Everi Holdings Inc. (NYSE: EVRI) (“Everi” or the “Company”), the
gaming industry’s premier single-source provider of gaming
products, financial technology and loyalty solutions, today
reported record financial results for the third quarter ended
September 30, 2019 and reiterated its financial targets for
the full year.
“Our record quarterly financial results can be
directly attributed to the value of our product development
initiatives and the operating strategies we adopted. Together,
these are driving ongoing growth across our business,” said Michael
Rumbolz, President and CEO. “This was our 13th consecutive quarter
of year-over-year growth in revenue and Adjusted EBITDA. Our
revenue rose 12% to $134.6 million. Third quarter 2019 net income
was $9.3 million and diluted earnings per share more than tripled
to $0.12. Adjusted EBITDA improved 11% to $64.7 million. We
generated Free Cash Flow of $11.0 million in the quarter and $39.3
million year-to-date. This continuing positive progress in our
financial results, includes another quarter of strong performance
in both our Games and our FinTech businesses. These achievements
are due to the passion and dedication of all our team members who
help our customers grow their businesses by providing them with
innovative solutions and world-class customer service. Given the
ongoing strength of our business and growth opportunities, we
remain on track to generate full-year results in line with our
financial targets.”
Randy Taylor, Executive Vice President and Chief
Financial Officer, said, “Our Free Cash Flow continues to
accelerate and, with our continued focus on reducing leverage, we
paid down $8.0 million on our term loan during the third quarter,
bringing our year-to-date total debt repayment to $25.7 million. As
a result, our total Net Debt Leverage Ratio improved to 4.5 times
at September 30, 2019. With our enhanced performance and the
ongoing benefits from the prudent capital investments we are making
in both our Games and FinTech operations, we are well positioned to
maintain our growth profile in the 2019 fourth quarter and into
2020, which we expect will drive further improvements in our
capital structure and lower our cost of capital.”
Consolidated Full Quarter Comparative
Results (unaudited)
|
Three Months
Ended September 30, |
|
2019 |
|
2018 |
|
(in millions, except per share amounts) |
Revenues |
$ |
134.6 |
|
$ |
120.3 |
|
|
|
|
|
|
Operating income |
$ |
27.3 |
|
$ |
21.5 |
|
|
|
|
|
|
Net income |
$ |
9.3 |
|
$ |
2.1 |
|
|
|
|
|
|
Net earnings per diluted
share |
$ |
0.12 |
|
$ |
0.03 |
|
|
|
|
|
|
Diluted shares
outstanding |
|
79.1 |
|
|
74.6 |
|
|
|
|
|
|
Adjusted EBITDA (1) (2) |
$ |
64.7 |
|
$ |
58.3 |
(1) Adjusted EBITDA for the three months
ended September 30, 2018 excludes the benefit of approximately $0.6
million related to an adjustment to certain purchase accounting
liabilities related to the Company’s acquisition of certain
compliance assets in 2015.
(2) For a reconciliation of net income to
Adjusted EBITDA, see the Unaudited Reconciliation of Net Income to
EBITDA and Adjusted EBITDA and to Free Cash Flow provided at the
end of this release.
Mr. Rumbolz added, “Especially noteworthy for
our third quarter Games’ segment performance was the combination of
the significant quarterly sequential growth in our installed base,
which rose 578 units primarily in our Premium units, and the
year-over-year increase in daily win per unit (“DWPU”) for the
quarter, which improved more than 15% to an all-time high of
$33.95. These gains are a direct result of the improved performance
of the products we introduced during the last several years and the
expanded categories of game types we now address on the slot floor.
The same innovation demonstrated in our newest premium units is
also being applied to the development of our standard games, as we
focus on building a deeper library of games to support our growing
portfolio of cabinets. We believe this focus will enable Everi to
deliver full-year unit sales growth and expand our ship share.
“Growth in our FinTech segment is attributable
to our unique ability to offer a comprehensive portfolio of
integrated solutions that allow customers to operate more
efficiently and productively. At the same time, we also maximize
funds delivered to our customers’ casino floors. We continue to
generate steady organic growth, while also benefitting from the
acquisition earlier this year of player loyalty and marketing
products. As a complementary addition to our FinTech portfolio,
this business is proving to be both strategic and highly accretive.
Also driving growth is the replacement of older kiosks and other
equipment, as our customers look to further improve their
efficiencies with the newest enhancements and latest innovations
embedded in all our products.”
