EX-99.1 2 evri-ex991_6.htm EX-99.1 evri-ex991_6.htm

Exhibit 99.1

EVERI REPORTS 2018 SECOND QUARTER RESULTS

Revenues of $118.7 Million, Net Income of $1.5 Million or $0.02 per Diluted Share,

and Adjusted EBITDA of $59.5 Million

 

Second Quarter Growth, Including Record Quarterly Adjusted EBITDA, Driven by Continued Improvement Across all Business Operations

 

Raises Full-Year Adjusted EBITDA Outlook Range to $228 Million to $231 Million

 

Las Vegas, NV – August 7, 2018 – Everi Holdings Inc. (NYSE:EVRI) (“Everi” or the “Company”) today reported record financial results for the second quarter ended June 30, 2018.  

Michael Rumbolz, President and Chief Executive Officer of Everi, commented, “Ongoing customer demand for products across the spectrum of our Games and Financial Technology Solutions portfolio is driving growth across the key performance indicators of our business including record quarterly unit sales, our highest ever quarter-end installed base, a record year-over-year rise in daily win per unit which increased $2.42, or 9%, and FinTech revenue improvement of more than 11% with the segment Adjusted EBITDA rising for the ninth consecutive quarter.  As a result, momentum in our business is building as comparable revenue grew 16%, Adjusted EBITDA improved 10% to a record $59.5 million, and we delivered our second consecutive quarter of positive net income and net earnings per diluted share.  With our strong operating performance through the first half of 2018, we are raising our outlook for full year Adjusted EBITDA to a range of $228 to $231 million.”

Consolidated Full Quarter Comparative Results (unaudited)

 

 

 

Three Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

 

(in millions, except per share amounts)

 

Revenues (1)

 

$

118.7

 

 

$

102.1

 

 

 

 

 

 

 

 

 

 

Operating income (2)

 

$

22.6

 

 

$

21.3

 

 

 

 

 

 

 

 

 

 

Net income (loss) (2)

 

$

1.5

 

 

$

(19.1

)

 

 

 

 

 

 

 

 

 

Net earnings (loss) per diluted share (2)

 

$

0.02

 

 

$

(0.29

)

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

73.4

 

 

 

66.4

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (3)

 

$

59.5

 

 

$

54.1

 

1

 

(1)

Revenues for the three months ended June 30, 2017 are presented on a comparable basis to retrospectively reflect a net versus gross reporting of revenues under ASC 606, which primarily impacts the Company’s Financial Technology Solutions business. This has no impact on the Company’s operating income, net loss, net loss per diluted share, or Adjusted EBITDA. For further discussion, see the Net Versus Gross Impacts on Revenues and Cost of Revenues disclosure at the end of this release.

(2)

Operating income, net income, and net earnings per diluted share for the three months ended June 30, 2018 include a non-cash charge of $2.6 million related to the write-off of certain inventory and fixed assets.

(3)

For a reconciliation of net income (loss) to Adjusted EBITDA, see the Unaudited Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA and Adjusted EBITDA Margin provided at the end of this release.

 

Everi today announced a change in the name of the operating segment previously referred to as “Payments” to “Financial Technology Solutions” (“FinTech”).  The Company believes this reference more accurately reflects the focus of the business segment on delivering innovative and integrated solutions.  Everi’s FinTech solutions provide actionable information to enhance the efficiency of the casino operator, support the comprehensive regulatory and tax requirements of their gaming customers and improve players’ gaming experience by providing easy access to their funds and payment of winnings.

 

Mr. Rumbolz added, “Growth in our Games segment, as reflected in the 20% revenue improvement and 15% Adjusted EBITDA increase in the second quarter, continues to be driven by our successful execution of the comprehensive product evolution initiative implemented about two years ago.  As a result, we now address more segments of the slot floor and have more in-demand games.  Games featured on our Core HDX and E43 cabinets as well as our highly successful mechanical reel games continue to drive year-over-year improvement in unit sales. The Core and E43 cabinets are also playing an integral role in the refreshing of our installed base.  Our success with this initiative, combined with new, exciting games and ongoing growth in wide-area progressive game placements, is delivering solid returns on our investments including consistent and increasing improvements in our daily win per unit which rose for the third consecutive quarter, demonstrating the benefits achieved through both the refresh of our installed base and the performance of our new games that are significant contributors to our growth.  Our premium unit count and wide-area progressive offerings will be further elevated early in the fourth quarter as we anticipate the launch of games with exciting new player entertainment experiences on our new Renegade 3600® and Empire Arena™ form factors.

 

“We also remain focused on FinTech solution innovation as we develop new products and further evolve the features and functionality of our existing products to provide customers with full-service, integrated solutions that help them better manage operations and drive more cash to the casino floor. The targeted investments in our FinTech portfolio combined with our focus on world-class customer service, is further extending our industry leadership position. We continue to expand our roster of customers as we garner new contracts from winning competitive bids and the new casino openings.  The benefit of ongoing improvement in the domestic casino market along with the addition of new customers is generating consistent increases in transaction volumes and overall dollars processed.  

