Everi Holdings Inc (EVRI) 2014 Q4 法說會逐字稿

Welcome to the Global Cash Access Holdings, Inc. Fourth-Quarter 2014 Earnings Call.

(Operator Instructions)

This conference call is being recorded today, Tuesday, March 10, 2015.

Now, I'd like to turn the conference over to Todd Valli, Vice President of Corporate Finance and Investor Relations. Please go ahead, sir.

Thank you and welcome to the call.

Joining me today is President and Chief Executive Officer, Ram V. Chary and Executive Vice President and Chief Financial Officer, Randy L. Taylor. For purpose of this call, unless otherwise noted, all results for the 2014 fourth quarter and full year discussed today include 13 days of operations for Multimedia Games.

Before we begin, I'd like to remind you that some of the comments to be made during this call contain forward-looking statements and assumptions that are subject to risks and uncertainties, including but not limited to, those contained in our SEC filings. These events could cause actual results to differ materially from those described in our forward-looking statements and as such, we would like to caution against undue reliance on these forward-looking statements, which speak only as of today.

They should not be considered an indication of future performance and we do not intend and assume no obligation to update any forward-looking statements. For additional information, please refer to our press release and our other filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2014, which we expect to file on or before March 16, 2015, and our subsequent reports filed with the SEC, all of which are posted within the IR section of our corporate website.

In addition, this call may refer to certain non-GAAP measures, such as cash, earnings per share, and adjusted EBITDA. We reference these non-GAAP measures to enhance investor understanding of the underlying trends in our business and to provide better comparability between periods in different years. For a full reconciliation of these non-GAAP measures to GAAP results, please see our earnings press release and related 8-K; both of which are available within the IR section of our corporate website. Finally, this call is being webcast, which may be also accessed within the IR section of our corporate website and a replay of the call will be archived.

With that, I am pleased to introduce our President and Chief Executive Officer, Ram V. Chary.

Thank you, Todd, and good afternoon, everyone, and thank you for joining us on today's call.

I will provide an update on our integration activities and the key initiatives we've undertaken since completing the acquisition of Multimedia Games less than three months ago. Randy will then discuss our 2014 fourth quarter and full year financial results.

Before we get started, I want to make sure everyone noticed yesterday's press release regarding the finalized multi-year cash access agreement we recently signed with one of our top customers, Las Vegas Sands. The new contract expands our relationship to include our integrated kiosks across the full gaming floors at the Venetian and Palazzo resorts in Las Vegas, as well as Sands Bethlehem in Pennsylvania.

We continue to gain momentum by providing comprehensive value to our premier operators, like the Las Vegas Sands. Turning now to our acquisition of Multimedia Games, which as you know, was completed last December. As we noted from the time we announced our intention to acquire Multimedia Games, our strategic rationale for the transaction was to create value for customers and our shareholders by combining the differentiated industry-leading solutions of GCA and Multimedia Games to offer an industry-unique new value proposition.

By leveraging our slot gaming entertainment, payments, and compliance solutions, we believe we can bring enhanced offerings to the market that maximize returns on our customers' capital investments in gaming technology. While we are still early in the integration and operation of Multimedia Games, I am very pleased to say that everyday, we see more and more evidence that our rationale for the acquisition is tremendous and that the combination of GCA with Multimedia Games has created a Company that is distinctly differentiated from any other.

It has been an invigorating to work with the unique Austin culture of Multimedia Games. While we further their culture of innovation, it is important to note that we are well on track to achieve the targeted cost synergies that we previously identified. In terms of some of the initial integration and reorganization activities that have taken place since the completion of the deal, one of the key measures we implemented was an overall organization structure that now defines a payments business, which is comprised of our legacy payments and compliance offerings; a games business, which includes gaming operations and gaming equipment sales; and finally, shared services, which includes, among others, sales, marketing, finance, and human resources.

Looking to the year ahead, we have set out a number of key initiatives for the payments and games businesses. For our payments business, our key strategies include investing in our platform to further increase its stability and continue our solution sale offering. This will serve to further differentiate our payment solutions from the market and provide a platform for long-term growth.

