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☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware						20-0723270
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
7250 S. Tenaya Way, Suite 100
Las Vegas
Nevada						89113
(Address of principal executive offices)						(Zip Code)

Title of each class			Trading symbol(s)			Name of each exchange on which registered
Common Stock, $0.001 par value			EVRI			New York Stock Exchange

Large accelerated filer

☒

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

☐

Emerging growth company

☐

As of October 30, 2020, there were 85,928,252 shares of the registrant’s $0.001 par value per share common stock outstanding.

Page

PART I: FINANCIAL INFORMATION

3

Item 1:

Financial Statements

3

Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2020 and 2019

3

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

5

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

6

Unaudited Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the three and nine months ended September 30, 2020 and 2019

8

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

51

Item 4:

Controls and Procedures

52

PART II: OTHER INFORMATION

53

Item 1:

Legal Proceedings

53

Item 1A:

Risk Factors

53

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

54

Item 3:

Defaults Upon Senior Securities

54

Item 4:

Mine Safety Disclosures

54

Item 5:

Other Information

54

Item 6:

Exhibits

55

Signatures

56

			Three Months Ended September 30,												Nine Months Ended September 30,
			2020						2019						2020						2019
Revenues
Games revenues
Gaming operations			$	46,968					$	48,515					$	106,513					$	138,377
Gaming equipment and systems			10,229						19,584						28,795						66,083
Gaming other			44						1,174						76						1,619
Games total revenues			57,241						69,273						135,384						206,079
FinTech revenues
Cash access services			33,979						43,152						80,986						123,680
Equipment			6,248						10,188						16,004						25,051
Information services and other			14,630						11,956						31,748						33,240
FinTech total revenues			54,857						65,296						128,738						181,971
Total revenues			112,098						134,569						264,122						388,050
Costs and expenses
Games cost of revenues(1)
Gaming operations			4,245						4,942						10,471						12,792
Gaming equipment and systems			5,730						11,126						16,625						37,087
Gaming other			—						1,117						456						1,464
Games total cost of revenues			9,975						17,185						27,552						51,343
FinTech cost of revenues(1)
Cash access services			1,161						4,112						5,227						9,777
Equipment			3,548						5,957						9,452						14,884
Information services and other			859						1,024						2,057						2,952
FinTech total cost of revenues			5,568						11,093						16,736						27,613
Operating expenses			34,927						37,631						115,428						111,446
Research and development			7,034						8,196						20,958						22,399
Depreciation			16,163						16,015						48,700						46,062
Amortization			18,693						17,156						57,312						51,143
Total costs and expenses			92,360						107,276						286,686						310,006
Operating income (loss)			19,738						27,293						(22,564)						78,044
Other expenses
Interest expense, net of interest income			18,905						19,297						56,226						60,130
Loss on extinguishment of debt			—						—						7,457						—
Total other expenses			18,905						19,297						63,683						60,130
Income (loss) before income tax			833						7,996						(86,247)						17,914
Income tax provision (benefit)			1,711						(1,319)						(3,434)						(2,747)
Net (loss) income			(878)						9,315						(82,813)						20,661
Foreign currency translation, net of tax			359						(658)						(1,295)						(189)
Comprehensive (loss) income			$	(519)					$	8,657					$	(84,108)					$	20,472

			Three Months Ended September 30,												Nine Months Ended September 30,
			2020						2019						2020						2019
(Loss) earnings per share
Basic			$	(0.01)					$	0.13					$	(0.97)					$	0.29
Diluted			$	(0.01)					$	0.12					$	(0.97)					$	0.27
Weighted average common shares outstanding
Basic			85,556						72,251						85,102						71,361
Diluted			85,556						79,125						85,102						77,854

See notes to unaudited condensed consolidated financial statements.

			At September 30,						At December 31,
			2020						2019
ASSETS
Current assets
Cash and cash equivalents			$	235,407					$	289,870
Settlement receivables			33,126						70,282
Trade and other receivables, net of allowances for credit losses of $3,754 and $5,786 at September 30, 2020 and December 31, 2019, respectively			75,997						87,910
Inventory			33,779						26,574
Prepaid expenses and other current assets			18,268						27,896
Total current assets			396,577						502,532
Non-current assets
Property and equipment, net			113,812						128,869
Goodwill			681,943						681,635
Other intangible assets, net			228,958						279,187
Other receivables, net			14,218						16,661
Other assets			22,696						20,339
Total non-current assets			1,061,627						1,126,691
Total assets			$	1,458,204					$	1,629,223
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities
Accounts payable and accrued expenses			165,217						173,103
Settlement liabilities			140,229						234,087
Current portion of long-term debt			1,250						—
Total current liabilities			306,696						407,190
Non-current liabilities
Long-term debt			1,127,191						1,108,078
Deferred tax liability, net			22,613						26,401
Other accrued expenses and liabilities			17,114						33,566
Total non-current liabilities			1,166,918						1,168,045
Total liabilities			1,473,614						1,575,235
Commitments and contingencies (Note 13)
Stockholders’ (deficit) equity
Convertible preferred stock, $0.001 par value, 50,000 shares authorized and no shares outstanding at September 30, 2020 and December 31, 2019, respectively			—						—
Common stock, $0.001 par value, 500,000 shares authorized and 111,079 and 85,906 shares issued and outstanding at September 30, 2020, respectively, and 109,493 and 84,497 shares issued and outstanding at December 31, 2019, respectively			111						109
Additional paid-in capital			460,967						445,162
Accumulated deficit			(295,753)						(212,940)
Accumulated other comprehensive loss			(2,114)						(819)
Treasury stock, at cost, 25,173 and 24,996 shares at September 30, 2020 and December 31, 2019, respectively			(178,621)						(177,524)
Total stockholders’ (deficit) equity			(15,410)						53,988
Total liabilities and stockholders’ (deficit) equity			$	1,458,204					$	1,629,223

