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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 September 30, 2020
 
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: 001-38889 
SciPlay Corporation
(Exact name of registrant as specified in its charter)
Nevada
83-2692460
(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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $.001 par valueSCPLThe 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 
The registrant has the following number of shares outstanding of each of the registrant’s classes of common stock as of October 29, 2020:
Class A Common Stock: 22,857,175
Class B Common Stock: 103,547,021



SCIPLAY CORPORATION
INDEX TO FINANCIAL INFORMATION
AND OTHER INFORMATION
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
Page
Item 1.


Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2


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 social, political, economic and financial complications;

our ability to attract and retain players;
our reliance on third-party platforms;
our dependence on the optional purchases of coins, chips and cards to supplement the availability of periodically offered free coins, chips and cards; 
dependence on skilled employees with creative and technical backgrounds;
expectations of growth in total consumer spending on social gaming, including social casino gaming;
our dependence on certain key providers;
natural events and health crises that disrupt our operations or those of our providers or suppliers;
U.S. and international economic and industry conditions;
stock price volatility;
our ability to continue to launch and enhance games that attract and retain a significant number of paying players;
our reliance on a small percentage of our players for nearly all of our revenue;
our ability to adapt to, and offer games that keep pace with, changing technology and evolving industry standards;
competition;
the impact of legal and regulatory restrictions on our business, including 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;
laws and government regulations, both foreign and domestic, including those relating to our parent, Scientific Games Corporation, and to data privacy and security, including with respect to the collection, storage, use, transmission, sharing and protection of personal information and other consumer data, and those laws and regulations that affect companies conducting business on the internet, including ours;
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;
our ability to use the intellectual property rights of our parent, Scientific Games Corporation, and other third parties, including the third-party intellectual property rights licensed to Scientific Games Corporation, under our intellectual property license agreement (“IP License Agreement”) with our parent; 
protection of our proprietary information and intellectual property, inability to license third-party intellectual property and the intellectual property rights of others;
3


security and integrity of our games and systems;
security breaches, cyber-attacks or other privacy or data security incidents, challenges or disruptions;
reliance on or failures in information technology and other systems;
our ability to complete acquisitions and integrate businesses successfully;
our ability to pursue and execute new business initiatives;
fluctuations in our results due to seasonality and other factors;
risks related to foreign operations, including the complexity of foreign laws, regulations and markets; the uncertainty of enforcement of remedies in foreign jurisdictions; the effect of currency exchange rate fluctuations; the impact of foreign labor laws and disputes; the ability to attract and retain key personnel in foreign jurisdictions; the economic, tax and regulatory policies of local governments; and compliance with applicable anti-money laundering, anti-bribery and anti-corruption laws;
changes in tax laws or tax rulings, or the examination of our tax positions;
the discontinuation or replacement of LIBOR, which may adversely affect interest rates;

litigation and other liabilities relating to our business, including litigation and liabilities relating to consumer protection, gambling-related matters, employee matters, alleged service and system malfunctions, alleged intellectual property infringement and claims relating to our contracts, licenses and strategic investments;
restrictions and covenants in debt agreements, including those that could result in acceleration of the maturity of our indebtedness;
failure to maintain adequate internal control over financial reporting;
influence of certain stockholders, including decisions that may conflict with the interests of other stockholders;
our ability to achieve some or all of the anticipated benefits of being a standalone public company; and
our dependence on distributions from SciPlay Parent Company, LLC (“SciPlay Parent LLC”) to pay our taxes and expenses, including substantial payments we will be required to make under the Tax Receivable Agreement (the “TRA”).
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 “Risk Factors” in our 2019 Annual Report on Form 10-K filed with the SEC on February 18, 2020 (the “2019 Form 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.
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 international social gaming industries than the same industries in the U.S. Some data is also based on our good faith estimates, which are derived from our review of internal surveys or data, as well as the independent sources referenced above. Assumptions and estimates of our and our industry's future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in our 2019 Form 10-K. These and other factors could cause future performance to differ materially from our assumptions and estimates.
    

