PlayAGS, Inc. (AGS) Bundle
Understanding PlayAGS, Inc. (AGS) Revenue Streams
Understanding PlayAGS, Inc.’s Revenue Streams
PlayAGS generates revenue primarily from two segments: gaming operations and equipment sales. The breakdown of these revenue sources for the nine months ended September 30, 2024, is as follows:
| Revenue Source | Revenue (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Gaming Operations | $187,927 | 64.3% |
| Equipment Sales | $103,955 | 35.7% |
| Total Revenue | $291,882 | 100% |
Year-over-year revenue growth for the nine months ended September 30, 2024, shows a significant increase:
- Gaming Operations: $7,286 increase from $180,641 in 2023, representing a 4.0% growth rate.
- Equipment Sales: $22,211 increase from $81,744 in 2023, representing a 27.2% growth rate.
The total revenue for the nine months ended September 30, 2024, was $291,882, compared to $262,385 for the same period in 2023, marking an overall growth of 11.2%.
Contribution of Different Business Segments to Overall Revenue
The EGM segment, which includes gaming operations and equipment sales, contributed significantly to the total revenue:
| Segment | Revenue (in thousands) | Year-over-Year Change |
|---|---|---|
| EGM Gaming Operations | $160,685 | (0.1%) |
| EGM Equipment Sales | $102,621 | 27.8% |
| Total EGM Revenue | $263,306 | 9.2% |
The interactive segment also marked substantial growth, with revenues for the nine months ended September 30, 2024, reaching $14,905, up from $8,407 in 2023, representing a staggering growth rate of 77.3%.
Analysis of Significant Changes in Revenue Streams
In the latest reporting period, the primary driver of revenue growth was the equipment sales segment, which saw an increase in the number of Electronic Gaming Machines (EGMs) sold. The company sold 4,462 units during the nine months ended September 30, 2024, compared to 3,725 units in the prior year, reflecting a year-over-year increase of 19.8%.
Additionally, the average sales price of the EGMs rose to $20,732 from $19,888, marking a growth of 4.2%.
Overall, the company’s focus on expanding its equipment sales and enhancing its interactive segment has led to a diverse and robust revenue structure, positioning it favorably for future growth.
A Deep Dive into PlayAGS, Inc. (AGS) Profitability
A Deep Dive into PlayAGS, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $17,458 thousand, compared to $14,523 thousand for the same period in 2023, reflecting a year-over-year increase of 20.2%.
Operating Profit Margin: The operating income for the same quarter in 2024 was $17,458 thousand, resulting in an operating margin of 17.6%, up from 16.3% in 2023. The net income for Q3 2024 was $2,432 thousand, contrasting with a net loss of $156 thousand in Q3 2023.
Net Profit Margin: The net profit margin for the most recent quarter stood at 2.5%, compared to (0.2%) in the prior year, indicating a significant turnaround in profitability.
Trends in Profitability Over Time
In the nine months ended September 30, 2024, total revenues reached $291,882 thousand, marking an increase of 11.3% from $262,385 thousand in 2023. The net income for this period was $7,217 thousand, compared to $361 thousand in 2023.
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change |
|---|---|---|---|
| Total Revenues | $291,882 | $262,385 | 11.3% |
| Net Income | $7,217 | $361 | 1,899.2% |
| Gross Profit | $51,033 | $41,345 | 23.4% |
| Operating Profit | $51,033 | $41,345 | 23.4% |
Comparison of Profitability Ratios with Industry Averages
The gross profit margin for the company is approximately 17.6%, which is above the industry average of 15%. The operating profit margin stands at 17.6% compared to the industry average of 14%. The net profit margin of 2.5% surpasses the industry average of 1.5%.
Analysis of Operational Efficiency
The cost management strategy appears effective, as the cost of gaming operations as a percentage of revenue decreased to 20.3% from 20.5% year-over-year. The cost of equipment sales was 46.4% for Q3 2024, down from 47.8% in Q3 2023, indicating improved operational efficiency in this area.
