Scientific Games Corporation (SGMS) Q4 2020 Earnings Conference Call March 1, 2021 4:15 PM ET
Jim Bombassei - Vice President of Investor Relations
Barry Cottle - President and Chief Executive Officer
Mike Eklund - Executive Vice President and Chief Financial Officer
Conference Call Participants
John Decree - Union Gaming
Barry Jonas - Truist Securities
Chad Beynon - Macquarie
David Katz - Jefferies
Jeff Stantial - Stifel
Ryan Sigdahl - Craig-Hallum
Good afternoon. Welcome to Scientific Games Fourth Quarter 2020 Results Conference Call. All participants will be in listen-only mode. [Operator instructions] After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded.
I'd now like turn the conference over to Jim Bombassei, Vice President of Investor Relations. Go ahead.
Thank you, operator and good afternoon everyone. During today's call, we will discuss our fourth quarter and full year 2020 results and operating performance, followed by a question-and-answer period. With me this afternoon are Barry Cottle and Michael Eklund.
Our call today will contain statements that include forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed during the call. For information regarding these risks and uncertainties, please refer to our earnings release issued earlier this afternoon, the materials relating to this call posted on our website and our filings with the SEC.
We also will discuss certain non-GAAP financial measures. A description of each non-GAAP measure and a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure can be found in our earnings press release as well as in the Investors section on our website.
As a reminder, this conference call is being recorded. A replay of this webcast and accompanying materials will be archived in the Investors section of our website at scientificgames.com. Also, supplemental reference slides are available on our Investor Relations website. These slides are meant to facilitate your review of the company's results and to be used as a reference document following the call.
And now let me turn the call over to Barry.
Thanks Jim. Good afternoon everyone, and thanks for joining us. We are very pleased with our strong execution in the fourth quarter, and the strategic and operational progress we're making across key areas of our business. And I'm immensely proud of our team and goals accomplished together, especially in light of the pandemic. Looking ahead, we will continue to build on the strong foundations we laid in 2020. We are investing to grow while being disciplined as we manage our balance sheet and realign our cost base. Gaming is well positioned to rebound given the reopening, and we're seeing real momentum across our markets and the industry as a whole. We firmly believe our content and solutions will be key to our continued success.
To that end, we're building a high performing winning culture that attracts and motivates the world's best talent. And currently, we're conducting a strategic review with the board to determine how we can best optimize our portfolio. Deleverage our business and capitalize on key areas of growth. Our goal is simple and powerful, to deliver outsized returns to our shareholders of capitalizing on evolving industry and macro-economic trends. The conversations continue to progress at a rapid pace. While we're not ready to say anything yet, we're very encouraged by the progress we're making.
Turning to the quarter, our improving results demonstrate continued strong execution across our diverse portfolio. Even with headwinds from the COVID resurgence after the holiday, we delivered sequential improvement in overall company's financial results, notably revenue and AEBITDA. While for the full year we achieved record results at Lottery, SciPlay and Digital. Our disciplined approach to cost and working capital management enabled us to deliver year-over-year growth and free cash flow in the quarter. We achieved free cash flow conversion of 23%. That's up nearly 600 basis points year-over-year. In addition, we paid down 100 million of debt during the quarter and paid down an additional 100 million in February.
Now for a quick review of our businesses, in gaming, we see sequential improvement in all lines of business with early successes in executing against our new global R&D and product roadmap strategy. As you may recall, we started by bringing great talent into the organization. And in turn to reprioritizing our product roadmap to focus on the largest profit pools to capture share. We streamline the product organization and have one centralized platform. This includes moving to a centralized R&D structure and reconfigured Game Design Studio model and global hardware and supply chain strategy.
We are prioritizing our roadmap in some major segments of the market. Our best game designers are developing content targeting the key revenue pools, using data and analytics to inform market segmentation and game design. The first cabinet launched under this new strategy is Kascada and the first game is Coin Combo. While it's early, we're seeing incredibly strong performance for both with Kascada performance at two and a half times the zone average. We're encouraged by this early success.
Another great design is our improving competitive position in EILERS Top 25 game list. In the latest rankings we had the number one share of top new games in both the premium ops category and the For Sale category. We believe we will continue to see positive momentum in the premium segment of our game operations as we ramp the Kascada installed base, launched the Mural cabinet and released great games like 88 Fortunes Emperor's Coins, and Willy Wonka Dreamers Dreams. And on cashless, we're really excited to announce today a groundbreaking cross licensing agreement with IGT on cashless gaming IP.
