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spk01: Oh, my God. Thank you. Thank you. THE END Thank you. Thank you. Thank you. THE END Thank you. Thank you. Thank you. Thank you. Good afternoon. Welcome to PlayAGS first quarter 2021 earnings conference call.
spk08: Our participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Brad Boyer, Vice President of Investor Relations, Corporate Development and Strategy. Please go ahead.
spk07: Thank you, Operator, and good afternoon, everyone. Welcome to AGS's first quarter 2021 earnings conference call. With me today are David Lopez, CEO, and Kimo Akiyama, CFO. A slide presentation reviewing our key operational and financial highlights for the first quarter of 2021 can be found on our investor relations website, investors.playags.com. On today's call, we will provide an overview of our Q1 2021 financial performance and offer perspective on our current financial outlook. This conference call includes forward-looking statements. Any statement that refers to expectations, projections, or other characterizations of future events, including financial projections or future market conditions, is a forward-looking statement based on assumptions today. Actual results may differ materially from those expressed in these forward-looking statements, and we make no obligation to update our disclosures. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued today, as well as risks described in our annual report on Form 10-K, particularly in the section of these documents titled Risk Factors. Our commentary today will also include non-GAAP financial measures. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings release issued today. Please refer to our filings with the SEC for more information. With that, I would like to turn the call over to our CEO, David Lopez.
spk05: Thanks, Brad, and good afternoon, everyone. As I sit here and reflect on the past 12 months, I'm amazed at how well the gaming industry has endured throughout the COVID-19 pandemic. It's hard to believe it has only been a year since we and our industry peers were talking about the steps we were taking to preserve our liquidity in the face of unprecedented adversity. At the onset of COVID, as casinos across the country began shutting down, I often heard industry executives and other constituents utter the phrase, never underestimate the spirit of the gambler. Judging by our first quarter financial performance, the gambler's spirit is alive and well. As you have heard from our casino operator partners and seen in the state-reported GGR data, the first quarter was all about momentum. Although lingering casino closures, occupancy restrictions, and several unprecedented weather events got the quarter off to a bumpy start, trends began to rapidly improve as the quarter progressed. To that end, relaxed COVID-related operating restrictions, declining case counts, improved vaccination efforts and other macroeconomic tailwinds allowed our U.S. casino partners to benefit from the release of significant pent-up demand across their businesses throughout the month of March. Fortunately, we were able to leverage our nearly 16,000-unit domestic EGM install base to benefit alongside our operator partners as March domestic RPD increased 13% over March 2019, driving our first quarter RPD 3% above the corresponding 2019 levels. While pleased with the performance of our domestic install base in the quarter, and despite some of the large strength carrying into April, we acknowledge the culmination of several events played a role in the results we and our customers were able to achieve. That said, we encourage investors to keep the first quarter market dynamic in mind while modeling our business forward, as we believe broader gaming trends are likely to stabilize over time as this initial surge in pent-up demand transitions to a new normal. Looking beyond the broader market dynamic, further execution upon several strategic initiatives enhanced our gaming operations performance in the quarter. On the premium gaming front, demand for StarWall remained steady as we added 120 units in the quarter, bringing our total footprint to over 400. In April, we introduced new Starwall configurations to the market, which we believe have the potential to stimulate customer demand for the product. As part of our strategy to further penetrate the lucrative premium recurring revenue segment, we recently initiated a fuel trial of our Orion Curve premium package with the product slated for broader rollout in the back half of the year. We continue to be excited about the prospects for Curve Premium, as it will be offered in a naturally distanced carousel layout and will feature an extension of our player-favorite Raken Raken brand. All told, we believe the combination of StarWall and Curve Premium favorably position us to command a greater share of the 70,000-unit domestic premium