Gaming technology supplier AGS’s revenue fell 77.5% to $16.8m as its losses increased almost six-fold for the three months ending 30 June.
Gaming operations revenue declined 81.0% year-on-year as casinos across the US were closed for much of the quarter, while equipment sales revenue fell by 68.5% to $6.6m
Electronic gaming machines (EGMs) made up the vast majority of revenue, but this division’s contribution fell 80.3% to $14.0m. Table product sales fell 72.1% to $674,000.
However, AGS president and chief executive David Lopez said EGM performance per machine had recovered strongly since casinos resumed operations.
“Initial game performance on EGM units that are in-service has been strong and better-than-expected, which allows us to lean on our strong recurring revenue footprint in this challenging environment,” he said.
Lopez added that new products such as the Starwall and Orion Rise machines proved especially successful.
While land-based operations struggled in the period, interactive revenue rose significantly but from a low base, almost doubling year-on-year to $2.2m.
AGS’s operating expenses, meanwhile, came to $45.5m, down 32.2%.
Selling, general and administrative expenses were the largest cost, at $8.6m, down 41.1%.
Costs of gaming operations came to $5.5m, down 49.9%, while costs of equipment sales fell 58.0% to $4.2m. Research and development costs fell 41.2% to $4.9m.
Write-downs and other charges fell by 83.7% to $816,000 and depreciation and amortisation costs declined by 19.2% to $21.5m.
This resulted in an operating loss of $28.7m, compared to an operating profit of $2.0m the year before.
AGS paid a further $10.9m in interest expenses, up 14.0% and received $120,000 in interest income. The supplier incurred a further £3.1m cost on the extinguishment and modification of debt.
After these costs, AGS made a pre-tax loss of $42.6m, up 468.7% from Q2 2019.
After a $49,000 income tax expense and accounting for income attributable to non-controlling interests and a $575,000 foreign currency adjustment in its favor, AGS’s total comprehensive loss came to $42.1m, up 473.9% from the loss posted in the prior year.
Lopez said the supplier has been careful in its return as casinos reopened as it did not wish to ramp up costs too drastically at this time.
“Although casinos started to reopen in the later part of the quarter, we remained disciplined in how we reintroduced cost back into the business, ramping departments that are essential to run our business, such as field service, R&D and manufacturing,” Lopez said.
“Given the breadth and depth of our current content portfolio, we believe that the long-term opportunities for AGS remain intact, and that we have ample liquidity and the best-in-class team to navigate through near-term uncertainties.”
Kimo Akiona, AGS’s chief financial officer, said AGS’s actions to strengthen liquidity could be extremely important moving forward as the future of the gaming industry amid the virus remains unknown
“Our careful management of expenses and capital expenditures during the casino shutdowns in the quarter — in addition to drawing $30 million under the existing revolving credit facility and entering into incremental term loans of $95 million — have resulted in a strengthened liquidity position,” Akiona explained.
“Although it is hard to predict exactly how the pandemic will continue to impact the macro operating environment, given all of the measures we’ve taken, we believe we are positioned with sufficient liquidity and flexibility to emerge from this a more competitive and more nimble organization.”
In the first quarter of 2020, AGS posted a loss of $22.6m as revenue came to $54.3m, down 25.6% from $73.0m in the same period last year. Gaming operations revenue was down 19.3% from $52.9m to $42.7m, while equipment sales revenue slipped 32.6% year-on-year to $11.6m.