LAS VEGAS, Nov. 5, 2020 /PRNewswire/ -- 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 financial results for
the third quarter ended September
30, 2020.
AGS President and Chief Executive Officer David Lopez said, "I am extremely proud of how
our team came together to offset the challenges brought upon by the
COVID-19 pandemic to deliver better than expected third quarter
2020 financial results. Our employees' experiences throughout the
pandemic will only help to strengthen their collective resolve, in
turn propelling AGS to emerge a stronger and more nimble
company as the world gradually returns to normal."
Lopez added, "I continue to believe AGS has its strongest
pipeline of new product and game themes in the Company's history,
positioning our EGM segment for greater success in the quarters
ahead. I am particularly enthused about the prospects for our
domestic EGM recurring revenue business, supported by the continued
outperformance of our initial Starwall installs, and believe
improved hardware and game content position us to command our fair
share of future unit placements. Additionally, I remain encouraged
by the strategic growth opportunities emerging within our
table games segment and look for our interactive performance
to continue to improve as additional states contemplate the
introduction of real money online gaming legislation."
AGS Chief Financial Officer Kimo
Akiona added, "Our third quarter financial performance
improved dramatically compared to the 2020 second quarter,
with revenues, net loss, and adjusted EBITDA
improving sharply on a sequential basis. Importantly, we were
free cash flow positive in the quarter, allowing us to report a
strong liquidity position of $113.2
million at quarter end. Given our better-than-expected third
quarter financial performance and growing comfort with our
resulting liquidity position, we elected to fully repay the
$30 million outstanding on our
revolving credit facility, subsequent to quarter end."
Summary of
the Three Months Ended September 30,
2020 and 2019
(In thousands,
except per-share and Adjusted EBITDA margin data)
|
|
|
|
Three Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM
|
|
$
|
45,081
|
|
|
$
|
75,299
|
|
|
$
|
(30,218)
|
|
|
|
(40.1)
|
%
|
Table
Products
|
|
|
2,262
|
|
|
|
2,861
|
|
|
|
(599)
|
|
|
|
(20.9)
|
%
|
Interactive
|
|
|
1,941
|
|
|
|
1,217
|
|
|
|
724
|
|
|
|
59.5
|
%
|
Total
revenues
|
|
$
|
49,284
|
|
|
$
|
79,377
|
|
|
$
|
(30,093)
|
|
|
|
(37.9)
|
%
|
(Loss) income from
operations
|
|
$
|
(12,750)
|
|
|
$
|
(3,593)
|
|
|
$
|
(9,157)
|
|
|
|
254.9
|
%
|
Net loss
attributable to PlayAGS, Inc.
|
|
$
|
(11,078)
|
|
|
$
|
(5,536)
|
|
|
$
|
(5,542)
|
|
|
|
100.1
|
%
|
Loss per
share
|
|
$
|
(0.31)
|
|
|
$
|
(0.16)
|
|
|
$
|
(0.15)
|
|
|
|
99.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM
|
|
$
|
25,000
|
|
|
$
|
35,825
|
|
|
$
|
(10,825)
|
|
|
|
(30.2)
|
%
|
Table
Products
|
|
|
1,272
|
|
|
|
1,409
|
|
|
|
(137)
|
|
|
|
(9.7)
|
%
|
Interactive
|
|
|
750
|
|
|
|
(447)
|
|
|
|
1,197
|
|
|
|
(267.8)
|
%
|
Total Adjusted
EBITDA(1)
|
|
$
|
27,022
|
|
|
$
|
36,787
|
|
|
$
|
(9,765)
|
|
|
|
(26.5)
|
%
|
Total Adjusted
EBITDA margin(2)
|
|
|
54.8
|
%
|
|
|
46.3
|
%
|
|
|
N/A
|
|
|
848 bps
|
|
Third Quarter 2020 Financial
Results
- During March and April and continuing through mid-to-late-May,
nearly all our customers closed their operations due to business
disruption caused by the global spread of COVID-19 and the actions
taken by governments and businesses to contain the virus. Though
less impactful than in the second quarter of 2020, COVID-19-related
measures continued to impact our customers' businesses throughout
the third quarter, pacing the majority of the year-over-year
declines in the metrics presented above, including revenues, (loss)
income from operations, net loss, and Adjusted EBITDA.
