(Registrant’s telephone number, including area ~~code:~~

~~(800) 833-7110~~

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
Common Stock, $0.001 par value	EVRI	New York Stock Exchange

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 ☒x No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ☒x 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.

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 ☒

As of ~~November 1, 2017,~~October 30, 2020, there were ~~67,366,979 shares~~85,928,252 shares of the registrant’s $0.001 par value per share common stock outstanding.

PART I: ~~FINANCI~~ALFINANCIAL INFORMATION

Item 1. Financial Statements.

EVERI HOLDINGS INC. AND SUBSIDIARIES

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenues

Games

$
55,452

$
56,218

$
165,832

$
158,660

Payments

191,870

165,959

561,257

483,286

Total revenues

247,322

222,177

727,089

641,946

Costs and expenses

Games cost of revenue (exclusive of
depreciation and amortization)

13,820

15,467

39,503

36,871

Payments cost of revenue (exclusive of
depreciation and amortization)

149,838

127,211

436,104

373,366

Operating expenses

29,463

26,996

87,235

87,735

Research and development

4,545

4,460

13,706

14,499

Depreciation

12,539

12,367

34,765

37,172

Amortization

17,322

24,104

52,086

70,887

Total costs and expenses

227,527

210,605

663,399

620,530

Operating income

19,795

11,572

63,690

21,416

Other expenses

Interest expense, net of interest income

23,368

24,815

72,306

74,548

Loss on extinguishment of debt

—

—

14,615

—

Total other expenses

23,368

24,815

86,921

74,548

Loss before income tax

(3,573
)

(13,243
)

(23,231
)

(53,132
)
Income tax provision (benefit)

716

(4,989
)

3,623

(20,930
)
Net loss

(4,289
)

(8,254
)

(26,854
)

(32,202
)
Foreign currency translation

602

(394
)

1,710

(1,314
)
Comprehensive loss

$
(3,687
)

$
(8,648
)

$
(25,144
)

$
(33,516
)
Loss per share

Basic

$
(0.06
)

$
(0.12
)

$
(0.40
)

$
(0.49
)
Diluted

$
(0.06
)

$
(0.12
)

$
(0.40
)

$
(0.49
)
Weighted average common shares outstanding

Basic

66,897

66,049

66,449

66,041

Diluted

66,897

66,049

66,449

66,041

Games cost of revenues(1)

FinTech cost of revenues(1)

(1) Exclusive of depreciation and amortization.

See notes to unaudited condensed consolidated financial statements.

At September 30,

At December 31,

2017

2016

ASSETS

Current assets

Cash and cash equivalents

$
108,471

$
119,051

Settlement receivables

127,443

128,821

Trade and other receivables, net of allowances for doubtful accounts of $5,427 and $4,701 at September 30, 2017 and December 31, 2016, respectively

44,971

56,651

Inventory

23,790

19,068

Prepaid expenses and other assets

22,538

18,048

Total current assets

327,213

341,639

Non-current assets

Property, equipment and leased assets, net

109,399

98,439

Goodwill

640,593

640,546

Other intangible assets, net

338,074

317,997

Other receivables

2,876

2,020

Other assets

7,450

7,522

Total non-current assets

1,098,392

1,066,524

Total assets

$
1,425,605

$
1,408,163

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities

Settlement liabilities

$
197,494

$
239,123

Accounts payable and accrued expenses

126,625

94,391

Current portion of long-term debt

8,200

10,000

Total current liabilities

332,319

343,514

Non-current liabilities

Deferred tax liability

60,785

57,611

Long-term debt, less current portion

1,130,671

1,111,880

Other accrued expenses and liabilities

25,634

2,951

Total non-current liabilities

1,217,090

1,172,442

Total liabilities

1,549,409

1,515,956

Commitments and contingencies (Note 12)

Stockholders’ deficit

Common stock, $0.001 par value, 500,000 shares authorized and 91,918 and 90,952 shares issued at September 30, 2017 and December 31, 2016, respectively

92

91

Convertible preferred stock, $0.001 par value, 50,000 shares authorized and 0 shares outstanding at September 30, 2017 and December 31, 2016, respectively

—

—

Additional paid-in capital

273,906

264,755

Accumulated deficit

(221,152
)

(194,299
)
Accumulated other comprehensive loss

(399
)

(2,109
)
Treasury stock, at cost, 24,872 and 24,867 shares at September 30, 2017 and December 31, 2016, respectively

(176,251
)

(176,231
)
Total stockholders’ deficit

(123,804
)

(107,793
)
Total liabilities and stockholders’ deficit

$
1,425,605

$
1,408,163

See notes to unaudited condensed consolidated financial statements.

Nine Months Ended September 30,

2017

2016

Supplemental cash disclosures

Cash paid for interest

$
59,894

$
55,465

Cash paid for income tax

$
760

$
1,124

Cash refunded for income tax

$
200

$
92

Supplemental non-cash disclosures

Accrued and unpaid capital expenditures

$
4,736

$
1,427

Accrued and unpaid placement fees

$
39,074

$
—

Accrued and unpaid contingent liability for acquisitions

$
—

$
(3,169
)
Transfer of leased gaming equipment to inventory

$
6,093

$
6,222

See notes to unaudited condensed consolidated financial statements.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY


	Common Stock— Series A			Additional				Accumulated Other				Total Stockholders’
	Number of Shares	Amount		Paid-in Capital		Accumulated Deficit		Comprehensive Loss		Treasury Stock		(Deficit) Equity

Balance, January 1, 2019	95,100	$	95	$	298,929	$	(229,457)	$	(1,998)	$	(176,464)	$	(108,895)
Net income	—	—		—		5,860		—		—		5,860
Foreign currency translation	—	—		—		—		504		—		504
Stock-based compensation expense	—	—		1,773		—		—		—		1,773
Exercise of options	864	1		4,970		—		—		—		4,971
Restricted share vesting and withholding	2	—		—		—		—		(15)		(15)
Balance, March 31, 2019	95,966	$	96	$	305,672	$	(223,597)	$	(1,494)	$	(176,479)	$	(95,802)
Net income	—	—		—		5,486		—		—		5,486
Foreign currency translation	—	—		—		—		(35)		—		(35)
Stock-based compensation expense	—	—		2,387		—		—		—		2,387
Exercise of options	764	1		4,491		—		—		—		4,492
Restricted share vesting and withholding	275	—		—		—		—		(965)		(965)
Balance, June 30, 2019	97,005	$	97	$	312,550	$	(218,111)	$	(1,529)	$	(177,444)	$	(84,437)
Net income	—	—		—		9,315		—		—		9,315
Foreign currency translation	—	—		—		—		(658)		—		(658)
Stock-based compensation expense	—	—		1,981		—		—		—		1,981
Exercise of options	263	—		1,825		—		—		—		1,825
Restricted share vesting and withholding	11	—		—		—		—		(41)		(41)
Balance, September 30, 2019	97,279	$	97	$	316,356	$	(208,796)	$	(2,187)	$	(177,485)	$	(72,015)


Balance, January 1, 2020	109,493	$	109	$	445,162	$	(212,940)	$	(819)	$	(177,524)	$	53,988
Net loss	—	—		—		(13,454)		—		—		(13,454)
Foreign currency translation	—	—		—		—		(1,958)		—		(1,958)
Stock-based compensation expense	—	—		4,173		—		—		—		4,173
Exercise of options	298	1		1,641		—		—		—		1,642
Restricted share vesting and withholding	15	—		—		—		—		(42)		(42)
Balance, March 31, 2020	109,806	$	110	$	450,976	$	(226,394)	$	(2,777)	$	(177,566)	$	44,349
Net loss	—	—		—		(68,481)		—		—		(68,481)
Foreign currency translation	—	—		—		—		304		—		304
Stock-based compensation expense	—	—		4,638		—		—		—		4,638
Issuance of warrants	—	—		502		—		—		—		502
Exercise of options	149	1		472		—		—		—		473
Restricted share vesting and withholding	579	—		—		—		—		(547)		(547)
Balance, June 30, 2020	110,534	$	111	$	456,588	$	(294,875)	$	(2,473)	$	(178,113)	$	(18,762)
Net loss	—	—		—		(878)		—		—		(878)
Foreign currency translation	—	—		—		—		359		—		359
Stock-based compensation expense	—	—		2,985		—		—		—		2,985
Exercise of options	287	—		1,394		—		—		—		1,394
Restricted share vesting and withholding	258	—		—		—		—		(508)		(508)
Balance, September 30, 2020	111,079	$	111	$	460,967	$	(295,753)	$	(2,114)	$	(178,621)	$	(15,410)

See notes to unaudited condensed consolidated financial statements.

In this filing, we refer to: (i) our unaudited condensed consolidated financial statements and notes thereto as our “Financial Statements,” (ii) our Unaudited Condensed Consolidated Statements of ~~Loss~~Operations and Comprehensive ~~Loss~~(Loss) Income as our “Statements of ~~Loss,~~Operations,” and (iii) our Unaudited Condensed Consolidated Balance Sheets as our “Balance ~~Sheets,~~Sheets.” ~~and our Unaudited Condensed Consolidated Statements of Cash Flows as our “Cash Flows.”~~

Everi Holdings Inc. ~~(formerly known as Global Cash Access Holdings, Inc.)~~ (“Everi Holdings,” ~~“Holdings”~~ or “Everi”) is a holding company, the assets of which are the issued and outstanding shares of capital stock of each of Everi Payments Inc. (“Everi FinTech” or “FinTech”) and Everi Games Holding Inc. ~~(formerly known as Multimedia Games Holding Company, Inc.) (“Everi Games Holding”)~~, which owns all of the issued and outstanding shares of capital stock of Everi Games Inc. ~~(formerly known as Multimedia Games, Inc.)~~ (“Everi Games” or “Games”~~) and Everi Payments Inc. (formerly known as Global Cash Access, Inc.) (“Everi Payments” or “Payments”~~). Unless otherwise indicated, the terms the “Company,” “we,” ~~“us”~~“us,” and “our” refer to Everi Holdings together with its consolidated subsidiaries.

Everi is ~~dedicated to providing video~~a leading supplier of imaginative entertainment and ~~mechanical reel gaming content and~~trusted technology solutions ~~integrated~~for the casino and digital gaming ~~payments~~industry. Everi’s mission is to transform the casino floor through innovative gaming and financial technology and loyalty solutions. With a focus on both land-based and digital gaming operators and players, the Company develops entertaining games and gaming machines, gaming systems and services that facilitate memorable player experiences, and is a preeminent and comprehensive provider of financial products and services that offer convenient and secure cash and cashless-based financial transactions, self-service player loyalty tools and applications, and intelligence software and other intuitive solutions that improve casino operational efficiencies and fulfill regulatory compliance requirements.

Everi Holdings reports its results of operations based on 2 operating segments: Games and ~~efficiency software~~FinTech.

Everi Games provides gaming operators with gaming technology products and services, including: (i) gaming machines, primarily comprising Class II and Class III slot machines placed under participation or fixed-fee lease arrangements or sold to casino ~~operators. Everi Games provides: (a) comprehensive content, electronic gaming units~~customers; (ii) providing and ~~systems for Native American and commercial casinos, including both Wide-Area Progressive (“WAP”) systems and the TournEvent® slot tournament solution; and (b)~~maintaining the central determinant ~~system~~systems for the video lottery terminals (“VLTs”) installed in the State of New ~~York.~~ York and similar technology in certain tribal jurisdictions; and (iii) business-to-business (“B2B”) and business-to-consumer (“B2C”) digital online gaming activities.

Everi ~~Payments provides: (a)~~FinTech provides gaming operators with financial technology products and services, including: (i) services and equipment that facilitate casino patrons’ self-service access to cash and cashless funding at gaming facilities via Automated Teller Machine (“ATM”) ~~cash~~debit withdrawals (cash dispensing and cashless), credit card cash access transactions ~~point of sale~~and point-of-sale (“POS”) debit card ~~transactions,~~purchase and cash access transactions; (ii) check ~~verification and~~ warranty services; ~~(b) fully integrated gaming industry kiosks that provide cash access~~(iii) self-service player loyalty enrollment and ~~related services; (c) products~~marketing equipment, including promotion management software and tools; (iv) software and services that improve credit decision making, automate cashier operations, and enhance patron marketing activities for gaming establishments; ~~(d)~~(v) equipment that provides cash access and other cash handling efficiency-related services; and (vi) compliance, audit, and data ~~solutions;~~solutions.

Impact of Coronavirus Disease 2019 (“COVID-19”) Pandemic

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility in the financial markets, increased unemployment levels, caused temporary, and ~~(e) online~~in certain cases, closures of many businesses. The gaming industry was not immune to these factors as our casino customers closed their gaming establishments, and as a result, our operations experienced significant disruptions. At the immediate onset of the COVID-19 pandemic, we were affected by various measures, including, but not limited to: the institution of social distancing and sheltering-in-place requirements in many states and communities, which significantly impacted demand for our products and services, and resulted in office closures, the furlough of a majority of our employees, the implementation of temporary base salary reductions for our employees and the implementation of a work-from-home policy.

During the second quarter of 2020, businesses began to adapt to social-distancing measures and various phases of reopening pursuant to government-mandated guidelines. As our gaming customers reopened, a number of their properties initially experienced an elevated level of activity as compared to what was originally anticipated. The revenues generated by this initial pent-up demand flattened to slightly below pre-COVID levels as more casinos reopened through the second quarter of 2020. Revenues then improved throughout the third quarter of 2020, though they still remained at pre-COVID levels. With a majority of our gaming customers reopening properties by the end of September 2020 and our results continuing to improve from the decreased activity rates in the second quarter, we have, among other measures: (i) returned nearly all of our furloughed employees to work on primarily a work-from-home basis; (ii) reinstated base compensation to pre-COVID levels for the employee base; (iii) reversed nearly all compensation reductions for both our Executives and Directors; and (iv) fully paid down the outstanding balance on our revolving line of credit.

It is unclear if and when customer volumes will return consistently to pre-COVID levels, or if in the future a resurgence of COVID-19 could result in the closure of casinos by federal, state, tribal and municipal governmental and regulatory agencies or by the casino operators themselves in an effort to contain the COVID-19 public health emergency or mitigate its impact; however, we continue to monitor the impacts of COVID-19 and we will make adjustments to our business accordingly to the extent the economic environment deteriorates.

In parallel, in connection with the uncertainty facing our customers as a result of COVID-19, we evaluated our business strategies in the second quarter of 2020 and implemented measures to reduce our ongoing operating costs. As a result of this evaluation, we permanently reduced our employee base, with most of the departures resulting from our furloughed employees, to accommodate the current and future operating needs of our customers and our business.

The impact of the COVID-19 pandemic also exacerbates the risks disclosed in our Annual Report, including, but not limited to: our ability to comply with the terms of our indebtedness, our ability to generate revenues, earn profits and maintain adequate liquidity, our ability to service existing and attract new customers, maintain our overall competitiveness in the market, the potential for significant fluctuations in demand for our services, overall trends in the gaming industry impacting our business, as well as potential volatility in our stock price, among other consequences such as cybersecurity exposure.

Results of Operations and Liquidity

To date, our operations have experienced revenue reductions and significant disruptions as a direct consequence of the circumstances surrounding the COVID-19 pandemic. This had a material adverse impact on our overall results of operations and financial condition for the current reporting period. As such, we have implemented a range of actions to maintain balance sheet flexibility and preserve liquidity as a result of the business disruption caused by the rapid nationwide spread of COVID-19, including, but not limited to:

•At the onset of COVID-19 pandemic:

•we completed the full draw down of our available capacity of $35.0 million under the Revolving Credit Facility in order to improve our liquidity and preserve financial flexibility in light of the uncertainty in our industry and the global economy as a result of COVID-19 (as discussed and defined in “Note 12 — Long-Term Debt”);

•we entered into a fourth amendment (the “Fourth Amendment”) to our existing Credit Agreement (as defined in “Note 12 — Long-Term Debt”), which among other things, amended our debt covenants to provide relief with respect to our senior secured leverage ratio (as discussed and defined in “Note 12 — Long-term Debt”);

•we also entered into a new credit agreement, which provides for a $125.0 million senior secured term loan, which is secured on a pari passu basis with the loans under our existing Credit Agreement. The entire amount was borrowed upon closing (as discussed and defined in “Note 12 — Long-term Debt”);

•our executive officers elected to accept significant reductions to their compensation during the pendency of the COVID-19 pandemic in order to better position the Company to withstand the challenging conditions that have caused global and domestic disruption in the current economic environment;

•our independent members of the Board of Directors of the Company elected to forgo their quarterly cash compensation for Board and related committee services;

•we furloughed a majority of our staff;

•we reduced the salaries of our employee-base from approximately 15% to 70%;

•we suspended certain employee benefits, such as providing a Company match on 401(k) contributions;

•we implemented a remote working environment;

•we canceled or delayed material capital expenditures;

•we suspended our share repurchases under our previously authorized repurchase program; and

•As of the end of the second quarter of 2020:

•we implemented a safe workplace return policy for those of our employees who return to our facilities;

•we returned most of our furloughed employees to work;

•we returned a portion of base compensation to our executives;

•we returned most base compensation to our employee-base;

•we returned a portion of cash compensation to our Board of Directors;

•we completed a reduction-in-force and incurred severance costs, among other expenses, of approximately $2.7 million; and

•we recorded a write-down of assets of approximately $11.0 million, of which $9.2 million and $1.8 million related to our Games and FinTech businesses, respectively, for certain of our trade receivables, inventory, prepaid expenses and other assets, fixed assets and other intangible assets that were not expected to be recoverable. This charge was reflected in Operating Expenses in our Statements of Operations. While we are unable to determine the nature, or amount, of further write-down charges, it is possible that we may record additional amounts to the extent we experience a decline in operations and financial performance in the future.

•As of the end of the third quarter of 2020:

•we have returned base compensation to our executives and employee-base;

•we have returned cash compensation to our Board of Directors; and

•we fully repaid the $35.0 million Revolving Credit Facility in light of improved results of operations and liquidity.

In late March 2020, the U.S. government enacted the Coronavirus Aid Relief and Economic Security Act (the “CARES Act”) in response to the COVID-19 pandemic. We have taken advantage of the following components contained within the CARES Act:

•Employee Retention Payroll Tax Credit: We are applying a credit against payroll taxes for 50% of eligible employee wages paid or incurred from March 13, 2020 to December 31, 2020. This employee retention payroll tax credit would be provided for as much as $10,000 of qualifying wages for each eligible employee, including health benefits;

•Employer Social Security Tax Payment Deferral: We are deferring payment ~~processing solutions~~of the employer portion of the social security taxes due on remaining payments and from enactment of the CARES Act through December 31, 2020, with 50% due by December 31, 2021 and 50% due by December 31, 2022; and

•Alternative Minimum Tax (“AMT”) Credit Refund: We are applying for ~~gaming operators in states that offer intrastate, Internet-based gaming and lottery activities.~~

a refund of our AMT tax credits as the CARES Act affords us the ability to accelerate the recovery of such credits.

2.	~~BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Our unaudited condensed consolidated financial statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Some of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made. The results for the three and nine months ended September 30, ~~2017~~2020 are not necessarily indicative of results to be expected for the full fiscal year. The Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto included in the 2019 Annual Report.

We evaluate the composition of our ~~Annual Report~~revenues to maintain compliance with SEC Regulation S-X Section 210.5-3, which requires us to separately present certain categories of revenues that exceed the quantitative threshold on ~~Form 10-K~~our Statements of Operations.

We evaluate the recognition of revenue based on the criteria set forth in Accounting Standards Codification (“ASC”) 606 — Revenue from Contracts with Customers and ASC 842 — Leases, as appropriate. We recognize revenue upon transferring control of goods or services to our customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We enter into contracts with customers that include various performance obligations consisting of goods, services, or combinations of goods and services. Timing of the transfer of control varies based on the nature of the contract. We recognize revenue net of any sales and other taxes collected from customers, which are subsequently remitted to governmental authorities and are not included in revenues or operating expenses. We measure revenue based on the consideration specified in a contract with a customer and adjust it, as necessary.

Disaggregation of Revenues

We disaggregate revenues based on the nature and timing of the cash flows generated by such revenues as presented in “Note 18 — Segment Information.”

Since our contracts may include multiple performance obligations, there is often a timing difference between cash collections and the satisfaction of such performance obligations and revenue recognition. Such arrangements are evaluated to determine whether contract assets and liabilities exist. We generally record contract assets when the timing of cash collections differs from when revenue is recognized due to contracts containing specific performance obligations that are required to be met prior to a customer being invoiced. We generally record contract liabilities when cash is collected in advance of us satisfying performance obligations, including those that are satisfied over a period of time. Balances of our contract assets and contract liabilities may fluctuate due to timing of cash collections.

The following table summarizes our contract assets and contract liabilities arising from contracts with customers (in thousands):


	Nine Months Ended September 30,
	2020		2019
Contract assets(1)
Balance at January 1 — current	$	8,634	$	6,821
Balance at January 1 — non-current	6,774		4,489
Total	15,408		11,310
Balance at September 30 - current	8,945		8,037
Balance at September 30 - non-current	7,545		4,049
Total	16,490		12,086
Increase	$	1,082	$	776
Contract liabilities(2)
Balance at January 1 — current	$	28,510	$	14,661
Balance at January 1 — non-current	354		809
Total	28,864		15,470
Balance at September 30 - current	34,846		28,827
Balance at September 30 - non-current	32		798
Total	34,878		29,625
Increase	$	6,014	$	14,155

(1) The current portion of contract assets is included within trade and other receivables, net, and the non-current portion is included within other receivables, net in our Balance Sheets.

(2) The current portion of contract liabilities is included within accounts payable and accrued expenses, and the non-current portion is included within other accrued expenses and liabilities in our Balance Sheets.

We recognized approximately $19.3 million and $10.7 million in revenue that was included in the beginning contract liability balance during the nine months ended September 30, 2020 and 2019, respectively.

Our products and services include electronic gaming devices, such as Native American Class II offerings and other electronic bingo products, Class III slot machine offerings, VLTs, B2B and B2C digital online gaming activities, accounting and central determinant systems, and other back office systems. We conduct our Games segment business based on results generated from the following major revenue streams: (i) Gaming Operations; (ii) Gaming Equipment and Systems; and (iii) Gaming Other.

We recognize our Gaming Operations revenue based on criteria set forth in ASC 842 or ASC 606, as applicable. The amount of lease revenue included in our Gaming Operations revenues and recognized under ASC 842 was approximately $35.9 million and $80.3 million for the ~~fiscal year~~three and nine months ended ~~December 31, 2016.~~

~~There have been no changes~~September 30, 2020, respectively and $36.6 million and $104.3 million for the three and nine months ended September 30, 2019, respectively.

Our FinTech products and services include solutions that we offer to gaming establishments to provide their patrons with cash access-related services, self-service player loyalty and marketing tools, and other information and regulatory compliance-related products and services. These solutions include: access to cash and cashless funding at gaming facilities via debit withdrawals (cash dispensing and cashless), credit card cash access transactions, and POS debit card purchase and cash access transactions; check warranty services; self-service ATMs and fully integrated kiosks and maintenance services; self-service player loyalty enrollment and marketing equipment, including promotion management software and tools; compliance, audit, and data software; casino credit data and reporting services; marketing and promotional offering subscription-based services; and other ancillary offerings. We conduct our ~~basis of presentation~~FinTech segment business based on results generated from the following major revenue streams: (i) Cash Access Services; (ii) Equipment; and ~~significant accounting policies since~~(iii) Information Services and Other.

Equipment revenues are derived from the ~~most recent filing~~sale of our ~~Annual Report on Form 10-K~~cash access and loyalty kiosks and related equipment and are accounted for under ASC 606, unless such transactions meet the definition of a sales type or direct financing lease, which are accounted for under ASC 842. We did not have any new cash access kiosk and related equipment sales contracts accounted for under ASC 842 during the three and nine months ended September 30, 2020. Sales contracts accounted for under ASC 842 were approximately $0.1 million and $2.7 million for the three and nine months ended September 30, 2019, respectively.

Our restricted cash primarily consists of: (i) funds held in connection with certain customer agreements; (ii) deposits held in connection with a sponsorship agreement; (iii) wide area progressive (“WAP”)-related restricted funds; and (iv) Internet-related cash access activities. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Balance Sheets that sum to the total of the same such amounts shown in the statement of cash flows for the nine months ended September 30, 2020 (in thousands).


	Classification on our Balance Sheets	At September 30, 2020		At December 31, 2019
Cash and cash equivalents	Cash and cash equivalents	$	235,407	$	289,870
Restricted cash - current	Prepaid expenses and other current assets	508		6,639
Restricted cash - non-current	Other assets	101		101
Total		$	236,016	$	296,610

Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations. We test for impairment annually on a reporting unit basis, at the beginning of our fourth fiscal ~~year ended December 31, 2016.~~

quarter and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The annual impairment test is completed using either: a qualitative “Step 0” assessment based on reviewing relevant events and circumstances; or a quantitative “Step 1” assessment, which determines the fair value of the reporting unit, using both an income approach that discounts future cash flows based on the estimated future results of our reporting units and a market approach that compares market multiples of comparable companies to determine whether or not any impairment exists. To the extent the carrying amount of a reporting unit is less than its estimated fair value, an impairment charge is recorded.

The evaluation of impairment of goodwill requires the use of estimates about future operating results. Changes in forecasted operations can materially affect these estimates, which could materially affect our results of operations and financial condition. The estimates of expected future cash flows require significant judgment and are based on assumptions we determined to be reasonable; however, they are unpredictable and inherently uncertain, including, estimates of future growth rates, operating margins and assumptions about the overall economic climate as well as the competitive environment within which we operate. There can be no assurance that our estimates and assumptions made for purposes of our impairment assessments as of the time of evaluation will prove to be accurate predictions of the future. If our assumptions regarding business plans, competitive environments, or anticipated growth rates are not correct, we may be required to record non-cash impairment charges in future periods, whether in connection with our normal review procedures periodically, or earlier, if an indicator of an impairment is present prior to such evaluation.

Our reporting units are identified as operating segments or one level below. Reporting units must: (i) engage in business activities from which they earn revenues and incur expenses; (ii) have operating results that are regularly reviewed by our segment management to ascertain the resources to be allocated to the segment and assess its performance; and (iii) have discrete financial information available. As of September 30, 2020, our reporting units included: (i) Games; (ii) Cash Access Services; (iii) Kiosk Sales and Services; (iv) Central Credit Services; (v) Compliance Sales and Services; and (vi) Player Loyalty Sales and Services.

Fair Values of Financial Instruments

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument.

The carrying amount of cash and cash equivalents, restricted cash, settlement receivables, short-term trade ~~receivables,~~and other receivables, settlement liabilities, accounts payable, and accrued expenses ~~approximates~~approximate fair value due to the short-term maturities of

these instruments. The fair value of the long-term trade and loans receivable is estimated by discounting expected future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and remaining maturities. The fair value of the long-term accounts payable is estimated by discounting the total obligation using the appropriate interest rate. As of September 30, 2020 and December 31, 2019, the fair value of trade and loans receivable approximated the carrying value due to contractual terms generally being slightly over 12 months. The fair value of our borrowings ~~are~~is estimated based on various inputs to determine a market price, such as: market demand and supply, size of tranche, maturity, and similar instruments trading in more active markets. The estimated fair value and outstanding balances of our borrowings are as follows ~~(in~~(dollars in thousands).

Our borrowings were reported at fair value using a Level ~~1 input as there were~~2 inputs based on quoted market prices ~~in markets that were considered active as of September 30, 2017.~~

The term loan was reported at fair value using a Level 1 input as there were quoted prices in markets that were considered active as of December 31, 2016. The senior secured notes were reported at fair value using a Level 3 input as there was no market activity or observable inputs as of December 31, 2016. The senior unsecured notes were reported at fair value using a Level 1 input as there were quoted prices in markets that were considered active as of December 31, 2016.

for these securities.

Reclassification of Prior Year Balances

Reclassifications were made to the prior-period Financial Statements to conform to the current period ~~presentation.~~

presentation where applicable.

Recent Accounting Guidance

Recently Adopted Accounting Guidance

~~In January 2017,~~


Standard	Description	Date of Adoption	Effect on Financial Statements
Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments	This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects lifetime expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.	January 1, 2020	This guidance primarily impacts our trade and other receivables, including those related to revenues from contracts with customers that may contain contract assets with respect to performance obligations that are satisfied for which the customers have not yet been invoiced. We adopted this guidance using the modified retrospective method. The adoption of ASC 326 did not have a material effect on our Financial Statements and did not result in a cumulative-effect adjustment. Refer to “Note 6 — Trade and Other Receivables” for further discussion.
ASU No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract	This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).	January 1, 2020	The adoption of this ASU did not have a material effect on our Financial Statements or on our disclosures.
ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”).	March 12, 2020	The adoption of this ASU did not have a material effect on our Financial Statements or on our disclosures.

Recent Accounting Guidance Not Yet Adopted


Standard	Description	Date of Planned Adoption	Effect on Financial Statements
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	This ASU simplifies the accounting for income taxes by removing certain exceptions for investments, intraperiod allocations, and interim calculations, and adds guidance to reduce the complexity of applying Topic 740.	January 1, 2021	We are currently evaluating the impact of adopting this ASU on our Financial Statements and our disclosures; however, we do not expect the impact to be material.

