Everi
Annual Report 2018

Plain-text annual report

Everi Holdings Inc. 2018 ANNUAL REPORT The Annual Meeting of Stockholders of Everi Holdings Inc. will be held: Tuesday, May 21, 2019 Everi Holdings Inc. Corporate Headquarters 7250 S. Tenaya Way, Ste. 100 Las Vegas, NV 89113 NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS To the Holders of Common Stock of Everi Holdings Inc.: The 2019 Annual Meeting of Stockholders of Everi Holdings Inc. (the “Annual Meeting”) will be held as follows: When: 9:00 a.m. Pacific Time, Tuesday, May 21, 2019 Where: Everi Holdings Inc. Corporate Headquarters 7250 S. Tenaya Way, Suite 100 Las Vegas, Nevada 89113 The purpose of the Annual Meeting is to consider and take action on the following proposals: 1. 2. 3. 4. To elect the three Class II director nominees named in this Proxy Statement; To vote on an advisory (non-binding) resolution to approve the compensation of our named executive officers as shown in this Proxy Statement; To ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019; and To transact such other business as may properly be brought before the Annual Meeting or any adjournment or postponement thereof. Holders of record of Everi Holdings Inc. common stock at the close of business on April 5, 2019 are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. YOUR PROXY IS IMPORTANT TO ASSURE A QUORUM AT THE ANNUAL MEETING. You are urgently requested to submit the enclosed proxy by telephone or through the Internet in accordance with the instructions provided to you. You may also date, sign and mail the Proxy Card in the postage-paid envelope that is provided. Your proxy is revocable in accordance with the procedures set forth in the accompanying Proxy Statement. Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on May 21, 2019. Our Proxy Statement is attached. Financial and other information concerning Everi Holdings Inc. is contained in our Annual Report to Stockholders for the fiscal year ended December 31, 2018 (the “2018 Annual Report”). A complete set of proxy materials relating to our Annual Meeting is available on the Internet. These materials, consisting of the Notice of 2019 Annual Meeting of Stockholders, Proxy Statement, Proxy Card and 2018 Annual Report are available and may be viewed at www.proxyvote.com. By Order of the Board of Directors, /s/ Michael D. Rumbolz Michael D. Rumbolz President and Chief Executive Officer April 22, 2019 [This page intentionally left blank] PROXY STATEMENT TABLE OF CONTENTS 1 4 4 10 14 24 25 PROXY STATEMENT SUMMARY ................................................................................................................................................................... PROXY STATEMENT ........................................................................................................................................................................................ QUESTIONS AND ANSWERS ........................................................................................................................................................................... PROPOSAL 1 ELECTION OF THREE CLASS II DIRECTORS ....................................................................................................................... BOARD AND CORPORATE GOVERNANCE MATTERS ............................................................................................................................... TRANSACTIONS WITH RELATED PERSONS ............................................................................................................................................... EXECUTIVE OFFICERS..................................................................................................................................................................................... PROPOSAL 2 ADVISORY (NON-BINDING) VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE 26 OFFICERS (SAY ON PAY) ................................................................................................................................................................................. 27 EXECUTIVE COMPENSATION ......................................................................................................................................................................... 27 Compensation Discussion and Analysis .................................................................................................................................................... 28 I. Executive Summary ..................................................................................................................................................................... 29 2018 Compensation Program Highlights ................................................................................................................................................... 29 II. Compensation Philosophy and Objectives .................................................................................................................................. 31 Components of Our Compensation Program ............................................................................................................................................. 32 2018 Target Total Compensation ............................................................................................................................................................... 32 2018 Say on Pay Vote and Stockholder Outreach ..................................................................................................................................... 32 III. Compensation Decision Making Process .................................................................................................................................. 33 Role of the Board ....................................................................................................................................................................................... 33 Role of the Compensation Committee ....................................................................................................................................................... 33 Role of Management .................................................................................................................................................................................. 34 Role of Compensation Consultants ............................................................................................................................................................ 34 Compensation Risk Oversight ................................................................................................................................................................... 34 IV. Compensation Competitive Analysis ........................................................................................................................................ 35 Peer Group ................................................................................................................................................................................................. 36 V. Elements of Compensation ......................................................................................................................................................... 36 Base Salary Compensation ........................................................................................................................................................................ 36 Annual Cash Incentives ............................................................................................................................................................................. 37 2018 Performance Metrics ......................................................................................................................................................................... 37 2018 Performance and Actual Payouts ...................................................................................................................................................... 38 Long-Term Equity Incentive Awards ........................................................................................................................................................ 39 2018 Awards .............................................................................................................................................................................................. 39 VI. Additional Compensation Policies and Practices ...................................................................................................................... 39 Equity Ownership Policy ........................................................................................................................................................................... 40 Clawback Policy ........................................................................................................................................................................................ 40 Anti-Hedging and Anti-Pledging Policies ................................................................................................................................................. 40 Tax Deductibility ....................................................................................................................................................................................... 41 Retirement Plans ........................................................................................................................................................................................ 41 Severance Benefits..................................................................................................................................................................................... 41 Compensation Committee Report .............................................................................................................................................................. 41 Members of the Compensation Committee ................................................................................................................................................ 42 Compensation of Named Executive Officers ............................................................................................................................................. 42 Summary Compensation Table ....................................................................................................................................................... 43 Grants of Plan-Based Awards ......................................................................................................................................................... 44 Outstanding Equity Awards ........................................................................................................................................................... 46 2018 Option Exercises and Stock Vested ........................................................................................................................................ 46 Pay Ratio ......................................................................................................................................................................................... 47 Employment Contracts and Equity Agreements, Termination of Employment and Change in Control Arrangements .................. 49 Pension Benefits and Nonqualified Deferred Compensation .......................................................................................................... 50 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ........................................................................... 52 PROPOSAL 3 RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ............... 54 REPORT OF THE AUDIT COMMITTEE ............................................................................................................................................................ 55 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE ................................................................................................... 55 OTHER MATTERS............................................................................................................................................................................................... 55 ANNUAL REPORT TO STOCKHOLDERS AND ANNUAL REPORT ON FORM 10-K ................................................................................. APPENDIX A RECONCILIATION OF NON-GAAP MEASURES .................................................................................................................... A-1 [This page intentionally left blank] PROXY STATEMENT SUMMARY This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Everi Holdings Inc. for use at the 2019 Annual Meeting of Stockholders and at any adjournment or postponement thereof. On or about April 22, 2019, we will begin distributing to each stockholder entitled to vote at the 2019 Annual Meeting of Stockholders this Proxy Statement, a proxy card or voting instruction form and our 2018 Annual Report to stockholders. Shares represented by a properly executed proxy will be voted in accordance with the instructions provided by the stockholder. This summary highlights information contained elsewhere in this Proxy Statement, however, it does not contain all of the information you should consider. You should read the entire Proxy Statement before casting your vote. General Information Date and Time: Tuesday, May 21, 2019 9:00 a.m. Pacific Time Record Date: April 5, 2019 Place: Voting: Everi Holdings Inc. Corporate Headquarters 7250 S. Tenaya Way, Suite 100 Las Vegas, Nevada 89113 Stockholders of record as of April 5, 2019 may cast their votes in any of the following ways: Internet Phone Mail In Person Visit www.proxyvote.com. You will need the 16-digit number in your included proxy card, voting instruction form or notice. Call 1-800-690-6903 or the number on your voting instruction form. You will need the 16-digit number included in your proxy card, voting instruction form or notice. Send your completed and signed proxy card or voting instruction form to the address on your proxy card or voting instruction form. If you plan to attend the meeting in person, you will need to bring a government- issued picture ID and proof of ownership of Everi Holdings Inc. common stock as of the record date. 1 Voting Matters and Board Recommendations Proposal 1 Description Election of three Class II director nominees named in this Proxy Statement. 2 3 Approval, on an advisory basis, of the compensation of our named executive officers. Ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. Board Recommendation FOR the Board’s nominees Page (for more detail) 10 FOR FOR 26 52 Stockholders will also transact any other business that properly comes before the meeting. Qualifications of Our Class II Director Nominees: ü ü ü Messrs. Judge and Congemi are independent. All three nominees have at least 5+ years of service on our Board of Directors. All three nominees are highly-qualified individuals with a diverse set of skills, background and experience. Name Age Director Since Principal (or Most Recent) Occupation Current Committees Geoffrey P. Judge 65 2006 Former Partner at iNovia Capital, a manager of early stage venture capital funds • • • Audit Committee Compensation Committee (Chair) Nominating and Corporate Governance (“Nom Gov”) Committee Michael D. Rumbolz Ronald V. Congemi 65 72 2010 2013 President and Chief Executive Officer of the Company None Member of the Philadelphia Federal Reserve’s Payments Advisory Council • • • Audit Committee Compensation Committee Nom Gov Committee 2 Corporate Governance Highlights WHAT WE DO WHAT WE DON’T DO X No Related Party Transactions X No Poison Pill X No Pledging of Our Securities X No Hedging of Our Securities þ 86% Independent Directors þ Entirely Independent Committees þ Independent Chairman þ Separate Chairman and Chief Executive Officer Roles þ “Plurality-Plus” Voting for Directors (mandatory resignation policy for nominees who fail to receive an affirmative majority of votes cast) þ Audit Committee Financial Experts þ Regular Executive Sessions of Independent Directors þ Limitations on Outside Board Service þ All Directors Attended at Least 75% of Board and Respective Committee Meetings þ Annual Board and Committee Self-Evaluations þ Stock Ownership Guidelines for Officers and Directors þ Executive Compensation Based on Pay-for-Performance Philosophy þ Annual Say on Pay Advisory Vote þ Cash and Equity Compensation Clawback Policy þ Double-Trigger for Change in Control Severance Payments þ Executive Succession Planning Process þ Code of Business Conduct, Standards and Ethics (and related training) 3 PROXY STATEMENT QUESTIONS AND ANSWERS Why am I receiving these proxy materials? The Board of Directors (the “Board”) of Everi Holdings Inc., a Delaware corporation (the “Company”), is furnishing these proxy materials to you in connection with the Company’s 2019 Annual Meeting of Stockholders (the “Annual Meeting”). The Annual Meeting will be held on Tuesday, May 21, 2019, at the Company’s Corporate Headquarters located at 7250 S. Tenaya Way, Suite 100, Las Vegas, Nevada 89113 beginning at 9:00 a.m. Pacific Time. You are invited to attend the Annual Meeting and are entitled and requested to vote on the proposals outlined in this proxy statement (“Proxy Statement”). This Proxy Statement is dated April 22, 2019 and is first being mailed to stockholders on or about April 22, 2019. What proposals will be voted on at the Annual Meeting, and what are the recommendations of the Board? There are three proposals scheduled to be voted on at the Annual Meeting. The proposals, and the Board’s voting recommendations with respect to such proposals, are as follows: Proposal 1 2 3 Election of three Class II directors to serve until the Company’s 2022 annual meeting of stockholders. Approval, on an advisory basis, of the compensation of our named executive officers as shown in this Proxy Statement. Ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm (“independent auditors”) for the fiscal year ending December 31, 2019. Board’s Voting Recommendations FOR the Board’s nominees FOR FOR Management does not know of any matters to be presented at the Annual Meeting other than those set forth in this Proxy Statement and in the Notice of 2019 Annual Meeting of Stockholders accompanying this Proxy Statement. If other matters should properly come before the Annual Meeting, the proxy holders will vote on such matters in accordance with their best judgment. Our stockholders have no dissenter’s or appraisal rights in connection with any of the proposals to be presented at the Annual Meeting. What is the record date and what does it mean? The record date for the Annual Meeting is April 5, 2019 (the “Record Date”). Only holders of shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), at the close of business on the Record Date are entitled to receive notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof. At the close of business on April 5, 2019, there were approximately 71,070,548 shares of Common Stock outstanding and entitled to vote. Shares held in treasury by the Company are not treated as being issued or outstanding for purposes of determining the number of shares of Common Stock entitled to vote. How many votes do I have? Each holder of shares of Common Stock is entitled to one vote for each share of Common Stock owned as of the Record Date. 4 Who is a “stockholder of record,” and who is a “beneficial holder”? You are a stockholder of record if your shares of our Common Stock are registered directly in your own name with our transfer agent, Broadridge Financial Solutions, Inc. (“Broadridge”), as of the Record Date. You are a beneficial owner if a bank, brokerage firm, trustee or other agent (each, a “nominee”) holds your stock. This is often called ownership in “street name” because your name does not appear in the records of our transfer agent. If your shares are held in street name, you will receive instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Internet voting also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered directly in your own name and you plan to vote your shares in person at the Annual Meeting, you should contact your nominee to obtain a legal proxy and bring it to the Annual Meeting in order to vote. For additional requirements to attend the Annual Meeting, see the information provided on page 1. Who votes shares held in “street name”? If you are a beneficial owner of shares held in “street name” by a nominee or other holder of record, and you do not give that nominee or other record holder specific instructions as to how to vote those shares, under the rules of the New York Stock Exchange (the “NYSE”), your nominee or other record holder may exercise discretionary authority to vote your shares only on routine proposals, which, in this Proxy Statement, includes only the ratification of the appointment of the Company’s independent auditors (Proposal 3). Without your specific instructions, however, your nominee or other record holder cannot vote your shares on non- routine proposals, which, in this Proxy Statement, include Proposals 1 and 2. Accordingly, if you do not instruct your nominee or other record holder how to vote with respect to Proposals 1 and 2, no votes will be cast on your behalf with respect to such proposals (this is referred to as a “broker non-vote”). Your nominee or other record holder, however, will continue to have discretion to vote any uninstructed shares on Proposal 3. If you hold your shares in street name, please refer to the information forwarded by your nominee or other holder of record for procedures on voting your shares or revoking or changing your proxy. We encourage you to provide instructions to your nominee or other holder of record regarding the voting of your shares. What constitutes a quorum? The presence at the Annual Meeting, in person or represented by proxy, of a majority of the shares of Common Stock outstanding and entitled to vote on the Record Date will constitute a quorum permitting the proposals described herein to be acted upon at the Annual Meeting. Abstentions and broker non-votes are counted as present and are, therefore, included for purposes of determining whether a quorum of shares of Common Stock is present at the Annual Meeting. What is the voting requirement to approve each of the proposals? Voting Item Board Recommendation Voting Standard Election of Directors Say on Pay(3) Auditor Ratification ___________________ For For For Plurality(1) of Votes Represented at the Meeting and Entitled to Vote Thereon Majority(4) of Votes Represented at the Meeting and Entitled to Vote Thereon Majority(4) of Votes Represented at the Meeting and Entitled to Vote Thereon Treatment of Abstentions & Broker Non- Votes No effect on the outcome of the election(2) Broker Non-Votes: No effect on the outcome of this proposal Abstentions: Same effect as a vote “Against” this proposal Broker Non-Votes: No effect on the outcome of this proposal Abstentions: Same effect as a vote “Against” this proposal (1) Director nominees who receive the highest number of shares voted “For” his or her election are elected. (2) If a nominee in an uncontested election (such as this one) does not receive the vote of at least the majority of the votes cast, it may trigger the Company’s guideline regarding majority voting for directors. Votes to withhold authority are included in the total number of votes cast with respect to the director’s election. Full details of the guideline are set out in our Corporate Governance Guidelines, which are publicly available at the Corporate Governance section of the “Investors” page on our website at ir.everi.com/investor-relations/corporate-governance/governance-documents. 5 (3) Although this vote is advisory and non-binding on our Board, the Board and the Compensation Committee will consider the voting results, along with other relevant factors, in connection with their ongoing evaluation of our compensation program. (4) Number of shares voted “For” exceeds 50% of the number of votes cast. All valid proxies received prior to the Annual Meeting will be exercised. All shares represented by a proxy will be voted, and where a proxy specifies a stockholder’s choice with respect to any matter to be acted upon, the shares will be voted in accordance with that specification. If you are a stockholder of record and sign and return your proxy card or vote electronically without making any specific selections, then your shares will be voted in accordance with the recommendations of the proxy holders on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion regarding any other matters properly presented for a vote at the Annual Meeting. How do I vote my shares? You can either attend the Annual Meeting and vote in person or give a proxy to be voted at the Annual Meeting. A proxy may be given in one of the following three ways: • • • electronically by using the Internet; over the telephone by calling a toll-free number; or by mailing the enclosed proxy card. Specific instructions for stockholders who wish to use the Internet or telephone voting procedures are set forth on the enclosed proxy card. If your shares are held in street name through a nominee or other holder of record, you will receive instructions from the nominee or other record holder that you must follow in order to have your shares voted. How are the proxy card votes counted? If the accompanying proxy card is properly completed, signed and returned to us, and not subsequently revoked, it will be voted as directed by you. If the proxy card is submitted, but voting instructions are not provided, the proxy will be voted: (i) “For” each of the director nominees; (ii) “For” the advisory approval of the compensation of our named executive officers; and (iii) “For” the ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. Can I change my vote after submitting my proxy? You can change your vote at any time before your proxy is exercised at the Annual Meeting. You may do so in one of the following four ways: • • • • submitting another proxy card bearing a later date; sending a written notice revoking your proxy to the Corporate Secretary of the Company at 7250 South Tenaya Way, Suite 100, Las Vegas, Nevada 89113, or via e-mail to secretary@everi.com; submitting new voting instructions via telephone or the Internet (if initially able to vote in that manner); or attending the Annual Meeting and voting in person. If you hold your shares in “street name” through a nominee or other holder of record and you have instructed the nominee or other holder of record to vote your shares, you must follow the directions received from the nominee or other holder of record to change those instructions. Please refer to the information sent by your nominee or other holder of record for procedures on revoking or changing your proxy. 6 Who is paying for this proxy solicitation? This proxy solicitation is being made by the Company. The Company will bear the cost of soliciting proxies, including the cost of preparing, assembling, printing and mailing this Proxy Statement. The Company also will reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners. In addition, proxies may be solicited by certain of the Company’s directors, officers and regular employees, either personally, by telephone, facsimile or e-mail. None of such persons will receive any additional compensation for their services. How can I find out the voting results? The Company will report the voting results in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission (“SEC”) within four business days after the end of the Annual Meeting. How do I receive electronic access to proxy materials for future annual meetings? Stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies, which results in cost savings for the Company and benefits the environment. If you are a stockholder of record and would like to receive future proxy materials electronically, you can elect this option by following the instructions provided when you vote your proxy over the Internet at www.proxyvote.com. If you choose to view future proxy statements and annual reports over the Internet, you will receive an e-mail notification next year with instructions containing the Internet address of those materials. Your choice to view future proxy statements and annual reports over the Internet will remain in effect until you contact either your nominee or other holder of record or the Company to rescind your instructions. You do not have to elect Internet access each year. If your shares of Common Stock are registered in the name of a brokerage firm, you still may be eligible to vote your shares of Common Stock electronically over the Internet. A large number of brokerage firms are participating in the Broadridge online program, which provides eligible stockholders who receive a paper copy of this Proxy Statement the opportunity to vote via the Internet. If your brokerage firm is participating in Broadridge’s program, your proxy materials will provide instructions for voting online. If your proxy materials do not reference Internet information, please complete and return your voting instruction form. What should I do if I receive more than one notice of internet availability or more than one set of proxy materials? There are circumstances under which you may receive multiple copies of the notice of internet availability, proxy materials, proxy cards or voting instruction form. For example, if you hold your shares in more than one brokerage account, you may receive separate notices for each such brokerage account. In addition, if you are a stockholder of record and your shares are registered in more than one name, you may receive more than one notice. Please authorize your proxy in accordance with the instructions of each notice separately, since each one represents different shares that you own. What is “householding”? The SEC has adopted rules that permit companies and intermediaries (such as brokers) to satisfy delivery requirements for annual reports and proxy statements with respect to two or more stockholders sharing the same address by delivering a single annual report or proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” provides extra convenience for stockholders, cost savings for companies and benefits the environment. Brokers with account holders who are stockholders of the Company may be householding the Company’s proxy materials. Once you have received notice from your broker that it will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate annual report or proxy statement, or if you are receiving multiple copies thereof and wish to receive only one, please notify your broker or notify the Company by sending a written request to the Corporate Secretary of the Company at 7250 South Tenaya Way, Suite 100, Las Vegas, Nevada 89113, or via e-mail to secretary@everi.com, or by calling (702) 855-3000. The Company, if contacted, will undertake to promptly deliver the requested materials. 7 When are stockholder proposals due for the 2020 Annual Meeting of Stockholders? Stockholder proposals may be included in our proxy materials for an annual meeting so long as they are provided to us on a timely basis and satisfy certain other conditions established by the SEC, including specifically under Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). To be timely, a proposal to be included in our proxy statement must be received at our principal executive offices, addressed to our Corporate Secretary of the Company, not less than 120 calendar days before the date our proxy statement was released to stockholders in connection with the previous year’s annual meeting. Accordingly, for a stockholder proposal to be included in our proxy materials for our 2020 Annual Meeting of Stockholders, the proposal must be received at our principal executive offices, addressed to our Corporate Secretary of the Company, not later than the close of business on December 24, 2019. Subject to certain exceptions, stockholder business that is not intended for inclusion in our proxy materials may be brought before an annual meeting so long as notice of the proposal as specified by, and subject to the conditions set forth in, our Bylaws, is received at our principal executive offices, addressed to our Corporate Secretary of the Company, not earlier than the close of business on the 120th day, nor later than the close of business on the 90th day, prior to the first anniversary of the date of the preceding year’s annual meeting. For our 2020 Annual Meeting of Stockholders, proper notice of business that is not intended for inclusion in our proxy statement must be received no earlier than the close of business on January 22, 2020, nor later than the close of business on February 21, 2020. A stockholder’s notice to the Corporate Secretary of the Company must set forth as to each matter the stockholder proposes to bring before the annual meeting: • • Director Nomination: all information relating to such proposed nominee that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act and Rule 14a-4(d) thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and Stockholder Proposals: a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made. Each stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made must also include (a) the name and address of such stockholder, as they appear on the Company’s books, and of such beneficial owner, (b) the class and number of shares of the Company which are owned beneficially and of record by such stockholder and such beneficial owner, and (c) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the Company’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Company’s voting shares to elect such nominee or nominees. 8 2018 Performance Highlights Throughout 2018, we executed on key initiatives, which led to consistent improvement in our financial performance. For the full year, revenue increased by 14.3% to approximately $469.5 million, net cash provided by operating activities increased by approximately $198.0 million, and our free cash flow increased by 78% to approximately $24.8 million. The strong growth that was experienced in revenue for the full year was entirely organic in nature, and it reflects the tremendous success that we are achieving as a result of the investments that we have made in improving and expanding our product portfolio over the last several years. The results achieved for the fiscal year ended December 31, 2018 represent a return to profitability for the Company, with a reported full-year net income of approximately $12.4 million and net income in each quarter. This was the first full year of profitability since the acquisition of the Games business in late 2014. Profitability was achieved primarily as a result of the increase in year-over-year revenues of approximately $36.8 million, or 17%, for the Games segment, and $22.0 million, or 12%, for the FinTech segment. Key financial highlights for 2018: Diluted Earnings per Share of $0.17 Games segment record unit sales of 4,513 units Growth in same store transactions and total dollars processed all four quarters in 2018, reaching 17 consecutive quarters Completion of a repricing of the $820 million Term Loan Facility in May 2018, resulting in approximately $4 million in interest savings over the first twelve months following the repricing Key business highlights for 2018: Games: British Columbia Lottery Corporation selected our TournEvent® system as its slot tournament system of choice for casinos in the province Games: Extended agreement with the New York Lottery to provide their Video Gaming Central System for an additional 2-year period FinTech: Extended cash access services contract with Penn National Gaming, the nation’s largest regional operator with 40 properties in 18 jurisdictions throughout the United States FinTech: Extended FinTech Central Credit agreement with Caesars Entertainment Corporation For more information on our 2018 results and other related financial measures, we refer you to our 2018 Annual Report. We look forward to continuing to execute on all aspects of our business strategy and believe we will continue to be successful in delivering long-term value and strong total returns to our stockholders. CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS This Proxy Statement contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. From time to time, we also provide forward-looking statements in other materials we release to the public, as well as oral forward-looking statements. We have tried, wherever possible, to identify such statements by using words such as “goal,” “target,” “future,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “project,” “may,” “should,” “will,” “likely,” “will likely result,” “will continue,” “forecast,” “observe,” “strategy,” and other words and terms of similar meaning. Forward-looking statements include, but are not limited to, statements regarding our ability to execute on all aspects of our business strategy and our ability to deliver long-term value and strong total returns to our stockholders. Forward- looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. 9 PROPOSAL 1 ELECTION OF THREE CLASS II DIRECTORS (Item No. 1 on the Proxy Card) Our Certificate of Incorporation provides that the number of directors that shall constitute the Board shall be exclusively fixed by resolutions adopted by a majority of the authorized directors constituting the Board. The Company’s Bylaws state that the number of directors of the Company shall be fixed in accordance with the Company’s certificate of incorporation as then in effect. The authorized number of directors of the Company is currently set at seven. Our Certificate of Incorporation and Bylaws provide that the Board shall be divided into three classes constituting the entire Board. The members of each class of directors serve staggered three-year terms. Proxies cannot be voted for a greater number of persons than the number of nominees named in this Proxy Statement. Currently, the Board is composed of the following seven members: Class Directors Term Commencement Term Expiration I II III E. Miles Kilburn and Eileen F. Raney Geoffrey P. Judge, Michael D. Rumbolz and Ronald V. Congemi Linster W. Fox and Maureen T. Mullarkey(1) 2018 Annual Meeting of Stockholders 2016 Annual Meeting of Stockholders 2017 Annual Meeting of Stockholders ___________________ 2021 Annual Meeting of Stockholders 2019 Annual Meeting of Stockholders 2020 Annual Meeting of Stockholders (1) Ms. Mullarkey’s term of office began on March 7, 2018, when she was appointed to the Board. Upon the recommendation of the Nom Gov Committee of the Board, the Board has nominated Geoffrey P. Judge, Michael D. Rumbolz and Ronald V. Congemi, who are currently Class II Directors of the Company, for reelection as Class II Directors of the Company. If reelected, each will serve a three-year term until the 2022 Annual Meeting of Stockholders and until his or her successor is each duly elected and qualified or until his or her earlier resignation or removal. Messrs. Judge, Rumbolz and Congemi have consented, if reelected as Class II Directors of the Company, to serve until their respective terms expire. The Board believes that Messrs. Judge, Rumbolz and Congemi will serve if elected, but if a nominee should become unavailable to serve as a director, and if the Board designates a substitute nominee, the person or persons named as proxy in the enclosed form of proxy may vote for a substitute nominee recommended by the Nom Gov Committee and approved by the Board. Information Concerning the Director Nominees Information regarding the business experience of our nominees for election as Class II Directors is provided below, as well as a description of the skills and qualifications that are desirable in light of our business and structure and led to the conclusion that each nominee should serve as a director. Geoffrey P. Judge Age 65 Independent Director since 2006 Geoffrey P. Judge was a Partner at iNovia Capital, a manager of early stage venture capital funds, from 2010 to 2016. He has been an active private equity investor since 2002. From 2003 to 2005, he was an investor in and the Chief Operating Officer of Preclick, a digital photography software firm. In 2002, he was the Chief Operating Officer of Media Solution Services, Inc., a provider of credit card billing insert media. From 1997 to 2002, Mr. Judge was a co-founder and Senior Vice President and General Manager of the media division of 24/7 Real Media. From 1995 to 1997, he was a Vice President of Marketing for iMarket, Inc., a software company. From 1985 to 1994, Mr. Judge was a Vice President and General Manager in the credit card division of American Express. Skills and Qualifications: Mr. Judge is valuable to our Board due to his extensive knowledge of the Company’s business and his experience in the financial services and payments industries. 10 Michael D. Rumbolz Age 65 Director since 2010 Ronald V. Congemi Age 72 Independent Director since 2013 Michael D. Rumbolz has served as our President and Chief Executive Officer since May 2016, having previously served as our Interim President and Chief Executive Officer since February 2016 and previously as an independent member of our Board since 2010 until his February 2016 appointment to the Interim President and Chief Executive Officer position. From 2008 to 2010, Mr. Rumbolz served as a consultant to the Company advising on various strategic, product development, and customer relations matters following the Company’s acquisition of Cash Systems, Inc., a provider of cash access services to the gaming industry, in 2008. Mr. Rumbolz served as Chairman and Chief Executive Officer of Cash Systems, Inc. from January 2005 until August 2008. Mr. Rumbolz is the former Vice Chairman of the Board of Casino Data Systems, was the President and Chief Executive Officer of Anchor Gaming, was the Director of Development for Circus Circus Enterprises (later Mandalay Bay Group) and was the President of Casino Windsor at the time of its opening in Windsor, Ontario. Mr. Rumbolz also has provided various consulting services and held various public and private sector employment positions in the gaming industry, including serving as Member and Chairman of the Nevada Gaming Control Board from January 1985 to December 1988. In addition, Mr. Rumbolz is the former Chief Deputy Attorney General of the State of Nevada. Mr. Rumbolz currently serves as Chairman of the Board of Directors of Employers Holdings, Inc. (NYSE: EIG), a holding company whose subsidiaries are engaged in the commercial property and casualty industry. In addition, Mr. Rumbolz currently serves as a member of the Board of Directors of VICI Properties Inc. (NYSE: VICI) and Seminole Hard Rock Entertainment, LLC. Skills and Qualifications: Mr. Rumbolz’s vast experience in and knowledge of the highly regulated gaming industry, both as an operator and as a regulator, as well as his experience in the cash access business and skills gained from previous and current public and private board service are valuable to our Company and our Board. Ronald V. Congemi is an active member of the Philadelphia Federal Reserve’s Payments Advisory Council and served as a member of the Board of Directors of Clearent LLC, a merchant processing company, from 2007 to 2015, and as a consultant to the Acxsys Corporation of Canada, the operating arm of the Interac debit network of Canada from 2009 to 2011. He was also a paid advisor to the Gerson Lehrman Group, a global advisory firm. Mr. Congemi previously served as the Chief Executive Officer of First Data’s Debit Services Group from 2004 until his retirement in 2009. Mr. Congemi also served as Senior Vice President of Concord EFS, Inc., a payment and network services company (which was acquired by First Data Corporation in February 2004), and Concord’s Network Services Group from 2001 to 2004. Mr. Congemi founded Star Systems, Inc., an ATM and Personal Identification Number, or PIN, debit network in the United States, and served as its President and Chief Executive Officer from 1984 to 2001. Skills and Qualifications: Mr. Congemi is valuable to our Board due to his extensive management experience in the payments industry. 11 THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION TO THE BOARD OF THE NOMINEES NAMED ABOVE. Directors Whose Terms Will Expire in Future Years Each of the Company’s directors listed below will continue in office for the remainder of his or her term and until a successor is duly elected and qualified or until his or her earlier resignation or removal. Information regarding the business experience, skills and qualifications, and directorships, of each such director is provided below. Class I Directors Whose Terms Will Expire in 2021 E. Miles Kilburn Age 56 Independent Director since 2005 Eileen F. Raney Age 69 Independent Director since 2016 E. Miles Kilburn currently serves as Chairman of the Board. Mr. Kilburn is the co-founder and a partner of Mosaik Partners, LLC, a venture capital firm focused on financial and commerce enabling technology he founded in 2012. He has been a private investor focused on the electronic payments sector since June 2004. Prior to that, Mr. Kilburn was Executive Vice President and Chief Strategy Officer of Concord EFS, Inc., a payment and network services company (which was acquired by First Data Corporation in February 2004), from 2003 to 2004, and Senior Vice President of Business Strategy and Corporate Development from 2001 to 2003. He served as Chief Executive Officer of Primary Payment Systems, Inc. (now Early Warning Services, LLC), a subsidiary of Concord EFS, Inc., from 2002 to 2003, and Chief Financial Officer from 1997 to 1999. From 1995 to 2001, Mr. Kilburn served in various roles at Star Systems, Inc., ultimately as Group Executive Vice President and Chief Financial Officer. Skills and Qualifications: Mr. Kilburn has valuable knowledge and skills in management due to his experience in investment and financial technology and payments industries, as well as his status as an “audit committee financial expert.” Eileen F. Raney, from January 2011 to November 2013, served as a member of the Board and a member of the Audit, Compensation and Governance Committees of the Board of SHFL entertainment, Inc., a global gaming supplier that was acquired by Bally Technologies, Inc. in November 2013. In 2018, Ms. Raney completed her certification as a NACD Board Leadership Fellow. Ms. Raney has been a member of the Advisory Board for the University of Nevada-Las Vegas Libraries since 2010, and a member of the Advisory Board of Fino Consulting since June 2015. She served on the Board of the University Medical Center of Southern Nevada from 2014 to 2017, as Vice Chair of the Board of Governors and as Chair of both the Strategy Committee and the Audit and Finance Committee. From April 2013 to April 2015, she also served as a member of the Board and Finance Committee of the Board of Nevada Health Centers, a federally qualified health center in Nevada. From 1988 to 2007, Ms. Raney held numerous positions with Deloitte & Touche USA, LLP, where she was hired as a Director in 1988 and made Principal in 1990. Her last position prior to retirement was National Managing Principal, Research & Development and Member, Deloitte & Touche USA Executive Committee, from 2003 to 2007. She was a member of the Deloitte Board of Directors from 2000 to 2003 while serving as the Human Capital E-Business Leader. She also held the positions of Global Leader, Integrated Health Group from 1996 to 2000; and Western Regional Leader and National Co-Leader, Integrated Health Group from 1988 to 1996. Skills and Qualifications: Ms. Raney is valuable to our Board due to her experience in the gaming industry, as well as her financial skills and status as an “audit committee financial expert.” 12 Class III Directors Whose Term Will Expire in 2020 Linster W. Fox Age 70 Independent Director since 2016 Maureen T. Mullarkey Age 59 Independent Director since 2018 Linster W. Fox is retired and previously served as Executive Vice President, Chief Financial Officer and Secretary of SHFL entertainment, Inc., a global gaming supplier, from 2009 up until the company’s acquisition by Bally Technologies, Inc. in November 2013. He served on the Executive Advisory Board of the Lee Business School at the University of Nevada-Las Vegas from 2015 to 2016, served as interim Chief Financial Officer of Vincotech in 2009 and as Executive Vice President, Chief Financial Officer and Secretary of Cherokee International Corp. from 2005 to 2009. He has also served in a variety of executive roles over the course of 18 years at Anacomp, Inc., including Executive Vice President and Chief Financial Officer and as a member of the company’s Board of Directors. He began his career as an accountant at PricewaterhouseCoopers LLC, is a Certified Public Accountant and has a B.S.B.A. from Georgetown University in Washington, D.C. Skills and Qualifications: Mr. Fox’s experience in the gaming industry, as well as his financial background and status as an “audit committee financial expert” are valuable to our Board. Maureen T. Mullarkey retired in 2007 as Executive Vice President and Chief Financial Officer of International Game Technology (currently known as International Game Technology PLC), a leading supplier of gaming equipment and technology, a position Ms. Mullarkey held from 1998 to 2007. She served in a variety of financial and executive management positions in her 18 years with the company. Ms. Mullarkey has served since 2014 as a director of PNM Resources, Inc. (NYSE: PNM), a holding company with two regulated utilities providing electricity and electric services in the State of New Mexico and Texas. Ms. Mullarkey previously served as a director of NV Energy, Inc. from 2008 to 2013 when the company was sold to Mid-American Energy Holdings Company, a subsidiary of Berkshire Hathaway, Inc. Ms. Mullarkey served as Entrepreneur in Residence with The Nevada Institute of Renewable Energy Commercialization from 2009 to 2011. Ms. Mullarkey has a B.S. from the University of Texas and an M.B.A. from the University of Nevada-Las Vegas. Skills and Qualifications: Ms. Mullarkey provides valuable knowledge and skills to our Board due to her experience in the gaming industry, as well as her financial skills and status as an “audit committee financial expert.” 13 BOARD AND CORPORATE GOVERNANCE MATTERS Corporate Governance Philosophy The business and affairs of the Company are managed under the direction of the Board in accordance with the Delaware General Corporation Law, as implemented by the Company’s Certificate of Incorporation and Bylaws. The role of the Board is to effectively oversee the affairs of the Company for the benefit of its stockholders and other constituencies. The Board strives to ensure the success and continuity of business through the selection of qualified management. It is also responsible for reviewing the Company’s compliance programs so that the Company’s activities are conducted in a responsible and ethical manner. The Company is committed to having sound corporate governance principles. Highlights of our corporate governance structure and policies include: WHAT WE DO þ 86% Independent Directors. Six of our seven directors have been determined by us to be “independent” as defined by the SEC and NYSE listing standards, which the Board has adopted as our standards. þ “Plurality-Plus” Voting for Directors. Director nominees are elected by the highest number of shares cast “For” a director (mandatory resignation policy for nominees who fail to receive an affirmative majority of votes cast). WHAT WE DON’T DO X No Related Party Transactions. For fiscal year 2018, we did not have any related party transactions. X No Poison Pill. We do not have a “poison pill” or stockholder rights plan. X No Pledging of Our Securities. Our officers and directors are prohibited from pledging our stock to secure loans of any type. X No Hedging of Our Securities. Our officers and directors are prohibited from engaging in any hedging or other speculative trading in our stock. þ Independent Chairman. Our Chairman of the Board is an independent director, which we believe ensures a greater role for the non-employee directors in setting agendas and establishing priorities and procedures for the work of the Board, as well as enables the independent directors to raise issues and concerns for Board consideration involving management. immediately without þ Separate Chairman and Chief Executive Officer Roles. Our Board believes the separation of these roles promotes the balance between the Board’s independent authority to oversee our business and determine long-term strategy and implementation and the Chief Executive Officer’s execution with his management team of our strategic direction and oversight of the day-to-day operations and performance of the Company. þ Entirely Independent Committees. All of the members of our Audit, Compensation, and Nom Gov Committees are independent. þ Audit Committee Financial Experts. Four of the six members of our Audit Committee qualify as an “audit committee financial expert” as defined by the SEC. The remaining two members qualify as “financially literate.” þ Regular Executive Sessions of Independent Directors. Our independent directors regularly meet in executive session without management’s participation. þ Limitations on Outside Board Service. Our directors may not serve on more than three public company boards without the approval of our Nom Gov Committee. þ All Directors Attended at Least 75% of Board and Respective Committee Meetings. Each director attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by all Committees of the Board on which he or she serves held during 2018. 14 þ Annual Board and Committee Self-Evaluations. Our Board and Committee members conduct self-evaluations at least annually to determine whether the Board and its Committees are functioning effectively. þ Executive Succession Planning Process. Our Board oversees Chief Executive Officer and senior management succession planning, which is reviewed at least annually. þ Code of Business Conduct, Standards and Ethics (and related training). We have adopted a Code of Business Conduct, Standards and Ethics for our non-employee directors and all employees and provide training on compliance. Code of Business Conduct, Standards and Ethics and Corporate Governance Guidelines We have adopted a Code of Business Conduct, Standards and Ethics for our non-employee directors and all employees (including officers) that is designed to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The Code of Business Conduct, Standards and Ethics is available on our website at ir.everi.com/investor-relations/corporate-governance/governance-documents. To the extent required by law, any amendments to, or waivers from, any provision of the Code of Business Conduct, Standards and Ethics will be promptly disclosed to the public. To the extent permitted by such legal requirements, we intend to make such public disclosure by posting the relevant material on our website within four business days following the date of the amendment or waiver in accordance with SEC rules. We have also adopted Corporate Governance Guidelines to assist the Board in the exercise of its responsibilities. Whistleblower Hotline Procedures for (i) the receipt, retention and treatment of complaints regarding improper or questionable accounting internal controls or auditing matters or practices, and (ii) the confidential, anonymous submission of such complaints are set forth in the Company’s Code of Business Conduct, Standards and Ethics. In order to facilitate the submission of such complaints, we have implemented a secure whistleblower hotline and website. The whistleblower hotline and website are operated by an independent service provider and are available for the anonymous submission of complaints. The Code of Business Conduct, Standards and Ethics is available on our website at ir.everi.com/investor-relations/corporate-governance/governance-documents. Policies Related to Equity Ownership Equity ownership. On February 25, 2016, the Board adopted a Policy on Equity Ownership (the “Equity Ownership Policy”) for its named executive officers, other executive officers and non-employee directors, which provides that such persons shall, within five years of the later of: (i) February 25, 2016; and (ii) the date such person first becomes subject to this policy, own shares of the Company’s Common Stock with a certain value as detailed in this Proxy Statement. At December 31, 2018, all current named executive officers, other executive officers, and non-employee directors either met the ownership guidelines or were within the five-year phase-in period. For more information on the Equity Ownership Policy, see “Executive Compensation — Compensation Discussion and Analysis — Additional Compensation Policies and Practices — Equity Ownership Policy.” Clawback. In February 2016, the Board adopted an Incentive Compensation Clawback Policy (the “Clawback Policy”). Pursuant to the Company’s Clawback Policy, in the event of a restatement of the Company’s financial results due to the misconduct of any employee, the Board or, if so designated by the Board, the Compensation Committee of the Board, is authorized to take action to recoup all or part of any incentive compensation received by a Section 16 or executive officer of the Company. In determining whether to take action to recoup any incentive compensation received by a Section 16 or executive officer of the Company, the Board or, if so designated, the Compensation Committee of the Board, will take into consideration whether the Section 16 or executive officer engaged in the misconduct or was in a position, including in a supervisory role, to have been able to have reasonably prevented the misconduct that caused the restatement. For more information on the Clawback Policy, see “Executive Compensation — Compensation Discussion and Analysis — Additional Compensation Policies and Practices — Clawback Policy” and our website at ir.everi.com/investor-relations/corporate-governance/governance-documents. 15 No hedging. We do not believe our executive officers or directors should speculate or hedge their interests in our Common Stock. Our Insider Trading Policy therefore prohibits them from making short sales of our Common Stock or from purchasing or selling puts, calls or other derivative securities involving our stock. No pledging. Our Insider Trading Policy prohibits our executive officers and directors from pledging our Common Stock. Access to Corporate Governance Policies Stockholders may access the Board Committee charters, our Code of Business Conduct, Standards and Ethics, our Corporate Governance Guidelines and Clawback Policy at the Corporate Governance section of the “Investors” page on our website at ir.everi.com/investor-relations/corporate-governance/governance-documents. Copies of our Board Committee charters, Code of Business Conduct, Standards and Ethics, Corporate Governance Guidelines and Clawback Policy will be provided to any stockholder upon written request to the Corporate Secretary, Everi Holdings Inc., 7250 South Tenaya Way, Suite 100, Las Vegas, Nevada 89113, or via e-mail to secretary@everi.com. Board Leadership Structure Our Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. Our Board is chaired by Mr. Kilburn, one of our independent directors. Mr. Kilburn’s service as Chairman enhances the Board’s independent oversight of management, while continuing to provide the effective leadership necessary for our Chairman. From his 14-year tenure as a member of our Board, Mr. Kilburn has acquired a deep knowledge of our history and culture as well as the issues, opportunities and challenges facing our business. Currently, we separate the roles and responsibilities of the Chief Executive Officer and Chairman of the Board in recognition of the differences between the two roles and to promote the balance between the Board’s independent authority to oversee our business and determine long-term strategy and the Chief Executive Officer’s implementation and execution with his management team of our strategic direction and oversight of the day-to-day operations and performance of the Company. The Chairman of the Board: ü As the current Presiding Director, generally presides at meetings of the Board (including all executive sessions); ü Serves as the liaison between the Chief Executive Officer and the independent and non-employee directors; ü Establishes the agenda and presides at executive sessions of the independent and non-employee directors; ü Generally, approves information provided to the Board; and ü In conjunction with the Compensation Committee, reviews and approves corporate goals and objectives relevant to the Chief Executive Officer’s compensation, evaluates the Chief Executive Officer’s compensation based upon such evaluation, and communicates with the Chief Executive Officer regarding the foregoing. Board Role in Risk Oversight Our Board is responsible for oversight of our risk assessment process. The Board’s role in the Company’s risk oversight process includes receiving regular reports from members of our management team with respect to material risks that the Company faces, including, but not limited to: operational, financial, legal and regulatory, cybersecurity, strategic and reputational risks. The Board, or the applicable Committee of the Board, receives these reports from members of our management team to enable it to identify material risks and assess management’s risk management and mitigation strategies. In connection with the respective Committee charters, our Audit Committee: ü assesses risks relating to the Company’s financial statements and cybersecurity matters, including information technology risks (inclusive of but not limited to data privacy and security issues); and ü oversees both the Company’s external and internal audit functions and oversees the Company’s compliance with applicable laws and regulations. 16 Our Compensation Committee: ü oversees the management of risks relating to the Company’s executive compensation plans and arrangements. Our Nom Gov Committee: ü reviews, no less than annually, the independence of our Board and potential conflicts of interest concerning our Board and senior executives. While each Committee is responsible for evaluating certain risks and overseeing the management of such risks, our entire Board is regularly informed through Committee reports about such risks and mitigation strategies. Executive Sessions of Non-Employee Directors Pursuant to our Corporate Governance Guidelines and the NYSE listing standards, in order to promote open discussion among non-employee directors, our non-employee directors regularly meet in executive session without management participation. Our non-employee directors designate one non-employee director to serve for a one-year term as the Presiding Director to chair the Board’s executive sessions. The executive sessions occur after each regularly scheduled meeting of the entire Board and at such other times that the non-employee directors deem necessary or appropriate. These sessions are presided over by the Chairman of the Board who is currently the designated Presiding Director. Board Meetings and Annual Meeting of Stockholders Attendance During fiscal year 2018, our Board held 14 meetings. Each director attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by all Committees of the Board on which he or she serves, in each case held during 2018. The Company encourages, but does not require, its Board members to attend annual meetings of stockholders. All of the Company’s then-current Board members attended the Company’s 2018 Annual Meeting of Stockholders, in person or via teleconference. Director Independence Our Corporate Governance Guidelines provide that a majority of our directors serving on our Board must be independent as required by the listing standards of the NYSE. We define “independent director” by reference to the rules, regulations and listing qualifications of the NYSE. In general, a director is deemed independent if the director has no relationship to us that may interfere with the exercise of the director’s independence from management and our Company. Our Board, after broadly considering all relevant facts and circumstances regarding the past and current relationships, if any, of each director with the Company, has affirmatively determined that all of the Company’s non- employee directors, Messrs. Kilburn, Judge, Fox and Congemi and Mses. Raney and Mullarkey, are independent directors, and determined that there are no material relationships that would interfere with the exercise of such directors’ independent from management and our Company. Regular Board and Committee Evaluations The Board and the Audit, Compensation, and Nom Gov Committees have an annual evaluation of the Committees and of the Board as a whole. In 2018, there was an evaluation process for the Audit Committee and a combined evaluation process for the Board and its Committees, which focused on their roles and effectiveness, as well as fulfillment of their fiduciary duties. The evaluations were completed anonymously to encourage candid feedback. The results of the evaluations are reported to and reviewed by the full Board. Each Committee and the Board was satisfied with its performance and considered itself to be operating effectively, with appropriate balance among governance, oversight, strategic and operational matters. Committees of the Board The Board has established three standing Committees: the Audit Committee, the Compensation Committee, and the Nom Gov Committee. In addition, from time to time, special committees may be established under the direction of the Board when necessary to address specific issues. The composition of the Board Committees complies with the applicable rules of the SEC, the NYSE, and applicable law. Our Board has adopted written charters for its Audit Committee, Compensation Committee, and Nom Gov Committee. 17 The table below depicts Committee membership during fiscal year 2018, the current Committee membership as of the date of this Proxy Statement, as well as the number of times the Committees met during fiscal year 2018. Our Board believes that at this time, it is appropriate for each of the Board’s non-employee/independent directors to serve on each of our Committees. This approach encourages focused discussions that benefit from the variety of perspectives and experiences represented by each of our non- employee directors. Our Board also benefits from a majority of members being apprised of Committee activities, which allows for the Board to respond quickly as needed to issues that arise. Our Board has determined that each of the members of our standing Committees identified below was “independent,” as defined under and required by the rules of the SEC and the NYSE. Since February 2016, when he became our Interim President and Chief Executive Officer (prior to becoming our President and Chief Executive Officer in May 2016) and director, Mr. Rumbolz has not served as a member of any Committees of the Board. Name E. Miles Kilburn* Geoffrey P. Judge Ronald V. Congemi Eileen F. Raney* Linster W. Fox* Maureen T. Mullarkey* ___________________ * Audit Committee Financial Expert Audit (4 meetings in 2018) X Compensation (6 meetings in 2018) X Nom Gov Committee (5 meetings in 2018) X X X X Chair X Chair X X X X X X Chair X X Audit Committee. The Audit Committee has responsibility to, among other things, review and discuss with management and our independent auditor, each, as appropriate: • • • • • • the integrity of our financial statements in accordance with generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the SEC and the NYSE, including the Company’s annual and quarterly audited financial statements; the performance and adequacy of the Company’s internal audit function and internal auditor; policies with respect to risk assessment and risk management, including information technology risks (inclusive of but not limited to data privacy and security issues) and material financial risk, and the steps management has taken to monitor and control such exposures (further detail about the role of the Audit Committee in risk assessment and risk management is included in the section entitled “Board and Corporate Governance Matters - Board Role in Risk Oversight” above); the performance and independence of the Company’s independent auditor; our compliance with certain legal and regulatory requirements, including reports from the Company’s independent auditor in connection with the preparation of the Company’s financial statements; and related-party transactions. The duties and responsibilities of our Audit Committee are more fully described in our Audit Committee Charter, which is available at the Corporate Governance section of the “Investors” page on our website at ir.everi.com/investor-relations/corporate-governance/ governance-documents. The Board has determined that Mr. Fox, the Chair of our Audit Committee, and each of Mr. Kilburn, Ms. Raney and Ms. Mullarkey, members of our Audit Committee, are each an “audit committee financial expert” and “independent” as defined under applicable NYSE standards and federal securities laws. Messrs. Congemi and Judge are each “financially literate” as defined under applicable NYSE standards. Compensation Committee. The Compensation Committee reviews and approves the compensation and benefits of our executive officers and directors, administers and makes recommendations to our Board regarding our non-Chief Executive Officer compensation and incentive compensation and equity-based plans, produces an annual report on executive compensation for inclusion in our annual report or proxy statement, and publishes an annual Compensation Committee report for our stockholders. The duties and responsibilities of our Compensation Committee are more fully described in our Compensation Committee Charter, which is available at the Corporate Governance section of the “Investors” page on our website at ir.everi.com/investor-relations/ corporate-governance/governance-documents. 