Financial Performance - Total revenues increased 17% year-over-year to nearly $90 million, marking the 10th consecutive quarter of sequential improvement [6][8] - Adjusted EBITDA grew 16% year-over-year to approximately $40 million, with adjusted EBITDA margin slightly above 44% [6][20] - Free cash flow surpassed $12 million in Q2, bringing year-to-date free cash flow to approximately $4 million [8][22] Business Segment Performance - Domestic game operations revenue increased 7% year-over-year to $49.3 million, establishing a new record for the third consecutive quarter [7][13] - EGM sales revenue surpassed $28 million, up more than 40% year-over-year, with EGM average selling prices (ASPs) exceeding $20,000 for the first time [7][16] - Table products revenue reached $4.4 million, up over 25% year-over-year, driven by the success of the PAX shuffler [7][18] - Interactive segment RMG revenue increased 10% year-over-year to $2.3 million, setting a new record [7][19] Market Performance - Domestic RPD reached $33.48, surpassing $30 for the ninth consecutive quarter, indicating strong performance in the domestic market [7][13] - International recurring revenue increased nearly 20% year-over-year, with international RPD topping $8 for the second consecutive quarter [17] Company Strategy and Industry Competition - The company is focused on recruiting top talent in R&D, sales, and product management to drive growth across all segments [6][9] - The launch of the Spectra 43 cabinet has been a significant success, contributing to record sales and strong market performance [9][10] - The company aims to reduce net leverage to below 3x in the medium term, indicating a focus on financial health and stability [23] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain momentum in premium product sales and overall market share growth [14][33] - The company anticipates continued strong performance in Q3, driven by the success of new product launches and a stable gaming environment [14][36] - Management highlighted the importance of ongoing investments in R&D and product development to sustain long-term growth [28][50] Other Important Information - Capital expenditures for Q2 totaled approximately $16 million, with full-year projections expected to land between $65 million to $70 million [21] - The company is focused on maintaining cash reserves and deleveraging before considering share repurchases [39] Q&A Session Summary Question: Thoughts on leverage and refinancing opportunities for next year - Management indicated a target leverage ratio below 3x in the medium term, with considerations for market conditions before refinancing [26][27] Question: R&D levels and future growth - Management is comfortable with current R&D levels but remains open to scaling up if necessary to maintain momentum [28][29] Question: Premium installed base growth and market share - Management expressed confidence in the potential for continued growth in the premium installed base, with aspirations for higher market share [32][33] Question: Share repurchases and valuation considerations - Management emphasized a focus on deleveraging and cash accumulation before considering share repurchases [39] Question: Updates on Texas market opportunities - Management reported ongoing marketing activities in Texas but no significant updates on expansion plans [41] Question: Drivers of gross margin performance in the EGM business - Management attributed improved gross margins to strong sales of the Spectra cabinet and a favorable product mix [42][43] Question: Future operating leverage in the Interactive segment - Management expects to see operating leverage in the Interactive segment starting next year as new content is released [45][49] Question: Pipeline and future product launches - Management hinted at exciting new products and developments to be revealed at G2E, reflecting strong R&D investments [52][53]

Q2 2023 Financial Highlights - Total revenue reached a record $89.8 million, a 17% year-over-year increase[6] - Adjusted EBITDA also hit a record $39.6 million, up over 15% year-over-year[6] - Free cash flow increased by 38% year-over-year, reaching $12.6 million[6] - The company generated net income of $851 thousand[6] EGM Segment Performance - Global EGM sales increased by 35% year-over-year, topping 1,250 units, and exceeding Q2 2019 levels by 7%[6] - Total EGM units sold were 1,259, compared to 934 in Q2 2022, representing a 35% increase[29] - Domestic EGM recurring revenue grew 7% year-over-year, outpacing the market's 2% to 3% growth[6] - International EGM revenue per day (RPD) increased by 33% year-over-year to $8.90[30] - Equipment sales revenue increased 42% from $19.929 million to $28.331 million[29] Table Products and Interactive Segments - Table Products revenue reached a record $4.4 million, a 25% increase year-over-year[6] - Interactive segment revenue increased 6% year-over-year to $2.8 million[38] - RMG revenue within the Interactive segment grew by approximately 10% year-over-year to a record $2.3 million[39] Balance Sheet and Outlook - The company aims to exit 2023 with net leverage in the range of 3.25x to 3.50x[6]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarter ended June 30, 2023 6775 S. Edmond St., Ste #300 Las Vegas, NV 89118 (Address of principal executive offices) (Zip Code) (702) 722-6700 (Registrant's telephone number, including area code) or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | Name of ...

