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FANTINI’S FINANCE
Turn and Face the Changes The pandemic has changed the world, but how will gaming respond? By Frank Fantini
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mong the questions as the Covid pandemic recedes is how the gaming industry has been changed. Initially, the discussion was often on the high margins that casino operators have achieved as they cut costs and how much of that improvement can be retained as normal business volumes resumed. Based on first-quarter results, there is considerable optimism that casinos have learned how to permanently become more efficient, a surmise that may come closer to proven fact as companies begin reporting second-quarter financial performance and project into the future. These changes might come under the category of blocking and tackling. The way to profit growth now isn’t so much spending on new properties, property expansions or new attractions as much as doing basic things right and freeing up revenue to fall to the bottom line. Some companies, with two examples noted below, are using this era to fundamentally change their structures, both to dramatically reduce debt and financing costs, and to exploit the growth opportunities presented by online gaming. Indeed, online gaming itself has been hastened by the pandemic as states legalize sports betting and iGaming to open new revenue streams and as both game developers and gaming operators develop omnichannel approaches to their businesses. Scientific Games and Everi are two examples of companies whose stocks have been hitting alltime highs recently, and that are taking actions that promise to further reward investors. First off, kudos to Chairman Jamie Odell and CEO Barry Cottle for a strategic review that proved to be just that. Often, the term strategic review is a euphemism for “let’s just sell the company.” In their case, the Sci Games strategic review is resulting in a strategic restructuring of the company. And, in a sense, the proposed changes are just
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Global Gaming Business AUGUST 2021
machine, online or as a non-gambling social game. a dramatic way of achieving an end that the gaming It is the way the gaming industry is headed. For industry is heading towards—being omnichannel those who a couple of years ago asked where growth providers of gambling entertainment. would come from in what was seen as a maturing Sci Games intends to slash the onerous debt industry, the answer is omnichannel. built up financing a series of mergers by selling off the lottery business and non-core sports betting KUDOS TO EVERI, ALSO business to focus on the core business of supplying Everi CEO Mike Rumbolz and COO Randy Tayslots, table games and casino management systems lor have their reasons to crow, too. plus fast-growing online gaming and social gaming. Everi is undergoing a comprehensive restrucStifel analyst Jeffrey Stantial estimates that the turing of its debt that, to use the popular term of sales could fetch $5.5 billion and allow Sci Games the day, checked off all the boxes. to cut its debt-to-EBITDA ratio to around three Everi already had given investors reasons times. It was nearly There is considerable to be bullish. The recovery in casino revenues 11 times to start optimism that casinos directly benefits Everi’s fintech business. The the year, though have learned how to expected rush to cashless gaming will benefit that was inflated by permanently become another fintech product. And Everi’s slots Covid impacts on product line is now filled out and performing more efficient, a surmise business. well. Lower debt that may come closer to The refinancing will cut debt from $1.145 will permit Sci proven fact as companies billion to $1 billion, which B Riley analyst Games to invest in begin reporting secondDave Bain estimates will reduce debt-tothe fast-growing quarter financial EBITDA to just 2.2 times by next year. That businesses that it is performance and project certainly will give Everi flexibility to invest in retaining. into the future. growth. The company The first evidence of the success of this is considering difprocess was the announcement that Everi will sell ferent routes to divestiture from IPOs to SPACs to $400 million in unsecured notes at 5 percent intersales. And, though it didn’t indicate as such in its est to redeem 7.5 percent debt. announcement, Sci Games could keep a portion of It doesn’t hurt that Everi also announced that it the businesses, as when it IPO’d social gamer Sciwill report record financial results in coming weeks. Play. Casino operators are also showing the benefit of Whatever path is chosen, the reorganization will rethinking how they do business and of exploiting simplify the corporate structure and help unify the digital opportunities. company culture, which had been challenged by the The list of operators reporting higher earnings several mergers that created today’s Sci Games. thanks to a rethinking of how they do business is There is some irony that Scientific Games, prinlong. We expect that second-quarter results will cipally a lottery company, had bought game compaprove this out for many of them, from the biggest, nies during the merger binge and now will be a pure such as Caesars, to the smallest, such as Full House games company sans lottery. In retrospect, that Resorts, and others in between. seems to have been likely with former Aristocrat CEO Odell as executive chairman and in bringing Frank Fantini is the editor and publisher of Fantini’s on so many former Aristocrat executives. Gaming Report. For a free 30-day trial subscription email Meanwhile, being an omnichannel supplier subscriptions@fantiniresearch.com. simply means that a game can be played in a slot
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