Everi Holdings Inc. (NYSE: EVRI) (“Everi” or the “Company”), a
premier provider of gaming products, financial technology and
player loyalty solutions to the gaming industry, today reported
financial results for the first quarter ended March 31, 2020.
First Quarter 2020
Highlights
- Results impacted by the March casino closures due to
the COVID-19 pandemic
- Company took swift action to increase liquidity and
reduce cash outflows
- Revenue was $113.3 million compared to $123.8 million a
year ago
- Net loss was $13.5 million, or a loss of $(0.16) per
diluted share, inclusive of a $7.4 million pre-tax loss on
extinguishment of debt, compared to net income of $5.9 million, or
$0.08 per diluted share, in the prior year
- Adjusted EBITDA, a non-GAAP financial measure, was
$52.3 million compared to $61.3 million a year ago
- Free Cash Flow, a non-GAAP financial measure, was $18.4
million compared to $21.2 million in the prior year
Michael Rumbolz, Chief Executive Officer of
Everi, said, “The significant improvement in our operating metrics
in the first two months of 2020, including revenue, earnings and
cash flow, demonstrates the strength in our business prior to the
outbreak of the COVID-19 pandemic. Our performance during that
time, which included a 21% year-over-year increase in the daily win
per unit of our installed base and a 17% year-over-year increase in
the total number of cash access transactions in our FinTech
business for January and February, offers clear evidence of our
operating momentum and contributed to the margin improvement we
experienced. Since the onset of the pandemic and the resulting
closure of our customers’ casinos in mid-March, our attention has
been on addressing the impact on our employees and their families,
our customers and our Company. We acted aggressively to
preserve cash and improve our liquidity position to allow the
Company to achieve our long-term goals as our customers’ operations
begin to reopen. These actions included dramatically reducing our
near-term cash burn rate, accessing the capital markets in April
for an incremental $125 million term loan and amending certain
financial covenants of our existing credit agreement.
“As a result of these early actions, we believe
Everi has the foundation and financial flexibility to both
withstand this current disruption and further our product
innovation as the industry and broader economy recover from the
pandemic impact. As casinos have now begun to reopen across the
country, we are working to support our customers and have started a
phased approach to bring our employees back to work. We believe we
have unique high-value FinTech and Games solutions that will help
our customers address the new operating environment as they begin
to reopen. We continued to provide in-demand services to customers
during their property closures — primarily related to our player
loyalty and cash access solutions — which are experiencing
increased interest. These solutions, together with our
player-popular gaming content, help address casino operators’
near-term needs as they reopen and will help us regain the revenue,
earnings and cash flow momentum we consistently demonstrated prior
to the COVID-19 outbreak.”
Consolidated Full Quarter Comparative
Results (unaudited)
|
Three Months Ended March 31, |
|
2020 |
|
2019 |
|
(in millions, except per share amounts) |
Revenues |
$ |
113.3 |
|
|
$ |
123.8 |
|
|
|
|
|
Operating income (1) |
$ |
10.4 |
|
|
$ |
25.9 |
|
|
|
|
|
Net (loss) income (1)(2) |
$ |
(13.5 |
) |
|
$ |
5.9 |
|
|
|
|
|
Net (loss) earnings per
diluted share (1)(2) |
$ |
(0.16 |
) |
|
$ |
0.08 |
|
|
|
|
|
Diluted shares
outstanding |
84.6 |
|
|
75.3 |
|
|
|
|
|
Adjusted EBITDA (3) |
$ |
52.3 |
|
|
$ |
61.3 |
|
|
|
|
|
Free Cash Flow (3) |
$ |
18.4 |
|
|
$ |
21.2 |
|
|
|
|
|
Principal amount of
outstanding debt |
$ |
1,055.9 |
|
|
$ |
1,180.7 |
|
|
|
|
|
Total Net Debt (4) |
$ |
1,005.9 |
|
|
$ |
1,130.7 |
|
(1) Operating income, net loss and net loss per
share for the three months ended March 31, 2020, included $1.3
million of foreign exchange losses associated with the repatriation
of foreign cash balances and $0.3 million of costs related to the
purchase of certain assets from Micro Gaming Technology, Inc.,
which closed on December 24, 2019. Operating income, net income and
net earnings per diluted share for the three months ended March 31,
2019, included approximately $0.5 million of operating expense
related to the acquisition of certain player loyalty assets and
other non-recurring professional service fees.
(2) Net loss and net loss per share for the
three months ended March 31, 2020, included a $7.4 million loss on
extinguishment of debt associated with the early redemption and
repurchase of unsecured notes.
(3) For a reconciliation of net (loss) income to
Adjusted EBITDA and Free Cash Flow, see the Unaudited
Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA
and to Free Cash Flow provided at the end of this release.
(4) Total Net Debt, a non-GAAP measure, is the
principal amount outstanding of our senior secured term loan, the
senior secured revolving credit facility, and the senior unsecured
notes, less cash and cash equivalents or $50 million, whichever is
smaller, as provided in the Company’s Credit Facility. For a
reconciliation of principal amount outstanding debt to Total Net
Debt, see the Unaudited Calculation of Total Net Debt Leverage
Ratio at the end of this release.
