation from service” (within the meaning of Section 409A of the Code) from the Company, and (ii) the amount of time the Consultant shall provide the Services during the Term shall be no more than twenty percent (20%) of the average level of bona fide services performed by the Consultant for the Company during the thirty-six (36) month period preceding February 26, 2018.

Equipment

During the Term, the Company agrees to provide a laptop computer, email account, and cell phone for use by the Consultant solely for business purposes under this Agreement.

Annex B

Fees

The Company will pay the Consultant $125,000 per month for the Services provided hereunder, subject to and in accordance with the terms of this Agreement.

Annex C

Certifications and Covenants

The Consultant certifies and covenants to the Company as follows:


1.	Consultant shall, in connection with this Agreement, (a) maintain complete and accurate books and records and (b) comply with all applicable laws, rules and regulations, including, but not limited to, those relating to anti-corruption, anti-money laundering, competition, licensing and registration; and

Consultant has not offered or paid, and will not offer or pay, directly or indirectly, (a) anything of value to any public official or candidate for political office, or any relative or agent thereof, for purposes of obtaining any official action or benefit relating in any way to this Agreement or (b) any commission or finder’s or referral fee to any person or entity in connection with this Agreement or any activities on behalf of the Company.

In the event the Company has reason to believe any of the foregoing has been violated, Consultant shall (a) promptly provide the Company (or its representatives) with access to Consultant’s books and records to enable the Company (or its representatives) to assess any potential non-compliance and (b) reasonably cooperate in any related investigation, including making any employees reasonably available for interviews.

The Consultant hereby acknowledges receipt of a copy of the Company’s (or its applicable Affiliate’s) Code of Business Conduct. The Consultant agrees and certifies that the Consultant will abide by such Code of Business Conduct and will not take any action (or omit to take any action) in connection with this Agreement or the performance under this Agreement that would conflict with such Code of Business Conduct.

Annex D

Whistleblower Hotline Information

The Company is committed to ethical and compliant business practices throughout the world. As a consultant for the Company, you are required to conduct yourself in an ethical manner, comply with all Laws and comply with the Company’s Code of Business Conduct.

If you discover events of a questionable, fraudulent or illegal nature that are, or that you believe in good faith may be, a violation of Law, the guidelines set forth in the Company’s Code of Business Conduct, or other Company policy, you should report the matter immediately to the Chief Compliance Officer (212-318-9199). In addition, you may call the Scientific Games Business Hotline (the “Hotline”), which is available 24 hours a day, seven days a week, at 1-866-384-4277 or log on to www.ethicspoint.com and click on “File a Report.”

To the extent permitted by Law, you may choose to remain anonymous in reporting any possible violation of the Code of Conduct to the Chief Compliance Officer or by calling the Hotline.

As a consultant for the Company, you have a duty to cooperate truthfully and fully in the investigation of any alleged violation of Law or the Company’s Code of Conduct.

Failure to comply with the requirements of this Annex D will be grounds for the Company to terminate the Agreement in accordance with Section 5.2.

OMNIBUS AMENDMENT TO COMPENSATION AND BENEFIT PLANS

The purpose of this Omnibus Amendment of Compensation and Benefit Plans (this “ Omnibus Amendment ”) is to amend the Plans (as defined below) to reflect the merger (the “ Reincorporation Merger ”) of Scientific Games Corporation, a Delaware corporation (“ Parent ”) into SG Nevada Merger Company, a Nevada corporation and a wholly-owned subsidiary of Parent (the “ Corporation ”), with the Corporation as the surviving corporation and, as the legal successor to Parent and assignee of all Parent’s rights and obligations under the Plans and the surviving sponsor of the Plans under the name “Scientific Games Corporation, a Nevada corporation”. This Omnibus Amendment shall be effective upon the effective time of the Reincorporation Merger (the “ Effective Time ”), which shall be upon the effective time of the filing of articles of merger with the Office of the Secretary of State of Nevada (the “ Articles of Merger ”) and a certificate of merger with the Office of the Secretary of State of Delaware (the “ Certificate of Merger ”).

W I T N E S S E T H:

WHEREAS , as a result of the Reincorporation Merger, by operation of law, the Corporation will, upon the Effective Time, assume, and become the sponsor of, the compensation and benefit plans, programs, agreements and arrangements currently sponsored and maintained by Parent, including the compensation and benefit plans, programs, agreements and arrangements listed on Schedule I hereto (collectively, the “ Plans ”); and

WHEREAS , following the Effective Time, the Corporation intends to maintain each of the Plans for the benefit of its directors, employees and consultants; and

WHEREAS , each Plan provides, pursuant to the applicable provision indicated next to such Plan on Schedule I hereto, that the sponsor of the applicable Plan or the Board of Directors of such sponsor may amend such Plan as provided herein; and

NOW, THEREFORE , each of the Plans shall be amended, effective as of the Effective Time, as follows:


1.	For the avoidance of doubt, each reference to “Scientific Games Corporation” shall refer to the Corporation, as it may be renamed from time-to-time, as the legal successor to Parent and as the sponsor of such Plan;


2.	For the avoidance of doubt, each reference to the “Board of Directors” or the “Compensation Committee of the Board of Directors” shall refer to the Board of Directors of the Corporation or the Compensation Committee of the Board of Directors of the Corporation, as applicable;


3.	Each reference to “the Company’s Class A Common Stock, $.01 par value”, or similar term, shall be replaced with “the Company’s Common Stock, $.001 par value”; and


4.	Each reference to the sponsor of such Plan being a “Delaware corporation” or “incorporated in the State of Delaware” and each phrase of similar meaning shall be replaced with “Nevada corporation” or “incorporated in the State of Nevada” or a corresponding phrase of similar meaning, as applicable; and


5.	Each reference to the laws of any state in the United States shall be replaced with a reference to Nevada law.

SCHEDULE I

Plans


1.	The Scientific Games Corporation 2003 Incentive Compensation Plan, as amended and restated June 10, 2015 (the “ 2003 Plan ”), and any awards granted thereunder ((Section 10(e) of the 2003 Plan).


2.	The Inducement Equity Award Agreement between Scientific Games Corporation and Kevin Sheehan, dated as of August 10, 2016, granting to Mr. Sheehan 67,370 restricted stock units, 133,717 stock options and 133,717 performance-conditioned stock options (Section 6(a)).


3.	The Inducement Equity Award Agreement between Scientific Games Corporation and each of Kevin Sheehan, dated as of August 10, 2016, granting to Mr. Sheehan 400,000 performance-conditioned restricted stock units (Section 7(a)).


4.	The Inducement Equity Award Agreement between Scientific Games Corporation and Michael Gavin Isaacs, dated as of June 9, 2014 (Section 6(a)).


5.	The 1995 Equity Incentive Plan, as amended (the “ 1995 Plan ”), and any awards granted thereunder (Section 9 of the 1995 Plan).


6.	The Scientific Games Corporation 2016 Employee Stock Purchase Plan (Section 18(a)).


7.	The Scientific Games Corporation 401(k) Plan.


8.	The Scientific Games Corporation Nonqualified Deferred Compensation Plan (Article VIII).


9.	The Asia-Pacific Business Incentive Compensation Program (the Section entitled “Amendments; Waivers”).

Amendment to Employment Agreement

This Amendment (this “ Amendment ”) to the Employment Agreement between Larry Potts (“ Employee ”) and Scientific Games Corporation, a Nevada corporation (the “ Company ”), is made and effective as of April 9, 2018.

WHEREAS, the Company and Employee entered into an Employment Agreement dated as of January 1, 2006 (executed August 2, 2006), which was amended by a letter agreement dated October 2, 2008 (the “ First Amendment ”), an amendment to the Employment Agreement dated as of December 30, 2008, a letter agreement dated September 28, 2011, a letter agreement dated April 30, 2014 and a letter agreement dated May 1, 2015 (as so amended, the “ Agreement ”); and

WHEREAS, all capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Agreement;

NOW THEREFORE, in consideration of the premises and the mutual benefits to be derived herefrom and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:


1.	Term . The Term shall be extended to April 30, 2019, subject to earlier termination in accordance with Section 5 of the Agreement. The penultimate sentence of Section 2 of the Agreement shall be deleted in its entirety, such that the Term shall no longer be extended automatically and shall end on April 30, 2019.


2.	Transition; Offices and Duties . Effective as of April 9, 2018 (the “ Transition Date ”), the defined term “Executive” and all uses of it in the Agreement shall be replaced with the term “Employee”. Effective upon the Transition Date, Section 3 of the Agreement shall be deleted in its entirety and replaced with the following:

“During the Term, Employee will serve as Compliance Advisor to the Chief Executive Officer. In such capacity, Employee shall report to the Chief Executive Officer and shall perform such duties and shall have such responsibilities as may be assigned to Employee from time to time by the Chief Executive Officer. Employee’s functions, duties and responsibilities are subject to reasonable changes as the Company may in good faith determine. Employee hereby agrees to accept such employment and to serve the Company to the best of his ability in such capacities, devoting substantially all of his business time to such employment. For the avoidance of doubt, a part-time or adjunct teaching position will not be considered to be done on business time.”

Upon the Transition Date, Employee shall no longer serve as an officer or director of any subsidiary or affiliate of the Company, and agrees to relinquish all such positions and titles he currently holds effective upon the Transition Date.


3.	Annual Equity Awards . Section 4(c) of the Agreement shall be deleted in its entirety. For the avoidance of doubt, Employee shall not be entitled to receive a grant of annual equity awards in 2018 or 2019.


