AGS REPORTS THIRD QUARTER 2023 RESULTS
- AGS achieved a record Q3 revenue of $89.4M, marking a 14% Y/Y increase, driven by strong growth in interactive, EGM, and table products segments.
- The company's adjusted EBITDA surpassed $40M for the first time, indicating a strong financial performance and improved operational efficiency.
- AGS reduced its net leverage to 3.4x at quarter end, well within the targeted year-end range, reflecting sound financial management and debt reduction strategies.
- The company's free cash flow reached a record $12.7M, demonstrating efficient working capital management and disciplined capex deployment.
- International EGM recurring revenue advanced more than 20% Y/Y, showcasing the company's global growth and market penetration.
- None.
Third Quarter 2023 Highlights:
- Total Revenue Increased
14% Y/Y to$89.4 Million - Domestic EGM Recurring Revenue Grew
6% Y/Y; Far Outpacing Market-Wide GGR Trends - Global EGM Sales Increased More Than
30% Y/Y to 1,345 Units - Interactive Revenue Reached a Record
$3.1 Million 20% - Generated a Modest Net Loss of
$156 Thousand - Adjusted EBITDA Eclipsed
$40 Million - Cash From Operations Totaled
$30 Million $12.7 Million - Net Leverage Fell to 3.4x at Quarter End; Within the Targeted Year-End Range of 3.25x to 3.50x
Commenting upon the Company's third quarter results, AGS President and Chief Executive Officer David Lopez said, "We delivered another solid quarter of execution in the third quarter, with our product momentum and focused team producing performance that far exceeded the trends observed across the broader domestic gaming landscape. Exiting our most exciting Global Gaming Expo to date, I believe our deeper and more diverse product portfolio, combined with our passionate team, position us to deliver on this theme of relative outperformance for many quarters to come."
Kimo Akiona, AGS Chief Financial Officer added, "Our record-setting Q3 2023 Adjusted EBITDA and free cash flow performance enabled us to reduce our net leverage to 3.4 times at quarter end, placing us inside of our targeted year-end range of 3.25 times to 3.50 times a full quarter ahead of schedule. We remain intently focused on leveraging our commitment to capex discipline and working capital efficiency to consistently generate free cash flow, which combined with our operating momentum, should allow for further net leverage reduction in the quarters ahead."
Summary of the Three Months Ended September 30, 2023 and 2022 (In thousands, except per-share and Adjusted EBITDA margin data) | ||||||||||||
Three Months Ended September 30, | ||||||||||||
2023 | 2022 | % Change | ||||||||||
Revenues: | ||||||||||||
EGM | $ | 81,862 | $ | 71,620 | 14.3 | % | ||||||
Table Products | 4,387 | 4,036 | 8.7 | % | ||||||||
Interactive | 3,129 | 2,603 | 20.2 | % | ||||||||
Total revenues | $ | 89,378 | $ | 78,259 | 14.2 | % | ||||||
Income from operations | $ | 14,523 | $ | 9,031 | 60.8 | % | ||||||
Net (loss) income | $ | (156) | $ | 476 | (132.8) | % | ||||||
Basic income per share | $ | 0.00 | $ | 0.01 | (100.0) | % | ||||||
Diluted income per share | $ | 0.00 | $ | 0.01 | (100.0) | % | ||||||
Adjusted EBITDA: | ||||||||||||
EGM | $ | 36,772 | $ | 31,331 | 17.4 | % | ||||||
Table Products | 2,436 | 2,561 | (4.9) | % | ||||||||
Interactive | 903 | 575 | 57.0 | % | ||||||||
Total Adjusted EBITDA(1) | $ | 40,111 | $ | 34,467 | 16.4 | % | ||||||
Total Adjusted EBITDA margin(2) | 44.9 | % | 44.0 | % | 90 bps | |||||||
Third Quarter 2023 Financial Results
- Total revenue increased
14% year-over-year to a third-quarter record$89.4 million $78.3 million 20% ,14% and9% year-over-year, respectively. - Gaming operations, or recurring revenue, reached a record
$61.0 million 8% ahead of the prior year and up modestly versus Q2 2023. Interactive revenue grew to a record$3.1 million 6% year-over-year, far outpacing market-wide domestic Gross Gaming Revenue ("GGR") trends. International EGM recurring revenue advanced more than20% year-over-year and increased sequentially for the thirteenth consecutive quarter, while recurring Table Products revenue grew3% versus the prior year. Recurring revenue accounted for nearly70% of the Company's consolidated Q3 2023 revenue mix. - Equipment sales revenue advanced
