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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER
2021
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
FOR THE TRANSITION PERIOD FROM TO
file number: 001-32622
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Delaware | 20-0723270 | |||||||
| (State or other jurisdiction of | (I.R.S. Employer | |||||||
7250 S. | ||||||||
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Nevada | 89113 | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(800) 833-7110
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| 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 | ||||||
| Large accelerated filer |
| Accelerated filer | ☒ | |||||||||||
Non-accelerated filer |
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| Smaller reporting company | ☐ | ||||||||||
Emerging growth company | ☐ | |||||||||||||
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| PART I: FINANCIAL INFORMATION | ||||||||||||||
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| 2020 |
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Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2021 and 2020 | ||||||||||||||
| Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3: | Quantitative and Qualitative Disclosures |
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INCOME (LOSS) 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 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 Nine Months Ended September 30, 2017 2016 Cash flows from operating activities Net loss $ (26,854 ) $ (32,202 ) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 86,851 108,059 Amortization of financing costs 4,567 5,023 Loss on sale or disposal of assets 1,580 2,554 Accretion of contract rights 5,845 6,521 Provision for bad debts 7,946 7,192 Deferred income taxes 3,174 (22,259 ) Write-down of assets — 4,289 Reserve for obsolescence 46 942 Loss on extinguishment of debt 14,615 — Stock-based compensation 5,125 4,146 Changes in operating assets and liabilities: Settlement receivables 1,569 9,158 Trade and other receivables 2,767 (1,386 ) Inventory (5,314 ) 6,315 Prepaid and other assets (3,337 ) 2,912 Settlement liabilities (41,799 ) (22,000 ) Accounts payable and accrued expenses 12,981 6,544 Net cash provided by operating activities 69,762 85,808 Cash flows from investing activities Capital expenditures (70,057 ) (67,025 ) Acquisitions, net of cash acquired — (694 ) Proceeds from sale of fixed assets 4 4,608 Placement fee agreements (13,132 ) (11,187 ) Changes in restricted cash (149 ) 88 Net cash used in investing activities (83,334 ) (74,210 ) Cash flows from financing activities Repayments of new credit facility (2,050 ) — Repayments of prior credit facility (465,600 ) (21,900 ) Repayments of secured notes (335,000 ) — Proceeds from current credit facility 820,000 — Debt issuance costs and discounts (19,748 ) (480 ) Proceeds from exercise of stock options 4,046 — Purchase of treasury stock (21 ) (17 ) Net cash provided by (used in) financing activities 1,627 (22,397 ) Effect of exchange rates on cash 1,365 (743 ) Cash and cash equivalents Net decrease for the period (10,580 ) (11,542 ) Balance, beginning of the period 119,051 102,030 Balance, end of the period $ 108,471 $ 90,488 See notes to unaudited condensed consolidated financial statements.LOSSOPERATIONS AND COMPREHENSIVE LOSSlossearnings (loss) per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenues Games revenues Gaming operations $ 73,220 $ 13,859 $ 131,361 $ 59,545 Gaming equipment and systems 26,090 6,983 44,078 18,566 Gaming other 27 11 49 32 Games total revenues 99,337 20,853 175,488 78,143 FinTech revenues Financial access services 44,840 10,034 83,552 47,007 Software and other 15,604 4,424 32,850 17,118 Hardware 12,801 3,404 19,805 9,756 FinTech total revenues 73,245 17,862 136,207 73,881 Total revenues 172,582 38,715 311,695 152,024 Costs and expenses Gaming operations 5,342 1,681 10,101 6,226 Gaming equipment and systems 15,248 4,071 25,555 10,895 Gaming other 0 456 0 456 Games total cost of revenues 20,590 6,208 35,656 17,577 Financial access services 1,560 511 3,033 4,066 Software and other 1,129 324 2,133 1,198 Hardware 7,670 2,014 11,698 5,904 FinTech total cost of revenues 10,359 2,849 16,864 11,168 Operating expenses 48,178 41,603 86,221 80,501 Research and development 8,766 5,193 17,179 13,924 Depreciation 15,931 16,294 32,108 32,537 Amortization 14,369 19,295 29,084 38,619 Total costs and expenses 118,193 91,442 217,112 194,326 Operating income (loss) 54,389 (52,727) 94,583 (42,302) Other expenses Interest expense, net of interest income 17,760 19,822 36,231 37,321 Loss on extinguishment of debt 0 80 0 7,457 Total other expenses 17,760 19,902 36,231 44,778 Income (loss) before income tax 36,629 (72,629) 58,352 (87,080) Income tax provision (benefit) 415 (4,148) 1,604 (5,145) Net income (loss) 36,214 (68,481) 56,748 (81,935) Foreign currency translation 328 304 107 (1,654) Comprehensive income (loss) $ 36,542 $ (68,177) $ 56,855 $ (83,589) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Earnings (loss) per share Basic $ 0.41 $ (0.80) $ 0.65 $ (0.97) Diluted $ 0.36 $ (0.80) $ 0.57 $ (0.97) Weighted average common shares outstanding Basic 88,722 85,122 87,858 84,873 Diluted 100,030 85,122 99,004 84,873 At June 30, At December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 340,361 $ 251,706 Settlement receivables 50,111 60,652 Trade and other receivables, net of allowances for credit losses of $4,790 and $3,689 at June 30, 2021 and December 31, 2020, respectively 95,705 74,191 Inventory 31,373 27,742 Prepaid expenses and other current assets 24,904 17,348 Total current assets 542,454 431,639 Non-current assets Property and equipment, net 113,256 112,323 Goodwill 681,992 681,974 Other intangible assets, net 195,084 214,627 Other receivables 13,482 14,620 Other assets 19,247 21,996 Total non-current assets 1,023,061 1,045,540 Total assets $ 1,565,515 $ 1,477,179 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities Settlement liabilities $ 193,893 $ 173,211 Accounts payable and accrued expenses 146,786 145,029 Current portion of long-term debt 1,250 1,250 Total current liabilities 341,929 319,490 Non-current liabilities Long-term debt, less current portion 1,129,627 1,128,003 Deferred tax liability, net 20,852 19,956 Other accrued expenses and liabilities 15,607 17,628 Total non-current liabilities 1,166,086 1,165,587 Total liabilities 1,508,015 1,485,077 Commitments and contingencies (Note 13) 0 0 Stockholders’ equity (deficit) Convertible preferred stock, $0.001 par value, 50,000 shares authorized and 0 shares outstanding at June 30, 2021 and December 31, 2020, respectively 0 0 Common stock, $0.001 par value, 500,000 shares authorized and 115,559 and 89,908 shares issued and outstanding at June 30, 2021, respectively, and 111,872 and 86,683 shares issued and outstanding at December 31, 2020, respectively 116 112 Additional paid-in capital 483,762 466,614 Accumulated deficit (237,872) (294,620) Accumulated other comprehensive loss (1,084) (1,191) Treasury stock, at cost, 25,652 and 25,190 shares at June 30, 2021 and December 31, 2020, respectively (187,422) (178,813) Total stockholders’ equity (deficit) 57,500 (7,898) Total liabilities and stockholders’ equity (deficit) $ 1,565,515 $ 1,477,179 Six Months Ended June 30, 2021 2020 Cash flows from operating activities Net income (loss) $ 56,748 $ (81,935) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation 32,108 32,537 Amortization 29,084 38,619 Non-cash lease expense 2,399 2,195 Amortization of financing costs and discounts 2,344 1,941 Loss on sale or disposal of assets 1,486 101 Accretion of contract rights 4,637 3,170 Provision for credit losses 3,806 4,981 Deferred income taxes 896 (5,392) Reserve for inventory obsolescence 1,211 1,021 Write-down of assets 0 11,033 Loss on extinguishment of debt 0 7,457 Stock-based compensation 8,452 7,123 Other non-cash items 0 456 Changes in operating assets and liabilities: Settlement receivables 10,546 35,998 Trade and other receivables (26,297) 12,202 Inventory (4,764) (9,880) Prepaid expenses and other assets (7,146) 1,437 Settlement liabilities 20,682 (75,566) Accounts payable and accrued expenses 27,326 (25,908) Net cash provided by (used in) operating activities 163,518 (38,410) Cash flows from investing activities Capital expenditures (49,234) (30,134) Acquisitions, net of cash acquired (15,000) (15,000) Proceeds from sale of property and equipment 19 86 Placement fee agreements 0 (875) Net cash used in investing activities (64,215) (45,923) Cash flows from financing activities Proceeds from incremental term loan 0 125,000 Repayment of incremental term loan (625) 0 Proceeds from revolving credit facility 0 35,000 Repayments of existing term loan 0 (13,500) Repayments of unsecured notes 0 (89,619) Fees associated with debt transactions 0 (11,128) Proceeds from exercise of stock options 8,703 2,113 Treasury stock (8,612) (589) Payment of contingent consideration, acquisition (9,875) 0 Net cash (used in) provided by financing activities (10,409) 47,277 Effect of exchange rates on cash and cash equivalents 67 (1,732) Cash, cash equivalents and restricted cash Net increase (decrease) for the period 88,961 (38,788) Balance, beginning of the period 252,349 296,610 Balance, end of the period $ 341,310 $ 257,822
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| Nine Months Ended September 30, |
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| 2017 |
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| 2016 |
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Supplemental cash disclosures |
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Cash paid for interest |
| $ | 59,894 |
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| $ | 55,465 |
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Cash paid for income tax |
| $ | 760 |
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| $ | 1,124 |
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Cash refunded for income tax |
