LAS VEGAS, Nov. 8, 2018 /PRNewswire/ -- PlayAGS, Inc.
(NYSE: AGS) ("AGS", "us", "we", or the "Company") today reported
operating results for its third quarter 2018.
![AGS Logo (PRNewsfoto/AGS) AGS Logo (PRNewsfoto/AGS)](https://mma.prnewswire.com/media/654341/AGS_logo_R_Logo.jpg)
AGS President and Chief Executive Officer David Lopez said, "In the third quarter, AGS
sold 1,332 EGMs, a 58% jump year-over-year, and a company record.
Revenue hit an all-time high of $75.5
million, demonstrating continued demand for our Orion
Portrait cabinet and growing momentum for our new Orion
Slant, in addition to significant progress in Canada, with 24% of our sold EGMs placed in
several Canadian provinces. Our Tables segment posted its best
quarter to date, with our innovative progressives contributing to a
30% increase in installs year-over-year. AGS is still very
underrepresented in many markets both domestically and
internationally, which presents significant long-term growth
opportunities for the Company due to our industry-leading game
performance, an expanding suite of cabinet options, best-in-class
R&D, and diversified product offerings."
Summary of the
quarter ended September 30, 2018 and 2017
|
(In thousands, except
per-share and unit data)
|
|
|
Three Months Ended
September 30,
|
|
2018
|
2017
|
%
Change
|
Revenues
|
|
|
|
|
|
EGM
|
$
|
71,784
|
$
|
53,331
|
34.6 %
|
Table
Products
|
|
2,052
|
|
1,099
|
86.7 %
|
Interactive
|
|
1,690
|
|
2,010
|
(15.9)%
|
Total
revenue
|
$
|
75,526
|
$
|
56,440
|
33.8 %
|
Operating
income
|
$
|
10,110
|
$
|
9,136
|
10.7 %
|
Net income
(loss)
|
$
|
4,347
|
$
|
(4,090)
|
N/A
|
Income (loss) per
share
|
$
|
0.12
|
$
|
(0.18)
|
N/A
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
EGM
|
$
|
34,026
|
$
|
29,756
|
14.4 %
|
Table
Products
|
|
428
|
|
(232)
|
N/A
|
Interactive
|
|
(877)
|
|
(123)
|
N/A
|
Total Adjusted
EBITDA(1)
|
$
|
33,577
|
$
|
29,401
|
14.2 %
|
|
|
|
|
|
|
EGM units
sold
|
|
1,332
|
|
842
|
58.2 %
|
EGM total installed
base, end of period
|
|
24,184
|
|
22,015
|
9.9 %
|
|
(1) Total
Adjusted EBITDA is a non-GAAP measure, see non-GAAP reconciliation
below.
|
|
Third Quarter Financial Highlights
- Total revenue increased 34% to $75.5
million, a Company record, driven by continued growth of our
EGMs in the Class III marketplace, including entry into
Alberta, Canada as well as a large
sale to a long-standing tribal customer.
- Recurring revenue grew to $50.7
million, or 18% year-over-year. In addition to the
contribution from the EGMs purchased from Rocket Gaming, the
increase was driven by our strong domestic revenue per day ("RPD")
of $27.14, up $1.70 year-over-year as well as increases in
Table Products revenue driven by an increase in Table Product
units.
- EGM equipment sales increased 82% to $24.7 million, another Company record, due to the
sale of 1,332 units, of which approximately 24% were sold in
Canada and 276 units were sold to
a long-standing tribal customer.
- Net income improved to $4.3
million from a net loss of $4.1
million in the prior year period, primarily due to the
increased revenue described above.
- Total Adjusted EBITDA (non-GAAP) increased to $33.6 million, or 14%, driven by the significant
increase in revenue, partially offset by increased adjusted
operating expenses of $6.1 million
primarily due to increased headcount in SG&A and R&D.
