Top management at Everi Holdings is “starting to see some green shoots appear,” according to CEO Randy Taylor during this morning’s first-quarter earnings call with Wall Street analysts. The upbeat proclamation came on the heels of a mostly downbeat set of first-quarter numbers.
The reasons for Taylor’s optimism included high ratings for new Everi games, and not just new ones. Taylor said the 2022 Player Signature Cabinet was “continuing to do well.” He expected four new families of slot titles to be released by year’s end, contributing to an improved second half of 2024.
Two other causes to be upbeat were the impending release of game titles from Everi’s Australian studios and the “final stages” of approval to enter Illinois’s slot-route market.
“As we exited the quarter,” [we saw] a return to single-digit same-store growth,” said Taylor. This had not been the case for Everi during the first quarter.
Analysts mostly wanted to discuss Everi’s in-progress merger with International Game Technology. Taylor began by saying he still anticipated a late 2024 or early 2025 closure to the accord. He added that it was “difficult to determine the amount, if any, of a special dividend.”
Regarding yesterday’s termination of stock repurchases, Taylor explained, “It doesn’t signal our confidence in the deal closing. What we want our shareholders to understand is we don’t want to be out spending,” lest it subtract from the special dividend.
CFO Mark Labay added, “The feedback [from customers] is positive on the deal. There’s not a lot you can do at this stage of the game,” while antitrust and regulatory processes continue to play out.
Asked if there had been any preliminary integration with IGT, Taylor replied, “I’m gonna stay away from that one.” He did state that there would probably be no pullback on research-and-development expenses.
Pressed as to whether the merger was sowing confusion among operators, Labay said, “It’s hard for us to quantify that.” He added that new game themes should stimulate business and “our new mechanics are lifting really well.”
Taylor was encouraged by Everi’s early performance in overseas interactive gaming, saying it’s “still very early stages,” but he was pleased with revenue growth in the United Kingdom and other jurisdictions.
As for Everi’s fintech performance, Labay admitted that it had been “lumpy. We’re confident it will ramp through the rest of the year.” He said contracts had been let and it was just a matter of when the technology would be installed and when operators would be ready to do so.
Why replace older slots? “We want to make a reasonable rate of return,” replied Taylor. He said that the reduction in Everi’s installed base (595 units) had to do with two customers in particular and that retirements would continue, but “not to the level that you saw” in the first quarter.
Labay walked analysts through some of the specifics of the first quarter, including 661 new installations in 75 locations, saying these were mostly replacements of older units. Slot sales, he conceded, “were below our expectations. Dynasty Vue was a disappointment, but ‘we expect it to improve.’ ”
Fintech revenues declined one percent. However, Everi had processed 39 million transactions, representing $12.4 billion. Operating expenses were up to $57.1 million, mostly driven by non-recurring charges related to the IGT merger.
While interest expenses and debt were up, indebtedness was at a 2.6 ratio to cash flow. The latter would decline until the third and fourth quarters, while capital expenditures would be slightly up, Laby predicted. The high operating expenditures were to be offset by an absence of significant debt maturities.
Asked why those opex numbers were going up, Taylor replied that “labor and headcount are probably our largest expense categories,” particularly in R&D. Labay added that one must invest in order to grow the business.