 

“Our FinTech and Games products are delivering increased value to casino operators as we continue to expand our presence on casino floors in both segments.  We are looking forward to the debut of our newest products at G2E in early October as we expect our Games and FinTech innovations will further raise the standards our customers have come to expect and create new opportunities to assist our customers in growing and operating more efficiently.”

2

Second Quarter 2018 Results Overview

Revenues are presented herein on a comparable basis (see the Net Versus Gross Impacts on Revenues and Cost of Revenues disclosure at the end of this release for a reconciliation of 2017 amounts as reported to as adjusted).

Revenues for the second quarter of 2018 increased 16.2% to $118.7 million from $102.1 million in the second quarter of 2017.  Revenues from the Games and FinTech segments were $66.0 million and $52.7 million, respectively, for the second quarter of 2018.  The Company reported operating income of $22.6 million for the second quarter of 2018, inclusive of a non-cash charge of $2.6 million for the write down of certain legacy EGMs and related component parts.  Operating income in the second quarter of 2017 was $21.3 million.

Everi recorded income before income tax of $0.3 million in the second quarter of 2018 compared to a loss before income tax of $17.2 million in the second quarter of 2017.  Income before income tax for the three months ended June 30, 2018 includes $1.2 million in fees and $0.2 million from the loss on early extinguishment of debt related to the May 2018 repricing of the Company’s Senior Secured Term Loan. Net loss before income tax and net loss for the three months ended June 30, 2017 included a $14.6 million loss on early extinguishment of debt.  The Company reported net income of $1.5 million, or $0.02 per diluted share, for the second quarter of 2018 compared to a net loss of $19.1 million, or a diluted loss per share of $(0.29), in the prior-year period.

Adjusted EBITDA for the second quarter of 2018 increased approximately 10%, or $5.4 million, to a quarterly record $59.5 million from $54.1 million in the second quarter of 2017.  Games and FinTech segment Adjusted EBITDA for the three months ended June 30, 2018 were $33.7 million and $25.8 million, respectively.  Games and FinTech segment Adjusted EBITDA for the three months ended June 30, 2017 were $29.2 million and $24.9 million, respectively.

 

 

 

 

3

 

Games Segment Full Quarter Comparative Results (unaudited)

 

 

Three Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

 

(in millions, except unit amounts and prices)

 

Revenues (1)

 

$

66.0

 

 

$

55.0

 

 

 

 

 

 

 

 

 

 

Operating income (2)

 

$

2.3

 

 

$

2.7

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (3)

 

$

33.7

 

 

$

29.2

 

 

 

 

 

 

 

 

 

 

Unit sales:

 

 

 

 

 

 

 

 

Units sold

 

 

1,108

 

 

 

886

 

Average sales price ("ASP")

 

$

17,650

 

 

$

17,613

 

 

 

 

 

 

 

 

 

 

Gaming operations installed base:

 

 

 

 

 

 

 

 

Average units installed during period:

 

 

 

 

 

 

 

 

Average units installed

 

 

14,174

 

 

 

12,958

 

Approximate daily win per unit (4)

 

$

29.49

 

 

$

27.07

 

 

 

 

 

 

 

 

 

 

Units installed at end of period:

 

 

 

 

 

 

 

 

Class II

 

 

9,494

 

 

 

8,701

 

Class III

 

 

4,707

 

 

 

4,241

 

Total installed base

 

 

14,201

 

 

 

12,942

 

 

 

 

 

 

 

 

 

 

Installed base - Oklahoma

 

 

6,761

 

 

 

6,734

 

Installed base - non-Oklahoma

 

 

7,440

 

 

 

6,208

 

Total installed base

 

 

14,201

 

 

 

12,942

 

 

 

 

 

 

 

 

 

 

Premium units

 

 

2,782

 

 

 

2,049

 

 

(1)

Revenues for the three months ended June 30, 2017 are presented on a comparable basis to retrospectively reflect a net versus gross reporting of revenues under ASC 606, which was not material for the Games operating segment.

(2)

Operating income for the three months ended June 30, 2018 includes a non-cash charge of $2.6 million related to the write-off of certain inventory and fixed assets.

(3)

For a reconciliation of net income (loss) to Adjusted EBITDA, see the Unaudited Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA and Adjusted EBITDA Margin provided at the end of this release.

(4)

Approximate daily win per unit excludes the impact of the direct costs associated with the Company’s wide-area progressive jackpot expense.

2018 Second Quarter Games Segment Highlights:

 

•

Games segment revenues were $66.0 million in the second quarter of 2018 compared to $55.0 million in the second quarter of 2017. 

