Hello everybody and thank you for standing-by. Welcome to Everi Holdings 2021 Fourth Quarter Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the prepared remarks, we will open the call for a question-and -answer session. As a reminder, this call is being recorded.

Now let me turn the call over to Bill Pfund, Senior Vice President of Investor Relations. Thank you sir, you may begin..

Thank you, operator. Let me begin by reminding everyone that our safe harbor disclaimer covers today's call and webcast. Our call contains forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from those discussed on this 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, which are made only as of today, March 1, 2022.

You are also cautioned not to place undue reliance on forward-looking statements. Our call will reference certain non-GAAP financial measures, such as adjusted EBITDA, free cash flow 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 of our website. This call is being webcast and recorded.

A link to the webcast and a replay of today's call can be found in the Investors section of our website.

On our call today are Mike Rumbolz, Chairman and Chief Executive Officer; Randy Taylor, President and Chief Operating Officer; Mark Labay, Chief Financial Officer; Kate Lowenhar-Fisher, General Counsel; Dean Ehrlich, Games Business Leader; and Darren Simmons, our Fintech Business Leader. Now, I will turn the call over to Mike..

Well thank you, Bill, and good morning, everyone and thank you for joining us. Before we begin today, I would like to acknowledge that this will be my last time addressing you as Everi CEO. I would also like to express my gratitude for all of your support these past six years.

I will continue working for our shareholders as the Executive Chairman of our Board, but will not be participating in these quarterly calls in the future. I'd also like to take this opportunity to publicly welcome Randy Taylor to his new role, leading our company as Chief Executive Officer, beginning April 1.

I have the utmost confidence in Randy to lead our company and Everi team of outstanding executives. I look forward to watching all of them take us into an even brighter future. Now let me share a few of Everi’s highlights for the fourth quarter and 2021 year-end.

Fourth quarter financial results and key operating metrics were up dramatically compared to 2020. And also increased significantly over the then record pre-pandemic 2019 fourth quarter. The continued strength of our recurring revenue streams and record game sales drove our fourth quarter revenues to a record level.

This strong quarterly performance capped an unprecedented year that began with substantial pandemic impacts and which had continued challenges throughout the year. Now despite these challenges, the Everi team delivered full year record results for revenues, operating and net income and most significantly, adjusted EBITDA and free cash flow.

These impressive results were driven by the strength of our outstanding global workforce and the leadership team that guides them. Together, we have built a global organization that has never been stronger. This team continues to focus on the consistent execution of our growth strategies.

Strategies that place a priority on high return investments in both new products and new geographies for both our games and Fintech business units. It was the concerted execution of these strategies, which drove our record 2021 results and will continue to deliver steady year-over-year growth as we begin 2022.

In our games business, the investments that we have made to build world class game development studios to engineer and expanding differentiated portfolio a player appealing cabinets, and a state-of-the-art remote gaming server platform for our digital gaming operation have been the key drivers supporting our growth.

These investments are also what is driving share gains, both in the growth of our gaming operations and our ship share of gaming machines sold to operators, and it's also driving our rapidly growing iGaming revenues. The improvements in our ship share of game sold led to a record level of game shipments in the fourth quarter and for the full year.

Our installed base of high performing gaming machines in gaming operations also reached a record level of nearly 17,000 units at year-end. Importantly, the fourth quarter represented the 14th consecutive quarter of increase placements of premium games.

Our investment for the future continues with the recent announcement of our agreement to acquire certain assets and employees of Atlas Gaming in Melbourne, Australia as well as with our recent decision to enter the niche but growing historical horse racing gaming machine market.

Atlas will provide a foundation for our longer term entry into Australia by bringing a core group of game developers and engineers who will form the core of the beginning of our new Australian studio operations. This will help accelerate our entry into what is after the U.S. the second largest swap market in the world.

This also provides an opportunity for Everi to develop and bring additional new game content to the United States market. And we also recently announced that we are in the early stages of entering the historical horse racing machine market. And we expect to place HHR machines before year end.

In our FinTech business, our investments have been focused on leveraging our strength and cash access to build a digital neighborhood or what I think of as I say digital neural network for casinos.

With the foundation of this network in place, we continue to layer in new products and enhanced features, each of which further benefits the casino operator and strengthens our customer relationships.

As an existing leader of financial access, loyalty and RegTech Solutions, our focus on expanding into new geographic jurisdictions, innovating and acquiring new products and developing new features that improve a patron experience, while at the same time providing greater cost efficiency for casino operators is paramount.

