U.S. Markets closed
  • S&P 500

    +8.70 (+0.24%)
  • Dow 30

    +37.90 (+0.13%)
  • Nasdaq

    +111.44 (+0.92%)
  • Russell 2000

    +10.25 (+0.56%)
  • Crude Oil

    -0.18 (-0.39%)
  • Gold

    -23.10 (-1.28%)
  • Silver

    -0.81 (-3.44%)

    +0.0054 (+0.4548%)
  • 10-Yr Bond

    -0.0360 (-4.10%)
  • Vix

    -0.41 (-1.93%)

    -0.0044 (-0.3288%)

    -0.1800 (-0.1727%)

    +226.38 (+1.34%)
  • CMC Crypto 200

    -4.23 (-1.25%)
  • FTSE 100

    +4.65 (+0.07%)
  • Nikkei 225

    +107.40 (+0.40%)

Edited Transcript of EVRI.N earnings conference call or presentation 2-Jun-20 9:00pm GMT

·57 min read

Q1 2020 Everi Holdings Inc Earnings Call LAS VEGAS Aug 12, 2020 (Thomson StreetEvents) -- Edited Transcript of Everi Holdings Inc earnings conference call or presentation Tuesday, June 2, 2020 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Darren D. A. Simmons Everi Holdings Inc. - Executive VP & FinTech Business Leader * Dean A. Ehrlich Everi Holdings Inc. - Executive VP & Games Business Leader * Mark F. Labay Everi Holdings Inc. - Executive VP, CFO & Treasurer * Michael David Rumbolz Everi Holdings Inc. - CEO & Director * Randy L. Taylor Everi Holdings Inc. - President & COO * William H. Pfund Everi Holdings Inc. - VP of IR ================================================================================ Conference Call Participants ================================================================================ * Barry Jonathan Jonas Truist Securities, Inc., Research Division - Gaming Analyst * Brad J. Boyer Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst * Chad C. Beynon Macquarie Research - Head of US Consumer, SVP and Senior Analyst * David Brian Katz Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure * George Frederick Sutton Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst * John Kimbrough Davis Raymond James & Associates, Inc., Research Division - Research Analyst * Luis Ricardo Chinchilla Deutsche Bank AG, Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Hello, everyone. Thank you for standing by, and welcome to the Everi Holdings Inc. First Quarter 2020 Earnings Conference Call. (Operator Instructions) This discussion is being recorded today. And now I would like to turn the conference over to Bill Pfund, Vice President, Investor Relations. Please go ahead, sir. -------------------------------------------------------------------------------- William H. Pfund, Everi Holdings Inc. - VP of IR [2] -------------------------------------------------------------------------------- Thank you, James, and welcome, everyone. Let me begin by reminding everyone of the safe harbor disclaimer that covers today's call and webcast. Our call will contain forward-looking statements and assumptions, which involve risks and uncertainties that could cause actual results to differ materially from those discussed during our call. These risks and uncertainties include, but are not limited to, those contained in our earnings release today and other SEC filings, which are posted in the Investors section of our corporate website at everi.com. We do not intend and assume no obligation to update any forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which are made only as of today, June 2, 2020. In addition, we will refer to certain non-GAAP financial measures such as adjusted EBITDA, free cash flow, total net debt and total net debt leverage ratio. A description of each non-GAAP measure and a reconciliation to the most directly comparable GAAP measure can be found in our earnings release and related 8-K as well as within the Investors section on our website. This call is being webcast and recorded. A link to the webcast and replay of today's call can be found in the Investors section of our website. Joining me on the call today are Mike Rumbolz, our Chief Executive Officer; Randy Taylor, President and Chief Operating Officer; Mark Labay, Executive Vice President and Chief Financial Officer; Dean Ehrlich, our Games Business Leader; Darren Simmons, our FinTech Business Leader; and Harper Ko, General Counsel. We are on this call from separate locations. So if there is a technical glitch, I apologize in advance. Now it's my pleasure to turn the call over to Randy Taylor, who will also act as our moderator for today's call. -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [3] -------------------------------------------------------------------------------- Thank you, Bill. Good afternoon, everyone, and thank you for joining. Before discussing our first quarter results, we would like to extend our sympathies to those individuals in the gaming industry as well as those in communities around the globe who have been or continue to be impacted by the COVID-19 pandemic. In just 3 months since our last earnings call on March 2, the virus has tragically turned the world upside down. However, the first green shoots of revival are being seen in the gaming industry as well as in communities across the country. For today's call, we recognize you are probably less focused on our Q1 results, so we are going to change our normal call structure a little. Mark will not do a normal quarterly results comparison. Instead, I will cover some of the more relevant highlights in my prepared remarks. Our first quarter results reflect the impact of our customers shutting down across the country in mid-March. To better understand our trends in operating performance and the overall health of our business, we believe it is relevant to highlight certain portions of the company's operating performance during the first 2 months of the quarter. Overall, we had very strong performance in the first part of the quarter, like a Ferrari with the throttle wide open on an open stretch of road. In the first 2 months of the first quarter, consolidated revenue was up more than 20% year-over-year. In gaming operations, a year-over-year revenue increase of over 30% in the first 2 months helped drive an increase for the full quarter period. These results reflect the continued growth in our installed base and strong daily win per unit in the first 2 months. Premium units were a key element in driving the growth as they comprise 38% of our total installed base at March 31, 2020, compared to 22% at the same time last year. These higher-yielding games contributed to the 20% year-over-year increase in daily win per unit in the first 2 months. In our largest gaming market, Oklahoma, not only was our installed base up on a quarterly sequential basis, but daily win per unit actually increased more than 50% in the first 2 months of 2020 as compared to the prior year. We believe the strong performance of our games prior to our customers' casinos closing are going to be highly correlated to the relative performance we expect as these casinos begin to reopen. Given our diversification across the Games and FinTech businesses, we are not overly dependent on the sale of slot machines. In terms of overall unit sales, 2019 was a good year for the industry and for Everi as our percentage of total ship share increased, yet only 17% of our 2019 consolidated revenue came from gaming equipment sales. Even as we expect our customers will be in a capital conservation mode for the near term, we believe we are well positioned to gain our fair share of slot purchase budgets. Beginning of 2020, we launched our new curve, single-screen Flex cabinet that combines an attractive cabinet with proven game features and play mechanics. Early performance has been very encouraging, with us selling 147 units in the first quarter. The most recent Eilers & Krejcik Gaming performance reports that Flex quickly climbed to be the top-performing cabinet in the very large and competitive portrait-sized category, surpassing several other well-known offerings in this category. These are early results and reflect our initial units sold into the market. But combined with the feedback we've gotten from our customers, we are very encouraged as we look to the back half of this year and beyond. Having grown our ship share in each of the last 3 years, we are optimistic that with the early performance of the Flex cabinet and it's exciting differentiated content, we will perform well in the future on a relative basis as casinos continue to reopen and recover. In our FinTech segment, business was also very strong prior to the casino closures. For the first 2 months, total cash access transactions increased 17% year-over-year, while the total amount of dollars processed rose 19%. In addition to the same-store sales growth we were experiencing, these increases also reflect incremental revenue from new casino openings and competitive takeaways. Revenues from information services and others increased for the full quarter as we benefited from $5.2 million of revenue from software sales and the recurring software license support for player loyalty and marketing products as compared to $0.5 million in the prior year following our initial entry into the player loyalty business in March of 2019. We continue to believe the player loyalty business is a great business, and we