Q1 2024 Everi Holdings Inc Earnings Call

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Operator: Good morning, and thank you for standing by. Welcome to the Everi Holdings 2024 First Quarter and Year End Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode.

Good morning, and thank you for standing by welcome to the every Holdings' 2020 for first quarter and year end earnings Conference call.

Operator: During todays presentation, all parties will be in a listen only mode.

Operator: Following the prepared remarks, the call will open for a question and answer session. As a reminder, this call is being recorded. Now, let me turn the call over to Jennifer Hills, Vice President, Investor Relations. Please go ahead.

Operator: Following the prepared remarks, the call will open for question and answer session.

Operator: As a reminder, this call is being recorded.

Operator: Now, let me turn the call over to Jennifer Hills, Vice President Investor Relations. Please go ahead.

Jennifer Hills: Thank you, operator. Let me begin with a reminder that our Safe Harbor disclaimer, which covers today's call and webcast, contains four forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those discussed on today's call. These risks and uncertainties include, but are not limited to, those contained in our earnings release today and in our SEC filings, which are posted in the investor section of our corporate website at Everi.com.

Jennifer Hills: Thank you operator.

Jennifer Hills: Let me begin with a reminder, that our safe Harbor disclaimer, which covers today's call and webcast contains forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those discussed on today's call.

Jennifer Hills: These risks and uncertainties include but are not limited to those contained in our earnings release today, and our SEC filings, which are posted in the investors section of our call.

Jennifer Hills: Website at <unk> Dot com.

Jennifer Hills: Because of the potential risk, you are cautioned not to place undue reliance on forward-looking statements. We do not intend and assume no obligation to update any forward-looking statements, which are made only as of today, May 8, 2024. We will refer to certain non-GAAP financial measures, such as Just Leave It Down, Free Cash Flow, and Net Cash Position. A description of each of these non-GAAP measures and a reconciliation to the most directly comparable GAAP measure can be found in our earnings release and related 8K today, as well as in the investor section of our website.

Jennifer Hills: So the potential missed you a question about it.

Jennifer Hills: Undue reliance on forward looking statements.

Jennifer Hills: We do not intend and there's been no obligation to update any forward looking statements.

Jennifer Hills: Which are made only as of today.

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Jennifer Hills: 24.

Jennifer Hills: We'll refer to certain non-GAAP financial measures, such as adjusted EBITDA free cash flow and that cash position.

Jennifer Hills: Description of each of these non-GAAP measures and a reconciliation to the most directly comparable GAAP measure can be found in our earnings release and.

Jennifer Hills: Related 8-K today as well as in the investors section of our website.

Jennifer Hills: This call is being webcast and recorded. A link to the webcast and a replay of today's call can be found in the investor section of our website. On our call today are Randy Taylor, Chief Executive Officer, Mark Labay, Chief Financial Officer, Kate Wallenhauer-Fisher, General Counsel, Dean Ehrlich, Dean Business Leader, and Darren Simmons, FinTech Business Leader. Now I will turn the call over to Randy. Thank you, Jennifer

Jennifer Hills: Call is being webcast and recorded a link to the webcast replay of today's call can be found in the investors section of our website.

Jennifer Hills: On our call today are Randy Taylor, Chief Executive Officer, Mark <unk>, Chief Financial Officer, Kate well in Howard Fischer General Counsel did narrow like games business leader and Darren Simmons Fintech business leader that I will turn the call over to Randy.

Randy L. Taylor: Thank you, Jennifer. Good morning, and thank you all for joining us today. First, I would like to provide a few more details, where possible, regarding our plan to merge Everi with IGT's Global Gaming and Play Digital Businesses, which was announced on February 29th this year. While we continue to make progress on our proposed merger, we have no specific update regarding antitrust or regulatory matters at this time. As we have communicated in the past, we still anticipate closing the merger in late 2024 or early 2025.

Randy L. Taylor: Thank you Jennifer good morning, and thank you all for joining us today.

Randy L. Taylor: First I would like to provide a few more details where possible regarding our plan to merge every with Igt's global gaming and play digital businesses, which was announced on February 29. This year.

Randy L. Taylor: While we continue to make progress on our proposed merger we have no specific update regarding antitrust or regulatory matters at this time as.

Randy L. Taylor: As we have messaged in the past, we still anticipate closing the merger in late 2024 or early 2025.

Randy L. Taylor: We are extremely excited about the opportunity to bring together the best of both of our businesses. While Everi has experienced tremendous success and growth over the past few years, we recognize the ability to accelerate our revenue growth by combining our complementary products and more rapidly entering new jurisdictions. Over the past several years, we have significantly increased our investment in research and development and expanded the number of studios to diversify and increase game content.

Randy L. Taylor: We are extremely excited about the opportunity to bring together the best of both of our businesses. While everybody has experienced tremendous success in growing over the past few years, we recognize the ability to accelerate our revenue growth by combining our complementary products and more rapidly entered new jurisdictions.

Randy L. Taylor: Over the past several years, we significantly increased our investment in research and development and expanded the number of studios to diversify and increase game content.

Randy L. Taylor: We have also been successful in expanding our product lines by leveraging our game content into new channels. Combining these businesses will provide greater resources and give us more opportunities for success over a product life cycle. Additionally, we believe IGT's established global distribution network in both land-based and digital will enable every content to enter new global jurisdictions more quickly with less risk.

Randy L. Taylor: We have also been successful in expanding our product lines by leveraging our game content into new channels.

Randy L. Taylor: Combining these businesses will provide greater resources and give us more opportunities for success over a product lifecycle.

Randy L. Taylor: Additionally, we believe Igt's established global distribution network in both land based and digital.

Randy L. Taylor: Every content to enter new global jurisdictions more quickly with less risks.

Randy L. Taylor: We believe this combination with our game segment will provide more stable, long-term growth opportunities for the combined business. On the FinTech side, we will be able to combine our FinTech platform with IGP's gaming systems business. Upon closing, IGT will be able to work more closely with the IDT system to provide products and services that reduce friction for casino operators and their customers. And, as they do today, IGT's casino management systems will continue to interface with fintech products from multiple providers.

Randy L. Taylor: We believe this combination with our game segment will provide more stable long term growth opportunities for the combined business.

Randy L. Taylor: On the Fintech side, we will be able to combine our fintech with Igt's gaming systems business.

Randy L. Taylor: In closing, we will be able to work more closely with igt's system to provide products and services that reduce friction for casino operators and their customers.

Randy L. Taylor: And as they do today Igt's <unk> Casino management systems will continue to interface with fintech products from multiple providers.

Randy L. Taylor: We will also continue to work with all gaming system providers to improve the expansion of cashless solutions to our casino customers by providing a positive, seamless transaction for their patrons. Additionally, combined, we believe we will be able to offer a complete suite of products from games to systems, financial access, red tech, and loyalty. The structure of the merger provides for shared equity ownership with modest pro forma net leverage at closing between 3.2 to 3.4 times and the ability to generate strong free cash flow.

Randy L. Taylor: We will also continue to work with all gaming system providers to improve the expansion of cashless solutions to our casino customers by providing a positive seamless transaction for their patrons. Additionally.

Randy L. Taylor: Additionally, combined we believe we will be able to offer a complete suite of products from games to systems financial access Gregg check and loyalty.

Randy L. Taylor: The structure of the merger provides for shared equity ownership with modest pro forma net leverage at closing between three to three four times and the ability to generate strong free cash flow.

Randy L. Taylor: We believe this sets the combined company up well for the future. The estimated $75 million in cash synergies, and an estimated $10 million in capital savings, are driven by leveraging efficiencies that can be gained primarily through procurement productivity, streamlining the assembly processes, and real estate optimization. They are not based on rationalizing existing product lines in the games business, which is where we believe previous supplier mergers have failed to deliver planned synergy. Additionally, revenue growth opportunities will come from leveraging global networks and a combined product offering. As part of the merger agreement, there is also an opportunity for a special dividend to be paid to every shareholder as of a record date prior to the close of the transaction.

Randy L. Taylor: We believe this sets the combined company up well for the future the estimated $75 million in cash synergies an estimated $10 million in capital savings are driven by leveraging efficiencies that can be gained primarily through procurement productivity streamlining the assembly processes and real estate optimization.

Randy L. Taylor: They are not based on rationalizing existing product lines and the games business, which is where we believe previous supplier mergers have failed to deliver planned synergies.

Randy L. Taylor: Additionally, revenue growth opportunities will come from leveraging global networks, and a combined product offering as part of the merger agreement. There is also an opportunity for a special dividend to be paid to every shareholders as a record date prior to the close of the transaction. This dividend is essentially the free cash flow generated from the signing of the transaction.

