LAS VEGAS, May 8, 2019 /PRNewswire/ -- AGS (NYSE: AGS)
("AGS", "us", "we" or the "Company") today reported operating
results for its first quarter ended March
31, 2019.
![AGS Logo (PRNewsfoto/AGS) AGS Logo (PRNewsfoto/AGS)](https://mma.prnewswire.com/media/654341/AGS_logo_R_Logo.jpg)
AGS Chief Executive Officer David
Lopez said, "I'm pleased to report another solid quarter of
growth for AGS, with total revenue of $73
million up 13% year-over-year, driven by double-digit gains
in EGMs and Tables. "Sold EGM units grew 22% year-over-year and our
Tables Products segment reported its strongest quarter to date,
driven by our award-winning progressive platforms. Our EGM
recurring revenue installed base grew 14% year-over-year to 27,308
units, driven by the inclusion of 2,500 EGMs from the Integrity
acquisition, which we closed in February of this year. With
numerous levers to build momentum — including
strategic investments in R&D to continue building a
strong, diversified, and expanded product portfolio, as well as
many new and underpenetrated domestic and international markets —
AGS is well-positioned for continued long-term, meaningful
growth."
Summary of the
quarter ended March 31, 2019 and 2018 (In thousands, except
per-share data)
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
|
%
Change
|
Revenues
|
|
|
|
|
|
EGM
|
69,655
|
|
|
61,258
|
|
|
13.7
|
%
|
Table
Products
|
2,156
|
|
|
1,670
|
|
|
29.1
|
%
|
Interactive
|
1,231
|
|
|
1,928
|
|
|
(36.2)
|
%
|
Total
revenues
|
73,042
|
|
|
64,856
|
|
|
12.6
|
%
|
Operating
income
|
8,348
|
|
|
2,238
|
|
|
273.0
|
%
|
Net loss
Attributable to PlayAGS, Inc.
|
(82)
|
|
|
(9,538)
|
|
|
(99.1)
|
%
|
Loss per
share
|
—
|
|
|
(0.30)
|
|
|
(100.0)
|
%
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
EGM
|
36,722
|
|
|
34,304
|
|
|
7.0
|
%
|
Table
Products
|
478
|
|
|
186
|
|
|
157.0
|
%
|
Interactive
|
(935)
|
|
|
9
|
|
|
N/A
|
|
Total Adjusted
EBITDA(1)
|
36,265
|
|
|
34,499
|
|
|
5.1
|
%
|
Total Adjusted
EBITDA margin(1)
|
49.6
|
%
|
|
53.2
|
%
|
|
(360)
bps(2)
|
First Quarter 2019 Financial Highlights
- Total revenue increased 13% to $73.0
million, driven by continued growth in our EGM segment,
primarily sold units in early-entry markets such as Michigan, Saskatchewan, Pennsylvania, and Massachusetts, as well as continued
penetration into ramping markets such as Florida and California in addition to the contribution of
leased EGMs acquired from Integrity Gaming Corp. ("Integrity") in
February 2019.
- EGM equipment sales revenue increased 33% to $20.2 million, driven by the sale of 1,024 units,
of which nearly 55% were sold into early-entry markets.
- Record gaming operations revenue, or recurring revenue, grew to
$52.9 million, or 7% year-over-year,
driven by the acquisition of Integrity, growth and performance of
our international installed base, and an increase in Table Products
revenue.
- Net loss attributable to PlayAGS, Inc. of $0.1 million improved year-over-year from a net
loss of $9.5 million.
- Total Adjusted EBITDA (non-GAAP)(1) increased to
$36.3 million, or 5%, driven by the
increase in revenue, offset by increased adjusted operating
expenses, primarily due to headcount related costs in SG&A and
R&D as well as an additional $1.0
million of operating costs from iGaming.
- Total Adjusted EBITDA margin (non-GAAP)(1) decreased
to 50% in the first quarter of 2019 compared to 53% in the prior
year driven by several factors, including increased headcount
related costs in SG&A and R&D, operating costs from
iGaming, as well as the increased proportion of equipment sales as
part of total revenues. The prior year also included a favorable
state and local tax benefit of $0.9
million.
