000075000412/312021Q2FALSEExclusive of D&A(2) Includes $63 million gain for the three and six months ended June 30, 2021, related to the SportCast acquisition transaction.Includes $63 million gain for the three and six months ended June 30, 2021, related to the SportsCast acquisition transaction. P10Dus-gaap:AccountingStandardsUpdate201905Member00007500042021-01-012021-06-300000750004us-gaap:CommonStockMember2021-01-012021-06-300000750004sgms:PreferredStockPurchaseRightsMember2021-01-012021-06-30xbrli:shares00007500042021-08-04iso4217:USD0000750004us-gaap:ServiceMember2021-04-012021-06-300000750004us-gaap:ServiceMember2020-04-012020-06-300000750004us-gaap:ServiceMember2021-01-012021-06-300000750004us-gaap:ServiceMember2020-01-012020-06-300000750004us-gaap:ProductMember2021-04-012021-06-300000750004us-gaap:ProductMember2020-04-012020-06-300000750004us-gaap:ProductMember2021-01-012021-06-300000750004us-gaap:ProductMember2020-01-012020-06-300000750004sgms:InstantProductsMember2021-04-012021-06-300000750004sgms:InstantProductsMember2020-04-012020-06-300000750004sgms:InstantProductsMember2021-01-012021-06-300000750004sgms:InstantProductsMember2020-01-012020-06-3000007500042021-04-012021-06-3000007500042020-04-012020-06-3000007500042020-01-012020-06-300000750004us-gaap:RetainedEarningsMember2021-04-012021-06-30iso4217:USDxbrli:shares0000750004us-gaap:SubsequentEventMembersgms:SportCastPtyLimitedMember2021-08-012021-08-3100007500042021-06-3000007500042020-12-310000750004us-gaap:CommonStockMember2021-06-300000750004us-gaap:AdditionalPaidInCapitalMember2021-06-300000750004us-gaap:RetainedEarningsMember2021-06-300000750004us-gaap:TreasuryStockMember2021-06-300000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-3000007500042019-12-3100007500042020-06-30sgms:Segmentxbrli:pure0000750004us-gaap:SubsequentEventMembersgms:OtherSciPlayOwnersMember2021-07-150000750004us-gaap:SubsequentEventMember2021-07-150000750004us-gaap:SubsequentEventMember2021-08-012021-08-310000750004us-gaap:RestrictedStockUnitsRSUMember2020-04-012020-06-300000750004us-gaap:EmployeeStockOptionMember2020-01-012020-06-300000750004sgms:SportCastPtyLimitedMember2020-08-012020-08-310000750004us-gaap:SubsequentEventMembersgms:SportCastPtyLimitedMember2021-08-010000750004us-gaap:SubsequentEventMembersgms:KoukoiOyMember2021-07-022021-07-020000750004us-gaap:SubsequentEventMembersgms:LightningBoxGamesMember2021-08-012021-08-310000750004us-gaap:SubsequentEventMembersgms:LightningBoxGamesMember2021-08-310000750004sgms:GamingOperationsMembersgms:GamingGroupMember2021-04-012021-06-300000750004sgms:GamingOperationsMembersgms:GamingGroupMember2020-04-012020-06-300000750004sgms:GamingOperationsMembersgms:GamingGroupMember2021-01-012021-06-300000750004sgms:GamingOperationsMembersgms:GamingGroupMember2020-01-012020-06-300000750004sgms:GamingGroupMembersgms:GamingMachineSalesMember2021-04-012021-06-300000750004sgms:GamingGroupMembersgms:GamingMachineSalesMember2020-04-012020-06-300000750004sgms:GamingGroupMembersgms:GamingMachineSalesMember2021-01-012021-06-300000750004sgms:GamingGroupMembersgms:GamingMachineSalesMember2020-01-012020-06-300000750004sgms:GamingSystemsMembersgms:GamingGroupMember2021-04-012021-06-300000750004sgms:GamingSystemsMembersgms:GamingGroupMember2020-04-012020-06-300000750004sgms:GamingSystemsMembersgms:GamingGroupMember2021-01-012021-06-300000750004sgms:GamingSystemsMembersgms:GamingGroupMember2020-01-012020-06-300000750004sgms:TableProductsMembersgms:GamingGroupMember2021-04-012021-06-300000750004sgms:TableProductsMembersgms:GamingGroupMember2020-04-012020-06-300000750004sgms:TableProductsMembersgms:GamingGroupMember2021-01-012021-06-300000750004sgms:TableProductsMembersgms:GamingGroupMember2020-01-012020-06-300000750004sgms:GamingGroupMember2021-04-012021-06-300000750004sgms:GamingGroupMember2020-04-012020-06-300000750004sgms:GamingGroupMemberus-gaap:OperatingSegmentsMember2021-01-012021-06-300000750004sgms:GamingGroupMember2020-01-012020-06-300000750004sgms:LotterySystemsGroupMembersgms:InstantProductsMember2021-04-012021-06-300000750004sgms:LotterySystemsGroupMembersgms:InstantProductsMember2020-04-012020-06-300000750004sgms:LotterySystemsGroupMembersgms:InstantProductsMember2021-01-012021-06-300000750004sgms:LotterySystemsGroupMembersgms:InstantProductsMember2020-01-012020-06-300000750004sgms:LotterySystemsGroupMembersgms:LotterySystemsMember2021-04-012021-06-300000750004sgms:LotterySystemsGroupMembersgms:LotterySystemsMember2020-04-012020-06-300000750004sgms:LotterySystemsGroupMembersgms:LotterySystemsMember2021-01-012021-06-300000750004sgms:LotterySystemsGroupMembersgms:LotterySystemsMember2020-01-012020-06-300000750004sgms:LotterySystemsGroupMember2021-04-012021-06-300000750004sgms:LotterySystemsGroupMember2020-04-012020-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:OperatingSegmentsMember2021-01-012021-06-300000750004sgms:LotterySystemsGroupMember2020-01-012020-06-300000750004sgms:MobileMembersgms:SciPlayMember2021-04-012021-06-300000750004sgms:MobileMembersgms:SciPlayMember2020-04-012020-06-300000750004sgms:MobileMembersgms:SciPlayMember2021-01-012021-06-300000750004sgms:MobileMembersgms:SciPlayMember2020-01-012020-06-300000750004sgms:WebAndOtherMembersgms:SciPlayMember2021-04-012021-06-300000750004sgms:WebAndOtherMembersgms:SciPlayMember2020-04-012020-06-300000750004sgms:WebAndOtherMembersgms:SciPlayMember2021-01-012021-06-300000750004sgms:WebAndOtherMembersgms:SciPlayMember2020-01-012020-06-300000750004sgms:SciPlayMember2021-04-012021-06-300000750004sgms:SciPlayMember2020-04-012020-06-300000750004sgms:SciPlayMember2021-01-012021-06-300000750004sgms:SciPlayMember2020-01-012020-06-300000750004sgms:DigitalBusinessSegmentMembersgms:SportsAndPlatformMember2021-04-012021-06-300000750004sgms:DigitalBusinessSegmentMembersgms:SportsAndPlatformMember2020-04-012020-06-300000750004sgms:DigitalBusinessSegmentMembersgms:SportsAndPlatformMember2021-01-012021-06-300000750004sgms:DigitalBusinessSegmentMembersgms:SportsAndPlatformMember2020-01-012020-06-300000750004sgms:DigitalBusinessSegmentMembersgms:GamingAndOtherMember2021-04-012021-06-300000750004sgms:DigitalBusinessSegmentMembersgms:GamingAndOtherMember2020-04-012020-06-300000750004sgms:DigitalBusinessSegmentMembersgms:GamingAndOtherMember2021-01-012021-06-300000750004sgms:DigitalBusinessSegmentMembersgms:GamingAndOtherMember2020-01-012020-06-300000750004sgms:DigitalBusinessSegmentMember2021-04-012021-06-300000750004sgms:DigitalBusinessSegmentMember2020-04-012020-06-300000750004sgms:DigitalBusinessSegmentMemberus-gaap:OperatingSegmentsMember2021-01-012021-06-300000750004sgms:DigitalBusinessSegmentMember2020-01-012020-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:AccountingStandardsUpdate201409Membersgms:InstantProductsMember2021-04-012021-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:AccountingStandardsUpdate201409Membersgms:InstantProductsMember2021-01-012021-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:AccountingStandardsUpdate201409Membersgms:InstantProductsMember2020-04-012020-06-300000750004sgms:LotterySystemsGroupMemberus-gaap:AccountingStandardsUpdate201409Membersgms:InstantProductsMember2020-01-012020-06-300000750004sgms:GamingBusinessSegmentMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000750004sgms:LotteryBusinessSegmentMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000750004sgms:SciPlayBusinessSegmentMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000750004sgms:DigitalBusinessSegmentMemberus-gaap:OperatingSegmentsMember2021-04-012021-06-300000750004sgms:CorporateAndReconcilingItemsMember2021-04-012021-06-300000750004sgms:GamingBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:LotteryBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:SciPlayBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:DigitalBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-04-012020-06-300000750004sgms:CorporateAndReconcilingItemsMember2020-04-012020-06-300000750004sgms:GamingBusinessSegmentMemberus-gaap:OperatingSegmentsMember2021-01-012021-06-300000750004sgms:LotteryBusinessSegmentMemberus-gaap:OperatingSegmentsMember2021-01-012021-06-300000750004sgms:SciPlayBusinessSegmentMemberus-gaap:OperatingSegmentsMember2021-01-012021-06-300000750004sgms:CorporateAndReconcilingItemsMember2021-01-012021-06-300000750004sgms:GamingBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:LotteryBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:SciPlayBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:DigitalBusinessSegmentMemberus-gaap:OperatingSegmentsMember2020-01-012020-06-300000750004sgms:CorporateAndReconcilingItemsMember2020-01-012020-06-300000750004us-gaap:EmployeeSeveranceMember2021-04-012021-06-300000750004us-gaap:EmployeeSeveranceMember2020-04-012020-06-300000750004us-gaap:EmployeeSeveranceMember2021-01-012021-06-300000750004us-gaap:EmployeeSeveranceMember2020-01-012020-06-300000750004sgms:RestructuringIntegrationAndOtherMember2021-04-012021-06-300000750004sgms:RestructuringIntegrationAndOtherMember2020-04-012020-06-300000750004sgms:RestructuringIntegrationAndOtherMember2021-01-012021-06-300000750004sgms:RestructuringIntegrationAndOtherMember2020-01-012020-06-300000750004sgms:ContingenciesRelatedToCOVID19Memberus-gaap:EmployeeSeveranceMember2021-04-012021-06-300000750004sgms:ContingenciesRelatedToCOVID19Memberus-gaap:EmployeeSeveranceMember2021-01-012021-06-300000750004country:USus-gaap:NotesReceivableMember2021-06-300000750004country:USus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:NotesReceivableMember2021-06-300000750004country:USus-gaap:NotesReceivableMember2020-12-310000750004country:USus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:NotesReceivableMember2020-12-310000750004sgms:InternationalMemberus-gaap:NotesReceivableMember2021-06-300000750004sgms:InternationalMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:NotesReceivableMember2021-06-300000750004sgms:InternationalMemberus-gaap:NotesReceivableMember2020-12-310000750004sgms:InternationalMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:NotesReceivableMember2020-12-310000750004us-gaap:NotesReceivableMember2021-06-300000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:NotesReceivableMember2021-06-300000750004us-gaap:NotesReceivableMember2020-12-310000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:NotesReceivableMember2020-12-310000750004country:US2020-12-310000750004sgms:InternationalMember2020-12-310000750004us-gaap:NotesReceivableMember2021-01-012021-03-310000750004country:USus-gaap:NotesReceivableMember2021-01-012021-03-310000750004sgms:InternationalMemberus-gaap:NotesReceivableMember2021-01-012021-03-310000750004us-gaap:NotesReceivableMember2020-01-012020-03-3100007500042021-03-310000750004country:US2021-03-310000750004sgms:InternationalMember2021-03-3100007500042020-03-310000750004country:US2021-04-012021-06-300000750004sgms:InternationalMember2021-04-012021-06-300000750004country:US2021-06-300000750004sgms:InternationalMember2021-06-300000750004us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2021-06-300000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-12-310000750004srt:LatinAmericaMember2021-06-300000750004srt:LatinAmericaMembersgms:FinancialAssetCurrentOrNotYetDueMember2021-06-300000750004us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMembersrt:LatinAmericaMember2021-06-300000750004us-gaap:LandMember2021-06-300000750004us-gaap:LandMember2020-12-310000750004sgms:BuildingsandLeaseholdImprovementsMember2021-06-300000750004sgms:BuildingsandLeaseholdImprovementsMember2020-12-310000750004us-gaap:MachineryAndEquipmentMember2021-06-300000750004us-gaap:MachineryAndEquipmentMember2020-12-310000750004us-gaap:FurnitureAndFixturesMember2021-06-300000750004us-gaap:FurnitureAndFixturesMember2020-12-310000750004us-gaap:ConstructionInProgressMember2021-06-300000750004us-gaap:ConstructionInProgressMember2020-12-310000750004us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2021-06-300000750004us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2020-12-310000750004us-gaap:CustomerRelationshipsMember2021-06-300000750004us-gaap:CustomerRelationshipsMember2020-12-310000750004us-gaap:IntellectualPropertyMember2021-06-300000750004us-gaap:IntellectualPropertyMember2020-12-310000750004us-gaap:LicensingAgreementsMember2021-06-300000750004us-gaap:LicensingAgreementsMember2020-12-310000750004sgms:BrandNameMember2021-06-300000750004sgms:BrandNameMember2020-12-310000750004us-gaap:TradeNamesMember2021-06-300000750004us-gaap:TradeNamesMember2020-12-310000750004us-gaap:PatentsMember2021-06-300000750004us-gaap:PatentsMember2020-12-310000750004us-gaap:TradeNamesMember2021-06-300000750004us-gaap:TradeNamesMember2020-12-310000750004sgms:GamingBusinessSegmentMember2020-12-310000750004sgms:LotteryBusinessSegmentMember2020-12-310000750004sgms:SocialBusinessSegmentMember2020-12-310000750004sgms:DigitalBusinessSegmentMember2020-12-310000750004sgms:GamingBusinessSegmentMember2021-01-012021-06-300000750004sgms:LotteryBusinessSegmentMember2021-01-012021-06-300000750004sgms:SocialBusinessSegmentMember2021-01-012021-06-300000750004sgms:DigitalBusinessSegmentMember2021-01-012021-06-300000750004sgms:GamingBusinessSegmentMember2021-06-300000750004sgms:LotteryBusinessSegmentMember2021-06-300000750004sgms:SocialBusinessSegmentMember2021-06-300000750004sgms:DigitalBusinessSegmentMember2021-06-300000750004sgms:SeniorSecuredRevolverMaturing2024Memberus-gaap:SecuredDebtMemberus-gaap:RevolvingCreditFacilityMember2021-06-300000750004sgms:SeniorSecuredRevolverMaturing2024Memberus-gaap:SecuredDebtMemberus-gaap:RevolvingCreditFacilityMember2020-12-310000750004sgms:SeniorSecuredCreditFacilityTermLoanB5Maturing2024Memberus-gaap:SecuredDebtMemberus-gaap:RevolvingCreditFacilityMember2021-06-300000750004sgms:SeniorSecuredCreditFacilityTermLoanB5Maturing2024Memberus-gaap:SecuredDebtMemberus-gaap:RevolvingCreditFacilityMember2020-12-310000750004sgms:SciPlayRevolverMaturing2024Memberus-gaap:SecuredDebtMemberus-gaap:RevolvingCreditFacilityMember2021-06-300000750004sgms:SciPlayRevolverMaturing2024Memberus-gaap:SecuredDebtMemberus-gaap:RevolvingCreditFacilityMember2020-12-310000750004sgms:SeniorSecuredNotesMaturing2025Memberus-gaap:SeniorNotesMember2021-06-300000750004sgms:SeniorSecuredNotesMaturing2025Memberus-gaap:SeniorNotesMember2020-12-310000750004sgms:SeniorSecuredEuroNotesMaturing2026Memberus-gaap:SeniorNotesMember2021-06-300000750004sgms:SeniorSecuredEuroNotesMaturing2026Memberus-gaap:SeniorNotesMember2020-12-310000750004sgms:SeniorUnsecuredNotesMaturing2025Memberus-gaap:SeniorNotesMember2021-06-300000750004sgms:SeniorUnsecuredNotesMaturing2025Memberus-gaap:SeniorNotesMember2020-12-310000750004sgms:SeniorUnsecuredEuroNotesMaturing2026Memberus-gaap:SeniorNotesMember2021-06-300000750004sgms:SeniorUnsecuredEuroNotesMaturing2026Memberus-gaap:SeniorNotesMember2020-12-310000750004sgms:SeniorUnsecuredNotesMaturing2026Memberus-gaap:SeniorNotesMember2021-06-300000750004sgms:SeniorUnsecuredNotesMaturing2026Memberus-gaap:SeniorNotesMember2020-12-310000750004sgms:SeniorUnsecuredNotesMaturing2028Memberus-gaap:SeniorNotesMember2021-06-300000750004sgms:SeniorUnsecuredNotesMaturing2028Memberus-gaap:SeniorNotesMember2020-12-310000750004sgms:SeniorUnsecuredNotesMaturing2029Memberus-gaap:SeniorNotesMember2021-06-300000750004sgms:SeniorUnsecuredNotesMaturing2029Memberus-gaap:SeniorNotesMember2020-12-310000750004sgms:CapitalLeaseObligationsPayableMonthlyMemberus-gaap:CapitalLeaseObligationsMember2021-06-300000750004sgms:CapitalLeaseObligationsPayableMonthlyMemberus-gaap:CapitalLeaseObligationsMember2020-12-310000750004sgms:SeniorSecuredNotesMaturing2025Memberus-gaap:SeniorNotesMember2018-02-280000750004sgms:SeniorSecuredEuroNotesMaturing2026Member2021-01-012021-06-300000750004sgms:SeniorSecuredEuroNotesMaturing2026Member2021-04-012021-06-300000750004us-gaap:SubsequentEventMemberus-gaap:RevolvingCreditFacilityMember2021-08-050000750004us-gaap:RevolvingCreditFacilityMember2021-01-012021-06-300000750004us-gaap:SubsequentEventMemberus-gaap:RevolvingCreditFacilityMember2021-07-012021-08-050000750004us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:CashFlowHedgingMember2021-06-300000750004us-gaap:InterestRateSwapMember2021-04-012021-06-300000750004us-gaap:InterestRateSwapMember2020-04-012020-06-300000750004us-gaap:InterestRateSwapMember2021-01-012021-06-300000750004us-gaap:InterestRateSwapMember2020-01-012020-06-300000750004us-gaap:CrossCurrencyInterestRateContractMembersgms:SeniorSecuredNotesMaturing2025Memberus-gaap:SeniorNotesMember2018-02-280000750004sgms:SeniorSecuredNotesMaturing2025Member2018-02-280000750004us-gaap:InterestRateSwapMemberus-gaap:OtherLiabilitiesMember2021-06-300000750004us-gaap:InterestRateSwapMemberus-gaap:OtherLiabilitiesMember2020-12-310000750004us-gaap:InterestRateSwapMemberus-gaap:OtherAssetsMember2021-06-300000750004us-gaap:InterestRateSwapMemberus-gaap:OtherAssetsMember2020-12-310000750004us-gaap:InterestRateSwapMemberus-gaap:OtherLiabilitiesMember2021-04-012021-06-300000750004us-gaap:InterestRateSwapMemberus-gaap:OtherLiabilitiesMember2020-01-012020-06-300000750004us-gaap:CrossCurrencyInterestRateContractMemberus-gaap:OtherAssetsMember2021-04-012021-06-300000750004us-gaap:CrossCurrencyInterestRateContractMemberus-gaap:OtherAssetsMember2020-01-012020-06-300000750004sgms:SeniorSecuredEuroNotesMaturing2026Memberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:NetInvestmentHedgingMember2021-04-012021-06-300000750004us-gaap:AccruedLiabilitiesMember2021-06-300000750004us-gaap:AccruedLiabilitiesMember2020-12-310000750004us-gaap:CommonStockMember2020-12-310000750004us-gaap:AdditionalPaidInCapitalMember2020-12-310000750004us-gaap:RetainedEarningsMember2020-12-310000750004us-gaap:TreasuryStockMember2020-12-310000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000750004us-gaap:NoncontrollingInterestMember2020-12-310000750004us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-3100007500042021-01-012021-03-310000750004us-gaap:RetainedEarningsMember2021-01-012021-03-310000750004us-gaap:NoncontrollingInterestMember2021-01-012021-03-310000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310000750004us-gaap:CommonStockMember2021-03-310000750004us-gaap:AdditionalPaidInCapitalMember2021-03-310000750004us-gaap:RetainedEarningsMember2021-03-310000750004us-gaap:TreasuryStockMember2021-03-310000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310000750004us-gaap:NoncontrollingInterestMember2021-03-310000750004us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300000750004us-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:AdditionalPaidInCapitalMember2020-01-012020-03-3100007500042020-01-012020-03-310000750004us-gaap:RetainedEarningsMember2020-01-012020-03-310000750004us-gaap:NoncontrollingInterestMember2020-01-012020-03-310000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310000750004us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-03-310000750004srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-03-310000750004us-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:NoncontrollingInterestMember2020-04-012020-06-300000750004us-gaap:RetainedEarningsMember2020-04-012020-06-300000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300000750004us-gaap:CommonStockMember2020-06-300000750004us-gaap:AdditionalPaidInCapitalMember2020-06-300000750004us-gaap:RetainedEarningsMember2020-06-300000750004us-gaap:TreasuryStockMember2020-06-300000750004us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300000750004us-gaap:NoncontrollingInterestMember2020-06-300000750004us-gaap:EmployeeStockOptionMember2021-04-012021-06-300000750004us-gaap:EmployeeStockOptionMember2020-04-012020-06-300000750004us-gaap:EmployeeStockOptionMember2021-01-012021-06-300000750004us-gaap:EmployeeStockOptionMember2020-01-012020-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2021-04-012021-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2020-04-012020-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-06-300000750004us-gaap:RestrictedStockUnitsRSUMembersgms:SciPlayMember2021-04-012021-06-300000750004us-gaap:RestrictedStockUnitsRSUMembersgms:SciPlayMember2020-04-012020-06-300000750004us-gaap:RestrictedStockUnitsRSUMembersgms:SciPlayMember2021-01-012021-06-300000750004us-gaap:RestrictedStockUnitsRSUMembersgms:SciPlayMember2020-01-012020-06-300000750004us-gaap:RestrictedStockUnitsRSUMember2020-12-310000750004us-gaap:RestrictedStockUnitsRSUMember2021-06-300000750004sgms:OtherSciPlayOwnersMember2021-06-300000750004sgms:UKGamingMember2020-01-012020-03-310000750004us-gaap:GuaranteeOfBusinessRevenueMember1993-06-300000750004us-gaap:PerformanceGuaranteeMember1993-06-30iso4217:COP0000750004sgms:EcosaludMember2013-05-012013-05-310000750004sgms:SciPlayIPOMatterMember2019-10-142019-10-140000750004sgms:SciPlayIPOMatterMember2021-06-30

