Everi Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

There are 12 speakers on the call.

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 open 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.

Operator

Please go ahead.

Speaker 1

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 in 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 evry.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, November 8, 2023.

Speaker 1

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 found in our earnings release and related 8 ks today as well as in our 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 Labbei, Chief Financial Officer Kate Loanhouse Fisher, General Counsel Dean Ehrlich, Dean, Business Leader and Darren Simmons, FinTech Business Leader.

Speaker 1

Now I will turn the call over to Randy.

Speaker 2

Thank you, Jennifer. Good morning and thank you all for joining us today. For the quarter, we reported revenue of 206,600,000 Adjusted EBITDA of $96,200,000 and free cash flow of $34,300,000 This brings our year to date free cash flow to 100 $22,100,000 During the Q3, we returned $33,900,000 to shareholders through share repurchases, bringing the total of the share repurchases since the inception of our program to $158,000,000 We have $106,000,000 remaining on our current $180,000,000 repurchase authorization. Our FinTech business continued to deliver strong revenue growth and our Financial Access and Software and Other Businesses. We reached another quarterly high for funds delivered to casino floors of over $11,900,000,000 While daily same store sales growth has returned to the pre pandemic level Of lowtomidsingledigit 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.

Speaker 2

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 patron experience and driving operator efficiencies. We showed 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 CashPlus 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 buying and are making progress on securing agreements with several operators.

Speaker 2

We also introduced our mobile Beyond 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 and 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 eCast 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 Venutize 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 continued to experience near term headwinds in the Q3.

Speaker 2

We expect a similar impact in Q4 of this year. However, at G2E, we've highlighted new cabinets, new content and new market opportunities for 2024 and beyond. Starting in 2022, over a 24 month period, we will launch 7 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 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 build in players' favorite game features, Additional never seen before innovative themes and our new every content that all in all targets both the entertainment and the avid players.

Speaker 2

We successfully launched 2 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 horseracing market, entering the video lottery terminal market in 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.

Speaker 2

We estimate that our share will be more than 10% of the slot floor At new openings in the Q4, our digital gaming business reported 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 year to date. Now let me turn the call over to Mark. Thanks, Randy. And let me begin by adding a little more color on the 3rd quarter operating results. We 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.

Speaker 2

FinTech continued to see solid growth in revenues from Financial Access Services, which grew by $4,000,000 or 7%. Software and other revenues increased by 12%, benefiting from both organic growth and the contribution from VenuTize, which was acquired in the Q4 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 by quarter basis.

Speaker 2

Long term, we continue to see opportunities for ongoing replacement sales of our financial access kiosks and increased market penetration for our royalties and other FinTech hardware. Adjusted EBITDA for the FinTech segment increased 1% year over year to $39,800,000 inclusive of the impact of higher cost of labor and increased R and D spending. Within the games segment, adjusted EBITDA was $56,500,000,000 compared with $57,200,000 a year ago. Our installed base and daily win 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.

Speaker 2

In the 4th quarter, We expect our installed base to be down slightly and partially due to seasonal influences, we also expect daily wind per unit to be down sequentially from the Q3. As our new cabinets gain traction in the market, we expect the declines in both the units in our installed base and our daily win per unit to moderate before returning to growth. Gaming equipment sales were down $4,400,000 from the prior year quarter, which reflects 392 fewer units sold. Partially offsetting the equipment sales decline is $1,400,000 in new equipment sales from our Video King acquisition in May and $2,300,000 in game theme buyouts related to our recurring revenue portion of the HHR business. The HHR platform provider has the right to buy out certain game themes under certain conditions.

Speaker 2

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 $96,200,000 was essentially flat year over year to the $96,600,000 reported in the Q3 of the prior year. Adjusted EBITDA as a percentage of revenues was 46.6% compared with 47.3 percent 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-forty percent range in the 4th quarter. Our adjusted earnings per share was $0.44 in the 3rd quarter, which was flat compared to the prior year.

Speaker 2

A lower income tax provision and 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 $20,000,000 an increase from $15,000,000 in the prior year. As a reminder, we have $400,000,000 of outstanding unsecured notes weighted average borrowing rate was approximately 6.7%. Also included in interest expense is the cash usage fee on our ATM bulk cash arrangements. Our estimated full year expense for our revolving cash is expected to be approximately $21,000,000 compared to only $9,000,000 in 2022.

