Everi Holdings Inc.

Hello, everyone. Thank you for standing by, and welcome to the Every Holdings 2022 Second Quarter Earnings Conference call. During today's presentation, all parties will be in a listen-only mode. Following the prepared remarks, the call will be open for a question-and-answer session. As a reminder, this call is being recorded. Now, let me turn the call over to Bill Fund, Senior Vice President, Investor Relations. Please go ahead, sir.

Thank you, Operator. Welcome, everyone. Let me begin with a reminder of our safe harbor disclaimer, which covers today's call and webcast. Our discussion will contain forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from those discussed in our call. These risks and uncertainties include, but are not limited to, those contained in our earnings release today and in other SEC filings, which are posted in the investor section of our corporate website at every.com. Because of the potential risk, you are cautioned not to place undue reliance on forward-looking statements. We do not intend and assume no obligation to update any forward-looking statements which are made only as of today, August 3rd, 2022. We will refer to certain non-GAAP financial measures such as adjusted EBITDA, free cash flow, and net cash position. A description of each non-GAAP measure and a reconciliation to the most directly comparable GAAP measure can be found in our earnings release and related 8K today and in the investor section on our website. This call is being webcast and recorded. A link to the webcast and replay of today's call can be found in the investor section of our website. On our call today are Randy Taylor, Chief Executive Officer, Mark Labai, Chief Financial Officer, Kate Lowenhar-Fisher, General Counsel, Dean Ehrlich, GAINS Business Leader, and Darren Simmons, our FinTech Business Leader. Now, I'm pleased to turn the call over to Randy Taylor.