Included in that amount was approximately $1.0 million of operating costs from our recently
acquired real money gaming ("RMG") content-aggregator
Gameiom.(1)
- Total Adjusted EBITDA margin (non-GAAP) decreased to 44% in the
third quarter of 2018 compared to 52% in the prior year driven by
several different factors, most notably the increased proportion of
equipment sales as part of total revenues, higher-period costs
related to manufacturing, and service costs,as well as increased
operating costs mentioned above and costs associated with our
recently acquired RMG content-aggregator
Gameiom.(1)
- SG&A expenses increased $5.5
million in the third quarter of 2018 primarily due to
increased salary and benefit costs of $2.8
million due to higher headcount, and $2.2 million from increased professional fees
driven by acquisitions as well as previous securities offerings.
The increase was also attributable to costs associated with the
recent acquisition of RMG content-aggregator Gameiom.
- R&D expenses increased $1.4
million in the third quarter of 2018 driven by higher salary
and benefit costs related to additional headcount. As a percentage
of total revenue, R&D expense was 10% for the period ended
September 30, 2018 compared to 11%
for the prior year period.
(1) Adjusted EBITDA is a non-GAAP measure, see non-GAAP
reconciliation below.
Third Quarter Business Highlights
- EGM units sold increased to 1,332, a Company record, in the
current quarter compared to 842 in the prior year led by sales of
the Orion Portrait and Orion Slant cabinets in
early-entry markets such as Alberta, Nevada, and Ontario.
- Domestic EGM RPD increased 7% to $27.14, driven by our new product offerings and
the optimization of our installed base by installing our newer
higher-performing EGMs.
- EGM average selling price ("ASP") increased 14% to $18,051, driven by record sales of the
premium-priced Orion Portrait cabinet and our newly
introduced core-plus cabinet, Orion Slant.
- Table Products increased 328 units sequentially, or 12%, to
3,065 units, driven by organic growth, most notably the Super 4
Progressive Blackjack and Buster Blackjack side
bet.
- Our ICON cabinet footprint grew 59% year over year to
over 6,800 total units in the field.
- Mexico's installed base
increased 645 units year over year and 240 units sequentially to
over 8,100 units with over 420 ICON units as of
September 30, 2018.
- The Orion Portrait cabinet ended the third
quarter of 2018 with a footprint of over 4,460 total units as
compared to 1,123 units in the third quarter of 2017, up 134% from
year-end and 298% year-over-year.
- AGS' new Orion Slant footprint increased to over 780
units by quarter end.
Balance Sheet Review
Capital expenditures increased $5.6
million to $16.1 million in
the third quarter, compared to $10.5
million in the prior year period. As of
September 30, 2018, we had
$33.2 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 September 30, 2018, was approximately
$476.9 million compared to
$648.7 million at December 31, 2017. This substantial reduction was
driven by the IPO and related redemption of our HoldCo PIK notes
during the first quarter. In the third quarter, net debt
decreased by over $6.9 million due to
mandatory principal payments on our term loans and a higher balance
of cash and cash equivalents. As a result of the above
transactions and our strong operational performance, our total net
debt leverage ratio, which is total net debt divided by Adjusted
EBITDA for the trailing 12-month period, decreased from 6.1 times
at December 31, 2017, to 3.6 times at
September 30, 2018.(2)
(2) Total net debt leverage ratio is a non-GAAP measure, see
non-GAAP reconciliation below.
Term Loan Repricing
On October 5, 2018, we entered
into an Incremental Assumption and Amendment Agreement No. 2 to
reduce the applicable interest rate margin for the Term B Loans by
75 basis point from LIBOR plus 425 bps to LIBOR plus 350 bps,
saving nearly $4 million in annual
cash interest expense, with an additional 25 basis points potential
reduction upon receiving a corporate credit rating of at least B1
from Moody's Investors Service. In conjunction with the
repricing, we secured commitments from lenders for an additional
$30 million in terms loans under our
existing credit agreement. The net proceeds of the incremental term
loans are expected to be used for general corporate purposes and
additional capital to accelerate growth.
2018 Outlook
Based on our year-to-date progress and due to our current
momentum, we now expect our total Adjusted EBITDA in 2018 to be
between $134.0 and $136.0 million. This is an upward revision to the
guidance we previously released and is based on our progress
executing against our many growth initiatives in the first half of
the year and due to our improved visibility for the remainder of
the year.
