LAS VEGAS, Aug. 5, 2020 /PRNewswire/ -- AGS (NYSE: AGS)
("AGS", "us", "we" or the "Company") today reported operating
results for its second quarter ended June 30, 2020.
"Although casinos started to reopen in the later part of the
quarter, we remained disciplined in how we reintroduced cost back
into the business, ramping departments that are essential to run
our business, such as field service, R&D and manufacturing,"
said AGS President and Chief Executive Officer David Lopez. "Initial game performance on
EGM units that are in-service has been strong and
better-than-expected, which allows us to lean on our strong
recurring revenue footprint in this challenging environment.
Prior to and even during COVID-19, we were seeing strong initial
performance from our new products, such as the Starwall and
Orion Rise, as well as
continued momentum from our new titles on Orion Portrait and
our suite of table game progressives. Given the breadth and
depth of our current content portfolio, we believe that the
long-term opportunities for AGS remain intact, and that we have
ample liquidity and the best-in-class team to navigate through
near-term uncertainties."
Kimo Akiona, AGS' Chief Financial
Officer, added, "Our careful management of expenses and capital
expenditures during the casino shutdowns in the quarter — in
addition to drawing $30 million under
the existing revolving credit facility and entering into
incremental term loans of $95 million
— have resulted in a strengthened liquidity position. Although
it is hard to predict exactly how the pandemic will continue to
impact the macro operating environment, given all of the measures
we've taken, we believe we are positioned with sufficient liquidity
and flexibility to emerge from this a more competitive and more
nimble organization."
Summary of
the Three Months Ended June 30,
2020 and 2019
(In thousands,
except per-share and Adjusted EBITDA margin data)
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM
|
|
$
|
13,957
|
|
|
$
|
70,978
|
|
|
$
|
(57,021)
|
|
|
|
(80.3)
|
%
|
Table
Products
|
|
|
674
|
|
|
|
2,420
|
|
|
|
(1,746)
|
|
|
|
(72.1)
|
%
|
Interactive
|
|
|
2,157
|
|
|
|
1,111
|
|
|
|
1,046
|
|
|
|
94.1
|
%
|
Total
revenues
|
|
$
|
16,788
|
|
|
$
|
74,509
|
|
|
$
|
(57,721)
|
|
|
|
(77.5)
|
%
|
(Loss) income from
operations
|
|
$
|
(28,749)
|
|
|
$
|
1,995
|
|
|
$
|
(30,744)
|
|
|
|
(1541.1)
|
%
|
Net loss
attributable to PlayAGS, Inc.
|
|
$
|
(42,639)
|
|
|
$
|
(7,557)
|
|
|
$
|
(35,082)
|
|
|
|
464.2
|
%
|
Loss per
share
|
|
$
|
(1.20)
|
|
|
$
|
(0.21)
|
|
|
$
|
(0.99)
|
|
|
|
471.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM
|
|
$
|
(2,191)
|
|
|
$
|
35,541
|
|
|
$
|
(37,732)
|
|
|
|
(106.2)
|
%
|
Table
Products
|
|
|
(126)
|
|
|
$
|
807
|
|
|
|
(933)
|
|
|
|
(115.6)
|
%
|
Interactive
|
|
|
1,164
|
|
|
|
(603)
|
|
|
|
1,767
|
|
|
|
(293.0)
|
%
|
Total Adjusted
EBITDA(1)
|
|
$
|
(1,153)
|
|
|
$
|
35,745
|
|
|
$
|
(36,898)
|
|
|
|
(103.2)
|
%
|
Total Adjusted
EBITDA margin(2)
|
|
|
-6.9
|
%
|
|
|
48.0
|
%
|
|
|
N/A
|
|
|
(5,490)
bps
|
|
Second Quarter 2020 Financial
Results
- During March and April and continuing through mid- to late-May
of the current year, nearly all of our customers closed their
operations due to business disruption caused by the global spread
of COVID-19 and the actions by governments and businesses to
contain the virus. The markets that we serve have been severely
impacted, which is the primary reason for the decreases in the
metrics noted above, specifically revenues, (loss) income from
operations, net loss, Adjusted EBITDA, and Adjusted EBITDA
margin.
- A limited number of customers reopened in mid- to late-May and
through June; by June 30,
approximately 500 of our 650 customers properties in the United States and Canada were partially open. In Mexico, 25 of our 320 customers properties
were partially open as of June
30.