| $ | 200 |
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| $ | 92 |
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Supplemental non-cash disclosures |
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Accrued and unpaid capital expenditures |
| $ | 4,736 |
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| $ | 1,427 |
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Accrued and unpaid placement fees |
| $ | 39,074 |
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| $ | — |
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Accrued and unpaid contingent liability for acquisitions |
| $ | — |
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| $ | (3,169 | ) |
Transfer of leased gaming equipment to inventory |
| $ | 6,093 |
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| $ | 6,222 |
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| Six Months Ended June 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Supplemental cash disclosures | |||||||||||
| Cash paid for interest | $ | 35,309 | $ | 32,956 | |||||||
| Cash paid (refunded) for income tax, net | $ | 566 | $ | (52) | |||||||
| Supplemental non-cash disclosures | |||||||||||
| Accrued and unpaid capital expenditures | $ | 2,212 | $ | 2,288 | |||||||
| Transfer of leased gaming equipment to inventory | $ | 3,715 | $ | 5,578 | |||||||
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. 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 long-term accounts payable is estimated by discounting the total obligation using appropriate interest rates. As of June 30, 2021 and December 31, 2020, 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 Level of Hierarchy Fair Value Outstanding Balance September 30, 2017 Term loan 2 $ 826,130 $ 817,950 Senior unsecured notes 1 $ 378,875 $ 350,000 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 Common Stock—
Series AAdditional Accumulated
OtherTotal Stockholders’ Number of
SharesAmount Paid-in
CapitalAccumulated
DeficitComprehensive Loss Treasury
StockEquity (Deficit) 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) Balance, January 1, 2021 111,872 $ 112 $ 466,614 $ (294,620) $ (1,191) $ (178,813) $ (7,898) Net income — — — 20,534 — — 20,534 Foreign currency translation — — — — (221) — (221) Stock-based compensation expense — — 3,005 — — — 3,005 Exercise of warrants 378 — — — — — — Exercise of options 561 1 2,284 — — — 2,285 Restricted share vesting and withholding 41 — (1) — — (172) (173) Balance, March 31, 2021 112,852 $ 113 $ 471,902 $ (274,086) $ (1,412) $ (178,985) $ 17,532 Net income — — — 36,214 — — 36,214 Foreign currency translation — — — — 328 — 328 Stock-based compensation expense — — 5,447 — — — 5,447 Exercise of options 1,358 2 6,416 — — — 6,418 Restricted share vesting and withholding 1,349 1 (3) — — (8,437) (8,439) Balance, June 30, 2021 115,559 $ 116 $ 483,762 $ (237,872) $ (1,084) $ (187,422) $ 57,500 Statements,Statements;” (ii) our Unaudited Condensed Consolidated Statements of LossOperations and Comprehensive LossIncome (Loss) 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.”1.BUSINESS(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.dedicateda leading supplier of imaginative entertainment and trusted technology solutions for the casino and digital gaming industry. Everi’s mission is to providing videolead the gaming industry through the power of people, imagination and mechanical reel gamingtechnology. With a focus on player engagement and helping casino customers operate more efficiently, the Company develops entertaining game content and gaming machines, gaming systems and services for land-based and iGaming operators. The Company is also a preeminent and comprehensive provider of trusted financial technology solutions integratedthat power the casino floor while improving operational efficiencies and fulfilling regulatory compliance requirements, including products and services that offer convenient and secure cash and cashless financial transactions, self-service player loyalty tools and applications, and regulatory and intelligence software.payments solutionsoperators with gaming technology products and complianceservices, including: (i) gaming machines, primarily comprising Class II and efficiency softwareClass III slot machines placed under participation or fixed-fee lease arrangements or sold to casino operators. Everi Games provides: (a) comprehensive content, electronic gaming unitscustomers; (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 systemsystems 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.Payments provides: (a)FinTech provides gaming operators with financial technology products and services, including: financial access and deposit-based services supporting digital, cashless and physical cash options across mobile, assisted and self-service channels along with related loyalty and marketing tools, and other information-related products and services. In addition, we provide an end-to-end security suite to protect against cyber-related attacks and maintain the necessary secured environments to maintain compliance with applicable regulatory requirements. These solutions include: access to cash and cashless funding at gaming facilities via Automated Teller Machine (“ATM”) cashdebit withdrawals, credit card cashfinancial access transactions, and point of sale (“POS”) debit card transactions,purchases at casino cages, kiosk and mobile POS devices; federally insured deposit accounts for the CashClub Wallet, check verificationwarranty services, self-service ATMs and warranty services; (b) fully integrated gaming industry kiosks that provide cash accesskiosk and relatedmaintenance services; (c) productsself-service loyalty tools and services that improve credit decision making, automate cashier operations and enhance patron marketing activities for gaming establishments; (d)promotion management software; compliance, audit, and data solutions;software; casino credit data and (e) online payment processing solutionsreporting services; marketing and promotional offering subscription-based services; and other ancillary offerings.gamingour 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.statesan effort to contain the COVID-19 global pandemic or mitigate its impact and the impact of vaccines on these matters; however, we continue to monitor the impacts of the global pandemic and make adjustments to our business, accordingly.offer intrastate, Internet-basedagain temporarily closed operations in late 2020 began reopening in the first and second quarters of 2021. At the onset of the pandemic, 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 included enhanced sanitization, limitations on public gathering and casino capacity, patron social distancing requirements, limitations on casino operations and amenities, which have limited the number of patrons that are able or who desire to attend these venues. This has also impacted the pace at which demand for our products and services rebounds.
With some limitations still in effect, we expect that demand for our products and services will continue to be tempered in the short-term, to the extent gaming activity decreases at our customers’ locations or fails to increase at expected rates of return to pre-pandemic levels and to the extent our customers decide 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.2.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESninesix months ended SeptemberJune 30, 20172021 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 Annual Report.Annual Reportrevenues 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-Kour Statements of Operations.Six Months Ended June 30, 2021 2020 Balance at January 1 — current $ 9,240 $ 8,634 Balance at January 1 — non-current 8,321 6,774 Total 17,561 15,408 Balance at June 30 - current 9,994 8,392 Balance at June 30 - non-current 7,252 7,754 Total 17,246 16,146 (Decrease)/increase $ (315) $ 738 Balance at January 1 — current $ 26,980 $ 28,510 Balance at January 1 — non-current 289 354 Total 27,269 28,864 Balance at June 30 - current 30,694 39,318 Balance at June 30 - non-current 466 103 Total 31,160 39,421 Increase $ 3,891 $ 10,557 fiscal yearthree and six months ended December 31, 2016.ThereJune 30, 2021, respectively, and $10.4 million and $44.4 million for the three and six months ended June 30, 2020, respectively.Classification on our Balance Sheets At June 30, 2021 At December 31, 2020 Cash and cash equivalents Cash and cash equivalents $ 340,361 $ 251,706 Restricted cash - current Prepaid expenses and other current assets 848 542 Restricted cash - non-current Other assets 101 101 Total $ 341,310 $ 252,349 nodetermined 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 related to these receivables. The provision for doubtful accounts receivable is included within operating expenses and the check warranty loss reserves are included within financial access services cost of revenues in the Statements of Operations.of presentation and significant accounting policies sinceat the most recent filingbeginning of our Annual Reportfourth fiscal 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 Form 10-Kreviewing 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.fiscal year ended December 31, 2016.receivables,and other receivables, settlement liabilities, accounts payable, and accrued expenses approximatesapproximate fair value due to the short-term maturities ofareis 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). Level of Hierarchy Fair Value Outstanding Balance June 30, 2021 June 30, 2021 Term loan 2 $ 734,728 $ 735,500 Incremental term loan Incremental term loan 2 $ 129,319 $ 123,750 Senior unsecured notes 2 $ 296,454 $ 285,381 December 31, 2020 December 31, 2020 Term loan 2 $ 729,138 $ 735,500 Incremental term loan Incremental term loan 2 $ 129,972 $ 124,375 Senior unsecured notes 2 $ 296,083 $ 285,381
The term loan facility was reported at
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.
presentation, where applicable.