4


PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)

SCIPLAY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in millions, except per share amounts)

Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Revenue$151.2 $116.4 $435.1 $352.9 
Operating expenses:
  Cost of revenue(1)
48.0 36.9 138.5 123.1 
  Sales and marketing(1)
33.7 32.9 97.0 98.4 
  General and administrative(1)
21.3 9.8 46.7 31.2 
  Research and development(1)
8.8 6.3 24.3 18.1 
  Depreciation and amortization2.7 1.7 6.9 5.2 
  Restructuring and other0.2 0.2 1.7 2.4 
         Operating income36.5 28.6 120.0 74.5 
  Other (expense) income, net(0.2)(0.4)0.9 (2.4)
         Net income before income taxes36.3 28.2 120.9 72.1 
  Income tax expense1.2 3.2 5.9 7.2 
         Net income35.1 25.0 115.0 64.9 
Less: Net income attributable to the noncontrolling interest29.6 23.0 98.5 36.9 
         Net income attributable to SciPlay$5.5 $2.0 $16.5 $28.0 
Basic and diluted net income attributable to SciPlay per share(2):
  Basic$0.24 $0.09 $0.72 $0.33 
  Diluted$0.23 $0.09 $0.69 $0.33 
Weighted average number of shares of Class A common stock used in per share calculation:
  Basic shares22.8 22.7 22.8 22.7 
  Diluted shares24.1 22.7 24.0 22.7 
(1) Excludes depreciation and amortization.
(2) For the nine months ended September 30, 2019 basic and diluted earnings per share and weighted average shares of Class A common stock is applicable only for the period from May 7, 2019 to September 30, 2019, which is the period following SciPlay Corporation’s IPO described in Note 1 — Description of the Business and Summary of Significant Accounting Policies. See Note 7 — Earnings per share for further details regarding the computation of earnings per share.
See accompanying notes to condensed consolidated financial statements.


5


SCIPLAY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in millions)

Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Net income$35.1 $25.0 $115.0 $64.9 
Other comprehensive income:
Foreign currency translation (loss) gain, net of tax(0.3)0.6 (0.2)2.8 
Total comprehensive income 34.8 25.6 114.8 67.7 
Less: comprehensive income attributable to the noncontrolling interest
29.4 23.5 98.4 37.7 
Comprehensive income attributable to SciPlay$5.4 $2.1 $16.4 $30.0 
See accompanying notes to condensed consolidated financial statements.


6


SCIPLAY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions, except par value)
As of
September 30, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$210.3 $110.6 
Accounts receivable, net
49.6 32.1 
Prepaid expenses and other current assets
6.4 4.3 
Total current assets
266.3 147.0 
Property and equipment, net4.7 4.6 
Operating lease right-of-use assets8.7 6.0 
Goodwill127.0 120.7 
Intangible assets and software, net
28.8 17.0 
Deferred income taxes and other assets
84.0 89.3 
Total assets
$519.5 $384.6 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$22.8 $12.8 
Accrued liabilities
17.1 13.7 
Due to affiliate
2.6 2.7 
Total current liabilities
42.5 29.2 
Operating lease liabilities7.8 5.2 
Liabilities under TRA67.3 72.7 
Other liabilities6.6  
Total liabilities
124.2 107.1 
Commitments and contingencies (see Note 8)
Stockholders’ equity:
Class A common stock, par value $0.001 per share - 625.0 shares authorized, 22.8 issued and outstanding as of September 30, 2020, 22.7 issued and outstanding as of December 31, 2019
  
Class B common stock, par value $0.001 per share - 130.0 shares authorized, 103.5 issued and outstanding as of September 30, 2020 and December 31, 2019
0.1 0.1 
Additional paid-in capital
44.7 41.7 
Retained earnings
28.5 12.0 
Accumulated other comprehensive income
0.2 0.3 
Total SciPlay stockholders’ equity
73.5 54.1 
Noncontrolling interest
321.8 223.4 
Total stockholders’ equity
395.3 277.5 
Total liabilities and stockholders’ equity
$519.5 $384.6 
See accompanying notes to condensed consolidated financial statements.

