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AGS Announces Fourth Quarter And Full Year 2018 Results

By: via PR Newswire

LAS VEGAS, March 5, 2019 /PRNewswire/ -- PlayAGS, Inc. (NYSE: AGS) ("AGS", "us", "we" or the "Company") today reported operating results for its fourth quarter and full year ended December 31, 2018.

AGS Logo (PRNewsfoto/AGS)

"We ended our first year as a public company with a solid fourth quarter and 35% growth in annual revenue," said Chief  Executive Officer David Lopez. "Our continued top line growth, increased operating cash, and free cash flow generation reflects the industry-leading performance of our products and AGS' unique position given how underrepresented we are in the market.  These two factors contributed to our phenomenal growth in electronic gaming machines ("EGMs"), ending the year with more than 4,300 sold units, a 71% increase from fiscal 2017. We kicked off 2019 with the close of our acquisition of Integrity Gaming Corp., which bolsters our recurring revenue footprint and provides long-term optimization opportunities.  With new product and content launches, further penetration of both new and early-entry markets, and international expansion, AGS is positioned for another high-growth year in 2019."

Summary of the quarter and year ended December 31, 2018 and 2017

(In thousands, except per-share and unit data)



Three Months Ended December 31,


Year Ended December 31,


2018


2017


% Change


2018


2017


% Change

Revenues












EGM

$

68,664



$

54,184



26.7

%


$

271,025



$

199,931



35.6

%

Table Products

2,137



1,623



31.7

%


7,651



4,065



88.2

%

Interactive

1,294



1,854



(30.2)

%


6,623



7,959



(16.8)

%

Total revenue

72,095



57,661



25.0

%


285,299



211,955



34.6

%

Operating income / (loss)

1,918



861



122.8

%


25,290



14,502



74.4

%

Net loss

(10,345)



(8,520)



21.4

%


(20,846)



(45,106)



(53.8)

%

Loss per share

(0.29)



(0.37)



(21.6)

%


(0.61)



(1.94)



(68.6)

%













Adjusted EBITDA












EGM

32,174



26,335



22.2

%


137,371



107,785



27.4

%

Table Products

258



193



33.7

%


942



(528)



(278.4)

%

Interactive

(884)



(79)



1,019

%


(2,107)



(416)



406.5

%

Total adjusted EBITDA(1)

$

31,548



$

26,449



19.3

%


$

136,206



$

106,841



27.5

%













EGM units sold

1,159



697



66.3

%


4,387



2,565



71.0

%

EGM total installed base, end of period

24,647



23,805



3.5

%


24,647



23,805



3.5

%


(1) Adjusted EBITDA is a non-GAAP measure, see non-GAAP reconciliation below.

Fourth Quarter 2018 Financial Highlights

  • Total revenue increased 25% to $72.1 million, driven by continued growth in our EGM segment in the Class III marketplace, primarily in early-entry markets such as Ontario, Mississippi and Nevada as well as continued penetration into ramping markets such as California and Florida.
  • EGM equipment sales increased 86% to $23.2 million, due to the sale of 1,159 units, of which nearly 60% were sold into early-entry markets.
  • Gaming operations revenue, or recurring revenue, grew to $48.9 million, or 8% year-over-year, driven by EGMs purchased from Rocket Gaming, increased domestic revenue per day ("RPD") of $26.41, growth and performance of our international installed base, and an increase in Table Products revenue.
  • Net loss of $10.3 million increased year-over-year from a net loss of $8.5 million. Fourth quarter 2018 net loss includes a non-cash, pre-tax impairment of goodwill of $4.8 million related to our social gaming business within our Interactive Social reporting unit.
  • This goodwill related to our acquisition of RocketPlay in 2015. The impairment charge was recorded within write downs and other charges in our consolidated statements of operations and comprehensive loss.
  • Total Adjusted EBITDA (non-GAAP)(2) increased to $31.5 million, or 19%, driven by the significant increase in revenue, partially offset by increased operating expenses primarily due to headcount related costs in SG&A and R&D. Included in that amount was approximately $1.0 million of operating costs from our real-money gaming ("RMG") content-aggregator Gameiom.
  • Total Adjusted EBITDA margin (non-GAAP)(2) decreased to 44% in the fourth quarter of 2018 compared to 46% in the prior year driven by several factors, including increased headcount related costs in SG&A and R&D, operating costs from Gameiom, as well as the increased proportion of equipment sales as part of total revenues.
  • SG&A expenses increased $2.0 million in the fourth quarter of 2018 primarily due to increased non-cash stock-based compensation expense of $1.2 million, $0.9 million in professional fees driven by acquisitions, $0.6 million in sales commissions, $0.3 million in headcount related costs and offset by decreased interactive user acquisition costs.
  • R&D expenses increased $0.6 million in the fourth quarter of 2018 driven by non-cash stock-based compensation expense. As a percentage of total revenue, R&D expense was 12% for the period ended December 31, 2018 compared to 14% for the prior year period.

