Greetings and welcome to the Everi Holdings Inc. Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Bill Pfund, Senior Vice President, Investor Relations. Please go ahead, sir..

Thank you, Hector. Welcome, everyone. Let me remind everyone of our 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 in 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, March 9, 2021. We will also refer to certain non-GAAP financial measures such as adjusted EBITDA, free cash flow, total net debt, total net debt leverage ratio and net cash position.

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 in 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, our Chief Financial Officer; Dean Ehrlich, our Games Business Leader; and Darren Simmons, our Fintech Business Leader. Now it's my pleasure to turn the call over to Mike..

Thank you, Bill and good afternoon everyone and thank you for joining us today. I'd like to begin by sharing a few highlights and observations. Our fourth quarter results were in line with the preliminary numbers that we announced in January.

These results demonstrate continued quarterly sequential progress in our recovery from the pandemic-related challenges that began to impact the industry early in 2020 and which continue even today.

Our improvement occurred despite an increase in jurisdictional restrictions in both November and December, which resulted in increased casino closures and reduced casino activity.

Our revenue and adjusted EBITDA improved sequentially from the third quarter and we generated positive net income and our free cash flow improved significantly year-over-year. Now our impressive fourth quarter performance reflects several of the strengths of our company.

The balance of our business between games and our FinTech segments both of which have a large base of recurring revenue streams, our focused investment and execution in developing innovative products that are increasingly in demand because they help our customers grow revenues, build stronger relationships with their guests and at the same time, attain greater operating efficiencies.

Also, our track record of consistent operating execution and then, of course, most importantly, the Everi team whose dedication and collaboration have made it all happen. Now common to both our FinTech and games businesses is the large component of high-margin revenues that are recurring in nature.

The recurring revenue portions of both businesses' operations have proven to be incredibly resilient as the gaming industry recovers. In the games business, our priority is on developing original, creative and engaging content.

The result of this is a growing portfolio of games that are popular with players and generating strong performance for casino operators. This success is clearly evidenced in the continued sequential growth of our gaming operations installed base, most significantly, the increase in our installed premium games.

Our installed base of premium games has increased every quarter for the past 10 consecutive quarters including, each quarter in 2020 despite the challenges that have been posed by the pandemic. At year-end, our installed footprint of premium games was up 1,318 units or 26% compared to our then record installed base, which we had at the end of 2019.

This growth came despite the impact of the pandemic, which caused reductions for many of the other suppliers in our space. Premium games now make up more than 41% of our total installed base and have been a driver of our daily win per unit performance.

Given the consistent growth achieved in our installed base, our daily win per unit, our growing ship share of unit sales during the last several years and our pipeline of new products, I am confident that we have the right elements in place to continue to propel the ongoing organic growth of our Games business.

And said another way, our goal is to become one of the largest premier suppliers of games for casino operators in North America and we are well on our way. Our iGaming digital business is also showing significant growth with revenues up 60% year-over-year and we are just beginning to ramp it up.

From the time, we launched our remote game server for B2B service with one customer in April 2019, we are now directly providing slot content to 30 customer sites in three US jurisdictions and this includes Michigan, which just launched in January of this year.

As Michigan opened, we were a launch partner to six of the nine online casinos that went live on day one. On average, we represented about 25% of the content at launch and we have a number of top-performing games in the market. As an example, we were a key content provider for the BetMGM casino launch.

Our Double Ruby game has been one of their most popular titles since then and we expect to continue to integrate additional innovative content into their offering on a regular basis.

As another example on the Rush Street gaming site, we have the number two top performing game based on average daily wagering since the start and we have a total of five games among their top 25 best-performing games.

The interest in iGaming, which is great gaining strength as a source of new taxable revenue across multiple US and Canadian jurisdictions when joined with our proven and growing library of game content gives us tremendous confidence that our digital business will be an increasing contributor to revenues and earnings in 2021 as well as the years ahead.

And in the FinTech business, our strategic focus remains the development and extension of our comprehensive integrated digital neighborhood. During the fourth quarter, two of our large casino customers went live with cashless mobile wallets powered by our digital CashClub Wallet solution.

White label to carry each Casino's own branding, the CashClub Wallet is fully customizable to meet the differing needs of our customers. With our flexible system, operators can choose the level of experience that they want to offer to their patrons and the speed at which they move forward.

Each of our first two customers began with a soft launch and then chose initial features and timing to both align with their comfort levels and to fit with their marketing plans for their guests. Our CashClub Wallet enables our customers to deliver integrated digital patron experiences alongside the existing solutions in the casinos.

By leveraging operators' investments in infrastructure with the addition of our casino banking as a service capability and our other advanced financial technology, our digital wallet can act as the central hub for payments across the entire breadth of a casino operators enterprise from the gaming floor to food and beverage, to retail and the hotel and resort amenities.

