LAS VEGAS, Jan. 29, 2024 (GLOBE NEWSWIRE) -- PlayAGS, Inc. (NYSE:AGS) ("AGS" or the "Company") today announced plans to explore a refinancing of its term loan credit facility, which may include decreasing the interest rate required to be paid under such facility. Additionally, the Company could look to voluntarily repay up to $15 million of its total debt outstanding in conjunction with the refinancing transaction. On January 29, 2024, the Company made available a presentation to potential lenders, which in ...

PlayAGS, Inc. (NYSE:AGS) Q3 2023 Earnings Conference Call November 7, 2023 5:00 PM ET Company Participants Brad Boyer - Senior Vice President, Investor Relations David Lopez - President and Chief Executive Officer Kimo Akiona - Chief Financial Officer Conference Call Participants Jordan Bender - Citizens JMP Securities David Katz - Jefferies Jeff Stantial - Stifel Chad Beynon - Macquarie Operator Hello, everyone. And welcome today call tilted PlayAGS Third Quarter 2023 Earnings Conference Call. My name is A ...

Q3 2023 Investor Update November 7, 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") b ...

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, and specific financial line items [CONDENSED CONSOLIDATED BALANCE SHEETS](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The balance sheets show the company's financial position at September 30, 2023, compared to December 31, 2022, indicating a slight decrease in total assets and liabilities, while stockholders' equity increased | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Total Assets | $683,748 | $684,751 | | Total Liabilities | $621,004 | $635,390 | | Total Stockholders' Equity | $62,744 | $49,361 | | Cash and Cash Equivalents | $43,662 | $37,891 | [CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20%28LOSS%29%20INCOME) The statements of operations highlight the company's performance for the three and nine months ended September 30, 2023 and 2022, showing strong revenue growth and a significant improvement from a net loss to net income for the nine-month period Three Months Ended September 30 | Metric | 2023 (in thousands) | 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total Revenues | $89,378 | $78,259 | $11,119 | 14.2% | | Income from Operations | $14,523 | $9,031 | $5,492 | 60.8% | | Net (Loss) Income | $(156) | $476 | $(632) | (132.8)% | | Basic EPS | $(0.00) | $0.01 | | | Nine Months Ended September 30 | Metric | 2023 (in thousands) | 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total Revenues | $262,385 | $227,700 | $34,685 | 15.2% | | Income from Operations | $41,345 | $24,522 | $16,823 | 68.6% | | Net Income (Loss) | $361 | $(10,576) | $10,937 | (103.4)% | | Basic EPS | $0.01 | $(0.28) | | | [CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS%27%20EQUITY) This statement details the changes in stockholders' equity for the three and nine months ended September 30, 2023 and 2022, primarily reflecting increases in additional paid-in capital and a positive shift in accumulated deficit | Metric | September 30, 2023 (in thousands) | September 30, 2022 (in thousands) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Total Stockholders' Equity | $62,744 | $44,223 | | Additional Paid-in Capital (9M End) | $415,014 | $405,116 | | Accumulated Deficit (9M End) | $(353,111) | $(355,666) | [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The cash flow statement for the nine months ended September 30, 2023, shows increased cash generated from operating activities and significantly reduced cash used in financing activities compared to the prior year | Metric | Nine Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2022 (in thousands) | Change ($) | | :-------------------------------------- | :-------------------------------------------------- | :-------------------------------------------------- | :--------- | | Net cash provided by operating activities | $59,755 | $52,574 | $7,181 | | Net cash used in investing activities | $(43,404) | $(54,521) | $11,117 | | Net cash used in financing activities | $(10,418) | $(59,585) | $49,167 | | Cash, cash equivalents and restricted cash, end of period | $43,892 | $33,467 | | [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 segments, significant accounting policies, and specific financial statement line items, offering context for the reported financial performance and position [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) This note describes PlayAGS, Inc.'s core business as a gaming product and service supplier across three segments: Electronic Gaming Machines (EGM), Table Products, and Interactive Games. It also details the company's revenue recognition policies for gaming operations and equipment sales, and provides a disaggregation of revenues by segment - PlayAGS, Inc. operates in three distinct segments: Electronic Gaming Machines (EGM), Table Products, and Interactive Games, offering a range of gaming products and services globally[18](index=18&type=chunk) - The EGM segment offers proprietary video slot titles and various cabinet types, including premium lease-only and core cabinets available for sale or lease, along with conversion kits[19](index=19&type=chunk) - The Interactive segment provides a Business-to-Business (B2B) game aggregation platform for online real-money gaming (RMG) and Business-to-Consumer (B2C) free-to-play social casino apps like Lucky Play Casino[21](index=21&type=chunk)[22](index=22&type=chunk) Revenue Disaggregation by Segment (Three Months Ended September 30) | Segment | 2023 (in thousands) | 2022 (in thousands) | | :-------------- | :------------------ | :------------------ | | EGM Gaming Ops | $54,026 | $50,233 | | EGM Equip Sales | $27,836 | $21,387 | | Table Gaming Ops| $3,871 | $3,756 | | Table Equip Sales| $516 | $280 | | Interactive Ops | $3,129 | $2,603 | | **Total Revenue** | **$89,378** | **$78,259** | Revenue Disaggregation by Segment (Nine Months Ended September 30) | Segment | 2023 (in thousands) | 2022 (in thousands) | | :-------------- | :------------------ | :------------------ | | EGM Gaming Ops | $160,789 | $148,067 | | EGM Equip Sales | $80,312 | $60,926 | | Table Gaming Ops| $11,445 | $10,652 | | Table Equip Sales| $1,432 | $378 | | Interactive Ops | $8,407 | $7,677 | | **Total Revenue** | **$262,385** | **$227,700** | - Gaming operations revenue is primarily derived from operating leases for gaming equipment and content licenses, with B2C social casino revenue from virtual coin sales and B2B/RMG revenue based on a percentage of monthly revenue or platform fees[28](index=28&type=chunk)[32](index=32&type=chunk) - Equipment sales revenue is recognized when customers obtain control of gaming machines, table products, and integral game content software[33](index=33&type=chunk) - The company adopted ASU No. 2022-02, Financial Instruments - Credit Losses, in the first quarter of 2023, which did not have a significant effect on its condensed consolidated financial statements[62](index=62&type=chunk) [NOTE 2. PROPERTY AND EQUIPMENT](index=15&type=section&id=NOTE%202.%20PROPERTY%20AND%20EQUIPMENT) This note details the net carrying value of property and equipment, primarily gaming equipment, and reports the associated depreciation expenses for the current and prior periods | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Property and equipment, net | $80,377 | $82,361 | Depreciation Expense | Period | 2023 (in millions) | 2022 (in millions) | | :-------------------- | :----------------- | :----------------- | | Three Months Ended Sep 30 | $10.0 | $10.2 | | Nine Months Ended Sep 30 | $30.5 | $29.5 | [NOTE 3. GOODWILL AND INTANGIBLES](index=16&type=section&id=NOTE%203.%20GOODWILL%20AND%20INTANGIBLES) This note provides a breakdown of goodwill by segment and details the composition and net carrying value of intangible assets, along with their amortization expenses and the impact of contract rights and placement fees on gaming operations revenue Goodwill Carrying Amount | Segment | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------- | :-------------------------------- | :------------------------------- | | EGM | $280,828 | $278,629 | | Table Products | $9,051 | $9,051 | | Interactive | $0 | $0 | | **Total** | **$289,879** | **$287,680** | Intangible Assets, Net | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Total intangible assets, net| $129,236 | $142,109 | Amortization Expense Related to Intangible Assets | Period | 2023 (in millions) | 2022 (in millions) | | :-------------------- | :----------------- | :----------------- | | Three Months Ended Sep 30 | $8.9 | $8.8 | | Nine Months Ended Sep 30 | $26.2 | $27.5 | Reduction of Gaming Operations Revenue from Accretion of Contract Rights | Period | 2023 (in millions) | 2022 (in millions) | | :-------------------- | :----------------- | :----------------- | | Three Months Ended Sep 30 | $1.6 | $1.6 | | Nine Months Ended Sep 30 | $4.7 | $4.8 | [NOTE 4. ACCRUED LIABILITIES](index=17&type=section&id=NOTE%204.