Revenues Rise 6% Reflecting Growth in Both Games and FinTech Segments including a 9% Increase in Recurring Revenues
Company Updates Full Year Outlook
LAS VEGAS – (Aug. 9, 2023) – Everi Holdings Inc. (NYSE: EVRI) (“Everi” or the “Company”), today announced results for the second quarter ended June 30, 2023.
- Revenues increased 6% to $208.7 million from $197.2 million a year ago
- FinTech segment revenues grew 13% to $95.6 million, reflecting a 26% increase in software and other revenues, a 9% rise in financial access revenues and a 6% increase in hardware revenues
- Games segment revenues rose 1% to $113.1 million, reflecting a 5% rise in gaming operations partially offset by an 8% decline in gaming equipment and systems sales revenues
- Recurring revenues grew 9% to $151.6 million and represented 73% of total revenues; non-recurring revenues declined 1% to $57.1 million
- Operating income of $53.3 million declined 2% from $54.5 million in the prior year; net income decreased 16% to $27.4 million, or $0.29 per diluted share, compared to $32.5 million, or $0.33 per diluted share, in the 2022 second quarter, primarily due to higher net interest costs of $7.8 million in the second quarter of 2023
- Adjusted EPS , a non-GAAP financial measure, was $0.41 per diluted share compared with $0.48 per diluted share in the prior year
- Adjusted EBITDA, a non-GAAP financial measure, increased 2% to $96.1 million compared with $94.4 million in the 2022 second quarter
- Free Cash Flow, a non-GAAP financial measure, was $47.7 million compared with $49.8 million in the 2022 second quarter
- Repurchased 2.7 million shares for $40.0 million in the 2023 second quarter under the $180 million share repurchase authorization, with $140.0 million available to repurchase
- Revised 2023 outlook, including net income range of $98 million to $106 million, Adjusted EBITDA range of $380 million to $386 million and Free Cash Flow range of $147 million to $153 million
Randy Taylor, Chief Executive Officer of Everi, said, “Our second quarter results include 6% year over year revenue growth. Revenues for both our FinTech and Games segment grew as we continue to benefit from our investments in new product development as well as from several tuck-in acquisitions we completed since the beginning of 2022. Importantly, despite the impact from higher interest rates and inflationary pressures, we continued to generate strong Free Cash Flow, which positions the Company to invest in our growth initiatives and return capital to shareholders through share repurchases.
“Our FinTech segment continued to generate strong year-over-year gains across all of our product categories as revenue rose 13% to an all-time quarterly record, with operating income increasing 13% and Adjusted EBITDA growing 6% compared to the year-ago period. Player funding reached an all-time quarterly record of $11.7 billion, exceeding $11 billion for the second quarter in a row, which drove growth in financial access services revenues. We also achieved strong year-over-year growth in hardware sales, as well as software and other revenues.
“While Games segment revenue continued to grow, gaming operations revenues and unit sales were impacted by near-term challenges during a transition period as we roll-out new cabinets and content. Following several consecutive years of growth in our installed base and increased unit shipments, we expect our Games segment revenue will be flat to slightly down in the second half of the year as compared to the second half of 2022. With the expected launch of several new cabinets in the back half of this year and first half of 2024, we expect our Games segment will return to an attractive growth profile.
“We continue to generate strong Free Cash Flow and are on track to deliver approximately $150 million of Free Cash Flow in 2023. We expect to continue to invest in development initiatives to sustain longer-term growth while remaining active in share repurchases. We are confident that we have the right product strategies and capital allocation priorities in place to continue creating value for shareholders.”
