AGS Announces Fourth Quarter and Full Year Results

AGS ANNOUNCES FOURTH QUARTER AND FULL YEAR RESULTS

          Fourth Quarter Revenue of $57.7 Million Grew 35% Year-Over-Year

          Record Annual Revenue of $212.0 Million Grew 27% Year-Over-Year

          Record Annual Adjusted EBITDA of $106.8 Million Grew 25% Year-Over-Year

          Annual Net Loss of $45.1 Million Improved 45% Year-Over-Year

LAS VEGAS, March 14, 2018 PlayAGS, Inc. (NYSE: AGS) (“AGS”, "us", "we" or the “Company”) today reported operating results for its fourth quarter 2017 and fiscal year ended December 31, 2017.

"Record revenue of $57.7 million in the fourth quarter punctuated a transformative year for AGS. With 27% growth on the top line, 10% recurring revenue growth, and 25% growth in Adjusted EBITDA in fiscal 2017, our results reflected AGS’s continued dedication to best-in-class execution against its growth initiatives to penetrate new jurisdictions and launch high-performing, in-demand products into the market,” said David Lopez, President and CEO of AGS. “Entering the new fiscal year, we believe we are well positioned for meaningful growth as we benefit from continued momentum of our Orion Portrait and Icon cabinets, entry into new domestic and international jurisdictions, and promising new product launches like the Orion Slant, STAX table progressive system, and the Dex S card shuffler.”

Summary of the quarter and year ended December 31, 2017 and 2016

(In thousands, except per-share and unit data)

Three Months Ended December 31,

Year Ended December 31,

2017

2016

% Change

2017

2016

% Change

Revenues

EGM

54,184

40,254

34.6

%

199,931

156,407

27.8

%

Table Products

1,623

669

142.6

%

4,065

2,674

52.0

%

Interactive

1,854

1,822

1.8

%

7,959

7,725

3.0

%

Total revenue

57,661

42,745

34.9

%

211,955

166,806

27.1

%

Operating income / (loss)

861

(1,403

)

161.4

%

14,502

(17,064

)

185.0

%

Net loss

(8,520

)

(20,234

)

57.9

%

(45,106

)

(81,374

)

44.6

%

Loss per share

(0.37

)

(0.87

)

57.5

%

(1.94

)

(3.51

)

44.7

%

Adjusted EBITDA

EGM

26,335

23,025

14.4

%

107,785

91,729

17.5

%

Table Products

193

(268

)

172.0

%

(528

)

(1,663

)

68.3

%

Interactive

(79

)

(656

)

88.0

%

(416

)

(4,727

)

91.2

%

Total adjusted EBITDA(1)

26,449

22,101

19.7

%

106,841

85,339

25.2

%

EGM Units Sold

697

260

168.1

%

2,565

465

451.6

%

EGM total installed base, end of period

23,805

20,851

14.2

%

23,805

20,851

14.2

%

(1) Adjusted EBITDA is a non-GAAP measure, see non-GAAP reconciliation below. 

 

Fourth Quarter Financial Highlights

        Total revenue increased 35% to $57.7 million driven by continued growth of our EGMs in the Class III marketplace.

        At $45.2 million, total recurring revenue grew approximately 20% quarter-over-quarter, primarily attributable to yield optimization efforts and the popularity of our new premium cabinet, Orion Portrait.

        EGM equipment sales increased 151% to $12.4 million due to the sale of 697 units.

        Total adjusted EBITDA margin decreased to 46% in the fourth quarter 2017 compared to 52% due to sales mix and the timing of G2E, which took place in the fourth quarter 2017 and in the third quarter for 2016.

        SG&A increased $4.2 million in the fourth quarter of 2017 due to the timing of the annual Global Gaming Expo ("G2E") trade show as well as well as increased costs due to higher headcount.

