AGS Reports Record Fourth Quarter and Full Year 2023 Results
- Total revenue increased by 15% year-over-year to $94.2 million in Q4 2023.
- Income from operations rose by 19% year-over-year to $16.0 million.
- Net income reached $67 thousand in the fourth quarter.
- Total Adjusted EBITDA advanced to a record $42.8 million with a margin exceeding 45%.
- Cash from operating activities totaled $26.4 million, with free cash flow surpassing $10 million for the third consecutive quarter.
- AGS aims to reduce net leverage to 2.75x to 3.00x by the end of 2024.
- None.
Insights
The reported financial results from PlayAGS, Inc. indicate a robust performance, with a 15% year-over-year increase in total revenue to $94.2 million. This growth is significant as it reflects the company's ability to expand its market share and improve its top-line figures consistently over eleven consecutive quarters, which is a strong indicator of the company's market position and operational efficiency. The record-setting global EGM sales, which saw over a 30% increase for the third consecutive quarter, suggest a growing demand for the company's products, potentially leading to increased market penetration.
However, the net income figure presents a contrasting narrative, as it shows a substantial decline from $2.5 million in Q4 2022 to just $67 thousand in Q4 2023. This sharp decrease raises questions about rising costs or other financial pressures, such as higher interest expenses, that may be impacting the company's bottom line. The reported net leverage reduction from 3.8x to 3.2x is a positive sign of debt management, but the net income figure suggests that profitability is not keeping pace with revenue growth, which could be a concern for investors focused on long-term financial health.
PlayAGS's performance in the gaming operations sector, with a notable 4% increase in recurring revenue, highlights the company's strategic positioning in the market. The emphasis on the Interactive and Table Products segments, which have seen significant revenue increases of 34% and 7% respectively, indicates a successful diversification of the company's product portfolio. This diversification is likely to provide resilience against market volatility and could be appealing to investors looking for companies with a stable revenue stream.
Another aspect worth noting is the company's efficient capital expenditure management and working capital optimization, which have contributed to a strong free cash flow performance. Three consecutive quarters of free cash flow exceeding $10 million underscore the company's ability to generate cash from its operations, which is a critical factor for sustaining growth and potentially funding future investments without the need for additional debt.
The reported results show that PlayAGS has a strong foothold in the gaming equipment sector, with its Spectra family of EGM cabinets performing exceptionally well. The Spectra UR43 and UR49's top-five ranking in the Eilers-Fantini Cabinet Performance Report is a testament to the company's competitive product offerings and innovation within the gaming industry. The emphasis on premium game content, such as the Pinata Pays game family, suggests a focus on high-margin products that can drive profitability.
However, the global EGM unit sales growth and the increase in the average sales price (ASP) need to be balanced against the potential market saturation and the competitive dynamics of the gaming industry. The company's strategic focus on broadening customer account penetration and leveraging a diverse suite of game content and cabinet variety will be critical in maintaining its growth trajectory in a highly competitive market.
Fourth Quarter 2023 Highlights:
| • | Total Revenue Increased | |
| • | Global EGM Sales Reached a Record 1,519 Units; Up by Over | |
| • | Table Products Revenue Surged | |
| • | Interactive Revenue Grew More than | |
| • | Income From Operations Increased | |
| • | Total Adjusted EBITDA Advanced to a Record | |
| • | Cash From Operating Activities Totaled | |
| • | Net Leverage Fell to 3.2x at Quarter End; Targeting Year End 2024 Net Leverage in the Range of 2.75x to 3.00x | |
LAS VEGAS, March 05, 2024 (GLOBE NEWSWIRE) -- PlayAGS, Inc. (NYSE: AGS) ("AGS", "us", "we" or the "Company"), a designer and developer of equipment and services solutions for the global gaming industry, today reported operating results for the fourth quarter and full year ended December 31, 2023.
Commenting upon the Company's fourth quarter financial performance, AGS President and Chief Executive Officer David Lopez said, "The strength in our four quarter results was broad-based, with all three operating segments setting new quarterly records for revenue and Adjusted EBITDA. The quality and consistency of our recent financial performance is a true reflection of our incredibly talented and focused team, increasingly deep and diverse product offering across all three segments, and the improving efficiency and effectiveness of our execution."
