Q4 2019 Earnings Call
By and welcome to <unk>.
First quarter 2019 earnings conference call. During today's presentation, all parties may listen only mode. Following the prepared remarks to call will be open for question and answer session. This discussion is being recorded today and now I would like to turn the conference over to Mr. Bill Pfund, Vice President of Investor Relations. Please go ahead Sir.
Thank you Lisa and welcome everyone. Let me begin by reminding everyone of the Safe Harbor disclaimers that covers today's call and webcast. Our call will contain forward looking statements and assumptions, which involve risks and uncertainties that could cause actual results to differ materially from those discussed during the call.
These risks and uncertainties include but are not limited to those contained in our SCC filings, which are posted in the investor section of our corporate web site at every dotcom.
We do not intend and assumes no obligation to update any forward looking statements. You are cautioned not to place undue reliance on forward looking statements, which are made only adds up today March 2nd 2020.
In addition, we will refer to certain non-GAAP financial measures such as adjusted EBITDA free cash flow total net debt and total net debt leverage ratio a description of each non-GAAP measure and a reconciliation to the most directly comparable GAAP measures can be found in our earnings release unrelated eight.
Okay as well as within the Investor section on our website.
This call is being webcast and recorded a link to the webcast and a replay of todays call can be found in the investor section of our website.
Joining me on the call today, our Mike Rumbled, our Chief Executive Officer, Randy Taylor, Chief Financial Officer, being Ehrlich games business leader Darrin Simmons Fintech business leader, Harpercollins General Counsel and Mark lab by Senior Vice President of Finance and Investor Relations now let me.
Turning the call over to Mike. Thank you Bill good afternoon, everyone and thank you for joining us today.
Before discussing our fourth quarter results, we would like to extend our sympathies to those communities around the globe that are being impacted by the cobot 19 virus.
We continue to monitor this situation closely including how it can affect our supply chain, however, well being of our team members is the top priority for us and were advising them to take appropriate precautions per CDC guidelines.
We have certainly noted the viruses impact on global markets, including the gaming sector.
But every has not experienced any discernible impact to date.
At the present time the guidance presented in our earnings release today does not contemplate any impact from the virus.
Our business today is much stronger than just two years ago.
This is most evident when considering both the de leveraging we've already achieved and our improved free cash flow in 2019, as well as our expectations for 2020.
As a north American centric company, we do not expect the same risk exposure as far more globally focused competition.
Our customer base, specifically and the gaming business generally is very diversified even within North America.
In fact, the majority of regional or local casinos or outside of the gaming markets frequented by international visitors.
In addition, the balance between our games and Fintech segments, and the continuing significant opportunities within North America provide us with a substantial runway for growth.
So turning now to our results.
Our strong fourth quarter and for your 2019 results reflect a clear focus on our priorities and solid execution across our businesses.
This execution resulted in our 14th consecutive quarter of year over year growth in both revenue and adjusted EBITDA.
Fourth quarter revenue increased 22% well they won a onetime rather 6.4 million pretax charge for the proposed settlement of litigation led to a net loss in the period.
Now once the settlement is approved by the court the legal cost in distraction caused by this proceeding well be behind us.
Adjusted EBITDA, which excludes the onetime charge rose, 16% to 63.2 million in the fourth quarter on quarterly record revenues of 145.2 million.
Driving that strong performance were record performances in both our games and Fintech segments.
The fourth quarter capped a strong 2019, we ended the year with momentum in Fintech kiosk sales.
Consistent increases in the number of cash access transactions and total dollars process on a same store basis together with solid customer demand for our new loyalty a player loyalty products and our services.
Our game segment momentum also continued with a record year end installed base.
Quarterly record daily win per unit and solid growth in gaming machine sales.
We have a strong pipeline of new cabinets and gaming content that will be launched this year and as we further if all are already industry, leading portfolio of integrated Fintech solutions, our momentum for both businesses is expected to continue in 2020.
Now, while we're on a continuous journey to strengthen the organization and our corporate culture.
Many significant strides over the last several years.
We have built a team that is focused on creative innovation and that executes at a high level to bring new products to the marketplace.