Another key initiative is for our payments group to combine our kiosk manufacturing with our games business in both Austin and a smaller facility in Las Vegas. We expect this combination to be completed in the third quarter of this year. By consolidating all of our manufacturing operations in both games and payments, we expect to significantly enhance our manufacturing efficiencies and economics, while improving our time to market.

For the games side of the business, we're focusing on continue to leverage the made in Austin culture of Multimedia Games, which has really served to set our products apart in the industry. We are going to contingent balance the company's Class 2 lineage with the opportunity to grow our Class 3 and 4 share.

Before I turn the call over to Randy, I want to highlight five key features of GCA that we think investors should focus on at this time. Number one, we have a very diligent integration plan and are on track to achieve our cost synergies. Number two, we generate significant recurring revenue across multiple business segments. Approximately 90% of our revenue was recurring nature in 2014. Number three, we offer highly differentiated products on the casino floor and I'll add that the combination of GCA and Multimedia Games was unique among all the recent combinations, as our products are truly complementary, rather than duplicative.

Number four, we generate strong free cash flow and are committed to deploying our free cash flow towards deleveraging as quickly as possible. Number five, the combined Company has substantial growth opportunities. With these key features in mind and the initiatives previously discussed, the Company believes we can reach adjusted EBITDA for 2015 of between $218 million and $228 million.

With that, let me turn the call over to Randy to review our fourth quarter results.

Thank you, Ram, and good afternoon to everyone on the call and webcast.

The majority of my review of the financial results will reference the combined operations and financial reporting of GCA and Multimedia Games following the closing of the acquisition on December 19. I will also briefly review Multimedia Games on a standalone basis for the fourth quarter.

2014 fourth quarter revenue was $152.1 million, which includes $7.4 million for Multimedia Games. Excluding this contribution, legacy GCA revenue rose $4.2 million, or 3% for the fourth-quarter 2014 over the same period in the prior year. Our fourth-quarter 2014 cash EPS increased $0.04 per share, or 21%, to $0.23 on a weighted average diluted shares of 66.4 million as compared to $0.19 on weighted average diluted shares of 67.4 million for Q4 2013.

Excluding the impact of Multimedia Games, GCA's cash EPS was $0.24, or a 26% increase over the prior-year quarter. We define cash EPS as net income plus deferred income tax, amortization, non-cash compensation, asset impairment charge, accretion of contract rights, acquisition costs, purchase accounting adjustments, and write-off of deferred loan fees divided by diluted shares outstanding.

Adjusted EBITDA increased $6.8 million or 40% to $23.9 million for the fourth-quarter 2014, as compared to $17.1 million for the same period last year. Excluding Multimedia Games, GCA's adjusted EBITDA was $19.9 million or a 16% increase over the prior-year quarter. We define adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, non-cash compensation, asset impairment charge, accretion of contract rights, acquisition costs, and purchase accounting adjustments.

On a full-year basis, GCA payments revenue was up less than 1% to $585.6 million, but excluding the Caesars entertainment business, revenue was up $37.1 million or nearly 7%. For the full-year 2014, excluding any impact from the Multimedia Games acquisition, our cash EPS per share was $0.89 on weighted average diluted shares of 66.9 million as compared to $0.78 on weighted average diluted shares of 67.2 million for 2013, an increase of $0.11 or 14%.

Our adjusted EBITDA, again excluding any impact for the Multimedia Games acquisition, was $76 million as compared to $71.2 million for 2013, an increase of $4.8 million or 7%. Both cash, EPS, per share, and adjusted EBITDA for GCA where line with our full-year guidance. On a segment basis, cash advance revenues and operating income were $56.8 million and $14.6 million respectively for the 2014 fourth quarter compared to $56.8 million and $14.5 million for the same period in 2013.