First Quarter 2020 Results
Overview
The operating results for the three-month period
ended March 31, 2020, presented below reflect the impact of casino
closures in March as a result of the COVID-19 pandemic, which
resulted in revenues declining to essentially zero following these
closures. The Company acted swiftly to reduce costs by furloughing
approximately 80% of its employees, instituting pay cuts for its
remaining employees (including the CEO and Board of Directors
electing to reduce their salary and director fees to zero),
eliminating discretionary and non-critical costs, and cancelling or
delaying substantially all near-term capital expenditures. These
cost reductions did not have a material impact on the Company’s
results of operations or financial position until the beginning of
the second quarter.
While revenues increased substantially in the
first two months of the first quarter of 2020 compared to the
comparable two-month year-ago period, revenues for the full-quarter
period decreased 8% to $113.3 million, from $123.8 million in the
first quarter of 2019.Games and FinTech segment revenues were $57.3
million and $56.0 million, respectively, for the first quarter of
2020.
Operating income declined to $10.4 million for
the first quarter of 2020 compared to $25.9 million in the
prior-year period. Net loss was $13.5 million, or a loss of $(0.16)
per diluted share, which included the impact of a $7.4 million
pre-tax loss on the extinguishment of debt related to the early
partial redemption and repurchase of a portion of the Company’s
senior unsecured notes in January and March 2020, compared with net
income of $5.9 million, or earnings of $0.08 per diluted share, in
the first quarter of 2019.
Adjusted EBITDA for the first quarter of 2020
was $52.3 million compared to $61.3 million in the first quarter of
2019. Games and FinTech segment Adjusted EBITDA were $28.5 million
and $23.8 million, respectively, for the three months ended March
31, 2020, compared with Adjusted EBITDA of $33.1 million and $28.2
million, respectively, for the three months ended March 31,
2019.
Games Segment Full Quarter Comparative
Results (unaudited)
|
Three Months
Ended March 31, |
|
2020 |
|
2019 |
|
(in millions, except unit amounts and prices) |
Revenues |
$ |
57.3 |
|
|
$ |
67.5 |
|
|
|
|
|
Operating (loss) income (1) |
$ |
(5.4 |
) |
|
$ |
3.1 |
|
|
|
|
|
Adjusted EBITDA (2) |
$ |
28.5 |
|
|
$ |
33.1 |
|
|
|
|
|
Unit sales: |
|
|
|
Units sold |
616 |
|
|
1,259 |
|
Average sales price ("ASP") |
$ |
17,526 |
|
|
$ |
17,361 |
|
|
|
|
|
Gaming operations installed
base: |
|
|
|
Average units installed during period: |
|
|
|
Average units installed |
14,793 |
|
|
13,634 |
|
Approximate daily win per unit ("DWPU") (3) |
$ |
30.13 |
|
|
$ |
31.76 |
|
|
|
|
|
Units installed at end of period: |
|
|
|
Class II |
8,872 |
|
|
9,218 |
|
Class III |
5,979 |
|
|
4,426 |
|
Total installed base |
14,851 |
|
|
13,644 |
|
|
|
|
|
Installed base — Oklahoma |
6,277 |
|
|
6,400 |
|
Installed base — non-Oklahoma |
8,574 |
|
|
7,244 |
|
Total installed base |
14,851 |
|
|
13,644 |
|
|
|
|
|
Premium units |
5,715 |
|
|
3,004 |
|
(1) Operating income for the three months ended
March 31, 2020, included $0.1 million of foreign exchange losses
associated with the repatriation of foreign cash balances.
Operating income for the three months ended March 31, 2019,
included the impact of approximately $0.2 million related to
certain non-recurring professional fees.
(2) For a reconciliation of net (loss) income to
Adjusted EBITDA, see the Unaudited Reconciliation of Net (Loss)
Income to EBITDA and Adjusted EBITDA and to Free Cash Flow provided
at the end of this release.
(3) Approximate daily win per unit excludes the
impact of the direct costs associated with the Company’s wide-area
progressive jackpot expense.
2020 First Quarter Games Segment
Highlights
Games segment revenues were $57.3 million
compared to $67.5 million in the first quarter of 2019.
Revenues from gaming operations increased to
$45.7 million from $44.3 million in the prior-year period. The
year-over-year improvement primarily reflects a 1,207-unit
year-over-year increase in the installed base at period end, as
well as a 21% year-over-year improvement in the estimated daily win
per unit (“DWPU”) for the first two months of the quarter, offset
by a year-over-year decline in the DWPU in March.
- DWPU was $30.13 in the first quarter of 2020 compared to $31.76
in the prior-year period. The 21% year-over-year increase in
January and February partially reflects improvements in overall
unit performance following the Company’s investments in design and
development of new games and cabinets, capital investments to
refresh and upgrade a significant portion of the installed base
over the last several years and growth in premium unit placements.
