Q3 2023 Everi Holdings Inc Earnings Call
Participants
Darren D. A. Simmons; Executive VP & FinTech Business Leader; Everi Holdings Inc.
Dean A. Ehrlich; Executive VP & Games Business Leader; Everi Holdings Inc.
Jennifer Hills; VP of IR; Everi Holdings Inc.
Mark F. Labay; Executive VP, CFO & Treasurer; Everi Holdings Inc.
Randy L. Taylor; President, CEO & Director; Everi Holdings Inc.
Barry Jonathan Jonas; Gaming Analyst ; Truist Securities, Inc., Research Division
Chad C. Beynon; Head of US Consumer, SVP and Senior Analyst; Macquarie Research
George Frederick Sutton; Partner, Co-Director of Research & Senior Research Analyst; Craig-Hallum Capital Group LLC, Research Division
Jeffrey Austin Stantial; Associate ; Stifel, Nicolaus & Company, Incorporated, Research Division
John Kimbrough Davis; MD & Analyst; Raymond James & Associates, Inc., Research Division
Unidentified Analyst
Presentation
Operator
Good morning, and thank you for standing by, and welcome to the Everi Holdings 2023 Third Quarter Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded.
Now let me turn the call over to Jennifer Hills, Vice President, Investor Relations. Please go ahead.
Jennifer Hills
Thank you, operator. Let me begin with a reminder that our safe harbor disclaimer, which covers today's call and webcast contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those discussed in today's call.
These risks and uncertainties include, but are not limited to, those contained in our earnings release today and in other SEC filings, which are posted in the Investors section of our corporate website at everi.com. Because of the potential risks, you are cautioned not to place undue reliance on forward-looking statements. We do not intend and assume no obligation to update any forward-looking statements, which are made only as of today, November 8, 2023.
We will refer to certain non-GAAP financial measures such as adjusted EBITDA, adjusted EPS, free cash flow and net cash position. A description of each of these non-GAAP measures and a reconciliation to the most directly comparable GAAP measures can be found in our earnings release and related 8-K today as well as in our Investors section of our website.
This call is being webcast and recorded. A link to the webcast and a replay of today's call can be found in the Investors section of our website. On our call today are Randy Taylor, Chief Executive Officer; Mark Labay, Chief Financial Officer; Kate Lowenhar-Fisher, General Counsel; Dean Ehrlich, Games Business Leader; and Darren Simmons, Fintech Business Leader.
Now I will turn the call over to Randy.
Randy L. Taylor
Thank you, Jennifer. Good morning, and thank you all for joining us today. For the quarter, we reported revenue of $206.6 million, adjusted EBITDA of $96.2 million and free cash flow of $34.3 million. This brings our year-to-date free cash flow to our $122.1 million.
During the third quarter, we returned $33.9 million to shareholders through share repurchases, bringing the total of the share repurchases since the inception of our program to $158 million. We have $106 million remaining under our current $180 million repurchase authorization.
Our Fintech business continued to deliver strong revenue growth in our financial access and software and other businesses. We reached another quarterly high for funds delivered to casino floors of over $11.9 billion. While daily same-store sales growth has returned to the pre-pandemic level of low- to mid-single-digit year-over-year growth, we have continued to grow our revenues at a higher rate as a result of our ability to add new customers, products and services.
During the recent global gaming show, G2E, our Fintech business continued to highlight our strategy for our digital neighborhood, which is focused on improving the patent experience and driving operator efficiencies. We show new and updated products across our diverse portfolio of payment solutions, casino and loyalty products and our mobile offerings that demonstrated our unique position to capitalize on the convergence trends of gaming, hospitality and online in our core customer footprint as well as extending our reach into venues and other adjacent business sectors.
Our cash flow wallet won the Payment Solution of the Year award. We introduced [Buy] which combines our digital capabilities with strong game content and allows an operator to offer on-premise digital gaming. We have received strong interest in Buy and are making progress on securing agreements with several operators.