Randy L. Taylor: This dividend is essentially the free cash flow generated from the signing of the transaction plus our merger-related expenses and other adjustments for the agreement. The final amount of this dividend will be impacted by the time it takes to close and the transaction-related expenses we incur. Therefore, it is difficult to determine the amount of the special dividend, if any, at this point in the process.

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Randy L. Taylor: Our merger related expenses and other adjustments per the agreement.

Randy L. Taylor: Final amount of this dividend will be impacted by the time it takes to close and the transaction related expenses, we incur therefore, it is difficult to determine the amount of a special dividend if any at this point in the process.

Randy L. Taylor: Turning to the business performance in the first quarter, while the transition to our new family cabinets and game content has been slower and more challenging than expected, they're starting to see the green shoots appear. In the last four months of 2023, we had 34 new games approved, and an additional 18 have been approved year to date. We are in the early stages of installing this new content, but several of the new titles are starting to be recognized in industry surveys.

Randy L. Taylor: Turning to the business performance in the first quarter, while the transition to our new family of cabinets and game content has been slower and more challenging than expected.

Randy L. Taylor: Starting to see the green shoots appear.

Randy L. Taylor: And the last four months of 2023, we had 34 new games approved and an additional 18 have been approved year to date.

Randy L. Taylor: We are in the early stages of installing this new content.

Randy L. Taylor: Other new titles are starting to be recognized industry surveys.

Randy L. Taylor: In the April Eilers report, the For Sale Dynasty Soul ranked number three in top indexing cabinets in the portrait slant category, and the two versions of Dynamite Pop on this cabinet both reached the top 20 indexing games in the core low denomination video reel category. Our Player Classic Signature Cabinet that was introduced in 2022 has performed well, and this performance is expected to continue with the recent introduction of several new game themes that have yet to be captured by ILR's survey results. The launch of the lower profile Dynasty View cabinet last spring was initially hampered by limited content at launch.

Randy L. Taylor: And the April Eilers report before sales dynasty. So ranked number three in top indexing cabinets in the portrait and Slant category and the two versions of Dynamite pop on this cabinet both reached the top 20 indexing games in the core low denomination video reel category.

Randy L. Taylor: Player Classic signature cabinet that was introduced in 2022 has performed well and this performance is expected to continue with the recent introduction of several new game themes that have yet to be captured by either survey results.

Randy L. Taylor: The launch of a lower profile dynasty view cabinet last spring was initially hampered by limited content at launch.

Randy L. Taylor: There are currently 15 titles that have been approved, and we expect to have introduced all of these titles into our install base by the end of Q2. We expect to see performance improvements on the views of these new titles, which should positively impact both for sale and lease units. The Premium Dynasty Solstice was launched late in the first quarter with the mask. And our newest theme, Smoking Hot Stuff Link, has just been approved.

Randy L. Taylor: There are currently 15 titles that have been approved and we expect to have introduced all of these titles into our install base by the end of Q2, we expect to see performance improvements on the <unk> of these new titles, which should positively impact both for sale and lease units.

Randy L. Taylor: The premium dynasty sourcing was launched late in the first quarter with the mask and our newest theme Smokin Hot stuff link has just been approved.

Randy L. Taylor: We expect installation of this new theme to begin this month. Additionally, four new families of titles are scheduled to be released for this cabinet by year end. The Dynasty Dynamic Premium Cabinet was launched at the end of the third quarter with Hot Stuff Spin Frenzy, and our newest theme based on our proven proprietary brand, The Vault, is being rolled out now. There are also two more families, Cash Machine Inferno and Zolpar Master of Mysteries planned for later this year.

Randy L. Taylor: We expect installation of this new theme to begin this month. Additionally for new families of titles are scheduled to be released for this cabinet by year end.

Randy L. Taylor: The dynasty dynamic premium cabinet was launched at the end of the third quarter with Hot Stuff's been frenzy, and our newest theme based on our proven proprietary brand vault is being rolled out now.

Randy L. Taylor: There are also two more families cash receipt Inferno, and Zohar Master of mysteries planned for later this year.

Randy L. Taylor: Finally, the Player Classic Reserve was launched at the end of last year's third quarter with great success. This premium cabinet launched with Jackpot Wheel Games, Casper, and Hot Stuff in the Class 3 WAP category. This quarter, we plan to launch the first content fully developed by our Australian studio. The first two themes to be deployed are Thunder and Lightning and Mighty King.

Randy L. Taylor: Finally, the player Classic Reserve was launched at the end of last years third quarter with great success. This premium cabinet launched with jackpot games, Casper and hot stuff in the class III WAF category.

Randy L. Taylor: This quarter, we plan to launch the first content fully developed by Australia studio. The first two themes to be deployed our Thunder and lightning and Mighty team.

Randy L. Taylor: We believe these investments in new cabinets and new content will drive improvements in the second half of the year. Although these improvements are taking longer than anticipated, we remain confident in our overall strategy. In terms of new product segments, we are in the final stages of the approval process necessary to enter Illinois with VLTs.

Randy L. Taylor: We believe these investments and new cabinets and new content will drive improvements in the second half of the year.

Randy L. Taylor: Although these improvements are taking longer than anticipated we remain confident in our overall strategy.

Randy L. Taylor: In terms of new product segments. We are in the final stages of the approval process necessary to enter Illinois VLT piece.

Randy L. Taylor: This has been a multi-year investment that opens a 50,000-unit opportunity for us, and we expect to have sold our first units in the second half of 2024. Meanwhile, our core FinTech cash access services business continues to be a steady grower, as we again process more transactions and deliver more dollars to our customers' operations during the quarter than we have in any previous quarter. Consistent with many of the operators' reports, our financial access services were negatively impacted by some bad weather in January, but we saw improvement in February, and as we exited the quarter, a return to low- to mid-single-digit same-store growth. April has been a little stronger, and we expect this trend to continue over the remainder of the year.

Randy L. Taylor: It has been a multiyear investment that opened a 50000 unit opportunity to us and we expect to have sold our first units in the second half of 2024.

Randy L. Taylor: Meanwhile, our core Fintech cash access services business continues to be a steady grower as we again process more transactions and delivered more dollars to our customers' operations during the quarter than we have in any previous quarter.

Randy L. Taylor: Consistent with many of the operators reports our financial access services were negatively impacted by some bad weather in January but we saw improvement in February and as we exited the quarter with return to low to mid single digit same store growth.

Randy L. Taylor: <unk> has been a little stronger and we expect this trend to continue over the remainder of the year.

Mark F. Labay: While we experienced some challenges in the first quarter, I believe the building blocks for our return to growth are present. I remain excited about the opportunities ahead and expect our growth initiatives to show improvement primarily in the second half of 2024. I want to end my remarks by acknowledging the strong team we have built here at Everi. It is based on a culture of innovation and focused on the needs of our customers and the experiences of their patrons.

Randy L. Taylor: While we experienced some challenges in the first quarter I believe the building blocks for our return to growth our present I remain excited about the opportunities ahead, and we expect our growth initiatives to show improvement primarily in the second half of 2024.

Mark F. Labay: I want to end my remarks by acknowledging the strong team. We have built here at every is based on a culture of innovation and focused on the needs of our customers and the experiences of their Patriots I want to thank all our employees for their dedication and for making every a top workplace has once again recognized by the top workplaces USA for the third.

Mark F. Labay: I want to thank all our employees for their dedication and for making Everi a top workplace, as once again recognized by Top Workplaces USA for the third year in a row. Now, let me turn the call over to Mark.

Mark: Year in a row.

Mark F. Labay: Now, let me turn the call over to Mark.

Mark F. Labay: Thanks, Randy. Let me begin by adding a little more color to our first quarter and our outlook for the remainder of the year. During the first quarter, as we expected, our games business continued to experience headwinds as we are transitioning to the new family of cabinets and introducing new content to support these cabinets. Revenue for both gaming operations and gaming equipment and systems declined year-over-year and was relatively flat with the fourth quarter.

Mark: Randy let me begin by adding a little more color on our first quarter and our outlook for the remainder of the year.

Mark F. Labay: During the first quarter as we expected our games business continued to experience headwinds as we are transitioning to the new family of cabinets and introducing new content to support these cabinets.

Mark F. Labay: Revenue for both gaming operations and gaming equipment and systems declined year over year. It was relatively flat with the fourth quarter.

