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NYSE:AGS

AGS to Report First Quarter 2024 Results on Thursday, May 9, 2024

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LAS VEGAS, April 24, 2024 (GLOBE NEWSWIRE) — PlayAGS, Incorporated (NYSE: AGS) (“AGS” or the “Company”) today announced it will release its financial results for the first quarter ended March 31, 2024, after the market close on Thursday, May 9, 2024. The Company will host an investor conference call and live webcast the same day at 5 p.m. EDT to further discuss its first quarter financial performance.

The Company encourages participants to pre-register for the conference call by using the following link: AGS Q1 2024 Earnings Call. Callers who pre-register will be given a conference passcode and unique PIN to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to the call start time.

To pre-register, please click here: AGS Q1 2024 Earnings Call

Investor Conference Call
Thursday, May 9, 2024
5 p.m. EDT/ 2 p.m. PDT

Those unable to pre-register may participate by calling: 
U.S. Participants (Local): +1 (404) 975-4839
U.S. Participants (Toll Free): +1 (833) 470-1428
International Participants: Global Dial-In Numbers
Conference Access Code: 850045

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Webcast
To access the live webcast of the call, please visit the Company’s website at http://investors.playags.com and click on “Events”. A replay of the webcast will be available approximately one hour after the webcast and will be archived on the Company’s website for 30 days.

About AGS
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 Native American gaming market, but our customer-centric culture and growth have helped us branch out to become a leading all-inclusive commercial gaming supplier. Powered by high-performing Class II and Class III slot products, an expansive table products portfolio, highly rated social casino solutions for players and operators, and best-in-class service, we offer an unmatched value proposition for our casino partners. Learn more at www.playags.com.

©2024 PlayAGS, Inc. All Rights Reserved. All ® notices signify marks registered in the United States. All ™ and ℠ notices signify unregistered trademarks.

Forward-Looking and Cautionary Language
This press 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 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 the section entitled “Risk Factors” its annual report on Form 10-K filed with the Securities and Exchange Commission, as such factors may be updated from time to time in our periodic filings 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 because of new information, future events or otherwise.

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Contact:
Brad Boyer, Senior Vice President Corporate Operations and Investor Relations
[email protected]

NYSE:AGS

AGS Enters Into Definitive Agreement To Be Acquired By Brightstar Capital Partners for Approximately $1.1 Billion

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LAS VEGAS and NEW YORK, May 09, 2024 (GLOBE NEWSWIRE) — PlayAGS, Incorporated (NYSE: AGS) (“AGS” or the “Company”), a global gaming supplier of high-performing slot, table, and interactive products, today announced that it has signed a definitive agreement to be acquired by affiliates of Brightstar Capital Partners (“Brightstar”), a middle market private equity firm focused on investing in industrial, manufacturing, and services businesses.   

The Company’s Board of Directors has unanimously approved, and recommended that the Company’s stockholders approve, the agreement. AGS shareholders will receive $12.50 per share in cash. The per share purchase price represents a 41% premium to the Company’s volume-weighted average share price over the last 90 days and a 40% premium to AGS’ closing price on May 8, 2024.

AGS is a global company focused on creating a diverse mix of entertaining gaming experiences for every kind of player. Powered by high-performing slot products, an expansive table products portfolio, and highly rated online casino content, the Company believes it offers an unmatched value proposition for its casino partners.

“We are very pleased to reach this agreement, which we believe provides our stockholders with compelling, certain cash value. Joining forces with Brightstar represents an exciting new chapter for AGS and our mission to provide exceptional gaming solutions for our operator partners,” said David Lopez, CEO & President of AGS. “With Brightstar’s resources and strategic guidance, we believe AGS will be well-positioned to make targeted investments in R&D, top talent, operations, and industry-leading innovation, which should accelerate our global footprint.”

“We look forward to working with David and the AGS team to capitalize on opportunities by taking a long-term approach to creating value,” said Andrew Weinberg, Founder & CEO of Brightstar. “AGS has a strong pipeline of new products, and we believe the Company’s innovative approach to game development provides significant potential for continued growth.”

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“We have been impressed by AGS’ award-winning products, differentiated culture, and outstanding reputation in this expanding industry,” said Roger Bulloch, Partner at Brightstar. “We trust that partnering with AGS and executing on our shared vision can accelerate the Company’s ability to create even greater value for its customers and players around the world.”

Macquarie Capital is serving as financial advisor and Cooley LLP is serving as legal counsel to AGS. Jefferies LLC is serving as lead financial advisor to Brightstar. Barclays and Citizens JMP Securities are also serving as financial advisors to Brightstar. Kirkland & Ellis LLP is serving as legal counsel to Brightstar.

First Quarter 2024 Financial Results

In light of the proposed transaction, AGS has canceled its previously announced conference call to discuss its first quarter 2024 financial results, which had been scheduled for Thursday, May 9, 2024, at 5:00 p.m. EDT. Additionally, AGS will not be issuing a quarterly earnings release. The Company expects to file its 10-Q for the quarter ended March 31, 2024 with the SEC later today.

Timing and Approvals

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The proposed transaction, which is expected to close in the second half of 2025 is subject to customary closing conditions, including the receipt of regulatory approvals and approval by a majority of AGS stockholders. Upon completion of the transaction, AGS will become a privately held company and shares of AGS common stock will no longer be listed on any public market.

About AGS

AGS is a global company focused on creating a diverse mix of entertaining gaming experiences for every kind of player. Its customer-centric culture and remarkable growth have helped it become one of the most all-inclusive commercial gaming suppliers in the world. Powered by high-performing slot products, an expansive table products portfolio, highly rated online casino content for players and operators, and differentiated service, the Company believes it offers an unmatched value proposition for its casino partners. Learn more at www.playags.com.

About Brightstar Capital Partners

Brightstar Capital Partners is a middle market private equity firm focused on investing in industrial, manufacturing, and services businesses where Brightstar believes it can drive significant value with respect to the management, operations, and strategic direction of the business. Brightstar employs an operationally intensive “Us & Us” approach that leverages its extensive experience and relationship network to help companies reach their full potential. For more information, please visit www.brightstarcp.com.

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Additional Information and Where to Find It

In connection with the proposed transaction, the Company intends to file with the SEC preliminary and definitive proxy statements relating to the proposed transaction and other relevant documents. Promptly after filing the definitive proxy statement with the SEC, the definitive proxy statement and a proxy card will be mailed to the Company’s stockholders entitled to vote as of the record date to be established for voting on the proposed transaction and any other matters to be voted on at the special meeting. BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENTS, ANY AMENDMENTS OR SUPPLEMENTS THERETO, ANY OTHER SOLICITING MATERIALS AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, THE ACQUIRING ENTITY AND THE PROPOSED TRANSACTION. When the documents are available, investors and security holders may obtain free copies of the proxy statement, any amendments or supplements thereto, and any other relevant documents filed by the Company with the SEC in connection with the proposed transaction on the SEC’s web site at www.sec.gov, on the Company’s website at https://investors.playags.com/financial-information/sec-filings or by contacting the Company’s Investor Relations via email at https://investors.playags.com/investor-resources/contact-investor-relations/.

