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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 30, 2017
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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 | |||||||
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7250 S. | ||||||||
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Nevada | 89113 | |||||||
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(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 | ||||||
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Emerging growth company | ☐ | |||||||||||||
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| PART I: FINANCIAL INFORMATION | ||||||||||||||
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Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021 | ||||||||||||||
| 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 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 Nine Months Ended September 30, 2017 2016 Supplemental cash disclosures Cash paid for interest $ 59,894 $ 55,465 Cash paid for income tax $ 760 $ 1,124 Cash refunded for income tax $ 200 $ 92 Supplemental non-cash disclosures Accrued and unpaid capital expenditures $ 4,736 $ 1,427 Accrued and unpaid placement fees $ 39,074 $ — Accrued and unpaid contingent liability for acquisitions $ — $ (3,169 ) Transfer of leased gaming equipment to inventory $ 6,093 $ 6,222 2022, our reporting units included: (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. 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 the appropriate interest rates. As of March 31, 2022 and December 31, 2021, 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 for these securities. These reclassifications had no effect on net income for the prior periods. 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.LOSSOPERATIONS AND COMPREHENSIVE LOSSlossearnings per share amounts) Three Months Ended March 31, 2022 2021 Revenues Games revenues Gaming operations $ 70,297 $ 58,141 Gaming equipment and systems 27,998 17,988 Gaming other 41 22 Games total revenues 98,336 76,151�� FinTech revenues Financial access services 49,879 38,712 Software and other 17,867 17,246 Hardware 9,534 7,004 FinTech total revenues 77,280 62,962 Total revenues 175,616 139,113 Costs and expenses Gaming operations 5,995 4,759 Gaming equipment and systems 16,782 10,307 Games total cost of revenues 22,777 15,066 Financial access services 2,175 1,473 Software and other 935 1,004 Hardware 5,941 4,028 FinTech total cost of revenues 9,051 6,505 Operating expenses 49,825 38,043 Research and development 12,519 8,413 Depreciation 15,220 16,177 Amortization 13,633 14,715 Total costs and expenses 123,025 98,919 Operating income 52,591 40,194 Other expenses Interest expense, net of interest income 11,348 18,471 Total other expenses 11,348 18,471 Income before income tax 41,243 21,723 Income tax provision 9,721 1,189 Net income 31,522 20,534 Foreign currency translation gain (loss) 580 (221) Comprehensive income $ 32,102 $ 20,313 Three Months Ended March 31, 2022 2021 Earnings per share Basic $ 0.34 $ 0.24 Diluted $ 0.31 $ 0.21 Weighted average common shares outstanding Basic 91,408 86,984 Diluted 101,471 97,968 At March 31, At December 31, 2022 2021 ASSETS Current assets Cash and cash equivalents $ 269,400 $ 302,009 Settlement receivables 60,348 89,275 Trade and other receivables, net of allowances for credit losses of $5,023 and $5,161 at March 31, 2022 and December 31, 2021, respectively 113,087 104,822 Inventory 45,699 29,233 Prepaid expenses and other current assets 27,856 27,299 Total current assets 516,390 552,638 Non-current assets Property and equipment, net 119,295 119,993 Goodwill 695,436 682,663 Other intangible assets, net 221,737 214,594 Other receivables 15,742 13,982 Deferred tax assets, net 22,972 32,121 Other assets 24,450 19,659 Total non-current assets 1,099,632 1,083,012 Total assets $ 1,616,022 $ 1,635,650 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Settlement liabilities $ 208,491 $ 291,861 Accounts payable and accrued expenses 192,554 173,933 Current portion of long-term debt 6,000 6,000 Total current liabilities 407,045 471,794 Non-current liabilities Long-term debt, less current portion 974,642 975,525 Other accrued expenses and liabilities 22,623 13,831 Total non-current liabilities 997,265 989,356 Total liabilities 1,404,310 1,461,150 Commitments and contingencies (Note 13) 0 0 Stockholders’ equity Convertible preferred stock, $0.001 par value, 50,000 shares authorized and no shares outstanding at March 31, 2022 and December 31, 2021, respectively — — Common stock, $0.001 par value, 500,000 shares authorized and 117,221 and 91,519 shares issued and outstanding at March 31, 2022, respectively, and 116,996 and 91,313 shares issued and outstanding at December 31, 2021, respectively 117 117 Additional paid-in capital 511,267 505,757 Accumulated deficit (110,233) (141,755) Accumulated other comprehensive loss (875) (1,455) Treasury stock, at cost, 25,702 and 25,683 shares at March 31, 2022 and December 31, 2021, respectively (188,564) (188,164) Total stockholders’ equity 211,712 174,500 Total liabilities and stockholders’ equity $ 1,616,022 $ 1,635,650 Three Months Ended March 31, 2022 2021 Cash flows from operating activities Net income $ 31,522 $ 20,534 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 15,220 16,177 Amortization 13,633 14,715 Non-cash lease expense 1,014 1,196 Amortization of financing costs and discounts 713 1,172 Loss on sale or disposal of assets 29 743 Accretion of contract rights 2,427 2,318 Provision for credit losses 1,947 1,999 Deferred income taxes 9,398 820 Reserve for inventory obsolescence 55 467 Stock-based compensation 4,811 3,005 Changes in operating assets and liabilities: Settlement receivables 28,958 14,832 Trade and other receivables (6,123) (7,673) Inventory (11,069) (2,438) Prepaid expenses and other assets (6,812) (1,863) Settlement liabilities (83,427) 25,105 Accounts payable and accrued expenses 2,978 20,497 Net cash provided by operating activities 5,274 111,606 Cash flows from investing activities Capital expenditures (23,639) (20,035) Acquisitions, net of cash acquired (13,318) (10,000) Proceeds from sale of property and equipment 57 80 Net cash used in investing activities (36,900) (29,955) Cash flows from financing activities Repayments of new term loan (1,500) — Repayments of prior incremental term loan — (313) Proceeds from exercise of stock options 699 2,285 Treasury stock (400) (173) Net cash (used in) provided by financing activities (1,201) 1,799 Effect of exchange rates on cash and cash equivalents 136 (120) Cash, cash equivalents and restricted cash Net (decrease) increase for the period (32,691) 83,330 Balance, beginning of the period 303,726 252,349 Balance, end of the period $ 271,035 $ 335,679 Supplemental cash disclosures Cash paid for interest $ 14,439 $ 12,026 Cash refunded for income tax, net (41) (197) Supplemental non-cash disclosures Accrued and unpaid capital expenditures $ 2,987 $ 2,786 Transfer of leased gaming equipment to inventory 1,358 1,407 Common Stock—
Series AAdditional Accumulated
OtherTotal Stockholders’ Number of
SharesAmount Paid-in
CapitalAccumulated
DeficitComprehensive
LossTreasury
StockEquity
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 Balance, January 1, 2022 116,996 $ 117 $ 505,757 $ (141,755) $ (1,455) $ (188,164) $ 174,500 Net income — — — 31,522 — — 31,522 Foreign currency translation — — — — 580 — 580 Stock-based compensation expense — — 4,811 — — — 4,811 Exercise of options 164 — 699 — — — 699 Restricted share vesting and withholding 61 — — — (400) (400) Balance, March 31, 2022 117,221 $ 117 $ 511,267 $ (110,233) $ (875) $ (188,564) $ 211,712 Statements,Statements;” (ii) our Unaudited Condensed Consolidated Statements of LossOperations and Comprehensive LossIncome 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.dedicated to providing video and mechanical reel gaming contenta supplier of entertainment and technology solutions integratedfor the casino and digital gaming paymentsindustry. The Company develops game content and gaming machines, gaming systems and services for land-based and iGaming operators. The Company is also a provider of financial technology solutions that power the casino floor, including products and complianceservices that facilitate cash and efficiency softwarecashless financial transactions, self-service player loyalty tools and applications, and regulatory and intelligence software.