Everi Boosting Game Content Portfolio in Atlas Gaming Deal

Posted on: January 11, 2022, 09:31h. 

Last updated on: January 11, 2022, 01:29h.

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

Gaming device manufacturer Everi Holdings (NYSE:EVRI) is ramping up its content library, announcing today it’s purchasing certain assets from Australia-based Atlas Gaming.

Everi Atlas
Everi staff ring the bell at the New York Stock Exchange in 2015. The company is acquiring content assets from Australia’s Atlas. (Image: Everi)

Atlas is a producer and provider of proprietary gaming content and products. Las Vegas-based Everi is acquiring select development technology and intellectual property assets from the seller.

Financial terms of the deal transaction weren’t disclosed, but B. Riley analyst David Bain estimates the buyer is paying in the “mid-single-digit million-dollar range.” The transaction is slated to close over the next 60 days.

The acquisition of the Atlas assets complements Everi’s existing game development studios and portfolio of games while providing a pathway for future expansion into new international markets,” according to a statement issued by Everi.

The transaction gives Everi a foothold in Australia — the second-largest slot market in the world after North America.

Good Timing for Everi

For any slot machine manufacturer, it’s always prudent to bolster content libraries and keep games fresh. But in the case of Everi buying the Atlas assets, the transaction could prove particularly well-timed, because slot demand is forecast to accelerate this year.

Bain estimates north of 15,000 slot replacement units will be sold this year, creating approximately $255 million in sales and $107 million in earnings before interest, taxes, depreciation and amortization (EBITDA). Additionally, new casinos opening and venue expansions could drive purchases of about 7,000 gaming devices this year.

Everi’s announcement of the Atlas deal arrives as casino operators are focusing more on the gaming floor following the coronavirus pandemic. With that, there’s renewed emphasis on higher-margin slot machines. Regional casino operators are expected to be dedicated buyers of new devices this year, because it was gaming amenities that helped those venues rebound from COVID-19.

“This transaction strengthens Everi’s development capabilities and will further bolster the future expansion and differentiation of our gaming products,” said Everi EVP Dean Ehrlich in the statement.

Long-Term Win

The Atlas transaction isn’t likely to be accretive to Everi earnings this year. But it could be a catalyst for growth as soon as 2023. Moving into Australia, which is home to 200,000 slot machines, puts Everi front-and-center in terms of competing with some well-known manufacturers. But the move could pay off over the long term.

“Major players in Australia are Aristocrat (market share leader, by far), followed by SGMS. Notably, both Aristocrat and SGMS stock valuations are at several turns above EVRI,” said B. Riley’s Bain. “The content design and Australia base could also lead to EVRI slot penetration in Asia, in our view, though Australia will likely remain EVRI’s core international expansion effort for some time.”

The analyst adds Everi is already gaining market share in the US, and the Atlas purchase adds diversification to the buyer’s US-only studio roster. He rates the stock a “buy,” with a $40 price target, or almost double where it closed on Jan. 10.