 

•

Revenues generated from the sale of gaming units and other related parts and equipment totaled $22.3 million compared to revenues of $17.6 million in the prior-year period.  Gaming unit sales increased by 25% to 1,108 gaming units in the second quarter of 2018 compared to 886 gaming units sold in the prior-year period.

4

 

 

•

Revenues from gaming operations were $43.7 million in the second quarter of 2018 compared to $37.4 million in the prior-year period.  The increase reflects year-over-year growth in both the installed base and estimated daily win per unit (“DWPU”).

 

o

The installed base at June 30, 2018 increased 1,259 units year over year to 14,201 units and increased 77 units on a quarterly sequential basis. Premium units rose 36% year over year and the non-Oklahoma portion of the installed base increased 20%.

 

o

DWPU in the second quarter of 2018 increased by $2.42 to $29.49 compared to $27.07 in the prior-year period. The increase reflects, in part, improvements in the unit performance following capital investment in new cabinets and games to update a portion of the installed base, continued growth in unit placements in higher yielding markets, and an increase in wide-area progressive games.  This is the third consecutive quarter of year-over-year growth in DWPU.

 

o

Revenues from the New York Lottery business, which are included in gaming operations revenue, were $4.8 million in the second quarter of 2018 compared to $4.7 million in the prior-year period.  

Financial Technology Solutions Segment Full Quarter Comparative Results (unaudited)

 

 

Three Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

 

(in millions, unless otherwise noted)

 

Revenues (1)

 

$

52.7

 

 

$

47.2

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

20.3

 

 

$

18.6

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (2)

 

$

25.8

 

 

$

24.9

 

 

 

 

 

 

 

 

 

 

Aggregate dollar amount processed (in billions):

 

 

 

 

 

 

 

 

Cash advance

 

$

1.7

 

 

$

1.5

 

ATM

 

$

4.9

 

 

$

4.4

 

Check warranty

 

$

0.3

 

 

$

0.3

 

 

 

 

 

 

 

 

 

 

Number of transactions completed (in millions):

 

 

 

 

 

 

 

 

Cash advance

 

 

2.7

 

 

 

2.4

 

ATM

 

 

23.0

 

 

 

21.3

 

Check warranty

 

 

0.9

 

 

 

0.9

 

 

(1)

Revenues for the three months ended June 30, 2017 are presented on a comparable basis to retrospectively reflect a net versus gross reporting of revenues under ASC 606, which primarily impacts the Company’s FinTech business. This has no impact on the Company’s operating income or Adjusted EBITDA. For further discussion, see the Net Versus Gross Impacts on Revenues and Cost of Revenues disclosure at the end of this release.

(2)

For a reconciliation of net income (loss) to Adjusted EBITDA, see the Unaudited Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA and Adjusted EBITDA Margin provided at the end of this release.

 

5

 

2018 Second Quarter Financial Technology Solutions Segment Highlights:

 

•

On a comparable revenue basis, FinTech revenues increased approximately 12% to $52.7 million in the second quarter of 2018 compared to $47.2 million in the prior year period. The growth reflects segment-wide strength, including growth in core cash access revenue as a result of increased same store transactions and dollars processed. FinTech revenue also continues to benefit from new customer wins from competitive bid processes, new casino openings, and the expansion of ATM services into Canada, as well as increases in equipment sales revenue.

 

o

Cash advance revenues in the second quarter of 2018 increased $0.3 million to $20.6 million compared to $20.3 million of comparable revenues in the prior-year period.

 

o

ATM revenues increased approximately 40.0% to $12.6 million in the second quarter of 2018, which includes a $0.6 million benefit from the reversal of a net revenue adjustment from the first quarter of 2018. ATM revenues on a comparable basis were $9.0 million in the prior-year period. 

 

o

Check services revenues increased approximately 8.2% to $6.6 million in the second quarter of 2018 compared to $6.1 million of comparable revenues in the prior-year period.

 

o

Equipment and Information Services and Other revenues increased approximately 11.1% to $13.0 million in the second quarter of 2018 compared to $11.7 million in the prior-year period primarily reflecting increased equipment sales revenue.

Updated 2018 Outlook

Everi today raised its expectation for 2018 full year Adjusted EBITDA to a range of $228 million to $231 million compared to the previously provided range of $225 million to $230 million. The Company also provided the following updates on a range of business metrics and assumptions:

 

•

The Company expects full year Games segment unit sales will increase approximately 10% from the 3,647 units sold in 2017.  The ASP for units sold in 2018 is expected to be comparable to the ASP for units sold in 2017.

 

•

The Company expects the 2018 year-end installed base to increase approximately 8% to 10% from the 13,296 units reported at December 31, 2017.  

 

•

The Company expects that the DWPU for its installed base will be higher in each quarter of 2018 compared to the DWPU of the comparable quarterly periods in 2017.

 

•

FinTech Adjusted EBITDA is expected to grow in the mid-single digits compared to 2017.  This assumes sustained performance in the gaming industry and the macro United States economy.