| Consolidated Full Quarter Comparative Results (unaudited) | |||
| As of and for the Three Months Ended June 30, | |||
| 2023 | 2022 | ||
| (in millions, except per share amounts) | |||
| Revenues | $ 208.7 | $ 197.2 | |
| Operating income (1) | $ 53.3 | $ 54.5 | |
| Net income (1) | $ 27.4 | $ 32.5 | |
| Net earnings per diluted share (1) | $ 0.29 | $ 0.33 | |
| Adjusted EPS (2) | $ 0.41 | $ 0.48 | |
| Weighted average diluted shares outstanding | 93.5 | 98.7 | |
| Adjusted EBITDA (3) | $ 96.1 | $ 94.4 | |
| Free Cash Flow (3) | $ 47.7 | $ 49.8 | |
| Cash and cash equivalents | $ 210.6 | $ 238.1 | |
| Net Cash Position (4) | $ 28.4 | $ 93.1 | |
| (1) | Operating income, net income, and net earnings per diluted share for the three months ended June 30, 2023, included $1.2 million for employee severance costs and related expenses, $0.6 million for non-recurring professional fees associated with acquisitions, litigation and the debt amendment, and $0.2 million for office and warehouse consolidation costs. Operating income for the three months ended June 30, 2022, included $0.7 million for office and warehouse consolidation costs and $0.9 million for non-recurring professional fees and other. |
| (2) | For a reconciliation of net earnings per diluted share to Adjusted EPS, see the Unaudited Reconciliation of net earnings per diluted share to Adjusted EPS provided toward the end of this release. |
| (3) | For a reconciliation of net income to Adjusted EBITDA and Free Cash Flow, see the Unaudited Reconciliation of Selected Financial GAAP to Non-GAAP Measures provided toward the end of this release. |
| (4) | For a reconciliation of Net Cash Position to Cash and Cash Equivalents, see the Unaudited Reconciliation of Cash and Cash Equivalents to Net Cash Position and Net Cash Available provided toward the end of this release. |
Second Quarter 2023 Results Overview
Revenues for the three-month period ended June 30, 2023 increased 6% to $208.7 million compared to $197.2 million in the year-ago quarter. Organic revenues rose 3% over the prior year, while revenues from acquisitions completed since July 1, 2022 contributed $5.3 million in the quarter. Recurring revenues increased 9% to $151.6 million from $139.7 million in the prior-year period driven by growth in both the Games and FinTech segments. Revenues from one-time sales declined 1% to $57.1 million from $57.5 million a year ago, driven by an 8% decrease in gaming equipment and systems sales partially offset by a 6% increase in FinTech hardware and one-time software sales.
Operating income of $53.3 million declined 2% from $54.5 million in the prior-year period as a result of higher costs. The year-over-year increases in operating expenses, research and development expense, and depreciation reflect higher labor costs, higher development costs and investment in growth initiatives.
Lower operating income and higher interest expense drove a 16% decline in net income to $27.4 million, or $0.29 per diluted share, compared to $32.5 million, or $0.33 per diluted share, in the second quarter of 2022. Higher interest expense partially offset by a lower provision for income tax and fewer weighted average diluted shares outstanding resulted in Adjusted EPS of $0.41 per diluted share compared with $0.48 per diluted share in the prior year.
Adjusted EBITDA increased 2% to $96.1 million from $94.4 million in the prior-year period.
Free Cash Flow was $47.7 million compared with $49.8 million in the year-ago period, primarily reflecting higher net cash interest paid and cash taxes, partially offset by lower capital expenditures.
Outlook
Everi revised its full year 2023 guidance today. Net income guidance is revised upward as a result of lower expected depreciation and amortization and income tax expense and is now expected to be in a range of $98 million to $106 million compared to the prior range of $92 million to $100 million. Adjusted EBITDA is now expected to be in a range of $380 million to $386 million compared to the prior outlook range of $384 million to $396 million, primarily due to lower gaming equipment sales in the second half of 2023 as compared to the second half of 2022. Free Cash Flow is now expected to be in a range of $147 million to $153 million compared to the prior range of $150 million to $160 million. Earnings per diluted share is now expected in the range of $1.05 to $1.13 compared to the prior expectation of $0.97 to $1.06 and Adjusted EPS is now expected to be in a range of $1.62 to $1.67 compared to the prior expectation of between $1.58 to $1.66, with the new range inclusive of the higher net income and a lower-than-previously expected diluted share count.
