Everi Holdings Inc. (NYSE: EVRI) (“Everi” or the “Company”), a
premier provider of gaming products, financial technology and
player loyalty solutions to the gaming industry, today reported
financial results for the second quarter ended June 30, 2020, which
includes the impact of the COVID-19 pandemic and related casino
closures.
Second Quarter 2020 Results
- Revenue was $38.7 million compared to $129.7 million a
year ago
- Net loss was $68.5 million, or a loss of $0.80 per
diluted share, inclusive of $14.8 million of pre-tax charges
associated with asset write-offs and write-downs, severance,
facility consolidation and certain business restructuring costs to
streamline operations and improve our cost structure; Net income
was $5.5 million, or $0.07 per diluted share, in the prior year
period
- Adjusted EBITDA, a non-GAAP financial measure, was $3.3
million compared to $64.1 million a year ago, driven by positive
contributions from both the Games and FinTech
segments
- Cash and cash equivalents increased to $257.4 million
at June 30, 2020, from $49.9 million at March 31, 2020; Net Cash
Position, a non-GAAP financial measure, rose to $133.2 million at
June 30, 2020 from $40.4 million at March 31, 2020, reflecting
approximately $118 million of net proceeds from an incremental term
loan in April and the benefit of changes in working
capital
Michael Rumbolz, Chief Executive Officer of
Everi, said, “We achieved better-than-expected results in the
second quarter, including a return to positive Adjusted EBITDA more
quickly than we anticipated at the beginning of the quarter. This
was the result of several factors, including the swift
actions we took in March when the pandemic struck to reduce our
operating costs and preserve liquidity during the time casinos were
shut down; as well as our focus on enhancing operational
efficiencies and pursuing higher-value opportunities. In addition,
as our customers began to reopen faster than previously expected,
we benefited from our prior investments in technology innovations
and game development through the strong performance of our FinTech
solutions and installed base of recurring-revenue games.
“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. The units
in our gaming operations installed base that are active are
performing at levels comparable to our experience pre-pandemic. In
addition, the cash access portion of our FinTech business is
processing same-store transactional volumes at levels that are, on
average, only moderately below the prior-year. Reflecting these
trends, as well as the benefit from the 636-unit growth in
installed premium games since the beginning of 2020, we expect
quarterly sequential growth in the second half of 2020, including a
return to Free Cash Flow generation in the third quarter, which is
earlier than we had previously anticipated.
“Looking forward, the Everi Team continues to
focus on helping our customers and prioritizing innovation across
our portfolio of products and solutions, from game development to
cashless funding solutions,” Rumbolz added. “We are favorably
positioned to leverage our industry leadership in cash access
funding and self-service player loyalty products to lead the future
evolution toward cashless funding and to successfully capitalize on
the additional growth opportunities presented by the increased
interest from both casino operators and players for cashless and
contactless options. These forward-thinking solutions include the
immediate availability of our cashless QuikTicket™ gaming voucher
and a unique fully cashless mobile solution with the development of
our CashClub® Wallet. We believe we have unique high-value FinTech
and Games solutions that will help our customers address the new
operating environment in their reopened properties, which when
combined with our more streamlined operating approach, will help us
regain the revenue, earnings and cash flow momentum we consistently
demonstrated prior to the pandemic.”
Consolidated Full Quarter Comparative Results
(unaudited)
|
Three Months Ended June 30, |
|
2020 |
|
2019 |
|
(in millions, except per share amounts) |
Revenues |
$ |
38.7 |
|
|
$ |
129.7 |
|
|
|
|
|
Operating (loss) income
(2) |
$ |
(52.7 |
) |
|
$ |
24.9 |
|
|
|
|
|
Net (loss) income (1)(2) |
$ |
(68.5 |
) |
|
$ |
5.5 |
|
|
|
|
|
Net (loss) earnings per
diluted share |
$ |
(0.80 |
) |
|
$ |
0.07 |
|
|
|
|
|
Diluted shares
outstanding |
85.1 |
|
|
79.2 |
|
|
|
|
|
Adjusted EBITDA (1) |
$ |
3.3 |
|
|
$ |
64.1 |
|
|
|
|
|
Free Cash Flow (1) |
$ |
(26.7 |
) |
|
$ |
7.0 |
|
|
|
|
|
Principal amount of
outstanding debt (3) |
$ |
1,180.9 |
|
|
$ |
1,147.2 |
|
|
|
|
|
Total Net Debt (3) |
$ |
1,130.9 |
|
|
$ |
1,097.2 |
|
|
|
|
|
Cash and cash equivalents |
$ |
257.4 |
|
|
$ |
123.8 |
|
|
|
|
|
Net Cash Position (4) |
$ |
133.2 |
|
|
$ |
36.7 |
|
(1) For a reconciliation of net (loss) income to
Adjusted EBITDA and Free Cash Flow, see the Unaudited
Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA
and to Free Cash Flow provided at the end of this release.
(2) Operating loss and net loss for the three
months ended June 30, 2020, include $14.8 million of pre-tax
charges, including $11.0 million of business reorganization costs,
$2.7 million of employee severance costs, $0.6 million
non-recurring professional fees, and $0.5 million in other one-time
charges.
(3) Total Net Debt is the principal face value
of the debt outstanding, inclusive of the senior secured term loan
facility, the senior secured revolving credit facility and senior
unsecured notes, less cash and cash equivalents or $50 million,
whichever is smaller, as provided in the Company’s Credit Facility.
For a reconciliation of Total Net Debt to Principal face value of
debt outstanding, see the Unaudited Calculation of Total Net Debt
Leverage Ratio at the end of this release.
(4) Net Cash Position is the sum of cash and
cash equivalents plus settlement receivables less settlement
liabilities. 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 at the end
of this release.
