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AGS Announces Fourth Quarter And Full Year Results


LAS VEGAS, March 14, 2018 /PRNewswire/ -- 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.

AGS Logo

"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

Full Year Financial Highlights

Full Year Business Highlights

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.

149

149

Additional paid-in capital

177,276

177,276

Accumulated deficit

(201,557)

(156,451)

Accumulated other comprehensive (loss) income

(3,803)

(4,546)

Total stockholders' equity

(27,935)

16,428

Total liabilities and stockholders' equity

$

697,242

$

634,092

 

PLAYAGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(amounts in thousands, except per share data)



Three months ended December 31,

Year ended December 31,

2017

2016

2017

2016

Revenues






Gaming operations (1)

$

45,212

$

37,764

$

170,252

$

154,857

Equipment sales

12,449

4,981

41,703

11,949

Total revenues

57,661

42,745

211,955

166,806

Operating expenses






Cost of gaming operations(2)

9,948

7,109

31,742

26,736

Cost of equipment sales(2)

5,521

1,993

19,847

6,237

Selling, general and administrative

13,647

9,454

44,015

46,108

Research and development

7,803

4,829

25,715

21,346

Write downs and other charges

1,830

1,109

4,485

3,262

Depreciation and amortization

18,051

19,654

71,649

80,181

Total operating expenses

56,800

44,148

197,453

183,870

Loss from operations

861

(1,403)

14,502

(17,064)

Other expense (income)






Interest expense

13,131

15,812

55,511

59,963

Interest income

(28)

(6)

(108)

(57)

Loss on extinguishment and modification of debt

903

?

9,032

?

Other expense (income)

1,867

1,090

(2,938)

7,404

Loss before income taxes

(15,012)

(18,299)

(46,995)

(84,374)

Income tax benefit (expense)

6,492

(1,935)

1,889

3,000

Net loss

(8,520)

(20,234)

(45,106)

(81,374)

Foreign currency translation adjustment

36

(598)

743

(2,735)

Total comprehensive loss

$

(8,484)

$

(20,832)

$

(44,363)

$

(84,109)








Basic and diluted loss per common share:






Basic

$

(0.37)

$

(0.87)

$

(1.94)

$

(3.51)

Diluted

$

(0.37)

$

(0.87)

$

(1.94)

$

(3.51)

Weighted average common shares outstanding:






Basic

23,208

23,208

23,208

23,208

Diluted

23,208

23,208

23,208

23,208












(1) includes revenues from our EGM, Table Products and Interactive segments

(2) exclusive of depreciation and amortization

 

PLAYAGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

Year ended December 31,

2017

2016

Cash flows from operating activities


Net loss

$

(45,106)

$

(81,374)

Adjustments to reconcile net loss to net cash provided by operating activities:


Depreciation and amortization

71,649

80,181

Accretion of contract rights under development agreements and placement fees

4,680

4,702

Amortization of deferred loan costs and discount

2,976

3,542

Payment-in-kind interest capitalized

15,935

15,396

Payment-in-kind interest payments

(2,698)

?

Write off of deferred loan cost and discount

3,294

?

Provision (benefit) for bad debts

651

2,290

Imputed interest income

?

?

Loss on disposition of assets

3,901

1,149

Impairment of assets

584

4,749

(Benefit) provision of deferred income tax

(7,062)

(7,998)

Changes in assets and liabilities that relate to operations:


Accounts receivable

(8,348)

(3,191)

Inventories

(1,636)

307

Prepaid expenses

(599)

2,021

Deposits and other

(374)

(315)

Other assets, non-current

(2,290)

467

Accounts payable and accrued liabilities

8,451

12,567

Net cash provided by (used in) operating activities

44,008

34,493

Cash flows from investing activities


Business acquisitions, net of cash acquired

(63,850)

?

Collection of notes receivable

?

?

Purchase of intangible assets

(1,226)

(1,311)

Software development and other expenditures

(7,664)

(6,526)

Proceeds from disposition of assets

514

87

Purchases of property and equipment

(48,585)

(32,879)

Net cash used in investing activities

(120,811)

(40,629)

Cash flows from financing activities


Borrowings under the revolving facility

?

