The coronavirus left a red-ink trail across the second-quarter earnings for Las Vegas-based gaming equipment provider AGS.
But the company jumped right back into the game as casinos began to reopen across the nation following their COVID-19 closures.
AGS CEO David Lopez said Wednesday the company began reviving its field service, research and development, and manufacturing operations.
New products, including, Starwall and Orion Rise, and new games including Orion Portrait, were performing well before the shutdown, Lopez said. Post-shutdown performance has been better than expected.
“Given the breadth and depth of our current content portfolio, we believe that the long-term opportunities for AGS remain intact,” Lopez said in a statement.
Added Chief Financial Officer Kimo Akiona, “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.”
Truist Securities gaming analyst Barry Jonas told investors the company’s gaming operations segment was “trending meaningfully higher” than he anticipated.
During the quarter that ended June 30, AGS bolstered its liquidity, drawing $30 million under its revolving credit line and entering $95 million in incremental term loans, the company had a wider loss and drops in cash flow and revenue.
Per-share results missed forecasts, but revenue topped them.
AGS posted a net loss of $42.6 million, or $1.20 per diluted share, for the three-month period, compared with a net loss of $7.6 million, or 21 cents per diluted share, a year earlier.
The latest result missed the average $1.07 per share loss forecast by analysts surveyed by Seeking Alpha.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excluded one-time costs, was a loss of $1.6 million, reversing year-earlier positive $35.7 million.
Revenue fell 77.4% to $16.8 million from $74.5 million but topped the average $16.8 million forecast by Seeking Alpha-polled analysts.
AGS said on a conference call the company was cash flow-positive in June and expects to turn free cash flow positive by year-end.
About 500 of AGS’s 650 customers properties in the United States and Canada and 25 of its 320 customers’ properties in Mexico were partially open as of June 30.
The United States and Canada segment represents approximately 15,400 electronic gambling machines from its domestic installed base. About 71.4% of that base, 11,000 machines were active as of June 30 because of government-mandated limited casino capacity and physical distancing.
AGS said its domestic electronic gambling machine installed base decreased by 627 units year-over-year, after the sale of 169 previously leased, lower-yielding Oklahoma units to distributors in the current quarter and 722 in previous quarters. These decreases were offset by placements of 210 machines at one new casino opening in the quarter, the company said.
Jonas told investors that AGS’s recovery in Oklahoma is still a work in progress.
“Given COVID-19 effectively paused the initiative, management still sees room to continue optimizing their install base in Oklahoma,” Jonas said in a research note. “AGS has executed several lease-to-sale transactions of lower-performing units in the market and expects to sell some additional units before exploring other rationalization decisions.”
After the results were announced, Deutsche Bank gaming analyst Carlo Santarelli kept his “hold” rating on AGS and set a $5 price target.
AGS shares rose in regular trading Wednesday on the Nasdaq, climbing 9 cents, or 2.51%, to close at $3.67. The company fell in after-hours trading, dropping 7 cents, or 1.91% to $3.60. The share price is down 69.7% in 2020.
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