PlayAGS, Inc.

Good afternoon and thank you for attending today's play AGS Q2 2022 earnings call. My name is Austin and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Brad Boyer. SCP Corporate Operations, and Investor Relations. Brad, you may begin.

Thank you, Operator, and good afternoon, everyone. Welcome to the PlayAGS Incorporated Second Quarter 2022 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 second quarter ended June 30, 2022. can be found on our investor relations website, investors.playags.com. On today's call, we will provide an overview of our Q2 2022 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 our actual results to differ materially from our forward-looking statements, please refer to the earnings press release 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 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. As I reflect upon our second quarter financial performance, I can't help but think back to the sentiment in the market exactly one year ago. As you may recall, most investors were wondering if the trends they were seeing across the broader U.S. game industry were as good as it gets. The stars all aligned for our casino operator partners in Q2 of 2021, resulting in record-setting gaming revenue for nearly every operator in the major US markets. At the time, though we were able to leverage the strength in the broader market to establish some new records of our own, I was fairly confident Q2 2021 did not reflect peak performance for AGS. Our 2022 second quarter results validated those views from one year ago, as we were able to build upon several records established last year. Let's take a few minutes to review some of the record-setting highlights from the quarter. First, Q2 2022 domestic EGM gaming ops revenue increased 1% year-over-year to a new company record of $46.2 million. Although modest growth, we are extremely encouraged by this accomplishment, considering it was achieved against the prior year period that comprised the greatest three months in the history of gaming. Second, our install base of premium EGM products nearly doubled year over year, accounting for 12% of our domestic EGM install base at the end of Q2 2022 compared to 6% this time last year. Our continued success in the premium gain category serves to highlight the strong returns we have been able to generate on tactical investments into R&D, sales, and product management teams. Third, our table product segment continues to fire on all cylinders, with revenues and adjusted EBITDA setting new all-time records in the quarter. Early commercialization of our PAX S single-deck shuffler, accelerating demand for our bonus spin extreme progressive, and growing customer adoption of AGS site licenses drove our record-setting table games performance. With all that said, I imagine some of you are probably wondering, If Q2 2021 wasn't as good as it gets for AGS, how should we think about Q2 of this year? From my perspective, though several new records were established in the quarter, I believe we can significantly build upon our recent success moving forward. Looking ahead, while I'm encouraged by our recent financial performance and excited about the direction which we are heading from a product perspective, I'm equally as enthused by the sales and product management teams we have in place to monetize our R&D investments. Over the past 24 months, we've added considerable talent to the front end of the business, which has directly supported our impressive premium install base growth and record domestic gaming ops revenue. Our recent success clearly demonstrates the power of having our R&D team work in concert with the front end of the business to allow our products to reach a broader subset of key customers. In addition to our execution-led growth catalyst, we continue to search for strategic opportunities capable of transforming the long-term growth trajectory of our business. Recent examples of these types of opportunities include our successful expansion into the historical horse racing, or HHR market, and continued exploration of avenues to accentuate growth outside of our core North American markets. Additionally, We continue to look for opportunities to further leverage key competitive advantages, including our extensive game content portfolio, unique development capabilities, and deeply rooted customer relationships to strategically broaden our Class 2 business. Recently, these efforts have extended well beyond the borders of our largest Class 2 markets. as we were able to benefit from a favorable June Supreme Court ruling to execute growth opportunities presented to us within the Texas Class II market, a market we have steadfastly supported for a very long time. While it's still too early to put hard numbers around what the Supreme Court ruling will mean for us in terms of incremental revenue or EBITDA in the long run, we believe our historical support of tribal operators within the state could present us with meaningful growth opportunities as our customers elect to expand the scale and scope of their existing Class II operations. Looking beyond EGMs, we see an equally compelling growth trajectory with our table product and interactive businesses. Supported by the three-pronged growth engine of Paxos, Bonus Spin Extreme, and AGS Arsenal, we continue to identify a long runway for growth within our table games division. Over the past few years, we have proven to be the most innovative product company in the industry, most recently highlighted by the launch of a homegrown shuffler, the Pax S. I know we have covered it on previous calls, but this is the first competitive single-deck specialty shuffler to be released in North America in over 15 years, breaking up a dominant position held by one of our competitors. Turning to interactive, we continue to make progress on our strategic plan to further leverage our high-performing game content and strong customer relationships to significantly grow our share of the North American RMG market. Q2 provided a glimpse of where we believe our RMG business is heading, as North American RMG revenue increased by over 15% sequentially. As with the land-based business, we continue to be encouraged by the strong performance and AGS game content in the online channels. To that end, I think it's important to remind everyone that we have achieved a top five supplier ranking in the Eilers Online Gaming Performance Report for six consecutive months. Moving forward, as we execute upon initiatives to accelerate the flow of AGS content, broaden our B2C operator-partner relationships, and expand our reach into untapped North American jurisdictions, we believe we will see a material acceleration of growth within our interactive business in the quarters ahead. Before closing, I would like to share some perspective on the trends we have observed within the business through July. Despite swirling uncertainty over the health of the consumer and the direction of the global economy, we have been encouraged by the incredible consistency demonstrated within our business quarter to date, as we have witnessed no meaningful change in July trends as compared to our strong June results. I would like to remind everyone we drive over 70% of our annualized revenue from recurring sources and our balance sheet is in great shape with over 70 million of available liquidity at quarter end and no maturities until 2027. With that, I will turn the call over to Kimo to walk you through our second quarter results in greater detail.