 

•

Revenue from the sale and service of fully integrated kiosks and compliance products is expected to be higher in 2018 compared to 2017.  

6

 

 

•

Capital expenditures and placement fees in 2018 are expected to be approximately $125 million to $130 million.  This includes capital expenditures of approximately $104 million to $109 million and placement fee payments of approximately $21 million.

 

•

Depreciation expense is expected to be approximately $56 million to $60 million and amortization expense is expected to be approximately $66 million to $70 million.

 

•

Net interest expense is expected to be approximately $83 million to $87 million, inclusive of Vault Cash interest expense of approximately $8 million, $2 million of imputed interest on the Player Station Agreement and $1.2 million in repricing fees and $0.2 million in loss on early extinguishment of debt associated with the repricing of the Company’s Senior Secured Term Loan completed in May 2018. Non-cash amortization of debt issuance costs is expected to be approximately $3.4 million.  

 

•

The Company expects to record a benefit for income tax of between $3 million and $5 million for 2018 and expects cash tax payments of approximately $0.5 million.

For a reconciliation of projected net income to projected Adjusted EBITDA, see the Reconciliation of Projected Net Income to Projected EBITDA and Projected Adjusted EBITDA provided at the end of this release.

New Revenue Recognition Standard

In May 2014, the Financial Accounting Standards Board issued a new standard related to revenue recognition, commonly referred to as ASC 606. The Company adopted the new standard effective January 1, 2018. 

Revenues for the three and six month periods ended June 30, 2017 have been presented on a comparable basis to retrospectively reflect a net versus gross reporting of revenues under ASC 606, which primarily impacts the Company’s Financial Technology Solutions business. This has no impact on the Company’s operating income, net income (loss), net income (loss) per diluted share or Adjusted EBITDA. For a reconciliation of the as adjusted to as reported amounts, see the Net Versus Gross Impacts on Revenues and Cost of Revenues disclosure at the end of this release.

Investor Conference Call and Webcast

The Company will host an investor conference call to discuss its 2018 second quarter results at 5:00 p.m. ET today.  The conference call may be accessed live over the phone by dialing (866) 548-4713 or for international callers by dialing (323) 794-2093.  A replay will be available beginning at 8:00 p.m. ET today and may be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the PIN number is 7143634.  The replay will be available until August 14, 2018. The call will be webcast live from 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, Adjusted EBITDA Margin, net cash position and net cash available, which are not measures of

7

 

our financial performance or position under United States Generally Accepted Accounting Principles (“GAAP”). Accordingly, Adjusted EBITDA and Adjusted EBITDA Margin 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 (loss), operating income (loss), basic or diluted earnings (loss) 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.

We define Adjusted EBITDA as earnings (loss) before interest, taxes, depreciation and amortization, non-cash stock compensation expense, accretion of contract rights, and the write-off of certain inventory and fixed assets. 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 Adjusted EBITDA Margin as Adjusted EBITDA divided by revenues.

A reconciliation of the Company’s net income (loss) per GAAP to Adjusted EBITDA and Adjusted EBITDA Margin is included in the Unaudited Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA and Adjusted EBITDA Margin provided at the end of this release. Additionally, a reconciliation of each segment’s operating income (loss) to Adjusted EBITDA is also included. On a segment level, operating income (loss) per GAAP, rather than net earnings (loss) per GAAP, is reconciled to Adjusted EBITDA as the Company does not report net earnings (loss) by segment. In addition, Adjusted EBITDA Margin is provided on a segment level. 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 because our cash position, as measured by cash and cash equivalents, depends upon changes in settlement receivables and the timing of payments related to settlement liabilities. As such, our cash and cash equivalents can change substantially based upon the timing of our receipt of payments for settlement receivables and payments we make to customers for our settlement liabilities.  We present net cash available as management monitors this amount in connection with its forecasting of cash flows and future cash requirements. 

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.

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,” or “will” and similar expressions to identify forward-looking statements. Examples of forward-looking statements include, among others, statements the Company makes regarding (a) its ability to lower its annual cash interests costs and accelerate

8

 

free cash flow generation; continue expanding the segments of the gaming floor the Company’s games address; continue product innovation; drive growth for the Company’s installed base and its DWPU, and in the Company’s annual ship share over the next several years; create incremental value for its shareholders; and improve its financial profile; and (b) its guidance related to 2018 financial and operational metrics, including Adjusted EBITDA, unit sales, the installed base size and placements, DWPU, revenue and anticipated levels of capital expenditures, depreciation expense, amortization expense, cash interest expense, and income tax benefit, including cash tax payments.

The forward-looking statements in this press release are subject to additional risks and uncertainties, including those set forth under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our periodic reports filed with the Securities and Exchange Commission (the “SEC”), including, without limitation, our Annual Reports on Form 10-K and quarterly reports on Form 10-Q, and are based on information available to us on the date hereof.