Financial Data and Key Metrics Changes - Total revenues increased 14% year-over-year to a record $83 million, marking nine consecutive quarters of sequential revenue growth [6][17] - Adjusted EBITDA reached a new first-quarter record of $36.5 million, up over 11% compared to the prior year [6] - Domestic EGM recurring revenue rose 10% year-over-year to a record $47.7 million, exceeding the average market-wide gross gaming revenue growth of 6% to 7% [7][17] - Global EGM sales topped 1,100 units for the second consecutive quarter, up over 15% year-over-year [7][19] - Table products revenue increased nearly 20% year-over-year, reaching a record of $4.1 million [7] Business Line Data and Key Metrics Changes - Domestic EGM gaming operations revenue increased 10% year-over-year to nearly $48 million, with record monthly revenues in March [17] - Domestic RPD (revenue per device) increased 7% year-over-year, maintaining above $30 for eight consecutive quarters [18] - International EGM recurring revenue grew over 15% year-over-year, with international RPD exceeding $8 for the first time since Q2 2019 [21] - The table products business achieved record revenues exceeding $4 million, with card shuffler revenues more than doubling year-over-year [22] Market Data and Key Metrics Changes - The company sold games to over 110 different customers, representing an increase of more than 45% year-over-year [11] - The average selling price (ASP) for global EGM increased 2% year-over-year to over $19,500, driven by a greater mix of premium-priced products [21] - The international recurring revenue business in Mexico was running at approximately 75% of 2019 levels, compared to just over 60% a year ago [21] Company Strategy and Development Direction - The company is focused on leveraging its strong R&D investments to maintain a diverse game content offering, with 7 game development studios creating over 75 titles per year [9] - The strategic expansion of the premium EGM footprint has been a key driver of growth, with a premium mix exceeding 15% of installed units [12] - The company aims to sustain its domestic EGM RPD above $30 throughout Q2, supported by new customer activations and game launches [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the gaming market, noting no significant pullback in capital expenditures from operators despite market volatility [30][36] - The company anticipates continued growth in its interactive business, expecting a more pronounced lift in the second half of the year [23] - Management highlighted the importance of deleveraging the business while maintaining a focus on growth opportunities [32][28] Other Important Information - First-quarter capital expenditures totaled $14 million, with expectations for full-year CapEx in the range of $65 million to $70 million [25] - Free cash flow for Q1 was negative $10 million, impacted by timing-related items, but management expects to deliver positive free cash flow for the remainder of 2023 [26] - Net leverage at quarter-end was 3.8x, with expectations to exit 2023 in the range of 3.25x to 3.75x [27][28] Q&A Session Summary Question: Observations on game operations business trends - Management noted overall stability in the gaming market, with no significant changes anticipated in the near term [30] Question: Capital allocation strategy and share repurchases - The focus remains on deleveraging the business, with management acknowledging the topic of share repurchases but reiterating the priority on reducing leverage [32][33] Question: Trends in gaming operators' spending - Management indicated that operators have not shown signs of pulling back on capital expenditures, maintaining a positive outlook [36] Question: Updates on new state market entries - Management expressed optimism about entering Colorado, Mississippi, and Missouri, viewing them as promising markets for growth [39] Question: Competitive landscape and ASPs - Management confirmed that strong performance allows for maintaining ASPs, with no significant discounting observed in the market [40][41] Question: International opportunities and market expansion - Management highlighted a focus on Latin America for international expansion, with potential future opportunities in Europe and Asia [56][57] Question: New product categories and future developments - Management indicated that while no new categories have been announced, the company is well-positioned to explore new options in the future [60]

[Filing Information](index=1&type=section&id=Filing%20Information) This section provides the essential details of the Form 10-Q filing, including the registrant's identification, the reporting period, and its classification under SEC regulations [Form 10-Q Details](index=1&type=section&id=Form%2010-Q%20Details) This section provides the essential details of the Form 10-Q filing, including the registrant's identification, the reporting period, and its classification under SEC regulations | Detail | Value | | :--- | :--- | | Registrant Name | PLAYAGS, INC. | | Commission File Number | 001-38357 | | Quarter Ended | March 31, 2023 | | Common Stock Trading Symbol | AGS | | Exchange | New York Stock Exchange | | Shares Outstanding (as of May 5, 2023) | 37,916,876 | | Filer Status | Accelerated filer, Emerging growth company | [PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of PlayAGS, Inc. for the three months ended March 31, 2023, and 