Mark F. Labay: We experienced declines in both our installed base and our quarterly unit sales. While our installed base declined by 595 units from year end, approximately half of this decline was a result of strategic decisions to not use capital to replace cabinets in lower performing locations, where recovery of the capital would not have met our internal return hurdles. The remainder of the decline is attributable to the additional churn in our older cabinet. To address this, we now have three new cabinets with a deep pipeline of themes rolling out.

Mark F. Labay: We experienced declines in both our installed base and our quarterly unit sales.

Mark F. Labay: While our installed base declined by 595 units from year end approximately half of this decline was the result of strategic decisions to not use capital to replace to cabinets and lower performing locations.

Mark F. Labay: The recovery of the capital would not have met our internal return hurdles.

Mark F. Labay: The remainder of the decline is attributable to the additional churn in our older cabinets.

Mark F. Labay: To address this we now have three new cabinets with a deep pipeline of themes rolling out.

Mark F. Labay: The Player Classic Reserve and Dynasty Dynamic, which were rolled out late in the third quarter, are performing to our expectations. As of March 31st, we have installed a combined total of 661 units in over 75 locations.

Mark F. Labay: The player answer preserved and David the dynamic which were rolled out late in the third quarter are performing to our expectations.

Mark F. Labay: As of March 31, we have installed the combined total of 661 units and over 75 locations.

Mark F. Labay: The Dynasty Soul Sync, our newest premium video cabinet, was just launched in the first quarter and is in the early stages of being placed on casino floors. In the near term, new cabinet installations will mostly replace existing cabinets, but as these cabinets and games gain traction, we expect to add incremental placements. Daily win per unit of $34.51 was down slightly from the fourth quarter, but we expect daily win per unit to improve as we roll out new cabinets and new content.

Mark F. Labay: The dynasty sourcing our newest premium video cabinet was just launched in the first quarter and is in the early stages of being placed on casino floors.

Mark F. Labay: Near term new cabinet installations will mostly replaced existing cabinets, but as these cabinets and games gain traction we expect to add incremental placements.

Mark F. Labay: Daily win per unit of $34 51 was down slightly from the fourth quarter.

Mark F. Labay: But we expect daily win per unit to improve as we rollout new cabinets and new content.

Mark F. Labay: In the first quarter, recurring revenues of $5.6 million from Video King operations and increased revenue from our digital segment offset about half the decline in revenues from the install base. First quarter gaming equipment and system sales were essentially flat with the fourth quarter. Gaming unit sales were below our expectations for the quarter as we sold 1,021 units at an average selling price of $20,827. Additionally, with limited initial content available, the early performance of the Dynasty View has not been as strong as we anticipated.

Mark F. Labay: In the first quarter recurring revenues of $5 6 million from video King operations and increased revenue from our digital segment offset about half the decline in revenues from the installed base.

Mark F. Labay: First quarter gaming equipment and system sales were essentially flat with the fourth quarter.

Mark F. Labay: Gaming unit sales were below our expectations for the quarter to quarter as we sold 1021 units at an average selling price of 28 27.

Mark F. Labay: With limited initial content available with the early performance of the dynasty view has not been as strong as we anticipated however.

Mark F. Labay: However, with additional themes being rolled out, we expect performance of the cabinet to improve now. We introduced the Dynasty Soul theme in the fourth quarter and are still in the early stages of the rollout. Its acceptance is building momentum with our customers, and from launch through the end of the first quarter, we have sold 525 units. As Randy mentioned, Dynamite Pop on the Dynasty Soul is off to a strong start and is recognized in the April iLearns Games Report as a top-performing new game.

Mark F. Labay: However, with additional teams being rolled out now we expect performance of the cabinet to improve.

Mark F. Labay: We introduced the dynasty sold in the fourth quarter and are still in the early stages of the rollout.

Mark F. Labay: Its acceptance is building momentum with our customers and from launch through the end of the first quarter, we have sold 525 units.

Mark F. Labay: Is there Andy mentioned dynamite pop on the dynasty soul is off to a strong start and is recognized in the April Eilers games report as a top performing new game.

Mark F. Labay: Moving on to FinTech, revenue declined 1% year over year as revenue growth in financial access services and software and other was offset by declines in hardware sales. Financial access services revenues grew 2.1% from the prior year first quarter, as we processed a record 39 million transactions and delivered a record $12.4 billion of funding to customers' operations. While we did see some weakness in financial access in January due to weather issues, which is consistent with what operators have been disclosing, the trends improved as we entered the quarter and have helped steady this thus far into the second quarter.

Mark F. Labay: Moving on to Fintech revenue declined 1% year over year as revenue growth and financial access services and software and other was offset by declines in hardware sales.

Mark F. Labay: Financial access services revenues grew two 1% from the prior year first quarter as we processed a record $39 million of transactions and delivered a record $12 $4 billion of funding to customers' operations.

Mark F. Labay: While we did see some weakness in financial access in January due to weather issues, which is consistent with what operator and have been disclosing the trends improved as we exited the quarter and has helped steady thus far into the second quarter.

Mark F. Labay: Software and other revenues grew from increased kiosk maintenance revenue, compliance revenue, and central credit and other revenue, but was partially offset by a decline in new software sales from loyalty. The decline in loyalty revenue is a timing issue related to our customers' readiness to accept inflation. We did experience some hardware sale declines in certain foreign jurisdictions related to our Ticker Redemption kiosks in the first quarter of 2024. Loyalty Kia sales also declined, reflecting a decline in new installations of loyalty software.

Mark F. Labay: Software and other revenues grew from increased kiosk maintenance revenue compliance revenue in central credit and other revenue was partially offset by declines in new software sales from loyalty.

Mark F. Labay: The decline in loyalty revenue was a timing issue related to our customers' readiness to accept inflation.

Mark F. Labay: We did experience some hardware sale declines in certain foreign jurisdictions related to particular redemption kiosks in the first quarter of 2024.

Mark F. Labay: Loyalty sales also declined reflecting a decline in new installations of loyalty software.

Mark F. Labay: As we have discussed previously, loyalty sales can be lumpy. They typically tend to be larger initial unit sales and are generally tied to the timing of new financial access contracts or contract renewals. While the timing of revenue recognition can be delayed due to the operator's readiness for acceptance of the loyalty software and equipment, they are generally not lost, just deferred to later quarters.

Mark F. Labay: As we have discussed previously loyalty sales can be lumpy.

Mark F. Labay: Typically tend to be larger initial unit sales and are generally tied to the timing of new financial access contracts or contract renewals.

Mark F. Labay: While the timing of revenue recognition can be delayed due to the operators readiness for acceptance of the loyalty software and equipment. They are generally not lost just deferred to later quarters.

Mark F. Labay: For the quarter, consolidated gross margin expanded by approximately 80 basis points to 80.9%, primarily due to revenue makeshifting to higher-margin gaming operations and financial access services revenue from lower-margin gaming equipment and hardware sales. Moving on to operating expenses, we incurred $15.7 million in one-time professional fees, employee retention awards, and other costs related to the planned merger with IGT's Global Gaming and Play Digital businesses. These costs have been excluded from adjusted EBITDA, but they skew our reported operating expense trends from a gap-based...

Mark F. Labay: For the quarter consolidated gross margin expanded by approximately 80 basis points to 89%, primarily due to revenue mix shift to higher margin gaming operations and financial exit services revenue from lower margin gaming equipment and hardware sales.

Mark F. Labay: Moving on to operating expenses, we incurred $15 7 million in one time professional fees.

Mark F. Labay: <unk> retention awards and other costs related to the planned merger with Igt's Global gaming and play digital businesses.

Mark F. Labay: These costs have been excluded from adjusted EBITDA.

Mark F. Labay: <unk> reported operating expense trends from a GAAP basis.

Mark F. Labay: The decline in adjusted EBITDA for the quarter to $80.3 million from $92.5 million in the prior-year quarter is reflective of lower revenues and higher operating and R&D expenses. The decline in adjusted EBITDA for games to $46.6 million from $53.7 million in the prior year first quarter was a result of both lower revenues and higher expenses, while the decline in adjusted EBITDA for fintech to $33.7 million from $38.8 million was primarily due to higher expenses.

Mark F. Labay: The decline in adjusted EBITDA for the quarter to $80 3 million from $92 5 million in the prior year quarter is reflective of the lower revenues and higher operating and R&D expenses.

Mark F. Labay: The decline in adjusted EBITDA for games to $46 6 million from $53 7 million in the prior year first quarter was a result of both lower revenues and higher expenses, while the decline in adjusted EBITDA for Fintech to $33 7 million from $38 8 million was primarily due to higher expenses.