Fourth Quarter Business Highlights

  • EGM units sold increased 66% to 1,159 compared to 697 in the prior year led by sales of the Orion Portrait and Orion Slant cabinets in early-entry markets as well as to corporate customers, the latter which accounted for approximately 43% of sold units in the period.
  • Domestic EGM installed base grew by over 200 units year-over-year despite the voluntary removal of approximately 500 machines in Texas earlier in the year as well as an end of lease buyout by a customer who purchased 420 VLT units in Illinois. The VLT units were not counted in our sold unit count in the periord. Domestic EGM installed base grew by 228 units sequentially.
  • Domestic EGM RPD increased 2% to $26.41, driven by our new product offerings and the optimization of our installed base by installing our newer higher-performing EGMs.
  • Average selling price ("ASP") for EGMs increased by more than $1,000 year over year to $18,782 driven by sales of our premium-priced Orion Portrait cabinet and our core-plus cabinet, Orion Slant, which accounted for nearly 80% of sales in the period.
  • Our new Orion Slant footprint increased to over 1,500 units, up 161% sequentially, and accounted for nearly 30% of sales in the quarter.(3)
  • Our Orion Portrait footprint increased to over 5,000 units, up 19% sequentially and 202% year-over-year. (3)
  • Our ICON cabinet footprint increased to 7,325 units, up 8% sequentially and 58% year-over-year. (3)
  • International installed base increased 624 units year-over-year and 235 units sequentially to over 8,350 units, with more than 500 ICON units in Mexico as of December 31, 2018.
  • Table Products increased by 762 units, or 32%, to 3,162 units, driven by organic growth, most notably the Super 4 Progressive Blackjack and Buster Blackjack side bet.

 

(2)     Total Adjusted EBITDA is a non-GAAP measure, see non-GAAP reconciliation below.

(3)     Footprint includes sold and leased units.

Balance Sheet Review

Capital expenditures increased $7.4 million to $22.0 million in the fourth quarter, compared to $14.6 million in the prior year period due to increased recurring units.  As of December 31, 2018, we had $70.7 million in cash and cash equivalents compared to $19.2 million at December 31, 2017. Total net debt, which is the principal amount of debt outstanding less cash and cash equivalents as of December 31, 2018, was approximately $468.1 million compared to $648.7 million at December 31, 2017. This substantial reduction was driven by the IPO and related redemption of our HoldCo PIK notes during the first quarter.  In the fourth quarter, net debt decreased by over $8.8 million due to a higher balance of cash and cash equivalents and mandatory principal payments on our term loans.  As a result of the above transactions and our strong operational performance, our total net debt leverage ratio, decreased from 6.1 times at December 31, 2017, to 3.4 times at December 31, 2018. (4)

Recent Developments

Acquisition of Integrity Gaming Corp.