18 Pursuant to the authority granted to it in its charter, during 2018 the Compensation Committee engaged Aon Hewitt (“Aon”) as its independent executive compensation consultant. Please refer to the discussion of the “Compensation Decision Making Process — Role of Compensation Consultants” in the “Compensation Discussion and Analysis” section of this Proxy Statement for further details. None of the Company’s management participated in the Compensation Committee’s decision to retain Aon; however, the Company’s management regularly interacted with Aon and provided information upon Aon’s request. Aon reported directly to our Compensation Committee, and the Compensation Committee may replace Aon or hire additional consultants at any time. Aon attended meetings of our Compensation Committee, as requested, and communicated with the Chair of the Compensation Committee between meetings; however, our Compensation Committee made all decisions regarding the compensation of the Company’s executive officers. Our Compensation Committee regularly reviews the services provided by its outside consultants and believes that Aon is independent in providing executive compensation consulting services. Our Compensation Committee conducted a specific review of its relationship with Aon in 2018 and determined that Aon’s work for the Compensation Committee did not raise any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the SEC, and the NYSE. In making this determination, the Compensation Committee noted that during 2018: • • • • • • Aon did not provide any services to the Company or its management, other than services to our Compensation Committee, and its services were limited to executive and director compensation consulting. Specifically, it did not provide, directly, or indirectly through affiliates, any non-executive compensation services, including, but not limited to, pension consulting or human resource outsourcing; Fees from the Company were less than 1% of Aon’s total revenue; Aon maintains a Conflicts Policy with specific policies and procedures designed to ensure independence; None of the Aon consultants who worked on Company matters had any business or personal relationship with the Compensation Committee members; None of the Aon consultants who worked on Company matters, or Aon, as a whole, had any business or personal relationship with executive officers of the Company; and None of the Aon consultants who worked on Company matters directly own Company stock. Our Compensation Committee continues to monitor the independence of its compensation consultant on a periodic basis. All of the members of our Compensation Committee are independent for purposes of the listing standards of the NYSE. Nom Gov Committee. The Nom Gov Committee (i) compiles and presents to the Board potential criteria for prospective members of our Board, conducts candidate searches and interviews, and formally proposes the slate of directors to be elected at each annual meeting of our stockholders, (ii) develops and recommends to our Board adoption of our Corporate Governance Guidelines, our Code of Business Conduct and our policies with respect to conflicts of interest, (iii) makes recommendations to the Board of Directors as to the membership of Committees of the Board, (iv) oversees and evaluates our Board and management, (v) evaluates from time to time the appropriate size and composition of our Board and recommends, as appropriate, increases, decreases and changes in the composition of our Board, and (vi) monitors our compliance with applicable laws, rules and regulations. The duties and responsibilities of our Nom Gov Committee are more fully described in our Nom Gov Committee Charter, which is available at the Corporate Governance section of the “Investors” page on our website at ir.everi.com/investor-relations/corporate-governance/ governance-documents. All of the members of our Nom Gov Committee are independent for purposes of the listing standards of the NYSE. Director Nomination Process Our Nom Gov Committee is responsible for recommending director candidates and nominees to the full Board of Directors, in collaboration with the Chairman of the Board. As provided in the charter of the Nom Gov Committee, nominations for director may be made by the Nom Gov Committee or by a stockholder of record entitled to vote. The Nom Gov Committee will consider and make recommendations to the Board regarding any stockholder recommendations for candidates to serve on the Board. Stockholders wishing to recommend candidates for consideration by the Nom Gov Committee may do so in accordance with the instructions set forth under “When are stockholder proposals due for the 2020 Annual Meeting of Stockholders?” section of this Proxy Statement. 19 Director Selection Process Our Nom Gov Committee seeks to identify candidates based on input provided by a number of sources, including (i) other members of the Board, (ii) officers and employees of the Company, and (iii) stockholders of the Company. Our Nom Gov Committee will also seek ongoing input from the incumbent directors and the Chief Executive Officer, with the goal of identifying and informally approaching possible director candidates in advance of actual need. The Company does not pay any third party to identify or assist in identifying or evaluating potential nominees. The Board shall itself determine in each case the manner by which an invitation to join the Board shall be extended to director nominees, other than those nominated directly by the Company’s stockholders. Key factors the Nom Gov Committee considers when determining whether to recommend directors for nomination include: • Experience - Particular skills and leadership that are relevant to the Company’s industry • Diversity - Diversity of background, race, gender, qualifications, attributes and skills • Age and Tenure - The age and Board tenure of each incumbent director • Board Size - The Nom Gov Committee periodically evaluates the size of the Board, depending on the Board’s needs • Board Independence - Independence of candidates for director nominees, including the appearance of any conflict in serving as a director • Board Contribution - Integrity, business judgment and commitment • Willingness to Continue to Serve - as applies to current directors if re-nominated Once director candidates have been identified, the Nom Gov Committee will then evaluate each candidate in light of his or her qualifications and credentials, and any additional factors that the Nom Gov Committee deems necessary or appropriate. Existing directors who are being considered for re-nomination will be re-evaluated in connection with the Nom Gov Committee’s process of recommending director candidates. There are no differences in the manner in which the Nom Gov Committee evaluates nominees for director based on whether the nominee is recommended by the Nom Gov Committee or a stockholder. A detailed description of the criteria used by the Nom Gov Committee in evaluating potential candidates may be found in the charter of the Nom Gov Committee which is available at the Corporate Governance section of the “Investors” page on our website at ir.everi.com/investor-relations/corporate-governance/governance-documents. Board Diversity Our Board believes that the Company’s directors should possess a combination of skills, professional experience, expertise, and diversity of backgrounds necessary to enable the Board to perform its oversight function effectively. Our Board maintains there are certain attributes every director should possess, as reflected in the Board’s membership criteria as discussed above in the “Director Selection Process.” Accordingly, our Board and our Nom Gov Committee consider the qualifications of directors and director candidates individually and in the context of the Board’s overall composition and the Company’s current and anticipated future needs. The Board assesses the effectiveness of this goal as part of its annual evaluation process. Board Refreshment We periodically review our Board’s composition to ensure that we have the right mix of skills, background and tenure. Our Board currently consists of seven directors divided into three equal classes, who each serve a three-year term. The background and skills of these directors contribute significantly to the Company’s strategy for future growth and long-term value creation. Our Board also believes that directors develop an understanding of the Company and an ability to work effectively as a group over time that provides substantial value and a significant degree of continuity year-over-year beneficial to our stockholders. 20 As a result of healthy refreshment of the Board, the current tenure, independence, and diversity composition of our Board is as follows: Tenure 43% < 5 Years 29% 5 - 10 Years 28% > 10 Years Independence 86% Independent 14% Non-Independent Diversity 71% Male 29% Female Communication Between Interested Parties and Directors Stockholders and other interested parties may communicate with individual directors (including the Presiding Director), the members of a Committee of the Board, the independent directors as a group or the Board as a whole by addressing the communication to the named director, the Committee, the independent directors as a group or the Board as a whole, c/o Corporate Secretary, Everi Holdings Inc., 7250 South Tenaya Way, Suite 100, Las Vegas, NV 89113, or via e-mail to secretary@everi.com. The Company’s Corporate Secretary will forward all correspondence to the named director, the Committee, the independent directors as a group or the Board as a whole, except for spam, junk mail, mass mailings, product complaints or inquiries, job inquiries, surveys, business solicitations or advertisements or patently offensive or otherwise inappropriate material. The Company’s Corporate Secretary may forward certain correspondence, such as product-related inquiries, elsewhere within the Company for review and possible response. Relationships Among Directors or Executive Officers There are no family relationships among any of the Company’s directors or executive officers. Executive Employment Agreements We are party to employment agreements with each of our named executive officers. The material terms of the employment agreements with our named executive officers are described under “Executive Compensation — Compensation of Named Executive Officers — Employment Contracts and Equity Agreements, Termination of Employment and Change in Control Arrangements.” Director and Officer Indemnification Agreements We have entered into an indemnification agreement with each of our directors and executive officers. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”) may be permitted to directors or executive officers, we have been informed that in the opinion of the SEC such indemnification is against public policy and is therefore unenforceable. We have purchased and maintain insurance on behalf of all of our directors and executive officers against liability asserted against or incurred by them in their official capacities, whether or not we are required to have the power to indemnify them against the same liability. 2018 Director Compensation Historically, our independent director compensation was delivered in the form of cash retainers for Board and Board Committee service, annual grants of stock options, and a one-time award of stock options upon initial appointment to the Board. In the fourth quarter 2017, the Compensation Committee reviewed the structure of our compensation program and made adjustments based upon a competitive market assessment, the Company’s share price at the time of equity grants, and input from its independent compensation consultant. For 2018, the Compensation Committee adopted the following changes to the compensation of our independent directors: • • • The values of cash retainers were increased to better align to competitive market practice; The form of equity portion of compensation was changed from stock options to restricted stock units, which vest 33% per year for three years and settle upon the earlier of the director’s separation from service, the occurrence of a Change in Control, or the ten-year anniversary of the date of grant; and The number of restricted stock units was determined based on stated cash value consistent with competitive market practice and converted to restricted stock units of equivalent value as of the date of grant. 21 In 2018, our non-employee directors were compensated through equity awards and annual cash retainers for Board and Board Committee service, as follows: All non-employee Board Members Chairman of the Board Audit Committee Member Audit Committee Chair Compensation Committee Member Compensation Committee Chair Nom Gov Committee Member Nom Gov Committee Chair ___________________ Annual Cash Retainer $75,000 $100,000 ($75,000 retainer plus $25,000 Chair fee) $12,500 $25,000 $10,000 $20,000 $9,375 $15,000 Restricted Stock Units(1) 17,687(2) 27,891(3) None None None None None None (1) Vest in equal installments on each of the first three anniversary dates of the grant date and settle on the earliest of the following events: (i) March 7, 2028; (ii) death; (iii) the occurrence of a Change in Control (as defined in the Amended and Restated 2014 Plan), subject to qualifying conditions; or (iv) the date that is six months following the separation from service, subject to qualifying conditions. (2) Represents equity units initially calculated based on a value of $130,000. The actual value at the date of grant is disclosed in the following table. (3) Represents equity units initially calculated based on a value of $205,000. The actual value at the date of grant is disclosed in the following table. The following table sets forth the compensation of our independent members of the Board for the fiscal year ended December 31, 2018: Name Fees earned or paid in cash Stock awards(1) Total E. Miles Kilburn(2) Geoffrey P. Judge(2) Ronald V. Congemi(2) Eileen F. Raney(2) Linster W. Fox(2) Maureen T. Mullarkey(2) ___________________ $ $ 131,875 116,875 106,875 112,500 119,375 87,339 $ 217,550 137,959 137,959 137,959 137,959 137,959 349,425 254,834 244,834 250,459 257,334 225,298 (1) Represents the fair value of the directors’ restricted stock unit awards in fiscal year 2018, as calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Stock Compensation. The time-based restricted stock units awards granted in 2018 to independent members of our Board vest in equal installments on each of the first three anniversary dates of the grant date and settle on the earliest of the following events: (i) March 7, 2028; (ii) death; (iii) the occurrence of a Change in Control (as defined in the Amended and Restated 2014 Plan), subject to qualifying conditions; or (iv) the date that is six months following the separation from service, subject to qualifying conditions. For a discussion on the assumptions made in the valuation of the directors’ restricted stock unit awards, see the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. 22 (2) At December 31, 2018, our independent directors had the following aggregate numbers of unvested restricted stock unit awards and shares underlying unvested option awards: Name Unvested stock awards Shares underlying unvested option awards E. Miles Kilburn Geoffrey P. Judge Ronald V. Congemi Eileen F. Raney Linster W. Fox Maureen T. Mullarkey 27,891 17,687 17,687 17,687 17,687 17,687 156,248 94,998 94,998 95,000 95,000 — Compensation Committee Interlocks and Insider Participation During fiscal year 2018, no member of the Compensation Committee was, or formerly was, an officer or employee of the Company or its subsidiaries. During fiscal year 2018, no interlocking relationship existed between any member of the Company’s Board or Compensation Committee and any member of the Board or Compensation Committee of any other company, nor has such interlocking relationship existed in the past. Chief Executive Officer and Senior Management Succession Planning Our Board oversees Chief Executive Officer and senior management succession planning, which is reviewed at least annually. Our Chief Executive Officer, after consultation with other members of management, provides the Board with a list of key individuals with immediate impact, the critical area of such individual’s impact, short-term/interim action and long-term action. Our Board reviews this information with our Chief Executive Officer. Further, our Board periodically reviews the overall composition of our senior management’s qualifications, tenure and experience. 23 Review, Approval or Ratification of Transactions with Related Persons TRANSACTIONS WITH RELATED PERSONS Under written procedures adopted by the Board, any transaction that is required to be reported under Item 404(a) of Regulation S-K promulgated by the SEC must be reviewed, approved or ratified by the Audit Committee. The types of transactions subject to these procedures include, but are not limited to: (i) the purchase, sale or lease of assets to or from a related person; (ii) the purchase or sale of products or services to or from a related person; or (iii) the lending or borrowing of funds from or to a related person. Approval of transactions with related persons shall be at the discretion of the Audit Committee, but the Audit Committee shall consider: (a) the consequences to the Company of consummating or not consummating the transaction; (b) the extent to which the Company has a reasonable opportunity to obtain the same or a substantially similar benefit of the transaction from a person or entity other than the related person; and (c) the extent to which the terms and conditions of such transaction are more or less favorable to the Company and its stockholders than the terms and conditions upon which the Company could reasonably be expected to negotiate with a person or entity other than the related person. Further, our Code of Business Conduct, Standards and Ethics requires our non-employee directors and our officers and employees to raise with our General Counsel any material transaction or relationship that could reasonably be expected to give rise to a personal conflict of interest. Our Corporate Governance Guidelines also prohibit the Company’s making of any personal loans to directors, executive officers or their immediate family members. Transactions with Related Persons in 2018 During fiscal year 2018, the Company did not engage in any transactions, and there are not currently proposed any transactions, or series of similar transactions, to which the Company was or will be a party, with related parties that required review, approval or ratification of the Audit Committee or any other Committee. 24 EXECUTIVE OFFICERS Set forth below is certain information regarding each of our current executive officers, other than Mr. Rumbolz, whose biographical information is presented under “Information Concerning the Director Nominees.” Name Michael D. Rumbolz Randy L. Taylor Edward A. Peters Dean A. Ehrlich Harper H. Ko Age 65 56 56 50 45 Position President and Chief Executive Officer Executive Vice President and Chief Financial Officer Executive Vice President, Sales and Marketing Executive Vice President, Games Business Leader Executive Vice President, Chief Legal Officer, General Counsel and Corporate Secretary Randy L. Taylor has served as our Executive Vice President and Chief Financial Officer since March 2014, having previously served as the Company’s Senior Vice President and Controller since November 2011. Prior to joining the Company, Mr. Taylor served in various positions for Citadel Broadcasting Corporation, a radio broadcasting company, from April 1999 to September 2005 and from September 2006 to September 2011, including as Chief Financial Officer, from 2008 to 2011. In December 2009, Citadel Broadcasting Corporation filed a petition for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code and emerged from reorganization under Chapter 11 in June 2010. Mr. Taylor also served as the Vice President of Finance and Corporate Controller of Bally Technologies, Inc. from September 2005 to September 2006. Edward A. Peters has served as our Executive Vice President, Sales and Marketing since January 2015, having previously served as Senior Vice President, Sales for the Company since November 2014. Prior to joining the Company, Mr. Peters served in various senior executive positions, including as Senior Vice President Business Development in Global Commercial Services from February 2010 through November 2014 for Fidelity Information Services, a services and global business solutions company; Chief Information Officer for Silverton Bank from August 2004 through February 2010; and Senior Vice President for Prudential Bank from December 2000 through July 2004. Dean A. Ehrlich has served as our Executive Vice President, Games Business Leader since January 2017, having previously served as an Executive Consultant to the Company since August 2016. Prior to joining the Company, Mr. Ehrlich served in various senior executive positions with WMS Industries Inc., an electronic gaming and amusement manufacturer, from May 2003 through July 2015, which was acquired by Scientific Games Corporation in late 2013, including as Senior Vice President Global Gaming Operations. Mr. Ehrlich spent several years at Anchor Gaming from October 1994 until May 2003, which was acquired by International Game Technology in late 2001, serving in multiple leadership roles, including as General Manager for its Proprietary Games division. Harper H. Ko has served as our Executive Vice President, Chief Legal Officer, General Counsel and Corporate Secretary since December 2017. Prior to joining the Company, Ms. Ko served as Deputy General Counsel, Gaming for Scientific Games Corporation, a leading gaming and lottery equipment and services supplier, from 2014 to 2017. From November 2007 to November 2014, Ms. Ko served as Assistant General Counsel for Bally Technologies, Inc., a manufacturer of casino equipment and games, joining Scientific Games following its acquisition of Bally Technologies, Inc. Ms. Ko also served as a Contract Attorney with Harrah’s Operating Company from 2006 to 2007, as Associate Corporate Counsel for Aristocrat Technologies, Inc. from 2004 to 2006, and as counsel for WMS Industries, Inc. from 2000 to 2004. 25 PROPOSAL 2 ADVISORY (NON-BINDING) VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (SAY ON PAY) (Item No. 2 on the Proxy Card) As required by Item 24 of Schedule 14A, we are asking for stockholder approval, on a non-binding, advisory basis, of the compensation of our named executive officers as disclosed in this Proxy Statement, which disclosures include the disclosures under “Compensation Discussion and Analysis,” the compensation tables, and the narrative discussion following the compensation tables. This proposal, commonly known as “Say on Pay” proposal, is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described in this Proxy Statement. We believe that the Company has created a compensation program deserving of stockholder support. At our 2018 annual meeting of stockholders, over 99% of the votes cast supported our executive compensation program for 2017. Our Compensation Committee, which is responsible for designing and administering our executive compensation program, has designed our executive compensation program to provide a competitive and internally equitable compensation and benefits package that reflects Company performance, job complexity and the strategic value of the applicable position, while ensuring long-term retention, motivation and alignment with the long-term interests of the Company’s stockholders. Please read “Compensation Discussion and Analysis” for additional details about our executive compensation program, including information about the 2018 compensation of our named executive officers. The Board unanimously recommends that stockholders vote in favor of the following resolution: “RESOLVED, that the stockholders of Everi Holdings Inc. approve, on a non-binding advisory basis, the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, set forth in the Company’s definitive proxy statement for the 2019 Annual Meeting of Stockholders.” Approval of this non-binding, advisory “Say on Pay” resolution requires the affirmative vote of the holders of a majority of the votes cast at the Annual Meeting at which a quorum is present. The vote on this proposal is non-binding and advisory in nature and will not affect any compensation already paid or awarded to any named executive officer, and it will not be binding on or overrule any decisions by our Board or our Compensation Committee. Nevertheless, our Board highly values input from our stockholders, and our Compensation Committee will carefully consider the result of this vote when making future decisions about executive compensation. THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RESOLUTION APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT. 26 EXECUTIVE COMPENSATION The Company is a holding company, the principal asset of which is the capital stock of Everi Payments Inc. (“Everi Payments”), and the capital stock of Everi Games Holding Inc. (“Everi Games Holding”), which is the parent of Everi Games Inc. (“Everi Games”). All of the executive officers of the Company are employees of Everi Payments, other than Mr. Ehrlich who is an employee of Everi Games. All references in this Proxy Statement to executive compensation relate to the executive compensation paid by Everi Payments or Everi Games to such executive officers. Compensation Discussion and Analysis The following Compensation Discussion and Analysis (“CD&A”) describes the philosophy, objectives and structure of our 2018 executive compensation program. This CD&A is intended to be read in conjunction with the Compensation of Named Executive Officers section contained within this Executive Compensation portion of the proxy, which provides further historical compensation information for our following named executive officers as of December 31, 2018 (“named executive officers” or “NEOs”): Name Michael D. Rumbolz Randy L. Taylor Edward A. Peters Dean A. Ehrlich Harper H. Ko President and Chief Executive Officer Current Title Executive Vice President and Chief Financial Officer Executive Vice President, Sales and Marketing Executive Vice President, Games Business Leader Executive Vice President, Chief Legal Officer, General Counsel and Corporate Secretary Quick CD&A Reference Guide Executive Summary Compensation Philosophy and Objectives Compensation Decision Making Process Compensation Competitive Analysis Elements of Compensation Additional Compensation Practices and Policies Section I Section II Section III Section IV Section V Section VI 27 I. Executive Summary Throughout 2018, the Company successfully implemented strategies that have stabilized the business and strengthened the Company going forward. This has included improving efficiencies, innovating new content and increasing infrastructure related to information technology and information security systems. The Company has also improved product offerings and currently has its most diverse portfolio of Games and FinTech solutions. The Company’s executive compensation program is designed to pay for performance - that is, to reward executives in a manner that is proportionate to the achievement of established goals. These goals may be expressed in terms of Company-wide performance, operating segment performance or individual performance. 2018 Performance Highlights Throughout 2018 the Company executed on key initiatives which led to consistent improvement in financial performance which provides the foundation for future growth. Some highlights of our accomplishments in 2018: • Total revenues adjusted for the net versus gross retrospective impact of ASC 606 increased by approximately $58.8 million, or 14%, to approximately $469.5 million; ◦ Games segment revenues increased by approximately $36.8 million, or 17%, and FinTech segment revenues increased by approximately $22.0 million, or 12%; • Reported Net Income of approximately $12.4 million as a result of net income in each quarter; ◦ ◦ First year of profitability since the acquisition of the Games business in late 2014; Profitability driven by increased year-over-year revenues in both the Games and in FinTech segments; • • • Achieved Diluted Earnings per Share of $0.17 in 2018; Record unit sales of 4,513 units in our Games segment; Installed base of gaming machines of 13,999 units in our Games segment. 28 2018 Compensation Program Highlights We believe our pay program is effective, and, consistent with past years, 2018 is a strong affirmation of this belief. Our business performance in 2018 has been reflected in our executive pay outcomes and Compensation Committee decisions. For example: • • • • • Performance-Based Compensation: Executive compensation includes substantial variable compensation components, including short-term incentive compensation in the form of annual non-equity incentive cash bonuses that are contingent upon achievement of certain financial targets as well as long-term incentive compensation in the form of both (i) performance-based equity grants that are contingent upon achievement of pre-determined revenue and Adjusted Earnings Before Interest Taxes Depreciation and Amortization (“AEBITDA”) targets by December 31, 2020, and (ii) time-based equity grants for which full value can only be realized upon continued employment with the Company through the entirety of the four-year vesting period. Short-Term Incentive Opportunities: To better align our NEOs (less the Chief Executive Officer) with the outcomes of our annual performance, target short-term incentive opportunities were increased to 75% of base salary for 2018. Short-Term Incentive Payouts: Our AEBITDA was $230.4 million, slightly above our target performance level. As such, executives received annual non-equity incentives for this financial goal. Average achieved target payout for named executive employees was approximately 80% of individual annual short-term incentive target. (See Appendix A to this Proxy Statement for a reconciliation of financial measures prepared in accordance with GAAP to non-GAAP financial measures disclosed in this CD&A. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, financial results prepared in accordance with GAAP). Equity Grants in 2018: Consistent with past years, the Compensation Committee concluded that executive equity grants are a beneficial vehicle for retaining and motivating the executive team to pursue the creation of long-term sustainable stockholder value. In 2018, the Compensation Committee modified the way it delivers long-term awards by replacing the stock option design used in 2017 with a mix of performance- and time-based restricted share units. The performance- based restricted share units link executive pay outcomes to three-year corporate revenue growth and AEBITDA growth goals and time-based restricted share units vest over a four-year period. Certain Base Salary Increases: In light of strong corporate performance in 2017, the Compensation Committee determined that the Chief Executive Officer and the Chief Financial Officer should receive merit increases to their respective base salaries in 2018. II. Compensation Philosophy and Objectives The principal objective of the Company’s executive compensation policies is to align the executives’ incentives with the achievement of the Company’s strategic goals, which are in turn designed to enhance stockholder value. The Company designed its executive compensation policies to be both fair and reasonable in light of performance, competitive with the compensation paid to executives of similarly situated companies, and to incent its executives to achieve the Company’s strategic goals, while at the same time discouraging them and other employees from taking excessive risk. Our primary objectives can be summed up as such: ü Align the interests of our executives with those of stockholders; ü Link executive compensation to the Company’s short-term and long-term performance; ü Attract, motivate and retain high performing executive officers through competitive compensation arrangements; and ü Promote long-term value creation and growth strategies. 29 Compensation Governance Practices The following is an overview of the highlights of our compensation structure, and the fundamental compensation policies and practices we do and do not use: WHAT WE DO þ Executive Compensation Based on Pay-for- Performance Philosophy. We align the interests of our executives and stockholders the use of performance-based annual cash incentive compensation and service and performance-based long-term equity incentive compensation. through WHAT WE DON’T DO X No Pledging of Our Securities. Our officers and directors are prohibited from pledging our stock to secure loans of any type. þ Double-Trigger Severance Payments. A Change in Control by itself is not sufficient to trigger severance payments, it must also be accompanied by a qualifying termination. X No Hedging of Our Securities. Our officers and directors are prohibited from engaging in any hedging or other speculative trading in our stock. regarding þ Cash and Equity Clawback Policy. We have a clawback policy incentive compensation if an executive officer willfully committed an illegal act, fraud, intentional misconduct or gross recklessness that caused a mandatory restatement of our financials. recoupment of the þ Stock Ownership Guidelines for Officers and Directors. Our officers and directors are required to accumulate stock holdings over a reasonable period of time that is a multiple of their respective base salaries or Board retainers, as applicable. X No Defined Benefit or Supplemental Retirement Plans. We do not provide pension arrangements, retirement plans or nonqualified deferred compensation plans or arrangements to our executives, other than benefits generally available to our employees. X No Excise Tax Gross-Ups. Our NEOs are not entitled to any such gross-up. þ Independent Committee Members. Our Compensation Committee is comprised of entirely independent members. X No Excessive Perquisites. We do not provide perquisites or other personal benefits to executive officers that are not available to all employees. þ Independent Compensation Consultant. We engage an independent compensation consultant to review and provide recommendations regarding our executive compensation program. þ Peer Group Analysis. We total direct compensation (base salary, annual cash incentive and long- term incentive payments) and the mix of compensation components for the NEOs relative to the peer group as one of the factors in determining if compensation is adequate to attract and retain executive officers. review þ Annual Say on Pay Advisory Vote. 30 Components of Our Compensation Program The Compensation Committee oversees our executive compensation program, which includes several compensation elements that have each been tailored to incentivize and reward specific aspects of Company performance that our Board believes are central to delivering long-term stockholder value. Key components of our 2018 compensation program are: Type Fixed Element Performance Period Base Salary Annual Performance - based Annual Cash Bonus Annual Objective Performance Measured and Rewarded Recognizes an individual’s role and responsibilities and serves as an important retention vehicle Short-Term Incentive Plan Rewards achievement of annual financial objectives and individual performance goals Long-Term Incentive Plan • Reviewed annually and set based on market competitiveness, individual performance and internal equity considerations • Corporate AEBITDA (37.5%) • Segment AEBITDA (37.5%) • Individual Performance Goals (25%) Performance - based Performance- Based Restricted Stock Units Time-Based Restricted Stock Units Long-Term Supports the achievement of long-term financial objectives and share price • Revenue growth (50%) • AEBITDA growth (50%) • Three year performance period Long-Term Aligns the interests of • Vests ratably over four years management and stockholders and supports share price growth 31 2018 Target Total Compensation Consistent with our desire to align pay and performance, we take the above-mentioned elements and more heavily weight their distribution towards variable (or, “at-risk”) compensation. Although our Compensation Committee does not target a specific allocation for each pay element, the Compensation Committee attempts to deliver an appropriate balance between fixed and variable elements, as well as short- and long-term incentives, as evidenced here in the following 2018 target pay mix allocation charts: 2018 Say on Pay Results At our 2018 Annual Meeting of Stockholders, the Say on Pay proposal received the support of approximately 99.6% of the shares voted, which we believe indicates strong support for our compensation program and practices. Our Compensation Committee believes the support for our ongoing efforts to improve and refine our compensation program and further align management and stockholder interests was reflected in the strong support for our 2018 Say on Pay proposal. III. Compensation Decision Making Process Paying for Performance: Realizable Pay Paying for performance continues to be the foundation of our compensation program, and we put much of our executive’s pay “at-risk”. In 2016 and 2017, we granted premium priced and market-priced stock options that do not vest unless significant stock price increases are achieved. In 2018, we granted time-based and performance-based restricted stock unit awards to retain and motivate our executives to deliver long-term performance. Given that a significant portion of the compensation packages are variable with our performance, oftentimes the grant date value of compensation packages (as reported annually on the Summary Compensation Table) is not always reflective of the actual realizable pay value that may be received by the executive team. 32 The following chart shows the difference between the reported pay, as disclosed in the Summary Compensation Table of our NEO team and the realizable pay values of those awards as of the end of the 2018 fiscal year. “SCT” pay is the pay disclosed in the Summary Compensation Table, including actual base salary, actual annual bonuses received, and long-term incentive components (restricted stock awards and annual stock option grants) based on the grant date fair value. “Realizable as of FYE” pay is defined as the compensation earned or deliverable, including: actual salary received, actual annual bonuses received, and the intrinsic value of long-term incentive plan components, as valued on December 28, 2018 (the last trading day of the 2018 fiscal year) using the year-end share price of $5.15 per share. Role of the Board Our Board has appointed a Compensation Committee, consisting exclusively of independent directors. The Compensation Committee’s charter authorizes our Compensation Committee to review and approve or to recommend for approval to the full Board, the compensation of our Chief Executive Officer and other executives. Our Board has authorized our Compensation Committee to make various decisions with respect to executive compensation. However, the Board also may make determinations and approve compensation in its discretion, including where the Compensation Committee recommends that the Board considers such executive compensation matters. Role of the Compensation Committee Our Compensation Committee evaluates the performance of our Chief Executive Officer and approves the compensation for our Chief Executive Officer in light of the goals and objectives of our compensation program for that year. Our Compensation Committee annually assesses the performance of our other executives, and, based in part on the recommendations from our Chief Executive Officer, approves the compensation of these executives. Our Compensation Committee may delegate its authority to subcommittees, but retains, and does not delegate, any of its responsibility to determine executive compensation. Role of Management At the request of our Compensation Committee, our Chief Executive Officer may attend a portion of our Compensation Committee meetings, including meetings at which our Compensation Committee’s compensation consultants are present. This enables our Compensation Committee to review, with our Chief Executive Officer, the corporate and individual goals that the Chief Executive Officer regards as important to achieve our overall business objectives. Our Compensation Committee also requests that our Chief Executive Officer assesses the performance of, and our goals and objectives for, certain other officers as deemed appropriate, including our other NEOs. In addition, our Compensation Committee may request certain other executives to provide input on executive compensation, including assessing individual performance and future potential, market data analyses and various compensation decisions relating to bonuses, equity awards and other pay during the year. None of our executives generally attends any portion of Compensation Committee meetings at which his or her compensation is discussed. 33 Role of Compensation Consultants Pursuant to the authority granted to it in its charter, the Compensation Committee may engage an independent executive compensation consultant. The consultant reports directly to the Compensation Committee, who may replace the consultant or hire additional consultants at any time. The compensation consultant attends meetings of the Compensation Committee, as requested, and may communicate with the Chair of the Compensation Committee between meetings; however, the Compensation Committee makes all decisions regarding the compensation of the Company’s executive officers. The compensation consultant provides services to the Compensation Committee, including, but not limited to: advice on compensation philosophy, incentive plan design, executive job compensation analysis, stockholder engagement and CD&A disclosure, among other compensation topics. The compensation consultant provides no additional services to the Company, other than the consulting services provided to the Compensation Committee. In 2018, Aon served as the Compensation Committee’s independent compensation consultant and provided the foregoing services to the Compensation Committee. Our Compensation Committee conducted a specific review of its relationship with Aon in 2018, and determined that Aon’s work for the Compensation Committee did not raise any conflicts of interest. Aon’s work has conformed to the independence factors and guidance provided by the Dodd-Frank Act, the SEC and the NYSE. Compensation Risk Oversight The Compensation Committee has reviewed and discussed the concept of risk as it relates to the Company’s compensation policies and it does not believe that the Company’s compensation policies encourage excessive or inappropriate risk taking. Further, the Compensation Committee has endorsed and adopted several measures to further discourage risk-taking, such as robust stock ownership guidelines for its executives and non-employee directors, and a clawback policy that grants the Compensation Committee broad discretion to recover incentive awards from Section 16 officers in the unlikely event that incentive plan award decisions were based on financial results that are subsequently restated. The Compensation Committee identified no material risks in the compensation programs in 2018. IV. Compensation Competitive Analysis The Compensation Committee worked with its independent consultant, Aon, to create a meaningful peer group for the purposes of assessing the competitiveness and appropriateness of the Company’s NEO compensation in the market. To formulate this peer group, the Compensation Committee looked to identify two types of businesses: Games and FinTech, which represent the two core businesses of the Company. From there, the Compensation Committee and Aon screened potential peers for similar size and complexity, using revenue, market capitalization, and enterprise value as its guiding metrics. Given the complexities and volatility of the industry, the Compensation Committee believes it is not appropriate to rigidly benchmark executive pay to a specific percentile of the group. Instead, the Compensation Committee uses the comparative data merely as a reference point in exercising its judgment about compensation design and setting appropriate target pay levels. 34 Our peer group consists of the following companies: Comparator Company Boyd Gaming Corporation Scientific Games Corp. Churchill Downs Inc. JAKKS Pacific, Inc. Zynga, Inc. Glu Mobile, Inc. Pinnacle Entertainment(1) Red Rock Resorts, Inc. Eldorado Resorts, Inc. Tropicana Entertainment Inc.(1) Golden Entertainment Inc. VeriFone Systems, Inc.(1) Euronet Worldwide, Inc. Moneygram International Inc. Blackhawk Network Holdings, Inc.(1) Cardtronics, Inc. WEX Inc. Green Dot Corporation ACI Worldwide, Inc. Evertec, Inc. ___________________ 20 Peers (1) Peer company was acquired since the completion of the last benchmarking analysis. Ticker BYD SGMS CHDN JAKK ZNGA GLUU PNK RRR ERI TPCA GDEN PAY EEFT MGI HAWK CATM WEX GDOT ACIW EVTC Type Gaming Gaming Gaming Gaming Gaming Gaming Gaming Gaming Gaming Gaming Gaming Payments Payments Payments Payments Payments Payments Payments Payments Payments 35 V. Elements of Compensation The Company’s executive compensation policy is simple and transparent in design, and consists primarily of base salary, annual cash incentive awards and long-term equity incentive awards for fiscal year 2018. Base Salary Compensation Base salary compensation is intended to provide an appropriate level of assured cash compensation that is sufficient to retain the services of our executives. Base salary compensation is reviewed annually in connection with the Company’s performance review process, and are determined based upon the following factors: • • • • • Position and responsibility; Job performance, and expected contribution to the Company’s future performance; Market factors, including the market compensation profile for similar jobs and the need to attract and retain qualified candidates for high-demand positions; Internal value of the executive’s role based on the relative importance of the job as compared to the Company’s other executive officers, as measured by the scope of responsibility and performance expectations; and Retention risk and the Company’s need to retain high performing and high potential executives. In 2018, base salary compensation was as follows: NEO Michael D. Rumbolz(1) Randy L. Taylor(1) Edward A. Peters Dean A. Ehrlich Harper H. Ko ___________________ $ 2017 Base Salary 2018 Base Salary $ 600,000 400,000 400,000 400,000 — 700,000 475,000 400,000 400,000 350,000 (1) In connection with the Company’s performance review process, the Compensation Committee increased the base salary for Mr. Rumbolz and Mr. Taylor to $700,000 and $475,000, respectively, effective November 6, 2017. Annual Cash Incentives All of our NEOs were eligible for the 2018 annual non-equity cash incentive plan, which promoted the Company’s pay-for- performance philosophy by providing executives with direct financial incentives in the form of annual cash incentive bonuses for achieving pre-determined individual and Company performance goals. Each NEO’s annual non-equity cash incentive bonus target is established as a percentage of base salary. Such target cash bonus percentage was either negotiated and set forth in the NEO’s employment agreement or otherwise established by the Compensation Committee. The following targets were effective in 2018: Name Michael D. Rumbolz Randy L. Taylor Edward A. Peters Dean A. Ehrlich Harper H. Ko Target Maximum (As a % of base salary) 100% 75% 75% 75% 75% 150% 150% 150% 150% 150% 36 2018 Performance Metrics For 2018, the Company’s annual non-equity incentive plan for executives consisted of four performance metrics. The metrics and their associated weightings in the incentive plan are as follows: Metric Michael D. Rumbolz Randy L. Taylor Edward A. Peters Dean A. Ehrlich Harper H. Ko Corporate AEBITDA 37.5% 37.5% 37.5% 37.5% 37.5% Games Segment AEBITDA 18.75% 18.75% 18.75% 37.5% 18.75% FinTech Segment AEBITDA 18.75% 18.75% 18.75% — 18.75% Personal Goals 25.0% 25.0% 25.0% 25.0% 25.0% The goals associated with the AEBITDA components of the annual incentive plan and the associated payouts are as follows: Component Corporate AEBITDA Games AEBITDA FinTech AEBITDA ______________ Performance Ranges Target $228M - $230M $128M - $129M $100M - $101M Payout Ranges Target(1) 100% 100% 100% (1) Maximum awards are capped at 150% of each executive’s target award value based on Board discretion. In 2018, the Individual Performance Goals, established by the Compensation Committee, and weighted equally, consisted of goals related to Corporate Strategy, Leadership, and Enhancing Customer and Community Relationships. In order for any portion of the Individual Performance Goals to be paid, the minimum level of Games Segment AEBITDA and FinTech Segment AEBITDA must be achieved (other than Mr. Ehrlich who must achieve only the minimum Games Segment AEBITDA). The Individual Performance Goals consist of: Corporate Strategy • Continue to lead in product innovation and technology for the gaming industry. • Maintain and expand the Company’s operating footprint through strategic acquisitions, alliances or technology development to achieve growth targets. • Continue to improve internal processes to align with provision of best in class products and services to our customers. Leadership • Implement corporate leadership training programs to educate and contribute to career development of senior and executive leaders. Enhance Customer and Community Relationships • Enhance the Company’s customer communications efforts with efficient and effective resources to ensure targeted and accurate information dissemination. • Implement additional employee benefits and procedures to measure employee satisfaction to invest in employee retention and better align employees with the Company’s strategic goals. 2018 Performance and Actual Payouts For the year ended December 31, 2018, we had the following achievements: • • AEBITDA - $230.4 million (100% of target) Games AEBITDA - $126.8 million (less than target) 37 76.4% 80.0% 88.3% 73.3% 83.8% Total Target 100% 700,000 356,250 300,000 300,000 262,500 Total Achieved 100% • FinTech AEBITDA - $103.6 million (100% of target) Based upon this performance, the NEOs received an average of approximately 80% of the target payout with respect to the Company’s AEBITDA objectives and Individual Performance Goals. Final earned payouts were adjusted slightly for certain NEOs based on the Compensation Committee’s assessment of their individual contributions during the past year. Target Short-Term Incentive Opportunity as a % of Base Salary Target Short-Term Incentive Opportunity ($) Total Short- Term Incentive Payment Achieved Short-Term Incentive Opportunity as a % of Base Salary Name Base Salary Michael D. Rumbolz Randy L. Taylor Edward A. Peters Dean A. Ehrlich Harper H. Ko $ 700,000 475,000 400,000 400,000 350,000 100% $ 75% 75% 75% 75% 700,000 $ 356,250 300,000 300,000 262,500 535,000 285,000 265,000 220,000 220,000 Target Split Corporate Split FinTech Split Games Games Only Personal Name 37.5% 18.75% 18.75% 37.5% 25.0% Michael D. Rumbolz Randy L. Taylor $ 262,500 $ 133,594 131,250 $ 66,797 131,250 $ 66,797 — $ — 175,000 $ 89,063 Edward A. Peters Dean A. Ehrlich Harper H. Ko 112,500 112,500 98,438 56,250 — 49,219 56,250 — 49,219 — 112,500 — 75,000 75,000 65,625 Corporate Split FinTech Split Games Games Only Personal Name 37.5% 18.75% 18.75% 37.5% 25.0% Actual Split Michael D. Rumbolz $ Randy L. Taylor Edward A. Peters Dean A. Ehrlich Harper H. Ko 262,500 $ 133,594 112,500 112,500 98,438 131,250 $ 66,797 56,250 — 49,219 39,375 $ 20,039 16,875 — 14,766 — $ — — 33,750 — 101,875 $ 64,570 79,375 73,750 57,579 535,000 285,000 265,000 220,000 220,000 Long-Term Equity Incentive Awards We believe that the award of stock-based compensation and incentives is an effective way of aligning our executives’ interests with the goal of enhancing stockholder value. Due to the direct relationship between the value of an equity award and the Company’s stock price, we believe that equity awards motivate executives to manage the Company’s business in a manner that is consistent with stockholder interests. Through the grant of restricted stock unit awards that vest over time, we can align executives’ interests with the long-term interests of our stockholders who seek appreciation in the value of our Common Stock. To that end, the time- based equity awards that we grant to executives typically vest and become fully-exercisable over a four-year period. Correspondingly, the performance-based equity awards that we grant to executives typically vest over a performance period based on the achievement of certain revenue and AEBITDA targets that must be approved by the Compensation Committee of the Board. In 2018, the Compensation Committee redesigned the long-term incentive plan. The use of market- (or tied to stock price performance) and time-based stock options was discontinued. In its place, the Compensation Committee implemented a program that includes performance- and time-based restricted share units. The new plan was adopted to continue a pay for performance philosophy, align executives with key financial metrics, and align with a common market-based compensation approach. 38 The principal factors considered in granting restricted stock unit awards and determining the size of grants to executives were prior performance, level of responsibility, the amounts of other compensation attainable by the executive and the executive’s ability to influence the Company’s long-term growth and profitability. Our Compensation Committee does not apply any quantitative method for weighing these factors and a decision to grant an award is primarily based upon a subjective evaluation of the executive’s past performance as well as anticipated future performance. 2018 Awards In keeping with the Company’s commitment to strengthening its overall corporate governance, including its compensation program, the Company continued the practice of granting a mix of performance- and time-based awards. For 2018, 60% of the restricted stock unit awards consisted of performance-based restricted stock and 40% of the restricted stock unit awards consisted of time- based restricted stock in order to continue to incentivize, motivate and retain the executive team, while further strengthening and demonstrating the alignment of management and stockholder interests. VI. Additional Compensation Policies and Practices Equity Ownership Policy The Company and its stockholders are best served by a board and executive team that manage the business with a long-term perspective. As such, the Company adopted the Equity Ownership Policy in February 2016, as the Company believes stock ownership is an important tool to strengthen the alignment of interests among stockholders, directors, NEOs, and other officers. The policy provides that the applicable required level of equity ownership is expected to be satisfied by our directors, NEOs, and other officers within five years of the later of: (i) February 25, 2016; and (ii) the date such person first becomes subject to the Equity Ownership Policy. The Compensation Committee will receive periodic reports of the ownership achieved by each director, executive officer and other officers. Until such time as such person satisfies the equity ownership requirement, the achievement level of ownership will be determined by reference to the average closing stock price of our Common Stock during the fiscal year ended immediately prior to the determination date. Once the equity ownership requirement has been satisfied, future increases or decreases in the equity price of our Common Stock will not impact the compliance of our directors, executive officers, and other officers with these guidelines, as long as such person holds the number of shares he or she had at the time he or she achieved the required ownership level. The following table sets forth the required salary multiples for each category of person subject to the policy: Current NEO Required Salary Multiple President and Chief Executive Officer All other NEOs Other officers Non-employee directors 6x base salary 3x base salary 1x to 2x base salary 5x annual cash retainer The value of all of the following types of Company stock or stock options owned by or granted to an executive, other officer or director qualifies toward the participant’s attainment of the target multiple of pay: • • • • Shares owned outright/shares beneficially owned (including by a family member and/or in a trust); Vested restricted stock; Shares owned through the Company’s 401(k) plan (if applicable); and Shares underlying vested, but unexercised, stock options (based on the excess of the market price of the stock over the exercise price and after deducting any tax withholding obligations). At December 31, 2018, all current named executive officers, other officers, and non-employee directors either met the ownership guidelines or were within the five-year phase-in period. 39 Clawback Policy The Board of the Company adopted an Incentive Compensation Clawback Policy in February 2016, which entitles the Company to recover certain compensation previously paid to its Section 16 and executive officers. The policy provides that, in the event of a restatement of the Company’s financial statement for any fiscal year commencing after December 31, 2015 that is due to the misconduct of any employee, the Board or, if so designated by the Board, the Compensation Committee of the Board, is authorized to take action to recoup all or part of any incentive compensation received by a Section 16 and executive officer of the Company. For purposes of this policy, incentive compensation includes any cash compensation or an award of equity compensation from the Company that is based in whole or in part on the achievement of financial results by the Company, including, but not limited to, any bonus, incentive arrangement or equity award, but excluding base salary. The policy defines misconduct as the willful commission of an illegal act, fraud, intentional misconduct or gross recklessness in the performance of an employee’s duties and responsibilities. In determining whether to take action to recoup any incentive compensation received by a Section 16 or executive officer of the Company, the Board or, if so designated, the Compensation Committee of the Board, will take into consideration whether the Section 16 or executive officer engaged in the misconduct or was in a position, including in a supervisory role, to have been able to have reasonably prevented the misconduct that caused the restatement. Anti-Hedging and Anti-Pledging Policies Under our Insider Trading Policy, directors and executive officers, as well as other employees, are prohibited from engaging in the following activities with respect to the Company’s Common Stock: • • Hedging their interest in Company shares by selling short or trading or purchasing “put” or “call” options on our Common Stock or engaging in similar transactions; and Pledging any shares of our Common Stock without prior clearance from our Corporate Compliance Officer as outlined in our Insider Trading Policy. As of the date of this Proxy Statement, no shares of Company Common Stock were pledged by any director or executive officer. Tax Deductibility Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) generally limits the corporate tax deduction for compensation paid to the Chief Executive Officer and the three other most highly compensated executives (other than the Chief Financial Officer) to $1.0 million annually, unless certain requirements are satisfied. To maximize the corporate tax deduction, our incentive plans in 2017 were designed so that certain awards under those plans could comply with the requirements of Section 162(m) of the Code. As the $1.0 million limit does not apply to compensatory amounts that qualify as performance-based compensation under Section 162(m), certain of our performance-based awards made pursuant to these plans were intended to qualify for corporate tax deductibility. The ability to rely on this performance-based compensation exclusion was generally eliminated in connection with the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) that was enacted on December 22, 2017 and the limitation on deductibility generally was expanded to include all named executive officers, including the Chief Financial Officer position, which was a function that was previously excluded from the then existing provisions set forth in the Code. As a result, the Company may no longer take a deduction for any compensation paid to its named executive officers to the extent NEO compensation is in excess of $1.0 million, unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. As a general matter, in making its previous NEO compensation decisions, the Compensation Committee endeavored to maximize deductibility of compensation under Section 162(m) to the extent practicable while maintaining competitive compensation; however, the Compensation Committee believes that it is important for it to retain maximum flexibility in designing compensation programs that are in the best interests of the Company and its stockholders, which may result in uncertainty and ambiguity with respect to the application and interpretation of the provisions set forth in Section 162(m) of the Code as amended by the enactment of the 2017 Tax Act. Furthermore, the Compensation Committee intends to continue its use of performance-based compensation to the extent that compliance with Code requirements does not conflict with the Company’s compensation objectives. In some cases, the Compensation Committee believes the loss of some portion of a corporate tax deduction may be necessary and appropriate in order to provide the compensation necessary to attract and retain qualified executives. 40 Retirement Plans We have established and maintain a retirement savings plan under Section 401(k) of the Code to cover our eligible employees, including our executive officers. The Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a tax deferred basis through contributions to the 401(k) plan. Our 401(k) plan is intended to constitute a qualified plan under Section 401(a) of the Code and its associated trust is intended to be exempt from federal income taxation under Section 501 (a) of the Code. We make contributions on behalf of certain executive officers consistent with Company contributions to all eligible non-executive employees. Severance Benefits In order to retain the ongoing services of our NEOs, we have provided the assurance and security of severance benefits and change in control payments, which are described below under the caption “Employment Contracts and Equity Agreements, Termination of Employment and Change in Control Arrangements.” We believe that these severance benefits and change in control payments reflect the fact that it may be difficult for such executives to find comparable employment within a short period of time and that providing such benefits should eliminate, or at least reduce, the reluctance of senior executives to pursue potential change in control transactions that may be in the best interests of stockholders. We believe that these benefits are appropriate in size relative to the overall value of the Company. Compensation Committee Report The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement. Members of the Compensation Committee: Geoffrey P. Judge (Chair) Ronald V. Congemi Linster W. Fox E. Miles Kilburn Eileen F. Raney Maureen T. Mullarkey 41 Compensation of Named Executive Officers 2018 Summary Compensation Table The following table sets forth the total compensation earned for services rendered in 2018 by the NEOs. Name and principal position Year Salary Bonus Stock awards(1)(2) Option awards(1) Michael D. Rumbolz 2018 $ 700,000 $ — $ 2,988,000 $ — $ Non-equity incentive plan compensation(3) 535,000 All other compensation(4) Total $ 17,718 $ 4,240,718 9,787 2,206,795 17,348 1,258,579 16,748 1,971,948 9,793 9,779 1,081,096 690,738 15,910 1,196,161 7,366 1,010,508 16,751 65,714 16,198 1,129,951 1,070,206 687,157 603,497 132,377 285,000 254,365 65,000 220,000 197,300 265,000 198,650 55,000 373,500 — 220,000 10,416 953,917 — — 266,400 712,316 — 601,162 — 1,195,200 — — 405,842 — 215,959 560,250 — — 405,842 448,200 — — 405,842 — 215,959 — — — — — — — — — President and Chief Executive Officer Randy L. Taylor Executive Vice President, Chief Financial Officer Dean A. Ehrlich(5) Executive Vice President, Games Business Leader 2017 2016 2018 2017 2016 2018 2017 614,795 507,692 475,000 411,096 400,000 400,000 400,000 Edward A. Peters Executive Vice President, Sales Marketing 2018 2017 2016 400,000 400,000 400,000 Harper H. Ko(6) 2018 350,000 Executive Vice President, Chief Legal Officer, General Counsel and Corporate Secretary ___________________ (1) Represents the fair value of the stock and option awards granted to the NEOs, as calculated in accordance with FASB ASC Topic 718, Stock Compensation. For a discussion of the assumptions made in determining the valuation of these equity awards, see our notes to the financial statements in the Company’s Annual Report on Form 10-K for the years ended December 31, 2018, 2017 and 2016. (2) The restricted stock units granted in 2018 were comprised of both time- and performance-based awards: (a) with 40% of those restricted stock units granted in 2018 being time-based awards that will vest ratably over a period of four years; and (b) with 60% of those restricted stock units granted in 2018 being performance-based awards and vesting will be evaluated by our Compensation Committee of our Board after a performance period, beginning on the date of grant through December 31, 2020, as a result of certain revenue and AEBITDA growth rate metrics being met, with achievement of each measure to be determined independently of one another. If the performance criteria of the metrics have been achieved and are then approved by our Compensation Committee, the eligible awards will become vested on the third anniversary of the grant dates. (3) Represents the amount of non-equity incentive compensation earned under the Company’s annual short-term incentive plan for the fiscal year. Amounts earned for a particular calendar year are typically paid to the NEOs in the first quarter of the following fiscal year. (4) Includes contributions made by the Company under its 401(k) plan and cost of short-term and long-term disability coverage. We make contributions on behalf of certain executive officers consistent with Company contributions to all eligible non-executive employees. 42 All Other Stock Awards: Number of Shares of Stock Units (#)(3) Grant date fair value of RSUs awarded ($)(4) (5) Mr. Ehrlich has served as our Executive Vice President, Games Business Leader since January 2017, having previously served as an Executive Consultant to the Company since August 2016. (6) Ms. Ko has served as our Executive Vice President, Chief Legal Officer, General Counsel, and Corporate Secretary since December 2017. Grants of Plan-Based Awards The following table sets forth certain information concerning grants of plan-based awards made to each NEO for the fiscal year ended December 31, 2018: Estimated future payouts under non- equity incentive plan compensation(1) Estimated future payouts under equity incentive plan compensation(2) Name Michael D. Rumbolz Grant Date Threshold ($) Target ($) $ — $ 700,000 Maximum ($) $1,050,000 Threshold (#) Target (#) Maximum (#) — — — — $ — Randy L. Taylor — 356,250 712,500 — — — — — 5/22/2018 — — — 120,000 240,000 480,000 160,000 2,988,000 Dean A. Ehrlich — 300,000 600,000 — — — — — 5/22/2018 — — — 48,000 96,000 192,000 64,000 1,195,200 Edward A. Peters — 300,000 600,000 — — — — — 5/22/2018 — — — 22,500 45,000 90,000 30,000 560,250 Harper H. Ko — 262,500 525,000 — — — — — 5/22/2018 — — — 18,000 36,000 72,000 24,000 448,200 5/22/2018 — — — 15,000 30,000 60,000 20,000 373,500 ___________________ (1) Represents amounts potentially payable to the NEOs under the Company’s annual cash incentive plan. A more detailed discussion of how the target is determined and calculated is found in the CD&A above. (2) The number of performance-based RSUs that are ultimately earned will range from 0% to 200% of the target number shown above. The number earned will be based upon the attainment of Revenue Growth goals and AEBITDA Growth goals measured over the three-year period ending on December 31, 2020. The Revenue Growth goals and AEBITDA Growth goals will apply to 50% of the target number of performance-based RSUs in the table above. The parameters set forth in the grant notice for these performance-based restricted stock unit awards are as follows: Performance Ranges Weighting 50% Below Threshold Threshold Target Maximum < 6.3% 6.3% 7.9% 9.5% 50% < 7.7% 7.7% 9.6% 11.5% Revenue Growth AEBITDA Growth Performance-based RSUs Earned (as a percent of target) Threshold Target Maximum Below Threshold 0% 0% 50% 100% 200% 50% 100% 200% (3) Time-based RSUs vest at a rate of 25% per year over the four years from the date of grant. (4) Represents the total fair value of the NEOs’ restricted stock unit awards granted to the NEOs, as calculated in accordance with FASB ASC Topic 718 Stock Compensation. For a discussion of the assumptions made in the valuation, please see the notes to the financial statements in the Company’s Annual Report on Form 10-K for the years ended December 31, 2018, 2017 and 2016. 43 Outstanding Equity Awards The following table sets forth certain information for our NEOs concerning unexercised stock options, unvested restricted stock and equity incentive plan awards outstanding at December 31, 2018: Option awards Equity Incentive Plan Awards: Name Date Granted Number of securities underlying unexercised exercisable options Number of securities underlying unexercised unexercisable options Number of securities underlying unexercised unearned options Stock awards Number of shares or units of unvested unearned stock Number of shares or units of unearned unvested stock Market value of shares or units of stock that have not vested Michael D. Rumbolz 8/30/2010 100,000 3/1/2011 3/2/2012 3/6/2013 5/2/2014 4/22/2015 2/13/2016 3/8/2017 3/8/2017 5/5/2017 5/22/2018 5/22/2018 12/7/2011 3/2/2012 3/6/2013 5/2/2014 4/22/2015 5/13/2016 5/13/2016 3/8/2017 3/8/2017 5/22/2018 5/22/2018 12/8/2016 12/8/2016 3/8/2017 3/8/2017 5/22/2018 5/22/2018 12/4/2014 4/22/2015 5/13/2016 5/13/2016 3/8/2017 3/8/2017 5/22/2018 5/22/2018 12/29/2017 12/29/2017 5/22/2018 5/22/2018 40,000 40,000 19,424 50,000 37,500 465,116 62,326 30,698 — — — 15,000 16,875 11,859 100,000 — 88,776 43,726 35,510 17,490 — — 21,450 43,550 17,490 35,510 — — 300,000 — 21,863 44,388 17,490 35,510 — — 20,625 — — — Randy L. Taylor Dean A. Ehrlich Edward A. Peters Harper H. Ko — — — — — 12,500 (1) — — 92,093 (1) — — — — — — — — — 43,724 (1) — 52,470 (1) — — — 21,450 (1) — 52,470 (1) — — — — — — 43,724 (1) — 52,470 (1) — — — 61,875 (1) — — — Option exercise price Option expiration date $ 3.72 8/30/2020 3.41 5.58 7.09 6.59 7.74 2.78 3.29 3.29 — — — 4.57 5.58 7.09 6.59 7.74 1.46 1.46 3.29 3.29 — — 2.40 2.40 3.29 3.29 — — 7.61 7.74 1.46 1.46 3.29 3.29 — — 3/1/2021 3/2/2022 3/6/2023 5/2/2024 4/22/2025 2/13/2026 3/8/2027 3/8/2027 — — — 12/7/2021 3/2/2022 3/6/2023 5/2/2024 4/22/2022 5/13/2026 5/13/2026 3/8/2027 3/8/2027 — — 12/8/2026 12/8/2026 3/8/2027 3/8/2027 — — 12/4/2024 4/22/2022 5/13/2026 5/13/2026 3/8/2027 3/8/2027 — — 7.54 12/29/2027 — — — — — — — 186,976 (2) — — — — — — — — (7) (5) 400,000 88,774 (6) — 106,530 (2) — — — — — 43,550 (5) — 106,530 (2) — — — — 200,000 (5) — 88,774 (6) — 106,530 (2) — — — 27,500 (6) 7.54 12/29/2027 — — — — — — — — — — — — — — — 8,330 160,000 (3) (1) — — — — — — — — — 64,000 (1) — — — — — 30,000 (1) — — — — — — — 24,000 (1) — — — 20,000 (1) — — — — — — — — — — — $ — — — — — — — — — 42,900 824,000 240,000 (4) 1,236,000 — — — — — — — — — — 96,000 (4) — — — — — 45,000 (4) — — — — — — — 36,000 (4) — — — — — — — — — — — — 329,600 494,400 — — — — 154,500 231,750 — — — — — — 123,600 185,400 — — 103,000 154,500 — 30,000 (4) ___________________ (1) These equity awards vest ratably over the first four anniversaries of the grant date. 44 (2) These equity awards vest at a rate of 25% per year on each of the first four anniversaries of the grant date, provided that as of the vesting date for each vesting tranche, the closing price of the Company’s shares on the NYSE is at least a specified price hurdle of $4.11, defined as a 25% premium to the closing stock price on the grant date. If the price hurdle is not met as of the vesting date for a vesting tranche, then such tranche shall vest and become vested shares on the last day of a period of 30 consecutive trading days during which the closing price is at least the price hurdle. If these target prices are not met during the life of the grant, the unvested shares underlying the options will terminate, except upon the termination of service without cause or by the participant without good reason within ten days prior to, or within eighteen months after a change in control of the Company as defined in the Amended 2014 Plan, in which case, the unvested shares underlying such options shall become fully vested on the effective date of such change in control. (3) These equity awards vest over two years from the date of grant, with an equal number of shares vesting each monthly period. (4) These equity awards have vesting conditions that will be evaluated by our Compensation Committee of our Board after a performance period, beginning on the date of grant through December 31, 2020, as a result of certain revenue and AEBITDA growth rate metrics being met, with achievement of each measure to be determined independently of one another. If the performance criteria of the metrics have been achieved and are then approved by our Compensation Committee, the eligible awards will become vested on the third anniversary of the grant dates. The parameters set forth in the grant notice for these performance-based restricted stock unit awards are as follows: Performance Ranges Weighting Below Threshold Threshold Target Maximum 50% < 6.3% 6.3% 7.9% 9.5% 50% < 7.7% 7.7% 9.6% 11.5% Revenue Growth AEBITDA Growth Performance-based RSUs Earned (as a percent of target) Threshold Target Maximum Below Threshold 0% 0% 50% 100% 200% 50% 100% 200% (5) These equity awards vest if our average stock price in any period of 30 consecutive trading days meets certain target prices of $18 and $21 per share during a four-year period that commenced on the date of grant for these options. These equity awards will expire on the seventh anniversary of the date of grant, except upon the termination of service without cause within ten days prior to, or within eighteen months after a change in control of the Company as defined in the Amended 2014 Plan, in which case, the unvested shares underlying such options shall become fully vested on the effective date of such change in control. (6) These equity awards vest at a rate of 25% per year on each of the first four anniversaries of the grant date, provided that as of the vesting date for each vesting tranche, the closing price of the Company’s shares on the NYSE is at least a specified price hurdle of $2.19, defined as a 50% premium to the closing stock price on the grant date. If the price hurdle is not met as of the vesting date for a vesting tranche, then such tranche shall vest and become vested shares on the last day of a period of 30 consecutive trading days during which the closing price is at least the price hurdle. If these target prices are not met during the life of the grant, the unvested shares underlying the options will terminate, except upon the termination of service without cause or by the participant without good reason within ten days prior to, or within eighteen months after a change in control of the Company as defined in the Amended 2014 Plan, in which case, the unvested shares underlying such options shall become fully vested on the effective date of such change in control. (7) The market-based option awards of 120,000 were canceled in 2018 due to not meeting the vesting requirements related to the option award granted in 2014. 