Everi (EVRI) - 2023 Q3 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements Presents the unaudited condensed consolidated financial statements for Everi Holdings Inc as of September 30, 2023 Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income Reports Q3 2023 total revenues of $206.6 million and net income of $26.6 million Consolidated Statements of Operations Highlights (In thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $206,600 | $204,318 | $615,789 | $577,156 | | Operating Income | $52,447 | $54,618 | $157,765 | $161,758 | | Net Income | $26,643 | $29,409 | $82,105 | $93,452 | | Diluted EPS | $0.29 | $0.30 | $0.88 | $0.95 | Unaudited Condensed Consolidated Balance Sheets Details total assets of $1.86 billion and total stockholders' equity of $243.5 million as of September 30, 2023 Consolidated Balance Sheet Summary (In thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $209,378 | $293,394 | | Total Assets | $1,864,372 | $1,918,243 | | Long-term debt, less current portion | $969,347 | $971,995 | | Total Liabilities | $1,620,838 | $1,700,602 | | Total Stockholders' Equity | $243,534 | $217,641 | Unaudited Condensed Consolidated Statements of Cash Flows Shows net cash from operating activities at $161.0 million for the nine months ended September 30, 2023 Consolidated Cash Flow Summary (In thousands) | Cash Flow Activity | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $161,013 | $146,914 | | Net cash used in investing activities | $(156,783) | $(125,907) | | Net cash used in financing activities | $(84,580) | $(64,080) | | Net decrease in cash | $(80,933) | $(44,179) | Notes to Unaudited Condensed Consolidated Financial Statements Provides details on business segments, acquisitions, debt structure, and the share repurchase program - The company operates across two business segments: Games (gaming machines, systems, digital gaming) and Financial Technology Solutions (FinTech), which provides financial access, loyalty, and compliance solutions[20][21][22] - On May 1, 2023, the company acquired strategic assets of VKGS LLC ("Video King"), a provider of electronic bingo gaming solutions, for approximately $61.0 million in cash at closing[52] - As of September 30, 2023, total debt outstanding was $986.5 million, consisting of a $586.5 million Term Loan and $400.0 million in Unsecured Notes[75] - A new share repurchase program was authorized in May 2023 for up to $180 million, with $106.1 million remaining available as of September 30, 2023[94][95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes financial results, highlighting revenue growth driven by the FinTech segment and the impact of rising interest rates - Q3 2023 total revenues increased 1% year-over-year to $206.6 million, driven by a 4% increase in FinTech revenues, partially offset by a 1% decrease in Games revenues[126][127][128] - For the nine months of 2023, total revenues grew 7% to $615.8 million, with FinTech revenues up 12% and Games revenues up 3%[144][145][146] - Interest expense increased by 34% in Q3 and 51% in the nine-month period, primarily due to higher interest rates on variable debt and vault cash arrangements[137][154] - Net cash available, a non-GAAP measure, was $163.0 million as of September 30, 2023, down from $214.2 million at year-end 2022[160] Item 3. Quantitative and Qualitative Disclosures About Market Risk Discloses primary market risk from interest rate fluctuations on its variable-rate debt and vault cash arrangements - The company is exposed to interest rate risk on its $586.5 million variable-rate Term Loan, where a 100 basis point increase would raise annual interest expense by approximately $5.9 million[177][178] - The company also has interest rate risk from its vault cash arrangements, where a 100 basis point increase would impact pre-tax income by about $3.3 million annually[176] - The $400 million in senior unsecured notes have a fixed interest rate of 5.00% and are not subject to interest rate fluctuation risk[179] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures as of September 30, 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[180] - The company excluded the assets of the recently acquired Video King from its quarterly assessment of internal controls over financial reporting, a standard practice for recent acquisitions[181] PART II: OTHER INFORMATION Item 1. Legal Proceedings Refers to Note 12 of the financial statements for a detailed discussion of ongoing legal matters - For a discussion of legal proceedings, the report refers to "Note 12 — Commitments and Contingencies" in Part I, Item 1[185] Item 1A. Risk Factors States no material changes have occurred to the risk factors disclosed in the company's latest Annual Report - There have been no material changes to the risk factors disclosed in the company's Annual Report[186] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the repurchase of 2.4 million shares for $33.9 million during the third quarter of 2023 Q3 2023 Share Repurchases | Period | Total Shares Purchased | Average Price Paid | Total Value (in thousands) | | :--- | :--- | :--- | :--- | | Jul 2023 | — | $— | $— | | Aug 2023 | 1,704,400 | $13.60 | $23,185.5 | | Sep 2023 | 739,900 | $14.53 | $10,750.6 | | Q3 Total | 2,444,300 | $13.88 | $33,936.1 | - The remaining availability under the $180 million share repurchase program was $106.1 million as of September 30, 2023[189] Item 5. Other Information Discloses the termination and adoption of Rule 10b5-1 trading plans by company executives - Executive Chair Michael D. Rumbolz and CEO Randy L. Taylor terminated their Rule 10b5-1 trading arrangements on August 29, 2023[193] - Darren Simmons, EVP of FinTech, entered into a new Rule 10b5-1 trading arrangement on September 15, 2023, to purchase and sell 45,000 shares of company stock[194]