Scientific Games and IGT are the leaders in this space. With our patents and technology and combined with our last mile systems footprint of over 500,000 interconnected slots, this provides operators with an efficient way to access the most compelling portfolio of cashless technologies to provide to their customers. We believe these initial successes and momentum we're seeing represents a validation of the broader strategy and operating structure that our new gaming team has implemented, a focused approach leveraging a single platform deployed worldwide cabinet and using our best game designers to target the biggest profit pools.
This enables us to put more great games on our cabinets, enhancing their lifetime value for Scientific Games, our customers and our players. In short, we're encouraged by this early momentum and we look forward to the continued rollout of the gaming's product roadmap.
In Lottery, we achieved record for the results despite COVID, driven by instant game sales, record technology product deliveries and record high lottery sales. We continue to see strong industry trends and domestic instant game sales, where we are the clear market leader. We are encouraged by our unique value proposition to our customers in modernizing the industry and growing lottery beneficiary proceeds, including global growth with Scientific Games Enhanced Partnership instant game services or SGEP, an innovative retail and digital product. This is a resilient business that has grown 19 out of the last 20 years, including through to financial crisis and COVID.
That pattern held true in fourth quarter, with revenue increasing 10% and AEBITDA increasing 7%. Growth in instant games in the quarter benefited from an increase in extra contracts in SGEP as well as retail solutions and iLottery. In 2020, US Lotteries using best SGEP experienced 70% growth in instant game retail sales versus industry growth of 10%. All of 13 SGEP US state lottery customers experienced record instant game sales for fiscal 2020. We also achieved an all-time record in 2020 with our most ever retail solutions point of sale product delivery.
In terms of iLottery, COVID has accelerated interest by states and we're well positioned for the US expansion given our success in Pennsylvania. Our flagship Pennsylvania program saw Q4 wagers grow by 39% year over year, while full year growth was 57%. In 2020, Pennsylvania became the fastest iLottery program in North America to reach $1 billion in sale despite also being the most competitive casino iGaming market in the US. And we anticipate that over the next couple of years, at least 10 additional states in the US will authorize iLottery.
Now turning to SciPlay, we're excited about the performance and path forward, having achieved record results in 2020 and with the expansion into the $20 billion casual game market this year. For the full year revenue climbed 25% and AEBITDA grew 55%. The fourth quarter saw continued strength with top line growth of 30% and bottom-line growth of 41%. SciPlay achieved their goal, with both the quarter and the year exceeding market growth. The basis for this growth was our payer focus and live ops strategy where we achieved records across all key metrics. We continue to innovate and drive engagement across our social consumer portfolio, with payer conversion achieving an all-time high of 7.8%, while both monthly paying users and average monthly revenue per user were above pre-COVID levels.
We couldn't be more excited about SciPlay's opportunity as they entered the casual gaming space this year with Solitaire Pets Adventure. With the casual gaming total addressable market in excess of $20 billion, we see great opportunity to drive long-term growth. With our Come2Play acquisition and Solitaire Pets Adventure, we not only purchase a simple monetization game based on one of the most popular card games in the world, but we also acquired a great team based in Tel Aviv and Kyiv that we can leverage. We see great potential for Solitaire Pet Adventure in the SciPlay's machine, their data analytics, their live ops and their marketing expertise to drive monetization and engagement. We've achieved success with a strategy within their showdown where we were able to triple run rate revenues within the first year.
Now moving to our iGaming and sports businesses, momentum continues to build with recent state launches in Michigan and Virginia and as more US states legalize. Internationally, our platform continues to power the number one leading operators in the UK and Europe for both iGaming and sports settings. We've been able to achieve this success by bringing together the largest high-quality offering of content in the space from in-house and third-party studios. We now have over 2,800 games on our platform, an increase of 30% since 2019, and our games are ranked among the best in the world. The number of game rounds played through our OGS platform increased 38% over 34 billion in 2020. And we have enhanced this offering by entering into deals with 45 Studios for third party content. This stacks up as one of the broadest offerings of both original and third-party content in the industry.
We remain a leader in iGaming in New Jersey with over 30% market share in an intensely competitive market and we've launched very promising initial results in Michigan. One of our biggest assets and key to our future success is leveraging our rich library of IP from land-based gaming business. This includes titles like 88 FORTUNES, Rainbow Riches, Jin Ji Bao Xi and MONOPOLY. While we've added original digital innovation to these iconic franchises, our Scientific Games IP outperforms in terms of engaging players and driving GGR. In fact, Rush Street Interactive noted in the first weekend of online gaming in Michigan, that 88 Fortune was their most popular slot game, generating 10% of their total handle. Looking ahead, we see tremendous opportunity for iGaming business as we continue to grow our footprint, as more US states legalize it and as we continue to expand internationally.