(1)
|
Adjusted EBITDA and
Adjusted EBITDA margin are non-GAAP measures, see non-GAAP
reconciliation below.
|
(2)
|
Basis
points
|
EGM
|
|
Three Months Ended
March 31, 2019 compared to Three Months Ended March 31,
2018
|
|
(Amounts in
thousands, except unit data)
|
Three months ended
March 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
$
Change
|
|
%
Change
|
EGM segment
revenues:
|
|
|
|
|
|
|
|
Gaming
operations
|
$
|
49,500
|
|
|
$
|
46,042
|
|
|
$
|
3,458
|
|
|
7.5
|
%
|
Equipment
sales
|
20,155
|
|
|
15,216
|
|
|
4,939
|
|
|
32.5
|
%
|
Total EGM
revenues
|
$
|
69,655
|
|
|
$
|
61,258
|
|
|
$
|
8,397
|
|
|
13.7
|
%
|
|
|
|
|
|
|
|
|
EGM Adjusted
EBITDA
|
$
|
36,722
|
|
|
$
|
34,304
|
|
|
$
|
2,418
|
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
EGM unit
information:
|
|
|
|
|
|
|
|
VLT
|
667
|
|
|
1,217
|
|
|
(550)
|
|
|
(45.2)
|
%
|
Class II
|
12,191
|
|
|
12,254
|
|
|
(63)
|
|
|
(0.5)
|
%
|
Class III
|
5,940
|
|
|
3,082
|
|
|
2,858
|
|
|
92.7
|
%
|
Domestic installed
base, end of period
|
18,798
|
|
|
16,553
|
|
|
2,245
|
|
|
13.6
|
%
|
International base,
end of period
|
8,510
|
|
|
7,480
|
|
|
1,030
|
|
|
13.8
|
%
|
Total installed base,
end of period
|
27,308
|
|
|
24,033
|
|
|
3,275
|
|
|
13.6
|
%
|
|
|
|
|
|
|
|
|
Domestic revenue per
day
|
$
|
26.42
|
|
|
$
|
26.72
|
|
|
$
|
(0.30)
|
|
|
(1.1)
|
%
|
International revenue
per day
|
$
|
8.68
|
|
|
$
|
8.27
|
|
|
$
|
0.41
|
|
|
5.0
|
%
|
Total revenue per
day
|
$
|
20.73
|
|
|
$
|
20.94
|
|
|
$
|
(0.21)
|
|
|
(1.0)
|
%
|
|
|
|
|
|
|
|
|
EGM units
sold
|
1,024
|
|
|
838
|
|
|
$
|
186
|
|
|
22.2
|
%
|
Average sales
price
|
$
|
18,738
|
|
|
$
|
17,758
|
|
|
$
|
980
|
|
|
5.5
|
%
|
EGM Highlights
- EGM sold units increased 22% to 1,024 compared to 838 in the
prior year led by sales of the Orion Portrait and
Orion Slant cabinets in early-entry markets and increased
sales to corporate customers.
- The average sales price ("ASP") for EGMs increased by nearly
$1,000 year-over-year to $18,738, driven by sales of our premium-priced
Orion Portrait cabinet and our core-plus cabinet,
Orion Slant, which, when combined, accounted for over 85% of
sales in the period.
- Domestic EGM installed base grew by 2,245 units year-over-year,
and over 2,500 units sequentially, driven by the acquisition of
2,500 EGMs from Integrity in February
2019. The prior year included the voluntary removal of
approximately 500 EGMs at one customer in Texas as well as 420 VLT units that were
purchased in an end-of-lease buyout by a customer in 2018 and an
additional 130 VLT units in 2019. (3)
- Domestic EGM revenue per day ("RPD") decreased slightly to
$26.42 compared to $26.72 in the prior year period, due to adverse
weather conditions and the inclusion of EGMs from Integrity. We
estimate adverse weather conditions in the first quarter negatively
impacted RPD by approximately 2% - 4%, or $1.0 million to $2.0
million of EGM gaming operations revenue. When normalized
for the impact of EGMs purchased from Integrity, we estimate that
domestic RPD was $27.51, up 3%
compared to the prior-year-period, driven by our new product
offerings and the ongoing optimization of our installed base.