Just last week at the annual either as an creature Gaming Award ceremony every one three awards for the top performing new mechanical real core game with our cash machine themed game.
For the top performing third party intellectual property branded game for shark week jaws of steel and our company one for the most improve supplier in the premium game category.
Hi, I'm extremely proud of our game development in hardware design teams and the progress that we've made over the last several years.
It is extremely satisfying to see that the hard work by everyone is being recognized by both our customers and our industry peers.
But the team that we have in place now I'm very optimistic about both our ability and our capability to achieve further growth this year.
Now I'd like to share a few quick fourth quarter highlights from across the company.
In our games business highlights include the exceptional performance in both gaming operations placements and daily win per unit.
The ongoing success of our higher yielding premium games was the primary driver behind a 21% increase in quarterly daily win per unit to an all time high up $34.52 per unit.
Our installed base increased 439 games on a quarterly sequential basis to an all time high of 14711 games as of December 31, 2019.
Premium placements increased by 765 units on a quarterly sequential basis of which 58 were higher yielding wide area progressive units.
Our premium units as of December 31, 29 team were 35% of our total base compared with just 20% at year end 2018.
And ongoing key factor behind our premium game growth is the strong player appeal and customer demand for the game themes on our premium.
He 50 527 cabinet.
Both our smoking hot stuff Wicked wheel and shark week units continued to perform at a very high level consistently exceeding their category in house averages.
We're also very encouraged by the early strong performance of our newest game theme for this cabinet the fault.
In November 2019, we placed the ball at 10 of our first to market partner casinos, which are large casinos geographically spread across the United States.
While it's still early the results to date are equal to or exceed the high standards that we have set with smoking hot stuff, we could wheel and shark week.
In the fourth quarter. We also reached an agreement with the New York State Lottery Commission that extends our longstanding relationship for another 10 years.
This is our business, providing and maintaining the central determinant monitoring and accounting system for the more than 17000 VLP is across the state.
We have supported the New York Lotteries gaming program since its beginning 17 years ago.
We're very pleased to maintain this long term relationship with the state and we're also pleased with the improved economics in this latest agreement.
Another highlight was the fourth quarter record of sales of 1348 gaming machines, which is up 15%.
We achieved this despite a tough comparison quarter as the 2018 fourth quarter included the sale of approximately 120 premium turn event units to a large multi property customer.
Our average sales price of 17630 was lower than last year's fourth quarter, given the premium price on last year's churn event sales, but it was in line with the average of our most recent quarters.
Now turning to the highlights of our Fintech business. We continued our consistent operational excellence as the leading provider of integrated financial and player loyalty solutions for the gaming industry.
Our cash access business had its 21st consecutive quarter of same store increases in both transaction volumes and dollars processed. This was a major driver of the 4% revenue increase over the same quarter a year ago.
Fintech equipment sales revenues more than doubled.
This was primarily driven by the demand for our fully integrated self service kiosks.
There was also a 1.9 million dollar contribution from sales of self service player loyalty kiosks, which is up from the 1.2 million of revenue in the third quarter.
In large part this growth in equipment sales was driven by additional units to our existing customers.
As we previously noted we believe we're generating a portion of our sales from a refresh cycle for our kiosks.
Due to the significant growth in the number of integrated kiosks over the last five years, we now have more than twice as many of these kiosks in the field as we do standalone ATM and more than 60% of the kiosks are older than three years.
Revenue from information and other services in the fourth quarter increase substantially organic revenue growth was 19% and we generated an additional 4.3 million from our acquired player loyalty and marketing business.
Information and other services revenue includes our subscription services, such as credit information compliant services and player loyalty as well as kiosk maintenance revenue and the upfront revenue from newly initiated software licenses.
Now be took before I turn the call over to Randy I want to highlight how extremely pleased we are with the integration and scaling of our loyalty products business.
We followed the successful purchase of atrium loyalty assets in March 2019, with the addition of loyalty assets from MGT in December.
The purchase of MGTS loyalty assets brought a complimentary customer base and a team of talented people, including a strong contingent of customer focused sales and service personnel.