%20ACCRUED%20LIABILITIES) This note outlines the components of accrued liabilities, showing a slight decrease in total accrued liabilities from December 31, 2022, to September 30, 2023 | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------- | :-------------------------------- | :------------------------------- | | Total accrued liabilities | $36,700 | $37,262 | [NOTE 5. LONG-TERM DEBT](index=18&type=section&id=NOTE%205.%20LONG-TERM%20DEBT) This note details the company's long-term debt, primarily consisting of First Lien Credit Facilities (term loans and a revolving facility), and finance leases, along with their terms and interest rates | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------- | :-------------------------------- | :------------------------------- | | Total debt | $554,746 | $556,141 | | Long-term debt | $548,479 | $550,081 | - The company's 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[77](index=77&type=chunk)[79](index=79&type=chunk) - Borrowings under the Amended Credit Agreement bear interest at an adjusted term SOFR (subject to a **0.75%** floor for term loans and **0.00%** for revolver) plus an applicable margin of **4.00%**, or a base rate plus **3.00%**[78](index=78&type=chunk) - As of September 30, 2023, there were no required financial covenants for the company's debt instruments[83](index=83&type=chunk) [NOTE 6. STOCKHOLDERS' EQUITY](index=20&type=section&id=NOTE%206.%20STOCKHOLDERS%27%20EQUITY) This note provides information on the company's authorized and outstanding common and preferred stock, as well as details of its share repurchase program - As of September 30, 2023, the company had **38,702,415 shares** of common stock outstanding[85](index=85&type=chunk) - The board of directors approved a share repurchase program for up to **$50.0 million**, with **$46.7 million** still available as of September 30, 2023, and extended to August 11, 2025[88](index=88&type=chunk) [NOTE 7. WRITE-DOWNS AND OTHER CHARGES](index=20&type=section&id=NOTE%207.%20WRITE-DOWNS%20AND%20OTHER%20CHARGES) This note summarizes write-downs and other charges recognized by the company, primarily related to asset impairment, disposal of long-lived assets, and fair value adjustments to contingent consideration - For the three months ended September 30, 2023, the company did not recognize any significant write-downs and other charges, compared to **$1.4 million** in the prior year, primarily from a fair value adjustment to contingent consideration[90](index=90&type=chunk) - For the nine months ended September 30, 2023, the company recognized **$0.6 million** in write-downs and other charges, mainly related to intangible asset impairment and long-lived asset disposal, down from **$1.8 million** in the prior year[91](index=91&type=chunk) [NOTE 8. BASIC AND DILUTED (LOSS) INCOME](index=21&type=section&id=NOTE%208.%20BASIC%20AND%20DILUTED%20%28LOSS%29%20INCOME) This note details the calculation of basic and diluted earnings per share (EPS) for the nine months ended September 30, 2023 | Metric | Nine Months Ended September 30, 2023 | | :-------------------------------------- | :----------------------------------- | | Net income attributable to common stock | $330 (in thousands) | | Weighted average common shares outstanding, basic | 37,965 (in thousands) | | Basic EPS | $0.01 | [NOTE 9. BENEFIT PLANS](index=21&type=section&id=NOTE%209.%20BENEFIT%20PLANS) This note describes the company's 401(k) plan and its equity incentive plans, including the Long-Term Incentive Plan (LTIP) and the Omnibus Incentive Plan, highlighting the shares available for future issuance 401(k) Plan Expense | Period | 2023 (in millions) | 2022 (in millions) | | :-------------------- | :----------------- | :----------------- | | Three Months Ended Sep 30 | $0.5 | $0.4 | | Nine Months Ended Sep 30 | $1.7 | $1.5 | - As of September 30, 2023, the company had **4,423,884 shares** available for issuance under the Omnibus Incentive Plan[100](index=100&type=chunk) [NOTE 10. STOCK-BASED COMPENSATION](index=23&type=section&id=NOTE%2010.