Speaker 2

We remain comfortable with our current level of debt and our cash interest costs. We ended the 3rd quarter with total net leverage at 2.5x trailing adjusted EBITDA, which remains in line with our 2.5 to 3 times target. Free cash flow generated in the quarter was $34,300,000 compared with 44 $900,000 a year ago. The decline was the result of $5,000,000 of increased net cash interest costs and $5,000,000 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 Capital allocation strategy on reinvesting in our business for growth.

Speaker 2

This includes maintaining R and 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 Any material increase in the total capital expenditures from the 2023 levels. Any increased spending on customer equipment should offset the expected reduced spending of 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 investments 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.

Speaker 2

We will continue to focus on driving market share gains with new and existing customers and expanding our product lines and geographies serviced to leverage our existing offerings. While we will continue to evaluate tuck in acquisition 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.

Speaker 2

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 installed base and daily win per unit. We also expect reduced recurring revenue contributions from our HHR portfolio due to the 3rd quarter game theme buyouts. In total, for games, we now expect revenues to be flat to 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 Q2 earnings call.

Speaker 2

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 Q3 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 reach casino floors 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.

Speaker 2

And with that, I'll now conclude our prepared remarks and turn the call over to the operator for questions.

Operator

Thank you. We will now be conducting a question and answer from the queue. One moment please while we poll for questions. The first question comes from the line of Jeff Stancho with Stifel. Please go ahead.

Speaker 3

Hey, good morning guys. Thanks for taking our questions. Starting off here on the GameOuts business, Ray, I think last call You talked to targeting sequential growth in installations to resume sometime around year end, potentially bleeding a bit into 2020 Or now that G2E is in the rearview mirror and you're starting to see installations ramp up for some of the newer cabinets, Just curious, is that still the right timeframe or just how are you thinking about that given some of the incremental data points? Thanks.

Speaker 4

Sure, Jeff. I would say we probably were a little more bullish where we would end the year, probably thought we would be up. I think at this point, I think our installed base will be Slightly down by the end of the year. There's a couple of factors in there. We do have some units that are out due to renovation that will come back in the Q1.

Speaker 4

But what we are seeing, our newer cabinets get out of the field. So we've 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'll see a slight decline in our installed base Through quarter end, and we do but we do expect to start to grow next year, whether that'll be Q1, it's hard to say. It'll just depend on how The new units and the new cabinets are take on, but the expectation is next year the installed base will start to grow again.

Speaker 3

Okay, great. That's helpful. Thanks, Randy. And then maybe sticking with the games business, 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.

Speaker 3

Curious if you have a sense And kind of how overall category market wide sales have been trending, just given it does seem like we're coming into a bit of a refresh cycle For Stepper specifically? And then from a ShipShare perspective, is your expectation as we look out to 2024 and 2025 that you'll continue to sort of share this category evenly with a couple of different competitors? Or I guess in other words, kind of what point does the performance of the content 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.

Speaker 4

No, I think it does, Jeff. And I'll take the first Peace and then Dean can add on. But look, I think we're still very comfortable and very bullish on our mechanical products. Clearly, 2 big competitors have refocused in on the mechanical areas. So we think that there will be more of a split.

Speaker 4

I think we've got We received a greater amount of our fair share in the last few years, and I think it's going to be closer to a split between those three Main operators in that area, so we still feel very comfortable with mechanical. And I would say, again, mechanical is only 20% to 30% of the market. Let's realize that we're also focused on video and that's where we think is the best area for us To grow, but we think we're going to continue to maintain a very nice share in mechanical and think that we'll continue to compete very well And in my view, we'll be at the top of that, but we'll see how that plays out. Zeen, anything to add?

Speaker 5

I would just say that we continue to provide a pipeline of what we think are very compelling products. If you look at the Eilers list and High denomination and even lower denomination on the mechanical side, we still dominate it. I mean, we're half of the list. So That's telling me that our products continue to resonate. And but we're most excited about is the stuff that's also coming out that We feel put us in a good position to continue to move forward on the mechanical side.

Speaker 3

Great. That's very helpful. Thank you, both. I'll pass it on.

Speaker 2

Thanks, Jeff. Appreciate it.

Operator

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

Speaker 6

Hey, guys. You've seen we've seen the consolidation in the space between lottery and gaming. How strong is the case still for games and FinTech to be together?