Kimo Akiona, AGS Chief Financial Officer added, "We exited 2023 with a total net debt leverage ratio of 3.2 times, down from 3.8 times at the start of the year. Supported by our consistent operating momentum and execution, heightened focus on efficient and effective working capital management, continued capex deployment discipline, and anticipated cash interest savings from our recent debt repricing and repayment; a path to below 3.0 times remains well within our sight."
| Summary of the Three and Twelve Months Ended December 31, 2023 and 2022 | ||||||||||||||||||||||||
| (In thousands, except per-share and Adjusted EBITDA margin data) | ||||||||||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | % Change | 2023 | 2022 | % Change | |||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| EGM | $ | 85,952 | $ | 75,338 | 14.1 | % | $ | 327,053 | $ | 284,331 | 15.0 | % | ||||||||||||
| Table Products | 4,829 | 3,890 | 24.1 | % | 17,706 | 14,920 | 18.7 | % | ||||||||||||||||
| Interactive | 3,370 | 2,508 | 34.4 | % | 11,777 | 10,185 | 15.6 | % | ||||||||||||||||
| Total revenues | $ | 94,151 | $ | 81,736 | 15.2 | % | $ | 356,536 | $ | 309,436 | 15.2 | % | ||||||||||||
| Income from operations | $ | 16,048 | $ | 13,447 | 19.3 | % | $ | 57,393 | $ | 37,969 | 51.2 | % | ||||||||||||
| Net income (loss) | $ | 67 | $ | 2,541 | (97.4 | )% | $ | 428 | $ | (8,035 | ) | (105.3 | )% | |||||||||||
| Basic income (loss) per share | $ | 0.00 | $ | 0.06 | (97.1 | )% | $ | 0.01 | $ | (0.22 | ) | (104.5 | )% | |||||||||||
| Diluted income (loss) per share | $ | 0.00 | $ | 0.06 | (97.1 | )% | $ | 0.01 | $ | (0.22 | ) | (104.5 | )% | |||||||||||
| Adjusted EBITDA: | ||||||||||||||||||||||||
| EGM | $ | 38,626 | $ | 34,412 | 12.2 | % | $ | 146,287 | $ | 127,502 | 14.7 | % | ||||||||||||
| Table Products | 2,842 | 2,370 | 19.9 | % | 9,792 | 8,781 | 11.5 | % | ||||||||||||||||
| Interactive | 1,292 | 498 | 159.4 | % | 2,888 | 2,360 | 22.4 | % | ||||||||||||||||
| Total Adjusted EBITDA(1) | $ | 42,760 | $ | 37,280 | 14.7 | % | $ | 158,967 | $ | 138,643 | 14.7 | % | ||||||||||||
| Total Adjusted EBITDA margin(2) | 45.4 | % | 45.6 | % | (20 bps) | 44.6 | % | 44.8 | % | (20 bps) | ||||||||||||||
Fourth Quarter 2023 Financial Results
| • | Total revenue increased | |
| • | Gaming operations, or recurring revenue, totaled | |
| • | Equipment sales revenue increased more than | |
| • | The Company generated near breakeven net income in Q4 2023 compared to | |
| • | Total Adjusted EBITDA (non-GAAP)(1) increased approximately | |
| • | Total Adjusted EBITDA margin (non-GAAP)(1) was | |
| • | Net cash provided by operating activities increased approximately |
(1) Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures; see non-GAAP reconciliation below.
(2) Free Cash Flow is a non-GAAP financial measure; see non-GAAP reconciliation below.
EGM
Three Months Ended December 31, 2023 compared to Three Months Ended December 31, 2022
| (Amounts in thousands, except unit data) | Three Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | $ Change | % Change | |||||||||||||
| EGM segment revenues: | ||||||||||||||||
| Gaming operations | $ | 52,290 | $ | 51,207 | $ | 1,083 | 2.1 | % | ||||||||
| Equipment sales | 33,662 | 24,131 | 9,531 | 39.5 | % | |||||||||||
| Total EGM revenues | 85,952 | 75,338 | 10,614 | 14.1 | % | |||||||||||
| EGM Adjusted EBITDA | $ | 38,626 | $ | 34,412 | $ | 4,214 | 12.2 | % | ||||||||
| EGM Business Segment Key Performance Indicators ("KPI's") | ||||||||||||||||
| EGM gaming operations: | ||||||||||||||||
| EGM installed base: | ||||||||||||||||
| Class II | 11,193 | 11,251 | (58 | ) | (0.5 | )% | ||||||||||
| Class III | 5,250 | 5,075 | 175 | 3.4 | % | |||||||||||
| Domestic installed base, end of period | 16,443 | 16,326 | 117 | 0.7 | % | |||||||||||
| International installed base, end of period | 6,126 | 6,244 | (118 | ) | (1.9 | )% | ||||||||||
| Total installed base, end of period | 22,569 | 22,570 | (1 | ) | (0.0 | )% | ||||||||||
| EGM revenue per day ("RPD"): | ||||||||||||||||
| Domestic revenue per day | $ | 31.68 | $ | 31.46 | $ | 0.22 | 0.7 | % | ||||||||
| International revenue per day | $ | 8.86 | $ | 7.61 | $ | 1.25 | 16.4 | % | ||||||||
| Total revenue per day | $ | 25.47 | $ | 24.87 | $ | 0.60 | 2.4 | % | ||||||||
| EGM equipment sales | ||||||||||||||||
| EGM units sold | 1,519 | 1,116 | 403 | 36.1 | % | |||||||||||
| Average sales price ("ASP") | $ | 20,677 | $ | 19,382 | $ | 1,295 | 6.7 | % | ||||||||
EGM Quarterly Results
| Domestic Gaming Operations (3) | ||
| • | Domestic EGM gaming operations, or recurring revenue, increased approximately | |
| • | The domestic EGM installed base expanded to 16,443 units at the end of Q4 2023, representing an increase of 117 units versus the prior year and up sequentially for the seventh consecutive quarter. Outsized premium EGM footprint growth and deployment of our high-performing Spectra UR43 and Spectra UR49 cabinets drove the expansion of our domestic EGM installed base in both the year-over-year and quarterly sequential periods. | |
