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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 March 31, 2021
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 May 3, 2021, there were 88,122,030 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 Income (Loss) for the three months ended March 31, 2021 and 2020
    
  
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020
    
  
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020
Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2021 and 2020
    
  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  

2


PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.
EVERI HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except earnings per share amounts)
 
 Three Months Ended March 31,
 20212020
Revenues  
Games revenues  
Gaming operations$58,141 $45,686 
Gaming equipment and systems17,988 11,583 
Gaming other22 21 
Games total revenues76,151 57,290 
FinTech revenues  
Financial access services38,712 36,973 
Software and other17,246 12,694 
Hardware7,004 6,351 
FinTech total revenues62,962 56,018 
Total revenues139,113 113,308 
Costs and expenses  
Games cost of revenues(1)
  
Gaming operations4,759 4,545 
Gaming equipment and systems10,307 6,824 
Games total cost of revenues15,066 11,369 
FinTech cost of revenues(1)
  
Financial access services1,473 3,555 
Software and other1,004 873 
Hardware4,028 3,891 
FinTech total cost of revenues6,505 8,319 
Operating expenses38,043 39,272 
Research and development8,413 8,355 
Depreciation16,177 16,243 
Amortization14,715 19,324 
Total costs and expenses98,919 102,882 
Operating income40,194 10,426 
Other expenses  
Interest expense, net of interest income18,471 17,499 
Loss on extinguishment of debt 7,378 
Total other expenses18,471 24,877 
Income (loss) before income tax21,723 (14,451)
Income tax provision (benefit)1,189 (997)
Net income (loss)20,534 (13,454)
Foreign currency translation(221)(1,958)
Comprehensive income (loss)$20,313 $(15,412)

(1) Exclusive of depreciation and amortization.
3


 Three Months Ended March 31,
 20212020
Earnings (loss) per share  
Basic$0.24 $(0.16)
Diluted$0.21 $(0.16)
Weighted average common shares outstanding  
Basic86,984 84,624 
Diluted97,968 84,624 

See notes to unaudited condensed consolidated financial statements.
4


EVERI HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
 
 At March 31,At December 31,
 20212020
ASSETS  
Current assets  
Cash and cash equivalents
$335,133 $251,706 
Settlement receivables
45,822 60,652 
Trade and other receivables, net of allowances for credit losses of $4,449 and $3,689 at March 31, 2021 and December 31, 2020, respectively
80,235 74,191 
Inventory
29,729 27,742 
Prepaid expenses and other current assets
19,865 17,348 
Total current assets510,784 431,639 
Non-current assets
Property and equipment, net109,909 112,323 
Goodwill681,981 681,974 
Other intangible assets, net203,093 214,627 
Other receivables14,238 14,620 
Other assets19,809 21,996 
Total non-current assets1,029,030 1,045,540 
Total assets$1,539,814 $1,477,179 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)   
Current liabilities  
Settlement liabilities$198,316 $173,211 
 Accounts payable and accrued expenses157,029 145,029 
 Current portion of long-term debt1,250 1,250 
Total current liabilities356,595 319,490 
Non-current liabilities
Long-term debt, less current portion1,128,815 1,128,003 
Deferred tax liability, net20,776 19,956 
Other accrued expenses and liabilities16,096 17,628 
Total non-current liabilities1,165,687 1,165,587 
Total liabilities1,522,282 1,485,077 
Commitments and contingencies (Note 13)
Stockholders’ equity (deficit)  
Convertible preferred stock, $0.001 par value, 50,000 shares authorized and no shares outstanding at March 31, 2021 and December 31, 2020, respectively
  
Common stock, $0.001 par value, 500,000 shares authorized and 112,852 and 87,651 shares issued and outstanding at March 31, 2021, respectively, and 111,872 and 86,683 shares issued and outstanding at December 31, 2020, respectively
113 112 
Additional paid-in capital471,902 466,614 
Accumulated deficit(274,086)(294,620)
Accumulated other comprehensive loss(1,412)(1,191)
Treasury stock, at cost, 25,202 and 25,190 shares at March 31, 2021 and December 31, 2020, respectively
(178,985)(178,813)
Total stockholders’ equity (deficit)17,532 (7,898)
Total liabilities and stockholders’ equity (deficit)$1,539,814 $1,477,179 