- By September 30, nearly all our
customers' casinos in the United
States and Canada resumed
limited operations. In Mexico,
approximately 50% of our customers' properties were reopened with
capacity restrictions as of September 30,
2020.
- Total revenue reached $49.3
million compared to $16.8
million in the 2020 second quarter. Revenue decreased 37.9%
year-over-year, with the decline predominantly attributable to the
pandemic's negative impact on our customer's operations and,
subsequently, our gaming operations revenue and EGM unit
sales.
- Gaming operations revenue, or recurring revenue, totaled
$36.3 million compared to
$10.2 million in the 2020 second
quarter. Recurring revenue decreased 30.9% year-over-year as a
portion of our leased EGMs and Table Products were out of service
as a result of COVID-related casino closures and capacity
limitations. A year-over-year increase in our Interactive segment
revenue helped to partially offset the declines in our other
reporting segments.
- Our 2020 third quarter net loss of $11.1
million improved dramatically from the $42.6 million net loss reported in the 2020
second quarter. As a result of management's actions taken to reduce
spending amid COVID-19, including employee furloughs, workforce
reductions, and salary decreases, coupled with a strategic focus to
streamline expenses, primarily in professional fees, sales and
marketing activities, and, to a lesser extent, modest delays in
development expenses, we were able to partially offset the flow
through of our year-over-year revenue decline to minimize our
reported net loss.
- Total Adjusted EBITDA (non-GAAP)(1) increased to $27.0
million from a $1.2 million
loss in the 2020 second quarter. Adjusted EBITDA declined as
compared to the $36.8 million
delivered in the prior-year period, as year-over-year decreases in
our EGM and Table Products segments were partially offset by
growth in our Interactive segment.
- Total Adjusted EBITDA margin (non-GAAP)(1) increased to 54.8%
in the third quarter of 2020 compared to 46.3% in
the prior year, reflecting a greater mix of higher-margin lease
revenues, the sale of previously leased, lower-yielding
Oklahoma units to distributors
with modest offsetting costs, and management's actions to reduce
operating expenses and other costs in response to the COVID-19
crisis.
(1) Adjusted
EBITDA and Adjusted EBITDA margin are non-GAAP measures, see
non-GAAP reconciliation below.
|
(2) Basis
points ("bps")
|
EGM
|
|
Three Months Ended
September 30, 2020 compared to Three Months Ended
September 30, 2019
|
|
(Amounts in
thousands, except unit data)
|
|
Three Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
EGM segment
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
32,188
|
|
|
$
|
48,854
|
|
|
$
|
(16,666)
|
|
|
|
(34.1)
|
%
|
Equipment
sales
|
|
|
12,893
|
|
|
|
26,445
|
|
|
|
(13,552)
|
|
|
|
(51.2)
|
%
|
Total EGM
revenues
|
|
$
|
45,081
|
|
|
$
|
75,299
|
|
|
$
|
(30,218)
|
|
|
|
(40.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM Adjusted
EBITDA
|
|
$
|
25,000
|
|
|
$
|
35,825
|
|
|
$
|
(10,825)
|
|
|
|
(30.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM unit
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VLT
|
|
|
512
|
|
|
|
517
|
|
|
|
(5)
|
|
|
|
(1.0)
|
%
|
Class II
|
|
|
11,887
|
|
|
|
12,355
|
|
|
|
(468)
|
|
|
|
(3.8)
|
%
|
Class III
|
|
|
4,426
|
|
|
|
5,852
|
|
|
|
(1,426)
|
|
|
|
(24.4)
|
%
|
Domestic installed
base, end of period
|
|
|
16,825
|
|
|
|
18,724
|
|
|
|
(1,899)
|
|
|
|
(10.1)
|
%
|
International
installed base, end of period
|
|
|
8,030
|
|
|
|
8,668
|
|
|
|
(638)
|
|
|
|
(7.4)
|
%
|
Total installed base,
end of period
|
|
|
24,855
|
|
|
|
27,392
|
|
|
|
(2,537)
|
|
|
|
(9.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installed base -