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; and (iii) business-to-business (“B2B”) digital online gaming activities.Payments provides: (a)FinTech provides gaming operators with financial technology products and services, including: (i) financial access and related services supporting digital, cashless and physical cash options across mobile, assisted and self-service channels; (ii) loyalty and marketing software and tools, regulatory and compliance (“RegTech”) software solutions, other information-related products and services, and hardware maintenance services; and (iii) associated casino patron self-service hardware that utilizes our financial access, software and other services. Our services operate as part of 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; 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.operatorsactivity decreases at our customers’ locations, or fails to increase at expected rates, and to the extent our customers decide to continue to restrict their capital spending as a result of uncertainty in statesthe industry, or that offer intrastate, Internet-basedsupply chain disruptions might impact customer deliveries or otherwise. lottery activities. potential volatility in our stock price, among other concerns such as cybersecurity exposure.2.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESand nine months ended September 30, 2017March 31, 2022 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 most recently filed 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.Three Months Ended March 31, 2022 2021 Balance at January 1 - current $ 9,927 $ 9,240 Balance at January 1 - non-current 5,294 8,321 Total 15,221 17,561 Balance at March 31 - current 10,662 9,796 Balance at March 31 - non-current 3,852 7,299 Total 14,514 17,095 Decrease $ (707) $ (466) Balance at January 1 - current $ 36,238 $ 26,980 Balance at January 1 - non-current 377 289 Total 36,615 27,269 Balance at March 31 - current 38,877 27,887 Balance at March 31 - non-current 213 98 Total 39,090 27,985 Increase $ 2,475 $ 716 fiscal yearthree months ended DecemberMarch 31, 2016.There2022 and 2021, respectively.Classification on our Balance Sheets At March 31, 2022 At December 31, 2021 Cash and cash equivalents Cash and cash equivalents $ 269,400 $ 302,009 Restricted cash - current Prepaid expenses and other current assets 1,534 1,616 Restricted cash - non-current Other assets 101 101 Total $ 271,035 $ 303,726 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. Account balances are charged against the provision when the Company believes it is probable the receivable will not be recovered. 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 an 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 Decembertime 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.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 March 31, 2022 $600 million New Term Loan 2 $ 591,030 $ 597,000 $400 million 2021 Unsecured Notes 2 $ 378,000 $ 400,000 December 31, 2021 $600 million New Term Loan 2 $ 598,171 $ 598,500 $400 million 2021 Unsecured Notes 2 $ 404,000 $ 400,000 The term loan facility was reported atvaluevalues were determined using a Level 2 input as there wereinputs based on quoted market prices in markets that were not considered active as of September 30, 2017. 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 September 30, 2017.The term loan was reported at fair value using a Level 1 input as there were quoted prices in markets that were considered active as of December 31, 2016. The senior secured notes were reported at fair value using a Level 3 input as there was no market activity or observable inputs as of December 31, 2016. The senior unsecured notes were reported at fair value using a Level 1 input as there were quoted prices in markets that were considered active as of December 31, 2016.Reclassifications were madethe prior-period Financial Statements to conform tobe consistent with the current periodyear presentation.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 realizableStandard Description Date of Adoption Effect on Financial Statements This ASU amends the lease classification requirements for lessors to align them with practice under ASC Topic 840 January 1, 2022 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,FASB issued ASU No. 2017-09inception, or modification, of a contract based on whether the contract conveys the right to clarify which changescontrol the use of an identified asset for a period of time in exchange for consideration. Control over the use of an asset is predicated upon the notion that a lessee has both the right to (i) obtain substantially all of the termseconomic benefit from the use of the asset; and conditions(ii) direct the use of share-based payment awards require an entity to apply modification accounting under Topic 718. An entitythe asset.requiredrecognized on a straight-line basis over the expected lease term. Our lease arrangements have both lease and non-lease components, and we have elected the practical expedient to account for the effectslease and non-lease elements as a single lease.modificationrange of approximately one to ten years. The exercise of lease renewal options is generally at our sole discretion. The expected lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such option. The depreciable life of leased assets and leasehold improvements is limited by the expected term of such assets, unless allthere is a transfer of the following conditionstitle or purchase option reasonably certain to be exercised.met: (i) the fairperiodically adjusted for inflation. Our lease agreements do not contain material residual value (or calculated valueguarantees or intrinsic value, if such an alternative measurement methodmaterial restrictive covenants. Our lease agreements do not generally provide explicit rates of interest; therefore, we use our incremental collateralized borrowing rate, which is used) of the modified award isbased on a fully collateralized and fully amortizing loan with a maturity date the same as the fair value (or value using an alternative measurement method)length of the original award immediately beforelease that is based on the original awardinformation available at the commencement date to determine the present value of lease payments. Leases with an initial term of 12 months or less (short-term) are not accounted for on our Balance Sheets. As of March 31, 2022 and December 31, 2021, our finance leases were not material.modified. Ifas follows (in thousands):Classification on our Balance Sheets At March 31, 2022 At December 31, 2021 Assets Operating lease ROU assets Other assets, non-current $ 17,483 $ 12,692 Liabilities Current operating lease liabilities Accounts payable and accrued expenses $ 5,842 $ 5,663 Non-current operating lease liabilities Other accrued expenses and liabilities $ 16,099 $ 11,869 Three Months Ended March 31, 2022 2021 Cash paid for: Long-term operating leases $ 1,668 $ 1,625 Short-term operating leases $ 409 $ 430 Right-of-use assets obtained in exchange for lease obligations: $ 5,947 $ — modification does not affect anyperiod.At March 31, 2022 At December 31, 2021 Weighted Average Remaining Lease Term (in years): Operating leases 3.79 3.52 Weighted Average Discount Rate: Operating leases 4.55 % 5.04 % Three Months Ended March 31, 2022 2021 Operating Lease Cost: Operating lease cost $ 1,362 $ 1,460 Variable lease cost $ 279 $ 250 Year Ending December 31, Amount 2022 (excluding the three months ended March 31, 2022) $ 4,958 2023 6,377 2024 5,749 2025 5,043 2026 1,587 Thereafter 154 Total future minimum lease payments 23,868 Amount representing interest 1,927 Present value of future minimum lease payments 21,941 Current operating lease obligations 5,842 Long-term lease obligations $ 16,099 inputselectronic gaming machines (“EGMs”) installed at customer facilities. We receive recurring revenues based on a percentage of the net win per day generated by the leased gaming equipment or a fixed daily fee. Such revenues are generated daily and are limited to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; (ii) the vesting conditionslesser of the modified award arenet win per day generated by the same asleased gaming equipment or the vesting conditions offixed daily fee and the original award immediately before the original award is modified; and (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted in the first period of the year this guidance is adopted. We are currently evaluating the impact of adopting this guidance on our Financial Statements.In January 2017, the FASB issued ASU No. 2017-01, which clarifies the definition of a business. The amendments affect all companies 