7


SCIPLAY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/ACCUMULATED NET PARENT INVESTMENT
(Unaudited, in millions)
Class A common stockClass B common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Noncontrolling interestTotal
SharesAmountSharesAmount
December 31, 201922.7 $ 103.5 $0.1 $41.7 $12.0 $0.3 $223.4 $277.5 
Net income— — — — — 4.4 — 26.7 31.1 
Stock-based compensation— — — — 0.2 — — (0.1)0.1 
Currency translation— — — — — — (0.2)(0.6)(0.8)
March 31, 202022.7 $ 103.5 $0.1 $41.9 $16.4 $0.1 $249.4 $307.9 
Net income— — — — — 6.6 — 42.2 48.8 
Distributions to Parent and affiliates, net — — — — — — — (11.6)(11.6)
Stock-based compensation— — — — 1.0 — — 4.1 5.1 
Net issuance of common stock in connection with RSUs0.1 — — — — — — —  
Currency translation— — — — — — 0.2 0.7 0.9 
June 30, 202022.8 $ 103.5 $0.1 $42.9 $23.0 $0.3 $284.8 $351.1 
Net income— — — — — 5.5 — 29.6 35.1 
Stock-based compensation— — — — 1.9 — — 8.0 9.9 
Net redemption of common stock in connection with RSUs— — — — (0.1)— — (0.2)(0.3)
Distributions to Parent and affiliates, net— — — — — — — (0.2)(0.2)
Currency translation— — — — — — (0.1)(0.2)(0.3)
September 30, 202022.8 $ 103.5 $0.1 $44.7 $28.5 $0.2 $321.8 $395.3 

8


Accumulated net parent investmentClass A common stockClass B common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Noncontrolling interestTotal
SharesAmountSharesAmount
December 31, 2018$140.8  $  $ $ $ $(2.2)$ $138.6 
Net income13.7 — — — — — — — — 13.7 
Transactions with Parent and affiliates, net6.2 — — — — — — — — 6.2 
Currency translation— — — — — — — 1.9 — 1.9 
March 31, 2019$160.7  $  $ $ $ $(0.3)$ $160.4 
Activity prior to IPO and organization transactions:
Net income6.7 — — — — — — — — 6.7 
Transactions with Parent and affiliates, net3.0 — — — — — — — — 3.0 
May 7, 2019$170.4  $  $ $ $ $(0.3)$ $170.1 
Effects of the IPO and organization transactions:
Issuance of Class A common stock in the IPO, net of underwriting discount and offering costs— 22.7 — — — 59.9 — — 272.9 332.8 
Issuance of Class B common stock— — — 103.5 0.1 — — — — 0.1 
Allocation of SGC equity to noncontrolling interests(170.4)— — — — 30.7 — 0.2 139.5  
Distributions to Parent and affiliates, net— — — — — (56.1)— — (255.6)(311.7)
Net effect of tax-related organization transactions and other— — — — — 5.6 — — — 5.6 
Activity subsequent to the IPO and organization transactions:
Net income— — — — — — 5.6 — 13.9 19.5 
Stock-based compensation— — — — — 0.8 — — 3.1 3.9 
Currency translation— — — — — — — 0.1 0.2 0.3 
June 30, 2019$ 22.7 $ 103.5 $0.1 $40.9 $5.6 $ $174.0 $220.6 
Net income— — — — — — 2.0 — 23.0 25.0 
Stock-based compensation— — — — — 0.4 — — 1.1 1.5 
Currency translation and other— — — — — (0.1)— 0.1 0.2 0.2 
September 30, 2019$ 22.7 $ 103.5 $0.1 $41.2 $7.6 $0.1 $198.3 $247.3 
See accompanying notes to condensed consolidated financial statements.