market, which generates over $1 billion of annualized gross gaming revenues. In addition to our premium effort, we continue to look for opportunities to prune lower-yielding units from within our install base, as this strategic initiative has the potential to streamline our costs and improve our fair share operating performance over time. In the first quarter, we pruned and sold approximately 430 units from our domestic install base. Note these units are not included in our product sales KPIs for the quarter. Ultimately, we believe pruning could allow us to generate comparable or higher revenue from a smaller capital footprint, further enhancing the overall return and capital efficiencies of our gaming operations business. Turning to product sales, although we sold a modest 289 units in the quarter, we are encouraged by the tone and tenor of recent conversations with our customers. As a more favorable operating environment continues to support a broad-based recovery in gaining revenue, we are slowly starting to see the improved revenue performance trigger a willingness by operators to commit capital for new unit purchases. This sentiment was reinforced by the results of the recent Eilers-Fantini quarterly thought survey, where operators indicated they plan to replace an average of 6.5% of their own gains over the next 12 months, a notable increase from the 5.9% reported last quarter and well above the pandemic low of 4.2%. While we believe it could take a few years before we return to 2019 levels, we are feeling confident about the potential for a continued recovery in our unit sales as we progress through 2021. To accelerate the pace of our EGM revenue recovery, we continue to look for opportunities to efficiently expand our business into areas such as historical horse racing, or HHR. We placed additional gains into Virginia and Kentucky HHR markets during the first quarter And driven by exceptional AGS gain performance, our pipeline for the remainder of the year continues to grow. Looking ahead, we believe we have the potential to broaden our presence in the Virginia and Kentucky markets while also taking advantage of placement opportunities in additional HHR markets. Before closing, I would like to briefly touch on the trends we are seeing in our table products and interactive businesses. First, within tables, our team continues to relentlessly and thoughtfully grow the business as evidenced by the achievement of record EBITDA performance in the quarter. Although small on an absolute dollar basis, I don't want investors to overlook the fact that not only did this business not exist just a few short years ago, but it also is operating at ever-improving EBITDA margins. Looking ahead, I remain confident in the growth prospects for our table product business. Supported by further installation momentum of our industry-best progressive products, greater adoption of our AGS Arsenal site licenses, and the launch of our PAX S hand-forming shuffler later in the year. With Respect Interactive, we continue to execute our four-pronged growth strategy to drive results in our real-money gaming business. RMG revenues established a new record in the first quarter, driven by a successful launch in the Michigan iGaming market, introduction of additional AGS content into the online domain, and integration with additional B2C online operators. Importantly, the momentum we saw in the first quarter has continued into April, which highlights the improving execution of our RMG strategy. Perhaps the most notable achievement within our interactive segment occurred subsequent to quarter end, as we were able to leverage our growing online presence to execute our first omnichannel enterprise-wide agreement with a large multi-state operator. In addition to providing the operator with access to our growing suite of online content, the agreement also extends to our product sales and gaming operation segments. A first of its kind for AGS, we intend to look for opportunities to further leverage our omnichannel content capabilities with additional operators in the future. In closing, I was very pleased with our team's execution in the quarter and am equally as encouraged by the macro-level trends and overall sentiment we are seeing across the gaming landscape today. Following one of the best strategic planning offsites I have ever been a part of, I believe we are strengthening our organizational alignment around key business objectives, which should allow us to improve our operating efficiencies and enhance shareholder value over time. I'd like to thank all our AGS team members for their hard work, flexibility, and commitment in the first quarter, and I look forward to sharing our progress with all of you in the quarters ahead. With that, I will turn the call over to Keymo to provide additional perspective on our financial results, liquidity position, and current outlook for the business.
