LAS VEGAS, Aug. 7, 2019 /PRNewswire/ -- AGS (NYSE: AGS)
("AGS", "us", "we" or the "Company") today reported operating
results for its second quarter ended June
30, 2019.
"Results in the second quarter were mixed, with 2%
year-over-year growth in both total and recurring revenue offset by
a slight decrease in Adjusted EBITDA. The decrease was
related to increased operating expenses as we continue to invest in
strategic areas of our business, particularly in R&D, to
capitalize on the vast whitespace in front of us," said
David Lopez, President and Chief
Executive Officer. "With our many upcoming product launches,
including the Orion UprightSM and three new slot
innovations which we'll showcase at G2E, we remain confident in the
many opportunities for sustainable growth in the back half of 2019
and beyond."
Summary of the
Three Months Ended June 30, 2019 and 2018
(In
thousands, except per-share data)
|
|
|
Three Months Ended
June 30,
|
|
2019
|
|
2018
|
|
$
Change
|
|
%
Change
|
Revenues:
|
|
|
|
|
|
|
|
EGM
|
$
|
70,978
|
|
|
$
|
69,319
|
|
|
$
|
1,659
|
|
|
2.4
|
%
|
Table
Products
|
2,420
|
|
|
1,792
|
|
|
628
|
|
|
35.0
|
%
|
Interactive
|
1,111
|
|
|
1,711
|
|
|
(600)
|
|
|
(35.1)
|
%
|
Total
revenues
|
$
|
74,509
|
|
|
$
|
72,822
|
|
|
$
|
1,687
|
|
|
2.3
|
%
|
Operating
income
|
1,995
|
|
|
11,024
|
|
|
(9,029)
|
|
|
(81.9)
|
%
|
Net loss
attributable to PlayAGS, Inc.
|
$
|
(7,557)
|
|
|
$
|
(5,310)
|
|
|
$
|
(2,247)
|
|
|
42.3
|
%
|
Loss per
share
|
$
|
(0.21)
|
|
|
$
|
(0.15)
|
|
|
$
|
(0.06)
|
|
|
(40.0)
|
%
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
|
|
|
EGM
|
$
|
35,541
|
|
|
$
|
36,867
|
|
|
$
|
(1,326)
|
|
|
(3.6)
|
%
|
Table
Products
|
807
|
|
|
70
|
|
|
737
|
|
|
1,052.9
|
%
|
Interactive
|
(603)
|
|
|
(355)
|
|
|
(248)
|
|
|
(69.9)
|
%
|
Total Adjusted
EBITDA(1)
|
$
|
35,745
|
|
|
$
|
36,582
|
|
|
$
|
(837)
|
|
|
(2.3)
|
%
|
Total Adjusted
EBITDA margin(2)
|
48.0
|
%
|
|
50.2
|
%
|
|
N/A
|
|
|
(220)bps
|
|
Second Quarter 2019 Financial Highlights
- Total revenue increased 2% to $74.5
million, driven by record gaming operations revenue, or
recurring revenue, from increases in our EGM and Table Products
segments, as well EGM sales revenue.
- Gaming operations revenue, or recurring revenue, grew to
$53.6 million, or 2% year-over-year,
driven by EGMs purchased from Integrity Gaming Corp. ("Integrity"),
growth of our international installed base, and an increase in
Table Products revenue.
- EGM sold units increased 12% to 1,181 compared to 1,058 in the
prior year, led by sales of the Orion
PortraitSM and Orion SlantSM
cabinets in markets such as Florida, Alabama, California, Nevada, and Mexico.
- Table Products revenue increased 35% to $2.4 million, driven by increased progressive
table game and side bet placements.
- Net loss of $7.6 million was up
year-over-year from a net loss of $5.3
million. Net loss includes an impairment of goodwill of
$3.5 million and an impairment of
intangible assets of $1.3 million
related to our real money gaming business ("iGaming") within our
Interactive segment.