Importantly, the same wallet can be used at each and every one of the operators' casinos, multiple casinos, multiple jurisdictions one wallet. Now for operators with online offerings such as iGaming and sports waitering, it can also provide funding to bridge the patron's online experience with their land-based experience.

Our CashClub Wallet solution complements our cash access services. It is fully integrated with all of our loyalty, regulatory, compliance and financial service offerings and is the next step in providing convenience for players together with a significant cost efficiency for operators.

In addition to cost savings, the data and intelligence on patron spending that is gathered through our wallet, provides operators with the opportunity to extend their relationship and connection time with their patrons. Our digital wallet fits seamlessly into Casino's existing back of house processes and controls.

It also meets the needs of the relevant banking and other financial regulators at the state and federal level, as well as the extensive needs of the various gaming regulators in the United States. We believe we are truly at the forefront of the convergence of payments and loyalty in the digital casino world.

With the stringent compliance requirements that we meet and our history of player funding capabilities we offer the industry a truly differentiated high-value solution. Given the early stage of deployment, we are not yet at a point where it's appropriate to share specific data.

However the initial response from the casinos patrons has been highly positive. And our expectation remains that cashless transactions will increase the total number of transactions performed by patrons, providing yet another growth driver for Everi in the years ahead.

As our cash solution goes live at additional casinos in the coming months and as the user base expands, we expect to share further insights about these trends with you. Now let me turn the call over to Randy..

Thank you Mike and hello to everyone on the call this afternoon. We continue to show positive inflection from the severe challenges caused by the pandemic throughout most of 2020 and we expect to achieve further operating improvements in the year ahead.

Even as we benefit from the ongoing industry recovery we are maintaining our focus on organic growth by leveraging the strengths and strategies that generated our growth and cash flows in the pre-pandemic months and we expect to drive better product adoption rates and higher returns on our investments.

As Mike noted in our games business gaming operations continues to demonstrate solid performance, primarily due to the success of our product development and operating execution which has resulted in continued growth in our installed base and an impressive daily win per unit particularly from our premium units.

Revenue from gaming operations was essentially flat with the record revenue generated in the fourth quarter of 2019, despite the impact of closed casinos inactive units and lower casino activity.

We believe our performance driven by our installed base and daily win per unit has outpaced the vast majority of our peer sets performance which is the same trend we were seeing before the pandemic. Another avenue of consistent growth has been the installed footprint of wide area progressive or WAP units.

Since the initial launch in early 2017, our Class II and Tribal Class III installed base of WAP units has grown every quarter for 16 consecutive quarters. At the end of 2020, the installed base totaled 1048 WAP units up 13% from 924 units at the end of 2019.

Currently we have a field trial of commercial Class III WAP units underway in Nevada and New Jersey. We expect to go live with Class III WAP units for commercial operators in both states in the second quarter adding a new channel to continue our growth.

Our focus on developing original creative and engaging content and differentiated cabinets is also a key factor behind a nice rebound in our equipment sales. Q4 unit sales were up on a quarterly sequential basis, driven by the strong in-casino performance of the Empire Flex our newest cabinet.

The Flex Cabinet has been ranked the number top one performing cabinet in the popular Portrait category in the Eilers-Fantini Cabinet Performance Report for the last seven consecutive months.

Our unit sales increased 62% and over the third quarter, despite the fact that most operators remain in a capital conservation mode due to the ongoing uncertainty related to the pandemic. Our average sales price was up slightly year-over-year, but generally in line with our most recent quarters.

This reflects a favorable mix of our new for sale Empire Flex cabinets in the overall mix of units sold. Based on the reported Q4 results of several competitors, we believe we are continuing to grow our for-sale ship share.

We expect this growth to continue in 2021, due in part to the expanding library of game themes for the Flex -- for the Empire Flex cabinet, which is garnering positive feedback from our customers and their players, together with the ongoing success of our high denomination three real mechanical products that continue to capture the majority, that is 18 of the top 25, including the top 10 high denomination performing game themes as ranked in the Eilers-Fantini Game Performance Report.

Similar to our gaming operations growth, we believe our for-sale ship share gains over the last several years, has also outpaced the overwhelming majority of our peer set. In the FinTech segment, cash access revenues declined modestly in the fourth quarter from the third quarter.

Given our broad customer base, our revenue in Q4 reflected the impact of the additional casino closures and the overall reduction in casino activity, particularly in November and December, when there was an increase in restrictions and casino closures.

With casinos reopening and activity rebounding, I'm pleased to note that our same-store cash access transactional activity has been improving since the end of 2020, notwithstanding the impact from the severe weather that disrupted much of the country in February.

Equipment sales revenues from our FinTech and loyalty products increased 33% from the third quarter. The increase was primarily driven by higher unit sales of our self-service promotional kiosks, which were up 39% on a quarterly sequential basis and led to a 9% year-over-year increase in revenue from loyalty kiosks.

While we continue to see solid demand for our financial kiosks, some operators are opting for longer delivery dates or preferring to delay deliveries, even as they place their orders.

