Casino equipment maker and financial technology (fintech) supplier Everi Holdings Inc swung to a second-quarter net loss of US$68.5 million, compared to net income of US$5.5 million in the prior-year quarter. The company had reported a net loss of US$13.5 million in the first quarter this year.
The result was affected by casino closures from March onward in its key markets – including in the United States – due to the Covid-19 pandemic, the firm stated.
The net loss included US$14.8-million in pre-tax charges associated with asset write-offs and write-downs, severance, facility consolidation and certain business restructuring costs to streamline operations and improve the group’s cost structure, said Everi in a Tuesday press release.
Revenue for the reporting period was US$38.7 million compared to US$129.7 million a year ago. “The closing of casinos due to the Covid-19 pandemic resulted in revenues declining to essentially zero until the casinos began to slowly reopen in May with the pace steadily ramping through June,” said the company.
Adjusted earnings before interest, taxation, depreciation, and amortisation (EBITDA) was US$3.3 million for the three months to June 30, compared to US$64.1 million in the prior-year period. The result was driven by positive contributions from both the games and fintech segments, said Everi.
“We achieved better-than-expected results in the second quarter, including a return to positive adjusted EBITDA more quickly than we anticipated at the beginning of the quarter,” said Michael Rumbolz, the group’s chief executive, in prepared remarks accompanying Tuesday’s earnings release.
The CEO said the return to positive EBITDA in the second quarter reflected the “swift actions” the company took in order to reduce its operating costs and preserve liquidity.
He added: “In addition, as our customers began to reopen faster than previously expected, we benefited from our prior investments in technology innovations and game development through the strong performance of our fintech solutions and installed base of recurring-revenue games.”
Roth Capital Partners LLC suggested in a July note that the Covid-19 crisis had stimulated casino-industry interest in cashless technology, which would play to Everi’s product strengths.
Everi’s free cash flow was negative US$26.7 million for the second quarter. The company said it expected to generate positive free cash flow in the third quarter this year.
Total net debt was US$1.13 billion by quarter-end, compared to US$1.01 billion in the opening quarter of 2020.
Everi said its cash and cash equivalents increased to US$257.4 million at June 30, from US$49.9 million at the end of March. Net cash position rose to US$133.2 million as of June 30, reflecting approximately US$118 million of net proceeds from an incremental term loan in April and the benefit of changes in working capital.
Everi’s CEO said that the company’s business in the third quarter was returning to the “performance momentum” it had achieved before Covid-19. “The units in our gaming operations installed base that are active are performing at levels comparable to our experience pre-pandemic,” said Mr Rumbolz, adding that the fintech business was also returning to normal levels.
“Reflecting these trends, as well as the benefit from the 636-unit growth in installed premium games since the beginning of 2020, we expect quarterly sequential growth in the second half of 2020, including a return to free cash flow generation in the third quarter, which is earlier than we had previously anticipated,” added the executive.
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