Executive Summary

Q4 2023 delivered record total revenue of $94.2M (+15% YoY; +5% QoQ) and record Adjusted EBITDA of $42.8M (+15% YoY; +7% QoQ), with all three segments (EGM, Table Products, Interactive) posting double‑digit YoY growth .
Net income was approximately breakeven at $0.07M (vs $2.54M in Q4 2022), pressured by higher interest expense and an unfavorable ~$2M swing in tax expense; diluted EPS was $0.00 .
Mix shift toward premium cabinets and disciplined pricing lifted ASP to $20,677 and sustained margins; total Adjusted EBITDA margin reached 45.4% (vs 45.6% LY) and management guided FY 2024 margin to 44.5%-45.5% .
Balance sheet de-risking: net leverage fell to 3.2x; post-quarter debt repricing and $15M voluntary repayment expected to save ~$3M annually in cash interest; exit‑2024 net leverage targeted at 2.75x–3.00x .
Potential catalysts: continued Spectra UR43/UR49 momentum, entry into mechanical reel/jumbo in 2H24, accelerating Interactive growth, and sustained free cash flow generation (Q4 FCF $11.0M; FY23 $27.4M) .

What Went Well and What Went Wrong

What Went Well

Record segment performance: EGM revenue +14% YoY, Table Products +24% YoY, Interactive +34% YoY; all segments set quarterly records; “quality and consistency of our recent financial performance” driven by people, product, and process .
Spectra cabinets outperforming: global EGM unit sales hit a record 1,519 (+36% YoY); ASP rose to $20,677 on premium mix and “price integrity initiatives” .
Free cash flow and deleveraging: Q4 FCF $11.0M (+45% YoY), net leverage down to 3.2x; CFO reiterated a path “to below 3.0x well within our sight” .

Quote: “All three operating segments setting new quarterly records for revenue and Adjusted EBITDA… a true reflection of our incredibly talented and focused team” — David Lopez, CEO .
Quote: “A path to below 3.0 times remains well within our sight” — Kimo Akiona, CFO .

What Went Wrong

GAAP net income compressed to near breakeven despite stronger operations due to higher interest expense and ~$(2)M swing in tax expense; diluted EPS $0.00 (vs $0.06 LY) .
Gaming operations (recurring) revenue declined modestly QoQ ($59.6M vs $61.0M) on normal seasonality; domestic RPD fell sequentially ($31.68 vs $32.57) .
Table Products Adjusted EBITDA margin dipped YoY on higher field service allocation and revenue mix (58.9% vs 60.9% LY), albeit expanding >300 bps sequentially .

Financial Results

Consolidated Results vs Prior Quarters (Oldest → Newest)

Metric	Q2 2023	Q3 2023	Q4 2023
Total Revenues ($USD Millions)	$89.832	$89.378	$94.151
Gaming Operations Revenue ($USD Millions)	$60.973	$61.026	$59.596
Equipment Sales Revenue ($USD Millions)	$28.859	$28.352	$34.555
Operating Income ($USD Millions)	$15.076	$14.523	$16.048
Net Income ($USD Millions)	$0.851	$(0.156)	$0.067
Diluted EPS ($USD)	$0.02	$(0.00)	$0.00
Adjusted EBITDA ($USD Millions)	$39.593	$40.111	$42.760
Adjusted EBITDA Margin (%)	44.1%	44.9%	45.4%

Segment Revenue Breakdown (Oldest → Newest)

Segment Revenue ($USD Millions)	Q2 2023	Q3 2023	Q4 2023
EGM	$82.681	$81.862	$85.952
Table Products	$4.396	$4.387	$4.829
Interactive	$2.755	$3.129	$3.370
Total	$89.832	$89.378	$94.151

Operating KPIs (Oldest → Newest)

KPI	Q2 2023	Q3 2023	Q4 2023
Global EGM Units Sold (units)	1,259	1,345	1,519
ASP ($USD per unit)	$20,700	$19,380	$20,677
Domestic EGM RPD ($USD)	$33.48	$32.57	$31.68
International EGM RPD ($USD)	$8.90	$9.43	$8.86
Total EGM Installed Base (units, end of period)	22,542	22,507	22,569
Table Products Installed Base (units)	5,257	5,309	5,415
Table Products ALP ($USD/month)	$241	$240	$239
Interactive RMG Revenue ($USD Millions)	$2.3	$2.8	$3.1

Note: Adjusted EBITDA, margin and FCF are non‑GAAP; see reconciliations in the 8‑K exhibits .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA Margin (%)	FY 2024	n/a	44.5%–45.5%	Established
CapEx ($USD Millions)	FY 2024	n/a	$65–$70	Established
Net Leverage (x)	Exit 2024	n/a	2.75–3.00	Established
Cash Interest Savings ($USD Millions)	Annualized	n/a	~$3 from repricing & $15M repayment	Established
R&D Expense (% of Revenue)	FY 2024	n/a	~12%	Maintained discipline
Margin Q1 2024 (qualitative)	Q1 2024	n/a	“In line with to slightly below” low end of FY range due to ~$1M used Orion cabinet sales	One‑time impact
Net Leverage (x)	Exit 2023	3.25–3.50 (target)	Actual 3.2x	Beat target