However, given the average age of units to the casinos, we believe the opportunity for further replacements and growth of financial kiosks will improve as macro conditions improve and operators ease or concerns about capital and investing.

Regarding our loyalty kiosks, our loyalty product team has done a refresh of our self-service enrollment kiosk hardware to improve its design, footprint efficiency and player engagement. With its new 32-inch J-shaped monitor, the new kiosk starts shipping this month.

With our Promo Kiosk, now called the Prelude, our team undertook a complete redesign of the hardware in conjunction with upgrading the software to include new capabilities. The Prelude utilizes a 32-inch monitor and can be either standalone or hung on a wall.

With the new Trilogy Loyalty Software, our loyalty platform has taken a giant step forward to significantly expand its capabilities, which dramatically enhances the value to casino operators and convenience for their players. Our Trilogy platform is designed to unify the patron experience across all touch points within the casino.

Trilogy goes beyond traditional player loyalty marketing and enrollment programs by utilizing our enhanced solution for promotions, drawings, targeted alerts, card sign-ups and reprints, gift card programs, resort information and geo fencing. The loyalty Trilogy promo product line went live at two large casinos in Q4.

Trilogy has additional multiple integration points that are currently in cross-functional development between our games, digital, payments and compliance teams. As we look to 2021, our loyalty team is very busy, and we believe we have a full pipeline of additional new products that will launch throughout the upcoming year.

This provides significant opportunity for us to continue to expand our product portfolio, increase our customer base and grow our recurring revenues. Information services and other revenue, was up 7% on a year-over-year basis, and up 5% sequentially from the third quarter.

This growth reflects an ongoing operator interest in our player loyalty software and subscription products and the value they provide operators as well as the value of our regulatory compliance products.

With a significant portion of this revenue related to service and maintenance contract, each new customer expands our substantial recurring revenue base. Our regulatory compliance solutions also continue to show positive momentum as our footprint continues to grow with new Jackpot Xpress installations in new jurisdictions.

The award-winning Jackpot Xpress solution enables casino attendance to securely and efficiently process and pay Jackpot using a mobile device, Jackpot Xpress Mobile or an Everi JackpotXchange kiosk. At the end of 2020, we launched the Jackpot Xpress professional addition upgrade with a major operator and have several more in the pipeline.

Jackpot Xpress Professional edition allows operators to take advantage of new features and unlock several key integrations with an average digital neighborhood such as CashClub Wallet and Trilogy products.

We expect to start our Jackpot Express field trials in Nevada this year with several key partners as well as launched the product into several other new jurisdictions. Now, I'd like to turn the call over to Mark to share his perspective on our performance and current trends.

Mark?.

Thanks Randy. To begin, I would note that in the fourth quarter, we recorded $2 million of charges that were added back in determining our reported adjusted EBITDA as we believe these charges are non-recurring in nature, $1.4 million of the charges related to the Games segment and $0.6 million related to the FinTech segment.

These costs were primarily associated with the consolidation and exiting of certain office and warehouse facilities no longer needed as more of our workforce continues to work remotely and these reductions support our ongoing cost savings initiatives.

As part of this consolidation, we also disposed of certain old and excess inventory items that we did not want to move to our new warehouse facility.

From an overall financial perspective, I believe the most impressive result in the fourth quarter was our year-over-year increase in free cash flow which is more than tripled versus the year ago period on essentially an equivalent level of adjusted EBITDA.

This improvement reflects lower year-over-year cash interest and a reduction in our capital expenditures. A key portion of our capital expenditures is for investment in our gaming operations installed base. Our quarterly sequential basis our fourth quarter net installed base increased by 489 units.

So, we did not cut our capital expenditures in a way that inhibits our ongoing growth.

As you review your models and look towards 2021 cash flow, I would remind you that there are several notable cash expenditure items that are expected in the first half of 2021 that are not part of our free cash flow computation, but they will impact our cash balances.

These include, the final payment of our 2019 asset acquisition from Atrient, including the expected contingent consideration earned, which results in a total of up to $20 million and this will be paid in the first half of 2021.

Also included in the first quarter is a funding of approximately $5 million for the remaining litigation settlement that was included in the charges we reported in the fourth quarter of 2019. And $5 million for the final purchase price payment related to the 2019 MGT asset acquisition that is expected to be paid in the second quarter of 2021.

In February, we took advantage of lower interest rate environment and reduced the LIBOR floor on our $735.5 million senior secured term loan. We reduced the floor by 25 basis points, which saved us approximately $1.8 million in cash interest on an annualized basis at the current market rates.

Those cash savings will provide an ongoing boost to the free cash flow we expect to generate from our operating results. Regarding cash taxes, with more than $450 million of accumulated net operating loss carry-forwards, we do not expect to pay meaningful cash taxes for the next several years.