On February 8, 2019, we completed the acquisition of Integrity Gaming Corp. ("Integrity"), a regional slot route operator with approximately 2,600 recurring revenue gaming machines in operation across over 33 casinos in Oklahoma and Texas. Under the terms of the deal, AGS acquired all issued and outstanding common shares of Integrity for a cash payment of CAD$0.46 per share, reflecting a total transaction value of USD$49.0 million, which includes repaying USD$35.0 million of Integrity's outstanding debt. The acquisition was funded with cash on the balance sheet and funds from the new $30 million term loan facility closed on October 5, 2018.

Entry Into Philippines

We recently completed the necessary regulatory requirements in the Philippines and initial units of our Alora video bingo cabinet are now live. The Philippines video bingo market comprises approximately 70,000 machines currently, and we are confident that our content and innovative cabinet will be a competitive market addition.

2019 Outlook

We expect to generate total Adjusted EBITDA(4) of $160.0 - $164.0 million in 2019, representing growth of approximately 17% - 20% compared to 2018.

We further expect 2019 capital expenditures to be in the range of $65.0 - $69.0 million, compared to $66.2 million in 2018, reflecting an expectation for a continued increase in our installed base in both existing and new markets as well as our ongoing yield optimization initiative, which includes units recently purchased from Integrity.

We expect our total net debt leverage ratio, excluding any potential future M&A, to be at or below 3.0 times within the next 12 months.

Comparison of Fiscal 2019 Guidance to Fiscal 2018 Results

(amounts in millions)



Year ended December 31,




2019 Guidance


2018


Growth

Adjusted EBITDA (4)

$160 - $164


$

136



17% - 20%

Capital expenditures

$65 - $69


$

66



(2)% - 4%

We have not provided a reconciliation of forward-looking total Adjusted EBITDA and total net debt leverage ratio to the most directly comparable GAAP financial measure, net income (loss), due primarily to the variability and difficulty in making accurate forecasts and projections of the variable and individual adjustments for a reconciliation to net income (loss), as not all of the information necessary for a quantitative reconciliation is available to us without unreasonable effort.

We expect that the main components of net income (loss) for fiscal year 2019 will consist of operating expenses, interest expenses as well as other expenses (income) and income tax expenses, which are inherently difficult to forecast and quantify with reasonable accuracy without unreasonable efforts. The amounts associated with these items have historically and may continue to vary significantly from quarter to quarter and material changes to these items could have a significant effect on our future GAAP results.

(4)     Total Adjusted EBITDA is a non-GAAP measure, see non-GAAP reconciliation below.

Conference Call and Webcast

Today, at 5:00 p.m. EST, AGS leadership will host a conference call to present the fourth quarter and full year 2018 results. Listeners may access a live webcast of the conference call along with accompanying slides at AGS' Investor Relations website at http://investors.playags.com/. A replay of the webcast will be available on the website following the live event. To listen by telephone, the US/Canada toll-free dial-in number is +1 (844) 746-0637 and the dial-in number for participants outside the US/Canada is +1 (412) 317-5261. The conference ID/confirmation code is "AGS Q4 and Full Year 2018 Earnings Call".

Company Overview

AGS is a global company focused on creating a diverse mix of entertaining gaming experiences for every kind of player. Our roots are firmly planted in the Class II tribal gaming market, but our customer-centric culture and remarkable growth have helped us branch out to become one of the most all-inclusive commercial gaming suppliers in the world. Powered by high-performing Class II and Class III slot products, an expansive table products portfolio, highly rated social casino and real-money gaming solutions for players and operators, and best-in-class service, we offer an unmatched value proposition for our casino partners. Learn more about us at playags.com.

AGS Media Contacts:

Julia Boguslawski, Chief Marketing Officer and Executive Vice President of Investor Relations
jboguslawski@playags.com

Steven Kopjo, Director of Investor Relations
skopjo@playags.com

©2019 PlayAGS, Inc. All® notices signify marks registered in the United States.  All ™ and SM notices signify unregistered trademarks. Products referenced herein are sold by AGS LLC or other subsidiaries of PlayAGS, Inc.