Speaker 4

Look, from our standpoint, We've been we've had this combination since 2014 and it's done very well for the company. There are Cost synergies, there are revenue synergies and these businesses are complementary. 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

Speaker 2

offer of 1 or

Speaker 4

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

Speaker 2

the things that we do with these two businesses with our by Product, we're now utilizing

Speaker 4

our digital assets and incorporating our cash access into a 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 every, but we will continue to evaluate anything that comes our way.

Speaker 6

Great. That's really helpful. And then I'm somewhat excited about your international roadmap. Would 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? Thanks.

Speaker 4

Sure. I'll start a little, Dean, probably give a little more color. Look, we're in the early stages. I don't want to overstate what's out there, but clearly going into Australia where there

Speaker 2

is the 2nd largest market for Gaming machines is going

Speaker 4

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's more like at the end of 'twenty four and end

Speaker 2

of 'twenty five. But I think it just adds to the other markets and areas that we're going into, VLT Continuing to increase our share in HHR in Australia.

Speaker 4

So I think all those things continue to Allow us to grow and show growth in 2024 2025. So it's early, but it's very promising from our standpoint.

Speaker 6

Great. All right. Thanks so much.

Speaker 2

Thank you.

Operator

Thank you. Next question comes from the line of Chad Beynon with Macquarie. Please go ahead.

Speaker 7

Good morning. Thanks for taking my question. 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 Remains significantly higher than the market growth.

Speaker 7

So as we look into 2024 understanding that you're not giving guidance, can you help us think about when Either some of the acquisitions anniversary, kind of how you're 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 6 to 12 months? Thanks.

Speaker 4

Sure. I'll start again and Darren can add. Look, I still think we're 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'll 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 It comes up. And so when you add that along with the investments we're making in loyalty and compliance And now into Vai 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

Speaker 2

of the business and we would expect

Speaker 4

to continue to grow in 2024.

Speaker 7

That's great. And can Venue ties 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 4?

Speaker 5

Well, I'm going to turn it over

Speaker 4

to Darren, but I'll just say that on Monday we had a major league team in the office and I will say Venue Ties continues to look and work into the sports area. So I think it's an area for growth, but Darren, I'll let you kind of Add on that one since you're a little closer to it.

Speaker 6

Yes, look, I think, as I've said

Speaker 8

a few times now, VenuTize really complements our overall The product roadmap that we've actually been executing on now for a number of years. So I think you need to look at it as complementoring the mobile solutions that we've got that are really resonating with customers. Again, we got tremendous feedback at G2E Just around our whole mobile strategy as it relates to how we're 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're at and into 'twenty four with the momentum that we've got here.

Speaker 7

Appreciate it. Thanks, Darren.

Speaker 2

Thanks, Ed.

Operator

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

Speaker 9

Thank you. Mark, I wanted to ask you about cash flow and free cash flow into 2024, understanding you're not giving guidance, but just generically as we look at the cash flow you're generating this year versus What you'll 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?

Speaker 2

Yes. First, I think we tried to as you highlighted, we're not going to give guidance. I'll 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 what's happening with interest rates. Certainly, we're exiting the year higher than we entered the year.

Speaker 2

So that could be a little bit of A negative depending on your views, forward views on how interest rates and how quickly they start coming down. I think there's I believe they will start coming down or 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've got a tremendous amount of new products specifically on the game side Available to us.

Speaker 2

So we think it's going to drive some nice compelling revenue growth for us as we move forward. So we'll lean in a little bit more into the customer equipment side as we have a lot of new product available 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're going to see in terms of those discrete items, we'll have completed the build out of our new Las Vegas assembly and warehouse facility, 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, we've got in somewhere in the neighborhood of where we are today for 2023. And we still believe from a cash tax perspective, We'll still be in a pretty good spot from a cash tax perspective. I would suspect we're probably about much different than what we're paying this year in terms of cash taxes unless tax Okay.

Speaker 2

So it feels like we're in a nice spot for growth on that line right now. But again, I'll 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 booking 2024.

Speaker 9

Great. A question for Dean. Obviously, we've 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're really focused on when those Are expected to be available. What should we be closely watching for?

Speaker 2

So I'll go down the

Speaker 5

list of new cabinets that are coming out and the timing. It's 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.