Our primary use of our growing free cash flow will be to bolster our liquidity during this pandemic and to ultimately reduce our leverage. While the pandemic has slowed our momentum towards lower leverage, it did not change our goal of achieving a lower net leverage ratio. Now, let me share you some perspectives on our near-term outlook.

The financial markets now appear to believe a macro and gaming industry recovery is no longer an if, but rather a when event.

While that would represent a significant improvement in the overall outlook, we believe there is still some near-term uncertainty created by the pandemic and other macro-related factors that need to be considered as part of these views. Not the least of which is the desire by our customers to remain in capital conservation mode.

At least until patient restrictions are further loosened, vaccination rates increase, and the public becomes more comfortable gathering in large public settings. As we look to the first quarter, many of our customers are still impacted by restrictions that caused lower activity levels, while others still have their casinos closed.

Given this current gaming environment and the current levels of activity we have seen since year end, we are guardedly optimistic that our first quarter revenue and adjusted EBITDA will be comparable to or slightly ahead of our fourth quarter performance and we expect to again generate positive net income.

We anticipate that our free cash flow will improve sequentially in the first quarter and may also exceed the prior record for first quarter free cash flow generated in 2019.

While we are not forecasting a significant ramp in current quarterly performance without a corresponding improvement in the overall gaming industry and the macro environment, we believe a gradual industry recovery is likely as more of the population becomes vaccinated and some of the typical demographics that make up a larger portion of our customers' best players return to their favorite casinos.

Barring any further macro setbacks that would position the industry and Everi to enjoy a better second half of the year as compared to the first half of 2021. With that, I'll now turn the call back to the operator for questions..

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question comes from the line of David Bain with B. Riley. Please proceed with your question..

Great. Thank you, very nice quarter again. So, just to start, I actually went to the hard rock in Florida and sign up for the digital wallet. It was fast completely intuitive. And I left thinking this could be one of the largest structural changes on the floor since TITO but my question is, how we make this standard to the end user over time.

So there was great signage that was placed on the floor.

But I'm just curious as to what some of the broad-based strategies are that you can share as to how you or casinos will promote the end player promote that linkage in order to ramp proliferation?.

Sure. Thanks. Good to hear from you David. And one of the clearest methods that casino operators can use to increase adoption is to provide incentives. And we know that the operators have been considering and discussing a variety of incentive types.

But certainly of the ways that you can incentivize is through the loyalty system, which is also connected through Everi, so that they can first judge the spend activity and the cash access activity of the customer, and then actually make them an offer through the loyalty program whether it be for additional free play or some sort of a comp, it is probably the easiest most frictionless way of getting to the patron that has the wallet on their phone and making an offer to them to either bring them back or to keep them in the casino space longer.

As we expand the wallet into casinos that also have online either sports wagering or iGaming, you can also see the operator using that as an enticement to further expand adoption of the wallet by offering the various kinds of offers that you already see in the sports wagering space and to some degree in the iGaming space.

So I would anticipate those being probably amongst the first, but it's really after the creativity of the operators to come up with as many as they need..

Right. Okay. Thank you. And then Mark, I appreciate and understand the comments on the near-term and sort of the gradual improvement remark in the industry. But I mean, you also cited sort of the return of the key demographic and we've all been hearing the encouraging operator commentary and you're speaking with your sales team.

Just trying to understand using a benchmark maybe like 2019, could we get back to normalcy before the end of the year? Is there anything that you can opine on there or should we just think about that deeper into 2022? Just kind of any big picture would be helpful..

I think Randy hit on it in his commentary how we've seen some improvement. I think we would all agree that fourth quarter was a little bit challenging in terms of the -- I'll call them the transactional kind of volumes that were being performed by patrons.

As casinos, more casinos closed as a result of the pandemic, and further restrictions were implemented. I think what we've seen since the start of the New Year is, things have gotten better since Q4 a little bit, but it's still a little bit choppy.

The weather has come into play in February, there was a happening a little bit, but that's not an excuse, just a fact there. But I think what we're seeing if you look back is 2019 is a benchmark that we could start approaching those 2019 levels and possibly doing better.

Where we really benefit is the growth in our installed base and our premium units. And I think that positions us very nicely to perform very well on a like-for-like basis compared to the 2019 kind of levels.

And we have a lot of new products that are varying demand on the FinTech side, on things like our loyalty products and even some of our compliance products that seem to be generating some buzz in our pipeline as well.

So we do think that you could start approaching those 2019 levels but we really think capital is going to be the biggest challenge for us in terms of new equipment sales, games and some of our kiosk products as customers wait for that those patrons really be back and be certain before they start or they start to be willing to commit to the capital they have available to them..

Got it. Okay, great. Thank you, guys..

Thanks, David..

Your next question comes from the line of Jeff Stantial with Stifel. Please proceed with your question..

Hey, great. Thanks. Good afternoon, everyone. First start on – I just want to start on cashless gaming. We've seen several strategic partnerships struck since the last earnings call.