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, 2021
OR
☐ 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 August 4, 2021:
Common Stock: 96,369,658



SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL AND OTHER INFORMATION
THREE AND SIX MONTHS ENDED JUNE 30, 2021
 
Page
Item 1.
6
6
7
8
9
10
Item 2.
28
Item 3.
41
Item 4.
42
Item 1.
42
Item 1A.
42
Item 2.
44
Item 3.
44
Item 4.
44
Item 5.
44
Item 6.
45

2


Glossary of Terms
The following terms or acronyms used in this Quarterly Report on Form 10-Q are defined below:
Term or Acronym Definition
2020 10-K 2020 Annual Report on Form 10-K filed with the SEC on March 1, 2021
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
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 (excluding goodwill)
Exchange Act Securities Exchange Act of 1934, as amended
FASB Financial Accounting Standards Board
FOBT
Fixed odds betting terminal
KPIs Key Performance Indicators
LBO licensed betting office
LIBOR London Interbank Offered Rate
Note a note in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, unless otherwise indicated
POS percentage of retail sales
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
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
SportCast
SportCast Pty, Limited
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.
U.S. jurisdictions the 50 states in the U.S. plus the District of Columbia, U.S. Virgin Islands and Puerto Rico
FOBT recovery
recovery from customers of U.K. value-added tax charged on FOBTs
VGT video gaming terminal
VLT video lottery terminal
Intellectual Property Rights 
All ® notices signify marks registered in the United States. © 2021 Scientific Games Corporation. All Rights Reserved.

3


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 and potentially recurring closure of casinos and lottery operations on a jurisdiction-by-jurisdiction basis;
•risks relating to our continuing strategic review and proposed acquisition of public SciPlay equity, including lack of assurance that the review will result in the consummation of any transaction, on any particular timetable or at all, that the review will yield additional value or that the review will not adversely impact our business, financial results, results of operations, cash flows or stock price;
•slow growth of new gaming jurisdictions, slow addition of casinos in existing jurisdictions and declines in the replacement cycle of gaming machines;
•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 following the U.K.’s withdrawal from the European Union;
•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;
•U.S. and international economic and industry conditions;
•level of our indebtedness, higher interest rates, availability or adequacy of cash flows and liquidity to satisfy indebtedness, other obligations or future cash needs;
•the discontinuation or replacement of LIBOR, which may adversely affect interest rates;
•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;
•competition;
•inability to win, retain or renew, or unfavorable revisions of, existing contracts, and the inability to enter into new contracts;
•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;
•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;
•changes in demand for our products and services;
•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;
•dependence on suppliers and manufacturers;
•SciPlay’s dependence on certain key providers;
•ownership changes and consolidation in the gaming industry;
•fluctuations in our results due to seasonality and other factors;
•security and integrity of our products and systems, including the impact of any security breaches or cyber-attacks;
•protection of our intellectual property, inability to license third-party intellectual property and the intellectual property rights of others;
•reliance on or failures in information technology and other systems;

4


•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;
•reliance on technological blocking systems;
•challenges or disruptions relating to the completion of the domestic migration to our enterprise resource planning system;
•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;
•legislative interpretation and enforcement, regulatory perception and regulatory risks with respect to gaming, especially internet wagering, social gaming and sports wagering;
•changes in tax laws or tax rulings, or the examination of our tax positions;
•opposition to legalized gaming or the expansion thereof and potential restrictions on internet wagering;
•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;
•expectations of shift to regulated online gaming or sports wagering;
•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;
•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;
•incurrence of restructuring costs;
•goodwill impairment charges including changes in estimates or judgments related to our impairment analysis of goodwill or other intangible assets;
•stock price volatility;
•failure to maintain adequate internal control over financial reporting;
•dependence on key executives;
•natural events that disrupt our operations, or those of our customers, suppliers or regulators;
•possibility that the 2018 renewal of the Lotterie Nazionali S.r.l. 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); and
•expectations of growth in total consumer spending on social casino gaming.
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 2020 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.

5

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 June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenue:
Services $ 551  $ 322  $ 1,014  $ 744 
Product sales 155  84  259  252 
Instant products 174  133  336  268 
Total revenue 880  539  1,609  1,264 
Operating expenses:
Cost of services(1)
151  126  290  256 
Cost of product sales(1)
75  69  125  160 
Cost of instant products(1)
77  62  154  135 
Selling, general and administrative 205  151  391  349 
Research and development 54  31  106  82 
Depreciation, amortization and impairments 123  140  246  278 
Goodwill impairment —  —  —  54 
Restructuring and other 32  16  53  38 
Operating income (loss) 163  (56) 244  (88)
Other (expense) income:
Interest expense (119) (124) (240) (248)
Earnings (loss) from equity investments 14  (3) 23  (5)
(Loss) gain on remeasurement of debt (7) (12) 18  (2)
Other income (expense), net(2)
70  (1) 70  (4)
Total other expense, net (42) (140) (129) (259)
Net income (loss) before income taxes
121  (196) 115  (347)
Income tax expense (8) (2) (11) (6)
Net income (loss)
113  (198) 104  (353)
Less: Net income attributable to noncontrolling interest 4  5  10  9 
Net income (loss) attributable to SGC $ 109  $ (203) $ 94  $ (362)
Basic and diluted net income (loss) attributable to SGC per share:
 
 
 
Basic $ 1.13  $ (2.15) $ 0.98  $ (3.85)
Diluted $ 1.10  $ (2.15) $ 0.97  $ (3.85)
Weighted average number of shares used in per share calculations:
 
 
Basic shares 96  95  96  94 
Diluted shares 99  95  97  94 
(1) Excludes D&A.
(2) Includes $63 million gain for the three and six months ended June 30, 2021, related to the SportCast acquisition transaction.
See accompanying notes to condensed consolidated financial statements.

6

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in millions)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Net income (loss)
$ 113  $ (198) $ 104  $ (353)
Other comprehensive gain (loss):
Foreign currency translation gain (loss), net of tax 7  61  11  (22)
Pension and post-retirement (loss) gain, net of tax —  (1) (1) 1 
Derivative financial instruments unrealized gain (loss), net of tax 4  2  9  (14)
Total other comprehensive gain (loss) 11  62  19  (35)
Total comprehensive gain (loss) 124  (136) 123  (388)
Less: comprehensive income attributable to noncontrolling interest 4  5  10  9 
Comprehensive income (loss) attributable to SGC $ 120  $ (141) $ 113  $ (397)
See accompanying notes to condensed consolidated financial statements.

