Everi Holdings Inc

Everi Holdings Inc. (NYSE: EVRI) develops and offers products and services that provide gaming entertainment, improve its customers’ patron engagement, and help its casino customers operate their businesses. It develops and supplies entertaining game content, gaming machines and gaming systems and services for land-based and iGaming operators. It operates through two segments: Games and Financial Technology Solutions (FinTech).

Recent Business and Financial Updates:

• Termination of Stock Repurchase Program
  • Everi Holdings Inc. announced the termination of its stock repurchase program effective May 2, 2024. This program, initially approved by the Company's Board of Directors on May 3, 2023, authorized the repurchase of up to USD 180 million of the Company's common stock through November 3, 2024. Under this program, Everi repurchased 7.5 million shares at an average price of USD 13.40 per share, totaling USD 100 million. As of December 31, 2023, USD 80 million remained available for repurchases, but no additional shares were repurchased after this date.
  • Special Dividend and Merger Agreement: As previously disclosed, under the Agreement and Plan of Merger involving Everi, International Game Technology PLC, Ignite Rotate LLC, and Ember Sub LLC, along with the Separation and Distribution Agreement, Everi may declare a Special Dividend. This dividend is payable to stockholders as of a specified record date before the merger's consummation and reflects the cash flow generated by the Company up to the merger date. The Special Dividend amount will be calculated based on cash and cash equivalents exceeding USD 30 million at closing, adjusted for factors such as net working capital, indebtedness as of December 31, 2023, and certain transaction expenses.
  • Implementation of Sell-to-Cover Policy: On May 1, 2024, Everi implemented a mandatory sell-to-cover policy for tax withholding obligations related to the vesting and settlement of restricted stock units and performance stock units. This policy replaces the previous practice of withholding shares and aims to retain cash for the Special Dividend. Consequently, Section 16 officers are required to file a Form 4 to report the sale of a portion of their stock to cover these tax obligations. Previously, withheld shares were not sold on the open market, and Form 4 filings reflected the net shares granted to these officers.
  • Strategic Allocation of Resources: Everi's decision to terminate the stock repurchase program and implement the sell-to-cover policy underscores its commitment to strategically allocate resources towards the Special Dividend. The Company believes that this reallocation of funds, which would have been used for stock repurchases or tax withholdings, will better support its financial objectives in light of the upcoming merger.
• First Quarter 2024 Financial Results
  • Consolidated revenues for the three-month period ending March 31, 2024, were USD 189.3 million, a decrease from USD 200.5 million in the first quarter of the previous year.
  • Games Revenue: Games revenues amounted to USD 97.1 million, reflecting a decrease from the prior year and remaining essentially flat on a quarterly sequential basis. This stagnation is attributed to the Company's ongoing transition to its new family of cabinets and content. Approximately half of the decline in the installed base during the quarter is due to proactive decisions not to replace cabinets in lower-performing locations. The Company launched its new for-sale Dynasty Sol cabinet in late 2023 and its premium-leased Dynasty Sol Sync cabinet in the first quarter of 2024. These cabinets are anticipated to grow in popularity as new games are introduced.
  • FinTech Revenue: FinTech revenues were USD 92.2 million, slightly down year-over-year and on a quarterly sequential basis. Financial access revenues experienced modest growth, although inclement weather impacted a significant portion of the Company's customer base early in the quarter. Same-store volumes improved late in the first quarter and remained steady into the early second quarter. A decline in hardware sales was noted, primarily due to reduced unit sales of ticket redemption kiosks in certain foreign jurisdictions and lower loyalty equipment sales, influenced by the timing of initial software sales and installations. FinTech hardware sales typically involve large purchases tied to new contracts and renewals, leading to quarterly revenue fluctuations. Growth in hardware sales is expected for the year.
  • Operating and R&D Expenses: Operating expenses and research and development (R&D) expenses increased year-over-year, primarily due to USD 15.7 million in merger-related costs incurred in the first quarter. The decline in segment revenues and higher operating expenses led to lower net income compared to the first quarter of the previous year.
  • Balance Sheet: As of March 31, 2024, the Company held USD 268.6 million in cash and cash equivalents, compared to USD 267.2 million as of December 31, 2023. The net cash position was USD 49.6 million, up from USD 46.1 million at the end of 2023. Total debt decreased to USD 980.5 million as of March 31, 2024, from USD 986.5 million as of December 31, 2023, following a USD 6.0 million payment on its secured term loan during the first quarter.
  • Outlook: Everi has updated its outlook for 2024, now anticipating Adjusted EBITDA to decline from 2023 levels, primarily due to ongoing near-term challenges affecting the Games segment. Improvement is expected in the second half of the year as new cabinets and content gain traction with customers. The business is also projected to benefit from new product introductions, including the initial commercialization of video lottery terminals and entry into new international jurisdictions. The FinTech segment is expected to remain relatively flat year-over-year in the second quarter, with growth resuming in the second half of the year.
  • Everi projects Free Cash Flow to decline compared to 2023, with capital expenditures for the year expected to be flat or slightly up compared to 2023, cash interest remaining flat, and cash taxes anticipated to range between USD 15 million and USD 20 million.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is May 17, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.