I'm just curious if this has changed your thoughts overall on kind of competitive positioning, market share, separately is this approach something you would consider or do you think going out of yourself presents the most value upside longer term? Just curious to get your updated thoughts there..

Sure. I'll give you my view and certainly can let Darren weigh in with his thoughts after. The announcements by various competitors. In – especially the system operators, really hasn't changed our view of things. I mean we are – our product is an omnichannel product. We're agnostic as to whatever system is on the floor. We're multi jurisdictional.

We can go multi-platform for online. So we're also multi system. And we are the only wallet to my knowledge that can be used with the same wallet in multiple jurisdictions with the same casino operators casinos.

But we also – we are also offering the ability to open that wallet up to purchases in retail in hotel and food and beverage and entertainment, as well as online retail for that matter if the casino operator has an online store.

So with all of those additional benefits and opportunities coming from our wallet, I'm not really as concerned about various other companies that are trying to enter the space for the first time..

Great, that's helpful. Thanks. Switching gears and moving over to equipment sales for the gaming segment. A recent industry survey you quoted slot managers is expecting to allocate about 10% of forward 12-month ship share to your machines on average. And I know, in the past you've kind of called out a similar call it run rate long-term target.

I guess my question is this, do you think the pandemic has accelerated the path to that call it 10% on a go-forward basis? And kind of by that what I mean is, historically speaking, shocks of demand like the one we are seeing now because some be catalyst for folks to reconsider their kind of historical purchasing tenancies or ICs or whatever you want to call them.

Is that something you're seeing now, or do you think there's potential to see as we start to see capital budgets normalize?.

Yes. That certainly can be part of it Jeff. In my view, it's really a testament to the tremendous job that the games development studios have done. And I don't want Dean to get too big ahead, because he's going to have to change from his 10% to another percentage pretty soon, if we actually hit that mark.

But at the end of the day it's the performance of the games that's been driving the sales. As well as the – in all honesty the beauty of the new cabinets and their ability to fit very seamlessly into a floor configuration. And those – the combination of those I think has really driven the greater ship share on the sales side.

But the 10% was Dean's long-term goal. We have to see it actually occur before we force him to raise it up again..

Great. Thanks. That’s very helpful and congrats on another strong quarter..

Thank you..

Your next question comes from the line of Barry Jonas with Truist Securities. Please proceed with your question..

Hey, guys.

Wanted to ask about margins or specifically the margin expansion that you've been seeing now, maybe by segment how much of this do you think is sustainable on a go-forward basis?.

Barry, I'll take this one I guess look I think the -- our mix right now is very beneficial to us in terms of how we've come out of this recovery. Again, we said on previous calls, some of our greater strength was our ability to get some of our recurring revenue streams back in action very quickly.

So those are generally our higher-margin products, whether it's gaming operations revenue, whether it's a cash access services and where we've seen the challenges in the revenue has been on the equipment sales side. And again, because the inventory component in there those are usually the lower-margin products.

So I think you'll see in the near term especially that we'll continue to have higher margins.

But I think as you move forward, what we've been doing very effectively is managing our cost structure, trying to trim out some of the unnecessary costs or managing our costs better, things like reducing our office spaces, which is going to help on the expense side of things, but we're also expanding those recurring revenue streams that have the higher margin.

So you're going to attack it two ways.

And I think if you kind of want to think of it in terms of comparability to 2019 as David Bain kind of mentioned on the first question, I think you'll see that longer term as we normalize, you'll probably have slightly higher margins for us going forward, as we continue to see more of that recurring revenue streams, being a larger portion of our total revenue..

Great.

And Mike, after what you've experienced you and the industry experienced in 2020, do you have any updated thinking about the benefits or I guess lack thereof to house gaming and FinTech in the same company?.

Actually, I do. I mean, well I've got several observations. The first is the next time I see a black swan I'm probably going to shoot it. But beyond that the -- and I said in my prepared remarks, I mean, the amazing resilience of both segments of our company, both games and FinTech.

And the amount of recurring revenue that was so resilient and came back as quickly, if not quicker than the equipment sales revenues to me really pushes make into the camp even further of these two businesses, finding a tremendous home and a great synergy being together under one umbrella.

I'm constantly asked because I'm bullish on keeping both businesses in one company. I'm often asked about well would you split them up? And I've always said for the right dollars of course. But I don't see any reason to -- there's no strategic need to do that. I think they're highly complementary and this has really proven it..

Understood. All right. Thanks so much guys..

Thanks, Barry..

Your next question comes from the line of Mark Palmer with BTIG. Please proceed with your question..

Yes. Thanks gentlemen. Another question on the CashClub Wallet, I know that you are not at the point at which you are ready to share metrics with regard to the wallet.

But conceptually, how should we think about the take rate on the wallet relative to other digital wallets that are out there from various other market participants?.

Yeah. Well one -- I guess the first thing I would say and I'll turn it over to Darren and let him speak to the uptake in the adoption rate. But we're live in two casinos and we're tracking that. I'm not aware of anyone that's anyone else that has a solution that's alive in two -- with two casino operators I should say.