Participants in the Solicitation

The Company and its directors and executive officers may be deemed participants in the solicitation of proxies from the Company’s stockholders in connection with the proposed transaction. Information regarding the Company’s directors and executive officers, including a description of their direct or indirect interests, by security holdings or otherwise, in the Company can be found under the captions “The Board of Directors,” “Executive Officers,” and “Section 16(a) Beneficial Ownership Reporting Compliance” contained in the Company’s 2024 annual proxy statement filed with the SEC on April 29, 2024 (the “2024 Proxy Statement”). To the extent that the Company’s directors and executive officers and their respective affiliates have acquired or disposed of security holdings since the applicable “as of” date disclosed in the 2024 Proxy Statement, such transactions have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. Other information regarding the participants in the proxy solicitation and a description of their interests will be contained in the proxy statement for the Company’s special meeting of stockholders and other relevant materials to be filed with the SEC in respect of the proposed transaction when they become available. These documents can be obtained free of charge from the sources indicated above.

Forward-Looking and Cautionary Language

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This press release contains, and oral statements made from time to time by our representatives may contain, forward-looking statements which include, but are not limited to, all statements that do not relate solely to historical or current facts, such as statements regarding the Company’s expectations, intentions or strategies regarding the timing, completion and effects of the proposed transaction. In some cases, these statements include words like: “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” and “ongoing,” or the negatives of these terms, or other comparable terminology intended to identify statements about the future. These forward-looking statements are subject to the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. The Company’s expectations and beliefs regarding these matters may not materialize. Actual outcomes and results may differ materially from those contemplated by these forward-looking statements as a result of uncertainties, risks, and changes in circumstances, including, but not limited to, risks and uncertainties related to: the ability of the parties to consummate the proposed transaction in a timely manner or at all; the satisfaction (or waiver) of closing conditions to the consummation of the proposed transaction, including with respect to the approval of the Company’s stockholders; potential delays in consummating the proposed transaction; the ability of the Company to timely and successfully achieve the anticipated benefits of the proposed transaction; the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the definitive agreement; the effect of the announcement or pendency of the proposed transaction on the Company’s business relationships, operating results and business generally; costs related to the proposed transaction; the outcome of any legal proceedings that may be instituted against the Company, Brightstar or any of their respective directors or officers related to the definitive agreement or the proposed transaction; and the impact of these costs and other liabilities on the cash, property, and other assets available for distribution to the Company’s stockholders. Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those contemplated by the forward-looking statements are included under the caption “Risk Factors” and elsewhere in the Company’s most annual and quarterly reports filed with the SEC, including its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 and any subsequent reports on Form 10-K, Form 10-Q or Form 8-K filed with the SEC from time to time and available at www.sec.gov. These documents can be accessed on the Company’s web page at https://investors.playags.com/financial-information/sec-filings.

The forward-looking statements included in this press release, and in any oral statements made from time to time by our representatives, are made only as of the date hereof or thereof. The Company assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

AGS Contact
Julia Boguslawski, Chief Marketing Officer
[email protected]

Brad Boyer, Senior Vice President of Investor Relations & Corporate Operations
[email protected]

Brightstar Contact
Craig Thomas, Chief Marketing Officer
[email protected]

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NYSE:AGS

Here Comes the Hot Stepper: AGS Unveils its First Mechanical Stepper and More at IGA 2024

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LAS VEGAS, April 03, 2024 (GLOBE NEWSWIRE) — AGS (NYSE: AGS or “the Company”), a global gaming supplier of high-performing slot, table, and interactive products, steps into a new vertical as it unveils its first mechanical reel cabinet among a diverse lineup of new products at the 2024 Indian Gaming Association (“IGA”) trade show in Anaheim, CA. AGS is set to sizzle with a stunning array of new products, from mesmerizing slot hardware and cutting-edge core and premium games to its ultra-reliable card shufflers, award-winning table progressives, and growing library of online games.

Revel

Where Nostalgia and Modern Technology Collide
At IGA in booth 460, AGS transcends time with the highly anticipated launch of its classic Revel™ cabinet. Featuring traditional stepper elements reminiscent of gaming’s golden age, Revel transports players back in time with its authentic jackpot bell, mechanical arm-pull, and champagne gold accents. The classic-meets-modern cabinet seamlessly interlaces approachable modern touches such as game-state controlled reel LED lights and a vivid 4K high-definition video paytable display, all framed by AGS’ iconic twinkling eclipse lighting. The combination of these features sets the framework for AGS to offer unmatched three-reel games, including the first four mechanical stepper games premiering at IGA: Triple Treasure™, Liberty Diamond™, Flaming Reels™, and Diamond Reels™.

Heavy-Hitters Stepping Up to the Plate
But that’s not all – AGS will reveal new core and premium games to support its recently launched Spectra UR49™ and Spectra UR43 Premium™ form factors, including the Triple Coin Treasures Gold™ brand extension from the award-winning Triple Coin Treasures® games and the trending Bacon Riches™ games displayed on the chart-topping Spectra UR43™ portrait cabinet.

The Crescendo of Online Gaming
AGSi, AGS’ Interactive division, is making waves in the online gaming world, earning the number two spot in the most recent Eilers-Fantini Online Game Performance Report and picking up momentum leading into IGA with its successful cross-channel debut of Rakin’ Bacon Odyssey® in New Jersey and its expansion with multiple operator partners in West Virginia. AGSi continues executing on its game roadmap with new high-performing real-money online games released into the market–most recently earning five spots per the March ‘24 Eilers-Fantini Online Game Performance 25 New Top Game Ranks: Platinum 8X8X8X™ (#2), AGSi’s interactive-first game Double Shamrock™ (#14), Rakin’ Bacon Deluxe® Golden Blessings® (#16), Gold Inferno® (#21), and Mine Blast™ (#25).

Bringing Industry-Leading Innovations to the Table
AGS’ single-deck shuffler, Pax S® will be on display at IGA. Its unmatched reliability provides operators with more optionality, and its hassle-free setup has made it possible to quickly go live in over 65 casinos across 20 states and provinces since first launching in 2022. In addition, AGS’ award-winning side bet progressive system Bonus Spin™ Xtreme continues to create celebratory jackpots by linking all table games on a floor and recently awarded its highest progressive jackpot to date of over $1.5 million. The Tables division continues to innovate on the popular progressive system and will showcase an added high-hand option to operators looking to award players for high-ranking hands.

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Don’t miss out on all the excitement at IGA – follow AGS at @play_AGS on social media for updates and visit booth 460 to experience AGS’ thrilling new products. Get ready to revel in the future of gaming with AGS!