4.	Health and Welfare Benefits . Effective upon the Transition Date, the phrase “its other senior executives” contained in Section 4(e) of the Agreement shall be deleted and replaced with the phrase “its senior executives”.

Good Reason . Employee hereby agrees that this Amendment constitutes Employee’s prior written consent, as contemplated by Section 5(e) of the Agreement, to the changes to Employee’s employment contemplated by this Amendment and any actions taken by the Company in furtherance thereof so that such changes and actions shall not constitute Good Reason for purposes of the Agreement. Furthermore, Employee agrees that the second sentence in Section 5(e) containing the definition of “Good Reason” is deleted and replaced with the following:

“For purposes of this Agreement “Good Reason” shall mean that, without Employee’s prior written consent, any of the following shall have occurred: (A) a material decrease in base salary or material decrease in Employee’s Incentive Compensation opportunity provided under this Agreement; or (B) any other material failure by the Company to perform any material obligation under, or material breach by the Company of any material provision of, this Agreement; provided, however, that a termination by Employee for Good Reason under clause (A) or (B) of this Section 5(e) shall not be considered effective unless Employee shall have provided the Company with written notice of the specific reasons for such termination within thirty (30) days after Employee has knowledge of the event or circumstance constituting Good Reason and the Company shall have failed to cure the event or condition allegedly constituting Good Reason within thirty (30) days after such notice has been given to the Company and Employee actually terminates his employment within one (1) year following the initial occurrence of the event giving rise to Good Reason.”

Termination Upon Expiration of Agreement . The paragraph of the First Amendment entitled “Termination Upon Expiration of Agreement” shall be deleted in its entirety. Upon expiration of the Agreement, as modified by this Amendment, on April 30, 2019, Employee shall receive the Standard Termination Payments and, provided Employee has, within 21 days of April 30, 2019, delivered to the Company, and not revoked, a release agreement, substantially in the form attached hereto as Exhibit A (the “ Release Requirement ”):


a.	no later than March 15, 2020, payment of an amount equal to (A) the Incentive Compensation which would have been payable to Employee had Employee remained in employment with the Company during all of 2019, multiplied by (B) a fraction the numerator of which is 120 and the denominator of which is 365;


b.	the consulting agreement attached hereto as Exhibit B (the “ Consulting Agreement ”) shall become effective as of May 1, 2019 (in the event the Release Requirement is not satisfied, the Consulting Agreement shall be null and void and of no effect);


c.	all unvested restricted stock units held by Employee shall become fully vested and non-forfeitable and shares of the Company’s common stock in respect of such restricted stock units shall be delivered to Employee as soon as practicable, but in no event more than 70 days following April 30, 2019;

all unvested stock options held by Employee shall continue to vest during the term of the Consulting Agreement as if Employee was still an employee of the Company and if Employee provides consulting services to the Company in accordance with the terms of the Consulting Agreement through December 31, 2020, all unvested stock options as of such date shall become fully vested and non-forfeitable; and


e.	all vested stock options held by Employee (including those that become vested in accordance with paragraph 6(d) above) shall remain outstanding and exercisable until the scheduled expiration date of such stock options;

provided , however , that all equity awards held by Employee and/or all amounts received by him in respect thereof shall remain subject to forfeiture or recovery by the Company pursuant to Sections 5(k) and 6.6 of the Agreement and any applicable clawback or similar compensation recovery policy adopted by the Company from time to time. The Company and Employee hereby agree and acknowledge that the Release Requirement shall satisfy the requirements of Section 5(k) of the Agreement.


7.	The reference to the State of New York in Section 13(a) of the Agreement shall be deleted and replaced with the State of Nevada.


8.	Section 16 shall be deleted and replaced with:

Notices . All notices and other communications to be given or to otherwise be made to any party to this Agreement shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by certified mail or by a recognized national courier service, postage or charges prepaid, (a) to Scientific Games Corporation, Attn: Legal Department, 6601 Bermuda Rd., Las Vegas, NV 89119, (b) to Employee, at the last address shown in the Company’s records, or (c) to such other replacement address as may be designated in writing by the addressee to the addressor.

Except as set forth in this Amendment, all terms and conditions of the Agreement shall remain unchanged and in full force and effect in accordance with their terms. All references to the “Agreement” in the Agreement shall refer to the Agreement as previously amended and as amended by this Amendment.

This Amendment may be executed in counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute the same instrument. Delivery of an executed counterpart of a signature page of this Amendment by electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Amendment as of April 9, 2018.

SCIENTIFIC GAMES CORPORATION

By: /s/Shawn Williams

Name: Shawn Williams

Title: SVP & CHRO

/s/Larry Potts

Larry Potts

Exhibit A

Release Agreement

[see attached]

A-1

Exhibit A

RELEASE AGREEMENT

In consideration of the promises contained herein and in the Amendment to Employment Agreement dated as of April 9, 2018 (the “ Amendment ”), Scientific Games Corporation (the “ Company ”) and Larry Potts (“ you ”) hereby enter into this release agreement (this “ Release Agreement ”) as of May ____, 2019.

Whereas, the Company and you entered into an Employment Agreement dated as of January 1, 2006 (executed August 2, 2006), which was amended by a letter agreement dated October 2, 2008, an amendment to the Employment Agreement dated as of December 30, 2008, a letter agreement dated September 28, 2011, a letter agreement dated April 30, 2014, a letter agreement dated May 1, 2015, and the Amendment (as so amended, the “ Employment Agreement ”); and

WHEREAS, the Amendment includes this Release Agreement as an exhibit thereto; and

WHEREAS, the Company’s obligations to you upon expiration of your Employment Agreement are conditioned on you entering into this Release Agreement;

NOW THEREFORE, you hereby agree to the following:

1. General Release of Claims . In consideration of the benefits described in Sections 6(a)-(e) of the Amendment (the “ Expiration Benefits ”), which you acknowledge are not otherwise owed to you, you understand and agree that you are knowingly and voluntarily releasing, waiving and forever discharging, to the fullest extent permitted by law, on your own behalf and on behalf of your agents, assignees, attorneys, heirs, executors, administrators and anyone else claiming by or through you (collectively referred to as the “ Releasors ”), the Company, and its affiliates, subsidiaries and members, predecessors, successors or assigns, and any of its or their past or present parents, affiliates, subsidiaries and members, predecessors, successors or assigns; and any of its or their past or present shareholders; and any of its or their past or present directors, executives, members, officers, insurers, attorneys, employees, consultants, agents, both individually and in their business capacities, and employee benefits plans and trustees, fiduciaries, and administrators of those plans (collectively referred to as the “ Released Parties ”), of and from any and all claims under local, state or federal law, whether known or unknown, asserted and unasserted, that you and/or the other Releasors have or may have against Released Parties as of the day you sign this Release Agreement, including but not limited to all matters relating to or in any way arising out of any aspect of your employment with the Company, separation from employment with the Company, or your treatment by the Company while in the Company’s employ, all claims under any applicable law, and all other claims, charges, complaints, liens, demands, causes of action, obligations, damages (including punitive or exemplary damages), liabilities or the like (including without limitation attorneys’ fees and costs) (collectively “ Claims ”), including but not limited to all Claims for:

(a) salary and other wages, including, but not limited to, overtime if applicable, incentive compensation and other bonuses, severance pay, paid time off, or any benefits under the Employee Retirement Income Security Act of 1974, as amended or any other applicable local, state or federal law;

(b) discrimination, harassment or retaliation based upon race, color, national origin, ancestry, religion, marital status, sex, sexual orientation, citizenship status, pregnancy or any pregnancy related disability, family status, leave of absence (including but not limited to the Family Medical Leave Act or any other federal, state or local leave laws), handicap (including but not limited to The Rehabilitation Act of 1973), medical condition or disability, or any other characteristic covered by law under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Americans with Disabilities Act, as amended, Sections 1981 through 1988 of the Civil Rights Act

A-2

Exhibit A

of 1866, and any other federal, state, or local law prohibiting discrimination in employment, the Worker Adjustment and Retraining Notification Act, or any other federal, state or local law concerning plant shutdowns, mass layoffs, reductions in force or other business restructuring;

(c) discrimination, harassment or retaliation based upon age under the Age Discrimination in Employment Act as amended by the Older Workers Benefit Protection Act of 1990 and as further amended (the “ ADEA ”), or under any other federal, state, or local law prohibiting age discrimination;

(d) breach of implied or express contract (whether written or oral), breach of promise, misrepresentation, fraud, estoppel, waiver or breach of any covenant of good faith and fair dealing, including without limitation breach of any express or implied covenants of any employment agreement that may be applicable to you;

(e) defamation, negligence, infliction of emotional distress, violation of public policy, wrongful or constructive discharge, or any employment-related tort recognized under any applicable local, state, or federal law;

(f) any violation of any of the Fair Employment Practices Act, Equal Rights Act; Civil Rights Act; Minimum Fair Wages Act; Equal Pay Act; or Payment of Wages Act; or any comparable federal, state or local law;

(g) any violation of the Immigration Reform and Control Act, or any comparable federal, state or local law;

(h) any violation of the Fair Credit Reporting Act, or any comparable federal, state or local law;

(i) any violation of the Family and Medical Leave Act;

(j) any violation of the Virginia Human Rights Act, and any comparable federal, state or local law and any violation of any statute, regulation, or law of any country or nation;

(k) costs, fees, or other expenses, including attorneys’ fees; and

(l) any other claim, charge, complaint, lien, demand, cause of action, obligation, damages, liabilities or the like of any kind whatsoever, whether under U.S. law or the law of another nation, including, without limitation, any claim that this Release Agreement was induced or resulted from any fraud or misrepresentation by the Company.

