Everi Holdings Inc. (NYSE:EVRI) Q3 2023 Earnings Call Transcript

Everi Holdings Inc. (NYSE:EVRI) Q3 2023 Earnings Call Transcript November 8, 2023

Everi Holdings Inc. misses on earnings expectations. Reported EPS is $0.29 EPS, expectations were $0.39.

Operator: Good morning, and thank you for standing by. And welcome to the Everi Holdings 2023 Third 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 opened for question-and-answer session. As a reminder, this call is being recorded. Now, let me turn the call over to Jennifer Hills, Vice President Investor Relations. Please go ahead.

Jennifer Hills: Thank you, operator. Let me begin with a reminder that our Safe Harbor disclaimer, which covers today’s call and webcast, contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those discussed on today’s 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 Investors section of our corporate website at everi.com. Because of the potential risks, 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, November 08, 2023.

We will refer to certain non-GAAP financial measures, such as adjusted EBITDA, adjusted EPS, free cash flow and net cash position. A description of each of these non-GAAP measures and a reconciliation to the most directly comparable GAAP measure can be bound in our earnings release and related 8-K today, as well as in the Investors section of our website. This call is being webcast and recorded. A link to the webcast and a replay of today’s call can be found in the Investors section of our website. On our call today are Randy Taylor, Chief Executive Officer; Mark Labay, Chief Financial Officer; Kate Lowenhar-Fisher, General Counsel; Dean Ehrlich, Games Business Leader; and Darren Simmons, FinTech Business Leader. Now I will turn the call over to Randy.

Randy Taylor: Thank you, Jennifer. Good morning, and thank you all for joining us. For the quarter, we have reported revenue of $206.6 million, adjusted EBITDA of $96.2 million and free cash flow of $34.3 million. This brings our year-to-date free cash flow $122.1 million. During the third quarter, we have returned $33.9 million to shareholders through share repurchases, bringing the total of the share repurchases since the inception of our program to $158 million. We have $106 million remaining on our current with another $8 million repurchase authorization. Our FinTech business continued to deliver strong revenue growth in our Financial Access and Software and Others businesses. We have reached another quarterly high for funds delivered to casino floors of over $11.9 billion.

While daily same-store sales growth has returned to the pre-pandemic level, of low to mid single-digit year-over-year growth, we have continued to grow our revenues at a higher rate as a result of our ability to add new customers, products and services. During the recent Global Gaming Show, G2E, our FinTech business continued to highlight our strategy for our digital neighborhood, which is focused on improving the player experience and driving operator efficiencies. We show new and updated products across our diverse portfolio of payment solutions, casino and loyalty products, and our mobile offerings that demonstrated our unique position to capitalize on the convergence trends of gaming, hospitality and online in our core customer footprint as well as extending our reach into venues and other adjacent business sectors.

Our CASHCLUB WALLET won the Payment Solution of the Year award. We introduced Buy, which combines our digital capabilities with strong game content and allows an operator to offer on-premise digital gaming. We have received strong interest in Buy and are making progress on securing agreements with several operators. We also introduced our mobile BeOn Wallet, a digital wallet that casino patrons will be able to use across multiple properties and jurisdictions, and includes a comprehensive offering of our mobile wallet for cash access, ticketing, gaming, mobile ordering, engagement, loyalty, rewards and other amenities. We believe these new products, together with our existing mobile products will continue to gain traction with our customers.

We see additional FinTech opportunity in 2024, including our plan to sell the smaller e-cash kiosks in the North American distributed gaming markets, in the first half of next year. Our mobile first initiatives utilize the assets that we acquired from Venuetize and provide us the opportunity to grow our base of recurring revenues and expand our market into new adjacencies, including sports, venues, entertainment, retail, hotel, food and beverage by leveraging our payment and loyalty capabilities. Our Games business continue to experience near-term headwinds in the third quarter. We expect a similar impact in Q4 of this year. However, at G2E, we have highlighted new cabinets, new content and new market opportunities for 2024 beyond. Starting in 2022, over a 24-month period, we will launch seven new cabinets that refresh our mechanical and video reel for sale and premium cabinets.