We do not anticipate recently issued accounting guidance to have a significant impact on our Financial Statements as of September 30, 2020.

We determine if a contract is, or contains, a lease at the ~~Financial Accounting Standards Board~~inception, or modification, of a contract based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control over the use of an asset is predicated upon the notion that a lessee has both the right to (i) obtain substantially all of the economic benefit from the use of the asset; and (ii) direct the use of the asset.

Operating lease right-of-use (“~~FASB”~~ROU”) ~~issued Accounting Standards Update (“ASU”) No. 2017-04, which provides updated guidance~~assets and liabilities are recognized based on the ~~goodwill impairment test~~present value of minimum lease payments over the expected lease term at commencement date. Lease expense is recognized on a straight-line basis over the expected lease term. Our lease arrangements have both lease and non-lease components, and we have elected the practical expedient to account for the lease and non-lease elements as a single lease.

Certain of our lease arrangements contain options to renew with terms that generally have the ability to extend the lease term to a range of approximately 1 to 10 years. The exercise of lease renewal options is generally at our sole discretion. The expected lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such option. The depreciable life of leased assets and leasehold improvements are limited by the expected term of such assets, unless there is a transfer of title or purchase option reasonably certain to be exercised.

The Company leases real estate and vehicles under operating and finance leases, respectively. We enter into operating lease agreements for real estate purposes that generally consist of buildings for office space and warehouses for manufacturing purposes. Certain of our lease agreements consist of rental payments that are periodically adjusted for inflation. Our lease agreements do not contain material residual value guarantees or material restrictive covenants. Our lease agreements do not generally provide explicit rates of interest; therefore, we use our incremental collateralized borrowing rate, which is based on a fully collateralized and fully amortizing loan with a maturity date the same as the length of the lease that is based on the information available at the commencement date to determine the present value of lease payments. Leases with an expected term of 12 months or less (short-term) are not accounted for on our Balance Sheets.

Supplemental balance sheet information related to our operating leases is as follows (in thousands):


	Classification on our Balance Sheets	At September 30, 2020		At December 31, 2019
Assets
Operating lease ROU assets	Other assets, non-current	$	16,479	$	12,257
Finance lease ROU assets(2)	Other assets, non-current	$	522	$	0
Liabilities(1)
Current operating lease liabilities	Accounts payable and accrued expenses	$	5,402	$	5,824
Current finance lease liabilities	Accounts payable and accrued expenses	$	143	$	0
Non-current operating lease liabilities	Other accrued expenses and liabilities	$	15,491	$	9,628
Non-current finance lease liabilities	Other accrued expenses and liabilities	$	399	$	0

(1) The amount of operating lease liabilities recorded on our Balance Sheets upon the adoption of ASC 842 on January 1, 2019 was approximately $18.0 million.

(2) Presented net of accumulated depreciation.

Supplemental cash flow information related to leases is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Cash paid for:
Long- and short-term operating leases	$	2,076	$	1,869	$	6,325	$	5,602
Finance leases	$	39	$	0	$	44	$	0
Right-of-use assets obtained in exchange for lease obligations:
Operating leases(1)	$	7,594	$	0	$	8,454	$	14,595	(2)
Finance leases(1)	$	310	$	0	$	592	$	0

(1) The amounts are presented net of current year terminations and exclude amortization for the period.

(2) The amount includes approximately $13.7 million of operating lease ROU assets obtained in exchange for existing lease obligations due to the adoption of ASC 842 and $0.9 million of operating lease ROU assets obtained in exchange for new lease obligations entered into during the nine months ended September 30, 2019.

Other information related to lease terms and discount rates is as follows:


	At September 30, 2020		At December 31, 2019
Weighted Average Remaining Lease Term (in years):
Operating leases	4.21		2.96
Finance leases	3.62		—
Weighted Average Discount Rate:
Operating leases	5.25	%	5.25	%
Finance leases	3.85	%	0

Components of lease expense, which are included in operating expenses, are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating Lease Cost:
Operating lease cost	$	1,475	$	1,354	$	4,212	$	3,629
Variable lease cost	$	421	$	401	$	1,333	$	1,240
Finance Lease Cost:
Amortization of ROU assets	$	47	$	0	$	70	$	0
Interest expense on lease liabilities	$	5	$	0	$	8	$	0

Maturities of lease liabilities are summarized as follows as of September 30, 2020 (in thousands):


Year Ending December 31,	Operating Leases		Finance Leases
2020 (excluding the nine months ended September 30, 2020)	$	1,516	$	40
2021	6,181		161
2022	5,501		161
2023	3,946		161
2024	2,977		57
Thereafter	3,331		0
Total future minimum lease payments	$	23,452	$	580
Amount representing interest	2,559		38
Present value of future minimum lease payments	$	20,893	$	542
Current lease obligations	5,402		143
Long-term lease obligations	$	15,491	$	399

We generate lease revenues primarily from our gaming operations activities, with a majority of our leases being month-to-month relationships. Under these arrangements, we retain ownership of the electronic gaming machines (“EGMs”) installed at customer facilities. We receive recurring revenues based on a percentage of the net win per day generated by the leased gaming equipment or a fixed daily fee. Such revenues are generated daily and are limited to the lesser of the net win per day generated by the leased gaming equipment or the fixed daily fee and the ~~method by which an entity recognizes an impairment charge. These amendments eliminate Step 2~~lease payments that have been collected from the ~~current goodwill impairment process~~lessee. Certain of our leases have terms and ~~require~~conditions with options for a lessee to purchase the underlying assets. The cost of property and equipment the Company is leasing to third-parties as of September 30, 2020 is approximately $203.2 million, which includes accumulated depreciation of approximately $124.7 million.

We did 0t have any new sales transactions that an entity recognize an impairment charge equal to the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Additionally, a company should also take into consideration income tax effects from tax deductible goodwill on the carrying amount of a reporting unit when recording an impairment loss. The new standard is effectivequalified for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This guidance will be applied using a prospective approach. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted this guidance in the current period. As no indicators of impairment were identified for our goodwillsales-type lease accounting treatment during the three and nine months ended September 30, ~~2017, this ASU did not impact~~2020. We generated lease revenue from sales-type leases in the FinTech segment in the amount of approximately $0.1 million and $2.7 million for the three and nine months ended September 2019, respectively. Our interest income recognized in connection with sales-type leases executed in the prior periods is immaterial.

Supplemental balance sheet information related to our ~~Financial Statements.~~

Insales-type leases is as follows (in thousands):


	Classification on our Balance Sheets	At September 30, 2020		At December 31, 2019
Assets
Net investment in sales-type leases — current	Trade and other receivables, net	$	885	$	874
Net investment in sales-type leases — non-current	Other receivables	$	640	$	1,288

4. BUSINESS COMBINATIONS

We had no material acquisitions for the three and nine months ended September 30, 2020.

On March ~~2016,~~8, 2019, we acquired certain assets of Atrient, Inc. (“Atrient” or the ~~FASB issued ASU No. 2016-09, which simplifies several aspects~~“Seller”), a privately held company that develops and distributes hardware and software applications to gaming operators to enhance gaming patron loyalty, pursuant to an asset purchase agreement. Under the terms of the ~~accounting for share-based payment transactions, including~~asset purchase agreement, we paid the ~~accounting for income taxes, statutory tax withholding requirements~~Seller $20.0 million at the closing of the transaction and ~~classification~~an additional $10.0 million during the nine months ended September 30, 2020 with another $10.0 million being due two years following the date of closing. The related liabilities were recorded at fair value on the ~~statement~~acquisition date as part of the consideration transferred and were included in accounts payable and accrued expenses as of September 30, 2020 and accounts payable and accrued expenses and other accrued expenses and liabilities as of December 31, 2019.

In addition to the cash ~~flows.~~payments, we have recorded approximately $9.0 million in contingent consideration liabilities based upon the achievement of certain revenue targets with a maximum payout of up to $10.0 million. The new standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This guidance will be applied either prospectively, retrospectively or using a modified retrospective transition method, dependingrelated liabilities were recorded at fair value on the ~~area covered in this update. Early adoption is permitted. We adopted this guidance~~acquisition date as part of the consideration transferred and are remeasured each reporting period. The inputs used to measure the fair value of our liabilities are categorized as Level 3 in the ~~current period on a prospective basis. As~~fair value hierarchy. Contingent consideration liabilities as of September 30, 2017, the adoption of ASU No. 2016-09 has not materially impacted our Financial Statements. With respect to forfeitures, the Company will continue to estimate the number of awards expected to be forfeited 2020 and December 31, 2019 were approximately $9.8 million and $9.4 million, respectively, and were included in ~~accordance with our existing accounting policy. In addition, our Cash Flows present excess tax benefits as operating activities in the current period, as the prior period was not adjusted.~~

~~In July 2015, the FASB issued ASU No. 2015-11, which provides guidance on the measurement of inventory value. The amendments require an entity to measure in scope inventory at the lower of cost~~accounts payable and ~~net realizable value. Net realizable~~

value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. The amendments do not apply to inventory that is measured using LIFO or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (“FIFO”) or average cost. The pronouncement is effective for annual periods beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. We adopted this guidance in the current period. This ASU did not have a material impact on our Financial Statements.

~~Recent Accounting Guidance Not Yet Adopted~~

In May 2017, the FASB issued ASU No. 2017-09 to clarify which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. An entity is required to account for the effects of a modification unless all of the following conditions are met: (i) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or value using an alternative measurement method) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; (ii) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted in the first period of the year this guidance is adopted. We are currently evaluating the impact of adopting this guidance on our Financial Statements.

~~In January 2017, the FASB issued ASU No. 2017-01, which clarifies the definition of a business. The amendments affect all companies~~accrued expenses and other ~~reporting organizations that must determine whether they have acquired or sold a business. The amendments are intended to help companies~~accrued expenses and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a prospective approach as of the beginning of the first period of adoption. Early adoption is permitted for acquisitions, or disposals that occur before the issuance date or effectiveness date of the amendments when the transaction has not been reportedliabilities in ~~financial statements that have been issued or made available for issuance. We are currently evaluating the impact of adopting this guidance on our Financial Statements.~~

In October 2016, the FASB issued ASU No. 2016-18, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a retrospective approach to each period presented. Early adoption is permitted and adoption in an interim period should reflect adjustments as of the beginning of the fiscal year that includes that interim period. We are currently evaluating the impact of adopting this guidance on our Financial Statements.

In October 2016, the FASB issued ASU No. 2016-16, which provides updated guidance on the recognition of the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs, and this eliminates the exception for an intra-entity transfer of such assets. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a modified retrospective approach through a cumulative-effective adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted during the first interim period of the year this guidance is adopted. We are currently evaluating the impact of adopting this guidance on our Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15, which provides updated guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a

retrospective approach. If it is impracticable to apply the amendments retrospectively for some of the issues within this ASU, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted including adoption in an interim period. We are currently evaluating the impact of adopting this guidance on our Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, which provides updated guidance on credit losses for financial assets measured at amortized cost basis and available-for sale debt securities. The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This guidance will be applied using a modified retrospective approach for the cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective and using a prospective approach for debt securities for which any other-than-temporary impairment had been recognized before the effective date. Early adoption is permitted for fiscal years beginning after December 15, 2018. We are currently evaluating the impact of adopting this guidance on our Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, which provides guidance on the accounting treatment of leases. The ASU establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. While we are currently assessing the impact of this ASU on our Financial Statements, we expect the primary impact to our consolidated financial position upon adoption will be the recognition, on a discounted basis, of our minimum commitments under noncancelable operating leases on our Balance Sheets ~~which will result~~as of September 30, 2020 and December 31, 2019, respectively.

Micro Gaming Technologies, Inc.

On December 24, 2019, we acquired certain assets of Micro Gaming Technologies, Inc. (“MGT”), a privately held company that develops and distributes kiosks and software applications to gaming patrons to enhance patron loyalty, in an asset purchase agreement. The acquired assets consist of existing contracts with gaming operators, technology, and intellectual property intended to allow us to provide gaming operators with self-service patron loyalty functionality delivered through stand-alone kiosk equipment and a marketing platform that manages and delivers gaming operators marketing programs through these patron interfaces. This acquisition further expands our financial technology player loyalty offerings within our FinTech segment. Under the ~~recording of right of use assets and lease obligations and are currently discussed in “Note 12 — Commitments and Contingencies.”~~

In May 2014, the FASB issued ASU No. 2014-09, which creates FASB Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” and supersedes ASC Topic 605, “Revenue Recognition”. The guidance replaces industry-specific guidance and establishes a single five-step model to identify and recognize revenue. The core principleterms of the ~~guidance is that an entity should recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects~~asset purchase agreement, we paid MGT $15.0 million at the consideration to which an entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires the entity to disclose further quantitative and qualitative information regarding the nature and amount of revenues arising from contracts with customers, as well as other information about the significant judgments and estimates used in recognizing revenues from contracts with customers. The guidance in ASU 2014-09 was further updated by ASU 2016-08 in March 2016, which provides clarification on the implementationclosing of the ~~principal versus agent considerations in ASU 2014-09. In~~transaction and per the original agreement, additional $5.0 million was due by April ~~2016, the FASB issued ASU 2016-10, which provides clarification on the implementation~~1, 2020 with a final payment of ~~performance obligations and licensing in ASU 2014-09. In May 2016, the FASB issued ASU 2016-11, which amends guidance provided in~~$5.0 million due two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force meeting over various topics relating to ASU 606. In May 2016, the FASB issued ASU 2016-12, which clarified various topics in ASU 606. In December 2016, the FASB issued ASU 2016-20, which clarified additional topics in ASU 606. This guidance was originally effective for interim and annual reporting periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU No. 2015-14, which extended the effective date to interim and annual periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2015, including interim reporting periods within that reporting period. This guidance may be adopted retrospectively or under a modified retrospective method where the cumulative effect is recognized atyears following the date of ~~initial application.~~

~~We have performed a review~~closing. In light of the ~~requirements~~COVID-19 pandemic, we entered into an amendment to the asset purchase agreement allowing us to remit the additional $5.0 million by July 1, 2020, which we paid in June 2020, with a final payment of $5.0 million due by July 1, 2021. The related liabilities were recorded at fair value on the acquisition date as part of the ~~standard~~consideration transferred and ~~identified our major revenue streams~~were included in accounts payable and accrued expenses and other accrued expenses and liabilities as of September 30, 2020 and December 31, 2019 for the ~~anticipated impact to each of them:~~

~~Major Revenue Stream~~		~~Preliminary Expected Impact Upon Adoption~~

~~Games Segment:~~

~~Game Sales~~		~~We expect revenue recognition to be consistent with our current practices, however, there may be some differences as we continue to evaluate the implications.~~

~~Game Operations~~		We expect revenue recognition to be consistent with our current practices, however, with respect to our WAP offering(s), for which we initiated this year, we will be required to net the direct costs with Games revenues as opposed to our existing practice of recording those amounts to Games cost of revenues. WAP jackpot expense was approximately $0.1 million and $0.3 million for the three and nine months ended September 30, 2017, respectively.

~~Payments Segment:~~

~~Cash Advance, ATM and Check Services~~		We generally expect revenue recognition to be consistent with our current practices, however, there may potentially be significant differences as we continue to evaluate the implications specifically related to our reporting these revenues on a gross versus net basis. As such, there will be no effect on operating income, net loss, cash flows or the timing of revenues recognized and costs incurred. In addition, there may be changes to the Kiosk Sales and Services and Compliance Sales and Services offerings that impact cash advance, ATM and check services revenue streams as we continue to evaluate the revenue recognition standard.

~~Central Credit~~		~~We expect revenue recognition to be consistent with our current practices, however, there may be differences as we continue to evaluate the implications.~~

~~Kiosk Sales and Services~~		~~We expect to encounter some level of change to our revenue recognition practices for these revenue streams under the new guidance, however, the amounts are~~current and non-current portions, respectively. The total consideration for this acquisition was approximately $25.0 million. The acquisition did not ~~anticipated to be material as we continue to evaluate the implications.~~

~~Compliance Sales and Services~~		We expect to encounter some level of change to our revenue recognition practices for these revenue streams under the new guidance, however, the amounts are not anticipated to be material as we continue to evaluate the implications.

Currently, we do not expect our Games or certain of our Payments revenues to be materially impacted by the implementation of this guidance; however, we continue to evaluate certain of our other Payments-related revenue streams as there may be a potentially significant impact, depending on our final interpretation of the accounting guidance. More specifically, based on the transition guidance related to the new revenue recognition standard, we are in the process of determining if our cash advance, ATM and check services revenue streams will be required to be reported “net of transaction price” rather than our current gross revenue presentation basis. Under the existing Topic 605, certain factors that supported our gross reporting position have been eliminated in the new Topic 606. In addition, our understanding of the new transition guidance, as it specifically pertains to payments from customers, may further require us to report certain of these Payments-related revenue streams on a net presentation basis. If our conclusions, in accordance with GAAP, support a net reporting of these specific revenue streams, this will have a significant impact on our ~~revenues, cost~~results of ~~revenues~~operations or financial condition.

The estimates and ~~margins~~assumptions incorporated in accounting for the ~~affected revenue streams, however, there will be no effect on operating income, net loss, cash flows or~~transaction included the ~~timing of revenues recognized and costs incurred.~~

~~As we continue to take the necessary measures of preparedness in connection with the adoption of the new revenue recognition standard, we continue to do the following:~~

~~Evaluate our revenue streams to determine the extent, if any, of the changes to the~~projected timing and amount of ~~revenue recorded in each reporting period.~~

~~Review our existing accounting policies, procedures~~future cash flows and ~~internal controls to further determine the impact of the new standard on our Financial Statements.~~

Prepare the enhanced disclosures and updates to our revenue recognition policies to identify performance obligations to customers and that will require significant judgment in both measurement and recognition.

~~Review in detail our sales contract terms and conditions to determine the necessary adjustments, if any.~~

~~Monitor the activity of the FASB and the transition resource group as it relates to specific interpretive guidance that may impact us.~~

~~We may identify other impacts from the implementation of this guidance as we continue our assessment. We expect to adopt this guidance using the modified retrospective method beginning~~discount rates reflecting risk inherent in the ~~first quarter~~future cash flows. The estimated fair values of ~~2018.~~

3.	~~BUSINESS COMBINATIONS~~

~~We account for business combinations in accordance with ASC 805, which requires that the identifiable~~ assets acquired and liabilities assumed and resulting goodwill are subject to adjustment as the Company finalizes its purchase price accounting. The significant items for which a final fair value has not been determined include, but are not limited to: the valuation and estimated useful lives of intangible assets, contract liabilities, including deferred and unearned revenues, and deferred income taxes. We do not expect our fair value determinations to materially change; however, there may be differences between the amounts recorded at ~~their estimated fair values on~~ the ~~acquisition~~closing date ~~separately from goodwill, which is the excess~~ of the transaction and the final fair value analysis, which we expect to complete no later than the fourth quarter of 2020.

The financial results included in our Statements of Operations for the three and nine months ended September 30, 2020 reflected revenues of approximately $3.1 million and $6.9 million, respectively, attributed to the MGT business. As a result of the ~~purchase price over~~integration of the ~~fair values of these identifiable assets and liabilities. We include the results of operations of an~~ acquired business into our existing player loyalty operations during the current period, presentation of net income contributed by MGT is impracticable. Acquisition-related costs incurred during the three and nine months ended September 30, 2020 were not material.

The unaudited pro forma financial data with respect to the revenue and earnings as if the MGT acquisition occurred on January 1, 2019 would reflect revenues of ~~the acquisition date. We had no material acquisitions~~approximately $138.0 million and $399.0 million for the three and nine months ended September 30, ~~2017~~2019, respectively, and ~~2016.~~

net income of approximately $9.2 million and $20.3 million for the three and nine months ended September 30, 2019, respectively.

4.	~~FUNDING AGREEMENTS~~

~~Contract Cash Solutions Agreement~~

~~Our Contract Cash Solutions Agreement~~

5. FUNDING AGREEMENTS

We have commercial arrangements with ~~Wells Fargo Bank, N.A. (“Wells Fargo”) allows us to use funds owned by Wells Fargo~~third-party vendors to provide ~~the currency needed~~cash for ~~normal operating requirements for~~certain of our ATMs. For the use of these funds, we pay ~~Wells Fargo~~ a cash usage fee on either the average daily balance of funds utilized multiplied by a contractually defined cash usage rate or the amounts supplied multiplied by a contractually defined cash usage rate. These cash usage fees, reflected as interest expense within the Statements of ~~Loss,~~Operations, were ~~$1.2~~approximately $0.7 million and ~~$3.5~~$2.5 million for the three and nine months ended September 30, ~~2017,~~2020, respectively, and ~~$0.7~~approximately $1.8 million and ~~$2.3~~$5.5 million for the three and nine months ended September 30, ~~2016,~~2019, respectively. We are exposed to interest rate risk to the extent that the applicable ~~London Interbank Offered Rate (“LIBOR”) increases.~~

rates increase.

Under ~~this agreement, all~~these agreements, the currency supplied by ~~Wells Fargo~~third-party vendors remains ~~the~~their sole property ~~of Wells Fargo at all times~~ until ~~it is dispensed, at which time Wells Fargo obtains an interest in~~ the ~~corresponding settlement receivable which is recorded on a net basis.~~funds are dispensed. As these funds are not our assets, supplied cash is not reflected ~~on the~~in our Balance Sheets. The outstanding balances of ATM cash utilized by us from ~~Wells Fargo~~these third parties were ~~$226.6~~approximately $301.6 million and ~~$285.4~~$292.6 million as of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.

We are responsible for any losses of cash in the ATMs under this agreement, and we ~~self‑insure~~self-insure for this type of risk. ~~We incurred~~There were no material losses ~~related to this self‑insurance~~ for the three and nine months ended September 30, ~~2017~~2020 and ~~2016.~~

~~Site-Funded ATMs~~

We operate ATMs at certain customer gaming establishments where the gaming establishment provides the cash required for the ATM operational needs. We are required to reimburse the customer for the amount of cash dispensed from these site-funded ATMs. The site-funded ATM liability included within settlement liabilities in the accompanying Balance Sheets was $134.1 million and $151.0 million as of September 30, 2017 and December 31, 2016, respectively.

~~Prefunded Cash Access Agreements~~

Due to certain regulatory requirements, some international gaming establishments require prefunding of cash to cover all outstanding settlement amounts in order for us to provide cash access services to their properties. We enter into agreements with these operators for which we supply our cash access services for their properties. Under these agreements, we maintain sole discretion to either continue or cease operations as well as discretion over the amounts prefunded to the properties and may request amounts to be refunded to us, with appropriate notice to the operator, at any time. The initial prefunded amounts and subsequent amounts from the settlement of transactions are deposited into a bank account that is to be used exclusively for cash access services, and we maintain the right to monitor all transaction activity in that account. The total amount of prefunded cash outstanding was approximately $9.3 million and $8.5 million at September 30, 2017 and December 31, 2016, respectively, and is included in prepaid expenses and other assets on our Balance Sheets.

2019.

5.	~~TRADE AND OTHER RECEIVABLES~~

6. TRADE AND OTHER RECEIVABLES

Trade and ~~loans~~other receivables represent short-term credit granted to customers ~~as well as~~and long-term loans receivable onin connection with our ~~games, fully integrated kiosks~~Games and FinTech equipment and compliance products. Trade and loans ~~receivables~~receivable generally do not require collateral. The balance of trade and loans ~~receivables~~receivable consists of outstanding balances owed to us by gaming ~~establishments and casino patrons.~~establishments. Other receivables include income ~~taxes~~tax receivables and other miscellaneous receivables.

The balance of trade and other receivables consisted of the following (in thousands):

At September 30,

At December 31,

2017

2016

Trade and other receivables, net

Games trade and loans receivables

$
36,837

$
44,410

Payments trade and loans receivables

10,214

12,337

Other receivables

796

1,924

Total trade and other receivables, net

$
47,847

$
58,671

Less: non-current portion of receivables

2,876

2,020

Total trade and other receivables,
current portion

$
44,971

$
56,651


	At September 30,		At December 31,
	2020		2019
Trade and other receivables, net
Games trade and loans receivable	$	42,774	$	51,651
FinTech trade and loans receivable	20,989		23,723
Contract assets	16,490		15,408
Insurance settlement receivable(1)	7,650		7,650
Other receivables	787		3,977
Net investment in sales-type leases	1,525		2,162
Total trade and other receivables, net	90,215		104,571
Non-current portion of receivables
Games trade and loans receivable	(1,769)		(1,018)
FinTech trade and loans receivable	(4,264)		(7,581)
Contract assets	(7,545)		(6,774)
Net investment in sales-type leases	(640)		(1,288)
Total non-current portion of receivables	(14,218)		(16,661)
Total trade and other receivables, current portion	$	75,997	$	87,910

(1) Refer to “Note 13 — Commitments and Contingencies” for a discussion on the insurance settlement receivable.

Allowance for Credit Losses

As discussed in “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies,” we adopted ASC 326 effective January 1, 2020 using the modified retrospective approach such that the new guidance applies to the reporting periods following the adoption date with prior period presentation not being impacted. The adoption of ASC 326 did not have a material impact on our Financial Statements and did not result in a cumulative-effect adjustment as of the adoption date. Our operations were not significantly impacted, both for short- and long-term accounts receivable, due to the following:

•Our FinTech business acts as a merchant of record for settlement transactions for our cash access related customers wherein cash is held by the Company; therefore, we generally have the ability to withhold the necessary funds from customers to satisfy the outstanding receivables associated with equipment, information and other products and services.

•Our Games business sells EGMs to gaming establishments on a relatively short-term basis and collections are reasonably certain based on historical experience, financial stability of our customers, and lack of concentration of our receivables. The material portion of long-term loans receivable balance is fully collateralized, and therefore, does not represent a risk of credit loss. The risk of credit loss is further reduced by the fact that both segments generally share the same top customers such that sales made by the Games business to the existing FinTech customers are secured by our ability to withhold the necessary funds through the FinTech revenue arrangements.

We continually evaluate the collectability of outstanding balances and maintain an allowance for credit losses related to our trade and other receivables and notes receivable that have been determined to have a high risk of uncollectability, which represents our best estimates of the current expected credit losses to be incurred in the future. To derive our estimates, we analyze historical collection trends and changes in our customer payment patterns, current and expected conditions and market trends along with our operating forecasts, concentration, and creditworthiness when evaluating the adequacy of our allowance for credit losses. In addition, with respect to our check warranty receivables, we are exposed to risk for the losses associated with warranted items that cannot be collected from patrons issuing these items. We evaluate the collectability of the outstanding balances and establish a reserve for the face amount of the current expected credit losses on our receivables. The allowance for doubtful accounts for trade receivables was $5.4 million and $4.7 million as of September 30, 2017 and December 31, 2016, respectively, and includes reserves for both Games and Paymentsrelated to these receivables. The provision for doubtful accounts receivable is ~~generally~~ included within operating expenses and the check warranty loss reserves are included within cash access services cost of revenues in the Statements of ~~Loss. We also have a provision~~Operations.

The activity in our allowance for ~~doubtful accounts specifically associated with our outstanding check warranty receivables, which is included within Payments cost of revenues (exclusive of depreciation and amortization) in~~credit losses for the ~~Statements of Loss. The outstanding balances of the check warranty and general reserves were $3.0 million and $2.4 million, respectively, as of~~nine months ended September 30, ~~2017~~2020 and ~~$2.7 million and $2.0 million, respectively,~~2019 is as ~~of December 31, 2016.~~

6.	~~PREPAID AND OTHER ASSETS~~

Prepaid and other assets include the balance of prepaid expenses, deposits, debt issuance costs on our Revolving Credit Facility (defined herein), restricted cash and other assets. The current portion of these assets is included in prepaid and other assets and the non-current portion is included in other assets, both of which are contained within the Balance Sheets.

~~The balance of the current portion of prepaid and other assets consisted of the following~~follows (in thousands):

At September 30,

At December 31,

2017

2016

Prepaid expenses and other assets

Deposits

$
9,971

$
8,622

Prepaid expenses

7,870

5,937

Other

4,697

3,489

Total prepaid expenses and other assets

$
22,538

$
18,048


	Nine Months Ended September 30,
	2020		2019
Beginning allowance for credit losses	$	(5,786)	$	(6,425)
Provision	(6,926)		(10,010)
Charge-offs and recoveries	8,958		10,723
Ending allowance for credit losses	$	(3,754)	$	(5,712)

At September 30,

At December 31,

2017

2016

Other assets

Prepaid expenses and deposits

$
3,464

$
3,399

Debt issuance costs of revolving credit facility

898

689

Other

3,088

3,434

Total other assets

$
7,450

$
7,522

Our inventory primarily consists of component parts as well as work-in-progress and finished goods. The cost of inventory includes cost of materials, labor, overhead and ~~freight.~~freight, and is accounted for using the first in, first out method. The inventory is stated at the lower of cost or net realizable ~~value and accounted for using the FIFO method.~~

value.