Oklahoma
|
|
|
9,063
|
|
|
|
10,503
|
|
|
|
(1,440)
|
|
|
|
(13.7)
|
%
|
Installed base -
non-Oklahoma
|
|
|
7,762
|
|
|
|
8,221
|
|
|
|
(459)
|
|
|
|
(5.6)
|
%
|
Domestic installed
base, end of period
|
|
|
16,825
|
|
|
|
18,724
|
|
|
|
(1,899)
|
|
|
|
(10.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic revenue per
day
|
|
$
|
20.81
|
|
|
$
|
25.08
|
|
|
$
|
(4.27)
|
|
|
|
(17.0)
|
%
|
International revenue
per day
|
|
$
|
0.78
|
|
|
$
|
7.99
|
|
|
$
|
(7.21)
|
|
|
|
(90.2)
|
%
|
Total revenue per
day
|
|
$
|
14.50
|
|
|
$
|
19.68
|
|
|
$
|
(5.18)
|
|
|
|
(26.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic EGM unit
sales components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino opening and
expansion units
|
|
|
117
|
|
|
|
348
|
|
|
|
(231)
|
|
|
|
(66.4)
|
%
|
Other
|
|
|
270
|
|
|
|
1,002
|
|
|
|
(732)
|
|
|
|
(73.1)
|
%
|
Total Domestic EGM
units sold
|
|
|
387
|
|
|
|
1,350
|
|
|
|
(963)
|
|
|
|
(71.3)
|
%
|
International EGM
units sold
|
|
|
-
|
|
|
|
41
|
|
|
|
(41)
|
|
|
|
(100.0)
|
%
|
Total EGM units
sold
|
|
|
387
|
|
|
|
1,391
|
|
|
|
(1,004)
|
|
|
|
(72.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic average sales
price
|
|
$
|
18,190
|
|
|
$
|
18,476
|
|
|
$
|
(286)
|
|
|
|
(1.5)
|
%
|
EGM Quarterly Results
Domestic Gaming Operations(3)
- Domestic gaming operations revenue decreased $10.9 million year-over-year to $31.6 million, driven by disruptions in lease
revenue from EGMs that were not active during the period and, to a
lesser extent, a decline in our installed base compared to the
prior year period.
- As of September 30, 2020, nearly
all our customers' properties in the
United States and Canada
were reopened, with most operating under some type of capacity
limitation. We estimate that more than 14,500, or approximately
87%, of our domestic EGMs were active at the end of the 2020 third
quarter.
- Domestic EGM installed base decreased by approximately 1,900
units year-over-year, primarily due to the sale of 476 previously
leased, lower-yielding Oklahoma
units to distributors in the current period and 891 in previous
periods(4). Additionally, several of our customers reconfigured
their slot floors in response to COVID-19 and, as a result, removed
nearly 350 EGMs from our domestic installed base in the 2020 third
quarter.
- Domestic EGM revenue per day ("RPD") decreased to $20.81 compared to $25.08 in the prior year period, reflecting
the impact of EGMs that were not active in the quarter and
thus did not contribute to EGM revenue.
- Excluding EGMs that were not active during the period,
Domestic EGM RPD increased to approximately $29, supported by strong play levels, which
we believe were bolstered by pent-up demand, a resilient core
gambling customer, and limited supply of active EGMs.
International Gaming Operations
- International gaming operations revenue decreased to
$0.6 million in the current year
period compared to $6.4 million in
the prior year period as most of our customers' casinos in
Mexico and the Philippines were closed at the
commencement of the quarter.
- Several casinos reopened throughout the quarter and as of
September 30, 2020, nearly half of
our customers' properties were open in Mexico, which accounts for approximately 4,800
EGMs in our international installed base. We estimate that
approximately 2,500 of these EGMs were active at the end of the
quarter as the casinos in Mexico
are required to follow strict protocols that include deactivating
adjacent machines and cleaning machines after each is
played.
- International installed base decreased 638 units year-over-year
as a result of permanent casino closures in Mexico and the sale of previously leased
machines in the last 12 months.