			Nine Months Ended September 30,
			2020						2019
Cash flows from operating activities
Net (loss) income			$	(82,813)					$	20,661
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:
Depreciation			48,700						46,062
Amortization			57,312						51,143
Non-cash lease expense			3,615						3,060
Amortization of financing costs and discounts			3,111						2,697
Loss on sale or disposal of assets			111						1,375
Accretion of contract rights			5,345						6,539
Provision for credit losses			6,925						10,010
Deferred income taxes			(3,788)						(3,173)
Reserve for inventory obsolescence			1,810						1,830
Write-down of assets			11,281						843
Loss on extinguishment of debt			7,457						—
Stock-based compensation			10,108						6,141
Other non-cash items			456						—
Changes in operating assets and liabilities:
Settlement receivables			36,922						26,774
Trade and other receivables			6,682						(23,820)
Inventory			(10,614)						(3,341)
Other assets			(4,952)						(20,866)
Settlement liabilities			(93,622)						(34,573)
Other liabilities			(5,814)						29,002
Net cash (used in) provided by operating activities			(1,768)						120,364
Cash flows from investing activities
Capital expenditures			(52,428)						(81,642)
Acquisitions, net of cash acquired			(15,000)						(20,000)
Proceeds from sale of property and equipment			141						56
Placement fee agreements			(3,021)						(17,102)
Net cash used in investing activities			(70,308)						(118,688)
Cash flows from financing activities
Proceeds from incremental term loan			125,000						—
Repayments of incremental term loan			(313)						—
Proceeds from revolving credit facility			35,000						—
Repayments of revolving credit facility			(35,000)						—
Repayments of existing term loan			(13,500)						(25,700)
Repayments of unsecured notes			(89,619)						—
Fees associated with debt transactions			(11,128)						—
Proceeds from exercise of stock options			3,509						11,288
Treasury stock			(1,097)						(1,021)
Net cash provided by (used in) financing activities			12,852						(15,433)
Effect of exchange rates on cash and cash equivalents			(1,370)						(1,314)
Cash, cash equivalents and restricted cash
Net decrease for the period			(60,594)						(15,071)
Balance, beginning of the period			296,610						299,181
Balance, end of the period			$	236,016					284,110

			Nine Months Ended September 30,
			2020						2019
Supplemental cash disclosures
Cash paid for interest			$	45,331					$	52,077
Cash paid (refunded) for income tax, net			81						(69)
Supplemental non-cash disclosures
Accrued and unpaid capital expenditures			$	2,970					$	3,989
Accrued and unpaid placement fees added during the year			—						585
Accrued and unpaid liabilities for acquisitions added during the year			—						27,556
Transfer of leased gaming equipment to inventory			5,493						9,118

						Common Stock— Series A												Additional												Accumulated Other												Total Stockholders’
						Number of Shares						Amount						Paid-in Capital						Accumulated Deficit						Comprehensive Loss						Treasury Stock						(Deficit) Equity
Balance, January 1, 2019						95,100						$	95					$	298,929					$	(229,457)					$	(1,998)					$	(176,464)					$	(108,895)
Net income						—						—						—						5,860						—						—						5,860
Foreign currency translation						—						—						—						—						504						—						504
Stock-based compensation expense						—						—						1,773						—						—						—						1,773
Exercise of options						864						1						4,970						—						—						—						4,971
Restricted share vesting and withholding						2						—						—						—						—						(15)						(15)
Balance, March 31, 2019						95,966						$	96					$	305,672					$	(223,597)					$	(1,494)					$	(176,479)					$	(95,802)
Net income						—						—						—						5,486						—						—						5,486
Foreign currency translation						—						—						—						—						(35)						—						(35)
Stock-based compensation expense						—						—						2,387						—						—						—						2,387
Exercise of options						764						1						4,491						—						—						—						4,492
Restricted share vesting and withholding						275						—						—						—						—						(965)						(965)
Balance, June 30, 2019						97,005						$	97					$	312,550					$	(218,111)					$	(1,529)					$	(177,444)					$	(84,437)
Net income						—						—						—						9,315						—						—						9,315
Foreign currency translation						—						—						—						—						(658)						—						(658)
Stock-based compensation expense						—						—						1,981						—						—						—						1,981
Exercise of options						263						—						1,825						—						—						—						1,825
Restricted share vesting and withholding						11						—						—						—						—						(41)						(41)
Balance, September 30, 2019						97,279						$	97					$	316,356					$	(208,796)					$	(2,187)					$	(177,485)					$	(72,015)

Balance, January 1, 2020						109,493						$	109					$	445,162					$	(212,940)					$	(819)					$	(177,524)					$	53,988
Net loss						—						—						—						(13,454)						—						—						(13,454)
Foreign currency translation						—						—						—						—						(1,958)						—						(1,958)
Stock-based compensation expense						—						—						4,173						—						—						—						4,173
Exercise of options						298						1						1,641						—						—						—						1,642
Restricted share vesting and withholding						15						—						—						—						—						(42)						(42)
Balance, March 31, 2020						109,806						$	110					$	450,976					$	(226,394)					$	(2,777)					$	(177,566)					$	44,349
Net loss						—						—						—						(68,481)						—						—						(68,481)
Foreign currency translation						—						—						—						—						304						—						304
Stock-based compensation expense						—						—						4,638						—						—						—						4,638
Issuance of warrants						—						—						502						—						—						—						502
Exercise of options						149						1						472						—						—						—						473
Restricted share vesting and withholding						579						—						—						—						—						(547)						(547)
Balance, June 30, 2020						110,534						$	111					$	456,588					$	(294,875)					$	(2,473)					$	(178,113)					$	(18,762)
Net loss						—						—						—						(878)						—						—						(878)
Foreign currency translation						—						—						—						—						359						—						359
Stock-based compensation expense						—						—						2,985						—						—						—						2,985
Exercise of options						287						—						1,394						—						—						—						1,394
Restricted share vesting and withholding						258						—						—						—						—						(508)						(508)
Balance, September 30, 2020						111,079						$	111					$	460,967					$	(295,753)					$	(2,114)					$	(178,621)					$	(15,410)

In this filing, we refer to: (i) our unaudited condensed consolidated financial statements and notes thereto as our “Financial Statements,” (ii) our Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income as our “Statements of Operations,” and (iii) our Unaudited Condensed Consolidated Balance Sheets as our “Balance Sheets.”

Everi Holdings Inc. (“Everi Holdings,” or “Everi”) is a holding company, the assets of which are the issued and outstanding shares of capital stock of each of Everi Payments Inc. (“Everi FinTech” or “FinTech”) and Everi Games Holding Inc., which owns all of the issued and outstanding shares of capital stock of Everi Games Inc. (“Everi Games” or “Games”). Unless otherwise indicated, the terms the “Company,” “we,” “us,” and “our” refer to Everi Holdings together with its consolidated subsidiaries.