        R&D increased $3.0 million in the fourth quarter of 2017 driven by increased headcount costs and the development of our new Orion Portrait and Orion Slant cabinets as well as our newly established game development studio in Sydney, Australia.

        At $26.4 million, adjusted EBITDA increased 20% driven by increases in revenue, and offset by increased adjusted operating expenses of $4.8 million primarily due to increased headcount.

        Net loss significantly improved to $8.5 million from $20.2 million.

Full Year Financial Highlights

        Total revenue increased 27% to $212.0 million due to the continued growth of our EGM segment driven by the introduction of new products and our continued expansion into the Class III marketplace. 

        At $170.3 million, total recurring revenue grew approximately 10%, primarily attributable to yield optimization efforts and the popularity of our new premium cabinet, Orion Portrait.

        EGM equipment sales increased 250% to $41.6 million driven by an increase of 2,100 sold EGMs for a total of 2,565.

        Total adjusted EBITDA margin was 50% for 2017 compared to 51%, which is attributable primarily to the large increase in EGM equipment sales revenue.

        SG&A decreased $2.1 million in 2017 primarily due to decreased user acquisition fees from our Interactive segment in efforts to optimize marketing spend.

        R&D increased $4.4 million in 2017 driven by increased headcount costs and the development of our new Orion Portrait and Orion Slant cabinets as well as our newly established game development studio in Sydney, Australia.

        At $106.8 million, adjusted EBITDA increased 25% driven by the increases in revenue described above, and offset by increased adjusted operating expenses of $4.1 million primarily due to increased headcount.

        Net loss significantly improved to $45.1 million from $81.4 million.

Full Year Business Highlights

        EGM average selling price increased nearly 10% to $16,329.

        Domestic EGM revenue per day increased $1.03 to $25.77 driven by our yield optimization efforts as well as the introduction of our new, high performing products.

        Nearly $4.4 million of 2017’s recurring revenue came from our yield optimization efforts.  As of year end, we have optimized nearly 2,300 units, of which 70% were optimized in 2017.

        Table Products increased 900 units, or 60%, to 2,400 units driven by both organic growth and the purchase of In Bet assets.

        Our ICON cabinet footprint grew nearly 300% to over 4,700 total units in the field.

        Introduced to the market in Q1 of 2017, our Orion Portrait cabinet ended the year with over 1,900 total units in the field.

Balance Sheet Review

Capital expenditures increased $16.8 million to $57.5 million in 2017, compared to $40.7 million.  The increase was driven primarily by the purchase of property and equipment of $15.7 million and software development costs of $1.1 million to fuel growth initiatives. As of December 31, 2017, AGS had $19.2 million in cash and cash equivalents compared to $18.0 million at December 31, 2016.  Total net debt as of December 31, 2017, was approximately $649 million.  As a result of the IPO, the exercise in full of the underwriters’ overallotment option and the settlement of our HoldCo PIK notes subsequent to year end, our pro forma total net debt decreased by $171 million to $478 million.

Recent Developments

Initial Public Offering

On January 26, 2018, we completed the initial public offering of our common stock, in which it issued and sold 10,250,000 shares of common stock at a public offering price of $16.00 per share.  We received net proceeds of $149.1 million from the initial public offering, after deducting underwriting discounts and commissions and offering expenses payable.

On February 27, 2018 we sold an additional 1,537,500 shares of common stock at a public offering price of $16.00 per share pursuant to the underwriters’ exercise in full of the over-allotment option and we received net proceeds of $23.0 million from the exercise of the over-allotment option, after deducting underwriting discounts and commissions.

Repayment of Senior Secured PIK Notes   

On January 30, 2018, we used the net proceeds of the initial public offering and cash on hand to redeem in full the 11.25% senior secured PIK notes due 2024 (the “Notes”). On the redemption date, the aggregate principal amount of the Notes outstanding was $152.6 million and the amount of accrued and unpaid interest was $1.4 million. In connection with the redemption, we repaid all of the outstanding obligations in respect of principal, interest and fees under the Notes.