45 2018 Option Exercises and Stock Vested The following table sets forth certain information concerning the exercise of stock options, and the vesting of restricted stock, for each NEO for the fiscal year ended December 31, 2018: Name Michael D. Rumbolz Randy L. Taylor Edward A. Peters Dean A. Ehrlich Harper H. Ko ___________________ Option Awards Stock Awards Number of shares acquired on exercise 85,000 — 66,251 — — Value realized on exercise(1) 190,850 $ — 503,348 — — Number of shares acquired on vesting 20,001 11,000 — — 10,000 Value realized on vesting(2) 148,608 $ 76,010 — — 49,400 (1) The value realized on exercise equals (i) the closing price of our Common Stock on the date of exercise minus the exercise price of options exercised, multiplied by (ii) the number of shares that were exercised. (2) The value realized on vesting equals (i) the closing price of our Common Stock on the vesting date, multiplied by (ii) the number of shares that vested. Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Rumbolz, our President and Chief Executive Officer. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. For 2018, our last completed fiscal year: • • • the median of the annual total compensation (inclusive of base salary, bonus and other items, as described below) of all our employees, other than Mr. Rumbolz, was $68,204; and the annual total compensation of Mr. Rumbolz, as reported in the Summary Compensation Table included elsewhere in this Proxy Statement, was $4,240,718. Based on this information, for 2018, the ratio of the annual total compensation of Mr. Rumbolz, our President and Chief Executive Officer, to the median of the annual total compensation of all employees was 62.2 to 1. To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of the “median employee,” we took the following steps: 1. 2. We determined that, as of December 31, 2018, we had approximately 1,250 employees, with approximately 93% and 7% of the individuals located domestically in the United States (the “U.S.”) and internationally in various foreign jurisdictions, respectively. The relevant payroll and other compensation data for our employee population are maintained in a single system located at our principal headquarters in the U.S. and were utilized to identify the “median employee” from our employee population. To identify the “median employee” from our employee population, we compared the amount of base salary of our employees as reflected in our payroll records and included as part of the total compensation reported to the Internal Revenue Service on Form W-2 for 2018. We identified our median employee using this compensation measure, which was consistently applied to all our employees included in the calculation. 46 3. Once we identified our median employee, we combined all of the elements of such employee’s compensation for 2018 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in the annual total compensation presented in the pay ratio calculation. The difference between such employee’s base salary and the employee’s annual total compensation represents company matching contributions on behalf of the employee to our 401(k) employee savings plan and cost of short-term and long-term disability coverage. Since we do not maintain a defined benefit or other actuarial plan for our employees, and do not otherwise provide a plan for payments or other benefits at, following, or in connection with retirement, the “median employee’s” annual total compensation did not include amounts attributable to those types of arrangements. Name and principal position Michael D. Rumbolz - President and Chief Executive Officer Median Employee(4) Pay Ratio ___________________ Salary Year 2019 $700,000 Bonus Stock awards(1) $ — $2,988,000 Option awards(1) $ — $ Non-equity incentive plan compensation(2) 535,000 All other compensation(3) 17,718 $ Total $4,240,718 2019 66,209 — — — — 1,995 68,204 62.2x (1) Represents the fair value of the equity awards, as calculated in accordance with FASB ASC Topic 718, Stock Compensation. For a discussion of the assumptions made in determining the valuation of the restricted stock awards, see our notes to the financial statements in the Company’s Annual Report on Form 10-K for the years ended December 31, 2018, 2017 and 2016. (2) Represents the amount of non-equity incentive compensation earned under the Company’s annual short-term incentive plan for the fiscal year. Amounts earned for a particular calendar year are typically paid to the NEOs in the first quarter of the following fiscal year. (3) Includes contributions made by the Company under its 401(k) plan as well as short-term and long-term disability payments made by the Company. (4) Represents the total annual compensation of the middle-most employee, excluding the President and Chief Executive Officer. Employment Contracts and Equity Agreements, Termination of Employment and Change in Control Arrangements The Company is a party to employment agreements with our NEOs, which provide that, in the event of the termination of the executive’s employment by the Company, the executive is entitled to the severance benefits described below. The severance benefits discussed above are all subject to the executive’s execution of a release of claims in favor of the Company. The employment agreements contain restrictive covenants not to compete with our Company or solicit our employees for a period of two years immediately following termination of employment, subject to certain exceptions, as well as confidentiality and preservation of intellectual property obligations. Mr. Rumbolz: In the event of termination by the Company without cause or by the executive for good reason (as such terms are defined in the employment agreement), Mr. Rumbolz’s employment agreement provides for twenty-four months of salary continuation; and continued group health insurance for the executive and the executive’s eligible dependents over eighteen months. The employment agreement defers to the equity grants with respect to treatment of outstanding awards in connection with a termination of employment or a Change in Control (as defined in the Amended 2014 Plan) which provide for accelerated vesting in full of all unvested equity awards in the event of termination of the executive’s employment by the Company without cause or by the executive for good reason for 2016 and 2017 equity awards, within eighteen months following a Change in Control event, and for the 2018 and 2019 equity awards, within twenty-four months of a Change in Control event. In the event of death or incapacity, Mr. Rumbolz is entitled to base salary and employee benefits earned through the date of such death or incapacity, and, for the remainder of the term of his agreement, periodic disability payments equal to sixty percent of his then-current base salary at the time of such death or incapacity. Beginning February 1, 2021, Mr. Rumbolz’s employment agreement will renew for one year periods on February 1st of each year, unless either party provides 6 months’ notice of nonrenewal. 47 Messrs. Taylor and Peters: In the event of termination by the Company without cause or by the executive for good reason, Messrs. Taylor’s and Peters’ employment agreements each provides for twelve months of salary continuation plus one times the executive’s target bonus amount for the year of termination payable over twelve months; continued group health insurance for the executives and the executives’ eligible dependents over twelve months; and accelerated vesting in full of all unvested time-based equity awards. The employment agreements also provide for accelerated vesting of all unvested equity awards in the event of Change in Control. All equity grants subject to the single-trigger acceleration benefit have either vested or, with respect to certain market-based equity grants, as of December 31, 2018, the Closing Price (as such term is defined in the agreement) has not equaled or exceeded the Price Hurdle (as such term is defined in the agreement). Equity grant agreements in 2015, 2016, and 2017 provide for accelerated vesting in full of all unvested equity awards in the event of both a Change in Control and a termination of the executive’s employment by the Company without cause or by the executive for good reason within ten days prior to, or within eighteen months of a Change in Control event. Equity grant agreements in 2018 provide for accelerated vesting in full of all unvested equity awards in the event of both a Change in Control and a termination of the executive’s employment by the Company without cause or by the executive for good reason within twenty-four months of a Change in Control event. In the event of death or incapacity, Messrs. Taylor and Peters are entitled to base salary and employee benefits earned through the date of such death or incapacity. Mr. Ehrlich: In the event of termination by the Company without cause or by the executive for good reason, Mr. Ehrlich’s employment agreement provides for twelve months of salary continuation plus one times his target bonus amount for the year of termination payable over twelve months; and continued group health insurance for the executive and the executive’s eligible dependents over twelve months. Equity grant agreements in 2016 and 2017 provide for accelerated vesting in full of all unvested equity awards in the event of termination of the executive’s employment by the Company without cause or by the executive for good reason for the 2017 equity award, within eighteen months following a Change in Control event, and for the 2018 equity award, within twenty-four months following a Change in Control event. In the event of death or incapacity, Mr. Ehrlich is entitled to base salary and employee benefits earned through the date of such death or incapacity. Mr. Ehrlich’s employment agreement will renew for one year periods on January 1st of each year, unless either party provides six months’ notice of nonrenewal. Ms. Ko: In the event of termination by the Company without cause or by the executive for good reason (as such terms are defined in the employment agreement), Ms. Ko’s employment agreement provides for twelve months of salary continuation plus one times the executive’s target bonus amount for the year of termination payable over twelve months; continued group health insurance for the executive and the executive’s eligible dependents over eighteen months; accelerated vesting in full of all unvested equity awards granted on the Effective Date (as such term is defined in the agreement); provided that, in the case of market-based equity awards, the Closing Price (as such term is defined in the agreement) equals or exceeds the Price Hurdle (as such term is defined in the agreement) with respect to such award. Equity grant agreements provide accelerated vesting in full of all unvested equity awards in the event of termination of the executive’s employment by the Company without cause or by the executive for good reason: as an additional acceleration trigger for that equity granted as of the Effective Date, within eighteen months following a Change in Control event, and for the 2018 equity award, within twenty-four months following a Change in Control event. In the event of death or incapacity, Ms. Ko is entitled to base salary and employee benefits earned through the date of such death or incapacity. Beginning December 29, 2020, Ms. Ko’s employment agreement will renew for one-year periods on December 29th of each year, unless either party provides six months’ notice of nonrenewal. 48 Treatment of Equity Upon a Termination Without Cause or For Good Reason or in Connection with a Change in Control The following table sets forth the estimated payments and benefits to the NEOs based upon: (i) a hypothetical termination without cause by the Company or for good reason by the executive on December 31, 2018 that is not in connection with a Change in Control event; (ii) a hypothetical Change in Control event on December 31, 2018; and (iii) a hypothetical termination without cause by the Company or for good reason on December 31, 2018 by the executive in connection with a Change in Control event: Termination without Cause or For Good Reason Termination without Cause or For Good Reason following a Change in Control Event Acceleration of Stock and Options (3) Total Change in Control Event Acceleration of Stock and Options (3) Cash Payment (1) $ — $ 1,426,666 $ — $ 1,400,000 $ — — — — 865,135 732,103 730,019 655,015 — — — — 831,250 700,000 700,000 612,500 Acceleration of Stock and Options (3) $ 2,621,968 1,608,658 1,093,658 Total $ 4,048,634 2,473,792 1,825,761 860,740 1,590,759 257,500 912,515 Benefits (2) 26,666 33,885 32,103 30,019 42,515 Cash Payment Benefits Name Michael D. Rumbolz (1) $ 1,400,000 $ Randy L. Taylor Edward A. Peters Dean A. Ehrlich Harper H. Ko 831,250 700,000 700,000 612,500 ___________________ (2) 26,666 33,885 32,103 30,019 42,515 (1) Based on the NEO’s salary and target bonus in effect at the date of termination. (2) Estimated value of continued coverage under group health insurance plans through the end of the applicable severance period. (3) The value attributable to the hypothetical acceleration of the vesting of any restricted stock awards held by a NEO is determined by multiplying the number of unvested shares of restricted stock accelerated by $5.15 (the closing price of our Common Stock on December 28, 2018). The value attributable to the hypothetical acceleration of the vesting of any stock option awards held by a NEO is determined by multiplying (i) the difference, if greater than zero, between the exercise price of the applicable stock option award and the closing price of our Common Stock on December 28, 2018 of $5.15 by (ii) the number of unvested shares underlying the applicable stock option. The equity awards held by the NEO that are subject to possible acceleration are described as unexercisable or not vested in the table entitled “Outstanding Equity Awards at December 31, 2018.” Pension Benefits and Nonqualified Deferred Compensation We do not currently offer, nor do we have plans to provide, pension arrangements, retirement plans or nonqualified deferred compensation plans or arrangements to our executives, other than the retirement benefits generally available to employees. 49 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information known to the Company with respect to the beneficial ownership as of March 25, 2019 (except as otherwise noted in the footnotes to the table) by: (i) all persons who are beneficial owners of 5% or more of our Common Stock; (ii) each director and nominee; (iii) each of our NEOs; and (iv) all current directors and executive officers as a group. There were 70,613,515 shares of our Common Stock issued and outstanding as of the close of business on March 25, 2019. The amounts and percentages of our Common Stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days of the close of business on March 25, 2019. Under these rules, more than one person may be deemed a beneficial owner of securities as to which such person has no economic interest. Name Principal stockholders Indaba Capital Management, L.P.(2) Eagle Asset Management, Inc.(3) BlackRock, Inc.(4) Private Capital Management, LLC (5) Directors and named executive officers(6) Michael D. Rumbolz(7) E. Miles Kilburn(8) Edward A. Peters(9) Randy L. Taylor(10) Geoffrey P. Judge(11) Ronald V. Congemi(12) Dean A. Ehrlich(13) Eileen F. Raney(14) Linster W. Fox(15) Harper H. Ko(16) Maureen T. Mullarkey(17) Shares Beneficially Owned Percentage(1) Number 7,009,118 5,929,002 4,785,799 3,854,840 1,094,293 700,531 550,500 517,946 420,347 302,251 178,500 164,000 105,000 33,190 — 9.9% 8.4% 6.8% 5.5% 1.5% * * * * * * * * * * Directors and current named executive officers as a group (11 persons) 4,066,558 5.5% ___________________ * Represents beneficial ownership of less than 1%. (1) The percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days after such date, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days after such date. Consequently, the numerator and denominator for calculating beneficial ownership percentages may be different for each beneficial owner. (2) As reported on Schedule 13G filed on February 14, 2019 for shares held by Indaba Capital Management, L.P. (“Indaba”) jointly on behalf of Indaba, IC GP, LLC (“IC”), and Derek C. Schrier. According to Schedule 13G, Indaba, IC and Mr. Schrier all have shared voting and dispositive power over all 7,009,118 shares. The address for Indaba is One Letterman Drive, Building D, Suite DM700, San Francisco, California 94129. (3) As reported on Schedule 13G/A filed on January 11, 2019 for shares held by Eagle Asset Management, Inc. (“Eagle”) on its own behalf. According to Schedule 13G/A, Eagle has sole voting and dispositive power over all 5,929,002 shares. The address for Eagle is 880 Carillon Parkway, St. Petersburg, FL 33716. 50 (4) As reported on Schedule 13G/A filed on February 4, 2019 for shares held by BlackRock, Inc. (“BlackRock”) on its own behalf. According to the Schedule 13G/A, BlackRock has sole voting power over 4,651,944 shares and sole dispositive power over all 4,785,799 shares. The address for BlackRock is 55 East 52nd Street, New York, NY 10055. (5) As reported on Schedule 13G/A filed on February 8, 2019 for shares held by Private Capital Management, LLC (“Private Capital”) on its own behalf. According to the Schedule 13G/A, Private Capital has sole voting and dispositive power over 980,546 shares and shared voting and dispositive power over 2,874,294 shares. The address for Private Capital is 8889 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108. (6) Includes shares owned and shares issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days. (7) Consists of 143,705 shares owned by Mr. Rumbolz and 950,588 shares issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days for Mr. Rumbolz. (8) Consists of 207,645 shares owned by Mr. Kilburn and 492,886 shares issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days for Mr. Kilburn. (9) Consists of 12,000 shares owned by Mr. Peters and 538,500 shares issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days for Mr. Peters. (10) Consists of 69,461 shares owned by Mr. Taylor and 448,485 shares issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days for Mr. Taylor. (11) Consists of 104,672 shares owned by Mr. Judge and 315,675 shares issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days for Mr. Judge. (12) Consists of 16,000 shares owned by Mr. Congemi and 286,251 shares issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days for Mr. Congemi. (13) Consists of 7,500 shares owned by Mr. Ehrlich and 171,000 shares issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days for Mr. Ehrlich. (14) Consists of 59,000 shares owned by Ms. Raney and 105,000 shares issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days for Ms. Raney. (15) Consists of 105,000 shares issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days for Mr. Fox. (16) Consists of 12,565 shares owned by Ms. Ko and 20,625 shares issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days for Ms. Ko. (17) As of the date of this filing, Ms. Mullarkey is not a beneficial owner of any securities nor does she have a right to acquire beneficial ownership within 60 days. 51 PROPOSAL 3 RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Item No. 3 on the Proxy Card) Ratification of BDO USA, LLP The Board has appointed BDO USA, LLP to serve as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2019. Our Board and Audit Committee engaged BDO USA, LLP, effective March 18, 2015, as our independent registered public accounting firm, beginning with the audit for the year ending December 31, 2015, including the 2015 quarterly reviews. Although the Company is not required to seek stockholder approval of its selection of an independent registered public accounting firm, the Board believes it to be sound corporate governance to do so. If the appointment is not ratified, the Board will investigate the reasons for stockholder rejection and will reconsider its selection of its independent registered public accounting firm. However, because of the difficulty in making any substitution so long after the beginning of the current year, the appointment of BDO USA, LLP for fiscal 2019 will stand, unless the Audit Committee finds other good reason for making a change and doing so is in the best interests of the Company and its stockholders. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the fiscal year if the Audit Committee determines that such a change would be in the Company’s and its stockholders’ best interests. Proxies solicited by our Board will, unless otherwise directed, be voted to ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. Attendance at Annual Meeting A representative of BDO USA, LLP is expected to be present at the Annual Meeting, will have an opportunity to make a statement, if he or she so desires, although we do not expect him or her to do so, and will be available to respond to appropriate questions from stockholders. THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019. Audit and Non-Audit Fees The following table represents fees invoiced for professional audit services rendered by BDO USA, LLP, our independent registered public accounting firm for the years ended December 31, 2018 and 2017, for the audit of the Company’s annual financial statements and fees invoiced for other services rendered by BDO USA, LLP for each respective year (amounts in thousands): Audit fees(1) Audit-related fees(2) Tax fees(3) Total ___________________ Year Ended December 31, 2018 2017 $ $ 1,193 48 7 1,248 $ $ 1,303 55 — 1,358 (1) Audit fees include amounts for the following professional services: • • • • • audit of the Company’s annual financial statements for fiscal years 2018 and 2017; attestation services, technical consultations and advisory services in connection with Section 404 of the Sarbanes‑Oxley Act of 2002; reviews of the financial statements included in the Company’s Quarterly Reports on Form 10‑Q; statutory and regulatory audits, consents and other services related to SEC matters; and professional services provided in connection with other statutory and regulatory filings. 52 (2) Audit-related fees include amounts for the following professional services: • • • audit of the Company’s employee benefit program; evaluations of service organization controls under the Statement on Standards for Attestation Engagements (SSAE) No. 18; and professional services provided in connection with proposed accounting and reporting standards. (3) Tax Fees include amounts for planning (domestic and international), advisory and compliance services. In making its recommendation to ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019, the Audit Committee has considered whether services other than audit and audit-related services provided by BDO USA, LLP are compatible with maintaining the independence of BDO USA, LLP. Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm The Audit Committee pre-approves all audit and permissible non-audit services provided by its independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has adopted a policy for the pre-approval of services provided by its independent registered public accounting firm. Under the policy, pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget. In addition, the Audit Committee may also pre-approve particular services on a case-by-case basis. For each proposed service, the independent registered public accounting firm is required to provide detailed back-up documentation at the time of approval. The hours expended on the engagement to audit the Company’s financial statements for fiscal year 2018 were not attributed to work performed by persons other than BDO USA, LLP’s full-time, permanent employees. All of the services described in the table above were approved in conformity with the Audit Committee’s pre-approval process for independent registered public accounting firm fees. 53 REPORT OF THE AUDIT COMMITTEE The information contained in the following report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference in such filing. The Audit Committee of the Board currently consists of Messrs. Kilburn, Fox, Judge, and Congemi and Mses. Raney and Mullarkey. Mr. Fox serves as Chair of the Audit Committee. The Board has determined that each member of the Audit Committee meets the experience requirements of the rules and regulations of the NYSE and the SEC, as currently applicable to the Company. The Board has also determined that each member of the Audit Committee meets the independence requirements of the rules and regulations of the NYSE and the SEC, as currently applicable to the Company. The Audit Committee operates under a written charter approved by the Board. A copy of the charter is available on our website at ir.everi.com/investor-relations/corporate-governance/governance-documents. The primary function of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing financial reports and other financial information provided by the Company to any governmental body or the public, the Company’s systems of internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established, and the Company’s auditing, accounting and financial reporting processes generally. The Audit Committee annually recommends to the Board the appointment of an independent registered public accounting firm to audit the consolidated financial statements and internal controls over financial reporting of the Company and meets with such personnel of the Company to review the scope and the results of the annual audits, the amount of audit fees, the Company’s internal controls over financial reporting, the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K and other related matters. The Audit Committee has reviewed and discussed with management the consolidated financial statements for fiscal year 2018 audited by BDO USA, LLP, the Company’s independent registered public accounting firm for its fiscal year ended December 31, 2018, and management’s assessment of internal controls over financial reporting. The Audit Committee has discussed with BDO USA, LLP various matters related to the financial statements, including those matters required to be discussed under the applicable standards of the Public Company Accounting Oversight Board. The Audit Committee has also received the written disclosures regarding auditors’ independence required by the Public Company Accounting Oversight Board’s applicable rules and has discussed with BDO USA, LLP its independence. Based upon such review and discussions, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for filing with the SEC. The Audit Committee and the Board also has recommended, subject to stockholder ratification, the selection of BDO USA, LLP as our independent registered public accounting firm for the year ending December 31, 2019. Members of the Audit Committee: Linster W. Fox (Chair) E. Miles Kilburn Geoffrey P. Judge Ronald V. Congemi Eileen F. Raney Maureen T. Mullarkey 54 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and any persons who directly or indirectly hold more than 10% of our Common Stock (“Reporting Persons”) to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received and written representations from certain Reporting Persons that no such forms were required, the Company believes that during fiscal year 2018, all Reporting Persons complied with the applicable filing requirements on a timely basis. OTHER MATTERS As of the date of this Proxy Statement, the Company knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is intended that proxies in the enclosed form will be voted in respect thereof in accordance with the judgments of the person voting the proxies. ANNUAL REPORT TO STOCKHOLDERS AND ANNUAL REPORT ON FORM 10-K The 2018 Annual Report, including the Company’s audited financial statements, is being delivered with this Proxy Statement, but is not incorporated into this Proxy Statement and is not to be considered a part of these proxy materials or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Exchange Act. The information contained in the “Compensation Committee Report” and the “Report of the Audit Committee” shall not be deemed “filed” with the SEC or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Exchange Act. We will provide a copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, to each stockholder as of the Record Date, without charge, upon written request to Corporate Secretary, Everi Holdings Inc., 7250 South Tenaya Way, Suite 100, Las Vegas, Nevada, 89113, or via e-mail to secretary@everi.com. Any exhibits listed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 also will be furnished upon written request at the actual expense we incur in furnishing such exhibits. By Order of the Board of Directors, /s/ Michael D. Rumbolz Michael D. Rumbolz President and Chief Executive Officer Las Vegas, Nevada April 22, 2019 55 Appendix A RECONCILIATION OF NON-GAAP MEASURES The following table presents a reconciliation of our GAAP financial measure to AEBITDA, the most comparable non-GAAP financial measure included in this Proxy Statement: Net income Income tax benefit Loss on extinguishment of debt Interest expense, net of interest income Operating income Plus: depreciation and amortization EBITDA Non-cash stock compensation expense Accretion of contract rights Non-recurring professional fees Adjustment of certain purchase accounting liabilities Write-off of inventory and fixed assets AEBITDA Year Ended December 31, 2018 Reconciliation of Net Income to EBITDA and AEBITDA (in thousands) $ $ $ $ 12,356 (9,710) 166 83,001 85,813 126,470 212,283 7,251 8,421 408 (550) 2,575 230,388 We present AEBITDA as we use this measure to manage our business and consider this measure to be supplemental to our operating performance. We also make certain compensation decisions based, in part, on our operating performance, as measured by AEBITDA; and our credit facility, senior secured notes and senior unsecured notes require us to comply with a consolidated secured leverage ratio that includes performance metrics substantially similar to AEBITDA. AEBITDA is not a measure of financial performance under GAAP. Accordingly, AEBITDA should not be considered in isolation, or as a substitute for, and should be read in conjunction with, our operating income data prepared in accordance with GAAP. A-1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR □ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number: 001-32622 EVERI HOLDINGS INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 7250 S. Tenaya Way, Suite 100, Las Vegas, Nevada (Address of principal executive offices) 20-0723270 (I.R.S. Employer Identification No. ) 89113 (Zip Code) (800) 833-7110 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, $0.001 par value per share Name of each exchange on which registered New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes □ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes □ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No □ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No □ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act. Large accelerated filer Non-accelerated filer Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying Accelerated filer Smaller reporting company □ □ □ ☒ □ with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes □ No ☒ As of June 29, 2018, the aggregate market value of the registrant’s common stock held by non-affiliates was approximately $500.2 million based on the closing sale price as reported on the New York Stock Exchange. There were 70,320,028 shares of the registrant’s common stock issued and outstanding as of the close of business on March 1, 2019. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the registrant’s Definitive Proxy Statement for its 2019 Annual Meeting of Stockholders (which is expected to be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s 2018 fiscal year) are incorporated by reference into Part III of this Annual Report on Form 10-K. Except as expressly incorporated by reference, the registrant’s Proxy Statement shall not be deemed to be a part of this Annual Report on Form 10-K. EVERI HOLDINGS INC. ANNUAL REPORT ON FORM 10‑K FOR FISCAL YEAR ENDED DECEMBER 31, 2018 TABLE OF CONTENTS PART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. 5 Business ....................................................................................................................................................... Risk Factors ................................................................................................................................................. 15 Unresolved Staff Comments ........................................................................................................................ 30 Properties ..................................................................................................................................................... 30 Legal Proceedings ........................................................................................................................................ 30 Mine Safety Disclosures .............................................................................................................................. 36 PART II Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...................................................................................................................................................... Selected Financial Data ................................................................................................................................ 33 Management’s Discussion and Analysis of Financial Condition and Results of Operations ....................... 34 Quantitative and Qualitative Disclosures about Market Risk ...................................................................... 47 Financial Statements and Supplementary Data ............................................................................................ 48 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....................... 91 Controls and Procedures .............................................................................................................................. 91 Other Information ........................................................................................................................................ 92 32 PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance ........................................................................... 94 Executive Compensation .............................................................................................................................. 94 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ..... 94 Certain Relationships and Related Transactions, and Director Independence ............................................. 94 Principal Accountant Fees and Services ...................................................................................................... 94 PART IV Item 15. Item 16. Exhibits and Financial Statement Schedules ................................................................................................ 95 Form 10-K Summary ................................................................................................................................... 99 SIGNATURES .................................................................................................................................................................... 100 In this filing, we refer to: (i) our audited consolidated financial statements and notes thereto as our “Financial Statements,” (ii) our audited Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) as our “Statements of Income (Loss),” (iii) our audited Consolidated Balance Sheets as our “Balance Sheets,” and (iv) Item 7. Management’ s Discussion and Analysis of Financial Condition and Results of Operations as our “Results of Operations.” ꢀ CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS EveriꢀHoldingsꢀInc.ꢀ(“EveriꢀHoldings,”ꢀ“Holdings,”ꢀorꢀ“Everi”)ꢀisꢀaꢀholdingꢀcompany,ꢀtheꢀassetsꢀofꢀwhichꢀareꢀtheꢀissuedꢀand outstandingꢀsharesꢀofꢀcapitalꢀstockꢀofꢀeachꢀofꢀEveriꢀGamesꢀHoldingꢀInc.ꢀ(“EveriꢀGamesꢀHolding”),ꢀwhichꢀownsꢀallꢀofꢀtheꢀissued andꢀ outstandingꢀ sharesꢀ ofꢀ capitalꢀ stockꢀ ofꢀ Everiꢀ Gamesꢀ Inc.ꢀ (“Everiꢀ Games”ꢀ orꢀ “Games”),ꢀ andꢀ Everiꢀ Paymentsꢀ Inc.ꢀ (“Everi Payments”).ꢀUnlessꢀotherwiseꢀindicated,ꢀtheꢀtermsꢀtheꢀ“Company,”ꢀ“we,”ꢀ“us,”ꢀandꢀ“our”ꢀreferꢀtoꢀEveriꢀHoldingsꢀtogetherꢀwith itsꢀconsolidatedꢀsubsidiaries. OurꢀdisclosureꢀandꢀanalysisꢀinꢀthisꢀAnnualꢀReportꢀonꢀFormꢀ10-Kꢀcontainꢀ“forward-looking”ꢀstatementsꢀwithinꢀtheꢀmeaningꢀof Sectionꢀ27AꢀofꢀtheꢀSecuritiesꢀActꢀofꢀ1933,ꢀasꢀamendedꢀ(theꢀ“SecuritiesꢀAct”),ꢀSectionꢀ21EꢀofꢀtheꢀSecuritiesꢀExchangeꢀActꢀofꢀ1934, asꢀamendedꢀ(theꢀ“ExchangeꢀAct”),ꢀandꢀtheꢀPrivateꢀSecuritiesꢀLitigationꢀReformꢀActꢀofꢀ1995.ꢀFromꢀtimeꢀtoꢀtime,ꢀweꢀalsoꢀprovide forward-lookingꢀstatementsꢀinꢀotherꢀmaterialsꢀweꢀreleaseꢀtoꢀtheꢀpublic,ꢀasꢀwellꢀasꢀoralꢀforward-lookingꢀstatements.ꢀWeꢀhaveꢀtried, whereverꢀpossible,ꢀtoꢀidentifyꢀsuchꢀstatementsꢀbyꢀusingꢀwordsꢀsuchꢀasꢀ“goal,”ꢀ“target,”ꢀ“future,”ꢀ“estimate,”ꢀ“expect,”ꢀ“anticipate,” “intend,”ꢀ“plan,”ꢀ“believe,”ꢀ“seek,”ꢀ“project,”ꢀ“may,”ꢀ“should,”ꢀ“will,”ꢀ“likely,”ꢀ“willꢀlikelyꢀresult,”ꢀ“willꢀcontinue,”ꢀ“forecast,” “observe,”ꢀ“strategy,”ꢀandꢀotherꢀwordsꢀandꢀtermsꢀofꢀsimilarꢀmeaning.ꢀTheꢀforward-lookingꢀstatementsꢀinꢀthisꢀAnnualꢀReportꢀon Formꢀ10-KꢀreflectꢀtheꢀCompany’sꢀcurrentꢀviewsꢀwithꢀrespectꢀtoꢀfutureꢀeventsꢀandꢀfinancialꢀperformance. Forward-lookingꢀ statementsꢀ include,ꢀ butꢀ areꢀ notꢀ limitedꢀ to,ꢀ statementsꢀ regardingꢀ theꢀ followingꢀ matters:ꢀ trendsꢀ inꢀ gaming establishmentꢀ andꢀ patronꢀ usageꢀ ofꢀ ourꢀ products;ꢀ benefitsꢀ realizedꢀ byꢀ usingꢀ ourꢀ productsꢀ andꢀ services;ꢀ productꢀ development, includingꢀtheꢀreleaseꢀofꢀnewꢀgameꢀfeaturesꢀandꢀadditionalꢀgameꢀandꢀsystemꢀreleasesꢀinꢀtheꢀfuture;ꢀregulatoryꢀapprovals;ꢀgaming regulatory,ꢀcardꢀassociation,ꢀandꢀstatutoryꢀcompliance;ꢀtheꢀimplementationꢀofꢀnewꢀorꢀamendedꢀcardꢀassociationꢀandꢀpayment networkꢀ rules;ꢀ consumerꢀ collectionꢀ activities;ꢀ futureꢀ competition;ꢀ futureꢀ taxꢀ liabilities;ꢀ futureꢀ goodwillꢀ impairmentꢀ charges; internationalꢀexpansion;ꢀresolutionꢀofꢀlitigation;ꢀdividendꢀpolicy;ꢀnewꢀcustomerꢀcontractsꢀandꢀcontractꢀrenewals;ꢀfutureꢀresultsꢀof operationsꢀ(includingꢀrevenue,ꢀexpenses,ꢀmargins,ꢀearnings,ꢀcashꢀflowꢀandꢀcapitalꢀexpenditures);ꢀfutureꢀinterestꢀratesꢀandꢀinterest expense;ꢀfutureꢀborrowings;ꢀandꢀfutureꢀequityꢀincentiveꢀactivityꢀandꢀcompensationꢀexpense.ꢀ Forward-lookingꢀstatementsꢀareꢀneitherꢀhistoricalꢀfactsꢀnorꢀassurancesꢀofꢀfutureꢀperformance.ꢀInstead,ꢀtheyꢀareꢀbasedꢀonlyꢀonꢀour currentꢀ beliefs,ꢀ expectations,ꢀ andꢀ assumptionsꢀ regardingꢀ theꢀ futureꢀ ofꢀ ourꢀ business,ꢀ futureꢀ plansꢀ andꢀ strategies,ꢀ projections, anticipatedꢀeventsꢀandꢀtrends,ꢀtheꢀeconomy,ꢀandꢀotherꢀfutureꢀconditions.ꢀBecauseꢀforward-lookingꢀstatementsꢀrelateꢀtoꢀtheꢀfuture, theyꢀareꢀsubjectꢀtoꢀinherentꢀrisks,ꢀuncertaintiesꢀandꢀchangesꢀinꢀcircumstancesꢀthatꢀareꢀoftenꢀdifficultꢀtoꢀpredictꢀandꢀmanyꢀofꢀwhich areꢀbeyondꢀourꢀcontrol.ꢀOurꢀactualꢀresultsꢀandꢀfinancialꢀconditionꢀmayꢀdifferꢀmateriallyꢀfromꢀthoseꢀindicatedꢀinꢀforward-looking statements.ꢀImportantꢀfactorsꢀthatꢀcouldꢀcauseꢀourꢀactualꢀresultsꢀandꢀfinancialꢀconditionꢀtoꢀdifferꢀmateriallyꢀfromꢀthoseꢀindicated inꢀtheꢀforward-lookingꢀstatementsꢀinclude,ꢀwithoutꢀlimitation: • • • • • • • • • • ourꢀhistoryꢀofꢀnetꢀlossesꢀandꢀourꢀabilityꢀtoꢀgenerateꢀprofitsꢀinꢀtheꢀfuture; ourꢀsubstantialꢀleverage,ꢀrestrictionsꢀunderꢀourꢀindebtedness,ꢀandꢀourꢀabilityꢀtoꢀraiseꢀadditionalꢀcashꢀtoꢀfundꢀoperations, workingꢀcapital,ꢀandꢀcapitalꢀexpenditures,ꢀandꢀtoꢀserviceꢀallꢀofꢀourꢀindebtedness; ourꢀabilityꢀtoꢀcompeteꢀinꢀtheꢀgamingꢀindustry,ꢀmanageꢀcompetitiveꢀpressures,ꢀnavigateꢀgamingꢀmarketꢀcontractions,ꢀand continueꢀoperatingꢀinꢀNativeꢀAmericanꢀgamingꢀmarkets; ourꢀabilityꢀtoꢀprotectꢀourꢀintellectualꢀpropertyꢀrights; theꢀimpactꢀofꢀchangesꢀinꢀU.S.ꢀfederalꢀcorporateꢀtaxꢀlaws; ourꢀabilityꢀtoꢀmaintainꢀourꢀcurrentꢀcustomers,ꢀreplaceꢀrevenueꢀassociatedꢀwithꢀterminatedꢀcontracts,ꢀandꢀaddressꢀmargin degradationꢀfromꢀcontractꢀrenewals; ourꢀabilityꢀtoꢀprevent,ꢀmitigate,ꢀorꢀtimelyꢀrecoverꢀfromꢀcybersecurityꢀbreaches,ꢀattacks,ꢀandꢀcompromises; ourꢀabilityꢀtoꢀexecuteꢀonꢀmergers,ꢀacquisitions,ꢀorꢀstrategicꢀalliances,ꢀincludingꢀourꢀabilityꢀtoꢀintegrateꢀandꢀoperateꢀsuch acquisitionsꢀconsistentꢀwithꢀourꢀforecasts; expectationsꢀregardingꢀourꢀexistingꢀandꢀfutureꢀinstalledꢀbaseꢀandꢀwinꢀperꢀday,ꢀourꢀproductꢀportfolio,ꢀandꢀdevelopment andꢀplacementꢀfeeꢀarrangements; expectationsꢀregardingꢀcustomers’,ꢀgamingꢀestablishments’,ꢀandꢀpatrons’ꢀpreferencesꢀandꢀdemandsꢀforꢀfutureꢀgaming offerings; 3 • • • • • • • • • • • nationalꢀandꢀinternationalꢀeconomicꢀconditions,ꢀincludingꢀtheꢀoverallꢀgrowthꢀofꢀtheꢀgamingꢀindustry,ꢀifꢀany; ourꢀabilityꢀtoꢀcomplyꢀwithꢀtheꢀEuropay,ꢀMasterCard,ꢀandꢀVisaꢀglobalꢀstandardꢀforꢀcardsꢀequippedꢀwithꢀsecurityꢀchip technologyꢀ(“EMV”); technologicalꢀ obsolescence,ꢀ expenditures,ꢀ andꢀ productꢀ development,ꢀ andꢀ ourꢀ abilityꢀ toꢀ introduceꢀ newꢀ productsꢀ and services,ꢀincludingꢀthird-partyꢀlicensedꢀcontent; anticipatedꢀsalesꢀperformance; employeeꢀturnover; changesꢀinꢀgamingꢀregulatory,ꢀcardꢀassociation,ꢀandꢀstatutoryꢀrequirements,ꢀasꢀwellꢀasꢀregulatoryꢀandꢀlicensingꢀdifficulties; operationalꢀlimitations; uncertaintyꢀofꢀlitigationꢀoutcomes; businessꢀprospects; unanticipatedꢀexpensesꢀorꢀcapitalꢀneeds,ꢀinterestꢀrateꢀfluctuations,ꢀorꢀinaccuraciesꢀinꢀunderlyingꢀoperatingꢀassumptions; and thoseꢀotherꢀrisksꢀandꢀuncertaintiesꢀdiscussedꢀinꢀ“Itemꢀ7.ꢀManagement’sꢀDiscussionꢀandꢀAnalysisꢀofꢀFinancialꢀCondition andꢀResultsꢀofꢀOperations”ꢀandꢀ“Itemꢀ1A.ꢀRiskꢀFactors”ꢀofꢀthisꢀAnnualꢀReportꢀonꢀFormꢀ10-K. Inꢀlightꢀofꢀtheseꢀrisksꢀandꢀuncertainties,ꢀthereꢀcanꢀbeꢀnoꢀassuranceꢀthatꢀtheꢀforward-lookingꢀinformationꢀcontainedꢀinꢀthisꢀAnnual ReportꢀonꢀFormꢀ10-Kꢀwillꢀinꢀfactꢀtranspireꢀorꢀproveꢀtoꢀbeꢀaccurate.ꢀReadersꢀareꢀcautionedꢀtoꢀconsiderꢀtheꢀspecificꢀriskꢀfactors describedꢀhereinꢀandꢀinꢀ“Itemꢀ1A.ꢀRiskꢀFactors”ꢀofꢀthisꢀAnnualꢀReportꢀonꢀFormꢀ10-Kꢀandꢀnotꢀtoꢀplaceꢀundueꢀrelianceꢀonꢀthe forward-lookingꢀstatementsꢀcontainedꢀherein,ꢀwhichꢀareꢀbasedꢀonlyꢀonꢀinformationꢀcurrentlyꢀavailableꢀtoꢀusꢀandꢀspeakꢀonlyꢀasꢀof theꢀdateꢀhereof. Weꢀundertakeꢀnoꢀobligationꢀtoꢀupdateꢀorꢀpubliclyꢀreviseꢀanyꢀforward-lookingꢀstatement,ꢀwhetherꢀwrittenꢀorꢀoral,ꢀthatꢀmayꢀbeꢀmade fromꢀtimeꢀtoꢀtime,ꢀwhetherꢀasꢀaꢀresultꢀofꢀnewꢀinformation,ꢀfutureꢀdevelopmentsꢀorꢀotherwise.ꢀAllꢀsubsequentꢀwrittenꢀorꢀoralꢀforward- lookingꢀstatementsꢀattributableꢀtoꢀusꢀorꢀpersonsꢀactingꢀonꢀourꢀbehalfꢀareꢀexpresslyꢀqualifiedꢀinꢀtheirꢀentiretyꢀbyꢀthisꢀparagraph. Youꢀareꢀadvised,ꢀhowever,ꢀtoꢀconsultꢀanyꢀfurtherꢀdisclosuresꢀweꢀmakeꢀonꢀrelatedꢀsubjectsꢀinꢀourꢀreportsꢀandꢀotherꢀfilingsꢀwithꢀthe SecuritiesꢀandꢀExchangeꢀCommissionꢀ(theꢀ“SEC”).ꢀ 4 Item 1. Business. Overview PART I Everiꢀisꢀaꢀleadingꢀsupplierꢀofꢀtechnologyꢀsolutionsꢀforꢀtheꢀcasinoꢀgamingꢀindustry.ꢀWeꢀprovideꢀcasinoꢀoperatorsꢀwithꢀaꢀdiverse portfolioꢀofꢀproductsꢀincludingꢀinnovativeꢀgamingꢀmachinesꢀthatꢀpowerꢀtheꢀcasinoꢀfloor,ꢀandꢀcasinoꢀoperationalꢀandꢀmanagement systemsꢀthatꢀincludeꢀcomprehensiveꢀend-to-endꢀpaymentsꢀsolutions,ꢀcriticalꢀintelligenceꢀofferings,ꢀandꢀgamingꢀoperationsꢀefficiency technologies. EveriꢀHoldingsꢀreportsꢀitsꢀresultsꢀofꢀoperationsꢀbasedꢀonꢀtwoꢀoperatingꢀsegments:ꢀGamesꢀandꢀFinTech.ꢀEffectiveꢀAprilꢀ1,ꢀ2018, weꢀchangedꢀtheꢀnameꢀofꢀtheꢀoperatingꢀsegmentꢀpreviouslyꢀreferredꢀtoꢀasꢀ“Payments”ꢀtoꢀ“FinancialꢀTechnologyꢀSolutions”ꢀ(“Everi FinTech”ꢀ orꢀ “FinTech”).ꢀWeꢀ believeꢀ thisꢀ referenceꢀ moreꢀ accuratelyꢀ reflectsꢀ theꢀ focusꢀ ofꢀ theꢀ businessꢀ segmentꢀ onꢀ delivering innovativeꢀandꢀintegratedꢀsolutionsꢀtoꢀenhanceꢀtheꢀefficiencyꢀofꢀtheꢀcasinoꢀoperator,ꢀsupportꢀtheꢀcomprehensiveꢀregulatoryꢀand taxꢀrequirementsꢀofꢀtheirꢀgamingꢀcustomers,ꢀandꢀimproveꢀplayers’ꢀgamingꢀexperienceꢀbyꢀprovidingꢀeasyꢀaccessꢀtoꢀtheirꢀfundsꢀand paymentꢀofꢀwinnings. EveriꢀGamesꢀprovidesꢀgamingꢀoperatorsꢀproductsꢀandꢀservices,ꢀincluding:ꢀ(a)ꢀgamingꢀmachinesꢀprimarilyꢀcomprisedꢀofꢀClassꢀII andꢀClassꢀIIIꢀslotꢀmachinesꢀplacedꢀunderꢀparticipationꢀorꢀfixedꢀfeeꢀleaseꢀarrangementsꢀorꢀsoldꢀtoꢀcasinoꢀcustomers,ꢀincluding TournEvent®ꢀthatꢀallowsꢀoperatorsꢀtoꢀswitchꢀfromꢀin-revenueꢀgamingꢀtoꢀout-of-revenueꢀtournaments;ꢀ(b)ꢀsystemꢀsoftware,ꢀlicenses, ancillaryꢀequipment,ꢀandꢀmaintenance;ꢀandꢀ(c)ꢀbusiness-to-consumerꢀandꢀbusiness-to-businessꢀinteractiveꢀactivities.ꢀInꢀaddition, EveriꢀGamesꢀdevelopsꢀandꢀmanagesꢀtheꢀcentralꢀdeterminantꢀsystemꢀforꢀtheꢀvideoꢀlotteryꢀterminalsꢀ(“VLTs”)ꢀinstalledꢀinꢀtheꢀState ofꢀNewꢀYorkꢀandꢀitꢀalsoꢀprovidesꢀsimilarꢀtechnologyꢀinꢀcertainꢀtribalꢀjurisdictions. EveriꢀFinTechꢀprovidesꢀgamingꢀoperatorsꢀcashꢀaccessꢀandꢀrelatedꢀproductsꢀandꢀservices,ꢀincluding:ꢀ(a)ꢀaccessꢀtoꢀcashꢀatꢀgaming facilitiesꢀviaꢀAutomatedꢀTellerꢀMachineꢀ(“ATM”)ꢀcashꢀwithdrawals,ꢀcreditꢀcardꢀcashꢀaccessꢀtransactions,ꢀpointꢀofꢀsaleꢀ(“POS”) debitꢀcardꢀcashꢀaccessꢀtransactions,ꢀandꢀcheckꢀverificationꢀandꢀwarrantyꢀservices;ꢀ(b)ꢀequipmentꢀthatꢀprovidesꢀcashꢀaccessꢀand efficiency-relatedꢀservices;ꢀ(c)ꢀproductsꢀandꢀservicesꢀthatꢀimproveꢀcreditꢀdecisionꢀmaking,ꢀautomateꢀcashierꢀoperations,ꢀandꢀenhance patronꢀmarketingꢀactivitiesꢀforꢀgamingꢀestablishments;ꢀ(d)ꢀcompliance,ꢀaudit,ꢀandꢀdataꢀsolutions;ꢀandꢀ(e)ꢀonlineꢀpaymentꢀprocessing solutionsꢀforꢀgamingꢀoperatorsꢀinꢀstatesꢀthatꢀofferꢀintrastate,ꢀInternet-basedꢀgaming,ꢀandꢀlotteryꢀactivities. Everiꢀ Holdingsꢀ wasꢀ formedꢀ asꢀ aꢀ Delawareꢀ limitedꢀ liabilityꢀ companyꢀ onꢀ Februaryꢀ 4,ꢀ 2004ꢀ andꢀ wasꢀ convertedꢀ toꢀ aꢀ Delaware corporationꢀonꢀMayꢀ14,ꢀ2004.ꢀOurꢀprincipalꢀexecutiveꢀofficesꢀareꢀlocatedꢀatꢀ7250ꢀSouthꢀTenayaꢀWay,ꢀSuiteꢀ100,ꢀLasꢀVegas,ꢀNevada 89113.ꢀOurꢀtelephoneꢀnumberꢀisꢀ(800)ꢀ833-7110.ꢀOurꢀwebsiteꢀaddressꢀisꢀwww.everi.com.ꢀTheꢀinformationꢀonꢀourꢀwebsiteꢀisꢀnot partꢀofꢀthisꢀAnnualꢀReportꢀonꢀFormꢀ10-KꢀorꢀourꢀotherꢀfilingsꢀwithꢀtheꢀSEC. Our Business Segments Weꢀreportꢀourꢀfinancialꢀperformance,ꢀandꢀorganizeꢀandꢀmanageꢀourꢀoperations,ꢀacrossꢀtheꢀfollowingꢀtwoꢀbusinessꢀsegments:ꢀ(a) Games;ꢀandꢀ(b)ꢀFinTech.ꢀForꢀadditionalꢀinformationꢀonꢀourꢀsegmentsꢀandꢀtheꢀrevenuesꢀgeneratedꢀbyꢀourꢀproductsꢀandꢀservicesꢀsee “Itemꢀ7.ꢀManagement’sꢀDiscussionꢀandꢀAnalysisꢀofꢀFinancialꢀConditionꢀandꢀResultsꢀofꢀOperationsꢀ—ꢀResultsꢀofꢀOperations”ꢀand “Noteꢀ18ꢀ—ꢀSegmentꢀInformation”ꢀincludedꢀelsewhereꢀinꢀthisꢀAnnualꢀReportꢀonꢀFormꢀ10-K. Our Products and Services Everi Games OurꢀGamesꢀproductsꢀandꢀservicesꢀincludeꢀcommercialꢀdevices,ꢀsuchꢀasꢀNativeꢀAmericanꢀClassꢀIIꢀofferingsꢀandꢀotherꢀbingoꢀproducts, ClassꢀIIIꢀofferings,ꢀvideoꢀlotteryꢀterminals,ꢀaccountingꢀandꢀcentralꢀdeterminantꢀsystems,ꢀandꢀotherꢀbackꢀofficeꢀsystems.ꢀWeꢀconduct ourꢀGamesꢀsegmentꢀbusinessꢀbasedꢀonꢀresultsꢀgeneratedꢀfromꢀtheꢀfollowingꢀmajorꢀrevenueꢀstreams:ꢀ(a)ꢀGamingꢀOperations;ꢀ(b) GamingꢀEquipmentꢀandꢀSystems;ꢀandꢀ(c)ꢀGamingꢀOther. Gaming Operations WithꢀrespectꢀtoꢀourꢀGamingꢀOperationsꢀrevenueꢀstream,ꢀweꢀprimarilyꢀoffer:ꢀ(a)ꢀleasedꢀgamingꢀequipmentꢀonꢀaꢀparticipationꢀorꢀa fixedꢀdailyꢀfeeꢀbasis;ꢀ(b)ꢀlocal-areaꢀprogressiveꢀmachines;ꢀ(c)ꢀwide-areaꢀprogressiveꢀmachinesꢀ(“WAP”);ꢀ(d)ꢀTournEvent®ꢀmachines; (e)ꢀaccountingꢀandꢀcentralꢀdeterminantꢀsystems;ꢀandꢀ(f)ꢀinteractiveꢀgamingꢀactivities.ꢀ 5 Inꢀconnectionꢀwithꢀourꢀleasedꢀgamingꢀequipment,ꢀweꢀgenerallyꢀretainꢀownershipꢀofꢀtheꢀmachinesꢀinstalledꢀatꢀcustomerꢀfacilities. Weꢀreceiveꢀrecurringꢀrevenueꢀbasedꢀonꢀaꢀpercentageꢀofꢀtheꢀnetꢀwinꢀperꢀdayꢀgeneratedꢀbyꢀtheꢀleasedꢀgamingꢀequipmentꢀorꢀaꢀfixed dailyꢀfee.ꢀWeꢀcontinueꢀtoꢀexpandꢀourꢀgameꢀplacementsꢀintoꢀnewꢀjurisdictions,ꢀincreaseꢀinvestmentꢀinꢀresearchꢀandꢀdevelopment, andꢀintroduceꢀpremiumꢀgameꢀhardwareꢀandꢀthemeꢀcontent.ꢀFromꢀourꢀhistoricalꢀfocusꢀonꢀplacementꢀofꢀgamesꢀintoꢀtheꢀOklahoma andꢀWashingtonꢀtribalꢀmarkets,ꢀEveriꢀGamesꢀhasꢀdiversifiedꢀitsꢀinstalledꢀbaseꢀinꢀrecentꢀyearsꢀwithꢀentryꢀintoꢀnewꢀcommercialꢀand tribalꢀ markets.ꢀ Everiꢀ Gamesꢀ hasꢀ grownꢀ premiumꢀ gameꢀ installationsꢀ withꢀ approximatelyꢀ 2,859ꢀ unitsꢀ installedꢀ (representing approximatelyꢀ20.4%ꢀofꢀourꢀinstalledꢀbaseꢀasꢀofꢀDecemberꢀ31,ꢀ2018)ꢀsinceꢀenteringꢀtheꢀcategoryꢀapproximatelyꢀsixꢀyearsꢀago.ꢀ InꢀconnectionꢀwithꢀourꢀWAPꢀoffering,ꢀmachinesꢀplacedꢀunderꢀsuchꢀarrangementsꢀfallꢀintoꢀtheꢀleasedꢀgamingꢀequipmentꢀcategory andꢀweꢀretainꢀownershipꢀofꢀsuchꢀmachines.ꢀWeꢀdebutedꢀourꢀfirstꢀWAPꢀinꢀClassꢀIIꢀmarketsꢀinꢀ2017ꢀandꢀareꢀnowꢀoperatingꢀinꢀClass IIIꢀtribalꢀmarketsꢀasꢀwell.ꢀSpanningꢀthreeꢀproductꢀlines,ꢀourꢀWAPꢀisꢀofferedꢀtoꢀcustomersꢀon the Player Classic, Core HDX, and Empire MPX cabinets.ꢀTheꢀoriginalꢀClassꢀIIꢀoffering,ꢀJackpot Lockdown®,ꢀdebutedꢀwithꢀtwoꢀthemesꢀ—ꢀJackpot Lockdown Mega Meltdown™ꢀandꢀJackpot Lockdown High Voltage™.ꢀWithꢀtheꢀreleaseꢀofꢀDiamond Blaze™ꢀalongꢀwithꢀmultipleꢀotherꢀproduct offeringsꢀactiveꢀonꢀtheꢀlink,ꢀtheꢀoriginalꢀClassꢀIIꢀofferingꢀhasꢀexpandedꢀtoꢀEveri’sꢀnewꢀpremiumꢀsignꢀpackageꢀoffering,ꢀRenegade 3600™.ꢀ GamingꢀoperationsꢀalsoꢀincludeꢀrevenuesꢀgeneratedꢀunderꢀourꢀarrangementꢀtoꢀprovideꢀtheꢀNewꢀYorkꢀStateꢀGamingꢀCommission withꢀanꢀaccountingꢀandꢀcentralꢀdeterminantꢀsystemꢀforꢀtheꢀVLTsꢀinꢀoperationꢀatꢀlicensedꢀStateꢀofꢀNewꢀYorkꢀgamingꢀfacilities.ꢀIn Januaryꢀ2018,ꢀanꢀamendmentꢀtoꢀtheꢀagreementꢀbetweenꢀEveriꢀGamesꢀandꢀtheꢀNewꢀYorkꢀStateꢀGamingꢀCommissionꢀwasꢀapproved andꢀbecameꢀeffective.ꢀUnderꢀthisꢀamendment,ꢀEveriꢀGamesꢀwillꢀcontinueꢀtoꢀprovideꢀandꢀmaintainꢀtheꢀcentralꢀdeterminantꢀsystem forꢀtheꢀNewꢀYorkꢀLotteryꢀthroughꢀDecemberꢀ2019.ꢀAsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀthisꢀsystemꢀisꢀconnectedꢀtoꢀapproximatelyꢀ18,500 VLTsꢀandꢀhasꢀtheꢀabilityꢀtoꢀinterfaceꢀwith,ꢀprovideꢀoutcomesꢀto,ꢀandꢀmanageꢀtheꢀVLTs.ꢀPursuantꢀtoꢀourꢀagreementꢀwithꢀtheꢀNew YorkꢀStateꢀGamingꢀCommission,ꢀweꢀreceiveꢀaꢀportionꢀofꢀtheꢀnetwork-wideꢀnetꢀwinꢀ(generally,ꢀcash-inꢀlessꢀprizesꢀpaid)ꢀperꢀday inꢀ exchangeꢀ forꢀ provisionꢀ andꢀ maintenanceꢀ ofꢀ theꢀ centralꢀ determinantꢀ system.ꢀ Weꢀ alsoꢀ provideꢀ centralꢀ determinantꢀ system technologyꢀtoꢀNativeꢀAmericanꢀtribesꢀinꢀotherꢀlicensedꢀjurisdictionsꢀforꢀwhichꢀweꢀreceiveꢀaꢀportionꢀofꢀtheꢀrevenueꢀgeneratedꢀfrom theꢀVLTsꢀconnectedꢀtoꢀtheꢀsystem. Inꢀconnectionꢀwithꢀourꢀinteractiveꢀactivities,ꢀEveriꢀoperatesꢀinꢀtheꢀfollowingꢀtwoꢀareas:ꢀ(a)ꢀbusiness-to-consumerꢀ(“B2C”);ꢀand (b)ꢀbusiness-to-businessꢀ(“B2B”).ꢀB2Cꢀrelatesꢀtoꢀgamesꢀofferedꢀdirectlyꢀtoꢀconsumersꢀthroughꢀourꢀsocial,ꢀmobileꢀapplication, whichꢀcanꢀbeꢀplayedꢀusingꢀvirtualꢀcurrency.ꢀTheꢀCompanyꢀearnsꢀrevenuesꢀbyꢀprovidingꢀtheꢀvirtualꢀcurrencyꢀtoꢀtheꢀconsumers,ꢀor theꢀplayers,ꢀwheneverꢀtheꢀconsumersꢀpurchaseꢀadditionalꢀvirtualꢀcurrency.ꢀThisꢀofferingꢀisꢀlimitedꢀtoꢀtheꢀareaꢀofꢀfree-to-playꢀalso referredꢀtoꢀasꢀsocialꢀcasinos,ꢀandꢀisꢀofferedꢀthroughꢀconnectivityꢀwithꢀFacebookꢀasꢀwellꢀasꢀmobileꢀplatformsꢀsuchꢀasꢀtheꢀApple AppꢀStoreꢀforꢀAppleꢀdevicesꢀandꢀtheꢀGoogleꢀPlayꢀStoreꢀforꢀAndroidꢀdevices.ꢀB2Bꢀrelatesꢀtoꢀgamesꢀofferedꢀtoꢀtheꢀonlineꢀbusiness partnersꢀwhoꢀthenꢀofferꢀtheꢀgamesꢀtoꢀconsumers.ꢀEveriꢀhasꢀdevelopedꢀitsꢀownꢀremoteꢀgamingꢀserverꢀ(“RGS”)ꢀleveragingꢀour extensiveꢀlibraryꢀofꢀland-basedꢀcontentꢀthatꢀisꢀdeliveredꢀthroughꢀtheꢀRGS.ꢀThisꢀlibraryꢀcontainsꢀcasino-themedꢀsocialꢀandꢀmobile games,ꢀandꢀgamesꢀavailableꢀforꢀrealꢀmoneyꢀgamingꢀ(“RMG”)ꢀofferedꢀtoꢀtheꢀonlineꢀbusinessꢀpartnersꢀthatꢀoperateꢀinꢀplay-for-fun, orꢀ socialꢀ casinos,ꢀ andꢀ theꢀ regulatedꢀ onlineꢀ casinosꢀ thatꢀ operateꢀ inꢀ theꢀ RMGꢀ regulatedꢀ markets.ꢀWeꢀ enterꢀ intoꢀ revenueꢀ share agreementsꢀwithꢀonlineꢀbusinessꢀpartnersꢀofferingꢀEveri'sꢀvirtualꢀgames. Gaming Equipment and Systems WithꢀrespectꢀtoꢀourꢀGamingꢀEquipmentꢀandꢀSystemsꢀrevenueꢀstream,ꢀweꢀenterꢀintoꢀdirectꢀsalesꢀcontractsꢀgenerallyꢀforꢀsome combinationꢀof:ꢀ(a)ꢀgamingꢀequipmentꢀandꢀplayerꢀterminals,ꢀincludingꢀTournEvent®ꢀmachines;ꢀ(b)ꢀgameꢀcontent;ꢀ(c)ꢀlicenseꢀfees; (d)ꢀancillaryꢀequipment;ꢀandꢀ(e)ꢀmaintenance. Gaming Other WithꢀrespectꢀtoꢀourꢀGamingꢀOtherꢀrevenueꢀstream,ꢀweꢀofferꢀourꢀTournEvent of Champions®ꢀthatꢀallowsꢀwinnersꢀofꢀlocalꢀand regionalꢀtournamentsꢀthroughoutꢀtheꢀyearꢀtoꢀparticipateꢀinꢀaꢀnationalꢀtournamentꢀthatꢀresultsꢀinꢀtheꢀdeterminationꢀofꢀaꢀfinalꢀchampion. OurꢀGamesꢀproductsꢀinclude: Classic Mechanical Reel Games.ꢀOurꢀ fullꢀ rangeꢀ ofꢀ classicꢀ mechanicalꢀ reelꢀ gamesꢀ providesꢀ playersꢀ withꢀ aꢀ traditional,ꢀ high denominationꢀslotꢀgamingꢀexperience.ꢀTheseꢀgamesꢀleverageꢀourꢀlong-standingꢀexperienceꢀinꢀbuildingꢀenduringꢀbrands,ꢀsuchꢀas Black Diamond® and Wild Wild Gems®,ꢀandꢀfeatureꢀaꢀuniqueꢀtakeꢀonꢀtraditionalꢀslotꢀgamesꢀwithꢀeye-catchingꢀfeatures. Super Jackpot Series™ꢀoffersꢀlargeꢀlinkedꢀprogressivesꢀonꢀtheꢀPlayer Classic®ꢀcabinetꢀpackagedꢀwithꢀoverheadꢀsignageꢀtoꢀdisplayꢀrolling progressiveꢀmetersꢀandꢀexcitingꢀwinꢀcelebrationsꢀfromꢀacrossꢀtheꢀcasinoꢀfloor.ꢀTheꢀpremium Skyline™ꢀtopꢀboxꢀisꢀaꢀvintage-inspired bezelꢀforꢀtheꢀPlayer Classicꢀcabinetꢀshowcasingꢀredꢀgreenꢀblueꢀlightingꢀandꢀaꢀ24-inchꢀliquidꢀcrystalꢀdisplayꢀ(“LCD”)ꢀpanel,ꢀwith titlesꢀincluding Double Jackpot Gems®, Kingmaker®,ꢀBlazin’ Gems®, and licensedꢀbrands,ꢀsuchꢀas Smokin’ Hot Stuff® and Casper®. 6 Video Reel Games.ꢀWeꢀofferꢀaꢀgrowingꢀrangeꢀofꢀdual-screenꢀandꢀportraitꢀsingleꢀscreenꢀvideoꢀreelꢀgamesꢀthatꢀprovideꢀaꢀuniquely entertainingꢀslotꢀgamingꢀexperience.ꢀTheꢀmostꢀrecentꢀreleasedꢀtitlesꢀleverageꢀCore HDX® andꢀEmpire MPX™ꢀcabinetsꢀ(E43ꢀand E5527)ꢀthatꢀdeliverꢀeye-catchingꢀgraphicsꢀandꢀfull,ꢀrichꢀsound. Aꢀrangeꢀofꢀprogressiveꢀfeaturesꢀroundꢀoutꢀourꢀlibraryꢀinꢀgamesꢀon theꢀE43,ꢀsuchꢀas Lighting Zap Jackpots™,ꢀDiamond Rain®,ꢀDiamond Rain Jackpot Wheel™,ꢀCash Money®, and Diamond Money™. TheꢀE5527ꢀcabinetꢀincludesꢀtitles,ꢀsuchꢀas Smokin’ Hot Stuff Wicked Wheel®,ꢀandꢀtheꢀrecentlyꢀintroducedꢀShark Weekꢀwithꢀtheꢀnew Nitro™ꢀtechnologyꢀenablingꢀdisplayꢀfeaturesꢀacrossꢀmultipleꢀdevices. Core HDX. The Core HDX cabinet enhancesꢀtheꢀplayerꢀgamingꢀexperienceꢀwithꢀitsꢀdualꢀwidescreenꢀ23-inchꢀmonitorsꢀwithꢀ1080p highꢀdefinitionꢀ(“HD”)ꢀcapability,ꢀintegratedꢀtouchscreens,ꢀandꢀpremiumꢀ3-wayꢀsoundꢀsystem.ꢀTheꢀeye-catchingꢀcabinetꢀcommands aꢀpresenceꢀonꢀtheꢀcasinoꢀfloorꢀwithꢀgame-controlledꢀlightingꢀandꢀaꢀcustomꢀpremiumꢀLCDꢀtopper,ꢀApex N™.ꢀSelect Core HDX gamesꢀfeatureꢀEveriꢀBet™,ꢀtheꢀbetꢀconfigurationꢀsystemꢀthatꢀgivesꢀcasinoꢀoperatorsꢀtheꢀpowerꢀtoꢀoptimizeꢀtheꢀcasinoꢀfloorꢀfor maximumꢀreturns.ꢀTheꢀvastꢀmajorityꢀofꢀourꢀstandardꢀvideoꢀlibraryꢀonꢀourꢀMForce®ꢀsoftwareꢀplatformꢀisꢀdesignedꢀtoꢀbeꢀplayable onꢀthe Core HDX.ꢀꢀ Empire MPX (E43).ꢀTheꢀEmpire MPX debutedꢀinꢀAprilꢀ2017 withꢀtheꢀlaunchꢀofꢀtheꢀCompany’sꢀfirstꢀpremiumꢀparticipationꢀcabinet onꢀitsꢀWAP,ꢀandꢀthenꢀlaunchedꢀitsꢀfor-saleꢀcategoryꢀEmpire MPX productsꢀinꢀDecemberꢀ2017. Theꢀnewꢀcabinetꢀfeaturesꢀaꢀsingle- screenꢀ43-inchꢀmonitor,ꢀfullꢀ1080pꢀHDꢀgraphicsꢀcapabilities,ꢀandꢀaꢀfully-customizableꢀtouchscreenꢀbuttonꢀpanel.ꢀItsꢀefficientꢀdesign allowsꢀforꢀtighterꢀbankꢀconfiguration.ꢀEmpire MPX licensedꢀvideoꢀcontentꢀincludesꢀCasablanca™, Penn & Teller®,ꢀBuffy the Vampire Slayer™,ꢀSingin’ in the Rain™,ꢀandꢀWillie Nelson™. Empire MPX (E5527). TheꢀE5527ꢀisꢀalsoꢀuniquelyꢀdesignedꢀtoꢀoccupyꢀlessꢀspaceꢀonꢀtheꢀcasinoꢀfloor,ꢀallowingꢀforꢀeasyꢀgameꢀbank andꢀpodꢀconfigurations.ꢀTheꢀall-newꢀpremiumꢀleaseꢀcabinetꢀfeaturesꢀaꢀportraitꢀorientedꢀ55-inchꢀupperꢀdisplayꢀandꢀlandscapeꢀoriented 27-inchꢀlowerꢀdisplayꢀthatꢀareꢀsureꢀtoꢀdazzleꢀplayers.ꢀTheꢀcabinetꢀleveragesꢀprovenꢀtechnologyꢀfromꢀEveri’sꢀEmpire MPXꢀtoꢀdeliver anꢀexcitingꢀnewꢀplayerꢀexperienceꢀwithꢀvisualsꢀneverꢀbeforeꢀseenꢀonꢀanꢀEveriꢀgamingꢀdevice.ꢀWithꢀitsꢀleading-edgeꢀcabinetꢀdesign andꢀinnovativeꢀtechnologyꢀfeatures,ꢀthatꢀbothꢀplayersꢀandꢀcasinoꢀoperatorsꢀwillꢀappreciate,ꢀE5527ꢀcommandsꢀattentionꢀonꢀthe casinoꢀfloor. The Texan HDX™. The Texan HDX isꢀanꢀ8-footꢀtallꢀcabinetꢀwithꢀdualꢀ42-inchꢀHDꢀvideoꢀscreensꢀandꢀfeaturesꢀaꢀtwo-personꢀbench seat,ꢀintegratedꢀtouchꢀscreens,ꢀandꢀaꢀpremiumꢀthree-wayꢀsoundꢀsystem.ꢀTheꢀcabinetꢀisꢀdesignedꢀtoꢀshowcaseꢀtheꢀEveriꢀstandard videoꢀlibraryꢀinꢀanꢀoversizedꢀformat,ꢀallowingꢀgamesꢀtoꢀbeꢀprominentlyꢀdisplayedꢀonꢀtheꢀcasinoꢀfloor. TournEvent®.ꢀOurꢀslotꢀtournamentꢀsystemꢀthatꢀallowsꢀgamingꢀoperatorsꢀtoꢀswitchꢀfromꢀin-revenueꢀgamingꢀtoꢀout-of-revenue tournamentsꢀandꢀtoꢀdesignꢀandꢀbuildꢀaꢀvarietyꢀofꢀflexibleꢀtournamentꢀformats,ꢀsuchꢀasꢀsoloꢀorꢀteamꢀtournamentꢀplay,ꢀsessionꢀor roundꢀwinnerꢀadvancement,ꢀandꢀcumulativeꢀorꢀmaximumꢀscoring,ꢀincludingꢀprovidingꢀbonusꢀopportunitiesꢀthatꢀimproveꢀscores orꢀautomaticallyꢀmoveꢀaꢀplayerꢀtoꢀfirstꢀplace.ꢀTheꢀlatest TournEvent® 5.0ꢀgameꢀversionꢀincludesꢀnewꢀsystemꢀenhancementsꢀthat improveꢀoperatorꢀefficienciesꢀandꢀhardwareꢀandꢀoffersꢀengagingꢀtournamentꢀgamesꢀthatꢀattractꢀplayers.ꢀWithꢀtheꢀwirelessꢀtablet option,ꢀ casinoꢀ operatorsꢀ willꢀ beꢀ ableꢀ toꢀ signꢀ upꢀ playersꢀ forꢀ tournamentsꢀ remotely,ꢀ allowingꢀ forꢀ aꢀ moreꢀ efficientꢀ tournament registrationꢀandꢀanꢀoverallꢀbetterꢀtournamentꢀexperienceꢀforꢀtheꢀcasinosꢀandꢀplayersꢀalike.ꢀTournEvent®ꢀalsoꢀisꢀavailableꢀwith multipleꢀ signꢀ options,ꢀ consistingꢀ ofꢀ aꢀ 65-inchꢀ television,ꢀ lightedꢀ accentꢀ dividers,ꢀ andꢀ theꢀ abilityꢀ toꢀ beꢀ featuredꢀ onꢀ newꢀ bank configurations. Everi FinTech OurꢀFinTechꢀproductsꢀandꢀservicesꢀincludeꢀsolutionsꢀthatꢀweꢀprovideꢀdirectlyꢀtoꢀgamingꢀestablishmentsꢀtoꢀofferꢀtheirꢀpatronsꢀcash access-relatedꢀservicesꢀandꢀproductsꢀincluding:ꢀaccessꢀtoꢀcashꢀatꢀgamingꢀfacilitiesꢀviaꢀATMꢀcashꢀwithdrawals,ꢀcreditꢀcardꢀcash accessꢀtransactions,ꢀandꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransactions;ꢀcheck-relatedꢀservices;ꢀfullyꢀintegratedꢀkiosksꢀandꢀmaintenance services;ꢀcompliance,ꢀaudit,ꢀandꢀdataꢀsoftware;ꢀcasinoꢀcreditꢀdataꢀandꢀreportingꢀservices;ꢀandꢀotherꢀancillaryꢀofferings.ꢀWeꢀconduct ourꢀ FinTechꢀ segmentꢀ businessꢀ basedꢀ onꢀ resultsꢀ generatedꢀ fromꢀ theꢀ followingꢀ majorꢀ revenueꢀ streams:ꢀ (a)ꢀ CashꢀAccess;ꢀ (b) Equipment;ꢀandꢀ(c)ꢀInformationꢀServicesꢀandꢀOther. Cash Access InꢀconnectionꢀwithꢀourꢀCashꢀAccessꢀservices,ꢀweꢀofferꢀtheꢀfollowing: ATM Cash Withdrawals.ꢀATMꢀcashꢀwithdrawalꢀtransactionsꢀrepresentꢀtheꢀlargestꢀcategoryꢀofꢀelectronicꢀpaymentꢀtransactionsꢀthat weꢀprocess,ꢀasꢀmeasuredꢀbyꢀdollarꢀandꢀtransactionꢀvolume.ꢀInꢀanꢀATMꢀcashꢀwithdrawalꢀtransaction,ꢀaꢀpatronꢀdirectlyꢀaccesses fundsꢀfromꢀaꢀdeviceꢀenabledꢀwithꢀourꢀATMꢀserviceꢀbyꢀeitherꢀusingꢀanꢀATMꢀcardꢀorꢀaꢀdebitꢀcardꢀtoꢀwithdrawꢀfundsꢀfromꢀtheꢀpatron’s demandꢀdepositꢀaccount,ꢀorꢀusingꢀaꢀcreditꢀcardꢀtoꢀaccessꢀtheꢀpatron’sꢀlineꢀofꢀcredit.ꢀInꢀeitherꢀevent,ꢀtheꢀpatronꢀmustꢀuseꢀtheꢀpersonal identificationꢀnumberꢀ(“PIN”)ꢀassociatedꢀwithꢀsuchꢀcard.ꢀOurꢀprocessorꢀthenꢀroutesꢀtheꢀtransactionꢀrequestꢀthroughꢀanꢀelectronic fundsꢀtransferꢀ(“EFT”)ꢀnetworkꢀtoꢀtheꢀpatron’sꢀbankꢀorꢀissuer,ꢀasꢀapplicable.ꢀ 7 Dependingꢀuponꢀaꢀnumberꢀofꢀfactors,ꢀincludingꢀtheꢀpatron’sꢀaccountꢀbalanceꢀorꢀcreditꢀlimitꢀandꢀdailyꢀwithdrawalꢀlimitꢀ(which limitsꢀareꢀsetꢀbyꢀtheꢀbankꢀorꢀissuer,ꢀasꢀapplicable),ꢀtheꢀbankꢀorꢀissuerꢀwillꢀeitherꢀauthorizeꢀorꢀdeclineꢀtheꢀtransaction.ꢀIfꢀtheꢀtransaction isꢀauthorized,ꢀthenꢀtheꢀATM-enabledꢀdeviceꢀdispensesꢀtheꢀcashꢀtoꢀtheꢀpatron.ꢀForꢀaꢀtransactionꢀusingꢀanꢀATMꢀcardꢀorꢀaꢀdebitꢀcard, theꢀpatron’sꢀdemandꢀdepositꢀaccountꢀisꢀdebitedꢀbyꢀtheꢀamountꢀofꢀcashꢀdisbursedꢀplusꢀaꢀserviceꢀfeeꢀthatꢀweꢀassessꢀtheꢀpatronꢀfor theꢀuseꢀofꢀtheꢀATMꢀservice.ꢀForꢀaꢀtransactionꢀusingꢀaꢀcreditꢀcardꢀwithꢀaꢀPIN,ꢀtheꢀpatron’sꢀcreditꢀcardꢀaccountꢀisꢀchargedꢀbyꢀthe amountꢀofꢀtheꢀcashꢀdisbursedꢀplusꢀaꢀserviceꢀfeeꢀthatꢀweꢀassessꢀtheꢀpatronꢀforꢀtheꢀuseꢀofꢀtheꢀATMꢀservice.ꢀInꢀbothꢀcases,ꢀtheꢀservice feeꢀisꢀcurrentlyꢀaꢀfixedꢀdollarꢀamountꢀandꢀnotꢀaꢀpercentageꢀofꢀtheꢀtransactionꢀsize.ꢀWeꢀalsoꢀreceiveꢀaꢀfee,ꢀwhichꢀweꢀreferꢀtoꢀasꢀa reverseꢀinterchangeꢀfee,ꢀfromꢀtheꢀpatron’sꢀcard-issuingꢀbankꢀforꢀaccommodatingꢀtheꢀcardꢀissuer’sꢀcustomer.ꢀInꢀmostꢀcircumstances, weꢀpayꢀaꢀpercentageꢀofꢀtheꢀserviceꢀfee thatꢀweꢀreceiveꢀfromꢀtheꢀpatronꢀand,ꢀinꢀsomeꢀcircumstances,ꢀaꢀportionꢀofꢀtheꢀreverse interchangeꢀfeesꢀweꢀreceive,ꢀasꢀaꢀcommissionꢀtoꢀourꢀgamingꢀestablishmentꢀcustomersꢀforꢀtheꢀrightꢀtoꢀoperateꢀonꢀtheirꢀpremises. Credit Card Cash Access Transactions and POS Debit Card Cash Access Transactions.ꢀPatronsꢀcanꢀperformꢀcreditꢀcardꢀcash accessꢀtransactionsꢀandꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransactionsꢀusingꢀmanyꢀofꢀourꢀenabledꢀdevices.ꢀAꢀpatron’sꢀcreditꢀcardꢀcash accessꢀlimitꢀisꢀusuallyꢀaꢀsub-limitꢀofꢀtheꢀtotalꢀcreditꢀlineꢀandꢀisꢀsetꢀbyꢀtheꢀcard-issuingꢀbank,ꢀnotꢀEveriꢀFinTech.ꢀTheseꢀlimitsꢀvary significantlyꢀandꢀcanꢀbeꢀlargerꢀorꢀsmallerꢀthanꢀtheꢀPOSꢀdebitꢀcashꢀaccessꢀlimit.ꢀAꢀcreditꢀcardꢀcashꢀaccessꢀtransactionꢀobligatesꢀthe patronꢀtoꢀrepayꢀtheꢀissuingꢀbankꢀoverꢀtimeꢀonꢀtermsꢀthatꢀareꢀpresetꢀbyꢀtheꢀcardholderꢀagreement.ꢀAꢀpatron’sꢀPOSꢀdebitꢀcardꢀallows theꢀpatronꢀtoꢀmakeꢀcashꢀwithdrawalsꢀatꢀtheꢀPOSꢀinꢀanꢀamountꢀequalꢀtoꢀtheꢀlesserꢀofꢀtheꢀamountꢀofꢀfundsꢀinꢀtheꢀaccount,ꢀorꢀaꢀdaily limitꢀthatꢀisꢀgenerallyꢀfiveꢀtoꢀtenꢀtimesꢀasꢀlargeꢀasꢀtheꢀpatron’sꢀdailyꢀATMꢀlimit. WhenꢀaꢀpatronꢀrequestsꢀaꢀcreditꢀcardꢀcashꢀaccessꢀorꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransaction,ꢀourꢀprocessorꢀroutesꢀtheꢀtransaction requestꢀthroughꢀoneꢀofꢀtheꢀcardꢀassociations,ꢀorꢀEFTꢀnetworks,ꢀtoꢀtheꢀissuingꢀbank.ꢀDependingꢀuponꢀseveralꢀfactors,ꢀsuchꢀasꢀthe availableꢀcreditꢀorꢀbankꢀaccountꢀbalance,ꢀtheꢀtransactionꢀisꢀeitherꢀauthorizedꢀorꢀdeclinedꢀbyꢀtheꢀissuingꢀbank.ꢀIfꢀauthorized,ꢀthe patron’sꢀbankꢀaccountꢀisꢀdebitedꢀorꢀtheꢀpatron’sꢀcreditꢀcardꢀbalanceꢀisꢀincreased,ꢀinꢀbothꢀcases,ꢀbyꢀanꢀamountꢀequalꢀtoꢀtheꢀfunds requestedꢀplusꢀourꢀserviceꢀfee.ꢀTheꢀserviceꢀfeeꢀisꢀaꢀfixedꢀdollarꢀamount,ꢀaꢀpercentageꢀofꢀtheꢀtransactionꢀsize,ꢀorꢀaꢀcombinationꢀof aꢀfixedꢀdollarꢀamountꢀandꢀpercentageꢀofꢀtheꢀtransactionꢀsize.ꢀIfꢀtheꢀtransactionꢀisꢀauthorized,ꢀtheꢀdeviceꢀinformsꢀtheꢀpatronꢀthatꢀthe transactionꢀhasꢀbeenꢀapproved.ꢀTheꢀdeviceꢀthenꢀfurtherꢀinstructsꢀtheꢀpatronꢀtoꢀproceedꢀtoꢀtheꢀgamingꢀestablishment’sꢀcashier,ꢀor Company-operatedꢀsatelliteꢀcageꢀ(“financialꢀservicesꢀcenter”),ꢀtoꢀcompleteꢀtheꢀtransactionꢀbecauseꢀcreditꢀcardꢀcashꢀaccessꢀand POSꢀdebitꢀcardꢀcashꢀaccessꢀtransactionsꢀmust,ꢀinꢀmostꢀcircumstances,ꢀbeꢀcompletedꢀinꢀface-to-faceꢀenvironmentsꢀandꢀaꢀunique signatureꢀmustꢀbeꢀreceivedꢀinꢀorderꢀtoꢀcomplyꢀwithꢀrulesꢀofꢀtheꢀcardꢀassociations.ꢀWeꢀreimburseꢀtheꢀgamingꢀestablishmentꢀforꢀthe amountꢀofꢀcashꢀthatꢀitꢀprovidedꢀtoꢀtheꢀpatronꢀbyꢀpayingꢀtheꢀgamingꢀestablishmentꢀviaꢀwireꢀtransferꢀorꢀotherꢀsimilarꢀformꢀofꢀelectronic payment.ꢀInꢀaddition,ꢀweꢀpayꢀtheꢀgamingꢀestablishmentꢀaꢀportionꢀofꢀtheꢀserviceꢀfeeꢀasꢀaꢀcommissionꢀforꢀtheꢀrightꢀtoꢀoperateꢀonꢀits premises.ꢀWeꢀareꢀalsoꢀobligatedꢀtoꢀpayꢀinterchangeꢀfeesꢀtoꢀtheꢀissuingꢀbankꢀandꢀprocessingꢀcostsꢀrelatedꢀtoꢀtheꢀelectronicꢀpayment transactionꢀtoꢀcardꢀassociations. Check-Related Services.ꢀPatronsꢀareꢀableꢀtoꢀcashꢀchecksꢀatꢀcertainꢀgamingꢀestablishments.ꢀWhenꢀaꢀpatronꢀpresentsꢀaꢀcheckꢀtoꢀthe cashier,ꢀtheꢀgamingꢀestablishmentꢀcanꢀacceptꢀorꢀdenyꢀtheꢀtransactionꢀbasedꢀonꢀitsꢀownꢀcustomerꢀinformationꢀandꢀatꢀitsꢀownꢀrisk, obtainꢀthird-partyꢀverificationꢀinformationꢀaboutꢀtheꢀcheckꢀwriter,ꢀtheꢀbankꢀaccountꢀnumber,ꢀandꢀotherꢀinformationꢀrelatingꢀtoꢀthe checkꢀtoꢀmanageꢀitsꢀrisk,ꢀorꢀobtainꢀaꢀwarrantyꢀonꢀpaymentꢀofꢀtheꢀcheck,ꢀwhichꢀentitlesꢀtheꢀgamingꢀestablishmentꢀtoꢀreimbursement ofꢀtheꢀfullꢀamountꢀofꢀtheꢀcheckꢀifꢀitꢀisꢀdishonored. Ifꢀaꢀgamingꢀestablishmentꢀchoosesꢀtoꢀhaveꢀaꢀcheckꢀwarranted,ꢀitꢀsendsꢀaꢀrequestꢀtoꢀaꢀcheckꢀwarrantyꢀserviceꢀprovider,ꢀinquiring whetherꢀitꢀwouldꢀbeꢀwillingꢀtoꢀacceptꢀtheꢀriskꢀofꢀcashingꢀtheꢀcheck.ꢀIfꢀtheꢀcheckꢀwarrantyꢀproviderꢀacceptsꢀtheꢀriskꢀandꢀwarrants theꢀcheck,ꢀtheꢀgamingꢀestablishmentꢀnegotiatesꢀtheꢀpatron’sꢀcheckꢀbyꢀprovidingꢀcashꢀforꢀtheꢀfaceꢀamountꢀofꢀtheꢀcheck.ꢀIfꢀtheꢀcheck isꢀdishonoredꢀbyꢀtheꢀpatron’sꢀbankꢀuponꢀpresentment,ꢀtheꢀgamingꢀestablishmentꢀinvokesꢀtheꢀwarranty,ꢀandꢀtheꢀcheckꢀwarranty serviceꢀproviderꢀpurchasesꢀtheꢀcheckꢀfromꢀtheꢀgamingꢀestablishmentꢀforꢀtheꢀfullꢀcheckꢀamountꢀandꢀthenꢀpursuesꢀcollectionꢀactivities onꢀitsꢀown. Forꢀthoseꢀgamingꢀestablishmentsꢀthatꢀseekꢀtoꢀmanageꢀtheirꢀownꢀrisk,ꢀweꢀprovideꢀaꢀsubscriptionꢀcheckꢀverificationꢀserviceꢀviaꢀa databaseꢀoperatedꢀbyꢀourꢀsubsidiary,ꢀCentralꢀCredit,ꢀLLCꢀ(“CentralꢀCredit”),ꢀwhichꢀisꢀusedꢀbyꢀgamingꢀestablishmentsꢀtoꢀmake creditꢀissuingꢀdecisions.ꢀCentralꢀCreditꢀmaintainsꢀinformationꢀonꢀtheꢀcheckꢀcashingꢀandꢀcreditꢀhistoryꢀofꢀmanyꢀgamingꢀestablishment patrons.ꢀForꢀthoseꢀgamingꢀestablishmentsꢀthatꢀpreferꢀtoꢀobtainꢀaꢀwarranty,ꢀweꢀprovideꢀcheckꢀwarrantyꢀservicesꢀthroughꢀaꢀthird- partyꢀcheckꢀwarrantyꢀserviceꢀprovider.ꢀWeꢀpayꢀthisꢀthird-partyꢀproviderꢀtoꢀassistꢀwithꢀtheꢀwarrantyꢀdecision,ꢀcheckꢀprocessing, billing,ꢀandꢀcollectionꢀactivities.ꢀOnꢀourꢀbehalf,ꢀthisꢀthird-partyꢀproviderꢀchargesꢀourꢀgamingꢀestablishmentꢀcustomersꢀaꢀfeeꢀfor theꢀcheckꢀwarrantyꢀservices,ꢀwhichꢀisꢀtypicallyꢀaꢀpercentageꢀofꢀtheꢀfaceꢀamountꢀofꢀtheꢀcheckꢀbeingꢀwarranted.ꢀInꢀsuchꢀcircumstances, weꢀreceiveꢀallꢀofꢀtheꢀcheckꢀwarrantyꢀrevenue.ꢀWeꢀareꢀexposedꢀtoꢀriskꢀforꢀtheꢀlossesꢀassociatedꢀwithꢀanyꢀwarrantedꢀitemsꢀthatꢀcannot beꢀcollectedꢀfromꢀpatronsꢀissuingꢀtheꢀitems.ꢀWarrantyꢀexpensesꢀareꢀdefinedꢀasꢀanyꢀamountsꢀpaidꢀbyꢀtheꢀthird-partyꢀproviderꢀto gamingꢀestablishmentsꢀtoꢀpurchaseꢀdishonoredꢀchecksꢀthatꢀwillꢀnotꢀbeꢀcollectibleꢀfromꢀpatronsꢀandꢀanyꢀexpensesꢀrelatedꢀtoꢀthe collectionꢀonꢀtheseꢀamounts.ꢀWeꢀalsoꢀpayꢀcertainꢀfeesꢀandꢀoperatingꢀexpensesꢀtoꢀourꢀthird-partyꢀproviderꢀrelatedꢀtoꢀtheꢀprovision ofꢀtheseꢀservices. 8 Casino Cash Plus 3-in-1 ATMs areꢀunmanned,ꢀcash-dispensingꢀmachinesꢀthatꢀenableꢀATMꢀcashꢀwithdrawals,ꢀPOSꢀdebitꢀcardꢀcash accessꢀtransactions,ꢀandꢀcreditꢀcardꢀcashꢀaccessꢀtransactionsꢀdirectlyꢀorꢀusingꢀourꢀ3-in-1ꢀRolloverꢀfunctionality.ꢀMostꢀfinancial institutionsꢀthatꢀissueꢀdebitꢀcardsꢀimposeꢀdailyꢀATMꢀwithdrawalꢀlimits,ꢀand,ꢀinꢀsomeꢀinstances,ꢀaggregateꢀandꢀcountꢀFriday,ꢀSaturday, andꢀSundayꢀasꢀaꢀsingleꢀdayꢀinꢀcalculatingꢀsuchꢀlimits.ꢀIfꢀaꢀpatronꢀhasꢀreachedꢀhisꢀorꢀherꢀdailyꢀATMꢀlimit,ꢀourꢀ3-in-1ꢀRollover functionalityꢀautomaticallyꢀenablesꢀtheꢀpatronꢀtoꢀobtainꢀfundsꢀviaꢀaꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransactionꢀorꢀaꢀcreditꢀcardꢀcash accessꢀtransactionꢀinstead. CashClub® isꢀaꢀsoftwareꢀpaymentsꢀplatformꢀthatꢀprovidesꢀgamingꢀestablishmentsꢀwithꢀaꢀpersonalꢀcomputerꢀworkstationꢀsoftware userꢀinterfaceꢀandꢀpoint-of-saleꢀterminalꢀthatꢀstreamlinesꢀcreditꢀandꢀdebitꢀcardꢀcashꢀaccessꢀtransactionꢀprocessingꢀandꢀcheckꢀwarranty transactionsꢀforꢀcasinoꢀpatrons.ꢀItꢀallowsꢀforꢀelectronicꢀsignatureꢀcaptureꢀandꢀdynamicꢀcurrencyꢀconversion.ꢀItꢀalsoꢀinterfacesꢀwith ourꢀEveriꢀComplianceꢀsolutionsꢀ(definedꢀbelow)ꢀtoꢀassistꢀcasinoꢀoperationsꢀwithꢀmeetingꢀregulatoryꢀrequirementsꢀunderꢀTitleꢀ31 ofꢀtheꢀBankꢀSecrecyꢀAct. Equipment InꢀconnectionꢀwithꢀourꢀEquipment,ꢀweꢀofferꢀtheꢀfollowing: Fully Integrated Kiosks areꢀaꢀcompleteꢀlineꢀofꢀproductsꢀthatꢀprovideꢀmultipleꢀfunctionsꢀtoꢀtheꢀcasinoꢀfloor.ꢀThisꢀincludesꢀcash accessꢀfunctionality,ꢀsuchꢀasꢀourꢀ3-in-1ꢀRollover,ꢀwhichꢀprovidesꢀcasinoꢀpatronsꢀaccessꢀtoꢀperformꢀcashꢀadvance,ꢀPOSꢀdebit,ꢀand ATMꢀtransactions.ꢀTheꢀkiosksꢀalsoꢀprovideꢀfunctionalityꢀtoꢀperformꢀcheckꢀcashingꢀtransactions,ꢀslotꢀmachineꢀticketꢀredemption, billꢀbreaking,ꢀandꢀloyaltyꢀprogramꢀaccessꢀasꢀwellꢀasꢀintegrationꢀwithꢀmobileꢀandꢀwalletꢀtechnology.ꢀTheꢀavailabilityꢀofꢀourꢀcash accessꢀplatformꢀonꢀtheseꢀslotꢀticketꢀredemptionꢀdevicesꢀprovidesꢀusꢀwithꢀadditionalꢀpointsꢀofꢀcontactꢀwithꢀgamingꢀpatronsꢀat locationsꢀthatꢀareꢀusuallyꢀcloserꢀtoꢀgamingꢀdevicesꢀthanꢀtraditionalꢀcashꢀaccessꢀdevicesꢀthatꢀareꢀtypicallyꢀlocatedꢀonꢀtheꢀperiphery ofꢀtheꢀgamingꢀareaꢀwithinꢀtheꢀcasinoꢀfloorꢀandꢀalsoꢀprovidesꢀgamingꢀpatronsꢀwithꢀmoreꢀopportunitiesꢀtoꢀaccessꢀtheirꢀcashꢀwithꢀless cashierꢀinvolvement. Other Integrated Kiosk Solutions provideꢀcasinosꢀwithꢀmoreꢀefficientꢀandꢀstreamlinedꢀmethodsꢀforꢀcashꢀhandlingꢀandꢀtransaction processing.ꢀTheseꢀproductsꢀareꢀdesignedꢀtoꢀbeꢀintegratedꢀwithꢀourꢀcashꢀaccessꢀproductsꢀandꢀcageꢀcomplianceꢀsoftwareꢀensuring complianceꢀwithꢀanti-moneyꢀlaunderingꢀregulations,ꢀandꢀprovideꢀanꢀautomatedꢀwayꢀtoꢀprocessꢀcommonꢀtaxꢀforms,ꢀsuchꢀasꢀthe InternalꢀRevenueꢀServiceꢀFormꢀW-2GꢀorꢀFormꢀ1042-S.ꢀInꢀaddition,ꢀweꢀofferꢀequipmentꢀinꢀtheꢀformꢀofꢀstandalone,ꢀnon-ATM terminalsꢀthatꢀperformꢀauthorizationsꢀforꢀcreditꢀcardꢀcashꢀaccessꢀandꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransactions.ꢀOurꢀkioskꢀsolutions includeꢀtheꢀfollowingꢀproducts: • • • • JackpotXchange familyꢀofꢀkiosks, JXC 4.0, and JXC-L, enableꢀcasinoꢀpersonnelꢀtoꢀefficientlyꢀaccessꢀfundsꢀtoꢀpayꢀout jackpotsꢀforꢀtheirꢀguests.ꢀTheseꢀkiosksꢀareꢀintegratedꢀwithꢀallꢀmajorꢀslotꢀsystemsꢀtoꢀofferꢀjackpotꢀprocessingꢀandꢀpay-out inꢀaꢀcombinationꢀofꢀcashꢀorꢀslotꢀtickets.ꢀTheseꢀkiosksꢀofferꢀgamingꢀoperatorsꢀtheꢀabilityꢀtoꢀreduceꢀworkloadꢀatꢀtheꢀcage andꢀforꢀslotꢀpersonnel.ꢀꢀ JackpotXpress isꢀaꢀfull-featuredꢀjackpotꢀandꢀtaxꢀformꢀmanagementꢀplatformꢀthatꢀallowsꢀcasinoꢀpersonnelꢀtoꢀworkꢀthrough theꢀcomplexꢀjackpotꢀprocessꢀusingꢀaꢀmobileꢀtabletꢀorꢀkiosk.ꢀJackpotXpressꢀallowsꢀgamingꢀoperatorsꢀtoꢀreduceꢀjackpot waitꢀtimes,ꢀeliminateꢀcumbersomeꢀpaperꢀdocuments,ꢀandꢀperformꢀ“knowꢀyourꢀcustomer”ꢀchecks.ꢀItꢀisꢀfullyꢀintegrated withꢀourꢀEveriꢀComplianceꢀ(definedꢀbelow),ꢀCageXchange,ꢀandꢀJackpotXchangeꢀproducts.ꢀꢀ CageXchange isꢀ aꢀ cashꢀ dispensingꢀ deviceꢀ thatꢀ helpsꢀ streamlineꢀ casinoꢀ cageꢀ operations.ꢀWithꢀ CageXchange,ꢀ cashꢀ is securelyꢀvaulted,ꢀcreatingꢀincreasedꢀsecurityꢀwhileꢀalsoꢀreducingꢀcashꢀshrinkageꢀandꢀhelpingꢀtoꢀimproveꢀcashierꢀaccuracy. Additionalꢀefficienciesꢀareꢀachievedꢀfromꢀacceleratingꢀtheꢀprocessꢀofꢀcageꢀcashiersꢀobtainingꢀmoneyꢀfromꢀtheꢀvault. CageXchangeꢀisꢀintegratedꢀwithꢀCashClub®ꢀtoꢀcreateꢀanꢀefficientꢀtransactionꢀforꢀcasinoꢀguests. OurꢀCash Recycling Solutionsꢀallowꢀcasinosꢀtoꢀfullyꢀautomateꢀtheꢀcheckꢀinꢀandꢀcheckꢀoutꢀprocessꢀofꢀmoney,ꢀsavingꢀtime andꢀexpense.ꢀAsꢀgamingꢀestablishmentsꢀvaryꢀinꢀsizeꢀandꢀcomplexity,ꢀtheseꢀCash Recycling Solutionsꢀsupportꢀaꢀnumber ofꢀdiverseꢀresortꢀoperationsꢀsuchꢀasꢀretail,ꢀfoodꢀandꢀbeverage,ꢀentertainment,ꢀandꢀgamingꢀoperations.ꢀ Information Services and Other InꢀconnectionꢀwithꢀourꢀInformationꢀServicesꢀandꢀOtherꢀsolutions,ꢀweꢀofferꢀtheꢀfollowing: Maintenance providesꢀforꢀvariousꢀformsꢀofꢀsupportꢀtoꢀmaintainꢀourꢀfullyꢀintegratedꢀkiosks.