Everi is a leading supplier of imaginative entertainment and trusted technology solutions for the casino and digital gaming industry. Everi’s mission is to transform the casino floor through innovative gaming and financial technology and loyalty solutions. With a focus on both land-based and digital gaming operators and players, the Company develops entertaining games and gaming machines, gaming systems and services that facilitate memorable player experiences, and is a preeminent and comprehensive provider of financial products and services that offer convenient and secure cash and cashless-based financial transactions, self-service player loyalty tools and applications, and intelligence software and other intuitive solutions that improve casino operational efficiencies and fulfill regulatory compliance requirements.

Everi Holdings reports its results of operations based on two operating segments: Games and FinTech.

Everi Games provides gaming operators with gaming technology products and services, including: (i) gaming machines, primarily comprising Class II and Class III slot machines placed under participation or fixed-fee lease arrangements or sold to casino customers; (ii) providing and maintaining the central determinant systems for the video lottery terminals (“VLTs”) installed in the State of New York and similar technology in certain tribal jurisdictions; and (iii) business-to-business (“B2B”) and business-to-consumer (“B2C”) digital online gaming activities.

Everi FinTech provides gaming operators with financial technology products and services, including: (i) services and equipment that facilitate casino patrons’ self-service access to cash and cashless funding at gaming facilities via Automated Teller Machine (“ATM”) debit withdrawals (cash dispensing and cashless), credit card cash access transactions and point-of-sale (“POS”) debit card purchase and cash access transactions; (ii) check warranty services; (iii) self-service player loyalty enrollment and marketing equipment, including promotion management software and tools; (iv) software and services that improve credit decision making, automate cashier operations, and enhance patron marketing activities for gaming establishments; (v) equipment that provides cash access and other cash handling efficiency-related services; and (vi) compliance, audit, and data solutions.

Impact of Coronavirus Disease 2019 (“COVID-19”) Pandemic

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility in the financial markets, increased unemployment levels, caused temporary, and in certain cases, closures of many businesses. The gaming industry was not immune to these factors as our casino customers closed their gaming establishments, and as a result, our operations experienced significant disruptions. At the immediate onset of the COVID-19 pandemic, we were affected by various measures, including, but not limited to: the institution of social distancing and sheltering-in-place requirements in many states and communities, which significantly impacted demand for our products and services, and resulted in office closures, the furlough of a majority of our employees, the implementation of temporary base salary reductions for our employees and the implementation of a work-from-home policy.

During the second quarter of 2020, businesses began to adapt to social-distancing measures and various phases of reopening pursuant to government-mandated guidelines. As our gaming customers reopened, a number of their properties initially experienced an elevated level of activity as compared to what was originally anticipated. The revenues generated by this initial pent-up demand flattened to slightly below pre-COVID levels as more casinos reopened through the second quarter of 2020. Revenues then improved throughout the third quarter of 2020, though they still remained at pre-COVID levels. With a majority of our gaming customers reopening properties by the end of September 2020 and our results continuing to improve from the decreased activity rates in the second quarter, we have, among other measures: (i) returned nearly all of our furloughed employees to work on primarily a work-from-home basis; (ii) reinstated base compensation to pre-COVID levels for the employee base; (iii) reversed nearly all compensation reductions for both our Executives and Directors; and (iv) fully paid down the outstanding balance on our revolving line of credit.

It is unclear if and when customer volumes will return consistently to pre-COVID levels, or if in the future a resurgence of COVID-19 could result in the closure of casinos by federal, state, tribal and municipal governmental and regulatory agencies or by the casino operators themselves in an effort to contain the COVID-19 public health emergency or mitigate its impact; however, we continue to monitor the impacts of COVID-19 and we will make adjustments to our business accordingly to the extent the economic environment deteriorates.

In parallel, in connection with the uncertainty facing our customers as a result of COVID-19, we evaluated our business strategies in the second quarter of 2020 and implemented measures to reduce our ongoing operating costs. As a result of this evaluation, we permanently reduced our employee base, with most of the departures resulting from our furloughed employees, to accommodate the current and future operating needs of our customers and our business.

The impact of the COVID-19 pandemic also exacerbates the risks disclosed in our Annual Report, including, but not limited to: our ability to comply with the terms of our indebtedness, our ability to generate revenues, earn profits and maintain adequate liquidity, our ability to service existing and attract new customers, maintain our overall competitiveness in the market, the potential for significant fluctuations in demand for our services, overall trends in the gaming industry impacting our business, as well as potential volatility in our stock price, among other consequences such as cybersecurity exposure.

Results of Operations and Liquidity

To date, our operations have experienced revenue reductions and significant disruptions as a direct consequence of the circumstances surrounding the COVID-19 pandemic. This had a material adverse impact on our overall results of operations and financial condition for the current reporting period. As such, we have implemented a range of actions to maintain balance sheet flexibility and preserve liquidity as a result of the business disruption caused by the rapid nationwide spread of COVID-19, including, but not limited to:

•At the onset of COVID-19 pandemic:

•we completed the full draw down of our available capacity of $35.0 million under the Revolving Credit Facility in order to improve our liquidity and preserve financial flexibility in light of the uncertainty in our industry and the global economy as a result of COVID-19 (as discussed and defined in “Note 12 — Long-Term Debt”);

•we entered into a fourth amendment (the “Fourth Amendment”) to our existing Credit Agreement (as defined in “Note 12 — Long-Term Debt”), which among other things, amended our debt covenants to provide relief with respect to our senior secured leverage ratio (as discussed and defined in “Note 12 — Long-term Debt”);

•we also entered into a new credit agreement, which provides for a $125.0 million senior secured term loan, which is secured on a pari passu basis with the loans under our existing Credit Agreement. The entire amount was borrowed upon closing (as discussed and defined in “Note 12 — Long-term Debt”);

•our executive officers elected to accept significant reductions to their compensation during the pendency of the COVID-19 pandemic in order to better position the Company to withstand the challenging conditions that have caused global and domestic disruption in the current economic environment;

•our independent members of the Board of Directors of the Company elected to forgo their quarterly cash compensation for Board and related committee services;

•we furloughed a majority of our staff;

•we reduced the salaries of our employee-base from approximately 15% to 70%;

•we suspended certain employee benefits, such as providing a Company match on 401(k) contributions;

•we implemented a remote working environment;

•we canceled or delayed material capital expenditures;

•we suspended our share repurchases under our previously authorized repurchase program; and

•As of the end of the second quarter of 2020:

•we implemented a safe workplace return policy for those of our employees who return to our facilities;

•we returned most of our furloughed employees to work;

•we returned a portion of base compensation to our executives;

•we returned most base compensation to our employee-base;

•we returned a portion of cash compensation to our Board of Directors;

•we completed a reduction-in-force and incurred severance costs, among other expenses, of approximately $2.7 million; and

•we recorded a write-down of assets of approximately $11.0 million, of which $9.2 million and $1.8 million related to our Games and FinTech businesses, respectively, for certain of our trade receivables, inventory, prepaid expenses and other assets, fixed assets and other intangible assets that were not expected to be recoverable. This charge was reflected in Operating Expenses in our Statements of Operations. While we are unable to determine the nature, or amount, of further write-down charges, it is possible that we may record additional amounts to the extent we experience a decline in operations and financial performance in the future.