They're focused on ensuring a positive customer experience is best in industry class and is a discipline that we can use to enhance our capabilities across the entire company.
We couldn't be more positive about all areas of this business, including its strategic fit within our portfolio and under Darrens leadership, it's growth potential.
With that I'll turn the call over to Randy. Thank you, Mike and good afternoon, everyone.
For the fourth quarter of 2019 total revenues rose 22%.
This includes 16% organic growth and a 6.2 million contribution from our newly acquired player loyalty operations, which is up from 4.6 million in Q3 2019.
Adjusted EBITDA increased by 16% to 63.2 million.
This reflects the higher revenue, partially offset by a change in revenue mix, along with higher SDMA in R&D expense consolidated free cash flow increased 6.4 million year over year to a 4.5 million in the fourth quarter 2019.
In our game segment, adjusted EBITDA increased 20% outpacing a 15% revenue gains.
Yes, the EBITDA as a percentage of games revenues increased to 45.9% in the fourth quarter 2019, compared to 44.2% in the prior year quarter.
This year over year improvement reflects a revenue mix shift to a greater contribution of higher margin gaming operations revenue and in particular was driven by the 21% increase in daily win per unit.
This improvement was partially offset by an increase in operating expenses, primarily reflecting higher compensation and R&D expense in the quarter.
Gaming operations revenue increased 22%, reflecting the ongoing strength and daily win per unit and the net growth and the total installed base.
Its exceptional performance reflects the improvements made during the last year across the full range of our portfolio of game content and differentiated cabinets these improvements, including a strong pipeline a premium content.
Coupled with our disciplined allocation that incremental capital toward additional gaming machines to ensure we earn at appropriate return.
In addition to the incremental units installed we continue to replace an upgrade older units on casino floors.
Many of which we replaced with premium units.
As a reminder, our premium you guys provides some of our highest financial returns.
Based on the average daily win per unit performance of our premium units the present cash payback for each new deployed cabin generally 12 months with the potential to maintain that cash generation over several years through less costly game refreshes.
We did have a solid backlog for a premium units at the ended the quarter, which should allow us to grow our installed base in Q1 2020. Despite the net loss of approximately 170 units from a tribal customer that converted their floor from class two to class three in February of this year.
We expect to end the first quarter with an installed base between 14750 and 14850, along with a low double digit increase in daily win per unit compared to the prior year quarter.
We expect daily win per unit will continue to grow in each quarter. In 2020, we would expect the growth rate to be slower in the second half of the year as you will be comparing to guess against a tough comps from the back half of last year.
Our interactive operations continued to show revenue growth in the quarter, a new went live with several new casino partners that now offer a selection of our games online in real money format.
This is this is that an effective way to leverage the player appeal and performance of our growing library of land based games.
As our portfolio of new games continues to expand the land based world. We also continue to port them for play into the online world.
Our team remains focused on expanding our online presence today, we have a pipeline of more than 20 casinos in New Jersey, and Pennsylvania, with whom we are working to build the necessary secure connections with our remote game server for real money gaming.
We continue to explore further expansions.
For 2019 total total unit sales increased 9% over 2018, including a 15% increase in the fourth quarter.
The strong into the year is evidenced both our great product showing at GGB with a particular highlight being our mechanical reel slots as was operators, having some capital at year end that they wanted to spend.
While most of our competitors have not yet reported their results for the quarter ended December 31st we do anticipate that our overall ship share improved in 2019.
As noted in our press release on February 19th we have launched our new for sale Empire Flex cabinet. The broad suite of game content, which we expect will contribute to our ongoing growth in 2020.
I'd also note that we are now live and casinos with initial units of our new Empire, DCIX cabinet, which is a for lease only product.
The mask and cry kit or the initial themes and we are encouraged by the performance out of the gate.
We also launched our new turn of it six that Oh system that provides operators in players greater flexibility in managing slot tournaments, including a sit and go feature that allows patrons to participate in the tournament on their own time schedule throughout the day or over a longer period of time set by the casino.