Internally, this includes the development of products, such as our Jackpot Xpress tablet that streamlines the administrative process that accompanies the payout of major jackpots.

We have further enhanced this product through the addition of integrated features and technology that we gained with the acquisition of the assets of meter imaging capture last autumn.

It also includes our exciting, robust cashless wallet that enables casino operators to offer their patrons easy to use funding features across multiple properties in multiple jurisdictions, and across the entirety of their casino [reserved] operations, both on premises as well as online.

Our focus also includes our continued search for tuck-in acquisitions that we can integrate and scale up for future organic growth. We've already established a successful track record for this through our prior acquisitions, including the two loyalty businesses that provided our entry into the casino loyalty and solutions category.

Our loyalty products continue to provide revenue growth for our FinTech business. Most recently, our agreement to acquire ecash Holdings provides for a geographic expansion of our FinTech offerings into the Australian gaming market. Additionally, we will be adding ecash products to our offerings in North America.

One example is that certain of their kiosks have been developed to meet the demands of smaller facilities, and are currently being used in the Australian pubs and clubs gaming sector. These kiosks will also perfectly meet the needs of the distributed gaming sector in the United States.

This acquisition will provide both new products to our FinTech portfolio and create new growth opportunities in the U.S. and Australia.

Given the strength of our balance sheet, and our expectations for continued free cash flow growth, we will stay on course with this dual growth focus, continuing to prioritize internal product development and the evaluation of attractive bolt-on or tuck-in acquisitions.

This focus emphasizes products, technologies and talent that complement our core businesses. This also allows us to focus on newer products and technologies that may not be getting appropriate attention today.

The strategy also includes geographic opportunities, where we're not currently operating or where we're not as heavily penetrated as we would like. Enabling this capital allocation strategy to drive our longer term expansion is the phenomenal growth of our free cash flow.

Despite spending $31 million on CapEx in the fourth quarter, which was a key driver behind our high return gaming operations growth, and investing another $31 million in placement fees, we were able to generate nearly $20 million in free cash flow in the quarter.

For the full year, our $159 million of free cash flow was equal to the combined total of the previous five years. Now, let me turn the call over to Randy to provide you more insight into our operational successes..

Thank you, Mike, and welcome everyone. Before sharing some of the meaningful operating achievements of the quarter, I'd like to take a moment and thank Mike for his very substantial contributions during his tenure as CEO.

While the growth in free cash flow is one of the more dramatic accomplishments, this is just one of many positive changes that have occurred under Mike's leadership. To list them all would be worthy of a special documentary, but I would like to call out just a couple.

Mike has been the driving force behind the establishment of our vision and our successful growth strategies that were always underpinned with a focus on the needs of our customers, and the new products that can provide greater efficiencies and value.

The strength of our organization, it's great talent and diversity today, not just at the leadership level, but across the wide breadth of our company is a key tenet of our culture, which we expect will provide long-term benefits. As is the successful investments in the infrastructure of our business, which were led by Mike.

Thank you, Mike, for your leadership and mentorship. I'm very pleased that I personally and all of Everi will continue to benefit from your vast experience and insights as you transition to Executive Chairman. Moving on to our results, a key driver of our growth in the fourth quarter was the continued success of our core recurring revenue operations.

These are high margin operations that have been demonstrating consistent growth. On a consolidated basis, our recurring revenue streams accounted for approximately 73% of fourth quarter revenue and 76% of full year 2021 revenue. In the quarter our recurring revenues grew 42% over the fourth quarter of 2020 and 30% over the 2019 fourth quarter.

We believe that consistent long-term strength we have demonstrated in recurring revenues across our games and FinTech segments, is a significant differentiator of our investment thesis that is worthy of a higher valuation than what is currently being ascribed. Turning to review of our segment performance.

Games revenues were up 62% over a year ago and up 37% over then record fourth quarter of 2019. A strong revenue growth led to a 47% increase in adjusted EBITDA for the game segment. The revenue growth was driven by a quarterly record level of game machine sales, along with continued steady growth in gaming operations.

We believe our quarterly ship share of games sold reached a new high. And while we won't know the precise level until all of our competitors have reported their results, we believe it will be approximately 11% to 12%.

That increase is driven by the continued high performance and breadth of our industry leading mechanical wheel games, along with the ongoing success of our flex video cabinet and its expanding array of games.

Within gaming operations, we added 482 units to our total installed base during the fourth quarter, our total installed base reached 16,903 units. Combined with the completed installation of our units at the three Delaware casinos, in addition to a new travel casino opening where we garnered more than 200 units.

