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

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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:

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