Mr. Rumbolz further commented, “The favorable
customer reaction to our newest Games and FinTech solutions at the
recent G2E® show bolsters our confidence in our near- and long-term
outlook that we can generate consistent profitable revenue growth
and Free Cash Flow generation. For our Games segment, our broad
offering of new products across the spectrum of premium mechanical,
premium video, standard mechanical, standard video and wide-area
progressive (“WAP”) games, including the extensive depth of new
game content, were very favorably received by customers. New games,
such as The Vault™, an innovative premium game that is a follow-on
theme to our very successful Discovery Channel’s Shark Week® game,
our Cash Machine™ high-denomination mechanical reel and the new
Empire Flex™ for-sale video cabinet with a library of unique new
titles were among the highlights for our customers at G2E.
“Our visionary CashClub® Wallet, with its
compelling customer and player dynamics that link our ‘Digital
Neighborhood’ of products, garnered especially favorable responses
from customers at G2E. Our FinTech product portfolio has never been
stronger. Our new loyalty and marketing kiosks and programs, the
integrated nature of our comprehensive offering, and the growing
number of solutions we offer customers are all designed to retain
players with a seamless and convenient experience at our customers’
properties. All of this further strengthens our ability to
deliver consistent future growth across our Games and FinTech
businesses, including opportunities to continue to gain market
share.”
Third Quarter 2019 Results
Overview
Revenues for the third quarter of 2019 increased
12% to a record $134.6 million, from $120.3 million in the third
quarter of 2018. Games and FinTech segment revenues increased 5% to
$69.3 million and 20% to $65.3 million, respectively, for the third
quarter of 2019.
Operating income increased 27% to $27.3 million
for the third quarter of 2019 compared to $21.5 million in the
third quarter of 2018, reflecting an approximately 200 basis point
improvement in operating margin to 20% from 18%. Net income
increased 350% to $9.3 million and diluted earnings per share more
than tripled to $0.12, compared with net income of $2.1 million and
$0.03 per diluted share, in the prior-year period.
Adjusted EBITDA for the third quarter of 2019
increased 11% to a record $64.7 million from $58.3 million in the
third quarter of 2018. Games and FinTech segment Adjusted EBITDA
increased to $34.6 million and $30.1 million, respectively, for the
three months ended September 30, 2019, compared with Games and
FinTech Adjusted EBITDA for the third quarter 2018 of $31.8 million
and $26.5 million, respectively.
Games Segment Full Quarter Comparative
Results (unaudited)
|
Three Months Ended September 30, |
|
2019 |
|
2018 |
|
|
(in millions, except unit amounts and prices) |
Revenues |
$ |
69.3 |
|
$ |
65.8 |
|
|
|
|
|
Operating income (loss) |
$ |
3.1 |
|
$ |
(0.7 |
) |
|
|
|
|
Adjusted EBITDA (1) |
$ |
34.6 |
|
$ |
31.8 |
|
|
|
|
|
Unit
sales: |
|
|
|
Units sold |
1,040 |
|
1,165 |
|
Average sales price ("ASP") |
$ |
17,983 |
|
$ |
17,005 |
|
|
|
|
|
Gaming
operations installed base: |
|
|
|
Average units installed during period: |
|
|
|
Average units installed |
13,979 |
|
14,233 |
|
Approximate daily win per unit (2) |
$ |
33.95 |
|
$ |
29.45 |
|
|
|
|
|
Units installed at end of period: |
|
|
|
Class II |
9,188 |
|
9,478 |
|
Class III |
5,084 |
|
4,638 |
|
Total installed base |
14,272 |
|
14,116 |
|
|
|
|
|
Installed base - Oklahoma |
6,351 |
|
6,598 |
|
Installed base - non-Oklahoma |
7,921 |
|
7,518 |
|
Total installed base |
14,272 |
|
14,116 |
|
|
|
|
|
Premium units |
4,395 |
|
2,840 |
|
(1) For a reconciliation of net income to Adjusted EBITDA, see
the Unaudited Reconciliation of Net Income to EBITDA and Adjusted
EBITDA and to Free Cash Flow provided at the end of this
release.
(2) Approximate daily win per unit excludes the impact of the
direct costs associated with the Company’s wide-area progressive
jackpot expense.
2019 Third Quarter Games Segment
Highlights
Games segment revenues increased 5% to $69.3
million in the third quarter of 2019 compared to $65.8 million in
the third quarter of 2018.