Furthermore, the selling, general and administrative expenses showed a slight decrease to $19,042 thousand in Q3 2024 from $19,453 thousand in Q3 2023, reflecting ongoing efforts to control operational costs.
| Expense Type | 2024 Q3 (in thousands) | 2023 Q3 (in thousands) | Change |
|---|---|---|---|
| Cost of Gaming Operations | $13,477 | $13,246 | 1.7% |
| Cost of Equipment Sales | $17,039 | $13,540 | 25.8% |
| Selling, General and Administrative | $19,042 | $19,453 | (2.1%) |
| Research and Development | $11,726 | $9,731 | 20.5% |
Debt vs. Equity: How PlayAGS, Inc. (AGS) Finances Its Growth
Debt vs. Equity: How PlayAGS, Inc. Finances Its Growth
Debt Levels:
As of September 30, 2024, total long-term debt stood at $530,286 thousand, down from $547,499 thousand at December 31, 2023. The current portion of long-term debt is $6,277 thousand, leaving the long-term portion at $524,009 thousand.
Short-term liabilities total $50,371 thousand, which includes obligations such as accounts payable and accrued liabilities.
Debt-to-Equity Ratio:
The debt-to-equity ratio as of September 30, 2024, is calculated as follows:
- Total Debt: $536,563 thousand
- Total Stockholders’ Equity: $70,842 thousand
- Debt-to-Equity Ratio: 7.57
This ratio is significantly higher than the industry average of around 1.5, indicating a higher reliance on debt financing compared to equity.
Recent Debt Issuances and Refinancing Activity:
In February 2022, the company amended its credit agreement, which included term loans with interest rates of 8.6% as of September 30, 2024. This is a decrease from 9.5% as of December 31, 2023. The total debt has seen a reduction due to proactive refinancing efforts, which included a $1,636 thousand loss on extinguishment of debt during the nine months ended September 30, 2024.
Credit Ratings:
As of the latest updates, the company does not have an official credit rating from major agencies, but its high debt-to-equity ratio may suggest increased financial risk, impacting potential future ratings.
Balance Between Debt Financing and Equity Funding:
The company has utilized a combination of debt and equity funding to finance its growth. The total stockholders’ equity as of September 30, 2024, is $70,842 thousand, which shows growth from $67,667 thousand at December 31, 2023.
The structure indicates a strategic choice to leverage debt for capital expenditures and growth while maintaining a relatively stable equity base.
| Financial Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total Long-Term Debt | $530,286 thousand | $547,499 thousand |
| Total Short-Term Liabilities | $50,371 thousand | $47,585 thousand |
| Total Stockholders’ Equity | $70,842 thousand | $67,667 thousand |
| Debt-to-Equity Ratio | 7.57 | N/A |
Assessing PlayAGS, Inc. (AGS) Liquidity
Assessing Liquidity and Solvency
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $168,809,000 | $50,371,000 | 3.34 |
Quick Ratio: The quick ratio, which excludes inventories from current assets, is calculated as:
| Quick Assets | Current Liabilities | Quick Ratio |
|---|---|---|
| $132,736,000 | $50,371,000 | 2.63 |
Working Capital Trends: The working capital as of September 30, 2024, is:
| Working Capital | Change from Previous Year |
|---|---|
| $118,438,000 | +3.4% |
Cash Flow Statements Overview:
| Cash Flow Type | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | Change |
|---|---|---|---|
| Net Cash Provided by Operating Activities | $79,939,000 | $59,755,000 | +33.7% |
| Net Cash Used in Investing Activities | ($55,982,000) | ($43,404,000) | +28.9% |
| Net Cash Used in Financing Activities | ($29,875,000) | ($10,418,000) | +87.3% |
Potential Liquidity Concerns: As of September 30, 2024, the company has:
- Cash and Cash Equivalents: $45,165,000
- Available Credit: $40,000,000 under revolving credit facility
- Total Current Liabilities: $50,371,000
- Debt Levels: Total long-term debt stands at $530,286,000
Liquidity Strengths: The company maintains a healthy liquidity position with:
- Current Ratio: 3.34 indicates strong short-term financial health
- Quick Ratio: 2.63 suggests adequate liquidity without relying on inventory sales
- Positive Operating Cash Flow: $79,939,000 reflects effective cash management
Is PlayAGS, Inc. (AGS) Overvalued or Undervalued?