See notes to unaudited condensed consolidated financial statements.
5


EVERI HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended March 31,
20212020
Cash flows from operating activities
Net income (loss)$20,534 $(13,454)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation16,177 16,243 
Amortization14,715 19,324 
Non-cash lease expense1,196 1,056 
Amortization of financing costs and discounts1,172 854 
Loss on sale or disposal of assets743 87 
Accretion of contract rights2,318 2,170 
Provision for credit losses1,999 3,750 
Deferred income taxes820 (1,175)
Reserve for inventory obsolescence467 362 
Loss on extinguishment of debt 7,378 
Stock-based compensation3,005 2,483 
Changes in operating assets and liabilities:
Settlement receivables14,832 67,604 
Trade and other receivables(7,673)15,846 
Inventory(2,438)(13,131)
Prepaid expenses and other assets(1,863)856 
Settlement liabilities25,105 (221,832)
Accounts payable and accrued expenses20,497 (19,257)
Net cash provided by (used in) operating activities111,606 (130,836)
Cash flows from investing activities
Capital expenditures (20,035)(22,507)
Acquisitions, net of cash acquired(10,000)(10,000)
Proceeds from sale of property and equipment80 30 
Placement fee agreements (585)
Net cash used in investing activities(29,955)(33,062)
Cash flows from financing activities
Repayments of incremental term loan(313) 
Proceeds from revolving credit facility 35,000 
Repayments of existing term loan (13,500)
Repayments of unsecured notes (89,619)
Fees associated with debt transactions (6,491)
Proceeds from exercise of stock options2,285 1,642 
Treasury stock(173)(42)
Net cash provided by (used in) financing activities1,799 (73,010)
Effect of exchange rates on cash and cash equivalents(120)(2,592)
Cash, cash equivalents and restricted cash
Net increase (decrease) for the period83,330 (239,500)
Balance, beginning of the period252,349 296,610 
Balance, end of the period$335,679 $57,110 

See notes to unaudited condensed consolidated financial statements.
6


 Three Months Ended March 31,
 20212020
Supplemental cash disclosures  
Cash paid for interest$12,026 $10,855 
Cash refunded for income tax, net (197)(78)
Supplemental non-cash disclosures
Accrued and unpaid capital expenditures$2,786 $4,488 
Transfer of leased gaming equipment to inventory1,407 5,529 
 
See notes to unaudited condensed consolidated financial statements.

7


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

Common Stock—
Series A
AdditionalAccumulated
Other
Total Stockholders’
Number of
Shares
AmountPaid-in
Capital
Accumulated
Deficit
Comprehensive
Loss
Treasury
Stock
Equity
(Deficit)
Balance, January 1, 2020
109,493 $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, 2020
109,806 $110 $450,976 $(226,394)$(2,777)$(177,566)$44,349 

Balance, January 1, 2021
111,872 $112 $466,614 $(294,620)$(1,191)$(178,813)$(7,898)
Net income— — — 20,534 — — 20,534 
Foreign currency translation— — — — (221)— (221)
Stock-based compensation expense— — 3,005 — — — 3,005 
Exercise of warrants378 — — — — — — 
Exercise of options561 1 2,284 — — — 2,285 
Restricted share vesting and withholding41 (1)— — (172)(173)
Balance, March 31, 2021
112,852 $113 $471,902 $(274,086)$(1,412)$(178,985)$17,532 

See notes to unaudited condensed consolidated financial statements.
8


EVERI HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In this filing, we refer to: (i) our unaudited condensed consolidated financial statements and notes thereto as our “Financial Statements;” (ii) our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as our “Statements of Operations;” and (iii) 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 trusted technology solutions for the casino and digital gaming industry. Everi’s mission is to be the industry leader by reimagining the gaming experience. With a focus on player engagement and helping casino customers operate more efficiently, the Company develops entertaining game content and gaming machines, gaming systems, and services for land-based and iGaming operators. The Company is also the preeminent provider of trusted financial technology solutions that power the casino floor while improving operational efficiencies and fulfilling regulatory compliance requirements, including products and services that facilitate convenient and secure cash and cashless financial transactions, self-service player loyalty tools and applications, and regulatory and intelligence software.
Everi reports its financial performance, and organizes and manages its operations, across the following two business segments: (i) Games and (ii) FinTech.
Everi Games provides gaming operators with gaming technology products and services, including: (i) gaming machines, primarily comprising Class II and Class III slot machines placed under participation or fixed-fee lease arrangements or sold to casino customers; (ii) 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; (iii) 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: financial access and deposit-based services supporting digital, cashless and physical cash options across mobile, assisted and self-service channels along with related loyalty and marketing tools, and other information-related products and services. In addition, we provide an end-to-end security suite to protect against cyber-related attacks and maintain the necessary secured environments to maintain compliance with applicable regulatory requirements. These solutions include: access to cash and cashless funding at gaming facilities via Automated Teller Machine (“ATM”) debit withdrawals, credit card financial access transactions, and point of sale (“POS”) debit card purchases at casino cages, kiosk and mobile POS devices; federally insured deposit accounts for the CashClub Wallet, check warranty services, self-service ATMs and fully integrated kiosk and maintenance services; self-service loyalty tools and promotion management software; compliance, audit, and data software; casino credit data and reporting services; marketing and promotional offering subscription-based services; and other ancillary offerings.
With respect to our FinTech business, we have made the following updates to certain of our financial statement descriptions, where applicable: (i) “Cash access services” has become “Financial access services;” (ii) “ATM” has been renamed “Funds dispensed;” (iii) “Equipment” has been changed to “Hardware;” and (iv) “Information services and other” has been revised to “Software and other.” These naming convention changes better represent how our business has evolved.
Impact of Coronavirus Disease 2019 (“COVID-19”) Pandemic
The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, temporarily lowered equity market valuations, created significant volatility in the financial markets, increased unemployment levels, caused temporary, and in certain cases, permanent 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 experienced significant disruptions in the first three quarters of 2020. 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 where we operate, 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.
9