7

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions, except par value)
As of
June 30, 2021 December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents $ 932  $ 1,016 
Restricted cash 51  117 
Receivables, net of allowance for credit losses $67 and $81, respectively
636  616 
Inventories 184  191 
Prepaid expenses, deposits and other current assets 214  241 
Total current assets 2,017  2,181 
Non-current assets:
Restricted cash 10  10 
Receivables, net of allowance for credit losses $2 and $5, respectively
20  20 
Property and equipment, net 391  415 
Operating lease right-of-use assets 92  94 
Goodwill 3,356  3,292 
Intangible assets, net 1,217  1,299 
Software, net 215  227 
Equity investments 252  262 
Other assets 192  184 
Total assets $ 7,762  $ 7,984 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt
$ 44  $ 44 
Accounts payable
178  203 
Accrued liabilities
558  586 
Total current liabilities
780  833 
Deferred income taxes
88  79 
Operating lease liabilities
73  77 
Other long-term liabilities
216  260 
Long-term debt, excluding current portion
8,975  9,259 
Total liabilities
10,132  10,508 
Commitments and contingencies (Note 16)


Stockholders’ deficit:
Common stock, par value $0.001 per share: 199 shares authorized; 113 shares issued and 96 and 95 shares outstanding, respectively
1  1 
Additional paid-in capital
1,299  1,268 
Accumulated loss
(3,435) (3,529)
Treasury stock, at cost, 17 shares
(175) (175)
Accumulated other comprehensive loss
(199) (218)
Total SGC stockholders’ deficit
(2,509) (2,653)
Noncontrolling interest
139  129 
Total stockholders’ deficit
(2,370) (2,524)
Total liabilities and stockholders’ deficit
$ 7,762  $ 7,984 
See accompanying notes to condensed consolidated financial statements.

8

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
Six Months Ended June 30,
2021 2020
Cash flows from operating activities:
Net income (loss)
$ 104  $ (353)
Adjustments to reconcile net income (loss) to cash provided by operating activities
234  460 
Changes in working capital accounts, net of effect of acquisitions
(71) 57 
Changes in deferred income taxes and other
5  8 
Net cash provided by operating activities
272  172 
Cash flows from investing activities:
Capital expenditures (103) (92)
Acquisitions of businesses, net of cash acquired (9) (13)
Distributions from equity method investments, net of additions 7  (1)
Proceeds from sale of assets and other 7  22 
Net cash used in investing activities
(98) (84)
Cash flows from financing activities:
Borrowings under SGI revolving credit facility
—  530 
Repayments under SGI revolving credit facility
(250) (90)
Payments on long-term debt (21) (20)
Payments of debt issuance and deferred financing costs
—  (1)
Payments on license obligations
(29) (15)
Taxes paid related to net share settlement of equity awards and other (24) (2)
Net cash (used in) provided by financing activities
(324) 402 
Effect of exchange rate changes on cash, cash equivalents and restricted cash —  (1)
(Decrease) increase in cash, cash equivalents and restricted cash
(150) 489 
Cash, cash equivalents and restricted cash, beginning of period 1,143  375 
Cash, cash equivalents and restricted cash, end of period
$ 993  $ 864 
Supplemental cash flow information:
Cash paid for interest $ 229  $ 224 
Income taxes paid
13  7 
Distributed earnings from equity investments 15  13 
Supplemental non-cash transactions:
Non-cash interest expense
$ 12  $ 11 
 See accompanying notes to condensed consolidated financial statements.

9


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 and other mobile games to retail customers; and providing a comprehensive suite of digital RMG and sports wagering solutions, distribution platforms, content, products and services. We also gain access to technologies and pursue global expansion through strategic acquisitions and equity investments. We report our results of operations in four business segments—Gaming, Lottery, SciPlay and Digital—representing our different products and services.
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 2020 10-K. Interim results of operations are not necessarily indicative of results of operations to be expected for a full year.
Strategic Review Update
On June 29, 2021, we announced that the Company, with the support of its Board of Directors, completed the strategic review and intends to divest our Lottery and Sports Betting (component of our Digital business segment) operations creating a path to significantly de-lever and position the Company for enhanced growth. We are currently evaluating strategic alternatives to execute the divestitures for each business, respectively, including an initial public offering (“IPO”) or a combination with a special purpose acquisition company (“SPAC”), or a sale or a strategic combination with another business.
On July 15, 2021, we submitted a proposal to SciPlay’s board of directors to acquire all the outstanding equity interest in SciPlay not already owned by us (approximately 19%) in alignment with the strategy developed as part of the strategic review described above. Our offer to all SciPlay shareholders (other than SGMS and our subsidiaries) is that they will receive 0.250 shares of our common stock for each share of SciPlay Class A common stock they own. The transaction is subject to the negotiation and execution of a mutually acceptable merger agreement.
There can be no assurances that our evaluation of strategic alternatives for our Lottery and Sports Betting businesses or for the acquisition of the remaining equity interest in SciPlay will result in any transactions or other actions and execution of these transactions is subject to significant market, operational and other uncertainties. As such, the Lottery and Sports Betting portions of the Company do not meet held-for sale criteria set forth under ASC 360 and ASC 205 as of June 30, 2021.
Impact of COVID-19
As more fully described in the “Description of the Business and Summary of Significant Accounting Policies - Impact of COVID-19” in Note 1 of our 2020 10-K, COVID-19 disruptions continue to impact our results of operations and particularly our Gaming business segment operations. Although most gaming establishments have reopened globally and while some have begun operating at full capacity, many gaming operations have yet to return to pre-COVID levels. The current state reflects continued fluctuations in infection rates and regulations for various regions along with ongoing domestic and international travel restrictions or warnings, social distancing measures, reduced operating capacity and an overall economic and general uncertainty regarding the magnitude and length of time that these disruptions will continue. These circumstances may change in the future and such changes could be material. We continue to assess the situation jurisdiction by jurisdiction, actively managing our cash flows and continuing to evaluate additional measures that may reduce operating costs and conserve cash to preserve liquidity as we execute on our strategic initiatives.

10


As of June 30, 2021, our total available liquidity (excluding our SciPlay business segment) was $984 million, which included $353 million of undrawn availability under SGI’s revolving credit facility. In July 2021, we made a voluntary payment of $150 million on SGI’s revolving credit facility.
Significant Accounting Policies
There have been no changes to our significant accounting policies described within the Notes of our 2020 10-K.
Computation of Basic and Diluted Net Income (Loss) Per Share
Basic and diluted net income per share for the three and six months ended June 30, 2021 were computed by dividing net income attributable to SGC by the weighted average number of shares outstanding, and the weighted average number of shares outstanding adjusted to give effect to all potentially dilutive securities using the treasury stock method, respectively.
Basic and diluted net loss per share were the same for the three and six months ended June 30, 2020 as all common stock equivalents during those periods would be anti-dilutive. We excluded 1 million and 4 million of stock options and RSUs from the diluted weighted-average common shares outstanding for the three and six months ended June 30, 2020, respectively.
SportCast Acquisition
In August of 2020, we obtained a one-year option agreement to acquire SportCast Pty, Limited (the “SportCast Option”), a privately held sports betting content and player engagement technology and platform supplier. We accounted for the SportCast Option by electing a measurement alternative to measure this equity investment at cost, less impairment given lack of readily determinable fair value in accordance with ASC Topic 321. In May 2021, we exercised the SportCast Option and completed an acquisition of SportCast (the “SportCast Acquisition”), which expanded our portfolio of sports betting technology, services and content of our Digital business segment.
We accounted for this acquisition using the acquisition method of accounting allocating the total consideration transferred to acquired tangible and intangible assets and assumed liabilities based on estimated fair values. The fair value determination of the SportCast Option, the acquired assets and assumed liabilities requires significant judgments and estimates. The estimated fair values of the SportCast Option, acquired assets, assumed liabilities and resulting goodwill are subject to adjustment as we finalize our purchase price accounting.
The total consideration transferred was $81 million primarily consisting of $7 million in cash and $63 million in fair value of the SportCast Option. This resulted in a $63 million gain recorded in the Other income (expense), net line item in our consolidated statements of operations for the three and six-months ended June 30, 2021 due to the increase in fair value of the SportCast Option. The fair value of the Sportscast Option has been preliminarily determined using an income approach method and level 3 inputs in the hierarchy as established by ASC 820. The discount rate used in the valuation analysis was 15%.
The preliminary allocation of the purchase price (expected to be finalized by the end of 2021) resulted in $26 million allocated to intangible assets primarily consisting of technology and customer relationship and $61 million allocated to goodwill. The factors contributing to the recognition of acquisition goodwill are based on customer offering diversification, expected synergies, assembled workforce and other strategic benefits. None of the resultant goodwill is expected to be deductible for income tax purposes.
Subsequent Period Acquisitions
On July 2, 2021, SciPlay acquired privately held Koukoi Oy (“Koukoi”), a developer and operator of casual mobile games for approximately $5 million in cash consideration. The acquisition allows SciPlay to expand its casual games portfolio.
In August of 2021, we acquired privately held Lightning Box Games (Lightning Box), iGaming content studio for approximately $40 million in cash consideration and up to an additional $30 million in contingent consideration. The acquisition allows our Digital business segment to expand our iGaming content portfolio.
We are in the process of completing the preliminary purchase price accounting for these acquisitions and expect that a substantial portion of the purchase price will be allocated to acquired intellectual property, customer relationship and goodwill.
The revenue and earnings associated with all of the above acquisitions are not significant to our consolidated financial statements.
New Accounting Guidance - Not Yet Adopted
The FASB issued ASU No. 2020-04 and subsequently ASU No. 2021-01, Reference Rate Reform (Topic 848) in March 2020 and January 2021, respectively. The new guidance provides optional expedients and exceptions for applying U.S.

11


GAAP to contract modifications and hedging relationships, including derivative instruments impacted by changes in the interest rates used for discounting cash flows for computing variable margin settlements, subject to meeting certain criteria, that reference LIBOR or other reference rates expected to be discontinued, in 2022 or potentially 2023 (pending possible extension). The ASUs establish certain contract modification principles that entities can apply in other areas that may be affected by reference rate reform and certain elective hedge accounting expedients and exceptions. The ASUs may be applied prospectively. Based on our preliminary assessment completed to date, we do not expect the adoption of this guidance to have a significant impact on our consolidated financial statements.
We do not expect that any other 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,
2021 2020 2021 2020
Gaming
Gaming operations(1)
$ 181  $ 16  $ 294  $ 135 
Gaming machine sales 100  53  155  145 
Gaming systems 52  17  94  72 
Table products 34  5  68  57 
Total $ 367  $ 91  $ 611  $ 409 
Lottery
Instant products $ 175  $ 133  $ 337  $ 269 
Lottery systems 91  76  177  152 
Total $ 266  $ 209  $ 514  $ 421 
SciPlay
Mobile $ 136  $ 144  $ 269  $ 245 
Web and other 18  22  36  39 
Total $ 154  $ 166  $ 305  $ 284 
Digital
Sports and platform $ 38  $ 26  $ 71  $ 64 
Gaming and other 55  47  108  86 
Total $ 93  $ 73  $ 179  $ 150 
(1) Gaming operations revenue for the three and six months ended June 30, 2021 benefited from $38 million and $44 million U.K. FOBT recovery received from certain U.K. customers related to a 2020 U.K. court ruling associated with overcharging of value-added tax for gaming operators that consequently reduced our net gaming revenues related to these customers and arrangements.
    
The amount of rental income revenue that is outside the scope of ASC 606 was $119 million and $182 million for the three and six months ended June 30, 2021, respectively, and $12 million and $86 million for the three and six months ended June 30, 2020, respectively.
Contract Liabilities and Other Disclosures
The following table summarizes the activity in our contract liabilities for the reporting period:

12


Six Months Ended June 30,
2021
Contract liability balance, beginning of period(1)
$ 89 
Liabilities recognized during the period 47 
Amounts recognized in revenue from beginning balance (43)
Contract liability balance, end of period(1)
$ 93 
(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 tickets to end consumers. As a result, revenue recognition under ASC 606 does not approximate conversion to cash for such contracts in any periods presented. Total revenue recognized under such contracts for the three and six months ended June 30, 2021 was $31 million and $50 million, respectively, and $21 million and $40 million for the three and six months ended June 30, 2020, 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 $ 636  $ 127 
End of period balance, June 30, 2021
656  113 
(1) Contract assets are included primarily within Prepaid expenses, deposits and other current assets in our consolidated balance sheets.
As of June 30, 2021, 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 2020 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 2020 10-K. The accounting policies of our business segments are the same as those described within the Notes in our 2020 10-K. The following tables present our segment information:

13

Three Months Ended June 30, 2021
Gaming Lottery SciPlay Digital
Unallocated and Reconciling Items(1)
Total
Total revenue
$ 367  $ 266  $ 154  $ 93  $ —  $ 880 
AEBITDA
196  138  48  31  (30) $ 383 
Reconciling items to consolidated net income before income taxes:
D&A
(72) (14) (4) (26) (7) (123)
Restructuring and other
(3) (1) (1) —  (27) (32)
EBITDA from equity investments
(24) (24)
Earnings from equity investments
14  14 
Interest expense
(119) (119)
Loss on remeasurement of debt (7) (7)
Other income, net
70  70 
Stock-based compensation
(41) (41)
Net income before income taxes
$ 121 
(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 income before income taxes.

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.


14

Six Months Ended June 30, 2021
Gaming Lottery SciPlay Digital
Unallocated and Reconciling Items(1)
Total
Total revenue
$ 611  $ 514  $ 305  $ 179  $ —  $ 1,609 
AEBITDA
304  257  94  60  (62) $ 653 
Reconciling items to consolidated net income before income taxes:
D&A
(147) (28) (7) (50) (14) (246)
Restructuring and other
(6) (1) (1) (1) (44) (53)
EBITDA from equity investments
(44) (44)
Earnings from equity investments
23  23 
Interest expense
(240) (240)
Gain on remeasurement of debt 18  18 
Other income, net
68  68 
Stock-based compensation
(64) (64)
Net income before income taxes
$ 115 
(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 income 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.
(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 and disposition related costs and other unusual items. The following table summarizes pre-tax restructuring and other costs for the periods presented:

15


Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Employee severance and related(1)
$ 1  $ 12  $ 2  $ 30 
Restructuring, integration and other(2)
31  4  51  8 
Total $ 32  $ 16  $ 53  $ 38 
(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.
(2) The three and six months ended June 30, 2021 largely includes cost associated with strategic and business optimization initiatives (see the Strategic Review section in Note 1).
(5) Receivables, Allowance for Credit Losses and Credit Quality of Receivables
Receivables
The following table summarizes the components of current and long-term receivables, net:
As of
June 30, 2021 December 31, 2020
Current:
Receivables
$ 703  $ 697 
Allowance for credit losses
(67) (81)
Current receivables, net
636  616 
Long-term:
Receivables
22  25 
Allowance for credit losses
(2) (5)
Long-term receivables, net 20  20 
Total receivables, net
$ 656  $ 636 
Allowance for Credit Losses
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, 2021 Balances over 90 days past due December 31, 2020 Balances over 90 days past due
Receivables:
U.S. and Canada $ 478  $ 81  $ 443  $ 88 
International 247  60  279  52 
Total receivables 725  141  722  140 
Receivables allowance:
U.S. and Canada (26) (11) (43) (26)
International (43) (24) (43) (24)
Total receivables allowance (69) (35) (86) (50)
Receivables, net $ 656  $ 106  $ 636  $ 90 

Account balances are charged against the allowances after all internal and external 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, 2021 and 2020 is as follows:

16

2021 2020
Total U.S. and Canada International Total
Beginning allowance for credit losses(1)
$ (86) $ (43) $ (43) $ (42)
Provision
—  —  —  (28)
Charge-offs and recoveries
2  1  1  — 
Allowance for credit losses as of March 31 (84) (42) (42) (70)
Provision
(2) (1) (1) (12)
Charge-offs
17  17  —  — 
Allowance for credit losses as of June 30 $ (69) $ (26) $ (43) $ (82)
(1) Reflects $6 million related to implementation of ASC 326 for the 2020 beginning balance.