We also introduced our mobile [BeOn Wallet], a digital wallet that casino patrons will be able to use across multiple properties and jurisdictions and includes a comprehensive offering of our mobile wallet for cash access, ticketing, gaming, mobile ordering, engagement and loyalty, rewards and other amenities. We believe these 2 products together with our existing mobile products will continue to gain traction with our customers.
We see additional Fintech opportunity in 2024, including our plan to sell the smaller ecash kiosks into the North American distributed gaming markets in the first half of next year. Our mobile-first initiatives utilize the assets that we acquired from venue ties and provide us the opportunity to grow our base of recurring revenues and expand our market into new adjacencies, including sports, venues, entertainment, retail, hotel, food and beverage by leveraging our payment and loyalty capabilities.
Our Games business continued to experience near-term headwinds in the third quarter and we expect a similar impact in Q4 of this year. However, at G2E, we highlighted new cabinets, new content and new market opportunities for 2024 and beyond. Starting in 2022, over a 24-month period, we will launch 7 new cabinets that refresh our mechanical and video real for sale and premium cabinets.
These cabinets incorporate newer components and technologies and complement our existing portfolio of cabinets. In addition to the new cabinets at G2E, we showed a diverse portfolio of new games and our targeted release of 25 new themes this quarter to support the launch of our new cabinets and over 80 new themes in 2024.
Importantly, this portfolio represents a diversity of content for our video offerings that build in players favorite game features, additional never seen before innovative themes and our new every content that all in all, targets both the entertainment and the avid players.
We successfully launched 2 new cabinets at the end of Q3, Player Classic Reserve and Dynasty Dynamic. Customer response has been positive. And as of the end of October, we have placed nearly 50 of these cabinets into our installed base with another 200 expected to be placed by year-end.
We look forward to the rollout of our new cabinets in Q4 and into the next year to drive growth in 2024. As we move into 2024, we have additional opportunities to accelerate our growth by increasing our presence in the historical horse racing market, entering the video lottery terminal market in the Illinois in the second quarter and expanding internationally, starting with Australia late in the year or early 2025.
Despite some recent challenges, we continue to grow share at new casino openings and expansions. We estimate that our share will be more than 10% of the slot floor at new openings in the fourth quarter. Our digital gaming business reported a 27% revenue growth and the performance of our Bingo operations through the acquisition of the Video King assets has exceeded our expectations for the quarter and year-to-date.
Now let me turn the call over to Mark.
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Mark F. Labay
Thanks, Randy, and let me begin by adding a little more color on the third quarter operating results. We reported year-over-year quarterly revenue growth of 1%, driven by a 4% growth in Fintech revenues and partially offset by a 1% decline in games revenues. Fintech continued to see solid growth in revenues from financial access services, which grew by $4 million or 7%.
Software and other revenues increased by 12%, benefiting from both organic growth and the contribution from Venuetize, which was acquired in the fourth quarter of 2022. Hardware sales decreased by 20% from the prior year. However, the prior year quarter had the benefit of increased sales to support more new openings and expansions than in the current year.
In terms of quarterly cadence for equipment sales on the Fintech side of the business, I'd remind you that these can be quite lumpy on a quarter-by-quarter basis. Long term, we continue to see opportunities for ongoing replacement sales of our financial access kiosks and increased market penetration for our royalty and other Fintech hardware.
Adjusted EBITDA for the Fintech segment increased 1% year-over-year to $39.8 million, inclusive of the impact of higher cost of labor and increased R&D spending. Within the Games segment, adjusted EBITDA was $56.5 million compared with $57.2 million a year ago. Our installed base and daily win per unit decreased compared to both the prior year and the second quarter.
This was consistent with our expectations as we continue to transition to our next generation of cabinets. In the fourth quarter, we expect our installed base to be down slightly and partially due to seasonal influences, we also expect daily win per unit to be down sequentially from the third quarter. As our new cabinets gain traction in the market, we expect the declines in both the units in our installed base and our daily win per unit to moderate before returning to growth.