We expect another nice quarterly sequential increase in the installed base in Q1 this year. Our daily win per unit increased 27% over the fourth quarter of 2020.

The growth in performance of our premium units in the quarter more than offset the incremental placement of standard units as a result of upgrading a significant number of units in our Class II installed base to premium units.

Placement of newer premium games such as cash NATO on Flex Fusion, along with gold standard and cash machine jackpots on our skyline revolve mechanical wheel cabinet, were key drivers of the growth. Our improved performance in the games business was further evidence at the recent Eilers & Krejcik Gaming Award ceremony held last week.

Everi received nine category nominations. And we were awarded top honors in three categories, including two awards for our mechanical wheel games, and an award for most improved supplier for organic core category.

For our digital gaming business record fourth quarter revenues of $4.1 million increased on both in sequential and year-over-year basis, which led to an annualized run rate of over $16 million as we ended 2021. Revenues of our digital business for the full year 2021 of $13.9 million increased 123% over the full year 2020.

And we expect strong double-digit growth in 2022. Turning to our FinTech business, quarterly record total segment revenues increased 37% year-over-year, and were up 10% over the 2019 fourth quarter. These strong revenues benefited adjusted EBITDA resulting in growth of 41% over the prior year and 18% over the 2019 period.

Within the FinTech segment, financial access services revenues increased 17% over the fourth quarter of 2019, driven primarily by 6% increase in total transactional activity. Of note the average transaction size has increased 18% over the fourth quarter of 2019, which led to the value of total funds delivered to casino floors rising 25%.

Software and other revenue rose 17% over the fourth quarter of 2020. Driving that strong revenue performance was year-over-year growth in royalty, software sales and subscriptions RegTech software for regulatory compliance, and equipment maintenance services.

A key contributor behind the growth of our software services revenues is the growth in our customer base. For example, we have increased the number of customer properties, utilizing our loyalty products and services by more than 40% since the end of 2019, including the introduction of a recurring revenue subscription services.

Like financial access services, our software services have a large recurring revenue component, which amounted to 76% of this line item for the fourth quarter. Revenue from hardware sales, although remaining below pre-pandemic 2019 levels, rose 8% over the fourth quarter of 2020.

Now I'd like to turn the call over Mark to share his perspective on our outlook for 2022. Mark..

Thanks, Randy. In addition to discussing our 2022 outlook, and the guidance we provided in our earnings release, I will also highlight the strength of our balance sheet at year-end. But before I dive into that, I would first like that my best wishes to Mike as he prepares to take on his new responsibilities as our Executive Chairman.

Under his leadership, we've truly made great strides in improving our business operations and building shareholder value. And I'm glad he will remain engaged with the business in his new role. With that, let me start with the strength of our balance sheet. For many quarters, I focused on our progress towards de-leveraging.

And because of our strong growth and consistent operating execution, I'm pleased that I don't have to speak on that topic today. Except to say that at year-end, our total net leverage was only 2.6 times. Moving on to the outlook for the full year of 2022.

We expect net income to be in the range of $125 million to $132 million, driven by an 8% to 13% increase in operating income. As a result of the reversal of certain deferred tax asset valuation allowances in the fourth quarter of 2021, which created a benefit of $63.5 million or $0.62 per diluted share.

We expect our income statement in 2022, to begin to record a provision for income taxes. For modeling purposes, if you include federal, state and some foreign taxes, and account for some of our normal operating deductions. We expect that provision to be approximately 23% of pre-tax earnings.

Because we've reversed a significant portion of our tax valuation reserves in 2021, this projected increase in our effective tax rate is expected to cause a shift from income tax benefit to income tax expense. This could impact net income between $89 million and $91 million as compared to 2021 or the equivalent [$0.87 to $0.89] per diluted share.

The important element to highlight is that this change should not have any meaningful impact on our actual cash taxes paid, as we still have approximately $361 million of gross net loss carryforwards on our books. We believe that adjusted EBITDA will grow between 6% and 8% in 2022 and be within a range of $368 million to $376 million.

When viewed over the last several years, including the ups and downs of the pandemic, this steady growth in 2022 is expected to generate a full year compounded annual growth of approximately 13% from the pre-pandemic period of 2018. Now, let me share some of the variables that shape these views.

We expect to generate full year growth in the sale of game machines, driven by a combination of our improve ship share the launch of our newly released mechanical cabinet, the player classic signature, and increases in capital spending by our casino customers.

We believe our robust pipeline of new games and additional categories will also contribute to ongoing growth in the installed base of our gaming operations business, while also keeping our daily win per unit in the $40 range for the full year.

