Gaming equipment provider AGS capped off 2019 with fourth-quarter increases in total revenue and cash flow while reversing a net loss from a year ago.
The Las Vegas-based company hit a few speed bumps during the year, including a second-quarter reduction in its earnings guidance that sunk the company’s stock price and issues with its games in Oklahoma’s tribal casinos – the company’s largest U.S. market.
“Overall, we believe 2020 will a meaningful product release year, where we should be in a position to build momentum in every quarter, generating stability while also functioning as a turning point return to more meaningful growth in 2021 and beyond,” AGS CEO David Lopez told analysts on a Wednesday afternoon conference call.
In the quarter that ended Dec. 31, AGS grew total revenues 7.9% to $77.8 million, which included a 12.7% increase in gaming machine sales and a 5.6% increase in revenue for slot machines where the company shares in the game profits with casino operators.
The revenue increase helped reverse a fourth-quarter net loss from a year ago, with AGS reporting net income of $1.4 million, or 4 cents per share. Cash flow increased by 18.1% to $37.3 million during the three-month period.
AGS CEO David Lopez
For the year, AGS grew total revenues from 6.8% to $304.7 million and generated cash flow growth of 7.2% to $136.2 million.
AGS’s total installed base of slot machines ended the year up 9% at 26,865 games, which included 18,368 games in the U.S. market and 8,497 games internationally.
The company’s U.S. total grew by 12.7% in 2019, which included 10,171 games in Oklahoma’s tribal casino industry. Oklahoma’s games increased 33.1% over the number of the company’s games in the state at the end of 2018.
However, AGS removed almost 400 underperforming games from the state during the fall.
“After evaluating our capital strategy, and analyzing the current operating environment in Oklahoma, we believe the prudent thing to do is to sell some of our underperforming units to generate cash,” Lopez said.
That money, he said, “can be invested in other higher performing markets.” He also suggested the company allocate some of the funds “to improve revenue per day in Oklahoma.”
The revenues from Oklahoma remained relatively flat between the third and fourth quarters, “signifying stabilization as a result of some of our countermeasures.”
Lopez said 2020 will mark “one of — if not the most — significant product launch years in AGS’s history.”
He said games on the company’s premium slot products and new cabinet designs, along with a new automated card shuffler, will all debut on casino floors during the years. AGS also plans to offer 20 new game titles in 2020.
“We feel confident that this lineup of new products, along with brand extensions and innovative offerings on our current portfolio, will provide meaningful long-term growth opportunities for AGS,” Lopez said.
During the conference call, Lopez said the company expected cash flow levels of between $148 million and $153 million in 2020, a 1% to 5% increase over 2019.
In a Feb. 18 research note, Stifel gaming analyst Brad Boyer said the sentiment around AGS was “currently depressed,” but could improve depending on how scheduled product launches are viewed by customers in the second half of 2020.
“We are encouraged by the recent feedback we have received on AGS’ product from operators both inside and outside of Oklahoma, making us cautiously optimistic for 2020,” Boyer told investors.
During last week’s stock market meltdown, AGS shares fell 8.4%. On Wednesday, AGS closed at $8.18 on the New York Stock Exchange, down 26 cents or 3.08%.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