- Total revenue decreased to $16.8
million, primarily due to decreased gaming operations
revenue and unit sales in our EGM segment.
- Gaming operations revenue, or recurring revenue, decreased to
$10.2 million compared to
$53.6 million in the prior year
period, primarily related to our leased EGMs and Table Products
that were impacted by closed casinos. This decrease was
slightly offset by increased revenue in our Interactive
segment.
- Net loss of $42.6 million
increased year-over-year from net loss of $7.6 million in the prior year, primarily due to
the decrease in EGM and Table Products revenue, partially offset by
decreases in expenses that were a result of management's actions
taken to decrease spending amid COVID-19, including employee
furloughs, a reduction in force, and salary reductions. Additional
savings resulted from the Company's focus to reduce expenses,
primarily in sales and marketing activities, professional
fees, and delayed development expenses.
- Total Adjusted EBITDA (non-GAAP)(1) decreased to a loss of
$1.2 million compared to
$35.7 million in the prior year
period, driven by decreases in our EGM and Table Products
segments and slightly offset by growth in our Interactive
segment.
(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, 2020 compared to Three Months Ended June
30, 2019
|
|
(Amounts in
thousands, except unit data)
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
EGM segment
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
7,535
|
|
|
$
|
50,161
|
|
|
$
|
(42,626)
|
|
|
|
(85.0)
|
%
|
Equipment
sales
|
|
|
6,422
|
|
|
|
20,817
|
|
|
|
(14,395)
|
|
|
|
(69.2)
|
%
|
Total EGM
revenues
|
|
$
|
13,957
|
|
|
$
|
70,978
|
|
|
$
|
(57,021)
|
|
|
|
(80.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM Adjusted
EBITDA
|
|
$
|
(2,191)
|
|
|
$
|
35,541
|
|
|
$
|
(37,732)
|
|
|
|
(106.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EGM unit
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VLT
|
|
|
512
|
|
|
|
517
|
|
|
|
(5)
|
|
|
|
(1.0)
|
%
|
Class II
|
|
|
12,449
|
|
|
|
12,154
|
|
|
|
295
|
|
|
|
2.4
|
%
|
Class III
|
|
|
4,833
|
|
|
|
5,750
|
|
|
|
(917)
|
|
|
|
(15.9)
|
%
|
Domestic installed
base, end of period
|
|
|
17,794
|
|
|
|
18,421
|
|
|
|
(627)
|
|
|
|
(3.4)
|
%
|
International
installed base, end of period
|
|
|
7,969
|
|
|
|
8,596
|
|
|
|
(627)
|
|
|
|
(7.3)
|
%
|
Total installed base,
end of period
|
|
|
25,763
|
|
|
|
27,017
|
|
|
|
(1,254)
|
|
|
|
(4.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installed base -
Oklahoma
|
|
|
9,562
|
|
|
|
10,083
|
|
|
$
|
(521)
|
|
|
|
(5.2)
|
%
|
Installed base -
non-Oklahoma
|
|
|
8,232
|
|
|
|
8,338
|
|
|
$
|
(106)
|
|
|
|
(1.3)
|
%
|
Domestic installed
base, end of period
|
|
|
17,794
|
|
|
|
18,421
|
|
|
$
|
(627)
|
|
|
|
(3.4)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic revenue per
day
|
|
$
|
5.96
|
|
|
$
|
26.16
|
|
|
$
|
(20.20)
|
|
|
|
(77.2)
|
%
|
International revenue
per day
|
|
$
|
0.02
|
|
|
$
|
8.22
|
|
|
$
|
(8.20)
|
|
|
|
(99.8)
|
%
|
Total revenue per
day
|
|
$
|
4.09
|
|
|
$
|
20.49
|
|
|
$
|
(16.40)
|
|
|
|
(80.0)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic EGM units
sold
|
|
|
147
|
|
|
|
1,053
|
|
|
|
(906)
|
|
|
|
(86.0)
|
%
|
International EGM
units sold
|
|
|
62
|
|
|
|
128
|
|
|
|
(66)
|
|
|
|
(51.6)
|
%
|
Total EGM units
sold
|
|
|
209
|
|
|
|
1,181
|
|
|
|
(972)
|
|
|
|
(82.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic average sales
price
|
|
$
|
19,646
|
|
|
$
|
18,178
|
|
|
$
|
1,468
|
|
|
|
8.1
|
%
|
EGM Quarterly Results
Domestic Gaming Operations(3)
- Domestic gaming operations revenue decreased $36.2 million, driven by disruptions in lease
revenue from EGMs that were non-operational as noted above and to a
lesser extent, a decreased installed base compared to the prior
year period.
