Hello everyone. Thank you for standing by and welcome to the Everi Holdings' Fourth Quarter 2019 Earnings Conference Call. During today's presentation, all parties would be in a listen-only mode. Following the prepared remarks, the call will be opened for a question-and-answer session. This discussion is being recorded today.

And now, I would like to turn the conference over to Mr. Bill Pfund, Vice President of Investor Relations. Please go ahead, sir..

Thank you, Lisa 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 the call.

These risks and uncertainties include, but are not limited to, those contained in our 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, March 2nd, 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 a 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, Chief Financial Officer; Dean Ehrlich, Games Business Leader; Darren Simmons, FinTech business Leader, Harper Ko, General Counsel; and Mark Labay, Senior Vice President of Finance and Investor Relations. Now, let me turn the call over to Mike..

Thank you, Bill. Good afternoon everyone and thank you for joining us today. Before discussing our fourth quarter results, we would like to extend our sympathies to those communities around the globe that are being impacted by the COVID-19 virus.

We continue to monitor this situation closely, including how it can affect our supply chain; however, the well-being of our team members is the top priority for us. And we're advising them to take appropriate precautions per CDC guidelines.

We have certainly noted the virus' impact on global markets, including the gaming sector, but Everi has not experienced any discernible impact to-date. At the present time, the guidance presented in our earnings release today does not contemplate any impact from the virus. Our business today is much stronger than just two years ago.

This is most evident when considering both the deleveraging we've already achieved, and our improved free cash flow in 2019 as well as our expectations for 2020. As a North American-centric company, we do not expect the same risk exposure as our more globally focused competition.

Our customer base specifically and the gaming business generally, is very diversified even within North America. In fact, the majority of regional or locals casinos are outside of the gaming markets frequented by international visitors.

In addition, the balance between our Games and FinTech segments, and the continuing significant opportunities within North America, provide us with a substantial runway for growth. So, turning now to our results. Our strong fourth quarter and full year 2019 results reflect a clear focus on our priorities and solid execution across our businesses.

This execution resulted in our 14th consecutive quarter of year-over-year growth in both revenue and adjusted EBITDA. Fourth quarter revenue increased 22%, while our one-time rather $6.4 million pretax charge for the proposed settlement of litigation led to a net loss in the period.

Now, once the settlement is approved by the court, the legal cost and distraction caused by this proceeding will be behind us. Adjusted EBITDA, which excludes the one-time charge, rose 16% to $63.2 million in the fourth quarter on quarterly record revenues of $145.2 million.

Driving that strong performance were record performances in both our Games and FinTech segments. The fourth quarter capped a strong 2019.

We ended the year with momentum in FinTech kiosk sales, consistent increases in the number of cash access transactions and total dollars processed on a same-store basis, together with solid customer demand for our new loyalty -- player loyalty products and our services.

Our Games segment momentum also continued with a record year-end installed base, a quarterly record daily win per unit and solid growth in gaming machine sales.

We have a strong pipeline of new cabinets and gaming content that will be launched this year and as we further evolve our already industry-leading portfolio of integrated FinTech solutions, our momentum for both businesses is expected to continue in 2020.

Now, while we're on a continuous journey to strengthen the organization and our corporate culture, we've made many significant strides over the last several years. We have built a team that is focused on creative innovation and that executes at a high level to bring new products to the marketplace.

Just last week, at the Annual Eilers & Krejcik Gaming Award Ceremony, Everi won three awards for the Top Performing New Mechanical Reel Core Game with our Cash Machine themed game, for the Top Performing Third Party Intellectual Property Branded Game for Shark Week Jaws Of Steel, and our company won for the Most Improved Supplier in the Premium Game category.

I am extremely proud of our game development and hardware design teams and the progress that we've made over the last several years. It is extremely satisfying to see that the hard work by everyone is being recognized by both our customers and our industry peers.

With the team that we have in place now, I am very optimistic about both our ability and our capability to achieve further growth this year. Now, I'd like to share a few quick fourth quarter highlights from across the company.