In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, which provides updated guidance on the goodwill impairment test and the method by which an entity recognizes an impairment charge. These amendments eliminate Step 2 from the current goodwill impairment process and require 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 effective 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 goodwill during the three and nine months ended September 30, 2017, this ASU did not impact our Financial Statements.
In March 2016, the FASB issued ASU No. 2016-09, which simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. 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, depending on the area covered in this update. Early adoption is permitted. We adopted this guidance in the current period on a prospective basis. 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 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 and net realizable value. Net realizable
| Standard | Description | Date of Adoption | Effect on Financial Statements | ||||||||
Accounting Standard Update (“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 | The adoption of this ASU did not have a material effect on our Financial Statements or on our disclosures. | ||||||||
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.
In May 2017, the FASB
In January 2017, the FASB issued ASU No. 2017-01, which clarifies the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The amendments are intended to help companies 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 reported 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 in 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 principle 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 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 implementation of the principal versus agent considerations in ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, which provides clarification on the implementation of performance obligations and licensing in ASU 2014-09. In May 2016, the FASB issued ASU 2016-11, which amends guidance provided in 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 at the date of initial application.
We have performed a review of the requirements of the standard and identified our major revenue streams and the anticipated impact to each of them:
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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, costconsolidated financial statements.
| Classification on our Balance Sheets | At June 30, 2021 | At December 31, 2020 | ||||||||||||||||||
| Assets | ||||||||||||||||||||
| Operating lease ROU assets | Other assets, non-current | $ | 14,369 | $ | 16,104 | |||||||||||||||
| Liabilities | ||||||||||||||||||||
| Current operating lease liabilities | Accounts payable and accrued expenses | $ | 5,410 | $ | 5,649 | |||||||||||||||
| Non-current operating lease liabilities | Other accrued expenses and liabilities | $ | 14,160 | $ | 16,077 | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Cash paid for: | |||||||||||||||||||||||
| Long-term operating leases | $ | 1,745 | $ | 1,983 | $ | 3,370 | $ | 3,281 | |||||||||||||||
| Short-term operating leases | $ | 389 | $ | 479 | $ | 819 | $ | 969 | |||||||||||||||
| Right-of-use assets obtained in exchange for lease obligations: | |||||||||||||||||||||||
Operating leases(1) | $ | 667 | $ | 156 | $ | 667 | $ | 860 | |||||||||||||||
| At June 30, 2021 | At December 31, 2020 | |||||||||||||
| Weighted Average Remaining Lease Term (in years): | ||||||||||||||
| Operating leases | 3.89 | 4.16 | ||||||||||||
| Weighted Average Discount Rate: | ||||||||||||||
| Operating leases | 5.13 | % | 5.16 | % | ||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Operating Lease Cost: | |||||||||||||||||||||||
Operating lease cost (1) | $ | 1,456 | $ | 1,365 | $ | 2,916 | $ | 2,737 | |||||||||||||||
| Variable lease cost | $ | 385 | $ | 468 | $ | 635 | $ | 912 | |||||||||||||||
| Year Ending December 31, | Amount | |||||||
| 2021 (excluding the six months ended June 30, 2021) | $ | 3,184 | ||||||
| 2022 | 6,160 | |||||||
| 2023 | 4,780 | |||||||
| 2024 | 3,548 | |||||||
| 2025 | 2,889 | |||||||
| Thereafter | 1,044 | |||||||
| Total future minimum lease payments | 21,605 | |||||||
| Amount representing interest | 2,035 | |||||||
| Present value of future minimum lease payments | 19,570 | |||||||
| Current operating lease obligations | 5,410 | |||||||
| Long-term lease obligations | $ | 14,160 | ||||||
As we continue to take the necessary measures of preparedness in connection with sales-type leases executed in 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 timing and amount of revenue recorded in each reporting period.
Review our existing accounting policies, procedures and internal controls to further determine the impact of the new standard on our Financial Statements.
Prepare the enhanced disclosures and updatesSupplemental balance sheet information related 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.
| Classification on our Balance Sheets | At June 30, 2021 | At December 31, 2020 | ||||||||||||||||||
| Assets | ||||||||||||||||||||
| Net investment in sales-type leases — current | Trade and other receivables, net | $ | 1,352 | $ | 1,397 | |||||||||||||||
| Net investment in sales-type leases — non-current | Other receivables | $ | 372 | $ | 803 | |||||||||||||||
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 in the first quarter of 2018.
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We account for business combinations in accordance with ASC 805, which requires that the identifiable assets acquired and liabilities assumed be recorded at their estimated fair values on the acquisition date separately from goodwill, which is the excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities. We include the results of operations of an acquired business as of the acquisition date. We had no material acquisitions for the three and ninesix months ended SeptemberJune 30, 20172021.
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Contract Cash Solutions Agreement
Our Contract Cash Solutions Agreementdistributed hardware and software applications to gaming operators to enhance gaming patron loyalty, pursuant to an asset purchase agreement. This acquisition included existing contracts with Wells Fargo Bank, N.A. (“Wells Fargo”) allowsgaming operators, technology, and intellectual property that allow us to use funds ownedprovide gaming operators with self-service enrollment, loyalty and marketing equipment, a mobile application to offer a gaming operator’s patrons additional flexibility in accessing casino promotions, and a marketing platform that manages and delivers a gaming operator’s marketing programs through these patron interfaces. This acquisition expanded our financial technology solutions offerings within our FinTech segment. Under the terms of the asset purchase agreement, we paid the Seller $20.0 million at the closing of the transaction, $10.0 million one year following the closing and an
rates increase.
TheOur primary commercial arrangement, the Contract Cash Solutions Agreement, as amended, is with Wells Fargo, N.A. (“Wells Fargo”). Wells Fargo provides us with cash inup to $300 million with the maximumability to increase the amount of $425.0 million duringas defined within the agreement or otherwise permitted by the vault cash provider. The term of the agreement which expires on June 30, 2019.
2023 and will automatically renew for additional one-year periods unless either party provides a ninety-day written notice of its intent not to renew.
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.
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| At September 30, |
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| At December 31, |
| At June 30, | At December 31, | |||||||||||
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| 2017 |
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| 2016 |
| 2021 | 2020 | |||||||||||
Trade and other receivables, net |
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| Trade and other receivables, net | ||||||||||
Games trade and loans receivables |
| $ | 36,837 |
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| $ | 44,410 |
| Games trade and loans receivables | $ | 68,384 | $ | 44,794 | ||||||
Payments trade and loans receivables |
|
| 10,214 |
|
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| 12,337 |
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| FinTech trade and loans receivables | FinTech trade and loans receivables | 19,782 | 14,683 | ||||||||||||||||
Contract assets(1) | Contract assets(1) | 17,246 | 17,561 | ||||||||||||||||
| Net investment in sales-type leases | Net investment in sales-type leases | 1,724 | 2,200 | ||||||||||||||||
Insurance settlement receivable(2) | Insurance settlement receivable(2) | 0 | 7,650 | ||||||||||||||||
Other receivables |
|
| 796 |
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| 1,924 |
| Other receivables | 2,051 | 1,923 | ||||||||
Total trade and other receivables, net |
| $ | 47,847 |
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| $ | 58,671 |
| Total trade and other receivables, net | 109,187 | 88,811 | ||||||||
Less: non-current portion of receivables |
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| 2,876 |
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| 2,020 |
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| Non-current portion of receivables | Non-current portion of receivables | ||||||||||||||||||
| Games trade and loans receivables | Games trade and loans receivables | (1,428) | (1,333) | ||||||||||||||||
| FinTech trade and loans receivables | FinTech trade and loans receivables | (4,430) | (4,163) | ||||||||||||||||
Contract assets(1) | Contract assets(1) | (7,252) | (8,321) | ||||||||||||||||
| Net investment in sales-type leases | Net investment in sales-type leases | (372) | (803) | ||||||||||||||||
| Total non-current portion of receivables | Total non-current portion of receivables | (13,482) | (14,620) | ||||||||||||||||
Total trade and other receivables, current portion |
| $ | 44,971 |
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| $ | 56,651 |
| Total trade and other receivables, current portion | $ | 95,705 | $ | 74,191 | ||||||
At least quarterly, we evaluate
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 followingfollows (in thousands):
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| At September 30, |
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| At December 31, |
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| 2017 |
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| 2016 |
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Prepaid expenses and other assets |
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Deposits |
| $ | 9,971 |
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| $ | 8,622 |
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Prepaid expenses |
|
| 7,870 |
|
|
| 5,937 |
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Other |
|
| 4,697 |
|
|
| 3,489 |
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Total prepaid expenses and other assets |
| $ | 22,538 |
|
| $ | 18,048 |
|
| Six Months Ended June 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Beginning allowance for credit losses | $ | (3,689) | $ | (5,786) | |||||||
| Provision | (3,806) | (4,981) | |||||||||
| Charge-offs and recoveries | 2,705 | 8,162 | |||||||||
| Ending allowance for credit losses | $ | (4,790) | $ | (2,605) | |||||||
The balance of the non-current portion of other assets consisted of the following (in thousands):
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| At September 30, |
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| At December 31, |
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|
| 2017 |
|
| 2016 |
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Other assets |
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|
|
|
|
|
Prepaid expenses and deposits |
| $ | 3,464 |
|
| $ | 3,399 |
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Debt issuance costs of revolving credit facility |
|
| 898 |
|
|
| 689 |
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Other |
|
| 3,088 |
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|
| 3,434 |
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Total other assets |
| $ | 7,450 |
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| $ | 7,522 |
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value.