%20STOCK-BASED%20COMPENSATION) This note details the company's stock-based compensation, including stock options, restricted stock, and phantom stock units, outlining their vesting conditions, fair value, and unrecognized compensation expense - As of September 30, 2023, unrecognized compensation expense was **$3.2 million** for restricted stock and restricted stock units (**2.3-year** weighted average period) and **$12.1 million** for phantom stock units (**2.2-year** weighted average period)[102](index=102&type=chunk) - An amendment to performance-based restricted stock units for the CEO and CFO in Q1 2023 resulted in an incremental fair value of **$3.9 million**, recognized over service and performance vesting periods[103](index=103&type=chunk) Stock Options Outstanding (September 30, 2023) | Metric | Value | | :-------------------------------- | :------ | | Number of Options Outstanding | 1,158,202 | | Weighted Average Exercise Price | $9.04 | Restricted Stock and Restricted Stock Units Outstanding (September 30, 2023) | Metric | Value | | :-------------------------------- | :-------- | | Shares Outstanding | 1,420,041 | | Weighted Average Grant Date Fair Value (per share) | $10.07 | Phantom Stock Units Outstanding (September 30, 2023) | Metric | Value | | :-------------------------------- | :-------- | | Shares Outstanding | 3,588,299 | | Weighted Average Grant Date Fair Value (per share) | $6.44 | [NOTE 11. INCOME TAXES](index=26&type=section&id=NOTE%2011.%20INCOME%20TAXES) This note explains the company's effective income tax rates for the three and nine months ended September 30, 2023 and 2022, highlighting the primary factors causing differences from the federal statutory rate, such as valuation allowances and US tax on foreign income - The effective income tax rate for Q3 2023 was an expense of **119.9%**, primarily due to changes in valuation allowance on deferred tax assets and US tax on foreign income[117](index=117&type=chunk) - The effective income tax rate for 9M 2023 was an expense of **39.5%**, primarily due to changes in valuation allowance on deferred tax assets, expiration of statute of limitations for uncertain tax positions, and US tax on foreign income[118](index=118&type=chunk) [NOTE 12. COMMITMENTS AND CONTINGENCIES](index=26&type=section&id=NOTE%2012.%20COMMITMENTS%20AND%20CONTINGENCIES) This note details various legal and tax-related contingencies, including ongoing securities class action and shareholder derivative lawsuits, an Alabama rental tax assessment, and a preliminary Mexican import tax audit, for which the company is unable to estimate the probability or amount of liability - The company is involved in a consolidated securities class action lawsuit alleging false and misleading statements, with a remaining 'scheme liability' claim against the company, CEO, and CFO[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - A shareholder derivative lawsuit, piggy-backing on the securities class action, remains stayed pending resolution of the motion for judgment on the pleadings in the securities class action[126](index=126&type=chunk) - The Alabama Department of Revenue assessed **$3.3 million** in unpaid state and local rental taxes on EGM participation revenues from a Native American tribe (May 2016-August 2019), which the company disputes based on federal preemption; a trial is scheduled for December 2023[128](index=128&type=chunk)[129](index=129&type=chunk) - The Mexican tax authority (SAT) has communicated preliminary assessment scenarios of up to approximately **$9.4 million** for alleged non-compliance with NAFTA requirements for imported EGMs, which the company plans to dispute[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) [NOTE 13. OPERATING SEGMENTS](index=29&type=section&id=NOTE%2013.%20OPERATING%20SEGMENTS) This note provides financial information for the company's three reportable segments (EGM, Table Products, Interactive), detailing their revenues and Adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022 Revenues by Segment (Three Months Ended September 30) | Segment | 2023 (in thousands) | 2022 (in thousands) | | :-------------- | :------------------ | :------------------ | | EGM | $81,862 | $71,620 | | Table Products | $4,387 | $4,036 | | Interactive | $3,129 | $2,603 | | **Total Revenues** | **$89,378** | **$78,259** | Adjusted EBITDA by Segment (Three Months Ended September 30) | Segment | 2023 (in thousands) | 2022 (in thousands) | | :-------------- | :------------------ | :------------------ | | EGM | $36,772 | $31,331 | | Table Products | $2,436 | $2,561 | | Interactive | $903 | $575 | | **Subtotal** | **$40,111** | **$34,467** | Revenues by Segment (Nine Months Ended September 30) | Segment | 2023 (in thousands) | 2022 (in thousands) | | :-------------- | :------------------ | :------------------ | | EGM | $241,101 | $208,993 | | Table Products | $12,877 | $11,030 | | Interactive | $8,407 | $7,677 | | **Total Revenues** | **$262,385** | **$227,700** | Adjusted EBITDA by Segment (Nine Months Ended September 30) | Segment | 2023 (in thousands) | 2022 (in thousands) | | :-------------- | :------------------ | :------------------ | | EGM | $107,661 | $93,090 | | Table Products | $6,950 | $6,411 | | Interactive | $1,596 | $1,862 | | **Subtotal** | **$116,207** | **$101,363** | [NOTE 14. ACQUISITIONS](index=31&type=section&id=NOTE%2014.