In addition, this upgraded version enhances revenue game performance when the units are not internal vote.
For unit sales, while while our outlook contemplates full year growth compared to 2019, we do have tough comps the first and second quarters of 2020.
The first half of 2019, we had 195 units purchased from our installed base by customer.
The Boston Encore opening with approximately 100 units and another 101 units were sold to the Harris property that opened in northern California.
In general while our customers tell us that they have budgets that are similar to last year.
Leave operators are being cautious given the uncertain macroeconomic start to the year.
As a cautious CFO myself I can understand that they would like to see how the year begins before extensively committing their capital.
Behavior is largely consistent with the last several years.
Turning to our Fintech segment fourth quarter revenue increased 30% inclusive of organic growth of 18% and the contribution from our acquired player loyalty operations.
Adjusted EBITDA grew 11%.
Adjusted EBITDA as a percentage of Fintech revenues and the 2019 fourth quarter declined to 40.8% compared to 47.6% in the fourth quarter of 2018.
This decrease reflects a mix shift in revenues toward more equipment sales, which provide a lower gross profit contribution then services along with higher incremental check warranty expense and an increase in SDMA in R&D costs.
I would note that as a result of the higher rate of equipment sales are expanding base positions us well to grow our higher margin services revenue in future periods.
The increase in our SGN eight R&D costs for Fintech includes the costs associated with the acquired player loyalty business and higher compensation costs. In addition, we've increased our R&D activity focused on internal innovation around new features and functionality as well as costs related to building our vision of an integrated digital game.
The neighborhood, including our digital wallet.
Check warranty expense increase which has noted in Q3 continued into the fourth quarter.
We had expected at improvement, but we now believe it changes we are implementing implementing will likely take a few more quarters before we see a reduction in warranty expense.
Dissipate improvement throughout the year in 2020 with a greater amount of benefit in the second half of the year.
Moving to the balance sheet and our free cash flow.
The fourth quarter free cash flow increased $6.4 million over the prior year, bringing the full year total to 43.8 million nearly double the 24.8 million generated in 2018.
We used 2.5 million of our quarterly cash flow along with 30.5 million from the equity proceeds raised in December to pay down a portion of our term loan.
We also use 15 million to make the initial payment for the acquisition the player loyalty assets micro gaming technologies.
On January six following the required 30 day notice, we redeemed 84.5 million of our 7.5% unsecured notes.
This brought our outstanding total debt balance on a pro forma basis to approximately 1.04 billion.
As a result on a pro forma basis adjusting the year end debt to reflect the redemption of the unsecured notes our total net debt leverage ratio stood at 3.9 times 2019 adjusted EBITDA.
The fourth quarter capital expenditures totaled 32.6 million.
Games segment, Capex was 26.6 million and Fintech segment, Capex was 6 million.
Turning now to our 2020 outlook that we provided this afternoon.
Overall, we continue to see opportunities to maintain our growth profile.
Expect to generate growth within both our games and Fintech businesses.
With the performance and ongoing demand for our products and services the expertise of our people and our exciting opportunities. We believe we will succeed in making 2020 another great year.
We should continue to drive revenue grew at a high single to low double digit rate. We currently expect 2020 adjusted EBITDA to be in a range of 272 million to 282 million.
We're also focused on reinvesting in internal development activities to ensure that we maintain a level of strong sustainable growth through 2020 and beyond.
We are also committed to ensuring that our compensation levels and incentives are competitive and are aligned with our growth targets. Our full year guidance includes our known opportunities and headwinds revenue mix shifts investment in R&D and higher operating costs.
We expect as a result of lower cash interest costs lower placement fees and growth in adjusted EBITDA, We will generate 95 to 100 million a free cash flow this year.
We'll continue to prioritize the use of our growing free cash flow toward debt repayment with a goal of achieving total net debt leverage of three to three and a half times trailing adjusted EBITDA.
Secondarily, if opportunities present themselves for accretive tuck in acquisitions that we can scale for profitable growth, we could use a portion of our free cash flow to fund such an opportunity.
And as noted in this afternoon's press release, we have a new 10 million share repurchase authorization that we can utilize is another means of enhancing value for our shareholders.