Forward-looking Statement

This release contains, and oral statements made from time to time by our representatives may contain, forward-looking statements based on management's current expectations and projections, which are intended to qualify for the safe harbor of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the proposed public offering and other statements identified by words such as "believe," "will," "may," "might," "likely," "expect," "anticipates," "intends," "plans," "seeks," "estimates," "believes," "continues," "projects" and similar references to future periods, or by the inclusion of forecasts or projections. All forward-looking statements are based on current expectations and projections of future events.

These forward-looking statements reflect the current views, models, and assumptions of AGS, and are subject to various risks and uncertainties that cannot be predicted or qualified and could cause actual results in AGS's performance to differ materially from those expressed or implied by such forward looking statements. These risks and uncertainties include, but are not limited to, the ability of AGS to maintain strategic alliances, unit placements or installations, grow revenue, garner new market share, secure new licenses in new jurisdictions, successfully develop or place proprietary product, comply with regulations, have its games approved by relevant jurisdictions and other factors set forth under Item 1. "Business," Item 1A. "Risk Factors" in AGS's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 5, 2019. All forward-looking statements made herein are expressly qualified in their entirety by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. Readers are cautioned that all forward-looking statements speak only to the facts and circumstances present as of the date of this press release. AGS expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PLAYAGS, INC.

CONSOLIDATED BALANCE SHEETS

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



December 31,


2018


2017

Assets

Current assets




Cash and cash equivalents

$

70,726



$

19,242


Restricted cash

78



100


Accounts receivable, net of allowance of $885 and $1,462 respectively

44,704



32,776


Inventories

27,438



24,455


Prepaid expenses

3,566



2,675


Deposits and other

4,231



3,460


Total current assets

150,743



82,708


Property and equipment, net

91,547



77,982


Goodwill

277,263



278,337


Intangible assets

196,898



232,287


Deferred tax asset

2,544



1,115


Other assets

12,347



24,813


Total assets

$

731,342



$

697,242






Liabilities and Stockholders' Equity

Current liabilities




Accounts payable

$

14,821



$

11,407


Accrued liabilities

26,659



24,954


Current maturities of long-term debt

5,959



7,359


Total current liabilities

47,439



43,720


Long-term debt

521,924



644,158


Deferred tax liability - noncurrent

1,443



1,016


Other long-term liabilities

24,732



36,283


Total liabilities

595,538



725,177


Commitments and contingencies




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 at December 31, 2018 and 46,629,155 shares authorized at December 31, 2017; 35,353,296 and 23,208,076 shares issued and outstanding at December 31, 2018 and 2017.

353



149


Additional paid-in capital

361,628



177,276


Accumulated deficit

(222,403)



(201,557)


Accumulated other comprehensive (loss) income

(3,774)



(3,803)


Total stockholders' equity (deficit)

135,804



(27,935)


Total liabilities and stockholders' equity

$

731,342



$

697,242


 

PLAYAGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(amounts in thousands, except per share data)



Three months ended December 31,


Year ended December 31,


2018


2017


2018


2017

Revenues








Gaming operations (1)

$

48,922



$

45,212



$

201,809



$

170,252


Equipment sales

23,173



12,449



83,490



41,703


Total revenues

72,095



57,661



285,299



211,955


Operating expenses








Cost of gaming operations(2)

10,206



9,948



39,268



31,742


Cost of equipment sales(2)

10,751



5,521



39,670



19,847


Selling, general and administrative

15,627



13,647



63,038



44,015


Research and development

8,371



7,803



31,745



25,715


Write downs and other charges

5,471



1,830



8,753



4,485


Depreciation and amortization

19,751



18,051



77,535



71,649


Total operating expenses

70,177



56,800



260,009



197,453


Loss from operations

1,918



861



25,290



14,502


Other expense (income)