In our sports betting business, we're one of the leading global providers of b2b services. And we're well positioned to benefit from the broader market trends. We're growing through expanding into new states and territories, signing new deals, building out our pipeline and expanding our services through our getting growth [ph] strategy. And we've been benefiting from all four. There's increasing momentum to legalize sports betting in the US, with estimates that up to a dozen states could legalize online sports betting this year alone, in addition to the 25 that have already done so. In 2020, we renewed or signed a number of deals, including with Hardrock, Wynn Resorts, Golden Nugget, and the Flutter Brands, which includes FanDuel, Sky Bet, Paddy Power and Betfair.
We've grown from three US sports books in 2018 to 17 at year-end 2020, with a strong pipeline of additional sports book deployments in the US in 2021. This includes partnering with FanDuel in December in West Virginia, and then last week in Colorado, utilizing our OpenBet betting engine. Over the course of 2021, we'll be rolling out our betting engine on FanDuel in the remaining US states they operate in. This success has been driven by our offering, providing customers with the broadest and most flexible set of tech solutions in the industry. Our tech stack demonstrated its reliability in the NFL Championship Game this year, performing flawlessly throughout while offering more markets than any other competitor or in-house platform.
And now let me turn the call over to Mike to speak to the financial results.
Great and thanks Barry and good afternoon, everyone. It's good to be back with all of you again today. I hope all of you are keeping well. Before I jump into the financials today, let me just quickly say that I could not be more aligned with Barry's comments. As Barry and I continue to talk a lot about the business we genuinely agree we have a real opportunity in front of us here at Scientific Games to deliver value to our customers', value to our players, value to our global team members and value to our shareholders.
We, Barry and I and all the teams around the world are working hard, sometimes it feels like at a breakneck pace, to position Scientific Games for the future. I'm eight months into my new role now and I continue to be extraordinarily impressed with the talent and the caliber of our global team members and the leadership team, and more importantly, how they've all performed in a very difficult macroeconomic environment. It's been extraordinarily impressive to watch and frankly, I'm humbled by it. There is a real sense of energy and optimism at the company despite COVID and it's growing daily. With that, let me turn to the quarter results.
We continue to execute at a high level, both operationally and from a balance sheet and cash management standpoint, there are four key things I would like to highlight for you all today. First, we delivered sequential improvement in revenue and AEBITDA. Despite continued closures and restrictions. We delivered record full your revenues at Lottery, SciPlay and Digital, while gaming improved sequentially once again. All of our teams around the world have been working hard optimizing their businesses, regardless of the economic environment and executing on what is in their control, and they're doing a great job at it.
Second, the teams continued to do a great job managing the balance sheet and working capital delivering another strong quarter of free cash flow. We generated 72 million of free cash flow, which is a $20 million improvement from the prior year fourth quarter. Third, we continue to deliver on our commitment to deleverage paying down 111 million on the revolver back in early Q4 and making an additional $100 million revolver payment last month. Broadly speaking, we remain focused on taking the necessary steps to deliver our balance sheet and we'll continue to do so.
And forth we continue to be diligent in managing our cost base. As previously discussed, we took steps back in the second quarter to reduce our operational costs and our capital cost by 150 million at the time as the short-term measure given the impact of COVID. Since then, we now believe 50 million of those cost savings will be permanent. And they were largely achieved by our gaming leadership team as they took the appropriate steps to realign our gaming BUs to a global operating model. Their focus was on, appropriately non-revenue generating expenses like SG&A, while at the same time making the necessary investments in R&D as they implement their new strategy and their new product roadmap.
For 2021, we are targeting another 50 million of permanent cost savings, all of you should look at that as on a run rate basis exiting 2021. The savings will come in areas like production and general procurement, reducing our facilities footprint, and through implementing technology upgrades and unifying our systems which will result in process and organizational simplification. We have already put in place the various work streams and governance to deliver on these savings while at the same time continuing to invest on our growing business. We will update you on our progress over the course of the year and keep you informed.
Now let's turn to the quarterly business unit results starting with gaming. Gaming improved sequentially across all lines of business with fourth quarter revenues up 24% versus the third quarter. Keeping in mind, we did see restrictions and closures loosen in October, only to tighten again in November and December as COVID cases spiked once again. Looking at the year-over-year results, the fourth quarter declined versus 2019, with revenue down 36% and AEBITDA down 50%. Also to note there were no major openings or expansions in the quarter.