Excluded from the release set forth in this Section 1 are: (i) any Claims or rights to enforce benefits under the Amendment or this Release Agreement against the Company, (ii) Claims arising after the date you sign this Release Agreement, (iii) claims for indemnification covered by Section 8 of the Employment Agreement, and (iv) any Claims that you cannot lawfully release. Notwithstanding anything to the contrary contained herein, including in Section 2 below, also excluded from the release set forth in this Section 1 is your right to file a charge with an administrative agency (including the Equal Employment Opportunity Commission and the National Labor Relations Board) or participate in any agency investigation. You are, however, to the extent allowed by law, waiving your right to recover money or other damages in connection with any such charge or investigation. You are also, to the extent allowed by law, waiving your right to recover money in connection with a charge filed by any other individual or by the Equal Employment Opportunity Commission, National Labor Relations Board or any other federal, state or local agency.

A-3

Exhibit A

Furthermore, notwithstanding anything herein to the contrary, nothing in your Employment Agreement, this Release Agreement, or any other agreement between you and the Company shall (i) prohibit you from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) require notification or prior approval by the Company of any reporting described in clause (i).


2.	Additional Agreements by Employee.

(a) BY SIGNING THIS RELEASE AGREEMENT YOU ARE KNOWINGLY AND VOLUNTARILY WAIVING ANY RIGHTS (KNOWN OR UNKNOWN) TO BRING OR PROSECUTE A LAWSUIT OR MAKE ANY LEGAL CLAIM AGAINST THE RELEASED PARTIES WITH RESPECT TO ANY OF THE CLAIMS DESCRIBED ABOVE IN SECTION 1. You agree that the release set forth above will bar all claims or demands of every kind, known or unknown, referred to above in Section 1 and further agree that no non-governmental person, organization or other entity acting on your behalf has in the past or will in the future file any lawsuit, arbitration or proceeding asserting any claim that is waived or released under this Release Agreement. If you break this promise and file a lawsuit, arbitration or other proceeding asserting any Claim waived in this Release Agreement, (i) you will pay for all costs, including reasonable attorneys’ fees, incurred by the Released Parties in defending against such Claim (unless such Claim is a charge with the Equal Employment Opportunity Commission or the National Labor Relations Board); (ii) you give up any right to individual damages in connection with any administrative, arbitration or court proceeding with respect to your employment with and/or termination from employment with the Company, including damages, reinstatement or attorneys' fees; and (iii) if you are awarded money damages, you will assign to the Released Parties your right and interest to all such money damages. If any claim is not subject to release, to the extent permitted by law, you waive any right or ability to be a class or collective action representative or to otherwise participate in any putative or certified class, collective or multi-party action or proceeding based on such a claim in which the Company or any other Released Party is a party. Furthermore, if you are made a member of a class or collective action in any proceeding without your prior knowledge or consent, you agree to opt out of the class or collective action at the first opportunity. Notwithstanding the foregoing, this Section 2 does not limit your right to challenge the validity of this Release Agreement in a legal proceeding under the Older Workers Benefit Protection Act, 29 U.S.C. § 626(f), with respect to claims under the ADEA. This Section also is not intended to and shall not limit the right of a court to determine, in its discretion, that the Company is entitled to restitution, recoupment or setoff of any payments made to you by the Company should this Release Agreement be found to be invalid as to the release of claims under the ADEA.

(b) You agree that you shall not solicit, encourage, assist or participate (directly or indirectly) in bringing any Claims or actions against any of the Released Parties by other current or former employees, officers or third parties, except as compelled by subpoena or other court order or legal process, and only after providing the Company with prior notice of any such subpoena, order or legal process and an opportunity to timely contest such process. Notwithstanding the foregoing, nothing in this Release Agreement shall preclude you from making truthful statements that are required by applicable law, regulation or legal process.

(c) You represent and warrant that you have not filed any administrative, judicial or other form of complaint or initiated any claim, charge, complaint or formal legal proceeding, nor are you a party

A-4

Exhibit A

to any such claim, against any of the Released Parties, and that you will not make such a filing at any time hereafter based on any events or omissions occurring prior to the date of execution of this Release Agreement. You understand and agree that this Release Agreement will be pleaded as a full and complete defense to any action, suit or proceeding which is or may be instituted, prosecuted or maintained by you, your agents, assignees, attorneys, heirs, executors, administrators and anyone else claiming by or through you.

(d) You agree to cooperate with Company and take all necessary steps to effectuate this Release Agreement, each of its terms and the intent of the parties.


3.	Affirmations . In signing this Release Agreement, you are affirming that:

(a) Other than as described in the Amendment, you have been paid and/or have received all compensation, wages, bonuses, commissions, overtime and/or benefits to which you may be entitled. You affirm that you have been granted or not been denied any leave to which you were entitled under the Family and Medical Leave Act or related state or local leave or disability accommodation laws;

(b) You are not eligible to receive payments or benefits under any other Company and/or other Released Party’s severance pay policy, plan, practice or arrangement;

(d) You have not complained of and you are not aware of any fraudulent activity or any act(s) which would form the basis of a claim of fraudulent or illegal activity by the Company or any other Released Party that you have not reported to the Company in writing. You also affirm that you have not been retaliated against for reporting any allegations of wrongdoing by any Released Party, including any allegations of corporate fraud. Both parties acknowledge that this Release Agreement does not limit either party’s right, where applicable, to file or to participate in an investigative proceeding of any federal, state or local governmental agency. To the extent permitted by law, you agree that if such an administrative claim is made, you shall not be entitled to recover any individual monetary relief or other individual remedies;

(e) You acknowledge and agree that all of the Company’s decisions regarding your pay and benefits through the date of your execution of this Release Agreement were not discriminatory based on age, medical condition or disability, race, color, sex, religion, national origin, ancestry, marital status, sexual orientation, citizenship status, pregnancy or any pregnancy related disability, family status, leave of absence, handicap, or any other classification protected by law; and

(f) You acknowledge and agree that if you breach the provisions of this Release Agreement or your Employment Agreement that the Company will have the right to seek an appropriate remedy against you, which may include, but not be limited to, injunctive relief, the return of the Expiration Benefits, other monetary damages, and the payment of the Company’s attorneys’ fees. Additionally, if you breach this Release Agreement or the Employment Agreement the Company shall have the right, without waiving any other remedies in law or equity, to cease any further payment or delivery of the Expiration Benefits. Notwithstanding such cessation, all of your obligations hereunder shall be continuing and enforceable including but not limited to your release of claims, and the Company shall be entitled to pursue all remedies against you available at law or in equity for such breach.

A-5

Exhibit A

4. Governing Law; Arbitration . The parties hereby agree that the “Governing Law; Arbitration” section of the Employment Agreement set forth at Section 13 of the Employment Agreement is incorporated into this Release Agreement.

5. Non-Admission of Wrongdoing . You and the Company agree that neither this Release Agreement nor the furnishing of the consideration for this Release Agreement and the Amendment shall be deemed or construed at any time for any purpose as an admission by any of the Released Parties of any liability, wrongdoing, or unlawful conduct of any kind, and the Released Parties do specifically deny, any violation of any local, state, federal, or other law, whether regulatory, common or statutory. Additionally, this Release Agreement, its existence or its terms will not be admissible in any proceeding other than a proceeding to enforce the terms of this Release Agreement.

6. Right to Consider, Rescind and Revoke Acceptance . This Release Agreement is intended to comply with the Older Workers Benefit Protection Act of 1990 with regard to your waiver of rights under the ADEA. In signing this Release Agreement, you understand and agree that:

(a) You are specifically advised to consult with an attorney of your own choosing before you sign this Release Agreement, as it waives and releases rights you have or may have under federal, state and local law, including but not limited to the ADEA. You acknowledge that you will bear all expenses incurred by you in the negotiation and preparation of this Release Agreement, and the Company will bear all fees incurred by it.

(b) You will have up to twenty-one (21) calendar days from the date of the expiration of the Employment Agreement (i.e., April 30, 2019) to decide whether to accept and sign this Release Agreement. In the event you do sign this Release Agreement, you may revoke or rescind your acceptance within seven (7) calendar days of signing it, and it will not become effective or enforceable until the eighth (8 ^th ) day after you sign it (the “ Release Agreement Effective Date ”). In order to effectively revoke or rescind your acceptance, the revocation or rescission must be in writing and postmarked within the seven (7) calendar day period, and properly addressed to:

Scientific Games Corporation

6601 Bermuda Road

Las Vegas, NV 89119

Attention: Chief Legal Officer

You acknowledge that if you do not accept this Release Agreement in the manner described above, it will be withdrawn and of no effect. You acknowledge and agree that, if you revoke your acceptance of this Release Agreement, you shall receive none of the Expiration Benefits provided for in the Amendment and that this Release Agreement and the Amendment will not be admissible as evidence in any judicial, administrative or arbitral proceeding or trial. You further acknowledge that if the Release Agreement is not effectively revoked in the time period set forth above, you shall have forever waived your right to revoke this Release Agreement, and it shall thereafter have full force and effect as of the Release Agreement Effective Date.

(c) Any and all questions regarding the terms of this Release Agreement have been asked and answered to your complete satisfaction.

(d) You acknowledge that the consideration provided for hereunder is in addition to anything of value to which you already are entitled and the consideration provided for herein is good and valuable.

