Everi (NYSE:EVRI) Misses Q4 Sales Targets
Casino gaming technology company Everi (NYSE:EVRI) fell short of analysts' expectations in Q4 FY2023, with revenue down 6.5% year on year to $192 million. It made a non-GAAP profit of $0.30 per share, down from its profit of $0.44 per share in the same quarter last year.
Is now the time to buy Everi? Find out by accessing our full research report, it's free.
Everi (EVRI) Q4 FY2023 Highlights:
Revenue: $192 million vs analyst estimates of $198.1 million (3.1% miss)
EPS (non-GAAP): $0.30 vs analyst estimates of $0.24 (25% beat)
Free Cash Flow of $19.8 million, down 42.3% from the previous quarter
Gross Margin (GAAP): 81.4%, up from 77.4% in the same quarter last year
Market Capitalization: $965.2 million
Randy Taylor, Chief Executive Officer of Everi, said, "This morning we announced the strategic combination of Everi with IGT's Gaming and Digital businesses. We are excited about the opportunity to bring together the two companies to create a world class leader in gaming solutions for our customers."
Formed between the 2015 merger of Global Cash Access and Multimedia Games, Everi (NYSE:EVRI) is a producer of games and financial infrastructure for the casino and hospitality industries.
Casinos and Gaming
Casino and gaming companies that offer slot machines, Texas Hold ‘Em, Blackjack and the like can enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits-have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casino and gaming companies may face stroke-of-the-pen risk that suddenly limits what they do or where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing casino and gaming companies to adapt to keep up with changing consumer preferences such as being able to wager anywhere on demand.
Sales Growth
A company's long-term performance can indicate its business quality. Any business can enjoy short-lived success, but best-in-class ones sustain growth over many years. Everi's annualized revenue growth rate of 11.5% over the last five years was mediocre for a consumer discretionary business.
Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Everi's annualized revenue growth of 10.6% over the last two years aligns with its five-year revenue growth, suggesting the company's demand has been stable.
We can dig even further into the company's revenue dynamics by analyzing its most important segment, Gaming. Over the last two years, Everi's Gaming revenue (slot machines, iGaming) averaged 7.7% year-on-year growth. This segment has lagged the company's overall sales.
This quarter, Everi missed Wall Street's estimates and reported a rather uninspiring 6.5% year-on-year revenue decline, generating $192 million of revenue. Looking ahead, Wall Street expects sales to grow 3% over the next 12 months, an acceleration from this quarter.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, Everi has shown strong cash profitability, giving it an edge over its competitors and the option to reinvest or return capital to investors while keeping cash on hand for emergencies. The company's free cash flow margin has averaged 20.6%, quite impressive for a consumer discretionary business.
Everi's free cash flow came in at $19.8 million in Q4, equivalent to a 10.3% margin and down 52.5% year on year. Over the next year, analysts predict Everi's cash profitability will improve. Their consensus estimates imply its LTM free cash flow margin of 17.2% will increase to 18.6%.
Key Takeaways from Everi's Q4 Results
We were impressed by how significantly Everi blew past analysts' EPS expectations this quarter. On the other hand, its revenue and operating margin fell short as its Gaming segment underperformed.
In a blockbuster deal announced this morning, Everi will be merging with International Game Technology's (IGT) Global Gaming and PlayDigital businesses. IGT is one of the largest slot machine companies in the U.S., and the deal is valued at $6.2 billion including debt.
Overall, this quarter's results could have been better, but it seems like the market is a fan of Everi and IGT's merger. The stock is up 4.3% after reporting and currently trades at $11.77 per share.
So should you invest in Everi right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
