Investments in technology, faster-than-expected casino reopenings, and cost mitigation helped Everi Holdings post-Wall Street-topping revenue for the second quarter.
But the pain came, too. Everi’s revenue declined sharply from a year earlier, and, weighed down by pretax charges, the company posted a loss and missed per-share estimates.
Analysts, however, are looking past second-quarter results, which were largely impacted by the coronavirus pandemic with more of a focus on technology products for both gaming operations and financial services to help casinos recover from their COVID-19 closures.
“We think gaming ops and FinTech could see a quicker recovery than we had originally contemplated, with management noting several encouraging demand trends,” said Truist Securities gaming analyst Barry Jonas. “We think these factor not only ongoing strength seen across our regional operator coverage but also company-specific growth drivers as Everi had strong momentum in their premium leased product and FinTech offerings into the pandemic.”
Macquarie Securities gaming analyst Chad Beynon noted that Everi’s FinTech division was “arguably the most attractive business” in gaming technology. He said Everi processes more than 100 million financial transactions per year, which could build and shift those transactions to a customer’s phone.
“While the gaming industry is behind other tech industries, we think this product will be well accepted in the near-term,” Beynon said.
In a statement issued after stock markets closed Tuesday, the Las Vegas-based slot machine and financial equipment maker said its net loss was $68.5 million, or 80 cents per diluted share, for the three months ended June 30, reversing year-earlier net income of $5.5 million, or 7 cents per diluted share.
The latest result missed the average 63-cents-per-share loss forecast by analysts surveyed by Seeking Alpha. The result also included $14.8 million in pretax charges associated with asset write-offs and write-downs, severance, facility consolidation, and restructuring costs.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, were $3.3 million, down from $64.1 million a year ago, driven by positive contributions from Everi’s games and financial technology segments.
Revenue fell 70% to $38.7 million from $129.7 million.
“In April, at the beginning of the second quarter, as a direct result of all of our casino customers having closed, we had essentially no revenue,” Everi CEO Mike Rumbolz said on a conference call Tuesday. “By the end of June, with about 75% of U.S. casinos reopened, our revenues were ramping in conjunction with those reopenings.”
In a statement, Rumbolz pointed out pluses, saying efforts to reduce operating costs during the coronavirus infection curve-flattening shutdown and a focus on enhancing operational efficiencies paid off.
“We achieved better-than-expected results in the second quarter, including a return to positive adjusted (cash flow) more quickly than we anticipated at the beginning of the quarter,” he said.
Rumbolz said the development of the company’s digital wallet included its integration with the leading gaming systems providers.
“’Cashclub’ wallet expands the options for patron access to their funds where, when, and how they want to access them,” Rumbolz said. “This solution, using Everi’s technology and money transmitter capability gives operators the opportunity to create a seamlessly integrated solution across on-premises and online across multiple states and jurisdictions.”
As of June 30, Everi’s installed base increased by 1,244 units year over year and by 87 units on a quarterly sequential basis to 14,938, which is up 227 units since the beginning of 2020.
The installed base’s premium segment increased by 2,383 units year over year and by 81 units on a quarterly sequential basis to 5,796 units or up 636 units from Dec. 31. Premium units represented approximately 39% of the total installed base at quarter’s end compared with 25% a year earlier.
“As we move through the third quarter, our products and services continue to reflect a return to the performance momentum we were achieving before COVID-19,” Rumbolz said. “The units in our gaming operations installed base that are active are performing at levels comparable to our experience pre-pandemic.”
Also, Rumbolz said, same-store transactional volumes in the cash access portion of Everi’s financial technology business are only slightly below year-earlier levels.
Meanwhile, the Everi Digital online gaming division is diversifying Everi’s portfolio. On Monday, the division partnered with Roar Digital, a joint venture created by MGM Resorts International and GVC Holdings to launch three popular three-reel mechanical titles on Borgata Online Casino, BetMGM and Party Casino New Jersey. Financial terms weren’t disclosed.
On July 10, Everi got a positive jolt after Roth Capital gaming analyst David Bain opened coverage of the stock with a “buy” rating and a $17 price target. The move sent Everi shares up 8.8% for the day.
“About 70% of casinos in North America (are) utilizing (Everi’s) technology, Bain wrote in an investor’s note that day. “Peers lack (financial technology), have less earnings visibility (heavier weighted toward one-time sales) and most have less upside optionality, in our view.”
Everi shares were down 1.55 in trading Tuesday.
Follow Matthew Crowley on Twitter @copyjockey