Inventory consisted of the following (in thousands):

At September 30,

At December 31,

2017

2016

Inventory

Raw materials and component parts, net of reserves of $1,523 and $2,155 at
September 30, 2017 and December 31, 2016, respectively

$
15,974

$
12,570

Work-in-progress

3,516

1,502

Finished goods

4,300

4,996

Total inventory

$
23,790

$
19,068

8.	~~PROPERTY, EQUIPMENT AND LEASED ASSETS~~


	At September 30,		At December 31,
	2020		2019
Inventory
Component parts, net of reserves of $3,426 and $2,007 at September 30, 2020 and December 31, 2019, respectively	$	24,175	$	24,864
Work-in-progress	1,481		94
Finished goods	8,123		1,616
Total inventory	$	33,779	$	26,574

~~Property, equipment~~

8. PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and ~~leased~~other assets ~~consist~~include the balance of prepaid expenses, deposits, debt issuance costs on our Revolving Credit Facility (defined herein), restricted cash, operating lease ROU assets, and other assets. The current portion of these assets is included in prepaid expenses and other current assets and the non-current portion is included in other assets, both of which are contained within the Balance Sheets.

The balance of the current portion of prepaid expenses and other assets consisted of the following (in thousands):

At September 30, 2017

At December 31, 2016

Useful Life

Accumulated

Net Book

Accumulated

Net Book

(Years)

Cost

Depreciation

Value

Cost

Depreciation

Value

Property, equipment and leased
   assets

Rental pool - deployed

2-4

$
149,895

$
73,623

$
76,272

$
123,812

$
59,188

$
64,624

Rental pool - undeployed

2-4

19,829

10,874

8,955

13,456

5,721

7,735

ATM equipment

5

17,154

11,992

5,162

16,537

11,189

5,348

Leasehold and building
   improvements

Lease
Term

10,723

4,820

5,903

10,023

3,698

6,325

Cash advance equipment

3

8,492

5,544

2,948

8,590

4,499

4,091

Machinery, office and other
   equipment

2-5

33,217

23,058

10,159

30,424

20,108

10,316

Total

$
239,310

$
129,911

$
109,399

$
202,842

$
104,403

$
98,439


	At September 30,		At December 31,
	2020		2019
Prepaid expenses and other current assets
Prepaid expenses	$	11,652	$	11,272
Restricted cash(1)	508		6,639
Deposits	4,221		8,501
Other	1,887		1,484
Total prepaid expenses and other current assets	$	18,268	$	27,896

(1) Refer to “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies” for discussion on the composition of the restricted cash balance.

The balance of the non-current portion of other assets consisted of the following (in thousands):


	At September 30,		At December 31,
	2020		2019
Other assets
Operating lease ROU assets	$	16,479	$	12,257
Prepaid expenses and deposits	5,279		7,378
Debt issuance costs of revolving credit facility	315		460
Other	623		244
Total other assets	$	22,696	$	20,339

9. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (dollars in thousands):


		At September 30, 2020						At December 31, 2019
	Useful Life (Years)	Cost		Accumulated Depreciation		Net Book Value		Cost		Accumulated Depreciation		Net Book Value
Property and equipment
Rental pool - deployed	2-4	$	203,247	$	124,697	$	78,550	$	196,571	$	106,888	$	89,683
Rental pool - undeployed	2-4	27,805		20,342		7,463		31,901		22,970		8,931
FinTech equipment	3-5	31,991		21,826		10,165		29,947		22,114		7,833
Leasehold and building improvements	Lease Term	10,924		8,173		2,751		11,815		8,150		3,665
Machinery, office, and other equipment	2-5	45,458		30,575		14,883		48,860		30,103		18,757
Total		$	319,425	$	205,613	$	113,812	$	319,094	$	190,225	$	128,869

Depreciation expense related to property ~~equipment~~ and ~~leased assets~~equipment totaled approximately ~~$12.5~~$16.2 million and ~~$34.8~~$48.7 million for the three and nine months ended September 30, ~~2017, respectively,~~2020, respectively. Depreciation expense related to property and ~~$12.4~~equipment totaled approximately $16.0 million and ~~$37.2~~$46.1 million for the three and nine months ended September 30, ~~2016,~~2019, respectively. ~~There was no material impairment of our property, equipment and leased assets for the three and nine months ended September 30, 2017 and 2016.~~

9.	~~GOODWILL AND OTHER INTANGIBLE ASSETS~~

10. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations. The balance of goodwill was ~~$640.6~~approximately $681.9 million and ~~$640.5~~$681.6 million at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.

~~In accordance with ASC 350, we~~ We have the following reporting units: (i) Games; (ii) Cash Access Services; (iii) Kiosk Sales and Services; (iv) Central Credit Services; (v) Compliance Sales and Services; and (vi) Player Loyalty Sales and Services.

We test our goodwill ~~at the reporting unit level, which are identified as operating segments or one level below,~~ for impairment on ~~an annual basis and between annual tests~~October 1 each year, or more frequently if events ~~and~~or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

We generally conduct the test ~~for impairment annually on~~by utilizing a “Step 1” analysis, which requires a comparison of the carrying amount of each reporting unit ~~basis, at~~to its estimated fair value.

Interim Assessment for Impairment of Goodwill

The impact of COVID-19 and the ~~beginning~~closure of ~~our fourth fiscal~~most casino properties during the second quarter ~~or more often under certain circumstances. The annual~~of 2020 qualified as a triggering event and accordingly, we performed a goodwill impairment test ~~is completed using either:~~during the second quarter of 2020, for which we utilized the “Step 1” approach that required a ~~qualitative Step 0 assessment based on reviewing relevant events and circumstances; or a quantitative Step 1 assessment, which determines~~comparison of the carrying amount of each reporting unit to its estimated fair value.

To estimate the fair value of ~~the~~each reporting unit, ~~using~~we used a combination of an income valuation approach ~~that discounts future cash flows based on the estimated future results of our reporting units~~ and a market valuation approach. The income valuation approach ~~that compares~~is based on a discounted cash flow (“DCF”) analysis. This method involves estimating the after-tax net cash flows attributable to a reporting unit and then discounting them to a present value using a risk-adjusted discount rate. Assumptions applied in the DCF to derive our after-tax net cash flows require the use of significant judgment, including, but not limited to: appropriate discount rates and terminal values, growth rates and the amount and timing of expected future cash flows. The projected cash flows are based on our most recent expectations. We believe our assumptions are consistent with the plans and estimates used to manage the underlying businesses. The discount rates, which are intended to reflect the risks inherent in future after-tax net cash flow projections used in the DCF are based on estimates of the weighted average cost of capital (the “WACC”) of market participants relative to each respective reporting unit. The market valuation approach considers comparable market data based on multiples of ~~comparable companies to determine whether~~revenue or ~~not any impairment exists. If~~earnings before interest, taxes, depreciation and amortization (“EBITDA”). To the ~~fair value~~extent the carrying amount of a reporting unit is less than its estimated fair value, an impairment charge is recorded.

In connection with the interim assessment conducted during the second quarter of 2020, we determined that no goodwill impairment adjustments were necessary as a result of the fair value of each reporting unit exceeding its carrying amount. Our Games reporting unit had a carrying amount ~~we will use~~of approximately $449.0 million as of May 31, 2020, which represented a majority of the ~~Step 1 assessment~~total goodwill balance. The fair value of this reporting unit exceeded carrying value by approximately 10% as of May 31, 2020.

As casinos reopened and our business continued to ~~determine~~recover in the ~~impairment in accordance with the adoption~~third quarter of ~~ASU No 2017-04.~~

No2020, there were no new triggering events identified that would have an adverse impact on our business; and therefore, 0 impairment was identified for our goodwill ~~for the three and nine months ended~~as of September 30, ~~2017~~2020.

As additional facts and ~~2016.~~

circumstances evolve, we continue to observe and assess our reporting units with a specific focus on the Games reporting unit, particularly as a direct consequence of the circumstances surrounding COVID-19. To the extent new information becomes available that may impact our results of operations and financial condition, we expect to revise our projections accordingly as our estimates of future net after-tax cash flows are highly dependent upon certain assumptions, including, but not limited to, the amount and timing of the economic recovery globally, nationally and specifically within the gaming industry. More specifically, we may need to further adjust our assumptions and we may be required to perform either a quantitative or qualitative assessment of our goodwill in future periods given the significant degree of uncertainty with respect to: (i) the timing of reopening, and the subsequent reclosing, of certain casino properties; (ii) regulatory and governmental restrictions; and (iii) the demand from patrons that visit gaming establishments.

Furthermore, the evaluation of impairment of goodwill requires the use of estimates about future operating results. Changes in forecasted operations can materially affect these estimates, which could materially affect our results of operations and financial condition. The estimates of expected future cash flows require significant judgment and are based on assumptions we determined to be reasonable; however, they are unpredictable and inherently uncertain, including, estimates of future growth rates, operating margins and assumptions about the overall economic climate as well as the competitive environment within which we operate. There can be no assurance that our estimates and assumptions made for purposes of our impairment assessments as of the time of evaluation will prove to be accurate predictions of the future, especially in light of the uncertainty surrounding the COVID-19 pandemic. If our assumptions regarding business plans, competitive environments, or anticipated growth rates are not correct, we may be required to record non-cash impairment charges in future periods, whether in connection with our normal review procedures periodically, or earlier, if an indicator of an impairment is present prior to such evaluation.

Other Intangible Assets

Other intangible assets consist of the following ~~(in~~(dollars in thousands):

		At September 30, 2017						At December 31, 2016
	Useful Life			Accumulated		Net Book				Accumulated		Net Book				At September 30, 2020						At December 31, 2019
	(years)	Cost		Amortization		Value		Cost		Amortization		Value			Useful Life (Years)	Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value
Other intangible assets														Other intangible assets
Contract rights under placement fee agreements	1-7	$	59,605	$	1,782	$	57,823	$	17,742	$	6,281	$	11,461	Contract rights under placement fee agreements	3-7	$	60,497	$	25,777	$	34,720	$	58,516	$	20,888	$	37,628
Customer contracts	7-14		50,975		42,768		8,207		50,975		40,419		10,556	Customer contracts	3-14	71,975		53,174		18,801		71,975		49,477		22,498
Customer relationships	8-12		231,100		58,412		172,688		231,100		42,688		188,412	Customer relationships	3-7	231,100		121,308		109,792		231,100		105,584		125,516
Developed technology and software	1-6		244,151		152,706		91,445		224,265		126,721		97,544	Developed technology and software	1-6	309,323		245,942		63,381		314,343		224,274		90,069
Patents, trademarks and other	1-17		28,834		20,923		7,911		27,771		17,747		10,024
Patents, trademarks, and other														Patents, trademarks, and other	2-18	19,682		17,418		2,264		19,682		16,206		3,476
Total		$	614,665	$	276,591	$	338,074	$	551,853	$	233,856	$	317,997	Total		$	692,577	$	463,619	$	228,958	$	695,616	$	416,429	$	279,187

Amortization expense related to other intangible assets was approximately ~~$17.3~~$18.7 million and ~~$52.1~~$57.3 million for the three and nine months ended September 30, ~~2017, respectively, and $24.1~~2020, respectively. Amortization expense related to other intangible assets was approximately $17.2 million and ~~$70.9~~$51.1 million for the three and nine months ended September 30, ~~2016,~~2019, respectively.

We ~~evaluate our other intangible assets for potential impairment~~ paid approximately $2.1 million and $3.0 million in ~~connection with our quarterly review process. There was no material impairment identified for any of our other intangible assets~~placement fees for the three and nine months ended September 30, ~~2017 and 2016.~~

~~We enter into placement fee agreements to provide financing~~2020, respectively. The payment for new gaming facilities or for the expansion or improvement of existing facilities. The funding under placement fee agreements is not reimbursed. In return for the fees under these agreements, each facility dedicates a percentage of its floor space, or an agreed upon unit count, for the placement of our electronic gaming machines (“EGMs”) over the term of the agreement, generally 12 to 83 months, and we receive a fixed percentage or flat fee of those machines’ hold per day. Certain of the agreements contain EGM performance standards that could allow the respective facility to reduce a portion of our guaranteed floor space.

Placement fees and amounts advanced in excess of those to be reimbursed by the customer for real property and land improvements are allocated to intangible assets and are generally amortized over the term of the contract, which is recorded as a reduction of revenue generated from the facility. In the past we have, and in the future, we may, by mutual agreement, amend these agreements to reduce our floor space at the facilities. Any proceeds received for the reduction of floor space are first applied against the intangible asset for that particular placement fee agreement, if any, and the remaining net book value of the intangible asset is prospectively amortized on a straight-line method over the remaining estimated useful life. In July 2017, we entered into a placement fee agreement with a customer for certain of its locations for approximately $49.1 million, net of $10.1 million of unamortized fees related to superseded contracts. During the three and nine months ended September 30, ~~2017, we~~2020 did not include imputed interest. We paid approximately ~~$10.1~~ $5.6 million and ~~$13.1~~$17.7 million ~~respectively,~~ in placement fees, ~~primarily related to this agreement. For~~including $0.1 million and $0.6 million of imputed interest, for the three and nine months ended September 30, 2019, respectively.

During the three months ended September 30, 2020, there were 0 material write-downs of intangible assets. During the nine months ended September 30, ~~2016, $11.2~~2020, we recorded a full write-down of intangible assets of approximately $5.9 million, ~~was paid~~of which $5.5 million and $0.4 million, related to ~~extend the term of placement fee agreements with the same customer~~our Games and Fintech businesses, respectively, for certain of ~~its locations. We did~~our internally developed and third-party software projects that were not ~~enter into any placement fee agreements or incur related fees during the three months ended September 30, 2016.~~

expected to be pursued. This charge was reflected in Operating Expenses of our Statements of Operations.

~~10.~~

~~ACCOUNTS PAYABLE AND ACCRUED EXPENSES~~

11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The following table presents our accounts payable and accrued expenses (in thousands):

At September 30,

At December 31,

2017

2016

Accounts payable and accrued expenses

Trade accounts payable

$
62,422

$
55,352

Placement fees⁽¹⁾

16,746

—

Accrued interest

7,650

82

Payroll and related expenses

10,207

12,305

Deferred and unearned revenues

9,981

9,222

Cash access processing and related expenses

7,682

7,001

Accrued taxes

2,734

2,587

Other

9,203

7,842

Total accounts payable and accrued expenses

$
126,625

$
94,391

~~(1)~~

The total outstanding balance of the placement fees was $39.1 million. The remaining $22.3 million of non-current placement fees was included in other accrued expenses and liabilities in our Balance Sheets as of September 30, 2017.

~~11.~~

~~LONG-TERM DEBT~~


	At September 30,		At December 31,
	2020		2019
Accounts payable and accrued expenses
Trade accounts payable	$	58,857	$	78,627
Contract liabilities	34,846		28,510
Litigation accrual(1)	12,903		14,000
Contingent consideration and acquisition-related liabilities(2)	24,353		14,902
Accrued interest	6,419		1,347
Operating lease liabilities	5,402		5,824
Payroll and related expenses	14,526		18,058
Cash access processing and related expenses	2,065		5,511
Other	3,619		3,893
Accrued taxes	2,227		1,846
Placement fees	0		585
Total accounts payable and accrued expenses	$	165,217	$	173,103

(1) Refer to “Note 13 — Commitments and Contingencies .”

(2) Refer to “Note 4 — Business Combinations .”

12. LONG-TERM DEBT

The following table summarizes our outstanding indebtedness ~~(in~~(dollars in thousands):

At September 30,

At December 31,

2017

2016

Long-term debt

Senior secured term loan

$
817,950

$
465,600

Senior secured notes

—

335,000

Senior unsecured notes

350,000

350,000

Total debt

1,167,950

1,150,600

Less: debt issuance costs and discount

(29,079
)

(28,720
)
Total debt after debt issuance costs and
discount

1,138,871

1,121,880

Less: current portion of long-term debt

(8,200
)

(10,000
)
Long-term debt, less current portion

$
1,130,671

$
1,111,880


	Maturity	Interest	At September 30,		At December 31,
	Date	Rate	2020		2019
Long-term debt
$820 million Term Loan Facility	2024	LIBOR+2.75%	$	735,500	$	749,000
$125 million Incremental Term Loan Facility	2024	LIBOR+10.50%	124,688		0
$35 million Revolving Credit Facility	2022	LIBOR+4.50%	0		0
Senior Secured Credit Facilities			860,188		749,000
$375 million 2017 Unsecured Notes	2025	7.50%	285,381		375,000
Total debt			1,145,569		1,124,000
Debt issuance costs and discount			(17,128)		(15,922)
Total debt after debt issuance costs and discount			1,128,441		1,108,078
Current portion of long-term debt			(1,250)		0
Total long-term debt, net of current portion			$	1,127,191	$	1,108,078

~~Refinancing~~

~~On May 9, 2017~~

Senior Secured Credit Facilities

Our Senior Secured Credit Facilities consist of: (i) an $820.0 million, seven-year senior secured term loan facility (the ~~“Closing Date”~~“Term Loan Facility”),; (ii) a $125.0 million, seven-year senior secured term loan (the “Incremental Term Loan”); and (iii) a $35.0 million, five-year senior secured revolving credit facility (the “Revolving Credit Facility”) provided for under our credit agreement with Everi Payments, as borrower, and Everi Holdings ~~entered into a credit agreement~~ with the lenders party thereto and Jefferies Finance LLC, as administrative agent, collateral agent, swing line lender, letter of credit issuer, sole lead arranger and sole book manager (the ~~“New Credit~~“Credit Agreement”). ~~The New Credit Agreement provides for: (i) a~~

In March 2020, we completed the full draw down of our available capacity of $35.0 million ~~five-year senior secured revolving credit facility (the “New~~under the Revolving Credit ~~Facility”);~~Facility in order to improve our liquidity and ~~(ii) an $820.0 million, seven-year senior secured term loan facility (the “New Term Loan Facility,”~~preserve financial flexibility in light of the uncertainty in our industry and ~~together~~the global economy as a result of COVID-19. In accordance with the ~~New~~terms of the Revolving Credit Facility, the “New Credit Facilities”). The fees associated with the New Credit Facilities included discounts of approximately $4.1 million and debt issuance costs of approximately $15.5 million. All borrowings under the New Credit Facilities are subject to the satisfaction of customary conditions, including the absence of defaults and the accuracy of representations and warranties.

~~The~~ proceeds from this borrowing were being used for working capital, general corporate purposes and other permitted uses. On September 14, 2020, we repaid in full the ~~New Term Loan Facility incurred on the Closing Date were used to: (i) refinance: (a) the Everi Payments existing credit facility with an outstanding balance of approximately $462.3~~$35.0 million with Bank of America, N.A., as administrative agent, collateral agent, swing line lender and letter of credit issuer, Deutsche Bank Securities Inc., as syndication agent, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., as joint lead arrangers and joint book managers (the “Prior Credit Facility”); and (b) the Everi Payments 7.25% Senior

~~Secured Notes due 2021 in the aggregate original principal amount of $335.0 million (the “Refinanced Secured Notes”); and (ii) pay related transaction fees and expenses.~~

In connection with the refinancing, we recorded a non-cash charge of approximately $14.6 million during the second quarter of 2017 related to the unamortized deferred financing fees and discounts related to the extinguished term loan under the ~~Prior Credit Facility and the redeemed Refinanced Secured Notes. No prepayment penalties were incurred.~~

~~New Credit Facilities~~

On April 21, 2020, we entered into the Fourth Amendment to our existing Credit Agreement, which among other things: (i) permits the incurrence of incremental equivalent debt subject to a 4.50:1.00 Consolidated Secured Leverage Ratio (as defined in the Credit Agreement) for calculation periods prior to December 31, 2021; and (ii) amends the ~~Unsecured Notes Maturity Date, any Unsecured Notes remain outstanding~~consolidated secured leverage ratio covenant, including to remove the maximum consolidated secured leverage ratio for the quarters ending June 30, 2020, September 30, 2020 and December 31, 2020 and to change the ~~Unsecured Notes Maturity Date has not been extended to~~computation methodology of the consolidated leverage ratio for the quarters ending March 31, 2021, June 30, 2021, and September 30, 2021.

On April 21, 2020 (the “Closing Date”), we entered into a ~~date that~~new credit agreement, dated as of April 21, 2020 (the “Incremental Term Loan Credit Agreement”), which provides for a $125.0 million Incremental Term Loan, which is ~~at least six months after~~secured on a pari passu basis with the Stated Term Maturity Date, then the New Revolving Credit Facility shall mature on the date that is 121 days before the Unsecured Notes Maturity Date. The New Revolving Credit Facility is available for general corporate purposes, including permitted acquisitions, working capital and the issuance of letters of credit.

~~The interest rate per annum applicable to~~ loans under our existing Credit Agreement. The entire amount of the New Revolving Credit Facility will be, at Everi Payments’ option, the base rate or the Eurodollar Rate (defined to be the London Interbank Offered Rate or a comparable or successor rate) (the “Eurodollar Rate”) plus, in each case, an applicable margin.Incremental Term Loan was borrowed on April 21, 2020.

The Incremental Term Loan matures May 9, 2024. The interest rate per annum applicable to the ~~New~~Incremental Term Loan ~~Facility~~ will ~~also~~ be, at Everi ~~Payments’~~Payment’s option, the Eurodollar rate plus 10.50% or the base rate ~~or the Eurodollar Rate~~ plus in each case, an applicable margin. The Eurodollar Rate will be reset at the beginning of each selected interest period based on the Eurodollar Rate then in effect; provided that, if the Eurodollar Rate is below 1.0%, then such rate will be equal to 1.0% plus the applicable margin. The base rate is a fluctuating interest rate equal to the highest of: (i) the prime lending rate announced by the administrative agent; (ii) the federal funds effective rate from time to time plus 0.50%; and (iii) the Eurodollar Rate (after taking account of any applicable floor) applicable for an interest period of one month plus 1.00%9.50%. ~~The applicable margins for both the New Revolving Credit Facility and the New Term Loan Facility are: (i) 4.50% in respect of Eurodollar Rate loans and (ii) 3.50% in respect of base rate loans.~~

Voluntary prepayments of the ~~term loan and~~Incremental Term Loan prior to the ~~revolving loans~~two-year anniversary of the Closing Date will be subject to a make-whole premium, and voluntary ~~reductions in~~prepayments for the unused commitments are permitted in whole or in part, in minimum amounts as set forth in the New Credit Agreement governing the New Credit Facilities, with prior notice but without premium or penalty, except that certain refinancings of the term loans within six months after the Closing Datesubsequent six-month period will be subject to a prepayment premium of 1.00% of the principal amount repaid.

~~Subject to certain exceptions, the obligations under the New~~

The Incremental Term Loan Credit Facilities are secured by substantially all of the present and subsequently acquired assets of each of Everi Payments, Holdings and the subsidiary guarantors party thereto including: (i) a perfected first priority pledge of all the capital stock of Everi Payments and each domestic direct, wholly owned material restricted subsidiary held by Holdings, Everi Payments or any such subsidiary guarantor; and (ii) a perfected first priority security interest in substantially all other tangible and intangible assets of Holdings, Everi Payments, and such subsidiary guarantors (including, but not limited to, accounts receivable, inventory, equipment, general intangibles, investment property, real property, intellectual property and the proceeds of the foregoing). Subject to certain exceptions, the New Credit Facilities are unconditionally guaranteed by Holdings and such subsidiary guarantors.

~~The New Credit~~ Agreement ~~governing the New Credit Facilities~~ contains certain covenants that, among other things, limit ~~Holdings’~~our ability, and the ability of certain of ~~its~~our subsidiaries, to incur additional indebtedness, sell assets or consolidate or merge with or into other companies, pay dividends or repurchase or redeem capital stock, make certain investments, issue capital stock of subsidiaries, incur liens, prepay, redeem or repurchase subordinated debt, and enter into certain types of transactions with ~~its~~our affiliates. The ~~New~~Incremental Term Loan Credit Agreement ~~governing the New Credit Facilities~~ also requires ~~Holdings,~~us, together with ~~its~~our subsidiaries, to comply with a ~~consolidated secured leverage ratio. At~~

~~September 30, 2017, our consolidated secured leverage ratio was 3.63 to 1.00, with a maximum allowable ratio of 5.00 to 1.00. Our~~ maximum consolidated secured leverage ratio, ~~will be 5.00 to 1.00, 4.75 to 1.00,~~except that no such requirement shall apply for the quarters ending September 30, 2020, and ~~4.50 to 1.00 as of~~ December 31, ~~2017, 2018, and 2019 and thereafter, respectively.~~

~~We were in compliance~~2020.

In connection with the ~~terms~~issuance of the ~~New~~Incremental Term Loan on April 21, 2020, we also issued warrants to Sagard Credit ~~Facilities~~Partners, LP and Sagard Credit Partners (Cayman), LP (collectively, “Sagard”) to acquire 184,670 and 40,330 shares of our common stock with an exercise price equal to $5.37 per share. The warrants were issued in connection with the Incremental Term Loan as further consideration based on the level of ~~September 30, 2017.~~

~~Events of default under~~participation in the ~~New Credit Agreement governing~~arrangement by Sagard. The warrants expire on the New Credit Facilities include customary events such as a cross-default provision with respect to other material debt. In addition, an event of default will occur if Holdings undergoes a change of control. This is defined to include the case where Holdings ceases to own 100%fifth anniversary of the ~~equity interests~~date of ~~Everi Payments, or where any person or group acquires a percentage~~issuance. The number of shares issuable pursuant to the ~~economic or voting interests of Holdings’ capital stock of 35% or more (determined on a fully diluted basis).~~

We are required to repay the New Term Loan Facility in an amount equal to 0.25% per quarter of the initial aggregate principal, with the final principal repayment installment on the maturity date. Interest is due in arrears on each interest payment date applicable thereto and at such other times as may be specified in the New Credit Agreement. As to any loan other than a base rate loan, the interest payment dates shall be the last day of each interest period applicable to such loanwarrants and the ~~maturity date (provided, however, that if any interest period~~warrant exercise price are subject to adjustment for a Eurodollar Rate loan exceeds three months, the respective dates that fall every three months after the beginning of such interest period shall also be interest payment dates). As to any base rate loan, the interest payment dates shall be last business day of each March, June, Septemberstock splits, reverse stock splits, stock dividends, recapitalization, mergers and ~~December and the maturity date.~~

~~For the quarter ended September 30, 2017, the New Term Loan Facility had an applicable~~certain other events.

The weighted average interest rate ~~of 5.74%. For~~on the ~~nine months ended September 30, 2017, the Prior Credit Facility had an applicable weighted average interest rate of 6.29%; the New~~ Term Loan ~~Facility had an applicable weighted average interest rate of 5.71%;~~was 3.82% and ~~a blended weighted average interest rate of 5.87% for the period ended September 30, 2017.~~

At September 30, 2017, we had $818.0 million of borrowings outstanding under the New Term Loan Facility and no borrowings outstanding under the New Revolving Credit Facility. We had $35.0 million of additional borrowing availability under the New Revolving Credit Facility as of September 30, 2017.

~~Refinanced Senior Secured Notes~~

In connection with entering into the New Credit Agreement, on May 9, 2017, Everi Payments redeemed in full $335.0 million face value (plus accrued interest) of the Refinanced Secured Notes. As a result of the redemption, the Company recorded $1.7 million, which consisted of unamortized deferred financing fees of $0.2 million and discounts of $1.5 million. These fees are included in the total $14.6 million non-cash charge.

~~Senior Unsecured Notes~~

In December 2014, we issued $350.0 million in aggregate principal amount of 10.00% Unsecured Notes due 2022 (the “Unsecured Notes”). The fees associated with the Unsecured Notes included original issue discounts of approximately $3.8 million and debt issuance costs of approximately $14.0 million.

~~Interest is due semi-annually in arrears each January and July.~~

The Unsecured Notes were acquired by the initial purchasers pursuant to the terms of a purchase agreement. Under the terms of the purchase agreement, during a one-year period following the closing and upon prior notice from the initial purchasers, the Company was required to use commercially reasonable efforts to aid the purchasers in the resale of the Unsecured Notes, including by preparing an updated offering memorandum and participating in reasonable marketing efforts including road shows, to the extent required therein. The Unsecured Notes were resold by the initial purchasers to third parties in the second quarter of 2015.

~~In December 2015, we completed an exchange offer in which all of the unregistered Unsecured Notes were exchanged for a like amount of Unsecured Notes that had been registered under the Securities Act.~~

~~We were in compliance with the terms of the Unsecured Notes as of September 30, 2017 and December 31, 2016.~~

~~12.~~

~~COMMITMENTS AND CONTINGENCIES~~

The following transactions have resulted in a change in our commitments under contractual obligations as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016:

In May 2017, we entered into the New Credit Agreement, which provides for the $35.0 million New Revolving Credit Facility and the $820.0 million New Term Loan Facility. Under the New Credit Agreement, we are required to make principal payments of 1% annually of $2.0 million in 2017, $8.2 million in years 2018 through 2021 and $783.1 million thereafter. We also have required interest payments, computed using a weighted average interest rate at September 30, 2017 of 5.74%, of $12.0 million, $46.6 million, $46.1 million, $45.7 million, $45.3 million and $104.5 million from 2017 through 2021 and thereafter, respectively.

In July 2017, we extended the term of our placement fee agreements to 6 years and 11 months with our largest customer in Oklahoma. Under the terms of the agreement, we made a $10.0 million cash payment in August 2017 and will pay approximately $5.6 million per quarter in placement fees, beginning in January 2018 and ending in July 2019.

We are involved in various investigations, claims and lawsuits in the ordinary course of our business. In addition, various legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against us and our subsidiaries. Although the outcome of our legal proceedings cannot be predicted with certainty and no assurances can be provided, based upon current information, we do not believe the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, will have a material adverse impact on our financial position, liquidity or results of operations.

