AGS - Earnings call transcript Q2 2019

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Operator

Good day and welcome to the AGS Second Quarter Earnings Conference call. All participants will be in listen only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Julia Boguslawski, Chief Marketing Officer and Executive Vice President of Investor Relations. ahead. go Please

Julia Boguslawski

a good XXXX, quarter and are Welcome the our for website, We to Lopez, operational Relations our Thank financial Investor can and earnings afternoon be conference second highlights posted CFO. Akiona, XXXX and second today presentation, call. AGS's reviewing CEO; key quarter you the Kimo everyone. slide which With investors.playags.com. David in me found

our projections performance, financial provide to with regarding in you future includes addition forward-looking is XXXX statements. events, refers to characterizations market This Today's statement call is a or future statement forward-looking outlook. our information financial call or conference that QX on projections based of today. conditions, including Any to other expectations, assumptions

differ looking from these obligation materially make no in expressed statements, update we may our forward to those Actual disclosures. and results

cause about in documents XX-K, we to please the these to titled the may For earnings forward-looking section particularly well Risk more risks materially that as statements, that actual on information of Form from annual today report as refer results release in factors Factors. differ our issued described

financial earnings the refer in for to with accordance for filings prepared financial commentary GAAP. for release provides trends. also today SEC financial for our non-cash non-GAAP We an that should Please GAAP in not information results operating our reported measures Our These isolation the in metrics these with more a of and can between additional issued information. in substitute include believe tool evaluating use from investors non-GAAP or use and to measures. be ongoing as will Reconciliations found today. our measures results considered be

CEO, turn I'd to over David like that, call the With Lopez. to our

David Lopez

joining and Julia, everyone, you call. you, Thank AGS's QX for earnings thank

Slide start business a in against close revised how operational our second few words segment. those some I'll financial using our review providing please strategic along call overview brief year. the I'll initiatives our each from for highlights, our on slide on with we're X. by executing quarter a of Kimo, turn to with outlook the deck, For color After the

results was ops, $X.X Despite were our quarter, In loss mixed. growth game quarter, one-time $X.X and of the X% EGM table impairments EGM period, of in to $XX.X cover by million year-over-year, increased million, the will Net real bright by products from iGaming or and our year-over-year domestic money driven up points in international in gaming sales. which Kimo second driven these the related later. revenue million business, prior-year

X expenses the to during million. million $XX.X due to decreased year-over-year $X.X and Integrity higher X growth acquisition, the of generated total year-over-year of % million, recurring % $XX.X to SG&A revenue which of operating the period, R&D. revenue EBITDA benefited Adjusted related QX to from contributing

Additionally, various EGM detail. by was greater our to in related on Kimo Oklahoma factors recurring negatively revenue which touch footprint, impacted will

across XX I'll significant % X, you quarter, our Mexico to were Canada latest estimation with in nearly solid in achieved in quarter, in-line and the the the Nevada share approximately markets Canada, XXX for and sold in is quarter, Michigan now We and X% states year-over-year, California, sales total the normal sold Slide Mexico. slot Alabama, survey, the plus on segment EILERS-FANTINI resulting placements quarterly we share addition casinos EGM for quarter. X,XXX up Florida, in in walk through our performance which the EGMs Pennsylvania. of based XX on units, at range. second with segment among the most ship and placements ship Beginning

those remain second XX% of many market, QX. grow more placed Orion products Orion strongest with opportunities % quarter accounting were than for Portrait Orion the the the of one We to of now of performing cabinet and revised footprint. the as be X,XXX in units to Nearly XXX continues lease. of our in on our Portraits with have orders XX sold Portrait

Orion game studio. Slant various accounted for XX Australian by titles our sales, driven % of by developed

share. recent Mexico which % driven as installed approximately our Slant and machines, customers inclusion testament reached our We ICON up and our reported footprint, in sold with driven in includes by % Mexico, and to XX,XXX up which recurring XX deepening leased gain acquisition. us units both Orion of both a of the new by year-over-year gaining revenue is units product as introduction total Year-over-year, relationships Integrity the base X,XXX from a units QX. cabinet, year-over-year, helped XX existing success we well and was expanding customers. Our X,XXX of suite floor in new units, the EGM added the XXX

initial Next, XXX a our video the field the I'll shipments quick Philippines provided market entry. scheduled currently Alora We update in feedback of on more but units throughout bingo with have It's in XXXX. early game, the remainder We're games grow have to have recurring the installed expected. continue current in indicates global that as this our as from opportunity pleased performing an reorders that base. to are had view locations and the we're received to

three QX the now. X, FANTINI on in slot EILERS as survey, highlights shown AGS's industry a maintained position, casino-only row all suppliers performance Slide leading of result leading years its for game The

core at And ranked Nan still most X.XX Orion Rakin' today. X.XX River nearly with finally, times core survey has performer also Bacon! survey's Some Fu house X.XX strong ICON XXX remains the times installs Top our and Fu ranked house recent of cabinet highlights average. notable indexing times average house at times in average and with Dragons XX a include our from Nu in house the new Portrait success respectively. Bacon!, average. for as games two been top game Rakin' a XXth the

years. our about consistently three The past performing to AGS What's and important its is games. team that given ability to every note any our title quarter, it's takeaway produced recognized top of perform key in game that over in about a performance not it's is and the survey consistently be specific slot single the R&D