In our Games business, our highlights include the exceptional performance in both gaming operations placements and daily win per unit. The ongoing success of our higher-yielding premium games was the primary driver behind a 21% increase in quarterly daily win per unit to an all-time high of $34.52 per unit.

Our installed base increased 439 games on a quarterly sequential basis to an all-time high of 14,711 games as of December 31, 2019. Premium placements increased by 765 units on a quarterly sequential basis, of which 58 were higher-yielding wide-area progressive units.

Our premium units as of December 31, 2019, were 35% of our total base compared with just 20% at year-end 2018. An ongoing key factor behind our premium game growth is the strong player appeal and customer demand for the game themes on our premium E5527 cabinet.

Both our Smokin' Hot Stuff Wicked Wheel and Shark Week units continued to perform at a very high level, consistently exceeding their category and house averages. We're also very encouraged by the early strong performance of our newest game theme for this cabinet, The Vault.

In November 2019, we placed The Vault at 10 of our first-to-market partner casinos, which are large casinos geographically spread across The United States. While it's still early, the results to date are equal to or exceed the high standards that we've set with Smokin' Hot Stuff Wicked Wheel and Shark Week.

In the fourth quarter, we also reached an agreement with the New York State Lottery Commission that extends our long-standing relationship for another 10 years. This is our business of providing and maintaining the central determinant monitoring and accounting system for the more than 17,000 VLTs across the state.

We've supported the New York Lotteries gaming program since its beginning 17 years ago. We are very pleased to maintain this long-term relationship with the state, and we are also pleased with the improved economics in this latest agreement. Another highlight was the fourth quarter record of sales of 1,348 gaming machines, which is up 15%.

We achieved this despite a tough comparison quarter as the 2018 fourth quarter included the sale of approximately 120 premium TournEvent units to a large multi-property customer.

Our average sales price of $17,630 was lower than last year's fourth quarter, given the premium price on last year's TournEvent sales, but it was in line with the average of our most recent quarters. Now, turning to the highlights of our FinTech business.

We continued our consistent operational excellence as the leading provider of integrated financial and player loyalty solutions for the gaming industry. Our cash access business had its 21st consecutive quarter of same-store increases in both transaction volumes and dollars processed.

This was a major driver of the 4% revenue increase over the same quarter a year ago. FinTech equipment sales revenues more than doubled. This was primarily driven by the demand for our fully integrated self-service kiosks.

There was also a $1.9 million contribution from sales of self-service player loyalty kiosks, which is up from the $1.2 million of revenue in the third quarter. In large part, this growth in equipment sales was driven by additional units to our existing customers.

As we've previously noted, we believe we're generating a portion of our sales from a refresh cycle for our kiosks.

Due to the significant growth in the number of integrated kiosks over the last five years, we now have more than twice as many of these kiosks in the field as we do standalone ATMs, and more than 60% of the kiosks are older than three years. Revenue from information and other services in the fourth quarter increased substantially.

Organic revenue growth was 19%, and we generated an additional $4.3 million from our acquired player loyalty and marketing business.

Information and other services revenue includes our subscription services, such as credit information, compliance services and player loyalty as well as kiosk maintenance revenue and the upfront revenue from newly initiated software licenses.

Now, before I turn the call over to Randy, I want to highlight how extremely pleased we are with the integration and scaling of our loyalty products business. We followed the successful purchase of Atrient loyalty assets in March 2019, with the addition of loyalty assets from MGT in December.

The purchase of MGT's loyalty assets brought a complementary customer base and a team of talented people, including a strong contingent of customer-focused sales and service personnel.

Their focus on ensuring a positive customer experience is best-in-industry class and is a discipline that we can use to enhance our capabilities across the entire company. We couldn't be more positive about all areas of this business, including its strategic fit within our portfolio, and under Darren's leadership, its growth potential.

Now, with that, I'll turn the call over to Randy..

Thank you, Mike and good afternoon everyone. For the fourth quarter of 2019, total revenues rose 22%. This includes 16% organic growth and a $6.2 million contribution from our newly acquired player loyalty operations, which is up from $4.6 million in Q3 2019. Adjusted EBITDA increased by 16% to $63.2 million.