- As of June 30, 2020,
approximately 500 of our customer properties were open in
the United States and Canada, which represents approximately 15,400
EGMs from our domestic installed base. Of these EGMs, we estimate
that more than 11,000 of our EGMs were active as of June 30 due to the limited capacity and social
distancing guidelines under which casinos have restarted
operations.
- Domestic EGM installed base decreased by 627 units
year-over-year, primarily due to the sale of 169 previously leased,
lower-yielding Oklahoma units to
distributors in the current period and 722 in previous periods.(4)
These decreases were offset by placements of 210 EGMs at one
new casino opening in the quarter.
- Domestic EGM revenue per day ("RPD") decreased to $5.96 compared to $26.16 in the prior year period, driven by
non-operational EGMs in the quarter.
- Excluding EGMs that were not active during the period,
Domestic EGM RPD increased to approximately $33.00, due to strong play levels, which we
believe was bolstered by pent-up demand, limited supply, and the
Federal stimulus benefit provided for under the CARES Act.
International Gaming Operations
- International gaming operations revenue decreased to nearly
$0 in the current year period as
nearly all our customers remained closed for the entire second
quarter in Mexico and the Philippines.
- As of June 30, 2020, 25 of our
customer properties were open in Mexico, which represents approximately 500
EGMs in our international installed base.
- International installed base decreased 627 units year over year
due to casinos that closed permanently in Mexico as well as the sale of previously
leased machines in the last 12 months.
Equipment Sales
- EGM units sold decreased to 209 units in the second quarter,
primarily due to business disruptions related to COVID-19 as noted
above and reduced customer budgets for EGM purchases.(4)
- Domestic ASP for EGMs increased to $19,646 from $18,178 in the prior year period driven by a
favorable product mix that included sales of our new Orion
Curve cabinet in the current period.
- EGM equipment sales revenue was driven by sales in Arkansas, California, Nevada, and New
York and International EGM units were sold primarily into
Argentina.
Product Highlights
- Initial placements of our new premium, lease-only
Starwall immersive video cabinet in Oklahoma continued to perform between 2.5x to
3.0x house average.
- Initial placements of nearly 40 Orion Curve cabinets in
the quarter mark the launch of this product that is the driver of
our significantly improved ASP in the current quarter.
(3)
|
"Domestic" includes
both the United States and Canada.
|
(4)
|
The 169 units
were not included in our sold unit count or ASP for the current
period.
|
Table
Products
|
|
Three Months Ended
June 30, 2020 compared to Three Months Ended June 30,
2019
|
|
(Amounts in
thousands, except unit data)
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
Table Products
segment revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
497
|
|
|
$
|
2,321
|
|
|
$
|
(1,824)
|
|
|
|
(78.6)
|
%
|
Equipment
sales
|
|
|
177
|
|
|
|
99
|
|
|
|
78
|
|
|
|
78.8
|
%
|
Total Table
Products revenues
|
|
$
|
674
|
|
|
$
|
2,420
|
|
|
$
|
(1,746)
|
|
|
|
(72.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
Adjusted EBITDA
|
|
$
|
(126)
|
|
|
$
|
807
|
|
|
$
|
(933)
|
|
|
|
(115.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
unit information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table Products
installed base, end of period
|
|
|
3,962
|
|
|
|
3,380
|
|
|
|
582
|
|
|
|
17.2
|
%
|
Average monthly lease
price
|
|
$
|
42
|
|
|
$
|
230
|
|
|
$
|
(188)
|
|
|
|
(81.7)
|
%
|
Table Products Quarterly Results
- Table Products gaming operations revenue decreased to
$0.5 million in the current period,
driven by casino closures in the quarter.
- Table Products installed base increased year-over-year driven
by the continued growth of all of our product categories, including
side bets, premium table games, table equipment and, most notably,
progressives.
- Equipment sales revenue increased $0.1
million in the current year period primarily due to sales of
protective VisiDeal Shield plexiglass player dividers
and other parts to help our casino customers operate safely in this
new environment. The prior year period included sales of both our
new Dex S card shuffler and our table signage.
- Installed base of table game progressives of over 1,350 units,
up 28% year-over-year.