Since the onset of COVID-19, we have implemented measures to mitigate our exposure throughout the global pandemic. While there may be further uncertainty facing our customers as a result of COVID-19, we continue to evaluate our business strategies and the impacts of the global pandemic on our results of operations and financial condition and make business decisions to mitigate further risk. It is unclear when, and if, customer volumes will consistently return to pre-COVID levels, the extent a resurgence of COVID-19 could result in the further or re-closure of casinos by federal, state, tribal or municipal governments and regulatory agencies or by the casino operators themselves in an effort to contain the COVID-19 global pandemic or mitigate its impact and the impact of vaccines on these matters; however, we continue to monitor the impacts of the global pandemic and make adjustments to our business, accordingly.

Industry conditions have improved as many of the casino properties that again temporarily closed operations in late 2020 began reopening in the first quarter of 2021. As of March 31, 2021, approximately 5% of casinos in the United States remained closed, according to the American Gaming Association. Our revenues, cash flows, and liquidity improved during the first quarter of 2021 as compared to the prior year on a sequential basis. At the onset of the pandemic, our customers implemented protocols intended to protect their patrons and guests from potential COVID-19 exposure and re-establish customer confidence in the gaming and hospitality industry. These measures included enhanced sanitization, limitations on public gathering and casino capacity, patron social distancing requirements, limitations on casino operations and amenities, of which have limited the number of patrons that are able or who desire to attend these venues. This has also impacted the pace at which demand for our products and services rebounds.
We expect that demand for our products and services will continue to be tempered in the short-term, to the extent gaming activity decreases at our customers’ locations or fails to increase at expected rates return to pre-pandemic levels and to the extent our customers decide to restrict their capital spending as a result of uncertainty in the industry, or otherwise. As a result, we continue to monitor and manage liquidity levels and we may, from time to time, evaluate available capital resource alternatives on acceptable terms to provide additional financial flexibility.
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, and potential volatility in our stock price, among other consequences such as cybersecurity exposure.
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 months ended March 31, 2021 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 2020 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.
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 adjusted, as necessary.
10


