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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number: 001-32622
EVERI HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 20-0723270
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
7250 S. Tenaya Way, Suite 100  
Las Vegas 
Nevada89113
(Address of principal executive offices) (Zip Code)

(800) 833-7110
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueEVRINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  x  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer¨
Non-accelerated filer¨Smaller reporting company
  Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No x
As of July 29, 2020, there were 85,450,998 shares of the registrant’s $0.001 par value per share common stock outstanding.

TABLE OF CONTENTS

   Page
    
PART I: FINANCIAL INFORMATION
    
Item 1: Financial Statements
    
  Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2020 and 2019
    
  Unaudited Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019
    
  Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019
Unaudited Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the three and six months ended June 30, 2020 and 2019
    
  Notes to Unaudited Condensed Consolidated Financial Statements
    
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
    
Item 3: Quantitative and Qualitative Disclosures About Market Risk
    
Item 4: Controls and Procedures
    
PART II: OTHER INFORMATION
    
Item 1: Legal Proceedings
    
Item 1A: Risk Factors
    
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
Item 3: Defaults Upon Senior Securities
    
Item 4: Mine Safety Disclosures
    
Item 5: Other Information
    
Item 6: Exhibits
    
Signatures  




PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.
EVERI HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(In thousands, except earnings per share amounts)
 
 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
Revenues  
Games revenues  
Gaming operations$13,859  $45,576  $59,545  $89,862  
Gaming equipment and systems6,983  23,412  18,566  46,499  
Gaming other11  391  32  445  
Games total revenues20,853  69,379  78,143  136,806  
FinTech revenues  
Cash access services10,034  39,696  47,007  80,528  
Equipment3,404  7,835  9,756  14,863  
Information services and other4,424  12,796  17,118  21,284  
FinTech total revenues17,862  60,327  73,881  116,675  
Total revenues38,715  129,706  152,024  253,481  
Costs and expenses  
Games cost of revenues(1)
  
Gaming operations1,681  3,726  6,226  7,850  
Gaming equipment and systems4,071  13,432  10,895  25,961  
Gaming other456  347  456  347  
Games total cost of revenues6,208  17,505  17,577  34,158  
FinTech cost of revenues(1)
  
Cash access services511  2,968  4,066  5,665  
Equipment2,014  4,597  5,904  8,927  
Information services and other324  970  1,198  1,928  
FinTech total cost of revenues2,849  8,535  11,168  16,520  
Operating expenses41,603  39,167  80,501  73,815  
Research and development5,193  6,672  13,924  14,203  
Depreciation16,294  15,258  32,537  30,047  
Amortization19,295  17,690  38,619  33,987  
Total costs and expenses91,442  104,827  194,326  202,730  
Operating (loss) income(52,727) 24,879  (42,302) 50,751  
Other expenses  
Interest expense, net of interest income19,822  20,433  37,321  40,833  
Loss on extinguishment of debt80    7,457    
Total other expenses19,902  20,433  44,778  40,833  
(Loss) income before income tax(72,629) 4,446  (87,080) 9,918  
Income tax benefit(4,148) (1,040) (5,145) (1,428) 
Net (loss) income (68,481) 5,486  (81,935) 11,346  
Foreign currency translation, net of tax304  (35) (1,654) 469  
Comprehensive (loss) income $(68,177) $5,451  $(83,589) $11,815  

(1) Exclusive of depreciation and amortization.
2


 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
(Loss) earnings per share  
Basic$(0.80) $0.08  $(0.97) $0.16  
Diluted$(0.80) $0.07  $(0.97) $0.15  
Weighted average common shares outstanding  
Basic85,122  71,477  84,873  70,909  
Diluted85,122  79,158  84,873  77,211  