This two-month improvement was offset by a decline in March
reflecting the closure of casinos due to the COVID-19
pandemic.
- The installed base at March 31, 2020 increased by 1,207 units
year over year to a record quarter-end level of 14,851 units and
grew by 140 units on a quarterly sequential basis, primarily
reflecting the continued expansion of premium units within the
installed base. The installed base growth in the quarter includes
the impact from the net removal of 172 Class II units as a result
of a customer converting their casino from leased Class II gaming
machines to owned Class III gaming machines.
- The premium portion of the installed base rose by 2,711 units
year over year to 5,715 units, which was 555 units higher on a
quarterly sequential basis. Premium units now represent 38% of the
installed base compared with 22% at March 31, 2019. Wide-area
progressive (“WAP”) units, a subcomponent of premium units, grew by
242 units year over year and by 41 units on a quarterly sequential
basis to 965 units at March 31, 2020.
- Interactive revenues were $1.1 million compared to $1.0 million
a year ago.
- Revenues from the New York Lottery business were $4.8 million
compared to $4.7 million in the prior-year period, partially
reflecting the higher rate earned under the new 10-year
agreement.
Revenues generated from the sale of gaming units
and other related parts and equipment totaled $11.6 million in the
first quarter of 2020 compared to revenues of $23.1 million in the
prior-year period.
- The Company sold 616 units in the first quarter of 2020
compared with 1,259 units in the first quarter of 2019.
- The average selling price (“ASP”) was $17,526 compared with
$17,361 in the prior-year period.
Financial Technology Solutions Segment
Full Quarter Comparative Results (unaudited)
|
Three Months
Ended March 31, |
|
2020 |
|
2019 |
|
(in millions, unless otherwise noted) |
Revenues |
$ |
56.0 |
|
|
$ |
56.3 |
|
|
|
|
|
Operating income (1) |
$ |
15.8 |
|
|
$ |
22.8 |
|
|
|
|
|
Adjusted EBITDA (2) |
$ |
23.8 |
|
|
$ |
28.2 |
|
|
|
|
|
Aggregate dollar amount processed
(in millions): |
|
|
|
Cash advance |
$ |
1,705.5 |
|
|
$ |
1,863.0 |
|
ATM |
$ |
4,918.0 |
|
|
$ |
5,296.5 |
|
Check warranty |
$ |
366.5 |
|
|
$ |
330.1 |
|
|
|
|
|
Number of transactions completed
(in millions): |
|
|
|
Cash advance |
2.7 |
|
|
2.9 |
|
ATM |
22.7 |
|
|
24.8 |
|
Check warranty |
1.0 |
|
|
0.9 |
|
(1) Operating income for the three months ended
March 31, 2020, included $1.2 million of foreign exchange losses
associated with the repatriation of foreign cash balances and $0.3
million of costs related to the purchase of certain assets from
Micro Gaming Technology, Inc., which closed on December 24, 2019.
Operating income for the three months ended March 31, 2019,
included the impact of approximately $0.3 million of non-recurring
operating expenses related to the acquisition of certain player
loyalty assets and other professional service fees.
(2) For a reconciliation of net (loss) income to
Adjusted EBITDA, see the Unaudited Reconciliation of Net (Loss)
Income to EBITDA and Adjusted EBITDA and to Free Cash Flow at the
end of this release.
2020 First Quarter Financial Technology
Solutions Segment Highlights
FinTech revenues were $56.0 million in the first
quarter of 2020 compared to $56.3 million in the prior-year period.
Revenue from player loyalty and marketing operations acquired in
March 2019 and December 2019 contributed $6.5 million and $0.5
million in the first quarter of 2020 and 2019, respectively.
- Revenues from cash access services, including ATM, cash advance
and check services, were $37.0 million compared with $40.8 million
in the first quarter of 2019. Revenues in January and February were
driven by a 17% increase in the number of cash access transactions
and a 19% increase in the total value of transactions processed,
offset by a decline in March due to the closure of casinos. The
growth in January and February reflected increases in the number
and value of transactions processed on a same-store basis, new
customer wins from competitive bid processes, and new casino
openings and expansions compared with the year-ago period.
- Equipment sales revenues were $6.4 million in the first quarter
of 2020 compared to $7.0 million in the first quarter of
2019. Sales of player loyalty and marketing kiosks
contributed $1.4 million in the first quarter of 2020.
- Revenues from information services and other, which includes
kiosk maintenance, player loyalty and compliance software sales and
support, CentralCredit™ service, and other revenues, were $12.7
million compared to $8.5 million in the first quarter of 2019. The
increase primarily reflects $5.1 million of software sales and
recurring software license support for the player loyalty and
marketing business compared with revenue of $0.5 million in the
year-ago period.
Balance Sheet and Liquidity
- At March 31, 2020, the Company had cash and cash equivalents of
$49.9 million. The Net Cash Position, a non-GAAP measure, which
nets settlement liabilities and settlement receivables from cash
and cash equivalents, was $40.4 million.
