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AGS halves losses in 2019 thanks to strong Q4

News

Gaming technology supplier AGS cut its losses in half for 2019, as revenue increased 6.8% to $304.7m with the help of a profitable fourth quarter.

Of AGS’s $304.7m in revenue, $298.6m came from the sale of 4,879 electronic gaming machines, a revenue increase of 44.9% year-on-year and an 11.0% increase in units shipped.

A further $10.2m came from table products, up 148%, of which $9.6m was due to gaming operations and a further $639,000 in equipment sales. In August 2019 AGS acquired table games provider In Bet Gaming for an undisclosed fee.

AGS brought in $4.9m from interactive gaming, down 38.8%. $3.3m of this came from social gaming and $1.6m from real-money gaming.

AGS’s operating expenses came to $281.0m, an 8.1% increase. Depreciation and amortisation charges were the largest single expenditure, at $91.5m, up 18.0%.

Selling, general and administrative expenses declined 2.0% to $61.8m. Costs of equipment sales came to $45.5m, up 14.6%, while costs of gaming operations grew 4.4% to $41.0m.

Research and development costs increased to $34.3m and write-downs and other charges declined 21.1% to $6.9m.

After these costs, AGS’s operating income came to $23.7m, down 6.1%.

AGS paid $36.2m in interest, down 4.7%, plus a further $4.6m in other expenses, less than half of what it paid for other expenses in 2018.

This resulted in a pre-tax loss of $17.0m, down 41.9% from 2018’s loss.

AGS received $5.4m in income tax benefits, down 35.0%. This meant that AGS’s net loss declined 44.7% to $11.5m. After accounting for a $231,000 loss attributable to non-controlling interests and a $1.4m foreign currency adjustment, the total comprehensive loss attributable to AGS came to $10.4m, down 50.1% year-on-year.

For the fourth quarter of 2019, AGS’s revenue increased 7.9% to $72.1m. Gaming operations made up $51.5m of this and equipment sales $26.2m.

AGS’s operating expenses came to $69.8m, down slightly year-on-year. Depreciation and amortisation costs were $22.4m, with selling, general and administrative costs at $15.4m, costs of equipment sales at $12.6m and costs of gaming operations at $10.2m. Research and development costs were $9.2m.

Although costs in most areas increased, overall operating expenses declined thanks mostly to write-downs and other charges decreasing to just $53,000, less than 1% of the cost for these charges in 2018.

This resulted in operating income of $7.8m, more than four times 2018’s operating income. AGS’s interest expenses fell to $8.5m, while it made $486,000 in other income.

This resulted in a pre-tax loss of $142,000, less than one-fiftieth of 2018’s pre-tax loss. After a $1.6m tax benefit, net income came to $1.4m, compared to a $10.3m loss in 2018.

Following currency adjustments, AGS’s comprehensive income for Q4 was $3.2m, a stark difference from 2018’s loss of $12.0m.

AGS’s total number of gaming machines installed rose to 26,865 on 31 December 2019, with 18,368 sales in the United States, including 10,171 in its home state of Oklahoma.

Of the gaming machines sold domestically, 12,415 Class II machines. Class III gaming machines made up 5,445 sales and video lottery terminals (VLTs) 512.

AGS president and chief executive officer David Lopez said the business is optimistic for 2020, due to a series of high-profile product launches.

“2020 is one of — if not the most — significant product launch years in AGS’s history, with the Orion Rise, the Orion Curve, the Starwall, and the Pax S card shuffler all debuting on casino floors this year,” Lopez said.

“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.”

The supplier issued an EBITDA guidance for 2020 of $148m-153m, with expected capital expenditures of $67m-71m.