- International gaming operations revenue increased 19%
year-over-year due to the addition of more than 1,000 incremental
units.
- International RPD for the first quarter increased by
$0.41, or 5.0% compared to the first
quarter of 2018, driven by the optimization of our installed base.
On a constant currency basis, RPD in Mexico increased nearly 7%
year-over-year.
- Our Orion Portrait footprint (4) increased to
over 5,900 units, up 125% year-over-year and accounted for 65% of
sales in the quarter.
- Our new Orion Slant footprint (4) increased
to over 1,930 units, up 27% sequentially, and accounted for 21% of
sales in the quarter with initial placements in several early-entry
markets such as California and
Washington driven by strong
performance of our Fa Cai Shu
family of games.
- Our ICON cabinet footprint (4) increased by
977 units year-over-year and over 400 units sequentially to over
7,860 units, with 686 ICON units in Mexico as of the first quarter.
(3)
|
The VLT units were
not counted in our sold unit count either period.
|
(4)
|
Footprint includes
sold and leased units.
|
Table
Products
|
|
Three Months Ended
March 31, 2019 compared to Three Months Ended March 31,
2018
|
|
(Amounts in
thousands, except unit data)
|
Three Months Ended
March 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
$
Change
|
|
%
Change
|
Table Products
segment revenues:
|
|
|
|
|
|
|
|
Gaming
operations
|
$
|
2,130
|
|
|
$
|
1,662
|
|
|
$
|
468
|
|
|
28.2
|
%
|
Equipment
sales
|
26
|
|
|
8
|
|
|
18
|
|
|
225.0
|
%
|
Total Table
Products revenues
|
$
|
2,156
|
|
|
$
|
1,670
|
|
|
$
|
486
|
|
|
29.1
|
%
|
|
|
|
|
|
|
|
|
Table Products
Adjusted EBITDA
|
$
|
478
|
|
|
$
|
186
|
|
|
$
|
292
|
|
|
157.0
|
%
|
|
|
|
|
|
|
|
|
Table Products
unit information:
|
|
|
|
|
|
|
|
Table Products
installed base, end of period
|
3,285
|
|
|
2,631
|
|
|
654
|
|
|
24.9
|
%
|
Average monthly lease
price
|
$
|
217
|
|
|
$
|
220
|
|
|
(3)
|
|
|
(1.4)
|
%
|
Table Products Highlights
- Revenue increased $0.5 million,
or 29%, due to an increase of 654 units year-over-year and over 120
units sequentially, driven by growth of our Super 4 Progressive
Blackjack and Buster Blackjack side bet.
- Our installed base of table game progressives reached nearly
1,100, with over 100 placed during the quarter.
- Converted over 200 competitor progressives to our own
STAX™ progressives in the quarter, driving Adjusted EBITDA
increases.
- Momentum and demand for our new Dex S card shuffler
continues to grow with 45 shufflers installed in several markets
across the U.S.
- Sixth consecutive quarter of positive Adjusted EBITDA for the
Table Products segment.
Interactive
|
|
Three Months Ended
March 31, 2019 compared to Three Months Ended March 31,
2018
|
|
(Amounts in
thousands, except unit data)
|
Three months ended
March 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
$
Change
|
|
%
Change
|
Interactive
segment revenue:
|
|
|
|
|
|
|
|
Social gaming
revenue
|
$
|
958
|
|
|
$
|
1,928
|
|
|
$
|
(970)
|
|
|
(50.3)
|
%
|
Real Money Gaming
revenue
|
273
|
|
|
—
|
|
|
273
|
|
|
100.0
|
%
|
Total Interactive
revenue
|
$
|
1,231
|
|
|
$
|
1,928
|
|
|
$
|
(697)
|
|
|
(36.2)
|
%
|
Interactive
Adjusted EBITDA
|
$
|
(935)
|
|
|
$
|
9
|
|
|
$
|
(944)
|
|
|
N/A
|
|
Interactive Highlights
- Interactive revenue decreased $0.7
million due to a decrease in social gaming revenues as a
result of strategically optimizing our user acquisition costs.