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 billing 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 (in thousands):
Three Months Ended March 31,
20212020
Contract assets(1)
Balance at January 1 — current$9,240 $8,634 
Balance at January 1 — non-current8,321 6,774 
Total
17,561 15,408 
Balance at March 31 - current9,796 8,559 
Balance at March 31 - non-current7,299 6,902 
Total
17,095 15,461 
         (Decrease)/increase $(466)$53 
Contract liabilities(2)
Balance at January 1 — current$26,980 $28,510 
Balance at January 1 — non-current289 354 
Total
27,269 28,864 
Balance at March 31 - current27,887 31,226 
Balance at March 31 - non-current98 185 
Total
27,985 31,411 
Increase
$716 $2,547 
(1)  The current portion of contract assets is included within trade and other receivables, net, and the non-current portion is included within other receivables in our Balance Sheets.
(2)  The current portion of contract liabilities is included within accounts payable and accrued expenses, and the non-current portion is included within other accrued expenses and liabilities in our Balance Sheets.
We recognized approximately $10.5 million and $11.0 million in revenue that was included in the beginning contract liability balance during the three months ended March 31, 2021 and 2020, respectively.
Games Revenues
Our products and services include electronic gaming devices, such as Native American Class II offerings and other electronic bingo products, Class III slot machine offerings, VLTs, B2B and B2C digital online gaming activities, accounting and central determinant systems, and other back office systems. We conduct our Games segment business based on results generated from the following major revenue streams: (i) Gaming Operations; (ii) Gaming Equipment and Systems; and (iii) Gaming Other.
We recognize our Gaming Operations revenue based on criteria set forth in ASC 842 or ASC 606, as applicable. The amount of lease revenue included in our Gaming Operations revenues and recognized under ASC 842 was approximately $40.8 million and $34.0 million for the three months ended March 31, 2021 and 2020, respectively.
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FinTech Revenues
Our FinTech products and services include solutions that we offer to gaming establishments to provide their patrons with financial access and deposit-based services supporting digital, cashless and physical cash options across mobile, assisted and self-service channels along with related loyalty and marketing tools, and other information-related products and services. In addition, we provide an end-to-end security suite to protect against cyber-related attacks and maintain the necessary secured environments to maintain compliance with applicable regulatory requirements. These solutions include: access to cash and cashless funding at gaming facilities via ATM debit withdrawals, credit card financial access transactions, and POS debit card purchases at casino cages, kiosk and mobile POS devices; federally insured deposit accounts for the CashClub Wallet, check warranty services, self-service ATMs and fully integrated kiosk and maintenance services; self-service loyalty tools and promotion management software; compliance, audit, and data software; casino credit data and reporting services; marketing and promotional offering subscription-based services; and other ancillary offerings. We conduct our FinTech segment business based on results generated from the following major revenue streams: (i) Financial Access Services; (ii) Software and Other; and (iii) Hardware.
Hardware revenues are derived from the sale of our financial access and loyalty kiosks and related equipment and are accounted for under ASC 606, unless such transactions meet the definition of a sales type or direct financing lease, which are accounted for under ASC 842. We did not have any new financial access kiosk and related equipment sales contracts accounted for under ASC 842 during the three months ended March 31, 2021 and 2020.
Restricted Cash
Our restricted cash primarily consists of: (i) funds held in connection with certain customer agreements; (ii) deposits held in connection with a sponsorship agreement; (iii) wide area progressive (“WAP”)-related restricted funds; and (iv) internet-related financial access activities. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Balance Sheets that sum to the total of the same such amounts shown in the statement of cash flows for the three months ended March 31, 2021 (in thousands).
Classification on our Balance Sheets
At March 31, 2021
At December 31, 2020
Cash and cash equivalentsCash and cash equivalents$335,133 $251,706 
Restricted cash - currentPrepaid expenses and other current assets445 542 
Restricted cash - non-currentOther assets101 101 
Total
$335,679 $252,349 
Allowance for Credit Losses
We continually evaluate the collectability of outstanding balances and maintain an allowance for credit losses related to our trade and other receivables and notes receivable that have been determined to have a high risk of uncollectability, which represents our best estimates of the current expected credit losses to be incurred in the future. To derive our estimates, we analyze historical collection trends and changes in our customer payment patterns, current and expected conditions and market trends along with our operating forecasts, concentration, and creditworthiness when evaluating the adequacy of our allowance for credit losses. In addition, with respect to our check warranty receivables, we are exposed to risk for the losses associated with warranted items that cannot be collected from patrons issuing these items. We evaluate the collectability of the outstanding balances and establish a reserve for the face amount of the current expected credit losses related to these receivables. The provision for doubtful accounts receivable is included within operating expenses and the check warranty loss reserves are included within financial access services cost of revenues in the Statements of Operations.
Goodwill
Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations. We test for impairment annually on a reporting unit basis, at the beginning of our fourth fiscal quarter and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The annual impairment test is completed using either: a qualitative “Step 0” assessment based on reviewing relevant events and circumstances; or a quantitative “Step 1” assessment, which determines the fair value of the reporting unit, using both an income approach that discounts future cash flows based on the estimated future results of our reporting units and a market approach that compares market multiples of comparable companies to determine whether or not any impairment exists. To the extent the carrying amount of a reporting unit is less than its estimated fair value, an impairment charge is recorded.
