Q2 2020 Everi Holdings Inc Earnings Call

Thank you for standing by we will begin momentarily again, thank you for standing by.

[music].

Please standby.

Hello, everyone. Thank you for standing by and welcome to the every holdings.

2022nd quarter earnings Conference call.

During today's presentation, all parties will be in listen only mode.

So going be prepared remarks, the call will be open for a question and answer session.

As a reminder, this call is being recorded now let me turn the call over to build on Vice President Investor Relations. Please go ahead Sir.

Thank you operator and welcome everyone.

Since we're operating from multiple locations today, please bear with US in case, we end up with some sort of technical difficulties.

Let me begin by reminding everyone of the Safe Harbor disclaimer that covers todays call and webcast. Our called 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 other S. T SEC filings, which are posted in the Investor section of our corporate web site at every dot com.

We do not intend and assumes no obligation to update any forward looking statements youre cautioned not to place undue reliance on forward looking statements, which are made only as of today August 4th 2020.

In addition, we will 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.

Description of each non-GAAP measure and a reconciliation to the most directly comparable GAAP measures can be found in our earnings release and related 8-K as well as within the investors section on our website. This call is being webcast and recorded a linked to the webcast and replay of today's call can be found.

In the Investor section of our website joining me on the call today, our Mike Rumbles, Our Chief Executive Officer, Randy Taylor, President and Chief Operating Officer, Mark Lab by Executive Vice President and Chief Financial Officer in Air like our games business leader guaranteed Simmons.

Our Fintech business leader at Harpercollins General Counsel 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.

Since our last call about a month ago on June 2nd the gaming industry and we here at every I've made meaningful progress with casino reopenings across the country.

In April at the beginning of the second quarter as a direct result of all of our casino customers, having closed we had essentially no revenue.

By the end of June was about 75% of U.S. casinos reopened.

Revenues were ramping in conjunction with those real.

For the quarter, we achieved better than expected results, including generating positive adjusted EBITDA with positive contributions from both games and Fintech.

Previously we anticipated that this would not happen until the third quarter.

These results were accomplished largely due to four key factors.

First we start ticking rapid and aggressive action in March to reduce operating costs and cash right. That's what's taking steps to preserve and increase our liquidity position.

Second for the steps, we took to focus our priorities and enhanced our operational efficiencies Randy will be providing some additional details and perspective on these steps, which we believe we'll continue to have a positive impact.

Sure we're benefiting from the strong performing spark fin tech solutions, and the strength and growth of our recurring revenue gains.

Our games strength is result of the investments that we've made the last several years to foster a culture of originality and our game development Studios.

Along with that we've had a keen focus placed on product differentiation in both game features and game play.

Mark maybe speaking just some of the key performance trends, we experienced in the second quarter as well as how these metrics are trending at the beginning of the third quarter.

Fourth.

Although what occurred somewhat unevenly casinos open more quickly than we'd anticipated and.

As an even greater surprise, we saw an enthusiastic demand from casino patrons.

I would point out that even as we took aggressive steps to reduce costs. We maintained our focus on the development of products that provide cashless and contact with options.

Several years of experience under our belt, we anticipated that the pandemic could act as a catalyst to accelerate interest and demand like players into operators for knows for new solutions that offer contactless and cashless options and that supports social distancing.

Our focus is paying off.

Principally in the family of increased customer interest in our self service solutions that offer cashless optionality and cost efficiencies.

These offerings include our existing quick ticket product that allows players to receive a gaming culture, which can be inserted into their favorite slot machine, enabling them to avoid cash cash as well as face to face interaction with casino employees.

We're also completing development of a mobile application for these quick ticket transactions.

Additionally, the development of our fully digital cash club wallet continues including its integration with the leading gaming systems providers.

Cash footwall it expands the options per patron access to their funds, where when and how they want to access them.

This solution using every technology and money transmitter capability gives operators the opportunity to create a seamlessly integrated solution.

Cross on premise and online.

Multiple states and jurisdictions.

And it integrates their payments loyalty anti money laundering, and responsible gaming all into one ecosystem.

Oh, the extension of our cash club wallet to the wagering accounts systems will allow players to directly from a gaming machine to read cashless mobile application and also allows financial transactions to extend to locations off we gaming floor.

We have no doubt that the ability to easily and seamlessly use their casino wallet throughout a resort will provide the patrons within enhanced cashless experience.

This is an exciting growing opportunity for cashless gaming and gives everybody the ability to introduce new transaction types or said another way new revenue opportunities for both the casino operators and every.

You know given our many years of industry leadership in player funding solutions. We believe that we have first mover advantage and will become the leader in cashless funding options in casinos. As these technologies are adopted more broadly in the near and long term.

Now before I turn the call over to Randy I wouldn't like to remind our investors that the executive team here at every his position our company to quickly regained our revenue earnings and cash flow momentum, which was already building prior to the onset of the cobot 19 pandemic.

We continue to benefit from our existing offerings in both Fintech and games.

In particular, the player popularity and performance of our premium operating units together with the 636 unit increase in our installed base of operating units during the first half a 2020 should play a meaningful role in our second half results.