This reflects the higher revenue, partially offset by a change in revenue mix, along with higher SG&A and R&D expense. Consolidated free cash flow increased $6.4 million year-over-year to a $4.5 million in the fourth quarter of 2019. In our Games segment, adjusted EBITDA increased 20%, outpacing a 15% revenue gain.

Adjusted EBITDA, as a percentage of games revenues, increased to 45.9% in the fourth quarter of 2019 compared to 44.2% in the prior year quarter. This year-over-year improvement reflects a revenue mix shift to a greater contribution of higher-margin gaming operations revenue and, in particular, was driven by the 21% increase in daily win per unit.

This improvement was partially offset by an increase in operating expenses, primarily reflecting higher compensation and R&D expense in the quarter. Gaming operations revenue increased 22%, reflecting the ongoing strength in daily win per unit and the net growth in the total installed base.

This exceptional performance reflects the improvements made during the last year across the full range of our portfolio of game content and differentiated cabinets.

These improvements, including a strong pipeline of premium content, are coupled with our disciplined allocation of incremental capital toward additional gaming machines to ensure we earn an appropriate return.

In addition to the incremental units installed, we continue to replace and upgrade older units on casino floors, many of which we replaced with premium units. As a reminder, our premium units provides some of our highest financial returns.

Based on the average daily win per unit performance of our premium units, the present cash payback for each new deployed cabin is generally 12 months, with the potential to maintain that cash generation over several years through less costly game refreshes.

We, again, had a solid backlog for our premium units at the end of the quarter, which should allow us to grow our installed base in Q1 2020, despite the net loss of approximately 170 units from a tribal customer that converted their floor from Class II to Class III in February of this year.

We expect to end the first quarter with an installed base between 14,750 and 14,850, along with a low double-digit increase in daily win per unit compared to the prior year quarter. We expect daily win per unit will continue to grow in each quarter in 2020.

We would expect the growth rate to be slower in the second half of the year as we will be comparing against the tough comps from the back half of last year. Our interactive operations continue to show revenue growth in the quarter, and we went live with several new casino partners that now offer a selection of our games online in real money format.

This is an effective way to leverage the player appeal and performance of our growing library of land-based games. As our portfolio of new games continues to expand in the land-based world, we also continue to port them for play into the online world. Our team remains focused on expanding our online presence.

Today, we have a pipeline of more than 20 casinos in New Jersey and Pennsylvania, with whom we are working to build the necessary secure connections with our remote game server for real money gaming, and we continue to explore further expansions. For 2019, total unit sales increased 9% over 2018, including a 15% increase in the fourth quarter.

The strong end to the year is evidence of both our great products showing at G2E, with a particular highlight being our mechanical real slots as well as operators having some capital at year end that they wanted to spend.

While most of our competitors have not yet reported their results for the quarter ended December 31st, we do anticipate that our overall ship share improved in 2019.

As noted in our press release on February 19, we have launched our new for sale Empire Flex cabinet, the broad suite of game content, which we expect will contribute to our ongoing growth in 2020. I would also note that we are now live in casinos with initial units of our new Empire DCX cabinet, which is a for-lease only product.

The Mask and Karate Kid are the initial themes and we are encouraged by the performance out of the gate.

We also launched our new TournEvent 6.0 system that provides operators and players greater flexibility in managing slot tournaments, including a sit and go feature that allows patrons to participate in a tournament on their own time schedule throughout the day or over a longer period of time as set by the casino.

In addition, this upgraded version enhances revenue gain performance when the units are not in tournament mode. For unit sales, while our outlook contemplates full year growth compared to 2019, we do have tough comps in the first and second quarters of 2020. In the first half of 2019, we had 195 units purchased from our installed base by customer.

The Boston Encore opening with approximately 100 units and another 101 units were sold to the Harris Property that opened in Northern California. In general, while our customers tell us that they have budgets that are similar to last year, we believe operators are being cautious given the uncertain macroeconomic start to the year.

