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PI

PlayAGS, Inc. (AGS)·Q1 2023 Earnings Summary

Executive Summary

  • Q1 delivered record total revenue of $83.2M (+14% YoY), with adjusted EBITDA of $36.5M (11% YoY) and domestic EGM recurring revenue at a new record $47.7M; net loss improved sharply to $(0.334)M from $(12.6)M a year ago .
  • Sales momentum remains strong: global EGM units sold topped 1,100 for the second straight quarter, ASP rose to $19,587, and sales were to >110 unique customers; management expects Q2 global unit sales to exceed Q1 .
  • Product catalysts: Spectra UR43 maintained its #1 Eilers ranking for seven consecutive months; premium EGM mix exceeded 15%, aiding RPDs; Table Products revenue hit a record $4.1M on PAX S shuffler and BSX progressive traction .
  • Margin/timing considerations: adjusted EBITDA margin was 43.9% (down 110 bps YoY); Q2 margin is expected “slightly below” the low end of the 44–45% full-year range due to GameOn seasonal costs—an important near-term trading consideration .
  • Estimates context: S&P Global consensus data was unavailable for AGS this quarter (SPGI mapping error); comparisons to Wall Street estimates cannot be provided.

What Went Well and What Went Wrong

What Went Well

  • Record revenue and EBITDA: “Total revenues increased 14% YoY to a record $83.2 million… Adjusted EBITDA reached a first quarter record $36.5 million” .
  • Spectra and content depth: “Spectra 43… extended its run… to 7 consecutive months… 7 game development studios creating over 75 titles per year” .
  • Table Products momentum: “Table products revenue increased by nearly 20%… reaching a new record of $4.1 million… PAX S footprint grew >40% sequentially to >200 units; BSX footprint ~500 units” .

What Went Wrong

  • Margin compression and segment mix: adjusted EBITDA margin fell to 43.9% (–110 bps YoY) amid inflation and investments; Interactive adjusted EBITDA declined YoY (still positive) .
  • Free cash flow negative on timing: Q1 FCF was $(9.545)M, impacted by bonus payouts ($7M) and inventory build ($7.5M); management expects normalization over the year .
  • Ongoing net loss: GAAP net loss persisted at $(0.334)M despite operational progress, reflecting higher interest expense vs prior year .

Financial Results

MetricQ3 2022Q4 2022Q1 2023
Revenue ($USD Millions)$78.259 $81.736 $83.175
Net Income ($USD Millions)$0.476 $2.541 $(0.334)
EPS ($USD)$0.01 $0.06 $(0.01)
Adjusted EBITDA ($USD Millions)$34.467 $37.280 $36.503
Adjusted EBITDA Margin (%)44.0% 45.6% 43.9%
Segment Revenue ($USD Millions)Q3 2022Q4 2022Q1 2023
EGM$71.620 $75.338 $76.558
Table Products$4.036 $3.890 $4.094
Interactive$2.603 $2.508 $2.523
KPIsQ3 2022Q4 2022Q1 2023
Global EGM Units Sold (units)1,014 1,116 1,121
ASP ($USD)$19,146 $19,382 $19,587
Domestic EGM RPD ($USD)$31.13 $31.46 $32.82
International EGM RPD ($USD)$7.34 $7.61 $8.29
Domestic Installed Base (units)16,258 16,326 16,360
International Installed Base (units)6,274 6,244 6,248
Total Installed Base (units)22,532 22,570 22,608
Premium EGM Mix (% of domestic installed base)14% 15% >15% (record, reported “over 15%”)

Notes:

  • Estimates comparison: unavailable this quarter due to S&P mapping issue; “Wall Street consensus via S&P Global” could not be retrieved.
  • Sequential revenue increased ~2% vs Q4 2022; domestic EGM recurring revenue +~2% vs previous record in Q4 2022 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA Margin (%)FY 202344–45% (Q4 call) 44–45% (reaffirmed) Maintained
Q2 Adjusted EBITDA Margin (%)Q2 2023N/ASlightly below low end of FY range (GameOn costs) New (caution)
Capital Expenditures ($USD Millions)FY 2023$65–70 $65–70 (reaffirmed) Maintained
Cash Interest (run-rate) ($USD Millions)Quarterly 2023N/A~$13 per quarter New
Net Leverage (x)Exit 20233.25–3.75x 3.25–3.75x (on track) Maintained
Domestic EGM RPD ($)Q2 2023Above $30 for 2023 (prior tone) “Comfortably” sustain >$30 in Q2 Maintained

