Everi Holdings inc (EVRI) Q3 2021 Earnings Call Transcript

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Everi Holdings inc (EVRI -3.54%)
Q3 2021 Earnings Call
Nov 3, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to Everi Holdings Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. At this time, I'll turn the conference over to Bill Pfund, Vice President of Investor Relations. Bill, you may begin.

William H. Pfund -- Senior Vice President of Investor Relations

Thank you, operator. We welcome everyone to our call today. Let me begin by reminding you of our safe harbor disclaimer that covers today's call and webcast. Our call contains forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from those discussed on this call. These risks and uncertainties include, but are not limited to, those contained in our earnings release today and in other SEC filings, which are posted in the Investors section of our corporate website at everi.com. We do not intend and assume no obligation to update any forward-looking statements, which are made only as of today, November 3, 2021. You are also cautioned not to place undue reliance on forward-looking statements. Our call will also refer to certain non-GAAP financial measures, such as adjusted EBITDA, free cash flow and net cash position. A description of each non-GAAP measure and a reconciliation to the most directly comparable GAAP measure can be found in our earnings release and related 8-K as well as in the Investors section of our website. This call is being webcast and recorded. A link to the webcast and a replay of today's call can be found in the Investors section of our website. On our call today are Mike Rumbolz, Chairman and Chief Executive Officer; Randy Taylor, President and Chief Operating Officer; Mark Labay, Chief Financial Officer; Kate Lowenhar-Fisher, General Counsel; Dean Ehrlich, Games Business Leader; and Darren Simmons, our Fintech Business Leader. Now, I will turn the call over to Mike Rumbolz.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Thank you, Bill, and good morning, everyone. Thank you for joining us. Let me begin by sharing a few highlights from the third quarter. Our key financial results and our operating metrics were all up dramatically compared to 2020, and we increased substantially over the pre pandemic 2019 third quarter period. We achieved these impressive results through the successful execution of our growth strategies, which are focused on high-return investments in both new games and new technologies. On a consolidated basis, the best evidence of our progress is our free cash flow growth. We generated a record $56 million of free cash flow in the third quarter, with strong contributions coming from each of our business segments. This outstanding performance is clear proof of the strength and complementary nature of our games and fintech products. It's further supported by the strongly favorable feedback we received from our customers at this year's G2E trade show. At G2E, cashless was the hottest topic. While many would be competitors have been quick to release cashless related press releases, we have been focused on winning new customers and deploying our industry-leading solution. Our cashless solution, the CashClub wallet is now in 15 casinos across four jurisdictions in the United States and is presently in the process of going live at two additional properties, including another jurisdiction by the end of the year.

Our cashless technology places us squarely at the leading edge of an exciting new long-term growth opportunity in the casino industry. There's a simple reason why our wallet solution is outperforming the competition. Our competitive advantage draws its strength from our many decades of experience and expertise in funding patron initiated transactions across the gaming industry. We also benefit from our considerable prior investment in developing an integrated portfolio of efficiency creating products for casinos. Our CashClub wallet leverages the existing infrastructure of our digital neighborhood of products, resulting in an easy-to-use, convenient experience for casino guests that also enables significant cost efficiencies in the back of house operations of the casino. Now G2E, we also showcased several new patron loyalty and RegTech related products. These new applications expand our existing portfolio of integrated products, while creating additional new cost-saving opportunities for casino operators. Turning now to our games business. We currently have more depth in our product selection than ever before, and that breadth and diversity of products was also on display at G2E. Across the spectrum of mechanical and video games from standard units to wide area progressive and our nonwide area progressive premium units, our booth featured an array of new products.

The games we presented have all been either recently approved and introduced to the market or are expected to be available no later than the first half of 2022. Our newest cabinet, the Player Classic signature was very well received by customers. This cabinet incorporates updated technology and yet retains that Classic Player appeal that has driven our tremendous success in mechanical real products for over 10 years. Importantly, in addition to the introduction of this broad selection of new games at G2E, we have a significant quantity of yet to be released newly developed content. In fact, our new product pipeline is more robust than ever before, and we have many more exciting games and cabinets to bring to market in 2022 and beyond. Each cabinet that we commercialize is supported by a strong pipeline of original content that will be available for distribution in both Class II and in Class III markets. Now in addition, this vigorous development effort also helps us support the continued growth of our iGaming product set. So as a result of all of our operating progress, a successful refinancing of our debt a few months ago and our substantial free cash flow, Everi has never been in better financial shape. And of course, that brings up the question, what will we do with our free cash flow? Our focus is first and foremost on internal organic growth opportunities.