Mark F. Labay: That interest expense in the first quarter was $18.8 million, an increase from $18 million in the prior year. As a reminder, we have $400 million of outstanding unsecured notes at a fixed rate of 5% and approximately $581 million of term loans that have a variable rate of interest. At the end of the quarter, our weighted average borrowing rate was approximately 6.7 percent.

Mark F. Labay: Net interest expense in the first quarter was $18 8 million, an increase from $18 million in the prior year.

Mark F. Labay: As a reminder, we have $400 million of outstanding unsecured notes at a fixed rate of 5% and approximately $581 million of term loan that has a variable rate of interest.

Mark F. Labay: At the end of the quarter, our weighted average borrowing rate was approximately six 7%.

Mark F. Labay: Also included in interest expense is the cash usage fee on our ATM vault cash arrangements. Our expense for the vault cash was $4.8 million compared to $4.3 million in the prior year first quarter. We ended the quarter with total net leverage at 2.6 times trailing adjusted even die, which remains at the low end of our 2.5 to 3 times target range. Free cash flow generated in the quarter was $14 million compared with $40 million a year ago.

Mark F. Labay: Also included in interest expense is the cash usage fee on our ATM vault cash arrangements.

Mark F. Labay: <unk> expense for the bulk cash was $4 8 million compared to $4 3 million in the prior year first quarter.

Mark F. Labay: We ended the quarter with total net leverage at two six times trailing adjusted EBITDA, which remains at the low end of our two five to three times target range.

Mark F. Labay: Free cash flow generated in the quarter was $14 million compared with $40 million a year ago.

Mark F. Labay: The decline was primarily the result of an increase of $13 million in cash paid for capital expenditures and a $12 million decline in adjusted EBITDA. We believe the increased investment in capital expenditures is important to refresh our installed base, and we expect this spending to return the installed base to growth and improve daily win per unit over time. Moving on to our outlook, our current expectations are that we will return to revenue growth in the back half of the year, assuming that our new cabinets and content resonate as expected with casino patrons, failing to wind up wind per unit rebounds and unit sales and per unit.

Mark F. Labay: The decline was primarily the result of an increase of $13 million in cash paid for capital expenditures and the $12 million decline in adjusted EBITDA.

Mark F. Labay: We believe the increased investment in capital expenditures is important to refresh our installed base.

Mark F. Labay: We expect this spending to return the installed base to growth and improved daily win per unit over time.

Mark F. Labay: Moving onto our outlook. Our current expectations are that we will return to revenue growth in the back half of the year, assuming that our new cabinets and content resonate as expected with casino patrons.

Mark F. Labay: Daily win per unit rebounds.

Mark F. Labay: Sales improve.

Mark F. Labay: We expect fintech revenues to return to growth over the remainder of the year, driven by increasing financial access volumes, improved software and other revenue, and a return to growth in our hardware sales. Turning to expenses, we expect higher operating expenses due to our investment in people and products, as well as the costs incurred related to the proposed merger. With $6 million in term loans repaid in the first quarter, we do not have any significant debt repayments due for the remainder of the year.

Mark F. Labay: We expect Fintech revenues to return to growth over the remainder of the year.

Mark F. Labay: Driven by increasing financial access volumes improved software and other revenue and a return to growth in our hardware sales.

Mark F. Labay: Turning to expenses, we expect higher operating expenses due to our investment in people and products as well as the costs incurred related to the proposed merger.

Mark F. Labay: With $6 million in term loan repaid in the first quarter, we do not have any significant debt repayments due for the remainder of the year.

Mark F. Labay: With $400 million of our debt fixed at 5%, our net interest expense will depend primarily on what happens to interest rates this year. We expect our effective tax rate to be in the 22 to 25% range for the year and our full-year cash taxes to be between $15 and $20 million. Justin Iveda's revenue is expected to decline from the prior year, primarily reflecting the near-term headwinds that are impacting the game segment.

Mark F. Labay: With $400 million of our 6% to 5% our net interest expense will depend primarily on what happens to interest rates this year.

Mark F. Labay: We expect our effective tax rate to be in the 22% to 25% range for the year and our full year cash taxes to be between 15% and $20 million.

Mark F. Labay: Adjusted EBITDA is expected to decline from the prior year, primarily reflecting the near term headwinds that are impacting the game segment.

Mark F. Labay: But we expect to see improvement in the second half of the year, as new cabinets and content hit casino floors and gain traction with customers, and we begin to provide products in new categories, like BLT and international gaming. Capital expenditures are expected to be flat to slightly higher from $145.1 million in 2023 as we primarily invest in replacing older cabinets and building out our installed base. Pre-cash flow is expected to be down from the prior year but will remain strong. And with that, I will now conclude our prepared remarks and turn the call over to the operator for questions.

Mark F. Labay: We expect to see improvement in the second half of the year as new cabinets and content casino floors and gained traction with customers and we began to provide product in new categories like DLT and international gaming.

Mark F. Labay: Capital expenditures are expected to be flat to up slightly from $145 1 million in 2023, as we primarily invest in replacing older cabinets and building out our installed base.

Mark F. Labay: Free cash flow is expected to be down from the prior year, but will remain strong.

Speaker Change: And with that I will now conclude our prepared remarks and turn the call over to the operator for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. And you may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Jeffrey Stantial, with CFO. Please proceed with your question.

Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

Operator: You May press star two if you'd like to remove your question from the queue.

Operator: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Jeffrey Austin Stantial: Thank you. Our first question comes from the line of Jefferies Financial with Stifel. Please proceed with your question.

Aidan Young: Hi, this is Aidan Young on behalf of Jeff Stantial. Thanks for taking our questions. So starting off on the FinTech business, it looks like operating expenses, excluding adjusted EVA to add backs, were up fairly meaningfully quarter on quarter, both nominally and as a percentage of revenue. Could you have some color on what's driving that? And what should we think about the right R&D and OPEX levels heading into the remainder of 2024

Young: Hi, This is <unk> young on for Jeff <unk>. Thanks for taking my question.

Aidan Young: Fair enough on the Fintech business it looks like operating expenses, excluding adjusted EBITDA add backs were up fairly meaningfully quarter on quarter, both nominally and as a percentage of revenues.

Aidan Young: Could you give some color on what's driving that and how should we think about the right R&D and opex level heading into the remainder of 2024.

Aidan Young: Yes.

Mark F. Labay: Yes, thanks, Hayden. Look, I think we're, as we look at operating expenses and R&D, we've always kind of talked that labor and headcount is probably our largest expense category, but it's still a very tight labor market in terms of how we're operating today. Typically, there are annual reviews, and other impacts that impact our current payroll, where we are. We feel like we're at a pretty good level, though, you know, Q1 levels for kind of what you're looking at from an R&D and operating expense from a headcount and investment level are the right levels going forward. So in terms of modeling, I'd be thinking kind of consistently along those lines.

Speaker Change: Yeah. Thanks, Hey, look I think worthy as we look at operating expenses and R&D, we've always kind of talk that that labor and head count is probably our largest expense category, but still a very tight labor market in terms of how we're operating today.

Mark F. Labay: Typically there is annual reviews other impacts that impact our current payroll, where we are we feel like we're at a pretty good level, though.

Mark F. Labay: Q1 levels for kind of what you're looking at from an R&D and Opex that is from a head count and investment level or at the right levels going forward. So in terms of modeling I'd be thinking kind of consistent a lot of those slides I think in terms of percentage of revenues, obviously, having a little bit of a decline in the revenues is impacting some of the percentage metrics, but again, we believe we're invested proper.

Mark F. Labay: I think in terms of percentage of revenues, obviously, having a little bit of a decline in revenues is impacting some of the percentage metrics. But again, we believe we're invested properly for the long-term growth of the business right now where we are. And as revenue begins to rebound, particularly in the second half of the year, we think that will kind of close that gap and get back to those normalized levels that we talked about.

Mark F. Labay: For the long term growth of the business right now, where we are and as revenue begins to rebound, particularly in the second half of the year, we think that will kind of close that gap to get back to those normalized levels that we've talked about yeah, and I would add I think we're very comfortable on the Fintech side again, it's still a business that we believe you have to invest for improved products.

Mark F. Labay: Yeah, I would add, you know, I think we're very comfortable on the FinTech side. Again, that's still a business that we believe you have to invest in improved products. It makes us, it provides better products for our customers and continues to help us, you know, grow that business. And as Mark said, as revenue comes back up, then I think we'll come back in line.

Mark F. Labay: It makes us.

Mark F. Labay: It provides better products for our customers and continues to help us.

Mark F. Labay: Grow that business and as Mark said.

Mark F. Labay: As the revenue comes back up then I think we'll come back in line.

