AGS Reports First Quarter 2020 Results

LAS VEGAS, May 7, 2020 /PRNewswire/ -- AGS (NYSE: AGS) ("AGS", "us", "we" or the "Company") today reported operating results for its first quarter ended March 31, 2020.

AGS President and Chief Executive Officer David Lopez said, "As a result of the global impact of COVID-19, particularly near the end of the quarter, the gaming industry was significantly impacted with essentially all North American gaming facilities closed at the end of March. Casino closures resulted in significant revenue interruptions and increased business uncertainty.  Our team took early steps to formulate and implement a comprehensive plan that included costs savings through Company-wide salary reductions, layoffs, and furloughs, capital expenditure reductions, and strengthening our liquidity position.  Through these initial steps, we were able to reduce our estimated monthly cash outflow nearly 80% to approximately $4 million, which does not include our monthly debt service costs of $3.8 million.  We are approaching the uncertainty and challenges in the second quarter and the rest of 2020 with resolve and from a position of strength given the recent reinforcement of our balance sheet and operational initiatives. With our strong culture underpinning our recovery efforts, we are focused on not simply managing through the crisis, but building a strong future for our employees, customers, and shareholders." 

Kimo Akiona, AGS' Chief Financial Officer, added, "In addition to the operational savings and cash-saving programs that we have implemented, we have taken measures to ensure that the Company is in the best possible liquidity position given the current operating environment. These measures included drawing the full $30 million under the existing revolving credit facility during the quarter and postponing substantially all capital expenditures and related projects. On May 1, 2020, we entered into an incremental agreement in which we incurred incremental term loans of $95 million and obtained covenant relief on our net first lien leverage ratio for the remaining periods in 2020."

First Quarter 2020 Financial Results

• Due to business disruption caused by the global spread of COVID-19 and the actions by governments and businesses to contain the virus, nearly all of our customers have closed their operations and the markets that we serve have been severely impacted.  This affected several metrics noted above, specifically revenues, net loss, Adjusted EBITDA, and Adjusted EBITDA margin.
• Total revenue decreased 26% to $54.3 million, primarily due to decreased unit sales and gaming operations revenue in our EGM segment as a result of business disruptions and casino closures.
• Gaming operations revenue, or recurring revenue, decreased to $42.7 million, or 19% year-over-year, due to disruptions in revenue from leased EGMs that were non-operational, and slightly offset by increased Table Products and real-money gaming ("RMG") revenue.
• Net loss of $14.4 million increased year-over-year from net loss of $0.1 million in the prior year, primarily due to the decrease in revenue from our EGM segment, offset by decreases in SG&A and cost of equipment sales.
• Total Adjusted EBITDA (non-GAAP)(1) decreased 32% to $24.5 million, driven by decreased revenue from our EGM segment and slightly offset by growth in our Table Products and Interactive segments.
• Total Adjusted EBITDA margin (non-GAAP)(1) decreased to 45% in the first quarter of 2020 compared to 50% in the prior year, driven by several different factors, most notably due to business disruptions in our EGM segment due to casino closures.

EGM Quarterly Results

Domestic Gaming Operations(3)

• Domestic gaming operations revenue decreased $9.1 million, or 21%, 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.
• Domestic EGM installed base decreased by 995 units year-over-year, primarily due to the sale of 395 previously leased, lower-yielding Oklahoma units to distributors in the current period and 327 in the fourth quarter of 2019.(4) The prior year installed base included 150 VLT units that were purchased in an end-of-lease buyout.(5)
• Domestic EGM revenue per day ("RPD") decreased 20% to $21.08 compared to $26.42 in the prior year period, driven by non-operational EGMs in the latter part of the quarter.
• Oklahoma RPD decreased compared to the prior year period driven primarily by non-operational EGMs in the quarter. Oklahoma RPD for the two months ended February 29, 2020, decreased 7%, to $18.98 compared to $20.47 in the prior year period, driven by the decrease in product performance that was discussed in previous quarterly results and the impact of EGMs purchased from Integrity in February 2019.  The 7% decrease in Oklahoma RPD represents a lower degradation from fourth quarter RPD which was down 9% year-over-year, as a result of targeted countermeasures.

International Gaming Operations

• International gaming operations revenue decreased by 24% year-over-year, driven primarily by business disruption and casino closures in Mexico.
• International RPD decreased by $1.79, or 21%, due largely to casino closures in March.

Equipment Sales

• Domestic EGM units sold decreased by nearly 600 units compared to the prior year period, primarily due to business disruptions related to COVID-19 as noted above. The sale of 395 previously leased, lower-yielding units were not included in our sold unit count or domestic average sales price ("ASP") for the current period.
• ASP for EGMs decreased to $17,564 from $18,738 in the prior year period driven by product mix.
• EGM equipment sales revenue was driven by sales in early-entry markets such as New York, Canada, Rhode Island, and Michigan.

Product Highlights

• Initial placements of our new premium, lease-only Starwall in Oklahoma. Prior to the casino shutdowns from COVID-19, initial performance was more than 2x house average.
• Initial placements of nearly 50 Orion Rise cabinets in the quarter, in markets such as Oklahoma, Florida, Indiana, and California.

Table Products Quarterly Results

• Total Table Products revenue increased 15% to $2.5 million, driven by an increase of 612 units year-over-year and increased equipment sales despite casino closures in the quarter. Total Table Products revenue for the two months ended February 29, 2020 increased 26% to $2.0 million compared to $1.5 million in the prior year period driven, by continued product momentum.
• Gaming operations revenue increased $0.2 million, or 9%, driven by the continued growth of our progressive offerings; Bonus Spin, Royal 9 Baccarat Progressive, and Super 4 Progressive Blackjack, as well as our Buster Blackjack side bet, our new Dex S card shuffler, and our Criss Cross Poker premium game offering.
• Equipment sales revenue increased $0.1 million due to the sales of both our new Dex S card shuffler and our table signage.
• Installed base of table game progressives reached nearly 1,350 units, up 30% year-over-year.
• Installed base of side bets reached nearly 2,200 units in the quarter.
• Progressive conversions from competitor progressives to our own STAX Progressives in the first half of 2019, which helped drive the Adjusted EBITDA increase.