%20ACQUISITIONS) This note details the acquisition of table game-related intellectual property and an installed base of table games under the Lucky Lucky trade name from Aces Up Gaming in January 2022 - On January 3, 2022, the company acquired intangible assets related to table game intellectual property and an installed base of table games under the Lucky Lucky trade name from Aces Up Gaming[143](index=143&type=chunk) - The acquisition consideration of **$4.8 million** was allocated primarily to **$1.2 million** in tax-deductible goodwill and **$3.5 million** in intangible assets, amortized over approximately **9.1 years**[143](index=143&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=32&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 and condition, discussing key business drivers, detailed results of operations for the quarter and nine-month period, segment-specific performance, liquidity, and capital resources [Overview](index=32&type=section&id=Overview) The overview describes PlayAGS, Inc. as a leading designer and supplier of gaming products across its EGM, Table Products, and Interactive segments, highlighting its expansion into various gaming markets and the significant portion of revenue derived from recurring lease agreements - PlayAGS operates in three segments: Electronic Gaming Machines (EGMs), Table Products, and Interactive, with EGMs representing **92%** of total revenue for the nine months ended September 30, 2023[146](index=146&type=chunk)[147](index=147&type=chunk) - Approximately **69%** of total revenue for the nine months ended September 30, 2023, was generated through recurring contracted lease agreements (revenue sharing or fee-per-day) or Interactive gaming operations[146](index=146&type=chunk) - The company has expanded its product line since 2014 to include Class III EGMs, Historical Horse Racing (HHR) EGMs, table game products, and interactive products, aiming for growth in new and existing markets[146](index=146&type=chunk) [Key Drivers of Our Business](index=34&type=section&id=Key%20Drivers%20of%20Our%20Business) This section identifies the critical factors influencing the company's revenues and expenses, including consumer spending, product pricing, market expansion, competitive landscape, and macroeconomic conditions - Revenue drivers include consumer spending on revenue share installed base, daily fees and selling prices of EGMs, revenue share percentages, customer capital budgets, EGM replacement levels, casino expansion, new gaming jurisdictions, product competitiveness, and general macroeconomic factors[154](index=154&type=chunk) - Expense drivers include fluctuations in labor costs (productivity, overtime, training), component prices for gaming equipment, energy prices, gaming license costs, maintenance expenses, and tariff increases[154](index=154&type=chunk) [Results of Operations - Three Months Ended September 30, 2023 compared to the Three Months Ended September 30, 2022](index=35&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20September%2030%2C%202023%20compared%20to%20the%20Three%20Months%20Ended%20September%2030%2C%202022) For the third quarter of 2023, the company reported a 14.2% increase in total revenues, driven by growth in both gaming operations and equipment sales. However, increased operating expenses and interest expense led to a net loss compared to net income in the prior year period Consolidated Statements of Operations (Three Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total Revenues | $89,378 | $78,259 | $11,119 | 14.2% | | Gaming operations | $61,026 | $56,592 | $4,434 | 7.8% | | Equipment sales | $28,352 | $21,667 | $6,685 | 30.9% | | Total operating expenses | $74,855 | $69,228 | $5,627 | 8.1% | | Interest expense | $14,588 | $10,291 | $4,297 | 41.8% | | Net (Loss) Income | $(156) | $476 | $(632) | (132.8)% | - Gaming operations revenue increased due to an **8.1%** rise in EGM Revenue Per Day (RPD) to **$26.28** and growth in the domestic EGM installed base[156](index=156&type=chunk) - Equipment sales increased significantly due to the sale of **331 more EGM units** year-over-year, totaling **1,345 units** in Q3 2023[157](index=157&type=chunk) - Selling, general and administrative expenses increased primarily due to a **$2.5 million** rise in salaries and benefits and a **$1.1 million** increase in non-cash stock-based compensation