•we have returned base compensation to our executives and employee-base;

•we have returned cash compensation to our Board of Directors; and

•we fully repaid the $35.0 million Revolving Credit Facility in light of improved results of operations and liquidity.

Government Relief

In late March 2020, the U.S. government enacted the Coronavirus Aid Relief and Economic Security Act (the “CARES Act”) in response to the COVID-19 pandemic. We have taken advantage of the following components contained within the CARES Act:

•Employee Retention Payroll Tax Credit: We are applying a credit against payroll taxes for 50% of eligible employee wages paid or incurred from March 13, 2020 to December 31, 2020. This employee retention payroll tax credit would be provided for as much as $10,000 of qualifying wages for each eligible employee, including health benefits;

•Employer Social Security Tax Payment Deferral: We are deferring payment of the employer portion of the social security taxes due on remaining payments and from enactment of the CARES Act through December 31, 2020, with 50% due by December 31, 2021 and 50% due by December 31, 2022; and

•Alternative Minimum Tax (“AMT”) Credit Refund: We are applying for a refund of our AMT tax credits as the CARES Act affords us the ability to accelerate the recovery of such credits.

Basis of Presentation

Our unaudited condensed consolidated financial statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Some of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of results to be expected for the full fiscal year. The Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto included in the 2019 Annual Report.

We evaluate the composition of our revenues to maintain compliance with SEC Regulation S-X Section 210.5-3, which requires us to separately present certain categories of revenues that exceed the quantitative threshold on our Statements of Operations.

Revenue Recognition

Overview

We evaluate the recognition of revenue based on the criteria set forth in Accounting Standards Codification (“ASC”) 606 — Revenue from Contracts with Customers and ASC 842 — Leases, as appropriate. We recognize revenue upon transferring control of goods or services to our customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We enter into contracts with customers that include various performance obligations consisting of goods, services, or combinations of goods and services. Timing of the transfer of control varies based on the nature of the contract. We recognize revenue net of any sales and other taxes collected from customers, which are subsequently remitted to governmental authorities and are not included in revenues or operating expenses. We measure revenue based on the consideration specified in a contract with a customer and adjust it, as necessary.

We disaggregate revenues based on the nature and timing of the cash flows generated by such revenues as presented in “Note 18 — Segment Information.”

Contract Balances

Since our contracts may include multiple performance obligations, there is often a timing difference between cash collections and the satisfaction of such performance obligations and revenue recognition. Such arrangements are evaluated to determine whether contract assets and liabilities exist. We generally record contract assets when the timing of cash collections differs from when revenue is recognized due to contracts containing specific performance obligations that are required to be met prior to a customer being invoiced. We generally record contract liabilities when cash is collected in advance of us satisfying performance obligations, including those that are satisfied over a period of time. Balances of our contract assets and contract liabilities may fluctuate due to timing of cash collections.

						Nine Months Ended September 30,
						2020						2019
Contract assets(1)
Balance at January 1 — current						$	8,634					$	6,821
Balance at January 1 — non-current						6,774						4,489
Total						15,408						11,310
Balance at September 30 - current						8,945						8,037
Balance at September 30 - non-current						7,545						4,049
Total						16,490						12,086
Increase						$	1,082					$	776
Contract liabilities(2)
Balance at January 1 — current						$	28,510					$	14,661
Balance at January 1 — non-current						354						809
Total						28,864						15,470
Balance at September 30 - current						34,846						28,827
Balance at September 30 - non-current						32						798
Total						34,878						29,625
Increase						$	6,014					$	14,155

(1)  The current portion of contract assets is included within trade and other receivables, net, and the non-current portion is included within other receivables, net in our Balance Sheets.

(2)  The current portion of contract liabilities is included within accounts payable and accrued expenses, and the non-current portion is included within other accrued expenses and liabilities in our Balance Sheets.

We recognized approximately $19.3 million and $10.7 million in revenue that was included in the beginning contract liability balance during the nine months ended September 30, 2020 and 2019, respectively.

Games Revenues

Our products and services include electronic gaming devices, such as Native American Class II offerings and other electronic bingo products, Class III slot machine offerings, VLTs, B2B and B2C digital online gaming activities, accounting and central determinant systems, and other back office systems. We conduct our Games segment business based on results generated from the following major revenue streams: (i) Gaming Operations; (ii) Gaming Equipment and Systems; and (iii) Gaming Other.

We recognize our Gaming Operations revenue based on criteria set forth in ASC 842 or ASC 606, as applicable. The amount of lease revenue included in our Gaming Operations revenues and recognized under ASC 842 was approximately $35.9 million and $80.3 million for the three and nine months ended September 30, 2020, respectively and $36.6 million and $104.3 million for the three and nine months ended September 30, 2019, respectively.

FinTech Revenues

Our FinTech products and services include solutions that we offer to gaming establishments to provide their patrons with cash access-related services, self-service player loyalty and marketing tools, and other information and regulatory compliance-related products and services. These solutions include: access to cash and cashless funding at gaming facilities via debit withdrawals (cash dispensing and cashless), credit card cash access transactions, and POS debit card purchase and cash access transactions; check warranty services; self-service ATMs and fully integrated kiosks and maintenance services; self-service player loyalty enrollment and marketing equipment, including promotion management software and tools; compliance, audit, and data software; casino credit data and reporting services; marketing and promotional offering subscription-based services; and other ancillary offerings. We conduct our FinTech segment business based on results generated from the following major revenue streams: (i) Cash Access Services; (ii) Equipment; and (iii) Information Services and Other.

Equipment revenues are derived from the sale of our cash access and loyalty kiosks and related equipment and are accounted for under ASC 606, unless such transactions meet the definition of a sales type or direct financing lease, which are accounted for under ASC 842. We did not have any new cash access kiosk and related equipment sales contracts accounted for under ASC 842 during the three and nine months ended September 30, 2020. Sales contracts accounted for under ASC 842 were approximately $0.1 million and $2.7 million for the three and nine months ended September 30, 2019, respectively.

