PlayAGS(US:AGS)2023-05-13 16:26Financial 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]