Sign in

You're signed outSign in or to get full access.

EH

Everi Holdings Inc. (EVRI)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 revenue was $192.0M, down 6.5% year over year and down 7.0% sequentially; diluted EPS was $0.02 including an $11.7M intangible impairment; Adjusted EPS was $0.30; Adjusted EBITDA was $82.2M; Free Cash Flow was $19.8M .
  • FinTech outperformed with revenue up 3% YoY to $94.9M and Adjusted EBITDA up to $38.5M, supported by 6% growth in financial access and 25% growth in software and other; Games revenue fell to $97.1M with an operating loss of $7.4M on lower unit sales and DWPU, and the impairment charge tied to Intuicode customer relationships .
  • 2024 outlook: revenue growth expected in both segments; Adjusted EBITDA up slightly vs 2023; Free Cash Flow “flat to slightly down”; operating expenses targeted at 28–29% of revenue; R&D at 8–8.5%; capex flat to slightly up from $145M .
  • Catalyst: announced strategic merger with IGT’s Global Gaming and PlayDigital to create a combined ~$2.6B revenue platform with ~$1B 2024 pro forma Adjusted EBITDA and identified $75M cost synergies; EVRI will rebrand as International Game Technology Inc. (ticker to transition to IGT) after close (late 2024/early 2025) .

What Went Well and What Went Wrong

What Went Well

  • FinTech growth and mix improvement: revenues +3% YoY to $94.9M, with software and other +25% and financial access +6%; FinTech operating income +9% to $28.9M; Adjusted EBITDA +5% to $38.5M .
  • Cashless and funding momentum: total value processed rose 10% to $11.85B and transactions +12%; cashless transactions grew 50% YoY, albeit <5% of total funding transactions .
  • Product pipeline progressing: new for-sale Dynasty Sol launched in Q4 and Dynasty Vue ramping; early performance of premium Dynasty Dynamic and Player Classic Reserve was positive, with 360 units deployed by year end .
    • CEO tone: “2023 was a transitional year in our gaming business… Our FinTech business continues to perform well” .

What Went Wrong

  • Games segment weakness: total Games revenue fell to $97.1M (from $113.2M), with gaming equipment and systems down to $24.5M (from $39.8M); operating loss was $7.4M (vs $25.2M operating income LY); DWPU decreased to $34.67 (from $37.76); units sold declined to 1,043 (from 1,944) .
  • Impairment and elevated expenses: recorded $11.7M non-cash impairment tied to Intuicode customer relationship assets due to contract term changes; higher operating expenses from Video King acquisition, wages/benefits, and facility consolidation; Free Cash Flow down to $19.8M (from $44.2M) .
  • Installed base and margin pressure: installed base declined to 17,512 (from 17,975) as older underperforming units were removed; Adjusted EBITDA decreased to $82.2M (from $93.4M) on lower revenue and higher R&D/operating costs .

Financial Results

Consolidated metrics (Q4 2022 → Q2 2023 → Q3 2023 → Q4 2023)

MetricQ4 2022Q2 2023Q3 2023Q4 2023
Revenue ($M)$205.4 $208.7 $206.6 $192.0
Operating Income ($M)$51.6 $53.3 $52.4 $21.5
Net Income ($M)$27.0 $27.4 $26.6 $1.9
Diluted EPS ($)$0.28 $0.29 $0.29 $0.02
Adjusted EPS ($)$0.40 $0.41 $0.44 $0.30
Adjusted EBITDA ($M)$93.4 $96.1 $96.2 $82.2
Free Cash Flow ($M)$44.2 $47.7 $34.3 $19.8

Segment breakdown

MetricQ4 2022Q2 2023Q3 2023Q4 2023
Games Revenue ($M)$113.2 $113.1 $111.5 $97.1
- Gaming Operations – Land-based ($M)$67.2 $70.8 $71.9 $66.0
- Gaming Operations – Digital iGaming ($M)$6.2 $7.0 $6.5 $6.6
- Gaming Equipment & Systems ($M)$39.8 $35.3 $33.1 $24.5
Games Operating Income (Loss) ($M)$25.2 $24.4 $21.4 $(7.4)
Games Adjusted EBITDA ($M)$56.7 $58.1 $56.5 $43.7
FinTech Revenue ($M)$92.2 $95.6 $95.1 $94.9
- Financial Access Services ($M)$52.8 $55.7 $57.2 $56.0
- Software & Other ($M)$21.2 $24.0 $24.8 $26.4
- Hardware ($M)$18.2 $15.9 $13.1 $12.5
FinTech Operating Income ($M)$26.4 $28.9 $31.0 $28.9
FinTech Adjusted EBITDA ($M)$36.7 $38.0 $39.8 $38.5