With that I'll now turn the call back the operator for questions.
Thank you, Sir ladies and gentlemen, if you would like to ask your question. Please press star one on your telephone keypad.
Speakerphone.
Turned off.
Three charclub.
Sorry.
Question.
Our first question comes from Barry Jonas Suntrust.
Hey, guys. Thanks for taking my questions I wanted to touch on the guidance. Maybe just start can you maybe just talk through some key items, which are the difference between the higher than the low end of the guide. Thanks.
Sure Barry This is this is Randy.
Let me first of all look we gave our revenue growth that the I'll say high single to low double digits growth and I think if you use kind of those parameters that is going to be the top line, which should flow through but in those revenue differences. We looked again at our key CPI as you know our daily.
You win per unit, where that could be.
Our installed base when that install base gets puts that gets put out into the market. The earlier, we get it out there that the faster.
We'll see revenue growth.
We also just looked at the Fintech business, our player loyalty, but thats, a new business as we kind of see how that will ramp up and.
Growth throughout the year.
From a from a from the bill the lower end, we also kind of looked at a cautious outlook of the global macro environment.
Any slowdown in the economy.
Anything that would impact the spending of our of of our customers, but I will highlight to date, we have not seen anything that has impacted that so I. Just think it's just a range we use that we feel very comfortable.
Got it and then look aside from current virus I noticed that guidance excludes any impact on the class three Oklahoma business as it relates to the ongoing dispute between stayed in the tried it can you guys, maybe just help frame what the potential downside.
Maybe the upside here could be.
If we do see some impact to that class three business. Thanks.
Yes, well Barry Yes. This is Mike.
Actually you said it correctly.
Potentially upside I believe more than downside if class three becomes a problem. There is always the opportunity for the tribes to expand their footprint in class two machines and as you know everything we develop is both in class two and in class three so I would anticipate given our relationships in the south.
Great that we could be the beneficiary of that.
At this point as you know, though it's I mean, it's very difficult to tell what's going to happen in the court system.
Maybe just as a follow up on class to you talked about some reductions or subtract shifting from class to the class three but I'm curious like.
These days what exactly is the difference and look feel or maybe performance between class two and class three and maybe what's the right way to think about the growth profile between these two businesses.
Well, they look and they look and feel very similar to somebody who is not.
Really familiar with the differences between the two I can't tell you that they would necessarily automatically understand the difference between the two but by and large when placed on the same floor class three will do better than class to now.
In some places that may be much better in other places it will be slightly better, but by and large three will do better than two and and in Oklahoma. The tribes if elected to have a mix of both.
It's also the case in some some other states and in those other states when given the opportunity.
To go fully class three and not have that impact their payments.
I've seen them eliminate class two and go to class three.
And large class two machines are not paid.
No taxes paid or payments are paid to the state for their placement in casinos.
Great Thats really helpful. Alright, thanks, so much guys.
The next thanks Barry.
Larry.
Hi, good afternoon, and thanks for taking my question.
First I wanted to ask about international revenues I know historically this is Dan.
Up 5% I noticed in the release that.
But you were able to sell some some some games units internationally, but I think it's been a focus on the Fintech side also too.
Really show your offerings to some international customers. So could you kind of help us think about 2020, if if this should be a bigger year for international or this is more 2021 or beyond thanks.
Yes, I would say from an international standpoint, we've sold some units down into primarily South America, we are looking to potentially so.
So more how we clearly have a nice.
Offering in sales up in Canada, but I really kind of look at that is North America.
And potentially even into Australia, someday, but I think those are farther down the road and they're just I just a much smaller portion of of our business because I think we we have.
Quite a bit of opportunity in North America. So, although we will sell some product there I don't think I would put a large.
What percentage of our revenue growth coming from there and on the Fintech business now we still have.
You know operations in the UK.
We have some in Europe, it very small and we have.
A small amount very small amount in Macau, so again that percentage of our revenue and that's really with only one operator. So generally we don't even do cash access services in Macau. So there's just not a lot of international revenue just yet in our business.