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 statementslease payments that have been issued or made availablecollected from the lessee. Certain of our leases have terms and conditions with options 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 aretrospective 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 assetpurchase the underlying assets. Refer to a lease liability on the balance sheetEquipment" 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,details of our minimum commitments under noncancelable operating leases on our Balance Sheets, which will result in rental pool assets cost and accumulated depreciation.recording of right of use assetsthree months ended March 31, 2022 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”2021The 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 isOur interest income 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:Major Revenue StreamPreliminary Expected Impact Upon AdoptionGames Segment:Game SalesWe expect revenue recognition to be consistent with our current practices, however, there may be some differences as we continue to evaluate the implications.Game OperationsWe expect revenue recognition to be consistent with our current practices, however, with respect to our WAP offering(s), for which we initiated this year, we will be required to net the direct costs with Games revenues as opposed to our existing practice of recording those amounts to Games cost of revenues. WAP jackpot expense was approximately $0.1 million and $0.3 million for the three and nine months ended September 30, 2017, respectively.Payments Segment:Cash Advance, ATM and Check ServicesWe generally expect revenue recognition to be consistent with our current practices, however, there may potentially be significant differences as we continue to evaluate the implications specifically related to our reporting these revenues on a gross versus net basis. As such, there will be no effect on operating income, net loss, cash flows or the timing of revenues recognized and costs incurred. In addition, there may be changes to the Kiosk Sales and Services and Compliance Sales and Services offerings that impact cash advance, ATM and check services revenue streams as we continue to evaluate the revenue recognition standard.Central CreditWe expect revenue recognition to be consistent with our current practices, however, there may be differences as we continue to evaluate the implications.Kiosk Sales and ServicesWe expect to encounter some level of change to our revenue recognition practices for these revenue streams under the new guidance, however, the amounts are not anticipated to be material as we continue to evaluate the implications.Compliance Sales and ServicesWe expect to encounter some level of change to our revenue recognition practices for these revenue streams under the new guidance, however, the amounts are not anticipated to be material as we continue to evaluate the implications.Currently, we do not expect our Games or certain of our Payments revenues to be materially impacted by the implementation of this guidance; however, we continue to evaluate certain of our other Payments-related revenue streams as there may be a potentially significant impact, depending on our final interpretation of the accounting guidance. More specifically, based on the transition guidance related to the new revenue recognition standard, we are in the process of determining if our cash advance, ATM and check services revenue streams will be required to be reported “net of transaction price” rather than our current gross revenue presentation basis. Under the existing Topic 605, certain factors that supported our gross reporting position have been eliminated in the new Topic 606. In addition, our understanding of the new transition guidance, as it specifically pertains to payments from customers, may further require us to report certain of these Payments-related revenue streams on a net presentation basis. If our conclusions, in accordance with GAAP, support a net reporting of these specific revenue streams, this will have a significant impact on our revenues, cost of revenues and margins for the affected revenue streams, however, there will be no effect on operating income, net loss, cash flows or the timing of revenues recognized and costs incurred.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 March 31, 2022 At December 31, 2021 Assets Net investment in sales-type leases - current Trade and other receivables, net $ 898 $ 1,331 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 2018.3.BUSINESS COMBINATIONS We had no material acquisitions
|
| ||||
| Amount in USD | |||||
| Purchase consideration | |||||
| Cash consideration paid at closing | $ | 14,980 | |||
| Cash consideration to be paid in subsequent periods | 15,905 | ||||
| Total purchase consideration | $ | 30,885 | |||
Contract Cash Solutions Agreement
Our Contract Cash Solutions Agreement
| Amount in USD | |||||
| Current assets | $ | 14,168 | |||
| Property and equipment | 1,435 | ||||
| Other intangible assets | 11,600 | ||||
| Goodwill | 10,661 | ||||
| Other assets | 549 | ||||
| Total Assets | 38,413 | ||||
| Accounts payable and accrued expenses | 6,416 | ||||
| Other accrued expenses and liabilities | 1,112 | ||||
| Total liabilities | 7,528 | ||||
| Net assets acquired | $ | 30,885 | |||
| Useful Life (Years) | Estimated Fair Value (USD) | ||||||||||
| Other Intangible Assets | |||||||||||
| Trade name | 3 | $ | 700 | ||||||||
| Developed technology | 3 | 3,600 | |||||||||
| Customer relationships | 9 | 7,300 | |||||||||
| Total other intangible assets | $ | 11,600 | |||||||||
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.
|
|
|
| At September 30, |
|
| At December 31, |
| At March 31, | At December 31, | |||||||||||
|
| 2017 |
|
| 2016 |
| 2022 | 2021 | |||||||||||
Trade and other receivables, net |
|
|
|
|
|
|
|
| Trade and other receivables, net | ||||||||||
Games trade and loans receivables |
| $ | 36,837 |
|
| $ | 44,410 |
| Games trade and loans receivables | $ | 78,349 | $ | 77,053 | ||||||
Payments trade and loans receivables |
|
| 10,214 |
|
|
| 12,337 |
| |||||||||||
| FinTech trade and loans receivables | FinTech trade and loans receivables | 26,989 | 21,504 | ||||||||||||||||
Contract assets(1) | Contract assets(1) | 14,514 | 15,221 | ||||||||||||||||
Other receivables |
|
| 796 |
|
|
| 1,924 |
| Other receivables | 8,079 | 3,695 | ||||||||
| Net investment in sales-type leases | Net investment in sales-type leases | 898 | 1,331 | ||||||||||||||||
Total trade and other receivables, net |
| $ | 47,847 |
|
| $ | 58,671 |
| Total trade and other receivables, net | 128,829 | 118,804 | ||||||||
Less: non-current portion of receivables |
|
| 2,876 |
|
|
| 2,020 |
| |||||||||||
| Non-current portion of receivables | Non-current portion of receivables | ||||||||||||||||||
| Games trade and loans receivables | Games trade and loans receivables | 1,265 | 1,348 | ||||||||||||||||
| FinTech trade and loans receivables | FinTech trade and loans receivables | 10,625 | 7,340 | ||||||||||||||||
Contract assets(1) | Contract assets(1) | 3,852 | 5,294 | ||||||||||||||||
| Total non-current portion of receivables | Total non-current portion of receivables | 15,742 | 13,982 | ||||||||||||||||
Total trade and other receivables, current portion |
| $ | 44,971 |
|
| $ | 56,651 |
| Total trade and other receivables, current portion | $ | 113,087 | $ | 104,822 | ||||||
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):
|
| At September 30, |
|
| At December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Prepaid expenses and other assets |
|
|
|
|
|
|
|
|
Deposits |
| $ | 9,971 |
|
| $ | 8,622 |
|
Prepaid expenses |
|
| 7,870 |
|
|
| 5,937 |
|
Other |
|
| 4,697 |
|
|
| 3,489 |
|
Total prepaid expenses and other assets |
| $ | 22,538 |
|
| $ | 18,048 |
|
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Beginning allowance for credit losses | $ | (5,161) | $ | (3,689) | |||||||
| Provision | (1,947) | (1,999) | |||||||||
| Charge-offs and recoveries | 2,085 | 1,239 | |||||||||
| Ending allowance for credit losses | $ | (5,023) | $ | (4,449) | |||||||
The balance of the non-current portion of other assets consisted of the following (in thousands):
|
| At September 30, |
|
| At December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Other assets |
|
|
|
|
|
|
|
|
Prepaid expenses and deposits |
| $ | 3,464 |
|
| $ | 3,399 |
|
Debt issuance costs of revolving credit facility |
|
| 898 |
|
|
| 689 |
|
Other |
|
| 3,088 |
|
|
| 3,434 |
|
Total other assets |
| $ | 7,450 |
|
| $ | 7,522 |
|
|
|
value.
