Everi (US:EVRI)2023-11-08 20:29Financial Data and Key Metrics Changes - The company reported revenue of $206.6 million, adjusted EBITDA of $96.2 million, and free cash flow of $34.3 million for the quarter, bringing year-to-date free cash flow to $122.1 million [5][37] - Consolidated adjusted EBITDA was essentially flat year over year at $96.2 million, with adjusted EBITDA as a percentage of revenues at 46.6%, down from 47.3% a year ago [17][54] - Net interest expense increased to $20 million from $15 million in the prior year, with a weighted average borrowing rate of approximately 6.7% [18][19] Business Line Data and Key Metrics Changes - The FinTech business saw strong revenue growth, with financial access services increasing by $4 million (7%) and software and other revenues up by 12% [14][59] - The Games business experienced a 1% decline in revenues, with hardware sales down 20% from the prior year [32][33] - Digital Gaming business recorded a 27% revenue growth, driven by the acquisition of Video King assets [13] Market Data and Key Metrics Changes - The company highlighted a return to pre-pandemic daily same-store sales growth of low to mid single-digit year-over-year growth [25] - The company expects to expand its presence in the historical horse racing market and enter the video lottery terminal market in Illinois in the second quarter of 2024 [12] Company Strategy and Development Direction - The company is focused on improving player experience and driving operator efficiencies through its digital neighborhood strategy [7] - New product launches, including the CASHCLUB WALLET and the Buy digital gaming solution, are expected to drive future growth [8][9] - The company plans to maintain R&D spending at 8% to 8.5% of revenues to support growth initiatives [56][125] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the FinTech business continuing to grow at high single digits, while the Games business faces near-term headwinds [59][60] - The company anticipates a slight decline in its install base through the end of the year but expects growth to resume in 2024 [45][60] - Management remains committed to returning excess cash flow to shareholders through share repurchases, with $33.9 million returned in the quarter [24][58] Other Important Information - The company has completed the build-out of a new assembly and warehouse facility in Las Vegas, which is expected to support future growth [75] - The company has a remaining share repurchase authorization of $106 million [24] Q&A Session Summary Question: What is the outlook for the Games business and installations? - Management indicated that the installed base may slightly decline by year-end but expects growth to resume in 2024 as new cabinets gain traction [44][45] Question: How is the overall category market-wide sales trending for the stepper category? - Management remains bullish on mechanical products and believes they will maintain a strong market share despite competition [48][50] Question: What is the case for keeping the Games and FinTech businesses together? - Management highlighted the cost and revenue synergies from the combination of the two businesses, which have performed well since 2014 [65][66] Question: Can you provide insights on the international expansion plans? - Management noted that entering the Australian market, the second largest for gaming machines, presents significant growth opportunities [88] Question: What are the expectations for cash flow and capital expenditures in 2024? - Management expects cash flow to remain stable, with capital expenditures anticipated to be similar to 2023 levels, focusing on customer equipment [99][116]