Equipment Sales
- EGM units sold decreased to 387 units in the third quarter,
primarily attributable to business disruptions related to COVID-19
as noted above and reduced customer budgets for EGM purchases.
- Domestic ASP for EGMs remained stable at $18,190 compared to $18,476 in the
prior year period.
- We sold units into 11 U.S. states and two Canadian provinces,
with Pennsylvania, British Columbia, and California emerging as our top three sales
markets.
- The Orion family of cabinets accounted for 95% of units
shipped in the quarter.
- EGM equipment sales revenue benefited from the sale of 476
previously leased, lower-yielding Oklahoma units to distributors(4).
Product Highlights
- Installed an additional 45 seats of our new premium, lease-only
Orion Starwall immersive video cabinet, increasing
our installed base to over 50 seats at quarter end. Starwall
games are performing well above house average, further stimulating
operators' interest in the product.
- Installed over 85 Orion Curve cabinets in the quarter,
increasing our total footprint to over 150 units as of September 30, 2020.
- Ultimate Choice Jackpot and Imperial 88 families
of games are performing well above house average, reflecting
encouraging initial returns on our unwavering commitment to
consistently invest in R&D.
(3) "Domestic" includes both the United
States and Canada.
|
(4) The 476
previously leased units sold to distributors were not included
in our sold unit count or ASP for the current period.
|
Table
Products
|
|
Three Months Ended
September 30, 2020 compared to Three Months Ended
September 30, 2019
|
|
(Amounts in
thousands, except unit data)
|
|
Three Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
Table Products
segment revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
2,170
|
|
|
$
|
2,451
|
|
|
$
|
(281)
|
|
|
|
(11.5)
|
%
|
Equipment
sales
|
|
|
92
|
|
|
|
410
|
|
|
$
|
(318)
|
|
|
|
(77.6)
|
%
|
Total Table
Products revenues
|
|
$
|
2,262
|
|
|
$
|
2,861
|
|
|
$
|
(599)
|
|
|
|
(20.9)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
Adjusted EBITDA
|
|
$
|
1,272
|
|
|
$
|
1,409
|
|
|
$
|
(137)
|
|
|
|
(9.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
unit information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
installed base, end of period
|
|
|
4,012
|
|
|
|
3,601
|
|
|
|
411
|
|
|
|
11.4
|
%
|
Average monthly lease
price
|
|
$
|
169
|
|
|
$
|
232
|
|
|
$
|
(63)
|
|
|
|
(27.2)
|
%
|
Table Products Quarterly Results
- Table Products gaming operations revenue totaled $2.2 million compared to $2.5 million in the prior year's quarter.
Capacity limitations and other restrictions at casinos to help
combat the spread of COVID negatively impacted the year-over-year
comparison.
- Continued growth across all product categories, including side
bets, premium table games, table equipment and, most notably,
progressives, drove an 11.4% increase in our installed base versus
the prior year. We estimate approximately 80% of our installed base
was active at quarter end.
- Equipment sales revenue decreased $0.3
million compared to the prior year period that included
sales of our new Dex S card shuffler and table
signage. The 2020 third quarter primarily included sales of
protective VisiDeal Shield plexiglass player dividers and
other parts to help our casino customers operate safely in the
current environment.
- Installed base of table game progressives increased to
over 1,400 units, up 17.7% year-over-year.
- Site license agreements went live with three operators in the
quarter. Site license interest continues to build as our customers
look for additional ways to improve operating efficiency.
Interactive
|
|
Three Months Ended
September 30, 2020 compared to Three Months Ended
September 30, 2019
|
|
(Amounts in
thousands)
|
|
Three Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
Interactive
segment revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social gaming
revenue
|
|
$
|
829
|
|
|
$
|
712
|
|
|
$
|
117
|
|
|
|
16.4
|
%
|
Real-money gaming
revenue
|
|
|
1,112
|
|
|
|
505
|
|
|
|
607
|
|
|
|
120.2
|
%
|
Total Interactive
revenue
|
|
$
|
1,941
|
|
|
$
|
1,217
|
|
|
$
|
724
|
|
|
|
59.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interactive
Adjusted EBITDA
|
|
$
|
750
|
|
|
$
|
(447)
|
|
|
$
|
1,197
|
|
|
|
(267.8)
|
%
|
Interactive Quarterly Results
- Total revenue increased 59.5% year-over-year to $1.9 million, while Adjusted EBITDA totaled
$0.8 million, marking a $1.2 million improvement versus the prior
year.