Interactive
|
|
Three Months Ended
June 30, 2020 compared to Three Months Ended June
30, 2019
|
|
(Amounts in
thousands)
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
%
Change
|
|
Interactive
segment revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social gaming
revenue
|
|
$
|
1,095
|
|
|
$
|
890
|
|
|
$
|
205
|
|
|
|
23.0
|
%
|
Real-money gaming
revenue
|
|
|
1,062
|
|
|
|
221
|
|
|
|
841
|
|
|
|
380.5
|
%
|
Total Interactive
revenue
|
|
$
|
2,157
|
|
|
$
|
1,111
|
|
|
$
|
1,046
|
|
|
|
94.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interactive
Adjusted EBITDA
|
|
$
|
1,164
|
|
|
$
|
(603)
|
|
|
$
|
1,767
|
|
|
|
(293.0)
|
%
|
Interactive Quarterly Results
- Total revenue increased $1.0
million, while Adjusted EBITDA increased $1.8 million compared to the prior year.
- Interactive segment reported positive Adjusted EBITDA for the
second quarter in a row, up both year-over year and sequentially,
due to an increase in both real-money gaming ("RMG") and Social
gaming revenue and bolstered by cost savings from the restructuring
of our social business in prior periods and company-wide cost
savings measures in the current period.
- RMG revenue increased $0.8
million, driven by the continued introduction of our
EGM content in the European RMG market, the recent launch into the
New Jersey market in the fourth
quarter of 2019, as well as the launch in Pennsylvania in the current quarter.
- Our RMG platform in Pennsylvania and New
Jersey currently provides game content to nine operators,
with the recent additions of Rush Street Interactive and
Parx Online in Pennsylvania, as well as Harrah's, WSOP, and 888 in New Jersey in the quarter.
Liquidity and Capital Expenditures
As of June 30, 2020, we had
$113.1 million in cash and
cash equivalents compared to $13.2
million at December 31, 2019.
Total principle amount of debt as of June
30, 2020, of $656.0 million was predominantly
comprised of first lien term loans of $624.3 million, which mature in 2024, and
revolving credit facility of $30.0
million, which matures in 2022.
As a precautionary measure to increase the Company's cash
position and facilitate financial flexibility in light of current
uncertainty in the gaming industry resulting from the COVID-19
pandemic, in March the Company borrowed $30 million under the revolving credit
facility and in May issued an additional $95 million in term loans. In connection with the
new term loans, the Company negotiated a financial covenant relief
period through December 31, 2020
related to its net first lien leverage ratio financial
covenant, and implemented a revised calculation of EBITDA to be
used in the net first lien leverage ratio for the first three
quarters of 2021.
Total net debt, which is the principal amount of debt
outstanding less cash and cash equivalents as of June 30, 2020, was approximately $542.9 million compared to $520.6 million at December 31, 2019. Our Total Net Debt Leverage
Ratio increased from 3.6 times at December
31, 2019, to 5.6 times at June 30, 2020, see Total Net Debt Leverage Ratio
Reconciliation below.(6)
Capital expenditures decreased by 74% to $3.9 million in the current period, which is in
line with our plans to reduce the use of our cash and invest in
those projects that will yield the highest returns. The
current quarter capital expenditures were primarily comprised
of $2.0 million in intangible capital
expenditures, including internal software development, as well as
$1.8 million in growth capital
expenditures, primarily for machines placed at a new casino
opening.
(6)
|
Total Adjusted EBITDA
and total net debt leverage ratio are non-GAAP measures, see
non-GAAP reconciliation below.
|
Conference Call and Webcast
On August 5, 2020, at 5 p.m. EDT, AGS leadership will host a conference
call to present the second quarter 2020 results.
Listeners may access a live webcast of the conference call, along
with accompanying slides, at AGS' Investor Relations website at
http://investors.playags.com/. A replay of the webcast will be
available on the website following the live event. To listen by
telephone, the U.S./Canada
toll-free call-in number is +1 (888) 349-0106 and the call-in
number for participants outside the U.S./Canada is +1 (412) 902-0131. The
conference ID/confirmation code is "AGS Q2 2020 Earnings
Call".
Company Overview
AGS is a global company focused on creating a diverse mix of
entertaining gaming experiences for every kind of player. Our roots
are firmly planted in the Class II tribal gaming market, but our
customer-centric culture and remarkable growth have helped us
branch out to become one of the most all-inclusive commercial
gaming suppliers in the world. Powered by high-performing Class II
and Class III slot products, an expansive table products portfolio,
highly rated social casino, real-money gaming solutions for players
and operators, and best-in-class service, we offer an unmatched
value proposition for our casino partners. Learn more at
playags.com.