- Total Adjusted EBITDA (non-GAAP)(1) decreased 2% to
$35.7 million, driven by increased
EGM-related headcount costs in SG&A and R&D, increased EGM
service costs of $0.5 million
associated with a larger installed base, and a $0.2 million increased loss in Interactive
Adjusted EBITDA.
- Total Adjusted EBITDA margin (non-GAAP)(1) decreased
to 48% in the second quarter of 2019 compared to 50% in the prior
year, driven by increased headcount related and service costs
mentioned above.
(1)
|
Adjusted EBITDA and
Adjusted EBITDA margin are non-GAAP measures, see non-GAAP
reconciliation below.
|
(2)
|
Basis points
("bps")
|
EGM
|
|
Three Months Ended
June 30, 2019 compared to Three Months Ended June 30,
2018
|
|
(Amounts in
thousands, except unit data)
|
Three months ended
June 30,
|
|
|
|
|
|
2019
|
|
2018
|
|
$
Change
|
|
%
Change
|
EGM segment
revenues:
|
|
|
|
|
|
|
|
Gaming
operations
|
$
|
50,161
|
|
|
$
|
49,150
|
|
|
$
|
1,011
|
|
|
2.1
|
%
|
Equipment
sales
|
20,817
|
|
|
20,169
|
|
|
648
|
|
|
3.2
|
%
|
Total EGM
revenues
|
$
|
70,978
|
|
|
$
|
69,319
|
|
|
$
|
1,659
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
EGM Adjusted
EBITDA
|
$
|
35,541
|
|
|
$
|
36,867
|
|
|
$
|
(1,326)
|
|
|
(3.6)
|
%
|
|
|
|
|
|
|
|
|
EGM unit
information:
|
|
|
|
|
|
|
|
VLT
|
517
|
|
|
1,217
|
|
|
(700)
|
|
|
(57.5)
|
%
|
Class II
|
12,154
|
|
|
12,206
|
|
|
(52)
|
|
|
(0.4)
|
%
|
Class III
|
5,750
|
|
|
3,224
|
|
|
2,526
|
|
|
78.3
|
%
|
Domestic installed
base, end of period
|
18,421
|
|
|
16,647
|
|
|
1,774
|
|
|
10.7
|
%
|
International
installed base, end of period
|
8,596
|
|
|
7,876
|
|
|
720
|
|
|
9.1
|
%
|
Total installed base,
end of period
|
27,017
|
|
|
24,523
|
|
|
2,494
|
|
|
10.2
|
%
|
|
|
|
|
|
|
|
|
Domestic revenue per
day
|
$
|
26.16
|
|
|
$
|
27.79
|
|
|
$
|
(1.63)
|
|
|
(5.9)
|
%
|
International revenue
per day
|
$
|
8.22
|
|
|
$
|
8.80
|
|
|
$
|
(0.58)
|
|
|
(6.6)
|
%
|
Total revenue per
day
|
$
|
20.49
|
|
|
$
|
21.77
|
|
|
$
|
(1.28)
|
|
|
(5.9)
|
%
|
|
|
|
|
|
|
|
|
Domestic EGM units
sold
|
1,053
|
|
|
1,058
|
|
|
(5)
|
|
|
(0.5)
|
%
|
International EGM
units sold
|
128
|
|
|
—
|
|
|
128
|
|
|
100.0
|
%
|
Total EGM units
sold
|
1,181
|
|
|
1,058
|
|
|
123
|
|
|
11.6
|
%
|
|
|
|
|
|
|
|
|
Domestic average
sales price
|
$
|
18,178
|
|
|
$
|
18,728
|
|
|
$
|
(550)
|
|
|
(2.9)
|
%
|
EGM Highlights
- Domestic EGM installed base grew by 1,774 units year-over-year,
driven by the acquisition of 2,500 EGMs from Integrity. The prior
year installed base included approximately 500 EGMs at one customer
in Texas which were predominantly
redeployed internationally and 700 VLT units that were purchased in
an end-of-lease buyout (420 in Q4 2018, 130 in Q1 2019, and 150 in
Q2 2019).(3)
- Domestic EGM revenue per day ("RPD") decreased to $26.16 compared to $27.79 in the prior year period. When we
normalize for the impact of EGMs purchased from Integrity, we
estimate that domestic RPD was $27.45. The remaining decrease is due to a number
of factors in Oklahoma, including:
(1) product underperformance at three Oklahoma properties which largely accounted
for the decrease in RPD, (2) the placement of approximately 800
incremental units into Oklahoma
over the past year, which as a market yields a lower RPD than our
domestic average, and (3) flooding that resulted in several casino
closings.