expect it will be a meaningful contributor to our performance in both the near and longer term. Even during the period when casinos were closed, we were selling and installing player loyalty equipment at some customers' facilities as they prepare to reopen with our self-service, contactless kiosks and marketing support. We also signed the cash access agreements with both new and existing customers as casino operators continue to appreciate the real value that our FinTech product and service solutions can bring as they reopen their facilities. As the COVID-19 pandemic began to impact the gaming industry, we took rapid action to focus on what we could control, including: one, making sure we quickly took precautionary safety measures to protect our employees; aggressively reduced our cash burn rate; and three, taking steps to increase our liquidity cushion to withstand a potentially prolonged period of minimal industry activity. As hard as the decision was to make, we furloughed 80% of our workforce while continuing to cover their health care plans and associated costs. We also created and funded an employee support and relief plan to provide access to additional emergency funds to our furloughed team members. To date, we have dispersed relief payments to more than 700 employees. Most of our remaining employees have been working remotely. Additionally, led by Mike and the Board of Directors who reduced their salaries to 0, and the executive team, which reduced their salaries by approximately 70%, we implemented company-wide temporary pay reductions and eliminated nonessential travel and other expenses. As it became apparent that all casinos would eventually close for some period of time, we also deferred all nonessential CapEx. These austerity moves allowed us to reduce payroll to approximately $2 million per month, and together with overhead costs for rent, utilities and other required operating expenses, yielded a cash burn rate for operating costs of approximately $5 million per month. In addition, average cash interest runs another $5 million to $6 million per month, which includes our semiannual bond payments as well as the interest on our secured borrowings. We improved our liquidity position by drawing down our $35 million revolving credit line. And in April, we borrowed an incremental $125 million term loan. Concurrent with completing this new borrowing, we also amended our credit facility to eliminate the financial maintenance covenant measures through the first quarter of 2021 and reset the go-forward leverage targets. At the end of May, our net cash position was approximately $125 million. I would emphasize that this is just an estimate of our operating cash position, 2/3 of the way through the quarter and not an audited number. In total, we believe as a result of our decisive and rapid actions, we are in a solid position to be able to fully support our customers as they reopen their facilities while maintaining maximum flexibility to weather any short-term sluggishness in recovery. As casinos reopen across the country and assuming there is no major second wave of the pandemic, we expect the second quarter will be the low watermark for revenue and cash flow. Based on the reopening schedules we have seen, we believe we will be on pace to achieve positive adjusted EBITDA in the third quarter. More importantly, as recovery continues, we should be poised to generate positive free cash flow in the fourth quarter. Now I'd like to turn the call over to Mike so he can share his perspective on the industry and how Everi is positioned to regain the momentum we had prior to the pandemic. Mike? -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [4] -------------------------------------------------------------------------------- Well, thanks, Randy, and good afternoon, everyone. I've been in the gaming industry now for more than 4 years. And during that time, I've held a number of different positions and had a wide range of business responsibilities. But while having seen my share of tragic and recessionary conditions, I can honestly say to you that I have never experienced anything close to the impact from this pandemic. Faced with this extraordinary challenge, it is critical that we here at Everi embrace this time as an opportunity to be a catalyst for change. Alongside our casino customers, we're reviewing everything that we do with a critical eye toward planning and adjusting both our strategies and processes to deliver our products and services with excellence under this new normal. As Randy mentioned, we acted swiftly to protect our employees and our company, making sure that we were in the best possible position to support our customers when and as the industry begins to recover. We realized early on that to be able to support our customers and their patrons, we first have to make sure that our employees are safe. Even as we took significant actions to reduce costs and capital spending, we also furthered the progress that we were making in our innovation and development projects that align with the new normal. We anticipated that there would be a demand for new solutions that are contactless, cashless and that supports social distancing. As an example, our teams continue to work on major portions of our digital neighborhood. As a result, today, we are in active discussions with several customers about our digital neighborhood product offerings, including a core digital mobile wallet that features cashless and contactless benefits. Additionally, our existing QuikTicket product allows players to insert their debit card into one of our integrated kiosks and receive a ticket that can be directly inserted into their favorite slot machine, enabling them to bypass any handling of cash. Similar to our player loyalty solutions, we are seeing increased interest from operators for QuikTicket as a cashless, self-service option for their casino floors. Now these two solutions as well as additional functionality that we've added to our self-service kiosks, including player loyalty programs, helped our customers to address the expected desire of many players to limit face-to-face interactions. We have existing products that can provide real-time solutions for today's environment by eliminating the need for players to stand in line at a casino cage or engage with players club employees to sign up for an operator's loyalty programs. Of course, a key element of a truly successful and sustainable solution is that it supports consumer choice. We give the casino patron an opportunity to have a digital experience, but also continue to provide ticket and cash solutions for players who still prefer those options. Enabling patron choice wherever, whenever and however they want leads to success in our industry. Whether it's cash or cashless, video slots or spinning real slots, the patron always welcomes having a choice in how and what they do on a casino floor. Everi is in an excellent position to help our customers deliver the best possible array of choices for their guests. And at the same time, these products enable cost-effective integration across both our consumer-facing products and our employee-facing back-of-house products. Now let me share some additional color regarding our early performance as our customers restart their operations. Today, based on the American Gaming Association reports and our own estimates, approximately 32% of U.S. casinos have reopened. Importantly, as doors reopened, players were eager to enter and enjoy the entertainment options on their casino's floor. Now while it is still very early, let me say that again, it's very early, our initial reports indicate that we are generating average daily win on most of our operating slot products that is exceeding pre-COVID levels. Additionally, the number and value of cash access transactions that we are processing are also initially exceeding pre-COVID levels in newly reopened jurisdictions. Now this is great news. We believe that as more casinos open, this news will become tempered and cash access transactions will trend closer to prior year levels. Going forward, we will continue to invest in innovation and development. In addition to the heightened interest that we're seeing for our forward-thinking FinTech solutions that I already mentioned, our game studios still have a pipeline of exciting new game content that we expect to launch in the coming months. These new games will augment our already strong performing game themes that are in the market today. Now as Randy noted, we borrowed an incremental $125 million to provide an extra cushion for our liquidity so the company could endure even the most negative of scenarios. Now while those outcomes look less and less likely as more and more casinos reopen and stay open across the country, we appreciate having that liquidity. We view this incremental borrowing as a temporary bump in the road to the success that we have consistently demonstrated in reducing our total leverage. This prior success gives me great confidence that we will regain our momentum and generate a steady stream