- The Company amended its Existing Credit Agreement (the “Amended
Term Loan”) in April 2020 to provide for changes to certain
covenant provisions, including, but not limited to: eliminating the
financial maintenance covenant related to senior secured leverage
for each of the remaining quarters in 2020; modifying the
compliance threshold in each of the quarters thereafter; and making
changes that limit the Company’s ability to make certain restricted
payments and designate unrestricted subsidiaries.
- To further supplement its liquidity position, in April 2020,
the Company successfully completed a new First Lien Term Loan (the
“Incremental Term Loan”) in the amount of $125 million. The
Incremental Term Loan has a maturity concurrent with the May 2024
maturity date under the existing Senior Secured Credit Facility and
an interest rate of LIBOR plus 1050 basis points with a 1% LIBOR
floor. After fees, discounts and expenses associated with the
Incremental Term Loan and the Amended Term Loan transactions, the
Company received approximately $118 million in net proceeds.
- Pro forma for the new borrowing of the Incremental Term Loan,
the Company would have had $1.18 billion in principal outstanding
debt at March 31, 2020.
2020 Outlook
As previously disclosed, due to the COVID-19
pandemic and the ongoing uncertainty regarding its magnitude and
duration, Everi has withdrawn the 2020 financial outlook it
provided on March 2, 2020.
“As casinos across the country begin to reopen
and return to normalized operations over time, we believe our
product development innovation initiatives together with our
consistency in operational execution will drive the long-term
enhancement of shareholder value,” said Rumbolz.
Investor Conference Call and
Webcast
The Company will host an investor conference
call to discuss its 2020 first quarter results at 5:00 p.m. ET
today. The conference call may be accessed live by phone by
dialing +1 (323) 794-2423. A replay of the call will be
available beginning at 8:00 p.m. ET today and may be accessed by
dialing +1 (412) 317-6671; the PIN number is 5912266. A
replay will be available until June 9, 2020. The call will also be
webcast live and archived on the Company’s website at www.everi.com
(select “Investors” followed by “Events & Presentations”).
Non-GAAP Financial
Information
In order to enhance investor understanding of
the underlying trends in our business, our cash balance and cash
available for our operating needs, and to provide for better
comparability between periods in different years, we are providing
in this press release Adjusted EBITDA, Free Cash Flow, Net Cash
Position and Net Cash Available, and Total Net Debt and Total Net
Debt Leverage Ratio, which are not measures of our financial
performance or position under United States Generally Accepted
Accounting Principles (“GAAP”). Accordingly, Adjusted EBITDA, and
Free Cash Flow should not be considered in isolation or as a
substitute for measures prepared in accordance with GAAP.
These measures should be read in conjunction with our net earnings,
operating income, basic and diluted earnings per share, and cash
flow data prepared in accordance with GAAP. With respect to Net
Cash Position and Net Cash Available, these measures should be read
in conjunction with cash and cash equivalents prepared in
accordance with GAAP. Total Net Debt and Total Net Debt
Leverage Ratio should be read in conjunction with principal face
value of debt outstanding and cash and cash equivalents.
We define Adjusted EBITDA as earnings before
interest, loss on extinguishment of debt, taxes, depreciation and
amortization, non-cash stock compensation expense, accretion of
contract rights, the write-down of assets, certain purchase
accounting adjustments, other non-recurring professional service
fees, and the litigation accrual. We present Adjusted EBITDA as we
use this measure to manage our business and consider this measure
to be supplemental to our operating performance. We also make
certain compensation decisions based, in part, on our operating
performance, as measured by Adjusted EBITDA; and our current credit
facility and existing senior unsecured notes require us to comply
with a consolidated secured leverage ratio that includes
performance metrics substantially similar to Adjusted EBITDA.
We define Free Cash Flow as Adjusted EBITDA less
cash paid for interest, cash paid for capital expenditures, cash
paid for placement fees, and cash paid for taxes net of
refunds. We present Free Cash Flow as a measure of
performance and believe it provides investors with another
indicator of our operating performance. It should not be inferred
that the entire Free Cash Flow amount is available for
discretionary expenditures.
A reconciliation of the Company’s net (loss)
income per GAAP to Adjusted EBITDA and Free Cash Flow is included
in the Unaudited Reconciliation of Net (Loss) Income to EBITDA and
Adjusted EBITDA and to Free Cash Flow provided at the end of this
release. Additionally, a reconciliation of each segment’s operating
income to EBITDA and Adjusted EBITDA is also included. On a segment
level, operating income per GAAP, rather than net earnings per
GAAP, is reconciled to EBITDA and Adjusted EBITDA as the Company
does not report net earnings by segment. Management believes that
this presentation is meaningful to investors in evaluating the
performance of the Company’s segments.