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The evaluation of impairment of goodwill requires the use of estimates about future operating results. Changes in forecasted operations can materially affect these estimates, which could materially affect our results of operations and financial condition. The estimates of expected future cash flows require significant judgment and are based on assumptions we determined to be reasonable; however, they are unpredictable and inherently uncertain, including, estimates of future growth rates, operating margins and assumptions about the overall economic climate as well as the competitive environment within which we operate. There can be no assurance that our estimates and assumptions made for purposes of our impairment assessments as of the time of evaluation will prove to be accurate predictions of the future. If our assumptions regarding business plans, competitive environments, or anticipated growth rates are not correct, we may be required to record non-cash impairment charges in future periods, whether in connection with our normal review procedures periodically, or earlier, if an indicator of an impairment is present prior to such evaluation.
Our reporting units are identified as operating segments or one level below. Reporting units must: (i) engage in business activities from which they earn revenues and incur expenses; (ii) have operating results that are regularly reviewed by our segment management to ascertain the resources to be allocated to the segment and assess its performance; and (iii) have discrete financial information available. As of March 31, 2021, our reporting units included: (i) Games; (ii) Financial Access Services; (iii) Kiosk Sales and Services; (iv) Central Credit Services; (v) Compliance Sales and Services; and (vi) Loyalty Sales and Services.
Fair Values of Financial Instruments
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument.
The carrying amount of cash and cash equivalents, restricted cash, settlement receivables, short-term trade and other receivables, settlement liabilities, accounts payable, and accrued expenses approximate fair value due to the short-term maturities of these instruments. The fair value of the long-term trade and loans receivable is estimated by discounting expected future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and remaining maturities. The fair value of long-term accounts payable is estimated by discounting the total obligation using the appropriate interest rates. As of March 31, 2021 and December 31, 2020, the fair value of trade and loan receivable approximated the carrying value due to contractual terms generally being slightly over 12 months. The fair value of our borrowings is estimated based on various inputs to determine a market price, such as: market demand and supply, size of tranche, maturity, and similar instruments trading in more active markets. The estimated fair value and outstanding balances of our borrowings are as follows (dollars in thousands):
 Level of HierarchyFair ValueOutstanding Balance
March 31, 2021   
Term loan2$731,749 $735,500 
Incremental term loan2$130,886 $124,063 
Senior unsecured notes2$296,454 $285,381 
December 31, 2020   
Term loan2$729,138 $735,500 
Incremental term loan2$129,972 $124,375 
Senior unsecured notes2$296,083 $285,381 
Our borrowings’ fair values were determined using Level 2 inputs based on quoted market prices for these securities.
Reclassification of Prior Year Balances
Reclassifications were made to prior-period Financial Statements to conform to the current period presentation, where applicable.
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Recent Accounting Guidance
Recently Adopted Accounting Guidance
StandardDescriptionDate of AdoptionEffect on Financial Statements
Accounting Standard Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
This ASU simplifies the accounting for income taxes by removing certain exceptions for investments, intraperiod allocations, and interim calculations, and adds guidance to reduce the complexity of applying Topic 740.January 1, 2021The adoption of this ASU did not have a material effect on our Financial Statements or on our disclosures.
Recent Accounting Guidance Not Yet Adopted
As of March 31, 2021, we did not identify recently issued accounting guidance that would have a significant impact on our consolidated financial statements.
3. LEASES
We determine if a contract is, or contains, a lease at the inception, or modification, of a contract based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control over the use of an asset is predicated upon the notion that a lessee has both the right to (i) obtain substantially all of the economic benefit from the use of the asset; and (ii) direct the use of the asset.
Operating lease right-of-use (“ROU”) assets and liabilities are recognized based on the present value of minimum lease payments over the expected lease term at commencement date. Lease expense is recognized on a straight-line basis over the expected lease term. Our lease arrangements have both lease and non-lease components, and we have elected the practical expedient to account for the lease and non-lease elements as a single lease.
Certain of our lease arrangements contain options to renew with terms that generally have the ability to extend the lease term to a range of approximately 1 to 10 years. The exercise of lease renewal options is generally at our sole discretion. The expected lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such option. The depreciable life of leased assets and leasehold improvements are limited by the expected term of such assets, unless there is a transfer of title or purchase option reasonably certain to be exercised.
Lessee
We enter into operating lease agreements for real estate purposes that generally consist of buildings for office space and warehouses for manufacturing purposes. Certain of our lease agreements consist of rental payments that are periodically adjusted for inflation. Our lease agreements do not contain material residual value guarantees or material restrictive covenants. Our lease agreements do not generally provide explicit rates of interest; therefore, we use our incremental collateralized borrowing rate, which is based on a fully collateralized and fully amortizing loan with a maturity date the same as the length of the lease that is based on the information available at the commencement date to determine the present value of lease payments. Leases with an expected term of 12 months or less (short-term) are not accounted for on our Balance Sheets. As of March 31, 2021 and December 31, 2020, our finance leases are immaterial.
Supplemental balance sheet information related to our operating leases is as follows (in thousands):
Classification on our Balance Sheets
At March 31, 2021
At December 31, 2020
Assets
Operating lease ROU assetsOther assets, non-current$14,907 $16,104 
Liabilities(1)
Current operating lease liabilitiesAccounts payable and accrued expenses$5,605 $5,649 
Non-current operating lease liabilitiesOther accrued expenses and liabilities$14,798 $16,077 
14