spk07: Thank you, David, and good afternoon, everyone. I'm proud of the way our team came together to deliver strong first quarter financial performance. Our results, once again, serve as a testament to the resiliency and durability inherent to our company's recurring revenue-centric business model. Although it remains difficult to predict the degree to which changes in the macroeconomic environment, including those directly related to COVID-19 protocols, might impact our customers' operations or demand for our products. I am confident our improved execution and strong liquidity position will allow us to deliver more consistent financial performance and, in turn, further enhance shareholder value. Turning to our first quarter 2021 operating results, we generated consolidated revenue of $55.4 million, representing an increase of 2% versus the prior year's quarter. Our gaming operations or recurring revenue improved 4% year-over-year, Easing COVID-19-related operating restrictions and ongoing vaccination efforts unlock significant pent-up demand across our U.S. operator partners' businesses as the quarter progressed, in turn strengthening our domestic EGM gaming operations revenue. Continued rollout of our industry-leading table game progressive products, broadening of our penetration into the lucrative EGM premium game segment, and enhanced execution within our real-money iGaming business further supported our improved recurring revenue performance in the quarter. In aggregate, revenue generated from recurring sources accounted for 80% of our total reported revenue compared to 79% in the 2020 first quarter. With respect to equipment sales, total revenue decreased 6% year-over-year to $10.9 million this Revenues related to our ongoing efforts to strategically prune lower-yielding units from our Oklahoma EGM install base increased by $2.1 million. However, this increase is more than offset by sustained sluggishness in the North American replacement market, reflecting operators' current preference to carefully manage capital expenditures as their businesses recover from COVID-19-related business disruptions. First quarter 2021 net loss of $7.8 million improved compared to net loss of $14.4 million incurred in the prior year's quarter. The year-over-year decline in our reported net loss reflects our improved revenue performance, led by our recurring revenue businesses, and recognition of lower depreciation and amortization expense due to several intangible assets reaching the end of their useful lives. Higher interest expense, related to our incremental debt financing, which we closed upon in May 2020, partially offset the flow-through of our improved operating performance to the bottom line. Consolidated adjusted EBITDA totaled $26.3 million compared to $24.5 million in the prior year's quarter. Adjusted EBITDA margin was 47.5%, nicely above the 45.1% achieved in the first quarter of 2020. strength within our high margin recurring revenue businesses, and an increase in higher margin revenues generated from our ongoing strategic pruning initiative paced our improved adjusted EBITDA and adjusted EBITDA margin performance versus the prior year. These items were partially offset by normalization in our operating expenses versus the prior year period, which benefited from our early stage COVID-19 related liquidity preservation initiatives. As we look to the full year, we continue to expect margins to bracket, which is another way of saying land slightly above or slightly below the low end of our targeted 45% to 47% adjusted EBITDA margin range. Our margin outlook reflects the anticipated impact of investment in our R&D franchise to support future growth initiatives ahead of a more pronounced recovery in new unit sales revenues. I will now provide an update of each of our operating segments, beginning with our EGM business. Total first quarter 2021 EGM revenue was $50.5 million, relatively consistent with the prior year's quarter. We sold a total of 289 units in the quarter, all of which were replacement units, compared to 464 units in the prior year period. EGM units were sold into 14 U.S. states and two Canadian provinces. with British Columbia, Virginia, and Ohio emerging as our top three sales markets. Domestic average selling price, or ASP, was approximately 17,500, relatively consistent with the level achieved in the prior year. As David mentioned, we're starting to see an early indication of modest improvement in customer demand for new units as COVID operating restrictions are eased and the health of our customers' businesses improves. However, we continue to believe the North American sales market could potentially take a few years to fully recover to pre-COVID levels. That said, I believe we will see a fairly material quarterly sequential increase in our second quarter of 2021 unit sales as a result of a more favorable opening and expansion demand outlook. Our domestic EGM install base at the end of the first quarter comprised 15,456 units, representing a quarterly sequential decrease of 812 units. The sequential decline reflects the planned strategic pruning of approximately 430 lower-yielding units and the impact of COVID-related floor reconfigurations. After adjusting for these changes, we estimate approximately 99% of our domestic units were active at quarter end. The net impact of the removed units on our domestic install base was partially offset by the replacement of opening and expansion units and growth within our HHR and Orion Starwall unit footprints. Looking ahead, we remain committed to searching for inefficiencies within our install base and strategically pruning as situations permit. Additionally, we believe the upcoming launch of