PlayAGS, Inc.

Ladies and gentlemen, welcome to the PlayAGS Incorporated Q1 2020 Free Earnings Conference call. My name is Glen and I'll be the operator for today's call. If you'd like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. I'll now hand you over to your host, Brad Boyer, SVP of Investor Relations to begin. Brad? Chris, go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to the PlayAGS Incorporated first quarter 2023 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 ended March 31, 2023, can be found on our investor relations website, investors.playags.com. On today's call, we will provide an overview of our Q1 2023 financial performance and 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. I would like to start off today's call by highlighting five of our most noteworthy accomplishments in the first quarter. First, total revenues increased 14% year-over-year to a company record $83 million, with growth achieved across all three segments of our business. Revenues have now increased sequentially for nine consecutive quarters, supported by a consistent product and operating momentum within the business. Second, adjusted EBITDA approved to a new first quarter record of $36.5 million, up over 11% versus the prior year and ahead of Q1 2019 levels. Third, domestic EGM recurring revenue increased 10% year over year to a record $47.7 million, nicely exceeding the 6% to 7% average rate of growth in market-wide gross gaming revenue. Our domestic recur business has now set revenue records in three of the past four quarters. Fourth, global EGM sales topped 1,100 units for the second consecutive quarter, up over 15% versus the prior year and nearly 10% ahead of Q1 2019. Based on the latest EILRS data, we believe our unit sales growth outpaced the level of growth witnessed in the broader sales market during the first quarter. Finally, table products revenue increased by nearly 20% versus the prior year, reaching a new record of $4.1 million. Overall, the consistent improvement reflected in our recent financial performance speaks directly to the returns we have realized on the strategic investments in our R&D and operational teams over the past several years. These investments continue to produce greater resiliency and vibrancy in our operating performance today, while also strengthening our foundation for long-term growth. As I look ahead, my level of excitement about the long-term prospects for our company is the same as it was when we last gathered a couple months ago. Since that time, our newest cabinet, Spectra 43, hasn't skipped a beat. extending its run at the top of the Eilers cabinet report to seven consecutive months. Spectra's two launch titles, Long Bow Bow and Shamrock Fortunes, continue to support the cabinet's chart topping performance with each theme achieving a top 10 ranking for Eilers. We are excited about the buzz Spectra is creating around the AGS brand and continue to consider our most successful new product launch ever. Looking beyond Spectra, the calculated transformation and expansion of our content creation teams over the past several years has armed the business with the deepest and most diverse game content offering in the company's history. We currently have seven game development studios creating over 75 titles per year, nearly doubling our game output compared to just a few years ago. In addition to added breadth of our portfolio, We remain laser focused on ensuring we maintain our reputation as a provider of high-performing content featuring themes and game mechanics players love. This focus was prominently reflected in the most recent Eilers Game Performance Report as AGS titles, including one of our initial game themes in the high-denomination category, accounted for over 10% of the top 50 new core games. Supported by the teams we have in place today, we are now able to deliver new high-performing hardware targeting a variety of market segments and an increasingly diverse content portfolio, expanding multiple game category types with greater consistency. This consistency positions us for sustainable market share growth in the quarters and years ahead. In addition to leveraging very strong R&D organization, we are also benefiting from the work of our sales and product management teams. By carefully investing in our customer-facing teams, we have successfully increased the frequency of our interactions, resulting in better sell-through of our products. Along with this, we have deployed a stronger go-to-market strategy which better positions our products for success in the field. During the first quarter, We sold games to over 110 different customers, including five of our largest corporate customers, representing an increase of more than 45% versus the prior year. All told, given the diverse array of customer accounts touched, cabinet types sold, and market segments penetrated, I consider Q1 2023 the healthiest EGM sales quarter in our company's history. Moving outside of EGM sales, the initiatives underway to further strengthen our domestic EGM recurring revenue business continue to deliver consistent results as reflected by our record-setting performance in the quarter. During Q1, we successfully grew our premium EGM footprint for the 13th consecutive quarter, pushing our premium mix to over 15%. Although our premium strategy has come a long way in a relatively short period of time, we continue to see considerable growth opportunities in front of us, supported by new customer activations, game theme launches, and hardware introductions. In addition to our success on the premium game front, we continue to leverage the added depth of our game content portfolio and product management team to further optimize our core unit performance. The compound benefit of our premium market penetration and optimization initiatives has structurally transformed the composition of our domestic install base, resulting in eight consecutive quarters of $30-plus domestic RPD performance. Looking beyond EGMs, the momentum building within our table products business is as strong as it's ever been. Our PACS S single-deck shuffler footprint grew by more than 40% sequentially, topping 200 units at the end of the quarter. The competitively priced shuffler's reliability and our service team's laser focus on ensuring a seamless conversion experience continues to resonate with our customers. With several multi-site operators currently trialing packs and re-buy momentum amongst early adopters building, we remain in the very early innings of realizing the product's full growth potential. In addition to PACS, we continue to leverage our commitment to being an innovator of choice to expand the reach of our progressive products and operators table pits. To that end, our bonus spin extreme footprint eclipsed 500 units at the end of Q1, with units installed across 20 jurisdictions. While BSX is off to a hot start, we see considerable growth in front of us as the product was installed at fewer than 50 casinos at quarter end. Finally, our interactive business is quickly approaching launch mode. Supported by forthcoming introduction of a new platform, expanded game content portfolio, and recent new customer and market activations, we continue to expect the growth trajectory within the business to improve in the back half of the year. With a record first quarter behind us, our focus now shifts to Q2 and beyond. While we are acutely aware of the macroeconomic uncertainty in the financial markets today, we believe our ability to leverage the unique growth catalyst I just described, coupled with our outsized recurring revenue mix and strong liquidity position, provide a level of resiliency within our business that is grossly underappreciated by investors today. These same attributes also provide a path to sustainable multi-year growth, in turn, further balance sheet deleveraging, positioning the company to outperform over the longer term. In closing, I would like to thank our AGS team for the continued hard work, focus, and execution, which remains the foundation of our record-setting financial performance. I continue to believe we have the strongest team and the deepest product lineup in my tenure, and I'm encouraged by and look forward to what lies ahead for our company. With that, I will turn the call over to Kimo.