- Interactive achieved positive Adjusted EBITDA for the third
consecutive quarter. Increases in both real-money gaming ("RMG")
and Social gaming revenue, coupled with cost savings from the
restructuring of our social business in prior periods and
company-wide cost savings measures implemented in the current
period, helped to drive improved profitability within the
segment.
- RMG revenue more than doubled year-over-year and established a
new quarterly record, supported by the continued
introduction of our EGM content into the European RMG market,
our fourth quarter 2019 launch into the New Jersey market, and our second quarter
2020 launch into Pennsylvania. We also believe
COVID-initiated stay-at-home measures supported our quarterly
performance.
- Our RMG platform in Pennsylvania and New
Jersey currently provides our proven land-based game content
to 11 operators.
Liquidity and Capital Expenditures
As of September 30, 2020, we had
$113.2 million in total
liquidity compared to $43.2
million at December 31, 2019.
The total principal amount of debt outstanding, as of
September 30, 2020, was $654.3 million, predominantly comprised of
$622.7 million in first lien
term loans, which mature in 2024, and a revolving credit facility
of $30.0 million, which matures in
2022.
As a precautionary measure to increase the Company's cash
position and facilitate financial flexibility in light of current
uncertainty in the gaming industry resulting from the COVID-19
pandemic, in March the Company borrowed $30.0 million under the revolving credit
facility, and in May issued an additional $95.0 million in term loans. In connection with
the new term loans, the Company negotiated a financial covenant
relief period through December 31,
2020 related to its net first lien leverage ratio
financial covenant and implemented a revised calculation of EBITDA
to be used in the net first lien leverage ratio for the first
three quarters of 2021. In October, as a result of our
better-than-anticipated third quarter free cash flow performance
and improved comfort level with our resulting liquidity position,
we elected to fully repay the $30.0
million previously drawn down on our revolving credit
facility.
Total net debt, which is the principal amount of debt
outstanding less cash and cash equivalents, as of September 30, 2020 was $541.1 million compared to $520.6 million at December 31, 2019. Our Total Net Debt Leverage
Ratio increased from 3.6 times at December
31, 2019, to 6.2 times at September 30, 2020, see Total Net Debt Leverage
Ratio Reconciliation below(6).
Capital expenditures decreased by 63.7% year-over-year to
$7.1 million in the current period,
in line with our plans to conservatively manage the use of our cash
and only invest in those projects that will provide the highest
return on our investment. The current quarter capital
expenditures were primarily comprised of $3.0 million in intangible capital expenditures,
including capitalized internal software development costs, and
$3.6 million in growth
capital expenditures, which reflects costs associated with the
placement of additional units into our leased installed base.
(6) Total Adjusted
EBITDA and total net debt leverage ratio are non-GAAP measures, see
non-GAAP reconciliation below.
|
Conference Call and Webcast
On November 5, 2020 at 5 p.m.
