Everi (US:EVRI)2021-05-06 02:40Financial Data and Key Metrics Changes - The company reported record results for Q1 2021, with operating income up 55% compared to Q1 2019 and adjusted EBITDA up 23% compared to the same period in 2019 [8][36] - Free cash flow more than doubled compared to the previous year, equating to the free cash flow generated in all of 2019 [31][33] - The company expects adjusted EBITDA in the second half of the year to exceed record results from the second half of 2019 [38] Business Line Data and Key Metrics Changes - The Games business saw premium units increase every quarter for the past 11 quarters, with premium units now comprising 42% of the installed base compared to 22% at the end of Q1 2019 [11][12] - In the FinTech segment, revenue from financial access services grew 25% sequentially over Q4 2020 and is only about 5% below the record revenue of Q1 2019 [18][20] - Software and other revenues doubled from Q1 2019, with 72% of these revenues being recurring [20] Market Data and Key Metrics Changes - North American gaming has benefited from pent-up demand and easing of capacity restrictions, leading to improved financial performance compared to pre-COVID levels [7][8] - The company noted that about 5% of U.S. casinos are currently closed, with Canadian casinos still closed and international travel virtually non-existent, indicating potential for further recovery [19] Company Strategy and Development Direction - The company is focused on organic growth initiatives and has made significant investments in developing innovative products to enhance customer relationships and operational efficiencies [9][22] - The CashClub Wallet is a key growth opportunity, providing a customizable digital cashless experience for casino operators, integrating various financial services [26][29] - The company aims to leverage its strengths in digital solutions and expand its market presence in iGaming and cashless transactions [24][30] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the recovery of the gaming industry, noting that while Q1 results were strong, competition for discretionary spending may impact future performance [36][38] - There is an expectation for operating expenses to increase as business volumes recover, but margins are expected to trend lower than pre-pandemic levels [23][73] - Management highlighted the importance of maintaining flexibility in capital expenditures and reducing leverage as the macroeconomic environment stabilizes [33][79] Other Important Information - The company has undergone changes in revenue line item naming conventions within the FinTech segment to better reflect its evolved business model [14][17] - The board is actively engaged in succession planning for the CEO position, focusing on candidates with relevant industry experience [47] Q&A Session Summary Question: Thoughts on TITO rollout and digital wallet technology - Management indicated that the rollout of TITO may be faster in tribal jurisdictions compared to commercial ones due to regulatory differences [40] - The transition to digital and cashless solutions is seen as both revolutionary and evolutionary, with the pace driven by customer adoption [41] Question: Sustainability of game segment ship share gains - Management expressed confidence in sustaining ship share gains as capital budgets are finalized, with a focus on providing compelling products [42][43] Question: Leadership succession plans - The board has been reviewing succession planning for over two years, narrowing the field to internal and external candidates with relevant experience [46][47] Question: CashClub Wallet integration with online offerings - Discussions with potential customers frequently include integrating the CashClub Wallet into their online offerings, reflecting a strategic focus on omni-channel solutions [48][54] Question: Digital wallet revenue structure - Revenue from the digital wallet will include transactional fees and potential customization costs, with a focus on integrating with other FinTech products [56][59] Question: Kiosk replacement cycle and capital preservation - The replacement cycle for kiosks is tied to capital preservation strategies, with customers prioritizing revenue-generating capital expenditures [68][69]