LAS VEGAS, Nov. 7, 2019 /PRNewswire/ -- AGS (NYSE: AGS)
("AGS", "us", "we" or the "Company") today reported operating
results for its third quarter ended September 30, 2019.
"Our third quarter performance was underscored by the sale of
nearly 1,400 EGMs - the most in our company's history - as well as
record performance in our Table Products segment. 92% of domestic
EGM unit sales were from our Orion family of cabinets,
including our latest addition, the Orion Upright, which
accounted for approximately 300 sold units in the quarter," said
David Lopez, President and Chief
Executive Officer. "After a successful G2E last month, we are
looking forward to launching our premium lease-only Orion Rise cabinet and Starwall LED
merchandising display, as well as our highly anticipated Orion
49C, Pax S card shuffler, and Bonus Spin Xtreme
progressive system. We believe this robust suite of products
will help drive growth in 2020 and beyond."
Summary of the
Three Months Ended September 30, 2019 and 2018
|
(In thousands,
except per-share and Adjusted EBITDA margin data)
|
|
|
|
Three Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
$
Change
|
|
|
%
Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM
|
|
$
|
75,299
|
|
|
$
|
71,784
|
|
|
$
|
3,515
|
|
|
|
4.9
|
%
|
Table
Products
|
|
|
2,861
|
|
|
|
2,052
|
|
|
|
809
|
|
|
|
39.4
|
%
|
Interactive
|
|
|
1,217
|
|
|
|
1,690
|
|
|
|
(473)
|
|
|
|
(28.0)
|
%
|
Total
revenues
|
|
$
|
79,377
|
|
|
$
|
75,526
|
|
|
$
|
3,851
|
|
|
|
5.1
|
%
|
Operating
income
|
|
$
|
5,579
|
|
|
$
|
10,110
|
|
|
$
|
(4,531)
|
|
|
|
(44.8)
|
%
|
Net (loss) income
attributable to PlayAGS, Inc.
|
|
$
|
(5,536)
|
|
|
$
|
4,347
|
|
|
$
|
(9,883)
|
|
|
|
(227.4)
|
%
|
(Loss) income per
share
|
|
$
|
(0.16)
|
|
|
$
|
0.12
|
|
|
$
|
(0.28)
|
|
|
|
(233.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM
|
|
$
|
35,825
|
|
|
$
|
34,026
|
|
|
$
|
1,799
|
|
|
|
5.3
|
%
|
Table
Products
|
|
|
1,409
|
|
|
|
428
|
|
|
|
981
|
|
|
|
229.2
|
%
|
Interactive
|
|
|
(447)
|
|
|
|
(877)
|
|
|
|
430
|
|
|
|
(49.0)
|
%
|
Total Adjusted
EBITDA(1)
|
|
$
|
36,787
|
|
|
$
|
33,577
|
|
|
$
|
3,210
|
|
|
|
9.6
|
%
|
Total Adjusted
EBITDA margin(2)
|
|
|
46.3
|
%
|
|
|
44.5
|
%
|
|
|
N/A
|
|
|
180 bps
|
|
Third Quarter 2019 Financial
Highlights
- Total revenue increased 5% to $79.4
million, driven by record EGM unit sales and increased
gaming operations revenue in our EGM and Table Products
segments.
- Gaming operations revenue, or recurring revenue, grew to
$52.5 million, or 4% year-over-year,
driven by an increase in our domestic and international EGM
installed base, and growth in our Table Products installed
base.
- EGM sold units increased 4%, to 1,391 compared to 1,332 in the
prior year led by sales of the Orion Portrait
and the successful launch of our new Orion Upright
cabinets.
- Table Products revenue increased 39% to $2.9 million, driven by increased progressive
table game placements and an increased
footprint(3) of the recently introduced Dex
S card shuffler.
- Net loss of $5.5 million
decreased year-over-year from net income of $4.3 million in the prior year due to
increases in non-cash depreciation and amortization as well as an
increase in tax expense compared to the prior year period.
- Total Adjusted EBITDA (non-GAAP)(1) increased 10% to
$36.8 million, driven by increased
revenue from our EGM and Table Products segments as well as reduced
operating costs in our Interactive social gaming business.