Restricted Cash

Our restricted cash primarily consists of: (i) funds held in connection with certain customer agreements; (ii) deposits held in connection with a sponsorship agreement; (iii) wide area progressive (“WAP”)-related restricted funds; and (iv) Internet-related cash access activities. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Balance Sheets that sum to the total of the same such amounts shown in the statement of cash flows for the nine months ended September 30, 2020 (in thousands).

			Classification on our Balance Sheets						At September 30, 2020						At December 31, 2019
Cash and cash equivalents			Cash and cash equivalents						$	235,407					$	289,870
Restricted cash - current			Prepaid expenses and other current assets						508						6,639
Restricted cash - non-current			Other assets						101						101
Total									$	236,016					$	296,610

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument.

The carrying amount of cash and cash equivalents, restricted cash, settlement receivables, short-term trade and other receivables, settlement liabilities, accounts payable, and accrued expenses approximate fair value due to the short-term maturities of these instruments. The fair value of the long-term trade and loans receivable is estimated by discounting expected future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and remaining maturities. The fair value of the long-term accounts payable is estimated by discounting the total obligation using the appropriate interest rate. As of September 30, 2020 and December 31, 2019, the fair value of trade and loans receivable approximated the carrying value due to contractual terms generally being slightly over 12 months. The fair value of our borrowings is estimated based on various inputs to determine a market price, such as: market demand and supply, size of tranche, maturity, and similar instruments trading in more active markets. The estimated fair value and outstanding balances of our borrowings are as follows (dollars in thousands):

			Level of Hierarchy						Fair Value						Outstanding Balance
September 30, 2020
Term loan			2						$	715,127					$	735,500
Incremental term loan			2						$	127,805					$	124,688
Senior unsecured notes			2						$	279,673					$	285,381
December 31, 2019
Term loan			2						$	753,494					$	749,000
Senior unsecured notes			2						$	401,738					$	375,000

Our borrowings were reported at fair value using Level 2 inputs based on quoted market prices for these securities.

Reclassification of Prior Year Balances

Reclassifications were made to the prior-period Financial Statements to conform to the current period presentation where applicable.

Recent Accounting Guidance

Recently Adopted Accounting Guidance

Standard			Description			Date of Adoption			Effect on Financial Statements
Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments			This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects lifetime expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.			January 1, 2020			This guidance primarily impacts our trade and other receivables, including those related to revenues from contracts with customers that may contain contract assets with respect to performance obligations that are satisfied for which the customers have not yet been invoiced. We adopted this guidance using the modified retrospective method. The adoption of ASC 326 did not have a material effect on our Financial Statements and did not result in a cumulative-effect adjustment. Refer to “Note 6 — Trade and Other Receivables” for further discussion.
ASU No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract			This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).			January 1, 2020			The adoption of this ASU did not have a material effect on our Financial Statements or on our disclosures.
ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting			This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”).			March 12, 2020			The adoption of this ASU did not have a material effect on our Financial Statements or on our disclosures.

Recent Accounting Guidance Not Yet Adopted

Standard			Description			Date of Planned Adoption			Effect on Financial Statements
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes			This ASU simplifies the accounting for income taxes by removing certain exceptions for investments, intraperiod allocations, and interim calculations, and adds guidance to reduce the complexity of applying Topic 740.			January 1, 2021			We are currently evaluating the impact of adopting this ASU on our Financial Statements and our disclosures; however, we do not expect the impact to be material.

We do not anticipate recently issued accounting guidance to have a significant impact on our Financial Statements as of September 30, 2020.

We determine if a contract is, or contains, a lease at the inception, or modification, of a contract based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control over the use of an asset is predicated upon the notion that a lessee has both the right to (i) obtain substantially all of the economic benefit from the use of the asset; and (ii) direct the use of the asset.

Operating lease right-of-use (“ROU”) assets and liabilities are recognized based on the present value of minimum lease payments over the expected lease term at commencement date. Lease expense is recognized on a straight-line basis over the expected lease term. Our lease arrangements have both lease and non-lease components, and we have elected the practical expedient to account for the lease and non-lease elements as a single lease.

Certain of our lease arrangements contain options to renew with terms that generally have the ability to extend the lease term to a range of approximately 1 to 10 years. The exercise of lease renewal options is generally at our sole discretion. The expected lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such option. The depreciable life of leased assets and leasehold improvements are limited by the expected term of such assets, unless there is a transfer of title or purchase option reasonably certain to be exercised.

Lessee

The Company leases real estate and vehicles under operating and finance leases, respectively. We enter into operating lease agreements for real estate purposes that generally consist of buildings for office space and warehouses for manufacturing purposes. Certain of our lease agreements consist of rental payments that are periodically adjusted for inflation. Our lease agreements do not contain material residual value guarantees or material restrictive covenants. Our lease agreements do not generally provide explicit rates of interest; therefore, we use our incremental collateralized borrowing rate, which is based on a fully collateralized and fully amortizing loan with a maturity date the same as the length of the lease that is based on the information available at the commencement date to determine the present value of lease payments. Leases with an expected term of 12 months or less (short-term) are not accounted for on our Balance Sheets.

Supplemental balance sheet information related to our operating leases is as follows (in thousands):

						Classification on our Balance Sheets						At September 30, 2020						At December 31, 2019
Assets
Operating lease ROU assets						Other assets, non-current						$	16,479					$	12,257
Finance lease ROU assets(2)						Other assets, non-current						$	522					$	—
Liabilities(1)
Current operating lease liabilities						Accounts payable and accrued expenses						$	5,402					$	5,824
Current finance lease liabilities						Accounts payable and accrued expenses						$	143					$	—
Non-current operating lease liabilities						Other accrued expenses and liabilities						$	15,491					$	9,628
Non-current finance lease liabilities						Other accrued expenses and liabilities						$	399					$	—

(1) The amount of operating lease liabilities recorded on our Balance Sheets upon the adoption of ASC 842 on January 1, 2019 was approximately $18.0 million.

(2) Presented net of accumulated depreciation.

Supplemental cash flow information related to leases is as follows (in thousands):

			Three Months Ended September 30,															Nine Months Ended September 30,
			2020						2019									2020						2019
Cash paid for:
Long- and short-term operating leases			$	2,076					$	1,869								$	6,325					$	5,602
Finance leases			$	39					$	—								$	44					$	—
Right-of-use assets obtained in exchange for lease obligations:
Operating leases(1)			$	7,594					$	—								$	8,454					$	14,595		(2)
Finance leases(1)			$	310					$	—								$	592					$	—

(1) The amounts are presented net of current year terminations and exclude amortization for the period.