Interest expense

9,354



13,131



37,607



55,511


Interest income

(45)



(28)



(207)



(108)


Loss on extinguishment and modification of debt

2,017



903



6,625



9,032


Other expense (income)

367



1,867



10,488



(2,938)


Loss before income taxes

(9,775)



(15,012)



(29,223)



(46,995)


Income tax (expense) benefit

(570)



6,492



8,377



1,889


Net loss

(10,345)



(8,520)



(20,846)



(45,106)


Foreign currency translation adjustment

(1,661)



36



29



743


Total comprehensive loss

$

(12,006)



$

(8,484)



$

(20,817)



$

(44,363)










Basic and diluted loss per common share:








Basic

$

(0.29)



$

(0.37)



$

(0.61)



$

(1.94)


Diluted

$

(0.29)



$

(0.37)



$

(0.61)



$

(1.94)


Weighted average common shares outstanding:








Basic

35,353



23,208



34,404



23,208


Diluted

35,353



23,208



34,404



23,208



(1) Includes revenues from our EGM, Table Products and Interactive segments.

(2) Exclusive of depreciation and amortization.

 

PLAYAGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)



Year ended
December 31,


Year ended
December 31,


2018


2017

Cash flows from operating activities




Net loss

$

(20,846)



$

(45,106)


Adjustments to reconcile net loss to net cash provided by operating activities:




Depreciation and amortization

77,535



71,649


Accretion of contract rights under development agreements and placement fees

4,552



4,680


Amortization of deferred loan costs and discount

1,826



2,976


Payment-in-kind interest capitalized



15,935


Payment-in-kind interest payments

(37,624)



(2,698)


Write-off of deferred loan cost and discount

3,876



3,294


Stock-based compensation expense

10,933




Provision (benefit) for bad debts

(441)



651


Loss on disposition of assets

1,963



3,901


Impairment of assets

6,089



584


Fair value adjustment of contingent consideration

701




Benefit of deferred income tax

(970)



(7,062)


Changes in assets and liabilities related to operations:




Accounts receivable

(11,488)



(8,348)


Inventories

4,907



(1,636)


Prepaid expenses

(895)



(599)


Deposits and other

(748)



(374)


Other assets, non-current

12,204



(2,290)


Accounts payable and accrued liabilities

(6,063)



8,451


Net cash provided by operating activities

45,511



44,008


Cash flows from investing activities




Business acquisitions, net of cash acquired

(4,452)



(63,850)


Purchase of intangible assets

(1,119)



(1,226)


Software development and other expenditures

(10,460)



(7,664)


Proceeds from disposition of assets

519



514


Purchases of property and equipment

(54,602)



(48,585)


Net cash used in investing activities

(70,114)



(120,811)


Cash flows from financing activities




Proceeds from issuance of first lien credit facilities



448,725


Proceeds from incremental term loans

29,874



65,000


Payments on first lien credit facilities

(5,211)



(2,413)


Payments on equipment long term note payable and capital leases

(2,883)



(2,372)


Payment of deferred loan costs

(41)



(3,267)


Payment of financed placement fee obligations

(3,628)



(3,807)


Payment of previous acquisition obligation



(128)


Repayment of senior secured credit facilities

(115,000)



(410,655)


Repayment of seller notes



(12,401)


Proceeds from stock option exercise

774




Proceeds from issuance of common stock

176,341




Proceeds from employees in advance of common stock issuance



25


Initial public offering costs

(4,160)



(653)


Net cash provided by financing activities

76,066



78,054


Effect of exchange rates on cash, cash equivalents and restricted cash

(1)



14


Increase in cash cash, cash equivalents and restricted cash

51,462



1,265


Cash, cash equivalents and restricted cash, beginning of period

19,342



18,077


Cash, cash equivalents and restricted cash, end of period

$

70,804



$

19,342


Supplemental cash flow information:




Cash paid during the period for interest

$

35,392



$

35,890


Cash paid during the period for taxes

$

1,742



$

1,157


Non-cash investing and financing activities:




Non-cash consideration given in business acquisitions

$

500



$

2,600


Financed purchase property and equipment

$

1,454



$

368


Financed purchase of intangible asset

$

2,000



$

4,866


Non-GAAP Financial Measures

To provide investors with additional information in connection with our results as determined by generally accepted accounting principles in the United States ("GAAP"), we disclose the following non-GAAP financial measures: total adjusted EBITDA, total adjusted EBITDA margin, total net debt leverage ratio, and Free Cash Flow. These measures are not financial measures calculated in accordance with GAAP, and should not be considered as a substitute for net income, operating income, cash flows, or any other measure calculated in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.

Total Adjusted EBITDA

This press release and accompanying schedules provide certain information regarding adjusted EBITDA, which is considered a non-GAAP financial measure under the rules of the Securities and Exchange Commission.

We believe that the presentation of total adjusted EBITDA is appropriate to provide additional information to investors about certain material non-cash items that we do not expect to continue at the same level in the future, as well as other items we do not consider indicative of our ongoing operating performance. Further, we believe total adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against that of other peer companies using similar measures. It also provides management and investors with additional information to estimate our value.

Total adjusted EBITDA is not a presentation made in accordance with GAAP. Our use of the term total adjusted EBITDA may vary from others in our industry. Total adjusted EBITDA should not be considered as an alternative to operating income or net income. Total adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation or as a substitute for the analysis of our results as reported under GAAP.

Our definition of total adjusted EBITDA allows us to add back certain non-cash charges that are deducted in calculating net income and to deduct certain gains that are included in calculating net income. However, these expenses and gains vary greatly, and are difficult to predict. They can represent the effect of long-term strategies as opposed to short-term results. In addition, in the case of charges or expenses, these items can represent the reduction of cash that could be used for other corporate purposes. Due to these limitations, we rely primarily on our GAAP results, such as net loss, (loss) income from operations, EGM Adjusted EBITDA, Table Products Adjusted EBITDA or Interactive Adjusted EBITDA and use Total adjusted EBITDA only supplementally.

The total adjusted EBITDA discussion above is also applicable to its margin measure, which is calculated as total adjusted EBITDA as a percentage of Total Revenue.

The following table presents a reconciliation of total adjusted EBITDA to net loss, which is the most comparable GAAP measure:

Total Adjusted EBITDA Reconciliation



Three months ended December 31,


Year ended December 31,


2018


2017


2018


2017

Net loss

$

(10,345)



$

(8,520)



$

(20,846)



$

(45,106)


Income tax expense (benefit)

570



(6,492)



(8,377)



(1,889)


Depreciation and amortization

19,751



18,051



77,535



71,649


Other expense (income)

367



1,867



10,488



(2,938)


Interest income

(45)



(28)



(207)



(108)


Interest expense

9,354



13,131



37,607



55,511


Write-downs and other(1)

5.471



1,830



8,753



4,485


Loss on extinguishment and modification of debt(2)

2,017



903



6,625



9,032


Other adjustments(3)

208



823



2,426



2,890


Other non-cash charges(4)

1,743



2,332



6,633



7,794


New jurisdiction and regulatory licensing costs(5)



758





2,062


Legal and litigation expenses including settlement payments(6)

203



(243)



992



523


Acquisition and integration related costs(7)

488



2,037



3,644



2,936


Non-cash stock compensation

1,766





10,933




Adjusted EBITDA

$

31,548



$

26,449



$

136,206



$

106,841





Three months ending December 31,


Year ended December 31,


2018


2017


2018


2017

Total revenues

$

72,095



$

57,661



$

285,299



$

211,955


Adjusted EBITDA

$

31,548



$

26,449



$

136,206



$

106,841


Adjusted EBITDA margin

43.8%



45.9%



47.7%



50.4%



(1) Write-downs and other includes items related to loss on disposal or impairment of long lived assets (including impairments of goodwill), fair value adjustments to contingent consideration and acquisition costs.