A-6

Exhibit A

(e) You are entering into this Release Agreement voluntarily, of your own free will, and without any coercion or undue influence of any kind or type whatsoever.

(f) Any modifications of or revisions to this Release Agreement do not re-start the consideration period, described in paragraph (b) of this Section 6.

(g) You understand that the releases contained in this Release Agreement do not extend to any rights or claims that you have under the ADEA that first arise after execution of this Release Agreement.

IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Release Agreement as of the date set forth below:

SCIENTIFIC GAMES Corporation

By: Date:

Name:

Title:

I have decided to accept this Release Agreement, to fulfill the promises I have made in the Amendment and in this Release Agreement, and to receive the Expiration Benefits described in Sections 6(a)-(e) of the Amendment. I hereby freely and voluntarily assent to all the terms and conditions in this Release Agreement and reaffirm my obligations under my Employment Agreement, as amended, to the extent provisions of the Employment Agreement survive termination or expiration thereof. I understand that this Release Agreement will become a binding agreement between the Company and me as of the 8 ^th day after I sign it, and I am signing this Release Agreement as my own free act with the full intent of releasing the Released Parties from all Claims, as described in Section 1 above, including but not limited to those under the Age Discrimination in Employment Act (ADEA).

________________________________ Date: ____________________

Larry Potts

A-7

Exhibit B

Consulting Agreement

[see attached]

B-1

Exhibit B

CONSULTING AGREEMENT

This Consulting Agreement is entered into as of May 1, 2019 (this “ Agreement ”) by and between SCIENTIFIC GAMES CORPORATION, with offices located at 6601 Bermuda Road, Las Vegas, NV 89119 (the “ Company ”), and Larry Potts, an individual, 17670 Braemar Place, Leesburg, VA 20175 (the “ Consultant ” and, together with the Company, the “ Parties ”).

RECITALS

WHEREAS, the Company and the Consultant entered into an Employment Agreement dated as of January 1, 2006 (executed August 2, 2006), which was amended by a letter agreement dated October 2, 2008, an amendment to the Employment Agreement dated as of December 30, 2008, a letter agreement dated September 28, 2011, a letter agreement dated April 30, 2014, a letter agreement dated May 1, 2015, and an amendment to the Employment Agreement dated April 9, 2018 (as so amended, the “ Employment Agreement ”); and

WHEREAS, the Employment Agreement expired on April 30, 2019; and

NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties made herein and intending to be legally bound, the Parties hereto agree as follows:

Section 1 Interpretation

1.1 Certain Terms . As used herein, the following terms have the following meanings:

“Code” means the Internal Revenue Code of 1986, as amended.

B-2

Exhibit B

department, agency, authority, commission, administration, court or other body, or any official of any of the foregoing (including any gaming- or lottery-related Governmental Authority).

1.2 Incorporation . The Annexes to this Agreement are incorporated by reference into, and form an integral part of, this Agreement.

Section 2 Engagement

Section 3 Compensation

B-3

Exhibit B

3.1 Consideration . As full consideration for the provision of Services and the rights granted to the Company under this Agreement, the Company shall provide the Consultant with the consideration set forth in Annex B .

3.3 Withholding, etc . Amounts payable under this Agreement shall be without deduction or withholding of any kind other than any tax or other deduction or withholding determined by the Company to be required by Law. Consultant shall be responsible for, and shall indemnify the Company against, any taxes or contributions, including penalties and interest, owed by Consultant. The foregoing shall not apply to any equity-based awards held by Consultant that were granted at a time during which Consultant was an employee of the Company and its affiliates.

3.4 Taxes and Internal Revenue Code 409A . It is intended that the provisions of this Agreement comply with Section 409A of the Code, and applicable administrative guidance and regulations (“ Section 409A ”), and all provisions of this Agreement shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes and penalties under Section 409A and that all reimbursements provided under this Agreement shall be made or provided in accordance with Section 409A. Notwithstanding the foregoing, the Company makes no representations or warranties and shall have no responsibility regarding the tax implications of the compensation and benefits to be paid to the Consultant under this Agreement, including under Section 409A.

Section 4 Certain Agreements

4.1 Restrictive Covenants. The Consultant acknowledges that he has continuing obligations to the Company as set forth in Section 6 of his Employment Agreement, which continue in full force and effect after his separation from employment with the Company according to their terms.

B-4

Exhibit B

required to be disclosed (as confirmed by the opinion of the Consultant’s counsel). In such an event, the Consultant shall take reasonable efforts to obtain assurance that confidential treatment will be accorded to that portion of the Confidential Information being disclosed. In no event shall the Consultant oppose action by the Company (or any of its Affiliates) to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. Notwithstanding anything herein to the contrary, nothing in this Agreement or any other agreement with the Company shall (i) prohibit Consultant from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) require notification or prior approval by the Company of any reporting described in clause (i).

4.4 Indemnification . Company agrees to indemnify, defend and hold harmless the Consultant as to any claim asserted against the Consultant arising from his performance of the Services, to the extent such claim does not arise from the gross negligence or other wrongful act of Consultant.

Section 5 Termination

5.1 Term of Agreement . The term of this Agreement shall commence on May 1, 2019 and shall continue until December 31, 2020, unless earlier terminated by the Company in accordance with Section 5.2 (the “ Term ”). The Term can be extended if agreed to by both parties in writing.

5.2 Early Termination by Company . The Company may terminate this Agreement early if the Consultant breaches the restrictive covenants referenced in Section 4.1 of the Agreement.

5.3 Effect of Termination . Notwithstanding the foregoing, (a) Sections 1, 2.2, 4.2, 4.3, 5 and 6 and any other Sections of this Agreement that expressly or by implication are intended to continue in effect after the expiration or earlier termination of this Agreement, shall continue in effect after the expiration or earlier termination of this Agreement in accordance with their terms, and (b) any termination of this Agreement shall not affect any accrued rights or liabilities of either Party.

5.4 Payments Upon Early Termination . In the event that the Company terminates this Agreement pursuant to Section 5.2, all future consideration due hereunder shall cease as of the date of such termination.

Section 6 Miscellaneous

B-5

Exhibit B

In the case of Consultant: to the address set forth in the preamble of this Agreement

In the case of the Company: Scientific Games Corporation

6601 Bermuda Road

Las Vegas, NV 89119

Attention: Chief Legal Officer

or such other persons or addresses as either Party may from time to time designate by notice to the other.

6.4 Entire Agreement . This Agreement (including the Annexes) constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, negotiations, discussions and understandings, written or oral, between the Parties with respect to such subject matter. The parties acknowledge that this Agreement does not supersede any terms of the Employment Agreement that continue after such agreement's expiration, or any releases entered into between Consultant and the Company, including the provisions thereof related to the effectiveness of this Agreement.

B-6

Exhibit B

in accordance with the Rules of the American Arbitration Association. Venue for the conduct of the arbitration shall be Las Vegas, Nevada, except that, at the direction of the arbitral tribunal or with the consent of the Parties, particular hearings in aid of such arbitration may be held in other places. Judgment upon any award rendered by the arbitrator(s) may be entered in any court having jurisdiction there. The Parties agree that the factual findings of the arbitral tribunal shall be final absent manifest or material error and rulings on questions of Law or mixed questions of fact and Law shall be reviewed under the “clearly erroneous” standard of review and not under a “manifest disregard of the law” or other standard, notwithstanding any Law concerning such standard to the contrary. Except as contemplated by Section 6.8, the remedies expressly provided herein shall constitute the parties’ sole and exclusive remedies, and all other remedies which might be otherwise available under the Law of any jurisdiction are hereby waived by both parties.

6.9 Counterparts . This Agreement may be executed in any number of counterparts which, taken together, constitute one and the same agreement.

IN WITNESS WHEREOF, the Company and the Consultant have each caused this Agreement to be duly executed pursuant to due authorization, all as of the day and year first above written.

SCIENTIFIC GAMES CORPORATION

By: ______________________________

Name:

Title:

Larry Potts

______________________________

B-7

Exhibit B

Annex A

Services

The Consultant will provide consulting services related to compliance matters to the Company during the Term, subject to Consultant’s reasonable availability, as requested by the Company’s Chief Executive Officer.

Equipment

During the Term, the Company agrees to provide a laptop computer, email account, and cell phone for use by the Consultant solely for business purposes under this Agreement.

B-8

Exhibit B

Annex B

Consideration

In consideration for the Services:


1.	during the Term, the Consultant is eligible for continued vesting of all unvested stock options previously granted to the Consultant by the Company during his employment as if the Consultant was still an employee of the Company;


2.	if Consultant provides consulting services to the Company in accordance with the terms of this Agreement through December 31, 2020, all unvested stock options as of such date shall become fully vested and non-forfeitable; and


3.	any stock options that are vested prior to the commencement of the Term or that vest following the commencement of the Term in accordance with this Annex B shall remain exercisable until the later of (a) the date that is three months after the end of the Term and (b) the scheduled expiration date of such stock options.

Other than as set forth above, all other terms and conditions of the stock option grant agreements between the Company and Consultant will continue to apply.

B-9

Exhibit B

Annex C

Certifications and Covenants

The Consultant certifies and covenants to the Company as follows:


1.	Consultant shall, in connection with this Agreement, (a) maintain complete and accurate books and records and (b) comply with all applicable laws, rules and regulations, including, but not limited to, those relating to anti-corruption, anti-money laundering, competition, licensing and registration; and

B-10

Exhibit B

Annex D

Whistleblower Hotline Information

To the extent permitted by Law, you may choose to remain anonymous in reporting any possible violation of the Code of Conduct to the Chief Compliance Officer or by calling the Hotline.