EST, AGS leadership will host a conference call to present
the third quarter 2020 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 2020 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 Investor & Media Contacts:
Brad Boyer, Vice President of
Investor Relations, Corporate Development
and Strategy
bboyer@playags.com
Julia Boguslawski, Chief
Marketing Officer
jboguslawski@playags.com
©2020 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,
|
|
|
|
2020
|
|
|
2019
|
|
Assets
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
113,200
|
|
|
$
|
13,162
|
|
Restricted
cash
|
|
|
20
|
|
|
|
20
|
|
Accounts receivable,
net of allowance of $1,961 and $723, respectively
|
|
|
39,673
|
|
|
|
61,224
|
|
Inventories
|
|
|
30,435
|
|
|
|
32,875
|
|
Prepaid
expenses
|
|
|
4,401
|
|
|
|
2,983
|
|
Deposits and
other
|
|
|
4,371
|
|
|
|
5,332
|
|
Total current
assets
|
|
|
192,100
|
|
|
|
115,596
|
|
Property and
equipment, net
|
|
|
79,234
|
|
|
|
103,598
|
|
Goodwill
|
|
|
284,206
|
|
|
|
287,049
|
|
Intangible
assets
|
|
|
196,126
|
|
|
|
230,451
|
|
Deferred tax
asset
|
|
|
4,048
|
|
|
|
4,965
|
|
Operating lease
assets
|
|
|
10,143
|
|
|
|
11,543
|
|
Other
assets
|
|
|
12,101
|
|
|
|
9,176
|
|
Total
assets
|
|
$
|
777,958
|
|
|
$
|
762,378
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
4,682
|
|
|
$
|
15,598
|
|
Accrued
liabilities
|
|
|
28,055
|
|
|
|
34,840
|
|
Current maturities of
long-term debt
|
|
|
7,061
|
|
|
|
6,038
|
|
Total current
liabilities
|
|
|
39,798
|
|
|
|
56,476
|
|
Long-term
debt
|
|
|
632,232
|
|
|
|
518,689
|
|
Deferred tax
liability, non-current
|
|
|
1,139
|
|
|
|
1,836
|
|
Operating lease
liabilities, long-term
|
|
|
9,926
|
|
|
|
11,284
|
|
Other long-term
liabilities
|
|
|
31,048
|
|
|
|
40,309
|
|
Total
liabilities
|
|
|
714,143
|
|
|
|
628,594
|
|
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, 2020 and
at December 31, 2019; and 35,697,583 and 35,534,558 shares issued
and outstanding at September 30, 2020 and December 31, 2019,
respectively.
|
|
|
357
|
|
|
|
355
|
|
Additional paid-in
capital
|
|
|
376,193
|
|
|
|
371,311
|
|
Accumulated
deficit
|
|
|
(304,093)
|
|
|
|
(235,474)
|
|
Accumulated other
comprehensive loss
|
|
|
(8,642)
|
|
|
|
(2,408)
|
|
Total stockholders'
equity
|
|
|
63,815
|
|
|
|
133,784
|
|
Total liabilities
and stockholders' equity
|
|
$
|
777,958
|
|
|
$
|
762,378
|
|
PLAYAGS,
INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS (amounts in thousands, except per
share data)
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
36,299
|
|
|
$
|
52,522
|
|
Equipment
sales
|
|
|
12,985
|
|
|
|
26,855
|
|
Total
revenues
|
|
|
49,284
|
|
|
|
79,377
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of gaming
operations(7)
|
|
|
8,268
|
|
|
|
10,170
|
|
Cost of equipment
sales(7)
|
|
|
3,981
|
|
|
|
13,479
|
|
Selling, general and
administrative
|
|
|
10,862
|
|
|
|
16,861
|
|
Research and
development
|
|
|
6,180
|
|
|
|
8,671
|
|
Write-downs and other
charges
|
|
|
1,932
|
|
|
|
807
|
|
Depreciation and
amortization
|
|
|
20,463
|
|
|
|
23,810
|
|
Total operating
expenses
|
|
|
51,686
|
|
|
|
73,798
|
|
(Loss) income from
operations
|
|
|
(2,402)
|
|
|
|
5,579
|
|
Other
expense
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
11,330
|
|
|
|
9,320
|
|
Interest
income
|
|
|
(671)
|
|
|
|
(42)
|
|
Loss on extinguishment
and modification of debt
|
|
|
-
|
|
|
|
-
|
|
Other
expense
|
|
|
(311)
|
|
|
|
(106)
|
|
(Loss) income
before income taxes
|
|
|
(12,750)
|
|
|
|
(3,593)
|
|
Income tax (expense)
benefit
|
|
|
1,672
|
|
|
|
(1,926)
|
|
Net (loss)
income
|
|
|
(11,078)
|
|
|
|
(5,519)
|
|
Less: Net income
attributable to non-controlling interests
|
|
|
-
|
|
|
|
(17)
|
|
Net (loss) income
attributable to PlayAGS, Inc.