have customers on. right the right and people longevity of to investment ensure approach, count level the right can a We that consistency and the our

will in at EGM positively initial the that three half BCLC second of XXXX. segment news are trial the the approximately during other period. Some average times performing house units impact

have new II favorable California. in Washington of driven of market, in following recently the Initial multiple We XXX sizable to has rule Class since XXXX, Pennsylvania nearly Northern March of at recently performing a received and which in approximately were are change. property regulatory very at a EGM installs awarded orders Portrait high we installs installs house X% units, average, Orion a

we In million, up of $X.X year-over-year, our year-over-year. revenue quarter, record the on $XXX,XXX. of QX in Table Adjusted Moving achieved to record Slide segment than on grew XX% significantly EBITDA X. a more second hitting

installed with from with year-over-year success progressives premium table and additional units. footprint such Our coming XX% of base games of of the as Super growth cable X year-over-year products much The drove grew XXXX side Spin growth and an other Bonus bets, equipment.

progressives We had our the Graton footprint West our Xs Coast property expanding at of California. at Super to one largest Casino installation XX quarter, Northern in in

We quarter. our platform platform year-over-year also competitors table converted the from XXX roughly progressives and installed in to our products nearly XXX

XXX of progressive to As than STAX games we more total have platform. QX, converted our

Dex for momentum S Card build to continue Shuffler. We

Michigan the to States. In XX XXX and casinos both across additional As and continue quarter, independent new and PA across and of various in approval approvals we today, Nevada the received have the we units Connecticut, U.S. installed Canada, July from test in notable installs United made approximately labs we pursue Oklahoma, in

through and We a to in are XXXX grow pleased more installs as position with beyond. and its significantly customer reliability feedback the performance are

In decrease and revenue our Interactive by segment gaming of decrease on Revenues to This market iGaming. slightly $X.X interactive revenue, $XXX,XXX $XXX,XXX a in of than in social social also of Slide decreasing down to with in other more continued such were line million is iGaming pivoting BXC due models in X. our year-over-year, spend $XXX,XXX revenues. as strategy

of and We expanded launched release than platform titles our games and than channels have hit across platform, money QX agreement Jackpots quarter. the systematic Longhorn Bacon!. with new AGS games more finalizing Playtech. distribution games since Rakin' live SG We live platform Jade XXX suppliers Nan launching Digital our the global via Fu real in of XX by with more OGS marketplace. continued Fu suppliers a going and gaming now game are XX Nu, the by into titles in four Wins, our We

a However, caused generating despite consequently the the progress, which delay business has have in extended regulatory experienced timelines, revenues.

high-performing the we Pennsylvania, half the second expect as key we Jersey additional expand During AGS library such Olympus titles including New into enter hit games, our year, of revenue like build Strike. new of and also as to from and markets

Social side to On business, progress make continue signings installs. we with White-Label the the and of

of meaningful many value a not this is that for us Interactive EBITDA contributor. sub-segment understand important creates ways. in Although to small business It

by customers our with have property. are patrons, to enable not we relationships the them deepens they and with expands connect that it their First, products while offering on them

lines game expansion our available the Second, real it and a money range product online. the And online by table potential extends slot casino making sports. of them at to for offering our it point of to foundation lays lastly, some patrons in

June. I will Oklahoma, to in update Before turn Resort the Chickasaw We're marketing this Nation, believe call spend largest record give GameON dollar-for-dollar the partnered notch annual fourth in an Casino once early I with with that event at to Customer was our over the held week we again customer WinStar a Kimo, world-class a as another on we pleased conduct the The a have annually. top most attendees. is XXX host basis, valuable to event success Summit on

discuss With will that, our now Kimo financial results.

Kimo Akiona

good and David, everyone. you, afternoon, Thank

I'd provides to Slide I to operational Before comprehensive which like XX, summary. point begin, you a

we PlayAGS, to fair in million forecasted David which and the current net on triggered the iGaming of less impairment to loss reporting related includes requirement was that accounting goodwill In delays iGaming business. determine our XXXX, valuation than unit As the quarter an intangible related This assets based Inc. value. we for which second and previously our David our $X.X on in mentioned. of iGaming of of value its earlier, the touched increased attributable carrying expectations goodwill by an the quarter, reduction year-over-year, intangible reduced assets

of the XX% an of goodwill As a an assets impairments, for intangible impairment year-over-year. result, loss iGaming net have these $X.X $X.X or we and of recognize impairment million Normalized million up been $X.X million. would of

to in points of costs with EBITDA gaming margin million EBITDA were due service both costs increased approximately to related and XXX of and approximately operations were installed down primarily larger basis $X year-over-year, XX% a QX adjusted $XX.X base. respectively, increased adjusted Total million, associated and

our increased SG&A Operating $X.X by plan. largely in expenses million, both in approximately to growth support headcount also R&D driven long-term our investments and

period costs current related also the to includes of approximately inclusion the of reminder, $XXX,XXX a iGaming. higher As operating

sold customers domestic EGM average units the sale second corporate the sold quarter. in sales sales internationally. to a to $XX.X due stayed EGM prior-year equipment our strong large period. XX% X,XXX year-over-year second Turning of increased X% X,XXX price to to of to million compared quarter segment, units quarter in at to in Domestic the year-over-year went X% as decreased to EGM XX% and customer sales due but were the $XX,XXX,

