SCIENTIFIC GAMES CORP (Form: 10-Q, Received: 07/23/2020 16:24:24)

000075000412/312020Q2FALSEExclusive of D&A74368———199199112111959417170.01one.00112431212434394602.946671227214121800007500042020-01-012020-06-3000007500042019-01-012019-06-30xbrli:shares00007500042020-07-20iso4217:USD0000750004us-gaap:ServiceMember2020-04-012020-06-300000750004us-gaap:ServiceMember2019-04-012019-06-300000750004us-gaap:ServiceMember2020-01-012020-06-300000750004us-gaap:ServiceMember2019-01-012019-06-300000750004us-gaap:ProductMember2020-04-012020-06-300000750004us-gaap:ProductMember2019-04-012019-06-300000750004us-gaap:ProductMember2020-01-012020-06-300000750004us-gaap:ProductMember2019-01-012019-06-300000750004sgms:InstantProductsMember2020-04-012020-06-300000750004sgms:InstantProductsMember2019-04-012019-06-300000750004sgms:InstantProductsMember2020-01-012020-06-300000750004sgms:InstantProductsMember2019-01-012019-06-3000007500042020-04-012020-06-3000007500042019-04-012019-06-300000750004us-gaap:RetainedEarningsMember2020-04-012020-06-30iso4217:USDxbrli:shares00007500042020-06-3000007500042019-12-310000750004us-gaap:CommonStockMember2020-06-300000750004us-gaap:AdditionalPaidInCapitalMember2020-06-300000750004us-gaap:RetainedEarningsMember2020-06-300000750004us-gaap:TreasuryStockMember2020-06-300000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300000750004us-gaap:NoncontrollingInterestMember2020-06-3000007500042018-01-1000007500042018-01-102018-01-1000007500042018-01-1100007500042018-12-3100007500042019-06-3000007500042020-04-092020-04-09xbrli:pure0000750004us-gaap:DebtInstrumentRedemptionPeriodOneMember2020-01-012020-06-300000750004us-gaap:DebtInstrumentRedemptionPeriodTwoMember2020-01-012020-06-300000750004us-gaap:DebtInstrumentRedemptionPeriodThreeMember2020-01-012020-06-3000007500042020-05-082020-05-080000750004sgms:CertainCovenantInstancesMember2020-05-082020-05-080000750004us-gaap:LondonInterbankOfferedRateLIBORMember2020-05-082020-05-080000750004us-gaap:DebtInstrumentRedemptionPeriodFourMember2020-01-012020-06-300000750004us-gaap:DebtInstrumentRedemptionPeriodFiveMember2020-01-012020-06-300000750004us-gaap:EmployeeStockOptionMember2020-01-012020-06-300000750004us-gaap:EmployeeStockOptionMember2019-01-012019-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-06-300000750004us-gaap:AccountingStandardsUpdate201613Member2020-01-010000750004us-gaap:EmployeeStockOptionMember2020-04-012020-06-300000750004us-gaap:EmployeeStockOptionMember2019-04-012019-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2020-04-012020-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2019-04-012019-06-300000750004sgms:GamingOperationsMembersgms:GamingGroupMember2020-04-012020-06-300000750004sgms:GamingOperationsMembersgms:GamingGroupMember2019-04-012019-06-300000750004sgms:GamingOperationsMembersgms:GamingGroupMember2020-01-012020-06-300000750004sgms:GamingOperationsMembersgms:GamingGroupMember2019-01-012019-06-300000750004sgms:GamingGroupMembersgms:GamingMachineSalesMember2020-04-012020-06-300000750004sgms:GamingGroupMembersgms:GamingMachineSalesMember2019-04-012019-06-300000750004sgms:GamingGroupMembersgms:GamingMachineSalesMember2020-01-012020-06-300000750004sgms:GamingGroupMembersgms:GamingMachineSalesMember2019-01-012019-06-300000750004sgms:GamingGroupMembersgms:GamingSystemsMember2020-04-012020-06-300000750004sgms:GamingGroupMembersgms:GamingSystemsMember2019-04-012019-06-300000750004sgms:GamingGroupMembersgms:GamingSystemsMember2020-01-012020-06-300000750004sgms:GamingGroupMembersgms:GamingSystemsMember2019-01-012019-06-300000750004sgms:TableProductsMembersgms:GamingGroupMember2020-04-012020-06-300000750004sgms:TableProductsMembersgms:GamingGroupMember2019-04-012019-06-300000750004sgms:TableProductsMembersgms:GamingGroupMember2020-01-012020-06-300000750004sgms:TableProductsMembersgms:GamingGroupMember2019-01-012019-06-300000750004sgms:GamingGroupMember2020-04-012020-06-300000750004sgms:GamingGroupMember2019-04-012019-06-300000750004sgms:GamingGroupMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:GamingGroupMember2019-01-012019-06-300000750004sgms:LotterySystemsGroupMembersgms:InstantProductsMember2020-04-012020-06-300000750004sgms:LotterySystemsGroupMembersgms:InstantProductsMember2019-04-012019-06-300000750004sgms:LotterySystemsGroupMembersgms:InstantProductsMember2020-01-012020-06-300000750004sgms:LotterySystemsGroupMembersgms:InstantProductsMember2019-01-012019-06-300000750004sgms:LotterySystemsMembersgms:LotterySystemsGroupMember2020-04-012020-06-300000750004sgms:LotterySystemsMembersgms:LotterySystemsGroupMember2019-04-012019-06-300000750004sgms:LotterySystemsMembersgms:LotterySystemsGroupMember2020-01-012020-06-300000750004sgms:LotterySystemsMembersgms:LotterySystemsGroupMember2019-01-012019-06-300000750004sgms:LotterySystemsGroupMember2020-04-012020-06-300000750004sgms:LotterySystemsGroupMember2019-04-012019-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:LotterySystemsGroupMember2019-01-012019-06-300000750004sgms:SciPlayMembersgms:MobileMember2020-04-012020-06-300000750004sgms:SciPlayMembersgms:MobileMember2019-04-012019-06-300000750004sgms:SciPlayMembersgms:MobileMember2020-01-012020-06-300000750004sgms:SciPlayMembersgms:MobileMember2019-01-012019-06-300000750004sgms:SciPlayMembersgms:WebAndOtherMember2020-04-012020-06-300000750004sgms:SciPlayMembersgms:WebAndOtherMember2019-04-012019-06-300000750004sgms:SciPlayMembersgms:WebAndOtherMember2020-01-012020-06-300000750004sgms:SciPlayMembersgms:WebAndOtherMember2019-01-012019-06-300000750004sgms:SciPlayMember2020-04-012020-06-300000750004sgms:SciPlayMember2019-04-012019-06-300000750004sgms:SciPlayMember2020-01-012020-06-300000750004sgms:SciPlayMember2019-01-012019-06-300000750004sgms:DigitalBusinessSegmentMembersgms:SportsAndPlatformMember2020-04-012020-06-300000750004sgms:DigitalBusinessSegmentMembersgms:SportsAndPlatformMember2019-04-012019-06-300000750004sgms:DigitalBusinessSegmentMembersgms:SportsAndPlatformMember2020-01-012020-06-300000750004sgms:DigitalBusinessSegmentMembersgms:SportsAndPlatformMember2019-01-012019-06-300000750004sgms:DigitalBusinessSegmentMembersgms:GamingAndOtherMember2020-04-012020-06-300000750004sgms:DigitalBusinessSegmentMembersgms:GamingAndOtherMember2019-04-012019-06-300000750004sgms:DigitalBusinessSegmentMembersgms:GamingAndOtherMember2020-01-012020-06-300000750004sgms:DigitalBusinessSegmentMembersgms:GamingAndOtherMember2019-01-012019-06-300000750004sgms:DigitalBusinessSegmentMember2020-04-012020-06-300000750004sgms:DigitalBusinessSegmentMember2019-04-012019-06-300000750004sgms:DigitalBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:DigitalBusinessSegmentMember2019-01-012019-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:AccountingStandardsUpdate201409Membersgms:InstantProductsMember2020-04-012020-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:AccountingStandardsUpdate201409Membersgms:InstantProductsMember2020-01-012020-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:AccountingStandardsUpdate201409Membersgms:InstantProductsMember2019-04-012019-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:AccountingStandardsUpdate201409Membersgms:InstantProductsMember2019-01-012019-06-30sgms:Segment0000750004sgms:GamingGroupMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:SciPlayMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:DigitalBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:CorporateAndReconcilingItemsMember2020-04-012020-06-300000750004sgms:GamingBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:LotteryBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:SciPlayBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:GamingGroupMemberus-gaap:OperatingSegmentsMember2019-04-012019-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:OperatingSegmentsMember2019-04-012019-06-300000750004sgms:SciPlayMemberus-gaap:OperatingSegmentsMember2019-04-012019-06-300000750004sgms:DigitalBusinessSegmentMemberus-gaap:OperatingSegmentsMember2019-04-012019-06-300000750004sgms:CorporateAndReconcilingItemsMember2019-04-012019-06-300000750004sgms:GamingBusinessSegmentMemberus-gaap:OperatingSegmentsMember2019-04-012019-06-300000750004sgms:LotteryBusinessSegmentMemberus-gaap:OperatingSegmentsMember2019-04-012019-06-300000750004sgms:SciPlayBusinessSegmentMemberus-gaap:OperatingSegmentsMember2019-04-012019-06-300000750004sgms:SciPlayMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:CorporateAndReconcilingItemsMember2020-01-012020-06-300000750004sgms:GamingBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:LotteryBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:SciPlayBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:GamingGroupMemberus-gaap:OperatingSegmentsMember2019-01-012019-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:OperatingSegmentsMember2019-01-012019-06-300000750004sgms:SciPlayMemberus-gaap:OperatingSegmentsMember2019-01-012019-06-300000750004sgms:DigitalBusinessSegmentMemberus-gaap:OperatingSegmentsMember2019-01-012019-06-300000750004sgms:CorporateAndReconcilingItemsMember2019-01-012019-06-300000750004sgms:GamingBusinessSegmentMemberus-gaap:OperatingSegmentsMember2019-01-012019-06-300000750004sgms:LotteryBusinessSegmentMemberus-gaap:OperatingSegmentsMember2019-01-012019-06-300000750004sgms:SciPlayBusinessSegmentMemberus-gaap:OperatingSegmentsMember2019-01-012019-06-300000750004us-gaap:EmployeeSeveranceMember2020-04-012020-06-300000750004us-gaap:EmployeeSeveranceMember2019-04-012019-06-300000750004us-gaap:EmployeeSeveranceMember2020-01-012020-06-300000750004us-gaap:EmployeeSeveranceMember2019-01-012019-06-300000750004sgms:ContingentConsiderationAdjustmentMember2020-04-012020-06-300000750004sgms:ContingentConsiderationAdjustmentMember2019-04-012019-06-300000750004sgms:ContingentConsiderationAdjustmentMember2020-01-012020-06-300000750004sgms:ContingentConsiderationAdjustmentMember2019-01-012019-06-300000750004sgms:RestructuringIntegrationAndOtherMember2020-04-012020-06-300000750004sgms:RestructuringIntegrationAndOtherMember2019-04-012019-06-300000750004sgms:RestructuringIntegrationAndOtherMember2020-01-012020-06-300000750004sgms:RestructuringIntegrationAndOtherMember2019-01-012019-06-300000750004us-gaap:ExtendedMaturityMember2020-06-300000750004country:USus-gaap:NotesReceivableMember2020-06-300000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMembercountry:USus-gaap:NotesReceivableMember2020-06-300000750004country:USus-gaap:NotesReceivableMember2019-12-310000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMembercountry:USus-gaap:NotesReceivableMember2019-12-310000750004sgms:InternationalMemberus-gaap:NotesReceivableMember2020-06-300000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMembersgms:InternationalMemberus-gaap:NotesReceivableMember2020-06-300000750004sgms:InternationalMemberus-gaap:NotesReceivableMember2019-12-310000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMembersgms:InternationalMemberus-gaap:NotesReceivableMember2019-12-310000750004us-gaap:NotesReceivableMember2020-06-300000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:NotesReceivableMember2020-06-300000750004us-gaap:NotesReceivableMember2019-12-310000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:NotesReceivableMember2019-12-310000750004country:US2019-12-310000750004sgms:InternationalMember2019-12-3100007500042020-01-012020-03-310000750004country:US2020-01-012020-03-310000750004sgms:InternationalMember2020-01-012020-03-3100007500042019-01-012019-03-3100007500042020-03-310000750004country:US2020-03-310000750004sgms:InternationalMember2020-03-3100007500042019-03-310000750004country:US2020-01-012020-06-300000750004sgms:InternationalMember2020-01-012020-06-300000750004country:US2020-06-300000750004sgms:InternationalMember2020-06-300000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-06-300000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000750004srt:LatinAmericaMember2020-06-300000750004srt:LatinAmericaMembersgms:FinancialAssetCurrentOrNotYetDueMember2020-06-300000750004srt:LatinAmericaMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-06-300000750004us-gaap:LandMember2020-06-300000750004us-gaap:LandMember2019-12-310000750004sgms:BuildingsandLeaseholdImprovementsMember2020-06-300000750004sgms:BuildingsandLeaseholdImprovementsMember2019-12-310000750004us-gaap:MachineryAndEquipmentMember2020-06-300000750004us-gaap:MachineryAndEquipmentMember2019-12-310000750004us-gaap:FurnitureAndFixturesMember2020-06-300000750004us-gaap:FurnitureAndFixturesMember2019-12-310000750004us-gaap:ConstructionInProgressMember2020-06-300000750004us-gaap:ConstructionInProgressMember2019-12-310000750004us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2020-06-300000750004us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2019-12-310000750004us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2019-01-012019-06-300000750004us-gaap:CustomerRelationshipsMember2020-06-300000750004us-gaap:CustomerRelationshipsMember2019-12-310000750004us-gaap:IntellectualPropertyMember2020-06-300000750004us-gaap:IntellectualPropertyMember2019-12-310000750004us-gaap:LicensingAgreementsMember2020-06-300000750004us-gaap:LicensingAgreementsMember2019-12-310000750004sgms:BrandNameMember2020-06-300000750004sgms:BrandNameMember2019-12-310000750004us-gaap:TradeNamesMember2020-06-300000750004us-gaap:TradeNamesMember2019-12-310000750004us-gaap:PatentsMember2020-06-300000750004us-gaap:PatentsMember2019-12-310000750004us-gaap:TradeNamesMember2020-06-300000750004us-gaap:TradeNamesMember2019-12-310000750004sgms:UKGamingMember2020-04-012020-06-300000750004srt:MinimumMembersgms:RevenueGrowthEstimateFY2021Member2020-01-012020-06-300000750004srt:MaximumMembersgms:RevenueGrowthEstimateFY2021Member2020-01-012020-06-300000750004srt:MinimumMembersgms:RevenueGrowthEstimateFY2022ToFY2027Member2020-01-012020-06-300000750004srt:MaximumMembersgms:RevenueGrowthEstimateFY2022ToFY2027Member2020-01-012020-06-300000750004sgms:RevenueEstimatedTerminalGrowthRateMember2020-01-012020-06-300000750004srt:MinimumMember2020-01-012020-06-300000750004srt:MaximumMember2020-01-012020-06-300000750004srt:MinimumMemberus-gaap:MeasurementInputRevenueMultipleMember2020-01-012020-06-300000750004srt:MaximumMemberus-gaap:MeasurementInputRevenueMultipleMember2020-01-012020-06-300000750004us-gaap:MeasurementInputEbitdaMultipleMembersrt:MinimumMember2020-01-012020-06-300000750004us-gaap:MeasurementInputEbitdaMultipleMembersrt:MaximumMember2020-01-012020-06-300000750004sgms:GamingGroupMember2019-12-310000750004sgms:LotterySystemsGroupMember2019-12-310000750004sgms:SocialBusinessSegmentMember2019-12-310000750004sgms:DigitalBusinessSegmentMember2019-12-310000750004sgms:GamingBusinessSegmentMember2020-01-012020-06-300000750004sgms:LotterySystemsMember2020-01-012020-06-300000750004sgms:SciPlayBusinessSegmentMember2020-01-012020-06-300000750004sgms:DigitalBusinessSegmentMember2020-01-012020-06-300000750004sgms:GamingGroupMember2020-01-012020-06-300000750004sgms:LotterySystemsGroupMember2020-01-012020-06-300000750004sgms:SocialBusinessSegmentMember2020-01-012020-06-300000750004sgms:GamingGroupMember2020-06-300000750004sgms:LotterySystemsGroupMember2020-06-300000750004sgms:SocialBusinessSegmentMember2020-06-300000750004sgms:DigitalBusinessSegmentMember2020-06-300000750004sgms:SeniorUnsecuredNotesMaturing2025Memberus-gaap:SeniorNotesMember2020-07-010000750004us-gaap:SeniorSubordinatedNotesMembersgms:SeniorSubordinatedNotesMaturing2021Member2020-06-300000750004us-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredDebtMembersgms:SeniorSecuredRevolverMaturing2024Member2020-06-300000750004us-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredDebtMembersgms:SeniorSecuredRevolverMaturing2024Member2019-12-310000750004us-gaap:RevolvingCreditFacilityMembersgms:SeniorSecuredCreditFacilityTermLoanB5Maturing2024Memberus-gaap:SecuredDebtMember2020-06-300000750004us-gaap:RevolvingCreditFacilityMembersgms:SeniorSecuredCreditFacilityTermLoanB5Maturing2024Memberus-gaap:SecuredDebtMember2019-12-310000750004sgms:SciPlayRevolverMaturing2024MemberMemberus-gaap:SecuredDebtMembersgms:SeniorSecuredRevolverMaturing2024Member2020-06-300000750004sgms:SciPlayRevolverMaturing2024MemberMemberus-gaap:SecuredDebtMembersgms:SeniorSecuredRevolverMaturing2024Member2019-12-310000750004sgms:SeniorSecuredNotesMaturing2025Memberus-gaap:SeniorNotesMember2020-06-300000750004sgms:SeniorSecuredNotesMaturing2025Memberus-gaap:SeniorNotesMember2019-12-310000750004us-gaap:SeniorNotesMembersgms:SeniorSecuredEuroNotesMaturing2026Member2020-06-300000750004us-gaap:SeniorNotesMembersgms:SeniorSecuredEuroNotesMaturing2026Member2019-12-310000750004us-gaap:SeniorNotesMembersgms:SeniorUnsecuredEuroNotesMaturing2026Member2020-06-300000750004us-gaap:SeniorNotesMembersgms:SeniorUnsecuredEuroNotesMaturing2026Member2019-12-310000750004us-gaap:SeniorNotesMembersgms:SeniorUnsecuredNotesMaturing2026Member2020-06-300000750004us-gaap:SeniorNotesMembersgms:SeniorUnsecuredNotesMaturing2026Member2019-12-310000750004sgms:SeniorUnsecuredNotesMaturing2028Memberus-gaap:SeniorNotesMember2020-06-300000750004sgms:SeniorUnsecuredNotesMaturing2028Memberus-gaap:SeniorNotesMember2019-12-310000750004us-gaap:SeniorNotesMembersgms:SeniorUnsecuredNotesMaturing2029Member2020-06-300000750004us-gaap:SeniorNotesMembersgms:SeniorUnsecuredNotesMaturing2029Member2019-12-310000750004us-gaap:SeniorSubordinatedNotesMembersgms:SeniorSubordinatedNotesMaturing2021Member2019-12-310000750004sgms:CapitalLeaseObligationsPayableMonthlyMemberus-gaap:CapitalLeaseObligationsMember2020-06-300000750004sgms:CapitalLeaseObligationsPayableMonthlyMemberus-gaap:CapitalLeaseObligationsMember2019-12-310000750004sgms:SeniorSecuredNotesMaturing2025Memberus-gaap:SeniorNotesMember2018-02-280000750004sgms:SeniorSecuredAndUnsecuredEuroNotesMaturing2026Member2019-01-012019-12-310000750004sgms:SeniorSecuredAndUnsecuredEuroNotesMaturing2026Member2019-04-012019-06-300000750004us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2019-06-300000750004us-gaap:InterestRateSwapMember2020-04-012020-06-300000750004us-gaap:InterestRateSwapMember2019-04-012019-06-300000750004us-gaap:InterestRateSwapMember2020-01-012020-06-300000750004us-gaap:InterestRateSwapMember2019-01-012019-06-300000750004sgms:SeniorSecuredNotesMaturing2025Memberus-gaap:SeniorNotesMemberus-gaap:CrossCurrencyInterestRateContractMember2018-02-280000750004sgms:SeniorSecuredNotesMaturing2025Member2018-02-280000750004us-gaap:OtherLiabilitiesMemberus-gaap:InterestRateSwapMember2020-06-300000750004us-gaap:OtherLiabilitiesMemberus-gaap:InterestRateSwapMember2019-12-310000750004us-gaap:OtherAssetsMemberus-gaap:InterestRateSwapMember2020-06-300000750004us-gaap:OtherAssetsMemberus-gaap:InterestRateSwapMember2019-12-310000750004us-gaap:NetInvestmentHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMembersgms:SeniorSecuredEuroNotesMaturing2026Member2019-04-012019-06-300000750004us-gaap:AccruedLiabilitiesMember2020-06-300000750004us-gaap:AccruedLiabilitiesMember2019-06-300000750004us-gaap:OtherLiabilitiesMemberus-gaap:InterestRateSwapMember2019-04-012019-06-300000750004us-gaap:OtherLiabilitiesMemberus-gaap:InterestRateSwapMember2019-01-012019-06-300000750004us-gaap:OtherAssetsMemberus-gaap:CrossCurrencyInterestRateContractMember2019-04-012019-06-300000750004us-gaap:OtherAssetsMemberus-gaap:CrossCurrencyInterestRateContractMember2019-01-012019-06-300000750004us-gaap:CommonStockMember2019-12-310000750004us-gaap:AdditionalPaidInCapitalMember2019-12-310000750004us-gaap:RetainedEarningsMember2019-12-310000750004us-gaap:TreasuryStockMember2019-12-310000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000750004us-gaap:NoncontrollingInterestMember2019-12-310000750004us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310000750004us-gaap:RetainedEarningsMember2020-01-012020-03-310000750004us-gaap:NoncontrollingInterestMember2020-01-012020-03-310000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310000750004us-gaap:RetainedEarningsMember2020-01-0100007500042020-01-010000750004us-gaap:CommonStockMember2020-03-310000750004us-gaap:AdditionalPaidInCapitalMember2020-03-310000750004us-gaap:RetainedEarningsMember2020-03-310000750004us-gaap:TreasuryStockMember2020-03-310000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310000750004us-gaap:NoncontrollingInterestMember2020-03-310000750004us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300000750004us-gaap:NoncontrollingInterestMember2019-04-012019-06-300000750004us-gaap:CommonStockMember2018-12-310000750004us-gaap:AdditionalPaidInCapitalMember2018-12-310000750004us-gaap:RetainedEarningsMember2018-12-310000750004us-gaap:TreasuryStockMember2018-12-310000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000750004us-gaap:NoncontrollingInterestMember2018-12-310000750004us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-310000750004us-gaap:RetainedEarningsMember2019-01-012019-03-310000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-310000750004us-gaap:CommonStockMember2019-03-310000750004us-gaap:AdditionalPaidInCapitalMember2019-03-310000750004us-gaap:RetainedEarningsMember2019-03-310000750004us-gaap:TreasuryStockMember2019-03-310000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-310000750004us-gaap:NoncontrollingInterestMember2019-03-310000750004us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300000750004us-gaap:IPOMemberus-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300000750004us-gaap:IPOMemberus-gaap:NoncontrollingInterestMember2019-04-012019-06-300000750004us-gaap:RetainedEarningsMember2019-04-012019-06-300000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012019-06-300000750004us-gaap:EmployeeStockOptionMember2020-04-012020-06-300000750004us-gaap:EmployeeStockOptionMember2019-04-012019-06-300000750004us-gaap:EmployeeStockOptionMember2020-01-012020-06-300000750004us-gaap:EmployeeStockOptionMember2019-01-012019-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2020-04-012020-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2019-04-012019-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-06-300000750004sgms:SciPlayMemberus-gaap:RestrictedStockUnitsRSUMember2020-04-012020-06-300000750004sgms:SciPlayMemberus-gaap:RestrictedStockUnitsRSUMember2019-04-012019-06-300000750004sgms:SciPlayMemberus-gaap:RestrictedStockUnitsRSUMember2020-01-012020-06-300000750004sgms:SciPlayMemberus-gaap:RestrictedStockUnitsRSUMember2019-01-012019-06-300000750004sgms:SciPlayIPOMatterMember2019-10-142019-10-14

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020

☐ 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: 001-11693

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)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 par value	SGMS	The NASDAQ Stock Market
Preferred Stock Purchase Rights		The NASDAQ Stock Market

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 every Interactive Data File required to be submitted 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 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.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	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 July 20, 2020:

Common Stock: 94,705,110

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

INDEX TO FINANCIAL INFORMATION

AND OTHER INFORMATION

THREE AND SIX MONTHS ENDED JUNE 30, 2020


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)	6

	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019	6

	Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019	7

	Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	8

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	9

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48

Item 4.	Controls and Procedures	49

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	49

Item 1A.	Risk Factors	49

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58

Item 3.	Defaults Upon Senior Securities	58

Item 4.	Mine Safety Disclosures	58

Item 5.	Other Information	58

Item 6.	Exhibits	59

Glossary of Terms

The following terms or acronyms used in this Quarterly Report on Form 10-Q are defined below:

Term or Acronym

Definition

2019 10-K

2019 Annual Report on Form 10-K filed with the SEC on February 18, 2020

2020 Notes

6.250% senior subordinated notes issued by SGI and redeemed in December 2019

2021 Notes

6.625% senior subordinated notes due 2021 issued by SGI and redeemed in July 2020

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

2022 Unsecured Notes

10.000% senior unsecured notes due 2022 issued by SGI

2025 Unsecured Notes

8.625% senior unsecured notes due 2025 issued by SGI

2026 Unsecured Notes

8.250% senior unsecured notes due 2026 issued by SGI

2028 Unsecured Notes

7.000% senior unsecured notes due 2028 issued by SGI

2029 Unsecured Notes

7.250% senior unsecured notes due 2029 issued by SGI

AEBITDA

Adjusted EBITDA, our performance measure of profit or loss for our business segments

ASC

Accounting Standards Codification

ASU

Accounting Standards Update

COVID-19

Coronavirus disease first identified in 2019 (declared a pandemic by the World Health Organization on March 11, 2020)

D&A

depreciation, amortization and impairments

Exchange Act

Securities Exchange Act of 1934, as amended

FASB

Financial Accounting Standards Board

KPIs

Key Performance Indicators

LBO

licensed betting office

LIBOR

London Interbank Offered Rate

LNS

Lotterie Nazionali S.r.l.

Note

a note in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, unless otherwise indicated

Obligor Group

SGC, SGI and guarantor subsidiaries, excludes all SciPlay subsidiaries

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

R&D

research and development

RMG

real-money gaming

RSU

restricted stock unit

SEC

Securities and Exchange Commission

Secured Notes

refers to the 2025 Secured Notes and 2026 Secured Euro Notes, collectively

Securities Act

Securities Act of 1933, as amended

Senior Notes

the Secured Notes and the Unsecured Notes

SciPlay Revolver

$150 million revolving credit facility agreement entered into by SciPlay Holding Company, LLC, a subsidiary of SciPlay Corporation, that matures in May 2024

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

Unsecured Notes

refers to the 2026 Unsecured Euro Notes, 2026 Unsecured Notes, 2028 Unsecured Notes and 2029 Unsecured Notes, collectively

U.S. GAAP

accounting principles generally accepted in the U.S.

VGT

video gaming terminal

VLT

video lottery terminal

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:

•the impact of the COVID-19 pandemic and any resulting unfavorable social, political, economic and financial conditions, including the temporary closure of casinos and lottery operations on a jurisdiction-by-jurisdiction basis;

•natural events and health crises that disrupt our operations or those of our customers, suppliers or regulators;

•incurrence of restructuring costs;

•changes in demand for our products and services;

•dependence on suppliers and manufacturers;

•dependence on key employees;

•goodwill impairment charges including changes in estimates or judgments related to our impairment analysis of goodwill or other intangible assets;

•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;

•stock price volatility;

•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 and potential restrictions on internet wagering;

•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, both foreign and domestic, including those relating to gaming, data privacy and security, including with respect to the collection, storage, use, transmission and protection of personal information and other consumer data, and environmental laws, and those laws and regulations that affect companies conducting business on the internet, including online gambling;

•the continuing evolution of the scope of data privacy and security regulations, and our belief that the adoption of increasingly restrictive regulations in this area is likely within the U.S. and other jurisdictions;

•significant opposition in some jurisdictions to interactive social gaming, including social casino gaming and how such opposition could lead these jurisdictions to adopt legislation or impose a regulatory framework to govern interactive social gaming or social casino gaming specifically, and how this could result in a prohibition on interactive social gaming or social casino gaming altogether, restrict our ability to advertise our games, or substantially increase our costs to comply with these regulations;

•legislative interpretation and enforcement, regulatory perception and regulatory risks with respect to gaming, especially internet wagering, social gaming and sports wagering;

•reliance on technological blocking systems;

•expectations of shift to regulated online gaming or sports wagering;

•expectations of growth in total consumer spending on social casino gaming;

•SciPlay’s dependence on certain key providers;

•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, including the impact of any security breaches or cyber-attacks;

•reliance on or failures in information technology and other systems;

•challenges or disruptions relating to the implementation of a new global enterprise resource planning system;

•failure to maintain adequate internal control over financial reporting;

•inability to benefit from, and risks associated with, strategic equity investments and relationships;

•inability to achieve some or all of the anticipated benefits of SciPlay being a standalone public company;

•implementation of complex new accounting standards;

•fluctuations in our results due to seasonality and other factors;

•risks relating to foreign operations, including anti-corruption laws, fluctuations in currency 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 continuing uncertainty around the U.K.’s withdrawal from the European Union;

•possibility that the 2018 renewal of the LNS concession to operate the Italian instant games lottery is not final (pending appeal against existing court rulings relating to third-party protest against the renewal of the concession);

•the impact of U.K. legislation approving the reduction of fixed-odds betting terminals maximum stakes limit on LBO operators, including the related closure of certain LBO shops;

•changes in tax laws or tax rulings, or the examination of our tax positions;

•difficulty predicting what impact, if any, new tariffs imposed by and other trade actions taken by the U.S. and foreign jurisdictions could have on our business;

•the discontinuation or replacement of LIBOR, which may adversely affect interest rates;

•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; and

•influence of certain stockholders, including decisions that may conflict with the interests of other stockholders.

