The financial report for Everi reveals a contrasting performance between its two divisions in 2023. The company’s FinTech sector achieved a growth of 9.4% during the year, contributing positively to the overall revenue numbers. This success, however, was overshadowed by a downturn in the Everi Games branch, which experienced a 1.7% fall in revenue.
A worrying trend emerged in the fourth quarter when group revenue declined, although growth was recorded in the previous three quarters. This drop was mainly due to a slump in the Gaming sector while the FinTech division experienced only a slight rise in the same quarter. As a result, Everi’s net profit plummeted by an alarming 85.2%.
In a bold move amidst financial setbacks, International Game Technology (IGT) has announced its intention to merge with Everi, alongside the publication of these financial results. This partnership entails IGT spinning off its Global Gaming and PlayDigital units to amalgamate with Everi. Post-merger, IGT stockholders are poised to possess 54% of equity in the new entity, whereas Everi shareholders will retain the remaining 46%.
Everi, which has recently embarked on numerous acquisition ventures acquiring assets from companies like Video King, Venuetize, Atlas Gaming, and XUVI, is expected to pause further mergers and acquisitions in light of the IGT merger. These acquisitions have yet to fully display their long-term effects, but under IGT’s substantial industry presence, progress seems promising.
The impact of this merger is corroborated by Everi CEO Randy Taylor, who perceives the union as a substantial progression for their business. “We are excited about the opportunity to bring together the two companies to create a world-class leader in gaming solutions for our customers,” Taylor stated. Taylor further commented on the FinTech division’s solid performance, underlining the integration of novel products and services.
A detailed look at Everi’s 2023 performance shows the Games segment generating the highest revenue, totaling $429.2 million, despite this being a decrease from $436.4 million in the previous year. Within this segment, gaming operations accounted for the majority of revenue, but it also witnessed a loss year-on-year.
On the FinTech front, an increase in revenue to $378.7 million signified a robust performance, bolstered by a considerable rise in financial access services and software revenues. In contrast, hardware revenue within this division faced a decrease of 8.3%.
Everi’s expenses represent a mixed picture, with cost of revenue for the Games section experiencing a slight decrease, while the FinTech cost of revenue remained stable. Nonetheless, there was a surge in other expenses, including a 20.2% jump in operating costs and an 11.7% increase in research and development spending. Overall, Everi’s total costs escalated by 10.4% to reach $628.5 million for the year.
The company’s finance costs also saw a significant increase of 39.3%, culminating in a reduced pre-tax profit of $101.6 million, which is 35.5% lower than previous figures. The year ended with a net profit of $84.7 million after tax, a 28.0% decrease, and a marginal 1.9% reduction in adjusted EBITDA to $367.0 million.
Focusing on the fourth quarter, the revenue downturn continued with $192.0 million compared to $205.4 million in the same period of the prior year. Games revenue notably decreased, reflecting weaker machine sales and gaming operations. Conversely, FinTech continued its upward trajectory with minor growth, despite hardware revenue declining.
The final quarter of the year emulated the full year’s pattern, with reduced costs in revenue, yet higher overall expenditures resulting in a 10.9% increase in total costs. After incorporating finance expenses, the pre-tax profit lingered at a mere $1.9 million – quite the disparity from the $34.4 million profit the year before. With a modest tax benefit and a gain in foreign exchange translation, Everi wrapped up the quarter with a net profit of $4.3 million, far from the previous year’s $29.0 million.
Despite the anticipated merger with IGT in 2024, Everi provided forecasts for the current year, expressing optimism for revenue growth in both Games and FinTech sectors. The company maintains that adjusted EBITDA will improve slightly, with free cash flow either remaining stable or experiencing a slight dip.
Everi’s forecasts for the Games segment warn of ongoing struggles in sales and declines in the installed base in H1, aligned with the introduction of new gaming cabinets and content and the phasing-out of less productive gaming operations units. It portrays a drive to achieve a higher return from invested capital, particularly in the earlier half of 2024. For the FinTech sector, the anticipation of industry growth and the rollout of new services are expected to propel continued expansion. Everi’s strategic maneuvers, tempered by some challenges, have set the stage for a potentially transformative 2024, guided by the impending integration with IGT’s formidable capabilities.