our Orion Curve Premium Package, further Orion Starwall market penetration, and planned new openings and expansions have the potential to produce modest quarterly sequential domestic installed base growth over the remainder of the year. First quarter domestic EGM RPD was $27.10, representing an increase of nearly 30% compared to $21.08 achieved in the prior year quarter. We attribute improved RPD performance to a more accommodative U.S. casino operating environment supported by easing COVID-19-related operating restrictions and improved vaccine distribution. These measures resulted in the release of significant pent-up demand across our casino operator partners' businesses. We also believe the continued growth of our premium game footprint and the strategic pruning of lower-yielding units further enhanced our quarterly RPD performance. Domestic EGM RPD grew approximately 17% relative to the $23.26 achieved in the 2020 fourth quarter and increased approximately 3% as compared to the $26.42 realized in the 2019 first quarter. Domestic EGM RPD improved month over month throughout the 2021 first quarter, with notable strength witnessed across several impactful geographies during the quarter's final month. As David mentioned, we believe our first quarter domestic RPD performance benefited from several unique macroeconomic factors, many of which we believe were temporary. That said, we would expect to see some level of moderation in our reported domestic RPD as these macro influences gradually taper off. Turning to our international EGM business, our installed base comprised 7,985 units at quarter end, unchanged versus the 2024 quarter, and about 50% of which were active as of the end of the quarter. International RPD was $2.94, down 57% year-over-year, but up approximately 15% on a quarterly sequential basis. A less supportive macroeconomic climate and stringent COVID-19-related operating protocols continue to protract the recovery within our Mexico gaming operations business. That said, we are seeing signs of additional casino openings and improved customer demand throughout the Mexico market, which has us feeling cautiously optimistic about the potential for international RPD to continue to gradually recover as we progress through the remainder of 2021. Our table product segment generated first quarter revenue of $2.8 million, representing an increase of 11% year-over-year and 8% on a sequential quarterly basis. Table products adjusted in the dock was 1.4 million, establishing a new quarterly record for the segment. The total table products install base at quarter end comprised 4,362 units, representing an increase of 12% year over year and 108 units sequentially. We estimate approximately 90% of our table products lease install base was active at quarter end, compared to 80% at the start of the quarter. Looking ahead, operator interest in our growing suite of industry-leading progressive products and our AGS Arsenal site license offering continues to build. Combined, we believe progressives, site licenses, and PACs have the potential to simultaneously expand our cable product installed base and increase our average lease price as we proceed throughout 2021. Finally, our interactive segment delivered first quarter 2021 revenues of $2.1 million, representing an increase of 41% year-over-year. Our real money gaming business led the way in the quarter, with revenues more than doubling year-over-year to a record $1.4 million. Perhaps more importantly, our interactive segment delivered positive adjusted EBITDA for the fifth consecutive quarter, supported by improved revenue performance. Looking ahead, we believe our continued success in integrating our online content with additional B2C operators, introducing additional AGS titles into the online domain, and expanding our suite of online content to include our first online table game offering have the potential to produce improved revenue and profitability within the interactive segment in the quarters ahead. Turning our focus to cash flow in the balance sheet, first quarter CapEx totaled $9.9 million compared to $10.6 million in the prior year period. Growth and intangible CapEx accounted for the majority of our quarterly capital spend at $5.2 million and $3.8 million respectively. Looking out over the remainder of 2021, we expect our quarterly growth CapEx to ramp in the second and third quarters as we look to broaden our presence in the premium recurring revenue segment prior to moderating in the fourth quarter. First quarter free cash flow was near break-even compared to positive $8.2 million in the prior year. The year-over-year free cash flow decline reflects the first quarter 2021 period-related unfavorable working capital changes. As of March 31, 2021, we had $107.3 million of available liquidity, inclusive of our $30 million undrawn revolver, compared to $111.7 million at December 31, 2020. For the full year, we remain confident in our ability to maintain or potentially improve upon our December 31, 2020 liquidity position, with improvement weighted to the back half of the year. Total net debt, which is the principal amount of total debt less cash and cash equivalents, was approximately $543.6 million at March 31, 2021, compared to $540.8 million at December 31, 2020. Our total net debt leverage ratio, which is total net debt divided by adjusted EBITDA for the trailing 12-month period, decreased from 7.5 times at December 31, 2020 to 7.4 times at March 31, 2021. Our modified net debt leverage ratio used for covenant compliance purposes was 4.0 times below the maximum allowable level of 6.0 times. Operator, this concludes our prepared remarks, and we would now like to open the line up for questions.