We will continue to invest in internal product development initiatives in both our games and fintech businesses. These initiatives are aimed at driving further growth and market share gains through product enhancements as well as extensions and expansions of our product portfolio. We will continue to leverage our distribution channel and our digital neighborhood, layering in new products that drive growth and strengthen the ongoing relationship between Everi and our customers. We're also going to continue to emphasize high-return capital investments that expand our gaming operations installed base. This includes growing our placements of these high-value recurring revenue units and securing those placements for extended periods of time. New additions to our installed base provide a very attractive and quick return on capital when done properly as we have demonstrated for many years.

And we'll also continue to support operations that are in a very early phase of rapid growth, such as iGaming and as you can imagine, cashless and digital fintech products. Beyond internal opportunities, we will also look externally as we continue to evaluate bolt-on or tuck-in acquisitions. Generally, we're focused on products, technologies or talent that complement our core businesses. Following the path of our successful track record, we look for newer products and technologies in the casino universe that may not be getting appropriate attention. These include opportunities that we believe we are uniquely positioned to profitably scale and which will drive rapid revenue growth with minimal risk. We are also always looking for new geographies, regions that we're not currently in or where we may not be as heavily penetrated as we would like. Now finally, if we do not find worthwhile external growth opportunities or organic opportunities, we will, of course, assess the opportunity to invest in ourselves. If the appropriate decision is to repurchase every shares, then we will adopt a program to return capital to our shareholders. Now let me turn the call over to Randy to provide a bit more insight into our operational successes.

Randy L. Taylor -- President & Chief Operating Officer

Thank you, Mike, and hello, everyone. We hope you're doing well. A key driver of our continuing growth is our core high-value recurring revenue operations, which accounted for 78% of the third quarter revenue and 77% of year-to-date revenue. These are high-margin operations that demonstrate consistent growth. In the third quarter, our recurring revenues grew 42% over the third quarter of 2020 and 31% over the 2019 third quarter. Within our games segment, it is gaming operations that provide strong recurring performance. Total gaming operations revenue increased 52% year-over-year and is up 48% over the 2019 third quarter. Our total installed base continued to grow as we added 170 units on a quarterly sequential basis. At quarter end, our total installed base was up 8% over a year ago despite the 238 units that were converted from lease to sale in the quarter, as we highlighted on the second quarter call. The growth of premium units is a significant driver of our performance. This was the 13th consecutive quarter of sequential growth in our premium unit installed base. This led to daily win per unit increasing 26% over the then record level in the pre-pandemic 2019 third quarter. Placements of new premium games, such as Cashnado on Flex Fusion, MonsterVerse on DCX and Gold Standard in Cash Machine Jackpots on our Skyline Revolve cabinet were key drivers of the incremental net growth.

Continued strong performance of our older units was another key element in both the growth of the base contributor to our strong gaming operations growth was the 90% year-over-year increase in digital gaming revenue. And subsequent to quarter end, our online content went live in both Ontario and Connecticut. In Connecticut, we supported both Mohegan Sun and Foxwoods with content as their iGaming sites launched. Alongside our success in Gaming operations, product sales revenue more than doubled from the 2020 third quarter and was up 24% over the 2019 third quarter. The increase was driven largely by replacement sales. Excluding the variable quarterly impact from unit sales for new casino openings and expansions, unit shipments for replacements have increased sequentially in each quarter in 2021, and we believe that trend will continue in the fourth quarter and beyond as we are now targeting a 15% quarterly ship share. Turning to our Fintech business. Record total segment revenues increased 32% year-over-year and are up 11% over the 2019 third quarter. Our financial access services revenues increased 8% over the 2019 third quarter, driven primarily by higher same-store transactional activity, which led to a 13% increase in total transactions completed. Incremental revenue from new customers added during the last two years also contributed to higher revenue growth, partially offset by a few customer sites that are still closed or operating with limitations as well as reduced demand from an almost nonexistent international player in the U.S. We're hopeful that international travel to U.S. gaming markets will improve once travel restrictions lift.