Additionally, we expect to benefit from the ability to assist customers to address the new operating environment with our cashless solutions that are available today and the pipeline of exciting products that we are developing to address the future.

Now, let me turn the call over to Randy just speak to some of the operational changes that we've made.

Thank you Mike good afternoon, everyone.

During the second quarter, we completed a comprehensive review of our opportunities in growth drivers together with our internal operational processes basically we took the opportunity to look at everything we do.

This review was done with a critical eye toward planning and adjusting our priorities. So that we could create and deliver our products and services with excellence under the new normal.

We embrace this review as a catalyst for improvement and have established a set of near and medium term priorities.

Well the first items was the realization that a significant portion of our workforce could be highly productive by working remotely.

Many actually prefer to do so.

This has allowed us to begin to consolidate facilities and plan for future consolidations.

And the terms of our various lease locations with the ultimate goal of reducing our annual occupancy costs.

Working more effectively from remote locations. We also expect to save on travel costs, all while enhancing our employees engagement.

In the quarter, we consolidated some of our corporate and Fintech space in Las Vegas, resulting in a 1 billion dollar charge in the quarter for lease exit costs. We continue to review our entirely footprint from warehousing to office space and expect further consolidation in the future.

We also incurred a charge of approximately 2.7 billion in the quarter for severance and other employee related costs as we streamline certain processes and right size, our business to focus on higher value opportunities.

Even as we leaned out the total organization.

Also redirected resources to higher value opportunities such as our cashless projects.

In addition, we reviewed our existing gaming Cabot development roadmap in light of it changes we expect in the industry.

As a result, we're focused on the appropriate product categories to drive further growth in both ship share in yield per unit in our product sales and gaming operations business.

Yes, we wrote down or reduce certain assets. It don't embody the above strategies together with some related inventory software and other costs. These non strategic asset write offs totaled 9.5 billion in the quarter.

Finally specific pandemic, we made the decision to cancel our annual turned a bit of champions event, which resulted in approximately 400000, a charges and we wrote off approximately 600000 receivables that we believe our uncollectible as a result casino closures.

Of the 14.8 million a pre tax charges in the second quarter approximate Lee 11 million was of a noncash in nature.

Second half of this year, we expect in the neighborhood of one to 2 million of additional charges related to our plan to further consolidation of facilities.

Going forward, we will continue to invest in innovation and development that offers the potential for growth and high returns. In addition to the heightened interest we are seeing in our forward thinking Fintech solutions. Our game studios have a full pipeline of exciting game content that we expect to launch in the coming months.

New games will augment our strong performing game themes that are already in the market.

I'd like to turn call over to Mark to share his perspective on our performance and the trends as we begin the third quarter and what that could mean for the future Mark.

Thanks, Randy because I like the imagery it conveys and sets the stage perfectly for my prepared remarks, I'm going to start by carrying forward. Your metaphor from the last fall and frame out our current views on our business operations.

With cobot effectively closing all the roads and highways or the gaming industry, our Ferrari spending the garage since you ended the first quarter.

Well as you know operating results indicate ranges for our is getting back on the road again.

As a conservative guy and when things only beginning to reopen he is checking out the lower gears first and while moving swiftly you still cautious.

However, with how our volumes are trending it suggests that we should be highly encouraged that even in this uncertain environment, we'll be able to open it up and running full throttle before too long.

Now that's rather protracted metaphor for saying that we believe we have an amazing car, which is our business and we see no fundamental issues with this powerful engine thats driving it.

We just need some open road to really let it before.

As all the roads reopened in the industry continues to stabilize in the near term we.

We expect to regain strong operating momentum in our business that we exhibited as we entered 2020.

We also continued to see an acceleration of growth opportunities that positions us well for long term success as a result as improvements. We're currently seeing and many of our key performance metrics that I'll highlight.

In the second quarter, our installed base grew by an additional 87 units on a quarterly sequential basis.

This was on top of the 140 units sequential increase we reported in the first quarter.

Year over year, that's a 9% increase over the ending installed base at June Thirtyth 29 King.

Significant in the quarter premium games accounted for 81 of these incremental units.

This is on top of the 555 unit quarterly sequential increase in premium is reported in the first quarter.

Greetings and you have grown almost 2400 units or approximately 70% since the June of last year and now represent approximately 39% of our total installed base.

This compares to just 25% a year ago.

Pandemic closing most casinos for a large portion of the first half of 2020.

636 increment mental units, we have added this year have not had the full opportunity to contribute to our growth in daily win per unit nor to total games revenue.

With our customers reopening.

Units coming back online and.

And the existing backlog of orders for new premium units, we are well positioned for continuing sequential unit and revenue growth.

Daily win per unit decline for the full quarter, which was expected. This almost exclusively the result of a large number of days in which no units were active we're generating revenue inside of the close casinos.

However, using internal metrics and based on the estimated number of units at our games were actually active during the quarter. The daily win per unit on our active devices was in excess of $35 per day.