We have not provided a reconciliation of forward-looking total
Adjusted EBITDA to the most directly comparable GAAP financial
measure, net income (loss), due primarily to the variability and
difficulty in making accurate forecasts and projections of the
variable and individual adjustments for a reconciliation to net
income (loss), as not all of the information necessary for a
quantitative reconciliation is available to us without unreasonable
effort. We expect that the main components of net income (loss) for
fiscal year 2018 shall consist of operating expenses, interest
expenses, as well as other expenses (income) and income tax
expenses, which are inherently difficult to forecast and quantify
with reasonable accuracy without unreasonable efforts. The amounts
associated with these items have historically and may continue to
vary significantly from quarter to quarter and material changes to
these items could have a significant effect on our future GAAP
results.
Conference Call and Webcast
Today at 5 p.m. EST management
will host a conference call to present the third 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 U.S/Canada toll-free dial-in number is +1 (866)
270-1533 and the dial-in number for participants outside the
U.S./Canada is +1 (412) 317-0797.
The conference ID/confirmation code is AGS Q3 2018 Earnings
Call.
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 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
about us at playags.com.
AGS Media 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
Forward-Looking Statements
This release contains, and
oral statements made from time to time by our representatives may
contain, forward-looking statements based on management's current
expectations and projections, which are intended to qualify for the
safe harbor of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements include statements regarding
the proposed public offering and other statements identified by
words such as "believe," "will," "may," "might," "likely,"
"expect," "anticipates," "intends," "plans," "seeks," "estimates,"
"believes," "continues," "projects" and similar references to
future periods, or by the inclusion of forecasts or projections.
All forward-looking statements are based on current expectations
and projections of future events.
These forward-looking statements reflect the current views,
models, and assumptions of AGS, and are subject to various risks
and uncertainties that cannot be predicted or qualified and could
cause actual results in AGS's performance to differ materially from
those expressed or implied by such forward looking statements.
These risks and uncertainties include, but are not limited to, the
ability of AGS to maintain strategic alliances, unit placements or
installations, grow revenue, garner new market share, secure new
licenses in new jurisdictions, successfully develop or place
proprietary product, comply with regulations, have its games
approved by relevant jurisdictions and other factors set forth
under Item 1. "Business," Item 1A. "Risk Factors" in AGS's Annual
Report on Form 10-K, filed with the Securities and Exchange
Commission on March 30, 2018. 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.
All ® notices signify marks registered in the United States.
PLAYAGS,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(amounts in
thousands, except share and per share data)
(unaudited)
|
|
|
September 30,
2018
|
December 31,
2017
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
33,227
|
$
|
19,242
|
Restricted
cash
|
|
78
|
|
100
|
Accounts receivable,
net of allowance of $1,180 and $1,462, respectively
|
|
46,082
|
|
32,776
|
Inventories
|
|
31,819
|
|
24,455
|
Prepaid
expenses
|
|
4,638
|
|
2,675
|
Deposits and
other
|
|
4,275
|
|
3,460
|
Total current
assets
|
|
120,119
|
|
82,708
|
Property and equipment,
net
|
|
84,323
|
|
77,982
|
Goodwill
|
|
282,731
|
|
278,337
|
Intangible
assets
|
|
204,801
|
|
232,287
|
Deferred tax
asset
|
|
1,047
|
|
1,115
|
Other assets
|
|
12,489
|
|
24,813
|
Total
assets
|
$
|
705,510
|
$
|
697,242
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts
payable
|
$
|
12,094
|
$
|
11,407
|
Accrued
liabilities
|
|
22,517
|
|
24,954
|
Current maturities of
long-term debt
|
|
6,223
|
|
7,359
|
Total current
liabilities
|
|
40,834
|
|
43,720
|
Long-term
debt
|
|
492,208
|
|
644,158
|
Deferred tax liability
- noncurrent
|
|
678
|
|
1,016
|
Other long-term
liabilities
|
|
25,789
|
|
36,283
|
Total
liabilities
|
|
559,509
|
|
725,177
|
Commitments and
contingencies
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Preferred stock at
$0.01 par value; 100,000 shares authorized, no shares issued and
outstanding
|
|
—
|
|
—
|
Common stock at
$0.01 par value; 450,000,000 shares authorized at September 30,
2018 and 46,629,155 at December 31, 2017; and 35,305,479 and
23,208,706 shares issued and outstanding at September 30, 2018 and
December 31, 2017, respectively.