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| At September 30, |
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| At December 31, |
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| 2017 |
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| 2016 |
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Inventory |
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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 |
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| $ | 12,570 |
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Work-in-progress |
|
| 3,516 |
|
|
| 1,502 |
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Finished goods |
|
| 4,300 |
|
|
| 4,996 |
|
Total inventory |
| $ | 23,790 |
|
| $ | 19,068 |
|
|
| At June 30, | At December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Inventory | |||||||||||
| Component parts, net of reserves of $1,981 and $1,262 at June 30, 2021 and December 31, 2020, respectively | $ | 22,686 | $ | 21,560 | |||||||
| Work-in-progress | 1,383 | 182 | |||||||||
| Finished goods | 7,304 | 6,000 | |||||||||
| Total inventory | $ | 31,373 | $ | 27,742 | |||||||
Property, equipment
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|
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| At September 30, 2017 |
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| At December 31, 2016 |
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| Useful Life |
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| Accumulated |
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| Net Book |
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| Accumulated |
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| Net Book |
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| (Years) |
| Cost |
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| Depreciation |
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| Value |
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| Cost |
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| Depreciation |
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| Value |
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Property, equipment and leased assets |
|
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Rental pool - deployed |
| 2-4 |
| $ | 149,895 |
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| $ | 73,623 |
|
| $ | 76,272 |
|
| $ | 123,812 |
|
| $ | 59,188 |
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| $ | 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 June 30, | At December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Prepaid expenses | $ | 16,447 | $ | 11,282 | |||||||
| Deposits | 5,933 | 4,133 | |||||||||
Restricted cash(1) | 848 | 542 | |||||||||
| Other | 1,676 | 1,391 | |||||||||
| Total prepaid expenses and other current assets | $ | 24,904 | $ | 17,348 | |||||||
| At June 30, | At December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Other assets | |||||||||||
| Operating lease ROU assets | $ | 14,369 | $ | 16,104 | |||||||
| Prepaid expenses and deposits | 4,160 | 4,952 | |||||||||
| Debt issuance costs of revolving credit facility | 173 | 267 | |||||||||
| Other | 545 | 673 | |||||||||
| Total other assets | $ | 19,247 | $ | 21,996 | |||||||
| At June 30, 2021 | At December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||
| Useful Life (Years) | Cost | Accumulated Depreciation | Net Book Value | Cost | Accumulated Depreciation | Net Book Value | |||||||||||||||||||||||||||||||||||
| Property and equipment | |||||||||||||||||||||||||||||||||||||||||
| Rental pool - deployed | 2-4 | $ | 228,739 | $ | 150,446 | $ | 78,293 | $ | 216,775 | $ | 136,975 | $ | 79,800 | ||||||||||||||||||||||||||||
| Rental pool - undeployed | 2-4 | 21,969 | 17,961 | 4,008 | 21,974 | 16,680 | 5,294 | ||||||||||||||||||||||||||||||||||
| FinTech equipment | 1-5 | 32,757 | 20,925 | 11,832 | 33,349 | 21,947 | 11,402 | ||||||||||||||||||||||||||||||||||
| Leasehold and building improvements | Lease Term | 12,417 | 8,548 | 3,869 | 11,352 | 8,557 | 2,795 | ||||||||||||||||||||||||||||||||||
| Machinery, office, and other equipment | 1-5 | 40,190 | 24,936 | 15,254 | 45,085 | 32,053 | 13,032 | ||||||||||||||||||||||||||||||||||
| Total property and equipment | $ | 336,072 | $ | 222,816 | $ | 113,256 | $ | 328,535 | $ | 216,212 | $ | 112,323 | |||||||||||||||||||||||||||||
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We have the following reporting units: (i) Games; (ii) Financial Access Services; (iii) Kiosk Sales and Services; (iv) Central Credit Services; (v) Compliance Sales and Services; and (vi) Loyalty Sales and Services.
Nocharge is recorded.
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| At September 30, 2017 |
|
| At December 31, 2016 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Useful Life |
|
|
|
|
| Accumulated |
|
| Net Book |
|
|
|
|
|
| Accumulated |
|
| Net Book |
| At June 30, 2021 | At December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||
|
| (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 | $ | 60,561 | $ | 32,744 | $ | 27,817 | $ | 60,561 | $ | 28,108 | $ | 32,453 | |||||||||||||||||||||||||||
Customer contracts |
| 7-14 |
|
| 50,975 |
|
|
| 42,768 |
|
|
| 8,207 |
|
|
| 50,975 |
|
|
| 40,419 |
|
|
| 10,556 |
| Customer contracts | 3-14 | 71,975 | 56,716 | 15,259 | 71,975 | 54,407 | 17,568 | |||||||||||||||||||||||||||||||||
Customer relationships |
| 8-12 |
|
| 231,100 |
|
|
| 58,412 |
|
|
| 172,688 |
|
|
| 231,100 |
|
|
| 42,688 |
|
|
| 188,412 |
| Customer relationships | 3-7 | 231,100 | 137,032 | 94,068 | 231,100 | 126,549 | 104,551 | |||||||||||||||||||||||||||||||||
Developed technology and software |
| 1-6 |
|
| 244,151 |
|
|
| 152,706 |
|
|
| 91,445 |
|
|
| 224,265 |
|
|
| 126,721 |
|
|
| 97,544 |
| Developed technology and software | 1-6 | 325,741 | 268,883 | 56,858 | 313,957 | 255,771 | 58,186 | |||||||||||||||||||||||||||||||||
Patents, trademarks and other |
| 1-17 |
|
| 28,834 |
|
|
| 20,923 |
|
|
| 7,911 |
|
|
| 27,771 |
|
|
| 17,747 |
|
|
| 10,024 |
| Patents, trademarks and other | 2-18 | 19,682 | 18,600 | 1,082 | 19,682 | 17,813 | 1,869 | |||||||||||||||||||||||||||||||||
Total |
|
|
| $ | 614,665 |
|
| $ | 276,591 |
|
| $ | 338,074 |
|
| $ | 551,853 |
|
| $ | 233,856 |
|
| $ | 317,997 |
| |||||||||||||||||||||||||||||||||||||||||
| Total other intangible assets | Total other intangible assets | $ | 709,059 | $ | 513,975 | $ | 195,084 | $ | 697,275 | $ | 482,648 | $ | 214,627 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
We enter into placement fee agreements to provide financing for new gaming facilitiesan asset or for the expansion or improvement of existing facilities. The funding under placement fee agreements isasset group may 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.recoverable. During the three and ninesix months ended SeptemberJune 30, 2017,2021, there were 0 material write-downs of intangible assets.