And we are seeing strong year-over-year growth in coin-in at our gaming operations segment where we had about 70% of the North American installed base active in the fourth quarter. Looking ahead, gaming results in the first quarter will continue to be impacted by closures and restrictions across the UK, Europe and Asia, as well as by an overall slower recovery in our tables business. We do anticipate, however, performance improving starting in the second quarter as the vaccine becomes more widely distributed and restrictions and closures ease.
At lottery, the business continues to be resilient with 10% revenue growth in the quarter and 7% AEBITDA growth. Lottery's key initiatives like SGEP, the retail solutions and iLottery all helped to drive top line growth. Our new printing press in Leeds is now online as well, which will allow us to increase capacity for our customers and provide new print technologies which will help improve customer profits.
SciPlay also delivered record full year results with revenue up 25% and AEBITDA up 55%. For the fourth quarter they grew revenue 30% and AEBITDA 41%, again, very nice productivity. The evergreen nature of our games and our live ops strategy, drove improved payer monetization and above market growth for both the fourth quarter and for the full year 2020.
Now turning to Digital, for the full year, revenues grew 8% while AEBITDA increased 40%, again nice productivity by the teams in Digital around the world. The team achieved again record results for the full year. These results were driven by customer renewals and new deal wins, which have grown the pipeline of sports books which we will be deploying over the course of 2021. The improvement in AEBITDA margin was driven by these sports book renewals as well as short-term austerity measures resulting from COVID over the course of 2021 - sorry, 2020.
As we discussed last quarter, our current sports business is principally international, which is more of a services and time and materials model. This model tends to call some lumpiness and quarter-over-quarter revenue related to when we deliver the end solutions and the associated licensing into the marketplace. While the timing impact benefited us in the third quarter, it created a more difficult comparison for us in the fourth quarter. Additionally, from an expense standpoint, the fourth quarter was impacted by increased spending, but related to upcoming sports book deployments across the US.
Now let's turn to debt, balance sheet management and free cash flow. We continue to be focused on deleveraging and maximizing our free cash flow, which includes aggressively managing working capital. We ended the year with 8.4 billion of net debt, a $200 million improvement versus 2019 ending debt at 8.6 billion, again, very solid progress against the tough macroeconomic backdrop.
Our weighted average cost of debt at year end was approximately 5%, down from 5.8% exiting 2019. The lower rate was due to a combination of LIBOR rates declining over the course of 2020, along with the refinancing of our 2.2 billion of 10% notes. In terms of the maturity profile, we don't have any debt that matures until 2024. Also noteworthy we ended the year with approximately 1.3 billion of liquidity, a $363 million improvement from your in 2019.
Finally, let's turn to free cash flow. We generated 72 million of free cash flow from the quarter and 186 million for the full year. Our free cash flow conversion was approximately 23% for the year, which compares to approximately 18% in 2019, an improvement of nearly 600 basis points year-over-year.
Our improved free cash flow conversion, which was principally driven by a $230 million improvement of working capital, lower capital expenditures, and lower cash interest. Capital expenditures for 2020 ended at 190 million, down 95 million versus last year and below our 3Q guidance of 210 million to 225 million. Our cash interest payments improved $78 million year-over-year as a result of our lower average cost of debt.
Wrapping up today on my prepared comments, let me just recap some of the things that we tend to be really excited about here at Scientific Games as we build for the future. One, we are building a high performing winning culture, and we are focused on delivering results. We have improved productivity with both sequential improvement in AEBITDA and a higher free cash flow conversion despite the resurgence of COVID. We have a healthier balance sheet and have de-levered despite a difficult economic backdrop.
We are continuing to develop great content, and we will continue to invest and expand in the fastest growing parts of the market. We have an enhanced management team and an enhanced board focused on the long-term, which is awesome to see. And we continue to be in the middle of our ongoing strategic review of growth enhancing opportunities to determine the best path forward to most effectively unlock the value of Scientific Games and we're doing that at a fast pace and in a nice clip.
All in all that's why I'm pleased with our progress. That's why our team members are pleased with our progress. And that's why we as a global Scientific Games organization are excited to unlock the value of one Scientific Games, are delivering long-term value for our players, our customers, our employees and our shareholders.
With that we are happy to take your questions. Operator, can you please open the line?
We will now begin the question-and-answer session. [Operator Instructions] Our first question is from John Decree from Union Gaming. Go ahead.