These cautionary statements qualify our forward-looking statements and you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement contained herein speaks only as of the date on which it is made, and we do not intend, and assume no obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

This press release should be read in conjunction with the Form 10-K or Form 10-Q to which it relates, 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 is a leading supplier of technology solutions for the casino gaming industry. The Company provides casino operators with a diverse portfolio of products including innovative gaming machines that Powers the Casino Floor®, and casino operational and management systems that include comprehensive, end-to-end financial technology solutions, critical intelligence offerings, and gaming operations efficiency technology. Everi’s mission is to be a transformative force for casino operations by facilitating memorable player experiences, delivering reliable protection and security, and striving for customer satisfaction and operational excellence. For more information, visit www.everi.com.

Contacts

Investor Relations

Richard Land, James Leahy

JCIR

212-835-8500 or evri@jcir.com    

 

9

 

EVERI HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND

COMPREHENSIVE INCOME (LOSS)

(In thousands, except earnings (loss) per share amounts)

  

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Games revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming operations

 

$

43,022

 

 

$

36,869

 

 

$

83,078

 

 

$

73,400

 

Gaming equipment and systems

 

 

22,278

 

 

 

17,557

 

 

 

42,431

 

 

 

36,281

 

Gaming other

 

 

648

 

 

 

678

 

 

 

656

 

 

 

699

 

Games total revenues

 

 

65,948

 

 

 

55,104

 

 

 

126,165

 

 

$

110,380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FinTech revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash access services

 

 

39,739

 

 

 

175,442

 

 

 

77,958

 

 

 

347,175

 

Equipment

 

 

4,765

 

 

 

3,697

 

 

 

9,183

 

 

 

5,997

 

Information services and other

 

 

8,230

 

 

 

7,987

 

 

 

16,377

 

 

 

16,215

 

FinTech total revenues

 

 

52,734

 

 

 

187,126

 

 

 

103,518

 

 

 

369,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

 

118,682

 

 

 

242,230

 

 

 

229,683

 

 

 

479,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Games cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming operations

 

 

4,211

 

 

 

3,963

 

 

 

8,393

 

 

 

7,171

 

Gaming equipment and systems

 

 

12,045

 

 

 

8,740

 

 

 

22,786

 

 

 

17,976

 

Gaming other

 

 

559

 

 

 

536

 

 

 

559

 

 

 

536

 

Games total cost of revenues

 

 

16,815

 

 

 

13,239

 

 

 

31,738

 

 

 

25,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FinTech cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash access services

 

 

2,446

 

 

 

142,445

 

 

 

4,676

 

 

 

281,106

 

Equipment

 

 

3,426

 

 

 

2,212

 

 

 

5,940

 

 

 

3,631

 

Information services and other

 

 

980

 

 

 

810

 

 

 

2,197

 

 

 

1,529

 

FinTech total cost of revenues

 

 

6,852

 

 

 

145,467

 

 

 

12,813

 

 

 

286,266

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

37,570

 

 

 

28,779

 

 

 

69,757

 

 

 

57,772

 

Research and development

 

 

4,595

 

 

 

4,618

 

 

 

8,906

 

 

 

9,161

 

Depreciation

 

 

13,701

 

 

 

11,396

 

 

 

26,526

 

 

 

22,226

 

Amortization

 

 

16,552

 

 

 

17,439

 

 

 

32,855

 

 

 

34,764

 

Total costs and expenses

 

 

96,085

 

 

 

220,938

 

 

 

182,595

 

 

 

435,872

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

22,597

 

 

 

21,292

 

 

 

47,088

 

 

 

43,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 

22,122

 

 

 

23,881

 

 

 

42,429

 

 

 

48,938

 

Loss on extinguishment of debt

 

 

166

 

 

 

14,615

 

 

 

166

 

 

 

14,615

 

Total other expenses

 

 

22,288

 

 

 

38,496

 

 

 

42,595

 

 

 

63,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax

 

 

309

 

 

 

(17,204

)

 

 

4,493

 

 

 

(19,658

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (benefit) provision

 

 

(1,166

)

 

 

1,853

 

 

 

(1,591

)

 

 

2,907

 

Net income (loss)

 

 

1,475

 

 

 

(19,057

)

 

 

6,084

 

 

 

(22,565

)

Foreign currency translation

 

 

(1,058

)

 

 

836

 

 

 

(735

)

 

 

1,108

 

Comprehensive income (loss)

 

$

417

 

 

$

(18,221

)

 

$

5,349

 

 

$

(21,457

)

Earnings (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.02

 

 

$

(0.29

)

 

$

0.09

 

 

$

(0.34

)

Diluted

 

$

0.02

 

 

$

(0.29

)

 

$

0.08

 

 

$

(0.34

)

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

69,203

 

 

 

66,350

 

 

 

68,946

 

 

 

66,221

 

Diluted

 

 

73,440

 

 

 

66,350

 

 

 

73,323

 

 

 

66,221

 

 

The results for the three and six month periods ended June 30, 2018 reflect the adoption of ASC 606.