- Revenues from gaming operations increased $5.0 million, or 11%,
to a record $48.5 million in the third quarter of 2019, compared to
$43.5 million in the prior-year period. The year-over-year
improvement primarily reflects a 15% increase in estimated DWPU.°
DWPU increased 15%, or $4.50, to a record $33.95 in the third
quarter of 2019, compared to $29.45 in the prior-year period. The
increase reflects, in part, improvements in overall unit
performance following 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 the growth in premium unit
placements, including WAP games. This was the eighth consecutive
quarter of year-over-year growth in DWPU.° The installed base
at September 30, 2019 increased by 156 units year over year to a
record quarter-ending level of 14,272 units and grew by 578 units
on a quarterly sequential basis, primarily reflecting the continued
expansion of premium units within the installed base. With more
than 30% of the installed units now being premium games and the
steady demand for its newest products, the Company is favorably
positioned for further gaming operations revenue growth in the
fourth quarter.° The premium portion of the installed base
increased 55% year over year, or by 1,555 units, to 4,395 units,
which was 982 units higher on a quarterly sequential basis. WAP
units, a subcomponent of premium units, grew by 331 units year over
year and by 66 units on a quarterly sequential basis to 866 units
at September 30, 2019.° Interactive revenue more than doubled
to $1.2 million in the third quarter of 2019 compared to $0.5
million in the prior-year period.° Revenues from the New York
Lottery business were $4.8 million in the third quarter of 2019
compared to $4.7 million in the prior-year period.
- Revenues generated from the sale of gaming units and other
related parts and equipment totaled $19.6 million in the third
quarter of 2019 compared to revenues of $21.1 million in the
prior-year period. Unit sales decreased by 125 units to 1,040 units
in the third quarter of 2019 compared to 1,165 units in the
prior-year period, primarily reflecting a 60-unit decrease in sales
to international customers and a 120-unit conversion from lease to
sale at one customer location in the prior year. The ASP increased
to $17,983 compared with $17,005 in the prior-year period.
The ASP for the third quarter 2018 reflects the lower-priced
international unit sales.
- Other gaming revenues, which primarily includes revenues from
TournEvent of Champions® qualifying events at participating
casinos, was $1.1 million for the third quarter of 2019 compared
with $1.2 million in the prior-year period.
Financial Technology Solutions Segment
Full Quarter Comparative Results (unaudited)
|
Three Months Ended September 30, |
|
2019 |
|
2018 |
|
(in millions, unless otherwise noted) |
Revenues |
$ |
65.3 |
|
$ |
54.5 |
|
|
|
|
Operating income |
$ |
24.2 |
|
$ |
22.2 |
|
|
|
|
Adjusted EBITDA (1) (2) |
$ |
30.1 |
|
$ |
26.5 |
|
|
|
|
Aggregate dollar amount processed (in billions): |
|
|
|
Cash advance |
$ |
1.9 |
|
$ |
1.8 |
ATM |
$ |
5.4 |
|
$ |
4.9 |
Check warranty |
$ |
0.4 |
|
$ |
0.3 |
|
|
|
|
Number
of transactions completed (in millions): |
|
|
|
Cash advance |
3.0 |
|
2.8 |
ATM |
25.0 |
|
23.4 |
Check warranty |
0.9 |
|
0.9 |
(1) Adjusted EBITDA for the three months ended September 30,
2018 excludes the benefit of approximately $0.6 million related to
an adjustment to certain purchase accounting liabilities related to
the Company’s acquisition of certain compliance assets in 2015.
(2) For a reconciliation of net income to Adjusted EBITDA, see
the Unaudited Reconciliation of Net Income to EBITDA and Adjusted
EBITDA and to Free Cash Flow at the end of this release.
2019 Third Quarter Financial Technology
Solutions Segment Highlights
FinTech revenues increased $10.8 million, or
20%, to $65.3 million in the third quarter of 2019 compared to
$54.5 million in the prior-year period, reflecting 11% organic
growth and $4.6 million in revenues from the player loyalty and
marketing business acquired in March 2019.
- Revenues from cash access services, which include ATM, cash
advance and check services, increased 10% to $43.2 million in the
third quarter of 2019 compared to $39.4 million in the third
quarter of 2018. Third quarter 2019 cash access services revenues
reflect the benefit from increased transactions and dollars
processed, as well as the benefits from new customer wins from
competitive bid processes and new casino openings and expansions.
This was the 20th consecutive quarter of growth in both the number
of transactions and total dollars processed on a same-store
basis.