2022, including balance sheets, statements of operations and comprehensive loss, changes in stockholders' equity, and cash flows, along with detailed explanatory notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $676,107 | $684,751 | | Total Liabilities | $621,150 | $635,390 | | Total Stockholders' Equity | $54,957 | $49,361 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) | Metric (in thousands, except per share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $83,175 | $72,857 | 14.2% | | Income from Operations | $11,746 | $5,678 | 106.9% | | Net Loss | $(334) | $(12,594) | (97.3)% | | Basic and Diluted Loss Per Common Share | $(0.01) | $(0.34) | (97.1)% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS%20%27%20EQUITY) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total Stockholders' Equity | $54,957 | $33,649 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,167 | $7,070 | | Net cash used in investing activities | $(13,103) | $(16,149) | | Net cash used in financing activities | $(3,380) | $(52,968) | | Net decrease in cash, cash equivalents and restricted cash | $(12,323) | $(62,045) | [Notes to the Condensed Consolidated Financial Statements](index=7&type=section&id=NOTES%20TO%20THE%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes provide detailed explanations of the company's business, significant accounting policies, and specific financial statement line items, offering crucial context for the reported financial figures [Note 1. Description of the Business and Summary of Significant Accounting Policies](index=7&type=section&id=NOTE%201.%20DESCRIPTION%20OF%20THE%20BUSINESS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - PlayAGS, Inc. designs and supplies gaming products and services across three segments: Electronic Gaming Machines (EGM), Table Products, and Interactive Games[16](index=16&type=chunk) Revenues by Segment (in thousands) | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **EGM** | | | | Gaming operations | $52,413 | $47,296 | | Equipment sales | $24,145 | $19,610 | | **Table Products** | | | | Gaming operations | $3,706 | $3,397 | | Equipment sales | $388 | $83 | | **Interactive** | | | | Gaming Operations | $2,523 | $2,471 | | **Total Revenue** | $83,175 | $72,857 | - Key accounting policies include revenue recognition (operating leases for gaming operations, ASC 606 for equipment sales), inventory valuation (FIFO at net realizable value), depreciation of property and equipment (straight-line), impairment testing for long-lived assets and intangibles, goodwill impairment testing, and fair value measurements[25](index=25&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[45](index=45&type=chunk)[50](index=50&type=chunk)[52](index=52&type=chunk) [Note 2. Property and Equipment](index=16&type=section&id=NOTE%202.%20PROPERTY%20AND%20EQUIPMENT) Property and Equipment, Net (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Gaming equipment | $241,157 | $232,244 | | Other property and equipment | $23,147 | $22,922 | | Less: Accumulated depreciation | $(184,274) | $(172,805) | | **Property and equipment, net** | **$80,030** | **$82,361** | | Depreciation expense (Q1) | $10,600 | $9,700 | [Note 3. Goodwill and Intangibles](index=17&type=section&id=NOTE%203.%20GOODWILL%20AND%20INTANGIBLES) Goodwill by Segment (in thousands) | Segment | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | EGM | $280,103 | $278,629 | | Table Products | $9,051 | $9,051 | | Interactive | $- | $- | | **Total Goodwill** | **$289,154** | **$287,680** | Intangible Assets, Net (in thousands) | Asset Type | March 31, 2023 (Net Carrying Value) | December 31, 2022 (Net Carrying Value) | | :--- | :--- | :--- | | Indefinite lived trade names | $12,126 | $12,126 | | Trade and brand names | $254 | $268 | | Customer relationships | $48,426 | $51,517 | | Contract rights under development and placement fees | $17,373 | $18,551 | | Gaming software and technology platforms | $51,185 | $51,229 | | Intellectual property | $7,888 | $8,418 | | **Total Intangible Assets, Net** | **$137,252** | **$142,109** | | Amortization expense (Q1) | $8,500 | $9,100 | [Note 4. Accrued Liabilities](index=18&type=section&id=NOTE%204.%20ACCRUED%20LIABILITIES) Accrued Liabilities (in thousands) | Type | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Salary and payroll tax accrual | $10,194 | $13,255 | | Taxes payable | $3,034 | $2,903 | | Current portion of operating lease liability | $2,490 | $2,287 | | License fee obligation | $1,000 | $1,000 | | Placement fees payable | $6,314 | $6,314 | | Accrued other | $8,772 | $11,503 | | **Total Accrued Liabilities** | **$31,804** | **$37,262** | [Note 5. Long-Term Debt](index=19&type=section&id=NOTE%205.%20LONG-TERM%20DEBT) Long-Term Debt (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | First Lien Credit Facilities (Term loans, net) | $554,558 | $555,453 | | Finance leases | $609 | $688 | | Total debt | $555,167 | $556,141 | | Less: Current portion | $(6,036) | $(6,060) | | **Long-term debt** | **$549,131** | **$550,081** | - The First Lien Credit Facilities include a **$575.0 million New Term Loan Facility** maturing on February 15, 2029, and a **$40.0 million New Revolving Credit Facility** terminating on February 15, 2027[76](index=76&type=chunk)[78](index=78&type=chunk) - Borrowings under the Amended Credit Agreement bear interest at SOFR (subject to a 0.75% floor for term loans) plus an applicable margin of 4.00%, resulting in an **8.7% interest rate** as of March 31, 2023[77](index=77&type=chunk)[73](index=73&type=chunk) - As of March 31, 2023, there were **no required financial covenants** for the company's debt instruments[82](index=82&type=chunk) [Note 6. Stockholders' Equity](index=21&type=section&id=NOTE%206.