|
| 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 |
|
|
|
|
|
| At June 30, | At December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Accounts payable and accrued expenses | |||||||||||
| Vendor commissions payable | $ | 57,089 | $ | 39,028 | |||||||
| Contract liabilities | 30,694 | 26,980 | |||||||||
| Payroll and related expenses | 22,932 | 13,357 | |||||||||
| Trade accounts payable | 20,395 | 15,503 | |||||||||
| Operating lease liabilities | 5,410 | 5,649 | |||||||||
| Accrued taxes | 2,610 | 1,329 | |||||||||
| Financial access processing and related expenses | 2,505 | 1,109 | |||||||||
| Accrued interest | 1,063 | 1,068 | |||||||||
Contingent consideration and acquisition-related liabilities(1) | 0 | 24,674 | |||||||||
Litigation accrual(2) | 0 | 12,727 | |||||||||
| Other | 4,088 | 3,605 | |||||||||
| Total accounts payable and accrued expenses | $ | 146,786 | $ | 145,029 | |||||||
|
| 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 June 30, | At December 31, | |||||||||||||||||||||||
| Date | Rate | 2021 | 2020 | |||||||||||||||||||||||
| Long-term debt | ||||||||||||||||||||||||||
| $820 million Term Loan Facility | 2024 | LIBOR+2.75% | $ | 735,500 | $ | 735,500 | ||||||||||||||||||||
| $125 million Incremental Term Loan Facility | 2024 | LIBOR+10.50% | 123,750 | 124,375 | ||||||||||||||||||||||
| $35 million Revolving Credit Facility | 2022 | LIBOR+4.50% | 0 | 0 | ||||||||||||||||||||||
| Senior Secured Credit Facilities | 859,250 | 859,875 | ||||||||||||||||||||||||
| $375 million 2017 Unsecured Notes | 2025 | 7.50% | 285,381 | 285,381 | ||||||||||||||||||||||
| Total debt | 1,144,631 | 1,145,256 | ||||||||||||||||||||||||
| Debt issuance costs and discount | (13,754) | (16,003) | ||||||||||||||||||||||||
| Total debt after debt issuance costs and discount | 1,130,877 | 1,129,253 | ||||||||||||||||||||||||
| Current portion of long-term debt | (1,250) | (1,250) | ||||||||||||||||||||||||
| Total long-term debt, net of current portion | $ | 1,129,627 | $ | 1,128,003 | ||||||||||||||||||||||
Refinancing
On May 9, 2017
The proceeds from the Newour 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.by 0.25% from 1.00% to 0.75% and from 2.00% to 1.75%, 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 connectionrespectively, 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 feesLIBOR and discounts related to the extinguished term loan under the Prior Credit FacilityBase Rate margins unchanged at 2.75% and the redeemed Refinanced Secured Notes. No prepayment penalties were incurred.
New Credit Facilities
1.75%, respectively. 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 interest rate per annum applicable 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, 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 for any voluntary prepayment or mandatory prepayment with proceeds of debt that has a lower effective yield than the repriced Term Loan Facility or any amendment to the repriced Term Loan Facility that reduces the interest rate thereon, in each case, to the extent occurring within six months of the effective date of the Amendment. The maturity of the Term Loan Facility remains May 9, 2024, and no changes were made to the financial covenants or other debt repayment terms.
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 5.00ratio.
15.
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.
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 SeptemberJune 30, 2017 and December 31, 2016.
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.
|
|
Preferred Stock. operations, litigation of this nature is inherently unpredictable. Our amendedviews on these legal proceedings, including those described below, may change in the future. We intend to vigorously defend against these actions, and restated certificateultimately believe we should prevail.
Common Stock. Subject to the preferences that may apply to shares of preferred stock that may be outstanding at the time, the holdersexceed $10.0 million of outstanding shares ofCompany common stock are entitledwith no minimum number of shares that the Company is required to receive dividends out of assets legally available at the times andrepurchase. This repurchase program commenced in the amounts asfirst quarter of 2020 and authorizes us to buy our Board of Directors maycommon stock from time to time determine. All dividends are non-cumulative. In the eventin 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 liquidation, dissolutionSecurities Exchange Act of 1934, as amended, or winding upby a combination of Everi,such methods, including compliance with the holders of common stock are entitled toCompany’s finance agreements. The share ratably in all assets remaining after the payment of liabilities,repurchase program is 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 votingavailable liquidity, general market and economic conditions, alternate uses for the electioncapital and other factors, and may be suspended or discontinued at any time without prior notice. In light of directors is not provided for. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption.COVID-19, we have suspended our share repurchase program. There arewere no sinking fund provisions applicable toshare repurchases during 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 stock for the
|
| 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 |
|
|
|
|
|
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Weighted average shares | |||||||||||||||||||||||
| Weighted average number of common shares outstanding - basic | 88,722 | 85,122 | 87,858 | 84,873 | |||||||||||||||||||
Potential dilution from equity awards(1) | 11,308 | 0 | 11,146 | 0 | |||||||||||||||||||
Weighted average number of common shares outstanding - diluted(1) | 100,030 | 85,122 | 99,004 | 84,873 | |||||||||||||||||||
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 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.
Our time-based stock options granted under our equity plans generally vest at a rate of 25% per year on each of the first four anniversaries of the option grant dates. These options expire after a ten-year period. We estimate forfeiture amounts based on historical patterns.
Our market-based options granted in 2017 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 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 25% 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.
Our market-based 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 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.
|
| 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 |
|
| Stock Options | Restricted Stock Units | ||||||||||
| Outstanding, December 31, 2020 | 10,261 | 4,250 | |||||||||
| Granted | 0 | 960 | |||||||||
| Exercised options or vested shares | (1,919) | (1,390) | |||||||||
| Canceled or forfeited | (6) | (41) | |||||||||
| Outstanding, June 30, 2021 | 8,336 | 3,779 | |||||||||
The maximum number
Stock Options
The fair values of our standard time-based options were determinedincentive plans 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 SeptemberJune 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:
|
| 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 |
|
| — |
| % |
|
| — |
| % |
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 granted for the three and nine months ended September 30, 2017, respectively, 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. The total intrinsic value of options exercised was $0.8 million and $2.8 million for the three and nine months ended September 30, 2017, respectively. No options were exercised during the three and nine months ended September 30, 2016.
There was $11.7 million in unrecognized compensation expense related to options 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 2.3 years. We recorded $4.8 million in non-cash compensation expense related to options granted that were expected to vest as of September 30, 2017. We received $2.2 million and $4.0 million in cash from the exercise of options for the three and nine months ended September 30, 2017, respectively.
There was $13.5 million in unrecognized compensation expense related to options expected to vest as of September 30, 2016. This cost was expected to be recognized on a straight-line basis over a weighted average period of 2.3 years. We recorded $3.8 million in non-cash compensation expense related to options granted that were expected to vest as of September 30, 2016. There were no proceeds received from the exercise of options as no exercises occurred for the three and nine months ended September 30, 2016.
Restricted Stock
The following is a summary of non-vested share 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 for the three and nine months ended September 30, 2017, respectively, and there were no shares of restricted stock granted for the three and nine months ended September 30, 2016. The total fair value of restricted stock vested was $37,958 and $121,979 for the three and nine months ended September 30, 2017, respectively, and $23,393 and $74,100 for the three and nine months ended September 30, 2016, respectively.
There was $0.7 million in unrecognized compensation expense related to shares of time based restricted stock 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 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. 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 of time-based restricted shares vested 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, 2016.
|
|
The income tax provision for the three and six months ended June 30, 2021, reflected an effective income tax rate of negative 20.0%1.1% and negative 15.6% for the three and nine months ended September, 30, 2017,2.7%, respectively, which was less than the statutory federal rate of 35.0%21.0%, primarily due to a decrease in our valuation allowance for our deferred tax assets and the benefit from stock option exercises. The decrease in our valuation allowance was primarily due to book income earned during the period. The income tax benefit for the three and six months ended June 30, 2020 reflected an effective income tax rate of 5.7% and 5.9%, which was less than the statutory federal rate of 21.0%, primarily due to an increase in our valuation allowance fordue to book loss incurred during the period, partially offset by certain indefinite-lived deferred tax assets partiallythat can be offset by state taxes, 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 toagainst 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 ourindefinite lived deferred tax assets.
liabilities.
|
|
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.
•The Games segment provides solutions directly to gaming establishments to offer their patrons gaming entertainment-relatedentertainment- related experiences including: leased gaming equipment; sales and maintenance related services of gaming equipment; gaming systems; digital online solutions; and ancillary products and services.
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.
The accounting policies of the operating segments are generally the same as those described in the summary of significant accounting policies.