See notes to unaudited condensed consolidated financial statements.
3


EVERI HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
 
 At June 30,At December 31,
 20202019
ASSETS  
Current assets  
Cash and cash equivalents
$257,430  $289,870  
Settlement receivables
33,833  70,282  
Trade and other receivables, net of allowances for credit losses of $2,605 and $5,786 at June 30, 2020 and December 31, 2019, respectively
70,733  87,910  
Inventory
33,840  26,574  
Prepaid expenses and other current assets
19,440  27,896  
Total current assets415,276  502,532  
Non-current assets
Property and equipment, net112,996  128,869  
Goodwill681,531  681,635  
Other intangible assets, net242,015  279,187  
Other receivables, net16,096  16,661  
Other assets16,186  20,339  
Total non-current assets1,068,824  1,126,691  
Total assets$1,484,100  $1,629,223  
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities  
Settlement liabilities$158,075  $234,087  
Accounts payable and accrued expenses147,639  173,103  
Current portion of long-term debt1,250    
Total current liabilities306,964  407,190  
Non-current liabilities
Deferred tax liability, net21,009  26,401  
Long-term debt1,161,380  1,108,078  
Other accrued expenses and liabilities13,509  33,566  
Total non-current liabilities1,195,898  1,168,045  
Total liabilities1,502,862  1,575,235  
Commitments and contingencies (Note 13)
Stockholders’ (deficit) equity  
Convertible preferred stock, $0.001 par value, 50,000 shares authorized and no shares outstanding at June 30, 2020 and December 31, 2019, respectively
    
Common stock, $0.001 par value, 500,000 shares authorized and 110,534 and 85,426 shares issued and outstanding at June 30, 2020, respectively, and 109,493 and 84,497 shares issued and outstanding at December 31, 2019, respectively
111  109  
Additional paid-in capital456,588  445,162  
Accumulated deficit(294,875) (212,940) 
Accumulated other comprehensive loss(2,473) (819) 
Treasury stock, at cost, 25,108 and 24,996 shares at June 30, 2020 and December 31, 2019, respectively
(178,113) (177,524) 
Total stockholders’ (deficit) equity(18,762) 53,988  
Total liabilities and stockholders’ equity$1,484,100  $1,629,223  

See notes to unaudited condensed consolidated financial statements.
4


EVERI HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended June 30,
20202019
Cash flows from operating activities
Net (loss) income $(81,935) $11,346  
Adjustments to reconcile net (loss) income to cash used in operating activities:
Depreciation32,537  30,047  
Amortization38,619  33,987  
Non-cash lease expense2,195  2,018  
Amortization of financing costs and discounts1,941  1,789  
Loss on sale or disposal of assets101  1,121  
Accretion of contract rights3,170  4,318  
Provision for credit losses4,981  5,912  
Deferred income taxes(5,392) (1,748) 
Reserve for inventory obsolescence1,021  670  
Write-down of assets11,033  843  
Loss on extinguishment of debt7,457    
Stock-based compensation7,123  4,160  
Other non-cash items456    
Changes in operating assets and liabilities:
Settlement receivables35,998  (161,117) 
Trade and other receivables12,202  (16,497) 
Inventory(9,880) (4,570) 
Other assets1,437  (20,518) 
Settlement liabilities(75,566) (3,478) 
Other liabilities(25,908) 24,060  
Net cash used in operating activities(38,410) (87,657) 
Cash flows from investing activities
Capital expenditures (30,134) (45,683) 
Acquisitions, net of cash acquired(15,000) (20,000) 
Proceeds from sale of property and equipment86  50  
Placement fee agreements(875) (11,648) 
Net cash used in investing activities(45,923) (77,281) 
Cash flows from financing activities
Proceeds from secured term loan125,000    
Borrowings under revolving credit facility35,000    
Repayments of unsecured notes(89,619)   
Repayments of credit facility(13,500) (17,700) 
Fees associated with debt transactions(11,128)   
Proceeds from exercise of stock options2,113  9,450  
Treasury stock(589) (980) 
Net cash provided by (used in) financing activities47,277  (9,230) 
Effect of exchange rates on cash and cash equivalents(1,732) 714  
Cash, cash equivalents and restricted cash
Net decrease for the period(38,788) (173,454) 
Balance, beginning of the period296,610  299,181  
Balance, end of the period$257,822  125,727  

See notes to unaudited condensed consolidated financial statements.
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 Six Months Ended June 30,
 20202019
Supplemental cash disclosures  
Cash paid for interest$32,956  $39,549  
Cash (refunded) paid for income tax, net (52) 293  
Supplemental non-cash disclosures
Accrued and unpaid capital expenditures$2,288  $3,321  
Accrued and unpaid placement fees added during the year  585  
Accrued and unpaid liabilities for acquisitions added during the year  27,556  
Transfer of leased gaming equipment to inventory5,578  7,637  
Operating lease right-of-use assets obtained in exchange for new lease obligations860  15,132  
 
See notes to unaudited condensed consolidated financial statements.