of strong free cash flow and, once again, begin to reduce our net leverage in the near future. Now with that, I'd like to turn the call back to the operator for your questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And we'll take our first question today from Brad Boyer with Stifel. -------------------------------------------------------------------------------- Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [2] -------------------------------------------------------------------------------- Yes. First question for me is just around breakeven levels. I know a lot of your peers have sort of provided this level of detail, and it's pretty helpful for us. I also appreciate that you guys have sort of dramatically different gross margin profiles across your businesses, so it might be a little bit harder to tease out. But can you give us a sense of what level of, say, prior period revenue you guys need to achieve to get back to breakeven EBITDA as you sort of bring the operation back online here? -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [3] -------------------------------------------------------------------------------- Yes. We think our CFO should probably address that. Mark? -------------------------------------------------------------------------------- Mark F. Labay, Everi Holdings Inc. - Executive VP, CFO & Treasurer [4] -------------------------------------------------------------------------------- Thanks, Mike. I think you hit on the head with our margin profile and how our revenue streams are a little different. Obviously, our cash access and gaming operations revenues, very high-margin business. And again, with the growth we experienced in 2019, I'm not sure that the revenue number is good of a metric to look at. So let me try to go about it in a little different way and focus you on kind of where our spend is and how we kind of view the spend coming here. Looking at our cash interest on our debt, that's kind of the easy part. With current rates, we're expecting about $65 million in annualized cash interest costs. And with business returning, the ATM vault cash interest was probably another $3 million to $5 million on top of that. So our total cash interest, probably in the $70 million range for -- on an annualized basis. Now as you kind of get into expenses, it gets a little bit more challenging, as Randy kind of highlighted in his prepared comments. What you'll see as we've been ramping up our employees to help support our customers reopening. So you're seeing more and more of the employee base coming back to work and more of the costs we're incurring to support our customers as that goes. So I really kind of focus you more on Q3. In Q3, we said we're going to be EBITDA positive. And this kind of assumes that most casinos will open at the start of the third quarter in our estimation, and we'll no longer have any employees remaining on furlough at that point. With that as a backdrop, and excluding some of the direct costs, if you will, related to any equipment sales we have, the rest of our expense profile, we kind of think probably falls in the $35 million to $40 million range for the third quarter. And as we move into Q4, this is where we expect us to start getting more into the free cash flow positive at that point and still remain EBITDA positive. This would assume that all the rest of the casinos have reopened in some fashion and that gaming revenues from the casinos that have been opening are ramping up a little more. So again, our employee base is full at that point. I think we kind of fall in a similar range, probably at the higher end of that range, with probably a couple of million dollars on top of that. So hopefully, that kind of frames it out for you, but... -------------------------------------------------------------------------------- Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [5] -------------------------------------------------------------------------------- Yes, that's helpful. Second question is just around cashless. I mean there's a lot of -- you guys provided a lot of good color on the call. Just curious if you could sort of talk about the appetite amongst regulators today. And I appreciate that it's still early, but with regard to sort of fully embracing cashless technology, any thoughts you could provide there? -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [6] -------------------------------------------------------------------------------- Yes. I think -- yes, Brad, this is Mike. We're seeing receptiveness from commercial gaming regulators. We've had, I think, receptiveness all along from travel gaming regulators. And as we go forward, I think the regulatory systems in virtually every jurisdiction are trying to be as helpful as possible to allow the paper in the casinos to feel safe. And if that includes contactless or cashless solutions, they're willing to take those into their laboratories and give them a quick review for us before allowing them out on the floor. So I'm very heartened by the regulatory environment that we're seeing today. -------------------------------------------------------------------------------- Brad J. Boyer, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [7] -------------------------------------------------------------------------------- Okay. And then lastly, I don't know if Dean is on the line, who wants to answer this, or Mike or Randy. But I think we all appreciate the fact that the landscape is going to change a little bit on the other side of this, whether it's some capacity limitations in the near term, impaired operator balance sheets, capital budgets, what have you. But strategically, how do you guys -- or how are you guys positioning the slot business here to sort of win in this new sort of normal that we're going to be facing here over the next, who knows how long, but certainly here in the near term? And that's all for me. -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [8] -------------------------------------------------------------------------------- Thanks, Brad. Look, Dean is on the line, and so I'll turn it over to him since you directed it there, and Dean can reply. -------------------------------------------------------------------------------- Dean A. Ehrlich, Everi Holdings Inc. - Executive VP & Games Business Leader [9] -------------------------------------------------------------------------------- Okay. Thanks, Brad, for the question. I believe it's about product, and the bottom line is, is we continue to not only have a tremendous amount of success from the product that we have launched and a couple of new hardware form factors before the pandemic took place, we think we're very well poised to continue on through this with not only what has been approved but also what's in the pipeline, and to continue on in 2021. And that's been the major preparation here, is to make sure that as our customers come out of their respective situations and all very different, it's amazing that some are going to try to operate as close to business as usual with limiting players coming in versus others that are going to turn off machines and so on and so forth. At the end of the day, the key focus from our standpoint is to make sure that we can provide the best product to them and that it makes sense from their standpoint when they're ready to invest and get the greatest ROI on the best product that we have available. So to me, it's -- the product is still going to be a key important component. And I think with the current trajectory that we have, we're poised very well coming out of this. -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [10] -------------------------------------------------------------------------------- And Brad, this is Randy. I will just tackle a couple of things. Things is that -- as in my opening remarks, I mean, we now have 38% of our footprint being our premium product, and that's really what had been strong at the end of '19 and strong into '20. And again, talked about sales being, look, not a big portion of our revenue. So I just think we're very well positioned going forward as we come out of this because I think, or we think, what will stay on the floor is going to be the best-performing products. And I think we've shown that those premium products that the Games team under Dean have produced are doing really well. So again, don't know where everything will shake out, but I think we're well positioned. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Next, we'll hear from David Katz with Jefferies. -------------------------------------------------------------------------------- David Brian Katz, Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure [12] -------------------------------------------------------------------------------- I wanted to focus on the FinTech segment because I will admit as -- since this event is an equalizer for all of us, that I had not contemplated sort of what this business looks like, what it does, the puts and takes in a period of time that, at least for the second quarter or so, is mostly shut down. Can you just talk me through the different pieces of it and their ability to earn and cost for the first couple of months of the quarter, anyway, that are effectively shut down? And I think that would be really helpful to start out, please. -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [13] -------------------------------------------------------------------------------- David, this is Randy. I'm -- to make sure I'm addressing your question. I think from the FinTech business, the great piece of that business is that immediately as casinos start to open up, we start earning revenue on transacting business. Now during the shutdown, we don't -- we have -- the major cost is payroll, and we talked about what we did from a furlough standpoint. But as the casinos come back on board, we will bring people on board. But it's a business that -- on day 1, as transactions start to take place, we're going to generate revenue. And then we need -- we add on the loyalty product that we have that, as I said in the remarks, is that -- look, we've had interest in that, even when the casinos were shut down. So I want to make sure I'm addressing your question appropriately. -------------------------------------------------------------------------------- David Brian Katz, Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure [14] -------------------------------------------------------------------------------- It -- the question is probably simpler than you think, only from the perspective that are -- just understanding any -- the ability to earn any revenue at all. And obviously, the costs are self-evident during the periods of time that things are shut down. In other words, does its revenue become entirely 0 for every day that it's shut down, I suppose, is what I'm asking. -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [15] -------------------------------------------------------------------------------- Okay. Well, I would say, you would think that would be yes, although we have -- and I would just say it's relatively yes, other than we were still transacting some business in some locations. I'll give you some examples. There may have been a gas station that was connected to a casino that still had businesses very small, David. So once we're -- their casinos are shut down, there's no cash access or check transactions. But I would say we have still looked at selling kiosks because, again, the casinos want to reopen. And so they were buying kiosks as well as loyalty. But from a cash access standpoint, you're exactly right. With them closed down, revenue goes to basically 0, correct. -------------------------------------------------------------------------------- Darren D. A. Simmons, Everi Holdings Inc. - Executive VP & FinTech Business Leader [16] -------------------------------------------------------------------------------- Randy, this is Darren... -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [17] -------------------------------------------------------------------------------- And I would just add to... -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [18] -------------------------------------------------------------------------------- Darren, go ahead. You got it. -------------------------------------------------------------------------------- Darren D. A. Simmons, Everi Holdings Inc. - Executive VP & FinTech Business Leader [19] -------------------------------------------------------------------------------- Yes. I think, Randy, just to add to that. I mean I think we were still supporting our maintenance and software support agreements, which we're billing that -- customers were still paying because, obviously, they all expect to continue business and reopen. So they want that support when they reopen. So we did have some revenues there. -------------------------------------------------------------------------------- David Brian Katz, Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure [20] -------------------------------------------------------------------------------- Okay. Appreciate that. And then on the gaming side, I wanted to ask what kind of an order backlog for sale or placements did you have on the day before we found out that things were going to start shutting down? And have you had any conversations about what portions of that backlog could be revisited or resurrected now that we have some visibility into things opening again? -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [21] -------------------------------------------------------------------------------- Sure. Again, maybe I'll -- I'll turn it over to Dean because he's probably a little closer to what the backlog was going into the end of the quarter. As you know, that March is -- those last 15 days of March are important to us and had a big impact. But I'll turn it over to Dean and go from there. -------------------------------------------------------------------------------- Dean A. Ehrlich, Everi Holdings Inc. - Executive VP & Games Business Leader [22] -------------------------------------------------------------------------------- David, so the great news on it is that we didn't -- the backlog, without going into exact numbers, was pretty robust before all this started happening. And the good news is there hasn't been a lot of cancellations or a lot of returns. And basically, what's happened is it's been a postponement. And as people -- as our customers turn the lights back on and seeing the levels is -- that predicates on how quick that the backlog is fortified. So surprisingly, it hasn't been -- you would think it would be the other direction where there'll be a ton of cancellations, returns of operating unit products and so forth, truly has not been the case. To a point -- to me, personally, it has been pretty surprising. So we're very encouraged from that side. Then what it shows is, like how I answered Brad's question before, is that our products have been performing extraordinary well, and there's a great demand to get it on at the time that the customer is comfortable towards bringing it on to their property. So they want them still. It's just a matter of when, not if. I don't know if they answered you direct what's the backlog number, size of that, but I'm not comfortable giving those direct numbers out as well. So if Randy wants to do it, that's on him. But it's not going to come from me, so... -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [23] -------------------------------------------------------------------------------- Yes. I think he answered it the way I would, which is, look, we had a strong backlog still, David, and it, as you know, shut down immediately. And I think we're still very optimistic about the orders that we had out there and whether we'll ultimately fulfill those. Mike? -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [24] -------------------------------------------------------------------------------- We've also seen -- we've seen a large increase in our premium units going into March, and we have yet to see a full quarter of those units' performance. So we're anticipating that as well as we come out of this. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- Next, we'll hear from Barry Jonas with SunTrust. -------------------------------------------------------------------------------- Barry Jonathan Jonas, Truist Securities, Inc., Research Division - Gaming Analyst [26] -------------------------------------------------------------------------------- I wanted to start on FinTech. With all the discussions around cashless gaming, what do you think is a realistic mix of cashless versus cash on casino floors at some point in the future? And, I guess, the second part to that is could you see the -- your FinTech business maybe moving to more support remote gaming virtual outside of, say, traditional land-based casinos where I think the focus is now? -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [27] -------------------------------------------------------------------------------- Okay. Barry, good to see you or hear from you, and I'll let Darren start that question. -------------------------------------------------------------------------------- Darren D. A. Simmons, Everi Holdings Inc. - Executive VP & FinTech Business Leader [28] -------------------------------------------------------------------------------- So on your first question on sort of what you would anticipate mix of cash versus cashless, I still think it's early days with what I would say is kind of the digital transformation of customers' operations. What I would say is our approach has been release products that help them achieve cash flows quicker. And we've talked about QuikTicket. And that's a real simple, low lift, cost-effective way to help our casino go cashless. Now if you want to talk about the digital experience, I think that -- more longer term, is that does require some investment. Now we pivoted a little bit with our strategy around our mobile wallet to provide something that is simple, easy for operators to have as a part of their offering to their patrons, allows