Texas our driven installed by year-over-year, In units were Integrity XXX Mexico the our February domestic removed by installed over XXXX, from XXX the purchase the or which removed from and the buyouts in base. over from X,XXX gaming units, EGM grew year. of EGMs lease to to acquisition redeployed than mostly units domestic quarters, for XXX business, the installed Normalized domestic operations of base in approximately declined X,XXX in this X%, three addition last Integrity base more end-of-lease to our our VLTs due of units QX

several of units down by new VLTs outflows, quarterly are placements to grew year-over-year, those we pruning as a our will of and still driven underperforming and to in Orion Illinois in of organic buyouts as standard XXX installs be EGM Portrait, the we EGM new XXXX. well installed Despite occurring this XXX units. driven Orion back by track primarily year, nearly half the by we end-of-lease openings Sequentially, grow due of are base ICON, Slant on which

underperformance X% which we previously flooding, a per This $XX.XX, period. RPD approximately Oklahoma normalize average. of of has to units accounts When Oklahoma lower EGM's RPD X%. the in from the year-over-year. in the in the properties, RPD; Domestic finally, the compared year, than EGM decrease three prior-year which a casinos. which estimate largely at and $XX.XX of approximately placement number is over we down that several two, day for or domestic of to to increased including, incremental a our which Oklahoma, decreased $XX.XX RPD VLTs in Texas of Outside domestic XXX product or factors decrease Integrity, was purchase past the into RPD market units due and for from one, revenue resulted yield mentioned, domestic the the impact market Oklahoma And removed excluding the closure

RPD in our or lesser Our $X.XX to in the the international as base Mexico, by decreased for grew installed currency. and a foreign second effect of our X%, we quarter extent, different markets

or in Now, XX% driven turning to by each increased revenues primarily The installed increase product increase of our and side Blackjack. of XX% bets. success table the pleased our the surpassing products, have year-over-year, by categories, X,XXX growth a of $XXX,XXX by to due notably second We're was to base. side bets, driven most in progressives milestone Buster the quarter hit quarter by

in margin compared quarter, In tables will EBITDA for the and to we forward. adjusted as to prior-year as X% continue margin improve second XX% expect we was the period, move

$XXX,XXX in in segment, driven $XXX,XXX to EBITDA iGaming in ramp primarily to gaming adjusted revenue the half revenue, social primarily of increased which by a decrease in back offset year. of slightly by interactive the The our we costs. iGaming $XXX,XXX decrease Moving was to the interactive operating expect in was and revenue decrease due

$XX.X operating the million and in secondary decreased Gameiom to million. $XX.X was prior second in costs million, and SG&A professional fees prior-year compensation in from to acquisition The expenses $XXX,XXX. or primarily professional The compared in increase headcount-related decrease SG&A the The QX headcount-related an is by costs X% partially in year. the Turning in greater period. to million decreased increase decrease driven by quarter due was well of fees $XX.X SG&A to $XXX,XXX by acquisition $X.X year-over-year. offering of in expenses, increased to integration-related costs as due the expense offset in stock-based was $X Adjusted costs primarily as million,

million as $XXX,XXX QX R&D as development-related of the increased increased Adjusted the expenses of of $X.X period. quarter, well as In as period. in costs. expense expense compensation the compared to additional in $X.X XX.X% headcount-related the Our increase Adjusted percentage quarter, the increase a $XXX,XXX for $X.X non-cash second in stock-based prior-year million $XXX,XXX R&D an in million, due costs. expenses million prior-year remainder was $X.X with of to the due expense, an X.X% to to was of R&D headcount-related compared $XXX,XXX revenue to

We non-cash expect quarterly for year. expense the $X.X to be remainder million compensation approximately stock-based of the

acquisition to debt, amount December December structure closed cash capital by update XXXX. X, XXXX, this as debt on $XXX.X of Net on XX, primarily net less compared debt, principal XX, of June by total in is $XXX.X XXXX, XX, was Moving increased the Slide $XX.X to and Integrity, our which equivalents, million million total the to which of February driven at cash of year. million compared

times times EBITDA, total XX-month XX, is X.X trailing which net ratio, the total to increased from period, the divided our For debt XXXX. net by adjusted debt June at XX, leverage December X.X XXXX, at

from XX, of XX, XXXX, capex, approximately which of X.X XXXX components. to estimate One, XX increased Capital capex. $XX.X $X.X and ratio $X.X three, million million times maintenance net total and $X.X June EBITDA which leverage quarter growth $X.X of of for for million approximately several capex; million $X.X placement second of of of fees two, Integrity, four, at XXXX. an were times at expenditures capex; corporate intangible adjusted included the million comprised to X.X include Adjusted trailing adjusted contribution debt from months December million;

over David I that, the will With back remarks. turn to now call closing for

David Lopez

is nearly QX, our slots market share, shows footprint of Thank up North we Kimo. and in of domestic placing the XXX in the and growth, QX trailing year. X% X we for marketplace the approximately of you, result period. to continue XX-month steady Slide that units sales which America, grow at were basis This as recurring in from sold XXXX points last reflects

price[Phonetic], We X% along several launches, share and there the new progress slot will our market continue that get help believe toward years. our us with our current in next

to which X% have million, $XXX XX% Slide we growth. guidance XX range, EBITDA annual adjusted our revised to $XXX million shows to updated or

and factors, year. guidance, the which of lowering revenue majority center for remainder to of are outlook due the several our on We the recurring revisions