About AGS
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 Native American gaming market, and our customer-centric culture and growth have helped us branch out to become a leading all-inclusive commercial gaming supplier. Powered by high-performing Class II and Class III slot products, an expansive table products portfolio, real-money gaming platforms and content, highly rated social casino solutions for operators and players, and best-in-class service, we offer an unmatched value proposition for our casino partners. Learn more at www.playags.com.

AGS Media Contact:
Julia Boguslawski, Chief Marketing Officer
Nikki Davis, Director, Marketing & Communications
[email protected]

AGS Investor Contact:
Brad Boyer, Senior Vice President of Investor Relations & Corporate Operations
[email protected]

©2024 AGS LLC. All® notices signify marks registered in the United States. All ™ and ℠ notices signify trademarks, which are not registered on any country-wide basis. Products referenced herein are sold by AGS LLC or other subsidiaries of PlayAGS, Inc. 

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A photo accompanying this announcement is available at:
https://www.globenewswire.com/NewsRoom/AttachmentNg/b3281956-3533-472b-aa32-6ea0bd0e828a

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NYSE:AGS

AGS Reports Record Fourth Quarter and Full Year 2023 Results

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Fourth Quarter 2023 Highlights:

  Total Revenue Increased 15% Y/Y to a Record $94.2 Million; Eleventh Consecutive Quarter of Double-Digit Y/Y Growth
  Global EGM Sales Reached a Record 1,519 Units; Up by Over 30% Y/Y for the Third Straight Quarter
  Table Products Revenue Surged 24% Y/Y to a New Record; Supported by Accelerating PAX S Adoption
  Interactive Revenue Grew More than 30% Y/Y to a Record $3.4 Million; Up 8% Versus Q3 2023
  Income From Operations Increased 19% Y/Y to $16.0 Million; Net Income Totaled $67 Thousand
  Total Adjusted EBITDA Advanced to a Record $42.8 Million; Total Adjusted EBITDA Margin Exceeded 45%
  Cash From Operating Activities Totaled $26.4 Million; Free Cash Flow Topped $10 Million for the Third Quarter in a Row
  Net Leverage Fell to 3.2x at Quarter End; Targeting Year End 2024 Net Leverage in the Range of 2.75x to 3.00x
     

LAS VEGAS, March 05, 2024 (GLOBE NEWSWIRE) — PlayAGS, Inc. (NYSE: AGS) (“AGS”, “us”, “we” or the “Company”), a designer and developer of equipment and services solutions for the global gaming industry, today reported operating results for the fourth quarter and full year ended December 31, 2023.

Commenting upon the Company’s fourth quarter financial performance, AGS President and Chief Executive Officer David Lopez said, “The strength in our four quarter results was broad-based, with all three operating segments setting new quarterly records for revenue and Adjusted EBITDA. The quality and consistency of our recent financial performance is a true reflection of our incredibly talented and focused team, increasingly deep and diverse product offering across all three segments, and the improving efficiency and effectiveness of our execution.”

Kimo Akiona, AGS Chief Financial Officer added, “We exited 2023 with a total net debt leverage ratio of 3.2 times, down from 3.8 times at the start of the year. Supported by our consistent operating momentum and execution, heightened focus on efficient and effective working capital management, continued capex deployment discipline, and anticipated cash interest savings from our recent debt repricing and repayment; a path to below 3.0 times remains well within our sight.”

Summary of the Three and Twelve Months Ended December 31, 2023 and 2022
(In thousands, except per-share and Adjusted EBITDA margin data)
 
    Three Months Ended December 31,   Twelve Months Ended December 31,
                                                 
    2023   2022   % Change   2023   2022   % Change
Revenues:                                                
EGM   $ 85,952     $ 75,338       14.1 %   $ 327,053     $ 284,331       15.0 %
Table Products     4,829       3,890       24.1 %     17,706       14,920       18.7 %
Interactive     3,370       2,508       34.4 %     11,777       10,185       15.6 %
Total revenues   $ 94,151     $ 81,736       15.2 %   $ 356,536     $ 309,436       15.2 %
Income from operations   $ 16,048     $ 13,447       19.3 %   $ 57,393     $ 37,969       51.2 %
Net income (loss)   $ 67     $ 2,541       (97.4 )%   $ 428     $ (8,035 )     (105.3 )%
Basic income (loss) per share   $ 0.00     $ 0.06       (97.1 )%   $ 0.01     $ (0.22 )     (104.5 )%
Diluted income (loss) per share   $ 0.00     $ 0.06       (97.1 )%   $ 0.01     $ (0.22 )     (104.5 )%
                                                 
Adjusted EBITDA:                                                
EGM   $ 38,626     $ 34,412       12.2 %   $ 146,287     $ 127,502       14.7 %
Table Products     2,842       2,370       19.9 %     9,792       8,781       11.5 %
Interactive     1,292       498       159.4 %     2,888       2,360       22.4 %
Total Adjusted EBITDA(1)   $ 42,760     $ 37,280       14.7 %   $ 158,967     $ 138,643       14.7 %
Total Adjusted EBITDA margin(2)     45.4 %     45.6 %     (20 bps)       44.6 %     44.8 %   (20 bps)  


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Fourth Quarter 2023 Financial Results

