LAS VEGAS, May 7, 2020 /PRNewswire/ -- AGS (NYSE: AGS)
("AGS", "us", "we" or the "Company") today reported operating
results for its first quarter ended March 31, 2020.
AGS President and Chief Executive Officer David Lopez said, "As a result of the global
impact of COVID-19, particularly near the end of the quarter, the
gaming industry was significantly impacted with essentially all
North American gaming facilities closed at the end of March. Casino
closures resulted in significant revenue interruptions and
increased business uncertainty. Our team took early steps to
formulate and implement a comprehensive plan that included costs
savings through Company-wide salary reductions, layoffs, and
furloughs, capital expenditure reductions, and strengthening our
liquidity position. Through these initial steps, we were able
to reduce our estimated monthly cash outflow nearly 80% to
approximately $4 million, which does
not include our monthly debt service costs of $3.8 million. We are approaching the
uncertainty and challenges in the second quarter and the rest of
2020 with resolve and from a position of strength given the recent
reinforcement of our balance sheet and operational initiatives.
With our strong culture underpinning our recovery efforts, we are
focused on not simply managing through the crisis, but building a
strong future for our employees, customers, and
shareholders."
Kimo Akiona, AGS' Chief Financial
Officer, added, "In addition to the operational savings and
cash-saving programs that we have implemented, we have taken
measures to ensure that the Company is in the best possible
liquidity position given the current operating environment. These
measures included drawing the full $30
million under the existing revolving credit facility during
the quarter and postponing substantially all capital expenditures
and related projects. On May 1, 2020,
we entered into an incremental agreement in which we incurred
incremental term loans of $95 million
and obtained covenant relief on our net first lien leverage ratio
for the remaining periods in 2020."
Summary of
the Three Months Ended March 31,
2020 and 2019
|
(In thousands,
except per-share and Adjusted EBITDA margin data)
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM
|
|
$
|
50,355
|
|
|
$
|
69,655
|
|
|
$
|
(19,300)
|
|
|
|
(27.7)
|
%
|
Table
Products
|
|
|
2,482
|
|
|
|
2,156
|
|
|
|
326
|
|
|
|
15.1
|
%
|
Interactive
|
|
|
1,476
|
|
|
|
1,231
|
|
|
|
245
|
|
|
|
19.9
|
%
|
Total
revenues
|
|
$
|
54,313
|
|
|
$
|
73,042
|
|
|
$
|
(18,729)
|
|
|
|
(25.6)
|
%
|
(Loss) income from
operations
|
|
$
|
(5,183)
|
|
|
$
|
8,348
|
|
|
$
|
(13,531)
|
|
|
|
(162.1)
|
%
|
Net loss attributable
to PlayAGS, Inc.
|
|
$
|
(14,419)
|
|
|
$
|
(82)
|
|
|
$
|
(14,337)
|
|
|
N/A
|
|
Loss per
share
|
|
$
|
(0.41)
|
|
|
$
|
-
|
|
|
$
|
(0.41)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM
|
|
$
|
23,372
|
|
|
$
|
36,722
|
|
|
$
|
(13,350)
|
|
|
|
(36.4)
|
%
|
Table
Products
|
|
|
898
|
|
|
|
478
|
|
|
|
420
|
|
|
|
87.9
|
%
|
Interactive
|
|
|
231
|
|
|
|
(935)
|
|
|
|
1,166
|
|
|
|
(124.7)
|
%
|
Total Adjusted
EBITDA(1)
|
|
$
|
24,501
|
|
|
$
|
36,265
|
|
|
$
|
(11,764)
|
|
|
|
(32.4)
|
%
|
Total Adjusted
EBITDA margin(2)
|
|
|
45.1
|
%
|
|
|
49.6
|
%
|
|
|
N/A
|
|
|
(450) bps
|
|
First Quarter 2020 Financial
Results
- Due to business disruption caused by the global spread of
COVID-19 and the actions by governments and businesses to contain
the virus, nearly all of our customers have closed their operations
and the markets that we serve have been severely impacted.
This affected several metrics noted above, specifically revenues,
net loss, Adjusted EBITDA, and Adjusted EBITDA margin.
- Total revenue decreased 26% to $54.3
million, primarily due to decreased unit sales and gaming
operations revenue in our EGM segment as a result of business
disruptions and casino closures.