expense[160](index=160&type=chunk) [Results of Operations - Nine Months Ended September 30, 2023 compared to the Nine Months Ended September 30, 2022](index=37&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended%20September%2030%2C%202023%20compared%20to%20the%20Nine%20Months%20Ended%20September%2030%2C%202022) For the first nine months of 2023, the company achieved a 15.2% increase in total revenues and a substantial improvement in net income, turning around from a net loss in the prior year. This was driven by strong growth in gaming operations and equipment sales, despite higher interest expenses Consolidated Statements of Operations (Nine Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total Revenues | $262,385 | $227,700 | $34,685 | 15.2% | | Gaming operations | $180,641 | $166,396 | $14,245 | 8.6% | | Equipment sales | $81,744 | $61,304 | $20,440 | 33.3% | | Total operating expenses | $221,040 | $203,178 | $17,862 | 8.8% | | Interest expense | $42,362 | $27,851 | $14,511 | 52.1% | | Loss on extinguishment and modification of debt | $0 | $8,549 | $(8,549) | (100.0)% | | Net income (loss) | $361 | $(10,576) | $10,937 | (103.4)% | - Gaming operations revenue increased due to a **9.5%** rise in EGM Revenue Per Day (RPD) to **$26.36** and growth in the domestic EGM installed base, partially offset by a decrease in the international EGM installed base[166](index=166&type=chunk) - Equipment sales increased significantly due to the sale of **822 more EGM units** year-over-year, totaling **3,725 units** in 9M 2023[167](index=167&type=chunk) - Selling, general and administrative expenses increased primarily due to a **$6.2 million** rise in salaries and benefits, partially offset by a **$1.0 million** decrease in non-cash stock-based compensation[170](index=170&type=chunk) [Segment Operating Results](index=39&type=section&id=Segment%20Operating%20Results) This section provides a detailed analysis of the financial performance and key performance indicators for each of the company's three operating segments: Electronic Gaming Machines (EGM), Table Products, and Interactive, highlighting segment-specific revenue and Adjusted EBITDA trends [Electronic Gaming Machines (EGM)](index=40&type=section&id=Electronic%20Gaming%20Machines%20%28EGM%29) The EGM segment demonstrated strong revenue growth in both gaming operations and equipment sales for the three and nine months ended September 30, 2023, driven by increased Revenue Per Day (RPD) and higher unit sales, resulting in a significant increase in Adjusted EBITDA EGM Segment Revenues and Adjusted EBITDA (Three Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :-------------------- | :------------------ | :------------------ | :--------- | | Total EGM revenues | $81,862 | $71,620 | 14.3% | | EGM Adjusted EBITDA | $36,772 | $31,331 | 17.4% | EGM Key Performance Indicators (Three Months Ended September 30) | Metric | 2023 | 2022 | Change (%) | | :-------------------- | :--- | :--- | :--------- | | Total revenue per day | $26.28 | $24.31 | 8.1% | | EGM units sold | 1,345 | 1,014 | 32.6% | EGM Segment Revenues and Adjusted EBITDA (Nine Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :-------------------- | :------------------ | :------------------ | :--------- | | Total EGM revenues | $241,101 | $208,993 | 15.4% | | EGM Adjusted EBITDA | $107,661 | $93,090 | 15.7% | EGM Key Performance Indicators (Nine Months Ended September 30) | Metric | 2023 | 2022 | Change (%) | | :-------------------- | :--- | :--- | :--------- | | Total revenue per day | $26.36 | $24.07 | 9.5% | | EGM units sold | 3,725 | 2,903 | 28.3% | | Domestic installed base | 16,424 | 16,258 | 1.0% | | International installed base | 6,083 | 6,274 | (3.0)% | [Table Products](index=44&type=section&id=Table%20Products) The Table Products segment experienced revenue growth in both gaming operations and equipment sales for the three and nine months ended September 30, 2023, driven by an increased installed base and strong sales of Pax S shufflers. Adjusted EBITDA saw a slight decrease in Q3 but an overall increase for the nine-month period Table Products Segment Revenues and Adjusted EBITDA (Three Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | | Total Table Products revenues | $4,387 | $4,036 | 8.7% | | Gaming operations | $3,871 | $3,756 | 3.1% | | Equipment sales | $516 | $280 | 84.3% | | Table Products Adjusted EBITDA | $2,436 | $2,561 | (4.9)% | - The increase in gaming operations revenue is attributable to a **6.8%** increase in the Table Products installed base to **5,309 units**, driven