  Total revenue increased 15% year-over-year to a record $94.2 million, representing our eleventh consecutive quarter of double-digit total revenue growth. All three operating segments delivered double-digit growth rates versus the prior year, with Interactive, Table Products and Electronic Gaming Machines (“EGM”) revenue increasing 34%, 24% and 14% year-over-year, respectively. Total revenue grew approximately 5% relative to the $89.4 million delivered in Q3 2023 and has now established a new Company record in four of the past five quarters.   
  Gaming operations, or recurring revenue, totaled $59.6 million, approximately 4% ahead of the $57.4 million achieved in Q4 2022. Interactive and Table Products recurring revenue increased 34% and 7% year-over-year, respectively, with each establishing new records within their respective segments. EGM gaming operations revenue advanced 2% versus the prior year, setting a new Q4 high-water mark of $52.3 million. Recurring revenue accounted for over 60% of the Company’s consolidated Q4 2023 revenue mix. Gaming operations revenue declined modestly relative to the $61.0 million achieved in Q3 2023, consistent with historically normal seasonal trends within the business. 
  Equipment sales revenue increased more than 40% year-over-year to a record $34.6 million, with EGM and Table Products sales revenue reaching records of $33.7 million and $893 thousand, respectively. Global EGM unit sales eclipsed 1,500 units for the first time ever, advancing approximately 36% year-over-year. Global EGM unit sales growth has surpassed 30% in each of the past three quarters. Equipment sales revenue increased over 20% relative to the $28.4 million delivered in Q3 2023, supported by strong growth in both EGM and Table Products sales revenue. 
  The Company generated near breakeven net income in Q4 2023 compared to $2.5 million in Q4 2022. Higher interest expense, commensurate with an increase in market-level rates, and an approximately $2 million unfavorable swing in income tax expense more than offset a nearly 20% year-over-year increase in income from operations. 
  Total Adjusted EBITDA (non-GAAP)(1) increased approximately 15% year-over-year to a record $42.8 million, marking our fifth consecutive quarter of double-digit Adjusted EBITDA growth. All three segments contributed to the record-setting performance, led by a more than doubling of Interactive Adjusted EBITDA to $1.3 million, while Table Products and EGM Adjusted EBITDA increased approximately 20% and 12% year-over-year, respectively. Q4 2023 Total Adjusted EBITDA surpassed the prior record of $40.1 million, delivered in Q3 2023, by approximately 7%. The Company has now established new Total Adjusted EBITDA records in four of the past five quarters. 
  Total Adjusted EBITDA margin (non-GAAP)(1) was 45.4%, surpassing the 45% level for the first time since Q4 2022. Q4 2023 margin performance reflects the improving margin profile of the Company’s Interactive business, supported by the segment’s recent outsized revenue growth; superior gross margins on the highly-modular and efficiently designed Spectra family of EGM cabinets; and operating leverage resulting from the over 15% year-over-year increase in total revenues. For the full year 2023, Adjusted EBITDA margin was 44.6%, placing it in the upper half of the Company’s targeted 44% to 45% range articulated at the start of the year. 
  Net cash provided by operating activities increased approximately 10% year-over-year to $26.4 million. Q4 2023 free cash flow (non-GAAP)(2) totaled $11.0 million, up more than 45% compared to the $7.6 million delivered in the prior year period. The year-over-year improvement in free cash flow generation reflects the Company’s record-setting operating performance, heightened focus on efficient and effective working capital management, and continued capex deployment discipline. The Company has now generated over $10 million of free cash flow in three consecutive quarters.   

(1) Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures; see non-GAAP reconciliation below.
(2) Free Cash Flow is a non-GAAP financial measure; see non-GAAP reconciliation below.

EGM

Three Months Ended December 31, 2023 compared to Three Months Ended December 31, 2022 

(Amounts in thousands, except unit data)   Three Months Ended December 31,
                                 
    2023   2022   $ Change   % Change
EGM segment revenues:                                
Gaming operations   $ 52,290     $ 51,207     $ 1,083       2.1 %
Equipment sales     33,662       24,131       9,531       39.5 %
Total EGM revenues     85,952       75,338       10,614       14.1 %
                                 
EGM Adjusted EBITDA   $ 38,626     $ 34,412     $ 4,214       12.2 %
                                 
EGM Business Segment Key Performance Indicators (“KPI’s”)                                
EGM gaming operations:                                
EGM installed base:                                
Class II     11,193       11,251       (58 )     (0.5 )%
Class III     5,250       5,075       175       3.4 %
Domestic installed base, end of period     16,443       16,326       117       0.7 %
International installed base, end of period     6,126       6,244       (118 )     (1.9 )%
Total installed base, end of period     22,569       22,570       (1 )     (0.0 )%
                                 
EGM revenue per day (“RPD”):                                
Domestic revenue per day   $ 31.68     $ 31.46     $ 0.22       0.7 %
International revenue per day   $ 8.86     $ 7.61     $ 1.25       16.4 %
Total revenue per day   $ 25.47     $ 24.87     $ 0.60       2.4 %
                                 
EGM equipment sales                                
EGM units sold     1,519       1,116       403       36.1 %
Average sales price (“ASP”)   $ 20,677     $ 19,382     $ 1,295       6.7 %
                                 

