Note 14 - Operating Segments

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE 14. OPERATING SEGMENTS

We report our business segment results by segment in accordance with the “management approach.” The Management approach designates the internal reporting used by our chief operating decision maker (“CODM”), who is our Chief Executive Officer (the “CEO”), for making decisions and assessing performance of our reportable segments.

See Note 1 for a detailed discussion of our three segments. Each segment’s activities include the design, development, acquisition, manufacturing, marketing, distribution, installation and servicing of its product lines. We evaluate the performance of our operating segments based on revenues and segment adjusted EBITDA, which is defined in the paragraph below.

Segment revenues include leasing, licensing, or selling of products within each reportable segment. Segment adjusted EBITDA includes the revenues and operating expenses from each segment adjusted for depreciation, amortization, write-downs and other charges, accretion of placement fees, non-cash stock based compensation expense, as well as other costs such as certain acquisitions and integration-related costs including restructuring and severance charges; initial public offering and secondary offerings costs; legal and litigation expenses including settlement payments; new jurisdictions and regulatory licensing costs; non-cash charges on capitalized installation and delivery; contract cancellation fees; and other adjustments primarily composed of professional fees incurred by the Company for projects, corporate and public filing compliance and other costs deemed to be non-recurring in nature. Revenues in each segment are attributable to third parties and segment operating expenses are directly associated with the product lines included in each segment such as research and development, product approval costs, product-related litigation expenses, sales commissions and other directly-allocable sales expenses. Cost of gaming operations and cost of equipment sales primarily include the cost of products sold, service, manufacturing overhead, shipping and installation.

Segment adjusted EBITDA excludes other income and expense, income taxes and certain expenses that are managed outside of the operating segments.

The following provides financial information concerning our reportable segments for the three and six months ended June 30, 2020 and 2019 (amounts in thousands):   

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenues by segment
EGM	$	13,957		$	70,978		$	64,312		$	140,633
Table Products		674			2,420			3,156			4,576
Interactive		2,157			1,111			3,633			2,342
Total Revenues		16,788			74,509		$	71,101		$	147,551
Adjusted EBITDA by segment
EGM		(2,191	)		35,541			21,181			72,263
Table Products		(126	)		807			772			1,285
Interactive		1,164			(603	)		1,395			(1,538	)
Subtotal		(1,153	)		35,745			23,348			72,010
Write-downs and other:
Loss on disposal of long-lived assets		25			179			74			445
Impairment of long lived assets		-			4,857			6			5,207
Fair value adjustments to contingent consideration and other items		794			-			794			400
Depreciation and amortization		21,521			23,659			45,890			45,192
Accretion of placement fees(1)		1,874			1,532			3,733			2,803
Non-cash stock-based compensation expense		1,442			2,154			2,993			3,350
Acquisitions and integration-related costs including restructuring and severance		(220	)		394			232			2,463
Initial public offering costs and secondary offering		-			146			-			425
Legal and litigation expenses including settlement payments		-			3			-			3
Non-cash charge on capitalized installation and delivery		623			664			1,319			1,312
Other adjustments		1,537			162			2,239			67
Interest expense		10,894			9,560			19,236			18,434
Interest (income)		(120	)		(31	)		(172	)		(70	)
Loss on extinguishment and modification of debt		3,102			-			3,102			-
Other expense		(35	)		(46	)		4,304			5,214
(Loss) income before income taxes	$	(42,590	)	$	(7,488	)	$	(60,402	)	$	(13,235	)

⁽¹⁾ Non-cash item related to the accretion of contract rights under development agreements and placement fees.

The Company’s CODM does not receive a report with a measure of total assets or capital expenditures for each reportable segment as this information is not used for the evaluation of segment performance. The CODM assesses the performance of each segment based on adjusted EBITDA and not based on assets or capital expenditures due to the fact that two of the Company’s reportable segments, Table Products and Interactive, are not capital intensive. Any capital expenditure information is provided to the CODM on a consolidated basis. Therefore, the Company has not provided asset and capital expenditure information by reportable segment.