Valuation Analysis
To assess the valuation of the company, we will examine key financial ratios including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA). Additionally, we will analyze stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current stock price is approximately $3.95 as of September 30, 2024. The earnings per share (EPS) for the last twelve months is $0.18. Therefore, the P/E ratio can be calculated as follows:
- P/E Ratio = Current Stock Price / EPS = $3.95 / $0.18 = 21.94
Price-to-Book (P/B) Ratio
The book value per share is calculated from total stockholders' equity of $70,842,000 and shares outstanding of 40,760,174.
- Book Value per Share = Total Stockholders' Equity / Shares Outstanding = $70,842,000 / 40,760,174 = $1.74
- P/B Ratio = Current Stock Price / Book Value per Share = $3.95 / $1.74 = 2.27
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value is calculated as follows:
- Enterprise Value = Market Capitalization + Total Debt - Cash and Cash Equivalents
- Market Capitalization = Current Stock Price Shares Outstanding = $3.95 40,760,174 = $161,297,000
- Total Debt = $530,286,000
- Cash and Cash Equivalents = $44,950,000
- Enterprise Value = $161,297,000 + $530,286,000 - $44,950,000 = $646,633,000
EBITDA for the last twelve months is $129,808,000.
- EV/EBITDA = Enterprise Value / EBITDA = $646,633,000 / $129,808,000 = 4.98
Stock Price Trends
The stock price over the last 12 months has shown the following trends:
- 12 months ago: $5.20
- 6 months ago: $4.50
- 3 months ago: $4.00
- Current price: $3.95
Dividend Yield and Payout Ratios
As of September 30, 2024, the company does not pay a dividend, resulting in a dividend yield of 0%.
Analyst Consensus on Stock Valuation
According to recent analyst reports, the consensus rating is:
- Buy: 2 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Ratio | Value |
|---|---|
| P/E Ratio | 21.94 |
| P/B Ratio | 2.27 |
| EV/EBITDA | 4.98 |
| Current Stock Price | $3.95 |
| Dividend Yield | 0% |
Key Risks Facing PlayAGS, Inc. (AGS)
Key Risks Facing PlayAGS, Inc.
PlayAGS, Inc. faces a range of internal and external risks that can significantly impact its financial health. Understanding these risks is crucial for investors.
Industry Competition
The gaming industry is highly competitive, with numerous companies vying for market share. In the three months ended September 30, 2024, total revenues increased to $99.17 million, up from $89.38 million in the same period of 2023, reflecting growth in gaming operations and equipment sales. However, the competitive landscape means that maintaining this growth is contingent upon product differentiation and market positioning.
Regulatory Changes
Changes in federal, state, and local regulations can impact operations. The company operates under various gaming licenses that are subject to renewal and compliance with changing regulations. Management must navigate these complexities to avoid disruptions in operations and potential fines.
Market Conditions
Economic conditions significantly influence consumer spending on gaming. For instance, the company's gaming operations revenue for the nine months ended September 30, 2024, was $187.93 million, compared to $180.64 million in the same period of 2023. Fluctuations in disposable income and consumer spending can impact revenue generation.
Operational Risks
Operational risks include the potential for product failures or supply chain disruptions. The cost of gaming operations for the three months ended September 30, 2024, was $13.48 million, which represents a marginal increase from $13.25 million in the previous year. Any significant disruptions could lead to increased costs and lost revenue opportunities.
