Executive Summary

Record Q2 revenue of $89.8M (+17% y/y, +8% q/q) and record Total Adjusted EBITDA of $39.6M with margin at 44.1%, driven by strength across EGM, Table Products, and Interactive .
Management narrowed year-end net leverage target to 3.25x–3.50x from 3.25x–3.75x on stronger EBITDA and free cash flow generation; Q2 free cash flow was $12.6M and operating cash flow $25.7M .
Operational momentum highlighted by premium EGM mix and Spectra UR43 cabinet performance (No. 1 in Eilers for 7th straight month), record domestic RPD ($33.48), record EGM ASP ($20,700), and 1,259 EGM units sold (+35% y/y) .
Management guides Q3 unit sales to modestly exceed Q2, ASP slightly below Q2 on mix, domestic RPD in line to slightly above $31.13 (Q3’22), Q3 margin similar to Q2; capex maintained at $65–$70M with bias to lower end .
Estimates context: S&P Global consensus estimates for AGS were unavailable due to a mapping issue; no beat/miss assessment versus Street possible this quarter (SPGI GetEstimates returned error; see note under “Estimates Context”).

What Went Well and What Went Wrong

What Went Well

EGM sales momentum: 1,259 units sold (+35% y/y), ASP topped $20K for first time, with Spectra UR43 driving mix; EGM sales revenue $28.3M (+42% y/y) .
Recurring revenue resilience: Gaming operations reached a record $61.0M (+8% y/y), domestic EGM recurring revenue at $49.3M (third consecutive record), international EGM recurring revenue +18% y/y .
Table Products strength: Segment revenue hit a record $4.4M (+25% y/y), with PAX S shuffler footprint >265 units and >$2M quarterly progressive revenue contribution .
Management quote: “Our record-setting second quarter financial performance clearly demonstrates the strength of our products, team members, and strategy” (David Lopez) .

What Went Wrong

GAAP net income compressed to $0.851M (vs. $1.542M y/y) as higher market interest rates lifted interest expense by ~+$6M y/y; Adjusted EBITDA margin slightly down y/y (44.1% vs. 44.6%) .
Interactive Adjusted EBITDA down y/y due to tactical investments to accelerate RMG content cadence and expand genres, though segment remained positive and doubled q/q .
International installed base declined q/q by ~130 units; management expects optimization to stabilize the fleet over 2023 .

Financial Results

Consolidated Results vs. Prior Periods

Metric	Q4 2022	Q1 2023	Q2 2023
Total Revenue ($USD Millions)	$81.736	$83.175	$89.832
Income from Operations ($USD Millions)	$13.447	$11.746	$15.076
Net Income ($USD Millions)	$2.541	$(0.334)	$0.851
Diluted EPS ($USD)	$0.06	$(0.01)	$0.02
Total Adjusted EBITDA ($USD Millions)	$37.280	$36.503	$39.593
Adjusted EBITDA Margin (%)	45.6%	43.9%	44.1%

Notes: Adjusted EBITDA is non-GAAP; see reconciliations in filings .

Segment Revenue Breakdown

Segment Revenue ($USD Millions)	Q4 2022	Q1 2023	Q2 2023
EGM	$75.338	$76.558	$82.681
Table Products	$3.890	$4.094	$4.396
Interactive	$2.508	$2.523	$2.755
Total	$81.736	$83.175	$89.832

KPIs (EGM)

KPI	Q4 2022	Q1 2023	Q2 2023
EGM Units Sold (Units)	1,116	1,121	1,259
ASP ($USD)	$19,382	$19,587	$20,700
Domestic RPD ($USD)	$31.46	$32.82	$33.48
International RPD ($USD)	$7.61	$8.29	$8.90
Total RPD ($USD)	$24.87	$26.06	$26.75
Domestic Installed Base (End of Period Units)	16,326	16,360	16,422
International Installed Base (End of Period Units)	6,244	6,248	6,120
Total Installed Base (End of Period Units)	22,570	22,608	22,542

KPIs (Table Products)

KPI	Q4 2022	Q1 2023	Q2 2023
Installed Base (Units)	5,051	5,278	5,257
Average Monthly Lease Price ($USD)	$241	$230	$241
PAX S Shuffler Footprint (Units)	>145	>200	>265
Progressive Revenue ($USD Millions per Quarter)	>$2.0	>$2.0	>$2.0

Cash Flow Snapshot

Metric ($USD Millions)	Q4 2022	Q1 2023	Q2 2023
Net Cash from Operating Activities	$25.135	$4.167	$25.705
Free Cash Flow	$5.820	$(9.545)	$12.571

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Leverage (Exit 2023)	FY 2023	3.25x–3.75x	3.25x–3.50x	Top-end lowered
Domestic RPD	Q3 2023	N/A	In line to slightly ahead of $31.13 (Q3’22)	Initiated
Global ASP	Q3 2023	N/A	Slightly below Q2 level	Initiated
EGM Units Sales Volume	Q3 2023	N/A	Modestly exceeds Q2	Initiated
Adjusted EBITDA Margin	Q3 2023	Full-year 44–45%	Q3 margin similar to Q2’s 44.1%; FY 44–45% maintained	Maintained (FY); Q3 color added
Capital Expenditures	FY 2023	$65–$70M	$65–$70M; trending to lower end	Maintained; lower-end bias
Free Cash Flow	FY 2023	N/A	Full-year FCF on pace to exceed ~$15M (2022 normalized)	Initiated
Cash Interest Expense	H2 2023	N/A	Modest increase vs. Q2’s ~$13M	Initiated