(2) The amount includes approximately $13.7 million of operating lease ROU assets obtained in exchange for existing lease obligations due to the adoption of ASC 842 and $0.9 million of operating lease ROU assets obtained in exchange for new lease obligations entered into during the nine months ended September 30, 2019.

						At September 30, 2020						At December 31, 2019
Weighted Average Remaining Lease Term (in years):
Operating leases						4.21						2.96
Finance leases						3.62						—
Weighted Average Discount Rate:
Operating leases						5.25		%				5.25		%
Finance leases						3.85		%				—

Components of lease expense, which are included in operating expenses, are as follows (in thousands):

						Three Months Ended September 30,												Nine Months Ended September 30,
						2020						2019						2020						2019
Operating Lease Cost:
Operating lease cost						$	1,475					$	1,354					$	4,212					$	3,629
Variable lease cost						$	421					$	401					$	1,333					$	1,240
Finance Lease Cost:
Amortization of ROU assets						$	47					$	—					$	70					$	—
Interest expense on lease liabilities						$	5					$	—					$	8					$	—

Maturities of lease liabilities are summarized as follows as of September 30, 2020 (in thousands):

Year Ending December 31,						Operating Leases			Finance Leases
2020 (excluding the nine months ended September 30, 2020)						$	1,516		$	40
2021						6,181			161
2022						5,501			161
2023						3,946			161
2024						2,977			57
Thereafter						3,331			—
Total future minimum lease payments						$	23,452		$	580
Amount representing interest						2,559			38
Present value of future minimum lease payments						$	20,893		$	542
Current lease obligations						5,402			143
Long-term lease obligations						$	15,491		$	399

Lessor

We generate lease revenues primarily from our gaming operations activities, with a majority of our leases being month-to-month relationships. Under these arrangements, we retain ownership of the electronic gaming machines (“EGMs”) installed at customer facilities. We receive recurring revenues based on a percentage of the net win per day generated by the leased gaming equipment or a fixed daily fee. Such revenues are generated daily and are limited to the lesser of the net win per day generated by the leased gaming equipment or the fixed daily fee and the lease payments that have been collected from the lessee. Certain of our leases have terms and conditions with options for a lessee to purchase the underlying assets. The cost of property and equipment the Company is leasing to third-parties as of September 30, 2020 is approximately $203.2 million, which includes accumulated depreciation of approximately $124.7 million.

We did not have any new sales transactions that qualified for sales-type lease accounting treatment during the three and nine months ended September 30, 2020. We generated lease revenue from sales-type leases in the FinTech segment in the amount of approximately $0.1 million and $2.7 million for the three and nine months ended September 2019, respectively. Our interest income recognized in connection with sales-type leases executed in the prior periods is immaterial.

Supplemental balance sheet information related to our sales-type leases is as follows (in thousands):

						Classification on our Balance Sheets						At September 30, 2020						At December 31, 2019
Assets
Net investment in sales-type leases — current						Trade and other receivables, net						$	885					$	874
Net investment in sales-type leases — non-current						Other receivables						$	640					$	1,288

We had no material acquisitions for the three and nine months ended September 30, 2020.

Atrient, Inc.

On March 8, 2019, we acquired certain assets of Atrient, Inc. (“Atrient” or the “Seller”), a privately held company that develops and distributes hardware and software applications to gaming operators to enhance gaming patron loyalty, pursuant to an asset purchase agreement. Under the terms of the asset purchase agreement, we paid the Seller $20.0 million at the closing of the transaction and an additional $10.0 million during the nine months ended September 30, 2020 with another $10.0 million being due two years following the date of closing. The related liabilities were recorded at fair value on the acquisition date as part of the consideration transferred and were included in accounts payable and accrued expenses as of September 30, 2020 and accounts payable and accrued expenses and other accrued expenses and liabilities as of December 31, 2019.

In addition to the cash payments, we have recorded approximately $9.0 million in contingent consideration liabilities based upon the achievement of certain revenue targets with a maximum payout of up to $10.0 million. The related liabilities were recorded at fair value on the acquisition date as part of the consideration transferred and are remeasured each reporting period. The inputs used to measure the fair value of our liabilities are categorized as Level 3 in the fair value hierarchy. Contingent consideration liabilities as of September 30, 2020 and December 31, 2019 were approximately $9.8 million and $9.4 million, respectively, and were included in accounts payable and accrued expenses and other accrued expenses and liabilities in our Balance Sheets as of September 30, 2020 and December 31, 2019, respectively.

Micro Gaming Technologies, Inc.

On December 24, 2019, we acquired certain assets of Micro Gaming Technologies, Inc. (“MGT”), a privately held company that develops and distributes kiosks and software applications to gaming patrons to enhance patron loyalty, in an asset purchase agreement. The acquired assets consist of existing contracts with gaming operators, technology, and intellectual property intended to allow us to provide gaming operators with self-service patron loyalty functionality delivered through stand-alone kiosk equipment and a marketing platform that manages and delivers gaming operators marketing programs through these patron interfaces. This acquisition further expands our financial technology player loyalty offerings within our FinTech segment. Under the terms of the asset purchase agreement, we paid MGT $15.0 million at the closing of the transaction and per the original agreement, additional $5.0 million was due by April 1, 2020 with a final payment of $5.0 million due two years following the date of closing. In light of the COVID-19 pandemic, we entered into an amendment to the asset purchase agreement allowing us to remit the additional $5.0 million by July 1, 2020, which we paid in June 2020, with a final payment of $5.0 million due by July 1, 2021. The related liabilities were recorded at fair value on the acquisition date as part of the consideration transferred and were included in accounts payable and accrued expenses and other accrued expenses and liabilities as of September 30, 2020 and December 31, 2019 for the current and non-current portions, respectively. The total consideration for this acquisition was approximately $25.0 million. The acquisition did not have a significant impact on our results of operations or financial condition.

The estimates and assumptions incorporated in accounting for the transaction included the projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future cash flows. The estimated fair values of assets acquired and liabilities assumed and resulting goodwill are subject to adjustment as the Company finalizes its purchase price accounting. The significant items for which a final fair value has not been determined include, but are not limited to: the valuation and estimated useful lives of intangible assets, contract liabilities, including deferred and unearned revenues, and deferred income taxes. We do not expect our fair value determinations to materially change; however, there may be differences between the amounts recorded at the closing date of the transaction and the final fair value analysis, which we expect to complete no later than the fourth quarter of 2020.

