Supplier News
US – AGS encouraged by ‘tone of customers’ but recovery will take a ‘few years’
By Phil - 7 May 2021
With slot sales falling steeply in the quarter US slot manufacturer PlayAGS has said it will take a ‘few years’ before sales get back to pre-pandemic levels.
CEO David Lopez said: ““We are encouraged by the tone and tenor of recent conversation with our customers. As a more favorable operating environment continues to support a broad-based recovery and gaming revenue, we are slowly starting to see the improved revenue performance trigger a willingness by operators … for new purchases.”
AGS saw revenue come in at $55.4m compared to $54.3m in the 2020 first quarter, representing a year-over-year increase of 1.9 per cent per cent.
The growth came within the recurring revenue channels of AGS’ EGM, Table Products and Interactive businesses helped to offset the impact of ongoing sluggishness in the North American slot replacement market on our reported revenue. Additionally, AGS recognised an additional $2.1m in sales revenue related to units that were strategically pruned and subsequently sold as compared to the prior year’s quarter. It sold slots into 14 US states and two Canadian provinces during the quarter, with British Columbia, Virginia, and Ohio emerging as the top three sales markets. The Orion Curve accounted for 31 per cent of units shipped in the quarter. EGM equipment sales revenue benefitted from the planned sale of approximately 430 previously leased, lower-yielding units to a distributor as part of its ongoing effort to strategically prune under-earning units from our Oklahoma installed base.
During March and April and continuing through mid-to-late May 2020, nearly all of AGS’ customers either closed their facilities or dramatically curtailed operations to slow the spread of the COVID-19 virus. The company said: “These actions significantly limit the year-over-year comparability of our reported financial metrics, including revenues, (loss) income from operations, net (loss) income, and Adjusted EBITDA.”
The company said approximately 99 per cent of its 15,456-unit domestic installed base and 51 per cent of our 7,985-unit international installed base was active as of March 31, 2021. These figures compare to 90 per cent and 36 per cent, respectively, as of December 31, 2020.
AGS President and Chief Executive Officer David Lopez said: “I was very pleased with our team’s execution in the 2021 first quarter and am equally as encouraged by the macro level trends and overall sentiment we are seeing across the gaming landscape today. Following one of the best corporate strategic planning meetings I have ever participated in, we are strengthening our organizational alignment around key business objectives, which should allow us to improve our business trajectory and overall operating efficiency.”
Kimo Akiona, AGS’ Chief Financial Officer, added: “Our first quarter results once again serve as a testament to the resiliency and durability inherent to our company’s recurring revenue-centric business model. I am confident our improving execution and strong liquidity position will allow us to deliver more consistent financial performance and, in turn, further enhance shareholder value.”
The company’s domestic EGM installed base decreased by approximately 2,350 units year-over-year, attributable to the strategic pruning of approximately 1,300 lower-yielding units, the end-of-lease buyout of approximately 500 lower-earning IL VLT units and the removal of approximately 550 units primarily associated with COVID-19-related floor reconfigurations.
Domestic EGM revenue per day increased 28.6 per cent year-over-year to $27.10.
The company said: “We attribute the improved RPD performance to a more accommodative casino operating environment supported by easing COVID-19-related operating restrictions and improved vaccine distribution, the continued growth of our premium game footprint, and the strategic pruning of lower-yielding units. Domestic EGM RPD increased approximately three per cent as compared to the $26.42 realized in the 2019 first quarter.”
On a quarterly sequential basis, AGS’ domestic EGM installed base decreased by approximately 800 units, including the planned removal and sale of approximately 430 lower-yielding units as part of an ongoing strategic pruning initiative, while its domestic EGM RPD increased 16.5 per cent relative to the $23.26 achieved in the 2020 fourth quarter. Domestic EGM RPD improved month-over-month throughout the 2021 first quarter, with notable strength witnessed across several impactful geographies during the quarter’s final month. AGS said: “We attribute the improving RPD trend to the release of significant pent-up casino patron demand, which immediately followed the easing of COVID-19-related operating restrictions and improving vaccination efforts.”
International gaming operations revenue decreased to $2m compared to $5.1m in the prior year period. The year-over-year decline reflects the impact of measures implemented to slow the spread of COVID-19, such as temporary casino closures and capacity restrictions, on the business. Additionally, in contrast to the United States, Mexico has not provided any type of fiscal stimulus to support its post-COVID-19 economic recovery.
AGS’ international installed base decreased by 301 units year-over-year because of permanent casino closures in Mexico and COVID-19-related floor reconfigurations. The international installed base was unchanged on a quarterly sequential basis. EGM unit sales decreased to 289 units in the 2021 first quarter, reflecting operators’ preference to carefully manage capital expenditures as their businesses recover from COVID-19-related business disruption.