This is comparable to where our units were performing at the beginning of the year.

Prior to the closure of casinos as a result for the pandemic.

Recent additions to the game portfolio as well as the performance of our existing installed base contributed to our strong performance.

Our recently introduced wide area Progressive game teams, the mask and Karate Kid.

Sure boats offered on our dual curved screen Dcs cabinet are performing very well out of the gate.

Our existing franchise games, such as shark week, which we launched in February of 2019, and smoking Hot stuff, we could wheel, which came to the market in October of 2018 also still remain strong performers.

Our latest premium non Wap games seem to vault, which launched in the fourth quarter of 29 team continues to exceed our expectations.

This game theme is currently performing at a level higher than any game. We've previously launched.

With the increased number of installed premium units and their ongoing strong performance. We continue to believe that our performance in gaming operations will be similar to work seed levels reached pre.

Yeah.

As it relates unit sales, we expect that operators in general will want to continue to conserve capital.

Therefore slot spend by our customers. This is expected to remain at reduced levels throughout 2020.

However, the first quarter lots of our newest cabinet flex with this combination of differentiated cabinet design and gain teams continue proven features in play mechanics positions us strongly to gain our fair share of any available slots spend by our customers.

Well the 381 units sold in the second quarter 109 reflects cabinets.

The relative performance of these flex units within our early adopters also remains very encouraging which gives us confidence and the opportunity for future sales.

Another way of looking at a relative strength is our floor share for new casino openings in general we have been garnering a floor shared new casinos that exceeds our overall floors here.

And even our most recent quarterly ship here.

This remains true for several of the locations. They are scheduled to open near the end of year as their construction periods and.

In our Fintech segment businesses also recovering strongly on a relative basis currently our same store sales for cash access transactions and volumes are trending only moderately below the levels experienced in the prior year.

We continue to believe the player loyalty business is great business and a great fit forever, we expect sales of loyalty software and the associated self service contests close kiosks to be meaningful contributor to our revenues in the near term.

Longer term the recurring software license support fees, we charged for these player loyalty of marketing products will supplement our already strong recurring revenue base.

In the second quarter revenues from player loyalty products and services totaled $3.8 million compared to 4.9 million a year ago.

Even during the period when casinos were closed and we deferred certain support contract revenues, we continue to install new player loyalty equipment, our customers facilities as a plan in prepared for their reopenings.

We also signed cash access agreements with both new and existing customers as casino operators continue to appreciate the value or a comprehensive and integrated fintech product and service solutions.

Turning now onto our balance sheet.

Our net cash position of 133 million improved from 40 million at the end of the first quarter.

This primarily reflects the 118 million of net proceeds we received from our new hundred 25 million incremental term loan, which you BARDA in April.

I'd also point out that during the second quarter, we incurred approximately 600000, a transaction related expenses in connection with the issuance of the incremental term loan and the amendment to our credit facility.

These charges were included in operating expense and combined with the charges. Randy just walk through are included in the 14.8 million a nonrecurring charges, we added back in the quarter in determining adjusted EBITDA.

We believe that our current not their current net cash position combined with the cost reduction initiatives that Randy as Mike discussed provides a strong base of liquidity and enables us to sustain our operations in the event of any near term pullback in the industry.

Finally, as it relates to our debt.

I'd also highlight that even with interest associated with the new incremental term loan and the full drought drawdown on our $35 million revolving credit facility, our cash interest in the second quarter was lower than the second quarter of the prior year.

As we look towards the second half of 2020, there's still plenty of uncertainty in the market. The American Gaming Association reports, but as of today approximately 85% of all U.S. casinos are now open.

Within our customer base, we're seeing a fairly similar percentage of total cash access terminals and gaining units as being installed in active locations.

We continue to expect more casinos reopened but with the majority now open this will occur at a slower paced than we saw in May and June.

While we remain cautious we are highly encouraged by performance achieved in June about what we've seen this fall thus far in the third quarter.

Given the social distancing and other capacity restrictions implemented by our customers many of our games remain active.

We believe our games that are active are still over indexing when compared to pre pandemic periods and we continue to see new orders for our premium products.

This means operators recognized that our games are in demand by players and this player demand is driving strong results today, and we expect will continue into the future.

Based upon the current level of activity and the strong relative performance in both our games and Fintech businesses. We now expect that we will generate positive free cash flow in both.

Third and fourth quarter.

This is a little earlier than our previous expectation when we talked about our first quarter results in June we had anticipated only positive free cash flow in the fourth quarter.

We also expected adjusted EBITDA will continue to improve in the third quarter and will then see further sequential improvement in the fourth quarter.

While it's still early provided there is no substantial industry pullback due to the second we have a covisint fall or winter all of our improving performance metrics would indicate that every should have strong here in 2021.

With that I'll now turn the call back over to the operator for questions.

Thank you and if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

If you're using a speakerphone. Please make sure immune function is turned off.

Your signal to reach our equipment.

Please we ask you to only have one question and one follow up today as a reminder, it is star one if you would like to ask a question.

And we'll take our first question from David Bain from Roth Capital. Please go ahead.