challenges we EGM. earlier, covered of are experiencing have revenue, base as Oklahoma, where recurring our largest we First, some in

we decreased factors give mentioned fix color on to one working We actively earlier issues is this. driving you some and are several for I'll product RPD of underperformance. the what's

incremental Over the separately footprint we've XXX and numerous past Oklahoma year, with units. existing units grown our optimized

of Some the too going with into result certain the underperformance of and is products. a hard fast market

our have of should most on game too into also We titles, portfolio went successful themes. focused our deep we where

will how the know As mentioned, have overall issues. a performing points. title two, types; properties, three, where improve these Kimo improve At all across cabinet highest first where two concentration better the my see placement we mix, floor better of in few the properties, we performance. to and exploit with selection a types; we identified One, conjunction our game specific we these highest cabinet

known So, is in fixable. and problem short, this

healthy game We continues help to year. important quickly the are won't market our has decision That significant revise the implementing revenue the that of Oklahoma variety a a to correct and half know Hence. a this attributable second and market. improve What's not in into ops been of forecasts enough said, impacted to to Oklahoma impact to going is remainder be this year. to itself. XXXX. of the the for performance changes make our happen this measures

profitability talked would in The Interactive the about our the to timing On we corner the second we QX how half turn in year. business. believe reason our due this of the of for back revision EBITDA call, is the

that our Every neutral. getting of we domestically. because and to continues the our internationally communicated we necessary thesis resonates grow supports that space performance prudent both approvals to year think anticipate have previously and delays exit the opportunity in that AGS our out initial in it's near licenses, recently content rolled we and continues content exist. game However, this land-based proven at/or RMG We to online. market The will

sales believe where some second changes still EGM the will throughout of several from saw that corporate the be that given in at That an restructurings certain some softness recent year, activity, year first and we may said, significant Finally, we half, half large management customers. acquisition improvement from of the carry the corporates. softness

units of of Moving the communicated optimizations. reiterating new guidance, to we million we both and driven back for deployment the to game last for incremental maintain ops from $XX call, in that year, the number half CapEx year on $XX openings million our the the by placed game

Given the EBITDA you to about that confidence I talk revision, give me guidance our momentum, few into to want a XXXX and about things heading beyond.

will sales EGM on continue to basis. scale an annual First,

doing drive moving sales game forward than channels the to year. our placements experience by We and resources already following are started improve greater secure distribution help strong gaining with last relationships. leadership multiple We've more proven and adding ops and industry-leading sales to

with Upright few. States. Orion addressable percent the a to Slant launched installs attack United officially nearly of and with and in Foxwoods, now at operate market XX% We Mohegan, Portrait, us San allows have Manuel We the the name along to Orion Pechanga the

products we major slot launching recurring that revenue. drive several in and both are categories Second, growth new sales us in will enable to

XXXX, will three than showcasing we will unveil ever our contents. history at GXE before be in product where fact, In Company's slot AGS new slot we more

EGM's nicely in. fit This exception premium fashion integrated lease-only our rent, and game innovative that utilizes category big unique a Orion winning have segment, we in with at a Candice. Portrait and the and as sign award led cabinet. is the product we participated into tightly and with immersive that titles package GXE call merchandising never will of First, an package Candice debut will

interactive Rise, along offering showcases and in inch in a XXXX us Orion to over XX and give premium second Candice lease-only featuring eight HD game that launching late events. candidate feet, our at a bonus half will is Rise, with jackpots LCD Second Orion segment. tallest the a date a cabinet

family our offering. be be to adds a product XXC, most Orion segment subset curved displayed of yet. Our in iteration is to cabinets, stunning is the Orion our sale the The the our marketplace. ever product continue first of cabinet third to which new This the XXC, Portrait screen GXE hottest at

addition and will software best on be growth in giving table the games, new us beyond games our another table enhancements, of lever Finally, single new for we the showcasing side, the progressive software proprietary division.

we communicated revised we domestic and remain share. We EGM our in path in confident focused previously and future guidance market Although those our XXXX. the X% opportunities on on to range, remain forthcoming the

well-positioned for are and Investor business all Day $XXX discuss for segments to for have sustainable three EBITDA, the We of fundamentals growth at our road changed million GXE. will our in not which or in we content business during the

launches, the and want and upcoming game new opportunities the compelling our for hires growth white-space current product our we've customers vast I thank for shareholders strategic AGS. Our all performance, to create made long-term their our detail and many you our We our providing look and at look on October there. Investor XXth Monday, to support. GXE map continued of updates forward more to at we seeing further forward Presentation on road

With to move that, portion the the of call. we will Q&A

Operator

our Brad question will And come first Instructions] from ahead. go Boyer Stifel. [Operator of Please

Brad Boyer

thanks questions for guys. Yes, the taking

big picture David. is here one a just question for First you,

demand there gives I you confidence a at your your prepared of I by were see in on guess, in think you as any decline the little driven bit on touched decline deceleration for but out to of change business remarks, this stage quarter. and obviously in or evolution, the products. to sort what being a drivers us don't seeing opposed EBITDA the call whether the your of in this I any and this and sort expected I year-on-year mean, what as of to you're nature of transitory growth that structural think,

David Lopez

question, Good Right. Brad.