- Total Adjusted EBITDA margin (non-GAAP)(1) increased
to 46% in the third quarter of 2019 compared to 44% in the
prior year, driven by several different factors, most notably due
to improved operating performance of our Table Products and
Interactive segments.
(1)
Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures,
see non-GAAP reconciliation below.
|
(2) Basis points
("bps")
|
(3)
Footprint includes sold and leased units.
|
EGM
|
|
Three Months Ended
September 30, 2019 compared to Three Months
Ended September 30, 2018
|
|
(Amounts in
thousands, except unit data)
|
|
Three months
ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
$
Change
|
|
|
%
Change
|
|
EGM segment
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
48,854
|
|
|
$
|
47,109
|
|
|
$
|
1,745
|
|
|
|
3.7
|
%
|
Equipment
sales
|
|
|
26,445
|
|
|
|
24,675
|
|
|
|
1,770
|
|
|
|
7.2
|
%
|
Total EGM
revenues
|
|
$
|
75,299
|
|
|
$
|
71,784
|
|
|
$
|
3,515
|
|
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM Adjusted
EBITDA
|
|
$
|
35,825
|
|
|
$
|
34,026
|
|
|
$
|
1,799
|
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM unit
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VLT
|
|
|
517
|
|
|
|
1,217
|
|
|
|
(700)
|
|
|
|
(57.5)
|
%
|
Class II
|
|
|
12,355
|
|
|
|
11,477
|
|
|
|
878
|
|
|
|
7.7
|
%
|
Class III
|
|
|
5,852
|
|
|
|
3,374
|
|
|
|
2,478
|
|
|
|
73.4
|
%
|
Domestic installed
base, end of period
|
|
|
18,724
|
|
|
|
16,068
|
|
|
|
2,656
|
|
|
|
16.5
|
%
|
International
installed base, end of period
|
|
|
8,668
|
|
|
|
8,116
|
|
|
|
552
|
|
|
|
6.8
|
%
|
Total installed base,
end of period
|
|
|
27,392
|
|
|
|
24,184
|
|
|
|
3,208
|
|
|
|
13.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic revenue per
day
|
|
$
|
25.08
|
|
|
$
|
27.14
|
|
|
$
|
(2.06)
|
|
|
|
(7.6)
|
%
|
International revenue
per day
|
|
$
|
7.99
|
|
|
$
|
8.52
|
|
|
$
|
(0.53)
|
|
|
|
(6.2)
|
%
|
Total revenue per
day
|
|
$
|
19.68
|
|
|
$
|
20.95
|
|
|
$
|
(1.27)
|
|
|
|
(6.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic revenue per
day - excluding EGMs purchased from Integrity
|
|
$
|
26.55
|
|
|
$
|
27.14
|
|
|
$
|
(0.59)
|
|
|
|
(2.2)
|
%
|
Total revenue per day -
excluding EGMs purchased from Integrity
|
|
$
|
20.11
|
|
|
$
|
20.95
|
|
|
$
|
(0.84)
|
|
|
|
(4.0)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic EGM units
sold
|
|
|
1,350
|
|
|
|
1,332
|
|
|
|
18
|
|
|
|
1.4
|
%
|
International EGM
units sold
|
|
|
41
|
|
|
|
-
|
|
|
|
41
|
|
|
|
100.0
|
%
|
Total EGM units
sold
|
|
|
1,391
|
|
|
|
1,332
|
|
|
|
59
|
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic average sales
price
|
|
$
|
18,476
|
|
|
$
|
18,051
|
|
|
$
|
425
|
|
|
|
2.4
|
%
|
EGM Highlights
Domestic Gaming Operations
- Domestic EGM installed base grew by 2,656 units year-over-year,
driven by the acquisition of 2,500 EGMs from Integrity Gaming Corp.
("Integrity") and the placement of approximately 900 incremental
recurring units year-over-year. The prior year installed base
included approximately 700 VLT units that were purchased in an
end-of-lease buyout.(4)
- Sequentially, our domestic EGM installed base grew more than
300 units, driven by new casino openings.