We do expect some variability in the quarterly rate throughout the year, which reflects the impact on casino traffic due to pandemic related effects, as well as other normal seasonal influences.

As we previously mentioned, because of the steady return we receive on all installed units, we will continue to prioritize growing the total installed base and not just the premium units.

As a result, the percentage of premium units to total units may vary in any given quarter, and thus also further contributed to changes in quarterly reported daily win per unit.

For FinTech, we expect the trend of positive financial access transaction activity to continue, as well as continue the rollout of our digital wallet, including the addition of new customers.

We expect continued strong demand for our software and other products and services driven by the steady stream of new and enhanced products we plan to introduce.

In addition, we expect to benefit from year-over-year growth in FinTech equipment sales driven by ongoing demand for loyalty kiosks, and replacements of our fully integrated financial access kiosks.

While supply chain constraints have been a focus of the entire industry for some time now, we largely mitigated much of that challenge throughout 2021 to the great effort of our supply chain and manufacturing teams in both FinTech and games.

At present, we continue to believe supply chain disruptions will be temporary, and anticipate they will begin to abate in the second half of 2022. Excluding the impact of non-cash comp expense from total operating expenses, we expect the percentage of operating expenses to total revenues to be comparable to the current levels of between 25% and 26%.

However, we expect slightly higher payroll expense, which reflects our support of ongoing growth activities, as well as the current tight labor market. Our R&D expense should continue to be in the range of 6.5% to 7.5% of total revenues, which is comparable to the run rate of the fourth quarter.

However, given our increased focus on internal new product development, and our outlook for higher revenue, we expect to see R&D expense trend towards the higher end of the range as the year progresses. In regard to our capital expenditures, we expect to spend between $120 million and $132 million during 2022.

I should note that despite a very significant increase in the installed base in gaming operations since 2019, this level of capital spending is only expected to be up about $6 million to $18 million over 2019. At this time, we expect no additional placement fees to be paid in 2022.

In total, we expect to continue to generate strong and increasing free cash flow, which we anticipate will amount to between $185 million and $200 million in 2022. And I’ll now pass it now. I’ll will now conclude our prepared remarks and turn the call over to the operator for questions..

Thank you. [Operator Instructions] Our first question is from George Sutton with Craig-Hallum Capital Group. Please proceed..

Thank you, Mike, I remember when you joined mere six years ago, and I would say somewhat reluctantly out of previous retirement. And you had a fairly levered business with a pretty minimal product, outlook. And I look at what you're leaving to Randy and team today. And it's quite impressive, quite frankly, from my perspective. So congratulations..

Thanks, George..

Kind of give you a sense of our call, if you will, on this stock has been that you are in a very interesting position of strength that frankly, you haven't been in prior. And that's really because of the improvement in the balance sheet and overall fundamentals.

So when we look at some of the things you did this quarter, like M&A and group hires, and last quarter with the long-term lease signs, give us a sense, if we look out, maybe this is a better question for Randy over the next couple of years.

What other things might we see as benefits of this position of strength?.

Thank you, George. Look, I think it's going to be consistent with what we've talked about in the past, which is looking for -- I think, two pieces investments internally on new products and other technologies that will again help the patron experience and our customers, and then products and geographies outside of what we've done today.

So again, looking for tuck-ins primarily, like we just announced in December, and that can be bolt-in North America and outside of it. So it's I don't think we're going to change our game plan. We've been very successful. And in the small tuck-in that was acquired, obviously, we're going to have in our view, more cash flow to work with.

So we're going to probably expand what we're looking at going forward, but it's going to be consistent for now look what we've done in the past..

Gotcha. Rather than a follow up, I'm going to give a gambling tip, since most of us on this call are gamblers in one way shape or form. But as you enter this new era for yourself, Mike, you just earned $0.88 in earnings.

You had $88.8 million in EBITDA and you guided to up to 8% EBITDA growth in 2022, I assume there will be a roulette table nearby but just a recommendation?.

Yes. Appreciate that, George. Thank you..

Thank you, Mark..

Our next question is from David Katz with Jefferies. Please proceed..

Hi, good morning, everyone. Congrats, Mike. I don't know if you recall, but I think it was about 2015. I called and said, I really only have one question, are you interim or you're taking the job? Because that's all I need to know..

No, I'm not going to repeat your answer in the public call, maybe I'll tell you what the reply was offline. But, I'm glad to say it's been a great ride..

What I wanted to ask about is really two things. I mean, you've spoken about the cash flows getting to a certain place, and the CapEx is not -- it's not an intimidating number, but it starts to set kind of a trend line, what does that really look like? As we start to rollout into an I know, you're not guiding ‘23, and I haven't published ‘24.