- EGM equipment sales revenue increased 3% to $20.8 million, driven by international sales.
Domestic sales included 1,053 domestic units, of which nearly 70%
were sold into early-entry markets such as Nevada, Canada, Michigan, and Pennsylvania.
- Domestic average sales price ("ASP") for EGMs decreased 3% to
$18,178 due to sales to a large
customer in the quarter.
- International gaming operations revenue increased 4%
year-over-year due to the addition of 720 incremental units placed
with both existing and new customers, predominantly in Mexico.
- International RPD decreased by $0.58, or 7%, as we grew our installed base in
different markets in Mexico and to
a lesser extent the effect of foreign currency.
- Orion PortraitSM footprint(4)
increased to more than 6,700 units, up 95% year-over-year and
accounted for 55% of sales in the quarter.
- Orion SlantSM footprint(4)
increased to 2,230 units, up 15% sequentially, and accounted for
21% of sales in the quarter with placements in several early-entry
markets such as Wisconsin,
Michigan, and Arizona, as well as ramping markets such as
Florida and California, driven by placements of our Fa
Cai Shu family of games.
- ICONSM cabinet footprint(4)
increased by 2,241 units year-over-year and 454 units sequentially
to over 8,300 units, with more than 800 units placed in
Mexico.
(3)
|
The VLT units were
not included in our sold unit count for either period.
|
(4)
|
Footprint includes
sold and leased units.
|
Table
Products
|
|
Three Months Ended
June 30, 2019 compared to Three Months Ended June 30,
2018
|
|
(Amounts in
thousands, except unit data)
|
Three months ended
June 30,
|
|
|
|
|
|
2019
|
|
2018
|
|
$
Change
|
|
%
Change
|
Table Products
segment revenues:
|
|
|
|
|
|
|
|
Gaming
operations
|
$
|
2,321
|
|
|
$
|
1,693
|
|
|
$
|
628
|
|
|
37.1
|
%
|
Equipment
sales
|
99
|
|
|
99
|
|
|
—
|
|
|
—
|
%
|
Total Table
Products revenues
|
$
|
2,420
|
|
|
$
|
1,792
|
|
|
$
|
628
|
|
|
35.0
|
%
|
|
|
|
|
|
|
|
|
Table Products
Adjusted EBITDA
|
$
|
807
|
|
|
$
|
70
|
|
|
$
|
737
|
|
|
1,052.9
|
%
|
|
|
|
|
|
|
|
|
Table Products
unit information:
|
|
|
|
|
|
|
|
Table Products
installed base, end of period
|
3,380
|
|
|
2,737
|
|
|
643
|
|
|
23.5
|
%
|
Average monthly lease
price
|
$
|
230
|
|
|
$
|
213
|
|
|
$
|
17
|
|
|
8.0
|
%
|
Table Products Highlights
- Revenue increased $0.6 million,
or 35%, due to an increase of 643 units year-over-year and 95 units
sequentially, driven by the continued growth of our Super
4® progressive blackjack, Buster
Blackjack® side bet, and our Criss Cross
Poker™ premium game offering.