Aidan Young: And it looks like splash payments were down 34% year-on-year. You know, recognizing there's a number of moving parts here, just curious to get your views on to what extent you think the announcement of the merger may be impacting sales. Are your sales reps seeing any confusion from customers on the deal and long-term strategy? Any thoughts here would be great. Thank you.

Speaker Change: Great. Thank you.

Mark F. Labay: And it looks like fashion Thats were down 34% year on year.

Aidan Young: Recognizing there's a number of moving parts here just curious to get your views on to what extent do you think the announcement of the merger and maybe impacting sales or your sales reps seeing any confusion from customers on the deal and long term strategy.

Aidan Young: Any thoughts there would be great. Thank you.

Randy L. Taylor: Yeah, yeah, that's a difficult one, right? Hard to say. I would say, look, we think we're, as we said in the remarks, we should, we expect to grow again in the next quarter sequentially. Whether or not there's a real impact right now because of the deal, it's just really hard for us to quantify that. But we just brought in our new sole cabinet that came out late in the quarter. It's doing what we expected it to do.

Aidan Young: Yeah.

Aidan Young: Yes.

Randy L. Taylor: That's a difficult one right.

Randy L. Taylor: Hard to say I would I would say look we think we're as we said in the NIM.

Randy L. Taylor: Remarks, we should we expect to grow again in next quarter sequentially.

Randy L. Taylor: Whether or not Theres, a real impact right now because of the deal. It's just really hard for us to quantify that but.

Randy L. Taylor: We think with some of the new themes on view, that should hopefully help that our mechanical products are getting hit very well on the items report. So, it's just hard to say. I can't tell you that there's not some thought process out there, but I'm not going to point out right now just early in the stage that it's being impacted just by the deal.

Randy L. Taylor: And we just brought out a new sole cabinet that came out late in the quarter. It's doing what we expected to do we think with some of the new themes on view that should hopefully help that.

Randy L. Taylor: Tactical products are hitting very well on the Eilers report so.

Randy L. Taylor: It's just hard to say I can't tell you that theres not some some thought process out there, but I'm not going to point right now at this early stage that.

Randy L. Taylor: Being impacted just by the deal.

Aidan Young: Great, thanks for the call. I'll pass it on.

Speaker Change: Great. Thanks for the color I'll pass it on.

Speaker Change: Thank you.

Barry Jonathan Jonas: And our next question comes from the line of Barry Jonas with Truist Securities. Please proceed.

Aidan Young: And our next question comes from the line of Barry Jonas with <unk> Securities. Please proceed with your question.

Barry Jonathan Jonas: Hey guys, thanks for all the helpful remarks. Maybe I just wanted to dive more. Can you maybe give more color on what gives you the confidence that you think New Cabinet Momentum will show up in the financials in the second half of the year, which starts pretty soon? Thanks.

Barry Jonathan Jonas: Hey, guys. Thanks, Thanks for all the helpful remarks, maybe I just wanted to dive more can you maybe give more color on what gives you. The confidence that you think new cabinet momentum will show up in the financials in the second half of the year, which starts pretty soon thanks.

Randy L. Taylor: Barry, it's, you know, it's hard to say specifically, but, you know, we're investing in capital. So we're getting games out there. We know that we're getting a lift off of new games in comparison to the games that are being replaced. So, in the install base, you know, there is some churn, and it's first going to be to replace the older units. So that's going to move in the right direction. We think that's pretty straightforward. The question is, how long will it hold?

Barry Jonathan Jonas: Sure.

Speaker Change: It's hard to say, specifically, but we're investing in the capital. So we're getting games out there we know that we're getting lift off of new games in comparison to the games that are being replaced on the installed base. You know there is some churn in its first one would be to replace the older units. So that's going to move in the right direction, we think that's pretty straightforward.

Randy L. Taylor: The question is how long they hold and is it really go to a higher win per day than than maybe what we are modeling so I would say.

Randy L. Taylor: And does it really go to a higher win per day than maybe what we're modeling? So I would say, you know, we're seeing interest in the soul with the new, the two themes that have hit well in the report. Right? That's something new for us. So look, there are green shoots here, Barry, that would point to the fact that, you know, we should improve in the second half of the year. It's a difficult one to say how much, but, you know, so far, the new themes are working well.

Randy L. Taylor: We're seeing interest in the soul with the new.

Randy L. Taylor: The two themes that are well in the Eilers report right, that's something new for us. So look there's green shoots here Barry that would point to the fact that you know.

Randy L. Taylor: We should improve in the second half of the year, it's a difficult one to say how much but so far the new themes are working well.

Randy L. Taylor: And we're seeing, you know, as we're replacing games, we're getting a lift. It's just that we have a big installed base, and so that takes a little time. It's a bigger, you know, a bigger shift to make, but we're still very comfortable that we're going to improve in the back half of the year.

Randy L. Taylor: We are seeing.

Randy L. Taylor: As youre, replacing games, we're getting a lift it's just that we have a big installed base and so that takes a little time, it's a bigger a bigger shift to turn but we're still very comfortable that we're going to improve in the back half of the year.

Randy L. Taylor: Great, great. And then just as a follow-up, you know, look, we know you need to run the businesses independently until the deal closes, but is there any early integration work or maybe ways for the two companies to work together between now and when the deal closes?

Speaker Change: Great Great and then just as a follow up.

Speaker Change: We know you need to run the businesses independently until the deal closes but is there any early integration work or maybe wait for the two companies to work together between now and the deal close thanks.

Randy L. Taylor: Yeah.

Randy L. Taylor: Yeah, Barry, I would say, look, that's kind of a topic we're really not going to cover, you know, that you're very limited on what you can do. So I would say I'm going to stay away from that one. Because until, you know, we're, as we said, we're not going to give an update there. So I would say I'll leave it at that, Barry. Unfortunately, not much I can give you. Understandable. Thank you.

Speaker Change: Yes, Barry I would say, that's that's kind of a topic, we're really not going to cover.

Randy L. Taylor: You're very limited on what you can do so I would say I'm going to stay away from that one because until.

Randy L. Taylor: As I said, we're not going to give an update there so I would say E.

Randy L. Taylor: Leave it at that very unfortunately, not much I can I can give you.

Speaker Change: Understood. Thank you.

Speaker Change: You bet.

David Brian Katz: And our next question comes from the line of David Katz with Jeffreys. Please proceed with your question. Hi. Good morning, everyone.

Randy L. Taylor: And our next question comes from the line of David Katz with Jefferies. Please proceed with your question.

David Brian Katz: Hi, good morning, everyone. Thanks for taking my questions for all the detail. I'm just curious, as you sort of progress toward closing on the transaction, what kind of feedback are you getting sort of in the field in terms of opportunities that may be going slower or faster as a result of just the pending deal outcome?

David Brian Katz: Hi, Good morning, everyone. Thanks for taking my questions for all the detail.

David Brian Katz: I'm just curious as you sort of progress towards closing on the transaction.

David Brian Katz: What kind of.

David Brian Katz: <unk> are you getting sort of in the field.

David Brian Katz: In terms of opportunities that may be going slower or faster.

David Brian Katz: As a result of just the pending deal out there.

Randy L. Taylor: Hey, David, how are you doing? I'm struggling a little bit with how to answer your question. I mean, I would say the feedback that we've got from customers is positive on the deal, you know, so, but, you know, whether or not I can say, is there anything that You know, what we're doing in the interim, again, as I remarked to Barry, there's not a lot that you can really do at this stage in the game until you get through a couple of the processes that we've talked about between anti

Speaker Change: Hey, David how are you doing.

Randy L. Taylor: Struggling a little bit with how to answer your question I mean, I would say the feedback that we got from customers is positive on the deal.

Randy L. Taylor: So, but whether or not I can say is there anything that you.

Randy L. Taylor: We are doing in the <unk>.

Randy L. Taylor: In the interim again.

Randy L. Taylor: We marked very there's not a lot that you can really do at this stage in the game until you get through a couple of the.

Randy L. Taylor: Of the processes that we've talked about between antitrust and regulatory we have we did have a cab or.

Randy L. Taylor: We did have a CAB, where we brought our customers in for a customer evaluation of the products, and I think, again, they were favorable to the transaction, right? They still want to see how it goes. We've been very clear to our customers that both product lines will continue to be supported, and so I think that's really what they want to know, and I think they've been supportive of that. But there's not, I guess, anything else I can really point to, David, that says where we are in this process, and until we are farther along and have other information, we're just, as you said, operating as independent units with the understanding that down the road, we expect to come together.

Randy L. Taylor: Yeah.

Randy L. Taylor: When we bring our customers and our customer.

Randy L. Taylor: Evaluation of other products and I think again they were they were.

