PlayAGS, Inc.

Hello, everyone, and welcome to PlayAGS Q3 21 earnings call. My name is Emily, and I will be coordinating the call today. During the presentation, you will have the opportunity to ask a question by pressing star and then one on your telephone keypads. I now have the pleasure of handing the call over to Brad Boyer, Vice President of Investor Relations. Please go ahead, Brad.

Thank you, operator, and good afternoon, everyone. Welcome to the PlayAGS Incorporated third quarter 2021 earnings conference call. With me today are David Lopez, CEO, and Kimo Akiyona, CFO. The slide presentation reviewing our key operational and financial highlights for the third 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 Q3 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. Reconciliation 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 SDC for more information. With that, I would like to turn the call over to our CEO, David Lopez.

Thanks, Brad, and good afternoon, everyone. Our third quarter results once again reflect our growing product momentum and improved execution. While our financial performance was driven by a multitude of factors, I would like to highlight a few that I view as most impactful. First, in advance of the initial COVID outbreak, we invested in broadening the scale and scope of our game development franchise. Though the return on game dev investments takes time to recognize, I'm confident our third quarter results would have looked a lot different if not for the contributions made by those additions to our game development team. We continue to leverage recent hires with significant industry experience to apply greater analytical rigor around all facets of our gaming operations business. In addition to thoroughly evaluating new deployed machine CapEx, our team also ensures our existing assets are oriented to optimize our return on investment, which occasionally includes strategic pruning opportunities. All told, I expect the recent changes in people and process to create a franchise with higher RPD potential and superior returns on deployed capital, which combined will enhance our free cash flow generation over time. Finally, we have worked diligently to carefully assemble a deep content roadmap for each of our cabinets to strengthen the returns for AGS and our operator partners. In the end, I believe our product management improvements and recent game development investments should better position our products for success in the quarters ahead. Thanks in no small part to the initiatives I have just highlighted, we continue to see considerable momentum building behind all areas of our business. Turning first to our premium game initiative, demand strengthened throughout the quarter with premium games accounting for over 8% of our domestic install base at quarter end compared to approximately 4% at the start of the year. Supported by Curve Premium's strong performance, our premium gains generated nearly 13% of our domestic GameOps revenue in the quarter. Given our superior revenue performance, I'm confident our premium strategy will gradually strengthen our returns on invested capital and allow for continued growth of our footprint both in Class 2 and Class 3 markets. Shifting of slot product sales. While the broader North American slot replacement market continues to recover from post-COVID lows, it's clear that our core content performance has helped to accelerate our recovery. The volume of quality content available today within our core game portfolio is the best in the company's history, with three families of games performing nicely above house average. Importantly, our improving execution has not been lost on the market. as the strong performance of our Captain Riches, Tiki Fortune, and Lucky O'Reilly titles allow us to achieve the largest percentage point growth in the October Eilers performance report in the new core games category. Ultimately, I believe the added depth, quality, and diversity of our core content portfolio could allow us to take share as the domestic replacement market further recovers. Looking beyond slots, the operational momentum also extended to our interactive and table product segments. In the interactive space, our performance remains relatively consistent as we begin to ramp spending to prepare for future growth in what we believe is one of the most promising segments. In our table segment, third quarter revenue and adjusted EBITDA established new all-time records. Notably, we saw sequential growth across all table product verticals, including progressives, side bets, premium games, and shufflers. Looking ahead, I see no signs of momentum slowing as demand for virtually all new table products remain strong. Perhaps most importantly, the momentum witnessed throughout the third quarter carried over to the Global Gaming Expo. Exiting G2E, we received overwhelming positive operator feedback on the product showcase throughout our booth. On the slot side, operators were particularly complimentary of the depth of content, enhanced graphics, and new gameplay mechanics. The feedback on our table products was equally as encouraging, with our bonus spin Extreme Progressive receiving the Gold Award in the annual GGB Gaming and Technology Awards. All told, G2E served as a formal opportunity for us to showcase our team's output over the past 18 months. Judging from the customer response, it appears operators were collectively supportive of our current strategic path. Before turning the call over to Kimo, I would be remiss to ignore the topic of inflationary costs and supply chain disruption. As the supplier of a great number of manufactured gaming products, we are not immune to these macroeconomic factors. That said, I would like to highlight the actions our team has taken to mitigate the impact on our business. First, our sales leadership has initiated a price integrity program to limit discounting on all for sale and recurring revenue products. Additionally, well before the onset of the supply chain disruption, we undertook measures to value engineer each of our slot cabinets. And last but not least, we've extended our material planning timeline to help lock in future inventory to the best of our ability. Although we can't eliminate the present global supply chain issues, we believe our ops and procurement teams have taken the right actions to mitigate the overall impact on our business. In closing, I would like to reiterate just how excited I am about the prospects for our company. Over the past 18 months, we planted the seeds of change at AGS. And with a firm foundation in place, I'm confident in what lies ahead as we transition into harvest mode. I would like to thank our employees for their contribution to our company's success and look forward to further updating you on our next call. With that, I'll turn the call over to Kimo.