- Gaming operations revenue, or recurring revenue, decreased to
$42.7 million, or 19% year-over-year,
due to disruptions in revenue from leased EGMs that were
non-operational, and slightly offset by increased Table Products
and real-money gaming ("RMG") revenue.
- Net loss of $14.4 million
increased year-over-year from net loss of $0.1 million in the prior year, primarily due to
the decrease in revenue from our EGM segment, offset by decreases
in SG&A and cost of equipment sales.
- Total Adjusted EBITDA (non-GAAP)(1) decreased 32% to
$24.5 million, driven by decreased
revenue from our EGM segment and slightly offset by growth in our
Table Products and Interactive segments.
- Total Adjusted EBITDA margin (non-GAAP)(1) decreased to 45% in
the first quarter of 2020 compared to 50% in the
prior year, driven by several different factors, most notably due
to business disruptions in our EGM segment due to casino
closures.
(1) Adjusted
EBITDA and Adjusted EBITDA margin are non-GAAP measures, see
non-GAAP reconciliation below.
|
(2) Basis
points ("bps")
|
EGM
|
Three Months Ended
March 31, 2020 compared to Three Months Ended
March 31, 2019
|
|
(Amounts in
thousands, except unit data)
|
|
Three Months
Ended
March 31,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
EGM segment
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
38,885
|
|
|
$
|
49,500
|
|
|
$
|
(10,615)
|
|
|
|
(21.4)
|
%
|
Equipment
sales
|
|
|
11,470
|
|
|
|
20,155
|
|
|
|
(8,685)
|
|
|
|
(43.1)
|
%
|
Total EGM
revenues
|
|
$
|
50,355
|
|
|
$
|
69,655
|
|
|
$
|
(19,300)
|
|
|
|
(27.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM Adjusted
EBITDA
|
|
$
|
23,372
|
|
|
$
|
36,722
|
|
|
$
|
(13,350)
|
|
|
|
(36.4)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM unit
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VLT
|
|
|
512
|
|
|
|
667
|
|
|
|
(155)
|
|
|
|
(23.2)
|
%
|
Class II
|
|
|
12,291
|
|
|
|
12,191
|
|
|
|
100
|
|
|
|
0.8
|
%
|
Class III
|
|
|
5,000
|
|
|
|
5,940
|
|
|
|
(940)
|
|
|
|
(15.8)
|
%
|
Domestic installed
base, end of period
|
|
|
17,803
|
|
|
|
18,798
|
|
|
|
(995)
|
|
|
|
(5.3)
|
%
|
International
installed base, end of period
|
|
|
8,286
|
|
|
|
8,510
|
|
|
|
(224)
|
|
|
|
(2.6)
|
%
|
Total installed base,
end of period
|
|
|
26,089
|
|
|
|
27,308
|
|
|
|
(1,219)
|
|
|
|
(4.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installed base -
Oklahoma
|
|
|
9,745
|
|
|
|
10,193
|
|
|
$
|
(448)
|
|
|
|
(4.4)
|
%
|
Installed base -
non-Oklahoma
|
|
|
8,058
|
|
|
|
8,605
|
|
|
$
|
(547)
|
|
|
|
(6.4)
|
%
|
Domestic installed
base, end of period
|
|
|
17,803
|
|
|
|
18,798
|
|
|
$
|
(995)
|
|
|
|
(5.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic revenue per
day
|
|
$
|
21.08
|
|
|
$
|
26.42
|
|
|
$
|
(5.34)
|
|
|
|
(20.2)
|
%
|
International revenue
per day
|
|
$
|
6.89
|
|
|
$
|
8.68
|
|
|
$
|
(1.79)
|
|
|
|
(20.6)
|
%
|
Total revenue per
day
|
|
$
|
16.57
|
|
|
$
|
20.73
|
|
|
$
|
(4.16)
|
|
|
|
(20.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic EGM units
sold
|
|
|
426
|
|
|
|
1,024
|
|
|
|
(598)
|
|
|
|
(58.4)
|
%
|
International EGM
units sold
|
|
|
38
|
|
|
|
-
|
|
|
|
38
|
|
|
|
100.0
|
%
|
Total EGM units
sold
|
|
|
464
|
|
|
|
1,024
|
|
|
|
(560)
|
|
|
|
(54.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic average
sales price
|
|
$
|
17,564
|
|
|
$
|
18,738
|
|
|
$
|
(1,174)
|
|
|
|
(6.3)
|
%
|
EGM Quarterly Results
Domestic Gaming Operations(3)
- Domestic gaming operations revenue decreased $9.1 million, or 21%, driven by disruptions in
lease revenue from EGMs that were non-operational as noted above
and to a lesser extent, a decreased installed base compared to the
prior year period.