- Equipment sales revenues rose $3.0 million, or 42%, to $10.2
million in the third quarter of 2019 compared to $7.2 million in
the third quarter of 2018. This increase is primarily due to a 25%
increase in year-over-year sales of fully integrated kiosks and
other value-add products that improve operator efficiencies and
productivity, along with $1.2 million of player loyalty and
marketing kiosk sales.
- Revenues from information services and other, which includes
kiosk maintenance, compliance products, Central Credit, player
loyalty and other revenue, increased $4.1 million, or 52%, to $12.0
million, in the third quarter of 2019 compared to $7.9 million in
the third quarter of 2018. The increase is primarily due to $3.4
million of revenues related to recurring software license support
for the player loyalty and marketing business together with an 8%
increase in organic revenue.
2019 Outlook
Everi today reiterated its 2019 expectation of
generating annual growth in revenue, Adjusted EBITDA and Free Cash
Flow. The target for Adjusted EBITDA is reaffirmed as a range of
$252 million to $255 million, reflecting the continued broad-based
growth across the Company’s operating segments.
Given the significant success being achieved in
the Company’s gaming operations business, evidenced by its higher
DWPU and the continued strong demand for its premium gaming
machines, Everi expects to further grow its installed base in the
2019 fourth quarter. The Company believes its ending
installed base at December 31, 2019 will be in the range of 14,500
to 14,700 units. The Company now expects its capital expenditures
and placement fees, including the capital expenditures related to
the player loyalty acquisition, for 2019 to be approximately $130
million to $133 million, exceeding the Company’s previous range of
$122 million to $125 million. As a result of this increased
investment in the second half of 2019 to support momentum in its
high-margin gaming operations’ unit placements, which are expected
to help drive growth in 2020, the Company expects 2019 Free Cash
Flow will be within a range of $42 million to $45 million.
For a reconciliation of projected net income to
projected Adjusted EBITDA, see the Reconciliation of Projected Net
Income to Projected EBITDA, Projected Adjusted EBITDA and Free Cash
Flow provided at the end of this release.
Investor Conference Call and
Webcast
The Company will host an investor conference
call to discuss its 2019 third quarter results at 5:00 p.m. ET
today. The conference call may be accessed live by phone by
dialing +1 (323) 794-2551. 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 7029323. A
replay will be available until November 12, 2019. The call will
also be webcast live and archived on the Company’s website at
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 before
interest, loss on extinguishment of debt, taxes, depreciation and
amortization, non-cash stock compensation expense, accretion of
contract rights, the write-off of inventory and fixed assets,
certain purchase accounting adjustments and asset acquisition
expense and other non-recurring professional service fees. 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,” 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 (a) its
ability to execute on key initiatives and deliver ongoing
improvements; accelerate Free Cash Flow generation 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; and (b) its guidance related to 2019 financial and
operational metrics, including net income; Adjusted EBITDA;
Free Cash Flow; revenues; unit sales of Gaming units and FinTech
equipment; gaming operations placements, size of the installed base
and DWPU; the contribution from acquisitions; anticipated levels of
capital expenditures and placement fees; depreciation and
amortization expense; interest expense; income tax benefit,
including cash tax payments; cash interest payments; non-cash stock
compensation expense; and accretion of contract rights.
The forward-looking statements in this press
release are subject to a variety of risks and uncertainties,
including those set forth under the heading “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our periodic reports filed with the
Securities and Exchange Commission (the “SEC”), including, without
limitation, our Annual Report on Form 10-K for the year ended
December 31, 2018 , and are based on information available to us on
the date hereof.