AGS Media & Investor Contacts:
Julia Boguslawski, Chief
Marketing Officer and Executive Vice President of Investor
Relations
jboguslawski@playags.com
Steven Kopjo, Director of
Investor Relations
skopjo@playags.com
©2020 PlayAGS, Inc. Products referenced herein are sold by AGS
LLC or other subsidiaries of PlayAGS, Inc. Solely for convenience,
marks, trademarks and trade names referred to in this press release
appear without
the ® and TM and SM symbols,
but such references are not intended to indicate, in any way, that
PlayAGS, Inc. will not assert, to the fullest extent under
applicable law, its rights or the rights of the applicable licensor
to these marks, trademarks and trade names.
Forward-Looking Statement
This release contains, and oral statements made from time to
time by our representatives may contain, forward-looking statements
based on management's current expectations and projections, which
are intended to qualify for the safe harbor of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking
statements include statements regarding the proposed public
offering and other statements identified by words such as
"believe," "will," "may," "might," "likely," "expect,"
"anticipates," "intends," "plans," "seeks," "estimates,"
"believes," "continues," "projects" and similar references to
future periods, or by the inclusion of forecasts or projections.
All forward-looking statements are based on current expectations
and projections of future events.
These forward-looking statements reflect the current views,
models, and assumptions of AGS, and are subject to various risks
and uncertainties that cannot be predicted or qualified and could
cause actual results in AGS's performance to differ materially from
those expressed or implied by such forward looking statements.
These risks and uncertainties include, but are not limited to, the
ability of AGS to maintain strategic alliances, unit placements or
installations, grow revenue, garner new market share, secure new
licenses in new jurisdictions, successfully develop or place
proprietary product, comply with regulations, have its games
approved by relevant jurisdictions, the effects of COVID-19 on the
Company's business and results of operations and other factors set
forth under Item 1. "Business," Item 1A. "Risk Factors" in AGS's
Annual Report on Form 10-K, filed with the Securities and Exchange
Commission. All forward-looking statements made herein are
expressly qualified in their entirety by these cautionary
statements and there can be no assurance that the actual results,
events or developments referenced herein will occur or be realized.
Readers are cautioned that all forward-looking statements speak
only to the facts and circumstances present as of the date of this
press release. AGS expressly disclaims any obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
PLAYAGS,
INC.
CONSOLIDATED
BALANCE SHEETS
(amounts in
thousands, except share and per share data)
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Assets
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
113,069
|
|
|
$
|
13,162
|
|
Restricted
cash
|
|
|
20
|
|
|
|
20
|
|
Accounts receivable,
net of allowance of $640 and $723, respectively
|
|
|
33,954
|
|
|
|
61,224
|
|
Inventories
|
|
|
35,754
|
|
|
|
32,875
|
|
Prepaid
expenses
|
|
|
4,926
|
|
|
|
2,983
|
|
Deposits and
other
|
|
|
4,550
|
|
|
|
5,332
|
|
Total current
assets
|
|
|
192,273
|
|
|
|
115,596
|
|
Property and
equipment, net
|
|
|
84,446
|
|
|
|
103,598
|
|
Goodwill
|
|
|
283,537
|
|
|
|
287,049
|
|
Intangible
assets
|
|
|
207,795
|
|
|
|
230,451
|
|
Deferred tax
asset
|
|
|
3,849
|
|
|
|
4,965
|
|
Operating lease
assets
|
|
|
10,659
|
|
|
|
11,543
|
|
Other
assets
|
|
|
10,292
|
|
|
|
9,176
|
|
Total
assets
|
|
$
|
792,851
|
|
|
$
|
762,378
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
10,073
|
|
|
$
|
15,598
|
|
Accrued
liabilities
|
|
|
25,549
|
|
|
|
34,840
|
|
Current maturities of
long-term debt
|
|
|
7,110
|
|
|
|
6,038
|
|
Total current
liabilities
|
|
|
42,732
|
|
|
|
56,476
|
|
Long-term
debt
|
|
|
632,846
|
|
|
|
518,689
|
|
Deferred tax
liability, non-current
|
|
|
1,496
|
|
|
|
1,836
|
|
Operating lease
liabilities, long-term
|
|
|
10,331
|
|
|
|
11,284
|
|
Other long-term
liabilities
|
|
|
33,538
|
|
|
|
40,309
|
|
Total
liabilities
|
|
|
720,943
|
|
|
|
628,594
|
|
Commitments and
contingencies (Note 13)
|
|
|
|
|
|
|
|
|
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, 2020 and at
December 31, 2019; and 35,613,708 and 35,534,558 shares issued and
outstanding at June 30, 2020 and December 31, 2019,
respectively.