Great. Thank you Mark I apologize if you just reviewed this but just to that I'm clear.

For the days that the units were and use the daily win plus 9% versus last year can you give us a sense as to the number of units in the base that were on and then looking at July thinking about August sounds like your part with the industry, 85% of the games now generating revenue have you seen what kind of simultaneous impact to win per day have you seen.

And that ramp has occurred I mean, just kind of wondering as a whole that we've seen any kind of drop off after initial pent up demand, perhaps are real impact from cobot flare ups.

Or as demand just remain steady across the board.

I can certainly speak to our experience and we have certainly seen a I'll see fairly steady demand for the products as customers of reopened our cash access volumes have seen to remained consistent at locations in terms of performance and while moderately off the prior year, they do seem to be.

Holding fairly steady and we continue to add new customers as new markets open a new to cienas within those markets open. So so we've been seeing a nice steady growth in may and really in June as the bulk of the casinos opened up.

Terms to your first part of your question related to the gaming Ops business. You know, we really tried to frame out for you in the prepared remarks out how're units are performing and we think again, what we tried to convey is when you're certainly seeing over indexing compared to where we entered the cobot period that could be a function of fewer games on casino floors, but also I think it's the speaks to the.

Quality of our game content in the players how it's resonating with players in terms of performance. So we're still performing on a like for like basis on a same kind of day basis at levels in excess of $35 day, which is consistent to where we entered.

The pandemic close down periods.

Okay, great and.

No I got one follow up so I choose yet so I guess.

I'll ask Mike.

The you mentioned the increase interest were fully cashless, while at what what the mobile solution I'm, just curious as to the content of those discussions.

I mean after you educate the casino operator as does that kind of a loyalty Joel are tightening relationship opportunity with the patrons I think without that much capex from there and.

What's the biggest thing like what's the biggest doctor the moving this forward isn't waiting to see the first to adopt and then once it is adopted how do you work with the casino to educate the actual patriot about the technology, so they one download and to use it.

Yeah.

Well a couple of things there David first the.

During the closed down.

As a result of the pandemic, we talk to seems that actually took.

A quick ticket product that didn't have it previously we installed at to.

Two major customers locations during the dependent make shutdown because they were so interested in having something available when they reopen their casinos.

But we also have been.

Talking with management groups at a large number quite frankly of of our customers about the various products and which ones maybe the best for them I mean, one of the.

One of the questions. It always comes up is the adoption rate and yeah, we've seen an uptick in the adoption of quick ticket.

Over the over the last month or so once we started reopening casinos. So.

So we're seeing more use of quikticket, it's been more locations.

But a lot of pursuing those are asking us about what is what's going to take to go to be mobile applications and as we have those discussions you know we have to tell them that part of what's going to occurs the customer's going to have to adopt at the same time that you bring this onto your floor and that means you're going to have to help.

Educate the customer as we will and will help you in that effort.

But if you have today the customers have to feel comfortable with the technology and the best way to to introduce it to them is a combination of us and the casino operator.

And in particular their marketing departments, letting the customers know the value of using it and.

Because its tied into our loyalty systems.

That they'll be able to reward them for their use of that that cashless system, no matter, which one to install.

Got it okay. Thank you congrats.

Yeah. Thank you.

Well take our next question from John Davis from Raymond James. Please go ahead.

Hey, good afternoon, guys I, just really on the follow up on the the question on active machines that were just looks at 85% of casinos are open at the average casino. That's open he has had a ballpark what percentage of your machines are active obviously, a 35 dollar win per day is very positive, but just trying to.

To gauge what percentage of your machines in your footprint our active it open casinos.

Hey, John It's Randy just it's hard for us to too.

You know gets you what you're looking for.

I would say look on in our footprint, we believe that about 80% of our games at locations that are open ours are are available right. So how many they actually have up and operating Lincoln can depend from casinos casino. So I. It's just hard for me to give you a specific on how many of those are really operating right.

Now I guess feeling I can say as you know that detailed work that we did.

We believe you know that that our estimates that they're doing $35. A day I just can't tell you if that at bats specific locational overall I've got 90% of my 80% of machines up an operating it's just it's just not that easy we don't have that type of reporting and they can turn them off and on as as time goes on so I I.

I think that makes you can you can get from is that you know our footprint.

Yes, a large portion of our footprint is up and operating and I think as mark laid out really well.

At the games that are operating are doing above index that they were doing before so they're performing very well. So I wish I had better details there I really don't John.

Okay, John the only thing I would rather it's John the only thing I would add or that we do have configurations to allow us to keep Morgan song that most that upon configuration. So.

It does allow itself the opportunity to not have happened getting shot offices at 50% required that they would keep the gains that are more socially driven on rather.

So we're really working with our customers to do those types of creative.

I didn't concepts to make sure that.

We do that.

Thank you because many games on as possible.

Okay.

And then Randy I appreciate all the detail on the.

Our restructuring, but that's basically what it is any idea what we had annual cost saves our did you've implemented and we should think about the decremental margins from the revenue that's going to you know obviously be down year over year in threeq versus.