As a cautious CFO myself, I can understand that they would like to see how the year begins before extensively committing their capital. This behavior is largely consistent with the last several years. Turning to our FinTech segment.

Fourth quarter revenue increased to 30%, inclusive of organic growth of 18% and the contribution from our acquired player loyalty operations. Adjusted EBITDA grew 11%. Adjusted EBITDA as a percentage of FinTech revenues in the 2019 fourth quarter declined to 40.8% compared to 47.6% in the fourth quarter of 2018.

This decrease reflects a mix shift in revenues toward more equipment sales, which provide a lower gross profit contribution than services, along with higher incremental check warranty expense and an increase in SG&A and R&D costs.

I would note that as a result of the higher rate of equipment sales, our expanding base positions us well to grow our higher-margin services revenue in future periods. The increase in our SG&A and R&D costs for FinTech includes the costs associated with the acquired player loyalty business and higher compensation costs.

In addition, we have increased our R&D activity, focused on internal innovation around new features and functionality as well as costs related to building our vision of an integrated digital gaming neighborhood, including our digital wallet. The check warranty expense increase, which was noted in Q3, continued into the fourth quarter.

We had expected an improvement, but we now believe the changes we are implementing will likely take a few more quarters before we see a reduction in warranty expense. We anticipate improvement throughout the year in 2020, with a greater amount of benefit in the second half of the year. Moving to the balance sheet and our free cash flow.

In the fourth quarter, free cash flow increased $6.4 million over the prior year, bringing the full year total to $43.8 million, nearly double the $24.8 million generated in 2018. We used $2.5 million of our quarterly cash flow, along with $30.5 million from the equity proceeds raised in December to pay down a portion of our term loan.

We also used $15 million to make the initial payment for the acquisition of the player loyalty assets of Micro Gaming Technologies. And on January 6, following the required 30-day notice, we redeemed $84.5 million of our 7.5% unsecured notes. This brought our outstanding total debt balance on a pro forma basis to approximately $1.04 billion.

As a result, on a pro forma basis, adjusting the year-end debt to reflect the redemption of the unsecured notes, our total net debt leverage ratio stood at 3.9 times 2019 adjusted EBITDA. In the fourth quarter, capital expenditures totaled $32.6 million, Games segment CapEx was $26.6 million, and FinTech segment CapEx was $6 million.

Turning now to our 2020 outlook that we provided this afternoon. Overall, we continue to see opportunities to maintain our growth profile. We expect to generate growth within both our Games and FinTech businesses.

With the performance and ongoing demand for our products and services, the expertise of our people and our exciting opportunities, we believe we will succeed in making 2020 another great year.

We should continue to drive revenue growth at a high single to low double-digit rate, and we currently expect 2020 adjusted EBITDA to be in a range of $272 million to $282 million. We are also focused on reinvesting in internal development activities to ensure that we maintain a level of strong, sustainable growth through 2020 and beyond.

We are also committed to ensuring that our compensation levels and incentives are competitive and are aligned with our growth targets. Our full year guidance includes our known opportunities and headwinds, revenue mix shifts, investment in R&D, and higher operating costs.

We expect as a result of lower cash interest costs, lower placement fees and growth in adjusted EBITDA that we will generate $95 million to $100 million of free cash flow this year.

We will continue to prioritize the use of our growing free cash flow toward debt repayment, with the goal of achieving total net debt leverage of three to three and a half times trailing adjusted EBITDA.

Secondarily, if opportunities present themselves for accretive tuck-in acquisitions that we can scale for profitable growth, we could use a portion of our free cash flow to fund such an opportunity.

And as noted in this afternoon's press release, we have a new $10 million share repurchase authorization that we can utilize as another means of enhancing value for our shareholders. With that, I will now turn the call back to the operator for questions..

Thank you, sir. [Operator Instructions] Our first question comes from Barry Jonas, SunTrust..

Hey guys. Thanks for taking my questions. I wanted to touch on the guidance. Maybe just to start, can you maybe just talk through some key items which are the difference between the high end and the low end of the guide? Thanks..