Our software and other revenue, which includes loyalty software sales and subscriptions, our RegTech software for regulatory compliance, our unique gaming industry credit Bureau and equipment maintenance services grew 42% over the 2019 third quarter. The strong demand for our loyalty products has been a key contributor to this growth as we have increased the number of customer properties by more than 40% since the end of 2019 and instituted a recurring revenue subscription service. Like financial access services, our software services have a large recurring revenue component. The recurring revenue portion represented 77% of software and other revenues in the third quarter this year and last. Revenue from hardware sales although below pre-pandemic 2019 third quarter levels grew 45% year-over-year. We have expanded our portfolio of hardware offerings and we expect ongoing growth in the future. Now, I would like to turn the call over to Mark to share his perspective on our financial position, free cash flow and outlook. Mark?

Dean A. Ehrlich -- Executive Vice President & Games Business Leader

Thanks, Randy. I'd like to start by expanding on our message of consistent execution and ongoing growth. Our focus on execution has enabled us to consistently strengthen our operating performance these past several years. This has led to a dramatic rise in our free cash flow. For the first nine months of this year, which includes our record third quarter total, our total free cash flow is more than the total of the last five years combined. We largely deployed this free cash flow to significantly delever our balance sheet. And with the high proportion of high-margin recurring revenue we generate, we have never been in a more solid financial position. As a result of our enhanced free cash flow profile, the very significant portion of our recurring revenue streams, and our expectation for continued adjusted EBITDA growth, we are very comfortable with maintaining our long-term total net leverage target at 2.5 times to 3.0 times adjusted EBITDA, which is the levels we are at today. We believe this target leverage level provides the flexibility for us to pursue the high return, accretive growth opportunities that Mike discussed, whether they are organic or externally generated. Looking to the fourth quarter and our expected free cash flow, we have recently taken several opportunities to secure large portions of our installed base and provide for future growth of the high-value recurring revenue of our gaming operations business.

First, we entered into a new agreement, which replaces and extends our former agreement with a major tribal customer. This agreement locks in our current installed footprint of more than 4,500 units for a six year term for an incremental investment of $28.9 million. This amount was paid in the fourth quarter. Second, last week, we announced a five year deal with the Delaware lottery to place nearly 500 units at casinos throughout the state. We expect to begin installations later this quarter, and we expect to install more than half of the plan units by year-end. The remainder of these units are expected to be installed in the first quarter of 2022. Finally, we expect to complete the installation of several hundred lease gaming machines at a new tribal casino in Oklahoma that we previously discussed last quarter. As a reminder, this will include a placement fee of approximately $3 million and will secure our unit placements for a period of almost seven years. Collectively, these deals secure long-term placements of existing and new high-value recurring revenue for five or more years. With the cost of these units, the placement fees to the travel customers and our ongoing normal expected quarterly growth in our installed base, we expect a sequential increase in capital expenditures and placement fees in the fourth quarter. As a reminder, our free cash flow in the fourth quarter will benefit from a change in the timing of the semiannual interest payments on our unsecured notes that were issued on July 15.

The semiannual interest payments for the new notes will occur in January and July as compared to the previous payments that were made in June and December. Thus, our comparable former December interest payment will now be made in January. As a result of these items, including the impact of the expected $32 million in placement fees, we believe we still will exceed the strong free cash flow generated in last year's fourth quarter. Let me now turn to the other elements of our raised guidance from this morning. For the full year, we now expect net income to be in a range of $98 million to $100 million and adjusted EBITDA to be in a range of $342 million to $346 million. Let me share some of the variables that shape our view. As we continue to execute on our ongoing growth strategy, and we had the incremental units expected from the expansions in Delaware and Oklahoma. We believe the total installed base at year-end could approach or even exceed 17,000 units. I would note that while most of the is targeted for both the new Delaware and Oklahoma properties will be standard units, there will also be a component of premium units at both locations.

We expect our Q4 daily win per unit to exceed the daily win per unit we reported in the fourth quarter of 2019 and 2020. And we also expect this total to be above $40 for the third consecutive quarter. Our operating expenses are expected to increase in the fourth quarter, primarily reflecting the costs associated with G2E, which was not held last year. Additionally, we expect to see a modest rise in R&D expense, reflecting our increased focus on internal new product development, along with a slightly higher payroll, which reflects our growth in the current tight labor market. Although not factored into our guidance, as noted in the press release this morning and as a result of our strong operating performance of the business, there exists a high probability that we may reverse some portion of the company's deferred tax asset valuation allowances during the fourth quarter. To the extent this materializes, a significant noncash income tax benefit may be realized. This would likely result in a substantial quarterly and full year income tax benefit and increase the reported net income for the company in the quarter, well above the guidance levels. While this may have a substantial impact on our reported tax benefit and net income for book purposes, it will not affect our cash taxes paid or free cash flow. Regarding unit sales, as Randy mentioned, we expect to see an increase in total units sold. Similar to recent quarters, we believe we are continuing to achieve gains in ship share for our unit sales. And on that positive note, I'll now turn the call over to the operator for questions.