10

 

EVERI HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

6,084

 

 

$

(22,565

)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

59,381

 

 

 

56,990

 

Amortization of financing costs and discounts

 

 

3,061

 

 

 

3,186

 

Loss on sale or disposal of assets

 

 

215

 

 

 

1,399

 

Accretion of contract rights

 

 

4,178

 

 

 

3,909

 

Provision for bad debts

 

 

5,114

 

 

 

5,170

 

Deferred income taxes

 

 

(1,909

)

 

 

2,565

 

Write-down of inventory and fixed assets

 

 

2,575

 

 

 

—

 

Reserve for obsolescence

 

 

1,053

 

 

 

266

 

Loss on extinguishment of debt

 

 

166

 

 

 

14,615

 

Stock-based compensation

 

 

4,305

 

 

 

3,480

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Settlement receivables

 

 

87,336

 

 

 

81,590

 

Trade and other receivables

 

 

(20,230

)

 

 

5,283

 

Inventory

 

 

(2,359

)

 

 

(2,890

)

Prepaid and other assets

 

 

1,977

 

 

 

(1,957

)

Settlement liabilities

 

 

(99,859

)

 

 

(93,479

)

Accounts payable and accrued expenses

 

 

(1,857

)

 

 

16,530

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

49,231

 

 

 

74,092

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(57,936

)

 

 

(43,696

)

Proceeds from sale of fixed assets

 

 

79

 

 

 

2

 

Placement fee agreements

 

 

(10,117

)

 

 

(3,044

)

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(67,974

)

 

 

(46,738

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from current credit facility

 

 

—

 

 

 

820,000

 

Repayments of prior credit facility

 

 

—

 

 

 

(465,600

)

Repayments of secured notes

 

 

—

 

 

 

(335,000

)

Repayments of credit facilities

 

 

(4,100

)

 

 

—

 

Debt issuance costs and discounts

 

 

(1,276

)

 

 

(19,663

)

Proceeds from exercise of stock options

 

 

6,373

 

 

 

1,799

 

Purchase of treasury stock

 

 

(47

)

 

 

(11

)

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

950

 

 

 

1,525

 

 

 

 

 

 

 

 

 

 

Effect of exchange rates on cash

 

 

(620

)

 

 

882

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

 

 

Net (decrease) increase for the period

 

 

(18,413

)

 

 

29,761

 

Balance, beginning of the period

 

 

129,604

 

 

 

119,438

 

Balance, end of the period

 

$

111,191

 

 

$

149,199

 

 

11

 

EVERI HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED NET VERSUS GROSS IMPACTS ON REVENUES AND COST OF REVENUES

(In thousands)

 

 

Three Months Ended June 30,

 

 

2018

 

 

2017

 

 

 

 

2017

 

 

2017

 

 

As reported

 

 

As adjusted

 

 

 

 

Adjustments

 

 

As reported

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Games revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming operations

$

43,022

 

 

$

36,749

 

 

 

 

$

120

 

 

$

36,869

 

Gaming equipment and systems

 

22,278

 

 

 

17,557

 

 

 

 

 

—

 

 

 

17,557

 

Gaming other

 

648

 

 

 

678

 

 

 

 

 

—

 

 

 

678

 

Games total revenues

 

65,948

 

 

 

54,984

 

 

 

 

 

120

 

 

 

55,104

 

FinTech revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash access services

 

39,739

 

 

 

35,481

 

 

 

 

 

139,961

 

 

 

175,442

 

Equipment

 

4,765

 

 

 

3,697

 

 

 

 

 

—

 

 

 

3,697

 

Information services and other

 

8,230

 

 

 

7,987

 

 

 

 

 

—

 

 

 

7,987

 

FinTech total revenues

 

52,734

 

 

 

47,165

 

 

 

 

 

139,961

 

 

 

187,126

 

Total revenues

$

118,682

 

 

$

102,149

 

 

 

 

$

140,081

 

 

$

242,230

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Games cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming operations

$

4,211

 

 

$

3,843

 

 

 

 

$

120

 

 

$

3,963

 

Gaming equipment and systems

 

12,045

 

 

 

8,740

 

 

 

 

 

—

 

 

 

8,740

 

Gaming other

 

559

 

 

 

536

 

 

 

 

 

—

 

 

 

536

 

Games total cost of revenues

 

16,815

 

 

 

13,119

 

 

 

 

 

120

 

 

 

13,239

 

FinTech cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash access services

 

2,446

 

 

 

2,484

 

 

 

 

 

139,961

 

 

 

142,445

 

Equipment

 

3,426

 

 

 

2,212

 

 

 

 

 

—

 

 

 

2,212

 

Information services and other

 

980

 

 

 

810

 

 

 

 

 

—

 

 

 

810

 

FinTech total cost of revenues

 

6,852

 

 

 

5,506

 

 

 

 

 

139,961

 

 

 

145,467

 

Total cost of revenues

$

23,667

 

 

$

18,625

 

 

 

 

$

140,081

 

 

$

158,706

 

 

Revenues for the three month period ended June 30, 2017 are presented on a comparable basis to retrospectively reflect a net versus gross reporting of revenues under ASC 606, which primarily impacts the Company’s FinTech business.