Thank you, Bill. Good morning, everyone, and thank you for joining us. I'd like to begin by sharing a few highlights of our second quarter financial results. Recurring revenue increased 7% in total from both our games and fintech segments, each reporting record recurring revenue. Revenue from sales of gaming machines and fintech hardware performed even better, growing 37% year over year, also reaching a record revenue level in both segments. This strong revenue growth drove an increase in operating income, pre-tax income, adjusted EBITDA, and pre-cash flow even with higher supply chain related costs and increased costs for internal product development, which is focused on ensuring that our pathway to consistent long-term growth remains within our control. Our record results are even more impressive when you consider the tough comparison against last year's record second quarter results. Those results included the benefit from government stimulus payments together with pent-up demand as players re-engaged at their favorite casinos following the reopening of most properties and the acceleration in vaccination rates. These record results reflect the foundational strength in our core businesses and our attention to operational execution on a daily basis. I want to highlight my appreciation for all of our team members for the dedication they bring to the job each day, whether they are collaborating to take care of customers' needs, developing and enhancing our product portfolios, or addressing the many opportunities or challenges across our operations. Their efforts result in the successful execution of our long-term growth priorities, initiatives that are focused on high return investments in new products and technologies, customer satisfaction, and new geographies for our games and fintech business units. The strongest proof point of the success of our investments has been the growth in our free cash flow. We generated $49.5 million in the second quarter and $101.1 million of free cash flow for the first six months of 2022, driven by increased contributions from both business segments. Even as we, like all of our peers and most other industries, address the fluid nature of the macro economy, I firmly believe we are well positioned to continue to succeed based on the significant free cash flow we generate on a quarterly basis. This enables us to look beyond servicing debt to place our focus on our capital allocation strategy and how we position ourselves in the future. This strategy is aimed at optimizing shareholder value through both further investment in our growth initiatives, as well as in returning capital to our shareholders through opportunistic repurchases of our stock. A key driver behind our sustainable performance is the high margin contribution from our core recurring revenue operations. Representing more than 70% of total consolidated revenues in the second quarter, our recurring revenue operations provide stability and also serve as the foundation to integrate and scale newly developed products and acquired operations. Mark will review our financial and operating performance in more detail in a few minutes, But first, let me share several key operating accomplishments. In the second quarter, our games business sold a record 1,957 gaming machines. For perspective, the last three quarters games sales have been the best three quarters in our history. I believe this is evidence that we are achieving increased ship share in the product categories in which we compete today, and benefiting from an improving industry-wide replacement sales trend. The success of our recent sales activity has been driven by our industry-leading, high-performing mechanical reel games, along with the ongoing success of our games library on our flex cabinet. Adding to this increase was the recent launch of our newly released mechanical reel cabinet, our player classic signature. Supporting these cabinets is our growing library of innovative content, in which we continually invest to ensure a robust pipeline of new original content. This enables us to support and maintain performance of our existing installed units and fuel further growth as we continue the march towards our latest target of 15% ship share. With industry unit sales strong for the first half of the year, we expect to see continued strength over the second half of the year as operators remain comfortable with releasing additional capital for machine purchases. We also look for opportunities to expand our capabilities and addressable markets. Through our recent acquisitions of IntuCode and Australian Game Development Assets, we increased our capacity to develop more games by adding two teams of talented gaming people in additional design studios. This strategically positions us to address two incremental market categories that will further channel and leverage our gaming content. A great example of our ability to leverage our content to generate growth in new markets is the success of our digital iGaming business, which has proven to be a key driver of our growth. We're able to leverage the success of our current and historical library of games that have proven popular with gamers and land-based casinos to be repurposed to the online gaming space. Our digital gaming revenue grew 61% year-over-year and was up 5% on a quarterly sequential basis. This growth reflects the quality and ongoing growth of our proven land-based content library, which we leveraged to add more titles with our existing customer platforms Combined with our ability to enter new markets as they open and to increase the number of operators to whom we supply games to in our existing markets. Following our successful launch with six operators in Ontario, as that market opened at the beginning of the second quarter, we are now featured on nine operator sites in Ontario. Another driver of our growth is the success being achieved with the launch of progressive jackpot linked games. We recently added some of our linked progressive games to six new customer sites and created four additional bespoke progressive games for customers. In our FinTech segment, we had another record quarter with gains across all parts of the business. This was the second consecutive quarter in which our core recurring financial access business delivered more than $10 billion of funds to our customers' casino floors. These results are being driven by consistent share gains, as well as increased activity on a same-store basis. We expect this trend to continue at levels similar to our pre-pandemic levels of historic growth, generally a low to mid-single-digit percentage increase over the prior year period. Our FinTech hardware sales reached a record $15 million in the quarter, driven by the ongoing demand for our fully integrated self-service kiosks, and the sales contribution from the recent acquisition of eCash, a leading provider of self-service voucher redemption kiosks in Australia. We are still in the early stages of realizing the growth potential from the eCash acquisition, with opportunities for product integration and cross-selling amongst our respective markets. I'm pleased to see eCash be the accretive contributor to our business that we expected. As a leader in providing financial access, loyalty, and reg tech solutions, we expect to generate continued growth through our relentless focus on internal innovation to develop new features and services that improve a patron's experience while also providing greater cost efficiencies for casino operators. The recognition of our innovation and the value we bring to operators continues to grow as evidenced with the SBC Award as Payment Solution of the Year for our digital wallet. In addition to our internal focus, we also review and evaluate opportunities that will enable us to acquire and scale up new products and expand into new geographic jurisdictions. The addition of our loyalty assets in 2019 and our ongoing focus to provide an integrated digital platform of loyalty, compliance, and mobile solutions has expanded the total addressable market for our FinTech business. To support the continued organic introduction of new technologies and products to capture this growth, we have ramped our efforts and investment in internal research and development over the last two years. On a year-to-year basis, on a year-to-date basis, R&D expense within the FinTech segment is running at nearly 6% of revenues compared to only minimal amounts pre-COVID. While we are clearly seeing the value and benefit of these investments in our record results, we are also making prudent investments to sustain a strong longer-term future. Our track record clearly demonstrates our search for new technologies, geographies, and interesting products can provide further sustainable growth across both our FinTech and games portfolios. Our priority for capital allocation will continue to be first, ensure that we are successfully investing in high-value internal opportunities. Second, evaluating and acting on strategic acquisitions that can combine with our core strengths to provide accretive growth. And third, opportunistically investing in our own stock when we feel its valuation is not fully reflected in the market relative to our future growth prospects. Now let me turn the call over to Mark to provide more insight into our operational successes.