Questions and Answers:

Operator

[Operator Instructions] Thank you. And our first question is coming from the line of David Bain with B. Riley. Please go ahead with your question.

David Brian Bain -- B. Riley Securities, Inc.

Great. Congratulations once again on a really good execution and outlook. I guess my first question will be on fintech. Do you have any updated thoughts on digital fintech adoption to the end casino customer in terms of penetration of current rewards members to usage ramp for those patients that are digitally connected at this point?

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Thank you David. Let me ask Darren to speak to that. I'm not sure that we're in a position yet, though, so I can lead with the disappointment that we're not really capturing all of that information to a degree that we could start sharing it at this point in time, but we expect to have KPIs on that soon. But Darren, is there any color you want to add to that?

Darren D. A. Simmons -- Executive Vice President & FinTech Business Leader

Yes. Look, I think our customers are obviously targeting their existing players' club. There's somewhat low-hanging fruit right to go after them and incentivize them. I would say, again, as I've indicated previously, we're very happy with -- call it, the growth trajectory, we keep seeing volumes grow week-over-week, the number of patients using it across our enterprise grows week-over-week. And again, I think as we penetrate more properties, I think the KPIs will be clear as we get into early 2022. But I would say very encouraging. I think our customer base is very happy with the trajectory. And now it's just a matter of coming up with those creative ways that we continue the incentive. And I think, again, tied in with our loyalty will obviously be important from a long-term standpoint to have that growth continue.

David Brian Bain -- B. Riley Securities, Inc.

Okay great. And then on the game side, subsequent to G2E now at the fiscal year-end for certain tribes, do you give us any more color as to your view for '22 industry replacement levels relative to any other year you want to look to and also, any reason to believe commercial casinos would differ greatly from a directional standpoint from the tribes and what they're, sort of indicating?

Dean A. Ehrlich -- Executive Vice President & Games Business Leader

David, this is Dean. I think for all of our key takeaways that we've been hearing from customers, we think it's going to be slightly better next year than what we're currently seeing on both fronts. But there's not really much more additional color I can give than that.

David Brian Bain -- B. Riley Securities, Inc.

Okay. Alright. Fair enough. Thanks so much.

Dean A. Ehrlich -- Executive Vice President & Games Business Leader

Thanks David.

Operator

Our next question is coming from the line of Barry Jonas with Truist Securities. Please go ahead with your question.

Barry Jonathan Jonas -- Truist Securities, Inc.

Alright great thanks. Great to hear the 15% games target. I'm just wondering if you can give any more color on how you see that composition playing out. Maybe slicing it mechanical versus video, new openings versus replacements or any other ways.

Dean A. Ehrlich -- Executive Vice President & Games Business Leader

Hey, Barry, this is Dean again. You know what, the way I see it is the 15% is a further out target. We're around the 10% mark right now. It took us a few years to get there. My opinion, with our product portfolio, I think it's a quicker time frame to get to the next target that we set, and it's going to be both. We have a great performing mechanical product on our existing player classic cabinet, but we have a new one coming out. That's going to hit the market at end of Q1, beginning of Q2 next year. In addition to a great product portfolio of flex product on our video for sale cabinet. Can I say it's going to be 50-50? I'm not absolutely sure on that. Obviously, it's going to depend on customer purchasing behaviors. But what I'm targeting is an equal placement of both. But we know the pie is bigger on the video side of it than the high denomination mechanical piece. So we are heavily, I would say, placing additional new themes, even much more so in flex than we would even be doing in a high denomination mechanical. If you were to sum up all cabinet support versus newer cabinets of products.

Barry Jonathan Jonas -- Truist Securities, Inc.

Got it. Great. And then just as a follow-up question, can you give any color on how supply chain issues are impacting Everi or just the industry at large? Thanks.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Randy?