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| |||||||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||
| 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 | $ | 73,220 | $ | 13,859 | $ | 131,361 | $ | 59,545 | ||||||||||||||||||||||||||||||
| Gaming equipment and systems | Gaming equipment and systems | 26,090 | 6,983 | 44,078 | 18,566 | ||||||||||||||||||||||||||||||||||
| Gaming other | Gaming other | 27 | 11 | 49 | 32 | ||||||||||||||||||||||||||||||||||
Total revenues |
| $ | 247,322 |
|
| $ | 222,177 |
|
| $ | 727,089 |
|
| $ | 641,946 |
| Total revenues | 99,337 | 20,853 | 175,488 | 78,143 | ||||||||||||||||||
| Costs and expenses | Costs and expenses | ||||||||||||||||||||||||||||||||||||||
Cost of revenues(1) | Cost of revenues(1) | ||||||||||||||||||||||||||||||||||||||
| Gaming operations | Gaming operations | 5,342 | 1,681 | 10,101 | 6,226 | ||||||||||||||||||||||||||||||||||
| Gaming equipment and systems | Gaming equipment and systems | 15,248 | 4,071 | 25,555 | 10,895 | ||||||||||||||||||||||||||||||||||
| Gaming other | Gaming other | 0 | 456 | 0 | 456 | ||||||||||||||||||||||||||||||||||
| Cost of revenues | Cost of revenues | 20,590 | 6,208 | 35,656 | 17,577 | ||||||||||||||||||||||||||||||||||
| Operating expenses | Operating expenses | 17,565 | 22,714 | 32,160 | 37,519 | ||||||||||||||||||||||||||||||||||
| Research and development | Research and development | 5,854 | 3,620 | 11,521 | 9,816 | ||||||||||||||||||||||||||||||||||
| Depreciation | Depreciation | 14,064 | 14,844 | 28,627 | 29,572 | ||||||||||||||||||||||||||||||||||
| Amortization | Amortization | 10,675 | 15,315 | 21,659 | 30,900 | ||||||||||||||||||||||||||||||||||
| Total costs and expenses | Total costs and expenses | 68,748 | 62,701 | 129,623 | 125,384 | ||||||||||||||||||||||||||||||||||
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income (loss) | $ | 30,589 | $ | (41,848) | $ | 45,865 | $ | (47,241) | ||||||||||||||
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 |
| |||||||||||||||||||||||
|
| 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 |
|
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| FinTech | |||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Financial access services | $ | 44,840 | $ | 10,034 | $ | 83,552 | $ | 47,007 | |||||||||||||||
| Software and other | 15,604 | 4,424 | 32,850 | 17,118 | |||||||||||||||||||
| Hardware | 12,801 | 3,404 | 19,805 | 9,756 | |||||||||||||||||||
| Total revenues | 73,245 | 17,862 | 136,207 | 73,881 | |||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||
Cost of revenues(1) | |||||||||||||||||||||||
| Financial access services | 1,560 | 511 | 3,033 | 4,066 | |||||||||||||||||||
| Software and other | 1,129 | 324 | 2,133 | 1,198 | |||||||||||||||||||
| Hardware | 7,670 | 2,014 | 11,698 | 5,904 | |||||||||||||||||||
| Cost of revenues | 10,359 | 2,849 | 16,864 | 11,168 | |||||||||||||||||||
| Operating expenses | 30,613 | 18,889 | 54,061 | 42,981 | |||||||||||||||||||
| Research and development | 2,912 | 1,573 | 5,658 | 4,108 | |||||||||||||||||||
| Depreciation | 1,867 | 1,450 | 3,481 | 2,965 | |||||||||||||||||||
| Amortization | 3,694 | 3,980 | 7,425 | 7,719 | |||||||||||||||||||
| Total costs and expenses | 49,445 | 28,741 | 87,489 | 68,941 | |||||||||||||||||||
| Operating income (loss) | $ | 23,800 | $ | (10,879) | $ | 48,718 | $ | 4,940 | |||||||||||||||
| At June 30, | At December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Total assets | |||||||||||
| Games | $ | 829,699 | $ | 811,523 | |||||||
| FinTech | 735,816 | 665,656 | |||||||||
| Total assets | $ | 1,565,515 | $ | 1,477,179 | |||||||
|
|
governingremaining proceeds from the New Notes and cash on hand, to: (i) prepay in full and terminate all commitments under our Term Loan Facility and Incremental Term Loan; (ii) redeem in full the 2017 Unsecured Notes; or (iv)and (iii) pay the legal or covenant defeasance ofrelated transaction fees and expenses with respect to 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 and 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 | ) |
|
| 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 | ) |
|
| 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 |
|
|
|
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.
Everi is dedicated to providing video and mechanical reel gaming content and technology solutions, integrated gaming payments solutions and compliance and efficiency softwaresold to casino operators. Everi Games provides: (a) comprehensive content, electronic gaming unitscustomers; (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 systemsystems 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
(a)FinTech provides gaming operators with financial technology products and services, including: financial access and deposit-based services supporting digital, cashless and physical cash options across mobile, assisted and self-service channels along with related loyalty and marketing tools, and other information-related products and services. In addition, we provide an end-to-end security suite to protect against cyber-related attacks and maintain the necessary secured environments to maintain compliance with applicable regulatory requirements. These solutions include: access to cash and cashless funding at gaming facilities via Automated Teller Machine (“ATM”) cashdebit withdrawals, credit card cashfinancial access transactions, and point of sale (“POS”) debit card transactions,purchases at casino cages, kiosk and mobile POS devices; federally insured deposit accounts for the CashClub Wallet, check verificationwarranty services, self-service ATMs and warranty services; (b) fully integrated gaming industry kiosks that provide cash accesskiosk and relatedmaintenance services; (c) productsself-service loyalty tools and services that improve credit decision making, automate cashier operations and enhance patron marketing activities for gaming establishments; (d)promotion management software; compliance, audit, and data solutions;software; casino credit data and (e) online payment processing solutionsreporting services; marketing and promotional offering subscription-based services; and other ancillary offerings.
hospitality industry. These measures included enhanced sanitization, limitations on public gathering and casino capacity, patron social distancing requirements, limitations on casino operations and amenities, of which have limited the number of patrons that are able or who desire to attend these venues. This has also impacted the pace at which demand for our products and services rebounds.
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 flatIn addition to the same period in 2016. We expect flatfactors discussed above and the information below, we refer to moderate growth in the forward replacement cycle for electronic gaming machines (“EGMs”).
The volumeItem 7, “Management’s Discussion and Analysis of new casino openingsFinancial 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
our Annual Report, which is incorporated herein by reference.
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.
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.
