scpl-20220331

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 March 31, 2022

☐ 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 class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $.001 par value	SCPL	The 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 May 5, 2022:

Class A Common Stock: 24,661,361

Class B Common Stock: 103,547,021

SCIPLAY CORPORATION

INDEX TO FINANCIAL INFORMATION

AND OTHER INFORMATION

THREE MONTHS ENDED MARCH 31, 2022


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)	6

	Consolidated Statements of Income for the Three Months Ended March 31, 2022 and 2021	6

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021	7

	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	8

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021	9

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021	10

	Notes to Condensed Consolidated Financial Statements	11

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

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 continuing impact of the COVID-19 pandemic and any resulting social, political, economic and financial complications;

•Light & Wonder, Inc.’s (“Light & Wonder” and “Parent”) announced decision to withdraw its offer to acquire our public shares not already owned by Light & Wonder may subject us to risks and uncertainties;

•our ability to attract and retain players;

•expectations of growth in total consumer spending on social gaming, including social casino gaming;

•our reliance on third-party platforms and our ability to track data on those platforms;

•our ability to continue to launch and enhance games that attract and retain a significant number of paying players;

•our ability to expand in international markets;

•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;

•our dependence on the optional purchases of coins, chips and cards to supplement the availability of periodically offered free coins, chips and cards;

•our ability to access additional financing and restrictions and covenants in debt agreements, including those that could result in acceleration of the maturity of our indebtedness;

•the discontinuation or replacement of LIBOR, which may adversely affect interest rates;

•fluctuations in our results due to seasonality and other factors;

•dependence on skilled employees with creative and technical backgrounds;

•our ability to use the intellectual property rights of our Parent and other third parties, including the third-party intellectual property rights licensed to Light & Wonder, under our intellectual property 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;

•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;

•loss of revenue due to unauthorized methods of playing our games;

•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 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;

•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;

•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;

•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”);

•failure to establish and maintain adequate internal control over financial reporting;

•stock price volatility;

•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;

•our ability to complete acquisitions and integrate businesses successfully;

•our ability to pursue and execute new business initiatives;

• our expectations of future growth that will place significant demands on our management and operations;

•natural events and health crises that disrupt our operations or those of our providers or suppliers;

•changes in tax laws or tax rulings, or the examination of our tax positions;

•levels of insurance coverage against claims;

•our dependence on certain key providers; and

•U.S. and international economic and industry conditions.

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 the Company’s current reports on Form 8-K, quarterly reports on Form 10-Q and annual reports on Form 10-K, including the latest annual report filed with the SEC on March 2, 2022 (“2021 Form 10-K”) (including under the headings “Forward Looking Statements” and “Risk Factors”). 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 2021 Form 10-K. These and other factors could cause future performance to differ materially from our assumptions and estimates.

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 Ended
	March 31,
	2022		2021
Revenue	$	158.0	$	151.1
Operating expenses:
Cost of revenue(1)	48.2		47.1
Sales and marketing(1)	40.0		34.7
General and administrative(1)	16.7		15.7
Research and development(1)	11.5		9.5
Depreciation and amortization	4.7		3.4
Restructuring and other	2.2		0.3
Operating income	34.7		40.4
Other expense, net	(0.5)		(0.4)
Net income before income taxes	34.2		40.0
Income tax expense	2.2		2.1
Net income	32.0		37.9
Less: Net income attributable to the noncontrolling interest	27.6		32.6
Net income attributable to SciPlay	$	4.4	$	5.3

Basic and diluted net income attributable to SciPlay per share:
Basic	$	0.18	$	0.23
Diluted	$	0.18	$	0.21

Weighted average number of shares of Class A common stock used in per share calculation:
Basic shares	24.6		23.2
Diluted shares	24.8		25.1
(1) Excludes depreciation and amortization.

See accompanying notes to condensed consolidated financial statements.

SCIPLAY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in millions)


	Three Months Ended
	March 31,
	2022		2021
Net income	$	32.0	$	37.9
Other comprehensive loss:
Foreign currency translation loss, net of tax	(1.6)		(2.6)
Total comprehensive income	30.4		35.3
Less: comprehensive income attributable to the noncontrolling interest	26.3		30.4
Comprehensive income attributable to SciPlay	$	4.1	$	4.9






See accompanying notes to condensed consolidated financial statements.