6


EVERI HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(In thousands)

Common Stock—
Series A
AdditionalAccumulated
Other
Total Stockholders’
Number of
Shares
AmountPaid-in
Capital
Accumulated
Deficit
Comprehensive
Loss
Treasury
Stock
(Deficit) Equity
Balance, January 1, 201995,100  $95  $298,929  $(229,457) $(1,998) $(176,464) $(108,895) 
Net income—  —  —  5,860  —  —  5,860  
Foreign currency translation—  —  —  —  504  —  504  
Stock-based compensation expense—  —  1,773  —  —  —  1,773  
Exercise of options864  1  4,970  —  —  —  4,971  
Restricted share vesting and withholding2  —  —  —  —  (15) (15) 
Balance, March 31, 201995,966  $96  $305,672  $(223,597) $(1,494) $(176,479) $(95,802) 
Net income—  —  —  5,486  —  —  5,486  
Foreign currency translation—  —  —  —  (35) —  (35) 
Stock-based compensation expense—  —  2,387  —  —  —  2,387  
Exercise of options764  1  4,491  —  —  —  4,492  
Restricted share vesting and withholding275  —  —  —  —  (965) (965) 
Balance, June 30, 201997,005  $97  $312,550  $(218,111) $(1,529) $(177,444) $(84,437) 

Balance, January 1, 2020109,493  $109  $445,162  $(212,940) $(819) $(177,524) $53,988  
Net loss—  —  —  (13,454) —  —  (13,454) 
Foreign currency translation—  —  —  —  (1,958) —  (1,958) 
Stock-based compensation expense—  —  4,173  —  —  —  4,173  
Exercise of options298  1  1,641  —  —  —  1,642  
Restricted share vesting and withholding15  —  —  —  —  (42) (42) 
Balance, March 31, 2020109,806  $110  $450,976  $(226,394) $(2,777) $(177,566) $44,349  
Net loss—  —  —  (68,481) —  —  (68,481) 
Foreign currency translation—  —  —  —  304  —  304  
Stock-based compensation expense—  —  4,638  —  —  —  4,638  
Issuance of warrants—  —  502  —  —  —  502  
Exercise of options149  1  472  —  —  —  473  
Restricted share vesting and withholding579  —  —  —  —  (547) (547) 
Balance, June 30, 2020110,534  $111  $456,588  $(294,875) $(2,473) $(178,113) $(18,762) 

See notes to unaudited condensed consolidated financial statements.
7


EVERI HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In this filing, we refer to: (a) our unaudited condensed consolidated financial statements and notes thereto as our “Financial Statements,” (b) our Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income as our “Statements of Operations,” and (c) our Unaudited Condensed Consolidated Balance Sheets as our “Balance Sheets.”