Okay. Thank you.
Then shifting to the strong performance and giving up some premium side.
Really nice quarter in terms of units and win per day.
I believe from Merck versus has been driven by the.
27, and you noted that you do have a positive backlog for first quarter.
Are you seeing additional units being placed at properties that have.
Your your units throughout the year are these.
Properties or new clients can you just kind of help us think about the the framework in terms of where these units or be in place.
Chad as seen in both.
It's a location and the incremental ones as well.
Okay. Thank you very much appreciate it guys.
Thanks, Chad.
From Stifel.
Okay.
Hey, thanks for taking the questions guys.
First one just just what the the announcement today around the buyback I realize 10 millions not super large number, but obviously I think it it sends a clear message just curious how you're thinking about.
Capital allocation here now that you have you have made pretty good headway on the de leveraging front.
But you have a little bit of ways to go to get inside your range you now the buyback out there and you sort of talked a little bit about small tuck in deals. So can you just give us a flavor of how you're thinking about capital allocation at this point.
Sure Brad This is Randy so again I think we looked at the first allocation looking at 100 million and say our free cash flow.
We want to put about 10% towards a bucket, where there will ever use it we don't know, but we want it therefore as you say just.
And ability to I think the tuck ins again would be similar to what we've done in the past they would not be anything where we would do you know 50% of our free cash flow at least that's not we'd anticipate they would be smaller and they would be more earnout types I still think the majority of our free cash flow until we get to the range that we want will be fully fell.
Just on debt pay down, but it does give us the flexibility.
Something right comes along that we can tweak it up or tweak it down.
Okay. That's helpful and then.
Looking at the quarter.
And you guys did a good job of sort of foreshadowing this but.
The key sales on the Fintech side were exceptionally strong boosted as well by some early.
Player loyalty kiosk sales.
I think Mike made a comment about 60% of the existing fleet is three years or older in age I guess, how should we think about the trajectory there around the kiosk sales as we roll over into the new year.
Hey, Brad as Darren I think as we stated previously we still feel like we're in a good refresh cycle with customers and so we see that continuing into 2020. So.
The player loyalty piece again, that's a relatively new business for US again, we see.
Again trending trending nicely into 2020, so both of those will obviously see growth for us in 2000 joint.
And I really I would add there is I don't think your as you think debit growth I mean that that number that we sold in 19 was a solid number and more than we sold in a while so I don't want something to think that hey, it's going to be a again a decrease from double on top of that I think that those those numbers are solid for us I do think we'll see growth there.
But you won't see the same type of growth well since a wall to you very well could but I think what we're looking at is there we will be able to sell very well into that and and show some growth, but over the same growth level at least that's not or anticipating right now.
That makes sense, yeah, that's perfect Grandee I appreciate that and then lastly.
I realize you guys have no sort of or very limited direct exposure internationally on sort of.
Your your slot orphaned tech side of things, but mindful of the fact that you guys do source.
But for both segments from various suppliers around the globe can you speak to any sort of dislocations, you're seeing in the supply chain at this point, if any and Thats all for me. Thanks.
Yes, Brad. Thank you you know, we really haven't we haven't seen any real problems in the supply chain, yet we continue to monitor that carefully and and we do continue to look to secondary sources in the event that some of our.
Smaller supply needs.
End up drying upper end up being impacted by the Corona virus in Asia.
But currently we think we're in we're in good shape for the next couple of quarters.
I'd say, we actually we actually did a probably a little bit of buying at the end of the year just more based on kind of the projection of what are our sales would be and the units. The backlog that we had so we had to have some of that inventory on hand, so I'm I'm with Mike I think we look pretty good for the first half the year, but we'll monitor it will continue to monitor that throughout the year.
Perfect. Thanks, guys.
Thanks, Brett.
Next question is George.
Hello.
Thank you Randy as a self to find a conservative CFO.
I'm sure.
I see.
Net debt leverage starting with a three so congratulations on that.
Thanks George.
Question for Dean and Im not a doctor sounds like you have the common cold.
But.
Relative of faults.