Earnings Call Themes & Trends

Topic	Q4 2022 (Prior-2)	Q1 2023 (Prior-1)	Q2 2023 (Current)	Trend
Premium EGM mix & RPD	Premium mix 15%; domestic RPD $31.46	Premium mix >15%; domestic RPD $32.82	Premium installs >2,700; domestic RPD $33.48	Positive, rising mix & RPD
Spectra UR43 cabinet	Launch momentum; top Eilers ranking; footprint >200	Continued No.1 ranking; sales >400; footprint >650	No.1 for 7th month; >1,650 units	Strong, accelerating adoption
International (Mexico)	Sequential recurring rev growth for 10th quarter	11th quarter; RPD $8.29	12th quarter; RPD $8.90	Continued recovery
Table Products (PAX, progressives)	PAX >145; progressives >1,800	PAX >200; BSX >500	PAX >265; progressives >$2M/qtr	Rapid adoption
Interactive (RMG)	Positive EBITDA; content expansion	Tactical investments; positive EBITDA	Record RMG revenue $2.3M; operating leverage expected 2024	Investing now; growth emerging
Deleveraging focus	Target exit 2023 3.25x–3.75x	On track; focus on FCF	Narrowed to 3.25x–3.50x	Improved leverage outlook
Pricing/ASP integrity	ASP >$19K	ASP $19,587; price integrity	ASP $20,700 record; Q3 slightly lower on mix	Strong pricing, mix-driven
Seasonality & unit sales	Q4 typically strong	—	Q3 units >Q2; Q4 likely seasonal high	Healthy cycle
Gross margins (EGM sales)	—	—	Near 55%; sustainable 50–55% range	Durable margins
Texas/Naskila	—	—	Leasing ongoing; awaiting expansion news	Monitoring regulatory

Management Commentary

Record-setting quarter across all three segments driven by strong products and execution: “We established 10 new records in the quarter… total revenues… nearly $90 million; Adjusted EBITDA… ~$40 million… Domestic RPD reached $33.48… EGM ASPs eclipsed $20,000 for the first time ever” (David Lopez) .
Spectra UR43 as a sustained winner with robust roadmap: “Topping the July Eilers survey for the 7th consecutive month… launch titles… each averaging over 1.75x house average… hands down better than anything I’ve ever seen” (David Lopez) .
PAX S shuffler success in a concentrated market: “Successfully design, develop, manufacture, sell, and service, a competitive shuffler product in an industry long dominated by one company” (David Lopez) .
Interactive strategy: first game on redesigned online platform; collaboration between land-based and online teams; “records are made to be broken” tone on future RMG growth (David Lopez) .
Leverage path: “We now expect to exit the year with net leverage in the range of 3.25x to 3.5x… should broader market trends remain… bottom half of the range” (Kimo Akiona) .

Q&A Highlights

Leverage and refinancing: Medium-term target below 3x leverage; refinancing considered when conditions and ratings align; near-term focus remains deleveraging (Kimo) .
Premium installed base trajectory: Upside remains with pipeline and content; expectation it “can still move higher” (David) .
Seasonality and units: Q3 unit sales flat-to-slightly higher vs. Q2; Q4 could be seasonal high watermark given product cadence (Kimo) .
Capital allocation: Share repurchases not prioritized; focus on leverage reduction and potential refinancing savings (Kimo) .
Texas (Naskila): Leasing machines; market strengthening post Supreme Court decision; awaiting expansion developments (David) .
EGM sales gross margin: Near 55% in Q2; sustainable 50–55% range, mix-dependent; Spectra and shared parts efficiency support future margins (Kimo/David) .
Interactive investments: Operating leverage expected to show starting next year as new studio content and platform rollouts ramp (Kimo/David) .

Estimates Context

S&P Global consensus estimates for AGS were unavailable due to a CIQ mapping issue in our data source; as a result, we cannot assess beats/misses versus Wall Street for Q2 2023 at this time (GetEstimates error for AGS).
Given momentum across EGM sales, recurring revenue, and margin resilience, Street models are likely to adjust upward for EGM units/ASP, domestic RPD, and FY leverage trajectory, with caution on interest expense and Interactive EBITDA mix .

Key Takeaways for Investors

Broad-based strength: EGM, Table, and Interactive all grew y/y; recurring revenue mix ~70% provides resilience and margin support .
Product-driven share gains: Spectra UR43 and premium EGM mix are clear differentiators; unit sales and ASP records indicate pricing power and demand .
Margin durability: EGM sales gross margin targeted 50–55% range; Q3 EBITDA margin expected similar to Q2’s 44.1% despite mix shifts .
Deleveraging accelerating: Net leverage target narrowed to 3.25x–3.50x; FCF on track to exceed 2022 normalized ~$15M, improving refinancing optionality .
International recovery: Mexico trends remain favorable; international RPD sustained above $8 with continued sequential growth .
Table products runway: PAX S footprint expanding rapidly; progressives consistently >$2M/quarter revenue, supporting high-margin recurring base .
Near-term setup: Q3 unit sales modestly above Q2; ASP slightly lower on mix; domestic RPD stable-to-up; traders should watch margin mix and interest expense trajectory as catalysts around prints .

Citations: All quantitative and qualitative statements are sourced from AGS’s Q2 2023 8-K press release and accompanying schedules , the Q2 2023 earnings call transcript , and prior-quarter 8-Ks for Q1 2023 and Q4 2022 .

PlayAGS, Inc. (AGS)·Q2 2023 Earnings Summary