At June 30, 2021, 16% of our total receivables, net, were past due by over 90 days compared to 14% at December 31, 2020.

Credit Quality of Receivables
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, 2021
Total Current or Not Yet Due Balances Over 90 days Past Due
Receivables 119  $ 45  $ 74 
Allowance for credit losses (52) (19) (33)
Receivables, net $ 67  $ 26  $ 41 

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 with COVID-related closures lasting longer than in other geographic regions. We did not have material credit losses during the first half of 2021. We continuously review receivables and as information concerning credit quality arise, reassess our expectations of future losses and record an incremental reserve if warranted 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, 2021 and December 31, 2020, the fair value of receivables, net, approximated the carrying value due to contractual terms of receivables generally being less than 24 months.
(6) Inventories
Inventories consisted of the following:
As of
June 30, 2021 December 31, 2020
Parts and work-in-process
$ 102  $ 122 
Finished goods
82  69 
Total inventories
$ 184  $ 191 
    

17


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 related to inventory in our Gaming business segment. The charges were a result of: (1) leadership’s strategic plan to condense the amount of legacy platforms we will continue to service and support as we roll out new products and (2) the rapid demand reduction largely as a result of the COVID-19 disruptions and continued closures in the LATAM region. For additional information regarding our inventory valuation charges, see Note 7 in our 2020 10-K.
(7) Property and Equipment, net    
Property and equipment, net consisted of the following:
As of
June 30, 2021 December 31, 2020
Land $ 15  $ 15 
Buildings and leasehold improvements 131  132 
Gaming and lottery machinery and equipment 1,035  1,026 
Furniture and fixtures 31  32 
Construction in progress 56  43 
Other property and equipment 281  277 
Less: accumulated depreciation (1,158) (1,110)
Total property and equipment, net $ 391  $ 415 
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 June 30, Six Months Ended June 30,
2021 2020 2021 2020
Depreciation expense $ 39  $ 46  $ 79  $ 90 
(8) Intangible Assets, net and Goodwill
Intangible Assets, net
The following tables present certain information regarding our intangible assets as of June 30, 2021 and December 31, 2020:

18

As of
June 30, 2021 December 31, 2020
Gross Carrying Value
Accumulated Amortization
Net Balance
Gross Carrying Value
Accumulated Amortization
Net Balance
Amortizable intangible assets:
Customer relationships $ 1,117  $ (525) $ 592  $ 1,108  $ (478) $ 630 
Intellectual property 977  (679) 298  958  (648) 310 
Licenses 557  (424) 133  558  (405) 153 
Brand names 127  (92) 35  128  (86) 42 
Trade names 118  (48) 70  117  (42) 75 
Patents and other 22  (14) 8  24  (16) 8 
2,918  (1,782) 1,136  2,893  (1,675) 1,218 
Non-amortizable intangible assets:
Trade names
83  (2) 81  83  (2) 81 
Total intangible assets
$ 3,001  $ (1,784) $ 1,217  $ 2,976  $ (1,677) $ 1,299 
The following reflects intangible amortization expense included within D&A:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Amortization expense $ 57  $ 63  $ 113  $ 128 
The table below reconciles the change in the carrying value of goodwill by business segment for the period from December 31, 2020 to June 30, 2021.
Gaming(1)
Lottery(2)
SciPlay Digital Totals
Balance as of December 31, 2020
$ 2,425  $ 353  $ 124  $ 390  $ 3,292 
Acquired goodwill —  —  —  61  61 
Foreign currency adjustments —  —  —  3  3 
Balance as of June 30, 2021
$ 2,425  $ 353  $ 124  $ 454  $ 3,356 
(1) Accumulated goodwill impairment charges for the Gaming segment as of June 30, 2021 were $989 million.
(2) Accumulated goodwill impairment charges for the Lottery segment as of June 30, 2021 were $137 million.
(9) Software, net
Software, net consisted of the following:
As of
June 30, 2021 December 31, 2020
Software $ 1,221  $ 1,197 
Accumulated amortization (1,006) (970)
Software, net $ 215  $ 227 
The following reflects amortization of software included within D&A:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Amortization expense $ 27  $ 31  $ 54  $ 60 

(10) Equity Investments

19

Equity investments totaled $252 million and $262 million as of June 30, 2021 and December 31, 2020, respectively. We received distributions and dividends totaling $33 million and $13 million during the six months ended June 30, 2021 and 2020, respectively.
(11) Long-Term and Other Debt
Outstanding Debt and Finance Leases
The following table reflects our outstanding debt (in order of priority and maturity):
As of
June 30, 2021 December 31, 2020
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 $ 285  $ —  $ 285  $ 535 
SGI Term Loan B-5 2024 variable 4,039  (42) 3,997  4,012 
SciPlay Revolver 2024 variable —  —  —  — 
SGI Senior Notes:
2025 Secured Notes(1)
2025 5.000% 1,250  (12) 1,238  1,237 
2026 Secured Euro Notes(2)
2026 3.375% 386  (4) 382  395 
2025 Unsecured Notes 2025 8.625% 550  (7) 543  542 
2026 Unsecured Euro Notes(2)
2026 5.500% 297  (3) 294  303 
2026 Unsecured Notes 2026 8.250% 1,100  (11) 1,089  1,088 
2028 Unsecured Notes 2028 7.000% 700  (9) 691  691 
2029 Unsecured Notes 2029 7.250% 500  (6) 494  493 
Finance lease obligations as of June 30, 2021 payable monthly through 2023 and other(3)
2023 4.217% 6  —  6  7 
Total long-term debt outstanding $ 9,113  $ (94) $ 9,019  $ 9,303 
Less: current portion of long-term debt (44) (44)
Long-term debt, excluding current portion $ 8,975  $ 9,259 
Fair value of debt(4)
$ 9,399 
(1) In connection with the February 2018 Refinancing (see Note 15 in our 2020 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 $29 million, of which a $7 million loss and a $18 million gain were recognized on remeasurement of debt in the Consolidated Statements of Operations for the three and six months ended June 30, 2021, respectively.
(3) Includes $6 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.

We were in compliance with the financial covenants under all debt agreements as of June 30, 2021 (for information regarding our financial covenants of all debt agreements, see Notes 1 and 15 in our 2020 10-K).
Subsequent to June 30, 2021, we amended our Credit Agreement to provide for additional flexibility on executing the recently announced strategic transactions, including among other items: (a) extended the time period for conversion of securities into cash for purposes of satisfying the 75% minimum cash proceeds requirement from 180- to 365 days for proceeds received from the intended disposition of our Sports Betting business (“the Disposition Transaction”), (b) amend the basket for

20

non-cash consideration received in connection with a permitted disposition, (c) permit any capital stock received as consideration in the Disposition Transactions and (d) require that at least 25% of the net cash proceeds received from the Disposition Transactions will be used to prepay outstanding term loans within ten business days of the Disposition Transactions.
For additional information regarding the terms of our credit facilities, Secured Notes and Unsecured Notes, see Note 15 in our 2020 10-K.
(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, 2021, 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, 2021. 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 June 30, Six Months Ended June 30,
2021 2020 2021 2020
Gain (loss) recorded in accumulated other comprehensive loss, net of tax $ 4  $ 2  $ 9  $ (14)
Interest expense recorded related to interest rate swap contracts 4  4  9  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:

21

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Interest expense
Interest expense
Total interest expense which reflects the effects of cash flow hedges $ (119) $ (124) $ (240) $ (248)
Hedged item (4) (5) (9) (10)
Derivative designated as hedging instrument —  1  —  4 
Cross-Currency Interest Rate Swaps
In connection with the February 2018 Refinancing described in Note 15 of our 2020 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 gain (loss) in Accumulated other comprehensive loss. The cross-currency basis spread (along with other components of the cross-currency swap’s fair value excluded from the spot method effectiveness assessment) are amortized and recorded to Interest expense. We evaluate the effectiveness of our net investment hedge at the beginning of each quarter.
The following table shows the fair value of our hedges:
As of
Balance Sheet Line Item
June 30, 2021 December 31, 2020
Interest rate swaps (1)(3)
Accrued liabilities/Other liabilities $ 13  $ 22 
Cross-currency interest rate swaps (2)(3)
Other assets 27  14 
(1) Gains of $4 million and $9 million for the three and six months ended June 30, 2021, respectively, are reflected in Derivative financial instrument unrealized gain (loss) in Other comprehensive gain (loss).
(2) A loss of $8 million and a gain of $13 million for the three and six months ended June 30, 2021, respectively, are reflected in Foreign currency translation gain (loss) in Other comprehensive gain (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 2021, we designated $117 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 loss, and the remaining remeasurement change is recognized in (Loss) gain 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 Acquisition 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 acquisition consideration liabilities as of June 30, 2021 are $16 million, of which $15 million is included in Accrued liabilities with the remainder included in Other long-term liabilities. Contingent acquisition consideration liabilities as

22

of December 31, 2020 were $13 million, of which $11 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, 2021 and June 30, 2020:
Six Months Ended June 30, 2021
Common Stock Additional Paid in Capital Accumulated Loss Treasury Stock Accumulated Other Comprehensive Loss Noncontrolling Interest Total
January 1, 2021 $ 1  $ 1,268  $ (3,529) $ (175) $ (218) $ 129  $ (2,524)
Vesting of RSUs, net of tax withholdings and other —  (13) —  —  —  —  (13)
Stock-based compensation —  17  —  —  —  —  17 
Net loss —  —  (15) —  —  6  (9)
Other comprehensive gain —  —  —  —  8  —  8 
March 31, 2021 $ 1  $ 1,272  $ (3,544) $ (175) $ (210) $ 135  $ (2,521)
Vesting of RSUs, net of tax withholdings and other —  (4) —  —  —  —  (4)
Stock-based compensation —  31  —  —  —  —  31 
Net income —  —  109  —  —  4  113 
Other comprehensive gain —  —  —  —  11  —  11 
June 30, 2021 $ 1  $ 1,299  $ (3,435) $ (175) $ (199) $ 139  $ (2,370)
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)
Vesting of RSUs, net of tax withholdings and other —  (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)
Vesting of RSUs, net of tax withholdings and other —  1  —  —  —  —  1 
Stock-based compensation —  13  —  —  —  1  14 
Net loss —  —  (203) —  —  5  (198)
Other comprehensive loss —  —  —  —  62  —  62 
June 30, 2020 $ 1  $ 1,230  $ (3,322) $ (175) $ (327) $ 114  $ (2,479)
Stock Based Compensation
The following reflects total stock-based compensation expense recognized under all programs:

23

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Related to SGC stock options $ 15  $ 1  $ 21  $ 2 
Related to SGC RSUs 23  8  38  17 
Related to SciPlay RSUs 3  5  5  5 
Total(1)
$ 41  $ 14  $ 64  $ 24 
(1) The increase in SGC stock based compensation expense for both periods is related to the acceleration of the expense as a result of attainment of certain targets for some of our directors coupled with the new equity awards issued at a higher fair value given the increase in our stock price compared to the prior period.
Restricted Stock Units
A summary of the changes in RSUs outstanding under our equity-based compensation plans during the six months ended June 30, 2021 is presented below:
Number of
Restricted
Stock
Units 		Weighted
Average
Grant Date
Fair Value
Unvested RSUs as of December 31, 2020
3.3  $ 19.07 
Granted 1.0  $ 52.62 
Vested (1.3) $ 23.13 
Cancelled (0.1) $ 17.08 
Unvested RSUs as of June 30, 2021
2.9  $ 28.92 
The weighted-average grant date fair value of RSUs granted during the six months ended June 30, 2021 and 2020 was $52.62 and $10.44, respectively. The fair value of each RSU grant is based on the market value of our common stock at the time of grant. At June 30, 2021, we had $70 million of unrecognized stock-based compensation expense relating to unvested RSUs that will be amortized over a weighted-average period of approximately two years. The fair value at vesting date of RSUs vested during the six months ended June 30, 2021 and 2020 was $62.1 million and $7.8 million, respectively.
(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 2021, we maintain a valuation allowance for certain of our U.S. operations as of June 30, 2021. We also maintain other valuation allowances for certain non-U.S. jurisdictions with cumulative losses.
Our effective income tax rates were 7% and 10% for the three and six months ended June 30, 2021, respectively, and (2)% for both of the three and six months ended June 30, 2020, and were determined using an estimated annual effective tax rate after considering any discrete items for such periods. Our effective tax rate differs from the U.S. statutory rate of 21% primarily due to the aforementioned valuation allowance against certain of our U.S. and foreign net deferred tax assets. We recorded an overall tax expense in all periods due to pre-tax earnings in jurisdictions without valuation allowances, including our 19% noncontrolling interest in SciPlay. Additionally, our rate is impacted by an unfavorable adjustment for the legacy U.K. Gaming reporting unit goodwill impairment of $54 million recorded in the first quarter of 2020, which was not deductible for tax purposes.
As discussed in Note 1, the COVID-19 disruptions significantly impacted certain segments of our business during 2020 and through the first half of 2021. 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. Additionally, we continue to monitor and evaluate the tax implications resulting from any existing and forthcoming 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 expense for the three and six months ended June 30, 2021 and 2020 were $8 million and $16 million, respectively. The total amount of variable and short-term lease payments was immaterial for all periods presented.
Supplemental balance sheet and cash flow information related to operating leases is as follows:

24


As of
June 30, 2021 December 31, 2020
Operating lease right-of-use assets(1)
$ 92  $ 94 
Accrued liabilities 27  26 
Operating lease liabilities 73  77 
Total operating lease liabilities $ 100  $ 103 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases for the six-month periods ended June 30, 2021 and 2020, respectively
$ 16  $ 15 
Weighted average remaining lease term, units in years 5 5
Weighted average discount rate 5  % 5  %

Lease liability maturities:
Remainder of 2021 2022 2023 2024 2025 Thereafter Less Imputed Interest Total
Operating leases $ 16  $ 27  $ 23  $ 19  $ 12  $ 15  $ (12) $ 100 
    