|
|
353
|
|
149
|
Additional paid-in
capital
|
|
359,819
|
|
177,276
|
Accumulated
deficit
|
|
(212,058)
|
|
(201,557)
|
Accumulated other
comprehensive loss
|
|
(2,113)
|
|
(3,803)
|
Total stockholders'
equity
|
|
146,001
|
|
(27,935)
|
Total liabilities
and stockholders' equity
|
$
|
705,510
|
$
|
697,242
|
PLAYAGS,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
(amounts in
thousands, except per share data) (unaudited)
|
|
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues
|
|
|
|
|
|
|
|
|
Gaming
operations
|
$
|
50,701
|
$
|
42,849
|
$
|
152,887
|
$
|
125,040
|
Equipment
sales
|
|
24,825
|
|
13,591
|
|
60,317
|
|
29,254
|
Total
revenues
|
|
75,526
|
|
56,440
|
|
213,204
|
|
154,294
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of gaming
operations(1)
|
|
10,494
|
|
7,344
|
|
29,062
|
|
21,794
|
Cost of equipment
sales(1)
|
|
12,109
|
|
6,330
|
|
28,919
|
|
14,326
|
Selling, general and
administrative
|
|
15,284
|
|
9,742
|
|
47,411
|
|
30,368
|
Research and
development
|
|
7,894
|
|
6,467
|
|
23,374
|
|
17,912
|
Write-downs and other
charges
|
|
667
|
|
490
|
|
3,282
|
|
2,655
|
Depreciation and
amortization
|
|
18,968
|
|
16,931
|
|
57,784
|
|
53,598
|
Total operating
expenses
|
|
65,416
|
|
47,304
|
|
189,832
|
|
140,653
|
Income from
operations
|
|
10,110
|
|
9,136
|
|
23,372
|
|
13,641
|
Other expense
(income)
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
8,956
|
|
12,666
|
|
28,253
|
|
42,380
|
Interest
income
|
|
(89)
|
|
(25)
|
|
(162)
|
|
(80)
|
Loss on extinguishment
and modification of debt
|
|
—
|
|
—
|
|
4,608
|
|
8,129
|
Other expense
(income)
|
|
434
|
|
(467)
|
|
10,121
|
|
(4,805)
|
Income (loss) before
income taxes
|
|
809
|
|
(3,038)
|
|
(19,448)
|
|
(31,983)
|
Income tax benefit
(expense)
|
|
3,538
|
|
(1,052)
|
|
8,947
|
|
(4,603)
|
Net income
(loss)
|
|
4,347
|
|
(4,090)
|
|
(10,501)
|
|
(36,586)
|
Foreign currency
translation adjustment
|
|
1,636
|
|
(498)
|
|
1,690
|
|
707
|
Total comprehensive
income (loss)
|
$
|
5,983
|
$
|
(4,588)
|
$
|
(8,811)
|
$
|
(35,879)
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.12
|
$
|
(0.18)
|
$
|
(0.31)
|
$
|
(1.58)
|
Diluted
|
$
|
0.12
|
$
|
(0.18)
|
$
|
(0.31)
|
$
|
(1.58)
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
35,305
|
|
23,208
|
|
34,097
|
|
23,208
|
Diluted
|
|
36,313
|
|
23,208
|
|
34,097
|
|
23,208
|
|
(1) exclusive of
depreciation and amortization
|
PLAYAGS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
(unaudited)
|
|
|
Nine months ended
September 30,
|
|
2018
|
2017
|
Cash flows from
operating activities
|
|
|
|
|
Net loss
|
$
|
(10,501)
|
$
|
(36,586)
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
57,784
|
|
53,598
|
Accretion of contract
rights under development agreements and placement fees
|
|
3,412
|
|
3,459
|
Amortization of
deferred loan costs and discount
|
|
1,388
|
|
2,315
|
Payment-in-kind
interest capitalized
|
|
—
|
|
7,807
|
Payment-in-kind
interest payments
|
|
(37,624)
|
|
(2,698)
|
Write-off of deferred
loan cost and discount
|
|
3,410
|
|
3,294
|
Stock-based
compensation expense
|
|
9,167
|
|
—
|
(Benefit) provision
for bad debts
|
|
(198)
|
|
902
|
Loss on disposition of
assets
|
|
1,383
|
|
2,896
|
Impairment of
assets
|
|
1,199
|
|
333
|
Fair value adjustment
of contingent consideration
|
|
700
|
|
—
|
(Benefit) provision
for deferred income tax