A summary and reconciliation of the full year 2023 financial targets are included in a supplemental table at the end of this release.
| Games Segment Full Quarter Comparative Results (unaudited) | |||
| Three Months Ended June 30, | |||
| 2023 | 2022 | ||
| (in millions, except unit amounts and prices) | |||
| Games revenues | |||
| Gaming operations – Land-based casinos | $ 70.8 | $ 68.2 | |
| Gaming operations – Digital iGaming | 7.0 | 5.8 | |
| Gaming operations – Total | 77.8 | 74.0 | |
| Gaming equipment and systems | 35.3 | 38.3 | |
| Games total revenues | $ 113.1 | $ 112.3 | |
| Operating income (1) | $ 24.4 | $ 28.9 | |
| Adjusted EBITDA (2) | $ 58.1 | $ 58.7 | |
| Research and development expense | $ 11.2 | $ 9.5 | |
| Capital expenditures | $ 23.9 | $ 28.9 | |
| Gaming operations information: | |||
| Units installed at period end: | |||
| Class II | 10,552 | 9,792 | |
| Class III | 7,260 | 7,672 | |
| Total installed base at period end | 17,812 | 17,464 | |
| Average units installed during period | 17,855 | 17,362 | |
| Daily win per unit (“DWPU”) (3) | $ 37.22 | $ 39.94 | |
| Unit sales information: | |||
| Units sold | 1,597 | 1,957 | |
| Average sales price (“ASP”) | $ 20,512 | $ 18,800 | |
| (1) | Operating income for the three months ended June 30, 2023, included $0.3 million for employee severance costs and related expenses, $0.3 million for non-recurring professional fees associated with acquisitions, and $0.2 million for office and warehouse consolidation costs. Operating income for the three months ended June 30, 2022 included $0.7 million for office and warehouse consolidation costs. |
| (2) | For a reconciliation of net income to Adjusted EBITDA, see the Unaudited Reconciliation of Selected Financial GAAP to Non-GAAP measures provided toward the end of this release. |
| (3) | Daily win per unit excludes the impact of the direct costs associated with the Company’s wide-area progressive jackpot expense. |
2023 Second Quarter Games Segment Highlights
Games segment revenues increased 1% to $113.1 million compared to $112.3 million in the second quarter of 2022, reflecting a 5% increase in gaming operations revenues, inclusive of digital gaming operations, partially offset by an 8% decrease in revenues from gaming equipment and systems sales. The recent acquisition of Video King contributed $4.1 million in revenues in the 2023 second quarter.
Operating income was $24.4 million compared to $28.9 million in the second quarter of 2022, reflecting higher operating expenses including research and development expenditures, primarily due to higher labor costs, as well as increased depreciation and amortization associated with acquisitions. Adjusted EBITDA was $58.1 million compared with $58.7 million in the second quarter of 2022.
Gaming operations revenues increased 5% to $77.8 million compared to $74.0 million a year ago.
- The installed base grew by 2% to 17,812 units from 17,464 units in the prior year. The premium portion of the installed base remained relatively flat at 48% when compared to the prior period.
- Daily Win per Unit (“DWPU”) was $37.22 in the second quarter of 2023 compared to $39.94 in the second quarter of 2022.
- Revenues from digital gaming rose 21% to $7.0 million compared to $5.8 million in the second quarter of 2022. The increase reflects new customer sites, including going live in Alberta, Canada, as well as the growth in the library of available slot content.
Gaming equipment and systems revenues generated from the sale of gaming machines and other related parts and equipment, declined 8% to $35.3 million compared to $38.3 million in the second quarter of 2022.
- The Company sold 1,597 gaming machines at an average selling price (“ASP”) of $20,512 in the 2023 second quarter, compared with 1,957 units sold at an ASP of $18,800 in the 2022 second quarter.