31% year-over-year to$28.4 million 30% versus the prior year to$27.8 million $500 thousand - The Company generated a net loss of
$156 thousand $476 thousand $4 million - Total Adjusted EBITDA (non-GAAP)(1) increased
16% year-over-year to a record$40.1 million 57% and17% , respectively. Q3 2023 Total Adjusted EBITDA surpassed the then record$39.6 million 1% . The Company has now established new Total Adjusted EBITDA records in three of the past four quarters. - Total Adjusted EBITDA margin (non-GAAP)(1) was
44.9% compared to44.0% in Q3 2022 and44.1% in Q2 2023. Operating leverage resulting from outsized EGM segment revenue growth, a greater mix of higher-margin Spectra family EGM unit sales, and accelerating returns on the strategic Interactive segment investments initiated in the back half of 2022 contributed to the Company's improved Adjusted EBITDA margin performance in the quarter. - Net cash provided by operating activities increased nearly
70% year-over-year to$29.9 million $12.7 million
(1) Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures; see non-GAAP reconciliation below. |
(2) Free cash flow is a non-GAAP measure; see non-GAAP reconciliation below. |
EGM
Three Months Ended September 30, 2023 compared to Three Months Ended September 30, 2022
(Amounts in thousands, except unit data) | Three Months Ended September 30, | |||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
EGM segment revenues: | ||||||||||||||||
Gaming operations | $ | 54,026 | $ | 50,233 | $ | 3,793 | 7.6 | % | ||||||||
Equipment sales | 27,836 | 21,387 | 6,449 | 30.2 | % | |||||||||||
Total EGM revenues | 81,862 | 71,620 | 10,242 | 14.3 | % | |||||||||||
EGM Adjusted EBITDA | $ | 36,772 | $ | 31,331 | $ | 5,441 | 17.4 | % | ||||||||
EGM Business Segment Key Performance Indicators ("KPI's") | ||||||||||||||||
EGM gaming operations: | ||||||||||||||||
EGM installed base: | ||||||||||||||||
Class II | 11,257 | 11,324 | (67) | (0.6) | % | |||||||||||
Class III | 5,167 | 4,934 | 233 | 4.7 | % | |||||||||||
Domestic installed base, end of period | 16,424 | 16,258 | 166 | 1.0 | % | |||||||||||
International installed base, end of period | 6,083 | 6,274 | (191) | (3.0) | % | |||||||||||
Total installed base, end of period | 22,507 | 22,532 | (25) | (0.1) | % | |||||||||||
EGM revenue per day ("RPD"): | ||||||||||||||||
Domestic revenue per day | $ | 32.57 | $ | 31.13 | $ | 1.44 | 4.6 | % | ||||||||
International revenue per day | $ | 9.43 | $ | 7.34 | $ | 2.09 | 28.5 | % | ||||||||
Total revenue per day | $ | 26.28 | $ | 24.31 | $ | 1.97 | 8.1 | % | ||||||||
EGM equipment sales | ||||||||||||||||
EGM units sold | 1,345 | 1,014 | 331 | 32.6 | % | |||||||||||
Average sales price ("ASP") | $ | 19,380 | $ | 19,146 | $ | 234 | 1.2 | % | ||||||||
EGM Quarterly Results
Domestic Gaming Operations (3)
- Domestic EGM gaming operations, or recurring revenue, increased
6% year-over-year to$48.6 million 20% year-over-year increase in our higher-yielding premium EGM installed base, further deployment of Spectra UR43, which is delivering per unit performance comparable to our premium products, and continuous installed base optimization allowed the Company to deliver year-over-year recurring revenue growth that far outpaced market-wide domestic GGR trends. Domestic EGM recurring revenue topped$45 million 60% of the total domestic EGM revenue generated in Q3 2023. - The domestic EGM installed base expanded to 16,424 units at the end of Q3 2023, representing an increase of 166 units versus the prior year and up sequentially for the sixth consecutive quarter. Outsized premium EGM footprint growth and deployment of our high-performing Spectra UR43 cabinet drove the expansion of our domestic EGM installed base in both the year-over-year and quarterly sequential periods.
