AGS revenues hit by casino closures, liquidity position strengthened

AGS reported Thursday operating results for its first quarter ended March 31, 2020. 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 the company’s customers have closed their operations and the markets that it serves have been severely impacted, AGS stated. This affected several metrics, 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 its 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 its EGM segment, offset by decreases in SG&A and cost of equipment sales.

Total Adjusted EBITDA decreased 32% to $24.5 million, driven by decreased revenue from its EGM segment and slightly offset by growth in our Table Products and Interactive segments.

AGS President and Chief Executive Officer David Lopez commented: "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,” Lopez added.

Kimo Akiona, AGS' Chief Financial Officer, stated: “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."