| • | Domestic EGM RPD increased approximately | |
| • | Our installed base of high-performing premium EGM units increased | |
| International Gaming Operations | ||
| • | International EGM gaming operations, or recurring revenue, totaled | |
| • | The international EGM installed base totaled 6,126 units at December 31, 2023, representing a quarterly sequential increase of 43 units. New casino openings paced the installed base growth realized in the quarter. | |
| • | International EGM RPD increased approximately | |
| EGM Equipment Sales | ||
| • | Global EGM sales reached a record 1,519 units in Q4 2023, representing an increase of over | |
| • | The average sales price ("ASP") in Q4 2023 was | |
| • | The Company sold units into 30 U.S. states, four Canadian provinces and four international jurisdictions outside of the U.S. and Canada throughout Q4 2023, supported by further successful execution of our strategic initiative to broaden our customer account penetration, particularly with larger corporate buyers. To that end, we sold units to nearly 180 unique customers in Q4 2023, representing an increase of more than | |
| Product Highlights | ||
| • | The Company's Spectra family of gaming cabinets continues to take the gaming industry by storm, with both Spectra UR49 and UR43 achieving a top-five ranking in the January 2024 Eilers-Fantini Cabinet Performance Report, with reported theoretical index performance of 1.62 times and 1.51 times zone average, respectively. The Spectra duo's exceptional performance put AGS in an enviable position as the only manufacturer with two cabinets in the top five of any category within the Eilers Report. The Spectra UR43 footprint surpassed 4,000 units at year end 2023, while Spectra UR49 continued to gain steam with nearly 170 units deployed. With multiple game themes in various stages of the field testing process and several new additions to the cabinet lineup scheduled for release in 2024, the Company believes it remains in the very early innings of realizing the Spectra family's true growth potential. | |
| • | AGS' decision to strategically transform the scale and scope of its game development team beginning in the back half of 2019 has provided the Company with the content needed to consistently scale the business. The byproduct of this multi-year effort was well-represented within the January 2024 Eilers-Fantini Game Performance Report, as the Company placed seven titles in the Quarterly Top-50 New Core games, while also producing two top-five titles in the report's New Premium Leased category. Supported by the breadth, depth and quality of its current game portfolio, which features contributions from each of the Company's game development studios, AGS has uniquely armed itself with the tools needed to simultaneously execute its recurring revenue yield optimization initiatives, while also positioning the Company to emerge as the middle-tier provider of choice in the North American slot sales market. |
(3) "Domestic" includes both the United States and Canada.
Table Products
Three Months Ended December 31, 2023 compared to Three Months Ended December 31, 2022
| (Amounts in thousands, except unit data) | Three Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | $ Change | % Change | |||||||||||||
| Table Products segment revenues: | ||||||||||||||||
| Gaming operations | $ | 3,936 | $ | 3,691 | $ | 245 | 6.6 | % | ||||||||
| Equipment sales | 893 | 199 | 694 | 348.7 | % | |||||||||||
| Total Table Products revenues | $ | 4,829 | $ | 3,890 | $ | 939 | 24.1 | % | ||||||||
| Table Products Adjusted EBITDA | $ | 2,842 | $ | 2,370 | $ | 472 | 19.9 | % | ||||||||
| Table Products unit information: | ||||||||||||||||
| Table products installed base, end of period | 5,415 | 5,051 | 364 | 7.2 | % | |||||||||||
| Average monthly lease price | $ | 239 | $ | 241 | $ | (2 | ) | (0.8 | )% | |||||||
Table Products Quarterly Results
| • | Total table products revenue increased | |
| • | Gaming operations revenue reached a record | |
| • | The table products installed base totaled 5,415 units at the end of Q4 2023, up 364 units, or approximately | |
| • | The average monthly lease price ("ALP") was relatively consistent versus the prior year and prior sequential quarter at | |
| • | Equipment sales revenue more than quadrupled year-over-year to a record | |
| • | Table Products Adjusted EBITDA increased | |
| • | The PAX S specialty game card shuffler footprint surpassed 330 units at the end of Q4 2023, with units live in over 65 unique casinos across more than 20 states and provinces. The PAX S footprint expanded by over 40 units, or approximately | |
| • | The Bonus Spin Xtreme progressive installed base increased by over | |
| • | At quarter end, the Company was live with over 20 AGS Arsenal site licenses across a variety of tribal and commercial end markets. The Arsenal's compelling value proposition and our organizational commitment to investing in table product innovation continue to drive interest in our site license offering. | |
