Everi Holdings, the gaming technology and payment solutions provider, reported strong revenue and EBITDA growth for the 2017 second quarter Tuesday afternoon, driven by increases across its payments business.
Net revenues and adjusted EBITDA in this segment both grew year-over-year by more than 17 percent to $187.1 million and $24.9 million, respectively. The lion’s share of the gains came from cash advance revenues and ATM revenues, which grew by 19 percent and 18 percent, respectively, over the prior year quarter.
“Our payments segment had another very strong quarter as we continue to benefit from a broad range of growth drivers,” said Michael Rumbolz, president and chief executive of Everi. “These include positive macroeconomic trends and regional gaming revenue growth, which are helping to drive same-store improvements in cash access transactions and cash to the floor.”
“Importantly, the growth that we’re achieving in the business…is not dependent on any one singular growth driver,” Rumbolz continued, on a conference call with investors. “In fact, our payment segment performance is resulting from our execution upon a broad base of strategic initiatives as well as the overall positive growth trends that the gaming industry is experiencing in North America.”
Enterprise-wide, Everi generated $242.2 million in revenues for the quarter, up 13 percent, and adjusted EBITDA of $54.1 million, a 6 percent increase year-over-year. Operating income was up from $6.1 million in the prior year quarter to $21.3 million, but net loss grew from $10.8 million to $19.1 million.
The company raised its full-year EBITDA guidance to between $209 million and $212 million.
“Everi continued its turnaround with solid operating progress and the benefits of a partial refinancing of its balance sheet, both of which should continue to expand the equity,” said David Katz, an analyst with the Telsey Group, in a note.
“As the domestic casino markets are providing a positive operating context, we expect the valuation and underlying earnings to improve which implies considerable upside potential going forward,” Katz continued.
Rumbolz noted that while he expects momentum in the payments segment to continue, it faces a tough year-over-year comparison in the second half of the year and expectations should be tempered accordingly. “We will continue to grow but we do not expect to see the same mid to high double-digit levels that we experienced in the first half of the year.”
The company’s games segment was essentially flat year-over-year in terms of both net revenues and adjusted EBITDA, the result of a smaller installed base and lower daily win per unit. While Everi boasted nearly 1,000 more Class II units in its installed base than in the prior year quarter, its Class III base shrunk by nearly 1,200.
“There should be no surprise at this point that we have been challenged in our gaming operations business by the ongoing removal of older, third party Class III games from a customer’s facilities in Oklahoma,” Rumbolz explained, though he added that a new agreement with a large customer in the state had been reached to supply 4,300 Class II games for the next seven years.
“With this agreement almost a third of our installed base is now under a long-term placement arrangement which provides for greater visibility into future recurring revenue and adjusted EBITDA,” he emphasized.
Revenues from Everi’s new compliance products – including tax compliance and anti-money laundering solutions – have also begun to pick up, growing 52 percent in the first half of 2017 over the same period in 2016.
“The work that we completed throughout 2016 to educate our customers on the value and benefit of our compliance products set us up to achieve solid revenue growth in 2017 as customers annual capital budgets were refreshed,” Rumbolz said.
As of June 30, the company had $1.17 billion in long-term debt on its books, with a leverage ratio of 3.67 times adjusted EBITDA.