Excluding a loss of the Caesars contract, which represented approximately $3.7 million in revenue, cash advance revenues have increased by approximately 7%, primarily due to new business and same-store growth in both transactions and cash to the floor. The Company was able to maintain its operating income at a level equal to the prior year period, inclusive of the loss of the Caesars contract.

ATM revenues and operating income were $68.3 million and $6.1 million, respectively for 2014 fourth quarter compared to $66.2 million and $6 million for Q4 2013. Excluding the loss of the Caesars contract, which represented approximately $6.4 million in revenue, ATM revenues would have increased by approximately 14% primarily due to new business and same-store growth in both transactions and cash to floor.

The Company was able to slightly increase its operating income when compared to the prior year, even after taking into consideration the loss of the Caesars contract. Check services revenue and operating income were $5 million and $2.6 million, respectively for Q4 2014 compared to $4.8 million and $2.5 million for the 2013 fourth quarter. Check services revenue was up due to an increase in face amount per transaction and number of transactions.

Our game segment, which consists of gaming operations and gaming equipment and systems sales for the 13 days in December 2014 for Multimedia Games reported $7.4 million in revenue and $2.2 million in operating income. Our other segment, which consists primarily of fully integrated kiosk sales, kiosk parts and services, central credit operations, and our compliance audit and data solutions reported revenues and operating income of $14.6 million and $7.3 million, respectively for Q4 2014 compared to $12.6 million and $5.7 million for Q4 2013.

Other revenues increased in the quarter, primarily due to our compliance audit and data solutions offerings. Other operating income increased in the quarter, primarily due to our compliance audit and data solutions, as well as higher margins on our fully integrated kiosk sales. Operating expenses excluding research and development cost and depreciation and amortization expense were $33.2 million in the fourth-quarter 2014.

Operating expenses in Q4 2014 included $8.5 million in Multimedia Games acquisition costs, a $3.1 million asset impairment charge, and $2.7 million in operating expenses for Multimedia Games during the 13-day period in December. Excluding these items, operating expenses in the 2014 fourth quarter were comparable to the prior year. The increase in depreciation and amortization expense in the quarter, as compared to the prior-year period is due to the acquisition of Multimedia Games and NEWave.

Other cash transaction metrics to note, same-store cash to the floor, our best indicator of industry trends, increased approximately 5% in the 2014 fourth quarter as compared to the same period last year. ATM volume increased in Q4 2014 for the first time since the first quarter of 2012 and both debit and credit card transactions increased. Combined credit and debit cash to the floor increased by approximately 7% for Q4 2014 while ATM cash to the floor increased by approximately 5%.

Let me turn now to a brief overview of Multimedia Games. For the three months ended December 31, 2014, total revenue was $48 million, which compares to revenue of $59.2 million in the same period in the prior year. The three months ended December 31, 2013 benefited from the sale of 499 units to a single customer in Alabama; 221 of which were previously installed at the customer's facility on a revenue share basis.

Gaming operations revenue increased $4.3 million or 13% over the same period in the prior-year, reflecting an increase in installed base and an approximate $1.37 increase in the average daily win per unit. Installed base at December 31, 2014 was 13,287 units and the installed base reflects the temporary removal of 123 units at a customer's facility in Oklahoma, as the facility is undergoing a renovation, which we currently anticipate will continue through the third quarter of 2015.

The 13,287 unit installed base compares to 12,657 units at December 31, 2013 and 13,329 units as of September 30, 2014. Included in the 2014 year-end installed base are 1,541 premium participation units, predominantly comprised of our high-rise games compared to 1,059 premium participation units that were installed as of December 31, 2013 and 1,399 units as of September 30, 2014.

On a consolidated pro forma basis, as if the acquisition of Multimedia Games had been completed on January 1, 2014, total revenue for the year would have been $792.6 million, of which approximately 90% was recurring revenue, and adjusted EBITDA would have been $186.9 million. 2014 fourth quarter total revenue would have been $192.7 million and adjusted EBITDA would have been $42.7 million.