EGM Quarterly Results

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    Domestic Gaming Operations (3)
  Domestic EGM gaming operations, or recurring revenue, increased approximately 1% year-over-year to a fourth quarter record $47.2 million. A 15% year-over-year increase in our higher-yielding premium EGM installed base, further deployment of Spectra UR43 and initial deployment of Spectra UR 49, both of which are delivering per unit performance comparable to our premium products, and continuous installed base optimization contributed to our improved gaming operations revenue performance in the quarter. Domestic EGM recurring revenue topped $45 million for the seventh consecutive quarter and accounted for approximately 60% of the total domestic EGM revenue generated in Q4 2023.
  The domestic EGM installed base expanded to 16,443 units at the end of Q4 2023, representing an increase of 117 units versus the prior year and up sequentially for the seventh consecutive quarter. Outsized premium EGM footprint growth and deployment of our high-performing Spectra UR43 and Spectra UR49 cabinets drove the expansion of our domestic EGM installed base in both the year-over-year and quarterly sequential periods.   
  Domestic EGM RPD increased approximately 1% year-over-year to a fourth-quarter record $31.68, exceeding $30 for the eleventh consecutive quarter. Outsized premium unit growth, further capital efficient installed base optimization, deployment of our high-performing Spectra UR43 and Spectra UR49 cabinets and a relatively stable gaming macroeconomic environment paced our improved Q4 2023 domestic EGM RPD performance versus the prior year. Domestic EGM RPD decreased modestly relative from the $32.57 achieved in Q3 2023, reflecting historically normal seasonality in market-level Gross Gaming Revenue (“GGR”) trends.
  Our installed base of high-performing premium EGM units increased 15% year-over-year and accounted for over 17% of our domestic EGM installed base at the end of Q4 2023 compared to approximately 15% at the end of Q4 2022. Our premium EGM installed base grew sequentially for the sixteenth consecutive quarter. Supported by our deep pipeline of new premium game content, including the recently-launched Pinata Pays game family, which placed two titles in the top five of the “New-Premium Leased” category within the January 2024 Eilers-Fantini Game Performance Report, and our increasingly diverse portfolio of premium cabinet offerings, with several new premium form factors scheduled to launch throughout 2024, we continue to believe we are poised to benefit from a compelling multi-year growth runway within the higher-yielding, higher-return premium game market segment.        
    International Gaming Operations
  International EGM gaming operations, or recurring revenue, totaled $5.1 million, up 16% versus the $4.4 million delivered in Q4 2022. The sustained relative outperformance of established AGS franchise game themes throughout the Mexico casino market, further execution of our global installed base optimization initiatives, a stable macroeconomic backdrop, and favorable foreign exchange fluctuations all contributed to our year-over-year revenue increase. International EGM recurring revenue declined approximately 5% relative to the $5.4 million delivered in Q3 2023, with the decrease largely attributable to historically normal seasonality and, to a lesser extent, unfavorable foreign exchange movements. 
  The international EGM installed base totaled 6,126 units at December 31, 2023, representing a quarterly sequential increase of 43 units. New casino openings paced the installed base growth realized in the quarter. 
  International EGM RPD increased approximately 16% year-over-year to $8.86, establishing a new fourth quarter record. The Company estimates International EGM RPD grew approximately 4% year-over-year on a constant-currency basis. Anticipated seasonality and unfavorable foreign exchange fluctuations led to an approximately 6% quarterly sequential decline in Q4 2023 International EGM RPD.  
    EGM Equipment Sales
  Global EGM sales reached a record 1,519 units in Q4 2023, representing an increase of over 35% compared to the 1,116 units sold in Q4 2022. Sustained Spectra UR43 demand momentum, supported by the continued strong performance of multiple titles on the cabinet; initial sales of our recently-launched Spectra UR49 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; and continued outsized penetration of the Historical Horse Racing (“HHR”) market, aided by the strength of our game performance, contributed to our improved EGM unit sales performance versus the prior year. Global EGM unit sales increased approximately 13% relative to the 1,345 units sold in Q3 2023 and have now grown sequentially in eleven of the past twelve quarters.   
  The average sales price (“ASP”) in Q4 2023 was $20,677 versus $19,382 in Q4 2022, surpassing the $20,000 level for the second time in the past three quarters. Our improved quarterly ASP performance reflects the superior pricing we have been able to command on our high-performing Spectra family of cabinets and continued implementation of our price integrity initiatives. ASP increased approximately 7% relative to the $19,380 delivered in Q3 2023, with the lift largely attributable to a greater mix of Spectra family cabinet sales, including our premium-priced Spectra UR49, and a decrease in the relative weighting of lower-priced convert-to-sale unit sales.
  The Company sold units into 30 U.S. states, four Canadian provinces and four international jurisdictions outside of the U.S. and Canada throughout Q4 2023, supported by further successful execution of our strategic initiative to broaden our customer account penetration, particularly with larger corporate buyers. To that end, we sold units to nearly 180 unique customers in Q4 2023, representing an increase of more than 70% versus the prior year and over 60% higher than the number sold to in Q4 2019. 
    Product Highlights
  The Company’s Spectra family of gaming cabinets continues to take the gaming industry by storm, with both Spectra UR49 and UR43 achieving a top-five ranking in the January 2024 Eilers-Fantini Cabinet Performance Report, with reported theoretical index performance of 1.62 times and 1.51 times zone average, respectively. The Spectra duo’s exceptional performance put AGS in an enviable position as the only manufacturer with two cabinets in the top five of any category within the Eilers Report. The Spectra UR43 footprint surpassed 4,000 units at year end 2023, while Spectra UR49 continued to gain steam with nearly 170 units deployed. With multiple game themes in various stages of the field testing process and several new additions to the cabinet lineup scheduled for release in 2024, the Company believes it remains in the very early innings of realizing the Spectra family’s true growth potential.     
  AGS’ decision to strategically transform the scale and scope of its game development team beginning in the back half of 2019 has provided the Company with the content needed to consistently scale the business. The byproduct of this multi-year effort was well-represented within the January 2024 Eilers-Fantini Game Performance Report, as the Company placed seven titles in the Quarterly Top-50 New Core games, while also producing two top-five titles in the report’s New Premium Leased category. Supported by the breadth, depth and quality of its current game portfolio, which features contributions from each of the Company’s game development studios, AGS has uniquely armed itself with the tools needed to simultaneously execute its recurring revenue yield optimization initiatives, while also positioning the Company to emerge as the middle-tier provider of choice in the North American slot sales market.  

(3) “Domestic” includes both the United States and Canada.

Table Products

Three Months Ended December 31, 2023 compared to Three Months Ended December 31, 2022 

(Amounts in thousands, except unit data)   Three Months Ended December 31,
                                 
    2023   2022   $ Change   % Change
Table Products segment revenues:                                
Gaming operations   $ 3,936     $ 3,691     $ 245       6.6 %
Equipment sales     893       199       694       348.7 %
Total Table Products revenues   $ 4,829     $ 3,890     $ 939       24.1 %
                                 
Table Products Adjusted EBITDA   $ 2,842     $ 2,370     $ 472       19.9 %
                                 
Table Products unit information:                                
Table products installed base, end of period     5,415       5,051       364       7.2 %
Average monthly lease price   $ 239     $ 241     $ (2 )     (0.8 )%
                                 

Table Products Quarterly Results

  Total table products revenue increased 24% year-over-year to a record $4.8 million. Gaming operations, or recurring, revenue accounted for over 80% of Q4 2023 segment-level revenue. Total table products revenue advanced approximately 10% relative to the $4.4 million achieved in Q3 2023.
  Gaming operations revenue reached a record $3.9 million, representing a year-over-year increase of approximately 7%. Growth across all major segments of our table products installed base, including an over 65% increase in the number of shufflers installed on lease, drove our improved recurring revenue performance versus the prior year. Broad-based installed base growth also paced a 2% increase in recurring revenue on a quarterly sequential basis. 
  The table products installed base totaled 5,415 units at the end of Q4 2023, up 364 units, or approximately 7%, versus the prior year. A more than 65% increase in both our PAX S and DEX S shuffler lease bases, further customer adoption of our all-inclusive AGS Arsenal site license offering, which contributed to outsized premium game growth of approximately 19%, and an over 30% increase in our Bonus Spin Xtreme (“BSX”) progressive installed base combined to drive our year-over-year installed base growth. This same set of growth catalysts, along with new casino opening activity, contributed to an over 100 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 $239. 
  Equipment sales revenue more than quadrupled year-over-year to a record $893 thousand, exceeding the prior record, established in Q2 2023, by nearly 70%. Supported by new casino opening activity, PAX S sales surpassed 35 units, while we also benefitted from the sale of 13 DEX S units in the quarter. 
  •  Table Products Adjusted EBITDA increased 20% year-over-year to a record $2.8 million. Adjusted EBITDA margin was 58.9% compared to 60.9% in Q4 2022, reflecting a higher allocation of field service expense to the segment to better align with the current composition of the installed base and a greater mix of equipment sales revenue. Table Products Adjusted EBITDA increased by more than 15% versus the $2.4 million delivered in Q3 2023, representing our third consecutive quarter of sequential Adjusted EBITDA growth. Adjusted EBITDA margin expanded by over 300bps sequentially, reflecting the operating leverage realized as a result of our outsized revenue growth. 
  The PAX S specialty game card shuffler footprint surpassed 330 units at the end of Q4 2023, with units live in over 65 unique casinos across more than 20 states and provinces. The PAX S footprint expanded by over 40 units, or approximately 14%, sequentially in Q4 2023, supported by the activation of more than 20 units in conjunction with a recent high-profile new casino opening. 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 increased by over 30% year-over-year and approximately 5% sequentially to 530 units. BSX is currently installed in over 50 casinos across nearly 20 jurisdictions. The enhanced BSX features and functionality scheduled to launch in 2024 should allow the product to resonate with an even broader audience, helping to drive additional customer adoption in the quarters ahead. 
  At quarter end, the Company was live with over 20 AGS Arsenal site licenses across a variety of tribal and commercial end markets. The Arsenal’s compelling value proposition and our organizational commitment to investing in table product innovation continue to drive interest in our site license offering.
     