Randy L. Taylor -- President & Chief Operating Officer

Yes. Barry, it's Randy. To date, we've really not been impacted in any material way from supply chain. It's there, I think our team is doing a great job. I would say, finding additional parts, supplies, but really not had a material slowdown. To some extent, some of the stuff you hear in the media on chips for automobiles are not the same thing that we use in our product. But it's a challenge. But I would say, to-date, we're not having anything material, but we are having the challenge out there and we're continuing to work through it. And I'm really pleased at how well our team has been able to manage this.

Barry Jonathan Jonas -- Truist Securities, Inc.

And I guess just on the flip side, are you hearing any competitors having issues, which maybe present opportunities for you given your situation?

Randy L. Taylor -- President & Chief Operating Officer

Yes. I don't think I'm going to talk about the competitors, but I would say, look, I would say, we know that we're doing a good job on our side. But I'm not going to speak to how the competitors are handling it at this point.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Very honestly, if we stay focused on ourselves and just handle what's in front of us to do the best that we can do. I'll let the others worry about themselves. And I just know if we could keep the lead times why where we need them to be, then we will be very successful.

Barry Jonathan Jonas -- Truist Securities, Inc.

Perfect, I appreciate all the callers. Thanks guys.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Thanks Barry.

Operator

Our next question is from the line of George Sutton with Craig-Hallum. Please go ahead with your question.

George Frederick Sutton -- Craig-Hallum Capital Group

Thank you. First, Randy, I did not know you had 15% in your vocabulary. So I was excited to hear that.

Randy L. Taylor -- President & Chief Operating Officer

That was Dean, just so you know. So you know that would be his vocabulary not mine, but that's right. But I'm all for it now that we get it out there.

George Frederick Sutton -- Craig-Hallum Capital Group

I'll read back through the prepared comments. So I wanted to make sure I understood your investment goals. And what -- you mentioned products, you mentioned technology, you mentioned talent. Can you just go through those areas and talk about? What are you looking for, for these investment returns, just so we have some perspective?

Randy L. Taylor -- President & Chief Operating Officer

Sure. Part of it, I think, is captured well in our most recent acquisition, metered imaging, talented people and a great product that just was having a hard time scaling and as many products do. It's a large industry. It's coast-to-coast, it's border-to-border. It's -- Canada and the U.S. is a very broad market. And if you're a small operator with a new product trying to introduce it to the market and get traction, it's difficult, and we can provide significant scale to those kinds of products. In addition, people that are coming up with great ideas, they're extremely talented, but perhaps don't have the wherewithal themselves to bring a product even to fruition or the kinds of people that we're most interested in talking to. And then there's products that are out there that are doing well, that we think would do even better if they were included as part of our digital neighborhood, and I'd refer you to Atrient and MGT as acquisitions that fit well into that category.

So if we're looking externally, that's what we're looking for. Internally, we're looking at very similar kinds of products that we see coming sometimes to market or sometimes being talked about in the marketplace and getting those integrated into our network and into our neighborhood and bringing those back out. So it really is both internal and external, and they have a lot of the same characteristics. Clearly, it's easier to look at one that's already in the market than it is to create one whole flow [phonetic]. But we look at both of those equally.

George Frederick Sutton -- Craig-Hallum Capital Group

Mike, I wonder if you could put a timeframe on this investment concept. And I wonder, if we'll oddly look at an announced buyback in the future as the recognition that you weren't able to continue to make investments. I just want to make sure I fully understood that.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Yes, George. I don't envision you -- I don't think you should expect to see some, sort of, buyback announcements near term. I mean, if we were to put a program in place, it doesn't mean that we would activate it. I've got a very good feeling about a variety of targets that we're looking at right now out in the marketplace. Hard to put a time line on because you never know what due diligence is going to produce? You don't know whether you'll come to a stalemate around pricing or terms, but we have several things in the pipeline currently. We have a lot of targets that are available for us to start working as soon as we get through the ones that are on our plate today. So I would expect that you'll see, as we did with the loyalty and our RegTech acquisitions. You'll see them come in, sort of, a usual cadence. I can't tell you there will two or three a year, if it will be one or two year, but you should expect regular cadence on that.

George Frederick Sutton -- Craig-Hallum Capital Group

Financial flexibility is a great thing. Congratulation.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Yes, it is.

Operator

Our next question is from the line of John Davis with Raymond James. Please go ahead with your question.