ꢀOurꢀsupportꢀoperations,ꢀfieldꢀservice, andꢀ customerꢀ engagementꢀ teamsꢀ provideꢀ quarterlyꢀ andꢀ annualꢀ maintenanceꢀ onꢀ theseꢀ productsꢀ andꢀ softwareꢀ systemsꢀ toꢀ help maximizeꢀtheꢀefficiencyꢀofꢀourꢀproducts. 9 Everi Compliance isꢀourꢀsuiteꢀofꢀcomplianceꢀsoftwareꢀofferingsꢀforꢀgamingꢀoperatorsꢀthatꢀhelpꢀgamingꢀestablishmentsꢀcomply withꢀfinancialꢀservicesꢀandꢀgamingꢀregulations,ꢀwhichꢀincludeꢀsoftwareꢀtoꢀassistꢀwithꢀanti-moneyꢀlaunderingꢀregulations,ꢀsuchꢀas filingꢀcurrencyꢀtransactionꢀreportsꢀ(“CTRs”),ꢀandꢀsuspiciousꢀactivityꢀreportsꢀ(“SARs”).ꢀInꢀaddition,ꢀtheseꢀcomplianceꢀsolutions assistꢀwithꢀ“knowꢀyourꢀcustomer”ꢀchecksꢀtoꢀensureꢀtransactionsꢀareꢀappropriatelyꢀconducted. Central Credit isꢀourꢀgamingꢀpatronꢀcreditꢀbureauꢀserviceꢀwhich,ꢀonꢀaꢀsubscriptionꢀbasis,ꢀallowsꢀgamingꢀestablishmentsꢀtoꢀimprove theirꢀcredit-grantingꢀdecisionsꢀbyꢀobtainingꢀaccessꢀtoꢀaꢀdatabaseꢀcontainingꢀcreditꢀinformationꢀandꢀtransactionꢀdataꢀonꢀmillionsꢀof gamingꢀpatrons.ꢀOurꢀgamingꢀcreditꢀreportsꢀareꢀcomprisedꢀofꢀinformationꢀrecordedꢀfromꢀpatronꢀcreditꢀhistoriesꢀatꢀhundredsꢀof gamingꢀestablishments.ꢀWeꢀprovideꢀsuchꢀinformationꢀtoꢀgamingꢀestablishmentsꢀthatꢀsubscribeꢀtoꢀtheꢀservice.ꢀTheseꢀestablishments thenꢀuseꢀthatꢀdata,ꢀamongꢀotherꢀthings,ꢀtoꢀdetermineꢀhowꢀmuchꢀcredit,ꢀifꢀany,ꢀtheyꢀwillꢀgrantꢀtoꢀaꢀgamingꢀpatron.ꢀWeꢀtypically chargeꢀourꢀcustomersꢀforꢀaccessꢀtoꢀgamingꢀpatronꢀcreditꢀreportsꢀonꢀaꢀmonthlyꢀbasisꢀandꢀourꢀfeesꢀareꢀgenerallyꢀcomprisedꢀofꢀaꢀfixed minimumꢀfeeꢀplusꢀper-transactionꢀchargesꢀforꢀcertainꢀrequests. Otherꢀsolutionsꢀincludeꢀdatabaseꢀservicesꢀthatꢀallowꢀgamingꢀestablishmentsꢀaccessꢀtoꢀinformationꢀfromꢀourꢀproprietaryꢀpatron transactionꢀdatabaseꢀforꢀpurposesꢀofꢀplayerꢀacquisition,ꢀdirectꢀmarketing,ꢀmarketꢀshareꢀanalysis,ꢀandꢀaꢀvarietyꢀofꢀotherꢀpatron promotionalꢀuses.ꢀOurꢀproprietaryꢀpatronꢀtransactionꢀdatabaseꢀincludesꢀinformationꢀthatꢀisꢀcapturedꢀfromꢀtransactionsꢀweꢀprocess. Patronsꢀmayꢀ“optꢀout”ꢀofꢀhavingꢀtheirꢀnamesꢀincludedꢀinꢀmarketingꢀmailingꢀlists.ꢀWeꢀalsoꢀofferꢀanꢀonlineꢀpaymentꢀprocessing solutionꢀforꢀgamingꢀoperatorsꢀinꢀstatesꢀthatꢀofferꢀintra-state,ꢀInternet-basedꢀgaming,ꢀandꢀlotteryꢀactivities. Manufacturing Weꢀutilizeꢀcontractꢀmanufacturersꢀtoꢀproduceꢀtheꢀcabinetsꢀthatꢀmakeꢀupꢀourꢀelectronicꢀgamingꢀmachinesꢀ(“EGMs”),ꢀkioskꢀproducts, andꢀotherꢀsub-assemblies.ꢀWeꢀhaveꢀassemblyꢀfacilitiesꢀinꢀAustin,ꢀTexasꢀandꢀLasꢀVegas,ꢀNevada,ꢀwhereꢀweꢀassembleꢀtheꢀEGMs andꢀourꢀkioskꢀproducts,ꢀwhichꢀincludeꢀtheꢀcabinets,ꢀcomputerꢀassemblies,ꢀLCDꢀscreens,ꢀprinters,ꢀbillꢀvalidatorsꢀandꢀacceptors,ꢀand otherꢀwiringꢀandꢀharnesses.ꢀWeꢀbelieveꢀthatꢀourꢀsourcesꢀofꢀsupplyꢀofꢀcomponentꢀpartsꢀandꢀrawꢀmaterialsꢀforꢀourꢀproductsꢀare generallyꢀadequateꢀandꢀweꢀhaveꢀfewꢀsole-sourcedꢀparts. Research and Development Weꢀconductꢀresearchꢀandꢀdevelopmentꢀactivitiesꢀprimarilyꢀtoꢀdevelopꢀgamingꢀsystems,ꢀgameꢀengines,ꢀcasinoꢀdataꢀmanagement systems,ꢀbingoꢀoutcomeꢀdeterminationꢀsystems,ꢀvideoꢀlotteryꢀoutcomeꢀdeterminationꢀsystems,ꢀgamingꢀplatforms,ꢀandꢀgaming content,ꢀandꢀtoꢀenhanceꢀourꢀexistingꢀproductꢀlines.ꢀWeꢀbelieveꢀourꢀabilityꢀtoꢀdeliverꢀdifferentiated,ꢀappealingꢀproductsꢀandꢀservices toꢀtheꢀmarketplaceꢀisꢀbasedꢀonꢀourꢀresearchꢀandꢀdevelopmentꢀinvestments,ꢀandꢀweꢀexpectꢀtoꢀcontinueꢀtoꢀmakeꢀsuchꢀinvestments inꢀtheꢀfuture.ꢀResearchꢀandꢀdevelopmentꢀcostsꢀconsistꢀprimarilyꢀofꢀsalariesꢀandꢀbenefits,ꢀconsultingꢀfees,ꢀandꢀgameꢀlabꢀtestingꢀfees. Onceꢀtheꢀtechnologicalꢀfeasibilityꢀofꢀaꢀprojectꢀhasꢀbeenꢀestablished,ꢀitꢀisꢀcapitalizedꢀuntilꢀitꢀbecomesꢀavailableꢀforꢀgeneralꢀrelease. Customers AsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀweꢀservedꢀapproximatelyꢀ1,450ꢀcasinosꢀandꢀotherꢀgamingꢀpropertiesꢀinꢀtheꢀUnitedꢀStates,ꢀEurope, Canada,ꢀtheꢀCaribbean,ꢀCentralꢀAmerica,ꢀandꢀAsia.ꢀInꢀcertainꢀlimitedꢀcircumstances,ꢀweꢀprovideꢀourꢀproductsꢀandꢀservicesꢀtoꢀnon- gamingꢀestablishments,ꢀsuchꢀasꢀgasꢀstationsꢀandꢀotherꢀretailꢀbusinessesꢀassociatedꢀwithꢀgamingꢀestablishmentꢀcustomers.ꢀHowever, theꢀrevenueꢀgeneratedꢀfromꢀtheseꢀoperationsꢀisꢀnotꢀmaterialꢀtoꢀourꢀoperationsꢀandꢀweꢀdoꢀnotꢀactivelyꢀmarketꢀorꢀtargetꢀnon-gaming establishmentꢀcustomers. Sales and Marketing InꢀourꢀGamesꢀbusiness,ꢀweꢀsellꢀandꢀmarketꢀourꢀproductsꢀandꢀservicesꢀtoꢀgamingꢀestablishmentsꢀprimarilyꢀthroughꢀtheꢀuseꢀofꢀa directꢀsalesꢀforce,ꢀwhichꢀtargetsꢀgamingꢀestablishmentsꢀinꢀtheꢀUnitedꢀStatesꢀandꢀinꢀcertainꢀinternationalꢀmarkets.ꢀWithꢀrespectꢀto ourꢀgamingꢀproducts,ꢀweꢀparticipateꢀinꢀtheꢀClassꢀIIꢀandꢀClassꢀIIIꢀgamingꢀmachineꢀmarkets,ꢀandꢀtheꢀcentralꢀdeterminantꢀsystem marketꢀinꢀNorthꢀAmerica,ꢀthroughꢀparticipation,ꢀorꢀrevenueꢀshare,ꢀandꢀfixedꢀfeeꢀarrangements,ꢀandꢀtheꢀsaleꢀofꢀproprietaryꢀEGMs andꢀsystems.ꢀ InꢀourꢀFinTechꢀbusiness,ꢀweꢀsellꢀandꢀmarketꢀCashꢀAccessꢀ(i.e.,ꢀCashꢀAdvance,ꢀATM,ꢀandꢀCheckꢀServices),ꢀEquipmentꢀ(i.e.,ꢀKiosks Sales),ꢀInformationꢀServicesꢀandꢀOtherꢀ(i.e.,ꢀKioskꢀServices,ꢀComplianceꢀSalesꢀandꢀServices,ꢀCentralꢀCreditꢀServices,ꢀandꢀAncillary Services)ꢀthroughꢀtheꢀuseꢀofꢀaꢀdirectꢀsalesꢀforce,ꢀwhichꢀtargetsꢀgamingꢀestablishmentsꢀinꢀtheꢀUnitedꢀStatesꢀandꢀinꢀcertainꢀinternational markets.ꢀ WithꢀrespectꢀtoꢀbothꢀourꢀGamesꢀandꢀFinTechꢀbusinesses,ꢀourꢀsalesꢀandꢀmarketingꢀeffortsꢀareꢀdirectedꢀbyꢀaꢀteamꢀofꢀcustomerꢀservice executives,ꢀeachꢀofꢀwhomꢀhasꢀbusinessꢀdevelopmentꢀresponsibilityꢀforꢀgamingꢀestablishmentsꢀinꢀspecifiedꢀgeographicꢀregions. 10 Theseꢀ customerꢀ serviceꢀ executivesꢀ directꢀ theirꢀ effortsꢀ atꢀ variousꢀ levelsꢀ ofꢀ gamingꢀ establishmentꢀ personnel,ꢀ including:ꢀ senior executives,ꢀfinanceꢀprofessionals,ꢀmarketingꢀstaff,ꢀslotꢀdirectors,ꢀandꢀcashiers,ꢀandꢀseekꢀtoꢀeducateꢀthemꢀonꢀtheꢀbenefitsꢀofꢀour productsꢀandꢀservices.ꢀInꢀsomeꢀcases,ꢀourꢀcustomerꢀserviceꢀexecutivesꢀareꢀsupportedꢀbyꢀfieldꢀserviceꢀandꢀcustomerꢀengagement teams,ꢀwhoꢀprovideꢀon-siteꢀcustomerꢀserviceꢀtoꢀmostꢀofꢀourꢀcustomers.ꢀInꢀotherꢀcases,ꢀourꢀsalesꢀexecutivesꢀdirectlyꢀmaintainꢀthe customerꢀrelationships.ꢀTheseꢀcustomerꢀserviceꢀexecutivesꢀandꢀfieldꢀserviceꢀandꢀcustomerꢀengagementꢀteamsꢀgenerallyꢀresideꢀin theꢀ vicinityꢀ ofꢀ theꢀ specificꢀ gamingꢀ establishmentsꢀ theyꢀ supportꢀ toꢀ ensureꢀ aꢀ promptꢀ responseꢀ toꢀ theꢀ needsꢀ ofꢀ thoseꢀ gaming establishments.ꢀWeꢀalsoꢀhaveꢀjointꢀsalesꢀeffortsꢀwithꢀaꢀnumberꢀofꢀstrategicꢀpartners,ꢀincludingꢀindependentꢀsalesꢀorganizations, whichꢀallowꢀusꢀtoꢀmarketꢀourꢀproductsꢀandꢀservicesꢀtoꢀgamingꢀestablishmentsꢀthroughꢀchannelsꢀotherꢀthanꢀourꢀdirectꢀsalesꢀforce. Competition WithꢀrespectꢀtoꢀourꢀGamesꢀbusiness,ꢀweꢀcompeteꢀacrossꢀdifferentꢀgamingꢀmarketsꢀwithꢀaꢀvarietyꢀofꢀgamingꢀequipmentꢀsuppliers. Competitionꢀisꢀgenerallyꢀbasedꢀuponꢀthe:ꢀ(a)ꢀamountꢀofꢀrevenueꢀourꢀproductsꢀgenerateꢀforꢀourꢀcustomersꢀrelativeꢀtoꢀtheꢀamount ofꢀrevenueꢀgeneratedꢀbyꢀourꢀcompetitors’ꢀproducts;ꢀ(b)ꢀpricesꢀandꢀfeesꢀweꢀandꢀourꢀcompetitorsꢀchargeꢀforꢀproductsꢀandꢀservices offered;ꢀandꢀ(c)ꢀappealꢀofꢀourꢀcompetitors’ꢀproductsꢀtoꢀgamingꢀpatrons,ꢀwhichꢀhasꢀaꢀdirectꢀeffectꢀonꢀtheꢀvolumeꢀofꢀplayꢀgenerated byꢀ aꢀ productꢀ and,ꢀ accordingly,ꢀ theꢀ revenuesꢀ generatedꢀ forꢀ ourꢀ customers.ꢀ Toꢀ driveꢀ customerꢀ demandꢀ andꢀ improveꢀ product attractiveness,ꢀweꢀcontinuallyꢀworkꢀtoꢀdevelopꢀnewꢀgameꢀthemes,ꢀgameꢀengines,ꢀhardwareꢀplatforms,ꢀandꢀsystemsꢀthatꢀappealꢀto gamingꢀpatrons,ꢀallꢀwhileꢀworkingꢀtoꢀreleaseꢀtheseꢀnewꢀproductsꢀtoꢀtheꢀmarketplaceꢀinꢀaꢀtimelyꢀmanner. WithꢀrespectꢀtoꢀourꢀFinTechꢀbusiness,ꢀweꢀcompeteꢀwithꢀotherꢀprovidersꢀofꢀcashꢀaccessꢀservicesꢀtoꢀtheꢀgamingꢀindustryꢀasꢀwellꢀas withꢀfinancialꢀinstitutionsꢀandꢀotherꢀregionalꢀandꢀlocalꢀbanksꢀthatꢀoperateꢀATMsꢀonꢀtheꢀpremisesꢀofꢀgamingꢀestablishments.ꢀSome ofꢀtheseꢀotherꢀprovidersꢀandꢀfinancialꢀinstitutionsꢀhaveꢀestablishedꢀcooperativeꢀrelationshipsꢀwithꢀeachꢀotherꢀtoꢀexpandꢀtheirꢀservice offerings.ꢀWeꢀalsoꢀfaceꢀincreasedꢀcompetitionꢀfrom:ꢀ(a)ꢀindependentꢀsalesꢀorganizations,ꢀwhichꢀprovideꢀbasicꢀservicesꢀandꢀaggressive pricing;ꢀ(b)ꢀotherꢀmanufacturersꢀthatꢀprovideꢀsimilarꢀgoodsꢀandꢀservices;ꢀandꢀ(c)ꢀtraditionalꢀtransactionꢀprocessorsꢀthatꢀhaveꢀentered theꢀgamingꢀpatronꢀcashꢀaccessꢀservicesꢀmarket.ꢀThisꢀincreasedꢀcompetitionꢀamongstꢀtheseꢀvariousꢀprovidersꢀofꢀcashꢀaccessꢀservices hasꢀresultedꢀinꢀpricingꢀpressureꢀandꢀmarginꢀerosionꢀwithꢀrespectꢀtoꢀourꢀcoreꢀcashꢀaccessꢀproductsꢀandꢀservices.ꢀInꢀadditionꢀto competingꢀwithꢀvariousꢀprovidersꢀofꢀcashꢀaccessꢀservices,ꢀFinTechꢀhasꢀexperiencedꢀcompetitionꢀfromꢀeitherꢀthoseꢀsameꢀproviders orꢀstand-aloneꢀprovidersꢀofꢀanti-moneyꢀlaunderingꢀcomplianceꢀproductsꢀandꢀself-serviceꢀkiosksꢀforꢀticketꢀredemptionꢀandꢀjackpot redemption.ꢀ Intellectual Property Weꢀbelieveꢀtheꢀabilityꢀtoꢀintroduceꢀandꢀrespondꢀtoꢀtechnologicalꢀinnovationꢀinꢀtheꢀgamingꢀindustryꢀwillꢀbeꢀanꢀincreasinglyꢀimportant qualificationꢀ forꢀ theꢀ futureꢀ successꢀ ofꢀ anyꢀ providerꢀ ofꢀ cashꢀ accessꢀ andꢀ gaming-relatedꢀ productsꢀ andꢀ services.ꢀ Ourꢀ continued competitivenessꢀwillꢀdependꢀon:ꢀ(a)ꢀtheꢀpaceꢀofꢀourꢀnewꢀproductꢀdevelopment;ꢀ(b)ꢀourꢀpatent,ꢀcopyright,ꢀtrademark,ꢀandꢀtrade secretꢀprotection;ꢀandꢀ(c)ꢀourꢀrelationshipsꢀwithꢀcustomers.ꢀOurꢀbusinessꢀdevelopmentꢀpersonnelꢀworkꢀwithꢀgamingꢀestablishments, ourꢀtechnologyꢀandꢀotherꢀstrategicꢀpartners,ꢀandꢀtheꢀsuppliersꢀofꢀtheꢀfinancialꢀservicesꢀuponꢀwhichꢀourꢀcashꢀaccessꢀservicesꢀrely, toꢀdesignꢀandꢀdevelopꢀinnovativeꢀproductsꢀandꢀservicesꢀthatꢀappealꢀtoꢀgamingꢀpatrons. Weꢀrelyꢀonꢀaꢀcombinationꢀofꢀpatents,ꢀtrademarks,ꢀcopyrights,ꢀtradeꢀsecrets,ꢀandꢀcontractualꢀrestrictionsꢀtoꢀprotectꢀourꢀintellectual property.ꢀTheꢀexpirationꢀdatesꢀofꢀtheseꢀpatentsꢀvaryꢀandꢀareꢀbasedꢀonꢀtheirꢀfilingꢀandꢀissuancesꢀdates.ꢀWeꢀintendꢀtoꢀcontinueꢀto activelyꢀfileꢀforꢀpatentꢀprotection,ꢀwhenꢀsuchꢀfilingsꢀareꢀcommerciallyꢀreasonable,ꢀwithinꢀandꢀoutsideꢀtheꢀUnitedꢀStates.ꢀWeꢀalso seekꢀtrademarkꢀprotectionꢀforꢀourꢀnamesꢀandꢀproductsꢀandꢀhaveꢀregisteredꢀhundredsꢀofꢀtrademarksꢀinꢀtheꢀUnitedꢀStatesꢀandꢀvarious foreignꢀcountries.ꢀUnderꢀpermissionꢀorꢀlicenseꢀagreementsꢀwithꢀthirdꢀparties,ꢀweꢀalsoꢀsellꢀgamingꢀproductsꢀcoveredꢀbyꢀindependently filedꢀcopyrights,ꢀtrademarks,ꢀorꢀpatents.ꢀTypically,ꢀtheseꢀcontractsꢀrequireꢀusꢀtoꢀpayꢀroyaltiesꢀtoꢀtheꢀlicensingꢀparty.ꢀRoyaltyꢀexpenses areꢀincludedꢀinꢀtheꢀcostꢀofꢀgamingꢀandꢀsystemsꢀinꢀourꢀFinancialꢀStatementsꢀincludedꢀelsewhereꢀinꢀthisꢀAnnualꢀReportꢀonꢀFormꢀ10- K.ꢀInꢀadditionꢀtoꢀourꢀpatents,ꢀtrademarks,ꢀandꢀcopyrights,ꢀweꢀalsoꢀrelyꢀonꢀaꢀbroaderꢀscopeꢀofꢀintellectualꢀpropertyꢀincludingꢀtrade secrets,ꢀin-houseꢀknow-how,ꢀandꢀinnovation. Seasonality Ourꢀrevenuesꢀandꢀcashꢀflowsꢀmayꢀfluctuateꢀthroughoutꢀtheꢀyearꢀdrivenꢀbyꢀseasonalityꢀinꢀplayerꢀdemandꢀandꢀactivity.ꢀWeꢀgenerally experienceꢀhigherꢀoperatingꢀresultsꢀduringꢀtheꢀfirstꢀhalfꢀofꢀaꢀyearꢀandꢀlowerꢀoperatingꢀresultsꢀduringꢀtheꢀsecondꢀhalfꢀofꢀaꢀyear, however,ꢀsuchꢀfluctuationsꢀdoꢀnotꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀrevenuesꢀandꢀcashꢀflows.ꢀ Employees AsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀweꢀhadꢀapproximatelyꢀ1,250ꢀemployees.ꢀWeꢀbelieveꢀthatꢀourꢀrelationsꢀwithꢀourꢀemployeesꢀareꢀgood. Weꢀhaveꢀneverꢀexperiencedꢀaꢀworkꢀstoppageꢀandꢀnoneꢀofꢀourꢀemployeesꢀareꢀsubjectꢀtoꢀaꢀcollectiveꢀbargainingꢀagreement. 11 Available Information Ourꢀwebsiteꢀaddressꢀisꢀwww.everi.com.ꢀWeꢀmakeꢀavailableꢀfreeꢀofꢀchargeꢀonꢀourꢀwebsiteꢀourꢀAnnualꢀReportsꢀonꢀFormꢀ10-K, QuarterlyꢀReportsꢀonꢀFormꢀ10-Q,ꢀCurrentꢀReportsꢀonꢀFormꢀ8-K,ꢀandꢀallꢀamendmentsꢀtoꢀthoseꢀreportsꢀfiledꢀorꢀfurnishedꢀpursuant toꢀSectionꢀ13(a)ꢀorꢀ15(d)ꢀofꢀtheꢀExchangeꢀAct,ꢀasꢀsoonꢀasꢀreasonablyꢀpracticableꢀafterꢀsuchꢀreportsꢀareꢀelectronicallyꢀfiledꢀwith, orꢀfurnishedꢀto,ꢀtheꢀSEC.ꢀInꢀaddition,ꢀourꢀearningsꢀconferenceꢀcallsꢀareꢀwebꢀcastꢀliveꢀviaꢀourꢀwebsite.ꢀInꢀadditionꢀtoꢀvisitingꢀour website,ꢀyouꢀmayꢀreadꢀanyꢀdocumentꢀweꢀfileꢀwithꢀtheꢀSECꢀatꢀwww.sec.gov.ꢀ General REGULATION Weꢀ believeꢀ thatꢀ weꢀ areꢀ inꢀ substantialꢀ complianceꢀ withꢀ allꢀ materialꢀ gamingꢀ andꢀ financialꢀ institutionꢀ lawsꢀ applicableꢀ toꢀ our business.ꢀWeꢀhaveꢀaꢀdiligentꢀinternalꢀcomplianceꢀprogramꢀtoꢀensureꢀcomplianceꢀwithꢀourꢀbusinessꢀactivities,ꢀasꢀwellꢀasꢀlegal requirementsꢀgenerallyꢀapplicableꢀtoꢀallꢀpubliclyꢀtradedꢀcompanies.ꢀTheꢀcomplianceꢀprogramꢀisꢀdirectedꢀonꢀaꢀday-to-dayꢀbasisꢀby ourꢀChiefꢀComplianceꢀOfficer.ꢀLegalꢀadviceꢀisꢀprovidedꢀbyꢀattorneysꢀfromꢀtheꢀCompany’sꢀlegalꢀdepartmentꢀandꢀoutsideꢀexperts. Theꢀ complianceꢀ programꢀ isꢀ overseenꢀ byꢀ theꢀ Corporateꢀ Complianceꢀ Committee,ꢀ whichꢀ includesꢀ aꢀ gamingꢀ lawꢀ expertꢀ asꢀ an independentꢀmember.ꢀWeꢀcanꢀgiveꢀnoꢀassurance,ꢀhowever,ꢀthatꢀourꢀbusinessꢀactivitiesꢀorꢀtheꢀactivitiesꢀofꢀourꢀcustomersꢀinꢀthe gamingꢀindustryꢀwillꢀnotꢀbeꢀsubjectꢀtoꢀanyꢀregulatoryꢀorꢀlegalꢀenforcementꢀproceedingsꢀinꢀtheꢀfutureꢀandꢀaꢀviolationꢀofꢀapplicable lawsꢀbyꢀusꢀorꢀanyꢀofꢀourꢀsubsidiariesꢀcouldꢀhaveꢀaꢀmaterialꢀadverseꢀeffectꢀonꢀourꢀfinancialꢀcondition,ꢀprospects,ꢀandꢀresultsꢀof operations.ꢀDependingꢀonꢀtheꢀnatureꢀofꢀanyꢀnoncompliance,ꢀourꢀfailureꢀtoꢀcomplyꢀwithꢀsuchꢀlaws,ꢀregulations,ꢀandꢀordinances mayꢀresultꢀinꢀtheꢀsuspensionꢀorꢀrevocationꢀofꢀanyꢀlicense,ꢀregistration,ꢀorꢀotherꢀapproval,ꢀaꢀpartialꢀorꢀcompleteꢀcessationꢀofꢀour business,ꢀseizureꢀofꢀourꢀassets,ꢀasꢀwellꢀasꢀtheꢀimpositionꢀofꢀcivilꢀfinesꢀandꢀcriminalꢀpenalties. Gaming Regulation Theꢀgamingꢀindustryꢀisꢀhighlyꢀregulatedꢀunderꢀlegalꢀsystemsꢀthatꢀfrequentlyꢀevolveꢀandꢀchangeꢀbasedꢀonꢀgovernmentalꢀpublic policies.ꢀVariousꢀaspectsꢀofꢀourꢀbusinessꢀareꢀsubjectꢀtoꢀcomprehensiveꢀlaws,ꢀregulations,ꢀandꢀordinancesꢀapplicableꢀtoꢀtheꢀownership, management,ꢀandꢀoperationꢀofꢀgamblingꢀestablishmentsꢀasꢀwellꢀasꢀcertainꢀfinancialꢀservicesꢀconductedꢀatꢀsuchꢀestablishments. Theꢀstatedꢀpoliciesꢀandꢀotherꢀpurposesꢀbehindꢀsuchꢀlaws,ꢀregulations,ꢀandꢀordinancesꢀareꢀgenerallyꢀto:ꢀ(i)ꢀensureꢀtheꢀpublic’sꢀtrust andꢀ confidenceꢀ inꢀ legalizedꢀ gamblingꢀ throughꢀ aꢀ systemꢀ ofꢀ mandatedꢀ regulation,ꢀ internalꢀ controls,ꢀ accountingꢀ practices,ꢀ and operatingꢀprocedures;ꢀandꢀ(ii)ꢀpromoteꢀeconomicꢀactivityꢀforꢀtheꢀstate,ꢀcounty,ꢀandꢀlocalꢀgovernmentsꢀthroughꢀrevenueꢀopportunities emanatingꢀfromꢀtaxes,ꢀlicensingꢀfees,ꢀandꢀotherꢀeconomicꢀbenefitsꢀarisingꢀoutꢀofꢀgamblingꢀandꢀrelatedꢀactivities. Aꢀdescriptionꢀofꢀtheꢀmaterialꢀregulationsꢀtoꢀwhichꢀweꢀareꢀsubjectꢀisꢀsetꢀforthꢀbelow. Gaming Authorities.ꢀWeꢀareꢀregulatedꢀbyꢀvariousꢀcity,ꢀcounty,ꢀstate,ꢀprovincial,ꢀfederal,ꢀtribal,ꢀandꢀforeignꢀgovernmentꢀagencies (collectively,ꢀ“GamingꢀAuthorities”)ꢀinꢀtheꢀjurisdictionsꢀwhereꢀweꢀconductꢀbusinessꢀasꢀeitherꢀa:ꢀ(i)ꢀmanufacturerꢀofꢀgamingꢀdevices, inꢀ thoseꢀ jurisdictionsꢀ whereꢀ weꢀ manufactureꢀ gamingꢀ devicesꢀ andꢀ systems;ꢀ (ii)ꢀ supplierꢀ ofꢀ “associatedꢀ equipment,”ꢀ inꢀ those jurisdictionsꢀwhereꢀweꢀsellꢀandꢀserviceꢀfullyꢀintegratedꢀkiosksꢀandꢀotherꢀintegratedꢀkioskꢀsolutions;ꢀandꢀ(iii)ꢀnon-gamingꢀsupplier orꢀvendor,ꢀinꢀthoseꢀjurisdictionsꢀwhereꢀweꢀprovideꢀcashꢀaccessꢀandꢀCentralꢀCreditꢀservicesꢀonly.ꢀWeꢀmustꢀmaintainꢀthoseꢀlicenses, registrations,ꢀorꢀotherꢀapprovalsꢀinꢀgoodꢀstandingꢀtoꢀcontinueꢀourꢀbusiness.ꢀGamingꢀAuthoritiesꢀhaveꢀbroadꢀdiscretionꢀinꢀdetermining whetherꢀtoꢀgrantꢀaꢀlicense,ꢀregistration,ꢀorꢀotherꢀapproval.ꢀSubjectꢀtoꢀcomplyingꢀwithꢀcertainꢀproceduralꢀrequirements,ꢀGaming Authoritiesꢀmayꢀdenyꢀanyꢀapplication,ꢀorꢀlimit,ꢀcondition,ꢀrestrict,ꢀrevokeꢀorꢀsuspendꢀanyꢀlicense,ꢀregistration,ꢀfindingꢀofꢀsuitability, qualification,ꢀorꢀotherꢀapprovalꢀforꢀanyꢀcauseꢀdeemedꢀreasonableꢀtoꢀthem.ꢀ Approvals, Licensing and Suitability Theꢀprocessꢀofꢀobtainingꢀnecessaryꢀlicenses,ꢀregistrations,ꢀorꢀotherꢀapprovalsꢀoftenꢀinvolvesꢀsubstantialꢀdisclosureꢀofꢀconfidential orꢀproprietaryꢀinformationꢀaboutꢀusꢀandꢀourꢀofficers,ꢀdirectors,ꢀkeyꢀpersonnelꢀand,ꢀinꢀcertainꢀinstances,ꢀbeneficialꢀownersꢀofꢀour debtꢀorꢀequityꢀsecurities,ꢀandꢀrequiresꢀaꢀdeterminationꢀbyꢀtheꢀregulatorsꢀasꢀtoꢀourꢀsuitabilityꢀasꢀaꢀmanufacturer,ꢀsupplier,ꢀorꢀvendor toꢀgamingꢀestablishments.ꢀGamingꢀregulatoryꢀauthoritiesꢀhaveꢀbroadꢀdiscretionꢀandꢀmayꢀrequireꢀanyꢀbeneficialꢀholderꢀofꢀour securities,ꢀregardlessꢀofꢀtheꢀnumberꢀofꢀsharesꢀofꢀcommonꢀstockꢀorꢀamountꢀofꢀdebtꢀsecuritiesꢀowned,ꢀtoꢀfileꢀanꢀapplication,ꢀmake personalꢀorꢀconfidentialꢀdisclosures,ꢀbeꢀinvestigated,ꢀandꢀbeꢀsubjectꢀtoꢀaꢀdeterminationꢀofꢀsuitability.ꢀManyꢀjurisdictionsꢀrequire anyꢀpersonꢀwhoꢀacquiresꢀbeneficialꢀownershipꢀofꢀmoreꢀthanꢀaꢀcertainꢀpercentageꢀofꢀvotingꢀsecuritiesꢀofꢀaꢀgamingꢀcompanyꢀand, inꢀsomeꢀjurisdictions,ꢀnon-votingꢀsecurities,ꢀtypicallyꢀ5%,ꢀtoꢀreportꢀtheꢀacquisitionꢀtoꢀGamingꢀAuthorities,ꢀandꢀGamingꢀAuthorities mayꢀ requireꢀ suchꢀ holdersꢀ toꢀ applyꢀ forꢀ qualificationꢀ orꢀ aꢀ findingꢀ ofꢀ suitability,ꢀ subjectꢀ toꢀ limitedꢀ exceptionsꢀ forꢀ “institutional investors”ꢀthatꢀholdꢀaꢀcompany’sꢀvotingꢀsecuritiesꢀforꢀinvestmentꢀpurposesꢀonly. 12 Product Approvals OurꢀgamingꢀdevicesꢀandꢀcertainꢀotherꢀproductsꢀandꢀtechnologiesꢀmustꢀbeꢀcertifiedꢀorꢀapprovedꢀbyꢀGamingꢀAuthoritiesꢀinꢀmany jurisdictionsꢀwhereꢀweꢀconductꢀbusiness.ꢀTheseꢀGamingꢀAuthoritiesꢀtestꢀtheꢀgamingꢀdevices,ꢀsystems,ꢀandꢀrelatedꢀequipment directlyꢀorꢀthroughꢀanꢀindependentꢀtestingꢀlaboratoryꢀandꢀmayꢀalsoꢀrequireꢀaꢀfieldꢀtrialꢀunderꢀtheꢀregulator’sꢀtechnicalꢀstandards beforeꢀallowingꢀusꢀtoꢀsellꢀtheꢀproduct.ꢀAlthoughꢀweꢀcollaborateꢀcloselyꢀwithꢀtheꢀGamingꢀAuthoritiesꢀandꢀindependentꢀtesting laboratories,ꢀweꢀcannotꢀcontrolꢀwhetherꢀourꢀproductsꢀwillꢀbeꢀapprovedꢀorꢀtheꢀlengthꢀofꢀtimeꢀtakenꢀtoꢀreviewꢀourꢀproductsꢀforꢀsale toꢀthirdꢀparties.ꢀMoreover,ꢀthereꢀareꢀnoꢀguaranteesꢀthatꢀweꢀwillꢀbeꢀsuccessfulꢀinꢀobtainingꢀandꢀmaintainingꢀallꢀnecessaryꢀlicenses, permits,ꢀandꢀapprovalsꢀandꢀtoꢀcontinueꢀtoꢀholdꢀotherꢀnecessaryꢀgamingꢀlicenses,ꢀpermits,ꢀandꢀapprovalsꢀtoꢀconductꢀourꢀbusinesses eitherꢀasꢀcurrentlyꢀbeingꢀconductedꢀbyꢀusꢀorꢀtoꢀexpandꢀourꢀbusinesses. OurꢀNativeꢀAmericanꢀcustomersꢀareꢀregulatedꢀbyꢀtheꢀNationalꢀIndianꢀGamingꢀCommissionꢀ(“NIGC”),ꢀwhichꢀwasꢀestablishedꢀby theꢀIndianꢀGamingꢀRegulatoryꢀActꢀofꢀ1988ꢀ(“IGRA”).ꢀTheꢀNIGCꢀhasꢀregulatoryꢀauthorityꢀoverꢀcertainꢀaspectsꢀofꢀNativeꢀAmerican gamingꢀandꢀdefinesꢀtheꢀboundariesꢀofꢀourꢀdealingsꢀwithꢀtheꢀNativeꢀAmericanꢀmarketplaceꢀandꢀtheꢀlevelꢀofꢀregulatoryꢀauthorityꢀto whichꢀtheseꢀgamesꢀareꢀsubject.ꢀIGRAꢀestablishesꢀthreeꢀclassesꢀofꢀgaming,ꢀeachꢀwithꢀaꢀdifferentꢀregulatoryꢀframework: Class I II III Type of Games SocialꢀgamingꢀforꢀminimalꢀprizesꢀandꢀtraditionalꢀIndian gaming. Bingoꢀ(bothꢀinꢀtraditionalꢀandꢀelectronicꢀform). Casinoꢀstyleꢀgamesꢀ(includingꢀslotꢀmachines,ꢀblackjack, craps,ꢀandꢀroulette). Regulatory Oversight Exclusiveꢀregulationꢀandꢀoversightꢀbyꢀtribal governments. RegulationꢀbyꢀtribalꢀgovernmentsꢀwithꢀNIGCꢀoversight. Mustꢀbeꢀpermittedꢀbyꢀtheꢀstateꢀinꢀwhichꢀtheꢀtribeꢀis located.ꢀTheꢀstateꢀandꢀtheꢀtribeꢀmustꢀhaveꢀnegotiatedꢀa compactꢀapprovedꢀbyꢀNIGC,ꢀandꢀtheꢀtribeꢀmustꢀhave adoptedꢀaꢀgamingꢀordinanceꢀapprovedꢀbyꢀtheꢀNIGC. ꢀ WeꢀsellꢀourꢀgamingꢀdevicesꢀandꢀsystemsꢀinꢀbothꢀClassꢀIIꢀandꢀClassꢀIIIꢀmarkets. ClassꢀIIIꢀgamingꢀonꢀNativeꢀAmericanꢀtribalꢀlandsꢀisꢀusuallyꢀsubjectꢀtoꢀtheꢀnegotiationꢀofꢀaꢀcompactꢀbetweenꢀtheꢀtribeꢀandꢀthe proximateꢀstateꢀattendantꢀtoꢀwhereꢀtheꢀtribeꢀintendsꢀtoꢀoperateꢀaꢀgamingꢀfacility.ꢀTheseꢀtribal-stateꢀcompactsꢀtypicallyꢀinclude provisionsꢀentitlingꢀtheꢀstateꢀtoꢀreceiveꢀsignificantꢀsumsꢀofꢀmoneyꢀinꢀexchangeꢀforꢀtheꢀtribe’sꢀoperationꢀofꢀClassꢀIIIꢀgaming.ꢀWhile tribal-stateꢀcompactsꢀareꢀintendedꢀtoꢀdocumentꢀtheꢀagreementꢀbetweenꢀtheꢀstateꢀandꢀaꢀtribe,ꢀtheseꢀtribal-stateꢀcompactsꢀcanꢀbe subjectꢀtoꢀdisputesꢀrelativeꢀtoꢀpermittedꢀClassꢀIIIꢀgamingꢀoperations. The Johnson Act.ꢀTheꢀJohnsonꢀAct,ꢀasꢀamendedꢀbyꢀtheꢀfederalꢀGamblingꢀDevicesꢀActꢀofꢀ1962ꢀ(theꢀ“JohnsonꢀAct”),ꢀrequiresꢀthat weꢀregisterꢀannuallyꢀwithꢀtheꢀCriminalꢀDivisionꢀofꢀtheꢀUnitedꢀStatesꢀDepartmentꢀofꢀJusticeꢀandꢀrequiresꢀaꢀwideꢀvarietyꢀofꢀrecord keepingꢀandꢀequipmentꢀidentificationꢀeffortsꢀonꢀourꢀpart.ꢀRegistrationꢀisꢀrequiredꢀinꢀorderꢀforꢀusꢀtoꢀsell,ꢀdistribute,ꢀmanufacture, transport,ꢀorꢀreceiveꢀgamingꢀequipment,ꢀmachines,ꢀorꢀcomponentsꢀacrossꢀstateꢀlines.ꢀIfꢀweꢀfailꢀtoꢀcomplyꢀwithꢀtheꢀrequirements setꢀforthꢀunderꢀtheꢀJohnsonꢀAct,ꢀweꢀcouldꢀbecomeꢀsubjectꢀtoꢀaꢀvarietyꢀofꢀpenalties,ꢀincluding,ꢀbutꢀnotꢀlimitedꢀto,ꢀtheꢀseizureꢀand forfeitureꢀofꢀequipment. Internet and Online Gaming Regulation.ꢀSeveralꢀstatesꢀhaveꢀpassedꢀimplementingꢀlegislationꢀandꢀregulationsꢀtoꢀallowꢀcertain intra-state,ꢀwager-based,ꢀonlineꢀcasino,ꢀorꢀlotteryꢀgames,ꢀsuchꢀasꢀonlineꢀpoker,ꢀonlineꢀlottery,ꢀlotteryꢀticketꢀpurchases,ꢀorꢀlottery ticketꢀsubscriptions.ꢀToꢀdate,ꢀseveralꢀstatesꢀhaveꢀauthorizedꢀsomeꢀformꢀofꢀInternetꢀorꢀonlineꢀgamingꢀorꢀlotteryꢀactivities.ꢀHowever, theꢀlegislativeꢀandꢀregulatoryꢀframeworkꢀgoverningꢀtheseꢀactivitiesꢀmayꢀcontinueꢀtoꢀevolveꢀinꢀtheꢀfuture. Financial Services Regulation OurꢀFinTechꢀbusinessꢀisꢀalsoꢀsubjectꢀtoꢀaꢀnumberꢀofꢀfinancialꢀservicesꢀregulations: Durbin Amendment.ꢀRulesꢀpromulgatedꢀbyꢀtheꢀBoardꢀofꢀGovernorsꢀofꢀtheꢀFederalꢀReserveꢀSystem,ꢀrequiredꢀasꢀpartꢀofꢀtheꢀDodd- Frankꢀ Wallꢀ Streetꢀ Reformꢀ andꢀ Consumerꢀ Protectionꢀ Actꢀ ofꢀ 2010ꢀ (theꢀ “Dodd-Frankꢀ Act”),ꢀ includingꢀ theꢀ so-calledꢀ Durbin Amendmentꢀ(theꢀ“DurbinꢀAmendment”),ꢀestablish,ꢀamongꢀotherꢀthings,ꢀstandardsꢀforꢀassessingꢀwhetherꢀdebitꢀcardꢀinterchange feesꢀreceivedꢀbyꢀcertainꢀdebitꢀcardꢀissuersꢀareꢀreasonableꢀandꢀproportionalꢀtoꢀtheꢀcostsꢀincurredꢀbyꢀissuersꢀforꢀelectronicꢀdebit transactions.ꢀDebitꢀcardꢀinterchangeꢀfeesꢀareꢀestablishedꢀbyꢀpaymentꢀcardꢀnetworksꢀandꢀultimatelyꢀpaidꢀbyꢀmerchantsꢀtoꢀdebitꢀcard issuersꢀforꢀeachꢀdebitꢀtransaction. 13 Anti-Money Laundering.ꢀTheꢀUSAꢀPATRIOTꢀActꢀofꢀ2001,ꢀotherꢀfederalꢀstatutes,ꢀgenerallyꢀreferredꢀtoꢀasꢀtheꢀBankꢀSecrecyꢀAct, andꢀimplementingꢀfederalꢀregulationsꢀrequireꢀusꢀtoꢀestablishꢀandꢀmaintainꢀanꢀanti-moneyꢀlaunderingꢀprogram.ꢀOurꢀanti-money launderingꢀprogramꢀincludes:ꢀinternalꢀpolicies,ꢀprocedures,ꢀandꢀcontrolsꢀdesignedꢀtoꢀidentifyꢀandꢀreportꢀmoneyꢀlaundering,ꢀa designatedꢀcomplianceꢀofficer,ꢀanꢀongoingꢀemployeeꢀtrainingꢀprogram,ꢀandꢀanꢀindependentꢀauditꢀfunctionꢀtoꢀtestꢀtheꢀprogram.ꢀIn addition,ꢀtheꢀcashꢀaccessꢀservicesꢀthatꢀweꢀprovideꢀareꢀsubjectꢀtoꢀrecordꢀkeepingꢀandꢀreportingꢀobligationsꢀunderꢀtheꢀBankꢀSecrecy Act.ꢀ Ourꢀ gamingꢀ establishmentꢀ customersꢀ areꢀ requiredꢀ toꢀ fileꢀ aꢀ SARꢀ withꢀ theꢀ U.S.ꢀTreasuryꢀ Department’sꢀ Financialꢀ Crimes EnforcementꢀNetworkꢀtoꢀreportꢀanyꢀsuspiciousꢀtransactionsꢀrelevantꢀtoꢀaꢀpossibleꢀviolationꢀofꢀlawꢀorꢀregulation.ꢀWeꢀareꢀalso requiredꢀtoꢀfileꢀaꢀSARꢀwhereꢀweꢀprovideꢀourꢀcashꢀaccessꢀservicesꢀdirectlyꢀtoꢀpatronsꢀthroughꢀfinancialꢀservicesꢀcentersꢀthatꢀwe staffꢀandꢀoperate.ꢀToꢀbeꢀreportable,ꢀsuchꢀaꢀtransactionꢀmustꢀmeetꢀcriteriaꢀthatꢀareꢀdesignedꢀtoꢀidentifyꢀtheꢀhidingꢀorꢀdisguisingꢀof fundsꢀderivedꢀfromꢀillegalꢀactivities.ꢀOurꢀgamingꢀestablishmentꢀcustomers,ꢀinꢀsituationsꢀwhereꢀourꢀcashꢀaccessꢀservicesꢀareꢀprovided throughꢀ gamingꢀ establishmentꢀ cashierꢀ personnel,ꢀ andꢀ we,ꢀ inꢀ situationsꢀ whereꢀ weꢀ provideꢀ ourꢀ cashꢀ accessꢀ servicesꢀ throughꢀ a financialꢀservicesꢀcenter,ꢀareꢀrequiredꢀtoꢀfileꢀaꢀCTRꢀofꢀeachꢀdeposit,ꢀwithdrawal,ꢀexchangeꢀofꢀcurrency,ꢀorꢀotherꢀpaymentꢀorꢀtransfer by,ꢀthrough,ꢀorꢀtoꢀusꢀwhichꢀinvolvesꢀaꢀtransactionꢀinꢀcurrencyꢀofꢀmoreꢀthanꢀ$10,000ꢀinꢀaꢀsingleꢀday.ꢀOurꢀCashClub®ꢀproductꢀcan assistꢀinꢀidentifyingꢀtransactionsꢀthatꢀgiveꢀriseꢀtoꢀreportingꢀobligations.ꢀ Fund Transfers.ꢀOurꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransactions,ꢀcreditꢀcardꢀcashꢀaccessꢀtransactions,ꢀandꢀATMꢀservicesꢀareꢀsubject toꢀtheꢀElectronicꢀFundꢀTransferꢀAct,ꢀwhichꢀprovidesꢀcardholdersꢀwithꢀrightsꢀwithꢀrespectꢀtoꢀelectronicꢀfundꢀtransfers,ꢀincluding theꢀrightꢀtoꢀdisputeꢀunauthorizedꢀcharges,ꢀchargesꢀthatꢀlistꢀtheꢀwrongꢀdateꢀorꢀamount,ꢀchargesꢀforꢀgoodsꢀandꢀservicesꢀthatꢀareꢀnot acceptedꢀorꢀdeliveredꢀasꢀagreed,ꢀmathꢀerrors,ꢀandꢀchargesꢀforꢀwhichꢀaꢀcardholderꢀasksꢀforꢀanꢀexplanationꢀorꢀwrittenꢀproofꢀof transactionꢀalongꢀwithꢀaꢀclaimedꢀerrorꢀorꢀrequestꢀforꢀclarification.ꢀWeꢀbelieveꢀtheꢀnecessaryꢀpoliciesꢀandꢀproceduresꢀhaveꢀbeen implementedꢀthroughoutꢀourꢀorganizationꢀinꢀorderꢀtoꢀcomplyꢀwithꢀtheꢀregulatoryꢀrequirementsꢀforꢀfundꢀtransfers. State Money Transmission Laws.ꢀManyꢀ statesꢀ whereꢀ weꢀ completeꢀ creditꢀ cardꢀ cashꢀ accessꢀ andꢀ POSꢀ debitꢀ cardꢀ cashꢀ access transactionsꢀorꢀofferꢀourꢀonlineꢀpaymentꢀprocessingꢀsolutionꢀrequireꢀusꢀtoꢀhaveꢀaꢀmoneyꢀtransmitterꢀlicense. Credit Reporting.ꢀOurꢀCentralꢀCreditꢀgamingꢀpatronꢀcreditꢀbureauꢀservicesꢀandꢀcheckꢀverificationꢀandꢀwarrantyꢀservicesꢀareꢀsubject toꢀtheꢀFairꢀCreditꢀReportingꢀActꢀ(theꢀ“FCRA”)ꢀandꢀtheꢀFairꢀandꢀAccurateꢀCreditꢀTransactionsꢀActꢀofꢀ2003ꢀ(theꢀ“FACTA”)ꢀand theirꢀimplementingꢀrules,ꢀwhichꢀrequireꢀconsumerꢀcreditꢀbureaus,ꢀsuchꢀasꢀCentralꢀCredit,ꢀtoꢀprovideꢀcreditꢀreportꢀinformationꢀto businessesꢀonlyꢀforꢀcertainꢀpurposesꢀandꢀtoꢀotherwiseꢀsafeguardꢀcreditꢀreportꢀinformation,ꢀtoꢀdiscloseꢀtoꢀconsumersꢀtheirꢀcredit reportꢀonꢀrequest,ꢀandꢀtoꢀpermitꢀconsumersꢀtoꢀdisputeꢀandꢀcorrectꢀinaccurateꢀorꢀincompleteꢀinformationꢀinꢀtheirꢀcreditꢀreport.ꢀThese lawsꢀandꢀrulesꢀalsoꢀgovernꢀtheꢀinformationꢀthatꢀmayꢀbeꢀcontainedꢀinꢀaꢀconsumerꢀcreditꢀreport.ꢀWeꢀcontinueꢀtoꢀimplementꢀpolicies andꢀproceduresꢀasꢀwellꢀasꢀadaptꢀourꢀbusinessꢀpracticesꢀinꢀorderꢀtoꢀcomplyꢀwithꢀtheseꢀlawsꢀandꢀregulations.ꢀInꢀadditionꢀtoꢀfederal regulations,ꢀourꢀCentralꢀCreditꢀgamingꢀpatronꢀcreditꢀbureauꢀservicesꢀareꢀsubjectꢀtoꢀtheꢀstateꢀcreditꢀreportingꢀregulationsꢀthatꢀimpose similarꢀrequirementsꢀtoꢀtheꢀFCRAꢀandꢀtheꢀFACTA. Debt Collection.ꢀWeꢀ currentlyꢀ outsourceꢀ mostꢀ ofꢀ ourꢀ debtꢀ collectionꢀ effortsꢀ toꢀ thirdꢀ parties.ꢀ However,ꢀ weꢀ doꢀ engageꢀ inꢀ debt collectionꢀtoꢀcollectꢀonꢀchargebacksꢀonꢀourꢀcashꢀaccessꢀproductsꢀandꢀunpaidꢀbalances forꢀservicesꢀperformedꢀforꢀourꢀcheckꢀservices, CentralꢀCreditꢀservices,ꢀcomplianceꢀservices,ꢀreceivablesꢀrelatingꢀtoꢀtheꢀsaleꢀandꢀserviceꢀofꢀourꢀfullyꢀintegratedꢀkiosksꢀandꢀother integratedꢀkioskꢀsolutions,ꢀandꢀotherꢀamountsꢀowingꢀtoꢀusꢀinꢀconnectionꢀwith performingꢀvariousꢀservicesꢀforꢀourꢀcustomers.ꢀAll suchꢀcollectionꢀpracticesꢀmayꢀbeꢀsubjectꢀtoꢀtheꢀFairꢀDebtꢀCollectionꢀPracticesꢀActꢀ(theꢀ“FDCPA”),ꢀwhichꢀprohibitsꢀunfair,ꢀdeceptive, orꢀabusiveꢀdebtꢀcollectionꢀpractices,ꢀasꢀwellꢀasꢀconsumer-debt-collectionꢀlawsꢀandꢀregulationsꢀadoptedꢀbyꢀtheꢀvariousꢀstates. Privacy Regulations.ꢀOurꢀcollectionꢀofꢀinformationꢀfromꢀpatronsꢀwhoꢀuseꢀourꢀfinancialꢀproductsꢀandꢀservices,ꢀsuchꢀasꢀourꢀcash accessꢀservices,ꢀareꢀsubjectꢀtoꢀtheꢀfinancialꢀinformationꢀprivacyꢀprotectionꢀprovisionsꢀofꢀtheꢀGramm-Leach-BlileyꢀActꢀofꢀ1999 (theꢀ “GLBA”)ꢀ andꢀ itsꢀ implementingꢀ federalꢀ regulations.ꢀ Weꢀ gather,ꢀ asꢀ permittedꢀ byꢀ law,ꢀ non-public,ꢀ personally-identifiable financialꢀinformationꢀfromꢀpatronsꢀwhoꢀuseꢀourꢀcashꢀaccessꢀservices,ꢀsuchꢀasꢀnames,ꢀaddresses,ꢀtelephoneꢀnumbers,ꢀbankꢀand creditꢀcardꢀaccountꢀnumbers,ꢀandꢀtransactionꢀinformation.ꢀTheꢀGLBAꢀrequiresꢀusꢀtoꢀsafeguardꢀandꢀprotectꢀtheꢀprivacyꢀofꢀsuch non-publicꢀpersonalꢀinformationꢀandꢀalsoꢀrequiresꢀusꢀtoꢀmakeꢀdisclosuresꢀtoꢀpatronsꢀregardingꢀourꢀprivacyꢀandꢀinformationꢀsharing policiesꢀandꢀgiveꢀpatronsꢀtheꢀopportunityꢀtoꢀdirectꢀusꢀnotꢀtoꢀdiscloseꢀinformationꢀaboutꢀthemꢀtoꢀunaffiliatedꢀthirdꢀpartiesꢀinꢀcertain situations.ꢀWeꢀareꢀalsoꢀsubjectꢀtoꢀstateꢀprivacyꢀregulationsꢀwhich,ꢀinꢀsomeꢀcases,ꢀmayꢀbeꢀevenꢀstricterꢀthanꢀfederalꢀlaw.ꢀWeꢀcontinue toꢀimplementꢀpoliciesꢀandꢀprogramsꢀasꢀwellꢀasꢀadaptꢀourꢀbusinessꢀpracticesꢀinꢀorderꢀtoꢀcomplyꢀwithꢀfederalꢀandꢀstateꢀprivacyꢀlaws andꢀregulations.ꢀInꢀaddition,ꢀweꢀareꢀalsoꢀsubjectꢀtoꢀforeignꢀdataꢀprotectionꢀandꢀprivacyꢀlawsꢀincluding,ꢀbutꢀnotꢀlimitedꢀto,ꢀthe EuropeanꢀUnionꢀGeneralꢀDataꢀProtectionꢀRegulation,ꢀwhichꢀbecameꢀeffectiveꢀinꢀMayꢀ2018ꢀandꢀrequiresꢀcompaniesꢀtoꢀmeetꢀnew requirementsꢀregardingꢀdataꢀprivacyꢀandꢀsecurity.ꢀ ATM Operations.ꢀTheꢀElectronicꢀFundꢀTransferꢀActꢀrequiresꢀusꢀtoꢀdiscloseꢀcertainꢀnoticesꢀregardingꢀtheꢀfeesꢀthatꢀweꢀchargeꢀfor performingꢀanꢀATMꢀtransactionꢀasꢀwellꢀasꢀtoꢀincorporateꢀsuchꢀnoticesꢀonꢀtheꢀATMꢀscreensꢀtoꢀnotifyꢀpatronsꢀofꢀsuchꢀfeesꢀpriorꢀto completingꢀanꢀATMꢀtransaction.ꢀOurꢀATMꢀservicesꢀareꢀalsoꢀsubjectꢀtoꢀapplicableꢀstateꢀbankingꢀregulationsꢀinꢀeachꢀjurisdictionꢀin whichꢀweꢀoperateꢀATMsꢀwhichꢀrequire,ꢀamongꢀotherꢀthings,ꢀthatꢀweꢀregisterꢀwithꢀtheꢀstateꢀbankingꢀregulatorsꢀasꢀanꢀoperatorꢀof 14 ATMs,ꢀthatꢀweꢀprovideꢀgamingꢀpatronsꢀwithꢀnoticesꢀofꢀtheꢀtransactionꢀfeesꢀassessedꢀuponꢀuseꢀofꢀourꢀATMs,ꢀthatꢀourꢀtransaction feesꢀdoꢀnotꢀexceedꢀdesignatedꢀmaximums,ꢀthatꢀweꢀofferꢀgamingꢀpatronsꢀaꢀmeansꢀofꢀresolvingꢀdisputesꢀwithꢀus,ꢀandꢀthatꢀweꢀcomply withꢀprescribedꢀsafetyꢀandꢀsecurityꢀrequirements.ꢀInꢀaddition,ꢀtheꢀATMsꢀthatꢀweꢀoperateꢀareꢀsubjectꢀtoꢀrequirementsꢀofꢀtheꢀAmericans withꢀDisabilitiesꢀAct,ꢀwhichꢀinꢀgeneralꢀrequireꢀthatꢀATMsꢀbeꢀaccessibleꢀtoꢀindividualsꢀwithꢀdisabilities,ꢀsuchꢀasꢀvisually-impaired persons. Check Cashing.ꢀInꢀjurisdictionsꢀinꢀwhichꢀweꢀserveꢀasꢀaꢀcheckꢀcasher,ꢀweꢀareꢀrequiredꢀtoꢀbeꢀlicensedꢀbyꢀtheꢀapplicableꢀstateꢀbanking regulatorꢀtoꢀoperateꢀasꢀaꢀcheckꢀcasher.ꢀSomeꢀstatesꢀalsoꢀimposeꢀrestrictionsꢀonꢀthisꢀactivity,ꢀsuchꢀasꢀlimitsꢀonꢀtheꢀamountsꢀofꢀservice feesꢀthatꢀmayꢀbeꢀimposedꢀonꢀtheꢀcashingꢀofꢀcertainꢀtypesꢀofꢀchecks,ꢀrequirementsꢀasꢀtoꢀrecordsꢀthatꢀmustꢀbeꢀkeptꢀwithꢀrespectꢀto dishonoredꢀchecksꢀandꢀrequirementsꢀasꢀtoꢀtheꢀcontentsꢀofꢀreceiptsꢀthatꢀmustꢀbeꢀdeliveredꢀtoꢀgamingꢀpatronsꢀatꢀtheꢀtimeꢀaꢀcheckꢀis cashed. Network and Card Association Regulations.ꢀInꢀadditionꢀtoꢀtheꢀgovernmentalꢀregulationꢀdescribedꢀabove,ꢀsomeꢀofꢀourꢀservices areꢀalsoꢀsubjectꢀtoꢀrulesꢀpromulgatedꢀbyꢀvariousꢀpaymentꢀnetworks,ꢀEFTꢀnetworks,ꢀandꢀcardꢀassociations.ꢀForꢀexample,ꢀweꢀmust complyꢀwithꢀtheꢀPaymentꢀCardꢀIndustryꢀ(“PCI”)ꢀDataꢀSecurityꢀStandard.ꢀWeꢀhaveꢀbeenꢀdesignatedꢀasꢀaꢀcompliantꢀserviceꢀprovider underꢀtheꢀPCIꢀDataꢀSecurityꢀStandard.ꢀWeꢀmustꢀbeꢀcertifiedꢀtoꢀmaintainꢀourꢀstatusꢀasꢀaꢀcompliantꢀserviceꢀproviderꢀonꢀanꢀannual basis. EMV,ꢀdesignedꢀtoꢀdeterꢀfraudulentꢀcardꢀtransactionsꢀrelatedꢀtoꢀidentityꢀtheft,ꢀcounterfeitꢀcards,ꢀandꢀtheꢀmisuseꢀofꢀlostꢀorꢀstolen cardsꢀviaꢀenhancedꢀcardꢀauthentication,ꢀtransactionꢀauthorization,ꢀandꢀcardholderꢀverificationꢀusingꢀchip-basedꢀsmart-cards.ꢀEMV hasꢀbeenꢀadoptedꢀinꢀmanyꢀregionsꢀofꢀtheꢀworldꢀasꢀtheꢀglobalꢀstandardꢀforꢀfraudꢀdeterrenceꢀinꢀchip-basedꢀsmart-cardꢀpayments.ꢀIn Octoberꢀ2015,ꢀtheꢀnetworkꢀandꢀcardꢀassociationsꢀbeganꢀshiftingꢀliabilityꢀforꢀfraudulentꢀPOSꢀandꢀATMꢀtransactionsꢀgenerated throughꢀEMV-capableꢀcardsꢀontoꢀmerchantsꢀwhoseꢀdevicesꢀareꢀnotꢀcapableꢀofꢀprocessingꢀchip-basedꢀsmart-cardꢀEMVꢀtransactions. Thisꢀshiftsꢀtheꢀresponsibilityꢀforꢀchargebacksꢀdueꢀtoꢀfraudulentꢀtransactionsꢀonꢀsuchꢀcardsꢀfromꢀtheꢀcardꢀissuerꢀontoꢀtheꢀmerchant. AsꢀaꢀmerchantꢀofꢀcashꢀaccessꢀtransactionsꢀprocessedꢀthroughꢀMasterCard,ꢀVisa,ꢀDiscover,ꢀandꢀAmericanꢀExpress,ꢀallꢀwhoꢀhave adoptedꢀtheꢀEMVꢀstandard,ꢀandꢀasꢀanꢀoperatorꢀofꢀATMs,ꢀourꢀPOS,ꢀfullyꢀintegratedꢀkiosk,ꢀandꢀATMꢀdevicesꢀareꢀsubjectꢀtoꢀtheꢀEMV standard.ꢀThisꢀrequiresꢀusꢀtoꢀmaintainꢀourꢀfleetꢀofꢀU.S.-basedꢀPOS,ꢀfullyꢀintegratedꢀkiosk,ꢀandꢀATMꢀdevicesꢀtoꢀsupportꢀtheꢀEMV standard. International Regulation Weꢀareꢀalsoꢀsubjectꢀtoꢀaꢀvarietyꢀofꢀgamingꢀandꢀfinancialꢀservicesꢀregulationsꢀandꢀotherꢀlaws,ꢀincludingꢀtheꢀForeignꢀCorruptꢀPractices Act,ꢀinꢀtheꢀinternationalꢀmarketsꢀinꢀwhichꢀweꢀoperate.ꢀWeꢀexpectꢀtoꢀbecomeꢀsubjectꢀtoꢀadditionalꢀgamingꢀandꢀfinancialꢀservices regulationsꢀandꢀotherꢀlawsꢀinꢀtheꢀjurisdictionsꢀintoꢀwhichꢀweꢀexpandꢀourꢀoperations.ꢀOurꢀexpansionꢀintoꢀnewꢀmarketsꢀisꢀdependent uponꢀourꢀabilityꢀtoꢀcomplyꢀwithꢀtheꢀregulatoryꢀregimesꢀadoptedꢀbyꢀsuchꢀjurisdictions.ꢀ Inꢀaddition,ꢀreferꢀtoꢀ“Itemꢀ1A.ꢀRiskꢀFactorsꢀ—ꢀRisksꢀRelatedꢀtoꢀRegulationꢀofꢀOurꢀIndustry”ꢀforꢀadditionalꢀindustry,ꢀstate,ꢀand federalꢀregulationsꢀimpactingꢀourꢀbusiness. Item 1A. Risk Factors. The following section describes material risks and uncertainties that we believe may adversely affect our business, financial condition, results of operations, or the market price of our stock. This section should be read in conjunction with our Financial Statements and Results of Operations included elsewhere in this Annual Report on Form 10-K. Risks Related to Our Business We have recorded net losses in each of the two fiscal years prior to fiscal year 2018 and we may not generate profits in the future. Weꢀhadꢀnetꢀincomeꢀofꢀ$12.4ꢀmillionꢀandꢀnetꢀlossesꢀofꢀ$51.9ꢀmillionꢀandꢀ$249.5ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018, 2017,ꢀandꢀ2016,ꢀrespectively.ꢀAsꢀaꢀresultꢀofꢀtheꢀinterestꢀpaymentsꢀonꢀtheꢀindebtednessꢀincurredꢀinꢀconnectionꢀwithꢀEveriꢀHoldings’ purchaseꢀofꢀEveriꢀGamesꢀHoldingꢀinꢀDecemberꢀ2014ꢀ(theꢀ“Merger”),ꢀamortizationꢀofꢀintangibleꢀassetsꢀassociatedꢀwithꢀtheꢀMerger andꢀotherꢀacquisitions,ꢀotherꢀrelatedꢀacquisitionꢀandꢀfinancingꢀcosts,ꢀassetꢀimpairmentꢀcharges,ꢀdepreciation,ꢀandꢀotherꢀamortization, weꢀmayꢀnotꢀbeꢀableꢀtoꢀgenerateꢀprofitsꢀinꢀtheꢀfuture.ꢀOurꢀabilityꢀtoꢀcontinueꢀtoꢀgenerateꢀnetꢀprofitsꢀinꢀtheꢀfutureꢀwillꢀdepend,ꢀin part,ꢀonꢀourꢀabilityꢀto: • establishꢀstrategicꢀbusinessꢀrelationshipsꢀwithꢀnewꢀandꢀexistingꢀcustomers; 15 • • • • • • • sellꢀourꢀproductsꢀandꢀservicesꢀintoꢀnewꢀmarketsꢀandꢀtoꢀnewꢀcustomersꢀinꢀexistingꢀmarketsꢀandꢀretainꢀourꢀexistingꢀcustomers; developꢀnewꢀgamesꢀorꢀlicenseꢀthird-partyꢀcontentꢀinꢀourꢀGamesꢀbusinessꢀandꢀdevelopꢀnewꢀproductsꢀandꢀservicesꢀinꢀour FinTechꢀbusiness; effectivelyꢀmanageꢀaꢀlargerꢀandꢀmoreꢀdiversifiedꢀworkforceꢀandꢀbusiness; reactꢀtoꢀchanges,ꢀincludingꢀtechnologicalꢀandꢀregulatoryꢀchanges,ꢀinꢀtheꢀmarketsꢀweꢀtargetꢀorꢀoperateꢀin; respondꢀtoꢀcompetitiveꢀdevelopmentsꢀandꢀchallenges; continueꢀtoꢀcomplyꢀwithꢀtheꢀEMVꢀglobalꢀstandardꢀforꢀcardsꢀequippedꢀwithꢀsecurityꢀchipꢀtechnology;ꢀand attractꢀandꢀretainꢀexperiencedꢀandꢀtalentedꢀpersonnel. Weꢀmayꢀnotꢀbeꢀableꢀtoꢀdoꢀanyꢀofꢀtheseꢀsuccessfully,ꢀandꢀourꢀfailureꢀtoꢀdoꢀsoꢀcouldꢀhaveꢀaꢀmaterialꢀadverseꢀeffectꢀonꢀourꢀbusiness, financialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflows,ꢀwhichꢀcould,ꢀamongꢀotherꢀthings,ꢀaffectꢀourꢀabilityꢀtoꢀmakeꢀpaymentsꢀunderꢀour NewꢀCreditꢀFacilitiesꢀ(definedꢀherein)ꢀorꢀtheꢀ2017ꢀUnsecuredꢀNotesꢀ(asꢀdefinedꢀherein). Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in our industry or the economy, expose us to interest rate risk to the extent of our variable rate debt, and prevent us from meeting our obligations with respect to our indebtedness. AsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀourꢀtotalꢀindebtednessꢀwasꢀapproximatelyꢀ$1.2ꢀbillion,ꢀwhichꢀincludedꢀtheꢀNewꢀCreditꢀFacilitiesꢀand theꢀ2017ꢀUnsecuredꢀNotes,ꢀeachꢀofꢀwhichꢀcontainꢀrestrictiveꢀcovenants.ꢀOurꢀhighꢀdegreeꢀofꢀleverageꢀcouldꢀhaveꢀsignificantꢀadverse effectsꢀonꢀourꢀbusiness,ꢀincluding: • requiringꢀaꢀsubstantialꢀportionꢀofꢀcashꢀflowꢀfromꢀoperationsꢀtoꢀbeꢀdedicatedꢀtoꢀtheꢀpaymentꢀofꢀprincipalꢀandꢀinterestꢀon ourꢀindebtedness,ꢀtherefore,ꢀreducingꢀourꢀabilityꢀtoꢀuseꢀourꢀcashꢀflowꢀtoꢀfundꢀourꢀoperations,ꢀcapitalꢀexpenditures,ꢀand futureꢀbusinessꢀopportunities; • makingꢀitꢀmoreꢀdifficultꢀforꢀusꢀtoꢀsatisfyꢀourꢀobligationsꢀwithꢀrespectꢀtoꢀourꢀindebtednessꢀandꢀanyꢀfailureꢀtoꢀcomplyꢀwith theꢀobligationsꢀofꢀanyꢀofꢀourꢀdebtꢀinstruments,ꢀincludingꢀrestrictiveꢀcovenantsꢀandꢀborrowingꢀconditions,ꢀcouldꢀresultꢀin anꢀeventꢀofꢀdefaultꢀunderꢀtheꢀNewꢀCreditꢀFacilitiesꢀandꢀtheꢀindenturesꢀgoverningꢀtheꢀ2017ꢀUnsecuredꢀNotes; • • • • increasingꢀourꢀvulnerabilityꢀtoꢀadverseꢀeconomic,ꢀindustry,ꢀorꢀcompetitiveꢀdevelopments; restrictingꢀusꢀfromꢀmakingꢀstrategicꢀacquisitionsꢀorꢀcausingꢀusꢀtoꢀmakeꢀnon-strategicꢀdivestitures; limitingꢀourꢀabilityꢀtoꢀobtainꢀadditionalꢀfinancingꢀforꢀworkingꢀcapital,ꢀcapitalꢀexpenditures,ꢀproductꢀdevelopment,ꢀdebt serviceꢀrequirements,ꢀacquisitions,ꢀandꢀgeneralꢀcorporateꢀorꢀotherꢀpurposes;ꢀand limitingꢀourꢀflexibilityꢀinꢀplanningꢀfor,ꢀorꢀreactingꢀto,ꢀchangesꢀinꢀourꢀbusinessꢀorꢀmarketꢀconditionsꢀandꢀplacingꢀusꢀatꢀa competitiveꢀdisadvantageꢀcomparedꢀtoꢀourꢀcompetitorsꢀwhoꢀareꢀlessꢀhighlyꢀleveragedꢀorꢀmayꢀhaveꢀmoreꢀresourcesꢀthan usꢀandꢀwhoꢀthereforeꢀmayꢀbeꢀableꢀtoꢀtakeꢀadvantageꢀofꢀopportunitiesꢀthatꢀourꢀleverageꢀpreventsꢀusꢀfromꢀexploiting, includingꢀpursuitꢀandꢀexecutionꢀofꢀpotentialꢀfutureꢀacquisitions. We may not be able to generate sufficient cash to service all of our indebtedness, including the New Credit Facilities and the 2017 Unsecured Notes, and fund our working capital and capital expenditures, and we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. Ourꢀabilityꢀtoꢀmakeꢀscheduledꢀpaymentsꢀonꢀourꢀindebtedness,ꢀincludingꢀtheꢀNewꢀCreditꢀFacilitiesꢀandꢀtheꢀ2017ꢀUnsecuredꢀNotes, willꢀdependꢀuponꢀourꢀfutureꢀoperatingꢀperformanceꢀandꢀonꢀourꢀabilityꢀtoꢀgenerateꢀcashꢀflowꢀinꢀtheꢀfuture,ꢀwhichꢀisꢀsubjectꢀto generalꢀeconomic,ꢀfinancial,ꢀbusiness,ꢀcompetitive,ꢀlegislative,ꢀregulatory,ꢀandꢀotherꢀfactorsꢀthatꢀareꢀbeyondꢀourꢀcontrol.ꢀWeꢀcannot assureꢀyouꢀthatꢀourꢀbusinessꢀwillꢀgenerateꢀsufficientꢀcashꢀflowꢀfromꢀoperations,ꢀorꢀthatꢀfutureꢀborrowings,ꢀincludingꢀthoseꢀunder theꢀNewꢀCreditꢀFacilities,ꢀwillꢀbeꢀavailableꢀtoꢀusꢀinꢀanꢀamountꢀsufficientꢀtoꢀpayꢀourꢀindebtednessꢀorꢀtoꢀfundꢀotherꢀliquidityꢀneeds. Ifꢀourꢀcashꢀflowsꢀandꢀcapitalꢀresourcesꢀareꢀinsufficientꢀtoꢀfundꢀourꢀdebtꢀserviceꢀobligations,ꢀweꢀcouldꢀfaceꢀsubstantialꢀliquidity problemsꢀandꢀcouldꢀbeꢀforcedꢀtoꢀreduceꢀorꢀdelayꢀinvestmentꢀandꢀcapitalꢀexpendituresꢀorꢀtoꢀdisposeꢀofꢀmaterialꢀassetsꢀorꢀoperations, seekꢀadditionalꢀequityꢀcapital,ꢀorꢀrestructureꢀorꢀrefinanceꢀourꢀindebtedness.ꢀWeꢀmayꢀnotꢀbeꢀableꢀtoꢀaffectꢀanyꢀsuchꢀalternative measures,ꢀifꢀnecessary,ꢀonꢀcommerciallyꢀreasonableꢀtermsꢀorꢀatꢀallꢀand,ꢀevenꢀifꢀsuccessful,ꢀsuchꢀalternativeꢀactionsꢀmayꢀnotꢀallow usꢀtoꢀmeetꢀourꢀscheduledꢀdebtꢀserviceꢀobligations.ꢀTheꢀNewꢀCreditꢀFacilitiesꢀandꢀtheꢀindentureꢀgoverningꢀtheꢀ2017ꢀUnsecured Notesꢀrestrictꢀourꢀabilityꢀtoꢀdisposeꢀofꢀassetsꢀandꢀuseꢀtheꢀproceedsꢀfromꢀanyꢀsuchꢀdisposition. 16 Ifꢀweꢀcannotꢀmakeꢀscheduledꢀpaymentsꢀonꢀourꢀdebt,ꢀweꢀwillꢀbeꢀinꢀdefault.ꢀAsꢀaꢀresult,ꢀtheꢀholdersꢀofꢀtheꢀ2017ꢀUnsecuredꢀNotes couldꢀdeclareꢀallꢀoutstandingꢀprincipalꢀandꢀinterestꢀtoꢀbeꢀdueꢀandꢀpayable;ꢀtheꢀlendersꢀunderꢀtheꢀNewꢀCreditꢀFacilitiesꢀcouldꢀdeclare allꢀoutstandingꢀamountsꢀunderꢀsuchꢀfacilitiesꢀdueꢀandꢀpayableꢀandꢀterminateꢀtheirꢀcommitmentsꢀtoꢀloanꢀmoney;ꢀand,ꢀinꢀeachꢀcase, couldꢀ forecloseꢀ againstꢀ theꢀ assetsꢀ securingꢀ theꢀ borrowingsꢀ underꢀ theꢀ Newꢀ Creditꢀ Facilities.ꢀ Suchꢀ actionsꢀ couldꢀ forceꢀ usꢀ into bankruptcyꢀorꢀliquidation. Ifꢀourꢀindebtednessꢀisꢀaccelerated,ꢀweꢀmayꢀneedꢀtoꢀrefinanceꢀallꢀorꢀaꢀportionꢀofꢀourꢀindebtednessꢀbeforeꢀmaturity.ꢀWeꢀmayꢀnotꢀbe ableꢀtoꢀrefinanceꢀanyꢀofꢀourꢀindebtednessꢀonꢀcommerciallyꢀreasonableꢀtermsꢀorꢀatꢀall.ꢀThereꢀcanꢀbeꢀnoꢀassuranceꢀthatꢀweꢀwillꢀbe ableꢀtoꢀobtainꢀsufficientꢀfundsꢀtoꢀenableꢀusꢀtoꢀrepayꢀorꢀrefinanceꢀourꢀdebtꢀobligationsꢀonꢀcommerciallyꢀreasonableꢀterms,ꢀorꢀatꢀall. The agreements and instruments governing our debt impose restrictions that may limit our operating and financial flexibility. TheꢀNewꢀCreditꢀFacilitiesꢀandꢀtheꢀindentureꢀgoverningꢀtheꢀ2017ꢀUnsecuredꢀNotesꢀcontainꢀaꢀnumberꢀofꢀsignificantꢀrestrictionsꢀand covenantsꢀthatꢀlimitꢀourꢀabilityꢀto: • • • incurꢀadditionalꢀindebtedness; sellꢀassetsꢀorꢀconsolidateꢀorꢀmergeꢀwithꢀorꢀintoꢀotherꢀcompanies; payꢀdividendsꢀorꢀrepurchaseꢀorꢀredeemꢀcapitalꢀstock; • makeꢀcertainꢀinvestments; • • • • issueꢀcapitalꢀstockꢀofꢀourꢀsubsidiaries; incurꢀliens; prepay,ꢀredeem,ꢀorꢀrepurchaseꢀsubordinatedꢀdebt;ꢀand enterꢀintoꢀcertainꢀtypesꢀofꢀtransactionsꢀwithꢀourꢀaffiliates. Theseꢀcovenantsꢀcouldꢀhaveꢀtheꢀeffectꢀofꢀlimitingꢀourꢀflexibilityꢀinꢀplanningꢀforꢀorꢀreactingꢀtoꢀchangesꢀinꢀourꢀbusinessꢀandꢀthe marketsꢀinꢀwhichꢀweꢀcompete.ꢀInꢀaddition,ꢀtheꢀNewꢀCreditꢀFacilitiesꢀrequireꢀusꢀtoꢀcomplyꢀwithꢀaꢀfinancialꢀmaintenanceꢀcovenant underꢀcertainꢀcircumstances.ꢀOperatingꢀresultsꢀbelowꢀcurrentꢀlevelsꢀorꢀotherꢀadverseꢀfactors,ꢀincludingꢀaꢀsignificantꢀincreaseꢀin interestꢀrates,ꢀcouldꢀresultꢀinꢀourꢀbeingꢀunableꢀtoꢀcomplyꢀwithꢀtheꢀfinancialꢀcovenantsꢀcontainedꢀinꢀtheꢀNewꢀCreditꢀFacilities,ꢀif applicable.ꢀIfꢀweꢀviolateꢀthisꢀcovenantꢀandꢀareꢀunableꢀtoꢀobtainꢀaꢀwaiverꢀfromꢀourꢀlenders,ꢀourꢀdebtꢀunderꢀtheꢀNewꢀCreditꢀFacilities wouldꢀbeꢀinꢀdefaultꢀandꢀcouldꢀbeꢀacceleratedꢀbyꢀourꢀlenders.ꢀBasedꢀonꢀcross-defaultꢀprovisionsꢀinꢀtheꢀagreementsꢀandꢀinstruments governingꢀourꢀindebtedness,ꢀaꢀdefaultꢀunderꢀoneꢀagreementꢀorꢀinstrumentꢀcouldꢀresultꢀinꢀaꢀdefaultꢀunder,ꢀandꢀtheꢀaccelerationꢀof, ourꢀotherꢀindebtedness.ꢀInꢀaddition,ꢀtheꢀlendersꢀunderꢀtheꢀNewꢀCreditꢀFacilitiesꢀcouldꢀproceedꢀagainstꢀtheꢀcollateralꢀsecuringꢀthat indebtedness. Ifꢀourꢀindebtednessꢀisꢀaccelerated,ꢀweꢀmayꢀnotꢀbeꢀableꢀtoꢀrepayꢀourꢀdebtꢀorꢀborrowꢀsufficientꢀfundsꢀtoꢀrefinanceꢀit.ꢀEvenꢀifꢀweꢀare ableꢀtoꢀobtainꢀnewꢀfinancing,ꢀitꢀmayꢀnotꢀbeꢀonꢀcommerciallyꢀreasonableꢀterms,ꢀonꢀtermsꢀthatꢀareꢀacceptableꢀtoꢀus,ꢀorꢀatꢀall.ꢀIfꢀour debtꢀisꢀinꢀdefaultꢀforꢀanyꢀreason,ꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀandꢀresultsꢀofꢀoperationsꢀcouldꢀbeꢀmateriallyꢀandꢀadversely affected.ꢀInꢀaddition,ꢀcomplyingꢀwithꢀtheseꢀcovenantsꢀmayꢀmakeꢀitꢀmoreꢀdifficultꢀforꢀusꢀtoꢀsuccessfullyꢀexecuteꢀourꢀbusiness strategyꢀandꢀcompeteꢀagainstꢀcompaniesꢀthatꢀareꢀnotꢀsubjectꢀtoꢀsuchꢀrestrictions. Our net operating losses and other tax credit carry-forwards are subject to limitations that could potentially reduce these tax assets. AsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀweꢀhadꢀtaxꢀeffectedꢀfederalꢀandꢀstateꢀnetꢀoperatingꢀlossꢀ(“NOL”)ꢀcarry-forwardsꢀofꢀapproximatelyꢀ$83.0 millionꢀandꢀ$14.1ꢀmillion,ꢀrespectively,ꢀfederalꢀresearchꢀandꢀdevelopmentꢀcreditꢀcarry-forwardsꢀofꢀapproximatelyꢀ$8.5ꢀmillion, andꢀforeignꢀtaxꢀcreditꢀcarry-forwardsꢀofꢀapproximatelyꢀ$0.5ꢀmillion.ꢀTheꢀfederalꢀnetꢀoperatingꢀlossesꢀcanꢀbeꢀcarriedꢀforwardꢀand appliedꢀtoꢀoffsetꢀtaxableꢀincomeꢀforꢀ20ꢀyearsꢀandꢀwillꢀexpireꢀstartingꢀinꢀ2022ꢀ(forꢀlossesꢀincurredꢀbeforeꢀ2018).ꢀAnꢀestimatedꢀfederal lossꢀincurredꢀinꢀ2018ꢀofꢀapproximatelyꢀ$8.2ꢀmillion,ꢀtaxꢀeffected,ꢀcanꢀbeꢀcarriedꢀforwardꢀindefinitelyꢀtoꢀoffsetꢀtaxableꢀincome. Theꢀstateꢀnetꢀoperatingꢀlossꢀcarry-forwardsꢀwillꢀexpireꢀbetweenꢀ2019ꢀandꢀ2039.ꢀTheꢀfederalꢀresearchꢀandꢀdevelopmentꢀcreditsꢀare limitedꢀtoꢀaꢀ20ꢀyearꢀcarry-forwardꢀperiodꢀandꢀwillꢀbeginꢀtoꢀexpireꢀinꢀvaryingꢀamountsꢀinꢀ2029,ꢀifꢀnotꢀutilized.ꢀTheꢀforeignꢀtax credits,ꢀwhichꢀhaveꢀaꢀfullꢀvaluationꢀallowance,ꢀcanꢀbeꢀcarriedꢀforwardꢀ10ꢀyearsꢀandꢀwillꢀexpireꢀinꢀ2020,ꢀifꢀnotꢀutilized. Basedꢀonꢀtheꢀweightꢀofꢀavailableꢀevidence,ꢀincludingꢀbothꢀpositiveꢀandꢀnegativeꢀindicators,ꢀifꢀitꢀisꢀmoreꢀlikelyꢀthanꢀnotꢀthatꢀa portion,ꢀorꢀall,ꢀofꢀtheꢀdeferredꢀtaxꢀassetsꢀwillꢀnotꢀbeꢀrealized,ꢀweꢀmustꢀconsiderꢀrecordingꢀaꢀvaluationꢀallowance.ꢀGreaterꢀweight isꢀgivenꢀtoꢀevidenceꢀthatꢀisꢀobjectivelyꢀverifiable,ꢀmostꢀnotablyꢀhistoricalꢀresults.ꢀWeꢀareꢀinꢀaꢀcumulativeꢀlossꢀpositionꢀandꢀweꢀhave decreasedꢀourꢀvaluationꢀallowanceꢀforꢀdeferredꢀtaxꢀassetsꢀrelatedꢀtoꢀtheseꢀNOLꢀandꢀotherꢀtaxꢀcreditꢀcarry-forwards,ꢀexcludingꢀthe 17 2018ꢀfederalꢀNOL,ꢀbyꢀ$10.1ꢀmillionꢀduringꢀ2018.ꢀOurꢀabilityꢀtoꢀutilizeꢀtheꢀremainingꢀNOLꢀandꢀotherꢀtaxꢀcreditꢀcarry-forwardsꢀto reduceꢀtaxableꢀincomeꢀinꢀfutureꢀyearsꢀmayꢀbeꢀfurtherꢀlimited,ꢀincludingꢀtheꢀpossibilityꢀthatꢀprojectedꢀfutureꢀtaxableꢀincomeꢀis insufficientꢀtoꢀrealizeꢀtheꢀbenefitꢀofꢀtheseꢀNOLꢀcarry-forwardsꢀpriorꢀtoꢀtheirꢀexpiration.ꢀToꢀtheꢀextentꢀourꢀresultsꢀofꢀoperationsꢀdo notꢀimprove,ꢀweꢀmayꢀnotꢀhaveꢀtheꢀabilityꢀtoꢀovercomeꢀtheꢀmoreꢀlikelyꢀthanꢀnotꢀaccountingꢀstandardꢀthatꢀwouldꢀallowꢀusꢀtoꢀreverse theꢀvaluationꢀallowanceꢀandꢀmayꢀbeꢀsubjectꢀtoꢀrecordꢀanꢀadditionalꢀvaluationꢀallowanceꢀinꢀtheꢀfuture. OurꢀabilityꢀtoꢀuseꢀtheseꢀtaxꢀassetsꢀcouldꢀbeꢀadverselyꢀaffectedꢀbyꢀtheꢀlimitationsꢀofꢀSectionsꢀ382,ꢀ383,ꢀandꢀ384ꢀofꢀtheꢀInternal RevenueꢀCode.ꢀInꢀaddition,ꢀaꢀportionꢀofꢀourꢀNOL’sꢀincludeꢀamortizationꢀofꢀgoodwillꢀforꢀtaxꢀpurposesꢀassociatedꢀwithꢀaꢀrestructuring thatꢀoccurredꢀinꢀ2004,ꢀwhichꢀcouldꢀbeꢀsubjectꢀtoꢀauditꢀbyꢀtheꢀIRSꢀandꢀthusꢀmayꢀhaveꢀanꢀadverseꢀeffectꢀonꢀourꢀNOLꢀcarry-forwards. The Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”) could adversely affect our business and financial condition. Dueꢀtoꢀtheꢀ2017ꢀTaxꢀAct,ꢀnetꢀoperatingꢀlossesꢀarisingꢀinꢀtaxableꢀyearsꢀbeginningꢀafterꢀDecemberꢀ31,ꢀ2017ꢀareꢀlimitedꢀinꢀuseꢀto offsetꢀ80%ꢀofꢀtaxableꢀincomeꢀwithoutꢀtheꢀabilityꢀtoꢀcarrybackꢀsuchꢀnetꢀoperatingꢀlosses,ꢀhowever,ꢀwithꢀanꢀindefiniteꢀcarry-forward ofꢀsuchꢀnetꢀoperatingꢀlossesꢀ(insteadꢀofꢀtheꢀformerꢀ2-yearꢀcarrybackꢀandꢀ20-yearꢀcarry-forwardꢀforꢀnetꢀoperatingꢀlossesꢀarisingꢀin taxableꢀyearsꢀbeginningꢀbeforeꢀDecemberꢀ31,ꢀ2017).ꢀTheꢀamountꢀofꢀtheꢀnetꢀU.S.ꢀfederalꢀinterestꢀexpenseꢀdeductionꢀisꢀgenerally limitedꢀ toꢀ (a)ꢀ 30%ꢀ ofꢀ adjustedꢀ taxableꢀ income,ꢀ calculatedꢀ withoutꢀ regardꢀ toꢀ depreciation,ꢀ amortization,ꢀ depletionꢀ orꢀ interest, effectiveꢀforꢀtaxꢀyearsꢀbeginningꢀafterꢀDecemberꢀ31,ꢀ2017ꢀandꢀbeforeꢀJanuaryꢀ1,ꢀ2022ꢀandꢀ(b)ꢀ30%ꢀofꢀadjustedꢀtaxableꢀincome, calculatedꢀwithoutꢀregardꢀtoꢀinterestꢀ(reducedꢀbyꢀdepreciation,ꢀamortizationꢀandꢀdepletion),ꢀeffectiveꢀforꢀtaxꢀyearsꢀbeginningꢀafter Decemberꢀ31,ꢀ2021.ꢀDisallowedꢀamountsꢀmayꢀbeꢀcarriedꢀforwardꢀindefinitely,ꢀsubjectꢀtoꢀownershipꢀchangeꢀlimitations. U.S. corporationsꢀareꢀalsoꢀsubjectꢀtoꢀcurrentꢀtaxꢀonꢀglobalꢀintangibleꢀlow-taxedꢀincomeꢀ(“GILTI”)ꢀearnedꢀbyꢀcertainꢀforeignꢀsubsidiaries andꢀaꢀbaseꢀerosionꢀanti-avoidanceꢀtax.ꢀTheꢀ2017ꢀTaxꢀActꢀchangesꢀareꢀcomplexꢀandꢀsubjectꢀtoꢀadditionalꢀguidanceꢀtoꢀbeꢀissuedꢀby theꢀU.S.ꢀTreasuryꢀandꢀtheꢀInternalꢀRevenueꢀService.ꢀInꢀaddition,ꢀtheꢀindividualꢀstates’ꢀreactionsꢀtoꢀtheꢀfederalꢀtaxꢀchangesꢀare evolving.ꢀAsꢀaꢀresult,ꢀtheꢀoverallꢀlong-termꢀimpactꢀofꢀtheꢀ2017ꢀTaxꢀActꢀisꢀuncertain.ꢀItꢀisꢀpossibleꢀthatꢀtheꢀapplicationꢀofꢀanyꢀnew rulesꢀmayꢀhaveꢀaꢀmaterialꢀandꢀadverseꢀimpactꢀonꢀourꢀoperatingꢀresults,ꢀcashꢀflows,ꢀandꢀfinancialꢀcondition. We may experience network or system failures, or service interruptions, including cybersecurity attacks, or other technology risks. Our inability to protect our systems and data against such risks could harm our business and reputation. Ourꢀabilityꢀtoꢀprovideꢀuninterruptedꢀandꢀhighꢀlevelsꢀofꢀservicesꢀdependsꢀuponꢀtheꢀperformanceꢀofꢀourꢀinternalꢀnetwork,ꢀsystems andꢀrelatedꢀinfrastructure,ꢀandꢀthoseꢀofꢀourꢀthird-partyꢀvendors.ꢀAnyꢀsignificantꢀinterruptionsꢀin,ꢀorꢀdegradationꢀof,ꢀtheꢀqualityꢀof theꢀservices,ꢀincludingꢀinfrastructureꢀstorageꢀandꢀsupport,ꢀthatꢀtheseꢀthirdꢀpartiesꢀprovideꢀtoꢀusꢀcouldꢀseverelyꢀharmꢀourꢀbusiness andꢀreputationꢀandꢀleadꢀtoꢀtheꢀlossꢀofꢀcustomersꢀandꢀrevenue.ꢀOurꢀinternalꢀnetwork,ꢀsystems,ꢀandꢀrelatedꢀinfrastructure,ꢀinꢀaddition toꢀtheꢀnetworks,ꢀsystems,ꢀandꢀrelatedꢀinfrastructureꢀofꢀourꢀthird-partyꢀtechnologyꢀvendors,ꢀmayꢀbeꢀvulnerableꢀtoꢀcomputerꢀviruses andꢀotherꢀmalwareꢀthatꢀinfiltrateꢀsuchꢀsystemsꢀandꢀnetworks,ꢀasꢀwellꢀasꢀphysicalꢀorꢀelectronicꢀsecurityꢀbreaches,ꢀnaturalꢀdisasters, andꢀsimilarꢀdisruptions.ꢀTheyꢀhaveꢀbeenꢀandꢀmayꢀcontinueꢀtoꢀbeꢀtheꢀtargetꢀofꢀattemptsꢀtoꢀidentifyꢀandꢀexploitꢀnetworkꢀandꢀsystem vulnerabilities,ꢀpenetrateꢀorꢀbypassꢀsecurityꢀmeasuresꢀinꢀorderꢀtoꢀinterruptꢀorꢀdegradeꢀtheꢀqualityꢀofꢀtheꢀservicesꢀweꢀreceive,ꢀor provideꢀorꢀotherwiseꢀgainꢀunauthorizedꢀaccessꢀtoꢀourꢀnetworksꢀandꢀsystemsꢀorꢀthoseꢀofꢀourꢀthird-partyꢀvendors.ꢀTheseꢀvulnerabilities orꢀotherꢀattemptsꢀatꢀaccessꢀmayꢀresultꢀfrom,ꢀorꢀbeꢀcausedꢀby,ꢀhumanꢀerrorꢀorꢀtechnologyꢀfailures,ꢀhowever,ꢀtheyꢀmayꢀalsoꢀbeꢀthe productꢀofꢀmaliciousꢀactionsꢀbyꢀthirdꢀpartiesꢀintendingꢀtoꢀharmꢀourꢀbusiness.ꢀTheꢀmethodsꢀthatꢀmayꢀbeꢀusedꢀbyꢀtheseꢀthirdꢀparties toꢀcauseꢀserviceꢀinterruptionsꢀorꢀfailuresꢀorꢀtoꢀobtainꢀunauthorizedꢀaccessꢀtoꢀinformationꢀchangeꢀfrequently,ꢀareꢀdifficultꢀtoꢀdetect, evolveꢀrapidly,ꢀandꢀareꢀincreasinglyꢀsophisticatedꢀandꢀhardꢀtoꢀdefendꢀagainst.ꢀAlthoughꢀweꢀhaveꢀnotꢀincurredꢀmaterialꢀlossesꢀor liabilitiesꢀasꢀaꢀresultꢀofꢀsecurityꢀbreachesꢀorꢀattemptedꢀsecurityꢀbreaches,ꢀweꢀcannotꢀbeꢀcertainꢀthatꢀourꢀdefensiveꢀmeasures,ꢀand thoseꢀemployedꢀbyꢀourꢀthird-partyꢀvendors,ꢀwillꢀbeꢀsufficientꢀtoꢀdefendꢀagainstꢀallꢀsuchꢀcurrentꢀandꢀfutureꢀmethods.ꢀ Ourꢀcarefulꢀvettingꢀofꢀthirdꢀpartiesꢀtoꢀprovideꢀtechnologyꢀservicesꢀandꢀtheꢀcontractualꢀrequirementsꢀrelatedꢀtoꢀtheꢀsecurityꢀthatꢀwe imposeꢀonꢀourꢀthird-partyꢀvendorsꢀwhoꢀhaveꢀaccessꢀtoꢀthisꢀdataꢀmayꢀnotꢀbeꢀsufficientꢀtoꢀprotectꢀusꢀfromꢀnetworkꢀorꢀsystemꢀfailures orꢀserviceꢀinterruptions. Anyꢀsecurityꢀbreach,ꢀwhetherꢀexperiencedꢀbyꢀusꢀorꢀaꢀthird-partyꢀvendor,ꢀmayꢀbeꢀmaterialꢀandꢀleadꢀtoꢀharmꢀtoꢀourꢀfinancialꢀcondition, businessꢀ reputation,ꢀ andꢀ prospectsꢀ ofꢀ futureꢀ businessꢀ dueꢀ to,ꢀ amongꢀ otherꢀ factors:ꢀ lossꢀ ofꢀ customerꢀ confidenceꢀ arisingꢀ from interruptionsꢀ orꢀ outagesꢀ ofꢀ ourꢀ services,ꢀ delays,ꢀ failureꢀ toꢀ meetꢀ contractualꢀ obligations,ꢀ andꢀ lossꢀ ofꢀ dataꢀ orꢀ publicꢀ releaseꢀ of confidentialꢀdata;ꢀincreaseꢀregulatoryꢀscrutinyꢀonꢀus;ꢀcompromiseꢀourꢀtradeꢀsecretꢀandꢀintellectualꢀproperty;ꢀexposeꢀusꢀtoꢀcostly uninsuredꢀliabilitiesꢀsuchꢀasꢀmaterialꢀfines,ꢀpenalties,ꢀliquidatedꢀdamages,ꢀandꢀoverallꢀmarginꢀcompressionꢀdueꢀtoꢀrenegotiation ofꢀcontractsꢀonꢀlessꢀfavorableꢀtermsꢀorꢀlossꢀofꢀbusiness;ꢀandꢀliabilityꢀforꢀclaimsꢀrelatingꢀtoꢀmisuseꢀofꢀpersonalꢀinformationꢀin violationꢀofꢀcontractualꢀobligationsꢀorꢀdataꢀprivacyꢀlaws.ꢀTheꢀoccurrenceꢀofꢀanyꢀsuchꢀfailureꢀmayꢀalsoꢀsubjectꢀusꢀtoꢀcostlyꢀlawsuits, claimsꢀforꢀcontractualꢀindemnities,ꢀandꢀnegativelyꢀimpactꢀtheꢀstatusꢀofꢀourꢀgamingꢀregulatoryꢀlicensesꢀupꢀtoꢀandꢀincludingꢀrevocation, asꢀwellꢀasꢀdivertꢀvaluableꢀmanagement,ꢀengineering,ꢀinformationꢀtechnology,ꢀandꢀmarketingꢀresourcesꢀtowardꢀaddressingꢀthese issues,ꢀdelayingꢀourꢀabilityꢀtoꢀachieveꢀourꢀstrategicꢀinitiatives.ꢀInꢀtheꢀeventꢀourꢀEGMsꢀorꢀcashꢀaccessꢀproducts,ꢀsystems,ꢀorꢀnetworks areꢀcompromised,ꢀgamingꢀestablishmentsꢀmayꢀrequireꢀusꢀtoꢀremediateꢀanyꢀabnormality,ꢀdowntime,ꢀlossꢀofꢀuse,ꢀorꢀsuspicious 18 activityꢀorꢀrequireꢀusꢀtoꢀindemnifyꢀcasinoꢀoperatorsꢀforꢀlostꢀbusinessꢀand,ꢀpotentially,ꢀtheirꢀpatrons.ꢀInꢀaddition,ꢀweꢀgather,ꢀas permittedꢀbyꢀlaw,ꢀnon-public,ꢀpersonally-identifiableꢀfinancialꢀinformationꢀfromꢀpatronsꢀwhoꢀuseꢀourꢀcashꢀaccessꢀservices,ꢀsuch asꢀnames,ꢀaddresses,ꢀtelephoneꢀnumbers,ꢀbankꢀandꢀcreditꢀcardꢀaccountꢀnumbers,ꢀandꢀtransactionꢀinformation,ꢀtheꢀcompromiseꢀof suchꢀdata,ꢀwhichꢀmayꢀsubjectꢀusꢀtoꢀfinesꢀandꢀotherꢀrelatedꢀcostsꢀofꢀremediation. Theꢀinsuranceꢀweꢀmaintainꢀagainstꢀcybersecurityꢀandꢀrelatedꢀrisksꢀmayꢀnotꢀcoverꢀallꢀlossesꢀthatꢀweꢀcouldꢀsuffer. The gaming industry is intensely competitive, and if we are unable to compete effectively, our business could be negatively impacted. Theꢀmarketꢀforꢀgamingꢀdevices,ꢀcashꢀaccessꢀproducts,ꢀandꢀrelatedꢀservicesꢀisꢀhighlyꢀcompetitive,ꢀandꢀweꢀexpectꢀcompetitionꢀto increaseꢀandꢀintensifyꢀinꢀtheꢀfuture.ꢀInꢀbothꢀourꢀGamesꢀandꢀFinTechꢀbusinesses,ꢀsomeꢀofꢀourꢀcompetitorsꢀandꢀpotentialꢀcompetitors haveꢀsignificantꢀadvantagesꢀoverꢀus,ꢀincludingꢀgreaterꢀnameꢀrecognition;ꢀlongerꢀoperatingꢀhistories;ꢀpre-existingꢀrelationshipsꢀwith currentꢀorꢀpotentialꢀcustomersꢀwithꢀrespectꢀtoꢀotherꢀfinancialꢀservices;ꢀgreaterꢀfinancial,ꢀresearch,ꢀdesign,ꢀdevelopment,ꢀmarketing, technological,ꢀandꢀotherꢀresources;ꢀandꢀmoreꢀreadyꢀaccessꢀtoꢀcapitalꢀresources,ꢀwhichꢀallowꢀthemꢀtoꢀrespondꢀmoreꢀquicklyꢀtoꢀnew orꢀchangingꢀopportunities,ꢀbeꢀinꢀaꢀbetterꢀpositionꢀtoꢀcompeteꢀand,ꢀinꢀrespectꢀofꢀourꢀcashꢀaccessꢀbusiness,ꢀtoꢀpayꢀhigherꢀcommissions orꢀotherꢀincentivesꢀtoꢀgamingꢀestablishmentsꢀinꢀorderꢀtoꢀgainꢀnewꢀcustomers.ꢀInꢀourꢀFinTechꢀbusiness,ꢀweꢀcompeteꢀwithꢀother establishedꢀprovidersꢀofꢀcashꢀaccessꢀproductsꢀandꢀservices,ꢀincludingꢀthird-partyꢀtransactionꢀprocessors,ꢀfinancialꢀinstitutions,ꢀand otherꢀregionalꢀandꢀlocalꢀbanksꢀthatꢀoperateꢀATMsꢀonꢀtheꢀpremisesꢀofꢀgamingꢀestablishments.ꢀToꢀtheꢀextentꢀthatꢀweꢀloseꢀcustomers toꢀtheseꢀcompetitors,ꢀorꢀcompetitiveꢀpressuresꢀforceꢀusꢀtoꢀofferꢀincentivesꢀorꢀlessꢀfavorableꢀpricingꢀtermsꢀtoꢀusꢀtoꢀestablishꢀor maintainꢀrelationshipsꢀwithꢀgamingꢀestablishments,ꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflowsꢀcouldꢀbeꢀmaterially andꢀadverselyꢀaffected. Consolidation among our customers or competitors could have a material adverse effect on our revenues and profitability. Weꢀoftenꢀexecuteꢀcontractsꢀwithꢀcustomersꢀpursuantꢀtoꢀwhichꢀweꢀprovideꢀproductsꢀandꢀservicesꢀatꢀmultipleꢀgamingꢀestablishments. Accordingly,ꢀtheꢀexpirationꢀorꢀterminationꢀofꢀaꢀsingleꢀkeyꢀcontractꢀcanꢀmeanꢀtheꢀlossꢀofꢀmultipleꢀgamingꢀfacilitiesꢀatꢀwhichꢀmany ofꢀourꢀproductsꢀandꢀservicesꢀareꢀused.ꢀConsolidationꢀamongꢀoperatorsꢀofꢀgamingꢀestablishmentsꢀmayꢀalsoꢀresultꢀinꢀtheꢀlossꢀof customers,ꢀifꢀoneꢀofꢀourꢀcustomersꢀisꢀacquiredꢀbyꢀaꢀbusinessꢀthatꢀutilizesꢀoneꢀofꢀourꢀcompetitors,ꢀorꢀsignificantꢀmarginꢀcompression, ifꢀratesꢀvaryꢀbetweenꢀacquiringꢀandꢀacquiredꢀcustomers.ꢀConsolidationꢀamongꢀourꢀcompetitorsꢀinꢀeitherꢀtheꢀGamesꢀorꢀFinTech sectorsꢀwillꢀonlyꢀincreaseꢀadvantagesꢀtheseꢀcompetitorsꢀmayꢀhaveꢀoverꢀusꢀasꢀweꢀcompeteꢀforꢀtheseꢀcustomers,ꢀincludingꢀeven greaterꢀfinancial,ꢀresearch,ꢀdesign,ꢀdevelopment,ꢀmarketing,ꢀtechnological,ꢀandꢀotherꢀresources,ꢀtheꢀabilityꢀtoꢀofferꢀcustomersꢀmore favorableꢀratesꢀandꢀpricesꢀdueꢀtoꢀlowerꢀoperatingꢀcostsꢀresultingꢀfromꢀefficienciesꢀofꢀscaleꢀandꢀvaryingꢀmarginsꢀofꢀaꢀlargerꢀproduct portfolio,ꢀamongꢀotherꢀfactors. Our business depends on our ability to introduce new, commercially viable games, products, and services in a timely manner. Ourꢀsuccessꢀisꢀdependentꢀonꢀourꢀabilityꢀtoꢀdevelopꢀandꢀsellꢀnewꢀgames,ꢀproducts,ꢀandꢀservicesꢀthatꢀareꢀattractiveꢀnotꢀonlyꢀtoꢀour customers,ꢀbutꢀalsoꢀtoꢀtheirꢀcustomers,ꢀtheꢀgamingꢀpatrons.ꢀIfꢀourꢀgames,ꢀproducts,ꢀandꢀservicesꢀdoꢀnotꢀappealꢀtoꢀgamingꢀoperators andꢀpatrons,ꢀorꢀdoꢀnotꢀmeetꢀorꢀsustainꢀrevenueꢀandꢀprofitabilityꢀofꢀcontractualꢀobligationsꢀandꢀexpectations,ꢀweꢀmayꢀloseꢀbusiness toꢀourꢀcompetitors.ꢀAdditionally,ꢀweꢀmayꢀbeꢀunableꢀtoꢀenhanceꢀexistingꢀgames,ꢀproducts,ꢀandꢀservicesꢀinꢀaꢀtimelyꢀmannerꢀin responseꢀtoꢀchangingꢀregulatory,ꢀlegal,ꢀorꢀmarketꢀconditions,ꢀcustomerꢀrequirements,ꢀorꢀnewꢀgames,ꢀproducts,ꢀandꢀservicesꢀmay notꢀachieveꢀmarketꢀacceptanceꢀinꢀnewꢀorꢀexistingꢀmarkets.ꢀDelayꢀinꢀregulatoryꢀapprovalsꢀofꢀnewꢀgamingꢀdevicesꢀandꢀequipment mayꢀadverselyꢀimpactꢀnewꢀproductꢀdeployment.ꢀIfꢀweꢀareꢀunableꢀtoꢀkeepꢀpaceꢀwithꢀrapidꢀinnovationsꢀinꢀnewꢀtechnologiesꢀor productꢀdesignꢀandꢀdeploymentꢀorꢀifꢀweꢀareꢀunableꢀtoꢀquicklyꢀadaptꢀourꢀdevelopment,ꢀmanufacturing,ꢀorꢀsalesꢀprocessesꢀtoꢀcompete, ourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflowsꢀcouldꢀsufferꢀaꢀmaterialꢀadverseꢀeffect. Our business is dependent upon consumer demand for gaming and overall economic trends specific to the gaming industry. Economic downturns or a decline in the popularity of gaming could reduce the number of patrons that use our products and services or the amounts of cash that they access using our services. Weꢀprovideꢀourꢀgaming-relatedꢀandꢀcashꢀaccessꢀproductsꢀandꢀservicesꢀalmostꢀexclusivelyꢀtoꢀgamingꢀestablishments.ꢀAsꢀaꢀresult, ourꢀbusinessꢀdependsꢀonꢀconsumerꢀdemandꢀforꢀgaming.ꢀGamingꢀisꢀaꢀdiscretionaryꢀleisureꢀactivity,ꢀparticipationꢀinꢀwhichꢀhasꢀin theꢀpastꢀandꢀmayꢀinꢀtheꢀfutureꢀdeclineꢀduringꢀperiodsꢀofꢀ(i)ꢀeconomicꢀgrowth,ꢀdueꢀtoꢀchangesꢀinꢀconsumers’ꢀspendingꢀhabits;ꢀ(ii) economicꢀ downturns,ꢀ dueꢀ toꢀ decreasesꢀ inꢀ ourꢀ customers’ꢀ disposableꢀ incomeꢀ orꢀ generalꢀ tourismꢀ activities;ꢀ andꢀ (iii)ꢀ declining consumerꢀconfidence,ꢀdueꢀtoꢀgeneralꢀeconomicꢀconditions,ꢀdomestic-ꢀandꢀgeo-politicalꢀconcerns,ꢀorꢀotherꢀfactors.ꢀGamingꢀcompetes withꢀotherꢀleisureꢀactivitiesꢀasꢀaꢀformꢀofꢀconsumerꢀentertainmentꢀandꢀmayꢀloseꢀpopularityꢀasꢀnewꢀleisureꢀactivitiesꢀariseꢀorꢀasꢀother leisureꢀactivitiesꢀbecomeꢀmoreꢀpopular.ꢀInꢀaddition,ꢀgamingꢀinꢀtraditionalꢀgamingꢀestablishmentsꢀ(toꢀwhichꢀweꢀsellꢀourꢀproducts andꢀservices)ꢀcompetesꢀwithꢀInternet-basedꢀgaming.ꢀTheꢀpopularityꢀandꢀacceptanceꢀofꢀgamingꢀisꢀalsoꢀinfluencedꢀbyꢀtheꢀprevailing socialꢀmoresꢀandꢀchangesꢀinꢀsocialꢀmores,ꢀincludingꢀchangesꢀdrivenꢀbyꢀsocialꢀresponsibilityꢀorganizationsꢀthatꢀareꢀdedicatedꢀto addressingꢀproblemꢀgaming,ꢀwhichꢀcouldꢀresultꢀinꢀreducedꢀacceptanceꢀofꢀgamingꢀasꢀaꢀleisureꢀactivityꢀorꢀlitigationꢀorꢀlobbying 19 effortsꢀfocusedꢀonꢀlimitingꢀgamingꢀactivities.ꢀToꢀtheꢀextentꢀthatꢀtheꢀpopularityꢀorꢀavailabilityꢀofꢀgamingꢀinꢀtraditionalꢀgaming establishmentsꢀdeclinesꢀasꢀaꢀresultꢀofꢀanyꢀofꢀtheseꢀfactors,ꢀtheꢀdemandꢀforꢀourꢀcashꢀaccessꢀandꢀgaming-relatedꢀproductsꢀandꢀservices, orꢀtheꢀwillingnessꢀofꢀourꢀcustomersꢀtoꢀspendꢀnewꢀcapitalꢀonꢀacquiringꢀgamingꢀequipmentꢀorꢀutilizeꢀrevenueꢀshareꢀagreements,ꢀmay declineꢀandꢀourꢀbusinessꢀmayꢀbeꢀharmed. We may not successfully enter new markets and potential new markets may not develop quickly, or at all. Ifꢀandꢀasꢀnewꢀandꢀdevelopingꢀdomesticꢀmarketsꢀdevelop,ꢀcompetitionꢀamongꢀprovidersꢀofꢀgaming-relatedꢀandꢀcashꢀaccessꢀproducts andꢀservicesꢀwillꢀintensify.ꢀWeꢀwillꢀfaceꢀaꢀnumberꢀofꢀhurdlesꢀinꢀourꢀattemptsꢀtoꢀenterꢀtheseꢀmarkets,ꢀincludingꢀtheꢀneedꢀtoꢀexpand ourꢀ salesꢀ andꢀ marketingꢀ presence,ꢀ competeꢀ againstꢀ pre-existingꢀ relationshipsꢀ thatꢀ ourꢀ targetꢀ customersꢀ mayꢀ haveꢀ withꢀ our competitors,ꢀtheꢀuncertaintyꢀofꢀcomplianceꢀwithꢀnewꢀorꢀdevelopingꢀregulatoryꢀregimesꢀ(includingꢀregulatoryꢀregimesꢀrelatingꢀto Internetꢀgaming)ꢀwithꢀwhichꢀweꢀareꢀnotꢀcurrentlyꢀfamiliar,ꢀandꢀoversightꢀbyꢀregulatorsꢀthatꢀareꢀnotꢀfamiliarꢀwithꢀusꢀorꢀourꢀbusinesses. Eachꢀofꢀtheseꢀrisksꢀcouldꢀmateriallyꢀimpairꢀourꢀabilityꢀtoꢀsuccessfullyꢀexpandꢀourꢀoperationsꢀintoꢀtheseꢀnewꢀandꢀdevelopingꢀdomestic markets. Inꢀaddition,ꢀasꢀweꢀattemptꢀtoꢀsellꢀourꢀgaming-relatedꢀandꢀcashꢀaccessꢀproductsꢀandꢀservicesꢀintoꢀinternationalꢀmarketsꢀinꢀwhich weꢀhaveꢀnotꢀpreviouslyꢀoperated,ꢀweꢀmayꢀbecomeꢀexposedꢀtoꢀpolitical,ꢀeconomic,ꢀtax,ꢀlegal,ꢀandꢀregulatoryꢀrisksꢀnotꢀfacedꢀby businessesꢀthatꢀoperateꢀonlyꢀinꢀtheꢀUnitedꢀStates.ꢀTheꢀlegalꢀandꢀregulatoryꢀregimesꢀofꢀforeignꢀmarketsꢀandꢀtheirꢀramificationsꢀon ourꢀbusinessꢀmayꢀbeꢀlessꢀcertain.ꢀOurꢀinternationalꢀoperationsꢀmayꢀbeꢀsubjectꢀtoꢀaꢀvarietyꢀofꢀrisks,ꢀincludingꢀdifferentꢀregulatory requirementsꢀandꢀinterpretations,ꢀtradeꢀbarriers,ꢀdifficultiesꢀinꢀstaffingꢀandꢀmanagingꢀforeignꢀoperations,ꢀhigherꢀratesꢀofꢀfraud, complianceꢀ withꢀ anti-corruptionꢀ andꢀ exportꢀ controlꢀ laws,ꢀ fluctuationsꢀ inꢀ currencyꢀ exchangeꢀ rates,ꢀ difficultyꢀ inꢀ enforcingꢀ or interpretingꢀcontractsꢀorꢀlegislation,ꢀpoliticalꢀandꢀeconomicꢀinstability,ꢀandꢀpotentiallyꢀadverseꢀtaxꢀconsequences.ꢀDifficultiesꢀin obtainingꢀapprovals,ꢀlicenses,ꢀorꢀwaiversꢀfromꢀtheꢀmonetaryꢀandꢀGamingꢀAuthoritiesꢀofꢀotherꢀjurisdictions,ꢀinꢀadditionꢀtoꢀother potentialꢀregulatoryꢀandꢀquasi-regulatoryꢀissuesꢀthatꢀweꢀhaveꢀnotꢀyetꢀascertained,ꢀmayꢀariseꢀinꢀinternationalꢀjurisdictionsꢀintoꢀwhich weꢀattemptꢀtoꢀenter.ꢀInꢀtheseꢀnewꢀmarkets,ꢀourꢀoperationsꢀwillꢀrelyꢀonꢀanꢀinfrastructureꢀof,ꢀamongꢀotherꢀthings,ꢀfinancialꢀservices andꢀtelecommunicationsꢀfacilitiesꢀthatꢀmayꢀnotꢀbeꢀsufficientꢀtoꢀsupportꢀourꢀbusinessꢀneeds.ꢀInꢀtheseꢀnewꢀmarkets,ꢀweꢀmayꢀadditionally provideꢀservicesꢀbasedꢀuponꢀinterpretationsꢀofꢀapplicableꢀlaw,ꢀwhichꢀinterpretationꢀmayꢀbeꢀsubjectꢀtoꢀregulatoryꢀorꢀjudicialꢀreview. Theseꢀrisks,ꢀamongꢀothers,ꢀcouldꢀmateriallyꢀandꢀadverselyꢀaffectꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀandꢀoperations.ꢀInꢀconnection withꢀourꢀexpansionꢀintoꢀnewꢀinternationalꢀmarkets,ꢀweꢀmayꢀforgeꢀstrategicꢀrelationshipsꢀwithꢀbusinessꢀpartnersꢀtoꢀassistꢀus.ꢀThe successꢀofꢀourꢀexpansionꢀintoꢀtheseꢀmarketsꢀthereforeꢀmayꢀdependꢀinꢀpartꢀuponꢀtheꢀsuccessꢀofꢀtheꢀbusinessꢀpartnersꢀwithꢀwhom weꢀforgeꢀtheseꢀstrategicꢀrelationships.ꢀIfꢀweꢀdoꢀnotꢀsuccessfullyꢀformꢀstrategicꢀrelationshipsꢀwithꢀtheꢀrightꢀbusinessꢀpartnersꢀorꢀif weꢀareꢀnotꢀableꢀtoꢀovercomeꢀculturalꢀorꢀbusinessꢀpracticeꢀdifferences,ꢀourꢀabilityꢀtoꢀpenetrateꢀtheseꢀnewꢀinternationalꢀmarketsꢀcould suffer. Weꢀareꢀsubjectꢀtoꢀtheꢀriskꢀthatꢀtheꢀdomesticꢀorꢀinternationalꢀmarketsꢀweꢀattemptꢀtoꢀenterꢀorꢀexpandꢀintoꢀmayꢀnotꢀdevelopꢀasꢀquickly asꢀanticipated,ꢀorꢀatꢀall.ꢀTheꢀdevelopmentꢀofꢀnewꢀgamingꢀmarketsꢀisꢀsubjectꢀtoꢀpolitical,ꢀsocial,ꢀregulatory,ꢀandꢀeconomicꢀforces beyondꢀourꢀcontrol.ꢀTheꢀexpansionꢀofꢀgamingꢀactivitiesꢀinꢀnewꢀmarketsꢀcanꢀbeꢀveryꢀcontroversialꢀandꢀmayꢀdependꢀheavilyꢀonꢀthe supportꢀandꢀsponsorshipꢀofꢀlocalꢀgovernment,ꢀandꢀmayꢀbeꢀbasedꢀuponꢀinterpretationsꢀofꢀnewlyꢀenactedꢀlaws,ꢀtheꢀinterpretationꢀof whichꢀmayꢀbeꢀsubjectꢀtoꢀregulatoryꢀorꢀjudicialꢀreview.ꢀChangesꢀinꢀgovernmentꢀleadership,ꢀfailureꢀtoꢀobtainꢀrequisiteꢀvoterꢀsupport inꢀreferendums,ꢀfailureꢀofꢀlegislatorsꢀtoꢀenactꢀenablingꢀlegislation,ꢀandꢀlimitationsꢀonꢀtheꢀvolumeꢀofꢀgamingꢀactivityꢀthatꢀisꢀpermitted inꢀparticularꢀmarketsꢀmayꢀinhibitꢀtheꢀdevelopmentꢀofꢀnewꢀmarkets.ꢀFurther,ꢀourꢀestimatesꢀofꢀtheꢀpotentialꢀfutureꢀopportunitiesꢀin newꢀmarketsꢀareꢀbasedꢀonꢀaꢀvarietyꢀofꢀassumptionsꢀthatꢀmayꢀproveꢀtoꢀbeꢀinaccurate.ꢀToꢀtheꢀextentꢀthatꢀweꢀoverestimateꢀtheꢀpotential ofꢀaꢀnewꢀmarket,ꢀincorrectlyꢀgaugeꢀtheꢀtimingꢀofꢀtheꢀdevelopmentꢀofꢀaꢀnewꢀmarket,ꢀorꢀfailꢀtoꢀanticipateꢀtheꢀdifferencesꢀbetweenꢀa newꢀmarketꢀandꢀourꢀexistingꢀmarkets,ꢀweꢀmayꢀfailꢀinꢀourꢀstrategyꢀofꢀgrowingꢀourꢀbusinessꢀbyꢀexpandingꢀintoꢀnewꢀmarkets.ꢀMoreover, ifꢀweꢀareꢀunableꢀtoꢀmeetꢀtheꢀneedsꢀofꢀourꢀexistingꢀcustomersꢀasꢀtheyꢀenterꢀmarketsꢀthatꢀweꢀdoꢀnotꢀcurrentlyꢀserve,ꢀourꢀrelationships withꢀtheseꢀcustomersꢀcouldꢀbeꢀharmed. We may not realize satisfactory returns on money loaned or otherwise funded to new and existing customers to develop or expand gaming facilities. Inꢀourꢀgamingꢀbusiness,ꢀweꢀenterꢀintoꢀplacementꢀfeeꢀagreementsꢀtypicallyꢀtoꢀsecureꢀaꢀlong-termꢀrevenueꢀshareꢀpercentageꢀandꢀa fixedꢀnumberꢀofꢀplayerꢀterminalꢀplacementsꢀinꢀtheꢀgamingꢀfacility.ꢀTheseꢀplacementꢀfeeꢀarrangementsꢀmayꢀprovideꢀforꢀtheꢀremoval ofꢀ ourꢀ playerꢀ terminalꢀ placementsꢀ inꢀ theꢀ eventꢀ ofꢀ poorꢀ gameꢀ performanceꢀ withꢀ noꢀ furtherꢀ obligationꢀ ofꢀ theꢀ gaming customer.ꢀAdditionally,ꢀ weꢀ haveꢀ historicallyꢀ enteredꢀ intoꢀ developmentꢀ feeꢀ arrangementsꢀ andꢀ mayꢀ continueꢀ toꢀ doꢀ soꢀ inꢀ the future.ꢀUnderꢀtheꢀdevelopmentꢀfeeꢀarrangements,ꢀweꢀprovideꢀfinancingꢀforꢀconstruction,ꢀexpansion,ꢀorꢀremodelingꢀofꢀgaming facilitiesꢀinꢀexchangeꢀforꢀaꢀlong-termꢀrevenueꢀshareꢀpercentageꢀandꢀaꢀfixedꢀnumberꢀofꢀplayerꢀterminalꢀplacementsꢀinꢀtheꢀgaming facilityꢀuntilꢀtheꢀdevelopmentꢀfeeꢀisꢀrepaidꢀtoꢀus.ꢀTheꢀsuccessꢀofꢀtheseꢀventuresꢀisꢀdependentꢀuponꢀtheꢀtimelyꢀcompletionꢀofꢀthe gamingꢀfacility,ꢀtheꢀplacementꢀandꢀperformanceꢀofꢀourꢀplayerꢀterminals,ꢀandꢀaꢀfavorableꢀregulatoryꢀenvironment.ꢀOurꢀdevelopment andꢀ placementꢀ effortsꢀ andꢀ financingꢀ activitiesꢀ mayꢀ resultꢀ inꢀ operatingꢀ difficulties,ꢀ financialꢀ andꢀ regulatoryꢀ risks,ꢀ orꢀ required expendituresꢀthatꢀcouldꢀmateriallyꢀandꢀadverselyꢀaffectꢀourꢀliquidity.ꢀInꢀconnectionꢀwithꢀoneꢀorꢀmoreꢀofꢀtheseꢀtransactions,ꢀandꢀto 20 obtainꢀtheꢀnecessaryꢀdevelopmentꢀandꢀplacementꢀfeeꢀfunds,ꢀweꢀmayꢀneedꢀtoꢀextendꢀsecuredꢀandꢀunsecuredꢀcreditꢀtoꢀpotentialꢀor existingꢀcustomersꢀthatꢀmayꢀnotꢀbeꢀrepaid,ꢀincurꢀdebtꢀonꢀtermsꢀunfavorableꢀtoꢀus,ꢀincurꢀdifficultiesꢀinꢀperfectingꢀsecurityꢀinterests inꢀcollateralꢀonꢀIndianꢀlands,ꢀorꢀthatꢀweꢀareꢀunableꢀtoꢀrepay,ꢀorꢀincurꢀotherꢀcontingentꢀliabilities.ꢀTheꢀfailureꢀtoꢀmaintainꢀcontrols andꢀprocessesꢀrelatedꢀtoꢀourꢀcollectionꢀeffortsꢀorꢀtheꢀdeteriorationꢀofꢀregulatoryꢀorꢀfinancialꢀconditionꢀofꢀourꢀcustomersꢀcould negativelyꢀimpactꢀourꢀbusiness. If we are unable to develop and protect our intellectual property adequately or obtain intellectual property rights and agreements, we may lose valuable competitive advantages, be forced to incur costly litigation to protect our rights, or be restricted in our ability to provide various products in our markets. Ourꢀ successꢀ depends,ꢀ inꢀ part,ꢀ onꢀ developingꢀ andꢀ protectingꢀ ourꢀ intellectualꢀ property.ꢀ Weꢀ relyꢀ onꢀ aꢀ combinationꢀ ofꢀ patents, trademarks,ꢀ copyrights,ꢀ tradeꢀ secrets,ꢀ andꢀ contractualꢀ restrictionsꢀ toꢀ protectꢀ ourꢀ intellectualꢀ property.ꢀ Weꢀ alsoꢀ relyꢀ onꢀ other confidentialityꢀandꢀcontractualꢀagreementsꢀandꢀarrangementsꢀwithꢀourꢀemployees,ꢀaffiliates,ꢀbusinessꢀpartners,ꢀandꢀcustomersꢀto establishꢀandꢀprotectꢀourꢀintellectualꢀpropertyꢀandꢀsimilarꢀproprietaryꢀrights.ꢀWeꢀcannotꢀassureꢀyouꢀthatꢀweꢀwillꢀbeꢀsuccessfulꢀin protectingꢀtheseꢀrightsꢀand,ꢀdespiteꢀourꢀefforts,ꢀourꢀtradeꢀsecretsꢀandꢀproprietaryꢀknow-howꢀcouldꢀbecomeꢀknownꢀto,ꢀorꢀindependently developedꢀby,ꢀcompetitors.ꢀAnyꢀlitigationꢀrelatingꢀtoꢀtheꢀdefenseꢀofꢀourꢀintellectualꢀproperty,ꢀwhetherꢀsuccessfulꢀorꢀunsuccessful, couldꢀresultꢀinꢀsubstantialꢀcostsꢀtoꢀusꢀandꢀpotentiallyꢀcauseꢀaꢀdiversionꢀofꢀourꢀresources. Inꢀaddition,ꢀweꢀmayꢀfaceꢀclaimsꢀofꢀinfringementꢀthatꢀcouldꢀinterfereꢀwithꢀourꢀabilityꢀtoꢀuseꢀtechnologyꢀorꢀotherꢀintellectualꢀproperty rightsꢀthatꢀareꢀmaterialꢀtoꢀourꢀbusinessꢀoperations.ꢀInꢀtheꢀeventꢀaꢀclaimꢀofꢀinfringementꢀagainstꢀusꢀisꢀsuccessful,ꢀweꢀmayꢀbeꢀrequired toꢀpayꢀroyaltiesꢀtoꢀuseꢀtechnologyꢀorꢀotherꢀintellectualꢀpropertyꢀrightsꢀthatꢀweꢀhadꢀbeenꢀusing,ꢀorꢀweꢀmayꢀbeꢀrequiredꢀtoꢀenterꢀinto aꢀlicenseꢀagreementꢀandꢀpayꢀlicenseꢀfees,ꢀorꢀweꢀmayꢀbeꢀrequiredꢀtoꢀstopꢀusingꢀtheꢀtechnologyꢀorꢀotherꢀintellectualꢀpropertyꢀrights thatꢀweꢀhadꢀbeenꢀusing.ꢀWeꢀmayꢀbeꢀunableꢀtoꢀobtainꢀnecessaryꢀlicensesꢀfromꢀthirdꢀpartiesꢀatꢀaꢀreasonableꢀcostꢀorꢀwithinꢀaꢀreasonable amountꢀofꢀtime.ꢀAnyꢀlitigationꢀofꢀthisꢀtype,ꢀwhetherꢀsuccessfulꢀorꢀunsuccessful,ꢀcouldꢀresultꢀinꢀsubstantialꢀcostsꢀtoꢀusꢀandꢀpotentially causeꢀaꢀdiversionꢀofꢀourꢀresources. We rely on technology provided by third-party vendors, the loss of which could materially and adversely affect our business, increase our costs, and delay deployment or suspend development of our financial services products, gaming systems, and player terminals. Weꢀhaveꢀenteredꢀintoꢀlicenseꢀagreementsꢀwithꢀthirdꢀpartiesꢀforꢀtheꢀexclusiveꢀuseꢀofꢀtheirꢀtechnologyꢀandꢀintellectualꢀpropertyꢀrights inꢀtheꢀgamingꢀindustry,ꢀsuchꢀasꢀourꢀlicenseꢀtoꢀuseꢀportionsꢀofꢀtheꢀsoftwareꢀinfrastructureꢀuponꢀwhichꢀourꢀcashꢀaccessꢀsystems operate,ꢀandꢀweꢀalsoꢀrelyꢀonꢀthird-partyꢀmanufacturersꢀtoꢀmanufactureꢀourꢀgamingꢀdevices,ꢀfullyꢀintegratedꢀkiosks,ꢀandꢀother integratedꢀkioskꢀsolutions.ꢀWeꢀrelyꢀonꢀtheseꢀotherꢀpartiesꢀtoꢀmaintainꢀandꢀprotectꢀthisꢀtechnologyꢀandꢀtheꢀrelatedꢀintellectualꢀproperty rights.ꢀIfꢀourꢀlicensorsꢀfailꢀtoꢀprotectꢀtheirꢀintellectualꢀpropertyꢀrightsꢀinꢀmaterialꢀthatꢀweꢀlicenseꢀandꢀweꢀareꢀunableꢀtoꢀprotectꢀsuch intellectualꢀpropertyꢀrights,ꢀtheꢀvalueꢀofꢀourꢀlicensesꢀmayꢀdiminishꢀsignificantlyꢀandꢀourꢀbusinessꢀcouldꢀbeꢀsignificantlyꢀharmed. Inꢀaddition,ꢀifꢀtheseꢀagreementsꢀexpireꢀandꢀweꢀareꢀunableꢀtoꢀrenewꢀthem,ꢀorꢀifꢀtheꢀmanufacturersꢀofꢀthisꢀsoftwareꢀorꢀhardware,ꢀor functionalꢀequivalentsꢀofꢀthisꢀsoftwareꢀorꢀhardware,ꢀwereꢀeitherꢀnoꢀlongerꢀavailableꢀtoꢀusꢀorꢀnoꢀlongerꢀofferedꢀtoꢀusꢀonꢀcommercially reasonableꢀterms,ꢀweꢀmayꢀloseꢀaꢀvaluableꢀcompetitiveꢀadvantageꢀandꢀourꢀbusinessꢀcouldꢀbeꢀharmed. Actsꢀ ofꢀ God,ꢀ adverseꢀ weatherꢀ andꢀ shippingꢀ difficulties,ꢀ particularlyꢀ withꢀ respectꢀ toꢀ internationalꢀ third-partyꢀ suppliersꢀ ofꢀ our components,ꢀcouldꢀcauseꢀsignificantꢀproductionꢀdelays.ꢀIfꢀweꢀareꢀunableꢀtoꢀobtainꢀtheseꢀcomponentsꢀfromꢀourꢀestablishedꢀthird- partyꢀvendors,ꢀweꢀcouldꢀbeꢀrequiredꢀtoꢀeitherꢀredesignꢀourꢀproductꢀtoꢀfunctionꢀwithꢀalternateꢀthird-partyꢀproductsꢀorꢀtoꢀdevelopꢀor manufactureꢀtheseꢀcomponentsꢀourselves,ꢀwhichꢀwouldꢀresultꢀinꢀincreasedꢀcostsꢀandꢀcouldꢀresultꢀinꢀdelaysꢀinꢀtheꢀdeploymentꢀof ourꢀgamingꢀsystemsꢀandꢀplayerꢀterminals.ꢀFurthermore,ꢀweꢀmightꢀbeꢀforcedꢀtoꢀlimitꢀtheꢀfeaturesꢀavailableꢀinꢀourꢀcurrentꢀorꢀfuture offerings. Weꢀrelyꢀonꢀintellectualꢀpropertyꢀlicensesꢀfromꢀoneꢀorꢀmoreꢀthird-partyꢀcompetitors,ꢀtheꢀlossꢀofꢀwhichꢀcouldꢀmateriallyꢀandꢀadversely affectꢀourꢀbusinessꢀandꢀtheꢀsaleꢀorꢀplacementꢀofꢀourꢀproducts.ꢀVariousꢀthird-partyꢀgamingꢀmanufacturersꢀwithꢀwhichꢀweꢀcompete areꢀ muchꢀ largerꢀ thanꢀ usꢀ andꢀ haveꢀ substantiallyꢀ largerꢀ intellectualꢀ propertyꢀ assets.ꢀTheꢀ gamingꢀ manufacturerꢀ industryꢀ isꢀ very competitiveꢀandꢀlitigious,ꢀandꢀaꢀlawsuitꢀbroughtꢀbyꢀoneꢀofꢀourꢀlargerꢀcompetitors,ꢀwhetherꢀorꢀnotꢀwell-founded,ꢀmayꢀhaveꢀaꢀmaterial adverseꢀeffectꢀonꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflowsꢀandꢀourꢀabilityꢀtoꢀsellꢀorꢀplaceꢀourꢀproducts. Our inability to identify business opportunities and future acquisitions, or successfully execute any of our identified business opportunities or future acquisitions could limit our future growth. Fromꢀtimeꢀtoꢀtime,ꢀweꢀpursueꢀstrategicꢀacquisitionsꢀinꢀsupportꢀofꢀourꢀstrategicꢀgoals.ꢀInꢀconnectionꢀwithꢀanyꢀsuchꢀacquisitions,ꢀwe couldꢀfaceꢀsignificantꢀchallengesꢀinꢀtimelyꢀsecuringꢀrequiredꢀapprovalsꢀofꢀGamingꢀAuthorities,ꢀorꢀmanagingꢀandꢀintegratingꢀour expandedꢀorꢀcombinedꢀoperations,ꢀincludingꢀacquiredꢀassets,ꢀoperations,ꢀandꢀpersonnel.ꢀThereꢀcanꢀbeꢀnoꢀassuranceꢀthatꢀacquisition opportunitiesꢀwillꢀbeꢀavailableꢀonꢀacceptableꢀtermsꢀorꢀatꢀallꢀorꢀthatꢀweꢀwillꢀbeꢀableꢀtoꢀobtainꢀnecessaryꢀfinancingꢀorꢀregulatory approvalsꢀtoꢀcompleteꢀpotentialꢀacquisitions. 21 We may not achieve the intended benefits of our acquisitions, if any, nor may we be able to integrate those businesses successfully, and any such acquisitions may disrupt our current plans and operations. Ourꢀabilityꢀtoꢀsucceedꢀinꢀimplementingꢀourꢀstrategyꢀwillꢀdependꢀtoꢀsomeꢀdegreeꢀuponꢀtheꢀabilityꢀofꢀourꢀmanagementꢀtoꢀsuccessfully integrateꢀcommerciallyꢀviableꢀacquisitions.ꢀAcquisitionꢀtransactionsꢀmayꢀdisruptꢀourꢀongoingꢀbusinessꢀandꢀdistractꢀmanagement fromꢀotherꢀresponsibilities.ꢀTheꢀexpectedꢀcostꢀsynergiesꢀassociatedꢀwithꢀsuchꢀacquisitionsꢀmayꢀnotꢀbeꢀfullyꢀrealizedꢀinꢀtheꢀanticipated amountsꢀorꢀwithinꢀtheꢀcontemplatedꢀtimeframesꢀorꢀcostꢀexpectations,ꢀwhichꢀcouldꢀresultꢀinꢀincreasedꢀcostsꢀandꢀhaveꢀanꢀadverse effectꢀonꢀourꢀprospects,ꢀresultsꢀofꢀoperations,ꢀcashꢀflows,ꢀandꢀfinancialꢀcondition.ꢀOurꢀbusinessesꢀmayꢀbeꢀnegativelyꢀimpactedꢀif weꢀareꢀunableꢀtoꢀeffectivelyꢀmanageꢀourꢀexpandedꢀoperations.ꢀTheꢀintegrationꢀofꢀtheseꢀacquisitionsꢀwillꢀrequireꢀsignificantꢀtime andꢀfocusꢀfromꢀmanagementꢀandꢀmayꢀdivertꢀattentionꢀfromꢀtheꢀday‑to‑dayꢀoperationsꢀofꢀtheꢀcombinedꢀbusinessꢀorꢀdelayꢀthe achievementꢀofꢀourꢀstrategicꢀobjectives.ꢀWeꢀexpectꢀtoꢀincurꢀincrementalꢀcostsꢀandꢀcapitalꢀexpendituresꢀrelatedꢀtoꢀourꢀcontemplated integrationꢀactivities. Theꢀrisksꢀweꢀcommonlyꢀencounterꢀinꢀacquisitionsꢀinclude: • • • • • • • • • • • • • • • • • if,ꢀinꢀadditionꢀtoꢀourꢀcurrentꢀindebtedness,ꢀweꢀincurꢀsignificantꢀdebtꢀtoꢀfinanceꢀaꢀfutureꢀacquisitionꢀandꢀourꢀcombined businessꢀdoesꢀnotꢀperformꢀasꢀexpected,ꢀweꢀmayꢀhaveꢀdifficultyꢀcomplyingꢀwithꢀdebtꢀcovenants; weꢀmayꢀbeꢀunableꢀtoꢀmakeꢀaꢀfutureꢀacquisitionꢀwhichꢀisꢀinꢀourꢀbestꢀinterestꢀdueꢀtoꢀourꢀcurrentꢀlevelꢀofꢀindebtedness; ifꢀweꢀuseꢀourꢀstockꢀtoꢀmakeꢀaꢀfutureꢀacquisition,ꢀitꢀwillꢀdiluteꢀexistingꢀstockholders; weꢀmayꢀhaveꢀdifficultyꢀassimilatingꢀtheꢀoperationsꢀandꢀpersonnelꢀofꢀanyꢀacquiredꢀcompany; theꢀchallengeꢀandꢀadditionalꢀinvestmentꢀinvolvedꢀwithꢀintegratingꢀnewꢀproductsꢀandꢀtechnologiesꢀintoꢀourꢀsalesꢀand marketingꢀprocess; weꢀ mayꢀ haveꢀ difficultyꢀ effectivelyꢀ integratingꢀ anyꢀ acquiredꢀ technologiesꢀ orꢀ productsꢀ withꢀ ourꢀ currentꢀ productsꢀ and technologies,ꢀparticularlyꢀwhereꢀsuchꢀproductsꢀresideꢀonꢀdifferentꢀtechnologyꢀplatformsꢀorꢀoverlapꢀwithꢀourꢀproducts; ourꢀongoingꢀbusinessꢀmayꢀbeꢀdisruptedꢀbyꢀtransitionꢀandꢀintegrationꢀissues; theꢀcostsꢀandꢀcomplexityꢀofꢀintegratingꢀtheꢀinternalꢀinformationꢀtechnologyꢀinfrastructureꢀofꢀeachꢀacquiredꢀbusinessꢀwith oursꢀmayꢀbeꢀgreaterꢀthanꢀexpectedꢀandꢀmayꢀrequireꢀadditionalꢀcapitalꢀinvestments; weꢀmayꢀnotꢀbeꢀableꢀtoꢀretainꢀkeyꢀtechnicalꢀandꢀmanagerialꢀpersonnelꢀfromꢀanꢀacquiredꢀbusiness; weꢀmayꢀbeꢀunableꢀtoꢀachieveꢀtheꢀfinancialꢀandꢀstrategicꢀgoalsꢀforꢀanyꢀacquiredꢀandꢀcombinedꢀbusinesses; weꢀmayꢀhaveꢀdifficultyꢀinꢀmaintainingꢀcontrols,ꢀprocedures,ꢀandꢀpoliciesꢀduringꢀtheꢀtransitionꢀandꢀintegrationꢀperiod followingꢀaꢀfutureꢀacquisition; ourꢀrelationshipsꢀwithꢀpartnerꢀcompaniesꢀorꢀthird-partyꢀprovidersꢀofꢀtechnologyꢀorꢀproductsꢀcouldꢀbeꢀadverselyꢀaffected; ourꢀrelationshipsꢀwithꢀemployeesꢀandꢀcustomersꢀcouldꢀbeꢀimpaired; ourꢀdueꢀdiligenceꢀprocessꢀmayꢀfailꢀtoꢀidentifyꢀsignificantꢀissuesꢀwithꢀproductꢀquality,ꢀproductꢀarchitecture,ꢀlegal,ꢀorꢀtax contingencies,ꢀcustomerꢀobligations,ꢀandꢀproductꢀdevelopment,ꢀamongꢀotherꢀthings; asꢀsuccessorꢀweꢀmayꢀbeꢀsubjectꢀtoꢀcertainꢀliabilitiesꢀofꢀourꢀacquisitionꢀtargets; weꢀmayꢀfaceꢀnewꢀintellectualꢀpropertyꢀchallenges;ꢀand weꢀmayꢀbeꢀrequiredꢀtoꢀsustainꢀsignificantꢀexitꢀorꢀimpairmentꢀchargesꢀifꢀproductsꢀacquiredꢀinꢀbusinessꢀcombinationsꢀare unsuccessful. Ourꢀfailureꢀtoꢀeffectivelyꢀintegrateꢀanyꢀfutureꢀacquisitionꢀwouldꢀadverselyꢀaffectꢀtheꢀbenefitꢀofꢀsuchꢀtransaction,ꢀincludingꢀpotential synergiesꢀorꢀsalesꢀgrowthꢀopportunities,ꢀinꢀtheꢀtimeꢀframeꢀanticipated.ꢀ We operate our business in regions subject to natural disasters. Any interruption to our business resulting from a natural disaster will adversely affect our revenues and results of operations. Inꢀtheꢀeventꢀofꢀaꢀnaturalꢀdisaster,ꢀtheꢀoperationsꢀofꢀgamingꢀestablishmentsꢀcouldꢀbeꢀnegativelyꢀimpactedꢀorꢀconsumerꢀdemandꢀfor gamingꢀcouldꢀdecline,ꢀorꢀboth,ꢀandꢀasꢀaꢀresult,ꢀourꢀbusinessꢀcouldꢀbeꢀinterrupted,ꢀwhichꢀcouldꢀmateriallyꢀandꢀadverselyꢀaffectꢀour 22 revenuesꢀandꢀresultsꢀofꢀoperations.ꢀAdverseꢀweatherꢀconditions,ꢀparticularlyꢀflooding,ꢀhurricanes,ꢀtornadoes,ꢀheavyꢀsnowfall,ꢀand otherꢀextremeꢀweatherꢀconditionsꢀoftenꢀdeterꢀourꢀcustomer’sꢀendꢀusersꢀfromꢀtravelingꢀorꢀmakeꢀitꢀdifficultꢀforꢀthemꢀtoꢀfrequentꢀthe sitesꢀwhereꢀourꢀgamesꢀandꢀFinTechꢀequipmentꢀareꢀinstalled.ꢀIfꢀanyꢀofꢀthoseꢀsitesꢀexperiencedꢀprolongedꢀadverseꢀweatherꢀconditions, orꢀifꢀtheꢀsitesꢀinꢀtheꢀStateꢀofꢀOklahoma,ꢀwhereꢀaꢀsignificantꢀnumberꢀofꢀourꢀgamesꢀandꢀFinTechꢀequipmentꢀareꢀinstalled,ꢀsimultaneously experiencedꢀ adverseꢀ weatherꢀ conditions,ꢀ ourꢀ resultsꢀ ofꢀ business,ꢀ financialꢀ condition,ꢀ andꢀ operationsꢀ couldꢀ beꢀ materiallyꢀ and adverselyꢀaffected.