his a to much we that. during again or to go covered amount constitute sales, can maybe game that EGM what sort even three you four game that, properties you unit year-over-year, start Kimo that Oklahoma, the we good majority of extent, if down with in ops drove to a in it. much, It's break it the if decline If right. talked its shortage, It's we of said interactive, will. of game if think, but about the attribute And remarks, the as ops. remarks, this prepared lesser we I and it's you ops,

we it, On you the into top of optimizing. last the said, broke XXX the market in in we've we've been about where that, hey, added we Diving XX remarks, new months. it units down for over

like And didn't something enough hard, so, we fast Portrait. looks down said hard products with really it with go it's with like as went we a came titles. some too And to too little -- we and again, some a

We went in into than have. we should portfolio title much deeper our

We in went have products. very consistently, portfolio, did the up we show proven They EILERS which report, they and yield into show deeper not the performance. up much

on Lastly, hate the we those clout, well the have I have we relationships, very floor, as the as as by I said that respect we the do we of have account we the remarks to position on that have the important, really well with And market really as account. and better job move well, in after look accounts. to forward that manage that a those

situation, to where recurring ops are, and that that can end, a what to that flexible, not transitory that we or are game revenue know issues, again interactive the word, So, see very they transitory in we the what use dollars long-term issue. state,

a this that lesser much EBITDA game you will we little into then a for signs see softness lastly sales extent. We too transition can to then And lastly, to get positive can the challenge, And there's talked there, already. we then, think about if to that bit and that will I of of us. signs know see that. obviously of break-even, transition it We business

account the really the drop items alone first over-year for The two miss. year- in

Brad Boyer

I content we you where I'm the through then guess higher-performing of a obviously mean, the new their helpful.And that lease-based seeing pipeline, launches at steer new hardware? think getting industry, content these that's on the I And think Okay, model. generally in some is. we in how manufacturers are revenue about as should segmenting product to

factors through out segmenting you how are you form new content over hardware twelve next about factors? thinking months, As coming the all the of the those call it, form for you have, think and

David Lopez

question. good Another

there. you'll I think what see

Rise three both will Candice coming, and yes, those are to obviously, product that of not We'll new steer products lease-only Candice some remarks highest-performing products products. sale in are really So right. got the the of you we And say heard for Two we've products. Rise. our three and

We will past, with from some successful also new there products there'll have on be but out some come are turns twists the and based the new that of that that. be products will new

get the part display, you'll chance a itself, some game. you to canvas immersive that the not see person, the see it if point. look As in just independent. interactive is you It's will, when this be with you will at at Candice of Candice the and It very

yes, the majority the content everything shipped units successful content. field, but about have course, clearly, stuff our it very and segment is is a view. and in on now. steer new of dominating the of will really we And We'll the some then, curved So, of very being ship excited point that's cabinet and the Candice. the sales of placement right certainly share from Portrait space some It's of majority a Rise not to having that's unique the the we're

successful. very Orion Portrait right now is

of as content out there. another will we're for or And to have or that be excited So, get as well. Portrait Obviously, great to of sale, some lease sub-set now a be course. there iteration well sort them of we

Brad Boyer

about possibly of going quarter. by the for net think at I we should of helpful. And that's targeting but lastly, do year? times the type by that is know, X.X And prepared Okay, the pro me. what end then here forma a that's sense Where just have of ratio may leverage for a have about the in of his Thanks. of sort question you're you Kimo. this end integrity it year-end? missed for housekeeping I remarks,

Kimo Akiona

Brad. Thanks,

fiscal to we're the end put we revised the is out, we year, So, right guidance X.X the now. think, will range X.X of around that be that somewhere on, by based I targeting what

Operator

comes Katz Please question of from ahead. David go next Our Jefferies.

David Katz

Apologies I'm if everyone. over back go it I right. something. that asking Afternoon it's I you think Hi. to just of get critical sort

you the in we've In about me remind a the of the do, ramp. expectation what today? said what year, we pretty Would got where an sold back half should ASP the given terms of and units that you've had meaningful what of

David Lopez

in on we So there. didn't turn prepared a guide really Kimo ASP our to remarks, I'll it anything didn't but really in we second,

I think that now that or we where our $XX.X is range. range ASP around quarter, within right were $XX.X the

We expect units within of as we're year. range that go, remainder stay the for the of steady to the far listen year. here for as it And reguiding sort somewhat

be X,XXX the a around slight reduction the still a reduction number. from there but number, obviously will around So, slight approximately there; original

David Katz

the just of Okay. in And then, meaningful to the just same base. just a year negative the question. one have we're one quick we've half if back the off total detail. you I strategic into of sort And don't coming more a installed terms of I'm had and quarter. pretty ask going ramp time Again, mind,

David Lopez

to domestic David, the for looking So, clarify, base just to directionally happen going installed what's here. you're with

David Katz

Right, trajectory yes. the year, around the back half of

David Lopez

over right and with and domestically. we think year, of I everything XXX half second now, net stand, look removals we'll where of conversions net XXX net at the Yes, the to installs, another of that's

David Katz

back, we've different and course and of and GameON, obviously the then the time amount throughout it gone just get Including going some coming of out the the a of Right, inputs a bit way, okay. gotten we've surveys at like. prior quarter, to question back spending And little sort fair a we of slightly the

surprise. I'm of And guess this a likely not so, bit that alone is I a

the issues when you today like. And asked I that trim. isn't first what next we can context, with companies that the question trim year are time look can in to be transitory, I the be comfortable with David, where infrequently How enough, consider you it's could we the not trajectory that the versus ultimately trim, the but know comfortable, and do be said how we

