425: Everi Holdings Anticipates Merger with IGT's Gaming Businesses Despite Q1 Challenges

Everi Holdings remains focused on its proposed merger with IGT's Global Gaming and Play Digital Businesses, expecting closure in late 2024 or early 2025, while addressing a challenging first quarter.

Summary

• Everi Holdings held its first quarter town hall on May 21, 2024, addressing the proposed merger with IGT's Global Gaming and Play Digital Businesses.
• The company anticipates closing the merger in late 2024 or early 2025, but has no further updates on antitrust or regulatory matters.
• A kickoff planning meeting was held in late April with IGT, Everi, KPMG, and Bain to identify areas for efficient integration post-merger, focusing on back-office operations.
• Due to regulatory restrictions, Everi and IGT are operating independently, with consultants aggregating information on permissible integration topics like IT networks and accounting systems.
• The company's Q1 results were lower than anticipated, with declines in revenue, net income, and Adjusted EBITDA compared to Q1 2023.
• Everi expects improvements in the second half of 2024, driven by improved game sales, higher revenues from leased gaming machines, and momentum in FinTech hardware sales.
• The company is filing relevant materials with the SEC, including a registration statement on Form S-4 with a joint proxy statement/prospectus.
• The document contains forward-looking statements regarding the merger and future financial performance, which are subject to risks and uncertainties.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While Q1 results were disappointing, the company expresses confidence in future improvements and the potential benefits of the merger. However, the uncertainty surrounding regulatory approvals and integration risks tempers the optimism.

Positives

• Everi is actively planning for the integration with IGT through meetings and consultations.
• The company anticipates improvements in financial performance in the second half of 2024.
• New cabinet deployments and game content are expected to drive revenue growth.
• Momentum is expected in hardware sales from the FinTech segment.

Negatives

• Q1 2024 results showed a decline in revenue, net income, and Adjusted EBITDA compared to Q1 2023.
• The decline in Q1 was greater than anticipated.
• The merger is subject to regulatory approvals, creating uncertainty.

Risks

• The merger is subject to regulatory and antitrust approvals, which could delay or prevent the transaction.
• Integration of IT networks and accounting systems poses challenges.
• The company faces risks related to the COVID-19 pandemic, competition, and dependence on licensing arrangements.
• There are risks associated with financing the proposed transaction and Everi's overall debt levels.

Future Outlook

Everi expects improvements in the second half of 2024, driven by improved game sales, higher revenues from leased gaming machines, and momentum in FinTech hardware sales.

Management Comments

• Randy Taylor: 'We continue to make progress on our proposed merger with IGTs Global Gaming and Play Digital Businesses.'
• Randy Taylor: 'While we expected our financial results to be down, the decline was greater than anticipated.'
• Randy Taylor: 'The task ahead of us in 2024 remains challenging, but I firmly believe we have the people, the products, and the resources to decisively meet this challenge.'
• Randy Taylor: 'Change can also bring about great opportunities.'

Industry Context

The merger reflects a trend of consolidation in the gaming industry, as companies seek to expand their product offerings and market reach. Everi's focus on both gaming and FinTech positions it to capitalize on the convergence of these sectors.

Comparison to Industry Standards

• IGT is a major player in the global gaming industry, comparable to Scientific Games (now Light & Wonder) and Aristocrat Leisure.
• Mergers and acquisitions are common in the gaming industry as companies seek to gain market share and diversify their product portfolios.
• The integration of IT systems and back-office functions is a typical challenge in post-merger scenarios, similar to the integration efforts seen in other large-scale corporate transactions.

Stakeholder Impact

• Shareholders face uncertainty due to the pending merger and Q1 financial performance.
• Employees may experience uncertainty due to the integration process.
• Customers could benefit from a broader range of products and services post-merger.
• Suppliers may be affected by changes in procurement and supply chain management.

Next Steps

• Continue working through the regulatory approval processes for the merger.
• Schedule meetings on permissible integration planning topics.
• Deploy new cabinets and game content to improve game sales and leased gaming machine revenues.
• Focus on improving momentum in hardware sales from the FinTech segment.

Key Dates