Randy L. Taylor: Favorable to the transaction right there still want to see how it goes we've been very clear to our customers that both product lines will continue to be supported.

Randy L. Taylor: So I think that's really what they want to know and I think they have been supportive of that but there's not I guess anything else I can really point to David that says where we are in this process and Intel.

Randy L. Taylor: We are further along and have other information.

Randy L. Taylor: We're just as you said, we're kind of operating as independent units with understanding that's down the road, we expect to come together.

Randy L. Taylor: And Randy, in your prepared remarks, you talked about some of the technology opportunities coming together, which is clearly an exciting part of all this, notwithstanding the, you know, time to meld those two enterprises together.

Speaker Change: I'll, just start and Randy or you're.

Randy L. Taylor: Prepared remarks, you talked about some of the technology opportunities that are coming together, which which is clearly an exciting part of all of us.

Randy L. Taylor: Notwithstanding.

Randy L. Taylor: Standing.

Randy L. Taylor: Time to meld those two enterprises together.

Randy L. Taylor: I.

Randy L. Taylor: Presume.

Randy L. Taylor: There may also be some incremental R&D.

Speaker Change: To that end have you started to look at.

Randy L. Taylor: The cost of melding those together might be at this stage or is that just way too early to get a little sorry, though.

David Brian Katz: It's again, yeah, David, it's just, it's just way too early. You know, I think it...

Randy L. Taylor: David It's just it's just way too early.

Randy: I think the good thing is as we've talked on our remarks before is that we don't expect to change R&D, but R&D is what's going to drive this company and the success of this company combined so it's definitely not going to be in the in the neighborhood of pulling back in my estimation right now but.

David Brian Katz: Specifically, where and in that area. David again, it's just too early to talk about anything of that nature or how we're going to look at that going forward.

Randy L. Taylor: Okay, fair enough. Thank you very much.

David Brian Katz: Okay.

Speaker Change: Fair enough. Thank you very much.

Speaker Change: I appreciate it David Thanks.

Chad C. Beynon: Our next question comes from the line of Chad Beynon with Macquarie. Please proceed with your question.

Randy L. Taylor: Our next question comes from the line of Chad Beynon with Macquarie. Please proceed with your question.

Chad C. Beynon: Morning. Thanks for taking my question. I wanted to ask about the iGaming or digital side of things. The market here in the U.S. continues to grow quite significantly, and I know that's been an area of focus for your content here. And then you've also talked about expanding into the U.K., Europe, and Latin American markets. So can you just kind of give us an update in terms of how that business, that line item, is progressing, and then opportunities for 24? Thanks.

Chad C. Beynon: Good morning, Thanks for taking my question wanted to ask about the <unk>.

Chad C. Beynon: Gaming or digital side of things the market here in the U S continues to grow quite significantly and I know that.

Chad C. Beynon: That's been an area of focus for your content here and then you've also talked about expanding into the U K Europe and Latin American markets. So can you just kind of give us an update in terms of how that.

Chad C. Beynon: That business that line item is progressing and then opportunities for 24. Thanks.

Mark F. Labay: Yeah, Chad, I'll take that one. Look, I think digital continues to be an important part of our business and a great avenue for growth. Again, what we really appreciate about the gaming business is the ability to take proven content that we've developed and take it to new channels and really expand what we're doing there. And as you mentioned, the North America, U.S. market, is growing, and our ability to get into new markets like the U.K. is also something we're really excited about.

Speaker Change: Yes, Ed I'll take that one look I think digital continues to be an important part of our business is a great Avenue for growth again, what we really appreciate about the gaming business is the ability to take proven content that we've developed and taken into new channels and really expand what we're doing there and as you mentioned.

Mark F. Labay: North America U S market growing.

Mark F. Labay: Create opportunities and our ability to get into new markets. Like UK is also something that we're really excited about still very early stages of that international piece, but but we are live actually in the U K now and looking to continue to expand what we do in UK and in Europe with some partners that we have here in the coming quarters. So so great opportunity I think in terms.

Mark F. Labay: Still very early stages of that international piece, but we are live, actually, in the U.K. now and looking to continue to expand what we do in the U.K. and in Europe with some partners that we have here in the coming quarters. So great opportunity, I think, in terms of growth. You know, we ended the quarter probably just a little over $7.3 million in revenues, so nice year-over-year growth, probably about 12%, 13% growth on a year-over-year basis in terms of performance there. So it's, again, progressing nicely and continuing to grow along the path of our expectations.

Mark F. Labay: Of of growth, we ended the quarter, probably a little over $773 billion of revenue a nice year over year growth, probably about 12% to 13% growth.

Mark F. Labay: The year over year basis in terms of performance. There. So it's again progressing nicely and continue to grow along the path of our expectations.

Chad C. Beynon: Thanks, Mark. And then on the fintech side, you mentioned hardware, which is coming in a little bit late this quarter. That's always been lumpy and kind of harder to predict. Is there general seasonality in that business? And I know you have a few big improvements and kind of products that are out in the market. Can you just kind of help us with the outlook for that for the rest of the year on the hardware side?

Mark F. Labay: Thanks, Mark and then on the Fintech side.

Chad C. Beynon: You mentioned.

Chad C. Beynon: Hardware coming in a little bit light this quarter.

Chad C. Beynon: That's always been lumpy and kind of harder to predict is there general seasonality in that business and I know you have a few big improvements and kind of products that are out in the market.

Chad C. Beynon: Can you just kind of help us with the outlook for that for the rest of the year on the hardware side.

Mark F. Labay: Yeah, Chad, to your point, it is lumpy. I would say, you know, we have signed contracts. We have, you know, a product that we do believe will get placed this year. So, we're very confident that that will, you know, ramp throughout the rest of the year. The only, you know, the unknown is, you know, customers, when they're ready for it, and are they going to take it at that point in time? So, you know, we had something that pushed this quarter and pushed out.

Speaker Change: Yes, Chad to your point.

Mark F. Labay: Is lumpy I would say.

Mark F. Labay: We have signed contracts we have.

Mark F. Labay: Product that we do believe we'll get placed this year. So we're very confident that that will ramp throughout the rest of the year the only.

Mark F. Labay: The unknown is customers when they are ready for it and are they going to take at that point in time. So that we had some they got pushed this quarter and pushed out but again. These are signed contracts, which are generally tied to a cash access contract and so.

Mark F. Labay: But again, these are signed contracts, which are generally kind of tied to a cash access contract. And so, it's just when they want to install them and when they're ready for it. So, we're still very comfortable that, you know, hardware should ramp throughout the rest of the year. But in Q1, just a little bit lower than we had anticipated, obviously, compared to the prior year.

Mark F. Labay: It's just when they want to install them and when they are ready for it. So we're still very comfortable that hardware should ramp throughout the throughout the rest of the year, but in Q1, just a little bit lower than we had anticipated obviously compared to prior year.

Chad C. Beynon: Thank you very much. I appreciate it.

Chad C. Beynon: Thank you very much.

Speaker Change: Thank you very much I appreciate it.

Speaker Change: Thanks, Jeff.

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

Chad C. Beynon: Our next question comes from the line of John Davis with Raymond James. Please proceed with your question.

Madison: Hey, good morning, guys. This is Madison on for JD.

John Kimbrough Davis: Hey, Good morning, guys. This is Madison on for J D. I just wanted to touch on the comments around the decision to not replace some cabinets in lower performing areas is this something that's just going to be isolated to <unk> or is this an ongoing process, where you guys are looking at other areas, where there could be some bleed over into <unk> in the second half.

Madison: I just wanted to touch on the comments around the decision not to replace some cabinets and lower performing areas. Is this something that's just going to be isolated to one queue? Or is this an ongoing process where you guys are looking at other areas where there could be some bleed over into two queues or the second half?

Mark F. Labay: I'll take that one, Madison. Look, I think we're always in the gaming operations team is laser focused on making sure they make smart choices with respect to, you know, generating revenue and driving revenue. And if we have low volume locations that are looking either for increased placement fees or new placement fees, in addition to swapping out equipment, you know, we want to make sure we get a reasonable rate of return and hit that hurdle for us internally to make sure it makes sense. If it doesn't make sense, you know, just to never get your money back or barely make any money over a four or five year period of time, we're not going to spend that money.

Speaker Change: I'll take that one Madison.

Speaker Change: Thank you.

Mark F. Labay: We're always in the gaming operations team is laser focused on making sure they make smart choices with respect to generating revenue driving revenue and if we have low volume locations that are looking either for increased placement fees, our new placement fees. In addition to swapping out equipment.

