2. Everi Holdings Inc. (NYSE:EVRI)
Number of Hedge Fund Holders: 29
Market Capitalization as of August 21: $1.11 billion
Everi Holdings Inc. (NYSE:EVRI) is a leading gaming technology solutions provider that provides gaming products and services to various operations in the United States, Canada, and Internationally. The company operates through two main business segments including Games, where the company develops game content, gaming machines, and systems for land-based, igaming, and bingo operations.
On the other hand, the Fintech segment provides financial access services such as funds dispensing and transactions for gaming and casino operators. It offers platforms like CashClub for gaming operators, fully integrated kiosks, loyalty kiosks, and other solutions.
Everi Holdings Inc. (NYSE:EVRI) presents a compelling investment opportunity driven by its strategic merger plan and the solid competitive edge it will have once it has merged with IGT’s Global Gaming and PlayDigital business. The company is in the process of closing its acquisition of IGT’s Global Gaming and PlayDigital business worth $3.8 billion at the time of its announcement.
Given the comprehensive research and development portfolio of Everi Holdings Inc. (NYSE:EVRI) and the gaming portfolio of its merger partners, the combined entity will serve as a one-stop shop for casino operators. The merger is expected to generate approximately $85 million in cost savings through operational synergies, particularly in capital expenditures and research and development.
However, the second quarter of 2024 was a challenge for the company as its revenue dropped by around 8% due to weaker sales all over and a challenging market environment. However, the company was still able to generate more than $30 million in operating income and around $9 million in net income mostly from its Fintech operations.
Management has been focused on developing its portfolio of games and has approved 34 new games in late 2023 and an additional 18 in 2024. Moreover, the company is prepared to leverage the revenue growth opportunities that will arise by leveraging the global networks and a combined product offering of the companies.
If you look beyond the recent quarter results, you will see that Everi Holdings Inc. (NYSE:EVRI) has been growing its top line by 10%, and the bottom line by 19%, while growing its levered free cash flow by 10% during the past 5 years. These strong fundamentals combined with the global reach of IGT will open significant avenues of growth for the company.
Everi Holdings Inc. (NYSE:EVRI) is also one of the best small-cap casino stocks hedge funds are buying. It was held by 29 hedge funds in Q2 2024, with total stakes worth $120.15 million. Private Capital Management is the top shareholder, with a position worth $25.5 million.
Patient Capital Opportunity Equity Strategy stated the following regarding Everi Holdings Inc. (NYSE:EVRI) in its Q2 2024 investor letter:
“This quarter we entered one new position, while exiting two positions. We started a position in Everi Holdings Inc. (NYSE:EVRI) during the quarter, a leading supplier of technology solutions for the casino gaming industry providing gaming machines, casino operational and management systems, as well as online gaming content. The company is in the middle of closing its acquisition of IGT’s Global Gaming and PlayDigital business in a cash and stock deal worth $3.8B at the time of the announcement. The stock sold off following the news, given the historical record of revenue dis-synergies in prior industry M&A deals. We believe this isn’t applicable here since neither company has meaningful product or market overlap. On a pro-forma basis, the combined company trades at just 4.2x 2025 EBITDA, an attractive valuation for what will continue to be a market leader in the industry. We believe that as we move past the acquisition, the market will gain confidence in the long-term opportunity for the combined businesses and appreciate its strong cash generating dynamics.”
