Record Quarterly Revenue of $64.9 Million Grew 36% Year-Over-Year
Record Adjusted EBITDA of $34.5 Million Grew 39% Year-Over-Year
Record Recurring Revenue of $49.6 Million Grew 23% Year-Over-Year
EGM Units Sold of 838 grew 85% Year-Over-Year
Net Loss of $9.5 Million Improved 23% Year-Over-Year, which includes $8.0 million initial non-cash stock based compensation expense
LAS VEGAS, May 3, 2018 – PlayAGS, Inc. (NYSE: AGS) (“AGS”, “us”, “we” or the “Company”) today reported operating results for its first quarter 2018 and quarter ended March 31, 2018.
“The first quarter of 2018 was absolutely tremendous for AGS – we achieved records in every key category, including revenue, adjusted EBITDA, average selling price, and recurring revenue. We reported the most EGM sales revenue in our company’s history with 838 units sold, driven largely by the continued success of the Orion Portrait cabinet, while our Tables and Interactive segments both reported their strongest EBITDA quarters to date,” said David Lopez, President and CEO of AGS. “With industry-leading game performance and the recent introduction of the new Orion Slant, AGS shows no signs of slowing down and we are confident that 2018 will be our best year yet.”
First Quarter Financial Highlights
- Total revenue increased 36% to $64.9 million, a company record, driven by continued growth of our EGMs in the Class III marketplace, led by demand for our newer premium Orion Portrait
- Recurring revenue grew to $49.6 million or 23% year-over-year, primarily attributable to the contribution of EGMs purchased from Rocket Gaming and Table Products purchased from In Bet in the Fall of 2017, as well as our yield optimization efforts and the popularity of the Orion Portrait cabinet.
- EGM equipment sales increased 107% to $15.2 million, another company record, due to the sale of 838 units, approximately 60% of which were Orion Portrait
- Adjusted EBITDA increased to $34.5 million, or 39%, driven by an increase in revenue, and partially offset by increased adjusted operating expenses of $3.8 million primarily due to increased headcount in our R&D studios including our new studio in Sydney, Australia.
- Total adjusted EBITDA margin increased to 53% in the first quarter 2018 compared to 52% driven by several different factors, most notably due to the operating leverage from the assets purchased from Rocket Gaming.
- SG&A expenses increased $6.5 million in the first quarter of 2018 primarily due to an initial non-cash charge of $6.2 million in stock based compensation recorded in connection with the IPO, as well as increased costs due to higher headcount.
- R&D expenses increased $3.3 million in the first quarter of 2018 driven by an initial non-cash charge of $1.6 million in stock based compensation recorded in connection with the IPO, as well as increased headcount, and the development of our new Orion Slant cabinet and DEX S card shuffler.
- Net loss also improved to $9.5 million from $12.4 million, which included non-cash stock based compensation in the current quarter of $8.2 million versus no non-cash stock based compensation in the prior year.
First Quarter Business Highlights
- Domestic EGM installed base increased by over 2,500 units year-over-year driven by the purchase of approximately 1,500 EGMs from Rocket Gaming in December 2017 and the popularity of our ICON and Orion Portrait
- Domestic EGM revenue per day increased 3% to $26.72 driven by our yield optimization efforts as well as the growing footprint of our latest high-performing products in both current and new markets.
- EGM units sold increased to 838 in the current quarter compared to 453 in the prior year led by sales of the Orion Portrait
- EGM average selling price (ASP) increased over 13% to $17,758, a quarterly company record, driven by record sales of the Orion Portrait
- On a trailing twelve months basis, nearly $5.6 million of our recurring revenue came from our yield optimization efforts.
- Table Products increased 940 units, or 56%, to 2,631 units driven by both organic growth – most notably in Buster Blackjack and Bonus Spin progressive units – and the purchase of approximately 500 In Bet assets in the third quarter of 2017.
- Our ICON cabinet footprint grew 172% to over 5,400 total units in the field.
- Introduced to the market in Q1 of 2017, our Orion Portrait cabinet ended Q1 2018 with a footprint of over 2,800 total units, up 49% from year end.
Balance Sheet Review
Capital expenditures increased $0.6 million to $15.0 million in the first quarter, compared to $14.4 million in the prior year period. As of March 31, 2018, AGS had $25.8 million in cash and cash equivalents compared to $19.2 million at December 31, 2017. Total net debt, which is the principal amount of debt outstanding less cash and cash equivalents, as of March 31, 2018, was approximately $487.7 million compared to $648.7 million at December 31, 2017. This substantial reduction was driven by the IPO, the exercise in full of the underwriters’ over allotment option and the settlement of our HoldCo PIK notes during the first quarter.
Based on our year-to-date progress and due to our current momentum, we now expect our adjusted EBITDA in 2018 to be between $126 and $131 million. This is an upward revision to the guidance we previously released and is based on greater visibility that we now have for Orion Portrait and other products throughout the year. We maintain our capital expenditures range of $55 to $60 million.
Conference Call and Webcast
Today, at 5:00 p.m. ET, management will host a conference call to present the first quarter 2018 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 US/Canada toll-free dial-in number is +1 (866) 777-2509 and the dial-in number for participants outside the US/Canada is +1 (412) 317-5413. The conference ID/confirmation code is AGS Q1 2018 Earnings Call.
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 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 solutions for players and operators, and best-in-class service, we offer an unmatched value proposition for our casino partners. Learn more about us at www.playags.com.
This release contains “forward-looking statements.” Forward-looking statements include any statements that address future results or occurrences. In some cases you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “would,” “should,” “could” or the negatives thereof. Generally, the words “anticipate,” “believe,” “continue,” “expect,” “intend,” “estimate,” “project,” “plan” and similar expressions identify forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained in this Annual Report on Form 10-K in Item 1. “Business,” Item 1A. “Risk Factors” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. These forward-looking statements include statements that are not historical facts, including statements concerning our possible or assumed future actions and business strategies.
Non-GAAP Financial Measures
This press release and accompanying schedules provide certain information regarding adjusted EBITDA, which is considered a non-GAAP financial measures 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 or expenses that are deducted in calculating net income and to deduct certain gains that are included in calculating net income. However, these charges and 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 following table presents a reconciliation of total adjusted EBITDA to net loss, which is the most comparable GAAP measure:
For information contact:
Julia Boguslawski, Chief Marketing Officer & EVP of Investor Relations
Steven Kopjo, Director of SEC Reporting & Investor Relations