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Everi highlights Q3 recovery following H1 losses


Gaming technology and payment solutions provider Everi Holdings says its business is showing signs of recovery in the early weeks of the third quarter, after seeing revenue plummet and losses mount in the first half of the year. 

Revenue for the six months to 30 June declined 40.0% to $152.0m (£115.9m/€128.3m), with the business posting a loss of $81.9m for the period, compared to an $11.3m profit in the prior year. 

This followed a 70.2% year-on-year decline in revenue for the second quarter of 2020 to $38.7m, which Everi noted reflected the impact of casino closures across the US from mid-March. During this period, the business saw revenue decline to zero – which already impacted first quarter performance – before venues began to reopen in May, ramping up through June. 

As a result of the industry shut-down, Everi began to implement cost-saving measures in March, to lower its cash burn rate, with these largely in effect by the beginning of Q2, from 1 April. 

For the three months to 30 June, games revenue amounted to $20.8m, down 70.0%, with a further $17.9m coming from Everi’s financial technology arm, 70.3% less than the prior year.

For the games segment, daily win per unit (DWPU) was $9.84 in Q2, compared to $32.26 in Q2 2019, reflecting the number of days for which casinos were closed and no revenue generated. However, in reopened venues, DWPU had since jumped in excess of $35.00, which Everi said highlighted the quality and popularity of its titles. 

Gaming operations revenue accounted for $13.9m of the segment’s total, including a $1.5m contribution from interactive games.

As of June 30, the supplier had 14,938 devices in operation, up by 87 units from the first quarter. Gaming sales revenue totalled $7.0m, down from $23.4m the previous year, with 381 units sold at an average price of $18,044. 

Fintech revenue for the quarter comprised $3.0m in revenue from loyalty products and services (down 63.3%), and a further $10.0m from cash access solutions, such as automatic teller machines, cash advances and checking services (down 74.8%). A further $4.4m came from information services, such as kiosk maintenance and compliance products.

The decline in revenue saw revenue-related costs for all divisions fall sharply. Cost of revenue for games dropped 64.5% to $6.2m, while for fintech this figure fell 66.6% to $2.8m. 

The supplier had embarked on a cost-cutting drive when the pandemic hit in march, which saw some development projects scrapped, and resources redirected to higher priority opportunities. An evaluation of staff numbers was also carried out, and corporate office space reduced as employees shifted to home working.

Total costs and expenses for the quarter also declined, falling 12.8% to $91.4m, with a marginal rise in operating costs, and higher depreciation and amortisation charges, offset by the declines in revenue-related outgoings. This saw Everi swing to an operating loss for Q2, of $91.4m. 

If $16.3m in depreciation costs, and $19.3m in amortisation charges, were factored back in, earnings before interest, tax, depreciation and amortisation was $3.3m, down from $64.1m in the prior year. 

Once finance costs, largely interest expenses, were stripped out, Everi posted a pre-tax loss of $72.6m, which was reduced by a $4.1m income tax benefit. Once a $304,000 foreign exchange loss was factored in, net loss for the quarter amounted to $68.2m.

Everi chief executive Michael Rumbolz hailed the “better than expected” results, noting that the return to positive adjusted EBITDA had been achieved much sooner than anticipated.

“This was the result of several factors, including the swift actions we took in March when the pandemic struck to reduce our operating costs and preserve liquidity during the time casinos were shut down; as well as our focus on enhancing operational efficiencies and pursuing higher-value opportunities,” he explained. 

“In addition, as our customers began to reopen faster than previously expected, we benefited from our prior investments in technology innovations and game development through the strong performance of our fintech solutions and installed base of recurring-revenue games.”

While the uncertainty caused by Covid-19 has prompted Everi to withdraw its 2020 projections, it said that products and services were returning to pre-pandemic levels, especially the gaming operations installed base. The payments arm, meanwhile, has seen transactional volumes track marginally below prior year figures. 

“Reflecting these trends, as well as the benefit from the 636-unit growth in installed premium games since the beginning of 2020, we expect quarterly sequential growth in the second half of 2020, including a return to free cash flow generation in the third quarter, which is earlier than we had previously anticipated,” Rumbolz said.

“As additional casinos across the country continue to reopen and the industry continues its return toward normalized operations, we believe our operational and product development initiatives will support our goal of enhancing shareholder value,” said Rumbolz.