%20STOCKHOLDERS%27%20EQUITY) - As of March 31, 2023, the company had **37,904,589 shares of common stock outstanding**, with 450,000,000 shares authorized[84](index=84&type=chunk) - The board of directors approved extending a share repurchase program to August 11, 2023, with **$47.0 million remaining available** out of $50.0 million authorized[87](index=87&type=chunk) [Note 7. Write-Downs and Other Charges](index=21&type=section&id=NOTE%207.%20WRITE-DOWNS%20AND%20OTHER%20CHARGES) Write-Downs and Other Charges (in thousands) | Period | Amount | | :--- | :--- | | Three Months Ended March 31, 2023 | $204 | | Three Months Ended March 31, 2022 | $93 | - The charges in Q1 2023 were primarily related to the impairment of intangible assets and the disposal of long-lived assets[89](index=89&type=chunk) [Note 8. Basic and Diluted Loss Per Share](index=22&type=section&id=NOTE%208.%20BASIC%20AND%20DILUTED%20LOSS) Basic and Diluted Loss Per Common Share | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Basic Loss Per Share | $(0.01) | $(0.34) | | Diluted Loss Per Share | $(0.01) | $(0.34) | - No potentially dilutive securities were included in the EPS calculation for both periods due to the reported net loss, making their effect anti-dilutive[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) [Note 9. Benefit Plans](index=22&type=section&id=NOTE%209.%20BENEFIT%20PLANS) 401(k) Plan Expense (in millions) | Period | Expense | | :--- | :--- | | Three Months Ended March 31, 2023 | $0.7 | | Three Months Ended March 31, 2022 | $0.6 | - As of March 31, 2023, **5,070,407 shares remained available** for issuance under the 2018 Omnibus Incentive Plan[98](index=98&type=chunk) [Note 10. Stock-Based Compensation](index=23&type=section&id=NOTE%2010.%20STOCK-BASED%20COMPENSATION) - As of March 31, 2023, unrecognized compensation expense was **$5.0 million for restricted stock and units** (2.2-year weighted average period) and **$9.2 million for phantom stock units** (2.1-year weighted average period)[100](index=100&type=chunk) - An amendment to performance-based restricted stock units for the CEO and CFO resulted in an incremental fair value of **$3.9 million**, to be recognized over service and performance periods[101](index=101&type=chunk) Stock Options Outstanding (as of March 31, 2023) | Metric | Value | | :--- | :--- | | Number of Options Outstanding | 1,162,088 | | Weighted Average Exercise Price | $9.05 | | Remaining Contract Term (years) | 2.1 | | Aggregate Intrinsic Value (in thousands) | $385 | Restricted Stock and Units Outstanding (as of March 31, 2023) | Metric | Value | | :--- | :--- | | Shares Outstanding | 1,608,788 | | Weighted Average Grant Date Fair Value (per share) | $6.71 | Phantom Stock Units Outstanding (as of March 31, 2023) | Metric | Value | | :--- | :--- | | Shares Outstanding | 3,350,692 | | Weighted Average Grant Date Fair Value (per share) | $5.80 | [Note 11. Income Taxes](index=26&type=section&id=NOTE%2011.%20INCOME%20TAXES) Effective Income Tax Rate | Period | Effective Tax Rate | | :--- | :--- | | Three Months Ended March 31, 2023 | 78.1% benefit | | Three Months Ended March 31, 2022 | 3.9% expense | - The significant difference in the effective tax rate for Q1 2023 (**78.1% benefit**) compared to Q1 2022 (**3.9% expense**) is primarily due to changes in the valuation allowance on deferred tax assets and the expiration of the statute of limitations for certain uncertain tax positions[115](index=115&type=chunk) [Note 12. Commitments and Contingencies](index=26&type=section&id=NOTE%2012.%20COMMITMENTS%20AND%20CONTINGENCIES) - The company is involved in a consolidated securities class action lawsuit and a shareholder derivative lawsuit, both of which are currently stayed pending resolution of motions[120](index=120&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - The Alabama Department of Revenue (ADOR) assessed **$3.3 million in unpaid state and local rental taxes** for 2016-2019, which the company disputes; an estimated additional **$2.3 million** (excluding interest) could be assessed for subsequent periods through March 31, 2023[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) - The company is currently unable to estimate the probability or amount of liability related to the securities class action or shareholder derivative matters[125](index=125&type=chunk) [Note 13. Operating Segments](index=28&type=section&id=NOTE%2013.%20OPERATING%20SEGMENTS) - The company operates in three segments: EGM, Table Products, and Interactive, with performance evaluated based on revenues and segment Adjusted EBITDA[129](index=129&type=chunk)[130](index=130&type=chunk) Revenues and Adjusted EBITDA by Segment (in thousands) | Segment | Q1 2023 Revenues | Q1 2022 Revenues | Q1 2023 Adjusted EBITDA | Q1 2022 Adjusted EBITDA | | :--- | :--- | :--- | :--- | :--- | | EGM | $76,558 | $66,906 | $34,032 | $30,195 | | Table Products | $4,094 | $3,480 | $2,251 | $1,829 | | Interactive | $2,523 | $2,471 | $220 | $742 | | **Total** | **$83,175** | **$72,857** | **$36,503** | **$32,766** | [Note 14. Acquisitions](index=30&type=section&id=NOTE%2014.