One of those operators has it in multiple casinos the same wallet and nobody has that out there. So with respect to others, I don't know that I see them having any kind of a real uptake at this point. I think they're quite a bit behind us.

But Darren, do you have objectives that you want to share?.

Yeah. Well look I think again, still early days, still what I would consider very soft launches with our customers. And again, it's really just all about their own planning in terms of how they translate this into their enterprise. But the early data is very encouraging.

If you sort of think about David -- Dave's comments earlier, look it's a simplified user experience that's got great tilly for the operators because there's a lot of efficiencies that come along with this digital transformation.

So I expect based on our early information that we have on the data that I think the adoption will be strong and this will certainly move the needle for us, because again it provides just another alternative for patients in terms of how they're enjoying their entertainment experience and how they -- the operators can connect to that patron from their differentiated platforms whether that be the brick-and-mortar, whether that be their retail, whether that be their online sports or iGaming..

Thanks very much..

Your next question comes from the line of Chad Beynon with Macquarie Group. Please proceed with your question..

Good afternoon. Thanks for taking my question guys. Congrats on the results..

Yeah. Hi..

As we think about your game ops unit division and the opportunity whether it be premium or just the entire base? I know at prior investor days and on former conference calls when things were a little bit more predictable. You had provided some goals and I think you exceeded those goals in 2019 and 2020 in terms of units.

Can you just help us think about the white space that remains for you guys or the cabinet white space that could further drive this in 2021 and 2022? And maybe if I can go as far as asking should we expect growth in 2021 in the gaming ops units division given where it currently stands?.

Yeah absolutely. Well, I can give you my point of view and then I'll turn it over to Dean. But I expect to see growth this year. I don't know that we can maintain the growth that we've had for the last 10 consecutive quarters at the same rate, but I certainly expect growth.

I also expect some churn in the underlying installed base in that we may see some casinos go from Class II to Class III and take some of our games out of the installed base. But you hit on a key, which is we now have another metric that Dean is responsible for that he's put out previously that he's now going to have to change.

So Dean, do you want to speak to those issues?.

I don't know if I would call them issues, but I'd call potential opportunities. Look, Chad, I mean the bottom line is that we got five different product categories that we continue to develop into between our Empire DCX or Empire Arena or Renegade installed base. We just launched Flex Fusion.

And then Skyline Revolve is really -- it's our mechanical wheel product high denomination. Now we're starting to get some significant traction on that has plenty of opportunity. So I think the building blocks are there. But as you've heard is a repetitive tone, it depends on what happens out within our industry and our customers.

And but our plan is to have a product offering that will continue to allow us to grow and do our best to take as much advantage of that as possible..

Great. Thanks. Dean appreciate it. And then regarding the digital on the game side the formerly interactive division, small but important and DraftKings talked about a much larger iGaming market in North America that probably is positive for the outlook for digital for you guys and for your competitors. You elaborated on some of the successes so far.

But just wanted to ask if you could go a little further and just kind of talk about what the game plan is there more titles. It sounds like you have a few things that are working really well. It should be a much more fragmented space. And, obviously, from a digital perspective there's less barriers to entry.

But just wondering if you could frame out the opportunity there?.

Sure. And I'm going to turn it over to Randy to really speak to that. But I would note that I mean we have -- each of the games that are produced in digital are made for digital. And they're made for our -- for the ability of our RGS to send them to other sites.

So they're using a lot of our existing game features and game play types in the field but they haven't -- I mean, we haven't really dipped into the depth of our catalog yet to bring along the sheer number of games that we could.

But Randy do you want to speak to where you see digital going?.

Sure. Chad, I would say as Mike put in his opening remarks, we launched with six of the sites in Michigan. When we started in 2017 we didn't launch in Pennsylvania and New Jersey to that extent. So we believe, there's still room to launch with other operate iGaming locations with our games. So we've got more operators we can launch with.

We believe our RGS makes it very easy for us to provide our games. We think there's opportunity also up in Canada. And as any jurisdiction opens up, we think we're in a very good spot to launch with whatever sites want to launch. I think we're starting to be known as a very good partner in launching.

And I think the success we had in Michigan, just lays that out that, we can meet the needs of whoever wants to launch, and however, quickly they want. And as Mike said, we've got some – we've had a lot of content and that's what they're looking for, and we've done special content for some of the operators as well.

So we're in agreement with you that we think this is an area that will continue to grow for us, and we think we're well positioned there..

Thanks, Randy. Appreciate it. Best of luck..

Thank you..

Thanks, Chad..

Your next question comes from the line of George Sutton with Craig-Hallum. Please proceed with your question..

Thank you. Mike, I hate to disagree with you, but I actually hope Dean gets a very big head and that will mean – he is killing it..

Yeah. Unfortunately, I'm not going to tell him that..