KPIs

KPIQ2 2023Q3 2023Q4 2023
Installed Base at Period End (Units)17,812 17,676 17,512
Premium Portion of Installed Base (%)48% 48% 49%
DWPU ($)$37.22 $36.26 $34.67
Units Sold (#)1,597 1,449 1,043
ASP ($)$20,512 $19,485 $20,270
FinTech – Total Value Processed ($M)$11,664.8 $11,909.3 $11,850.3
FinTech – Total Transactions Completed (MM)36.3 37.4 37.3
Cashless Funding Transactions YoY Growth (%)+48% +51% +50%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Operating Expenses (% of revenue)FY 2024N/A28%–29% of consolidated revenues Initiated
R&D Expense (% of revenue)FY 2024N/A8%–8.5% Initiated
Capital ExpendituresFY 2024N/AFlat to slightly up vs $145M in 2023 Initiated
Cash InterestFY 2024N/AConsistent with prior year Initiated
Free Cash FlowFY 2024N/AStrong but flat to slightly down Initiated
Segment Revenue GrowthFY 2024N/AGrowth expected in both Games and FinTech Initiated
Installed Base TrajectoryH1 2024N/ASlight decline as underperforming units removed Initiated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2023)Trend
Games cabinet transition & content pipelineQ2: Transition period; roll-out of new cabinets; expect H2 Games flat/down vs 2022 . Q3: Headwinds from lower unit sales/DWPU; >80 new themes; positive G2E feedback .New Dynasty Sol launch; Vue ramp; early positive performance of premium cabinets; installed base down; DUWP lower .Mixed near term; improving product slate, installed base trimmed
Cashless & fundingQ2: Value processed record $11.7B; cashless +48% YoY . Q3: Value processed record $11.9B; cashless +51% YoY .$11.85B processed; 12% transaction growth; cashless +50% YoY .Strong secular growth
M&A/StrategicQ2/Q3: Integrating Video King; entering VLT & UK mobile in early 2024 .Announced merger with IGT Gaming & PlayDigital; ~$75M cost synergies; ~$1B 2024 pro forma Adjusted EBITDA .Transformational
R&D & Capex intensityQ2/Q3: Higher R&D; discrete capex for facility build-out .2024 R&D at 8–8.5%; capex flat to slightly up vs $145M .Sustained investment
Interest rate/macroQ2/Q3: Higher net interest paid from rising rates .Q4 net interest paid $14.4M; higher from variable-rate debt and commercial cash arrangements .Ongoing rate headwind

Management Commentary

  • “After several years of rapid growth, 2023 was a transitional year in our gaming business… Our FinTech business continues to perform well” — Randy Taylor, CEO .
  • “The combination [with IGT] is expected to create a comprehensive and diverse portfolio of high-performing land-based, digital, and FinTech gaming products and services” — Company announcement .
  • “We expect estimated P&L annualized run rate synergies of $75 million… pro forma net leverage at closing… 3.2x to 3.4x” — Randy Taylor on merger terms .
  • “Pro forma adjusted EBITDA is projected… approximately $1 billion in 2024” — Vincent Sadusky .

Q&A Highlights

  • Revenue and cost synergy framework: Management emphasized minimal negative synergies due to complementary portfolios and identified $75M cost savings in supply chain optimization, streamlined ops, and real estate consolidation; revenue synergies expected from cross-selling content and systems/FinTech integration .
  • Capital structure and leverage: Pro forma leverage targeted at ~3.2–3.4x with balanced capital allocation (organic/inorganic investment, debt reduction, buybacks); IGT RemainCo expects ~2.5x leverage shortly after closing .
  • Regulatory path: Both companies are well-licensed and compliant; antitrust risk viewed as manageable, with larger competitors remaining post-close; timeline late 2024/early 2025 .
  • Wallet and systems integration: Combined FinTech and IGT systems aim to deliver a best-in-class, end-to-end cashless solution without third-party dependencies, improving patron experience and accelerating adoption .
  • No planned divestitures: Portfolio viewed as complementary; no assets targeted for monetization at this time .

Estimates Context

  • Wall Street consensus for EVRI Q4 2023 via S&P Global was unavailable in our system due to missing CIQ mapping; therefore, estimate comparisons are not provided. Values retrieved from S&P Global are unavailable for EVRI Q4 2023 in this session.

Key Takeaways for Investors

  • FinTech resilience and mix shift supported Q4 results; software and financial access growth offset hardware volatility; recurring revenue mix improved (77% of total in Q4) .
  • Games segment headwinds and impairment depressed profitability; installed base and DWPU declines reflect cabinet transition timing; near-term unit sales softness weighed on revenue .
  • 2024 set up: disciplined cost framework (OpEx 28–29% of revenue, R&D 8–8.5%) and capex focused on refreshing installed base; Adjusted EBITDA guided “up slightly,” FCF “flat to slightly down” .
  • Strategic merger with IGT creates scale across land-based, digital, and FinTech; identified $75M cost synergies and ~ $1B 2024 pro forma Adjusted EBITDA position the combined entity for improved growth and cash conversion .
  • Cashless adoption maintains strong growth trajectory (+50% YoY in Q4), offering a secular tailwind and cross-sell opportunity with IGT systems .
  • Interest expense remains a watch item; Q4 net interest paid increased amid higher rates and commercial arrangements; 2024 cash interest expected consistent with 2023 .
  • Near-term trading: narrative likely driven by merger milestones and integration clarity; medium-term thesis hinges on cabinet/content ramp, FinTech cross-sell with IGT systems, and synergy delivery .