Interactive
Three Months Ended December 31, 2023 compared to Three Months Ended December 31, 2022
| (Amounts in thousands) | Three Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | $ Change | % Change | |||||||||||||
| Interactive segment revenue: | ||||||||||||||||
| Gaming Operations | $ | 3,370 | $ | 2,508 | $ | 862 | 34.4 | % | ||||||||
| Total Interactive revenue | $ | 3,370 | $ | 2,508 | $ | 862 | 34.4 | % | ||||||||
| Interactive Adjusted EBITDA | $ | 1,292 | $ | 498 | $ | 794 | 159.4 | % | ||||||||
Interactive Quarterly Results
| • | Total Interactive revenue reached a record | |
| • | RMG revenue increased | |
| • | Interactive Adjusted EBITDA more than doubled versus the prior year to a record | |
| • | AGS maintained its position near the top of the charts in the February 2024 Eilers-Fantini Online Game Performance Report, with the exceptional performance of its new and proven online brands producing a top-five overall slot index ranking for the fourth consecutive month. The Company's "New" game performance told a similar story within the February report, ranking second best for the fourth month in a row with a reported theoretical win index of over 3 times site average. Three AGS game themes achieved a top-15 ranking within the February report's "New" game category, including Platinum 8x8x8x, Mega Diamond and 8x Crystal Bells, while its established online franchise brand, Capital Gains, ranked second in the overall slots category with a reported theoretical win index of more than 14 times site average. Looking ahead, the Company remains committed to further diversifying its online content offering to include online-first game themes, bespoke product, simple slots, instant win, and table games to further solidify its position as a partner of choice to the industry's leading B2C i-casino operators. | |
| • | The Company's growing suite of RMG game content, consisting of over 60 proven AGS land-based titles, was live in nearly all of the most prominent regulated North American online jurisdictions and with over 80 i-gaming operators globally as of December 31, 2023. Pennsylvania, Michigan and Canada represented the Company's highest revenue generating end markets in Q4 2023. | |
Balance Sheet and Cash Flow Highlights
As of December 31, 2023, the Company had an available cash balance of
The total principal amount of debt outstanding, as of December 31, 2023, was
Fourth quarter 2023 capital expenditures totaled
Free cash flow(4) reached
February 2024 Debt Repricing and Voluntary Repayment
On February 5, 2024, the Company successfully completed a repricing of its term loan credit facility. Among other things, the repricing removed the credit spread adjustment with respect to term loan borrowings and reduced the interest rate applied to such borrowings to the Secured Overnight Financing Rate (“SOFR”) plus
2024 Net Leverage Target
Supported by the relative resiliency observed across the broader North American gaming complex 2024-to-date, both with respect to GGR trends and customer purchasing demand; the growing appeal and strong performance of AGS's deeper and more diverse suite of EGM gaming cabinets and game content; the anticipated continued outsized growth in Interactive revenues; an unwavering commitment to cost containment and operational efficiency; and steadily improving free cash flow conversion, the Company expects to exit 2024 with a total net debt leverage ratio in the range of 2.75 times to 3.00 times.
(4) Total Adjusted EBITDA, Total Net Debt Leverage Ratio and Free Cash Flow are non-GAAP financial measures; see non-GAAP reconciliation below.
Conference Call and Webcast
AGS executive leadership will host a conference call on Tuesday, March 5, 2024, at 5 p.m. EST to review the Company's fourth quarter and full year 2023 financial results. Participants may visit the Company's website, investors.playags.com, to access a live webcast of the conference call and a slide presentation reviewing the Company's quarterly and full year financial performance. A replay of the webcast will be available on the Company's website following the live event. United States residents may access the call live by dialing +1 (833) 470-1428, while international participants should visit www.netroadshow.com/events/global-numbers?confId=60800 for a dial by country directory. The conference call access code is 775707.
Company Overview
AGS is a global company focused on creating a diverse mix of entertaining gaming experiences for every kind of player. Our roots are firmly planted in the Class II tribal gaming market, but our customer-centric culture and remarkable growth have helped us branch out to become one of the most all-inclusive commercial gaming equipment suppliers in the world. Powered by high-performing Class II and Class III slot products, an expansive table products portfolio, highly rated social casino, real-money gaming solutions for players and operators, and best-in-class service, we offer an unmatched value proposition for our casino partners. Learn more at playags.com.