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 “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A in our 2019 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 and expressly disclaim any 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, social and digital gaming industries than the same industries in the U.S.

Due to rounding, certain numbers presented herein may not precisely agree or add up on a cumulative basis to the totals previously reported.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in millions, except per share amounts)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Revenue:
Services	$	322	$	457	$	744	$	916
Product sales	84		238		252		476
Instant products	133		150		268		290
Total revenue	539		845		1,264		1,682
Operating expenses:
Cost of services⁽¹⁾	126		135		256		268
Cost of product sales⁽¹⁾	69		111		160		218
Cost of instant products⁽¹⁾	62		75		135		142
Selling, general and administrative	151		174		349		360
Research and development	31		46		82		95
Depreciation, amortization and impairments	140		170		278		335
Goodwill impairment	—		—		54		—
Restructuring and other	16		6		38		13
Operating (loss) income	(56)		128		(88)		251
Other (expense) income:
Interest expense	(124)		(147)		(248)		(301)
(Loss) earnings from equity investments	(3)		7		(5)		13
Loss on debt financing transactions	—		(60)		—		(60)
(Loss) gain on remeasurement of debt	(12)		(3)		(2)		2
Other (expense) income, net	(1)		7		(4)		7
Total other expense, net	(140)		(196)		(259)		(339)
Net loss before income taxes	(196)		(68)		(347)		(88)
Income tax expense	(2)		(7)		(6)		(11)
Net loss	(198)		(75)		(353)		(99)
Less: Net income attributable to noncontrolling interest	5		2		9		2
Net loss attributable to SGC	$	(203)	$	(77)	$	(362)	$	(101)
Basic and diluted net loss attributable to SGC per share:
Basic	$	(2.15)	$	(0.83)	$	(3.85)	$	(1.09)
Diluted	$	(2.15)	$	(0.83)	$	(3.85)	$	(1.09)

Weighted average number of shares used in per share calculations:
Basic shares	95		93		94		93
Diluted shares	95		93		94		93
(1) Excludes D&A.
See accompanying notes to condensed consolidated financial statements.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in millions)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Net loss	$	(198)	$	(75)	$	(353)	$	(99)
Other comprehensive loss:
Foreign currency translation gain (loss), net of tax	61		(39)		(22)		16
Pension and post-retirement (loss) gain, net of tax	(1)		(1)		1		—
Derivative financial instruments unrealized gain (loss), net of tax	2		(11)		(14)		(16)
Total other comprehensive gain (loss)	62		(51)		(35)		—
Total comprehensive loss	(136)		(126)		(388)		(99)
Less: comprehensive income attributable to noncontrolling interest	5		2		9		2
Comprehensive loss attributable to SGC	$	(141)	$	(128)	$	(397)	$	(101)

See accompanying notes to condensed consolidated financial statements.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions, except par value)


	As of
	June 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	790	$	313
Restricted cash	63		51
Receivables, net of allowance for credit losses $74 and $36, respectively	612		755
Inventories	233		244
Prepaid expenses, deposits and other current assets	234		252
Total current assets	1,932		1,615
Non-current assets:
Restricted cash	11		11
Receivables, net of allowance for credit losses $8 and $-, respectively	38		53
Property and equipment, net	447		500
Operating lease right-of-use assets	96		105
Goodwill	3,211		3,280
Intangible assets, net	1,397		1,516
Software, net	240		258
Equity investments	258		273
Other assets	214		198
Total assets	$	7,844	$	7,809

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt	$	384	$	45
Accounts payable	179		226
Accrued liabilities	522		495
Total current liabilities	1,085		766
Deferred income taxes	91		91
Operating lease liabilities	80		88
Other long-term liabilities	298		292
Long-term debt, excluding current portion	8,769		8,680
Total liabilities	10,323		9,917
Commitments and contingencies (Note 16)
Stockholders’ deficit:
Common stock, par value $0.001 per share: 199 shares authorized; 112 and 111 shares issued and 95 and 94 shares outstanding, respectively	1		1
Additional paid-in capital	1,230		1,208
Accumulated loss	(3,322)		(2,954)
Treasury stock, at cost, 17 shares	(175)		(175)
Accumulated other comprehensive loss	(327)		(292)
Total SGC stockholders’ deficit	(2,593)		(2,212)
Noncontrolling interest	114		104
Total stockholders’ deficit	(2,479)		(2,108)
Total liabilities and stockholders’ deficit	$	7,844	$	7,809

See accompanying notes to condensed consolidated financial statements.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)


	Six Months Ended
	June 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(353)	$	(99)
Adjustments to reconcile net loss to cash provided by operating activities	460		440
Changes in working capital accounts, net of effects of acquisitions	57		(86)
Changes in deferred income taxes and other	8		7


















Net cash provided by operating activities	172		262

Cash flows from investing activities:
Capital expenditures	(92)		(132)
Acquisition of business, net of cash acquired	(13)		—
(Contributions) distributions of capital from equity investments, net	(1)		17

Proceeds from sale of asset and other	22		—
Net cash used in investing activities	(84)		(115)

Cash flows from financing activities:
Borrowings under SGI revolving credit facility	530		40
Repayments under SGI revolving credit facility	(90)		(320)
Proceeds from issuance of senior notes and term loans	—		1,100
Repayment of senior notes and term loans (including redemption premium)	—		(1,050)
Payments on long-term debt	(20)		(23)
Payments of debt issuance and deferred financing costs	(1)		(15)
Payments on license obligations	(15)		(13)
Sale of future revenue	—		11
Net proceeds from the sale of SciPlay common stock	—		342
Payments of deferred SciPlay common stock offering costs	—		(8)
Net redemptions of common stock under stock-based compensation plans and other	(2)		(7)
Net cash provided by financing activities	402		57
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1)		1
Increase in cash, cash equivalents and restricted cash	489		205
Cash, cash equivalents and restricted cash, beginning of period	375		220
Cash, cash equivalents and restricted cash, end of period	$	864	$	425


Supplemental cash flow information:
Cash paid for interest	$	224	$	270
Income taxes paid	7		18
Distributed earnings from equity investments	13		22
Supplemental non-cash transactions:



Non-cash interest expense	$	11	$	13

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 products, lottery systems and lottery content and services to lottery operators; providing social casino gaming solutions to retail consumers; and providing a comprehensive suite of digital RMG and sports wagering solutions, distribution platforms, content, products and services. We report our operations in four business segments—Gaming, Lottery, SciPlay and Digital.

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, 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 consolidated financial statements using the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of SGC and its management, we have made all adjustments necessary to present fairly our consolidated financial position, results of operations, 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 2019 10-K. Interim results of operations are not necessarily indicative of results of operations to be expected for a full year.

Impact of COVID-19

In March 2020, the World Health Organization declared the rapidly spreading COVID-19 outbreak a pandemic. In response to the COVID-19 pandemic, governments across the world implemented a number of measures to prevent its spread, including but not limited to, the temporary closure of a substantial number of gaming operations establishments and disruptions to lottery operations, travel restrictions, and cancellation of sporting events, which are affecting our business segments in a number of ways. During the latter part of the second quarter of 2020, lifting of restrictions began, including reopening of some of the gaming establishments globally. As gaming operations begin to resume, social distancing measures, decreased operating capacities, high unemployment rates, and potential changes in consumer behaviors are expected to continue to negatively impact our results of operations, cash flows and financial condition as they did in the first quarter of 2020.

Based on our current estimates regarding the magnitude and length of the disruptions to our business, we do not anticipate these disruptions will impact our ability to meet our obligations when due or our ability to maintain compliance with our debt covenants for at least the next 12 months. However, the ultimate magnitude and length of time that the disruptions from COVID-19 will continue is uncertain. This uncertainty will require us to continually assess the situation, including the impact of changes to government imposed restrictions, changes in customer behaviors, social distancing measures and decreased gaming establishments operating capacity jurisdiction by jurisdiction. Accordingly, our estimates regarding the magnitude and length of time that these disruptions will continue to impact our results of operations, cash flows and financial condition may change in the future and such changes could be material.

On April 9, 2020, we borrowed $480 million under SGI’s revolving credit facility, which was substantially all of our remaining availability thereunder. As of June 30, 2020, our total available liquidity (excluding our SciPlay business segment) was $637 million, which included $3 million of undrawn availability under SGI’s revolving credit facility. We have implemented a number of measures to proactively reduce operating costs, conserve liquidity and navigate through this unprecedented situation. These include measures such as: reductions in both salaries and workforce, including temporary voluntary 50% or greater reductions in salaries by our executive leadership team (100% as to our President and Chief Executive Officer until June 30, 2020 and 50% from July 1, 2020 to July 31, 2020), unpaid employee furloughs, reductions in hours, temporary elimination of 401(k) matching among other compensation and benefits reductions, and deferral of certain operating and capital expenditures. We have also engaged with our vendors to negotiate concessions on the timing and amount of payments to preserve liquidity through the COVID-19 disruption period. We continue to actively manage our daily cash flows and continue to evaluate additional measures that will reduce operating costs and conserve cash.

Our only financial maintenance covenant (excluding SciPlay’s Revolver) is contained in SGI’s credit agreement. Prior to the Credit Agreement Amendment (as defined below) dated May 8, 2020, this covenant was tested at the end of each fiscal quarter and required us to not exceed a maximum consolidated net first lien leverage ratio of 5.00x Consolidated EBITDA (as defined in the credit agreement). Prior to the Credit Agreement Amendment, this ratio stepped down to 4.75x beginning with the fiscal quarter ending December 31, 2020 and to 4.50x beginning with the fiscal quarter ending December 31, 2021. Additionally, the SciPlay Revolver requires that SciPlay maintain a maximum total net leverage ratio not to exceed 2.50x and maintain a minimum fixed charge coverage ratio of no less than 4.00x. We had no amounts drawn on our SciPlay Revolver as of June 30, 2020.

On May 8, 2020, the requisite lenders under SGI’s revolving credit facility agreed to amend the consolidated net first lien leverage ratio covenant in the credit agreement (the “Credit Agreement Amendment”) to (a) implement a financial covenant relief period through the end of the first quarter ending March 31, 2021 (the “Covenant Relief Period”), as a result of which SGI is not required to maintain compliance with the consolidated net first lien leverage ratio covenant during the Covenant Relief Period, (b) reset the consolidated net first lien leverage ratio covenant following the Covenant Relief Period, (c) impose a minimum liquidity requirement (excluding SciPlay) of at least $275 million during the Covenant Relief Period, (d) further restrict our ability to incur indebtedness and liens, make restricted payments and investments and prepay junior indebtedness during the Covenant Relief Period, subject to certain exceptions and further subject, in some instances, to maintaining minimum liquidity (excluding SciPlay) of at least $400 million and (e) establish a LIBOR floor of 0.500% on borrowings under the revolving credit facility during the Covenant Relief Period. The revised consolidated net first lien leverage ratio will be 6.00x Consolidated EBITDA beginning with the fiscal quarter ending June 30, 2021, stepping down as follows: (1) 5.75x beginning with the fourth quarter of 2021, (2) 5.25x beginning with the second quarter of 2022, (3) 4.75x beginning with the fourth quarter of 2022 and (4) 4.50x beginning with the second quarter of 2023 and thereafter. The revised consolidated net first lien leverage ratio is based on Consolidated EBITDA (as defined in the Credit Agreement Amendment) as follows: (1) for the testing period ending June 30, 2021, Consolidated EBITDA for the fiscal quarter ending June 30, 2021 multiplied by 4, (2) for the testing period ending September 30, 2021, Consolidated EBITDA for the fiscal quarters ending June 30, 2021 and September 30, 2021 multiplied by 2, (3) for the testing period ending December 31, 2021, Consolidated EBITDA for the fiscal quarters ending June 30, 2021, September 30, 2021 and December 31, 2021 multiplied by 4/3 and (4) for all subsequent testing periods, Consolidated EBITDA for the previous twelve months including the quarter for the which the test is performed. Refer to Note 11 for description of issuance of the 2025 Unsecured Notes and the redemption of the 2021 Notes completed subsequent to June 30, 2020.

Additionally, changes to estimates related to the COVID-19 disruptions could result in other impacts, including but not limited to, additional goodwill impairments (see Note 8), indefinite-lived intangibles, long-lived asset and equity method investments impairment charges, inventory write downs and receivables credit allowance charges (see Notes 5 and 6).

Significant Accounting Policies

There have been no changes to our significant accounting policies described within the Notes of our 2019 10-K other than adoption of ASC 326 as described in Note 5.

Computation of Basic and Diluted Net Loss Per Share

Basic and diluted net loss attributable to SGC per share were the same for all periods presented as all common stock equivalents during those periods would be anti-dilutive. We excluded 1 million of stock options from the diluted weighted-average common shares outstanding for the three and six months ended June 30, 2020 and 2 million of stock options from the diluted weighted-average common shares outstanding for the three and six months ended June 30, 2019. We excluded 4 million of RSUs from the calculation of diluted weighted-average common shares outstanding for the three and six months ended June 30, 2020 and 3 million of RSUs from the calculation of diluted weighted-average common shares outstanding for the three and six months ended June 30, 2019.

Acquisitions

On June 22, 2020, SciPlay completed the acquisition of all of the issued and outstanding capital stock of privately held mobile and social game company Come2Play, Ltd. (“Come2Play”), which expands SciPlay’s existing portfolio of social games. Come2Play offers Backgammon and Solitaire social games targeted towards casual game players on the same platforms in which we currently offer our existing games. The total purchase consideration was $18 million, which includes our estimate of contingent acquisition consideration. Our preliminary allocation of the purchase price resulted in $13 million intangible assets primarily allocated to customer relationship and acquired technology and $6 million in excess purchase price allocated to goodwill.

New Accounting Guidance - Recently Adopted

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 legacy 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 are 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. We adopted ASC 326 as of January 1, 2020 using the modified retrospective method for all financial assets measured at amortized cost, which resulted in a $6 million cumulative-effect adjustment increase to accumulated loss. See Note 5 for our credit losses policy and the adoption impact of ASC 326 on our consolidated financial statements.

The FASB issued ASU No. 2018-13, Fair Value Measurement, and several subsequent amendments (collectively, Topic 820) in 2018. The standard amends the required quantitative and qualitative disclosure requirements for recurring and nonrecurring fair value measurements. We adopted this standard effective January 1, 2020. The adoption of this standard did not have a material impact on our financial statement disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes, to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes, enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years with early adoption permitted. We adopted this standard effective January 1, 2020. The adoption of this guidance did not have a material effect on our consolidated financial statements.

New Accounting Guidance - Not Yet Adopted

The FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) in March 2020. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. This ASU may be applied prospectively through December 31, 2022. We are currently assessing the impact of this standard on our consolidated financial statements.

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

(2) Revenue Recognition

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Gaming
Gaming operations	$	16	$	150	$	135	$	302
Gaming machine sales	53		148		145		284
Gaming systems	17		67		72		141
Table products	5		62		57		122
Total	$	91	$	427	$	409	$	849

Lottery
Instant products	$	133	$	150	$	269	$	290
Lottery systems	76		81		152		168
Total	$	209	$	231	$	421	$	458

SciPlay
Mobile	$	144	$	98	$	245	$	195
Web and other	22		20		39		41
Total	$	166	$	118	$	284	$	236

Digital
Sports and platform	$	26	$	26	$	64	$	56
Gaming and other	47		43		86		83
Total	$	73	$	69	$	150	$	139

The amount of rental income revenue that is outside the scope of ASC 606 was $12 million and $86 million for the three and six months ended June 30, 2020, respectively, and $95 million and $191 million for the three and six months ended June 30, 2019, respectively.

Contract Liabilities and Other Disclosures

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


	Six Months Ended June 30,
	2020
Contract liability balance, beginning of period⁽¹⁾	$	109
Liabilities recognized during the period	42
Amounts recognized in revenue from beginning balance	(53)
Contract liability balance, end of period⁽¹⁾	$	98
(1) Contract liabilities are included within Accrued liabilities and Other long-term liabilities in our consolidated balance sheets.

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 sheets. 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 retail sales contracts. 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 for such contracts in any periods post-adoption. Total revenue recognized under such contracts for the three and six months ended June 30, 2020 was $21 million and $40 million, respectively, and $26 million and $49 million for the three and six months ended June 30, 2019, respectively. The following table summarizes our balances in these accounts for the periods indicated (other than contract liabilities disclosed above):


	Receivables		Contract Assets⁽¹⁾
Beginning of period balance⁽²⁾	$	808	$	121
End of period balance, June 30, 2020	650		132


(1) Contract assets are included primarily within Prepaid expenses, deposits and other current assets in our consolidated balance sheets.
(2) The beginning of period balance excludes the impact of adoption of ASC 326.

As of June 30, 2020, 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

We report our operations in four business segments—Gaming, Lottery, SciPlay and Digital—representing our different products and services. A detailed discussion regarding the products and services from which each reportable business segment derives its revenue is included in Notes 2 and 3 in our 2019 10-K.

In evaluating financial performance, our Chief Operating Decision Maker focuses on AEBITDA as management’s segment measure of profit or loss, which is described in Note 2 in our 2019 10-K. The accounting policies of our business segments are the same as those described within the Notes in our 2019 10-K. The following tables present our segment information:


	Three Months Ended June 30, 2020
	Gaming		Lottery		SciPlay		Digital		Unallocated and Reconciling Items⁽¹⁾		Total
Total revenue	$	91	$	209	$	166	$	73	$	—	$	539
AEBITDA	(31)		97		60		20		(25)		$	121
Reconciling items to consolidated net loss before income taxes:
D&A	(86)		(18)		(2)		(23)		(11)		(140)

Restructuring and other	(7)		(3)		(1)		(1)		(4)		(16)
EBITDA from equity investments									(7)		(7)
Loss from equity investments									(3)		(3)
Interest expense									(124)		(124)

Loss on remeasurement of debt									(12)		(12)
Other expense, net									(1)		(1)
Stock-based compensation									(14)		(14)
Net loss before income taxes											$	(196)


(1) Includes amounts not allocated to the business segments (including corporate costs) and items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.


	Three Months Ended June 30, 2019
	Gaming		Lottery		SciPlay		Digital		Unallocated and Reconciling Items⁽¹⁾		Total
Total revenue	$	427	$	231	$	118	$	69	$	—	$	845
AEBITDA	215		103		33		12		(28)		$	335
Reconciling items to consolidated net loss before income taxes:
D&A	(114)		(20)		(2)		(19)		(15)		(170)
Restructuring and other	(2)		(1)		(1)		(1)		(1)		(6)
EBITDA from equity investments									(18)		(18)
Earnings from equity investments									7		7
Interest expense									(147)		(147)
Loss on debt financing transactions									(60)		(60)
Loss on remeasurement of debt									(3)		(3)
Other income, net									4		4
Stock-based compensation									(10)		(10)
Net loss before income taxes											$	(68)

(1) Includes amounts not allocated to the business segments (including corporate costs) and items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.


	Six Months Ended June 30, 2020
	Gaming		Lottery		SciPlay		Digital		Unallocated and Reconciling Items⁽¹⁾		Total
Total revenue	$	409	$	421	$	284	$	150	$	—	$	1,264
AEBITDA	65		175		94		43		(56)		$	321
Reconciling items to consolidated net loss before income taxes:
D&A	(175)		(32)		(4)		(44)		(23)		(278)
Goodwill impairment	(54)		—		—		—		—		(54)
Restructuring and other	(19)		(8)		(2)		(2)		(7)		(38)
EBITDA from equity investments									(14)		(14)
Loss from equity investments									(5)		(5)
Interest expense									(248)		(248)

Loss on remeasurement of debt									(2)		(2)
Other expense, net									(5)		(5)
Stock-based compensation									(24)		(24)
Net loss before income taxes											$	(347)


(1) Includes amounts not allocated to the business segments (including corporate costs) and items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.


	Six Months Ended June 30, 2019
	Gaming		Lottery		SciPlay		Digital		Unallocated and Reconciling Items⁽¹⁾		Total
Total revenue	$	849	$	458	$	236	$	139	$	—	$	1,682
AEBITDA	430		207		58		25		(57)		$	663
Reconciling items to consolidated net loss before income taxes:
D&A	(226)		(39)		(4)		(38)		(28)		(335)
Restructuring and other	(4)		(1)		(2)		(4)		(2)		(13)
EBITDA from equity investments									(35)		(35)
Earnings from equity investments									13		13
Interest expense									(301)		(301)
Loss on debt financing transactions									(60)		(60)
Gain on remeasurement of debt									2		2
Other income, net									2		2
Stock-based compensation									(24)		(24)
Net loss before income taxes											$	(88)

(1) Includes amounts not allocated to the business segments (including corporate costs) and items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.

(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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Employee severance and related⁽¹⁾	$	12	$	2	$	30	$	5
Contingent consideration adjustment	—		2		—		2
Restructuring, integration and other	4		2		8		6
Total	$	16	$	6	$	38	$	13

(1) The three and six months ended June 30, 2020 includes $10 million and $24 million, respectively, in severance and other benefits granted to employees as a result of COVID-19 related austerity measures.

(5) Receivables, Allowance for Credit Losses and Credit Quality of Receivables

Receivables

Receivables are recorded at the invoiced amount less allowance for credit losses and imputed interest, if any. For a portion of our receivables, we have provided extended payment terms with installment payment terms greater than 12 months and in certain international jurisdictions up to 36 months. We have a total of $149 million in gross receivables with extended payment terms as of June 30, 2020. Interest income, if any, is recognized ratably over the life of the receivable, and any related fees or costs to establish the receivables are charged to selling, general and administrative expense as incurred, as they are immaterial. Actual or imputed interest, if any, is determined based on current market rates at the time the receivables with extended payment terms originated and is recorded ratably over the payment period, which approximates the effective interest method. We generally impute interest income on all receivables with payment terms greater than one year that do not contain a stated interest rate. Our general policy is to recognize interest on receivables until a receivable is deemed non-performing, which we define as payments being overdue by 180 days beyond the agreed-upon terms. When a receivable is deemed to be non-performing, the item is placed on non-accrual status and interest income is recognized on a cash basis. Accrued interest, non-performing receivables and interest income were immaterial for all periods presented. Effective January 1, 2020, we changed our receivables presentation and combined accounts receivable and notes receivable into a single line item on our

balance sheets due to their similar characteristics and have reclassified the prior period balances to conform to the current year presentation.

The following table summarizes the components of current and long-term receivables, net:


	As of
	June 30, 2020		December 31, 2019
Current:
Receivables	$	686	$	791
Allowance for credit losses	(74)		(36)
Current receivables, net	612		755
Long-term:
Receivables	46		53
Allowance for credit losses	(8)		—
Long-term receivables, net	38		53
Total receivables, net	$	650	$	808

Allowance for Credit Losses

As described in Note 1, results for reporting periods effective January 1, 2020 are presented in accordance with ASC 326 while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. We recorded a net increase to accumulated loss of $6 million for the cumulative effect of adopting ASC 326, which was primarily related to incremental allowance for credit losses associated with our current receivables and contract assets that were not required under previously applicable U.S. GAAP.

The receivables allowance for credit losses is our best estimate of the amount of expected credit losses in our existing receivables over the contractual term. We evaluate our exposure to credit loss on both a collective and individual basis. We evaluate such receivables on a geographic basis and take into account any relevant available information, which begins with historical credit loss experience and consideration of current and expected conditions and market trends (such as general economic conditions, other microeconomic and macroeconomic considerations, etc.) and reasonable and supportable forecasts that could impact the collectability of such receivables over the contractual term individually or in the aggregate. Changes in circumstances relating to these factors may result in the need to increase or decrease our allowance for credit losses in the future.

We manage our receivable portfolios using both geography and delinquency as key credit quality indicators. The following summarizes geographical delinquencies of total receivables, net:


	As of
	June 30, 2020		Balances over 90 days past due		December 31, 2019		Balances over 90 days past due
Receivables:
U.S. and Canada	$	441	$	109	$	534	$	65
International	291		71		310		55
Total receivables	732		180		844		120

Receivables allowance:
U.S. and Canada	(37)		(27)		(13)		(8)
International	(45)		(36)		(23)		(23)
Total receivables allowance	(82)		(63)		(36)		(31)
Receivables, net	$	650	$	117	$	808	$	89

Account balances are charged against the allowances after all collection efforts have been exhausted and the potential for recovery is considered remote.

The activity in our allowance for receivable credit losses for each of the three and six-months ended June 30, 2020 and 2019 is as follows:


	2020								2019
	Total		U.S. and Canada		International		Total
Beginning allowance for credit losses⁽¹⁾	$	(42)	$	(14)	$	(28)	$	(40)
Provision	(28)		(15)		(13)		(1)
Charge-offs and recoveries	—		—		—		3
Allowance for credit losses as of March 31	(70)		(29)		(41)		(38)
Provision	(12)		(9)		(3)		(1)
Charge-offs and recoveries	—		—		—		3
Allowance for credit losses as of June 30	$	(82)	$	(38)	$	(44)	$	(36)

(1) Reflects $6 million related to implementation of ASC 326 for the 2020 beginning balance.

At June 30, 2020, 18% of our total receivables, net, were past due by over 90 days compared to 11% at December 31, 2019.

Credit Quality of Receivables

In our Gaming machine sales business, we file UCC-1 financing statements domestically in order to retain a security interest in the gaming machines that underlie a significant portion of our domestic receivables until the receivable balance is fully paid. However, the value of the gaming machines, if repossessed, may be less than the balance of the outstanding receivable. For international customers, depending on the country and our historic collection experience with the customer, we may obtain pledge agreements, bills of exchange, guarantees, post-dated checks or other forms of security agreements designed to enhance our ability to collect the receivables, although a majority of our international receivables do not have these features. In our Gaming operations business, because we own the Participation gaming machines that are leased or otherwise provided to the customer, in a bankruptcy the customer has to generally either accept or reject the lease or other agreement and, if rejected, our gaming machines are returned to us. Our receivables related to revenue earned on Participation gaming machines and all other revenue sources are typically unsecured claims.

Due to the significance of our gaming machines to the ongoing operations of our casino customers, we may be designated as a key vendor in any bankruptcy filing by a casino customer, which can enhance our position above other creditors in the bankruptcy. Due to our successful collection experience and our continuing relationship with casino customers and their businesses, it is infrequent that we repossess gaming machines from a customer in partial settlement of outstanding receivable balances. In those unusual instances where repossession occurs to mitigate our exposure on the related receivable, the repossessed gaming machines are subsequently resold in the used gaming machine market; however, we may not fully recover the receivable from this re-sale.

We have certain concentrations of outstanding receivables in international locations that impact our assessment of the credit quality of our receivables. We monitor the macroeconomic and political environment in each of these locations in our assessment of the credit quality of our receivables. The international customers with significant concentrations (generally deemed to be exceeding 10%) of our receivables with terms longer than one year are in the Latin America region (“LATAM”) and are primarily comprised of Mexico, Peru and Argentina. The following table summarizes our LATAM receivables:


	As of
	June 30, 2020		Current or Not Yet Due		Balances Over 90 days Past Due
Receivables	$	129	$	62	$	53
Allowance for credit losses	(55)		(13)		(40)
Receivables, net	$	74	$	49	$	13

We increased our allowance for credit losses by $12 million and $40 million for the three and six months ended June 30, 2020, respectively. These increases were primarily related to Gaming customers in LATAM (which transact with both domestic and international subsidiaries) as those customers were particularly affected by COVID-19 closures of gaming operations establishments. As noted above, we have concentrations of receivables in LATAM, where customers generally take

longer to pay us than those from other geographies and late payments have continued to persist into the second quarter of 2020 in which we collected substantially less compared to historical quarterly collections primarily due to COVID related business interruptions. In addition, customers in this region expect and have often been granted extended payment terms as described above. Our customers in LATAM have been and are expected to continue to be negatively affected by the COVID-19-related closures of gaming operations establishments and the resulting impact on both their specific financial situations and the general macroeconomic environments in which they operate. Our policy is to continuously review receivables and as information concerning credit quality arises, we reassess our expectations of future losses. If such losses exceed our existing allowance for credit losses we record an incremental reserve at that time. Our current allowance for credit losses represents our current expectation of credit losses; however future expectations could change as the ultimate impact of the COVID-19 disruption remains uncertain, particularly as to the financial stability of our customers during and after the COVID-19 disruption period.

The fair value of receivables 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 June 30, 2020 and December 31, 2019, the fair value of receivables, net, approximated the carrying value due to contractual terms of receivables generally being under 24 months.

(6) Inventories

Inventories consisted of the following:


	As of
	June 30, 2020		December 31, 2019
Parts and work-in-process	$	140	$	153
Finished goods	93		91
Total inventories	$	233	$	244

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.