As a consultant for the Company, you have a duty to cooperate truthfully and fully in the investigation of any alleged violation of Law or the Company’s Code of Conduct.

Failure to comply with the requirements of this Annex D will be grounds for the Company to terminate the Agreement in accordance with Section 5.2.

B-11

February 21, 2018

Stephen Richardson Via Email

Dear Stephen,

Congratulations, we are pleased to extend you an offer of employment with Scientific Games Corporation , (the "Company") in the role of Senior Vice President & Chief Compliance Officer in the Corporate Compliance department located in Las Vegas, Nevada reporting to the President & Chief Executive Officer.

Your start date will be TBD or such other date as is mutually agreed between you and the Company (the "Commencement Date").

COMPENSATION

In this full-time position, your base compensation will be $15,384.62 bi-weekly which is equivalent to an annualized salary of $40 0,000. Your compensation will be paid in accordance with the Company's regular payroll practices and subject to such deductions or amounts to be withheld as required by applicable law. This position is an exempt position and is not eligible for overtime compensation.

BENEFITS-FULL TIME EMPLOYEE

You will be eligible to enroll in medical, dental and vision coverage for you and your dependents on your date of hire, if you are scheduled to work 30 hours or more per week. You will receive 2x your base salary in Company paid life insurance, Company paid short term disability insurance and a core long-term disability plan equal to 50% of your base salary at no cost to you. Voluntary life insurance coverage is available for you, your spouse and children. The Company offers a generous 401(k) Plan package that is available after 45 days of employment. Additionally, you are eligible for paid time off and company holidays pursuant to company policy. More details on the Company's benefit plans will be provided during your new hire orientation. The Company reserves the right to eliminate or modify any of its benefits at any time.

INCENTIVE PLAN COMPENSATION

You are eligible to participate in the annual incentive compensation plan in amounts determined by the Compensation Committee of the Board of Directors of Scientific Games Corporation (the "Committee"). For your job level , your target incentive compensation is 67% of your annual base salary. Participation will commence in the current year if your initial date of employment is on or before September 30; otherwise your participation will commence as of January 1 of the year following your initial date of employment. Your bonus will be pro-rated based on the number of months worked during the year. Payments will depend on financial performance criteria established by the Committee, subject to modification based on considerations such as individual performance, and are pursuant to the terms and conditions of the annual incentive plan which is reviewed annually by the Committee.

LONG-TERM INCENTIVES

February 21, 2018

2 | P a g e

Your role is eligible beginning in 2018 to receive stock options, restricted stock units, equity awards or other cash-based long term incentives in the sole discretion of the Committee and subject to Scientific Games Corporation's right to at any time amend or terminate any such plan or program, so long as any such change does not adversely affect any accrued or vested interest you may have under any such plan or program. The specific details on any award and terms and conditions of the plan will be sent to you separately with instructions on how accept the award, including any applicable grant agreement which must be signed in order to accept the award.

RELOCATION PACKAGE

To assist with your relocation needs, you are approved for a Company provided relocation package . We also encourage you to consult with your tax adviser on tax consideration related to relocation. Please review and acknowledge the attached relocation payback policy.

SIGN ON BONUS

You are also eligible for a one-time sign on bonus in the amount of $50,000 to cover transition related items. This amount will be paid to you on your first scheduled pay period, less any applicable withholding taxes. You agree that if you voluntarily leave your employment with the Company within (1) year of your Commencement Date, you will repay the Company the full amount of this sign-on bonus within ten days of your last day with the Company.

EMPLOYMENT-AT-WILL

The scope of this letter is to outline our offer of employment and is not to be perceived as an employment contract. Your employment with the Company will be "at will," meaning that the terms of employment, including, but not limited to, termination, demotion, promotion, transfer, compensation, benefits, duties and location of work may be changed at any time, and either you or the Company may terminate your employment at any time and for any reason, with or without notice and with or without cause. Although your job duties, title, compensation and benefits, as well as the Company's personnel policies and procedures, may change from time to time, the "at will" nature of employment may only be changed in an express written agreement signed by you and the CEO or Chief Human Resources Officer of Scientific Games Corporation . No supervisor, manager, or representative of Scientific Games Corporation, or any of its subsidiaries, other than the CEO or Chief Human Resources Officer has any authority to alter the "at will" relationship or enter into an express or implied agreement on any other basis. This offer of employment incorporates the complete understanding of the parties and supersedes all other explicit and/or implicit, expressed or implied agreements/promises conveyed regarding this employment relationship.

CONDITIONS OF EMPLOYMENT AND OTHER INFORMATION

This offer of employment is contingent on the successful completion of a check of employment references, a background investigation, and a drug test. The results of these screens must be satisfactory to the Company. Should the results not be satisfactory to the Company, the employment offer may be rescinded in the Company's sole discretion.

For purposes of federal immigration law, you will be required to provide the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us on or before the 3rd business day of your employment, or our employment relationship with you may be terminated.

The Company is subject to the laws, rules and regulations of various governmental bodies in the gaming field. In your position, you may be required to submit to background ("suitability") and licensing investigations conducted by multiple governmental agencies.

February 21, 2018

3 | P a g e

By accepting this offer of employment you agree to fully cooperate with both the Company and gaming regulators by furnishing all relevant and material information, including personally identifiable information, and documentation during the regulatory process. In the event that you are found non-suitable or are denied a license, or the investigation reveals any unsuitable and/or negative information or findings, your employment may be terminated. By signing below, you are agreeing to cooperate with and conform to all regulatory requests for information in the required timeframe and understand that any omissions can result in disciplinary action, up to and including termination.

This employment offer is contingent upon your qualifying (and remaining qualified) under any suitability or licensing requirements to which you may be subject to by reason of your position with the Company.

In addition, this offer is contingent upon your agreement, in writing prior to or on your Commencement Date, to comply fully with the Employee Intellectual Material , Secrecy, Non-Competition & Non-Solicitation Agreement and the Code of Business Conduct as enclosed.

Finally, by signing the acknowledgment below, you affirm that you are aware of no agreements or arrangements with any individual or entity which would prohibit you from entering into an employment relationship with the Company and commencing employment in the above-described position.

This letter contains the Company's entire offer of employment and no other terms or conditions are a part of this offer.

We anticipate this offer is agreeable and trust your employment with the Company will be a mutually beneficial relationship. Please acknowledge your acceptance of the offer by signing below and returning this letter to Human Resources. We look forward to you joining the team soon.

Sincerely,

Scientific Games Corporation

Shawn Williams

Senior Vice President, Chief Human Resources Officer

Enclosure(s)

I have reviewed this offer letter, understand the contents of this offer letter and affirm that I am aware of no agreements or arrangements with any individual or entity which

would prohibit me from entering into an employment relationship with the Company and commencing employment in the above-described position.

ACCEPTED AND AGREED TO this day of

By:

Exhibit 31.1

Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Kevin Sheehan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Scientific Games Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2018

/s/ Kevin Sheehan

Kevin Sheehan

Chief Executive Officer

Exhibit 31.2

Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael A. Quartieri, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Scientific Games Corporation;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2018

/s/ Michael A. Quartieri

Michael A. Quartieri

Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Scientific Games Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin Sheehan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.



	/s/ Kevin Sheehan
	Kevin Sheehan
	Chief Executive Officer
	May 2, 2018

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Scientific Games Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Quartieri, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ Michael A. Quartieri
	Michael A. Quartieri
	Chief Financial Officer
	May 2, 2018

SCIENTIFIC GAMES CORPORATION

2003 INCENTIVE COMPENSATION PLAN

AS AMENDED AND RESTATED JUNE 10, 2015

TERMS AND CONDITIONS OF EQUITY AWARDS TO KEY EMPLOYEES

THIS AGREEMENT, made as of the [DAY] day of [MONTH], 20[YEAR], between SCIENTIFIC GAMES CORPORATION (the “ Company ”) and [PARTICIPANT NAME] (the “ Participant ”).

WHEREAS, the Compensation Committee (the “ Committee ”) administers the Scientific Games Corporation 2003 Incentive Compensation Plan, as amended from time to time (the “ Plan ”);

WHEREAS, the Participant is eligible to receive awards under the Plan in connection with the Participant’s employment with the Company (or any of its applicable affiliates) (“ Employment ”); and

WHEREAS, the Committee may from time to time approve awards for the Participant in such amounts and at such times as the Committee may determine in its sole discretion, which awards shall be subject to the terms and conditions of the Plan and this Agreement, as such terms and conditions may be amended or supplemented from time to time by the Committee;

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties agree as follows:

1. Grants . Pursuant and subject to the terms and conditions set forth herein and in the Plan, the Participant may be granted the following types of awards (“ Awards ”) with respect to the Company’s Common Stock (“ Common Stock ”), pursuant to an Award notice, which will state the type of Award, the number of shares subject to the Award and any other terms determined by the Committee in its sole discretion:

(a) Stock Options (“ Options ”) -- representing a right to purchase shares of the Common Stock at an exercise price per share that is equal to or greater than the fair market value of a share of Common Stock on the date of grant. The Committee will generally set the exercise price of Options at the fair market value of the Common Stock on the date of grant. The Options and “Performance Options” (as defined below) do not become exercisable until satisfaction of an applicable vesting period. The Options and Performance Options are “Non-Qualified Stock Options” ( i.e. , they do not constitute “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (“ Code ”)).

(b) Restricted Stock Units (“ Units ”) -- representing a right to receive shares of Common Stock following satisfaction of an applicable vesting period subject to the conditions, restrictions and limitations set forth in Section 6(d) of the Plan, this Agreement and the Award notice.