Gaming and equipment sales were down $4.4 million from the prior year quarter, which reflects 392 fewer units sold. Partially offsetting the equipment sales decline is $1.4 million in new equipment sales from our Video King acquisition in May and $2.3 million in game theme buyouts related to our recurring revenue portion of the HHR business.
The HHR platform provider has the right to buy out certain game themes under certain conditions. When they exercise this right, we receive an upfront payment to compensate us for our share of the lost future recurring revenue related to these game themes.
Consolidated gross margin expanded by 110 basis points to 79.7%, primarily due to revenue mix shift to higher-margin gaming operations and financial access services revenues from lower-margin gaming equipment and hardware sales.
Consolidated adjusted EBITDA of $96.2 million was essentially flat year-over-year to the $96.6 million reported in the third quarter of the prior year. Adjusted EBITDA as a percentage of revenues was 46.6% compared with 47.3% a year ago, primarily reflecting higher payroll expenses and other costs as we continue to invest for future growth.
We expect adjusted EBITDA as a percentage of revenue to remain in the mid-40% range in the fourth quarter. Our adjusted earnings per share was $0.44 in the third quarter, which was flat compared to the prior year. A lower income tax provision and a decrease in our diluted shares outstanding, primarily from our share repurchase activity, which was offset by the impact of lower net income due to lower operating income and higher interest expense.
Net interest expense in the quarter was $40 million, an increase from $15 million in the prior year. As a reminder, we have $400 million of outstanding unsecured notes at a fixed rate of 5% and $587 million of term loan that has a variable rate of interest. At the end of the quarter, our weighted average borrowing rate was approximately 6.7%.
Also included in interest expense is the cash usage fee on our ATM bulk cash arrangements. Our estimated full year expense for evolved cash is expected to be approximately $21 million compared to only $9 million in 2022. We remain comfortable with our current level of debt and our cash interest costs. We ended the third quarter with total net leverage at 2.5x trailing adjusted EBITDA, which remains in line with our 2.5x to 3x target.
Free cash flow generated in the quarter was $34.3 million compared with $44.9 million a year ago. The decline was a result of $5 million of increased net cash interest costs and $5 million of higher capital expenditures related primarily to the discrete capital items we discussed for 2023, including the new assembly facility in Las Vegas and other IT infrastructure investments.
We will continue to focus our capital allocation strategy on reinvesting in our business for growth. This includes maintaining R&D spending on a consolidated basis in a range of 8% to 8.5% of revenues and as we transition to our next family of gaming cabinets, making increased capital investments in our installed base to drive future revenue growth.
While we are still working to finalize our views for 2024, overall, we currently do not expect any material increase in the total capital expenditures from the 2023 levels. Any increased spending on customer equipment should offset the expected reduced spending of discrete items like the build-out of our new warehouse and assembly facility in Las Vegas.
From 2018 to 2021, we experienced tremendous revenue growth as we launched our last family of cabinets into our premium footprint. We believe our current increased investment in a broader array of new cabinets and a deeper library of new game themes will result in improvements to our gaming operations and will provide increased revenue and adjusted EBITDA growth.
We will continue to focus on driving market share gains with new and existing customers and expanding our product lines and geography service to leverage our existing offerings. While we will continue to evaluate tuck-in acquisition opportunities that support our product development and growth objectives, in the near-term, with our share price far below what we would consider to be fairly valued, we expect to place a higher priority in our capital allocation towards returning excess cash flow to shareholders through share repurchases.
Moving on to our outlook. For Fintech, we continue to expect to see high single-digit revenue growth for the year. For the games business, based on the current headwinds and until our new cabinets and games have the opportunity to gain traction with operators and their patrons, we expect greater near-term pressure on our unit sales and decline in our installed base and daily win per unit.
We also expect reduced recurring revenue contributions from our HHR portfolio due to the third quarter game theme [Bios]. In total, for games, we now expect revenues to be flat to down 1% for the full year. On a consolidated basis, primarily as a result of our lowered outlook for the games business, we now expect consolidated adjusted EBITDA for the full year 2023 to be in line with the prior year.
