Wall Street analysts praised a move Monday by Everi Holdings to refinance its debt and raised their price targets for the stock after it projected record second-quarter revenue.
The Las Vegas-based slot-machine and financial-equipment maker announced Monday its plan to “take advantage of favorable market conditions” to lower the cost of its debt. At the same time, Everi said that expected record 2021 second-quarter results “demonstrate meaningful quarterly sequential improvement compared to the 2021 first-quarter results, as well as substantial growth compared to the pre-pandemic 2019 second-quarter results, even with a continued, albeit lesser, impact from the COVID-19 pandemic.”
Everi said it expects second-quarter revenues of $167 million to $172 million, reflecting an improvement from $139.1 million during the first quarter of 2021. That’s also an increase of more than 25% compared to $129.7 million in the pre-pandemic 2019 second quarter.
The company expects 2021 second-quarter net income of $31 million to $34 million, compared to $20.5 million during the first quarter of 2021 and $5.5 million during the 2019 second quarter.
“Our expected record 2021 second-quarter results highlight the ongoing strength of our core recurring revenue businesses and the benefit of our organic growth initiatives,” said Everi CEO Michael Rumbolz. “Both our games and FinTech segments are performing significantly above pre-pandemic periods, driving substantial improvements in our total revenue, net income, adjusted EBITDA, and free cash flow.”
Rumbolz said that since March, the total value of its financial-access transactions on a same-store basis has been consistently trending at a mid-teens percentage growth rate above the comparable 2019 volumes.
“This is significantly higher than our mid-single-digit percentage historical average growth rate,” Rumbolz said. “Additionally, our gaming-operations installed base has continued to grow, fueled primarily by a greater number of premium units, which is also driving new record levels of daily win per unit. We also expect our gaming-machine-unit sales in the second quarter will well exceed the level shipped in the first quarter of 2021.”
Everi is also refinancing its outstanding total debt and extending maturities. It plans to refinance its $35 million Revolving Credit Facility due in 2022 and its $820 million Term Loan Facility due in 2024. It will prepay in full its $125 million Incremental Term Loan Facility due in 2024 and redeem the $285.4 million of unsecured notes due in 2025, the company announced.
After refinancing its total outstanding debt, the company said it expects to have $1 billion of outstanding total debt and a new $125 million Revolving Credit Facility that will be undrawn at closing.
“Our strong performance is driven by the collaborative efforts of the worldwide Everi team to continuously enhance our product portfolio and innovate new products that help our customers extend the connection with their guests and operate more efficiently, as well as our focus on providing unmatched customer service,” Rumbolz said. “Given the momentum of our products in both of our business segments and our continued focus on operating execution, as well as the potential opportunity to lower our annual interest expense through refinancing of our outstanding debt, we believe Everi is well positioned to continue to generate strong free cash flow and further grow shareholder value.”
Diluted earnings per share are expected to be $0.31 to $0.34, compared to $0.21 per share in the 2021 first quarter and $0.07 per share in the 2019 second quarter, the company said.
David Bain, a senior research analyst with B. Riley Securities, raised his price target from $33 to $38 and said “the good just got better.” The stock opened Monday at $22.62.
“Everi announced a refinancing of its total debt outstanding and guided (second quarter) mid-point EBITDA +21% versus consensus EBITDA. We believe the refinancing will result in (about) $16 million of additional free cash flow per annum. We further believe EBITDA has reached a new baseline from continued win per day gains driven from premium unit installations, market share/ship share gains of recurring/participation installations and of for-sale units, and the thawing of capital budgets by operators for replacement game purchases.”
Bain also pointed to more positive news beyond today’s announcement. He said they believe Everi continues in advanced-stage discussion with several multi-property, multi-jurisdiction operators with an online presence about digital-wallet installations. He said they believe Everi during the third quarter will make its next major digital-wallet installation.
David Katz, managing director at Jefferies, said the refinancing and better-than-expected preliminary results should drive “a positive reaction in the shares.” He said they expect material improvement in the company’s capital structure and credit profile, “reflecting meaningful savings on interest expense, while business trends continue to accelerate. The announcement supports our positive view on the company. We expect product momentum in both segments to continue to accelerate, driven by a robust macro environment and management’s track record of execution.”