- Domestic EGM revenue per day ("RPD") decreased 8% to
$25.08 compared to $27.14 in the prior year period driven by
incremental units in markets that yield lower RPD than our domestic
average. When excluding the impact of the EGMs purchased from
Integrity, we estimate that Domestic RPD was $26.55.
- Oklahoma RPD decreased 17% to $18.13 compared to $21.72 in the prior year driven by the inclusion
of EGMs purchased from Integrity and the continued product
performance previously identified. When normalized for the impact
of the EGMs purchased from Integrity, we estimate that Oklahoma RPD
was $18.96.
- Non-Oklahoma RPD increased 5% to $35.85 compared to $34.18 in the prior year period driven by
improved performance in markets such as Washington and California.(5)
International Gaming Operations
- International gaming operations revenue grew year-over-year due
to the addition of 552 incremental units placed with both existing
and new customers, predominantly in Mexico.
- International RPD decreased by $0.53, or 6%, as we grew our installed base in
new markets and properties in Mexico that have lower yields than our average
international RPD as well as initial placements in the Philippines.
Equipment Sales
- EGM equipment sales revenue increased 7%, to $26.4 million, driven by record EGM sales and
increased domestic average sales price ("ASP"). Record EGM sales of
1,391 units included 1,350 domestic units, of which nearly 65% were
sold into early-entry markets such as Canada, Nevada, Pennsylvania, and Michigan.
- ASP for EGMs increased 2% to $18,476 due to a greater mix of higher-priced
Orion family cabinets.
Product Highlights
- The new Orion Upright footprint(6) grew to
more than 325 units and accounted for 22% of sales in the quarter
with placements in several early-entry markets such as Arizona, Canada, New
Mexico, Michigan and
Oregon as well as ramping markets
such as Florida and California. Placements were driven by our
proven legacy games such as Golden
Wins and new games such as Imperial Luck.
- Orion Portrait footprint(6) increased to
nearly 8,000 units, up 87% year-over-year and accounted for 57% of
sales in the quarter.
- Orion Slant footprint(6) increased to
nearly 2,500 units and accounted for 13% of sales in the
quarter.
(4) The VLT units were
not included in our sold unit count for either period (420 in the
fourth quarter of 2018, 130 in the first quarter of 2019, and 150
in the second quarter of 2019).
|
(5) Excludes the positive
impact of the removal of 700 VLT units and 500 Texas units (third
quarter of 2018), both lower yielding than our domestic
average.
|
(6) Footprint includes sold
and leased units.
|
Table
Products
|
|
Three Months Ended
September 30, 2019 compared to Three Months Ended
September 30, 2018
|
|
(Amounts in
thousands, except unit data)
|
|
Three months
ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
$
Change
|
|
|
%
Change
|
|
Table Products
segment revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
2,451
|
|
|
$
|
1,902
|
|
|
$
|
549
|
|
|
|
28.9
|
%
|
Equipment
sales
|
|
|
410
|
|
|
|
150
|
|
|
|
260
|
|
|
|
173.3
|
%
|
Total Table
Products revenues
|
|
$
|
2,861
|
|
|
$
|
2,052
|
|
|
$
|
809
|
|
|
|
39.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
Adjusted EBITDA
|
|
$
|
1,409
|
|
|
$
|
428
|
|
|
$
|
981
|
|
|
|
229.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
unit information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
installed base, end of period
|
|
|
3,601
|
|
|
|
3,065
|
|
|
|
536
|
|
|
|
17.5
|
%
|
Average monthly lease
price
|
|
$
|
232
|
|
|
$
|
214
|
|
|
$
|
18
|
|
|
|
8.4
|
%
|
Table Products Highlights
- Total Table Products revenue increased 39% to $2.9 million, driven by record gaming operations
revenue due to an increase of 536 units year-over-year and record
equipment sales.
- Gaming operations revenue increased $0.5
million, or 29%, driven by the continued growth of our
progressive offerings; Bonus Spin, Royal 9 and Super 4,
Buster Blackjack side bets, our newly introduced Dex S
card shuffler, and our Criss Cross Poker premium game
offering.
- Record equipment sales revenue increased $0.3 million, or 173%, due to the successful
launch of our new Dex S card shuffler and sales of our table
signage.
