Everi emerging from pandemic with new leadership, strong cash flow

May 7, 2021 1:42 AM
  • Matthew Crowley, CDC Gaming Reports
May 7, 2021 1:42 AM
  • Matthew Crowley, CDC Gaming Reports

Everi Holdings highlighted its improving business with casinos gradually emerging from the coronavirus pandemic’s long shadow.

Story continues below

But the Las Vegas-based gaming equipment and cash access provider also discussed governance during its first-quarter earnings call on Wednesday.

With Miles Kilburn’s pending retirement as board chairman, Michael Rumbolz will take the chairman’s post while continuing to serve as chief executive officer.

The company posted first-quarter earnings that reversed a year-earlier loss and increases in a key cash flow measure and revenue. Earnings per share and cash flow topped Wall Street forecasts.

Macquarie Securities gaming analyst Chad Beynon said Everi generated as much free cash flow in the quarter that ended March 31 as did for all of 2019.

In a statement, Everi said its net income was $20.5 million, or 21 cents per diluted share, for the three months ended March 31, reversing a year-earlier loss of $13.5 million, or 16 cents per diluted share.

The latest per-share results topped the average 5-cents-per-share forecast of analysts polled by Seeking Alpha. Earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, rose 44.2% to $75.4 million from $52.3 million.

Quarterly revenue rose 22.8% to $139.1 million from $113.3 million and topped the $122.5 million average forecast of Seeking Alpha-polled analysts.

Everi’s shares rose in both regular trading (up 23 cents, or 1.35%, to close at $18.03) and after-hours trading (up 22 cents, or 1.22% to $18.25) on the Nasdaq.

In Everi’s earnings statement, Rumbolz said his company’s performance showed the strength of its core gaming and financial technology segments.

The company’s total installed base of games, which include slot machines, rose 7.3 % to 15,949 from 14,851. Units sold increased 53.1% to 943 from 616. And games segment revenue rose 32.8% to $76.1 million from $57.3 million.

Financial technology revenue rose 12.5% to $63 million from $56 million, buoyed by an increase in software and lower-margin hardware sales.

“The majority of our business today is facilitating financial transactions that provide more than just standalone ATM-type operations,” Rumbolz said in a conference call with analysts. “As we continue to evolve our digital solutions, the power of patrons performing their own enhanced movement of value into, around, and back out of the gaming ecosystem in a self-service environment will further cement this definition of our products and services.”

Rumbolz said casinos’ reopening from their government-mandated coronavirus shutdowns boosted business and that he expects a further bump as vaccines roll out and restrictions, especially to Las Vegas, ease.

Beynon, in a research note, said COVID-19 has “accelerated” the effort by casinos to move into cashless gaming.

“Everi) will be able to transform important cashless applications for its operator partners,” Beynon said. “With business trends humming and the biggest opportunity ahead (cashless gaming), Everi is well-positioned to drive higher, in our view.”

Everi CFO Mike Labay said although the pandemic slowed Everi’s effort to reduce debt in 2020, the company remains devoted to reducing total borrowings and achieving a lower net leverage ratio.

Kilburn had served on Everi’s board since the company went public in 2005 and had been board chairman since 2013. Kilburn will retire from the board at this year’s annual shareholders meeting on May 19.

During his chairmanship, Kilburn led the company’s emergence in gaming equipment, systems and products; financial technology; and player loyalty programs. Everi also acquired 11 companies and grew organically.

Along with Kilburn’s retirement, first announced April 6, Everi named Ronald Congemi, an eight-year board member, as lead independent director effective immediately.

Everi said on April 6 that it will fill the director vacancy created by Congemi’s duties shift with someone who will diversify the board and bring additional gaming, financial technology, digital, and leadership experience. Everi has said the board has identified preferred candidates but will continue to consider others.

Rumbolz has been Everi’s CEO since 2016 and has been on the company’s board since 2010. In March 2020, Rumbolz agreed to extend his contract through March 2022 to focus on Everi’s long-term growth.

In the conference call, Rumbolz said Everi’s board continues to consider an executive succession plan begun two years ago.

“That’s been an ongoing review they’ve narrowed the field somewhat to both internal and external candidates that are well aware of,” he said. “And I would assume, we’ll be getting more deeply involved in the selection process here over the next several months.”

Follow Matthew Crowley on Twitter @copyjockey