|
|
(205)
|
|
2,147
|
Changes in assets and
liabilities that relate to operations:
|
|
|
|
|
Accounts
receivable
|
|
(12,277)
|
|
(9,649)
|
Inventories
|
|
(3,173)
|
|
(453)
|
Prepaid
expenses
|
|
(1,958)
|
|
(1,119)
|
Deposits and
other
|
|
(626)
|
|
(276)
|
Other assets,
non-current
|
|
13,574
|
|
(2,010)
|
Accounts payable and
accrued liabilities
|
|
(12,135)
|
|
2,333
|
Net cash provided by
operating activities
|
|
13,320
|
|
26,293
|
Cash flows from
investing activities
|
|
|
|
|
Business acquisitions,
net of cash acquired
|
|
(4,452)
|
|
(7,000)
|
Purchase of intangible
assets
|
|
(931)
|
|
(565)
|
Software
development
|
|
(8,794)
|
|
(6,334)
|
Proceeds from
disposition of assets
|
|
21
|
|
171
|
Purchases of property
and equipment
|
|
(34,457)
|
|
(35,961)
|
Net cash used in
investing activities
|
|
(48,613)
|
|
(49,689)
|
Cash flows from
financing activities
|
|
|
|
|
Proceeds from issuance
of first lien credit facilities
|
|
—
|
|
448,725
|
Repayment of senior
secured credit facilities
|
|
(115,000)
|
|
(410,655)
|
Payments on first lien
credit facilities
|
|
(3,864)
|
|
(1,125)
|
Payment of financed
placement fee obligations
|
|
(2,688)
|
|
(2,971)
|
Payments on deferred
loan costs
|
|
—
|
|
(3,127)
|
Repayment of seller
notes
|
|
—
|
|
(12,401)
|
Payments on equipment
long-term note payable and capital leases
|
|
(2,108)
|
|
(1,832)
|
Initial public
offering cost
|
|
(4,160)
|
|
(1,203)
|
Proceeds from issuance
of common stock
|
|
176,341
|
|
—
|
Proceeds from
employees in advance of common stock issuance
|
|
—
|
|
25
|
Proceeds from stock
option exercise
|
|
731
|
|
—
|
Net cash provided by
financing activities
|
|
49,252
|
|
15,436
|
Effect of exchange
rates on cash and cash equivalents and restricted cash
|
|
4
|
|
8
|
Increase in cash and
cash equivalents and restricted cash
|
|
13,963
|
|
(7,952)
|
Cash, cash
equivalents and restricted cash, beginning of period
|
|
19,342
|
|
17,977
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
33,305
|
$
|
10,125
|
|
Non-GAAP Financial Measures
This press release and accompanying schedules provide certain
information regarding total Adjusted EBITDA, total Adjusted EBITDA
(margin), and total net debt leverage ratio, which are 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
income (loss), income (loss) 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 income (loss), which is the most comparable GAAP
measure:
Total Adjusted
EBITDA Reconciliation
|
|
Three Months
Ended September 30, 2018 compared to the Three Months Ended
September 30, 2017
|
|
|
Three months
ended September 30,
|
|
$
|
%
|
|
|
2018
|
|
2017
|
|
Change
|
Change
|
Net income
(loss)
|
$
|
4,347
|
$
|
(4,090)
|
$
|
8,437
|
206.3 %
|
Income tax (benefit)
expense
|
|
(3,538)
|
|
1,052
|
|
(4,590)
|
(436.3)%
|
Depreciation and
amortization
|
|
18,968
|
|
16,931
|
|
2,037
|
12.0 %
|
Other expense
(income)
|
|
434
|
|
(467)
|
|
901
|
192.9 %
|
Interest
income
|
|
(89)
|
|
(25)
|
|
(64)
|
(256.0)%
|
Interest
expense
|
|
8,956
|
|
12,666
|
|
(3,710)
|
(29.3)%
|
Write-downs and
other(1)
|
|
667
|
|
490
|
|
177
|
36.1 %
|
Loss on extinguishment
and modification of debt(2)
|
|
—
|
|
—
|
|
—
|
— %
|
Other
adjustments(3)
|
|
893
|
|
474
|
|
419
|
88.4 %
|
Other non-cash
charges(4)
|
|
1,700
|
|
1,551
|
|
149
|
9.6 %
|
New jurisdictions and
regulatory licensing costs(5)
|
|
—
|
|