During the three and six months ended June 30, 2020, we recorded $21 million and $30 million, respectively, in inventory valuation charges (recorded in Cost of products sales) related to inventory in our Gaming business segment. Our new Gaming leadership team brought in late in the first quarter of 2020 began to set a new strategic plan for the Gaming business late in the second quarter of 2020. This new strategic plan includes revising product roadmaps and an assessment of how many and which platforms we will support, when we end service on legacy platforms and when we stop selling on such platforms in conjunction with new product launches. This new approach, combined with the rapid demand reduction that took place in the second quarter largely as a result of the COVID-19 disruptions, required us to reassess our inventory valuation, including whether we had excess or obsolete inventory based on the new strategic plan and related demand. In addition, the continued closures in the LATAM region make it difficult to execute our previous strategy of shipping legacy platforms into that market. The combination of these factors led to the $21 million inventory valuation charge recognized in the three months ended June 30, 2020. Our policy is to continue to review and assess these and other factors, especially during the COVID-19 disruption periods, and if such factors or our outlook changes, we record adjustments to the valuation of inventory.

(7) Property and Equipment, net

Property and equipment, net consisted of the following:


	As of
	June 30, 2020		December 31, 2019
Land	$	15	$	15
Buildings and leasehold improvements	129		129
Gaming and lottery machinery and equipment	1,005		1,028
Furniture and fixtures	30		31
Construction in progress	35		30
Other property and equipment	263		263
Less: accumulated depreciation	(1,030)		(996)
Total property and equipment, net	$	447	$	500

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						Six Months Ended
	June 30,						June 30,
	2020		2019⁽¹⁾		2020		2019⁽¹⁾
Depreciation expense	$	46	$	64	$	90	$	122
(1) Includes assets held for sale impairment charges of $9 million.

During the first quarter of 2020, we sold certain properties in Chicago that were held for sale as of December 31, 2019 and received total net proceeds of $22 million.

(8) Intangible Assets, net and Goodwill

Intangible Assets, net

The following tables present certain information regarding our intangible assets as of June 30, 2020 and December 31, 2019.


	As of
	June 30, 2020										December 31, 2019
	Gross Carrying Value		Accumulated Amortization		Net Balance		Gross Carrying Value		Accumulated Amortization		Net Balance
Amortizable intangible assets:
Customer relationships	$	1,084	$	(424)	$	660	$	1,086	$	(383)	$	703
Intellectual property	932		(599)		333		931		(563)		368
Licenses	552		(365)		187		548		(329)		219
Brand names	125		(78)		47		123		(72)		51
Trade names	116		(36)		80		116		(31)		85
Patents and other	24		(15)		9		24		(15)		9
	2,833		(1,517)		1,316		2,828		(1,393)		1,435
Non-amortizable intangible assets:
Trade names	83		(2)		81		83		(2)		81
Total intangible assets	$	2,916	$	(1,519)	$	1,397	$	2,911	$	(1,395)	$	1,516

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Amortization expense	$	63	$	75	$	128	$	152

Q1 2020 Legacy U.K. Gaming Impairment Charge

We test goodwill for impairment annually as of October 1 of each fiscal year or more frequently if events arise or circumstances change that indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value.

A substantial portion of our legacy U.K. Gaming reporting unit revenue comes from Ladbrokes Coral Group (acquired by GVC Holdings PLC in March 2018), which operates LBOs in the U.K. In May 2018, the U.K. government published its decision mandating that the maximum stakes limit on fixed-odds betting terminals be reduced from £100 to £2, which was effective as of April 1, 2019. As a result of this change, LBO operators began to rationalize their retail operations, which among other measures has included closure of certain LBO shops. Consequently, as of October 1, 2019, we concluded that an elevated risk of goodwill impairment existed for our legacy U.K. Gaming reporting unit as adverse changes in projections for future operating results or other key assumptions, such as projected revenue, profit margin, capital expenditures or cash flows associated with investments included in that reporting unit could lead to future goodwill impairments.

During the first quarter of 2020, the COVID-19 disruptions resulted in the widespread closures of LBO shops across the U.K., which, along with global economic uncertainty, contributed to further deterioration in business conditions from our 2019 annual goodwill test date. This had an adverse effect on our legacy U.K. Gaming reporting unit, which necessitated performing a quantitative goodwill impairment test during the first quarter of 2020.

We performed this quantitative impairment test by comparing the fair value of our legacy U.K. Gaming reporting unit to its carrying value, including goodwill. As described in further detail below, the fair value of our legacy U.K. Gaming reporting unit was determined using a combination of both an income approach, based on the present value of discounted cash flows, and a market approach. Due to market volatility and limited market data points specific to the nature of our legacy U.K. Gaming reporting unit operations, we placed greater weight on the income approach than on the market approach. As a result of this analysis, during the first quarter of 2020 we recognized a partial impairment charge totaling $54 million, which is the amount by which the carrying value exceeded the estimated fair value. This impairment charge resulted in no tax benefit.

We used projections of revenues, profit margin, operating costs, capital expenditures and cash flows that primarily considered general economic and market conditions and estimated future results including the estimated impact of the COVID-19 disruptions. We used a range of different scenarios and derived estimated fair value based on an equal weighting of these scenarios to reflect the economic uncertainty resulting from the COVID-19 disruptions and the timing and magnitude of the economic recovery following the COVID-19 disruptions coupled with the impact of the regulatory change. The following ranges of the key estimates and assumptions were used in the discounted cash flow analysis:

•Revenue growth for FY 2021 between negative 9% and negative 20%, an average revenue growth for FY 2022 to FY 2027 between positive 3% and positive 5%, and terminal revenue growth rate of positive 2.0%;

•An average profit margin ranging from 13% to 23%;

•Assumptions regarding future capital expenditures reflective of maintaining our current customer contracts; and

•An overall discount rate ranging from 8.5% to 10.0%.

In our market comparable analysis, we considered revenue and EBITDA multiples ranging from 2.1x to 2.7x and 5.7x to 7.5x, respectively, and ultimately selected multiples at the low end of the range.

The legacy U.K. Gaming reporting unit is included in our Gaming business segment.

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

December 31, 2019 to June 30, 2020.


	Gaming⁽¹⁾		Lottery		SciPlay		Digital		Totals
Balance as of December 31, 2019	$	2,449	$	349	$	115	$	367	$	3,280
Impairment	(54)		—		—		—		(54)
Acquired goodwill	—		—		6		—		6
Foreign currency adjustments	(8)		(2)		—		(11)		(21)
Balance as of June 30, 2020	$	2,387	$	347	$	121	$	356	$	3,211

(1) Accumulated goodwill impairment charges for the Gaming segment as of June 30, 2020 were $989 million.

(9) Software, net

Software, net consisted of the following:


	As of
	June 30, 2020		December 31, 2019
Software	$	1,152	$	1,173
Accumulated amortization	(912)		(915)
Software, net	$	240	$	258

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Amortization expense	$	31	$	31	$	60	$	61

(10) Equity Investments

Equity investments totaled $258 million and $273 million as of June 30, 2020 and December 31, 2019, respectively. We received distributions and dividends totaling $13 million and $40 million during the six months ended June 30, 2020 and 2019, respectively, primarily related to our LNS equity investment.

(11) Long-Term and Other Debt

Issuance of 2025 Unsecured Notes and Redemption of 2021 Notes

On July 1, 2020, we completed the issuance of $550 million in aggregate principal amount of 8.625% senior unsecured notes due 2025 in a private offering, for which we received the total net proceeds of $543 million. We used a portion of the net proceeds to redeem all $341 million of our outstanding 2021 Notes and paid accrued and unpaid interest thereon plus related premiums, fees and costs, which redemption was completed on July 17, 2020, and will use the remaining net proceeds to fund working capital and general corporate purposes.

The 2025 Unsecured Notes were issued pursuant to an indenture dated as of July 1, 2020 (the “2025 Unsecured Notes Indenture”). We may redeem some or all of the 2025 Unsecured Notes at any time prior to July 1, 2022 at a redemption price equal to 100% of the principal amount of the 2025 Unsecured Notes plus accrued and unpaid interest, if any, to the date of the redemption plus a “make whole” premium. We may redeem some or all of the 2025 Unsecured Notes at any time on or after July 1, 2022 at the prices specified in the 2025 Unsecured Notes Indenture.

The 2025 Unsecured Notes are senior obligations of SGI, rank equally to all SGI’s existing and future senior debt and rank senior to all of SGI’s existing and future debt that is expressly subordinated to the 2025 Unsecured Notes. The 2025 Unsecured Notes are guaranteed on a senior unsecured basis by SGC and all of its wholly owned domestic restricted subsidiaries (other than SGI, the unrestricted business entities comprising our SciPlay business segment and certain immaterial subsidiaries), subject to customary exceptions.

Outstanding Debt and Finance Leases

The following table reflects our outstanding debt (in order of Priority and Maturity):


	As of
	June 30, 2020										December 31, 2019
	Final Maturity	Rate(s)	Face value		Unamortized debt discount/premium and deferred financing costs, net		Book value		Book value
Senior Secured Credit Facilities:
SGI Revolver	2024	variable	$	635	$	—	$	635	$	195
SGI Term Loan B-5	2024	variable	4,080		(54)		4,026		4,042
SciPlay Revolver	2024	variable	—		—		—		—
SGI Senior Notes:
2025 Secured Notes⁽¹⁾	2025	5.000%	1,250		(14)		1,236		1,235

2026 Secured Euro Notes⁽²⁾	2026	3.375%	365		(4)		361		359
2026 Unsecured Euro Notes⁽²⁾	2026	5.500%	281		(4)		277		276
2026 Unsecured Notes	2026	8.250%	1,100		(13)		1,087		1,085
2028 Unsecured Notes	2028	7.000%	700		(9)		691		690
2029 Unsecured Notes	2029	7.250%	500		(7)		493		493
SGI Subordinated Notes:
2021 Notes	2021	6.625%	341		(1)		340		339
Finance lease obligations as of June 30, 2020 payable monthly through 2023 and other⁽³⁾	2023	4.652%	7		—		7		11
Total long-term debt outstanding			$	9,259	$	(106)	$	9,153	$	8,725
Less: current portion of long-term debt							(384)		(45)
Long-term debt, excluding current portion							$	8,769	$	8,680
Fair value of debt⁽⁴⁾			$	8,287

(1) In connection with the February 2018 Refinancing (see Note 15 in our 2019 Form 10-K), we entered into certain cross-currency interest rate swap agreements to achieve more attractive interest rates by effectively converting $460 million of the 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 average interest rate of approximately 2.946%. These cross-currency swaps have been designated as a hedge of our net investment in certain subsidiaries.
(2) 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). The total change in the face value of the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes due to changes in foreign currency exchange rates since the issuance was a reduction of $67 million, of which a $12 million and $2 million loss were recognized on remeasurement of debt in the Consolidated Statements of Operations for the three and six months ended June 30, 2020, respectively.
(3) Includes $7 million related to certain revenue transactions presented as debt in accordance with ASC 470.
(4) 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.

Debt Maturities

Maturities for our outstanding debt were as follows as of June 30, 2020:


Due	Total Principal Due		Series of Debt	Principal Due per Series of Debt
Remainder of 2020	$	361	Term Loan B-5	$	20
				2021 Notes⁽¹⁾			341
2021	42		Term Loan B-5	42

2022	42		Term Loan B-5	42
2023	42		Term Loan B-5	42
2024	4,569		Term Loan B-5	3,934
						Drawn Revolving Credit Facility		635
2025 and beyond	4,196		2025 Secured Notes	1,250
				2026 Secured Euro Notes			365
				2026 Unsecured Euro Notes			281
				2026 Unsecured Notes			1,100
				2028 Unsecured Notes			700
				2029 Unsecured Notes			500
(1) On July 17, 2020, the 2021 Notes were redeemed using the proceeds from the issuance of the 2025 Unsecured Notes, which was completed on July 1, 2020.

We were in compliance with the financial covenants under all debt agreements as of June 30, 2020 (see Note 1 for more detailed disclosure, including the amendment to SGI’s revolving credit facility).

For additional information regarding the terms of our credit facilities, Secured Notes, Unsecured Notes and the 2021 Notes, see Note 15 in our 2019 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 and six months ended June 30, 2019, none of which were incurred in 2020:


	Three and Six Months Ended June 30,
	2019
Repayment and cancellation of principal balance at premium	$	50
Unamortized debt (premium) discount and deferred financing costs, net	10

Total loss on debt financing transactions	$	60

(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, receivables, 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

As of June 30, 2020, 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.

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 million as of June 30, 2020. 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. We qualitatively monitor the effectiveness of these hedges on a quarterly basis. 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 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 as established by ASC 820.

The following table shows the gain (loss) and interest expense recognized on our interest rate swap contracts:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Gain (loss) recorded in accumulated other comprehensive loss, net of tax	$	2	$	(11)	$	(14)	$	(16)
Interest expense recorded related to interest rate swap contracts	4		—		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:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	Interest expense						Interest expense
Total interest expense which reflects the effects of cash flow hedges	$	(124)	$	(147)	$	(248)	$	(301)
Hedged item	(5)		(5)		(10)		(10)
Derivative designated as hedging instrument	1		5		4		10

Cross-Currency Interest Rate Swaps

In connection with the February 2018 Refinancing described in Note 15 of our 2019 10-K, we entered into certain cross-currency interest rate swap agreements to achieve more beneficial interest rates by effectively converting $460 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 million cross-currency interest rate swaps is reported in Foreign currency translation (loss) gain 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:

As of

Balance Sheet Line Item

June 30, 2020

December 31, 2019

Interest rate swaps ⁽¹⁾⁽³⁾

Other liabilities

Cross-currency interest rate swaps ⁽²⁾⁽³⁾

Other assets

(1) A gain of $2 million and loss of $14 million for the three and six months ended June 30, 2020, respectively, are reflected in Derivative financial instrument unrealized (loss) gain in Other comprehensive loss.

(2) A loss of $12 million and gain of $18 million for the three and six months ended June 30, 2020, respectively, are reflected in Foreign currency translation gain (loss) in Other comprehensive loss.

(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

For the second quarter of 2020, we designated $116 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 Gain (loss) on remeasurement of debt in our consolidated statements of operations. 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 Consideration Liabilities

In connection with our acquisitions, we have recorded certain contingent consideration liabilities, of which the values are primarily based on reaching certain earnings-based metrics. 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 liabilities are categorized as Level 3 in the fair value hierarchy.

Contingent consideration liabilities as of June 30, 2020 are $11 million, of which $1 million is included in Accrued liabilities with the remainder included in Other long-term liabilities. Contingent consideration liabilities as of December 31, 2019 were $14 million, of which $7 million was included in Accrued liabilities with the remaining balance included in Other long-term liabilities.

(13) Stockholders’ Deficit

Changes in Stockholders’ Deficit

The following tables present certain information regarding our stockholders’ deficit as of June 30, 2020 and June 30, 2019:


	Six Months Ended June 30, 2020
	Common Stock		Additional Paid in Capital		Accumulated Loss		Treasury Stock		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
January 1, 2020	$	1	$	1,208	$	(2,954)	$	(175)	$	(292)	$	104	$	(2,108)
Net payment in connection with settlement of stock options and RSUs	—		(1)		—		—		—		—		(1)
Stock-based compensation	—		9		—		—		—		—		9
Net loss	—		—		(159)		—		—		4		(155)
Other comprehensive loss	—		—		—		—		(97)		—		(97)
Impact of ASC 326 Adoption	—		—		(6)		—		—		—		(6)
March 31, 2020	$	1	$	1,216	$	(3,119)	$	(175)	$	(389)	$	108	$	(2,358)
Net proceeds in connection with settlement of stock options and RSUs	—		1		—		—		—		—		1
Stock-based compensation	—		13		—		—		—		1		14
Net loss	—		—		(203)		—		—		5		(198)
Other comprehensive income	—		—				—		62		—		62
June 30, 2020	$	1	$	1,230	$	(3,322)	$	(175)	$	(327)	$	114	$	(2,479)


	Six Months Ended June 30, 2019
	Common Stock		Additional Paid in Capital		Accumulated Loss		Treasury Stock		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
January 1, 2019	$	1	$	835	$	(2,824)	$	(175)	$	(300)	$	—	$	(2,463)
Net proceeds of common stock in connection with stock options and RSUs	—		2		—		—		—		—		2
Stock-based compensation	—		11		—		—		—		—		11
Net loss	—		—		(24)		—		—		—		(24)
Other comprehensive income	—		—		—		—		51		—		51
March 31, 2019	$	1	$	848	$	(2,848)	$	(175)	$	(249)	$	—	$	(2,423)
Net proceeds of common stock in connection with stock options and RSUs and other	—		2		—		—		—		—		2
Sale of SciPlay common stock and related transactions	—		328		—		—		—		91		419
Stock-based compensation	—		9		—		—		—		1		10
Net loss	—		—		(77)		—		—		2		(75)
Other comprehensive loss	—		—		—		—		(51)		—		(51)
June 30, 2019	$	1	$	1,187	$	(2,925)	$	(175)	$	(300)	$	94	$	(2,118)

Stock Based Compensation

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Related to SGC stock options	$	1	$	1	$	2	$	3
Related to SGC RSUs	8		5		17		17
Related to SciPlay RSUs	5		4		5		4
Total	$	14	$	10	$	24	$	24

(14) Income Taxes

We consider new evidence (both positive and negative) at each reporting date that could affect our 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 2020, we maintain a valuation allowance for certain of our U.S. operations as of June 30, 2020. We also maintain other valuation allowances for certain non-U.S. jurisdictions with cumulative losses.

The effective income tax rate for both the three and six months ended June 30, 2020 was (2)%, and (10)% and (13)% for the three and six months ended June 30, 2019, respectively, and were determined using an estimated annual effective tax rate after considering any discrete items for such periods. Due to the aforementioned valuation allowance against certain of our U.S. net deferred tax assets, the effective tax rates for the three and six months ended June 30, 2020 and 2019 generally do not include the benefits of the U.S. tax losses. We recorded an overall tax expense in both periods due to pre-tax earnings in jurisdictions without valuation allowances. The change in effective tax rates relates primarily to the overall mix of income (loss) in our jurisdictions without valuation allowances and the increase in unbenefited U.S. pre-tax losses. Additionally, the effective tax rate for the three and six months ended June 30, 2020 included an unfavorable adjustment for the legacy U.K. Gaming reporting unit goodwill impairment of $54 million recorded in the first quarter of 2020, which is not deductible for tax purposes. The tax structure of our SciPlay business was altered as a result of SciPlay’s initial public offering, which was completed on May 7, 2019. For the three and six months ended June 30, 2020, we recorded a tax provision for our 18% noncontrolling interest in SciPlay.

As discussed in Note 1, the COVID-19 disruptions significantly impacted certain segments of our business during the first half of 2020. We considered the COVID-19 disruptions in our ability to realize deferred tax assets in the future and determined that such conditions did not change our overall valuation allowance positions. The U.S. signed into law on March 27, 2020 the CARES Act, which includes various income tax provisions to help stabilize U.S. businesses, including a provision to ease the limitation on deductible interest expense in 2019 and 2020, which will reduce our interest limitation for these years, preserving U.S. net operating losses. We continue to monitor and evaluate the tax implications resulting from the CARES Act and any new legislation passed in response to COVID-19 in the federal, state, and foreign jurisdictions where we have an income tax presence.

(15) Leases

Our total operating lease expenses for the three and six months ended June 30, 2020 were $8 million and $16 million, respectively, and were $10 million and $19 million for the three and six months ended June 30, 2019, respectively. The total amount of variable and short term lease payments were immaterial for all periods presented.

Supplemental balance sheet and cash flow information related to operating leases is as follows:


	As of
	June 30, 2020			December 31, 2019
Operating lease right-of-use assets⁽¹⁾	$	96		$	105
Accrued liabilities	24			26
Operating lease liabilities	80			88
Total operating lease liabilities	$	104		$	114
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases for the six month period ended June 30, 2020 and 2019, respectively	$	15		$	17
Weighted average remaining lease term, units in years	5			5
Weighted average discount rate	5		%	5		%
(1) Operating lease right-of-use assets obtained in exchange for lease obligations were immaterial.

Lease liability maturities:


	Remainder of 2020		2021		2022		2023		2024		Thereafter		Less Imputed Interest		Total
Operating leases	$	15	$	27	$	22	$	17	$	14	$	23	$	(14)	$	104

As of June 30, 2020, we did not have material additional operating leases that have not yet commenced.

(16) Litigation

We are involved in various routine and other specific legal proceedings, including the following which are described in Note 21 within our 2019 10-K: the Colombia litigation, SNAI litigation, Washington State Matter and Raqqa Matter. There have been no material changes to these matters since the 2019 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 $3 million for all of our legal matters that were contingencies as of June 30, 2020 and December 31, 2019.

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 21 in our 2019 10-K and this Note 16 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 $13 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.

TCS John Huxley Matter

On March 15, 2019, TCS John Huxley America, Inc., TCS John Huxley Europe Ltd., TCS John Huxley Asia Ltd., and Taiwan Fulgent Enterprise Co., Ltd. brought a civil action in the United States District Court for the Northern District of Illinois against SGC, Bally Technologies, Inc. and SG Gaming. In the complaint, the plaintiffs assert federal antitrust claims arising from the defendants’ procurement of particular U.S. and South African patents. The plaintiffs allege that the defendants used those patents to create an allegedly illegal monopoly in the market for automatic card shufflers sold to regulated casinos in the United States. On April 10, 2019, the defendants filed a motion to dismiss the plaintiffs’ complaint with prejudice. On April 25, 2019, the district court denied the defendants’ motion to dismiss without prejudice pursuant to the court’s local rules, after the plaintiffs advised that they intended to file an amended complaint. The plaintiffs filed their amended complaint on May 3, 2019, and on May 22, 2019, the defendants filed a motion to dismiss the plaintiffs’ amended complaint with prejudice. On March 20, 2020, the district court denied the defendants’ motion to dismiss the plaintiffs’ amended complaint, and defendants filed an answer to Plaintiffs’ amended complaint on June 19, 2020. On June 3, 2020, the trial court granted the defendants’ request to bifurcate proceedings in the case, with discovery to occur first into the statute of limitations and release defenses asserted by the defendants in their motion to dismiss, before proceeding into broader discovery. The trial court set a September 18, 2020, deadline for the parties to complete discovery relating to the statute of limitations and release defenses. We are currently unable to determine the likelihood of an outcome or estimate a range of reasonably possible loss.

SciPlay IPO Matter (New York)

On or about October 14, 2019, the Police Retirement System of St. Louis filed a putative class action complaint in New York state court against SciPlay, certain of its executives and directors, and SciPlay’s underwriters with respect to its initial public offering (the “PRS Action”). The complaint was amended on November 18, 2019. The plaintiff seeks to represent a class of all persons or entities who acquired Class A common stock of SciPlay pursuant and/or traceable to the Registration Statement filed and issued in connection with SciPlay’s initial public offering, which commenced on or about May 3, 2019. The complaint asserts claims for alleged violations of Sections 11 and 15 of the Securities Act, 15 U.S.C. § 77, and seeks certification of the putative class; compensatory damages of at least $146 million, and the award of the plaintiff’s and the class’s reasonable costs and expenses incurred in the action.

On or about December 9, 2019, Hongwei Li filed a putative class action complaint in New York state court asserting substantively similar causes of action under the Securities Act of 1933 and substantially similar factual allegations as those alleged in the PRS Action (the “Li Action”). On December 18, 2019, the New York state court entered a stipulated order consolidating the PRS Action and the Li Action into a single lawsuit. On December 23, 2019, the defendants moved to dismiss the consolidated action. We are currently unable to determine the likelihood of an outcome or estimate a range of reasonably possible loss, if any. We believe that the claims in the lawsuit are without merit, and intend to vigorously defend against them.

Sylebra Matter

On October 23, 2019, Sylebra Capital Partners Master Fund, Limited and P Sylebra, Limited (together, “Sylebra”) filed a complaint in Delaware Chancery Court against SGC, SG Gaming, Inc., and certain of SGC’s current and former executives and directors. The complaint asserts claims for alleged breaches of fiduciary duty and alleged aiding and abetting of such alleged breaches of fiduciary duty; for alleged unjust enrichment; for alleged anticipatory breach of Sylebra’s alleged rights under SGC’s prior Restated Certificate of Incorporation (“prior Charter”) and for alleged breach of that prior Charter; for alleged violations of certain Delaware statutes; and for alleged tortious interference with contract. The complaint seeks injunctive relief, declaratory relief, money damages, and the award of the plaintiffs’ costs and expenses incurred in the action. On December 20, 2019, the defendants filed a motion to dismiss Sylebra’s complaint. In response, on January 27, 2020, Sylebra filed an amended complaint, and on February 28, 2020, the defendants filed a motion to dismiss Sylebra’s amended complaint. On June 30, 2020, the trial court heard oral argument on defendants’ motion to dismiss Sylebra’s amended complaint. We are currently unable to determine the likelihood of an outcome or estimate a range of reasonably possible losses, if any. We believe that the claims in the lawsuit are without merit, and intend to vigorously defend against them.

SciPlay IPO Matter (Nevada)

On or about November 4, 2019, plaintiff John Good filed a putative class action complaint in Nevada state court against SciPlay, certain of its executives and directors, SGC, and SciPlay’s underwriters with respect to SciPlay’s initial public offering. The plaintiff seeks to represent a class of all persons who purchased Class A common stock of SciPlay in or traceable to SciPlay’s initial public offering that it completed on or about May 7, 2019. The complaint asserts claims for alleged violations of Sections 11 and 15 of the Securities Act, 15 U.S.C. § 77, and seeks certification of the putative class; compensatory damages, and the award of the plaintiff’s and the class’s reasonable costs and expenses incurred in the action. On February 27, 2020, the trial court entered a stipulated order that, among other things, stayed the lawsuit pending entry of an order resolving the motion to dismiss that is pending in the SciPlay initial public offering matter in New York state court. We are currently unable to determine the likelihood of an outcome or estimate a range of reasonably possible losses, if any. We believe that the claims in the lawsuit are without merit, and intend to vigorously defend against them.

For additional information regarding our pending litigation matters, see Note 21 in our 2019 10-K.

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 Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2019 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 2019 10-K. As used in this MD&A, the terms “we,” “us,” “our” and the “Company” 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 products, lottery systems and lottery content and services to lottery operators; providing social casino solutions to retail consumers; and providing a comprehensive suite of digital RMG and sports wagering solutions, distribution platforms, content, products and services.

Recent Events — Impact of COVID-19

In March 2020, the World Health Organization declared the rapidly spreading COVID-19 outbreak a pandemic. In response to the COVID-19 pandemic, governments across the world implemented measures to prevent its spread including the temporary closure of all non-essential businesses and travel restrictions, which have affected and continue to affect our business segments in a number of ways. The closure and phased in reopening of gaming establishments during the latter part of the second quarter of 2020 have impacted a substantial amount of our gaming and, to a lesser extent, lottery operations. The reopening of gaming establishments began during the latter part of the second quarter of 2020, however, significant health and safety measures continue to be taken to ensure the safety of players which continues to negatively affect our gaming business segment as these measures are implemented and observed. These safety and social distancing measures include the reduction of floor occupancy, limitation of the number of players allowed at table games and a reduction of slot machines available for play, among others.

Impact on Business Operations and Financial Results

Our Gaming business segment is especially impacted due to the widespread temporary closures and restricted re-opening of a substantial number of gaming operations establishments coupled with global economic uncertainty. The COVID-19 pandemic remains a rapidly evolving situation. Although businesses began reopening during the latter part of the second quarter of 2020, our Participation gaming business revenue and cash flows continue to be significantly negatively affected, as they are largely driven by players’ disposable incomes and level of gaming activity. New social distancing requirements that were implemented in many jurisdictions have and are expected to continue to have a negative impact on the amount of customer traffic within gaming establishments. The COVID-19 disruptions continue to cause prolonged periods of closures and modified operating schedules and may result in changes in customer behaviors, including a reduction in consumer discretionary spending as a result of the uncertainty caused by the pandemic and unemployment levels. Additionally, our gaming machine and table product sales largely depend on our customers’ liquidity and operating results, which has negatively impacted the replacement cycle and demand for gaming machines, table products and opportunities from new or expanded markets. Further, we have granted customer concessions for a portion of the time for which such customers’ operations were impacted by closures or quarantines. Also, based on historical gaming customers’ orders and our manufacturing capacity, a substantial portion of gaming machine sales are fulfilled in the third month of each quarter. Since March when the COVID-19 disruptions became widespread, gaming machine sales revenues have been and continue to be particularly negatively impacted. We believe this negative trend could reduce the capital expenditures of casino operators and continue to lengthen the replacement cycles of their existing gaming machines.

Unfavorable economic conditions caused by COVID-19 could continue to impact the timing of cash receipts from our Gaming customers. In addition, unfavorable economic conditions have caused, and could continue to cause, some of our Gaming customers to temporarily close gaming venues or ultimately declare bankruptcy, which would adversely affect our business. In recent years, our Gaming business has expanded the use of extended payment term financing for gaming machine

purchases primarily in the LATAM region, and we expect to continue to provide a higher level of extended payment term financing in this business until demand from our customers for such financings abates or our business model changes. These financing arrangements may increase our collection risk, and if customers are not able to pay us, whether as a result of financial difficulties, bankruptcy or otherwise, we may incur provisions for bad debt related to our inability to collect certain receivables. In addition, both extended payment term financing and operating leases result in a delay in our receipt of cash, which reduces our cash balance, liquidity and financial flexibility to respond to changing economic events. Unfavorable economic conditions may also result in volatility in the credit and equity markets. The difficulty or inability of our customers to generate or obtain adequate levels of capital to finance their ongoing operations may reduce their ability to purchase our products and services. Refer to Note 5 for international locations with significant concentrations of our receivables with terms longer than one year.