- Domestic EGM RPD increased
5% year-over-year to a third-quarter record$32.57 $30 $33.48 - Our installed base of high-performing premium EGM units increased
20% year-over-year and accounted for17% of our domestic EGM installed base at the end of Q3 2023 compared to approximately14% at the end of Q3 2022. Our premium EGM installed base grew sequentially for the fifteenth consecutive quarter. Supported by the added versatility of our premium gaming cabinet offering and our deep portfolio of premium game content, our premium EGM footprint continues to deliver superior per unit economics, driving relative outperformance in our reported domestic EGM RPD metrics and enhancing the returns we are able to achieve on our machine-related growth capital investments.
International Gaming Operations
- International EGM gaming operations, or recurring revenue, totaled
$5.4 million 25% versus the$4.3 million Mexico casino market, a consistent and broad-based recovery in prevailing local macroeconomic conditions inMexico , further successful implementation of our global installed base optimization initiatives, and favorable foreign exchange fluctuations. International EGM recurring revenue improved approximately7% over the$5.1 million - The international EGM installed base totaled 6,083 units at September 30, 2023, down modestly versus the prior sequential quarter. The Company intends to leverage its global fleet optimization initiatives to further stabilize its international EGM installed base in Q4 2023.
- International EGM RPD increased nearly
30% year-over-year to$9.43 $9 9% year-over-year on a constant-currency basis. International EGM RPD increased approximately6% over the$8.90
EGM Equipment Sales
- Total global EGM sales reached 1,345 units in Q3 2023, representing an increase of over
30% compared to the 1,014 units sold in Q3 2022. Sustained Spectra UR43 demand momentum, supported by the continued strong performance of multiple titles on the cabinet; a strategic focus on broadening our customer account penetration, particularly with larger multi-site corporate operators; the ability to leverage a deeper and more diverse suite of game content and cabinet variety to increase average order size; continued outsized penetration of the Historical Horse Racing ("HHR") market, aided by the strength of our game performance; and relatively consistent core North American replacement unit demand contributed to our improved EGM unit sales performance versus the prior year. Global EGM unit sales increased approximately7% relative to the 1,259 units sold in Q2 2023 and have now grown sequentially in ten of the past eleven quarters. - The average sales price ("ASP") in Q3 2023 was
$19,380 $19,146 $20,700 - The Company sold units into 30 U.S. states, five Canadian provinces and one international jurisdiction outside of
North America throughout Q3 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 over 150 unique customers in Q3 2023, representing an increase of more than60% versus the prior year and over55% higher than the number sold to in Q3 2019.