Net income, GAAP-based earnings per share, free cash flow and adjusted earnings per share are now expected to be at the lower end of the guidance ranges provided in August during our second quarter earnings call. We expect our lower operating income to be offset by lower net interest expense, lower taxes and lower capital expenditures.
Our estimates for earnings per share and adjusted earnings per share are based on the shares outstanding at the end of the third quarter and do not reflect any potential benefit from future share count reductions from any additional buyback activity. As Randy highlighted, we continue to execute on our road map for long-term profitable growth in both our Games and Fintech business.
We are excited to begin to see our recent investments in people and the new studios reach casino floors over the next several quarters. We believe this, combined with our expansion into the VLT market, will drive a return to growth in Games next year.
And with that, I'll now conclude our prepared remarks and turn the call over to the operator for questions.
Question and Answer Session
Operator
(Operator Instructions) The first question comes from the line of Jeff Stantial with Stifel.
Jeffrey Austin Stantial
Starting off here on the game ops business. [Ray], I think last call, you talked to targeting sequential growth in installations to resume sometime around year-end potentially bleeding a bit into 2024. Now at G2E is in the rearview mirror and you're starting to see installations ramp up for some of the newer cabinets.
Just curious, is that still the right time frame? Or just how are you thinking about that given some of the incremental data points?
Randy L. Taylor
Sure, Jeff. I would say, we probably were a little more bullish where we would end the year, probably thought we would be up. I think -- at this point, I think our installed base will be slightly down by the end of the year. There's a couple of factors in there. We do have some units that are out due to renovation, they'll come back in the first quarter. But we are seeing, our newer cabinets get out in the field. So we've put out about 50 of the newer cabinets in October and we have another 200 that we expect to install.
So overall, I think we'll see a slight decline in our installed base through quarter end. And -- but we do expect to start to grow next year. Whether that will be Q1, it's hard to say. It will just depend on how the new units and the new cabinets are take on, but the expectation is next year, the installed base will start to grow again.
Jeffrey Austin Stantial
Okay. Great. That's helpful. And then maybe stick with the Games business, one for Dean or Randy, whoever wants to take this. Obviously, a ton of focus last couple of quarters on the stepper category, in particular, coming out of G2E. Curious if you have a sense on kind of how overall category market-wide sales have been trending, just given it does seem like we're coming into a bit of a refresh cycle for stepper specifically?
And then from a shift share perspective, your expectation as we look out to 2024 and 2025 that you'll continue to sort of share this category evenly with a couple of different competitors? Or I guess, in other words, kind of what point does the performance of the content start to outweigh push from other operators to diversify hardware a bit. Let me know if that makes sense kind of the way I break it out.
Randy L. Taylor
No. I think it does, Jeff. And I'll take the first piece and then Dean can add on. But look, I think we're still very comfortable and very bullish on our mechanical products. Clearly, 2 big competitors have refocused in on the mechanical area. So we think that there will be more of a split. I think we've got -- where we received a greater amount of our fair share in the last few years and I think it's going to be closer to a split between those 3 main operators in that area.
So we still feel very comfortable with mechanical. And I would say, again, mechanical is only 20% to 30% of the market, let's realize that we're also focused on video. And that's where we think is the best area for us to grow, but we think we're going to continue to maintain a very nice share in mechanical and think that we'll continue to compete very well. And in my view, we'll be at the top of that, but we'll see how that plays out.
Dean, anything to add?
Dean A. Ehrlich
I would just say that we continue to provide a pipeline of what we think are very compelling products. If you look at the [Isler's] list and high denomination and even lower denomination in the mechanical side, we still dominate it. I mean we're half of the list. So that's telling me that our products continue to resonate and what we're most excited about is the stuff that's also coming out that we feel put us in a good position to continue to move forward on the mechanical side.
Operator
Next question comes from the line of Barry Jonas with Truist Securities.