|
| At September 30, |
|
| At December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Inventory |
|
|
|
|
|
|
|
|
Raw materials and component parts, net of reserves of $1,523 and $2,155 at September 30, 2017 and December 31, 2016, respectively |
| $ | 15,974 |
|
| $ | 12,570 |
|
Work-in-progress |
|
| 3,516 |
|
|
| 1,502 |
|
Finished goods |
|
| 4,300 |
|
|
| 4,996 |
|
Total inventory |
| $ | 23,790 |
|
| $ | 19,068 |
|
|
| At March 31, | At December 31, | ||||||||||
| 2022 | 2021 | ||||||||||
| Inventory | |||||||||||
| Component parts, net of reserves of $2,098 and $2,422 at March 31, 2022 and December 31, 2021, respectively | $ | 33,646 | $ | 22,490 | |||||||
| Work-in-progress | 4,179 | 554 | |||||||||
| Finished goods | 7,874 | 6,189 | |||||||||
| Total inventory | $ | 45,699 | $ | 29,233 | |||||||
Property, equipment
|
|
|
| At September 30, 2017 |
|
| At December 31, 2016 |
| ||||||||||||||||||
|
| Useful Life |
|
|
|
|
| Accumulated |
|
| Net Book |
|
|
|
|
|
| Accumulated |
|
| Net Book |
| ||||
|
| (Years) |
| Cost |
|
| Depreciation |
|
| Value |
|
| Cost |
|
| Depreciation |
|
| Value |
| ||||||
Property, equipment and leased assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental pool - deployed |
| 2-4 |
| $ | 149,895 |
|
| $ | 73,623 |
|
| $ | 76,272 |
|
| $ | 123,812 |
|
| $ | 59,188 |
|
| $ | 64,624 |
|
Rental pool - undeployed |
| 2-4 |
|
| 19,829 |
|
|
| 10,874 |
|
|
| 8,955 |
|
|
| 13,456 |
|
|
| 5,721 |
|
|
| 7,735 |
|
ATM equipment |
| 5 |
|
| 17,154 |
|
|
| 11,992 |
|
|
| 5,162 |
|
|
| 16,537 |
|
|
| 11,189 |
|
|
| 5,348 |
|
Leasehold and building improvements |
| Lease Term |
|
| 10,723 |
|
|
| 4,820 |
|
|
| 5,903 |
|
|
| 10,023 |
|
|
| 3,698 |
|
|
| 6,325 |
|
Cash advance equipment |
| 3 |
|
| 8,492 |
|
|
| 5,544 |
|
|
| 2,948 |
|
|
| 8,590 |
|
|
| 4,499 |
|
|
| 4,091 |
|
Machinery, office and other equipment |
| 2-5 |
|
| 33,217 |
|
|
| 23,058 |
|
|
| 10,159 |
|
|
| 30,424 |
|
|
| 20,108 |
|
|
| 10,316 |
|
Total |
|
|
| $ | 239,310 |
|
| $ | 129,911 |
|
| $ | 109,399 |
|
| $ | 202,842 |
|
| $ | 104,403 |
|
| $ | 98,439 |
|
| At March 31, | At December 31, | ||||||||||
| 2022 | 2021 | ||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Prepaid expenses | $ | 15,738 | $ | 14,389 | |||||||
| Deposits | 8,102 | 7,709 | |||||||||
Restricted cash(1) | 1,534 | 1,616 | |||||||||
| Other | 2,482 | 3,585 | |||||||||
| Total prepaid expenses and other current assets | $ | 27,856 | $ | 27,299 | |||||||
| At March 31, | At December 31, | ||||||||||
| 2022 | 2021 | ||||||||||
| Other assets | |||||||||||
| Operating lease ROU assets | $ | 17,483 | $ | 12,692 | |||||||
| Prepaid expenses and deposits | 4,948 | 4,789 | |||||||||
| Debt issuance costs of revolving credit facility | 1,664 | 1,760 | |||||||||
| Other | 355 | 418 | |||||||||
| Total other assets | $ | 24,450 | $ | 19,659 | |||||||
| At March 31, 2022 | At December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Useful Life (Years) | Cost | Accumulated Depreciation | Net Book Value | Cost | Accumulated Depreciation | Net Book Value | |||||||||||||||||||||||||||||||||||
| Property and equipment | |||||||||||||||||||||||||||||||||||||||||
| Rental pool - deployed | 2-4 | $ | 253,441 | $ | 171,562 | $ | 81,879 | $ | 248,958 | $ | 166,075 | $ | 82,883 | ||||||||||||||||||||||||||||
| Rental pool - undeployed | 2-4 | 24,676 | 19,730 | 4,946 | 23,284 | 18,285 | 4,999 | ||||||||||||||||||||||||||||||||||
| FinTech equipment | 1-5 | 33,265 | 21,978 | 11,287 | 32,802 | 21,257 | 11,545 | ||||||||||||||||||||||||||||||||||
| Leasehold and building improvements | Lease Term | 12,622 | 9,612 | 3,010 | 12,598 | 9,234 | 3,364 | ||||||||||||||||||||||||||||||||||
| Machinery, office, and other equipment | 1-5 | 47,352 | 29,179 | 18,173 | 45,277 | 28,075 | 17,202 | ||||||||||||||||||||||||||||||||||
| Total | $ | 371,356 | $ | 252,061 | $ | 119,295 | $ | 362,919 | $ | 242,926 | $ | 119,993 | |||||||||||||||||||||||||||||
|
|
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.