(c) Performance Conditioned Restricted Stock Units (“ Performance Units ”) or Stock Options (“ Performance Options ”) -- representing (i) with respect to Performance Units, a right to receive shares of the Common Stock and (ii) with respect to Performance Options, a right to purchase shares of Common Stock at an exercise price per share that is equal to or greater than the fair market value of a share of Common Stock on the date of grant, in both cases, following satisfaction of an applicable vesting period and subject to performance requirements established by the Committee at the time of grant, which may be based on Company or individual performance criteria for an annual or other applicable performance period, and subject to such other conditions, restrictions and limitations set forth in Section 7 of the Plan, this Agreement and the Award notice.

2. Incorporation of Plan by Reference . All terms, conditions and restrictions of the Plan are incorporated in, and made a part of, this Agreement as if stated herein. If there is any conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan, as interpreted by the Committee, shall govern. Except as otherwise provided herein, all capitalized terms used in this Agreement shall have the meaning given to such terms in the Plan. In addition, if there is any conflict between this Agreement and the terms of any written employment contract between the Participant and the Company (or any of its applicable affiliates), the terms of the written employment contract will govern (except to the extent the terms set forth in this Agreement or the Award notice expressly apply notwithstanding anything to the contrary set forth in such employment contract), subject to the mandatory terms of the Plan.

3. Restriction on Transfer of Awards . Awards under the Plan may not be sold, assigned, transferred, pledged, hypothecated, margined, or otherwise encumbered or disposed of by the Participant, except for transfers upon the death of the Participant.

4. Vesting Schedule for Awards . Unless otherwise set forth in the applicable Award notice, an Award under the Plan will be granted with a four-year ratable vesting schedule such that 25% of the total Award will vest on each of the first four anniversaries of the grant date. In the case of Performance Units and Performance Options, vesting will also be conditioned on satisfaction of performance criteria established by the Committee. With respect to such Performance Units and Performance Options, where the applicable performance criteria is not solely based on the Company’s achievement of a specified stock price or average stock price value of the Common Stock, the Committee will determine whether the performance criteria applicable to an Award have been satisfied within 90 days following the end of the applicable performance period(s) (but not later than the March 15 following the year in which the performance period ended). Notwithstanding anything contained to the contrary in this Agreement (or in any prior award agreement), in any Award notice or in any other document (including any employment contract), in the event that the Participant’s Employment is terminated other than as a result of death or “Disability” (as defined below) prior to the Committee’s determination as to the satisfaction of any performance criteria to which any Award of Performance Units or Performance Options is subject, such Performance Units or Performance Options, as applicable, will neither vest nor accelerate unless and until a determination is or has been made by the Committee that such criteria have been satisfied, at which time such Performance Units or Performance Options may vest or accelerate to the extent provided in, and in accordance with, any applicable contract and the Plan (it being understood and agreed that nothing in this Agreement shall grant any right to any such acceleration or vesting upon any such termination). For the avoidance of doubt, in the event that the criteria are determined not to have been satisfied, such Award shall immediately lapse and be forfeited.

5. Method of Exercise of Vested Options and Performance Options . Awards of Options and Performance Options, to the extent vested, shall be exercisable in whole or in part by the Participant delivering notice to the Plan Administrator (as defined below) in accordance with the terms of the Award. Payment for shares of Common Stock purchased upon the exercise of an Option or Performance Option, and any applicable withholding taxes, shall be made on the effective date of such exercise through any of the following means: (i) in cash, by certified check, bank cashier’s check or wire transfer; (ii) through a brokered exercise with the Plan Administrator under which a portion of the proceeds from a sale are withheld for such exercise price and applicable taxes; or (iii) if permitted by the Company at the time of exercise, by surrendering shares of Common Stock. The notification to the Plan Administrator shall be made in accordance with its procedures. The shares of Common Stock purchased upon the exercise of an Option or Performance Option shall be delivered as soon as practicable following exercise in accordance with the procedures established by the Company or the Plan Administrator from time to time. Options and Performance Options may only be exercised by the Participant or, if the Participant is incapacitated, by the Participant's guardian or legal representative; provided that an exercise by a guardian or legal representative shall not be effective unless and until the Company has received evidence satisfactory to it as to the authority of such guardian or legal representative.

6. Distribution of Vested Units and Performance Units . As soon as administratively practicable after each applicable vesting date of an Award of Units or Performance Units (generally within three business days and in no event more than 15 business days), the Company will deliver to the Participant a number of shares of Common Stock equal to the number of Units or Performance Units that vested as of an applicable vesting date less the number of shares, if any, withheld in satisfaction of applicable withholding taxes as discussed in Section 7(b).

7. Taxes . To the extent required by applicable federal, state, local or foreign law, the Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise with respect to an Award. The Company shall not be required to issue shares until such obligations are satisfied. The methods permitted by the Company for the payment of taxes are as follows:

(a) Options and Performance Options . In the case of Options and Performance Options, the acceptable methods for making payment for taxes shall be the same as those for payment of the exercise price for Options and Performance Options as discussed in Section 5 above. If shares of Common Stock are used to satisfy the applicable taxes, the taxes must be calculated at the Participant’s minimum applicable tax rates.

(b) Units and Performance Units . In the case of Units and Performance Units, unless otherwise determined by the Committee, the Company will withhold from any shares deliverable upon the vesting of Units or Performance Units a number of shares sufficient to satisfy the minimum applicable withholding taxes; provided, however, that, unless otherwise determined by the Committee, the Participant will be permitted to elect, in accordance with procedures adopted from time to time by the Company, to pay the tax withholding amount in cash, in which case no shares will be withheld and the Participant will be required to pay the amount of the taxes in full by the vesting date, in cash, by certified check, bank cashier’s check or wire transfer.


8.	Expiration of Awards; Effect of Termination .

(a) Units and Performance Units . Subject to the provisions of the Plan and this Agreement, except to the extent otherwise specifically provided under the terms of any Award notice with respect to Units or Performance Units (as the case may be):

(i) in the event the Employment of the Participant terminates for any reason (other than by reason of death or Disability (as defined below)), all unvested Units and Performance Units shall be immediately forfeited; or

(ii) in the event the Employment of the Participant terminates by reason of death or Disability, all unvested Units or Performance Units shall fully vest and become non-forfeitable as of the date of death or the date of such termination, as the case may be, and, in all other respects, all such Units or Performance Units shall be governed by the plans and programs and the agreements and other documents pursuant to which such Units or Performance Units were granted.

(b) Options and Performance Options . The Options and Performance Options granted by the Company will expire at a date specified in the Award notice, which shall be not later than the tenth anniversary of the grant date (the “ Scheduled Expiration Date ”). Subject to the provisions of the Plan and this Agreement, except to the extent otherwise specifically provided under the terms of any Award notice with respect to Options or Performance Options (as the case may be):

(i) in the event the Employment of the Participant terminates for any reason (other than by reason of death or Disability), (A) all unvested Options and Performance Options shall immediately expire on the date of termination and (B) the portion of any Options and Performance Options that vested prior to such termination (other than a termination for “Cause” (as defined below), in which event all such vested Options and Performance Options shall be immediately forfeited) shall remain exercisable until the earlier of three (3) months after such termination and the Scheduled Expiration Date and, in all other respects, shall be governed by the plans and programs and the agreements and other documents pursuant to which such Options or Performance Options, as applicable, were granted; or

(ii) in the event the Employment of the Participant terminates by reason of death or Disability, all unvested Options or Performance Options shall fully vest and become non-forfeitable as of the date of death or the date of such termination, as the case may be, and such Options or Performance Options (together with the portion of any Options or Performance Options that vested prior to such death or termination) shall remain exercisable by the Participant (or, in the case of death, Participant’s executor or administrator or “Beneficiary” (as defined below)) until the earlier of (A) the first anniversary of such death or termination and (B) the Scheduled Expiration Date and, in all other respects, all such Options or Performance Options shall be governed by the plans and programs and the agreements and other documents pursuant to which such Options or Performance Options were granted.

For purposes of this Agreement, “Cause” shall have the meaning provided in any employment contract entered into between the Company and the Participant or, if not defined therein or no such contract exists, shall mean any of the following: (i) the Participant’s breach of the terms of any employment or other agreement with any of the Company and its subsidiaries and affiliates (collectively, “ SG ”); (ii) the Participant’s failure substantially to perform his or her duties; (iii) the Participant’s material act or omission that is or may be injurious to the SG, monetarily or otherwise; (iv) the Participant’s material violation of the SG’s policies, including the Code of Conduct; and (v) the Participant’s commission of a felony, any other crime involving moral turpitude or any act involving dishonesty or fraud. Any rights SG may have hereunder in respect of the events giving rise to Cause shall be in addition to the rights SG may have under any other agreement with the Participant or at law or in equity. Any determination of whether the Participant is (or is deemed to have been) terminated for Cause shall be made by the Committee in its discretion. The Participant’s termination for Cause shall be effective as of the date of the occurrence of the event giving rise to Cause, regardless of when the determination of Cause is made.

For purposes of this Agreement, “Beneficiary” means the person, persons, trust, or trusts which have been designated by a Participant in his or her most recent written beneficiary designation filed with the Company to receive the benefits specified under the Plan upon such Participant's death. If, upon a Participant's death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means a person, persons, trust, or trusts entitled by will or the laws of descent and distribution to receive such benefits. A Beneficiary or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award agreement applicable to such Participant and to any additional terms and conditions deemed necessary or appropriate by the Committee.