- We generated $0.3 million in
revenue from iGaming.
- The decrease in Interactive Adjusted EBITDA is related to
$1.0 million of operating costs from
iGaming.
- Launched our proven land-based EGM content in the quarter in
Europe and the UK, including
Golden Wins, Jade Wins, and Longhorn Jackpots,
which are currently some of our highest-performing games on the
iGaming platform.
Operating Expenses
SG&A expenses decreased $1.9
million in the first quarter of 2019 primarily due to a
decrease of $5.7 million non-cash
stock-based compensation expense (the prior year period included an
initial charge of $6.2 million
recorded in connection with the IPO), offset by an increase in
headcount related costs of $1.6
million, $1.7 million in
professional fees related to acquisition and integration costs, and
costs related to secondary equity offerings. The prior year
included a state and local tax benefit of $0.9 million.
R&D expenses decreased $0.5
million to $8.1 million in the
first quarter of 2019 due to a decrease of $1.3 million non-cash stock-based compensation
expense (the prior year period included an initial charge of
$1.6 million recorded in connection
with the IPO) and $0.5 million
related to the timing of software testing and product approval
costs. These decreases were offset by an increase in
headcount related costs of $0.8
million driven partially by our new design studio in
Sydney, Australia.
Balance Sheet Review
As of March 31, 2019, we had
$10.4 million in cash and cash
equivalents compared to $70.7 million
at December 31, 2018. Total net debt,
which is the principal amount of debt outstanding less cash and
cash equivalents as of March 31,
2019, was approximately $527.2
million compared to $468.1
million at December 31, 2018.
In the first quarter, net debt increased by over $59.1 primarily driven by the acquisition of
Integrity as well as increased capital expenditures. Our
Adjusted Total Net Debt Leverage Ratio increased from 3.4 times at
December 31, 2018, to 3.6 times at
March 31, 2019, see Total Net Debt
Leverage Ratio Reconciliation below.(5) Capital
expenditures increased $4.0 million
to $19.0 million in the first
quarter, compared to $15.0 million in
the prior year period due to new domestic and international
recurring EGM units placed on lease, optimization of our EGM
installed base, an increase in recurring table game progressive
units.
2019 Outlook
Based on our year to date progress, we continue to expect to
generate total adjusted EBITDA of $160 - $164 million
in 2019, representing growth of approximately 17% - 20% compared to
the prior year period. We also continue to expect 2019 capital
expenditures to be in the range of $64 - $69 million,
compared to $66.6 million in 2018,
reflecting an expectation for a continued increase in our installed
base in both existing and new markets as well as our ongoing yield
optimization initiative, including units recently purchased from
Integrity.
Recent Developments
Acquisition of Integrity Gaming Corp.
On February 8, 2019, we completed
the acquisition of Integrity, a regional slot route operator with
approximately 2,500 recurring revenue gaming machines in operation
across over 33 casinos in Oklahoma
and Texas. The acquisition was
funded with cash on the balance sheet and funds from incremental
$30.0 million term loans incurred on
October 5, 2018.
Entry into Philippines
We recently completed the necessary regulatory requirements in
the Philippines and initial units
of our Alora video bingo cabinet are now live.
Conference Call and Webcast
Today, at 5:00 p.m. EDT, AGS
leadership will host a conference call to present the first quarter
2019 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 (844)
746-0637 and the dial-in number for participants outside the
U.S./Canada is +1 (412) 317-5261.
The conference ID/confirmation code is "AGS Q1 2019 Earnings
Call".