The financial results included in our Statements of Operations for the three and nine months ended September 30, 2020 reflected revenues of approximately $3.1 million and $6.9 million, respectively, attributed to the MGT business. As a result of the integration of the acquired business into our existing player loyalty operations during the current period, presentation of net income contributed by MGT is impracticable. Acquisition-related costs incurred during the three and nine months ended September 30, 2020 were not material.

The unaudited pro forma financial data with respect to the revenue and earnings as if the MGT acquisition occurred on January 1, 2019 would reflect revenues of approximately $138.0 million and $399.0 million for the three and nine months ended September 30, 2019, respectively, and net income of approximately $9.2 million and $20.3 million for the three and nine months ended September 30, 2019, respectively.

We have commercial arrangements with third-party vendors to provide cash for certain of our ATMs. For the use of these funds, we pay a cash usage fee on either the average daily balance of funds utilized multiplied by a contractually defined cash usage rate or the amounts supplied multiplied by a contractually defined cash usage rate. These cash usage fees, reflected as interest expense within the Statements of Operations, were approximately $0.7 million and $2.5 million for the three and nine months ended September 30, 2020, respectively, and approximately $1.8 million and $5.5 million for the three and nine months ended September 30, 2019, respectively. We are exposed to interest rate risk to the extent that the applicable rates increase.

Under these agreements, the currency supplied by third-party vendors remains their sole property until the funds are dispensed. As these funds are not our assets, supplied cash is not reflected in our Balance Sheets. The outstanding balances of ATM cash utilized by us from these third parties were approximately $301.6 million and $292.6 million as of September 30, 2020 and December 31, 2019, respectively.

Our primary commercial arrangement, the Contract Cash Solutions Agreement, as amended, is with Wells Fargo, N.A. (“Wells Fargo”). Wells Fargo provides us with cash in the maximum amount of $300 million with the ability to increase the amount by $75 million over a five-day period for holidays, such as the period around New Year’s Day. The term of the agreement expires on June 30, 2022 and will automatically renew for additional one-year periods unless either party provides a 90-day written notice of its intent not to renew.

Trade and other receivables represent short-term credit granted to customers and long-term loans receivable in connection with our Games and FinTech equipment and compliance products. Trade and loans receivable generally do not require collateral. The balance of trade and loans receivable consists of outstanding balances owed to us by gaming establishments. Other receivables include income tax receivables and other miscellaneous receivables.

The balance of trade and other receivables consisted of the following (in thousands):

			At September 30,						At December 31,
			2020						2019
Trade and other receivables, net
Games trade and loans receivable			$	42,774					$	51,651
FinTech trade and loans receivable			20,989						23,723
Contract assets			16,490						15,408
Insurance settlement receivable(1)			7,650						7,650
Other receivables			787						3,977
Net investment in sales-type leases			1,525						2,162
Total trade and other receivables, net			90,215						104,571
Non-current portion of receivables
Games trade and loans receivable			(1,769)						(1,018)
FinTech trade and loans receivable			(4,264)						(7,581)
Contract assets			(7,545)						(6,774)
Net investment in sales-type leases			(640)						(1,288)
Total non-current portion of receivables			(14,218)						(16,661)
Total trade and other receivables, current portion			$	75,997					$	87,910

(1) Refer to “Note 13 — Commitments and Contingencies” for a discussion on the insurance settlement receivable.

Allowance for Credit Losses

As discussed in “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies,” we adopted ASC 326 effective January 1, 2020 using the modified retrospective approach such that the new guidance applies to the reporting periods following the adoption date with prior period presentation not being impacted. The adoption of ASC 326 did not have a material impact on our Financial Statements and did not result in a cumulative-effect adjustment as of the adoption date. Our operations were not significantly impacted, both for short- and long-term accounts receivable, due to the following:

•Our FinTech business acts as a merchant of record for settlement transactions for our cash access related customers wherein cash is held by the Company; therefore, we generally have the ability to withhold the necessary funds from customers to satisfy the outstanding receivables associated with equipment, information and other products and services.

•Our Games business sells EGMs to gaming establishments on a relatively short-term basis and collections are reasonably certain based on historical experience, financial stability of our customers, and lack of concentration of our receivables. The material portion of long-term loans receivable balance is fully collateralized, and therefore, does not represent a risk of credit loss. The risk of credit loss is further reduced by the fact that both segments generally share the same top customers such that sales made by the Games business to the existing FinTech customers are secured by our ability to withhold the necessary funds through the FinTech revenue arrangements.

We continually evaluate the collectability of outstanding balances and maintain an allowance for credit losses related to our trade and other receivables and notes receivable that have been determined to have a high risk of uncollectability, which represents our best estimates of the current expected credit losses to be incurred in the future. To derive our estimates, we analyze historical collection trends and changes in our customer payment patterns, current and expected conditions and market trends along with our operating forecasts, concentration, and creditworthiness when evaluating the adequacy of our allowance for credit losses. In addition, with respect to our check warranty receivables, we are exposed to risk for the losses associated with warranted items that cannot be collected from patrons issuing these items. We evaluate the collectability of the outstanding balances and establish a reserve for the face amount of the current expected credit losses related to these receivables. The provision for doubtful accounts receivable is included within operating expenses and the check warranty loss reserves are included within cash access services cost of revenues in the Statements of Operations.

The activity in our allowance for credit losses for the nine months ended September 30, 2020 and 2019 is as follows (in thousands):

			Nine Months Ended September 30,
			2020						2019
Beginning allowance for credit losses			$	(5,786)					$	(6,425)
Provision			(6,926)						(10,010)
Charge-offs and recoveries			8,958						10,723
Ending allowance for credit losses			$	(3,754)					$	(5,712)

Our inventory primarily consists of component parts as well as work-in-progress and finished goods. The cost of inventory includes cost of materials, labor, overhead and freight, and is accounted for using the first in, first out method. The inventory is stated at the lower of cost or net realizable value.

Inventory consisted of the following (in thousands): 

			At September 30,						At December 31,
			2020						2019
Inventory
Component parts, net of reserves of $3,426 and $2,007 at September 30, 2020 and December 31, 2019, respectively			$	24,175					$	24,864
Work-in-progress			1,481						94
Finished goods			8,123						1,616
Total inventory			$	33,779					$	26,574

Prepaid expenses and other assets include the balance of prepaid expenses, deposits, debt issuance costs on our Revolving Credit Facility (defined herein), restricted cash, operating lease ROU assets, and other assets. The current portion of these assets is included in prepaid expenses and other current assets and the non-current portion is included in other assets, both of which are contained within the Balance Sheets.