These cabinets incorporate newer components and technologies and complement our existing portfolio cabinets. In addition to the new cabinets at G2E, we showed a diverse portfolio of new games and are targeting release of 25 new themes this quarter to support the launch of our new cabinets and over 80 new themes in 2024. Importantly, this portfolio represents a diversity of content for our video offerings that builds in players favorite game features, additional never-seen-before innovative themes, and our new Everi content that all-in-all targets both the entertainment and the players. We successfully launched two new cabinets at the end of Q3, Player Classic Reserve, and Dynasty Dynamic. Customer response has been positive and as of the end of October, we have placed nearly 50 of these cabinets into our installed base with another 200 expected to be placed by year-end.

We look forward to the rollout of our new cabinets in Q4 and into the next year to drive growth in 2024. As we move into 2024, we have additional opportunities to accelerate our growth, by increasing our presence in the historical horse racing market, bettering the video lottery terminal market into Illinois in the second quarter, and expanding internationally starting with Australia late in the year or early 2025. Despite some recent challenges, we continue to grow share at new casino openings and expansions. We estimate that our share will be more than 10% of the slot floor at new openings in the fourth quarter. Our Digital Gaming business recorded a 27% revenue growth and the performance of our bingo operations through the acquisition of the Video King assets has exceeded our expectations for the quarter and year-to-date.

Now let me turn the call over to Mark.

Mark Labay: Thanks, Randy. And let me begin by adding a little more color on our third quarter operating results. We have reported year-over-year quarterly revenue growth of 1%, driven by a 4% growth in FinTech revenues and partially offset by a 1% decline in Games revenues. FinTech continued to see solid growth in revenues from financial access services, which grew by four million or 7%. Software and other revenues increased by 12% benefiting from both organic growth and the contribution from venue ties, which was required in the fourth quarter of 2022. Hardware sales decreased by 20% from the prior year, however, the prior year quarter had the benefit of increased sales to support more new openings and expansions than in the current year.

In terms of quarterly cadence for equipment sales in the FinTech side of the business, I’d remind you that these can be quite lumpy on a quarterly five quarter basis. Long term, we continue to see opportunities for ongoing replacement sales of our financial access kiosks and increased market penetration for our loyalty and other FinTech hardware. Adjusted EBITDA for the FinTech segment increased 1% year over year to 39.8 million, inclusive of the impact of higher cost of labor and increased R&D spending within the gain segment. Adjusted EBITDA was 56.5 billion compared with 57.2 million a year ago. Our install base and daily wind per unit decreased compared to both the prior year and the second quarter. This was consistent with our expectations as we continue to transition to our next generation of cabinets.

In the fourth quarter, we expect our install base to be down slightly and partially due to seasonal influences. We also expect daily wind pre unit to be down sequentially from the third quarter. As our new cabinets gain traction in the market, we expect the declines in both the units in our install base and our daily win per unit to moderate before returning to growth. Gaming equipment sales were down 4.4 million from the prior year quarter, which reflects 392 fewer units sold, partially offsetting the equipment sales declined is 1.4 million in new equipment sales from our Video King acquisition in May and 2.3 million in game theme buy ops related to our recurring revenue portion of the HHR business. In HHR platform provider has the right to buy out certain game themes under certain conditions.

When they exercise this right, we receive an upfront payment to compensate us for our share of the lost future recurring revenue related to these game themes. Consolidated gross margin expanded by 110 basis points to 79.7%, primarily due to revenue mix shift to higher margin gaming operations and financial access services revenues from lower margin gaming equipment and hardware sales. Consolidated adjusted EBITDA of 96.2 million was essentially flat year over year to the 96.6 million reported in the third quarter of the prior year. Adjusted EBITDA as a percentage of revenues was 46.6% compared with 47.3% a year ago, primarily reflecting higher payroll expenses and other costs as we continue to invest for future growth. We expect adjusted EBITDA as a percentage of revenue to remain in the mid 40% range in the fourth quarter.

Our adjusted earnings per share was $0.44 in the third quarter, which was flat compared to the prior year. A lower income tax provision at a decrease in our diluted shares outstanding primarily from our share repurchase activity, which was offset by the impact of lower net income due to lower operating income and higher interest expense. Net interest expense in the quarter was 20 million, an increase from 15 million in the prior year. As a reminder, we have 400 million of outstanding unsecured notes at a fixed rate of 5%, and 587 million of term loan that has a variable rate of interest. At the end of the quarter, a weighted average borrowing rate was approximately 6.7%. Also included an interest expense is the cash usage fee on our ATM Vault cash arrangements.