~~13.~~

~~SHAREHOLDERS’ EQUITY~~

~~Preferred Stock.~~ Our amended and restated certificate of incorporation, as amended, allows our Board of Directors, without further action by stockholders, to issue up to 50,000,000 shares of preferred stock in one or more series and to fix the designations, powers, preferences, privileges and relative participating, optional, or special rights as well as the qualifications, limitations or restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences. As of September 30, 2017 and December 31, 2016, we had no shares of preferred stock outstanding.

~~Common Stock.~~ Subject to the preferences that may apply to shares of preferred stock that may be outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available at the times and in the amounts as our Board of Directors may from time to time determine. All dividends are non-cumulative. In the event of the liquidation, dissolution or winding up of Everi, the holders of common stock are entitled to share ratably in all assets remaining after the payment of liabilities, subject to the prior distribution rights of preferred stock, if any, then outstanding. Each stockholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not provided for. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. There are no sinking fund provisions applicable to the common stock. Each outstanding share of common stock is fully paid and non-assessable. As of September 30, 2017 and December 31, 2016, we had 91,918,086 and 90,952,185 shares of common stock issued, respectively.

~~Treasury Stock.~~ Employees may direct us to withhold vested shares of restricted stock to satisfy the minimum statutory withholding requirements applicable to their restricted stock vesting. We withheld from restricted stock awards 1,365 and 4,394 shares of common stock4.02% for the three and nine months ended September 30, ~~2017, respectively, at an aggregate purchase price of $10,115~~2020, respectively. The weighted average interest rate on the Revolving Credit Facility was 5.50% and ~~$20,706, respectively, and 2,223 and 7,135 shares of common stock~~5.52% for the three and nine months ended September 30, ~~2016, respectively,~~2020, respectively. The weighted average interest rate on the Incremental Term Loan Credit Facility was 11.50% for the three and nine months ended September 30, 2020, respectively.

Senior Unsecured Notes

In December 2017, we issued $375.0 million in aggregate principal amount of 7.50% Senior Unsecured Notes due 2025 (the “2017 Unsecured Notes”) under an indenture (the “2017 Notes Indenture”), dated December 5, 2017, among Everi Payments (as issuer), Everi Holdings and certain of its direct and indirect domestic subsidiaries as guarantors, and Deutsche Bank Trust Company Americas, as trustee. Interest on the 2017 Unsecured Notes accrues at a rate of 7.50% per annum and is payable semi-annually in arrears on each June 15 and December 15 since June 15, 2018.

In January 2020, we completed a partial redemption payment of approximately $84.5 million of aggregate principal with respect to the 2017 Unsecured Notes. In March 2020, we completed an open market repurchase of approximately $5.1 million of aggregate ~~purchase price~~principal with respect to the 2017 Unsecured Notes. The total outstanding balance of ~~$3,879~~the 2017 Unsecured Notes following the redemption and ~~$16,894, respectively, to satisfy the minimum applicable tax withholding obligations~~repurchase transactions was approximately $285.4 million. We incurred a loss on extinguishment of debt of approximately $7.5 million, which consisted of a $6.4 million redemption premium related to the ~~vesting~~satisfaction and redemption of a portion of the 2017 Unsecured Notes, and non-cash charges for the accelerated amortization of the related debt issuance costs of approximately $1.1 million.

Compliance with Debt Covenants

We were in compliance with the covenants and terms of the Senior Secured Credit Facilities and the 2017 Unsecured Notes as of September 30, 2020.

13. COMMITMENTS AND CONTINGENCIES

We are involved in various legal proceedings in the ordinary course of our business. While we believe resolution of the claims brought against us, both individually and in the aggregate, will not have a material adverse impact on our financial condition or results of operations, litigation of this nature is inherently unpredictable. Our views on these legal proceedings, including those described below, may change in the future. We intend to vigorously defend against these actions, and ultimately believe we should prevail.

Legal Contingencies

We evaluate matters and record an accrual for legal contingencies when it is both probable that a liability has been incurred and the amount or range of the loss may be reasonably estimated. We evaluate legal contingencies at least quarterly and, as appropriate, establish new accruals or adjust existing accruals to reflect: (i) the facts and circumstances known to us at the time, including information regarding negotiations, settlements, rulings, and other relevant events and developments; (ii) the advice and analyses of counsel; and (iii) the assumptions and judgment of management. Legal costs associated with such proceedings are expensed as incurred. Due to the inherent uncertainty of legal proceedings as a result of the procedural, factual, and legal issues involved, the outcomes of our legal contingencies could result in losses in excess of amounts we have accrued.

We accrued approximately $14.0 million for the legal contingencies in connection with Fair and Accurate Credit Transactions Act (“FACTA”)-related matters based on ongoing settlement negotiations with by and among the various plaintiffs described in the FACTA-related matters discussion below and Everi by and on behalf of itself and Everi FinTech. Within the next year we expect to recover approximately $7.7 million of the amount accrued from certain of our insurance providers, for which we recorded an insurance settlement receivable included within trade and other receivables, net on our Balance Sheets, as recovery is deemed to be probable. In addition, we are seeking relief from Peleus Insurance Company pursuant to the provisions of our policy; however, we have not recorded any amounts with respect to this specific insurance carrier as there have been no commitments, settlements or determinations entered into as of the date of this periodic filing.

FACTA-related matters:

Geraldine Donahue, et. al. v. Everi FinTech, et. al. (“Donahue”), is a putative class action matter filed on December 12, 2018, in the Circuit Court of Cook County, Illinois County Division, Chancery Division. The original defendant was dismissed and the Company was substituted as the defendant on April 22, 2019. Plaintiff, on behalf of himself and others similarly situated, alleges that Everi FinTech and the Company (i) have violated certain provisions of FACTA by their failure, as agent to the original defendant, to properly truncate patron credit card numbers when printing cash access receipts as required under FACTA, and (ii) have been unjustly enriched through the charging of service fees for transactions conducted at the original defendant’s facilities. Plaintiff seeks an award of statutory damages, attorney’s fees, and costs. The parties have reached an agreement in principle for settlement of this matter, which will include the settlement and resolution of all the FACTA-related matters pending against the Company and Everi FinTech. In the third quarter of 2020, the court granted preliminary approval of the settlement agreement between the parties, which will include the settlement and resolution of all the FACTA-related matters pending against Everi. The final approval hearing is scheduled for November 30, 2020. The third-party claims administrator began contacting potential claimants via electronic and regular mail as of September 1, 2020. The objection date is October 19, 2020 and claims forms must be postmarked by February 1, 2021.

Oneeb Rehman, et. al. v. Everi FinTech and Everi Holdings, was a putative class action matter pending in the U.S. District Court for the Southern District of Florida, Ft. Lauderdale Division filed on October 16, 2018. The original defendant was dismissed and the Company was substituted as the defendant on April 22, 2019. Plaintiff, on behalf of himself and others similarly situated, alleged that Everi FinTech and the Company (i) had violated certain provisions of FACTA by their failure, as agent to the original defendant, to properly truncate patron credit card numbers when printing cash access receipts as required under FACTA, and (ii) had been unjustly enriched through the charging of service fees for transactions conducted at the original defendant’s facilities. Plaintiff sought an award of statutory damages, attorney’s fees, and costs. This matter has been dismissed in anticipation of court approval of the settlement in Donahue.

Mat Jessop, et. al. v. Penn National Gaming, Inc., was a putative class action matter filed on October 15, 2018, pending in the U.S. District Court for the Middle District of Florida, Orlando Division. Everi FinTech was added as a defendant on December 21, 2018. Penn National Gaming, Inc. (“Penn National”) was dismissed by the Court with prejudice on October 28, 2019, leaving only claims against Everi FinTech. Plaintiff, on behalf of himself and others similarly situated, alleged that Everi FinTech had been unjustly enriched through the charging of service fees for transactions conducted at Penn National facilities. Plaintiff sought injunctive relief against both parties, and an award of statutory damages, attorney’s fees, and costs. This matter has been dismissed in anticipation of court approval of the settlement in Donahue.

Everi Payments Inc. and Everi Holdings Inc. v Peleus Insurance Company is a civil action filed by the Company on January 28, 2020, pending in the District Court, Clark County, Nevada alleging defendant breached its contractual obligations under an excess insurance policy when it denied the Company coverage of the FACTA-related matters described above. Everi FinTech and the Company are seeking actual and consequential damages for breach of contract, costs, attorney’s fees, and other fees and expenses incurred by Everi FinTech and the Company, up to and including amounts related to the settlement in Donahue.

NRT matter:

NRT Technology Corp., et. al. v. Everi Holdings Inc., et. al., is a civil action filed on April 30, 2019 against the Company and Everi FinTech in the United States District Court for the District of Delaware by NRT Technology Corp. and NRT Technology, Inc., alleging monopolization of the market for unmanned, integrated kiosks in violation of federal antitrust laws, fraudulent procurement of patents on functionality related to such unmanned, integrated kiosks and sham litigation related to prior litigation brought by Everi FinTech (operating as Global Cash Access Inc.) against the plaintiff entities. Plaintiffs seek compensatory damages, trebled damages, and injunctive and declaratory relief. We are currently unable to determine the probability of the outcome of this legal matter or estimate the range of reasonably possible loss, if any. We believe that the claims in the lawsuit are without merit, and intend to vigorously defend against them.

In addition, we have commitments with respect to certain lease obligations discussed in “Note 3 — Leases” and installment payments under our asset purchase agreements discussed in “Note 4 — Business Combinations.”

14. STOCKHOLDERS’ (DEFICIT) EQUITY

In February 2020, our Board of Directors authorized and approved a new share repurchase program granting us the authority to repurchase an amount not to exceed $10.0 million of outstanding Company common stock with no minimum number of shares that the Company is required to repurchase. This new repurchase program commenced in the first quarter of 2020 and authorizes us to buy our common stock from time to time in open market transactions, block trades or in private transactions in accordance with trading plans established in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended, or by a combination of such ~~restricted stock awards.~~

methods, including compliance with the Company’s finance agreements. The share repurchase program is subject to available liquidity, general market and economic conditions, alternate uses for the capital and other factors, and may be suspended or discontinued at any time without prior notice. In light of COVID-19, we have suspended our share repurchase program. There were no share repurchases during the three and nine months ended September 30, 2020.

~~14.~~

~~WEIGHTED AVERAGE COMMON SHARES~~

15. WEIGHTED AVERAGE COMMON SHARES

The weighted average number of shares of common stock outstanding used in the computation of basic and diluted ~~loss~~earnings per share is as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Weighted average shares

Weighted average number of common shares
outstanding - basic

66,897

66,049

66,449

66,041

Potential dilution from equity awards⁽¹⁾

—

—

—

—

Weighted average number of common
shares outstanding - diluted

66,897

66,049

66,449

66,041

~~(1)~~

The Company was in a net loss position for the three and nine months ended September 30, 2017 and 2016; therefore, potentially dilutive common shares were excluded as their effects would be antidilutive under the application of the treasury method. Equity awards to purchase approximately 8.0 million and 12.0 million shares of common stock for the three and nine months ended September 30, 2017, respectively, and 18.5 million and 15.9 million shares of common stock for the three and nine months ended September 30, 2016, respectively, were excluded from the diluted net loss per share results.

~~15.~~

~~SHARE-BASED COMPENSATION~~


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019
Weighted average shares
Weighted average number of common shares outstanding - basic	85,556	72,251	85,102	71,361
Potential dilution from equity awards(1)	0	6,874	0	6,493
Weighted average number of common shares outstanding - diluted(1)	85,556	79,125	85,102	77,854

~~Equity Incentive Awards~~

Our 2014 Equity Incentive Plan (as amended and restated effective May 23, 2017, the “Amended and Restated 2014 Plan”) and our 2012 Equity Incentive Plan (as amended, the “2012 Plan”) are used to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and to promote the success of our business. The Amended and Restated 2014 Plan superseded the then current 2005 Stock Incentive Plan (the “2005 Plan”). The 2012 Plan was assumed

(1) We were in connection with our acquisition of Everi Games Holding and conformed to include similar provisions to those as set forth in the Amended and Restated 2014 Plan. Our equity incentive plans are administered by the Compensation Committee of our Board of Directors, which has the authority to select individuals who are to receive equity incentive awards and to specify the terms and conditions of grants of such awards, including, but not limited to, the vesting provisions and exercise prices.

~~Generally, we grant the following award types: (a) time-based options, (b) market-based options and (c) restricted stock. These awards have varying vesting provisions and expiration periods. For~~a net loss position for the three and nine months ended September 30, ~~2017,~~2020; and therefore, no potential dilution from the application of the treasury stock method was applicable. The potential dilution excludes the weighted average effect of equity awards to purchase approximately 7.3 million and 6.5 million shares of common stock for the three and nine months ended September 30, 2020, respectively, as the application of the treasury stock method, as required, makes them anti-dilutive. The potential dilution excludes the weighted average effect of equity awards to purchase approximately 0.2 million and 1.7 million shares of common stock for the three and nine months ended September 30, 2019, respectively, as the application of the treasury stock method, as required, makes them anti-dilutive.

16. SHARE-BASED COMPENSATION

Equity Incentive Awards

Generally, we ~~granted time-~~grant the following types of awards: (i) time-based options; (ii) market-based options; (iii) time-based restricted stock units (“RSUs”); and ~~market-based options.~~

(iv) performance-based stock units (“PSUs”).

A summary of award activity is as follows (in thousands):


	Stock Options Granted	Restricted Stock Units Granted
Outstanding, December 31, 2019	11,969	3,451
Granted	0	2,183
Exercised options or vested shares	(734)	(852)
Canceled or forfeited	(146)	(192)
Outstanding, September 30, 2020	11,089	4,590

There are approximately 0.5 million awards of our common stock available for future equity grants under our existing equity incentive plans.

Stock Options

Our time-based stock options granted under our equity plans generally vest atevenly over a ~~rate of 25% per year~~four-year period on each of the ~~first four~~applicable anniversaries of the ~~option~~ grant ~~dates. These options~~dates, and typically expire after a ten-year period. ~~We estimate forfeiture amounts based on historical patterns.~~

Our market-based options granted ~~in 2017~~generally vest atevenly over a ~~rate of 25% per year~~four-year period on each of the ~~first four~~applicable anniversaries of the grant date, provided that as of the vesting date for each vesting tranche, the closing price of ~~the Company’s~~our shares on the New York Stock Exchange is at least a specified price hurdle, defined as a ~~25%~~percentage premium to the closing stock price on the grant date. If the price hurdle is not met as of the vesting date for a vesting tranche, then ~~the vested tranche~~it shall vest and become vested shares on the last day of a period of 30 consecutive trading days during which the closing price is at least the price hurdle. These options typically expire after a ten-year period.

~~Our market-based~~

The following table presents the options ~~granted in 2016 vest at a rate of 25% per year on each of the first four anniversaries of the grant date, provided that as of the vesting date~~activity for each vesting tranche, the closing price of the Company’s shares on the New York Stock Exchange is at least a specified price hurdle, defined as a 50% premium to the closing stock price on the grant date. If the price hurdle is not met as of the vesting date for a vesting tranche, then the vested tranche shall vest and become vested shares on the last day of a period of 30 consecutive trading days during which the closing price is at least the price hurdle. These options expire after a ten-year period.

~~A summary of award activity is as follows (in thousands):~~

Stock Options

Restricted Stock

Granted

Granted

Outstanding, December 31, 2016

18,233

80

Granted

4,107

40

Exercised options or vested shares

(950
)

(16
)
Cancelled or forfeited

(358
)

—

Outstanding, September 30, 2017

21,032

104

The maximum number of shares available for future equity awards, both under the Amended and Restated 2014 Plan and the 2012 Plan, is approximately 4.6 million shares of our common stock. There are no shares available for future equity awards under the 2005 Plan.

~~Stock Options~~

~~The fair values of our standard time-based options were determined as of the date of grant using the Black-Scholes option pricing model with the following assumptions:~~

Nine months ended

September 30,

2017

2016

Risk-free interest rate

2

%

1

%
Expected life of options (in years)

6

5

Expected volatility

54

%

51

%
Expected dividend yield

—

%

—

%

~~For~~ the nine months ended September 30, 2016, certain executive and director grants were valued under the Black-Scholes option pricing model that utilized different assumptions from those used for our standard time-based options. For the time-based options granted on February 25, 2016, the assumptions were: (a) risk-free interest rate of 1%; (b) expected term of five years; (c) expected volatility of 49%; and (d) no expected dividend yield. For the time-based options granted on February 13, 2016, the assumptions were: (a) risk-free interest rate of 1%; (b) expected term of six years; (c) expected volatility of 49%; and (d) no expected dividend yield.

~~The fair values of our market-based options were determined as of the date of grant using a lattice-based option valuation model with the following assumptions:~~

2020:

Nine months ended

September 30,

2017

2016

Risk-free interest rate

3

%

2

%
Measurement period (in years)

10

10

Expected volatility

70

%

68

%
Expected dividend yield

—

%

—

%


	Number of Options (in thousands)	Weighted Average Exercise Price (per Share)		Weighted Average Life Remaining (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2019	11,969	$	5.06	5.5	$	100,143
Granted	0
Exercised	(734)	$	4.78
Canceled or forfeited	(146)	$	5.42
Outstanding, September 30, 2020	11,089	$	5.08	4.8	$	36,542
Vested and expected to vest, September 30, 2020	11,045	$	5.08	4.8	$	36,340
Exercisable, September 30, 2020	10,159	$	5.20	4.6	$	32,362

For the market-based options granted during the third quarter of 2016, the assumptions were: (a) risk-free interest rate of 2%; (b) expected term of ten years; (c) expected volatility of 69% and (d) no expected dividend yield.

~~The following tables present the options activity:~~

Weighted

Number of

Weighted Average

Average Life

Aggregate

Common Shares

Exercise Price

Remaining

Intrinsic Value

(in thousands)

(per share)

(years)

(in thousands)

Outstanding, December 31, 2016

18,233

$
6.02

6.4

$
2,387

Granted

4,107

3.38

Exercised

(950
)

4.29

Canceled or forfeited

(358
)

5.99

Outstanding, September 30, 2017

21,032

$
5.58

6.5

$
48,106

Vested and expected to vest, September 30, 2017

18,401

$
5.71

6.3

$
40,291

Exercisable, September 30, 2017

10,539

$
6.85

4.8

$
13,298

There were ~~45,750 and 4.1 million options~~no option awards granted ~~for~~during the three and nine months ended September 30, ~~2017, respectively,~~2020 and 0.2 million and 4.2 million options granted for the three and nine months ended September 30, 2016, respectively. The weighted average grant date fair value per share of options granted was $3.85 and $1.86 for the three and nine months ended September 30, 2017, respectively, and $0.89 and $0.81 for the three and nine months ended September 30, 2016, respectively.2019. The total intrinsic value of options exercised was ~~$0.8~~approximately $0.6 million and ~~$2.8~~$2.3 million for the three and nine months ended September 30, 2020, respectively, and $1.3 million and $8.8 million for the three and nine months ended September 30, ~~2017,~~2019, respectively. ~~No options were exercised during the three and nine months ended September 30, 2016.~~

There was ~~$11.7~~approximately $0.6 million in unrecognized compensation expense related to options expected to vest as of September 30, ~~2017.~~2020. This cost iswas expected to be recognized on a straight-line basis over a weighted average period of ~~2.3~~0.5 years. We recorded ~~$4.8~~approximately $1.2 million in non-cash compensation expense related to options granted that were expected to vest ~~as of~~for the nine months ended September 30, ~~2017.~~ 2020.We received ~~$2.2~~approximately $1.4 million and ~~$4.0~~$3.5 million in cash from the exercise of options for the three and nine months ended September 30, ~~2017,~~2020, respectively.

There was ~~$13.5~~approximately $1.8 million in unrecognized compensation expense related to options expected to vest as of September 30, ~~2016.~~2019. This cost was expected to be recognized on a straight-line basis over a weighted average period of ~~2.3~~1.3 years. We recorded ~~$3.8~~approximately $2.1 million in non-cash compensation expense related to options granted that were expected to vest ~~as of~~for the nine months ended September 30, ~~2016. There were no proceeds~~2019. We received approximately $1.8 million and $11.3 million in cash from the exercise of options ~~as no exercises occurred~~ for the three and nine months ended September 30, ~~2016.~~

2019.

Restricted Stock

Units

The fair value of each RSU grant is based on the market value of our common stock at the date of grant. The RSUs generally vest evenly either over a three- or four-year period on each of the applicable anniversaries of the dates of grants. The PSUs vest upon achievement of stipulated performance criteria.

The following ~~is a summary of non-vested share~~table presents our RSU awards ~~for our time-based restricted stock:~~

Weighted

Shares

Average Grant

Outstanding

Date Fair Value

(in thousands)

(per share)

Outstanding, December 31, 2016

80

$
7.12

Granted

40

6.66

Vested

(16
)

6.91

Forfeited

—

—

Outstanding, September 30, 2017

104

$
6.97

~~There were no shares and 40,000 shares of restricted stock granted~~activity for the ~~three and~~ nine months ended September 30, ~~2017, respectively,~~2020:


	Shares Outstanding (in thousands)	Weighted Average Grant Date Fair Value (per share)		Weighted Average Life Remaining (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2019	3,451	$	9.05	1.7	$	46,342
Granted	2,183	$	6.08
Vested	(852)	$	8.39
Forfeited	(192)	$	9.32
Outstanding, September 30, 2020	4,590	$	7.75	1.4	$	37,855
Vested and expected to vest, September 30, 2020	3,765	$	7.58	1.4	$	31,064

There were approximately 2.2 million and ~~there were no~~2.0 million shares of ~~restricted stock~~RSU awards granted for the ~~three and~~ nine months ended September 30, ~~2016. The total fair value of restricted stock~~2020 and 2019, respectively. There were approximately 852,469 and 287,929 RSU awards that vested ~~was $37,958 and $121,979 for~~during the ~~three and~~ nine months ended September 30, ~~2017, respectively,~~2020 and ~~$23,393 and $74,100 for the three and nine months ended September 30, 2016,~~2019, respectively.

There was ~~$0.7~~approximately $18.1 million and $15.3 million in unrecognized compensation expense related to ~~shares of time based restricted stock~~RSU awards expected to vest as of September 30, ~~2017. This cost is expected to be recognized on a straight-line basis over a weighted average period of 1.2 years. There were 16,071 shares of restricted stock that vested~~2020 and ~~we recorded $0.3 million in non-cash compensation expense related to the restricted stock granted that was expected to vest during the nine months ended September 30, 2017.~~

~~There was $1.3 million in unrecognized compensation expense related to shares of time-based restricted shares expected to vest as of September 30, 2016.~~2019, respectively. This cost was expected to be recognized on a straight-line basis over a weighted average period of ~~1.9 years. There were 30,000 shares~~2.0 and 2.7 years as of ~~time-based restricted shares vested~~September 30, 2020 and we2019, respectively. We recorded ~~$0.3~~approximately $8.9 million and $4.0 million in non-cash compensation expense related to the ~~restricted stock granted that was expected to vest~~RSU awards during the nine months ended September 30, ~~2016.~~

2020 and 2019, respectively.

~~16.~~

~~INCOME TAXES~~

17. INCOME TAXES

The income tax provision for the three months ended September 30, 2020, reflected an effective income tax rate of ~~negative 20.0% and negative 15.6%~~205.4%, which was greater than the statutory federal rate of 21.0%, primarily due to an increase in our valuation allowance as a result of a reduction of certain indefinite-lived deferred tax assets that can be offset against our indefinite-lived deferred tax liabilities. The income tax benefit for the nine months ended September 30, 2020 reflected an effective income tax rate of 4.0%, which was less than the statutory federal rate of 21.0%, primarily due to an increase in our valuation allowance due to book loss incurred during the period, partially offset by certain indefinite-lived deferred tax assets that can be offset against our indefinite lived deferred tax liabilities. The income tax benefit for the three and nine months ended September 30, ~~2017,~~2019 reflected an effective income tax rate of negative 16.5% and negative 15.3%, respectively, which was less than the statutory federal rate of ~~35.0%~~21.0%, primarily due to ~~an increase~~a decrease in our valuation allowance for deferred tax assets, ~~partially offset by state taxes,~~the benefit from stock option exercises and the benefit from a research credit. The income tax benefit reflected an effective income tax rate of 37.7% and 39.4% for the three and nine months ended September 30, 2016, respectively, which was higher than the statutory federal rate of 35.0%, primarily due to state taxes, the lower foreign tax rate applicable to our foreign source income, and the benefit from a research credit, partially offset by non-statutory stock options that expired in the year.

~~During the third quarter of 2017, we increased our valuation allowance by approximately $2.4 million for our deferred tax assets.~~

We have analyzed filing positions in all of the federal, state, and foreign jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. As of September 30, ~~2017, the Company~~2020, we recorded ~~$0.8~~approximately $1.4 million of unrecognized tax benefits, all of which would impact our effective tax rate, if recognized. We do not anticipate that our unrecognized tax benefits will materially change within the next 12 months. ~~The Company has~~We have not accrued any penalties and interest for ~~its~~our unrecognized tax benefits. Other than the unrecognized tax benefit recorded, we believe that our income tax filing positions and deductions will be sustained upon audit, and we do not anticipate any other adjustments that will result in a material change to our financial position. We may, from time to time, be assessed interest or penalties by tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. Our policy for recording interest and penalties associated with audits and unrecognized tax benefits is to record such items as a component of income tax in our Statements of ~~Loss.~~

Operations.

~~17.~~

~~SEGMENT INFORMATION~~

For interim income tax reporting, the Company estimates its annual effective tax rate and applies it to its year-to-date ordinary income. Our projection of certain indefinite lived deferred tax assets affecting the valuation allowance is particularly dependent upon current and anticipated future revenue and cash outflows. However, we could be impacted by unanticipated developments or by events beyond our control, including developments related to the COVID-19 pandemic. Future changes to estimates used in this projection could result in material changes in the annual effective tax rate with a corresponding impact on the provision for income taxes.

As discussed in “Note 1 — Business,” in late March 2020, the CARES Act was enacted in light of the COVID-19 pandemic. We are participating in certain of the relief measures provided by various income and payroll tax provisions in the CARES Act and we are continuing to analyze its impact on our tax related accounts.

18. SEGMENT INFORMATION

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-making group ~~in deciding how to allocate resources and in assessing performance.~~(the “CODM”). Our ~~chief operating decision-making group~~CODM consists of the Chief Executive Officer, the President and Chief Operating Officer, and the Chief Financial Officer. ~~This group manages the business,~~Our CODM allocates resources and measures profitability based on our operating ~~segments. Our operating~~ segments, which are managed and reviewed separately, as each represents products and services that can be sold separately to our customers.

Our ~~chief operating decision-making group has determined the following to be the operating~~ segments are monitored by management for ~~which we conduct business: (a) Games and (b) Payments.~~ performance against our internal forecasts.

We have reported our financial performance based on our segments in both the current and prior periods. ~~Each of these~~Our CODM determined that our operating segments ~~is monitored by our management~~ for ~~performance against its internal forecast~~conducting business are: (i) Games and ~~is consistent with our internal management reporting.~~

(ii) FinTech:

•The Games segment provides solutions directly to gaming establishments to offer their patrons gaming ~~entertainment-related~~entertainment- related experiences including: leased gaming equipment; sales ~~and maintenance related services~~ of gaming equipment; gaming systems; digital online solutions; and ancillary products and services.

•The FinTech segment provides solutions directly to gaming establishments to offer their patrons cash access-related services and products, including: access to cash and cashless funding at gaming facilities via debit withdrawals (cash dispensing and cashless); credit card cash access transactions and POS debit card cash access transactions; check warranty services; kiosks for cash access and other services; self-service enrollment, player loyalty and marketing equipment; maintenance services; compliance, audit, and data software; casino credit data and reporting services; and other ancillary offerings.

•

The Payments segment provides solutions directly to gaming establishments to offer their patrons cash access-related services and products, including: access to cash at gaming facilities via ATM cash withdrawals, credit card cash access transactions and POS debit card cash access transactions; check-related services; fully integrated kiosks and maintenance services; compliance, audit and data software; casino credit data and reporting services and other ancillary offerings.

Corporate overhead expenses have been allocated to the segments either through specific identification or based on a reasonable methodology. In addition, we record depreciation and amortization expenses to the business segments.

Our business is predominantly domestic with no specific regional concentrations and no significant assets in foreign locations.