- Installed base of table game progressives reached more than
1,200 units, up 37% year-over-year, contributing to the 8% increase
in average monthly lease price.
- Installed base of side bets reached nearly 2,100 units in the
quarter.
- Continued to convert competitor progressives to our own STAX
Progressives in the quarter, which helped drive the Adjusted
EBITDA increase.
- We expect that momentum and demand for our new Dex
S card shuffler will continue to grow, with more than 175
shufflers currently installed in 13 markets across the U.S.
Interactive
|
|
Three Months Ended
September 30, 2019 compared to Three
Months Ended September 30, 2018
|
|
(Amounts in
thousands)
|
|
Three months
ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
$
Change
|
|
|
%
Change
|
|
Interactive
segment revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social gaming
revenue
|
|
$
|
712
|
|
|
$
|
1,446
|
|
|
$
|
(734)
|
|
|
|
(50.8)
|
%
|
iGaming
revenue
|
|
|
505
|
|
|
|
244
|
|
|
|
261
|
|
|
|
107.0
|
%
|
Total Interactive
revenue
|
|
$
|
1,217
|
|
|
$
|
1,690
|
|
|
$
|
(473)
|
|
|
|
(28.0)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interactive
Adjusted EBITDA
|
|
$
|
(447)
|
|
|
$
|
(877)
|
|
|
$
|
430
|
|
|
|
(49.0)
|
%
|
Interactive Highlights
- The increase in Interactive Adjusted EBITDA is primarily due to
increases in iGaming revenue and decreased operating costs. iGaming
Adjusted EBITDA loss was $0.4 million
compared to $0.8 million in the prior
year period.
- iGaming revenue increased $0.3
million, driven by the continued placement of our proven
land-based EGM content in the European RMG market as well as our
recent launch into the New Jersey RMG marketplace.
- We successfully launched our iGaming platform in New Jersey with Rush Street Interactive this
quarter with titles such as Golden
Wins, Jade Wins,
Longhorn Jackpots, and our hit title Rakin'
Bacon!
- We now have more than 28 suppliers live across the iGaming
platform with eight new suppliers launched in Q3 2019.
- Social gaming revenue decreased $0.7
million while Interactive Adjusted EBITDA increased
$0.4 million compared to the prior
year as a result of strategically optimizing our user acquisition
costs in our social business.
Balance Sheet Review
As of September 30, 2019, we had
$11.7 million in cash and cash
equivalents compared to $70.7 million
at December 31, 2018. Total net debt,
which is the principal amount of debt outstanding less cash and
cash equivalents as of September 30,
2019, was approximately $523.3
million compared to $468.1
million at December 31, 2018.
Net debt as of September 30,
2019 increased by $55.2 million
compared to December 31, 2018,
primarily driven by the acquisition of Integrity. Our Adjusted
Total Net Debt Leverage Ratio increased from 3.4 times at
December 31, 2018, to 3.6 times at
September 30, 2019, see Total Net
Debt Leverage Ratio Reconciliation
below.(7) Capital expenditures increased
$3.5 million to $19.6 million in the third quarter, compared to
$16.1 million in the prior year
period due to new domestic and international recurring EGM units
placed on lease driven by new openings and expansions, and an
increase in recurring Table Products units.
During the current quarter, we repurchased 103,385 shares of our
common stock at an average price of $10.96 per share for an aggregate amount of
$1.1 million. Approximately
$48.9 million remained available
under the $50 million share
repurchase program as of September 30,
2019. All shares repurchased under the Company's program
have been retired.
2019 Outlook
Based on our year-to-date progress, we continue to expect to
generate total adjusted EBITDA of $145 - $150 million
in 2019, representing growth of approximately 6% - 10% compared to
the prior year period. We continue to expect 2019 capital
expenditures to be in the range of $65 - $69 million,
compared to $66.2 million in 2018,
reflecting an expectation for an increase in our EGM installed
base.