- Installed base of table game progressives reached nearly 1,100
units, up 48% year-over-year, contributing to the 8% increase in
average monthly lease price.
- Installed base of side bets reached more than 2,000 units in
the quarter.
- Converted 100 competitor progressives to our own STAX™
Progressive system in the quarter, which helped drive the
Adjusted EBITDA increase.
- We expect that momentum and demand for our new Dex S™
card shuffler will continue to grow, with approximately 100
shufflers currently installed in several markets across the
U.S.
Interactive
|
|
Three Months Ended
June 30, 2019 compared to Three Months Ended June 30,
2018
|
|
(Amounts in
thousands)
|
Three months ended
June 30,
|
|
|
|
|
|
2019
|
|
2018
|
|
$
Change
|
|
%
Change
|
Interactive
segment revenue:
|
|
|
|
|
|
|
|
Social gaming
revenue
|
$
|
890
|
|
|
$
|
1,660
|
|
|
$
|
(770)
|
|
|
(46.4)
|
%
|
Real Money Gaming
revenue
|
221
|
|
|
51
|
|
|
170
|
|
|
333.3
|
%
|
Total Interactive
revenue
|
$
|
1,111
|
|
|
$
|
1,711
|
|
|
$
|
(600)
|
|
|
(35.1)
|
%
|
|
|
|
|
|
|
|
|
Interactive
Adjusted EBITDA
|
$
|
(603)
|
|
|
$
|
(355)
|
|
|
$
|
(248)
|
|
|
(69.9)
|
%
|
Interactive Highlights
- Social gaming revenue decreased $0.8
million as a result of strategically optimizing our user
acquisition costs.
- The decrease in Interactive Adjusted EBITDA is primarily due to
increased iGaming operating cost. iGaming Adjusted EBITDA loss was
$0.7 million in the current
period.
- We generated $0.2 million in
revenue from iGaming in the current period.
- Continued the launch of our proven land-based EGM content in
the European RMG space this quarter with titles such as
Jade Wins®,
Longhorn Jackpots™, Fu Nan Fu Nu™, and
our hit title Rakin' Bacon!®, the best performing
AGS game offered in the quarter.
- Our social white-label casino solution
ConnexSysSM is currently live with five
operators, and there are five additional deals signed and pending
launch.
- We now have more than 25 suppliers live across the iGaming
platform with 13 new suppliers launched since Q1 2019.
Operating Expenses
SG&A expenses decreased $0.7
million year-over-year to $14.6
million in the second quarter of 2019, primarily due to a
decrease of $2.2 million in
professional fees related to costs associated with the acquisition
and integration of Gameiom Technologies Limited ("Gameiom") and
secondary offering costs in the prior year and decreased marketing
costs of $0.3 million driven by
strategically optimizing social gaming user acquisition costs. The
decreases were offset by increases in stock-based compensation of
$1.0 million and increased headcount
related costs of $0.7 million.
R&D expenses increased $1.5
million year-over-year to $8.4
million in the second quarter of 2019 due to an increase of
$0.6 million of stock-based
compensation, $0.6 million in
increased development costs, $0.4
million in increased headcount related costs partially due
to the opening of our new design studios in Sydney, Australia and Reno, Nevada, and $0.2
million in increased costs associated with iGaming.
Balance Sheet Review
As of June 30, 2019, we had
$18.0 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 June 30, 2019,
was approximately $518.4 million
compared to $468.1 million at
December 31, 2018. Net debt as of
June 30, 2019 increased by
$50.3 million compared to
December 31, 2018, primarily driven
by the acquisition of Integrity. Our Adjusted Total Net Debt
Leverage Ratio increased from 3.4 times at December 31, 2018, to 3.6 times at June 30, 2019, see Total Net Debt Leverage Ratio
Reconciliation below.(5) Capital expenditures increased
$2.0 million to $15.1 million in the second quarter, compared to
$13.1 million in the prior year
period, primarily due to increased placements fees.