ꢀDuringꢀ2018,ꢀtheꢀimpactꢀofꢀweather-relatedꢀnaturalꢀdisastersꢀresultedꢀinꢀbusinessꢀdisruptionꢀatꢀcertainꢀofꢀour customers’ꢀfacilities. We derive a significant portion of our revenue from Native American tribal customers, and our ability to effectively operate in Native American gaming markets is vulnerable to legal and regulatory uncertainties, including the ability to enforce contractual rights on Native American land. Weꢀderiveꢀaꢀsignificantꢀpercentageꢀofꢀourꢀrevenueꢀfromꢀtheꢀprovisionꢀofꢀcashꢀaccessꢀandꢀgaming-relatedꢀproductsꢀandꢀservicesꢀto gamingꢀfacilitiesꢀoperatedꢀonꢀNativeꢀAmericanꢀlands. NativeꢀAmericanꢀtribesꢀthatꢀareꢀfederallyꢀrecognizedꢀareꢀconsideredꢀ“domesticꢀdependentꢀnations”ꢀwithꢀcertainꢀsovereignꢀrights and,ꢀinꢀtheꢀabsenceꢀofꢀaꢀspecificꢀgrantꢀofꢀauthorityꢀbyꢀCongressꢀtoꢀaꢀstateꢀorꢀaꢀspecificꢀcompactꢀorꢀagreementꢀbetweenꢀaꢀtribalꢀentity andꢀaꢀstateꢀthatꢀwouldꢀallowꢀtheꢀstateꢀtoꢀregulateꢀactivitiesꢀtakingꢀplaceꢀonꢀNativeꢀAmericanꢀlands,ꢀsuchꢀtribesꢀcanꢀenactꢀtheirꢀown lawsꢀandꢀregulateꢀgamingꢀoperationsꢀandꢀcontracts.ꢀInꢀthisꢀcapacity,ꢀNativeꢀAmericanꢀtribesꢀgenerallyꢀenjoyꢀaꢀdegreeꢀofꢀsovereign immunity,ꢀwhich,ꢀamongꢀotherꢀthings,ꢀrecognizesꢀaꢀtribe’sꢀinherentꢀauthorityꢀofꢀself-determinationꢀandꢀself-governance,ꢀimmunizes theꢀtribeꢀfromꢀcertainꢀlawsuitsꢀoutsideꢀofꢀtribalꢀjurisdiction,ꢀandꢀgenerallyꢀauthorizesꢀaꢀtribe’sꢀpowersꢀofꢀtaxationꢀandꢀspending overꢀitsꢀfederally-recognizedꢀnation.ꢀAccordingly,ꢀbeforeꢀweꢀcanꢀseekꢀtoꢀenforceꢀcontractꢀrightsꢀwithꢀaꢀNativeꢀAmericanꢀtribe,ꢀor anꢀagencyꢀorꢀinstrumentalityꢀofꢀaꢀNativeꢀAmericanꢀtribe,ꢀweꢀmustꢀobtainꢀfromꢀtheꢀNativeꢀAmericanꢀtribeꢀaꢀgeneralꢀorꢀlimited waiverꢀofꢀitsꢀsovereignꢀimmunityꢀwithꢀrespectꢀtoꢀtheꢀmatterꢀinꢀdispute,ꢀwhichꢀweꢀareꢀnotꢀalwaysꢀableꢀtoꢀdo.ꢀWithoutꢀaꢀgeneralꢀor limitedꢀwaiverꢀofꢀsovereignꢀimmunity,ꢀorꢀifꢀsuchꢀwaiverꢀisꢀheldꢀtoꢀbeꢀineffective,ꢀweꢀcouldꢀbeꢀprecludedꢀfromꢀjudiciallyꢀenforcing anyꢀrightsꢀorꢀremediesꢀagainstꢀaꢀNativeꢀAmericanꢀtribe,ꢀincludingꢀtheꢀrightꢀtoꢀenterꢀNativeꢀAmericanꢀlandsꢀtoꢀretrieveꢀourꢀproperty inꢀtheꢀeventꢀofꢀaꢀbreachꢀofꢀcontractꢀbyꢀtheꢀtribalꢀpartyꢀtoꢀthatꢀcontract.ꢀGoverningꢀlawꢀandꢀvenueꢀprovisionsꢀinꢀourꢀcontractsꢀwith NativeꢀAmericanꢀtribalꢀcustomersꢀvaryꢀwidelyꢀandꢀmayꢀnotꢀbeꢀenforceable. Further,ꢀcertainꢀNativeꢀAmericanꢀtribesꢀrequireꢀusꢀtoꢀcontractꢀorꢀsubcontractꢀtoꢀprovideꢀallꢀorꢀsomeꢀportionꢀofꢀourꢀservicesꢀwith entitiesꢀthatꢀareꢀowned,ꢀcontrolled,ꢀorꢀmanagedꢀbyꢀtribalꢀmembersꢀorꢀrelatedꢀparties.ꢀOurꢀabilityꢀtoꢀprovideꢀourꢀservicesꢀisꢀdependent uponꢀourꢀrelationshipꢀwithꢀtheseꢀthirdꢀpartiesꢀandꢀtheirꢀabilityꢀtoꢀprovideꢀservicesꢀinꢀaccordanceꢀwithꢀtheꢀtermsꢀofꢀourꢀcontractual arrangementꢀwithꢀtheseꢀthirdꢀpartiesꢀand,ꢀinꢀsomeꢀinstances,ꢀtheꢀthirdꢀparties’ꢀrelationshipꢀorꢀcontractualꢀarrangementꢀwithꢀthe applicableꢀtribalꢀgamingꢀcasinoꢀorꢀtribe. Governmentꢀenforcement,ꢀregulatoryꢀaction,ꢀjudicialꢀdecisions,ꢀandꢀproposedꢀlegislativeꢀactionꢀhaveꢀinꢀtheꢀpast,ꢀandꢀwillꢀlikely continueꢀtoꢀaffectꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀcashꢀflows,ꢀandꢀprospectsꢀinꢀNativeꢀAmericanꢀtribalꢀlands.ꢀThe legalꢀandꢀregulatoryꢀuncertaintiesꢀsurroundingꢀourꢀNativeꢀAmericanꢀtribalꢀagreementsꢀcouldꢀresultꢀinꢀaꢀsignificantꢀandꢀimmediate materialꢀadverseꢀeffectꢀonꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflows.ꢀForꢀexample,ꢀcertainꢀofꢀourꢀagreements withꢀNativeꢀAmericanꢀtribesꢀareꢀsubjectꢀtoꢀreviewꢀbyꢀregulatoryꢀauthorities.ꢀAdditionally,ꢀsuchꢀuncertaintiesꢀcouldꢀincreaseꢀour costꢀofꢀdoingꢀbusinessꢀandꢀcouldꢀtakeꢀmanagement’sꢀattentionꢀawayꢀfromꢀoperations.ꢀRegulatoryꢀactionꢀagainstꢀourꢀcustomersꢀor equipmentꢀinꢀtheseꢀorꢀotherꢀmarketsꢀcouldꢀresultꢀinꢀmachineꢀseizuresꢀandꢀsignificantꢀrevenueꢀdisruptions,ꢀamongꢀotherꢀadverse consequences.ꢀMoreover,ꢀNativeꢀAmericanꢀtribalꢀpoliciesꢀandꢀprocedures,ꢀasꢀwellꢀasꢀtribalꢀselectionꢀofꢀgamingꢀvendors,ꢀareꢀsubject toꢀtheꢀpoliticalꢀandꢀgovernanceꢀenvironmentꢀwithinꢀeachꢀNativeꢀAmericanꢀtribe.ꢀChangesꢀinꢀtribalꢀleadershipꢀorꢀtribalꢀpolitical pressureꢀcanꢀaffectꢀourꢀbusinessꢀrelationshipsꢀwithinꢀNativeꢀAmericanꢀmarkets. Most of our leased gaming device contracts with our customers are short-term, and if we are unable to maintain our current customers on terms that are favorable to us, our business, financial condition, operations, or cash flows may suffer a material adverse effect. Mostꢀofꢀourꢀleasedꢀgamingꢀdeviceꢀcontractsꢀwithꢀourꢀcustomersꢀareꢀgenerallyꢀshort-term,ꢀexceptꢀforꢀcustomersꢀwithꢀwhomꢀwe haveꢀenteredꢀintoꢀdevelopmentꢀandꢀplacementꢀfeeꢀagreements.ꢀWeꢀdoꢀnotꢀrelyꢀuponꢀtheꢀstatedꢀtermꢀofꢀourꢀgamingꢀdeviceꢀcontracts toꢀretainꢀtheꢀbusinessꢀofꢀourꢀcustomers.ꢀWeꢀrelyꢀinsteadꢀuponꢀprovidingꢀcompetitiveꢀplayerꢀterminals,ꢀgames,ꢀandꢀsystemsꢀtoꢀgive ourꢀcustomersꢀtheꢀincentiveꢀtoꢀcontinueꢀdoingꢀbusinessꢀwithꢀus.ꢀAtꢀanyꢀpointꢀinꢀtime,ꢀaꢀsignificantꢀportionꢀofꢀourꢀgamingꢀdevice businessꢀisꢀsubjectꢀtoꢀnonrenewal,ꢀwhichꢀmayꢀmateriallyꢀandꢀadverselyꢀaffectꢀourꢀearnings,ꢀfinancialꢀcondition,ꢀandꢀcashꢀflows. Toꢀrenewꢀorꢀextendꢀanyꢀofꢀourꢀcustomerꢀcontracts,ꢀgenerally,ꢀweꢀmayꢀbeꢀrequiredꢀtoꢀacceptꢀfinancialꢀandꢀotherꢀtermsꢀthatꢀareꢀless favorableꢀtoꢀusꢀthanꢀtheꢀtermsꢀofꢀtheꢀexpiredꢀcontracts.ꢀInꢀaddition,ꢀweꢀmayꢀnotꢀsucceedꢀinꢀrenewingꢀcustomerꢀcontractsꢀwhenꢀthey expire.ꢀIfꢀweꢀareꢀrequiredꢀtoꢀagreeꢀtoꢀotherꢀlessꢀfavorableꢀtermsꢀtoꢀretainꢀourꢀcustomersꢀorꢀweꢀareꢀnotꢀableꢀtoꢀrenewꢀourꢀrelationships withꢀourꢀcustomersꢀuponꢀtheꢀexpirationꢀofꢀourꢀcontracts,ꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflowsꢀcouldꢀsuffer aꢀmaterialꢀadverseꢀeffect. 23 Tribal gaming customers who have historically operated large quantities of Class II gaming units may negotiate into arrangements with state governments or renegotiate existing gaming compacts that could impact the amount of Class II gaming devices currently supplied by the Company. If we are unable to maintain our existing placement of units, then our business, financial condition, operations, or cash flows may suffer an adverse effect. AsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀweꢀoperatedꢀ9,370ꢀClassꢀIIꢀgamingꢀunitsꢀunderꢀleaseꢀorꢀdailyꢀfixedꢀfeeꢀarrangementsꢀtoꢀourꢀcustomers. CustomersꢀwhoꢀenterꢀintoꢀcompactsꢀwithꢀstateꢀgovernmentsꢀmayꢀdesireꢀtoꢀchangeꢀfromꢀClassꢀIIꢀgamingꢀunitsꢀtoꢀClassꢀIIIꢀgaming units,ꢀasꢀClassꢀIIIꢀunitsꢀgenerallyꢀperformꢀbetterꢀthanꢀClassꢀIIꢀunits.ꢀThisꢀmayꢀresultꢀinꢀtheꢀlossꢀofꢀplacementsꢀunderꢀleaseꢀorꢀdaily fixedꢀfeeꢀarrangementsꢀasꢀcustomersꢀpurchaseꢀorꢀleaseꢀClassꢀIIIꢀunitsꢀfromꢀotherꢀequipmentꢀsuppliersꢀtoꢀreplaceꢀourꢀexistingꢀClass IIꢀunits.ꢀIfꢀweꢀareꢀunableꢀtoꢀreplaceꢀtheseꢀlostꢀunitsꢀwithꢀourꢀproprietaryꢀClassꢀIIIꢀunits,ꢀthenꢀourꢀbusiness,ꢀfinancialꢀcondition, operations,ꢀorꢀcashꢀflowsꢀmayꢀsufferꢀanꢀadverseꢀeffect. If we are unable to renew our contract with the New York State Gaming Commission, our revenues, financial condition, operations, or cash flows may suffer an adverse effect. OurꢀcontractꢀtoꢀprovideꢀanꢀaccountingꢀandꢀcentralꢀdeterminantꢀsystemꢀforꢀtheꢀVLTsꢀinꢀtheꢀStateꢀofꢀNewꢀYorkꢀhasꢀprovidedꢀGames segmentꢀrevenuesꢀofꢀapproximatelyꢀ$18.5ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018ꢀandꢀ$18.1ꢀmillionꢀforꢀtheꢀyearsꢀended Decemberꢀ31,ꢀ2017ꢀandꢀ2016.ꢀInꢀJanuaryꢀ2018,ꢀanꢀamendmentꢀtoꢀtheꢀagreementꢀbetweenꢀEveriꢀGamesꢀandꢀtheꢀNewꢀYorkꢀState GamingꢀCommissionꢀwasꢀapprovedꢀandꢀbecameꢀeffective.ꢀUnderꢀthisꢀamendment,ꢀEveriꢀGamesꢀwillꢀcontinueꢀtoꢀprovideꢀand maintainꢀtheꢀcentralꢀdeterminantꢀsystemꢀforꢀtheꢀNewꢀYorkꢀLotteryꢀthroughꢀDecemberꢀofꢀ2019.ꢀUponꢀitsꢀexpiration,ꢀifꢀweꢀare unsuccessfulꢀinꢀrenewingꢀtheꢀcontract,ꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflowsꢀmayꢀsufferꢀanꢀadverseꢀeffect. An unexpectedly high level of chargebacks, as the result of fraud or otherwise, including in connection with new technology standards being implemented in the United States regarding chip-based cards, could materially and adversely affect our cash access business. Inꢀ1994,ꢀEuropay,ꢀMasterCard,ꢀandꢀVisaꢀjointlyꢀdevelopedꢀEMV,ꢀdesignedꢀtoꢀdeterꢀfraudulentꢀcardꢀtransactionsꢀrelatedꢀtoꢀidentity theft,ꢀcounterfeitꢀcards,ꢀandꢀtheꢀmisuseꢀofꢀlostꢀorꢀstolenꢀcardsꢀviaꢀenhancedꢀcardꢀauthentication,ꢀtransactionꢀauthorization,ꢀand cardholderꢀverificationꢀusingꢀchip-basedꢀsmart-cards.ꢀEMVꢀhasꢀbeenꢀadoptedꢀinꢀmanyꢀregionsꢀofꢀtheꢀworldꢀasꢀtheꢀglobalꢀstandard forꢀfraudꢀdeterrenceꢀinꢀchipꢀbasedꢀsmart-cardꢀpayments.ꢀToꢀencourageꢀadoptionꢀinꢀtheꢀU.S.,ꢀeffectiveꢀOctoberꢀ1,ꢀ2015,ꢀtheꢀU.S. paymentꢀcardꢀindustryꢀimplementedꢀnewꢀrulesꢀwhichꢀshiftedꢀtheꢀliabilityꢀforꢀfraudulentꢀtransactionsꢀontoꢀmerchantsꢀifꢀtheyꢀelect toꢀprocessꢀtransactionsꢀusingꢀtheꢀmagneticꢀstripeꢀwhenꢀpresentedꢀwithꢀaꢀEMVꢀchip-basedꢀsmart-card.ꢀThisꢀshiftedꢀtheꢀresponsibility forꢀchargebacksꢀdueꢀtoꢀfraudulentꢀtransactionsꢀonꢀsuchꢀcardsꢀfromꢀtheꢀcardꢀissuerꢀontoꢀtheꢀmerchant.ꢀIfꢀweꢀareꢀunableꢀtoꢀmaintain compliantꢀstatusꢀwithꢀtheꢀEMVꢀregulations,ꢀourꢀcashꢀaccessꢀbusinessꢀmayꢀbeꢀadverselyꢀaffected. Whenꢀpatronsꢀuseꢀourꢀcashꢀaccessꢀservices,ꢀweꢀeitherꢀdispenseꢀcashꢀorꢀproduceꢀaꢀnegotiableꢀinstrumentꢀthatꢀcanꢀbeꢀexchangedꢀfor cash.ꢀIfꢀaꢀcompletedꢀcashꢀaccessꢀtransactionꢀisꢀsubsequentlyꢀdisputed,ꢀandꢀifꢀweꢀareꢀunsuccessfulꢀinꢀestablishingꢀtheꢀvalidityꢀof theꢀtransaction,ꢀweꢀmayꢀnotꢀbeꢀableꢀtoꢀcollectꢀpaymentꢀforꢀsuchꢀtransactionꢀandꢀsuchꢀtransactionꢀbecomesꢀaꢀchargeback.ꢀInꢀthe eventꢀthatꢀweꢀincurꢀchargebacksꢀinꢀexcessꢀofꢀspecifiedꢀlevels,ꢀweꢀcouldꢀloseꢀourꢀsponsorshipꢀintoꢀtheꢀcardꢀassociationsꢀorꢀbe censuredꢀbyꢀtheꢀcardꢀassociationsꢀbyꢀwayꢀofꢀfinesꢀorꢀotherwise.ꢀOurꢀfailureꢀtoꢀadequatelyꢀmanageꢀourꢀchargebacksꢀcouldꢀhaveꢀa materialꢀadverseꢀeffectꢀonꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflows. Changes in consumer willingness to pay a convenience fee to access their funds could reduce the demand for our cash access products and services. Ourꢀcashꢀaccessꢀbusinessꢀdependsꢀuponꢀtheꢀwillingnessꢀofꢀpatronsꢀtoꢀpayꢀaꢀconvenienceꢀfeeꢀtoꢀaccessꢀtheirꢀownꢀfundsꢀonꢀthe premisesꢀofꢀaꢀgamingꢀestablishment.ꢀInꢀmostꢀretailꢀenvironments,ꢀconsumersꢀtypicallyꢀdoꢀnotꢀpayꢀanꢀadditionalꢀfeeꢀforꢀusingꢀnon- cashꢀpaymentꢀmethodsꢀsuchꢀasꢀcreditꢀcards,ꢀPOSꢀdebitꢀcards,ꢀorꢀchecks.ꢀGamingꢀpatronsꢀcouldꢀbringꢀmoreꢀcashꢀwithꢀthemꢀto gamingꢀestablishmentsꢀorꢀaccessꢀcashꢀoutsideꢀofꢀgamingꢀestablishmentsꢀwithoutꢀpayingꢀaꢀfeeꢀforꢀtheꢀconvenienceꢀofꢀnotꢀhaving toꢀleaveꢀtheꢀgamingꢀestablishment.ꢀToꢀtheꢀextentꢀthatꢀgamingꢀpatronsꢀbecomeꢀunwillingꢀtoꢀpayꢀtheseꢀconvenienceꢀfeesꢀorꢀlower costꢀcashꢀaccessꢀalternativesꢀbecomeꢀavailable,ꢀtheꢀdemandꢀforꢀcashꢀaccessꢀservicesꢀwithinꢀgamingꢀestablishmentsꢀwillꢀdecline andꢀourꢀbusinessꢀcouldꢀsuffer. Our 3-in-1 Rollover patent expired in early 2018 and our business, financial condition, operations, or cash flows may suffer an adverse effect from our competitors’ use of this technology. Weꢀnoꢀlongerꢀhaveꢀtheꢀabilityꢀtoꢀextendꢀourꢀexistingꢀ3-in-1ꢀRolloverꢀpatent,ꢀwhichꢀallowsꢀaꢀpatronꢀthatꢀhasꢀreachedꢀhisꢀorꢀherꢀdaily ATMꢀlimitꢀtoꢀobtainꢀfundsꢀviaꢀaꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransactionꢀorꢀaꢀcreditꢀcardꢀcashꢀaccessꢀtransactionꢀinstead.ꢀAsꢀaꢀresult ofꢀtheꢀpatentꢀexpiration,ꢀourꢀcompetitorsꢀwillꢀhaveꢀtheꢀabilityꢀtoꢀemulateꢀthisꢀtechnology;ꢀandꢀourꢀbusiness,ꢀfinancialꢀcondition, operations,ꢀorꢀcashꢀflowsꢀmayꢀsufferꢀanꢀadverseꢀeffect. 24 Risks Related to Regulation of Our Industry Unauthorized disclosure of cardholder and patron data or similar violations of applicable data privacy laws, whether through a security breach of our computer systems, our third-party processor’s computer systems or otherwise, or through our unauthorized use or transmission of such data could subject us to costly fines, penalties, and legal claims. WeꢀcollectꢀandꢀstoreꢀpersonallyꢀidentifiableꢀinformationꢀaboutꢀcardholdersꢀandꢀpatronsꢀthatꢀperformꢀcertainꢀcashꢀaccessꢀandꢀCentral Creditꢀtransactions,ꢀincludingꢀnames,ꢀaddresses,ꢀsocialꢀsecurityꢀnumbers,ꢀdriver’sꢀlicenseꢀnumbers,ꢀandꢀaccountꢀnumbers,ꢀandꢀwe maintainꢀaꢀdatabaseꢀofꢀcardholderꢀandꢀpatronꢀdata,ꢀincludingꢀaccountꢀnumbers,ꢀinꢀorderꢀtoꢀprocessꢀourꢀcashꢀaccessꢀandꢀCentral Creditꢀtransactions.ꢀWeꢀalsoꢀrelyꢀonꢀourꢀthird-partyꢀprocessorꢀandꢀcertainꢀotherꢀtechnologyꢀpartnersꢀtoꢀprocessꢀandꢀstoreꢀcardholder andꢀpatronꢀdataꢀrelatingꢀtoꢀourꢀcashꢀaccessꢀandꢀCentralꢀCreditꢀtransactions.ꢀAsꢀaꢀresult,ꢀwe,ꢀasꢀwellꢀasꢀourꢀthird-partyꢀprocessor, certainꢀofꢀourꢀotherꢀtechnologyꢀproviders,ꢀandꢀsomeꢀofꢀourꢀgamingꢀestablishmentꢀcustomers,ꢀareꢀrequiredꢀtoꢀcomplyꢀwithꢀvarious foreign,ꢀfederal,ꢀandꢀstateꢀprivacyꢀstatutesꢀandꢀregulations,ꢀandꢀtheꢀPCIꢀDataꢀSecurityꢀStandard.ꢀComplianceꢀwithꢀtheseꢀregulations andꢀrequirements,ꢀwhichꢀareꢀsubjectꢀtoꢀchangeꢀatꢀanyꢀtime,ꢀisꢀoftenꢀdifficultꢀandꢀcostly,ꢀandꢀourꢀfailure,ꢀorꢀtheꢀfailureꢀofꢀtheseꢀother thirdꢀparties,ꢀtoꢀcomplyꢀmayꢀresultꢀinꢀsignificantꢀfinesꢀorꢀcivilꢀpenalties,ꢀregulatoryꢀenforcementꢀaction,ꢀliabilityꢀtoꢀourꢀsponsor bank,ꢀandꢀterminationꢀofꢀourꢀagreementsꢀwithꢀourꢀgamingꢀestablishmentꢀcustomers,ꢀeachꢀofꢀwhichꢀcouldꢀhaveꢀaꢀmaterialꢀadverse effectꢀonꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflows.ꢀIfꢀourꢀcomputerꢀsystemsꢀorꢀthoseꢀofꢀourꢀthird-partyꢀprocessor orꢀotherꢀtechnologyꢀprovidersꢀsufferꢀaꢀsecurityꢀbreach,ꢀweꢀmayꢀbeꢀsubjectꢀtoꢀliability,ꢀincludingꢀclaimsꢀforꢀunauthorizedꢀtransactions withꢀmisappropriatedꢀbankꢀcardꢀinformation,ꢀimpersonation,ꢀorꢀsimilarꢀfraudꢀclaims,ꢀasꢀwellꢀasꢀforꢀanyꢀfailureꢀtoꢀcomplyꢀwithꢀlaws governingꢀrequiredꢀnotificationsꢀofꢀsuchꢀaꢀbreach,ꢀandꢀtheseꢀclaimsꢀcouldꢀresultꢀinꢀprotractedꢀandꢀcostlyꢀlitigation,ꢀpenalties,ꢀor sanctionsꢀfromꢀtheꢀcardꢀassociationsꢀandꢀEFTꢀpaymentꢀnetworks,ꢀandꢀdamageꢀtoꢀourꢀreputation,ꢀwhichꢀcouldꢀreduceꢀandꢀlimitꢀour abilityꢀtoꢀprovideꢀcashꢀaccessꢀandꢀrelatedꢀservicesꢀtoꢀourꢀgamingꢀestablishmentꢀcustomers. Theꢀpersonallyꢀidentifiableꢀinformationꢀweꢀcollectꢀalsoꢀincludesꢀourꢀpatrons’ꢀtransactionꢀbehavioralꢀdataꢀandꢀcreditꢀhistoryꢀdata, whichꢀweꢀmayꢀuseꢀtoꢀprovideꢀmarketingꢀandꢀdataꢀintelligenceꢀservicesꢀtoꢀgamingꢀestablishments.ꢀThisꢀinformationꢀisꢀincreasingly subjectꢀtoꢀfederal,ꢀstate,ꢀandꢀcardꢀassociationꢀlawsꢀandꢀregulations,ꢀasꢀwellꢀasꢀlawsꢀandꢀregulationsꢀinꢀnumerousꢀjurisdictionsꢀaround theꢀworld.ꢀGovernmentalꢀregulationsꢀareꢀtypicallyꢀintendedꢀtoꢀprotectꢀtheꢀprivacyꢀandꢀsecurityꢀofꢀsuchꢀdataꢀandꢀinformationꢀas wellꢀasꢀtoꢀregulateꢀtheꢀcollection,ꢀstorage,ꢀtransmission,ꢀtransfer,ꢀuse,ꢀandꢀdistributionꢀofꢀsuchꢀdataꢀandꢀinformation.ꢀWeꢀcouldꢀbe materiallyꢀandꢀadverselyꢀaffectedꢀifꢀdomesticꢀorꢀinternationalꢀlawsꢀorꢀregulationsꢀareꢀexpandedꢀtoꢀrequireꢀchangesꢀinꢀourꢀbusiness practicesꢀorꢀifꢀgoverningꢀjurisdictionsꢀinterpretꢀorꢀimplementꢀtheirꢀlawsꢀorꢀregulationsꢀinꢀwaysꢀthatꢀnegativelyꢀaffectꢀourꢀbusiness orꢀevenꢀprohibitꢀusꢀfromꢀofferingꢀcertainꢀmarketingꢀandꢀdataꢀintelligenceꢀorꢀotherꢀservices.ꢀSimilarly,ꢀifꢀweꢀareꢀrequiredꢀtoꢀallocate significantꢀresourcesꢀtoꢀmodifyꢀourꢀinternalꢀoperatingꢀsystemsꢀandꢀproceduresꢀtoꢀenableꢀenhancedꢀprotectionꢀofꢀpatronꢀdataꢀthat weꢀtransmit,ꢀstoreꢀandꢀuse,ꢀourꢀbusinessꢀresultsꢀcouldꢀbeꢀadverselyꢀaffected.ꢀInꢀaddition,ꢀweꢀmayꢀfaceꢀrequirementsꢀthatꢀpose complianceꢀchallengesꢀinꢀnewꢀinternationalꢀmarketsꢀthatꢀweꢀseekꢀtoꢀenterꢀasꢀvariousꢀforeignꢀjurisdictionsꢀhaveꢀdifferentꢀlawsꢀand regulationsꢀconcerningꢀtheꢀstorage,ꢀtransmissionꢀandꢀuseꢀofꢀgamingꢀpatronꢀdata.ꢀSuchꢀvariationꢀcouldꢀsubjectꢀusꢀtoꢀcosts,ꢀliabilities, orꢀnegativeꢀpublicityꢀthatꢀcouldꢀimpairꢀourꢀabilityꢀtoꢀexpandꢀourꢀoperationsꢀintoꢀsomeꢀcountries;ꢀtherefore,ꢀitꢀcouldꢀlimitꢀourꢀfuture growth. We are subject to extensive governmental gaming regulation, which may harm our business. Ourꢀabilityꢀtoꢀconductꢀbothꢀourꢀgamingꢀandꢀcashꢀaccessꢀbusinesses,ꢀexpandꢀoperations,ꢀdevelopꢀandꢀdistributeꢀnewꢀgames,ꢀproducts andꢀsystems,ꢀandꢀexpandꢀintoꢀnewꢀgamingꢀmarketsꢀisꢀalsoꢀsubjectꢀtoꢀsignificantꢀfederal,ꢀstate,ꢀlocal,ꢀNativeꢀAmericanꢀandꢀforeign regulationsꢀwhichꢀvaryꢀfromꢀjurisdictionꢀtoꢀjurisdiction.ꢀInꢀtheꢀUnitedꢀStatesꢀandꢀmanyꢀotherꢀcountries,ꢀgamingꢀmustꢀbeꢀexpressly authorizedꢀbyꢀlaw.ꢀOnceꢀauthorized,ꢀsuchꢀactivitiesꢀareꢀsubjectꢀtoꢀextensiveꢀandꢀevolvingꢀgovernmentalꢀregulation.ꢀTheꢀgaming laws,ꢀregulationsꢀandꢀordinancesꢀgenerallyꢀconcernꢀtheꢀantecedents,ꢀacumen,ꢀfinancialꢀstabilityꢀandꢀcharacterꢀofꢀourꢀowners,ꢀofficers andꢀdirectors,ꢀasꢀwellꢀasꢀthoseꢀpersonsꢀfinanciallyꢀinterestedꢀorꢀinvolvedꢀinꢀourꢀcompanies;ꢀdictateꢀtheꢀtechnicalꢀstandardsꢀand regulationsꢀofꢀourꢀelectronicꢀplayerꢀterminals,ꢀgamingꢀsystemsꢀandꢀcertainꢀotherꢀproducts;ꢀsetꢀforthꢀtheꢀprocessꢀandꢀmannerꢀby whichꢀ theꢀ GamingꢀAuthoritiesꢀ issueꢀ suchꢀ licenses,ꢀ findingsꢀ ofꢀ suitabilityꢀ andꢀ productꢀ approvals.ꢀ Inꢀ addition,ꢀ theꢀ suspension, revocation,ꢀnonrenewalꢀorꢀlimitationꢀofꢀanyꢀofꢀourꢀlicensesꢀorꢀproductꢀapprovals,ꢀorꢀtheꢀinabilityꢀtoꢀobtainꢀorꢀmaintainꢀrequisite licenseꢀorꢀproductꢀapprovalsꢀcouldꢀhaveꢀaꢀmaterialꢀadverseꢀeffectꢀonꢀourꢀbusinessꢀoperations,ꢀfinancialꢀcondition,ꢀandꢀresultsꢀof operationsꢀandꢀourꢀabilityꢀtoꢀmaintainꢀkeyꢀemployees.ꢀTheꢀGamingꢀAuthoritiesꢀmayꢀdeny,ꢀlimit,ꢀcondition,ꢀsuspendꢀorꢀrevokeꢀa gamingꢀlicenseꢀorꢀrelatedꢀapprovalꢀforꢀviolationsꢀofꢀapplicableꢀgamingꢀlawsꢀandꢀregulationsꢀandꢀmayꢀimposeꢀsubstantialꢀfinesꢀand takeꢀotherꢀactions,ꢀanyꢀoneꢀofꢀwhichꢀcouldꢀhaveꢀaꢀsignificantꢀadverseꢀeffectꢀonꢀourꢀbusiness,ꢀfinancialꢀconditionꢀandꢀresultsꢀof operations. Further,ꢀchangesꢀinꢀexistingꢀgamingꢀlawsꢀorꢀregulationsꢀorꢀnewꢀinterpretationsꢀofꢀexistingꢀgamingꢀlawsꢀmayꢀhinderꢀorꢀpreventꢀus fromꢀcontinuingꢀtoꢀoperateꢀinꢀthoseꢀjurisdictionsꢀwhereꢀweꢀcurrentlyꢀdoꢀbusiness,ꢀwhichꢀcouldꢀharmꢀourꢀoperatingꢀresults.ꢀIn particular,ꢀtheꢀenactmentꢀofꢀunfavorableꢀlegislationꢀorꢀgovernmentꢀeffortsꢀaffectingꢀorꢀdirectedꢀatꢀmanufacturersꢀorꢀgamingꢀoperators, suchꢀasꢀreferendumsꢀtoꢀincreaseꢀgamingꢀtaxesꢀorꢀrequirementsꢀtoꢀuseꢀlocalꢀdistributors,ꢀorꢀuncertaintyꢀasꢀtoꢀtheꢀmeansꢀandꢀmanner 25 inꢀwhichꢀexistingꢀgamingꢀlawsꢀmayꢀbeꢀinterpretedꢀandꢀapplied,ꢀeitherꢀsinglyꢀorꢀtogether,ꢀcouldꢀhaveꢀaꢀnegativeꢀimpactꢀonꢀour operations.ꢀ InꢀMayꢀ2018,ꢀtheꢀUnitedꢀStatesꢀSupremeꢀCourtꢀstruckꢀdownꢀtheꢀProfessionalꢀandꢀAmateurꢀSportsꢀProtectionꢀActꢀ(“PASPA”)ꢀas unconstitutional,ꢀwhichꢀledꢀmanyꢀstatesꢀtoꢀquicklyꢀproposeꢀand,ꢀinꢀsomeꢀinstances,ꢀpassꢀlegislationꢀauthorizingꢀsportsꢀbetting. Consequently,ꢀgamingꢀregulators,ꢀmanyꢀofꢀourꢀoperatorꢀcustomers,ꢀandꢀmanyꢀofꢀourꢀcompetitorsꢀdedicatedꢀresourcesꢀtoꢀservice thisꢀnewꢀmarket,ꢀasꢀdidꢀwe.ꢀHowever,ꢀinꢀJanuaryꢀ2019,ꢀtheꢀOfficeꢀofꢀLegalꢀCounselꢀofꢀtheꢀDepartmentꢀofꢀJusticeꢀ(“OLC”)ꢀpublished anꢀopinionꢀreversingꢀitsꢀpriorꢀ2011ꢀopinionꢀinterpretingꢀtheꢀFederalꢀWireꢀAct.ꢀTheꢀ2019ꢀopinionꢀnowꢀindicatesꢀthatꢀtheꢀWireꢀAct isꢀ applicableꢀ toꢀ anyꢀ wireꢀ communicationꢀ acrossꢀ stateꢀ linesꢀ andꢀ specificallyꢀ indicatingꢀ thatꢀ theꢀ Unlawfulꢀ Internetꢀ Gambling EnforcementꢀActꢀ(“UIGEA”)ꢀdoesꢀnotꢀmodifyꢀtheꢀWireꢀAct,ꢀviolationsꢀofꢀwhichꢀmayꢀbeꢀsubjectꢀtoꢀcriminalꢀprosecution.ꢀThe specificꢀ commentꢀ regardingꢀ UIGEAꢀ implicatesꢀ UIGEA’sꢀ carveꢀ outꢀ forꢀ “unlawfulꢀ Internetꢀ gambling”ꢀ andꢀ “intermediate routing”ꢀ(i.e.,ꢀtheꢀancillaryꢀcrossingꢀofꢀstateꢀlinesꢀofꢀtransmissionsꢀbetweenꢀintra-stateꢀcommunicationsꢀpoints).ꢀInꢀrelianceꢀonꢀthe 2011ꢀWireꢀActꢀopinion,ꢀseveralꢀstatesꢀlegalizedꢀonlineꢀgaming,ꢀandꢀtheꢀproposedꢀlegislationꢀinꢀmanyꢀjurisdictionsꢀinꢀresponseꢀto theꢀMayꢀ2018ꢀPASPAꢀdecisionꢀincludedꢀonlineꢀsportsꢀbetting.ꢀTheꢀimpactꢀofꢀtheꢀ2019ꢀWireꢀActꢀopinionꢀisꢀcurrentlyꢀunclear,ꢀand mayꢀimplicateꢀlottery,ꢀland-based,ꢀandꢀonlineꢀgamingꢀasꢀwellꢀasꢀbanksꢀandꢀpaymentꢀprocessorsꢀthatꢀservicesꢀtheseꢀmarketꢀsegments. TheꢀDeputyꢀAttorneyꢀGeneralꢀofꢀtheꢀUnitedꢀStatesꢀdelayedꢀimplementationꢀofꢀtheꢀ2019ꢀopinionꢀthroughꢀJuneꢀ14,ꢀ2019,ꢀandꢀseveral states’ꢀattorneyꢀgeneralꢀhave,ꢀorꢀareꢀcontemplating,ꢀactionꢀinꢀresponseꢀtoꢀtheꢀ2019ꢀopinion,ꢀincludingꢀlitigation.ꢀInterpretationsꢀand resultantꢀenforcementꢀofꢀtheꢀWireꢀActꢀasꢀmayꢀrelateꢀtoꢀintermediateꢀroutingꢀtransactionsꢀcouldꢀnegativelyꢀimpactꢀourꢀWAPꢀgames businessꢀasꢀwellꢀasꢀourꢀFinTechꢀcashꢀaccessꢀbusinessꢀandꢀourꢀinteractiveꢀrealꢀmoneyꢀgamingꢀbusiness.ꢀ Moreover,ꢀinꢀadditionꢀtoꢀtheꢀriskꢀofꢀenforcementꢀaction,ꢀweꢀareꢀalsoꢀatꢀriskꢀofꢀlossꢀofꢀbusinessꢀreputationꢀinꢀtheꢀeventꢀofꢀanyꢀpotential legalꢀorꢀregulatoryꢀinvestigation,ꢀwhetherꢀorꢀnotꢀweꢀareꢀultimatelyꢀaccusedꢀofꢀorꢀfoundꢀtoꢀhaveꢀcommittedꢀanyꢀviolation.ꢀForꢀa summaryꢀofꢀgamingꢀregulationsꢀthatꢀcouldꢀaffectꢀourꢀbusiness,ꢀseeꢀ“Itemꢀ1.ꢀBusinessꢀ—ꢀRegulation.” Many of the financial services that we provide are subject to extensive rules and regulations, which may harm our business. OurꢀCentralꢀCreditꢀgamingꢀpatronꢀcreditꢀbureauꢀandꢀcheckꢀverificationꢀandꢀwarrantyꢀservicesꢀareꢀsubjectꢀtoꢀtheꢀFCRA,ꢀtheꢀFACTA, andꢀsimilarꢀstateꢀlaws.ꢀTheꢀcollectionꢀpracticesꢀthatꢀareꢀusedꢀbyꢀourꢀthird-partyꢀprovidersꢀandꢀusꢀmayꢀbeꢀsubjectꢀtoꢀtheꢀFDCPAꢀand applicableꢀstateꢀlawsꢀrelatingꢀtoꢀdebtꢀcollection.ꢀAllꢀofꢀourꢀcashꢀaccessꢀservicesꢀandꢀpatronꢀmarketingꢀservicesꢀareꢀsubjectꢀtoꢀthe privacyꢀprovisionsꢀofꢀstateꢀandꢀfederalꢀlaw,ꢀincludingꢀtheꢀGramm-Leach-BlileyꢀAct.ꢀOurꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransactions andꢀATMꢀwithdrawalꢀservicesꢀareꢀsubjectꢀtoꢀtheꢀElectronicꢀFundꢀTransferꢀAct.ꢀOurꢀATMꢀservicesꢀareꢀsubjectꢀtoꢀtheꢀapplicableꢀstate bankingꢀregulationsꢀinꢀeachꢀjurisdictionꢀinꢀwhichꢀweꢀoperateꢀATMs.ꢀOurꢀATMꢀservicesꢀmayꢀalsoꢀbeꢀsubjectꢀtoꢀstateꢀandꢀlocal regulationsꢀrelatingꢀtoꢀtheꢀimpositionꢀofꢀdailyꢀlimitsꢀonꢀtheꢀamountsꢀthatꢀmayꢀbeꢀwithdrawnꢀfromꢀATMs,ꢀtheꢀlocationꢀofꢀATMs, ourꢀabilityꢀtoꢀsurchargeꢀcardholdersꢀwhoꢀuseꢀourꢀATMs,ꢀandꢀtheꢀformꢀandꢀtypeꢀofꢀnoticesꢀthatꢀmustꢀbeꢀdisclosedꢀregardingꢀthe provisionꢀofꢀourꢀATMꢀservices.ꢀTheꢀcashꢀaccessꢀservicesꢀweꢀprovideꢀareꢀsubjectꢀtoꢀrecordꢀkeepingꢀandꢀreportingꢀobligationsꢀunder theꢀBankꢀSecrecyꢀActꢀandꢀtheꢀUSAꢀPATRIOTꢀActꢀofꢀ2001.ꢀWeꢀareꢀrequiredꢀtoꢀfileꢀSARsꢀwithꢀrespectꢀtoꢀtransactionsꢀcompleted atꢀallꢀgamingꢀestablishmentsꢀwhereꢀweꢀprovideꢀourꢀcashꢀaccessꢀservicesꢀthroughꢀaꢀgamingꢀestablishment’sꢀcashierꢀorꢀfinancial servicesꢀcenter.ꢀIfꢀweꢀareꢀfoundꢀtoꢀbeꢀnoncompliantꢀinꢀanyꢀwayꢀwithꢀtheseꢀlaws,ꢀweꢀcouldꢀbeꢀsubjectꢀtoꢀsubstantialꢀcivilꢀandꢀcriminal penalties.ꢀInꢀjurisdictionsꢀinꢀwhichꢀweꢀserveꢀasꢀaꢀcheckꢀcasher,ꢀweꢀareꢀsubjectꢀtoꢀtheꢀapplicableꢀstateꢀlicensingꢀrequirementsꢀand regulationsꢀgoverningꢀcheckꢀcashingꢀactivities.ꢀWeꢀareꢀalsoꢀsubjectꢀtoꢀvariousꢀstateꢀlicensingꢀrequirementsꢀandꢀregulationsꢀgoverning moneyꢀtransmitters. Weꢀareꢀsubjectꢀtoꢀformalꢀorꢀinformalꢀaudits,ꢀinquiries,ꢀorꢀreviewsꢀfromꢀtimeꢀtoꢀtimeꢀbyꢀtheꢀregulatoryꢀauthoritiesꢀthatꢀenforceꢀthese financialꢀservicesꢀrulesꢀandꢀregulations.ꢀInꢀtheꢀeventꢀthatꢀanyꢀregulatoryꢀauthorityꢀdeterminesꢀthatꢀtheꢀmannerꢀinꢀwhichꢀweꢀprovide cashꢀaccess,ꢀpatronꢀmarketing,ꢀorꢀgamingꢀpatronꢀcreditꢀbureauꢀservicesꢀisꢀnotꢀinꢀcomplianceꢀwithꢀexistingꢀrulesꢀandꢀregulations, orꢀtheꢀregulatoryꢀauthoritiesꢀadoptꢀnewꢀrulesꢀorꢀregulationsꢀthatꢀprohibitꢀorꢀrestrictꢀtheꢀmannerꢀinꢀwhichꢀweꢀprovideꢀcashꢀaccess, patronꢀmarketing,ꢀorꢀgamingꢀpatronꢀcreditꢀbureauꢀservices,ꢀthenꢀtheseꢀregulatoryꢀauthoritiesꢀmayꢀforceꢀusꢀtoꢀmodifyꢀtheꢀmanner inꢀwhichꢀweꢀoperateꢀorꢀforceꢀusꢀtoꢀstopꢀprocessingꢀcertainꢀtypesꢀofꢀcashꢀaccessꢀtransactionsꢀorꢀprovidingꢀpatronꢀmarketingꢀor gamingꢀpatronꢀcreditꢀbureauꢀservicesꢀaltogether.ꢀWeꢀmayꢀalsoꢀbeꢀrequiredꢀtoꢀpayꢀsubstantialꢀpenaltiesꢀandꢀfinesꢀifꢀweꢀfailꢀtoꢀcomply withꢀapplicableꢀrulesꢀandꢀregulations.ꢀForꢀexample,ꢀifꢀweꢀfailꢀtoꢀfileꢀCTRsꢀorꢀSARsꢀonꢀaꢀtimelyꢀbasisꢀorꢀifꢀweꢀareꢀfoundꢀtoꢀbe noncompliantꢀinꢀanyꢀwayꢀwithꢀeitherꢀtheꢀBankꢀSecrecyꢀActꢀorꢀtheꢀUSAꢀPATRIOTꢀActꢀofꢀ2001,ꢀweꢀcouldꢀbeꢀsubjectꢀtoꢀsubstantial civilꢀandꢀcriminalꢀpenalties.ꢀInꢀaddition,ꢀourꢀfailureꢀtoꢀcomplyꢀwithꢀapplicableꢀrulesꢀandꢀregulationsꢀcouldꢀsubjectꢀusꢀtoꢀprivate litigation. We are subject to extensive rules and regulations of card associations, including VISA, MasterCard, and EFT networks that are always subject to change, which may harm our business. Ourꢀcashꢀaccessꢀbusinessꢀisꢀsubjectꢀtoꢀtheꢀextensiveꢀrulesꢀandꢀregulationsꢀofꢀtheꢀleadingꢀcardꢀassociations,ꢀVISAꢀandꢀMasterCard. Theꢀrulesꢀandꢀregulationsꢀdoꢀnotꢀexpresslyꢀaddressꢀsomeꢀofꢀtheꢀcontextsꢀandꢀsettingsꢀinꢀwhichꢀweꢀprocessꢀcashꢀaccessꢀtransactions orꢀdoꢀsoꢀinꢀaꢀmannerꢀsubjectꢀtoꢀvaryingꢀinterpretations.ꢀAsꢀanꢀexample,ꢀweꢀandꢀcertainꢀofꢀourꢀprovidersꢀmustꢀcomplyꢀwithꢀtheꢀPCI 26 DataꢀSecurityꢀStandard.ꢀTheꢀfailureꢀbyꢀanyꢀofꢀsuchꢀprovidersꢀtoꢀcomplyꢀwithꢀsuchꢀstandardsꢀcouldꢀresultꢀinꢀourꢀbeingꢀfinedꢀor beingꢀprohibitedꢀfromꢀprocessingꢀtransactionsꢀthroughꢀVISA,ꢀMasterCard,ꢀandꢀotherꢀcardꢀandꢀpaymentꢀnetworks.ꢀWeꢀalsoꢀprocess transactionsꢀinvolvingꢀtheꢀuseꢀofꢀtheꢀproprietaryꢀcreditꢀcardsꢀsuchꢀasꢀthoseꢀofferedꢀbyꢀDiscoverꢀCardꢀandꢀAmericanꢀExpress,ꢀas wellꢀasꢀotherꢀregionalꢀcardsꢀissuedꢀinꢀcertainꢀinternationalꢀmarkets.ꢀTheꢀrulesꢀandꢀregulationsꢀofꢀtheꢀproprietaryꢀcreditꢀcardꢀnetworks thatꢀserviceꢀtheseꢀcardsꢀpresentꢀrisksꢀtoꢀusꢀthatꢀareꢀsimilarꢀtoꢀthoseꢀposedꢀbyꢀtheꢀrulesꢀandꢀregulationsꢀofꢀVISA,ꢀMasterCard,ꢀand otherꢀpaymentꢀnetworks. Theꢀcardꢀassociations’ꢀandꢀpaymentꢀnetworks’ꢀrulesꢀandꢀregulationsꢀareꢀalwaysꢀsubjectꢀtoꢀchange,ꢀandꢀtheꢀcardꢀassociationsꢀor paymentꢀnetworksꢀmayꢀmodifyꢀtheirꢀrulesꢀandꢀregulationsꢀfromꢀtimeꢀtoꢀtime.ꢀOurꢀinabilityꢀtoꢀanticipateꢀchangesꢀinꢀrulesꢀand regulations,ꢀorꢀtheꢀinterpretationꢀorꢀapplicationꢀthereof,ꢀmayꢀresultꢀinꢀsubstantialꢀdisruptionꢀtoꢀourꢀbusiness.ꢀInꢀtheꢀeventꢀthatꢀthe cardꢀassociations,ꢀpaymentꢀnetworksꢀorꢀourꢀsponsoringꢀbanksꢀdetermineꢀthatꢀtheꢀmannerꢀinꢀwhichꢀweꢀprocessꢀcertainꢀtypesꢀofꢀcard transactionsꢀisꢀnotꢀinꢀcomplianceꢀwithꢀexistingꢀrulesꢀandꢀregulations,ꢀorꢀifꢀtheꢀcardꢀassociationsꢀorꢀpaymentꢀnetworksꢀadoptꢀnew rulesꢀorꢀregulationsꢀthatꢀprohibitꢀorꢀrestrictꢀtheꢀmannerꢀinꢀwhichꢀweꢀprocessꢀcertainꢀtypesꢀofꢀcardꢀtransactions,ꢀweꢀmayꢀbeꢀforced toꢀpayꢀaꢀfine,ꢀmodifyꢀtheꢀmannerꢀinꢀwhichꢀweꢀoperateꢀourꢀbusiness,ꢀorꢀstopꢀprocessingꢀcertainꢀtypesꢀofꢀcashꢀaccessꢀtransactions altogether,ꢀanyꢀofꢀwhichꢀcouldꢀhaveꢀaꢀmaterialꢀadverseꢀeffectꢀonꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflows. Card associations and EFT networks may change interchange reimbursement rates or network operating fees or assess new fees associated with the processing and settlement of our cash access transactions or otherwise change their operating rules and regulations without our consent and such changes may affect our revenues, cost of revenues (exclusive of depreciation and amortization), net income, and our business generally. WeꢀreceiveꢀincomeꢀfromꢀissuersꢀofꢀATM,ꢀcredit,ꢀandꢀdebitꢀcardsꢀforꢀcertainꢀtransactionsꢀperformedꢀonꢀourꢀATMsꢀrelatedꢀtoꢀcash dispensingꢀorꢀcertainꢀotherꢀnon-financialꢀtransactionsꢀsuchꢀasꢀbalanceꢀinquiries.ꢀTheꢀEFTꢀnetworksꢀmayꢀalsoꢀchargeꢀcertainꢀfees relatedꢀtoꢀtheꢀperformanceꢀofꢀtheseꢀtransactions.ꢀWeꢀreferꢀtoꢀtheꢀnetꢀofꢀthisꢀincomeꢀandꢀfeesꢀasꢀreverseꢀinterchange.ꢀTheꢀamount ofꢀthisꢀreverseꢀinterchangeꢀincomeꢀisꢀdeterminedꢀbyꢀtheꢀcardꢀassociationsꢀandꢀEFTꢀnetworks,ꢀandꢀthisꢀincomeꢀisꢀsubjectꢀtoꢀdecrease atꢀtheirꢀdiscretion. WeꢀpayꢀinterchangeꢀandꢀotherꢀnetworkꢀfeesꢀforꢀservicesꢀtoꢀtheꢀcreditꢀcardꢀassociationsꢀandꢀEFTꢀnetworksꢀthatꢀtheyꢀprovideꢀin settlingꢀtransactionsꢀroutedꢀthroughꢀtheirꢀnetworks.ꢀCollectivelyꢀweꢀcallꢀtheseꢀchargesꢀinterchangeꢀfees.ꢀSubjectꢀtoꢀtheꢀlimitations imposedꢀbyꢀfederalꢀregulationsꢀsuchꢀasꢀtheꢀDurbinꢀAmendmentꢀorꢀotherꢀregulationsꢀthatꢀmayꢀbeꢀenacted,ꢀtheꢀamountsꢀofꢀthese interchangeꢀfeesꢀareꢀdeterminedꢀbasedꢀuponꢀtheꢀsoleꢀdiscretionꢀofꢀtheꢀcardꢀassociationsꢀandꢀEFTꢀnetworksꢀandꢀareꢀsubjectꢀto increaseꢀatꢀanyꢀtime.ꢀCompetitiveꢀpressuresꢀmightꢀpreventꢀusꢀfromꢀpassingꢀallꢀorꢀsomeꢀofꢀtheseꢀfeesꢀthroughꢀtoꢀourꢀcustomersꢀin theꢀfuture.ꢀToꢀtheꢀextentꢀthatꢀweꢀareꢀunableꢀtoꢀpassꢀthroughꢀtoꢀourꢀcustomersꢀallꢀorꢀanyꢀportionꢀofꢀanyꢀincreaseꢀinꢀinterchangeꢀor otherꢀnetworkꢀprocessingꢀfees,ꢀourꢀcostꢀofꢀrevenuesꢀ(exclusiveꢀofꢀdepreciationꢀandꢀamortization)ꢀwouldꢀincreaseꢀandꢀourꢀnetꢀincome wouldꢀdecrease,ꢀassumingꢀnoꢀchangeꢀinꢀtransactionꢀvolumes.ꢀAnyꢀsuchꢀdecreaseꢀinꢀnetꢀincomeꢀcouldꢀhaveꢀaꢀmaterialꢀadverseꢀeffect onꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflows.ꢀInꢀaddition,ꢀproposedꢀchangesꢀtoꢀtheꢀDodd-FrankꢀAct,ꢀsuchꢀasꢀthe repealꢀofꢀtheꢀDurbinꢀAmendment,ꢀifꢀadopted,ꢀorꢀotherꢀregulationꢀthatꢀcouldꢀbeꢀimplementedꢀtoꢀlimitꢀtheꢀamountꢀofꢀsurchargeꢀor serviceꢀfeesꢀchargedꢀforꢀourꢀcashꢀaccessꢀtransactionsꢀcouldꢀhaveꢀaꢀnegativeꢀimpactꢀonꢀrevenueꢀandꢀgrossꢀmarginsꢀ(exclusiveꢀof depreciationꢀandꢀamortization)ꢀasꢀaꢀresultꢀofꢀreducedꢀserviceꢀfeeꢀrevenueꢀandꢀpotentialꢀincreasesꢀinꢀinterchangeꢀratesꢀmerchants payꢀforꢀdebitꢀcardꢀtransactions. TheꢀcardꢀassociationsꢀandꢀEFTꢀnetworksꢀmayꢀalsoꢀelectꢀtoꢀimposeꢀnewꢀmembershipꢀorꢀotherꢀfees,ꢀorꢀimplementꢀnewꢀrulesꢀand regulationsꢀwithꢀrespectꢀtoꢀprocessingꢀtransactionsꢀthroughꢀtheirꢀnetworks,ꢀandꢀanyꢀsuchꢀnewꢀfees,ꢀrules,ꢀorꢀregulationsꢀcouldꢀhave aꢀmaterialꢀadverseꢀeffectꢀonꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflows. The provision of our credit card access, POS debit, and ATM services are dependent upon our continued sponsorship into the VISA and MasterCard card associations, and the suspension or termination of our sponsorship would result in a material adverse effect on our business, financial condition, operations, or cash flows. Weꢀprocessꢀvirtuallyꢀallꢀofꢀourꢀcreditꢀcardꢀcashꢀaccess,ꢀPOSꢀdebit,ꢀandꢀATMꢀserviceꢀtransactionsꢀthroughꢀtheꢀVISAꢀandꢀMasterCard cardꢀassociations,ꢀbothꢀdomesticallyꢀandꢀinternationally,ꢀandꢀvirtuallyꢀallꢀofꢀtheꢀrevenueꢀthatꢀweꢀderiveꢀfromꢀourꢀcreditꢀcardꢀcash access,ꢀPOSꢀdebit,ꢀandꢀATMꢀservicesꢀisꢀdependentꢀuponꢀourꢀcontinuedꢀsponsorshipꢀintoꢀtheꢀVISAꢀandꢀMasterCardꢀassociations. WeꢀcannotꢀprovideꢀtheseꢀservicesꢀwithoutꢀsponsorshipꢀintoꢀtheꢀVISAꢀandꢀMasterCardꢀassociationsꢀbyꢀaꢀmemberꢀfinancialꢀinstitution. OurꢀfailureꢀtoꢀmaintainꢀourꢀcurrentꢀsponsorshipꢀarrangementsꢀorꢀsecureꢀalternativeꢀsponsorshipꢀarrangementsꢀintoꢀtheꢀVISAꢀand MasterCardꢀassociationsꢀcouldꢀhaveꢀaꢀmaterialꢀadverseꢀeffectꢀonꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflows. Our ATM service business is subject to extensive rules and regulations, which may harm our business. OurꢀATMꢀservicesꢀareꢀsubjectꢀtoꢀtheꢀapplicableꢀfederal,ꢀstate,ꢀandꢀlocalꢀbankingꢀregulationsꢀinꢀeachꢀjurisdictionꢀinꢀwhichꢀweꢀoperate ATMs,ꢀwhichꢀregulationsꢀrelateꢀtoꢀtheꢀimpositionꢀofꢀdailyꢀlimitsꢀonꢀtheꢀamountsꢀthatꢀmayꢀbeꢀwithdrawnꢀfromꢀATMs,ꢀtheꢀlocation ofꢀATMs,ꢀourꢀabilityꢀtoꢀsurchargeꢀcardholdersꢀwhoꢀuseꢀourꢀATMs,ꢀandꢀtheꢀformꢀandꢀtypeꢀofꢀnoticesꢀthatꢀmustꢀbeꢀdisclosedꢀwith 27 respectꢀtoꢀ theꢀfeesꢀweꢀchargeꢀtoꢀ patronsꢀinꢀ connectionꢀwithꢀ ourꢀATMꢀservices.ꢀATMsꢀareꢀalsoꢀsubjectꢀtoꢀ requirementsꢀofꢀthe AmericansꢀwithꢀDisabilitiesꢀAct,ꢀwhichꢀinꢀgeneralꢀrequireꢀthatꢀATMsꢀbeꢀaccessibleꢀtoꢀindividualsꢀwithꢀdisabilities,ꢀsuchꢀasꢀvisually- impairedꢀpersons.ꢀTheseꢀlawsꢀandꢀregulationsꢀmayꢀimposeꢀsignificantꢀburdensꢀonꢀourꢀabilityꢀtoꢀoperateꢀATMsꢀprofitablyꢀinꢀsome locations,ꢀorꢀatꢀall,ꢀandꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflowsꢀcouldꢀbeꢀmateriallyꢀadverselyꢀaffected.ꢀMoreover, becauseꢀtheseꢀregulationsꢀareꢀsubjectꢀtoꢀchange,ꢀweꢀmayꢀbeꢀforcedꢀtoꢀmodifyꢀourꢀATMꢀoperationsꢀinꢀaꢀmannerꢀinconsistentꢀwith theꢀassumptionsꢀuponꢀwhichꢀweꢀreliedꢀwhenꢀenteringꢀintoꢀcontractsꢀtoꢀprovideꢀATMꢀservicesꢀatꢀgamingꢀestablishments.ꢀIfꢀfederal, state,ꢀlocal,ꢀorꢀforeignꢀauthoritiesꢀadoptꢀnewꢀlawsꢀorꢀregulations,ꢀorꢀraiseꢀenforcementꢀlevelsꢀonꢀexistingꢀlawsꢀandꢀregulationsꢀthat makeꢀitꢀmoreꢀdifficultꢀforꢀusꢀtoꢀoperateꢀourꢀATMꢀbusiness,ꢀthenꢀourꢀrevenuesꢀandꢀearningsꢀmayꢀbeꢀnegativelyꢀaffected.ꢀIfꢀlegislation orꢀregulationsꢀareꢀenactedꢀinꢀtheꢀfutureꢀthatꢀadverselyꢀimpactꢀourꢀATMꢀbusiness,ꢀweꢀmayꢀbeꢀforcedꢀtoꢀmodifyꢀourꢀoperationsꢀinꢀa mannerꢀ inconsistentꢀ withꢀ theꢀ assumptionsꢀ uponꢀ whichꢀ weꢀ reliedꢀ whenꢀ enteringꢀ intoꢀ contractsꢀ toꢀ provideꢀ ATMsꢀatꢀ gaming establishmentsꢀandꢀourꢀbusiness,ꢀfinancialꢀcondition,ꢀoperations,ꢀorꢀcashꢀflowsꢀcouldꢀsufferꢀaꢀmaterialꢀadverseꢀeffect. Consumer privacy laws may change, requiring us to change our business practices or expend significant amounts on compliance with such laws. Ourꢀpatronꢀmarketingꢀandꢀdatabaseꢀservicesꢀdependꢀonꢀourꢀabilityꢀtoꢀcollectꢀandꢀuseꢀnon-publicꢀpersonalꢀinformationꢀrelatingꢀto patronsꢀwhoꢀuseꢀourꢀproductsꢀandꢀservicesꢀandꢀtheꢀtransactionsꢀtheyꢀconsummateꢀusingꢀourꢀservices.ꢀWeꢀareꢀrequiredꢀbyꢀfederal andꢀstateꢀprivacyꢀlawsꢀandꢀrulesꢀtoꢀsafeguardꢀandꢀprotectꢀtheꢀprivacyꢀofꢀsuchꢀinformation,ꢀtoꢀmakeꢀdisclosuresꢀtoꢀpatronsꢀregarding ourꢀprivacyꢀandꢀinformationꢀsharingꢀpoliciesꢀand,ꢀinꢀsomeꢀcases,ꢀtoꢀprovideꢀpatronsꢀanꢀopportunityꢀtoꢀ“optꢀout”ꢀofꢀtheꢀuseꢀofꢀtheir informationꢀforꢀcertainꢀpurposes.ꢀTheꢀfailureꢀorꢀcircumventionꢀofꢀtheꢀmeansꢀbyꢀwhichꢀweꢀsafeguardꢀandꢀprotectꢀtheꢀprivacyꢀof informationꢀweꢀgatherꢀmayꢀresultꢀinꢀtheꢀdisseminationꢀofꢀnon-publicꢀpersonalꢀinformation,ꢀwhichꢀmayꢀharmꢀourꢀreputationꢀand mayꢀexposeꢀusꢀtoꢀliabilityꢀtoꢀtheꢀaffectedꢀindividualsꢀandꢀregulatoryꢀenforcementꢀproceedingsꢀorꢀfines.ꢀRegulatorsꢀreviewingꢀour policiesꢀandꢀpracticesꢀmayꢀrequireꢀusꢀtoꢀmodifyꢀourꢀpracticesꢀinꢀaꢀmaterialꢀorꢀimmaterialꢀmannerꢀorꢀimposeꢀfinesꢀorꢀotherꢀpenalties ifꢀtheyꢀbelieveꢀthatꢀourꢀpoliciesꢀandꢀpracticesꢀdoꢀnotꢀmeetꢀtheꢀnecessaryꢀstandard.ꢀToꢀtheꢀextentꢀthatꢀourꢀpatronꢀmarketingꢀand databaseꢀservicesꢀhaveꢀfailed,ꢀareꢀnowꢀfailing,ꢀorꢀinꢀtheꢀfutureꢀfailꢀtoꢀcomplyꢀwithꢀapplicableꢀlaw,ꢀourꢀprivacyꢀpoliciesꢀorꢀtheꢀnotices thatꢀweꢀprovideꢀtoꢀpatrons,ꢀweꢀmayꢀbecomeꢀsubjectꢀtoꢀactionsꢀbyꢀaꢀregulatoryꢀauthorityꢀorꢀpatronsꢀwhichꢀcauseꢀusꢀtoꢀpayꢀmonetary penaltiesꢀorꢀrequireꢀusꢀtoꢀmodifyꢀtheꢀmannerꢀinꢀwhichꢀweꢀprovideꢀpatronꢀmarketingꢀandꢀdatabaseꢀservices.ꢀToꢀtheꢀextentꢀthatꢀpatrons exerciseꢀtheirꢀrightꢀtoꢀ“optꢀout,”ꢀourꢀabilityꢀtoꢀleverageꢀexistingꢀandꢀfutureꢀdatabasesꢀofꢀinformationꢀwouldꢀbeꢀcurtailed.ꢀConsumer andꢀdataꢀprivacyꢀlawsꢀareꢀevolving,ꢀandꢀdueꢀtoꢀrecentꢀhighꢀprofileꢀtheftsꢀandꢀlossesꢀofꢀsensitiveꢀconsumerꢀinformationꢀfromꢀprotected databases,ꢀsuchꢀlawsꢀmayꢀbeꢀbroadenedꢀinꢀtheirꢀscopeꢀandꢀapplication,ꢀimposeꢀadditionalꢀrequirementsꢀandꢀrestrictionsꢀonꢀgathering, encryptingꢀandꢀusingꢀpatronꢀinformationꢀorꢀnarrowꢀtheꢀtypesꢀofꢀinformationꢀthatꢀmayꢀbeꢀcollectedꢀorꢀusedꢀforꢀmarketingꢀorꢀother purposesꢀorꢀrequireꢀpatronsꢀtoꢀ“opt-in”ꢀtoꢀtheꢀuseꢀofꢀtheirꢀinformationꢀforꢀspecificꢀpurposes,ꢀorꢀimposeꢀadditionalꢀfinesꢀorꢀpotentially costlyꢀcomplianceꢀrequirementsꢀwhichꢀwillꢀhamperꢀtheꢀvalueꢀofꢀourꢀpatronꢀmarketingꢀandꢀdatabaseꢀservices. Risks Related to Our Stock Our common stock has been publicly traded since September 2005, and we expect that the price of our common stock will fluctuate substantially. ThereꢀhasꢀbeenꢀaꢀpublicꢀmarketꢀforꢀourꢀcommonꢀstockꢀsinceꢀSeptemberꢀ2005.ꢀTheꢀmarketꢀpriceꢀofꢀourꢀcommonꢀstockꢀmayꢀfluctuate significantlyꢀinꢀresponseꢀtoꢀaꢀnumberꢀofꢀfactors,ꢀsomeꢀofꢀwhichꢀareꢀbeyondꢀourꢀcontrol,ꢀincludingꢀthoseꢀdescribedꢀaboveꢀunder “—RisksꢀRelatedꢀtoꢀOurꢀBusiness,”ꢀ“—RisksꢀRelatedꢀtoꢀRegulationꢀofꢀOurꢀIndustry”,ꢀandꢀtheꢀfollowing: • • • • • • • • ourꢀfailureꢀtoꢀmaintainꢀourꢀcurrentꢀcustomers,ꢀincludingꢀbecauseꢀofꢀconsolidationꢀinꢀtheꢀgamingꢀindustry; increasesꢀinꢀcommissionsꢀpaidꢀtoꢀgamingꢀestablishmentsꢀasꢀaꢀresultꢀofꢀcompetition; increasesꢀinꢀinterchangeꢀrates,ꢀprocessingꢀfees,ꢀorꢀotherꢀfeesꢀpaidꢀbyꢀus; decreasesꢀinꢀreverseꢀinterchangeꢀratesꢀpaidꢀtoꢀus; actualꢀorꢀanticipatedꢀfluctuationsꢀinꢀourꢀorꢀourꢀcompetitors’ꢀrevenue,ꢀoperatingꢀresults,ꢀorꢀgrowthꢀrate; ourꢀinabilityꢀtoꢀadequatelyꢀprotectꢀorꢀenforceꢀourꢀintellectualꢀpropertyꢀrights; anyꢀadverseꢀresultsꢀinꢀlitigationꢀinitiatedꢀbyꢀusꢀorꢀbyꢀothersꢀagainstꢀus; ourꢀinabilityꢀtoꢀmakeꢀpaymentsꢀonꢀourꢀoutstandingꢀindebtednessꢀasꢀtheyꢀbecomeꢀdueꢀorꢀourꢀinabilityꢀtoꢀundertakeꢀactions thatꢀmightꢀotherwiseꢀbenefitꢀusꢀbasedꢀonꢀtheꢀfinancialꢀandꢀotherꢀrestrictiveꢀcovenantsꢀcontainedꢀinꢀtheꢀNewꢀCreditꢀFacilities andꢀtheꢀindentureꢀgoverningꢀtheꢀ2017ꢀUnsecuredꢀNotes; 28 • • • • • • • • • • • • • • • theꢀloss,ꢀorꢀfailure,ꢀofꢀaꢀsignificantꢀsupplierꢀorꢀstrategicꢀpartnerꢀtoꢀprovideꢀtheꢀgoodsꢀorꢀservicesꢀthatꢀweꢀrequireꢀfrom them; ourꢀinabilityꢀtoꢀintroduceꢀsuccessful,ꢀnewꢀproductsꢀandꢀservicesꢀinꢀaꢀtimelyꢀmannerꢀorꢀtheꢀintroductionꢀofꢀnewꢀproducts orꢀservicesꢀbyꢀourꢀcompetitorsꢀthatꢀreduceꢀtheꢀdemandꢀforꢀourꢀproductsꢀandꢀservices; ourꢀfailureꢀtoꢀsuccessfullyꢀenterꢀnewꢀmarketsꢀorꢀtheꢀfailureꢀofꢀnewꢀmarketsꢀtoꢀdevelopꢀinꢀtheꢀtimeꢀandꢀmannerꢀthatꢀwe anticipate; announcementsꢀbyꢀourꢀcompetitorsꢀofꢀsignificantꢀnewꢀcontractsꢀorꢀcontractꢀrenewalsꢀorꢀofꢀnewꢀproductsꢀorꢀservices; changesꢀinꢀgeneralꢀeconomicꢀconditions,ꢀfinancialꢀmarkets,ꢀtheꢀgamingꢀindustry,ꢀorꢀtheꢀpaymentsꢀprocessingꢀindustry; theꢀtradingꢀvolumeꢀofꢀourꢀcommonꢀstock; salesꢀofꢀcommonꢀstockꢀorꢀotherꢀactionsꢀbyꢀourꢀcurrentꢀofficers,ꢀdirectors,ꢀandꢀstockholders; acquisitions,ꢀstrategicꢀalliances,ꢀorꢀjointꢀventuresꢀinvolvingꢀusꢀorꢀourꢀcompetitors; futureꢀsalesꢀofꢀourꢀcommonꢀstockꢀorꢀotherꢀsecurities; theꢀfailureꢀofꢀsecuritiesꢀanalystsꢀtoꢀcoverꢀourꢀcommonꢀstockꢀorꢀchangesꢀinꢀfinancialꢀestimatesꢀorꢀrecommendationsꢀby analysts; ourꢀfailureꢀtoꢀmeetꢀtheꢀrevenue,ꢀnetꢀincome,ꢀorꢀearningsꢀperꢀshareꢀestimatesꢀofꢀsecuritiesꢀanalystsꢀorꢀinvestors; departuresꢀofꢀkeyꢀpersonnelꢀorꢀourꢀinabilityꢀtoꢀattractꢀorꢀretainꢀkeyꢀpersonnel; ourꢀabilityꢀtoꢀprevent,ꢀmitigate,ꢀorꢀtimelyꢀrecoverꢀfromꢀcybersecurityꢀbreaches,ꢀattacks,ꢀandꢀcompromisesꢀwithꢀrespect toꢀourꢀinfrastructure,ꢀsystems,ꢀandꢀinformationꢀtechnologyꢀenvironment; terroristꢀacts,ꢀtheft,ꢀvandalism,ꢀfires,ꢀfloods,ꢀorꢀotherꢀnaturalꢀdisasters;ꢀand rumorsꢀorꢀspeculationꢀasꢀtoꢀanyꢀofꢀtheꢀaboveꢀwhichꢀweꢀmayꢀbeꢀunableꢀtoꢀconfirmꢀorꢀdenyꢀdueꢀtoꢀdisclosureꢀrestrictions imposedꢀonꢀusꢀbyꢀlawꢀorꢀwhichꢀweꢀotherwiseꢀdeemꢀimprudentꢀtoꢀcommentꢀupon. Some provisions of our amended and restated certificate of incorporation and amended and restated bylaws may delay or prevent transactions that many stockholders may favor. Someꢀprovisionsꢀofꢀourꢀamendedꢀandꢀrestatedꢀcertificateꢀofꢀincorporationꢀandꢀamendedꢀandꢀrestatedꢀbylawsꢀmayꢀhaveꢀtheꢀeffect ofꢀdelaying,ꢀdiscouraging,ꢀorꢀpreventingꢀaꢀmergerꢀorꢀacquisitionꢀthatꢀourꢀstockholdersꢀmayꢀconsiderꢀfavorableꢀorꢀaꢀchangeꢀinꢀour managementꢀorꢀourꢀBoardꢀofꢀDirectors.ꢀTheseꢀprovisions: • • • • • • divideꢀourꢀBoardꢀofꢀDirectorsꢀintoꢀthreeꢀseparateꢀclassesꢀservingꢀstaggeredꢀthree-yearꢀterms,ꢀwhichꢀwillꢀhaveꢀtheꢀeffect ofꢀrequiringꢀatꢀleastꢀtwoꢀannualꢀstockholderꢀmeetingsꢀinsteadꢀofꢀone,ꢀtoꢀreplaceꢀaꢀmajorityꢀofꢀourꢀdirectors,ꢀwhichꢀcould haveꢀtheꢀeffectꢀofꢀdelayingꢀorꢀpreventingꢀaꢀchangeꢀinꢀourꢀcontrolꢀorꢀmanagement; provideꢀthatꢀspecialꢀmeetingsꢀofꢀstockholdersꢀcanꢀonlyꢀbeꢀcalledꢀbyꢀourꢀBoardꢀofꢀDirectors,ꢀChairmanꢀofꢀtheꢀBoard,ꢀor ChiefꢀExecutiveꢀOfficer.ꢀInꢀaddition,ꢀtheꢀbusinessꢀpermittedꢀtoꢀbeꢀconductedꢀatꢀanyꢀspecialꢀmeetingꢀofꢀstockholdersꢀis limitedꢀtoꢀtheꢀbusinessꢀspecifiedꢀinꢀtheꢀnoticeꢀofꢀsuchꢀmeetingꢀtoꢀtheꢀstockholders; provideꢀforꢀanꢀadvanceꢀnoticeꢀprocedureꢀwithꢀregardꢀtoꢀbusinessꢀtoꢀbeꢀbroughtꢀbeforeꢀaꢀmeetingꢀofꢀstockholdersꢀwhich mayꢀdelayꢀorꢀprecludeꢀstockholdersꢀfromꢀbringingꢀmattersꢀbeforeꢀaꢀmeetingꢀofꢀstockholdersꢀorꢀfromꢀmakingꢀnominations forꢀdirectorsꢀatꢀaꢀmeetingꢀofꢀstockholders,ꢀwhichꢀcouldꢀdelayꢀorꢀdeterꢀtakeoverꢀattemptsꢀorꢀchangesꢀinꢀmanagement; eliminateꢀtheꢀrightꢀofꢀstockholdersꢀtoꢀactꢀbyꢀwrittenꢀconsentꢀsoꢀthatꢀallꢀstockholderꢀactionsꢀmustꢀbeꢀeffectedꢀatꢀaꢀduly calledꢀmeeting; provideꢀ thatꢀ directorsꢀ mayꢀ onlyꢀ beꢀ removedꢀ forꢀ causeꢀ withꢀ theꢀ approvalꢀ ofꢀ stockholdersꢀ holdingꢀ aꢀ majorityꢀ ofꢀ our outstandingꢀvotingꢀstock; provideꢀthatꢀvacanciesꢀonꢀourꢀBoardꢀofꢀDirectorsꢀmayꢀbeꢀfilledꢀbyꢀaꢀmajority,ꢀalthoughꢀlessꢀthanꢀaꢀquorum,ꢀofꢀdirectors inꢀofficeꢀandꢀthatꢀourꢀBoardꢀofꢀDirectorsꢀmayꢀfixꢀtheꢀnumberꢀofꢀdirectorsꢀbyꢀresolution; 29 • • allowꢀourꢀBoardꢀofꢀDirectorsꢀtoꢀissueꢀsharesꢀofꢀpreferredꢀstockꢀwithꢀrightsꢀseniorꢀtoꢀthoseꢀofꢀtheꢀcommonꢀstockꢀandꢀthat otherwiseꢀcouldꢀadverselyꢀaffectꢀtheꢀrightsꢀandꢀpowers,ꢀincludingꢀvotingꢀrightsꢀandꢀtheꢀrightꢀtoꢀapproveꢀorꢀnotꢀtoꢀapprove anꢀacquisitionꢀorꢀotherꢀchangeꢀinꢀcontrol,ꢀofꢀtheꢀholdersꢀofꢀcommonꢀstock,ꢀwithoutꢀanyꢀfurtherꢀvoteꢀorꢀactionꢀbyꢀthe stockholders;ꢀand doꢀnotꢀprovideꢀforꢀcumulativeꢀvotingꢀforꢀourꢀdirectors,ꢀwhichꢀmayꢀmakeꢀitꢀmoreꢀdifficultꢀforꢀstockholdersꢀowningꢀless thanꢀaꢀmajorityꢀofꢀourꢀstockꢀtoꢀelectꢀanyꢀdirectorsꢀtoꢀourꢀBoardꢀofꢀDirectors.ꢀInꢀaddition,ꢀweꢀareꢀalsoꢀsubjectꢀtoꢀSectionꢀ203 ofꢀtheꢀDelawareꢀGeneralꢀCorporationꢀLaw,ꢀwhichꢀprovides,ꢀsubjectꢀtoꢀenumeratedꢀexceptions,ꢀthatꢀifꢀaꢀpersonꢀacquires 15%ꢀorꢀmoreꢀofꢀourꢀvotingꢀstock,ꢀtheꢀpersonꢀisꢀanꢀ“interestedꢀstockholder”ꢀandꢀmayꢀnotꢀengageꢀinꢀ“businessꢀcombinations” withꢀusꢀforꢀaꢀperiodꢀofꢀthreeꢀyearsꢀfromꢀtheꢀtimeꢀtheꢀpersonꢀacquiredꢀ15%ꢀorꢀmoreꢀofꢀourꢀvotingꢀstock. Theseꢀprovisionsꢀmayꢀhaveꢀtheꢀeffectꢀofꢀentrenchingꢀourꢀmanagementꢀteamꢀandꢀmayꢀdepriveꢀourꢀstockholdersꢀofꢀtheꢀopportunity toꢀsellꢀsharesꢀtoꢀpotentialꢀacquirersꢀatꢀaꢀpremiumꢀoverꢀprevailingꢀprices.ꢀThisꢀpotentialꢀinabilityꢀtoꢀobtainꢀaꢀpremiumꢀcouldꢀreduce theꢀpriceꢀofꢀourꢀcommonꢀstock.ꢀ Item 1B. Unresolved Staff Comments. None. Item 2. Properties. WeꢀoccupyꢀrealꢀestateꢀpropertiesꢀmostlyꢀinꢀtheꢀUnitedꢀStatesꢀand,ꢀtoꢀaꢀlesserꢀdegree,ꢀinternationallyꢀthatꢀareꢀunderꢀleaseꢀagreements. Weꢀbelieveꢀthatꢀtheseꢀfacilitiesꢀareꢀadequateꢀforꢀourꢀbusinessꢀneedsꢀasꢀpresentlyꢀconducted.ꢀ Weꢀprimarilyꢀoccupyꢀtheꢀfollowingꢀleasedꢀrealꢀestateꢀproperties: Location Austin,ꢀTexas LasꢀVegas,ꢀNevada Reno,ꢀNevada Chicago,ꢀIllinois Sq. Ft 204,256 106,873 17,138 17,124 Purpose Segment GamesꢀHeadquartersꢀandꢀOperations Games CorporateꢀHeadquarters;ꢀFinTech HeadquartersꢀandꢀOperations GameꢀDesignꢀStudio GameꢀDesignꢀStudio FinTech;ꢀGames Games Games Inꢀaddition,ꢀweꢀleaseꢀseveralꢀotherꢀlessꢀsignificantꢀrealꢀestateꢀpropertiesꢀthatꢀareꢀusedꢀtoꢀsupportꢀourꢀproductsꢀandꢀservices.ꢀ Item 3. Legal Proceedings. Weꢀareꢀinvolvedꢀinꢀvariousꢀinvestigations,ꢀclaims,ꢀandꢀlawsuitsꢀinꢀtheꢀordinaryꢀcourseꢀofꢀourꢀbusiness.ꢀAlthoughꢀtheꢀoutcomeꢀof ourꢀlegalꢀproceedingsꢀcannotꢀbeꢀpredictedꢀwithꢀcertaintyꢀandꢀnoꢀassurancesꢀcanꢀbeꢀprovided,ꢀbasedꢀuponꢀcurrentꢀinformation,ꢀwe doꢀnotꢀbelieveꢀtheꢀliabilities,ꢀifꢀany,ꢀwhichꢀmayꢀultimatelyꢀresultꢀfromꢀtheꢀoutcomeꢀofꢀsuchꢀmatters,ꢀindividuallyꢀorꢀinꢀtheꢀaggregate, willꢀhaveꢀaꢀmaterialꢀadverseꢀimpactꢀonꢀourꢀfinancialꢀposition,ꢀliquidity,ꢀorꢀresultsꢀofꢀoperations. Item 4. Mine Safety Disclosures. Notꢀapplicable. 30 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. OurꢀcommonꢀstockꢀisꢀlistedꢀforꢀtradingꢀonꢀtheꢀNewꢀYorkꢀStockꢀExchangeꢀunderꢀtheꢀsymbolꢀ“EVRI.”ꢀOnꢀMarchꢀ1,ꢀ2019,ꢀthere wereꢀeightꢀholdersꢀofꢀrecordꢀofꢀourꢀcommonꢀstock.ꢀBecauseꢀmanyꢀofꢀourꢀsharesꢀofꢀcommonꢀstockꢀareꢀheldꢀbyꢀbrokersꢀandꢀother institutionsꢀonꢀbehalfꢀofꢀstockholders,ꢀweꢀareꢀunableꢀtoꢀestimateꢀtheꢀtotalꢀnumberꢀofꢀbeneficialꢀstockholdersꢀrepresentedꢀbyꢀthese recordꢀholders. Common Stock Repurchases WeꢀdidꢀnotꢀhaveꢀaꢀshareꢀrepurchaseꢀprogramꢀinꢀeffectꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016. Issuer Purchases and Withholding of Equity Securities Weꢀrepurchasedꢀorꢀwithheldꢀfromꢀrestrictedꢀstockꢀawardsꢀ17,552,ꢀ15,457,ꢀandꢀ18,717ꢀsharesꢀofꢀourꢀcommonꢀstockꢀatꢀanꢀaggregate purchaseꢀpriceꢀofꢀ$0.1ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively,ꢀtoꢀsatisfyꢀtheꢀminimum applicableꢀtaxꢀwithholdingꢀobligationsꢀincidentꢀtoꢀtheꢀvestingꢀofꢀsuchꢀrestrictedꢀstockꢀawards.ꢀTheꢀfollowingꢀtableꢀincludesꢀthe monthlyꢀrepurchasesꢀorꢀwithholdingsꢀofꢀourꢀcommonꢀstockꢀduringꢀtheꢀfourthꢀquarterꢀendedꢀDecemberꢀ31,ꢀ2018:ꢀ Tax Withholdings 10/1/18ꢀ-ꢀ10/31/18 11/1/18ꢀ-ꢀ11/30/18 12/1/18ꢀ-ꢀ12/31/18 Total Total Number of Shares Purchased (1) (in thousands) Average Price per Share (2) 6.4 0.6 3.1 10.1 $ $ $ $ 7.04 7.41 5.26 6.52 (1) Representsꢀtheꢀsharesꢀofꢀcommonꢀstockꢀthatꢀwereꢀwithheldꢀfromꢀrestrictedꢀstockꢀawardsꢀtoꢀsatisfyꢀtheꢀminimumꢀapplicable taxꢀwithholdingꢀobligationsꢀincidentꢀtoꢀtheꢀvestingꢀofꢀsuchꢀrestrictedꢀstockꢀawards.ꢀThereꢀareꢀnoꢀlimitationsꢀonꢀtheꢀnumberꢀof sharesꢀofꢀcommonꢀstockꢀthatꢀmayꢀbeꢀwithheldꢀfromꢀrestrictedꢀstockꢀawardsꢀtoꢀsatisfyꢀtheꢀminimumꢀtaxꢀwithholdingꢀobligations incidentꢀtoꢀtheꢀvestingꢀofꢀrestrictedꢀstockꢀawards. (2) Representsꢀtheꢀaverageꢀpriceꢀperꢀshareꢀofꢀcommonꢀstockꢀwithheldꢀfromꢀrestrictedꢀstockꢀawardsꢀonꢀtheꢀdateꢀofꢀwithholding. Stock Performance Graph Theꢀlineꢀgraphꢀbelowꢀcomparesꢀtheꢀcumulativeꢀtotalꢀstockholderꢀreturnꢀonꢀourꢀcommonꢀstockꢀwithꢀtheꢀcumulativeꢀtotalꢀreturnꢀof theꢀ Standardꢀ &ꢀ Poor’sꢀ (“S&P”)ꢀ 500ꢀ Indexꢀ andꢀ theꢀ S&Pꢀ Informationꢀ Technologyꢀ Indexꢀ duringꢀ theꢀ five-yearꢀ periodꢀ ended Decemberꢀ31,ꢀ2018. Theꢀgraphꢀassumesꢀthatꢀ$100ꢀwasꢀinvestedꢀonꢀDecemberꢀ31,ꢀ2013ꢀinꢀourꢀcommonꢀstock,ꢀinꢀtheꢀS&Pꢀ500ꢀIndexꢀandꢀtheꢀS&P InformationꢀTechnologyꢀIndex,ꢀandꢀthatꢀallꢀdividendsꢀwereꢀreinvested.ꢀResearchꢀDataꢀGroup,ꢀInc.ꢀfurnishedꢀthisꢀdataꢀandꢀthe cumulativeꢀtotalꢀstockholderꢀreturnsꢀforꢀourꢀcommonꢀstock,ꢀtheꢀS&Pꢀ500ꢀIndexꢀandꢀtheꢀS&PꢀInformationꢀTechnologyꢀIndexꢀare basedꢀonꢀtheꢀcalendarꢀmonthꢀendꢀclosingꢀprices.ꢀTheꢀcomparisonsꢀinꢀtheꢀgraphꢀareꢀrequiredꢀbyꢀtheꢀSECꢀandꢀareꢀnotꢀintendedꢀto forecastꢀorꢀbeꢀindicativeꢀofꢀpossibleꢀfutureꢀperformanceꢀofꢀourꢀcommonꢀstock. 31 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Everi Holdings Inc, the S&P 500 Index, and the S&P Information Technology Index $250 $200 $150 $100 $50 $0 12/13 12/14 12/15 12/16 12/17 12/18 Everi Holdings Inc S&P 500 S&P Information Technology *$100 invested on 12/31/13 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2018 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. The performance graph and the related chart and text are being furnished solely to accompany this Annual Report on Form 10- K pursuant to Item 201(e) of Regulation S-K, and are not being filed for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference in any filing by us under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. Item 6. Selected Financial Data. Theꢀfollowingꢀselectedꢀhistoricalꢀfinancialꢀdataꢀhasꢀbeenꢀderivedꢀfrom,ꢀandꢀshouldꢀbeꢀreadꢀinꢀconjunctionꢀwith,ꢀourꢀFinancial StatementsꢀandꢀResultsꢀofꢀOperationsꢀincludedꢀelsewhereꢀinꢀthisꢀAnnualꢀReportꢀonꢀFormꢀ10-K.ꢀOurꢀselectedꢀconsolidatedꢀfinancial dataꢀmayꢀnotꢀbeꢀindicativeꢀofꢀourꢀfutureꢀfinancialꢀconditionꢀorꢀresultsꢀofꢀoperationsꢀ(inꢀthousands,ꢀexceptꢀperꢀshareꢀamounts).ꢀ 2018(1) Year Ended December 31, 2016(3) 2017(2) 2015(4)(5) 2014(6) Income Statement Data Revenues Operatingꢀincomeꢀ(loss) Netꢀincomeꢀ(loss) Basicꢀearningsꢀ(loss)ꢀperꢀshare Dilutedꢀearningsꢀ(loss)ꢀperꢀshare Weightedꢀaverageꢀcommonꢀsharesꢀoutstanding Basic Diluted $ 469,515 85,813 12,356 0.18 0.17 $ 974,948 81,819 (51,903) (0.78) (0.78) $ 859,456 (118,555) (249,479) (3.78) (3.78) $ 826,999 (9,730) (104,972) (1.59) (1.59) $ 593,053 33,782 12,140 0.18 0.18 69,464 73,796 66,816 66,816 66,050 66,050 65,854 65,854 65,780 66,863 32 2018(1) AtꢀandꢀForꢀtheꢀYearꢀEndedꢀDecemberꢀ31, 2016(3) 2015(4)(5)(6) 2017(2) 2014(7) Balanceꢀsheetꢀdata Cash and cash equivalents Working capital Total assets Total borrowings Stockholders’ (deficit) equity Cashꢀflowꢀdata Net cash provided by operating activities Net cash used in investing activities Net cash provided by (used in) financing activities $ 297,532 17,304 1,548,261 1,163,216 (108,895) $ 128,586 (12,040) 1,537,074 1,167,843 (140,633) $ 119,051 (1,875) 1,408,163 1,121,880 (107,793) $ 102,030 2,452 1,550,385 1,139,899 $ 89,095 12,550 1,707,285 1,188,787 137,420 231,473 $ 294,286 (123,350) 11 $ 95,828 (109,979) 22,394 $ 131,711 (88,054) (24,922) $ 124,587 (85,549) (24,551) 24,531 $ (1,085,847) 1,037,423 (1) On January 1, 2018, we adopted ASC 606 using the modified retrospective method, which resulted in the recording of an immaterial cumulative adjustment in the amount of approximately $4.4 million to accumulated deficit as of the adoption date. Our prior period results were not recast to reflect the new revenue recognition standard under the modified retrospective method. (2) During 2017, we refinanced our senior secured term loan, senior secured notes and senior unsecured notes, which resulted in approximately $51.8 million of loss on extinguishment of debt. (3) During 2016, the Games reporting unit had a goodwill impairment of $146.3 million. (4) 2015 amounts include a full year of financial results for Everi Games. (5) During 2015, the Games reporting unit had a goodwill impairment of $75.0 million. (6) We reclassified $23.7 million of debt issuance costs related to our outstanding debt from the non-current portion of other assets to contra-liabilities included in long-term debt as of December 31, 2015 in connection with our retrospective adoption of Accounting Standards Update (“ASU”) No. 2015-03 in 2016. This reclassification decreased the December 31, 2015 balance of both total assets and total borrowings. (7) 2014 amounts affected by the Merger for which total merger consideration of $1.1 billion on December 19, 2014 was paid and results of operations were recorded from the date of acquisition through December 31, 2014. Itemꢀ7.ꢀꢀManagement’sꢀDiscussionꢀandꢀAnalysisꢀofꢀFinancialꢀConditionꢀandꢀResultsꢀofꢀOperations. The following discussion and analysis of financial condition and results of operations should be read in conjunction with “Item 1. Business,” “Item 6. Selected Financial Data,” and our Financial Statements included elsewhere in this Annual Report on Form 10-K and the information included in our other filings with the SEC. This discussion includes forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995 and should be read in conjunction with the disclosure and information contained and referenced in “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors” included elsewhere in this Annual Report on Form 10-K. Overviewꢀ Everi is a leading supplier of technology solutions for the casino gaming industry. We provide casino operators with a diverse portfolio of products including innovative gaming machines that power the casino floor, and casino operational and management systems that include comprehensive end-to-end payments solutions, critical intelligence offerings, and gaming operations efficiency technologies. Everi’s mission is to be a transformative force for casino operations by facilitating memorable player experiences, delivering reliable protection and security, and striving for customer satisfaction and operational excellence. We are divided into two primary business segments: “Everi Games” or “Games” and “Everi FinTech” or “FinTech”. 33 Items Impacting Comparability of Results of Operations OurꢀFinancialꢀStatementsꢀincludedꢀinꢀthisꢀreportꢀthatꢀpresentꢀourꢀfinancialꢀconditionꢀandꢀresultsꢀofꢀoperationsꢀreflectꢀtheꢀfollowing transactionsꢀandꢀevents: • • • • OnꢀJanuaryꢀ1,ꢀ2018,ꢀweꢀadoptedꢀASCꢀ606ꢀusingꢀtheꢀmodifiedꢀretrospectiveꢀmethod,ꢀwhichꢀrequiresꢀusꢀtoꢀevaluateꢀwhether anyꢀcumulativeꢀadjustmentꢀisꢀrequiredꢀtoꢀbeꢀrecordedꢀtoꢀretainedꢀearningsꢀ(orꢀaccumulatedꢀdeficit)ꢀasꢀaꢀresultꢀofꢀapplying theꢀprovisionsꢀsetꢀforthꢀunderꢀASCꢀ606ꢀforꢀanyꢀexistingꢀarrangementsꢀnotꢀyetꢀcompletedꢀasꢀofꢀtheꢀadoptionꢀdateꢀofꢀJanuary 1,ꢀ2018.ꢀAsꢀaꢀresult,ꢀweꢀrecordedꢀanꢀimmaterialꢀcumulativeꢀadjustmentꢀinꢀtheꢀamountꢀofꢀapproximatelyꢀ$4.4ꢀmillionꢀto accumulatedꢀdeficitꢀasꢀofꢀtheꢀadoptionꢀdate.ꢀRevenuesꢀandꢀcostsꢀrelatedꢀtoꢀcertainꢀcontractsꢀareꢀrecognizedꢀatꢀaꢀpointꢀin timeꢀunderꢀASCꢀ606ꢀasꢀtheꢀperformanceꢀobligationsꢀrelatedꢀtoꢀcertainꢀtypesꢀofꢀsalesꢀareꢀsatisfied;ꢀwhereas,ꢀpreviously theseꢀrevenuesꢀandꢀcostsꢀwereꢀrecognizedꢀoverꢀaꢀperiodꢀofꢀtimeꢀunderꢀASCꢀ605.ꢀ Further,ꢀ weꢀ previouslyꢀ reportedꢀ costsꢀ andꢀ expensesꢀ relatedꢀ toꢀ ourꢀ cashꢀ accessꢀ servicesꢀ -ꢀ whichꢀ includeꢀ commission expensesꢀpayableꢀtoꢀcasinoꢀoperators,ꢀinterchangeꢀfeesꢀpayableꢀtoꢀtheꢀnetworkꢀassociations,ꢀandꢀprocessingꢀandꢀrelated costsꢀpayableꢀtoꢀotherꢀthirdꢀpartyꢀpartnersꢀ-ꢀasꢀaꢀcostꢀofꢀrevenues.ꢀUnderꢀASCꢀ606,ꢀsuchꢀcostsꢀareꢀreflectedꢀasꢀreductions toꢀcashꢀaccessꢀservicesꢀrevenuesꢀonꢀaꢀnetꢀbasisꢀofꢀpresentation,ꢀsinceꢀweꢀdoꢀnotꢀcontrolꢀtheꢀcashꢀadvanceꢀandꢀATMꢀservices providedꢀtoꢀaꢀcustomerꢀand,ꢀtherefore,ꢀareꢀactingꢀasꢀanꢀagentꢀwhoseꢀperformanceꢀobligationꢀisꢀtoꢀarrangeꢀforꢀtheꢀprovision ofꢀ theseꢀ services.ꢀ Inꢀ addition,ꢀ weꢀ previouslyꢀ reportedꢀ certainꢀ costsꢀ incurredꢀ inꢀ connectionꢀ withꢀ ourꢀ WAPꢀ platform, consistingꢀprimarilyꢀofꢀtheꢀjackpotꢀexpenses,ꢀasꢀcostꢀofꢀrevenues.ꢀUnderꢀASCꢀ606,ꢀsuchꢀcostsꢀareꢀreflectedꢀasꢀreductions toꢀgamingꢀoperationsꢀrevenuesꢀonꢀaꢀnetꢀbasisꢀofꢀpresentation.ꢀOurꢀpriorꢀperiodꢀresultsꢀwereꢀnotꢀrecastꢀtoꢀreflectꢀtheꢀnew revenueꢀrecognitionꢀstandardꢀunderꢀtheꢀmodifiedꢀretrospectiveꢀmethod.ꢀ Duringꢀtheꢀfourthꢀquarterꢀofꢀ2017,ꢀweꢀrecordedꢀaꢀ$37.2ꢀmillionꢀlossꢀonꢀextinguishmentꢀofꢀdebtꢀconsistingꢀofꢀaꢀ$26.3 millionꢀmake-wholeꢀpremiumꢀrelatedꢀtoꢀtheꢀsatisfactionꢀandꢀredemptionꢀofꢀtheꢀ2014ꢀUnsecuredꢀNotesꢀ(definedꢀherein) andꢀapproximatelyꢀ$10.9ꢀmillionꢀforꢀtheꢀwrite-offꢀofꢀrelatedꢀunamortizedꢀdebtꢀissuanceꢀcostsꢀandꢀfees.ꢀAnꢀadditional $14.6ꢀmillionꢀlossꢀonꢀextinguishmentꢀofꢀdebtꢀwasꢀincurredꢀinꢀtheꢀsecondꢀquarterꢀofꢀ2017ꢀforꢀtheꢀunamortizedꢀdeferred financingꢀfeesꢀandꢀdiscountsꢀrelatedꢀtoꢀtheꢀextinguishedꢀtermꢀloanꢀunderꢀtheꢀPriorꢀCreditꢀFacilityꢀandꢀtheꢀredeemed RefinancedꢀSecuredꢀNotesꢀ(bothꢀdefinedꢀherein).ꢀRepricingꢀofꢀtheꢀNewꢀTermꢀLoanꢀFacilityꢀ(definedꢀherein)ꢀduringꢀthe secondꢀquarterꢀofꢀ2018ꢀdidꢀnotꢀresultꢀinꢀaꢀmaterialꢀlossꢀonꢀextinguishmentꢀofꢀdebt. InꢀOctoberꢀofꢀeachꢀyear,ꢀweꢀconductꢀourꢀannualꢀimpairmentꢀtestꢀforꢀourꢀreportingꢀunits.ꢀBasedꢀonꢀtheꢀresultsꢀofꢀourꢀtesting, thereꢀwasꢀnoꢀgoodwillꢀimpairmentꢀforꢀ2018ꢀandꢀ2017.ꢀWeꢀrecordedꢀgoodwillꢀimpairmentꢀofꢀapproximatelyꢀ$146.3ꢀmillion relatedꢀtoꢀourꢀGamesꢀsegmentꢀinꢀ2016. Theꢀincomeꢀtaxꢀbenefitꢀwasꢀ$9.7ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀtoꢀanꢀincomeꢀtaxꢀbenefit ofꢀ$20.2ꢀmillionꢀinꢀtheꢀpriorꢀyearꢀperiod.ꢀTheꢀincomeꢀtaxꢀbenefitꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018ꢀreflectedꢀan effectiveꢀincomeꢀtaxꢀrateꢀofꢀnegativeꢀ367.0%,ꢀwhichꢀwasꢀlessꢀthanꢀtheꢀstatutoryꢀfederalꢀrateꢀofꢀ21.0%ꢀprimarilyꢀdueꢀtoꢀa decreaseꢀinꢀtheꢀvaluationꢀallowanceꢀforꢀdeferredꢀtaxꢀassetsꢀandꢀanꢀincreaseꢀinꢀaꢀfederalꢀresearchꢀcredit.ꢀTheꢀincomeꢀtax benefitꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017ꢀreflectedꢀanꢀeffectiveꢀincomeꢀtaxꢀrateꢀofꢀ28.0%,ꢀwhichꢀwasꢀlessꢀthanꢀthe statutoryꢀfederalꢀrateꢀofꢀ35.0%,ꢀprimarilyꢀdueꢀtoꢀaꢀdecreaseꢀinꢀtheꢀcarryingꢀvalueꢀofꢀourꢀdeferredꢀtaxꢀliabilitiesꢀasꢀaꢀresult ofꢀtheꢀenactmentꢀofꢀtheꢀ2017ꢀTaxꢀAct,ꢀoffsetꢀbyꢀanꢀincreaseꢀinꢀourꢀvaluationꢀallowanceꢀforꢀdeferredꢀtaxꢀassets. Asꢀaꢀresultꢀofꢀtheꢀaboveꢀtransactionsꢀandꢀevents,ꢀtheꢀresultsꢀofꢀoperationsꢀandꢀearningsꢀperꢀshareꢀinꢀtheꢀperiodsꢀcoveredꢀbyꢀour FinancialꢀStatementsꢀmayꢀnotꢀbeꢀdirectlyꢀcomparable. Trends and Developments Impacting our Business Ourꢀstrategicꢀplanningꢀandꢀforecastingꢀprocessesꢀincludeꢀtheꢀconsiderationꢀofꢀeconomicꢀandꢀindustryꢀwideꢀtrendsꢀthatꢀmayꢀimpact ourꢀGamesꢀandꢀFinTechꢀbusinesses.ꢀBelowꢀweꢀhaveꢀidentifiedꢀaꢀnumberꢀofꢀtrendsꢀthatꢀcouldꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀbusiness: • • • Casinoꢀgamingꢀisꢀdependentꢀuponꢀdiscretionaryꢀconsumerꢀspending,ꢀwhichꢀisꢀtypicallyꢀtheꢀfirstꢀtypeꢀofꢀspendingꢀthatꢀis restrainedꢀ byꢀ consumersꢀ whenꢀ theyꢀ areꢀ uncertainꢀ aboutꢀ theirꢀ jobsꢀ andꢀ income.ꢀ Globalꢀ economicꢀ uncertaintyꢀ inꢀ the marketplaceꢀmayꢀhaveꢀanꢀimpactꢀonꢀcasinoꢀgamingꢀandꢀultimatelyꢀtheꢀdemandꢀforꢀnewꢀgamingꢀequipment,ꢀwhichꢀimpacts bothꢀofꢀourꢀsegments. TheꢀtotalꢀNorthꢀAmericanꢀinstalledꢀslotꢀbaseꢀwasꢀslightlyꢀhigherꢀinꢀ2018ꢀwhenꢀcomparedꢀtoꢀ2017ꢀandꢀ2016.ꢀWeꢀexpect flatꢀtoꢀmoderateꢀgrowthꢀinꢀtheꢀforwardꢀreplacementꢀcycleꢀforꢀEGMs,ꢀwhichꢀhasꢀaꢀdirectꢀimpactꢀonꢀtheꢀoperationsꢀofꢀour Gamesꢀsegment. Theꢀvolumeꢀofꢀsalesꢀandꢀinstallationsꢀtoꢀnewꢀcasinoꢀopeningsꢀandꢀnewꢀmarketꢀexpansionsꢀalongꢀwithꢀreplacementsꢀto theꢀexistingꢀgamingꢀoperatorsꢀinꢀNorthꢀAmericaꢀisꢀexpectedꢀtoꢀcontinueꢀtoꢀtrendꢀslightlyꢀupwardꢀinꢀ2019.ꢀThisꢀcould 34 positivelyꢀimpactꢀtheꢀoverallꢀdemandꢀforꢀslotꢀmachinesꢀinꢀNorthꢀAmericaꢀduringꢀ2019,ꢀwhichꢀinꢀturnꢀmayꢀcontributeꢀto improvedꢀoperationsꢀofꢀourꢀGamesꢀsegment. • Weꢀfaceꢀcontinuedꢀcompetitionꢀfromꢀsmallerꢀcompetitorsꢀinꢀtheꢀgamingꢀcashꢀaccessꢀmarketꢀandꢀfaceꢀadditionalꢀcompetition fromꢀlargerꢀgamingꢀequipmentꢀmanufacturersꢀandꢀsystemsꢀproviders.ꢀThisꢀincreasedꢀcompetitionꢀhasꢀresultedꢀinꢀpricing pressureꢀforꢀbothꢀourꢀGamesꢀandꢀFinTechꢀbusinesses. • • Governmentalꢀoversightꢀrelatedꢀtoꢀtheꢀcostꢀofꢀtransactionꢀprocessingꢀandꢀrelatedꢀfeesꢀtoꢀtheꢀconsumerꢀhasꢀincreasedꢀin recentꢀyears.ꢀWeꢀexpectꢀtheꢀfinancialꢀservicesꢀandꢀpaymentsꢀindustryꢀtoꢀrespondꢀtoꢀtheseꢀlegislativeꢀactsꢀbyꢀchanging otherꢀfeesꢀandꢀcosts,ꢀwhichꢀmayꢀnegativelyꢀimpactꢀourꢀFinTechꢀbusinessꢀinꢀtheꢀfuture. Casinoꢀ operatorsꢀ continueꢀ toꢀ tryꢀ toꢀ broadenꢀ theirꢀ appealꢀ byꢀ focusingꢀ onꢀ investmentsꢀ inꢀ theꢀ additionꢀ ofꢀ non-gaming amenitiesꢀtoꢀtheirꢀfacilities,ꢀwhichꢀcouldꢀimpactꢀcasinoꢀoperator’sꢀcapitalꢀallocationꢀforꢀgamesꢀandꢀpaymentꢀsolution productsꢀandꢀimpactꢀbothꢀofꢀourꢀoperatingꢀsegments. Impact of ASC Topic 842 on the Comparability of Our Results of Operations in Future Periods Asꢀdiscussedꢀinꢀ“Noteꢀ2ꢀ—ꢀBasisꢀofꢀPresentationꢀandꢀSummaryꢀofꢀSignificantꢀAccountingꢀPoliciesꢀ–ꢀRecentꢀAccountingꢀGuidance –ꢀRecentꢀAccountingꢀGuidanceꢀNotꢀYetꢀAdopted,”ꢀinꢀItem 8: Financial Statements and Supplementary Data,ꢀonꢀJanuaryꢀ1,ꢀ2019, theꢀCompanyꢀimplementedꢀtheꢀnewꢀleaseꢀaccountingꢀstandardꢀpromulgatedꢀbyꢀtheꢀFASB.ꢀTheꢀCompanyꢀadoptedꢀASCꢀ842ꢀusing theꢀadoptionꢀdateꢀmethod.ꢀWhileꢀweꢀareꢀfinalizingꢀtheꢀadoptionꢀprocedures,ꢀweꢀexpectꢀthatꢀtheꢀstandardꢀwillꢀhaveꢀaꢀmaterialꢀimpact onꢀourꢀBalanceꢀSheets,ꢀhowever,ꢀweꢀdoꢀnotꢀexpectꢀthatꢀtheꢀstandardꢀwillꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀStatementsꢀofꢀIncome (Loss).ꢀTheꢀmostꢀsignificantꢀimpactꢀwillꢀbeꢀtheꢀrecognitionꢀofꢀright-of-useꢀ(“ROU”)ꢀassetsꢀandꢀleaseꢀliabilitiesꢀofꢀoperatingꢀleases, whichꢀareꢀexpectedꢀtoꢀbeꢀwithinꢀaꢀrangeꢀofꢀapproximatelyꢀ1%ꢀtoꢀ2%ꢀofꢀtotalꢀassets.ꢀWeꢀelectedꢀtheꢀpracticalꢀexpedientsꢀofferedꢀin theꢀguidance,ꢀincludingꢀtheꢀtransitionꢀpackage. Operating Segments Weꢀreportꢀourꢀfinancialꢀperformanceꢀbasedꢀonꢀtwoꢀoperatingꢀsegments:ꢀ(a)ꢀGames;ꢀandꢀ(b)ꢀFinTech.ꢀForꢀadditionalꢀinformation onꢀourꢀsegmentsꢀseeꢀ“Itemꢀ1.ꢀBusiness”ꢀandꢀ“Noteꢀ18ꢀ—ꢀSegmentꢀInformation”ꢀincludedꢀelsewhereꢀinꢀthisꢀAnnualꢀReportꢀonꢀForm 10-K. Results of Operations Year ended December 31, 2018 compared to the year ended December 31, 2017 TheꢀfollowingꢀtableꢀpresentsꢀourꢀResultsꢀofꢀOperationsꢀasꢀreportedꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018ꢀcomparedꢀtoꢀtheꢀyear endedꢀDecemberꢀ31,ꢀ2017ꢀasꢀreportedꢀandꢀasꢀadjustedꢀforꢀtheꢀretrospectiveꢀimpactꢀofꢀASCꢀ606ꢀtoꢀreflectꢀtheꢀpriorꢀperiodꢀresults onꢀaꢀnetꢀbasisꢀofꢀpresentationꢀ(amountsꢀinꢀthousands)*: ꢀ 35 December 31, 2018 December 31, 2017 Year Ended 2018 As Reported vs 2017 As Adjusted $ % $ % $ $ % $ % As Reported As Reported Adjustments As Adjusted Revenues Games revenues Gamingꢀoperations $ 168,146 36% $ 148,654 15% $ (565) $ 148,089 36% $ 20,057 Gamingꢀequipmentꢀandꢀsystems Gamingꢀother 87,038 3,794 18% 1% 70,118 4,005 7% 1% — — 70,118 4,005 Games total revenues 258,978 55% 222,777 23% (565) 222,212 17% 1% 54% 16,920 (211) 36,766 FinTech revenues Cashꢀaccessꢀservices Equipment Informationꢀservicesꢀandꢀother 156,806 34% 707,222 73% (563,637) 143,585 35% 13,221 20,977 32,754 4% 7% 13,258 31,691 1% 3% — — 13,258 31,691 3% 8% 7,719 1,063 FinTech total revenues 210,537 45% 752,171 77% (563,637) 188,534 46% 22,003 14 % 24 % (5)% 17 % 9 % 58 % 3 % 12 % Total revenues 469,515 100% 974,948 100% (564,202) 410,746 100% 58,769 14 % (565) — — (565) 15,176 35,707 3,247 54,130 4% 8% 1% 2,427 11,414 38 13% 13,879 (563,637) — — 9,243 7,717 3,253 (563,637) 20,213 2% 2% 1% 5% 29% 5% 11% 17% 80% 20% 474 4,884 857 6,215 23,363 1,635 13,943 (4,260) 54,775 3,994 16 % 32 % 1 % 26 % 5 % 63 % 26 % 31 % 20 % 9 % 29 % (6)% 17 % 5 % Costs and expenses Games cost of revenues(1) Gamingꢀoperations Gamingꢀequipmentꢀandꢀsystems Gamingꢀother Games total cost of revenues FinTech cost of revenues(1) Cashꢀaccessꢀservices Equipment Informationꢀservicesꢀandꢀother FinTech total cost of revenues 17,603 47,121 3,285 68,009 9,717 12,601 4,110 26,428 4% 9% 1% 14% 15,741 35,707 3,247 54,695 2% 572,880 3% 1% 7,717 3,253 6% 583,850 2% 3% 1% 6% 59% 1% —% 60% Operatingꢀexpenses 142,298 30% 118,935 12% — 118,935 Researchꢀandꢀdevelopment Depreciation Amortization Total costs and expenses Operating income 20,497 61,225 65,245 383,702 85,813 4% 14% 14% 18,862 47,282 69,505 82% 893,129 18% 81,819 2% 5% 7% 92% 8% — — — 18,862 47,282 69,505 (564,202) 328,927 — 81,819 ꢀ*ꢀRoundingꢀmayꢀcauseꢀvariances. (1)ꢀExclusiveꢀofꢀdepreciationꢀandꢀamortization. 36 December 31, 2018 December 31, 2017 Year Ended 2018 As Reported vs 2017 As Adjusted $ % $ % $ $ % $ % As Reported As Reported Adjustments As Adjusted 83,001 18 % 102,136 11 % — 102,136 24 % (19,135) (19)% Other expenses Interestꢀexpense,ꢀnetꢀofꢀinterest income Lossꢀonꢀextinguishmentꢀofꢀdebt 166 — % 51,750 Total other expenses 83,167 18 % 153,886 5 % 16 % — 51,750 — 153,886 13 % 37 % (51,584) (100)% (70,719) (46)% Income (loss) before income tax 2,646 1 % (72,067) (7)% — (72,067) (18)% 74,713 (104)% Incomeꢀtaxꢀ(benefit)ꢀprovision (9,710) (2)% (20,164) Net income (loss) $ 12,356 3 % $ (51,903) (2)% (5)% — (20,164) (5)% 10,454 — $ (51,903) (13)% $ 64,259 (52)% 124 % *ꢀRoundingꢀmayꢀcauseꢀvariances. (1)ꢀExclusiveꢀofꢀdepreciationꢀandꢀamortization. Total Revenues Totalꢀrevenuesꢀincreasedꢀbyꢀ$58.8ꢀmillion,ꢀorꢀ14%,ꢀtoꢀ$469.5ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀtoꢀthe priorꢀyearꢀperiodꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀhigherꢀGames andꢀFinTechꢀrevenues. Gamesꢀrevenuesꢀincreasedꢀbyꢀ$36.8ꢀmillion,ꢀorꢀ17%,ꢀtoꢀ$259.0ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀto theꢀpriorꢀyearꢀperiodꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀanꢀincrease inꢀbothꢀunitꢀsalesꢀandꢀaverageꢀsellingꢀpricesꢀandꢀanꢀincreaseꢀinꢀtheꢀaverageꢀdailyꢀwinꢀperꢀunitꢀonꢀaꢀhigherꢀinstalledꢀbaseꢀofꢀleased machines. FinTechꢀrevenuesꢀincreasedꢀbyꢀ$22.0ꢀmillion,ꢀorꢀ12%,ꢀtoꢀ$210.5ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀto theꢀpriorꢀyearꢀperiodꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀhigher transactionꢀvolumesꢀfromꢀcashꢀaccessꢀservicesꢀandꢀincreasedꢀequipmentꢀsales. Costs and Expenses Gamesꢀcostꢀofꢀrevenuesꢀincreasedꢀbyꢀ$13.9ꢀmillion,ꢀorꢀ26%,ꢀtoꢀ$68.0ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcompared toꢀtheꢀpriorꢀyearꢀperiodꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀtheꢀcosts associatedꢀwithꢀtheꢀadditionalꢀunitꢀsalesꢀandꢀanꢀincreaseꢀinꢀcostsꢀrelatedꢀtoꢀourꢀleasedꢀmachinesꢀasꢀaꢀresultꢀofꢀtheꢀincreaseꢀinꢀrevenue. FinTechꢀcostꢀofꢀrevenuesꢀincreasedꢀbyꢀ$6.2ꢀmillion,ꢀorꢀ31%,ꢀtoꢀ$26.4ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcompared toꢀtheꢀpriorꢀyearꢀperiodꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀtheꢀcosts associatedꢀwithꢀtheꢀadditionalꢀequipmentꢀsales. Operatingꢀexpensesꢀincreasedꢀbyꢀ$23.4ꢀmillion,ꢀorꢀ20%,ꢀtoꢀ$142.3ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcompared toꢀtheꢀsameꢀperiodꢀinꢀtheꢀpriorꢀyear.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀhigherꢀpayrollꢀandꢀrelatedꢀexpenses,ꢀconsultingꢀfees,ꢀadvertising, promotionꢀandꢀtradeꢀshowꢀcostsꢀandꢀsoftwareꢀlicenseꢀfeesꢀforꢀbothꢀourꢀGamesꢀandꢀFinTechꢀsegments.ꢀOurꢀGamesꢀsegmentꢀalso incurredꢀanꢀincreaseꢀinꢀcostsꢀrelatedꢀtoꢀinventoryꢀdisposalsꢀandꢀleasedꢀassetsꢀimpairmentꢀcharges.ꢀꢀ Researchꢀandꢀdevelopmentꢀincreasedꢀbyꢀ$1.6ꢀmillion,ꢀorꢀ9%,ꢀtoꢀ$20.5ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcompared toꢀtheꢀsameꢀperiodꢀinꢀtheꢀpriorꢀyear.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀhigherꢀpayrollꢀandꢀrelatedꢀexpensesꢀforꢀourꢀGamesꢀsegment. Depreciationꢀincreasedꢀbyꢀ$13.9ꢀmillion,ꢀorꢀ29%,ꢀtoꢀ$61.2ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀtoꢀtheꢀprior yearꢀperiod.ꢀThisꢀwasꢀprimarilyꢀdrivenꢀbyꢀtheꢀincreaseꢀinꢀtheꢀinstalledꢀbaseꢀofꢀleasedꢀgamingꢀmachinesꢀandꢀadjustmentsꢀtoꢀthe remainingꢀusefulꢀlivesꢀofꢀcertainꢀofꢀtheꢀgamingꢀfixedꢀassetsꢀrelatedꢀtoꢀourꢀGamesꢀsegment.ꢀ Amortizationꢀdecreasedꢀbyꢀ$4.3ꢀmillion,ꢀorꢀ6%,ꢀtoꢀ$65.2ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀtoꢀtheꢀprior yearꢀperiod.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀassetsꢀbeingꢀfullyꢀamortizedꢀrelatedꢀtoꢀbothꢀourꢀGamesꢀandꢀFinTechꢀsegments. 37 Primarilyꢀasꢀaꢀresultꢀofꢀtheꢀfactorsꢀdescribedꢀabove,ꢀoperatingꢀincomeꢀincreasedꢀbyꢀ$4.0ꢀmillion,ꢀorꢀ5%,ꢀtoꢀ$85.8ꢀmillionꢀforꢀthe yearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀyearꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASC 606.ꢀTheꢀoperatingꢀincomeꢀmarginꢀdecreasedꢀfromꢀ20%ꢀtoꢀ18%ꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀadjustedꢀforꢀtheꢀnet versusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606. Interestꢀexpense,ꢀnetꢀofꢀinterestꢀincome,ꢀdecreasedꢀbyꢀ$19.1ꢀmillion,ꢀorꢀ19%,ꢀtoꢀ$83.0ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31, 2018,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀyearꢀperiod.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀlowerꢀinterestꢀexpenseꢀasꢀaꢀresultꢀofꢀourꢀdebtꢀrefinancing transactionsꢀinꢀ2017ꢀandꢀanꢀadditionalꢀrepricingꢀofꢀourꢀNewꢀTermꢀLoanꢀFacilitiesꢀinꢀ2018,ꢀpartiallyꢀoffsetꢀbyꢀanꢀincreaseꢀinꢀour cashꢀusageꢀfeesꢀinꢀconnectionꢀwithꢀourꢀcommercialꢀcashꢀarrangementsꢀandꢀtheꢀimpactꢀofꢀtheꢀLondonꢀInterbankꢀOfferedꢀRate (“LIBOR”)ꢀincreasesꢀduringꢀtheꢀpastꢀyear. Lossꢀonꢀextinguishmentꢀofꢀdebtꢀwasꢀ$0.2ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018ꢀinꢀconnectionꢀwithꢀtheꢀrepricingꢀtransaction completedꢀinꢀMayꢀ2018ꢀasꢀcomparedꢀtoꢀ$51.8ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀwhichꢀconsistedꢀofꢀ$26.3ꢀmillion make-wholeꢀpremiumꢀrelatedꢀtoꢀtheꢀsatisfactionꢀandꢀredemptionꢀofꢀtheꢀ2014ꢀUnsecuredꢀNotes,ꢀapproximatelyꢀ$10.9ꢀmillionꢀfor theꢀwrite-offꢀofꢀrelatedꢀunamortizedꢀdebtꢀissuanceꢀcostsꢀandꢀfeesꢀinꢀtheꢀfourthꢀquarterꢀofꢀ2017ꢀandꢀapproximatelyꢀ$14.6ꢀmillion forꢀtheꢀunamortizedꢀdeferredꢀfinancingꢀfeesꢀandꢀdiscountsꢀrelatedꢀtoꢀourꢀextinguishedꢀtermꢀloanꢀunderꢀtheꢀPriorꢀCreditꢀFacilityꢀand theꢀredeemedꢀRefinancedꢀSecuredꢀNotesꢀinꢀtheꢀsecondꢀquarterꢀofꢀ2017.ꢀ Incomeꢀtaxꢀbenefitꢀwasꢀ$9.7ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀtoꢀanꢀincomeꢀtaxꢀbenefitꢀofꢀ$20.2ꢀmillion inꢀtheꢀpriorꢀyearꢀperiod.ꢀTheꢀincomeꢀtaxꢀbenefitꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018ꢀreflectedꢀanꢀeffectiveꢀincomeꢀtaxꢀrateꢀof negativeꢀ367.0%,ꢀwhichꢀwasꢀlessꢀthanꢀtheꢀstatutoryꢀfederalꢀrateꢀofꢀ21.0%,ꢀprimarilyꢀdueꢀtoꢀaꢀdecreaseꢀinꢀourꢀvaluationꢀallowance forꢀdeferredꢀtaxꢀassetsꢀandꢀaꢀresearchꢀcredit.ꢀTheꢀdecreaseꢀinꢀourꢀvaluationꢀallowanceꢀisꢀprimarilyꢀdueꢀtoꢀtheꢀnetꢀoperatingꢀloss duringꢀtheꢀyearꢀandꢀtheꢀinterestꢀdeductionꢀlimitationꢀ(deferredꢀtaxꢀassets)ꢀwhichꢀcanꢀbeꢀoffsetꢀagainstꢀourꢀindefiniteꢀlivedꢀdeferred taxꢀliabilities.ꢀTheꢀtaxꢀbenefitꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017ꢀreflectedꢀanꢀeffectiveꢀincomeꢀtaxꢀrateꢀofꢀ28.0%,ꢀwhichꢀwas lessꢀthanꢀtheꢀstatutoryꢀfederalꢀrateꢀofꢀ35.0%,ꢀprimarilyꢀdueꢀtoꢀaꢀdecreaseꢀinꢀtheꢀcarryingꢀvalueꢀofꢀourꢀdeferredꢀtaxꢀliabilitiesꢀasꢀa resultꢀofꢀtheꢀenactmentꢀofꢀtheꢀ2017ꢀTaxꢀAct,ꢀoffsetꢀbyꢀanꢀincreaseꢀinꢀtheꢀvaluationꢀallowanceꢀforꢀdeferredꢀtaxꢀassets. Primarilyꢀasꢀaꢀresultꢀofꢀtheꢀforegoing,ꢀourꢀnetꢀlossꢀdecreasedꢀbyꢀ$64.3ꢀmillion,ꢀorꢀ124%,ꢀtoꢀaꢀnetꢀincomeꢀofꢀ$12.4ꢀmillionꢀforꢀthe yearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀyearꢀperiod. Year ended December 31, 2017 compared to year ended December 31, 2016: Theꢀ followingꢀ tableꢀ presentsꢀ ourꢀ Resultsꢀ ofꢀ Operationsꢀ forꢀ theꢀ yearꢀ endedꢀ Decemberꢀ 31,ꢀ 2017ꢀ comparedꢀ toꢀ theꢀ yearꢀ ended Decemberꢀ31,ꢀ2016ꢀasꢀreportedꢀandꢀasꢀadjustedꢀforꢀtheꢀretrospectiveꢀimpactꢀofꢀASCꢀ606ꢀtoꢀreflectꢀtheꢀpriorꢀperiodꢀresultsꢀonꢀaꢀnet basisꢀofꢀpresentationꢀ(amountsꢀinꢀthousands)*: 38 December 31, 2017 December 31, 2016 Year Ended 2017 As Adjusted vs 2016 As Adjusted $ % $ $ % $ % $ $ % $ % As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Revenues Games revenues Gamingꢀoperations $ 148,654 15% $ (565) $148,089 36% $ 152,514 Gamingꢀequipmentꢀand systems 70,118 7% Gamingꢀother 4,005 Games total revenues 222,777 1% 23% — — 70,118 17% 56,277 4,005 1% 4,462 (565) 222,212 54% 213,253 18 % 6 % 1 % 25 % — $ 152,514 40 % $ (4,425) 56,277 15 % 13,841 (3)% 25 % 4,462 — 213,253 1 % 56 % (457) (10)% 8,959 4 % — — FinTechꢀrevenues Cashꢀaccessꢀservices 707,222 73% (563,637) 143,585 35% 601,874 70 % (476,380) 125,494 32 % 18,091 13,258 31,691 1% 3% — 13,258 — 31,691 3% 8% 14,995 29,334 2 % 3 % — — 14,995 29,334 4 % 8 % (1,737) 2,357 14 % (12)% 8 % 752,171 77% (563,637) 188,534 46% 646,203 75 % (476,380) 169,823 44 % 18,711 11 % Equipment Informationꢀservices andꢀother FinTech total revenues Total revenues 974,948 100% (564,202) 410,746 100% 859,456 100 % (476,380) 383,076 100 % 27,670 7 % Costs and expenses Games cost of revenues(1) Gamingꢀoperations Gamingꢀequipmentꢀand systems Gamingꢀother Games total cost of revenues FinTech cost of revenues(1) Cashꢀaccessꢀservices Equipment Informationꢀservices andꢀother FinTech total cost of revenues 15,741 35,707 2% 4% (565) 15,176 — 35,707 3,247 —% — 3,247 54,695 6% (565) 54,130 4% 8% 1% 13% 15,265 31,602 3,441 50,308 2 % 4 % — % 6 % — — — — 15,265 31,602 3,441 50,308 4 % 8 % 1 % 13 % (89) 4,105 (194) 3,822 (1)% 13 % (6)% 8 % 572,880 59% (563,637) 7,717 1% 3,253 —% — — 9,243 7,717 3,253 2% 485,061 57 % (476,380) 2% 1% 9,889 3,756 1 % — % — — 8,681 9,889 3,756 2 % 3 % 1 % 562 6 % (2,172) (22)% (503) (13)% 583,850 60% (563,637) 20,213 5% 498,706 58 % (476,380) 22,326 6 % (2,113) (9)% Operatingꢀexpenses 118,935 12% — 118,935 28% 118,709 14 % — 118,709 31 % Researchꢀand development 18,862 2% — 18,862 5% 19,356 2 % — 19,356 5 % 226 (494) — % (3)% Goodwillꢀimpairment — —% — — —% 146,299 17 % — 146,299 38 % (146,299) (100)% Depreciation Amortization Total costs and expenses 47,282 69,505 5% 7% — 47,282 — 69,505 12% 17% 49,995 6 % 94,638 11 % — — 49,995 13 % (2,713) (5)% 94,638 25 % (25,133) (27)% 893,129 92% (564,202) 328,927 80% 978,011 114 % (476,380) 501,631 131 % (172,704) (34)% Operating income 81,819 8% — 81,819 20% (118,555) (14)% — (118,555) (31)% 200,374 (169)% ꢀ*ꢀRoundingꢀmayꢀcauseꢀvariances. (1)ꢀExclusiveꢀofꢀdepreciationꢀandꢀamortization. 39 December 31, 2017 December 31, 2016 Year Ended 2017 As Adjusted vs 2016 As Adjusted $ % $ $ % $ % $ $ % $ % As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Other expenses Interestꢀexpense,ꢀnetꢀof interestꢀincome Lossꢀon extinguishmentꢀofꢀdebt 102,136 10 % — 102,136 25 % 99,228 12 % 51,750 6 % — 51,750 12 % — — % Total other expenses 153,886 16 % — 153,886 37 % 99,228 12 % — — — 99,228 26 % 2,908 3 % — — % 51,750 — % 99,228 26 % 54,658 55 % Income (loss) before income tax Income tax (benefit) provision (72,067) (7)% — (72,067) (18)% (217,783) (25)% — (217,783) (57)% 145,716 (67)% (20,164) (2)% — (20,164) (5)% 31,696 4 % — 31,696 8 % (51,860) (164)% Net income (loss) $(51,903) (5)% — $ (51,903) (13)% $(249,479) (29)% — $(249,479) (65)% $197,576 (79)% *ꢀRoundingꢀmayꢀcauseꢀvariances. (1)ꢀExclusiveꢀofꢀdepreciationꢀandꢀamortization. Total Revenues Totalꢀrevenuesꢀincreasedꢀbyꢀ$27.7ꢀmillion,ꢀorꢀ7%,ꢀtoꢀ$410.7ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀthe priorꢀyearꢀperiodꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606.ꢀThisꢀwasꢀdueꢀtoꢀincreasedꢀFinTechꢀand Gamesꢀrevenues. Gamesꢀrevenuesꢀincreasedꢀbyꢀ$9.0ꢀmillion,ꢀorꢀ4%,ꢀtoꢀ$222.2ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀthe priorꢀyearꢀperiodꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀanꢀincreaseꢀin unitsꢀsold,ꢀpartiallyꢀoffsetꢀbyꢀlowerꢀdailyꢀwinꢀperꢀunitꢀonꢀleasedꢀgames. FinTechꢀrevenuesꢀincreasedꢀbyꢀ$18.7ꢀmillion,ꢀorꢀ11%,ꢀtoꢀ$188.5ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀto theꢀpriorꢀyearꢀperiodꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀhigherꢀdollar andꢀtransactionꢀvolumeꢀandꢀfeesꢀearnedꢀfromꢀcashꢀaccessꢀservices,ꢀnewꢀcustomerꢀopenings,ꢀtheꢀexpansionꢀofꢀourꢀATMꢀservices inꢀCanada,ꢀasꢀwellꢀasꢀoverallꢀgrowthꢀinꢀtheꢀsegment. Costs and Expenses Gamesꢀcostꢀofꢀrevenuesꢀincreasedꢀbyꢀ$3.8ꢀmillion,ꢀorꢀ8%,ꢀtoꢀ$54.1ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcompared toꢀtheꢀpriorꢀyearꢀperiodꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀhigher variableꢀcostsꢀassociatedꢀwithꢀincreasedꢀunitꢀsales. FinTechꢀcostꢀofꢀrevenuesꢀdecreasedꢀbyꢀ$2.1ꢀmillion,ꢀorꢀ9%,ꢀtoꢀ$20.2ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcompared toꢀtheꢀpriorꢀyearꢀperiodꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀhigher costsꢀassociatedꢀwithꢀhigherꢀequipmentꢀsalesꢀinꢀ2016ꢀasꢀcomparedꢀtoꢀ2017. Operatingꢀexpensesꢀremainedꢀrelativelyꢀconsistentꢀtoꢀtheꢀpriorꢀyear.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀanꢀincreaseꢀinꢀpayrollꢀandꢀbenefit- relatedꢀexpensesꢀoffsetꢀbyꢀtheꢀdecreaseꢀinꢀexpensesꢀrelatedꢀtoꢀtheꢀ2016ꢀBeeꢀCaveꢀGames,ꢀInc.ꢀ(“BeeꢀCave”)ꢀloanꢀimpairmentꢀof approximatelyꢀ$4.3ꢀmillionꢀthatꢀdidꢀnotꢀimpactꢀourꢀ2017ꢀresultsꢀforꢀourꢀGamesꢀsegment;ꢀandꢀanꢀincreaseꢀinꢀpayrollꢀandꢀbenefits- relatedꢀexpensesꢀandꢀprofessionalꢀservicesꢀexpensesꢀoffsetꢀbyꢀtheꢀdecreaseꢀinꢀexpensesꢀrelatedꢀtoꢀtheꢀ2016ꢀseparationꢀcostsꢀforꢀour formerꢀCEOꢀthatꢀdidꢀnotꢀimpactꢀourꢀ2017ꢀresultsꢀforꢀourꢀFinTechꢀsegment.ꢀ ThereꢀwasꢀnoꢀgoodwillꢀimpairmentꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀ$146.3ꢀmillionꢀinꢀtheꢀpriorꢀyearꢀperiod asꢀaꢀresultꢀofꢀourꢀOctoberꢀ1,ꢀ2016ꢀannualꢀgoodwillꢀassessmentꢀattributableꢀtoꢀourꢀGamesꢀreportingꢀunit. Researchꢀandꢀdevelopmentꢀcostsꢀremainedꢀrelativelyꢀconsistentꢀwithꢀpriorꢀyear.ꢀ Depreciationꢀdecreasedꢀbyꢀ$2.7ꢀmillion,ꢀorꢀ5%,ꢀtoꢀ$47.3ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀtheꢀprior yearꢀperiod.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀaꢀdecreaseꢀinꢀdepreciationꢀfromꢀcertainꢀassetsꢀbeingꢀfullyꢀdepreciatedꢀinꢀbothꢀourꢀGames andꢀFinTechꢀsegments. 40 Amortizationꢀdecreasedꢀbyꢀ$25.1ꢀmillion,ꢀorꢀ27%,ꢀtoꢀ$69.5ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀthe priorꢀyearꢀperiod.