We define (i) Net Cash Position as cash and cash
equivalents plus settlement receivables less settlement liabilities
and (ii) Net Cash Available as Net Cash Position plus undrawn
amounts available under our revolving credit facility. We present
Net Cash Position to illustrate the impact on cash and cash
equivalents of the timing of our receipt of payments for settlement
receivables and the timing of our payments to customers for
settlement liabilities. We present Net Cash Available as management
monitors this amount in connection with its forecasting of cash
flows and related requirements, both on a short-term and long-term
basis.
A reconciliation of the Company’s cash and cash
equivalents per GAAP to Net Cash Position and Net Cash Available is
included in the Unaudited Reconciliation of Cash and Cash
Equivalents to Net Cash Position and Net Cash Available provided at
the end of this release.
We define Total Net Debt as total principal face
value of debt outstanding, the most directly comparable GAAP
measure, less cash and cash equivalents or $50 million, whichever
is smaller. Total Net Debt Leverage Ratio, as used herein,
represents Total Net Debt divided by Adjusted EBITDA for the
trailing twelve-month period. We present Total Net Debt and Total
Net Debt Leverage Ratio as management monitors these items in
evaluating our overall liquidity, financial flexibility and
leverage, as well as our financial position relative to our credit
agreements. Management believes that investors find these
useful in evaluating the Company’s overall liquidity.
Cautionary Note Regarding
Forward-Looking Statements
This press release contains “forward-looking
statements” as defined in the U.S. Private Securities Litigation
Reform Act of 1995. In this context, forward-looking statements
often address our expected future business and financial
performance, and often contain words such as “goal,” “target,”
“future,” “estimate,” “expect,” “anticipate,” “intend,” “plan,”
“believe,” “seek,” “project,” “may,” “should,” “designed to,” “in
an effort to,” “will provide,” “look forward to,” or “will” and
similar expressions to identify forward-looking statements. These
statements are based upon management’s current expectations,
assumptions and estimates and are not guarantees of timing, future
events or performance. Actual results may differ materially from
those contemplated in these statements, due to risks and
uncertainties. Examples of forward-looking statements include,
among others, statements the Company makes regarding (a) its
ability to execute on key initiatives and deliver ongoing
improvements; accelerate Free Cash Flow generation and improve the
Company’s capital structure; integrate acquisitions and achieve
future growth; drive growth of the gaming operations installed base
and DWPU; continue expanding the portions of the gaming floor the
Company’s games address; and create incremental value for its
shareholders and (b) its expectations for the reopening of casinos,
including the related public health confidence and availability of
discretionary spending income of casino patrons and its ability to
withstand the current disruption, further product innovation,
address customer needs in the new operating environment, regain
revenue, earnings, and cash flow momentum and to enhance
shareholder value in the long-term.
Forward-looking statements are neither
historical facts nor assurances of future performance. Instead,
they are based only on our current beliefs, expectations and
assumptions regarding the future of our business, future plans and
strategies, projections, anticipated events and trends, the economy
and other future conditions. Because forward-looking statements
relate to the future, they are subject to inherent risks,
uncertainties and changes in circumstances that are often difficult
to predict and many of which are beyond our control. Our actual
results and financial condition may differ materially from those
indicated in forward-looking statements. Important factors that
could cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, without limitation, the extent and duration of the impact
of the ongoing COVID-19 global pandemic on our business, operations
and financial condition, our history of net losses and our ability
to generate profits in the future; including (a) actions taken by
federal, state, tribal and municipal governmental and regulatory
agencies to contain the COVID-19 public health emergency or
mitigate its impact, (b) the direct and indirect economic effects
of COVID-19 and measures to contain it, including directives,
orders or similar actions by federal, state, tribal and municipal
governmental and regulatory agencies to regulate freedom of
movement and business operations such as travel restrictions,
border closures, business closures, limitations on public
gatherings, quarantines and shelter-in-place orders as well as
reopening guidance related to capacity restrictions for casino
operations, social distancing, hygiene and reopening safety
protocols, and (c) potential adverse reactions or changes to
employee relationships in response to the furlough and salary
reduction actions taken in response to COVID-19; changes in global
market, business and regulatory conditions arising as a result of
the COVID-19 global pandemic; our substantial leverage and the
related covenants that restrict our operations; our ability to
generate sufficient cash to service all of our indebtedness, fund
working capital, and capital expenditures; our ability to withstand
unanticipated impacts of a pandemic outbreak of uncertain duration;
our ability to withstand the loss of revenue during the closure of
our customers’ facilities; our ability to maintain our current
customers; our ability to compete in the gaming industry; our
ability to execute on mergers, acquisitions and/or strategic
alliances, including the timing and closing of acquisitions and our
ability to integrate and operate such acquisitions consistent with
our forecasts; our ability to access the capital markets to raise
funds; expectations regarding our existing and future installed
base and win per day; expectations regarding development and
placement fee arrangements; inaccuracies in underlying operating
assumptions; expectations regarding customers’ preferences and
demands for future gaming offerings; expectations regarding our
product portfolio; the overall growth of the gaming industry, if
any; our ability to replace revenue associated with terminated
contracts; margin degradation from contract renewals; technological
obsolescence; our ability to comply with the Europay, MasterCard
and Visa global standard for cards equipped with security chip
technology; our ability to introduce new products and
services, including third-party licensed content; gaming
establishment and patron preferences; our ability to prevent,
mitigate or timely recover from cybersecurity breaches, attacks and
compromises; the level of our capital expenditures and product
development; anticipated sales performance; employee turnover;
national and international economic conditions; changes in gaming
regulatory, card association and statutory requirements; regulatory
and licensing difficulties that we may face; competitive pressures
in the gaming and financial technology sectors; the impact of
changes to tax laws; uncertainty of litigation outcomes; interest
rate fluctuations; unanticipated expenses or capital needs and
those other risks and uncertainties discussed in our most recent
Annual Report on Form 10-K filed with the U.S. Securities and
Exchange Commission on March 2, 2020 and our Form 10-Q filed today,
June 2, 2020. Given these risks and uncertainties, there can be no
assurance that the forward-looking information contained in this
press release will in fact transpire or prove to be accurate.