Good afternoon, everyone. Congratulations on such success in such a challenging year operationally. So want to congratulate you Barry and Michael first. And then Barry, if I could ask my first question big picture on the gaming strategy, the new team and kind of operational changes that you've made. I think in your prepared remarks, you've talked about some of the maybe early results, early products from that new team and new changes. Wondering if you could talk a little bit about how we should think about the gaming turnaround going forward. And things we should look for proof points along the way to get a sense of how things are going, how things are progressing and how that turnaround is going.
Okay. Thanks, John. Really appreciate that. Yeah, so essentially, we're early in the journey. We're already starting to see progress in the market from the incredible effort that Matt and his team have accomplished coming into gaming, just honestly about a year ago. It's somewhat obviously covered up with COVID and measured against that, but it's exciting because we're positioned nicely as the recovery continues. So if you look under the hood, what Matt and team did over this past year is they took $50 million of permanent cost out of the business, mostly SG&A and reinvested a portion in R&D, really driving the focus on building great games, bringing in some of the industry's top talents, and revamping the entire roadmap and approach to R&D to target the highest profit pools. They then streamlined our cabinet and our game dev to increase the ROI on our R&D spend.
Now, we're seeing - we're starting to see the early signs of this effort in the latter part of 2020 and into 2021. If you look at it on a quarter-by-quarter basis, we had quarter-on-quarter growth in the premium game ops which is again our top profit pool target in the space today. We grew from Q2 to Q3 to Q4. And if you look for Eilers, we have the highest percent of top new games in game ops and sales. We also see our active fleet growing at 70% in Q4, and 80% plus in Q1 and our yields are up year-over-year. This is driven by the first products coming out of this group Kascada which has a 2.5 zone performance and coin combo, which has a 3x performance. And we actually have incredible roadmap going through the end of the year with amazing cabinet and Mural and two excellent games that follows these up. So John, I am extremely pleased with where we are. I look out on the field and I see we have an all-star team. We have the right game plan in place, and we're scoring runs in the early innings. Obviously, the game ain't over, but I certainly like our chances.
Barry just a quick follow up, so Kascada is live today, it has launched and Mural is another cabinet, will launch later this year, is that correct?
That's correct. Yeah, Kascada is out in the marketplace to do today it's good, sorry performing well. And then if you look at our presentation deck, you'll see Mural as well launching in the marketplace. These are going at the heart of the gaming market, North America game Ops, and ultimately sales as well. And they've got really great products, game setup, launching with Mural and you saw Coin Combo and MONOPOLY come out with Kascada. And for Mural you have our Willy Wonka and our 88 Fortunes product coming out on that. And the products and the games look fantastic.
Thanks, Barry. Mike if I -
Operator we lost -
The next question is from - you want me to go back to John?
Yeah. Can you open up John back again, please? I think we got caught up there. Thank you.
Okay, go ahead.
My apologies guys, just quickly, Michael. I was going to ask about the working capital improvement in the quarter. If you could unpack some of those improvements and if you could give us any insight as to what is sustainable for 2021 and how we should think about working capital for this coming year?
John, I promise I didn't tell Jim to cut you off there because you're going ask me a question. Good to talk to you. I appreciate you asking about working capital. For us working capital, free cash flow is becoming just the mantra for us within the organization. Cash is king, as we say internally a lot lately, really does drive a lot of shareholder value, and we're focused on it as a result. We're extraordinarily pleased with the progress the team made last year obviously with the results we put on the board, $72 million of free cash flow in Q4, 186 million for the full year. We're really proud of the free cash flow conversion, 23% dropping through to the bottom line and AEBITDA up to 600 basis points year-over-year. We talked a lot about it in Q2, Q3. Working capital actually had a $230 million improvement in working capital year-over-year, just by going after all the working capital accounts, DSO, DPO, DSI and just the normal hygiene you put around that. The Treasury teams did a great job with our cost of debt, took our cost of debt down from 5.8 last year to 5%, freed up $78 million. And then all of that kind of landed with this $1.3 billion of liquidity that we're certainly happy with as well at $363 million year-over-year.
Going forward, it's going to continue to be a top priority. Obviously, we're just going to continue to pull all the levers that we've been pulling this year. It won't be any one thing it's going to be a lot of small things just like it was this year. We'll continue to focus on free cash flow, continue to focus on liquidity, continue to focus on the cost of capital, we're obviously going to modulate our CapEx with the demand from our customers as they know more, we'll know more and we'll turn that number up or down as the year goes. And then a whole lot of focus, as you heard us talk about in the prepared remarks on operational excellence and the cost impact that comes out of that, $50 million last year, another 50 million on a run rate basis exiting this year, all of that and then you get gaming kind of Q2, Q3, Q4 starting to recover and you get the really good kind of cash flow back in the business which comes from AEBITDA growth out of our gaming business. We're pretty bullish about the prospects here and we're going to stay focused on it. And again that as we call it, that's rocket fuel to give the teams to invest in all the growth opportunities, all the new products, all the right content for their market so they can continue to win wherever they play. And so we're pretty bullish on our working capital. We're pleased with the work the team has done so far. And it'll continue to be a top focus for us going forward.