The benefit from a cost saves and then also the longer term impact potential impact on the margin and then finally, it'll be squeeze and just capex and cash interest expectations for for Threeq you. Thanks, guys.

I'll take this one John instead of Randy I would tell you I think got our last call we framed out for you.

35, 40 million kind of range in terms of Opex in R&D exclusive of a.

Certain cost for noncash items like the noncash comp piece of.

Of the.

Now I think that range still kind of holds true, we're probably a with more casinos opening with us.

He back employees to prepare for casinos opening restoring salary levels for employees were probably more near the higher end of that range for Q3, and probably right at the top of that range for Q4, leading into into 2021, I think if you look back at different analysts where their projections, where we've never given operating expenses.

As the guidance point, but I think folks were kind of more along the lines of 50 million for those two numbers. So so I think those savings that we see from the reduction in in a employee base plus some of the other cost saves that we think are in there should kind of frame you into into number without.

Too much work.

Okay. Thanks, and then just cash Capex and cash interest for Threeq you.

Yeah, Capex I think we're still pretty much a holding to our our estimates to be fourth last quarter on a where we thought we'd be for the year, which is about a third reduction from original guidance that kind of puts you somewhere and 75 to 80 million range I think we're expecting a good portion of that still our customer equipments and games.

On the installed base, we've talked about are I talked about in my remarks that we expect the <unk> the backlog in the pipeline for placements in the premium unit will help drive that but I think theres some variability or are some optionality in those numbers depending on how the market goes. So so I'd say, that's probably a good conservative estimate range of where we think capex will be for the.

Here and as it relates to a cash interest for the year you know we have our semi annual payments on our notes in June in December So Q3, they'll probably be probably just a little north of 12 million occurred interest rates and Q4, as probably 22, and a half 23 million somewhere in that range.

All right. Thanks, guys.

Actually it will take.

We'll take our next question from Barry Jonas come True Securities. Please go ahead.

Hey, Thanks, Thank you.

I wanted to start with the games.

Division can you maybe give a little more color about when you get these performance metrics maybe.

Give more color specific to the markets, whether that's tribal class two class three or commercial markets. Just curious if we can dive in anymore there.

Well I would say again, we have eight it's Randy Barry its you know clearly we've got a higher class two overall footprints. So you know I think we're we're performing.

Yeah that would be the biggest piece of it I still think our premium units, which make up 40% is where the majority of our revenues being driven from so yeah. I don't know how much you know regionally if there's not really were way that to break that out.

Because where we've got a fairly a spread out footprint, but you know again, what's what's really.

Pushing our performance is the premium games, which is almost 40% of our footprint and we believe those games or what it is whats being played the most.

Okay.

Larry I'm very I'd also tell you that up even within our standard class to install base.

Poor performance in gone up significantly year over year, or so we get some of those metrics as well and the power to say where are we website, which is part of market are we going up the most.

I think it all the above right now we're definitely been on a really good run in terms of.

Product that we've introduced not only in the premium side, but even in that standard side for significant installed basis without the classic customers.

Got it.

Got it that's great to hear and then maybe taking some of that commentary and applying it to fintech. If operators are noting lower visitation, but higher spend per visit can you just remind me for your cash access revenues.

Hi closer to the number of transactions or to the amounts processed.

Yes.

Well I'll tell you what.

Very I'm gonna have geron answer that for you, but I would.

No that were I mean.

We're seeing we're seeing greater.

Volume for the number of bodies that we believe are coming into the casino. So part of what you're seeing is an uptick in the amount of moneys are going through but we.

We don't we've never cast our.

Fintech revenues as being a a substitute for Gigi our numbers because.

What what happens so the cash after after our systems.

Put it out whether it be the ATM zohr cash access through the K two or through our kiosks.

We don't have we don't have a way of tracking where that money goes we know obviously that a good portion of its going to the casino, but also maybe used for other things around the casino operations, but darrens you want to address that question.

So far revenue standpoint based on the transaction. It's it's a combination of both depending on the transaction ATM is more on a per transaction basis. So that is really all about the volume or the other transactions are more really about the volume and decide the transaction that maybe the transaction, where we make so it's a combination of both for four of the cash.

For the quite the cash the debit and credit card transactions.

Well I guess, if if you look at your early 2018 disclosures I take ATM, even though it's a higher.

Gross number in terms of your actual revenues was it was a lower percentage.

So I guess I guess, what I'm getting at is.

As we see these trends of higher spend per player.

Even though maybe their social distancing limitations limiting the amount of players in there.

Like should we be more focused on the amount of cash that's going through the casino as opposed to the amount of players there.

Well I think the transaction volumes are still pretty good on a same store basis. We are seeing certainly higher average transaction size is but I don't know theres necessarily a drop off.

Really significantly on a same store basis for customers that have reopened.

As we kind of mentioned during the quarter. There really showed that pent up demand. It has not really dropped off and in fact, we're actually seeing you know into Q2 now into Q3 sort of that the lap of new contracts that we signed last year and then as we mentioned in the in the March remarks the.