As of June 30, 2021, we did not have material additional operating leases that have not yet commenced.
(16) Litigation
We are involved in various legal proceedings, which are described in Note 21 within our 2020 10-K. There have been no material changes to these matters since the 2020 10-K was filed with the SEC on March 1, 2021, 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 $11 million and $3 million for all of our legal matters that were contingencies as of June 30, 2021 and December 31, 2020, respectively.
Substantially all of our legal contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss involves a series of complex judgments about future events. Consequently, the ultimate outcomes of our legal contingencies could result in losses in excess of amounts we have accrued. We may be unable to estimate a range of possible losses for some matters pending against us or our subsidiaries, even when the amount of damages claimed against us or our subsidiaries is stated because, among other things: (1) the claimed amount may be exaggerated or unsupported; (2) the claim may be based on a novel legal theory or involve a large number of parties; (3) there may be uncertainty as to the likelihood of a class being certified or the ultimate size of the class; (4) there may be uncertainty as to the outcome of pending appeals or motions; (5) the matter may not have progressed sufficiently through discovery or there may be significant factual or legal issues to be resolved or developed; and/or (6) there may be uncertainty as to the enforceability of legal judgments and outcomes in certain jurisdictions. Other matters have progressed sufficiently that we are able to estimate a range of possible loss. For those legal contingencies disclosed in Note 21 in our 2020 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 $14 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

25

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.
Washington State Matter
On April 17, 2018, a plaintiff, Sheryl Fife, filed a putative class action complaint, Fife v. Scientific Games Corporation, against SGC in the United States District Court for the Western District of Washington. The plaintiff seeks to represent a putative class of all persons in the State of Washington who purchased and allegedly lost virtual coins playing SGC’s online social casino games, including but not limited to Jackpot Party® Casino and Gold Fish® Casino. The complaint asserts claims for alleged violations of Washington’s Recovery of Money Lost at Gambling Act, Washington’s consumer protection statute, and for unjust enrichment, and seeks unspecified money damages (including treble damages as appropriate), the award of reasonable attorneys’ fees and costs, pre- and post-judgment interest, and injunctive and/or declaratory relief. On July 2, 2018, SGC filed a motion to dismiss the plaintiff’s complaint with prejudice, which the trial court denied on December 18, 2018. SGC filed its answer to the putative class action complaint on January 18, 2019. On August 24, 2020, the trial court granted plaintiff’s motion for leave to amend her complaint and to substitute a new plaintiff, Donna Reed, for the initial plaintiff, and re-captioned the matter Reed v. Scientific Games Corporation. On August 25, 2020, the plaintiff filed a first amended complaint against SGC, asserting the same claims, and seeking the same relief, as the complaint filed by Sheryl Fife. On September 8, 2020, SGC filed a motion to compel arbitration of plaintiff’s claims and to dismiss the action, or, in the alternative, to transfer the action to the United States District Court for the District of Nevada. On April 9, 2021, the plaintiff filed a motion to certify the putative class and for a preliminary injunction. On April 26, 2021, the district court stayed the lawsuit, pending its ruling on SGC’s motion to compel arbitration of plaintiff’s claims and to dismiss the action, or, in the alternative, to transfer the action to the United States District Court for the District of Nevada. On June 17, 2021, the district court denied that motion, and on June 23, 2021, SGC filed a notice of appeal from the district court’s denial of that motion, and also filed a motion to stay all district court proceedings, pending the appeals court’s ruling on the Company’s arbitration appeal. We are currently unable to determine the likelihood of an outcome or estimate a range of reasonably possible loss.
Casino Queen Matter
On April 2, 2021, Casino Queen, Inc. and Casino Queen Marquette, Inc. filed a putative class action complaint in the United States District Court for the Northern District of Illinois against SGC, Bally Technologies, Inc. and SG Gaming, f/k/a Bally Gaming, Inc. In the complaint, the plaintiffs assert federal antitrust claims arising from the defendants’ procurement of particular U.S. patents. The plaintiffs allege that the defendants used those patents to create an allegedly illegal monopoly in the market for automatic card shufflers sold or leased in the United States. The plaintiffs seek to represent a putative class of all persons and entities that directly purchased or leased automatic card shufflers within the United States from the defendants, or any predecessor, subsidiary, or affiliate thereof, at any time between April 1, 2009, and the present. The complaint seeks unspecified money damages, which the complaint asks the court to treble, the award of plaintiffs’ costs of suit, including attorneys’ fees, and the award of pre-judgment and post-judgment interest. On June 11, 2021, the defendants filed a motion to dismiss plaintiffs’ 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.
Colombia litigation
Our subsidiary, SGI, owned a minority interest in Wintech de Colombia S.A., or Wintech (now liquidated), which formerly operated the Colombian national lottery under a contract with Empresa Colombiana de Recursos para la Salud, S.A. (together with its successors, “Ecosalud”), an agency of the Colombian government. The contract provided for a penalty against Wintech, SGI and the other shareholders of Wintech of up to $5.0 million if certain levels of lottery sales were not achieved. In addition, SGI delivered to Ecosalud a $4.0 million surety bond as a further guarantee of performance under the contract. Wintech started the instant lottery in Colombia but, due to difficulties beyond its control, including, among other factors, social and political unrest in Colombia, frequently interrupted telephone service and power outages, and competition from another lottery being operated in a province of Colombia that we believe was in violation of Wintech’s exclusive license from Ecosalud, the projected sales level was not met for the year ended June 30, 1993.
In 1993, Ecosalud issued a resolution declaring that the contract was in default. In 1994, Ecosalud issued a liquidation resolution asserting claims for compensation and damages against Wintech, SGI and other shareholders of Wintech for, among other things, realization of the full amount of the penalty, plus interest, and the amount of the bond. SGI filed separate actions opposing each resolution with the Tribunal Contencioso of Cundinamarca in Colombia (the “Tribunal”), which upheld both resolutions. SGI appealed each decision to the Council of State. In May 2012, the Council of State upheld the contract default

26

resolution, which decision was notified to us in August 2012. In October 2013, the Council of State upheld the liquidation resolution, which decision was notified to us in December 2013.
In July 1996, Ecosalud filed a lawsuit against SGI in the U.S. District Court for the Northern District of Georgia asserting many of the same claims asserted in the Colombia proceedings, including breach of contract, and seeking damages. In March 1997, the District Court dismissed Ecosalud’s claims. Ecosalud appealed the decision to the U.S. Court of Appeals for the Eleventh Circuit. The Court of Appeals affirmed the District Court’s decision in 1998.
In June 1999, Ecosalud filed a collection proceeding against SGI to enforce the liquidation resolution and recover the claimed damages. In May 2013, the Tribunal denied SGI’s merit defenses to the collection proceeding and issued an order of payment of approximately 90 billion Colombian pesos, or approximately $30.2 million, plus default interest (potentially accrued since 1994 at a 12% statutory interest rate). SGI filed an appeal to the Council of State, and on December 10, 2020, the Council of State issued a ruling affirming the Tribunal’s decision. On December 16, 2020, SGI filed a motion for clarification of the Council of State’s ruling, which the Council of State denied on April 15, 2021. On April 22, 2021, SGI filed a motion for reconsideration relating to that decision.
SGI believes it has various defenses, including on the merits, against Ecosalud’s claims. Although we believe these claims will not result in a material adverse effect on our consolidated results of operations, cash flows or financial position, it is not feasible to predict the final outcome, and we cannot assure that these claims will not ultimately be resolved adversely to us or result in material liability.
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 IPO (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 the SciPlay IPO, 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. On August 28, 2020, the court issued an oral ruling granting in part and denying in part the defendants’ motion to dismiss. On December 14, 2020, plaintiffs in the consolidated action filed a motion to certify the putative class. On May 12, 2021, the parties in the consolidated action reached an agreement in principle to settle the consolidated action and so informed the New York court, which stayed non-settlement related proceedings in the consolidated action, pending finalization of the settlement in principle.
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 the SciPlay IPO. The plaintiff seeks to represent a class of all persons who purchased Class A common stock of SciPlay in or traceable to the SciPlay IPO 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 was pending in the SciPlay IPO matter in New York state court. On September 29, 2020, the trial court entered a stipulated order that extended the stay pending a ruling on class certification in the SciPlay IPO matter in New York state court. On May 12, 2021, the parties in the Nevada lawsuit reached an agreement in principle to settle the lawsuit and so informed the Nevada court, which stayed non-settlement related proceedings in the lawsuit, pending finalization of the settlement in principle.
Based on our assessment under ASC 410 and ASC 450 and consideration of the SciPlay IPO matters pending in New York and Nevada described above, we determined that both loss and insurance proceeds loss recovery, which we believe is recoverable under our insurance policy, are deemed probable and reasonably estimable. As a result, we recorded approximately $8 million in Accrued liabilities and Prepaid expenses and other current assets as of June 30, 2021, with no material impact on our statement of operations income for the three and six-month periods ended June 30, 2021.
For additional information regarding our pending litigation matters, see Note 21 in our 2020 10-K.

27

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 from management’s perspective 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 2020 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 2020 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 and other mobile games to retail customers; and providing a comprehensive suite of digital RMG and sports wagering solutions, distribution platforms, content, products and services. We also gain access to technologies and pursue global expansion through strategic acquisitions and equity investments. We report our results of operations in four business segments—Gaming, Lottery, SciPlay and Digital—representing our different products and services.
Recent Events
Strategic Review Update
On June 29, 2021, we announced that the Company with the support of its Board of Directors completed the strategic review, which (1) reaffirmed the strategy to become a content-led growth company with a particular focus on digital markets; and (2) intends to divest our Lottery and Sports Betting (component of our Digital business segment) operations (“referred herein as businesses”) creating the path to significantly de-lever and position the Company for enhanced growth. We are currently evaluating strategic alternatives to execute the divestitures for each business, respectively, including IPO or a combination with SPAC, or a sale or a strategic combination with another business.
Additionally, as described in Note 1, on July 15, 2021, we submitted a proposal to SciPlay’s board of directors to acquire the remaining 19% equity interest in SciPlay that we do not currently own in an all-stock transaction, following which SciPlay would become a wholly-owned subsidiary of Scientific Games. This proposed transaction is part of our strategic review described above and a step forward on the recently announced strategy to become a content-led growth company with a particular focus on digital markets that we believe will unlock the value of our products and technologies.
There can be no assurances that our evaluation of strategic alternatives for our Lottery and Sports Betting businesses or for the acquisition of the remaining equity interest in SciPlay will result in any transactions or other actions and execution of these transactions is subject to market, operational and other uncertainties.
Impacts of COVID-19
As more fully described in the “Description of the Business and Summary of Significant Accounting Policies - Impact of COVID-19” in Note 1 of our 2020 10-K, COVID-19 disruptions continue to impact our results of operations and particularly our Gaming business segment operations. Although most gaming establishments have reopened globally and some have begun operating at full capacity, many gaming operations have yet to return to pre-COVID levels. The current state reflects continued fluctuations in infection rates and regulations for various regions along with ongoing domestic and international travel restrictions or warnings, social distancing measures, reduced operating capacity and an overall economic and general uncertainty regarding the magnitude and length of time that these disruptions will continue. These circumstances may change in the future and such changes could be material. We continue to assess the situation jurisdiction by jurisdiction, actively managing our cash flows and continuing to evaluate additional measures that may reduce operating costs and conserve cash to preserve liquidity as we execute on our strategic initiatives.
Impact on Business Operations and Financial Results

28

Throughout 2020 and the first half of 2021, the Gaming business segment was especially impacted by the COVID-19 disruptions due to the widespread closures of gaming operation establishments and restricted reopening of a substantial number of gaming operation establishments coupled with global economic uncertainty. Many of these closures and restrictions have been lifted with some gaming operation establishments removing all restrictions, thereby allowing full capacity operations along with other businesses which have begun to see more activity given the expansion of capacity limits, increased travel, and distribution of vaccines during the second quarter of 2021. Additionally, we noted that the U.S. and U.K. markets have rebounded which has had a notable impact on our Gaming operations primarily due to the lifting of restrictions and further elevated by consumer pent up demand from prior periods resulting in higher gross gaming revenues. Additionally, Gaming operations revenue for the three and six months ended June 30, 2021 benefited from the FOBT recovery as described in the Consolidated Results section below. However, the future impact of the COVID-19 pandemic remains uncertain. We continue to monitor the global supply chain constraints along with the labor shortages on a macro level caused by COVID-19, which have negatively impacted the hospitality and leisure industries, including gaming.
For more information on the effects that COVID-19 has had on each of our business segments, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Impact on Business Operations and Financial Results” and Note 1 of our 2020 10-K.
Impact on Liquidity
Our only financial maintenance covenant (excluding SciPlay’s Revolver) is contained in SGI’s credit agreement. For information regarding the impact on liquidity and other requirements, please refer to the “Description of the Business and Summary of Significant Accounting Policies” in Note 1 and “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the “Business Overview” along with the “Liquidity, Capital Resources and Working Capital” sections of our 2020 10-K. In July 2021, we made a voluntary payment of $150 million on SGI’s revolving credit facility.
Subsequent to June 30, 2021, we amended our Credit Agreement to provide for additional flexibility on executing the recently announced strategic transactions, more fully described in Note 11.
Segments
We report our operations in four business segments - Gaming, Lottery, SciPlay and Digital - representing our different products and services. See “- Business Segments Results” below and Note 3 for additional business segment information.
Foreign Exchange
Our results are impacted by changes in foreign currency exchange rates used in the translation of foreign functional currencies into USD and the remeasurement of foreign currency transactions or balances. The impact of foreign currency exchange rate fluctuations represents the difference between current rates and prior-period rates applied to current activity. Our exposure to foreign currency volatility on revenue is as follows:
Three Months Ended June 30,
Six Months Ended June 30,
2021 2020 2021 2020
($ in millions)
Revenue % Consolidated Revenue Revenue % Consolidated Revenue Revenue % Consolidated Revenue Revenue % Consolidated Revenue
Foreign Currency:
British Pound Sterling $ 121  14  % $ 60  11  % $ 192  12  % $ 145  11  %
Euro 57  6  % 46  9  % 109  7  % 109  9  %
    
We also have foreign currency exposure related to certain of our equity investments, cross-currency interest rate swaps, and Euro-denominated debt. See Part I, Item 1A in our 2020 10-K, “Consolidated Results — Other Factors Affecting 2020 and 2019 Net Loss Attributable to SGC Comparability” under Item 7 in our 2020 10-K and Item 3 “Quantitative and Qualitative Disclosures about Market Risk” in this Quarterly Report on Form 10-Q.
CONSOLIDATED RESULTS

29

Three Months Ended June 30,
Variance
Six Months Ended June 30,
Variance
($ in millions) 2021

2020 2021 vs. 2020 2021 2020 2021 vs. 2020
Total revenue
$ 880  $ 539  $ 341  63  % $ 1,609  $ 1,264  $ 345  27  %
Total operating expenses 717  595  122  21  % 1,365  1,352  13  1  %
Operating income (loss) 163  (56) 219  391  % 244  (88) 332  377  %
Net income (loss) before income taxes 121  (196) 317  162  % 115  (347) 462  133  %
Net income (loss) 113  (198) 311  157  % 104  (353) 457  129  %
Net income (loss) attributable to SGC $ 109  $ (203) $ 312  154  % $ 94  $ (362) $ 456  126  %