2019 Outlook
Based on our year to date progress, we are revising our annual
adjusted EBITDA guidance. We now expect to generate total
adjusted EBITDA of $145 -
$150 million in 2019, representing
growth of approximately 6% - 10% compared to the prior year period.
The change is due to several factors, including: (1) decreased
gaming operations revenue in our EGM segment, largely due to
product underperformance in Oklahoma, (2) decreased gaming operations
revenue in our Interactive segment caused by delayed entry into
New Jersey, as well as select
markets in Europe and Latin America, and (3) decreased sales revenue
from our EGM segment due to anticipated softness from certain
corporate customers. We continue to expect 2019 capital
expenditures to be in the range of $65 - $69 million,
compared to $66.2 million in 2018,
reflecting an expectation for an increase in our EGM installed base
in existing markets.
(Amounts in
millions)
|
2018
Actual
Results
|
|
Previous
2019
Guidance
|
|
Previous
Growth
Percentage
|
|
Revised
2019
Guidance
|
|
Revised
Growth
Percentage
|
Adjusted
EBITDA
|
$136.2
|
|
$160 -
$164
|
|
17% - 20%
|
|
$145 -
$150
|
|
6% - 10%
|
Capex
|
$66.2
|
|
$65 - $69
|
|
(2%) - 4%
|
|
$65 - $69
|
|
(2%) - 4%
|
Conference Call and Webcast
On August 7, 2019, at 5 p.m. EDT, AGS leadership will host a conference
call to present the second 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 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 Q2 2019 Earnings Call".
(5) Total Adjusted
EBITDA, total net debt leverage ratio, and adjusted total net debt
leverage ratio are 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. Some
trademarks with a ™ notice are registered in the United States as a design mark. 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)
|
|
|
June
30,
|
|
December
31,
|
|
2019
|
|
2018
|
Assets
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
17,974
|
|
|
$
|
70,726
|
|
Restricted
cash
|
20
|
|
|
78
|
|
Accounts receivable,
net of allowance of $891 and $855 respectively
|
49,806
|
|
|
44,704
|
|
Inventories
|
30,195
|
|
|
27,438
|
|
Prepaid
expenses
|
5,390
|
|
|
3,566
|
|
Deposits and
other
|
4,682
|
|
|
4,231
|
|
Total current
assets
|
108,067
|
|
|
150,743
|
|
Property and
equipment, net
|
103,327
|
|
|
91,547
|
|
Goodwill
|
285,186
|
|
|
277,263
|
|
Intangible
assets
|
243,949
|
|
|
196,898
|
|
Deferred tax
asset
|
2,426
|
|
|
2,544
|
|
Operating
leases
|
11,908
|
|
|
—
|
|
Other
assets
|
6,637
|
|
|
12,347
|
|
Total
assets
|
$
|
761,500
|
|
|
$
|
731,342
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$
|
13,568
|
|
|
$
|
14,821
|
|
Accrued
liabilities
|
33,334
|
|
|
26,659
|
|
Current maturities of
long-term debt
|
6,036
|
|
|
5,959
|
|
Total current
liabilities
|
52,938
|
|
|
47,439
|
|
Long-term
debt
|
520,313
|
|
|
521,924
|
|
Deferred tax
liability - noncurrent
|
625
|
|
|
1,443
|
|
Operating lease
liability, long-term
|
11,958
|
|
|
—
|
|
Other long-term
liabilities
|
42,568
|
|
|
24,732
|
|
Total
liabilities
|
628,402
|
|
|
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 June 30, 2019 and at
December 31, 2018; and 35,442,112, and 35,353,269 shares issued and
outstanding at June 30, 2019 and December 31, 2018,
respectively.