9


SCIPLAY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
Nine Months Ended
September 30,
20202019
Net cash provided by operating activities$131.9 $60.3 
Cash flows from investing activities:
  Capital expenditures(5.0)(6.5)
  Acquisition of business, net of cash acquired(12.6) 
Net cash used in investing activities(17.6)(6.5)
Cash flows from financing activities:
  Payments under tax receivable agreement(2.5) 
  Net proceeds from issuance of Class A common stock 341.7 
  Net proceeds from issuance of Class B common stock 0.1 
  Distributions to Parent and affiliates, net(11.8)(311.7)
  Payments of deferred offering costs (9.1)
  Payments of contingent consideration (1.8)
  Payments on license obligations (1.0)
  Payments of debt issuance costs (1.1)
Net redemptions of stock under stock-based compensation plans and other(0.3) 
Net cash (used in) provided by financing activities(14.6)17.1 
Effect of exchange rate changes on cash, cash equivalents and restricted cash 0.4 
Increase in cash, cash equivalents and restricted cash99.7 71.3 
Cash, cash equivalents and restricted cash, beginning of period110.6 10.0 
Cash, cash equivalents and restricted cash, end of period$210.3 $81.3 
Supplemental cash flow information:
Cash paid for income taxes$1.5 $0.7 
Cash paid for contingent consideration included in operating activities4.0 22.2 
Payment for Scientific Games’ intellectual property license included in Distributions to Parent and affiliates, net 255.0 
See accompanying notes to condensed consolidated financial statements.

10


SCIPLAY CORPORATION
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

Background and Nature of Operations

SciPlay Corporation was formed as a Nevada corporation on November 30, 2018 as a subsidiary of Scientific Games Corporation (“Scientific Games”, “SGC”, and “the Parent”) for the purpose of completing a public offering and related transactions (collectively referred to herein as the “IPO”) in order to carry on the business of SciPlay Parent LLC and its subsidiaries (collectively referred to as “SciPlay”, the “Company”, “we”, “us”, and “our”). The IPO was completed on May 7, 2019. As the managing member of SciPlay Parent LLC, SciPlay operates and controls all of the business affairs of SciPlay Parent LLC and its subsidiaries.

We develop, market and operate a portfolio of social games played on various mobile and web platforms, including Jackpot Party Casino®, Quick Hit Slots®, Gold Fish Casino®, Hot Shot Casino®, Bingo Showdown®, MONOPOLY Slots®, and 88 Fortunes Slots®, among others. Our games are available in various formats. We have one operating segment with one business activity, developing and monetizing social games.

Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). SG Social Holding Company II, LLC is SciPlay’s predecessor for financial reporting purposes, and accordingly, for all periods presented prior to May 7, 2019, the financial statements represent the financial statements of the predecessor. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, we have made all adjustments necessary to present fairly our condensed consolidated balance sheets, consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in stockholders’ equity/accumulated net parent investment, and condensed consolidated statements of cash flows for the periods presented. Such adjustments are of a normal, recurring nature. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related Notes included in our 2019 Form 10-K. Interim results of operations are not necessarily indicative of results of operations to be expected for a full year.

Variable Interest Entities (“VIE”) and Consolidation

Subsequent to the IPO, our sole material asset is our member’s interest in SciPlay Parent LLC. In accordance with the Operating Agreement of SciPlay Parent LLC (the “Operating Agreement”), we have all management powers over the business and affairs of SciPlay Parent LLC and to conduct, direct and exercise full control over the activities of SciPlay Parent LLC. Class A common stock issued in the IPO do not hold majority voting rights but hold 100% of the economic interest in the Company, which results in SciPlay Parent LLC being considered a VIE. Due to our power to control the activities most directly affecting the results of SciPlay Parent LLC, we are considered the primary beneficiary of the VIE. Accordingly, beginning with the IPO, we consolidate the financial results of SciPlay Parent LLC and its subsidiaries.