As for the balance sheet, cash and cash equivalents were $89.1 million as of December 31, 2014. Please note that our daily cash balance fluctuates significantly due to our large settlement receivables and settlement liabilities and the ultimate timing of when the cash is received from patron's issuing bank and when we reimburse our casino customer.

Borrowings were $1.2 billion at the end of the quarter, reflecting our borrowings to complete the acquisition of Multimedia Games in December and the Company is in compliance with its debt covenants as of December 31, 2014. As the date of this call, we have repaid $15 million on our outstanding debt and are required to pay another $2.5 million at the end of March. Capital expenditures were $18 million for the year ended December 31, 2014, which included $2.8 million from the Multimedia Games.

Regarding our merger integration activities initiatives, as Ram noted, we have made considerable progress on this front. As of December 31, 2014, we have eliminated approximately $10.9 million on an annual run rate basis from our overall cost structure and we expect to achieve our targeted annual run rate of $24 million in cost synergies by the end of the calendar year.

Finally, today we provided our initial guidance for the FY15 of adjusted EBITDA of $218 million to $228 million. In addition, we expect full-year depreciation and amortization expense of $130 million to $135 million, but note that this estimate for depreciation and amortization expense could change significantly, depending on the Company's final allocation of the purchase price for Multimedia Games to certain depreciable and amortizable assets, as well as nonamortizable goodwill.

We also expect full-year capital expenditures of $60 million to $70 million, which would include capitalized software costs and contract rights. Looking forward, our plan continues to focus on the deployment of cash to reduce leverage.

With that, I would like to turn the call back to the operator for your questions.

(Operator Instructions)

From Craig-Hallum, George Sutton.

Thank you. Congratulations on getting this deal done and finally getting to this point.

I wondered if you could talk about the shared service capabilities and how you've combined these two pieces? So for example, if I was a salesperson previously for MGAM, how has my quota changed and same would be asked for a GCA salesperson?

Under our new sales leader, Ed Peters, what we've done is several things. We've combined all sales and relationship folks, organizationally in terms of management reporting structure, into one organization under his leadership. From a territory perspective, the legacy Multimedia and legacy payments direct reports at the VP level are organized in a way to cover geographically North America in a way that's a little bit more detailed that has a smaller scope than any one of them had before.

In terms of the individual sales contributor for 2015, we've got sales folks writing side-by-side on payments and games, essentially in a team fashion, in that the people who were previously selling games will continue to. The folks who were previously selling our payments capabilities will continue to do so, but they're going to do so in a team fashion and by 2016, we'll have further integrated them so that everybody is selling everything.

Okay. That's helpful.

I know you did a lot of work in the pre-close process getting the approvals for all the different jurisdictions. Can you talk about what new markets MGAM will be able to sell into that they couldn't previously?

Yes, they fundamentally had a small fraction of the licenses we do, which are nearly 300 in all the jurisdictions we do business. One of the underlying foundations of the combination was for us to open up new markets and new jurisdictions for slot product to enter into.

Much to my delight, in early days, we've already seen quite a bit of traction on that front. Probably difficult in advance of an actual dealer transaction to list out some of those jurisdictions, but needless to say, we're really delighted and happy about our early traction that way.

Okay and lastly if I could, the deal with Las Vegas Sands, can you just give us a sense of how comparable that is to some of your other larger contracts you've recently negotiated in terms of contract length and margins?

All I would say is it's comparable, as you might expect given the different client relationships we have. We have to be respectful in terms of how much they want us to reveal in terms of the agreements we enter into, but I would say it's comparable at a high level in that some of our existing clients on the cash access side that might've had parts of our full solution, we have been and will continue to aggressively signed them up for the full GCA portfolio suite, and so that's reflected here and I think it's a very similar transaction.

Super. Thanks.

(Operator Instructions)

Todd Eilers, Eilers Research.

Hello, thanks for taking my questions. First, wanted to ask thoughts on gross gaming revenue trends in the United States. Looks like starting in December of last year, things really started to pick up. I wonder if you could maybe just comment on how that translates into your traditional or core cash access business? What have you have seen in the last couple of months or I guess for February? Should we expect similar trends or should we maybe even see some DGR trends maybe tail off a little bit, or just in general, how are you looking at that going forward?