|
354
|
|
|
353
|
|
Additional paid-in
capital
|
365,562
|
|
|
361,628
|
|
Accumulated
deficit
|
(230,042)
|
|
|
(222,403)
|
|
Accumulated other
comprehensive (loss) income
|
(2,904)
|
|
|
(3,774)
|
|
Non-controlling
interest
|
128
|
|
|
—
|
|
Total
stockholders' equity
|
133,098
|
|
|
135,804
|
|
Total liabilities
and stockholders' equity
|
$
|
761,500
|
|
|
$
|
731,342
|
|
PLAYAGS,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
(amounts in
thousands, except per share data)
|
|
|
Three months ended
June 30,
|
|
2019
|
|
2018
|
Revenues
|
|
|
|
Gaming
operations
|
$
|
53,593
|
|
|
$
|
52,554
|
|
Equipment
sales
|
20,916
|
|
|
20,268
|
|
Total
revenues
|
74,509
|
|
|
72,822
|
|
Operating
expenses
|
|
|
|
Cost of gaming
operations(6)
|
10,932
|
|
|
9,710
|
|
Cost of equipment
sales(6)
|
9,903
|
|
|
9,411
|
|
Selling, general and
administrative
|
14,605
|
|
|
15,350
|
|
Research and
development
|
8,379
|
|
|
6,855
|
|
Write-downs and other
charges
|
5,036
|
|
|
1,005
|
|
Depreciation and
amortization
|
23,659
|
|
|
19,467
|
|
Total operating
expenses
|
72,514
|
|
|
61,798
|
|
Income from
operations
|
1,995
|
|
|
11,024
|
|
Other expense
(income)
|
|
|
|
Interest
expense
|
9,560
|
|
|
8,873
|
|
Interest
income
|
(31)
|
|
|
(21)
|
|
Other (income)
expense
|
(46)
|
|
|
455
|
|
(Loss) income
before income taxes
|
(7,488)
|
|
|
1,717
|
|
Income tax benefit
(expense)
|
52
|
|
|
(7,027)
|
|
Net
loss
|
(7,436)
|
|
|
(5,310)
|
|
Less: Net income
attributable to non-controlling interests
|
(121)
|
|
|
—
|
|
Net loss
attributable to PlayAGS, Inc
|
(7,557)
|
|
|
(5,310)
|
|
Foreign currency
translation adjustment
|
228
|
|
|
(2,883)
|
|
Total
comprehensive loss
|
$
|
(7,329)
|
|
|
$
|
(8,193)
|
|
|
|
|
|
Basic and diluted
loss per common share:
|
|
|
|
Basic
|
$
|
(0.21)
|
|
|
$
|
(0.15)
|
|
Diluted
|
$
|
(0.21)
|
|
|
$
|
(0.15)
|
|
Weighted average
common shares outstanding:
|
|
|
|
Basic
|
35,428
|
|
|
35,233
|
|
Diluted
|
35,428
|
|
|
35,233
|
|
|
|
(6)
|
Exclusive of
depreciation and amortization.
