Fourth Quarter 2023 Highlights:
•
Total Revenue Increased 15% Y/Y to a Record $94.2 Million; Eleventh Consecutive Quarter of Double-Digit Y/Y Growth
•
Global EGM Sales Reached a Record 1,519 Units; Up by Over 30% Y/Y for the Third Straight Quarter
•
Table Products Revenue Surged 24% Y/Y to a New Record; Supported by Accelerating PAX S Adoption
•
Interactive Revenue Grew More than 30% Y/Y to a Record $3.4 Million; Up 8% Versus Q3 2023
•
Income From Operations Increased 19% Y/Y to $16.0 Million; Net Income Totaled $67 Thousand
•
Total Adjusted EBITDA Advanced to a Record $42.8 Million; Total Adjusted EBITDA Margin Exceeded 45%
•
Cash From Operating Activities Totaled $26.4 Million; Free Cash Flow Topped $10 Million for the Third Quarter in a Row
•
Net Leverage Fell to 3.2x at Quarter End; Targeting Year End 2024 Net Leverage in the Range of 2.75x to 3.00x
LAS VEGAS, March 05, 2024 (GLOBE NEWSWIRE) — PlayAGS, Inc. (NYSE:AGS) (“AGS”, “us”, “we” or the “Company”), a designer and developer of equipment and services solutions for the global gaming industry, today reported operating results for the fourth quarter and full year ended December 31, 2023.
Commenting upon the Company’s fourth quarter financial performance, AGS President and Chief Executive Officer David Lopez said, “The strength in our four quarter results was broad-based, with all three operating segments setting new quarterly records for revenue and Adjusted EBITDA. The quality and consistency of our recent financial performance is a true reflection of our incredibly talented and focused team, increasingly deep and diverse product offering across all three segments, and the improving efficiency and effectiveness of our execution.”
Kimo Akiona, AGS Chief Financial Officer added, “We exited 2023 with a total net debt leverage ratio of 3.2 times, down from 3.8 times at the start of the year. Supported by our consistent operating momentum and execution, heightened focus on efficient and effective working capital management, continued capex deployment discipline, and anticipated cash interest savings from our recent debt repricing and repayment; a path to below 3.0 times remains well within our sight.”
Summary of the Three and Twelve Months Ended December 31, 2023 and 2022
(In thousands, except per-share and Adjusted EBITDA margin data)
Three Months Ended December 31,
Twelve Months Ended December 31,
2023
2022
% Change
2023
2022
% Change
Revenues:
EGM
$
85,952
$
75,338
14.1
%
$
327,053
$
284,331
15.0
%
Table Products
4,829
3,890
24.1
%
17,706
14,920
18.7
%
Interactive
3,370
2,508
34.4
%
11,777
10,185
15.6
%
Total revenues
$
94,151
$
81,736
15.2
%
$
356,536
$
309,436
15.2
%
Income from operations
$
16,048
$
13,447
19.3
%
$
57,393
$
37,969
51.2
%
Net income (loss)
$
67
$
2,541
(97.4
)%
$
428
$
(8,035
)
(105.3
)%
Basic income (loss) per share
$
0.00
$
0.06
(97.1
)%
$
0.01
$
(0.22
)
(104.5
)%
Diluted income (loss) per share
$
0.00
$
0.06
(97.1
)%
$
0.01
$
(0.22
)
(104.5
)%
Adjusted EBITDA:
EGM
$
38,626
$
34,412
12.2
%
$
146,287
$
127,502
14.7
%
Table Products
2,842
2,370
19.9
%
9,792
8,781
11.5
%
Interactive
1,292
498
159.4
%
2,888
2,360
22.4
%
Total Adjusted EBITDA(1)
$
42,760
$
37,280
14.7
%
$
158,967
$
138,643
14.7
%
Total Adjusted EBITDA margin(2)
45.4
%
45.6
%
(20 bps)
44.6
%
44.8
%
(20 bps)
Fourth Quarter 2023 Financial Results
•
Total revenue increased 15% year-over-year to a record $94.2 million, representing our eleventh consecutive quarter of double-digit total revenue growth. All three operating segments delivered double-digit growth rates versus the prior year, with Interactive, Table Products and Electronic Gaming Machines (“EGM”) revenue increasing 34%, 24% and 14% year-over-year, respectively. Total revenue grew approximately 5% relative to the $89.4 million delivered in Q3 2023 and has now established a new Company record in four of the past five quarters.