Todd, as you referred to it, our payments business or specifically, our cash Access volumes are very correlated to gross gaming volumes. As you noted, starting in the month of December and I would say for the last three months, we have seen a pickup, so we don't have any reason to believe that will go way. We also don't have any reason to believe that it'll accelerate at a pace beyond what it already has.

That being said, I would tell you relative to our business strategy and our business model, we don't count on those kind of volume pickups as we project the go-forward success for our business. Definitely a tailwind and definitely a tailwind in the last couple of months, but we have a fair amount of uncertainty, as everybody does, as to whether it will continue or not.

Okay, great. Then wanted to ask a question on the installed base for MGAM. You noted the temporary removal of 123 games with a customer in Oklahoma as they renovate their casino. I just wanted to make sure I heard you right: did you expect those to be added back in the third quarter of this year? Is that correct? Should it be the same number of games or could you possibly have maybe increased units with this customer due to the expansion?

This is Randy. It is definitely the 123 games and we are expecting it to be in the third quarter. I really don't have any insight just yet whether it will be an expansion of those games, but our expectation is our games will come back onto the floor once the renovation is completed.

Okay. Then also wanted to ask a quick question on the installed base that you provided for MGAM in the period. Does that include any electronic table games, whether it be the actual table or seats. I'm not sure how you would account for it from the PokerTek acquisition?

No, again, that was a fairly small acquisition and those units are not included in the installed base.

Okay, perfect. Then on the slot sales for the quarter, I guess the pro forma number you gave 537, can you give us a number or what percent of those were tournament-related sales?

Yes, approximately 30% was tournament sales.

Okay, great. Sorry, I have a lot of questions.

I also wanted to ask, I believe you gave a full quarter, or was it a full-year impact. You broke down Multimedia's revenue, I thought I heard you say that their participation business was up 13% year-over-year. Did I hear that correct?

That was only in the fourth quarter, so it was quarter over quarter fourth quarter, their gaming ops were up 13%.

Okay, perfect. Thank you.

Then a general question about MGAM. This will be my last question. Obviously now with almost a full quarter under your belt, maybe updated thoughts, anything better than you expected, anything worse than you expected? Any changes over the last month? Curious to get your updated thoughts there?

I would say most of what we thought when we entered into the combination and closed it has turned out to be true. As you would expect, the magnitude of some of those observations, as we get into reality might be a little bit different, but I wouldn't say we've had meaningful surprises.

We continue to be delighted and really enjoy the differentiated development and products they bring to the market and we just hope to be able to continue the traction we've gotten so far bringing those products to many more markets than they were able to.

Okay, great. Thanks.

Thank you.

From Stifel, John Davis.

Good afternoon. Ram, I think you said that Las Vegas Sands was meaningful. Any ideas, was it top 10, top 5? Any more detail you could give there on exactly how meaningful Las Vegas Sands is to you?

I think people know the size of their operation, and I think I can only describe it as being one of our top customers. I'm not sure I would extend the description beyond that. I said in terms of term or any of those dynamics, we've got to be respectful of our client.

Okay, fair enough. Are there any other top 5, top 10 accounts or contracts coming up new in 2015 or in 2016 that we should be aware of?

We only have one in 2015. That will be a decision that's made by that client in the second half of this year and that's on the payment side.

Okay, great. Switching over to MGAM, it looks like guidance implies a nice rebound in revenue growth there. What's driving that and any comments you can make on trends quarter-to-date, given that we're already in March.

The two comments I'll make is that, as you would expect, it's understandable in these kind of transactions and frankly, human nature, that the exiting management team might take their foot off the gas a little bit, so to speak, and that probably was part of the phenomenon in the fourth quarter. That is neither a reflection of the successful business they ran for a period of years, nor does it reflect the rebound you just described.