|
|
|
356
|
|
|
|
355
|
|
Additional paid-in
capital
|
|
|
374,461
|
|
|
|
371,311
|
|
Accumulated
deficit
|
|
|
(292,892)
|
|
|
|
(235,474)
|
|
Accumulated other
comprehensive loss
|
|
|
(10,017)
|
|
|
|
(2,408)
|
|
Total stockholders'
equity
|
|
|
71,908
|
|
|
|
133,784
|
|
Total liabilities
and stockholders' equity
|
|
$
|
792,851
|
|
|
$
|
762,378
|
|
PLAYAGS,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(amounts in
thousands, except per share data)
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
$
|
10,189
|
|
|
$
|
53,593
|
|
Equipment
sales
|
|
|
6,599
|
|
|
|
20,916
|
|
Total
revenues
|
|
|
16,788
|
|
|
|
74,509
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of gaming
operations(7)
|
|
|
5,495
|
|
|
|
10,932
|
|
Cost of equipment
sales(7)
|
|
|
4,162
|
|
|
|
9,903
|
|
Selling, general and
administrative
|
|
|
8,609
|
|
|
|
14,605
|
|
Research and
development
|
|
|
4,931
|
|
|
|
8,379
|
|
Write-downs and other
charges
|
|
|
819
|
|
|
|
5,036
|
|
Depreciation and
amortization
|
|
|
21,521
|
|
|
|
23,659
|
|
Total operating
expenses
|
|
|
45,537
|
|
|
|
72,514
|
|
(Loss) income from
operations
|
|
|
(28,749)
|
|
|
|
1,995
|
|
Other
expense
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
10,894
|
|
|
|
9,560
|
|
Interest
income
|
|
|
(120)
|
|
|
|
(31)
|
|
Loss on extinguishment
and modification of debt
|
|
|
3,102
|
|
|
|
-
|
|
Other
expense
|
|
|
(35)
|
|
|
|
(46)
|
|
(Loss) income
before income taxes
|
|
|
(42,590)
|
|
|
|
(7,488)
|
|
Income tax (expense)
benefit
|
|
|
(49)
|
|
|
|
52
|
|
Net (loss)
income
|
|
|
(42,639)
|
|
|
|
(7,436)
|
|
Less: Net income
attributable to non-controlling interests
|
|
|
-
|
|
|
|
(121)
|
|
Net (loss) income
attributable to PlayAGS, Inc.
|
|
|
(42,639)
|
|
|
|
(7,557)
|
|
Foreign currency
translation adjustment
|
|
|
575
|
|
|
|
228
|
|
Total
comprehensive (loss) income
|
|
$
|
(42,064)
|
|
|
$
|
(7,329)
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
loss per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.20)
|
|
|
$
|
(0.21)
|
|
Diluted
|
|
$
|
(1.20)
|
|
|
$
|
(0.21)
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35,602
|
|
|
|
35,428
|
|
Diluted
|
|
|
35,602
|
|
|
|
35,428
|
|
|
(7) Exclusive of
depreciation and amortization.