Term Loan Repricing

On February 7, 2018 we completed the repricing of our existing $513 million term loans under our First Lien Credit Agreement (the "Term Loans"). The Term Loans were repriced from 550 basis points to 425 basis points over LIBOR. The LIBOR floor remains at 100 basis points. As a result of the repricing, we expect to realize annual cash interest savings of approximately $6.4 million.

2018 Outlook

We expect to generate total adjusted EBITDA of $124 - $130 million in 2018, representing growth of approximately 16%-22% compared to the prior year period.

AGS expects 2018 capital expenditures to be in the range of $55 - $60 million, compared to $57.5 million in 2017, 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.

 

Comparison of Fiscal 2018 Guidance to Fiscal 2017 and Fiscal 2016 Results

Year ended December 31,

(in $mm)

2018 Guidance

2017

2016

Adjusted EBITDA (1)

$124 - $130

$

107

$

85

Capex

$55 - $60

$

57

$

41

(1)A reconciliation of this measure to net income, which is its most comparable GAAP measure, can be found on page 8 of this press release.

Conference Call and Webcast

Today, at 4:00 p.m. EST, management will host a conference call to present the fourth quarter 2017 results. Listeners may access a live webcast of the conference call along with accompanying slides at AGS' Investor Relations website at http://investors.playags.com/. A replay of the webcast will be available on the website following the live event. To listen by telephone, the US/Canada toll-free dial-in number is +1 (866) 777-2509 and the dial-in number for participants outside the US/Canada is +1 (412) 317-5413. The conference ID/confirmation code is AGS Q4 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 Native American gaming market, but our customer-centric culture and remarkable growth have helped us branch out to become one of the most all-inclusive commercial gaming suppliers in the world. Powered by high-performing Class II and Class III slot products, an expansive table products portfolio, highly-rated social casino solutions for players and operators, and best-in-class service, we offer an unmatched value proposition for our casino partners. Learn more about us at www.playags.com.

Forward-looking Statements

This release contains “forward-looking statements.” Forward-looking statements include any statements that address future results or occurrences. In some cases you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “would,” “should,” “could” or the negatives thereof. Generally, the words “anticipate,” “believe,” “continue,” “expect,” “intend,” “estimate,” “project,” “plan” and similar expressions identify forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained in this Annual Report on Form 10-K in Item 1. “Business,” Item 1A. “Risk Factors” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. These forward-looking statements include statements that are not historical facts, including statements concerning our possible or assumed future actions and business strategies.

PLAYAGS, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

 

December 31, 2017

2017

2016

Assets

Current assets

Cash and cash equivalents

$

19,242

$

17,977

Restricted cash

100

100

Accounts receivable, net of allowance of $1,462 and $1,972 respectively

32,776

24,035

Inventories

24,455

10,729

Prepaid expenses

2,675

2,609

Deposits and other

3,460

3,052

Total current assets

82,708

58,502

Property and equipment, net

77,982

67,926

Goodwill

278,337

251,024

Deferred tax asset

1,115

9

Intangible assets

232,287

232,877

Other assets

24,813

23,754

Total assets

$

697,242

$

634,092

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable

$

11,407

$

8,790

Accrued liabilities

24,954

17,702

Current maturities of long-term debt

7,359

6,537

Total current liabilities

43,720

33,029

Long-term debt

644,158

547,238

Deferred tax liability - noncurrent

1,016

6,957

Other long-term liabilities

36,283

30,440

Total liabilities

725,177

617,664

Commitments and contingencies (Note 14)

Stockholders' equity

Preferred stock at $0.01 par value; 100,000 shares authorized, no shares issued and outstanding

Common stock at $0.01 par value; 46,629,155 shares authorized; 23,208,076 Shares issued and outstanding at December 31, 2017 and 2016.

Please Be Social!