%20ACQUISITIONS) - On January 3, 2022, the company acquired intangible assets related to the Lucky Lucky trade name from Aces Up Gaming for **$4.8 million**, allocated primarily to tax-deductible goodwill (**$1.2 million**) and intangible assets (**$3.5 million**)[136](index=136&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and results of operations for the three months ended March 31, 2023, compared to the prior year, including segment-specific analysis and key business drivers [Cautionary Statement Regarding Forward-Looking Statements](index=31&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) - The report contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from projections[138](index=138&type=chunk) [Overview](index=31&type=section&id=Overview) - PlayAGS, Inc. is a leading designer and supplier of Electronic Gaming Machines (EGMs), Table Products, and Interactive games for the gaming industry[140](index=140&type=chunk) - Approximately **71% of total revenue** for Q1 2023 was generated through recurring contracted lease agreements (revenue sharing or fee-per-day) and Interactive gaming operations[140](index=140&type=chunk) - The EGM segment represents **92% of Q1 2023 revenue**, offering a library of over 550 proprietary game titles and various cabinet options for lease or sale[141](index=141&type=chunk) - The Table Products segment offers over 60 unique products, including live felt games, side bets, progressives, and shufflers, with nearly all revenue being recurring[143](index=143&type=chunk)[144](index=144&type=chunk) - The Interactive segment operates a B2B game aggregation platform for online real-money gaming (RMG) and B2C free-to-play social casino apps[145](index=145&type=chunk)[146](index=146&type=chunk) [Key Drivers of Our Business](index=33&type=section&id=Key%20Drivers%20of%20Our%20Business) - Revenue is driven by consumer spending on revenue share installed base, daily fees and selling prices of EGMs, revenue share percentage, customer capital budgets, replacement of existing EGMs, casino expansion/development, new gaming jurisdictions, competitiveness of products, and macroeconomic factors[148](index=148&type=chunk) - Expenses are influenced by fluctuations in labor costs, component prices, energy prices, gaming license costs, maintenance expenses, and tariff increases[148](index=148&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Consolidated Statements of Operations (in thousands) | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Gaming operations revenue | $58,642 | $53,164 | $5,478 | 10.3% | | Equipment sales revenue | $24,533 | $19,693 | $4,840 | 24.6% | | **Total revenues** | **$83,175** | **$72,857** | **$10,318** | **14.2%** | | Cost of gaming operations | $11,756 | $10,269 | $1,487 | 14.5% | | Cost of equipment sales | $12,333 | $9,787 | $2,546 | 26.0% | | Selling, general and administrative | $17,205 | $17,951 | $(746) | (4.2)% | | Research and development | $10,789 | $10,210 | $579 | 5.7% | | Write-downs and other charges | $204 | $93 | $111 | 119.4% | | Depreciation and amortization | $19,142 | $18,869 | $273 | 1.4% | | **Total operating expenses** | **$71,429** | **$67,179** | **$4,250** | **6.3%** | | **Income from operations** | **$11,746** | **$5,678** | **$6,068** | **106.9%** | | Interest expense | $13,704 | $9,473 | $4,231 | 44.7% | | Loss on extinguishment and modification of debt | $- | $8,549 | $(8,549) | (100.0)% | | Loss before income taxes | $(1,523) | $(12,127) | $10,604 | (87.4)% | | Income tax benefit (expense) | $1,189 | $(467) | $1,656 | (354.6)% | | **Net loss** | **$(334)** | **$(12,594)** | **$12,260** | **(97.3)%** | - Gaming operations revenue increased primarily due to a **12.7% rise in EGM Revenue Per Day (RPD)** and an increase in the domestic EGM installed base, partially offset by a decrease in the international EGM installed base[150](index=150&type=chunk) - Equipment sales increased due to a **17.4% increase in EGM units sold** (1,121 units in Q1 2023 vs. 955 in Q1 2022)[151](index=151&type=chunk) - Selling, general and administrative expenses decreased by **$0.7 million**, mainly due to a **$3.4 million decrease in non-cash stock-based compensation**, partially offset by a **$1.9 million increase in salaries and benefits**[154](index=154&type=chunk) - Interest expense increased by **44.7%** due to a higher effective interest rate, despite a decrease in the outstanding term loan balance[158](index=158&type=chunk) [Segment Operating Results](index=36&type=section&id=Segment%20Operating%20Results) - Segment performance is measured by revenue, segment-specific Adjusted EBITDA, and unit placements, with Adjusted EBITDA excluding certain non-cash and non-operating items[163](index=163&type=chunk)[164](index=164&type=chunk)[166](index=166&type=chunk) [Electronic Gaming Machines (EGM)](index=37&type=section&id=Electronic%20Gaming%20Machines) EGM Segment Key Performance Indicators | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total EGM revenues (in thousands) | $76,558 | $66,906 | $9,652 | 14.4% | | EGM Adjusted EBITDA (in thousands) | $34,032 | $30,195 | $3,837 | 12.7% | | Total installed base, end of period | 22,608 | 23,112 | (504) | (2.2)% | | Total revenue per day (RPD) | $26.06 | $23.13 | $2.93 | 12.7% | | EGM units sold | 1,121 | 955 | 166 | 17.4% | | Average sales price (ASP) | $19,587 | $19,276 | $311 | 