Relative to the vault I'm interested in a little bit more detail given how strong smoking hot will and shark week have both been and you're suggesting this is doing as well or better can you just give us a perspective of what that might mean.
Yes.
I would tell you that.
Ranging somewhere in the neighborhood of almost twice as good as shark week.
Wow Okay.
With that.
That's a good leave Darren question for you relative to the increased.
Mount you're spending on Capex and expenses for the fin Tech group related to the integrated gaming neighborhood and the the wallet. What are you spending on and I am actually encouraged to see that increased spending that could result, I assume in some acceleration of that.
Yes, so I think with the.
Player loyalty business, obviously, that's overall key part of our strategy as it relates to.
The development of what we're describing as our digital neighborhood. So.
A lot of that investment is around.
[music].
Coming up with again, new products, new services that flesh out how that digital neighborhood is going to help our customers operationally create efficiencies for their businesses and obviously provide a great experience for their patron so.
Those combined investments as we tie player loyalty across the rest of our businesses is where that investments going.
Okay.
Okay. Thanks, guys.
Absolutely. Thank you George.
And the reminder, everyone. If you do have a question today.
On your telephone Keypad next is David Katz Jefferies.
Hi afternoon, everyone.
Nice nice quarter.
Just a few details one gene if I could follow that up one of the.
Aspects that we look at with new product introductions is evidence and I'm sure you do as well.
What evidence do you have the sustainability of what you've introduced so far right I mean, new games, often start out hot men cool off considerably obviously, you can't share those details because I assume their proprietary but do you have.
Some evidence of sustainability with the newest games you rolled out.
So David the first 90 days is a good indicator and we see.
Pretty good consistency with some of our new launches.
During the day right you don't know after what 80 or to 70 or how long.
In particular as core labs, but I would tell you were 50 527, we've seen greater longevity with those few products that we have with.
The other products I've seen throughout the industry.
Many years of BNN so I.
Hi, good leave it at that whether it's got to be.
2345 years, who knows but I could tell you spoken hopped up what goodwill as well north of a year and it's still holding relatively where where did what started.
No.
Okay that answers.
Yep.
Secondarily I just wanted to check on and this is not asking you for a prediction or indications because it's it's likely to early.
But you do have a presence and the Seattle area of Washington.
Can you help us just take attendance on what that exposure is just so we keep it.
Keep track how should we go.
Well I mean, and this is Mike David I mean, we're we have we have operations throughout tribal casinos in North America and commercial casinos in North America.
I don't think the concentrations any greater in Washington that isn't in California, or Florida, or or or Oklahoma, I mean in fact, oklahoma's probably stronger.
But we don't we don't really get into the percentage that we have any given market or the numbers that we havent given market.
But I don't think you should expect it to be.
Any more significant than any other jurisdiction.
Got it and my last question is really on the fin Tech side.
You know, you've obviously made some tuck ins and rolling.
Rolling those through into the next year.
Without guiding again.
What kind of a vision do you have for that business 234 years down the road and obviously the question has come up a couple of times.
From some of the pending consolidation that's out there in the industry.
Are those.
Would you consider those constructive are helpful or neutral.
Or is there any any risk that we can discuss.
Coming out of that Fintech side.
Yes sure there is there so what I would say specifically around the player loyalty acquisitions.
Consolidations that actually helped us and provided opportunities so.
I would say it's been a positive for us.
Great I don't mean my questions just how negative it's all just span.
So rhythmically good.
Randy I would thank you to understand I'm, just trying to figure out.
Make sure I am not missing anything.
Absolutely. Thanks for your I think we all get.
We do David no problem. Thank you.
Our next question is John Davis Raymond James.
Hey, good afternoon, guys want to drill on a little bit on the margin.
Randy you called out some check warranty expense I know, obviously have a different mix of business with the key the lower margin kiosks growing and also you new acquisitions are obviously lower margin as well. So I just look at the year over year decline and the margins how should I think about that is whats business mix change versus check warranty or something that may not started.
The one time is in this quarter, but should improve over time and kind of work at the core kind of what's the new run rate how should we think of new run rate margin and tax.