•
Gaming operations, or recurring revenue, totaled $59.6 million, approximately 4% ahead of the $57.4 million achieved in Q4 2022. Interactive and Table Products recurring revenue increased 34% and 7% year-over-year, respectively, with each establishing new records within their respective segments. EGM gaming operations revenue advanced 2% versus the prior year, setting a new Q4 high-water mark of $52.3 million. Recurring revenue accounted for over 60% of the Company’s consolidated Q4 2023 revenue mix. Gaming operations revenue declined modestly relative to the $61.0 million achieved in Q3 2023, consistent with historically normal seasonal trends within the business.
•
Equipment sales revenue increased more than 40% year-over-year to a record $34.6 million, with EGM and Table Products sales revenue reaching records of $33.7 million and $893 thousand, respectively. Global EGM unit sales eclipsed 1,500 units for the first time ever, advancing approximately 36% year-over-year. Global EGM unit sales growth has surpassed 30% in each of the past three quarters. Equipment sales revenue increased over 20% relative to the $28.4 million delivered in Q3 2023, supported by strong growth in both EGM and Table Products sales revenue.
•
The Company generated near breakeven net income in Q4 2023 compared to $2.5 million in Q4 2022. Higher interest expense, commensurate with an increase in market-level rates, and an approximately $2 million unfavorable swing in income tax expense more than offset a nearly 20% year-over-year increase in income from operations.
•
Total Adjusted EBITDA (non-GAAP)(1) increased approximately 15% year-over-year to a record $42.8 million, marking our fifth consecutive quarter of double-digit Adjusted EBITDA growth. All three segments contributed to the record-setting performance, led by a more than doubling of Interactive Adjusted EBITDA to $1.3 million, while Table Products and EGM Adjusted EBITDA increased approximately 20% and 12% year-over-year, respectively. Q4 2023 Total Adjusted EBITDA surpassed the prior record of $40.1 million, delivered in Q3 2023, by approximately 7%. The Company has now established new Total Adjusted EBITDA records in four of the past five quarters.
•
Total Adjusted EBITDA margin (non-GAAP)(1) was 45.4%, surpassing the 45% level for the first time since Q4 2022. Q4 2023 margin performance reflects the improving margin profile of the Company’s Interactive business, supported by the segment’s recent outsized revenue growth; superior gross margins on the highly-modular and efficiently designed Spectra family of EGM cabinets; and operating leverage resulting from the over 15% year-over-year increase in total revenues. For the full year 2023, Adjusted EBITDA margin was 44.6%, placing it in the upper half of the Company’s targeted 44% to 45% range articulated at the start of the year.
•
Net cash provided by operating activities increased approximately 10% year-over-year to $26.4 million. Q4 2023 free cash flow (non-GAAP)(2) totaled $11.0 million, up more than 45% compared to the $7.6 million delivered in the prior year period. The year-over-year improvement in free cash flow generation reflects the Company’s record-setting operating performance, heightened focus on efficient and effective working capital management, and continued capex deployment discipline. The Company has now generated over $10 million of free cash flow in three consecutive quarters.
(1) Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures; see non-GAAP reconciliation below.
(2) Free Cash Flow is a non-GAAP financial measure; see non-GAAP reconciliation below.
EGM
Three Months Ended December 31, 2023 compared to Three Months Ended December 31, 2022
(Amounts in thousands, except unit data)
Three Months Ended December 31,
2023
2022
$ Change
% Change
EGM segment revenues:
Gaming operations
$
52,290
$
51,207
$
1,083
2.1
%
Equipment sales
33,662
24,131
9,531
39.5
%
Total EGM revenues
85,952
75,338
10,614
14.1
%
EGM Adjusted EBITDA
$
38,626
$
34,412
$
4,214
12.2
%
EGM Business Segment Key Performance Indicators (“KPI’s”)
EGM gaming operations:
EGM installed base:
Class II
11,193
11,251
(58
)
(0.5
)%
Class III
5,250
5,075
175
3.4
%
Domestic installed base, end of period
16,443
16,326
117
0.7
%
International installed base, end of period
6,126
6,244
(118
)
(1.9
)%
Total installed base, end of period
22,569
22,570
(1
)
(0.0
)%
EGM revenue per day (“RPD”):
Domestic revenue per day
$
31.68
$
31.46
$
0.22
0.7
%
International revenue per day
$
8.86
$
7.61
$
1.25
16.4
%
Total revenue per day
$
25.47
$
24.87
$
0.60
2.4
%
EGM equipment sales
EGM units sold
1,519
1,116
403
36.1
%
Average sales price (“ASP”)
$
20,677
$
19,382
$
1,295
6.7
%
EGM Quarterly Results
Domestic Gaming Operations (3)
•
Domestic EGM gaming operations, or recurring revenue, increased approximately 1% year-over-year to a fourth quarter record $47.2 million. A 15% year-over-year increase in our higher-yielding premium EGM installed base, further deployment of Spectra UR43 and initial deployment of Spectra UR 49, both of which are delivering per unit performance comparable to our premium products, and continuous installed base optimization contributed to our improved gaming operations revenue performance in the quarter. Domestic EGM recurring revenue topped $45 million for the seventh consecutive quarter and accounted for approximately 60% of the total domestic EGM revenue generated in Q4 2023.