|
|
| At September 30, 2017 |
|
| At December 31, 2016 |
| |||||||||||||||||||
|
| Useful Life |
|
|
|
|
| Accumulated |
|
| Net Book |
|
|
|
|
|
| Accumulated |
|
| Net Book |
| ||||
|
| (years) |
| Cost |
|
| Amortization |
|
| Value |
|
| Cost |
|
| Amortization |
|
| Value |
| ||||||
Other intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract rights under placement fee agreements |
| 1-7 |
| $ | 59,605 |
|
| $ | 1,782 |
|
| $ | 57,823 |
|
| $ | 17,742 |
|
| $ | 6,281 |
|
| $ | 11,461 |
|
Customer contracts |
| 7-14 |
|
| 50,975 |
|
|
| 42,768 |
|
|
| 8,207 |
|
|
| 50,975 |
|
|
| 40,419 |
|
|
| 10,556 |
|
Customer relationships |
| 8-12 |
|
| 231,100 |
|
|
| 58,412 |
|
|
| 172,688 |
|
|
| 231,100 |
|
|
| 42,688 |
|
|
| 188,412 |
|
Developed technology and software |
| 1-6 |
|
| 244,151 |
|
|
| 152,706 |
|
|
| 91,445 |
|
|
| 224,265 |
|
|
| 126,721 |
|
|
| 97,544 |
|
Patents, trademarks and other |
| 1-17 |
|
| 28,834 |
|
|
| 20,923 |
|
|
| 7,911 |
|
|
| 27,771 |
|
|
| 17,747 |
|
|
| 10,024 |
|
Total |
|
|
| $ | 614,665 |
|
| $ | 276,591 |
|
| $ | 338,074 |
|
| $ | 551,853 |
|
| $ | 233,856 |
|
| $ | 317,997 |
|
| At March 31, 2022 | At December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Useful Life (Years) | Cost | Accumulated Amortization | Net Book Value | Cost | Accumulated Amortization | Net Book Value | |||||||||||||||||||||||||||||||||||
| Other intangible assets | |||||||||||||||||||||||||||||||||||||||||
| Contract rights under placement fee agreements | 2-7 | $ | 59,376 | $ | 6,664 | $ | 52,712 | $ | 58,837 | $ | 4,237 | $ | 54,600 | ||||||||||||||||||||||||||||
| Customer relationships | 3-14 | 310,613 | 212,542 | 98,071 | 303,238 | 206,273 | 96,965 | ||||||||||||||||||||||||||||||||||
| Developed technology and software | 1-6 | 355,920 | 286,665 | 69,255 | 342,309 | 280,412 | 61,897 | ||||||||||||||||||||||||||||||||||
| Patents, trade names, and other | 2-18 | 21,247 | 19,548 | 1,699 | 20,547 | 19,415 | 1,132 | ||||||||||||||||||||||||||||||||||
| Total | $ | 747,156 | $ | 525,419 | $ | 221,737 | $ | 724,931 | $ | 510,337 | $ | 214,594 | |||||||||||||||||||||||||||||
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 nine months ended September 30, 2017, we paid approximately $10.1 million and $13.1 million, respectively, in placement fees primarily related to this agreement. For the nine months ended September 30, 2016, $11.2 million was paid to extend the term of placement fee agreements with the same customer for certain of its locations. We did not enter into any placement fee agreements or incur related fees during the three months ended September 30, 2016.
|
| 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 March 31, | At December 31, | ||||||||||
| 2022 | 2021 | ||||||||||
| Accounts payable and accrued expenses | |||||||||||
| Customer commissions payable | $ | 65,764 | $ | 57,515 | |||||||
| Accounts payable - trade | 47,184 | 25,453 | |||||||||
| Contract liabilities | 38,877 | 36,238 | |||||||||
| Payroll and related expenses | 17,893 | 29,125 | |||||||||
| Operating lease liabilities | 5,842 | 5,663 | |||||||||
| Accrued interest | 5,816 | 9,273 | |||||||||
| Financial access processing and related expenses | 3,865 | 3,619 | |||||||||
| Accrued taxes | 3,317 | 2,756 | |||||||||
| Other | 3,996 | 4,291 | |||||||||
| Total accounts payable and accrued expenses | $ | 192,554 | $ | 173,933 | |||||||
|
| 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 March 31, | At December 31, | |||||||||||||||||||||||
| Date | Rate | 2022 | 2021 | |||||||||||||||||||||||
| Long-term debt | ||||||||||||||||||||||||||
| $600 million New Term Loan | 2028 | LIBOR+2.50% | $ | 597,000 | $ | 598,500 | ||||||||||||||||||||
| $125 million New Revolver | 2026 | LIBOR+2.50% | — | — | ||||||||||||||||||||||
| Senior secured credit facilities | 597,000 | 598,500 | ||||||||||||||||||||||||
| $400 million 2021 Unsecured Notes | 2029 | 5.00% | 400,000 | 400,000 | ||||||||||||||||||||||
| Total debt | 997,000 | 998,500 | ||||||||||||||||||||||||
| Debt issuance costs and discount | (16,358) | (16,975) | ||||||||||||||||||||||||
| Total debt after debt issuance costs and discount | 980,642 | 981,525 | ||||||||||||||||||||||||
| Current portion of long-term debt | (6,000) | (6,000) | ||||||||||||||||||||||||
| Total long-term debt, net of current portion | $ | 974,642 | $ | 975,525 | ||||||||||||||||||||||
Refinancing
On May 9, 2017
Secured Notes due 2021may be specified 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 afterAgreement. As to any loan other than a base rate loan, the Closing Date (the “Stated Term Maturity Date”); provided that, if oninterest payment dates shall be the date that is 91 days priorlast day of each interest period applicable to such loan
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 loansRevolver 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, butand without premium or penalty, except that certain refinancings or repricings of the term loansNew Term Loan 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.
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 of 4.25:1.00 as of Decemberthe measurement date.
July 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 September 30, 2017 and DecemberMarch 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 March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Weighted average shares | |||||||||||
| Weighted average number of common shares outstanding - basic | 91,408 | 86,984 | |||||||||
Potential dilution from equity awards(1) | 10,063 | 10,984 | |||||||||
Weighted average number of common shares outstanding - diluted(1) | 101,471 | 97,968 | |||||||||
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, 2021 | 7,073 | 3,540 | |||||||||
| Granted | — | 25 | |||||||||
| Exercised options or vested shares | (164) | (61) | |||||||||
| Canceled or forfeited | — | (13) | |||||||||
| Outstanding, March 31, 2022 | 6,909 | 3,491 | |||||||||
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 September 30, 2016, certain executive and director grants were valued under the Black-Scholes option pricing model that utilized different assumptions from those used for our standard time-based options. For the time-based options granted on February 25, 2016, the assumptions were: (a) risk-free interest rate of 1%; (b) expected term of five years; (c) expected volatility of 49%; and (d) no expected dividend yield. For the time-based options granted on February 13, 2016, the assumptions were: (a) risk-free interest rate of 1%; (b) expected term of six years; (c) expected volatility of 49%; and (d) no expected dividend yield.
|
| 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 grantedincome tax provision 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 provisionMarch 31, 2022, reflected an effective income tax rate of negative 20.0%23.6%, which was greater than the statutory federal rate of 21.0%, primarily due to state taxes and negative 15.6%an accrual for foreign withholding tax, partially offset by both a research credit and the benefit from stock option exercises. The income tax provision for the three and nine months ended September, 30, 2017, respectively,March 31, 2021 reflected an effective income tax rate of 5.5%, which was less than the statutory federal rate of 35.0%21.0%, primarily due to an increasea decrease in our valuation allowance for our 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%both stock option exercises and 39.4% for the three and nine months ended September 30, 2016, respectively, which was higher than the statutory federal rate of 35.0%, primarily due to state taxes, the lower foreign tax rate applicable to our foreign source income, and the benefit from a research credit, partially offset by non-statutory stock options that expired in the year.