AGS Investor & Media Contacts:
Brad Boyer, Senior Vice President Corporate Operations and Investor Relations
investors@playags.com
Julia Boguslawski, Chief Marketing Officer
jboguslawski@playags.com
©2024 PlayAGS, Inc. Products referenced herein are sold by AGS LLC or other subsidiaries of PlayAGS, Inc. Solely for convenience, marks, trademarks and trade names referred to in this press release appear without the ® and TM and SM symbols, but such references are not intended to indicate, in any way, that PlayAGS, Inc. will not assert, to the fullest extent under applicable law, its rights or the rights of the applicable licensor to these marks, trademarks and trade names.
Forward-Looking Statement
This release contains forward-looking statements based on management’s current expectations and projections, which are intended to qualify for the safe harbor of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements identified by words such as “believe,” “will,” “may,” “might,” “likely,” “expect,” “anticipates,” “intends,” “plans,” “seeks,” “estimates,” “believes,” “continues,” “projects” and similar references to future periods. All forward-looking statements are based on current expectations and projections of future events.
These forward-looking statements reflect the current views, models, and assumptions of AGS, and are subject to various risks and uncertainties that cannot be predicted or qualified and could cause actual results in AGS’s performance to differ materially from those expressed or implied by such forward looking statements. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties, which include, but are not limited to, the ability of AGS to maintain strategic alliances, unit placements or installations, grow revenue, garner new market share, secure new licenses in new jurisdictions, successfully develop or place proprietary product, comply with regulations, have its games approved by relevant jurisdictions, market conditions, and other factors. For a more detailed discussion of these and other factors, please refer to AGS's filings with the Securities and Exchange Commission ("SEC"), including those set forth under Item 1. “Business,” and Item 1A. “Risk Factors” in AGS’s Annual Report on Form 10-K, filed with the SEC. All forward-looking statements made herein are expressly qualified in their entirety by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. Readers are cautioned that all forward-looking statements speak only to the facts and circumstances present as of the date of this press release. AGS expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
| PLAYAGS, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (amounts in thousands, except share and per share data) | ||||||||
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 50,936 | $ | 37,891 | ||||
| Restricted cash | 244 | 20 | ||||||
| Accounts receivable, net of allowance of credit losses for | 68,499 | 59,909 | ||||||
| Inventories | 36,081 | 35,394 | ||||||
| Prepaid expenses | 5,473 | 4,020 | ||||||
| Deposits and other | 4,145 | 8,930 | ||||||
| Total current assets | 165,378 | 146,164 | ||||||
| Property and equipment, net | 78,768 | 82,361 | ||||||
| Goodwill | 290,486 | 287,680 | ||||||
| Intangible assets | 123,436 | 142,109 | ||||||
| Deferred tax asset | 7,680 | 7,893 | ||||||
| Operating lease assets | 9,862 | 11,198 | ||||||
| Other assets | 4,728 | 7,346 | ||||||
| Total assets | $ | 680,338 | $ | 684,751 | ||||
| Liabilities and Stockholders’Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 5,406 | $ | 15,244 | ||||
| Accrued liabilities | 35,926 | 37,262 | ||||||
| Current maturities of long-term debt | 6,253 | 6,060 | ||||||
| Total current liabilities | 47,585 | 58,566 | ||||||
| Long-term debt | 547,499 | 550,081 | ||||||
| Deferred tax liability, non-current | 2,326 | 2,048 | ||||||
| Operating lease liabilities, long-term | 8,636 | 10,413 | ||||||
| Other long-term liabilities | 6,625 | 14,282 | ||||||
| Total liabilities | 612,671 | 635,390 | ||||||
| Stockholders’equity | ||||||||
| Preferred stock at | - | - | ||||||
| Common stock at | 389 | 378 | ||||||
| Additional paid-in capital | 417,689 | 406,436 | ||||||
| Accumulated deficit | (353,044 | ) | (353,125 | ) | ||||
| Accumulated other comprehensive income (loss) | 2,633 | (4,328 | ) | |||||
| Total stockholders’equity | 67,667 | 49,361 | ||||||
| Total liabilities and stockholders’equity | $ | 680,338 | $ | 684,751 | ||||
| PLAYAGS, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||||||||||||||||
| (amounts in thousands, except per share data) | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | ||||||||||||||||
| Gaming operations | $ | 59,596 | $ | 57,406 | $ | 240,237 | $ | 223,802 | ||||||||
| Equipment sales | 34,555 | 24,330 | 116,299 | 85,634 | ||||||||||||
| Total revenues | 94,151 | 81,736 | 356,536 | 309,436 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Cost of gaming operations(5) | 13,248 | 10,688 | 50,278 | 42,200 | ||||||||||||
| Cost of equipment sales(5) | 15,995 | 12,442 | 54,849 | 44,472 | ||||||||||||
| Selling, general and administrative | 16,869 | 16,847 | 73,248 | 67,728 | ||||||||||||
| Research and development | 10,909 | 9,676 | 42,385 | 39,628 | ||||||||||||
| Write-downs and other (gains) charges | 810 | 99 | 1,434 | 1,923 | ||||||||||||
| Depreciation and amortization | 20,272 | 18,537 | 76,949 | 75,516 | ||||||||||||