•
The domestic EGM installed base expanded to 16,443 units at the end of Q4 2023, representing an increase of 117 units versus the prior year and up sequentially for the seventh consecutive quarter. Outsized premium EGM footprint growth and deployment of our high-performing Spectra UR43 and Spectra UR49 cabinets drove the expansion of our domestic EGM installed base in both the year-over-year and quarterly sequential periods.
•
Domestic EGM RPD increased approximately 1% year-over-year to a fourth-quarter record $31.68, exceeding $30 for the eleventh consecutive quarter. Outsized premium unit growth, further capital efficient installed base optimization, deployment of our high-performing Spectra UR43 and Spectra UR49 cabinets and a relatively stable gaming macroeconomic environment paced our improved Q4 2023 domestic EGM RPD performance versus the prior year. Domestic EGM RPD decreased modestly relative from the $32.57 achieved in Q3 2023, reflecting historically normal seasonality in market-level Gross Gaming Revenue (“GGR”) trends.
•
Our installed base of high-performing premium EGM units increased 15% year-over-year and accounted for over 17% of our domestic EGM installed base at the end of Q4 2023 compared to approximately 15% at the end of Q4 2022. Our premium EGM installed base grew sequentially for the sixteenth consecutive quarter. Supported by our deep pipeline of new premium game content, including the recently-launched Pinata Pays game family, which placed two titles in the top five of the “New-Premium Leased” category within the January 2024 Eilers-Fantini Game Performance Report, and our increasingly diverse portfolio of premium cabinet offerings, with several new premium form factors scheduled to launch throughout 2024, we continue to believe we are poised to benefit from a compelling multi-year growth runway within the higher-yielding, higher-return premium game market segment.
International Gaming Operations
•
International EGM gaming operations, or recurring revenue, totaled $5.1 million, up 16% versus the $4.4 million delivered in Q4 2022. The sustained relative outperformance of established AGS franchise game themes throughout the Mexico casino market, further execution of our global installed base optimization initiatives, a stable macroeconomic backdrop, and favorable foreign exchange fluctuations all contributed to our year-over-year revenue increase. International EGM recurring revenue declined approximately 5% relative to the $5.4 million delivered in Q3 2023, with the decrease largely attributable to historically normal seasonality and, to a lesser extent, unfavorable foreign exchange movements.
•
The international EGM installed base totaled 6,126 units at December 31, 2023, representing a quarterly sequential increase of 43 units. New casino openings paced the installed base growth realized in the quarter.
•
International EGM RPD increased approximately 16% year-over-year to $8.86, establishing a new fourth quarter record. The Company estimates International EGM RPD grew approximately 4% year-over-year on a constant-currency basis. Anticipated seasonality and unfavorable foreign exchange fluctuations led to an approximately 6% quarterly sequential decline in Q4 2023 International EGM RPD.
EGM Equipment Sales
•
Global EGM sales reached a record 1,519 units in Q4 2023, representing an increase of over 35% compared to the 1,116 units sold in Q4 2022. Sustained Spectra UR43 demand momentum, supported by the continued strong performance of multiple titles on the cabinet; initial sales of our recently-launched Spectra UR49 cabinet; a strategic focus on broadening our customer account penetration, particularly with larger multi-site corporate operators; the ability to leverage a deeper and more diverse suite of game content and cabinet variety to increase average order size; and continued outsized penetration of the Historical Horse Racing (“HHR”) market, aided by the strength of our game performance, contributed to our improved EGM unit sales performance versus the prior year. Global EGM unit sales increased approximately 13% relative …
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