Revenue
Consolidated Revenue by Business Segment
(in millions)
Three Months Ended June 30, 2021 and 2020
Six Months Ended June 30, 2021 and 2020
SGMS-20210630_G1.JPG SGMS-20210630_G2.JPG
As described in the “Recent Events – Impact of COVID-19” section above, our total revenue, primarily revenues for the Gaming business segment, were significantly impacted in both of the prior year periods. Although these business disruptions continued to adversely impact our Gaming revenue in the first half of 2021, the re-opening of venues, lifting of restrictions, increased travel, and distribution of vaccines along with pent up consumer demand have caused businesses to see more activity and thereby have helped drive the three and six-month improvement during the second quarter of 2021.
Lottery revenue increased above pre-COVID operation levels in 2021 for both periods, primarily due to the rebound of lottery operations globally, coupled with the positive impact of two mega jackpots in the first half of 2021.
Digital Gaming revenues increased for both periods primarily due to growth in iGaming and Sports offerings in the U.S. market as iGaming is live in three U.S. states with a 25% market share and 26 Sportsbooks are live with 20 new deployments planned before the end of the year.
SciPlay revenue decreased for the three-month period as a result of declining paying player engagement largely due to the easing of stay-at-home measures compared to the height of COVID-19 prevention measures in the prior year. Revenues increased for the six-month period due to elevated player engagement from continued COVID-19 prevention measures during the first quarter of 2021 compared to limited COVID-19 prevention measures for most of the first quarter of 2020 in addition to the introduction of new content and features resulting in increased paying player interaction.
Given the impact of the COVID-19 pandemic on the prior year period, we also present below certain sequential comparisons to the quarter ended March 31, 2021, in order to provide additional context for our results of operations. During the three months ended June 30, 2021, total revenue, compared to the three months ended March 31, 2021, increased from $729 million to $880 million, representing a 21% increase, primarily driven by higher Gaming business segment revenue and particularly higher Gaming operations revenue as a result of the market rebound for land based gaming establishments due to the re-opening of venues and lifting of restrictions, as described above. Additionally, Gaming operations revenue for the three and six months ended June 30, 2021 benefited from $38 million and $44 million, respectively, due to the U.K. FOBT recovery received from certain U.K. customers. The FOBT recovery is related to a 2020 U.K. court ruling, associated with overcharging

30

of value-added tax for previous services rendered to gaming operators and consequently reduced our net gaming revenue related to these customers and arrangements.
Operating Expenses
Three Months Ended June 30,
Variance
Six Months Ended June 30,
Variance
($ in millions) 2021

2020 2021 vs. 2020 2021

2020 2021 vs. 2020
Operating expenses:
Cost of services $ 151  $ 126  $ 25  20  % $ 290  $ 256  $ 34  13  %
Cost of product sales 75  69  6  9  % 125  160  (35) (22) %
Cost of instant products 77  62  15  24  % 154  135  19  14  %
SG&A 205  151  54  36  % 391  349  42  12  %
R&D 54  31  23  74  % 106  82  24  29  %
D&A 123  140  (17) (12) % 246  278  (32) (12) %
Goodwill impairment —  —  —  —  —  54  (54) 100%
Restructuring and other 32  16  16  100  % 53  38  15  39  %
Total operating expenses
$ 717  $ 595  $ 122  21  % $ 1,365  $ 1,352  $ 13  1  %
Cost of Revenue
Total cost of revenue for both periods increased as a direct result of higher revenue due to the global economy beginning to recover as easing of restrictions continues. The increases in total cost of revenue for the three and six-month periods were partially offset by the prior year periods including $15 million and $24 million, respectively, in higher Gaming cost of product inventory valuation charges for excess and obsolete inventory.
SG&A
SG&A increased in both periods primarily due to (1) higher stock-based compensation expenses of $27 million and $40 million, respectively, primarily driven by the acceleration of the expense as a result of attainment of certain targets for some of our directors coupled with the new equity awards issued at a higher fair value given the increase in our stock price compared to the prior period and (2) prior year comparable periods reflecting lower operating costs as a result of the temporary austerity measures implemented to reduce costs during the COVID-19 disruptions. The increases in SG&A were partially offset by the prior year three and six-month periods including $10 million and $38 million, respectively, in higher Gaming business segment allowance for credit loss charges that reflected credit deterioration and credit weakness specifically in our Latin America receivables portfolio due to the COVID-19 disruptions.
R&D
R&D increased in both periods primarily due to higher salaries and benefits compared to the prior year periods reflecting lower operating costs as a result of the temporary austerity measures implemented to reduce costs during the COVID-19 disruptions.
D&A
The decrease in D&A for both periods is primarily due to certain gaming equipment, intangible assets and software primarily associated with historical acquisitions becoming fully depreciated and amortized in the prior year period.
Goodwill Impairment
Goodwill impairment recorded during the prior year six-month period was related to our legacy U.K. Gaming reporting unit.
Restructuring and Other
The increase in restructuring and other in both periods is primarily due to charges related to announced strategic initiatives in the current year associated with our intent to monetize our Lottery and Sports betting businesses and to a lesser extent business optimization initiatives implementation costs primarily associated with efficiency programs, partially offset by higher COVID-19 business disruption charges in the prior year periods.
Other Factors Affecting Net Income (Loss) Attributable to SGC

31

Three Months Ended June 30, Six Months Ended June 30, Factor Affecting Net Income (Loss) Attributable to SGC
(in millions) 2021 2020 2021 2020 2021 vs. 2020
Earnings (loss) from equity investments $ 14  $ (3) $ 23  $ (5)
Higher earnings from equity investments in the current year periods are primarily due to pent up demand from consumers and improved performance of our equity investments as lockdowns and restrictions were lifted.
(Loss) gain on remeasurement of debt $ (7) $ (12) $ 18  $ (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 periods. 83% of our Euro Notes were not treated as a net investment hedge in the second quarter of 2021 compared to 82% in the second quarter of 2020.
Other income (expense), net $ 70  $ (1) $ 70  $ (4)
2021 periods include $63 million gain associated with the SportCast Acquisition through the exercise of the SportCast Option (see Note 1).
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, 2021 compared to the three and six months ended June 30, 2020)
GAMING
Our Gaming business segment designs, develops, manufactures, markets and distributes a comprehensive portfolio of gaming products and services. We provide our Gaming portfolio of products and services to commercial casinos, Native American casinos, wide-area gaming operators such as LBOs, arcade and bingo operators in the U.K. and continental Europe, and government agencies and their affiliated operators. Our equity investment in Roberts Communications Network, LLC is included in our Gaming business segment.
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 2020 10-K.
Current Year Update
See the “Business Overview – Recent Events – Impact of COVID-19” section above for a description of the COVID-19 impact on our Gaming business segment, which continued to have an overall adverse effect on our results of operations and cash flows in the first half of 2021, and is expected to continue into the third quarter of 2021 and potentially beyond as social distancing measures, which are slowly being rolled back, continue to be enforced in certain jurisdictions. In the near term, we expect to see an increase in the demand for our Gaming products as the easing of restrictions continues and gaming operators slowly return to pre-COVID levels. See also “Description of the Business and Summary of Significant Accounting Policies - Impact of COVID-19” in Note 1 of our 2020 10-K.
Results of Operations and KPIs
Three and Six Months Ended June 30, 2021 and 2020

32

SGMS-20210630_G3.JPG SGMS-20210630_G4.JPG SGMS-20210630_G5.JPG
Revenue
Three Months Ended June 30,
Variance
Six Months Ended June 30,
Variance
($ in millions) 2021 2020 2021 vs. 2020 2021 2020 2021 vs. 2020
Revenue:
Gaming operations
$ 181  $ 16  $ 165  1,031  % $ 294  $ 135  $ 159  118  %
Machine sales
100  53  47  89  % 155  145  10  7  %
Systems
52  17  35  206  % 94  72  22  31  %
Table products
34  5  29  580  % 68  57  11  19  %
Total revenue
$ 367  $ 91  $ 276  303  % $ 611  $ 409  $ 202  49  %
F/X impact on revenue
$ 10  $ (1) $ 11  (1,100) % $ 12  $ (2) $ 14  (700) %
Gaming KPIs:
U.S. and Canada units:
Installed base at period end 29,965  30,324  (359) (1) % 29,965  30,324  (359) (1) %
Average daily revenue per unit $ 44.58  $ 4.45  $ 40.13  902  % $ 40.50  $ 18.17  $ 22.33  123  %
International units(1):
Installed base at period end 31,412  34,333  (2,921) (9) % 31,412  34,333  (2,921) (9) %
Average daily revenue per unit $ 8.44  $ 0.83  $ 7.61  917  % $ 5.76  $ 4.53  $ 1.23  27  %
Gaming machine unit sales:
U.S. and Canada new unit shipments 3,221  1,431  1,790  125  % 5,164  4,321  843  20  %
International new unit shipments 1,751  2,917  (1,166) (40) % 2,407  4,920  (2,513) (51) %
Total new unit shipments 4,972  4,348  624  14  % 7,571  9,241  (1,670) (18) %
Average sales price per new unit $ 17,048  $ 11,137  $ 5,911  53  % $ 16,902  $ 13,644  $ 3,258  24  %
(1) Excludes the impact of game content licensing revenue.

33

While we continue to see increased demand, Gaming revenue continues to be impacted by the COVID-19 disruptions, as described above, as the continuation of social distancing requirements (including reduced floor capacities, table play customer limitations and reduction of slot machines available for play) implemented in the first half of 2020 are still being enforced in certain jurisdictions. Although the restrictions are being eased, the mitigation measures are expected to continue for an indeterminate amount of time, which will continue to affect consumer behavior, and thus, we expect to continue to see the impact on our gaming segment in the third quarter of 2021 and potentially beyond.
During the three months ended June 30, 2021, Gaming revenues, compared to the three months ended March 31, 2021, increased from $244 million to $367 million representing a 50% increase, primarily driven by increased Gaming operations and Machine sales. Gaming operations revenue for the three months ended June 30, 2021 also benefited from FOBT recovery of $38 million in the U.K. as described in the Consolidated Results – Revenue section above, and machine sales increased due to higher domestic new unit shipments.
Gaming Operations
Gaming operations revenue increased for both periods primarily due to the significant impact of COVID-19 disruptions on the prior year periods and the current year three-month period including FOBT recovery of $38 million as described in the Consolidated Results – Revenue section above. During the three and six-month periods Gaming operations had 359-unit and 2,921-unit decreases in the U.S. and Canada and International ending installed base, respectively, which were offset by increases in average daily revenue per unit for the three and six-month periods of $40.13 and $22.33 for the U.S. and Canada units and $7.61 and $1.23 for the International units, respectively, which were all primarily caused by the COVID-19 disruptions in the prior year and current year recovery.
Gaming Machine Sales
Gaming machine sales revenue increased primarily due to higher sales of replacement units in the U.S and Canada along with a higher average sales price per new unit. Additionally, the impact of COVID-19 on the prior year periods as described above, resulted in lower unit shipments in the prior year periods. The following table summarizes Gaming machine sales changes:
Three Months Ended June 30,
Variance
Six Months Ended June 30,
Variance
2021 2020 2021 vs. 2020 2021 2020 2021 vs. 2020
U.S. and Canada unit shipments:
Replacement units 2,541  640  1,901  297  % 4,164  2,384  1,780  75  %
Casino opening and expansion units 680  791  (111) (14) % 1,000  1,937  (937) (48) %
Total unit shipments 3,221  1,431  1,790  125  % 5,164  4,321  843  20  %
International unit shipments:
Replacement units —  2,532  (2,532) (100) % 656  4,359  (3,703) (85) %
Casino opening and expansion units 1,751  385  1,366  355  % 1,751  561  1,190  212  %
Total unit shipments 1,751  2,917  (1,166) (40) % 2,407  4,920  (2,513) (51) %

Operating Expenses and AEBITDA
Operating expenses increased in the three-month period by $34 million primarily due to a $16 million increase in cost of services associated with the increase in revenue as described above coupled with $13 million in higher SG&A costs related to Salaries and Benefits due to the austerity measures implemented in the prior year in response to the COVID-19 disruptions.
Operating expenses decreased in the six-month period by $128 million, primarily due to a number of charges in the prior year period, which did not recur in 2021. The prior year period included: (1) a $54 million goodwill impairment charge related to our U.K. Gaming unit, which was recorded during the first quarter of 2020; (2) $38 million in higher allowance for credit loss charges; (3) $24 million in inventory valuation charges to cost of products; and (4) $12 million in higher restructuring and other charges.
AEBITDA as a percentage of revenue (“AEBITDA margin”) for the three and six-month periods increased by 87 and 34 percentage points to 53% and 50%, respectively, which is primarily related to increased revenues coupled with the lower allowance for credit loss and inventory valuation charges in the current year periods as described above coupled with the three

34

and six-month periods ended June 30, 2021 benefiting from the FOBT recovery in the U.K. of $38 million and $44 million, respectively.
AEBITDA for the three-month period ended June 30, 2021 compared to the three-month period ended March 31, 2021, increased from $108 million to $196 million primarily due to increased revenues as a result of the ongoing easing of restrictions coupled with the FOBT recovery of $38 million.
LOTTERY
Our Lottery segment is primarily comprised of our instant products business, systems-based services and product sales business. Our systems-based services and product sales business provide customized enterprise systems computer software, software support, equipment and data communication services, game content, and related products for retail and digital lottery draw and instant games, sports and virtual sports, and keno to lotteries. In the U.S., we typically provide the necessary POS terminals and equipment, internet and mobile solutions, software and maintenance services on a Participation basis under contracts that typically have an initial term of up to ten years. Internationally, we typically sell POS terminals and mobile lottery wagering platforms, related computer software and products, and technical operations services to lottery authorities and may provide ongoing fee-based systems maintenance and software support services.
Our instant products business generates revenue from the manufacture and sale of instant products, and the provision of value-added services such as game design, sales and marketing support, specialty games and promotions, inventory management, warehousing, fulfillment services and full instant product category management administered through our SGEP program. 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. For further details on our Lottery segment’s primary business activities refer to the “Business Segment Results” under Item 7 of our 2020 10-K.
Current Year Update
We believe we will continue to face intense price-based competition in our Lottery business through the remainder of 2021 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. 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 KPIs
Three and Six Months Ended June 30, 2021 and 2020
SGMS-20210630_G6.JPG SGMS-20210630_G7.JPG SGMS-20210630_G8.JPG
Revenue