ꢀThisꢀwasꢀprimarilyꢀdueꢀtoꢀcertainꢀacquiredꢀintangibleꢀassetsꢀbeingꢀfullyꢀamortizedꢀinꢀtheꢀfourthꢀquarterꢀofꢀ2016 forꢀbothꢀourꢀGamesꢀandꢀFinTechꢀsegments. Primarilyꢀasꢀaꢀresultꢀofꢀtheꢀfactorsꢀdescribedꢀabove,ꢀoperatingꢀincomeꢀincreasedꢀbyꢀ$200.4ꢀmillion,ꢀorꢀ169%,ꢀtoꢀanꢀoperatingꢀincome ofꢀ$81.8ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀyearꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospective impactꢀofꢀASCꢀ606.ꢀTheꢀoperatingꢀincomeꢀmarginꢀasꢀadjustedꢀforꢀtheꢀnetꢀversusꢀgrossꢀretrospectiveꢀimpactꢀofꢀASCꢀ606ꢀincreased fromꢀnegativeꢀ31%ꢀtoꢀaꢀpositiveꢀ20%ꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017. Interestꢀexpense,ꢀnetꢀofꢀinterestꢀincome,ꢀincreasedꢀbyꢀ$2.9ꢀmillion,ꢀorꢀ3%,ꢀtoꢀ$102.1ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31, 2017,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀyearꢀperiod.ꢀThisꢀwasꢀprimarilyꢀattributableꢀtoꢀhigherꢀinterestꢀrecognizedꢀasꢀaꢀresultꢀofꢀourꢀdebt restructuringꢀactivitiesꢀinꢀtheꢀfourthꢀquarterꢀofꢀ2017ꢀasꢀwellꢀasꢀhigherꢀcashꢀusageꢀfees,ꢀpartiallyꢀoffsetꢀbyꢀlowerꢀinterestꢀexpense asꢀaꢀresultꢀofꢀourꢀdebtꢀrefinancingꢀinꢀMayꢀ2017.ꢀ LossꢀonꢀextinguishmentꢀofꢀdebtꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017ꢀwasꢀ$51.8ꢀmillion,ꢀwhichꢀconsistedꢀofꢀaꢀ$26.3ꢀmillion make-wholeꢀpremiumꢀrelatedꢀtoꢀtheꢀsatisfactionꢀandꢀredemptionꢀofꢀtheꢀ2014ꢀUnsecuredꢀNotes,ꢀapproximatelyꢀ$10.9ꢀmillionꢀfor theꢀwrite-offꢀofꢀrelatedꢀunamortizedꢀdebtꢀissuanceꢀcostsꢀandꢀfeesꢀinꢀtheꢀfourthꢀquarterꢀofꢀ2017ꢀandꢀapproximatelyꢀ$14.6ꢀmillion forꢀtheꢀunamortizedꢀdeferredꢀfinancingꢀfeesꢀandꢀdiscountsꢀrelatedꢀtoꢀourꢀextinguishedꢀtermꢀloanꢀunderꢀtheꢀPriorꢀCreditꢀFacilityꢀand theꢀredeemedꢀRefinancedꢀSecuredꢀNotesꢀinꢀtheꢀsecondꢀquarterꢀofꢀ2017.ꢀThereꢀwasꢀnoꢀlossꢀonꢀextinguishmentꢀofꢀdebtꢀinꢀtheꢀprior yearꢀperiod. Incomeꢀtaxꢀbenefitꢀwasꢀ$20.2ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀanꢀincomeꢀtaxꢀprovisionꢀofꢀ$31.7 millionꢀinꢀtheꢀpriorꢀyearꢀperiod.ꢀTheꢀincomeꢀtaxꢀbenefitꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017ꢀreflectedꢀanꢀeffectiveꢀincomeꢀtax rateꢀofꢀ28.0%,ꢀwhichꢀwasꢀlessꢀthanꢀtheꢀstatutoryꢀfederalꢀrateꢀofꢀ35.0%ꢀprimarilyꢀdueꢀtoꢀaꢀdecreaseꢀinꢀtheꢀcarryingꢀvalueꢀofꢀour deferredꢀtaxꢀliabilitiesꢀasꢀaꢀresultꢀofꢀtheꢀenactmentꢀofꢀtheꢀ2017ꢀTaxꢀAct,ꢀoffsetꢀbyꢀanꢀincreaseꢀinꢀtheꢀvaluationꢀallowanceꢀforꢀdeferred taxꢀassets.ꢀTheꢀincomeꢀtaxꢀprovisionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2016ꢀreflectedꢀaꢀnegativeꢀeffectiveꢀincomeꢀtaxꢀrateꢀofꢀ14.6%, whichꢀwasꢀlessꢀthanꢀtheꢀstatutoryꢀfederalꢀrateꢀofꢀ35.0%,ꢀprimarilyꢀdueꢀtoꢀanꢀincreaseꢀinꢀourꢀvaluationꢀallowanceꢀforꢀdeferredꢀtax assetsꢀandꢀtheꢀimpairmentꢀofꢀgoodwillꢀforꢀwhichꢀnoꢀtaxꢀbenefitꢀwasꢀprovidedꢀforꢀbookꢀpurposes. Primarilyꢀasꢀaꢀresultꢀofꢀtheꢀforegoing,ꢀnetꢀlossꢀdecreasedꢀbyꢀ$197.6ꢀmillion,ꢀorꢀ79%,ꢀtoꢀ$51.9ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecember 31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀyearꢀperiod. Critical Accounting Policies TheꢀpreparationꢀofꢀourꢀfinancialꢀstatementsꢀinꢀconformityꢀwithꢀU.S.ꢀgenerallyꢀacceptedꢀaccountingꢀprinciplesꢀ(“GAAP”)ꢀrequires usꢀtoꢀmakeꢀestimatesꢀandꢀassumptionsꢀthatꢀaffectꢀourꢀreportedꢀamountsꢀofꢀassetsꢀandꢀliabilities,ꢀrevenuesꢀandꢀexpenses,ꢀandꢀrelated disclosuresꢀofꢀcontingentꢀassetsꢀandꢀliabilitiesꢀinꢀourꢀFinancialꢀStatements.ꢀTheꢀSECꢀhasꢀdefinedꢀcriticalꢀaccountingꢀpoliciesꢀas theꢀonesꢀthatꢀareꢀmostꢀimportantꢀtoꢀtheꢀportrayalꢀofꢀtheꢀfinancialꢀconditionꢀandꢀresultsꢀofꢀoperations,ꢀandꢀwhichꢀrequireꢀmanagement toꢀmakeꢀitsꢀmostꢀdifficultꢀandꢀsubjectiveꢀjudgments,ꢀoftenꢀasꢀaꢀresultꢀofꢀtheꢀneedꢀtoꢀmakeꢀestimatesꢀaboutꢀmattersꢀthatꢀareꢀinherently uncertain.ꢀBasedꢀonꢀthisꢀdefinition,ꢀweꢀhaveꢀidentifiedꢀourꢀcriticalꢀaccountingꢀpoliciesꢀasꢀthoseꢀaddressedꢀbelow.ꢀWeꢀalsoꢀhave otherꢀ keyꢀ accountingꢀ policiesꢀ thatꢀ involveꢀ theꢀ useꢀ ofꢀ estimates,ꢀ judgments,ꢀ andꢀ assumptions.ꢀ Referꢀ toꢀ “Noteꢀ 2ꢀ —ꢀ Basisꢀ of PresentationꢀandꢀSummaryꢀofꢀSignificantꢀAccountingꢀPolicies”ꢀwithinꢀourꢀFinancialꢀStatementsꢀincludedꢀelsewhereꢀinꢀthisꢀAnnual ReportꢀonꢀFormꢀ10-Kꢀforꢀaꢀsummaryꢀofꢀtheseꢀpolicies.ꢀWeꢀbelieveꢀthatꢀourꢀestimatesꢀandꢀassumptionsꢀareꢀreasonable,ꢀbasedꢀupon informationꢀpresentlyꢀavailable;ꢀhowever,ꢀactualꢀresultsꢀmayꢀdifferꢀfromꢀtheseꢀestimatesꢀunderꢀdifferentꢀassumptionsꢀorꢀconditions. Goodwill. Weꢀ hadꢀ approximatelyꢀ $640.5ꢀ millionꢀ ofꢀ goodwillꢀ onꢀ ourꢀ Balanceꢀ Sheetsꢀ atꢀ Decemberꢀ31,ꢀ 2018ꢀ resultingꢀ from acquisitionsꢀofꢀotherꢀbusinesses.ꢀWeꢀtestꢀforꢀimpairmentꢀannuallyꢀonꢀaꢀreportingꢀunitꢀbasis,ꢀatꢀtheꢀbeginningꢀofꢀourꢀfourthꢀfiscal quarter,ꢀorꢀmoreꢀoftenꢀunderꢀcertainꢀcircumstances.ꢀOurꢀreportingꢀunitsꢀareꢀidentifiedꢀasꢀoperatingꢀsegmentsꢀorꢀoneꢀlevelꢀbelow andꢀweꢀevaluateꢀourꢀreportingꢀunitsꢀatꢀleastꢀannually.ꢀ Theꢀannualꢀevaluationꢀofꢀgoodwillꢀrequiresꢀtheꢀuseꢀofꢀdifferentꢀassumptions,ꢀestimates,ꢀorꢀjudgmentsꢀinꢀtheꢀgoodwillꢀimpairment testingꢀprocess,ꢀsuchꢀas:ꢀtheꢀmethodology,ꢀtheꢀestimatedꢀfutureꢀcashꢀflowsꢀofꢀourꢀreportingꢀunits,ꢀtheꢀdiscountꢀrateꢀusedꢀtoꢀdiscount suchꢀcashꢀflows,ꢀandꢀtheꢀmarketꢀmultiplesꢀofꢀcomparableꢀcompanies.ꢀManagementꢀperformsꢀitsꢀannualꢀforecastingꢀprocess,ꢀwhich, amongꢀotherꢀfactors,ꢀincludesꢀreviewingꢀrecentꢀhistoricalꢀresults,ꢀcompany-specificꢀvariables,ꢀandꢀindustryꢀtrends.ꢀThisꢀprocessꢀis generallyꢀcompletedꢀinꢀtheꢀfourthꢀquarterꢀandꢀconsideredꢀinꢀconjunctionꢀwithꢀtheꢀannualꢀgoodwillꢀimpairmentꢀevaluation.ꢀ‎ Changesꢀinꢀforecastedꢀoperationsꢀcanꢀmateriallyꢀaffectꢀtheseꢀestimates,ꢀwhichꢀcouldꢀmateriallyꢀaffectꢀourꢀresultsꢀofꢀoperations. Ourꢀestimatesꢀofꢀfairꢀvalueꢀrequireꢀsignificantꢀjudgmentꢀandꢀareꢀbasedꢀonꢀassumptionsꢀweꢀdeterminedꢀtoꢀbeꢀreasonable;ꢀhowever, theyꢀareꢀunpredictableꢀandꢀinherentlyꢀuncertain,ꢀincluding:ꢀestimatesꢀofꢀfutureꢀgrowthꢀrates,ꢀoperatingꢀmargins,ꢀandꢀassumptions aboutꢀtheꢀoverallꢀeconomicꢀclimateꢀasꢀwellꢀasꢀtheꢀcompetitiveꢀenvironmentꢀforꢀourꢀreportingꢀunits.ꢀ 41 Thereꢀcanꢀbeꢀnoꢀassuranceꢀthatꢀourꢀestimatesꢀandꢀassumptionsꢀmadeꢀforꢀpurposesꢀofꢀourꢀgoodwillꢀtestingꢀasꢀofꢀtheꢀtimeꢀofꢀtesting willꢀproveꢀtoꢀbeꢀaccurateꢀpredictionsꢀofꢀtheꢀfuture.ꢀIfꢀourꢀassumptionsꢀregardingꢀbusinessꢀplans,ꢀcompetitiveꢀenvironments,ꢀor anticipatedꢀgrowthꢀratesꢀareꢀnotꢀcorrect,ꢀweꢀmayꢀbeꢀrequiredꢀtoꢀrecordꢀgoodwillꢀimpairmentꢀchargesꢀinꢀfutureꢀperiods,ꢀwhetherꢀin connectionꢀwithꢀourꢀnextꢀannualꢀimpairmentꢀtesting,ꢀorꢀearlier,ꢀifꢀanꢀindicatorꢀofꢀanꢀimpairmentꢀisꢀpresentꢀpriorꢀtoꢀourꢀnextꢀannual evaluation. Property, Equipment, Leased Assets, and Other Intangible Assets. Weꢀ haveꢀ approximatelyꢀ $116.3ꢀ millionꢀ inꢀ netꢀ property, equipment,ꢀandꢀleasedꢀassetsꢀandꢀapproximatelyꢀ$287.4ꢀmillionꢀinꢀnetꢀunamortizedꢀotherꢀintangibleꢀassetsꢀonꢀourꢀBalanceꢀSheets atꢀDecemberꢀ31,ꢀ2018.ꢀSuchꢀassetsꢀareꢀstatedꢀatꢀcost,ꢀlessꢀaccumulatedꢀdepreciationꢀorꢀamortization,ꢀcomputedꢀprimarilyꢀusing theꢀstraight-lineꢀmethodꢀoverꢀtheꢀestimatedꢀusefulꢀlivesꢀofꢀsuchꢀassets.ꢀWeꢀapplyꢀjudgmentꢀinꢀtheꢀdeterminationꢀofꢀtheꢀusefulꢀlives, whichꢀareꢀgenerallyꢀbasedꢀonꢀtheꢀnatureꢀofꢀtheꢀassetsꢀandꢀtheꢀunderlyingꢀcontractualꢀobligationsꢀforꢀcertainꢀassets. Property,ꢀequipment,ꢀleasedꢀassets,ꢀandꢀotherꢀintangibleꢀassetsꢀareꢀreviewedꢀforꢀimpairmentꢀwheneverꢀeventsꢀorꢀcircumstances indicateꢀthatꢀtheꢀcarryingꢀamountꢀofꢀanꢀassetꢀmayꢀnotꢀbeꢀrecoverable.ꢀSuchꢀeventsꢀorꢀcircumstancesꢀinclude,ꢀbutꢀareꢀnotꢀlimited to,ꢀaꢀsignificantꢀdecreaseꢀinꢀtheꢀfairꢀvalueꢀofꢀtheꢀunderlyingꢀbusinessꢀorꢀmarketꢀpriceꢀofꢀtheꢀasset,ꢀaꢀsignificantꢀadverseꢀchangeꢀin legalꢀfactorsꢀorꢀbusinessꢀclimateꢀthatꢀcouldꢀaffectꢀtheꢀvalueꢀofꢀanꢀasset,ꢀorꢀaꢀcurrentꢀperiodꢀoperatingꢀorꢀcashꢀflowꢀlossꢀcombined withꢀaꢀhistoryꢀofꢀoperatingꢀorꢀcashꢀflowꢀlosses.ꢀImpairmentꢀisꢀindicatedꢀwhenꢀundiscountedꢀfutureꢀcashꢀflowsꢀdoꢀnotꢀexceedꢀthe carryingꢀvalueꢀofꢀtheꢀasset.ꢀAnyꢀimpairmentꢀtoꢀbeꢀrecognizedꢀisꢀmeasuredꢀbyꢀtheꢀamountꢀbyꢀwhichꢀtheꢀcarryingꢀamountꢀofꢀthe assetsꢀexceedsꢀtheꢀfairꢀvalueꢀofꢀtheꢀassets.ꢀDeterminationꢀofꢀtheꢀamountꢀandꢀtimingꢀofꢀfutureꢀcashꢀflowsꢀrequiresꢀsignificantꢀestimates andꢀassumptions.ꢀIfꢀactualꢀresultsꢀdifferꢀfromꢀsuchꢀestimatesꢀandꢀassumptions,ꢀthisꢀmayꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀconclusions. Income Taxes. WeꢀareꢀsubjectꢀtoꢀincomeꢀtaxesꢀinꢀtheꢀUnitedꢀStatesꢀasꢀwellꢀasꢀvariousꢀstatesꢀandꢀforeignꢀjurisdictionsꢀinꢀwhichꢀwe operate.ꢀDueꢀtoꢀtheꢀ2017ꢀTaxꢀAct,ꢀthereꢀisꢀnoꢀU.S.ꢀfederalꢀtaxꢀonꢀcashꢀrepatriationꢀfromꢀforeignꢀsubsidiaries;ꢀhowever,ꢀweꢀcould beꢀsubjectꢀtoꢀforeignꢀwithholdingꢀtaxꢀandꢀU.S.ꢀstateꢀincomeꢀtaxes.ꢀTheꢀ2017ꢀTaxꢀActꢀalsoꢀsubjectsꢀourꢀforeignꢀsubsidiaryꢀearnings toꢀtheꢀGILTIꢀtaxꢀprovisions.ꢀSomeꢀitemsꢀofꢀincomeꢀandꢀexpenseꢀareꢀnotꢀreportedꢀinꢀtaxꢀreturnsꢀandꢀourꢀFinancialꢀStatementsꢀin theꢀsameꢀyear.ꢀTheꢀtaxꢀeffectꢀofꢀsuchꢀtemporaryꢀdifferencesꢀisꢀreportedꢀasꢀdeferredꢀincomeꢀtaxes.ꢀ Ourꢀincomeꢀtaxꢀreturnsꢀareꢀsubjectꢀtoꢀexaminationꢀbyꢀvariousꢀtaxꢀauthoritiesꢀandꢀwhileꢀweꢀbelieveꢀthatꢀtheꢀpositionsꢀtakenꢀinꢀour taxꢀreturnsꢀareꢀinꢀaccordanceꢀwithꢀtheꢀapplicableꢀlaws,ꢀtheyꢀmayꢀbeꢀchallengedꢀbyꢀtheꢀtaxꢀauthorities,ꢀwhichꢀmayꢀoccurꢀseveral yearsꢀafterꢀsuchꢀtaxꢀreturnsꢀhaveꢀbeenꢀfiled.ꢀWeꢀaccountꢀforꢀuncertaintyꢀinꢀincomeꢀtaxꢀpositionsꢀbyꢀevaluatingꢀwhetherꢀitꢀisꢀmore likelyꢀthanꢀnotꢀthatꢀtheꢀpositionꢀwillꢀbeꢀsustainedꢀuponꢀexaminationꢀbyꢀtaxingꢀauthoritiesꢀbasedꢀonꢀtheꢀtechnicalꢀmeritsꢀofꢀtheꢀissue. TheꢀamountꢀrecognizedꢀinꢀourꢀFinancialꢀStatementsꢀisꢀtheꢀlargestꢀbenefitꢀthatꢀweꢀbelieveꢀhasꢀgreaterꢀthanꢀaꢀ50%ꢀlikelihoodꢀof beingꢀrealizedꢀuponꢀsettlement.ꢀActualꢀincomeꢀtaxesꢀpaidꢀmayꢀvaryꢀfromꢀestimatesꢀdependingꢀuponꢀchangesꢀinꢀincomeꢀtaxꢀlaws, actualꢀresultsꢀofꢀoperations,ꢀandꢀtheꢀfinalꢀauditꢀofꢀtaxꢀreturnsꢀbyꢀtaxingꢀauthorities.ꢀ Weꢀrecognizeꢀdeferredꢀtaxꢀassets,ꢀwhichꢀgenerallyꢀrepresentꢀtaxꢀbenefitsꢀrelatedꢀtoꢀtaxꢀdeductionsꢀorꢀcreditsꢀavailableꢀinꢀfutureꢀtax returns,ꢀandꢀapplyꢀaꢀvaluationꢀallowanceꢀtoꢀreduceꢀourꢀdeferredꢀtaxꢀassetsꢀtoꢀtheꢀamountsꢀthatꢀareꢀmoreꢀlikelyꢀthanꢀnotꢀtoꢀbeꢀrealized. Theꢀassessmentꢀofꢀtheꢀvaluationꢀallowanceꢀinvolvesꢀsignificantꢀestimatesꢀregardingꢀfutureꢀtaxableꢀincomeꢀandꢀwhenꢀitꢀisꢀrecognized, theꢀ amountꢀ andꢀ timingꢀ ofꢀ taxableꢀ differences,ꢀ theꢀ reversalꢀ ofꢀ temporaryꢀ differencesꢀ andꢀ theꢀ implementationꢀ ofꢀ tax-planning strategies.ꢀAꢀvaluationꢀallowanceꢀisꢀestablishedꢀbasedꢀonꢀtheꢀweightꢀofꢀavailableꢀevidence,ꢀincludingꢀbothꢀpositiveꢀandꢀnegative indicators,ꢀifꢀitꢀisꢀmoreꢀlikelyꢀthanꢀnotꢀthatꢀaꢀportion,ꢀorꢀall,ꢀofꢀtheꢀdeferredꢀtaxꢀassetsꢀwillꢀnotꢀbeꢀrealized.ꢀInꢀaddition,ꢀweꢀrelyꢀon deferredꢀtaxꢀliabilitiesꢀinꢀourꢀassessmentꢀofꢀtheꢀrealizabilityꢀofꢀdeferredꢀtaxꢀassetsꢀifꢀtheꢀtemporaryꢀdifferencesꢀareꢀanticipatedꢀto reverseꢀinꢀtheꢀsameꢀperiodꢀandꢀjurisdictionꢀandꢀtheꢀdeferredꢀtaxꢀliabilitiesꢀareꢀofꢀtheꢀsameꢀcharacterꢀasꢀtheꢀtemporaryꢀdifferences givingꢀriseꢀtoꢀtheꢀdeferredꢀtaxꢀassets.ꢀ Revenue Recognition. Weꢀrecognizeꢀrevenueꢀuponꢀtransferringꢀcontrolꢀofꢀgoodsꢀorꢀservicesꢀtoꢀourꢀcustomersꢀinꢀanꢀamountꢀthat reflectsꢀtheꢀconsiderationꢀweꢀexpectꢀtoꢀreceiveꢀinꢀexchangeꢀforꢀthoseꢀgoodsꢀorꢀservices.ꢀWeꢀenterꢀintoꢀcontractsꢀwithꢀcustomers thatꢀincludeꢀvariousꢀperformanceꢀobligationsꢀconsistingꢀofꢀgoods,ꢀservices,ꢀorꢀcombinationsꢀofꢀgoodsꢀandꢀservices.ꢀTimingꢀofꢀthe transferꢀofꢀcontrolꢀvariesꢀbasedꢀonꢀtheꢀnatureꢀofꢀtheꢀcontract.ꢀ TheꢀguidanceꢀinꢀASCꢀ606ꢀrequiresꢀthatꢀweꢀdiscloseꢀsignificantꢀjudgmentsꢀandꢀestimatesꢀusedꢀinꢀdeterminationꢀofꢀourꢀrevenue recognitionꢀ policyꢀ disclosedꢀ inꢀ “Noteꢀ 2ꢀ —ꢀ Basisꢀ ofꢀ Presentationꢀ andꢀ Summaryꢀ ofꢀ SignificantꢀAccountingꢀ Policiesꢀ –ꢀ Recent AccountingꢀGuidanceꢀ–ꢀRecentꢀAccountingꢀGuidanceꢀNotꢀYetꢀAdopted,”ꢀincludingꢀthoseꢀrelatedꢀtoꢀdeterminationꢀofꢀperformance obligations,ꢀ theꢀ timingꢀ ofꢀ satisfactionꢀ ofꢀ suchꢀ performanceꢀ obligations,ꢀ andꢀ theꢀ stand-aloneꢀ sellingꢀ priceꢀ ofꢀ eachꢀ identified performanceꢀobligation.ꢀTheꢀcriticalꢀjudgmentsꢀthatꢀweꢀareꢀrequiredꢀtoꢀmakeꢀinꢀourꢀassessmentꢀofꢀcontractsꢀwithꢀcustomersꢀand whichꢀmayꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀtheꢀamountꢀorꢀtimingꢀofꢀrevenueꢀrecognizedꢀinclude: 42 • • Determinationꢀofꢀstand-aloneꢀsellingꢀpriceꢀ(“SSP”)ꢀ-ꢀWeꢀareꢀrequiredꢀtoꢀmakeꢀaꢀsignificantꢀjudgmentꢀasꢀtoꢀwhetherꢀthere isꢀaꢀsufficientꢀquantityꢀofꢀitemsꢀsoldꢀorꢀrenewedꢀonꢀaꢀstand-aloneꢀbasisꢀandꢀthoseꢀpricesꢀdemonstrateꢀanꢀappropriateꢀlevel ofꢀconcentrationꢀtoꢀconcludeꢀthatꢀaꢀSSPꢀexists.ꢀTheꢀSSPꢀofꢀourꢀgoodsꢀandꢀservicesꢀareꢀgenerallyꢀdeterminedꢀbasedꢀon observableꢀ prices,ꢀ anꢀ adjustedꢀ marketꢀ assessmentꢀ approach,ꢀ orꢀ anꢀ expectedꢀ costꢀ plusꢀ marginꢀ approach.ꢀWeꢀ utilizeꢀ a residualꢀapproachꢀonlyꢀwhenꢀtheꢀSSPꢀforꢀperformanceꢀobligationsꢀwithꢀobservableꢀpricesꢀhaveꢀbeenꢀestablishedꢀandꢀthe remainingꢀperformanceꢀobligationꢀinꢀtheꢀcontractꢀwithꢀaꢀcustomerꢀdoesꢀnotꢀhaveꢀanꢀobservableꢀpriceꢀasꢀitꢀisꢀuncertainꢀor highlyꢀvariableꢀand,ꢀtherefore,ꢀisꢀnotꢀdiscernible. Contractꢀ combinationsꢀ withꢀ multipleꢀ promisedꢀ goodsꢀ orꢀ servicesꢀ -ꢀ Ourꢀ contractsꢀ mayꢀ includeꢀ variousꢀ performance obligationsꢀforꢀpromisesꢀtoꢀtransferꢀmultipleꢀgoodsꢀandꢀservicesꢀtoꢀaꢀcustomer,ꢀespeciallyꢀsinceꢀourꢀGamesꢀandꢀFinTech businessesꢀmayꢀenterꢀintoꢀmultipleꢀagreementsꢀwithꢀtheꢀsameꢀcustomerꢀthatꢀmeetꢀtheꢀcriteriaꢀtoꢀbeꢀcombinedꢀforꢀaccounting purposesꢀunderꢀASCꢀ606.ꢀForꢀsuchꢀarrangements,ꢀweꢀuseꢀourꢀjudgmentꢀtoꢀanalyzeꢀtheꢀnatureꢀofꢀtheꢀpromisesꢀmadeꢀand determineꢀwhetherꢀeachꢀisꢀdistinctꢀorꢀshouldꢀbeꢀcombinedꢀwithꢀotherꢀpromisesꢀinꢀtheꢀcontractꢀbasedꢀonꢀtheꢀlevelꢀof integrationꢀandꢀinterdependencyꢀbetweenꢀtheꢀindividualꢀdeliverables. Recent Accounting Guidance Forꢀaꢀdescriptionꢀofꢀourꢀrecentlyꢀadoptedꢀaccountingꢀguidanceꢀandꢀrecentꢀaccountingꢀguidanceꢀnotꢀyetꢀadopted,ꢀseeꢀ“Noteꢀ2ꢀ— BasisꢀofꢀPresentationꢀandꢀSummaryꢀofꢀSignificantꢀAccountingꢀPoliciesꢀ—ꢀRecentꢀAccountingꢀGuidance”ꢀwithinꢀourꢀFinancial StatementsꢀincludedꢀelsewhereꢀinꢀthisꢀAnnualꢀReportꢀonꢀFormꢀ10-K. Liquidity and Capital Resources Overview Theꢀfollowingꢀtableꢀpresentsꢀselectedꢀinformationꢀaboutꢀourꢀfinancialꢀpositionꢀ(inꢀthousands):ꢀ Balance sheet data Totalꢀassets Totalꢀborrowings Totalꢀstockholders’ꢀdeficit Cash available Cashꢀandꢀcashꢀequivalents Settlementꢀreceivables Settlementꢀliabilities Net cash position(1) Undrawnꢀrevolvingꢀcreditꢀfacility Net cash available(1) ꢀ At December 31, 2018 2017 $ $ $ $ 1,548,261 1,163,216 (108,895) 297,532 82,359 (334,198) 45,693 35,000 $ 80,693 $ 1,537,074 1,167,843 (140,633) 128,586 227,403 (317,744) 38,245 35,000 73,245 (1) Non‑GAAPꢀmeasure.ꢀInꢀorderꢀtoꢀenhanceꢀinvestorꢀunderstandingꢀofꢀourꢀcashꢀbalance,ꢀweꢀareꢀprovidingꢀinꢀthisꢀAnnualꢀReport onꢀFormꢀ10-Kꢀnetꢀcashꢀpositionꢀandꢀnetꢀcashꢀavailable,ꢀwhichꢀareꢀnotꢀmeasuresꢀofꢀourꢀfinancialꢀperformanceꢀorꢀpositionꢀunder GAAP.ꢀAccordingly,ꢀtheseꢀmeasuresꢀshouldꢀnotꢀbeꢀconsideredꢀinꢀisolationꢀorꢀasꢀaꢀsubstituteꢀfor,ꢀandꢀshouldꢀbeꢀreadꢀinꢀconjunction with,ꢀourꢀcashꢀandꢀcashꢀequivalentsꢀpreparedꢀinꢀaccordanceꢀwithꢀGAAP.ꢀWeꢀdefineꢀ(i)ꢀnetꢀcashꢀpositionꢀasꢀcashꢀandꢀcash equivalentsꢀplusꢀsettlementꢀreceivablesꢀlessꢀsettlementꢀliabilitiesꢀandꢀ(ii)ꢀnetꢀcashꢀavailableꢀasꢀnetꢀcashꢀpositionꢀplusꢀundrawn amountsꢀavailableꢀunderꢀourꢀNewꢀRevolvingꢀCreditꢀFacilityꢀ(definedꢀherein).ꢀWeꢀpresentꢀnetꢀcashꢀpositionꢀbecauseꢀourꢀcash position,ꢀasꢀmeasuredꢀbyꢀcashꢀandꢀcashꢀequivalents,ꢀdependsꢀuponꢀchangesꢀinꢀsettlementꢀreceivablesꢀandꢀtheꢀtimingꢀofꢀpayments relatedꢀtoꢀsettlementꢀliabilities.ꢀAsꢀsuch,ꢀourꢀcashꢀandꢀcashꢀequivalentsꢀcanꢀchangeꢀsubstantiallyꢀbasedꢀuponꢀtheꢀtimingꢀofꢀour receiptꢀofꢀpaymentsꢀforꢀsettlementꢀreceivablesꢀandꢀpaymentsꢀweꢀmakeꢀtoꢀcustomersꢀforꢀourꢀsettlementꢀliabilities.ꢀWeꢀpresent netꢀcashꢀavailableꢀasꢀmanagementꢀmonitorsꢀthisꢀamountꢀinꢀconnectionꢀwithꢀitsꢀforecastingꢀofꢀcashꢀflowsꢀandꢀfutureꢀcash requirements,ꢀbothꢀonꢀshortꢀtermꢀandꢀlongꢀtermꢀbasis.ꢀ 43 Cash Resources Ourꢀcashꢀbalance,ꢀcashꢀflowsꢀandꢀlineꢀofꢀcreditꢀareꢀexpectedꢀtoꢀbeꢀsufficientꢀtoꢀmeetꢀourꢀrecurringꢀoperatingꢀcommitmentsꢀandꢀto fundꢀourꢀplannedꢀcapitalꢀexpendituresꢀforꢀtheꢀforeseeableꢀfuture.ꢀCashꢀandꢀcashꢀequivalentsꢀatꢀDecemberꢀ31,ꢀ2018ꢀincludedꢀcash inꢀnon‑U.S.ꢀjurisdictionsꢀofꢀapproximatelyꢀ$21.8ꢀmillion.ꢀGenerally,ꢀtheseꢀfundsꢀareꢀavailableꢀforꢀoperatingꢀandꢀinvestmentꢀpurposes withinꢀtheꢀjurisdictionꢀinꢀwhichꢀtheyꢀreside,ꢀandꢀasꢀaꢀresultꢀofꢀtheꢀ2017ꢀTaxꢀAct,ꢀenactedꢀonꢀDecemberꢀ22,ꢀ2017,ꢀweꢀwillꢀnotꢀbe subjectꢀtoꢀadditionalꢀtaxationꢀifꢀweꢀrepatriateꢀforeignꢀfundsꢀtoꢀtheꢀUnitedꢀStates,ꢀexceptꢀforꢀpotentialꢀwithholdingꢀtax. Weꢀexpectꢀthatꢀcashꢀprovidedꢀbyꢀoperatingꢀactivitiesꢀwillꢀbeꢀsufficientꢀforꢀourꢀoperatingꢀandꢀdebtꢀservicingꢀneedsꢀduringꢀthe foreseeableꢀfuture.ꢀIfꢀnot,ꢀweꢀhaveꢀsufficientꢀborrowingsꢀavailableꢀunderꢀourꢀNewꢀCreditꢀFacilitiesꢀtoꢀmeetꢀadditionalꢀfunding requirements.ꢀWeꢀmonitorꢀtheꢀfinancialꢀstrengthꢀofꢀourꢀlendersꢀonꢀanꢀongoingꢀbasisꢀusingꢀpublicly-availableꢀinformation.ꢀBased uponꢀthatꢀinformation,ꢀweꢀbelieveꢀthereꢀisꢀnotꢀaꢀlikelihoodꢀthatꢀanyꢀofꢀourꢀlendersꢀmightꢀnotꢀbeꢀableꢀtoꢀhonorꢀtheirꢀcommitments underꢀtheꢀCreditꢀAgreement.ꢀ Weꢀprovideꢀcashꢀsettlementꢀservicesꢀtoꢀgamingꢀestablishmentsꢀrelatedꢀtoꢀourꢀcashꢀaccessꢀservices,ꢀwhichꢀinvolveꢀtheꢀmovement ofꢀfundsꢀbetweenꢀvariousꢀpartiesꢀinvolvedꢀinꢀtheseꢀtypesꢀofꢀtransactions.ꢀWeꢀreceiveꢀreimbursementꢀfromꢀtheꢀpatron’sꢀcreditꢀor debitꢀcardꢀissuingꢀfinancialꢀinstitutionꢀforꢀtheꢀamountꢀowedꢀtoꢀtheꢀgamingꢀestablishmentꢀplusꢀtheꢀfeeꢀchargedꢀtoꢀtheꢀpatron.ꢀThese activitiesꢀresultꢀinꢀamountsꢀdueꢀtoꢀusꢀatꢀtheꢀendꢀofꢀeachꢀbusinessꢀdayꢀthatꢀweꢀgenerallyꢀrecoverꢀoverꢀtheꢀnextꢀfewꢀbusinessꢀdays, whichꢀareꢀclassifiedꢀasꢀsettlementꢀreceivablesꢀonꢀourꢀBalanceꢀSheets.ꢀꢀAsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀweꢀhadꢀ$82.4ꢀmillionꢀinꢀsettlement receivables.ꢀInꢀaddition,ꢀcashꢀsettlementꢀservicesꢀresultꢀinꢀamountsꢀdueꢀtoꢀgamingꢀestablishmentsꢀforꢀtheꢀcashꢀdisbursedꢀtoꢀpatrons throughꢀtheꢀissuanceꢀofꢀaꢀnegotiableꢀinstrumentꢀorꢀthroughꢀelectronicꢀsettlementꢀforꢀtheꢀfaceꢀamountꢀprovidedꢀtoꢀpatronsꢀthatꢀwe generallyꢀ remitꢀ overꢀ theꢀ nextꢀ fewꢀ businessꢀ days,ꢀ whichꢀ areꢀ classifiedꢀ asꢀ settlementꢀ liabilitiesꢀ onꢀ ourꢀ Balanceꢀ Sheets.ꢀAsꢀ of Decemberꢀ31,ꢀ2018,ꢀweꢀhadꢀ$334.2ꢀmillionꢀinꢀsettlementꢀliabilities.ꢀAsꢀtheꢀtimingꢀofꢀcashꢀreceivedꢀfromꢀcashꢀsettlementꢀservices mayꢀdiffer,ꢀtheꢀtotalꢀamountꢀofꢀcashꢀheldꢀbyꢀusꢀwillꢀfluctuateꢀthroughoutꢀtheꢀyear. Ourꢀ cashꢀ andꢀ cashꢀ equivalentsꢀ wereꢀ $297.5ꢀ millionꢀ andꢀ $128.6ꢀ millionꢀ asꢀ ofꢀ Decemberꢀ31,ꢀ 2018ꢀ andꢀ Decemberꢀ31,ꢀ 2017, respectively.ꢀOurꢀnetꢀcashꢀpositionꢀafterꢀconsideringꢀtheꢀimpactꢀofꢀsettlementꢀreceivablesꢀandꢀsettlementꢀliabilitiesꢀwasꢀ$45.7 millionꢀandꢀ$38.2ꢀmillionꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀDecemberꢀ31,ꢀ2017,ꢀrespectively.ꢀOurꢀnetꢀcashꢀavailableꢀafterꢀconsidering theꢀnetꢀcashꢀpositionꢀandꢀundrawnꢀamountsꢀavailableꢀunderꢀourꢀNewꢀRevolvingꢀCreditꢀFacilityꢀwasꢀapproximatelyꢀ$80.7ꢀmillion andꢀ$73.2ꢀmillionꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀDecemberꢀ31,ꢀ2017,ꢀrespectively. Cash Flows TheꢀfollowingꢀtableꢀsummarizesꢀourꢀcashꢀflowsꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀ2017ꢀandꢀ2016ꢀ(inꢀthousands):ꢀ Year Ended December 31, Increase/(Decrease) 2018 2017 2016 2018 vs 2017 2017 vs 2016 Cash flow activities Netꢀcashꢀprovidedꢀbyꢀoperatingꢀactivities Netꢀcashꢀusedꢀinꢀinvestingꢀactivities Netꢀcashꢀprovidedꢀbyꢀ(usedꢀin)ꢀfinancingꢀactivities Effectꢀofꢀexchangeꢀratesꢀonꢀcash $ $ 294,286 (123,350) 11 (1,370) $ 96,259 (109,780) 22,394 1,292 $ 131,899 (88,148) (24,922) (1,714) $ 198,027 (13,570) (22,383) (2,662) (35,640) (21,632) 47,316 3,006 Cash and cash equivalents Netꢀincreaseꢀforꢀtheꢀperiod Balance,ꢀbeginningꢀofꢀtheꢀperiod Balance, end of the period 169,577 129,604 10,165 119,439 17,115 102,324 159,412 10,165 (6,950) 17,115 $ 299,181 $ 129,604 $ 119,439 $ 169,577 $ 10,165 Cashꢀflowsꢀprovidedꢀbyꢀoperatingꢀactivitiesꢀwereꢀ$294.3ꢀmillion,ꢀ$96.3ꢀmillion,ꢀandꢀ$131.9ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecember 31,ꢀ2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively.ꢀCashꢀflowsꢀprovidedꢀbyꢀoperatingꢀactivitiesꢀincreasedꢀbyꢀ$198.0ꢀmillionꢀforꢀtheꢀyearꢀended Decemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀyearꢀperiod,ꢀprimarilyꢀattributableꢀtoꢀtheꢀchangesꢀinꢀworkingꢀcapitalꢀassociatedꢀwith cashꢀsettlementꢀservicesꢀfromꢀourꢀFinTechꢀsegment,ꢀandꢀtheꢀreductionꢀinꢀcashꢀpaidꢀforꢀinterest.ꢀCashꢀflowsꢀprovidedꢀbyꢀoperating activitiesꢀdecreasedꢀbyꢀ$35.6ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀyearꢀperiod.ꢀThisꢀwas primarilyꢀattributableꢀtoꢀtheꢀchangesꢀinꢀworkingꢀcapitalꢀassociatedꢀwithꢀsettlementꢀreceivablesꢀandꢀsettlementꢀliabilitiesꢀfromꢀour FinTechꢀsegment. Cashꢀflowsꢀusedꢀinꢀinvestingꢀactivitiesꢀwereꢀ$123.4ꢀmillion,ꢀ$109.8ꢀmillion,ꢀandꢀ$88.1ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31, 2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively.ꢀCashꢀflowsꢀusedꢀinꢀinvestingꢀactivitiesꢀincreasedꢀbyꢀ$13.6ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecember 44 31,ꢀ2018,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀyearꢀperiod,ꢀprimarilyꢀattributableꢀtoꢀanꢀincreaseꢀinꢀcapitalꢀexpenditures,ꢀandꢀhigherꢀplacement feeꢀarrangementsꢀinꢀourꢀGamesꢀsegment.ꢀCashꢀflowsꢀusedꢀinꢀinvestingꢀactivitiesꢀincreasedꢀbyꢀ$21.6ꢀmillionꢀforꢀtheꢀyearꢀended Decemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀyearꢀperiod.ꢀThisꢀwasꢀprimarilyꢀattributableꢀtoꢀanꢀincreaseꢀinꢀcapitalꢀexpenditures, higherꢀplacementꢀfeeꢀarrangementsꢀinꢀourꢀGamesꢀsegment,ꢀandꢀdecreasedꢀsalesꢀofꢀfixedꢀassets. Cashꢀflowsꢀprovidedꢀbyꢀfinancingꢀactivitiesꢀwereꢀ$11,000ꢀandꢀ$22.4ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017, respectively,ꢀcomparedꢀtoꢀ$24.9ꢀmillionꢀofꢀcashꢀflowsꢀusedꢀinꢀfinancingꢀactivitiesꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2016.ꢀCash flowsꢀprovidedꢀbyꢀfinancingꢀactivitiesꢀdecreasedꢀbyꢀ$22.4ꢀmillionꢀinꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀcomparedꢀtoꢀtheꢀprior yearꢀperiod,ꢀprimarilyꢀattributableꢀtoꢀlessꢀdebtꢀrestructuringꢀactivitiesꢀcompletedꢀinꢀ2018.ꢀCashꢀflowsꢀprovidedꢀbyꢀfinancingꢀactivities increasedꢀbyꢀ$47.3ꢀmillionꢀinꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017,ꢀasꢀcomparedꢀtoꢀtheꢀpriorꢀperiod.ꢀThisꢀwasꢀprimarilyꢀattributable toꢀourꢀdebtꢀrestructuringꢀactivitiesꢀcompletedꢀinꢀ2017ꢀandꢀanꢀincreaseꢀinꢀproceedsꢀfromꢀtheꢀexerciseꢀofꢀstockꢀoptions.ꢀ Weꢀhaveꢀnotꢀdeclaredꢀorꢀpaidꢀanyꢀcashꢀdividendsꢀonꢀourꢀcapitalꢀstockꢀasꢀweꢀintendꢀtoꢀretainꢀourꢀearningsꢀandꢀutilizeꢀthemꢀforꢀthe repaymentꢀofꢀoutstandingꢀdebtꢀandꢀtoꢀfinanceꢀtheꢀgrowthꢀandꢀdevelopmentꢀofꢀourꢀbusiness.ꢀAnyꢀfutureꢀchangeꢀinꢀourꢀdividend policyꢀwillꢀbeꢀmadeꢀatꢀtheꢀdiscretionꢀofꢀourꢀBoardꢀofꢀDirectors,ꢀandꢀwillꢀdependꢀonꢀourꢀcontractualꢀrestrictions,ꢀresultsꢀofꢀoperations, earnings,ꢀ capitalꢀ requirements,ꢀ andꢀ otherꢀ factorsꢀ consideredꢀ relevantꢀ byꢀ ourꢀ Boardꢀ ofꢀ Directors.ꢀ Inꢀ addition,ꢀ theꢀ Newꢀ Credit Facilitiesꢀandꢀtheꢀindentureꢀgoverningꢀtheꢀ2017ꢀUnsecuredꢀNotesꢀlimitꢀourꢀabilityꢀtoꢀdeclareꢀandꢀpayꢀcashꢀdividends. Long‑Term Debt Forꢀadditionalꢀinformationꢀregardingꢀourꢀcreditꢀagreementꢀandꢀotherꢀdebtꢀasꢀwellꢀasꢀinterestꢀrateꢀriskꢀseeꢀ“ContractualꢀObligations” inꢀ thisꢀ Itemꢀ 7ꢀ below,ꢀ Partꢀ II,ꢀ Itemꢀ 7Aꢀ “Quantitativeꢀ andꢀ Qualitativeꢀ DisclosuresꢀAboutꢀ Marketꢀ Risk,”ꢀ andꢀ Itemꢀ 8.ꢀ Financial StatementsꢀandꢀSupplementaryꢀDataꢀ“Noteꢀ12ꢀ—ꢀLong-TermꢀDebt.” Contractual Obligations Theꢀfollowingꢀsummarizesꢀourꢀcontractualꢀcashꢀobligationsꢀ(inꢀthousands):ꢀ Total 2019 2020 At December 31, 2021 2022 2023 Thereafter Contractual obligations Debtꢀobligations(1) Estimatedꢀinterestꢀobligations(2) Operatingꢀleaseꢀobligations(3) Purchaseꢀobligations(4) Total contractual obligations $ 1,182,700 435,709 19,721 66,463 $ 1,704,593 $ 8,200 73,566 5,570 $ 8,200 73,186 5,680 $ 8,200 72,769 4,598 $ 8,200 72,189 2,799 $ 8,200 71,730 1,074 56,233 $ 143,569 7,887 $ 94,953 1,835 $ 87,402 508 $ 83,696 — $ 81,004 $ 1,141,700 72,269 — — $ 1,213,969 ꢀ (1) Weꢀareꢀrequiredꢀtoꢀmakeꢀprincipalꢀpaymentsꢀofꢀ0.25%ꢀperꢀquarterꢀofꢀtheꢀinitialꢀaggregateꢀprincipal,ꢀwithꢀtheꢀfinalꢀprincipal repaymentꢀinstallmentꢀonꢀtheꢀmaturityꢀdateꢀandꢀmayꢀalsoꢀbeꢀrequiredꢀtoꢀmakeꢀanꢀexcessꢀcashꢀflowꢀpaymentꢀthatꢀisꢀbasedꢀon fullꢀyearꢀendꢀearningsꢀandꢀourꢀconsolidatedꢀsecuredꢀleverageꢀratioꢀinꢀeffectꢀatꢀthatꢀtime.ꢀTheꢀaboveꢀtableꢀdoesꢀnotꢀreflectꢀany futureꢀpaymentsꢀrelatedꢀtoꢀexcessꢀcashꢀflowꢀpayments. (2) EstimatedꢀinterestꢀpaymentsꢀwereꢀcomputedꢀusingꢀtheꢀinterestꢀrateꢀinꢀeffectꢀatꢀDecemberꢀ31,ꢀ2018ꢀmultipliedꢀbyꢀtheꢀprincipal balanceꢀoutstandingꢀafterꢀscheduledꢀprincipalꢀamortizationꢀpayments.ꢀForꢀourꢀdebtꢀobligations,ꢀtheꢀweightedꢀaverageꢀrate assumedꢀwasꢀapproximatelyꢀ6.16%ꢀuntilꢀ2024,ꢀwhenꢀtheꢀweightedꢀaverageꢀrateꢀwouldꢀincreaseꢀtoꢀapproximatelyꢀ7.50%ꢀuntil theꢀremainingꢀdebtꢀisꢀfullyꢀsatisfiedꢀinꢀ2025. (3) Ourꢀoperatingꢀleaseꢀobligationsꢀprimarilyꢀconsistꢀofꢀrealꢀestateꢀarrangementsꢀweꢀenterꢀintoꢀwithꢀthirdꢀparties.ꢀSeeꢀNoteꢀ13ꢀfor additionalꢀinformationꢀregardingꢀourꢀoperatingꢀleases.ꢀ (4) OurꢀpurchaseꢀobligationsꢀprimarilyꢀconsistꢀofꢀopenꢀpurchaseꢀordersꢀandꢀplacementꢀfeeꢀagreementsꢀrelatedꢀtoꢀourꢀGames businessꢀasꢀwellꢀasꢀminimumꢀtransactionꢀprocessingꢀservicesꢀfromꢀvariousꢀthird‑partyꢀprocessorsꢀusedꢀbyꢀourꢀFinTechꢀbusiness. Other Liquidity Needs and Resources Weꢀneedꢀcashꢀtoꢀsupportꢀourꢀforeignꢀoperations.ꢀAsꢀaꢀresultꢀofꢀtheꢀ2017ꢀTaxꢀAct,ꢀenactedꢀDecemberꢀ22,ꢀ2017,ꢀweꢀwillꢀnotꢀbeꢀsubject toꢀadditionalꢀtaxationꢀifꢀweꢀrepatriateꢀforeignꢀfundsꢀtoꢀtheꢀUnitedꢀStates,ꢀexceptꢀforꢀpotentialꢀwithholdingꢀtax.ꢀDependingꢀonꢀthe jurisdictionꢀandꢀtheꢀtreatyꢀbetweenꢀdifferentꢀforeignꢀjurisdictionsꢀourꢀwithholdingꢀtaxꢀratesꢀcanꢀvaryꢀsignificantly.ꢀIfꢀweꢀexpand 45 ourꢀbusinessꢀintoꢀnewꢀforeignꢀjurisdictions,ꢀweꢀwillꢀrelyꢀonꢀtreaty‑favoredꢀcross‑borderꢀtransfersꢀofꢀfunds,ꢀtheꢀcashꢀgeneratedꢀby ourꢀoperationsꢀinꢀthoseꢀforeignꢀjurisdictions,ꢀorꢀalternateꢀsourcesꢀofꢀworkingꢀcapital. Off‑Balance Sheet Arrangements WeꢀhaveꢀcommercialꢀarrangementsꢀwithꢀthirdꢀpartyꢀvendorsꢀtoꢀprovideꢀcashꢀforꢀcertainꢀofꢀourꢀATMs.ꢀForꢀtheꢀuseꢀofꢀtheseꢀfunds, weꢀpayꢀaꢀcashꢀusageꢀfeeꢀonꢀeitherꢀtheꢀaverageꢀdailyꢀbalanceꢀofꢀfundsꢀutilizedꢀmultipliedꢀbyꢀaꢀcontractuallyꢀdefinedꢀcashꢀusageꢀrate orꢀtheꢀamountsꢀsuppliedꢀmultipliedꢀbyꢀaꢀcontractuallyꢀdefinedꢀcashꢀusageꢀrate.ꢀTheseꢀcashꢀusageꢀfees,ꢀreflectedꢀasꢀinterestꢀexpense withinꢀtheꢀStatementsꢀofꢀIncomeꢀ(Loss),ꢀwereꢀ$7.0ꢀmillion,ꢀ$4.9ꢀmillion,ꢀandꢀ$3.1ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018, 2017,ꢀandꢀ2016,ꢀrespectively.ꢀWeꢀareꢀexposedꢀtoꢀinterestꢀrateꢀriskꢀtoꢀtheꢀextentꢀthatꢀtheꢀapplicableꢀfederalꢀfundsꢀrateꢀincreases. Underꢀtheseꢀagreements,ꢀtheꢀcurrencyꢀsuppliedꢀbyꢀthirdꢀpartyꢀvendorsꢀremainꢀtheirꢀsoleꢀpropertyꢀuntilꢀtheꢀfundsꢀareꢀdispensed.ꢀAs theseꢀfundsꢀareꢀnotꢀourꢀassets,ꢀsuppliedꢀcashꢀisꢀnotꢀreflectedꢀonꢀourꢀBalanceꢀSheets.ꢀTheꢀoutstandingꢀbalancesꢀofꢀATMꢀcashꢀutilized byꢀusꢀfromꢀtheꢀthirdꢀpartyꢀvendorsꢀwereꢀ$224.7ꢀmillionꢀandꢀ$289.8ꢀmillionꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀrespectively. Theꢀprimaryꢀcommercialꢀarrangement,ꢀtheꢀContractꢀCashꢀSolutionsꢀAgreement,ꢀasꢀamended,ꢀwithꢀWellsꢀFargoꢀBank,ꢀN.A.ꢀ(“Wells Fargo”)ꢀprovidesꢀusꢀwithꢀcashꢀinꢀtheꢀmaximumꢀamountꢀofꢀ$300.0ꢀmillionꢀwithꢀtheꢀabilityꢀtoꢀincreaseꢀtheꢀamountꢀbyꢀ$75ꢀmillion overꢀaꢀ5-dayꢀperiodꢀforꢀspecialꢀoccasions,ꢀsuchꢀasꢀtheꢀperiodꢀaroundꢀNewꢀYear’sꢀDay.ꢀTheꢀagreementꢀcurrentlyꢀexpiresꢀonꢀJune 30,ꢀ2021ꢀandꢀwillꢀautoꢀrenewꢀforꢀadditionalꢀone-yearꢀperiodsꢀunlessꢀeitherꢀpartyꢀprovidesꢀaꢀ90-dayꢀwrittenꢀnoticeꢀofꢀitsꢀintentꢀnot toꢀrenew.ꢀ WeꢀareꢀresponsibleꢀforꢀanyꢀlossesꢀofꢀcashꢀinꢀtheꢀATMsꢀunderꢀthisꢀagreementꢀandꢀweꢀself-insureꢀforꢀthisꢀrisk.ꢀWeꢀincurredꢀnoꢀmaterial lossesꢀrelatedꢀtoꢀthisꢀself-insuranceꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017. Effects of Inflation Ourꢀmonetaryꢀassetsꢀthatꢀprimarilyꢀconsistꢀofꢀcash,ꢀreceivables,ꢀinventoryꢀasꢀwellꢀasꢀourꢀnon-monetaryꢀassetsꢀthatꢀareꢀmostly comprisedꢀofꢀgoodwillꢀandꢀotherꢀintangibleꢀassets,ꢀareꢀnotꢀsignificantlyꢀaffectedꢀbyꢀinflation.ꢀWeꢀbelieveꢀthatꢀreplacementꢀcosts ofꢀequipment,ꢀfurniture,ꢀandꢀleaseholdꢀimprovementsꢀwillꢀnotꢀmateriallyꢀaffectꢀourꢀoperations.ꢀHowever,ꢀtheꢀrateꢀofꢀinflationꢀaffects ourꢀ operatingꢀ expenses,ꢀ suchꢀ asꢀ thoseꢀ forꢀ salariesꢀ andꢀ benefits,ꢀ armoredꢀ carrierꢀ expenses,ꢀ telecommunicationsꢀ expenses,ꢀ and equipmentꢀrepairꢀandꢀmaintenanceꢀservices,ꢀwhichꢀmayꢀnotꢀbeꢀreadilyꢀrecoverableꢀinꢀtheꢀfinancialꢀtermsꢀunderꢀwhichꢀweꢀprovide ourꢀGamesꢀandꢀFinTechꢀproductsꢀandꢀservicesꢀtoꢀgamingꢀestablishments.ꢀ Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Inꢀtheꢀnormalꢀcourseꢀofꢀbusiness,ꢀweꢀareꢀexposedꢀtoꢀforeignꢀcurrencyꢀexchangeꢀrisk.ꢀWeꢀoperateꢀandꢀconductꢀbusinessꢀinꢀforeign countriesꢀand,ꢀasꢀaꢀresult,ꢀareꢀexposedꢀtoꢀmovementsꢀinꢀforeignꢀcurrencyꢀexchangeꢀrates.ꢀOurꢀexposureꢀtoꢀforeignꢀcurrencyꢀexchange riskꢀrelatedꢀtoꢀourꢀforeignꢀoperationsꢀisꢀnotꢀmaterialꢀtoꢀourꢀresultsꢀofꢀoperations,ꢀcashꢀflows,ꢀorꢀfinancialꢀcondition.ꢀAtꢀpresent,ꢀwe doꢀnotꢀhedgeꢀthisꢀrisk;ꢀhowever,ꢀweꢀcontinueꢀtoꢀevaluateꢀsuchꢀforeignꢀcurrencyꢀtranslationꢀexposure. Inꢀtheꢀnormalꢀcourseꢀofꢀbusiness,ꢀweꢀhaveꢀcommercialꢀarrangementsꢀwithꢀthirdꢀpartyꢀvendorsꢀtoꢀprovideꢀcashꢀforꢀcertainꢀofꢀour ATMs.ꢀUnderꢀtheꢀtermsꢀofꢀtheseꢀagreements,ꢀweꢀpayꢀaꢀmonthlyꢀcashꢀusageꢀfeeꢀbasedꢀuponꢀtheꢀtargetꢀfederalꢀfundsꢀrate.ꢀWeꢀare, therefore,ꢀexposedꢀtoꢀinterestꢀrateꢀriskꢀtoꢀtheꢀextentꢀthatꢀtheꢀapplicableꢀfederalꢀfundsꢀrateꢀincreases.ꢀTheꢀoutstandingꢀbalanceꢀof ATMꢀcashꢀutilizedꢀbyꢀusꢀfromꢀthirdꢀpartyꢀvendorsꢀwasꢀ$224.7ꢀmillionꢀasꢀofꢀDecemberꢀ31,ꢀ2018;ꢀtherefore,ꢀeachꢀ1%ꢀincreaseꢀin theꢀapplicableꢀfederalꢀfundsꢀrateꢀwouldꢀhaveꢀapproximatelyꢀaꢀ$2.2ꢀmillionꢀimpactꢀonꢀincomeꢀbeforeꢀtaxꢀoverꢀaꢀ12‑monthꢀperiod.ꢀ TheꢀNewꢀCreditꢀFacilitiesꢀbearꢀinterestꢀatꢀratesꢀthatꢀcanꢀvaryꢀoverꢀtime.ꢀWeꢀhaveꢀtheꢀoptionꢀofꢀhavingꢀinterestꢀonꢀtheꢀoutstanding amountsꢀunderꢀtheꢀNewꢀCreditꢀFacilitiesꢀpaidꢀusingꢀonꢀaꢀbaseꢀrateꢀorꢀLIBOR.ꢀWeꢀhaveꢀhistoricallyꢀelectedꢀtoꢀpayꢀinterestꢀbased onꢀLIBOR,ꢀandꢀweꢀexpectꢀtoꢀcontinueꢀtoꢀdoꢀsoꢀforꢀvariousꢀmaturities.ꢀTheꢀweightedꢀaverageꢀinterestꢀrateꢀtheꢀNewꢀCreditꢀFacilities wasꢀapproximatelyꢀ5.17%ꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018.ꢀBasedꢀuponꢀtheꢀoutstandingꢀbalanceꢀonꢀtheꢀNewꢀCreditꢀFacilities ofꢀ$807.7ꢀmillionꢀasꢀofꢀDecemberꢀ31,ꢀ2018,ꢀeachꢀ1%ꢀincreaseꢀinꢀtheꢀapplicableꢀEurodollarꢀRateꢀwouldꢀhaveꢀanꢀ$8.1ꢀmillionꢀimpact onꢀinterestꢀexpenseꢀoverꢀaꢀ12‑monthꢀperiod.ꢀTheꢀinterestꢀrateꢀforꢀtheꢀUnsecuredꢀNotesꢀisꢀfixed;ꢀtherefore,ꢀanꢀincreaseꢀinꢀLIBOR ratesꢀdoesꢀnotꢀimpactꢀtheꢀrelatedꢀinterestꢀexpense.ꢀAtꢀpresent,ꢀweꢀdoꢀnotꢀhedgeꢀtheꢀriskꢀrelatedꢀtoꢀtheꢀchangesꢀinꢀtheꢀinterestꢀrate; however,ꢀweꢀcontinueꢀtoꢀevaluateꢀsuchꢀinterestꢀrateꢀexposure.ꢀ 46 Item 8. Financial Statements and Supplementary Data. ꢀ Index to Consolidated Financial Statements ReportꢀofꢀBDOꢀUSA,ꢀLLP,ꢀIndependentꢀRegisteredꢀPublicꢀAccountingꢀFirm ConsolidatedꢀStatementsꢀofꢀIncomeꢀ(Loss)ꢀandꢀComprehensiveꢀIncomeꢀ(Loss)ꢀforꢀtheꢀthreeꢀyearsꢀendedꢀDecemberꢀ31, 2018 ConsolidatedꢀBalanceꢀSheetsꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017 ConsolidatedꢀStatementsꢀofꢀCashꢀFlowsꢀforꢀtheꢀthreeꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018 ConsolidatedꢀStatementsꢀofꢀStockholders’ꢀ(Deficit)ꢀEquityꢀforꢀtheꢀthreeꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018 NotesꢀtoꢀConsolidatedꢀFinancialꢀStatements 48 49 51 52 54 55 47 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ShareholdersꢀandꢀBoardꢀofꢀDirectors EveriꢀHoldingsꢀInc.ꢀandꢀsubsidiaries LasꢀVegas,ꢀNV Opinion on the Consolidated Financial Statements WeꢀhaveꢀauditedꢀtheꢀaccompanyingꢀconsolidatedꢀbalanceꢀsheetsꢀofꢀEveriꢀHoldingsꢀInc.ꢀ(theꢀ“Company”)ꢀandꢀsubsidiariesꢀasꢀof Decemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀtheꢀrelatedꢀconsolidatedꢀstatementsꢀofꢀincomeꢀ(loss)ꢀandꢀcomprehensiveꢀincomeꢀ(loss),ꢀstockholders’ deficit,ꢀandꢀcashꢀflowsꢀforꢀeachꢀofꢀtheꢀthreeꢀyearsꢀinꢀtheꢀperiodꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀandꢀtheꢀrelatedꢀnotesꢀ(collectively referredꢀtoꢀasꢀtheꢀ“consolidatedꢀfinancialꢀstatements”).ꢀInꢀourꢀopinion,ꢀtheꢀconsolidatedꢀfinancialꢀstatementsꢀpresentꢀfairly,ꢀinꢀall materialꢀrespects,ꢀtheꢀfinancialꢀpositionꢀofꢀtheꢀCompanyꢀandꢀsubsidiariesꢀatꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀandꢀtheꢀresultsꢀofꢀtheir operationsꢀandꢀtheirꢀcashꢀflowsꢀforꢀeachꢀofꢀtheꢀthreeꢀyearsꢀinꢀtheꢀperiodꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀinꢀconformityꢀwithꢀaccounting principlesꢀgenerallyꢀacceptedꢀinꢀtheꢀUnitedꢀStatesꢀofꢀAmerica. Weꢀalsoꢀhaveꢀaudited,ꢀinꢀaccordanceꢀwithꢀtheꢀstandardsꢀofꢀtheꢀPublicꢀCompanyꢀAccountingꢀOversightꢀBoardꢀ(UnitedꢀStates) (“PCAOB”),ꢀtheꢀCompany’sꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀasꢀofꢀDecemberꢀ31,ꢀ2018,ꢀbasedꢀonꢀcriteriaꢀestablishedꢀin Internal Control - Integrated Framework (2013)ꢀ issuedꢀ byꢀ theꢀ Committeeꢀ ofꢀ Sponsoringꢀ Organizationsꢀ ofꢀ theꢀ Treadway Commissionꢀ(“COSO”)ꢀandꢀourꢀreportꢀdatedꢀMarchꢀ12,ꢀ2019ꢀexpressedꢀanꢀunqualifiedꢀopinionꢀthereon. Adoption of ASU No. 2014-09 AsꢀdiscussedꢀinꢀNoteꢀ3ꢀtoꢀtheꢀconsolidatedꢀfinancialꢀstatements,ꢀtheꢀCompanyꢀhasꢀchangedꢀitsꢀmethodꢀofꢀaccountingꢀforꢀrevenue fromꢀcontractsꢀwithꢀcustomersꢀinꢀ2018ꢀdueꢀtoꢀtheꢀadoptionꢀofꢀAccountingꢀStandardsꢀUpdateꢀ(ASU)ꢀNo.ꢀ2014-09,ꢀ“Revenueꢀfrom ContractsꢀwithꢀCustomersꢀ(Topicꢀ606),”ꢀandꢀtheꢀrelatedꢀamendments. Basis for Opinion TheseꢀconsolidatedꢀfinancialꢀstatementsꢀareꢀtheꢀresponsibilityꢀofꢀtheꢀCompany’sꢀmanagement.ꢀOurꢀresponsibilityꢀisꢀtoꢀexpressꢀan opinionꢀonꢀtheꢀCompany’sꢀconsolidatedꢀfinancialꢀstatementsꢀbasedꢀonꢀourꢀaudits.ꢀWeꢀareꢀaꢀpublicꢀaccountingꢀfirmꢀregisteredꢀwith theꢀPCAOBꢀandꢀareꢀrequiredꢀtoꢀbeꢀindependentꢀwithꢀrespectꢀtoꢀtheꢀCompanyꢀinꢀaccordanceꢀwithꢀtheꢀU.S.ꢀfederalꢀsecuritiesꢀlaws andꢀtheꢀapplicableꢀrulesꢀandꢀregulationsꢀofꢀtheꢀSecuritiesꢀandꢀExchangeꢀCommissionꢀandꢀtheꢀPCAOB. WeꢀconductedꢀourꢀauditsꢀinꢀaccordanceꢀwithꢀtheꢀstandardsꢀofꢀtheꢀPCAOB.ꢀThoseꢀstandardsꢀrequireꢀthatꢀweꢀplanꢀandꢀperformꢀthe auditꢀtoꢀobtainꢀreasonableꢀassuranceꢀaboutꢀwhetherꢀtheꢀconsolidatedꢀfinancialꢀstatementsꢀareꢀfreeꢀofꢀmaterialꢀmisstatement,ꢀwhether dueꢀtoꢀerrorꢀorꢀfraud. Ourꢀauditsꢀincludedꢀperformingꢀproceduresꢀtoꢀassessꢀtheꢀrisksꢀofꢀmaterialꢀmisstatementꢀofꢀtheꢀconsolidatedꢀfinancialꢀstatements, whetherꢀdueꢀtoꢀerrorꢀorꢀfraud,ꢀandꢀperformingꢀproceduresꢀthatꢀrespondꢀtoꢀthoseꢀrisks.ꢀSuchꢀproceduresꢀincludedꢀexamining,ꢀonꢀa testꢀ basis,ꢀ evidenceꢀ regardingꢀ theꢀ amountsꢀ andꢀ disclosuresꢀ inꢀ theꢀ consolidatedꢀ financialꢀ statements.ꢀ Ourꢀ auditsꢀ alsoꢀ included evaluatingꢀ theꢀ accountingꢀ principlesꢀ usedꢀ andꢀ significantꢀ estimatesꢀ madeꢀ byꢀ management,ꢀ asꢀ wellꢀ asꢀ evaluatingꢀ theꢀ overall presentationꢀofꢀtheꢀconsolidatedꢀfinancialꢀstatements.ꢀWeꢀbelieveꢀthatꢀourꢀauditsꢀprovideꢀaꢀreasonableꢀbasisꢀforꢀourꢀopinion. /s/ꢀBDOꢀUSA,ꢀLLPꢀ WeꢀhaveꢀservedꢀasꢀtheꢀCompany’sꢀauditorꢀsinceꢀ2015. LasꢀVegas,ꢀNevada Marchꢀ12,ꢀ2019ꢀ 48 EVERI HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (In thousands, except per share amounts) Revenues Games revenues ꢀꢀꢀꢀꢀꢀꢀGamingꢀoperations ꢀꢀꢀꢀꢀꢀꢀGamingꢀequipmentꢀandꢀsystems ꢀꢀꢀꢀꢀꢀꢀGamingꢀother Games total revenues FinTech revenues ꢀꢀꢀꢀꢀꢀꢀCashꢀaccessꢀservices ꢀꢀꢀꢀꢀꢀꢀEquipment ꢀꢀꢀꢀꢀꢀꢀInformationꢀservicesꢀandꢀother FinTech total revenues 2018 Year Ended December 31, 2017 2016 $ 168,146 $ 148,654 $ 87,038 3,794 258,978 156,806 20,977 32,754 210,537 70,118 4,005 222,777 707,222 13,258 31,691 752,171 152,514 56,277 4,462 213,253 601,874 14,995 29,334 646,203 Total revenues 469,515 974,948 859,456 Costs and expenses Games cost of revenues(1) ꢀꢀꢀꢀꢀꢀꢀꢀGamingꢀoperations ꢀꢀꢀꢀꢀꢀꢀꢀGamingꢀequipmentꢀandꢀsystems ꢀꢀꢀꢀꢀꢀꢀꢀGamingꢀother Games total cost of revenues FinTech cost of revenues(1) ꢀꢀꢀꢀꢀꢀꢀꢀꢀCashꢀaccessꢀservices ꢀꢀꢀꢀꢀꢀꢀꢀꢀEquipment ꢀꢀꢀꢀꢀꢀꢀꢀꢀInformationꢀservicesꢀandꢀother FinTech total cost of revenues ꢀꢀꢀꢀOperatingꢀexpenses ꢀꢀꢀꢀResearchꢀandꢀdevelopment ꢀꢀꢀꢀGoodwillꢀimpairment ꢀꢀꢀꢀDepreciation ꢀꢀꢀꢀAmortization Total costs and expenses 17,603 47,121 3,285 68,009 9,717 12,601 4,110 26,428 142,298 20,497 — 61,225 65,245 383,702 15,741 35,707 3,247 54,695 572,880 7,717 3,253 583,850 118,935 18,862 — 47,282 69,505 893,129 15,265 31,602 3,441 50,308 485,061 9,889 3,756 498,706 118,709 19,356 146,299 49,995 94,638 978,011 Operating income (expense) 85,813 81,819 (118,555) ꢀ ꢀ 49 Other expenses ꢀꢀꢀꢀInterestꢀexpense,ꢀnetꢀofꢀinterestꢀincome ꢀꢀꢀꢀLossꢀonꢀextinguishmentꢀofꢀdebt Total other expenses 2018 Year Ended December 31, 2017 2016 83,001 166 83,167 102,136 51,750 153,886 99,228 — 99,228 Income (loss) before income tax 2,646 (72,067) (217,783) ꢀꢀꢀꢀIncomeꢀtaxꢀ(benefit)ꢀprovision Net income (loss) ꢀꢀꢀꢀForeignꢀcurrencyꢀtranslation Comprehensive income (loss) Earnings (loss) per share Basic Diluted Weighted average common shares outstanding Basic Diluted (1)ꢀExclusiveꢀofꢀdepreciationꢀandꢀamortization. $ $ $ (9,710) 12,356 (1,745) 10,611 0.18 0.17 69,464 73,796 $ $ $ (20,164) (51,903) 1,856 (50,047) $ (0.78) $ (0.78) $ 66,816 66,816 31,696 (249,479) (2,427) (251,906) (3.78) (3.78) 66,050 66,050 Theꢀ2018ꢀresultsꢀincludeꢀtheꢀimpactꢀofꢀadoptingꢀtheꢀFinancialꢀAccountingꢀStandardsꢀBoardꢀ(theꢀ“FASB”)ꢀAccountingꢀStandards CodificationꢀTopicꢀ606ꢀRevenues from Contracts with Customersꢀ(“ASCꢀ606”).ꢀReferꢀtoꢀ“Noteꢀ2ꢀ—ꢀBasisꢀofꢀPresentationꢀand SummaryꢀofꢀSignificantꢀAccountingꢀPolicies”ꢀandꢀ“Noteꢀ3ꢀ—ꢀAdoptionꢀofꢀASCꢀ606,ꢀRevenueꢀfromꢀContractsꢀwithꢀCustomers” toꢀourꢀconsolidatedꢀfinancialꢀstatementsꢀincludedꢀinꢀPartꢀII,ꢀItemꢀ8ꢀofꢀthisꢀFormꢀ10-Kꢀforꢀmoreꢀinformation. Seeꢀnotesꢀtoꢀconsolidatedꢀfinancialꢀstatements. 50 ꢀ EVERI HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except par value amounts) ASSETS Current assets Cashꢀandꢀcashꢀequivalents Settlementꢀreceivables ꢀꢀꢀꢀꢀTradeꢀandꢀotherꢀreceivables,ꢀnetꢀofꢀallowancesꢀforꢀdoubtfulꢀaccountsꢀofꢀ$6,425ꢀandꢀꢀꢀꢀꢀꢀ ꢀꢀꢀꢀꢀ$4,706ꢀatꢀDecemberꢀ31,ꢀ2018ꢀandꢀDecemberꢀ31,ꢀ2017,ꢀrespectively Inventory Prepaidꢀexpensesꢀandꢀotherꢀassets Total current assets Non-current assets Property,ꢀequipmentꢀandꢀleasedꢀassets,ꢀnet Goodwill Otherꢀintangibleꢀassets,ꢀnet Otherꢀreceivables Otherꢀassets Total non-current assets Total assets LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities Settlementꢀliabilities Accountsꢀpayableꢀandꢀaccruedꢀexpenses Currentꢀportionꢀofꢀlong-termꢀdebt Total current liabilities Non-current liabilities Deferredꢀtaxꢀliability Long-termꢀdebt,ꢀlessꢀcurrentꢀportion Otherꢀaccruedꢀexpensesꢀandꢀliabilities Total non-current liabilities Total liabilities Commitments and contingencies (Note 13) Stockholders’ deficit Commonꢀstock,ꢀ$0.001ꢀparꢀvalue,ꢀ500,000ꢀsharesꢀauthorizedꢀandꢀ95,100ꢀandꢀ93,120 sharesꢀissuedꢀatꢀDecemberꢀ31,ꢀ2018ꢀandꢀDecemberꢀ31,ꢀ2017,ꢀrespectively Convertibleꢀpreferredꢀstock,ꢀ$0.001ꢀparꢀvalue,ꢀ50,000ꢀsharesꢀauthorizedꢀandꢀnoꢀshares outstandingꢀatꢀDecemberꢀ31,ꢀ2018ꢀandꢀDecemberꢀ31,ꢀ2017,ꢀrespectively Additionalꢀpaid-inꢀcapital Accumulatedꢀdeficit Accumulatedꢀotherꢀcomprehensiveꢀloss Treasuryꢀstock,ꢀatꢀcost,ꢀ24,900ꢀandꢀ24,883ꢀsharesꢀatꢀDecemberꢀ31,ꢀ2018ꢀandꢀDecemberꢀ31, 2017,ꢀrespectively Total stockholders’ deficit Total liabilities and stockholders’ deficit Seeꢀnotesꢀtoꢀconsolidatedꢀfinancialꢀstatements. 51 At December 31, 2018 2017 $ $ 297,532 82,359 64,387 24,403 20,259 488,940 116,288 640,537 287,397 8,847 6,252 1,059,321 128,586 227,403 47,782 23,967 20,670 448,408 113,519 640,589 324,311 2,638 7,609 1,088,666 $ 1,548,261 $ 1,537,074 $ $ 334,198 129,238 8,200 471,636 317,744 134,504 8,200 460,448 27,867 1,155,016 2,637 1,185,520 1,657,156 38,207 1,159,643 19,409 1,217,259 1,677,707 95 — 298,929 (229,457) (1,998) (176,464) 93 — 282,070 (246,202) (253) (176,341) (108,895) (140,633) $ 1,548,261 $ 1,537,074 ꢀ EVERI HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Cash flows from operating activities Netꢀincomeꢀ(loss) Adjustmentsꢀtoꢀreconcileꢀnetꢀincomeꢀ(loss)ꢀtoꢀcashꢀprovidedꢀbyꢀoperating activities: Year Ended December 31, 2017 2016 2018 $ 12,356 $ (51,903) $ (249,479) Depreciation Amortization Amortizationꢀofꢀfinancingꢀcostsꢀandꢀdiscounts Lossꢀonꢀsaleꢀorꢀdisposalꢀofꢀassets Accretionꢀofꢀcontractꢀrights Provisionꢀforꢀbadꢀdebts Deferredꢀincomeꢀtaxes Write-downꢀofꢀassets Reserveꢀforꢀobsolescence Goodwillꢀimpairment Lossꢀonꢀextinguishmentꢀofꢀdebt Stock-basedꢀcompensation Changesꢀinꢀoperatingꢀassetsꢀandꢀliabilities: Settlementꢀreceivables Tradeꢀandꢀotherꢀreceivables Inventory Prepaidꢀandꢀotherꢀassets Settlementꢀliabilities Accountsꢀpayableꢀandꢀaccruedꢀexpenses Net cash provided by operating activities Cash flows from investing activities Capitalꢀexpenditures Acquisitions,ꢀnetꢀofꢀcashꢀacquired Proceedsꢀfromꢀsaleꢀofꢀfixedꢀassets Placementꢀfeeꢀagreements Net cash used in investing activities Cash flows from financing activities Proceedsꢀfromꢀnewꢀcreditꢀfacility Proceedsꢀfromꢀunsecuredꢀnotes Repaymentsꢀofꢀpriorꢀcreditꢀfacility Repaymentsꢀofꢀsecuredꢀnotes Repaymentsꢀofꢀunsecuredꢀnotes Repaymentsꢀofꢀnewꢀcreditꢀfacility Debtꢀissuanceꢀcostsꢀandꢀdiscounts Proceedsꢀfromꢀexerciseꢀofꢀstockꢀoptions Purchaseꢀofꢀtreasuryꢀstock Net cash provided by (used in) financing activities Effectꢀofꢀexchangeꢀratesꢀonꢀcash Cash, cash equivalents and restricted cash Netꢀincreaseꢀforꢀtheꢀperiod Balance,ꢀbeginningꢀofꢀtheꢀperiod Balance, end of the period 61,225 65,245 4,877 869 8,421 11,459 (10,343) 2,575 1,919 — 166 7,251 143,705 (29,320) (3,848) 1,672 17,159 (1,102) 294,286 (103,031) — 237 (20,556) (123,350) — — — — — (8,200) (1,276) 9,610 (123) 11 (1,370) 47,282 69,505 8,706 2,513 7,819 9,737 (20,015) — 397 — 51,750 6,411 (98,390) (884) (5,753) (1,105) 78,465 (8,276) 96,259 (96,490) — 10 (13,300) (109,780) 820,000 375,000 (465,600) (335,000) (350,000) (4,100) (28,702) 10,906 (110) 22,394 1,292 169,577 129,604 299,181 $ 10,165 119,439 129,604 $ $ 49,995 94,638 6,695 2,563 8,692 9,908 29,940 4,289 3,581 146,299 — 6,735 (83,998) (8,207) 5,600 4,668 99,245 735 131,899 (80,741) (694) 4,599 (11,312) (88,148) — — (24,400) — — — (480) — (42) (24,922) (1,714) 17,115 102,324 119,439 ꢀSeeꢀnotesꢀtoꢀconsolidatedꢀfinancialꢀstatements. 52 Supplemental cash disclosures Cashꢀpaidꢀforꢀinterest Cashꢀpaidꢀforꢀincomeꢀtax Cashꢀrefundedꢀforꢀincomeꢀtax Supplemental non-cash disclosures Accruedꢀandꢀunpaidꢀcapitalꢀexpenditures Accruedꢀandꢀunpaidꢀplacementꢀfeesꢀaddedꢀduringꢀtheꢀyear Accruedꢀandꢀunpaidꢀcontingentꢀliabilityꢀforꢀacquisitions Transferꢀofꢀleasedꢀgamingꢀequipmentꢀtoꢀinventory Year Ended December 31, 2017 2016 2018 $ $ $ $ 81,609 406 4 3,657 — (550) 10,028 $ $ 89,008 1,009 829 1,386 39,074 — 7,820 93,420 1,703 171 2,104 — (3,169) 9,042 53 EVERI HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (In thousands) ꢀ ꢀ Common Stock— Series A Additional Retained Earnings Accumulated Other Number of Shares Amount Paid-in Capital (Accumulated Deficit) Comprehensive Income (Loss) Treasury Stock Total Equity (Deficit) Balance, January 1, 2016 90,877 $ Netꢀloss Foreignꢀcurrencyꢀtranslation Stock-basedꢀcompensationꢀexpense Restrictedꢀshareꢀvestingꢀwithholdings Restrictedꢀshares — — — — 75 Balance, December 31, 2016 90,952 $ Netꢀloss Foreignꢀcurrencyꢀtranslation Stock-basedꢀcompensationꢀexpense Exerciseꢀofꢀoptions Restrictedꢀshareꢀvestingꢀwithholdings Restrictedꢀshares — — — 2,037 — 131 Balance, December 31, 2017 93,120 $ Netꢀincome Cumulativeꢀadjustmentꢀrelatedꢀto adoptionꢀofꢀASCꢀ606 Foreignꢀcurrencyꢀtranslation Stock-basedꢀcompensationꢀexpense Exerciseꢀofꢀoptions Restrictedꢀshareꢀvestingꢀwithholdings — — — — 1,980 — Balance, December 31, 2018 95,100 $ 91 — — — — — 91 — — — 2 — — 93 — — — — 2 — 95 $ 258,020 $ 55,180 $ 318 $ (176,189) $ 137,420 — — 6,735 — — (249,479) — — — — — (2,427) — — — — — — (42) — (249,479) (2,427) 6,735 (42) — $ 264,755 $ (194,299) $ (2,109) $ (176,231) $ (107,793) — — 6,411 10,904 — — (51,903) — — — — — — 1,856 — — — — — — — — (110) — (51,903) 1,856 6,411 10,906 (110) — $ 282,070 $ (246,202) $ (253) $ (176,341) $ (140,633) — — — 7,251 9,608 — 12,356 4,389 — — — — — — (1,745) — — — — — — — — (123) 12,356 4,389 (1,745) 7,251 9,610 (123) $ 298,929 $ (229,457) $ (1,998) $ (176,464) $ (108,895) Seeꢀnotesꢀtoꢀconsolidatedꢀfinancialꢀstatements. 54 EVERI HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In this filing, we refer to: (i) our audited consolidated financial statements and notes thereto as our “Financial Statements;” (ii) our audited Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) as our “Statements of Income (Loss);” and (iii) our audited Consolidated Balance Sheets as our “Balance Sheets.” 1. BUSINESS EveriꢀHoldingsꢀInc.ꢀ(“EveriꢀHoldings,”ꢀ“Holdings,”ꢀorꢀ“Everi”)ꢀisꢀaꢀholdingꢀcompany,ꢀtheꢀassetsꢀofꢀwhichꢀareꢀtheꢀissuedꢀand outstandingꢀsharesꢀofꢀcapitalꢀstockꢀofꢀeachꢀofꢀEveriꢀGamesꢀHoldingꢀInc.ꢀ(“EveriꢀGamesꢀHolding”),ꢀwhichꢀownsꢀallꢀofꢀtheꢀissued andꢀ outstandingꢀ sharesꢀ ofꢀ capitalꢀ stockꢀ ofꢀ Everiꢀ Gamesꢀ Inc.ꢀ (“Everiꢀ Games”ꢀ orꢀ “Games”),ꢀ andꢀ Everiꢀ Paymentsꢀ Inc.ꢀ (“Everi Payments”).ꢀUnlessꢀotherwiseꢀindicated,ꢀtheꢀtermsꢀtheꢀ“Company,”ꢀ“we,”ꢀ“us,”ꢀandꢀ“our”ꢀreferꢀtoꢀEveriꢀHoldingsꢀtogetherꢀwith itsꢀconsolidatedꢀsubsidiaries. Everiꢀisꢀaꢀleadingꢀsupplierꢀofꢀtechnologyꢀsolutionsꢀforꢀtheꢀcasinoꢀgamingꢀindustry.ꢀWeꢀprovideꢀcasinoꢀoperatorsꢀwithꢀaꢀdiverse portfolioꢀofꢀproductsꢀincludingꢀinnovativeꢀgamingꢀmachinesꢀthatꢀpowerꢀtheꢀcasinoꢀfloor,ꢀandꢀcasinoꢀoperationalꢀandꢀmanagement systemsꢀthatꢀincludeꢀcomprehensiveꢀend-to-endꢀpaymentsꢀsolutions,ꢀcriticalꢀintelligenceꢀofferings,ꢀandꢀgamingꢀoperationsꢀefficiency technologies. EveriꢀHoldingsꢀreportsꢀitsꢀresultsꢀofꢀoperationsꢀbasedꢀonꢀtwoꢀoperatingꢀsegments:ꢀGamesꢀandꢀFinTech.ꢀEffectiveꢀAprilꢀ1,ꢀ2018, weꢀchangedꢀtheꢀnameꢀofꢀtheꢀoperatingꢀsegmentꢀpreviouslyꢀreferredꢀtoꢀasꢀ“Payments”ꢀtoꢀ“FinancialꢀTechnologyꢀSolutions”ꢀ(“Everi FinTech”ꢀ orꢀ “FinTech”).ꢀWeꢀ believeꢀ thisꢀ referenceꢀ moreꢀ accuratelyꢀ reflectsꢀ theꢀ focusꢀ ofꢀ theꢀ businessꢀ segmentꢀ onꢀ delivering innovativeꢀandꢀintegratedꢀsolutionsꢀtoꢀenhanceꢀtheꢀefficiencyꢀofꢀtheꢀcasinoꢀoperator,ꢀsupportꢀtheꢀcomprehensiveꢀregulatoryꢀand taxꢀrequirementsꢀofꢀtheirꢀgamingꢀcustomers,ꢀandꢀimproveꢀplayers’ꢀgamingꢀexperienceꢀbyꢀprovidingꢀeasyꢀaccessꢀtoꢀtheirꢀfundsꢀand paymentꢀofꢀwinnings. EveriꢀGamesꢀprovidesꢀgamingꢀoperatorsꢀproductsꢀandꢀservices,ꢀincluding:ꢀ(a)ꢀgamingꢀmachinesꢀprimarilyꢀcomprisedꢀofꢀClassꢀII andꢀClassꢀIIIꢀslotꢀmachinesꢀplacedꢀunderꢀparticipationꢀorꢀfixedꢀfeeꢀleaseꢀarrangementsꢀorꢀsoldꢀtoꢀcasinoꢀcustomers,ꢀincluding TournEvent®ꢀthatꢀallowsꢀoperatorsꢀtoꢀswitchꢀfromꢀin-revenueꢀgamingꢀtoꢀout-of-revenueꢀtournaments;ꢀ(b)ꢀsystemꢀsoftware,ꢀlicenses, ancillaryꢀequipment,ꢀandꢀmaintenance;ꢀandꢀ(c)ꢀbusiness-to-consumerꢀandꢀbusiness-to-businessꢀinteractiveꢀactivities.ꢀInꢀaddition, EveriꢀGamesꢀdevelopsꢀandꢀmanagesꢀtheꢀcentralꢀdeterminantꢀsystemꢀforꢀtheꢀvideoꢀlotteryꢀterminalsꢀ(“VLTs”)ꢀinstalledꢀinꢀtheꢀState ofꢀNewꢀYorkꢀandꢀitꢀalsoꢀprovidesꢀsimilarꢀtechnologyꢀinꢀcertainꢀtribalꢀjurisdictions. EveriꢀFinTechꢀprovidesꢀgamingꢀoperatorsꢀcashꢀaccessꢀandꢀrelatedꢀproductsꢀandꢀservices,ꢀincluding:ꢀ(a)ꢀaccessꢀtoꢀcashꢀatꢀgaming facilitiesꢀviaꢀAutomatedꢀTellerꢀMachineꢀ(“ATM”)ꢀcashꢀwithdrawals,ꢀcreditꢀcardꢀcashꢀaccessꢀtransactions,ꢀpointꢀofꢀsaleꢀ(“POS”) debitꢀcardꢀcashꢀaccessꢀtransactions,ꢀandꢀcheckꢀverificationꢀandꢀwarrantyꢀservices;ꢀ(b)ꢀequipmentꢀthatꢀprovidesꢀcashꢀaccessꢀand efficiency-relatedꢀservices;ꢀ(c)ꢀproductsꢀandꢀservicesꢀthatꢀimproveꢀcreditꢀdecisionꢀmaking,ꢀautomateꢀcashierꢀoperations,ꢀandꢀenhance patronꢀmarketingꢀactivitiesꢀforꢀgamingꢀestablishments;ꢀ(d)ꢀcompliance,ꢀaudit,ꢀandꢀdataꢀsolutions;ꢀandꢀ(e)ꢀonlineꢀpaymentꢀprocessing solutionsꢀforꢀgamingꢀoperatorsꢀinꢀstatesꢀthatꢀofferꢀintrastate,ꢀInternet-basedꢀgaming,ꢀandꢀlotteryꢀactivities. 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation Allꢀintercompanyꢀtransactionsꢀandꢀbalancesꢀhaveꢀbeenꢀeliminatedꢀinꢀconsolidation. Business Combinations WeꢀapplyꢀtheꢀprovisionsꢀofꢀtheꢀFinancialꢀAccountingꢀStandardsꢀBoardꢀ(theꢀ“FASB”)ꢀAccountingꢀStandardsꢀCodificationꢀ(“ASC”) 805,ꢀ“BusinessꢀCombinations,”ꢀinꢀtheꢀaccountingꢀforꢀacquisitions.ꢀItꢀrequiresꢀusꢀtoꢀrecognizeꢀseparatelyꢀfromꢀgoodwillꢀtheꢀassets acquiredꢀandꢀtheꢀliabilitiesꢀassumed,ꢀatꢀtheirꢀacquisitionꢀdateꢀfairꢀvalues.ꢀGoodwillꢀasꢀofꢀtheꢀacquisitionꢀdateꢀisꢀmeasuredꢀasꢀthe excessꢀofꢀconsiderationꢀtransferredꢀoverꢀtheꢀnetꢀofꢀtheꢀacquisitionꢀdateꢀfairꢀvaluesꢀofꢀtheꢀassetsꢀacquiredꢀandꢀtheꢀliabilitiesꢀassumed. Significantꢀestimatesꢀandꢀassumptionsꢀareꢀrequiredꢀtoꢀvalueꢀassetsꢀacquiredꢀandꢀliabilitiesꢀassumedꢀatꢀtheꢀacquisitionꢀdateꢀasꢀwell asꢀ contingentꢀ consideration,ꢀ whereꢀ applicable.ꢀ Theseꢀ estimatesꢀ areꢀ preliminaryꢀ andꢀ typicallyꢀ includeꢀ theꢀ calculationꢀ ofꢀ an appropriateꢀdiscountꢀrateꢀandꢀprojectionꢀofꢀtheꢀcashꢀflowsꢀassociatedꢀwithꢀeachꢀacquiredꢀassetꢀoverꢀitsꢀestimatedꢀusefulꢀlife.ꢀAsꢀa result,ꢀduringꢀtheꢀmeasurementꢀperiod,ꢀwhichꢀmayꢀbeꢀupꢀtoꢀoneꢀyearꢀfromꢀtheꢀacquisitionꢀdate,ꢀtheꢀCompanyꢀmayꢀrecordꢀadjustments toꢀtheꢀassetsꢀacquiredꢀandꢀliabilitiesꢀassumedꢀwithꢀtheꢀcorrespondingꢀoffsetꢀtoꢀgoodwill.ꢀInꢀaddition,ꢀdeferredꢀtaxꢀassets,ꢀdeferred taxꢀliabilities,ꢀuncertainꢀtaxꢀpositions,ꢀandꢀtaxꢀrelatedꢀvaluationꢀallowancesꢀassumedꢀinꢀconnectionꢀwithꢀaꢀbusinessꢀcombination areꢀinitiallyꢀestimatedꢀasꢀofꢀtheꢀacquisitionꢀdate.ꢀWeꢀreevaluateꢀtheseꢀitemsꢀquarterlyꢀbasedꢀuponꢀfactsꢀandꢀcircumstancesꢀthat existedꢀasꢀofꢀtheꢀacquisitionꢀdateꢀandꢀanyꢀadjustmentsꢀtoꢀitsꢀpreliminaryꢀestimatesꢀareꢀrecordedꢀtoꢀgoodwill,ꢀinꢀtheꢀperiodꢀof 55 identification,ꢀifꢀidentifiedꢀwithinꢀtheꢀmeasurementꢀperiod.ꢀUponꢀtheꢀconclusionꢀofꢀtheꢀmeasurementꢀperiodꢀorꢀfinalꢀdetermination ofꢀtheꢀvaluesꢀofꢀassetsꢀacquiredꢀorꢀliabilitiesꢀassumed,ꢀwhicheverꢀcomesꢀfirst,ꢀanyꢀsubsequentꢀadjustmentsꢀareꢀrecordedꢀtoꢀthe StatementsꢀofꢀIncomeꢀ(Loss). Cash and Cash Equivalents Cashꢀandꢀcashꢀequivalentsꢀincludeꢀcashꢀandꢀbalancesꢀonꢀdepositꢀinꢀbanksꢀandꢀfinancialꢀinstitutions.ꢀWeꢀconsiderꢀhighlyꢀliquid investmentsꢀwithꢀmaturitiesꢀofꢀthreeꢀmonthsꢀorꢀlessꢀatꢀtheꢀtimeꢀofꢀpurchaseꢀtoꢀbeꢀcashꢀandꢀcashꢀequivalents.ꢀSuchꢀbalancesꢀgenerally exceedꢀtheꢀfederalꢀinsuranceꢀlimits,ꢀhowever,ꢀweꢀperiodicallyꢀevaluateꢀtheꢀcreditworthinessꢀofꢀtheseꢀinstitutionsꢀtoꢀminimizeꢀrisk. ATM Funding Agreements WeꢀobtainꢀallꢀofꢀtheꢀcashꢀrequiredꢀtoꢀoperateꢀourꢀATMsꢀthroughꢀvariousꢀATMꢀFundingꢀAgreements.ꢀSomeꢀgamingꢀestablishments provideꢀtheꢀcashꢀutilizedꢀwithinꢀtheꢀATMꢀ(“Site‑Funded”).ꢀTheꢀSite‑Fundedꢀreceivablesꢀgeneratedꢀforꢀtheꢀamountꢀofꢀcashꢀdispensed fromꢀtransactionsꢀperformedꢀatꢀourꢀATMsꢀareꢀownedꢀbyꢀusꢀandꢀweꢀareꢀliableꢀtoꢀtheꢀgamingꢀestablishmentꢀforꢀtheꢀfaceꢀamountꢀof theꢀcashꢀdispensed.ꢀInꢀourꢀBalanceꢀSheets,ꢀtheꢀamountꢀofꢀtheꢀreceivableꢀforꢀtransactionsꢀprocessedꢀonꢀtheseꢀATMꢀtransactionsꢀis includedꢀ withinꢀ settlementꢀ receivablesꢀ andꢀ theꢀ amountꢀ dueꢀ toꢀ theꢀ gamingꢀ establishmentꢀ forꢀ theꢀ faceꢀ amountꢀ ofꢀ dispensing transactionsꢀisꢀincludedꢀwithinꢀsettlementꢀliabilities. Forꢀtheꢀnon‑Site‑Fundedꢀlocations,ꢀweꢀenterꢀintoꢀcommercialꢀarrangementsꢀwithꢀthirdꢀpartyꢀvendorsꢀtoꢀprovideꢀusꢀtheꢀcurrency neededꢀforꢀnormalꢀoperatingꢀrequirementsꢀforꢀourꢀATMs.ꢀForꢀtheꢀuseꢀofꢀtheseꢀfunds,ꢀweꢀpayꢀaꢀcashꢀusageꢀfeeꢀbasedꢀuponꢀtheꢀtarget federalꢀfundsꢀrate.ꢀUnderꢀtheseꢀagreements,ꢀtheꢀcurrencyꢀsuppliedꢀbyꢀtheꢀthirdꢀpartyꢀvendorsꢀremainsꢀtheꢀsoleꢀpropertyꢀofꢀthese suppliersꢀuntilꢀcashꢀisꢀdispensed,ꢀatꢀwhichꢀtimeꢀtheꢀthirdꢀpartyꢀvendorsꢀobtainꢀanꢀinterestꢀinꢀtheꢀcorrespondingꢀsettlementꢀreceivable. Asꢀtheꢀcashꢀisꢀanꢀassetꢀofꢀtheseꢀsuppliers,ꢀitꢀisꢀthereforeꢀnotꢀreflectedꢀonꢀourꢀBalanceꢀSheets.ꢀTheꢀusageꢀfeeꢀforꢀtheꢀcashꢀsupplied inꢀtheseꢀATMsꢀisꢀincludedꢀasꢀinterestꢀexpenseꢀinꢀtheꢀStatementsꢀofꢀIncomeꢀ(Loss).ꢀOurꢀrationaleꢀtoꢀrecordꢀcashꢀusageꢀfeesꢀasꢀinterest expenseꢀisꢀprimarilyꢀdueꢀtoꢀtheꢀsimilarꢀoperationalꢀcharacteristicsꢀtoꢀaꢀrevolvingꢀlineꢀofꢀcredit,ꢀtheꢀfactꢀthatꢀtheꢀfeesꢀareꢀcalculated onꢀaꢀfinancialꢀindex,ꢀandꢀtheꢀfeesꢀareꢀpaidꢀforꢀaccessꢀtoꢀaꢀcapitalꢀresource. Allowance for Doubtful Accounts Weꢀmaintainꢀanꢀallowanceꢀforꢀdoubtfulꢀaccountsꢀrelatedꢀtoꢀourꢀtradeꢀandꢀotherꢀreceivablesꢀandꢀnotesꢀreceivableꢀthatꢀhaveꢀbeen deemedꢀtoꢀhaveꢀaꢀhighꢀriskꢀofꢀuncollectibilityꢀorꢀforꢀwhichꢀuncertaintyꢀexistsꢀasꢀtoꢀwhetherꢀtheꢀaccountꢀbalanceꢀhasꢀbecome uncollectible.ꢀManagementꢀreviewsꢀitsꢀaccountsꢀandꢀnotesꢀreceivableꢀonꢀaꢀquarterlyꢀbasisꢀtoꢀdetermineꢀifꢀanyꢀreceivablesꢀwill potentiallyꢀbeꢀuncollectible.ꢀManagementꢀanalyzesꢀhistoricalꢀcollectionꢀtrendsꢀandꢀchangesꢀinꢀourꢀcustomerꢀpaymentꢀpatterns, concentration,ꢀandꢀcreditworthinessꢀwhenꢀevaluatingꢀtheꢀadequacyꢀofꢀourꢀallowanceꢀforꢀdoubtfulꢀaccounts.ꢀBasedꢀonꢀtheꢀinformation available,ꢀ managementꢀ believesꢀ theꢀ allowanceꢀ forꢀ doubtfulꢀ accountsꢀ isꢀ adequate;ꢀ however,ꢀ actualꢀ write-offsꢀ mayꢀ exceedꢀ the recordedꢀallowance. Settlement Receivables and Settlement Liabilities Weꢀprovideꢀcashꢀsettlementꢀservicesꢀtoꢀgamingꢀestablishmentsꢀrelatedꢀtoꢀourꢀcashꢀaccessꢀservices,ꢀwhichꢀinvolveꢀtheꢀmovement ofꢀfundsꢀbetweenꢀvariousꢀpartiesꢀinvolvedꢀinꢀtheseꢀtypesꢀofꢀtransactions.ꢀWeꢀreceiveꢀreimbursementꢀfromꢀtheꢀpatron’sꢀcreditꢀor debitꢀcardꢀissuingꢀfinancialꢀinstitutionꢀforꢀtheꢀamountꢀowedꢀtoꢀtheꢀgamingꢀestablishmentꢀplusꢀtheꢀfeeꢀchargedꢀtoꢀtheꢀpatron.ꢀThese activitiesꢀresultꢀinꢀamountsꢀdueꢀtoꢀusꢀatꢀtheꢀendꢀofꢀeachꢀbusinessꢀdayꢀthatꢀweꢀgenerallyꢀrecoverꢀoverꢀtheꢀnextꢀfewꢀbusinessꢀdays, whichꢀareꢀclassifiedꢀasꢀsettlementꢀreceivablesꢀonꢀourꢀBalanceꢀSheets.ꢀInꢀaddition,ꢀcashꢀsettlementꢀservicesꢀresultꢀinꢀamountsꢀdue toꢀgamingꢀestablishmentsꢀforꢀtheꢀcashꢀdisbursedꢀtoꢀpatronsꢀthroughꢀtheꢀissuanceꢀofꢀaꢀnegotiableꢀinstrumentꢀorꢀthroughꢀelectronic settlementꢀforꢀtheꢀfaceꢀamountꢀprovidedꢀtoꢀpatronsꢀthatꢀweꢀgenerallyꢀremitꢀoverꢀtheꢀnextꢀfewꢀbusinessꢀdays,ꢀwhichꢀareꢀclassified asꢀsettlementꢀliabilitiesꢀonꢀourꢀBalanceꢀSheets. Warranty Receivables Ifꢀaꢀgamingꢀestablishmentꢀchoosesꢀtoꢀhaveꢀaꢀcheckꢀwarranted,ꢀitꢀsendsꢀaꢀrequestꢀtoꢀourꢀthird-partyꢀcheckꢀwarrantyꢀserviceꢀprovider, askingꢀwhetherꢀitꢀwouldꢀbeꢀwillingꢀtoꢀacceptꢀtheꢀriskꢀofꢀcashingꢀtheꢀcheck.ꢀIfꢀtheꢀcheckꢀwarrantyꢀproviderꢀacceptsꢀtheꢀriskꢀand warrantsꢀtheꢀcheck,ꢀtheꢀgamingꢀestablishmentꢀnegotiatesꢀtheꢀpatron’sꢀcheckꢀbyꢀprovidingꢀcashꢀforꢀtheꢀfaceꢀamountꢀofꢀtheꢀcheck. Ifꢀtheꢀcheckꢀisꢀdishonoredꢀbyꢀtheꢀpatron’sꢀbankꢀuponꢀpresentment,ꢀtheꢀgamingꢀestablishmentꢀinvokesꢀtheꢀwarranty,ꢀandꢀtheꢀcheck warrantyꢀserviceꢀproviderꢀpurchasesꢀtheꢀcheckꢀfromꢀtheꢀgamingꢀestablishmentꢀforꢀtheꢀfullꢀcheckꢀamountꢀandꢀthenꢀpursuesꢀcollection activitiesꢀonꢀitsꢀown.ꢀInꢀourꢀCentralꢀCreditꢀCheckꢀWarrantyꢀproductꢀunderꢀourꢀagreementꢀwithꢀtheꢀthird-partyꢀserviceꢀprovider,ꢀwe receiveꢀallꢀofꢀtheꢀcheckꢀwarrantyꢀrevenue.ꢀWeꢀareꢀexposedꢀtoꢀriskꢀforꢀtheꢀlossesꢀassociatedꢀwithꢀanyꢀwarrantedꢀitemsꢀthatꢀcannot beꢀcollectedꢀfromꢀpatronsꢀissuingꢀtheꢀitems.ꢀWarrantyꢀreceivablesꢀareꢀdefinedꢀasꢀanyꢀamountsꢀpaidꢀbyꢀtheꢀthird-partyꢀcheckꢀwarranty serviceꢀproviderꢀtoꢀgamingꢀestablishmentsꢀtoꢀpurchaseꢀdishonoredꢀchecks.ꢀAdditionally,ꢀweꢀpayꢀaꢀfeeꢀtoꢀtheꢀthird-partyꢀcheck warrantyꢀserviceꢀproviderꢀforꢀitsꢀservices. 56 Theꢀwarrantyꢀreceivablesꢀamountꢀisꢀrecordedꢀinꢀtradeꢀandꢀotherꢀreceivables,ꢀnetꢀonꢀourꢀBalanceꢀSheets.ꢀOnꢀaꢀmonthlyꢀbasis,ꢀthe Companyꢀevaluatesꢀtheꢀcollectabilityꢀofꢀtheꢀoutstandingꢀbalancesꢀandꢀestablishesꢀaꢀreserveꢀforꢀtheꢀfaceꢀamountꢀofꢀtheꢀexpected lossesꢀonꢀtheseꢀreceivables.ꢀTheꢀwarrantyꢀexpenseꢀassociatedꢀwithꢀthisꢀreserveꢀisꢀincludedꢀwithinꢀcostꢀofꢀrevenuesꢀ(exclusiveꢀof depreciationꢀandꢀamortization)ꢀonꢀourꢀStatementsꢀofꢀIncomeꢀ(Loss). Inventory Ourꢀinventoryꢀprimarilyꢀconsistsꢀofꢀcomponentꢀpartsꢀasꢀwellꢀasꢀfinishedꢀgoodsꢀandꢀwork-in-progress.ꢀTheꢀcostꢀofꢀinventoryꢀincludes costꢀofꢀmaterials,ꢀlabor,ꢀoverheadꢀandꢀfreight.ꢀTheꢀinventoryꢀisꢀstatedꢀatꢀtheꢀlowerꢀofꢀcostꢀorꢀnetꢀrealizableꢀvalueꢀandꢀaccounted forꢀusingꢀtheꢀfirstꢀin,ꢀfirstꢀoutꢀmethodꢀ(“FIFO”). Restricted Cash Ourꢀrestrictedꢀcashꢀprimarilyꢀconsistsꢀof:ꢀ(i)ꢀdepositsꢀheldꢀinꢀconnectionꢀwithꢀaꢀsponsorshipꢀagreement;ꢀ(ii)ꢀWAP-relatedꢀrestricted funds;ꢀandꢀ(iii)ꢀInternet-relatedꢀcashꢀaccessꢀactivities.ꢀTheꢀcurrentꢀportionꢀofꢀrestrictedꢀcash,ꢀwhichꢀisꢀincludedꢀinꢀprepaidꢀexpenses andꢀ otherꢀ assets,ꢀ wasꢀ approximatelyꢀ $1.5ꢀ million,ꢀ $0.9ꢀ million,ꢀ andꢀ $0.3ꢀ millionꢀ asꢀ ofꢀ Decemberꢀ31,ꢀ 2018,ꢀ 2017,ꢀ andꢀ 2016, respectively.ꢀTheꢀnon-currentꢀportionꢀofꢀrestrictedꢀcash,ꢀwhichꢀisꢀincludedꢀinꢀotherꢀassets,ꢀwasꢀapproximatelyꢀ$0.1ꢀmillionꢀasꢀof Decemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016.ꢀ Property, Equipment and Leased Assets Property,ꢀequipmentꢀandꢀleasedꢀassetsꢀareꢀstatedꢀatꢀcost,ꢀlessꢀaccumulatedꢀdepreciation,ꢀandꢀareꢀcomputedꢀusingꢀtheꢀstraight-line methodꢀoverꢀtheꢀlesserꢀofꢀtheꢀestimatedꢀlifeꢀofꢀtheꢀrelatedꢀassets,ꢀgenerallyꢀtwoꢀtoꢀfiveꢀyears,ꢀorꢀtheꢀrelatedꢀleaseꢀterm.ꢀPlayer terminalsꢀandꢀrelatedꢀcomponentsꢀandꢀequipmentꢀareꢀincludedꢀinꢀourꢀrentalꢀpool.ꢀTheꢀrentalꢀpoolꢀcanꢀbeꢀfurtherꢀdelineatedꢀas “rentalꢀpoolꢀ–ꢀdeployed,”ꢀwhichꢀconsistsꢀofꢀassetsꢀdeployedꢀatꢀcustomerꢀsitesꢀunderꢀparticipationꢀarrangements,ꢀandꢀ“rentalꢀpool –ꢀundeployed,”ꢀwhichꢀconsistsꢀofꢀassetsꢀheldꢀbyꢀusꢀthatꢀareꢀavailableꢀforꢀcustomerꢀuse.ꢀRentalꢀpoolꢀ–ꢀundeployedꢀconsistsꢀofꢀboth newꢀunitsꢀawaitingꢀdeploymentꢀtoꢀaꢀcustomerꢀsiteꢀandꢀpreviouslyꢀdeployedꢀunitsꢀcurrentlyꢀbackꢀwithꢀusꢀtoꢀbeꢀrefurbishedꢀawaiting re-deployment.ꢀRoutineꢀmaintenanceꢀofꢀproperty,ꢀequipmentꢀandꢀleasedꢀgamingꢀequipmentꢀisꢀexpensedꢀinꢀtheꢀperiodꢀincurred, whileꢀmajorꢀcomponentꢀupgradesꢀareꢀcapitalizedꢀandꢀdepreciatedꢀoverꢀtheꢀestimatedꢀremainingꢀusefulꢀlifeꢀofꢀtheꢀcomponent.ꢀSales andꢀretirementsꢀofꢀdepreciableꢀpropertyꢀareꢀrecordedꢀbyꢀremovingꢀtheꢀrelatedꢀcostꢀandꢀaccumulatedꢀdepreciationꢀfromꢀtheꢀaccounts. GainsꢀorꢀlossesꢀonꢀsalesꢀandꢀretirementsꢀofꢀpropertyꢀareꢀreflectedꢀinꢀourꢀStatementsꢀofꢀIncomeꢀ(Loss).ꢀProperty,ꢀequipmentꢀand leasedꢀassetsꢀareꢀreviewedꢀforꢀimpairmentꢀwheneverꢀeventsꢀorꢀcircumstancesꢀindicateꢀthatꢀtheirꢀcarryingꢀamountsꢀmayꢀnotꢀbe recoverable.ꢀImpairmentꢀisꢀindicatedꢀwhenꢀfutureꢀcashꢀflows,ꢀonꢀanꢀundiscountedꢀbasis,ꢀdoꢀnotꢀexceedꢀtheꢀcarryingꢀvalueꢀofꢀthe asset. Placement Fee and Development Agreements Weꢀenterꢀintoꢀplacementꢀfeeꢀand,ꢀtoꢀaꢀcertainꢀextent,ꢀdevelopmentꢀagreementsꢀtoꢀprovideꢀfinancingꢀforꢀtheꢀexpansionꢀofꢀexisting facilities,ꢀorꢀforꢀnewꢀgamingꢀfacilities.ꢀFundsꢀprovidedꢀunderꢀplacementꢀfeeꢀagreementsꢀareꢀnotꢀreimbursed,ꢀwhileꢀfundsꢀprovided underꢀdevelopmentꢀagreementsꢀareꢀreimbursedꢀtoꢀus,ꢀinꢀwhole,ꢀorꢀinꢀpart.ꢀInꢀreturn,ꢀtheꢀfacilityꢀdedicatesꢀaꢀpercentageꢀofꢀitsꢀfloor spaceꢀtoꢀplacementꢀofꢀourꢀplayerꢀterminals,ꢀandꢀweꢀreceiveꢀaꢀfixedꢀpercentageꢀofꢀthoseꢀplayerꢀterminals’ꢀholdꢀamountsꢀperꢀday overꢀtheꢀtermꢀofꢀtheꢀagreement,ꢀwhichꢀisꢀgenerallyꢀfromꢀ12ꢀtoꢀ83ꢀmonths.ꢀCertainꢀofꢀtheꢀagreementsꢀcontainꢀplayerꢀterminal performanceꢀstandardsꢀthatꢀcouldꢀallowꢀtheꢀfacilityꢀtoꢀreduceꢀaꢀportionꢀofꢀourꢀguaranteedꢀfloorꢀspace.ꢀInꢀaddition,ꢀcertainꢀdevelopment agreementsꢀallowꢀtheꢀfacilitiesꢀtoꢀbuyꢀoutꢀfloorꢀspaceꢀafterꢀadvancesꢀthatꢀareꢀsubjectꢀtoꢀrepaymentꢀhaveꢀbeenꢀrepaid.ꢀTheꢀagreements typicallyꢀprovideꢀforꢀaꢀportionꢀofꢀtheꢀamountsꢀretainedꢀbyꢀtheꢀgamingꢀfacilityꢀforꢀtheirꢀshareꢀofꢀtheꢀoperatingꢀprofitsꢀofꢀtheꢀfacility toꢀbeꢀusedꢀtoꢀrepayꢀsomeꢀorꢀallꢀofꢀtheꢀadvancesꢀrecordedꢀasꢀnotesꢀreceivable. Goodwill Goodwillꢀrepresentsꢀtheꢀexcessꢀofꢀtheꢀpurchaseꢀpriceꢀoverꢀtheꢀidentifiableꢀtangibleꢀandꢀintangibleꢀassetsꢀacquiredꢀplusꢀliabilities assumedꢀarisingꢀfromꢀbusinessꢀcombinations.ꢀWeꢀtestꢀforꢀimpairmentꢀannuallyꢀonꢀaꢀreportingꢀunitꢀbasis,ꢀatꢀtheꢀbeginningꢀofꢀour fourthꢀfiscalꢀquarter,ꢀorꢀmoreꢀoftenꢀunderꢀcertainꢀcircumstances.ꢀTheꢀannualꢀimpairmentꢀtestꢀisꢀcompletedꢀusingꢀeither:ꢀaꢀqualitative “Stepꢀ0”ꢀassessmentꢀbasedꢀonꢀreviewingꢀrelevantꢀeventsꢀandꢀcircumstances;ꢀorꢀaꢀquantitativeꢀ“Stepꢀ1”ꢀassessment,ꢀwhichꢀdetermines theꢀfairꢀvalueꢀofꢀtheꢀreportingꢀunit,ꢀusingꢀbothꢀanꢀincomeꢀapproachꢀthatꢀdiscountsꢀfutureꢀcashꢀflowsꢀbasedꢀonꢀtheꢀestimatedꢀfuture resultsꢀofꢀourꢀreportingꢀunitsꢀandꢀaꢀmarketꢀapproachꢀthatꢀcomparesꢀmarketꢀmultiplesꢀofꢀcomparableꢀcompaniesꢀtoꢀdetermineꢀwhether orꢀnotꢀanyꢀimpairmentꢀexists.ꢀIfꢀtheꢀfairꢀvalueꢀofꢀaꢀreportingꢀunitꢀisꢀlessꢀthanꢀitsꢀcarryingꢀamount,ꢀweꢀwillꢀuseꢀtheꢀ“Stepꢀ1”ꢀassessment toꢀdetermineꢀtheꢀimpairment,ꢀinꢀaccordanceꢀwithꢀASCꢀ350,ꢀIntangiblesꢀ-ꢀGoodwillꢀandꢀOther. Ourꢀreportingꢀunitsꢀareꢀidentifiedꢀasꢀoperatingꢀsegmentsꢀorꢀoneꢀlevelꢀbelow.ꢀReportingꢀunitsꢀmust:ꢀ(a)ꢀengageꢀinꢀbusinessꢀactivities fromꢀ whichꢀ theyꢀ earnꢀ revenuesꢀ andꢀ incurꢀ expenses;ꢀ (b)ꢀ haveꢀ operatingꢀ resultsꢀ thatꢀ areꢀ regularlyꢀ reviewedꢀ byꢀ ourꢀ segment managementꢀtoꢀascertainꢀtheꢀresourcesꢀtoꢀbeꢀallocatedꢀtoꢀtheꢀsegmentꢀandꢀassessꢀitsꢀperformance;ꢀandꢀ(c)ꢀhaveꢀdiscreteꢀfinancial 57 informationꢀavailable.ꢀAsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀourꢀreportingꢀunitsꢀincluded:ꢀGames,ꢀCashꢀAccessꢀServices,ꢀKioskꢀSalesꢀand Service,ꢀCentralꢀCreditꢀServices,ꢀandꢀComplianceꢀSalesꢀandꢀServices.ꢀ Other Intangible Assets Otherꢀintangibleꢀassetsꢀareꢀstatedꢀatꢀcost,ꢀlessꢀaccumulatedꢀamortization,ꢀandꢀareꢀcomputedꢀprimarilyꢀusingꢀtheꢀstraight-lineꢀmethod. Otherꢀintangibleꢀassetsꢀconsistꢀprimarilyꢀof:ꢀ(i)ꢀcustomerꢀcontractsꢀ(rightsꢀtoꢀprovideꢀGamesꢀandꢀFinTechꢀservicesꢀtoꢀgaming establishmentꢀ customers),ꢀ developedꢀ technology,ꢀ tradeꢀ namesꢀ andꢀ trademarks,ꢀ andꢀ contractꢀ rightsꢀ acquiredꢀ throughꢀ business combinations;ꢀandꢀ(ii)ꢀcapitalizedꢀsoftwareꢀdevelopmentꢀcosts.ꢀCustomerꢀcontractsꢀrequireꢀusꢀtoꢀmakeꢀrenewalꢀassumptions,ꢀwhich impactꢀtheꢀestimatedꢀusefulꢀlivesꢀofꢀsuchꢀassets.ꢀCapitalizedꢀsoftwareꢀdevelopmentꢀcostsꢀrequireꢀusꢀtoꢀmakeꢀcertainꢀjudgmentsꢀas toꢀtheꢀstagesꢀofꢀdevelopmentꢀandꢀcostsꢀeligibleꢀforꢀcapitalization.ꢀCapitalizedꢀsoftwareꢀcostsꢀplacedꢀinꢀserviceꢀareꢀamortizedꢀover theirꢀusefulꢀlives,ꢀgenerallyꢀnotꢀtoꢀexceedꢀfiveꢀyears.ꢀWeꢀreviewꢀintangibleꢀassetsꢀwheneverꢀeventsꢀorꢀchangesꢀinꢀcircumstances indicateꢀthatꢀtheꢀcarryingꢀamountꢀofꢀanꢀassetꢀmayꢀnotꢀbeꢀrecoverable.ꢀSuchꢀeventsꢀorꢀcircumstancesꢀinclude,ꢀbutꢀareꢀnotꢀlimited to,ꢀaꢀsignificantꢀdecreaseꢀinꢀtheꢀfairꢀvalueꢀofꢀtheꢀunderlyingꢀbusinessꢀorꢀmarketꢀpriceꢀofꢀtheꢀasset,ꢀaꢀsignificantꢀadverseꢀchangeꢀin legalꢀfactorsꢀorꢀbusinessꢀclimateꢀthatꢀcouldꢀaffectꢀtheꢀvalueꢀofꢀanꢀasset,ꢀorꢀaꢀcurrentꢀperiodꢀoperatingꢀorꢀcashꢀflowꢀlossꢀcombined withꢀaꢀhistoryꢀofꢀoperatingꢀorꢀcashꢀflowꢀlosses.ꢀWeꢀgroupꢀintangibleꢀassetsꢀforꢀimpairmentꢀanalysisꢀatꢀtheꢀlowestꢀlevelꢀforꢀwhich identifiableꢀcashꢀflowsꢀareꢀlargelyꢀindependentꢀofꢀtheꢀcashꢀflowsꢀofꢀotherꢀassetsꢀandꢀliabilities.ꢀRecoverabilityꢀofꢀdefiniteꢀlived intangibleꢀassetsꢀisꢀmeasuredꢀbyꢀaꢀcomparisonꢀofꢀtheꢀcarryingꢀamountꢀofꢀtheꢀassetꢀtoꢀfutureꢀnetꢀcashꢀflowsꢀexpectedꢀtoꢀbeꢀgenerated byꢀtheꢀasset,ꢀonꢀanꢀundiscountedꢀbasisꢀandꢀwithoutꢀinterestꢀorꢀtaxes.ꢀAnyꢀimpairmentꢀtoꢀbeꢀrecognizedꢀisꢀmeasuredꢀbyꢀtheꢀamount byꢀwhichꢀtheꢀcarryingꢀamountꢀofꢀtheꢀassetsꢀexceedsꢀtheꢀfairꢀvalueꢀofꢀtheꢀassets. Debt Issuance Costs Debtꢀissuanceꢀcostsꢀincurredꢀinꢀconnectionꢀwithꢀlong-termꢀborrowingsꢀareꢀcapitalizedꢀandꢀamortizedꢀtoꢀinterestꢀexpenseꢀbased uponꢀtheꢀrelatedꢀdebtꢀagreementsꢀusingꢀtheꢀstraight-lineꢀmethod,ꢀwhichꢀapproximatesꢀtheꢀeffectiveꢀinterestꢀmethod.ꢀDebtꢀissuance costsꢀrelatedꢀtoꢀline-of-creditꢀarrangementsꢀareꢀincludedꢀinꢀotherꢀassets,ꢀnon-current,ꢀonꢀourꢀBalanceꢀSheets.ꢀAllꢀotherꢀdebtꢀissuance costsꢀareꢀincludedꢀasꢀcontra-liabilitiesꢀinꢀlong-termꢀdebt. Original Issue Discounts Originalꢀissueꢀdiscountsꢀincurredꢀinꢀconnectionꢀwithꢀlong-termꢀborrowingsꢀareꢀcapitalizedꢀandꢀamortizedꢀtoꢀinterestꢀexpenseꢀbased uponꢀtheꢀrelatedꢀdebtꢀagreementsꢀusingꢀtheꢀstraight-lineꢀmethod,ꢀwhichꢀapproximatesꢀtheꢀeffectiveꢀinterestꢀmethod.ꢀTheseꢀamounts areꢀrecordedꢀasꢀcontra-liabilitiesꢀandꢀincludedꢀinꢀlong-termꢀdebtꢀonꢀourꢀBalanceꢀSheets. Revenue Recognition Overview WeꢀevaluateꢀtheꢀrecognitionꢀofꢀrevenueꢀbasedꢀonꢀtheꢀcriteriaꢀsetꢀforthꢀinꢀASCꢀ606ꢀandꢀASCꢀ840,ꢀasꢀappropriate.ꢀWeꢀrecognize revenueꢀuponꢀtransferringꢀcontrolꢀofꢀgoodsꢀorꢀservicesꢀtoꢀourꢀcustomersꢀinꢀanꢀamountꢀthatꢀreflectsꢀtheꢀconsiderationꢀweꢀexpectꢀto receiveꢀinꢀexchangeꢀforꢀthoseꢀgoodsꢀorꢀservices.ꢀWeꢀenterꢀintoꢀcontractsꢀwithꢀcustomersꢀthatꢀincludeꢀvariousꢀperformanceꢀobligations consistingꢀofꢀgoods,ꢀservices,ꢀorꢀcombinationsꢀofꢀgoodsꢀandꢀservices.ꢀTimingꢀofꢀtheꢀtransferꢀofꢀcontrolꢀvariesꢀbasedꢀonꢀtheꢀnature ofꢀtheꢀcontract.ꢀWeꢀrecognizeꢀrevenueꢀnetꢀofꢀanyꢀsalesꢀandꢀotherꢀtaxesꢀcollectedꢀfromꢀcustomers,ꢀwhichꢀareꢀsubsequentlyꢀremitted toꢀgovernmentalꢀauthoritiesꢀandꢀareꢀnotꢀincludedꢀinꢀrevenuesꢀorꢀoperatingꢀexpenses.ꢀWeꢀmeasureꢀrevenueꢀbasedꢀonꢀtheꢀconsideration specifiedꢀinꢀaꢀcontractꢀwithꢀaꢀcustomerꢀandꢀadjusted,ꢀasꢀnecessary. WeꢀevaluateꢀtheꢀcompositionꢀofꢀourꢀrevenuesꢀtoꢀensureꢀcomplianceꢀwithꢀSECꢀRegulationꢀS-XꢀSectionꢀ210.5-3,ꢀwhichꢀrequiresꢀus toꢀseparatelyꢀpresentꢀcertainꢀcategoriesꢀofꢀrevenuesꢀthatꢀexceedꢀtheꢀquantitativeꢀthresholdꢀonꢀourꢀStatementsꢀofꢀIncomeꢀ(Loss). Significant Judgments WeꢀapplyꢀjudgmentsꢀorꢀestimatesꢀtoꢀdetermineꢀtheꢀperformanceꢀobligationsꢀandꢀtheꢀStand-AloneꢀSellingꢀPriceꢀ(“SSP”)ꢀofꢀeach identifiedꢀperformanceꢀobligation.ꢀTheꢀestablishmentꢀofꢀSSPꢀrequiresꢀjudgmentꢀasꢀtoꢀwhetherꢀthereꢀisꢀaꢀsufficientꢀquantityꢀofꢀitems soldꢀorꢀrenewedꢀonꢀaꢀstand-aloneꢀbasisꢀandꢀthoseꢀpricesꢀdemonstrateꢀanꢀappropriateꢀlevelꢀofꢀconcentrationꢀtoꢀconcludeꢀthatꢀaꢀSSP exists.ꢀTheꢀSSPꢀofꢀourꢀgoodsꢀandꢀservicesꢀareꢀgenerallyꢀdeterminedꢀbasedꢀonꢀobservableꢀprices,ꢀanꢀadjustedꢀmarketꢀassessment approachꢀorꢀanꢀexpectedꢀcostꢀplusꢀmarginꢀapproach.ꢀWeꢀutilizeꢀaꢀresidualꢀapproachꢀonlyꢀwhenꢀtheꢀSSPꢀforꢀperformanceꢀobligations withꢀobservableꢀpricesꢀhaveꢀbeenꢀestablishedꢀandꢀtheꢀremainingꢀperformanceꢀobligationꢀinꢀtheꢀcontractꢀwithꢀaꢀcustomerꢀdoesꢀnot haveꢀanꢀobservableꢀpriceꢀasꢀitꢀisꢀuncertainꢀorꢀhighlyꢀvariableꢀand,ꢀtherefore,ꢀisꢀnotꢀdiscernible. 58 Collectability Toꢀassessꢀcollectability,ꢀweꢀdetermineꢀwhetherꢀitꢀisꢀprobableꢀthatꢀweꢀwillꢀcollectꢀsubstantiallyꢀallꢀofꢀtheꢀconsiderationꢀtoꢀwhichꢀwe areꢀentitledꢀinꢀexchangeꢀforꢀtheꢀgoodsꢀandꢀservicesꢀtransferredꢀtoꢀtheꢀcustomerꢀinꢀaccordanceꢀwithꢀtheꢀtermsꢀandꢀconditionsꢀofꢀthe contract.ꢀInꢀconnectionꢀwithꢀtheseꢀprocedures,ꢀweꢀevaluateꢀtheꢀcustomerꢀusingꢀinternalꢀandꢀexternalꢀinformationꢀavailable,ꢀincluding, butꢀnotꢀlimitedꢀto,ꢀresearchꢀandꢀanalysisꢀofꢀtheꢀcreditꢀhistoryꢀwithꢀtheꢀcustomer.ꢀBasedꢀonꢀtheꢀnatureꢀofꢀourꢀtransactionsꢀandꢀhistorical trends,ꢀweꢀdetermineꢀwhetherꢀourꢀcustomersꢀhaveꢀtheꢀabilityꢀandꢀintentionꢀtoꢀpayꢀtheꢀamountsꢀofꢀconsiderationꢀwhenꢀtheyꢀbecome dueꢀtoꢀidentifyꢀpotentiallyꢀsignificantꢀcreditꢀriskꢀexposure. Contract Combinations - Multiple Promised Goods and Services Ourꢀcontractsꢀmayꢀincludeꢀvariousꢀperformanceꢀobligationsꢀforꢀpromisesꢀtoꢀtransferꢀmultipleꢀgoodsꢀandꢀservicesꢀtoꢀaꢀcustomer, especiallyꢀsinceꢀourꢀGamesꢀandꢀFinTechꢀbusinessesꢀmayꢀenterꢀintoꢀmultipleꢀagreementsꢀwithꢀtheꢀsameꢀcustomerꢀthatꢀmeetꢀthe criteriaꢀtoꢀbeꢀcombinedꢀforꢀaccountingꢀpurposesꢀunderꢀASCꢀ606.ꢀWhenꢀthisꢀoccurs,ꢀaꢀSSPꢀwillꢀbeꢀdeterminedꢀforꢀeachꢀperformance obligationꢀinꢀtheꢀcombinedꢀarrangementꢀandꢀtheꢀconsiderationꢀallocatedꢀbetweenꢀtheꢀrespectiveꢀperformanceꢀobligations.ꢀWeꢀuse ourꢀjudgmentꢀtoꢀanalyzeꢀtheꢀnatureꢀofꢀtheꢀpromisesꢀmadeꢀandꢀdetermineꢀwhetherꢀeachꢀisꢀdistinctꢀorꢀshouldꢀbeꢀcombinedꢀwithꢀother promisesꢀinꢀtheꢀcontractꢀbasedꢀonꢀtheꢀlevelꢀofꢀintegrationꢀandꢀinterdependencyꢀbetweenꢀtheꢀindividualꢀdeliverables. Disaggregation of Revenues Weꢀdisaggregateꢀrevenuesꢀbasedꢀonꢀtheꢀnatureꢀandꢀtimingꢀofꢀtheꢀcashꢀflowsꢀgeneratedꢀbyꢀsuchꢀrevenuesꢀasꢀpresentedꢀinꢀ“Noteꢀ18 -ꢀSegmentꢀInformation.” Outbound Freight Costs Uponꢀtransferringꢀcontrolꢀofꢀaꢀgoodꢀtoꢀaꢀcustomer,ꢀtheꢀshippingꢀandꢀhandlingꢀcostsꢀinꢀconnectionꢀwithꢀsaleꢀtransactionsꢀareꢀaccounted forꢀasꢀfulfillmentꢀcostsꢀandꢀincludedꢀinꢀcostꢀofꢀrevenues. Costs to Acquire a Contract with a Customer Weꢀtypicallyꢀincurꢀincrementalꢀcostsꢀtoꢀacquireꢀcustomerꢀcontractsꢀinꢀtheꢀformꢀofꢀsalesꢀcommissionꢀexpenses.ꢀWeꢀevaluateꢀthose acquisitionꢀcostsꢀforꢀgroupsꢀofꢀcontractsꢀwithꢀsimilarꢀcharacteristics,ꢀbasedꢀonꢀtheꢀnatureꢀofꢀtheꢀtransactions.ꢀTheꢀincrementalꢀcosts toꢀacquireꢀcustomerꢀcontractsꢀidentifiedꢀwouldꢀbeꢀamortizedꢀwithinꢀoneꢀyearꢀand,ꢀasꢀaꢀresult,ꢀweꢀelectedꢀtoꢀutilizeꢀtheꢀpractical expedientꢀsetꢀforthꢀinꢀASCꢀ340-40,ꢀContractꢀCostsꢀ-ꢀIncremental Costs of Obtaining a Contractꢀtoꢀexpenseꢀtheseꢀamountsꢀas incurred. Contract Balances Sinceꢀourꢀcontractsꢀmayꢀincludeꢀmultipleꢀperformanceꢀobligations,ꢀthereꢀisꢀoftenꢀaꢀtimingꢀdifferenceꢀbetweenꢀtheꢀcashꢀcollections andꢀtheꢀsatisfactionꢀofꢀsuchꢀperformanceꢀobligationsꢀandꢀrevenueꢀrecognition.ꢀSuchꢀarrangementsꢀareꢀevaluatedꢀtoꢀdetermine whetherꢀcontractꢀassetsꢀandꢀliabilitiesꢀexist.ꢀWeꢀgenerallyꢀrecordꢀcontractꢀassetsꢀwhenꢀtheꢀtimingꢀofꢀcashꢀcollectionsꢀdiffersꢀfrom whenꢀrevenueꢀisꢀrecognizedꢀdueꢀtoꢀcontractsꢀcontainingꢀspecificꢀperformanceꢀobligationsꢀthatꢀareꢀrequiredꢀtoꢀbeꢀmetꢀpriorꢀtoꢀa customerꢀbeingꢀbilled.ꢀWeꢀgenerallyꢀrecordꢀcontractꢀliabilitiesꢀwhenꢀcashꢀisꢀcollectedꢀinꢀadvanceꢀofꢀusꢀsatisfyingꢀperformance obligations,ꢀincludingꢀthoseꢀthatꢀareꢀsatisfiedꢀoverꢀaꢀperiodꢀofꢀtime.ꢀ 59 Theꢀfollowingꢀtableꢀsummarizesꢀourꢀcontractꢀassetsꢀandꢀcontractꢀliabilitiesꢀarisingꢀfromꢀcontractsꢀwithꢀcustomers: Contract assets(1) ꢀꢀꢀꢀꢀBalanceꢀatꢀJanuaryꢀ1 ꢀꢀꢀꢀꢀBalanceꢀatꢀDecemberꢀ31 Increase (decrease) Contract liabilities(2) ꢀꢀꢀꢀꢀBalanceꢀatꢀJanuaryꢀ1 ꢀꢀꢀꢀꢀBalanceꢀatꢀDecemberꢀ31 Increase (decrease) For the Year Ended December 31, 2018 $ $ 8,433 11,310 2,877 12,397 15,470 3,073 (1)ꢀCurrentꢀportionꢀofꢀcontractꢀassetsꢀisꢀincludedꢀwithinꢀTradeꢀandꢀotherꢀreceivables,ꢀnetꢀandꢀnon-currentꢀportionꢀisꢀincluded withinꢀOtherꢀreceivablesꢀinꢀourꢀBalanceꢀSheets.ꢀ (2)ꢀCurrentꢀportionꢀofꢀcontractꢀliabilitiesꢀisꢀincludedꢀwithinꢀAccountsꢀpayableꢀandꢀaccruedꢀexpensesꢀandꢀnon-currentꢀportionꢀis includedꢀwithinꢀOtherꢀaccruedꢀexpensesꢀandꢀliabilitiesꢀinꢀourꢀBalanceꢀSheets.ꢀ Weꢀrecognizedꢀapproximatelyꢀ$11.4ꢀmillionꢀinꢀrevenueꢀthatꢀwasꢀincludedꢀinꢀtheꢀbeginningꢀcontractꢀliabilityꢀbalanceꢀduring 2018.ꢀ Games Revenues Ourꢀ Gamesꢀ productsꢀ andꢀ servicesꢀ includeꢀ commercialꢀ products,ꢀ suchꢀ asꢀ NativeꢀAmericanꢀ Classꢀ IIꢀ productsꢀ andꢀ otherꢀ bingo products,ꢀClassꢀIIIꢀproducts,ꢀvideoꢀlotteryꢀterminals,ꢀaccountingꢀandꢀcentralꢀdeterminantꢀsystems,ꢀandꢀotherꢀbackꢀofficeꢀsystems. Weꢀ conductꢀ ourꢀ Gamesꢀ segmentꢀ businessꢀ basedꢀ onꢀ resultsꢀ generatedꢀ fromꢀ theꢀ followingꢀ majorꢀ revenueꢀ streams:ꢀ (i)ꢀ Gaming Operations;ꢀ(ii)ꢀGamingꢀEquipmentꢀandꢀSystems;ꢀandꢀ(iii)ꢀGamingꢀOther. Gaming Operations Gamesꢀrevenuesꢀareꢀprimarilyꢀgeneratedꢀbyꢀourꢀgamingꢀoperationsꢀunderꢀplacement,ꢀparticipation,ꢀandꢀdevelopmentꢀarrangements, inꢀwhichꢀweꢀprovideꢀourꢀcustomersꢀwithꢀplayerꢀterminals,ꢀincludingꢀTournEvent®ꢀthatꢀallowsꢀoperatorsꢀtoꢀswitchꢀfromꢀin-revenue gamingꢀ toꢀ out-of-revenueꢀ tournaments,ꢀ playerꢀ terminal-contentꢀ licenses,ꢀ local-areaꢀ progressiveꢀ machines,ꢀ andꢀ back-office equipment,ꢀcollectivelyꢀreferredꢀtoꢀhereinꢀasꢀleasedꢀgamingꢀequipment.ꢀWeꢀevaluateꢀtheꢀrecognitionꢀofꢀleaseꢀrevenuesꢀbasedꢀon criteriaꢀsetꢀforthꢀinꢀASCꢀ840.ꢀGenerally,ꢀunderꢀtheseꢀarrangements,ꢀweꢀretainꢀownershipꢀofꢀtheꢀmachinesꢀinstalledꢀatꢀcustomer facilities.ꢀWeꢀreceiveꢀrecurringꢀrevenueꢀbasedꢀonꢀaꢀpercentageꢀofꢀtheꢀnetꢀwinꢀperꢀdayꢀgeneratedꢀbyꢀtheꢀleasedꢀgamingꢀequipment orꢀaꢀfixedꢀdailyꢀfee.ꢀRevenuesꢀfromꢀleaseꢀparticipationꢀorꢀdailyꢀfeeꢀarrangementsꢀareꢀconsideredꢀbothꢀrealizableꢀandꢀearnedꢀatꢀthe endꢀofꢀeachꢀgamingꢀday.ꢀGamingꢀoperationsꢀrevenuesꢀgeneratedꢀbyꢀleasedꢀgamingꢀequipmentꢀdeployedꢀatꢀsitesꢀunderꢀdevelopment orꢀplacementꢀfeeꢀagreementsꢀgiveꢀriseꢀtoꢀcontractꢀrights,ꢀwhichꢀareꢀamountsꢀrecordedꢀtoꢀintangibleꢀassetsꢀforꢀdedicatedꢀfloorꢀspace resultingꢀfromꢀsuchꢀagreements.ꢀTheꢀgamingꢀoperationsꢀrevenuesꢀgeneratedꢀbyꢀtheseꢀarrangementsꢀareꢀreducedꢀbyꢀtheꢀaccretion ofꢀcontractꢀrights,ꢀwhichꢀrepresentsꢀtheꢀrelatedꢀamortizationꢀofꢀtheꢀcontractꢀrightsꢀrecordedꢀinꢀconnectionꢀwithꢀthoseꢀagreements. GamingꢀoperationsꢀleaseꢀrevenuesꢀaccountedꢀforꢀunderꢀASCꢀ840ꢀareꢀgenerallyꢀshort-termꢀinꢀnatureꢀwithꢀpaymentꢀtermsꢀranging fromꢀ30ꢀtoꢀ90ꢀdays.ꢀWeꢀrecognizedꢀ$136.6ꢀmillion,ꢀ$126.1ꢀmillion,ꢀandꢀ$134.0ꢀmillionꢀinꢀleaseꢀrevenuesꢀforꢀtheꢀyearsꢀended Decemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively.ꢀ GamingꢀoperationsꢀrevenuesꢀincludeꢀamountsꢀgeneratedꢀbyꢀWideꢀAreaꢀProgressiveꢀ(“WAP”)ꢀsystems,ꢀwhichꢀareꢀrecognizedꢀunder ASCꢀ606.ꢀWAPꢀconsistsꢀofꢀlinkedꢀslotꢀmachinesꢀlocatedꢀinꢀmultipleꢀcasinoꢀpropertiesꢀthatꢀareꢀconnectedꢀtoꢀaꢀcentralꢀsystem.ꢀWAP- basedꢀgamingꢀmachinesꢀhaveꢀaꢀprogressiveꢀjackpotꢀweꢀadministerꢀthatꢀincreasesꢀwithꢀeveryꢀwagerꢀuntilꢀaꢀplayerꢀwinsꢀtheꢀtopꢀaward combination.ꢀ Casinoꢀ operatorsꢀ payꢀ usꢀ aꢀ percentageꢀ ofꢀ theꢀ coin-inꢀ (theꢀ totalꢀ amountꢀ wagered),ꢀ aꢀ percentageꢀ ofꢀ netꢀ win,ꢀ orꢀ a combinationꢀofꢀbothꢀforꢀservicesꢀrelatedꢀtoꢀtheꢀdesign,ꢀassembly,ꢀinstallation,ꢀoperation,ꢀmaintenance,ꢀadministration,ꢀandꢀmarketing ofꢀtheꢀWAPꢀsystems.ꢀTheꢀgamingꢀoperationsꢀrevenuesꢀwithꢀrespectꢀtoꢀWAPꢀmachinesꢀcompriseꢀaꢀseparateꢀperformanceꢀobligation andꢀareꢀrecognizedꢀoverꢀtimeꢀbasedꢀonꢀtheꢀamountꢀexpectedꢀtoꢀbeꢀreceivedꢀwithꢀanyꢀvariabilityꢀbeingꢀresolvedꢀinꢀtheꢀreporting period.ꢀTheseꢀarrangementsꢀareꢀgenerallyꢀshort-termꢀinꢀnatureꢀwithꢀaꢀmajorityꢀofꢀinvoicesꢀpayableꢀwithinꢀ30ꢀtoꢀ45ꢀdays.ꢀSuch revenuesꢀareꢀpresentedꢀinꢀtheꢀStatementsꢀofꢀIncomeꢀ(Loss)ꢀnetꢀofꢀtheꢀjackpotꢀexpense,ꢀwhichꢀisꢀcomprisedꢀofꢀincrementalꢀamounts fundedꢀbyꢀaꢀportionꢀofꢀtheꢀcoin-inꢀfromꢀplayers.ꢀAtꢀtheꢀtimeꢀaꢀjackpotꢀisꢀwonꢀbyꢀaꢀplayer,ꢀanꢀadditionalꢀjackpotꢀexpenseꢀisꢀrecorded 60 withꢀrespectꢀtoꢀtheꢀbaseꢀseedꢀamountꢀrequiredꢀtoꢀfundꢀtheꢀminimumꢀlevelꢀrequiredꢀbyꢀtheꢀrespectiveꢀWAPꢀarrangementꢀwithꢀthe casinoꢀoperator.ꢀ GamingꢀoperationsꢀrevenuesꢀalsoꢀincludeꢀamountsꢀreceivedꢀinꢀconnectionꢀwithꢀourꢀrelationshipꢀwithꢀtheꢀNewꢀYorkꢀStateꢀGaming CommissionꢀtoꢀprovideꢀanꢀaccountingꢀandꢀcentralꢀdeterminantꢀsystemꢀforꢀtheꢀVLTsꢀinꢀoperationꢀatꢀlicensedꢀStateꢀofꢀNewꢀYork gamingꢀfacilities.