Since its initial public offering 16 months ago, Wall Street has considered AGS one of the gaming industry’s up-and-coming slot machine providers.
On Wednesday, AGS CEO David Lopez told analysts that the Las Vegas-based company had a total installed base of 27,308 gaming machines at the end of March, a 13.6 percent increase from a year ago.
“We believe that fiscal 2019 is off to a good start and that we have the appropriate strategies, products and people to ensure long-term meaningful growth,” Lopez said on a conference call announcing the company’s first quarter results. “In addition to the opportunities in 2019, we have made the right investments in the business to truly benefit from scale as we exit the year and head into 2020.”
AGS said it had a 2.9 percent market share of the electronic gaming machines business where it operates in the U.S. and Canada – and increase of 2.3 percent from a year ago. Lopez said the company’s efforts to land gaming licenses in new markets for the company – he cited Colorado, West Virginia and several Canadian provinces in particular – show that AGS is “on a very achievable path to 5 percent market share.”
In the quarter ending March 31, AGS grew revenue nearly 13 percent to $73 million, led by 7.5 percent gain in recurring revenues – games in which AGS shares revenue with casino operators.
In February, AGS acquired regional slot machine route operator Integrity Gaming for $49 million, picking up approximately 2,500 recurring revenue gaming machines across 33 casinos in Oklahoma and Texas. The quarterly results included revenues from those games.
AGS CFO Kimo Akiona said “tuck-in” acquisitions such as Integrity and Rocket Gaming, both acquired last year, provide a higher return on investment at this stage of the game than using free cash to pay down debt.
Meanwhile, AGS said sales revenue from electronic gaming machines grew 33 percent to $20.2 million. AGS said the number of games sold grew 22 percent over the same quarter last year, fueled by deals to locations in Michigan, Pennsylvania, and Massachusetts, and the Canadian province of Saskatchewan. The company is also expanding its presence in Florida and California.
AGS reported $2.1 million in table game revenue, a 29.1 percent increase; however, interactive revenue declined by roughly $700,000, to $1.2 million, due to a decrease in social gaming revenues.
AGS recorded a net loss in the quarter of less than $100,000, compared to a net loss of $9.5 million a year ago. Cash flow for AGS increased 5.1 percent to $36.3 million.
“With numerous levers to build momentum, including strategic investments in research and development, to continue building a strong, diversified, and expanded product portfolio, as well as many new and under-penetrated domestic and international markets, AGS is well-positioned for continued long-term, meaningful growth,” Lopez said in a statement.
Part of the growth is international, which includes Mexico and the Philippines. The company opened a new game design studio in Australia last year, and plans to open another new studio in Reno, Nevada in July. Lopez said the Reno operation “will help bolster further cabinet and content innovation, helping make AGS a more comprehensive and robust electronic gaming machine supplier.”
As it looks to expand both its domestic and international footprints, AGS continues to concentrate on the Indian gaming market, which currently provides the company more than half of its revenues. In March, AGS renewed its long-term contract with Oklahoma’s Chickasaw Nation, which secured the company’s installed base of more the 3,200 games in the tribe’s 22 casinos.
Wall Street said investors should reward the company for its first quarter results. Macquarie Securities gaming analyst Chad Beynon said numbers “showcase positive momentum in market share, unit sales, and table games, (and) should give investors greater conviction in management’s ability to execute on heightened expectations.”
Stifel gaming analyst Brad Boyer said AGS management has designed a “product roadmap” for long-term success.
“We commend management for making decisions intended to position the business for the long term, as opposed to simply enacting measures intended to chase short-term results,” Boyer told investors.
Shares of AGS, traded on the New York Stock Exchange, closed at $23.01, up 69 cents or 3.09 percent.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