Product Highlights
- Spectra UR43 continues to cement its position as one of the Company's best-ever new product launches, amassing a total footprint of more than 2,700 units as of September 30, 2023. The cabinet also continues to add to its list of industry accolades, as it was recently named the Silver Award winner within the "Best Slot Product" category of the highly coveted GGB Gaming & Technology Awards 2024, which were announced at the 2023 Global Gaming Expo in
Las Vegas . The performance of Spectra UR43's original launch themes, Shamrock Fortunes and Long Bao Bao, remains exceptional, with each maintaining a top-20 ranking in the "Core Overall" category of the October 2023 Eilers-Fantini Game Performance Report nearly a full year post their initial introduction. In addition to fueling incremental EGM unit sales demand, Spectra UR43 has also established itself as a strategic yield optimization tool within the recurring revenue business, with installed units delivering RPD performance that is comparable to one of the Company's premium EGM products. Supported by a deep portfolio of titles under development, including several new themes that are delivering above-average performance at a variety of test sites, we expect demand for the cabinet to remain strong over the coming quarters. - Building on the commercial success of Spectra UR43, the Company recently introduced the second cabinet in the Spectra family, Spectra UR49. With a vibrant 49-inch curved monitor and multiple configuration options, the Spectra UR49 strategically complements the workhorse Spectra UR43 cabinet by diversifying the Company's core cabinet portfolio across a variety of price points and use cases, enabling AGS to sell into multiple segments of a traditional operators' slot floor. To date, Spectra UR49's two launch titles, Rakin' Bacon Odyssey and Sahara, are performing nicely above House Average across a variety of test sites, favorably positioning the cabinet for its planned commercial launch in Q4 2023.
- Recent investments intended to diversify, fortify and deepen AGS's EGM content portfolio continue to generate healthy returns, as evidenced by the Company achieving the second highest performance index ranking in the "Overall" and "Core" categories within the October 2023 Eilers-Fantini Game Performance Report. Additionally, the Company was able to leverage the added depth and diversity of its product portfolio to improve its Class 2 index performance by over
20% year-over-year within the report, moving from fifth to third in the Class 2 category.
(3) "Domestic" includes both |
Table Products
Three Months Ended September 30, 2023 compared to Three Months Ended September 30, 2022
(Amounts in thousands, except unit data) | Three Months Ended September 30, | |||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Table Products segment revenues: | ||||||||||||||||
Gaming operations | $ | 3,871 | $ | 3,756 | $ | 115 | 3.1 | % | ||||||||
Equipment sales | 516 | 280 | 236 | 84.3 | % | |||||||||||
Total Table Products revenues | $ | 4,387 | $ | 4,036 | $ | 351 | 8.7 | % | ||||||||
Table Products Adjusted EBITDA | $ | 2,436 | $ | 2,561 | $ | (125) | (4.9) | % | ||||||||
Table Products unit information: | ||||||||||||||||
Table products installed base, end of period | 5,309 | 4,969 | 340 | 6.8 | % | |||||||||||
Average monthly lease price | $ | 240 | $ | 243 | $ | (3) | (1.2) | % | ||||||||
Table Products Quarterly Results
- Total table products revenue increased
9% year-over-year to$4.4 million $4 million 90% of Q3 2023 segment-level revenue. Total table products revenue was relatively consistent with the prior sequential quarter. - Gaming operations revenue totaled
$3.9 million 3% . Growth across all major segments of our table products installed base, including shufflers, utility products, premium games, progressives, and side bets, drove our improved recurring revenue performance versus the prior year. - The table products installed base totaled 5,309 units at the end of Q3 2023, up 340 units, or approximately
7% , versus the prior year. A near tripling of our PAX S single-deck shuffler footprint, a more than45% increase in our Bonus Spin Xtreme ("BSX") progressive installed base, and further customer adoption of our all-inclusive AGS Arsenal site license offering paced our year-over-year installed base growth. This same set of growth catalysts also contributed to an over 50 unit increase in our installed base versus the prior sequential quarter. - The average monthly lease price ("ALP") was relatively consistent versus the prior year and prior sequential quarter at
$240 - Equipment sales revenue increased over
80% year-over-year to$516 thousand $500 thousand - Table Products Adjusted EBITDA decreased
