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AGS slips to loss in Q1 as Covid-19 casino closures hit


Gaming technology supplier AGS has said that enforced closures as a result of the novel coronavirus (Covid-19) global pandemic were to blame for it posting a loss of $22.6m in the first quarter.

Revenue in the three months to March 31, 2020, totalled $54.3m, down 25.6% from $73.0m in the same period last year.

AGS noted a year-on-year drop in revenue across both its gaming operations and equipment sales businesses. 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.

Looking at the supplier’s different business segments, revenue from electronic gaming machines, its primary source of income, dropped 27.7% to $50.4m. Operations revenue was down by 21.4% to $38.9m and equipment sales fell 43.1% to $11.5m.

AGS said this decline was driven by disruptions in lease revenue from machines that were not operational due to the shutdowns caused by the coronavirus and, to a lesser extent, a decreased installed base compared to the prior year period.

In terms of table products, revenue was up 15.1% to $2.5m, boosted by a 9.1% rise in gaming operations revenue and a 507.7% jump in equipment sales to $158,000.

AGS also saw an increase in interactive revenue, which climbed 19.9% to $1.5m. Gaming operations revenue was down 14.2% to $822,000, but equipment sales hiked 139.6% to $654,000.

Focusing on spending in Q1, operating expenses amounted to $59.5m, which was down 8.0% from 2019. Selling, general and administrative costs were lowered by 22.2% to $11.6m, while the cost of equipment sales was cut by 45.3% to $5.2m.

However, expenses related to gaming operations increased by 4.2% to $10.0m, while depreciation and amortisation costs were up 13.5% to $24.4m.

Despite cutting costs, the decline in revenue meant that AGS reported an operating loss of $5.2m, compared to an $8.3m profit in Q1 2019.

When taking into account $8.3m in interest expenses and $4.3m in other costs, AGS reported a loss before tax of $17.8m, compared to a loss of $5.7m last year. Despite a tax benefit of $3.4m, net loss after tax stood at $14.4m.

Coupled with a foreign currency translation adjustment of $8.2m, AGS posted a total compressive loss of $22.6m for the period, compared to a profit of $560,000 in the first quarter of 2019.

Reflecting on the quarter, AGS president and chief executive David Lopez said that while the business was hit by the coronavirus in Q1, it was able to take steps to mitigate this impact.

“Casino closures resulted in significant revenue interruptions and increased business uncertainty,” he said. “Our team took early steps to formulate and implement a comprehensive plan that included costs savings through company-wide salary reductions, layoffs, and furloughs, capital expenditure reductions, and strengthening our liquidity position.

“Through these initial steps, we were able to reduce our estimated monthly cash outflow nearly 80% to approximately $4m, which does not include our monthly debt service costs of $3.8m.”

Looking ahead to Q2, Lopez said that while a sense of uncertainty remains, he is confident the business will emerge from the crisis stronger.

“We are approaching the uncertainty and challenges in the second quarter and the rest of 2020 with resolve and from a position of strength given the recent reinforcement of our balance sheet and operational initiatives,” he said.

“With our strong culture underpinning our recovery efforts, we are focused on not simply managing through the crisis, but building a strong future for our employees, customers, and shareholders.”