We increased our allowance for credit losses by $12 million and $40 million for the three and six month periods ended June 30, 2020, respectively. These increases were primarily related to Gaming customers in LATAM as those customers were particularly affected by COVID-19 closures of gaming operations establishments. In addition, customers in this region expect and have often been granted extended payment terms. As described above, our customers in LATAM have been and are expected to continue to be affected by the COVID-19-related closures of gaming operations establishments and the resulting impact on both their specific financial situations and the general macroeconomic environments in which they operate.

During the three and six months ended June 30, 2020, we recorded $21 million and $30 million, respectively, in inventory valuation charges (recorded in cost of product sales) related to inventory in our Gaming business segment primarily due to the COVID-19 disruption impacting future demand combined with a reassessment of our Gaming product strategy. Our new Gaming leadership team brought in late in the first quarter of 2020 began to set a new strategic plan for the Gaming business late in the second quarter of 2020. This new strategic plan includes revising product roadmaps and an assessment of how many and which platforms we will support, when we end service on legacy platforms and when we stop selling on such platforms in conjunction with new product launches. This new approach, combined with the rapid demand reduction that took place in the second quarter largely as a result of the COVID-19 disruptions, required us to reassess our inventory valuation, including whether we had excess or obsolete inventory based on the new strategic plan and related demand. In addition, the continued closures in the LATAM region make it difficult to execute our previous strategy of shipping legacy platforms into that market. The combination of these factors led to the $21 million inventory valuation charge recognized in the three months ended June 30, 2020. Our policy is to continue to review and assess these and other factors, especially during the COVID-19 disruptions, and if such factors or our outlook changes, we record adjustments to the valuation of inventory.

Our Lottery business segment continues to be negatively impacted primarily as a result of lower foot traffic and reduced discretionary spending by end players, coupled with international retail establishments that were temporarily closed and began to re-open during the second quarter of 2020. Lottery sales were down meaningfully early in the second quarter as a result of the pandemic, but have since largely recovered in the U.S. and we have also seen a strong recovery in international markets.

The temporary closure of gaming operations, disruptions to lottery operations, travel restrictions, cancellation of sporting events, lower disposable incomes of consumers and the adverse impact on our casino and gaming customers’ liquidity and financial results caused by the COVID-19 pandemic, had and continues to have an adverse effect on our results of operations, cash flows and financial condition for the first half of 2020 and into the second half of 2020 and potentially beyond.

Although gaming and lottery operations have begun to re-open, with encouraging early performance results, we are unable to determine the ultimate magnitude and the length of time that the pandemic disruptions will continue to impact our results of operations, cash flows and financial condition, which will depend, among other factors, on the currently unknowable duration of the COVID-19 pandemic, the impact of governmental regulations and actions that might continue to be imposed in response to the pandemic, change in customer behaviors, social distancing measures, decreased gaming establishments operating capacity, high unemployment rates, and the pace of overall recovery of gaming and lottery operations globally. We implemented a number of measures to reduce operating costs and conserve liquidity. These include measures such as: reductions in both salaries and workforce, including temporary voluntary 50% or greater reductions in salaries by our executive leadership team (100% as to our President and Chief Executive Officer until June 30, 2020 and 50% from July 1, 2020 to July 31, 2020), unpaid employee furloughs, temporary elimination of 401(k) matching among other compensation and benefits reductions and deferral of all non-essential operating and capital expenditures. We have also engaged with our vendors to negotiate concessions on the timing and amount of payments to preserve liquidity through the COVID-19 disruption period. We estimate that these measures resulted in excess of $150 million in cost savings in the second quarter of 2020. Additionally, reduced capital expenditures and the above measures are expected to result in an overall lower future cost structure.

Impact on Liquidity

On May 8, 2020, SGC and the requisite lenders under SGI’s revolving credit facility entered into the Credit Agreement Amendment that, among other things, implements a financial covenant relief period through the end of the first quarter ending March 31, 2021 (the “Covenant Relief Period”), as a result of which SGI is not required to maintain compliance with the

consolidated net first lien leverage ratio covenant during the Covenant Relief Period, imposes a minimum liquidity requirement (excluding SciPlay) of at least $275 million during the Covenant Relief Period, and further restricts our ability to incur indebtedness and liens, make restricted payments and investments and prepay junior indebtedness during the Covenant Relief Period, subject to certain exceptions and further subject, in some instances, to maintaining minimum liquidity (excluding SciPlay) of at least $400 million. See Note 1 for additional details regarding the Credit Agreement Amendment.

On April 9, 2020, we borrowed $480 million under SGI’s revolving credit facility. As of June 30, 2020, our total available liquidity (excluding our SciPlay business segment) was $637 million. We continue to actively manage our daily cash flows and continue to evaluate additional measures that will reduce operating costs and conserve cash. We believe that, based on our current projections, we will have sufficient liquidity for a period of at least one year.

Segments

We report our operations in four business segments - Gaming, Lottery, SciPlay and Digital - representing our different products and services. See “- Business Segments 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 remeasurement 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														Six Months Ended
	June 30,														June 30,
	2020						2019						2020				2019
($ in millions)	Revenue		% Consolidated Revenue		Revenue		% Consolidated Revenue		Revenue		% Consolidated Revenue		Revenue		% Consolidated Revenue
Foreign Currency:
British Pound Sterling	$	60	11	%	$	78	9	%	$	145	11	%	$	163	10	%
Euro	46		9	%	61		7	%	109		9	%	117		7	%

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 Part II, Item 1A in this Quarterly Report on Form 10-Q and Part I, Item 1A in our 2019 10-K, “Consolidated Results — Other Factors Affecting 2019 and 2018 Net Loss Comparability— Foreign exchange” under Item 7 in our 2019 10-K and Item 3 “Quantitative and Qualitative Disclosures about Market Risk” in this Quarterly Report on Form 10-Q.

CONSOLIDATED RESULTS


	Three Months Ended June 30,						Variance						Six Months Ended June 30,				Variance
($ in millions)	2020		2019		2020 vs. 2019						2020		2019		2020 vs. 2019
Total revenue	$	539	$	845	$	(306)	(36)	%	$	1,264	$	1,682	$	(418)	(25)	%
Total operating expenses	595		717		(122)		(17)	%	1,352		1,431		(79)		(6)	%
Operating (loss) income	(56)		128		(184)		(144)	%	(88)		251		(339)		(135)	%
Net loss before income taxes	(196)		(68)		(128)		(188)	%	(347)		(88)		(259)		(294)	%
Net loss	(198)		(75)		(123)		(164)	%	(353)		(99)		(254)		(257)	%
Net loss attributable to SGC	$	(203)	$	(77)	$	(126)	(164)	%	$	(362)	$	(101)	$	(261)	(258)	%

Revenue

Consolidated Revenue by Business Segment

(in millions)

Three Months Ended June 30, 2020 and 2019

Six Months Ended June 30, 2020 and 2019

As described in the “Recent Events – Impact of COVID-19” section above, our total revenue for both the three and six months, specifically revenues for the Gaming business segment, were adversely impacted by COVID-19 disruptions. Gaming revenue for the six months ended June 30, 2020 also reflects lower system revenues due to completion of certain Canadian systems launches that we benefited from in the prior year comparable period, while Lottery revenue for the six months ended June 30, 2020 reflects approximately $14 million in lower equipment sales.

Operating Expenses


	Three Months Ended June 30,						Variance						Six Months Ended June 30,				Variance
($ in millions)	2020		2019		2020 vs. 2019						2020		2019		2020 vs. 2019
Operating expenses:
Cost of services	$	126	$	135	$	(9)	(7)	%	$	256	$	268	$	(12)	(4)	%
Cost of product sales	69		111		(42)		(38)	%	160		218		(58)		(27)	%
Cost of instant products	62		75		(13)		(17)	%	135		142		(7)		(5)	%
SG&A	151		174		(23)		(13)	%	349		360		(11)		(3)	%
R&D	31		46		(15)		(33)	%	82		95		(13)		(14)	%
D&A	140		170		(30)		(18)	%	278		335		(57)		(17)	%
Goodwill impairment	—		—		—		— %		54		—		54		— %
Restructuring and other	16		6		10		167	%	38		13		25		192	%

Total operating expenses	$	595	$	717	$	(122)	(17)	%	$	1,352	$	1,431	$	(79)	(6)	%

Cost of Revenue

Cost of revenue for the three and six months ended June 30, 2020 decreased primarily as a result of lower Gaming and Lottery cost of revenue correlated with a decrease in revenue due to the COVID-19 disruptions described above and lower equipment sales for Lottery business segment. Additionally, the three and six months ended June 30, 2020 Cost of product sales includes approximately $21 million and $30 million, respectively, in Gaming segment inventory valuation charges, due to a decrease in demand for certain platforms as we believe that our customers will continue to extend replacement cycles to preserve their liquidity following their return to full operations combined with a reassessment of our Gaming product strategy,

which commenced during the second quarter of 2020 by the new Gaming business segment leadership and is expected to continue into the second half of the year (see Note 6).

SG&A and R&D

SG&A and R&D decreased for both comparable periods primarily due to company-wide austerity measures in response to the COVID-19 disruptions described above, which resulted in lower SG&A compensation and benefit expenses of $29 million and $41 million and lower R&D compensation and benefit expense of $11 million and $5 million for the three and six month comparable periods, respectively. The decreases in SG&A for both comparable periods were partially offset by increases of $12 million and $40 million in Gaming business segment allowance for credit losses in the three and six months ended June 30, 2020, respectively that reflect forecasted credit deterioration due to the COVID-19 disruptions generally and credit weakness in our Latin America receivables portfolio specifically (see Note 5).

D&A

The decrease in D&A for the three and six months ended June 30, 2020 was primarily due to certain Gaming intangible assets and software becoming fully amortized during 2019.

Goodwill Impairment

Goodwill impairment was related to our legacy U.K. Gaming reporting unit, which was recorded during the first quarter of 2020 (see Note 8).

Restructuring and Other

The increase in restructuring and other for the three and six months ended June 30, 2020 is primarily due to severance and related charges associated with COVID-19 disruptions (see Note 4).

Other Factors Affecting Net Loss Attributable to SGC


	Three Months Ended June 30,						Six Months Ended June 30,			Factors Affecting Net Loss Attributable to SGC
(in millions)	2020		2019		2020		2019		2020 vs. 2019
Interest expense	$	(124)	$	(147)	$	(248)	$	(301)	The decreases in interest expense for the three and six months ended June 30, 2020 reflect the favorable impact of 2019 refinancing activities.
Loss on debt financing transactions	—		(60)		—		(60)		Loss on debt financing transactions consummated during the second quarter of 2019 includes a $50 million charge associated with premiums paid to redeem $1,000 million of the 2022 Unsecured Notes (see Note 11).
(Loss) gain on remeasurement of debt	(12)		(3)		(2)		2		(Losses) and gains are attributable to remeasurement of the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes and reflect changes in the Euro vs. the U.S. Dollar foreign exchange rates between the comparable periods.
Income tax expense	(2)		(7)		(6)		(11)		The decrease is primarily due to the overall mix of worldwide income/(loss).

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 (for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019)

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 licensed betting offices, 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 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, proprietary table game 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 2019 10-K.

Current Year Update

See the “Recent Events – Impact of COVID-19” section above for a description of the COVID-19 impact on our Gaming business segment, which had an adverse effect on our results of operations and cash flows in the first half of 2020 and into the second half of 2020 and potentially beyond. In addition to the adverse effect of COVID-19, we anticipate challenges in our gaming operations as corporate consolidations continue and decline in our gaming systems products and services due to certain large Canadian contracts that were completed in 2019.

Results of Operations and Key Performance Indicators


Three Months Ended June 30, 2020 and 2019						Six Months Ended June 30, 2020 and 2019


1 - The three and six months ended June 30, 2019 includes $3 million and $10 million, respectively, in intellectual property royalties paid by the SciPlay business segment, which are no longer being paid as of May 7, 2019 in connection with the IP License Agreement described in Note 1 of our 2019 10-K.

Revenue


	Three Months Ended June 30,						Variance						Six Months Ended June 30,				Variance
($ in millions)	2020		2019		2020 vs. 2019						2020		2019		2020 vs. 2019
Revenue:
Gaming operations	$	16	$	150	$	(134)	(89)	%	$	135	$	302	$	(167)	(55)	%
Gaming machine sales	53		148		(95)		(64)	%	145		284		(139)		(49)	%
Gaming systems	17		67		(50)		(75)	%	72		141		(69)		(49)	%
Table products	5		62		(57)		(92)	%	57		122		(65)		(53)	%
Total revenue	$	91	$	427	$	(336)	(79)	%	$	409	$	849	$	(440)	(52)	%

F/X impact on revenue	$	(1)	$	(4)	$	3	(75)	%	$	(2)	$	(8)	$	6	(75)	%

Gaming KPIs:
U.S. and Canada units:
Installed base at period end	30,324		32,056		(1,732)		(5)	%	30,324		32,056		(1,732)		(5)	%
Average daily revenue per unit	$	4.45	$	38.98	$	(34.53)	(89)	%	$	18.17	$	38.71	$	(20.54)	(53)	%

International units⁽¹⁾:
Installed base at period end	34,333		34,112		221		1	%	34,333		34,112		221		1	%
Average daily revenue per unit	$	0.83	$	11.24	$	(10.41)	(93)	%	$	4.53	$	11.33	$	(6.8)	(60)	%

Gaming machine unit sales:
U.S. and Canada new unit shipments	1,431		4,671		(3,240)		(69)	%	4,321		9,472		(5,151)		(54)	%
International new unit shipments	2,917		2,730		187		7	%	4,920		4,813		107		2	%
Total new unit shipments	4,348		7,401		(3,053)		(41)	%	9,241		14,285		(5,044)		(35)	%
Average sales price per new unit	$	11,137	$	17,436	$	(6,299)	(36)	%	$	13,644	$	17,288	$	(3,644)	(21)	%
(1) Excludes the impact of game content licensing revenue.

All of our Gaming revenue was negatively impacted by the COVID-19 disruptions that resulted in temporary closures and/or reduced operating capacity of a substantial number of gaming operations establishments in various jurisdictions globally, as described in the “Recent Events – Impact of COVID-19” section above. Although gaming establishments began to reopen in June, and have seen strong initial demand, new social distancing requirements that were implemented in many jurisdictions (including reduced floor occupation to 50%, table play customer limitations and reduction of slot machines available for play) have had and are expected to continue to have a negative impact on our Gaming revenue until casino operators are able to return to normal operations.

Gaming Operations

Gaming operations revenue decreased for both comparable periods primarily due to the COVID-19 disruptions described above along with a 1,732-unit decrease in the U.S. and Canada ending installed base and decreases in both domestic and International average daily revenue, which was partially offset by a 221-unit increase in the International ending installed base.

Gaming Machine Sales

Gaming machine sales revenue decreased for both comparable periods primarily due to the impact of COVID-19 as described above driving lower unit shipments primarily in replacement unit sales for both comparable periods, coupled with decreases in the average sales price per unit reflecting a less favorable mix of gaming machine sales. The following table summarizes Gaming machine sales changes:


	Three Months Ended June 30,			Variance				Six Months Ended June 30,			Variance
	2020	2019	2020 vs. 2019				2020	2019	2020 vs. 2019
U.S. and Canada unit shipments:
Replacement units	640	3,443	(2,803)	(81)	%	2,384	6,637	(4,253)	(64)	%
Casino opening and expansion units	791	1,228	(437)	(36)	%	1,937	2,835	(898)	(32)	%
Total unit shipments	1,431	4,671	(3,240)	(69)	%	4,321	9,472	(5,151)	(54)	%

International unit shipments:
Replacement units	2,532	2,674	(142)	(5)	%	4,359	4,757	(398)	(8)	%
Casino opening and expansion units	385	56	329	588	%	561	56	505	902	%
Total unit shipments	2,917	2,730	187	7	%	4,920	4,813	107	2	%

Operating Expenses and AEBITDA

The decrease in operating expenses and decrease in AEBITDA and AEBITDA as a percentage of revenue (“AEBITDA margin”) for both comparable periods are primarily attributable to the COVID-19 disruptions described in the “Recent Events – Impact of COVID-19” section.

The decrease in operating expenses for both comparable periods is primarily due to lower cost of revenue correlated with the decrease in revenue partially offset by: (1) $12 million and $40 million increases in allowance for credit losses, respectively, which reflect actual and forecasted credit deterioration primarily due to the COVID-19 disruptions and in particular the worsening of the expected credit position in our Latin America receivables portfolio, (2) $21 million and $30 million increase of inventory valuation charges to cost of products, respectively (as described above), and (3) $5 million and $15 million increase in restructuring and other charges, respectively. Additionally, the six months ended June 30, 2020 period includes a $54 million goodwill impairment charge that was recognized in the first quarter of 2020.

AEBITDA margin for the three and six-month comparable periods decreased by 84 and 35 percentage points, respectively, to (34)% and 16%, respectively.

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 our point-of-sale 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 2019 10-K.

Current Year Update

See “Recent Events – Impact of COVID-19” section above for a description of the COVID-19 impact on our Lottery business segment, which had and could have an adverse effect on our results of operations and cash flows continuing into the second half of 2020 and potentially beyond. In addition to the adverse effect of COVID-19, we believe we will continue to face intense price-based competition in our Lottery business in 2020 and potentially beyond. 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 requests for proposals, 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


Three Months Ended June 30, 2020 and 2019						Six Months Ended June 30, 2020 and 2019

Revenue


	Three Months Ended June 30,						Variance						Six Months Ended June 30,				Variance
($ in millions)	2020		2019		2020 vs. 2019						2020		2019		2020 vs. 2019
Revenue:
Instant products	$	133	$	150	$	(17)	(11)	%	$	269	$	290	$	(21)	(7)	%
Lottery systems	76		81		(5)		(6)	%	152		168		(16)		(10)	%
Total revenue	$	209	$	231	$	(22)	(10)	%	$	421	$	458	$	(37)	(8)	%

F/X impact on revenue	$	(2)	$	(4)	$	2	(50)	%	$	(3)	$	(6)	$	3	(50)	%

The decrease in instant products revenue for both comparable periods is primarily due to the negative impact from COVID-19 disruptions, which resulted in a lower level of lottery ticket sales. The decrease in lottery systems revenue for the comparable periods is primarily due to COVID-19 disruptions and higher 2019 lottery systems equipment sales, which were $5 million and $14 million higher for the three and six month comparable periods, respectively.

Operating Expenses and AEBITDA

The decrease in operating expenses and decrease in AEBITDA for both comparable periods and AEBITDA margin for the six month comparable periods are correlated with the decrease of lottery ticket retail sales described above and the impact COVID-19 disruptions had on our joint ventures (particularly LNS), coupled with lower operating expenses due to implemented austerity measures. As a result of the above drivers, AEBITDA margin for the three month comparable period improved by 1 percentage point, while AEBITDA margin for the six month comparable period decreased by 3 percentage points. AEBITDA margin decrease for the six month comparable period is primarily due to lower JV EBITDA, contributing 5 percentage points to the overall decrease, more than offsetting the impact of lower operating expenses.

SCIPLAY

We generate revenue in our SciPlay business segment from the sale of virtual coins, chips and bingo cards, which players can use to play casino-style slot games, table games and bingo games (i.e., spin in the case of casino-style slot games, bet in the case of table games and use of bingo cards in the case of bingo games). We distribute our games through various global social web and mobile platforms such as Facebook, Apple, Google and Amazon, with some of our games available on Microsoft and other web and mobile platforms. The games are primarily our WMS^®, Bally^®, Barcrest^®, and SHFL^® branded games. We offer both third-party branded games and original content.

Our apps include Jackpot Party^® Casino, Gold Fish^® Casino, Quick Hit^® Slots, Hot Shot Casino^®, Bingo Showdown^TM, 88 Fortunes^®, MONOPOLY Slots, and recently added Backgammon and Solitaire social games as a part of Come2Play acquisition on various platforms referenced above.

Current Year Update

While the COVID-19 disruptions did not negatively affect SciPlay’s results for both comparable periods (see the “Recent Events – Impact of COVID-19” section above), sustained consumer unease, lower discretionary spending and shelter-in-place orders may impact SciPlay’s results of operations in the second half of 2020 and potentially beyond. SciPlay experienced an increase in nearly all key performance indicators and revenue beginning in March 2020 and continuing throughout the three months ended June 30, 2020, which we believe is partially due to the stay at home measures and increased player free time. We believe the increase in paying players is also a result of significant game enhancements that have enabled us to attract and retain new players. The new players are highly engaged, and could allow us to continue to drive increases in our key performance indicators, as they continue to be active paying players following the easing of COVID-19 restrictions. Many of SciPlay’s current and potential players may have significantly more free time to play games, however they may also experience sustained consumer unease and have lower discretionary income.

During the first half of 2020, we deployed significant updates across a number of our portfolio games, and we continued testing in certain international markets. We expect to deploy further updates to games in future quarters.

On June 22, 2020, SciPlay completed the acquisition of the privately held mobile and social game company Come2Play (see Note 1), which will enable SciPlay to expand and diversify its social games. As a result of this acquisition we now offer Backgammon and Solitaire social games targeted towards casual game players on some of the same platforms in which we currently offer our existing games.

Results of Operations and Key Performance Indicators


Three Months Ended June 30, 2020 and 2019						Six Months Ended June 30, 2020 and 2019


1 - The three and six months ended June 30, 2019 include charges of $3 million and $10 million, respectively for intellectual property royalties paid to the Gaming business segment, which are no longer being paid as of May 7, 2019 in connection with the IP License Agreement described in Note 1 of our 2019 10-K.

Revenue


	Three Months Ended June 30,								Variance								Six Months Ended June 30,				Variance
($ in millions)	2020			2019			2020 vs. 2019							2020			2019		2020 vs. 2019
Revenue:
Mobile	$	144		$	98		$	46	47	%	$	245		$	195		$	50	26	%
Web and other	22			20			2		10	%	39			41			(2)		(5)	%
Total revenue	$	166		$	118		$	48	41	%	$	284		$	236		$	48	20	%



SciPlay KPIs:

Mobile Penetration⁽¹⁾	87		%	83		%	4pp		nm		86		%	83		%	3pp		nm
Average MAU⁽²⁾	8.1			8.1			—		—	%	7.8			8.2			(0.4)		(5)	%
Average DAU⁽³⁾	2.7			2.7			—		—	%	2.7			2.7			—		—	%
ARPDAU⁽⁴⁾	$	0.67		$	0.48		$	0.19	40	%	$	0.58		$	0.48		$	0.10	21	%
nm = not meaningful. pp = percentage points. (1) Mobile penetration is defined as the percentage of business to consumer SciPlay gaming revenue generated from mobile platforms. (2) MAU = Monthly Active Users is a count of visitors to our sites during a month. An individual who plays multiple games or from multiple devices may, in certain circumstances, be counted more than once. However, we use third-party data to limit the occurrence of multiple counting. (3) DAU = Daily Active Users is a count of visitors to our sites during a day. An individual who plays multiple games or from multiple devices may, in certain circumstances, be counted more than once. However, we use third-party data to limit the occurrence of multiple counting. (4) ARPDAU = Average 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.

Mobile platform revenue increased for both comparable periods primarily due to increased player engagement as a result of the stay at home measures across North America and other countries and the ongoing popularity of Jackpot Party Casino, Quick Hits Slots, Gold Fish Casino, and MONOPOLY Slots. Web platform revenues increased for the three months ended June 30, 2020 primarily due to the stay at home measure across North America and other countries. For the six months ended June 30, 2020, web platform revenues decreased due to the continued trend of players migrating from web to mobile platforms to play our games.

ARPDAU increased for both comparable periods due to stay at home measures across North America and other countries, introduction of new content and features, and ongoing popularity of our games.

Operating Expenses and AEBITDA

The increase in operating expenses for both comparable periods is primarily due to higher cost of revenue correlated with revenue growth, partially offset by lower IP charges paid to the Gaming business segment, which are reflected in increases in AEBITDA and AEBITDA margin. AEBITDA margin for the three and six month comparable periods increased by 8 and 9, percentage points to 36% and 33%, respectively.

DIGITAL

Our Digital segment provides a comprehensive suite of digital gaming, iLottery and sports betting solutions and services, including digital RMG and sports wagering solutions, distribution platforms, content, products and services. A portion of our Digital revenue consists of professional services related to highly customized 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 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

•While the impact of the COVID-19 disruptions was not material on our first half 2020 revenue, closure of gaming facilities, cancellations of sporting events, consumer unease and lower discretionary spending did have a negative impact on our customers’ operations and consequently our results of operations for the three and six months ended June 30, 2020, as a significant portion of our sports revenue is based on the volume of wagers generated by our customers.

•We continue to expand our customer base and capitalize on both iGaming and sports opportunities in the U.S. by leveraging our industry leading platforms, content and solutions.

Results of Operations and Key Performance Indicators


Three Months Ended June 30, 2020 and 2019						Six Months Ended June 30, 2020 and 2019

Revenue


	Three Months Ended June 30,						Variance						Six Months Ended June 30,				Variance
($ in millions)	2020		2019		2020 vs. 2019						2020		2019		2020 vs. 2019
Revenue:
Sports and platform	$	26	$	26	$	—	—	%	$	64	$	56	$	8	14	%
Gaming and other	47		43		4		9	%	86		83		3		4	%
Total revenue	$	73	$	69	$	4	6	%	$	150	$	139	$	11	8	%

F/X impact on revenue	$	(2)	$	(4)	$	2	(50)	%	$	(2)	$	(8)	$	6	(75)	%

Gaming KPI:

Wagers processed through OGS (in billions)	$	14.0	$	9.3	$	4.7	51	%	$	23.9	$	18.2	$	5.7	31	%

Sports and platform revenue for the three months ended June 30, 2020 remained relatively flat while Gaming and other revenue increased as a result of higher online gaming revenue. The increase in Sports and platform revenue and Digital AEBITDA for the six months ended June 30, 2020 was primarily due to a cancellation fee associated with certain legacy agreements that were modified in the first quarter of 2020 and to a lesser extent lower compensation costs as Digital continues to execute on scaling its business and growth in Gaming and other revenue. AEBITDA margin for the three and six months increased by 10 and 11 percentage points to 27% and 29%, respectively.

RECENTLY ISSUED ACCOUNTING GUIDANCE

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

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 2019 10-K.

Goodwill Impairment Assessment Update

As disclosed in our 2019 10-K, goodwill is tested for impairment at the reporting unit level annually on October 1 and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business

climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of a reporting unit or a sustained decrease in stock price.

As described in the “Recent Events – Impact of COVID-19” section above, the COVID-19 pandemic has had and continues to have an adverse effect on our results of operations, cash flows and financial condition and has resulted in significant volatility in global markets, including our stock price. While we do not believe these trends are long lasting nor that the magnitude of the decrease in the fair value of our debt or the volatility of our stock price consistent with market conditions is necessarily indicative of the fair values of our reporting units decreasing below their carrying values, we are unable to determine the ultimate magnitude and the length of time that these disruptions will continue to impact our future results of operations, cash flows and financial condition.

We assessed our estimated fair values of the reporting units as of October 1, 2019 (as of March 31, 2020 for our legacy U.K. Gaming reporting unit) compared to the total enterprise value using the average stock price and the fair value of our debt as of June 30, 2020, and concluded that such analysis does not indicate that estimated fair values for any of our reporting units more likely than not decreased below those reporting units’ carrying values. Accordingly, we determined the COVID-19 disruptions do not trigger any impairments at June 30, 2020 for any reporting units; however, this could change in the future depending on prevailing conditions and changes in our current estimates of the timing and magnitude of the economic recovery following the COVID-19 disruptions.

As described in Note 8, we determined that our legacy U.K. Gaming reporting unit’s goodwill was impaired during the first quarter of 2020. During the first quarter of 2020, we determined that the COVID-19 disruptions impacting our Gaming segment reporting units necessitated a supplemental analysis of the underlying goodwill carrying amounts to determine whether a full quantitative assessment was warranted. We concluded the impact of the COVID-19 disruptions on our reporting units, other than our legacy U.K. Gaming reporting unit, did not reach a level that triggered a quantitative test as there was significant cushion calculated as of our latest full quantitative valuation in the 2019 annual impairment test and the supplemental sensitivity analysis described below corroborated that there continued to be sufficient cushion as of March 31, 2020. Our second quarter 2020 analysis concluded that it is not more likely than not that an impairment exists in the reporting units in our Gaming segment.

The supplemental analysis of the likelihood of impairment in the Gaming segment reporting units performed in the first quarter of 2020 leveraged the full quantitative valuations prepared in the fourth quarter of 2019 as the base, and included a sensitivity analysis eliminating all cash flows from 2020 and reduced 2021 cash flows by 50%, with operations returning to a normal level in 2022. This sensitivity analysis indicated a fair value cushion exceeding 20% in each of our Gaming segment reporting units other than our legacy U.K. Gaming reporting unit. As a part of our second quarter 2020 goodwill analysis, we determined that it is not more likely than not that an impairment exists in the reporting units in our Gaming segment. We also believe there to be an elevated risk of goodwill impairment for the Gaming segment reporting units if the adverse impact of the COVID-19 disruptions or overall recovery for these reporting units sustains over an extended period of time.

The following table summarizes goodwill balances and cushions based on the latest annual goodwill test for all of our Gaming segment reporting units other than our legacy U.K. Gaming reporting unit:


Reporting Unit:	June 30, 2020 Goodwill Balance (in millions)		FY 2019 Goodwill Testing Percentage Cushion
SG Gaming	$	1,081	51	%
Casino Management Systems	556		49	%
Table Products	635		102	%

As disclosed in Note 8, based on the results of our first quarter 2020 interim goodwill impairment test for our legacy U.K. Gaming reporting unit, we recorded a partial goodwill impairment charge of $54 million. We estimated the fair value of the legacy U.K. Gaming reporting unit using both an income approach that analyzed a range of projected discounted cash flows and a market approach that considered comparable public companies.