(Amounts in
millions)
|
2018 Actual
Results
|
|
2019
Guidance
|
|
Growth
Percentage
|
Adjusted
EBITDA
|
$136.2
|
|
$145 -
$150
|
|
6% - 10%
|
Capex
|
$66.2
|
|
$65 - $69
|
|
(2)% - 4%
|
|
(7) Total Adjusted
EBITDA, total net debt leverage ratio, and adjusted total net debt
leverage ratio are non-GAAP measures, see non-GAAP reconciliation
below.
|
Conference Call and Webcast
On November 7, 2019, at
5 p.m. EST, AGS leadership will host
a conference call to present the third
quarter 2019 results. Listeners may access a live webcast
of the conference call, along with accompanying slides, at AGS'
Investor Relations website at http://investors.playags.com/. A
replay of the webcast will be available on the website following
the live event. To listen by telephone, the U.S./Canada toll-free call-in number is +1 (844)
746-0637 and the call-in number for participants outside the
U.S./Canada is +1 (412) 317-5261.
The conference ID/confirmation code is "AGS Q3 2019 Earnings
Call".
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 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 Media & Investor Contacts:
Julia Boguslawski, Chief
Marketing Officer and Executive Vice President of Investor
Relations
jboguslawski@playags.com
Steven Kopjo, Director of
Investor Relations
skopjo@playags.com
©2019 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 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 on March 5, 2019. 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,
|
|
|
|
2019
|
|
|
2018
|
|
Assets
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
11,733
|
|
|
$
|
70,726
|
|
Restricted
cash
|
|
|
20
|
|
|
|
78
|
|
Accounts receivable,
net of allowance of $901 and $855 respectively
|
|
|
58,149
|
|
|
|
44,704
|
|
Inventories
|
|
|
30,264
|
|
|
|
27,438
|
|
Prepaid
expenses
|
|
|
4,782
|
|
|
|
3,566
|
|
Deposits and
other
|
|
|
7,326
|
|
|
|
4,231
|
|
Total current
assets
|
|
|
112,274
|
|
|
|
150,743
|
|
Property and
equipment, net
|
|
|
104,880
|
|
|
|
91,547
|
|
Goodwill
|
|
|
286,203
|
|
|
|
277,263
|
|
Intangible
assets
|
|
|
237,794
|
|
|
|
196,898
|
|
Deferred tax
asset
|
|
|
2,415
|
|
|
|
2,544
|
|
Operating
leases
|
|
|
11,940
|
|
|
|
-
|
|
Other
assets
|
|
|
4,438
|
|
|
|
12,347
|
|
Total
assets
|
|
$
|
759,944
|
|
|
$
|
731,342
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
18,510
|
|
|
$
|
14,821
|
|
Accrued
liabilities
|
|
|
33,812
|
|
|
|
26,659
|
|
Current maturities of
long-term debt
|
|
|
6,026
|
|
|
|
5,959
|
|
Total current
liabilities
|
|
|
58,348
|
|
|
|
47,439
|
|
Long-term
debt
|
|
|
519,521
|
|
|
|
521,924
|
|
Deferred tax
liability - noncurrent
|
|
|
2,195
|
|
|
|
1,443
|
|
Operating lease
liability, long-term
|
|
|
11,823
|
|
|
|
-
|
|
Other long-term
liabilities
|
|
|
40,970
|
|
|
|
24,732
|
|
Total
liabilities
|
|
|
632,857
|
|
|
|
595,538
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Preferred stock at
$0.01 par value; 50,000,000 shares authorized, no shares issued and
outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock at $0.01
par value; 450,000,000 shares authorized at September 30, 2019 and
at December 31, 2018; and 35,405,594, and 35,353,296 shares issued
and outstanding at September 30, 2019 and December 31, 2018,
respectively.