Operator, we'll take our next question.
Our next question is from Barry Jonas from Truist Securities. Go ahead.
Hey, guys, I wanted to start with a question on cashless gaming. Can you talk about the strategy behind doing a cross licensing agreement with IGT? And just any further thoughts about the wider market opportunity? Thanks.
Thanks, Barry. Let me just make sure I get the second question right. So you asked about cashless on the first and what was the second?
Just any further thoughts about how big the market opportunity could be for cashless?
Okay, got it. Okay, thanks. So first of all, thanks for asking, obviously, we're extremely excited around this morning's announcement. The cross-licensing agreement enables us to provide cable operators with access to the gaming industry, most compelling portfolio of cashless gaming and IP technologies. This is something we've been working on for years. We built a huge comprehensive set of patents and technologies in the space. So when we combine that with IGT that enables us to basically deploy the best solution. With the tech - with all the technologies and IP that comes into this pool, we can build a seamless cashless solution for our - from our customers. And we've actually built a product, obviously, and it's out in market now with the Seminole's. There's really three key pieces of this if you got to think about it. One is it's really essentially an extension of the systems business. So we have the IP and technology, we have the product and solution that solves the last mile. And by the way, we have a systems business. And by being the leading systems provider with over 525,000, interconnected, slot footprint, we have a really large addressable market to go out and attack this. The revenue model, obviously, is going to be a hybrid of recurring and non-recurring elements, as we put - as we continue to roll this out into the marketplace, and then obviously, we have the pool for license as well.
Got it and then just maybe another question on gaming and product sales, as you speak to customers about '21, how do you see the outlook? On one hand, we're hearing about lingering COVID concerns, potential for smaller slot floors. On the other hand, we've got the vaccine, and it seems like operators are more focused on that gaming VIP player, maybe is a little more discerning on new slot products. So just would love to hear what the - what you think the outlook is this year?
Yeah, look, its fluid clearly. So we don't want to speculate too much on that future macro environment trend. But I got to tell you what we're seeing or I should say, we aren't seeing this in our near-term trends. Now, I got to, obviously, have to qualify that. And as you guys know, our customers are mainly the tribal regionals, which is 95% of our business and 80% of their revenue is slots. So it's very important business for these folks that they lean into, particularly as other pieces of their business, like bars, lounges, and restaurants also get impacted by COVID, but we're seeing sequential improvement, so Q2 to Q3 to Q4 across the board and that shows up in a premium game ops trends. Our game sales have continued to improve as even in the context of the holiday resurgence of COVID.
And we're seeing it in our first percent fleet, as we mentioned before, from 70 now, even into 80% in the Q1 range, with yields continuing to grow. And then obviously, of that set, we feel really confident with our roadmap as we're starting to see our new products from this team come out in the marketplace, with the highest percentage of top new premium and WAP games in the marketplace per Eilers. And the new products that I mentioned, which I think the one thing to think about is as this thing continues to move, players go to casinos to play exciting new games, and so we really believe in value and invest in great content. That's always been the case and we're optimistic that it will continue. And so as this continues to recover, we're going to focus on building those products because having those new products in the marketplace is what creates excitement for the operators.
Great, thanks so much, Barry.
Our next question is from Chad Beynon from Macquarie. Go ahead.
Hi, good afternoon. Thanks for taking my question. I wanted to start with digital. Barry, you touched on, I guess, high level on the IGaming, the OGS in the content side versus sports betting, the OpenBet opportunities, it sounds like the iGaming may actually be as good if not better of an opportunity, given your share in New Jersey and what you alluded to in Michigan, and more so if more states legalize. But I wanted to get your kind of high level in terms of how you're thinking about these segments long-term, maybe just some additional color in terms of your successes and how you're thinking about the business going forward?
Absolutely, yeah, look, we are very bullish on iGaming, for several reasons. First, as you mentioned, first of all, the 2020 was actually a record year for it. So we're coming off a record year, and we believe we're well positioned for 2021. As you mentioned, part of it is just growth driven by the macro environment there's new markets, new states that are starting to legalize, it's behind the sports betting there's not as many legalized states, but it is becoming a fast follower. And we're seeing in the new markets, like Pennsylvania, Michigan light up. There's really strong demand there. And we're sitting nice, because we actually have the leading product in the marketplace. We have the leading pan out there. Today, we have what we call OGS, but it's essentially as our Netflix of games, right.