Financial Risks
The company carries long-term debt totaling $530.29 million as of September 30, 2024. This financial burden necessitates careful management of cash flows to ensure obligations can be met. Additionally, interest expense for the nine months ended September 30, 2024, was $41.05 million, highlighting the importance of maintaining favorable financing conditions.
Strategic Risks
Strategic risks arise from the company’s growth initiatives, including potential acquisitions or expansions. The company has indicated a need for additional funds to pursue strategic growth opportunities, which may involve incurring additional debt or issuing equity. The ability to secure financing on favorable terms is critical for sustaining growth.
Mitigation Strategies
To address these risks, PlayAGS, Inc. has implemented various strategies:
- Continuous monitoring of regulatory changes and compliance requirements to ensure operations are not disrupted.
- Diversification of product offerings to remain competitive in the market.
- Active management of debt levels and cash flows to maintain financial stability.
- Investment in research and development to innovate and enhance product offerings.
Financial Overview
| Category | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Revenues | $99.17 million | $89.38 million | 11.0% |
| Gaming Operations Revenue | $62.43 million | $61.03 million | 2.3% |
| Equipment Sales Revenue | $36.74 million | $28.35 million | 29.6% |
| Long-term Debt | $530.29 million | $547.50 million | -3.2% |
| Interest Expense | $41.05 million | $42.36 million | -3.1% |
Future Growth Prospects for PlayAGS, Inc. (AGS)
Future Growth Prospects for PlayAGS, Inc.
Analysis of Key Growth Drivers
The company has identified several growth drivers that are expected to enhance its market position:
- Product Innovations: The launch of new electronic gaming machines (EGMs) has shown promising sales growth. For the nine months ended September 30, 2024, equipment sales reached $103,955 thousand, up 27.2% from $81,744 thousand in the same period of 2023.
- Market Expansions: The company has increased its installed base, with a total of 23,033 EGM units as of September 30, 2024, compared to 22,507 units in 2023, reflecting a 2.3% growth.
- Acquisitions: Strategic acquisitions are being pursued to enhance product offerings and market reach.
Future Revenue Growth Projections and Earnings Estimates
Analysts project continued revenue growth driven by the expansion of the gaming operations segment. Total revenues for nine months ended September 30, 2024, were $291,882 thousand, compared to $262,385 thousand in the prior year, marking an increase of 11.2%. Earnings estimates suggest a focus on maintaining profitability with net income reaching $7,217 thousand for the same period, up from $361 thousand.
Strategic Initiatives or Partnerships
Strategic initiatives include partnerships aimed at enhancing customer engagement and expanding market access. The interactive gaming segment has shown significant growth, with revenue increasing by 89.9% from $3,129 thousand to $5,942 thousand.
Competitive Advantages
The company’s competitive advantages include:
- Strong Brand Recognition: Established presence in the gaming industry enhances customer loyalty.
- Diverse Product Portfolio: A wide range of gaming products caters to various market segments.
- Operational Efficiency: The EGM Adjusted EBITDA margin was 42.4% for the three months ended September 30, 2024, compared to 44.9% in the previous year.
Revenue Breakdown by Segment
| Segment | Revenue (2024) | Revenue (2023) | Change |
|---|---|---|---|
| Gaming Operations | $62,428 thousand | $61,026 thousand | +2.3% |
| Equipment Sales | $36,742 thousand | $28,352 thousand | +29.6% |
| Total Revenues | $99,170 thousand | $89,378 thousand | +11.0% |
Conclusion
The strategic focus on innovations, market expansion, and partnerships positions the company for strong future growth. The financial metrics indicate a positive trajectory that suggests potential for continued success within the gaming industry.
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Updated on 16 Nov 2024
Resources:
- PlayAGS, Inc. (AGS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of PlayAGS, Inc. (AGS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View PlayAGS, Inc. (AGS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.