|
|
|
354
|
|
|
|
353
|
|
Additional paid-in
capital
|
|
|
367,620
|
|
|
|
361,628
|
|
Accumulated
deficit
|
|
|
(236,710)
|
|
|
|
(222,403)
|
|
Accumulated other
comprehensive loss
|
|
|
(4,177)
|
|
|
|
(3,774)
|
|
Total stockholders'
equity
|
|
|
127,087
|
|
|
|
135,804
|
|
Total liabilities
and stockholders' equity
|
|
$
|
759,944
|
|
|
$
|
731,342
|
|
PLAYAGS,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
(amounts in
thousands, except per share data)
|
|
|
|
Three months ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Revenues
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
52,522
|
|
|
$
|
50,701
|
|
Equipment
sales
|
|
|
26,855
|
|
|
|
24,825
|
|
Total
revenues
|
|
|
79,377
|
|
|
|
75,526
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of gaming
operations(8)
|
|
|
10,170
|
|
|
|
10,494
|
|
Cost of equipment
sales(8)
|
|
|
13,479
|
|
|
|
12,109
|
|
Selling, general and
administrative
|
|
|
16,861
|
|
|
|
15,284
|
|
Research and
development
|
|
|
8,671
|
|
|
|
7,894
|
|
Write-downs and other
charges
|
|
|
807
|
|
|
|
667
|
|
Depreciation and
amortization
|
|
|
23,810
|
|
|
|
18,968
|
|
Total operating
expenses
|
|
|
73,798
|
|
|
|
65,416
|
|
Income from
operations
|
|
|
5,579
|
|
|
|
10,110
|
|
Other expense
(income)
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
9,320
|
|
|
|
8,956
|
|
Interest
income
|
|
|
(42)
|
|
|
|
(89)
|
|
Other (income)
expense
|
|
|
(106)
|
|
|
|
434
|
|
(Loss) income
before income taxes
|
|
|
(3,593)
|
|
|
|
809
|
|
Income tax benefit
(expense)
|
|
|
(1,926)
|
|
|
|
3,538
|
|
Net (loss)
income
|
|
|
(5,519)
|
|
|
|
4,347
|
|
Less: Net income
attributable to non-controlling interests
|
|
|
(17)
|
|
|
|
-
|
|
Net (loss) income
attributable to PlayAGS, Inc.
|
|
|
(5,536)
|
|
|
|
4,347
|
|
Foreign currency
translation adjustment
|
|
|
(1,273)
|
|
|
|
1,636
|
|
Total
comprehensive (loss) income
|
|
$
|
(6,809)
|
|
|
$
|
5,983
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
(loss) income per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.16)
|
|
|
$
|
0.12
|
|
Diluted
|
|
$
|
(0.16)
|
|
|
$
|
0.12
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35,447
|
|
|
|
35,305
|
|
Diluted
|
|
|
35,447
|
|
|
|
36,313
|
|
|
(8) Exclusive of depreciation and
amortization.
|
PLAYAGS,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
|
|
|
|
Nine months ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(12,944)
|
|
|
$
|
(10,501)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
69,002
|
|
|
|
57,784
|
|
Accretion of contract
rights under development agreements and placement fees
|
|
|
4,550
|
|
|
|
3,412
|
|
Amortization of
deferred loan costs and discount
|
|
|
1,426
|
|
|
|
1,388
|
|
Payment-in-kind
interest payments
|
|
|
-
|
|
|
|
(37,624)
|
|
Write-off of deferred
loan cost and discount
|
|
|
-
|
|
|
|
3,410
|
|
Stock-based
compensation expense
|
|
|
5,309
|
|
|
|
9,167
|
|
Provision (benefit)
for bad debts
|
|
|
183
|
|
|
|
(198)
|
|
Loss on disposition of
assets
|
|
|
1,015
|
|
|
|
1,383
|
|
Impairment of
assets
|
|
|
5,343
|
|
|
|
1,199
|
|
Fair value adjustment
of contingent consideration
|
|
|
501
|
|
|
|
700
|
|
Provision (Benefit)
for deferred income tax
|
|
|
873
|
|
|
|
(205)
|
|
Changes in assets and
liabilities that relate to operations:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(12,136)
|
|
|
|
(12,277)
|
|
Inventories
|
|
|
961
|
|
|
|
(3,173)
|
|
Prepaid
expenses
|
|
|
(1,098)
|
|
|
|
(1,958)
|
|
Deposits and
other
|
|
|
(3,081)
|
|
|
|
(626)
|
|
Other assets,
non-current
|
|
|
9,024
|
|
|
|
13,574
|
|
Accounts payable and
accrued liabilities
|
|
|
(6,447)
|
|
|
|
(12,135)
|
|
Net cash provided
by operating activities
|
|