So I think that's point in time. I think the reason we are confident about our growth going forward in 2015 is this point that I've touched on a couple times, which is their products are differentiated, they haven't been afforded the opportunity, whether it's sales or licensing, to be in a number of different jurisdictions that we're going to afford that organization that opportunity in and we'll enjoy the growth associated with it.

Okay. Lastly, any comments you can make on the expected or acquired CapEx that may be required for the Chickasaws in either 2015 or 2016? I think our analysts here modeled a pretty sharp increase in CapEx and I know your 2015 guidance is in line with what I'd expect, but is there any reason to expect a big step up from there in 2016 when that contract comes up?

John, there are a number of different contracts, so its really hard for me to say exactly which ones are coming up and I don't think we really report that, so we looked at it as over a five-year period. It's about $10 million a year, but where that hits by year is hard to say and really depends as we negotiate with them on each one that comes up, so it's at multiple locations there.

I think Randy described it very accurately. Same point communicated a little bit differently, as you can see, our 2015 is in line with historical spending levels and CapEx and based on Randy's description about how we look at that over a multiple year period of time, we don't have any information right now that would suggest the years beyond 2015 to be materially different.

Okay, great. Thanks.

Matt Kaplan, CIFC.

Hi. Did you provide MGam standalone revenue and EBITDA for the quarter?

Yes, we did. In the press release, there is the standalone for the full quarter of Multimedia. We did provide that in the press release.

Okay. Then the average selling price decline of the units, what drove that? Was that just a function of last year, the 400 units to the Oklahoma property, or is there more price pressure in the market today?

I think the year-over-year dynamics were more a function of what you described in the former comment, is that their organization had a large game sale in the calendar fourth quarter of 2013 that made for a difficult comp. That's more a phenomenon than less that we've gotten compression in the market.

Got it. Are you, based on what you're seeing in Q1, any change in pricing pressure for new unit sales relative to what it's been over the last year or two?

We don't have any evidence to that extent.

Okay. Then as it relates to the 2015 EBITDA guidance, how are you treating the $24 million of run rate synergies? Does that include $24 million of run rate synergies of EBITDA or cost savings, excuse me, or what is included in those number?

The numbers are full-year guidance and so the $24 million is on a run rate basis, so by the end of 2015, our expectation is to have a $24 million savings going forward. So the $218 million has got the savings embedded in the estimate.

$218 million has $24 million in them?

I'm not going to say it's $24 million, because again, it's on a run rate basis, so not all $24 million will be fully baked in at the beginning of the year. So we're obviously working through the cost synergies as we go, but our expectation is by the end of the year, we would have made cuts and changes that would allow for $24 million in savings.

So, then can you say how much actual savings are in there flowing through the numbers?

The only thing we've given is, as of December 31, 2014, we've achieved about $10.9 million, almost $11 million in savings.

Got it. Okay. Then cost to realize savings, are those getting deducted before getting to the $218 million, or is that net back?

The costs that we would incur along the way would be included in the $218 million.

So $218 million, so if there's $10 million of costs to realized savings, would it be $218 million, which would be $228 million if it were not for those costs, or is it $218 million --

No and we can't discretely breakout how much of the total for the $30 million that we've identified in aggregate, we can't discretely breakout how much of that we're going to spend in 2015. So I don't know that you can do that math the way you described it.

Okay. All right. Great. Thank you very much.

(Operator Instructions)

Josh Eisenberger, OZ Management.

Just a quick question regarding the participation footprint. You said there were how many machines that got pulled out in the quarter for the Chickasaws?

In the beginning of October, 123 units were pulled off of participation, October 1.

So the decline quarter-over-quarter in the install base, if you net that out was actually an increase?

Correct.

Can you shed some light as to where that increase was? Is that in Oklahoma or in other tribal regions, or was that outside of the Oklahoma tribal market?

I don't really have that detail with me at this point. We have had, and I think I gave the increase, there has been an increase in our premium games, but not really broken out by region.

Okay. Thank you.

David Hargreaves, Sterne Agee.

