The CFO of Everi Holdings told Nevada gaming regulators Wednesday he’s optimistic that “the worst is behind us” from the pandemic, while the chief legal officer said they’re confident they’ll prevail in a patent-infringement lawsuit over cashless technology.
CFO Mark Labay and legal counsel Kate Lowenhar-Fisher appeared before the Nevada Gaming Control Board seeking an amendment to its order of registration application to pledge the equity securities of Everi to Jefferies Finance as collateral in conjunction with a credit agreement.
The Board recommended approval to the Nevada Gaming Commission for the Las Vegas-based maker of slot machines, financial equipment, and player-loyalty solutions, which last summer announced its plan to take advantage of favorable market conditions and lower the cost of its debt. That left it with $1 billion in outstanding debt and a new $125 million revolving credit facility. The move was praised by Wall Street analysts.
Labay said Everi is in a much better position today, nearly two years from the start of the pandemic that temporarily shut down the gaming industry in the U.S. and abroad.
“With the pandemic in 2020, our earnings were highly depressed like most in the industry, but as we returned from there, we were probably five or six times leveraged to (adjusted earnings) to our debt profile,” Labay said. “Obviously, paying down debt and having better earnings come through, we’re only three times leveraged. And we created more capacity for ourselves in terms of a revolver. That gave us more access to liquidity (for working capital), in case an event like the pandemic happened. Just one is good enough for me. This is a lifetime event. I’m happy with this one being over and behind us.”
Labay said they’re seeing increases in purchases on the machine, financial-technology, and loyalty segments. The pandemic has especially increased the loyalty segment, as patrons are looking to do more in self-service mode.
“Loyalty has been a fast and rapidly growing product segment for us, but the core of the business was game and fin tech on the cash-access side,” Labay said. “We’ve seen steady increases throughout the year in 2021, and we’ve held those nicely throughout the fourth quarter and as we started the first quarter. We’re cautiously optimistic that the worst is behind us and we can hold these trends in 2022.”
As for leases on equipment, Labay told Board members they’ve seen steady increases over several years, but there have been changing attitudes and more interest in leases since the pandemic and growing interest in purchases.
“We’ve seen operators sitting on their pocketbooks in terms of new spend and being judicious in how they allocate their capital,” Labay said. “We’ve had slow increases, but quarterly have seen increases throughout 2021 in our unit sales. It feels like customers are getting more comfortable spending again and buying units back as well.”
In response to a Board question, Lowenhar-Fisher confirmed that CEO and Chairman Michael Rumbolz will transition from his role on April 1 to executive chairman. COO Randy Taylor will assume the role of CEO.
Lowenhar-Fisher also addressed a patent-infringement lawsuit filed Sept. 30 against Everi by Sightline Payments in federal court in Texas. Sightline alleges Everi violated five of its patents that include how players can transfer funds from their bank accounts to digital wallets for gaming and non-gaming.
Lowenhar-Fisher said they are in early stages of the litigation and one of the discussions is venue, since both companies are based in Las Vegas.
“In terms of our concerns as a company, our initial investigation tells us that we’re not particularly concerned about the litigation,” Lowenhar-Fisher said. “I am concerned about paying all the legal fees in connection with it, but I think we’re going to have a number of things of our own.”
Lowenhar-Fisher said there’s a reason why Everi is being targeted. “A lot of it has to do with Everi increasingly becoming a player in the market and getting more attention,” Lowenhar-Fisher said. “I think a lot of these things inevitably follow.”
When it filed the lawsuit, Sightline said it was an innovator in the gaming industry and will defend its intellectual property.