The new contracts that we've actually signed had contributed so.

I don't think it's as big an issue that way.

In terms of the absolute size of the transaction because I do believe that you know our same store volumes are similar to pre killed and.

Got it okay. Thanks, so much guys.

Thanks very much.

Well now take our next question from Brad Blair from Stifel. Please go ahead.

Yeah. Thanks for taking the questions guys first question for whoever wants to take its just around the the growth and me in the installed base in the quarter.

Stoping, you could give some additional color as to sort of the composition of that gross you know where we over index.

To do vault in the quarter are we still seeing strong demand for some of those sort of early mover premium titles.

That allowed you guys to grow just any additional color you could provide around sort of the composition of the growth in the installed base.

So thanks for the question, Brad So I would say the growth in the installed base is definitely related to the premier inside a bit and we still see demand coming in so it's a little bit yes, yes, right. So.

You know, obviously time will tell you mentioned the vault I mean at star starting off just tremendous as Mark mentioned in his prepared comments.

We think there is a really long runway for it so let's see where that goes from there but.

We are we are seeing growth in our hyatt's revenue producing categories in bonds. We continue to do the things that we're currently doing these are the perform.

We should see a continued traction in terms of growing that respect the footprint.

Okay. That's helpful. And then second one maybe for dairy or again whoever wants to take it just dropped cashless. There's there's been a lot written lately in the public domain just around you know changing appetites for cashless amongst regulators and what have you I just kind of curious is there a scenario.

So in which the adoption of cashless could introduce alternative means or you know there I call. It competition for ways in which a patron could get cash to the floor.

You know if if if a slot systems provider.

Has some sort of you know cashless app that can fund again, good that could that offering work simultaneously with your existing cash business just any any color around that.

So I'll answer it this way I think when you think of of sort of what you're proposing there you're really talking about payment methods and so introducing new payment method is you know, it's always an opportunity for increasing cash flow.

And so what I would say is from from our perspective, we're interested in being able to interconnect the gaming before a gaming floor also to the non gaming side and so having the ability to be able to take on these other payment methods is something that obviously, we're interested in doing.

But but having a true cash wallet that is not just the purchase of gaming credit is a much different.

Thing and in our conversations with our customers its debt that's what's resonating they understand our ability to leverage the.

Ecosystems at the <unk> products and services that we have today all of the touch points that we have today the things that we're doing with them in terms of settlement of the transactions that were providing today all of the M.L. tools.

Money laundering tools that we provide became I see tools that were providing for the ability to some of the yield actually had a mobile wallet.

That's that's the differentiator leveraging the infrastructure that they've invested with US is a differentiator because those other systems don't don't have all that.

Yeah, and one of things brands I mean, we've integrated with the major system providers slots. So.

If you're suggesting there might be a slot manufacturer.

That would would have their own unique methodology for bringing value to the game it would be very difficult for the casino operator to take that into their system. The way. They can they can bring into values from our cashless solutions into the gaming systems that are already in place on the casino floor.

In addition, if you're if you're referencing.

Some of the cryptocurrency is the regulators that have looked at crypto currencies have rejected them pretty much out of hand.

As being methods that they're not interested in allowing ethics uniform right now.

Yes, and I think you know like you bring up sort of a good point I mean at the end of the day right pop are our positioning is to provide choice to the consumer.

Because not all of them are going to say I want to be able to form transactions on my mobile phone. So we're providing the ability for them to get to cashless, but leveraging the infrastructure that they've invested in so that you know the consumers. The players the patrons today have the option of of how they want to.

Access their funds, where they want it and and and when they want it so that that's how we're differentiating ourselves.

And well guys reality cash today is still still still still prefer right I mean, that's you know.

Cash are against our are performing.

Why did lead during this time ahead of that.

Very good guys. Thanks for all the color appreciate it.

<unk>.

Well take our next question.

From an Chad Beynon from Macquarie. Please go ahead.

Hi, good afternoon, Thanks for taking my question.

Guys just as you review the the business operations, particularly on the game side I guess, how did you end up thinking about medium term or longer term product sales marketshare goals. If it's worth it to invest no. The R&D in the Capex that you have in prior years given that.

Growth in the margins that you're you're you're generating in the gaming Ops Division and Fintech I guess my point is.

As you went through this process since your returns focused is it a lower priority and are you rethinking how much time effort and capital you'll be committing to that division. Thanks.

Hey, Chad. Thank you very much for the question what I would tell you then you got to concentrate on all of it right you got to make sure that all your product categories have solidified. The one thing to remember is that we have a tremendous amount of installed base. It's still in our standard product categories like that we would sell certain comes.

Total customers, but also represented in ER revenue share and our class to that so you answered a yeah, you've got to do both.

I think we're very well positioned with our current road map that takes us well north of 2021, and I feel very very confident in both Oh.

I hope that answers your question.

Okay, Yes, no that's perfect and then.

More on the near term when you're speaking when you're you and your staff for speaking to operators are they are they even looking for package deals conversion kits and looking to purchase anything I guess in the near term or is it kind of a hard no at this point from from all the operators across the country.