~~The accounting policies of the operating segments are generally the same as those described in the summary of significant accounting policies.~~

The following tables present segment information (in thousands):

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2017		2016			2017		2016				Three Months Ended September 30,				Nine Months Ended September 30,
												2020		2019		2020		2019
Games											Games
Revenues											Revenues
Games	$	55,452	$	56,218		$	165,832	$	158,660
Payments		191,870		165,959			561,257		483,286
Gaming operations											Gaming operations	$	46,968	$	48,515	$	106,513	$	138,377
Gaming equipment and systems											Gaming equipment and systems	10,229		19,584		28,795		66,083
Gaming other											Gaming other	44		1,174		76		1,619
Total revenues	$	247,322	$	222,177		$	727,089	$	641,946		Total revenues	$	57,241	$	69,273	$	135,384	$	206,079
Operating income (loss)
Games	$	1,787	$	(4,183	)	$	9,301	$	(14,638	)
Payments		18,008		15,755			54,389		36,054
Total operating income	$	19,795	$	11,572		$	63,690	$	21,416
Costs and expenses											Costs and expenses
Cost of revenues(1)											Cost of revenues(1)
Gaming operations											Gaming operations	4,245		4,942		10,471		12,792
Gaming equipment and systems											Gaming equipment and systems	5,730		11,126		16,625		37,087
Gaming other											Gaming other	0		1,117		456		1,464
Cost of revenues											Cost of revenues	9,975		17,185		27,552		51,343
Operating expenses											Operating expenses	13,078		13,968		50,597		44,599
Research and development											Research and development	5,003		6,369		14,819		17,481
Depreciation											Depreciation	14,777		14,420		44,349		41,283
Amortization											Amortization	14,838		14,258		45,738		42,644
Total costs and expenses											Total costs and expenses	57,671		66,200		183,055		197,350
Operating (loss) income											Operating (loss) income	$	(430)	$	3,073	$	(47,671)	$	8,729

At September 30, 2017

At December 31, 2016

Total assets

Games

$
927,888

$
894,213

Payments

497,717

513,950

Total assets

$
1,425,605

$
1,408,163

(1) Exclusive of depreciation and amortization.

* Rounding may cause variances.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
FinTech
Revenues
Cash access services	$	33,979	$	43,152	$	80,986	$	123,680
Equipment	6,248		10,188		16,004		25,051
Information services and other	14,630		11,956		31,748		33,240
Total revenues	$	54,857	$	65,296	$	128,738	$	181,971
Costs and expenses
Cost of revenues(1)
Cash access services	1,161		4,112		5,227		9,777
Equipment	3,548		5,957		9,452		14,884
Information services and other	859		1,024		2,057		2,952
Cost of revenues	5,568		11,093		16,736		27,613
Operating expenses	21,850		23,663		64,831		66,847
Research and development	2,030		1,827		6,138		4,918
Depreciation	1,387		1,595		4,352		4,779
Amortization	3,855		2,898		11,574		8,499
Total costs and expenses	34,690		41,076		103,631		112,656
Operating income	$	20,167	$	24,220	$	25,107	$	69,315

(1) Exclusive of depreciation and amortization.

* Rounding may cause variances.


	At September 30,		At December 31,
	2020		2019
Total assets
Games	$	837,357	$	902,888
FinTech	620,847		726,335
Total assets	$	1,458,204	$	1,629,223

Major Customers. ~~For the three and nine months ended September 30, 2017 and 2016, no single~~No single customer accounted for more than 10% of our ~~revenues. Our five largest customers accounted for approximately 25% and 26%~~revenues for the three and nine months ended September 30, ~~2017, respectively,~~2020 and ~~30%~~2019. Our five largest customers accounted for approximately 17% and ~~31%~~16% of our revenues for the three and nine months ended September 30, ~~2016, respectively.~~

~~18.~~

~~CONDENSED CONSOLIDATING FINANCIAL INFORMATION~~

~~We conduct substantially all~~2020, respectively, and approximately 15% of our business through our U.S. and foreign subsidiaries. Everi Payments’ (“Subsidiary Issuer”) obligations under the Unsecured Notes are fully and unconditionally guaranteed, subject to certain customary release provisions, on a joint and several basis by Holdings (“Parent”) and substantially all of our 100%-owned U.S. subsidiaries other than Subsidiary Issuer (the “Guarantor Subsidiaries” and, together with Parent, the “Guarantors” and each a “Guarantor”). The guarantees of our Unsecured Notes will be released under the following customary circumstances: (i) the sale or disposition of all or substantially all of the assets of the Guarantor (by way of merger, consolidation, or otherwise) to a person that is not (either before or after giving effect to such transaction) Parent, Subsidiary Issuer or a restricted subsidiary; (ii) the sale or disposition of sufficient capital stock of the Guarantor to a person that is not (either before or after giving effect to such transaction) Parent, Subsidiary Issuer or a restricted subsidiary and the Guarantor ceases to be a restricted subsidiary of Subsidiary Issuer as a result of the sale or other disposition; (iii) the designation of the Guarantor as an unrestricted subsidiary in accordance with the indenture

~~governing the Unsecured Notes; or (iv) the legal or covenant defeasance of the Unsecured Notes or the satisfaction and discharge of the indenture governing the Unsecured Notes.~~

Presented below is condensed consolidating financial information for (a) Parent, (b) Subsidiary Issuer, (c) the Guarantor Subsidiaries and (d) our U.S. subsidiaries that are not Guarantor Subsidiaries and our foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) as of September 30, 2017 and December 31, 2016 andrevenues for the three and nine months ended September 30, 2017 and 2016. The condensed consolidating financial information has been presented to show the nature of assets held and the results of operations and cash flows of Parent, Subsidiary Issuer, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries assuming that the guarantee structure of the Unsecured Notes had been in effect at the beginning of the periods presented.

Three Months Ended September 30, 2017

Parent

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

Total

Revenues

Games

$
—

$
—

$
55,331

$
1,739

$
(1,618
)

$
55,452

Payments

—

175,793

7,841

9,040

(804
)

191,870

Total revenues

—

175,793

63,172

10,779

(2,422
)

247,322

Costs and expenses

Games cost of revenue (exclusive of depreciation and amortization)

—

—

13,857

1,106

(1,143
)

13,820

Payments cost of revenue (exclusive of depreciation and amortization)

—

140,299

2,478

7,061

—

149,838

Operating expenses

—

18,519

10,365

1,858

(1,279
)

29,463

Research and development

—

—

4,542

3

—

4,545

Depreciation

—

1,615

10,740

184

—

12,539

Amortization

—

2,260

14,579

483

—

17,322

Total costs and expenses

—

162,693

56,561

10,695

(2,422
)

227,527

Operating income

—

13,100

6,611

84

—

19,795

Other expenses (income)

Interest (income) expense, net

—

(292
)

23,406

254

—

23,368

Income (loss) from subsidiaries

4,289

(2,898
)

(39
)

—

(1,352
)

—

Total other expenses (income)

4,289

(3,190
)

23,367

254

(1,352
)

23,368

(Loss) income before income tax

(4,289
)

16,290

(16,756
)

(170
)

1,352

(3,573
)
Income tax (benefit) provision

—

(1,055
)

1,708

63

—

716

Net (loss) income

(4,289
)

17,345

(18,464
)

(233
)

1,352

(4,289
)
Foreign currency translation

602

—

—

602

(602
)

602

Comprehensive (loss) income

$
(3,687
)

$
17,345

$
(18,464
)

$
369

$
750

$
(3,687
)
2019, respectively.

Three Months Ended September 30, 2016

Parent

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

Total

Revenues

Games

$
—

$
—

$
56,218

$
—

$
—

$
56,218

Payments

—

153,145

7,519

5,417

(122
)

165,959

Total revenues

—

153,145

63,737

5,417

(122
)

222,177

Costs and expenses

Games cost of revenue (exclusive of depreciation and amortization)

—

—

15,467

—

—

15,467

Payments cost of revenue (exclusive of depreciation and amortization)

—

122,316

2,206

2,689

—

127,211

Operating expenses

—

16,491

10,148

479

(122
)

26,996

Research and development

—

—

4,460

—

—

4,460

Depreciation

—

1,892

10,447

28

—

12,367

Amortization

—

3,128

20,439

537

—

24,104

Total costs and expenses

—

143,827

63,167

3,733

(122
)

210,605

Operating income

—

9,318

570

1,684

—

11,572

Other expenses (income)

Interest expense, net of interest income

—

1,371

23,399

45

—

24,815

Loss (income) from subsidiaries

8,254

(4,306
)

—

—

(3,948
)

—

Total other expenses (income)

8,254

(2,935
)

23,399

45

(3,948
)

24,815

(Loss) income before income tax

(8,254
)

12,253

(22,829
)

1,639

3,948

(13,243
)
Income tax provision (benefit)

—

3,849

(9,261
)

423

—

(4,989
)
Net (loss) income

(8,254
)

8,404

(13,568
)

1,216

3,948

(8,254
)
Foreign currency translation

(394
)

—

—

(394
)

394

(394
)
Comprehensive (loss) income

$
(8,648
)

$
8,404

$
(13,568
)

$
822

$
4,342

$
(8,648
)

Nine Months Ended September 30, 2017

Non-

Subsidiary

Guarantor

Guarantor

Parent

Issuer

Subsidiaries

Subsidiaries

Eliminations

Total

Revenues

Games

$
—

$
—

$
165,551

$
5,445

$
(5,164
)

$
165,832

Payments

—

515,853

23,323

25,409

(3,328
)

561,257

Total revenues

—

515,853

188,874

30,854

(8,492
)

727,089

Costs and expenses

Games cost of revenue (exclusive of depreciation and amortization)

—

—

39,659

2,945

(3,101
)

39,503

Payments cost of revenue (exclusive of depreciation and amortization)

—

410,038

7,167

18,899

—

436,104

Operating expenses

—

53,413

32,463

6,750

(5,391
)

87,235

Research and development

—

—

13,676

30

—

13,706

Depreciation

—

5,057

29,292

416

—

34,765

Amortization

—

7,756

42,885

1,445

—

52,086

Total costs and expenses

—

476,264

165,142

30,485

(8,492
)

663,399

Operating income

—

39,589

23,732

369

—

63,690

Other expenses (income)

Interest expense, net of interest income

—

2,216

69,455

635

—

72,306

Loss (income) from subsidiaries

26,854

(8,884
)

(121
)

—

(17,849
)

—

Loss on extinguishment of debt

—

14,615

—

—

—

14,615

Total other expenses (income)

26,854

7,947

69,334

635

(17,849
)

86,921

(Loss) income before income tax

(26,854
)

31,642

(45,602
)

(266
)

17,849

(23,231
)
Income tax (benefit) provision

—

(1,701
)

5,108

216

—

3,623

Net (loss) income

(26,854
)

33,343

(50,710
)

(482
)

17,849

(26,854
)
Foreign currency translation

1,710

—

—

1,710

(1,710
)

1,710

Comprehensive (loss) income

$
(25,144
)

$
33,343

$
(50,710
)

$
1,228

$
16,139

$
(25,144
)

Nine Months Ended September 30, 2016

Non-

Subsidiary

Guarantor

Guarantor

Parent

Issuer

Subsidiaries

Subsidiaries

Eliminations

Total

Revenues

Games

$
—

$
—

$
158,660

$
—

$
—

158,660

Payments

—

447,762

22,622

13,769

(867
)

483,286

Total revenues

—

447,762

181,282

13,769

(867
)

641,946

Costs and expenses

Games cost of revenue (exclusive of depreciation and amortization)

—

—

36,871

—

—

36,871

Payments cost of revenue (exclusive of depreciation and amortization)

—

359,265

6,754

7,347

—

373,366

Operating expenses

—

53,912

33,230

1,460

(867
)

87,735

Research and development

—

—

14,499

—

—

14,499

Depreciation

—

6,376

30,707

89

—

37,172

Amortization

—

9,370

59,830

1,687

—

70,887

Total costs and expenses

—

428,923

181,891

10,583

(867
)

620,530

Operating income (loss)

—

18,839

(609
)

3,186

—

21,416

Other expenses (income)

Interest expense, net of interest income

—

4,880

69,500

168

—

74,548

Loss (income) from subsidiaries

32,202

(11,120
)

—

—

(21,082
)

—

Total other expenses (income)

32,202

(6,240
)

69,500

168

(21,082
)

74,548

(Loss) income before income tax

(32,202
)

25,079

(70,109
)

3,018

21,082

(53,132
)
Income tax provision (benefit)

—

5,785

(27,642
)

927

—

(20,930
)
Net (loss) income

(32,202
)

19,294

(42,467
)

2,091

21,082

(32,202
)
Foreign currency translation

(1,314
)

—

—

(1,314
)

1,314

(1,314
)
Comprehensive (loss) income

$
(33,516
)

$
19,294

$
(42,467
)

$
777

$
22,396

$
(33,516
)
19. SUBSEQUENT EVENTS

At September 30, 2017

Parent

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

Total

ASSETS

Current assets

Cash and cash equivalents

$
—

$
85,633

$
6,587

$
16,251

$
—

$
108,471

Settlement receivables

—

112,879

—

14,564

—

127,443

Trade and other receivables, net

—

6,370

35,415

3,186

—

44,971

Inventory

—

5,550

18,240

—

—

23,790

Prepaid expenses and other assets

—

6,078

6,691

9,769

—

22,538

Intercompany balances

—

167,488

207,021

1,531

(376,040
)

—

Total current assets

—

383,998

273,954

45,301

(376,040
)

327,213

Non-current assets

Property, equipment and leased assets, net

—

13,987

93,258

2,154

—

109,399

Goodwill

—

151,417

488,511

665

—

640,593

Other intangible assets, net

—

20,330

314,348

3,396

—

338,074

Other receivables

—

1,220

1,656

—

—

2,876

Investment in subsidiaries

(123,760
)

182,365

1,007

79

(59,691
)

—

Deferred tax asset

—

34,386

—

—

(34,386
)

—

Other assets

—

4,632

2,635

183

—

7,450

Intercompany balances

—

1,148,223

—

—

(1,148,223
)

—

Total non-current assets

(123,760
)

1,556,560

901,415

6,477

(1,242,300
)

1,098,392

Total assets

$
(123,760
)

$
1,940,558

$
1,175,369

$
51,778

$
(1,618,340
)

$
1,425,605

LIABILITIES AND STOCKHOLDERS’
(DEFICIT) EARNINGS

Current liabilities

Settlement liabilities

$
—

$
189,738

$
202

$
7,554

$
—

$
197,494

Accounts payable and accrued expenses

—

77,194

46,314

3,117

—

126,625

Current portion of long-term debt

—

8,200

—

—

—

8,200

Intercompany balances

—

204,387

154,489

17,164

(376,040
)

—

Total current liabilities

—

479,519

201,005

27,835

(376,040
)

332,319

Non-current liabilities

Deferred tax liability

—

—

95,171

—

(34,386
)

60,785

Long-term debt, less current portion

—

1,130,671

—

—

—

1,130,671

Other accrued expenses and liabilities

—

2,973

22,661

—

—

25,634

Intercompany balances

—

—

1,148,223

—

(1,148,223
)

—

Total non-current liabilities

—

1,133,644

1,266,055

—

(1,182,609
)

1,217,090

Total liabilities

—

1,613,163

1,467,060

27,835

(1,558,649
)

1,549,409

Stockholders’ (deficit) equity

Common stock

92

—

—

—

—

92

Additional paid-in capital

273,906

93,091

6,841

21,109

(121,041
)

273,906

(Accumulated deficit) retained earnings

(221,152
)

234,659

(297,969
)

4,279

59,031

(221,152
)
Accumulated other comprehensive loss

(355
)

(355
)

(563
)

(1,445
)

2,319

(399
)
Treasury stock, at cost

(176,251
)

—

—

—

—

(176,251
)
Total stockholders’ (deficit) equity

(123,760
)

327,395

(291,691
)

23,943

(59,691
)

(123,804
)
Total liabilities and stockholders’ (deficit) equity

$
(123,760
)

$
1,940,558

$
1,175,369

$
51,778

$
(1,618,340
)

$
1,425,605

At December 31, 2016

Parent

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

Total

ASSETS

Current assets

Cash and cash equivalents

$
—

$
88,648

$
9,103

$
21,300

$
—

$
119,051

Settlement receivables

—

122,222

—

6,599

—

128,821

Trade and other receivables, net

—

9,001

41,743

5,907

—

56,651

Inventory

—

6,009

13,059

—

—

19,068

Prepaid expenses and other assets

—

5,359

3,807

8,882

—

18,048

Intercompany balances

—

106,729

188,028

1,461

(296,218
)

—

Total current assets

—

337,968

255,740

44,149

(296,218
)

341,639

Non-current assets

Property, equipment and leased assets, net

—

15,144

81,993

1,302

—

98,439

Goodwill

—

151,417

488,512

617

—

640,546

Other intangible assets, net

—

23,901

289,338

4,758

—

317,997

Other receivables

—

2,019

—

1

—

2,020

Investment in subsidiaries

(107,751
)

171,979

1,293

86

(65,607
)

—

Deferred tax asset

—

37,578

—

—

(37,578
)

—

Other assets

—

4,940

2,286

296

—

7,522

Intercompany balances

—

1,143,115

7,851

—

(1,150,966
)

—

Total non-current assets

(107,751
)

1,550,093

871,273

7,060

(1,254,151
)

1,066,524

Total assets

$
(107,751
)

$
1,888,061

$
1,127,013

$
51,209

$
(1,550,369
)

$
1,408,163

LIABILITIES AND STOCKHOLDERS’
(DEFICIT) EQUITY

Current liabilities

Settlement liabilities

$
—

$
225,170

$
268

$
13,685

$
—

$
239,123

Accounts payable and accrued expenses

—

64,192

28,970

1,229

—

94,391

Current portion of long-term debt

—

10,000

—

—

—

10,000

Intercompany balances

—

189,488

101,387

5,343

(296,218
)

—

Total current liabilities

—

488,850

130,625

20,257

(296,218
)

343,514

Non-current liabilities

Deferred tax liability

—

—

95,189

—

(37,578
)

57,611

Long-term debt, less current portion

—

1,111,880

—

—

—

1,111,880

Other accrued expenses and liabilities

—

2,583

368

—

—

2,951

Intercompany balances

—

—

1,143,116

7,850

(1,150,966
)

—

Total non-current liabilities

—

1,114,463

1,238,673

7,850

(1,188,544
)

1,172,442

Total liabilities

—

1,603,313

1,369,298

28,107

(1,484,762
)

1,515,956

Stockholders’ (deficit) equity

Common stock

91

—

—

—

—

91

Additional paid-in capital

264,755

85,499

5,314

21,093

(111,906
)

264,755

(Accumulated deficit) retained earnings

(194,299
)

201,316

(247,273
)

5,168

40,789

(194,299
)
Accumulated other comprehensive loss

(2,067
)

(2,067
)

(326
)

(3,159
)

5,510

(2,109
)
Treasury stock, at cost

(176,231
)

—

—

—

—

(176,231
)
Total stockholders’ (deficit) equity

(107,751
)

284,748

(242,285
)

23,102

(65,607
)

(107,793
)
Total liabilities and stockholders’ (deficit) equity

$
(107,751
)

$
1,888,061

$
1,127,013

$
51,209

$
(1,550,369
)

$
1,408,163

Nine Months Ended September 30, 2017

Parent

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

Total

Cash flows from operating activities

Net (loss) income

$
(26,854
)

$
33,343

$
(50,710
)

$
(482
)

$
17,849

$
(26,854
)
Adjustments to reconcile net (loss) income
to cash provided by (used in) operating
activities:

Depreciation and amortization

—

12,813

72,177

1,861

—

86,851

Amortization of financing costs

—

4,567

—

—

—

4,567

Loss on sale or disposal of assets

—

347

1,233

—

—

1,580

Accretion of contract rights

—

—

5,845

—

—

5,845

Provision for bad debts

—

(136
)

8,082

—

—

7,946

Deferred income taxes

—

3,193

(19
)

—

—

3,174

Reserve for obsolescence

—

265

(219
)

—

—

46

Loss on extinguishment of debt

—

14,615

—

—

—

14,615

Equity in loss (income) of subsidiaries

26,854

(8,884
)

(121
)

—

(17,849
)

—

Stock-based compensation

—

3,684

1,441

—

—

5,125

Changes in operating assets and liabilities:

Net settlement receivables and liabilities

—

(26,089
)

(66
)

(14,075
)

—

(40,230
)
Other changes in operating assets and liabilities

—

(35,336
)

34,422

8,011

—

7,097

Net cash provided by (used in) operating activities

—

2,382

72,065

(4,685
)

—

69,762

Cash flows from investing activities

Capital expenditures

—

(7,191
)

(61,474
)

(1,392
)

—

(70,057
)
Proceeds from sale of fixed assets

—

4

—

—

—

4

Placement fee agreements

—

—

(13,132
)

—

—

(13,132
)
Changes in restricted cash

—

96

(245
)

—

—

(149
)
Intercompany investing activities

(4,025
)

3,996

270

(76
)

(165
)

—

Net cash used in investing activities

(4,025
)

(3,095
)

(74,581
)

(1,468
)

(165
)

(83,334
)
Cash flows from financing activities

Repayments of new credit facility

—

(2,050
)

—

—

—

(2,050
)
Repayments of prior credit facility

—

(465,600
)

—

—

—

(465,600
)
Repayments of secured notes

—

(335,000
)

—

—

—

(335,000
)
Proceeds from current credit facility

—

820,000

—

—

—

820,000

Debt issuance costs and discounts

—

(19,748
)

—

—

—

(19,748
)
Proceeds from exercise of stock options

4,046

—

—

—

—

4,046

Purchase of treasury stock

(21
)

—

—

—

—

(21
)
Intercompany financing activities

—

96

—

(261
)

165

—

Net cash provided by (used in) financing activities

4,025

(2,302
)

—

(261
)

165

1,627

Effect of exchange rates on cash

—

—

—

1,365

—

1,365

Cash and cash equivalents

Net decrease for the period

—

(3,015
)

(2,516
)

(5,049
)

—

(10,580
)
Balance, beginning of the period

—

88,648

9,103

21,300

—

119,051

Balance, end of the period

$
—

$
85,633

$
6,587

$
16,251

$
—

$
108,471

Nine Months Ended September 30, 2016

Parent

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

Total

Cash flows from operating activities

Net (loss) income

$
(32,202
)

$
19,294

$
(42,467
)

$
2,091

$
21,082

$
(32,202
)
Adjustments to reconcile net (loss) income
to cash provided by operating
activities:

Depreciation and amortization

—

15,746

90,537

1,776

—

108,059

Amortization of financing costs

—

5,023

—

—

—

5,023

Loss on sale or disposal of assets

—

1,349

1,205

—

—

2,554

Accretion of contract rights

—

—

6,521

—

—

6,521

Provision for bad debts

—

18

7,174

—

—

7,192

Deferred income taxes

—

10,546

(32,805
)

—

—

(22,259
)
Write-down of assets

—

—

4,289

—

—

4,289

Reserve for obsolescence

—

484

458

—

—

942

Equity in loss (income) of subsidiaries

32,202

(11,120
)

—

—

(21,082
)

—

Stock-based compensation

—

2,910

1,236

—

—

4,146

Other non-cash items

—

—

—

—

—

—

Changes in operating assets and liabilities:

Net settlement receivables and liabilities

—

(16,538
)

6

3,690

—

(12,842
)
Other changes in operating assets and liabilities

1

(27,155
)

41,544

(5
)

—

14,385

Net cash provided by operating activities

1

557

77,698

7,552

—

85,808

Cash flows from investing activities

Capital expenditures

—

(7,330
)

(59,622
)

(73
)

—

(67,025
)
Acquisitions, net of cash acquired

—

(694
)

—

—

—

(694
)
Proceeds from sale of fixed assets

—

4,608

—

—

—

4,608

Placement fee agreements

—

—

(11,187
)

—

—

(11,187
)
Changes in restricted cash

—

88

—

—

—

88

Intercompany investing activities

10

499

175

(67
)

(617
)

—

Net cash provided by (used in) investing activities

10

(2,829
)

(70,634
)

(140
)

(617
)

(74,210
)
Cash flows from financing activities

Repayments of prior credit facility

—

(21,900
)

—

—

—

(21,900
)
Debt issuance costs and discounts

—

(480
)

—

—

—

(480
)
Purchase of treasury stock

(17
)

—

—

—

—

(17
)
Intercompany financing activities

—

68

—

(685
)

617

—

Net cash (used in) provided by financing activities

(17
)

(22,312
)

—

(685
)

617

(22,397
)
Effect of exchange rates on cash

—

—

—

(743
)

—

(743
)
Cash and cash equivalents

Net (decrease) increase for the period

(6
)

(24,584
)

7,064

5,984

—

(11,542
)
Balance, beginning of the period

6

87,078

3,900

11,046

—

102,030

Balance, end of the period

$
—

$
62,494

$
10,964

$
17,030

$
—

$
90,488

~~19.~~

~~SUBSEQUENT EVENTS~~

As of the filing date, we had not identified, and were not aware of, any subsequent event for the period.

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

In this filing, we refer to: (i) our unaudited condensed consolidated financial statements and notes thereto as our “Financial Statements,” (ii) our Unaudited Condensed Consolidated Statements of ~~Loss~~Operations and Comprehensive ~~Loss~~(Loss) Income as our “Statements of ~~Loss,~~Operations,” (iii) our Unaudited Condensed Consolidated Balance Sheets as our “Balance Sheets,” and (iv) our ~~unaudited condensed consolidated results~~Management’s Discussion and Analysis of ~~operations~~Financial Condition and Results of Operations as our “Results of Operations.”

Cautionary Information Regarding Forward-Looking Statements

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “goal,” “target,” “future,” “estimate,” “expect,” “anticipate,” “intend,” “aim to,” “plan,” “believe,” ~~“expect,” “intend,” “estimate,~~“seek,” “project,” “may,” “should,” ~~“will,~~“designed to,” ~~“likely,” “will likely result,” “will continue,” “future,” “plan,” “target,” “forecast,” “goal,” “observe,” “seek,” “strategy”~~or “will” and ~~other words~~similar expressions to identify forward-looking statements. Examples of forward-looking statements include, among others, statements regarding trends, developments, and ~~terms~~uncertainties impacting our business, as well as statements regarding expectations for the re-opening of ~~similar meaning. These forward-looking~~casinos including the related public health confidence and availability of discretionary spending income of casino patrons and our ability to withstand the current disruption, to further product innovation, to address customer needs in the new operating environment, to regain revenue, earnings, and cash flow momentum and to enhance shareholder value in the long-term. Forward-looking statements are subject to ~~various~~additional risks and uncertainties, ~~that~~including those set forth under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our current and periodic reports filed with the Securities and Exchange Commission (the “SEC”), including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2019 (the “Annual Report”) and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2020 (the “Q1 Quarterly Report”) and June 30, 2020 (the “Q2 Quarterly Report”), and are based on information available to us on the date hereof. Such risks and uncertainties could cause actual results to differ materially from those projected or assumed, including, but not limited to, the following: our ability to generate profits in the ~~future;~~future and to create incremental value for shareholders; our ability to execute on mergers, acquisitions and/or strategic alliances, including our ability to integrate and operate such acquisitions consistent with our ~~forecasts;~~forecasts in order to achieve future growth; our ability to execute on key initiatives and deliver ongoing improvements; expectations regarding ~~our existing and future~~growth for the Company’s installed base and daily win per ~~day;~~unit; expectations regarding placement fee arrangements; inaccuracies in underlying operating assumptions; the impact of the ongoing Coronavirus Disease 2019 (“COVID-19”) global pandemic on our business, operations and financial condition, including (i) actions taken by federal, state, tribal and municipal governmental and regulatory agencies to contain the COVID-19 public health emergency or mitigate its impact, (ii) the direct and indirect economic effects of COVID-19 and measures to contain it, including directives, orders or similar actions by federal, state, tribal and municipal governmental and regulatory agencies to regulate freedom of movement and business operations such as travel restrictions, border closures, business closures, limitations on public gatherings, quarantines and shelter-in-place orders as well as re-opening guidance related to capacity restrictions for casino operations, social distancing, hygiene and re-opening safety protocols, and (iii) potential adverse reactions or changes to employee relationships in response to the furlough and salary reduction actions taken in response to COVID-19; changes in global market, business, and regulatory conditions arising as a result of the COVID-19 global pandemic; our history of net losses and our ability to generate profits in the future; our substantial leverage and the related covenants that restrict our operations; our ability to generate sufficient cash to service all of our indebtedness, fund working capital, and capital expenditures; our ability to withstand unanticipated impacts of a pandemic outbreak of uncertain duration; our ability to withstand the loss of revenue during the closure of our customers’ facilities; our ability to maintain our current customers; expectations regarding customers’ preferences and demands for future ~~gaming~~product and service offerings; ~~expectations regarding our product portfolio;~~ the overall growth of the gaming industry, if any; our ability to replace revenue associated with terminated contracts; margin degradation from contract renewals; our ability to comply with the Europay, MasterCard, and Visa global standard for cards equipped with security chip technology; our ability to successfully introduce new products and services, including third-party licensed content; gaming establishment and patron preferences; ~~expenditures~~failure to control product development costs and ~~product development;~~create successful new products; anticipated sales performance; ~~employee turnover;~~our ability to prevent, mitigate, or timely recover from cybersecurity breaches, attacks, and compromises; national and international economic and industry conditions; changes in gaming regulatory, card association, and statutory requirements; regulatory and licensing ~~difficulties;~~difficulties, competitive ~~pressures;~~pressures and changes in the competitive environment; operational limitations; gaming market contraction; changes to tax laws; uncertainty of litigation outcomes; interest rate fluctuations; business prospects; unanticipated expenses or capital needs; technological ~~obsolescence;~~obsolescence and our ability to adapt to evolving technologies; our ability to comply with our debt covenants and service outstanding debt; employee ~~turnover~~turnover; and other statements that are not historical facts. If any of these assumptions prove to be incorrect, the results contemplated by the forward-looking statements regarding our future results of operations are unlikely to be realized.