spk08: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchstone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question is from Chad Bennion from McCary. Go ahead.
spk03: Hi. Good afternoon. Thanks for taking my question. Nice results. Guys, understanding that you're not giving guidance, I wanted to focus on the installed base outlook. David, you noted that the premium market comprises roughly 70,000 units in North America. It sounds like Starwall is performing well and Curve is right around the corner. Can you just kind of help us think about long-term, you know, maybe what some market share goals could be? And then near-term, how are you thinking about rolling out some of the titles that have been successful and could drive some growth in your installed base this year? Thank you.
spk05: Thanks, Chad. So we'll start with, you know, sort of the second half of the question there, because I think on the first half we're not really offering any particular guidance on what we're aiming for on market share of that, you know, sort of premium base, that premium lease base. As a reminder, you know, we're just getting started. I think as Timo and Brad and I were talking the other day, you know, we're probably a solid six months into the launch of our premium product campaign. We're happy with how it's going so far. We've been happy with the momentum of the StarWall. We just launched Curb Premium. Too early to tell there. Of course, happy because it's early, and usually we see good results early with our products like that. But we'll be rolling out Curve Premium throughout the back half of the year, additional in Q2. We think we've got a great lineup, quite honestly, not just in slots, but we're very pleased, Chad, with our R&D effort. there on games and really what their focus has been on since COVID. And of course, I'm just going to sort of plug the other two divisions too for online and tables have done a fantastic job in R&D. But, you know, I know I'm giving you a high level answer here, but yeah, we're not guiding on market penetration or ship share rate or anything like that just yet. It's too early in the game, but as you see on StarWall, so far so good. We're very pleased with results and, you know, early on-curve premium, but again, we're confident that that's going to do well. Our first game that we're launching there is Rake and Bacon Deluxe. It's a known product. It's sort of, we'll call it a fan favorite with our players. So, so far so good, and obviously you'll get more updates on that down the line.
spk03: Okay, great. And then the other side of that, just on the strategic pruning, I know you guys went through a lot of time with this during the past six to nine months. Does the elevated RPD levels that we're seeing right now, given strong regional gaming trends, does that kind of change how you were thinking about maybe pruning more? And where does this stand as you kind of look at it now?
spk05: Yeah, good question and something we've obviously discussed, but we're pretty confident that the pruning process and what we've embarked on here, Chad, is the right thing to do. As far as the integrity base and what we've done there, we think it's been very effective. We're in the closing innings of that. We will continue to look at other areas of the business, If something's not generating revenue or it's generating very low revenues because of location or something of the like, we're still going to get after it and burn it because from a capital allocation and efficiency point of view, we want to be smart. with our money and with shareholder money. And we continue to think it's the right strategy to get underperforming units out. And as we continue to roll out, whether it's class two, you know, for lease product, or if it's class three lease and class three premium lease, We think this is going to continue to improve our performance, efficiency, RPD, and the like. So we're sticking to our guns on it, and obviously it does change the equation when you look at a particular unit at any particular point in time. So, of course, if our team, you know, we have our team in product management and game ops, if they're looking at, a unit now, of course, it might not look like it's ready to be pruned versus maybe what it looked like in the past. So it does impact some things, but the high-level strategy we're sticking to, yeah.
spk03: Thanks, David. Appreciate it. Best of luck. Thanks, Chad.
spk08: Thanks. Our next question is from Barry Jonah from Truist Security. Go ahead. Mr. Berry?
spk04: Oh, sorry about that. I was confused. David, as the industry starts to recover, can you maybe talk about the general pricing environment? I imagine there was some pricing and discounting pressure on the height of COVID, but where are we now?