1.          BUSINESS
Everi Holdings Inc. (“Everi Holdings,” or “Everi”) is a holding company, the assets of which are the issued and outstanding shares of capital stock of each of Everi Payments Inc. (“Everi FinTech” or “FinTech”) and Everi Games Holding Inc., which owns all of the issued and outstanding shares of capital stock of Everi Games Inc. (“Everi Games” or “Games”). Unless otherwise indicated, the terms the “Company,” “we,” “us,” and “our” refer to Everi Holdings together with its consolidated subsidiaries.
Everi is a leading supplier of entertainment and technology solutions for the casino, digital online, and gaming industry. With a focus on both customers and players, Everi develops, sells, and leases games and gaming machines, gaming systems and services, and is an innovator and provider of core financial products and services, self-service player loyalty tools and promotion management software, and intelligence and regulatory compliance solutions. Everi’s mission is to provide casino operators with games that facilitate memorable player experiences, offer secure financial transactions for casinos and their patrons, and deliver software applications and self-service tools to improve casino operations’ efficiencies and fulfill regulatory compliance requirements.
Everi Holdings reports its results of operations based on two operating segments: Games and FinTech.
Everi Games provides gaming operators with gaming technology products and services, including: (a) gaming machines, primarily comprising Class II and Class III slot machines placed under participation or fixed-fee lease arrangements or sold to casino customers; (b) providing and maintaining the central determinant systems for the video lottery terminals (“VLTs”) installed in the State of New York and similar technology in certain tribal jurisdictions; and (c) business-to-business (“B2B”) and business-to-consumer (“B2C”) digital online gaming activities.
Everi FinTech provides gaming operators with financial technology products and services, including: (a) services and equipment that facilitate casino patrons’ self-service access to cash at gaming facilities via Automated Teller Machine (“ATM”) cash withdrawals, credit card cash access transactions and point-of-sale (“POS”) debit card purchase and cash access transactions; (b) check warranty services; (c) self-service player loyalty enrollment and marketing equipment, including promotion management software and tools; (d) software and services that improve credit decision making, automate cashier operations, and enhance patron marketing activities for gaming establishments; (e) equipment that provides cash access and other cash handling efficiency-related services; and (f) compliance, audit, and data solutions.
Impact of COVID-19 Pandemic
The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility in the financial markets, increased unemployment levels, caused temporary, and in certain cases, closures of many businesses. The gaming industry was not immune to these factors as our casino customers closed their gaming establishments, and as a result, our operations have experienced significant disruptions. At the immediate onset of the COVID-19 pandemic, we were affected by various measures, including, but not limited to: the institution of social distancing and sheltering-in-place requirements in many states and communities, which significantly impacted demand for our products and services, and resulted in office closures, the furlough of a majority of our employees, the implementation of temporary base salary reductions for our employees and the implementation of a work-from-home policy.
During the second quarter of 2020, businesses began to adapt to social-distancing measures and various phases of reopening pursuant to government-mandated guidelines. As gaming establishments reopened, a number of casino operators initially experienced an elevated level of activity as compared to what was originally anticipated. This initial demand that occurred during the second quarter of 2020 has recently flattened to slightly below pre-COVID levels. It is unclear if, and when, volume will return to pre-COVID levels; however, we continue to monitor the impacts of COVID-19 and make adjustments accordingly.
With our gaming customers reopening casino properties, we have recalled a majority of our furloughed employees on primarily a work-from-home basis consistent with our remaining employees and reversed a significant portion of their temporary pay reductions as our revenues began to return toward the end of the second quarter of 2020. In addition, a number of casino
8


properties have closed for a second time, and if this continues to occur, it may have an adverse impact on our revenue expectations in the near-term.
In parallel, in connection with the uncertainty facing our customers as a result of COVID-19, we have evaluated our business strategies and implemented measures to reduce the size of our ongoing operating costs. As a result of this evaluation, we permanently reduced our employee base, with most of the departures resulting from our furloughed employees, to accommodate the current and future operating needs of our customers and our business.
The impact of the COVID-19 pandemic also exacerbates the risks disclosed in our Annual Report, including, but not limited to: our ability to comply with the terms of our indebtedness, our ability to generate revenues, earn profits and maintain adequate liquidity, our ability to service existing and attract new customers, maintain our overall competitiveness in the market, the potential for significant fluctuations in demand for our services, overall trends in the gaming industry impacting our business, as well as potential volatility in our stock price, among other consequences such as cybersecurity exposure.
The impact of the COVID-19 pandemic on the Company’s operations, and significant and sustained decline in our stock price, qualified as a triggering event necessitating the evaluation of our long-lived assets and goodwill for indicators of impairment. We conducted a goodwill quantitative impairment assessment as of May 31, 2020. See “Note 9 — Property and Equipment” and “Note 10 — Goodwill and Other Intangible Assets.”
Results of Operations and Liquidity
To date, our operations have experienced revenue reductions and significant disruptions as a direct consequence of the circumstances surrounding the COVID-19 pandemic. This had a material adverse impact on our overall results of operations and financial condition for the current reporting period. As such, we have implemented a range of actions to maintain balance sheet flexibility and preserve liquidity as a result of the business disruption caused by the rapid nationwide spread of COVID-19, including, but not limited to:
At the onset of COVID-19 pandemic:
we completed the full draw down of our available capacity of $35.0 million under the Revolving Credit Facility in order to improve our liquidity and preserve financial flexibility in light of the uncertainty in our industry and the global economy as a result of COVID-19 (as discussed and defined in “Note 12 — Long-Term Debt”);
we entered into a fourth amendment (the “Fourth Amendment”) to our existing Credit Agreement (as defined in “Note 12 — Long-Term Debt”), which among other things, amended our debt covenants to provide relief with respect to our senior secured leverage ratio (as discussed and defined in “Note 12 — Long-term Debt”);
we also entered into a new credit agreement, which provides for a $125.0 million senior secured term loan, which is secured on a pari passu basis with the loans under our existing Credit Agreement. The entire amount was borrowed upon closing (as discussed and defined in “Note 12 — Long-term Debt”);
our executive officers elected to accept significant reductions to their compensation during the pendency of the COVID-19 pandemic in order to better position the Company to withstand the challenging conditions that have caused global and domestic disruption in the current economic environment;
our independent members of the Board of Directors of the Company elected to forgo their quarterly cash compensation for Board and related committee services;
we furloughed a majority of our staff;
we reduced the salaries of our employee-base from approximately 15% to 70%;
we suspended certain employee benefits, such as providing a Company match on 401(k) contributions;
we implemented a remote working environment;
we canceled or delayed material capital expenditures;
we suspended our share repurchases under our previously authorized repurchase program; and
As of the end of the second quarter of 2020:
we have implemented a safe workplace return policy for those of our employees who return to our facilities;
we have since returned most of our furloughed employees to work;
9