|
62,481
|
|
|
|
13,320
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
Business acquisitions,
net of cash acquired
|
|
|
(54,935)
|
|
|
|
(4,452)
|
|
Purchase of intangible
assets
|
|
|
(4,926)
|
|
|
|
(931)
|
|
Software development
and other expenditures
|
|
|
(9,957)
|
|
|
|
(8,794)
|
|
Proceeds from
disposition of assets
|
|
|
161
|
|
|
|
21
|
|
Purchases of property
and equipment
|
|
|
(38,760)
|
|
|
|
(34,457)
|
|
Net used in
investing activities
|
|
|
(108,417)
|
|
|
|
(48,613)
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
Repayment of PIK
notes
|
|
|
-
|
|
|
|
(115,000)
|
|
Repayment of senior
secured credit facilities
|
|
|
(4,040)
|
|
|
|
(3,864)
|
|
Payment of financed
placement fee obligations
|
|
|
(6,058)
|
|
|
|
(2,688)
|
|
Payments of previous
acquisition obligation
|
|
|
(1,227)
|
|
|
|
-
|
|
Payments on equipment
long-term note payable and capital leases
|
|
|
(1,043)
|
|
|
|
(2,108)
|
|
Proceeds from issuance
of common stock
|
|
|
-
|
|
|
|
176,341
|
|
Initial public
offering cost
|
|
|
-
|
|
|
|
(4,160)
|
|
Repurchase of common
stock
|
|
|
(1,133)
|
|
|
|
-
|
|
Proceeds from stock
option exercise
|
|
|
685
|
|
|
|
731
|
|
Distributions to
non-controlling interest owners
|
|
|
(302)
|
|
|
|
-
|
|
Net cash (used in)
provided by financing activities
|
|
|
(13,118)
|
|
|
|
49,252
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
|
3
|
|
|
|
4
|
|
(Decrease) increase in
cash and cash equivalents
|
|
|
(59,051)
|
|
|
|
13,963
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
|
|
70,804
|
|
|
|
19,342
|
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
11,753
|
|
|
$
|
33,305
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
|
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
|
|
|
|
|
|
Intangible assets
obtained under placement fee arrangements
|
|
$
|
39,198
|
|
|
$
|
931
|
|
Leased assets obtained
in exchange for new finance lease liabilities
|
|
$
|
882
|
|
|
$
|
307
|
|
Leased assets obtained
in exchange for new operating lease liabilities
|
|
$
|
13,048
|
|
|
$
|
-
|
|
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, adjusted 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, operating income, 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 loss, (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
|
|
(Amounts in
thousands)
|
|
Three months ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Net (loss) income
attributable to PlayAGS, Inc.
|
|
$
|
(5,536)
|
|
|
$
|
4,347
|
|
Income tax (benefit)
expense
|
|
|
1,926
|
|
|
|
(3,538)
|
|
Depreciation and
amortization
|
|
|
23,810
|
|
|
|
18,968
|
|
Other expense
(income)
|
|
|
(106)
|
|
|
|
434
|
|
Interest
income
|
|
|
(42)
|
|
|
|
(89)
|
|
Interest
expense
|
|
|
9,320
|
|
|
|
8,956
|
|
Write-downs and
other(9)
|
|
|
807
|
|
|
|
667
|
|
Other
adjustments(10)
|
|
|
(3)
|
|
|
|
893
|
|
Other non-cash
charges(11)
|
|
|
2,426
|
|
|
|
1,700
|
|
Legal and litigation
expenses including settlement payments(12)
|
|
|
1,745
|
|
|
|
(45)
|
|
Acquisition and
integration related costs including restructuring &
severance(13)
|
|
|
481
|
|
|
|
746
|
|
Non-cash stock
compensation
|
|
|
1,959
|
|
|
|
538
|
|
Adjusted
EBITDA
|
|
$
|
36,787
|
|
|
$
|
33,577
|
|
|
(Amounts in
thousands, except Adjusted EBITDA margin)
|
|
Three months ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Total
revenues
|
|
$
|
79,377
|
|
|
$
|
75,526
|
|
Adjusted
EBITDA
|
|
$
|
36,787
|
|
|
$
|
33,577
|
|
Adjusted EBITDA
margin
|
|
|
46.3
|
%
|
|
|
44.5
|
%
|
|
(9) Write-downs and other
includes items related to loss on disposal or impairment of
long-lived assets, fair value adjustments to contingent
consideration and acquisition costs.
