Everi Holdings Inc.’s latest quarterly earnings report wasn’t a disaster overall. However, isolating the company’s business from its gaming division shows the cost of doing business over the second quarter of 2023 was high.
That high cost is endemic to Everi’s entire business, though, as a deeper analysis of the company’s current financials reveals. While Everi is far from in trouble, investors must consider the entire scope of the present to make sound decisions about Everi’s future.
Everi reports $113 million in Q2 gaming revenues
Overall, Everi experienced some growth in the second quarter of this year compared to Q2 2022. From all products and services, revenue for the quarter came to $208.7 million. That’s a 6% increase compared to the comparable period last year.
The largest contribution to that growth came from Everi’s financial technology products. That segment saw revenue escalate by 13% year-over-year. In contrast, Everi’s gaming segment was essentially flat at $113.1 million.
A press release from Everi about the earnings explains the lack of movement. It states that the revenue reflects “a 5% rise in gaming operations partially offset by an 8% decline in gaming equipment and systems sales revenues.”
In the release, Everi CEO Randi Taylor added more context:
“While Games segment revenue continued to grow, gaming operations revenues and unit sales were impacted by near-term challenges during a transition period as we roll out new cabinets and content.
Following several consecutive years of growth in our installed base and increased unit shipments, we expect our Games segment revenue will be flat to slightly down in the second half of the year as compared to the second half of 2022.
With the expected launch of several new cabinets in the back half of this year and first half of 2024, we expect our Games segment will return to an attractive growth profile.”
The brightest spot for Everi in its gaming segment during the quarter was its online gambling products, like the Muscogee Creek mobile app that Everi powers. Revenue in that category climbed over 20% compared to Q2 2022. Admittedly, though, that represented just 6% of the gaming revenue total.
In summation, “higher operating expenses including research and development expenditures, primarily due to higher labor costs, as well as increased depreciation and amortization associated with acquisitions” caused the downturn in net operating income in terms of gaming. That alludes to another item that stockholders should note.
Everi’s debt load is worth noting
As Zacks Equity Research details for Yahoo! Finance, the second quarter’s bottom line for Everi investors was not bad. Many companies probably envy earnings per share that beat the estimates by 70.83%.
If it reads like there’s another shoe yet to drop, then you’ve read between the lines accurately. Everi’s release shows that the company’s total debt decreased to $986.5 million during the quarter due to a loan payment. Regardless, the company is still utilizing debt to a great extent to improve its bottom line.
Should sales from its products and services ever see a significant downturn, that debt-to-equity ratio could be a real issue. Investors should be watching how Everi manages its revenue in the near term with an emphasis on minimizing that debt reliance.
Everi’s future still looks bright given its foothold in the growing gaming industry in the US. That brightness is simply not currently blinding.