It just depends so it really does there are certain projects that you have bought would have been canceled or that they're working on pre total visit they continued world where.

There is still move water people costs, it's absolutely.

But I would tell you that they're still always trying to optimize what is turned on on their respective works, they're doing the convergent they want to make sure the premium side. They haven't that's product that they can now I'm not going from us, but I presume come all the vendor and quite frankly, you know as far as the product they bought book warranty and that they have.

Aren't particularly working there's still looking enhancing those as well we granted they may not have every game or not but they do want to make sure. They optimize wasn't that is turned on to make sure that they provide as much value than they can be possible.

Yeah, just Randy I would I'd also add on the front on the Fintech side. We are having operators that are you know still looking for our loyalty product that's capital to them.

And there, they're they're continuing to look at those products and and acquire those products and same honor and our kiosks side and some other.

Capital assets that we provide so you know I still think operators are being there being very careful and very strategic on what they buy but you know the products that we have are resonating with with the customers and therefore.

They are finding pockets, where they can they can buy our products on both sides of the business.

Thank you very much nice to see a encouraging results.

Thank you.

As a reminder, if he would like to ask a question. Please signal by pressing star one on your telephone keypad.

In one go with our next question from David Katz from Jefferies. Please go ahead.

Hi afternoon, I appreciate all the commentary in detail.

And congrats on a.

Positive quarter.

I wanted to ask about you know touchless and particularly the white label.

I apologize if you touched on it looked to know what the timing on that is and I know that every circumstance is different but if you could help us understand.

Exactly.

How about adds value in other words, how you get paid for it and the degree to which you know that enables sales of other products and you know the degree to which just adds value to the entirety of that segment.

So there and so the though the white label that we referenced in the last call was really around our core wallet and this is something that we had said was going to enable a cashless transactions to be able to have a player.

The mobile application that is branded to the casino, but does not talk to any of the systems and so that is actually available now and and we need the bigger.

I guess effort is around natural integration of our wallet into the gaming wagering accounts systems, and so that it where we can actually fund directly into the wagering accounts systems that the operators have invested so what's what's interesting is that.

During the start of the shut down time lot of operators have.

Our now doing a number of upgrades and changes to their systems to be able to actually.

I'll make make these.

Mobile wallet functions work within their system. So they do have an investment that they need to make an infrastructure changes that need to make to be able actually.

Consume into their gaming operations.

The mobile wallet or integration into their gaming systems, but as Mike mentioned, we have done integrations into the major operating systems and so it's really now just a matter of timing we've actually got a couple of customers that are targeting a Q4 Q1 for rollouts with those.

Investments into those gains systems to be able to enable wallets functionality.

So we're ready.

[laughter], David It's Randy I, <unk> I shouldn't say from a from a you spoke a little bit that but again remember the transaction as it comes into the wallet. When it went when its funded its still the same type of transaction fees that we would charge or whether they were they were doing it you know on on the floor ATM or if they.

We're going to do it directly from.

You know an ATM transaction into their their wallets to fee structure, you know from our standpoint, and I think the that's that's the whole process. That's the whole premise here is that we were keeping their structure in place today the operator.

Keeps their fees as well and again, it's just a another you know another transaction type for the casino operator, and as Darren said still out people doing normal ATM transactions, but the goal here is if you want to use a wallet you can you still have to.

Source, it and pay the fees it you paid in the past.

Yeah. So as we look at it as just an extension of all of the services that were providing today. So we see this has an opportunity to introduce new transactions there are new transaction types.

That that that are available with what the implementation of a wallet and there is some premium for her wallet transactions that will get so.

Okay, and if I can just follow up quickly specifically about you know, Oklahoma and you know what you're hearing from operators in terms of specifically their traffic you know their customer engagement you know we likely heard.

Different things you know from people there about.

You know whether cases are ramping up and having some impact on people's inclination to move about.

David.

Yeah good.

Well take a Randy or do you want me to say.

You have any more.

Yeah, I wouldn't take it out I don't have any more color I don't think than you do but go ahead.

I'm wondering I would say that if you look at our play levels. When you get some really good detailed information out of that market. It would suggest that it rather business as usual there isn't any if you're looking to location location base. It's something we're really starts out for Tony.

Basically when the war when the four walls are open.

And we'll be doing very well and that's up about the I could drop them, it's Randy as anything else you want.

No I agree Dino I don't I'm, not quite sure where you're heading with the David but I you know so far.

You know we have have any indication of the then if they're hoping they seem to be doing well.

Okay. I appreciate that would be information is plentiful the amount of but that is accurate credible et cetera. There's less next thank you very much.

Thank you David.

Well now take our next question from George Fan from <unk>. Please go ahead.

Hi, This is Adam on for George Thanks for taking my questions.

With respect to the updated game cabinet roadmap that Randy mentioned in his remarks I was hoping you could provide a little more detail is there anything specific you could point to that you pivot away from and is there anything new that you're focused on that that you weren't in the past.