Second Quarter 2020 Results
Overview
The operating results for the three-month period
ended June 30, 2020 presented below, reflect the impact of casino
closures that began in March. The closing of casinos due to the
COVID-19 pandemic resulted in revenues declining to essentially
zero until the casinos began to slowly reopen in May with the pace
steadily ramping through June. The Company responded swiftly to the
casino closures by reducing costs in March to significantly lower
its cash burn rate. These cost reductions were largely in effect by
the beginning of the second quarter.
Revenues for the three-month period ended June
30, 2020 decreased to $38.7 million from $129.7 million in the
second quarter of 2019. Games and FinTech segment revenues were
$20.8 million and $17.9 million, respectively, for the second
quarter of 2020.
Operating loss was $52.7 million for the second
quarter of 2020 compared to operating income of $24.9 million in
the prior-year period. Net loss was $68.5 million, or a loss of
$(0.80) per diluted share, compared with net income of $5.5
million, or $0.07 per diluted share, in the second quarter of
2019. The 2020 second quarter net loss includes $14.8 million
of pre-tax charges associated with asset write-offs and
write-downs, severance, consolidation and other restructuring costs
to streamline operations and improve the Company’s cost structure.
Approximately $11.0 million of the charges are related to non-cash
items.
Following a full review of the business and
evaluation of opportunities, proactive actions were taken to reduce
the cost structure and to prioritize high-value opportunities that
will drive long-term prosperity and success. The first steps
included discontinuing certain developmental efforts no longer seen
as appropriate and redirecting resources to higher priority
opportunities, evaluating the overall level of organizational
staffing, and consolidating corporate office space to reflect a
workforce that will increasingly work remotely.
Adjusted EBITDA for the second quarter of 2020
was $3.3 million compared to $64.1 million in the second quarter of
2019. Games and FinTech segment Adjusted EBITDA were $3.0 million
and $0.3 million, respectively, for the three months ended June 30,
2020, compared with Adjusted EBITDA of $34.7 million and $29.4
million, respectively, for the three months ended June 30,
2019.
Games Segment Full Quarter Comparative
Results (unaudited)
|
Three Months
Ended June 30, |
|
2020 |
|
2019 |
|
(in millions, except unit amounts and prices) |
Revenues |
$ |
20.8 |
|
|
$ |
69.4 |
|
|
|
|
|
Operating (loss) income (1) |
$ |
(41.8 |
) |
|
$ |
2.6 |
|
|
|
|
|
Adjusted EBITDA (2) |
$ |
3.0 |
|
|
$ |
34.7 |
|
|
|
|
|
Unit sales: |
|
|
|
Units sold |
381 |
|
|
1,270 |
|
Average sales price ("ASP") |
$ |
18,044 |
|
|
$ |
17,338 |
|
|
|
|
|
Gaming operations installed
base: |
|
|
|
Average units installed during period: |
|
|
|
Average units installed |
14,854 |
|
|
13,624 |
|
Approximate daily win per unit (3) |
$ |
9.84 |
|
|
$ |
32.26 |
|
|
|
|
|
Units installed at end of period: |
|
|
|
Class II |
8,971 |
|
|
9,205 |
|
Class III |
5,967 |
|
|
4,489 |
|
Total installed base |
14,938 |
|
|
13,694 |
|
|
|
|
|
Installed base — Oklahoma |
6,270 |
|
|
6,372 |
|
Installed base — non-Oklahoma |
8,668 |
|
|
7,322 |
|
Total installed base |
14,938 |
|
|
13,694 |
|
|
|
|
|
Premium units |
5,796 |
|
|
3,413 |
|
(1) Operating loss for the three-month
period ended June 30, 2020, includes $11.3 million of pre-tax
charges, including $9.2 million of business reorganization costs,
$1.6 million of employee severance costs and $0.5 million of other
one-time charges.
(2) For a reconciliation of net (loss)
income to Adjusted EBITDA, see the Unaudited Reconciliation of Net
(Loss) Income to EBITDA and Adjusted EBITDA and to Free Cash Flow
provided at the end of this release.
(3) Approximate daily win per unit
excludes the impact of the direct costs associated with the
Company’s wide-area progressive jackpot expense.
2020 Second Quarter Games Segment
Highlights
Games segment revenues were $20.8 million
compared to $69.4 million in the second quarter of 2019.
Revenues from gaming operations were $13.9
million compared to $46.0 million in the prior-year period. The
year-over-year decline primarily reflects the impact from the
extended casino closures during the second quarter of 2020.
- Daily Win per Unit (“DWPU”) was $9.84 in the second quarter of
2020 compared to $32.26 in the prior-year period, primarily
reflecting the large number of days that casinos were closed, and
the installed units earned no revenue. Relative to the number of
casinos that have reopened, the installed base has performed well
for the days the units were in use, with an estimated DWPU in
excess of $35.00 for active units. This strong relative performance
for active units reflects the player popularity of the Company’s
latest games as a result of the Company’s investments in design and
development of new games and cabinets, capital investments to
refresh and upgrade a significant portion of the installed base
over the last several years, and growth in premium unit
placements.
- The installed base at June 30, 2020 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 includes all units installed in all casinos at June
30, 2020, whether or not the facilities had reopened and whether or
not the games were active or inactive.
- The premium portion of the installed base increased by 2,383
units year over year and by 81 units on a quarterly sequential
basis to 5,796 units, or up a total of 636 units from December 31,
2019. Premium units represented approximately 39% of the total
installed base at quarter-end compared to 25% a year ago. Wide-area
progressive (“WAP”) units, a subcategory of premium units, grew by
168 units year over year and by three units on a quarterly
sequential basis to 968 units at June 30, 2020.