| Financial Technology Solutions Segment Full Quarter Comparative Results (unaudited) | |||
| Three Months Ended June 30, | |||
| 2023 | 2022 | ||
| (in millions, unless otherwise noted) | |||
| FinTech revenues | |||
| Financial access services | $ 55.7 | $ 50.9 | |
| Software and other | 24.0 | 19.0 | |
| Hardware | 15.9 | 15.0 | |
| FinTech total revenues | $ 95.6 | $ 84.9 | |
| Operating income (1) | $ 28.9 | $ 25.7 | |
| Adjusted EBITDA (2) | $ 38.0 | $ 35.7 | |
| Research and development expenses | $ 5.4 | $ 4.6 | |
| Capital expenditures | $ 6.3 | $ 7.5 | |
| Value of financial access transactions: | |||
| Funds advanced | $ 3,005.0 | $ 2,661.1 | |
| Funds dispensed | 8,176.2 | 7,511.0 | |
| Check warranty | 483.6 | 439.1 | |
| Total value processed | $ 11,664.8 | $ 10,611.2 | |
| Number of financial access transactions: | |||
| Funds advanced | 4.5 | 3.5 | |
| Funds dispensed | 30.9 | 28.6 | |
| Check warranty | 0.9 | 1.2 | |
| Total transactions completed | 36.3 | 33.3 | |
| (1) | Operating income for the three months ended June 30, 2023 included $0.9 million for employee severance costs and related expenses and $0.3 million for non-recurring professional fees associated with acquisitions, litigation and the debt amendment. Operating income for the three months ended June 30, 2022, included $0.9 million for professional fees associated with acquisitions and non-recurring litigation costs. |
| (2) | For a reconciliation of net income and operating income to Adjusted EBITDA, see the Unaudited Reconciliation of Selected Financial GAAP to Non-GAAP Measures provided toward the end of this release. |
2023 Second Quarter Financial Technology Solutions (“FinTech”) Segment Highlights
FinTech revenues for the 2023 second quarter increased 13% to $95.6 million compared to $84.9 million in the second quarter of 2022, reflecting a 26% gain in software and other revenues, 9% growth in financial access services, and a 6% increase in hardware sales.
Operating income increased 12% to $28.9 million compared to $25.7 million in the prior-year period, reflecting higher revenues partially offset by higher operating expenses and increased research and development expense for new and enhanced products. Adjusted EBITDA rose 6% to $38.0 million compared to $35.7 million in the 2022 second quarter.
- Financial access services revenues, which include cashless and cash-dispensing debit and credit card transactions and check services, increased 9% to $55.7 million compared with the 2022 second quarter, reflecting higher same-store financial funding transactions, as well as continued growth from new customer additions. Funds delivered to casino floors increased 10% to an all-time quarterly record of $11.7 billion on a 9% increase in the number of financial transactions and an increase in average transaction size. Cashless transactions (including both digital wallet and the sale of paper gaming vouchers) increased 48% over the 2022 second quarter and 8% on a quarterly sequential basis, while still representing less than 5% of funding transactions. The Company’s CashClub Wallet technology is currently installed or being deployed across 22 jurisdictions at 45 properties.
- Software and other revenues, which include Loyalty and RegTech software, product subscriptions, kiosk maintenance services, and other revenues, rose 26% to $24.0 million in the second quarter of 2023 compared to $19.0 million in the second quarter of 2022. Approximately 77% and 78% of software and other revenues were of a recurring nature in the 2023 and 2022 second quarter periods, respectively.
- Hardware sales revenues increased 6% to $15.9 million compared to $15.0 million in the second quarter of 2022.
Balance Sheet, Liquidity and Cash Flow
- As of June 30, 2023, the Company had $210.6 million of cash and cash equivalents compared with $293.4 million as of December 31, 2022. The Net Cash Position was $28.4 million compared with $89.2 million as of December 31, 2022.
- Total debt decreased to $986.5 million at June 30, 2023, from $992.5 million as of December 31, 2022, as the Company paid $6.0 million on its secured term loan during the 2023 first quarter.
- Cash paid for interest, net of interest income, was $14.4 million in the 2023 second quarter compared with $7.6 million in the year-ago period. The increase in net interest paid was primarily due to the impact of rising interest rates. In addition to the Company’s variable-rate term debt and notes outstanding, interest expense also includes the impact of rising rates on third-party commercial cash arrangements associated with certain of the Company’s funding of financial access services. These fees were $5.9 million for the 2023 second quarter on a daily average balance of $310.7 million compared to $1.7 million on a daily average balance of $382.8 million for the 2022 second quarter.
- In May 2023, the Company completed the acquisition of the assets of VKGS LLC (“Video King”), a privately-owned provider of integrated electronic bingo gaming tablets, video gaming content, instant win games, and systems for cash consideration of approximately $61.3 million, inclusive of estimated customary net working capital adjustments of which $59.2 million was paid in the quarter.
- During the quarter, the Company repurchased 2.7 million shares of its common stock for total consideration of $40.0 million under the current 18-month, $180 million share repurchase authorization. Currently $140.0 million is remaining under this authorization.