|
PLAYAGS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
|
|
|
Six months ended
June 30,
|
|
2019
|
|
2018
|
Cash flows from
operating activities
|
|
|
|
Net loss
|
$
|
(7,425)
|
|
|
$
|
(14,848)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
45,192
|
|
|
38,816
|
|
Accretion of contract
rights under development agreements and placement fees
|
2,803
|
|
|
2,206
|
|
Amortization of
deferred loan costs and discount
|
941
|
|
|
914
|
|
Payment-in-kind
interest payments
|
—
|
|
|
(37,624)
|
|
Write-off of deferred
loan cost and discount
|
—
|
|
|
3,410
|
|
Stock-based
compensation expense
|
3,350
|
|
|
8,629
|
|
Provision (benefit)
for bad debts
|
153
|
|
|
(148)
|
|
Loss on disposition
of assets
|
445
|
|
|
1,020
|
|
Impairment of
assets
|
5,207
|
|
|
995
|
|
Fair value adjustment
of contingent consideration
|
400
|
|
|
600
|
|
(Benefit) provision
for deferred income tax
|
(607)
|
|
|
3,090
|
|
Changes in assets and
liabilities that relate to operations:
|
|
|
|
Accounts
receivable
|
(3,461)
|
|
|
(11,552)
|
|
Inventories
|
419
|
|
|
(2,440)
|
|
Prepaid
expenses
|
(1,698)
|
|
|
(1,685)
|
|
Deposits and
other
|
(418)
|
|
|
(758)
|
|
Other assets,
non-current
|
6,605
|
|
|
11,138
|
|
Accounts payable and
accrued liabilities
|
(14,231)
|
|
|
(12,082)
|
|
Net cash provided
by (used in) operating activities
|
37,675
|
|
|
(10,319)
|
|
Cash flows from
investing activities
|
|
|
|
Business
acquisitions, net of cash acquired
|
(50,779)
|
|
|
(4,452)
|
|
Purchase of
intangible assets
|
(3,950)
|
|
|
(594)
|
|
Software development
and other expenditures
|
(6,299)
|
|
|
(5,168)
|
|
Proceeds from
disposition of assets
|
109
|
|
|
21
|
|
Purchases of property
and equipment
|
(23,819)
|
|
|
(22,314)
|
|
Net used in
investing activities
|
(84,738)
|
|
|
(32,507)
|
|
Cash flows from
financing activities
|
|
|
|
Repayment of PIK
notes
|
—
|
|
|
(115,000)
|
|
Repayment of senior
secured credit facilities
|
(2,694)
|
|
|
(2,576)
|
|
Payment of financed
placement fee obligations
|
(1,767)
|
|
|
(1,772)
|
|
Payments of previous
acquisition obligation
|
(1,022)
|
|
|
—
|
|
Payments on equipment
long-term note payable and capital leases
|
(695)
|
|
|
(1,405)
|
|
Proceeds from
issuance of common stock
|
—
|
|
|
176,341
|
|
Initial public
offering cost
|
—
|
|
|
(4,160)
|
|
Proceeds from stock
option exercise
|
585
|
|
|
279
|
|
Distributions to
non-controlling interest owners
|
(157)
|
|
|
—
|
|
Net cash (used in)
provided by financing activities
|
(5,750)
|
|
|
51,707
|
|
Effect of exchange
rates on cash and cash equivalents
|
3
|
|
|
6
|
|
(Decrease) increase
in cash and cash equivalents
|
(52,810)
|
|
|
8,887
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
70,804
|
|
|
19,342
|
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
17,994
|
|
|
$
|
28,229
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
|
Intangible assets
obtained under placement fee arrangements
|
$
|
35,003
|
|
|
$
|
—
|
|
Leased assets
obtained in exchange for new finance lease liabilities
|
$
|
620
|
|
|
$
|
256
|
|
Leased assets
obtained in exchange for new operating lease liabilities
|
$
|
12,668
|
|
|
$
|
—
|
|
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, adjusted 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
June 30,
|
|
2019
|
|
2018
|
Net loss attributable
to PlayAGS, Inc.
|
$
|
(7,557)
|
|
|
$
|
(5,310)
|
|
Income tax (benefit)
expense
|
(52)
|
|
|
7,027
|
|
Depreciation and
amortization
|
23,659
|
|
|
19,467
|
|
Other expense
(income)
|
(46)
|
|
|
455
|
|
Interest
income
|
(31)
|
|
|
(21)
|
|
Interest
expense
|
9,560
|
|
|
8,873
|
|
Write-downs and
other(7)
|
5,036
|
|
|
1,005
|
|
Other
adjustments(8)
|
429
|
|
|
929
|
|
Other non-cash
charges(9)
|
2,196
|
|
|
1,616
|
|
Legal and litigation
expenses including settlement payments(10)
|
3
|
|
|
834
|
|
Acquisition and
integration related costs including restructuring &
severance(11)
|
394
|
|
|
1,231
|
|
Non-cash stock
compensation
|
2,154
|
|
|
476
|
|
Adjusted
EBITDA
|
$
|
35,745
|
|
|
$
|
36,582
|
|
|
(Amounts in
thousands, except Adjusted EBITDA
margin)
|
|
Three months ended
June 30,
|
|
2019
|
|
2018
|
Total
revenues
|
$
|
74,509
|
|
|
$
|
72,822
|
|
Adjusted
EBITDA
|
$
|
35,745
|
|
|
$
|
36,582
|
|
Adjusted EBITDA
margin
|
48.0
|
%
|
|
50.2
|
%
|
|
(7) 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.