by the success of progressives like Bonus Spin Xtreme and shufflers (Pax S and Dex)[198](index=198&type=chunk)[200](index=200&type=chunk) - Equipment sales growth was primarily due to increased sales of Pax S single-deck shufflers[201](index=201&type=chunk) Table Products Segment Revenues and Adjusted EBITDA (Nine Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | | Total Table Products revenues | $12,877 | $11,030 | 16.7% | | Gaming operations | $11,445 | $10,652 | 7.4% | | Equipment sales | $1,432 | $378 | 278.8% | | Table Products Adjusted EBITDA | $6,950 | $6,411 | 8.4% | [Interactive](index=46&type=section&id=Interactive) The Interactive segment saw gaming operations revenue growth for both the three and nine months ended September 30, 2023, primarily from North American real-money gaming (RMG) operators, despite a strategic refocus away from international and social casino revenues. Adjusted EBITDA increased in Q3 but decreased for the nine-month period due to increased operating expenses Interactive Segment Revenues and Adjusted EBITDA (Three Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :-------------------- | :------------------ | :------------------ | :--------- | | Total Interactive revenue | $3,129 | $2,603 | 20.2% | | Interactive Adjusted EBITDA | $903 | $575 | 57.0% | - Gaming operations revenue increased due to higher RMG revenues from Canadian and US-based operators, partially offset by a strategic refocus of resources away from international customers and social casino revenues[210](index=210&type=chunk)[214](index=214&type=chunk) Interactive Segment Revenues and Adjusted EBITDA (Nine Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :-------------------- | :------------------ | :------------------ | :--------- | | Total Interactive revenue | $8,407 | $7,677 | 9.5% | | Interactive Adjusted EBITDA | $1,596 | $1,862 | (14.3)% | [TOTAL ADJUSTED EBITDA RECONCILIATION TO NET (LOSS) INCOME](index=47&type=section&id=TOTAL%20ADJUSTED%20EBITDA%20RECONCILIATION%20TO%20NET%20%28LOSS%29%20INCOME) This section provides a reconciliation of the company's net (loss) income to Total Adjusted EBITDA, a non-GAAP measure used by management to assess business performance by excluding certain non-cash and non-operating items Total Adjusted EBITDA (Three Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :-------------------- | :------------------ | :------------------ | :--------- | | Total Adjusted EBITDA | $40,111 | $34,467 | 16.4% | Total Adjusted EBITDA (Nine Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :-------------------- | :------------------ | :------------------ | :--------- | | Total Adjusted EBITDA | $116,207 | $101,363 | 14.6% | [LIQUIDITY AND CAPITAL RESOURCES](index=51&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's liquidity position, expected funding sources for its operations and growth initiatives, and summarizes the historical cash flows from operating, investing, and financing activities - As of September 30, 2023, the company had **$43.7 million** in cash and cash equivalents and **$40.0 million** available under its revolving credit facility, which management believes provides sufficient liquidity for the next twelve months[228](index=228&type=chunk) Cash Flow Information (Nine Months Ended September 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change ($) | | :-------------------------------------- | :------------------ | :------------------ | :--------- | | Net cash provided by operating activities | $59,755 | $52,574 | $7,181 | | Net cash used in investing activities | $(43,404) | $(54,521) | $11,117 | | Net cash used in financing activities | $(10,418) | $(59,585) | $49,167 | | Net decrease in cash, cash equivalents and restricted cash | $5,981 | $(61,530) | $67,511 | - The decrease in cash used in financing activities was primarily due to the reduction of debt principal and payment of related debt issuance costs in conjunction with the Amended Credit Agreement in the prior period[234](index=234&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=53&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) The company states that it does not maintain any off-balance sheet transactions, arrangements, obligations, or other relationships that are reasonably likely to have a material current or future effect on its financial condition or results of operations - The company does not maintain any material off-balance sheet arrangements[235](index=235&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=54&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) This