5% year-over-year to$2.4 million 55.5% compared to63.5% in Q3 2022, reflecting a higher allocation of field service expense to the segment to better align with the current complexion of the installed base and a greater mix of equipment sales revenue. Table Products Adjusted EBITDA increased approximately8% versus the$2.3 million - The PAX S specialty game card shuffler footprint grew to over 290 units at the end of Q3 2023, with units live in more than 60 unique casinos across 23 states and provinces. The PAX S footprint expanded more than 20 units, or approximately
8% , sequentially in Q3 2023, supported by initial installs into OR, KS and MO. With PAX S approved in all major North American markets and supported by the overwhelmingly positive customer feedback received on the product to date, the Company believes it remains in the early stages of realizing PAX's true growth potential. - The Bonus Spin Xtreme progressive installed base surpassed 500 units at quarter end, representing a year-over-year increase of nearly
50% . Exiting Q3 2023, BSX was installed in over 40 casinos across 19 jurisdictions. The enhanced BSX features and functionality unveiled at the recent Global Gaming Expo should allow the product to resonate with an even broader audience, helping to drive additional customer adoption in the quarters ahead. - At quarter end, we were live with over 20 AGS Arsenal site licenses across a variety of tribal and commercial end markets. During Q3 2023, we executed our first-ever Arsenal site license with an operator in the
Oregon market. 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 September 30, 2023 compared to Three Months Ended September 30, 2022
(Amounts in thousands) | Three Months Ended September 30, | |||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Interactive segment revenue: | ||||||||||||||||
Gaming Operations | $ | 3,129 | $ | 2,603 | $ | 526 | 20.2 | % | ||||||||
Total Interactive revenue | $ | 3,129 | $ | 2,603 | $ | 526 | 20.2 | % | ||||||||
Interactive Adjusted EBITDA | $ | 903 | $ | 575 | $ | 328 | 57.0 | % | ||||||||
Interactive Quarterly Results
- Total Interactive revenue reached a record
$3.1 million 20% year-over-year and14% ahead of Q2 2023. RMG revenue accounted for approximately90% of Q3 2023 segment-level revenue, with the balance derived from the Company's B2C social casino platform. - RMG revenue increased
26% year-over-year and more than20% sequentially to a record$2.8 million West Virginia market paced our record-setting Q3 2023 RMG revenue performance. Revenues earned from North American-facing customers accounted for over90% of Q3 2023 RMG revenue mix. - Interactive Adjusted EBITDA increased nearly
60% year-over-year to$903 thousand $474 thousand - AGS topped the charts in the October 2023 Eilers-Fantini Online Game Performance Report, as its Mega Diamond and Capital Gains game themes finished #1 and #2, respectively, in the "Slot Content" category with each producing a theoretical win index of over 15x House Average. The strong game performance propelled AGS to a top-five overall slot index ranking within the report, with its "New" game performance ranking second best. Looking ahead, the Company remains committed to further diversifying its online content offering to include online-first game themes, 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 40 proven AGS land-based titles, was live in nearly all of the most prominent regulated North American online jurisdictions and with over 60 i-gaming operators globally as of September 30, 2023. PA, MI and NJ remained the Company's highest revenue generating end markets in Q3 2023.
Liquidity and Capital Expenditures
As of September 30, 2023, the Company had an available cash balance of
The total principal amount of debt outstanding, as of September 30, 2023, was
Third quarter 2023 capital expenditures totaled
2023 Net Leverage Target
Supported by the Company's record-setting year-to-date financial performance through September 30, 2023, the growing appeal and customer adoption of our expanded suite of for-sale EGM products, the relative resiliency observed across our recurring revenue businesses, and an unwavering organizational focus on capital deployment discipline and working capital efficiency, we remain confident in our ability to exit 2023 with net leverage in the range of 3.25 times to 3.50 times.
(4) Total Adjusted EBITDA and Total Net Debt Leverage Ratio are non-GAAP measures, see non-GAAP reconciliation below. |
Conference Call and Webcast
AGS executive leadership will host a conference call on Tuesday, November 7, 2023, at 5 p.m. EST to review the Company's third quarter 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 financial performance. A replay of the webcast will be available on the Company's website following the live event.