2020
|
| 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 | ) | % |
|
|
Revenues
Total revenues increased by $25.1 million, or 11%, to $247.3 millionas reported for the three months ended SeptemberJune 30, 2017,2021 compared to the three months ended June 30, 2020 (amounts in thousands)*:
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| June 30, 2021 | June 30, 2020 | 2021 vs 2020 | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||
| Games revenues | |||||||||||||||||||||||||||||||||||
| Gaming operations | $ | 73,220 | 42 | % | $ | 13,859 | 36 | % | $ | 59,361 | 428 | % | |||||||||||||||||||||||
| Gaming equipment and systems | 26,090 | 15 | % | 6,983 | 18 | % | 19,107 | 274 | % | ||||||||||||||||||||||||||
| Gaming other | 27 | — | % | 11 | — | % | 16 | 145 | % | ||||||||||||||||||||||||||
| Games total revenues | 99,337 | 58 | % | 20,853 | 54 | % | 78,484 | 376 | % | ||||||||||||||||||||||||||
| FinTech revenues | |||||||||||||||||||||||||||||||||||
| Financial access services | 44,840 | 26 | % | 10,034 | 26 | % | 34,806 | 347 | % | ||||||||||||||||||||||||||
| Software and other | 15,604 | 9 | % | 4,424 | 11 | % | 11,180 | 253 | % | ||||||||||||||||||||||||||
| Hardware | 12,801 | 7 | % | 3,404 | 9 | % | 9,397 | 276 | % | ||||||||||||||||||||||||||
| FinTech total revenues | 73,245 | 42 | % | 17,862 | 46 | % | 55,383 | 310 | % | ||||||||||||||||||||||||||
| Total revenues | 172,582 | 100 | % | 38,715 | 100 | % | 133,867 | 346 | % | ||||||||||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||||||||||||||
Games cost of revenues(1) | |||||||||||||||||||||||||||||||||||
| Gaming operations | 5,342 | 3 | % | 1,681 | 4 | % | 3,661 | 218 | % | ||||||||||||||||||||||||||
| Gaming equipment and systems | 15,248 | 9 | % | 4,071 | 11 | % | 11,177 | 275 | % | ||||||||||||||||||||||||||
| Gaming other | — | — | % | 456 | 1 | % | (456) | (100) | % | ||||||||||||||||||||||||||
| Games total cost of revenues | 20,590 | 12 | % | 6,208 | 16 | % | 14,382 | 232 | % | ||||||||||||||||||||||||||
FinTech cost of revenues(1) | |||||||||||||||||||||||||||||||||||
| Financial access services | 1,560 | 1 | % | 511 | 1 | % | 1,049 | 205 | % | ||||||||||||||||||||||||||
| Software and other | 1,129 | 1 | % | 324 | 1 | % | 805 | 248 | % | ||||||||||||||||||||||||||
| Hardware | 7,670 | 4 | % | 2,014 | 5 | % | 5,656 | 281 | % | ||||||||||||||||||||||||||
| FinTech total cost of revenues | 10,359 | 6 | % | 2,849 | 7 | % | 7,510 | 264 | % | ||||||||||||||||||||||||||
| Operating expenses | 48,178 | 28 | % | 41,603 | 107 | % | 6,575 | 16 | % | ||||||||||||||||||||||||||
| Research and development | 8,766 | 5 | % | 5,193 | 13 | % | 3,573 | 69 | % | ||||||||||||||||||||||||||
| Depreciation | 15,931 | 9 | % | 16,294 | 42 | % | (363) | (2) | % | ||||||||||||||||||||||||||
| Amortization | 14,369 | 8 | % | 19,295 | 50 | % | (4,926) | (26) | % | ||||||||||||||||||||||||||
| Total costs and expenses | 118,193 | 68 | % | 91,442 | 236 | % | 26,751 | 29 | % | ||||||||||||||||||||||||||
| Operating income (loss) | 54,389 | 32 | % | (52,727) | (136) | % | 107,116 | 203 | % | ||||||||||||||||||||||||||
| Other expenses | |||||||||||||||||||||||||||||||||||
| Interest expense, net of interest income | 17,760 | 10 | % | 19,822 | 51 | % | (2,062) | (10) | % | ||||||||||||||||||||||||||
| Loss on extinguishment of debt | — | — | % | 80 | — | % | (80) | (100) | % | ||||||||||||||||||||||||||
| Total other expenses | 17,760 | 10 | % | 19,902 | 51 | % | (2,142) | (11) | % | ||||||||||||||||||||||||||
| Income (loss) before income tax | 36,629 | 21 | % | (72,629) | (188) | % | 109,258 | 150 | % | ||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| June 30, 2021 | June 30, 2020 | 2021 vs 2020 | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Income tax provision (benefit) | 415 | — | % | (4,148) | (11) | % | 4,563 | (110) | % | ||||||||||||||||||||||||||
| Net income (loss) | $ | 36,214 | 21 | % | $ | (68,481) | (177) | % | $ | 104,695 | 153 | % | |||||||||||||||||||||||
Games revenues decreased by $0.8approximately $133.9 million, or 1%346%, to $55.4approximately $172.6 million
Payments revenues increased by $25.9 million, or 16%, to $191.9 million for the three 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.
Games cost of revenues (exclusive of depreciation and amortization) decreased by $1.6 million, or 11%, to $13.8 million for the three months ended September 30, 2017,2021, as compared to the same period in the prior year. This was primarily due to a decline in cost ofthe higher Games and FinTech 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 ofdescribed below.
Operating expensesto new markets. In addition, an increase in the number of machines sold with a consistent average selling price per unit drove higher gaming equipment revenues.
Researchsupport solutions and developmentadditional compliance software sales and support solutions from our software and other revenues; and (iii) an increase in both our kiosk equipment sales with a higher average selling price per unit and our loyalty equipment sales with a consistent average selling price per unit from our hardware revenues.
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 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 $8.2 million, or 71%, to $19.8 million for the three months ended September 30, 2017, 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 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 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.
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 |
| % |
|
|
Revenues
Total revenues increased by $85.1 million, or 13%, to $727.1 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 Games and Payments revenues.
Games revenues increased by $7.2 million, or 5%, to $165.8 million for the nine months ended September 30, 2017, as compared to the same period in the prior year. This was primarily related to an increase in unit sales, which were partially offset by a lower average outstanding number of leased units combined with lower daily win per unit on these games. In addition, revenues were also impacted 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 revenues increased by $78.0 million, or 16%, to $561.3 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, 2017,2021, as compared to the same period in the prior year. This was primarily due to higher variableGames and FinTech costs associated with the increase in unit sales, partially offset by a decline in theand expenses described below.
Payments cost of revenues (exclusive of depreciation and amortization) increased by $62.7approximately $14.4 million, or 17%232%, to $436.1approximately
Operating expenses decreased by $0.5 million, or 1%, to $87.2 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, 2017,2021, as compared to the same period in the prior year. This was primarily due to athe additional variable costs associated with the higher capitalizationunit sales from our gaming equipment and systems revenues.
Depreciation decreasedrevenue increased by $2.4approximately $7.5 million, or 6%264%, to $34.8approximately
Amortization decreased by $18.8approximately $6.6 million, or 27%16%, to $52.1approximately
business being fully amortized.
same period in the prior year.
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 increaselower debt balances and more favorable variable interest rates in effect for certain of our debt instruments and a reduction in the valuation allowanceLIBOR floor on ou
| Six months ended | |||||||||||||||||||||||||||||||||||
| June 30, 2021 | June 30, 2020 | 2021 vs 2020 | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||
| Games revenues | |||||||||||||||||||||||||||||||||||
| Gaming operations | $ | 131,361 | 42 | % | $ | 59,545 | 39 | % | $ | 71,816 | 121 | % | |||||||||||||||||||||||
| Gaming equipment and systems | 44,078 | 14 | % | 18,566 | 12 | % | 25,512 | 137 | % | ||||||||||||||||||||||||||
| Gaming other | 49 | — | % | 32 | — | % | 17 | 53 | % | ||||||||||||||||||||||||||
| Games total revenues | 175,488 | 56 | % | 78,143 | 51 | % | 97,345 | 125 | % | ||||||||||||||||||||||||||
| FinTech revenues | |||||||||||||||||||||||||||||||||||
| Financial access services | 83,552 | 27 | % | 47,007 | 31 | % | 36,545 | 78 | % | ||||||||||||||||||||||||||
| Software and other | 32,850 | 11 | % | 17,118 | 11 | % | 15,732 | 92 | % | ||||||||||||||||||||||||||
| Hardware | 19,805 | 6 | % | 9,756 | 7 | % | 10,049 | 103 | % | ||||||||||||||||||||||||||
| FinTech total revenues | 136,207 | 44 | % | 73,881 | 49 | % | 62,326 | 84 | % | ||||||||||||||||||||||||||
| Total revenues | 311,695 | 100 | % | 152,024 | 100 | % | 159,671 | 105 | % | ||||||||||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||||||||||||||
Games cost of revenues(1) | |||||||||||||||||||||||||||||||||||
| Gaming operations | 10,101 | 3 | % | 6,226 | 4 | % | 3,875 | 62 | % | ||||||||||||||||||||||||||
| Gaming equipment and systems | 25,555 | 8 | % | 10,895 | 7 | % | 14,660 | 135 | % | ||||||||||||||||||||||||||
| Gaming other | — | — | % | 456 | — | % | (456) | (100) | % | ||||||||||||||||||||||||||
| Games total cost of revenues | 35,656 | 11 | % | 17,577 | 12 | % | 18,079 | 103 | % | ||||||||||||||||||||||||||
FinTech cost of revenues(1) | |||||||||||||||||||||||||||||||||||
| Financial access services | 3,033 | 1 | % | 4,066 | 3 | % | (1,033) | (25) | % | ||||||||||||||||||||||||||
| Software and other | 2,133 | 1 | % | 1,198 | 1 | % | 935 | 78 | % | ||||||||||||||||||||||||||
| Hardware | 11,698 | 4 | % | 5,904 | 4 | % | 5,794 | 98 | % | ||||||||||||||||||||||||||
| FinTech total cost of revenues | 16,864 | 5 | % | 11,168 | 7 | % | 5,696 | 51 | % | ||||||||||||||||||||||||||
| Operating expenses | 86,221 | 28 | % | 80,501 | 53 | % | 5,720 | 7 | % | ||||||||||||||||||||||||||
| Research and development | 17,179 | 6 | % | 13,924 | 9 | % | 3,255 | 23 | % | ||||||||||||||||||||||||||
| Depreciation | 32,108 | 10 | % | 32,537 | 21 | % | (429) | (1) | % | ||||||||||||||||||||||||||
| Amortization | 29,084 | 9 | % | 38,619 | 25 | % | (9,535) | (25) | % | ||||||||||||||||||||||||||
| Total costs and expenses | 217,112 | 70 | % | 194,326 | 128 | % | 22,786 | 12 | % | ||||||||||||||||||||||||||
| Operating income | 94,583 | 30 | % | (42,302) | (28) | % | 136,885 | 324 | % | ||||||||||||||||||||||||||
| Other expenses | |||||||||||||||||||||||||||||||||||
| Interest expense, net of interest income | 36,231 | 12 | % | 37,321 | 25 | % | (1,090) | (3) | % | ||||||||||||||||||||||||||
| Loss on extinguishment of debt | — | — | % | 7,457 | 5 | % | (7,457) | (100) | % | ||||||||||||||||||||||||||
| Total other expenses | 36,231 | 12 | % | 44,778 | 29 | % | (8,547) | (19) | % | ||||||||||||||||||||||||||
| Income (loss) before income tax | 58,352 | 19 | % | (87,080) | (57) | % | 145,432 | 167 | % | ||||||||||||||||||||||||||
| Six months ended | |||||||||||||||||||||||||||||||||||
| June 30, 2021 | June 30, 2020 | 2021 vs 2020 | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Income tax provision (benefit) | 1,604 | 1 | % | (5,145) | (3) | % | 6,749 | (131) | % | ||||||||||||||||||||||||||
| Net income (loss) | $ | 56,748 | 18 | % | $ | (81,935) | (54) | % | $ | 138,683 | 169 | % | |||||||||||||||||||||||
Games Revenues and Leased Units
The following tables includefactors described above, we had net income of approximately $56.7 million for the revenues from our Games segment andsix months ended June 30, 2021. We had a net loss of approximately $81.9 million for 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 | ) | % |
|
|
|
|
|
|
|
| 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 |
| % |
|
|
|
|
|
|
Critical Accounting Policies
For the three and nine months ended September 30, 2017, there were no material changes to the critical accounting policies and estimates discussed in our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
LIQUIDITY AND CAPITAL RESOURCES
10-Q.