But maybe we can speak in qualitative terms about what happens to that.

And in conjunction with that, what do we need to see before we might start to think about a recurring capital return program of some kind or would you just want to run it all the way down to net cash?.

Well, before I let Mark, answer your question, first thing, thank you for that, and I will call you later and, and get my real response David. But I would say, if it was up to me, and it may be part of why I'm being retired is if it was up to me, I would take us down to no debt whatsoever. For but that doesn't seem to be the consensus, smart move.

So rather than let me be the bad guy here, let me turn it over to somebody with more sensibility and let Mark answer that..

Well thanks, Mike.

Look, David, I think, we -- as it relates to our leverage and where we stand, clearly, we are -- the mass benefits from the strong EBITDA results for generating, we continue to expect to grow our EBITDA we have no designs on trying to get too far below our stated leverage goals two and a half, three times of total leverage, just naturally, that will occur though, as we continue to grow our earnings will keep dropping.

So that's a good thing for us. We intended Randy and Mike both mentioned in their comments that we intend to invest in this business both organically in terms of growth new products ourselves and looking for those continuing to find those right acquisitions to keep growing the business.

And we think that's a good pipeline out there for us to stay within our debt kind of profile and continue to grow the business, more importantly, in terms of earnings to shareholders. So we're excited about those opportunities. And we think that keeps happening on that front..

In terms of CapEx, you mentioned that, and I'll come back to that one and just say, 2020 and 2021 with respect to the COVID pandemic, we've been a little more challenged in terms of being aggressive and refreshing installed base and keeping the portfolio occurring.

So there's a little bit of difference on our side as well that we're going to try to make up to ensure we're maximizing the return from the installed base as well, another investment we'll make in our business, but I think our guidance for ‘22 really is kind of where we kind of think the norm should be and we’ll clearly manage that as we move forward..

So I think I'd covered all your topics there, but if not let me know..

Nope, that'll work just fine. Thanks, Mark..

Our next question is from David Bain with B. Riley. Please proceed..

Great. Thank you. And along with everyone. Congrats to Mike and Randy. And really the whole team on just the positioning going forward in 4Q and the past been phenomenal.

Okay, so my first question, I guess we'll be on digital FinTech it seems like that the sales process with some of the larger operators the operators in general almost collaborative, unless I'm mistaken, which is great.

I was wondering if you could offer any sort of insight into timing of agreements is it feels like mid-year that we'll begin to see traction.

From that perspective, it's good to see that you're already in the field with the customer to not yet out there is that a process where you go in you work with them, and then the agreements are actually revealed later..

David, thanks for the question. First, let me just say that the one piece that you weren't encompassing in your question is regulatory. In many jurisdictions, regulatory is the long lead item.

And so, as I turned over to Darren, just keep that in mind as you look at what we're doing, but I think you'll ultimately agree that we're in more jurisdictions and more casinos and cover more slot machines than anybody in this space, but Darren want to speak to them..

Sure. Thanks, Mike. Yes, so, as we stated previously, David, we're in 4 jurisdiction 16 casinos, we've got a significant number in the pipeline in terms of rollouts.

And as Mike said, the biggest gaming factor generally is the regulatory side, since this is new for most jurisdictions, that not all jurisdictions, and as we've stated before, sometimes what they have in their regulations, speaks somewhat to -- moving towards cashless and digital payments. And sometimes it's a little ambiguous.

So that work is ongoing.

And I would say, we've had really tremendous success in being able to communicate our position with our customers cooperatively with the regulator, and the feedback is really good in terms of what we're bringing to market and how we're addressing the things that are important to them from an audit regulatory and responsible gaming standpoint.

So to your point about partnership with customers. Yes, that's what this is, I mean, this is a very collaborative effort. They're being very methodical and how they're approaching this. And we've got a number of new customers in the pipeline. And yes, we've got call it agreements signed, that would be announced.

And we expected those -- to announce those in the coming months. As you know, the customers are very measured in their rollout. So I, again, feel really good about where we're at in terms of our progress. Of course, we'd all like it to move quicker. But, we are somewhat at the mercy of the regulatory side in terms of rolling it out..

It's really helpful. And then my second one would be on games. And I guess it's a broader question. When we look at the potential slot buying this year, it seems almost dramatic, but it's also getting back to normalcy in some ways in terms of percentage of replacement.