The balance of the current portion of prepaid expenses and other assets consisted of the following (in thousands):

			At September 30,						At December 31,
			2020						2019
Prepaid expenses and other current assets
Prepaid expenses			$	11,652					$	11,272
Restricted cash(1)			508						6,639
Deposits			4,221						8,501
Other			1,887						1,484
Total prepaid expenses and other current assets			$	18,268					$	27,896

(1) Refer to “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies” for discussion on the composition of the restricted cash balance.

The balance of the non-current portion of other assets consisted of the following (in thousands): 

			At September 30,						At December 31,
			2020						2019
Other assets
Operating lease ROU assets			$	16,479					$	12,257
Prepaid expenses and deposits			5,279						7,378
Debt issuance costs of revolving credit facility			315						460
Other			623						244
Total other assets			$	22,696					$	20,339

Property and equipment consists of the following (dollars in thousands): 

									At September 30, 2020																		At December 31, 2019
			Useful Life (Years)						Cost						Accumulated Depreciation						Net Book Value						Cost						Accumulated Depreciation						Net Book Value
Property and equipment
Rental pool - deployed			2-4						$	203,247					$	124,697					$	78,550					$	196,571					$	106,888					$	89,683
Rental pool - undeployed			2-4						27,805						20,342						7,463						31,901						22,970						8,931
FinTech equipment			3-5						31,991						21,826						10,165						29,947						22,114						7,833
Leasehold and building improvements			Lease Term						10,924						8,173						2,751						11,815						8,150						3,665
Machinery, office, and other equipment			2-5						45,458						30,575						14,883						48,860						30,103						18,757
Total									$	319,425					$	205,613					$	113,812					$	319,094					$	190,225					$	128,869

Depreciation expense related to property and equipment totaled approximately $16.2 million and $48.7 million for the three and nine months ended September 30, 2020, respectively. Depreciation expense related to property and equipment totaled approximately $16.0 million and $46.1 million for the three and nine months ended September 30, 2019, respectively.

10.          GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations. The balance of goodwill was approximately $681.9 million and $681.6 million at September 30, 2020 and December 31, 2019, respectively. We have the following reporting units: (i) Games; (ii) Cash Access Services; (iii) Kiosk Sales and Services; (iv) Central Credit Services; (v) Compliance Sales and Services; and (vi) Player Loyalty Sales and Services.

We test our goodwill for impairment on October 1 each year, or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We generally conduct the test by utilizing a “Step 1” analysis, which requires a comparison of the carrying amount of each reporting unit to its estimated fair value.

Interim Assessment for Impairment of Goodwill

The impact of COVID-19 and the closure of most casino properties during the second quarter of 2020 qualified as a triggering event and accordingly, we performed a goodwill impairment test during the second quarter of 2020, for which we utilized the “Step 1” approach that required a comparison of the carrying amount of each reporting unit to its estimated fair value.

To estimate the fair value of each reporting unit, we used a combination of an income valuation approach and a market valuation approach. The income valuation approach is based on a discounted cash flow (“DCF”) analysis. This method involves estimating the after-tax net cash flows attributable to a reporting unit and then discounting them to a present value using a risk-adjusted discount rate. Assumptions applied in the DCF to derive our after-tax net cash flows require the use of significant judgment, including, but not limited to: appropriate discount rates and terminal values, growth rates and the amount and timing of expected future cash flows. The projected cash flows are based on our most recent expectations. We believe our assumptions are consistent with the plans and estimates used to manage the underlying businesses. The discount rates, which are intended to reflect the risks inherent in future after-tax net cash flow projections used in the DCF are based on estimates of the weighted average cost of capital (the “WACC”) of market participants relative to each respective reporting unit. The market valuation approach considers comparable market data based on multiples of revenue or earnings before interest, taxes, depreciation and amortization (“EBITDA”). To the extent the carrying amount of a reporting unit is less than its estimated fair value, an impairment charge is recorded.

Other Intangible Assets

Other intangible assets consist of the following (dollars in thousands): 

									At September 30, 2020																		At December 31, 2019
			Useful Life (Years)						Cost						Accumulated Amortization						Net Book Value						Cost						Accumulated Amortization						Net Book Value
Other intangible assets
Contract rights under placement fee agreements			3-7						$	60,497					$	25,777					$	34,720					$	58,516					$	20,888					$	37,628
Customer contracts			3-14						71,975						53,174						18,801						71,975						49,477						22,498
Customer relationships			3-7						231,100						121,308						109,792						231,100						105,584						125,516
Developed technology and software			1-6						309,323						245,942						63,381						314,343						224,274						90,069
Patents, trademarks, and other			2-18						19,682						17,418						2,264						19,682						16,206						3,476
Total									$	692,577					$	463,619					$	228,958					$	695,616					$	416,429					$	279,187

Amortization expense related to other intangible assets was approximately $18.7 million and $57.3 million for the three and nine months ended September 30, 2020, respectively. Amortization expense related to other intangible assets was approximately $17.2 million and $51.1 million for the three and nine months ended September 30, 2019, respectively.

We paid approximately $2.1 million and $3.0 million in placement fees for the three and nine months ended September 30, 2020, respectively. The payment for the three and nine months ended September 30, 2020 did not include imputed interest. We paid approximately $5.6 million and $17.7 million in placement fees, including $0.1 million and $0.6 million of imputed interest, for the three and nine months ended September 30, 2019, respectively.

During the three months ended September 30, 2020, there were no material write-downs of intangible assets. During the nine months ended September 30, 2020, we recorded a full write-down of intangible assets of approximately $5.9 million, of which $5.5 million and $0.4 million, related to our Games and Fintech businesses, respectively, for certain of our internally developed and third-party software projects that were not expected to be pursued. This charge was reflected in Operating Expenses of our Statements of Operations.

The following table presents our accounts payable and accrued expenses (in thousands):

			At September 30,						At December 31,
			2020						2019
Accounts payable and accrued expenses
Trade accounts payable			$	58,857					$	78,627
Contract liabilities			34,846						28,510
Litigation accrual(1)			12,903						14,000
Contingent consideration and acquisition-related liabilities(2)			24,353						14,902
Accrued interest			6,419						1,347
Operating lease liabilities			5,402						5,824
Payroll and related expenses			14,526						18,058
Cash access processing and related expenses			2,065						5,511
Other			3,619						3,893
Accrued taxes			2,227						1,846
Placement fees			—						585
Total accounts payable and accrued expenses			$	165,217					$	173,103