(c) Definition of Disability . For purposes of this Agreement, “Disability” shall mean the Participant’s becoming eligible to receive benefits under any SG-sponsored long-term disability program under which the Participant is eligible for coverage, determined in accordance with Section 409A of the Code.

(d) Last Day to Exercise an Option or Performance Option . If an Option’s or Performance Option’s expiration date determined under this Section 8 falls on a day which is not a business day, then the last day to exercise the Option or Performance Option shall be the last business day before such date.


9.	Other Terms .

(a) No Shareholder Rights . Until shares of Common Stock covered by an Award are issued to the Participant in connection with the exercise of an Option or Performance Option or the vesting of Units or Performance Units, the Participant shall have no voting, dividend or other rights as a stockholder of the Company for any purpose.

(b) Consideration for Grant . Participant shall not be required to pay any cash consideration for the grant of an Award. In the case of grants of Units and Performance Units, as to which cash consideration at the time of grant or vesting shall not be required, the Participant's Employment from the grant date to the date of vesting shall be deemed to be consideration for the grant, which services have a value at least equal to the aggregate par value of the shares being newly issued in connection with the grant. The foregoing notwithstanding, an Award may be granted in exchange for the Participant’s surrender of another Award or other right to compensation, if and to the extent permitted by the Committee.

(c) Insider Trading Policy Applicable. Participant acknowledges that sales of shares received with respect to Awards will be subject to the SG's policies regulating trading by employees.

10. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party hereto, upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of such party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in a writing signed by such party and shall be effective only to the extent specifically set forth in such writing.

11. Integration . This Agreement, the Plan and the other documents, including without limitation, the Award notice, which form a part of this Agreement, and any employment contract between the Participant and the Company contain the entire understanding of the parties with respect to the subject matter herein. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof (except for any other agreement related to non-competition, non-solicitation, proprietary or confidential information, inventions or similar agreements) other than those expressly set forth herein. This Agreement, including, without limitation, the Plan, supersedes all prior agreements and understandings (except for any employment contract between the Participant and the Company and any other agreement related to non-competition, non-solicitation, proprietary or confidential information, inventions or similar agreements) between the parties with respect to its subject matter. The obligations under this Agreement shall supplement and be in addition to (and not replace or otherwise modify or affect) any restrictive covenant or other obligations set forth in any employment agreement, non-competition, non-solicitation, proprietary or confidential information, inventions or similar agreement and this Agreement shall remain in full force and effect even if any employment agreement, non-competition, non-solicitation, proprietary or confidential information, inventions or similar agreement, or any section thereof, is determined to be void, illegal, or otherwise unenforceable. If, notwithstanding the foregoing, obligations related to non-competition, non-solicitation, proprietary or confidential information and inventions in another agreement with Participant are deemed to conflict with provisions in this Agreement, then the obligation that provides the greatest protection to the Company’s legitimate protectable interests shall be the controlling obligation irrespective of the sequence in which the obligations were entered into by Participant.

12. Governing Law; Venue/Forum . In order to promote uniformity and predictability of treatment concerning matters related to the Awards by the Company, the laws of the State of Delaware where the Company is incorporated will govern the Agreement, the construction of its terms, and the interpretation of the rights and duties of the parties, regardless of any conflicts of law principles of Delaware or any other state. Any legal action arising from or related to this Agreement shall be litigated in a state or federal court of competent jurisdiction located in Las Vegas, Nevada. The parties expressly consent to the personal jurisdiction of the aforementioned courts over them and waive any all objections to the foregoing venue/forum selection (including, without limitation, any objection based on amount of contact with the selected venue, or the cost, convenience or location of relevant persons).

13. Restrictive Covenants Condition . The Participant hereby acknowledges and agrees that the receipt of Awards, including any right to exercise an Option or Performance Option, receive the shares of Common Stock following a vesting date or retains the profit from the sale of shares of Common Stock subject to an Award, is conditioned upon Participant’s compliance with the restrictive covenants in Section 14-17 of this Agreement.

14. Noncompetition; Non-solicitation .

(a) Participant acknowledges the highly competitive nature of the business of SG and that Participant’s access to SG’s confidential records and proprietary information and ability to develop relationships with SG’s customers and employees renders Participant special and unique within SG’s industry. Participant hereby agrees that during his or her Employment, and during the Covered Time (as defined below), Participant, alone or with others, will not, directly or indirectly, engage (as owner, investor, partner, stockholder, employer, employee, consultant, advisor, director or otherwise) in any Competing Business. For purposes of this Section 14, “ Competing Business ” shall mean any business or operations (i) (A) involving the design, development, manufacture, production, sale, lease, license, provision, operation, or management (as the case may be) of (I) instant lottery tickets or games or any related marketing, warehouse, distribution, category management or other services or programs; (II) lottery-related terminals or vending machines (whether clerk-operated, self-service or otherwise); (III) gaming machines, terminals or devices (including video or reel spinning slot machines, video poker machines, video lottery terminals and fixed odds betting terminals); (IV) lottery, video gaming (including server-based gaming), sports betting or other wagering or gaming systems, regardless of whether such systems are land-based, internet-based or mobile (including control and monitoring systems, local or wide-area progressive systems and redemption systems); (V) lottery-, real money gaming- or social gaming-related proprietary or licensed content (including themes, entertainment and brands), platforms, websites and loyalty and customer relationship management programs regardless of whether any of the foregoing are land-based, internet-based or mobile-based; (VI) social casino games or websites or mobile phone or tablet applications (or similar known, or hereafter existing, technologies) featuring social casino games or any related marketing, distribution, or other services or programs; (VII) interactive casino gaming products or services, including interactive casino-game themed games and platforms for websites or mobile phone or tablet applications (or similar known, or hereafter existing, technologies); (VIII) gaming utility products (including shufflers, card-reading shoes, deck checkers and roulette chip sorters), table games (including live, simulated, online, social gaming, interactive and electronic) and related products and services; (IX) slot accounting, casino management, casino marketing, player tracking, lottery, video lottery, bingo or similar gaming- or casino-related systems and related peripheral hardware, software and services; (X) prepaid cellular or other phone cards; or (XI) ancillary products (including equipment, hardware, software, marketing materials, chairs and signage) or services (including field service, maintenance and support) related to any of the foregoing under sub-clauses (I) through (X) above; or (B) in which SG is then or was within the previous 12 months engaged, or in which SG, to Participant’s knowledge, contemplates to engage in during Participant’s Employment or the Covered Time, (ii) in which Participant is or was engaged or involved (whether in a supervisory capacity or otherwise) on behalf of SG or with respect to which Participant has obtained proprietary or confidential information, and (iii) which is or was, to Participant’s knowledge, conducted or contemplated to be conducted anywhere in the United States or in any other geographic area where SG does business during Participant’s Employment or the Covered Time.

(b) Participant hereby agrees that, during his or her Employment and for twelve months after the date of Participant’s termination from Employment, whether voluntary or involuntary and regardless of the reason for termination, (the “ Termination Date ”), Participant shall not, directly or indirectly: (i) solicit or attempt to induce any of the employees, agents, consultants or representatives of SG to terminate his, her, or its relationship with SG; (ii) solicit or attempt to induce any of the employees, agents, consultants or representatives of SG to become employees, agents, consultants or representatives of any other person or entity; or (iii) hire any person who, to Participant’s actual knowledge, is, or was within 180 days prior to such hiring, an employee of SG.

(c) Participant hereby agrees that, during his or her Employment and for twelve months after Participant’s Termination Date, Participant shall not, without SG’s prior written consent, directly or indirectly, whether for Participant’s own account or for the account of any other person, firm, corporation or business organization, solicit or perform services of a type offered by SG, for any customer, partner, vendor, distributor, with whom Participant worked with on behalf of SG or about which Participant received confidential information during his or her Employment. Participant shall also not solicit or provide services of a type offered by SG to any prospective customer, partner, vendor, or distributor to whom SG made a proposal within the last 12 months prior to the Termination Date in which the Participant participated or about which the Participant received confidential information. Participant further agrees not to solicit or attempt to induce any partner, customer, vendor or distributor of SG to curtail or cancel any business with SG. Participant acknowledges and agrees that the restrictions contained in this subsection 14(c) are reasonable and necessary to protect SG’s legitimate interests in its customer, partner, vendor, and distributor relationships, goodwill, and confidential information.

• Participant hereby agrees that, during his or her Employment and for twelve months after Participant’s Termination Date, upon the earlier of Participant (i) negotiating with any Competitor (as defined below) concerning possible employment with the Competitor, (ii) responding to (other than for the purpose of declining) an offer of employment from a Competitor, or (iii) becoming employed by a Competitor, (A) Participant will provide copies of this Agreement to the Competitor, and (B) in the case of any circumstance described in (i), (ii), or (iii) above occurring during Participant’s Employment or during the twelve months after Participant’s Termination Date, Participant will promptly provide notice to the Company of such circumstances. Participant further agrees that the Company may provide notice to a Competitor of Participant’s obligations under this Agreement. For purposes of this Agreement, “ Competitor ” shall mean any person or entity (other than SG) that engages, directly or indirectly, in the United States or anywhere else SG does business in any Competing Business.

(e) Participant understands that the restrictions in this Section 14 may limit Participant’s ability to earn a livelihood in a business similar to the business of SG but nevertheless agrees and acknowledges that Participant willingly entered into this Agreement and agreed that the consideration provided under this Agreement is sufficient to justify such restrictions and that Participant agreed to be bound by these restrictions in exchange for such consideration. In consideration thereof and in light of Participant’s education, skills and abilities, Participant hereby agrees that Participant will not assert in any forum that such restrictions prevent Participant from earning a living or otherwise should be held void or unenforceable.

