ags20240331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarter ended March 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from to .

Commission file number 001-38357

PLAYAGS, INC.

(Exact name of registrant as specified in its charter)

Nevada	46-3698600
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

6775 S. Edmond St., Ste #300 Las Vegas, NV 89118

(Address of principal executive offices) (Zip Code)

(702) 722-6700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	AGS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 6, 2024, there were 39,454,547 shares of the Registrant’s common stock, $0.01 par value per share, outstanding.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements.” Forward-looking statements include any statements that address future results or occurrences. In some cases you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “would,” “should,” “could” or the negatives thereof. Generally, the words “anticipate,” “believe,” “continue,” “expect,” “intend,” “estimate,” “project,” “plan” and similar expressions identify forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained elsewhere in this Quarterly Report on Form 10-Q as well as those discussed under “Item 1. Business” and “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year-ended December 31, 2023 are forward-looking statements. These forward-looking statements include statements that are not historical facts, including statements concerning our possible or assumed future actions and business strategies. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, many of which are outside of our control, which could cause our actual results, performance or achievements to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements. Given the risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements are made only as of the date of this Quarterly Report. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments unless required by federal securities law. New factors emerge from time to time, and it is not possible for us to predict all such factors.

Unless the context indicates otherwise, or unless specifically stated otherwise, references to the “Company”, “PlayAGS”, “AGS”, “we”, “our” and “us” refer to PlayAGS, Inc. and its consolidated subsidiaries.

Table of Contents

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	CONDENSED CONSOLIDATED BALANCE SHEETS AT MARCH 31, 2024 AND DECEMBER 31, 2023	1

	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023	2

	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AT MARCH 31, 2024 AND 2023	3

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023	4

	NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38

ITEM 4.	CONTROLS AND PROCEDURES	39

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	40

ITEM 1A.	RISK FACTORS	40

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	40

ITEM 4.	MINE SAFETY DISCLOSURES	40

ITEM 5.	OTHER INFORMATION	40

ITEM 6.	EXHIBITS	41

	SIGNATURES	42

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLAYAGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

(unaudited)

	*March 31, 2024*			*December 31, 2023*
*Assets*
Current assets
Cash and cash equivalents	$	40,362		$	50,936
Restricted cash		220			244
Accounts receivable, net of allowance for credit losses $1,187 and $1,251, respectively		70,998			68,499
Inventories		36,547			36,081
Prepaid expenses		6,710			5,473
Deposits and other		3,576			4,145
Total current assets		158,413			165,378
Property and equipment, net		77,433			78,768
Goodwill		290,987			290,486
Intangible assets, net		118,320			123,436
Deferred tax asset		7,781			7,680
Operating lease assets, net		9,214			9,862
Other assets		4,540			4,728
Total assets	$	666,688		$	680,338

*Liabilities and Stockholders’ Equity*
Current liabilities
Accounts payable	$	5,020		$	5,406
Accrued liabilities		35,548			35,926
Current maturities of long-term debt		6,239			6,253
Total current liabilities		46,807			47,585
Long-term debt		532,254			547,499
Deferred tax liability, non-current		2,541			2,326
Operating lease liabilities, long-term		7,920			8,636
Other long-term liabilities		4,227			6,625
Total liabilities		593,749			612,671
Commitments and contingencies (Note 12)
Stockholders’ equity
Preferred stock at $0.01 par value; 50,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock at $0.01 par value; 450,000,000 shares authorized at March 31, 2024 and at December 31, 2023; and 39,378,705 and 38,947,674 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively		393			389
Additional paid-in capital		419,841			417,689
Accumulated deficit		(350,850	)		(353,044	)
Accumulated other comprehensive income		3,555			2,633
Total stockholders’ equity		72,939			67,667
Total liabilities and stockholders’ equity	$	666,688		$	680,338

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLAYAGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) INCOME

(amounts in thousands, except per share data)

(unaudited)