(5)
|
Total Adjusted EBITDA
and total net debt leverage ratio are a non-GAAP measures, see
non-GAAP reconciliation below.
|
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
©2019 PlayAGS, Inc. All® notices signify marks
registered in the United States. All ™ and
SM notices signify unregistered
trademarks. Products referenced herein are sold by AGS LLC or
other subsidiaries of PlayAGS, Inc
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 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 5, 2019. 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,
2019
|
|
December
31,
2018
|
Assets
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
10,369
|
|
|
$
|
70,726
|
|
Restricted
cash
|
20
|
|
|
78
|
|
Accounts receivable,
net of allowance of $833 and $855 respectively
|
50,363
|
|
|
44,704
|
|
Inventories
|
28,440
|
|
|
27,438
|
|
Prepaid
expenses
|
5,238
|
|
|
3,566
|
|
Deposits and
other
|
3,946
|
|
|
4,231
|
|
Total current
assets
|
98,376
|
|
|
150,743
|
|
Property and
equipment, net
|
107,677
|
|
|
91,547
|
|
Goodwill
|
288,787
|
|
|
277,263
|
|
Intangible
assets
|
250,663
|
|
|
196,898
|
|
Deferred tax
asset
|
2,356
|
|
|
2,544
|
|
Operating
leases
|
9,715
|
|
|
—
|
|
Other
assets
|
7,182
|
|
|
12,347
|
|
Total
assets
|
$
|
764,756
|
|
|
$
|
731,342
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$
|
18,080
|
|
|
$
|
14,821
|
|
Accrued
liabilities
|
27,459
|
|
|
26,659
|
|
Current maturities of
long-term debt
|
5,956
|
|
|
5,959
|
|
Total current
liabilities
|
51,495
|
|
|
47,439
|
|
Long-term
debt
|
521,200
|
|
|
521,924
|
|
Deferred tax
liability - noncurrent
|
969
|
|
|
1,443
|
|
Other long-term
liabilities
|
42,939
|
|
|
24,732
|
|
Operating lease
liability, long-term
|
9,930
|
|
|
—
|
|
Total
liabilities
|
626,533
|
|
|
595,538
|
|
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, 2019 and at
December 31, 2018; and 35,410,917 and 35,353,269 shares issued and
outstanding at March 31, 2019 and December 31, 2018,
respectively.
|
354
|
|
|
353
|
|
Additional paid-in
capital
|
363,379
|
|
|
361,628
|
|
Accumulated
deficit
|
(222,485)
|
|
|
(222,403)
|
|
Accumulated other
comprehensive (loss) income
|
(3,132)
|
|
|
(3,774)
|
|
Non-controlling
interest
|
107
|
|
|
—
|
|
Total
stockholders' equity (deficit)
|
138,223
|
|
|
135,804
|
|
Total liabilities
and stockholders' equity
|
$
|
764,756
|
|
|
$
|
731,342
|
|
PLAYAGS,
INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) (amounts in thousands, except
per share data)
|
|
|
Three months ended
March 31,
|
|
2019
|
|
2018
|
Revenues
|
|
|
|
Gaming
operations
|
$
|
52,861
|
|
|
$
|
49,632
|
|
Equipment
sales
|
20,181
|
|
|
15,224
|
|
Total
revenues
|
73,042
|
|
|
64,856
|
|
Operating
expenses
|
|
|
|
Cost of gaming
operations(6)
|
9,619
|
|
|
8,858
|
|
Cost of equipment
sales(6)
|
9,524
|
|
|
7,399
|
|
Selling, general and
administrative
|
14,877
|
|
|
16,777
|
|
Research and
development
|
8,125
|
|
|
8,625
|
|
Write-downs and other
charges
|
1,016
|
|
|
1,610
|
|
Depreciation and
amortization
|
21,533
|
|
|
19,349
|
|
Total operating
expenses
|
64,694
|
|
|
62,618
|
|
Income from
operations
|
8,348
|
|
|
2,238
|
|
Other (income)
expense
|
|
|
|
Interest
expense
|
8,874
|
|
|
10,424
|
|
Interest
income
|
(39)
|
|
|
(52)
|
|
Loss on
extinguishment and modification of debt
|
—
|
|
|
4,608
|
|
Other (income)
expense
|
5,260
|
|
|
9,232
|
|
Loss before income
taxes
|
(5,747)
|
|
|
(21,974)
|
|
Income tax benefit
(expense)
|
5,758
|
|
|
12,436
|
|
Net income
(loss)
|
11
|
|
|
(9,538)
|
|
Less: Net income
attributable to non-controlling interests
|
(93)
|
|
|
—
|
|
Net loss