Hi. I was wondering if you can comment on what you see as your customer's appetites right now for buying new machines or releasing new machines, and whether it's more a case of trying to shorten the life on the floor, for example maybe catch up on machines that have been outstanding maybe bit too long or if their looking for new titles? Please don't give me just an all of the above. Thanks.

To go the first part of your question, I think clearly, across the board with our largest clients, but I think extends to clients of all sizes, we've observed in 2015 continued reductions in our clients' CapEx budgets. So they have less dollars to spend and need to be much more focused what they spend those dollars on. At a high-level, that looks like a reduced opportunity for us, but I would suggest early on it's an increased opportunity for us in that when you look across the competitive landscape, we're a little bit more organized.

It's my observation, anyway, that we're a little bit more organized with our sales force, our sales coverage, our structure of our client-facing organization. I think some of the players in the competitive landscape, especially because of their overlapping combinations, haven't quite gotten there yet. So in a lot of cases, we're calling on our clients in a way that nobody else does. We're offering them value and product that nobody else has, and so I think that's a good opportunity for us. But from a macro perspective, I would say their appetites are less than they've been.

In terms of adding new jurisdictions and extending the footprint of MGAM, can you talk a little bit about the pace of the process and how long it's going to take to maximize that potential?

It is something that's going to play out over the next two or three quarters, I would say for the most part. We've had different kinds of results in a lot of jurisdictions. We have gotten licensed very quickly. In some jurisdictions it is taking longer. Simple logic would suggest in some of the places they were not able to be licensed, either because of lack of effort or other challenges.

Naturally, those places are hard to get licensed for anybody. So even though we'll be faster than anyone in the industry, it's still going to take us some time to get licensed in some of those tougher jurisdictions. So I would say, by the second half of this year, we'll be well through that process.

That is pretty fast. In terms of the tournament product, which is really hot, I've heard some industry experts -- I don't know enough about it to be able to say either way, but some folks have said they thought the product was copyable. Could you talk about any patents that are outstanding related to that particular product and whether you would agree or disagree with that statement and why?

I can definitely address that. In terms of functionality, there are competitors of ours who have robust systems businesses and through those systems, you can turn an entire slot floor into tournament mode. You can take them out of revenue and create a tournament. The difference is, though, in those instances, you have to turn over your entire slot floor and make it a tournament.

Our product capability is very unique in that we can select individual banks to turn into tournament modes. No other product has that capability and we do have patent protection around that. So we give the operator a lot more flexibility and give them the opportunity to create a tournament in the middle of the week, for example, where they might have lower foot traffic, but not take their the whole floor out of revenue mode. So the competitive offerings are a different offering that are not nearly as attractive to the operator.

Okay. On your contract renewals, are you able to give us any kind of a color as to what the trend is with in terms of how much you're reimbursing back to the host casinos? Is it increasing or are you able to sort of hold the line on that? What are you seeing now?

Assuming based on the content of your question, you're asking about our payments contracts?

Yes, sir.

They have, as you see, as they translate into our results, we've been able to hold and in some cases, increase our pricing. That's a function of the very unique and robust solution offering that we provide that adds tremendous value in a way that isn't comparable in the market. So our pricing has been equal to or greater, for the most part, and you see that flowing into our results and you'll continue to see that.

Last question, should we still be thinking about QuikTicket as something on the horizon or is that off the radar at this point?

The functionality associated with that former product is still something that's alive and well in our offering, but to see that as a product, as I mentioned in the past, we're not going to go to market with a distinct product known as QuikTicket.

Are you changing the name? I'm not sure I understand your comment.

We continue to have and invest in that functionality. There are a lot of our clients who have that functionality as part of a solution set that they get from us, but we're not going to discretely sell QuikTicket as a product.

I see. Thank you so much for all the answers and nice work on the quarter.

Thank you.

It does appear that concludes our question and answer session. I'd like to turn things back to Mr. Todd Valli for any additional or closing remarks.

Thank you, again, for joining us today. Have a great afternoon.

Once again, ladies and gentlemen, that does conclude today's conference. Thank you for your participation.