Supplemental cash flow information related to leases is as follows (in thousands):
Three Months Ended March 31,
20212020
Cash paid for:
Long-term operating leases$1,625 $1,299 
Short-term operating leases$430 $489 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases(1)
$ $704 
(1) The amounts are presented net of current year terminations and exclude amortization for the period.
Other information related to lease terms and discount rates is as follows:
At March 31, 2021At December 31, 2020
Weighted Average Remaining Lease Term (in years):
Operating leases4.034.16
Weighted Average Discount Rate:
Operating leases5.15 %5.16 %
Components of lease expense, which are included in operating expenses, are as follows (in thousands):
Three Months Ended March 31,
20212020
Operating Lease Cost:
Operating lease cost (1)
$1,460 $1,372 
Variable lease cost $250 $445 
(1) The amount includes approximately $1.2 million and $1.1 million in non-cash lease expense for the three months ended March 31, 2021 and 2020, respectively.

Maturities of lease liabilities are summarized as follows as of March 31, 2021 (in thousands):
Year Ending December 31, Amount
2021 (excluding the three months ended March 31, 2021)
$4,936 
20225,891 
20234,414 
20243,456 
20252,889 
Thereafter1,043 
Total future minimum lease payments $22,629 
Amount representing interest 2,226 
Present value of future minimum lease payments$20,403 
Current operating lease obligations5,605 
Long-term lease obligations$14,798 
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Lessor
We generate lease revenues primarily from our gaming operations activities, and the majority of our leases are month-to-month leases. Under these arrangements, we retain ownership of the electronic gaming machines (“EGMs”) installed at customer facilities. We receive recurring revenues based on a percentage of the net win per day generated by the leased gaming equipment or a fixed daily fee. Such revenues are generated daily and are limited to the lesser of the net win per day generated by the leased gaming equipment or the fixed daily fee and the lease payments that have been collected from the lessee. Certain of our leases have terms and conditions with options for a lessee to purchase the underlying assets. Refer to "Note 9 - Property and Equipment" for details of our rental pool assets cost and accumulated depreciation.
We did not have any new sales transactions that qualified for sales-type lease accounting treatment during the three months ended March 31, 2021 and 2020. Our interest income recognized in connection with sales-type leases executed in the prior periods is immaterial.
Supplemental balance sheet information related to our sales-type leases is as follows (in thousands):
Classification on our Balance SheetsAt March 31, 2021At December 31, 2020
Assets
Net investment in sales-type leases — currentTrade and other receivables, net$1,258 $1,397 
Net investment in sales-type leases — non-currentOther receivables$575 $803 