- Digital (formerly called Interactive) revenue was $1.5 million
in the second quarter of 2020 compared to $1.3 million a year
ago.
- The New York Lottery systems business generated no revenue in
the second quarter of 2020, as no New York VLTs were in operations
during the period, compared to revenues of $4.9 million in the
prior-year period.
Revenues generated from the sale of gaming units
and other related parts and equipment totaled $7.0 million in the
second quarter of 2020 compared to $23.4 million in the prior-year
period.
- The Company sold 381 units at an average selling price (“ASP”)
of $18,044 in the second quarter of 2020 compared with 1,270 units
at an ASP of $17,338 in the second quarter of 2019.
Financial Technology Solutions Segment
Full Quarter Comparative Results (unaudited)
|
Three Months
Ended June 30, |
|
2020 |
|
2019 |
|
(in millions, unless otherwise noted) |
Revenues |
$ |
17.9 |
|
|
$ |
60.3 |
|
|
|
|
|
Operating (loss) income (1) |
$ |
(10.9 |
) |
|
$ |
22.3 |
|
|
|
|
|
Adjusted EBITDA (2) |
$ |
0.3 |
|
|
$ |
29.4 |
|
|
|
|
|
Aggregate dollar amount processed
(in millions): |
|
|
|
Cash advance |
$ |
531.3 |
|
|
$ |
1,878.2 |
|
ATM |
$ |
1,403.4 |
|
|
$ |
5,328.7 |
|
Check warranty |
$ |
67.0 |
|
|
$ |
353.0 |
|
|
|
|
|
Number of transactions completed
(in millions): |
|
|
|
Cash advance |
0.9 |
|
|
2.9 |
|
ATM |
6.3 |
|
|
24.8 |
|
Check warranty |
0.2 |
|
|
0.9 |
|
(1) Operating loss for the three-month
period ended June 30, 2020, includes $3.5 million of pre-tax
charges, including $1.8 million of business reorganization costs,
$1.1 million of employee severance costs and $0.6 million of
non-recurring professional fees.
(2) For a reconciliation of net (loss)
income to Adjusted EBITDA, see the Unaudited Reconciliation of Net
(Loss) Income to EBITDA and Adjusted EBITDA and to Free Cash Flow
at the end of this release.
2020 Second Quarter Financial Technology
Solutions Segment Highlights
FinTech revenues were $17.9 million in the
second quarter of 2020 compared to $60.3 million in the prior-year
period. Revenues from player loyalty products and services totaled
$3.0 million compared with $4.9 million in the prior year
period.
- Revenues from cash access services, which include ATM, cash
advance and check services, were $10.0 million compared to $39.7
million in the second quarter of 2019. In June, relative to the
number of casinos that were open and operating, cash access
revenues reflected same-store transactional volumes that were on
average only moderately below prior-year levels, while continuing
to benefit from new customer wins from competitive bid processes
and new casino openings and expansions. During the second quarter,
development efforts were maintained on projects supporting cashless
and contactless player funding products. These projects included:
ongoing support of the Company’s cashless QuikTicket gaming voucher
product; development of a white-label mobile wallet app to
interface with the QuikTicket voucher; and ongoing development and
integration efforts supporting the CashClub Wallet cashless and
contactless solution.
- Equipment sales revenues were $3.4 million in the second
quarter of 2020 compared to $7.8 million in the second quarter of
2019. Sales of player loyalty and marketing kiosks
contributed $0.9 million in the second quarter of 2020 compared
with $1.1 million in the prior year period.
- Revenues from information services and other, which includes
kiosk maintenance, compliance products, Central Credit, player
loyalty and other revenue, were $4.4 million compared to $12.8
million in the second quarter of 2019. There were $2.1 million of
revenues from software sales and recurring software license support
for the player loyalty and marketing business in the second quarter
of 2020 compared with $3.8 million in the prior year period.
Balance Sheet and Liquidity
- At June 30, 2020, the Company had cash and cash equivalents of
$257.4 million, with a Net Cash Position of $133.2 million.
- The Company amended its Existing Credit Agreement in April 2020
to provide for changes to certain covenant provisions, including,
but not limited to: eliminating the financial maintenance covenant
related to senior secured leverage for each of the remaining
quarters in 2020; modifying the compliance threshold in each of the
quarters thereafter; and making changes that limit the Company’s
ability to make certain restricted payments and designate
unrestricted subsidiaries (the “Amendment”).
- To further supplement its liquidity position, in April 2020 the
Company completed a new $125 million First Lien Term Loan
(“Incremental Financing”). The Incremental Financing has a maturity
concurrent with the May 2024 maturity date under its existing
Senior Secured Credit Facility and an interest rate of LIBOR plus
1050 basis points with a 1% LIBOR floor. After fees, discounts and
expenses from the Incremental Financing and the Amendment, the
Company received approximately $118 million in net proceeds.
- The Company’s total principal outstanding debt balance as of
June 30, 2020 was $1.18 billion.
2020 Outlook
As previously disclosed, due to the COVID-19
pandemic and the ongoing uncertainty regarding its magnitude and
duration, Everi has withdrawn the 2020 financial outlook it
provided on March 2, 2020.
Despite the existing uncertainty in the current
environment, based on current conditions and performance trends,
the Company continues to expect to generate positive Adjusted
EBITDA in the 2020 third quarter and now expects to return to Free
Cash Flow generation in the third quarter, compared to its prior
expectation that it would not begin to generate Free Cash Flow
until the 2020 fourth quarter.
“As additional casinos across the country
continue to reopen and the industry continues its return toward
normalized operations, we believe our operational and product
development initiatives will support our goal of enhancing
shareholder value,” said Rumbolz.