1.6% | - The increase in EGM gaming operations revenue was driven by a **12.7% increase in EGM RPD** and growth in the domestic installed base, despite a **13.2% decrease in the international installed base** due to inactive machines, casino closures, and new gaming taxes in Mexico[173](index=173&type=chunk)[171](index=171&type=chunk) - EGM Adjusted EBITDA margin decreased slightly to **44.5% in Q1 2023** from 45.1% in Q1 2022, due to increased cost of equipment sales and operating expenses[175](index=175&type=chunk) [Table Products](index=39&type=section&id=Table%20Products) Table Products Segment Key Performance Indicators | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Table Products revenues (in thousands) | $4,094 | $3,480 | $614 | 17.6% | | Table Products Adjusted EBITDA (in thousands) | $2,251 | $1,829 | $422 | 23.1% | | Table products installed base, end of period | 5,278 | 4,418 | 860 | 19.5% | | Average monthly lease price | $230 | $249 | $(19) | (7.6)% | - The increase in Table Products gaming operations revenue is attributed to a **19.5% increase in the installed base**, driven by the success of progressives like Bonus Spin Xtreme and the growing installed base of Pax S and Dex shufflers[180](index=180&type=chunk)[177](index=177&type=chunk) - Equipment sales saw a significant increase of **367.5%**, primarily due to higher sales of Pax S single-deck shufflers[181](index=181&type=chunk)[177](index=177&type=chunk) [Interactive](index=40&type=section&id=Interactive) Interactive Segment Key Performance Indicators | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Interactive revenue (in thousands) | $2,523 | $2,471 | $52 | 2.1% | | Interactive Adjusted EBITDA (in thousands) | $220 | $742 | $(522) | (70.4)% | - Gaming operations revenue increased by **2.1%**, primarily due to higher Real Money Gaming (RMG) revenues from Canadian and US-based operators, partially offset by decreased international and social casino revenues as resources were strategically refocused on the North American RMG market[185](index=185&type=chunk) - Interactive Adjusted EBITDA decreased by **70.4%**, mainly due to increased operating expenses[186](index=186&type=chunk) [Total Adjusted EBITDA Reconciliation to Net Loss](index=40&type=section&id=TOTAL%20ADJUSTED%20EBITDA%20RECONCILIATION%20TO%20NET%20LOSS) Total Adjusted EBITDA Reconciliation (in thousands) | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(334) | $(12,594) | $12,260 | (97.3)% | | Income tax (benefit) expense | $(1,189) | $467 | $(1,656) | (354.6)% | | Depreciation and amortization | $19,142 | $18,869 | $273 | 1.4% | | Interest expense, net of interest income and other | $13,269 | $9,256 | $4,013 | 43.4% | | Loss on extinguishment and modification of debt | $- | $8,549 | $(8,549) | (100.0)% | | Write-downs and other | $204 | $93 | $111 | 119.4% | | Other adjustments | $413 | $111 | $302 | 272.1% | | Other non-cash charges | $2,454 | $2,190 | $264 | 12.1% | | Non-cash stock-based compensation | $2,544 | $5,825 | $(3,281) | (56.3)% | | **Total Adjusted EBITDA** | **$36,503** | **$32,766** | **$3,737** | **11.4%** | [Liquidity and Capital Resources](index=43&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - The company expects to fund its liquidity requirements for the next twelve months through cash on hand, additional financing, and cash flows from operating activities[196](index=196&type=chunk) - As of March 31, 2023, the company had **$25.4 million in cash and cash equivalents** and **$40.0 million available** under its revolving credit facility, believing it has sufficient liquidity for the next twelve months[198](index=198&type=chunk) Historical Cash Flows (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | Change ($) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $4,167 | $7,070 | $(2,903) | | Net cash used in investing activities | $(13,103) | $(16,149) | $3,046 | | Net cash used in financing activities | $(3,380) | $(52,968) | $49,588 | | Net decrease in cash, cash equivalents and restricted cash | $(12,323) | $(62,045) | $49,722 | - The decrease in operating cash flow was due to a **$9.8 million increase in cash used for assets and liabilities**, partially offset by a **$6.8 million improvement in net loss** adjusted for non-cash expenses[202](index=202&type=chunk) - The decrease in cash used in investing activities was primarily due to a **$4.8 million decrease in business acquisitions**, partially offset by increased purchases of property and equipment and software development expenditures[203](index=203&type=chunk) - The significant decrease in cash used in financing activities (**$49.6 million**) was mainly attributable to the reduction of debt principal and related issuance costs in the prior period due to the Amended Credit Agreement[204](index=204&type=chunk) [Off-Balance Sheet Arrangements](index=45&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) - The company does not maintain any off-balance sheet transactions, arrangements, obligations, or relationships that are reasonably likely to have a material current or future effect on its financial condition[205](index=205&type=chunk) [Critical Accounting Policies](index=46&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) - There were no material changes to the company's critical accounting policies during the three months ended March 31, 2023, with a full description available in the Annual Report on