Our estimated full-year expense for our vault cash is expected to be approximately 21 million compared to only nine million in 2022. We remain comfortable with our current level of debt and our cash interest costs. We ended the third quarter with total net leverage at 2.5 times trailing adjusted EBITDA, which remains in line with our 2.5 times to three times target free cash flow generated a quarter was 34.3 million compared with 44.9 million a year ago. The decline was the result of 5 million of increased net cash interest costs and 5 million of higher capital expenditures related primarily to the discrete capital items we discussed for 2023, including the new assembly facility in Las Vegas and other IT infrastructure investments. We will continue to focus our capital allocation strategy on reinvesting in our business for growth.

This includes maintaining R&D spending on a consolidated basis in a range of 8% to 8.5% of revenues. And as we transition to our next family of gaming cabinets, making increased capital investments in our installed base to drive future revenue growth, while we are still working to finalize our views for 2024 overall, we currently do not expect any material increase in the total capital expenditures from the 2023 levels. Any increased spending on customer equipment should offset the expected reduced spending from discrete items like the build out of our new warehouse and assembly facility in Las Vegas. From 2018 to 2021, we experienced tremendous revenue growth as we launched our last family of cabinets into our premium footprint. We believe our current increased investment in a broader array of new cabinets and a deeper library of new game themes will result in improvements to our gaming operations and will provide increased revenue and adjusted EBITDA growth.

We will continue to focus on driving market share gains with new and existing customers and expanding our product lines and geography service to leverage our existing offerings. While we will continue to evaluate tech and acquisition opportunities that support our product development and growth objectives. In the near-term with our share price far below what we would consider to be fairly valued, we expect to place a higher priority in our capital allocation towards returning excess cash flow to shareholders through share repurchases. Moving on to our outlook, for FinTech, we continue to expect to see high single digit revenue growth for the year. For the games business based on the current headwinds and until our new cabinets and games have the opportunity to gain traction with operators and their patrons, we expect greater near-term pressure on our unit sales and decline in our install base and daily win per unit.

We also expect reduced recurrent revenue contributions from our HHR portfolio due to the third quarter game theme buyouts. In total for games, we now expect revenues to be flat down 1% for the full-year. On a consolidated basis, primarily as a result of our lowered outlook for the games business. We now expect consolidated adjusted EBITDA for the full-year 2023 to be in line with the prior year. Net income, GAAP based earnings per share, free cash flow, and adjusted earnings per share are now expected to be at the lower end of the guidance ranges provided in August during our second quarter earnings call. We expect our lower operating income to be offset by lower net interest expense, lower taxes, and lower capital expenditures. Our estimates for earnings per share and adjusted earnings per share are based on the shares outstanding at the end of the third quarter, and do not reflect any potential benefit from future share count reductions from any additional buyback activity.

As Randy highlighted, we continue to execute on our roadmap for long-term profitable growth in both our games and FinTech business. We are excited to begin to see our recent investments in people and the new studios to reach casino ports over the next several quarters. We believe this, combined with our expansion into the VLT market will drive a return to growth in games next year. And with that, I will now conclude our prepared remarks and turn the call over to the operator for questions.

Operator: Thank you. [Operator Instructions] The first question comes from the line of Jeff Stantial with Stifel. Please go ahead.

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Q&A Session

Jeff Stantial: Good morning, guys. Thanks for taking our questions. Starting off here, on the Game business. Ray, I think last call, you talked to targeting sequential growth and installations to resume sometime around year end potentially bleeding a bit into 2024, now that G2E is in the rearview mirror and you are starting to see installations ramp-up for some of the newer cabinets. Just curious, is that still the right time frame or just how are you thinking about that, given some of these incremental data points? Thanks.

Randy Taylor: Sure, Jeff. I would say, we probably were a little more bullish where we would end the year, probably thought we would be up. At this point, I think our installed base will be slightly down by the end of the year. There is a couple factors in there. We do have some units that are out of due to renovation, they will come back in the first quarter. But what we are seeing, our newer cabinets get out of the field. So we put out about 50 of the newer cabinets in October. And we have another 200 that we expect to install. So overall, I think we will see a slight decline in our install base through quarter end. But we do expect to start to grow next year, whether that will be Q1, it is hard to say. It will just depend on how, the new units and the new cabinets are take on, but the expectation is next year the install base will start to grow again.