Jeffrey Austin Stantial -- Stifel, Nicolaus & Company

Hey. Good morning guys. First, maybe one for Mark. Just wanted to touch on the margin. I think guide implies full year EBITDA margins are roughly 53% this year. I think if you go back pre-pandemic, those are running in the high 40s. Just as we think about going forward, is 53% at a sustainable level? Do you think they're elevated this year? Just -- I think you said that there would be structurally higher margins on the other side of the pandemic, just trying to understand kind of, the magnitude and how we should think about it?

Dean A. Ehrlich -- Executive Vice President & Games Business Leader

Yes, John, I think, really, what you're looking at is a little bit of a mix of revenue. I don't want to be challenged, but where we are today. Obviously, the really high-margin recurring revenue has come back the most quick endemic where equipment sales have been a little bit lagging just as customers have been a little more cautious with their capital budgets. So what that's resulted in is less revenues from the lower-margin products, which are still decent margin products, but you don't have those equipment sales margins. And that's why you're seeing these above 50% kind of, margin levels. I think as we move forward. And again, we're working on our budgets and plans for '22 and beyond. Now I think you'll see a gradual settling down of that number back more close to the historic levels. And that's really just because we think the mix, kind of, mix will be growing in both the recurring revenue and the equipment sales as we move forward in time. So I think you, kind of, start reverting back closer to those kind of, margin levels as opposed to staying at these 53%, 54% levels that we've been seeing this year.

Jeffrey Austin Stantial -- Stifel, Nicolaus & Company

Okay, that makes sense. And then maybe Mike wanted to talk a little bit about the shift for partnership. I think as we've thought about cashless, it was part of the [Indecipherable] beyond gaming floor for into some of the restaurants and retail. But also ship four [phonetic] has a partnership with MGM on the sports betting side. So just want to understand from your perspective, what the opportunities are there, is this more about expansion into the restaurants and retail or is there also, kind of, a sports book angle here? Just any further detail on that partnership would be awesome.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Sure. It's an alternative Darren given maybe even deeper color on that, John. But yes, absolutely, we're looking at the retail and being able to address all of the sales opportunities that exist inside these very large casino operations. So retail is the principle going forward, the clearly, getting into the sports wagering side in any of our customers is something that wallet [phonetic] is capable of doing and maybe something that our customers ultimately wanted to do. But right now, we're focused -- we shift for on the retail side. Darren, do you want to talk to that?

Darren D. A. Simmons -- Executive Vice President & FinTech Business Leader

Yes, that's right. I mean I think, again, we've indicated, sort of, our overall strategy is, obviously, extending wallet beyond the gaming floor, and we've done that with a couple of our customers now with another integration with another provider. So the ship four [phonetic] integration really gets us extended into -- deeper into the non-gaming retail side. And as Mike mentioned, look, we're obviously looking forward to enabling integration of a wallet to expand not only beyond the brick-and-mortar and retail, but obviously, our gaming and sports. So that's all part of the strategy, all part of the road map, and I expect that, that's what's going to play out here as we move forward.

Jeffrey Austin Stantial -- Stifel, Nicolaus & Company

Okay [Indecipherable]. Thanks.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Thanks Jeff.

Operator

[Operator Instructions] Our next question is coming from the line of Jeff Stantial with Stifel. Please go ahead with your question.

Scott Andrew Gruber -- Citigroup Inc.

Hey good morning everyone. Thanks for taking my questions. I wanted to start on guidance for a second. You talked to daily yields in the game of business saying north of $40 per day that in Q4, while also acknowledging the potential for the consumer to fade a bit sequentially. If you look out to 2022, and assume for argument to think that regional GGR [phonetic] starts to approximate 2019 levels rather than the low double-digit growth rate that has been running at for the past couple of quarters here. Is $40 per day, plus or mine is still the right way to think about your game ops business, given where the premium mix stands at this point, even with a normalized consumer? Just trying to get a sense for what's the mix versus what's the healthy consumer when contemplating out period?

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Yes, you're touching on the right levers. Let me have Dean give you some color on that.

Dean A. Ehrlich -- Executive Vice President & Games Business Leader

I think we're very comfortable with $40 a day north. Just looking at the trajectory and seeing all that, the mix of product between our premium within our entire installed base, I would say, I'm very comfortable with $40 per day.

Scott Andrew Gruber -- Citigroup Inc.