Readers are cautioned not to place undue reliance on the
forward-looking statements contained herein, which are based only
on information currently available to us and speak only as of the
date hereof.
This press release should be read in conjunction
with our Annual Report on Form 10-K for the year ended December 31,
2019, and with the information included in our other press
releases, reports and other filings with the SEC. Understanding the
information contained in these filings is important in order to
fully understand our reported financial results and our business
outlook for future periods.
About Everi
Everi (NYSE: EVRI) is a leading supplier of
imaginative entertainment and trusted technology solutions for the
casino, interactive, and gaming industry. With a focus on both
customers and players, the Company develops entertaining games and
gaming machines, gaming systems and services, and is the preeminent
and most comprehensive provider of core financial products and
services, player loyalty tools and applications, and intelligence
and regulatory compliance solutions. Everi’s mission is to provide
casino operators with games that facilitate memorable player
experiences, offer seamless and secure financial transactions for
casinos and their patrons, and deliver software tools and
applications to improve casino operations efficiencies and fulfill
regulatory compliance requirements. Everi provides these products
and services in its effort to help make customers successful. For
more information, please visit www.everi.com, which is updated
regularly with financial and other information about the
Company.
CONTACTSInvestor RelationsEveri
Holdings Inc.William PfundVP, Investor Relations 702-676-9513 or
william.pfund@everi.com
JCIRRichard Land, James Leahy212-835-8500 or
evri@jcir.com
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS ANDCOMPREHENSIVE (LOSS)
INCOME (In thousands, except earnings per share
amounts)
|
|
Three Months Ended March 31, |
|
|
2020 |
|
2019 |
Revenues |
|
|
|
|
Games revenues |
|
|
|
|
Gaming operations |
|
$ |
45,686 |
|
|
$ |
44,286 |
|
Gaming equipment and systems |
|
11,583 |
|
|
23,087 |
|
Gaming other |
|
21 |
|
|
54 |
|
Games total revenues |
|
57,290 |
|
|
67,427 |
|
FinTech revenues |
|
|
|
|
Cash access services |
|
36,973 |
|
|
40,832 |
|
Equipment |
|
6,351 |
|
|
7,028 |
|
Information services and other |
|
12,694 |
|
|
8,488 |
|
FinTech total revenues |
|
56,018 |
|
|
56,348 |
|
Total revenues |
|
113,308 |
|
|
123,775 |
|
Costs and
expenses |
|
|
|
|
Games cost of revenues |
|
|
|
|
Gaming operations |
|
4,545 |
|
|
4,124 |
|
Gaming equipment and systems |
|
6,824 |
|
|
12,529 |
|
Games total cost of revenues |
|
11,369 |
|
|
16,653 |
|
FinTech cost of revenues |
|
|
|
|
Cash access services |
|
3,555 |
|
|
2,697 |
|
Equipment |
|
3,891 |
|
|
4,330 |
|
Information services and other |
|
873 |
|
|
958 |
|
FinTech total cost of revenues |
|
8,319 |
|
|
7,985 |
|
Operating expenses |
|
39,272 |
|
|
34,648 |
|
Research and development |
|
8,355 |
|
|
7,531 |
|
Depreciation |
|
16,243 |
|
|
14,789 |
|
Amortization |
|
19,324 |
|
|
16,297 |
|
Total costs and expenses |
|
102,882 |
|
|
97,903 |
|
Operating income |
|
10,426 |
|
|
25,872 |
|
Other
expenses |
|
|
|
|
Interest expense, net of interest income |
|
17,499 |
|
|
20,400 |
|
Loss on extinguishment of debt |
|
7,378 |
|
|
— |
|
Total other expenses |
|
24,877 |
|
|
20,400 |
|
(Loss) income before income tax |
|
(14,451 |
) |
|
5,472 |
|
Income tax benefit |
|
(997 |
) |
|
(388 |
) |
Net (loss) income |
|
(13,454 |
) |
|
5,860 |
|
Foreign currency translation, net of tax |
|
(1,958 |
) |
|
504 |