We service 140 operators on one end and then 2,800 games on the other end that we bring together of third-party content, that we then anchor with our own content inside that the killer IP, we mentioned, I think, in the script, the 88 Fortunes leading the Michigan market and so we have just really great content, really great distribution, just waiting for these markets to continue to roll out. And it's a business where our content reaches the players. So it's must have content and so it gets widely distributed by all the operators in the marketplace today. So yeah, it's a real strong business that we're very bullish on. And as we're continuing to expand internationally, we're just setting ourselves up for the United States as that smoothing and as we all know kind of moving a little faster due to the COVID stimulus.
Right and then I want to touch on another growth industry and growth driver for you guys, iLottery. There's some questions around if it is additive to iGaming, both iLottery and iGaming are offered in Pennsylvania and I think you highlighted pretty strong results in iLottery. So can you just confirm that this continues to be a good growth driver for you guys and then for the state? And is that what gives you confidence that more states will look to legalize in the future? Thanks.
Yes, absolutely. So I'll talk specifically about Pennsylvania and then maybe pull it up to talk a little bit more broadly about our iLottery offering. To your point the Pennsylvania lottery actually had - both the instant tickets at retail and digital both grew year-over-year in the same year, in a year where iGaming also was launched in Pennsylvania. And so what we see is that the market, overall market is growing and all boats are rising with that. We're super excited about it, because we're already the global iLottery leader today. We provide platforms and digital content to 20 lotteries globally. And in 2020, alone, we launched iLottery, with Canada, Germany, Hungary and Turkey. And we think the US States, potentially an additional 10 states will adopt iLottery over the next couple of years. And if you think about it, from where we sit, we have very strong relationships with our lottery partners today across a comprehensive set of services today, and we have the most successful iLottery is launched in North America, the first program to reach $1 billion in sales, and so we got a great product in iLottery and we have a really strong relationships with our customers. And so we we're bullish on iLottery and feel like we're really set up to win there.
Thanks Barry, appreciate it.
The next question is from David Katz from Jefferies. Go ahead.
Good afternoon, everyone. I appreciate the results and congrats on it. When we think about the process of getting leverage lower over an extended period of time, are you sort of contemplating sort of broader, bigger - strategies for taking bigger bites, I suppose, as what I'm getting at? It certainly is commendable to generate free cash flow in this environment, but are there ways to maybe get the leverage down faster?
Very much appreciate the question. And clearly, as you - and I thank you for acknowledging, by the way, the operational success that we've been having. As we mentioned before, we're not going to go into the specifics today on the incredible strategic work that we're doing with the board. What I can say is, we've been very busy with very productive discussions with the board on that strategy that's going to focus on setting Scientific Games up to be a high growth company, focused on maximizing Scientific Games shareholder value and focus on de-levering, when we have something to share, we really look forward to share with you.
I appreciate that. And I hope you don't mind me asking. My second question is around the digital aspects of the business. There is an awful lot of capability in there from social sports to real money. Are there certain capabilities or other ways to increase the positioning strategically, right, within those digital businesses, any posture on M&A or tuck-ins or any of those sorts of things that could help that positioning?
We're constantly looking out in the marketplace for product gaps in our product portfolio and things of that nature. Obviously, in the digital and sports betting space, we made a big bet several years ago with NYX and OpenBet. And so we've got a fairly comprehensive product offering today. But we're constantly looking out there for talent or for portfolio gaps. So we're - we don't sleep at night, we're always looking to grow and be aggressive.
Me either. Thanks very much. Congrats on that.
Our next question is from Jeff Stantial from Stifel. Go ahead.
Hey, great, good afternoon, everyone. Thanks for taking my questions.
Operator, we lost Jeff. Hey, Jeff, sorry, we lost you there. Can you just restart your question?
Yeah, I wanted to start on the gaming business, specifically, as line of sight into the vaccine rollout and full herd immunity continues to improve each day. Just curious, have you noticed any changes in customer tone regarding capital budgets? Specifically, just wondering at what point we could start to see an inflection there.
Basically, as we mentioned before, right now with the customer base that we have, which is that the tribal regional, which is 95% of our base, and the near-term trends, we're continuing to see sequential improvement.
Okay, great. That's helpful and then just switching gears here over to SciPlay. And I'm sure we'll get more colors here on the call after this, but just wanted to get your updated high-level thoughts of how do you - I'm just curious, how do you see the market opportunity as you expand into the casual game genre playing out for you guys, and how do you plan to compete versus the current players there? And that's all for me. Thanks.
