PlayAGS Soars on Q4 Preview and Debt Refinancing Effort

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Posted: January 18, 2022, 7:57 a.m.

Last update: January 18, 2022, 2:40 a.m.

On a tough day for the broader market and amid mixed performance in casino stocks, PlayAGS (NYSE:AGS) stands out. This is after the gaming provider revealed a bullish outlook for its fourth quarter results and a debt refinancing effort.

PlayAGS
PlayAGS slot machines, seen in the illustration above. Their action takes off on a new debt reduction plan. (Picture: PlayAGS)

In early trading, shares of the Las Vegas-based slot machine maker and gaming technology provider are nearly 6% higher. That puts the stock on pace for its highest close in about two months after forecasting fourth-quarter revenue and earnings before interest, tax, depreciation and amortization (EBITDA) that easily outpaced results reported over the course of the year. of the last three months of 2020.

PlayAGS forecasts adjusted EBITDA of $30.67 million to $32.82 million on sales of $68.4 to $70.8 million for the period October through December 2021. This compares to an adjusted EBITDA of $21.29 million on revenue of $46.62 million in the prior quarter. The company’s EBTIDA margin is expected to be 44.8% to 46.4%, compared to 45.7% in the last three months of 2020.

PlayAGS, which is one of the most beloved small cap gaming names among analysts, is in the process of finalizing fourth quarter and full year financial reports. These updates are expected to ship on March 10 after US markets close.

Refinancing of the PlayAGS lifting effort, too

In addition to the aforementioned fourth quarter preview, investors are also likely applauding PlayAGS’ plan to refinance outstanding bonds and reduce net leverage.

A refinancing transaction could include increasing the size of the company’s revolving credit facility, extending its debt maturities and reducing its borrowing costs,” according to a statement. “Additionally, the Company may seek to utilize a significant amount of cash on the Company’s balance sheet which could exceed $50 million in such refinancing.”

PlayAGS did not reveal a date for potential debt-related transactions. But companies in various sectors could seek to refinance their outstanding obligations before the Federal Reserve raises interest rates. The central bank tightening cycle could start as early as March.

Free cash flow (FCF) can help with that effort, and some analysts are optimistic about the company’s outlook on that front. The slot machine maker forecasts fourth-quarter FCF of $5.5 million to $11.5 million, at least more than double the $2.35 million it posted during the comparable period in 2020.

Encouraging net leverage target

Investors are also likely applauding a plan by PlayAGS to significantly reduce net debt – net debt divided by trailing 12-month EBITDA.

For the last three months of 2021, the company forecasts a net leverage ratio of 4.2x to 4.3x. But it aims to reduce that figure to 4x by the end of this year.

The Company’s net leverage ratio target does not contemplate or depend on any refinancing of its outstanding debt. » it says in the statement.

These efforts could be supported by a steady pace of new installations and sales at regional and tribal casinos, as operators renew their focus on high-margin gaming opportunities.

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