Speaker 5

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 sole Sync, which is our premium version of our new Portrait cabinet, will launch in early Q1. So those are the that's the cadence of Before cabinets, also to remind you that we really just launched View 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 and to next year as well. So we will have 2 video cabinets, which is obviously the biggest Category of opportunity to position out into the commercial markets.

Speaker 5

So Not commercial, all markets. So that's the strategy, George. I hope that answers that for you.

Speaker 9

That's outstanding. Very helpful. Thank you.

Operator

Thank you. Next question comes from the line of John Davis with Raymond James, please go ahead.

Speaker 10

Hey, good morning guys. Just wanted to follow-up a little bit on the free cash flow commentary, but specifically, Mark, on CapEx. You know that you would expect it to be kind of flattish next year, but if I recall, you had about $25,000,000 of onetime ish type products $15,000,000 for the new manufacturing facility and $10,000,000 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?

Speaker 2

We're either waiting to talk about guidance, John. I like it. All right. I'll be answering a little bit. Look, John, I think, again, we talked about having maybe a little bit more CapEx this year.

Speaker 2

I kind of framed that in my prepared remarks. We think With what we've been spending so far this year that our CapEx in total is kind of coming down a little bit from where we had provided Explicit guidance maybe or explicit update last quarter of like $142,000,000 to $144,000,000 for the full year. So I think we'll spend a little bit less just because Q3 was a little lighter in terms of customer equipment. We're getting new equipment in now. We're starting to roll that out.

Speaker 2

And we've probably been a little bit under some of the discrete items that we've spent than what we projected this year, which was kind of in that $25,000,000 to $30,000,000 Kind of range is what we kind of thought was there. So we're 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's important that we keep investing in the infrastructure of the footprint, but I'll also highlight that R and D expense, we think is adequate for what we need to spend and it's still at that 8%, 8.5% range compared to revenue. So we think we're 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're saving this year into next year, I expect will be made up for with the increased Customer equipment spend as we refresh the installed base.

Speaker 2

Okay. Hope I hear you.

Speaker 10

Yes. No, that's perfect. I appreciate the color there. And then Maybe Randy or Mark, as we think about kind of the guide down the $8,000,000 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 kind of Cabinets and content versus potentially lower GGR or just general macro conditions?

Speaker 4

Look, John, it's hard to say. Look, we're still seeing reasonable growth in our as we look to Our FinTech business, our cash access, cash to the floor, but it is going it's lowering down, it's been lowering each quarter, but still a I'll say a low single digit growth. So I think there's some impact from the macro, maybe you've heard it from operators, probably a

Speaker 3

little bit more

Speaker 4

In the regional market, Las Vegas still doing well. But I think what ours is, we're in the transition period. And so we know that There's some impact to us as we transition to the newer cabinets and the newer content. And so It's 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.

Speaker 4

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

Speaker 10

Okay. Thanks. And then last quickly, just want to clarify one of Mark's comments to the prior question. Yes. I believe I heard you say, Mark, that you would expect EBITDA growth next year.

Speaker 10

Just wanted to confirm that. And even if macro were to deteriorate further, Do you think you can still grow EBITDA next year?

Speaker 2

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 Yes, I am 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.

Speaker 4

Yes, John, I'll answer that really easily. The answer is yes.

Speaker 2

Thank you, Randy. Thanks, John.

Operator

Thank you. Next question comes from the line of Eira Marcias with Jefferies. Please go ahead.

Speaker 11

Good morning, everyone, and thanks for taking my question. I just wanted to ask if we could get some color on R and D and whether it remains at a stable level or how to think about it moving forward? Thank you.

Speaker 4

Sure. I think Mark touched on it a little bit, but I'll just reiterate. We still look to Spend, honestly, on the expense line, somewhere between 8% and 8.5% of expense R and D expenses as a percentage of revenue. We think that number is in line with larger competitors, obviously from a pure dollar standpoint, they spend more than we do. But we think that's an adequate amount to really support both businesses being FinTech and Games, and that doesn't account for the amount that you capitalize.

Speaker 4

So we feel good about that. It's what Dean has worked with throughout this year to kind of line up his hardware, The new content he's got coming out and we stay 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 and capital allocation is to continue to reinvest in the company and that really is that R and D line that drives both FinTech and Games.

Speaker 11

Okay, great. That's all. Thank you.

Speaker 4

Thank you.

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.

Speaker 4

Well, we'd 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 Q4 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.

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Everi Q3 2023
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