|
PLAYAGS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(57,058)
|
|
|
$
|
(7,425)
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
45,890
|
|
|
|
45,192
|
|
Accretion of contract
rights under development agreements and placement fees
|
|
|
3,733
|
|
|
|
2,803
|
|
Amortization of
deferred loan costs and discount
|
|
|
1,429
|
|
|
|
941
|
|
Stock-based
compensation expense
|
|
|
2,993
|
|
|
|
3,350
|
|
(Benefit) provision
for bad debts
|
|
|
(199)
|
|
|
|
153
|
|
Loss on disposition of
long-lived assets
|
|
|
74
|
|
|
|
445
|
|
Impairment of
assets
|
|
|
6
|
|
|
|
5,207
|
|
Fair value adjustment
of contingent consideration
|
|
|
794
|
|
|
|
400
|
|
Benefit for deferred
income tax
|
|
|
(123)
|
|
|
|
(607)
|
|
Changes in assets and
liabilities that relate to operations:
|
|
|
-
|
|
|
|
-
|
|
Accounts
receivable
|
|
|
26,174
|
|
|
|
(3,461)
|
|
Inventories
|
|
|
101
|
|
|
|
419
|
|
Prepaid
expenses
|
|
|
(1,992)
|
|
|
|
(1,698)
|
|
Deposits and
other
|
|
|
1,030
|
|
|
|
(418)
|
|
Other assets,
non-current
|
|
|
915
|
|
|
|
6,605
|
|
Accounts payable and
accrued liabilities
|
|
|
(15,900)
|
|
|
|
(14,231)
|
|
Net cash provided
by operating activities
|
|
|
7,867
|
|
|
|
37,675
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
Customer notes
receivable
|
|
|
(2,579)
|
|
|
|
-
|
|
Business
acquisitions, net of cash acquired
|
|
|
-
|
|
|
|
(50,779)
|
|
Purchase of intangible
assets
|
|
|
(925)
|
|
|
|
(3,950)
|
|
Software development
and other expenditures
|
|
|
(5,530)
|
|
|
|
(6,299)
|
|
Proceeds from
disposition of assets
|
|
|
28
|
|
|
|
109
|
|
Purchases of property
and equipment
|
|
|
(8,057)
|
|
|
|
(23,819)
|
|
Net cash used in
investing activities
|
|
|
(17,063)
|
|
|
|
(84,738)
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
Repayment of first
lien credit facilities
|
|
|
(2,694)
|
|
|
|
(2,694)
|
|
Payment of financed
placement fee obligations
|
|
|
(3,444)
|
|
|
|
(1,767)
|
|
Proceeds from
incremental term loans
|
|
|
92,150
|
|
|
|
-
|
|
Borrowing on
revolver
|
|
|
30,000
|
|
|
|
-
|
|
Payment of deferred
loan costs
|
|
|
(5,744)
|
|
|
|
-
|
|
Payments of previous
acquisition obligation
|
|
|
(284)
|
|
|
|
(1,022)
|
|
Payments on finance
leases and other obligations
|
|
|
(669)
|
|
|
|
(695)
|
|
Repurchase of
stock
|
|
|
(360)
|
|
|
|
-
|
|
Proceeds from stock
option exercise
|
|
|
158
|
|
|
|
585
|
|
Distributions to
non-controlling interest owners
|
|
|
-
|
|
|
|
(157)
|
|
Net cash provided
by (used in) financing activities
|
|
|
109,113
|
|
|
|
(5,750)
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
|
(10)
|
|
|
|
3
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
99,907
|
|
|
|
(52,810)
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
|
|
13,182
|
|
|
|
70,804
|
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
113,089
|
|
|
$
|
17,994
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
|
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
|
|
|
|
|
|
Intangible assets
obtained under financed placement fee arrangements
|
|
$
|
-
|
|
|
$
|
35,003
|
|
Leased assets obtained
in exchange for new finance lease liabilities
|
|
$
|
338
|
|
|
$
|
620
|
|
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, 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,
|
|
|
|
2020
|
|
|
2019
|
|
Net (loss) income
attributable to PlayAGS, Inc.
|
|
$
|
(42,639)
|
|
|
$
|
(7,557)
|
|
Income tax (benefit)
expense
|
|
|
49
|
|
|
|
(52)
|
|
Depreciation and
amortization
|
|
|
21,521
|
|
|
|
23,659
|
|
Other
expense
|
|
|
(35)
|
|
|
|
(46)
|
|
Interest
income
|
|
|
(120)
|
|
|
|
(31)
|
|
Interest
expense
|
|
|
10,894
|
|
|
|
9,560
|
|
Loss on
extinguishment and modification of debt
|
|
|
3,102
|
|
|
|
-
|
|
Write-downs and
other(8)
|
|
|
819
|
|
|
|
5,036
|
|
Other
adjustments(9)
|
|
|
1,537
|
|
|
|
429
|
|
Other non-cash
charges(10)
|
|
|
2,497
|
|
|
|
2,196
|
|
Legal and litigation
expenses including settlement payments(11)
|
|
|
-
|
|
|
|
3
|
|
Acquisitions and
integration related costs including restructuring and
severance(12)
|
|
|
(220)
|
|
|
|
394
|
|
Non-cash stock-based
compensation
|
|
|
1,442
|
|
|
|
2,154
|
|
Total Adjusted
EBITDA
|
|
$
|
(1,153)
|
|
|
$
|
35,745
|
|
|
(Amounts in
thousands, except Adjusted EBITDA margin)
|
|
Three Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Total
revenues
|
|
$
|
16,788
|
|
|
$
|
74,509
|
|
Adjusted
EBITDA
|
|
$
|
(1,153)
|
|
|
$
|
35,745
|
|
Adjusted EBITDA
margin
|
|
|
-6.9
|
%
|
|
|
48.0
|
%
|
|
(8) Write-downs and other includes items
related to loss on disposal or impairment of long-lived assets,
fair value adjustments to contingent consideration, and acquisition
costs.