At least, when we speak to operators, it feels like they're more focused on slot floors versus other amenities than in the past? Not sure you're seeing the same, but the real question is, I mean, are we seeing a potential longer term industry shift in focus that could translate to replacement percentage levels above where they were and say, ‘19 ‘18 for the longer term or is this just more of a catch up back to normalcy in your view, I just want to get your big picture take on the buying environment?.

Yes, I'm going to turn it over to Dean to get into that. And I'll tell you, though, that replacement cycles, as you know, David have been all over the map, depending on which five-year period of time you look at.

As an industry, we always said it was that we were on a five-year replacement cycle, but that was usually imposed by technological advances like TITO, and not necessarily by machines wearing out, these machines just don't wearout. More importantly, the customer's interest might wear out. And that's what really drives replacement cycles.

But Dean wouldn't let you speak to that question..

We're seeing similar to 2019 levels. Depending on the property, it's a little more tired in terms of product a little bit more. Otherwise, that they progressed throughout the last couple of years, maybe a little bit less. But Mike's spot on, usually in the five-year cycle, there's a technological driver don't have that.

So it's more than standard refresh phase, I would call it..

Okay, well, very good. Thanks again, guys..

Thanks, David..

Our next question is from Jeff Stantial with Stifel. Please proceed..

Great. Good morning everyone all. My congratulations to you both Mike and Randy's been really great to work with you guys these past several years. And definitely wish the both of you the basket in your respective new roles here..

Thank you Jeff..

I wanted to start on Australia for a second if we could just given the recent M&A activity.

And I was just curious, how should we think about the timing for you to really begin building momentum in that market more so on the gaming side and what kind of further investment if any, do you think it's going to be required to get where you want to be ultimately?.

Jeff, let me -- first I don't want to [short trip] Darren at all because he's hitting the ground with a company that is up and running and is throwing out EBITDA today and he has done a great job in that market.

And that's got a nice, I think it's got a nice blend of products that we can take there and that they have developed that we can bring over here. So let me just say that's the start of our Australian operations that are actually going to be included in our P&L.

But Dean do you want to speak to the game side?.

Sure. I would say the expectation would be by the end of 2023 to be able to leverage a -- what I would call a more larger studio presence down there that would do a couple of things not only enable us to get into a new market, but also be able to leverage content coming into North America as well.

But that's going to take a little bit of time to not only build that, but implement protocols into our current platform that we use..

Yes Jeff I -- yes I just following on Dean's comment, I think you'll probably see Australian style games coming out of that studio being spread in the U.S. before you see us actually selling games in Australia..

Okay, perfect. That's a super helpful. And then for my follow up, I did want to spend a minute on supply chain disruptions and potentially just clear some noise out there right now, you did call out that. It seems like there's some light coming at the end of the tunnel.

But I was more curious, you know, as it stands today, how would the impact and weigh out? Are you seeing it really more in in gross margins and more with lead times? And then just to be clear, and clear up any potential noise here? Any implications from everything going on in Russia and the Ukraine from a sourcing perspective?.

Well, let me take the last one first. And no, we don't see anything coming from that issue in the Ukraine with Russia. We're not sourcing anything from there that would cause us any issues that -- I don't believe we're sourcing anything at all. And supply chain as you know, covers both of our businesses.

I think Dean is -- has been dealing with these issues more, perhaps than Darren has. But let me ask both of them to speak to redeem your -- Darren go first..

Yes, again, I think, both sides both [indiscernible] and games, I think we did a really solid job in terms of even going back to ‘20 and ‘21, in terms of anticipating that these things were starting to happen. I think we're looking for it to somewhat continue through the first half of ‘22.

And then, again, probably abate in the second half, nothing material that we expect will impact us. Nothing has impacted us so far. It might be pushing some things out from one month to the next month, but there's nothing material in terms of supply chain that's impacting us at this point..

Dean?.

Yes, the only thing I would add is it is obviously challenges that we've been very resilient to working through it. Also our increases in terms of what our demand forecasting has been, we've exceeded though.

So it's not so much supply chain, but if you let us say do a one and a half times your supply plan, in terms of especially getting long lead time items, with or without the international supply chain side, you got to adapt and collaborate towards that.

So it's, I wouldn't call it a headwind, it's a great problem to have, because we've publicly out kick the coverage in terms of how much products we need to bring in-house. So even will be even more resilient with respect to the challenges. I think, we just continue to work through it and get product out to the field..

Helpful and encouraging as always. Thank you all. And once again, congrats, Mike and Randy..

Thanks, Jeff..

Thanks, Jeff..

[Operator Instructions] Our next question comes from Chad Beynon with Macquarie. Please proceed..