customers to download the app, complete their profiles, link it with their player card and add their accounts to it and basically perform all of these transactions and do it mobilely, and through our kiosks, access a ticket and be cashless. So low -- kind of low tech, but helping achieve that. There are some longer-term sort of transformational journeys that operators are going to with larger integrations with some of the systems and the wagering accounts, which we're a part of and what we've been working on with -- to Mike's point, is in travel customers. But I think it's early days as to what that will be. We've got some data around sort of what our QuikTicket transactions are. But I think it's still early on in the process. Other industries are more mature within the retail world, and you've seen a growth in that over the past few months because of kind of this new world order we have. But I think it's early to tell, and I think we'll see in the coming months. Your second question around land-based versus, I guess, online. Yes, I mean, I would say that you could probably expect there to be an increase in online. But I would say you're not going to be able to replace that land-based experience that patrons love and with all the amenities that properties offer. So I think you'll see a mix in terms of that as those offerings increase in the different states and with different operators. -------------------------------------------------------------------------------- Barry Jonathan Jonas, Truist Securities, Inc., Research Division - Gaming Analyst [29] -------------------------------------------------------------------------------- Sorry, Darren, I think what I was saying in the second question was more could we see Everi sort of change its strategy to somewhat address some of those casinos and -- offerings from a FinTech perspective? -------------------------------------------------------------------------------- Darren D. A. Simmons, Everi Holdings Inc. - Executive VP & FinTech Business Leader [30] -------------------------------------------------------------------------------- Look -- sure, yes. Absolutely. We do have the ability to be able to provide that from an online and pure mobile digital experience standpoint. So absolutely, we see growth with that, yes. -------------------------------------------------------------------------------- Barry Jonathan Jonas, Truist Securities, Inc., Research Division - Gaming Analyst [31] -------------------------------------------------------------------------------- Great. And then maybe more for Mike. In the past, you've talked about the Games and FinTech business not necessarily having a need to be together. Does the events over the past few months changed your perspective on this at all? -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [32] -------------------------------------------------------------------------------- That's a great question, Barry. Thanks. I don't know that it has changed my opinion with respect to whether they have to be together. I can tell you that -- and this is something I've said for a long time now, they are highly complementary of one another and continue to be. And I think if anything, this pandemic is proving the need for casinos to be able to deal with their vendors in a multitude of different places on their casino floor. And in our case, it's initially at our kiosks and our games. But ultimately, it's a matter of smartphones enabled by our FinTech business being able to address our machines directly on the floor. And that's a coalescing that's going to occur over the next year to 2 years. -------------------------------------------------------------------------------- Operator [33] -------------------------------------------------------------------------------- We'll now hear from John Davis with Raymond James. -------------------------------------------------------------------------------- John Kimbrough Davis, Raymond James & Associates, Inc., Research Division - Research Analyst [34] -------------------------------------------------------------------------------- Appreciate the commentary on the kind of the trend of the casinos that have opened versus pre-COVID. But wondered if we can maybe dig in a little bit there. I think a couple of properties have been open for a couple of weeks now. Maybe just talk a little bit about what that opening weekend or opening week look like and kind of where we are today? Have you seen it start to trail off yet, maybe as a percentage of what pre-COVID volumes were? What was that opening this weekend? And kind of where are we today? Just how has that trended over the first couple of weeks, realizing it's still early? -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [35] -------------------------------------------------------------------------------- Yes, John. Look, I think Mike said it, where he said again, this is early, and this is early. But right now, what we're seeing in the casinos that have opened that are either a FinTech or a Games that have our lease games, we're seeing that our revenues are equal to or sometimes better than they were pre-COVID. Now -- and I think we think there's a supply issue there. We think there's some pent-up demand there. But even in -- I'll give an example of one of our larger customers. We're seeing that even though they may have the games either spaced out or they may have a portion of our games turned off just because of their social distancing, still we're at the same type of revenue we were having with all the units on that floor. On the cash access side, it's similar. Even though they may have restrictions on how many people they're letting in the door, we're seeing -- what we look at, John, is cash at the floor. And I -- Darren continues to run reports that show right now, the cash at the floor is consistent with either the same period of the prior year because we try to match it at the same period because you can get some differences with holidays or pre-COVID. Now I think we still want to caution that we just don't know how long that will last. And I guess, I think long term, we think it's going to come down just because there'll be more supply. But it's very encouraging right now because, I guess, it's better than the alternative we were talking about. So far, very encouraged at both how our Games are performing and how our cash access -- these FinTech products from the standpoint of just volume of transactions. -------------------------------------------------------------------------------- John Kimbrough Davis, Raymond James & Associates, Inc., Research Division - Research Analyst [36] -------------------------------------------------------------------------------- Okay. But you haven't seen like an opening weekend where it shoots up a lot and immediately falls off. It's been -- I know it's early, but it's been fairly consistent with... -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [37] -------------------------------------------------------------------------------- No, it's been fairly steady, John. I mean -- yes, it's been fairly steady, John. To your point, though, I mean, obviously Memorial Day was a strong weekend. There's no doubt about it, but it would be strong in normal times. And the fact that people were able to produce the kind of gaming revenue that they did with only 50% of the positions, I think, speaks well to that demand curve continuing. -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [38] -------------------------------------------------------------------------------- And John, we compare it to a -- as I say, in some cases, we would have either compared it to prior year Memorial Day weekend or just a 7-day period that was exclusive of a holiday. So -- and we try to line it up as best we can, and again, taking out Memorial Day weekend pass that. And we're still seeing that our volumes and our daily win per unit is slightly above what it was. -------------------------------------------------------------------------------- John Kimbrough Davis, Raymond James & Associates, Inc., Research Division - Research Analyst [39] -------------------------------------------------------------------------------- Okay. And then on the gaming side, specifically on the units, if those casino were to have 50% -- do you have that information, like if the casino were to shut down half of their machines because of social distancing, what does that kind of look like for you? I would assume, given the performance of your machines, that sort of they would shut down less than kind of the floor average. I don't know if you have any stats on different properties or just kind of a ballpark idea of if they do shut down 30% of the machines, only 20% of your machines are shut down. Any kind of commentary there that kind of speak to your performance? -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [40] -------------------------------------------------------------------------------- Yes. I was trying to get there, and maybe I didn't come across. But look, the limited data that we have, we've been at a location