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
©2023 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, and oral statements made from time to time by our representatives may contain, 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 statements regarding the proposed public offering and other 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, or by the inclusion of forecasts or projections. 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. These risks and uncertainties 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, the effects of COVID-19 on the Company's business and results of operations and other factors set forth under Item 1. "Business," Item 1A. "Risk Factors" in AGS's Annual Report on Form 10-K, filed with the Securities and Exchange Commission. 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) | ||||||||
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 43,662 | $ | 37,891 | ||||
Restricted cash | 230 | 20 | ||||||
Accounts receivable, net of allowance of credit losses for | 67,626 | 59,909 | ||||||
Inventories | 36,893 | 35,394 | ||||||
Prepaid expenses | 5,909 | 4,020 | ||||||
Deposits and other | 5,211 | 8,930 | ||||||
Total current assets | 159,531 | 146,164 | ||||||
Property and equipment, net | 80,377 | 82,361 | ||||||
Goodwill | 289,879 | 287,680 | ||||||
Intangible assets | 129,236 | 142,109 | ||||||
Deferred tax asset | 8,551 | 7,893 | ||||||
Operating lease assets | 10,353 | 11,198 | ||||||
Other assets | 5,821 | 7,346 | ||||||
Total assets | $ | 683,748 | $ | 684,751 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 9,455 | $ | 15,244 | ||||
Accrued liabilities | 36,700 | 37,262 | ||||||
Current maturities of long-term debt | 6,267 | 6,060 | ||||||
Total current liabilities | 52,422 | 58,566 | ||||||
Long-term debt | 548,479 | 550,081 | ||||||
Deferred tax liability, non-current | 2,991 | 2,048 | ||||||
Operating lease liabilities, long-term | 9,227 | 10,413 | ||||||
Other long-term liabilities | 7,885 | 14,282 | ||||||
Total liabilities | 621,004 | 635,390 | ||||||
Stockholders' equity | ||||||||
Preferred stock at | - | - | ||||||
Common stock at December 31, 2022; 38,702,415 and 37,789,131 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 386 | 378 | ||||||
Additional paid-in capital | 415,014 | 406,436 | ||||||
Accumulated deficit | (353,111) | (353,125) | ||||||
Accumulated other comprehensive income (loss) | 455 | (4,328) | ||||||
Total stockholders' equity | 62,744 | 49,361 | ||||||
Total liabilities and stockholders' equity | $ | 683,748 | $ | 684,751 | ||||
PLAYAGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (amounts in thousands, except per share data) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenues | ||||||||||||||||
Gaming operations | $ | 61,026 | $ | 56,592 | $ | 180,641 | $ | 166,396 | ||||||||
Equipment sales | 28,352 | 21,667 | 81,744 | 61,304 | ||||||||||||
Total revenues | 89,378 | 78,259 | 262,385 | 227,700 | ||||||||||||
Operating expenses | ||||||||||||||||
Cost of gaming operations(5) | 13,246 | 10,375 | 37,030 | 31,512 | ||||||||||||
Cost of equipment sales(5) | 13,540 | 11,857 | 38,854 | 32,030 | ||||||||||||
Selling, general and administrative | 19,453 | 16,955 | 56,379 | 50,881 | ||||||||||||
Research and development | 9,731 | 9,702 | 31,476 | 29,952 | ||||||||||||
Write-downs and other (gains) charges | (11) | 1,389 | 624 | 1,824 | ||||||||||||
Depreciation and amortization | 18,896 | 18,950 | 56,677 | 56,979 | ||||||||||||
Total operating expenses | 74,855 | 69,228 | 221,040 | 203,178 | ||||||||||||
Income from operations | 14,523 | 9,031 | 41,345 | 24,522 | ||||||||||||