- Domestic EGM installed base decreased by 995 units
year-over-year, primarily due to the sale of 395 previously leased,
lower-yielding Oklahoma units to
distributors in the current period and 327 in the fourth quarter of
2019.(4) The prior year installed base included 150 VLT units that
were purchased in an end-of-lease buyout.(5)
- Domestic EGM revenue per day ("RPD") decreased 20% to
$21.08 compared to $26.42 in the prior year period, driven by
non-operational EGMs in the latter part of the quarter.
- Oklahoma RPD decreased compared to the prior year period driven
primarily by non-operational EGMs in the quarter. Oklahoma RPD for
the two months ended February 29,
2020, decreased 7%, to $18.98
compared to $20.47 in the prior year
period, driven by the decrease in product performance that was
discussed in previous quarterly results and the impact of EGMs
purchased from Integrity in February 2019. The 7% decrease in
Oklahoma RPD represents a lower degradation from fourth quarter RPD
which was down 9% year-over-year, as a result of targeted
countermeasures.
International Gaming Operations
- International gaming operations revenue decreased by 24%
year-over-year, driven primarily by business disruption and casino
closures in Mexico.
- International RPD decreased by $1.79, or 21%, due largely to casino closures in
March.
Equipment Sales
- Domestic EGM units sold decreased by nearly 600 units compared
to the prior year period, primarily due to business disruptions
related to COVID-19 as noted above. The sale of 395 previously
leased, lower-yielding units were not included in our sold unit
count or domestic average sales price ("ASP") for the current
period.
- ASP for EGMs decreased to $17,564
from $18,738 in the prior year period
driven by product mix.
- EGM equipment sales revenue was driven by sales in early-entry
markets such as New York,
Canada, Rhode Island, and Michigan.
Product Highlights
- Initial placements of our new premium, lease-only
Starwall in Oklahoma. Prior
to the casino shutdowns from COVID-19, initial performance was more
than 2x house average.
- Initial placements of nearly 50 Orion Rise cabinets in the quarter, in
markets such as Oklahoma,
Florida, Indiana, and California.
(3) "Domestic" includes both the United
States and Canada.
|
(4) The 395
units were not included in our sold unit count or ASP for the
current period.
|
(5) The
VLT units were not included in our sold unit count for either
period.
|
Table
Products
|
|
Three Months Ended
March 31, 2020 compared to Three Months Ended March 31,
2019
|
|
(Amounts in
thousands, except unit data)
|
|
Three Months
Ended
March 31,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
Table Products
segment revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
2,324
|
|
|
$
|
2,130
|
|
|
$
|
194
|
|
|
|
9.1
|
%
|
Equipment
sales
|
|
|
158
|
|
|
|
26
|
|
|
|
132
|
|
|
|
507.7
|
%
|
Total Table
Products revenues
|
|
$
|
2,482
|
|
|
$
|
2,156
|
|
|
$
|
326
|
|
|
|
15.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
Adjusted EBITDA
|
|
$
|
898
|
|
|
$
|
478
|
|
|
$
|
420
|
|
|
|
87.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
unit information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
installed base, end of period
|
|
|
3,897
|
|
|
|
3,285
|
|
|
|
612
|
|
|
|
18.6
|
%
|
Average monthly lease
price
|
|
$
|
197
|
|
|
$
|
217
|
|
|
$
|
(20)
|
|
|
|
(9.2)
|
%
|
Table Products Quarterly Results
- Total Table Products revenue increased 15% to $2.5 million, driven by an increase of 612 units
year-over-year and increased equipment sales despite casino
closures in the quarter. Total Table Products revenue for the two
months ended February 29, 2020
increased 26% to $2.0 million
compared to $1.5 million in the prior
year period driven, by continued product momentum.
