Everi Credit Rating Lifts as Fitch Sees Restored EBITDA Levels in Late 2021

Posted on: March 15, 2021, 10:41h. 

Last updated on: March 15, 2021, 11:50h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Gaming device manufacturer and FinTech purveyor Everi Holdings (NYSE:EVRI) can return to earnings before interest, taxation, depreciation and amortization (EBITDA) levels last seen prior to the coronavirus pandemic late this year, says Fitch Ratings.

Everi rating
An Everi cashless machine at Sunset Station Casino in Henderson, Nevada. Fitch raised the company’s credit rating. (Image: Las Vegas Review-Journal)

The research firm made that forecast in a recent report while boosting the Las Vegas-based company’s credit rating to “B+” from “B”. That’s still well into junk territory. Boosted by strength from regional gaming clients, Everi is on the path to meet its leverage goal of 3.0x-3.5x.

As a result, Fitch expects Everi’s EBITDA to recover toward pre-pandemic levels by year-end 2021, aided in part by the company’s cost cutting initiatives during the pandemic,” says the research firm. “Everi’s FCF generation during second-half 2020 was stronger than initially expected at the onset of the pandemic.”

Shares of Everi are higher by 9.41 percent year-to-date, as investors wager that an ongoing recovery in the US gaming industry will boost demand for the company’s gaming machines.

Cash Gaming Big Everi Driver

At the onset of the coronavirus pandemic in early 2020, Everi was pushed to the brink. But there’s an emerging silver lining for the company.

As is the case with myriad other industries, gaming is becoming increasingly cashless — a move that was budding prior to the pandemic, and one that was hastened by the arrival of COVID-19. Science indicates cash itself isn’t a great transmitter of the virus. But at a time when businesses are looking for any way to bolster health and safety protocols on behalf of employees and guests, the move away from the hard currency is sensible for casino operators.

That’s a positive, long-ranging catalyst for Everi, because its fintech unit is an increasingly prominent part of its overall business mix.

“About 54 percent of Everi’s EBITDA comes from gaming and 46 percent from FinTech,” said Fitch. “About two-thirds of the gaming revenue is generated on a participation basis, whereby Everi earns fees based on games performance. FinTech revenues mostly come from ATM and cash advance service fees, which are tied to contracts with generally three- and five-year terms and high renewal rates.”

Fintech Competition

While Everi has procured some lucrative cashless gaming contracts with large tribal clients, it doesn’t have a monopoly on that technology in the gaming industry, meaning it must contend with fierce competition. Still, Fitch sees the company meeting that challenge.

“New, cashless technologies employed by other participants in the gaming and FinTech industries represent a long-term risk to disintermediate Everi’s cash access services (roughly one-third of total revenues),” according to the research firm. “However, the company’s diverse FinTech product portfolio, investments made in new technologies, and its own cashless solutions (including maintenance of money transmitter licenses) reduces this risk.”

With major gaming markets, including Nevada, embracing electronic payments over hard bills, there’s ample opportunity for Everi to capture a solid market share.