Form 10-K for December 31, 2022[206](index=206&type=chunk) [Recently Issued Accounting Pronouncements](index=47&type=section&id=RECENTLY%20ISSUED%20ACCOUNTING%20PRONOUNCEMENTS) - The company adopted ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326), in the current quarter, which did not have a significant effect on its consolidated financial statements[61](index=61&type=chunk) - No other recently issued accounting guidance is expected to have a significant effect on the consolidated financial statements[62](index=62&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to market risks, primarily focusing on interest rate fluctuations affecting its variable-rate long-term debt and foreign currency exchange rate risks from international operations - The primary market risk exposure is interest rate risk associated with variable-rate long-term debt; a hypothetical **1% increase in interest rates** would increase interest expense by approximately **$5.7 million** over the next twelve months[208](index=208&type=chunk) - The company is exposed to foreign currency exchange rate risk from operations in Mexico and, to a lesser extent, the United Kingdom, which can affect cash flows and earnings[209](index=209&type=chunk) [ITEM 4. Controls and Procedures](index=49&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section details management's evaluation of the effectiveness of the company's disclosure controls and procedures, concluding their effectiveness as of March 31, 2023, and reporting no material changes to internal control over financial reporting [Disclosure Controls and Procedures](index=49&type=section&id=Disclosure%20Controls%20and%20Procedures) - Management, with the CEO and CFO, concluded that disclosure controls and procedures were **effective** as of March 31, 2023, ensuring timely and accurate information reporting[211](index=211&type=chunk) - The company acknowledges the inherent limitations of control systems, which can only provide reasonable assurance and may not prevent all errors or fraud[212](index=212&type=chunk)[213](index=213&type=chunk) [Changes in Internal Controls](index=49&type=section&id=Changes%20in%20Internal%20Controls) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended March 31, 2023[214](index=214&type=chunk) [PART II. OTHER INFORMATION](index=50&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and a list of exhibits [ITEM 1. Legal Proceedings](index=50&type=section&id=ITEM%201.%20Legal%20Proceedings) This section incorporates by reference the detailed information on legal proceedings from Note 12 of the condensed consolidated financial statements - Information regarding legal proceedings is incorporated by reference from Note 12, 'Commitments and Contingencies,' in the financial statements[216](index=216&type=chunk) [ITEM 1A. Risk Factors](index=50&type=section&id=ITEM%201A.%20Risk%20Factors) This section refers to the company's Annual Report on Form 10-K for a comprehensive discussion of risk factors, acknowledging that additional, currently unknown or immaterial risks may also exist - A discussion of the company's risk factors is provided in 'Item 1A. Risk Factors' of its Annual Report on Form 10-K for the year ended December 31, 2022[217](index=217&type=chunk) - The company acknowledges that additional risks and uncertainties not currently known or deemed immaterial could materially adversely affect its business, financial condition, or future results[217](index=217&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[218](index=218&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=50&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities to report[219](index=219&type=chunk) [ITEM 4. Mine Safety Disclosures](index=50&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section confirms that there are no mine safety disclosures required for the company - No mine safety disclosures to report[219](index=219&type=chunk) [ITEM 5. Other Information](index=50&type=section&id=ITEM%205.%20Other%20Information) This section indicates that there is no other information to report for the period - No other information to report[220](index=220&type=chunk) [ITEM 6. Exhibits](index=51&type=section&id=ITEM%206.%20Exhibits) This section lists all documents filed as exhibits to the Form 10-Q, including corporate governance documents, employment agreements, and certifications - Exhibits include corporate documents (Articles of Incorporation, Bylaws), amendments to the Omnibus Incentive Plan, employment agreements for key executives, and certifications required by the Sarbanes-Oxley Act[221](index=221&type=chunk) [Signatures](index=52&type=section&id=SIGNATURES) This section contains the official signatures for the Form 10-Q, confirming its submission by authorized personnel - The report was signed on May 9, 2023, by Kimo Akiona, Chief Financial Officer, Chief Accounting Officer, and Treasurer of PlayAGS, Inc[226](index=226&type=chunk)

confidential Investor Presentation March 2023 Cautionary Note Regarding Forward-Looking Statements This presentation contains statements that constitute forward-looking statements which involve risks and uncertainties, including such risks and uncertainties related to the effects of COVID-19 on the business and results of operations of PlayAGS, Inc. ("AGS" or the "Company") and other factors set forth in the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the "SE ...