spk05: so thanks barry and thanks for being on mute because we do that all the time it wouldn't feel like anything near covet if somebody wasn't on mute right so i think pricing is is it has not really changed a whole a whole bunch uh from even 2019 2020 2021 obviously during 2020 that's like hey We can sort of take that off the table and set it aside. But I don't see average sale prices changing dramatically. You can look at certain pockets with certain vendors and, of course, see some change and some modulation there in pricing. But I think that largely it will be rather consistent. And, you know, we don't have anything in our plans to say, oh, there's going to be some dramatic shifts pricing from I think what's good and it was in the prepared remarks is that number one we're starting to see obviously with this performance you know everybody listens to the to the operator calls with the performance we're hearing from the operators on their calls and It's freeing up some capital. It's not just sort of looking down the pipe and saying, hey, we're starting to see sort of some capital loosening up. It's loosening up. I think it's due to, obviously, their great performance. So, you know, for us, Q2, we can say is going to be something better than a modest improvement over Q1, and it'll be – Although O&E is part of our Q2 numbers, O&E should be a modest portion of those figures that we do in Q2. So ASPs in line, no big changes, but capital allocations improving.
spk04: That's great. And then as a follow up, you know, look, I know margins can move on mixed, but you guys, and frankly, the whole industry, I think, have done a great job reining in costs as a result of COVID. But as we look forward, are there meaningful items you can call out that, you know, that are starting to come back or are going to need to come back?
spk07: Yeah, I would say if you look at the cost structure, right, I think it's fairly evident things like T&E have been seriously reduced, right, as we come off of last year. But as, you know, Salesforce starts meeting with customers even more so face-to-face and you've got trade shows start picking back up, you know, you'll see some of that sales-type related cost structure come back into the organization, right? I think as, obviously, the macro environment improves, we get more comfortable spending in some areas that we probably maybe tightened up or over-tightened up, right, coming off of last year. So, you know, you'll see some costs come back into the business. I think that's why, Barry, we tried to give some parameters right. Like, historically, we've always spoken about the 45% to 47% margin. But for the full year, you know, we're trying to talk more down towards the 45% range.
spk04: And anything you'd call out that you think is permanent that doesn't have to come back?
spk07: I mean, across the organization, you know, we did do some headcount reductions, you know. I think we were pretty loud, though, about we reinvested some of those savings we took in certain areas back into R&D, right? So although it may be permanent in one sense, we kind of just reallocated back to R&D. Let's see if it's got anything else.
spk05: You know, I mean, Barry, I think I'm not trying to send any messages here or anything, and I know our marketing folks listen. I think our marketing spend and how we approach it might shift going forward. We might see some dollars reallocated from something like G2E, meaning we'll spend either a modest or significant amount portion less than what we used to at G2E, and really reallocate those dollars in a number of different directions. I would say most of them in marketing itself. But I think that COVID has taught us a few things. And we believe this might be one of the areas where it may not be a true clawback, but reallocation of dollars to become more efficient and more effective with our spend to get a better ROI on those dollars. So we'll probably see you at G2E this year and next year, and we'll let you be the judge of the direction we're taking with that.
spk04: Oh, that's great. Sounds good. Thanks so much, guys. Thanks, Barry.
spk08: Our next question is from David Katz from Jefferies. Go ahead.
spk02: Afternoon, everyone. Thanks for taking my question. I wanted to just talk about something a bit more specific, which is the Kentucky historical racing machine market, which seemingly is growing and getting some traction. What, you know, updated thoughts or initiatives might you have around participating there with some of your stronger content?