Hi, good morning. Thanks for taking my question. Mike, Randy, congrats on everything from myself as well.

Regarding the guidance, a lot of components in there that you laid out, and it's very early in the year and conservative is usually a good approach to take this early in the year given everything that that's going on, but wanted to focus on just your comment around I guess the $40 level for your gaming operations yields it seems like that's been improving as premium represents a bigger piece of that on an annualized basis, I think we should certainly be above $40.

Wondering if you could comment on maybe what any impact was in January, we've heard from some of your partners that there was a little bit of weakness to kind of start the year, just given Omicron. And just anything else you can kind of comment on around that $40 level or what you've seen so far to start the quarter? Thanks..

Sure. Chad. Thank you. And I think Mark should give you some read on this..

Yes, I'll go to the latter part first. You didn't mention that, some of the operators have been mentioning a little bit softer January with respect to Omicron. We do have would say we've seen that flowing through the early January numbers February started-off seems to pick up a little bit. So we're optimistic about maybe getting more behind us.

But clearly throughout the full year, you should expect to see the ups and lows that we've been seeing of the pandemic that impacts the business.

As we look towards the actual daily win, we mentioned on our call last quarter, again, we'll talk in this quarter somewhat, but we expect to see more base units going out into the installed base, that that's going to impact us whether it's that one large property install that we have in Oklahoma or the Delaware that we've been rolling out their significant number of units.

And that added a big a lot of issues that could impact the daily wind and caused the daily win number to drop a little bit slightly closer to that $40 range.

But again, we expect to see our top line revenue growing and these all these units that we add in the installed base certainly have great return and they're good units to add to the installed base.

So we're not so focused on the individual metric of daily win it's more of a kind of a gauge of health but, we expect to stay at or above $40 for the year and see some seasonal influences and these new installing that could impact that and cause it to dip or rise..

Okay, that makes sense. Thanks, Mark. And then just a follow up also on the gaming business, you mentioned that you're getting into the HRM market is any of that included in kind of how you're thinking about 2022.

And just any additional color in terms of the timing in terms of being able to deploy these machines?.

Chad, I can take that it's minimal, where I would say [indiscernible] water into that market. Working up, I would say a little bit of a much longer term plan that will have more of an impact in 2023. But will be in there, you'll start to see units and some of these various jurisdictions start --.

Great. Thanks, guys. Appreciate it..

Thank you, Mr. Chad..

Our next question is from John Davis with Raymond James. Please proceed..

Hey, good morning, guys. My congrats, Mike and Randy, quite a run here. But first on margin, I know you have been guide to revenue for the full year. But maybe there's probably some dependence as far as game sales or game ups. And we just maybe some puts and takes on the margin and how each thing on a year-over-year basis versus 2021.

I think in the past, you said you kind of expect some modest compression.

But any other comments that would be helpful?.

Yes, I mean, again, I want to frame the compression comments around the guides of we expect equipment sales to increase much faster, with the last couple of years being depressed by COVID. And operators not spending a lot in the way of games or financial equipment.

And with the healthy growth in that in stuff is a game sales piece and obviously has a much lower margin profile than our cash access or our recurring revenues in the gaming ops business. So that picks up that should cause the blended margin percentage to compress a little bit, as you said.

Again, I think as we move into 2022, you should expect to see a little bit of a downward draft because we expect to see some nice healthy growth in the equipment sales side of the business.

But, we still probably exceed where we were pretty pandemic periods in terms of [indiscernible] just because of the strength of the recurring revenue businesses that we've had and the growth we've experienced there. So, you're probably in the high 40s, if not low 50s, as we progress forward throughout the year..

Yes, I'd say and including that obviously, it's just the overall inflation, employee costs, et cetera. So I'm with Mark, I think it's more mixed than it is necessarily, rising costs..

Okay, and then just to clarify on the guide, what if any, is baked in for inorganic contributions from Atlas and ecash are the relatively small but there's a couple million dollars not in the guide just say any color there will be helpful..

Yes, I think that's exactly right. We're still working on getting these acquisitions totally closed. So that's still kind of open. But I think in terms of U.S.

dollars, you're looking that ecash probably contributing about a million bucks a quarter right now, Atlas might be without selling as the Australian market selling product, it's probably a little bit of an EBITDA drag in the near-term is it's more of a development shop than -- for sale shops.

So net, you're probably picking up a couple million dollars in the U.S. today. And as we expand that business and invest in that business, we think it'll pick up meaningfully in the coming periods and years..

Okay, just to be clear, Mark that, call it, whatever, let's call it, net $2 million is or is not included in the outlook or the ecash included? It is..

