From Everi Holdings’ investor meeting yesterday with Truist Securities, analysts came away excited about the company’s prospects, particularly for cashless gaming. Everi executives stressed the impact of an August 12 deal with Penn National Gaming, in which Everi’s CashClub Wallet will support Penn’s own MyChoice loyalty program.
Rolled out in Pennsylvania at Hollywood Casino York, Hollywood Penn National racino, and Meadows Racetrack & Casino, the pact is expected to eventually encompass all Penn-operated casinos nationwide, giving Everi significant market penetration. Everi has already gone cashless in Ohio via a deal with Jack Entertainment’s two Cleveland-area casinos.
Truist Securities analyst Barry Jonas called the Penn pact “important, given the higher commercial regulatory burdens across multiple states and increased willingness for experimentation by tribal operators,” whose implementation he described as piecemeal. He offered the example of Winstar casino in Oklahoma, which initially went cashless with only VIP players before broadening the application.
“We note EVRI’s cashless revenue model comprises an upfront software fee for new customer locations and fees for annual software maintenance, on top of potentially premium fund access/processing fees,” Jonas wrote of the recurring-revenue model that would underwrite the new technology. Everi reported that adopters were seeing higher volumes and bigger voucher sizes. And while Baby Boomers were expected to be reluctant customers for cashless gambling, their employment of it was described as greater than expected.
Jonas believes Everi (formerly Global Cash Access) was well poised to cash in on the growing cashless market, given its predominance as a distributor of cash-access systems, “as well as its robust offering encapsulating other services driving both efficiencies and cross-selling.” Everi generated $800 million in cash-access revenues in 2019, leading to $600 million worth of commissions paid to casino operators.
“We believe operators don’t want to give up those high margin revenues,” Jonas said. “We also note management has discussed the potential down the road to sell its cashless solutions to non-gaming customers (e.g., hotels, leisure), especially around their loyalty capabilities, which could dramatically increase the total addressable market.”
Management, he observed, was aware of some of the early vulnerabilities of going cashless, with Everi executives citing the example of all-cashless Allegiant Stadium in Las Vegas. The venue, which employs a non-Everi cashless vendor (Shift4Payments), was brought to a grinding halt during WWE Summer Slam last weekend when its systems went down, leading to what the Las Vegas Review-Journal described as “havoc … long lines and frustration.”
As for what used to be Everi’s core segment, games, management noted that there was a bubble in sales in the second quarter of 2021, as players returned, and expected volumes to normalize, but remain strong, in the second half of the year. Jonas described the new-game product ahead of Global Gaming Expo (where nascent games are traditionally unveiled) as “robust,” adding that a major Everi client had recently purchased outright several previously leased Everi machines.
Everi management is monitoring the rise in Delta-variant COVID cases and “noted [that] payment-processing volumes have continued to hold strong and steady. Consistent with operator commentary, management believes casino customers are used to wearing masks and new mandates haven’t affected behavior,” wrote Jonas.
Pointing to the closure of Chinook Winds casino in Oregon due to a coronavirus surge, Everi leadership noted that outright closures were a far greater menace to business than mask mandates or other restrictions.