 

12

 

EVERI HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED NET VERSUS GROSS IMPACTS ON REVENUES AND COST OF REVENUES

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

2018

 

 

2017

 

 

 

 

2017

 

 

2017

 

 

As reported

 

 

As adjusted

 

 

 

 

Adjustments

 

 

As reported

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Games revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming operations

$

83,078

 

 

$

73,265

 

 

 

 

$

135

 

 

$

73,400

 

Gaming equipment and systems

 

42,431

 

 

 

36,281

 

 

 

 

 

—

 

 

 

36,281

 

Gaming other

 

656

 

 

 

699

 

 

 

 

 

—

 

 

 

699

 

Games total revenues

 

126,165

 

 

 

110,245

 

 

 

 

 

135

 

 

 

110,380

 

FinTech revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash access services

 

77,958

 

 

 

70,709

 

 

 

 

 

276,466

 

 

 

347,175

 

Equipment

 

9,183

 

 

 

5,997

 

 

 

 

 

—

 

 

 

5,997

 

Information services and other

 

16,377

 

 

 

16,215

 

 

 

 

 

—

 

 

 

16,215

 

FinTech total revenues

 

103,518

 

 

 

92,921

 

 

 

 

 

276,466

 

 

 

369,387

 

Total revenues

$

229,683

 

 

$

203,166

 

 

 

 

$

276,601

 

 

$

479,767

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Games cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming operations

$

8,393

 

 

$

7,036

 

 

 

 

$

135

 

 

$

7,171

 

Gaming equipment and systems

 

22,786

 

 

 

17,976

 

 

 

 

 

—

 

 

 

17,976

 

Gaming other

 

559

 

 

 

536

 

 

 

 

 

—

 

 

 

536

 

Games total cost of revenues

 

31,738

 

 

 

25,548

 

 

 

 

 

135

 

 

 

25,683

 

FinTech cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash access services

 

4,676

 

 

 

4,640

 

 

 

 

 

276,466

 

 

 

281,106

 

Equipment

 

5,940

 

 

 

3,631

 

 

 

 

 

—

 

 

 

3,631

 

Information services and other

 

2,197

 

 

 

1,529

 

 

 

 

 

—

 

 

 

1,529

 

FinTech total cost of revenues

 

12,813

 

 

 

9,800

 

 

 

 

 

276,466

 

 

 

286,266

 

Total cost of revenues

$

44,551

 

 

$

35,348

 

 

 

 

$

276,601

 

 

$

311,949

 

 

Revenues for the six month period ended June 30, 2017 are presented on a comparable basis to retrospectively reflect a net versus gross reporting of revenues under ASC 606, which primarily impacts the Company’s FinTech business.

13

 

EVERI HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF CASH AND CASH EQUIVALENTS

TO NET CASH POSITION AND NET CASH AVAILABLE

(In thousands)

 

 

 

 

At June 30,

 

 

At December 31,

 

 

 

2018

 

 

2017

 

Cash available

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

110,164

 

 

$

128,586

 

Settlement receivables

 

 

139,314

 

 

 

227,403

 

Settlement liabilities

 

 

(217,473

)

 

 

(317,744

)

Net cash position

 

 

32,005

 

 

 

38,245

 

 

 

 

 

 

 

 

 

 

Undrawn revolving credit facility

 

 

35,000

 

 

 

35,000

 

 

 

 

 

 

 

 

 

 

Net cash available

 

$

67,005

 

 

$

73,245

 

 

14

 

EVERI HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN ON AS COMPARABLE BASIS

(In thousands)

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

June 30, 2018

 

 

June 30, 2017

 

 

 

Games

 

 

FinTech

 

 

Total

 

 

Games

 

 

FinTech

 

 

Total

 

Net income (loss)

 

 

 

 

 

 

 

 

 

$

1,475

 

 

 

 

 

 

 

 

 

 

$

(19,057

)

Income tax (benefit) provision

 

 

 

 

 

 

 

 

 

 

(1,166

)

 

 

 

 

 

 

 

 

 

 

1,853

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

166

 

 

 

 

 

 

 

 

 

 

 

14,615

 

Interest expense, net of interest income

 

 

 

 

 

 

 

 

 

 

22,122

 

 

 

 

 

 

 

 

 

 

 

23,881

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

2,307

 

 

$

20,290

 

 

$

22,597

 

 

$

2,722

 

 

$

18,570

 

 

$

21,292

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus: depreciation and amortization

 

 

