Though it braced for pain from the coronavirus pandemic, the pain, as it has for most of the casino industry, still came for AGS.
With essentially all North American gaming facilities closed at the end of March, the gaming industry was “significantly impacted,” AGS said, and the company posted a quarterly loss and drops in a key cash flow measure and revenue.
Both earnings per share and revenue missed Wall Street forecasts.
“As a result of the global impact of COVID-19, particularly near the end of the quarter, the gaming industry was significantly impacted with essentially all North American gaming facilities closed at the end of March,” AGS CEO David Lopez said in a statement issued after stock markets closed Thursday. “Casino closures resulted in significant revenue interruptions and increased business uncertainty.”
In the statement, AGS, which was founded in 2005 and went public in January 2018, posted a net loss of $14.4 million, or 41 cents per diluted share, for the three months ended March 31, compared with a net loss of $82,000, or break-even per share, a year earlier. Analysts polled by Seeking Alpha had expected the company to lose 10 cents per share.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, fell 32.5% to $24.5 million from $36.3 million.
Overall quarterly revenue fell 27.7% to $50.4 million from $69.7 million. Seeking Alpha-polled analysts had expected revenue of $65.5 million.
Although AGS’ share price rose in regular trading, climbing 28 cents, or 7.76%, to close at $3.89 on the New York Stock Exchange, the gain vanished after hours. After the closing bell, AGS’s share price fell 7.46%.
On Wednesday, SunTrust Robinson gaming analyst Barry Jonas downgraded AGS shares from a Buy rating to a Hold rating, saying the company’s business in which it shares revenues from slot machines placed in Indian casino location, will offer some cash flow protection.
“For AGS we are positive on its tribal exposure, which could see a quicker recovery, but concerned over higher relative exposure to a challenged North America gaming market while the company is still recovering from strategic missteps last year,” Jonas wrote.
As the COVID-19 crisis advanced, Lopez said AGS promptly moved to secure cost savings, including companywide salary reductions, layoffs, and furloughs along with capital expenditure reductions and liquidity strengthening. Lopez said the moves let the company reduce its estimated monthly cash outflow nearly 80% to approximately $4 million, not including $3.8 million in monthly debt service costs.
“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,” Lopez 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.”
On May 1, AGS amended its first lien credit agreement, yielding $83.5 million in after-fees liquidity. AGS said it believes the additional financing, and existing cash balances, will give the company enough liquidity to fund operating requirements and meet obligations for at least the next 12 months.
AGS said gaming operations revenue dropped 19% year over year to $42.7 million, hurt by disrupted revenue from leased electronic gambling machines that were nonoperational, slightly offset by increased table products and real-money gaming revenue.
Quarterly table products revenue rose 15% to $2.5 million, driven by an increase of 612 units year-over-year and increased equipment sales despite casino closures in the quarter. For the two months ended Feb. 29, weeks before the coronavirus-related shutdowns, table products revenue increased 26% to $2 million from $1.5 million a year earlier, buoyed by continued product momentum.
AGS’ installed base of domestic electronic gaming machines installed dropped 995 units year over year, primarily because of the sale of 395 previously leased, lower-yielding Oklahoma units to distributors in the first quarter of 2020 and 327 in the fourth quarter of 2019.
Domestic electronic gaming machine units sold decreased by nearly 600 units from a year earlier, also because of COVID-19-related business disruptions.
International gaming operations revenue fell 24 percent year over year, hurt by business disruptions and casino closures in Mexico.
AGS said that because of the pandemic, it withdrew the 2020 earnings guidance provided in a March 4 statement. The company on Thursday said it couldn’t provide updated guidance.
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