- Gaming operations revenue increased $0.2
million, or 9%, driven by the continued growth of our
progressive offerings; Bonus Spin, Royal 9 Baccarat
Progressive, and Super 4 Progressive Blackjack, as well
as our Buster Blackjack side bet, our new Dex S card
shuffler, and our Criss Cross Poker premium game
offering.
- Equipment sales revenue increased $0.1
million due to the sales of both our new Dex S card
shuffler and our table signage.
- Installed base of table game progressives reached nearly 1,350
units, up 30% year-over-year.
- Installed base of side bets reached nearly 2,200 units in the
quarter.
- Progressive conversions from competitor progressives to our own
STAX Progressives in the first half of 2019, which helped
drive the Adjusted EBITDA increase.
Interactive
|
|
Three Months Ended
March 31, 2020 compared to Three Months Ended
March 31, 2019
|
|
(Amounts in
thousands)
|
|
Three Months
Ended
March 31,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
Interactive
segment revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social gaming
revenue
|
|
$
|
822
|
|
|
$
|
958
|
|
|
$
|
(136)
|
|
|
|
(14.2)
|
%
|
Real-money gaming
revenue
|
|
|
654
|
|
|
|
273
|
|
|
|
381
|
|
|
|
139.6
|
%
|
Total Interactive
revenue
|
|
$
|
1,476
|
|
|
$
|
1,231
|
|
|
$
|
245
|
|
|
|
19.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interactive
Adjusted EBITDA
|
|
$
|
231
|
|
|
$
|
(935)
|
|
|
$
|
1,166
|
|
|
|
(124.7)
|
%
|
Interactive Quarterly Results
- Total revenue increased $0.2
million while Adjusted EBITDA increased $1.2 million compared to the prior year.
- Interactive segment reported positive Adjusted EBITDA, up both
year-over year and sequentially, due to cost savings from the
restructuring of our social business discussed in the previous
quarter, as well as an increase in RMG revenue.
- RMG revenue increased $0.4
million driven by the continued launch of our EGM content in
the European RMG market as well as our recent launch into the New
Jersey RMG market.
- Our RMG platform in New Jersey
currently has five operators, with recent addition of Caesars
Entertainment in the quarter and the addition of Golden Nugget,
Resorts Digital Gaming, and Mohegan Sun in the previous
quarter.
Balance Sheet Review
As of March 31, 2020, we had
$43.6 million in cash and cash
equivalents compared to $13.2 million
at December 31, 2019. Total principle
amount of debt as of March 31, 2020,
of $562.4 million was predominantly
comprised of first lien term loans of $530.6
million, which mature in 2024, and a first lien revolving
credit facility of $30.0 million,
which matures in 2022. On March 19,
2020, the Company borrowed under the revolving credit
facility the full amount of $30.0
million 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.
Total net debt, which is the principal amount of debt
outstanding less cash and cash equivalents as of March 31, 2020, was approximately $518.9 million compared to $520.6 million at December
31, 2019. Net debt as of March 31, 2020 decreased by
$1.7 million compared to December 31, 2019. Our Total Net Debt Leverage
Ratio increased from 3.6 times at December
31, 2019, to 3.9 times at March 31,
2020, see Total Net Debt Leverage Ratio Reconciliation
below.(6) Capital expenditures decreased $8.4 million to $10.6
million in the first quarter, compared to $19.0 million in the prior year period due to a
reduction of EGM units placed on lease as a result of the casino
closures and impacts of COVID-19.
Recent Developments
On May 1, 2020, we entered into an
amendment to the First Lien Credit Agreement (the "Amendment No.
4") that provided for additional financing of $95.0 million, of which we received $83.5 million after original issue discount and
related fees. As a result of the additional financing, coupled with
existing cash balances, we believe we have sufficient liquidity to
fund our operating requirements and meet our obligations as they
become due for at least the next 12 months. Amendment No. 4 also
implemented a financial covenant relief period (the "Financial
Covenant Relief Period") through December
31, 2020, and implemented a revised calculation of EBITDA
commencing on the first day after the expiration of the Financial
Covenant Relief Period and ending on the first day of the fourth
fiscal quarter after the expiration of the Financial Covenant
Relief Period. As a result of this Amendment No. 4, and based
on our projected operating results for the next 12 months, we
expect that we will be in compliance with our debt covenants under
the First Lien Credit Agreement for at least the next 12
months.