|
(8) 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.
|
(9) 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.
|
(10) Legal and
litigation expenses including settlement payments consist of
payments to law firms and settlements for matters that are outside
the normal course of business. These costs related to litigation
and matters that were not significant individually.
|
(11) Acquisition
and integration costs primarily relate to costs incurred after
the purchase of businesses, such as the purchase of Gameiom and
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 and adjusted total net debt
leverage ratio:
(Amounts in
thousands, except net debt leverage ratio)
|
June
30,
|
|
December
31,
|
|
2019
|
|
2018
|
Total debt
|
$
|
536,324
|
|
|
$
|
538,799
|
|
Less: Cash and cash
equivalents
|
17,974
|
|
|
70,726
|
|
Total net
debt
|
$
|
518,350
|
|
|
$
|
468,073
|
|
LTM Adjusted
EBITDA
|
$
|
137,135
|
|
|
$
|
136,206
|
|
Total net debt
leverage ratio
|
3.8
|
|
|
3.4
|
|
|
|
|
|
Integrity LTM
Adjusted EBITDA(12)
|
$
|
6,640
|
|
|
$
|
—
|
|
Post-Integrity LTM
Adjusted EBITDA
|
$
|
143,775
|
|
|
$
|
136,206
|
|
Adjusted total net
debt leverage ratio
|
3.6
|
|
|
3.4
|
|
|
(12) Represents the
trailing twelve month estimated impact of Integrity's Adjusted
EBITDA, 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)
|
Six months
ended
June 30, 2019
|
|
Three months
ended
March 31, 2019
|
|
Three months
ended
June 30, 2019
|
Net cash provided by
operating activities
|
$
|
37,675
|
|
|
$
|
11,655
|
|
|
$
|
26,020
|
|
Purchase of
intangible assets
|
(3,950)
|
|
|
(1,231)
|
|
|
(2,719)
|
|
Software development
and other expenditures
|
(6,299)
|
|
|
(2,669)
|
|
|
(3,630)
|
|
Purchases of property
and equipment
|
(23,819)
|
|
|
(15,105)
|
|
|
(8,714)
|
|
Free Cash
Flow
|
$
|
3,607
|
|
|
$
|
(7,350)
|
|
|
$
|
10,957
|
|
|
|
(amounts in
thousands)
|
Six months
ended
June 30, 2018
|
|
Three months
ended
March 31, 2018
|
|
Three months
ended
June 30, 2018
|
Net cash provided by
operating activities
|
$
|
(10,319)
|
|
|
$
|
(32,816)
|
|
|
$
|
22,497
|
|
Purchase of
intangible assets
|
(594)
|
|
|
(568)
|
|
|
(26)
|
|
Software development
and other expenditures
|
(5,168)
|
|
|
(2,490)
|
|
|
(2,678)
|
|
Purchases of property
and equipment
|
(22,314)
|
|
|
(11,931)
|
|
|
(10,383)
|
|
Payments-in-kind
interest payments
|
37,624
|
|
|
37,624
|
|
|
—
|
|
Free Cash
Flow
|
$
|
(771)
|
|
|
$
|
(10,181)
|
|
|
$
|
9,410
|
|
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SOURCE AGS