Q4 2022 Investor Update March 9, 2023 Cautionary Note Regarding Forward-Looking Statements This presentation contains statements that constitute forward-looking statements which involve risks and uncertainties, including such risks and uncertainties related to the effects of COVID-19 on the Company's business and results of operations and other factors set forth in the Annual Report on Form 10-K of PlayAGS, Inc. ("AGS" or the "Company") filed with the U.S. Securities and Exchange Commission (the "SEC") by t ...

Financial Data and Key Metrics Changes - Total company revenue increased 16% year-over-year to a record $82 million [7] - Net income and adjusted EBITDA grew to quarterly records of $2.5 million and $37.3 million respectively [8] - Adjusted EBITDA margin for Q4 was approximately 46%, ahead of expectations [27] - Full year adjusted EBITDA margin was approximately 45% [27] Business Line Data and Key Metrics Changes - Domestic EGM recurring revenue grew by 8% year-over-year to over $47 million [8] - Global EGM unit sales increased by more than 35% year-over-year to over 1,100 units [8] - Table Products revenue was up more than 20% year-over-year to approximately $4 million [8] - International EGM recurring revenue increased 12% year-over-year to $4.4 million [24] Market Data and Key Metrics Changes - Domestic EGM installed base increased sequentially for three consecutive quarters [17] - Domestic EGM RPD held above the $30 level for the past seven quarters [9] - The company estimates it has only penetrated 65% of the addressable casino market for its products [12] Company Strategy and Development Direction - The company plans to nearly double its core game content releases compared to 2019 [11] - Recent investments in R&D, product management, and sales are expected to enhance market penetration [11] - The company received regulatory approval to sell products in Colorado, Minnesota, and Missouri, representing an addressable market of over 40,000 units [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth prospects for 2023, citing strong performance in all three product lines [15] - The company aims to challenge its record full year adjusted EBITDA performance in 2023 [15] - Management noted that 2023 is off to a strong start with record domestic EGM recurring revenue in January [13] Other Important Information - The company achieved a year-end net leverage target of less than four times [16] - Total liquidity at year-end was just under $80 million, including $40 million available under an undrawn revolving credit facility [29] - The company generated approximately $6 million of free cash flow in Q4, pushing full year free cash flow to $8.5 million [31] Q&A Session Summary Question: Differences in product and positioning today versus 2019 - Management highlighted significant changes in product offerings, including the introduction of premium games and the PAX shuffler, which were not present in 2019 [37][38] Question: Support for the Spectra cabinet and content comparison - Management confirmed that the Spectra cabinet was launched with over 30 titles, a level of support not previously achieved [43][46] Question: International sales and operator budget comfort - Management indicated that Latin American sales are still small but have potential for growth, and operators have not indicated any budget trimming [51][52] Question: New market opportunities and licensing timelines - Management confirmed that they are ready to roll in new markets and expect to see sales lift in the back half of the year [58] Question: Capital allocation priorities - Management emphasized a focus on deleveraging and generating incremental free cash flow as the top priority [70] Question: Interactive segment growth drivers - Management noted that recent customer wins and new hires are expected to accelerate growth in the interactive segment [81]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to . Commission file number 001-38357 PLAYAGS, INC. (Exact name of registrant as specified in its charter) Nevada 46-3698600 (State or other jurisdiction of incorp ...

PlayAGS, Inc. (NYSE:AGS) Q3 2022 Earnings Conference Call November 8, 2022 5:00 PM ET Company Participants Brad Boyer - Senior Vice President, Corporate Operations and IR David Lopez - President and Chief Executive Officer Kimo Akiona - Chief Financial Officer Conference Call Participants Jeff Stantial - Stifel Carlo Santarelli - Deutsche Bank Barry Jonas - Truist Securities David Katz - Jefferies Chad Beynon - Macquarie Edward Engel - ROTH Capital Operator Hello, and welcome to today's AGS Q3 2022 Earnings ...