Other expense (income) | ||||||||||||||||
Interest expense | 14,588 | 10,291 | 42,362 | 27,851 | ||||||||||||
Interest income | (591) | (305) | (1,267) | (728) | ||||||||||||
Loss on extinguishment and modification of debt | - | - | - | 8,549 | ||||||||||||
Other (expense) income | (259) | 445 | (347) | 714 | ||||||||||||
Income (loss) before income taxes | 785 | (1,400) | 597 | (11,864) | ||||||||||||
Income tax (expense) benefit | (941) | 1,876 | (236) | 1,288 | ||||||||||||
Net (loss) income | (156) | 476 | 361 | (10,576) | ||||||||||||
Foreign currency translation adjustment | (1,355) | 23 | 4,783 | 466 | ||||||||||||
Total comprehensive (loss) income | $ | (1,511) | $ | 499 | $ | 5,144 | $ | (10,110) | ||||||||
Basic and diluted income (loss) per common share: | ||||||||||||||||
Basic | $ | (0.00) | $ | 0.01 | $ | 0.01 | $ | (0.28) | ||||||||
Diluted | $ | (0.00) | $ | 0.01 | $ | 0.01 | $ | (0.28) | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 38,162 | 37,244 | 37,965 | 37,116 | ||||||||||||
Diluted | 38,162 | 37,244 | 37,972 | 37,116 | ||||||||||||
(5) Exclusive of depreciation and amortization. |
PLAYAGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) | |||||||
Nine Months Ended September 30, | |||||||
2023 | 2022 | ||||||
Cash flows from operating activities | |||||||
Net income (loss) | $ | 361 | $ | (10,576) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 56,677 | 56,979 | |||||
Accretion of contract rights under development agreements and placement fees | 4,697 | 4,790 | |||||
Amortization of deferred loan costs and discount | 1,918 | 2,167 | |||||
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 | 8,586 | 10,572 | |||||
Provision for bad debts | 558 | 402 | |||||
Disposal of long-lived assets | 385 | 337 | |||||
Impairment of assets | 239 | 21 | |||||
Fair value adjustment of contingent consideration | - | 1,466 | |||||
Deferred income tax | 1,147 | 936 | |||||
Changes in assets and liabilities that relate to operations: | |||||||
Accounts receivable | (7,550) | (8,868) | |||||
Inventories | 1,827 | (6,856) | |||||
Prepaid expenses | (1,877) | (2,259) | |||||
Deposits and other | 4,066 | (1,266) | |||||
Other assets, non-current | (283) | (134) | |||||
Accounts payable and accrued liabilities | (10,996) | 2,429 | |||||
Net cash provided by operating activities | 59,755 | 52,574 | |||||
Cash flows from investing activities | |||||||
Business acquisitions, net of cash acquired | - | (4,750) | |||||
Proceeds from payments on customer notes receivable | 3,081 | 137 | |||||
Purchase of intangibles | (183) | - | |||||
Software development and other expenditures | (17,855) | (15,439) | |||||
Proceeds from disposition of assets | 11 | 15 | |||||
Purchases of property and equipment | (28,458) | (34,484) | |||||
Net cash used in investing activities | (43,404) | (54,521) | |||||
Cash flows from financing activities | |||||||
Repayment of prior first lien credit facilities | - | (521,215) | |||||
Repayment of first lien credit facilities | (4,313) | (2,876) | |||||
Repayment of incremental term loans | - | (93,575) | |||||
Payment of financed placement fee obligations | (4,316) | (3,917) | |||||
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 | (301) | (445) | |||||
Payments on finance leases and other obligations | (1,141) | (920) | |||||
Repurchase of stock | (347) | (201) | |||||
Net cash used in financing activities | (10,418) | (59,585) | |||||
Effect of exchange rates on cash and cash equivalents | 48 | 2 | |||||
Net increase in cash, cash equivalents and restricted cash | 5,981 | (61,530) | |||||