Interactive

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Three Months Ended December 31, 2023 compared to Three Months Ended December 31, 2022 

(Amounts in thousands)   Three Months Ended December 31,
                                 
    2023    2022    $ Change    % Change 
Interactive segment revenue:                                
Gaming Operations   $ 3,370     $ 2,508     $ 862       34.4 %
Total Interactive revenue   $ 3,370     $ 2,508     $ 862       34.4 %
                                 
Interactive Adjusted EBITDA   $ 1,292     $ 498     $ 794       159.4 %


Interactive Quarterly Results

  Total Interactive revenue reached a record $3.4 million, representing an increase of 34% year-over-year and approximately 8% ahead of Q3 2023. Real-money gaming (“RMG”) revenue accounted for over 90% of Q4 2023 segment-level revenue, with the balance derived from the Company’s B2C social casino platform. 
  RMG revenue increased 46% year-over-year and more than 20% sequentially to a record $3.1 million. An accelerating cadence of new game launches, including the introduction of the Company’s first ever online-first game theme, Double Shamrock; more tactical and targeted business development activities with our B2C operator partners; the continued strong performance of franchise brands, including Capital Gains, in the online channel; and the activation of more than 10 new B2C operator partners globally paced our record-setting Q4 2023 RMG revenue performance. Revenues earned from North American-facing customers accounted for over 90% of Q4 2023 RMG revenue mix.
  Interactive Adjusted EBITDA more than doubled versus the prior year to a record $1.3 million, reflecting our ability to flow through a significant portion of the RMG revenue growth achieved in the quarter while simultaneously providing our team with the financial resources necessary to support achievement of our multi-year growth objectives. Adjusted EBITDA increased by over 40% compared to the $902 thousand delivered in Q3 2023, supported by further returns on the tactical investments in technical and customer-facing talent initiated in the back half of 2022. The Interactive segment has generated positive Adjusted EBITDA for sixteen consecutive quarters, consistent with the Company’s commitment to profitably scaling revenues within the segment.
  AGS maintained its position near the top of the charts in the February 2024 Eilers-Fantini Online Game Performance Report, with the exceptional performance of its new and proven online brands producing a top-five overall slot index ranking for the fourth consecutive month. The Company’s “New” game performance told a similar story within the February report, ranking second best for the fourth month in a row with a reported theoretical win index of over 3 times site average. Three AGS game themes achieved a top-15 ranking within the February report’s “New” game category, including Platinum 8x8x8x, Mega Diamond and 8x Crystal Bells, while its established online franchise brand, Capital Gains, ranked second in the overall slots category with a reported theoretical win index of more than 14 times site average. Looking ahead, the Company remains committed to further diversifying its online content offering to include online-first game themes, bespoke product, simple slots, instant win, and table games to further solidify its position as a partner of choice to the industry’s leading B2C i-casino operators.    
  The Company’s growing suite of RMG game content, consisting of over 60 proven AGS land-based titles, was live in nearly all of the most prominent regulated North American online jurisdictions and with over 80 i-gaming operators globally as of December 31, 2023. Pennsylvania, Michigan and Canada represented the Company’s highest revenue generating end markets in Q4 2023.
     

Balance Sheet and Cash Flow Highlights

As of December 31, 2023, the Company had an available cash balance of $50.9 million and $40.0 million of availability under its undrawn revolving credit facility, resulting in total available liquidity of over $90 million.

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The total principal amount of debt outstanding, as of December 31, 2023, was $566.8 million compared to $571.4 million at December 31, 2022. Total net debt, which is the principal amount of debt outstanding less cash and cash equivalents, was $515.8 million as of December 31, 2023, conveying a total net debt leverage ratio of 3.2 times compared to 3.8 times as of December 31, 2022(4).

Fourth quarter 2023 capital expenditures totaled $15.4 million, bringing full year 2023 capital expenditures to $61.9 million. Growth capital expenditures, which primarily relate to gaming equipment-related investments into the Company’s EGM and Table Product installed bases, accounted for approximately 60% of the total capital expenditures incurred for the full year 2023, with the balance attributable to capitalized research and development (“R&D”) expenditures and investment in long-lived assets intended to support various corporate operations. The Company expects full year 2024 capital expenditures, inclusive of anticipated capitalized R&D and corporate operation expenditures, to land in the range of $65 million to $70 million.

Free cash flow(4) reached $11.0 million in Q4 2023 compared to $7.6 million in Q4 2022, pushing full year 2023 free cash flow to $27.4 million.

February 2024 Debt Repricing and Voluntary Repayment

On February 5, 2024, the Company successfully completed a repricing of its term loan credit facility. Among other things, the repricing removed the credit spread adjustment with respect to term loan borrowings and reduced the interest rate applied to such borrowings to the Secured Overnight Financing Rate (“SOFR”) plus 3.75%. Additionally, in conjunction with the repricing transaction, the Company elected to voluntarily repay $15 million of its total debt outstanding.

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2024 Net Leverage Target

Supported by the relative resiliency observed across the broader North American gaming complex 2024-to-date, both with respect to GGR trends and customer purchasing demand; the growing appeal and strong performance of AGS’s deeper and more diverse suite of EGM gaming cabinets and game content; the anticipated continued outsized growth in Interactive revenues; an unwavering commitment to cost containment and operational efficiency; and steadily improving free cash flow conversion, the Company expects to exit 2024 with a total net debt leverage ratio in the range of 2.75 times to 3.00 times.  

(4) Total Adjusted EBITDA, Total Net Debt Leverage Ratio and Free Cash Flow are non-GAAP financial measures; see non-GAAP reconciliation below.

Conference Call and Webcast

AGS executive leadership will host a conference call on Tuesday, March 5, 2024, at 5 p.m. EST to review the Company’s fourth quarter and full year 2023 financial results. Participants may visit the Company’s website, investors.playags.com, to access a live webcast of the conference call and a slide presentation reviewing the Company’s quarterly and full year financial performance. A replay of the webcast will be available on the Company’s website following the live event. United States residents may access the call live by dialing +1 (833) 470-1428, while international participants should visit www.netroadshow.com/events/global-numbers?confId=60800 for a dial by country directory. The conference call access code is 775707.

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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
[email protected] 

Julia Boguslawski, Chief Marketing Officer
[email protected]

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©2024 PlayAGS, Inc. Products referenced herein are sold by AGS LLC or other subsidiaries of PlayAGS, Inc. Solely for convenience, marks, trademarks and trade names referred to in this press release appear without the ® and  TM and SM  symbols, but such references are not intended to indicate, in any way, that PlayAGS, Inc. will not assert, to the fullest extent under applicable law, its rights or the rights of the applicable licensor to these marks, trademarks and trade names.

