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PlayAGS Appears Well Positioned For Casino Rebound

Trending 1 year ago
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A Quick Take On PlayAGS

PlayAGS (NYSE:AGS) reported its Q3 2022 financial results connected November 12, 2022, beating gross and EPS estimates.

The patient provides physics gaming machines and online gaming to nan gaming manufacture in nan U.S. and overseas.

While AGS appears positioned to use from a much robust and 'normal' casino business environment, location isn't overmuch visibility arsenic to erstwhile that use will show up successful nan financials.

Until we summation greater inclination visibility, I'm connected Hold for PlayAGS.

PlayAGS Overview

Las Vegas, NV-based PlayAGS was founded successful 2005 arsenic a commercialized gaming supplier. AGS offers physics slot machines, array games and equipment, and societal online casinos for B2B and B2C.

Management is headed by President and CEO David Lopez, who has been pinch nan patient since 2014. Lopez was antecedently nan President of Global Cash Access from 2012 - 2014 and COO of Shuffle Master from 1998 - 2011.

PlayAGS offers products successful 3 segments: Table Products, Interactive Social Casino Games, and Electronic Gaming Machines [EGM]. The institution is simply a starring designer and supplier of EGMs and related products and services.

The company's geographic attraction has been North America pinch agency locations successful California, Texas, Nevada, Oklahoma, and Georgia. AGS has hundreds of labor astir nan globe including Australia, Israel, and Mexico.

PlayAGS's Market

According to a 2022 marketplace research report by Data Bridge Market Research, nan Global Casino Gaming Equipment marketplace size was an estimated $7.1 cardinal successful 2021 and is forecast to scope $11.1 cardinal by 2029.

This represents a projected CAGR (Compound Annual Growth Rate) of 5.5% during nan play of 2022 to 2029.

The main factors driving nan market's maturation are nan increasing fame of reconfigurable physics gaming machines and an summation successful casino gaming worldwide.

Also, owed to being user-friendly and easy upgradeable to different games, EGMs are gaining fame successful modern casinos.

A cardinal marketplace situation is nan readiness of substitutes specified arsenic lotteries, equine title betting, sports betting, and casino games. Constant invention is required successful nan manufacture to stay competitive.

The institution went nationalist successful January 2018 astatine a value of $16.00 per share.

PlayAGS's Recent Financial Performance

  • Total gross by 4th has risen according to nan pursuing chart:

Total Revenue

Total Revenue (Seeking Alpha)

  • Gross profit separator by 4th has trended little successful caller quarters:

Gross Profit Margin

Gross Profit Margin (Seeking Alpha)

  • Selling, G&A expenses arsenic a percent of full gross by 4th person besides trended little much recently:

Selling, G&A % Of Revenue

Selling, G&A % Of Revenue (Seeking Alpha)

  • Operating income by 4th has grown successful caller reporting periods:

Operating Income

Operating Income (Seeking Alpha)

  • Earnings per stock (Diluted) person turned affirmative recently:

Earnings Per Share

Earnings Per Share (Seeking Alpha)

(All information successful nan supra charts is GAAP)

In nan past 12 months, AGS's banal value has fallen 219.4% vs. that of nan International Game Technology PLC's driblet of 11.3%, arsenic nan floor plan indicates below:

52-Week Stock Price Comparison

52-Week Stock Price Comparison (Seeking Alpha)

Valuation And Other Metrics For PlayAGS

Below is simply a array of applicable capitalization and valuation figures for nan company:

Measure [TTM]

Amount

Enterprise Value / Sales

2.6

Price / Sales

0.8

Revenue Growth Rate

26.2%

Market Capitalization

$247,700,160

Enterprise Value

$774,783,170

Operating Cash Flow

$76,709,000

Earnings Per Share (Fully Diluted)

-$0.54

(Source - Seeking Alpha)

As a reference, a applicable partial nationalist comparable would beryllium International Game Technology PLC (IGT); shown beneath is simply a comparison of their superior valuation metrics:

Metric [TTM]

International Game Technology

PlayAGS, Inc.

Variance

Enterprise Value / Sales

2.7

2.6

-3.0%

Revenue Growth Rate

6.5%

26.2%

301.7%

Operating Cash Flow

$1,020,000,000

$76,709,000

-92.5%

(Source - Seeking Alpha)

Commentary On PlayAGS

In its past net telephone (Source - Seeking Alpha), covering Q3 2022's results, guidance highlighted nan improving recurring gross aspects of nan firm's business operation owed to nan description of its premium crippled offerings.

The institution besides noted nan motorboat of its Spectra gaming cabinet, 'with a reported capacity astatine astir 3x location average.'

AGS has revamped its crippled improvement team, providing 'added extent and variety' for its increasing contented portfolio.

As to its financial results, full gross roseate 16.3% year-over-year, while gross profit separator dipped, apt owed to a displacement successful activity toward nan 'for sale' marketplace pinch little margins than nan recurring gross model.

Management did not disclose immoderate institution retention complaint metrics.

SG&A expenses continued to moderate, assisting nan firm's results for operating income and net per share.

For nan equilibrium sheet, nan institution ended nan 4th pinch $43.1 cardinal successful cash, equivalents and short-term investments.

Over nan trailing 12 months, free rate travel was $31.1 million, of which superior expenditures accounted for a hefty $45.6 million. The institution paid $16.4 cardinal successful stock-based compensation successful nan past 4 quarters.

Management said it doesn't expect further casino closings aft a play of immoderate standard simplification owed to nan pandemic.

Also, proviso concatenation challenges look to beryllium moderating to immoderate degree, though ostentation continues to wounded margins.

As nan casino business continues to return to much normal seasonal activity, nan firm's business cadence whitethorn do truthful arsenic well.

However, nan higher liking complaint situation is affecting its bottommost statement pinch higher indebtedness work costs.

Regarding valuation, nan marketplace is valuing AGS astatine a akin EV/Revenue aggregate arsenic a overmuch larger IGT, contempt AGS's faster maturation rate.

The superior consequence to nan company's outlook is an economical slowdown reducing user discretionary spending and causing gambling operators to slow their strategy purchases, elongating income cycles successful nan process.

A imaginable upside catalyst to nan banal could see a 'short and shallow' macroeconomic driblet aliases a region to Federal Reserve liking complaint increases, removing upward unit connected costs of superior assumptions.

Looking up is simply a spot of a mixed container for AGS. On nan 1 hand, it appears to person a coagulated caller furniture pinch nan Spectra mixed pinch each 7 of its contented studios successful afloat cogwheel producing much and amended value content.

On nan different hand, macroeconomic conditions are cloudy astatine champion and nan patient (and stock) is disadvantaged by nan higher costs of superior environment, some successful position of its higher liking disbursal and little valuation assumptions.

While AGS appears positioned to use from a much robust and 'normal' casino business environment, I'm conscionable not judge erstwhile that use will show up successful nan financials.

Until then, I'm connected Hold for PlayAGS.

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Editor: Naga



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