SCIPLAY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions, except par value)


	As of
	March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	292.0	$	364.4
Accounts receivable, net	42.8		39.6
Prepaid expenses and other current assets	16.5		6.4
Total current assets	351.3		410.4
Property and equipment, net	3.3		3.5
Operating lease right-of-use assets	6.2		6.8
Goodwill	222.6		131.1
Intangible assets and software, net	80.9		49.6
Deferred income taxes	76.3		78.5
Other assets	1.8		1.7
Total assets	$	742.4	$	681.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	20.6	$	20.0
Accrued liabilities	53.0		50.2
Due to affiliate	2.4		1.6
Total current liabilities	76.0		71.8

Operating lease liabilities	4.8		5.4
Liabilities under TRA	64.7		64.7
Other long-term liabilities	39.9		14.7
Total liabilities	185.4		156.6
Commitments and contingencies (see Note 8)
Stockholders’ equity:
Class A common stock, par value $0.001 per share, 625.0 shares authorized, 24.7 and 24.5 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	—		—
Class B common stock, par value $0.001 per share, 130.0 shares authorized, 103.5 and 103.5 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	0.1		0.1
Additional paid-in capital	45.6		45.2
Retained earnings	56.6		52.2
Accumulated other comprehensive income	0.8		1.1
Total SciPlay stockholders’ equity	103.1		98.6
Noncontrolling interest	453.9		426.4
Total stockholders’ equity	557.0		525.0
Total liabilities and stockholders’ equity	$	742.4	$	681.6

See accompanying notes to condensed consolidated financial statements.

SCIPLAY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited, in millions)



	Class A common stock			Class B common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Noncontrolling interest		Total
	Shares	Amount		Shares	Amount
December 31, 2021	24.5	$	—	103.5	$	0.1	$	45.2	$	52.2	$	1.1	$	426.4	$	525.0
Net income	—	—		—	—		—		4.4		—		27.6		32.0
Stock-based compensation	—	—		—	—		0.4		—		—		1.5		1.9
Vesting of RSUs, net of tax withholdings and other	0.2	—		—	—		—		—		—		(0.1)		(0.1)
Distributions to Parent and affiliates, net	—	—		—	—		—		—		—		(0.2)		(0.2)
Currency translation	—	—		—	—		—		—		(0.3)		(1.3)		(1.6)
March 31, 2022	24.7	$	—	103.5	$	0.1	$	45.6	$	56.6	$	0.8	$	453.9	$	557.0













	Class A common stock			Class B common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Noncontrolling interest		Total
	Shares	Amount		Shares	Amount
December 31, 2020	22.8	$	—	103.5	$	0.1	$	46.1	$	32.9	$	0.9	$	355.5	$	435.5
Net income	—	—		—	—		—		5.3		—		32.6		37.9
Stock-based compensation	—	—		—	—		0.4		—		—		1.4		1.8
Vesting of RSUs, net of tax withholdings	1.6	—		—	—		(2.3)		—		—		(10.0)		(12.3)
Distributions to Parent and affiliates, net	—	—		—	—		—		—		—		(0.3)		(0.3)
Currency translation	—	—		—	—		—		—		(0.4)		(2.2)		(2.6)
March 31, 2021	24.4	$	—	103.5	$	0.1	$	44.2	$	38.2	$	0.5	$	377.0	$	460.0













See accompanying notes to condensed consolidated financial statements.

