PlayAGS, Inc.

Hello everyone and welcome to the PlayAGS Q2 2021 earnings call. My name is Charlie and I'll be coordinating the call today. You will have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypad. I will now hand over to Brad Boyer, Head of Investor Relations to begin. Brad, please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to the PlayAGS Incorporated second quarter 2021 earnings conference call. With me today are David Lopez, CEO, and Kimo Akiyona, CFO. A slide presentation reviewing our key operational and financial highlights for the second 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 Q2 2021 financial performance and offer perspective on our current financial outlook for the business. This conference call will include the use of 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 in our business. 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.

Thanks, Brad, and good afternoon, everyone. Over the past several weeks, I have frequently been asked by investors and business colleagues, is this as good as it gets for the U.S. land-based gaming industry? After reflecting long and hard, I often reply with a definitive yes. Maybe. In my over 20-year career in gaming, I cannot recall a time in which so many records were being shattered in such a widespread fashion. It seems that with each domestic gaming operator's earnings report, long-standing records for margin or EBITDA are being broken. Similarly, as states report monthly gaming revenue data, more often than not, records are being rewritten. As it relates to AGS, We're able to leverage our over 15,000-unit domestic EGM installed base to benefit from the market strength throughout the second quarter, and in turn, set some records of our own. Notably, our second quarter domestic EGM RPD and domestic EGM gaming ops revenue each established new records for the company. Although encouraged by our record setting gaming ops performance and despite some of the broader market strength continuing into July, we continue to believe that unique macroeconomic factors are influencing the overall domestic gaming market. While we expect the market to eventually graduate to a new normal as support influences taper off, we believe our improved execution and product momentum across all three of our business segments position us for growth and share-taking in the quarters ahead. As you may remember, I commented on a recent earnings call that I believe we had the best new product lineup in our company's history. While simply a prognostication at the time, I'm proud to say that the enhancement made to our product portfolio, business practices, and personnel that gave me the confidence to make my original comment are already beginning to bear fruit. To that end, a desire to broaden our presence in the lucrative premium recurring revenue slot segment remains one of the most prominent and compelling strategic growth initiatives at AGS. During the second quarter, we achieved two major milestones within our premium game business. First, we leveraged our one-of-a-kind LED canvas display and consistent game performance to grow our Orion Starwall install base to over 500 games. As you may recall, we've only been actively placing Starwalls into the field without the overhang of COVID-related casino closures for effectively two quarters, making the ascent to over 500 games an impressive accomplishment. More importantly, supported by the steady game performance, and the introduction of additional product configurations, demand for the StarWall continues to build, which should allow for further growth in the quarters ahead. As a follow on the StarWall, our team recently executed a thoughtful and successful commercial launch of our second premium game concept, the Orion Curve Premium. Although early in the product's life cycle, initial Curve Premium installs have been performing well above house average helping to further solidify operator demand for the product. Ultimately, I envision our premium game strategy benefiting our company in three unique ways. First, when executed well and as we have witnessed with our initial installs, premium games can deliver RPDs well ahead of our historical game average in both Class 2 and Class 3 markets. Second, We should be able to leverage the strong RPD performance and the capital efficiency benefits derived from using our core portrait and curved screen cabinets to deliver our premium games to dramatically improve our returns on invested capital and free cash flow generation over time. Finally, our premium strategy broadens the overall addressable market for our products as we now have the products to penetrate the over $1 billion domestic premium game market. a capability did not exist prior to the initial COVID outbreak. Turning to our core EGAM business, I'm encouraged by the early indications of improved execution and accelerating product momentum being achieved throughout our game development organization. To that end, our recently released Captain Rich's title, a member of our Ultimate Choice Jackpots family of games, and available on our Orion Curve cabinet, achieved a top 15 ranking in the july eiler's game performance reports new core video reel category looking beyond captain riches we have launched additional game themes that we believe have the potential to help further improve our product momentum and recapture replacement market share all told we expect our egm sales business to recover over the coming quarters led by our improved game content execution and performance, further strengthening of the North American replacement demand, and our continued success in capitalizing upon new product adjacency opportunities such as HHR. Looking beyond EGMs, I'm equally as encouraged by the momentum in our table game products and interactive businesses, both of which delivered record adjusted EBITDA in the quarter. Within tables, we continue to leverage our strong performing and expanding suite of unique content to grow our table product install base. Additionally, we were live with 10 AGS Arsenal site license contracts at the end of the second quarter with the signed deals generating over $2 million of high margin and recurring annualized revenue. Looking ahead, I believe unwavering demand for our core table products, strengthened by our recently launched Bonus Spin Extreme Progressives, along with the ongoing site license discussions and the pending introduction of our Pax S card shuffler, have the potential to steepen the growth trajectory we're able to achieve within our table products business. With respect to Interactive, we continue to execute our strategy to accelerate growth within our real money gaming business. RMG Revenues and Adjusted EBITDA established a new record in the second quarter driven by successful launches into the new regulated jurisdictions, back-end integrations with additional B2C operators, and the introduction of additional AGS content into the online domain. Importantly, the momentum we saw in the second quarter has continued into July, which highlights our RMG team's improved execution. Although relatively small today in terms of absolute EBITDA dollars generated, we continue to believe that the superior growth attributes and strong pure play trading multiples should allow our table product and interactive businesses to meaningfully enhance shareholder value moving forward. In closing, I would like to thank all of our AGS team members for their contributions and commitment to the company during what continues to be a uniquely challenging and stressful time for many. Your efforts have not gone unnoticed as AGS was recently named the best and brightest company to work for in both the Atlanta and national categories for the fifth consecutive year. Although it's become in vogue of late for companies to tout strong corporate culture, I believe our recognition by the Best and Brightest program speaks to our employees' dedication and commitment to fostering a welcoming and inclusive corporate work environment. With that, I will turn the call over to Kimo to provide additional perspective on our financial results, liquidity position, and current outlook for the business.