These cautionary statements qualify our forward-looking statements, and you are cautioned not to place undue reliance on ~~these~~such forward-looking statements. Any forward-looking statement contained herein speaks only as of the date on which it is made, and we ~~disclaim any intention or~~do not intend, and assume no obligation, to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report ~~on Form 10-K for the fiscal year ended December 31, 2016~~ and the information included in our other press releases, reports, and other filings with the ~~Securities and Exchange Commission (the “SEC”).~~SEC. Understanding the information contained in these filings is important in order to fully understand our reported financial results and our business outlook for future periods.

Overview

Everi is a leading supplier of imaginative entertainment and trusted technology solutions for the casino and digital gaming industry. Everi’s mission is to transform the casino floor through innovative gaming and financial technology and loyalty solutions. With a focus on both land-based and digital gaming operators and players, the Company develops entertaining games and gaming machines, gaming systems and services that facilitate memorable player experiences, and is a preeminent and comprehensive provider of financial products and services that offer convenient and secure cash and cashless-based financial transactions, self-service player loyalty tools and applications, and intelligence software and other intuitive solutions that improve casino operational efficiencies and fulfill regulatory compliance requirements.

Everi Holdings ~~Inc. (formerly known as Global Cash Access Holdings, Inc.) (“Everi Holdings,” “Holdings” or “Everi”) is a holding company, the assets~~reports its results of ~~which are the issued~~operations based on two operating segments: Games and ~~outstanding shares of capital stock of each of~~ FinTech.

Everi Games ~~Holding Inc. (formerly known as Multimedia Games Holding Company, Inc.) (“Everi Games Holding”), which owns all of the issued~~provides gaming operators with gaming technology products and ~~outstanding shares of capital stock of Everi Games Inc. (formerly known as Multimedia Games, Inc.) (“Everi Games”~~services, including: (i) gaming machines, primarily comprising Class II and Class III slot machines placed under participation or ~~“Games”) and Everi Payments Inc. (formerly known as Global Cash Access, Inc.) (“Everi Payments”~~fixed-fee lease arrangements or ~~“Payments”). Unless otherwise indicated, the terms the “Company,” “we,” “us” and “our” refer to Holdings together with its consolidated subsidiaries.~~

~~Everi is dedicated to providing video and mechanical reel gaming content and technology solutions, integrated gaming payments solutions and compliance and efficiency software~~sold to casino ~~operators. Everi Games provides: (a) comprehensive content, electronic gaming units~~customers; (ii) providing and ~~systems for Native American and commercial casinos, including both Wide-Area Progressive systems and the award winning TournEvent® slot tournament solution; and (b)~~maintaining the central determinant ~~system~~systems for the video lottery terminals (“VLTs”) installed in the State of New ~~York.~~ York and similar technology in certain tribal jurisdictions; (iii) business-to-business (“B2B”) and business-to-consumer (“B2C”) digital online gaming activities.

Everi ~~Payments provides:~~

~~(a)~~FinTech provides gaming operators with financial technology products and services, including: (i) services and equipment that facilitate casino patron’s self-service access to cash and cashless funding at gaming facilities via Automated Teller Machine (“ATM”) ~~cash~~debit withdrawals (cash dispensing and cashless), credit card cash access transactions ~~point of sale~~and point-of-sale (“POS”) debit card ~~transactions,~~purchase and cash access transactions; (ii) check ~~verification and~~ warranty services; ~~(b) fully integrated gaming industry kiosks that provide cash access~~(iii) self-service player loyalty enrollment and ~~related services; (c) products~~marketing equipment, including promotion management software and tools; (iv) software and services that improve credit decision making, automate cashier operations, and enhance patron marketing activities for gaming establishments; ~~(d)~~(v) equipment that provides cash access and other cash handling efficiency-related services; and (vi) compliance, audit, and data ~~solutions;~~solutions.

Impact of COVID-19 Pandemic

Overall

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility in the financial markets, increased unemployment levels, caused temporary, and ~~(e) online payment processing solutions~~in certain cases, closures of many businesses. The gaming industry was not immune to these factors as our casino customers closed their gaming establishments, and as a result, our operations experienced significant disruptions. At the immediate onset of the COVID-19 pandemic, we were affected by various measures, including, but not limited to: the institution of social distancing and sheltering-in-place requirements in many states and communities, which significantly impacted demand for our products and services, and resulted in office closures, the furlough of a majority of our employees, the implementation of temporary base salary reductions for our employees and the implementation of a work-from-home policy.

It is unclear if and when customer volumes will return consistently to pre-COVID levels, or if in the future a resurgence of COVID-19 could result in the closure of casinos by federal, state, tribal and municipal governmental and regulatory agencies or by the casino operators themselves in ~~states~~an effort to contain the COVID-19 public health emergency or mitigate its impact; however, we continue to monitor the impacts of COVID-19 and we will make adjustments to our business accordingly to the extent the economic environment deteriorates.

Results of Operations and Financial Condition

•At the onset of COVID-19 pandemic:

•our executive officers elected to accept significant reductions to their compensation during the pendency of the COVID-19 pandemic in order to better position the Company to withstand the challenging conditions that ~~offer intrastate, Internet-based~~have caused global and domestic disruption in the current economic environment;

•our independent members of the Board of Directors of the Company elected to forgo their quarterly cash compensation for Board and related committee services;

•we furloughed a majority of our staff;

•we reduced the salaries of our employee-base from approximately 15% to 70%;

•we suspended certain employee benefits, such as providing a Company match on 401(k) contributions;

•we implemented a remote working environment;

•we canceled or delayed material capital expenditures;

•we suspended our share repurchases under our previously authorized repurchase program; and

•As of the end of the second quarter of 2020:

•we implemented a safe workplace return policy for those of our employees who return to our facilities;

•we returned most of our furloughed employees to work;

•we returned a portion of base compensation to our executives;

•we returned most base compensation to our employee-base;

•we returned a portion of cash compensation to our Board of Directors;

•we completed a reduction-in-force and incurred severance costs, among other expenses, of approximately $2.7 million; and

•As of the end of the third quarter of 2020:

•we have returned base compensation to our executives and employee-base;

•we have returned cash compensation to our Board of Directors; and

•we fully repaid the $35.0 million Revolving Credit Facility in light of improved results of operations and liquidity.

With respect to our Games and FinTech businesses, our revenues and results of operations were significantly lower for the three and nine months ended September 30, 2020, as compared to the same period in the prior year. The following key factors that contributed to the reduced results, include, but were not limited to: (i) the closure of nearly all casino properties, both domestically and internationally, in March 2020, with the reopening process beginning in mid-to-late May 2020 with approximately 15% of properties still closed at the beginning of the third quarter of 2020 and approximately 10% still closed at the end of the third quarter of 2020; (ii) reopened casino properties operating at reduced capacity levels due to certain regulatory or governmental restrictions and or casino-elected implementation of health and safety protocols related to social distancing; (iii) certain gaming establishments voluntarily reclosing or considering a level of additionally reduced operations at certain of their properties as a result of increases in the number of confirmed cases of COVID-19; and (iv) our revised focus internally to streamline operations and personnel to align with expectations going forward.

With respect to our financial condition, at the onset of the COVID-19 pandemic, there were varying levels of impact to certain components of net working capital balances, including, but not limited to certain of our: (i) trade accounts receivable that increased in age as customers delayed payments on certain outstanding balances; (ii) settlement receivables and settlement liabilities that decreased as these amounts fully settled for those customers who closed their casinos and that have not returned to pre-COVID total volume levels; (iii) finished goods inventory that increased as certain planned placements of our EGMs into the installed based or sold directly to our customers were either delayed or canceled by those customers; and (iv) accounts payable and accrued liabilities that increased as we made the decision to defer payments to preserve our available cash on hand.

Beginning in the second quarter of 2020, and continuing through the third quarter of 2020, we experienced an improvement in various components of net working capital associated with casino properties reopening that contributed to the increase in our cash and cash equivalents, as they are highly dependent upon the timing of cash access transactions; therefore, cash and cash equivalents can change substantially based upon the timing of our receipt of payments for settlement receivables and payments we make to customers for our settlement liabilities. To the extent our gaming customers continue to recover, we expect our results of operations and financial condition to improve throughout the remainder of 2020.

To date, we have not experienced significant impacts on our supply chain as a result of the pandemic; however, given the dynamic nature of the global situation, this may change.

Liquidity

As of September 30, 2020, our cash and cash equivalents were approximately $235.4 million, a decrease of $22 million from $257.4 million at June 30, 2020; and our Net Cash Position, a non-GAAP measure (as discussed and defined in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources ” section below), was approximately $128.3 million, a decrease from $133.2 million at June 30, 2020.

We implemented measures at the onset of the pandemic to prepare us to withstand what could have been a prolonged period of industry inactivity. Industry conditions have improved with casino properties beginning to reopen in the second and third quarter of 2020. Our revenues, cash flows, and liquidity improved more during the third quarter of 2020 compared with the second quarter of 2020 on a sequential basis. Given the significant number of casino properties that have reopened through September 2020, our customers implemented protocols intended to protect their patrons and guests from potential COVID-19 exposure and re-establish customer confidence in the gaming and ~~lottery activities.~~

hospitality industry. These measures, which may include enhanced sanitization, public gathering limitations of casino capacity, patron social distancing requirements, limitations on casino operations, face mask and temperature check requirements, as well as the closure of certain common attractions such as restaurants, bars and other food and beverage outlets, table games, spas, and pools, have limited the number of patrons that are able or who desire to attend these venues and have impacted the pace at which demand for our products and services rebounds.

We expect that demand for our products and services will continue to be tempered to the extent gaming activity decreases or fails to increase at expected rates and to the extent our customers determine to restrict their capital spending as a result of uncertainty in the industry or otherwise. As a result, we continue to monitor and manage liquidity levels and we may, from time to time, evaluate available capital resource alternatives on acceptable terms to provide additional financial flexibility.

Government Relief

•Employer Social Security Tax Payment Deferral: We are deferring payment of the employer portion of the social security taxes due on remaining payments and from enactment of the CARES Act through December 31, 2020, with 50% due by December 31, 2021 and 50% due by December 31, 2022; and

•Alternative Minimum Tax (“AMT”) Credit Refund: We are applying for a refund of our AMT tax credits as the CARES Act affords us the ability to accelerate the recovery of such credits.

Additional Items Impacting Comparability of Results of Operations

Our financial statements included in this report reflect the following additional items impacting comparability of results of operations for the three and nine months ended September 30, 2020, exclusive of the impact of COVID-19:

•In the current three and nine month periods, our loyalty solutions reflected results of operations from our acquisitions of certain assets from Atrient, Inc. (“Atrient”) and Micro Gaming Technologies, Inc. (“MGT”) in 2019, whereas the same period in the prior year, only included the results of operations associated with the initial acquisition of certain assets from Atrient that occurred in March 2019.

•During the first quarter of 2020, we completed a partial redemption payment of approximately $84.5 million of aggregate principal with respect to the 7.50% Senior Unsecured Notes due 2025 previously issued in December 2017 (the “2017 Unsecured Notes”) and an open market repurchase of approximately $5.1 million of aggregate principal with respect to the 2017 Unsecured Notes. The total outstanding principal balance of the 2017 Unsecured Notes following the redemption and repurchase transactions was approximately $285.4 million. We incurred a loss on extinguishment of debt of approximately $7.5 million, which consisted of a $6.4 million redemption premium related to the satisfaction and redemption of a portion of the 2017 Unsecured Notes, and non-cash charges for the accelerated amortization of debt issuance costs of approximately $1.1 million.

As a result of these events, together with the impacts of COVID-19, our results of operations and earnings per share in the periods covered by our Financial Statements may not be directly comparable.

Trends and Developments Impacting our Business

Our strategic planning and forecasting processes include the consideration of economic and industry wide trends that may impact our Games and Payments businesses. We have identified the more material positive and negative trends affecting our business as the following:

Casino gaming is dependent upon discretionary consumer spending, which is typically the first type of spending that is restrained by consumers when they are uncertain about their jobs and income. Global economic uncertainty in the marketplace may have an impact on casino gaming and ultimately the demand for new gaming equipment.

~~The total North American installed slot base in the third quarter of 2017 remained relatively flat~~In addition to the ~~same period in 2016. We expect flat~~factors discussed above, we refer to ~~moderate growth in the forward replacement cycle for electronic gaming machines (“EGMs”).~~

~~The volume~~Item 7, “Management’s Discussion and Analysis of ~~new casino openings~~Financial Condition and ~~new market expansions have slowed from previous years. The reduced demand as a result of fewer new market expansions could reduce the overall demand for slot machines.~~

We face continued competition from smaller competitors in the gaming cash access market and face additional competition from larger gaming equipment manufacturers and systems providers. This increased competition has resulted in pricing pressure for both our Games and Payments businesses.

Governmental oversight related to the cost of transaction processing and related fees to the consumer has increased in recent years. We expect the financial services and payments industry to respond to these legislative acts by changing other fees and costs, which may negatively impact our Payments business in the future.

Casino operators continue to try to broaden their appeal by focusing on investments in the addition of non-gaming amenities to their facilities, which could impact casino operator’s capital allocation for games.

~~Impact of ASC Topic 606 on the Comparability of Our~~ Results of Operations — Trends and Developments Impacting our Business” in ~~Future Periods~~

~~As discussed in detail in “Note~~our Annual Report, which is incorporated herein by reference.

Operating Segments

We report our financial performance based on two operating segments: (i) Games and (ii) FinTech. For additional information on our segments, see “Note 2 — Basis of Presentation and Summary of Significant Accounting ~~Policies – Recent Accounting Guidance – Recent Accounting Guidance Not Yet Adopted,”~~Policies” and “Note 18 — Segment Information” included in Part I, Item 1: Financial Statements~~, we are, and have been, assessing the potential impact~~of this Quarterly Report on our financial statements of ASC Topic 606, “Revenue from Contracts with Customers,” which will initially apply to us beginning with the fiscal year ending December 31, 2018. Based on the transition guidance related to ASC Topic 606, we are in the process of determining if our cash advance, ATM and check services revenue streams will be required to be reported “net of transaction price” rather than on a gross revenue presentation basis, as has been our practice to date. In this regard, ASC Topic 606 eliminates certain factors that appear in the existing governing standard, ASC Topic 605, and that supported our position of reporting these Payments-related revenue streams on a gross revenue basis. In addition, the new revenue recognition standard, as it specifically pertains to payments from customers, may also require us to report certain of these Payments-related revenue streams on a net presentation basis. If, upon the conclusion of our assessment and adoption of ASC Topic 606, we determine that we are required to report these Payments-related revenue streams on a “net of transaction price” basis rather than on a gross revenue presentation basis, this will have a significant impact on our Payments-related revenues, cost of revenues and margins. In particular, our “Payments revenue” would be reduced by the “Payments cost of revenue (exclusive of depreciation and amortization)” associated with the Payments-related revenue streams affected by the new standard, our “Payments cost of revenue (exclusive of depreciation and amortization)” would be reduced by a similar amount, and, correspondingly, our Payments operating margin will remain unchanged. The new revenue standard would not impact our operating income, net loss, cash flows or the timing of revenues recognized and costs incurred under generally accepted accounting principles in the United States (“GAAP”).

Form 10-Q.

~~Operating Segments~~

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-making group in deciding how to allocate resources and in assessing performance. Our chief operating decision-making group consists of the Chief Executive Officer and the Chief Financial Officer. This group manages the business, allocates resources and measures profitability based on our operating segments. The operating segments are managed and reviewed separately, as each represents products that can be sold separately to our customers.

Our chief operating decision-making group has determined the following to be the operating segments for which we conduct business: (a) Games and (b) Payments. We have reported our financial performance based on our segments in both the current and prior periods. Each of these segments is monitored by our management for performance against its internal forecast and is consistent with our internal management reporting.

The Games segment provides solutions directly to gaming establishments to offer their patrons gaming entertainment related experiences including: leased gaming equipment; sales and maintenance related services of gaming equipment; gaming systems; and ancillary products and services.

The Payments segment provides solutions directly to gaming establishments to offer their patrons cash access related services and products including: access to cash at gaming facilities via ATM cash withdrawals, credit card cash access transactions and POS debit card cash access transactions; check-related services; fully integrated kiosks and maintenance services; compliance, audit and data software; casino credit data and reporting services and other ancillary offerings.

~~Our business is predominantly domestic, with no specific regional concentrations and no significant assets in foreign locations.~~

Results of Operations

Three months ended September 30, ~~2017~~2020 compared to three months ended September 30, ~~2016~~

2019

The following table presents our Results of Operations ~~(in thousands)*:~~

Three Months Ended

September 30, 2017

September 30, 2016

2017 vs 2016

$

%

$

%

$ Variance

% Variance

Revenues

Games

$
55,452

22

%

$
56,218

25

%

$
(766
)

(1
)
%
Payments

191,870

78

%

165,959

75

%

25,911

16

%
Total revenues

247,322

100

%

222,177

100

%

25,145

11

%
Costs and expenses

Games cost of revenue (exclusive of depreciation and amortization)

13,820

5

%

15,467

7

%

(1,647
)

(11
)
%
Payments cost of revenue (exclusive of depreciation and amortization)

149,838

61

%

127,211

57

%

22,627

18

%
Operating expenses

29,463

12

%

26,996

12

%

2,467

9

%
Research and development

4,545

2

%

4,460

2

%

85

2

%
Depreciation

12,539

5

%

12,367

6

%

172

1

%
Amortization

17,322

7

%

24,104

11

%

(6,782
)

(28
)
%
Total costs and expenses

227,527

92

%

210,605

95

%

16,922

8

%
Operating income

19,795

8

%

11,572

5

%

8,223

71

%
Other expenses

Interest expense, net of interest income

23,368

9

%

24,815

11

%

(1,447
)

(6
)
%
Total other expenses

23,368

9

%

24,815

11

%

(1,447
)

(6
)
%
Loss before income tax

(3,573
)

(1
)
%

(13,243
)

(6
)
%

9,670

(73
)
%
Income tax provision (benefit)

716

(1
)
%

(4,989
)

(2
)
%

5,705

(114
)
%
Net loss

$
(4,289
)

(2
)
%

$
(8,254
)

(4
)
%

$
3,965

(48
)
%

*	~~Rounding may cause variances.~~

~~Revenues~~

~~Total revenues increased by $25.1 million, or 11%, to $247.3 million~~as reported for the three months ended September 30, ~~2017, as~~2020 compared to the ~~same period~~three months ended September 30, 2019 (amounts in thousands)*:


	Three Months Ended
	September 30, 2020				September 30, 2019				2020 vs 2019
	$		%		$		%		$		%
Revenues
Games revenues
Gaming operations	$	46,968	42	%	$	48,515	36	%	$	(1,547)	(3)	%
Gaming equipment and systems	10,229		9	%	19,584		14	%	(9,355)		(48)	%
Gaming other	44		—	%	1,174		1	%	(1,130)		(96)	%
Games total revenues	57,241		51	%	69,273		51	%	(12,032)		(17)	%
FinTech revenues
Cash access services	33,979		30	%	43,152		32	%	(9,173)		(21)	%
Equipment	6,248		6	%	10,188		8	%	(3,940)		(39)	%
Information services and other	14,630		13	%	11,956		9	%	2,674		22	%
FinTech total revenues	54,857		49	%	65,296		49	%	(10,439)		(16)	%
Total revenues	112,098		100	%	134,569		100	%	(22,471)		(17)	%
Costs and expenses
Games cost of revenues(1)
Gaming operations	4,245		4	%	4,942		4	%	(697)		(14)	%
Gaming equipment and systems	5,730		5	%	11,126		8	%	(5,396)		(48)	%
Gaming other	—		—	%	1,117		1	%	(1,117)		(100)	%
Games total cost of revenues	9,975		9	%	17,185		13	%	(7,210)		(42)	%
FinTech cost of revenues(1)
Cash access services	1,161		1	%	4,112		3	%	(2,951)		(72)	%
Equipment	3,548		3	%	5,957		4	%	(2,409)		(40)	%
Information services and other	859		1	%	1,024		1	%	(165)		(16)	%
FinTech total cost of revenues	5,568		5	%	11,093		8	%	(5,525)		(50)	%
Operating expenses	34,927		31	%	37,631		28	%	(2,704)		(7)	%
Research and development	7,034		6	%	8,196		6	%	(1,162)		(14)	%
Depreciation	16,163		14	%	16,015		12	%	148		1	%
Amortization	18,693		17	%	17,156		13	%	1,537		9	%
Total costs and expenses	92,360		82	%	107,276		80	%	(14,916)		(14)	%
Operating income	19,738		18	%	27,293		20	%	(7,555)		(28)	%
Other expenses
Interest expense, net of interest income	18,905		17	%	19,297		14	%	(392)		(2)	%
Total other expenses	18,905		17	%	19,297		14	%	(392)		(2)	%
Income before income tax	833		1	%	7,996		6	%	(7,163)		(90)	%

(1) Exclusive of depreciation and amortization.

* Rounding may cause variances.


	Three Months Ended
	September 30, 2020				September 30, 2019				2020 vs 2019
	$		%		$		%		$		%
Income tax provision (benefit)	1,711		2	%	(1,319)		(1)	%	3,030		(230)	%
Net (loss) income	$	(878)	(1)	%	$	9,315	7	%	$	(10,193)	(109)	%

* Rounding may cause variances.

Our revenues and our costs and expenses reflect the continued impact of casino property closures due to the COVID-19 pandemic, even as the number of casino properties that have opened increased in the ~~prior year. This was attributable~~third quarter of 2020. Of note, as of September 30, 2020, approximately 10% of casinos in the United States remained closed, according to ~~higher Payments revenues, slightly offset by lower Games revenues.~~

~~Games~~the American Gaming Association.

Revenues

Total revenues decreased by ~~$0.8~~approximately $22.5 million, or 1%17%, to ~~$55.4~~approximately $112.1 million for the three months ended September 30, ~~2017,~~2020, as compared to the same period in the prior year. This was primarily ~~related~~due to the ~~timing~~impact of ~~the TournEvent of Champions~~^® slot tournament that occurred in the fourth quarter of 2017 as compared to the third quarter of 2016 and, to a lesser extent, the decrease in leased units and a lower daily win per unit on these games, partially offsetCOVID-19. Games revenues decreased by ~~higher unit sales.~~

~~Payments revenues increased by $25.9~~approximately $12.0 million, or ~~16%~~17%, to ~~$191.9~~approximately $57.2 million for the three months ended September 30, ~~2017,~~2020, as compared to the same period in the prior year. We had: (i) a decline in the sale of machines in our gaming equipment and systems revenues; and (ii) a decrease in the average daily win per unit (due to units being inactive for a prolonged period) on a higher installed base of leased games included in our gaming operations revenues largely reflecting increased demand for our premium units. FinTech revenues decreased by approximately $10.4 million, or 16%, to approximately $54.9 million for the three months ended September 30, 2020, as compared to the same period in the prior year. We had: (i) a decline in the dollar and transaction volumes included in our cash access services revenues; (ii) a decrease in the sale of full service kiosks, which was partially offset by an increase in the player loyalty kiosks included in our equipment revenues; and (iii) an increase in software sales and support fees in connection with our player loyalty and compliance solutions and our kiosk maintenance services included in our information services and other revenues as a result of the resumption of services at a majority of our customer locations that reopened from pandemic-related casino closures.

Costs and Expenses

Total costs and expenses decreased by approximately $14.9 million, or 14%, to approximately $92.4 million for the three months ended September 30, 2020, as compared to the same period in the prior year. This was primarily ~~associated with higher dollar and transaction volumes and fees earned from our cash access services, expansion in Canada for our ATM operations as well as growth in~~due to the ~~segment.~~

~~Costs and Expenses~~

impact of COVID-19. Games cost of revenues ~~(exclusive of depreciation and amortization)~~ decreased by ~~$1.6~~approximately $7.2 million, or ~~11%~~42%, to ~~$13.8~~approximately $10.0 million for the three months ended September 30, ~~2017,~~2020, as compared to the same period in the prior year. We had a reduction in the variable costs included in our gaming and equipment systems cost of revenues as a result of the decline in the sale of machines. FinTech cost of revenues decreased by approximately $5.5 million, or 50%, to approximately $5.6 million for the three months ended September 30, 2020, as compared to the same period in the prior year. We had a reduction in the variable costs included in our cash access services cost of revenues primarily as a result of a decline in the dollar and transaction volumes and lower check warranty revenues. In addition, we had a reduction in the variable costs included in our equipment cost of revenues due to a decrease in the sale of full-service kiosks.

Operating expenses decreased by approximately $2.7 million, or 7%, to approximately $34.9 million for the three months ended September 30, 2020, as compared to the same period in the prior year. This was primarily due to decreased operating costs, such as reduced legal fees and expenses associated with the Fair and Accurate Credit Transactions Act legal matter that was settled in the prior year included in our FinTech segment; and payroll and related expenses associated with the furlough of a portion of our employees, salary reductions for those individuals that remained and significantly lower travel and related costs included in our Games and Fintech segments reflective of the lower business levels and the circumstances surrounding the global pandemic.

Research and development costs decreased by approximately $1.2 million, or 14%, to approximately $7.0 million for the three months ended September 30, 2020, as compared to the same period in the prior year. This was primarily due to lower payroll and related costs included in our Games segment in light of COVID-19; partially offset by higher payroll and related costs included in our FinTech segment primarily as a result of the acquisition of certain assets in connection with our player loyalty solutions in the prior year.

Depreciation increased by approximately $0.1 million, or 1%, to approximately $16.2 million for the three months ended September 30, 2020, as compared to the same period in the prior year. This was primarily due to an increase in the installed base of lease gaming machines placed in service included in our Games segment.

Amortization increased by approximately $1.5 million, or 9%, to approximately $18.7 million for the three months ended September 30, 2020, as compared to the same period in the prior year. The increase was primarily due to the release of new game themes included in our Games segment and the intangible assets acquired in connection with the player loyalty business in our FinTech segment.

Primarily as a result of the factors described above in light of COVID-19, our operating income decreased by approximately $7.6 million, or 28%, as compared to the same period in the prior year. The operating income margin was 18% for the three months ended September 30, 2020 compared to 20% for the same period in the prior year.

Interest expense, net of interest income, decreased by approximately $0.4 million, or 2%, to approximately $18.9 million for the three months ended September 30, 2020, as compared to the same period in the prior year. This was primarily due to lower debt balances and more favorable variable interest rates in effect for certain of our debt instruments; mostly offset by: (i) the amortization of debt issuance costs incurred in connection with the Fourth Amendment to the existing Credit Agreement and entering into the Incremental Term Loan Credit Agreement; (ii) the additional Incremental Term Loan debt incurred with less favorable variable interest rates in effect; (iii) the accretion of interest related to the acquisition of certain assets from Atrient and MGT in the prior year; and (iv) a reduction in interest income earned.

Income tax provision was $1.7 million for the three months ended September 30, 2020, as compared to an income tax benefit of $1.3 million for the same period in the prior year. The income tax provision reflected an effective income tax rate of 205.4% for the three months ended September 30, 2020, which was greater than the statutory federal rate of 21.0%, primarily due to an increase in our valuation allowance as a result of a reduction of certain indefinite-lived deferred tax assets that can be offset against our indefinite-lived deferred tax liabilities. The income tax benefit reflected an effective income tax rate of negative 16.5% for the same period in the prior year, which was less than the statutory federal rate of 21.0%, primarily due to a decrease in our valuation allowance for deferred tax assets, the benefit from stock option exercises, and the benefit from a research credit.

Primarily as a result of the factors described above in light of COVID-19, our net income decreased by approximately $10.2 million, or 109%, which resulted in a net loss of approximately $0.9 million for the three months ended September 30, 2020, as compared to the same period in the prior year.

Nine months ended September 30, 2020 compared to nine months ended September 30, 2019

The following table presents our Results of Operations as reported for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 (amounts in thousands)*:


	Nine months ended
	September 30, 2020				September 30, 2019				2020 vs 2019
	$		%		$		%		$		%
Revenues
Games revenues
Gaming operations	$	106,513	40	%	$	138,377	36	%	$	(31,864)	(23)	%
Gaming equipment and systems	28,795		11	%	66,083		17	%	(37,288)		(56)	%
Gaming other	76		—	%	1,619		—	%	(1,543)		(95)	%
Games total revenues	135,384		51	%	206,079		53	%	(70,695)		(34)	%
FinTech revenues
Cash access services	80,986		31	%	123,680		32	%	(42,694)		(35)	%
Equipment	16,004		6	%	25,051		6	%	(9,047)		(36)	%
Information services and other	31,748		12	%	33,240		9	%	(1,492)		(4)	%
FinTech total revenues	128,738		49	%	181,971		47	%	(53,233)		(29)	%
Total revenues	264,122		100	%	388,050		100	%	(123,928)		(32)	%
Costs and expenses
Games cost of revenues(1)
Gaming operations	10,471		4	%	12,792		3	%	(2,321)		(18)	%
Gaming equipment and systems	16,625		6	%	37,087		10	%	(20,462)		(55)	%
Gaming other	456		—	%	1,464		—	%	(1,008)		(69)	%
Games total cost of revenues	27,552		10	%	51,343		13	%	(23,791)		(46)	%
FinTech cost of revenues(1)
Cash access services	5,227		2	%	9,777		3	%	(4,550)		(47)	%
Equipment	9,452		4	%	14,884		3	%	(5,432)		(36)	%
Information services and other	2,057		1	%	2,952		1	%	(895)		(30)	%
FinTech total cost of revenues	16,736		7	%	27,613		7	%	(10,877)		(39)	%
Operating expenses	115,428		44	%	111,446		29	%	3,982		4	%
Research and development	20,958		8	%	22,399		6	%	(1,441)		(6)	%
Depreciation	48,700		18	%	46,062		12	%	2,638		6	%
Amortization	57,312		22	%	51,143		13	%	6,169		12	%
Total costs and expenses	286,686		109	%	310,006		80	%	(23,320)		(8)	%
Operating (loss) income	(22,564)		(9)	%	78,044		20	%	(100,608)		(129)	%
Other expenses
Interest expense, net of interest income	56,226		21	%	60,130		15	%	(3,904)		(6)	%
Loss on extinguishment of debt	7,457		3	%	—		—	%	7,457		100	%
Total other expenses	63,683		24	%	60,130		15	%	3,553		6	%
(Loss) income before income tax	(86,247)		(32)	%	17,914		5	%	(104,161)		(581)	%


	Nine Months Ended
	September 30, 2020				September 30, 2019				2020 vs 2019
	$		%		$		%		$		%
Income tax benefit	(3,434)		(1)	%	(2,747)		(1)	%	(687)		25	%
Net (loss) income	$	(82,813)	(31)	%	$	20,661	5	%	$	(103,474)	(501)	%

(1) Exclusive of depreciation and amortization.