(2) Loss on extinguishment and modification of debt primarily relates to the refinancing of long-term debt, in which deferred loan costs and discounts related to old senior secured credit facilities were written off.

(3) Other adjustments are primarily composed of professional fees incurred for projects, corporate and public filing compliance, contract cancellation fees and other transaction costs deemed to be non-operating.

(4) Other non-cash charges are costs related to non-cash charges and losses on the disposition of assets, non-cash charges on capitalized installation and delivery, which primarily includes the costs to acquire contracts that are expensed over the estimated life of each contract and non-cash charges related to accretion of contract rights under development agreements.

(5) New jurisdiction and regulatory license costs relates primarily to one-time non-operating costs incurred to obtain new licenses and develop products for new jurisdictions.

(6) Legal and litigation expenses include of payments to law firms and settlements for matters that are outside the normal course of business.

(7) Acquisition and integration costs include restructuring and severance and are related to costs incurred after the purchase of businesses, such as the acquisitions of Rocket, In Bet, Cadillac Jack and RocketPlay, to integrate operations.

Total Net Debt Leverage Ratio Reconciliation

The following table presents a reconciliation of total net debt and total net debt leverage ratio:


December 31,


December 31,


2018


2017

Total debt

$

538,799



$

667,968


Less: Cash and cash equivalents

70,726



19,242


Total net debt

$

468,073



$

648,726


LTM Adjusted EBITDA

$

136,206



$

106,841


Total net debt leverage ratio

3.4



6.1


Free Cash Flow

This schedule provides certain information regarding Free Cash Flow, which is considered a non-GAAP financial measure under the rules of the Securities and Exchange Commission.

We define Free Cash Flow as net cash provided by operating activities less cash outlays related to capital expenditures and payments of in-kind interest related to the redemption of our HoldCo PIK notes. We define capital expenditures to include purchase of intangible assets, software development and other expenditures, and purchases of property and equipment. In arriving at Free Cash Flow, we subtract cash outlays related to capital expenditures from net cash provided by operating activities because they represent long-term investments that are required for normal business activities. As a result, subject to the limitations described below, Free Cash Flow is a useful measure of our cash available to repay debt and/or make other investments.

Free Cash Flow adjusts for cash items that are ultimately within management's discretion to direct, and therefore, may imply that there is less or more cash that is available than the most comparable GAAP measure. Free Cash Flow is not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted. These limitations are best addressed by using Free Cash Flow in combination with the GAAP cash flow numbers.

The following table presents a reconciliation of Free Cash Flow:


Year ended
December 31, 2018


Nine months ended
September 30, 2018


Three months ended
December 31, 2018

Net cash provided by operating activities

$

45,511



$

13,320



$

32,191


Purchase of intangible assets

(1,119)



(931)



(188)


Software development and other expenditures

(10,460)



(8,794)



(1,666)


Purchases of property and equipment

(54,602)



(34,457)



(20,145)


Payments-in-kind interest payments

37,624



37,624




Free Cash Flow

$

16,954



$

6,762



$

10,192





Year ended
December 31, 2017


Nine months ended
September 30, 2017


Three months ended
December 31, 2017

Net cash provided by operating activities

$

44,008



$

26,293



$

17,715


Purchase of intangible assets

(1,226)



(565)



(661)


Software development and other expenditures

(7,664)



(6,334)



(1,330)


Purchases of property and equipment

(48,585)



(35,961)



(12,624)


Payments-in-kind interest payments

2,698



2,698




Free Cash Flow

$

(10,769)



$

(13,869)



$

3,100


 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/ags-announces-fourth-quarter-and-full-year-2018-results-300807195.html

SOURCE AGS

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