26,021

 

 

 

4,232

 

 

 

30,253

 

 

 

23,937

 

 

 

4,898

 

 

 

28,835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

$

28,328

 

 

$

24,522

 

 

$

52,850

 

 

$

26,659

 

 

$

23,468

 

 

$

50,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash stock compensation expense

 

 

677

 

 

 

1,278

 

 

 

1,955

 

 

 

624

 

 

 

1,445

 

 

 

2,069

 

Accretion of contract rights

 

 

2,121

 

 

 

—

 

 

 

2,121

 

 

 

1,907

 

 

 

—

 

 

 

1,907

 

Write-off of inventory and fixed assets

 

 

2,575

 

 

 

—

 

 

 

2,575

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

33,701

 

 

$

25,800

 

 

$

59,501

 

 

$

29,190

 

 

$

24,913

 

 

$

54,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues (1)

 

$

65,948

 

 

$

52,734

 

 

$

118,682

 

 

$

54,984

 

 

$

47,165

 

 

$

102,149

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

 

51

%

 

 

49

%

 

 

50

%

 

 

53

%

 

 

53

%

 

 

53

%

 

 

Six Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2018

 

 

June 30, 2017

 

 

 

Games

 

 

FinTech

 

 

Total

 

 

Games

 

 

FinTech

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

$

6,084

 

 

 

 

 

 

 

 

 

 

$

(22,565

)

Income tax (benefit) provision

 

 

 

 

 

 

 

 

 

 

(1,591

)

 

 

 

 

 

 

 

 

 

 

2,907

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

166

 

 

 

 

 

 

 

 

 

 

 

14,615

 

Interest expense, net of interest income

 

 

 

 

 

 

 

 

 

 

42,429

 

 

 

 

 

 

 

 

 

 

 

48,938

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

.

 

Operating income

 

$

6,660

 

 

$

40,428

 

 

$

47,088

 

 

$

7,513

 

 

$

36,382

 

 

$

43,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus: depreciation and amortization

 

 

50,644

 

 

 

8,737

 

 

 

59,381

 

 

 

46,826

 

 

 

10,164

 

 

 

56,990

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

$

57,304

 

 

$

49,165

 

 

$

106,469

 

 

$

54,339

 

 

$

46,546

 

 

$

100,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash stock compensation expense

 

 

1,304

 

 

 

3,001

 

 

 

4,305

 

 

 

1,038

 

 

 

2,442

 

 

 

3,480

 

Accretion of contract rights

 

 

4,178

 

 

 

—

 

 

 

4,178

 

 

 

3,909

 

 

 

—

 

 

 

3,909

 

Write-off of inventory and fixed assets

 

 

2,575

 

 

 

—

 

 

 

2,575

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

65,361

 

 

$

52,166

 

 

$

117,527

 

 

$

59,286

 

 

$

48,988

 

 

$

108,274

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues (1)

 

$

126,165

 

 

$

103,518

 

 

$

229,683

 

 

$

110,245

 

 

$

92,921

 

 

$

203,166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

 

52

%

 

 

50

%

 

 

51

%

 

 

54

%

 

 

53

%

 

 

53

%

 

 

(1)

Revenues for the three and six month periods ended June 30, 2017 are presented on a comparable basis to retrospectively reflect a net versus gross reporting of revenues under ASC 606, which primarily impacts the Company’s FinTech business.

15

 

EVERI HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF PROJECTED NET INCOME TO PROJECTED EBITDA

AND PROJECTED ADJUSTED EBITDA

FOR THE YEAR ENDING DECEMBER 31, 2018

(In thousands)

 

 

  

 

2018 Adjusted EBITDA Guidance

Range(1)

 

 

 

Low

 

 

High

 

Projected net income

 

$

6,900

 

 

$

1,400

 

Projected income tax benefit

 

 

(3,000

)

 

 

(5,000

)

Projected interest expense, net of interest income

 

 

82,900

 

 

 

86,800

 

Projected loss on extinguishment of debt

 

 

100

 

 

 

200

 

 

 

 

 

 

 

 

 

 

Projected operating income

 

$

86,900

 

 

$

83,400

 

 

 

 

 

 

 

 

 

 

Plus: projected depreciation and amortization

 

 

122,000

 

 

 

130,000

 

 

 

 

 

 

 

 

 

 

Projected EBITDA

 

$

208,900

 

 

$

213,400

 

 

 

 

 

 

 

 

 

 

Projected non-cash stock compensation expense

 

 

8,000

 

 

 

7,000

 

Projected accretion of contract rights

 

 

8,500

 

 

 

8,000

 

Projected inventory and fixed assets write-off

 

 

2,600

 

 

 

2,600

 

 

 

 

 

 

 

 

 

 

Projected Adjusted EBITDA

 

$

228,000

 

 

$

231,000

 

 

 

(1)

All figures presented are projected estimates for the year ending December 31, 2018.

16