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Scientific Games' (SGMS) CEO Gavin Isaacs on Q2 2015 Results - Earnings Call Transcript

Operator

Good day, ladies and gentlemen and welcome to the Q2 2015 Scientific Games Corporation Earnings Conference Call. My name is Whitley and I will be the operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

I would now like to turn the conference over to your host for today Mr. Bill Pfund. Please proceed.

Bill Pfund - VP, IR

Thank you, Whitley. Welcome, everyone and thank you for joining us. With me this afternoon are Gavin Isaacs, President and Chief Executive Officer and Scott Schweinfurth, Executive Vice President, Chief Financial Officer and Corporate Secretary. During this call, we will discuss our second quarter results and operating progress, followed by a question-and-answer period.

Our call will contain statements that constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those discussed. For certain information regarding these risks and uncertainties, please refer to our earnings press release issued today, the materials relating to this call posted on our Web site and our filings with the SEC, including our most recent Annual Report on Form 10-K filed on March 17, 2015 and our subsequent reports filed with the SEC.

We will also discuss certain non-GAAP financial measures. A description of each non-GAAP financial measure and a reconciliation of each non-GAAP financial measure to the most comparable GAAP financial measure can be found in our earnings press release. As a reminder, a replay of the call will also be archived in the Investor Information section of our Web site.

Now, let me turn the call over to Gavin.

Gavin Isaacs - President, CEO

Thank you, Bill. Good afternoon, everyone.

Today Scientific Games reported second quarter results. Only our second full quarter as the new Scientific Games and the quarter where we have made significant progress in working to empower our customers with innovative new products and services, whilst at the same time implementing our planned cost savings.

With the implementation of our integration initiatives well ahead of schedule, my current focus is working with customers in our Scientific Games teams to innovate and drive growth. Revenue from most of our operations was on track in the second quarter. The exception was gaming machine product sales which were below our expectations. Lower overall market demand coupled with not unexpected challenges of integrating all of our companies resulted in lower new unit shipped. The integration issues have been identified and we are laser focused on them.

Our higher margin recurring revenue businesses such as table products, gaming systems, gaming operations, lottery instant games and interactive are all showing improvements as expected. Some of the more notable accomplishments during the quarter included; our WAP and premium participation games continued to perform extremely well providing strong player appeal and high earnings performance in casinos across the country.

Our MONOPOLY Luxury Diamonds game continues to be amongst the best performing games we ever released. Duo Fu Duo Cai and 88 Fortunes continue to gain popularity globally, while newer game such as the Flintstones and the latest Willy Wonka game are hitting the ball out of the park. And our recently released Friends game is up to a very strong start.

We recently launched a new WMS branded S32 widescreen cabinet that replaces the Bluebird xD cabinet. And next week at the Australian Gaming Exposition, we will be demonstrating a new Shuffle Master branded cabinet called [Dualis] [ph] with an array of new games that will update our portfolio of slot products for the Australian and Asian markets.


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