| Total operating expenses | 78,103 | 68,289 | 299,143 | 271,467 | ||||||||||||
| Income from operations | 16,048 | 13,447 | 57,393 | 37,969 | ||||||||||||
| Other expense (income) | ||||||||||||||||
| Interest expense | 15,064 | 12,757 | 57,426 | 40,608 | ||||||||||||
| Interest income | (588 | ) | (331 | ) | (1,855 | ) | (1,059 | ) | ||||||||
| Loss on extinguishment and modification of debt | - | - | - | 8,549 | ||||||||||||
| Other expense (income) | 456 | (583 | ) | 109 | 131 | |||||||||||
| Income (loss) before income taxes | 1,116 | 1,604 | 1,713 | (10,260 | ) | |||||||||||
| Income tax (expense) benefit | (1,049 | ) | 937 | (1,285 | ) | 2,225 | ||||||||||
| Net income (loss) | 67 | 2,541 | 428 | (8,035 | ) | |||||||||||
| Foreign currency translation adjustment | 2,178 | 1,276 | 6,961 | 1,742 | ||||||||||||
| Total comprehensive income (loss) | $ | 2,245 | $ | 3,817 | $ | 7,389 | $ | (6,293 | ) | |||||||
| Basic and diluted income per common share: | ||||||||||||||||
| Basic | $ | 0.00 | $ | 0.06 | $ | 0.01 | $ | (0.22 | ) | |||||||
| Diluted | $ | 0.00 | $ | 0.06 | $ | 0.01 | $ | (0.22 | ) | |||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 38,769 | 37,747 | 38,167 | 37,252 | ||||||||||||
| Diluted | 38,839 | 37,747 | 38,190 | 37,252 | ||||||||||||
(5) Exclusive of depreciation and amortization.
| PLAYAGS, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) | ||||||||
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | 428 | $ | (8,035 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 76,949 | 75,516 | ||||||
| Accretion of contract rights under development agreements and placement fees | 6,273 | 6,345 | ||||||
| Amortization of deferred loan costs and discount | 2,574 | 2,803 | ||||||
| Write-off of deferred loan costs and discount | - | 1,586 | ||||||
| Cash paid for debt prepayment penalties to prior debt holders | - | 848 | ||||||
| Stock-based compensation expense | 11,264 | 11,893 | ||||||
| Provision for bad debts | 642 | 465 | ||||||
| Disposal of long-lived assets | 596 | 427 | ||||||
| Impairment of assets | 838 | 30 | ||||||
| Fair value adjustment of contingent consideration: | - | 1,466 | ||||||
| Benefit (expense) from deferred income tax | 1,598 | (829 | ) | |||||
| Changes in assets and liabilities that relate to operations: | ||||||||
| Accounts receivable | (7,694 | ) | (10,534 | ) | ||||
| Inventories | 4,295 | (6,252 | ) | |||||
| Prepaid expenses | (1,436 | ) | 450 | |||||
| Deposits and other | 5,206 | (436 | ) | |||||
| Other assets, non-current | 1,600 | 806 | ||||||
| Accounts payable and accrued liabilities | (16,934 | ) | 1,160 | |||||
| Net cash provided by operating activities | 86,199 | 77,709 | ||||||
| Cash flows from investing activities | ||||||||
| Proceeds from payments on customer notes receivable | 3,081 | 1,867 | ||||||
| Business acquisitions, net of cash acquired | - | (4,750 | ) | |||||
| Purchase of intangibles | (183 | ) | - | |||||
| Software development and other expenditures | (23,377 | ) | (21,127 | ) | ||||
| Proceeds from disposition of assets | 22 | 33 | ||||||
| Purchases of property and equipment | (38,361 | ) | (48,111 | ) | ||||
| Net cash used in investing activities | (58,818 | ) | (72,088 | ) | ||||
| Cash flows from financing activities | ||||||||
| Repayment of prior first lien credit facilities | - | (521,215 | ) | |||||
| Repayment of first lien credit facilities | (5,750 | ) | (4,313 | ) | ||||
| Repayment of incremental term loans | - | (93,575 | ) | |||||
| Payment of financed placement fee obligations | (5,735 | ) | (5,253 | ) | ||||
| Proceeds from term loans | - | 569,250 | ||||||
| Payment of deferred loan costs | - | (4,838 | ) | |||||
| Payment of debt prepayment penalties to prior debt holders | - | (848 | ) | |||||
| Payments of previous acquisition obligation | (310 | ) | (514 | ) | ||||
| Payments on finance leases and other obligations | (2,038 | ) | (1,213 | ) | ||||
| Repurchase of stock | (347 | ) | (201 | ) | ||||
| Net cash used in financing activities | (14,180 | ) | (62,720 | ) | ||||
| Effect of exchange rates on cash and cash equivalents | 68 | 13 | ||||||
| Net increase in cash, cash equivalents and restricted cash | 13,269 | (57,086 | ) | |||||
| Cash, cash equivalents and restricted cash, beginning of period | 37,911 | 94,997 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 51,180 | $ | 37,911 | ||||
| Supplemental cash flow information: | ||||||||
| Non-cash investing and financing activities: | ||||||||
| Leased assets obtained in exchange for new finance lease liabilities | $ | 1,658 | $ | 476 | ||||
| Leased assets obtained in exchange for new lease liabilities | $ | 882 | $ | 956 | ||||
| Property and equipment obtained in exchange for new other long-term liability | $ | 2,489 | $ | - | ||||
Non-GAAP Financial Measures
To provide investors with additional information in connection with our results as determined by generally accepted accounting principles in the United States (“GAAP”), we disclose the following non-GAAP financial measures: total Adjusted EBITDA, total Adjusted EBITDA margin, total net debt leverage ratio, and Free Cash Flow. These measures are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for net income (loss), income from operations, cash flows, or any other measure calculated in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.