Forward-Looking Statement

This release contains forward-looking statements based on management’s current expectations and projections, which are intended to qualify for the safe harbor of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements identified by words such as “believe,” “will,” “may,” “might,” “likely,” “expect,” “anticipates,” “intends,” “plans,” “seeks,” “estimates,” “believes,” “continues,” “projects” and similar references to future periods. All forward-looking statements are based on current expectations and projections of future events.

These forward-looking statements reflect the current views, models, and assumptions of AGS, and are subject to various risks and uncertainties that cannot be predicted or qualified and could cause actual results in AGS’s performance to differ materially from those expressed or implied by such forward looking statements. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties, which include, but are not limited to, the ability of AGS to maintain strategic alliances, unit placements or installations, grow revenue, garner new market share, secure new licenses in new jurisdictions, successfully develop or place proprietary product, comply with regulations, have its games approved by relevant jurisdictions, market conditions, and other factors. For a more detailed discussion of these and other factors, please refer to AGS’s filings with the Securities and Exchange Commission (“SEC”), including those set forth under Item 1. “Business,” and Item 1A. “Risk Factors” in AGS’s Annual Report on Form 10-K, filed with the SEC. All forward-looking statements made herein are expressly qualified in their entirety by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. Readers are cautioned that all forward-looking statements speak only to the facts and circumstances present as of the date of this press release. AGS expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PLAYAGS, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and per share data)
    December 31,     December 31,  
    2023     2022  
Assets  
Current assets                
Cash and cash equivalents   $ 50,936     $ 37,891  
Restricted cash     244       20  
Accounts receivable, net of allowance of credit losses for $1,251 and $1,974, respectively     68,499       59,909  
Inventories     36,081       35,394  
Prepaid expenses     5,473       4,020  
Deposits and other     4,145       8,930  
Total current assets     165,378       146,164  
Property and equipment, net     78,768       82,361  
Goodwill     290,486       287,680  
Intangible assets     123,436       142,109  
Deferred tax asset     7,680       7,893  
Operating lease assets     9,862       11,198  
Other assets     4,728       7,346  
Total assets   $ 680,338     $ 684,751  
                 
Liabilities and StockholdersEquity  
Current liabilities                
Accounts payable   $ 5,406     $ 15,244  
Accrued liabilities     35,926       37,262  
Current maturities of long-term debt     6,253       6,060  
Total current liabilities     47,585       58,566  
Long-term debt     547,499       550,081  
Deferred tax liability, non-current     2,326       2,048  
Operating lease liabilities, long-term     8,636       10,413  
Other long-term liabilities     6,625       14,282  
Total liabilities     612,671       635,390  
                 
Stockholdersequity                
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 December 31, 2023 and December 31, 2022; 38,947,674 and 37,789,131 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively     389       378  
Additional paid-in capital     417,689       406,436  
Accumulated deficit     (353,044 )     (353,125 )
Accumulated other comprehensive income (loss)     2,633       (4,328 )
Total stockholdersequity     67,667       49,361  
Total liabilities and stockholdersequity   $ 680,338     $ 684,751  

PLAYAGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(amounts in thousands, except per share data)
 
    Three Months Ended
December 31,
  Twelve Months Ended
December 31,
    2023   2022   2023   2022
Revenues                                
Gaming operations   $ 59,596     $ 57,406     $ 240,237     $ 223,802  
Equipment sales     34,555       24,330       116,299       85,634  
Total revenues     94,151       81,736       356,536       309,436  
Operating expenses                                
Cost of gaming operations(5)     13,248       10,688       50,278       42,200  
Cost of equipment sales(5)     15,995       12,442       54,849       44,472  
Selling, general and administrative     16,869       16,847       73,248       67,728  
Research and development     10,909       9,676       42,385       39,628  
Write-downs and other (gains) charges     810       99       1,434       1,923  
Depreciation and amortization     20,272       18,537       76,949       75,516  
Total operating expenses     78,103       68,289       299,143       271,467  
Income from operations     16,048       13,447       57,393       37,969  
Other expense (income)                                
Interest expense     15,064       12,757       57,426       40,608  
Interest income     (588 )     (331 )     (1,855 )     (1,059 )
Loss on extinguishment and modification of debt                       8,549  
Other expense (income)     456       (583 )     109       131  
Income (loss) before income taxes     1,116       1,604       1,713       (10,260 )
Income tax (expense) benefit     (1,049 )     937       (1,285 )     2,225  
Net income (loss)     67       2,541       428       (8,035 )
Foreign currency translation adjustment     2,178       1,276       6,961       1,742  
Total comprehensive income (loss)   $ 2,245     $ 3,817     $ 7,389     $ (6,293 )
                                 
Basic and diluted income per common share:                                
Basic   $ 0.00     $ 0.06     $ 0.01     $ (0.22 )
Diluted   $ 0.00     $ 0.06     $ 0.01     $ (0.22 )
Weighted average common shares outstanding:                                
Basic     38,769       37,747       38,167       37,252  
Diluted     38,839       37,747       38,190       37,252  

(5) Exclusive of depreciation and amortization.

PLAYAGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
 
 
    Year Ended December 31,  
    2023     2022  
Cash flows from operating activities                
Net income (loss)   $ 428     $ (8,035 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
Depreciation and amortization     76,949       75,516  
Accretion of contract rights under development agreements and placement fees     6,273       6,345  
Amortization of deferred loan costs and discount     2,574       2,803  
Write-off of deferred loan costs and discount           1,586  
Cash paid for debt prepayment penalties to prior debt holders           848  
Stock-based compensation expense     11,264       11,893  
Provision for bad debts     642       465  
Disposal of long-lived assets     596       427  
Impairment of assets     838       30  
Fair value adjustment of contingent consideration:           1,466  
Benefit (expense) from deferred income tax     1,598       (829 )
Changes in assets and liabilities that relate to operations:                
Accounts receivable     (7,694 )     (10,534 )
Inventories     4,295       (6,252 )
Prepaid expenses     (1,436 )     450  
Deposits and other     5,206       (436 )
Other assets, non-current     1,600       806  
Accounts payable and accrued liabilities     (16,934 )     1,160  
Net cash provided by operating activities     86,199       77,709  
Cash flows from investing activities                
Proceeds from payments on customer notes receivable     3,081       1,867  
Business acquisitions, net of cash acquired           (4,750 )
Purchase of intangibles     (183 )      
Software development and other expenditures     (23,377 )     (21,127 )
Proceeds from disposition of assets     22       33  
Purchases of property and equipment     (38,361 )     (48,111 )
Net cash used in investing activities     (58,818 )     (72,088 )
Cash flows from financing activities                
Repayment of prior first lien credit facilities           (521,215 )
Repayment of first lien credit facilities     (5,750 )     (4,313 )
Repayment of incremental term loans           (93,575 )
Payment of financed placement fee obligations     (5,735 )     (5,253 )
Proceeds from term loans           569,250  
Payment of deferred loan costs           (4,838 )
Payment of debt prepayment penalties to prior debt holders           (848 )
Payments of previous acquisition obligation     (310 )     (514 )
Payments on finance leases and other obligations     (2,038 )     (1,213 )
Repurchase of stock     (347 )     (201 )
Net cash used in financing activities     (14,180 )     (62,720 )
Effect of exchange rates on cash and cash equivalents     68       13  
Net increase in cash, cash equivalents and restricted cash     13,269       (57,086 )
Cash, cash equivalents and restricted cash, beginning of period     37,911       94,997  
Cash, cash equivalents and restricted cash, end of period   $ 51,180     $ 37,911  
                 