Earnings Call Themes & Trends

TopicQ-2 (Q3 2022)Q-1 (Q4 2022)Current (Q1 2023)Trend
Spectra cabinet performanceTrial success; soft launch planned; #1 cabinet in Eilers; 30+ titles pipeline #1 for five months; strong margins; sales ramp #1 for seven months; broad customer adoption; >110 customers sold in Q1 Accelerating
Premium mix and RPDPremium mix 14%; RPD >$30 for sixth straight quarter Premium mix 15%; RPD >$30 for seventh straight quarter Premium >15%; domestic RPD $32.82 (record streak 8 quarters) Improving
Supply chain and gross marginInflation and mix pressured margins; ASP resilience Supply chain moderating; Spectra value-engineered aids margins Supply chain “largely back on track”; Spectra mix lifts EGM sales GM Improving
International (Mexico) recoverySequential recurring revenue growth for 9 straight quarters 10 straight quarters; stable installed base 11 straight quarters; international RPD $8.29; business at ~75% of 2019 run-rate exiting Q1 Improving
Table Products (PAX S, BSX)Record Adjusted EBITDA; PAX S rollout; BSX growth Installed base growth; site licenses; momentum Record $4.1M revenue; PAX S >200 units; BSX ~500 units; more site licenses Accelerating
Capital allocation/deleveragingTarget <4x YE 2022; focus on deleveraging Reiterate 3.25–3.75x exit 2023; inside 3x in 18–24 months Focus on deleveraging; buybacks de-prioritized; optionality from cash accumulation Stable discipline
Operator CapEx/backdropPurchasing resilient; flattish to improved demand Purchasing behavior resilient Operators “no pullback”; CapEx strong Stable-positive
Regulatory/geographies (Texas, new states)Texas opportunity highlighted; cautious timing CO/MN/MO licensing approvals; addressable 40k units; 2023 initial installs New states testing; back half installs; Texas Naskila—no 2023 expectation Building pipeline
Interactive/RMGRefocus to NA; positive trends Expanding partners (DraftKings, BCLC) Stable revenue; back-half lift anticipated; 12 new operators in Q1 Stable to improving

Management Commentary

  • “Total revenues increased 14% year-over-year to a company record $83 million… adjusted EBITDA… $36.5 million… Domestic EGM recurring revenue increased 10%… to a record $47.7 million” (CEO) .
  • “Spectra 43… top of the Eilers Cabinet report… Spectra’s 2 launch titles… each theme achieving a top 10 ranking… we currently have 7 game development studios creating over 75 titles per year” (CEO) .
  • “We sold games to over 110 different customers… increase of more than 45% versus the prior year… I consider Q1 2023 the healthiest EGM sales quarter in our company’s history” (CEO) .
  • “We continue to expect full year adjusted EBITDA margin to land in the 44% to 45% range… Q2 margin slightly below the low end… seasonal costs… GameOn” (CFO) .
  • “Net leverage at quarter end was 3.8x… on track to exit 2023 with net leverage in the range of 3.25x to 3.75x” (CFO) .

Q&A Highlights

  • Geographic performance: While some peers cited softness in select Southern states, AGS sees broad stability across the U.S.; no specific dislocations flagged (Stifel) .
  • Capital allocation: Share repurchases considered but de-prioritized; singular focus remains deleveraging, accumulating cash to maintain optionality (Stifel) .
  • Operator CapEx: No evidence of pullback; CapEx and beliefs remain strong across operators (Truist) .
  • New jurisdictions: CO, MO, MN testing underway; initial installs expected back half; dominated by multi-site operators familiar with AGS—should allow fast ramp (B. Riley) .
  • Pricing/margins: ASPs benefit from strong indexing and price integrity; little aggressive discounting observed (Macquarie) ; supply chain normalization and Spectra value engineering supporting gross margin (ROTH MKM) .
  • Texas/Naskila: Texas broader legalization not a 2023 event; Naskila decision pending; not baked into leverage guide (Macquarie) .
  • Sales cadence: Q1 unit sales not “lumpy”; breadth across customers; Q2 expected to exceed Q1 levels (ROTH MKM) .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q1 2023 were unavailable due to a Capital IQ mapping issue for AGS; therefore, we cannot provide beat/miss comparisons versus Wall Street consensus this quarter.
  • Given record revenue and strong unit sales, consensus models may need to reflect higher for-sale momentum and sustained >$30 domestic RPD, balanced against management’s near-term margin caution for Q2 (GameOn seasonality) .

Key Takeaways for Investors

  • Spectra UR43 is a credible share-gain catalyst; cabinet performance and content depth (75+ titles/year) should sustain sales and lift ASPs and margins as mix shifts toward value-engineered hardware .
  • Premium penetration (>15%) continues to raise unit economics; domestic RPD at $32.82 sets an 8-quarter streak above $30, supporting recurring revenue stability .
  • Near-term margin watch: Q2 adjusted EBITDA margin guided slightly below the 44–45% full-year range due to GameOn costs—potential stock volatility around the event; full-year margin guide reaffirmed .
  • Q2 sales momentum expected to exceed Q1 units sold, with operator CapEx steady; breadth of customers (>110 in Q1) and new jurisdictions (CO/MO/MN) provide incremental pipeline .
  • Table Products runway: PAX S and BSX progressives are scaling, with site licenses broadening reach; segment delivered record revenue and strong margins .
  • Deleveraging remains the core capital priority; exit 2023 net leverage 3.25–3.75x on track; share repurchases are de-emphasized near term .
  • International recovery (Mexico) is durable: international RPD reached $8.29; business run-rating ~75% of 2019 levels, offering upside as macro normalizes .

Quotes and data are sourced from AGS’s Q1 2023 8‑K/press release and earnings call, plus prior Q4 and Q3 materials: .