Performing a discounted cash flow analysis requires the use of significant judgments, including: (1) estimation of future cash flows dependent on internal forecasts, (2) estimation of the long-term rate of growth for our business, (3) the relative risk of achieving those cash flows, and (4) determination of our weighted average cost of capital, all of which are subject to overall uncertainty about the magnitude and duration of the COVID-19 disruptions. When using the market approach, we make judgments about the comparability of publicly traded companies engaged in similar businesses or public transaction information for similar businesses. We base our judgments on factors such as size, growth rates, profitability, risk, and return on investment. We also make judgments when adjusting market multiples of revenue, and earnings for these companies to reflect

their relative similarity to our business. Refer to Note 8 for key estimates and assumptions used in the first quarter 2020 discounted cash flow analysis for our legacy U.K. Gaming reporting unit.

The remaining Goodwill balance for our legacy U.K. Gaming reporting unit as of June 30, 2020 was $115 million. Any future adverse changes in projections for future operating results or other key assumptions, such as projected revenue, profit margin, capital expenditures or cash flows associated with investments included in our estimation of fair value for our legacy U.K. Gaming reporting unit could lead to additional future goodwill impairments, which could be material.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in, first-out or weighted moving average method. Our inventory primarily consists of gaming machines and table products for sale and related parts, instant products for our Participation and PPU arrangements. We review our inventory levels each reporting period and adjust the value of our inventory to the extent we determine that inventory cost is in excess of its net realizable value. To estimate obsolete and excess inventory, we consider a number of qualitative and quantitative factors, including product strategy and product lifecycles, estimates of future demand, current pricing, historical sales trends, market trends, and economic conditions. Any changes in these factors could result in material inventory charges which would increase our cost of products and decrease our gross margin, and such charges could be material.

During the three and six months ended June 30, 2020, we recorded $21 million and $30 million, respectively, in charges related to inventory in our Gaming business segment. These charges are primarily due to the COVID-19 disruption impacting future demand combined with a reassessment of our Gaming products strategy, which have commenced during the second quarter of 2020 by the new Gaming business segment leadership and is expected to continue into the second half of the year. The total Gaming business segment net inventory as of June 30, 2020 was $157 million.

Other than our update to the goodwill impairment assessment and inventory valuation above, there have been no significant changes in our critical accounting estimate policies or the application or the results of 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 2019 10-K.

LIQUIDITY, CAPITAL RESOURCES AND WORKING CAPITAL

Cash and Available Liquidity

As of June 30, 2020, our principal sources of liquidity, other than cash flows provided by operating activities, were cash and cash equivalents, including SciPlay cash and cash equivalents (for our SciPlay business segment), and amounts available under the SciPlay Revolver (for our SciPlay business segment) discussed below under “Credit Agreement and Other Debt”.

Cash and Available Revolver Capacity


(in millions)	Cash and cash equivalents		Revolver capacity		Revolver capacity drawn or committed to letters of credit		Total
SGC (excluding SciPlay)	$	634	$	650	$	(647)	$	637
SciPlay	156		150		—		306
Total as of June 30, 2020	$	790	$	800	$	(647)	$	943

SGC (excluding SciPlay)	$	202	$	650	$	(207)	$	645
SciPlay	111		150		—		261
Total as of December 31, 2019	$	313	$	800	$	(207)	$	906

On April 9, 2020, we borrowed $480 million under SGI’s revolving credit facility, which was substantially all of the remaining availability thereunder.

On May 8, 2020, the Company and the requisite lenders under SGI’s revolving credit facility entered into the Credit Agreement Amendment that, among other things, implements a financial covenant relief period through the end of the first quarter ending March 31, 2021 (the “Covenant Relief Period”), as a result of which SGI is not required to maintain compliance

with the consolidated net first lien leverage ratio covenant during the Covenant Relief Period, imposes a minimum liquidity requirement (excluding SciPlay) of at least $275 million during the Covenant Relief Period, and further restricts our ability to incur indebtedness and liens, make restricted payments and investments and prepay junior indebtedness during the Covenant Relief Period, subject to certain exceptions and further subject in some instances to maintaining minimum liquidity (excluding SciPlay) of at least $400 million. See Note 1 for additional details regarding the Credit Agreement Amendment.

On July 1, 2020, we completed the issuance of $550 million in aggregate principal amount of 8.625% senior unsecured notes due 2025 in a private offering and on July 17, 2020 we redeemed all $341 million of our outstanding 2021 Notes (see above and Note 11).

Total cash held by our foreign subsidiaries was $150 million and $112 million as of June 30, 2020 and December 31, 2019, respectively. 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.

Our Gaming operations 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 “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q and under Part I, Item 1A in our 2019 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 June 30, 2020 our outstanding performance bonds totaled $257 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 “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q and under Part I, Item 1A in our 2019 10-K.

As described in Note 1 in our 2019 10-K, on May 7, 2019 we received $312 million in net proceeds from the SciPlay offering (excluding $30 million used by SciPlay to pay the initial public offering related expenses with the balance being retained by SciPlay for general corporate purposes). The ability of SciPlay to pay dividends or make other distributions to us, or to amend the agreements between SciPlay and us and our other subsidiaries, may be limited by the terms of the SciPlay Revolver or the terms of any future indebtedness that SciPlay may incur. For additional details see “Liquidity, Capital Resources and Working Capital” section in our 2019 10-K.

Cash Flow Summary


	Six Months Ended June 30,						Variance
($ in millions)	2020		2019		2020 vs. 2019
Net cash provided by operating activities	$	172	$	262	$	(90)
Net cash used in investing activities	(84)		(115)		31
Net cash provided by financing activities	402		57		345
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1)		1		(2)
Increase in cash, cash equivalents and restricted cash	$	489	$	205	$	284

Cash Flows from Operating Activities


	Six Months Ended June 30,						Variance
($ in millions)	2020		2019		2020 vs. 2019
Net loss	$	(353)	$	(99)	$	(254)
Adjustments to reconcile net loss to cash provided by operating activities	460		440		20

Changes in working capital accounts, net of effects of acquisitions	57		(86)		143
Changes in deferred income taxes and other	8		7		1

Net cash provided by operating activities decreased primarily due to a $234 million decrease in earnings (after adjustments to reconcile net loss to cash flows from operations) due to the impacts of the COVID-19 disruptions, which was

partially offset by a $144 million favorable change in working capital accounts and other. Changes in working capital accounts for the six months ended June 30, 2020 were primarily driven by lower billings after the closures as a result of the COVID-19 pandemic, collections on pre-COVID-19 receivables and disciplined cash flow management in conjunction with our efforts to reduce operating costs, achieve better vendor terms and preserve liquidity.

Cash Flows from Investing Activities

Net cash used in investing activities decreased primarily due to lower capital expenditures and the proceeds from the sale of certain properties in Chicago, which was partially offset by SciPlay’s acquisition of Come2Play. 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 provided by financing activities increased primarily due to the second quarter 2020 $480 million draw on SGI’s revolving credit facility, while the prior year comparable period included $342 million in proceeds from the sale of SciPlay common stock, which were partially offset by $253 million in net payments on long-term debt and $23 million in debt issuance, deferred financing and offering costs.

Summarized Financial Information of the Obligor Group

We conduct substantially all of our business through our U.S. and foreign subsidiaries. As of June 30, 2020, our obligations under the 2021 Notes, the 2025 Secured Notes, the 2026 Secured Euro Notes, the 2026 Unsecured Euro Notes, the 2026 Unsecured Notes, the 2028 Unsecured Notes, and the 2029 Unsecured Notes were fully and unconditionally and jointly and severally guaranteed by the SGC and the Guarantors subsidiaries other than SGI, of which the 2021 Notes are a registered security. The guarantees of our 2021 Notes, 2025 Secured Notes, 2026 Secured Euro Notes, 2026 Unsecured Euro Notes, 2026 Unsecured Notes, 2028 Unsecured Notes, and 2029 Unsecured 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; and (5) the proper designation of the guarantor as an unrestricted subsidiary pursuant to the indenture governing the respective Notes.

During the first quarter of 2020, the SEC amended the financial disclosure requirements for guarantors and issuers of guaranteed securities registered or being registered as set forth in Rule 3-10 of Regulation S-X. The amendment is effective on January 4, 2021; however, voluntary compliance with the amended rules is permitted in advance of the effective date. We elected to voluntarily comply with the amended regulation effective with our first quarter 2020 Form 10-Q.

In accordance with the amended regulation, the tables below represent the parent company, issuer and guarantor subsidiaries (collectively referred to as the Obligor Group) combined summarized financial information as of June 30, 2020 and December 31, 2019 and for the six and twelve months ended June 30, 2020 and December 31, 2019, respectively. The summarized financial information was derived from the same internal accounting records used to prepare SGC’s consolidated financial statements and are presented on a cost basis. All intercompany balances have been eliminated.


OBLIGOR GROUP SUMMARIZED BALANCE SHEET
	As of
	June 30, 2020		December 31, 2019
Assets:
Current Assets	$	1,094	$	860
Non-current assets⁽¹⁾	3,810		3,941
Total assets	$	4,904	$	4,801
Liabilities:
Current liabilities	$	825	$	529
Non-current liabilities	9,092		9,003
Total liabilities	$	9,917	$	9,532
(1) Includes $2,137 million of Goodwill as of June 30, 2020 and December 31, 2019.


OBLIGOR GROUP SUMMARIZED STATEMENT OF OPERATIONS
	Six months ended June 30, 2020		Year ended December 31, 2019
Revenue	$	535	$	1,688
Cost of services, cost of product sales and cost of instant products⁽¹⁾	250		462
Operating (loss) income	(135)		313
Net loss	(389)		(357)
(1) Excludes D&A.

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 15 and 16 and Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our 2019 10-K and Item 3 below.

Off-Balance Sheet Arrangements

As of June 30, 2020, we did not have any significant off-balance sheet arrangements.

Contractual Obligations

Other than the private offering of $550 million of 2025 Unsecured Notes and redemption of 2021 Notes, both subsequent to June 30, 2020 (see 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 2019 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 June 30, 2020, the face value of long term debt was $9,259 million, including $4,715 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 $47 million. All of our interest rate sensitive financial instruments are held for other than trading purposes.

We currently use 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 15 in our 2019 Form 10-K), we entered into certain cross-currency interest rate swap agreements to achieve more attractive interest rates by effectively converting $460 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 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 with respect to the U.S. Dollar.

As of June 30, 2020, 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 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 June 30, 2020, 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 $65 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.

There were no changes in our internal control over financial reporting during the three months ended June 30, 2020 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 16 in this Quarterly Report on Form 10-Q and Note 21 in our 2019 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 2019 10-K, except as noted below.

The recent COVID-19 pandemic and similar health epidemics, contagious disease outbreaks and public perception thereof, significantly disrupted our operations and adversely affected our business, results of operations, cash flows or financial condition.

The recent outbreak of a novel strain of coronavirus, COVID-19, and public perception thereof, have contributed to consumer unease and decreased discretionary spending and consumer travel, which have had, and will continue to have, a negative effect on us, especially in our Gaming and Lottery businesses. Other future health epidemics or contagious disease outbreaks could do the same. We cannot predict the ultimate effects that the outbreak of COVID-19, any resulting unfavorable social, political and economic conditions and decrease in discretionary spending or travel would have on us, as they would be expected to impact our customers, suppliers and business partners in varied ways in different communities. In our Gaming business, especially our Participation gaming business, our Digital business, and our Lottery business, our revenue is largely driven by players’ disposable incomes and level of gaming activity and lottery purchases. The recent outbreak of COVID-19 has led to economic and financial uncertainty for many consumers and has reduced, and may continue to reduce, the disposable incomes of players across all of our business units. This resulted in fewer patrons visiting casinos and fewer players purchasing lottery products, whether land-based or online, and lower amounts spent per casino visit or lottery purchase and may result in, reduced spend on online gambling activities, which negatively impact the results of operations, cash flows and financial condition of our casino customers, their ability to purchase or lease our products and services, revenues to lotteries and, therefore, our Lottery business revenue, and revenues to our online casino and sportsbook partners and, therefore, our Digital business revenue.

The outbreak of COVID-19 and the resulting unfavorable economic conditions have also impacted, and could continue to impact, the ability of our customers to make timely payments to us. These unfavorable conditions have caused, and could continue to or may cause, some of our Gaming and Lottery customers to temporarily close gaming venues and lottery operations, decrease spending on marketing of or purchases of Lottery products or declare bankruptcy, which would adversely

affect our business. In recent years, our Gaming business has expanded the use of extended payment term financing for gaming machine purchases, and we expect to continue to provide a higher level of extended payment term financing in this business until demand from our customers for such financings abates or our business model changes. These arrangements may increase our collection risk, and if customers are not able to pay us, whether as a result of financial difficulties, bankruptcy or otherwise, we may incur provisions for bad debt related to our inability to collect certain receivables. In addition, both extended payment term financing and operating leases result in a delay in our receipt of cash, which reduces our cash balance, liquidity and financial flexibility to respond to changing economic events. We have also seen a negative impact on future demand of certain Gaming products as a result of COVID-19, which has resulted and could continue to result in material inventory charges, which could increase our cost of products and decrease our gross margin. During the three and six months ended June 30, 2020, we recorded $21 million and $30 million, respectively, in charges related to inventory in our Gaming business segment. The recent outbreak also resulted in significant volatility in both the credit and equity markets, potentially leading to an economic downturn. The difficulty or inability of our customers to generate or obtain adequate levels of capital to finance their ongoing operations may reduce their ability to purchase our products and services. In our Lottery business, we believe that difficult economic conditions have contributed, or may contribute, to reductions in spending on marketing by our customers and, in certain instances, less favorable terms under our contracts, as many of our customers face budget shortfalls and seek to cut costs. In our Digital business, the suspension or cancellation of the majority of sporting events which has and could continue to negatively impact the financial condition of our sportsbook customers, their ability to purchase development and other services, their risk of payment default, or their spending levels as they seek to reduce costs, each of which could negatively impact our Digital business revenue. In addition, suppliers to our Digital business may suffer financial difficulties and may not be able to offer their services and products, which could restrict the provision of our services and negatively impact our business, results of operations, cash flows or financial condition.

Various gambling regulators have implemented additional responsible and safer gambling measures relating to our Digital casino business as a result of the COVID-19 outbreak, including the implementation of bet limits, spin speeds, deposit limits and bonusing, which could negatively impact on our business, results of operations, cash flows or financial condition, particularly if additional gambling regulators follow suit.

Furthermore, this outbreak of COVID-19 has caused, and may continue to cause us and certain of our suppliers, to implement temporary adjustment of work schemes allowing employees to work from home and collaborate remotely. We have taken measures to monitor and reduce the impact of the outbreak, including putting in place a global crisis monitoring team, protocols for responding when employees are infected and enhanced cleaning procedures at all sites, but we cannot assure these will be sufficient to mitigate the risks faced by our and our partners’ work forces. We have also taken measures to reduce operating costs and ensure liquidity given the uncertain impact of COVID-19 on revenue, deferred all non-critical capital expenditures, have implemented a number of employee-related actions and are actively considering further actions. However, we have experienced and may still experience lower work efficiency and productivity, which may adversely affect our service quality, and our business operations have been and could be disrupted if and/or when any of our employees has been or is suspected of infection, since this has and may cause our employees to be quarantined and/or our offices to be temporarily shut down. We will continue to incur costs for our operations, and our revenues during this period are difficult to predict. As a result of any of the above developments, our business, results of operations, cash flows or financial condition for the full fiscal year of 2020, especially in the second quarter, have been and will be adversely affected by the COVID-19 outbreak. The extent to which this outbreak impacts our results of operations, cash flows and financial condition will depend on future developments, which are highly uncertain and unpredictable, including new information which may emerge concerning the severity and duration of this outbreak and the actions taken by governmental authorities and us to contain it or treat its impact. For more information on the impact of COVID-19 pandemic on each of our business segments and measures taken by us in response to COVID-19, see section captioned “Recent Events- Impact of COVID-19” in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Unfavorable U.S. and international economic conditions, or decreased discretionary spending or travel due to other factors such as terrorist activity or threat thereof, civil unrest, health epidemics, contagious disease outbreaks, or public perception thereof or other economic or political uncertainties, have adversely affected our business, results of operations, cash flows and financial condition.

Unfavorable economic conditions, including recession, economic slowdown, decreased liquidity in the financial markets, decreased availability of credit and relatively high rates of unemployment, have had, and may continue to have, a negative effect on our business. Socio-political factors such as terrorist activity or threat thereof, civil unrest or other economic or political uncertainties, or health epidemics, contagious disease outbreaks, or public perception thereof that contribute to consumer unease may also result in decreased discretionary spending or travel by consumers and have a negative effect on our businesses. We cannot fully predict the effects that unfavorable social, political and economic conditions, economic uncertainties and public health crises and any resulting decrease in discretionary spending or travel would have on us, as they would be expected to impact our customers, suppliers and business partners in varied ways. For a description of the impact of the outbreak of COVID-19 and other public health crises, see the risk factor captioned “The recent COVID-19 pandemic and

similar health epidemics, contagious disease outbreaks and public perception thereof, could significantly disrupt our operations and adversely affect our business, results of operations, cash flows or financial condition.”

In our Gaming business, especially our Participation gaming business, our revenue is largely driven by players’ disposable incomes and level of gaming activity. Unfavorable economic conditions have reduced, or may reduce, the disposable incomes of casino patrons and resulted, or may result, in fewer patrons visiting casinos, whether land-based or online, and lower amounts spent per casino visit. A further or extended decline in disposable income has resulted in reduced play levels on our Participation gaming machines, causing our results of operations and cash flows from these products to decline. Additionally, higher travel and other costs may adversely affect the number of players visiting our customers’ casinos. Adverse changes in discretionary consumer spending or consumer preferences, resulting in fewer patrons visiting casinos and reduced play levels, could also be driven by factors such as an unstable job market, outbreaks of contagious diseases or public perception thereof or fears of terrorism or other violence. A decline in play levels has negatively impacted the results of operations, cash flows and financial condition of our casino customers and their ability to purchase or lease our products and services.

Unfavorable economic conditions have also impacted, and could continue to impact, the ability of our Gaming customers to make timely payments to us. In addition, unfavorable economic conditions have caused, and could continue to cause, some of our Gaming customers to temporarily close gaming venues or ultimately declare bankruptcy, which would adversely affect our business. In recent years, our Gaming business has expanded the use of extended payment term financing for gaming machine purchases, and we expect to continue to provide a higher level of extended payment term financing in this business until demand from our customers for such financings abates or our business model changes. These financing arrangements may increase our collection risk, and if customers are not able to pay us, whether as a result of financial difficulties, bankruptcy or otherwise, we may incur provisions for bad debt related to our inability to collect certain receivables. In addition, both extended payment term financing and operating leases result in a delay in our receipt of cash, which reduces our cash balance, liquidity and financial flexibility to respond to changing economic events. Unfavorable economic conditions may also result in volatility in the credit and equity markets. The difficulty or inability of our customers to generate or obtain adequate levels of capital to finance their ongoing operations may reduce their ability to purchase our products and services. Refer to Note 6 for international locations with significant concentrations of our receivables with terms longer than one year.

In our Lottery business, we believe that difficult economic conditions have contributed, or may contribute, to reductions in spending on marketing by our customers and, in certain instances, less favorable terms under our contracts, as many of our customers face budget shortfalls and seek to cut costs.

In our Digital business based on a Participation model, our revenue is largely driven by disposable incomes and level of player activity. Unfavorable economic conditions has reduced and may continue to reduce the disposable incomes of end users consuming the services, which could negatively impact revenues for the Digital business. The outbreak of COVID-19 has resulted in the suspension or cancellation of the majority of sporting events which has and could continue to negatively impact the financial condition of our sportsbook customers, their ability to purchase development and other services, their risk of payment default, or their spending levels as they seek to reduce costs, each of which could negatively impact our Digital business revenue. In addition, suppliers to our Digital business may suffer financial difficulties and may not be able to offer their services and products, which could restrict the provision of our services and negatively impact our revenues. Various gambling regulators have implemented additional responsible and safer gambling measures relating to our Digital casino business as a result of the COVID-19 outbreak, including the implementation of bet limits, spin speeds, deposit limits and bonusing, which could negatively impact on our revenues, particularly if additional gambling regulators follow suit.

There are ongoing concerns regarding the debt burden of certain countries, particularly in Europe and South America, and their ability to meet their future financial obligations, which have resulted in downgrades of the debt ratings for these countries. We currently operate in, and our growth strategy may involve pursuing expansion or business opportunities in certain of these jurisdictions, such as Argentina, Brazil, Greece, Italy, Puerto Rico, Turkey and Ukraine among others. These sovereign debt concerns, whether real or perceived, could result in a recession, prolonged economic slowdown, or otherwise negatively impact the general health and stability of the economies in these countries or more broadly. In more severe cases, this could result in a limitation on the availability or flow of capital, thereby restricting our liquidity and negatively impacting our results of operations, cash flows and financial condition.

Our future results of operations may be negatively impacted by slow growth or declines in the replacement cycle of gaming machines and by the slow growth of new gaming jurisdictions or slow addition of casinos in existing jurisdictions.

Demand for our Gaming products and services is driven by the replacement of existing gaming machines in existing casinos, the establishment of new jurisdictions, the opening of additional casinos in existing jurisdictions and the expansion of existing casinos. Slow growth or declines in the replacement cycle of gaming machines have reduced and will continue to reduce the demand for our products and negatively impact our results of operations, cash flows and financial condition, and

have resulted and could continue to result in material inventory charges, which could increase our cost of products and decrease our gross margin. We recorded charges related to inventory of $21 million and $30 million in the three and six months ended June 30, 2020, respectively, in our Gaming business segment primarily due to the COVID-19 disruption impacting future demand combined with a reassessment of our Gaming product strategy.

The opening of new casinos, expansion of existing casinos and replacement of existing gaming machines in existing casinos fluctuate with demand, economic conditions, regulatory approvals and the availability of financing and have been negatively affected by the recent COVID-19 pandemic. In addition, the expansion of gaming into new jurisdictions can be a protracted process. In the U.S., U.K. and other international jurisdictions in which we operate, governments usually require a public referendum and legislative action before establishing or expanding gaming. Any of these factors could delay, restrict or prohibit the expansion of our business and negatively impact our results of operations, cash flows and financial condition.

We heavily depend on our ability to win, maintain and renew our customer contracts, including our long-term Lottery contracts, and we could lose substantial revenue if we are unable to renew certain of our contracts on substantially similar terms or at all.

Generally, our Lottery contracts contain initial multi-year terms, with optional renewal periods at the discretion of the customer. Upon the expiration of any such contract, including any extensions thereof, a new contract may be awarded through a competitive bidding process. Conversely, in some instances, Lottery customers are authorized to extend contracts beyond the term initially agreed in the applicable contract without subjecting the contract to competitive bidding, thereby eliminating the possibility of obtaining that new business.

We cannot assure that our current contracts will be extended or that we will be awarded new contracts as a result of competitive bidding processes or otherwise in the future. In addition, it is common for competitors to protest the award of Lottery contracts to us. For example, there is a pending third-party protest against the renewal of the LNS concession to operate the Italian instant games lottery. Such protests could delay or prevent our ability to enter into a new contract. In addition, the recent outbreak of COVID-19 has caused some lotteries to delay the competitive bidding process, which in turn has delayed awards of new contracts. The termination, expiration or failure to renew one or more of our contracts could cause us to lose substantial revenue, which could have an adverse effect on our ability to win or renew other contracts or pursue growth initiatives. We cannot assure that new or renewed contracts will contain terms that are as favorable as our current terms or will contemplate the same scope of products and services as our current contracts, and any less favorable contract terms or diminution in scope could negatively impact our results of operations, cash flows and financial condition. For additional information regarding the potential expiration dates of certain of our more significant Lottery contracts, see the table in “Lottery Segment” in Part I, Item 1 of our Annual Report on Form 10-K.

We are also required by certain of our customers to provide surety or performance bonds in connection with our contracts. As of June 30, 2020, we had $257 million of outstanding performance bonds. We cannot assure that we will continue to be able to obtain surety or performance bonds on commercially reasonable terms or at all. Our inability to provide such bonds would materially and adversely affect our ability to renew existing, or obtain new, Lottery contracts.

A substantial portion of our Gaming revenue depends on repeat customers. In certain regions, our business may be concentrated with a small number of customers, such as our U.K. LBO business, and during the second quarter of 2018, we signed a new up to seven-year agreement with Ladbrokes Coral Group (which was acquired by GVC Holdings PLC in March 2018) to continue to supply terminals, content and related services, which represent a significant portion of our U.K. LBO business. We cannot assure that our current contracts will be extended or that we will be awarded new contracts.

Given the increased competition in the sports wagering landscape due to the 2018 Supreme Court decision overturning PASPA, it is crucial that we remain innovative in this field in order to preserve our first-mover advantage, maintain current contracts and gain new contracts.

We have incurred, and may continue to incur, restructuring costs, the benefits of which are unpredictable and may not be achieved.

In the past, we have implemented various business improvement, optimization and restructuring initiatives in an effort to streamline our organization, leverage our resources more efficiently, and reduce our operating costs. These initiatives encompassed a combination of headcount reductions, facilities streamlining, and reductions in other operating costs. We have engaged, and may continue to engage, in similar or additional restructuring initiatives, including in response to the COVID-19 pandemic and in the future. Because we are not able to predict with certainty when we will reorganize portions of our business, we cannot predict the extent, timing and magnitude of additional restructuring charges. We may also not realize the anticipated reduction in operating costs.

We may incur additional impairment charges.

We review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. We test goodwill and other indefinite-lived intangible assets for impairment at least annually. Factors that may indicate a change in circumstances, such that the carrying value of our goodwill, amortizable intangible assets or other non-amortizing assets may not be recoverable, include a decline in our stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in industry segments in which we participate. We may be required to record a significant charge in our consolidated financial statements during the period in which any impairment of our goodwill or intangible assets is determined, which would negatively affect our results of operations. For example, during the first quarter of 2020 we recorded a charge of $54 million, in 2016 we recorded a charge of $69 million and in 2015 we recorded charges of $935 million and $68 million for the impairment of goodwill. In light of the COVID-19 pandemic and the resulting unfavorable social, political, economic and financial conditions, during the first quarter of 2020 we performed an interim goodwill impairment assessment, which resulted in a $54 million goodwill impairment charge for our legacy U.K. Gaming reporting unit further discussed below. For all of our reporting units, we concluded that as of June 30, 2020 it was not more likely than not that the fair value of these reporting units is below their carrying values and that the COVID-19 disruptions do not trigger an impairment. However, this could change in the future depending on prevailing conditions that could result in additional impairment charges. For more information on the assessment and the goodwill impairment charge, see section captioned “Goodwill Impairment Assessment Update- COVID-19 Impact” in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 8.

As discussed above and further detailed in Note 8, the COVID-19 disruptions resulted in the widespread closures of LBO shops across the U.K., which, along with global economic uncertainty, contributed to further deterioration in business conditions from our 2019 annual goodwill test date, which resulted in a goodwill impairment charge of $54 million during the first quarter of 2020. Any future adverse changes to our projections, could negatively impact the recoverability of the remaining carrying value of our goodwill and other assets for our legacy U.K. Gaming reporting unit, which might result in additional material impairment charges.

We believe there to be an elevated risk of goodwill impairment for the unimpaired Gaming segment reporting units if the adverse impact of the COVID-19 disruptions or overall recovery of the casino industry globally sustains over an extended period of time. The remaining goodwill balance for our legacy U.K. Gaming reporting unit as of June 30, 2020 was $115 million. Any future adverse changes in projections for future operating results or other key assumptions, such as projected revenue, profit margin, capital expenditures or cash flows associated with investments included in our estimation of fair value for our legacy U.K. Gaming reporting unit could lead to additional future goodwill impairments, which could be material.

Moreover, application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. We cannot predict the occurrence of impairments, and we cannot assure that we will not have to record additional impairment charges in the future.

We depend on our suppliers and contract manufacturers, and any failure of these parties to meet our performance and quality standards or requirements could cause us to incur additional costs or lose customers.

Our production of instant lottery products, in particular, depends upon a continuous supply of raw materials, supplies, power and natural resources. Our operating results could be adversely affected by an interruption or cessation in the supply of these items or a serious quality assurance lapse, including as a result of the insolvency of any of our key suppliers.

Similarly, the operation of our instant ticket printing presses and the manufacture and maintenance of our gaming machines and gaming and lottery systems are dependent upon a regular and continuous supply of raw materials and components, many of which are manufactured or produced outside of the U.S. Certain of the components we use are customized for our products. The assembly of certain of our products and other hardware is performed by third parties. Any interruption or cessation in the supply of these items or services or any material quality assurance lapse with respect thereto could materially adversely affect our ability to fulfill customer orders, results of operations, cash flows and financial condition. We may be unable to find adequate replacements for our suppliers within a reasonable time frame, on favorable commercial terms or at all. The impact of the foregoing may be magnified as we continue to seek to streamline our gaming supply chain by reducing the number of our suppliers. Further, manufacturing costs may unexpectedly increase and we may not be able to successfully recover any or all of such cost increases.

In our Lottery systems business, we transmit certain wagering data using cellular technology and satellite transponders, generally pursuant to long- term contracts. The technical failure of any of these cellular or satellite services would require us to obtain other communication services, including other cellular or satellite access. In some cases, we employ backup systems to limit our exposure in the event of such a failure. While these networks are inherently highly redundant, we cannot assure access to such other cellular services or satellites or, if available, the ability to obtain the use of such other cellular services or satellites

on favorable terms or in a timely manner. While cellular and satellite failures are infrequent, the operation of each is outside of our control.