Significant Accounting Policies
There have been no changes to our significant accounting policies described within the Notes of our 2019 Form 10-K.
New Accounting Guidance
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes, a new standard to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also
11


simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years with early adoption permitted. We early adopted this standard effective January 1, 2020. The adoption of this guidance did not have a material effect 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.
Revenue Recognition
We generate revenue from the sale of virtual coins, chips and bingo cards (collectively referred to as “coins, chips and cards”), which players can use to play casino-style slot games, table games and bingo games (i.e., spin in the case of slot games, bet in the case of table games and use of bingo cards in the case of bingo games). We distribute our games through various global social web and mobile platforms such as Facebook, Apple, Google, Amazon, and Microsoft. The games are primarily WMS, Bally, Barcrest™, and SHFL® branded games. In addition, we also offer third-party branded games and original content.
Disaggregation of Revenue
We believe disaggregation of our revenue on the basis of platform and geographical locations of our players is appropriate because the nature and the number of players generating revenue could vary on such basis, which represent different economic risk profiles.
The following table presents our revenue disaggregated by type of platform:
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Mobile $131.8 $97.7 $377.3 $292.8 
Web 19.4 18.7 57.8 60.1 
Total revenue $151.2 $116.4 $435.1 $352.9 
The following table presents our revenue disaggregated based on the geographical location of our players:
Three Months EndedNine Months Ended
September 30,September 30,
2020(1)
2019(2)
2020(1)
2019(2)
North America
$138.5 $108.8 $399.1 $328.3 
International
12.7 7.6 36.0 24.6 
Total revenue
$151.2 $116.4 $435.1 $352.9 
(1) For the three and nine months ended September 30, 2020, North America revenue includes revenue derived from the U.S., Canada and Mexico. As a result of enhancements in the technologies and processes we use to obtain customer data, beginning with the first quarter of 2020, geographical location is now determined based on player location as reported by the platform provider.
(2) For the three and nine months ended September 30, 2019, revenue is disaggregated between the U.S. and International. Revenues are assumed to be derived from the U.S. when data on geographical location was not available. We did not recast revenue for this period as it was deemed impractical due to lack of availability of similar data.
Contract Assets, Contract Liabilities and Other Disclosures

We receive customer payments based on the payment terms established in our contracts. Payment for the purchase of coins, chips and cards is made at purchase, and such payments are non-refundable in accordance with our standard terms of service. Such payments are initially recorded as a contract liability, and revenue is subsequently recognized as we satisfy our performance obligations.
The following table summarizes our opening and closing balances in contract assets, contract liabilities and accounts receivable:
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Accounts Receivable
Contract Assets(1)
Contract Liabilities(2)
Beginning of period balance
$32.1 $0.2 $0.6 
Balance as of September 30, 2020
49.6 0.2 0.7 
(1) Contract assets are included within Prepaid expenses and other current assets in our consolidated balance sheets.
(2) Contract liabilities are included within Accrued liabilities in our consolidated balance sheets.
During the nine months ended September 30, 2020 and 2019, we recognized $0.6 million and $0.7 million, respectively, of revenue that was included in the opening contract liability balance. Substantially all of our unsatisfied performance obligations relate to contracts with an original expected length of one year or less.

Concentration of Credit Risk

Our revenue and accounts receivable are generated via certain platform providers, which subject us to a concentration of credit risk. The following tables summarize the percentage of revenues and accounts receivable generated via our platform providers in excess of 10% of our total revenues and total accounts receivable:
Revenue
Concentration
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Apple
46.5 %45.5 %46.0 %44.1 %
Google
37.0 %35.0 %37.3 %35.4 %
Facebook
12.8 %16.0 %13.3 %17.0 %

Accounts
Receivable
Concentration as of
September 30,December 31,
20202019
Apple 63.8 %42.7 %
Google 25.4 %33.1 %
Facebook 8.4 %20.9 %