where we had a portion of ours shut down. It wasn't 50%, but let's pick a number, 25% or so, or 30% or so. And still, based on the units that remained, we were again, on average, at -- equal to that same daily win per unit. So clearly, they're units that are staying on, were performing better, right? And again, I also think it has a lot to do with the premium units that we have. And our expectation is that the casino will probably dark those machines of ours that are maybe a little bit older, but they may be clearly keeping up the premium games, which is really helping us. So again, it's very early, but that's what we've seen. -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [41] -------------------------------------------------------------------------------- And I think you hit the nail on the head, John. It's all about performance for the operator. If our machines are performing better, they're going to want those to stay lit while they darken somebody else's machines or machines that aren't producing as well. -------------------------------------------------------------------------------- John Kimbrough Davis, Raymond James & Associates, Inc., Research Division - Research Analyst [42] -------------------------------------------------------------------------------- Okay. And then last one for me -- yes, go ahead. -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [43] -------------------------------------------------------------------------------- Also, John, some of our premium units also are configured in pods, which also lend itself to appropriate social distancing. So those, by default, will also all stay on. So we're highly encouraging as much of our footprint, especially with respect to 5527 with Vault or Shark Week or Smokin' Hot Stuff Wicked Wheel, that if they bank in a pod configuration, they can keep 100% of those on, and that's really helped us out as well. -------------------------------------------------------------------------------- John Kimbrough Davis, Raymond James & Associates, Inc., Research Division - Research Analyst [44] -------------------------------------------------------------------------------- Okay. And then last one for me. I'd be remiss not to touch on cash flows gaining, and not to be a dead horse here, but maybe taking a little bit different angle. Mike, how close are we to being able to implement that from a technology standpoint and a regulatory standpoint? And I think regulatory wise, I'm less concerned. But just from a technology standpoint, how close are we? Maybe any commentary on how the economics would be similar or different to your current cash access business? And then finally, who else can actually provide this service? Or are you kind of the only game in town at this point on the cash access side of cash flows gaining? -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [45] -------------------------------------------------------------------------------- Well, I'm going to -- yes, I'm going to turn some of this over to Darren. We're -- I don't think we've ever expressed the transaction economics between us and our customers when it comes to QuikTicket or our digital neighborhood or our core digital wallet. But I'll leave that for Darren to dance around or decide if he wants to give you an answer on it. But I will say, John, we have QuikTicket out there today, and QuikTicket today does not require anyone to touch cash. There's -- so it is already a cashless product on the floors of casinos in North America. And during the closure, we had customers that had been looking at the product that now want it, because they understand the power of being cashless, both in the efficiencies of their operations, but also in addressing customers' concerns about touching cash and what that may end up with in terms of infections or germs or bacteria or whatever. But I would say we're as close as the third quarter to the first iteration of a QuikTicket that is tied to your accounts, and I'll let Darren go into that with you a bit more. And probably not much behind that will be -- he'll be talking about the digital wallet aspect of QuikTicket as well. So Darren, do you want to address some of that? -------------------------------------------------------------------------------- Darren D. A. Simmons, Everi Holdings Inc. - Executive VP & FinTech Business Leader [46] -------------------------------------------------------------------------------- Yes. I think, to Mike's point around QuikTicket, I mean, what's great is that the customers that have opened the doors that already have current implementations of QuikTicket, we've actually seen increase in that transaction type. So more people are selecting that as an option in terms of how they're getting their funds to play. So again, it's a cashless transaction, simple, easy. They understand it. It's low tech. It's using technology and using an infrastructure that they are familiar with and feel good about today. So your question around pure cashless, and I think you may be thinking more mobile and thinking more maybe going direct from mobile down to a game, I think, again, that's a more transformational journey that we've been working on with some other customers, and again, extending not only to the gaming floor, but also into retail areas. And those integrations with the systems and other third parties are a little more involved. And so well -- again, we pivoted a little bit of our approach to -- just to provide a simple mobile digital wallet application that they can consume now that doesn't have any of these sort of regulatory integration concerns to sort of facilitate, again having transactions completed where somebody doesn't have to go to a cage or reduce that whole, I guess, social interaction and support that the new protocol that the operators are implementing. So we try to just look at, look, what do we have now that we can facilitate this. And some of those other sort of integrated solutions with other third-party and system providers and whatnot, those are a little longer pole in the tent because they do have regulatory implications. But to Mike's point, the regulators are supporting these and trying to fast track those. But I think those are just a little longer pole in the tent because they do require a little bit more work, and especially when you want to look purely integrating those wagering account systems to actually a funding wallet like we have. And they're very complementary products and they're compatible, and we're working with these providers to be able to implement that with customers. So I think it's early days yet, but I would see what may have been a kind of a 3 or 5-year sort of term may. To Mike's point, we would probably see these in the next couple of quarters start to get rolled out, and I think more in earnest in terms of investment from operators. -------------------------------------------------------------------------------- John Kimbrough Davis, Raymond James & Associates, Inc., Research Division - Research Analyst [47] -------------------------------------------------------------------------------- Okay. But, like, the advantage there is the money transmitter license. And to my knowledge, I don't think any of your competitors on the cash access side have that ability. So chance to be the first to market here. Or are any of your competitors kind of working on this or could offer similar product? -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [48] -------------------------------------------------------------------------------- Yes, John, to you point... -------------------------------------------------------------------------------- Darren D. A. Simmons, Everi Holdings Inc. - Executive VP & FinTech Business Leader [49] -------------------------------------------------------------------------------- Yes, I think, I could give a few comments -- sorry what we got back from a customer was -- I have all of your solutions today. And I guess the beauty of it is what we are offering really is based within the existing infrastructure that we provide them. So all the settlement of funding that we provide today, all the reporting, all the KYC, all the AML and all those responsible gaming support that we provide is levered in this. So it's a low lift for the operator to be able to consume this with their own staff because they're using all the existing tools that they have that support their business. And then from a patron standpoint, again, you're kind of leveraging sort of an existing relationship they have with us being a service provider. And so I think our ability to get adoption on both sides because, again, the operator needs to adopt it with their teams and the patrons need to adopt it. So we're in a really, really good place to be able to be in a position to deliver this. -------------------------------------------------------------------------------- Operator [50] -------------------------------------------------------------------------------- Chad Beynon with Macquarie has our next question. -------------------------------------------------------------------------------- Chad