567
|
|
(567)
|
(100.0)%
|
Legal and litigation
expenses including settlement payments(6)
|
|
(45)
|
|
181
|
|
(226)
|
(124.9)%
|
Acquisitions and
integration related costs including restructuring and
severance(7)
|
|
746
|
|
71
|
|
675
|
950.7 %
|
Non-cash stock-based
compensation(8)
|
|
538
|
|
—
|
|
538
|
100.0 %
|
Total Adjusted
EBITDA
|
$
|
33,577
|
$
|
29,401
|
$
|
4,176
|
14.2 %
|
Total
revenue
|
$
|
75,526
|
$
|
56,440
|
|
|
|
Total Adjusted
EBITDA margin
|
|
44.5%
|
|
52.1%
|
|
|
|
|
|
(1)
|
Write-downs and
other include items related to loss on disposal or impairment
of long-lived assets, fair value adjustments to contingent
consideration and acquisition costs
|
(2)
|
Loss on
extinguishment and modification of debt primarily relates to
the refinancing of long-term debt, in which deferred loan costs and
discounts related to old senior secured credit facilities were
written off
|
(3)
|
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
|
(4)
|
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
|
(5)
|
New jurisdiction
and regulatory license costs relates primarily to one-time
non-operating costs incurred to obtain new licenses and develop
products for new jurisdictions
|
(6)
|
Legal and
litigation expenses include payments to law firms and
settlements for matters that are outside the normal course of
business
|
(7)
|
Acquisition and
integration costs include restructuring and severance
and are related to costs incurred after the purchase of
businesses, such as the acquisitions of Rocket and AGS iGaming, to
integrate operations
|
(8)
|
Non-cash
stock-based compensation includes non-cash compensation expense
related to grants of options, restricted stock, and other equity
awards
|
Nine Months
Ended September 30, 2018 compared to the Nine Months Ended
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30,
|
|
$
|
%
|
|
2018
|
2017
|
|
Change
|
Change
|
Net loss
|
$
|
(10,501)
|
$
|
(36,586)
|
$
|
26,085
|
71.3 %
|
Income tax (benefit)
expense
|
|
(8,947)
|
|
4,603
|
|
(13,550)
|
(294.4)%
|
Depreciation and
amortization
|
|
57,784
|
|
53,598
|
|
4,186
|
7.8 %
|
Other expense
(income)
|
|
10,121
|
|
(4,805)
|
|
14,926
|
310.6 %
|
Interest
income
|
|
(162)
|
|
(80)
|
|
(82)
|
(102.5)%
|
Interest
expense
|
|
28,253
|
|
42,380
|
|
(14,127)
|
(33.3)%
|
Write-downs and
other(1)
|
|
3,282
|
|
2,655
|
|
627
|
23.6 %
|
Loss on extinguishment
and modification of debt(2)
|
|
4,608
|
|
8,129
|
|
(3,521)
|
(43.3)%
|
Other
adjustments(3)
|
|
2,218
|
|
2,067
|
|
151
|
7.3 %
|
Other non-cash
charges(4)
|
|
4,890
|
|
5,462
|
|
(572)
|
(10.5)%
|
New jurisdictions and
regulatory licensing costs(5)
|
|
—
|
|
1,304
|
|
(1,304)
|
(100.0)%
|
Legal and litigation
expenses including settlement payments(6)
|
|
789
|
|
766
|
|
23
|
3.0 %
|
Acquisitions and
integration related costs including restructuring and
severance(7)
|
|
3,156
|
|
899
|
|
2,257
|
251.1 %
|
Non-cash stock-based
compensation(8)
|
|
9,167
|
|
—
|
|
9,167
|
100.0 %
|
Total Adjusted
EBITDA
|
$
|
104,658
|
$
|
80,392
|
$
|
24,266
|
30.2 %
|
Total
revenue
|
|
213,204
|
|
154,294
|
|
|
|
Total Adjusted
EBITDA margin
|
|
49.1%
|
|
52.1%
|
|
|
|
|
|
(1)
|
Write-downs and
other include items related to loss on disposal or impairment
of long-lived assets, fair value adjustments to contingent
consideration, and acquisition costs
|
(2)
|
Loss on