2020 Outlook
On March 20, 2020, due to the
developments related to the COVID-19 outbreak, we withdrew our 2020
annual guidance provided under the heading "2020 Outlook" in our
Press Release dated March 4,
2020. We are currently unable to provide updated
guidance.
(6) Total Adjusted
EBITDA and total net debt leverage ratio are non-GAAP measures, see
non-GAAP reconciliation below.
|
Conference Call and Webcast
On May 7, 2020, at 5 p.m. EDT, AGS leadership will host a conference
call to present the first 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 Q1 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 and real-money gaming solutions for
players and operators, and best-in-class service, we offer an
unmatched value proposition for our casino partners. Learn more at
playags.com.
AGS Media & Investor Contacts:
Julia Boguslawski, Chief
Marketing Officer and Executive Vice President of Investor
Relations
jboguslawski@playags.com
Steven Kopjo, Director of
Investor Relations
skopjo@playags.com
©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)
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Assets
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
43,564
|
|
|
$
|
13,162
|
|
Restricted
cash
|
|
|
20
|
|
|
|
20
|
|
Accounts receivable,
net of allowance of $451 and $723, respectively
|
|
|
39,716
|
|
|
|
61,224
|
|
Inventories
|
|
|
39,015
|
|
|
|
32,875
|
|
Prepaid
expenses
|
|
|
4,999
|
|
|
|
2,983
|
|
Deposits and
other
|
|
|
5,172
|
|
|
|
5,332
|
|
Total current
assets
|
|
|
132,486
|
|
|
|
115,596
|
|
Property and
equipment, net
|
|
|
94,043
|
|
|
|
103,598
|
|
Goodwill
|
|
|
283,273
|
|
|
|
287,049
|
|
Intangible
assets
|
|
|
219,458
|
|
|
|
230,451
|
|
Deferred tax
asset
|
|
|
3,750
|
|
|
|
4,965
|
|
Operating lease
assets
|
|
|
11,039
|
|
|
|
11,543
|
|
Other
assets
|
|
|
6,659
|
|
|
|
9,176
|
|
Total
assets
|
|
$
|
750,708
|
|
|
$
|
762,378
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
14,260
|
|
|
$
|
15,598
|
|
Accrued
liabilities
|
|
|
23,877
|
|
|
|
34,840
|
|
Current maturities of
long-term debt
|
|
|
6,071
|
|
|
|
6,038
|
|
Total current
liabilities
|
|
|
44,208
|
|
|
|
56,476
|
|
Long-term
debt
|
|
|
547,844
|
|
|
|
518,689
|
|
Deferred tax
liability - non-current
|
|
|
1,482
|
|
|
|
1,836
|
|
Operating lease
liabilities, long-term
|
|
|
10,672
|
|
|
|
11,284
|
|
Other long-term
liabilities
|
|
|
33,960
|
|
|
|
40,309
|
|
Total
liabilities
|
|
|
638,166
|
|
|
|
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 March 31, 2020 and at
December 31, 2019; and 35,587,851 and 35,534,558 shares issued and
outstanding at March 31, 2020 and December 31, 2019,
respectively.
