PlayAGS Chief Executive Officer David Lopez was searching for something nice to say about 2020, “a bright spot, to the extent that there was one.” The pandemic’s fallout had rendered the fourth quarter forgettable, as the company posted a loss and revenue plummeted.
Both the loss per share and revenue narrowly missed Wall Street forecasts.
“(The) COVID-19 pandemic slowed down the pace of life,” Lopez said in a statement. “As a company, we used this time to refine our strategy and improve our operating efficiency, with a keen focus on three key areas: people, product, and processes. As a result, I believe we are better positioned today to achieve success across all three of our business segments than at any other point in our company’s history.”
PlayAGS, a Las Vegas-based electronic slot- and bingo-machine maker, posted a net loss of $17.2 million, or 49¢ per share, for the three months ended Dec. 31, reversing year-earlier income of $1.4 million, or 4¢ per share, a year earlier. Analysts polled by Seeking Alpha had, on average, expected a 40¢-per-share loss.
Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that excludes one-time costs, fell 43% to $21.3 million from $37.3 million.
Quarterly revenue fell 40% to $46.6 million from $77.8 million and missed the $47.4 million average forecast of Seeking Alpha-polled analysts. The company said March and April casino closures and virus-containing measures afterward curbed business and dampened results. Higher interest expense related to incremental debt financing also factored in the drop.
Investors punished the stock, sending it down 4.06% in regular trading (down 34¢ to $8.04) and after hours (34¢, or 4.23 percent to $7.70) on the Nasdaq.
Nevertheless, PlayAGS Chief Financial Officer Kimo Akiona, like Lopez, sounded an optimistic note.
“Not only were we able to nimbly streamline our business to preserve liquidity at the onset of COVID-19,” he said, “but we opportunistically shored up our balance sheet in May and successfully ramped operations as our casino-operator partners gradually brought their businesses back on line.”
Analysts found upsides, too. Though Jefferies downgraded the stock to “hold” from “buy,” analyst David Katz raised his price target to $7 from $6. In an investor’s note highlighted by Seeking Alpha, Katz said AGS continues to progress in retooling its slot-machine products, but sustaining this will require capital investment, which would limit free cash flow through 2022.
Union Gaming analyst John DeCree told Seeking Alpha that PlayAGS could be a global gaming “sleeper.” He said he expects the company to shake off any 2021 downturns and return to a long-term growth trajectory in 2022.
“With this in mind, the market is mispricing the recovery opportunity here and the lack of trading liquidity is likely preventing a quicker correction,” he wrote. “This creates an interesting later-innings recovery play and we recommend building a position in the shares over the next two or three quarters.”
DeCree boosted PayAGS’ price target to $10 from $6. His target and Katz’s are both above the average $6.89 price target for 2021, Seeking Alpha said.
Also, Roth Capital Partners analyst David Bain said AGS for the first time shipped historical horse racing electronic gaming machines to Virginia and added that legislative expansion of gambling could buoy PlayyAGS’ business there. Also, Bain said, table revenue and EBITDA rose quarter to quarter, amid continued demand for progressive game products.
“In our view, the broader regional casino recovery, led by the U.S. vaccine roll-out, pent-up demand, and additional stimulus measures, is likely to push casino (capital expenditure) for gaming product back to normalcy ahead of consensus/our estimates,” he said, “though to model for such now may be premature — let’s leave it as upside.”
For the full year ended Dec. 31, PlayAGS had a net loss of $85.3 million, or $2.40 per share, for the three months ended Dec. 31, down from a net loss of $11.5 million, or 33¢ per share, a year earlier.
Twelve-month revenue fell 38.6% to $129.2 million from $210.5 million.