Barry Jonathan Jonas
You've seen -- we've seen the consolidation in the space between lottery and gaming. How strong is the case still for Games and Fintech to be together?
Randy L. Taylor
Look, from our standpoint, we've been -- we've had this combination since 2014 and it's done very well for the company. There are cost synergies, there are revenue synergies and these businesses are complementary. So we continue to believe in the combination of the 2 businesses.
However, we don't have an entrenched management. If someone ever came to us with a offer of one or the other side of the business that was compelling, we definitely look at it, but I still don't believe the market really sees some of the things that we do with these 2 businesses with our byproduct, we're now we're utilizing our digital assets and incorporating our cash access into an on-prem mobile product, mobile gaming product. And I think there are other synergies here.
So I still believe right now that these 2 businesses together is the right answer for Everi. But we will continue to evaluate anything that comes our way.
Barry Jonathan Jonas
Great. That's really helpful. And then I'm somewhat excited about your international road map, I'd love to kind of hear more about it. And somewhat curious to get your views about how big international could be relative to the domestic business in terms of revenue or EBITDA?
Randy L. Taylor
Sure. I'll start a little and Dean will probably give a little more color. Look, we're in the early stages. So I don't want to overstate what's out there. But clearly, going into Australia, where they're the second largest market for gaming machines is going to be big for us. We just need a small piece of that market.
And if our content and cabinets resonate, I think it will be very positive for us. Look, it's more like at the end of '24 and into '25. But I think it just adds to the other markets and areas that we're going into, VLT continuing to increase our share in HHR in Australia. So I think all those things continue to allow us to grow and show growth in '24 and '25. So it's early, but it's very promising from our standpoint.
Operator
Next question comes from the line of Chad Beynon with Macquarie.
Chad C. Beynon
I wanted to start with Fintech for Randy or Darren. Based on your guide, revenues are expected to grow high-single-digits, so really positive there. On the financial access service transaction side, that year-over-year growth was -- remained significantly higher than the market growth. So as we look into '24, understanding that you're not giving guidance, can you help us think about when either some of the acquisitions anniversary, kind of how you're thinking about, can this business continue to grow at least mid-single digits, really good momentum right now? Just want to understand how that can look over the next 6 to 12 months?
Randy L. Taylor
Sure. I'll start again and Darren can add. Look, I still think we're extremely bullish on Fintech. Darren and that team has proven that even in a -- and if you go back to pre-pandemic in 2019, when we had low- to mid-single-digit growth, we grew faster than the overall, I'll say, same-store growth because we have the other products and services that we have to sell. And so we continue to do very well on new business that comes up. And so you add that along with the investments we're making in loyalty and compliance.
And now into Buy and beyond, I think that we always look at the Fintech business as singles and doubles, and Darren continues to find ways to add revenue into that Fintech side of the business and we would expect to continue to grow in 2024.
Chad C. Beynon
And can Venuetize in some of the nontraditional gaming pieces of that, will that start to be a bigger contributor in '24? Or are you still kind of planning the seeds on some of the items that you talked about, Randy, with relationship to sports retail hotel? Is that more of a multiyear opportunity? Or can we start to see that in '24?
Randy L. Taylor
Well, I'm going to turn it over to Darren, but I will just say that on Monday, we had a major lead team in the office and obviously, Venuetize continues to look and work into the sports area. So I think it's an area for growth. But Darren, I'll let you kind of add on that one since you're a little closer to it.
Darren D. A. Simmons
Yes. Look, I think as I've said a few times now, Venuetize really complements our overall fee product road map that we've actually been executing on now for a number of years. So I think you need to look at it as complementary, the mobile solutions that we've got that are really resonating with customers.
Again, we got tremendous feedback at G2E, just around our whole mobile strategy as it relates to how we're thinking about sports venues, entertainment and how our customers are seeing that convergence that continues to trend with gaming, online sports and venues. And so I think, as Randy said, I think we continue to win new business, win new customers because of the deep product set that we have and our ability to execute and deliver on the value that we have across our ecosystem of products and services. So again, we still feel good about where we're at and into '24 with the momentum that we've got here.