we have since restored most of the base compensation to our employee-base;
we completed a reduction-in-force and incurred severance costs, among other expenses, of approximately $2.7 million;
we recorded a write-down of assets of approximately $11.0 million, of which $9.2 million and $1.8 million related to our Games and Fintech businesses, respectively, for certain of our trade receivables, inventory, prepaid expenses and other assets, fixed assets and other intangible assets that were not expected to be recoverable. This charge was reflected in Operating Expenses in our Statements of Operations. While we are unable to determine the nature, or amount, of further write-down charges, it is possible that we may record additional amounts to the extent we experience a decline in operations and financial performance in the future;
we have since returned a portion of the cash compensation to our Board of Directors; and
we have since returned a portion of the base compensation to our executives.
Government Relief
In late March 2020, the U.S. government enacted the Coronavirus Aid Relief and Economic Security Act (the “CARES Act”) in response to the COVID-19 pandemic. We have taken advantage of the following components contained within the CARES Act:
Employee Retention Payroll Tax Credit: We are applying a credit against payroll taxes for 50% of eligible employee wages paid or incurred from March 13, 2020 to December 31, 2020. This employee retention payroll tax credit would be provided for as much as $10,000 of qualifying wages for each eligible employee, including health benefits;
Employer Social Security Tax Payment Deferral: We are deferring payment of the employer portion of the social security taxes due on remaining payments and from enactment of the CARES Act through December 31, 2020, with 50% due by December 31, 2021 and 50% due by December 31, 2022; and
Alternative Minimum Tax (“AMT”) Credit Refund: We are applying for a refund of our AMT tax credits as the CARES Act affords us the ability to accelerate the recovery of such credits.

2.          BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Our unaudited condensed consolidated financial statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Some of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made. The results for the three and six months ended June 30, 2020 are not necessarily indicative of results to be expected for the full fiscal year. The Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto included in the 2019 Annual Report.
We evaluate the composition of our revenues to maintain compliance with SEC Regulation S-X Section 210.5-3, which requires us to separately present certain categories of revenues that exceed the quantitative threshold on our Statements of Operations.
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Revenue Recognition
Overview
We evaluate the recognition of revenue based on the criteria set forth in Accounting Standards Codification (“ASC”) 606 — Revenue from Contracts with Customers and ASC 842 — Leases, as appropriate. We recognize revenue upon transferring control of goods or services to our customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We enter into contracts with customers that include various performance obligations consisting of goods, services, or combinations of goods and services. Timing of the transfer of control varies based on the nature of the contract. We recognize revenue net of any sales and other taxes collected from customers, which are subsequently remitted to governmental authorities and are not included in revenues or operating expenses. We measure revenue based on the consideration specified in a contract with a customer and adjust it, as necessary.
Disaggregation of Revenues
We disaggregate revenues based on the nature and timing of the cash flows generated by such revenues as presented in “Note 18 — Segment Information.”
Contract Balances
Since our contracts may include multiple performance obligations, there is often a timing difference between cash collections and the satisfaction of such performance obligations and revenue recognition. Such arrangements are evaluated to determine whether contract assets and liabilities exist. We generally record contract assets when the timing of cash collections differs from when revenue is recognized due to contracts containing specific performance obligations that are required to be met prior to a customer being invoiced. We generally record contract liabilities when cash is collected in advance of us satisfying performance obligations, including those that are satisfied over a period of time. Balances of our contract assets and contract liabilities may fluctuate due to timing of cash collections.
The following table summarizes our contract assets and contract liabilities arising from contracts with customers:
Six Months Ended June 30,