Everi slips to loss as revenue declines in Q1
Slots and payment solutions provider Everi Holdings has blamed first quarter losses of $15.4m (£12.2m/€13.8m) a decline in revenue resulting from the novel coronavirus (Covid-19) pandemic, and efforts to pay down net debt in the period.
Revenue in the three months to 31 March totalled $113.3m, down 8.5% from $123.8m in the corresponding period last year. Everi said while revenue was up substantially in January and February, the shutdown of casinos in March as a result of Covid-19 meant revenue in the period of closure was essentially zero.
Gaming segment revenue was down 15.1% to $57.3m, but within this area of the business, gaming operations revenue increased 3.4% to $45.7m.
Everi said this rise was the result of a 1,207-unit year-on-year increase in its installed base and a 21% rise in estimated daily win per unit for the first two months of the quarter, offset by a decline in March.
However, revenue generated from the sale of gaming units and other parts was down 49.8% to $11.6m.
Looking at Everi’s financial technology solutions segment, revenue was level at $56.0m for the quarter. Everi said revenue from player loyalty and marketing operations acquired in March 2019 and December 2019 contributed $6.5m and $500,000 in the first quarter of 2020 and 2019, respectively.
“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,” Everi’s chief executive Michael Rumbolz said.
“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.”
Despite the overall decline in revenue, Everi said that it was able to act swiftly to partly mitigate the impact of Covid-19. This included furloughing approximately 80% of staff, instituting pay cuts for its remaining employees - including its chief executive and board - eliminating discretionary and non-critical costs, and cancelling or delaying all near-term capital expenditure.
However, Everi noted that these cost reductions did not have a material impact on the results of its operations or financial position until the beginning of the second quarter.
“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,” Rumbolz said.
In terms of actual spending in the quarter, total costs and expenses amounted to $102.9m, up 5.1% year-on-year. Cost of revenue for games was down 31.7% to $11.4m, but costs of revenue for financial technology increased 3.8% to $8.3m.
Overall operating expenses jumped from $34.6m to $39.3m, while R&D spend was up 12.0% to $8.4m. Depreciation spend climbed 29.7% to $16.2m, while amortisation costs increased 18.4% to $19.3m.
Higher spending and lower revenue meant that operating income for the quarter stood at $10.4m, down 59.9% from $25.9m in the same period last year, prior to accounting for additional expenses.
Everi reported $17.5m in interest expense net of interest income, as well as an additional $7.4m spent on paying down net debt, leaving it with $24.9m in additional expenses, up from $20.4m last year.
As such, loss before tax amounted to $14.5m, compared to $5.5m in income in Q1 of 2019, though a tax benefit of $997,000 left it with a net loss of $13.5m. After accounting for $2.0m in foreign currency translation net of tax, this left Everi with a compressive loss of $15.4m, compared to a profit of $6.4m in Q1 2019.
Looking ahead, Rumbolz said that as casinos begin to reopen after the period of closure enforced by the Covid-19 crisis, Everi will be able to support operators and see its own business benefit as a result.
“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,” he said.
“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.”