In addition, in all of our businesses, we rely upon a number of significant third-party suppliers and vendors delivering parts, equipment and services on schedule in order for us to meet our contractual commitments. Furthermore, we outsource the manufacturing of certain of our sub-assemblies to third parties in the U.S., Europe, Central America and Asia. The willingness of such third parties to provide their services to us may be affected by various factors. Changes in law or regulation in any jurisdiction in which we operate may make the provision of key services to us unlawful in such jurisdictions. To the extent that third parties are unwilling or unable to provide services to us, this may have an adverse impact on our operations, financial performance and prospects. Failure of these third parties to meet their delivery commitments could result in us being in breach of, and subsequently losing, the affected customer orders, which loss could have a material adverse effect on our results of operations, cash flows and financial condition. We rely on network and/or telecommunications services for certain of our products. For instance, any disruption to our network or telecommunications could impact our linked or networked games, which could reduce our revenue.

In our Digital sports business, we rely on providers of third party sports data feeds. The outbreak of COVID-19 has resulted in the suspension or cancellation of the majority of sporting events which has and could continue to negatively impact the financial condition of our sportsbook customers, their ability to purchase development and other services, their risk of payment default, or their spending levels as they seek to reduce costs, each of which could negatively impact our Digital business revenue.

In our Lottery, SciPlay and Digital businesses, we often rely on third-party data center providers to, among other things, host our remote game servers. Our Lottery, SciPlay and Digital businesses could be adversely impacted by breaches of or disruptions to these third-party data centers, including through disruptions in our RMG and lottery businesses, potential service level penalties with respect to our customers, reputational harm, the disclosure of proprietary information or the information of our customers or the theft of our or our customers assets, and to the extent any such data center provider was unable or unwilling to continue to provide services to us.

In certain regions, we enter into agreements with local distributors for the distribution of our land-based gaming products to one or more customers. Changes to these distributor relationships, including modification or termination of our agreements or difficulties with any such distributor could prevent us from delivering products or services to our customers on a timely basis, or at all, and could negatively impact our business. Additionally, the outbreak of COVID-19 and any resulting unfavorable social, political and economic conditions have negatively impacted our suppliers and contract manufacturers in varied ways in different communities, which could lead to interruption or cessation of services provided to us. For more information on the impact of the outbreak of COVID-19, see the risk factor captioned “The recent COVID-19 pandemic and similar health epidemics, contagious disease outbreaks and public perception thereof, could significantly disrupt our operations and adversely affect our business, results of operations, cash flows or financial condition.”

We depend on our key employees and rely on skilled employees with creative and technical backgrounds.

We depend on the continued performance of our executive officers and key personnel, including Barry Cottle, our President and Chief Executive Officer. Our ability to recruit and retain our key employees and skilled technical workers has been impaired due to the recent COVID-19 pandemic (see Note 1). If we lose the services of any of our executive officers or key personnel and cannot find suitable replacements for such persons in a timely manner, it could have an adverse impact on our business. Our ability to expand is dependent on our ability to recruit and retain talented employees in the U.S. and internationally who are capable of leading our employees to achieve our strategic objectives.

We also rely on our highly skilled, technically trained and creative employees to develop new technologies and create innovative products. Such employees, particularly game designers, engineers and project managers with desirable skill sets are in high demand, and we devote significant resources to identifying, hiring, training, successfully integrating and retaining these employees. A lack of skilled technical workers could delay or negatively impact our business plans, ability to compete, results of operations, cash flows and financial condition.

Our level of indebtedness could adversely affect our results of operations, cash flows and financial condition.

We are a highly leveraged company. As of December 31, 2019 and June 30, 2020, we had total indebtedness of $8,725 million and $9,153 million, respectively, consisting primarily of borrowings under our credit agreement, Senior Notes and 2021 Notes, net of unamortized discounts and deferred financing costs. As of June 30, 2020, our total available liquidity (excluding our SciPlay business segment) was $637 million, which included $3 million of undrawn availability under SGI’s revolving credit facility. On July 1, 2020, we completed the issuance of $550 million in aggregate principal amount of 2025 Unsecured Notes and on July 17, 2020 we redeemed all $341 million of our 2021 Notes (see Note 11).

Our level of indebtedness could affect our ability to obtain financing or refinance existing indebtedness; require us to dedicate a significant portion of our cash flow from operations to interest and principal payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures and other general corporate purposes; increase our vulnerability to adverse general economic, industry or competitive developments or conditions; and limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate or in pursuing our strategic objectives. In addition, we are exposed to the risk of higher interest rates as a significant portion of our borrowings are at variable rates of interest. If interest rates increase, the interest payment obligations under our non-hedged variable rate indebtedness would increase even if the amount borrowed remained the same, and our results of operations, cash flows and financial condition would be negatively impacted. All of these factors became more severe given the unfavorable economic conditions and uncertainties and decrease in discretionary spending and consumer travel as a result of the outbreak of COVID-19 and could place us at a competitive disadvantage compared to competitors that may have less debt than we do.

Certain of our variable rate debt, including debt under our credit agreement and the SciPlay Revolver, relies on LIBOR as a benchmark for establishing the interest rate. The U.K. Financial Conduct Authority announced in 2017 that it intends to phase out LIBOR by the end of 2021. In addition, other regulators have suggested reforming or replacing other benchmark rates. The discontinuation, reform or replacement of LIBOR or any other benchmark rates may have an unpredictable impact on contractual mechanics in the credit markets or cause disruption to the broader financial markets. Uncertainty as to the nature of such potential discontinuation, reform or replacement may negatively impact the cost of our variable rate debt. We may in the future pursue amendments to the agreements underlying this debt to provide for a transition mechanism or other reference rate in anticipation of LIBOR’s discontinuation, but we may not be able to reach agreement with our lenders on any such amendments. As a result, additional financing to replace our LIBOR-based debt may be unavailable, more expensive or restricted by the terms of our outstanding indebtedness.

We may not have sufficient cash flows from operating activities, cash on hand and available borrowings under our credit agreement to finance required capital expenditures under new contracts and meet our other cash needs or satisfy our minimum liquidity covenant. These obligations require a significant amount of cash, which would reduce our available liquidity.

Our Gaming operations and Lottery systems businesses generally require significant upfront capital expenditures for gaming machine or lottery terminal assembly, software customization and implementation, systems and equipment installation and telecommunications configuration. In connection with a renewal or bid of a Gaming operations or Lottery systems contract, a customer may seek to obtain new equipment or impose new service requirements, which may require additional capital expenditures in order to retain or win the contract. In connection with the renewal of LNS’ exclusive concession to operate the Italian instant games lottery, we paid our pro rata share, or €160 million (€10 million paid in 2017 and the remaining €150 million paid in 2018), of the €800 million payment LNS was required to make to obtain the concession.

Historically, we have funded these upfront costs through cash flows generated from operations, available cash on hand and borrowings under our credit agreement. In addition, we have seen an increase in lottery RFPs, some involving PMAs, which include economic terms that expose us to increased risk, such as requiring the guarantee of specific income thresholds or significant upfront payments. In addition, to the extent we are compensated under any of our contractual arrangements based on a share of our customers’ revenue rather than payment for our expenses and services, we may incur upfront costs (which may be significant) prior to receipt of any revenue under such arrangements. Our ability to generate revenue and to continue to procure new contracts will depend on, among other things, our then present liquidity levels or our ability to obtain additional financing on commercially reasonable terms, which are negatively affected by the recent COVID-19 pandemic.

If we do not have adequate liquidity or are unable to obtain financing for these upfront costs and other cash needs on favorable terms or at all, we may not be able to bid on certain contracts, which could result in our losing business or restrict our ability to grow, which could have a material adverse effect on our results of operations, cash flows and financial condition. Moreover, we may not realize the return on investment that we anticipate on new or renewed contracts due to a variety of factors, including lower than anticipated retail sales or amounts wagered, higher than anticipated capital or operating expenses and unanticipated regulatory developments or litigation. We may not have adequate liquidity to pursue other aspects of our strategy, including bringing our products and services to new customers or new or underpenetrated geographies (including through equity investments) or pursuing strategic acquisitions. In the event we pursue significant acquisitions or other expansion opportunities, conduct significant repurchases of our outstanding securities, or refinance or repay existing debt, we may need to raise additional capital either through the public or private issuance of equity or debt securities or through additional borrowings under our existing financing arrangements, which sources of funds may not necessarily be available on terms acceptable to us, if at all, especially under the current unfavorable economic conditions and uncertainties as a result of the COVID-19 pandemic.

On May 8, 2020, the Company and the requisite lenders under SGI’s revolving credit facility entered into the Credit Agreement Amendment that, among other things, imposes a minimum liquidity requirement (excluding SciPlay) of at least

$275 million during the Covenant Relief Period and further restricts our ability to incur indebtedness and liens, make restricted payments and investments and prepay junior indebtedness during the Covenant Relief Period, subject to certain exceptions and further subject, in some instances, to maintaining minimum liquidity (excluding SciPlay) of at least $400 million. See Note 1 for additional details regarding the Credit Agreement Amendment. Therefore, even if we do have liquidity available to support our current cash needs, we may not be able to access that liquidity while still remaining in compliance with the minimum liquidity covenant. We cannot assure that we will be granted waivers or amendments to the minimum liquidity covenant, or will be able to obtain additional liquidity to cure such a violation, if for any reason we are unable to comply with that obligation.

We may not have sufficient cash flows from operating activities to service all of our indebtedness and other obligations, and may be forced to take other actions to satisfy our obligations, which may not be successful.

Our ability to make payments on and to refinance our indebtedness and other obligations depends on our results of operations, cash flows and financial condition, which in turn are subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness and our other obligations. Our results of operations and general economic and financial conditions have been negatively affected by the recent COVID-19 pandemic, which made it more difficult for us to meet our debt obligations from cash flows from operating activities.

We are required to make scheduled payments of principal on the term loans borrowed under our credit agreement, and our credit agreement requires that a portion of our excess cash flow be applied to prepay amounts borrowed under our credit agreement. We are also required to repay the entire principal amount of our Senior Notes and 2021 Notes at their maturity (see Note 11). We have also, from time to time, repurchased or otherwise retired or refinanced our debt, through our subsidiaries or otherwise and may continue to do so in the future. Such activities, if any, will depend on prevailing market conditions, contractual restrictions and other factors, and the amounts involved may or may not be material. If we need to refinance all or part of our indebtedness at or before maturity, we cannot assure that we will be able to obtain new financing or to refinance any of our indebtedness on commercially reasonable terms or at all, especially under the current unfavorable economic conditions and uncertainties as a result of the COVID-19 pandemic.

Our lenders, including the lenders participating in our revolving credit facility under our credit agreement or in the SciPlay Revolver, may become insolvent or tighten their lending standards, which could make it more difficult for us to borrow under our revolving credit facility or the SciPlay Revolver or to obtain other financing on favorable terms or at all. Our results of operations, cash flows and financial condition would be adversely affected if we were unable to draw funds under our revolving credit facility or the SciPlay Revolver because of a lender default or to obtain other cost-effective financing. Any default by a lender in its obligation to fund its commitment under our revolving credit facility or the SciPlay Revolver (or its participation in letters of credit) could limit our liquidity to the extent of the defaulting lender’s commitment. If we are unable to generate sufficient cash flow in the future to meet our commitments, we will be required to adopt one or more alternatives, such as refinancing or restructuring our indebtedness, selling material assets or operations or seeking to raise additional debt or equity capital. We cannot assure that any of these actions could be completed on a timely basis or on satisfactory terms or at all, or that these actions would enable us to continue to satisfy our capital requirements. Moreover, our existing debt agreements contain, and our future debt agreements may contain, restrictive covenants that may prohibit us from adopting these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt.

Agreements governing our indebtedness impose certain restrictions that may affect our ability to operate our business. Failure to comply with any of these restrictions could result in the acceleration of the maturity of our indebtedness and require us to make payments on our indebtedness. Were this to occur, we would not have sufficient cash to pay our accelerated indebtedness.

Agreements governing our indebtedness, including our credit agreement and the SciPlay Revolver and the indentures governing our Senior Notes and 2021 Notes, impose, and future financing agreements are likely to impose, operating and financial restrictions on our activities that may adversely affect our ability to finance future operations or capital needs or to engage in new business activities. Subject to certain exceptions, our credit facilities and/or indentures restrict our ability to, among other things:

•declare dividends or redeem or repurchase capital stock;

•prepay, redeem or purchase other debt;

•incur liens;

•make loans, guarantees, acquisitions and investments;

•incur additional indebtedness;

•engage in sale and leaseback transactions;

•amend or otherwise alter debt and other material agreements;

•engage in mergers, acquisitions or asset sales;

•engage in transactions with affiliates;

•enter into arrangements that would prohibit us from granting liens or restrict our subsidiaries’ ability to pay dividends, make loans or transfer assets; and

•alter the business we conduct.

In addition, prior to the Credit Agreement Amendment, the SGI credit agreement contained a covenant that was tested at the end of each fiscal quarter and required us to not exceed a maximum consolidated net first lien leverage ratio of 5.00x Consolidated EBITDA (as defined in the credit agreement), with this ratio stepping down to 4.75x beginning with the fiscal quarter ending December 31, 2020 and 4.50x beginning with the fiscal quarter ending December 31, 2021. On May 8, 2020, SGC and the requisite lenders entered into the Credit Agreement Amendment to (a) implement a financial covenant relief period through the end of the first quarter ending March 31, 2021 (the “Covenant Relief Period”), as a result of which SGI is not required to maintain compliance with the consolidated net first lien leverage ratio covenant during the Covenant Relief Period, (b) reset the consolidated net first lien leverage ratio covenant following the Covenant Relief Period, (c) impose a minimum liquidity requirement (excluding SciPlay) of at least $275 million during the Covenant Relief Period, (d) further restrict our ability to incur indebtedness and liens, make restricted payments and investments and prepay junior indebtedness during the Covenant Relief Period, subject to certain exceptions and further subject in some instances to maintaining minimum liquidity (excluding SciPlay) of at least $400 million and (e) establish a LIBOR floor of 0.500% on borrowings under the revolving credit facility during the Covenant Relief Period. The revised consolidated net first lien leverage ratio will be 6.00x Consolidated EBITDA beginning with the fiscal quarter ending June 30, 2021, stepping down as follows (1) 5.75x beginning with the fourth quarter of 2021, (2) 5.25x beginning with the second quarter of 2022, (3) 4.75x beginning with the fourth quarter of 2022 and (4) 4.50x beginning with the second quarter of 2023 and thereafter. The revised consolidated net first lien leverage ratio will be based on Consolidated EBITDA (as defined in the Credit Agreement Amendment) as follows: (1) for the testing period ending June 30, 2021, Consolidated EBITDA for the fiscal quarter ending June 30, 2021 multiplied by 4, (2) for the testing period ending September 30, 2021, Consolidated EBITDA for the fiscal quarters ending June 30, 2021 and September 30, 2021 multiplied by 2, (3) for the testing period ending December 31, 2021, Consolidated EBITDA for the fiscal quarters ending June 30, 2021, September 30, 2021 and December 31, 2021 multiplied by 4/3 and (4) for all subsequent testing periods, Consolidated EBITDA for the previous twelve months including the quarter for the which the test is performed. Under the SciPlay Revolver, SciPlay is required to maintain a maximum total net leverage ratio not to exceed 2.50x and maintain a minimum fixed charge coverage ratio of no less than 4.00x. Future financing arrangements may impose similar requirements.

Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants. The recent outbreak of COVID-19 has had, and will continue to have, a negative effect on us, especially in our Gaming and Lottery businesses. Accordingly, we cannot assure that we will continue to maintain liquidity sufficient to satisfy our current obligations or comply with the minimum liquidity requirement set forth in SGC’s credit agreement or return to compliance with the consolidated net first lien leverage ratio covenant following the Covenant Relief Period.

We also cannot assure that we will be granted waivers or amendments to the agreements governing our indebtedness if for any reason we are unable to comply with these obligations or that we will be able to refinance our debt on terms acceptable to us, or at all.

Certain holders of our common stock exert significant influence over us and may make decisions that conflict with the interests of other stockholders.

In August 2004, MacAndrews & Forbes Incorporated (formerly known as MacAndrews & Forbes Holdings Inc. and, together with its affiliates, referred to herein as “M&F”) was issued approximately 25% of our then outstanding Class A common stock in connection with its conversion of our then outstanding Series A Convertible Preferred Stock. As disclosed in an amendment to its beneficial ownership report on Schedule 13D (“Schedule 13D Amendment”) filed with the SEC on July 14, 2020, M&F beneficially owned 36,802,842 shares of our outstanding common stock, or approximately 39.0% of our outstanding common stock as of such date. Pursuant to a stockholders’ agreement with us, which we originally entered into with holders of the Series A Convertible Preferred Stock, such holder is entitled to appoint up to four members of our Board of Directors and certain actions of our Company require the approval of such holder. As a result, M&F has the ability to exert significant influence over our business and may make decisions with which other stockholders may disagree, including, among

other things, delaying, discouraging or preventing a change of control of our Company or a potential merger, consolidation, tender offer, takeover or other business combination.

On July 14, 2020, M&F filed the Schedule 13D Amendment announcing that it had determined to explore a possible sale of our common stock beneficially owned by M&F and that, as of the date of such filing, no specific or definitive plan or proposal had been formulated and that there can be no assurance that any transaction will occur or as to the terms of any such transaction.

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

There was no stock repurchase activity during the three months ended June 30, 2020.

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						Amendment to Amended and Restated Rights Agreement, dated as of June 16, 2020, between Scientific Games Corporation and American Stock Transfer & Trust Company, LLC, as rights agent (incorporated by reference to Exhibit 4.1 to Scientific Games Corporation’s Current Report on Form 8-K filed on June 19, 2020).

4.2						Indenture, dated as of July 1, 2020, among Scientific Games International, Inc., as issuer, Scientific Games Corporation, the other guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee, relating to the 8.625% Senior Unsecured Notes due 2025 (incorporated by reference to Exhibit 4.1 to Scientific Games Corporation’s Current Report on Form 8-K filed on July 1, 2020).

10.1						Amendment to Employment Agreement, dated as of March 24, 2020 (effective as of April 5, 2020), by and between Scientific Games Corporation and Barry Cottle (incorporated by reference to Exhibit 10.1 to Scientific Games Corporation’s Quarterly Report on Form 10-Q filed on May 11, 2020).*

10.2						Amendment to Employment Agreement, dated as of June 30, 2020 (effective as of July 1, 2020), by and between Scientific Games Corporation and Barry Cottle.*(†)

10.3						Amendment to Employment Agreement, dated as of March 24, 2020 (effective as of April 5, 2020), by and between Scientific Games Corporation and Michael Quartieri (incorporated by reference to Exhibit 10.2 to Scientific Games Corporation’s Quarterly Report on Form 10-Q filed on May 11, 2020).*

10.4						Amendment to Employment Agreement, dated as of May 19, 2020, by and between Scientific Games Corporation and Michael Quartieri.*(†)

10.5						Consulting Agreement, entered into as of July 1, 2020, by and between Scientific Games Corporation and Michael Quartieri.*(†)

10.6						Amendment to Employment Agreement, dated as of March 24, 2020 (effective as of April 5, 2020), by and between Scientific Games Corporation and James Sottile (incorporated by reference to Exhibit 10.3 to Scientific Games Corporation’s Quarterly Report on Form 10-Q filed on May 11, 2020).*

10.7						Amendment to Employment Agreement, dated as of June 30, 2020 (effective as of July 1, 2020), by and between Scientific Games Corporation and James Sottile.*(†)

10.8						Amendment to Employment Agreement, dated as of March 24, 2020 (effective as of April 5, 2020), by and between Scientific Games Corporation and Matthew Wilson (incorporated by reference to Exhibit 10.5 to Scientific Games Corporation’s Quarterly Report on Form 10-Q filed on May 11, 2020).*

10.9						Amendment to Employment Agreement, dated as of June 30, 2020 (effective as of July 1, 2020), by and between Scientific Games Corporation and Matthew Wilson.*(†)

10.10						Amendment to Employment Agreement, dated as of March 24, 2020 (effective as of April 5, 2020), by and between Scientific Games Corporation and Patrick J. McHugh (incorporated by reference to Exhibit 10.7 to Scientific Games Corporation’s Quarterly Report on Form 10-Q filed on May 11, 2020).*


10.11						Amendment to Employment Agreement, dated as of June 30, 2020 (effective as of July 1, 2020), by and between Scientific Games Corporation and Patrick J. McHugh.*(†)

10.12						Amendment to Employment Letter, dated as of March 27, 2020 (effective as of April 5, 2020), by and between Scientific Games Corporation and Stephen Richardson (incorporated by reference to Exhibit 10.8 to Scientific Games Corporation’s Quarterly Report on Form 10-Q filed on May 11, 2020).*

10.13						Amendment to Employment Letter, dated as of June 30, 2020 (effective as of July 1, 2020), by and between Scientific Games Corporation and Stephen Richardson.*(†)

10.14						Amendment to Employment Agreement, dated as of March 27, 2020 (effective as of April 5, 2020), by and between Scientific Games Corporation and Michael Winterscheidt (incorporated by reference to Exhibit 10.9 to Scientific Games Corporation’s Quarterly Report on Form 10-Q filed on May 11, 2020).*

10.15						Amendment to Employment Agreement, dated as of May 18, 2020, by and between Scientific Games Corporation and Michael Winterscheidt.*(†)

10.16						Amendment to Employment Agreement, dated as of June 30, 2020 (effective as of July 1, 2020), by and between Scientific Games Corporation and Michael Winterscheidt.*(†)

10.17						Third Amendment to Consulting Agreement, dated as of April 7, 2020, by and between Scientific Games Corporation and Richard Haddrill (incorporated by reference to Exhibit 10.10 to Scientific Games Corporation’s Quarterly Report on Form 10-Q filed on May 11, 2020).*

10.18						Fourth Amendment to Consulting Agreement, dated as of June 30, 2020, by and between Scientific Games Corporation and Richard Haddrill.*(†)

10.19						Employment Agreement, dated as of April 23, 2020, by and between Scientific Games Corporation and Michael Eklund.*(†)

10.20						Amendment No. 6, dated as of May 8, 2020, 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, Amendment No. 3, dated as of August 14, 2017, Amendment No. 4, dated as of February 14, 2018 and Amendment No. 5, dated as of November 20, 2019) (incorporated by reference to Exhibit 10.11 to Scientific Games Corporation’s Quarterly Report on Form 10-Q filed on May 11, 2020).

22.1						Issuer and Guarantor Information, dated as of June 30, 2020.(†)

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.**

101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Label Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document


104						Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

(†) Filed herewith.

** Furnished 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 C. Eklund

Name:

Michael C. Eklund

Title:

Executive Vice President, Chief Financial Officer, Treasurer and Corporate Secretary

By:

/s/ Michael F. Winterscheidt

Name:

Michael F. Winterscheidt

Title:

Senior Vice President and Chief Accounting Officer

Dated:

July 23, 2020

Exhibit 10.2

Amendment to Employment Agreement

This Amendment to Employment Agreement (this “Amendment”) is made on June 30, 2020 by and between Scientific Games Corporation, a Nevada corporation, (the “Company”) and Barry Cottle (“Executive”).

WHEREAS, the Company and Executive entered into an Employment Agreement dated as of May 4, 2018, which was then amended effective May 7, 2019, and then amended effective March 24, 2020 (as amended, the “Agreement”); and

WHEREAS, the amendment to the Employment Agreement dated as of March 24, 2020 decreased Executive’s annual base salary of one million, seven hundred and fifty thousand U.S. dollars ($1,750,000) by four hundred seventeen thousand, one hundred and twenty-three U.S. dollars ($417,123), representing the portion of his annual base salary attributable to the period from April 5, 2020 through June 30, 2020.

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.Decrease in Base Salary. The Agreement is hereby amended by adding the following sentence to the end of Section 3(a):

“Effective as of July 1, 2020, Executive will be paid seventy-four thousand, three hundred and fifteen U.S. dollars ($74,315) of base salary until and through July 31, 2020, and Executive’s annual base salary of one million, seven hundred and fifty thousand U.S. dollars ($1,750,000) is reduced by an additional seventy-four thousand, three hundred and fifteen U.S. dollars ($74,315), representing the portion of his annual base salary attributable to the period from July 1, 2020 through July 31, 2020.”

2. The Company and Executive further expressly agree that the decrease in base salary set forth in Section 1 of this Amendment does not constitute “Good Reason,” as that phrase is defined in Section 4(e) of the Agreement.

3. 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 amended by this Amendment. Any defined terms used in this Amendment and not defined herein shall have the meaning as set forth in the Agreement.

4. 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 June 30, 2020.

SCIENTIFIC GAMES CORPORATION

By: /s/ James Sottile

Name: James Sottile

Title: Executive Vice President and Chief Legal Officer

/s/ Barry Cottle

Barry Cottle

Exhibit 10.4

Amendment to Employment Agreement

This Amendment (this “Amendment”) to the Employment Agreement between Michael Quartieri (“Executive”) and Scientific Games Corporation, a Nevada corporation (the “Company”), is made and effective as of May 19, 2020.

WHEREAS, the Company and Executive entered into an Amended and Restated Employment Agreement dated as of December 15, 2015, which was then amended effective as of January 1, 2019, and then amended effective as of March 24, 2020 (as amended, the “Agreement”); and

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

1.Section 1 of the Agreement is hereby deleted and replaced with the following new section:

“Employment; Term. The Company hereby agrees to employ Executive, and Executive hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth in this Agreement. This term of employment of Executive under this Agreement (the “Term”) shall be the period commencing on the first day of Executive’s employment with the Company and ending on June 30, 2020, and is subject to earlier termination in accordance with Section 4. The Company and Executive further expressly agree that the Term shall no longer be automatically extended and shall terminate on June 30, 2020, unless otherwise terminated earlier in accordance with Section 4.

2.Transition; Offices and Duties. Effective as of May 31, 2020 (the “Transition Date”), Section 2 of the Agreement shall be deleted in its entirety and replaced with the following:

“During the Term, Executive will serve as an advisor to the President and Chief Executive Officer. In such capacity, Executive shall report to the President and Chief Executive Officer and shall perform such duties and shall have such responsibilities as may be assigned to Executive from time to time by the President and Chief Executive Officer. Executive’s functions, duties and responsibilities are subject to reasonable changes as the Company may in good faith determine. Executive 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.”

Upon the expiration of the Term on June 30, 2020, Executive 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 upon the Company’s request, and in any event not later than the expiration of the Term.

3.Executive acknowledges that he is eligible for Incentive Compensation as described in Section 3(b) of the Agreement, pro-rated based on the number of days he is employed in calendar year 2020.

4.Executive hereby agrees that this Amendment constitutes Executive’s prior written consent, as contemplated by Section 4(e) of the Agreement, to the changes to Executive’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.

5.Section 4(g) of the Agreement is hereby deleted and replaced with the following new section:

“Expiration of Term of Agreement. At the end of the Term, and provided that Executive has, within 21 days after June 30, 2020, delivered to the Company, and not revoked, a release agreement, substantially in the form attached hereto as Exhibit A (the “Release Requirement”), then Executive shall receive each of the following:

(i)The Standard Termination Payments;

(ii)an amount equal to $257,633, subject to applicable withholding, which is intended to compensate Executive for prior reductions in his base salary and in recognition of Executive’s work helping the Company meet the challenges posed for its business and employees by the COVID-19 pandemic, with such amount to be payable in equal monthly installments over a period of six (6) months after termination of Executive’s employment, in accordance with Section 4(h);

(iii)if Executive elects to continue medical coverage under the Company's group health plan in accordance with COBRA, the full monthly premiums for such coverage on a monthly basis until the earlier of: (A) a period of six (6) months has elapsed; or (B) Executive is eligible for medical coverage under a plan provided by a new employer;

(iv)no later than March 31, 2021, payment of an amount equal to (A) the Incentive Compensation which would have been payable to Executive had Executive remained in employment with the Company during all of 2020, multiplied by (B) a fraction the numerator of which is 182 and the denominator of which is 366;

(v)the consulting agreement attached hereto as Exhibit B (the “Consulting Agreement”) shall become effective as of July 1, 2020 (in the event the Release Requirement is not satisfied, the Consulting Agreement shall be null and void and of no effect);

(vi)subject to Section 5.6, any unvested restricted stock units held by Executive on the expiration of the Term, and any unvested stock options held by Executive on the expiration of the Term, in both cases that were granted to Executive prior to January 1, 2019, will become fully vested (and, in the case of any such stock options, exercisable) (provided that any such stock options held by Executive and vesting pursuant to this subsection 4(g)(vi) will cease being exercisable upon the earlier of December 31, 2021 and the scheduled expiration of such stock options), and in all other respects, all such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which the awards were granted; provided, however, if necessary to comply with Section

409A, settlement of any such equity-based awards shall be made on the date that is six (6) months plus one (1) day following expiration of the Term;

(vii)For avoidance of doubt, Section 4(g)(vi) does not apply to any unvested stock options or unvested restricted stock units held by Executive on the expiration of the Term and that were granted to Executive on or after January 1, 2019. Any such unvested restricted stock units or unvested stock options held by Executive as of the expiration of the Term, in both cases that were granted to Executive on or after January 1, 2019 (including but not limited to any performance-conditioned unvested stock options) shall continue to vest during the term of the Consulting Agreement as if Executive was still an employee of the Company. If any such unvested stock options vest during the term of the Consulting Agreement, then they will cease being exercisable upon the earlier of December 31, 2021 and the scheduled expiration of such stock options;

(viii)Upon the expiration of the Consulting Agreement on December 31, 2020, all restricted stock units and stock options that are unvested as of such date will be immediately forfeited on December 31, 2020; and

(ix)all vested stock options and vested restricted stock units held by Executive, that fully vested prior to the expiration of the Term, shall remain outstanding (and, in the case of any vested stock options, and exercisable until the earlier of December 31, 2021 and the scheduled expiration of such stock options);

provided, however, that all equity awards held by Executive and/or all amounts received by him in respect thereof shall remain subject to forfeiture or recovery by the Company pursuant to Sections 4(l) or 5.6 of the Agreement and any applicable clawback or similar compensation recovery policy adopted by the Company from time to time. The Company and Executive hereby agree and acknowledge that the Release Requirement shall satisfy the requirements of Section 4(l) of the Agreement.