* Rounding may cause variances.

Our revenues and our costs and expenses for the period reflect the impact from the closure of casino properties from March 2020 to May 2020 and the continued closure of certain casino properties through the third quarter of 2020 due to the COVID-19 pandemic, even as casinos began reopening in May 2020. Of note, as of September 30, 2020, approximately 10% of casinos in the United States remained closed, according to the American Gaming Association.

Revenues

Total revenues decreased by approximately $123.9 million, or 32%, to approximately $264.1 million for the nine months ended September 30, 2020, as compared to the same period in the prior year. This was primarily due to the impact of COVID-19 and the closure of many casino properties for a portion of the period. Games revenues decreased by approximately $70.7 million, or 34%, to approximately $135.4 million for the nine months ended September 30, 2020, as compared to the same period in the prior year. We had: (i) a decline in the sale of gaming machines included in our gaming equipment and systems revenues; and (ii) a decrease in the average daily win per unit as a result of units being deactivated for a prolonged period of time on a higher installed base of leased games largely reflecting higher demand for our premium units included in our gaming operations revenues. FinTech revenues decreased by approximately $53.2 million, or 29%, to approximately $128.7 million for the nine months ended September 30, 2020, as compared to the same period in the prior year. We had: (i) a decline in the dollar and transaction volumes included in our cash access services revenues; and (ii) a decrease in the sale of full service kiosks, partially offset by an increase in our player loyalty kiosks included in our equipment revenues.

Costs and Expenses

Total costs and expenses decreased by approximately $23.3 million, or 8%, to approximately $286.7 million for the nine months ended September 30, 2020, as compared to the same period in the prior year. This was primarily due to the impact of COVID-19 and the closure of many casino properties for a portion of the period. Games cost of revenues decreased by approximately $23.8 million, or 46%, to approximately $27.6 million for the nine months ended September 30, 2020, as compared to the same period in the prior year. We had a reduction in the variable costs included in our gaming and equipment systems cost of revenues as a result of the decline in the sale of machines. FinTech cost of revenues decreased by approximately $10.9 million, or 39%, to approximately $16.7 million for the nine months ended September 30, 2020, as compared to the same period in the prior year. We had a reduction in the variable costs included in our cash access services cost of revenues primarily as a result of a decline in the dollar and transaction volumes and lower check warranty revenues. In addition, we had a reduction in the variable costs included in our equipment cost of revenues due to a decrease in the sale of full-service kiosks.

Operating expenses increased by approximately $4.0 million, or 4%, to approximately $115.4 million for the nine months ended September 30, 2020, as compared to the same period in the prior year. This was primarily due to a ~~decline~~write-down of assets that were not expected to be recoverable or pursued, as applicable, as well as severance costs in ~~cost~~connection with our reduction-in-force included in our Games and Fintech segments in response to COVID-19 and the closure of ~~revenues as~~many casino properties for a ~~result~~portion of the ~~timing~~period. This was partially offset by a decrease in operating costs, such as payroll and related expenses associated with the furlough of a portion of our employees, salary reductions for those individuals that remained and significantly lower travel and related costs included in our Games and Fintech segments to offset the ~~TournEvent~~lost business in light of ~~Champions~~^® ~~slot tournament that occurred in the fourth quarter of 2017 as compared to the third quarter of 2016.~~

~~Payments cost of revenues (exclusive of depreciation~~COVID 19.

Research and ~~amortization) increased~~development costs decreased by ~~$22.6~~approximately $1.4 million, or ~~18%~~6%, to ~~$149.8~~approximately $21.0 million for the ~~three~~nine months ended September 30, ~~2017,~~2020, as compared to the same period in the prior year. This was primarily due to lower payroll and related ~~to the~~ costs ~~associated with the increase~~included in ~~cash access services volumes.~~

~~Operating expenses increased~~our Games segment in light of COVID-19; partially offset by ~~$2.5 million, or 9%, to $29.5 million for the three months ended September 30, 2017, as compared to the same period in the prior year. This was primarily attributable to~~ higher payroll and related ~~expenses.~~

~~Research and development for the three months ended September 30, 2017 remained relatively consistent with the same period~~costs included in ~~the prior year.~~

~~Depreciation for the three months ended September 30, 2017 remained relatively consistent with the same period in the prior year.~~

~~Amortization decreased by $6.8 million, or 28%, to $17.3 million for the three months ended September 30, 2017, as compared to the same period in the prior year. This was~~our FinTech segment primarily ~~associated with certain intangible assets being fully amortized related to our acquisition of the Games business.~~

~~Primarily~~ as a result of the ~~factors described above, operating income~~acquisition of certain assets in connection with our player loyalty solutions in the prior year.

Depreciation increased by ~~$8.2~~approximately $2.6 million, or ~~71%~~6%, to ~~$19.8~~approximately $48.7 million for the ~~three~~nine months ended September 30, ~~2017,~~2020, as compared to ~~the same period in the prior year. The operating margin increased from 5% for the three months ended September 30, 2016 to 8% for the three months ended September 30, 2017.~~

Interest expense, net of interest income decreased by $1.4 million, or 6%, to $23.4 million for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. This was primarily due to lower interest expense as a result of our debt refinancing in May 2017.

~~Income tax provision was $0.7 million for the three months ended September 30, 2017, as compared to an income tax benefit of $5.0 million for~~ the same period in the prior year. This was primarily due to an increase in the ~~valuation allowance for deferred tax assets. The income tax provision reflected an effective income tax rate~~installed base of ~~negative 20.0% for the three months ended September 30, 2017, which was less than the statutory federal rate of 35.0% primarily due to an increase~~lease gaming machines placed in service included in our valuation allowance for deferred tax assets, partially offset by state taxes and the benefit from a research credit. The income tax benefit reflected an effective income tax rate of 37.7% for the same period in the prior year, which was higher than the statutory federal rate of 35.0% primarily due to state taxes, the lower foreign tax rate applicable to our foreign source income and the benefit from a research credit, partially offset by non-statutory stock options that expired in the year.

Games segment.

~~Nine months ended September 30, 2017 compared to nine months ended September 30, 2016~~

~~The following table presents our Results of Operations (in thousands)*:~~

Nine Months Ended

September 30, 2017

September 30, 2016

2017 vs 2016

$

%

$

%

$ Variance

% Variance

Revenues

Games

$
165,832

23

%

$
158,660

25

%

$
7,172

5

%
Payments

561,257

77

%

483,286

75

%

77,971

16

%
Total revenues

727,089

100

%

641,946

100

%

85,143

13

%
Costs and expenses

Games cost of revenue (exclusive of depreciation and amortization)

39,503

5

%

36,871

6

%

2,632

7

%
Payments cost of revenue (exclusive of depreciation and amortization)

436,104

60

%

373,366

58

%

62,738

17

%
Operating expenses

87,235

12

%

87,735

14

%

(500
)

(1
)
%
Research and development

13,706

2

%

14,499

2

%

(793
)

(5
)
%
Depreciation

34,765

5

%

37,172

6

%

(2,407
)

(6
)
%
Amortization

52,086

7

%

70,887

11

%

(18,801
)

(27
)
%
Total costs and expenses

663,399

91

%

620,530

97

%

42,869

7

%
Operating income

63,690

9

%

21,416

3

%

42,274

197

%
Other expenses

Interest expense, net of interest income

72,306

10

%

74,548

12

%

(2,242
)

(3
)
%
Loss on extinguishment of debt

14,615

2

%

—

—

%

14,615

—

%
Total other expenses

86,921

12

%

74,548

12

%

12,373

17

%
Loss before income tax

(23,231
)

(3
)
%

(53,132
)

(8
)
%

29,901

56

%
Income tax provision (benefit)

3,623

(1
)
%

(20,930
)

(3
)
%

24,553

117

%
Net loss

$
(26,854
)

(4
)
%

$
(32,202
)

(5
)
%

$
5,348

17

%

*	~~Rounding may cause variances.~~

~~Revenues~~

~~Total revenues~~Amortization increased by ~~$85.1~~approximately $6.2 million, or ~~13%~~12%, to ~~$727.1~~approximately $57.3 million for the nine months ended September 30, ~~2017,~~2020, as compared to the same period in the prior year. ~~This~~The increase was primarily ~~attributable~~due to ~~higher~~the release of new game themes included in our Games segment and ~~Payments revenues.~~

~~Games revenues increased~~the intangible assets acquired in connection with the player loyalty business included in our FinTech segment.

Primarily as a result of the factors described above in light of COVID-19 and the closure of many casino properties for a portion of the period, operating income decreased by ~~$7.2~~approximately $100.6 million, or 5%129%, ~~to $165.8~~and resulted in an operating loss of approximately $22.6 million for the nine months ended September 30, ~~2017,~~2020, as compared to the same period in the prior year. ~~This~~The operating loss margin was ~~primarily related~~9% for the nine months ended September 30, 2020 compared to an ~~increase in unit sales, which were partially offset by a lower average outstanding number~~operating income margin of ~~leased units combined with lower daily win per unit on these games. In addition, revenues were also impacted as a result of~~20% for the ~~timing of the TournEvent of Champions~~^® ~~slot tournament that occurred~~same period in the ~~fourth quarter~~prior year.

Interest expense, net of ~~2017 as compared to the third quarter of 2016.~~

~~Payments revenues increased~~interest income, decreased by ~~$78.0~~approximately $3.9 million, or ~~16%~~6%, to ~~$561.3~~approximately $56.2 million for the nine months ended September 30, 2017, as compared to the same period in the prior year. This was primarily associated with higher dollar and transaction volumes and fees earned from our cash access services, expansion in Canada for our ATM operations as well as growth in the segment.

~~Costs and Expenses~~

~~Games cost of revenues (exclusive of depreciation and amortization) increased by $2.6 million, or 7%, to $39.5 million for the nine months ended September 30, 2017,~~2020, as compared to the same period in the prior year. This was primarily due to ~~higher~~lower debt balances and more favorable variable interest rates in effect for certain of our debt instruments; mostly offset by: (i) the amortization of debt issuance costs ~~associated~~incurred in connection with the ~~increase~~Fourth Amendment to the existing Credit Agreement and entering into the Incremental Term Loan Credit Agreement; (ii) the additional Incremental Term Loan debt incurred with less favorable variable interest rates in ~~unit sales, partially offset by a decline~~effect; (iii) an adjustment to, and the associated accretion of, interest related to the acquisition of certain assets from Atrient and MGT in the ~~cost~~prior year; and (iv) a reduction in interest income earned.

Loss on extinguishment of ~~revenues as a result of the timing of the TournEvent of Champions~~^® ~~slot tournament that occurred in the fourth quarter of 2017 as compared to the third quarter of 2016.~~

~~Payments cost of revenues (exclusive of depreciation and amortization) increased by $62.7 million, or 17%, to $436.1~~debt was approximately $7.5 million for the nine months ended September 30, ~~2017,~~2020 primarily as ~~compared to~~a result of the ~~same period in the prior year. This was primarily~~redemption and repurchase transactions related to the ~~costs associated with the increase in cash access services volumes.~~

~~Operating expenses decreased~~2017 Unsecured Notes.

Income tax benefit increased by ~~$0.5~~approximately $0.7 million, or 1%25%, to ~~$87.2~~approximately $3.4 million for the nine months ended September 30, 2017, as compared to the same period in the prior year. This was primarily attributable to higher costs in the prior-year period for the write down of an acquired note receivable and a warrant associated with Bee Cave Games, Inc. and severance costs related to a former executive, partially offset by higher payroll and related expenses and non-cash stock compensation costs.

Research and development decreased by $0.8 million, or 5%, to $13.7 million for the nine months ended September 30, 2017, as compared to the same period in the prior year. This was primarily due to a higher capitalization of certain development costs.

Depreciation decreased by $2.4 million, or 6%, to $34.8 million for the nine months ended September 30, 2017, as compared to the same period in the prior year. This was primarily associated with certain fixed assets being fully depreciated, partially offset by higher expense associated with new assets placed in service.

Amortization decreased by $18.8 million, or 27%, to $52.1 million for the nine months ended September 30, 2017, as compared to the same period in the prior year. This was primarily associated with certain intangible assets being fully amortized related to our acquisition of the Games business.

~~Primarily as a result of the factors described above, operating income increased by $42.3 million, or 197%, to $63.7 million for the nine months ended September 30, 2017,~~2020, as compared to the same period in the prior year. The ~~operating margin increased from 3%~~income tax benefit reflected an effective income tax rate of 4.0% for the nine months ended September 30, ~~2016 to 9% for the nine months ended September 30, 2017.~~

Interest expense, net of interest income decreased by $2.2 million, or 3%, to $72.3 million for the nine months ended September 30, 2017, as compared to $74.5 million for the nine months ended September 30, 2016. This was primarily due to lower interest expense as a result of our debt refinancing in May 2017.

~~Loss on extinguishment of debt was $14.6 million for the nine months ended September 30, 2017 as a result of our debt refinancing in May 2017.~~

Income tax provision was $3.6 million for the nine months ended September 30, 2017, as compared to an income tax benefit of $20.9 million for the same period in the prior year. This was primarily due to an increase in the valuation allowance for deferred tax assets. The income tax provision reflected an effective income tax rate of negative 15.6% for the nine months ended September 30, 2017,2020, which was less than the statutory federal rate of ~~35.0%~~21.0%, primarily due to an increase in our valuation allowance ~~for~~as a result of the book loss incurred during the period, partially offset by certain indefinite lived deferred tax assets ~~partially~~that can be offset ~~by state taxes and the benefit from a research credit.~~against our indefinite lived deferred tax liabilities. The income tax benefit reflected an effective income tax rate of ~~39.4%~~negative 15.3% for the same period in the prior year, which was ~~higher~~less than the statutory federal rate of ~~35.0%~~21.0%, primarily due to ~~state taxes,~~a decrease in our valuation allowance for deferred tax assets, the ~~lower foreign tax rate applicable to our foreign source income,~~benefit from stock option exercises, and the benefit from a research ~~credit, partially offset~~credit.

Primarily as a result of the factors described above in light of COVID-19, our net income decreased by ~~non-statutory stock options that expired~~approximately $103.5 million, or 501%, and resulted in a net loss of approximately $82.8 million for the nine months ended September 30, 2020, as compared to the same period in the prior year.

~~Games Revenues and Leased Units~~

~~The following tables include the revenues from our Games segment and the related leased units (amounts in thousands, except for EGMs):~~

Three Months Ended

September 30, 2017

September 30, 2016

Total

% of Games

Total

% of Games

2017 vs 2016

EGMs

Revenue

Revenue

EGMs

Revenue

Revenue

% Variance
Games revenues and leased
units

Contractual agreement⁽¹⁾

4,994

$
7,130

13

%

5,249

$
8,649

15

%

(18
)
%
Participation revenue⁽²⁾

8,221

25,842

47

%

8,038

24,789

44

%

4

%
Sales

—

16,292

29

%

—

14,795

27

%

10

%
NY Lottery⁽³⁾

—

4,667

8

%

—

4,594

8

%

2

%
Other

—

1,521

3

%

—

3,391

6

%

(55
)
%
Total

13,215

$
55,452

100

%

13,287

$
56,218

100

%

(1
)
%

~~(1)~~

~~We enter into placement fee agreements for our EGMs to secure floor space for a contracted period of time.~~

~~(2)~~

~~In general, under participation arrangements, we secure floor space for our EGMs on a month-to-month basis.~~

~~(3)~~

~~We provide the New York State Gaming Commission with an accounting and central determinant system for the video lottery terminals in operation at licensed New York State facilities.~~

Nine Months Ended

September 30, 2017

September 30, 2016

Total

% of Games

Total

% of Games

2017 vs 2016

EGMs

Revenue

Revenue

EGMs

Revenue

Revenue

% Variance
Games revenues and leased
units

Contractual agreement⁽¹⁾

4,994

$
20,552

12

%

5,249

$
27,694

17

%

(26
)
%
Participation revenue⁽²⁾

8,221

76,452

46

%

8,038

74,135

47

%

3

%
Sales

—

52,574

32

%

—

38,718

24

%

36

%
NY Lottery⁽³⁾

—

13,715

8

%

—

13,788

9

%

(1
)
%
Other

—

2,539

2

%

—

4,325

3

%

(41
)
%
Total

13,215

$
165,832

100

%

13,287

$
158,660

100

%

5

%

~~(1)~~

~~We enter into placement fee agreements for our EGMs to secure floor space for a contracted period of time.~~

~~(2)~~

~~In general, under participation arrangements, we secure floor space for our EGMs on a month-to-month basis.~~

~~(3)~~

~~We provide the New York State Gaming Commission with an accounting and central determinant system for the video lottery terminals in operation at licensed New York State facilities.~~

Critical Accounting Policies

Interim Assessment for Impairment of Goodwill

The impact of COVID-19 and the ~~three~~closure of most casino properties during the second quarter of 2020 qualified as a triggering event and ~~nine months ended September 30, 2017,~~accordingly, we performed a goodwill impairment test during the second quarter of 2020, for which we utilized the “Step 1” approach that required a comparison of the carrying amount of each reporting unit to its estimated fair value. Our operations have experienced significant disruptions and revenue reductions, and we have been impacted by various measures discussed in “Note 1 — Business” and in “Note 10 — Goodwill and Other Intangible Assets” included in Part I, Item 1: Financial Statements of this Quarterly Report on Form 10-Q and in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” section above.

In connection with the interim assessment conducted during the second quarter of 2020, we determined that no goodwill impairment adjustments were necessary as a result of the fair value of each reporting unit exceeding its carrying amount. Our Games reporting unit had a carrying amount of approximately $449.0 million as of May 31, 2020, which represented a majority of the total goodwill balance. The fair value of this reporting unit exceeded carrying value by approximately 10% as of May 31, 2020.

As casinos reopened and our business continued to recover in the third quarter of 2020, there were no ~~material changes~~new triggering events identified that would have an adverse impact on our business; and therefore, no impairment was identified for our goodwill as of September 30, 2020.

As additional facts and circumstances evolve, we continue to observe and assess our reporting units with a specific focus on the Games reporting unit, particularly as a direct consequence of the circumstances surrounding COVID-19. To the extent new information becomes available that may impact our results of operations and financial condition, we expect to revise our projections accordingly as our estimates of future net after-tax cash flows are highly dependent upon certain assumptions, including, but not limited to, the amount and timing of the economic recovery globally, nationally and specifically within the gaming industry. More specifically, we may need to further adjust our assumptions and we may be required to perform either a quantitative or qualitative assessment of our goodwill in future periods given the significant degree of uncertainty with respect to: (i) the timing of reopening, and the subsequent reclosing, of certain casino properties; (ii) regulatory and governmental restrictions; and (iii) the demand from patrons that visit gaming establishments.

For a description of our recently adopted accounting guidance and recent accounting guidance not yet adopted, see “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies — Recent Accounting Guidance” ~~of our~~ included in Part I, Item 1: Financial Statements ~~included elsewhere in~~of this Quarterly Report on Form ~~10-Q for a description of recent accounting guidance.~~

~~LIQUIDITY AND CAPITAL RESOURCES~~

10-Q.

Liquidity and Capital Resources

The following table presents ~~selected balance sheet information and~~ an unaudited reconciliation of cash and cash equivalents per GAAP to net cash position and net cash available (in thousands):

~~(1)~~

~~Non-GAAP measure. In order to enhance investor understanding of our cash balance, we are providing in this Quarterly Report on Form 10-Q net cash position and net cash available,~~(1) Non-GAAP measure. In order to enhance investor understanding of our cash balance, we are providing in this Quarterly Report on Form 10-Q Net Cash Position and Net Cash Available, which are not measures of our financial performance or position under GAAP. Accordingly, these measures should not be considered in isolation or as a substitute for, and should be read in conjunction with, our cash and cash equivalents prepared in accordance with GAAP. We define (i) net cash position as cash and cash equivalents plus settlement receivables less settlement liabilities and (ii) net cash available as net cash position under GAAP. Accordingly, these measures should not be considered in isolation or as a substitute for GAAP measures, and should be read in conjunction with our balance sheets prepared in accordance with GAAP. We define our (i) Net Cash Position as cash and cash equivalents plus settlement receivables less settlement liabilities; and (ii) Net Cash Available as Net Cash Position plus undrawn amounts available under our Revolving Credit Facility. Our Net Cash Position and Net Cash Available change substantially based upon the timing of our receipt of funds for settlement receivables and payments we make to customers for our settlement liabilities. We present these non-GAAP measures as we monitor these amounts available under our Revolving Credit Facility (defined herein). We present net cash position because our cash position, as measured by cash and cash equivalents, depends upon changes in settlement receivables and the timing of payments related to settlement liabilities. As such, our cash and cash equivalents can change substantially based upon the timing of our receipt of payments for settlement receivables and payments we make to customers for our settlement liabilities. We present net cash available as management monitors this amount in connection with ~~its~~ forecasting of ~~cash flows and future cash requirements.~~

Our cash and cash equivalents were approximately $235.4 million and $289.9 million as of ~~credit are expected to be sufficient to meet our recurring operating commitments~~September 30, 2020 and ~~to fund our planned capital expenditures for~~December 31, 2019, respectively. Our net cash position after considering the ~~foreseeable future.~~impact of settlement receivables and settlement liabilities was approximately $128.3 million and $126.1 million as of September 30, 2020 and December 31, 2019, respectively. Cash and cash equivalents at September 30, ~~2017~~2020 included cash in non-U.S. jurisdictions of approximately ~~$16.3~~$9.9 million. Generally, these funds are available for operating and investment purposes within the jurisdiction in which they reside, ~~but~~and we have the ability to repatriate these foreign funds to the United States, subject to potential withholding tax.

As discussed within Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” section above, we have implemented a number of precautionary measures in order to increase our cash position, improve our liquidity and preserve financial flexibility in light of the current uncertainty in the global markets as a result of COVID-19.

We believe that the actions implemented thus far are appropriate measures to preserve our liquidity and manage our business in the current environment such that we expect to be able to meet our recurring operating commitments and debt servicing needs and to fund our planned capital expenditures for the foreseeable future; however, any estimates of future cash needs and cash flows are subject to ~~taxation in~~substantial uncertainty, especially given the ~~U.S. upon repatriation.~~

current operating environment as a result of COVID-19. We continue to monitor and manage liquidity levels and we may, from time to time, evaluate available capital resource alternatives on acceptable terms to provide ~~cash settlement services~~additional financial flexibility. In addition, we expect to ~~our customers related~~continue to our cash access products. These services involve the movement of funds between the various parties associated with cash access transactions. These activities result in a balance due to us at the end of each business day for the face amount provided to patrons plus the service fee charged to those patronsevaluate future relief under state or federal-funded COVID-19 programs that we recoup over the next few business days and classify as settlement receivables. These activities also result in a balance due to our customers at the end of each business day for the face amount provided to patrons that we remit over the next few business days and classify as settlement liabilities. As of September 30, 2017, we had $127.4 million in settlement receivables, for which we generally receive payment within one week. As of September 30, 2017, we had $197.5 million in settlement liabilities due to our customers for these settlement services that are generally

~~paid within the next few business days. As the timing of cash received from settlement receivables and payment of settlement liabilities~~ may ~~differ, the total amount of cash held by us will fluctuate throughout the year.~~

Our cash and cash equivalents were $108.5 million and $119.1 million as of September 30, 2017 and December 31, 2016, respectively. Our net cash position after considering the impact of settlement receivables and settlement liabilities was $38.4 million and $8.7 million as of September 30, 2017 and December 31, 2016, respectively. Our net cash available after considering the net cash position and undrawn amounts available under our Revolving Credit Facility was approximately $73.4 million and $58.7 million as of September 30, 2017 and December 31, 2016, respectively.

become available.

Sources and Uses of Cash

The following table presents a summary of our cash flow activity (in thousands):

Nine Months Ended September 30,

2017 vs 2016

2017

2016

Change

Cash flow activities

Operating activities

$
69,762

$
85,808

$
(16,046
)
Investing activities

(83,334
)

(74,210
)

(9,124
)
Financing activities

1,627

(22,397
)

24,024

Effect of exchange rates on cash

1,365

(743
)

2,108

Cash and cash equivalents

Net decrease for the period

(10,580
)

(11,542
)

962

Balance, beginning of the period

119,051

102,030

17,021

Balance, end of the period

$
108,471

$
90,488

$
17,983


	Nine Months Ended September 30,				2020 vs 2019
	2020		2019		Change
Cash flow activities
Net cash (used in) provided by operating activities	$	(1,768)	$	120,364	$	(122,132)
Net cash used in investing activities	(70,308)		(118,688)		48,380
Net cash provided by (used in) financing activities	12,852		(15,433)		28,285
Effect of exchange rates on cash and cash equivalents	(1,370)		(1,314)		(56)
Cash, cash equivalents and restricted cash
Net decrease for the period	(60,594)		(15,071)		(45,523)
Balance, beginning of the period	296,610		299,181		(2,571)
Balance, end of the period	$	236,016	$	284,110	$	(48,094)

Cash flows ~~provided~~used in operating activities increased by ~~operating activities decreased by $16.0~~approximately $122.1 million for the nine months ended September 30, ~~2017,~~2020, as compared to the same period in the prior year. This was primarily attributable to the impact of ~~the change~~COVID-19 on our Games and FinTech segments, as well as changes in ~~settlement receivables and~~working capital associated with settlement liabilities from our FinTech segment. Refer to Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” section above for additional details of the ~~period.~~

impact of COVID-19.

Cash flows used in investing activities ~~increased~~decreased by ~~$9.1~~approximately $48.4 millionfor the nine months ended September 30, ~~2017,~~2020, as compared to the same period in the prior year. This was primarily attributable to ~~lower proceeds from~~ the ~~sale~~impact of ~~fixed~~COVID-19, in response to which we reduced our capital expenditures for Games and FinTech segments, and the impact of the acquisition of certain player loyalty related assets in our FinTech segment in the prior year. Refer to Item 2, “Management’s Discussion and ~~higher placement fees~~Analysis of Financial Condition and ~~capital expenditures.~~

Results of Operations — Overview” section above for additional details of the impact of COVID-19.

Cash flows provided by financing activities increased by ~~$24.0~~approximately $28.3 million for the nine months ended September 30, ~~2017,~~2020, as compared to the same period in the prior year. This was primarily attributable to ~~repayments of our Prior Credit Facility (defined below) that were not applicable in~~ the ~~current period and additional~~ proceeds from ~~exercise of stock options.~~

~~We expect that our cash provided by operating activities will be sufficient for our operating and debt servicing needs during~~ the next 12 months. If not, we have sufficient borrowings available under the New Credit Facilities to meet additional funding requirements. On occasion, we monitor the financial strength of our lenders associated with certain of our debt instruments using publicly-available information. Therefore, we believe it is more likely than not that our lenders will be able to honor their commitments under the New Credit Agreement.

~~Long-Term Debt~~

~~The following table summarizes our outstanding indebtedness (in thousands):~~

~~Refinancing~~

On May 9, 2017 (the “Closing Date”), Everi Payments, as borrower, and Holdings entered into a credit agreement with the lenders party thereto and Jefferies Finance LLC, as administrative agent, collateral agent, swing line lender, letter of credit issuer, sole lead arranger and sole book manager (the “New Credit Agreement”). The New Credit Agreement provides for: (i) a $35.0 million, five-year senior secured revolving credit facility (the “New Revolving Credit Facility”); and (ii) an $820.0 million, seven-year senior secured term loan facility (the “NewIncremental Term Loan, ~~Facility,” and together with~~partially offset by the ~~New Revolving Credit Facility, the “New Credit Facilities”). The fees associated with the New Credit Facilities included discounts of approximately $4.1 million and~~ debt issuance costs associated with these transactions and repayments of ~~approximately $15.5 million. All~~ borrowings under ~~the New~~our 2017 Unsecured Notes and Senior Secured Credit Facilities ~~are subject to the satisfaction of customary conditions, including the absence of defaults and the accuracy of representations and warranties.~~

The proceeds from the New Term Loan Facility incurred on the Closing Date were used to: (i) refinance: (a) the Everi Payments existing credit facility with an outstanding balance of approximately $462.3 million with Bank of America, N.A., as administrative agent, collateral agent, swing line lender and letter of credit issuer, Deutsche Bank Securities Inc., as syndication agent, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., as joint lead arrangers and joint book managers (the “Prior Credit Facility”); and (b) the Everi Payments 7.25% Senior Secured Notes due 2021 in the aggregate original principal amount of $335.0 million (the “Refinanced Secured Notes”); and (ii) pay related transaction fees and expenses.