Cash, cash equivalents and restricted cash, beginning of period | 37,911 | 94,997 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 43,892 | $ | 33,467 | |||
Supplemental cash flow information: | |||||||
Non-cash investing and financing activities: | |||||||
Leased assets obtained in exchange for new operating lease liabilities | $ | 882 | $ | 956 | |||
Leased assets obtained in exchange for new finance lease liabilities | $ | 1,702 | $ | 354 | |||
Property and equipment obtained in exchange for new other long-term liability | $ | 1,153 | $ | - | |||
Non-GAAP Financial Measures
To provide investors with additional information in connection with our results as determined by generally accepted accounting principles in
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 loss, which is the most comparable GAAP measure:
Total Adjusted EBITDA Reconciliation
Three Months Ended September 30, | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Net (loss) income | $ | (156) | $ | 476 | $ | (632) | (132.8) | % | ||||||||
Income tax benefit (expense) | 941 | (1,876) | 2,817 | (150.2) | % | |||||||||||
Depreciation and amortization | 18,896 | 18,950 | (54) | (0.3) | % | |||||||||||
Interest expense, net of interest income and other | 13,738 | 10,431 | 3,307 | 31.7 | % | |||||||||||
Write-downs and other (gains) charges(6) | (11) | 1,389 | (1,400) | (100.8) | % | |||||||||||
Other adjustments(7) | 1,127 | 585 | 542 | 92.6 | % | |||||||||||
Other non-cash charges(8) | 2,480 | 2,171 | 309 | 14.2 | % | |||||||||||
Non-cash stock-based compensation(9) | 3,096 | 2,341 | 755 | 32.3 | % | |||||||||||
Total Adjusted EBITDA | $ | 40,111 | $ | 34,467 | $ | 5,644 | 16.4 | % | ||||||||
Three Months Ended September 30, | ||||||||||||||||
(Amounts in thousands, except total Adjusted EBITDA margin) | ||||||||||||||||
2023 | 2022 | $ Change | % Change | |||||||||||||
Total revenues | $ | 89,378 | $ | 78,259 | $ | 11,119 | 14.2 | % | ||||||||
Total Adjusted EBITDA | $ | 40,111 | $ | 34,467 | $ | 5,644 | 16.4 | % | ||||||||
Total Adjusted EBITDA margin | 44.9 | % | 44.0 | % | 0.9 | % | 90 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) | September 30, | December 31, | ||||||
2023 | 2022 | |||||||
Total principal amount of debt | $ | 568,320 | $ | 571,376 | ||||
Less: Cash and cash equivalents | 43,662 | 37,891 | ||||||
Total net debt | $ | 524,658 | $ | 533,485 | ||||
LTM Adjusted EBITDA | $ | 153,487 | $ | 138,643 | ||||
Total net debt leverage ratio | 3.4 | 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) | Nine Months Ended | Six Months Ended | Three Months Ended | |||||||||
Net cash provided by operating activities | $ | 59,755 | $ | 29,872 | $ | 29,883 | ||||||
Proceeds from payments on customer notes receivable | 3,081 | 3,081 | - | |||||||||
Purchase of intangibles | (183) | (183) | - | |||||||||
Software development and other expenditures | (17,855) | (10,834) | (7,021) | |||||||||
Purchases of property and equipment | (28,458) | (18,312) | (10,146) | |||||||||
Free Cash Flow | $ | 16,340 | $ | 3,624 | $ | 12,716 | ||||||
(Amounts in thousands) | Nine Months Ended | Six Months Ended | Three Months Ended | |||||||||
Net cash provided by operating activities | $ | 52,574 | $ | 34,904 | $ | 17,670 | ||||||
Proceeds from payments on customer notes receivable | 137 | 137 | - | |||||||||
Software development and other expenditures | (15,439) | (9,852) | (5,587) | |||||||||
Purchases of property and equipment | (34,484) | (20,401) | (14,083) | |||||||||
Free Cash Flow | $ | 2,788 | $ | 4,788 | $ | (2,000) | ||||||
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SOURCE AGS
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