ꢀPursuantꢀtoꢀourꢀagreementꢀwithꢀtheꢀNewꢀYorkꢀStateꢀGamingꢀCommission,ꢀweꢀreceiveꢀaꢀportionꢀofꢀtheꢀnetwork- wideꢀnetꢀwinꢀ(generally,ꢀcash-inꢀlessꢀprizesꢀpaid)ꢀperꢀdayꢀinꢀexchangeꢀforꢀprovisionꢀandꢀmaintenanceꢀofꢀtheꢀcentralꢀdeterminant systemꢀandꢀrecordsꢀitꢀinꢀaccordanceꢀwithꢀASCꢀ606.ꢀWeꢀalsoꢀprovideꢀcentralꢀdeterminantꢀsystemꢀtechnologyꢀtoꢀNativeꢀAmerican tribesꢀinꢀotherꢀlicensedꢀjurisdictionsꢀforꢀwhichꢀweꢀreceiveꢀaꢀportionꢀofꢀtheꢀrevenueꢀgeneratedꢀfromꢀtheꢀVLTsꢀconnectedꢀtoꢀthe system.ꢀTheseꢀarrangementsꢀareꢀgenerallyꢀshort-termꢀinꢀnatureꢀwithꢀpaymentsꢀdueꢀmonthly.ꢀ Gamingꢀ operationsꢀ revenuesꢀ alsoꢀ includeꢀ amountsꢀ generatedꢀ byꢀ ourꢀ Interactiveꢀ offeringꢀ comprisedꢀ ofꢀ business-to-consumer (“B2C”)ꢀandꢀbusiness-to-businessꢀ(“B2B”)ꢀactivities.ꢀB2Cꢀrelatesꢀtoꢀgamesꢀofferedꢀdirectlyꢀtoꢀconsumersꢀtoꢀplayꢀwithꢀvirtual currencyꢀwhichꢀcanꢀbeꢀpurchasedꢀthroughꢀourꢀsocial,ꢀmobileꢀapplication.ꢀControlꢀtransfersꢀandꢀweꢀrecognizeꢀrevenuesꢀinꢀaccordance withꢀASCꢀ606ꢀfromꢀplayerꢀpurchasesꢀofꢀvirtualꢀcurrencyꢀasꢀitꢀisꢀconsumedꢀforꢀgameꢀplay,ꢀwhichꢀisꢀbasedꢀonꢀaꢀhistoricalꢀdata analysis.ꢀB2Bꢀrelatesꢀtoꢀgamesꢀofferedꢀtoꢀtheꢀonlineꢀbusinessꢀpartners,ꢀorꢀsocialꢀcasinos,ꢀwhoꢀthenꢀofferꢀtheꢀgamesꢀtoꢀconsumers. OurꢀB2BꢀarrangementsꢀprimarilyꢀprovideꢀaccessꢀtoꢀourꢀgameꢀcontentꢀandꢀrevenueꢀisꢀrecognizedꢀinꢀaccordanceꢀwithꢀASCꢀ606ꢀas theꢀcontrolꢀtransfersꢀuponꢀtheꢀonlineꢀbusinessꢀpartners’ꢀdailyꢀaccessꢀtoꢀsuchꢀcontentꢀbasedꢀonꢀeitherꢀaꢀflatꢀfeeꢀorꢀrevenueꢀshare arrangementsꢀwithꢀtheꢀsocialꢀcasinos.ꢀ Gaming Equipment and Systems GamingꢀequipmentꢀandꢀsystemsꢀrevenuesꢀareꢀaccountedꢀforꢀunderꢀASCꢀ606ꢀandꢀareꢀderivedꢀfromꢀtheꢀsaleꢀofꢀsomeꢀcombination of:ꢀ(a)ꢀgamingꢀequipmentꢀandꢀplayerꢀterminals,ꢀincludingꢀTournEvent®ꢀthatꢀallowsꢀoperatorsꢀtoꢀswitchꢀfromꢀin-revenueꢀgaming toꢀout-of-revenueꢀtournaments;ꢀ(b)ꢀgameꢀcontent;ꢀ(c)ꢀlicenseꢀfees;ꢀ(d)ꢀancillaryꢀequipment;ꢀandꢀ(e)ꢀmaintenance.ꢀSuchꢀarrangements areꢀpredominatelyꢀshort-termꢀinꢀnatureꢀwithꢀpaymentꢀtermsꢀrangingꢀfromꢀ30ꢀtoꢀ180ꢀdaysꢀwithꢀcertainꢀagreementsꢀprovidingꢀfor extendedꢀpaymentꢀterms,ꢀrangingꢀfromꢀ12ꢀtoꢀ24ꢀmonths.ꢀOurꢀcontractsꢀwithꢀcustomersꢀdoꢀnotꢀcontainꢀanyꢀfinancingꢀcomponents thatꢀ haveꢀ beenꢀ determinedꢀ toꢀ beꢀ significantꢀ toꢀ theꢀ contract.ꢀ Performanceꢀ obligationsꢀ forꢀ gamingꢀ equipmentꢀ andꢀ systems arrangementsꢀ includeꢀ gamingꢀ equipment,ꢀ playerꢀ terminals,ꢀ content,ꢀ systemꢀ software,ꢀ licenseꢀ fees,ꢀ ancillaryꢀ equipment, maintenance,ꢀorꢀvariousꢀcombinationsꢀthereof.ꢀGamingꢀequipmentꢀandꢀsystemsꢀareꢀrecognizedꢀatꢀaꢀpointꢀinꢀtimeꢀwhenꢀcontrolꢀof theꢀpromisedꢀgoodsꢀandꢀservicesꢀtransfersꢀtoꢀtheꢀcustomerꢀgenerallyꢀuponꢀshipmentꢀorꢀdeliveryꢀpursuantꢀtoꢀtheꢀtermsꢀofꢀtheꢀcontract. Theꢀperformanceꢀobligationsꢀareꢀgenerallyꢀsatisfiedꢀatꢀtheꢀsameꢀtimeꢀorꢀwithinꢀaꢀshortꢀperiodꢀofꢀtime.ꢀ Gaming Other GamingꢀotherꢀrevenuesꢀconsistꢀofꢀamountsꢀgeneratedꢀbyꢀourꢀTournEvent of Champions®ꢀnationalꢀtournamentꢀthatꢀallowsꢀwinners ofꢀlocalꢀandꢀregionalꢀtournamentsꢀthroughoutꢀtheꢀyearꢀtoꢀparticipateꢀinꢀaꢀnationalꢀtournamentꢀthatꢀresultsꢀinꢀtheꢀdeterminationꢀof aꢀfinalꢀchampion.ꢀSuchꢀrevenuesꢀareꢀaccountedꢀforꢀunderꢀASCꢀ606. Asꢀtheꢀcustomerꢀsimultaneouslyꢀreceivesꢀandꢀconsumesꢀthe benefitsꢀofꢀourꢀperformanceꢀasꢀitꢀoccurs,ꢀrevenuesꢀareꢀrecognizedꢀasꢀearnedꢀoverꢀaꢀperiodꢀofꢀtimeꢀusingꢀanꢀoutputꢀmethodꢀdepicting theꢀtransferꢀofꢀcontrolꢀtoꢀtheꢀcustomer.ꢀTheseꢀarrangementsꢀareꢀgenerallyꢀshort-termꢀinꢀnatureꢀwithꢀpaymentꢀtermsꢀrangingꢀfrom 30ꢀtoꢀ90ꢀdays. FinTech Revenues Cash Access Services CashꢀaccessꢀservicesꢀrevenuesꢀareꢀaccountedꢀforꢀunderꢀASCꢀ606ꢀandꢀareꢀgenerallyꢀcomprisedꢀofꢀtheꢀfollowingꢀdistinctꢀperformance obligations:ꢀcashꢀadvance,ꢀATM,ꢀandꢀcheckꢀservices.ꢀWeꢀdoꢀnotꢀcontrolꢀtheꢀcashꢀadvanceꢀandꢀATMꢀservicesꢀprovidedꢀtoꢀaꢀcustomer and,ꢀtherefore,ꢀweꢀareꢀactingꢀasꢀanꢀagentꢀwhoseꢀperformanceꢀobligationꢀisꢀtoꢀarrangeꢀforꢀtheꢀprovisionꢀofꢀtheseꢀservices.ꢀOurꢀcash accessꢀservicesꢀinvolveꢀtheꢀmovementꢀofꢀfundsꢀbetweenꢀtheꢀvariousꢀpartiesꢀassociatedꢀwithꢀcashꢀaccessꢀtransactionsꢀandꢀgiveꢀrise toꢀsettlementꢀreceivablesꢀandꢀsettlementꢀliabilities,ꢀbothꢀofꢀwhichꢀareꢀsettledꢀinꢀdaysꢀfollowingꢀtheꢀtransaction.ꢀ Cashꢀadvanceꢀrevenuesꢀareꢀcomprisedꢀofꢀtransactionꢀfeesꢀassessedꢀtoꢀgamingꢀpatronsꢀinꢀconnectionꢀwithꢀcreditꢀcardꢀcashꢀaccess andꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransactions.ꢀSuchꢀfeesꢀareꢀprimarilyꢀbasedꢀonꢀaꢀcombinationꢀofꢀaꢀfixedꢀamountꢀplusꢀaꢀpercentage ofꢀtheꢀfaceꢀamountꢀofꢀtheꢀcreditꢀcardꢀcashꢀaccessꢀorꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransactionꢀamount.ꢀInꢀconnectionꢀwithꢀtheseꢀtypes ofꢀ transactions,ꢀ weꢀ reportꢀ certainꢀ directꢀ costsꢀ incurredꢀ asꢀ reductionsꢀ toꢀ revenuesꢀ onꢀ aꢀ netꢀ basis,ꢀ whichꢀ generallyꢀ include:ꢀ (i) commissionꢀexpensesꢀpayableꢀtoꢀcasinoꢀoperators;ꢀ(ii)ꢀinterchangeꢀfeesꢀpayableꢀtoꢀtheꢀnetworkꢀassociations;ꢀandꢀ(iii)ꢀprocessing andꢀrelatedꢀcostsꢀpayableꢀtoꢀotherꢀthirdꢀpartyꢀpartners. ATMꢀrevenuesꢀareꢀprimarilyꢀcomprisedꢀofꢀtransactionꢀfeesꢀinꢀtheꢀformꢀofꢀcardholderꢀsurchargesꢀassessedꢀtoꢀgamingꢀpatronsꢀin connectionꢀwithꢀATMꢀcashꢀwithdrawalsꢀatꢀtheꢀtimeꢀtheꢀtransactionsꢀareꢀauthorizedꢀandꢀreverseꢀinterchangeꢀfeesꢀpaidꢀtoꢀusꢀbyꢀthe 61 patrons’ꢀissuingꢀbanks.ꢀTheꢀcardholderꢀsurchargesꢀassessedꢀtoꢀgamingꢀpatronsꢀinꢀconnectionꢀwithꢀATMꢀcashꢀwithdrawalsꢀare currentlyꢀaꢀfixedꢀdollarꢀamountꢀandꢀnotꢀaꢀpercentageꢀofꢀtheꢀtransactionꢀamount.ꢀInꢀconnectionꢀwithꢀtheseꢀtypesꢀofꢀtransactions,ꢀwe reportꢀcertainꢀdirectꢀcostsꢀincurredꢀasꢀreductionsꢀtoꢀrevenuesꢀonꢀaꢀnetꢀbasis,ꢀwhichꢀgenerallyꢀinclude:ꢀ(i)ꢀcommissionꢀexpenses payableꢀtoꢀcasinoꢀoperators;ꢀ(ii)ꢀinterchangeꢀfeesꢀpayableꢀtoꢀtheꢀnetworkꢀassociations;ꢀandꢀ(iii)ꢀprocessingꢀandꢀrelatedꢀcostsꢀpayable toꢀotherꢀthirdꢀpartyꢀpartners. Checkꢀservicesꢀrevenuesꢀareꢀprincipallyꢀcomprisedꢀofꢀcheckꢀwarrantyꢀrevenuesꢀandꢀareꢀgenerallyꢀbasedꢀuponꢀaꢀpercentageꢀofꢀthe faceꢀamountꢀofꢀchecksꢀwarranted.ꢀTheseꢀfeesꢀareꢀpaidꢀtoꢀusꢀbyꢀgamingꢀestablishments. Forꢀcashꢀaccessꢀservicesꢀarrangements,ꢀsinceꢀtheꢀcustomerꢀsimultaneouslyꢀreceivesꢀandꢀconsumesꢀtheꢀbenefitsꢀasꢀtheꢀperformance obligationsꢀoccur,ꢀweꢀrecognizeꢀrevenuesꢀasꢀearnedꢀoverꢀaꢀperiodꢀofꢀtimeꢀusingꢀanꢀoutputꢀmethodꢀdepictingꢀtheꢀtransferꢀofꢀcontrol toꢀtheꢀcustomerꢀbasedꢀonꢀvariableꢀconsideration,ꢀsuchꢀasꢀvolumeꢀofꢀtransactionsꢀprocessedꢀwithꢀvariabilityꢀgenerallyꢀresolvedꢀin theꢀreportingꢀperiod. Equipment EquipmentꢀrevenuesꢀareꢀderivedꢀfromꢀtheꢀsaleꢀofꢀequipmentꢀandꢀareꢀaccountedꢀforꢀunderꢀASCꢀ606.ꢀRevenuesꢀareꢀrecognizedꢀatꢀa pointꢀinꢀtimeꢀwhenꢀcontrolꢀofꢀtheꢀpromisedꢀgoodsꢀandꢀservicesꢀtransfersꢀtoꢀtheꢀcustomerꢀgenerallyꢀuponꢀshipmentꢀorꢀdelivery pursuantꢀtoꢀtheꢀtermsꢀofꢀtheꢀcontract.ꢀTheseꢀsalesꢀcontractsꢀareꢀgenerallyꢀshort-termꢀinꢀnatureꢀwithꢀpaymentꢀtermsꢀrangingꢀfrom 30ꢀtoꢀ90ꢀdays.ꢀ Information Services and Other InformationꢀservicesꢀandꢀotherꢀrevenuesꢀareꢀaccountedꢀforꢀunderꢀASCꢀ606ꢀandꢀincludeꢀamountsꢀderivedꢀfromꢀtheꢀsaleꢀof:ꢀ(i) softwareꢀlicenses,ꢀsoftwareꢀsubscriptions,ꢀprofessionalꢀservicesꢀandꢀcertainꢀotherꢀancillaryꢀfees;ꢀ(ii)ꢀserviceꢀrelatedꢀfeesꢀassociated withꢀtheꢀsale,ꢀinstallation,ꢀandꢀmaintenanceꢀofꢀequipmentꢀdirectlyꢀtoꢀourꢀcustomersꢀunderꢀcontracts,ꢀwhichꢀareꢀgenerallyꢀshort- termꢀinꢀnatureꢀwithꢀpaymentꢀtermsꢀrangingꢀfromꢀ30ꢀtoꢀ90ꢀdays,ꢀsecuredꢀbyꢀtheꢀrelatedꢀequipment;ꢀ(iii)ꢀcreditꢀworthiness-related softwareꢀsubscriptionꢀservicesꢀthatꢀareꢀbasedꢀuponꢀeitherꢀaꢀflatꢀmonthlyꢀunlimitedꢀusageꢀfeeꢀorꢀaꢀvariableꢀfeeꢀstructureꢀdrivenꢀby theꢀvolumeꢀofꢀpatronꢀcreditꢀhistoriesꢀgenerated;ꢀandꢀ(iv)ꢀancillaryꢀmarketing,ꢀdatabase,ꢀandꢀInternet-basedꢀgamingꢀrelatedꢀactivities. Ourꢀsoftwareꢀrepresentsꢀaꢀfunctionalꢀright-to-useꢀlicenseꢀandꢀtheꢀrevenuesꢀareꢀrecognizedꢀasꢀearnedꢀatꢀaꢀpointꢀinꢀtime.ꢀSubscription servicesꢀareꢀrecognizedꢀoverꢀaꢀperiodꢀofꢀtimeꢀusingꢀanꢀinputꢀmethodꢀbasedꢀonꢀtimeꢀelapsedꢀasꢀweꢀtransferꢀtheꢀcontrolꢀratablyꢀby providingꢀaꢀstand-readyꢀservice.ꢀProfessionalꢀandꢀotherꢀservicesꢀrevenuesꢀareꢀrecognizedꢀoverꢀaꢀperiodꢀofꢀtimeꢀusingꢀanꢀinput methodꢀbasedꢀonꢀtimeꢀelapsedꢀasꢀservicesꢀareꢀprovided,ꢀtherebyꢀreflectingꢀtheꢀtransferꢀofꢀcontrolꢀtoꢀtheꢀcustomer. Cost of Revenues (Exclusive of Depreciation and Amortization) Theꢀcostꢀofꢀrevenuesꢀ(exclusiveꢀofꢀdepreciationꢀandꢀamortization)ꢀrepresentsꢀtheꢀdirectꢀcostsꢀrequiredꢀtoꢀperformꢀrevenueꢀgenerating transactions.ꢀTheꢀcostsꢀincludedꢀwithinꢀcostꢀofꢀrevenuesꢀ(exclusiveꢀofꢀdepreciationꢀandꢀamortization)ꢀareꢀinventoryꢀandꢀrelated costsꢀassociatedꢀwithꢀtheꢀsaleꢀofꢀourꢀfullyꢀintegratedꢀkiosks,ꢀelectronicꢀgamingꢀmachinesꢀandꢀsystemꢀsale,ꢀcheckꢀcashingꢀwarranties, fieldꢀservice,ꢀandꢀnetworkꢀoperationsꢀpersonnel. Advertising, Marketing, and Promotional Costs Weꢀexpenseꢀadvertising,ꢀmarketing,ꢀandꢀpromotionalꢀcostsꢀasꢀincurred.ꢀTotalꢀadvertising,ꢀmarketing,ꢀandꢀpromotionalꢀcosts,ꢀincluded inꢀoperatingꢀexpensesꢀinꢀtheꢀStatementsꢀofꢀIncomeꢀ(Loss),ꢀwereꢀ$3.4ꢀmillion,ꢀ$1.1ꢀmillion,ꢀandꢀ$1.2ꢀmillionꢀforꢀtheꢀyearsꢀended Decemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively. Research and Development Costs Weꢀconductꢀresearchꢀandꢀdevelopmentꢀactivitiesꢀprimarilyꢀtoꢀdevelopꢀgamingꢀsystems,ꢀgameꢀengines,ꢀcasinoꢀdataꢀmanagement systems,ꢀcasinoꢀcentralꢀmonitoringꢀsystems,ꢀvideoꢀlotteryꢀoutcomeꢀdeterminationꢀsystems,ꢀgamingꢀplatformsꢀandꢀgamingꢀcontent, andꢀtoꢀenhanceꢀourꢀexistingꢀproductꢀlines.ꢀWeꢀbelieveꢀourꢀabilityꢀtoꢀdeliverꢀdifferentiated,ꢀappealingꢀproductsꢀandꢀservicesꢀtoꢀthe marketplaceꢀisꢀbasedꢀonꢀourꢀresearchꢀandꢀdevelopmentꢀinvestments,ꢀandꢀweꢀexpectꢀtoꢀcontinueꢀtoꢀmakeꢀsuchꢀinvestmentsꢀinꢀthe future.ꢀResearchꢀandꢀdevelopmentꢀcostsꢀconsistꢀprimarilyꢀofꢀsalariesꢀandꢀbenefits,ꢀconsultingꢀfees,ꢀandꢀgameꢀlabꢀtestingꢀfees.ꢀOnce theꢀtechnologicalꢀfeasibilityꢀofꢀaꢀprojectꢀhasꢀbeenꢀestablished,ꢀitꢀisꢀcapitalizedꢀuntilꢀitꢀbecomesꢀavailableꢀforꢀgeneralꢀrelease.ꢀ Researchꢀandꢀdevelopmentꢀcostsꢀwereꢀ$20.5ꢀmillion,ꢀ$18.9ꢀmillion,ꢀandꢀ$19.4ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018, 2017,ꢀandꢀ2016,ꢀrespectively. 62 Income Taxes WeꢀareꢀsubjectꢀtoꢀincomeꢀtaxesꢀinꢀtheꢀUnitedꢀStatesꢀasꢀwellꢀasꢀvariousꢀstatesꢀandꢀforeignꢀjurisdictionsꢀinꢀwhichꢀweꢀoperate.ꢀIn accordanceꢀwithꢀaccountingꢀguidance,ꢀourꢀincomeꢀtaxesꢀincludeꢀamountsꢀfromꢀdomesticꢀandꢀinternationalꢀjurisdictions.ꢀDueꢀto theꢀ2017ꢀTaxꢀAct,ꢀthereꢀisꢀnoꢀU.S.ꢀfederalꢀtaxꢀonꢀcashꢀrepatriationꢀfromꢀforeignꢀsubsidiaries;ꢀhowever,ꢀweꢀcouldꢀbeꢀsubjectꢀto foreignꢀwithholdingꢀtaxꢀandꢀU.S.ꢀstateꢀincomeꢀtaxes.ꢀTheꢀ2017ꢀTaxꢀActꢀalsoꢀsubjectsꢀourꢀforeignꢀsubsidiaryꢀearningsꢀtoꢀtheꢀGlobal IntangibleꢀLow-TaxedꢀIncomeꢀ(“GILTI”)ꢀtaxꢀprovisions.ꢀSomeꢀitemsꢀofꢀincomeꢀandꢀexpenseꢀareꢀnotꢀreportedꢀinꢀtaxꢀreturnsꢀand ourꢀFinancialꢀStatementsꢀinꢀtheꢀsameꢀyear.ꢀTheꢀtaxꢀeffectꢀofꢀsuchꢀtemporaryꢀdifferencesꢀisꢀreportedꢀasꢀdeferredꢀincomeꢀtaxes. Ourꢀdeferredꢀtaxꢀassetsꢀandꢀliabilitiesꢀareꢀrecognizedꢀforꢀtheꢀexpectedꢀfutureꢀtaxꢀconsequencesꢀofꢀeventsꢀthatꢀhaveꢀbeenꢀincluded inꢀourꢀFinancialꢀStatementsꢀorꢀincomeꢀtaxꢀreturns.ꢀDeferredꢀtaxꢀassetsꢀandꢀliabilitiesꢀareꢀdeterminedꢀbasedꢀuponꢀdifferencesꢀbetween financialꢀstatementꢀcarryingꢀamountsꢀofꢀexistingꢀassetsꢀandꢀtheirꢀrespectiveꢀtaxꢀbasesꢀusingꢀenactedꢀtaxꢀratesꢀexpectedꢀtoꢀapplyꢀto taxableꢀincomeꢀinꢀyearsꢀinꢀwhichꢀthoseꢀtemporaryꢀdifferencesꢀareꢀexpectedꢀtoꢀbeꢀrecoveredꢀorꢀsettled.ꢀTheꢀeffectꢀonꢀtheꢀincome taxꢀprovisionꢀorꢀbenefitꢀandꢀdeferredꢀtaxꢀassetsꢀandꢀliabilitiesꢀforꢀaꢀchangeꢀinꢀratesꢀisꢀrecognizedꢀinꢀtheꢀStatementsꢀofꢀIncomeꢀ(Loss) inꢀtheꢀperiodꢀthatꢀincludesꢀtheꢀenactmentꢀdate. Whenꢀmeasuringꢀdeferredꢀtaxꢀassets,ꢀcertainꢀestimatesꢀandꢀassumptionsꢀareꢀrequiredꢀtoꢀassessꢀwhetherꢀaꢀvaluationꢀallowanceꢀshould beꢀestablishedꢀbyꢀevaluatingꢀbothꢀpositiveꢀandꢀnegativeꢀfactorsꢀinꢀaccordanceꢀwithꢀaccountingꢀguidance.ꢀThisꢀevaluationꢀrequires thatꢀweꢀexerciseꢀjudgmentꢀinꢀdeterminingꢀtheꢀrelativeꢀsignificanceꢀofꢀeachꢀfactor.ꢀTheꢀassessmentꢀofꢀtheꢀvaluationꢀallowance involvesꢀ significantꢀ estimatesꢀ regardingꢀ futureꢀ taxableꢀ incomeꢀ andꢀ whenꢀ itꢀ isꢀ recognized,ꢀ theꢀ amountꢀ andꢀ timingꢀ ofꢀ taxable differences,ꢀtheꢀreversalꢀofꢀtemporaryꢀdifferencesꢀandꢀtheꢀimplementationꢀofꢀtax-planningꢀstrategies.ꢀAꢀvaluationꢀallowanceꢀis establishedꢀbasedꢀonꢀtheꢀweightꢀofꢀavailableꢀevidence,ꢀincludingꢀbothꢀpositiveꢀandꢀnegativeꢀindicators,ꢀifꢀitꢀisꢀmoreꢀlikelyꢀthanꢀnot thatꢀaꢀportion,ꢀorꢀall,ꢀofꢀtheꢀdeferredꢀtaxꢀassetsꢀwillꢀnotꢀbeꢀrealized.ꢀGreaterꢀweightꢀisꢀgivenꢀtoꢀevidenceꢀthatꢀisꢀobjectivelyꢀverifiable, mostꢀnotablyꢀhistoricalꢀresults.ꢀIfꢀweꢀreportꢀaꢀcumulativeꢀlossꢀfromꢀcontinuingꢀoperationsꢀbeforeꢀincomeꢀtaxesꢀforꢀaꢀreasonable periodꢀofꢀtime,ꢀthisꢀformꢀofꢀnegativeꢀevidenceꢀisꢀdifficultꢀtoꢀovercome.ꢀTherefore,ꢀweꢀincludeꢀcertainꢀaspectsꢀofꢀourꢀhistorical resultsꢀinꢀourꢀforecastsꢀofꢀfutureꢀtaxableꢀincome,ꢀasꢀweꢀdoꢀnotꢀhaveꢀtheꢀabilityꢀtoꢀsolelyꢀrelyꢀonꢀforecastedꢀimprovementsꢀinꢀearnings toꢀrecoverꢀdeferredꢀtaxꢀassets.ꢀWhenꢀweꢀreportꢀaꢀcumulativeꢀlossꢀposition,ꢀtoꢀtheꢀextentꢀourꢀresultsꢀofꢀoperationsꢀimprove,ꢀsuch thatꢀweꢀhaveꢀtheꢀabilityꢀtoꢀovercomeꢀtheꢀmoreꢀlikelyꢀthanꢀnotꢀaccountingꢀstandard,ꢀweꢀmayꢀbeꢀableꢀtoꢀreverseꢀtheꢀvaluationꢀallowance inꢀtheꢀapplicableꢀperiodꢀofꢀdetermination.ꢀInꢀaddition,ꢀweꢀrelyꢀonꢀdeferredꢀtaxꢀliabilitiesꢀinꢀourꢀassessmentꢀofꢀtheꢀrealizabilityꢀof deferredꢀtaxꢀassetsꢀifꢀtheꢀtemporaryꢀtimingꢀdifferenceꢀisꢀanticipatedꢀtoꢀreverseꢀinꢀtheꢀsameꢀperiodꢀandꢀjurisdictionꢀandꢀtheꢀdeferred taxꢀliabilitiesꢀareꢀofꢀtheꢀsameꢀcharacterꢀasꢀtheꢀtemporaryꢀdifferencesꢀgivingꢀriseꢀtoꢀtheꢀdeferredꢀtaxꢀassets. WeꢀalsoꢀfollowꢀaccountingꢀguidanceꢀtoꢀaccountꢀforꢀuncertaintyꢀinꢀincomeꢀtaxesꢀasꢀrecognizedꢀinꢀourꢀFinancialꢀStatements.ꢀThe accountingꢀstandardꢀcreatesꢀaꢀsingleꢀmodelꢀtoꢀaddressꢀuncertaintyꢀinꢀincomeꢀtaxꢀpositionsꢀandꢀprescribesꢀtheꢀminimumꢀrecognition thresholdꢀaꢀtaxꢀpositionꢀisꢀrequiredꢀtoꢀmeetꢀbeforeꢀbeingꢀrecognizedꢀinꢀourꢀFinancialꢀStatements.ꢀTheꢀstandardꢀalsoꢀprovides guidanceꢀonꢀderecognition,ꢀmeasurement,ꢀclassification,ꢀinterestꢀandꢀpenalties,ꢀaccountingꢀinꢀinterimꢀperiods,ꢀdisclosure,ꢀand transition. Underꢀthisꢀstandard,ꢀweꢀmayꢀrecognizeꢀtaxꢀbenefitsꢀfromꢀanꢀuncertainꢀpositionꢀonlyꢀifꢀitꢀisꢀmoreꢀlikelyꢀthanꢀnotꢀthatꢀtheꢀposition willꢀbeꢀsustainedꢀuponꢀexaminationꢀbyꢀtaxingꢀauthoritiesꢀbasedꢀonꢀtheꢀtechnicalꢀmeritsꢀofꢀtheꢀissue.ꢀTheꢀamountꢀrecognizedꢀisꢀthe largestꢀbenefitꢀthatꢀweꢀbelieveꢀhasꢀgreaterꢀthanꢀaꢀ50%ꢀlikelihoodꢀofꢀbeingꢀrealizedꢀuponꢀsettlement.ꢀActualꢀincomeꢀtaxesꢀpaidꢀmay varyꢀfromꢀestimatesꢀdependingꢀuponꢀchangesꢀinꢀincomeꢀtaxꢀlaws,ꢀactualꢀresultsꢀofꢀoperations,ꢀandꢀtheꢀfinalꢀauditꢀofꢀtaxꢀreturnsꢀby taxingꢀauthorities.ꢀTaxꢀassessmentsꢀmayꢀariseꢀseveralꢀyearsꢀafterꢀtaxꢀreturnsꢀhaveꢀbeenꢀfiled. Employee Benefits Plan TheꢀCompanyꢀprovidesꢀaꢀ401(k)ꢀPlanꢀthatꢀallowsꢀemployeesꢀtoꢀdeferꢀupꢀtoꢀtheꢀlesserꢀofꢀtheꢀInternalꢀRevenueꢀCodeꢀprescribed maximumꢀamountꢀorꢀ100%ꢀofꢀtheirꢀincomeꢀonꢀaꢀpre-taxꢀbasisꢀthroughꢀcontributionsꢀtoꢀtheꢀplan.ꢀAsꢀaꢀbenefitꢀtoꢀemployees,ꢀthe Companyꢀmatchesꢀaꢀpercentageꢀofꢀtheseꢀemployeeꢀcontributionsꢀ(asꢀdefinedꢀinꢀtheꢀplanꢀdocument).ꢀExpensesꢀrelatedꢀtoꢀtheꢀmatching portionꢀofꢀtheꢀcontributionsꢀtoꢀtheꢀ401(k)ꢀPlanꢀwereꢀ$2.2ꢀmillion,ꢀ$2.3ꢀmillion,ꢀandꢀ$1.9ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31, 2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively. Fair Values of Financial Instruments Theꢀfairꢀvalueꢀofꢀaꢀfinancialꢀinstrumentꢀrepresentsꢀtheꢀamountꢀatꢀwhichꢀtheꢀinstrumentꢀcouldꢀbeꢀexchangedꢀinꢀaꢀcurrentꢀtransaction betweenꢀwillingꢀparties,ꢀotherꢀthanꢀinꢀaꢀforcedꢀorꢀliquidationꢀsale.ꢀFairꢀvalueꢀestimatesꢀareꢀmadeꢀatꢀaꢀspecificꢀpointꢀinꢀtime,ꢀbased uponꢀrelevantꢀmarketꢀinformationꢀaboutꢀtheꢀfinancialꢀinstrument.ꢀ Theꢀ carryingꢀ amountꢀ ofꢀ cashꢀ andꢀ cashꢀ equivalents,ꢀ settlementꢀ receivables,ꢀ short-termꢀ tradeꢀ andꢀ otherꢀ receivables,ꢀ settlement liabilities,ꢀaccountsꢀpayableꢀandꢀaccruedꢀexpensesꢀapproximateꢀfairꢀvalueꢀdueꢀtoꢀtheꢀshort-termꢀmaturitiesꢀofꢀtheseꢀinstruments. Theꢀfairꢀvalueꢀofꢀtheꢀlong-termꢀtradeꢀandꢀloansꢀreceivableꢀisꢀestimatedꢀbyꢀdiscountingꢀexpectedꢀfutureꢀcashꢀflowsꢀusingꢀcurrent 63 interestꢀ ratesꢀ atꢀ whichꢀ similarꢀ loansꢀ wouldꢀ beꢀ madeꢀ toꢀ borrowersꢀ withꢀ similarꢀ creditꢀ ratingsꢀ andꢀ remainingꢀ maturities.ꢀAsꢀ of Decemberꢀ31,ꢀ 2018ꢀ andꢀ Decemberꢀ31,ꢀ 2017,ꢀ theꢀ fairꢀ valueꢀ ofꢀ notesꢀ receivable,ꢀ net,ꢀ approximatedꢀ theꢀ carryingꢀ valueꢀ dueꢀ to contractualꢀtermsꢀofꢀtradeꢀandꢀloansꢀreceivableꢀgenerallyꢀbeingꢀunderꢀ24ꢀmonths.ꢀTheꢀfairꢀvalueꢀofꢀourꢀborrowingsꢀisꢀestimated basedꢀonꢀvariousꢀinputsꢀtoꢀdetermineꢀaꢀmarketꢀprice,ꢀsuchꢀas:ꢀmarketꢀdemandꢀandꢀsupply,ꢀsizeꢀofꢀtranche,ꢀmaturity,ꢀandꢀsimilar instrumentsꢀtradingꢀinꢀmoreꢀactiveꢀmarkets.ꢀTheꢀestimatedꢀfairꢀvalueꢀandꢀoutstandingꢀbalancesꢀofꢀourꢀborrowingsꢀareꢀasꢀfollows (inꢀthousands): December 31, 2018 Termꢀloan Seniorꢀunsecuredꢀnotes December 31, 2017 Termꢀloan Seniorꢀunsecuredꢀnotes Level of Hierarchy Fair Value Outstanding Balance 2 1 2 1 $ $ $ $ 784,479 354,863 826,099 372,656 $ $ $ $ 807,700 375,000 815,900 375,000 TheꢀtermꢀloanꢀfacilityꢀwasꢀreportedꢀatꢀfairꢀvalueꢀusingꢀaꢀLevelꢀ2ꢀinputꢀasꢀthereꢀwereꢀquotedꢀpricesꢀinꢀmarketsꢀthatꢀwereꢀnotꢀconsidered activeꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀDecemberꢀ31,ꢀ2017.ꢀTheꢀseniorꢀunsecuredꢀnotesꢀwereꢀreportedꢀatꢀfairꢀvalueꢀusingꢀaꢀLevelꢀ1 inputꢀasꢀthereꢀwereꢀquotedꢀpricesꢀinꢀmarketsꢀthatꢀwereꢀconsideredꢀactiveꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀDecemberꢀ31,ꢀ2017. Foreign Currency Translation Foreignꢀcurrencyꢀdenominatedꢀassetsꢀandꢀliabilitiesꢀforꢀthoseꢀforeignꢀentitiesꢀforꢀwhichꢀtheꢀlocalꢀcurrencyꢀisꢀtheꢀfunctionalꢀcurrency areꢀtranslatedꢀintoꢀU.S.ꢀdollarsꢀbasedꢀonꢀexchangeꢀratesꢀprevailingꢀatꢀtheꢀendꢀofꢀeachꢀyear.ꢀRevenuesꢀandꢀexpensesꢀareꢀtranslated atꢀaverageꢀexchangeꢀratesꢀduringꢀtheꢀyear.ꢀTheꢀeffectsꢀofꢀforeignꢀexchangeꢀgainsꢀandꢀlossesꢀarisingꢀfromꢀtheseꢀtranslationsꢀare includedꢀ asꢀ aꢀ componentꢀ ofꢀ otherꢀ comprehensiveꢀ incomeꢀ onꢀ theꢀ Statementsꢀ ofꢀ Incomeꢀ (Loss).ꢀ Translationꢀ adjustmentsꢀ on intercompanyꢀbalancesꢀofꢀaꢀlong-termꢀinvestmentꢀnatureꢀareꢀrecordedꢀasꢀaꢀcomponentꢀofꢀaccumulatedꢀotherꢀcomprehensiveꢀloss onꢀourꢀBalanceꢀSheets. Use of Estimates Weꢀhaveꢀmadeꢀestimatesꢀandꢀjudgmentsꢀaffectingꢀtheꢀamountsꢀreportedꢀinꢀtheseꢀfinancialꢀstatementsꢀandꢀtheꢀaccompanyingꢀnotes inꢀconformityꢀwithꢀaccountingꢀprinciplesꢀgenerallyꢀacceptedꢀinꢀtheꢀUnitedꢀStates.ꢀTheꢀactualꢀresultsꢀmayꢀdifferꢀfromꢀtheseꢀestimates. Earnings Applicable to Common Stock Basicꢀearningsꢀperꢀshareꢀisꢀcalculatedꢀbyꢀdividingꢀnetꢀincomeꢀbyꢀtheꢀweightedꢀaverageꢀnumberꢀofꢀcommonꢀsharesꢀoutstandingꢀfor theꢀperiod.ꢀDilutedꢀearningsꢀperꢀshareꢀreflectꢀtheꢀeffectꢀofꢀpotentialꢀcommonꢀstockꢀresultingꢀfromꢀassumedꢀstockꢀoptionꢀexercises andꢀvestingꢀofꢀrestrictedꢀstockꢀunlessꢀitꢀisꢀanti-dilutive.ꢀToꢀtheꢀextentꢀweꢀreportꢀaꢀnetꢀlossꢀfromꢀcontinuingꢀoperationsꢀinꢀaꢀparticular period,ꢀnoꢀpotentialꢀdilutionꢀfromꢀtheꢀapplicationꢀofꢀtheꢀtreasuryꢀstockꢀmethodꢀwouldꢀbeꢀapplicableꢀinꢀaccordanceꢀwithꢀASCꢀ260, EarningsꢀperꢀShare.ꢀ Share‑Based Compensation Share-basedꢀcompensationꢀisꢀconsideredꢀanꢀequityꢀawardꢀandꢀresultsꢀinꢀaꢀcostꢀthatꢀisꢀmeasuredꢀatꢀfairꢀvalueꢀonꢀtheꢀgrantꢀdateꢀof anꢀaward. Ourꢀtime-basedꢀstockꢀoptionsꢀwereꢀmeasuredꢀatꢀfairꢀvalueꢀonꢀtheꢀgrantꢀdateꢀusingꢀtheꢀBlackꢀScholesꢀmodel.ꢀOurꢀrestrictedꢀstock awardsꢀandꢀrestrictedꢀstockꢀunits,ꢀincludingꢀtheꢀrestrictedꢀstockꢀunitsꢀboundꢀbyꢀcertainꢀperformance-basedꢀmetricsꢀissuedꢀinꢀ2018, wereꢀmeasuredꢀatꢀfairꢀvalueꢀbasedꢀonꢀtheꢀstockꢀpriceꢀonꢀtheꢀgrantꢀdate.ꢀTheꢀcompensationꢀexpenseꢀisꢀrecognizedꢀonꢀaꢀstraight-line basisꢀoverꢀtheꢀvestingꢀperiodꢀofꢀtheꢀawards. Ourꢀmarket-basedꢀoptionsꢀgrantedꢀinꢀ2017ꢀandꢀ2016ꢀunderꢀourꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀ(theꢀ“2014ꢀPlan”)ꢀandꢀ2012ꢀEquity IncentiveꢀPlanꢀ(asꢀamended,ꢀtheꢀ“2012ꢀPlan”)ꢀvestꢀatꢀaꢀrateꢀofꢀ25%ꢀperꢀyearꢀonꢀeachꢀofꢀtheꢀfirstꢀfourꢀanniversariesꢀofꢀtheꢀgrant date,ꢀprovidedꢀthatꢀasꢀofꢀtheꢀvestingꢀdateꢀforꢀeachꢀvestingꢀtranche,ꢀtheꢀclosingꢀpriceꢀofꢀtheꢀCompany’sꢀsharesꢀonꢀtheꢀNewꢀYork StockꢀExchangeꢀisꢀatꢀleastꢀaꢀspecifiedꢀpriceꢀhurdle,ꢀdefinedꢀasꢀaꢀ25%ꢀandꢀ50%ꢀpremiumꢀforꢀ2017ꢀandꢀ2016,ꢀrespectively,ꢀtoꢀthe closingꢀstockꢀpriceꢀonꢀtheꢀgrantꢀdate.ꢀIfꢀtheꢀpriceꢀhurdleꢀisꢀnotꢀmetꢀasꢀofꢀtheꢀvestingꢀdateꢀforꢀaꢀvestingꢀtranche,ꢀthenꢀtheꢀvested trancheꢀshallꢀvestꢀandꢀbecomeꢀvestedꢀsharesꢀonꢀtheꢀlastꢀdayꢀofꢀaꢀperiodꢀofꢀ30ꢀconsecutiveꢀtradingꢀdaysꢀduringꢀwhichꢀtheꢀclosing priceꢀisꢀatꢀleastꢀtheꢀpriceꢀhurdle. 64 Theꢀmarket-basedꢀoptionsꢀwereꢀmeasuredꢀatꢀfairꢀvalueꢀonꢀtheꢀgrantꢀdateꢀusingꢀaꢀlattice-basedꢀvaluationꢀmodelꢀbasedꢀonꢀtheꢀmedian timeꢀhorizonꢀfromꢀtheꢀdateꢀofꢀgrantꢀforꢀtheseꢀoptionsꢀtoꢀtheꢀvestingꢀdateꢀforꢀthoseꢀpathsꢀthatꢀachievedꢀtheꢀtargetꢀthreshold(s).ꢀThe compensationꢀexpenseꢀisꢀrecognizedꢀonꢀaꢀstraight-lineꢀbasisꢀoverꢀtheꢀmedianꢀvestingꢀperiodsꢀcalculatedꢀunderꢀsuchꢀvaluation model. Forfeituresꢀareꢀestimatedꢀatꢀtheꢀgrantꢀdateꢀforꢀourꢀtime-based,ꢀmarket-basedꢀandꢀperformance-basedꢀawards,ꢀwithꢀsuchꢀestimates updatedꢀperiodically;ꢀandꢀwithꢀactualꢀforfeituresꢀrecognizedꢀcurrentlyꢀtoꢀtheꢀextentꢀtheyꢀdifferꢀfromꢀtheꢀestimates. Unlessꢀotherwiseꢀprovidedꢀbyꢀtheꢀadministratorꢀofꢀourꢀequityꢀincentiveꢀplans,ꢀstockꢀoptionsꢀgrantedꢀunderꢀourꢀplansꢀgenerally expireꢀtenꢀyearsꢀfromꢀtheꢀdateꢀofꢀgrant.ꢀTheꢀexerciseꢀpriceꢀofꢀstockꢀoptionsꢀisꢀgenerallyꢀtheꢀclosingꢀmarketꢀpriceꢀofꢀourꢀcommon stockꢀonꢀtheꢀdateꢀofꢀtheꢀstockꢀoptionꢀgrant. Acquisition-Related Costs Weꢀrecognizeꢀaꢀliabilityꢀforꢀacquisition-relatedꢀcostsꢀwhenꢀtheꢀexpenseꢀisꢀincurred.ꢀAcquisition-relatedꢀcostsꢀinclude,ꢀbutꢀareꢀnot limitedꢀto:ꢀfinancialꢀadvisory,ꢀlegalꢀandꢀdebtꢀfees;ꢀaccounting,ꢀconsulting,ꢀandꢀprofessionalꢀfeesꢀassociatedꢀwithꢀdueꢀdiligence, valuation,ꢀandꢀintegration;ꢀseverance;ꢀandꢀotherꢀrelatedꢀcostsꢀandꢀadjustments. Reclassification of Prior Year Balances Reclassificationsꢀwereꢀmadeꢀtoꢀtheꢀprior-periodꢀFinancialꢀStatementsꢀtoꢀconformꢀtoꢀtheꢀcurrentꢀperiodꢀpresentation,ꢀexceptꢀforꢀthe adoptionꢀimpactꢀofꢀtheꢀapplicationꢀofꢀASCꢀ606ꢀutilizingꢀtheꢀmodifiedꢀretrospectiveꢀtransitionꢀmethod. Recent Accounting Guidance Recently Adopted Accounting Guidance InꢀMarchꢀ2018,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2018-05,ꢀwhichꢀprovidesꢀguidanceꢀonꢀaccountingꢀforꢀtheꢀtaxꢀeffectsꢀofꢀtheꢀ2017ꢀTax Actꢀ(pursuantꢀtoꢀSECꢀStaffꢀAccountingꢀBulletinꢀNo.ꢀ118).ꢀTheꢀnewꢀstandardꢀisꢀeffectiveꢀMarchꢀ13,ꢀ2018.ꢀWeꢀhaveꢀadoptedꢀthis guidanceꢀinꢀtheꢀquarterꢀendedꢀMarchꢀ31,ꢀ2018.ꢀInꢀaccordanceꢀwithꢀthisꢀguidance,ꢀsomeꢀofꢀtheꢀincomeꢀtaxꢀeffectsꢀrecordedꢀinꢀ2017 wereꢀprovisionalꢀandꢀinsignificantꢀadjustmentsꢀwereꢀmadeꢀduringꢀ2018.ꢀAsꢀofꢀDecemberꢀ22,ꢀ2018,ꢀweꢀcompletedꢀourꢀanalysisꢀand ourꢀupdatedꢀassessmentꢀisꢀthatꢀtheꢀ2017ꢀTaxꢀActꢀhasꢀnoꢀfurtherꢀimpactꢀonꢀourꢀpreviouslyꢀreportedꢀincomeꢀtaxꢀprovisionsꢀorꢀour deferredꢀtaxꢀassetsꢀorꢀliabilities;ꢀtherefore,ꢀtheseꢀamountsꢀareꢀnoꢀlongerꢀconsideredꢀprovisionalꢀinꢀnature.ꢀ InꢀMayꢀ2014,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2014-09,ꢀwhichꢀcreatesꢀASCꢀ606ꢀandꢀsupersedesꢀASCꢀTopicꢀ605,ꢀ“RevenueꢀRecognition.” Theꢀguidanceꢀreplacesꢀindustry-specificꢀguidanceꢀandꢀestablishesꢀaꢀsingleꢀfive-stepꢀmodelꢀtoꢀidentifyꢀandꢀrecognizeꢀrevenue.ꢀThe coreꢀprincipleꢀofꢀtheꢀguidanceꢀisꢀthatꢀanꢀentityꢀshouldꢀrecognizeꢀrevenueꢀuponꢀtransferꢀofꢀcontrolꢀofꢀpromisedꢀgoodsꢀorꢀservices toꢀcustomersꢀinꢀanꢀamountꢀthatꢀreflectsꢀtheꢀconsiderationꢀtoꢀwhichꢀanꢀentityꢀexpectsꢀtoꢀbeꢀentitledꢀinꢀexchangeꢀforꢀthoseꢀgoodsꢀor services.ꢀAdditionally,ꢀtheꢀguidanceꢀrequiresꢀtheꢀentityꢀtoꢀdiscloseꢀfurtherꢀquantitativeꢀandꢀqualitativeꢀinformationꢀregardingꢀthe natureꢀandꢀamountꢀofꢀrevenuesꢀarisingꢀfromꢀcontractsꢀwithꢀcustomers,ꢀasꢀwellꢀasꢀotherꢀinformationꢀaboutꢀtheꢀsignificantꢀjudgments andꢀestimatesꢀusedꢀinꢀrecognizingꢀrevenuesꢀfromꢀcontractsꢀwithꢀcustomers.ꢀTheꢀguidanceꢀinꢀASUꢀ2014-9ꢀwasꢀfurtherꢀupdatedꢀby ASUꢀ2016-08ꢀinꢀMarchꢀ2016,ꢀwhichꢀprovidedꢀclarificationꢀonꢀtheꢀimplementationꢀofꢀtheꢀprincipalꢀversusꢀagentꢀconsiderationsꢀin ASUꢀ2014-09.ꢀInꢀAprilꢀ2016,ꢀtheꢀFASBꢀissuedꢀASUꢀ2016-10,ꢀwhichꢀprovidesꢀclarificationꢀonꢀtheꢀimplementationꢀofꢀperformance obligationsꢀandꢀlicensingꢀinꢀASUꢀ2014-9.ꢀInꢀMayꢀ2016,ꢀtheꢀFASBꢀissuedꢀASUꢀ2016-11,ꢀwhichꢀamendedꢀguidanceꢀprovidedꢀin twoꢀSECꢀStaffꢀAnnouncementsꢀatꢀtheꢀMarchꢀ3,ꢀ2016ꢀEmergingꢀIssuesꢀTaskꢀForceꢀmeetingꢀoverꢀvariousꢀtopicsꢀrelatingꢀtoꢀASU 606.ꢀInꢀMayꢀ2016,ꢀtheꢀFASBꢀissuedꢀASUꢀ2016-12,ꢀwhichꢀclarifiedꢀvariousꢀtopicsꢀinꢀASCꢀ606.ꢀInꢀDecemberꢀ2016,ꢀtheꢀFASBꢀissued ASUꢀ2016-20,ꢀwhichꢀclarifiedꢀadditionalꢀtopicsꢀinꢀASCꢀ606.ꢀThisꢀguidanceꢀmayꢀbeꢀadoptedꢀretrospectivelyꢀorꢀunderꢀaꢀmodified retrospectiveꢀmethodꢀwhereꢀtheꢀcumulativeꢀeffectꢀisꢀrecognizedꢀatꢀtheꢀdateꢀofꢀinitialꢀapplication.ꢀWeꢀadoptedꢀthisꢀguidanceꢀeffective Januaryꢀ1,ꢀ2018ꢀandꢀhaveꢀprovidedꢀadditionalꢀinformationꢀwithꢀrespectꢀtoꢀtheꢀnewꢀrevenueꢀrecognitionꢀtopicꢀelsewhereꢀinꢀthis Noteꢀ2ꢀdisclosureꢀandꢀalsoꢀinꢀ“Noteꢀ3ꢀ—ꢀAdoptionꢀofꢀASCꢀ606,ꢀRevenueꢀfromꢀContractsꢀwithꢀCustomers.” InꢀMayꢀ2017,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2017-09ꢀtoꢀclarifyꢀwhichꢀchangesꢀtoꢀtheꢀtermsꢀandꢀconditionsꢀofꢀshare-basedꢀpayment awardsꢀrequireꢀanꢀentityꢀtoꢀapplyꢀmodificationꢀaccountingꢀunderꢀTopicꢀ718.ꢀAnꢀentityꢀisꢀrequiredꢀtoꢀaccountꢀforꢀtheꢀeffectsꢀofꢀa modificationꢀunlessꢀallꢀofꢀtheꢀfollowingꢀconditionsꢀareꢀmet:ꢀ(i)ꢀtheꢀfairꢀvalueꢀ(orꢀcalculatedꢀvalueꢀorꢀintrinsicꢀvalue,ꢀifꢀsuchꢀan alternativeꢀ measurementꢀ methodꢀ isꢀ used)ꢀ ofꢀ theꢀ modifiedꢀ awardꢀ isꢀ theꢀ sameꢀ asꢀ theꢀ fairꢀ valueꢀ (orꢀ valueꢀ usingꢀ anꢀ alternative measurementꢀmethod)ꢀofꢀtheꢀoriginalꢀawardꢀimmediatelyꢀbeforeꢀtheꢀoriginalꢀawardꢀisꢀmodified.ꢀIfꢀtheꢀmodificationꢀdoesꢀnotꢀaffect anyꢀofꢀtheꢀinputsꢀtoꢀtheꢀvaluationꢀtechniqueꢀthatꢀtheꢀentityꢀusesꢀtoꢀvalueꢀtheꢀaward,ꢀtheꢀentityꢀisꢀnotꢀrequiredꢀtoꢀestimateꢀtheꢀvalue immediatelyꢀ beforeꢀ andꢀ afterꢀ theꢀ modification;ꢀ (ii)ꢀ theꢀ vestingꢀ conditionsꢀ ofꢀ theꢀ modifiedꢀ awardꢀ areꢀ theꢀ sameꢀ asꢀ theꢀ vesting conditionsꢀofꢀtheꢀoriginalꢀawardꢀimmediatelyꢀbeforeꢀtheꢀoriginalꢀawardꢀisꢀmodified;ꢀandꢀ(iii)ꢀtheꢀclassificationꢀofꢀtheꢀmodified awardꢀasꢀanꢀequityꢀinstrumentꢀorꢀaꢀliabilityꢀinstrumentꢀisꢀtheꢀsameꢀasꢀtheꢀclassificationꢀofꢀtheꢀoriginalꢀawardꢀimmediatelyꢀbefore 65 theꢀoriginalꢀawardꢀisꢀmodified.ꢀWeꢀadoptedꢀthisꢀguidanceꢀinꢀtheꢀquarterꢀendedꢀMarchꢀ31,ꢀ2018.ꢀTheꢀadoptionꢀofꢀthisꢀASUꢀdidꢀnot haveꢀaꢀmaterialꢀimpactꢀonꢀourꢀFinancialꢀStatements. InꢀJanuaryꢀ2017,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2017-01,ꢀwhichꢀclarifiesꢀtheꢀdefinitionꢀofꢀaꢀbusiness.ꢀTheꢀamendmentsꢀaffectꢀall companiesꢀandꢀotherꢀreportingꢀorganizationsꢀthatꢀmustꢀdetermineꢀwhetherꢀtheyꢀhaveꢀacquiredꢀorꢀsoldꢀaꢀbusiness.ꢀTheꢀamendments areꢀintendedꢀtoꢀhelpꢀcompaniesꢀandꢀotherꢀorganizationsꢀevaluateꢀwhetherꢀtransactionsꢀshouldꢀbeꢀaccountedꢀforꢀasꢀacquisitionsꢀ(or disposals)ꢀofꢀassetsꢀorꢀbusinesses.ꢀTheꢀnewꢀstandardꢀisꢀeffectiveꢀforꢀfiscalꢀyearsꢀbeginningꢀafterꢀDecemberꢀ15,ꢀ2017,ꢀincluding interimꢀperiodsꢀwithinꢀthoseꢀfiscalꢀyears.ꢀThisꢀguidanceꢀisꢀtoꢀbeꢀappliedꢀusingꢀaꢀprospectiveꢀapproachꢀasꢀofꢀtheꢀbeginningꢀofꢀthe firstꢀperiodꢀofꢀadoption.ꢀWeꢀadoptedꢀthisꢀguidanceꢀinꢀtheꢀquarterꢀendedꢀMarchꢀ31,ꢀ2018.ꢀTheꢀadoptionꢀofꢀthisꢀASUꢀdidꢀnotꢀhaveꢀa materialꢀimpactꢀonꢀourꢀFinancialꢀStatements. InꢀOctoberꢀ2016,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2016-18,ꢀwhichꢀrequiresꢀthatꢀaꢀstatementꢀofꢀcashꢀflowsꢀexplainꢀtheꢀchangeꢀduringꢀthe periodꢀinꢀtheꢀtotalꢀofꢀcash,ꢀcashꢀequivalentsꢀandꢀamountsꢀgenerallyꢀdescribedꢀasꢀrestrictedꢀcashꢀorꢀrestrictedꢀcashꢀequivalents.ꢀAs aꢀresult,ꢀamountsꢀgenerallyꢀdescribedꢀasꢀrestrictedꢀcashꢀandꢀrestrictedꢀcashꢀequivalentsꢀshouldꢀbeꢀincludedꢀwithꢀcashꢀandꢀcash equivalentsꢀwhenꢀreconcilingꢀtheꢀbeginning-of-periodꢀandꢀend-of-periodꢀtotalꢀamountsꢀshownꢀonꢀtheꢀstatementꢀofꢀcashꢀflows.ꢀThe amendmentsꢀdoꢀnotꢀprovideꢀaꢀdefinitionꢀofꢀrestrictedꢀcashꢀorꢀrestrictedꢀcashꢀequivalents.ꢀWeꢀadoptedꢀthisꢀguidanceꢀinꢀtheꢀquarter endedꢀMarchꢀ31,ꢀ2018ꢀusingꢀaꢀretrospectiveꢀapproachꢀtoꢀeachꢀperiodꢀpresented.ꢀTheꢀadoptionꢀofꢀthisꢀASUꢀdidꢀnotꢀhaveꢀaꢀmaterial impactꢀonꢀourꢀFinancialꢀStatements. InꢀOctoberꢀ2016,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2016-16,ꢀwhichꢀprovidesꢀupdatedꢀguidanceꢀonꢀtheꢀrecognitionꢀofꢀtheꢀincomeꢀtax consequencesꢀofꢀintra-entityꢀtransfersꢀofꢀassetsꢀotherꢀthanꢀinventoryꢀwhenꢀtheꢀtransferꢀoccurs,ꢀandꢀthisꢀeliminatesꢀtheꢀexception forꢀ anꢀ intra-entityꢀ transferꢀ ofꢀ suchꢀ assets.ꢀ Thisꢀ guidanceꢀ willꢀ beꢀ appliedꢀ usingꢀ aꢀ modifiedꢀ retrospectiveꢀ approachꢀ throughꢀ a cumulative-effectiveꢀadjustmentꢀdirectlyꢀtoꢀretainedꢀearningsꢀasꢀofꢀtheꢀbeginningꢀofꢀtheꢀperiodꢀofꢀadoption.ꢀWeꢀadoptedꢀthisꢀguidance inꢀtheꢀquarterꢀendedꢀMarchꢀ31,ꢀ2018.ꢀTheꢀadoptionꢀofꢀthisꢀASUꢀdidꢀnotꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀFinancialꢀStatements. InꢀAugustꢀ2016,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2016-15,ꢀwhichꢀprovidesꢀupdatedꢀguidanceꢀonꢀtheꢀclassificationꢀofꢀcertainꢀcashꢀreceipts andꢀcashꢀpaymentsꢀinꢀtheꢀstatementꢀofꢀcashꢀflows.ꢀThisꢀguidanceꢀisꢀtoꢀbeꢀappliedꢀusingꢀaꢀretrospectiveꢀapproach.ꢀIfꢀitꢀisꢀimpracticable toꢀapplyꢀtheꢀamendmentsꢀretrospectivelyꢀforꢀsomeꢀofꢀtheꢀissuesꢀwithinꢀthisꢀASU,ꢀtheꢀamendmentsꢀforꢀthoseꢀissuesꢀwouldꢀbeꢀapplied prospectivelyꢀasꢀofꢀtheꢀearliestꢀdateꢀpracticable.ꢀWeꢀadoptedꢀthisꢀguidanceꢀinꢀtheꢀquarterꢀendedꢀMarchꢀ31,ꢀ2018.ꢀTheꢀadoptionꢀof thisꢀASUꢀdidꢀnotꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀFinancialꢀStatements. Inꢀ Januaryꢀ 2016,ꢀ theꢀ FASBꢀ issuedꢀASUꢀ No.ꢀ 2016-01,ꢀ which,ꢀ amongꢀ otherꢀ things,ꢀ requiresꢀ equityꢀ investmentsꢀ (exceptꢀ those accountedꢀforꢀunderꢀtheꢀequityꢀmethodꢀofꢀaccounting,ꢀorꢀthoseꢀthatꢀresultꢀinꢀconsolidationꢀofꢀtheꢀinvestee)ꢀtoꢀbeꢀmeasuredꢀatꢀfair valueꢀwithꢀchangesꢀinꢀfairꢀvalueꢀrecognizedꢀinꢀnetꢀincome.ꢀWeꢀadoptedꢀthisꢀguidanceꢀinꢀtheꢀquarterꢀendedꢀMarchꢀ31,ꢀ2018.ꢀThe adoptionꢀofꢀthisꢀASUꢀdidꢀnotꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀFinancialꢀStatements. Recent Accounting Guidance Not Yet Adopted InꢀAugustꢀ2018,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2018-15,ꢀwhichꢀalignsꢀtheꢀrequirementsꢀforꢀcapitalizingꢀimplementationꢀcostsꢀincurred inꢀaꢀhostingꢀarrangementꢀthatꢀisꢀaꢀserviceꢀcontractꢀwithꢀtheꢀrequirementsꢀforꢀcapitalizingꢀimplementationꢀcostsꢀincurredꢀtoꢀdevelop orꢀobtainꢀinternal-useꢀsoftwareꢀ(andꢀhostingꢀarrangementsꢀthatꢀincludeꢀanꢀinternalꢀuseꢀsoftwareꢀlicense).ꢀTheꢀnewꢀstandardꢀis effectiveꢀforꢀfiscalꢀyearsꢀbeginningꢀafterꢀDecemberꢀ15,ꢀ2019,ꢀincludingꢀinterimꢀperiodsꢀwithinꢀthoseꢀfiscalꢀyears.ꢀEarlyꢀadoption isꢀpermitted,ꢀincludingꢀadoptionꢀinꢀanyꢀinterimꢀperiod.ꢀWeꢀareꢀcurrentlyꢀevaluatingꢀtheꢀimpactꢀofꢀadoptingꢀthisꢀguidanceꢀonꢀour FinancialꢀStatements;ꢀhowever,ꢀweꢀdoꢀnotꢀexpectꢀtheꢀimpactꢀtoꢀbeꢀmaterial.ꢀ InꢀJuneꢀ2018,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2018-07,ꢀwhichꢀexpandsꢀtheꢀscopeꢀofꢀTopicꢀ718,ꢀCompensation-StockꢀCompensation (whichꢀcurrentlyꢀonlyꢀincludesꢀshare-basedꢀpaymentsꢀtoꢀemployees)ꢀtoꢀincludeꢀshare-basedꢀpaymentsꢀissuedꢀtoꢀnonemployeesꢀfor goodsꢀorꢀservices.ꢀConsequently,ꢀtheꢀaccountingꢀforꢀshare-basedꢀpaymentsꢀtoꢀnonemployeesꢀandꢀemployeesꢀwillꢀbeꢀsubstantially aligned.ꢀTheꢀnewꢀstandardꢀisꢀeffectiveꢀforꢀfiscalꢀyearsꢀbeginningꢀafterꢀDecemberꢀ15,ꢀ2018,ꢀincludingꢀinterimꢀperiodsꢀwithinꢀthose fiscalꢀyears.ꢀEarlyꢀadoptionꢀisꢀpermitted.ꢀWeꢀdoꢀnotꢀexpectꢀtheꢀadoptionꢀofꢀthisꢀASUꢀtoꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀFinancial Statements.ꢀ InꢀFebruaryꢀ2018,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2018-02,ꢀwhichꢀprovidesꢀfinancialꢀstatementꢀpreparersꢀwithꢀanꢀoptionꢀtoꢀreclassify strandedꢀtaxꢀeffectsꢀwithinꢀAOCIꢀtoꢀretainedꢀearningsꢀinꢀeachꢀperiodꢀinꢀwhichꢀtheꢀeffectꢀofꢀtheꢀchangeꢀinꢀtheꢀU.S.ꢀfederalꢀcorporate incomeꢀtaxꢀrateꢀinꢀtheꢀTaxꢀCutsꢀandꢀJobsꢀActꢀ(orꢀportionꢀthereof)ꢀisꢀrecorded.ꢀTheꢀnewꢀstandardꢀisꢀeffectiveꢀforꢀfiscalꢀyearsꢀbeginning afterꢀDecemberꢀ15,ꢀ2018,ꢀincludingꢀinterimꢀperiodsꢀwithinꢀthoseꢀfiscalꢀyears.ꢀWeꢀdoꢀnotꢀexpectꢀtheꢀadoptionꢀofꢀthisꢀASUꢀtoꢀhave aꢀmaterialꢀimpactꢀonꢀourꢀFinancialꢀStatements.ꢀ InꢀJuneꢀ2016,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2016-13,ꢀwhichꢀprovidesꢀupdatedꢀguidanceꢀonꢀhowꢀanꢀentityꢀshouldꢀmeasureꢀcreditꢀlosses onꢀfinancialꢀinstruments.ꢀTheꢀnewꢀguidanceꢀreplacesꢀtheꢀcurrentꢀincurredꢀlossꢀmeasurementꢀmethodologyꢀwithꢀaꢀlifetimeꢀexpected lossꢀmeasurementꢀmethodology,ꢀandꢀisꢀeffectiveꢀforꢀfiscalꢀyearsꢀbeginningꢀafterꢀDecemberꢀ15,ꢀ2019,ꢀincludingꢀinterimꢀperiods 66 withinꢀthoseꢀfiscalꢀyears.ꢀThisꢀguidanceꢀwillꢀbeꢀappliedꢀusingꢀaꢀmodifiedꢀretrospectiveꢀapproachꢀforꢀtheꢀcumulative-effectꢀadjustment toꢀretainedꢀearningsꢀasꢀofꢀtheꢀbeginningꢀofꢀtheꢀfirstꢀreportingꢀperiodꢀinꢀwhichꢀtheꢀguidanceꢀisꢀeffectiveꢀandꢀusingꢀaꢀprospective approachꢀforꢀdebtꢀsecuritiesꢀforꢀwhichꢀanyꢀother-than-temporaryꢀimpairmentꢀhadꢀbeenꢀrecognizedꢀbeforeꢀtheꢀeffectiveꢀdate.ꢀIn Novemberꢀ2018,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2018-19ꢀtoꢀmitigateꢀtransitionꢀcomplexityꢀbyꢀrequiringꢀentitiesꢀotherꢀthanꢀpublic businessꢀentitiesꢀtoꢀimplementꢀASUꢀNo.ꢀ2016-13ꢀforꢀfiscalꢀyearsꢀbeginningꢀafterꢀDecemberꢀ15,ꢀ2021,ꢀincludingꢀinterimꢀperiods withinꢀthoseꢀfiscalꢀyears.ꢀThisꢀalignsꢀtheꢀimplementationꢀdateꢀforꢀtheirꢀannualꢀfinancialꢀstatementsꢀwithꢀtheꢀimplementationꢀdate forꢀtheirꢀinterimꢀfinancialꢀstatements.ꢀTheꢀguidanceꢀalsoꢀclarifiedꢀthatꢀreceivablesꢀarisingꢀfromꢀoperatingꢀleasesꢀareꢀnotꢀwithinꢀthe scopeꢀofꢀtheꢀcreditꢀlossesꢀstandard,ꢀbutꢀrather,ꢀshouldꢀbeꢀaccountedꢀforꢀinꢀaccordanceꢀwithꢀtheꢀleasesꢀstandard.ꢀWeꢀareꢀcurrently evaluatingꢀtheꢀimpactꢀofꢀadoptingꢀthisꢀguidanceꢀonꢀourꢀFinancialꢀStatements;ꢀhowever,ꢀweꢀdoꢀnotꢀexpectꢀtheꢀimpactꢀtoꢀbeꢀmaterial. Inꢀ Februaryꢀ 2016,ꢀ theꢀ FASBꢀ issuedꢀASUꢀ No.ꢀ 2016-02,ꢀ toꢀ increaseꢀ transparencyꢀ andꢀ comparabilityꢀ amongꢀ organizationsꢀ by recognizingꢀleaseꢀassetsꢀandꢀleaseꢀliabilitiesꢀonꢀtheꢀbalanceꢀsheetꢀandꢀdisclosingꢀkeyꢀinformationꢀaboutꢀleasingꢀtransactions.ꢀThe guidanceꢀestablishesꢀaꢀright-of-useꢀ(“ROU”)ꢀmodelꢀthatꢀrequiresꢀaꢀlesseeꢀtoꢀrecordꢀaꢀROUꢀassetꢀandꢀaꢀleaseꢀliabilityꢀonꢀtheꢀbalance sheetꢀforꢀallꢀleasesꢀwithꢀtermsꢀlongerꢀthanꢀ12ꢀmonths.ꢀWeꢀmadeꢀanꢀaccountingꢀpolicyꢀelectionꢀwherebyꢀleasesꢀthatꢀareꢀ12ꢀmonths orꢀlessꢀthatꢀdoꢀnotꢀincludeꢀanꢀoptionꢀtoꢀpurchaseꢀtheꢀunderlyingꢀassetsꢀwillꢀbeꢀaccountedꢀforꢀsimilarlyꢀtoꢀourꢀcurrentꢀoperating leases;ꢀtherefore,ꢀtheseꢀarrangementsꢀwillꢀnotꢀbeꢀrecordedꢀonꢀtheꢀbalanceꢀsheet.ꢀForꢀlessees,ꢀleasesꢀwillꢀbeꢀclassifiedꢀasꢀeither financingꢀorꢀoperatingꢀwithꢀclassificationꢀaffectingꢀtheꢀpatternꢀofꢀexpenseꢀrecognitionꢀinꢀtheꢀincomeꢀstatement.ꢀForꢀlessors,ꢀleases willꢀbeꢀclassifiedꢀasꢀoperating,ꢀsales-typeꢀorꢀdirectꢀfinancingꢀwithꢀclassificationꢀaffectingꢀtheꢀpatternꢀofꢀrevenueꢀandꢀprofitꢀrecognition inꢀtheꢀincomeꢀstatement.ꢀInꢀJulyꢀ2018,ꢀtheꢀFASBꢀissuedꢀASUꢀNo.ꢀ2018-10ꢀ-ꢀCodificationꢀImprovementsꢀtoꢀTopicꢀ842,ꢀLeasesꢀand ASUꢀ No.ꢀ 2018-11ꢀ -ꢀ Leasesꢀ (Topicꢀ 842):ꢀ Targetedꢀ Improvements.ꢀASUꢀ No.ꢀ 2018-10ꢀ affectsꢀ narrowꢀ aspectsꢀ ofꢀ theꢀ guidance previouslyꢀissuedꢀandꢀASUꢀNo.ꢀ2018-11ꢀprovidesꢀaꢀpracticalꢀexpedientꢀforꢀlessorsꢀonꢀseparatingꢀcomponentsꢀofꢀaꢀcontractꢀand alsoꢀincludesꢀanꢀadditionalꢀoptionalꢀtransitionꢀreliefꢀmethodologyꢀforꢀadoptingꢀtheꢀnewꢀstandard.ꢀInꢀDecemberꢀ2018,ꢀtheꢀFASB issuedꢀASUꢀNo.ꢀ2018-20ꢀ-ꢀLeasesꢀ(Topicꢀ842):ꢀNarrow-ScopeꢀImprovementsꢀforꢀLessors,ꢀwhichꢀaddressesꢀtheꢀfollowingꢀissues facingꢀlessorsꢀwhenꢀapplyingꢀtheꢀstandard:ꢀsalesꢀtaxesꢀandꢀotherꢀsimilarꢀtaxesꢀcollectedꢀfromꢀlessees,ꢀcertainꢀlessorꢀcostsꢀpaid directlyꢀbyꢀlessees,ꢀandꢀrecognitionꢀofꢀvariableꢀpaymentsꢀforꢀcontractsꢀwithꢀleaseꢀandꢀnon-leaseꢀcomponents.ꢀTheꢀguidanceꢀrequires anꢀentityꢀtoꢀadoptꢀtheꢀnewꢀstandard,ꢀasꢀamended,ꢀunderꢀaꢀmodifiedꢀretrospectiveꢀapplication.ꢀWithꢀtheꢀoptionalꢀtransitionꢀrelief methodologyꢀavailable,ꢀentitiesꢀhaveꢀanꢀopportunityꢀtoꢀadoptꢀtheꢀnewꢀleaseꢀstandardꢀprospectivelyꢀatꢀtheꢀbeginningꢀofꢀtheꢀperiod ofꢀadoptionꢀthroughꢀaꢀcumulative-effectꢀadjustment,ꢀwithꢀcertainꢀpracticalꢀexpedientsꢀavailable.ꢀ OnꢀJanuaryꢀ1,ꢀ2019,ꢀtheꢀCompanyꢀadoptedꢀtheꢀnewꢀleasingꢀstandardꢀpromulgatedꢀbyꢀtheꢀFASBꢀusingꢀtheꢀadoptionꢀdateꢀmethod. Whileꢀweꢀareꢀfinalizingꢀtheꢀadoptionꢀprocedures,ꢀweꢀexpectꢀthatꢀtheꢀstandardꢀwillꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀBalanceꢀSheets, however,ꢀweꢀdoꢀnotꢀexpectꢀthatꢀtheꢀstandardꢀwillꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀStatementsꢀofꢀIncomeꢀ(Loss).ꢀUponꢀadoption,ꢀwe willꢀrecordꢀaꢀROUꢀassetꢀandꢀleaseꢀliability,ꢀrepresentingꢀourꢀobligationꢀtoꢀmakeꢀleaseꢀpaymentsꢀforꢀoperatingꢀleases,ꢀmeasuredꢀon aꢀ discountedꢀ basis.ꢀ Weꢀ expectꢀ theꢀ ROUꢀ assetsꢀ andꢀ leaseꢀ liabilitiesꢀ ofꢀ operatingꢀ leasesꢀ recordedꢀ toꢀ beꢀ withinꢀ theꢀ rangeꢀ of approximatelyꢀ1%-2%ꢀofꢀtotalꢀassets.ꢀWeꢀelectedꢀtheꢀpracticalꢀexpedientsꢀofferedꢀinꢀtheꢀaforementionedꢀguidance,ꢀincludingꢀthe transitionꢀpracticalꢀexpedientꢀthatꢀstatesꢀthatꢀtheꢀCompanyꢀneedꢀnotꢀreassess:ꢀ(a)ꢀwhetherꢀexpiredꢀorꢀexistingꢀcontractsꢀcontain leases;ꢀ(b)ꢀtheꢀleaseꢀclassificationꢀofꢀexpiredꢀorꢀexistingꢀleases;ꢀorꢀ(c)ꢀinitialꢀdirectꢀcostsꢀforꢀanyꢀexistingꢀleases.ꢀOtherꢀexpedients adoptedꢀincludeꢀpracticalꢀexpedientꢀthatꢀallowsꢀaꢀCompany,ꢀasꢀanꢀaccountingꢀpolicyꢀelectionꢀbyꢀclassꢀofꢀunderlyingꢀassets,ꢀchoose notꢀtoꢀseparateꢀnon-leaseꢀcomponentsꢀfromꢀleaseꢀcomponents;ꢀandꢀaꢀshort-termꢀleaseꢀrecognitionꢀexemptionꢀtoꢀnotꢀrecordꢀshort- termꢀleasesꢀwithꢀanꢀinitialꢀtermꢀofꢀ12ꢀmonthsꢀorꢀlessꢀonꢀtheꢀbalanceꢀsheet. Asꢀweꢀareꢀfinalizingꢀtheꢀadoptionꢀprocedures,ꢀweꢀexpectꢀtheꢀfollowingꢀimpactꢀtoꢀourꢀfinancialꢀstatementsꢀasꢀsummarizedꢀwithin theꢀtableꢀbelow:ꢀ Lessor Perspective GamesꢀandꢀFinTechꢀSegments Expected Impact Upon Adoption TheꢀadoptionꢀofꢀASCꢀ842ꢀwillꢀnotꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀtheꢀCompanyꢀfromꢀthe lessorꢀperspectiveꢀasꢀourꢀlessorꢀaccountingꢀforꢀleasesꢀwillꢀbeꢀconsistentꢀwithꢀcurrent practices. Lessee Perspective GamesꢀandꢀFinTechꢀSegments Expected Impact Upon Adoption WeꢀwillꢀrecognizeꢀoperatingꢀleaseꢀROUꢀassetsꢀandꢀliabilitiesꢀprimarilyꢀassociatedꢀwith realꢀestateꢀleasesꢀonꢀourꢀBalanceꢀSheetsꢀforꢀleaseꢀcontractsꢀwithꢀtermsꢀthatꢀareꢀlonger thanꢀ 12ꢀ monthsꢀ withꢀ noꢀ materialꢀ impactꢀ toꢀ theꢀ Statementsꢀ ofꢀ Incomeꢀ (Loss).ꢀ The operatingꢀ leaseꢀ ROUꢀ assetsꢀ andꢀ liabilitiesꢀ areꢀ expectedꢀ toꢀ beꢀ recognizedꢀ atꢀ the commencementꢀdateꢀbasedꢀonꢀtheꢀpresentꢀvalueꢀofꢀleaseꢀpaymentsꢀoverꢀtheꢀleaseꢀterms. Weꢀdoꢀnotꢀanticipateꢀthatꢀanyꢀotherꢀrecentlyꢀissuedꢀaccountingꢀguidanceꢀwillꢀhaveꢀaꢀsignificantꢀeffectꢀonꢀourꢀconsolidatedꢀfinancial statements. 67 3. ADOPTION OF ASC 606, “REVENUE FROM CONTRACTS WITH CUSTOMERS” Change in accounting policies OnꢀJanuaryꢀ1,ꢀ2018,ꢀweꢀadoptedꢀASCꢀ606ꢀusingꢀtheꢀmodifiedꢀretrospectiveꢀmethod,ꢀwhichꢀrequiredꢀusꢀtoꢀevaluateꢀwhetherꢀany cumulativeꢀadjustmentꢀwasꢀrequiredꢀtoꢀbeꢀrecordedꢀtoꢀretainedꢀearningsꢀ(accumulatedꢀdeficit)ꢀasꢀaꢀresultꢀofꢀapplyingꢀtheꢀprovisions setꢀforthꢀunderꢀASCꢀ606ꢀforꢀanyꢀexistingꢀarrangementsꢀnotꢀyetꢀcompletedꢀasꢀofꢀtheꢀadoptionꢀdateꢀofꢀJanuaryꢀ1,ꢀ2018.ꢀWeꢀdetermined thatꢀthereꢀwasꢀanꢀimmaterialꢀcumulativeꢀadjustmentꢀinꢀtheꢀamountꢀofꢀapproximatelyꢀ$4.4ꢀmillion,ꢀwhichꢀweꢀrecordedꢀtoꢀaccumulated deficitꢀasꢀofꢀtheꢀadoptionꢀdateꢀasꢀaꢀresultꢀofꢀapplyingꢀtheꢀmodifiedꢀretrospectiveꢀtransitionꢀmethod.ꢀRevenuesꢀandꢀcostsꢀrelatedꢀto certainꢀcontractsꢀareꢀrecognizedꢀatꢀaꢀpointꢀinꢀtimeꢀunderꢀASCꢀ606ꢀasꢀtheꢀperformanceꢀobligationsꢀrelatedꢀtoꢀcertainꢀtypesꢀofꢀsales areꢀsatisfied;ꢀwhereas,ꢀpreviouslyꢀtheseꢀrevenuesꢀandꢀcostsꢀwereꢀrecognizedꢀoverꢀaꢀperiodꢀofꢀtimeꢀunderꢀASCꢀ605.ꢀInꢀaddition, underꢀtheꢀmodifiedꢀretrospectiveꢀmethod,ꢀourꢀpriorꢀperiodꢀresultsꢀwereꢀnotꢀrecastꢀtoꢀreflectꢀtheꢀnewꢀrevenueꢀrecognitionꢀstandard. Exceptꢀforꢀtheꢀchangesꢀdiscussedꢀwithꢀrespectꢀtoꢀrevenueꢀrecognition,ꢀtheꢀimpactꢀofꢀwhichꢀisꢀsummarizedꢀinꢀtheꢀtablesꢀbelow,ꢀwe haveꢀconsistentlyꢀappliedꢀourꢀaccountingꢀpoliciesꢀtoꢀtheꢀperiodsꢀpresentedꢀinꢀourꢀFinancialꢀStatements. Balance Sheets and Statements of Cash Flows TheꢀadoptionꢀofꢀASCꢀ606ꢀutilizingꢀtheꢀmodifiedꢀretrospectiveꢀtransitionꢀmethodꢀdidꢀnotꢀhaveꢀaꢀmaterialꢀimpactꢀtoꢀourꢀBalance SheetsꢀandꢀStatementsꢀofꢀCashꢀFlowsꢀasꢀofꢀandꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018. Games revenuesꢀ WeꢀpreviouslyꢀreportedꢀcertainꢀcostsꢀincurredꢀinꢀconnectionꢀwithꢀourꢀWAPꢀplatform,ꢀconsistingꢀprimarilyꢀofꢀtheꢀjackpotꢀexpenses, asꢀ costꢀ ofꢀ revenues.ꢀ UnderꢀASCꢀ 606,ꢀ suchꢀ costsꢀ areꢀ reflectedꢀ asꢀ reductionsꢀ toꢀ gamingꢀ operationsꢀ revenuesꢀ onꢀ aꢀ netꢀ basisꢀ of presentation. FinTech revenuesꢀ Weꢀpreviouslyꢀreportedꢀcostsꢀandꢀexpensesꢀrelatedꢀtoꢀourꢀcashꢀaccessꢀservices,ꢀwhichꢀincludeꢀcommissionꢀexpensesꢀpayableꢀto casinoꢀoperators,ꢀinterchangeꢀfeesꢀpayableꢀtoꢀtheꢀnetworkꢀassociationsꢀandꢀprocessing,ꢀandꢀrelatedꢀcostsꢀpayableꢀtoꢀotherꢀthird partyꢀpartners,ꢀasꢀcostsꢀofꢀrevenues.ꢀAsꢀtheꢀresultꢀofꢀourꢀevaluationꢀofꢀtheꢀfactorsꢀcontainedꢀinꢀASCꢀ605,ꢀweꢀpreviouslyꢀdetermined thatꢀtheꢀindicatorsꢀrequiringꢀtheꢀgrossꢀreportingꢀoutweighedꢀthoseꢀforꢀnetꢀreportingꢀprimarilyꢀdueꢀtoꢀtheꢀriskꢀofꢀloss.ꢀUnderꢀASC 606,ꢀsuchꢀcostsꢀareꢀreflectedꢀasꢀreductionsꢀtoꢀrevenuesꢀonꢀaꢀnetꢀbasisꢀofꢀpresentation,ꢀsinceꢀweꢀdeterminedꢀthatꢀweꢀdoꢀnotꢀcontrol certainꢀcashꢀaccessꢀservicesꢀprovidedꢀtoꢀaꢀcustomerꢀand,ꢀtherefore,ꢀweꢀareꢀactingꢀasꢀanꢀagentꢀwhoseꢀperformanceꢀobligationꢀisꢀto arrangeꢀforꢀtheꢀprovisionꢀofꢀtheseꢀtypesꢀofꢀservices.ꢀInꢀaddition,ꢀcommissionꢀexpensesꢀpayableꢀtoꢀtheꢀgamingꢀoperatorsꢀareꢀdetermined toꢀbeꢀconsiderationꢀpaidꢀtoꢀcustomersꢀunderꢀASCꢀ606. TheꢀfollowingꢀtableꢀpresentsꢀtheꢀimpactꢀofꢀtheꢀapplicationꢀofꢀASCꢀ606ꢀutilizingꢀtheꢀmodifiedꢀretrospectiveꢀtransitionꢀmethodꢀto certainꢀlineꢀitemsꢀonꢀourꢀStatementsꢀofꢀIncomeꢀ(Loss)ꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018ꢀ(inꢀthousands):ꢀ 68 Revenues Games revenues Gamingꢀoperations Games total revenues FinTech revenues Cashꢀaccessꢀservices Equipment FinTech total revenues As Reported Year Ended December 31, 2018 Adjustments Without Adoption of ASC 606 $ 168,146 258,978 $ $ 2,364 2,364 170,510 261,342 156,806 20,977 210,537 629,641 (1,622) 628,019 786,447 19,355 838,556 Total revenues 469,515 630,383 1,099,898 Costs and expenses Games cost of revenues(1) Gamingꢀoperations Games total cost of revenues FinTech cost of revenues(1) Cashꢀaccessꢀservices Equipment FinTech total cost of revenues 17,603 68,009 9,717 12,601 26,428 2,364 2,364 629,092 (825) 628,267 19,967 70,373 638,809 11,776 654,695 Total costs and expenses 383,702 630,631 1,014,333 Operating income Income before income tax Incomeꢀtaxꢀbenefit Net income Comprehensive income (1)ꢀExclusiveꢀofꢀdepreciationꢀandꢀamortization. 4. BUSINESS COMBINATIONS 85,813 2,646 (9,710) 12,356 10,611 (248) (248) — (248) (248) 85,565 2,398 (9,710) 12,108 10,363 Weꢀ accountꢀ forꢀ businessꢀ combinationsꢀ inꢀ accordanceꢀ withꢀASCꢀ 805,ꢀ whichꢀ requiresꢀ thatꢀ theꢀ identifiableꢀ assetsꢀ acquiredꢀ and liabilitiesꢀassumedꢀbeꢀrecordedꢀatꢀtheirꢀestimatedꢀfairꢀvaluesꢀonꢀtheꢀacquisitionꢀdateꢀseparatelyꢀfromꢀgoodwill,ꢀwhichꢀisꢀtheꢀexcess ofꢀtheꢀfairꢀvalueꢀofꢀtheꢀpurchaseꢀpriceꢀoverꢀtheꢀfairꢀvaluesꢀofꢀtheseꢀidentifiableꢀassetsꢀandꢀliabilities.ꢀWeꢀincludeꢀtheꢀresultsꢀof operationsꢀofꢀanꢀacquiredꢀbusinessꢀasꢀofꢀtheꢀacquisitionꢀdate.ꢀWeꢀhadꢀnoꢀmaterialꢀacquisitionsꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31, 2018,ꢀ2017,ꢀandꢀ2016. 69 InꢀAugustꢀ2015,ꢀweꢀacquiredꢀcertainꢀassetsꢀofꢀResortꢀAdvantage,ꢀLLCꢀ(“ResortꢀAdvantage”),ꢀaꢀsupplierꢀofꢀcomprehensiveꢀand integratedꢀsolutionsꢀforꢀcompleteꢀFinancialꢀCrimesꢀEnforcementꢀNetworkꢀ(“FinCEN”)ꢀandꢀInternalꢀRevenueꢀServiceꢀregulatory complianceꢀtoꢀtheꢀgamingꢀindustry,ꢀforꢀanꢀaggregateꢀpurchaseꢀpriceꢀofꢀapproximatelyꢀ$13.3ꢀmillion,ꢀofꢀwhichꢀweꢀestimatedꢀthat approximatelyꢀ$4.7ꢀmillionꢀ(theꢀ“earnꢀoutꢀliability”)ꢀwouldꢀbeꢀpaidꢀunderꢀtheꢀprovisionsꢀofꢀtheꢀagreementꢀoverꢀaꢀperiodꢀofꢀ40 monthsꢀ(theꢀ“payoutꢀperiod”)ꢀbasedꢀuponꢀanꢀevaluationꢀoverꢀaꢀperiodꢀofꢀ36ꢀmonthsꢀ(theꢀ“earnꢀoutꢀperiod”)ꢀfollowingꢀtheꢀclosing ofꢀ theꢀ transaction.ꢀ Uponꢀ expirationꢀ ofꢀ theꢀ earnꢀ outꢀ periodꢀ inꢀAugustꢀ 2018,ꢀ weꢀ analyzedꢀ theꢀ remainingꢀ earnꢀ outꢀ liabilityꢀ of approximatelyꢀ$0.8ꢀmillionꢀandꢀdeterminedꢀthatꢀapproximatelyꢀ$0.6ꢀmillionꢀwouldꢀnotꢀbeꢀrealized;ꢀtherefore,ꢀweꢀreversedꢀthat amountꢀintoꢀincome.ꢀWeꢀcontinuedꢀtoꢀrecordꢀapproximatelyꢀ$0.2ꢀmillionꢀinꢀremainingꢀearnꢀoutꢀliabilityꢀtoꢀpotentiallyꢀbeꢀpaidꢀunder theꢀprovisionsꢀofꢀtheꢀagreementꢀduringꢀtheꢀfirstꢀquarterꢀofꢀ2019.ꢀTheꢀResortꢀAdvantageꢀacquisitionꢀdidꢀnotꢀhaveꢀaꢀmaterialꢀimpact onꢀourꢀresultsꢀofꢀoperationsꢀorꢀfinancialꢀcondition. 5. FUNDING AGREEMENTS Commercial Cash Arrangements WeꢀhaveꢀcommercialꢀarrangementsꢀwithꢀthirdꢀpartyꢀvendorsꢀtoꢀprovideꢀcashꢀforꢀcertainꢀofꢀourꢀATMs.ꢀForꢀtheꢀuseꢀofꢀtheseꢀfunds, weꢀpayꢀaꢀcashꢀusageꢀfeeꢀonꢀeitherꢀtheꢀaverageꢀdailyꢀbalanceꢀofꢀfundsꢀutilizedꢀmultipliedꢀbyꢀaꢀcontractuallyꢀdefinedꢀcashꢀusageꢀrate orꢀtheꢀamountsꢀsuppliedꢀmultipliedꢀbyꢀaꢀcontractuallyꢀdefinedꢀcashꢀusageꢀrate.ꢀTheseꢀcashꢀusageꢀfees,ꢀreflectedꢀasꢀinterestꢀexpense withinꢀtheꢀStatementsꢀofꢀIncomeꢀ(Loss),ꢀwereꢀ$7.0ꢀmillion,ꢀ$4.9ꢀmillion,ꢀandꢀ$3.1ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018, 2017,ꢀandꢀ2016,ꢀrespectively.ꢀWeꢀareꢀexposedꢀtoꢀinterestꢀrateꢀriskꢀtoꢀtheꢀextentꢀthatꢀtheꢀapplicableꢀratesꢀincrease. Underꢀtheseꢀagreements,ꢀtheꢀcurrencyꢀsuppliedꢀbyꢀthirdꢀpartyꢀvendorsꢀremainꢀtheirꢀsoleꢀpropertyꢀuntilꢀtheꢀfundsꢀareꢀdispensed.ꢀAs theseꢀfundsꢀareꢀnotꢀourꢀassets,ꢀsuppliedꢀcashꢀisꢀnotꢀreflectedꢀinꢀourꢀBalanceꢀSheets.ꢀTheꢀoutstandingꢀbalancesꢀofꢀATMꢀcashꢀutilized byꢀusꢀfromꢀtheꢀthirdꢀpartiesꢀwereꢀapproximatelyꢀ$224.7ꢀmillionꢀandꢀ$289.8ꢀmillionꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀrespectively. Ourꢀprimaryꢀcommercialꢀarrangement,ꢀtheꢀContractꢀCashꢀSolutionsꢀAgreement,ꢀasꢀamended,ꢀwithꢀWellsꢀFargoꢀprovidesꢀusꢀwith cashꢀinꢀtheꢀmaximumꢀamountꢀofꢀ$300ꢀmillionꢀwithꢀtheꢀabilityꢀtoꢀincreaseꢀtheꢀamountꢀbyꢀ$75ꢀmillionꢀoverꢀaꢀ5-dayꢀperiodꢀfor holidays,ꢀsuchꢀasꢀtheꢀperiodꢀaroundꢀNewꢀYear’sꢀDay.ꢀTheꢀtermꢀofꢀtheꢀagreementꢀexpiresꢀonꢀJuneꢀ30,ꢀ2021ꢀandꢀwillꢀautoꢀrenewꢀfor additionalꢀone-yearꢀperiodsꢀunlessꢀeitherꢀpartyꢀprovidesꢀaꢀ90-dayꢀwrittenꢀnoticeꢀofꢀitsꢀintentꢀnotꢀtoꢀrenew.ꢀ WeꢀareꢀresponsibleꢀforꢀanyꢀlossesꢀofꢀcashꢀinꢀtheꢀATMsꢀunderꢀthisꢀagreementꢀandꢀweꢀself-insureꢀforꢀthisꢀrisk.ꢀWeꢀincurredꢀnoꢀmaterial lossesꢀrelatedꢀtoꢀthisꢀself-insuranceꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016. Site‑Funded ATMs WeꢀoperateꢀATMsꢀatꢀcertainꢀcustomerꢀgamingꢀestablishmentsꢀwhereꢀtheꢀgamingꢀestablishmentꢀprovidesꢀtheꢀcashꢀrequiredꢀforꢀthe ATMꢀoperationalꢀneeds.ꢀWeꢀareꢀrequiredꢀtoꢀreimburseꢀtheꢀcustomerꢀforꢀtheꢀamountꢀofꢀcashꢀdispensedꢀfromꢀtheseꢀsite-fundedꢀATMs. Theꢀsite-fundedꢀATMꢀliabilityꢀisꢀincludedꢀwithinꢀsettlementꢀliabilitiesꢀinꢀtheꢀaccompanyingꢀBalanceꢀSheetsꢀandꢀwasꢀ$249.6ꢀmillion andꢀ$210.8ꢀmillionꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀrespectively. Everi-Funded ATMs WeꢀenterꢀintoꢀagreementsꢀwithꢀcustomersꢀforꢀcertainꢀofꢀourꢀCanadianꢀATMsꢀwherebyꢀweꢀprovideꢀtheꢀcashꢀrequiredꢀtoꢀoperateꢀthe ATMs.ꢀWeꢀsuppliedꢀapproximatelyꢀ$4.8ꢀmillionꢀandꢀ$6.9ꢀmillionꢀofꢀourꢀcashꢀforꢀtheseꢀATMsꢀatꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017, respectively,ꢀwhichꢀrepresentsꢀanꢀoutstandingꢀbalanceꢀunderꢀsuchꢀagreementsꢀatꢀtheꢀendꢀofꢀtheꢀperiod.ꢀSuchꢀamountsꢀareꢀreported withinꢀsettlementꢀreceivablesꢀlineꢀofꢀourꢀBalanceꢀSheets. Prefunded Cash Access Agreements Dueꢀ toꢀ certainꢀ regulatoryꢀ requirements,ꢀ someꢀ internationalꢀ gamingꢀ establishmentsꢀ requireꢀ prefundingꢀ ofꢀ cashꢀ toꢀ coverꢀ all outstandingꢀsettlementꢀamountsꢀinꢀorderꢀforꢀusꢀtoꢀprovideꢀcashꢀaccessꢀservicesꢀtoꢀtheirꢀproperties.ꢀWeꢀenterꢀintoꢀagreementsꢀwith theseꢀoperatorsꢀforꢀwhichꢀweꢀsupplyꢀourꢀcashꢀaccessꢀservicesꢀforꢀtheirꢀproperties.ꢀUnderꢀtheseꢀagreements,ꢀweꢀmaintainꢀsole discretionꢀtoꢀeitherꢀcontinueꢀorꢀceaseꢀoperationsꢀasꢀwellꢀasꢀdiscretionꢀoverꢀtheꢀamountsꢀprefundedꢀtoꢀtheꢀpropertiesꢀandꢀmayꢀrequest amountsꢀtoꢀbeꢀrefundedꢀtoꢀus,ꢀwithꢀappropriateꢀnoticeꢀtoꢀtheꢀoperator,ꢀatꢀanyꢀtime.ꢀTheꢀinitialꢀprefundedꢀamountsꢀandꢀsubsequent amountsꢀfromꢀtheꢀsettlementꢀofꢀtransactionsꢀareꢀdepositedꢀintoꢀaꢀbankꢀaccountꢀthatꢀisꢀtoꢀbeꢀusedꢀexclusivelyꢀforꢀcashꢀaccessꢀservices, andꢀweꢀmaintainꢀtheꢀrightꢀtoꢀmonitorꢀallꢀtransactionꢀactivityꢀinꢀthatꢀaccount.ꢀTheꢀtotalꢀamountꢀofꢀprefundedꢀcashꢀoutstandingꢀwas approximatelyꢀ$6.1ꢀmillionꢀandꢀ$8.4ꢀmillionꢀatꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀrespectively,ꢀandꢀisꢀincludedꢀinꢀprepaidꢀexpenses andꢀotherꢀassetsꢀinꢀourꢀBalanceꢀSheets. 70 6. TRADE AND OTHER RECEIVABLES Tradeꢀreceivablesꢀrepresentꢀshort-termꢀcreditꢀgrantedꢀtoꢀcustomersꢀasꢀwellꢀasꢀlong-termꢀloansꢀreceivableꢀonꢀourꢀgames,ꢀequipment, andꢀcomplianceꢀproducts.ꢀTradeꢀandꢀloansꢀreceivablesꢀgenerallyꢀdoꢀnotꢀrequireꢀcollateral.ꢀTheꢀbalanceꢀofꢀtradeꢀandꢀloansꢀreceivables consistsꢀofꢀoutstandingꢀbalancesꢀowedꢀtoꢀusꢀbyꢀgamingꢀestablishments.ꢀOtherꢀreceivablesꢀincludeꢀincomeꢀtaxꢀreceivablesꢀandꢀother miscellaneousꢀreceivables.ꢀ Theꢀbalanceꢀofꢀtradeꢀandꢀotherꢀreceivablesꢀconsistedꢀofꢀtheꢀfollowingꢀ(inꢀthousands):ꢀ Trade and other receivables, net Gamesꢀtradeꢀandꢀloansꢀreceivables FinTechꢀtradeꢀandꢀloansꢀreceivables Otherꢀreceivables Total trade and other receivables, net Non-current portion of receivables Gamesꢀtradeꢀandꢀloansꢀreceivables FinTechꢀtradeꢀandꢀloansꢀreceivables(1) Total non-current portion of receivables Total trade and other receivables, current portion At December 31, 2018 2017 $ $ $ $ $ 53,011 18,890 1,333 73,234 $ (2,922) (5,925) (8,847) $ 64,387 $ 38,070 10,780 1,570 50,420 (1,267) (1,371) (2,638) 47,782 ꢀ (1)ꢀInꢀconnectionꢀwithꢀtheꢀadoptionꢀofꢀASCꢀ606ꢀutilizingꢀtheꢀmodifiedꢀretrospectiveꢀtransitionꢀmethod,ꢀweꢀrecordedꢀanꢀimmaterial cumulativeꢀadjustmentꢀwithꢀrespectꢀtoꢀcertainꢀamountsꢀthatꢀhadꢀbeenꢀpreviouslyꢀdeferredꢀunderꢀtheꢀthenꢀexistingꢀrevenueꢀrecognition guidanceꢀasꢀofꢀDecemberꢀ31,ꢀ2017ꢀthatꢀrequiredꢀrecognitionꢀunderꢀASCꢀ606ꢀasꢀofꢀtheꢀeffectiveꢀdateꢀofꢀadoptionꢀinꢀaccumulated deficit. Atꢀleastꢀquarterly,ꢀweꢀevaluateꢀtheꢀcollectabilityꢀofꢀtheꢀoutstandingꢀbalancesꢀandꢀestablishꢀaꢀreserveꢀforꢀtheꢀamountꢀofꢀtheꢀexpected lossesꢀonꢀourꢀreceivables.ꢀTheꢀallowanceꢀforꢀdoubtfulꢀaccountsꢀforꢀtradeꢀreceivablesꢀwasꢀapproximatelyꢀ$6.4ꢀmillionꢀandꢀ$4.7 millionꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀrespectively,ꢀandꢀincludedꢀapproximatelyꢀ$3.2ꢀmillionꢀandꢀ$2.7ꢀmillionꢀofꢀcheck warrantyꢀreserves,ꢀrespectively.ꢀTheꢀprovisionꢀforꢀdoubtfulꢀcustomerꢀaccountsꢀreceivableꢀisꢀgenerallyꢀincludedꢀwithinꢀoperating expensesꢀinꢀtheꢀStatementsꢀofꢀIncomeꢀ(Loss). Aꢀsummaryꢀactivityꢀofꢀtheꢀreserveꢀforꢀcheckꢀwarrantyꢀlossesꢀisꢀasꢀfollowsꢀ(inꢀthousands):ꢀ Balance, December 31, 2015 Warrantyꢀexpenseꢀprovision Charge-offsꢀagainstꢀreserve Balance, December 31, 2016 Warrantyꢀexpenseꢀprovision Charge-offsꢀagainstꢀreserve Balance, December 31, 2017 Warrantyꢀexpenseꢀprovision Charge-offsꢀagainstꢀreserve Balance, December 31, 2018 7. INVENTORY Amount 2,973 8,694 (8,972) 2,695 9,418 (9,404) 2,709 9,819 (9,366) 3,162 $ $ Ourꢀinventoryꢀprimarilyꢀconsistsꢀofꢀcomponentꢀpartsꢀasꢀwellꢀasꢀwork-in-progressꢀandꢀfinishedꢀgoods.ꢀTheꢀcostꢀofꢀinventoryꢀincludes costꢀofꢀmaterials,ꢀlabor,ꢀoverheadꢀandꢀfreight.ꢀTheꢀinventoryꢀisꢀstatedꢀatꢀtheꢀlowerꢀofꢀcostꢀorꢀnetꢀrealizableꢀvalueꢀandꢀaccounted forꢀusingꢀtheꢀFIFOꢀmethod. 71 ThereꢀwasꢀnoꢀmaterialꢀimpairmentꢀofꢀourꢀinventoryꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017. Weꢀrecordedꢀanꢀimmaterialꢀimpairmentꢀchargeꢀofꢀapproximatelyꢀ$1.8ꢀmillionꢀinꢀourꢀGamesꢀsegmentꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31, 2018ꢀtoꢀreduceꢀtheꢀcarryingꢀvalueꢀofꢀcertainꢀcomponentꢀpartsꢀtoꢀtheirꢀfairꢀvalues.ꢀTheꢀadjustmentꢀwasꢀincludedꢀinꢀoperatingꢀexpenses inꢀourꢀStatementsꢀofꢀIncomeꢀ(Loss). Inventoryꢀconsistedꢀofꢀtheꢀfollowingꢀ(inꢀthousands): Inventory Componentꢀparts,ꢀnetꢀofꢀreservesꢀofꢀ$1,468ꢀandꢀ$1,327ꢀatꢀDecemberꢀ31,ꢀ2018ꢀand Decemberꢀ31,ꢀ2017,ꢀrespectively Work-in-progress Finishedꢀgoods Total inventory 8. PREPAID AND OTHER ASSETS At December 31, 2018 2017 $ $ 23,197 $ 18,782 280 926 985 4,200 24,403 $ 23,967 Prepaidꢀandꢀotherꢀassetsꢀincludeꢀtheꢀbalanceꢀofꢀprepaidꢀexpenses,ꢀdeposits,ꢀdebtꢀissuanceꢀcostsꢀonꢀourꢀNewꢀRevolvingꢀCredit Facilityꢀ(definedꢀherein),ꢀrestrictedꢀcashꢀandꢀotherꢀassets.ꢀTheꢀcurrentꢀportionꢀofꢀtheseꢀassetsꢀisꢀincludedꢀinꢀprepaidꢀandꢀotherꢀassets andꢀtheꢀnon-currentꢀportionꢀisꢀincludedꢀinꢀotherꢀassets,ꢀbothꢀofꢀwhichꢀareꢀcontainedꢀwithinꢀourꢀBalanceꢀSheets. Theꢀbalanceꢀofꢀtheꢀcurrentꢀportionꢀofꢀprepaidꢀandꢀotherꢀassetsꢀconsistedꢀofꢀtheꢀfollowingꢀ(inꢀthousands):ꢀ Prepaid expenses and other assets Deposits Prepaidꢀexpenses Other Total prepaid expenses and other assets At December 31, 2018 2017 $ $ 8,241 $ 8,351 3,667 9,003 6,426 5,241 20,259 $ 20,670 Theꢀbalanceꢀofꢀtheꢀnon-currentꢀportionꢀofꢀotherꢀassetsꢀconsistedꢀofꢀtheꢀfollowingꢀ(inꢀthousands):ꢀ Other assets Prepaidꢀexpensesꢀandꢀdeposits Debtꢀissuanceꢀcostsꢀofꢀrevolvingꢀcreditꢀfacility Other Total other assets At December 31, 2018 2017 $ $ 5,289 $ 654 309 6,252 $ 4,103 849 2,657 7,609 72 9. PROPERTY, EQUIPMENT AND LEASED ASSETS Property,ꢀequipmentꢀandꢀleasedꢀassetsꢀconsistꢀofꢀtheꢀfollowingꢀ(inꢀthousands): ꢀ Property, equipment and leased assets Rentalꢀpoolꢀ-ꢀdeployed Rentalꢀpoolꢀ-ꢀundeployed FinTechꢀequipment Leaseholdꢀandꢀbuilding ꢀꢀꢀimprovements Machinery,ꢀofficeꢀandꢀother ꢀꢀꢀequipment Total At December 31, 2018 At December 31, 2017 Useful Life (Years) Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value 2-4 2-4 3-5 Lease Term 2-5 $ 183,309 $ 105,038 $ 78,271 $ 162,319 $ 80,895 $ 81,424 23,825 27,285 11,857 14,680 21,000 6,938 9,145 6,285 4,919 17,366 25,907 10,981 9,374 18,654 5,211 7,992 7,253 5,770 46,322 28,654 17,668 35,167 24,087 11,080 $ 292,598 $ 176,310 $ 116,288 $ 251,740 $ 138,221 $ 113,519 ꢀ Depreciationꢀexpenseꢀrelatedꢀtoꢀproperty,ꢀequipmentꢀandꢀleasedꢀassetsꢀtotaledꢀapproximatelyꢀ$61.2ꢀmillion,ꢀ$47.3ꢀmillion,ꢀand $50.0ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively. Thereꢀwasꢀnoꢀmaterialꢀimpairmentꢀofꢀourꢀproperty,ꢀequipmentꢀandꢀleasedꢀassetsꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017. Weꢀrecordedꢀanꢀimmaterialꢀimpairmentꢀchargeꢀofꢀapproximatelyꢀ$0.8ꢀmillionꢀinꢀourꢀGamesꢀsegmentꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31, 2018ꢀtoꢀreduceꢀtheꢀcarryingꢀvalueꢀofꢀcertainꢀleasedꢀassetsꢀtoꢀtheirꢀfairꢀvalues.ꢀTheꢀadjustmentꢀwasꢀincludedꢀinꢀoperatingꢀexpenses inꢀourꢀStatementsꢀofꢀIncomeꢀ(Loss). 10. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill Goodwillꢀrepresentsꢀtheꢀexcessꢀofꢀtheꢀpurchaseꢀpriceꢀoverꢀtheꢀidentifiableꢀtangibleꢀandꢀintangibleꢀassetsꢀacquiredꢀplusꢀliabilities assumedꢀarisingꢀfromꢀbusinessꢀcombinations. InꢀaccordanceꢀwithꢀASCꢀ350,ꢀweꢀtestꢀgoodwillꢀatꢀtheꢀreportingꢀunitꢀlevel,ꢀwhichꢀareꢀidentifiedꢀasꢀoperatingꢀsegmentsꢀorꢀoneꢀlevel below,ꢀforꢀimpairmentꢀonꢀanꢀannualꢀbasisꢀandꢀbetweenꢀannualꢀtestsꢀifꢀeventsꢀandꢀcircumstancesꢀindicateꢀitꢀisꢀmoreꢀlikelyꢀthanꢀnot thatꢀtheꢀfairꢀvalueꢀofꢀaꢀreportingꢀunitꢀisꢀlessꢀthanꢀitsꢀcarryingꢀamount. Weꢀtestꢀforꢀimpairmentꢀannuallyꢀonꢀaꢀreportingꢀunitꢀbasis,ꢀatꢀtheꢀbeginningꢀofꢀourꢀfourthꢀfiscalꢀquarter,ꢀorꢀmoreꢀoftenꢀunderꢀcertain circumstances.ꢀTheꢀannualꢀimpairmentꢀtestꢀisꢀcompletedꢀusingꢀeither:ꢀaꢀqualitativeꢀ“Stepꢀ0”ꢀassessmentꢀbasedꢀonꢀreviewingꢀrelevant eventsꢀandꢀcircumstances;ꢀorꢀaꢀquantitativeꢀ“Stepꢀ1”ꢀassessment,ꢀwhichꢀdeterminesꢀtheꢀfairꢀvalueꢀofꢀtheꢀreportingꢀunit,ꢀusingꢀboth anꢀincomeꢀapproachꢀthatꢀdiscountsꢀfutureꢀcashꢀflowsꢀbasedꢀonꢀtheꢀestimatedꢀfutureꢀresultsꢀofꢀourꢀreportingꢀunitsꢀandꢀaꢀmarket approachꢀthatꢀcomparesꢀmarketꢀmultiplesꢀofꢀcomparableꢀcompaniesꢀtoꢀdetermineꢀwhetherꢀorꢀnotꢀanyꢀimpairmentꢀexists. Goodwill Testing Inꢀperformingꢀourꢀannualꢀgoodwillꢀimpairmentꢀtests,ꢀweꢀutilizeꢀtheꢀapproachꢀprescribedꢀunderꢀASCꢀ350.ꢀTheꢀ“Stepꢀ1”ꢀrequiredꢀa comparisonꢀofꢀtheꢀcarryingꢀamountꢀofꢀeachꢀreportingꢀunitꢀtoꢀitsꢀestimatedꢀfairꢀvalue.ꢀToꢀestimateꢀtheꢀfairꢀvalueꢀofꢀourꢀreporting unitsꢀforꢀ“Stepꢀ1”,ꢀweꢀusedꢀaꢀcombinationꢀofꢀanꢀincomeꢀvaluationꢀapproachꢀandꢀaꢀmarketꢀvaluationꢀapproach.ꢀTheꢀincomeꢀapproach isꢀbasedꢀonꢀaꢀdiscountedꢀcashꢀflowꢀ(“DCF”)ꢀanalysis.ꢀThisꢀmethodꢀinvolvesꢀestimatingꢀtheꢀafter-taxꢀcashꢀflowsꢀattributableꢀtoꢀa reportingꢀunitꢀandꢀthenꢀdiscountingꢀtheꢀafter-taxꢀcashꢀflowsꢀtoꢀaꢀpresentꢀvalue,ꢀusingꢀaꢀrisk-adjustedꢀdiscountꢀrate.ꢀAssumptions usedꢀinꢀtheꢀDCFꢀrequireꢀtheꢀexerciseꢀofꢀsignificantꢀjudgment,ꢀincluding,ꢀbutꢀnotꢀlimitedꢀto:ꢀappropriateꢀdiscountꢀratesꢀandꢀterminal values,ꢀgrowthꢀratesꢀandꢀtheꢀamountꢀandꢀtimingꢀofꢀexpectedꢀfutureꢀcashꢀflows.ꢀTheꢀprojectedꢀcashꢀflowsꢀareꢀbasedꢀonꢀourꢀmost recentꢀannualꢀbudgetꢀandꢀprojectedꢀyearsꢀbeyond.ꢀOurꢀbudgetsꢀandꢀprojectedꢀcashꢀflowsꢀareꢀbasedꢀonꢀestimatedꢀfutureꢀgrowth rates.ꢀWeꢀbelieveꢀourꢀassumptionsꢀareꢀconsistentꢀwithꢀtheꢀplansꢀandꢀestimatesꢀusedꢀtoꢀmanageꢀtheꢀunderlyingꢀbusinesses.ꢀThe discountꢀrates,ꢀwhichꢀareꢀintendedꢀtoꢀreflectꢀtheꢀrisksꢀinherentꢀinꢀfutureꢀcashꢀflowꢀprojections,ꢀusedꢀinꢀtheꢀDCFꢀareꢀbasedꢀon estimatesꢀofꢀtheꢀWACCꢀofꢀmarketꢀparticipantsꢀrelativeꢀtoꢀeachꢀrespectiveꢀreportingꢀunit.ꢀTheꢀmarketꢀapproachꢀconsidersꢀcomparable marketꢀdataꢀbasedꢀonꢀmultiplesꢀofꢀrevenueꢀorꢀearningsꢀbeforeꢀinterest,ꢀtaxes,ꢀdepreciationꢀandꢀamortizationꢀ(“EBITDA”).ꢀIfꢀthe fairꢀvalueꢀofꢀaꢀreportingꢀunitꢀisꢀlessꢀthanꢀitsꢀcarryingꢀamount,ꢀanꢀimpairmentꢀchargeꢀequalꢀtoꢀtheꢀamountꢀbyꢀwhichꢀtheꢀcarrying amountꢀofꢀgoodwillꢀforꢀtheꢀreportingꢀunitꢀexceedsꢀtheꢀfairꢀvalueꢀofꢀthatꢀgoodwillꢀisꢀrecordedꢀinꢀaccordanceꢀwithꢀASCꢀ350. 73 Weꢀhadꢀapproximatelyꢀ$640.5ꢀmillionꢀandꢀ$640.6ꢀmillionꢀofꢀgoodwillꢀonꢀourꢀBalanceꢀSheetsꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017, respectively,ꢀresultingꢀfromꢀacquisitionsꢀofꢀotherꢀbusinesses. Inꢀ connectionꢀ withꢀ ourꢀ annualꢀ goodwillꢀ impairmentꢀ testingꢀ processꢀ forꢀ 2018ꢀ andꢀ 2017,ꢀ weꢀ determinedꢀ thatꢀ noꢀ impairment adjustmentsꢀwereꢀnecessary.ꢀTheꢀfairꢀvalueꢀexceededꢀtheꢀcarryingꢀamountꢀforꢀeachꢀofꢀtheꢀGames,ꢀCashꢀAccessꢀServices,ꢀKiosk SalesꢀandꢀServices,ꢀCentralꢀCreditꢀServicesꢀandꢀComplianceꢀSalesꢀandꢀServicesꢀreportingꢀunitsꢀforꢀ2018ꢀandꢀ2017.ꢀꢀ Inꢀ connectionꢀ withꢀ ourꢀ annualꢀ goodwillꢀ impairmentꢀ testingꢀ processꢀ 2016,ꢀ weꢀ determinedꢀ thatꢀ impairmentꢀ adjustmentsꢀ were necessary.ꢀTheꢀfairꢀvalueꢀexceededꢀtheꢀcarryingꢀamountꢀforꢀeachꢀofꢀtheꢀCashꢀAccessꢀServices,ꢀKioskꢀSalesꢀandꢀServices,ꢀCentral CreditꢀServicesꢀandꢀComplianceꢀSalesꢀandꢀServicesꢀreportingꢀunits,ꢀwhileꢀGamesꢀreportingꢀunitꢀhadꢀaꢀgoodwillꢀimpairmentꢀof $146.3ꢀmillionꢀforꢀ2016.ꢀTheꢀimpairmentꢀrecordedꢀinꢀ2016ꢀwasꢀprimarilyꢀbasedꢀuponꢀlimitedꢀgrowthꢀandꢀcapitalꢀexpenditure constraintsꢀinꢀtheꢀgamingꢀindustry,ꢀconsolidationꢀandꢀincreasedꢀcompetitionꢀinꢀtheꢀgamingꢀmanufacturingꢀspace,ꢀstockꢀmarket volatility,ꢀglobalꢀandꢀdomesticꢀeconomicꢀuncertainty,ꢀandꢀlowerꢀthanꢀforecastedꢀoperatingꢀprofitsꢀandꢀcashꢀflows.ꢀBasedꢀonꢀthese indicators,ꢀweꢀrevisedꢀourꢀestimatesꢀandꢀassumptionsꢀforꢀtheꢀGamesꢀreportingꢀunit. Managementꢀperformsꢀitsꢀannualꢀforecastingꢀprocess,ꢀwhich,ꢀamongꢀotherꢀfactors,ꢀincludesꢀreviewingꢀrecentꢀhistoricalꢀresults, company-specificꢀ variablesꢀ andꢀ industryꢀ trends.ꢀ Thisꢀ processꢀ isꢀ generallyꢀ completedꢀ inꢀ theꢀ fourthꢀ quarterꢀ andꢀ consideredꢀ in conjunctionꢀwithꢀtheꢀannualꢀgoodwillꢀimpairmentꢀevaluation.ꢀꢀ Theꢀannualꢀevaluationꢀofꢀgoodwillꢀrequiresꢀtheꢀuseꢀofꢀestimatesꢀaboutꢀfutureꢀoperatingꢀresultsꢀofꢀeachꢀreportingꢀunitꢀtoꢀdetermine itsꢀestimatedꢀfairꢀvalue.ꢀChangesꢀinꢀforecastedꢀoperationsꢀcanꢀmateriallyꢀaffectꢀtheseꢀestimates,ꢀwhichꢀcouldꢀmateriallyꢀaffectꢀour resultsꢀofꢀoperations.ꢀTheꢀestimatesꢀofꢀfairꢀvalueꢀrequireꢀsignificantꢀjudgmentꢀandꢀareꢀbasedꢀonꢀassumptionsꢀweꢀdeterminedꢀtoꢀbe reasonable;ꢀhowever,ꢀthatꢀareꢀunpredictableꢀandꢀinherentlyꢀuncertain,ꢀincluding,ꢀestimatesꢀofꢀfutureꢀgrowthꢀrates,ꢀoperatingꢀmargins, andꢀassumptionsꢀaboutꢀtheꢀoverallꢀeconomicꢀclimateꢀasꢀwellꢀasꢀtheꢀcompetitiveꢀenvironmentꢀforꢀourꢀreportingꢀunits.ꢀThereꢀcanꢀbe noꢀassuranceꢀthatꢀourꢀestimatesꢀandꢀassumptionsꢀmadeꢀforꢀpurposesꢀofꢀourꢀgoodwillꢀtestingꢀasꢀofꢀtheꢀtimeꢀofꢀtestingꢀwillꢀproveꢀto beꢀaccurateꢀpredictionsꢀofꢀtheꢀfuture.ꢀIfꢀourꢀassumptionsꢀregardingꢀbusinessꢀplans,ꢀcompetitiveꢀenvironmentsꢀorꢀanticipatedꢀgrowth ratesꢀareꢀnotꢀcorrect,ꢀweꢀmayꢀbeꢀrequiredꢀtoꢀrecordꢀgoodwillꢀimpairmentꢀchargesꢀinꢀfutureꢀperiods,ꢀwhetherꢀinꢀconnectionꢀwithꢀour nextꢀannualꢀimpairmentꢀtesting,ꢀorꢀearlier,ꢀifꢀanꢀindicatorꢀofꢀanꢀimpairmentꢀisꢀpresentꢀpriorꢀtoꢀourꢀnextꢀannualꢀevaluation. Ourꢀreportingꢀunitsꢀareꢀidentifiedꢀasꢀoperatingꢀsegmentsꢀorꢀoneꢀlevelꢀbelow.ꢀReportingꢀunitsꢀmust:ꢀ(a)ꢀengageꢀinꢀbusinessꢀactivities fromꢀ whichꢀ theyꢀ earnꢀ revenuesꢀ andꢀ incurꢀ expenses;ꢀ (b)ꢀ haveꢀ operatingꢀ resultsꢀ thatꢀ areꢀ regularlyꢀ reviewedꢀ byꢀ ourꢀ segment managementꢀtoꢀascertainꢀtheꢀresourcesꢀtoꢀbeꢀallocatedꢀtoꢀtheꢀsegmentꢀandꢀassessꢀitsꢀperformance;ꢀandꢀ(c)ꢀhaveꢀdiscreteꢀfinancial informationꢀ available.ꢀ Ourꢀ reportingꢀ unitsꢀ included:ꢀ Games,ꢀ CashꢀAccessꢀ Services,ꢀ Kioskꢀ Salesꢀ andꢀ Services,ꢀ Centralꢀ Credit Services,ꢀandꢀComplianceꢀSalesꢀandꢀServices.ꢀ Theꢀchangesꢀinꢀtheꢀcarryingꢀamountꢀofꢀgoodwillꢀareꢀasꢀfollowsꢀ(inꢀthousands): Cash Access Services Kiosk Sales and Services Central Credit Services Compliance Sales and Services Games Total Goodwill Balance, December 31, 2016 Foreignꢀtranslationꢀadjustment Balance, December 31, 2017 Foreignꢀtranslationꢀadjustment Balance, December 31, 2018 $ 449,041 — $ 449,041 — $ 449,041 $ 157,055 43 $ 157,098 (52) $ 157,046 $ $ $ 5,745 — 5,745 — 5,745 $ $ $ 17,127 — 17,127 — 17,127 $ $ $ 11,578 — 11,578 — 11,578 $ $ $ 640,546 43 640,589 (52) 640,537 74 Other Intangible Assets Otherꢀintangibleꢀassetsꢀconsistꢀofꢀtheꢀfollowingꢀ(inꢀthousands):ꢀ Weighted Average Remaining Life (Years) 4 6 8 2 4 Other intangible assets Contractꢀrightsꢀunder ꢀꢀꢀplacementꢀfeeꢀagreements Customerꢀcontracts Customerꢀrelationships Developedꢀtechnologyꢀand ꢀꢀꢀsoftware Patents,ꢀtrademarksꢀandꢀother Total At December 31, 2018 At December 31, 2017 Cost Accumulated Amortization Net Book Value Cost Accumulated Amortization Net Book Value $ 57,440 $ 12,178 $ 45,262 $ 57,231 $ 3,910 $ 53,321 51,175 231,100 277,243 46,162 84,619 190,886 5,013 146,481 86,357 51,175 231,100 249,064 43,638 63,653 158,919 7,537 167,447 90,145 29,168 $ 646,126 24,884 358,729 4,284 $ 287,397 29,046 $ 617,616 23,185 293,305 5,861 $ 324,311 $ $ ꢀAmortizationꢀexpenseꢀrelatedꢀtoꢀotherꢀintangibleꢀassetsꢀtotaledꢀapproximatelyꢀ$65.2ꢀmillion,ꢀ$69.5ꢀmillion,ꢀandꢀ$94.6ꢀmillionꢀfor theꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively.ꢀWeꢀcapitalizedꢀ$33.3ꢀmillion,ꢀ$29.4ꢀmillion,ꢀandꢀ$24.2ꢀmillion ofꢀinternalꢀsoftwareꢀdevelopmentꢀcostsꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively. Onꢀaꢀquarterlyꢀbasis,ꢀweꢀevaluateꢀourꢀotherꢀintangibleꢀassetsꢀforꢀpotentialꢀimpairmentꢀasꢀpartꢀofꢀourꢀquarterlyꢀreviewꢀprocess.ꢀThere wasꢀnoꢀmaterialꢀimpairmentꢀidentifiedꢀforꢀanyꢀofꢀourꢀotherꢀintangibleꢀassetsꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀ2017,ꢀand 2016. Theꢀanticipatedꢀamortizationꢀexpenseꢀrelatedꢀtoꢀotherꢀintangibleꢀassets,ꢀassumingꢀnoꢀsubsequentꢀimpairmentꢀofꢀtheꢀunderlying assets,ꢀisꢀasꢀfollowsꢀ(inꢀthousands):ꢀ Anticipated amortization expense 2019 2020 2021 2022 2023 Thereafter Total(1) ꢀ $ Amount 64,380 52,168 41,440 33,473 20,241 50,316 $ 262,018 (1) ForꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀtheꢀCompanyꢀhadꢀ$25.4ꢀmillionꢀinꢀotherꢀintangibleꢀassetsꢀwhichꢀhadꢀnotꢀyetꢀbeen placedꢀintoꢀservice. Weꢀenterꢀintoꢀplacementꢀfeeꢀagreementsꢀtoꢀsecureꢀaꢀlong-termꢀrevenueꢀshareꢀpercentageꢀandꢀaꢀfixedꢀnumberꢀofꢀplayerꢀterminal placementsꢀinꢀaꢀgamingꢀfacility.ꢀTheꢀfundingꢀunderꢀplacementꢀfeeꢀagreementsꢀisꢀnotꢀreimbursed.ꢀInꢀreturnꢀforꢀtheꢀfeesꢀunderꢀthese agreements,ꢀeachꢀfacilityꢀdedicatesꢀaꢀpercentageꢀofꢀitsꢀfloorꢀspace,ꢀorꢀanꢀagreedꢀuponꢀunitꢀcount,ꢀforꢀtheꢀplacementꢀofꢀourꢀelectronic gamingꢀmachinesꢀ(“EGMs”)ꢀoverꢀtheꢀtermꢀofꢀtheꢀagreement,ꢀgenerallyꢀfromꢀ12ꢀtoꢀ83ꢀmonths,ꢀandꢀweꢀreceiveꢀaꢀfixedꢀpercentage orꢀflatꢀfeeꢀofꢀthoseꢀmachines’ꢀholdꢀperꢀday.ꢀCertainꢀofꢀtheꢀagreementsꢀcontainꢀEGMꢀperformanceꢀstandardsꢀthatꢀcouldꢀallowꢀthe respectiveꢀfacilityꢀtoꢀreduceꢀaꢀportionꢀofꢀourꢀguaranteedꢀfloorꢀspace. Placementꢀfeesꢀandꢀamountsꢀadvancedꢀinꢀexcessꢀofꢀthoseꢀtoꢀbeꢀreimbursedꢀbyꢀtheꢀcustomerꢀforꢀrealꢀpropertyꢀandꢀlandꢀimprovements areꢀallocatedꢀtoꢀintangibleꢀassetsꢀandꢀareꢀgenerallyꢀamortizedꢀoverꢀtheꢀtermꢀofꢀtheꢀcontract,ꢀwhichꢀisꢀrecordedꢀasꢀaꢀreductionꢀof revenueꢀgeneratedꢀfromꢀtheꢀfacility.ꢀInꢀtheꢀpastꢀweꢀhave,ꢀandꢀinꢀtheꢀfuture,ꢀweꢀmay,ꢀbyꢀmutualꢀagreement,ꢀamendꢀtheseꢀagreements toꢀreduceꢀourꢀfloorꢀspaceꢀatꢀtheꢀfacilities.ꢀAnyꢀproceedsꢀreceivedꢀforꢀtheꢀreductionꢀofꢀfloorꢀspaceꢀareꢀfirstꢀappliedꢀagainstꢀthe intangibleꢀassetꢀforꢀthatꢀparticularꢀplacementꢀfeeꢀagreement,ꢀifꢀany,ꢀandꢀtheꢀremainingꢀnetꢀbookꢀvalueꢀofꢀtheꢀintangibleꢀassetꢀis prospectivelyꢀamortizedꢀonꢀaꢀstraight-lineꢀmethodꢀoverꢀtheꢀremainingꢀestimatedꢀusefulꢀlife. 75 InꢀJulyꢀ2017,ꢀweꢀenteredꢀintoꢀaꢀplacementꢀfeeꢀagreementꢀwithꢀaꢀcustomerꢀforꢀcertainꢀofꢀitsꢀlocationsꢀforꢀapproximatelyꢀ$49.1 million,ꢀnetꢀofꢀ$10.1ꢀmillionꢀofꢀunamortizedꢀfeesꢀrelatedꢀtoꢀsupersededꢀcontracts.ꢀWeꢀpaidꢀapproximatelyꢀ$22.7ꢀmillionꢀandꢀ$13.3 millionꢀinꢀplacementꢀfeesꢀtoꢀthisꢀcustomerꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀrespectively.ꢀTheꢀpaymentsꢀmadeꢀin 2018ꢀincludedꢀapproximatelyꢀ$2.1ꢀmillionꢀofꢀimputedꢀinterest. 11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Theꢀfollowingꢀtableꢀpresentsꢀourꢀaccountsꢀpayableꢀandꢀaccruedꢀexpensesꢀ(amountsꢀinꢀthousands): Accounts payable and accrued expenses Tradeꢀaccountsꢀpayable Placementꢀfees(1) Payrollꢀandꢀrelatedꢀexpenses Deferredꢀandꢀunearnedꢀrevenues Other Cashꢀaccessꢀprocessingꢀandꢀrelatedꢀexpenses Accruedꢀtaxes Accruedꢀinterest At December 31, 2018 2017 $ 70,796 $ 16,746 15,055 12,887 6,303 4,160 1,917 1,374 59,435 22,328 14,178 10,450 11,303 8,932 2,112 5,766 Total accounts payable and accrued expenses $ 129,238 $ 134,504 ꢀ (1) Theꢀ totalꢀ outstandingꢀ balanceꢀ ofꢀ theꢀ placementꢀ feeꢀ liabilityꢀ wasꢀ approximatelyꢀ $16.7ꢀ millionꢀ andꢀ $39.1ꢀ millionꢀ asꢀ of Decemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀrespectively.ꢀTheꢀplacementꢀfeeꢀliabilityꢀwasꢀconsideredꢀcurrentꢀportionꢀdueꢀtoꢀtheꢀremaining obligationꢀbeingꢀdueꢀwithinꢀtwelveꢀmonthsꢀofꢀDecemberꢀ31,ꢀ2018.ꢀTheꢀremainingꢀnon-currentꢀplacementꢀfeesꢀofꢀapproximately $16.8ꢀmillionꢀasꢀofꢀDecemberꢀ31,ꢀ2017ꢀwereꢀincludedꢀinꢀotherꢀaccruedꢀexpensesꢀandꢀliabilitiesꢀinꢀourꢀBalanceꢀSheets. 12. LONG-TERM DEBT Theꢀfollowingꢀtableꢀsummarizesꢀourꢀindebtednessꢀ(inꢀthousands):ꢀ Long-term debt Seniorꢀsecuredꢀtermꢀloan Seniorꢀunsecuredꢀnotes Total debt Debtꢀissuanceꢀcostsꢀandꢀdiscount Total debt after debt issuance costs and discount Currentꢀportionꢀofꢀlong-termꢀdebt Long-term debt, less current portion Refinancings At December 31, 2018 2017 $ 807,700 $ 815,900 375,000 1,182,700 (19,484) 1,163,216 (8,200) 1,155,016 $ 375,000 1,190,900 (23,057) 1,167,843 (8,200) 1,159,643 $ OnꢀMayꢀ9,ꢀ2017ꢀ(theꢀ“ClosingꢀDate”),ꢀEveriꢀPayments,ꢀasꢀborrower,ꢀandꢀHoldingsꢀenteredꢀintoꢀaꢀcreditꢀagreementꢀwithꢀtheꢀlenders partyꢀtheretoꢀandꢀJefferiesꢀFinanceꢀLLC,ꢀasꢀadministrativeꢀagent,ꢀcollateralꢀagent,ꢀswingꢀlineꢀlender,ꢀletterꢀofꢀcreditꢀissuer,ꢀsole leadꢀarrangerꢀandꢀsoleꢀbookꢀmanagerꢀ(amendedꢀasꢀdescribedꢀbelow,ꢀtheꢀ“NewꢀCreditꢀAgreement”).ꢀTheꢀNewꢀCreditꢀAgreement providesꢀfor:ꢀ(i)ꢀaꢀ$35.0ꢀmillion,ꢀfive-yearꢀseniorꢀsecuredꢀrevolvingꢀcreditꢀfacilityꢀ(theꢀ“NewꢀRevolvingꢀCreditꢀFacility”);ꢀandꢀ(ii) anꢀ$820.0ꢀmillion,ꢀseven-yearꢀseniorꢀsecuredꢀtermꢀloanꢀfacilityꢀ(theꢀ“NewꢀTermꢀLoanꢀFacility,”ꢀandꢀtogetherꢀwithꢀtheꢀNewꢀRevolving CreditꢀFacility,ꢀtheꢀ“NewꢀCreditꢀFacilities”).ꢀTheꢀfeesꢀassociatedꢀwithꢀtheꢀNewꢀCreditꢀFacilitiesꢀincludedꢀdiscountsꢀofꢀapproximately $4.1ꢀmillionꢀandꢀdebtꢀissuanceꢀcostsꢀofꢀapproximatelyꢀ$15.5ꢀmillion.ꢀAllꢀborrowingsꢀunderꢀtheꢀNewꢀRevolvingꢀCreditꢀFacilityꢀare subjectꢀtoꢀtheꢀsatisfactionꢀofꢀcustomaryꢀconditions,ꢀincludingꢀtheꢀabsenceꢀofꢀdefaultsꢀandꢀtheꢀaccuracyꢀofꢀrepresentationsꢀand warranties. 76 TheꢀproceedsꢀfromꢀtheꢀNewꢀTermꢀLoanꢀFacilityꢀincurredꢀonꢀtheꢀClosingꢀDateꢀwereꢀusedꢀto:ꢀ(i)ꢀrefinance:ꢀ(a)ꢀEveriꢀPayments’ existingꢀcreditꢀfacilityꢀwithꢀanꢀoutstandingꢀbalanceꢀofꢀapproximatelyꢀ$462.3ꢀmillionꢀwithꢀBankꢀofꢀAmerica,ꢀN.A.,ꢀasꢀadministrative agent,ꢀcollateralꢀagent,ꢀswingꢀlineꢀlenderꢀandꢀletterꢀofꢀcreditꢀissuer,ꢀDeutscheꢀBankꢀSecuritiesꢀInc.,ꢀasꢀsyndicationꢀagent,ꢀandꢀMerrill Lynch,ꢀPierce,ꢀFennerꢀ&ꢀSmithꢀIncorporatedꢀandꢀDeutscheꢀBankꢀSecuritiesꢀInc.,ꢀasꢀjointꢀleadꢀarrangersꢀandꢀjointꢀbookꢀmanagers (theꢀ“PriorꢀCreditꢀFacility”);ꢀandꢀ(b)ꢀEveriꢀPayments’ꢀ7.25%ꢀSeniorꢀSecuredꢀNotesꢀdueꢀ2021ꢀinꢀtheꢀaggregateꢀoriginalꢀprincipal amountꢀofꢀ$335.0ꢀmillionꢀ(theꢀ“RefinancedꢀSecuredꢀNotes”);ꢀandꢀ(ii)ꢀpayꢀrelatedꢀtransactionꢀfeesꢀandꢀexpenses. Inꢀconnectionꢀwithꢀtheꢀrefinancing,ꢀweꢀrecordedꢀaꢀnon-cashꢀchargeꢀofꢀapproximatelyꢀ$14.6ꢀmillionꢀduringꢀtheꢀsecondꢀquarterꢀof 2017ꢀrelatedꢀtoꢀtheꢀunamortizedꢀdeferredꢀfinancingꢀfeesꢀandꢀdiscountsꢀrelatedꢀtoꢀtheꢀextinguishedꢀtermꢀloanꢀunderꢀtheꢀPriorꢀCredit FacilityꢀandꢀtheꢀredeemedꢀRefinancedꢀSecuredꢀNotes.ꢀNoꢀprepaymentꢀpenaltiesꢀwereꢀincurred. OnꢀNovemberꢀ13,ꢀ2017ꢀ(theꢀ“RepricingꢀClosingꢀDate”),ꢀweꢀenteredꢀintoꢀanꢀamendmentꢀtoꢀtheꢀNewꢀCreditꢀAgreementꢀ(theꢀ“First Amendment”)ꢀwhich,ꢀamongꢀotherꢀthings,ꢀreducedꢀtheꢀinterestꢀrateꢀonꢀtheꢀapproximatelyꢀ$818.0ꢀmillionꢀthen-outstandingꢀbalance ofꢀtheꢀNewꢀTermꢀLoanꢀFacility;ꢀhowever,ꢀitꢀdidꢀnotꢀchangeꢀtheꢀmaturityꢀdatesꢀforꢀtheꢀNewꢀTermꢀLoanꢀFacilityꢀorꢀtheꢀNewꢀRevolving CreditꢀFacilityꢀorꢀtheꢀfinancialꢀcovenantsꢀorꢀotherꢀdebtꢀrepaymentsꢀtermsꢀsetꢀforthꢀinꢀtheꢀNewꢀCreditꢀAgreement.ꢀWeꢀincurred approximatelyꢀ$3.0ꢀmillionꢀofꢀdebtꢀissuanceꢀcostsꢀandꢀfeesꢀassociatedꢀwithꢀtheꢀrepricingꢀofꢀtheꢀNewꢀTermꢀLoanꢀFacility. OnꢀMayꢀ17,ꢀ2018,ꢀweꢀenteredꢀintoꢀaꢀSecondꢀAmendmentꢀ(theꢀ“SecondꢀAmendment”)ꢀtoꢀtheꢀNewꢀCreditꢀAgreement,ꢀwhichꢀreduced theꢀinterestꢀrateꢀonꢀtheꢀ$813.9ꢀmillionꢀoutstandingꢀbalanceꢀofꢀtheꢀseniorꢀsecuredꢀtermꢀloanꢀunderꢀtheꢀCreditꢀAgreementꢀbyꢀ50ꢀbasis pointsꢀtoꢀLIBORꢀ+ꢀ3.00%ꢀfromꢀLIBORꢀ+ꢀ3.50%ꢀwithꢀtheꢀLIBORꢀfloorꢀunchangedꢀatꢀ1.00%.ꢀTheꢀseniorꢀsecuredꢀtermꢀloanꢀunder theꢀCreditꢀAgreementꢀwillꢀbeꢀsubjectꢀtoꢀaꢀprepaymentꢀpremiumꢀofꢀ1.00%ꢀofꢀtheꢀprincipalꢀamountꢀrepaidꢀforꢀanyꢀvoluntaryꢀprepayment orꢀmandatoryꢀprepaymentꢀwithꢀproceedsꢀofꢀdebtꢀthatꢀhasꢀaꢀlowerꢀeffectiveꢀyieldꢀthanꢀtheꢀrepricedꢀtermꢀloanꢀorꢀanyꢀamendmentꢀto theꢀrepricedꢀtermꢀloanꢀthatꢀreducesꢀtheꢀinterestꢀrateꢀthereon,ꢀinꢀeachꢀcase,ꢀtoꢀtheꢀextentꢀoccurringꢀwithinꢀsixꢀmonthsꢀofꢀtheꢀeffective dateꢀofꢀtheꢀSecondꢀAmendment.ꢀTheꢀmaturityꢀdateꢀforꢀtheꢀCreditꢀAgreementꢀremainsꢀMayꢀ9,ꢀ2024,ꢀandꢀnoꢀchangesꢀwereꢀmadeꢀto theꢀfinancialꢀcovenantsꢀorꢀotherꢀdebtꢀrepaymentꢀterms.ꢀWeꢀincurredꢀapproximatelyꢀ$1.3ꢀmillionꢀofꢀdebtꢀissuanceꢀcostsꢀandꢀfees associatedꢀwithꢀtheꢀrepricingꢀofꢀtheꢀNewꢀTermꢀLoanꢀFacility. New Credit Facilities TheꢀNewꢀTermꢀLoanꢀFacilityꢀmaturesꢀsevenꢀyearsꢀafterꢀtheꢀClosingꢀDateꢀandꢀtheꢀNewꢀRevolvingꢀCreditꢀFacilityꢀmaturesꢀfiveꢀyears afterꢀ theꢀ Closingꢀ Date.ꢀ Theꢀ Newꢀ Revolvingꢀ Creditꢀ Facilityꢀ isꢀ availableꢀ forꢀ generalꢀ corporateꢀ purposes,ꢀ includingꢀ permitted acquisitions,ꢀworkingꢀcapitalꢀandꢀtheꢀissuanceꢀofꢀlettersꢀofꢀcredit. TheꢀinterestꢀrateꢀperꢀannumꢀapplicableꢀtoꢀloansꢀunderꢀtheꢀNewꢀRevolvingꢀCreditꢀFacilityꢀis,ꢀatꢀEveriꢀPayments’ꢀoption,ꢀtheꢀbase rateꢀorꢀtheꢀEurodollarꢀRateꢀ(definedꢀtoꢀbeꢀtheꢀLondonꢀInterbankꢀOfferedꢀRateꢀorꢀaꢀcomparableꢀorꢀsuccessorꢀrate)ꢀ(theꢀ“Eurodollar Rate”)ꢀplus,ꢀinꢀeachꢀcase,ꢀanꢀapplicableꢀmargin.ꢀTheꢀinterestꢀrateꢀperꢀannumꢀapplicableꢀtoꢀtheꢀNewꢀTermꢀLoanꢀFacilityꢀalsoꢀis,ꢀat EveriꢀPayments’ꢀoption,ꢀtheꢀbaseꢀrateꢀorꢀtheꢀEurodollarꢀRateꢀplus,ꢀinꢀeachꢀcase,ꢀanꢀapplicableꢀmargin.ꢀTheꢀEurodollarꢀRateꢀisꢀreset atꢀtheꢀbeginningꢀofꢀeachꢀselectedꢀinterestꢀperiodꢀbasedꢀonꢀtheꢀEurodollarꢀRateꢀthenꢀinꢀeffect;ꢀprovidedꢀthat,ꢀifꢀtheꢀEurodollarꢀRate isꢀbelowꢀzero,ꢀthenꢀsuchꢀrateꢀwillꢀbeꢀequalꢀtoꢀzeroꢀplusꢀtheꢀapplicableꢀmargin.ꢀTheꢀbaseꢀrateꢀisꢀaꢀfluctuatingꢀinterestꢀrateꢀequalꢀto theꢀhighestꢀof:ꢀ(i)ꢀtheꢀprimeꢀlendingꢀrateꢀannouncedꢀbyꢀtheꢀadministrativeꢀagent;ꢀ(ii)ꢀtheꢀfederalꢀfundsꢀeffectiveꢀrateꢀfromꢀtimeꢀto timeꢀplusꢀ0.50%;ꢀandꢀ(iii)ꢀtheꢀEurodollarꢀRateꢀ(afterꢀtakingꢀaccountꢀofꢀanyꢀapplicableꢀfloor)ꢀapplicableꢀforꢀanꢀinterestꢀperiodꢀof oneꢀmonthꢀplusꢀ1.00%.ꢀPriorꢀtoꢀtheꢀeffectivenessꢀofꢀtheꢀFirstꢀAmendmentꢀonꢀtheꢀRepricingꢀClosingꢀDate,ꢀtheꢀapplicableꢀmargins forꢀbothꢀtheꢀNewꢀRevolvingꢀCreditꢀFacilityꢀandꢀtheꢀNewꢀTermꢀLoanꢀFacilityꢀwere:ꢀ(i)ꢀ4.50%ꢀinꢀrespectꢀofꢀEurodollarꢀRateꢀloans andꢀ(ii)ꢀ3.50%ꢀinꢀrespectꢀofꢀbaseꢀrateꢀloans.ꢀTheꢀapplicableꢀmarginsꢀforꢀtheꢀNewꢀTermꢀLoanꢀFacilityꢀfromꢀandꢀafterꢀtheꢀeffectiveness ofꢀtheꢀFirstꢀAmendmentꢀonꢀtheꢀRepricingꢀClosingꢀDateꢀthroughꢀtheꢀeffectivenessꢀofꢀtheꢀSecondꢀAmendmentꢀwere:ꢀ(i)ꢀ3.50%ꢀin respectꢀofꢀEurodollarꢀRateꢀloansꢀandꢀ(ii)ꢀ2.50%ꢀinꢀrespectꢀofꢀbaseꢀrateꢀloans.ꢀTheꢀapplicableꢀmarginsꢀforꢀtheꢀNewꢀTermꢀLoan FacilityꢀfromꢀandꢀafterꢀtheꢀeffectivenessꢀofꢀtheꢀSecondꢀAmendmentꢀare:ꢀ(i)ꢀ3.00%ꢀinꢀrespectꢀofꢀEurodollarꢀRateꢀloansꢀandꢀ(ii) 2.00%ꢀinꢀrespectꢀofꢀbaseꢀrateꢀloans.ꢀ Voluntaryꢀprepaymentsꢀofꢀtheꢀtermꢀloanꢀandꢀtheꢀrevolvingꢀloansꢀandꢀvoluntaryꢀreductionsꢀinꢀtheꢀunusedꢀcommitmentsꢀareꢀpermitted inꢀwhole,ꢀorꢀinꢀpart,ꢀinꢀminimumꢀamountsꢀasꢀsetꢀforthꢀinꢀtheꢀNewꢀCreditꢀAgreementꢀgoverningꢀtheꢀNewꢀCreditꢀFacilities,ꢀwith priorꢀnotice,ꢀhowever,ꢀwithoutꢀpremiumꢀorꢀpenalty,ꢀexceptꢀthatꢀcertainꢀrefinancingsꢀofꢀtheꢀtermꢀloansꢀwithinꢀsixꢀmonthsꢀafterꢀthe RepricingꢀClosingꢀDateꢀwillꢀbeꢀsubjectꢀtoꢀaꢀprepaymentꢀpremiumꢀofꢀ1.00%ꢀofꢀtheꢀprincipalꢀamountꢀrepaid. Subjectꢀtoꢀcertainꢀexceptions,ꢀtheꢀobligationsꢀunderꢀtheꢀNewꢀCreditꢀFacilitiesꢀareꢀsecuredꢀbyꢀsubstantiallyꢀallꢀofꢀtheꢀpresentꢀand subsequentlyꢀacquiredꢀassetsꢀofꢀeachꢀofꢀEveriꢀPayments,ꢀHoldingsꢀandꢀtheꢀsubsidiaryꢀguarantorsꢀpartyꢀtheretoꢀincluding:ꢀ(i)ꢀa perfectedꢀfirstꢀpriorityꢀpledgeꢀofꢀallꢀtheꢀcapitalꢀstockꢀofꢀEveriꢀPaymentsꢀandꢀeachꢀdomesticꢀdirect,ꢀwhollyꢀownedꢀmaterialꢀrestricted subsidiaryꢀheldꢀbyꢀHoldings,ꢀEveriꢀPaymentsꢀorꢀanyꢀsuchꢀsubsidiaryꢀguarantor;ꢀandꢀ(ii)ꢀaꢀperfectedꢀfirstꢀpriorityꢀsecurityꢀinterest inꢀsubstantiallyꢀallꢀotherꢀtangibleꢀandꢀintangibleꢀassetsꢀofꢀHoldings,ꢀEveriꢀPayments,ꢀandꢀsuchꢀsubsidiaryꢀguarantorsꢀ(including, butꢀnotꢀlimitedꢀto,ꢀaccountsꢀreceivable,ꢀinventory,ꢀequipment,ꢀgeneralꢀintangibles,ꢀinvestmentꢀproperty,ꢀrealꢀproperty,ꢀintellectual 77 propertyꢀandꢀtheꢀproceedsꢀofꢀtheꢀforegoing).