Earnings Call Themes & Trends

Topic	Q2 2023 (Prior-2)	Q3 2023 (Prior-1)	Q4 2023 (Current)	Trend
Spectra UR43/UR49 performance	UR43 #1 cabinet; strong content pipeline; ASP >$20k; footprint >1,650	UR49 introduced; test performance above house avg; UR43 footprint >2,700; cabinet awards	Both cabinets “kicking the ball”; deep libraries; UR49 GLI approval; top-five cabinet rankings	Strengthening product momentum
Premium mix & RPD	Premium footprint +40% YoY; domestic RPD record $33.48	Premium footprint +20% YoY; domestic RPD $32.57	Premium footprint +15% YoY; domestic RPD $31.68; seasonal dip	Sustained premium gains; normal seasonality
For‑sale EGM unit growth	1,259 units (+35% YoY)	1,345 units (+33% YoY)	1,519 units (+36% YoY)	Consecutive records
Interactive (RMG)	+6% YoY; platform upgrades planned	+26% YoY; top‑five online index; new jurisdictions	+46% YoY; online‑first content; top‑five slot index	Accelerating growth and content cadence
Table Products (PAX/BSX/Arsenal)	Record revenue; PAX footprint >265; BSX >1,800 units	Stable revenue; PAX >290; BSX >500; Arsenal >20 site licenses	Record revenue; PAX >330; BSX ~530; Arsenal >20 live	Broadening adoption
Macro/GGR outlook	Stable; recurring revenue rising	Domestic recurring far outpaced GGR trends	Q1 macro “stable”; market looks good	Stable macro backdrop
International	RPD +33% YoY; 12th seq increase	RPD +~30% YoY; 13th seq increase	RPD +16% YoY (cc ~4%); sequential decline on FX/seasonality	Modest growth; FX-sensitive
Mechanical reel/jumbo	n/a	n/a	Initial push in 2H24; increases addressable market by >15%	Emerging diversification
Leverage/FCF	CapEx disciplined; YTD free cash flow	Inside year‑end leverage target; record FCF	Repricing + repayment; 2024 FCF +25% target; exit leverage 2.7x–3.0x	Improving balance sheet/FCF

Management Commentary

“The strength in our fourth quarter results was broad-based, with all three operating segments setting new quarterly records for revenue and Adjusted EBITDA.” — David Lopez, CEO .
“Supported by… working capital management, continued capex deployment discipline, and anticipated cash interest savings… a path to below 3.0 times remains well within our sight.” — Kimo Akiona, CFO .
2024 playbook: broaden customer base, increase average order sizes; ship share gains expected with Spectra 43/49; mechanical reel/jumbo entry expands addressable market (>15% of NA units) .
Margin discipline: FY24 Adjusted EBITDA margin 44.5%-45.5%; R&D ~12% of revenue to sustain product pipeline; Q1 margin slightly below low end on used Orion cabinet sales .

Q&A Highlights

Market health: Q1 “stable”; AGS product pipeline “better than stable,” with Spectra 43 “crushing it” and premium content outperforming .
Ship share vs value creation: Focus on game performance, margins, FCF, and deleveraging; ship share should follow performance over time, noting AGS does not sell into certain route markets .
Valuation/IR stance: Prioritize deleveraging; $15M debt repayment applauded by investors; crossing <3.0x leverage enables access to broader shareholder base .
UR49 performance: Tracking “fantastic,” building off strong brands like Rakin’ Bacon; UR43 “still trucking along” .
International strategy: Broaden beyond Mexico into Latin America/Caribbean with Spectra family; longer‑term Australasian optionality .
Interactive growth drivers: More games (ported and online‑first), partnerships, omnichannel; quality of team emphasized .
R&D spend: ~12% of revenue calibrated to opportunities; consistent investment behind growth .
Mechanical reel/jumbo: 2024 is back‑half ramp; long‑term optimization and growth expected; near‑term cautious commentary .
FCF conversion: Targeting ~25%+ growth in FY24 FCF with sequential improvement in conversion .

Estimates Context

S&P Global consensus EPS and revenue estimates for AGS Q4 2023 were unavailable via our tool due to a mapping gap; therefore, estimate comparisons are not provided. Management referenced sell‑side consensus for 2024 EGM unit growth (~3% over FY23’s 5,244 units) and indicated confidence in surpassing it .

Key Takeaways for Investors

Premium cabinet momentum and pricing integrity drove ASP to $20,677 and supported 45.4% Adjusted EBITDA margin, with FY24 margin guided to 44.5–45.5% — positioning for continued profitability despite seasonality .
For‑sale EGM strength is a key growth engine: record 1,519 units in Q4 (+36% YoY), expanding customer breadth (~180 unique customers), and broader cabinet portfolio (UR43/UR49) .
Recurring revenue remains resilient but seasonal; watch domestic RPD normalization (Q4 $31.68 vs Q3 $32.57) and FX impacts on international RPD ($8.86) .
Balance sheet improving: net leverage 3.2x, repricing + $15M repayment lower annual cash interest by ~$3M; exit‑2024 leverage target 2.75–3.00x supports potential multiple re‑rating as <3.0x is approached .
Table Products and Interactive provide diversified growth pillars: PAX S and BSX footprints expanding; Interactive RMG revenue +46% YoY to $3.1M with robust content cadence and top‑five online slot index positioning .
2024 catalysts: entry into mechanical reel/jumbo (2H), continued Spectra content launches, targeted international expansion in LatAm/Caribbean, disciplined capex ($65–$70M) .
Risk monitor: interest rates (pressuring GAAP net income), FX headwinds internationally, seasonal recurring revenue, and execution on new product verticals; offset by strong FCF and margin guidance .

PlayAGS, Inc. (AGS)·Q4 2023 Earnings Summary