AGS Reports Second Quarter 2020 Results

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."

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.
  

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.