extinguishment and modification of debt primarily relates to
the refinancing of long-term debt, in which deferred loan costs and
discounts related to old senior secured credit facilities were
written off
|
(3)
|
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
|
(4)
|
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
|
(5)
|
New jurisdiction
and regulatory license costs relate primarily to one-time
non-operating costs incurred to obtain new licenses and develop
products for new jurisdictions
|
(6)
|
Legal and
litigation expenses include payments to law firms and
settlements for matters that are outside the normal course of
business
|
(7)
|
Acquisition and
integration costs include restructuring and severance
and are related to costs incurred after the purchase of
businesses, such as the acquisitions of Rocket and AGS iGaming, to
integrate operations
|
(8)
|
Non-cash
stock-based compensation includes non-cash compensation expense
related to grants of options, restricted stock, and other equity
awards
|
Adjusted EBITDA
Reconciliation
|
|
The following tables
reconcile net income (loss) to total adjusted EBITDA:
|
|
|
2017
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
YTD
|
Net loss
|
$
|
(12,386)
|
$
|
(20,110)
|
$
|
(4,090)
|
$
|
(8,520)
|
$
|
(45,106)
|
Income tax expense
(benefit)
|
|
2,233
|
|
1,318
|
|
1,052
|
|
(6,492)
|
|
(1,889)
|
Depreciation and
amortization
|
|
18,451
|
|
18,216
|
|
16,931
|
|
18,051
|
|
71,649
|
Other (income)
expense
|
|
(2,809)
|
|
(1,529)
|
|
(467)
|
|
1,867
|
|
(2,938)
|
Interest
income
|
|
(15)
|
|
(40)
|
|
(25)
|
|
(28)
|
|
(108)
|
Interest
expense
|
|
15,160
|
|
14,554
|
|
12,666
|
|
13,131
|
|
55,511
|
Write-downs and
other(1)
|
|
232
|
|
1,933
|
|
490
|
|
1,830
|
|
4,485
|
Loss on extinguishment
and modification of debt(2)
|
|
—
|
|
8,129
|
|
—
|
|
903
|
|
9,032
|
Other
adjustments(3)
|
|
647
|
|
946
|
|
474
|
|
823
|
|
2,890
|
Other non-cash
charges(4)
|
|
2,111
|
|
1,800
|
|
1,551
|
|
2,332
|
|
7,794
|
New jurisdictions and
regulatory licensing costs(5)
|
|
235
|
|
502
|
|
567
|
|
758
|
|
2,062
|
Legal and litigation
expenses including settlement payments(6)
|
|
399
|
|
186
|
|
181
|
|
(243)
|
|
523
|
Acquisitions and
integration related costs including restructuring and
severance(7)
|
|
647
|
|
181
|
|
71
|
|
2,037
|
|
2,936
|
Non-cash stock based
compensation(8)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Total Adjusted
EBITDA
|
$
|
24,905
|
$
|
26,086
|
|
29,401
|
|
26,449
|
|
106,841
|
|
|
(1)
|
Write-downs and
other include items related to loss on disposal or impairment
of long-lived assets, fair value adjustments to contingent
consideration, and acquisition costs
|
(2)
|
Loss on
extinguishment and modification of debt primarily relates to
the refinancing of long-term debt, in which deferred loan costs and
discounts related to old senior secured credit facilities were
written off
|
(3)
|
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
|
(4)
|
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
|
(5)
|
New jurisdiction
and regulatory license costs relate primarily to one-time
non-operating costs incurred to obtain new licenses and develop
products for new jurisdictions
|
(6)
|
Legal and
litigation expenses include payments to law firms and
settlements for matters that are outside the normal course of
business
|
(7)
|
Acquisition and