Mark F. Labay: Want to make sure we get a reasonable rate of return and it hit that hurdle for us internally to make sure. It makes sense and if it doesn't make sense.

Mark F. Labay: To never get your money back or barely make any money over a four five year period of time, we're not going to spend that money. So we're always evaluating that I think there were some larger concentrations of units in the first quarter that we've talked about of our defined over 300 of them are probably those kind of decisions to.

Randy L. Taylor: So we're always evaluating that. I think there were some larger concentrations of units in the first quarter that we talked about of our decline. Just over 300 of them were probably those kinds of decisions to not replace capital where we had the opportunity to. But I expect over the coming quarters, you'll see a couple more little instances like that.

Randy L. Taylor: Replace capital, where we had the opportunity to what I expect over the coming quarters Youll see a couple of more of a list like that maybe that's the level that you saw here, but but.

Randy L. Taylor: We are making those choices to maximize our yield in the installed base, yes, Madison I would point out that those are really kind of related to two customers.

Madison: Maybe not to the level that you saw here, but, you know, we are making those choices to maximize our yield at the installation base. Yeah, Madison, I would point out that those were really kind of related to two customers. So I don't want you to forget that this is somehow throughout the FAR install base, but there were a couple of customers that, you know, just had lower performing units. And then there were some other issues tied to it, and we decided that, from a yield standpoint, it made sense not to go after those. So we don't want it to look like it's throughout our install base, but it was just primarily two customers.

Madison: Don't want you to look at it is this somehow throughout far install base, but there were a couple of customers that.

Madison: Just to add lower performing units and then there were some other issues tied to it and we decided that from a yield it made sense not to go after those so don't want it to look like.

Madison: Throughout our installed base, but it was just primarily to customers.

Randy L. Taylor: Okay, got it. Just a quick follow up here on the fintech side, you know. I appreciate the color you gave on some of the hardware components. But as we think about kind of volumes progressing through the year or yields for that matter, you know, how are you guys thinking about cash on the casino floor and, you know, whether it be 2Q or the 2nd half and just any color in terms of what you're expecting from a yield perspective? Thanks, guys.

Speaker Change: Okay got it and just a quick follow up here on the <unk> side I. Appreciate the color you gave on some of the hardware component, but as we think about kind of volumes progressing through the year year or yields for that matter. How are you guys thinking about cash of the casino floor in whether it be <unk> or the second half and just any color.

Randy L. Taylor: In terms of what you're expecting from a yield perspective, thanks guys.

Madison: What I'd say is, I think Mark covered it a little bit in his remarks that, you know, January was softer than we expected, but, you know, it really kind of recovered in, you know, February and March. And I would say, so far, April and early May have been, you know, really pleasantly, not surprising, but, you know, higher than we kind of expected. So, it seems to be right now that, you know, we would expect the cash access, you know, volumes to kind of stay at that, you know, mid to low single-digit growth and maybe even a little bit better, but we'll have to wait and see.

Randy L. Taylor: Tremendous.

Speaker Change: What I'd say is I think mark covered it a little bit in the in his remarks that January was softer than we expected, but it really kind of recovered in.

Madison: February and March and I would say so far.

Madison: April and early May have been.

Madison: Pleasantly.

Madison: Surprising, but higher than we expected. So it seems to be right now that we would expect the cash access volumes to kind of stay at that mid to low single digit growth and maybe even a little bit better, but we'll have to wait and see but I would say look we are still expecting growth on cash access and I think we're kind of.

Madison: But I would say, look, we're still expecting growth in cash access, and I think we're kind of budgeting for that level. But right now, I'd say we're probably seeing something a little bit stronger than that. And I would just add, look, even with the little bit of headwinds of weather in January that we saw, we still ended the quarter positive on a same store basis. So, it seems like the patron, the consumer, is still very willing to spend in the gaming environment, and we're seeing some, as Randy mentioned, some really good strength, probably above the kind of our expectation levels into April and into May, probably closer to, you know, just mid to high single digits in April and into May.

Madison: We're kind of budgeting for that level, but right now I'd say, we're seeing probably a little bit stronger than that and I would just add look even with the little bit of headwinds of weather in January that we saw we still ended the quarter positive on a same store basis. So so it seems like the patriot the consumers still.

Madison: Very willing to spend in the gaming environment and we're seeing some as Randy mentioned, some really good strength, probably above the kind of what were our expectation levels into April and into May probably.

Madison: Closer to.

Madison: Mid to.

Madison: Mid single digits in April and into May So April last year made wasn't that impacted or what the comp wasn't so horribly bad either so it feels like it's still holding up very steady for us in this space.

Madison: So, you know, April last year, May wasn't that impacted, or the comp wasn't so horribly bad either. So, it feels like it's still holding up very steady for us in this space. Got it. Yeah, that's a very helpful color.

Madison: Got it. Yeah, that's very helpful, Collin. I appreciate it, guys.

Speaker Change: Got it yeah, that's very helpful color I appreciate it guys.

Speaker Change: You bet.

David Brian Katz: And our next question comes from the line David Bain with B. Reilly.

Madison: And our next question comes from the line of David <unk> with B. Riley. Please proceed with your question.

David Brian Katz: Great. Thank you. Hi Randy. Hi Mark.

David Brian Katz: Great. Thank you Hi, Randy Hi, Mark quick.

David Brian Katz: Quick question on the termination of the repurchase program does that signal like confidence of a deal close in.

Randy L. Taylor: Quick question on the termination of the repurchase program. Does that signal, like, confidence in a deal closing and, you know, you can keep the money for dividend purposes? Well, I think it doesn't really talk about... Well, no, I think it doesn't signal confidence in the deal closing. I still think our confidence hasn't changed.

Randy L. Taylor: The money for dividend purposes.

Randy L. Taylor: Or is that more I think.

Randy L. Taylor: It doesn't really talk about.

Randy L. Taylor: Well no I think it doesn't it doesn't cigna.

Randy L. Taylor: Signal the confidence of the deal close I still think our confidence Hasnt changed we still believe that will close at the end of the year or early next year, but but what we wanted to point out was that we're not going to be we have a special dividend if it's payable depending on on our operations and merger related expenses and so forth and so we just want to make sure that.

Randy L. Taylor: We still believe that we'll close at the end of the year or early next year. But what we wanted to point out was that we're not going to be, you know, we have a special dividend if it's payable, depending on our operations and merger-related expenses and so forth. And so we just want to make sure that, you know, shareholders understand that we're not going to be outpurchasing shares because we think that takes away from the dividend.

Randy L. Taylor: Shareholders understand that we're not going to be purchasing shares because we think that takes away from the dividend and then we also wanted to note to sell to cover where we have changed our approach to not not withholding shares for tax purposes, which would require us to pay the cash into into the U S government, so that will be it.

Randy L. Taylor: And then we also wanted to note the sell-to-cover, where we've changed our approach to not withholding shares for tax purposes, which would require us to pay the cash into the U.S. government, so that would be a use of our cash during this time period, versus just saying people should sell them on the open market and we'll still pay their taxes. But that would, again, help our overall potential for a dividend. So we're trying to manage cash as well to make sure that, you know, if possible, there could be a dividend.

Randy L. Taylor: Use of our cash during this time period versus just saying people should sell them on the open market and will still pay their taxes, but that would again to help our overall potential for a dividend. So we're trying to manage cash.

Randy L. Taylor: Well to make sure that if possible that there could be a dividend. So that was kind of both of that.

David Brian Katz: So that was kind of both, that's kind of two aspects to it, David. Very good. That's perfect. And then, as a follow-up, I know you spoke about some customers and their reactions to the deal generally. Have you specifically spoken to any systems customers or operators?

David Brian Katz: Two aspects to it David.

Speaker Change: Very good that's perfect and then.

Speaker Change: As a follow up I know you spoke about some customers and their reaction to the deal generally have you specifically spoken to any systems customers are operators.

Speaker Change: And maybe they have opined it.

David Brian Katz: With regard to the potential of the cashless friction removal from.

David Brian Katz: From the combination.

Speaker Change: Is that something that like as David cast is pointing out that could actually be more accelerated than you originally anticipated.

Speaker Change: Amongst the IGT base system space.

Randy L. Taylor: Yeah, look, I, you know, I would, I would.

David Brian Katz: Yes.

Speaker Change: I would expect we Havent I would say, we haven't really talked specifically to customers. I think there may be customers that are kind of thinking about what theyre going to do on the system side the system side.

Randy L. Taylor: In other words, if you think about what they're going to use from a cashless and then maybe they have the IGT system I think they are probably thinking about does that does that change.