SCIPLAY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)


	Three Months Ended
	March 31,
	2022		2021
Net cash provided by operating activities	$	36.6	$	19.6
Cash flows from investing activities:
Capital expenditures	(2.0)		(2.1)
Acquisition of business, net of cash acquired	(106.2)		—
Net cash used in investing activities	(108.2)		(2.1)
Cash flows from financing activities:

Payments on license obligations	(0.4)		(1.6)

Distributions to Light & Wonder and affiliates, net	(0.2)		(0.3)
Taxes paid related to net share settlement of equity awards and other	(0.1)		(12.3)

Net cash used in financing activities	(0.7)		(14.2)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(0.1)		(0.2)
(Decrease) increase in cash, cash equivalents and restricted cash	(72.4)		3.1
Cash, cash equivalents and restricted cash, beginning of period	364.4		268.9
Cash, cash equivalents and restricted cash, end of period	$	292.0	$	272.0


Supplemental cash flow information:
Cash paid for income taxes	$	0.5	$	3.8


Supplemental non-cash transactions:
Non-cash additions to intangible assets related to license agreements	$	—	$	16.1

See accompanying notes to condensed consolidated financial statements.

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, recently rebranded to Light & Wonder, Inc. (“Light & Wonder” and “Parent”), for the purposes 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 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, 88 Fortunes® Slots, Solitaire Pets™ Adventure, and Backgammon Live as well as other games in the hyper-casual space through our recent acquisition of Alictus Yazilim Anonim Şirketi (“Alictus”), such as Candy Challenge 3D™, Boss Life™, and Deep Clean™. Our games are available in various formats. We have one operating segment with one business activity, developing and monetizing 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”). 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 consolidated statements of income, consolidated statements of comprehensive income, condensed consolidated balance sheets, consolidated statements of changes in stockholders’ equity 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 2021 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 2021 Form 10-K, except as noted below.

New Accounting Guidance

There have been no recent accounting pronouncements or changes in accounting pronouncements since those described within the Notes of our 2021 10-K that are expected to have a material impact on our consolidated financial statements.

Revenue Recognition

We generate revenue from the sale of 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 we offer are internally branded franchises, original content and third-party branded games. With the acquisition of Alictus, we also generate revenue from providing advertising platforms with access to our game software platform, which facilitates the placement of advertising inventory.

Disaggregation of Revenue

We believe disaggregation of our revenue on the basis of platform and monetization type as well as the geographical locations of our players is appropriate because the nature of revenue 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 platform type:


	Three Months Ended
	March 31,
		2022		2021
Mobile in-app purchases		$	139.7	$	132.8
Web in-app purchases and other(1)		18.3		18.3

Total revenue		$	158.0	$	151.1
(1) Other primarily represents advertising revenue, which was not material in the periods presented.

The following table presents our revenue disaggregated based on the geographical location of our players:


	Three Months Ended
	March 31,
		2022		2021
North America(1)		$	144.9	$	138.5
International		13.1		12.6
Total revenue		$	158.0	$	151.1
(1) North America revenue includes revenue derived from the U.S., Canada and Mexico.

Contract Assets, Contract Liabilities and Other Disclosures

We receive customer payments based on the payment terms established in our contracts. For our in-app purchase revenue, 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:


	Accounts Receivable		Contract Assets(1)		Contract Liabilities(2)
Beginning of period balance	$	39.6	$	0.2	$	0.5
Balance as of March 31, 2022	42.8		0.2		0.5
(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 three months ended March 31, 2022 and 2021, we recognized $0.3 million and $0.5 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
		March 31, 2022	March 31, 2021
Apple		47.9%	46.8%
Google		34.6%	37.3%
Facebook		12.1%	12.1%


	Accounts Receivable Concentration as of
	March 31, 2022	December 31, 2021
Apple	45.9%	49.8%
Google	31.3%	33.9%
Facebook	10.4%	12.1%

Alictus Acquisition

On March 1, 2022, we acquired 80% of all issued and outstanding share capital of privately-held Alictus, a Turkey-based hyper-casual gaming studio. The remaining 20% will be acquired ratably for potential additional consideration payable annually based upon the achievement of specified revenue and earnings targets by Alictus during each of the five years following the acquisition date. The equity rights and privileges of the remaining Alictus shareholders lack the traditional rights and privileges associated with equity ownership and accordingly, the transaction will be accounted as if we acquired 100% of Alictus on the acquisition date. Any future payments associated with the acquisition of the remaining 20% will represent a redeemable non-controlling interest, with a payout ranging from a minimum of $— to a maximum payout of $200.0 million. The Alictus acquisition allows us to expand our business into the casual gaming market, growing our game pipeline and diversifying our revenue streams as we advance our strategy to be a diversified global game developer.

