Three years ago, Kimo Akiona wanted to go to a company that had a story to tell.
Akiona, chief financial officer at AGS, which designs and supplies electronic gaming machines, products and services to the gaming industry, said he found that and more at AGS, and sees the tale growing into a classic novel.
The 44-year-old Akiona oversaw AGS going public in January and has since been a key player in four major acquisitions totaling more than $450 million and helped reprice AGS’s existing term loan to save more than $6 million in annual interest expense.
During his three-year tenure with AGS, the company’s topline revenue has grown more than 190 percent. In the recently announced second quarter, total revenue increased 45 percent to $72.8 million, a company record, driven by the continued growth of electronic gaming machines in the Class III marketplace, which has been led by demand for AGS’ Orion Portrait cabinet.
In June, Akiona was named 2018 Financial Executive of the Year for manufacturing and technology by the Financial Executives International Las Vegas chapter.
The Hawaii native moved to Las Vegas and finished his studies at UNLV, receiving a bachelor’s degree with an emphasis in accounting. He then worked for public accounting firms and a convention service company before ultimately joining SHFL Entertainment.
By the end of his tenure there, he’d risen to senior vice president and corporate controller with responsibility for global accounting functions.
SHFL is also where he met David Lopez, who later became AGS President and CEO, and other executives who would later work for AGS and whom he now considers like family.
“On the professional side,” Akiona said, “I saw it as a company that would be able to tell a story. I felt a smaller company would be the only one positioned to… do something unique in the industry. I think part of that was the opportunity to go public because there were limited IPOs on the gaming supplier side.”
Akiona said it was exciting to take what was once a small private company, primarily focused on tribal gaming in Oklahoma, and help transform it into a global gaming supplier that was not only Class II but Class III. Today, it’s one of the fastest growing in the industry.
“It was also a company that was going from the ground up and created a whole new table division and innovated in that area,” Akiona said. “That is all part of the story that I liked and has been interesting to see play out today.
“The story is still being written, and that’s what’s interesting about it.”
AGS’ stock on the NYSE hit a new high this month, surpassing $30 a share at a time other stocks in the gaming industry have had big declines.
“We’d never before crossed $30. We are defying the industry because we are up when most are down,” Akiona said. “Our product and development are what the market needs and has wanted for a while. We spend a lot of time talking about culture, and that starts at the top (with David Lopez). The culture of how we treat our people ripples over to how we treat customers. We are big on customer service.”
Unfortunately, Akiona said, that hasn’t always been the case in the industry. It created an opportunity for the company to shine. When adding in a product that performs at levels above the industry, that’s a great combination, he said.
“I think people are rooting for us,” Akiona said. “We’re like the Golden Knights. Not a lot of people had heard of us until a year or two ago, and now they get to see us ramping up and having success. Having a broad group of gaming suppliers creating concepts for casinos is extremely good for the industry. It’s not good for the industry to have two or three companies making everything.”
The company reported an increase in EGM units sold, to 1,058 in the second quarter, as compared to 574 in the prior year. The increase was led by sales of the Orion Portrait cabinet in early entry markets such as California, Nevada and New Jersey. EGM equipment sales, measured in dollars, increased 144 percent to $20.2 million, a company record, of which approximately 60 percent were Orion Portraits and 12 percent the new Orion Slant cabinet.
“The Orion Portrait created a stir in the industry because it had a different form factor. It looks great, the screen looks great, and there’s cool lighting effects,” Akiona said. “When the industry was going for big curved screen, Orion Portrait went with the opposite, an HD flat screen. It looks like a big iPhone in some ways, with lighting around it. It resonated with people.”
Introduced to the market in the first quarter of 2017, the Orion Portrait cabinet ended the second quarter of 2018 with a footprint of more than 3,600 total units, compared to 463 units in the second quarter of 2017, up 90 percent from year end and 680 percent year-over-year.
The Orion Slant was launched in the second quarter, Akiona said. The Slant is a key part of growth as well by expanding the popular Orion look and feel.
Table Products increased 983 units or 56 percent to 2,737 units driven by both organic growth, most notably in Buster Blackjack and Bonus Spin progressive units, and the purchase of approximately 500 In Bet units in the third quarter of 2017.
“Although table games are very small for us, they’re a meaningful part of who we are and where we are headed,” Akiona said. “We are developing products that are innovative in that space. We’re doing some cool stuff like progressives to add more excitement and action to the floor.”
Recurring revenue grew to $52.6 million last year, a 26 percent increase year-over-year. In addition to the contribution from electronic gaming machines purchased from Rocket Gaming and table products purchased from In Bet in the fall of 2017, the increase was driven by domestic per-day revenue of $27.79, up $1.90 year-over-year.
“We derive probably 70 to 75 percent of our revenues from leased equipment. Most (companies) have 50 percent or less in recurring revenues. We have a substantial amount of reliable monthly revenue. You feel more comfortable when you’re not so dependent upon sales. The margins we derive from leasing are tremendous. It’s no secret in the industry. But leasing businesses are hard to build.”
AGS, which is headquartered in Las Vegas, has about 625 employees, up more than 200 from two years ago. Las Vegas has corporate offices, sales and marketing, finance functions and the table games division for research and development.
“We are growing everywhere,” Akiona said. “Oklahoma, where we manufacture. Las Vegas. Definitely Atlanta, where we have an R&D studio. We also do R&D in Sydney, and we have a small office in Tel Aviv.”
AGS’ ICON cabinet footprint grew 108 percent to over 6,417 total units in the field including its first placements of nearly 200 cabinets into Mexico. It’s also made initial entry into markets such as Canada to accelerate growth. It also recently acquired content-aggregator Gameiom to create a new channel to exploit game content in online real-money gaming markets.
“We are headed for greatness,” Akiona said. “Our market share is 2 percent of the North American market. We’re gunning for 5 percent in the medium term. We think we can hit it. We’re beginning to invest in interactive and digital.
“We’ll always be a slot and land-based gaming company at root, but we’re going to continue to grow.”
AGS is just getting into The Philippines, Akiona said, adding that they have a “clear plan and execution strategy” in Brazil.
“It’s not legal yet, but we are waiting for federal legislation to pass, just like Japan,” Akiona said.
“Brazil will be a bigger market than Japan. Brazil is like the last frontier of gaming. The day that happens, we are going to go gangbusters.”