Investor Conference Call and
Webcast
The Company will host an investor conference
call to discuss its 2020 second quarter results at 5:00 p.m. ET
today. The conference call may be accessed live by phone by
dialing (323) 794-2093. A replay of the call will be
available beginning at 8:00 p.m. ET today and may be accessed by
dialing +1 (412) 317-6671; the PIN number is 3113868. A
replay will be available until August 11, 2020. The call will be
webcast live and archived on www.everi.com (select “Investors”
followed by “Events & Presentations”).
Non-GAAP Financial
Information
In order to enhance investor understanding of
the underlying trends in our business, our cash balance and cash
available for our operating needs, and to provide for better
comparability between periods in different years, we are providing
in this press release Adjusted EBITDA, Free Cash Flow, Net Cash
Position and Net Cash Available, and Total Net Debt and Total Net
Debt Leverage Ratio, which are not measures of our financial
performance or position under United States Generally Accepted
Accounting Principles (“GAAP”). Accordingly, Adjusted EBITDA, and
Free Cash Flow should not be considered in isolation or as a
substitute for measures prepared in accordance with GAAP.
These measures should be read in conjunction with our net earnings,
operating income, basic and diluted earnings per share, and cash
flow data prepared in accordance with GAAP. With respect to Net
Cash Position and Net Cash Available, these measures should be read
in conjunction with cash and cash equivalents prepared in
accordance with GAAP. Total Net Debt and Total Net Debt
Leverage Ratio should be read in conjunction with principal face
value of debt outstanding and cash and cash equivalents.
We define Adjusted EBITDA as earnings (loss)
before interest, taxes, depreciation and amortization, loss on
extinguishment of debt, non-cash stock compensation expense,
accretion of contract rights, write-down of assets, litigation
accrual, employee severance costs and other expenses, foreign
exchange loss, asset acquisition expense, non-recurring
professional fees, other one-time charges and the adjustment of
certain purchase accounting liabilities. We present Adjusted EBITDA
as we use this measure to manage our business and consider this
measure to be supplemental to our operating performance. We also
make certain compensation decisions based, in part, on our
operating performance, as measured by Adjusted EBITDA; and our
current credit facility and existing senior unsecured notes require
us to comply with a consolidated secured leverage ratio that
includes performance metrics substantially similar to Adjusted
EBITDA.
We define Free Cash Flow as Adjusted EBITDA less
cash paid for interest, cash paid for capital expenditures, cash
paid for placement fees, and cash paid for taxes net of
refunds. We present Free Cash Flow as a measure of
performance and believe it provides investors with another
indicator of our operating performance. It should not be inferred
that the entire Free Cash Flow amount is available for
discretionary expenditures.
A reconciliation of the Company’s net income per
GAAP to Adjusted EBITDA and Free Cash Flow is included in the
Unaudited Reconciliation of Net Income to EBITDA and Adjusted
EBITDA and to Free Cash Flow provided at the end of this release.
Additionally, a reconciliation of each segment’s operating income
to EBITDA and Adjusted EBITDA is also included. On a segment level,
operating income per GAAP, rather than net earnings per GAAP, is
reconciled to EBITDA and Adjusted EBITDA as the Company does not
report net earnings by segment. Management believes that this
presentation is meaningful to investors in evaluating the
performance of the Company’s segments.
We define (i) Net Cash Position as cash and cash
equivalents plus settlement receivables less settlement liabilities
and (ii) Net Cash Available as Net Cash Position plus undrawn
amounts available under our revolving credit facility. We present
Net Cash Position because our cash position, as measured by cash
and cash equivalents, depends upon changes in settlement
receivables and the timing of payments related to settlement
liabilities. As such, our cash and cash equivalents can change
substantially based upon the timing of our receipt of payments for
settlement receivables and payments we make to customers for our
settlement liabilities. We present Net Cash Available as
management monitors this amount in connection with its forecasting
of cash flows and future cash requirements.
A reconciliation of the Company’s cash and cash
equivalents per GAAP to Net Cash Position and Net Cash Available is
included in the Unaudited Reconciliation of Cash and Cash
Equivalents to Net Cash Position and Net Cash Available provided at
the end of this release.
We define Total Net Debt as total principal face
value of debt outstanding, the most directly comparable GAAP
measure, less cash and cash equivalents or $50 million, whichever
is smaller. Total Net Debt Leverage Ratio, as used herein,
represents Total Net Debt divided by Adjusted EBITDA for the
trailing twelve-month period. We present Total Net Debt and Total
Net Debt Leverage Ratio as management monitors these items in
evaluating our overall liquidity, financial flexibility and
leverage, as well as our financial position relative to our credit
agreements. Management believes that investors find these
useful in evaluating the Company’s overall liquidity.
Cautionary Note Regarding
Forward-Looking Statements
This press release contains “forward-looking
statements” as defined in the U.S. Private Securities Litigation
Reform Act of 1995. In this context, forward-looking statements
often address our expected future business and financial
performance, and often contain words such as “goal,” “target,”
“future,” “estimate,” “expect,” “anticipate,” “intend,” “plan,”
“believe,” “seek,” “project,” “may,” “should,” “designed to,” “in
an effort to,” “will provide,” “look forward to,” or “will” and
similar expressions to identify forward-looking statements. These
statements are based upon management’s current expectations,
assumptions and estimates and are not guarantees of timing, future
events or performance. Actual results may differ materially from
those contemplated in these statements, due to risks and
uncertainties. Examples of forward-looking statements include,
among others, statements the Company makes regarding its ability to
execute on key initiatives and deliver ongoing improvements; regain
revenue momentum, generate positive Adjusted EBITDA and Free Cash
Flow; and improve the Company’s capital structure; integrate
acquisitions and achieve future growth; drive growth of the gaming
operations installed base and DWPU; continue expanding the portions
of the gaming floor the Company’s games address; and create
incremental value for its shareholders.