|
(9) Other
adjustments are primarily composed of professional fees
incurred for projects, corporate and public filing compliance,
contract cancellation fees, and other transaction costs deemed to
be non-operating in nature, as well as costs incurred related to
initial public offering, net of costs capitalized to equity and the
cost of related secondary offerings.
|
(10) Other
non-cash charges are costs related to non-cash charges and
losses on the disposition of assets, non-cash charges on
capitalized installation and delivery, which primarily includes the
costs to acquire contracts that are expensed over the estimated
life of each contract, and non-cash charges related to accretion of
contract rights under development agreements.
|
(11) 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.
|
(12) Acquisition and integration costs
primarily relate to costs incurred after the purchase of
businesses, such as the purchase of Integrity, to integrate
operations and obtain costs synergies. Restructuring and severance
costs primarily relate to costs incurred through the restructuring
of the Company's operations from time to time and other employee
severance costs recognized in the periods presented.
|
Total Net Debt
Leverage Ratio Reconciliation
|
|
The following table
presents a reconciliation of total net debt and total net debt
leverage ratio:
|
|
(Amounts in
thousands, except net debt leverage ratio)
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Total principle
amount of debt
|
|
$
|
655,976
|
|
|
$
|
533,727
|
|
Less: Cash and cash
equivalents
|
|
|
113,069
|
|
|
|
13,162
|
|
Total net
debt
|
|
$
|
542,907
|
|
|
$
|
520,565
|
|
LTM Adjusted
EBITDA
|
|
$
|
97,345
|
|
|
$
|
146,062
|
|
Total net debt
leverage ratio
|
|
|
5.6
|
|
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
This schedule provides certain information regarding Free Cash
Flow, which is considered a non-GAAP financial measure under the
rules of the Securities and Exchange Commission.
We define Free Cash Flow as net cash provided by operating
activities less cash outlays related to capital expenditures. We
define capital expenditures to include purchase of intangible
assets, software development and other expenditures, and purchases
of property and equipment. In arriving at Free Cash Flow, we
subtract cash outlays related to capital expenditures from net cash
provided by operating activities because they represent long-term
investments that are required for normal business activities. As a
result, subject to the limitations described below, Free Cash Flow
is a useful measure of our cash available to repay debt and/or make
other investments.
Free Cash Flow adjusts for cash items that are ultimately within
management's discretion to direct, and therefore, may imply that
there is less or more cash that is available than the most
comparable GAAP measure. Free Cash Flow is not intended to
represent residual cash flow for discretionary expenditures since
debt repayment requirements and other non-discretionary
expenditures are not deducted. These limitations are best addressed
by using Free Cash Flow in combination with the GAAP cash flow
numbers.
The following table presents a reconciliation of Free Cash
Flow:
(Amounts in
thousands)
|
|
Six Months
Ended June 30,
2020
|
|
|
Three Months
Ended March
31, 2020
|
|
|
Three Months
Ended June 30,
2020
|
|
Net cash provided by
operating activities
|
|
$
|
7,867
|
|
|
$
|
18,809
|
|
|
$
|
(10,942)
|
|
Purchase of
intangible assets
|
|
|
(925)
|
|
|
|
(699)
|
|
|
|
(226)
|
|
Software development
and other expenditures
|
|
|
(5,530)
|
|
|
|
(3,756)
|
|
|
|
(1,774)
|
|
Purchases of property
and equipment
|
|
|
(8,057)
|
|
|
|
(6,150)
|
|
|
|
(1,907)
|
|
Free Cash
Flow
|
|
$
|
(6,645)
|
|
|
$
|
8,204
|
|
|
$
|
(14,849)
|
|
|
(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
|
|
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SOURCE AGS