section refers to the company's Annual Report on Form 10-K for a description of its critical accounting policies and confirms that there were no material changes during the nine months ended September 30, 2023 - There were no material changes to the company's critical accounting policies during the nine months ended September 30, 2023[236](index=236&type=chunk) [RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS](index=55&type=section&id=RECENTLY%20ISSUED%20ACCOUNTING%20PRONOUNCEMENTS) This section directs readers to Note 1 of the financial statements for disclosures regarding recently issued accounting pronouncements - Refer to Note 1, 'Description of the Business and Summary of Significant Accounting Policies,' for details on recently issued accounting pronouncements[237](index=237&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=56&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, primarily interest rate risk associated with its variable-rate long-term debt and foreign currency exchange rate risk from its international operations - The company's primary market risk exposure is interest rate risk from 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[238](index=238&type=chunk) - The company is exposed to foreign currency exchange rate risk due to operations in Mexico and, to a lesser extent, the United Kingdom, which transact business in local currencies[239](index=239&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=57&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, and reported no material changes in internal control over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2023[241](index=241&type=chunk) - There were no material changes in the company's internal control over financial reporting during the fiscal quarter covered by the report[242](index=242&type=chunk) [PART II. OTHER INFORMATION](index=58&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and a comprehensive list of exhibits and signatures [ITEM 1. LEGAL PROCEEDINGS](index=58&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section incorporates by reference the detailed information on legal proceedings from Note 12, 'Commitments and Contingencies,' of the condensed consolidated financial statements - Information regarding legal proceedings is incorporated by reference from Note 12, 'Commitments and Contingencies,' in the notes to the condensed consolidated financial statements[244](index=244&type=chunk) [ITEM 1A. RISK FACTORS](index=58&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers to the comprehensive discussion of risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2022, and notes that additional, currently unknown or immaterial risks could also adversely affect the business - A discussion of the company's risk factors is included in 'Item 1A. Risk Factors' of its Annual Report on Form 10-K for the year ended December 31, 2022[245](index=245&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=58&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[246](index=246&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=58&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon senior securities during the period - None[247](index=247&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=58&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) The company reported no mine safety disclosures during the period - None[247](index=247&type=chunk) [ITEM 5. OTHER INFORMATION](index=58&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The company reported no other information to disclose under this item - None[248](index=248&type=chunk) [ITEM 6. EXHIBITS](index=59&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including corporate organizational documents, amendments to incentive plans, and various certifications required by the Sarbanes-Oxley Act, along with XBRL data files - Exhibits include the Certificate of Amended and Restated Articles of Incorporation, Amended and Restated Bylaws, Second Amendment to PlayAGS, Inc. Omnibus Incentive Plan, and certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[249](index=249&type=chunk)[251](index=251&type=chunk) [SIGNATURES](index=60&type=section&id=SIGNATURES) This section contains the formal signatures, certifying that the report has been duly caused to be signed on behalf of PlayAGS, Inc. by its authorized officer - The report was signed on November 7, 2023, by Kimo Akiona, Chief Financial Officer, Chief Accounting Officer, and Treasurer[255](index=255&type=chunk)

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 ...