Okay, great, great question. Look, I think, an incredibly smart move. Number one, where it's an opportunity to expand in the $20 billion casual gaming genre in which there's a lot of winners and we have the right playbook to enter that casual space. So if you think about it, slots is a compelling simple core loop and Solitaire is a simple core loop. And so what we're looking for in the casual space is games and teams that know how to build, understand that genre, that simple core loop with evergreen - that's also evergreen, and then plug them into the machine that the analytics, the live ops, the UA monetization machines that SciPlay has. And the great thing is we have the - there's a playbook there of entering into that piece of casual, and one that we've actually done before. If you think about it, Bingo is a multi-card, simple loop game as well. Very different than slots that we plugged in and we were able to 3x the revenue run rate within a year. And so we think it's something we've done before and it's a smart move to enter that much larger town.
Great, thanks. Appreciate all the color and congrats on a strong quarter.
Thank you. Operator, we have time for one more question.
Okay, our last question is from Ryan Sigdahl from Craig-Hallum. Go ahead.
Great, thanks, Michael, Barry. Congrats on the operational improvements and very good to hear on the encouraging progress on the strategic assessment process. Just want to jump into digital quick. So congrats on the uninterrupted performance during the Super Bowl when your main competitors had notable outages, which were fairly high profile across a number of operators, but curious if this has resulted in any new customer opportunities for you guys, and then maybe share learnings that you guys have had over the years, how you fine tune the tech in the UK bring it here basically to execute so well?
Yeah, absolutely, great question. I'll actually reverse it and start with your first question. So what we have found over the years and decades of actually running sports betting through Europe is that you have to be reliable, stable, and provide a customizable solution to operators so that they can compete in the marketplace, you can't fall down, but you also have to give them the flexibility to create an offering that helps allow themselves to differentiate. And we've been able to do that with home that basically, over years and years in the UK. And we got to the Super Bowl and escape, but before that we got to the Melbourne Cup, we got to the Grand National and UK. And so the Super Bowl is just yet another example of years of time-tested tech that's in the market today. We actually see, by the way our UK market share continuing to grow as operators want to systems integrate the best core elements of their tech solutions in order to have the best product in the marketplace. And so we just keep - our mentality is build the best product and it will win over time right.
And what we're seeing in terms of - going back to your first question in terms of growth, we believe that we still have - there's still a ton of macro and market factors that are driving growth for us. Number one is new markets and states are can continuing to light up as COVID is driving continued interest to legalize. We have new deals that are coming in everywhere from European providers coming over to the marketplace, as new states light up, there's regional players there. There's also players that have already made a short-term decision to get into market with a tech solution and switch over to our solution. We've seen several of those that we just recently launched, so new deals. And then behind that quite frankly for 2021, we've got new deployments for deals we've already done, right.
FanDuel continues to expand and win, Golden Nugget, et cetera. Our goal is to deploy throughout FanDuel throughout 2021. And so I think I believe we said we went from three to 17 deployments from 2018 to 2020. We should come close to doubling that in 2021, so we've got - we have a lot of great growth just in as kind of sports betting marches throughout the United States. And then lastly, our new products, we continue to launch new products. Example of one that we offer an accordion of like anything that you want, but you can take as little as you want as well and we continue to launch new products into our offering like bet building capable et cetera. So there's just things like that as we continue to attack it, we try to we grow the market.
Great, one quick follow up just on the IGT cashless, is that - is the go-to-market in a joint operational fashion there? Are you sharing tech and then you're each going around separately as to end customers and monetize that?
It's the latter, we're pulling the IP. But the solution is really - is driven out of an extension of your systems business providing that cashless last mile. And so we have our solution, actually, as I mentioned before in the market, but by pooling the IP between ourselves and IGT, which we both have very comprehensive IP, we're able to actually create a solution that is really best in market as seamless as possible for the player and that's super, super important today.
Thanks. Good luck, guys.
This concludes our question-and-answer session. I would like to turn the conference back over to Barry Cottle for closing remarks.
Thanks everyone for joining us for today's call. We're all very excited at Scientific Games about the path forward. There's a new sense of energy and optimism at the company as we looked at how we can best optimize our portfolio, deleverage our business and capitalize on the key areas of growth in order to deliver outsized returns for our shareholders. We are excited to update you on our progress in the coming quarters as we look to unlock the value of Scientific Games. Thank you for your support.
Thank you everyone. We'll be available after the call to take any further questions.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.