Scientific Games reports results

3 August 2007

EBITDA for the second quarter of 2007 was $84.3 million, up 21 percent from $69.6 million in the second quarter of 2006. Adjusted EBITDA increased 23 percent to $91.5 million for the second quarter of 2007, compared to adjusted EBITDA of $74.6 million for the second quarter of 2006.

For the six months ended June 30, 2007, revenues were $511.8 million, compared to $447.8 million for the six months ended June 30, 2006, an increase of 14 percent. Net income was $51.9 million or $0.54 per diluted share, compared to $47.3 million or $0.50 per diluted share in 2006. EBITDA increased to $160.1 million, compared to $127.4 million in 2006. Adjusted EBITDA increased 26 percent to $175.0 million, compared to $138.5 million in 2006.

"Printed Products service revenue grew 26 percent versus the second quarter of 2006, including revenues from Oberthur Gaming Technologies (OGT). 'Same store' sales growth of 9% would have been considerably higher- approximately 13%- had $3 million of Major League Baseball (MLB) revenue expected to have been realized in the second quarter not slipped into the third quarter," said Lorne Weil, Chairman and CEO of Scientific Games. "Italy continued to achieve record sales and our 20 percent ownership of the consortium contributed approximately $10.4 million in equity income during the second quarter. It has truly exceeded our initial expectations, and serves as a model for future international growth opportunities such as China, Mexico and Germany."

In addition, the Company has introduced an industry wide initiative to link instant ticket sales across lotteries in North America. Beginning in August, the first games will go on sale with a total of 23 states launching a linked version of Deal or No Deal(TM). Winners will get a chance to fly to Hollywood and participate in a Deal or No Deal(TM) game with host Howie Mandel and the models. This represents a significant step in bringing a new level of entertainment to the Lottery industry, and will contribute to Scientific Games' revenue beginning in the third quarter.

Added Weil, "Recently we were pleased to announce the acquisition of 50% of Guard Libang, the instant ticket division of REXCAPITAL Financial Holdings Limited. The partnership will give us immediate access to 17 provinces in China where we plan on implementing instant ticket cooperative services. With an addressable market of 792 million people, this deal should contribute meaningfully to future earnings, and maintain the Company's position as the industry leader for years to come. We look forward to executing on our strategy with our new partners."

Weil continued, "The acquisition of OGT strengthens our presence in several key international markets, most notably Canada, Australia and Europe. OGT was consolidated beginning in May and accounted for $15.9 million of service revenue and $0.5 million of EBITDA during the quarter. Including approximately $1.4 million of interest and other expenses, OGT accounted for a loss of over $0.01 per diluted share in the quarter. When we purchased OGT in May they were operating well below our historical Printed Products margins. However, the integration process is progressing according to plan and we expect to see margin improvement from OGT in future quarters. We also plan to launch a new state-of-the art printer (P6) in Georgia during the third quarter, which will bring on additional, highly efficient capacity."

Printed Products sales revenue for the quarter ended June 30, 2007 was $10.1 million compared to $11.8 million for the quarter ended June 30, 2006. This decrease was primarily attributable to a continuing decline in phone card prices and volumes reflecting the market driven shift to lower priced products. Printed Products sales margins went from 22 percent in the second quarter of 2006 to 17 percent in the second quarter of 2007 due to pricing pressure and decreased economies of scale.

Lottery Systems Group service revenue increased 7 percent during the second quarter. Excluding new contract revenues and elapsed contracts, 'same store' sales increased 5 percent. Mr. Weil noted, "Although we incurred a net loss of approximately $0.02 per diluted share this quarter from the start-up of the Mexican online lottery, we remain excited about the Mexican online lottery Multijuegos(R) with our partner Televisa. As of this week, we currently have over 5,400 terminals installed, and expect to expand this installed base to eight to ten thousand by year end. While we had initially planned to have already launched instant tickets in Mexico, we now expect instant tickets to launch this fall, which together with expanded distribution should improve sales dramatically, and help turn the corner to profitability."

Lottery Systems Group sales revenue was $10.5 million, a decrease of 47 percent from $19.8 million in the second quarter of 2006. This is primarily due to the absence of $11.3 million of terminal sales to customers in Germany in 2006. Add-on sales of terminals and other equipment continued to suffer from legislative uncertainty in the German market. However, the Company expects this to improve if the German Lotto Bloc's contract is extended this fall.

Diversified Gaming Group service revenue decreased from $57.0 million in the second quarter of 2006 to $54.9 million in 2007, primarily due to the sale of the racing and data communications business which contributed $3.4 million of revenue in the second quarter of 2006. The Company's continued ownership interest in this business is now reflected in the income statement on the line labeled "equity in earnings of joint ventures", and was approximately $1 million in the second quarter of 2007. Global Draw continued to show growth and contributed $21.7 million of service revenue in the second quarter of 2007.

Diversified Gaming Group sales revenue grew to $14.4 million from $1.2 million in the second quarter of 2006, due to $13.5 million of Games Media revenue. Mr. Weil noted, "Games Media's revenue to date has come mostly from the sales of analog Amusement with Prize (AWP) machines. We anticipate a UK replacement cycle from analog to digital AWPs, which will also transition the revenue from sales to participation. We have been testing new digital games throughout the UK pub market and are receiving exceptional results. Games Media and Global Draw give us confidence that the Diversified Gaming Group can be a major growth driver for years to come."

Second quarter business development included the acquisition of OGT, a joint venture with Inspur to launch instant tickets in the Shandong province of China, a Lottery Systems contract with Golden Casket of Australia, a new 10-year agreement with Electronic Game Card and a technology contract with Churchill Downs. Subsequent to the end of the quarter, the Company announced the acquisition of a 50 percent interest in Guard Libang, a leading provider of instant lottery ticket cooperative services in China, several racing contracts with Great Canadian Gaming, and new instant ticket contracts with Connecticut, Idaho, Ohio, and Rhode Island.

Weil concluded, "We have been very active executing some of our previously stated business goals. Most importantly, we have achieved a strong foothold in China, which we expect will become one of the most important lottery markets in the near future. As we have successfully done in the past, we will look to simultaneously integrate completed acquisitions, win new business, and execute on existing contracts. . This three-pronged strategy should lead to accelerated earnings power in the coming quarters."

Information about the use of non-GAAP financial information is provided under the section "Non-GAAP Disclosure" below. The non-GAAP measures (adjusted net income, diluted adjusted net income per share, EBITDA and adjusted EBITDA) are reconciled to the corresponding GAAP measures in the financial schedules accompanying this release.