During the third quarter of 2017, we increased our valuation allowance by approximately $2.4 million for our deferred tax assets.
credit.
|
|
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 directlygaming technology products and services, including: (i) gaming machines, primarily comprising Class II and Class III slot machines placed under participation or fixed-fee lease arrangements or sold to gaming establishments to offer their patrons gaming entertainment-related experiences including: leased gaming equipment; salescasino customers; (ii) provision and maintenance of the central determinant systems for the VLTs installed in the State of New York and similar technology in certain tribal jurisdictions; and (iii) B2B digital online gaming activities.
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 March 31, | ||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||||||
| 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 | $ | 70,297 | $ | 58,141 | ||||||||||||||||||||||
| Gaming equipment and systems | Gaming equipment and systems | 27,998 | 17,988 | ||||||||||||||||||||||||
| Gaming other | Gaming other | 41 | 22 | ||||||||||||||||||||||||
Total revenues |
| $ | 247,322 |
|
| $ | 222,177 |
|
| $ | 727,089 |
|
| $ | 641,946 |
| Total revenues | 98,336 | 76,151 | ||||||||
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Games |
| $ | 1,787 |
|
| $ | (4,183 | ) |
| $ | 9,301 |
|
| $ | (14,638 | ) | |||||||||||
Payments |
|
| 18,008 |
|
|
| 15,755 |
|
|
| 54,389 |
|
|
| 36,054 |
| |||||||||||
Total operating income |
| $ | 19,795 |
|
| $ | 11,572 |
|
| $ | 63,690 |
|
| $ | 21,416 |
| |||||||||||
| Costs and expenses | Costs and expenses | ||||||||||||||||||||||||||
Cost of revenues(1) | Cost of revenues(1) | ||||||||||||||||||||||||||
| Gaming operations | Gaming operations | 5,995 | 4,759 | ||||||||||||||||||||||||
| Gaming equipment and systems | Gaming equipment and systems | 16,782 | 10,307 | ||||||||||||||||||||||||
| Cost of revenues | Cost of revenues | 22,777 | 15,066 | ||||||||||||||||||||||||
| Operating expenses | Operating expenses | 17,346 | 14,595 | ||||||||||||||||||||||||
| Research and development | Research and development | 7,630 | 5,667 | ||||||||||||||||||||||||
| Depreciation | Depreciation | 12,981 | 14,563 | ||||||||||||||||||||||||
| Amortization | Amortization | 9,805 | 10,984 | ||||||||||||||||||||||||
| Total costs and expenses | Total costs and expenses | 70,539 | 60,875 | ||||||||||||||||||||||||
| Operating income | Operating income | $ | 27,797 | $ | 15,276 | ||||||||||||||||||||||
|
| 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 March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| FinTech | |||||||||||
| Revenues | |||||||||||
| Financial access services | $ | 49,879 | $ | 38,712 | |||||||
| Software and other | 17,867 | 17,246 | |||||||||
| Hardware | 9,534 | 7,004 | |||||||||
| Total revenues | 77,280 | 62,962 | |||||||||
| Costs and expenses | |||||||||||
Cost of revenues(1) | |||||||||||
| Financial access services | 2,175 | 1,473 | |||||||||
| Software and other | 935 | 1,004 | |||||||||
| Hardware | 5,941 | 4,028 | |||||||||
| Cost of revenues | 9,051 | 6,505 | |||||||||
| Operating expenses | 32,479 | 23,448 | |||||||||
| Research and development | 4,889 | 2,746 | |||||||||
| Depreciation | 2,239 | 1,614 | |||||||||
| Amortization | 3,828 | 3,731 | |||||||||
| Total costs and expenses | 52,486 | 38,044 | |||||||||
| Operating income | $ | 24,794 | $ | 24,918 | |||||||
| At March 31, | At December 31, | ||||||||||
| 2022 | 2021 | ||||||||||
| Total assets | |||||||||||
| Games | $ | 909,584 | $ | 913,880 | |||||||
| FinTech | 706,438 | 721,770 | |||||||||
| Total assets | $ | 1,616,022 | $ | 1,635,650 | |||||||
|
|
We conduct substantially all of ouras a business through our U.S. and foreign subsidiaries. Everi Payments’ (“Subsidiary Issuer”) obligationscombination under the Unsecured Notes are fully and unconditionally guaranteed, subject to certain customary release provisions, on a joint and several basis by Holdings (“Parent”) and substantially allacquisition method of our 100%-owned U.S. subsidiaries other than Subsidiary Issuer (the “Guarantor Subsidiaries” and, together with Parent, the “Guarantors” and each a “Guarantor”).accounting. The guarantees of our Unsecured Notes will be released under the following customary circumstances: (i) the sale or disposition of all or substantially all of the assets of the Guarantor (by way of merger, consolidation, or otherwise) to a person thatacquisition is not (either beforeexpected to have a material impact on our results of operations or after giving effectfinancial condition.
governing the Unsecured Notes; or (iv) the legal or covenant defeasanceCompany and regulatory policies and trading plans established in accordance with Rules 10b5-1 and 10b-18 of the Unsecured Notes or the satisfactionSecurities Exchange Act of 1934. The actual number of shares to be purchased will depend upon market conditions 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 Subsidiariessubject to available liquidity, general market 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 andeconomic conditions, alternative uses for the threecapital and nine months ended September 30, 2017other factors. All shares purchased will be held in the Company’s treasury for possible future use. As of March 31, 2022, Everi had approximately 91.5 million shares issued and 2016. The condensed consolidating financial information has been presentedoutstanding, net of 25.7 million shares held in the Company’s treasury. There is no minimum number of shares that the Company is required to show the nature of assets heldrepurchase, and the results of operationsprogram may be suspended or discontinued at any time without prior notice. This new repurchase program supersedes and cash flows of Parent, Subsidiary Issuer,replaces, in its entirety, 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.
These cautionary statements qualify our forward-looking statements, and you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
year ended December 31, 2021 (the “Annual Report”).
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; and (iii) business-to-business (“B2B”)
(a)FinTech provides gaming operators with financial technology products and services, including: (i) financial access and related services supporting digital, cashless and physical cash options across mobile, assisted and self-service channels; (ii) loyalty and marketing software and tools, regulatory and compliance (“RegTech”) software solutions, other information-related products and services, and hardware maintenance services; and (iii) associated casino patron self-service hardware that utilizes our financial access, software and other services. Our services operate as part of 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; 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.
entered into a credit agreement and a letter of credit (the “New Credit Agreement”). The New Credit Agreement provides for: (i) a seven-year $600 million senior secured term loan due 2028 issued at 99.75% of par (the “New Term Loan”); and (ii) a $125 million senior secured revolving credit facility due 2026, which was undrawn at closing (the “New Revolver” and together with the New Term Loan, the “New Credit Facilities”). The fees associated with the New Credit Facilities were approximately $13.9 million, which included discounts of approximately $1.5 million.