|
(10)
Other adjustments are primarily composed of professional
fees incurred for projects, corporate and public filing compliance,
contract cancellation fees and other transaction costs deemed to be
non-operating in nature.
|
(11) 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.
|
(12) Legal and litigation expenses
including settlement payments consist of payments to law firms
and settlements for matters that are outside the normal course of
business.
|
(13) Acquisition and integration
costs primarily relate to costs incurred after the purchase of
businesses, such as the purchase of Gameiom and Integrity, to
integrate operations and obtain costs synergies. Restructuring and
severance costs 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.
|
Total Net Debt Leverage Ratio Reconciliation
The following table presents a reconciliation of total net debt
and total net debt leverage ratio and adjusted total net debt
leverage ratio:
(Amounts in
thousands, except net debt leverage ratio)
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Total debt
|
|
$
|
535,037
|
|
|
$
|
538,799
|
|
Less: Cash and cash
equivalents
|
|
|
11,733
|
|
|
|
70,726
|
|
Total net
debt
|
|
$
|
523,304
|
|
|
$
|
468,073
|
|
LTM Adjusted
EBITDA
|
|
$
|
140,345
|
|
|
$
|
136,206
|
|
Total net debt
leverage ratio
|
|
|
3.7
|
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
Integrity LTM
Adjusted EBITDA(14)
|
|
$
|
3,880
|
|
|
$
|
—
|
|
Post-Integrity LTM
Adjusted EBITDA
|
|
$
|
144,225
|
|
|
$
|
136,206
|
|
Adjusted total net
debt leverage ratio
|
|
|
3.6
|
|
|
|
3.4
|
|
|
(14) Represents the trailing twelve
month estimated impact of Integrity's Adjusted EBITDA, adjusted for
the time period for which Integrity's financial measures are
included in AGS's results.
|
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 less cash outlays related to capital expenditures and
payments of in-kind interest related to the redemption of our
HoldCo PIK notes. 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 from 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
September
30, 2019
|
|
|
Six months
ended June
30, 2019
|
|
|
Three
months
ended
September
30, 2019
|
|
Net cash provided by
operating activities
|
|
$
|
62,481
|
|
|
$
|
37,675
|
|
|
$
|
24,806
|
|
Purchase of
intangible assets
|
|
|
(4,926)
|
|
|
|
(3,950)
|
|
|
|
(976)
|
|
Software development
and other expenditures
|
|
|
(9,957)
|
|
|
|
(6,299)
|
|
|
|
(3,658)
|
|
Purchases of property
and equipment
|
|
|
(38,760)
|
|
|
|
(23,819)
|
|
|
|
(14,941)
|
|
Free Cash
Flow
|
|
$
|
8,838
|
|
|
$
|
3,607
|
|
|
$
|
5,231
|
|
|
(amounts in
thousands)
|
|
Nine
months
ended
September
30, 2018
|
|
|
Six months
ended June
30, 2018
|
|
|
Three
months
ended
September
30, 2018
|
|
Net cash provided
(used) by operating activities
|
|
$
|
13,320
|
|
|
$
|
(10,319)
|
|
|
$
|
23,639
|
|
Purchase of
intangible assets
|
|
|
(931)
|
|
|
|
(594)
|
|
|
|
(337)
|
|
Software development
and other expenditures
|
|
|
(8,794)
|
|
|
|
(5,168)
|
|
|
|
(3,626)
|
|
Purchases of property
and equipment
|
|
|
(34,457)
|
|
|
|
(22,314)
|
|
|
|
(12,143)
|
|
Payments-in-kind
interest payments
|
|
|
37,624
|
|
|
|
37,624
|
|
|
|
-
|
|
Free Cash
Flow
|
|
$
|
6,762
|
|
|
$
|
(771)
|
|
|
$
|
7,533
|
|
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SOURCE AGS