Supplemental cash flow information:                
Non-cash investing and financing activities:                
Leased assets obtained in exchange for new finance lease liabilities   $ 1,658     $ 476  
Leased assets obtained in exchange for new lease liabilities   $ 882     $ 956  
Property and equipment obtained in exchange for new other long-term liability   $ 2,489     $  
                 

Non-GAAP Financial Measures

To provide investors with additional information in connection with our results as determined by generally accepted accounting principles in the United States (“GAAP”), we disclose the following non-GAAP financial measures: total Adjusted EBITDA, total Adjusted EBITDA margin, total net debt leverage ratio, and Free Cash Flow. These measures are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for net income (loss), income from operations, cash flows, or any other measure calculated in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.

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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.

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The total Adjusted EBITDA discussion above is also applicable to its margin measure, which is calculated as total Adjusted EBITDA as a percentage of total revenue.

The following table presents a reconciliation of total Adjusted EBITDA to net income, which is the most comparable GAAP measure:

Total Adjusted EBITDA Reconciliation
 
    Three Months Ended December 31,
(Amounts in thousands)                                
    2023   2022   $ Change   % Change
Net income   $ 67     $ 2,541     $ (2,474 )     (97.4 )%
Income tax benefit (expense)     1,049       (937 )     1,986       (212.0 )%
Depreciation and amortization     20,272       18,537       1,735       9.4 %
Interest expense, net of interest income and other     14,932       11,843       3,089       26.1 %
Write-downs and other (gains) charges(6)     810       99       711       718.2 %
Other adjustments(7)     500       1,228       (728 )     (59.3 )%
Other non-cash charges(8)     2,452       2,648       (196 )     (7.4 )%
Non-cash stock-based compensation(9)     2,678       1,321       1,357       102.7 %
Total Adjusted EBITDA   $ 42,760     $ 37,280     $ 5,480       14.7 %

    Three Months Ended December 31,  
(Amounts in thousands, except total Adjusted EBITDA margin)                                
    2023   2022   $ Change   % Change
Total revenues   $ 94,151     $ 81,736     $ 12,415       15.2 %
Total Adjusted EBITDA   $ 42,760     $ 37,280     $ 5,480       14.7 %
Total Adjusted EBITDA margin     45.4 %     45.6 %     (0.2 )%   (20 bps)  

(6) Write-downs and other includes items related to loss on disposal or impairment of long-lived assets and fair value adjustments to contingent consideration.
(7) Other adjustments are primarily composed of the following: 

Costs and inventory and receivable valuation charges associated with the COVID-19 pandemic, professional fees incurred for projects, costs incurred related to public offerings, contract cancellation fees and other transaction costs deemed to be non-operating in nature;
Acquisition and integration related costs related to the purchase of businesses and to integrate operations and obtain costs synergies;
Restructuring and severance costs, which primarily relate to costs incurred through the restructuring of the Company’s operations from time to time and other employee severance costs recognized in the periods presented; and
Legal and litigation related costs, which consist of payments to law firms and settlements for matters that are outside the normal course of business.

(8) Other non-cash charges are costs related to non-cash charges and losses on the disposition of assets, non-cash charges on capitalized installation and delivery, which primarily includes the costs to acquire contracts that are expensed over the estimated life of each contract, and non-cash charges related to accretion of contract rights under development agreements.
(9) Non-cash stock-based compensation includes non-cash compensation expense related to grants of options, restricted stock, and other equity awards.

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Total Net Debt Leverage Ratio Reconciliation

The following table presents a reconciliation of total net debt and total net debt leverage ratio:

(Amounts in thousands, except total net debt leverage ratio)   December 31,   December 31,
    2023   2022
Total principal amount of debt   $ 566,754     $ 571,376  
Less: Cash and cash equivalents     50,936       37,891  
Total net debt   $ 515,818     $ 533,485  
LTM Adjusted EBITDA   $ 158,967     $ 138,643  
Total net debt leverage ratio     3.2       3.8  
                 

Free Cash Flow

This schedule provides certain information regarding Free Cash Flow, which is considered a non-GAAP financial measure under the rules of the Securities and Exchange Commission.

We define Free Cash Flow as net cash provided by operating activities and proceeds from payments on customer notes receivable less cash outlays related to capital expenditures. We define capital expenditures to include purchase of intangible assets, software development and other expenditures, and purchases of property and equipment. In arriving at Free Cash Flow, we subtract cash outlays related to capital expenditures and add proceeds from payments on customer notes receivable to net cash provided by operating activities because they represent long-term investments that are required for normal business activities. As a result, subject to the limitations described below, Free Cash Flow is a useful measure of our cash available to repay debt and/or make other investments.

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Free Cash Flow adjusts for cash items that are ultimately within management’s discretion to direct, and therefore, may imply that there is less or more cash that is available than the most comparable GAAP measure. Free Cash Flow is not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted. These limitations are best addressed by using Free Cash Flow in combination with the GAAP cash flow numbers.

The following table presents a reconciliation of Free Cash Flow:

(Amounts in thousands)   Year Ended
December 31, 2023
    Nine Months Ended September 30, 2023     Three Months Ended December 31, 2023  
Net cash provided by operating activities   $ 86,199     $ 59,755     $ 26,444  
Proceeds from payments on customer notes receivable     3,081       3,081        
Purchase of intangibles     (183 )     (183 )      
Software development and other expenditures     (23,377 )     (17,855 )     (5,522 )
Purchases of property and equipment     (38,361 )     (28,458 )     (9,903 )
Free Cash Flow   $ 27,359     $ 16,340     $ 11,019  

(Amounts in thousands)   Year Ended
December 31, 2022
    Nine Months Ended September 30, 2022     Three Months Ended December 31, 2022  
Net cash provided by operating activities   $ 77,709     $ 52,574     $ 25,135  
Proceeds from payments on customer notes receivable     1,867       137     $ 1,730  
Software development and other expenditures     (21,127 )     (15,439 )     (5,688 )
Purchases of property and equipment     (48,111 )     (34,484 )     (13,627 )
Free Cash Flow   $ 10,338     $ 2,788     $ 7,550  

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