Operator
Next question comes from the line of George Sutton with Craig-Hallum.
George Frederick Sutton
Mark, I wanted to ask you about cash flow and free cash flow into 2024. Understanding you're not giving guidance. But just generically, as we look at the cash flow you're generating this year versus what you'll be positioned to do next year, can you just give us a sense of any large puts and takes that we should be aware of?
Mark F. Labay
I think we tried to -- as you highlighted, we're not going to give guidance, I'll be careful not to suggest I'm giving guidance right now. But we expect growth next year from where we are this year in terms of the EBITDA line of where we are. We all know it's happening with interest rates. Certainly, we're exiting the year higher than we entered the year.
So that could be a little bit of a negative depending on your views for views of how interest rates and how quickly they start coming down. I think there's -- I believe they will start coming down on our at least holding from these levels. So that should be kind of consistent, I think. And from a CapEx perspective, I tried to highlight that we really are investing in the business next year.
I think we've got a tremendous amount of new products, specifically on the gaming side available to us. So we think it's going to drive some nice compelling revenue growth for us as we move forward. So we'll lean a little bit more into the customer equipment side and we have a lot of new products available to us to refresh that installed base and really drive revenue growth. But that growth in the customer equipment is probably offset by the declines in terms of what we're going to see in terms of those discrete items.
We'll have completed the build-out of our new Las Vegas assembly and warehouse facilities, some of the discrete IT projects that we had mentioned at the beginning of the call. Those kind of things will be coming out of the numbers. So I suspect our CapEx number will be probably when we come out with guidance somewhere in the neighborhood of where we are today for 2023. And we still believe from a cash tax perspective, we'll still be in a pretty good spot from a cash tax perspective.
I would suspect we're probably about much different than what we're paying this year in terms of cash taxes unless tax rules change. So it feels like we're in a nice spot for growth on that line right now, but again, I'll hold off or reserve the rest of that commentary until we kind of get to year-end and kind of share some more views of 2024.
George Frederick Sutton
A question for Dean. Obviously, we've talked about this air pocket in terms of product availability and generations. Can you just make it simple for us in terms of what maybe the top 3 cabinet or content availability you're really focused on? When those are expected to be available? What should we be closely watching for?
Dean A. Ehrlich
So I'll go down the list of new cabinets that are coming out in the timing. It's probably the easiest thing. So Player Classic Reserve launched at the end of September. Dynasty Dynamic also launched at the end of September. So Randy talked about the 50 units that are currently out in the field and the 200 unit backlog. So those are the first 2. Dynasty Sol, which is our new for-sale portrait cabinet will launch in December, but it will be a small amount of units towards the end of December and then really into 2024.
And then our Sol Sync, which is our premium version of our new portrait cabinet will launch in early Q1. So those are the -- that's the cadence of the 4 cabinets. Also to remind you that we really just launched [View] at the end of Q1 this year. And a plethora of content really is coming out, I would say, towards the end of the year into next year as well. So we will have 2 video cabinets, which is obviously the biggest category of opportunity to position out into the commercial market. So -- not commercial, all markets. So that's the strategy. I hope that answers that for you.
Operator
Next question comes from the line of John Davis with Raymond James.
John Kimbrough Davis
Just wanted to follow up a little bit on the free cash flow commentary. But specifically, Mark, on CapEx, you know that you would expect it to be kind of flattish next year. But if I recall, you had about $25 million of onetime-ish type products between the $15 million for the new manufacturing facility and $10 million or so from, I think, a transition to ERP, if I recall correctly. But just maybe talk about some of the puts and takes, just specifically on CapEx as we enter 2024.
Mark F. Labay
The way to get talking about guidance like -- all right. I'll be a little bit -- look, John, I think, again, we talked about having maybe a little bit more CapEx this year, as I kind of framed that in my prepared remarks, we think with what we've been spending so far this year that our CapEx in total is kind of coming down a little bit from where we had provided explicit guidance maybe an explicit update last quarter, like $142 million to $144 million for the full year.