ꢀSubjectꢀtoꢀcertainꢀexceptions,ꢀtheꢀNewꢀCreditꢀFacilitiesꢀareꢀunconditionallyꢀguaranteed byꢀHoldingsꢀandꢀsuchꢀsubsidiaryꢀguarantors. TheꢀNewꢀCreditꢀAgreementꢀgoverningꢀtheꢀNewꢀCreditꢀFacilitiesꢀcontainsꢀcertainꢀcovenantsꢀthat,ꢀamongꢀotherꢀthings,ꢀlimitꢀHoldings’ ability,ꢀandꢀtheꢀabilityꢀofꢀcertainꢀofꢀitsꢀsubsidiaries,ꢀtoꢀincurꢀadditionalꢀindebtedness,ꢀsellꢀassetsꢀorꢀconsolidateꢀorꢀmergeꢀwithꢀor intoꢀ otherꢀ companies,ꢀ payꢀ dividendsꢀ orꢀ repurchaseꢀ orꢀ redeemꢀ capitalꢀ stock,ꢀ makeꢀ certainꢀ investments,ꢀ issueꢀ capitalꢀ stockꢀ of subsidiaries,ꢀincurꢀliens,ꢀprepay,ꢀredeemꢀorꢀrepurchaseꢀsubordinatedꢀdebt,ꢀandꢀenterꢀintoꢀcertainꢀtypesꢀofꢀtransactionsꢀwithꢀits affiliates.ꢀTheꢀNewꢀCreditꢀAgreementꢀgoverningꢀtheꢀNewꢀCreditꢀFacilitiesꢀalsoꢀrequiresꢀHoldings,ꢀtogetherꢀwithꢀitsꢀsubsidiaries, toꢀcomplyꢀwithꢀaꢀconsolidatedꢀsecuredꢀleverageꢀratio.ꢀAtꢀDecemberꢀ31,ꢀ2018,ꢀourꢀconsolidatedꢀsecuredꢀleverageꢀratioꢀwasꢀ3.28ꢀto 1.00,ꢀwithꢀaꢀmaximumꢀallowableꢀratioꢀofꢀ4.75ꢀtoꢀ1.00.ꢀOurꢀmaximumꢀconsolidatedꢀsecuredꢀleverageꢀwillꢀbeꢀreducedꢀtoꢀ4.50ꢀto 1.00ꢀasꢀofꢀDecemberꢀ31,ꢀ2019,ꢀ4.25ꢀtoꢀ1.00ꢀasꢀofꢀDecemberꢀ31,ꢀ2020,ꢀandꢀ4.00ꢀtoꢀ1.00ꢀasꢀofꢀDecemberꢀ31,ꢀ2021ꢀandꢀeachꢀDecember 31ꢀthereafter. WeꢀwereꢀinꢀcomplianceꢀwithꢀtheꢀcovenantsꢀandꢀtermsꢀofꢀtheꢀNewꢀCreditꢀFacilitiesꢀasꢀofꢀDecemberꢀ31,ꢀ2018. EventsꢀofꢀdefaultꢀunderꢀtheꢀNewꢀCreditꢀAgreementꢀgoverningꢀtheꢀNewꢀCreditꢀFacilitiesꢀincludeꢀcustomaryꢀeventsꢀsuchꢀasꢀaꢀcross- defaultꢀprovisionꢀwithꢀrespectꢀtoꢀotherꢀmaterialꢀdebt.ꢀInꢀaddition,ꢀanꢀeventꢀofꢀdefaultꢀwillꢀoccurꢀifꢀHoldingsꢀundergoesꢀaꢀchange ofꢀcontrol.ꢀThisꢀisꢀdefinedꢀtoꢀincludeꢀtheꢀcaseꢀwhereꢀHoldingsꢀceasesꢀtoꢀownꢀ100%ꢀofꢀtheꢀequityꢀinterestsꢀofꢀEveriꢀPayments,ꢀor whereꢀanyꢀpersonꢀorꢀgroupꢀacquiresꢀaꢀpercentageꢀofꢀtheꢀeconomicꢀorꢀvotingꢀinterestsꢀofꢀHoldings’ꢀcapitalꢀstockꢀofꢀ35%ꢀorꢀmore (determinedꢀonꢀaꢀfullyꢀdilutedꢀbasis). WeꢀareꢀrequiredꢀtoꢀrepayꢀtheꢀNewꢀTermꢀLoanꢀFacilityꢀinꢀanꢀamountꢀequalꢀtoꢀ0.25%ꢀperꢀquarterꢀofꢀtheꢀinitialꢀaggregateꢀprincipal, withꢀtheꢀfinalꢀprincipalꢀrepaymentꢀinstallmentꢀonꢀtheꢀmaturityꢀdate.ꢀInterestꢀisꢀdueꢀinꢀarrearsꢀonꢀeachꢀinterestꢀpaymentꢀdateꢀapplicable theretoꢀandꢀatꢀsuchꢀotherꢀtimesꢀasꢀmayꢀbeꢀspecifiedꢀinꢀtheꢀNewꢀCreditꢀAgreement.ꢀAsꢀtoꢀanyꢀloanꢀotherꢀthanꢀaꢀbaseꢀrateꢀloan,ꢀthe interestꢀpaymentꢀdatesꢀshallꢀbeꢀtheꢀlastꢀdayꢀofꢀeachꢀinterestꢀperiodꢀapplicableꢀtoꢀsuchꢀloanꢀandꢀtheꢀmaturityꢀdateꢀ(provided,ꢀhowever, thatꢀifꢀanyꢀinterestꢀperiodꢀforꢀaꢀEurodollarꢀRateꢀloanꢀexceedsꢀthreeꢀmonths,ꢀtheꢀrespectiveꢀdatesꢀthatꢀfallꢀeveryꢀthreeꢀmonthsꢀafter theꢀbeginningꢀofꢀsuchꢀinterestꢀperiodꢀshallꢀalsoꢀbeꢀinterestꢀpaymentꢀdates).ꢀAsꢀtoꢀanyꢀbaseꢀrateꢀloan,ꢀtheꢀinterestꢀpaymentꢀdates shallꢀbeꢀlastꢀbusinessꢀdayꢀofꢀeachꢀMarch,ꢀJune,ꢀSeptemberꢀandꢀDecemberꢀandꢀtheꢀmaturityꢀdate.ꢀꢀ ForꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀtheꢀNewꢀTermꢀLoanꢀFacilityꢀhadꢀanꢀapplicableꢀweightedꢀaverageꢀinterestꢀrateꢀofꢀ5.17%.ꢀ AtꢀDecemberꢀ31,ꢀ2018,ꢀweꢀhadꢀapproximatelyꢀ$807.7ꢀmillionꢀofꢀborrowingsꢀoutstandingꢀunderꢀtheꢀNewꢀTermꢀLoanꢀFacilityꢀand noꢀborrowingsꢀoutstandingꢀunderꢀtheꢀNewꢀRevolvingꢀCreditꢀFacility.ꢀWeꢀhadꢀ$35.0ꢀmillionꢀofꢀadditionalꢀborrowingꢀavailability underꢀtheꢀNewꢀRevolvingꢀCreditꢀFacilityꢀasꢀofꢀDecemberꢀ31,ꢀ2018. Refinanced Senior Secured Notes InꢀconnectionꢀwithꢀenteringꢀintoꢀtheꢀNewꢀCreditꢀAgreement,ꢀonꢀMayꢀ9,ꢀ2017,ꢀEveriꢀPaymentsꢀredeemedꢀinꢀfullꢀallꢀoutstanding RefinancedꢀSecuredꢀNotesꢀinꢀtheꢀaggregateꢀprincipalꢀamountꢀofꢀ$335.0ꢀmillionꢀplusꢀaccruedꢀandꢀunpaidꢀinterest.ꢀAsꢀaꢀresultꢀofꢀthe redemption,ꢀtheꢀCompanyꢀrecordedꢀnon-cashꢀchargesꢀinꢀtheꢀamountꢀofꢀapproximatelyꢀ$1.7ꢀmillion,ꢀwhichꢀconsistedꢀofꢀunamortized deferredꢀfinancingꢀfeesꢀofꢀ$0.2ꢀmillionꢀandꢀdiscountsꢀofꢀ$1.5ꢀmillion,ꢀwhichꢀwereꢀincludedꢀinꢀtheꢀtotalꢀ$14.6ꢀmillionꢀnon-cash charge. Senior Unsecured Notes InꢀDecemberꢀ2014,ꢀweꢀissuedꢀ$350.0ꢀmillionꢀinꢀaggregateꢀprincipalꢀamountꢀofꢀ10.0%ꢀSeniorꢀUnsecuredꢀNotesꢀdueꢀ2022ꢀ(theꢀ“2014 UnsecuredꢀNotes”)ꢀunderꢀanꢀindentureꢀ(asꢀsupplemented,ꢀtheꢀ“2014ꢀNotesꢀIndenture”),ꢀdatedꢀDecemberꢀ19,ꢀ2014,ꢀbetweenꢀEveri Paymentsꢀ (asꢀ successorꢀ issuer),ꢀ andꢀ Deutscheꢀ BankꢀTrustꢀ CompanyꢀAmericas,ꢀ asꢀ trustee.ꢀTheꢀ feesꢀ associatedꢀ withꢀ theꢀ 2014 UnsecuredꢀNotesꢀincludedꢀoriginalꢀissueꢀdiscountsꢀofꢀapproximatelyꢀ$3.8ꢀmillionꢀandꢀdebtꢀissuanceꢀcostsꢀofꢀapproximatelyꢀ$14.0 million.ꢀInꢀDecemberꢀ2015,ꢀweꢀcompletedꢀanꢀexchangeꢀofferꢀinꢀwhichꢀallꢀofꢀtheꢀunregisteredꢀ2014ꢀUnsecuredꢀNotesꢀwereꢀexchanged forꢀaꢀlikeꢀamountꢀofꢀ2014ꢀUnsecuredꢀNotesꢀthatꢀhadꢀbeenꢀregisteredꢀunderꢀtheꢀSecuritiesꢀAct. InꢀDecemberꢀ2017,ꢀweꢀissuedꢀ$375.0ꢀmillionꢀinꢀaggregateꢀprincipalꢀamountꢀofꢀ7.50%ꢀSeniorꢀUnsecuredꢀNotesꢀdueꢀ2025ꢀ(theꢀ“2017 UnsecuredꢀNotes”)ꢀunderꢀanꢀindentureꢀ(theꢀ“2017ꢀNotesꢀIndenture”),ꢀdatedꢀDecemberꢀ5,ꢀ2017,ꢀamongꢀEveriꢀPaymentsꢀ(asꢀissuer), Holdingsꢀandꢀcertainꢀofꢀitsꢀdirectꢀandꢀindirectꢀdomesticꢀsubsidiariesꢀasꢀguarantors,ꢀandꢀDeutscheꢀBankꢀTrustꢀCompanyꢀAmericas, asꢀtrustee.ꢀInterestꢀonꢀtheꢀ2017ꢀUnsecuredꢀNotesꢀaccruesꢀatꢀaꢀrateꢀofꢀ7.50%ꢀperꢀannumꢀandꢀisꢀpayableꢀsemi-annuallyꢀinꢀarrearsꢀon eachꢀJuneꢀ15ꢀandꢀDecemberꢀ15,ꢀcommencingꢀonꢀJuneꢀ15,ꢀ2018.ꢀTheꢀ2017ꢀUnsecuredꢀNotesꢀwillꢀmatureꢀonꢀDecemberꢀ15,ꢀ2025. Weꢀincurredꢀapproximatelyꢀ$6.1ꢀmillionꢀofꢀdebtꢀissuanceꢀcostsꢀandꢀfeesꢀassociatedꢀwithꢀtheꢀrefinancingꢀofꢀourꢀ2017ꢀUnsecured Notes. 78 OnꢀDecemberꢀ5,ꢀ2017,ꢀtogetherꢀwithꢀtheꢀissuanceꢀofꢀtheꢀ2017ꢀUnsecuredꢀNotes,ꢀEveriꢀPaymentsꢀsatisfiedꢀandꢀdischargedꢀtheꢀ2014 Notesꢀ Indentureꢀ relatingꢀ toꢀ theꢀ 2014ꢀ Unsecuredꢀ Notes.ꢀ Toꢀ effectꢀ theꢀ satisfactionꢀ andꢀ discharge,ꢀ Everiꢀ Paymentsꢀ issuedꢀ an unconditionalꢀnoticeꢀofꢀredemptionꢀtoꢀDeutscheꢀBankꢀTrustꢀCompanyꢀAmericas,ꢀasꢀtrustee,ꢀofꢀtheꢀredemptionꢀinꢀfullꢀonꢀJanuaryꢀ15, 2018ꢀ(theꢀ“RedemptionꢀDate”)ꢀofꢀallꢀoutstandingꢀ2014ꢀUnsecuredꢀNotesꢀunderꢀtheꢀtermsꢀofꢀtheꢀ2014ꢀNotesꢀIndenture.ꢀInꢀaddition, usingꢀtheꢀproceedsꢀfromꢀtheꢀsaleꢀofꢀtheꢀ2017ꢀUnsecuredꢀNotesꢀandꢀcashꢀonꢀhand,ꢀEveriꢀPaymentsꢀirrevocablyꢀdepositedꢀwithꢀthe trusteeꢀfundsꢀsufficientꢀtoꢀpayꢀtheꢀredemptionꢀpriceꢀofꢀtheꢀ2014ꢀUnsecuredꢀNotesꢀofꢀ107.5%ꢀofꢀtheꢀprincipalꢀamountꢀthereof,ꢀplus accruedꢀandꢀunpaidꢀinterestꢀto,ꢀbutꢀnotꢀincluding,ꢀtheꢀRedemptionꢀDateꢀ(theꢀ“RedemptionꢀPrice”),ꢀandꢀirrevocablyꢀinstructedꢀthe trusteeꢀtoꢀapplyꢀtheꢀdepositedꢀmoneyꢀtowardꢀpaymentꢀofꢀtheꢀRedemptionꢀPriceꢀforꢀtheꢀ2014ꢀUnsecuredꢀNotesꢀonꢀtheꢀRedemption Date.ꢀUponꢀtheꢀtrustee’sꢀreceiptꢀofꢀsuchꢀfundsꢀandꢀinstructions,ꢀalongꢀwithꢀanꢀofficer’sꢀcertificateꢀofꢀEveriꢀPaymentsꢀandꢀanꢀopinion ofꢀcounselꢀcertifyingꢀandꢀopiningꢀthatꢀallꢀconditionsꢀunderꢀtheꢀ2014ꢀNotesꢀIndentureꢀtoꢀtheꢀsatisfactionꢀandꢀdischargeꢀofꢀtheꢀ2014 NotesꢀIndentureꢀhadꢀbeenꢀsatisfied,ꢀtheꢀ2014ꢀNotesꢀIndentureꢀwasꢀsatisfiedꢀandꢀdischarged,ꢀandꢀallꢀofꢀtheꢀobligationsꢀofꢀEveri Paymentsꢀandꢀtheꢀguarantorsꢀunderꢀtheꢀ2014ꢀNotesꢀIndentureꢀceasedꢀtoꢀbeꢀofꢀfurtherꢀeffect,ꢀasꢀofꢀDecemberꢀ5,ꢀ2017ꢀ(subjectꢀto certainꢀexceptions).ꢀTheꢀ2014ꢀUnsecuredꢀNotesꢀwereꢀthereafterꢀredeemedꢀonꢀtheꢀRedemptionꢀDate. Inꢀconnectionꢀwithꢀtheꢀissuanceꢀofꢀtheꢀ2017ꢀUnsecuredꢀNotesꢀandꢀtheꢀredemptionꢀofꢀtheꢀ2014ꢀUnsecuredꢀNotes,ꢀweꢀincurredꢀa $37.2ꢀmillionꢀlossꢀonꢀextinguishmentꢀofꢀdebtꢀconsistingꢀofꢀaꢀ$26.3ꢀmillionꢀmake-wholeꢀpremiumꢀrelatedꢀtoꢀtheꢀsatisfactionꢀand redemptionꢀofꢀtheꢀ2014ꢀUnsecuredꢀNotesꢀandꢀapproximatelyꢀ$10.9ꢀmillionꢀforꢀtheꢀwrite-offꢀofꢀrelatedꢀunamortizedꢀdebtꢀissuance costsꢀandꢀfees. Weꢀwereꢀinꢀcomplianceꢀwithꢀtheꢀtermsꢀofꢀtheꢀ2017ꢀUnsecuredꢀNotesꢀasꢀofꢀDecemberꢀ31,ꢀ2018. Principal Repayments TheꢀmaturitiesꢀofꢀourꢀborrowingsꢀatꢀDecemberꢀ31,ꢀ2018ꢀareꢀasꢀfollowsꢀ(inꢀthousands):ꢀꢀꢀ Maturities of borrowings 2019 2020 2021 2022 2023 Thereafter Total 13. COMMITMENTS AND CONTINGENCIES Placement Fee Arrangements Amount $ 8,200 8,200 8,200 8,200 8,200 1,141,700 $ 1,182,700 InꢀJulyꢀ2017,ꢀweꢀextendedꢀtheꢀtermꢀofꢀourꢀthen-existingꢀplacementꢀfeeꢀagreementꢀtoꢀ6ꢀyearsꢀandꢀ11ꢀmonthsꢀwithꢀourꢀlargestꢀcustomer inꢀOklahoma.ꢀUnderꢀtheꢀtermsꢀofꢀtheꢀagreement,ꢀweꢀwillꢀpayꢀapproximatelyꢀ$5.6ꢀmillionꢀperꢀquarterꢀinꢀplacementꢀfees,ꢀinclusive ofꢀimputedꢀinterest,ꢀbeginningꢀinꢀJanuaryꢀ2018ꢀandꢀendingꢀinꢀJulyꢀ2019.ꢀWeꢀpaidꢀapproximatelyꢀ$22.7ꢀmillionꢀandꢀ$13.3ꢀmillion inꢀplacementꢀfeesꢀtoꢀthisꢀcustomerꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀrespectively.ꢀTheꢀpaymentsꢀmadeꢀinꢀ2018 includedꢀapproximatelyꢀ$2.1ꢀmillionꢀofꢀimputedꢀinterest. Lease Obligations Weꢀ leaseꢀ officeꢀ facilitiesꢀ andꢀ operatingꢀ equipmentꢀ underꢀ cancelableꢀ andꢀ non-cancelableꢀ agreements.ꢀ Totalꢀ rentꢀ expenseꢀ was approximatelyꢀ$7.8ꢀmillion,ꢀ$6.8ꢀmillion,ꢀandꢀ$6.8ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively. Weꢀhaveꢀaꢀlong‑termꢀleaseꢀagreementꢀrelatedꢀtoꢀofficeꢀspaceꢀforꢀourꢀcorporateꢀheadquartersꢀlocatedꢀinꢀLasꢀVegas,ꢀNevadaꢀthat expiresꢀinꢀAprilꢀ2023. InꢀSeptemberꢀ2014,ꢀtheꢀlong-termꢀleaseꢀagreementꢀforꢀofficeꢀspaceꢀinꢀAustin,ꢀTexasꢀwasꢀextendedꢀthroughꢀJuneꢀ2021. WeꢀalsoꢀhaveꢀleasedꢀfacilitiesꢀinꢀChicago,ꢀIllinoisꢀandꢀReno,ꢀNevada,ꢀwhichꢀsupportꢀtheꢀdesign,ꢀproductionꢀandꢀexpansionꢀofꢀour gamingꢀcontent.ꢀTheꢀlong-termꢀleaseꢀagreementꢀforꢀourꢀChicagoꢀfacilitiesꢀcommencedꢀinꢀNovemberꢀ2015ꢀandꢀexpiresꢀinꢀJune 2023.ꢀTheꢀlong-termꢀleaseꢀagreementꢀforꢀourꢀRenoꢀfacilitiesꢀcommencedꢀinꢀFebruaryꢀ2016ꢀandꢀexpiresꢀinꢀMayꢀ2021. 79 AsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀtheꢀminimumꢀaggregateꢀrentalꢀcommitmentꢀunderꢀallꢀnon‑cancelableꢀoperatingꢀleasesꢀwereꢀasꢀfollows (inꢀthousands):ꢀ Minimum aggregate rental commitments 2019 2020 2021 2022 2023 Thereafter Total Litigation Claims and Assessments Amount $ $ 5,570 5,680 4,598 2,799 1,074 — 19,721 Weꢀareꢀsubjectꢀtoꢀclaimsꢀandꢀsuitsꢀthatꢀariseꢀfromꢀtimeꢀtoꢀtimeꢀinꢀtheꢀordinaryꢀcourseꢀofꢀbusiness.ꢀWeꢀdoꢀnotꢀbelieveꢀtheꢀliabilities, ifꢀany,ꢀwhichꢀmayꢀultimatelyꢀresultꢀfromꢀtheꢀoutcomeꢀofꢀsuchꢀmatters,ꢀindividuallyꢀorꢀinꢀtheꢀaggregate,ꢀwillꢀhaveꢀaꢀmaterialꢀadverse impactꢀonꢀourꢀfinancialꢀposition,ꢀliquidity,ꢀorꢀresultsꢀofꢀoperations. 14. SHAREHOLDERS’ EQUITY Preferred Stock. Ourꢀamendedꢀandꢀrestatedꢀcertificateꢀofꢀincorporation,ꢀasꢀamended,ꢀallowsꢀourꢀBoardꢀofꢀDirectors,ꢀwithoutꢀfurther actionꢀbyꢀstockholders,ꢀtoꢀissueꢀupꢀtoꢀ50,000,000ꢀsharesꢀofꢀpreferredꢀstockꢀinꢀoneꢀorꢀmoreꢀseriesꢀandꢀtoꢀfixꢀtheꢀdesignations,ꢀpowers, preferences,ꢀprivilegesꢀandꢀrelativeꢀparticipating,ꢀoptional,ꢀorꢀspecialꢀrightsꢀasꢀwellꢀasꢀtheꢀqualifications,ꢀlimitationsꢀorꢀrestrictions ofꢀtheꢀpreferredꢀstock,ꢀincludingꢀdividendꢀrights,ꢀconversionꢀrights,ꢀvotingꢀrights,ꢀtermsꢀofꢀredemptionꢀandꢀliquidationꢀpreferences. AsꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀweꢀhadꢀnoꢀsharesꢀofꢀpreferredꢀstockꢀoutstanding. Common Stock. Subjectꢀtoꢀtheꢀpreferencesꢀthatꢀmayꢀapplyꢀtoꢀsharesꢀofꢀpreferredꢀstockꢀthatꢀmayꢀbeꢀoutstandingꢀatꢀtheꢀtime,ꢀthe holdersꢀofꢀoutstandingꢀsharesꢀofꢀcommonꢀstockꢀareꢀentitledꢀtoꢀreceiveꢀdividendsꢀoutꢀofꢀassetsꢀlegallyꢀavailableꢀatꢀtheꢀtimesꢀandꢀin theꢀamountsꢀasꢀourꢀBoardꢀofꢀDirectorsꢀmayꢀfromꢀtimeꢀtoꢀtimeꢀdetermine.ꢀAllꢀdividendsꢀareꢀnon-cumulative.ꢀInꢀtheꢀeventꢀofꢀthe liquidation,ꢀdissolutionꢀorꢀwindingꢀupꢀofꢀEveri,ꢀtheꢀholdersꢀofꢀcommonꢀstockꢀareꢀentitledꢀtoꢀshareꢀratablyꢀinꢀallꢀassetsꢀremaining afterꢀtheꢀpaymentꢀofꢀliabilities,ꢀsubjectꢀtoꢀtheꢀpriorꢀdistributionꢀrightsꢀofꢀpreferredꢀstock,ꢀifꢀany,ꢀthenꢀoutstanding.ꢀEachꢀstockholder isꢀentitledꢀtoꢀoneꢀvoteꢀforꢀeachꢀshareꢀofꢀcommonꢀstockꢀheldꢀonꢀallꢀmattersꢀsubmittedꢀtoꢀaꢀvoteꢀofꢀstockholders.ꢀCumulativeꢀvoting forꢀtheꢀelectionꢀofꢀdirectorsꢀisꢀnotꢀprovidedꢀfor.ꢀTheꢀcommonꢀstockꢀisꢀnotꢀentitledꢀtoꢀpreemptiveꢀrightsꢀandꢀisꢀnotꢀsubjectꢀtoꢀconversion orꢀredemption.ꢀThereꢀareꢀnoꢀsinkingꢀfundꢀprovisionsꢀapplicableꢀtoꢀtheꢀcommonꢀstock.ꢀEachꢀoutstandingꢀshareꢀofꢀcommonꢀstock isꢀfullyꢀpaidꢀandꢀnon-assessable.ꢀAsꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀweꢀhadꢀ95,099,532ꢀandꢀ93,119,988ꢀsharesꢀofꢀcommonꢀstock issued,ꢀrespectively. Treasury Stock. Employeesꢀmayꢀdirectꢀusꢀtoꢀwithholdꢀvestedꢀsharesꢀofꢀrestrictedꢀstockꢀtoꢀsatisfyꢀtheꢀminimumꢀstatutoryꢀwithholding requirementsꢀapplicableꢀtoꢀtheirꢀrestrictedꢀstockꢀvesting.ꢀWeꢀrepurchasedꢀorꢀwithheldꢀfromꢀrestrictedꢀstockꢀawardsꢀ17,552ꢀand 15,457ꢀsharesꢀofꢀcommonꢀstockꢀatꢀanꢀaggregateꢀpurchaseꢀpriceꢀofꢀ$0.1ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017 toꢀsatisfyꢀtheꢀminimumꢀapplicableꢀtaxꢀwithholdingꢀobligationsꢀrelatedꢀtoꢀtheꢀvestingꢀofꢀsuchꢀrestrictedꢀstockꢀawards. 80 15. WEIGHTED AVERAGE SHARES OF COMMON STOCK Theꢀweightedꢀaverageꢀnumberꢀofꢀcommonꢀstockꢀoutstandingꢀusedꢀinꢀtheꢀcomputationꢀofꢀbasicꢀandꢀdilutedꢀearningsꢀperꢀshareꢀisꢀas followsꢀ(inꢀthousands):ꢀ At December 31, 2018 2017 2016 Weightedꢀaverageꢀshares Weightedꢀaverageꢀnumberꢀofꢀcommonꢀsharesꢀoutstandingꢀ-ꢀbasic ꢀꢀꢀꢀꢀPotentialꢀdilutionꢀfromꢀequityꢀawards(1) Weightedꢀaverageꢀnumberꢀofꢀcommonꢀsharesꢀoutstandingꢀ-ꢀdiluted(1) 69,464 4,332 73,796 66,816 — 66,816 66,050 — 66,050 ꢀ (1) Theꢀpotentialꢀdilutionꢀexcludesꢀtheꢀweightedꢀaverageꢀeffectꢀofꢀequityꢀawardsꢀtoꢀpurchaseꢀapproximatelyꢀ7.5ꢀmillionꢀsharesꢀof commonꢀstockꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀasꢀtheꢀapplicationꢀofꢀtheꢀtreasuryꢀstockꢀmethod,ꢀasꢀrequired,ꢀmakes themꢀanti-dilutive.ꢀTheꢀCompanyꢀwasꢀinꢀaꢀnetꢀlossꢀpositionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2017ꢀandꢀ2016;ꢀtherefore,ꢀno potentialꢀdilutionꢀfromꢀtheꢀapplicationꢀofꢀtheꢀtreasuryꢀstockꢀmethodꢀwasꢀapplicable.ꢀEquityꢀawardsꢀtoꢀpurchaseꢀapproximately 16.0ꢀmillionꢀandꢀ15.7ꢀmillionꢀsharesꢀofꢀcommonꢀstockꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2017ꢀandꢀ2016,ꢀrespectively,ꢀwere excludedꢀfromꢀtheꢀcomputationꢀofꢀdilutedꢀnetꢀlossꢀperꢀshare,ꢀasꢀtheirꢀeffectꢀwouldꢀhaveꢀbeenꢀanti-dilutive. 16. SHARE‑BASED COMPENSATION Equity Incentive Awards Ourꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀ(asꢀamendedꢀandꢀrestatedꢀeffectiveꢀMayꢀ23,ꢀ2017,ꢀtheꢀ“AmendedꢀandꢀRestatedꢀ2014ꢀPlan”)ꢀand ourꢀ2012ꢀEquityꢀIncentiveꢀPlanꢀ(asꢀamended,ꢀtheꢀ“2012ꢀPlan”)ꢀareꢀusedꢀtoꢀattractꢀandꢀretainꢀtheꢀbestꢀavailableꢀpersonnel,ꢀtoꢀprovide additionalꢀincentivesꢀtoꢀemployees,ꢀdirectorsꢀandꢀconsultantsꢀandꢀtoꢀpromoteꢀtheꢀsuccessꢀofꢀourꢀbusiness.ꢀOurꢀequityꢀincentive plansꢀareꢀadministeredꢀbyꢀtheꢀCompensationꢀCommitteeꢀofꢀourꢀBoardꢀofꢀDirectors,ꢀwhichꢀhasꢀtheꢀauthorityꢀtoꢀselectꢀindividuals whoꢀareꢀtoꢀreceiveꢀequityꢀincentiveꢀawardsꢀandꢀtoꢀspecifyꢀtheꢀtermsꢀandꢀconditionsꢀofꢀgrantsꢀofꢀsuchꢀawards,ꢀincluding,ꢀbutꢀnot limitedꢀtoꢀtheꢀvestingꢀprovisionsꢀandꢀexerciseꢀprices. Generally,ꢀweꢀgrantꢀtheꢀfollowingꢀawardꢀtypes:ꢀ(a)ꢀtime-basedꢀoptions;ꢀ(b)ꢀmarket-basedꢀoptions;ꢀ(c)ꢀtime-basedꢀrestrictedꢀstock; andꢀ(d)ꢀrestrictedꢀstockꢀunitsꢀ(“RSUs”)ꢀwithꢀeitherꢀtime-ꢀorꢀperformance-basedꢀcriteria.ꢀ Aꢀsummaryꢀofꢀawardꢀactivityꢀisꢀasꢀfollowsꢀ(inꢀthousands):ꢀ Outstanding, December 31, 2017 Granted Exercisedꢀoptionsꢀorꢀvestedꢀshares Cancelledꢀorꢀforfeited Outstanding, December 31, 2018 Stock Options Granted 19,131 20 (1,980) (1,497) 15,674 Restricted Stock Awards Granted 74 — (66) — 8 Restricted Stock Units Granted — 1,877 — (80) 1,797 Thereꢀwereꢀapproximatelyꢀ3.6ꢀmillionꢀawardsꢀofꢀourꢀcommonꢀstockꢀavailableꢀforꢀfutureꢀequityꢀgrants,ꢀbothꢀunderꢀtheꢀAmended andꢀRestatedꢀ2014ꢀPlanꢀandꢀtheꢀ2012ꢀPlanꢀasꢀofꢀDecemberꢀ31,ꢀ2018. Stock Options Ourꢀtime-basedꢀstockꢀoptionsꢀgrantedꢀunderꢀourꢀequityꢀplansꢀgenerallyꢀvestꢀatꢀaꢀrateꢀofꢀ25%ꢀperꢀyearꢀonꢀeachꢀofꢀtheꢀfirstꢀfour anniversariesꢀofꢀtheꢀoptionꢀgrantꢀdatesꢀandꢀtheꢀoptionsꢀexpireꢀafterꢀaꢀten-yearꢀperiod.ꢀWeꢀestimateꢀforfeitureꢀamountsꢀbasedꢀon historicalꢀpatterns. Ourꢀmarket-basedꢀoptionsꢀgrantedꢀinꢀ2017ꢀandꢀ2016ꢀunderꢀourꢀ2014ꢀPlanꢀandꢀ2012ꢀPlanꢀvestꢀatꢀaꢀrateꢀofꢀ25%ꢀperꢀyearꢀonꢀeachꢀof theꢀfirstꢀfourꢀanniversariesꢀofꢀtheꢀgrantꢀdate,ꢀprovidedꢀthatꢀasꢀofꢀtheꢀvestingꢀdateꢀforꢀeachꢀvestingꢀtranche,ꢀtheꢀclosingꢀpriceꢀofꢀthe Company’sꢀsharesꢀonꢀtheꢀNewꢀYorkꢀStockꢀExchangeꢀisꢀatꢀleastꢀaꢀspecifiedꢀpriceꢀhurdle,ꢀdefinedꢀasꢀaꢀ25%ꢀandꢀ50%ꢀpremiumꢀfor 2017ꢀandꢀ2016,ꢀrespectively,ꢀtoꢀtheꢀclosingꢀstockꢀpriceꢀonꢀtheꢀgrantꢀdate.ꢀIfꢀtheꢀpriceꢀhurdleꢀisꢀnotꢀmetꢀasꢀofꢀtheꢀvestingꢀdateꢀforꢀa 81 vestingꢀtranche,ꢀthenꢀtheꢀvestedꢀtrancheꢀshallꢀvestꢀandꢀbecomeꢀvestedꢀsharesꢀonꢀtheꢀlastꢀdayꢀofꢀaꢀperiodꢀofꢀ30ꢀconsecutiveꢀtrading daysꢀduringꢀwhichꢀtheꢀclosingꢀpriceꢀisꢀatꢀleastꢀtheꢀpriceꢀhurdle.ꢀTheseꢀoptionsꢀexpireꢀafterꢀaꢀten-yearꢀperiod.ꢀ Thereꢀwereꢀnoꢀmarket-basedꢀoptionꢀawardsꢀgrantedꢀduringꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018. Theꢀfairꢀvaluesꢀofꢀourꢀstandardꢀtime-basedꢀoptionsꢀwereꢀdeterminedꢀasꢀofꢀtheꢀdateꢀofꢀgrantꢀusingꢀtheꢀBlack-Scholesꢀoptionꢀpricing modelꢀwithꢀtheꢀfollowingꢀassumptions: Risk-freeꢀinterestꢀrate Expectedꢀlifeꢀofꢀoptionsꢀ(inꢀyears) Expectedꢀvolatility Expectedꢀdividendꢀyield Year Ended December 31, 2017 2016 2018 3% 6 53% — 2% 6 54% — 1% 5 51% — Theꢀfairꢀvaluesꢀofꢀourꢀmarket-basedꢀoptionsꢀwereꢀdeterminedꢀasꢀofꢀtheꢀdateꢀofꢀgrantꢀusingꢀaꢀlattice-basedꢀoptionꢀvaluationꢀmodel withꢀtheꢀfollowingꢀassumptions:ꢀ Risk-freeꢀinterestꢀrate Measurementꢀperiodꢀ(inꢀyears) Expectedꢀvolatility Expectedꢀdividendꢀyield Theꢀfollowingꢀtableꢀpresentsꢀtheꢀoptionsꢀactivity:ꢀ Outstanding, December 31, 2017 Granted Exercised Canceledꢀorꢀforfeited Outstanding, December 31, 2018 Vested and expected to vest, December 31, 2018 Exercisable, December 31, 2018 Number of Options (in thousands) 19,131 20 (1,980) (1,497) 15,674 14,947 9,728 Year Ended December 31, 2017 2016 3% 10 70% — 2% 10 68% — Weighted Average Exercise Price (per Share) Weighted Average Life Remaining (Years) Aggregate Intrinsic Value (in thousands) 45,887 6.4 $ $ $ $ $ 5.34 7.88 4.84 5.51 5.39 5.44 6.15 6.0 $ 5.9 $ 5.3 $ 17,733 16,559 7,284 Theꢀfollowingꢀtableꢀpresentsꢀtheꢀoptionsꢀoutstandingꢀandꢀexercisableꢀbyꢀpriceꢀrange:ꢀꢀ Options Outstanding Options Exercisable Number Outstanding Weighted Average Remaining Contract Range of Exercise Prices (in thousands) Life (Years) $ $ 1.46 2.70 3.29 3.41 7.09 7.74 2.40 2.78 3.29 7.05 7.61 9.74 2,630 565 3,326 2,611 929 5,613 15,674 7.3 $ 7.1 8.2 4.1 5.5 4.9 82 Weighted Average Exercise Prices 1.54 2.77 3.29 5.81 7.34 8.19 Number Exercisable (in thousands) 1,110 $ 515 741 2,545 810 4,007 9,728 Weighted Average Exercise Price 1.55 2.77 3.29 5.79 7.32 8.36 Thereꢀ wereꢀ 20,000,ꢀ 4.3ꢀ million,ꢀ andꢀ 4.4ꢀ millionꢀ optionsꢀ grantedꢀ forꢀ theꢀ yearsꢀ endedꢀ Decemberꢀ31,ꢀ 2018,ꢀ 2017,ꢀ andꢀ 2016, respectively.ꢀTheꢀweightedꢀaverageꢀgrantꢀdateꢀfairꢀvalueꢀperꢀshareꢀofꢀtheꢀoptionsꢀgrantedꢀwasꢀ$4.15,ꢀ$1.98,ꢀandꢀ$0.83ꢀforꢀtheꢀyears endedꢀDecemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016,ꢀrespectively.ꢀTheꢀtotalꢀintrinsicꢀvalueꢀofꢀoptionsꢀexercisedꢀwasꢀ$6.5ꢀmillionꢀandꢀ$5.3 millionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017.ꢀThereꢀwereꢀnoꢀoptionsꢀexercisedꢀinꢀ2016. Thereꢀwasꢀapproximatelyꢀ$3.4ꢀmillionꢀinꢀunrecognizedꢀcompensationꢀexpenseꢀrelatedꢀtoꢀoptionsꢀexpectedꢀtoꢀvestꢀasꢀofꢀDecemberꢀ31, 2018.ꢀThisꢀcostꢀwasꢀexpectedꢀtoꢀbeꢀrecognizedꢀonꢀaꢀstraight‑lineꢀbasisꢀoverꢀaꢀweightedꢀaverageꢀperiodꢀofꢀ2.8ꢀyears.ꢀWeꢀrecorded approximatelyꢀ $5.1ꢀ millionꢀ inꢀ non‑cashꢀ compensationꢀ expenseꢀ relatedꢀ toꢀ optionsꢀ grantedꢀ thatꢀ wereꢀ expectedꢀ toꢀ vestꢀ asꢀ of Decemberꢀ31,ꢀ2018.ꢀWeꢀreceivedꢀapproximatelyꢀ$9.6ꢀmillionꢀinꢀcashꢀproceedsꢀfromꢀtheꢀexerciseꢀofꢀoptionsꢀduringꢀ2018. Thereꢀwasꢀapproximatelyꢀ$7.9ꢀmillionꢀandꢀ$11.7ꢀmillionꢀinꢀunrecognizedꢀcompensationꢀexpenseꢀrelatedꢀtoꢀoptionsꢀexpectedꢀto vestꢀasꢀofꢀDecemberꢀ31,ꢀ2017ꢀandꢀ2016,ꢀrespectively.ꢀThisꢀcostꢀwasꢀexpectedꢀtoꢀbeꢀrecognizedꢀonꢀaꢀstraight-lineꢀbasisꢀoverꢀa weightedꢀaverageꢀperiodꢀofꢀ3.5ꢀyearsꢀandꢀ2.1ꢀyearsꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2017ꢀandꢀ2016,ꢀrespectively.ꢀWeꢀrecorded approximatelyꢀ$6.0ꢀmillionꢀandꢀ$6.3ꢀmillionꢀinꢀnon‑cashꢀcompensationꢀexpenseꢀrelatedꢀtoꢀoptionsꢀgrantedꢀthatꢀwereꢀexpectedꢀto vestꢀasꢀofꢀDecemberꢀ31,ꢀ2017ꢀandꢀ2016,ꢀrespectively.ꢀWeꢀreceivedꢀapproximatelyꢀ$10.9ꢀmillionꢀinꢀcashꢀproceedsꢀfromꢀtheꢀexercise ofꢀoptionsꢀduringꢀ2017ꢀandꢀthereꢀwasꢀnoꢀexerciseꢀofꢀoptionsꢀduringꢀ2016,ꢀasꢀnoꢀexercisesꢀoccurredꢀduringꢀtheꢀperiod.ꢀ Restricted Stock Awards Theꢀfollowingꢀisꢀaꢀsummaryꢀofꢀnon‑vestedꢀshareꢀawardsꢀforꢀourꢀtime‑basedꢀrestrictedꢀshares:ꢀ Outstanding, December 31, 2017 Granted Vested Forfeited Outstanding, December 31, 2018 Shares Outstanding (in thousands) 74 — (66) — 8 Weighted Average Grant Date Fair Value (per Share) $ $ 7.00 — 7.04 — 6.66 ThereꢀwereꢀnoꢀsharesꢀofꢀrestrictedꢀstockꢀgrantedꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018.ꢀTheꢀtotalꢀfairꢀvalueꢀofꢀrestrictedꢀstock vestedꢀwasꢀapproximatelyꢀ$0.5ꢀmillionꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018.ꢀThereꢀwasꢀ$31,952ꢀinꢀunrecognizedꢀcompensation expenseꢀrelatedꢀtoꢀsharesꢀofꢀrestrictedꢀstockꢀexpectedꢀtoꢀvestꢀasꢀofꢀDecemberꢀ31,ꢀ2018,ꢀwhichꢀwasꢀexpectedꢀtoꢀbeꢀrecognizedꢀon aꢀstraight‑lineꢀbasisꢀoverꢀaꢀweightedꢀaverageꢀperiodꢀofꢀ0.3ꢀyears.ꢀThereꢀwereꢀ65,501ꢀsharesꢀofꢀrestrictedꢀstockꢀthatꢀvestedꢀduring 2018,ꢀandꢀweꢀrecordedꢀapproximatelyꢀ$0.4ꢀmillionꢀinꢀnon-cashꢀcompensationꢀexpenseꢀrelatedꢀtoꢀtheꢀrestrictedꢀstockꢀgrantedꢀthat wasꢀexpectedꢀtoꢀvestꢀduringꢀ2018. Thereꢀwereꢀ50,000ꢀsharesꢀofꢀrestrictedꢀstockꢀgrantedꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2017ꢀandꢀnoꢀsharesꢀofꢀrestrictedꢀstock grantedꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2016.ꢀTheꢀtotalꢀfairꢀvalueꢀofꢀrestrictedꢀstockꢀvestedꢀwasꢀapproximatelyꢀ$0.4ꢀmillionꢀand approximatelyꢀ$0.2ꢀmillionꢀforꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2017ꢀandꢀ2016,ꢀrespectively.ꢀThereꢀwasꢀapproximatelyꢀ$0.5ꢀmillion andꢀapproximatelyꢀ$1.0ꢀmillionꢀinꢀunrecognizedꢀcompensationꢀexpenseꢀrelatedꢀtoꢀsharesꢀofꢀtime‑basedꢀrestrictedꢀawardsꢀexpected toꢀvestꢀasꢀofꢀDecemberꢀ31,ꢀ2017ꢀandꢀ2016,ꢀrespectively,ꢀandꢀisꢀexpectedꢀtoꢀbeꢀrecognizedꢀonꢀaꢀstraight‑lineꢀbasisꢀoverꢀaꢀweighted averageꢀperiodꢀofꢀ1.1ꢀyearsꢀandꢀ1.7ꢀyears,ꢀrespectively.ꢀThereꢀwereꢀ56,578ꢀsharesꢀandꢀ74,919ꢀsharesꢀofꢀrestrictedꢀstockꢀthatꢀvested duringꢀ2017ꢀandꢀ2016,ꢀrespectively,ꢀandꢀweꢀrecordedꢀapproximatelyꢀ$0.4ꢀmillionꢀandꢀapproximatelyꢀ$0.5ꢀmillionꢀinꢀnon‑cash compensationꢀexpenseꢀrelatedꢀtoꢀtheꢀrestrictedꢀstockꢀgrantedꢀthatꢀwasꢀexpectedꢀtoꢀvestꢀduringꢀ2017ꢀandꢀ2016,ꢀrespectively. 83 Restricted Stock Units Theꢀfollowingꢀisꢀaꢀsummaryꢀofꢀnon-vestedꢀRSUꢀawards: Shares Outstanding (in thousands) Weighted Average Grant Date Fair Value (per Share) Weighted Average Life Remaining (Years) Aggregate Intrinsic Value (in thousands) Outstanding, December 31, 2017 Granted Exercised Canceledꢀorꢀforfeited Outstanding, December 31, 2018 Vested and expected to vest, December 31, 2018 — $ 1,877 — (80) 1,797 1,219 $ $ — 7.49 — 7.46 7.49 7.49 2.0 $ 1.8 $ 9,254 6,278 Theꢀtime-basedꢀRSUsꢀgrantedꢀduringꢀ2018ꢀvestꢀatꢀaꢀrateꢀofꢀ25%ꢀperꢀyearꢀonꢀeachꢀofꢀtheꢀfirstꢀfourꢀanniversariesꢀofꢀtheꢀgrantꢀdates. Theꢀperformance-basedꢀRSUsꢀgrantedꢀduringꢀ2018ꢀwillꢀbeꢀevaluatedꢀbyꢀourꢀCompensationꢀCommitteeꢀofꢀourꢀBoardꢀofꢀDirectors afterꢀaꢀperformanceꢀperiod,ꢀbeginningꢀonꢀtheꢀdateꢀofꢀgrantꢀthroughꢀDecemberꢀ31,ꢀ2020,ꢀbasedꢀonꢀcertainꢀrevenueꢀandꢀAdjusted EBITDAꢀgrowthꢀrateꢀmetrics,ꢀwithꢀachievementꢀofꢀeachꢀmeasureꢀtoꢀbeꢀdeterminedꢀindependentlyꢀofꢀoneꢀanother.ꢀIfꢀtheꢀperformance criteriaꢀofꢀtheꢀmetricsꢀareꢀapproved,ꢀtheꢀeligibleꢀawardsꢀwillꢀbecomeꢀvestedꢀonꢀtheꢀthirdꢀanniversaryꢀofꢀtheꢀgrantꢀdates. Theꢀtime-basedꢀRSUsꢀgrantedꢀduringꢀtheꢀfirstꢀquarterꢀofꢀ2018ꢀtoꢀindependentꢀmembersꢀofꢀourꢀBoardꢀofꢀDirectorsꢀvestꢀinꢀequal installmentsꢀonꢀeachꢀofꢀtheꢀfirstꢀthreeꢀanniversaryꢀdatesꢀofꢀtheꢀgrantꢀdateꢀandꢀsettleꢀonꢀtheꢀearliestꢀofꢀtheꢀfollowingꢀevents:ꢀ(i)ꢀMarch 7,ꢀ2028;ꢀ(ii)ꢀdeath;ꢀ(iii)ꢀtheꢀoccurrenceꢀofꢀaꢀChangeꢀinꢀControlꢀ(asꢀdefinedꢀinꢀtheꢀAmendedꢀandꢀRestatedꢀ2014ꢀPlan),ꢀsubjectꢀto qualifyingꢀconditions;ꢀorꢀ(iv)ꢀtheꢀdateꢀthatꢀisꢀsixꢀmonthsꢀfollowingꢀtheꢀseparationꢀfromꢀservice,ꢀsubjectꢀtoꢀqualifyingꢀconditions. Thereꢀwereꢀapproximatelyꢀ1.9ꢀmillionꢀsharesꢀofꢀRSUꢀawardsꢀgrantedꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31,ꢀ2018ꢀandꢀnoꢀRSUsꢀgranted forꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2017ꢀandꢀ2016.ꢀThereꢀwereꢀzeroꢀRSUsꢀthatꢀvestedꢀduringꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018, 2017ꢀandꢀ2016. Thereꢀ wasꢀ approximatelyꢀ $6.7ꢀ millionꢀ inꢀ unrecognizedꢀ compensationꢀ expenseꢀ relatedꢀ toꢀ RSUꢀ awardsꢀ expectedꢀ toꢀ vestꢀ asꢀ of Decemberꢀ31,ꢀ2018.ꢀThisꢀcostꢀisꢀexpectedꢀtoꢀbeꢀrecognizedꢀonꢀaꢀstraight-lineꢀbasisꢀoverꢀaꢀweightedꢀaverageꢀperiodꢀofꢀ3.0ꢀyears. Weꢀrecordedꢀapproximatelyꢀ$1.8ꢀmillionꢀinꢀnon-cashꢀcompensationꢀexpenseꢀrelatedꢀtoꢀRSUꢀawardsꢀforꢀtheꢀyearꢀendedꢀDecemberꢀ31, 2018.ꢀ 17. INCOME TAXES Theꢀfollowingꢀpresentsꢀconsolidatedꢀlossꢀbeforeꢀtaxꢀforꢀdomesticꢀandꢀforeignꢀoperationsꢀ(inꢀthousands):ꢀ Consolidated income (loss) before tax Domestic Foreign Total Year Ended December 31, 2018 2017 2016 $ $ 1,227 1,419 2,646 $ $ (73,445) $ 1,378 (72,067) $ (225,538) 7,755 (217,783) 84 Theꢀ incomeꢀ taxꢀ (benefit)ꢀ provisionꢀ attributableꢀ toꢀ lossꢀ fromꢀ operationsꢀ beforeꢀ taxꢀ consistsꢀ ofꢀ theꢀ followingꢀ componentsꢀ (in thousands):ꢀ Income tax (benefit) provision Domestic Foreign Total income tax (benefit) provision Income tax (benefit) provision Current Deferred Total income tax (benefit) provision Year Ended December 31, 2017 2016 2018 $ $ $ $ (10,166) $ 456 (9,710) $ $ 633 (10,343) (9,710) $ (20,507) $ 343 (20,164) $ $ 461 (20,625) (20,164) $ 30,400 1,296 31,696 1,756 29,940 31,696 Aꢀreconciliationꢀofꢀtheꢀfederalꢀstatutoryꢀrateꢀandꢀtheꢀeffectiveꢀincomeꢀtaxꢀrateꢀisꢀasꢀfollows:ꢀ Income tax reconciliation Federalꢀstatutoryꢀrate Foreignꢀprovision State/provinceꢀincomeꢀtax Non-deductibleꢀcompensationꢀcost ꢀꢀꢀꢀꢀAdjustmentꢀtoꢀcarryingꢀvalue(1) Researchꢀcredit Valuationꢀallowance Goodwillꢀimpairment Globalꢀintangibleꢀlow-taxedꢀincome Non-deductibleꢀexpensesꢀ-ꢀother Other Effective tax rate ꢀ Year Ended December 31, 2017 2016 2018 21.0 % 6.8 % 12.4 % (7.7)% 6.2 % (76.3)% (344.9)% — % 9.1 % 7.2 % (0.8)% (367.0)% 35.0 % 0.3 % 2.4 % (2.0)% 31.2 % 1.9 % (39.6)% — % — % (0.5)% (0.7)% 28.0 % 35.0 % 0.5 % 0.8 % (0.5)% 0.2 % 0.2 % (27.4)% (23.5)% — % (0.1)% 0.2 % (14.6)% (1) Theꢀadjustmentꢀtoꢀcarryingꢀvalueꢀinꢀ2017ꢀisꢀdueꢀprimarilyꢀtoꢀtheꢀfederalꢀtaxꢀrateꢀchangeꢀinꢀtheꢀTaxꢀCutsꢀandꢀJobsꢀActꢀofꢀ2017 (“2017ꢀTaxꢀAct”). 85 Theꢀmajorꢀtax‑effectedꢀcomponentsꢀofꢀtheꢀdeferredꢀtaxꢀassetsꢀandꢀliabilitiesꢀareꢀasꢀfollowsꢀ(inꢀthousands): Deferred income tax assets related to: Netꢀoperatingꢀlosses Stockꢀcompensationꢀexpense Accountsꢀreceivableꢀallowances Accruedꢀandꢀprepaidꢀexpenses Long-termꢀdebt Other Taxꢀcredits InterestꢀLimitation Valuationꢀallowance Total deferred income tax assets Deferred income tax liabilities related to: Property,ꢀequipmentꢀandꢀleasedꢀassets Intangibles Long-termꢀdebt Other Total deferred income tax liabilities Deferred income taxes, net Year Ended December 31, 2017 2016 2018 $ $ $ $ $ $ 97,190 7,264 $ 87,250 6,601 1,582 3,639 — 1,319 9,244 2,738 (53,156) 69,820 3,855 89,865 3,614 $ $ 1,117 3,953 — 479 6,822 — (63,303) 42,919 3,129 73,597 3,292 $ $ 353 97,687 $ (27,867) $ 1,108 81,126 $ (38,207) $ 98,664 11,559 1,745 6,276 493 1,399 6,394 — (61,012) 65,518 13,216 106,307 — 3,606 123,129 (57,611) Theꢀ2017ꢀTaxꢀActꢀwasꢀenactedꢀonꢀDecemberꢀ22,ꢀ2017.ꢀTheꢀ2017ꢀTaxꢀActꢀmadeꢀsignificantꢀchangesꢀtoꢀtheꢀfederalꢀtaxꢀlaw,ꢀincluding aꢀreductionꢀinꢀtheꢀfederalꢀincomeꢀtaxꢀrateꢀfromꢀ35%ꢀtoꢀ21%ꢀeffectiveꢀJanuaryꢀ1,ꢀ2018,ꢀstricterꢀlimitsꢀonꢀdeductionꢀofꢀinterest,ꢀan 80%ꢀtaxableꢀincomeꢀlimitationꢀonꢀtheꢀuseꢀofꢀpost-2017ꢀnetꢀoperatingꢀlossꢀ(“NOL”),ꢀandꢀaꢀone-timeꢀtransitionꢀtaxꢀonꢀpreviously deferredꢀearningsꢀofꢀcertainꢀforeignꢀsubsidiaries.ꢀAsꢀaꢀresultꢀofꢀourꢀinitialꢀanalysisꢀofꢀtheꢀ2017ꢀTaxꢀActꢀandꢀexistingꢀimplementation guidance,ꢀweꢀremeasuredꢀourꢀdeferredꢀtaxꢀassetsꢀandꢀliabilities,ꢀwhichꢀresultedꢀinꢀaꢀ$22.5ꢀmillionꢀreductionꢀinꢀourꢀincomeꢀtax expenseꢀinꢀ2017.ꢀWeꢀcomputedꢀourꢀtransitionꢀtaxꢀliabilityꢀofꢀ$1.3ꢀmillionꢀdueꢀtoꢀtheꢀ2017ꢀTaxꢀAct,ꢀnetꢀofꢀassociatedꢀforeignꢀtax credits,ꢀwhichꢀwasꢀcompletelyꢀoffsetꢀbyꢀadditionalꢀforeignꢀtaxꢀcreditsꢀcarriedꢀforward.ꢀAnyꢀremainingꢀforeignꢀtaxꢀcreditsꢀnotꢀutilized byꢀtheꢀtransitionꢀtaxꢀwereꢀfullyꢀoffsetꢀbyꢀaꢀvaluationꢀallowance.ꢀ OnꢀDecemberꢀ22,ꢀ2017,ꢀtheꢀSECꢀstaffꢀissuedꢀStaffꢀAccountingꢀBulletinꢀ118ꢀ(“SABꢀ118”),ꢀwhichꢀprovidedꢀguidanceꢀonꢀaccounting forꢀtheꢀtaxꢀeffectsꢀofꢀtheꢀ2017ꢀTaxꢀAct.ꢀInꢀaccordanceꢀwithꢀtheꢀSABꢀ118ꢀguidance,ꢀsomeꢀofꢀtheꢀincomeꢀtaxꢀeffectsꢀrecordedꢀinꢀ2017 andꢀthroughꢀDecemberꢀ22,ꢀ2018ꢀwereꢀprovisional,ꢀincludingꢀtheꢀone-timeꢀtransitionꢀtax,ꢀtheꢀeffectꢀonꢀourꢀvaluationꢀallowance includingꢀtheꢀstricterꢀlimitsꢀonꢀinterestꢀdeductions,ꢀtheꢀGILTIꢀprovisionsꢀofꢀtheꢀ2017ꢀTaxꢀAct,ꢀandꢀtheꢀremeasurementꢀofꢀourꢀdeferred taxꢀassetsꢀandꢀliabilities.ꢀDuringꢀ2018,ꢀweꢀrecognizedꢀinsignificantꢀadjustmentsꢀtoꢀtheꢀprovisionalꢀamountsꢀrecordedꢀatꢀDecember 31,ꢀ2017ꢀandꢀincludedꢀtheseꢀadjustmentsꢀasꢀaꢀcomponentꢀofꢀincomeꢀtaxꢀexpenseꢀfromꢀcontinuingꢀoperations. Unrepatriatedꢀearningsꢀwereꢀapproximatelyꢀ$19.7ꢀmillionꢀasꢀofꢀDecemberꢀ31,ꢀ2018.ꢀAlmostꢀallꢀofꢀtheseꢀearningsꢀareꢀconsidered permanentlyꢀreinvested,ꢀasꢀitꢀisꢀmanagement’sꢀintentionꢀtoꢀreinvestꢀforeignꢀearningsꢀinꢀforeignꢀoperations.ꢀWeꢀprojectꢀsufficient cashꢀflow,ꢀorꢀborrowingsꢀavailableꢀunderꢀourꢀNewꢀCreditꢀFacilitiesꢀinꢀtheꢀU.S.;ꢀtherefore,ꢀweꢀdoꢀnotꢀneedꢀtoꢀrepatriateꢀourꢀforeign earningsꢀtoꢀfinanceꢀU.S.ꢀoperationsꢀatꢀthisꢀtime.ꢀDueꢀtoꢀtheꢀ2017ꢀTaxꢀAct,ꢀthereꢀisꢀnoꢀU.S.ꢀfederalꢀtaxꢀonꢀcashꢀrepatriationꢀfrom foreignꢀsubsidiaries,ꢀhowever,ꢀitꢀcouldꢀbeꢀsubjectꢀtoꢀforeignꢀwithholdingꢀtaxꢀandꢀU.S.ꢀstateꢀincomeꢀtaxes. Theꢀ2017ꢀTaxꢀActꢀsubjectsꢀaꢀU.S.ꢀcorporationꢀtoꢀcurrentꢀtaxꢀonꢀtheꢀGILTIꢀearnedꢀbyꢀcertainꢀforeignꢀsubsidiariesꢀandꢀaꢀbaseꢀerosion anti-avoidanceꢀtaxꢀ(“BEAT”).ꢀOurꢀforeignꢀsubsidiaries’ꢀearningsꢀforꢀtheꢀyear-endedꢀDecemberꢀ31,ꢀ2018ꢀhaveꢀbeenꢀsubjectꢀtoꢀU.S. federalꢀincomeꢀtaxꢀviaꢀtheꢀnewlyꢀenactedꢀGILTIꢀprovision.ꢀWeꢀhaveꢀelectedꢀtoꢀrecognizeꢀtheꢀtaxesꢀonꢀGILTIꢀandꢀBEATꢀasꢀaꢀperiod expenseꢀinꢀtheꢀperiodꢀtheꢀtaxesꢀareꢀincurred.ꢀ Deferredꢀtaxꢀassetsꢀariseꢀprimarilyꢀbecauseꢀexpensesꢀhaveꢀbeenꢀrecordedꢀinꢀhistoricalꢀfinancialꢀstatementꢀperiodsꢀthatꢀwillꢀnot becomeꢀdeductibleꢀforꢀincomeꢀtaxesꢀuntilꢀfutureꢀtaxꢀyears.ꢀWeꢀrecordꢀvaluationꢀallowancesꢀtoꢀreduceꢀtheꢀbookꢀvalueꢀofꢀourꢀdeferred taxꢀassetsꢀtoꢀamountsꢀthatꢀareꢀestimatedꢀonꢀaꢀmoreꢀlikelyꢀthanꢀnotꢀbasisꢀtoꢀbeꢀrealized.ꢀThisꢀassessmentꢀrequiresꢀjudgmentꢀandꢀis 86 performedꢀonꢀtheꢀbasisꢀofꢀtheꢀweightꢀofꢀallꢀavailableꢀevidence,ꢀbothꢀpositiveꢀandꢀnegative,ꢀwithꢀgreaterꢀweightꢀplacedꢀonꢀinformation thatꢀisꢀobjectivelyꢀverifiableꢀsuchꢀasꢀhistoricalꢀperformance. Weꢀevaluatedꢀnegativeꢀevidenceꢀnotingꢀthatꢀweꢀreportedꢀcumulativeꢀnetꢀlossesꢀforꢀtheꢀthree-yearꢀperiodsꢀendedꢀasꢀofꢀDecember 31,ꢀ2016,ꢀ2017,ꢀandꢀ2018.ꢀPursuantꢀtoꢀaccountingꢀguidance,ꢀaꢀcumulativeꢀlossꢀinꢀrecentꢀyearsꢀisꢀaꢀsignificantꢀpieceꢀofꢀnegative evidenceꢀthatꢀmustꢀbeꢀconsideredꢀandꢀisꢀdifficultꢀtoꢀovercomeꢀwithoutꢀsufficientꢀobjectivelyꢀverifiable,ꢀpositiveꢀevidence.ꢀAsꢀsuch, certainꢀaspectsꢀofꢀourꢀhistoricalꢀresultsꢀwereꢀincludedꢀinꢀourꢀforecastedꢀtaxableꢀincome.ꢀAlthoughꢀourꢀforecastꢀofꢀfutureꢀtaxable incomeꢀwasꢀaꢀpositiveꢀindicator,ꢀsinceꢀthisꢀformꢀofꢀevidenceꢀwasꢀnotꢀobjectivelyꢀverifiable,ꢀitsꢀweightꢀwasꢀnotꢀsufficientꢀtoꢀovercome theꢀnegativeꢀevidence.ꢀHowever,ꢀbasedꢀonꢀourꢀcurrentꢀyearꢀactivityꢀandꢀtheꢀchangesꢀinꢀtheꢀ2017ꢀTaxꢀAct,ꢀweꢀdecreasedꢀourꢀvaluation allowanceꢀforꢀdeferredꢀtaxꢀassetsꢀbyꢀ$10.1ꢀmillionꢀduringꢀ2018.ꢀTheꢀdecreaseꢀinꢀourꢀvaluationꢀallowanceꢀisꢀprimarilyꢀdueꢀtoꢀthe netꢀoperatingꢀlossꢀduringꢀtheꢀyearꢀandꢀtheꢀinterestꢀdeductionꢀlimitationꢀ(deferredꢀtaxꢀassets)ꢀwhichꢀcanꢀbeꢀoffsetꢀagainstꢀourꢀindefinite livedꢀdeferredꢀtaxꢀliabilities.ꢀTheꢀultimateꢀrealizationꢀofꢀdeferredꢀtaxꢀassetsꢀdependsꢀonꢀhavingꢀsufficientꢀtaxableꢀincomeꢀinꢀthe futureꢀyearsꢀwhenꢀtheꢀtaxꢀdeductionsꢀassociatedꢀwithꢀtheꢀdeferredꢀtaxꢀassetsꢀbecomeꢀdeductible.ꢀTheꢀestablishmentꢀofꢀaꢀvaluation allowanceꢀdoesꢀnotꢀimpactꢀcash,ꢀnorꢀdoesꢀitꢀprecludeꢀusꢀfromꢀusingꢀourꢀtaxꢀcredits,ꢀlossꢀcarry-forwardsꢀandꢀotherꢀdeferredꢀtax assetsꢀinꢀtheꢀfuture. Theꢀfollowingꢀisꢀaꢀtabularꢀreconciliationꢀofꢀtheꢀtotalꢀamountsꢀofꢀdeferredꢀtaxꢀassetꢀvaluationꢀallowanceꢀ(inꢀthousands):ꢀ Balance at beginning of period Chargedꢀtoꢀprovisionꢀforꢀincomeꢀtaxes Other(1)ꢀ Balance at end of period Year Ended December 31, 2018 2017 2016 $ $ 63,303 (9,125) (1,022) 53,156 $ $ 61,012 (2,263) 4,554 63,303 $ $ 1,442 59,570 — 61,012 (1)ꢀForꢀ2017,ꢀtheꢀamountꢀwasꢀrecordedꢀasꢀaꢀresultꢀofꢀourꢀadoptionꢀofꢀASUꢀNo.ꢀ2016-09ꢀeffectiveꢀJanuaryꢀ1,ꢀ2017.ꢀForꢀ2018,ꢀthe amountꢀwasꢀrecordedꢀasꢀaꢀresultꢀofꢀourꢀadoptionꢀofꢀASCꢀ606ꢀeffectiveꢀJanuaryꢀ1,ꢀ2018. Weꢀhadꢀ$395.2ꢀmillion,ꢀorꢀ$83.0ꢀmillion,ꢀtaxꢀeffected,ꢀofꢀaccumulatedꢀfederalꢀnetꢀoperatingꢀlossesꢀasꢀofꢀDecemberꢀ31,ꢀ2018.ꢀThe netꢀoperatingꢀlossesꢀcanꢀbeꢀcarriedꢀforwardꢀandꢀappliedꢀtoꢀoffsetꢀtaxableꢀincomeꢀforꢀ20ꢀyearsꢀandꢀwillꢀexpireꢀstartingꢀinꢀ2022ꢀ(for lossesꢀincurredꢀbeforeꢀ2018).ꢀLossesꢀincurredꢀinꢀ2018ꢀofꢀapproximatelyꢀ$38.9ꢀmillion,ꢀorꢀ$8.2ꢀmillion,ꢀtaxꢀeffected,ꢀcanꢀbeꢀcarried forwardꢀindefinitelyꢀtoꢀoffsetꢀtaxableꢀincome.ꢀWeꢀhadꢀ$8.5ꢀmillion,ꢀtaxꢀeffected,ꢀofꢀfederalꢀresearchꢀandꢀdevelopmentꢀcreditꢀcarry- forwardsꢀandꢀ$0.5ꢀmillion,ꢀtaxꢀeffected,ꢀofꢀforeignꢀtaxꢀcreditꢀcarry-forwardsꢀasꢀofꢀDecemberꢀ31,ꢀ2018.ꢀTheꢀresearchꢀandꢀdevelopment creditsꢀareꢀlimitedꢀtoꢀaꢀ20ꢀyearsꢀcarry-forwardꢀperiodꢀandꢀwillꢀexpireꢀstartingꢀinꢀ2029.ꢀTheꢀforeignꢀtaxꢀcreditsꢀcanꢀbeꢀcarriedꢀforward 10ꢀyearsꢀandꢀwillꢀexpireꢀinꢀ2020,ꢀifꢀnotꢀutilized.ꢀOurꢀ$0.3ꢀmillionꢀbalanceꢀofꢀalternativeꢀminimumꢀtaxꢀcreditsꢀatꢀDecemberꢀ31, 2018ꢀwillꢀbeꢀrefundedꢀoverꢀtheꢀnextꢀfourꢀyearsꢀinꢀaccordanceꢀwithꢀtheꢀ2017ꢀTaxꢀAct.ꢀWeꢀalsoꢀhaveꢀaꢀreceivableꢀforꢀ$0.6ꢀmillion relatedꢀtoꢀalternativeꢀminimumꢀtaxꢀcreditsꢀforꢀwhichꢀaꢀrefundꢀwasꢀrequestedꢀonꢀourꢀDecemberꢀ31,ꢀ2017ꢀfederalꢀtaxꢀreturn.ꢀAsꢀof Decemberꢀ31,ꢀ2018,ꢀ$46.6ꢀmillionꢀofꢀourꢀvaluationꢀallowanceꢀrelatesꢀtoꢀfederalꢀnetꢀoperatingꢀlossꢀcarry-forwardsꢀandꢀcreditsꢀthat weꢀestimateꢀareꢀnotꢀmoreꢀlikelyꢀthanꢀnotꢀtoꢀbeꢀrealized. Weꢀhadꢀtaxꢀeffectedꢀstateꢀnetꢀoperatingꢀlossꢀcarry-forwardsꢀofꢀapproximatelyꢀ$14.1ꢀmillionꢀasꢀofꢀDecemberꢀ31,ꢀ2018.ꢀTheꢀstate netꢀoperatingꢀlossꢀcarry-forwardsꢀwillꢀexpireꢀbetweenꢀ2019ꢀandꢀ2039.ꢀTheꢀdeterminationꢀandꢀutilizationꢀofꢀtheseꢀstateꢀnetꢀoperating lossꢀcarry-forwardsꢀareꢀdependentꢀuponꢀapportionmentꢀpercentagesꢀandꢀotherꢀrespectiveꢀstateꢀlaws,ꢀwhichꢀcanꢀchangeꢀfromꢀyear toꢀyear.ꢀAsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀ$6.5ꢀmillionꢀofꢀourꢀvaluationꢀallowanceꢀrelatesꢀtoꢀcertainꢀstateꢀnetꢀoperatingꢀlossꢀcarry-forwards thatꢀweꢀestimateꢀareꢀnotꢀmoreꢀlikelyꢀthanꢀnotꢀtoꢀbeꢀrealized.ꢀTheꢀremainingꢀvaluationꢀallowanceꢀofꢀ$0.1ꢀmillionꢀrelatesꢀtoꢀforeign netꢀoperatingꢀlosses. Theꢀfollowingꢀisꢀaꢀtabularꢀreconciliationꢀofꢀtheꢀtotalꢀamountsꢀofꢀunrecognizedꢀtaxꢀbenefitsꢀ(inꢀthousands):ꢀ Unrecognized tax benefit Unrecognizedꢀtaxꢀbenefitꢀatꢀtheꢀbeginningꢀofꢀtheꢀperiod Grossꢀincreasesꢀ-ꢀtaxꢀpositionsꢀinꢀpriorꢀperiod Unrecognized tax benefit at the end of the period Year Ended December 31, 2017 2016 2018 $ $ 937 125 1,062 $ $ 834 103 937 $ $ 729 105 834 87 Weꢀhaveꢀanalyzedꢀfilingꢀpositionsꢀinꢀallꢀofꢀtheꢀfederal,ꢀstate,ꢀandꢀforeignꢀjurisdictionsꢀwhereꢀweꢀareꢀrequiredꢀtoꢀfileꢀincomeꢀtax returns,ꢀasꢀwellꢀasꢀallꢀopenꢀtaxꢀyearsꢀinꢀtheseꢀjurisdictions.ꢀAsꢀofꢀDecemberꢀ31,ꢀ2018,ꢀtheꢀCompanyꢀrecordedꢀ$1.1ꢀmillionꢀof unrecognizedꢀtaxꢀbenefits,ꢀallꢀofꢀwhichꢀwouldꢀimpactꢀourꢀeffectiveꢀtaxꢀrate,ꢀifꢀrecognized.ꢀWeꢀdoꢀnotꢀanticipateꢀthatꢀourꢀunrecognized taxꢀbenefitsꢀwillꢀmateriallyꢀchangeꢀwithinꢀtheꢀnextꢀ12ꢀmonths.ꢀTheꢀCompanyꢀhasꢀnotꢀaccruedꢀanyꢀpenaltiesꢀandꢀinterestꢀforꢀits unrecognizedꢀtaxꢀbenefits.ꢀOtherꢀthanꢀtheꢀunrecognizedꢀtaxꢀbenefitꢀrecorded,ꢀweꢀbelieveꢀthatꢀourꢀincomeꢀtaxꢀfilingꢀpositionsꢀand deductionsꢀwillꢀbeꢀsustainedꢀuponꢀaudit,ꢀandꢀweꢀdoꢀnotꢀanticipateꢀanyꢀotherꢀadjustmentsꢀthatꢀwillꢀresultꢀinꢀaꢀmaterialꢀchangeꢀto ourꢀ financialꢀ position.ꢀ Weꢀ may,ꢀ fromꢀ timeꢀ toꢀ time,ꢀ beꢀ assessedꢀ interestꢀ orꢀ penaltiesꢀ byꢀ taxꢀ jurisdictions,ꢀ althoughꢀ anyꢀ such assessmentsꢀhistoricallyꢀhaveꢀbeenꢀminimalꢀandꢀimmaterialꢀtoꢀourꢀfinancialꢀresults.ꢀOurꢀpolicyꢀforꢀrecordingꢀinterestꢀandꢀpenalties associatedꢀwithꢀauditsꢀandꢀunrecognizedꢀtaxꢀbenefitsꢀisꢀtoꢀrecordꢀsuchꢀitemsꢀasꢀaꢀcomponentꢀofꢀincomeꢀtaxꢀinꢀourꢀStatementsꢀof Incomeꢀ(Loss). WeꢀareꢀsubjectꢀtoꢀtaxationꢀinꢀtheꢀU.S.ꢀandꢀvariousꢀstatesꢀandꢀforeignꢀjurisdictions.ꢀWeꢀhaveꢀaꢀnumberꢀofꢀfederalꢀandꢀstateꢀincome taxꢀyearsꢀstillꢀopenꢀforꢀexaminationꢀasꢀaꢀresultꢀofꢀourꢀnetꢀoperatingꢀlossꢀcarry-forwards.ꢀAccordingly,ꢀweꢀareꢀsubjectꢀtoꢀexamination forꢀbothꢀU.S.ꢀfederalꢀandꢀsomeꢀofꢀtheꢀstateꢀtaxꢀreturnsꢀforꢀtheꢀyearsꢀ2004ꢀtoꢀpresent.ꢀForꢀtheꢀremainingꢀstate,ꢀlocalꢀandꢀforeign jurisdictions,ꢀwithꢀsomeꢀexceptions,ꢀweꢀareꢀnoꢀlongerꢀsubjectꢀtoꢀexaminationꢀbyꢀtaxꢀauthoritiesꢀforꢀyearsꢀbeforeꢀ2015. 18. SEGMENT INFORMATION Operatingꢀsegmentsꢀareꢀcomponentsꢀofꢀanꢀenterpriseꢀaboutꢀwhichꢀseparateꢀfinancialꢀinformationꢀisꢀavailableꢀthatꢀisꢀevaluated regularlyꢀbyꢀtheꢀchiefꢀoperatingꢀdecision-makingꢀgroupꢀ(theꢀ“CODM”).ꢀOurꢀCODMꢀconsistsꢀofꢀtheꢀChiefꢀExecutiveꢀOfficerꢀand theꢀChiefꢀFinancialꢀOfficer.ꢀOurꢀCODMꢀallocatesꢀresourcesꢀandꢀmeasuresꢀprofitabilityꢀbasedꢀonꢀourꢀoperatingꢀsegments,ꢀwhich areꢀmanagedꢀandꢀreviewedꢀseparately,ꢀasꢀeachꢀrepresentꢀproductsꢀandꢀservicesꢀthatꢀcanꢀbeꢀsoldꢀseparatelyꢀtoꢀourꢀcustomers.ꢀOur segmentsꢀareꢀmonitoredꢀbyꢀmanagementꢀforꢀperformanceꢀagainstꢀourꢀinternalꢀforecasts. Weꢀhaveꢀreportedꢀourꢀfinancialꢀperformanceꢀbasedꢀonꢀourꢀsegmentsꢀinꢀbothꢀtheꢀcurrentꢀandꢀpriorꢀperiods.ꢀOurꢀCODMꢀdetermined thatꢀourꢀoperatingꢀsegmentsꢀforꢀconductingꢀbusinessꢀare:ꢀ(a)ꢀGames;ꢀandꢀ(b)ꢀFinTech: • • TheꢀGamesꢀsegmentꢀprovidesꢀsolutionsꢀdirectlyꢀtoꢀgamingꢀestablishmentsꢀtoꢀofferꢀtheirꢀpatronsꢀgamingꢀentertainment- relatedꢀexperiencesꢀincluding:ꢀleasedꢀgamingꢀequipment;ꢀsalesꢀandꢀmaintenance-relatedꢀservicesꢀofꢀgamingꢀequipment; gamingꢀsystems;ꢀinteractiveꢀsolutions;ꢀandꢀancillaryꢀproductsꢀandꢀservices. TheꢀFinTechꢀsegmentꢀprovidesꢀsolutionsꢀ directlyꢀtoꢀ gamingꢀestablishmentsꢀtoꢀ offerꢀtheirꢀpatronsꢀcashꢀaccess-related servicesꢀandꢀproducts,ꢀincluding:ꢀaccessꢀtoꢀcashꢀatꢀgamingꢀfacilitiesꢀviaꢀATMꢀcashꢀwithdrawals;ꢀcreditꢀcardꢀcashꢀaccess transactionsꢀandꢀPOSꢀdebitꢀcardꢀcashꢀaccessꢀtransactions;ꢀcheck-relatedꢀservices;ꢀequipmentꢀandꢀmaintenanceꢀservices; compliance,ꢀauditꢀandꢀdataꢀsoftware;ꢀcasinoꢀcreditꢀdataꢀandꢀreportingꢀservicesꢀandꢀotherꢀancillaryꢀofferings. Corporateꢀoverheadꢀexpensesꢀhaveꢀbeenꢀallocatedꢀtoꢀtheꢀsegmentsꢀeitherꢀthroughꢀspecificꢀidentificationꢀorꢀbasedꢀonꢀaꢀreasonable methodology.ꢀInꢀaddition,ꢀweꢀrecordꢀdepreciationꢀandꢀamortizationꢀexpensesꢀtoꢀtheꢀbusinessꢀsegments. Ourꢀbusinessꢀisꢀpredominantlyꢀdomesticꢀwithꢀnoꢀspecificꢀregionalꢀconcentrationsꢀandꢀnoꢀsignificantꢀassetsꢀinꢀforeignꢀlocations. Theꢀaccountingꢀpoliciesꢀofꢀtheꢀoperatingꢀsegmentsꢀareꢀgenerallyꢀtheꢀsameꢀasꢀthoseꢀdescribedꢀinꢀtheꢀsummaryꢀofꢀsignificantꢀaccounting policies.ꢀSinceꢀweꢀadoptedꢀASCꢀ606ꢀutilizingꢀtheꢀmodifiedꢀretrospectiveꢀmethod,ꢀtheꢀpriorꢀyearꢀcomparativeꢀamountsꢀshownꢀin theꢀtablesꢀbelowꢀhaveꢀnotꢀbeenꢀrestated.ꢀReferꢀtoꢀ“Noteꢀ2ꢀ—ꢀBasisꢀofꢀPresentationꢀandꢀSummaryꢀofꢀSignificantꢀAccountingꢀPolicies” andꢀ“Noteꢀ3ꢀ—ꢀAdoptionꢀofꢀASCꢀ606,ꢀRevenueꢀfromꢀContractsꢀwithꢀCustomers”ꢀforꢀmoreꢀinformation. 88 Theꢀfollowingꢀtablesꢀpresentꢀsegmentꢀinformationꢀ(inꢀthousands):ꢀ Games Revenue Gamingꢀoperations Gamingꢀequipmentꢀandꢀsystems Gamingꢀother Total revenues Costs and expenses Cost of revenues(1) Gamingꢀoperations Gamingꢀequipmentꢀandꢀsystems Gamingꢀother Total cost of revenues Operatingꢀexpenses Researchꢀandꢀdevelopment Goodwillꢀimpairment Depreciation Amortization Total costs and expenses Operating income (loss) (1)ꢀExclusiveꢀofꢀdepreciationꢀandꢀamortization. FinTech Revenues Cashꢀaccessꢀservices Equipment Informationꢀservicesꢀandꢀother Total revenues Costs and expenses Cost of revenues(1) Cashꢀaccessꢀservices Equipment Informationꢀservicesꢀandꢀother Cost of revenues Operatingꢀexpenses Depreciation Amortization Total costs and expenses Operating income (1)ꢀExclusiveꢀofꢀdepreciationꢀandꢀamortization. 89 $ $ $ $ $ $ For the Year Ended December 31, 2017 2016 2018 168,146 87,038 3,794 258,978 $ $ 148,654 70,118 4,005 222,777 $ $ 152,514 56,277 4,462 213,253 17,603 47,121 3,285 68,009 57,244 20,497 — 55,058 55,099 15,741 35,707 3,247 54,695 42,780 18,862 — 40,428 57,060 15,265 31,602 3,441 50,308 42,561 19,356 146,299 41,582 79,390 255,907 3,071 $ 213,825 8,952 $ 379,496 (166,243) For the Year Ended December 31, 2017 2016 2018 156,806 20,977 32,754 210,537 $ $ 707,222 13,258 31,691 752,171 $ $ 601,874 14,995 29,334 646,203 9,717 12,601 4,110 26,428 85,054 6,167 10,146 127,795 82,742 $ 572,880 7,717 3,253 583,850 76,155 6,854 12,445 679,304 72,867 $ 485,061 9,889 3,756 498,706 76,148 8,413 15,248 598,515 47,688 For the Year Ended December 31, 2017 2016 2018 Total Games and FinTech Total revenues Costs and expenses Costꢀofꢀrevenues(1) Operatingꢀexpenses Researchꢀandꢀdevelopment Goodwillꢀimpairment Depreciation Amortization Total costs and expenses Operating income (loss) (1)ꢀExclusiveꢀofꢀdepreciationꢀandꢀamortization. Total assets Games FinTech Total assets $ 469,515 $ 974,948 $ 859,456 94,437 142,298 20,497 — 61,225 65,245 383,702 85,813 $ 638,545 118,935 18,862 — 47,282 69,505 893,129 81,819 $ 549,014 118,709 19,356 146,299 49,995 94,638 978,011 (118,555) At December 31, 2018 2017 912,849 635,412 1,548,261 $ $ 925,186 611,888 1,537,074 $ $ $ Major customers. ForꢀtheꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀ2017,ꢀandꢀ2016,ꢀnoꢀsingleꢀcustomerꢀaccountedꢀforꢀmoreꢀthanꢀ10%ꢀof ourꢀrevenues.ꢀOurꢀfiveꢀlargestꢀcustomersꢀaccountedꢀforꢀapproximatelyꢀ22%,ꢀ31%,ꢀandꢀ31%ꢀofꢀourꢀtotalꢀrevenueꢀinꢀ2018,ꢀ2017, andꢀ2016,ꢀrespectively. 90 19. SELECTED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Theꢀunauditedꢀselectedꢀquarterlyꢀresultsꢀofꢀoperationsꢀareꢀasꢀfollowsꢀ(inꢀthousands,ꢀexceptꢀforꢀperꢀshareꢀamounts)*.ꢀSinceꢀwe adoptedꢀASCꢀ606ꢀutilizingꢀtheꢀmodifiedꢀretrospectiveꢀmethod,ꢀtheꢀpriorꢀyearꢀcomparativeꢀamountsꢀshownꢀinꢀtheꢀtableꢀbelowꢀhave notꢀbeenꢀrestated.ꢀ Quarter First Second Third Fourth Year $ 111,001 24,491 $ 118,682 22,597 $ 120,330 21,510 $ 119,502 17,215 $ 469,515 85,813 4,609 0.07 0.06 $ $ 1,475 0.02 0.02 $ $ 2,069 0.03 0.03 $ $ 4,203 0.06 0.06 $ $ 12,356 0.18 0.17 $ $ 68,686 73,285 69,203 73,440 69,750 74,594 70,196 74,024 69,464 73,796 $ 242,230 21,292 (19,057) $ 237,537 22,603 (3,508) (0.05) $ (0.05) $ $ $ (0.29) $ (0.29) $ $ 247,322 19,795 (4,289) (0.06) $ (0.06) $ $ 247,859 18,129 (25,049) (0.37) $ (0.37) $ $ 974,948 81,819 (51,903) (0.78) (0.78) 66,090 66,090 66,350 66,350 66,897 66,897 67,755 67,755 66,816 66,816 2018 Revenues Operatingꢀincome Netꢀincome Basicꢀearningsꢀperꢀshare Dilutedꢀearningsꢀperꢀshare Weightedꢀaverageꢀcommonꢀsharesꢀoutstanding Basic Diluted 2017 Revenues Operatingꢀincomeꢀ(loss) Netꢀloss Basicꢀlossꢀperꢀshare Dilutedꢀlossꢀperꢀshare Weightedꢀaverageꢀcommonꢀsharesꢀoutstanding Basic Diluted ꢀ * Roundingꢀmayꢀcauseꢀvariances. 20. SUBSEQUENT EVENTS OnꢀMarchꢀ8,ꢀ2019,ꢀweꢀenteredꢀintoꢀanꢀagreementꢀtoꢀacquireꢀcertainꢀassetsꢀfromꢀaꢀprivatelyꢀheldꢀcompanyꢀthatꢀdevelopsꢀand distributesꢀhardwareꢀandꢀsoftwareꢀapplicationsꢀtoꢀgamingꢀoperatorsꢀtoꢀenhanceꢀgamingꢀpatronꢀloyalty.ꢀThisꢀacquisitionꢀincludes existingꢀcontractsꢀwithꢀgamingꢀoperators,ꢀtechnologyꢀandꢀintellectualꢀpropertyꢀthatꢀallowꢀusꢀtoꢀprovideꢀgamingꢀoperatorsꢀaꢀself- serviceꢀenrollmentꢀandꢀloyaltyꢀcardꢀprintingꢀkiosk,ꢀaꢀmobileꢀapplicationꢀtoꢀofferꢀaꢀgamingꢀoperator'sꢀpatronsꢀadditionalꢀflexibility inꢀaccessingꢀcasinoꢀpromotions,ꢀandꢀaꢀmarketingꢀplatformꢀthatꢀmanagesꢀandꢀdeliversꢀaꢀgamingꢀoperator’sꢀmarketingꢀprograms throughꢀtheseꢀpatronꢀinterfaces.ꢀThisꢀacquisitionꢀwillꢀexpandꢀourꢀfinancialꢀtechnologyꢀsolutionsꢀofferingsꢀwithinꢀourꢀFinTech segment.ꢀUnderꢀtheꢀtermsꢀofꢀtheꢀassetꢀpurchaseꢀagreement,ꢀweꢀpaidꢀtheꢀsellerꢀ$20ꢀmillionꢀatꢀtheꢀclosingꢀofꢀtheꢀtransactionꢀandꢀwill payꢀanꢀadditionalꢀ$10ꢀmillionꢀoneꢀyearꢀfollowingꢀafterꢀclosingꢀandꢀanotherꢀ$10ꢀmillionꢀtwoꢀyearsꢀfollowingꢀafterꢀtheꢀdateꢀof closing.ꢀInꢀaddition,ꢀweꢀexpectꢀthatꢀanꢀadditionalꢀ$10ꢀmillionꢀinꢀcontingentꢀconsiderationꢀwillꢀbeꢀearnedꢀbyꢀtheꢀsellerꢀbasedꢀupon theꢀ achievementꢀ ofꢀ certainꢀ revenueꢀ targetsꢀ overꢀ theꢀ firstꢀ twoꢀ yearsꢀ post-closing.ꢀWeꢀ expectꢀ theꢀ totalꢀ purchaseꢀ priceꢀ forꢀ this acquisition,ꢀinclusiveꢀofꢀtheꢀcontingentꢀconsideration,ꢀtoꢀbeꢀapproximatelyꢀ$50ꢀmillion.ꢀWeꢀhaveꢀnotꢀcompletedꢀtheꢀpurchaseꢀprice accountingꢀanalysis,ꢀhowever,ꢀweꢀdoꢀnotꢀexpectꢀthatꢀtheꢀacquisitionꢀwillꢀhaveꢀaꢀmaterialꢀimpactꢀonꢀourꢀresultsꢀofꢀoperationsꢀor financialꢀcondition. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. 91 Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures TheꢀCompany’sꢀmanagement,ꢀincludingꢀitsꢀChiefꢀExecutiveꢀOfficerꢀandꢀChiefꢀFinancialꢀOfficer,ꢀhaveꢀevaluatedꢀtheꢀeffectiveness ofꢀtheꢀCompany’sꢀdisclosureꢀcontrolsꢀandꢀproceduresꢀ(asꢀsuchꢀtermꢀisꢀdefinedꢀinꢀRulesꢀ13a-15(e)ꢀandꢀ15d-15(e)ꢀunderꢀtheꢀExchange Act)ꢀasꢀofꢀtheꢀendꢀofꢀtheꢀreportingꢀperiodꢀcoveredꢀbyꢀthisꢀFormꢀ10-K.ꢀBasedꢀonꢀsuchꢀevaluation,ꢀtheꢀChiefꢀExecutiveꢀOfficerꢀand ChiefꢀFinancialꢀOfficerꢀhaveꢀconcludedꢀthat,ꢀasꢀofꢀtheꢀendꢀofꢀtheꢀperiodꢀcoveredꢀbyꢀthisꢀreportꢀonꢀFormꢀ10-K,ꢀtheꢀCompany’s disclosureꢀcontrolsꢀandꢀproceduresꢀareꢀeffectiveꢀsuchꢀthatꢀinformationꢀrequiredꢀtoꢀbeꢀdisclosedꢀbyꢀtheꢀCompanyꢀinꢀtheꢀreportsꢀthat itꢀfilesꢀorꢀsubmitsꢀunderꢀtheꢀExchangeꢀActꢀisꢀ(i)ꢀrecorded,ꢀprocessed,ꢀsummarizedꢀandꢀreportedꢀwithinꢀtheꢀtimeꢀperiodsꢀspecified inꢀtheꢀSEC’sꢀrulesꢀandꢀforms,ꢀandꢀ(ii)ꢀaccumulatedꢀandꢀcommunicatedꢀtoꢀtheꢀCompany’sꢀmanagement,ꢀincludingꢀitsꢀChiefꢀExecutive OfficerꢀandꢀChiefꢀFinancialꢀOfficer,ꢀasꢀappropriateꢀtoꢀallowꢀtimelyꢀdecisionsꢀregardingꢀrequiredꢀdisclosures. Management’s Report of Internal Control over Financial Reporting TheꢀCompany’sꢀmanagement,ꢀincludingꢀitsꢀChiefꢀExecutiveꢀOfficerꢀandꢀChiefꢀFinancialꢀOfficer,ꢀisꢀresponsibleꢀforꢀestablishing andꢀmaintainingꢀadequateꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀasꢀdefinedꢀinꢀRulesꢀ13a-15(f)ꢀandꢀ15d-15(f)ꢀunderꢀtheꢀExchange Act.ꢀTheꢀCompany’sꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀisꢀdesignedꢀtoꢀprovideꢀreasonableꢀassuranceꢀregardingꢀtheꢀreliability ofꢀfinancialꢀreportingꢀandꢀtheꢀpreparationꢀofꢀfinancialꢀstatementsꢀforꢀexternalꢀpurposesꢀinꢀaccordanceꢀwithꢀGAAP.ꢀBecauseꢀof inherentꢀlimitations,ꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀmayꢀnotꢀpreventꢀorꢀdetectꢀmisstatements.ꢀAlso,ꢀcontrolsꢀmayꢀbecome inadequateꢀbecauseꢀofꢀchangesꢀinꢀconditions,ꢀorꢀtheꢀdegreeꢀofꢀcomplianceꢀwithꢀpoliciesꢀorꢀproceduresꢀmayꢀdeteriorate.ꢀManagement assessedꢀtheꢀeffectivenessꢀofꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀasꢀofꢀDecemberꢀ31,ꢀ2018,ꢀutilizingꢀtheꢀcriteriaꢀdescribedꢀin theꢀ“InternalꢀControlꢀ-ꢀIntegratedꢀFrameworkꢀ(2013)”ꢀissuedꢀbyꢀtheꢀCommitteeꢀofꢀSponsoringꢀOrganizationsꢀofꢀtheꢀTreadway Commission.ꢀManagement’sꢀassessmentꢀincludedꢀevaluationꢀofꢀelementsꢀsuchꢀasꢀtheꢀdesignꢀandꢀoperatingꢀeffectivenessꢀofꢀkey financialꢀ reportingꢀ controls,ꢀ processꢀ documentation,ꢀ accountingꢀ policies,ꢀ andꢀ ourꢀ overallꢀ controlꢀ environment.ꢀBasedꢀ onꢀ this assessment,ꢀmanagementꢀhasꢀconcludedꢀthatꢀourꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀwasꢀeffectiveꢀatꢀaꢀreasonableꢀassurance levelꢀasꢀofꢀDecemberꢀ31,ꢀ2018. Ourꢀindependentꢀregisteredꢀpublicꢀaccountingꢀfirm,ꢀBDOꢀUSA,ꢀLLP,ꢀindependentlyꢀassessedꢀtheꢀeffectivenessꢀofꢀtheꢀCompany’s internalꢀcontrolꢀoverꢀfinancialꢀreporting,ꢀasꢀstatedꢀinꢀtheꢀfirm’sꢀattestationꢀreport,ꢀwhichꢀisꢀincludedꢀwithinꢀPartꢀII,ꢀItemꢀ8ꢀofꢀthis Formꢀ10-K. Changes in Internal Control over Financial Reporting Thereꢀ wasꢀ noꢀ changeꢀ toꢀ ourꢀ internalꢀ controlꢀ overꢀ financialꢀ reportingꢀ (asꢀ definedꢀ inꢀ Rulesꢀ13a‑15(f)ꢀ andꢀ 15d‑15(f)ꢀ underꢀ the ExchangeꢀAct)ꢀthatꢀoccurredꢀduringꢀtheꢀfourthꢀquarterꢀendedꢀDecemberꢀ31,ꢀ2018ꢀthatꢀhasꢀmateriallyꢀaffected,ꢀorꢀisꢀreasonably likelyꢀtoꢀmateriallyꢀaffect,ꢀourꢀinternalꢀcontrolꢀoverꢀfinancialꢀreporting.ꢀ Item 9B. Other Information. None. 92 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ShareholdersꢀandꢀBoardꢀofꢀDirectors EveriꢀHoldingsꢀInc.ꢀandꢀsubsidiaries LasꢀVegas,ꢀNevada Opinion on Internal Control over Financial Reporting WeꢀhaveꢀauditedꢀEveriꢀHoldingsꢀInc.ꢀandꢀsubsidiaries’ꢀ(theꢀ“Company’s”)ꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀasꢀofꢀDecember 31,ꢀ2018,ꢀbasedꢀonꢀcriteriaꢀestablishedꢀinꢀInternal Control - Integrated Framework (2013)ꢀissuedꢀbyꢀtheꢀCommitteeꢀofꢀSponsoring Organizationsꢀ ofꢀ theꢀTreadwayꢀ Commissionꢀ (theꢀ “COSOꢀ criteria”).ꢀ Inꢀ ourꢀ opinion,ꢀ theꢀ Companyꢀ maintained,ꢀ inꢀ allꢀ material respects,ꢀeffectiveꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀasꢀofꢀDecemberꢀ31,ꢀ2018,ꢀbasedꢀonꢀtheꢀCOSOꢀcriteria. Weꢀalsoꢀhaveꢀaudited,ꢀinꢀaccordanceꢀwithꢀtheꢀstandardsꢀofꢀtheꢀPublicꢀCompanyꢀAccountingꢀOversightꢀBoardꢀ(UnitedꢀStates) (“PCAOB”),ꢀtheꢀconsolidatedꢀbalanceꢀsheetsꢀofꢀtheꢀCompanyꢀandꢀsubsidiariesꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017,ꢀtheꢀrelated consolidatedꢀstatementsꢀofꢀincomeꢀ(loss)ꢀandꢀcomprehensiveꢀincomeꢀ(loss),ꢀstockholders’ꢀdeficit,ꢀandꢀcashꢀflowsꢀforꢀeachꢀofꢀthe threeꢀyearsꢀinꢀtheꢀperiodꢀendedꢀDecemberꢀ31,ꢀ2018,ꢀandꢀtheꢀrelatedꢀnotesꢀandꢀourꢀreportꢀdatedꢀMarchꢀ12,ꢀ2019ꢀexpressedꢀan unqualifiedꢀopinionꢀthereon. Basis for Opinion TheꢀCompany’sꢀmanagementꢀisꢀresponsibleꢀforꢀmaintainingꢀeffectiveꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀandꢀforꢀitsꢀassessment ofꢀtheꢀeffectivenessꢀofꢀinternalꢀcontrolꢀoverꢀfinancialꢀreporting,ꢀincludedꢀinꢀtheꢀaccompanyingꢀItemꢀ9A,ꢀManagement’sꢀReportꢀon InternalꢀControlꢀoverꢀFinancialꢀReporting.ꢀOurꢀresponsibilityꢀisꢀtoꢀexpressꢀanꢀopinionꢀonꢀtheꢀCompany’sꢀinternalꢀcontrolꢀover financialꢀreportingꢀbasedꢀonꢀourꢀaudit.ꢀWeꢀareꢀaꢀpublicꢀaccountingꢀfirmꢀregisteredꢀwithꢀtheꢀPCAOBꢀandꢀareꢀrequiredꢀtoꢀbeꢀindependent withꢀrespectꢀtoꢀtheꢀCompanyꢀinꢀaccordanceꢀwithꢀU.S.ꢀfederalꢀsecuritiesꢀlawsꢀandꢀtheꢀapplicableꢀrulesꢀandꢀregulationsꢀofꢀtheꢀSecurities andꢀExchangeꢀCommissionꢀandꢀtheꢀPCAOB. WeꢀconductedꢀourꢀauditꢀofꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀinꢀaccordanceꢀwithꢀtheꢀstandardsꢀofꢀtheꢀPCAOB.ꢀThoseꢀstandards requireꢀthatꢀweꢀplanꢀandꢀperformꢀtheꢀauditꢀtoꢀobtainꢀreasonableꢀassuranceꢀaboutꢀwhetherꢀeffectiveꢀinternalꢀcontrolꢀoverꢀfinancial reportingꢀwasꢀmaintainedꢀinꢀallꢀmaterialꢀrespects.ꢀOurꢀauditꢀincludedꢀobtainingꢀanꢀunderstandingꢀofꢀinternalꢀcontrolꢀoverꢀfinancial reporting,ꢀassessingꢀtheꢀriskꢀthatꢀaꢀmaterialꢀweaknessꢀexists,ꢀandꢀtestingꢀandꢀevaluatingꢀtheꢀdesignꢀandꢀoperatingꢀeffectivenessꢀof internalꢀcontrolꢀbasedꢀonꢀtheꢀassessedꢀrisk.ꢀOurꢀauditꢀalsoꢀincludedꢀperformingꢀsuchꢀotherꢀproceduresꢀasꢀweꢀconsideredꢀnecessary inꢀtheꢀcircumstances.ꢀWeꢀbelieveꢀthatꢀourꢀauditꢀprovidesꢀaꢀreasonableꢀbasisꢀforꢀourꢀopinion. Definition and Limitations of Internal Control over Financial Reporting Aꢀcompany’sꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀisꢀaꢀprocessꢀdesignedꢀtoꢀprovideꢀreasonableꢀassuranceꢀregardingꢀtheꢀreliability ofꢀfinancialꢀreportingꢀandꢀtheꢀpreparationꢀofꢀfinancialꢀstatementsꢀforꢀexternalꢀpurposesꢀinꢀaccordanceꢀwithꢀgenerallyꢀaccepted accountingꢀprinciples.ꢀAꢀcompany’sꢀinternalꢀcontrolꢀoverꢀfinancialꢀreportingꢀincludesꢀthoseꢀpoliciesꢀandꢀproceduresꢀthatꢀ(1)ꢀpertain toꢀtheꢀmaintenanceꢀofꢀrecordsꢀthat,ꢀinꢀreasonableꢀdetail,ꢀaccuratelyꢀandꢀfairlyꢀreflectꢀtheꢀtransactionsꢀandꢀdispositionsꢀofꢀtheꢀassets ofꢀtheꢀcompany;ꢀ(2)ꢀprovideꢀreasonableꢀassuranceꢀthatꢀtransactionsꢀareꢀrecordedꢀasꢀnecessaryꢀtoꢀpermitꢀpreparationꢀofꢀfinancial statementsꢀinꢀaccordanceꢀwithꢀgenerallyꢀacceptedꢀaccountingꢀprinciples,ꢀandꢀthatꢀreceiptsꢀandꢀexpendituresꢀofꢀtheꢀcompanyꢀare beingꢀmadeꢀonlyꢀinꢀaccordanceꢀwithꢀauthorizationsꢀofꢀmanagementꢀandꢀdirectorsꢀofꢀtheꢀcompany;ꢀandꢀ(3)ꢀprovideꢀreasonable assuranceꢀregardingꢀpreventionꢀorꢀtimelyꢀdetectionꢀofꢀunauthorizedꢀacquisition,ꢀuse,ꢀorꢀdispositionꢀofꢀtheꢀcompany’sꢀassetsꢀthat couldꢀhaveꢀaꢀmaterialꢀeffectꢀonꢀtheꢀfinancialꢀstatements. Becauseꢀ ofꢀ itsꢀ inherentꢀ limitations,ꢀ internalꢀ controlꢀ overꢀ financialꢀ reportingꢀ mayꢀ notꢀ preventꢀ orꢀ detectꢀ misstatements.ꢀAlso, projectionsꢀofꢀanyꢀevaluationꢀofꢀeffectivenessꢀtoꢀfutureꢀperiodsꢀareꢀsubjectꢀtoꢀtheꢀriskꢀthatꢀcontrolsꢀmayꢀbecomeꢀinadequateꢀbecause ofꢀchangesꢀinꢀconditions,ꢀorꢀthatꢀtheꢀdegreeꢀofꢀcomplianceꢀwithꢀtheꢀpoliciesꢀorꢀproceduresꢀmayꢀdeteriorate.ꢀ /s/ꢀBDOꢀUSA,ꢀLLPꢀ LasꢀVegas,ꢀNevadaꢀ Marchꢀ12,ꢀ2019 93 PART III Item 10. Directors, Executive Officers and Corporate Governance. Theꢀinformationꢀregardingꢀourꢀdirectors,ꢀexecutiveꢀofficers,ꢀandꢀcertainꢀcorporateꢀgovernanceꢀrelatedꢀmattersꢀcontainedꢀunderꢀthe headingsꢀ“ElectionꢀofꢀDirectors,”ꢀ“ExecutiveꢀOfficers,”ꢀ“Sectionꢀ16(a)ꢀBeneficialꢀOwnershipꢀReportingꢀCompliance,”ꢀandꢀ“Board andꢀCorporateꢀGovernanceꢀMatters”ꢀinꢀtheꢀCompany’sꢀdefinitiveꢀproxyꢀstatementꢀtoꢀbeꢀfiledꢀwithꢀtheꢀSECꢀinꢀconnectionꢀwithꢀour 2019ꢀannualꢀmeetingꢀofꢀstockholdersꢀ(theꢀ“2019ꢀProxyꢀStatement”)ꢀisꢀincorporatedꢀhereinꢀbyꢀreference. Item 11. Executive Compensation. Theꢀinformationꢀregardingꢀdirectorꢀcompensationꢀandꢀexecutiveꢀofficerꢀcompensationꢀcontainedꢀunderꢀtheꢀheadingsꢀ“Boardꢀand CorporateꢀGovernanceꢀMattersꢀ–ꢀ2018ꢀDirectorꢀCompensation”ꢀandꢀ“ExecutiveꢀCompensation,”ꢀrespectively,ꢀinꢀtheꢀ2019ꢀProxy Statementꢀisꢀincorporatedꢀhereinꢀbyꢀreference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Theꢀinformationꢀregardingꢀshareꢀownershipꢀcontainedꢀunderꢀtheꢀheadingꢀ“SecurityꢀOwnershipꢀofꢀCertainꢀBeneficialꢀOwnersꢀand Management”ꢀinꢀtheꢀ2019ꢀProxyꢀStatementꢀisꢀincorporatedꢀhereinꢀbyꢀreference. Item 13. Certain Relationships and Related Transactions, and Director Independence. Theꢀ informationꢀ regardingꢀ directorꢀ independenceꢀ andꢀ relatedꢀ partyꢀ transactionsꢀ underꢀ theꢀ headingsꢀ “Boardꢀ andꢀ Corporate GovernanceꢀMattersꢀ–ꢀDirectorꢀIndependence”ꢀandꢀ“TransactionsꢀwithꢀRelatedꢀPersons,”ꢀrespectively,ꢀinꢀtheꢀ2019ꢀProxyꢀStatement isꢀincorporatedꢀhereinꢀbyꢀreference.ꢀꢀ Item 14. Principal Accountant Fees and Services. Theꢀinformationꢀregardingꢀauditꢀfees,ꢀaudit-relatedꢀfees,ꢀtaxꢀfees,ꢀallꢀotherꢀfees,ꢀandꢀtheꢀAuditꢀCommittee’sꢀpoliciesꢀandꢀprocedures onꢀpre-approvalꢀofꢀauditꢀandꢀpermissibleꢀnon-auditꢀservicesꢀofꢀindependentꢀauditorsꢀcontainedꢀunderꢀtheꢀheadingꢀ“Ratificationꢀof theꢀAppointmentꢀofꢀIndependentꢀRegisteredꢀPublicꢀAccountingꢀFirm”ꢀinꢀtheꢀ2019ꢀProxyꢀStatementꢀisꢀincorporatedꢀhereinꢀby reference.ꢀꢀ 94 Item 15. Exhibits and Financial Statement Schedules. PART IV (a) TheꢀfollowingꢀdocumentsꢀareꢀfiledꢀasꢀpartꢀofꢀthisꢀAnnualꢀReportꢀonꢀFormꢀ10‑K: 1.ꢀFinancialꢀStatements ꢀ ꢀ ReportꢀofꢀBDOꢀUSA,ꢀLLP,ꢀIndependentꢀRegisteredꢀPublicꢀAccountingꢀFirm ConsolidatedꢀStatementsꢀofꢀIncomeꢀ(Loss)ꢀandꢀComprehensiveꢀIncomeꢀ(Loss)ꢀforꢀtheꢀthreeꢀyearsꢀendedꢀDecemberꢀ31, 2018 ConsolidatedꢀBalanceꢀSheetsꢀasꢀofꢀDecemberꢀ31,ꢀ2018ꢀandꢀ2017ꢀ ConsolidatedꢀStatementsꢀofꢀCashꢀFlowsꢀforꢀtheꢀthreeꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018 ConsolidatedꢀStatementsꢀofꢀStockholders’ꢀ(Deficit)ꢀEquityꢀforꢀtheꢀthreeꢀyearsꢀendedꢀDecemberꢀ31,ꢀ2018 NotesꢀtoꢀConsolidatedꢀFinancialꢀStatements 48 49 51 52 54 55 2.ꢀFinancialꢀStatementꢀSchedules Allꢀschedulesꢀhaveꢀbeenꢀomittedꢀasꢀtheyꢀareꢀeitherꢀnotꢀrequiredꢀorꢀnotꢀapplicableꢀorꢀtheꢀrequiredꢀinformationꢀisꢀincludedꢀinꢀthe ConsolidatedꢀFinancialꢀStatementsꢀorꢀnotesꢀthereto. 3.ꢀSeeꢀItemꢀ15(b) (b)ꢀExhibits: Exhibit Number Exhibit Description 3.1 3.2 3.3 3.4 4.1 10.1 10.2 10.3 AmendedꢀandꢀRestatedꢀCertificateꢀofꢀIncorporationꢀofꢀHoldingsꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ3.1ꢀof AmendmentꢀNo.1ꢀHoldings’ꢀRegistrationꢀStatementꢀonꢀFormꢀS-1ꢀ(RegistrationꢀNo.ꢀ333-123514)ꢀfiledꢀwith theꢀSECꢀonꢀMayꢀ26,ꢀ2005). CertificateꢀofꢀAmendmentꢀofꢀAmendedꢀandꢀRestatedꢀCertificateꢀofꢀIncorporationꢀofꢀHoldingsꢀ(incorporated byꢀreferenceꢀtoꢀExhibitꢀ3.1ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀAprilꢀ30,ꢀ2009). CertificateꢀofꢀAmendmentꢀofꢀAmendedꢀandꢀRestatedꢀCertificateꢀofꢀIncorporationꢀofꢀHoldingsꢀ(incorporated byꢀreferenceꢀtoꢀExhibitꢀ3.1ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ14, 2015). SecondꢀAmendedꢀandꢀRestatedꢀBylawsꢀofꢀHoldingsꢀ(effectiveꢀasꢀofꢀAugustꢀ24,ꢀ2015)ꢀ(incorporatedꢀby referenceꢀtoꢀExhibitꢀ3.2ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ14,ꢀ2015). Indentureꢀ(andꢀFormꢀofꢀ7.50%ꢀSeniorꢀNoteꢀdueꢀ2025ꢀattachedꢀasꢀExhibitꢀAꢀthereto),ꢀdatedꢀasꢀofꢀDecember 5,ꢀ2017,ꢀbyꢀandꢀamongꢀEveriꢀPayments,ꢀEveriꢀHoldings,ꢀcertainꢀofꢀitsꢀwhollyꢀownedꢀsubsidiaries,ꢀas guarantors,ꢀandꢀDeutscheꢀBankꢀTrustꢀCompanyꢀAmericas,ꢀasꢀtrusteeꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibit 4.1ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀDecemberꢀ5,ꢀ2017). CreditꢀAgreement,ꢀdatedꢀasꢀofꢀMayꢀ9,ꢀ2017,ꢀamongꢀEveriꢀPayments,ꢀHoldings,ꢀtheꢀlendersꢀpartyꢀtheretoꢀand JefferiesꢀFinanceꢀLLC,ꢀasꢀadministrativeꢀagent,ꢀcollateralꢀagent,ꢀswingꢀlineꢀlender,ꢀletterꢀofꢀcreditꢀissuer, soleꢀleadꢀarrangerꢀandꢀsoleꢀbookꢀmanagerꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.1ꢀofꢀHoldings’ꢀCurrent ReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ9,ꢀ2017). SecurityꢀAgreement,ꢀdatedꢀasꢀofꢀMayꢀ9,ꢀ2017,ꢀamongꢀEveriꢀPayments,ꢀHoldings,ꢀasꢀaꢀguarantor,ꢀthe subsidiaryꢀguarantorsꢀpartyꢀthereto,ꢀandꢀJefferiesꢀFinanceꢀLLC,ꢀasꢀcollateralꢀagent,ꢀrelatedꢀtoꢀtheꢀCredit Agreementꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.2ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-Kꢀfiledꢀwith theꢀSECꢀonꢀMayꢀ9,ꢀ2017). Guaranty,ꢀdatedꢀMayꢀ9,ꢀ2017,ꢀbyꢀEveriꢀHoldings,ꢀasꢀaꢀguarantor,ꢀandꢀtheꢀsubsidiaryꢀguarantorsꢀpartyꢀthereto, inꢀfavorꢀofꢀtheꢀlendersꢀpartyꢀfromꢀtimeꢀtoꢀtimeꢀtoꢀtheꢀCreditꢀAgreementꢀandꢀJefferiesꢀFinanceꢀLLC,ꢀas administrativeꢀagentꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.3ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-K filedꢀwithꢀtheꢀSECꢀonꢀMayꢀ9,ꢀ2017). 95 Exhibit Number 10.4 10.5 10.6 †10.7 †10.8 †10.9 †10.10 †10.11 †10.12 †10.13 †10.14 †10.15 †10.16 †10.17 †10.18 †10.19 †10.20 †10.21 †10.22 Exhibit Description FirstꢀAmendmentꢀtoꢀCreditꢀAgreement,ꢀdatedꢀNovemberꢀ13,ꢀ2017,ꢀamongꢀEveriꢀPayments,ꢀHoldings,ꢀthe subsidiaryꢀguarantorsꢀpartyꢀthereto,ꢀtheꢀlendersꢀpartyꢀtheretoꢀandꢀJefferiesꢀFinanceꢀLLC,ꢀasꢀadministrative agentꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.1ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-Kꢀfiledꢀwithꢀthe SECꢀonꢀNovemberꢀ13,ꢀ2017). AgreementꢀforꢀProcessingꢀServices,ꢀdatedꢀasꢀofꢀAugustꢀ20,ꢀ2013,ꢀbyꢀandꢀbetweenꢀColumbusꢀDataꢀServices, LLCꢀandꢀEveriꢀPaymentsꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.10ꢀofꢀHoldings’ꢀAnnualꢀReportꢀonꢀForm 10-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMarchꢀ15,ꢀ2016). SponsorshipꢀAgreement,ꢀdatedꢀFebruaryꢀ11,ꢀ2011,ꢀbetweenꢀEveriꢀPaymentsꢀandꢀAmericanꢀStateꢀBank (incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.54ꢀofꢀHoldings’ꢀAnnualꢀReportꢀonꢀFormꢀ10-KꢀfiledꢀwithꢀtheꢀSEC onꢀMarchꢀ14,ꢀ2011). Holdingsꢀ2005ꢀStockꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.25ꢀofꢀtheꢀAnnualꢀReportꢀon Formꢀ10-KꢀofꢀEveriꢀPaymentsꢀfiledꢀwithꢀtheꢀSECꢀonꢀMarchꢀ10,ꢀ2005). FormꢀofꢀStockꢀOptionꢀAwardꢀforꢀPerformanceꢀPriceꢀVestingꢀunderꢀtheꢀ2005ꢀStockꢀIncentiveꢀPlan (incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.1ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-QꢀfiledꢀwithꢀtheꢀSEC onꢀAugustꢀ5,ꢀ2014). FormꢀofꢀStockꢀOptionꢀAwardꢀforꢀCliffꢀVestingꢀunderꢀtheꢀ2005ꢀStockꢀIncentiveꢀPlanꢀ(incorporatedꢀby referenceꢀtoꢀExhibitꢀ10.2ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-QꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ5, 2014). FormꢀofꢀStockꢀOptionꢀAwardꢀforꢀNon-EmployeeꢀDirectorsꢀunderꢀtheꢀ2005ꢀStockꢀIncentiveꢀPlan (incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.3ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-QꢀfiledꢀwithꢀtheꢀSEC onꢀAugustꢀ5,ꢀ2014). FormꢀofꢀStockꢀOptionꢀAwardꢀforꢀExecutivesꢀunderꢀtheꢀ2005ꢀStockꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreference toꢀExhibitꢀ10.4ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-QꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ5,ꢀ2014). FormꢀofꢀStockꢀOptionꢀAwardꢀforꢀEmployeesꢀunderꢀtheꢀ2005ꢀStockꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreference toꢀExhibitꢀ10.5ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-QꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ5,ꢀ2014). HoldingsꢀAmendedꢀandꢀRestatedꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.1ꢀto Holdings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ25,ꢀ2018). FormꢀofꢀStockꢀOptionꢀAgreementꢀunderꢀtheꢀAmendedꢀandꢀRestatedꢀ2014ꢀEquityꢀIncentiveꢀPlan (incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.7ꢀtoꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀon Mayꢀ10,ꢀ2016). FormꢀofꢀStockꢀOptionꢀAwardꢀ(Performance-Based)ꢀ(Double-TriggerꢀAcceleration)ꢀforꢀNon-Employee DirectorsꢀunderꢀtheꢀAmendedꢀandꢀRestatedꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀto Exhibitꢀ10.2ꢀtoꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). FormꢀofꢀStockꢀOptionꢀAwardꢀ(Performance-Based)ꢀ(Double-TriggerꢀAcceleration)ꢀforꢀExecutivesꢀunderꢀthe AmendedꢀandꢀRestatedꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.3ꢀtoꢀHoldings’ CurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). FormꢀofꢀStockꢀOptionꢀAwardꢀ(Time-Based)ꢀ(Double-TriggerꢀAcceleration)ꢀforꢀNon-EmployeeꢀDirectors underꢀtheꢀAmendedꢀandꢀRestatedꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.4ꢀto Holdings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). FormꢀofꢀStockꢀOptionꢀAwardꢀ(Time-Based)ꢀ(Double-TriggerꢀAcceleration)ꢀforꢀExecutivesꢀunderꢀthe AmendedꢀandꢀRestatedꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.5ꢀtoꢀHoldings’ CurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). FormꢀofꢀStockꢀOptionꢀAwardꢀ(Time-Based)ꢀ(Double-TriggerꢀAcceleration)ꢀforꢀEmployeesꢀunderꢀthe AmendedꢀandꢀRestatedꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.6ꢀtoꢀHoldings’ CurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). Holdingsꢀ2012ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ99.1ꢀtoꢀHoldings’ꢀCurrentꢀReport onꢀFormꢀS-8ꢀfiledꢀwithꢀtheꢀSECꢀonꢀMarchꢀ16,ꢀ2015). AmendmentꢀtoꢀtheꢀHoldingsꢀ2012ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ99.2ꢀto Holdings’ꢀCurrentꢀReportꢀonꢀFormꢀS-8ꢀfiledꢀwithꢀtheꢀSECꢀonꢀMarchꢀ16,ꢀ2015). FormꢀofꢀStockꢀOptionꢀAgreementꢀunderꢀtheꢀ2012ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀto Exhibitꢀ10.13ꢀtoꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). 96 Exhibit Number †10.23 †10.24 †10.25 †10.26 †10.27 †10.28 †10.29 †10.30 †10.31 †10.32 †10.33 †10.34 †10.35 †10.36 †10.37 10.38 10.39 †*10.40 †*10.41 Exhibit Description FormꢀofꢀStockꢀOptionꢀAwardꢀ(Performance-Based)ꢀ(Double-TriggerꢀAcceleration)ꢀforꢀNon-Employee Directorsꢀunderꢀtheꢀ2012ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.8ꢀtoꢀHoldings’ CurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). FormꢀofꢀStockꢀOptionꢀAwardꢀ(Performance-Based)ꢀ(Double-TriggerꢀAcceleration)ꢀforꢀExecutivesꢀunderꢀthe 2012ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.9ꢀtoꢀHoldings’ꢀCurrentꢀReportꢀon Formꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). FormꢀofꢀStockꢀOptionꢀAwardꢀ(Time-Based)ꢀ(Double-TriggerꢀAcceleration)ꢀforꢀNon-EmployeeꢀDirectors underꢀtheꢀ2012ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.10ꢀtoꢀHoldings’ꢀCurrent ReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). FormꢀofꢀStockꢀOptionꢀAwardꢀ(Time-Based)ꢀ(Double-TriggerꢀAcceleration)ꢀforꢀExecutivesꢀunderꢀtheꢀ2012 EquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.11ꢀtoꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-K filedꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). FormꢀofꢀStockꢀOptionꢀAwardꢀ(Time-Based)ꢀ(Double-TriggerꢀAcceleration)ꢀforꢀEmployeesꢀunderꢀtheꢀ2012 EquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.12ꢀtoꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-K filedꢀwithꢀtheꢀSECꢀonꢀMayꢀ10,ꢀ2016). FormꢀofꢀIndemnificationꢀAgreementꢀbetweenꢀHoldingsꢀandꢀeachꢀofꢀitsꢀexecutiveꢀofficersꢀandꢀdirectors (incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.27ꢀtoꢀHoldings’ꢀRegistrationꢀStatementꢀonꢀFormꢀS-1ꢀ(Registration No.ꢀ333-123514)ꢀfiledꢀwithꢀtheꢀSECꢀonꢀMarchꢀ22,ꢀ2005). EmploymentꢀAgreementꢀwithꢀRandyꢀL.ꢀTaylorꢀ(effectiveꢀasꢀofꢀAugustꢀ5,ꢀ2014)ꢀ(incorporatedꢀbyꢀreference toꢀExhibitꢀ10.1ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ5,ꢀ2014). EmploymentꢀAgreementꢀwithꢀJulietꢀA.ꢀLimꢀ(effectiveꢀasꢀofꢀAugustꢀ5,ꢀ2014)ꢀ(incorporatedꢀbyꢀreferenceꢀto Exhibitꢀ10.34ꢀofꢀHoldings’ꢀAnnualꢀReportꢀonꢀFormꢀ10-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀMarchꢀ16,ꢀ2015). FirstꢀAmendmentꢀtoꢀEmploymentꢀAgreementꢀwithꢀJulietꢀA.ꢀLimꢀ(effectiveꢀasꢀofꢀJanuaryꢀ3,ꢀ2017) (incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.45ꢀofꢀHoldings’ꢀAnnualꢀReportꢀonꢀFormꢀ10-KꢀfiledꢀwithꢀtheꢀSEC onꢀMarchꢀ14,ꢀ2017). EmploymentꢀAgreementꢀwithꢀDavidꢀLuccheseꢀ(effectiveꢀasꢀofꢀAugustꢀ5,ꢀ2014)ꢀ(incorporatedꢀbyꢀreferenceꢀto Exhibitꢀ10.2ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ5,ꢀ2014). FirstꢀAmendmentꢀtoꢀEmploymentꢀAgreementꢀwithꢀDavidꢀLuccheseꢀ(effectiveꢀasꢀofꢀJanuaryꢀ3,ꢀ2017) (incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.47ꢀofꢀHoldings’ꢀAnnualꢀReportꢀonꢀFormꢀ10-KꢀfiledꢀwithꢀtheꢀSEC onꢀMarchꢀ14,ꢀ2017). EmploymentꢀAgreementꢀwithꢀEdwardꢀA.ꢀPetersꢀ(effectiveꢀJanuaryꢀ15,ꢀ2015)ꢀ(incorporatedꢀbyꢀreferenceꢀto Exhibitꢀ10.1ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀJanuaryꢀ22,ꢀ2015). AmendedꢀandꢀRestatedꢀEmploymentꢀAgreementꢀwithꢀMichaelꢀRumbolzꢀ(effectiveꢀMayꢀ5,ꢀ2017) (incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.4ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀon Mayꢀ9,ꢀ2017). NoticeꢀofꢀGrantꢀofꢀStockꢀOptionꢀwithꢀMichaelꢀRumbolz,ꢀdatedꢀFebruaryꢀ13,ꢀ2016ꢀ(incorporatedꢀby referenceꢀtoꢀExhibitꢀ10.1ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-KꢀfiledꢀwithꢀtheꢀSECꢀonꢀFebruaryꢀ16, 2016). FormꢀofꢀNoticeꢀofꢀStockꢀOptionꢀAwardꢀandꢀStockꢀOptionꢀAwardꢀAgreementꢀforꢀMichaelꢀRumbolzꢀ(effective Augustꢀ30,ꢀ2010)ꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.3ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-Kꢀfiled withꢀtheꢀSECꢀonꢀSeptemberꢀ2,ꢀ2010). TransitionꢀandꢀResignationꢀAgreementꢀandꢀGeneralꢀReleaseꢀofꢀAllꢀClaimsꢀwithꢀJulietꢀA.ꢀLimꢀdatedꢀOctober 25,ꢀ2017ꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.1ꢀofꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-Qꢀfiledꢀwith theꢀSECꢀonꢀNovemberꢀ7,ꢀ2017). SecondꢀAmendmentꢀtoꢀCreditꢀAgreement,ꢀdatedꢀMayꢀ17,ꢀ2018,ꢀamongꢀEveriꢀPayments,ꢀHoldings,ꢀthe subsidiaryꢀguarantorsꢀpartyꢀthereto,ꢀtheꢀlendersꢀpartyꢀtheretoꢀandꢀJefferiesꢀFinanceꢀLLC,ꢀasꢀadministrative agentꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.1ꢀofꢀHoldings’ꢀCurrentꢀReportꢀonꢀFormꢀ8-Kꢀfiledꢀwithꢀthe SECꢀonꢀMayꢀ17,ꢀ2018). FirstꢀAmendmentꢀtoꢀAmendedꢀandꢀRestatedꢀEmploymentꢀAgreementꢀwithꢀMichaelꢀRumbolzꢀ(effective Februaryꢀ1,ꢀ2019).ꢀ NoticeꢀofꢀGrantꢀofꢀRestrictedꢀStockꢀUnitsꢀ(Time-Based)ꢀunderꢀtheꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀforꢀMichael Rumbolzꢀ(effectiveꢀFebruaryꢀ1,ꢀ2019). 97 Exhibit Number †10.42 †10.43 †10.44 †10.45 †10.46 †10.47 †10.48 †10.49 †10.50 *21.1 *23.1 *24.1 *31.1 *31.2 Exhibit Description EmploymentꢀAgreementꢀwithꢀDeanꢀA.ꢀEhrlichꢀ(effectiveꢀJanuaryꢀ1,ꢀ2017)ꢀ(incorporatedꢀbyꢀreferenceꢀto Exhibitꢀ10.1ꢀofꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-QꢀfiledꢀwithꢀtheꢀSECꢀonꢀMayꢀ9,ꢀ2018). FormꢀofꢀDeferredꢀRestrictedꢀStockꢀUnitsꢀAgreementꢀforꢀNon-EmployeeꢀDirectorsꢀunderꢀtheꢀ2012ꢀEquity IncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.2ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-Qꢀfiled withꢀtheꢀSECꢀonꢀAugustꢀ7,ꢀ2018). FormꢀofꢀNoticeꢀofꢀGrantꢀofꢀDeferredꢀRestrictedꢀStockꢀUnitsꢀforꢀtheꢀNon-EmployeeꢀDirectorsꢀunderꢀtheꢀ2012 EquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.3ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10- QꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ7,ꢀ2018). FormꢀofꢀDeferredꢀRestrictedꢀStockꢀUnitsꢀAgreementꢀforꢀNon-EmployeeꢀDirectorsꢀunderꢀtheꢀ2014ꢀEquity IncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.4ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-Qꢀfiled withꢀtheꢀSECꢀonꢀAugustꢀ7,ꢀ2018). FormꢀofꢀNoticeꢀofꢀGrantꢀofꢀDeferredꢀRestrictedꢀStockꢀUnitsꢀAgreementꢀforꢀNon-EmployeeꢀDirectorsꢀunder theꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.5ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀon Formꢀ10-QꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ7,ꢀ2018). FormꢀofꢀRestrictedꢀStockꢀUnitsꢀAgreementꢀunderꢀtheꢀ2014ꢀEquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreference toꢀExhibitꢀ10.6ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-QꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ7,ꢀ2018). FormꢀofꢀNoticeꢀofꢀGrantꢀofꢀRestrictedꢀStockꢀUnitsꢀ(Performance-Based)ꢀforꢀExecutivesꢀunderꢀtheꢀ2014 EquityꢀIncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.7ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10- QꢀfiledꢀwithꢀtheꢀSECꢀonꢀAugustꢀ7,ꢀ2018). FormꢀofꢀNoticeꢀofꢀGrantꢀofꢀRestrictedꢀStockꢀUnitsꢀ(Time-Based)ꢀunderꢀtheꢀ2014ꢀEquityꢀIncentiveꢀPlan (incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.8ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-QꢀfiledꢀwithꢀtheꢀSEC onꢀAugustꢀ7,ꢀ2018). FormꢀofꢀNoticeꢀofꢀGrantꢀofꢀRestrictedꢀStockꢀUnitsꢀ(Time-Based)ꢀforꢀExecutivesꢀunderꢀtheꢀ2014ꢀEquity IncentiveꢀPlanꢀ(incorporatedꢀbyꢀreferenceꢀtoꢀExhibitꢀ10.9ꢀtoꢀHoldings’ꢀQuarterlyꢀReportꢀonꢀFormꢀ10-Qꢀfiled withꢀtheꢀSECꢀonꢀAugustꢀ7,ꢀ2018). SubsidiariesꢀofꢀHoldings. ConsentꢀofꢀBDOꢀUSA,ꢀLLP. PowerꢀofꢀAttorneyꢀ(includedꢀonꢀsignatureꢀpage). CertificationꢀofꢀChiefꢀExecutiveꢀOfficerꢀofꢀHoldingsꢀinꢀaccordanceꢀwithꢀRulesꢀ13a-14(a)ꢀandꢀ15d-14(a)ꢀof theꢀSecuritiesꢀExchangeꢀAct,ꢀasꢀamended,ꢀasꢀadoptedꢀpursuantꢀtoꢀSectionꢀ302ꢀofꢀtheꢀSarbanes-OxleyꢀActꢀof 2002. CertificationꢀofꢀChiefꢀFinancialꢀOfficerꢀofꢀHoldingsꢀinꢀaccordanceꢀwithꢀRulesꢀ13a-14(a)ꢀandꢀ15d-14(a)ꢀof theꢀSecuritiesꢀExchangeꢀAct,ꢀasꢀamended,ꢀasꢀadoptedꢀpursuantꢀtoꢀSectionꢀ302ꢀofꢀtheꢀSarbanes-OxleyꢀActꢀof 2002. **32.1 CertificationꢀofꢀtheꢀChiefꢀExecutiveꢀOfficerꢀandꢀChiefꢀFinancialꢀOfficerꢀofꢀHoldingsꢀinꢀaccordanceꢀwithꢀ18 U.S.C.ꢀ§1350,ꢀasꢀadoptedꢀpursuantꢀtoꢀSectionꢀ906ꢀofꢀtheꢀSarbanes-OxleyꢀActꢀofꢀ202. *101.INS XBRLꢀInstanceꢀDocument. *101.SCH XBRLꢀTaxonomyꢀExtensionꢀSchemaꢀDocument. *101.CAL XBRLꢀTaxonomyꢀExtensionꢀCalculationꢀLinkbaseꢀDocument. *101.DEF XBRLꢀTaxonomyꢀExtensionꢀDefinitionꢀLinkbaseꢀDocument. *101.LAB XBRLꢀTaxonomyꢀExtensionꢀLabelꢀLinkbaseꢀDocument. *101.PRE XBRLꢀTaxonomyꢀExtensionꢀPresentationꢀLinkbaseꢀDocument. ꢀ 98 * Filedꢀherewith. ** Furnishedꢀherewith. † Managementꢀcontractsꢀorꢀcompensatoryꢀplansꢀorꢀarrangements. + ConfidentialꢀtreatmentꢀhasꢀbeenꢀgrantedꢀforꢀcertainꢀportionsꢀofꢀthisꢀexhibitꢀpursuantꢀtoꢀRuleꢀ24b-2ꢀofꢀtheꢀSecurities ExchangeꢀActꢀofꢀ1934,ꢀasꢀamended.ꢀTheꢀconfidentialꢀinformationꢀhasꢀbeenꢀomittedꢀandꢀfiledꢀseparatelyꢀwithꢀtheꢀSEC. Item 16. Form 10-K Summary. None. 99 SIGNATURES PursuantꢀtoꢀtheꢀrequirementsꢀofꢀSectionꢀ13ꢀorꢀ15(d)ꢀofꢀtheꢀSecuritiesꢀExchangeꢀActꢀofꢀ1934,ꢀtheꢀregistrantꢀhasꢀdulyꢀcausedꢀthis reportꢀtoꢀbeꢀsignedꢀonꢀitsꢀbehalfꢀbyꢀtheꢀundersigned,ꢀthereuntoꢀdulyꢀauthorized. ꢀ Dated:ꢀMarchꢀ12,ꢀ2019 EVERI HOLDINGS INC. By: /s/ꢀTODDꢀA.ꢀVALLI ToddꢀA.ꢀValli Chief Accounting Officer (Principal Accounting Officer) ꢀ POWER OF ATTORNEY KNOWꢀALLꢀPERSONSꢀBYꢀTHESEꢀPRESENTS,ꢀthatꢀeachꢀpersonꢀwhoseꢀsignatureꢀappearsꢀbelowꢀconstitutesꢀandꢀappointsꢀMichael D.ꢀRumbolz,ꢀRandyꢀL.ꢀTaylor,ꢀandꢀToddꢀA.ꢀValliꢀandꢀeachꢀofꢀthem,ꢀhisꢀattorneys‑in‑fact,ꢀeachꢀwithꢀtheꢀpowerꢀofꢀsubstitution,ꢀfor himꢀinꢀanyꢀandꢀallꢀcapacities,ꢀtoꢀsignꢀanyꢀamendmentsꢀtoꢀthisꢀAnnualꢀReportꢀonꢀFormꢀ10‑Kꢀandꢀtoꢀfileꢀtheꢀsame,ꢀwithꢀexhibits theretoꢀ andꢀ otherꢀ documentsꢀ inꢀ connectionꢀ therewith,ꢀ withꢀ theꢀ Securitiesꢀ andꢀ Exchangeꢀ Commission,ꢀ herebyꢀ ratifyingꢀ and confirmingꢀallꢀthatꢀeachꢀofꢀsaidꢀattorneys‑in‑fact,ꢀorꢀhisꢀsubstituteꢀorꢀsubstitutes,ꢀmayꢀdoꢀorꢀcauseꢀtoꢀbeꢀdoneꢀbyꢀvirtueꢀhereof. PursuantꢀtoꢀtheꢀrequirementsꢀofꢀtheꢀSecuritiesꢀExchangeꢀActꢀofꢀ1934,ꢀthisꢀreportꢀhasꢀbeenꢀsignedꢀbelowꢀbyꢀtheꢀfollowingꢀpersons onꢀbehalfꢀofꢀtheꢀregistrantꢀandꢀinꢀtheꢀcapacitiesꢀandꢀonꢀtheꢀdateꢀindicated. ꢀ Signature Title Date /s/ꢀMICHAELꢀD.ꢀRUMBOLZ MichaelꢀD.ꢀRumbolz PresidentꢀandꢀChiefꢀExecutiveꢀOfficer (PrincipalꢀExecutiveꢀOfficer)ꢀandꢀDirector /s/ꢀRANDYꢀL.ꢀTAYLOR RandyꢀL.ꢀTaylor ChiefꢀFinancialꢀOfficer (PrincipalꢀFinancialꢀOfficer) /s/ꢀTODDꢀA.ꢀVALLI ToddꢀA.ꢀValli ChiefꢀAccountingꢀOfficer (PrincipalꢀAccountingꢀOfficer) Marchꢀ12,ꢀ2019 Marchꢀ12,ꢀ2019 Marchꢀ12,ꢀ2019 /s/ꢀE.ꢀMILESꢀKILBURN E.ꢀMilesꢀKilburn /s/ꢀGEOFFREYꢀP.ꢀJUDGE GeoffreyꢀP.ꢀJudge /s/ꢀRONALDꢀV.ꢀCONGEMI RonaldꢀV.ꢀCongemi /s/ꢀEILEENꢀF.ꢀRANEY EileenꢀF.ꢀRaney /s/ꢀLINSTERꢀW.ꢀFOX LinsterꢀW.ꢀFox /s/ꢀMAUREENꢀT.ꢀMULLARKEY MaureenꢀT.ꢀMullarkey ꢀ ChairmanꢀofꢀtheꢀBoardꢀandꢀDirector Marchꢀ12,ꢀ2019 Marchꢀ12,ꢀ2019 Marchꢀ12,ꢀ2019 Marchꢀ12,ꢀ2019 Marchꢀ12,ꢀ2019 Marchꢀ12,ꢀ2019 Director Director Director Director Director 100 BR30034T-0419-COMBO 

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