Jeff Stantial: Okay. Great. That is helpful. Thanks, Randy. And then maybe sticking with the Games, there is this one for Dean or Randy, whoever wants to take this. Obviously, a ton of focus last couple of quarters on the stepper category in particular, coming out of the G2E. Curious if you have a sense on kind of how overall category market-wide sales have been trending, just given it does seem like we are coming into a bit of a refresh cycle for Stepper specifically. And then from a shift share perspective, your expectation as we look out to 2024 and 2025 that you will continue to sort of share this category evenly with a couple different competitors, or, I guess, in other words, kind of what point does the performance of the of the contents start to outweigh, push from other operators to diversify hardware a bit. Let me know if that makes sense kind of the way I phrased it out.

Randy Taylor: I think it does, Jeff. And I will take the first piece and then Dean can add on. But, look, I think we are still very comfortable and very bullish on our mechanical products. Clearly, two big competitors have refocused in on the mechanical area. So we think that know, there will be more of a split. I think we have got, where we received in a greater amount of our fair share in the last few years. And now I think it is going to be closer to a slip between those three main operators in that area. So we still feel very comfortable with mechanical. And I would say, again, mechanical’s only 20% to 30% of the market. Let’s realize that we are also focused on video, and that is where we think is the best area for us to grow.

But we think we are going to continue to maintain a very nice share in mechanical and think that we will continue to compete very well. And in my view, we will be at the top of that but we will see how that plays out. Dean, anything to add?

Dean Ehrlich: I would just say that, we continue to provide a pipeline of what we think are very compelling products. If you look at the IRS list and high denomination and even lower denomination in the mechanical side, we still dominate it. I mean, we are half the list, so that is telling me that our products continue to resonate. But we are most excited about is the stuff that is also coming out that we feel put us in a good position to continue to move forward on the mechanical side.

Operator: Next question comes from the line of Barry Jonas with Truist Securities. Please go ahead.

Barry Jonas: We have seen the consolidation in the space between lottery and gaming. How strong is the case still for games and FinTech to be together?

Randy Taylor: Look, from our standpoint, we have had this combination since 2014, and it is done very well for the company. There are cost synergies, there are revenue synergies, and these businesses are complimentary. So we continue to believe in the combination of the two businesses. However, we don’t have an entrenched management. If someone ever came to us with a offer of one or the other side of the business that was compelling. We definitely look at it, but I still don’t believe the market really sees some of the things that we do with these two businesses, with our byproduct, where now we are utilizing our digital assets and incorporating our cash access into on-prem mobile product, mobile gaming product. And I think, there are other synergies here. So I still believe right now that these two businesses together is the right answer for Everi. But we will continue to evaluate anything that comes our way.

Barry Jonas: And then I’m somewhat excited about your international roadmap. I’d love to kind of hear more about it and somewhat curious to get your views about how big international could be relative to the domestic business in terms of revenue or EBITDA.

Randy Taylor: Sure. I will start a little, Dean can probably give a little more color. Look, we are in the early stages, so I don’t want to overstate, what’s out there, but clearly, going into Australia where there, it is the second largest market for gaming machines is going to be big for us. We just need a small piece of that market. And if our content and cabinets resonate, I think it will be very positive for us. Look, it is more like at the end of 2024 and end of 2025, but I think it just adds to the other markets and areas that we are going into VLT continuing to increase our share in HHR and Australia. So I think all those things continue to allow us to grow and show growth in 2024 and 2025. So it is early, but it is very promising from our standpoint.

Operator: Next question comes to the line of Chad Beynon with Macquarie. Please go ahead.

Chad Beynon: Wanted to start with FinTech for Randy or Darren. Based on your guide revenues are expected to grow high single digits. So really positive there. On the financial access service transaction side, that year-over-year growth was remains significantly higher than the market growth. So as we look into 2024, understanding that you are not giving guidance, can you help us think about when either some of the acquisitions, anniversary kind of how you are thinking about can this business continue to grow at least mid-single digits. Really good momentum, right now. Just want to understand how that can look over the next six to 12-months. Thanks.

Randy Taylor: Sure. I will start again, and Darren can add. Look, I still think we are extremely bullish on FinTech. Darren and that team has proven that even in a – and if you go back to pre pandemic in 2019 when we had low to mid-single digit growth, we grew faster than the overall, I will say same store growth, because we have the other products and services that we have to sell. And so we continue to do very well on new business that comes up. And so, you add that along with the investments we are making in loyalty and compliance and now into buy and beyond. I think, that we always look at the FinTech businesses, singles and doubles, and Darren continues to find ways to add revenue into that FinTech side of the business, and we would expect to continue to grow in2024.