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, 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
As discussed in detail in “Noteour 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.
March 31, 2021
|
| 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 September 30, 2017,March 31, 2022 compared to the three months ended March 31, 2021 (amounts in thousands)*:
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 31, 2022 | March 31, 2021 | 2022 vs 2021 | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||
| Games revenues | |||||||||||||||||||||||||||||||||||
| Gaming operations | $ | 70,297 | 40 | % | $ | 58,141 | 42 | % | $ | 12,156 | 21 | % | |||||||||||||||||||||||
| Gaming equipment and systems | 27,998 | 16 | % | 17,988 | 13 | % | 10,010 | 56 | % | ||||||||||||||||||||||||||
| Gaming other | 41 | — | % | 22 | — | % | 19 | 86 | % | ||||||||||||||||||||||||||
| Games total revenues | 98,336 | 56 | % | 76,151 | 55 | % | 22,185 | 29 | % | ||||||||||||||||||||||||||
| FinTech revenues | |||||||||||||||||||||||||||||||||||
| Financial access services | 49,879 | 29 | % | 38,712 | 28 | % | 11,167 | 29 | % | ||||||||||||||||||||||||||
| Software and other | 17,867 | 10 | % | 17,246 | 12 | % | 621 | 4 | % | ||||||||||||||||||||||||||
| Hardware | 9,534 | 5 | % | 7,004 | 5 | % | 2,530 | 36 | % | ||||||||||||||||||||||||||
| FinTech total revenues | 77,280 | 44 | % | 62,962 | 45 | % | 14,318 | 23 | % | ||||||||||||||||||||||||||
| Total revenues | 175,616 | 100 | % | 139,113 | 100 | % | 36,503 | 26 | % | ||||||||||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||||||||||||||
Games cost of revenues(1) | |||||||||||||||||||||||||||||||||||
| Gaming operations | 5,995 | 3 | % | 4,759 | 3 | % | 1,236 | 26 | % | ||||||||||||||||||||||||||
| Gaming equipment and systems | 16,782 | 10 | % | 10,307 | 8 | % | 6,475 | 63 | % | ||||||||||||||||||||||||||
| Games total cost of revenues | 22,777 | 13 | % | 15,066 | 11 | % | 7,711 | 51 | % | ||||||||||||||||||||||||||
FinTech cost of revenues(1) | |||||||||||||||||||||||||||||||||||
| Financial access services | 2,175 | 1 | % | 1,473 | 1 | % | 702 | 48 | % | ||||||||||||||||||||||||||
| Software and other | 935 | 1 | % | 1,004 | 1 | % | (69) | (7) | % | ||||||||||||||||||||||||||
| Hardware | 5,941 | 3 | % | 4,028 | 3 | % | 1,913 | 47 | % | ||||||||||||||||||||||||||
| FinTech total cost of revenues | 9,051 | 5 | % | 6,505 | 5 | % | 2,546 | 39 | % | ||||||||||||||||||||||||||
| Operating expenses | 49,825 | 28 | % | 38,043 | 27 | % | 11,782 | 31 | % | ||||||||||||||||||||||||||
| Research and development | 12,519 | 7 | % | 8,413 | 6 | % | 4,106 | 49 | % | ||||||||||||||||||||||||||
| Depreciation | 15,220 | 9 | % | 16,177 | 12 | % | (957) | (6) | % | ||||||||||||||||||||||||||
| Amortization | 13,633 | 8 | % | 14,715 | 10 | % | (1,082) | (7) | % | ||||||||||||||||||||||||||
| Total costs and expenses | 123,025 | 70 | % | 98,919 | 71 | % | 24,106 | 24 | % | ||||||||||||||||||||||||||
| Operating income | 52,591 | 30 | % | 40,194 | 29 | % | 12,397 | 31 | % | ||||||||||||||||||||||||||
| Other expenses | |||||||||||||||||||||||||||||||||||
| Interest expense, net of interest income | 11,348 | 7 | % | 18,471 | 13 | % | (7,123) | (39) | % | ||||||||||||||||||||||||||
| Total other expenses | 11,348 | 7 | % | 18,471 | 13 | % | (7,123) | (39) | % | ||||||||||||||||||||||||||
| Income before income tax | 41,243 | 23 | % | 21,723 | 16 | % | 19,520 | 90 | % | ||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 31, 2022 | March 31, 2021 | 2022 vs 2021 | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Income tax provision | 9,721 | 5 | % | 1,189 | 1 | % | 8,532 | 718 | % | ||||||||||||||||||||||||||
| Net income | $ | 31,522 | 18 | % | $ | 20,534 | 15 | % | $ | 10,988 | 54 | % | |||||||||||||||||||||||
Games revenues decreased by $0.8approximately $36.5 million, or 1%26%, to $55.4approximately $175.6 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,March 31, 2022, 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 expenses increased by $2.5 million, or 9%, to $29.5 million for the three months ended September 30, 2017, as compared to the same period in the prior year. This was primarily attributable to higher payroll and related expenses.
Research and development for the three months ended September 30, 2017 remained relatively consistent with the same period in the prior year.
Depreciation for the three months ended September 30, 2017 remained relatively consistent with the same period in the prior year.
Amortization decreased by $6.8 million, or 28%, to $17.3 million for the three months ended September 30, 2017, as compared to the same period in the prior year. This was 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 both the valuation allowance for deferred tax assets. The income tax provision reflectedtotal number of units in our installed base and the average daily win per unit, particularly associated with a greater mix of premium units from our gaming operations revenues along with an effective income tax rateincreased customer base in our digital online gaming activities. In addition, we had an increase in the number of negative 20.0%machines sold from our gaming equipment revenues.
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,March 31, 2022, as compared to the same period in the prior year. This was primarily attributabledue to higher Gamescontributions that included: (i) an increase in both transaction and Payments revenues.
Games revenues increased by $7.2 million, or 5%, to $165.8 million fordollar volumes in base, new and renewed business from our financial access services revenues; (ii) contributions from the nine months ended September 30, 2017, as compared to the same period in the prior year. This was primarily related tonewly acquired Australian cash handling and financial payment solutions company, ecash; and (iii) 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 revenuesour kiosks.
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,March 31, 2022, 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 $7.7 million, or 17%51%, to $436.1approximately $22.8 million for the ninethree months ended September 30, 2017, as compared to the same period in the prior year. This was primarily related to the costs associated with the increase in cash access services volumes.
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,March 31, 2022, 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 decreasedrevenues increased by $2.4approximately $2.5 million, or 6%39%, to $34.8approximately $9.1 million for the ninethree months ended September 30, 2017,March 31, 2022, as compared to the same period in the prior year. This was primarily due to the additional variable costs associated with certain fixed assets being fully depreciated, partially offsetthe higher unit sales from our hardware revenues, as well as higher warranty expense from our check warranty solutions from our financial access services.