integration costs include restructuring and severance
and are related to costs incurred after the purchase of
businesses, such as the acquisition of Rocket, to integrate
operations
|
(8)
|
Non-cash
stock-based compensation includes non-cash compensation expense
related to grants of options, restricted stock, and other equity
awards
|
|
2017
|
2018
|
|
|
Q4
|
|
Q1
|
|
Q2
|
|
Q3
|
LTM
9/30/2018
|
Net loss
(income)
|
$
|
(8,520)
|
$
|
(9,538)
|
$
|
(5,310)
|
$
|
4,347
|
$
|
(19,021)
|
Income tax (benefit)
expense
|
|
(6,492)
|
|
(12,436)
|
|
7,027
|
|
(3,538)
|
|
(15,439)
|
Depreciation and
amortization
|
|
18,051
|
|
19,349
|
|
19,467
|
|
18,968
|
|
75,835
|
Other
expense
|
|
1,867
|
|
9,232
|
|
455
|
|
434
|
|
11,988
|
Interest
income
|
|
(28)
|
|
(52)
|
|
(21)
|
|
(89)
|
|
(190)
|
Interest
expense
|
|
13,131
|
|
10,424
|
|
8,873
|
|
8,956
|
|
41,384
|
Write-downs and
other(1)
|
|
1,830
|
|
1,610
|
|
1,005
|
|
667
|
|
5,112
|
Loss on extinguishment
and modification of debt(2)
|
|
903
|
|
4,608
|
|
—
|
|
—
|
|
5,511
|
Other
adjustments(3)
|
|
823
|
|
396
|
|
929
|
|
893
|
|
3,041
|
Other non-cash
charges(4)
|
|
2,332
|
|
1,574
|
|
1,616
|
|
1,700
|
|
7,222
|
New jurisdictions and
regulatory licensing costs(5)
|
|
758
|
|
—
|
|
—
|
|
—
|
|
758
|
Legal and litigation
expenses including settlement payments(6)
|
|
(243)
|
|
—
|
|
834
|
|
(45)
|
|
546
|
Acquisitions and
integration related costs including restructuring and
severance(7)
|
|
2,037
|
|
1,179
|
|
1,231
|
|
746
|
|
5,193
|
Non-cash stock based
compensation(8)
|
|
—
|
|
8,153
|
|
476
|
|
538
|
|
9,167
|
Total Adjusted
EBITDA
|
$
|
26,449
|
$
|
34,499
|
|
36,582
|
|
33,577
|
|
131,107
|
|
(1)
|
Write-downs and
other include items related to loss on disposal or impairment
of long-lived assets, fair value adjustments to contingent
consideration, and acquisition costs
|
(2)
|
Loss on
extinguishment and modification of debt primarily relates to
the refinancing of long-term debt, in which deferred loan costs and
discounts related to old senior secured credit facilities were
written off
|
(3)
|
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
|
(4)
|
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
|
(5)
|
New jurisdiction
and regulatory license costs relates primarily to one-time
non-operating costs incurred to obtain new licenses and develop
products for new jurisdictions
|
(6)
|
Legal and
litigation expenses include payments to law firms and
settlements for matters that are outside the normal course of
business
|
(7)
|
Acquisition and
integration costs include restructuring and severance
and are related to costs incurred after the purchase of
businesses, such as the acquisitions of Rocket and AGS iGaming, to
integrate operations
|
(8)
|
Non-cash
stock-based compensation includes non-cash compensation expense
related to grants of options, restricted stock, and other equity
awards
|
The following table
presents a reconciliation of total net debt and total net debt
leverage ratio:
|
|
|
|
September
30
|
December
30
|
2018
|
2017
|
Total debt
|
$
|
510,083
|
$
|
667,968
|
Less: Cash and cash
equivalents
|
|
33,227
|
|
19,242
|
Total net
debt
|
|
476,856
|
|
648,726
|
LTM Adjusted
EBITDA
|
|
131,107
|
|
106,841
|
Total net debt leverage
ratio
|
|
3.6
|
|
6.1
|
|
|
|
|
|
|
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SOURCE AGS