PlayAGS, Inc. (NYSE:AGS) is a leading designer and supplier of gaming products and services for the global gaming industry. The company operates in three distinct segments: Electronic Gaming Machines (EGM), Table Products, and Interactive. Each segment contributes to the company's diverse revenue streams and growth prospects.
Financials
In the fiscal year 2023, PlayAGS reported annual revenue of $356,536,000 and net income of $4,345,000. The company's annual operating cash flow was $86,199,000, and its annual free cash flow was $24,278,000. These financial metrics demonstrate the company's ability to generate consistent cash flows and profitability, even in a challenging macroeconomic environment.
Business Overview
Electronic Gaming Machines (EGM)
The EGM segment, which accounted for 91% of the company's revenue in the first quarter of 2024, has been a key driver of PlayAGS's success. The segment offers a diverse portfolio of proprietary video slot titles, as well as a range of premium lease-only and sale-capable cabinets. The company's focus on developing innovative game content and cabinet designs has allowed it to maintain a strong market presence and capture a growing share of the EGM market.
In the first quarter of 2024, the EGM segment reported revenue of $87,251,000, up 14.0% year-over-year. This growth was driven by a 28.5% increase in EGM unit sales, with the company selling 1,441 units during the quarter. The average selling price (ASP) of these units also increased by 5.3% to $20,626, reflecting the company's ability to command premium pricing for its high-performing cabinets.
On the recurring revenue side of the EGM business, PlayAGS has demonstrated its ability to consistently grow its domestic installed base and revenue per day (RPD). In the first quarter of 2024, the company's domestic EGM installed base increased by 1.4% to 16,596 units, while domestic RPD remained stable at $32.49. The company's international EGM installed base declined slightly by 3.0% to 6,061 units, but international RPD increased by 17.0% to $9.70 on a constant currency basis.
Table Products
The Table Products segment has also been a strong contributor to PlayAGS's growth, with revenue increasing by 11.5% year-over-year to $4,566,000 in the first quarter of 2024. This growth was driven by increased customer adoption of the company's Bonus Spin Xtreme progressive technology and the PAX S card shuffler, as well as the successful launch of the company's AGS Arsenal site license offering.
Interactive
The Interactive segment, which provides game content and access to the company's remote gaming server to real-money gaming (RMG) online casino operators, as well as social casino games, has been another area of focus for PlayAGS. In the first quarter of 2024, the Interactive segment reported revenue of $4,156,000, up 64.7% year-over-year. This growth was driven by an accelerating cadence of new game launches, improved business development efforts, and the continued strong performance of the company's franchise brands in the online channel.
Outlook
Looking ahead, PlayAGS has provided guidance for the full year 2024. The company expects to achieve an adjusted EBITDA margin in the range of 44.5% to 45.5%, representing a modest improvement over the 2023 fiscal year. Additionally, the company anticipates growing its full-year free cash flow by 25% or more, with positive free cash flow generation projected in all four quarters of 2024.
The company's focus on innovation, diversification, and operational efficiency has positioned it well for continued growth. With a strong product pipeline, a growing customer base, and a commitment to deleveraging its balance sheet, PlayAGS is poised to capitalize on the ongoing recovery and expansion of the global gaming industry.
Risks and Challenges
Risks to the investment thesis include regulatory changes, increased competition, and potential macroeconomic headwinds that could impact consumer spending and demand for the company's products. However, PlayAGS's diversified business model, strong market positions, and proven ability to adapt to industry changes mitigate these risks to some extent.
Conclusion
Overall, PlayAGS's solid financial performance, diverse product offerings, and strategic initiatives make it an attractive investment opportunity in the gaming solutions space. As the company continues to execute on its growth plans, investors can expect to see further improvements in its financial metrics and shareholder value creation.