Everi merger with IGT overshadows earnings; executives see possibility in synergy

February 29, 2024 9:30 PM
  • Matthew Crowley, CDC Gaming Reports
February 29, 2024 9:30 PM
  • Matthew Crowley, CDC Gaming Reports
  • United States

Everi Holdings transformed its future Thursday when it announced a merge with two International Game Technology units in a $6.2 billion deal. Amid the deal’s buzziness, however, was regular business — the reporting of fourth-quarter earnings.

Story continues below

Everi, a Las Vegas-based gaming-equipment and cash-access provider, said its financial technology drove overall revenue higher in the quarter, although net earnings declined. Both numbers missed Wall Street forecasts.

To recap the big deal, IGT will separate its lottery business and merge the digital gaming (PlayDigital) and slot machine (Global Gaming) businesses with Everi in a separate public company that will be called International Game Technology and be headquartered in Las Vegas.

When the deal closes later this year or early next, IGT shareholders will own about 54% of the combined company; Everi stockholders will hold the rest. The new company will trade on the New York Stock Exchange with the IGT ticker symbol.

Both companies’ shareholders and gaming regulators must OK the deal.

In an investors note highlighted by Reuters, Truist Securities gaming analyst Barry Jonas hailed the deal. “(It) creates a one-stop show across land-based gaming, igaming, sports betting, and financial technologies.”

Everi CEO Randy Taylor will join the new IGT’s new board, which Everi Chairman Mike Rumbolz will lead. Vince Sadusky, who heads the current IGT as CEO, will also be the new company’s CEO.

IGT said in a Thursday conference call and statement that it had weighed options for its slot-machine and digital-gaming units, believing the company’s stock price didn’t reflect the units’ value.

During the conference call, company executives projected pro forma 2024 revenue for the combined company at $2.7 billion and expected to deliver mid-single-digit compounded annual growth through 2026.

“We believe the expected merger with IGT’s Global Gaming and PlayDigital businesses may provide a compelling opportunity to become part of a global organization that will provide greater resources and capabilities,” Everi said in an 8-K report with the Securities and Exchange Commission. “The potential of merging … presents a strategic avenue to enhance our portfolio, broaden our product and service offerings, and create additional value for our customers.”

Everi’s shares gained on the news, which was released before stock markets opened Thursday. The share price rose 58 cents, or 5.14%, to close at $11.86 on the New York Stock Exchange. The share price slipped after hours, dipping 4 cents, or 0.34%, to settle at $11.82.

Meanwhile, Everi said fourth-quarter net income was $1.9 million, 2 cents per diluted share, for the three months ended Dec. 31, down from $27 million, or 28 cents per diluted share, a year earlier.

The most recent quarter included an $11.7 million (13-cent-per-share) impairment charge. The latest earnings per share missed the consensus 20-cents-per-share forecast of analysts surveyed by Seeking Alpha.

Adjusted earnings before interest, taxes, depreciation, and amortization, a cash-flow measure that excludes one-time costs, slid 12% to $82.2 million from $93.4 million.

Fourth-quarter revenue fell 6.5% to $192 million from $205.4 million and missed the consensus $198.1 million forecast of Seeking Alpha-polled analysts.

In the quarter, Everi’s financial-technology segment revenue rose 3% to $94.9 million, boosted by a 25% increase in software and other revenue and a 6% rise in financial-access revenue.

Games-segment revenue, meanwhile, fell 14.2% to $97.1 million, as gaming operations and gaming-equipment and systems revenue slid. Everi said the drops came as the company rolled out new content and transitioned to new cabinets.

For full-year 2023, Everi had $84 million, or 91 cents per diluted share, in net income, down from $120.5 million, or $1.24 per diluted share, a year earlier.

Twelve-month revenue rose 3.2% to $807.8 million from $782.5 million, buoyed by a 9% increase in financial-technology segment revenue.