Okay, perfect. That really helped. Dean, switching gears over to the equipment sale. You know, the past December does tend to see some positive seasonality on shipments in the commercial operators can historically try to use up their budget ahead of the fiscal year end from time-to-time. Are you expecting potential for similar trend this year, obviously, most of the commercial guys are pretty flush with cash, it seems logical that the swap floor would be one area look at some of that budget. But just curious for your thoughts there. And would you say this factors in guidance are largely incremental?

Dean A. Ehrlich -- Executive Vice President & Games Business Leader

Yes, why don't you go ahead and discuss that, Mark. Yes. You follow that carefully. Yes. I do look at the -- talk to sales guys quite regularly and talk about their views on what they're seeing on the equipment side and where we are, again, as I mentioned to John on the comments or the question he asked that equipment has been challenged throughout the year. We've been seeing sequential growth in our game sales. So for replacement, kind of, sales. So we've been seeing a slight pickup as we progress throughout the year. The year seems to have gotten better and better for the operators. And certainly, what we're seeing right now, as we enter Q4, part of our increase in our guidance is our comfort that we can expect those trends to continue into the fourth quarter. We haven't seen much in the way of change in the financial access volumes as we've entered through October and started November. And we see some increased demand on the game sales side of things. So we think there's an opportunity, clearly, for customers if they have last Q4 capital and they're ending their fiscal year to see a little bit of upside in terms of where unit sales are. But right now, we believe we continue to trend up seeing growth sequentially between Q3 and Q4 that we've been experiencing.

Scott Andrew Gruber -- Citigroup Inc.

Okay, perfect. That's all from me. All very helpful. I appreciate [indecipherable] everyone.

Dean A. Ehrlich -- Executive Vice President & Games Business Leader

Thanks Scott.

Operator

Our next question comes from the line of Chad Beynon with Macquarie. Please go ahead with your question.

Chad C. Beynon -- Macquarie Research

Hi, good morning. Thanks for taking my question. Wanted to start with the 4,600 unit tribal operator renewal or agreement that you announced. Should we expect within those units that there will be opportunities to upgrade and, kind of, you'll manage some of the machines that you currently have out on the floor or do we expect that little is done. And then as an add-on to that question, given your library of new games and cabinets, could there actually be more opportunities in markets like Oklahoma, given your balance sheet, given your games to do incremental deals? Thanks.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Yes. I think, Chad, it's a little bit of yes and yes. So we always yield manage with the best product possible within all our -- not just only our large installed base, but all our customers. And that one, we have a laser focus on making sure that we -- but I would say, yield optimized with our entire product portfolio within that particular account. And then to answer your other question, obviously, new games and cabinets give greater opportunities, depending on the performance as these relieved, and we have a very high level of confidence that our success rate continues to move up. And we see those trends, and we don't think anything will revert the other direction at all. So I'm very confident that, that will help us obtain larger shift share percentages that we've been talking about.

Chad C. Beynon -- Macquarie Research

Great. Thanks. And then separately, on the digital front, the iGaming room on the gaming side, another quarter with revenues over $3.5 million. We haven't seen much on the legislation front, but you mentioned opportunities that you're just getting into in Ontario and Connecticut that should help build this sequentially. Can you talk about anything in terms of gains that are working or you expected market share. Just kind of, how to think about this business until new legislation is approved domestically? Thanks.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

So Chad, the way I would look at it is, we're really in our early stages, definitely with respect to sporting content from our existing library and things that we know are successful. You've seen some data points from our release and this stuff the cash machine and the likes of some of the other products that we've released in the digital universe. But the fact of the breadth of content that we have, that we haven't supported over there yet equals growth opportunities in addition to new jurisdictions that are brought up and live that we haven't been in yet.

Unidentified Company Representative

Yes. And there's one other thing you should look to, and that is the custom gains that we provide to many of our customers. They tend to be among their highest grossing games in their iGaming space, and it's something that our developers in the iGaming side do extremely well. So that's something that I think you should also keep an eye on for future growth in that area.

Chad C. Beynon -- Macquarie Research

Thanks guys. Congrats on this quarter. I appreciate it.

Operator

Our next question comes from the line of David Katz with Jefferies. Please go ahead with your question.

David Brian Katz -- Jefferies LLC

Hi. Good morning everyone. Just expressing my appreciation for the fact that we're having a discussion about stock buybacks, which is quite an accomplishment. For sure, I wanted to just really talk about digital gaming, and I know you just touched on it a bit. But thinking about it, is this a business that grows based on your ability to develop content in the land-based direction that can be pushed out digitally or rework digitally or is it potentially in the other direction also. And with respect to tuck-ins, is that in the area where we could see you look to invest also hypothetically to things like live content offerings or any opportunity to really grow that within your thought?