Total Adjusted EBITDA
This press release and accompanying schedules provide certain information regarding Adjusted EBITDA, which is considered a non-GAAP financial measure under the rules of the Securities and Exchange Commission.
We believe that the presentation of total Adjusted EBITDA is appropriate to provide additional information to investors about certain material non-cash items that we do not expect to continue at the same level in the future, as well as other items we do not consider indicative of our ongoing operating performance. Further, we believe total Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against that of other peer companies using similar measures. It also provides management and investors with additional information to estimate our value.
Total Adjusted EBITDA is not a presentation made in accordance with GAAP. Our use of the term total Adjusted EBITDA may vary from others in our industry. Total Adjusted EBITDA should not be considered as an alternative to operating income or net income. Total Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation or as a substitute for the analysis of our results as reported under GAAP.
Our definition of total Adjusted EBITDA allows us to add back certain non-cash charges that are deducted in calculating net income and to deduct certain gains that are included in calculating net income. However, these expenses and gains vary greatly, and are difficult to predict. They can represent the effect of long-term strategies as opposed to short-term results. In addition, in the case of charges or expenses, these items can represent the reduction of cash that could be used for other corporate purposes. Due to these limitations, we rely primarily on our GAAP results, such as net income (loss), income from operations, EGM Adjusted EBITDA, Table Products Adjusted EBITDA or Interactive Adjusted EBITDA and use Total Adjusted EBITDA only supplementally.
The total Adjusted EBITDA discussion above is also applicable to its margin measure, which is calculated as total Adjusted EBITDA as a percentage of total revenue.
The following table presents a reconciliation of total Adjusted EBITDA to net income, which is the most comparable GAAP measure:
| Total Adjusted EBITDA Reconciliation | ||||||||||||||||
| Three Months Ended December 31, | ||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||
| 2023 | 2022 | $ Change | % Change | |||||||||||||
| Net income | $ | 67 | $ | 2,541 | $ | (2,474 | ) | (97.4 | )% | |||||||
| Income tax benefit (expense) | 1,049 | (937 | ) | 1,986 | (212.0 | )% | ||||||||||
| Depreciation and amortization | 20,272 | 18,537 | 1,735 | 9.4 | % | |||||||||||
| Interest expense, net of interest income and other | 14,932 | 11,843 | 3,089 | 26.1 | % | |||||||||||
| Write-downs and other (gains) charges(6) | 810 | 99 | 711 | 718.2 | % | |||||||||||
| Other adjustments(7) | 500 | 1,228 | (728 | ) | (59.3 | )% | ||||||||||
| Other non-cash charges(8) | 2,452 | 2,648 | (196 | ) | (7.4 | )% | ||||||||||
| Non-cash stock-based compensation(9) | 2,678 | 1,321 | 1,357 | 102.7 | % | |||||||||||
| Total Adjusted EBITDA | $ | 42,760 | $ | 37,280 | $ | 5,480 | 14.7 | % | ||||||||
| Three Months Ended December 31, | ||||||||||||||||
| (Amounts in thousands, except total Adjusted EBITDA margin) | ||||||||||||||||
| 2023 | 2022 | $ Change | % Change | |||||||||||||
| Total revenues | $ | 94,151 | $ | 81,736 | $ | 12,415 | 15.2 | % | ||||||||
| Total Adjusted EBITDA | $ | 42,760 | $ | 37,280 | $ | 5,480 | 14.7 | % | ||||||||
| Total Adjusted EBITDA margin | 45.4 | % | 45.6 | % | (0.2 | )% | (20 bps) | |||||||||
(6) Write-downs and other includes items related to loss on disposal or impairment of long-lived assets and fair value adjustments to contingent consideration.