attributable to PlayAGS, Inc
|
(82)
|
|
|
(9,538)
|
|
Foreign currency
translation adjustment
|
642
|
|
|
2,937
|
|
Total
comprehensive income (loss)
|
$
|
560
|
|
|
$
|
(6,601)
|
|
|
|
|
|
Basic and diluted
loss per common share:
|
|
|
|
Basic
|
—
|
|
|
(0.30)
|
|
Diluted
|
—
|
|
|
(0.30)
|
|
Weighted average
common shares outstanding:
|
|
|
|
Basic
|
35,371
|
|
|
31,735
|
|
Diluted
|
35,371
|
|
|
31,735
|
|
|
|
|
|
|
(6) Exclusive of
depreciation and amortization
|
|
|
|
|
PLAYAGS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
|
|
Three months ended
March 31,
|
|
2019
|
|
2018
|
Cash flows from
operating activities
|
|
|
|
Net income
(loss)
|
$
|
11
|
|
|
$
|
(9,538)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
21,533
|
|
|
19,349
|
|
Accretion of contract
rights under development agreements and placement fees
|
1,271
|
|
|
1,084
|
|
Amortization of
deferred loan costs and discount
|
468
|
|
|
451
|
|
Payment-in-kind
interest payments
|
—
|
|
|
(37,624)
|
|
Write-off of deferred
loan cost and discount
|
—
|
|
|
3,410
|
|
Stock-based
compensation expense
|
1,196
|
|
|
8,153
|
|
Provision
(benefit) for bad debts
|
52
|
|
|
(142)
|
|
Loss on disposition
of assets
|
266
|
|
|
340
|
|
Impairment of
assets
|
350
|
|
|
570
|
|
Fair value adjustment
of contingent consideration
|
400
|
|
|
700
|
|
(Benefit) provision
for deferred income tax
|
(298)
|
|
|
(3,551)
|
|
Changes in assets and
liabilities that relate to operations:
|
|
|
|
Accounts
receivable
|
(4,155)
|
|
|
(4,820)
|
|
Inventories
|
522
|
|
|
(2,462)
|
|
Prepaid
expenses
|
(1,554)
|
|
|
(1,826)
|
|
Deposits and
other
|
318
|
|
|
118
|
|
Other assets,
non-current
|
5,268
|
|
|
11,618
|
|
Accounts payable and
accrued liabilities
|
(13,993)
|
|
|
(18,646)
|
|
Net cash provided
by (used in) operating activities
|
11,655
|
|
|
(32,816)
|
|
Cash flows from
investing activities
|
|
|
|
Business
acquisitions, net of cash acquired
|
(50,779)
|
|
|
—
|
|
Purchase of
intangible assets
|
(1,231)
|
|
|
(568)
|
|
Software development
and other expenditures
|
(2,669)
|
|
|
(2,490)
|
|
Proceeds from
disposition of assets
|
109
|
|
|
21
|
|
Purchases of property
and equipment
|
(15,105)
|
|
|
(11,931)
|
|
Net cash (used in)
investing activities
|
(69,675)
|
|
|
(14,968)
|
|
Cash flows from
financing activities
|
|
|
|
Repayment of PIK
notes
|
—
|
|
|
(115,000)
|
|
Repayment of senior
secured credit facilities
|
(1,347)
|
|
|
(1,288)
|
|
Payment of financed
placement fee obligations
|
(971)
|
|
|
(879)
|
|
Payments on
contingent consideration
|
(157)
|
|
|
—
|
|
Payments on equipment
long-term note payable and capital leases
|
(417)
|
|
|
(678)
|
|
Proceeds from
issuance of common stock
|
—
|
|
|
176,341
|
|
Initial public
offering cost
|
—
|
|
|
(4,160)
|
|
Proceeds from stock
option exercise
|
556
|
|
|
—
|
|
Distributions to
non-controlling interest owners
|
(57)
|
|
|
—
|
|
Net cash (used in)
provided by financing activities
|
(2,393)
|
|
|
54,336
|
|
Effect of exchange
rates on cash and cash equivalents
|
(2)
|
|
|
5
|
|
(Decrease)
increase in cash and cash equivalents
|
(60,415)
|
|
|
6,557
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
70,804
|
|
|
19,342
|
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
10,389
|
|
|
$
|
25,899
|
|
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
|
Intangible assets
obtained under placement fee arrangements
|
$
|
33,129
|
|
|
$
|
—
|
|
Leased assets
obtained in exchange for new finance lease liabilities
|
$
|
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
ending March 31,
|
|
2019
|
|
2018
|
Net loss attributable
to PlayAGS, Inc.