Forward-looking statements are neither
historical facts nor assurances of future performance. Instead,
they are based only on our current beliefs, expectations and
assumptions regarding the future of our business, future plans and
strategies, projections, anticipated events and trends, the economy
and other future conditions. Because forward-looking statements
relate to the future, they are subject to inherent risks,
uncertainties and changes in circumstances that are often difficult
to predict and many of which are beyond our control. Our actual
results and financial condition may differ materially from those
indicated in forward-looking statements. Important factors that
could cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, without limitation, the impact of the ongoing COVID-19
global pandemic on our business, operations and financial
condition, our history of net losses and our ability to generate
profits in the future; our substantial leverage and the related
covenants that restrict our operations; our ability to generate
sufficient cash to service all of our indebtedness, fund working
capital, and capital expenditures; our ability to withstand
unanticipated impacts of a pandemic outbreak of uncertain duration;
our ability to withstand the loss of revenue during the closure of
our customers’ facilities; our ability to maintain our current
customers; our ability to compete in the gaming industry; our
ability to execute on mergers, acquisitions and/or strategic
alliances, including the timing and closing of acquisitions and our
ability to integrate and operate such acquisitions consistent with
our forecasts; our ability to access the capital markets to raise
funds; expectations regarding our existing and future installed
base and win per day; expectations regarding development and
placement fee arrangements; inaccuracies in underlying operating
assumptions; expectations regarding customers’ preferences and
demands for future gaming offerings; expectations regarding our
product portfolio; the overall growth of the gaming industry, if
any; our ability to replace revenue associated with terminated
contracts; margin degradation from contract renewals; technological
obsolescence; our ability to comply with the Europay, MasterCard
and Visa global standard for cards equipped with security chip
technology; our ability to introduce new products and
services, including third-party licensed content; gaming
establishment and patron preferences; our ability to prevent,
mitigate or timely recover from cybersecurity breaches, attacks and
compromises; the level of our capital expenditures and product
development; anticipated sales performance; employee turnover;
national and international economic conditions; changes in global
market, business and regulatory conditions arising as a result of
the COVID-19 global pandemic; changes in gaming regulatory, card
association and statutory requirements; regulatory and licensing
difficulties that we may face; competitive pressures in the gaming
and financial technology sectors; the impact of changes to tax
laws; uncertainty of litigation outcomes; interest rate
fluctuations; unanticipated expenses or capital needs and those
other risks and uncertainties discussed in our most recent Annual
Report on Form 10-K filed with the U.S. Securities and Exchange
Commission on March 2, 2020 and our Form 10-Q filed today, August
4, 2020. Given these risks and uncertainties, there can be no
assurance that the forward-looking information contained in this
press release will in fact transpire or prove to be accurate.
Readers are cautioned not to place undue reliance on the
forward-looking statements contained herein, which are based only
on information currently available to us and speak only as of the
date hereof.
This press release should be read in conjunction
with our Annual Report on Form 10-K for the year ended December 31,
2019, and with the information included in our other press
releases, reports and other filings with the SEC. Understanding the
information contained in these filings is important in order to
fully understand our reported financial results and our business
outlook for future periods.
About Everi
Everi (NYSE: EVRI) is a leading supplier of
imaginative entertainment and trusted technology solutions for the
casino, digital, and gaming industry. With a focus on both
customers and players, the Company develops entertaining games and
gaming machines, gaming systems and services, and is the preeminent
and most comprehensive provider of core financial products and
services, player loyalty tools and applications, and intelligence
and regulatory compliance solutions. Everi’s mission is to provide
casino operators with games that facilitate memorable player
experiences, offer seamless and secure financial transactions for
casinos and their patrons, and deliver software tools and
applications to improve casino operations efficiencies and fulfill
regulatory compliance requirements. Everi provides these products
and services in its effort to help make customers successful. For
more information, please visit www.everi.com, which is updated
regularly with financial and other information about the
Company.