|
|
|
(11,078)
|
|
|
|
(5,536)
|
|
Foreign currency
translation adjustment
|
|
|
1,375
|
|
|
|
(1,273)
|
|
Total
comprehensive (loss) income
|
|
$
|
(9,703)
|
|
|
$
|
(6,809)
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
loss per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.31)
|
|
|
$
|
(0.16)
|
|
Diluted
|
|
$
|
(0.31)
|
|
|
$
|
(0.16)
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35,647
|
|
|
|
35,447
|
|
Diluted
|
|
|
35,647
|
|
|
|
35,447
|
|
|
(7) Exclusive of
depreciation and amortization.
|
PLAYAGS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(68,136)
|
|
|
$
|
(12,944)
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
66,353
|
|
|
|
69,002
|
|
Accretion of contract
rights under development agreements and placement fees
|
|
|
5,643
|
|
|
|
4,550
|
|
Amortization of
deferred loan costs and discount
|
|
|
2,538
|
|
|
|
1,426
|
|
Stock-based
compensation expense
|
|
|
4,726
|
|
|
|
5,309
|
|
Provision (benefit)
for bad debts
|
|
|
1,133
|
|
|
|
183
|
|
Loss on disposition of
long-lived assets
|
|
|
2,004
|
|
|
|
1,015
|
|
Impairment of
assets
|
|
|
6
|
|
|
|
5,343
|
|
Fair value adjustment
of contingent consideration
|
|
|
796
|
|
|
|
501
|
|
Benefit for deferred
income tax
|
|
|
(518)
|
|
|
|
873
|
|
Changes in assets and
liabilities that relate to operations:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
19,391
|
|
|
|
(12,136)
|
|
Inventories
|
|
|
5,840
|
|
|
|
961
|
|
Prepaid
expenses
|
|
|
(1,463)
|
|
|
|
(1,098)
|
|
Deposits and
other
|
|
|
667
|
|
|
|
(3,081)
|
|
Other assets,
non-current
|
|
|
1,955
|
|
|
|
9,024
|
|
Accounts payable and
accrued liabilities
|
|
|
(21,216)
|
|
|
|
(6,447)
|
|
Net cash provided
by operating activities
|
|
|
19,719
|
|
|
|
62,481
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
Customer notes
receivable
|
|
|
(4,690)
|
|
|
|
-
|
|
Proceeds from payments
on customer notes receivable
|
|
|
279
|
|
|
|
-
|
|
Business
acquisitions, net of cash acquired
|
|
|
-
|
|
|
|
(54,935)
|
|
Purchase of intangible
assets
|
|
|
(1,414)
|
|
|
|
(4,926)
|
|
Software development
and other expenditures
|
|
|
(8,004)
|
|
|
|
(9,957)
|
|
Proceeds from
disposition of assets
|
|
|
32
|
|
|
|
161
|
|
Purchases of property
and equipment
|
|
|
(12,196)
|
|
|
|
(38,760)
|
|
Net cash used in
investing activities
|
|
|
(25,993)
|
|
|
|
(108,417)
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
Repayment of first
lien credit facilities
|
|
|
(4,040)
|
|
|
|
(4,040)
|
|
Repayment of
incremental term loans
|
|
|
(238)
|
|
|
|
-
|
|
Payment of financed
placement fee obligations
|
|
|
(4,179)
|
|
|
|
(6,058)
|
|
Proceeds from
incremental term loans
|
|
|
92,150
|
|
|
|
-
|
|
Borrowing on
revolver
|
|
|
30,000
|
|
|
|
-
|
|
Payment of deferred
loan costs
|
|
|
(5,744)
|
|
|
|
-
|
|
Payments of previous
acquisition obligation
|
|
|
(292)
|
|
|
|
(1,227)
|
|
Payments on finance
leases and other obligations
|
|
|
(1,012)
|
|
|
|
(1,043)
|
|
Repurchase of
stock
|
|
|
(483)
|
|
|
|
(1,133)
|
|
Proceeds from stock
option exercise
|
|
|
158
|
|
|
|
685
|
|
Distributions to
non-controlling interest owners
|
|
|
-
|
|
|
|
(302)
|
|
Net cash provided
by (used in) financing activities
|
|
|
106,320
|
|
|
|
(13,118)
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
|
(8)
|
|
|
|
3
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
100,038
|
|
|
|
(59,051)
|
|
Cash, cash equivalents
and restricted cash, beginning of period
|
|
|
13,182
|
|
|
|
70,804
|
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
113,220
|
|
|
$
|
11,753
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
|
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
|
|
|
|
|
|
Intangible assets
obtained under financed placement fee arrangements
|
|
$
|
-
|
|
|
$
|
39,198
|
|
Leased assets obtained
in exchange for new finance lease liabilities
|
|
$
|
426
|
|
|
$
|
882
|
|
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, 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,
|
|
|
|
2020
|
|
|
2019
|
|
Net (loss) income
attributable to PlayAGS, Inc.