|
$
|
(82)
|
|
|
$
|
(9,538)
|
|
Income tax (benefit)
expense
|
(5,758)
|
|
|
(12,436)
|
|
Depreciation and
amortization
|
21,533
|
|
|
19,349
|
|
Other expense
(income)
|
5,260
|
|
|
9,232
|
|
Interest
income
|
(39)
|
|
|
(52)
|
|
Interest
expense
|
8,874
|
|
|
10,424
|
|
Write-downs and
other(7)
|
1,016
|
|
|
1,610
|
|
Loss on
extinguishment and modification of debt(8)
|
—
|
|
|
4,608
|
|
Other
adjustments(9)
|
277
|
|
|
396
|
|
Other non-cash
charges(10)
|
1,919
|
|
|
1,574
|
|
Acquisition and
integration related costs(11)
|
2,069
|
|
|
1,179
|
|
Non-cash stock
compensation
|
1,196
|
|
|
8,153
|
|
Adjusted
EBITDA
|
$
|
36,265
|
|
|
$
|
34,499
|
|
|
|
|
|
(Amounts in
thousands, except Adjusted EBITDA margin)
|
Three months
ending March 31,
|
|
2019
|
|
2018
|
Total
revenues
|
$
|
73,042
|
|
|
$
|
64,856
|
|
Adjusted
EBITDA
|
$
|
36,265
|
|
|
$
|
34,499
|
|
Adjusted EBITDA
margin
|
49.6
|
%
|
|
53.2
|
%
|
|
|
(7)
|
Write-downs and
other includes items related to loss on disposal or impairment
of long lived assets (including impairments of goodwill), fair
value adjustments to contingent consideration and acquisition
costs.
|
(8)
|
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.
|
(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.
|
(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 include restructuring and severance
and are related to costs incurred after the purchase of
businesses, such as the acquisitions of Rocket and Integrity, to
integrate operations.
|
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,
|
|
2019
|
|
2018
|
Total debt
|
$
|
537,604
|
|
|
$
|
538,799
|
|
Less: Cash and cash
equivalents
|
10,369
|
|
|
70,726
|
|
Total net
debt
|
$
|
527,235
|
|
|
$
|
468,073
|
|
LTM Adjusted
EBITDA
|
$
|
137,972
|
|
|
$
|
136,206
|
|
Total net debt
leverage ratio
|
3.8
|
|
|
3.4
|
|
|
|
|
|
Integrity LTM
Adjusted EBITDA(12)
|
$
|
7,700
|
|
|
$
|
—
|
|
Post-Integrity LTM
Adjusted EBITDA
|
$
|
145,672
|
|
|
$
|
136,206
|
|
Adjusted total net
debt leverage ratio
|
3.6
|
|
|
3.4
|
|
|
|
(12)
|
Represents
Integrity's 2017 Adjusted EBITDA, which we believe is indicative of
Integrity's performance in subsequent periods, adjusted for the
time period for which Integrity's financial measures are included
in AGS's results.
|
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 and
payments of in-kind interest related to the redemption of our
HoldCo PIK notes. 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,
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)
|
|
(amounts in
thousands)
|
Three months
ended
March 31,
2018
|
Net cash provided by
operating activities
|
$
|
(32,816)
|
|
Purchase of
intangible assets
|
(568)
|
|
Software development
and other expenditures
|
(2,490)
|
|
Purchases of property
and equipment
|
(11,931)
|
|
Payments-in-kind
interest payments
|
37,624
|
|
Free Cash
Flow
|
$
|
(10,181)
|
|
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SOURCE AGS