|
Comprehensive (loss) income |
|
$ |
(15,412 |
) |
|
$ |
6,364 |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2020 |
|
2019 |
(Loss) earnings per
share |
|
|
|
|
Basic |
|
$ |
(0.16 |
) |
|
$ |
0.08 |
|
Diluted |
|
$ |
(0.16 |
) |
|
$ |
0.08 |
|
Weighted average
common shares outstanding |
|
|
|
|
Basic |
|
84,624 |
|
|
70,334 |
|
Diluted |
|
84,624 |
|
|
75,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (In
thousands)
|
Three Months Ended March 31, |
|
2020 |
|
2019 |
Cash flows from
operating activities |
|
|
|
Net (loss) income |
$ |
(13,454 |
) |
|
$ |
5,860 |
|
Adjustments to reconcile net (loss) income to cash used in
operating activities: |
|
|
|
Depreciation |
16,243 |
|
|
14,789 |
|
Amortization |
19,324 |
|
|
16,297 |
|
Non-cash lease expense |
1,056 |
|
|
983 |
|
Amortization of financing costs and discounts |
854 |
|
|
890 |
|
Loss on sale or disposal of assets |
87 |
|
|
513 |
|
Accretion of contract rights |
2,170 |
|
|
2,122 |
|
Provision for bad debts |
3,750 |
|
|
2,864 |
|
Deferred income taxes |
(1,175 |
) |
|
(513 |
) |
Reserve for inventory obsolescence |
362 |
|
|
441 |
|
Loss on extinguishment of debt |
7,378 |
|
|
— |
|
Stock-based compensation |
2,483 |
|
|
1,773 |
|
Changes in operating assets and liabilities: |
|
|
|
Settlement receivables |
67,604 |
|
|
(175,748 |
) |
Trade and other receivables |
15,846 |
|
|
(12,385 |
) |
Inventory |
(13,131 |
) |
|
57 |
|
Other assets |
856 |
|
|
(17,739 |
) |
Settlement liabilities |
(221,832 |
) |
|
19,931 |
|
Other liabilities |
(19,257 |
) |
|
27,677 |
|
Net cash used in operating activities |
(130,836 |
) |
|
(112,188 |
) |
Cash flows from investing
activities |
|
|
|
Capital expenditures |
(22,507 |
) |
|
(22,194 |
) |
Acquisitions, net of cash acquired |
(10,000 |
) |
|
(20,000 |
) |
Proceeds from sale of property and equipment |
30 |
|
|
33 |
|
Placement fee agreements |
(585 |
) |
|
(5,329 |
) |
Net cash used in investing activities |
(33,062 |
) |
|
(47,490 |
) |
Cash flows from financing
activities |
|
|
|
Borrowings under revolving credit facility |
35,000 |
|
|
— |
|
Repayments of unsecured notes |
(89,619 |
) |
|
— |
|
Repayments of credit facility |
(13,500 |
) |
|
(2,050 |
) |
Fees associated with prepayment of debt |
(6,491 |
) |
|
— |
|
Proceeds from exercise of stock options |
1,642 |
|
|
4,686 |
|
Treasury stock |
(42 |
) |
|
(15 |
) |
Net cash (used in) provided by financing
activities |
(73,010 |
) |
|
2,621 |
|
Effect of exchange rates on cash and cash equivalents |
(2,592 |
) |
|
(343 |
) |
Cash, cash equivalents
and restricted cash |
|
|
|
Net decrease for the period |
(239,500 |
) |
|
(157,400 |
) |
Balance, beginning of the period |
296,610 |
|
|
299,181 |
|
Balance, end of the period |
$ |
57,110 |
|
|
$ |
141,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED RECONCILIATION OF CASH AND
CASH EQUIVALENTSTO NET CASH POSITION AND NET CASH
AVAILABLE (In thousands)
|
At March 31, |
|
At December 31, |
|
2020 |
|
2019 |
Cash
available |
|
|
|
Cash and cash equivalents (1) |
$ |
49,941 |
|
|
$ |
289,870 |
|
Settlement receivables |
1,897 |
|
|
70,282 |
|
Settlement liabilities |
(11,440 |
) |
|
(234,087 |
) |
Net Cash Position |
40,398 |
|
|
126,065 |
|
|
|
|
|
Undrawn revolving credit facility |
— |
|
|
35,000 |
|
|
|
|
|
Net Cash Available |
$ |
40,398 |
|
|
$ |
161,065 |
|
|
|
|
|
|
|
|
|
(1) Cash and cash equivalents
at December 31, 2019, included approximately $91.2 million that was
used on January 6,2020, to pay down $84.5 of senior unsecured
notes, the accrued and unpaid interest thereon, and the related
fees and early redemption premium associated with the
transaction.