6.The reference to Section 4(g) in Section 4(i) is hereby deleted.

7.Section 15 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 Road, Las Vegas, NV 89119, (b) to Executive, 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.

8.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 amended by this Amendment. Any defined terms used in this Amendment and not defined herein shall have the meaning as set forth in the Agreement.

9.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 May 19, 2020.

SCIENTIFIC GAMES CORPORATION

By: /s/ James Sottile

Name: James Sottile

Title: Executive Vice President and Chief Legal Officer

/s/ Michael Quartieri

Michael Quartieri

Exhibit A

Release Agreement

[see attached]

RELEASE AGREEMENT

In consideration of the promises contained herein and in the Amendment to Employment Agreement dated as of May 19, 2020 (the “Amendment”), Scientific Games Corporation (the “Company”) and Michael Quartieri (“you”) hereby enter into this release agreement (this “Release Agreement”) as of the date set forth below.

WHEREAS, the Company and you entered into an Amended and Restated Employment Agreement dated as of December 15, 2015, which was then amended effective as of January 1, 2019, and then amended effective as of March 24, 2020, and then amended effective as of May 19, 2020 (as 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 5(i) – (ix) 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

A-2

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 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 7 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

A-3

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.

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.

A-4

(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 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

A-5

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.

4. Governing Law; Arbitration. The parties hereby agree that the “Governing Law; Arbitration” section of the Employment Agreement set forth at Section 12 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., June 30, 2020) 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

A-6

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.

(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 5(i)-(ix) 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: ____________________

MICHAEL QUARTIERI

A-7

Exhibit B

Consulting Agreement

[see attached]

CONSULTING AGREEMENT

This Consulting Agreement is entered into as of July 1, 2020 (this “Agreement”) by and between SCIENTIFIC GAMES CORPORATION, with offices located at 6601 Bermuda Road, Las Vegas, NV 89119 (the “Company”), and Michael Quartieri, an individual, 2133 Wilbanks Circle, Henderson, NV 89012 (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 Company and Consultant entered into an Amended and Restated Employment Agreement dated as of December 15, 2015, which was then amended effective as of January 1, 2019, and then amended effective as of March 24, 2020, and then amended effective as of May 19, 2020 (as amended, the “Employment Agreement”); and

WHEREAS, the Employment Agreement expired on June 30, 2020; 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 1Interpretation

1.1Certain 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).

B-2

“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.

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

Section 2Engagement

2.1Services. 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 consulting services related to financial matters to the Company during the Term, subject to Consultant’s reasonable availability, as requested by the Company’s Chief Executive Officer (collectively, the “Services”). 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.

2.2Relationship 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 3Compensation

3.1Consideration. 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 an amount equal to

B-3

$394,875, subject to applicable withholding, with such amount to be payable in six (6) equal monthly installments during the term of this Agreement.

3.2Expense 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.

3.3Withholding, 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.

3.4Taxes 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 4Certain Agreements

4.1Restrictive 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.

4.2Confidentiality. 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

B-4

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).

4.3Regulatory 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 A and Annex B attached hereto.

4.4Indemnification. 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 5Termination

5.1Term of Agreement. The term of this Agreement shall commence on July 1, 2020 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.

5.2Early 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.

5.3Effect 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.

5.4Payments 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 6Miscellaneous

B-5

6.1Notice. 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 89119Attention: Chief Legal Officer

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

6.2Assignment; 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.

6.3Amendment; 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.

6.4Entire 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.

6.5Severability. 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.

B-6

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.

6.7Costs. 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.

6.8Remedies. 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.

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:

MICHAEL QUARTIERI

______________________________

B-7

Annex A

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

2.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.

B-8

Annex B

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. 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 B will be grounds for the Company to terminate the Agreement in accordance with Section 5.2.

B-9

Exhibit 10.5

CONSULTING AGREEMENT

RECITALS

WHEREAS, the Employment Agreement expired on June 30, 2020; 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 1Interpretation

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

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

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

Section 2Engagement

Section 3Compensation

3.1Consideration. 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 an amount equal to $394,875, subject to applicable withholding, with such amount to be payable in six (6) equal monthly installments during the term of this Agreement.

Section 4Certain Agreements

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.

Section 5Termination

5.2Early 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.

Section 6Miscellaneous

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 89119Attention: Chief Legal Officer

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

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.

6.6Governing 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.

6.9Counterparts. 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: /s/ James Sottile

Name: James Sottile

Title: Executive Vice President and Chief Legal Officer

MICHAEL QUARTIERI

/s/ Michael Quartieri

Annex A

Certifications and Covenants

The Consultant certifies and covenants to the Company as follows:

Annex B

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 B will be grounds for the Company to terminate the Agreement in accordance with Section 5.2.

Exhibit 10.7

Amendment to Employment Agreement

This Amendment to Employment Agreement (this “Amendment”) is made on June 30, 2020 by and between Scientific Games Corporation, a Nevada corporation, (the “Company”) and James Sottile (“Executive”).

WHEREAS, the Company and Executive entered into an Employment Agreement dated as of September 4, 2018, which was then amended as of March 24, 2020 (as amended, the “Agreement”); and

WHEREAS, the amendment to the Employment Agreement dated as of March 24, 2020 decreased Executive’s annual base salary of six hundred thousand U.S. dollars ($600,000) by seventy-one thousand, five hundred and six U.S. dollars ($71,506), representing the portion of his annual base salary attributable to the period from April 5, 2020 through June 30, 2020;

1.Decrease in Base Salary. The Agreement is hereby amended by adding the following sentence to the end of Section 3(a):

“Effective as of July 1, 2020, Executive will be paid twenty-five thousand, four hundred and seventy-nine U.S. dollars ($25,479) of base salary until and through July 31, 2020, and Executive’s annual base salary of six hundred thousand U.S. dollars ($600,000) is reduced by an additional twenty-five thousand, four hundred and seventy-nine U.S. dollars ($25,479), representing the portion of his annual base salary attributable to the period from July 1, 2020 through July 31, 2020.”

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Amendment as of June 30, 2020.

SCIENTIFIC GAMES CORPORATION

By: /s/ Michael Eklund

Name: Michael Eklund

Title: Executive Vice President and Chief Financial Officer

/s/ James Sottile

James Sottile

Exhibit 10.9

Amendment to Employment Agreement

This Amendment to Employment Agreement (this “Amendment”) is made on June 30, 2020 by and between Scientific Games Corporation, a Nevada corporation, (the “Company”) and Matthew Wilson (“Executive”).

WHEREAS, the Company and Executive entered into an Employment Agreement dated as of July 6, 2019, which was then amended as of March 24, 2020 (as amended, the “Agreement”); and

WHEREAS, the amendment to the Employment Agreement dated as of March 24, 2020 decreased Executive’s annual base salary of seven hundred fifty thousand ($750,000) by one hundred seventy-eight thousand, seven hundred and sixty-seven U.S. dollars ($178,767), representing the portion of his annual base salary attributable to the period from April 5, 2020 through June 30, 2020.

1.Decrease in Base Salary. The Agreement is hereby amended by adding the following sentence to the end of Section 3(a):

“Effective as of July 1, 2020, Executive will be paid thirty-one thousand, eight hundred and forty-nine U.S. dollars ($31,849) of base salary until and through July 31, 2020, and Executive’s annual base salary of seven hundred and fifty thousand U.S. dollars ($750,000) is reduced by an additional thirty-one thousand, eight hundred and forty-nine U.S. dollars ($31,849), representing the portion of his annual base salary attributable to the period from July 1, 2020 through July 31, 2020.”

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Amendment as of June 30, 2020.

SCIENTIFIC GAMES CORPORATION

By: /s/ James Sottile

Name: James Sottile

Title: Executive Vice President and Chief Legal Officer

/s/ Matthew Wilson

Matthew Wilson

Exhibit 10.11

Amendment to Employment Agreement

This Amendment to Employment Agreement (this “Amendment”) is made on June 30, 2020 by and between Scientific Games Corporation, a Nevada corporation, (the “Company”) and Patrick J. McHugh (“Executive”).

WHEREAS, the Company and Executive entered into an Amended and Restated Employment Agreement dated as of January 1, 2019, which was then amended on February 26, 2020, and on March 24, 2020 (as amended, the “Agreement”); and

WHEREAS, the amendment to the Employment Agreement dated as of March 24, 2020 decreased Executive’s annual base salary of six hundred thousand U.S. dollars ($600,000) by seventy-one thousand, five hundred and six ($71,506), representing a portion of his annual base salary attributable to the period from April 5, 2020 through June 30, 2020.

1.Decrease in Base Salary. The Agreement is hereby amended by adding the following sentence to the end of Section 3(a):

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Amendment as of June 30, 2020.

SCIENTIFIC GAMES CORPORATION

By: /s/ James Sottile

Name: James Sottile

Title: Executive Vice President and Chief Legal Officer

/s/ Patrick J. McHugh

Patrick J. McHugh

Exhibit 10.13

Amendment to Employment Letter

This Amendment to Employment Letter (this “Amendment”) is made on June 30, 2020 by and between Scientific Games Corporation, a Nevada corporation, (the “Company”) and Stephen Richardson (“Executive”).

WHEREAS, the Company extended a written offer of employment to Executive on February 21, 2018, which Executive accepted that same day, which was then amended as of March 27, 2020 (the “Employment Letter”); and

WHEREAS, the amendment to the Employment Letter dated as of March 27, 2020 decreased Executive’s annual base salary of four hundred thousand U.S. dollars ($400,000) by nineteen thousand and sixty-eight U.S. dollars ($19,068), representing a portion of his annual base salary attributable to the period from April 5, 2020 through June 30, 2020;

1.Decrease in Base Salary. The Employment Letter is hereby amended by adding the following sentence to the end of the section of the Employment Letter captioned “Compensation”:

“Effective as of July 1, 2020, Executive will be paid twenty-seven thousand, one hundred and seventy-eight U.S. dollars ($27,178) of base salary until and through July 31, 2020, and Executive’s annual base salary of four hundred thousand U.S. dollars ($400,000) is reduced by six thousand, seven hundred and ninety-four U.S. dollars ($6,794), representing the portion of his annual base salary attributable to the period from July 1, 2020 through July 31, 2020.”

2. Except as set forth in this Amendment, all terms and conditions of the Employment Letter shall remain unchanged and in full force and effect in accordance with their terms. All references to the “letter” in the Employment Letter shall refer to the Employment Letter as amended by this Amendment. Any defined terms used in this Amendment and not defined herein shall have the meaning as set forth in the Employment Letter.

3. 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 June 30, 2020.

SCIENTIFIC GAMES CORPORATION

By: /s/ James Sottile

Name: James Sottile

Title: Executive Vice President and Chief Legal Officer

/s/ Stephen Richardson

Stephen Richardson

Exhibit 10.15

Amendment to Employment Agreement

This Amendment to Employment Agreement (this “Amendment”) is made as of May 18, 2020 by and between Scientific Games Corporation, a Nevada corporation, (the “Company”) and Michael Winterscheidt (“Executive”).

WHEREAS, the Company and Executive entered into an Amended and Restated Employment Agreement dated as of February 27, 2017, which was then amended as of February 25, 2019, and was then further amended as of March 27, 2020 (with amendments, the “Agreement”);

1.Eligibility for Cash Awards. The Agreement is hereby amended by adding the following new Section 3(g) to the Agreement:

“If Executive is an employee of the Company on November 30, 2020, then he shall receive, within ten (10) business days after that date, an amount equal to one hundred twenty-five thousand U.S. dollars ($125,000), less applicable withholdings. If Executive is an employee of the Company on February 28, 2021, then he shall receive, within ten (10) business days after that date, an additional amount equal to fifty thousand U.S. dollars ($50,000), less applicable withholdings. These amounts shall be in addition to, and not in lieu of, other compensation for which Executive is eligible pursuant to Section 3 of this Agreement.”

2. 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 amended by this Amendment. Any defined terms used in this Amendment and not defined herein shall have the meaning as set forth in the Agreement.

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Amendment as of May 18, 2020.

SCIENTIFIC GAMES CORPORATION

By: /s/ James Sottile

Name: James Sottile

Title: Executive Vice President and Chief Legal Officer

/s/ Michael Winterscheidt

Michael Winterscheidt

Exhibit 10.16

Amendment to Employment Agreement

This Amendment to Employment Agreement (this “Amendment”) is made as of June 30, 2020 by and between Scientific Games Corporation, a Nevada corporation, (the “Company”) and Michael Winterscheidt (“Executive”).

WHEREAS, the Company and Executive entered into an Amended and Restated Employment Agreement dated as of February 25, 2019, which was then amended as of March 27, 2020 (as amended, the “Agreement”); and

WHEREAS, the amendment to the Employment Agreement dated as of March 27, 2020 decreased Executive’s annual base salary by twenty percent (20%), from four hundred and seventy-five thousand U.S. dollars ($475,000) per annum to three hundred and eighty thousand U.S. dollars ($380,000) per annum, for the period from April 5, 2020 through June 30, 2020;

1.Decrease in Base Salary. The Agreement is hereby amended by adding the following sentence to the end of Section 3(a):

“Effective as of July 1, 2020, Executive’s base salary is decreased by twenty percent (20%), from four hundred and seventy-five thousand U.S. dollars ($475,000) per annum to three hundred and eighty thousand U.S. dollars ($380,000) per annum. This decrease in base salary shall be effective until and through July 31, 2020.”

2. The Company and Executive further expressly agree that by signing this Amendment, Executive waives the right to assert, until and through July 31, 2020, that the decrease in base salary set forth in Section 1 of this Amendment constitutes “Good Reason,” as that phrase is defined in Section 4(e) of the Agreement. For the avoidance of doubt, nothing in this Amendment amends the Agreement for any period of time after July 31, 2020.

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Amendment as of June 30, 2020.

SCIENTIFIC GAMES CORPORATION

By: /s/ James Sottile

Name: James Sottile

Title: Executive Vice President and Chief Legal Officer

/s/ Michael Winterscheidt

Michael Winterscheidt

Exhibit 10.18

Fourth Amendment to Consulting Agreement

This Fourth Amendment to Consulting Agreement (this “Amendment”) is made on June 30, 2020 by and between Scientific Games Corporation, a Nevada corporation, (the “Company”) and Richard Haddrill (“Consultant”).

WHEREAS, the Company and Consultant entered into a Consulting Agreement dated as of February 26, 2018, which was then amended effective as of January 1 2019, April 29, 2019 and as of April 2020 (as amended, the “Consulting Agreement”); and

WHEREAS, the amendment to the Consulting Agreement dated as of April 2020 provided that effective as of May 1, 2020, and until and through July 31, 2020, Consultant would be paid twenty thousand, eight hundred and thirty-three U.S. dollars and thirty-three cents ($20,833.33) each month for the Services provided hereunder for that period of time.

1.Decrease in Monthly Fees. The Agreement is hereby amended by adding the following sentence to the end of the first paragraph of Annex B:

“Effective as of August 1, 2020, and until and through August 31, 2020, Consultant will be paid twenty thousand, eight hundred and thirty-three U.S. dollars and thirty-three cents ($20,833.33) each month for the Services provided hereunder for that period of time.”

2. Except as set forth in this Amendment, all terms and conditions of the Consulting Agreement shall remain unchanged and in full force and effect in accordance with their terms. All references to the “Agreement” in the Consulting Agreement shall refer to the Consulting Agreement as amended by this Amendment. Any defined terms used in this Amendment and not defined herein shall have the meaning as set forth in the Agreement.

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Amendment as of June 30, 2020.

SCIENTIFIC GAMES CORPORATION

By: /s/ James Sottile

Name: James Sottile

Title: Executive Vice President and Chief Legal Officer

/s/ Richard Haddrill

Richard Haddrill

Exhibit 10.19

Employment Agreement

This Employment Agreement (this “Agreement”) is made as of April 23, 2020 by and between Scientific Games Corporation, a Nevada corporation (the “Company”), and Michael Eklund (“Executive”).

WHEREAS, the Company and Executive wish to enter into this Agreement setting forth terms and conditions of Executive’s employment.

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

1.Employment; Term. The Company hereby agrees to employ Executive, and Executive hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth in this Agreement. Executive’s principal place of work shall be the Company’s offices in Las Vegas, Nevada unless otherwise agreed by the Company in writing. The term of employment of Executive under this Agreement (the “Term”) shall be the period commencing on the day Executive begins work at the Company which shall be no later than June 1, 2020 (the “Employment Start Date”) and continuing for three (3) years thereafter, as may be extended in accordance with this Section 1 and subject to earlier termination in accordance with Section 4. The Term shall be extended automatically without further action by either party by one (1) additional year (added to the end of the Term), and then on each succeeding annual anniversary thereafter, unless either party shall have given written notice to the other party prior to the date which is sixty (60) days prior to the date upon which such extension would otherwise have become effective electing not to further extend the Term, in which case Executive’s employment shall terminate on the date upon which such extension would otherwise have become effective, unless earlier terminated in accordance with Section 4.

2.Position and Duties. During the Term, Executive will serve as Executive Vice President and Chief Financial Officer of the Company and as an officer or director of any subsidiary or affiliate of the Company if elected or appointed to such positions, as applicable, during the Term. In such capacities, Executive shall perform such duties and shall have such responsibilities as are normally associated with such positions, and as otherwise may be assigned to Executive from time to time by the Company’s Chief Executive Officer or upon the authority of the board of directors of the Company (the “Board”). Subject to Section 4(e), Executive’s functions, duties and responsibilities are subject to reasonable changes as the Company may in good faith determine from time to time. Executive hereby agrees to accept such employment and to serve the Company and its subsidiaries and affiliates to the best of Executive’s ability in such capacities, devoting all of Executive’s business time to such employment.

3.Compensation.

(a)Base Salary. From September 30, 2020 through the remainder of the Term, Executive will receive a base salary of seven hundred fifty thousand dollars ($750,000.00) per annum (pro-rated for any partial year), payable in accordance with the Company’s regular payroll practices and subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive. For the period from the Employment Start Date to September 30, 2020, Executive shall be paid at an annualized rate of $375,000 per annum, consistent with the 50% salary

reductions taken by other senior executives of the Company as a result of the COVID-19 pandemic. In the event that the Company, in its sole discretion, from time to time determines to increase Executive’s base salary, such increased amount shall, from and after the effective date of such increase, constitute the “base salary” of Executive for purposes of this Agreement.

(b)Incentive Compensation. Executive shall have the opportunity annually to earn incentive compensation (“Incentive Compensation”) during the Term in amounts determined by the Compensation Committee of the Board (the “Compensation Committee”) in its sole discretion in accordance with the applicable incentive compensation plan of the Company as in effect from time to time (the “Incentive Compensation Plan”). Under such Incentive Compensation Plan, Executive shall have the opportunity annually to earn up to 75% of Executive’s base salary as Incentive Compensation at “target opportunity” (“Target Bonus”) and up to 200% of Executive’s target bonus opportunity as Incentive Compensation at “maximum opportunity” on the terms and subject to the conditions of such Incentive Compensation Plan (any such Incentive Compensation to be subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive). Notwithstanding the foregoing Executive shall receive no Incentive Compensation with respect to the year of the Employment Start Date in light of the Cash Sign-On Award set forth in Section 3(g).

(c)Eligibility for Annual Equity Awards. During the Term, Executive shall be eligible to receive an annual grant of stock options, restricted stock units or other equity awards with a grant date fair value equal to approximately 125% of Executive’s base salary, as measured in accordance with the Company’s standard practices of measuring equity value, and in accordance with the applicable plans and programs of the Company for executives of the Company and subject to the Company’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 of Executive under any such plan or program.

(d)Expense Reimbursement. Subject to Section 3(f), during the Term the Company shall reimburse Executive for all reasonable and necessary travel and other business expenses incurred by Executive in connection with the performance of Executive’s duties under this Agreement, on a timely basis upon timely submission by Executive of vouchers therefor in accordance with the Company’s standard policies and procedures. In the event that Executive commutes to Las Vegas rather than relocating, or until Executive relocates, Company shall reimburse Executive for reasonable travel expenses incurred in commuting weekly from his home in Austin, Texas to Las Vegas, including reasonable costs of accommodation in hotels or rental of an apartment.

(e)Employee Benefits. During the Term, Executive shall be entitled to participate, without discrimination or duplication, in any and all medical insurance, group health, disability, life insurance, accidental death and dismemberment insurance, 401(k) or other retirement, deferred compensation, stock ownership and such other plans and programs which are made generally available by the Company to similarly situated executives of the Company in accordance with the terms of such plans and programs and subject to the right of the Company (or its applicable affiliate) to at any time amend or terminate any such plan or program. Executive shall be entitled to paid time off, holidays and any other time off in accordance with the Company’s policies in effect from time to time.

(f)Taxes and Internal Revenue Code 409A. Payment of all compensation and benefits to Executive under this Agreement shall be subject to all legally required and customary withholdings. 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 Executive under this

Agreement, including under Section 409A of the Internal Revenue Code of 1986, as amended (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 (including under Section 3 and Section 4) 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 Executive hereunder are deemed to be subject to Section 409A, Executive consents to the Company adopting such conforming amendments as the Company deems necessary, in its reasonable discretion, to comply with Section 409A (including delaying payment until six (6) months following termination of employment). To the extent any payments of money or other benefits due to Executive 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 Executive under this Agreement constitute deferred compensation under Section 409A, any such reimbursements or in-kind benefits shall be paid to Executive 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.

Sign-On Equity Awards. As an incentive to join the Company, Executive shall receive an award of 210,000 restricted stock units from the Company (the “Sign-On Equity Award”) under the SGC 2003 Incentive Compensation Plan, as amended and restated (or any successor plan) (the “Plan”), pursuant to an award agreement to be provided by the Company and entered into by and between Company and Executive (the “Award Agreement”). The Sign-on Equity Award shall consist of 60,000 time-vesting restricted stock units (“RSUs”) and 150,000 performance conditioned RSUs.

The grant of the Sign-On Equity Award will be made within ten (10) days after the Employment Start Date provided the Company is not in a blackout period on the Employment Start Date. If the Company is in a blackout period on the Employment Start Date, the grant of the Sign-On Equity Award will be made within three (3) trading days after the Company's next trading window opens.

The time vesting RSUs shall vest as follows: 26,667 RSUs on June 1, 2021, 16,667 RSUs on June 1, 2022 and 16,666 RSUs on June 1, 2023, provided Executive remains employed on such dates. [Dates will be anniversaries of the Employment Start Date.]

The 150,000 performance conditioned RSUs are eligible to cliff vest on the third anniversary of the grant date (the “Cliff Vesting Date”) based upon achievement of the following Attributable EBITDA (“AEBITDA”) targets for the twelve months ending March 31, 2023:

(i) $1.5 billion AEBITDA — 25% of the RSUs vest;

(ii) 1.6 billion AEBITDA — 50% of the RSUs vest; and

(iii) 1.7 billion AEBITDA — 100% of the RSUs vest.

If Executive is terminated without Cause or resigns for Good Reason at any time prior to the Cliff Vesting Date, the performance conditioned RSUs shall remain outstanding and eligible to vest on the Cliff Vesting Date subject to satisfaction of the performance conditions set forth above. In that event, the

number of RSUs that will vest shall be equal to the number of RSUs vesting if Executive were still employed on the Cliff Vesting Date multiplied by a fraction, the numerator of which is the number of days Executive was employed and the denominator of which is the number of days from the Employment Start Date to the Cliff Vesting Date. For example, if Executive were employed for 50% of the days from the Employment Start Date to the Cliff Vesting Date and then terminated without cause, and the $1.7 billion AEBITDA target were achieved, 50% of the performance conditioned RSUs (75,000) would vest.

The AEBITDA targets set forth above are based on the AEBITDA targets set forth in the employment agreements of Barry Cottle and Matthew Wilson. If the Company’s management re-evaluates the targets in Mr. Cottle’s and Mr. Wilson’s employment agreements and, as a result of such re-evaluation, proposes adjustments to those targets to the Company’s Compensation Committee and Board of Directors, management will propose corresponding adjustments with respect to the AEBITDA targets set forth above.

(g)Cash Sign-On Award. The Company will pay Executive a sign-on cash bonus of five hundred thousand dollars ($500,000), less withholdings and deductions and subject to reduction as set forth in the following sentence, (the “Cash Sign-On Award”) one year after the Employment Start Date. However, in the event that Executive receives a bonus from his previous employer in excess of $100,000, the Cash Sign-on Award shall be reduced by the amount by which such bonus from his former employer exceeds $100,000. Executive shall notify Company in writing within ten days of notice from his previous employer as to whether he will or will not receive that bonus or any portion thereof and of the amount of any bonus that will be paid.

(h)Relocation Benefits. In the event that Executive relocates to Las Vegas, Executive will receive the Company’s executive level relocation benefits, including twelve (12) months of temporary furnished housing and utilities, provided through the Company’s relocation provider.

4.Termination of Employment. Executive’s employment may be terminated at any time prior to the end of the Term under the terms described in this Section 4, and the Term shall automatically terminate upon any termination of Executive’s employment. For purposes of clarification, except as provided in Section 5.6, all stock options, restricted stock units and other equity-based awards will be governed by the terms of the plans, grant agreements and programs under which such options, restricted stock units or other awards were granted on any termination of the Term and Executive’s employment with the Company.

(a)Termination by Executive for Other than Good Reason. Executive may terminate Executive’s employment hereunder for any reason or no reason upon 60 days’ prior written notice to the Company referring to this Section 4(a); provided, however, that a termination by Executive for “Good Reason” (as defined below) shall not constitute a termination by Executive for other than Good Reason pursuant to this Section 4(a). In the event Executive terminates Executive’s employment for other than Good Reason, Executive shall be entitled only to the following compensation and benefits (the payments set forth in Sections 4(a)(i) – 4(a)(iii), collectively, the “Standard Termination Payments”):

(i) any accrued but unpaid base salary for services rendered by Executive to the date of such termination, payable in accordance with the Company’s regular payroll practices and subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive;

(ii) any vested non-forfeitable amounts owing or accrued at the date of such termination under benefit plans, programs and arrangements set forth or referred to in Section 3(e) in which Executive participated during the Term (which will be paid under the terms and conditions of such plans, programs, and arrangements (and agreements and documents thereunder)); and

(iii) reasonable business expenses and disbursements incurred by Executive prior to such termination will be reimbursed in accordance with Section 3(d).

If Executive terminates his employment for other than Good Reason prior to the first anniversary of the Employment Start Date, he shall forfeit the Cash Sign-On Award and the Sign-On Equity Award.

(b)Termination By Reason of Death. If Executive dies during the Term, the last beneficiary designated by Executive by written notice to the Company (or, in the absence of such designation, Executive’s estate) shall be entitled only to the Standard Termination Payments, including any benefits that may be payable under any life insurance benefit of Executive for which the Company pays premiums, in accordance with the terms of any such benefit and subject to the right of the Company (or its applicable affiliate) to at any time amend or terminate any such benefit.

(c)Termination By Reason of Total Disability. The Company may terminate Executive’s employment in the event of Executive’s “Total Disability.” For purposes of this Agreement, “Total Disability” shall mean Executive’s (1) becoming eligible to receive benefits under any long-term disability insurance program of the Company or (2) failure to perform the duties and responsibilities contemplated under this Agreement for a period of more than 180 days during any consecutive 12-month period due to physical or mental incapacity or impairment. In the event that Executive’s employment is terminated by the Company by reason of Total Disability, Executive shall not be entitled to receive any compensation or benefits under this Agreement except for the Standard Termination Payments; provided, however, that the Executive may separately be entitled to disability payments pursuant to a disability plan sponsored or maintained by the Company or any of its affiliates providing benefits to Executive.

(d)Termination by the Company for Cause. The Company may terminate the employment of Executive at any time for “Cause.” For purposes of this Agreement, “Cause” shall mean: (i) gross neglect by Executive of Executive’s duties hereunder; (ii) Executive’s indictment for or conviction of a felony, or any non-felony crime or offense involving the property of the Company or any of its subsidiaries or affiliates or evidencing moral turpitude; (iii) willful misconduct by Executive in connection with the performance of Executive’s duties hereunder; (iv) intentional breach by Executive of any material provision of this Agreement; (v) material violation by Executive of a material provision of the Company’s Code of Business Conduct; (vi) Executive’s failure to qualify (or failure to remain qualified) under any suitability or licensing requirements to which Executive may be subject by reason of Executive’s position with the Company; (vii) Executive’s failure to cooperate with or respond to any regulatory requests for information in connection with such licensing requirements; (viii) Executive’s failure to timely file required license applications; (ix) the denial of any license application submitted by Executive; or (x) any other willful or grossly negligent conduct of Executive that would make the continued employment of Executive by the Company materially prejudicial to the best interests of the Company. In the event Executive’s employment is terminated for “Cause,” Executive shall not be entitled to receive any compensation or benefits under this Agreement except for the Standard Termination Payments.