Yes, it's hard for me to for me to say I mean, John I I don't believe that you know the 40% 40, 41% is is the new run rate I do think.
There were just a couple of things that all hit in the same period. The check warranty was bigger than than I had anticipated fourth quarter. We do you think that will turn around I think that.
The loyalty you had some we had some good sales for both the kiosk equipment and the loyalty that add to it. So I still think we should be closer up probably to a probably a 45 overall, but you know it's that's hard to say on on do you have a good quarter, where you get like we did in the fourth quarter with.
Kiosk sales I'd love to say look I'll take that all day long if I can get 40%, but I can I can drop more to the bottom line, but I don't think it should be I do think it won't be 50% margin. There just because of the mix. We now have in in some of the the equipment sales, but I don't think it will be that level of the margin going forward.
Okay, and then obviously I understand it's very early.
With Corona, and obviously and I've got it doesn't include any impact begin to remind us what percentage of your revenue is Vegas I recall is 15% just wanted to confirm that and also have you seen any slowdown or any change in the operator behavior.
Obviously slower to put capital work is any of that does he was a virus or was that before we kind of had to worry about corona at all.
Well.
Yes, we're all trying to figure out where the 15% came from but.
But.
I have to tell you.
We are so spread across the United States John that.
That if Las Vegas.
Becomes an issue because of the because of the greater propensity for foreign travelers.
Choose Vegas as a destination.
Or Florida becomes an issue or new Jersey, or New York with our BLT Upper I mean, it could be any of those and and I think we're spread it spread out well enough on both sides of our business that I don't have a concern about any one location or any one jurisdiction becoming.
And issue for us.
And John are you looking at are you looking at just just a fintech side of our revenue business already looked like they told us that maybe maybe that's a sale number but I just remember that.
Surprisingly low percentage of your revenue comes from.
Yes. It is agents traveling to Vegas, that's not a biggest your spread out so I'll just maybe that's a little contact number that my head, but yes, that's trying to get a sense.
It's not you're not overly index to Vegas was kind of the point.
No we're not as not thats accurate that isn't that is definitely accurate with the regional casinos and tribal throughout North America, it's definitely.
We're not concentrated in one location.
Okay, I think thats it for me thanks, guys.
Okay. Thanks, John Asia.
Okay.
Okay.
Hello.
But.
Operator somebody on order.
Though Carter I.
Hi, guys.
Aligned.
Hey, guys and thanks for taking the question.
Most of my question has been asked can answer I'm. Just wondering if you guys could comment there will be done when you guys see the capital structure given that your bonds become callable on December do you guys see something more prone to more bonds prone to them or a term loan or how do you see your long term care.
Structure.
Yeah, I think it's I think it's in the it's under review right now is what I would say, we're going to continue to watch what's the markets and look at I mean.
Clearly the interest rate even on the term loan is beneficial to us.
Although it's nice to have some fixed so I don't really have an answer for you other than we're going to continue to monitor it and we obviously know that the make whole to ends in December and that premium is 3.5%.
And so we may look at the entire.
Debt structure or we May just look at that piece or we may do nothing but I would say, it's on our radar screen and.
We are going up we're going to see how the markets evolve over the next couple of quarters, but its little early for us at this point in time.
And Josh.
Lastly related to this.
Starting any discussions we the rating agencies about.
Becoming investment grade.
You know whats your target for becoming investment grade or if it's something that you guys even have considered.
Well I would say, we'd love to be investment grade, but I would say we had we just got the the upgrade in ratings at the end of the year when we did the offering.
We definitely are have plans to go out in and continue to meet with the rating agencies, because I think as we continue to perform we should see some improvements, but I think.
That's a little ways off but it's definitely a goal of ours a longer term goal of ours at this point.
Thank you so much.
Thank you.
Thank you all for your questions I'll hand back to Mr. Taylor for any additional.
Okay.
We'd like to thank everyone for joining us today on the call and we look forward to discussing our first quarter results in early may. Thank you. Thanks, everyone.
Again, ladies and gentlemen that does conclude today's conference. Thank you all for your participation today you may now disconnect.
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