David Lopez

think it's the there. first turn Okay. growth the it, corner to EBITDA, Getting back back and we going our to is ops. has is well-known. obviously in that's do think a very actual break-even, understand whether some If I or very issue what not, we'll issue business, clear, in the corner we'll of place And transitory through we to understanding believe game and do that really Interactive at, with sort David, to point look at to go I that. the very, analyzing turn look confident new It's and we time we'll positive transitory. We're is. where We we're a very of lot and phase, the itself. really

will the concern. We perspective, the I the important was question and the understand to us go. it it. business and ops understand and analyze understand how game From it And for

we back year of weather last and to fourth bit start view, have a hadn't that of before, provided ops a In QX, saw year point might analyzing from typically RPD anomalistic numbers. little the of when game which quarter head-fake, go a tracking bit has you things seen of we every you just softness. If a little

time no and RPD there say, be. to we QX single signs able our into a where trends [indiscernible] RPD it's could weather, And understand we're it. understand was In dive every we year of jurisdiction to and

X% over exempt Kimo's to Oklahoma, we're back some Ex-Oklahoma was up cleanups if year-over-year. Going excellent us, even favorable you to and comments. in RPD that just very

off the for If clean account, X% still RPD. VLTs taxes up we're in the actually and you

are and handful said, decisions accounts. down we Oklahoma, we to just those understood things them. where analyzed kind of even we hey, to went comes we to comes And down that well exist, certain of largely it and it in So, that comes and does it space made the there this down a

fix well-known. do. get to it's then, to we what we need know where mean, And We understand we it. there, know on know I how how that. of We missteped to out So, very

Operator

comes of Our Macquarie. from Chad Beynon next question go ahead. Please

Chad Beynon

to for growth, of your get you your this thanks levels. questions. we'll mentioned X,XXX. When roughly to sequential I release in the to think Based taking a ask From be cycle my the expectations you Portrait? about on almost the for Slant, think on new you're up wanted Portrait, to Portrait about X,XXX standpoint, life the several Upright, Hi, obviously team quarters, closer should years, maybe middle even several don't the over somewhere cabinet

units Upright the talked part have XX% hitting big of Thanks. Is the market the we market. a high attacking should of out expectations and you terms in about David, there? total about of

David Lopez

a why hot sort is a up. like of range that sub-set reasons like we're right which of did curve, in the the one [Indiscernible] is So, is it now. you Portrait the of of industry, Portrait. job Portrait right. And be the of good doing same framing the Will the in

segment. that we think stay still Orion want want We in to there's to cabinet strong that Portrait, in that The stay segment. clearly. on So, we mileage

it to the sell, there continues and what of we chunk continue We all to a be big and out lease time. sell

even the sort for what in like of magnitude From Slant. is Upright the in a almost X.Xx it's field what's more field, is than of

of you look [Indiscernible] Slant our and took ship have you what ships been might were as X%. share to If recently weight. low The AGS for as at

Now, up might AGS, if it range. X%, be that you add X% in in

So, I Portrait Slant a cabinet space, is of dominant a be truly than more Upright the the volume one. much the going sort cabinet that. but wouldn't of in to is it going because multiple it's call Portrait to higher be

you tripling if of times the -- opportunity, sort tripling that Slant from I and to framing aside, at or if know Upright when space, But that I into set cabinet than little think maybe more you're will, the together sort space. put really you don't you key a X.X and perspective. if ship is helps Portrait in looking ships, of the what the

Chad Beynon

as look compare generated flow then acquisition, you on and acquisitions. that That's Yes. business those Thanks.And cash that just you you for and reflect against share. fighting the for and the then Integrity installed the market you the paid those And at Rocket multiple from implied perfect. bases running acquisition, the free

does heard these a to competitors, sense just the we've of the opportunities of acquisitions can based and there term? space kind in it some and and at b. other more that then what in done A. near volatility at to on tuck-in make some more bit from little maybe tuck-in of Are the look be Thanks. low your operators multiples, acquisitions

David Lopez

as sense? we they and first, especially were know, I'd do, say, these I for done kind haven't been bit we at make acquisitions since yes, quite of them. XXXX.Do Thanks, about Chad. M&A. XXXX a guess late We've that paying you shy Yes.So, the multiples

we're are; these relationships out Second, always establishing they are always markets. We're various they them. out Yes, there? definitely hunting they for are in there;

exactly opportunity of track runs, want like should we're but also going that, forward, going an have how on to we what aware to business present obviously look their inside it's So the M&A, if itself. a.

that basis pretty regular a space, acquisition. aggressive a do because, but the are sense in in these They multiple very I'd We cheap versus make exist. end, from they are say

do, But out, ops And handful just situation, think we really although about Oklahoma When even just not that to and spaces refer RPD, things our we sometimes what are we Oklahoma a these our set these and in detailed of analyzing properly. off are deals and make sort value, can the they that sure of think and small that very tuck-ins the the those that, in confident other we side they're versus accounts, RPDs than lighter in in game we of that these space. to base we have rest in us. those we when we at inexpensive are affect we're relatively think

Chad Beynon

Great, very much. thank you

David Lopez

Thanks.