C. Beynon, Macquarie Research - Head of US Consumer, SVP and Senior Analyst [51] -------------------------------------------------------------------------------- Mark, on your financial model response, which was helpful, I know you and Randy both noted 3Q positive free cash flow. So I wanted to ask about, I guess, the missing piece that nobody has addressed here, I guess, near-term and then medium term, and that's CapEx, which you've noted you've eliminated nonessential CapEx. But firstly, on the third quarter, should we assume that, that positive free cash flow assumes, I guess, below average normal CapEx and then bringing it back to a bigger picture as things recover following your debt raise, with a focus on deleveraging? I know you've spent over $100 million in CapEx the past couple of years, and that's what you guided back in March. Does that still make sense? Or is that something that, obviously, you'll address after casinos reopen? -------------------------------------------------------------------------------- Mark F. Labay, Everi Holdings Inc. - Executive VP, CFO & Treasurer [52] -------------------------------------------------------------------------------- Yes. Chad, let me first correct you. I said, I think we were -- what we tried to convey, and hopefully you heard this, was Q3 will be EBITDA positive, Q4 will be EBITDA and cash flow positive -- free cash flow positive. I suspect Q3, just with the ramp-up and where we are, we probably are not going to be free cash flow positive at this point with the numbers I framed out, $35 million to $40 million of total expenses. And that -- again, that's really the cost of revenue on the gaming ops side. That's my OpEx and that's my R&D expense, just so we're very clear on what I was accumulating altogether in terms of spending of how that works. I think we end up being not free cash flow positive at that point. Now to your core of your question, which is CapEx, the great thing is we control the spend and we have a lot of optionality in how the spend goes. So depending on how our customers return and their needs, we can certainly pump up the CapEx to support that. But I think you're kind of right on that Q1, we spent $22 million as we fill the pipeline of demand for some of our premium units, had some really nice growth in the premium units. And we still have units -- unit demand for the premium unit growth coming out of this. So we'll make some smart choices in where we deploy that capital to and manage the CapEx numbers kind of relative to our casino customers' operations at that point. So to answer your question even more specifically, no, I don't think it's $114 million to $120 million. But it's still a little early to see right now where we shake out. I think looking at Q1 as a guide, $22 million, I think, you'll probably be 1/3, at least, reduced of where we were, if not more, just depending on how the flow of customer equipment really goes on there. -------------------------------------------------------------------------------- Chad C. Beynon, Macquarie Research - Head of US Consumer, SVP and Senior Analyst [53] -------------------------------------------------------------------------------- Okay. Perfect. My second question is a hypothetical, I guess, for operator -- for CFOs who are purchasing your slots in your FinTech products. So I think we're all expecting the second quarter to be extremely nominal for everybody. But as there's a budget for these CFOs and slot managers in the back half of the year, I know you've talked about potentially selling some kiosks in the FinTech business, which certainly drive a lot of efficiencies and, hopefully, higher revenues for your partners. Do you think that when CapEx budgets come back into light, the kiosk purchases could actually move up in the stack order? Or do you think they'll be focused on just replenishing their slots, and those could actually get pushed back into 2021? -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [54] -------------------------------------------------------------------------------- Chad, this is Randy. I'll throw one other item out there. I think the interesting thing on the kiosk, as I think what we're really focusing on, is the player loyalty. That usually kind of falls into marketing budget. And so it kind of, at least in our experience, has been -- there's been some extra dollars that I actually think, and we'll see who's right here, is that casinos will want to make sure they can get customers in and -- as much contactless as they can, which means that they would look to buy our enrollment kiosk, which allows them to get their card without going to the players club booth and then be able to get whatever promotions are going on. So if what happened during the shutdown has any indication -- and again, we were selling and installing our player loyalty and kiosk during the shutdown. And so we feel pretty comfortable that, that should continue. At what level? Hard to say. And even our standard -- I'll say, our fully integrated kiosk, again, if a casino wants to reduce the amount of -- they want to have QuikTicket and they want to have charity modules and other things that can be more efficient, they're still interested in buying the fully integrated kiosk. Because as we talked before, this whole pandemic, we felt and still believe we were in somewhat of a refresh cycle with those kiosks. So some of them are just getting old out there. Now will they buy as many? Don't know. Will they buy them this year or maybe push them to next year? Don't know. But we do think that there's still some CapEx that they're going to have to spend just -- my guess is they're going to want extended -- more extended payment terms, try to make it over a longer period of time than it is they want to not do it at all. -------------------------------------------------------------------------------- Operator [55] -------------------------------------------------------------------------------- Our last question will come from Ricardo Chinchilla with Deutsche Bank. -------------------------------------------------------------------------------- Luis Ricardo Chinchilla, Deutsche Bank AG, Research Division - Research Analyst [56] -------------------------------------------------------------------------------- Quick one for me. In terms of your installed base, I mean, there's always that some of the operators that get into trouble, they might be reducing some of the placements. Could you please remind us of how much of your installed base is currently protected under the placement fees? And how do you guys are thinking about the installed base now versus the end of the year? Do you guys envision it to shrink? Do you guys think it will be likely stable? Any color will be helpful. -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [57] -------------------------------------------------------------------------------- Sure. This is Randy again. And Mark or Dean can correct, but I think our -- still our placement fee covers 4,200-plus machines. So it's somewhere in that neighborhood. So it's still, I think, about not quite 1/3, if I'm doing the math right there. And then where we'll end up at the end of the year? Look, I will -- hard to say, right? It's -- I think our product continues to impress our customers, and we had a very good pipeline and a very good demand for our premium units. So if you're asking me, my expectation is that we somehow squeeze something out of there. But hopefully, we'll at least be flat or hopefully slightly up. -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [58] -------------------------------------------------------------------------------- This is Mike. I mean one of the things that we've witnessed in previous pandemics is -- well, excuse me, previous recessions and previous hard times for casinos, since this is our first and hopefully last pandemic, is that casinos that can make more money for themselves by bringing a participation unit on their floor than they are making with a machine that they are replacing are inclined to look for participation units that perform extremely well. And so that gives me great hope that we will see operators look at our premium products and how well they perform and consider putting them on their floors in place of perhaps even casino-owned games that are not producing that kind of revenue for them. -------------------------------------------------------------------------------- Mark F. Labay, Everi Holdings Inc. - Executive VP, CFO & Treasurer [59] -------------------------------------------------------------------------------- And Ricardo, this is Mark. Just to clarify Randy's one. We actually had a little bit of growth in Oklahoma related to one of the placement fees that were not covered under about 4,400 plus units under placement fees in Oklahoma. -------------------------------------------------------------------------------- Luis Ricardo Chinchilla, Deutsche Bank AG, Research Division - Research Analyst [60] -------------------------------------------------------------------------------- Perfect. And