These cautionary statements qualify our
forward-looking statements and you are cautioned not to place undue
reliance on these forward-looking statements. Any forward-looking
statement contained herein speaks only as of the date, today
November 5, 2019, on which it is made, and we do not intend, and
assume no obligation, to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
This press release should be read in conjunction with the Form
10-Q to which it relates, 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, interactive, 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
JCIRRichard Land, James Leahy212-835-8500 or evri@jcir.com
|
|
EVERI HOLDINGS INC. AND SUBSIDIARIES |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND |
COMPREHENSIVE INCOME |
(In thousands, except earnings per share
amounts) |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Revenues |
|
|
|
|
|
|
|
|
Games revenues |
|
|
|
|
|
|
|
|
Gaming operations |
|
$ |
48,515 |
|
|
$ |
43,540 |
|
|
$ |
138,377 |
|
|
$ |
126,618 |
|
Gaming equipment and systems |
|
19,584 |
|
|
21,068 |
|
|
66,083 |
|
|
63,499 |
|
Gaming other |
|
1,174 |
|
|
1,231 |
|
|
1,619 |
|
|
1,887 |
|
Games total revenues |
|
69,273 |
|
|
65,839 |
|
|
206,079 |
|
|
192,004 |
|
FinTech
revenues |
|
|
|
|
|
|
|
|
Cash access services |
|
43,152 |
|
|
39,406 |
|
|
123,680 |
|
|
117,364 |
|
Equipment |
|
10,188 |
|
|
7,155 |
|
|
25,051 |
|
|
16,338 |
|
Information services and other |
|
11,956 |
|
|
7,930 |
|
|
33,240 |
|
|
24,307 |
|
FinTech total revenues |
|
65,296 |
|
|
54,491 |
|
|
181,971 |
|
|
158,009 |
|
Total revenues |
|
134,569 |
|
|
120,330 |
|
|
388,050 |
|
|
350,013 |
|
Costs and
expenses |
|
|
|
|
|
|
|
|
Games cost of revenues |
|
|
|
|
|
|
|
|
Gaming operations |
|
4,942 |
|
|
4,607 |
|
|
12,792 |
|
|
13,000 |
|
Gaming equipment and systems |
|
11,126 |
|
|
11,907 |
|
|
37,087 |
|
|
34,693 |
|
Gaming other |
|
1,117 |
|
|
1,059 |
|
|
1,464 |
|
|
1,618 |
|
Games total cost of revenues |
|
17,185 |
|
|
17,573 |
|
|
51,343 |
|
|
49,311 |
|
FinTech cost of revenues |
|
|
|
|
|
|
|
|
Cash access services |
|
4,112 |
|
|
2,234 |
|
|
9,777 |
|
|
6,910 |
|
Equipment |
|
5,957 |
|
|
3,846 |
|
|
14,884 |
|
|
9,786 |
|
Information services and other |
|
1,024 |
|
|
949 |
|
|
2,952 |
|
|
3,146 |
|
FinTech total cost of revenues |
|
11,093 |
|
|
7,029 |
|
|
27,613 |
|
|
19,842 |
|
Operating expenses |
|
37,631 |
|
|
35,419 |
|
|
111,446 |
|
|
105,176 |
|
Research and development |
|
8,196 |
|
|
5,407 |
|
|
22,399 |
|
|
14,313 |
|
Depreciation |
|
16,015 |
|
|
17,304 |
|
|
46,062 |
|
|
43,830 |
|
Amortization |
|
17,156 |
|
|
16,088 |
|
|
51,143 |
|
|
48,943 |
|
Total costs and expenses |
|
107,276 |
|
|
98,820 |
|
|
310,006 |
|
|
281,415 |
|
Operating income |
|
27,293 |
|
|
21,510 |
|
|
78,044 |
|
|
68,598 |
|
Other
expenses |
|
|
|
|
|
|
|
|
Interest expense, net of interest income |
|
19,297 |
|
|
20,160 |
|
|
60,130 |
|
|
62,589 |
|
Loss on extinguishment of debt |
|
— |
|
|
— |
|
|
— |
|
|
166 |
|
Total other expenses |
|
19,297 |
|
|
20,160 |
|
|
60,130 |
|
|
62,755 |
|
Income before income tax |
|
7,996 |
|
|
1,350 |
|
|
17,914 |
|
|
5,843 |
|
Income tax benefit |
|
(1,319 |
) |
|
(719 |
) |
|
(2,747 |
) |
|
(2,310 |
) |
Net income |
|
9,315 |
|
|
2,069 |
|
|
20,661 |
|
|
8,153 |
|
Foreign currency translation |
|
(658 |
) |
|
(9 |