So I think we'll spend a little bit less just because Q3 was a little lighter in terms of customer equipment. We're getting new equipment and now we're starting to roll that out. And we've probably been a little bit under some of the discrete items that we've spent and what we projected this year, which was kind of in that $25 million to $30 million kind of range is what we kind of thought was there.
So we're getting a little bit of total CapEx decline overall and where we are. Again, as we move forward, I really want to make sure it's important that we keep investing in the infrastructure of the footprint. But I'll also highlight that R&D expense, we think is adequate from what we need to spend and still at that 0.5% range compared to revenue.
So we think we're investing enough in that. But from a CapEx perspective, I think you should expect to see it kind of similar because the discrete items that we're saving this year into next year, I expect will be made up for with the increased customer equipment spend as we refresh the installed base. Hope that (inaudible).
John Kimbrough Davis
Yeah, no, that's perfect. I appreciate the color there. And then maybe Randy or Mark, as we think about kind of the guide down the $8 million or so versus your prior guidance and EBITDA for this year, how much of that would you contribute to macro versus micro like the air pocket and kind of cabinets and content versus potentially lower GGR or just general macro conditions?
Randy L. Taylor
Look, John, it's hard to say. Look, we're still seeing reasonable growth in our -- as we look to our Fintech business, our cash access cash to the floor. But it is going -- it's lowering down, it's been lowering each quarter, but still a, I'll say, a low-single-digit growth. So I think there's some impact from the macro. I mean you've heard it from operators, probably a little bit more in the regional market, Las Vegas is still doing well.
But I think, look, ours is we're in a transition period. And so we know that there's some impact to us as we transition to the newer cabinets and the newer content. And so it's probably a little skewed more to that than macro. But again, right now macro seems to be holding in line what we hear from other operators. And I think the big question will be how it does next year. But so far, I would say that it's more from our standpoint, this transition, getting those new cabinets, getting that new content so that we're set up well to grow in 2024.
John Kimbrough Davis
Okay. And then last, quickly, I just want to clarify one of Mark's comments to the prior question. I believe I heard you say, Mark, that you would expect EBITDA growth next year. Just wanted to confirm that and even if macro were to deteriorate further, do you think you can still grow EBITDA next year?
Mark F. Labay
Look, we haven't given guidance yet. We always expect ourselves to grow on a year-over-year basis. And as I sit here today, looking at the macro where it is today and without completing my true 2024 roll up just yet, I am expecting growth year-over-year. I'm expecting to see us grow. We always strive to have growth on an annual basis. So I do see it growing.
Randy L. Taylor
Yes, John, I'll answer that really -- the answer is yes.
Operator
Next question comes from the line of [Ana Macias] with Jefferies.
Unidentified Analyst
I just wanted to ask if we could get some color on R&D and whether it remains at a stable level or how to think about it moving forward?
Randy L. Taylor
Sure. I think Mark touched on it a little bit, but I'll just reiterate. We still look to spend on the expense line, somewhere between 8% and 8.5% of expense, R&D expenses as a percentage of revenue. We think that number is in line with larger competitors. Obviously, from a pure dollar standpoint, they spend more than we do. But we think that's an adequate amount to really support both businesses being Fintech and Games, and that doesn't account for the amount that you capitalize.
So we feel good about that. It's what Dean's worked with throughout this year to kind of line up is hardware, the new content he's got coming out and we stayed within that range. So I don't anticipate that range going up or down because I think we believe that one of our main tenets in capital allocation is to continue to reinvest in the company and that really is that R&D line that drives both Fintech and Games.
Operator
Thank you. There are no further questions at this time. I would now like to turn the floor over to Randy Taylor for closing comments.
Randy L. Taylor
Well, we'd just like to thank everyone for joining us today and we appreciate your continued interest and we look forward to providing an update on our business and our outlook for 2024 in our fourth quarter year-end call in March. Thank you very much.
Operator
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