The total purchase consideration was $133.5 million, which included $96.0 million in cash, $1.5 million cash holdback related to working capital adjustments, $15.0 million of cash that was deposited into an escrow account, and redeemable non-controlling interest valued at $21.0 million at the acquisition date.

We accounted for this acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on respective estimated fair values. The estimated fair values of the acquired assets and assumed liabilities and resulting goodwill are subject to adjustment as we finalize our purchase price accounting, and such adjustments could be material.

We incurred $1.2 million of acquisition-related costs, which were recorded in Restructuring and other for the three months ended March 31, 2022.

The following table summarizes the preliminary allocation of the Alictus purchase price expected to be finalized by the fourth quarter of 2022:


		March 1, 2022
Cash and cash equivalents	$	4.7
Accounts receivable		5.4
Prepaid expenses and other current assets(1)		7.1
Intangible assets:
“Alictus” trade name, useful life of 5 years		4.4
Intellectual property (game content and related technology), useful life of 6 years		29.8
Goodwill		92.7
Total assets		144.1
Accounts payable and other current liabilities		3.6
Deferred tax liabilities		7.0
Total liabilities		10.6
Total consideration transferred	$	133.5
(1) Other current assets includes $6.1 million in Turkish lira-denominated time deposits, discussed in further detail within this note to the financial statements.

Cash, cash equivalents, accounts receivable and other current assets and most liabilities (other than as primarily related to deferred income taxes) were valued at the existing carrying values which approximated the estimated fair values. The estimated preliminary fair value of deferred income taxes was determined by applying the applicable enacted statutory tax rate to the temporary differences that arose on the differences between the financial reporting value and tax basis of the acquired assets and assumed liabilities.

Other current assets includes $6.1 million in Turkish lira-denominated time deposits, which include protection provided by the Turkish Ministry of Treasury and Finance against currency fluctuations as compared to the U.S. dollar. These time deposits have an original maturity term of six months, and are classified as short-term investments. They are measured at fair value under ASC 820 as Level 2 investments, and the change in fair value was not material between the acquisition date and March 31, 2022.

The fair value of intangible assets that have been preliminarily identified was determined using the relief from royalty method using Level 3 inputs in the hierarchy as established by ASC 820. The discount rate used in the valuation analysis was 18%, and the royalty rate used was 1% for the valuation of the “Alictus” trade name and 21% for the valuation of the acquired game content and related technology.

The fair value of the redeemable non-controlling interest was determined using a Monte Carlo simulation model, based on inputs that are classified as Level 3 under the ASC 820 fair value hierarchy using a discount rate ranging between 2% and 3%, and is primarily based on reaching certain revenue and earnings-based metrics, with a maximum payout of up to $200.0 million. We measure the fair value of redeemable non-controlling interest as of the acquisition date, and record such redeemable non-controlling interest as a liability on the Company’s consolidated balance sheet on the acquisition date. The fair value of the liability is remeasured when the contingency is resolved based on actual performance or settlement.

The factors contributing to the recognition of goodwill are based on enhanced financial and operational scale, games diversification, expected synergies, assembled workforce, and other strategic benefits. None of the resultant goodwill is expected to be deductible for income tax purposes.

The results of operations from Alictus have been included in our consolidated statement of income since the date of acquisition, and are not significant to our operations.

(2) Intangible Assets and Software, net and Goodwill

The following table presents certain information regarding our intangible assets and software:


	Gross Carrying Amount		Accumulated Amortization		Net Balance
Balance as of March 31, 2022
Intellectual property	$	78.4	$	(40.8)	$	37.6
Customer relationships	30.5		(22.6)		7.9
Software	29.8		(18.9)		10.9
Licenses	23.6		(5.7)		17.9
Brand names and other	11.0		(4.4)		6.6
Total intangible assets and software	$	173.3	$	(92.4)	$	80.9

Balance as of December 31, 2021
Intellectual property	$	49.6	$	(40.4)	$	9.2
Customer relationships	30.7		(22.1)		8.6
Software	28.1		(17.8)		10.3
Licenses

SEC Form 10-Q filed by SciPlay Corporation