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Right. Let me have -- I'll let Dean address the first part of that, and then I'll talk to the second part of that, David.

Dean A. Ehrlich -- Executive Vice President & Games Business Leader

So on the content side of it, porting it into both directions. I mean, obviously, if there's something that's developed in the digital side that seems to resonate, then we are going to pull it over to the land-based side. Let's say, at this point in time, though, it's really going to be driven from the other direction just because of the breadth of content that we have that they haven't utilized yet. So reporting effort is less significant. So there's no reason not to take games that have -- they're pretty timeless that have been out in the traditional market for years and years and not put those out first, but there will be times where we take an innovative play mechanic. And if we're able to implement it more efficiently on the digital side to see how that resonates with players and then bring it over to the land-based direction, we will, but that's further down the line conversation.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

And then with respect to tuck-ins, David, we -- I mean, we're looking at potential acquisitions across all of our business segments. So bricks-and-mortar games, fintech, digital products in fintech as well as iGaming. And so as we look at the landscape out there, there are lot of available companies and technologies, including in iGaming that we would look at to see if they provide additional value to every shareholders. And if they do, and it's something we think we can tuck-in and will contribute to our growth, then we will absolutely look at those.

Randy L. Taylor -- President & Chief Operating Officer

And David, this is Randy. I would add one other item, which is that's part of it. I think it was another question earlier about where are we investing dollars. We believe there's internal investment that can be made there. As Mike talked about unique games for operators, they have been very successful for us. So we're going to continue to invest internally in talent, as Dean talked about, so we can port more of our land base so that we can expand our portfolio to be provided. So we think it's an area that will be both in, but some of it will be internal investment as well.

David Brian Katz -- Jefferies LLC

Understood. And that's why I was headed with a follow-up to Dean's answering yours is if I were to look at a utilization rate or a penetration rate of what you use from your loan based into digital? Are you a quarter of the way through the pile, halfway through the pile? How would you characterize that part of it?

Randy L. Taylor -- President & Chief Operating Officer

We're not even 10% in my opinion.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Yes. We're at the surface level, still. It's a deep leak of content that we haven't really penetrated.

David Brian Katz -- Jefferies LLC

Perfect. If I may, just one last one. With respect to tuck-ins, just to play the devil's aggregates side of it with respect to digital tuck-ins, we're certainly seeing a lot of valuation in sensitivity out there. Mike, if you could just share a thought about how you think about valuations out there for digital assets these days.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Yes. And you make a good point, David. I mean there are some valuations that we think are way too high for us to be interested in trying to even meet their current valuation that's being given to them. On the other hand, there are others that really are flying under the radar. And while they may have as many small operators do, they may have an inflated view of their value. We look at it -- we really do an analysis of what would it mean to have either the product set or the group of executives or a combination of products and executives and market share brought in under Everi's umbrella and what that would mean to the overall company, including the acquired company. And so when we do that now, since not everybody is out there with valuations on negative EBITDA. There are others that are out there that are doing OK, and we think could do much better if they found a home with us.

David Brian Katz -- Jefferies LLC

Understood. Thanks and well done.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Thank you.

Operator

So thank you. At this time, we've reached the end of the question-and-answer session. I'll turn the call back to management for closing remarks.

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Thank you for joining us today. We appreciate your interest in Everi, and I would assure everyone that our focus remains clearly on achievable, sustainable growth and building long-term shareholder value. We look forward to our updated at fourth quarter. Thank you.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

William H. Pfund -- Senior Vice President of Investor Relations

Michael David Rumbolz -- Chief Executive Officer & Chairman of the Board

Randy L. Taylor -- President & Chief Operating Officer

Dean A. Ehrlich -- Executive Vice President & Games Business Leader

Darren D. A. Simmons -- Executive Vice President & FinTech Business Leader

Unidentified Company Representative

David Brian Bain -- B. Riley Securities, Inc.

Barry Jonathan Jonas -- Truist Securities, Inc.

George Frederick Sutton -- Craig-Hallum Capital Group

Jeffrey Austin Stantial -- Stifel, Nicolaus & Company

Scott Andrew Gruber -- Citigroup Inc.

Chad C. Beynon -- Macquarie Research

David Brian Katz -- Jefferies LLC

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