) |
|
(189 |
) |
|
(744 |
) |
Comprehensive income |
|
$ |
8,657 |
|
|
$ |
2,060 |
|
|
$ |
20,472 |
|
|
$ |
7,409 |
|
Earnings per
share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.13 |
|
|
$ |
0.03 |
|
|
$ |
0.29 |
|
|
$ |
0.12 |
|
Diluted |
|
$ |
0.12 |
|
|
$ |
0.03 |
|
|
$ |
0.27 |
|
|
$ |
0.11 |
|
Weighted average
common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
72,251 |
|
|
69,750 |
|
|
71,361 |
|
|
69,217 |
|
Diluted |
|
79,125 |
|
|
74,594 |
|
|
77,854 |
|
|
73,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (In
thousands)
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
Cash flows from
operating activities |
|
|
|
Net income |
$ |
20,661 |
|
|
$ |
8,153 |
|
Adjustments to reconcile net income to cash provided by operating
activities: |
|
|
|
Depreciation |
46,062 |
|
|
43,830 |
|
Amortization |
51,143 |
|
|
48,943 |
|
Amortization of financing costs and discounts |
2,697 |
|
|
3,969 |
|
Loss on sale or disposal of assets |
1,375 |
|
|
687 |
|
Accretion of contract rights |
6,539 |
|
|
6,299 |
|
Provision for bad debts |
10,010 |
|
|
8,342 |
|
Deferred income taxes |
(3,173 |
) |
|
(2,804 |
) |
Write-down of inventory and fixed assets |
843 |
|
|
2,575 |
|
Reserve for obsolescence |
1,830 |
|
|
1,386 |
|
Stock-based compensation |
6,141 |
|
|
6,117 |
|
Loss on extinguishment of debt |
— |
|
|
166 |
|
Adjustment to certain purchase accounting liabilities |
— |
|
|
(550 |
) |
Changes in operating assets and liabilities: |
|
|
|
Settlement receivables |
26,774 |
|
|
1,703 |
|
Trade and other receivables |
(23,820 |
) |
|
(23,856 |
) |
Inventory |
(3,341 |
) |
|
(4,824 |
) |
Other assets |
(17,806 |
) |
|
(1,146 |
) |
Settlement liabilities |
(34,573 |
) |
|
(12,889 |
) |
Other liabilities |
29,002 |
|
|
6,281 |
|
Net cash provided by operating activities |
120,364 |
|
|
92,382 |
|
Cash flows from investing activities |
|
|
|
Capital expenditures |
(81,642 |
) |
|
(78,545 |
) |
Acquisition |
(20,000 |
) |
|
— |
|
Proceeds from sale of fixed assets |
56 |
|
|
83 |
|
Placement fee agreements |
(17,102 |
) |
|
(15,300 |
) |
Net cash used in investing activities |
(118,688 |
) |
|
(93,762 |
) |
Cash flows from financing activities |
|
|
|
Repayments of credit facilities |
(25,700 |
) |
|
(6,150 |
) |
Debt issuance costs and discounts |
— |
|
|
(1,276 |
) |
Proceeds from exercise of stock options |
11,288 |
|
|
9,529 |
|
Purchase of treasury stock |
(1,021 |
) |
|
(57 |
) |
Net cash (used in) provided by financing
activities |
(15,433 |
) |
|
2,046 |
|
Effect of exchange rates on cash |
(1,314 |
) |
|
(432 |
) |
Cash, cash equivalents and restricted cash |
|
|
|
Net (decrease) increase for the period |
(15,071 |
) |
|
234 |
|
Balance, beginning of the period |
299,181 |
|
|
129,604 |
|
Balance, end of the period |
$ |
284,110 |
|
|
$ |
129,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED RECONCILIATION OF CASH AND
CASH EQUIVALENTSTO NET CASH POSITION AND NET CASH
AVAILABLE (In thousands)
|
At September 30, |
|
At December 31, |
|
2019 |
|
2018 |
Cash
available |
|
|
|
Cash and cash equivalents |
$ |
275,706 |
|
|
$ |
297,532 |
|
Settlement receivables |
56,035 |
|
|
82,359 |
|
Settlement liabilities |
(298,490 |
) |
|
(334,198 |
) |
Net Cash Position |
33,251 |
|
|
45,693 |
|
|
|
|
|
Undrawn revolving credit facility |
35,000 |
|
|
35,000 |
|
|
|
|
|