spk05: So, you know, the HHR space, you know, we're solidly, squarely in the middle of that with one of our partners that sort of enables our games to be served up in those jurisdictions. Our HHR game content and performance has been phenomenal. We're in Kentucky now. We do quite well down there. We will see orders throughout the balance of the year, and there's some new jurisdictions that are also opening up over the next year. I'll call it six to nine, perhaps, as long as 12 months, but I'll say over the next six to nine months, we'll probably see another jurisdiction or two open up. We're bullish on HHR. We like it. It's obviously fair in our prepared remarks that we've invested there because it helps bolster our product sales. We look forward to the new jurisdictions opening up, and everywhere where we are right now, our game performance is nothing short of fantastic.
spk02: Excellent. Thank you so much. Thanks, David.
spk08: Again, if you want to ask a question, please press star, then 1. Our next question is from Jeff Stantio from Stifel. Go ahead.
spk06: Hey, great. Thanks. Afternoon, guys. Thanks for taking my questions. I wanted to start and ask on the international operations. You know, you talked to it a bit in the prepared remarks, still lagging to U.S., just where Mexico stands on the casino closure and restrictions type basis. But, you know, my question is this, David. As we look further out and sort of see the market opening back up, should we expect to see a similar, you know, thesis or narrative of pent-up demand unwinding as we saw here in the U.S.? ? I know you called out the lack of stimulus, but just curious if there's anything else to contemplate as well as a way to potential for your international office to sort of mirror what we're seeing here right now in the U.S., just more on a lag basis.
spk05: Yeah, I hate to give you this answer, but I have no idea. I don't predict a huge pent-up demand in Mexico and in Latin America. I don't see that. The vaccine rollouts are slow. I think they're going to drag out for quite some time, so I think it's going to come back sort of in patches or in smaller geographies within Mexico and Latin America. Stimulus dollars don't really exist there. So there could be a little something there, but to predict something like that, I think the dynamic in the U.S. versus Mexico and Latin America is very different. Now, if you want to go up north of the border, you know, to Canada, I think the interesting news there is not a lot of Canadian casinos have come back yet. Sadly, COVID has sort of re-spiked there again. I think you could see some pent-up demand in Canada. But the good news is our Canadian customers have remained active with us and haven't really gone away. There's been a little bit of business going on there. And we hope as the casinos reopen there, we'll see some capital dollars released and things like that. But if we're looking for this surge that we saw in the U.S., I'd say that's unlikely to be the case.
spk06: Okay, that's helpful, and I appreciate you offering comments in spite of pretty limited visibility for everyone here on the call. So that's really helpful. Switching gears here over to your premium lease growth strategy. In particular, I wanted to talk about, you know, how you guys view Class 2 versus Class 3 markets for those product segments. I think in the past you commented on something to the tune of 15% of StarWars units being placed in Class 2 markets as Just sort of consistent with how you view the mix of the total premium lease exposure and the growth opportunity moving forward, just trying to get a sense of where the most upside potential here is if you look to grow your footprint there.
spk05: So, you know, without getting into the specifics of, you know, what percent is in which jurisdiction, because I don't have it in front of me right now, and I'll just end up quoting a number incorrectly. I would say in class two, we continue to be pretty strong. When I look at StarWall and what I anticipate with Curve Premium, I anticipate that those products will do very well in class two. So it'll have a pretty significant representation of our footprint. That said, class three is, I don't want to say a D prize. It is one of the prizes because class two is very productive for us. But class three is a very nice prize for us as we move into the jurisdiction, roll out more StarWall. At the moment, You know, we're actually rolling out a new configuration. We sort of refer to it as a football-shaped star wall, which creates a little more, I know, social distancing is not a term we may feel like we use forever, but it takes the middle seat of star wall and it makes it much more productive. In other words, it performs more like an end cap seat. So we expect some good things from that in class three. And as we, you know, roll out, You know, rake and bake in blocks on the curve premium. You know, we're going to be attacking the Class III mark with that. Again, no bold predictions about the mix. We're going after both markets. We're certainly very strong in Class II, and we're looking to improve our situation in Class III.
spk06: Okay, great. Thanks. That's really helpful. Thanks again, and congrats for the next quarter.
spk08: Thanks. Thank you. Again, if you have a question, it's star then 1. OK. The conference is now concluded. Thank you for attending today's presentation.
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