~~In connection with the refinancing, we recorded a non-cash charge of approximately $14.6 million~~ during the ~~second quarter of 2017 related to the unamortized deferred financing fees~~period.

For additional information regarding our credit agreement and ~~discounts related to the extinguished term loan under the Prior Credit Facility and the redeemed Refinanced Secured Notes. No prepayment penalties were incurred.~~

~~New Credit Facilities~~

The New Term Loan Facility matures seven years after the Closing Date (the “Stated Term Maturity Date”); provided that, if on the date that is 91 days prior to the maturity date (the “Unsecured Notes Maturity Date”) for the Everi Payments 10.00% Senior Unsecured Notes due 2022 in the aggregate original principal amount of $350.0 million (the “Unsecured Notes”), any Unsecured Notes remain outstanding and the Unsecured Notes Maturity Date has not been extended to a date that is at least six months after the Stated Term Maturity Date, then the New Term Loan Facility shall mature on the date that is 91 days before the Unsecured Notes Maturity Date. The New Revolving Credit Facility matures five years after the Closing Date; provided, that, if on the date that is 121 days prior to the Unsecured Notes Maturity Date, any Unsecured Notes remain outstanding and the Unsecured Notes Maturity Date has not been extended to a date that is at least six months after the Stated Term Maturity Date, then the New Revolving Credit Facility shall mature on the date that is 121 days before the Unsecured Notes Maturity Date. The New Revolving Credit Facility is available for general corporate purposes, including permitted acquisitions, working capital and the issuance of letters of credit.

~~The~~other debt as well as interest rate ~~per annum applicable~~risk refer to loans under the New Revolving Credit Facility will be, at Everi Payments’ option, the base rate or the Eurodollar Rate (defined to be the London Interbank Offered Rate or a comparable or successor rate) (the “Eurodollar Rate”) plus,Part I, Item 3: Quantitative and Qualitative Disclosures About Market Risk, “Note 12 — Long-Term Debt” in each case, an applicable margin. The interest rate per annum applicable to the New Term Loan Facility will also be, at Everi Payments’ option, the base rate or the Eurodollar Rate plus, in each case, an applicable margin. The Eurodollar Rate will be reset at the beginning of each selected interest period based on the Eurodollar Rate then in effect; provided that, if the Eurodollar Rate is below 1.0%, then such rate will be equal to 1.0% plus the applicable margin. The base rate is a fluctuating interest rate equal to the highest of: (i) the prime lending rate announced by the administrative agent; (ii) the federal funds effective rate from time to time plus 0.50%; and (iii) the Eurodollar Rate (after taking account of any applicable floor) applicable for an interest period of one month plus 1.00%. The applicable margins for both the New Revolving Credit Facility and the New Term Loan Facility are: (i) 4.50% in respect of Eurodollar Rate loans and (ii) 3.50% in respect of base rate loans.

Voluntary prepayments of the term loan and the revolving loans and voluntary reductions in the unused commitments are permitted in whole or in part, in minimum amounts as set forth in the New Credit Agreement governing the New Credit Facilities, with prior notice but without premium or penalty, except that certain refinancings of the term loans within six months after the Closing Date will be subject to a prepayment premium of 1.00% of the principal amount repaid.

Subject to certain exceptions, the obligations under the New Credit Facilities are secured by substantially all of the present and subsequently acquired assets of each of Everi Payments, Holdings and the subsidiary guarantors party thereto including: (i) a perfected first priority pledge of all the capital stock of Everi Payments and each domestic direct, wholly ownedPart I, Item 1: Financial Statements.

Contractual Obligations

There were no material restricted subsidiary held by Holdings, Everi Payments or any such subsidiary guarantor; and (ii) a perfected first priority security interest in substantially all other tangible and intangible assets of Holdings, Everi Payments, and such subsidiary guarantors (including, but not limited to, accounts receivable, inventory, equipment, general intangibles, investment property, real property, intellectual property and the proceeds of the foregoing). Subject to certain exceptions, the New Credit Facilities are unconditionally guaranteed by Holdings and such subsidiary guarantors.

The New Credit Agreement governing the New Credit Facilities contains certain covenants that, among other things, limit Holdings’ ability, and the ability of certain of its subsidiaries, to incur additional indebtedness, sell assets or consolidate or merge with or into other companies, pay dividends or repurchase or redeem capital stock, make certain investments, issue capital stock of subsidiaries, incur liens, prepay, redeem or repurchase subordinated debt, and enter into certain types of transactions with its affiliates. The New Credit Agreement governing the New Credit Facilities also requires Holdings, together with its subsidiaries, to comply with a consolidated secured leverage ratio. At September 30, 2017, our consolidated secured leverage ratio was 3.63 to 1.00, with a maximum allowable ratio of 5.00 to 1.00. Our maximum consolidated secured leverage ratio will be 5.00 to 1.00, 4.75 to 1.00, and 4.50 to 1.00 as of December 31, 2017, 2018, and 2019 and thereafter, respectively.

~~We were in compliance with the terms of the New Credit Facilities as of September 30, 2017.~~

Events of default under the New Credit Agreement governing the New Credit Facilities include customary events such as a cross-default provision with respect to other material debt. In addition, an event of default will occur if Holdings undergoes a change of control. This is defined to include the case where Holdings ceases to own 100% of the equity interests of Everi Payments, or where any person or group acquires a percentage of the economic or voting interests of Holdings’ capital stock of 35% or more (determined on a fully diluted basis).

We are required to repay the New Term Loan Facility in an amount equal to 0.25% per quarter of the initial aggregate principal, with the final principal repayment installment on the maturity date. Interest is due in arrears on each interest payment date applicable thereto and at such other times as may be specified in the New Credit Agreement. As to any loan other than a base rate loan, the interest payment dates shall be the last day of each interest period applicable to such loan and the maturity date (provided, however, that if any interest period for a Eurodollar Rate loan exceeds three months, the respective dates that fall every three months after the beginning of such interest period shall also be interest payment dates). As to any base rate loan, the interest payment dates shall be last business day of each March, June, September and December and the maturity date.

~~For the quarter ended September 30, 2017,~~ the New Term Loan Facility had an applicable weighted average interest rate of 5.74%. For the nine months ended September 30, 2017, the Prior Credit Facility had an applicable weighted average interest rate of 6.29%; the New Term Loan Facility had an applicable weighted average interest rate of 5.71%; and a blended weighted average interest rate of 5.87% for the period ended September 30, 2017.

~~Refinanced Senior Secured Notes~~

~~Senior Unsecured Notes~~

~~Interest is due semi-annually in arrears each January and July.~~

~~We were in compliance with the terms of the Unsecured Notes as of September 30, 2017 and December 31, 2016.~~

~~Contractual Obligations~~

~~The following transactions have resulted in a change~~changes in our commitments under contractual obligations as compared to those disclosed in our Annual Report, ~~on Form 10-K for the fiscal year ended December 31, 2016:~~

In May 2017, we entered into the New Credit Agreement, which provides for the $35.0 million New Revolving Credit Facility and the $820.0 million New Term Loan Facility. Under the New Credit Agreement, we are requiredother than a decrease to ~~make principal payments~~certain purchase obligations of 1% annually of $2.0 million in 2017, $8.2 million in years 2018 through 2021 and $783.1 million thereafter. We also have required interest payments, computed using a blended weighted average interest rate at September 30, 2017 of 5.74%, of $12.0 million, $46.6 million, $46.1 million, $45.7 million, $45.3 million and $104.5approximately $12.1 million from ~~2017 through 2021~~those disclosed in our Annual Report and ~~thereafter, respectively.~~

~~In July 2017, we extended~~obligations discussed in “Note 3 — Leases” and “Note 12 — Long-Term Debt” in Part I, Item 1: Financial Statements.We expect that cash provided by operating activities will be sufficient to meet such obligations during the ~~term~~foreseeable future.

We are involved in various legal proceedings in the ordinary course of our ~~placement fee agreements to 6 years and 11 months with our largest customer in Oklahoma. Under the terms~~business. While we believe resolution of the ~~agreement,~~claims brought against us, both individually and in aggregate, will not have a material adverse impact on our financial condition or results of operations, litigation of this nature is inherently unpredictable. Our views on these legal proceedings, including those described in “Note 13 — Commitments and Contingencies” in Part I, Item 1: Financial Statements, may change in the future. We intend to vigorously defend against these actions, and ultimately believe we ~~made a $10.0 million cash payment in August 2017, and will pay approximately $5.6 million per quarter in placement fees, beginning in January 2018 and ending in July 2019.~~

~~Other Liquidity Needs and Resources~~

We need cash to support our foreign operations. For some foreign jurisdictions, such as the United Kingdom, applicable law and cross border treaties allow us to transfer funds between our domestic and foreign operations efficiently. For

should prevail.

other foreign jurisdictions, we must rely on the cash generated by our operations in those foreign jurisdictions, and the cost of repatriation is prohibitive. For example, Global Cash Access (Canada), Inc., the subsidiary through which we operate our Payments business in Canada, generates cash that is sufficient to support its operations. If we expand our Payments business into new foreign jurisdictions, we must rely on treaty favored cross border transfers of funds, the cash generated by our operations in those foreign jurisdictions or alternate sources of working capital.

Off-Balance Sheet Arrangements

~~Our Contract Cash Solutions Agreement~~

We have commercial arrangements with ~~Wells Fargo Bank, N.A. (“Wells Fargo”) allows us to use funds owned by Wells Fargo~~third-party vendors to provide ~~the currency needed~~cash for ~~normal operating requirements for~~certain of our ATMs. For the use of these funds, we pay ~~Wells Fargo~~ a cash usage fee on either the average daily balance of funds utilized multiplied by a ~~contractually defined~~contractually-defined cash usage rate or the amounts supplied multiplied by a contractually-defined cash usage rate. These cash usage fees, reflected as interest expense within the Statements of ~~Loss,~~Operations, were ~~$1.2~~approximately $0.7 million and ~~$3.5~~$2.5 million for the three and nine months ended September 30, ~~2017,~~2020, respectively and ~~$0.7~~$1.8 million and ~~$2.3~~$5.5 million for the three and nine months ended September 30, ~~2016,~~2019, respectively. As a direct consequence surrounding the circumstances of COVID-19, the cash usage fees in the current reporting period were significantly reduced as compared to the same period in the prior year. We are exposed to interest rate risk to the extent that the ~~applicable LIBOR~~target federal funds rate increases.

Under ~~this agreement, all~~these agreements, the currency supplied by ~~Wells Fargo~~third-party vendors remains ~~the~~their sole property ~~of Wells Fargo at all times~~ until ~~it is dispensed, at which time Wells Fargo obtains an interest in~~ the ~~corresponding settlement receivable, which is recorded on a net basis.~~funds are dispensed. As these funds are not our assets, supplied cash is not reflected on ~~the~~our Balance Sheets. The outstanding balances of ATM cash utilized by us from ~~Wells Fargo~~the third-party vendors were ~~$226.6~~approximately $301.6 million and ~~$285.4~~$292.6 million as of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.

~~The~~

Our primary commercial arrangement, the Contract Cash Solutions Agreement, as amended, with Wells Fargo Bank, N.A. provides us with cash in the maximum amount of ~~$425.0~~$300 million ~~during~~with the ~~term of~~ability to increase the amount by $75 million over a five-day period for special occasions, such as the period around New Year’s Day. The agreement ~~which~~currently expires on June 30, ~~2019.~~

2022 and will automatically renew for additional one-year periods unless either party provides a 90-day written notice of its intent not to renew.

We are responsible for any losses of cash in the ATMs under this agreement, and we self-insure for this risk. ~~We incurred~~There were no material losses related to this self-insurance for the three and nine months ended September 30, ~~2017~~2020 and ~~2016.~~

~~Effects of Inflation~~

Our monetary assets, consisting primarily of cash, receivables, inventory and our non-monetary assets, consisting primarily of the deferred tax asset, goodwill and other intangible assets, are not significantly affected by inflation. We believe that replacement costs of equipment, furniture and leasehold improvements will not materially affect our operations. However, the rate of inflation affects our operating expenses, such as those for salaries and benefits, armored carrier expenses, telecommunications expenses and equipment repair and maintenance services, which may not be readily recoverable in the financial terms under which we provide our Games and Payments products and services to gaming establishments and their patrons.

2019.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

With the exception of the impacts of COVID-19 and the debt transactions that occurred in the second quarter of 2020, which are discussed elsewhere in this document, there have been no material changes in our reported market risks or risk management policies since the filing of our Annual Report.

In the normal course of business, we are exposed to foreign currency exchange risk. We operate and conduct business in foreign countries and, as a result, are exposed to movements in foreign currency exchange rates. Our exposure to foreign currency exchange risk related to our foreign operations is not material to our results of operations, cash flows, or financial ~~position.~~condition. At present, we do not hedge this ~~risk, but~~exposure; however, we continue to evaluate such foreign currency ~~translation risk exposure.~~

~~Wells Fargo supplies us~~exchange risk.

In the normal course of business, we have commercial arrangements with ~~currency needed~~third-party vendors to provide cash for ~~normal operating requirements~~certain of our ~~domestic ATMs pursuant to the Contract Cash Solutions Agreement.~~ATMs. Under the terms of ~~this agreement,~~these agreements, we pay a monthly cash usage fee that is generally based upon the ~~product of the average daily dollars outstanding in all such ATMs multiplied by a margin that is tied to LIBOR.~~target federal funds rate. We are, therefore, exposed to interest rate risk to the extent that the ~~applicable LIBOR~~target federal funds rate increases. The ~~currency supplied~~outstanding balance of ATM cash utilized by ~~Wells Fargo~~us from third-party vendors was ~~$226.6~~approximately $301.6 million as of September 30, ~~2017. Based upon this outstanding amount of currency supplied by Wells Fargo,~~2020; therefore, each 1%100 basis points increase in the ~~applicable LIBOR~~target federal funds rate would have approximately a ~~$2.3~~$3.0 million ~~impact~~ impact on income before ~~taxes~~tax over a 12-month period. ~~Foreign gaming establishments or third-party vendors supply~~

The Term Loan Facility and Revolving Credit Facility and the ~~currency needs for~~Incremental Term Loan Credit Facility (collectively, the ~~ATMs located on their premises.~~

~~The New Credit Facilities~~“Credit Facilities”) bear interest at rates that can vary over time. We have the option of ~~having~~paying interest on the outstanding amounts under the ~~New~~ Credit Facilities ~~paid based on~~using a base rate or ~~based on~~ LIBOR. We have historically elected to pay interest based on LIBOR, and we expect to continue to ~~pay interest based on LIBOR of~~do so for various maturities.

The weighted average interest rate on the ~~New Credit Facilities~~Term Loan was ~~approximately 5.71%~~3.82% and 4.02% for the three and nine months ended September 30, ~~2017.~~2020, respectively. Based upon the outstanding balance on the ~~New Credit Facilities~~Term Loan of ~~$818.0~~$735.5 million as of September 30, ~~2017,~~2020, each 1%100 basis points increase in the applicable LIBOR would have a combined impact of approximately $7.4 million on interest expense over a 12-month period.

The weighted average interest rate on the Incremental Term Loan Credit Facility was 11.50% for the three and nine months ended September 30, 2020, respectively. Based upon the outstanding balance on the Incremental Term Loan Credit Facility of $124.7 million as of September 30, 2020, each 100 basis points increase in the applicable LIBOR would have an ~~$8.2~~impact of approximately $1.25 million ~~impact~~ on ~~interest~~interest expense over a 12-month period.

The interest rate onfor the 7.50% Senior Unsecured Notes due 2025 is ~~fixed, and~~fixed; therefore, an increase in LIBOR does not impact the related interest ~~expense associated with~~expense. At present, we do not hedge the risk related to the changes in the interest rate; however, we continue to evaluate such ~~notes.~~

interest rate exposure.

We continue to evaluate the potential impact of the eventual replacement of the LIBOR benchmark, which is set to phase out by the end of 2021. We expect to utilize the replacement rate commonly referred to as the secured overnight financing rate (“SOFR”), which is the anticipated benchmark in place of LIBOR, and we do not expect the transition to SOFR to have a material impact on our business, financial condition and results of operations.

~~DELAWARE~~	~~20-0723270~~
Delaware		20-0723270
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7250 S. ~~TENAYA WAY, SUITE~~Tenaya Way, Suite 100
~~LAS VEGAS, NEVADA~~ Las Vegas		~~89113~~
Nevada		89113
(Address of principal executive offices)		(Zip Code)

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	Level of Hierarchy	Fair Value		Outstanding Balance
September 30, 2017
							Level of Hierarchy	Fair Value		Outstanding Balance
September 30, 2020						September 30, 2020
Term loan						Term loan	2	$	715,127	$	735,500
Incremental term loan						Incremental term loan	2	$	127,805	$	124,688
Senior unsecured notes						Senior unsecured notes	2	$	279,673	$	285,381
December 31, 2019						December 31, 2019
Term loan	2	$	826,130	$	817,950	Term loan	2	$	753,494	$	749,000
Senior unsecured notes	1	$	378,875	$	350,000	Senior unsecured notes	2	$	401,738	$	375,000
December 31, 2016
Term loan	1	$	451,632	$	465,600
Senior secured notes	3	$	324,950	$	335,000
Senior unsecured notes	1	$	350,000	$	350,000

	Nine months ended
	September 30,
	2017			2016
Risk-free interest rate		2	%		1	%
Expected life of options (in years)		6			5
Expected volatility		54	%		51	%
Expected dividend yield		—	%		—	%

						Weighted
	Number of			Weighted Average		Average Life		Aggregate
	Common Shares			Exercise Price		Remaining		Intrinsic Value
	(in thousands)			(per share)		(years)		(in thousands)
Outstanding, December 31, 2016		18,233		$	6.02		6.4	$	2,387
Granted		4,107			3.38
Exercised		(950	)		4.29
Canceled or forfeited		(358	)		5.99
Outstanding, September 30, 2017		21,032		$	5.58		6.5	$	48,106
Vested and expected to vest, September 30, 2017		18,401		$	5.71		6.3	$	40,291
Exercisable, September 30, 2017		10,539		$	6.85		4.8	$	13,298

				Weighted
	Shares			Average Grant
	Outstanding			Date Fair Value
	(in thousands)			(per share)
Outstanding, December 31, 2016		80		$	7.12
Granted		40			6.66
Vested		(16	)		6.91
Forfeited		—			—
Outstanding, September 30, 2017		104		$	6.97

	Three Months Ended September 30, 2017
	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total

Revenues
Games	$	—		$	—		$	55,331		$	1,739		$	(1,618	)	$	55,452
Payments		—			175,793			7,841			9,040			(804	)		191,870
Total revenues		—			175,793			63,172			10,779			(2,422	)		247,322
Costs and expenses
Games cost of revenue (exclusive of depreciation and amortization)		—			—			13,857			1,106			(1,143	)		13,820
Payments cost of revenue (exclusive of depreciation and amortization)		—			140,299			2,478			7,061			—			149,838
Operating expenses		—			18,519			10,365			1,858			(1,279	)		29,463
Research and development		—			—			4,542			3			—			4,545
Depreciation		—			1,615			10,740			184			—			12,539
Amortization		—			2,260			14,579			483			—			17,322
Total costs and expenses		—			162,693			56,561			10,695			(2,422	)		227,527
Operating income		—			13,100			6,611			84			—			19,795
Other expenses (income)
Interest (income) expense, net		—			(292	)		23,406			254			—			23,368
Income (loss) from subsidiaries		4,289			(2,898	)		(39	)		—			(1,352	)		—
Total other expenses (income)		4,289			(3,190	)		23,367			254			(1,352	)		23,368
(Loss) income before income tax		(4,289	)		16,290			(16,756	)		(170	)		1,352			(3,573	)
Income tax (benefit) provision		—			(1,055	)		1,708			63			—			716
Net (loss) income		(4,289	)		17,345			(18,464	)		(233	)		1,352			(4,289	)
Foreign currency translation		602			—			—			602			(602	)		602
Comprehensive (loss) income	$	(3,687	)	$	17,345		$	(18,464	)	$	369		$	750		$	(3,687	)

	Three Months Ended September 30, 2016
	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Revenues
Games	$	—		$	—		$	56,218		$	—		$	—		$	56,218
Payments		—			153,145			7,519			5,417			(122	)		165,959
Total revenues		—			153,145			63,737			5,417			(122	)		222,177
Costs and expenses
Games cost of revenue (exclusive of depreciation and amortization)		—			—			15,467			—			—			15,467
Payments cost of revenue (exclusive of depreciation and amortization)		—			122,316			2,206			2,689			—			127,211
Operating expenses		—			16,491			10,148			479			(122	)		26,996
Research and development		—			—			4,460			—			—			4,460
Depreciation		—			1,892			10,447			28			—			12,367
Amortization		—			3,128			20,439			537			—			24,104
Total costs and expenses		—			143,827			63,167			3,733			(122	)		210,605
Operating income		—			9,318			570			1,684			—			11,572
Other expenses (income)
Interest expense, net of interest income		—			1,371			23,399			45			—			24,815
Loss (income) from subsidiaries		8,254			(4,306	)		—			—			(3,948	)		—
Total other expenses (income)		8,254			(2,935	)		23,399			45			(3,948	)		24,815
(Loss) income before income tax		(8,254	)		12,253			(22,829	)		1,639			3,948			(13,243	)
Income tax provision (benefit)		—			3,849			(9,261	)		423			—			(4,989	)
Net (loss) income		(8,254	)		8,404			(13,568	)		1,216			3,948			(8,254	)
Foreign currency translation		(394	)		—			—			(394	)		394			(394	)
Comprehensive (loss) income	$	(8,648	)	$	8,404		$	(13,568	)	$	822		$	4,342		$	(8,648	)

	Nine Months Ended September 30, 2017
										Non-
				Subsidiary			Guarantor			Guarantor
	Parent			Issuer			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues
Games	$	—		$	—		$	165,551		$	5,445		$	(5,164	)	$	165,832
Payments		—			515,853			23,323			25,409			(3,328	)		561,257
Total revenues		—			515,853			188,874			30,854			(8,492	)		727,089
Costs and expenses
Games cost of revenue (exclusive of depreciation and amortization)		—			—			39,659			2,945			(3,101	)		39,503
Payments cost of revenue (exclusive of depreciation and amortization)		—			410,038			7,167			18,899			—			436,104
Operating expenses		—			53,413			32,463			6,750			(5,391	)		87,235
Research and development		—			—			13,676			30			—			13,706
Depreciation		—			5,057			29,292			416			—			34,765
Amortization		—			7,756			42,885			1,445			—			52,086
Total costs and expenses		—			476,264			165,142			30,485			(8,492	)		663,399
Operating income		—			39,589			23,732			369			—			63,690
Other expenses (income)
Interest expense, net of interest income		—			2,216			69,455			635			—			72,306
Loss (income) from subsidiaries		26,854			(8,884	)		(121	)		—			(17,849	)		—
Loss on extinguishment of debt		—			14,615			—			—			—			14,615
Total other expenses (income)		26,854			7,947			69,334			635			(17,849	)		86,921
(Loss) income before income tax		(26,854	)		31,642			(45,602	)		(266	)		17,849			(23,231	)
Income tax (benefit) provision		—			(1,701	)		5,108			216			—			3,623
Net (loss) income		(26,854	)		33,343			(50,710	)		(482	)		17,849			(26,854	)
Foreign currency translation		1,710			—			—			1,710			(1,710	)		1,710
Comprehensive (loss) income	$	(25,144	)	$	33,343		$	(50,710	)	$	1,228		$	16,139		$	(25,144	)

	Nine Months Ended September 30, 2016
										Non-
				Subsidiary			Guarantor			Guarantor
	Parent			Issuer			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues
Games	$	—		$	—		$	158,660		$	—		$	—			158,660
Payments		—			447,762			22,622			13,769			(867	)		483,286
Total revenues		—			447,762			181,282			13,769			(867	)		641,946
Costs and expenses
Games cost of revenue (exclusive of depreciation and amortization)		—			—			36,871			—			—			36,871
Payments cost of revenue (exclusive of depreciation and amortization)		—			359,265			6,754			7,347			—			373,366
Operating expenses		—			53,912			33,230			1,460			(867	)		87,735
Research and development		—			—			14,499			—			—			14,499
Depreciation		—			6,376			30,707			89			—			37,172
Amortization		—			9,370			59,830			1,687			—			70,887
Total costs and expenses		—			428,923			181,891			10,583			(867	)		620,530
Operating income (loss)		—			18,839			(609	)		3,186			—			21,416
Other expenses (income)
Interest expense, net of interest income		—			4,880			69,500			168			—			74,548
Loss (income) from subsidiaries		32,202			(11,120	)		—			—			(21,082	)		—
Total other expenses (income)		32,202			(6,240	)		69,500			168			(21,082	)		74,548
(Loss) income before income tax		(32,202	)		25,079			(70,109	)		3,018			21,082			(53,132	)
Income tax provision (benefit)		—			5,785			(27,642	)		927			—			(20,930	)
Net (loss) income		(32,202	)		19,294			(42,467	)		2,091			21,082			(32,202	)
Foreign currency translation		(1,314	)		—			—			(1,314	)		1,314			(1,314	)
Comprehensive (loss) income	$	(33,516	)	$	19,294		$	(42,467	)	$	777		$	22,396		$	(33,516	)

	Three Months Ended
	September 30, 2017							September 30, 2016							2017 vs 2016
	$			%				$			%				$ Variance			% Variance
Revenues
Games	$	55,452			22		%	$	56,218			25		%	$	(766	)		(1	)	%
Payments		191,870			78		%		165,959			75		%		25,911			16		%
Total revenues		247,322			100		%		222,177			100		%		25,145			11		%
Costs and expenses
Games cost of revenue (exclusive of depreciation and amortization)		13,820			5		%		15,467			7		%		(1,647	)		(11	)	%
Payments cost of revenue (exclusive of depreciation and amortization)		149,838			61		%		127,211			57		%		22,627			18		%
Operating expenses		29,463			12		%		26,996			12		%		2,467			9		%
Research and development		4,545			2		%		4,460			2		%		85			2		%
Depreciation		12,539			5		%		12,367			6		%		172			1		%
Amortization		17,322			7		%		24,104			11		%		(6,782	)		(28	)	%
Total costs and expenses		227,527			92		%		210,605			95		%		16,922			8		%
Operating income		19,795			8		%		11,572			5		%		8,223			71		%
Other expenses
Interest expense, net of interest income		23,368			9		%		24,815			11		%		(1,447	)		(6	)	%
Total other expenses		23,368			9		%		24,815			11		%		(1,447	)		(6	)	%
Loss before income tax		(3,573	)		(1	)	%		(13,243	)		(6	)	%		9,670			(73	)	%
Income tax provision (benefit)		716			(1	)	%		(4,989	)		(2	)	%		5,705			(114	)	%
Net loss	$	(4,289	)		(2	)	%	$	(8,254	)		(4	)	%	$	3,965			(48	)	%

	Total Number of Shares Purchased ⁽¹⁾ (in thousands)		Average Price per Share ⁽²⁾
Tax Withholdings
7/1/17 - 7/31/17		0.5	$	7.10
8/1/17 - 8/31/17		0.4	$	7.33
9/1/17 - 9/30/17		0.5	$	7.80
Total		1.4	$	7.41


	Total Number of Shares Purchased (1) (in thousands)	Average Price per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (3)
Period
7/1/20 - 7/31/20	0.8	$	5.59	—	—
8/1/20 - 8/31/20	4.0	$	6.78	—	—
9/1/20 - 9/30/20	59.6	$	7.99	—	—
Total	64.4	$	7.88	—	—

Exhibit Number	~~Description~~
Exhibit Number		Description
10.1*		~~Transition and Resignation Agreement and General Release of All Claims with Juliet A. Lim (dated October 25, 2017).~~

31.1* *31.1		Certification of Michael D. Rumbolz, ~~President and~~ Chief Executive Officer of Everi Holdings ~~Inc.~~ in accordance with Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002 .

31.2* *31.2		Certification of ~~Randy L. Taylor,~~Mark F. Labay, Chief Financial Officer of Everi Holdings ~~Inc.~~ in accordance with Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002 .

32.1** *32.1		Certification of ~~Michael D. Rumbolz, President and~~the Chief Executive Officer and Chief Financial Officer of Everi Holdings ~~Inc.~~ in accordance with 18 U.S.C. ~~1350,~~§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002 .

32.2** 101.INS		~~Certification of Randy L. Taylor, Chief Financial Officer of Everi Holdings Inc.~~ XBRL Instance Document - – this instance document does not appear in ~~accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of~~ the ~~Sarbanes-Oxley Act of 2002.~~ Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.INS* *101.SCH		~~XBRL Instance Document.~~

101.SCH*	XBRL Taxonomy Extension Schema Document.

101.CAL* *101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF* *101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.


101.LAB* Exhibit Number						Description

*101.LAB						XBRL Taxonomy Extension Label Linkbase Document.

101.PRE* *101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document.

*	~~Filed herewith.~~
*104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL (included as Exhibit 101).