Sure Barry. This is Randy. I mean, first of all, look, we gave our revenue growth at the, I'll say, high single to low double-digit growth. And I think if you use kind of those parameters, that's going to be the topline, which should flow through. But in those revenue differences, we looked again at our key KPIs.

Our daily win per unit, where that could be. Our installed base, when that installed base gets put up -- gets put out into the market. The earlier we get it out there, the faster we'll see revenue growth. We also just looked at the FinTech business, our player loyalty.

That's a new business as we kind of see how that will ramp up and grow throughout the year. From the lower end, we also kind of looked at a cautious outlook on the global macro environment; any slowdown in the economy; anything that would impact the spending of our customers.

But I will highlight to-date; we have not seen anything that has impacted that. So, I just think it's just a range we use that we feel very comfortable with..

Got it. And then, look, aside from coronavirus, I noticed that guidance excludes any impact on the Class III Oklahoma business as it relates to the ongoing dispute between the state and the tribes.

Can you guys maybe just help frame what the potential downside -- or maybe even upside here could be if we do see some impact to that Class III business? Thanks..

Yes. Well, Barry, this is Mike. Actually, you said it correctly. It's potentially upside, I believe, more than downside. If Class III becomes a problem, there's always the opportunity for the tribes to expand their footprint in Class II machines. And as you know, everything we develop is both in Class II and in Class III.

So, I would anticipate, given our relationships in the state that we could be the beneficiary of that. At this point, as you know, though, it's -- I mean, it's very difficult to tell what's going to happen in the court system..

And maybe just as a follow-up on Class II. You talked about some reductions or some tribes shifting from Class II to class III.

But I'm curious, like, these days, what exactly is the difference in look, feel or maybe performance between Class II and Class III? And maybe what's the right way to think about the growth profile between these two businesses?.

Well, they look and feel very similar to somebody who is not really familiar with the differences between the two. I can't tell you that they would necessarily automatically understand the difference between the two. But by and large, when placed on the same floor, Class III will do better than Class II. Now, in some places, that may be much better.

In other places, it'll be slightly better. But by and large, three, we'll do better than two. And in Oklahoma, the tribes have elected to have a mix of both. That's also the case in some other states.

And in those other states, when given the opportunity to go fully Class III and not have that impact their payments, you've seen them eliminate Class II and go to Class III. By and large, Class II machines are not paid -- are no taxes paid or payments are paid to the state for their placement in casinos..

Great, that's really helpful. All right. Thanks so much guys..

Thanks Barry..

Your next question is from Chad Beynon, Macquarie..

Hi, good afternoon. Thanks for taking my questions. I wanted to ask about international revenues. I know historically, this has been sub-5%. And I noticed in the release that you were able to sell some games units internationally. And I think it's been a focus on the FinTech side also to really show your offering to some international customers.

So, could you kind of help us think about 2020 if this should be a bigger year for international or if this is more 2021 or beyond? Thanks..

Yes, Chad. I would say, from an international standpoint, we've sold some units down into primarily South America. We are looking to potentially some sell more. We clearly have a nice offering in sales up into Canada, but I really kind of look at that as North America and potentially, even into Australia someday.

But I think those are farther down the road, and they're a just much smaller portion of our business because I think we have quite a bit of opportunity in North America. So, although we will sell some product there, I, again, don't think I would put a large percentage of our revenue growth coming from there.

And on the FinTech business, we still have operations in the U.K. We have some in Europe, but very small. And we have a small amount, a very small amount in Macau. So, again, the percentage of our revenue, and that's really with only one operator. So, generally, we don't even do cash access services in Macau.

So, there's just not a lot of international revenue just yet in our business..

Okay. Thank you. And then shifting to the strong performance in gaming ops on the premium side, really nice quarter in terms of units and win per day. I believe most of this has been driven by the 5527. And you noted that you do have a positive backlog for the first quarter.

Are you seeing additional units being placed at properties that have least your units throughout the year? Or are these new properties or new clients? Can you just kind of help us think about the framework in terms of where these units are being placed?.