Chad Beynon: That is great. And can Venuetize in some of the non-traditional gaming pieces of that? Will that start to be a bigger contributor in 2024 or are you still kind of planting the seeds on some of the items that you talked about, Randy, with relationship to sports, retail hotel. Is that more of a multi-year opportunity or can we start to see that in 2024?

Randy Taylor: Well, I’m going to turn it over to Darren, but I will just say that on Monday we had a major league team in the office and I will say Venuetize continues to look and work into the sports area. So I think it is an area for growth, but Darren, I will let you kind of add on that one since you are a little closer to it.

Darren Simmons: Yes, look, I think, as I have said a few times now Venuetize really compliments our overall deep product roadmap that we have actually been executing on now for a number of years. So I think you need to look at it as complimenting, the mobile solutions that we have got that are really resonating with customers. Again, we have tremendous feedback at G2E, just around our whole mobile strategy as it relates to how we are thinking about sports venues, entertainment, and how our customers are seeing that convergence, that continues to trend with gaming, online sports and venues. And so, I think, as Randy said, I think, we continue to win new business, win new customers, because of the deep product set that we have and our ability to execute and deliver on the value that we have across our ecosystem of products and services. So, again, still feel good about where we are at and it is 2024 with the momentum that we have got here.

Operator: Thank you. Next question comes from the line of George Sutton with Craig Hallam. Please go ahead.

George Sutton: Mark, I wanted to ask you about cash flow and free cash flow into 2024. Understanding you are not giving guidance. But just generically, as we look at the cash flow you are generating this year versus what you will be positioned to do next year, can you just give us a sense of any large puts and takes that we should be aware of?

Mark Labay: I think we tried to, as you highlighted, we are not going to give guidance. I will be careful not to suggest I’m giving guidance right now. But, we expect growth next year from where we are this year, in terms of the EBITDA line of where we are. We all know it is happening with interest rates. Certainly, we are exiting the year higher than we entered the year. So that could be a little bit of a negative depending on your views for views and how interest rates and how quickly they start coming down. I think there is, I believe they will start coming down or at least holding from these levels. So that should be kind of consistent, I think. And from a CapEx perspective, I tried to highlight that, we really are investing in the business next year.

I think we have got a tremendous amount of new products specifically on the gaming side, available to us. So we think it is going to drive some nice compelling revenue growth for us as we move forward. So we will lean in a little bit more into the customer equipment side, as we have a lot of new products available to us to refresh that installed base and really drive revenue growth. But that growth in the customer equipment is probably offset by the declines in terms of what we are going to see in terms of those discrete items. We have completed the build out of our new Las Vegas assembly and warehouse facility, some of the discrete IT projects that we had mentioned at the beginning of the call. Those kind of things will be coming out of the number.

So I suspect our CapEx number will be probably when we come out with guidance somewhere in the neighborhood of where we are today for 2023. And we still believe from a cash tax perspective, we will still be in a pretty good spot from a cash tax perspective. I would suspect, we are probably not much different than what we are paying this year in terms of cash taxes unless rules change. So it feels like we are in a nice spot for growth on that line right now. But again, I will hold off and reserve the rest of that commentary until we kind of get the year-end and kind of share some more views of 2024.

George Sutton: Great. A question for Dean. Obviously, we have talked about this air pocket in terms of product availability, and generations. Can you just make it simple for us in terms of what maybe the Top 3 cabinet or content availability, you are really focused on when those are expected to be available? What should we be closely watching for?

Dean Ehrlich: So I will go down the list of new cabinets that are coming out in the timing. It is probably the easiest thing. So, Player Classic Reserve launched at the end of September. Dynasty Dynamic also launched at the end of September. So Randy talked about the 50 units that are currently out in the field and the 200 unit backlog. So those are the first two. Dynasty Soul, which is our new-for-sale portrait cabinet will launch in December but it will be a small amount of units towards the end of December and then really into 2024. And then our Soul Sync, which is our premium version of our new portrait cabinet will launch in early Q1. So that is the cadence of the four cabinets. Also to remind you that, we really just launched Vue at the end of Q1 this year.

And a plethora of content really is coming out, I would say, towards the end of the year into next year as well. So we will have two video cabinets, which is obviously the biggest category of opportunity to position out into the commercial market, not commercial, all markets. So that is the strategy George. I hope that answers that for you.

Operator: Next question comes from the line of John Davis with Raymond James. Please proceed.

