Electronic slot and bingo machine maker AGS’ shares jumped more than 7% Tuesday after the company issued early fourth-quarter guidance and said it will refinance its debt, perhaps spending $50 million or more to do so.
In a statement, Las Vegas-based AGS said it will explore remaking its revolving-credit and term-loan facilities and may increase its revolving-credit facility, reducing borrowing costs and extending debt maturities.
AGS shares rose 52 cents, or 7.39%, Tuesday to close at $7.56 on the New York Stock Exchange. The share price was unchanged after hours.
AGS set a target for its net leverage ratio (net debt divided by trailing-12 month adjusted earnings before interest, taxes, depreciation, and amortization) of less than 4.0x by year-end 2022. Truist Securities noted this mark was lower than AGS’ preannounced levels of 4.2x to 4.3x at the end of 2021’s fourth quarter and 7.5x at the end of 2020.
AGS’ management said the net leverage ratio target does not hinge on the debt refinancing.
Meanwhile, AGS expects its net loss for the three months ended Dec. 31 to range from $6.07 million to $11.63 million. The company lost $17.2 million in 2020’s fourth quarter.
AGS set its revenue range at $68.4 million to $70.8 million. The company had $46.6 million in revenue 2020’s fourth quarter.
AGS expects fourth-quarter adjusted EBITDA of $30.5 million to $32.8 million, up from $21.3 million in 2020. EBITDA is a cash flow measure that excludes one-time costs.
The company made no predictions about its earnings per share.
AGS President and Chief Executive Officer David Lopez didn’t address debt moves in the statement, but suggested his company’s operations were gaining steam. “Our preliminary fourth-quarter 2021 financial results further reflect the operating momentum we are witnessing across all three segments of our business.”
In an investors note, Truist Securities said AGS’ declared that revenue, cash-flow, and net-loss ranges exceeded estimates. Truist forecast possible AGS share price gains amid a wider market recovery.
“As highlighted in our 2022 outlook, we are positive on gaming suppliers with operators generally looking to increase (capital expenditure) budgets,” Truist wrote, reiterating its “buy” rating and $13 price target for AGS.
On Jan. 5, as Seeking Alpha reported, B. Riley Financial named AGS and Everi Holdings as possible fourth-quarter outperformers. Analyst David Bain cited a 35%-plus increase in North America replacement slot unit sales, casino expansions, and openings, and gaming revenue strength could buoy Everi and AGS.
“Increasing non-slot casino technology (capital expenditure) off a renewed gaming floor focus from operators is expected to be a tailwind and supplier pricing power in an inflationary environment is noted,” Bain wrote.
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