Chad, its Dean. It's both; existing locations are new incremental ones as well..

Okay. Thank you very much. Appreciate it guys..

Hey thanks Chad..

Brad Boyer from Stifel is up next..

Hey thanks for taking the questions guys. First one, just with the announcement today around the buyback, I realize $10 million is not super large number, but obviously, I think it sends a clear message.

Just curious, how you're thinking about capital allocation here? Now that you have made pretty good headway on the deleveraging front, but you have a little bit of ways to go to get inside your range, you now have the buyback out there and you've sort of talked a little bit about small tuck-in deals.

So, could you just give us a flavor of how you're thinking about capital allocation at this point?.

Sure, Brad. It's Randy. So again, I think when we look at the first allocation, looking at $100 million in, say, our free cash flow. We want to put about 10% towards a bucket. Whether we'll ever use it? We don't know. But we want it there for, as you say, just an ability to. I think the tuck-ins, again, would be similar to what we've done in the past.

They would not be anything where we would do 50% of our free cash flow, at least that's not what we had anticipate they would be smaller, and they would be more earn-out type. So, I still think the majority of our free cash flow until we get to the range that we want, we'll be focused on debt pay-down.

But it does give us the flexibility if something right comes along that we can tweak it up or tweak it down..

Okay, that's helpful. And then, I mean, looking at the quarter -- and you guys did a good job of sort of foreshadowing this. But the kiosk sales on the FinTech side were exceptionally strong boosted as well by some early player loyalty kiosk sales. I think Mike made a comment about 60% of the existing fleet is three years or older in age.

I guess, how should we think about the trajectory there around the kiosk sales as we roll over into the New Year?.

Hi Brad, it's Darren. I think, as we stated previously, we still feel like we're in a good refresh cycle with customers and so we see that continuing into 2020. So, the player loyalty piece, again, that's a relatively new business for us, again, we see, again, trending nicely into 2020. So, both of those will obviously see growth for us in 2020. .

Yes. And the only thing I would add there is I don't think you'll see the same type of growth. I mean, that number that we sold in 2019 was a solid number and more than we sold in a while. So, I don't want somebody to think that, hey, it's going to be, again -- it's double on top of that, I think that those numbers are solid for us.

I do think we'll see growth there. But you won't see the same type of growth. Well, I shouldn't say won't, you very well could. But I think what we're looking at is there -- we will be able to sell very well into that and show some growth, but it won't be the same growth level, at least that's not what we're anticipating right now.

That makes sense?.

Yes, that's perfect, Randy. I appreciate that. And then lastly, I realize you guys have no sort of or very limited direct exposure internationally on sort of your slot or FinTech side of things. But mindful of the fact that you guys do source inputs for both segments from various suppliers around the globe.

Could you speak to any sort of dislocations you're seeing in the supply chain at this point, if any? And that's all for me. Thanks..

Yes. Brad, thank you. We really haven't -- we haven't seen any real problems in the supply chain yet. We continue to monitor that carefully. And we do continue to look to secondary sources in the event that some of our smaller supply needs end up drying up or end up being impacted by the coronavirus in Asia.

But currently, we think we're in good shape for the next couple of quarters..

I would say we actually did probably a little bit of buying at the end of the year, just more based on kind of the projection of what our sales would be in the units, the backlog that we had. So we had to have some of that inventory on hand. So, I'm with Mike, I think we looked pretty good for the first half of the year..

But we'll monitor it. We'll continue to monitor that throughout the year..

Perfect. Thanks guys..

Thanks Brad..

Next question is George Sutton, Craig-Hallum..

Thank you. Randy is a self-defined conservative CFO. I'm sure you're very happy to see net debt leverage starting with a three. So, congratulations on that..

Thanks George..

Question for Dean. And Dean, I'm not a doctor. It sounds like you have a common cold, not the coronavirus. But relative to The Vault, I'm interested in a little bit more detail, given how strong Smokin' Hot Wicked Wheel and Shark Week have both been, and you're suggesting this is doing as well or better.

Can you just give us a perspective of what that might mean?.