35

Three Months Ended June 30,
Variance
Six Months Ended June 30,
Variance
($ in millions) 2021 2020 2021 vs. 2020 2021 2020 2021 vs. 2020
Revenue:
Instant products
$ 175  $ 133  $ 42  32  % $ 337  $ 269  $ 68  25  %
Lottery systems
91  76  15  20  % 177  152  25  16  %
Total revenue
$ 266  $ 209  $ 57  27  % $ 514  $ 421  $ 93  22  %
F/X impact on revenue
$ 5  $ (2) $ 7  350  % $ 8  $ (3) $ 11  (367) %
The increase in instant products and systems revenue for both periods is primarily due to the impact of COVID-19 on the prior year results coupled with the large lottery jackpots in the first half of 2021 driving both instant products sales and system increases.
Operating Expenses and AEBITDA
The increase in operating expenses for both periods is primarily due to increased cost of revenues of $28 million and $32 million, respectively, associated with higher revenues as described above coupled with $7 million and $13 million, respectively, in higher SG&A costs as the prior year period was impacted by the Company-wide austerity measures in response to the COVID-19 disruptions. The increase in AEBITDA is directly correlated with increased revenues as described above coupled with higher EBITDA from equity investments.
AEBITDA margin for the three and six-month periods increased by 6 and 8 percentage points to 52% and 50%, respectively, which is primarily driven by the higher revenue as described above, coupled with higher EBITDA from equity investments reflective of continuing recovery from COVID-19 disruptions.
SCIPLAY
Our SciPlay business segment is a leading developer and publisher of social games on mobile and web platforms. SciPlay currently offers seven core games, including social casino games Jackpot Party Casino, Gold Fish Casino, Hot Shot Casino® and Quick Hit® Slots, and casual games MONOPOLY Slots, Bingo Showdown® and 88 Fortunes® Slots and recently added a solitaire social game as a part of the Come2Play acquisition. SciPlay’s social casino games typically include slots-style game play and occasionally include table games-style game play, while SciPlay’s casual games blend slots-style or bingo game play with adventure game features. All of SciPlay’s games are offered and played on multiple platforms, including Apple, Google, Facebook, Amazon, and the Microsoft platform. In addition to SciPlay’s internally created games, SciPlay’s content library includes recognizable, real-world slot and table games content from SGC. This content allows players who like playing land-based slot machines to enjoy some of those same titles in SciPlay’s free-to-play games. SciPlay has access to SGC’s library of more than 1,500 iconic casino titles, including titles and content from third-party licensed brands such as MONOPOLY, JAMES BOND™, THE FLINTSTONES™, MICHAEL JACKSON™, and PLAYBOY™.
We generate substantially all of our revenue from the sale of coins, chips and cards which players can use to play our games. Players who install our games receive free coins, chips and cards upon the initial launch of the game and additional free coins, chips and cards at specific time intervals. Players may exhaust the coins, chips and cards that they receive for free and may choose to purchase additional coins, chips and cards in order to extend their time of game play. Once obtained, coins, chips and cards (either free or purchased) cannot be redeemed for cash nor exchanged for anything other than game play within our apps. We distribute our games through various global social web and mobile platforms such as Facebook, Apple, Google, Amazon, 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.
Current Year Update
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 have implemented measures to prevent its spread, including the temporary closure of all non-essential businesses and travel restrictions. Many of our current and potential players may have significantly more free time to play our games, however they may also experience sustained consumer unease and have lower discretionary income. While the increased player engagement we experienced during the first half of 2020 as a result of the stay-at-home measures across the U.S. has begun to recede, we are still seeing an increase in paying player engagement as compared to the pre-COVID time period in the six-months ended June 30, 2021. We are not able to predict and quantify the ultimate impact of further COVID-19 developments on our results of operations in future periods.

36

On July 2, 2021, SciPlay acquired privately held Koukoi, a developer and operator of casual mobile games (see Note 1), which enables SciPlay to expand its casual games portfolio.
Results of Operations and KPIs
Three and Six Months Ended June 30, 2021 and 2020
SGMS-20210630_G9.JPG SGMS-20210630_G10.JPG SGMS-20210630_G11.JPG
Revenue
Three Months Ended June 30,
Variance
Six Months Ended June 30,
Variance
($ in millions) 2021 2020 2021 vs. 2020 2021 2020 2021 vs. 2020
Revenue:
Mobile
$ 136 $ 144 $ (8) (6) % $ 269 $ 245 $ 24 10  %
Web and other
18 22 (4) (18) % 36 39 (3) (8) %
Total revenue
$ 154 $ 166 $ (12) (7) % $ 305 $ 284 $ 21 7  %
SciPlay KPIs:
Mobile Penetration(1)
88  % 87  % 1pp nm 88  % 86  % 2pp nm
Average MAU(2)
6.3 8.1 (1.8) (22) % 6.5 7.8 (1.3) (17) %
Average DAU(3)
2.3 2.7 (0.4) (15) % 2.4 2.7 (0.3) (11) %
ARPDAU(4)
$ 0.72 $ 0.67 $ 0.05  7  % $ 0.70 $ 0.58 $ 0.12 21  %
nm = not meaningful.
pp = percentage points.
(1) Mobile penetration is defined as the percentage of business to consumer SciPlay 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.
For the three-month period, revenues decreased as a result of declining paying player engagement largely due to the easing of stay-at-home measures compared to the height of COVID-19 prevention measures in the prior year.
For the six-month period, revenues increased due to elevated player engagement from continued COVID-19 prevention measures during the first quarter of 2021 compared to limited COVID-19 prevention measures for most of the first quarter of 2020 in addition to the introduction of new content and features resulting in increased paying player interaction.
The increase in mobile penetration percentage primarily reflects a continued trend of players migrating from web to mobile platforms to play our games.


37

Average MAU and average DAU decreased due to the turnover in users due to more efficient marketing towards potential paying players. ARPDAU increased as a function of lower average DAU for periods presented.
Operating Expenses and AEBITDA
The increase in operating expenses for the six-month period is due to increases in SG&A and R&D associated with an increase in salary and benefits costs as a result of higher headcount along with higher sales and marketing expenses driven by incremental paying customers and higher D&A from additional long-term license agreements with third parties.
AEBITDA for the three-month period decreased primarily due to the decrease in revenue as described above.
AEBITDA margin for the three-month period decreased by 5 percentage points to 31%, primarily due to the decrease in revenue as described above. AEBITDA margin for the six-month period decreased by 2 percentage points to 31% due to the increase in operating expenses driven by SG&A as described above, partially offset by the higher revenue.
DIGITAL
Our Digital segment provides a comprehensive suite of digital iGaming, 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, 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
Our Digital segment revenues increased for both periods, with the six-month period being partially offset by a decrease in Sports and platform revenue primarily due to a cancellation fee of $7 million associated with certain legacy agreements that were modified in the first quarter of 2020. We continue to expand our customer base and capitalize on iGaming and sports opportunities and growth in the U.S. by leveraging our industry leading platforms, content and solutions. Currently, iGaming is live in three U.S. states with a 25% market share and 26 Sportsbooks are live with 20 new deployments planned before the end of the year. While we believe that we are well positioned and continue to successfully expand our customer base and capitalize on U.S. sports-betting markets, we expect to see increased levels of intense competition.
In May of 2021, we acquired SportCast (see Note 1), which expanded our portfolio of sports betting technology, services and content. In August of 2021, we acquired Lightning Box, which expanded our iGaming content portfolio.
Results of Operations and KPIs
Three and Six Months Ended June 30, 2021 and 2020
SGMS-20210630_G12.JPG SGMS-20210630_G13.JPG SGMS-20210630_G14.JPG
Revenue

38

Three Months Ended June 30,
Variance
Six Months Ended June 30,
Variance
($ in millions) 2021 2020 2021 vs. 2020 2021 2020 2021 vs. 2020
Revenue:
Sports and platform
$ 38  $ 26  $ 12  46  % $ 71  $ 64  $ 7  11  %
Gaming and other
55  47  8  17  % 108  86  22  26  %
Total revenue
$ 93  $ 73  $ 20  27  % $ 179  $ 150  $ 29  19  %
F/X impact on revenue
$ 6  $ (2) $ 8  (400) % $ 10  $ (2) $ 12  (600) %
Gaming KPI:
Wagers processed through OGS (in billions)
$ 18.0  $ 14.0  $ 4.0  29  % $ 35.0  $ 23.9  $ 11.1  46  %

The increase in revenues and AEBITDA for both periods is primarily due to increased free time and stay at home measures as a result of COVID-19 disruptions coupled with higher iGaming and Sports revenue driven by continued growth and expansion in the U.S. market, which was partially offset by the cancellation fee that was recognized in the first quarter of 2020, as described above.
AEBITDA margin for the three and six-month periods increased by 6 and 5 percentage points to 33% and 34%, 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 2020 10-K.
There have been no significant changes in our critical accounting estimate policies or the application of those policies to our condensed consolidated financial statements from those presented in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” included in our 2020 10-K.
LIQUIDITY, CAPITAL RESOURCES AND WORKING CAPITAL
Cash and Available Liquidity
As of June 30, 2021, 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).
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) $ 631  $ 650  $ (297) $ 984 
SciPlay 301  150  —  451 
Total as of June 30, 2021
$ 932  $ 800  $ (297) $ 1,435 
SGC (excluding SciPlay) $ 747  $ 650  $ (547) $ 850 
SciPlay 269  150  —  419 
Total as of December 31, 2020
$ 1,016  $ 800  $ (547) $ 1,269 


39

Total cash held by our foreign subsidiaries was $168 million and $173 million as of June 30, 2021 and December 31, 2020, 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 I, Item 1A in our 2020 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, 2021 our outstanding performance bonds totaled $265 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 I, Item 1A in our 2020 10-K.
In July 2021, we made a voluntary payment of $150 million on SGI’s revolving credit facility. Refer to Recent Events Strategic Review Update section above, which if executed would create the path to significantly reduce our long-term debt.
Subsequent to June 30, 2021, we amended our Credit Agreement to provide for additional flexibility on executing the recently announced strategic transactions, more fully described in Note 11.
Cash Flow Summary
Six Months Ended June 30,
Variance
($ in millions)
2021 2020 2021 vs. 2020
Net cash provided by operating activities $ 272  $ 172  $ 100 
Net cash used in investing activities (98) (84) (14)
Net cash (used in) provided by financing activities (324) 402  (726)
Effect of exchange rate changes on cash, cash equivalents and restricted cash —  (1) 1 
(Decrease) increase in cash, cash equivalents and restricted cash $ (150) $ 489  $ (639)
Cash Flows from Operating Activities
Six Months Ended June 30,
Variance
($ in millions)
2021 2020 2021 vs. 2020
Net income (loss) $ 104  (353) $ 457 
Adjustments to reconcile net income (loss) to cash provided by operating activities 234  460  (226)
Changes in working capital accounts, net of effect of acquisitions (71) 57  (128)
Changes in deferred income taxes and other 5  8  (3)
Net cash provided by operating activities increased primarily due to a $231 million increase in earnings (after adjustments to reconcile net income (loss) to cash flows from operations) as certain restrictions due to COVID-19 have been lifted, which was partially offset by a $131 million unfavorable change in working capital accounts and other. The current year improvement includes $44 million in FOBT recovery as described in the Consolidated Results – Revenue section above, which based on its nature is not expected to recur in future periods. Changes in working capital accounts for the six months ended June 30, 2021 were primarily driven by higher billings as recovery from the COVID-19 pandemic continues to gain momentum with eased restrictions and a beginning of the return to pre-COVID levels of business, coupled with cash management and timing of expenditures.
Cash Flows from Investing Activities
Net cash used in investing activities increased primarily due to higher capital expenditures. Capital expenditures are composed of investments in systems, equipment and other assets related to contracts, property and equipment, intangible assets and software.

40

Cash Flows from Financing Activities
Net cash used in financing activities increased primarily due to repayments of $250 million under SGI’s revolving credit facility compared to the prior year period $440 million net draw on SGI’s revolving credit facility.
As of August 9, 2021, we have repaid a cumulative $500 million since the fourth quarter of 2020, which includes a $150 million payment that was made subsequent to June 30, 2021.
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 2020 10-K and Item 3 below.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any significant off-balance sheet arrangements.
Contractual Obligations
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 2020 10-K, other than those related to the acquisitions completed subsequent to June 30, 2021, described in Note 1.
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, 2021, the face value of long-term debt was $9,113 million, including $4,324 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 $43 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 2020 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, 2021, 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.

41


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, 2021, 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 $68 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 3a-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 as of June 30, 2021.
There were no changes in our internal control over financial reporting during the three months ended June 30, 2021 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 2020 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 2020 10-K, except as noted below.
We are reviewing strategic alternatives for our Lottery and Sports Betting businesses and have submitted a proposal to acquire the public shares of our SciPlay business (the “Proposed SciPlay Acquisition”), but there can be no assurance that we will be successful in identifying or consummating any strategic alternatives or the Proposed SciPlay Acquisition, that strategic alternatives or the Proposed SciPlay Acquisition will yield additional value for our stockholders or that the evaluation of strategic alternatives or the Proposed SciPlay Acquisition will not adversely impact our business, financial results, results of operations, cash flows or stock price.
On June 29, 2021, we announced our intention to divest our Lottery and Sports Betting businesses. We are evaluating strategic alternatives to execute the divestitures of the Lottery and Sports Betting businesses, as applicable, including an initial public offering, a combination with a special purpose acquisition company, a sale or a strategic combination with another business. On July 15, 2021, we submitted a proposal to the board of directors of SciPlay Corporation to acquire the remaining 19% equity interest in SciPlay Corporation that we do not currently own in an all-stock transaction, following which SciPlay would become a wholly-owned subsidiary of Scientific Games. Evaluation of proposed transactions is ongoing and may not result in the consummation of any transaction, on any particular timetable or at all. Speculation regarding any developments related to the review of strategic alternatives for our Lottery and Sports Betting businesses or the Proposed SciPlay Acquisition and perceived uncertainties related to the future of such businesses or Scientific Games could cause our stock price to fluctuate significantly.
Our evaluation of strategic alternatives for our Lottery and Sports Betting businesses and the Proposed SciPlay Acquisition exposes us to a number of risks and uncertainties, including continued diversion of management’s time to the processes; the incurrence of significant expenses associated with the review and pursuit of any transaction; increased difficulties in attracting, retaining or motivating key management personnel; the potential loss of key customers, suppliers, vendors and other key business partners; the inability to obtain necessary regulatory approvals or otherwise satisfy conditions required in order to consummate any such transactions; the need to provide transition services, which may result in additional costs and the diversion of resources and focus; and exposure to potential litigation. Any of these factors could disrupt our business and could have a material adverse effect on our business, financial condition, results of operations, cash flows or stock price.
Additionally, we may not be able to realize the anticipated operational, strategic or financial benefits from a potential transaction or other strategic alternative involving our Lottery, Sports Betting and SciPlay businesses. There can be no assurance that any of the potential transactions or other strategic alternative, if identified, evaluated and consummated, will provide greater value to our stockholders than that reflected in our current stock price. Further, our board of directors may determine to suspend or terminate the evaluation of strategic alternatives for our Lottery and Sports Betting businesses or the Proposed SciPlay Acquisition at any time. Any potential transaction or other outcome of this review process is also dependent