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED RECONCILIATION OF NET (LOSS)
INCOME TO EBITDA AND ADJUSTED EBITDA AND TO FREE CASH
FLOW(In thousands)
|
Three Months Ended March 31, 2020 |
|
Three Months Ended March 31, 2019 |
|
Games |
|
FinTech |
|
Total |
|
Games |
|
FinTech |
|
Total |
Net (loss) income |
|
|
|
|
$ |
(13,454 |
) |
|
|
|
|
|
$ |
5,860 |
|
Income tax benefit |
|
|
|
|
(997 |
) |
|
|
|
|
|
(388 |
) |
Loss on extinguishment of
debt |
|
|
|
|
7,378 |
|
|
|
|
|
|
— |
|
Interest expense, net of interest
income |
|
|
|
|
17,499 |
|
|
|
|
|
|
20,400 |
|
Operating (loss) income |
$ |
(5,392 |
) |
|
$ |
15,818 |
|
|
$ |
10,426 |
|
|
$ |
3,104 |
|
|
$ |
22,768 |
|
|
$ |
25,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: depreciation and
amortization |
30,313 |
|
|
5,254 |
|
|
35,567 |
|
|
27,156 |
|
|
3,930 |
|
|
31,086 |
|
EBITDA |
$ |
24,921 |
|
|
$ |
21,072 |
|
|
$ |
45,993 |
|
|
$ |
30,260 |
|
|
$ |
26,698 |
|
|
$ |
56,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock compensation
expense |
1,286 |
|
|
1,197 |
|
|
2,483 |
|
|
557 |
|
|
1,216 |
|
|
1,773 |
|
Accretion of contract rights |
2,170 |
|
|
— |
|
|
2,170 |
|
|
2,122 |
|
|
— |
|
|
2,122 |
|
Foreign exchange loss |
83 |
|
|
1,199 |
|
|
1,282 |
|
|
— |
|
|
— |
|
|
— |
|
Asset acquisition expense,
non-recurring professional fees and other |
— |
|
|
350 |
|
|
350 |
|
|
186 |
|
|
271 |
|
|
457 |
|
Adjusted
EBITDA |
$ |
28,460 |
|
|
$ |
23,818 |
|
|
$ |
52,278 |
|
|
$ |
33,125 |
|
|
$ |
28,185 |
|
|
$ |
61,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
|
|
|
(10,855 |
) |
|
|
|
|
|
(12,470 |
) |
Cash paid for capital
expenditures |
|
|
|
|
(22,507 |
) |
|
|
|
|
|
(22,194 |
) |
Cash paid for placement fees |
|
|
|
|
(585 |
) |
|
|
|
|
|
(5,329 |
) |
Cash refunded (paid) for income
taxes, net |
|
|
|
|
78 |
|
|
|
|
|
|
(92 |
) |
Free Cash
Flow |
|
|
|
|
$ |
18,409 |
|
|
|
|
|
|
$ |
21,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVERI HOLDINGS INC. AND
SUBSIDIARIESUNAUDITED CALCULATION OF TOTAL NET
DEBT LEVERAGE RATIO(In thousands, except for
ratio)
|
|
Trailing Twelve Months Ended |
|
|
March 31, 2020 |
|
March 31, 2019 |
Net (loss) income |
|
$ |
(2,797 |
) |
|
$ |
13,607 |
|
Income tax benefit |
|
(1,132 |
) |
|
(9,673 |
) |
Loss on extinguishment of
debt |
|
7,557 |
|
|
166 |
|
Interest expense, net of interest
income |
|
74,943 |
|
|
83,094 |
|
Operating
income |
|
$ |
78,571 |
|
|
$ |
87,194 |
|
|
|
|
|
|
Plus: depreciation and
amortization |
|
136,616 |
|
|
128,428 |
|
EBITDA |
|
$ |
215,187 |
|
|
$ |
215,622 |
|
|
|
|
|
|
Non-cash stock compensation
expense |
|
10,566 |
|
|
6,673 |
|
Accretion of contract rights |
|
8,758 |
|
|
8,486 |
|
Adjustment of certain purchase
accounting liabilities |
|
(129 |
) |
|
(550 |
) |
Write-down of assets |
|
1,268 |
|
|
2,575 |
|
Foreign exchange loss |
|
1,282 |
|
|
— |
|
Asset acquisition expense,
non-recurring professional fees and other |
|
886 |
|
|
865 |
|
Litigation accrual |
|
6,350 |
|
|
— |
|
Adjusted
EBITDA |
|
$ |
244,168 |
|
|
$ |
233,671 |
|
|
|
|
|
|
Principal amount of outstanding
debt(1) |
|
$ |
1,055,881 |
|
|
$ |
1,180,650 |
|
Less: cash and cash equivalents (2) |
|
49,941 |
|
|
50,000 |
|
Total Net Debt |
|
$ |
1,005,940 |
|
|
$ |
1,130,650 |
|
Total Net Debt Leverage
Ratio |
|
4.1 |
x |
|
4.8 |
x |
(1) Principal amount outstanding of senior
secured term loan, the senior secured revolving credit facility and
senior unsecured notes.
(2) The Company nets the lesser of cash and cash
equivalents or $50 million against principal amount of outstanding
debt, as provided in the Company's Amended Credit Facility.
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