|
|
|
356
|
|
|
|
355
|
|
Additional paid-in
capital
|
|
|
373,019
|
|
|
|
371,311
|
|
Accumulated
deficit
|
|
|
(250,241)
|
|
|
|
(235,474)
|
|
Accumulated other
comprehensive loss
|
|
|
(10,592)
|
|
|
|
(2,408)
|
|
Total stockholders'
equity
|
|
|
112,542
|
|
|
|
133,784
|
|
Total liabilities
and stockholders' equity
|
|
$
|
750,708
|
|
|
$
|
762,378
|
|
PLAYAGS,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
(amounts in
thousands, except per share data)
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
42,685
|
|
|
$
|
52,861
|
|
Equipment
sales
|
|
|
11,628
|
|
|
|
20,181
|
|
Total
revenues
|
|
|
54,313
|
|
|
|
73,042
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of gaming
operations(7)
|
|
|
9,993
|
|
|
|
9,619
|
|
Cost of equipment
sales(7)
|
|
|
5,208
|
|
|
|
9,524
|
|
Selling, general and
administrative
|
|
|
11,640
|
|
|
|
14,877
|
|
Research and
development
|
|
|
8,231
|
|
|
|
8,125
|
|
Write-downs and other
charges
|
|
|
55
|
|
|
|
1,016
|
|
Depreciation and
amortization
|
|
|
24,369
|
|
|
|
21,533
|
|
Total operating
expenses
|
|
|
59,496
|
|
|
|
64,694
|
|
(Loss) income from
operations
|
|
|
(5,183)
|
|
|
|
8,348
|
|
Other
expense
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
8,342
|
|
|
|
8,874
|
|
Interest
income
|
|
|
(52)
|
|
|
|
(39)
|
|
Other
expense
|
|
|
4,339
|
|
|
|
5,260
|
|
(Loss) income
before income taxes
|
|
|
(17,812)
|
|
|
|
(5,747)
|
|
Income tax benefit
(expense)
|
|
|
3,393
|
|
|
|
5,758
|
|
Net (loss)
income
|
|
|
(14,419)
|
|
|
|
11
|
|
Less: Net income
attributable to non-controlling interests
|
|
|
-
|
|
|
|
(93)
|
|
Net (loss) income
attributable to PlayAGS, Inc.
|
|
|
(14,419)
|
|
|
|
(82)
|
|
Foreign currency
translation adjustment
|
|
|
(8,184)
|
|
|
|
642
|
|
Total
comprehensive (loss) income
|
|
$
|
(22,603)
|
|
|
$
|
560
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
loss per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.41)
|
|
|
$
|
-
|
|
Diluted
|
|
$
|
(0.41)
|
|
|
$
|
-
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35,543
|
|
|
|
35,371
|
|
Diluted
|
|
|
35,543
|
|
|
|
35,371
|
|
|
(7) Exclusive of
depreciation and amortization.
|
PLAYAGS,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(14,419)
|
|
|
$
|
11
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
24,369
|
|
|
|
21,533
|
|
Accretion of contract
rights under development agreements and placement fees
|
|
|
1,859
|
|
|
|
1,271
|
|
Amortization of
deferred loan costs and discount
|
|
|
492
|
|
|
|
468
|
|
Stock-based
compensation expense
|
|
|
1,551
|
|
|
|
1,196
|
|
(Benefit) provision
for bad debts
|
|
|
(299)
|
|
|
|
52
|
|
Loss on disposition of
assets
|
|
|
49
|
|
|
|
266
|
|
Impairment of
assets
|
|
|
6
|
|
|
|
350
|
|
Fair value adjustment
of contingent consideration
|
|
|
-
|
|
|
|
400
|
|
Benefit for deferred
income tax
|
|
|
(101)
|
|
|
|
(298)
|
|
Changes in assets and
liabilities that relate to operations:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
20,284
|
|
|
|
(4,155)
|
|
Inventories
|
|
|
(5,324)
|
|
|
|
522
|
|
Prepaid
expenses
|
|
|
(2,068)
|
|
|
|
(1,554)
|
|
Deposits and
other
|
|
|
408
|
|
|
|
318
|
|
Other assets,
non-current
|
|
|
3,681
|
|
|
|
5,268
|
|
Accounts payable and
accrued liabilities
|
|
|
(11,679)
|
|
|
|
(13,993)
|
|
Net cash provided
by operating activities
|
|
|
18,809
|
|
|
|
11,655
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
Customer notes
receivable
|
|
|
(2,301)
|
|
|
|
-
|
|
Business acquisitions, net of cash acquired
|
|
|
-
|
|
|
|
(50,779)
|
|
Purchase of intangible
assets
|
|
|
(699)
|
|
|
|
(1,231)
|
|
Software development
and other expenditures
|
|
|
(3,756)
|
|
|
|
(2,669)
|
|
Proceeds from
disposition of assets
|
|
|
27
|
|
|
|
109
|
|
Purchases of property
and equipment
|
|
|
(6,150)
|
|
|
|
(15,105)