42


upon a number of factors that may be beyond our control, including among other factors, market conditions (including the impact of the COVID-19 pandemic), industry trends, regulatory developments, litigation and the interest of third parties in these businesses.
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. Additionally, in the three-month period ended on June 30, 2021, we experienced pressures on the supply chain related to parts sourcing, which contributed to approximately $5 million of inventory obsolescence charge. Because of the use of certain shared parts in some of our gaming machines in both old and new cabinets, supply chain pressures on availability of these parts may require us to re-allocate shared parts, rendering further units obsolete if such conditions sustain for an extended period of time.
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. During the prior year, the outbreak of COVID-19 resulted in the suspension or cancellation of the majority of sporting events, which have mostly re-commenced during the current year, however potential future cancellations could 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

43


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, significantly disrupted our operations and adversely affected and continue to adversely affect our business, results of operations, cash flows and financial condition.”
The provisions of our bylaws requiring exclusive forum in the Eighth Judicial District Court of Clark County, Nevada for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.
Our bylaws provide that, to the fullest extent permitted by law, and unless we consent in writing to the selection of an alternative forum, the Eighth Judicial District Court of Clark County, Nevada, will be the sole and exclusive forum for any actions, suits or proceedings, whether civil, administrative or investigative or that assert any claim or counterclaim (i) brought in our name or right or on our behalf, (ii) asserting a claim for breach of any fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) arising or asserting a claim arising pursuant to any provision of Nevada Revised Statutes (“NRS”), Chapters 78 or 92A or any provision of our articles of incorporation or our bylaws or (iv) asserting a claim governed by the internal affairs doctrine. Our bylaws further provide that, in the event that the Eighth Judicial District Court of Clark County, Nevada does not have jurisdiction over any such action, suit or proceeding, then any other state district court located in the State of Nevada will be the sole and exclusive forum therefor and in the event that no state district court in the State of Nevada has jurisdiction over any such action, suit or proceeding, then a federal court located within the State of Nevada will be the sole and exclusive forum therefor. Application of the choice of forum provisions may be limited in some instances by law. Section 27 of the Exchange Act establishes exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. In addition, Section 22 of the Securities Act provides that federal and state courts have concurrent jurisdiction over lawsuits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. To the extent our bylaws restrict the courts in which claims arising under the federal securities laws may be brought, there is uncertainty as to whether a court would enforce such a provision and we note that our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Although we believe these provisions benefit us by providing increased consistency in the application of Nevada law in the types of lawsuits to which they apply, these provisions may have the effect of increasing the costs to bring a claim, and limiting a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors and officers. This may discourage lawsuits against us or our directors and officers. The enforceability of similar choice of forum provisions in other companies’ articles of incorporation and bylaws has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our bylaws to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provisions contained in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There was no stock repurchase activity during the three months ended June 30, 2021.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.

44

Item 6. Exhibits
Exhibit
Number 		Description
3.1(a)
3.1(b)
3.1(c)
3.2
10.1
10.2
10.3
10.4
10.5
10.6
Amendment No. 8, dated as of July 28, 2021, 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, Amendment No. 5, dated as of November 20, 2019, Amendment No. 6, dated as of May 8, 2020, and Amendment No. 7, dated as of October 8, 2020) (incorporated by reference to Exhibit 10.1 to Scientific Games Corporation's Current Report on Form 8-K filed on July 28, 2021).
31.1
31.2
32.1
32.2
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

45

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.

46


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:
August 9, 2021

47
Exhibit 10.2
Amendment to Employment Agreement
This Amendment to Employment Agreement (this “Amendment”) is made as of April 27, 2021, 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, as of March 27, 2020, as of May 18, 2020, as of June 30, 2020, and as of February 23, 2021 (with amendments, the “Agreement”);
NOW THEREFORE, in consideration of the premises and the mutual benefits to be derived herefrom and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.Eligibility for Annual Equity Awards. The Agreement is hereby amended by adding the following sentences to the end of Section 3(c) of the Agreement:
“If Executive is an employee of the Company on November 30, 2021, then, within 10 business days after November 30, 2021, all equity awards with respect to the Company’s common stock that were granted to Executive before March 20, 2021, to the extent unvested as of November 30, 2021, shall vest, less applicable withholdings. This acceleration of the foregoing equity awards 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.
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 April 27, 2021.
SCIENTIFIC GAMES CORPORATION

By: _/s/ James Sottile_______________
Name:    James Sottile    
Title:    Executive Vice President and Chief Legal Officer
    
_/s/ Michael Winterscheidt___________
Michael Winterscheidt
1


Exhibit 10.3
Employment Agreement
This Employment Agreement (this “Agreement”) is made as of August 2, 2021, by and between Scientific Games Corporation, a Nevada corporation (the “Company”), and James Sottile (“Executive”).
WHEREAS, Executive is currently employed by the Company pursuant to the Prior Employment Agreement (as defined below); and
WHEREAS, the Company and Executive wish to enter into this Agreement and to supersede the terms of the Prior Employment Agreement.
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 Prior Employment Agreement expires on August 31, 2021 and, for the avoidance of doubt, will not automatically extend. The Company hereby agrees to employ Executive following August 31, 2021, 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 September 1, 2021 (the “Effective Date”) and ending on August 31, 2024, 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. A notice of non-renewal of the Term by the Company pursuant to this Section 1 shall be deemed to be a termination without Cause by the Company for purposes of this Agreement as of the end of the Term.
2.Position and Duties. During the Term, Executive will serve as Executive Vice President and Chief Legal Officer of the Company and as an officer or director of any subsidiary or affiliate of the Company if elected to any such position by the stockholders or by the board of directors of any such subsidiary or affiliate, as the case may be. 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 President and 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. During the Term, Executive will receive a base salary of seven hundred thousand U.S. dollars (US$700,000) 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. In the event that the Company, in its sole discretion, from time to time determines to increase Executive’s base salary


as an annual merit increase or otherwise, 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”) 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”) 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).
(c)Equity Awards.
(i)The Company will grant to Executive a special equity award for 2021 consisting of 10,000 time-vesting RSUs (the “2021 Special Equity Award”). The 2021 Special Equity Award shall vest as follows: 3,334 RSUs on August 31, 2022, 3,333 RSUs on August 31, 2023 and 3,333 RSUs on August 31, 2024. The 2021 Special Equity Award will be granted pursuant to the Incentive Compensation Plan. The 2021 Special Equity Award will be evidenced by the execution of the Company’s standard form of award agreement under the Incentive Compensation Plan. The grant of the 2021 Special Equity Award will be made within ten (10) days after the Effective Date if the Company is not in a blackout period on the Effective Date. If the Company is in a blackout period on the Effective Date, the 2021 Special Equity Award will be made within three (3) trading days after the Company’s next trading window opens.
(ii)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 senior 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.
(iii)All equity awards granted pursuant to this Agreement shall be subject to the terms of the Company’s standard form of award agreement under the Incentive Compensation Plan modified to provide that, if Executive remains employed by the Company through the date when he becomes 65 years of age and retires at any time thereafter, any unvested equity held by Executive as of that retirement date shall vest ten days after such retirement, subject to the achievement of any applicable performance criteria; provided that, settlement of any such awards shall be in accordance with Section 4(f).
(d)Expense Reimbursement. Subject to Section 3(f), 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.
(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). Any tax gross-up payment provided under this Agreement will be made no later than the end of the calendar year immediately following the calendar year in which Executive remits the related taxes. Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A.
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) through 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, excluding, for the avoidance of doubt, any termination for Cause, any vesting to which Executive is entitled due to retirement; and
(iii)reasonable business expenses and disbursements incurred by Executive prior to such termination will be reimbursed in accordance with Section 3(d).
(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, and, as currently provided by the Company’s equity incentive plan, all equity awards held by Executive shall vest in full.
(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 be entitled only to the Standard Termination Payments and any amounts due under any Company disability policy, and, as currently provided by the Company’s equity incentive plan, all equity awards held by Executive shall vest in full.
(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 Effective 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 he 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 one (1) year 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 a notice of non- renewal of the Term by the Executive pursuant to Section 1), the Company shall pay the following amounts, and make the following other benefits available, to Executive.
(i)Standard Termination Payments;
(ii)an amount equal to the sum of (A) Executive’s base salary then in effect and (B) an amount equal to the highest annual Incentive Compensation paid to Executive (if any) in respect of the two (2) most recent fiscal years of the Company but not more than Executive’s Target Bonus for the-then current fiscal year (such amount under this sub-clause (B), the “Severance Bonus Amount”), such amount under this clause (ii) payable in substantially equal installments over a period of twelve (12) months after such termination in accordance with Section 4(f); provided that, to the extent paying any portion of such amount in accordance with the foregoing schedule would constitute an impermissible deferral of compensation under Section 409A, then such portion shall be payable at a time that would not result in a deferral of compensation and that is as near as possible to the payment timing contemplated by the foregoing;
(iii)in lieu of any Incentive Compensation for the year in which such termination occurs, payment of an amount equal to (A) the Incentive Compensation (if any) 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, payable when bonuses are paid to other executives of the Company, but no later than March 15 following the end of the year in which such termination occurs.
(iv)if Executive timely 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; and
(v)all outstanding equity awards held by Executive shall continue to vest during the term of this Agreement and through the end of the Covered Time (as defined in Section 5.1(f)) with any equity awards that remain unvested on the day following the last day of the Covered Time being forfeited; provided that if any such awards that were granted prior to September 1, 2021 would constitute deferred compensation subject to Section 409A as a result of the foregoing, the portion of such award that would have vested during the Covered Time shall vest upon the earlier of (A) the regularly scheduled vesting date and (B) March 15 of the year following the year in which such termination occurs (or, if such March 15 is not a trading day, the immediately preceding trading day) and the remainder shall be forfeited. For the avoidance of doubt, if such termination occurs on or after Executive becomes 65 years of age, the retirement provisions described in Section 4(c)(ii) shall prevail. Settlement of equity awards shall be subject to Section 4(f) and shall in all events be in accordance with Section 409A. Other than as set forth in this Agreement, equity awards shall be governed by the terms of the applicable award agreement pursuant to which such equity awards were granted.
(f)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 from service with the Company within the meaning of Treas. Reg. Section 1.409A-1(h). If at the time of Executive’s separation from 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 shall be made as follows: (x) no payments for a six-month period following the date of Executive’s separation from service with the Company; (y) 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 (z) during the period beginning six (6) months following Executive’s separation from 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).


(g)Mitigation. In the event the Executive’s employment is terminated in accordance with Section 4(e) 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, (i) Executive shall immediately advise the Company of such employment or engagement and any health insurance benefits to which he is entitled in connection therewith, and (ii) the Company’s obligation to make continued health insurance payments to or on behalf of Executive shall be reduced by any health insurance coverage obtained by Executive during the applicable period through such other employment or engagement (without regard to when such coverage is paid).
(h)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.
(i)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 that expressly survives execution of this Agreement, 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 he 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.
(j)Release of Employment Claims; Compliance with Section 5. Executive agrees, as a condition to receipt of any termination payments and benefits 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 seven (7) days following the date of termination. Executive shall thereupon have 21 days or, if required by the Older Workers Benefit Protection Act, 45 days, to consider such general release agreement and, if he 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 that constitute deferred compensation under Section 409A (if any) shall be paid on the later of the 60th day after the date of termination or the date such payments are otherwise scheduled to be paid pursuant to this Agreement. 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.
(k)Section 280G. If the aggregate of all amounts and benefits due to Executive under this Agreement or any other plan, program, agreement or arrangement of the Company or any of its affiliates, which, if received by 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 Executive would receive, after all such applicable taxes, if


Executive received aggregate Change in Control Benefits equal to an amount which is $1.00 less than three (3) times 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 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.
5.1Noncompetition; 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 addition to the protection of confidential records and proprietary information covered in Section 5.2, the provisions set forth in this Section 5.1 are necessary in order to protect the goodwill of the Company and the relationships developed by the Company with employees, customers and suppliers. 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, 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; (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.
(c)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 Covered Time, he will, at the request of the Company, provide consulting services to the Company for up to twenty (20)% of the time he devoted to business employment during the Term. For the avoidance of doubt, Executive’s compensation for the provision of such consulting services are the amounts that may be hereafter paid to Executive pursuant to this Agreement, and Executive shall not be entitled to any additional compensation for such consulting services.
(d)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.
(e)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.
(f)For purposes of this Agreement, “Covered Time” shall mean the period beginning on the date of termination of Executive’s employment (the “Date of Termination”) and ending twelve (12) months after the Date of Termination.
(g)In the event that a court of competent jurisdiction or arbitrator(s), as the case may be, determines that the provisions of 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 Effective Date has had) access to and made 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 to Executive), or general gaming industry information to the extent not particularly related or proprietary to the Company that was already known to Executive at the time Executive commenced his employment with 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 Effective Date) 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 C to this Agreement.
5.3Confidentiality and Surrender of Records.
(a)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.
(b)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. 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 or any other person 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. Executive covenants that Executive shall not employ the trade secrets or proprietary information of any other person in connection with Executive’s employment by the Company without such person’s authorization.
5.6Forfeiture of Outstanding Equity Awards; “Clawback” Policies. The provisions of Section 4 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 senior 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 providing information to the Company regarding matters related to his term of employment and 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 he 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. This provision shall survive termination of employment.
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 from and after the Effective Date and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof, including that certain Employment Agreement, dated as of September 4, 2018 between the Company and Executive, as amended (the “Prior Employment Agreement”), and no statement, representation, warranty or covenant has been made by either party with respect thereto except as expressly set forth herein; provided, however, nothing contained in this Agreement shall limit, impair or supersede any agreement between the Company and Executive relating to grants of stock options, restricted stock units or other equity-based awards granted to Executive prior to the Effective Date, which shall remain in full force and effect in accordance with the terms of such agreements and the plan pursuant to which such awards were granted. Executive acknowledges and agrees that the termination of the Prior Employment Agreement and the execution of this Agreement does not constitute a termination of Executive’s employment under the Prior Employment Agreement for any purpose. Except as contemplated by Section 3(f), 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, without limitation, 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. Judgment may be entered on the arbitrators’ award in any court having jurisdiction. For purposes of entering such judgment or seeking injunctive relief with regard to Section 5, the Company and Executive hereby consent to the jurisdiction of any state or federal court of competent jurisdiction 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 he 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 he would not otherwise be required to pay in a court action, unless so ordered by the arbitrators.
EXECUTIVE INITIALS: [JS] COMPANY INITIALS: [BC]


(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.
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: to Scientific Games Corporation, Attn: Legal Department, 6601 Bermuda Road, Las Vegas, Nevada 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.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, (a) the terms “hereof,” “herein,” “hereby,” “hereto”, “hereunder” and derivative or similar words in this Agreement refer to this entire Agreement, (b) the word “or” is disjunctive but not exclusive and (c) 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.


IN WITNESS WHEREOF, each of the parties has duly executed this Agreement as of the date above written.
SCIENTIFIC GAMES CORPORATION
By:  /s/ Barry Cottle
Name: Barry Cottle
Title: President and Chief Executive Officer
EXECUTIVE
 /s/ James Sottile
James Sottile

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: August 9, 2021
/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;
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: August 9, 2021
/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, 2021 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
August 9, 2021

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, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael C. 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.
    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/ Michael C. Eklund
Michael C. Eklund
Chief Financial Officer
August 9, 2021