Acquisitions

On June 22, 2020, we completed the acquisition of all of the issued and outstanding capital stock of privately held mobile and social game company Come2Play, Ltd. (“Come2Play”), which expands our existing portfolio of social games. Come2Play offers Backgammon and Solitaire social games targeted towards casual game players on some of the same platforms in which we currently offer our existing games. The total purchase consideration was $17.8 million including $3.7 million in contingent acquisition consideration. Our preliminary allocation of the purchase price resulted in $12.7 million allocated to acquired intangible assets, which includes $6.8 million in customer relationships, $4.1 million in intellectual property, and $1.8 million in brand names, which have useful lives of seven, five and seven years, respectively, an immaterial amount of net working capital and $6.4 million in excess purchase price allocated to goodwill. The factors contributing to the recognition of goodwill are based on expected synergies resulting from this acquisition, including the expansion of the games portfolio. None of the resultant goodwill is expected to be deductible for income tax purposes. The results of operations from Come2Play have been included in our consolidated statement of income since the date of acquisition, which results were not material for the periods presented nor any historical periods. The fair value of intangible assets was determined using a combination of the royalty savings method and excess earnings method, and considered the Level 3 hierarchy as established by ASC 820.
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(2) Intangible Assets and Software, net
The following table presents certain information regarding our intangible assets and software:
Gross
Carrying
Amount
Accumulated
Amortization
Net
Balance
Balance as of September 30, 2020
Intellectual property$39.5 $(34.3)$5.2 
Customer relationships30.0 (19.2)10.8 
Software20.6 (13.1)7.5 
Licenses6.3 (3.3)3.0 
Brand names5.7 (3.4)2.3 
Total intangible assets and software$102.1 $(73.3)$28.8 
Balance as of December 31, 2019
Intellectual property$35.4 $(33.4)$2.0 
Customer relationships23.2 (18.0)5.2 
Software16.8 (10.3)6.5 
Licenses5.1 (2.4)2.7 
Brand names3.9 (3.3)0.6 
Total intangible assets and software$84.4 $(67.4)$17.0 

The following reflects amortization expense related to intangible assets and software included within depreciation and amortization:
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Amortization expense
$2.3 $1.5 $5.8 $4.6 

(3) Leases
Our operating leases primarily consist of real estate leases such as offices. Our leases have remaining terms of 1 year to 5 years. We do not have any finance leases. Our total variable and short term lease payments and operating lease expenses were immaterial for all periods presented.

Supplemental balance sheet and cash flow information related to operating leases is as follows:
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September 30,
2020
December 31, 2019
Operating lease right-of-use assets(1)
$8.7 $6.0 
   Accrued liabilities2.0 1.9 
   Operating lease liabilities7.8 5.2 
Total operating lease liabilities$9.8 $7.1 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases for the nine months ended September 30, 2020 and 2019$1.8 $1.4 
Weighted average remaining lease term, units in years4.54.2
Weighted average discount rate5.0 %5.0 %
(1) Right-of-use assets obtained in exchange for lease obligations for the nine months ended September 30, 2020 were immaterial.

Lease liability maturities:
Operating Leases
Remainder of 2020$0.6 
20212.4 
20222.5 
20232.5 
20242.3 
20250.6 
Less: Imputed Interest(1.1)
Total$9.8 
As of September 30, 2020, we did not have material additional operating leases that have not yet commenced.

(4) Income Taxes
We hold an economic interest of 18% in SciPlay Parent LLC subsequent to the IPO. The 82% economic interest that we do not own represents a noncontrolling interest for financial reporting purposes. SciPlay Parent LLC is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As such, SciPlay Parent LLC is not subject to income tax in most jurisdictions, and SciPlay Parent LLC’s members, of which we are one, are liable for income taxes based on their allocable share of SciPlay Parent LLC’s taxable income. The effective income tax rates for the three and nine months ended September 30, 2020 were 3.3% and 4.9%, respectively, and 11.3% and 10.0% for the three and nine months ended September 30, 2019, respectively. The effective income tax rates were determined using an estimated annual effective tax rate after considering any discrete items for such periods.