I'll, let I'll, let dean give more.

I read your George I think we're focused on exactly what we talked about in the path I mean, we're really excited about our lots a deployment strategy. We have a quantity bandwidth in terms of what's going to hit the market knowledge throughout the rest of 2020, but in the 2021.

Differentiated planed mechanics.

Solid now.

We're very excited about that if you looked at the act, which we rolled out as well on a premium segment, we got an extra tough Walgreens coming out monster versus a right. After the mountain Karate Kid. So very much looking forward to that are stoppers reel mechanical just still continuing to do order.

Mechanical do a plenty of things that are supporting that products. One line so really just.

We feel like we're in very good position and I would say I'm very cautiously optimistic as long as the four walls. They open that Ah, we gotta Greek shocking to me.

Yeah.

Great and then I Dare I believe you also mentioned.

That one of the things that you're seeing right now is a lot of discussion with casinos about what is actually the right product fit for them in terms of contact list.

In touchless could you expand on what exactly are the factors that are brought up in those discussions.

Well I think number one is can we facilitate more cashless and contact list transaction. So so you know again as we've mentioned many many times a simple low hanging fruit low investment a quick and easy to deliver it the quick ticket transaction, which somebody's able to go up to a self service Keith.

And facilitate be a the purchase of gaming ticket. So castles transaction self service you don't have to go to cage.

We've also again continue to facilitate more cashless transactions in terms of check cashing were you able to do that self service had a kiosk. So so it's no self service cashless transactions that that that are or I guess, the easiest wants to be able to both implement and roll out and and you know again, we've done a a the sales teams that.

Great job and and our our installed base for you know for those particular products increased quite dramatically over the last quarter and we continue to implement quikticket and more and more locations and in fact, new jurisdictions are looking at more catalysts in contact list type solutions that they're supporting as far as a as we move.

More into what I would say is the more involved you know wallet in integration into the gaming systems into the wagering accounts systems as I mentioned, they do have a a slightly better investment that they need to make it to be able to enable that on their gaming floor, but as mentioned we've done those integrations into those systems.

And ultimately it's you know it's it's it's Oh.

Response to the demand of the players that they do want to have more cashless option. So as mentioned were we are there with our existing infrastructure to enable that you known as as Mike had mentioned that some of the earlier well. The other questions. You know at the end of the day, we've got an infrastructure that players in patrons any operator.

Our using right now so in terms of our ability to introduce this technology in this functionality, it's already embedded into all the services that we have today. So there's a greater level of comfort insecurity with that because they're they're interacting with us today and so we think we're best positioned as.

We are we leverage you know again, the loyalty up the pieces of our business and how it's already integrated into into all the touch points that we have so it's really around demand that they have found their customer base and our ability to be able to introduce the to they're getting Florida and like I say over the last a few months they've been been making those changes to their game for and they're doing.

Right now and we're excited about a rolling it out with with several customers.

Great. Thanks.

Well take our last question from David Bain from Roth Capital. Please go ahead.

Great. Thanks, they're just one follow up on the game so the 380.

Okay sounds good those were contracted prior to the quarter did they come in late in the quarter and I know in Q and how you touched on the loosening of the purse strings for slot buying being mix, but as regional casinos see the performance being better than most anticipated there like an emerging mindset of any sort from some customers to refocus a bit more quickly on kind of the streamline.

Earning potential automated portions of their floor that deemphasize other amenities or is that not happening.

Oh, I would say that well go ahead, sorry go ahead.

Go ahead, Steve Mrs are good.

I think once again as we mentioned, it's a mixed bag you're going to have some idea as far as what was purchased in Q2 up mostly choirs. They can to commitments that are they you know there won't be they basically opened up down baumann capital and Perkins clock.

You know ongoing it that's the.

The Big question, it's very difficult to answer right, what what they're going to look like down the road I mean, our thought process is always then you know we have a week.

You have the product and its meeting the player demand it will figure out a way to get on the floor and obviously with the strength of the regionals and tribalism, how well, we do and those respective category.

We we have a great opportunity continue to move the needle forward I mean, that's the best way I could say I'm not sure Randy do you have anything to add to that or.

Uh huh.

Yeah, I just I don't think we have a lot of inside a just yet but we were very pleased that you know people that had kind of committed to things continued through it we as mark talked about we got some some really good ship share on some of the newer properties that are opening. So you know I think you know with their new.

Cabinets with the games that that we produced you know I think we're in a good position.

But I just think it's too early to really be able to say how well a you know people are positioned and in what they're going to do in the next couple of quarters right now.

Got it thank you.

Thanks, David.

And that does conclude our question and answer session I would now like turn the call over to Randy for any closing remarks.

We'd like to thank everybody for joining us today, a with the actions we've taken in the gaming industry continues to rebound we expected the balance we have in our with our games and Fintech segments Places us in a unique and strong position to continue to improve our revenues and our cash flow in the coming months, we look forward to providing you an update.

Our next quarterly call thanks for joining us.

That does conclude today's call. Thank you for your participation you may now disconnect.

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