Operator

next from ahead. of SunTrust Jonas Please go comes question Barry Our Robinson Humphrey.

Barry Jonas

guys. Hey,

start to Oklahoma issues. want just the with I So

all the estate are is you're where there here? locked placement risk losing real up to agreements or having placements, they these Now issues, in any

David Lopez

a we have, can go risk and change Now, And we really the position. losing is can we can change you there, can are with down. locked cabinet, there. contracted even not many floor placements and of games know change relations we in locked we as those They're down. in There cases,

Barry Jonas

guys know would this on CAGR the I road that at XXXX would be million three- it get to to years GXE, hit sort great. point, five-year or that's more it five mid-teens look a Okay, of at a by you take target. you'll $XXX from the to time And detail said then, but into

So, any assumptions? is changes that in M&A meaningful still achievable, excluding

David Lopez

number have, we lot we look is opportunities we when we there if feel the update tables there's of that had before with us, for a we right there presented obviously then in there about great, think, was I you that And get GXE. we'll get of opportunities GXE, have we're as the didn't where the we give to to hey, all then the But many can huge at prepared in We're shufflers, ' tables in analysis. and is described. fire if and now, still count those still We 'XX and Brazil, range much there talking is core a And look international, you update we remarks, business, the And and detailed Interactive XX like how really of we're and that go then that a we then as you when that. we right. for believe that there, confident prospects, go, more things. and irons said one in is we things. we clearly, at like, us. and there's there how to at these it said, But right. our and will and can wasn't look interactive, shufflers all

Barry Jonas

still stock At for Okay, do view share free repurchases? great. a And is what you inflecting, guys last off, long-term consider is have me. one flow then positive you cash here. Look, point

David Lopez

Yes.

quite on bit. is tack Kimo I'll a question sort when So, we this get he I'll that to and of return over done.

Kimo Akiona

bit, allocation question. I goes Like it it right. we're guess it's David Barry, mentioned, good getting strategy, but to back think a capital I a quite our

flow at don't think level I are cash I our we priorities of like, think in change. if look you free where the

in year do. that to it's the base, is up property the I lease hundred going have domestically. mentioned, business to we're by we're think that openings David good this being going net we investing Like several good up growing end which units visibility there

changed. we Oklahoma. not then, there R&D. Contrary opportunities the and back down spending to how and a And results, pay from short-term the I to going has I time it see some to where you spend in little but continue the that But to in you more free into back debt. effort allocation and now, area. or it, buyback And cash not down other sausage the we consideration, base analysis flow about can capital are it's get strategy like for are and you is then maker then stock think is And optimizing get being think of the strategic we

David Lopez

was that, add to full nothing I That answer. pretty have apologize. I And Barry, to

Barry Jonas

All you guys. right, thank

David Lopez

you. Thank

Operator

of America. go Bank of Kelley Please Shaun from comes ahead. question next Our

Shaun Kelley

question. for thanks Hi, afternoon. the taking Good

terms expenses R&D a step the just hit as Kimo, a you levels thinking the be second, meaning expense we operating I full-year at your are right. being here, as on flexible X% these levels other we some frame mean bit to for back targets, operating fixed quarter, these point Should about about a and of revenues you being all? need achieve last very hitting EBITDA growth? look the big I on grew us in R&D. in help grew match bucket, a compromising SG&A So, to in term, just not I total expenses, revenue overall Can of X%, taking mean think that the Or order are these near more the in revenue bucket, little at big

Kimo Akiona

be, I we it versus get look look we'll and in think at leverage HX, a if some would SG&A, at way to answer adjusted HX good operating HX. you

leverage But it's We SG&A for HX. a amount we'll you'll will remind again meaningful everyone of have GXE. that And in QX we see. size, Company our a in get that

development on be the that. projects have, a rate; I closer as but see that revenue HX target. we we bit think based far of communicate think light, to that XX% And might we'll R&D, at revenue to have year always look you'll under the end As the little XX% different and about I up spend of we been HX openly always that pretty slightly

Shaun Kelley

a like digging then annualized ops on basis, right And is Integrity an or back, about I a -- if we take the step just on rate the guess, thinking piece. much game there great. run in now. on Okay, just how contributing

much see quarter? for of the the kind So, strip Can contributing of to we a just what's out you give year to that's or kind core for sense business. of that happening how can the us

David Lopez

million about quarter was for X.X for and somewhere revenue Integrity So, to from $X.X there the million was the X.X $X.X quarter. EBITDA around to contribution about million

Shaun Kelley

would have revenues, year-on-year. that been ex down so Okay,

like take the game delays immediate those to the organic and placement. corporate in may that may was be issues, Oklahoma think, doesn't longer, to comments remarks, but that on have floor then a it's will of you mean, on expectation the fix. I I going the will side, ops issues, is it revenue work take address because some customers, half, some know, growth So, the time there these prepared little to in second the an going you they sound it, in

David Lopez

asked we hey to one units And in asked, are a questions, we of the little XXX game said, XXX think, are of there guidance bit the our little just and units. to of give bit units about year. we a ops I So on for remainder

and setting units just see course, field, what incorporate in bit of can know in there. you Oklahoma, of top should units normal do will, aside, more units a the we XXX you if units of that, it to growth if we that XXX see throughout RPD the the just certainly that the you year, little the with So, here work of to our And XXX is have XXX result we'll and to certainly stabilize. remainder with RPD would stabilized be. On