Our effective tax rate differs from the statutory rate of 21% primarily because we generally do not record income taxes for the noncontrolling interest portion of U.S. pre-tax income. Additionally, the periods prior to the IPO are presented using historical results of operations and cost basis of the assets and liabilities as if we operated on a standalone basis during those periods, and the tax provision is calculated as if we completed separate tax returns apart from our Parent (“Separate-return Method’’). Certain legal entities that are included in these financial statements under the Separate-return Method were included in tax filings of affiliated entities that are not part of these financial statements. U.S. federal, state and local income tax provision of $6.5 million for the nine months ended September 30, 2019, is included in the income tax expense under the Separate-return Method for the 2019 periods prior to the IPO.

15


TRA

During the nine months ended September 30, 2020, payments totaling $2.5 million were made to Scientific Games pursuant to the TRA. As of September 30, 2020 and December 31, 2019, the total TRA liability was $71.3 million and $75.3 million, respectively, of which $4.0 million and $2.6 million, respectively, was included in Accrued liabilities.

(5) Related Party Transactions
The following is the summary of amounts paid to Scientific Games and settled in cash:
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019Financial Statement Line Item
Royalties for Scientific Games IP$ $ $ $10.2 Cost of revenue
Royalties to Scientific Games for third-party IP1.7 1.5 5.4 5.9 Cost of revenue
Parent services1.9 1.2 4.3 3.8 General and administrative, Research and development
TRA payments (see Note 4)(1)
  2.5  Accrued liabilities
Distributions to Parent and affiliates, net(1)
0.2  11.8  Noncontrolling interest
(1) Under the terms of the Operating Agreement, SciPlay Corporation relies on distributions from SciPlay Parent LLC to pay its obligations under the TRA and any other tax obligations. All distributions must be on a pari-passu basis, thus initiating a pro-rata distribution to Parent and affiliates.

The following is the summary of balances due to affiliates:
September 30, 2020December 31, 2019
Royalties under intercompany IP License Agreement$0.9 $0.5 
Parent services0.7 0.8 
Reimbursable expenses to Scientific Games and its subsidiaries1.0 1.4 
$2.6 $2.7 

(6) Stockholders’ Equity and Noncontrolling Interest          

Noncontrolling Interest

We are a holding company, and our sole material assets are LLC Interests that we purchased from SciPlay Parent LLC and SG Holding I, representing an aggregate 18.1% economic interest in SciPlay Parent LLC. The remaining 81.9% economic interest in SciPlay Parent LLC is owned indirectly by SGC, through the ownership of LLC Interests by the indirect wholly owned subsidiaries of SGC, the SG Members.

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Stock-Based Compensation

The following table summarizes stock-based compensation expense that is included in general and administrative expenses:
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Related to SciPlay equity awards$9.8 $1.3 $14.7 $5.0 
Related to the Parent’s equity awards0.1 0.2 0.4 3.1 
Total$9.9 $1.5 $15.1 $8.1 

As of September 30, 2020, we had $12.7 million in unrecognized stock-based compensation expense that is expected to be recognized over a weighted-average expected vesting period of one year, of which $5.3 million relates to performance-based restricted stock units.

(7) Earnings per Share
The table below sets forth a calculation of basic earnings per share ("EPS") based on dividing net income attributable to SciPlay by the basic weighted average number of shares of Class A common stock outstanding during the period. Diluted EPS of Class A common stock is computed by dividing net income attributable to SciPlay by the weighted average number of shares of Class A common stock outstanding adjusted to give effect to all potentially dilutive securities, using the treasury stock method. No material number of restricted stock units was excluded from the calculation of diluted weighted-average common shares outstanding.

For the nine months ended September 30, 2019 we only included net income attributable to SciPlay generated from May 7, 2019 to September 30, 2019, the period following our IPO in which we had outstanding Class A common stock.

We excluded Class B common stock from the computation of basic and diluted EPS, as holders of Class B common stock do not have economic interest in us and separate presentation of EPS of Class B common stock under the two-class method has not been presented.

Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Numerator:
Net income$35.1 $25.0 $115.0 $64.9 
Less: net income attributable to SG Social Holding Company II, LLC prior to IPO   20.4 
Less: net income attributable to the noncontrolling interest29.6 23.0