	*Three Months Ended March 31,*
	*2024*			*2023*
Revenues
Gaming operations	$	62,060		$	58,642
Equipment sales		33,913			24,533
Total revenues		95,973			83,175
Operating expenses
Cost of gaming operations(1)		12,074			11,756
Cost of equipment sales(1)		15,656			12,333
Selling, general and administrative		18,110			17,205
Research and development		10,918			10,789
Write-downs and other (gains) charges		(24	)		204
Depreciation and amortization		19,439			19,142
Total operating expenses		76,173			71,429
Income from operations		19,800			11,746
Other expense (income)
Interest expense		13,980			13,704
Interest income		(685	)		(357	)
Loss on extinguishment and modification of debt		1,636			-
Other income		(137	)		(78	)
Income (loss) before income taxes		5,006			(1,523	)
Income tax (expense) benefit		(661	)		1,189
Net income (loss)		4,345			(334	)
Foreign currency translation adjustment		922			3,413
Total comprehensive income	$	5,267		$	3,079

Basic and diluted income (loss) per common share:
Basic	$	0.11		$	(0.01	)
Diluted	$	0.10		$	(0.01	)
Weighted average common shares outstanding:
Basic		39,205			37,811
Diluted		39,346			37,811

⁽¹⁾ exclusive of depreciation and amortization

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLAYAGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(amounts in thousands)

(unaudited)

	*Three Months Ended March 31,*
	*2024*			*2023*
Common stock
Balance, beginning of period	$	389		$	378
Vesting of restricted stock		4			1
Balance of common stock, end of period		393			379
Additional paid-in capital
Balance, beginning of period		417,689			406,436
Stock-based compensation expense		2,106			2,544
Vesting of restricted stock		(4	)		(1	)
Stock option exercises		50			-
Balance of additional paid-in capital, end of period		419,841			408,979
Accumulated deficit
Balance, beginning of period		(353,044	)		(353,125	)
Net income (loss)		4,345			(334	)
Restricted stock vesting and withholding		(2,151	)		(27	)
Balance of accumulated deficit, end of period		(350,850	)		(353,486	)
Accumulated other comprehensive income (loss)
Balance, beginning of period		2,633			(4,328	)
Foreign currency translation adjustment		922			3,413
Balance of accumulated other comprehensive income (loss), end of period		3,555			(915	)
Total stockholders' equity	$	72,939		$	54,957

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLAYAGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	*Three Months Ended March 31,*
	*2024*			*2023*
Cash flows from operating activities
Net income (loss)	$	4,345		$	(334	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		19,439			19,142
Accretion of contract rights under development agreements and placement fees		1,576			1,545
Amortization of deferred loan costs and discount		597			628
Write-off of deferred loan costs and discount		742			-
Stock-based compensation expense		2,106			2,544
Provision for bad debts		137			10
(Gain) loss on disposition of long-lived assets		(44	)		83
Impairment of assets		20			121
Benefit (expense) from deferred income tax		270			591
Changes in assets and liabilities related to operations:
Accounts receivable		(2,357	)		(4,393	)
Inventories		1,025			(1,880	)
Prepaid expenses		(1,230	)		(2,286	)
Deposits and other		592			(467	)
Other assets, non-current		784			1,763
Accounts payable and accrued liabilities		(1,677	)		(12,900	)
Net cash provided by operating activities		26,325			4,167
Cash flows from investing activities
Proceeds from payments on customer notes receivable		-			598
Software development and other expenditures		(5,852	)		(4,973	)
Proceeds from disposition of assets		12			11
Purchases of property and equipment		(9,432	)		(8,739	)
Net cash (used in) investing activities		(15,272	)		(13,103	)
Cash flows from financing activities
Repayment of first lien credit facilities		(16,438	)		(1,438	)
Payment of financed placement fee obligations		(1,441	)		(1,356	)
Proceeds from stock option exercise		50			-
Payment of deferred loan costs		(5	)		-
Payment of previous acquisition obligation		-			(55	)
Payment on finance leases and other obligations		(2,177	)		(504	)
Repurchase of stock		(1,655	)		(27	)
Net cash (used in) financing activities		(21,666	)		(3,380	)
Effect of exchange rates on cash, cash equivalents and restricted cash		15			(7	)
Net decrease in cash, cash equivalents and restricted cash		(10,598	)		(12,323	)
Cash, cash equivalents and restricted cash, beginning of period

SEC Form 10-Q filed by PlayAGS Inc.