4. BUSINESS COMBINATIONS
We had no material acquisitions for the three months ended March 31, 2021.
Atrient, Inc.
On March 8, 2019, we acquired certain assets of Atrient, Inc. (“Atrient,” the “Seller”), a privately held company that developed and distributed hardware and software applications to gaming operators to enhance gaming patron loyalty, pursuant to an asset purchase agreement. This acquisition included existing contracts with gaming operators, technology, and intellectual property that allow us to provide gaming operators with self-service enrollment, loyalty and marketing equipment, a mobile application to offer a gaming operator’s patrons additional flexibility in accessing casino promotions, and a marketing platform that manages and delivers a gaming operator’s marketing programs through these patron interfaces. This acquisition expanded our financial technology solutions offerings within our FinTech segment. Under the terms of the asset purchase agreement, we paid the Seller $20.0 million at the closing of the transaction, $10.0 million one year following the closing and another $10.0 million during the three months ended March 31, 2021. The related liabilities were recorded at fair value on the acquisition date as part of the consideration transferred and were included in accounts payable and accrued expenses as of December 31, 2020.
Furthermore, an additional amount of approximately $10.0 million in contingent consideration was earned by the Seller based upon the achievement of certain revenue targets over the first two years post-closing. The related liabilities were recorded at fair value on the acquisition date as part of the consideration transferred and are remeasured each reporting period. The inputs used to measure the fair value of our liabilities are categorized as Level 3 in the fair value hierarchy. Contingent consideration liabilities as of March 31, 2021 and December 31, 2020 were approximately $10.0 million and $9.9 million, respectively, and were included in accounts payable and accrued expenses in our Balance Sheets as of March 31, 2021 and December 31, 2020, respectively.
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Micro Gaming Technologies, Inc.
On December 24, 2019, we acquired certain assets of Micro Gaming Technologies, Inc. (“MGT”), a privately held company that developed and distributed kiosks and software applications to gaming patrons to enhance patron loyalty, in an asset purchase agreement. The acquired assets consisted of existing contracts with gaming operators, technology, and intellectual property intended to allow us to provide gaming operators with self-service patron loyalty functionality delivered through stand-alone kiosk equipment and a marketing platform that manages and delivers gaming operators marketing programs through these patron interfaces. This acquisition further expanded our financial technology loyalty offerings within our FinTech segment. Under the terms of the asset purchase agreement, we paid MGT $15.0 million at the closing of the transaction, with an additional $5.0 million due by April 1, 2020 and a final payment of $5.0 million due two years following the date of closing.
In the second quarter of 2020, we entered into an amendment to the asset purchase agreement allowing us to remit the additional $5.0 million by July 1, 2020, which we paid in June 2020, with a final payment of $5.0 million due by July 1, 2021. The related liabilities were recorded at fair value on the acquisition date as part of the consideration transferred and were included in accounts payable and accrued expenses as of March 31, 2021 and December 31, 2020. The total consideration for this acquisition is expected to be approximately $25.0 million. The acquisition did not have a significant impact on our results of operations or financial condition.
5. FUNDING AGREEMENTS
We have commercial arrangements with third-party vendors to provide cash for certain of our fund dispensing devices. For the use of these funds, we pay a usage fee on either the average daily balance of funds utilized multiplied by a contractually defined usage rate or the amounts supplied multiplied by a contractually defined usage rate. These fund usage fees, reflected as interest expense within the Statements of Operations, were approximately $0.7 million and $1.5 million for the three months ended March 31, 2021 and 2020, respectively. We are exposed to interest rate risk to the extent that the applicable rates increase.
Under these agreements, the currency supplied by third party vendors remain their sole property until the funds are dispensed. As these funds are not our assets, supplied cash is not reflected in our Balance Sheets. The outstanding balance of funds provided from the third parties were approximately $451.0 million and $340.3 million as of March 31, 2021 and December 31, 2020, respectively.
Our primary commercial arrangement, the Contract Cash Solutions Agreement, as amended, is with Wells Fargo, N.A. (“Wells Fargo”). Wells Fargo provides us with cash up to $300 million with the ability to increase the amount as defined within the agreement or otherwise permitted by the vault cash provider. The term of the agreement expires on June 30, 2023 and will automatically renew for additional one-year periods unless either party provides a ninety-day written notice of its intent not to renew.
We are responsible for losses of cash in the fund dispensing devices under this agreement, and we self-insure for this type of risk. There were no material losses for the three months ended March 31, 2021 and 2020.
6. TRADE AND OTHER RECEIVABLES
Trade and other receivables represent short-term credit granted to customers and long-term loans receivable in connection with our Games and FinTech equipment and compliance products. Trade and loans receivables generally do not require collateral. The balance of trade and loans receivables consists of outstanding balances owed to us by gaming establishments. Other receivables include income tax receivables and other miscellaneous receivables.
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The balance of trade and other receivables consisted of the following (in thousands):
 At March 31,At December 31,
20212020
Trade and other receivables, net  
Games trade and loans receivables$55,770 $44,794 
FinTech trade and loans receivables
18,398 14,683 
Contract assets(1)
17,095 17,561 
Net investment in sales-type leases
1,833 2,200 
Insurance settlement receivable(2)
 7,650 
Other receivables
1,377 1,923 
Total trade and other receivables, net94,473 88,811 
Non-current portion of receivables  
Games trade and loans receivables(1,082)(1,333)
FinTech trade and loans receivables
(5,282)(4,163)
Contract assets(1)
(7,299)(8,321)
Net investment in sales-type leases
(575)(803)
Total non-current portion of receivables(14,238)(14,620)
Total trade and other receivables, current portion$80,235 $74,191 
(1) Refer to “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies for a discussion on the contract assets.
(2) Refer to “Note 13 — Commitments and Contingencies” for a discussion on the insurance settlement receivable.
Allowance for Credit Losses
The activity in our allowance for credit losses for the three months ended March 31, 2021 and 2020 is as follows (in thousands):
Three Months Ended March 31,
20212020
Beginning allowance for credit losses$(3,689)$(5,786)
Provision(1,999)(3,750)
Charge-offs and recoveries1,239 3,943 
Ending allowance for credit losses$(4,449)$(5,593)

7. INVENTORY
Our inventory primarily consists of component parts as well as work-in-progress and finished goods. The cost of inventory includes cost of materials, labor, overhead and freight, and is accounted for using the first in, first out method. The inventory is stated at the lower of cost or net realizable value.
Inventory consisted of the following (in thousands): 
 At March 31,At December 31,
 20212020
Inventory  
Component parts, net of reserves of $1,555 and $1,262 at March 31, 2021 and December 31, 2020, respectively
$21,956 $21,560 
Work-in-progress
2,408 182 
Finished goods
5,365 6,000 
Total inventory
$29,729 $27,742 

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8. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets include the balance of prepaid expenses, deposits, debt issuance costs on our Revolving Credit Facility (defined herein), restricted cash, operating lease ROU assets, and other assets. The current portion of these assets is included in prepaid expenses and other assets and the non-current portion is included in other assets, both of which are contained within the Balance Sheets.
The balance of the current portion of prepaid expenses and other assets consisted of the following (in thousands):
 At March 31,At December 31,
 20212020
Prepaid expenses and other current assets  
Prepaid expenses
$13,178 $11,282 
Deposits
4,960 4,133 
Restricted cash(1)
445 542 
Other
1,282 1,391 
Total prepaid expenses and other current assets$19,865 $17,348 
(1) Refer to “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies” for discussion on the composition of the restricted cash balance.
The balance of the non-current portion of other assets consisted of the following (in thousands): 
 At March 31,At December 31,
 20212020
Other assets  
Operating lease ROU assets
$14,907 $16,104 
Prepaid expenses and deposits
4,073 4,952 
Debt issuance costs of revolving credit facility
220 267 
Other
609 673 
Total other assets
$19,809 $21,996 

9. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (dollars in thousands): 
  At March 31, 2021At December 31, 2020
Useful Life
(Years)
CostAccumulated
Depreciation
Net Book
Value
CostAccumulated
Depreciation
Net Book
Value
Property and equipment       
Rental pool - deployed
2-4
$223,409 $145,853 $77,556 $216,775 $136,975 $79,800 
Rental pool - undeployed
2-4
22,769 17,636 5,133 21,974 16,680 5,294 
FinTech equipment
1-5
31,985 20,460 11,525 33,349 21,947 11,402 
Leasehold and building improvementsLease Term11,771 8,717 3,054 11,352 8,557 2,795 
Machinery, office, and other equipment
1-5
45,981 33,340 12,641 45,085 32,053 13,032 
Total
 $335,915 $226,006 $109,909 $328,535 $216,212 $112,323 
Depreciation expense related to property and equipment totaled approximately $16.2 million for both the three months ended March 31, 2021 and 2020.
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10. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations. The balance of goodwill was approximately $682.0 million at March 31, 2021 and December 31, 2020, respectively. We have the following reporting units: (i) Games; (ii) Financial Access Services; (iii) Kiosk Sales and Services; (iv) Central Credit Services; (v) Compliance Sales and Services; and (vi) Loyalty Sales and Services.
In accordance with ASC 350 (“Intangibles-Goodwill and Other”), we test goodwill at the reporting unit level, which is identified as an operating segment or one level below, for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
We test our goodwill for impairment on October 1 each year, or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The annual impairment test is completed using either: a qualitative “Step 0” assessment based on reviewing relevant events and circumstances or a quantitative “Step 1” assessment, which determines the fair value of the reporting unit, using both an income approach that discounts future cash flows based on the estimated future results of our reporting units and a market approach that compares market multiples of comparable companies to determine whether or not any impairment exists. To the extent the carrying amount of a reporting unit is less than its estimated fair value, an impairment charge is recorded.
There was no impairment identified for our goodwill for the three months ended March 31, 2021 and 2020.
Other Intangible Assets
Other intangible assets consist of the following (dollars in thousands): 
  At March 31, 2021At December 31, 2020
Useful Life
(Years)
CostAccumulated
Amortization
Net Book
Value
CostAccumulated
Amortization
Net Book
Value
Other intangible assets       
Contract rights under placement fee agreements
3-7
$60,561 $30,426 $30,135 $60,561 $28,108 $32,453 
Customer contracts
3-14
71,975 55,633 16,342 71,975 54,407 17,568 
Customer relationships
3-7
231,100 131,791 99,309 231,100 126,549 104,551 
Developed technology and software
1-6
317,621 261,789 55,832 313,957 255,771 58,186 
Patents, trademarks, and other
2-18
19,682 18,207 1,475 19,682 17,813 1,869 
Total$700,939 $497,846 $203,093 $697,275 $482,648 $214,627 
Amortization expense related to other intangible assets was approximately $14.7 million and $19.3 million for the three months ended March 31, 2021 and 2020, respectively.
There were no placement fees for the three months ended March 31, 2021. We paid approximately $0.6 million in placement fees for the three months ended March 31, 2020.
We evaluate our other intangible assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. During the three months ended March 31, 2021 and 2020, there were no material write-downs of intangible assets.
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11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The following table presents our accounts payable and accrued expenses (in thousands):
 At March 31,At December 31,
 20212020
Accounts payable and accrued expenses  
Trade accounts payable
$79,955 $54,531 
Contract liabilities
27,887 26,980 
Contingent consideration and acquisition-related liabilities(1)
14,935 24,674 
Payroll and related expenses
14,924 13,357 
Accrued interest
6,414 1,068 
Operating lease liabilities
5,605 5,649 
Other
3,288 3,605 
Financial access processing and related expenses2,634 1,109 
Accrued taxes
1,387 1,329 
Litigation accrual(2)
 12,727 
Total accounts payable and accrued expenses
$157,029 $145,029 
(1) Refer to “Note 4 — Business Combinations.”
(2) Refer to “Note 13 — Commitments and Contingencies.”
12. LONG-TERM DEBT
The following table summarizes our outstanding indebtedness (dollars in thousands):
 MaturityInterestAt March 31,At December 31,
 DateRate20212020
Long-term debt  
$820 million Term Loan Facility
2024
LIBOR+2.75%
$735,500 $735,500 
$125 million Incremental Term Loan Facility
2024
LIBOR+10.50%
124,063 124,375 
$35 million Revolving Credit Facility
2022
LIBOR+4.50%