Revenue for the three months to 31 March hit $189.3m (£151.7m/€176.2m), down 5.6% from Q1 last year. Everi posted declines across both its Games and Fintech segments, with the former reporting the biggest revenue drop.
Operations continued against a backdrop of merger talk, with IGT confirming the plans in February. The arrangement will see IGT merge Global Gaming and PlayDigital with Everi to create a “comprehensive and diverse” global enterprise.
The combined business will be worth an estimated $6.20bn, with the merger having been signed off by both the IGT and Everi boards. After the deal closes, Everi will rebrand to International Game Technology Inc. and trade on the New York Stock Exchange under the ticker IGT.
The deal is not due to complete until later this year or early 2025. IGT has made changes to its management team, with Enrico Drago stepping down as CEO of PlayDigital.
Speaking on the merger, Everi CEO Randy Taylor says he is pleased with progress during Q1. He adds the deal is still on course to close within its original completion timeline.
“We are excited about the significant growth opportunities we believe this combination will unlock,” Taylor said. “This will bring together a comprehensive and complementary product set focused on our customers and their diverse needs which we believe will deliver substantial long-term value to our shareholders.”
Cabinet and content transition hits Games arm in Q1
As for the wider performance of Everi in Q1, Taylor was largely upbeat despite the drop in revenue and net profit.
Looking first at the Games division, revenue was 9.6% lower at $97.1m. Game operations revenue fell 3.6% to $72.6m while equipment and systems revenue was down 23.7% to $24.5m.
Taylor put this down to the impact of the continuing transition to a new family of cabinets and content. He says this is taking longer than expected but stresses that progress is being made.
“While this transition has been slower than anticipated, we are gaining momentum with these efforts and expect our progress will continue to accelerate throughout the back half of the year,” Taylor said.
“Starting in the second quarter we expect this momentum to translate into improvements in sequential quarterly unit sales. We will continue to support our portfolio of game products following the closing of the proposed merger.”
FinTech revenue edges down at Everi
Turning to the FinTech division revenue here hit $92.2m, down 1.0% year-on-year. Financial access revenues reported modest growth – up 2.1% to $57.4m – with bad weather impacting a large portion of the customer base early in Q1.
Same store volumes improved late in Q1, but hardware sales were down due to reduced unit sales of ticket redemption kiosks in some foreign markets and lower loyalty equipment sales. Total software and other revenue edged up 6.6% to $25.8m but hardware revenue slipped 29.1% to $9.0m.
“For FinTech, our highest margin financial access and software and other revenue categories continued to grow in Q1, though this growth was more than offset by a decline in hardware revenues, which are less predictable on a quarterly basis,” Taylor said.
“Following the impact from weather related headwinds early in the year, our financial access revenue trends continued to improve, and we expect more consistent growth trends to continue. In addition, we expect consolidated hardware sales will recover over the balance of the year.”
Merger costs hit bottom line
Looking at spending, total costs were 10.9% higher at $164.6m, with expenses up across the board.
Everi made the point of noting additional, merger-related costs, with these reaching $15.7m in Q1. The group did not disclose whether these were in reference to the IGT deal or other, previous agreements. Recent deals include acquiring the assets of electronic bingo provider Video King in April 2023.
Increased operating costs and reduced revenue, together with $18.8m in interest expenses, inevitably had an impact on performance. Everi remained at a pre-tax profit, but the $6.0m posted was 82.4% short of last year’s total.
The group paid $1.4m in income tax and also noted a negative foreign currency impact of $1.7m. As such, it was left with a net profit of $2.9m, down 89.6% year-on-year. In addition, adjusted EBITDA declined 13.1% to $80.3m.
“Over the last several years, we have increased our investments in our employees and technology to develop our next generation of products that positions the company for long-term growth,” Taylor said.
“While conversion of these investments into increased revenues has taken longer than initially anticipated, we are on track to begin to deliver on several of our initiatives in the second half of 2024, including our initial video lottery terminal placements and our first gaming products for Australia.
“While our investments have led to higher payroll and related expenses, we believe investing in new products for our FinTech segment, for-sale and for-lease gaming products and products focused on new segments and jurisdictions will drive revenue growth in the second half of 2024 and position the company for long-term success.”
Original article: https://igamingbusiness.com/finance/quarterly-results/net-profit-slips-costs-increase-at-everi-in-q1/