I would tell you that it ranges somewhere in the neighborhood of almost [Indiscernible].

Well. Okay..

I'll leave it at that..

That's a good leave. Darren, a question for you relative to the increased amount you're spending on CapEx and expenses for the FinTech group related to the integrated gaming neighborhood and the wallet.

What are you spending on? And I'm actually encouraged to see that increased spending that could result, I assume, in some acceleration of that?.

Yes. So, I think with the player loyalty business, obviously, that's an overall a key part of our strategy as it relates to the development of what we're describing as our digital neighborhood.

So, a lot of that investment is around -- coming up with again, new products, to services that flesh out how that digital neighborhood is going to help our customers operationally, create efficiencies for their businesses and, obviously, provide a great experience for their patrons.

So, those combined investments as we tire player loyalty across the rest of our businesses is where that investment's going..

Got you. Okay. Thanks guys..

Absolutely. Thank you, George..

[Operator Instructions] Up next is David Katz, Jefferies..

Hi, afternoon everyone. Nice quarter. Just a few details. One, Dean, if I could follow that up. One of the aspects that we look at with new product introductions is evident, and I'm sure you do as well.

What evidence do you have of the sustainability of what you've introduced so far, right? I mean new games often start out hot and then cool off considerably.

Obviously, you can't share those details because I assume they're proprietary, but do you have some evidence of sustainability with the newest games you rolled out?.

So, David, the first 90 days is a good indicator. And we've seen pretty good consistency with some of our new launches. But at the end of the day, you're right. You don't know after 180 or 270 or how long some, in particular, is going to lapse.

But I would tell you, with 5527, we have seen greater longevity with those few products than we have with, I'd say, most of the other products I've seen throughout the industry in my many years of being in it. So, I could just leave it at that, whether it's going to be two, three, four, five years, who knows.

But I can tell you Smokin' Hot Stuff Wicked Wheel is well north of a year. And it's still holding relatively where it did when it started. So I hope that answers that..

Okay. Yes. Secondarily, I just wanted to check on -- and this is not asking for a prediction or indications because it's likely too early. But you do have a presence in the Seattle area of Washington.

Can you help us just take attendance on what that exposure is, just so we keep it -- keep track as we go?.

Well, I mean -- this is Mike, David. I mean, we're -- we have operations throughout tribal casinos in North America and commercial casinos in North America, I don't think the concentration is any greater in Washington than it is in California or Florida or Oklahoma. I mean, in fact, Oklahoma is probably stronger.

But we don't really get into the percentage that we have in a given market or the numbers that we have in a given market. But I don't think you should expect it to be any more significant than any other jurisdiction..

Got it. And my last question is really on the FinTech side.

You've obviously made some tuck-ins and rolling those through into the next year, without guiding, again, what kind of a vision do you have for that business two, three, four years down the road? And obviously, the question has come up a couple of times from some of the pending consolidation that's out there in the industry.

Are those -- would you consider those constructive or helpful or neutral, or is there any risk that we can discuss coming out of that FinTech side?.

Yes. Sure, David, it's Darren. So, what I would say, specifically around the player loyalty acquisitions. The consolidations have actually helped us and provided opportunities. So, I would say it's been a positive for us..

Great. I don't mean my questions to sound negative. It's all just been so rhythmically good. Randy, I would think you'd understand. I'm just trying to figure out, make sure I'm not missing anything..

Absolutely. I think we all get that..

We do, David. No problem. Thank you..

Our next question is John Davis, Raymond James..

Hey good afternoon guys. I want to drill in a little bit on the FinTech margin. And I think, Randy, you called out some check warranty expense. I know, obviously, you have a different mix of business to keep the lower margin kiosk rolling in. Also your new acquisitions are obviously lower margin as well.

So, if I just look at the year-over-year decline in the margins, how should I think about that? Is what's business mix change versus check warranty or something that may necessarily be one-time in this quarter, but should improve over time? And you kind of look at the core kind of -- what's the new run rate? Or how should we think about new run rate margin in FinTech?.