?

Repayments under the revolving facility

?

?

Proceeds from issuance of first lien credit facilities

448,725

?

Proceeds from incremental term loans

65,000

?

Repayment of senior secured credit facilities

(410,655)

?

Payments on first lien credit facilities

(2,413)

(6,987)

Deferred offering costs paid

(653)

?

Payment of previous acquisition obligation

?

(1,125)

Payment of financed obligations

(128)


Payment of financed placement fee obligations

(3,807)

(3,516)

Repayment of seller notes

(12,401)

?

Payments on equipment long term note payable and capital leases

(2,372)

?

Repurchase of shares issued to management

?

(50)

Proceeds from issuance of common stock

?

?

Proceeds from employees in advance of common stock issuance

25

75

Payment of deferred loan costs

(3,267)

?

Net cash provided by financing activities

78,054

(11,603)

Effect of exchange rates on cash and cash equivalents

14

(6)

Increase (decrease) in cash and cash equivalents

1,265

(17,745)

Cash and cash equivalents, beginning of period

17,977

35,722

Cash and cash equivalents, end of period

$

19,242

$

17,977

Supplemental cash flow information:


Cash paid during the period for interest

$

35,890

$

40,060

Cash paid during the period for taxes

$

1,157

$

1,247

Non-cash investing and financing activities:


Non-cash consideration given in business acquisitions

$

2,600

$

?

Financed placement fees

$

?

$

?

Financed purchase property and equipment

$

368

$

2,662

Financed purchase of intangible asset

$

4,866

$

?

Non-GAAP Financial Measures

This press release and accompanying schedules provide certain information regarding adjusted EBITDA  which is considered a non-GAAP financial measures 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 following table presents a reconciliation of total adjusted EBITDA to net loss, which is the most comparable GAAP measure:

Total Adjusted EBITDA Reconciliation      


Three months ended December 31,

Year ended December 31,

2017

2016

2017

2016

Net loss

(8,520)

(20,234)

(45,106)

(81,374)

Income tax (benefit) expense

(6,492)

1,935

(1,889)

(3,000)

Depreciation and amortization

18,051

19,654

71,649

80,181

Other expense (income)

1,867

1,090

(2,938)

7,404

Interest income

(28)

(6)

(108)

(57)

Interest expense

13,131

15,812

55,511

59,963

Write downs and other(1)

1,830

1,109

4,485

3,262

Loss on extinguishment and modification of debt(2)

903

?

9,032

?

Other adjustments(3)

823

159

2,890

1,809

Other non-cash charges(4)

2,332

1,777

7,794

8,860

New jurisdiction and regulatory licensing costs(5)

758

358

2,062

1,315

Legal & litigation expenses including settlement payments(6)

(243)

70

523

1,565

Acquisition & integration related costs(7)

2,037

377

2,936

5,411

Adjusted EBITDA

26,449

22,101

106,841

85,339

(1) 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

(2) Loss on extinguishment and modification of debt primarily relates to the refinancing of long-term debt, in which deferred loan costs and discounts related to old senior secured credit facilities were written off

(3) 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

(4) 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

(5) New jurisdiction and regulatory license costs relates primarily to one-time non-operating costs incurred to obtain new licenses and develop products for new jurisdictions

(6) Legal & litigation expenses include of payments to law firms and settlements for matters that are outside the normal course of business

(7) Acquisition and integration costs include restructuring and severance and are related to costs incurred after the purchase of businesses, such as the acquisitions of Rocket, In Bet, Cadillac Jack and RocketPlay, to integrate operations


 

For information contact:
Julia Boguslawski, Chief Marketing Officer & EVP of Investor Relations
PlayAGS, Inc.
702-724-1125
[email protected]

Or

Steven Kopjo, Director of SEC Reporting & Investor Relations
PlayAGS, Inc.
702-724-1155
[email protected]

 

SOURCE AGS


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