John Davis: Just wanted to follow-up a little bit on the free cash flow commentary, but specifically mark on CapEx, that you would expect it to be kind of flat-ish next year. But if I recall, you had about 25 million of onetime-ish type products between 15 million for the new manufacturing facility and 10 million or so from – I think a transition ERP if I recall correctly, but just maybe talk about some of the puts and takes just specifically on CapEx as we enter 2024.

Mark Labay: Either way to just talk about guidance, John. I like it. I will dance a little bit. Look, John, I think again, we talked about having maybe a little bit more CapEx this year. I kind of framed that in my prepare to remarks. We think with what we have been spending so far this year that our CapEx in total is kind of coming down a little bit from where we had, uh, provided explicit guidance maybe, or explicit update last quarter of like 142 million to 144 million for the full-year. So, I think we will spend a little bit less just because Q3 was a little lighter in terms of customer equipment. We are getting new equipment in now we are starting to roll that out and we have probably been a little bit under some of the discrete items that we have spent on what we projected this year, which was kind of in that $25 million to $30 million kind of range, is what we kind of thought was there.

So you are getting a little bit of total CapEx decline overall. And where we are again as we move forward, I really want to make sure it is important that we keep investing in the infrastructure of the footprint. But I will also highlight that R&D expense where we think is adequate for what we need to spend. And it is still at that 8 million and half percent range compared to revenue. So we think we are investing enough in that. But from a CapEx perspective, I think, you should expect to see it kind of similar because the discrete items that we are saving this year into next year, I expect we will be made up for with the increased customer equipment spend as we refresh the install base.

John Davis: And then maybe Randy or Mark, as we think about kind of the guide down the eight million or so versus your prior guidance and EBITDA for this year, how much of that would you contribute to macro versus micro, like, the air pocket and, and kind of cabinets and content versus potentially lower GGR or just general macro conditions?

Randy Taylor: Look, John, it is hard to say. Look, we are still seeing reasonable growth in our – that we look to our FinTech business, our cash access, cash to the floor. But it is going – it is lowering down. It is been lowering each quarter, but still a, I will say, a low single digit growth. So I think there is some impact from the macro. Maybe you have heard it from operators probably a little bit more in the regional market. Las Vegas still doing well. But I think, look, we are in the transition period and so we know that there is some, there is some impact to us as we transition to the newer cabinets and the newer content. And so it is probably a little skewed more to that than macro. But again, right now macro seems to be holding in line what we hear from other operators.

And I think, the big question will be how it does next year. But so far, I would see that it is more from our standpoint, this transition, getting those new cabinets, getting that new content so that we are set up well to grow in 2024.

John Davis: And then last quickly just want to clarify want to Mark’s comments to the prior question. I believe I heard you say, Mark, that you would expect EBITDA growth next year. Just wanted to confirm that and even if macro were to deteriorate further do you think you can still grow EBITDA next year?

Randy Taylor: Look, we haven’t given guidance yet. We always expect ourselves to grow on a year-over-year basis. And as I sit here today, looking at the macro where it is today, and without completing my true 2024 roll up just yet, I’m expecting growth year-over-year. I’m expecting to see us grow. We always strive to have growth on an annual basis. So I do see it growing.

Operator: Next question comes from the line of Anna [Indiscernible] with Jefferies. Please go ahead.

Unidentified Analyst: I just wanted to ask if we could get some color on R&D and whether it remains at a stable level or how to think about it moving forward. Thank you.

Randy Taylor: Sure. I think Mark touched on it a little bit, but I will just reiterate. We still look to spend, I want to say on the expense line somewhere between 8% and 8.5% expense – R&D expense as a percentage of revenue. We think that numbers in line with larger competitors, obviously from a pure dollar standpoint, they spend more than we do, but we think that is an adequate amount to really support both businesses being FinTech and games. And that doesn’t account for the amount that you capitalize. So we feel good about that. It is what Dean’s worked with throughout this year to kind of line up his hardware, the new content he’s got coming out. And we stayed within that range. So I don’t anticipate that range going up or down, because I think we believe that one of our main tenants in capital allocation is to continue to reinvest in the company. And that really is that R&D line that drives both FinTech and games.

Operator: Thank you. There are no further questions at this time. I would now like to turn the floor over to Randy Taylor for closing comments.

Randy Taylor: Well, we would just like to thank everyone for joining us today, and we appreciate your continued interest and we look forward to providing an update on our business and our outlook for 2024 in our fourth quarter year-end call in March. Thank you very much.

Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.