Yes, it's hard for me to say. I mean, John, I don't believe that the 40%, 41% is the new run rate. I do think there were just a couple of things that all hit in the same period. The check warranty was bigger than I had anticipated in the fourth quarter. We do think that will turn around.

I think that the loyalty, we had some good sales for both the kiosk equipment and the loyalty that added to it. So, I still think we should be closer up probably to a -- probably a 45%, overall. But it's hard to say on -- if you have a good quarter where you got -- like we did in the fourth quarter with the kiosk sales.

I'd love to say, hey, look, I'll take that all day long if I can get 40%, but I can drop more to the bottom-line. But I don't think it should be -- I do think it won't be a 50% margin there just because of the mix we now have in some of the equipment sales, but I don't think it'll be that low of a margin going forward..

Okay. And then, obviously, I understand it's very early with corona. And obviously, you have no guidance also including the impact.

But you can just remind us what percentage of your revenue is Vegas, I recall, it's 15%-ish; I just want to confirm that? And also, have you seen any slowdown or any change in the operator behavior, obviously, slower to put capital to work? Is any of that to do with the virus or is that before we kind of had to worry about corona at all?.

Well, yes. We're all trying to figure out where the 15% came from. But I have to tell you, we are so spread across the United States, John, that if Las Vegas becomes an issue because of the greater propensity for foreign travelers to choose Vegas as a destination or Florida becomes an issue or New Jersey or New York with our VLT offer.

I mean, it could be any of those. And I think we are spread out well enough on both sides of our business that I don't have a concern about any one location or any one jurisdiction becoming an issue for us..

And John, are you looking at just the FinTech side of our revenue business? Or--.

Maybe that's a stale number, but I just remember that kind of a surprisingly low percentage of your revenue comes from Vegas in the extend--.

Yes. Yes, it is..

--start traveling to Vegas, but it's not a -- Vegas, you're spread out. So, I'll just -- maybe that's an old FinTech number that I had in my head. But yes, I'm just trying to get a sense that it's not -- you're not overly indexed to Vegas was kind of the point..

No, we're not, we're not..

That's accurate. That is definitely accurate. With the regional casinos and tribal throughout the North America, it's definitely -- we're not concentrated in one location..

Okay. I think that's it for me. Thanks guys..

Thanks John..

Thanks John..

Hello? Operator?.

Operator, is somebody on? [Technical Difficulty].

[Indiscernible] on the line. Okay guys. Thanks for taking the question. Most of my questions have been asked and answered.

I'm just wondering, if you guys could comment a little bit on where do you guys see the capital structure, given that your bonds become callable on December? Do you guys see something more prone to more bonds, prone more term loan, how do you see your long-term capital structure?.

I think it's under review right now is what I would say. We're going to continue to watch the markets and look at it. I mean, clearly, the interest rate, even on the term loan is beneficial to us, although it's nice to have some fixed. So, I don't really have an answer for you other than we're going to continue to monitor it.

And we, obviously, know that the make hold ends in December and that premium is 3.5%. And so we may look at the entire debt structure or we may just look at that piece or we may do nothing.

But I would say, it's on our radar screen and we're going to see how the markets evolve over the next couple of quarters, but it's a little early for us at this point in time..

And just, lastly, related to this, have you guys started any discussions with the rating agencies about becoming investment-grade? Or what's your target for becoming investment grade or is it something that you guys even have considered?.

Well, I would say, we'd love to become investment-grade. But I would say we had -- we just got the upgrade in ratings at the end of the year when we did the offering. We definitely are -- have plans to go out and continue to meet with the rating agencies. Because I think as we continue to perform, we should see some improvements.

But I think that's a little ways off. But it's definitely a goal of ours -- a longer term goal of ours at this point in time..

Thank you so much..

Thank you..

Thank you..

And thank you all for your questions. I'll hand back to Mr. Taylor for any additional or closing remarks..

We'd like to thank everyone for joining us today on the call and we look forward to discussing our first quarter results in early May. Thank you..

Thanks everyone..

Again, ladies and gentlemen, that does conclude today's conference. Thank you all for your participation today. You may now disconnect..