Kimo Akiona

a of -- year are buyout. units. And last And out happened QX, over in had at QX, EGM high look Texas QX think those I we if units, ops that little in if you we dynamic then out is took watermark like think, to really that XXX XXX in remember, the a game related for XXXX. those end-of-lease come you and VLTs

nice think up we into I HX, comps going So, set specific ops. game to

game some half, can I think ops. the organic yes, back you So, expect in in growth

Shaun Kelley

this would about how think versus Okay, something dial last or being issue, versus trying bit and you rent expense to given or back bit just that a that delays as purchase on, around the games, temporary little how M&A permanent some question you customer spending capital maybe optimize structures? their can just leased treating they're or being corporate on elaborate major operators, of a either own more they are little be,

David Lopez

Right.

has it's on. restructuring; be them of impact been think there. been some to that lot I going what has way So, that's purchasing of the also industry of aren't think behind I some of It's other with you a there been mean look in that But where there has companies a has going permanent. M&A now. saying at up things that will you're Will lot for some put pick sort some M&A It's other the are of These a period things purchased time, again. us, to I and the have right, that's some possible. certainly happened restructuring,

to starts this M&A or And least gets see the begins there it quiet then the deal to M&A while. always a process, Post during close, it quiet be When during process. even make usually, at purchases for up gets quieter. stabilize. to the that be some We it closes, continues

the that stays that call. was but softness the don't the this to in for a nothing the long It's it's there, same industry, all I this things time, talked just for things I've that about on expect stick you described. we there noticed all that sure. So,

that no, that. and permanent, stick be we But don't to for around expect

Shaun Kelley

you very much. Thank

Operator

our Gaming. [Operator of question Please John go ahead. come Union Instructions] And next DeCree will from

John DeCree

Hi, everyone.

housekeeping from just, So I guess questions me couple a of here.

relates your to it in a capex and so, more to working guide the Oklahoma, in kind see or year? If somehow spend we some expect could is allocated Oklahoma into maybe XXXX? of going that As in things spend to to Is the that dollars there right for of need little bit you mitigating capital and capital fixing the get a is way over being on

David Lopez

it's Sure. a lot no out of others to Is go There be what to There will. range outside for we from you cabinet for our our changes? to purposes. So, knowing And there problems it's be no as if to are. going But redeployed that of movement, need is going come in, cabinet think elsewhere some be a that within is lot be cabinets I changes, that it's need title our go going perspective just going of that be to perspective, some will stated. the range. other

will we keep well here constraints and manage it we the be very think described what that we for CapEx. within able So, to of

believe will there all. be a bump to So, at have that no, we don't up there

John DeCree

deeper up those a little Was quicker David.And -- things it a the that faded units little it titles Or you you wondering little to as it maybe about respect changed. how bit pulled out the in you not then Got with if for your than today the more it. didn't to have added. bit XXX the outlook I could qualify Thanks, that quickly Oklahoma. to change was of a guess? relates thought, library expectations? those I in ramping was just

Where off do thought or a expectations, it than your have little it you Is a it did just perhaps there relative ? bit see to may getting quicker not you ago. taper quarter

David Lopez

a think little effect I of over just this Yes, is bit a cumulative time.

detect, If the you months, turn hard XX back would be it clock right. be very to

get We this You out again of go question know once I QX, then, in back the answered way this seasonality, earlier I months, that apologize. nine and I difficult.

you it and normal. seasonality in QX, at very If looks just look

machine, the to weather, clean You in down in There the able in deeper off to numbers, wasn't seems seasonality. anomalistic still things vortex we nice QX, there's of, sheet the Get that to we were or like we dive but analyze could these down any everything a work a QX, OK, property. happening. of have the had we and polar It

in have we saw to wasn't did QX. weather We it magnitude that but Oklahoma, the in

it we in very know But we're is accumulated time. now the to us. resolve little fix We for there of in more QX, saw well could it and I And it to of to how over the bit in very it look that after have to at it and clear QX how that it. to was get was us problem with it, So, out a go clear what and solution, but head-fake. we able it over like referred understand became much know could QX, look We how clarity them And time. actually say, just right. back some been, and clarity, And at just it.

John DeCree

give did but appreciate additional the that you clarity. David, answer Yes us question, prior to a I

related and to look for anything markets to? could and be that quarters start of you share should the entry markets, couple that Lastly shipping, we as expect get over space of that new for might your some paying timing potential attention next and we there is to any your me, at markets you white particular license early

David Lopez

BCLC begin forward and doing on during but we a I hinted QX trial So, is trial. very of is not will in will that sometime Canada BC this think out that I move think here beyond. but only little with is and script, come color, the Again, that the to game more year, with well, there

going, just just also ago. opened was up, Arkansas Pennsylvania got while a little

crank So, starting that we're up. to just

we it, ramp and Yes. just if at now up in approved really So, those starting there, look very we Arkansas jurisdiction, been areas? then approved, Pennsylvania, charts in Arkansas, where said first once placing recently, the we're approved I numbers off are them look And got are but we've we're we performance. in as game BC, to just in the as promising their forward for far orders. to just Canada again us we

John DeCree

David. Thanks

Operator

is attending concludes also concluded. presentation. our session. This for conference question-and-answer now The you today's Thank

You disconnect. may now

PlayAGS (AGS) 10 Aug 192019 Q2 Earnings call transcript