Net Cash Available |
$ |
68,251 |
|
|
$ |
80,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED RECONCILIATION OF NET INCOME
TO EBITDA AND ADJUSTED EBITDA ANDTO FREE CASH
FLOW(In thousands)
|
Three Months Ended September 30, 2019 |
|
Three Months Ended September 30, 2018 |
|
Games |
|
FinTech |
|
Total |
|
Games |
|
FinTech |
|
Total |
Net
income |
|
|
|
|
$ |
9,315 |
|
|
|
|
|
|
$ |
2,069 |
|
Income
tax benefit |
|
|
|
|
(1,319 |
) |
|
|
|
|
|
(719 |
) |
Interest
expense, net of interest income |
|
|
|
|
19,297 |
|
|
|
|
|
|
20,160 |
|
Operating income (loss) |
$ |
3,073 |
|
$ |
24,220 |
|
$ |
27,293 |
|
|
$ |
(746 |
) |
|
$ |
22,256 |
|
|
$ |
21,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus:
depreciation and amortization |
28,678 |
|
4,493 |
|
33,171 |
|
|
29,636 |
|
|
3,756 |
|
|
33,392 |
|
EBITDA |
$ |
31,751 |
|
$ |
28,713 |
|
$ |
60,464 |
|
|
$ |
28,890 |
|
|
$ |
26,012 |
|
|
$ |
54,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
stock compensation expense |
602 |
|
1,379 |
|
1,981 |
|
|
771 |
|
|
1,041 |
|
|
1,812 |
|
Accretion of contract rights |
2,221 |
|
— |
|
2,221 |
|
|
2,121 |
|
|
— |
|
|
2,121 |
|
Adjustment of certain purchase accounting liabilities |
— |
|
— |
|
— |
|
|
— |
|
|
(550 |
) |
|
(550 |
) |
Adjusted EBITDA |
$ |
34,574 |
|
$ |
30,092 |
|
$ |
64,666 |
|
|
$ |
31,782 |
|
|
$ |
26,503 |
|
|
$ |
58,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest |
|
|
|
|
(12,528 |
) |
|
|
|
|
|
(12,086 |
) |
Cash
paid for capital expenditures |
|
|
|
|
(35,959 |
) |
|
|
|
|
|
(20,609 |
) |
Cash
paid for placement fees |
|
|
|
|
(5,454 |
) |
|
|
|
|
|
(5,183 |
) |
Cash
paid for income taxes, net of refunds |
|
|
|
|
362 |
|
|
|
|
|
|
(124 |
) |
Free Cash Flow |
|
|
|
|
$ |
11,087 |
|
|
|
|
|
|
$ |
20,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED RECONCILIATION OF NET INCOME
TO EBITDA AND ADJUSTED EBITDA ANDTO FREE CASH
FLOW(In thousands)
|
Nine Months Ended September 30, 2019 |
|
Nine Months Ended September 30, 2018 |
|
Games |
|
FinTech |
|
Total |
|
Games |
|
FinTech |
|
Total |
Net
income |
|
|
|
|
$ |
20,661 |
|
|
|
|
|
|
$ |
8,153 |
|
Income
tax benefit |
|
|
|
|
(2,747 |
) |
|
|
|
|
|
(2,310 |
) |
Loss on
extinguishment of debt |
|
|
|
|
— |
|
|
|
|
|
|
166 |
|
Interest
expense, net of interest income |
|
|
|
|
60,130 |
|
|
|
|
|
|
62,589 |
|
Operating income |
$ |
8,729 |
|
$ |
69,315 |
|
$ |
78,044 |
|
|
$ |
5,914 |
|
$ |
62,684 |
|
|
$ |
68,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus:
depreciation and amortization |
83,927 |
|
13,278 |
|
97,205 |
|
|
80,280 |
|
12,493 |
|
|
92,773 |
|
EBITDA |
$ |
92,656 |
|
$ |
82,593 |
|
$ |
175,249 |
|
|
$ |
86,194 |
|
$ |
75,177 |
|
|
$ |
161,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
stock compensation expense |
1,895 |
|
4,246 |
|
6,141 |
|
|
2,075 |
|
4,042 |
|
|
6,117 |
|
Accretion of contract rights |
6,539 |
|
— |
|
6,539 |
|
|
6,299 |
|
— |
|
|
6,299 |
|
Adjustment of certain purchase accounting liabilities |
— |
|
— |
|
— |
|
|
— |
|
(550 |
) |
|
(550 |
) |
Write-off of inventory and fixed assets |
843 |
|
— |
|
843 |
|
|
2,575 |
|
— |
|
|
2,575 |
|
Asset
acquisition expense and other non-recurring professional fees |
484 |
|
790 |
|
1,274 |
|
|
— |
|
— |
|
|
— |
|
Adjusted EBITDA |
$ |
102,417 |
|
$ |
87,629 |
|
$ |
190,046 |
|
|
$ |
97,143 |
|
$ |
78,669 |
|
|
$ |