CONTACTSInvestor RelationsEveri
Holdings Inc.William PfundVP, Investor Relations 702-676-9513 or
william.pfund@everi.com
JCIR Richard Land, James Leahy212-835-8500 or
evri@jcir.com
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS ANDCOMPREHENSIVE (LOSS)
INCOME (In thousands, except earnings per share
amounts)
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues |
|
|
|
|
|
|
|
|
Games revenues |
|
|
|
|
|
|
|
|
Gaming operations |
|
$ |
13,859 |
|
|
$ |
45,576 |
|
|
$ |
59,545 |
|
|
$ |
89,862 |
|
Gaming equipment and systems |
|
6,983 |
|
|
23,412 |
|
|
18,566 |
|
|
46,499 |
|
Gaming other |
|
11 |
|
|
391 |
|
|
32 |
|
|
445 |
|
Games total revenues |
|
20,853 |
|
|
69,379 |
|
|
78,143 |
|
|
136,806 |
|
FinTech revenues |
|
|
|
|
|
|
|
|
Cash access services |
|
10,034 |
|
|
39,696 |
|
|
47,007 |
|
|
80,528 |
|
Equipment |
|
3,404 |
|
|
7,835 |
|
|
9,756 |
|
|
14,863 |
|
Information services and other |
|
4,424 |
|
|
12,796 |
|
|
17,118 |
|
|
21,284 |
|
FinTech total revenues |
|
17,862 |
|
|
60,327 |
|
|
73,881 |
|
|
116,675 |
|
Total revenues |
|
38,715 |
|
|
129,706 |
|
|
152,024 |
|
|
253,481 |
|
Costs and
expenses |
|
|
|
|
|
|
|
|
Games cost of revenues |
|
|
|
|
|
|
|
|
Gaming operations |
|
1,681 |
|
|
3,726 |
|
|
6,226 |
|
|
7,850 |
|
Gaming equipment and systems |
|
4,071 |
|
|
13,432 |
|
|
10,895 |
|
|
25,961 |
|
Gaming other |
|
456 |
|
|
347 |
|
|
456 |
|
|
347 |
|
Games total cost of revenues |
|
6,208 |
|
|
17,505 |
|
|
17,577 |
|
|
34,158 |
|
FinTech cost of revenues |
|
|
|
|
|
|
|
|
Cash access services |
|
511 |
|
|
2,968 |
|
|
4,066 |
|
|
5,665 |
|
Equipment |
|
2,014 |
|
|
4,597 |
|
|
5,904 |
|
|
8,927 |
|
Information services and other |
|
324 |
|
|
970 |
|
|
1,198 |
|
|
1,928 |
|
FinTech total cost of revenues |
|
2,849 |
|
|
8,535 |
|
|
11,168 |
|
|
16,520 |
|
Operating expenses |
|
41,603 |
|
|
39,167 |
|
|
80,501 |
|
|
73,815 |
|
Research and development |
|
5,193 |
|
|
6,672 |
|
|
13,924 |
|
|
14,203 |
|
Depreciation |
|
16,294 |
|
|
15,258 |
|
|
32,537 |
|
|
30,047 |
|
Amortization |
|
19,295 |
|
|
17,690 |
|
|
38,619 |
|
|
33,987 |
|
Total costs and expenses |
|
91,442 |
|
|
104,827 |
|
|
194,326 |
|
|
202,730 |
|
Operating (loss) income |
|
(52,727 |
) |
|
24,879 |
|
|
(42,302 |
) |
|
50,751 |
|
Other
expenses |
|
|
|
|
|
|
|
|
Interest expense, net of interest income |
|
19,822 |
|
|
20,433 |
|
|
37,321 |
|
|
40,833 |
|
Loss on extinguishment of debt |
|
80 |
|
|
— |
|
|
7,457 |
|
|
— |
|
Total other expenses |
|
19,902 |
|
|
20,433 |
|
|
44,778 |
|
|
40,833 |
|
(Loss) income before income tax |
|
(72,629 |
) |
|
4,446 |
|
|
(87,080 |
) |
|
9,918 |
|
Income tax benefit |
|
(4,148 |
) |
|
(1,040 |
) |
|
(5,145 |
) |
|
(1,428 |
) |
Net (loss) income |
|
(68,481 |
) |
|
5,486 |
|
|
(81,935 |
) |
|
11,346 |
|
Foreign currency translation, net of tax |
|
304 |
|
|
(35 |
) |
|
(1,654 |
) |
|
469 |
|
Comprehensive (loss) income |
|
$ |
(68,177 |
) |
|
$ |
5,451 |
|
|
$ |
(83,589 |
) |
|
$ |
11,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
2019 |
(Loss) earnings per
share |
|
|
|
|
|
|
|
Basic |
|
$ |
(0.80 |
) |
|
$ |
0.08 |
|
|
$ |
(0.97 |
) |
|
$ |
0.16 |
|
Diluted |
|
$ |
(0.80 |
) |
|
$ |
0.07 |
|
|
$ |
(0.97 |
) |
|
$ |
0.15 |
|
Weighted average
common shares outstanding |
|
|
|
|
|
|
|
Basic |
|
85,122 |
|
|
71,477 |
|
|
84,873 |
|
|
70,909 |
|
Diluted |
|
85,122 |
|
|
79,158 |
|
|
84,873 |
|
|
77,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (In
thousands)
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
Cash flows from
operating activities |
|
|
|
Net (loss) income |
$ |
(81,935 |
) |
|
$ |
11,346 |
|
Adjustments to reconcile net (loss) income to cash used in
operating activities: |
|
|
|
Depreciation |
32,537 |
|
|
30,047 |
|
Amortization |
38,619 |
|
|
33,987 |
|
Non-cash lease expense |
2,195 |
|
|
2,018 |
|
Amortization of financing costs and discounts |
1,941 |
|
|
1,789 |
|
Loss on sale or disposal of assets |
101 |
|
|
1,121 |
|
Accretion of contract rights |
3,170 |
|
|
4,318 |
|
Provision for credit losses |
4,981 |
|
|
5,912 |
|
Deferred income taxes |
(5,392 |
) |
|
(1,748 |
) |
Reserve for inventory obsolescence |
1,021 |
|
|
670 |
|
Write-down of assets |
11,033 |
|
|
843 |
|
Loss on extinguishment of debt |
7,457 |
|
|
— |
|
Stock-based compensation |
7,123 |
|
|
4,160 |
|
Other non-cash items |
456 |