(e)Termination by the Company without Cause or by Executive for Good Reason. The Company may terminate Executive’s employment at any time without Cause, for any reason or no reason, and Executive may terminate Executive’s employment for “Good Reason.” For purposes of this Agreement “Good Reason” shall mean that, without Executive’s prior written consent, any of the following shall have occurred: (A) a material adverse change to Executive’s positions, titles, offices, or duties following the Employment Start Date from those set forth in Section 2, except, in such case, in connection with the termination of Executive’s employment for Cause or due to Total Disability, death or expiration of the Term; (B) a material decrease in base salary or material decrease in Executive’s Incentive Compensation opportunity provided under this Agreement; or (C) 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 Executive for Good Reason under any of clauses (A) through (C) of this Section 4(e) shall not be considered effective unless Executive shall have provided the Company with written notice of the specific reasons for such termination within thirty (30) days after Executive 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 Executive actually terminates his employment within ninety (90) days following the initial occurrence of the event giving rise to Good Reason. In the event that Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason (and not, for the avoidance of doubt, in the event of a termination pursuant to Section 4(a), (b), (c) or (d) or due to or upon the expiration of the Term), the Company shall pay or provide the following amounts to Executive:

(i) the Standard Termination Payments;

(ii) an amount equal to the sum of (A) the Executive’s annual base salary then in effect, and (B) an amount equal to the highest annual Incentive Compensation paid to Executive in respect of the two (2) most recent fiscal years of the Company but in no event more than Executive’s Target Bonus for the then-current fiscal year, provided that, if such termination occurs prior to payment of any Incentive Compensation to Executive, the amount specified in clause (ii)(B) shall be Executive’s Target Bonus for the then-current fiscal year. The total amount under this clause (ii) shall be payable in equal installments in accordance with the Company’s normal payroll practices over a period of twelve (12) months after such termination, and otherwise in accordance with Section 4(g);

(iii) no later than March 15 following the end of the year in which such termination occurs, in lieu of any Incentive Compensation for the year in which such termination occurs, payment of an amount equal to (A) the Incentive Compensation which would have been payable to Executive had Executive remained in employment with the Company during the entire year in which such termination occurred, multiplied by (B) a fraction the numerator of which is the number of days Executive was employed in the year in which such termination occurs and the denominator of which is the total number of days in the year in which such termination occurs; and

(iv) if Executive elects to continue medical coverage under the Company’s group health plan in accordance with COBRA, the full monthly premiums for such coverage on a monthly basis until the earlier of: (A) a period of twelve (12) months has elapsed; or (B) Executive is eligible for medical coverage under a plan provided by a new employer.

(f)Expiration of Term of Agreement. In the event Executive’s employment is terminated by the Company at the end of the Term, Executive shall receive:

(i) the Standard Termination Payments;

(ii) an amount equal to the sum of (A) the Executive’s annual base salary then in effect, and (B) an amount equal to the highest annual Incentive Compensation paid to Executive in respect of the two (2) most recent fiscal years of the Company but in no event more than Executive’s Target Bonus for the then-current fiscal year. Such total amount under this clause (ii) shall be payable in equal installments in accordance with the Company’s normal payroll practices over a period of twelve (12) months after such termination, and otherwise in accordance with Section 4(g);

(iv)if Executive elects to continue medical coverage under the Company’s group health plan in accordance with COBRA, the full monthly premiums for such coverage on a monthly basis until the earlier of: (A) a period of twelve (12) months has elapsed; or (B) Executive is eligible for medical coverage under a plan provided by a new employer.

(g)Timing of Certain Payments under Section 4. For purposes of Section 409A, references herein to the Executive’s “termination of employment” shall refer to Executive’s separation of services with the Company within the meaning of Treas. Reg. Section 1.409A-1(h). If at the time of Executive’s separation of service with the Company other than as a result of Executive’s death, (i) Executive is a “specified employee” (as defined in Section 409A(a)(2)(B)(i) of the Code), (ii) one or more of the payments or benefits received or to be received by Executive pursuant to this Agreement would constitute deferred compensation subject to Section 409A, and (iii) the deferral of the commencement of any such payments or benefits otherwise payable hereunder as a result of such separation of service is necessary in order to prevent any accelerated or additional tax under Section 409A, such payments may be made as follows: (i) no payments for a six-month period following the date of Executive’s separation of service with the Company; (ii) an amount equal to the aggregate sum that would have been otherwise payable during the initial six-month period paid in a lump sum on the first payroll date following six (6) months following the date of Executive’s separation of service with the Company (subject to such deductions or amounts to be withheld as required by applicable law and regulations); and (iii) during the period beginning six (6) months following Executive’s separation of service with the Company through the remainder of the applicable period, payment of the remaining amount due in equal installments in accordance with the Company’s standard payroll practices (subject to such deductions or amounts to be withheld as required by applicable law and regulations).

(h)Mitigation. In the event the Executive’s employment is terminated in accordance with Section 4(e) or (f) and Executive is employed by or otherwise engaged to provide services to another person or entity at any time prior to the end of any period of payments to or on behalf of Executive

contemplated by this Section 4, Executive shall immediately advise the Company of such employment or engagement and his compensation therefor and the Company’s obligation to make payments pursuant to Section 4(e) or (f) shall be reduced by any base compensation payable to Executive during the applicable period through such other employment or engagement.

(i)Set-Off. To the fullest extent permitted by law and provided an acceleration of income or the imposition of an additional tax under Section 409A would not result, any amounts otherwise due to Executive hereunder (including any payments pursuant to this Section 4) shall be subject to set-off with respect to any amounts Executive otherwise owes the Company or any subsidiary or affiliate thereof.

(j)No Other Benefits or Compensation. Except as may be specifically provided under this Agreement, under any other effective written agreement between Executive and the Company, or under the terms of any plan or policy applicable to Executive, Executive shall have no right to receive any other compensation from the Company or any subsidiary or affiliate thereof, or to participate in any other plan, arrangement or benefit provided by the Company or any subsidiary or affiliate thereof, with respect to any future period after such termination or resignation. Executive acknowledges and agrees that Executive is entitled to no compensation or benefits from the Company or any of its subsidiaries or affiliates of any kind or nature whatsoever in respect of periods prior to the date of this Agreement.

(k)Release of Employment Claims; Compliance with Section 5. Executive agrees, as a condition to receipt of any termination payments provided for in this Section 4 (other than the Standard Termination Payments), that Executive will execute a general release agreement, in a form reasonably satisfactory to the Company, releasing any and all claims arising out of Executive’s employment and the termination of such employment. The Company shall provide Executive with the proposed form of general release agreement referred to in the immediately preceding sentence no later than five (5) days following the date of termination. Executive shall thereupon have at least 21 days to consider such general release agreement and, if Executive executes such general release agreement, shall have seven (7) days after execution of such general release agreement to revoke such general release agreement. Absent such revocation, such general release agreement shall become binding on Executive. If Executive does not revoke such general release agreement, payments contingent on such general release agreement shall be paid on the later of the 60^th day after the date of termination or the date such payments are otherwise scheduled to be paid pursuant to this Agreement (including pursuant to Section 4(g) hereof). The Company’s obligation to make any termination payments and benefits provided for in this Section 4 (other than the Standard Termination Payments) shall immediately cease if Executive willfully or materially breaches Section 5.1, 5.2 , 5.3, 5.4, or 5.8.

(l)Section 280G. If the aggregate of all amounts and benefits due to the Executive under this Agreement or any other plan, program, agreement or arrangement of the Company or any of its affiliates, which, if received by the Executive in full, would constitute “parachute payments,” as such term is defined in and under Section 280G of the Code (collectively, “Change in Control Benefits”), reduced by all Federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to Section 4999 of the Code, is less than the amount the Executive would receive, after all such applicable taxes, if the Executive received aggregate Change in Control Benefits equal to an amount which is $1.00 less than three (3) times the Executive's “base amount,” as defined in and determined under Section 280G of the Code, then such Change in Control Benefits shall be reduced or eliminated to the extent necessary so that the Change in Control Benefits received by the Executive will not constitute parachute payments. If a reduction in the Change in Control Benefits is necessary, reduction shall occur in the following order unless the Executive elects in writing a different order, subject to the Company's consent (which shall not

be unreasonably withheld or delayed): (i) severance payment based on multiple of base salary and/or Target Bonus; (ii) other cash payments; (iii) any pro-rated bonus paid as severance; (iv) acceleration of vesting of stock options with an exercise price that exceeds the then fair market value of stock subject to the option, provided such options are not permitted to be valued under Treasury Regulations Section 1.280G-1 Q/A – 24(c); (v) any equity awards accelerated or otherwise valued at full value, provided such equity awards are not permitted to be valued under Treasury Regulations Section 1.280G-1 Q/A – 24(c); (vi) acceleration of vesting of stock options with an exercise price that exceeds the then fair market value of stock subject to the option, provided such options are permitted to be valued under Treasury Regulations Section 1.280G-1 Q/A – 24(c); (vii) acceleration of vesting of all other stock options and equity awards; and (viii) within any category, reductions shall be from the last due payment to the first.

It is possible that after the determinations and selections made pursuant to the preceding paragraph that the Executive will receive Change in Control Benefits that are, in the aggregate, either more or less than the amounts contemplated by the preceding paragraph (hereafter referred to as an “Excess Payment” or “Underpayment,” respectively). If there is an Excess Payment, the Executive shall promptly repay the Company an amount consistent with this paragraph. If there is an Underpayment, the Company shall pay the Executive an amount consistent with this paragraph.

5.Noncompetition; Non-solicitation; Nondisclosure; etc.

5.1 Noncompetition; Non-solicitation.

(a)Executive acknowledges the highly competitive nature of the Company’s business and that access to the Company’s confidential records and proprietary information renders Executive special and unique within the Company’s industries. In consideration of the amounts that may hereafter be paid to Executive pursuant to this Agreement (including Sections 3 and 4), Executive agrees that during the Term (including any extensions thereof) and during the Covered Time (as defined in Section 5.1(e)), Executive, 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 5, “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 (1) instant lottery tickets or games or any related marketing, warehouse, distribution, category management or other services or programs; (2) lottery-related terminals or vending machines (whether clerk-operated, self-service or otherwise), (3) gaming machines, terminals or devices (including video or reel spinning slot machines, video poker machines, video lottery terminals and fixed odds betting terminals), (4) 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); (5) 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; (6) 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; (7) 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); (8) 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; (9) 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; (10) prepaid cellular or other phone cards; or (11) 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 (1) through (10) above; or (B) in which the Company is then or was within the previous 12 months engaged, or in which the Company, to Executive’s knowledge, contemplates to engage in during the Term or the Covered Time; (ii) in which Executive was engaged or involved (whether in an executive or supervisory capacity or otherwise) on behalf of the Company or with respect to which Executive has obtained proprietary or confidential information; and (iii) which were conducted anywhere in the United States or in any other geographic area in which such business was conducted or contemplated to be conducted by the Company. Notwithstanding anything to the contrary in the foregoing, the holding of up to one percent (1%) of the outstanding equity in a publicly traded entity for passive investment purposes shall not, in and of itself, be construed as engaging in a Competing Business.

(b)In further consideration of the amounts that may hereafter be paid to Executive pursuant to this Agreement (including Sections 3 and 4), Executive agrees that, during the Term (including any extensions thereof) and during the Covered Time, Executive shall not, directly or indirectly: (i) solicit or attempt to induce any of the employees, agents, consultants or representatives of the Company to terminate his, her, or its relationship with the Company; (ii) solicit or attempt to induce any of the employees, agents, consultants or representatives of the Company to become employees, agents, consultants or representatives of any other person or entity; or (iii) solicit or attempt to induce any customer, vendor or distributor of the Company to curtail or cancel any business with the Company; or (iv) hire any person who, to Executive’s actual knowledge, is, or was within 180 days prior to such hiring, an employee of the Company. Sections (i) and (ii) are limited to employees, agents, consultants and representatives with whom Executive had material contact for the purpose of performing Executive’s job duties or about whom Executive obtained confidential information during Executive’s employment. Section (iii) is limited to customers, vendors and distributors with whom Executive had material contact for the purpose of performing his job duties, or about whom Executive obtained confidential information during his employment.

(c)During the Term (including any extensions thereof) and during the Covered Time, Executive agrees that upon the earlier of Executive’s (i) negotiating with any Competitor (as defined below) concerning the possible employment of Executive by 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) Executive will provide copies of Section 5 of this Agreement to the Competitor, and (B) in the case of any circumstance described in (iii) above occurring during the Covered Time, and in the case of any circumstance described in (i) or (ii) above occurring during the Term or during the Covered Time, Executive will promptly provide notice to the Company of such circumstances. Executive further agrees that the Company may provide notice to a Competitor of Executive’s obligations under this Agreement. For purposes of this Agreement, “Competitor” shall mean any person or entity (other than the Company, its subsidiaries or affiliates) that engages, directly or indirectly, in the United States or any other geographic area in any Competing Business.

(d)Executive understands that the restrictions in this Section 5.1 may limit Executive’s ability to earn a livelihood in a business similar to the business of the Company but nevertheless agrees and acknowledges that the consideration provided under this Agreement (including Sections 3 and 4) is sufficient to justify such restrictions. In consideration thereof and in light of Executive’s education, skills and abilities, Executive agrees that Executive will not assert in any forum

that such restrictions prevent Executive from earning a living or otherwise should be held void or unenforceable.

(e)For purposes of this Section 5.1, “Covered Time” shall mean the period beginning on the date of termination of Executive’s employment and ending twelve (12) months thereafter.

(f)In the event that a court of competent jurisdiction or arbitrator(s), as the case may be, determine that the provisions of this Section 5.1 are unenforceable for any reason, the parties acknowledge and agree that the court or arbitrator(s) is expressly empowered to reform any provision of this Section so as to make them enforceable as described in Section 10 below.

5.2Proprietary Information; Inventions.

(a) Executive acknowledges that, during the course of Executive’s employment with the Company, Executive necessarily will have (and during any employment by, or affiliation with, the Company prior to the Term has had) access to and make use of proprietary information and confidential records of the Company. Executive covenants that Executive shall not during the Term or at any time thereafter, directly or indirectly, use for Executive’s own purpose or for the benefit of any person or entity other than the Company, 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 the Company; (ii) the name and/or address of any customer or vendor of the Company or any information concerning the transactions or relations of any customer or vendor of the Company with the Company; (iii) any information concerning any product, technology, or procedure employed by the Company but not generally known to its customers or vendors or competitors, or under development by or being tested by the Company but not at the time offered generally to customers or vendors; (iv) any information relating to the Company’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 the Company; (vi) any information that, to Executive’s actual knowledge, the Company ordinarily maintains as confidential or proprietary; (vii) any business plans, budgets, advertising or marketing plans; (viii) any information contained in any of the Company’s written or oral policies and procedures or manuals; (ix) any information belonging to customers, vendors or any other person or entity which the Company, to Executive’s actual knowledge, has agreed to hold in confidence; and (x) all written, graphic, electronic data and other material containing any of the foregoing. Executive 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, information that becomes available to Executive on an unrestricted, non-confidential basis from a source other than the Company or any of its directors, officers, employees, agents or other representatives (without breach of any obligation of confidentiality of which Executive has knowledge, after reasonable inquiry, at the time of the relevant disclosure by Executive), or general lottery, land-based gaming, interactive gaming or social gaming industry information to the extent not particularly related or proprietary to the Company that was already known to Executive at the time Executive commences his employment by the Company that is not subject to nondisclosure by virtue of Executive’s prior employment or otherwise. Notwithstanding the foregoing and Section 5.3, Executive 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 his duties as a director or employee of the Company, (B) required to do so by a court of law, by any governmental

agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order him to divulge, disclose or make accessible such information (provided that in such case Executive 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 the Company to obtain a protective order or similar confidentiality treatment for such information), (C) such information or records becomes generally known to the public without his violation of this Agreement, or (D) disclosed to Executive’s spouse, attorney and/or his personal tax and financial advisors to the extent reasonably necessary to advance Executive’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 5.2 or Section 5.3 by Executive.

(b) Executive 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 Executive during the Term (and during any employment by, or affiliation with, the Company prior to the Term) shall belong to the Company, provided that such Inventions grew out of Executive’s work with the Company or any of its subsidiaries or affiliates, are related in any manner to the business (commercial or experimental) of the Company or any of its subsidiaries or affiliates or are conceived or made on the Company’s time or with the use of the Company’s facilities or materials. Executive shall further: (i) promptly disclose such Inventions to the Company; (ii) assign to the Company, 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 Executive’s inventorship. If any Invention is described in a patent application or is disclosed to third parties, directly or indirectly, by Executive within two (2) years after the termination of Executive’s employment with the Company, it is to be presumed that the Invention was conceived or made during the Term. Executive agrees that Executive will not assert any rights to any Invention as having been made or acquired by Executive prior to the date of this Agreement, except for Inventions, if any, disclosed in Exhibit A to this Agreement.

5.3Confidentiality and Surrender of Records. Executive shall not, during the Term or at any time thereafter (irrespective of the circumstances under which Executive’s employment by the Company terminates), except to the extent required by law, directly or indirectly publish, make known or in any fashion disclose 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 the Company, nor shall Executive retain, and will deliver promptly to the Company, any of the same following termination of Executive’s employment hereunder for any reason or upon request by the Company. 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 Executive’s possession or under Executive’s control or accessible to Executive which contain any proprietary information. All confidential records shall be and remain the sole property of the Company during the Term and thereafter.

Notwithstanding anything herein to the contrary, nothing in this Agreement shall (i) prohibit Executive 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). Executive understands that activities protected by Sections 5.2 and 5.3 may include disclosure of trade secret or confidential information within the

limitations permitted by the Defend Trade Secrets Act (“DTSA”). And, in this regard, Executive acknowledges notification that under the DTSA no individual will be held criminally or civilly liable under Federal or State trade secret law for disclosure of a trade secret (as defined in the Economic Espionage Act) that is: (A) made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and made solely for the purpose of reporting or investigating a suspected violation of law; or, (B) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public. And, an individual who pursues a lawsuit for retaliation by an employer for reporting a suspected violation of the law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal, and does not disclose the trade secret, except as permitted by court order.

5.4Non-disparagement. Executive shall not, during the Term and thereafter, disparage in any material respect the Company, any affiliate of the Company, any of their respective businesses, any of their respective officers, directors or employees, or the reputation of any of the foregoing persons or entities. Notwithstanding the foregoing, nothing in this Agreement shall preclude Executive from making truthful statements that are required by applicable law, regulation or legal process.

5.5No Other Obligations. Executive represents that Executive is not precluded or limited in Executive’s ability to undertake or perform the duties described herein by any contract, agreement or restrictive covenant as of the Employment Start Date.

5.6Forfeiture of Outstanding Equity Awards; “Clawback” Policies. The other provisions of this Agreement notwithstanding, if Executive willfully and materially fails to comply with Section 5.1, 5.2, 5.3, 5.4, or 5.8, all options to purchase common stock, restricted stock units and other equity-based awards granted by the Company or any of its affiliates (whether prior to, contemporaneous with, or subsequent to the date hereof) and held by Executive or a transferee of Executive shall be immediately forfeited and cancelled. Executive acknowledges and agrees that, notwithstanding anything contained in this Agreement or any other agreement, plan or program, any incentive-based compensation or benefits contemplated under this Agreement (including Incentive Compensation and equity-based awards) shall be subject to recovery by the Company under any compensation recovery or “clawback” policy, generally applicable to executives of the Company, that the Company may adopt from time to time, including any policy which the Company may be required to adopt under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the Securities and Exchange Commission thereunder or the requirements of any national securities exchange on which the Company’s common stock may be listed.

5.7Enforcement. Executive acknowledges and agrees that, by virtue of Executive’s position, services and access to and use of confidential records and proprietary information, any violation by Executive of any of the undertakings contained in this Section 5 would cause the Company immediate, substantial and irreparable injury for which it has no adequate remedy at law. Accordingly, Executive 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 undertaking contained in this Section 5. Executive waives posting of any bond otherwise necessary to secure such injunction or other equitable relief. Rights and remedies provided for in this Section 5 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.

5.8Cooperation with Regard to Litigation. Executive agrees to cooperate reasonably with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), by being available to testify on behalf of the Company in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative. In addition, except to the extent that Executive has or intends to assert in good faith an interest or position adverse to or inconsistent with the interest or position of the Company, Executive agrees to cooperate reasonably with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), to assist the Company in any such action, suit, or proceeding by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to the Company, in each case, as reasonably requested by the Company. The Company agrees to pay (or reimburse, if already paid by Executive) all reasonable travel and communication expenses actually incurred in connection with Executive’s cooperation and assistance.

5.9Survival. The provisions of this Section 5 shall survive the termination of the Term and any termination or expiration of this Agreement.

5.10Company. For purposes of this Section 5, references to the “Company” shall include the Company and each subsidiary and/or affiliate of the Company (and each of their respective joint ventures and equity method investees).

6.Code of Conduct. Executive acknowledges that Executive has read the Company’s Code of Business Conduct and agrees to abide by such Code of Business Conduct, as amended or supplemented from time to time, and other policies applicable to employees and executives of the Company.

7.Indemnification. The Company shall indemnify Executive to the full extent permitted under the Company’s Certificate of Incorporation or By-Laws and pursuant to any other agreements or policies in effect from time to time in connection with any action, suit or proceeding to which Executive may be made a party by reason of Executive being an officer, director or employee of the Company or of any subsidiary or affiliate of the Company.

8.Assignability; Binding Effect. Neither this Agreement nor the rights or obligations hereunder of the parties shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution and as specified below. The Company may assign this Agreement and the Company’s rights and obligations hereunder to any affiliate of the Company, provided that upon any such assignment the Company shall remain liable for the obligations to Executive hereunder. This Agreement shall be binding upon and inure to the benefit of Executive, Executive’s heirs, executors, administrators, and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its successors and assigns.

9.Complete Understanding; Amendment; Waiver. This Agreement constitutes the complete understanding between the parties with respect to the employment of Executive and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof, including superseding any entitlements to benefits or payments pursuant to any severance plan, policy, practice or arrangement maintained by the Company or any affiliate thereof as of the date this Agreement is executed by both parties, and no statement, representation, warranty or covenant has been made by either party with respect thereto except as expressly set forth herein. Except as contemplated by Sections 3(f), 5.1(f) and 10, this Agreement shall not be modified, amended or

terminated except by a written instrument signed by each of the parties. Any waiver of any term or provision hereof, or of the application of any such term or provision to any circumstances, shall be in writing signed by the party charged with giving such waiver. Waiver by either party of any breach hereunder by the other party shall not operate as a waiver of any other breach, whether similar to or different from the breach waived. No delay by either party in the exercise of any rights or remedies shall operate as a waiver thereof, and no single or partial exercise by either party of any such right or remedy shall preclude other or further exercise thereof.

10.Severability. If any provision of this Agreement or the application of any such provision to any person or circumstances shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law. If any provision of this Agreement, or any part thereof, is held to be invalid or unenforceable because of the scope or duration of or the area covered by such provision, the parties agree that the court making such determination shall reduce the scope, duration and/or area of such provision (and shall substitute appropriate provisions for any such invalid or unenforceable provisions) in order to make such provision enforceable to the fullest extent permitted by law and/or shall delete specific words and phrases, and such modified provision shall then be enforceable and shall be enforced. The parties recognize that if, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants contained in this Agreement, then that invalid or unenforceable covenant contained in this Agreement shall be deemed eliminated from these provisions to the extent necessary to permit the remaining separate covenants to be enforced. In the event that any court determines that the time period or the area, or both, are unreasonable and that any of the covenants is to that extent invalid or unenforceable, the parties agree that such covenants will remain in full force and effect, first, for the greatest time period, and second, in the greatest geographical area that would not render them unenforceable.

11.Survivability. The provisions of this Agreement which by their terms call for performance subsequent to termination of Executive’s employment hereunder, or of this Agreement, shall so survive such termination, whether or not such provisions expressly state that they shall so survive.

12.Governing Law; Arbitration.

(a) Governing Law. 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.

(b) Arbitration.

(i) Executive and the Company agree that, except for claims for workers’ compensation, unemployment compensation, and any other claim that is non-arbitrable under applicable law, final and binding arbitration shall be the exclusive forum for any dispute or controversy between them, including disputes arising under or in connection with this Agreement, Executive’s employment, and/or termination of employment, with the Company; provided, however, that the Company shall be entitled to commence an action in any court of competent jurisdiction for injunctive relief in connection with any alleged actual or threatened violation of any provision of Section 5. For purposes of entering judgment on an arbitrators award or seeking

injunctive relief with regard to Section 5, the Company and Executive hereby consent to the exclusive personal jurisdiction in the state and federal courts located in Las Vegas, Nevada; provided that damages for any alleged violation of Section 5, as well as any claim, counterclaim or cross-claim brought by Executive or any third-party in response to, or in connection with any court action commenced by the Company seeking said injunctive relief shall remain exclusively subject to final and binding arbitration as provided for herein. The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which either may now or hereafter have to such jurisdiction, venue and any defense of inconvenient forum. Thus, except for the claims carved out above, this Agreement includes all common-law and statutory claims (whether arising under federal state or local law), including any claim for breach of contract, fraud, fraud in the inducement, unpaid wages, wrongful termination, and gender, age, national origin, sexual orientation, marital status, disability, or any other protected status.

(ii) Any arbitration under this Agreement shall be filed exclusively with, and administered by, the American Arbitration Association in Las Vegas, Nevada before three arbitrators, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect at the time of submission to arbitration. The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Company shall pay all costs uniquely attributable to arbitration, including the administrative fees and costs of the arbitrators. Each party shall pay that party’s own costs and attorney fees, if any, unless the arbitrators rule otherwise. Executive understands that Executive is giving up no substantive rights, and this Agreement simply governs forum. The arbitrators shall apply the same standards a court would apply to award any damages, attorney fees or costs. Executive shall not be required to pay any fee or cost that Executive would not otherwise be required to pay in a court action, unless so ordered by the arbitrators.

EXECUTIVE INITIALS: ME COMPANY INITIALS: JS

(c) WAIVER OF JURY TRIAL. BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT THE RIGHT TO A COURT TRIAL AND TRIAL BY JURY IS OF VALUE, AND KNOWINGLY AND VOLUNTARILY WAIVE THAT RIGHT FOR ANY DISPUTE SUBJECT TO THE TERMS OF THIS ARBITRATION PROVISION.

13. Titles and Captions. All paragraph titles or captions in this Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any provision hereof.

14.Joint Drafting. In recognition of the fact that the parties had an equal opportunity to negotiate the language of, and draft, this Agreement, the parties acknowledge and agree that there is no single drafter of this Agreement and, therefore, the general rule that ambiguities are to be construed against the drafter is, and shall be, inapplicable. If any language in this Agreement is found or claimed to be ambiguous, each party shall have the same opportunity to present evidence as to the actual intent of the parties with respect to any such ambiguous language without any inference or presumption being drawn against any party hereto.

15.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 Executive, 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.

16.Licensing Requirements. The Company is subject to the laws, rules and regulations of various governmental bodies that regulate gaming companies. Executive may be required to submit to background, suitability and licensing investigations conducted by multiple gaming regulators. Executive agrees to fully cooperate with both the Company and gaming regulators by furnishing all requested information, including personal information regarding Executive and Executive’s family members, and documentation during the regulatory process. Executive agrees to fully cooperate with and conform to all regulatory requests for information in the required timeframe. Compliance with this requirement is a material provision of this Agreement.

17.Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” unless the context otherwise indicates. When a reference in this Agreement is made to a “party” or “parties,” such reference shall be to a party or parties to this Agreement unless otherwise indicated or the context requires otherwise. Unless the context requires otherwise, the terms “hereof,” “herein,” “hereby,” “hereto”, “hereunder” and derivative or similar words in this Agreement refer to this entire Agreement. Unless the context requires otherwise, words in this Agreement using the singular or plural number also include the plural or singular number, respectively, and the use of any gender herein shall be deemed to include the other genders. References in this Agreement to “dollars” or “$” are to U.S. dollars. When a reference is made in this Agreement to a law, statute or legislation, such reference shall be to such law, statute or legislation as it may be amended, modified, extended or re-enacted from time to time (including any successor law, statute or legislation) and shall include any regulations promulgated thereunder from time to time. The headings used herein are for reference only and shall not affect the construction of this Agreement.

[remainder of page intentionally left blank]

IN WITNESS WHEREOF, each of the parties has duly executed this Agreement as of the date above written.


			SCIENTIFIC GAMES CORPORATION

			By:			/s/ James Sottile
						James Sottile
						Executive Vice President and Chief Legal Officer

						EXECUTIVE

						/s/ Michael Eklund
						Michael Eklund

Exhibit A

Inventions

Exhibit 22.1

Registered Debt Securities - Issuer and Guarantor Information

(All subsidiaries are 100% owned unless otherwise stated)

As of June 30, 2020

Scientific Games Corporation (Guarantor)

Scientific Games Corporation Subsidiaries:

•Scientific Games International, Inc. (Issuer)

•Don Best Sports Corporation (Guarantor)

•MDI Entertainment, LLC (Guarantor)

•NYX Digital Gaming (USA), LLC (Guarantor)

•Scientific Games New Jersey, LLC (Guarantor)

•Scientific Games Products, Inc. (Guarantor)

•SG Gaming, Inc. (Guarantor)

•SG Gaming North America, Inc. (Guarantor)

•Williams Electronics Games, Inc. (Guarantor)

The only registered debt securities are the 6.625% Senior Subordinated Notes due 2021, which are unsecured and therefore do not have any associated pledges.

Exhibit 31.1

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

I, Barry L. Cottle, 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: July 23, 2020


/s/ Barry L. Cottle
Barry L. Cottle
Chief Executive Officer

Exhibit 31.2

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

I, Michael C. Eklund, 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: July 23, 2020


/s/ Michael C. Eklund
Michael C. Eklund
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 June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barry L. Cottle, 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/ Barry L. Cottle
			Barry L. Cottle
			Chief Executive Officer
			July 23, 2020

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 June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Eklund, 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 C. Eklund
			Michael C. Eklund
			Chief Financial Officer
			July 23, 2020