Note 13 - Operating Segments

3 Months Ended

Mar. 31, 2025

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE 13. 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, for making decisions and assessing performance of our reportable segments.

See Note 1. "Description of the Business and Summary of Significant Accounting Policies" 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 Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), which is defined in the paragraph below.

In addition to revenue, we believe that Adjusted EBITDA reported to the CODM provides a meaningful measure of our operating profitability for evaluating our business performance, making budget decisions, and comparing our performance against that of other peer companies using similar measures. The 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. 

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:

• Write-downs and other included items related to loss on disposal or impairment of long-lived assets and fair value adjustments to contingent consideration;

• Depreciation, amortization;

• Loss on extinguishment and modification of debt primarily relates to third party costs incurred in connection with entering into the Seventh Amendment;

• Other adjustments, primarily composed of the following:

• Costs and inventory and receivable valuation charges, professional fees incurred for projects, costs incurred related to public offerings, contract cancellation fees and other transaction costs deemed to be non-operating in nature;

• Acquisition and integration-related costs related to the purchase of businesses and to integrate operations and obtain costs synergies;

• Restructuring and severance costs, which primarily relate to costs incurred through the restructuring of the Company’s operations from time to time and other employee severance costs recognized in the periods presented; 

• Legal and litigation related costs, which consist of payments to law firms and settlements for matters that are outside the normal course of business;

• Other non-cash charges are costs related to non-cash charges and losses on the disposition of assets, non-cash charges on capitalized installation and delivery, which primarily include the costs to acquire contracts that are expensed over the estimated life of each contract and non-cash charges related to accretion of contract rights under development agreements; and

• Non-cash stock-based compensation includes non-cash compensation expense related to grants of options, restricted stock, and other equity awards.

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 provided to the CODM for the three months ended March 31, 2025 and  March 31, 2024 (amounts in thousands):

	Three Months Ended March 31, 2025
	EGM		Table Products			Interactive		Total
Gaming Operations	$	53,428	$	4,242		$	7,269	$	64,939
Equipment Sales		29,175		711			-		29,886
Total Revenues	$	82,603	$	4,953		$	7,269	$	94,825
Less Cost of Gaming Operations	$	11,902	$	571		$	578	$	13,051
Less Cost of Equipment Sales	$	13,855	$	344		$	-	$	14,199
Less Selling, General and Administrative— Salaries and Benefits	$	7,537	$	991		$	360	$	8,888
Less Research and Development— Salaries and Benefits		13,382		463			1,032		14,877
Less Other Expenses and Adjustments to EBITDA (1)		993		(57	)		774		1,710
Total Operating Expenses and Adjustments to EBITDA (1)	$	21,912	$	1,397		$	2,166	$	25,475
Adjusted EBITDA	$	34,934	$	2,641		$	4,525	$	42,100
	Write-downs and other charges							$	558
	Depreciation and amortization								19,185
	Interest expense, net of interest income and other expense								11,948
	Other adjustments								1,441
	Other non-cash charges								2,236
	Non-cash stock compensation								2,097
	Income before income taxes							$	4,635

	Three Months Ended March 31, 2024
	EGM		Table Products		Interactive		Total
Gaming Operations	$	53,799	$	4,105	$	4,156	$	62,060
Equipment Sales		33,452		461		-		33,913
Total Revenues	$	87,251	$	4,566	$	4,156	$	95,973
Less Cost of Gaming Operations	$	11,084	$	546	$	444	$	12,074
Less Cost of Equipment Sales	$	15,521	$	135	$	-	$	15,656
Less Selling, General and Administrative— Salaries and Benefits	$	8,076	$	833	$	283	$	9,192
Less Research and Development— Salaries and Benefits		10,817		444		759		12,020
Less Other Expenses and Adjustments to EBITDA (1)		2,072		202		738		3,012
Total Operating Expenses and Adjustments to EBITDA (1)	$	20,965	$	1,479	$	1,780	$	24,224
Adjusted EBITDA	$	39,681	$	2,406	$	1,932	$	44,019
	Write-downs and other charges						$	(24	)
	Depreciation and amortization							19,439
	Interest expense, net of interest income and other expense							13,158
	Loss on extinguishment and modification of debt							1,636
	Other adjustments							429
	Other non-cash charges							2,269
	Non-cash stock compensation							2,106
	Income before income taxes						$	5,006

(1) Other expenses and adjustments to EBITDA include operating expense other than payroll-related expenses adjusted for capitalized labor and other non-cash charges and other adjustments described above.