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
Settlement receivables |
35,998 |
|
|
(161,117 |
) |
Trade and other receivables |
12,202 |
|
|
(16,497 |
) |
Inventory |
(9,880 |
) |
|
(4,570 |
) |
Other assets |
1,437 |
|
|
(20,518 |
) |
Settlement liabilities |
(75,566 |
) |
|
(3,478 |
) |
Other liabilities |
(25,908 |
) |
|
24,060 |
|
Net cash used in operating activities |
(38,410 |
) |
|
(87,657 |
) |
Cash flows from investing
activities |
|
|
|
Capital expenditures |
(30,134 |
) |
|
(45,683 |
) |
Acquisitions, net of cash acquired |
(15,000 |
) |
|
(20,000 |
) |
Proceeds from sale of property and equipment |
86 |
|
|
50 |
|
Placement fee agreements |
(875 |
) |
|
(11,648 |
) |
Net cash used in investing activities |
(45,923 |
) |
|
(77,281 |
) |
Cash flows from financing
activities |
|
|
|
Proceeds from secured term loan |
125,000 |
|
|
— |
|
Borrowings under revolving credit facility |
35,000 |
|
|
— |
|
Repayments of unsecured notes |
(89,619 |
) |
|
— |
|
Repayments of credit facility |
(13,500 |
) |
|
(17,700 |
) |
Fees associated with debt transactions |
(11,128 |
) |
|
— |
|
Proceeds from exercise of stock options |
2,113 |
|
|
9,450 |
|
Treasury stock |
(589 |
) |
|
(980 |
) |
Net cash provided by (used in) financing
activities |
47,277 |
|
|
(9,230 |
) |
Effect of exchange rates on cash and cash equivalents |
(1,732 |
) |
|
714 |
|
Cash, cash equivalents
and restricted cash |
|
|
|
Net decrease for the period |
(38,788 |
) |
|
(173,454 |
) |
Balance, beginning of the period |
296,610 |
|
|
299,181 |
|
Balance, end of the period |
$ |
257,822 |
|
|
$ |
125,727 |
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED RECONCILIATION OF CASH AND
CASH EQUIVALENTSTO NET CASH POSITION AND NET CASH
AVAILABLE (In thousands)
|
At June 30, |
|
At December 31, |
|
At June 30, |
|
2020 |
|
2019 |
|
2019 |
Cash
available |
|
|
|
|
|
Cash and cash equivalents |
$ |
257,430 |
|
|
$ |
289,870 |
|
|
$ |
123,845 |
|
Settlement receivables |
33,833 |
|
|
70,282 |
|
|
244,183 |
|
Settlement liabilities |
(158,075 |
) |
|
(234,087 |
) |
|
(331,291 |
) |
Net Cash Position |
133,188 |
|
|
126,065 |
|
|
36,737 |
|
|
|
|
|
|
|
Undrawn revolving credit facility |
— |
|
|
35,000 |
|
|
35,000 |
|
|
|
|
|
|
|
Net Cash Available |
$ |
133,188 |
|
|
$ |
161,065 |
|
|
$ |
71,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED RECONCILIATION OF NET (LOSS)
INCOME TO EBITDA AND ADJUSTED EBITDA AND TO FREE CASH
FLOW(In thousands)
|
Three Months Ended June 30, 2020 |
|
Three Months Ended June 30, 2019 |
|
Games |
|
FinTech |
|
Total |
|
Games |
|
FinTech |
|
Total |
Net (loss) income |
|
|
|
|
$ |
(68,481 |
) |
|
|
|
|
|
$ |
5,486 |
|
Income tax benefit |
|
|
|
|
(4,148 |
) |
|
|
|
|
|
(1,040 |
) |
Loss on extinguishment of
debt |
|
|
|
|
80 |
|
|
|
|
|
|
— |
|
Interest expense, net of interest
income |
|
|
|
|
19,822 |
|
|
|
|
|
|
20,433 |
|
Operating (loss) income |
$ |
(41,848 |
) |
|
$ |
(10,879 |
) |
|
$ |
(52,727 |
) |
|
$ |
2,552 |
|
|
$ |
22,327 |
|
|
$ |
24,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: depreciation and
amortization |
30,159 |
|
|
5,430 |
|
|
35,589 |
|
|
28,093 |
|
|
4,855 |
|
|
32,948 |
|
EBITDA |
$ |
(11,689 |
) |
|
$ |
(5,449 |
) |
|
$ |
(17,138 |
) |
|
$ |
30,645 |
|
|
$ |
27,182 |
|
|
$ |
57,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock compensation
expense |
2,402 |
|
|
2,238 |
|
|
4,640 |
|
|
736 |
|
|
1,650 |
|
|
2,386 |
|
Accretion of contract rights |
1,000 |
|
|
— |
|
|
1,000 |
|
|
2,197 |
|
|
— |
|
|
2,197 |
|
Write-down of assets |
9,232 |
|
|
1,801 |
|
|
11,033 |
|
|
843 |
|
|
— |
|
|
843 |
|
Employee severance costs and
other expenses |
1,578 |
|
|
1,122 |
|
|
2,700 |
|
|
— |
|
|
— |
|
|
— |
|
Non-recurring professional
fees |
30 |
|
|
582 |
|
|
612 |
|
|
298 |
|
|
519 |
|
|
817 |
|
Other one-time charges |
456 |
|
|
— |
|
|
456 |
|
|
— |
|
|
— |
|
|
— |
|
Adjusted
EBITDA |
$ |
3,009 |
|
|
$ |
294 |
|
|
$ |
3,303 |
|
|
$ |
34,719 |
|
|
$ |
29,351 |
|
|
$ |
64,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
|
|
|
(22,101 |
) |
|
|
|
|
|
(27,079 |
) |
Cash paid for capital
expenditures |
|
|
|
|
(7,627 |
) |
|
|
|
|
|
(23,489 |
) |
Cash paid for placement fees |
|
|
|
|
(290 |
) |
|
|
|
|
|
(6,319 |
) |
Cash paid for income taxes,
net |
|
|
|
|
(26 |
) |
|
|
|
|
|
(201 |
) |
Free Cash
Flow |
|
|
|
|
$ |
(26,741 |
) |
|
|
|
|
|
$ |
6,982 |
|
* Rounding may cause variances.