(7) Other adjustments are primarily composed of the following:
| • | Costs and inventory and receivable valuation charges associated with the COVID-19 pandemic, professional fees incurred for projects, costs incurred related to public offerings, contract cancellation fees and other transaction costs deemed to be non-operating in nature; |
| • | Acquisition and integration related costs related to the purchase of businesses and to integrate operations and obtain costs synergies; |
| • | Restructuring and severance costs, which primarily relate to costs incurred through the restructuring of the Company’s operations from time to time and other employee severance costs recognized in the periods presented; and |
| • | Legal and litigation related costs, which consist of payments to law firms and settlements for matters that are outside the normal course of business. |
(8) Other non-cash charges are costs related to non-cash charges and losses on the disposition of assets, non-cash charges on capitalized installation and delivery, which primarily includes the costs to acquire contracts that are expensed over the estimated life of each contract, and non-cash charges related to accretion of contract rights under development agreements.
(9) Non-cash stock-based compensation includes non-cash compensation expense related to grants of options, restricted stock, and other equity awards.
Total Net Debt Leverage Ratio Reconciliation
The following table presents a reconciliation of total net debt and total net debt leverage ratio:
| (Amounts in thousands, except total net debt leverage ratio) | December 31, | December 31, | ||||||
| 2023 | 2022 | |||||||
| Total principal amount of debt | $ | 566,754 | $ | 571,376 | ||||
| Less: Cash and cash equivalents | 50,936 | 37,891 | ||||||
| Total net debt | $ | 515,818 | $ | 533,485 | ||||
| LTM Adjusted EBITDA | $ | 158,967 | $ | 138,643 | ||||
| Total net debt leverage ratio | 3.2 | 3.8 | ||||||
Free Cash Flow
This schedule provides certain information regarding Free Cash Flow, which is considered a non-GAAP financial measure under the rules of the Securities and Exchange Commission.
We define Free Cash Flow as net cash provided by operating activities and proceeds from payments on customer notes receivable less cash outlays related to capital expenditures. We define capital expenditures to include purchase of intangible assets, software development and other expenditures, and purchases of property and equipment. In arriving at Free Cash Flow, we subtract cash outlays related to capital expenditures and add proceeds from payments on customer notes receivable to net cash provided by operating activities because they represent long-term investments that are required for normal business activities. As a result, subject to the limitations described below, Free Cash Flow is a useful measure of our cash available to repay debt and/or make other investments.
Free Cash Flow adjusts for cash items that are ultimately within management’s discretion to direct, and therefore, may imply that there is less or more cash that is available than the most comparable GAAP measure. Free Cash Flow is not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted. These limitations are best addressed by using Free Cash Flow in combination with the GAAP cash flow numbers.
The following table presents a reconciliation of Free Cash Flow:
| (Amounts in thousands) | Year Ended December 31, 2023 | Nine Months Ended September 30, 2023 | Three Months Ended December 31, 2023 | |||||||||
| Net cash provided by operating activities | $ | 86,199 | $ | 59,755 | $ | 26,444 | ||||||
| Proceeds from payments on customer notes receivable | 3,081 | 3,081 | - | |||||||||
| Purchase of intangibles | (183 | ) | (183 | ) | - | |||||||
| Software development and other expenditures | (23,377 | ) | (17,855 | ) | (5,522 | ) | ||||||
| Purchases of property and equipment | (38,361 | ) | (28,458 | ) | (9,903 | ) | ||||||
| Free Cash Flow | $ | 27,359 | $ | 16,340 | $ | 11,019 | ||||||
| (Amounts in thousands) | Year Ended December 31, 2022 | Nine Months Ended September 30, 2022 | Three Months Ended December 31, 2022 | |||||||||
| Net cash provided by operating activities | $ | 77,709 | $ | 52,574 | $ | 25,135 | ||||||
| Proceeds from payments on customer notes receivable | 1,867 | 137 | $ | 1,730 | ||||||||
| Software development and other expenditures | (21,127 | ) | (15,439 | ) | (5,688 | ) | ||||||
| Purchases of property and equipment | (48,111 | ) | (34,484 | ) | (13,627 | ) | ||||||
| Free Cash Flow | $ | 10,338 | $ | 2,788 | $ | 7,550 | ||||||
FAQ
What was PlayAGS, Inc.'s total revenue in the fourth quarter of 2023?
How much did Income from operations increase by in Q4 2023?
What was the Net income for PlayAGS, Inc. in the fourth quarter?
What was the Total Adjusted EBITDA for PlayAGS, Inc. in the fourth quarter of 2023?
How much cash did PlayAGS, Inc. generate from operating activities in Q4 2023?
What is the target net leverage range for PlayAGS, Inc. by the end of 2024?