Amortization decreased by $18.8approximately $11.8 million, or 27%31%, to $52.1approximately $49.8 million for the ninethree months ended September 30, 2017,March 31, 2022, as compared to the same period in the prior year. This was primarily due to higher payroll and related expenses to support the growth of our operations, including higher employee travel cost resulting from more normalized operations of our customers in our Games and FinTech segments. In addition, the increase was associated with certainincreased legal expenses due to ongoing litigation and legal costs incurred in connection with acquisition activity during the quarter.
segment.
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 interest savings achieved from a refinancing of our prior credit facilities and unsecured note in the third quarter of 2021 that resulted in a lower amount of principal outstanding and a lower borrowing rate.
Games Revenues and Leased Units
The following tables includefactors described above, we had net income of approximately $31.5 million for the revenues from our Games segment andthree months ended March 31, 2022. We had net income of approximately $20.5 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
Estimates
For the three and nine months ended September 30, 2017, thereregistrant.
LIQUIDITY AND CAPITAL RESOURCES
10-Q.
|
| At September 30, |
|
| At December 31, |
|
| At March 31, | At December 31 | |||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 | 2021 | |||||||||||
Balance sheet data |
|
|
|
|
|
|
|
|
| Balance sheet data | ||||||||||
Total assets |
| $ | 1,425,605 |
|
| $ | 1,408,163 |
|
| Total assets | $ | 1,616,022 | $ | 1,635,650 | ||||||
Total long-term debt |
| $ | 1,138,871 |
|
| $ | 1,121,880 |
|
| |||||||||||
Total stockholders’ deficit |
| $ | (123,804 | ) |
| $ | (107,793 | ) |
| |||||||||||
| Total borrowings | Total borrowings | $ | 980,642 | $ | 981,525 | |||||||||||||||
| Total stockholders’ equity | Total stockholders’ equity | $ | 211,712 | $ | 174,500 | |||||||||||||||
Cash available |
|
|
|
|
|
|
|
|
| Cash available | ||||||||||
Cash and cash equivalents |
| $ | 108,471 |
|
| $ | 119,051 |
|
| Cash and cash equivalents | $ | 269,400 | $ | 302,009 | ||||||
Settlement receivables |
|
| 127,443 |
|
|
| 128,821 |
|
| Settlement receivables | 60,348 | 89,275 | ||||||||
Settlement liabilities |
|
| (197,494 | ) |
|
| (239,123 | ) |
| Settlement liabilities | (208,491) | (291,861) | ||||||||
Net cash position(1) |
|
| 38,420 |
|
|
| 8,749 |
|
| Net cash position(1) | 121,257 | 99,423 | ||||||||
Undrawn revolving credit facility |
|
| 35,000 |
|
|
| 50,000 |
|
| Undrawn revolving credit facility | 125,000 | 125,000 | ||||||||
Net cash available(1) |
| $ | 73,420 |
|
| $ | 58,749 |
|
| Net cash available(1) | $ | 246,257 | $ | 224,423 | ||||||
|
|
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 Revolvingsenior secured revolving credit facility to meet further funding requirements. We monitor the financial strength of 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 Facility was approximately $73.4 million and $58.7 million as of September 30, 2017 and December 31, 2016, respectively.
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 |
|
| Three Months Ended March 31, | $ Change | ||||||||||||||||
| 2022 | 2021 | 2022 vs 2021 | |||||||||||||||
| Cash flow activities | |||||||||||||||||
| Net cash provided by operating activities | $ | 5,274 | $ | 111,606 | $ | (106,332) | |||||||||||
| Net cash used in investing activities | (36,900) | (29,955) | (6,945) | ||||||||||||||
| Net cash (used in) provided by financing activities | (1,201) | 1,799 | (3,000) | ||||||||||||||
| Effect of exchange rates on cash and cash equivalents | 136 | (120) | 256 | ||||||||||||||
| Cash, cash equivalents and restricted cash | |||||||||||||||||
| Net (decrease) increase for the period | (32,691) | 83,330 | (116,021) | ||||||||||||||
| Balance, beginning of the period | 303,726 | 252,349 | 51,377 | ||||||||||||||
| Balance, end of the period | $ | 271,035 | $ | 335,679 | $ | (64,644) | |||||||||||
from our FinTech segment, partially offset by net income earned in our Games and FinTech segments.
FinTech segments.
We expect thatinformation regarding 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,other debt 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.,well 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 applicablerisk refer to loans under the New Revolving Credit Facility will be, at Everi Payments’ option, the base rate or the Eurodollar Rate (defined to be the London Interbank Offered Rate or a comparable or successor rate) (the “Eurodollar Rate”) plus,
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 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 September 30, 2017 and December 31, 2016.
Contractual Obligations
The following transactions have resulted in a change in
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 $104.5approxi
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 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 changeMarch 31, 2022
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 XBRL Taxonomy Extension Schema Document. XBRL Taxonomy Extension Calculation Linkbase Document. XBRL Taxonomy Extension Definition Linkbase Document. Description XBRL Taxonomy Extension Presentation Linkbase Document. Furnished herewith. (Date) (Registrant) By: /s/ Todd A. Valli Todd A. Valli Senior Vice President, Corporate Finance and Tax & Chief Accounting Officer (For the Registrant and as Principal Accounting Officer)EquityEquity Securities and Use of Proceeds. Period 1/1/22 - 1/31/22 4.3 $ 19.88 — — 2/1/22 - 2/28/22 4.6 $ 23.49 — — 3/1/22 - 3/31/22 9.4 $ 21.89 — — Total 18.3 $ 21.83 — — (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.None.
On May 4, 2022, our Board of Directors authorized and approved a new share repurchase program in an amount not to exceed $150 million pursuant to which we may purchase outstanding Company common stock in open market or privately negotiated transactions over a period of eighteen (18) months through November 4, 2023, in accordance with Company and regulatory policies and trading plans established in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934. The actual number of shares to be purchased will depend upon market conditions and is subject to available liquidity, general market and economic conditions, alternative uses for the capital and other factors. All shares purchased will be held in the Company’s treasury for possible future use. As of March 31, 2022, Everi had approximately 91.5 million shares issued and outstanding, net of 25.7 million shares held in the Company’s treasury. There is no minimum number of shares that the Company is required to repurchase, and the program may be suspended or discontinued at any time without prior notice. This new repurchase program supersedes and replaces, in its entirety, the previous share repurchase program.ExhibitsExhibit
NumberDescriptionExhibit Number Description 10.1* 31.1* 31.2* 32.1** 32.2**101.INS*XBRL Instance Document.101.SCH*101.CAL*101.DEF*101.LAB**101.LAB XBRL Taxonomy Extension Label Linkbase Document. 101.PRE**Filed herewith.*104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL (included as Exhibit 101). * Filed herewith. ** November 7, 2017May 10, 2022 EVERI HOLDINGS INC. 51