|
|
$
|
(11,078)
|
|
|
$
|
(5,536)
|
|
Income tax (benefit)
expense
|
|
|
(1,672)
|
|
|
|
1,926
|
|
Depreciation and
amortization
|
|
|
20,463
|
|
|
|
23,810
|
|
Other
expense
|
|
|
(311)
|
|
|
|
(106)
|
|
Interest
income
|
|
|
(671)
|
|
|
|
(42)
|
|
Interest
expense
|
|
|
11,330
|
|
|
|
9,320
|
|
Write-downs and
other(8)
|
|
|
1,932
|
|
|
|
807
|
|
Other
adjustments(9)
|
|
|
2,413
|
|
|
|
(3)
|
|
Other non-cash
charges(10)
|
|
|
2,415
|
|
|
|
2,426
|
|
Legal and litigation
expenses including settlement payments(11)
|
|
|
389
|
|
|
|
1,745
|
|
Acquisitions and
integration related costs including restructuring and
severance(12)
|
|
|
79
|
|
|
|
481
|
|
Non-cash stock-based
compensation
|
|
|
1,733
|
|
|
|
1,959
|
|
Total Adjusted
EBITDA
|
|
$
|
27,022
|
|
|
$
|
36,787
|
|
|
(Amounts in
thousands, except Adjusted EBITDA margin)
|
|
Three Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Total
revenues
|
|
$
|
49,284
|
|
|
$
|
79,377
|
|
Adjusted
EBITDA
|
|
$
|
27,022
|
|
|
$
|
36,787
|
|
Adjusted EBITDA
margin
|
|
|
54.8
|
%
|
|
|
46.3
|
%
|
|
(8) 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.
|
(9) 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, as well as costs incurred related to
initial public offering, net of costs capitalized to equity and the
cost of related secondary offerings.
|
(10) 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.
|
(11) 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. These costs related to litigation and matters
that were not significant individually.
|
(12) Acquisition and integration costs
primarily relate to costs incurred after the purchase of
businesses, such as the purchase of 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:
|
|
(Amounts in
thousands, except net debt leverage ratio)
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Total principal
amount of debt
|
|
$
|
654,267
|
|
|
$
|
533,727
|
|
Less: Cash and cash
equivalents
|
|
|
113,200
|
|
|
|
13,162
|
|
Total net
debt
|
|
$
|
541,067
|
|
|
$
|
520,565
|
|
LTM Adjusted
EBITDA
|
|
$
|
87,635
|
|
|
$
|
146,062
|
|
Total net debt
leverage ratio
|
|
|
6.2
|
|
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
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. 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,
2020
|
|
|
Six Months
Ended June 30,
2020
|
|
|
Three Months
Ended
September 30,
2020
|
|
Net cash provided by
operating activities
|
|
$
|
19,719
|
|
|
$
|
7,867
|
|
|
$
|
11,852
|
|
Purchase of
intangible assets
|
|
|
(1,414)
|
|
|
|
(925)
|
|
|
|
(489)
|
|
Software development
and other expenditures
|
|
|
(8,004)
|
|
|
|
(5,530)
|
|
|
|
(2,474)
|
|
Purchases of property
and equipment
|
|
|
(12,196)
|
|
|
|
(8,057)
|
|
|
|
(4,139)
|
|
Free Cash
Flow
|
|
$
|
(1,895)
|
|
|
$
|
(6,645)
|
|
|
$
|
4,750
|
|
|
(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
|
|
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SOURCE AGS