Frankly, I'd like to see Darren get a big head as well, because you're seeing a lot of CashClub Wallet wins. But Mike you made a very interesting comment and that was that, you don't want to give too much information yet, because it's early but you're suggesting that you may see more transactions via the wallet versus traditional.

And that can obviously have a very good long-term economic impact on you.

Can you give a little more detail in terms of what you're seeing along those lines?.

Yeah. Actually let me – let me have Darren give that to you, but what I'll say, George is that, the more that we see digital transactions those are complementary to the existing land-based transactions. That's all growth for us. And that's really to me why – why whatever number you want to assign to it as a percentage of the overall transactions.

We think that these transactions are in addition to the existing land-based transactions and that's what excites me so much.

But, Darren, do you want to take that on?.

Sure. I think you just – you take a page out of what I would say is kind of retail Payments & Digital payments that are out there, the adoption and strategy of going to the digital channel has data points that you do see greater volumes, greater transactions, greater frequency.

And so I would say, again, we feel really good about the early indications of where we're at. I think we've got a frame of reference right now with one of the transactions that we support, which is quick ticket, which is the debit pin purchase of a TITO ticket and we see just exactly that.

I mean, you see greater frequency, greater volumes, it doesn't cannibalize anything.

And in our view, I think you're going to see players adopt this type of technology, because of – again, you hear these terms friction free, but I think it's more that the operators are looking for a digital strategy across their enterprise, because it brings value to their players, their patrons.

And then obviously to their enterprise, right? It's just not about a payment method, but this is a strategy and I think you're going to see as we continue to ramp up. We've got a very strong pipeline of wallet customers, you will see greater adoption. I think as we get more data in the coming months, I think we'll be surprised.

And I think, the adoption is going to be stronger than I think what we thought maybe originally..

Great. No, I think it's very exciting. That's all for me, but I did want to mention, if Mark or Randy get big heads we will know that immediately..

Yes. You will..

You will..

Thanks, George..

Thanks, George..

Your next question comes from the line of David Katz with Jefferies. Please proceed with your question..

Hi. This is Cassandra asking on behalf of David..

Hi Cassandra.

Hi. So can you elaborate a little bit on the mobile wallet? You mentioned multiple jurisdiction as a competitive advantage.

So, what would be the challenge for others to replicate that or will be a time line for people to catch up?.

Well I go ahead. Go ahead, Darren..

Yes. Sure.

So again, I mean we've built something very purposeful built for complex operators that operate multiple casinos, multiple jurisdictions and we built a solution that addresses again all the complexity that comes along with digital wallet capabilities, holding on to monies for their patrons and then be able to move those monies between casino operations and the different jurisdictions.

So, a big part of our solution is the integration into our AML tools or KYC tools and the other components around responsible gaming and obviously now, our loyalty products.

So remember, there still is a significant, what I would say traditional payment method usage out there, right? I mean, ATMs and typical sort of traditional cash access is not going away overnight. So, we bring that bridge for be able to move those patients and players that use that to the digital -- the digital channel.

And so, we bring all of that together and provide that solution that is very compelling for the operator because, you need to -- I think at the end of the day, the operators recognize having that single source in terms of the brick-and-mortar and the online and how it weaves together across really all of those mission-critical services that we provide from an AML and loyalty standpoint, makes it very compelling.

And I don't believe, there's a competitor that's kind of brought that together..

Got it. Thank you.

And also just one more, as your free cash flow improve and leverage trend down like would you be interested in tuck-ins and what kind of areas?.

Yes. Cassandra, we're always looking at potential tuck-in businesses that we think makes sense. We would look on either side of our business ledger, whether it’d be FinTech or Games.

But again, we'd be looking to something that is complementary to our existing product offering or something that would be -- would have too long a lead time to develop in-house and is easier to integrate by just purchasing a smaller company that has already developed the technology..

I see. Thank you for your color. Thanks..

Your next question comes from the line of John Davis with Raymond James. Please proceed with your question..

Hey, good afternoon guys. Quickly just wanted to hit on the win per day. Obviously, I think, it was down slightly sequentially, but I had expected with casino closures. But I didn't know if you guys had an idea of what that would look like on machines that were turned on.

If you had a guess, was that flat sequentially, up sequentially? Just any color there on the win per day would be helpful?.

John, I'll take this for you. I think, we've kind of suggested that, we think on active units, we're probably running around $36.5 of daily win per unit in our estimates of where they are. Again, that number is impacted by the same casino closures and the same reduced patron that did happen in Q4.

So, it's down a little bit sequentially, but still benefiting from the increased number of premium units out in the installed base..

Okay. And then Darren, I did want to ask on the CashClub Wallet and maybe ask a little differently, how important is the integration with the loyalty assets that you bought for the casino operator. Is that seen as a competitive advantage, the fact that you have this as loyalty offering that you can then embed with the cash or CashClub Wallet.