Randy L. Taylor: How they want to go forward, but and maybe that gives us more opportunity I'm, saying, David but I don't think I would say we've had any real discussions there because again, where we are in this period of.

Randy L. Taylor: They've got they've got to operate we have to operate.

Randy: Awesome. Thanks, Randy.

Randy L. Taylor: Okay.

George Frederick Sutton: And our next question comes from the line of George Sutton with Craig Hallam. Please proceed with your question.

Randy L. Taylor: And our next question comes from the line of George Sutton with Craig Hallum. Please proceed with your question.

George Frederick Sutton: Thank you. I have a mathematical question for Mark. You mentioned the daily win per unit numbers are expected to improve in the back half of the year as a result of new content. Help us understand the percentage of your units that would be impacted by the new content. That sounded to me to be an unusual way to grow quickly.

George Frederick Sutton: Thank you I have a mathematical question for Mark.

George Frederick Sutton: You mentioned that daily win per unit.

George Frederick Sutton: The numbers are expected to improve in the back half of the year.

George Frederick Sutton: As a result of new content.

George Frederick Sutton: Help us understand the percentage.

George Frederick Sutton: Of your units that would be impacted by the new content that sounded to be sounded to me to be an unusually.

George Frederick Sutton: Alright unusual way to grow quickly the daily win per unit.

Mark F. Labay: Well, remember, at the installation base, the entire base of units, we're continually making content for all of our cabinets in there. It's not just about brand new cabinets that are out there as well. So we're always swapping out content and trying to move the needle in terms of performance and improvement. And that's how you grow over time as well.

Speaker Change: Well remember in the installed base.

Mark F. Labay: The entire base of units, we're continually making content for all of our cabinets in there. It's not just about brand new cabinets that are out there as well so we're always swapping out content and trying to.

Mark F. Labay: Move the needle in terms of performance and improvement and that's how you can grow over time as well, but obviously, the new cabinets and the new content is something new to patients.

Mark F. Labay: But obviously, the new cabinets and the new content are something new to patrons, and that drives, generally, a slightly higher level of lift on the devices as we make those swaps out of cabinets as well as the content on them. So what we've been seeing in the install base is generally anywhere from $10 to $15, or $20 a day of daily win improvement on the swap-outs we've been doing. Clearly, we've been focused on the highest value units first in the install base.

Mark F. Labay: That drives generally a little more increased level of Av.

Mark F. Labay: On the devices as we make those swaps out of.

Mark F. Labay: Cabinets as well as the content on them. So what we've been seeing in the installed base that generally anywhere from you know.

Mark F. Labay: 10, 15, and $20 a day of daily win improvement.

Mark F. Labay: On the swap outs, we've been doing clearly we've been focused on the highest value units first in the installed base and we'll continue that over the course of time swapping out lower yielding older equipment legacy type cabinets that maybe a little more tired with the new freshest content. There. So that's where we expect to see the biggest bang for the Buck in terms of movement.

Mark F. Labay: And we'll continue that over the course of time, swapping out lower-yielding or older equipment, legacy-type cabinets that may be a little more tired with the new, freshest content in there. So that's where we expect to see the biggest bang for the buck in terms of movement in the daily win. It's a two-pronged approach, you know. Sorry Randy, go ahead. I didn't have much more to add. It's just a two, is it? Go ahead. Well, I need to know what the two-pronged approach is.

Randy L. Taylor: [inaudible]

Randy: In the daily win.

Randy L. Taylor: Okay.

Randy L. Taylor: Yes.

Speaker Change: Sorry, Randy.

Randy L. Taylor: Okay.

Randy: More to add as it just is it go ahead.

Randy: Well I need to know what the two pronged approaches.

George Frederick Sutton: Now that I said it, you have to, but I would say, like, you're focused on replacing themes where some of the themes have gotten older, and that's a little bit easier to lift, but then you're, but you have to start replacing the cabinets. So I think, you know, Mark's point is the cabinets plus new themes are probably the biggest lift, but also just putting new themes on older cabinets is a lift. So it's a combination.

Randy: Now that I've said that you have to but I would say that youre focused on.

George Frederick Sutton: Replacing themes, where some of the themes have gotten older and thats, a little bit easier lift, but then Europe, but you have to start replacing the cabinets. So I think Mark's point is the cabinets plus new themes are probably the biggest lift but also just putting new themes on older cabinets is a lift so it's a combo.

Dean A. Ehrlich: Gotcha. Dr. Ehrlich has been surprisingly quiet on this call, and there was a reference to the early performance of the Dynasty View not meeting your expectations but an expectation that that improves with new content. I just wondered if he could address sort of what might have been missing there, and what may be coming that we should be enthusiastic about.

George Frederick Sutton: Got you a doctor look has been surprisingly quiet on this call and there was a reference to the early performance of the dynasty view not meeting your expectations, but an expectation that that improves with new content and I. Just wondered if you could address sort of what might have been missing there what may be coming that we should be enthusiastic about.

Dean A. Ehrlich: I'll hit the latter part of it on the stuff that we should be enthusiastic about because we have a huge lineup coming out of product that we feel hits the tried and true mechanics that players are very familiar with and just the pure bandwidth on our emphasis on developing on some of the new hardware that we've been talking about for a while. So, what's happening here is that it's really starting to come to fruition as a product starts getting deployed. It's just taken a little bit longer than, obviously, any of us would have liked.

Speaker Change: I'll hit the latter part of it of the stuff that we should be enthusiastic about.

Dean A. Ehrlich: Because we have a huge lineup coming out of product that we feel hits the tried and true mechanics.

Dean A. Ehrlich: Players are very familiar with and just the pure bandwidth on our emphasis on.

Dean A. Ehrlich: Developing on some of the new hardware that we've been talking about for a while seller. What's happening here is that it's really starting to come to fruition as the products start getting deployed it's just taken a little bit longer then obviously any of us would have liked so.

Dean A. Ehrlich: So, I am excited about a lot of different products that are coming out in the next few months. So, hard to name if I had to give you one. We have Smoke and Hot Stuff, the link that Randy touched upon that hits our premium segment. Very excited to see how that's going to do, and just the continued success of Dynamite Pop that we've all talked about. Obviously, I look forward to seeing a couple of more themes resonate at that same particular level and see where this goes. I'd like to add that, you know, on the view specific, right, we launched

Dean A. Ehrlich: I am excited about a lot of different products that are coming out through the next upcoming few months. So hard to name if I had to give you one we got Smokin hot stuff.

Dean A. Ehrlich: Randy touched upon that.

Dean A. Ehrlich: Hits, our premium segment very excited to see how thats going to do and just the continued success of dynamite part that we have.

Dean A. Ehrlich: Ill talk about so.

Dean A. Ehrlich: Obviously look forward to seeing a couple of more themes resonate with that same particular level and see where this goes.

Randy L. Taylor: I'd just like to add that, you know, on the VIEW specific, right, we launched in throughout 23 with about six titles. We have now added nine more titles, so we have a total of 15 titles. So that's really what I'm focused on with those additional nine titles where, again, we placed VIEW out in our install base, and we obviously have it for sale. It's also, you know, it's also our cabinet that we'll be using for the VLTs. So, you know, we're still excited about that, but I'm focused on, hey, will those nine new themes really provide a lift versus where we came out?

Speaker Change: Hey, George I would add that.

Randy L. Taylor: On the view specific right, we launched and throughout 'twenty three of about six titles. We now added nine more titles. So we have a total of 15 titles. So that's really what I'm focused on where those will those additional nine titles.

Randy L. Taylor: Again, we placed view out in our installed base and we obviously have it for for sale. It's also.

Randy L. Taylor: Our our cabinet that will be using for the Blt's. So we're still excited about that but I'm focused on hey, where those nine new themes really.

Randy L. Taylor: Provide a lift.

Randy L. Taylor: At versus where we came out.

Speaker Change: Understood. Thanks, guys.

Speaker Change: Thank you.

Randy L. Taylor: Thank you. This concludes our question and answer session. I'd now like to turn the call back over to Mr. Taylor for his closing remarks.

Randy L. Taylor: This concludes our question and answer session I would now like to turn the call back over to Mr. Taylor for his closing remarks.

Randy L. Taylor: Sure. Thank you for joining us today. We appreciate your continued interest in Everi, and we look forward to providing an update on our business outlook on our second quarter call in August. Again, thanks for joining us.

Randy L. Taylor: Sure. Thank you for joining us today. We appreciate your continued interest in every and we look forward to providing an update on our business outlook on our second quarter call in August again, thanks for joining us.

Speaker Change: Thank you.

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

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Operator: Thanks for watching!

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Operator: Hmm.