Gaming equipment provider Everi Holdings put 10 million additional shares of the company’s stock on the open market Wednesday and is planning to use the sale’s profits to refinance a portion of its debt.
Macquarie Securities gaming analyst Chad Beynon said in a note to investors he expects the stock sale to raise proceeds of roughly $135 million, which includes allotments to the underwriters.
As of Sept. 30, Everi had $1.13 billion in long-term debt.
Beynon said the stock sale comes at a time when shares of Las Vegas-based Everi are up roughly 27% in the last month and 50% over the last three months, “hitting levels not seen in over a decade.”
On Thursday, Everi shares fell 8.07%, of $1.04 on the New York Stock Exchange to close at $11.84. More than 2 million shares were traded, roughly two-and-a-half times the average daily volume. Everi priced the offering at $11.25 a share Thursday afternoon.
“We believe earnings per share could see upside to our current estimate and free cash flow per share for 2020 will be little changed,” Beynon said. “Leverage remains an issue for Everi and its peers.”
In addition to slot machines, management systems and traditional gaming equipment, Everi provides financial transaction technology and player loyalty products.
In a note to investors last month, Morning Line Research gaming analyst Brian McGill touted both Everi’s gaming equipment and financial transaction businesses, saying the company impressed tradeshow attendees at October’s Global Gaming Expo in Las Vegas.
“We continue to hear positive checks surrounding both the for sale and revenue share games,” McGill told investors. “We have multiple checks that indicate the company has the best mechanical reel game in the industry.”
In addition, McGill said the investment community often misunderstands the financial technology business which is “not given enough credit for the success of the company.” McGill said the cash access service business offers “highly recurring revenue with extremely limited” capital expenditure requirements.
“The FinTech business has been able to grow at faster than expected rates with same-store transaction growth up in the mid-single digits on a year over year basis,” McGill told investors. “This comes at a time when there has been flat visitation to regional casinos.”
Everi granted the underwriters a 30-day option to purchase up to an additional 1.5 million shares of the company’s stock at the public offering price. All of the shares being offered are to be sold by Everi.
Beynon said the sale could increase Everi’s share count by roughly 15%, but by refinancing or paying down debt, the company can reduce its interest payments.
Fitch Ratings Service also viewed the stock sale positively, telling investors the deal would “create additional headroom” for the company’s balance sheet.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