How differentiated is that relative to some of the peer offerings that are out there, or is that something at this point that the two tribes aren't necessarily focused on. Just curious kind of what the integration with loyalty looks like in CashClub..

Sure. Well, I mean, strategically, we made the loyalty acquisitions precisely because of the integrations with what we do as the digital neighborhood.

And again, the loyalty platform provides an entry point from an enrollment into the player's card, players club, which again, operators, in terms of launching a digital wallet, the expectation and the desires that they sign up for in the players club. So we're providing this platform for players to be able to sign up and enroll in a player's club.

So having that integration in that offering to be able to not only sign up from a player club standpoint, but then also the wallet, just makes that transition to digital and that offering that much more compelling. And then you start to layer in, as Mike kind of mentioned, the incentives through the promotional platform.

So whether that be -- it could be incentivized through dollars, free-play, whatever, that connection and the promotions that you can have around that are very compelling. If you look at kind of what exists out there.

And I would say, out in the wild, the non-gaming world, kind of, promotions and loyalty and whatnot are kind of critical part of all of those offerings.

And the reality is, our promotional platform is more than just promotions, right? I mean, if you think of gaming and promotions you think of as an operator going to give away a toaster oven or something. Our platform is now an engagement platform. We've just gone so far above and beyond just promotions and it's about engagement.

And this is what the operators are looking for, is tying together how you engage with players in the digital channel and what we're doing from a mobile framework, which both, the wallet and our loyalty platform share is very, very compelling..

Okay. No, that's helpful. And then, it's probably Randy or Mark, just taking a step back for a second. I want to talk a little bit about balance sheet and just capital structure. And general knock on huge piece of -- but it feels like we're getting over the hop here and the vaccines seem to be rolling out.

And so, hopefully, we get back to some sort of normalcy in the back half of this year. But maybe just remind us, kind of, I think your make-whole on the bonds, step down again in December, kind of, how do you think about long-term capital structure from a leverage perspective? Free cash flow in Flex here.

But just curious how long thoughts as we kind of get to the back half of this year and into next year and how you envision the balance sheet transforming over that time?.

Yes. I think, right now, as you pointed out, where we are in the pandemic cycle, we're still maintaining our liquidity and the cash we borrowed related to the incremental term loan, is effectively still sitting on our balance sheet as we sit here today. And we continue to generate incremental free cash flow each quarter.

So as we continue throughout 2021, I think, we have a lot of opportunities to look at the capital structure and look at eliminating some of the higher-priced debt that is on the balance sheet, the incremental term loan, we've got to make hole through 2022 and then a 1% premium on that, for six months thereafter.

And as you mentioned on the notes, we do have a step down come December in the premium that we have to pay to redeem those notes a little bit early. So I think we do have a lot of flexibility and opportunities as we progress throughout the year.

And to see how we can reshuffle that and improve that and reduce our overall cash interest costs, as we move into 2022..

Okay. All right. Thanks guys..

Thanks John..

Thanks John..

Your next question comes from the line of David Hargreaves with Stifel. Please proceed with your question..

Great, quarter. Mostly answered, but in the past, you've been willing to offer some regional commentary cash access trends, sort of directionally what the business is looking like from a high level. And I assume the references earlier in the call to weather were probably regional.

I'm just wondering with the Vegas restrictions easing if you're seeing any kind of commensurate uptick in cash access volumes, anything you could talk about regionally, can you give us some sense of how things are going. I appreciate it. Thank you..

Yeah, David. I'll take that one for you. Look, I think, I tried to convey, as we've entered 2021 we have seen a little bit of improvement. Fantini puts out national revenue report where accumulates all of the commercial operators and what they saw in terms of -- reported in terms of gaming revenue trends.

And what you saw is, in Q4, every month was sequentially worse than the prior month with December being the worst. And it was down probably 25%, where, October and November were probably more along the lines of mid-teens. What we've seen is as we've entered into January things got a little bit better for us, than that. December I think, more people.

This is probably more people at home, as opposed to out gaming just in light of the pandemic. And I think we've seen a little bit of resurgence coming on in January.

February, we're not closed yet, but certainly that kind of trend has seemed to continue a little bit in February, but there was weather impacts that you saw whether its right through Oklahoma, Texas region the big snow and winter storm warnings that happened there, but we haven't given any kind of numbers or on our same-store data.

I would just tell you it is better than what we saw in Q4. And we're guardedly optimistic that they continue to improve..

Great. Thank you very much..

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Mr. Randy Taylor, for closing remarks..

Thank you, Operator. In closing, as we look to the year ahead, we expect to achieve further recovery in our revenues and to demonstrate our ability to grow adjusted EBITDA and free cash flow. This focus should provide attractive financial characteristics that build long-term shareholder value and lead to higher relative valuations.

With the actions we've taken, the gaming industry's ongoing recovery and the strength of our Games and FinTech segments, we believe, we are well positioned to enhance the long-term value of the company. We look forward to providing you an update on our next quarterly call. Thank you..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..