(f) For purposes of this Section 14, “ Covered Time ” shall mean six months immediately following the Participant’s Termination Date and, if SG in its sole discretion elects, for up to an additional six months if SG, in its sole discretion, to pay Participant on regular paydays an amount equal to Participant’s base rate of pay at the time of termination, less standard withholdings, during this additional period of non-competition. SG shall give Participant written notice of the election to extend the non-competition period at least thirty days before the expiration of the initial six-month term. The written notice of election shall be mailed to the last address SG had on record for the Participant.

15. Proprietary Information; Inventions.

(a) Participant hereby acknowledges that, during the course of his or her Employment, Participant necessarily will have (and during any affiliation with SG prior to his or her Employment Participant may have had) access to and make use of proprietary information and confidential records of SG. Participant covenants that Participant shall not during his or her Employment or at any time thereafter, directly or indirectly, use for his or her own purpose or for the benefit of any person or entity other than SG, nor otherwise disclose to any person or entity, any such proprietary information, unless and to the extent such disclosure has been authorized in writing by the Company or is otherwise required by law. The term “ proprietary information ” means: (i) the software products, programs, applications, and processes utilized by SG; (ii) the name or address of any customer or vendor of SG or any information concerning the transactions or relations of any customer or vendor of SG or with SG; (iii) any information concerning any product, technology, or procedure employed by SG but not generally known to its customers or vendors or competitors, or under development by or being tested by SG but not at the time offered generally to customers or vendors; (iv) any information relating to SG’s computer software, computer systems, pricing or marketing methods, sales margins, cost of goods, cost of material, capital structure, operating results, borrowing arrangements or business plans; (v) any information identified as confidential or proprietary in any line of business engaged in by SG; (vi) any information that, to Participant’s actual knowledge, SG ordinarily maintains as confidential or proprietary; (vii) any business plans, budgets, advertising or marketing plans; (viii) any information contained in any of SG’s written or oral policies and procedures or manuals; (ix) any information belonging to customers, vendors or any other person or entity which SG, to Participant’s actual knowledge, has agreed to hold in confidence; and (x) all written, graphic, electronic data and other material containing any of the foregoing. Participant acknowledges that information that is not novel or copyrighted or patented may nonetheless be proprietary information. The term “proprietary information” shall not include information generally known or available to the public or information that becomes available to Participant on an unrestricted, non-confidential basis from a source other than SG or any of its directors, officers, employees, agents or other representatives (without breach of any obligation of confidentiality of which Participant has knowledge, after reasonable inquiry, at the time of the relevant disclosure by Participant). Notwithstanding the foregoing and Section 16, Participant may disclose or use proprietary information or confidential records solely to the extent (A) such disclosure or use may be required or appropriate in the performance of Participant’s Employment, (B) required to do so by a court of law, by any governmental agency having supervisory authority over the business of SG or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order Participant to divulge, disclose or make accessible such information (provided that in such case Participant shall first give the Company prompt written notice of any such legal requirement, disclose no more information than is so required and cooperate fully with all efforts by SG to obtain a protective order or similar confidentiality treatment for such information), (C) such information or records becomes generally known to the public without Participant’s violation of this Agreement, or (D) disclosed to Participant’s spouse, attorney or personal tax and financial advisors to the extent reasonably necessary to advance Participant’s tax, financial and other personal planning (each an “ Exempt Person ”); provided , however , that any disclosure or use of any proprietary information or confidential records by an Exempt Person shall be deemed to be a breach of this Section 15 or Section 16 by Participant. Furthermore, nothing in this subsection 15(a) and nothing in this Agreement or any other agreement between Participant and SG shall in any way prohibit Participant from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) require notification or prior approval by the Company of any reporting described in clause (i).

(a) Participant hereby agrees that all processes, technologies and inventions (collectively, “ Inventions ”), including new contributions, improvements, ideas and discoveries, whether patentable or not, conceived, developed, invented or made by Participant during his or her Employment (and during any affiliation with SG prior to Participant’s Employment) shall belong to the SG, provided that such Inventions grew out of Participant’s work with SG, are related in any manner to the business (commercial or experimental) of SG or are conceived or made on SG’s time or with the use of SG’s facilities or materials. Participant further agrees to: (i) promptly disclose such Inventions to the Company; (ii) assign to the SG, without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries; (iii) sign all papers necessary to carry out the foregoing; and (iv) give testimony in support of Participant’s Inventions. If any Invention is described in a patent application or is disclosed to third parties, directly or indirectly, by Participant within two (2) years after the termination of Participant’s Employment, it is to be presumed that the Invention was conceived or made during Participant’s Employment. Participant agrees that Participant will not assert any rights to any Invention as having been made or acquired by him or her prior to the date of this Agreement, except for Inventions, if any, disclosed by Participant in writing in connection with his or her execution of this Agreement.

16. Confidentiality and Surrender of Records . Participant hereby agrees that Participant shall not, during his or her Employment or at any time thereafter (irrespective of the circumstances under which his or her Employment terminates), except to the extent required by law, directly or indirectly publish, make known or in any fashion disclose or retain any confidential records to, or permit any inspection or copying of confidential records by, any person or entity other than in the course of such person’s or entity’s employment or retention by SG, and Participant further agrees to deliver promptly to the Company, any of the same following termination of his or her Employment for any reason or upon request by SG. For purposes hereof, “ confidential records ” means those portions of correspondence, memoranda, files, manuals, books, lists, financial, operating or marketing records, magnetic tape, or electronic or other media or equipment of any kind in Participant’s possession or under Participant’s control or accessible to Participant which contain any proprietary information. All confidential records shall be and remain the sole property of the Company during Participant’s Employment and thereafter.

17. Non-disparagement . Participant hereby agrees that Participant shall not, during his or her Employment and thereafter, disparage in any material respect SG, any of their respective businesses, any of their respective officers, directors or employees, or the reputation of any of the foregoing persons or entities, whether orally, in writing, or otherwise, directly or by implication in communication with any person, including, but not limited to, customers, partners, vendors, distributors, or independent contractors of SG or agents with whom SG does business. Notwithstanding the foregoing, nothing in this Agreement shall preclude Participant from making truthful statements that are required by applicable law, regulation or legal process.

18. No Other Obligations . Participant hereby represents that Participant is not precluded or limited in his or her ability to undertake or perform his or her Employment by any contract, agreement or restrictive covenant. Participant covenants that Participant shall not employ the trade secrets or proprietary information of any other person in connection with his or her Employment without such person’s authorization.

19. Enforcement . Participant acknowledges and agrees that, by virtue of his or her position, Employment and access to and use of confidential records and proprietary information, any violation by Participant of any of the obligations contained in this Agreement would cause SG immediate, substantial and irreparable injury for which it has no adequate remedy at law. Accordingly, Participant hereby agrees and consents to the entry of an injunction or other equitable relief by a court of competent jurisdiction restraining any violation or threatened violation of any obligation contained in this Agreement in addition to any other remedies. Participant waives posting of any bond otherwise necessary to secure such injunction or other equitable relief or to the extent such a bond is required by law it shall be limited to an amount of $1,000. Rights and remedies provided for in this Agreement, including but not limited to injunctive relief, monetary damages, and all remedies contemplated by the Plan (including but not limited to termination or forfeiture of Awards), are cumulative and shall be in addition to rights and remedies otherwise available to the parties hereunder or under any other agreement or applicable law.

20. Data Privacy . For Participants in certain jurisdictions, the data privacy laws of such jurisdictions may require the Participant’s consent to the use, disclosure and transfer to the Company and its Plan Administrator (as defined below) in the United States of certain personal information necessary to administer the Plan and any Awards the Participants may receive. Accordingly, if applicable, the Participant hereby acknowledges and agrees that the Participant’s receipt of any Awards, including any right to exercise an Option or Performance Option, receive the shares of Common Stock following vesting of an award of Units or Performance Units or retain the profit from the sale of shares of Common Stock subject to an Award, is conditioned upon Participant’s consent to the use, disclosure and transfer to the Company and its Plan Administrator in the United States of such personal information.

21. Plan Administrator . The Company has retained Fidelity Stock Plan Services, LLC as a third-party administrator to assist in the administration and management of the Plan (the “ Plan Administrator ” or “ Fidelity” ). A listing of all Awards may be viewed through the Plan Administrator’s website at www.NetBenefits.com once the Participant has established an account with the Plan Administrator. The Plan Administrator shall handle the processing of Option and Performance Option exercises and vesting and settlement of Units and Performance Units. The Company reserves the right to replace Fidelity as the Plan Administrator at any time in the Company’s sole discretion.

22. Participant Acknowledgment . The Participant hereby acknowledges receipt of a copy of the Plan. The Participant hereby acknowledges that all decisions, determinations and interpretations of the Committee in respect of the Plan, this Agreement and the Awards shall be final and conclusive.

23. Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

24. Successors and Assigns . The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Participant or and the Participant’s beneficiaries, executors, administrators and the person(s) to whom the Award may be transferred by will or the laws of descent or distribution.

25. Severability . The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.

[remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer, and the Participant has signed this Agreement on his or her own behalf, thereby representing that he or she has carefully read and understands this Agreement and the Plan as of the day and year first written above.

SCIENTIFIC GAMES CORPORATION

By: __________________________________

PARTICIPANT:

_______________________________________

[PARTICIPANT NAME]