175,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest |
|
|
|
|
(52,077 |
) |
|
|
|
|
|
(54,930 |
) |
Cash
paid for capital expenditures |
|
|
|
|
(81,642 |
) |
|
|
|
|
|
(78,545 |
) |
Cash
paid for placement fees |
|
|
|
|
(17,102 |
) |
|
|
|
|
|
(15,300 |
) |
Cash
paid for income taxes, net of refunds |
|
|
|
|
69 |
|
|
|
|
|
|
(346 |
) |
Free Cash Flow |
|
|
|
|
$ |
39,294 |
|
|
|
|
|
|
$ |
26,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED CALCULATION OF TOTAL NET
DEBT LEVERAGE RATIO(In thousands, except for
ratio)
|
|
Trailing Twelve Months Ended |
|
|
September 30, 2019 |
|
September 30, 2018 |
Net income (loss) |
|
$ |
24,864 |
|
|
$ |
(16,896 |
) |
Income
tax benefit |
|
(10,147 |
) |
|
(26,097 |
) |
Loss on
extinguishment of debt |
|
— |
|
|
37,301 |
|
Interest
expense, net of interest income |
|
80,542 |
|
|
92,419 |
|
Operating income |
|
$ |
95,259 |
|
|
$ |
86,727 |
|
|
|
|
|
|
Plus:
depreciation and amortization |
|
130,902 |
|
|
122,709 |
|
EBITDA |
|
$ |
226,161 |
|
|
$ |
209,436 |
|
|
|
|
|
|
Non-cash
stock compensation expense |
|
7,274 |
|
|
7,404 |
|
Accretion of contract rights |
|
8,661 |
|
|
8,274 |
|
Adjustment of certain purchase accounting liabilities |
|
— |
|
|
(550 |
) |
Write-off of inventory and fixed assets |
|
843 |
|
|
2,575 |
|
Asset
acquisition expense and other non-recurring professional fees |
|
1,682 |
|
|
— |
|
Adjusted EBITDA |
|
$ |
244,621 |
|
|
$ |
227,139 |
|
|
|
|
|
|
Principal face value of debt outstanding (1) |
|
$ |
1,157,000 |
|
|
$ |
1,184,750 |
|
Less: cash and cash equivalents (2) |
|
50,000 |
|
|
50,000 |
|
Total
Net Debt |
|
$ |
1,107,000 |
|
|
$ |
1,134,750 |
|
Total Net Debt Leverage Ratio |
|
4.5x |
|
5.0x |
(1) Principal face value of
outstanding senior secured term loan facility, 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 debt outstanding,
as provided in the Company's Credit Facility.
RECONCILIATION OF PROJECTED NET INCOME TO
PROJECTED EBITDAAND PROJECTED ADJUSTED EBITDA AND
TO PROJECTED FREE CASH FLOWFOR THE YEAR ENDING
DECEMBER 31, 2019(In thousands)
|
2019 Adjusted EBITDA Guidance Range(1) |
|
Low |
|
High |
Projected net income |
$ |
25,000 |
|
|
$ |
30,000 |
|
Projected income tax benefit |
(4,000 |
) |
|
(5,000 |
) |
Projected interest expense, net of interest income |
80,000 |
|
|
79,000 |
|
|
|
|
|
Projected operating income |
$ |
101,000 |
|
|
$ |
104,000 |
|
|
|
|
|
Projected depreciation and amortization |
130,000 |
|
|
133,000 |
|
|
|
|
|
Projected EBITDA |
$ |
231,000 |
|
|
$ |
237,000 |
|
|
|
|
|
Projected non-cash stock compensation expense |
9,000 |
|
|
8,000 |
|
Projected accretion of contract rights |
9,000 |
|
|
8,000 |
|
Projected asset acquisition expense and other non-recurring
professional fees |
3,000 |
|
|
2,000 |
|
|
|
|
|
Projected Adjusted EBITDA |
$ |
252,000 |
|
|
$ |
255,000 |
|
|
|
|
|
Projected cash paid for interest |
(79,000 |
) |
|
(77,000 |
) |
Projected cash paid for capital expenditures |
(113,000 |
) |
|
(116,000 |
) |
Projected cash paid for placement fees |
(17,000 |
) |
|
(17,000 |
) |
Projected cash paid for income taxes, net of refunds |
(1,000 |
) |
|
— |
|
|
|
|
|
Projected Free Cash Flow |
$ |
42,000 |
|
|
$ |
45,000 |
|
(1) All figures presented are
projected estimates for the year ending December 31, 2019.
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