just to... -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [61] -------------------------------------------------------------------------------- I would say -- well, one other -- one last thing of color is that if you take a look at removals that are coming out from the field in comparison to our backlog, we still have placements for everything that would be coming out and then some. So if you look at this as a marathon, and you talk about getting out of the block, we are very well positioned out of the block as casinos start coming up. So we feel very good about having an opportunity to not only hold what our current footprint is. Obviously, product -- performance predicated, which we feel great about, even potentially being able to take some share from somebody else, so... -------------------------------------------------------------------------------- Luis Ricardo Chinchilla, Deutsche Bank AG, Research Division - Research Analyst [62] -------------------------------------------------------------------------------- Great. That's great color. In terms of your current operations, how much of your portfolio is currently opening, both in the payment side and in the participation side? And just to kind of -- like an idea of the cadence, you guys expect to be north of like 80% online by the end of the month or 100%? Or any cadence on the opening for your particular businesses would be helpful. -------------------------------------------------------------------------------- Darren D. A. Simmons, Everi Holdings Inc. - Executive VP & FinTech Business Leader [63] -------------------------------------------------------------------------------- So I'd give you some -- again, it's very early, but I would say, right now, on the FinTech side, as Mike had talked about, there's about 32% of the casinos open. And look, we have -- on the FinTech side, we have a fairly good market there -- market share there. So we are -- right now, about 30% of our customers are up and operating. Now that may just be because of who they are, they are -- they may be more tribal, which we've got a good footprint in. So that gives you an idea that we've got a lot of the customers on the FinTech side. They're up and operating. And on the customer -- on our customers' side, again, this is on the games side. It's a little different because it's a smaller set of customers, but we're in a smaller set of casinos. So we're at, again, about 32% of our customers that are open. We -- of the customers that are open, we have about 32% of our games in those customers. I don't know if I'm saying that right, but basically, 200-plus locations where we're at of the 600-and-some -- 600-plus locations that we have games in. So again, we're in that kind of 30% range in both, I would say, FinTech and Games. Does that help? -------------------------------------------------------------------------------- Luis Ricardo Chinchilla, Deutsche Bank AG, Research Division - Research Analyst [64] -------------------------------------------------------------------------------- Yes, that's very helpful. If I can squeeze one last one. You guys, I believe, have an earnout payment related to one of your acquisitions for next year. Any possibility that, that gets delayed or that you could work out on some way to delay that? Or do you guys feel like 2021 is going to be strong? We will not have any issues making that earnout payment even if there's -- gaming is a little bit weak, just as it -- because we recover? -------------------------------------------------------------------------------- Mark F. Labay, Everi Holdings Inc. - Executive VP, CFO & Treasurer [65] -------------------------------------------------------------------------------- Ricardo, it's Mark here. I'll take the question, and Randy can feed some color in on this one as well. As you pointed out related to the acquisition of assets from Atrient in March of '19, we do have an earnout in the final portion of purchase price payment left that would be due in March of 2021, and that would be -- we expect it to be $20 million worth of payments. Again, that's all reflective of the volume of business, the earnout is, anyways. The volume of business that the loyalty business performs and does, and that business has been performing very well. So we would expect that we will owe the full amount under those payments when -- due in March, and we would expect to pay those amounts in March. We expect that the volume of business has returned sufficient level enough, clearly, to keep us at a free cash flow positive by fourth quarter. And as you move into late Q1, we expect that position should only improve. -------------------------------------------------------------------------------- Operator [66] -------------------------------------------------------------------------------- And we do have a question from George Sutton with Craig-Hallum. -------------------------------------------------------------------------------- George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [67] -------------------------------------------------------------------------------- I got dropped off. And I want to make sure I don't ask something that's already been asked, so I will ask Randy the following question. Given that in February, you were driving a Ferrari with the throttle wide open on an open road, I'm curious what car you're driving now? And I'm curious if you could be specific to the month or the quarter, when do you plan to pick the Ferrari back up from the lender? -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [68] -------------------------------------------------------------------------------- You're killing me. You know I'm going to blame Bill for that. You realize that because... -------------------------------------------------------------------------------- George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [69] -------------------------------------------------------------------------------- Well, I'd love to know how you came up with Ferrari. I'm not sure if they're sponsoring the call. -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [70] -------------------------------------------------------------------------------- No, no, no. I just -- I do drive a faster car, but I would say it's not a Ferrari, so don't go there. You know what, I don't know how to answer your question. What car do I have right now? Look, as you know, it's just -- it's early. So we're just being -- we want to see the casinos open. We want to see how much activity they have before we decide what car we're going to put on the road and how fast we're going to be going. But look, I think what we were trying to say is that we were performing very well in those first 2 months, and we expect to be performing well as casinos come open. How much -- what their level of activity? That's still to be determined. But we just feel like we're very well positioned, George, and our products on the Games side, we're performing very well in the FinTech side. Transactions were up and the loyalty product is up. So we just feel like we were in a great position, and we should be in a good position when the casinos are back up and operating at whatever that normal level will be. What car it is? I have to think about it. -------------------------------------------------------------------------------- George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [71] -------------------------------------------------------------------------------- Sounds like you're driving a Jeep on a rugged road right now. But it is going to get better, and we look forward to that. -------------------------------------------------------------------------------- Operator [72] -------------------------------------------------------------------------------- Thank you for your questions. If there are no further questions at this time, I would like to turn things back to Mr. Taylor for closing remarks. -------------------------------------------------------------------------------- Randy L. Taylor, Everi Holdings Inc. - President & COO [73] -------------------------------------------------------------------------------- We'd like to thank everyone for joining us today on the call. With the green shoots of recovery now beginning to happen in the gaming industry, we expect that our balance between Games and FinTech segments places us in a unique position to weather this pandemic and come out the other side a more efficient and stronger company. We look forward to providing you further updates on our next quarterly call. Thank you. -------------------------------------------------------------------------------- Michael David Rumbolz, Everi Holdings Inc. - CEO & Director [74] -------------------------------------------------------------------------------- Thanks, everyone. -------------------------------------------------------------------------------- Operator [75] -------------------------------------------------------------------------------- That does conclude today's conference. Thank you for your participation. You may now disconnect.