The coronavirus blues lingered stubbornly for electronic slot and bingo machine maker AGS said. Even though casinos began to reopen from their shutdowns the company’s third-quarter loss widened and its revenue shrank, though both numbers surpassed Wall Street forecasts.
The results seemed to please investors, who sent the shares up 11% in after-hours trading.
In a statement issued after stock markets closed Thursday, the Las Vegas-based company said its net loss was $11.1 million, or 31 cents per share, for the three months ended Sept. 30, compared with net income of $5.5 million, or $5.5 million, or 16 cents per share, a year earlier.
Analysts surveyed by Seeking Alpha had, on average, forecast a 62-cents-per share loss.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, rose 26.6% to $27 million from $36.8 million a year earlier.
Revenue fell 37.9% to $49.3 million from $79.4 million and topped the $37.2 million average forecast of Seeking Alpha-polled analysts. AGS said disrupted lease revenue from inactive electronic game machines and a year-to-year decline in its installed base factored in the lower revenue.
AGS estimated that 87% of its domestic electronic gambling machines, more than 14,500 in all, were active at the end of the third quarter. The company said its domestic installed electronic gambling machine base dropped by 1,900 units year-over-year, because of the sale of 476 previously leased, lower-yielding Oklahoma units to distributors and the removal of 350 machines from action because of coronavirus-prompted slot-floor reconfigurations.
In the statement, AGS CEO David Lopez looked for the silver lining, saying the pandemic had strengthened its staff’s resolve and made the company nimbler.
“Improved hardware and game content position us to command our fair share of future unit placements,” Lopez said. “I remain encouraged by the strategic growth opportunities emerging within our table games segment and look for our interactive performance to continue to improve as additional states contemplate the introduction of real money online gaming legislation.”
CFO Kimo Akiona said the company’s third-quarter financial performance and liquidity position — $113.2 million in available liquidity as of Sept. 30 — let it repay its $30 million revolver.
On Sept. 25, Roth Capital analyst David Bain lifted his AGS price target to $8.50 partly because of the company’s improved game performance.
He also noted the company’s restructured cost base should carry forward as revenue increases.
“We view AGS’ (calendar year) 2021-22 46% to 47% discount-to-peer average enterprise value/EBITDA as unsustainable, particularly amidst above-consensus performance and structural cost improvements,” Bain wrote in a note, “leaving significant share price upside.”
Roth’s price target of $8.50 implies shares should trade at 5.75 times the 2022 enterprise value/EBITDA estimate. The average Wall Street price target is $5.88.
AGS shares rose 21 cents, or 6.75%, Thursday to close at $3.32 on the New York Stock Exchange. The shares rose 38 cents, or 11.5%, to reach $3.70 at 5:30 p.m. PT.
Follow Matthew Crowley on Twitter @copyjockey
