On a mixed day for gaming equities Everi Holdings (NYSE:EVRI)is one of the standouts after the slot machine manufacturer and provider of cashless gaming systems reported decent first-quarter results while unveiling a share repurchase program.
In late trading, Everi is higher by more than 8% on volume that’s nearly double the daily average after reporting record first-quarter revenue of $175.6 Million and net income of $31.5 million — also an all-time high. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $89.6 million during the March quarter. Solid as those results are, the bulk of today’s pop in the stock may be attributable to the announcement of a $150 million buyback plan.
EVRI announced a $150M repurchase authorization, suggesting the board of directors sees value in the shares in the context of EVRI’s return focused capital allocation framework,” said Stifel analyst Jeffrey Stantial in a note to clients.
At $150 million, Everi’s buyback program represents more than 10% of its current market capitalization of $1.41 billion.
“This new repurchase program supersedes and replaces in its entirety the previous share repurchase program,” according to a statement issued by the Las Vegas-based company.
Everi Fintech Focus
A major part of the Everi investment thesis is the company’s fintech offerings, and that’s underpinned by the move to cashless gaming at casinos across the country — one sped along by the coronavirus pandemic.
In the first three months of 2022, Everi’s fintech EBITDA was $34.1 million, beating Wall Street estimates by 7%. The company’s cashless gaming systems processed $10.1 billion worth of transactions at domestic casinos, topping the consensus forecast of $9.1 billion.
Everi’s CashClub digital wallet is live in 19 casinos in six states, up from 1 gaming venues in four jurisdictions at the end of last year.
“Software/Other revenues were slightly behind, while Hardware revenues were in line to our model but below the Street. Adj. EBITDA margins of 44.2% were ahead of our at-Consensus 43.8%, despite continued investments in R&D, likely reflecting favorable mix,” adds Stantial.
Strong Cash Position Facilitates Everi Shareholder Rewards
Another reason analysts are favoring Everi is the company’s robust free cash flow (FCF) capabilities, which create opportunities for elevating shareholder rewards, such as buybacks.
The company generated $52 million of FCF in the first quarter and is forecasting 2022 FCF of $187 million to $200 million, slightly higher than prior guidance of $185 million to $200 million.
“We view 1Q22 results as a core beat and raise, with share repurchases affirming management’s confidence in the business. EVRI trades at 6.0x the mid-point of 2022 EBITDA guidance and a 14% yield to 2022 FCF guidance,” said Roth Capital analyst Edward Engel in a note to clients today.
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