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED RECONCILIATION OF NET (LOSS)
INCOME TO EBITDA AND ADJUSTED EBITDA AND TO FREE CASH
FLOW(In
thousands)
|
Six Months Ended June 30, 2020 |
|
Six Months Ended June 30, 2019 |
|
Games |
|
FinTech |
|
Total |
|
Games |
|
FinTech |
|
Total |
Net (loss) income |
|
|
|
|
$ |
(81,935 |
) |
|
|
|
|
|
$ |
11,346 |
|
Income tax benefit |
|
|
|
|
(5,145 |
) |
|
|
|
|
|
(1,428 |
) |
Loss on extinguishment of
debt |
|
|
|
|
7,457 |
|
|
|
|
|
|
— |
|
Interest expense, net of interest
income |
|
|
|
|
37,321 |
|
|
|
|
|
|
40,833 |
|
Operating (loss) income |
$ |
(47,241 |
) |
|
$ |
4,940 |
|
|
$ |
(42,302 |
) |
|
$ |
5,656 |
|
|
$ |
45,095 |
|
|
$ |
50,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: depreciation and
amortization |
60,472 |
|
|
10,684 |
|
|
71,156 |
|
|
55,249 |
|
|
8,785 |
|
|
64,034 |
|
EBITDA |
$ |
13,231 |
|
|
$ |
15,624 |
|
|
$ |
28,854 |
|
|
$ |
60,905 |
|
|
$ |
53,880 |
|
|
$ |
114,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock compensation
expense |
3,688 |
|
|
3,435 |
|
|
7,123 |
|
|
1,293 |
|
|
2,867 |
|
|
4,160 |
|
Accretion of contract rights |
3,170 |
|
|
— |
|
|
3,170 |
|
|
4,318 |
|
|
— |
|
|
4,318 |
|
Write-down of assets |
9,232 |
|
|
1,801 |
|
|
11,033 |
|
|
843 |
|
|
— |
|
|
843 |
|
Employee severance costs and
other expenses |
1,578 |
|
|
1,122 |
|
|
2,700 |
|
|
— |
|
|
— |
|
|
— |
|
Foreign exchange loss |
83 |
|
|
1,199 |
|
|
1,282 |
|
|
— |
|
|
— |
|
|
— |
|
Non-recurring professional
fees |
30 |
|
|
932 |
|
|
962 |
|
|
484 |
|
|
790 |
|
|
1,274 |
|
Other one-time charges |
456 |
|
|
— |
|
|
456 |
|
|
— |
|
|
— |
|
|
— |
|
Adjusted
EBITDA |
$ |
31,468 |
|
|
$ |
24,113 |
|
|
$ |
55,580 |
|
|
$ |
67,843 |
|
|
$ |
57,537 |
|
|
$ |
125,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
|
|
|
(32,956 |
) |
|
|
|
|
|
(39,549 |
) |
Cash paid for capital
expenditures |
|
|
|
|
(30,134 |
) |
|
|
|
|
|
(45,683 |
) |
Cash paid for placement fees |
|
|
|
|
(875 |
) |
|
|
|
|
|
(11,648 |
) |
Cash refunded (paid) for income
taxes, net |
|
|
|
|
52 |
|
|
|
|
|
|
(293 |
) |
Free Cash
Flow |
|
|
|
|
$ |
(8,333 |
) |
|
|
|
|
|
$ |
28,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
* Rounding may cause variances.
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED CALCULATION OF TOTAL NET
DEBT LEVERAGE RATIO(In thousands, except for
ratio)
|
|
Trailing Twelve Months Ended |
|
|
June 30, 2020 |
|
June 30, 2019 |
Net (loss) income |
|
$ |
(76,764 |
) |
|
|
$ |
17,618 |
|
|
Income tax benefit |
|
(4,240 |
) |
|
|
(9,547 |
) |
|
Loss on extinguishment of
debt |
|
7,637 |
|
|
|
— |
|
|
Interest expense, net of interest
income |
|
74,332 |
|
|
|
81,405 |
|
|
Operating
income |
|
$ |
965 |
|
|
|
$ |
89,476 |
|
|
|
|
|
|
|
Plus: depreciation and
amortization |
|
139,257 |
|
|
|
131,123 |
|
|
EBITDA |
|
$ |
140,222 |
|
|
|
$ |
220,599 |
|
|
|
|
|
|
|
Non-cash stock compensation
expense |
|
12,820 |
|
|
|
7,104 |
|
|
Accretion of contract rights |
|
7,561 |
|
|
|
8,562 |
|
|
Write-down of assets |
|
11,458 |
|
|
|
843 |
|
|
Litigation accrual |
|
6,350 |
|
|
|
— |
|
|
Employee severance costs and
other expenses |
|
2,700 |
|
|
|
— |
|
|
Foreign exchange loss |
|
1,282 |
|
|
|
— |
|
|
Asset acquisition expense,
non-recurring professional fees and other |
|
681 |
|
|
|
1,682 |
|
|
Other one-time charges |
|
456 |
|
|
|
— |
|
|
Adjustment of certain purchase
accounting liabilities |
|
(129 |
) |
|
|
(550 |
) |
|
Adjusted
EBITDA |
|
$ |
183,401 |
|
|
|
$ |
238,240 |
|
|
|
|
|
|
|
Principal amount of outstanding
debt(1) |
|
$ |
1,180,881 |
|
|
|
$ |
1,147,207 |
|
|
Less: cash and cash equivalents (2) |
|
50,000 |
|
|
|
50,000 |
|
|
Total Net Debt |
|
$ |
1,130,881 |
|
|
|
$ |
1,097,207 |
|
|
Total Net Debt Leverage
Ratio |
|
6.2 |
|
x |
|
4.6 |
|
x |
(1) Principal amount outstanding of senior
secured term loan, the senior secured revolving credit facility and
senior unsecured notes.
(2) The Company nets the lesser of cash and cash
equivalents or $50 million against principal amount of outstanding
debt, as provided in the Company's Amended Credit Facility.
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