|
| At September 30, |
|
| At December 31, |
|
| June 30, | At December 31 | |||||||||||
|
| 2017 |
|
| 2016 |
|
| 2021 | 2020 | |||||||||||
Balance sheet data |
|
|
|
|
|
|
|
|
| Balance sheet data | ||||||||||
Total assets |
| $ | 1,425,605 |
|
| $ | 1,408,163 |
|
| Total assets | $ | 1,565,515 | $ | 1,477,179 | ||||||
Total long-term debt |
| $ | 1,138,871 |
|
| $ | 1,121,880 |
|
| |||||||||||
Total stockholders’ deficit |
| $ | (123,804 | ) |
| $ | (107,793 | ) |
| |||||||||||
| Total borrowings | Total borrowings | $ | 1,130,877 | $ | 1,129,253 | |||||||||||||||
| Total stockholders’ equity (deficit) | Total stockholders’ equity (deficit) | $ | 57,500 | $ | (7,898) | |||||||||||||||
Cash available |
|
|
|
|
|
|
|
|
| Cash available | ||||||||||
Cash and cash equivalents |
| $ | 108,471 |
|
| $ | 119,051 |
|
| Cash and cash equivalents | $ | 340,361 | $ | 251,706 | ||||||
Settlement receivables |
|
| 127,443 |
|
|
| 128,821 |
|
| Settlement receivables | 50,111 | 60,652 | ||||||||
Settlement liabilities |
|
| (197,494 | ) |
|
| (239,123 | ) |
| Settlement liabilities | (193,893) | (173,211) | ||||||||
Net cash position(1) |
|
| 38,420 |
|
|
| 8,749 |
|
| Net cash position(1) | 196,579 | 139,147 | ||||||||
Undrawn revolving credit facility |
|
| 35,000 |
|
|
| 50,000 |
|
| Undrawn revolving credit facility | 35,000 | 35,000 | ||||||||
Net cash available(1) |
| $ | 73,420 |
|
| $ | 58,749 |
|
| Net cash available(1) | $ | 231,579 | $ | 174,147 | ||||||
|
|
Our
We provide cash settlement services to our customers related to our cash access products. These services involve the movement of funds between the various parties associated with cash access transactions. These activities result inforeseeable future on both 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 patrons thatshort- and long-term basis. In addition, 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 amountshave sufficient borrowings available under our Revolving Credit Facility was approximately $73.4 million and $58.7 million asto meet further funding requirements. We monitor the financial strength of September 30, 2017 and December 31, 2016, respectively.
our lenders on an ongoing basis using publicly available information. Based upon available information, we believe our lenders should be able to honor their commitments under the Credit Agreement (defined in
“Note 12 — Long-term Debt”).
|
| 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 |
|
| Six Months Ended June 30, | $ Change | ||||||||||||||||
| 2021 | 2020 | 2021 vs 2020 | |||||||||||||||
| Cash flow activities | |||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 163,518 | $ | (38,410) | $ | 201,928 | |||||||||||
| Net cash used in investing activities | (64,215) | (45,923) | (18,292) | ||||||||||||||
| Net cash (used in) provided by financing activities | (10,409) | 47,277 | (57,686) | ||||||||||||||
| Effect of exchange rates on cash and cash equivalents | 67 | (1,732) | 1,799 | ||||||||||||||
| Cash, cash equivalents and restricted cash | |||||||||||||||||
| Net increase (decrease) for the period | 88,961 | (38,788) | 127,749 | ||||||||||||||
| Balance, beginning of the period | 252,349 | 296,610 | (44,261) | ||||||||||||||
| Balance, end of the period | $ | 341,310 | $ | 257,822 | $ | 83,488 | |||||||||||
Cash flows used in investing activities increased by $9.1 million for the nine months ended September 30, 2017, as compared to the same periodconnection with our debt related transactions that occurred in the prior year. This was primarily attributable to lower proceeds from the sale of fixed assets and higher placement fees and capital expenditures.
Cash flows provided by financing activities increased by $24.0 million for the nine months ended September 30, 2017,year period, 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 inwell as final earnout payment made during 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.
The following table summarizes our outstanding indebtedness (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 |
|
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 “New Term Loan Facility,” and together with 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 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 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 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 interest rate per annum applicable 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, 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 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’ 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 the Atrient transaction.
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 timesdebt 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 averagewell as 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%;risk refer to
At September 30, 2017, we had $818.0 million of borrowings outstanding under the New Term Loan Facility andQualitative Disclosures About Market Risk,
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 pursuantmaterial changes 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.
Contractual Obligations
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 requiredother than an increase to make principal paymentscertain 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 $15.3 million from 2017 through 2021those disclosed in our Annual Report and thereafter, respectively.
In July 2017, we extendedobligations discussed in
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
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.
Our Contract Cash Solutions Agreement
The
2023 and will automatically renew for additional one-year periods unless either party provides a ninety-day written notice of its intent not to renew.
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.
Wells Fargo supplies usexchange risk.
The New Credit Facilities“Credit Facilities”) bear interest at rates that can vary over time. We have the option of havingpaying interest on the outstanding amounts under the New Credit Facilities paid based onusing 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 ofdo so for various maturities.
The Company’s
No change2021
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
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 (1) Represents the shares of common stock that were withheld from restricted stock awards to satisfy the Inline XBRL Taxonomy Extension Schema Document. Inline XBRL Taxonomy Extension Calculation Linkbase Document. Inline XBRL Taxonomy Extension Definition Linkbase Document. Inline XBRL Taxonomy Extension Label Linkbase Document. Inline XBRL Taxonomy Extension Presentation Linkbase Document. Furnished herewith. (Date) (Registrant) By: /s/ Todd A. Valli Todd A. Valli Senior Vice President, Corporate Finance and Chief Accounting Officer (For the Registrant and as Principal Accounting Officer)EquityEquity Securities and Use of Proceeds. Period 4/1/21 - 4/30/21 4.8 $ 14.80 — — 5/1/21 - 5/31/21 436.7 $ 18.73 — — 6/1/21 - 6/30/21 8.4 $ 22.16 — — Total 449.9 $ 18.75 — — (1) minimum applicable tax withholding obligations incident to the vesting of such restricted stock awards. There are no limitations on the number of shares of common stock that may be withheld from restricted stock awards to satisfy the minimum tax withholding obligations incident to the vesting of restricted stock awards.
(2) Represents the average price per share of common stock withheld from restricted stock awards on the date of withholding.(2)Represents the average price per share of common stock withheld from restricted stock awards on the date of withholding.Exhibit
NumberDescriptionExhibit Number Description 10.1*4.1 31.1*10.2 10.1 *31.1 31.2* 32.1** 32.2**101.INS*XBRL Instance Document.101.SCH*101.CAL*101.DEF*101.LAB*101.PRE**Filed herewith.*104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL (included as Exhibit 101). * Filed herewith. ** November 7, 2017August 4, 2021 EVERI HOLDINGS INC. 51