|
|
Net cash used in
investing activities
|
|
|
(12,879)
|
|
|
|
(69,675)
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
Repayment of first
lien credit facilities
|
|
|
(1,347)
|
|
|
|
(1,347)
|
|
Payment of financed
placement fee obligations
|
|
|
(3,444)
|
|
|
|
(971)
|
|
Borrowing on
revolver
|
|
|
30,000
|
|
|
|
-
|
|
Payments of previous
acquisition obligation
|
|
|
(201)
|
|
|
|
(157)
|
|
Payments on finance
leases and other obligations
|
|
|
(333)
|
|
|
|
(417)
|
|
Repurchase of
stock
|
|
|
(348)
|
|
|
|
-
|
|
Proceeds from stock
option exercise
|
|
|
158
|
|
|
|
556
|
|
Distributions to
non-controlling interest owners
|
|
|
-
|
|
|
|
(57)
|
|
Net cash provided
by (used in) financing activities
|
|
|
24,485
|
|
|
|
(2,393)
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
|
(13)
|
|
|
|
(2)
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
30,402
|
|
|
|
(60,415)
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
|
|
13,182
|
|
|
|
70,804
|
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
43,584
|
|
|
$
|
10,389
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
|
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
|
|
|
|
|
|
Intangible assets
obtained under financed placement fee arrangements
|
|
$
|
-
|
|
|
$
|
33,129
|
|
Leased assets obtained
in exchange for new finance lease liabilities
|
|
$
|
254
|
|
|
$
|
494
|
|
Leased assets obtained
in exchange for new operating lease liabilities
|
|
$
|
-
|
|
|
$
|
10,102
|
|
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
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Net (loss) income
attributable to PlayAGS, Inc.
|
|
$
|
(14,419)
|
|
|
$
|
(82)
|
|
Income tax (benefit)
expense
|
|
|
(3,393)
|
|
|
|
(5,758)
|
|
Depreciation and
amortization
|
|
|
24,369
|
|
|
|
21,533
|
|
Other
expense
|
|
|
4,339
|
|
|
|
5,260
|
|
Interest
income
|
|
|
(52)
|
|
|
|
(39)
|
|
Interest
expense
|
|
|
8,342
|
|
|
|
8,874
|
|
Write-downs and
other(8)
|
|
|
55
|
|
|
|
1,016
|
|
Other
adjustments(9)
|
|
|
702
|
|
|
|
277
|
|
Other non-cash
charges(10)
|
|
|
2,555
|
|
|
|
1,919
|
|
Acquisitions and
integration related costs including restructuring and
severance(11)
|
|
|
452
|
|
|
|
2,069
|
|
Non-cash stock-based
compensation
|
|
|
1,551
|
|
|
|
1,196
|
|
Adjusted
EBITDA
|
|
$
|
24,501
|
|
|
$
|
36,265
|
|
|
|
(Amounts in
thousands, except Adjusted EBITDA margin)
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Total
revenues
|
|
$
|
54,313
|
|
|
$
|
73,042
|
|
Adjusted
EBITDA
|
|
$
|
24,501
|
|
|
$
|
36,265
|
|
Adjusted EBITDA
margin
|
|
|
45.1
|
%
|
|
|
49.6
|
%
|
|
(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) 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)
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Total principle
amount of debt
|
|
$
|
562,423
|
|
|
$
|
533,727
|
|
Less: Cash and cash
equivalents
|
|
|
43,564
|
|
|
|
13,162
|
|
Total net
debt
|
|
$
|
518,859
|
|
|
$
|
520,565
|
|
LTM Adjusted
EBITDA
|
|
$
|
134,298
|
|
|
$
|
146,062
|
|
Total net debt
leverage ratio
|
|
|
3.9
|
|
|
|
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)
|
|
Three Months
Ended March
31, 2020
|
|
Net cash provided by
operating activities
|
|
$
|
18,809
|
|
Purchase of
intangible assets
|
|
|
(699)
|
|
Software development
and other expenditures
|
|
|
(3,756)
|
|
Purchases of property
and equipment
|
|
|
(6,150)
|
|
Free Cash
Flow
|
|
$
|
8,204
|
|
|
|
(Amounts in
thousands)
|
|
Three Months
Ended March
31, 2019
|
|
Net cash provided by
operating activities
|
|
$
|
11,655
|
|
Purchase of
intangible assets
|
|
|
(1,231)
|
|
Software development
and other expenditures
|
|
|
(2,669)
|
|
Purchases of property
and equipment
|
|
|
(15,105)
|
|
Free Cash
Flow
|
|
$
|
(7,350)
|
|
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SOURCE AGS