Yes, look, we certainly anticipate closing that here in relatively short order. So in our numbers, you've got a couple dollars in there, you got a couple million probably of opportunity in there. And again, to the extent we're able to get it close sooner and accelerate the growth there. And that's how you get kind of to the top end of the range.

And that's kind of the puts and takes and everything..

Okay, and then last question for me CapEx, I think this year's just a touch higher, obviously, very good free cash flow generation of a million dollars at the top end, anything to call out specifically on the CapEx side, as soon as kind of supply chain issues, and it was kind of a good run rate to you going forward, the incredible commentary, that'll be helpful?.

I'll take that one to for you John. Look, we ended the year with CapEx just under $105 million. Certainly we were judicious in our spend early in the year and throughout the year. And as we progress through the year with supply chain pressures, I'll call them we certainly prioritize equipment sales.

But if there was choices to be made there, I think, as I mentioned a little earlier, one of the earlier questions, both ‘20 and ‘21, we are -- I'll call them relatively light years in terms of cap spend for the business, even though we were growing the business. So there's a little bit of deferred spend that we have outstanding.

That's why when you look at where we are guiding for next year for CapEx of $120 million to $132 million, you'll see a little bit of lift in there as we work to keep the maximum return from our installed base moving forward..

And John I would say that the investments we're going to make internally, from an R&D standpoint, we're going to have a little bit more capitalized there as well, palaces beginners and expense there'll be some cap there, as well as some of the things that Darren continues to do on the FinTech side. So I think we add those together.

It's why we're expecting a little bit higher than maybe what's your you were expecting?.

Okay. All right. Appreciate it as always. Thanks again, guys..

Thanks, JD..

Thanks John..

We have time for one final question. And that will be Barry Jonas with Truist Securities. Please proceed..

Hey, guys, Patrick here filling in for Barry, thanks for taking my question. Also wanted to start by saying congrats to Mike. Also, congrats for Randy, we're wishing you the best in your new roles. Just a couple high level questions on CapEx by May.

First to what extent are larger operators taking a wait and see approach and what you think needs to happen to get them on board?.

[indiscernible]..

Say that again. Once again, I think it's going to be towards the 2019 levels, you will have some other operators that who haven't refreshed before and more significantly in a while there will be a little bit more aggressive.

But I think the best way to frame it up is that it returns reasonably at least for this period of time presuming that nothing else happens in the upcoming quarters to some other levels in 2019..

And it's a panic -- I know that there's any you can point out specifically when they'll open up, I think they're taking a wait and see look as well.

So I -- it may come a little bit later in the year, but it's convenient to still be close to what you know, the ‘18, ‘19 was on a refresh standpoint, but it'll be hard to see how they come out of the gate is they want to see how their business performs. And we said January was a little slow. So that may impact that..

And if you were referring to the cash flow side to will there kind of weigh in on the cashless side and how that progression might happen and what we think the uptake will be there..

Yes, I mean, I think-- it's obvious that there is a capital investment needed to move forward with the capital strategy. So again I think like the game side, they're being prudent with their investments.

And I think it's a -- just see how the year trends but I would say from the FinTech side a lot of the operators are planning for their digital strategies, which is including cashless and so I think you're just going to see a continued growth in that part of the business for us..

Oh, that's great. Yes, all color I will appreciate it.

And then for a follow up, you talked about the potential for expanding cash flows into non-gaming at some point, just curious to see if any updates there or anything else you could say to help frame the opportunity?.

Sure, let me let me jump on that only because Darren's in the weeds of it. I mean, we continue to look at on the casino resort side, we look at all portions of the operation.

And obviously, if we can use cashless throughout a casino floor, that means we can use cashless in virtually any business that is similar to those, so food and beverage, hotel entertainment, even online retail or online gaming. And so absolutely, that's available to us.

The question for us, really from a -- an operational side, where do you focus first, and right now we're focused on getting the casinos up, and getting them cashless opportunities throughout their casino premise. But as we look at that, we also look at what are the opportunities and other verticals beyond just casino resorts..

Thanks guys so much. Congrats again and good luck..

Thanks..

Thanks Patrick..

Thank you. This does conclude our question and answer session. I would like to turn the conference back over to Mr. Taylor for closing remarks..

Thank you for joining us today. We appreciate your interest in Everi and I would assure everyone that our focus remains clearly on achieving sustainable growth and building long-term shareholder value. We look forward to providing you with an update our next quarterly call. Thank you..

Thank you. This does conclude today's conference. You may disconnect your lines at this time. And thank you for your participation..