PR Newswire | Mar 4, 2021 04:16PM EST

03/04 15:15 CST

AGS Reports Fourth Quarter And Full Year 2020 ResultsFourth Quarter 2020 Highlights:- Orion Starwall Off to an Encouraging Start with over 300 Games Installed as of December 31, 2020- Domestic Active Unit EGM RPD Increased 8% Year-Over-Year to Approximately $27- Installed Base of Industry-leading Table Game Progressive Products Increased by 127 Units Sequentially- Received our Provisional Michigan i-Gaming Supplier License in December and AGS Content Currently Live- Generated Positive Operating and Free Cash Flow for the Second Consecutive Quarter- $111.7 Million of Available Liquidity as of December 31, 2020 LAS VEGAS, March 4, 2021

LAS VEGAS, March 4, 2021 /PRNewswire/ -- PlayAGS, Inc. (NYSE: AGS) ("AGS", "us", "we" or the "Company") a designer and developer of equipment and services solutions for the global gaming industry, today reported financial results for the fourth quarter and full year ended December 31, 2020.

AGS President and Chief Executive Officer David Lopez said, "2020 was a year full of unprecedented challenges, the likes of which required the unwavering commitment of a passionate, loyal, and hardworking team to successfully overcome. To that end, I am extremely honored by and thankful for the tireless efforts put forth by so many of our AGS team members to ensure we not only survived the COVID-19 pandemic, but put ourselves in a position to emerge a stronger, more resilient company."

Lopez added, "Looking beyond the many challenges faced throughout the year, one of the bright spots, to the extent there was one, is that the COVID-19 pandemic slowed down the pace of life. As a company, we used this time to refine our strategy and improve our operating efficiency, with a keen focus on three key areas; people, product, and processes. As a result, I believe we are better positioned today to achieve success across all three of our business segments than at any other point in our company's history."

AGS Chief Financial Officer Kimo Akiona added, "I am incredibly proud of the way our team came together throughout 2020 to face the unprecedented operational and financial hurdles introduced by the spread of COVID-19. Not only were we able to nimbly streamline our business to preserve liquidity at the onset of COVID-19, but we opportunistically shored up our balance sheet in May and successfully ramped operations as our casino operator partners gradually brought their businesses back online. As I look ahead to 2021, I believe our strong liquidity position, improving product portfolio, and organizational alignment position us to achieve improved financial performance"

Summary of the Three Months Ended December 31, 2020 and 2019

(In thousands, except per-share and Adjusted EBITDA margin data)

Three Months Ended December 31, Twelve Months Ended December 31,

$ % % 2020 2019 2020 2019 $ Change Change Change Change

Revenues:

EGM $ 42,396 $ 73,710 $ (31,314) (42.5) % $ 151,789 $ 289,642 $ (137,853) (47.6) %

Table 2,551 2,757 (206) (7.5) % 7,969 10,194 (2,225) (21.8) %Products

Interactive 1,675 1,319 356 27.0 % 7,249 4,878 2,371 48.6 %

Total $ 46,622 $ 77,786 $ (31,164) (40.1) % $ 167,007 $ 304,714 $ (137,707) (45.2) %revenues

(Loss)income from $ (7,835) $ 7,815 $ (15,650) (200.3) % $ (44,169) $ 23,737 $ (67,906) (286.1) %operations

Net (loss)incomeattributable $ (17,242) $ 1,423 $ (18,665) (1311.7) % $ (85,378) $ (11,752) $ (73,626) 626.5 %to PlayAGS,Inc.

(Loss)income per $ (0.49) $ 0.04 $ (0.53) (1325.0) % $ (2.40) $ (0.33) $ (2.07) 627.3 %share

AdjustedEBITDA:

EGM $ 19,696 $ 36,630 $ (16,934) (46.2) % $ 65,877 $ 144,718 $ (78,841) (54.5) %

Table 1,316 1,005 311 30.9 % 3,360 3,699 (339) (9.2) %Products

Interactive 287 (370) 657 (177.6) % 2,432 (2,355) 4,787 (203.3) %

TotalAdjusted $ 21,299 $ 37,265 $ (15,966) (42.8) % $ 71,669 $ 146,062 $ (74,393) (50.9) %EBITDA(1)

TotalAdjusted 45.7 % 47.9 % (2.2) % (222)bps 42.9 % 47.9 % (5.0) % (502)bpsEBITDAmargin(1)

FourthQuarter 2020 Financial Results

* During March and April and continuing through mid- to late-May, nearly all of our customers closed their operations due to the COVID-19 pandemic and the actions taken by governments and businesses to contain the virus. COVID-19-related measures continued to impact our customers' businesses throughout the fourth quarter, pacing the majority of the year-over-year declines in the metrics presented above, including revenues, (loss) income from operations, net (loss) income, and Adjusted EBITDA. * Consolidated revenue totaled $46.6 million compared to $77.8 million in the 2019 fourth quarter, representing a year-over-year decrease of 40.1%. The year-over-year decline reflects the COVID-19 pandemic's negative impact on our customers' operations and, subsequently, our gaming operations revenue and EGM unit sales. * We estimate approximately 90% of our 16,268-unit domestic installed base was active as of December 31, 2020. Internationally, we estimate approximately 36% of our 7,985-unit installed base was active as of December 31, 2020. * Gaming operations revenue, or recurring revenue, totaled $40.0 million compared to $51.6 million in the 2019 fourth quarter. The year-over-year gaming operations revenue decrease reflects the impact of COVID-19 on our EGM and Table Product recurring revenue streams, partially offset by higher Interactive segment revenue, as compared to the prior year. Recurring revenue comprised 85.7% of our total revenue compared to 66.3% in the prior year, reflecting the relative resiliency inherent in our gaming operations business. * Our 2020 fourth quarter net loss of $17.2 million declined as compared to net income of $1.4 million in the 2019 fourth quarter. Lower net income year-over-year reflects the impact of the COVID-19 pandemic on our operations, coupled with higher interest expense related to our incremental debt financing, which we closed upon in May 2020. * Total Adjusted EBITDA (non-GAAP)(1) decreased to $21.3 million compared to $37.3 million in the 2019 fourth quarter. A year-over-year decrease in our EGM adjusted EBITDA, which we largely attribute to the impact of COVID, was partially offset by higher adjusted EBITDA in our Table Products and Interactive segments, as compared to the prior year's quarter. * Total Adjusted EBITDA margin (non-GAAP)(1) decreased to 45.7% in the fourth quarter of 2020 compared to 47.9% in the prior year, reflecting the impact of normalization in our operating cost base to support the anticipated recovery in our revenues from post-COVID lows.

(1) Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures, seenon-GAAP reconciliation below.

EGM

Three Months Ended December 31, 2020 compared to Three Months Ended December31, 2019

(Amounts inthousands, except Three Months Ended December 31, Twelve Months Ended December 31,unit data)

$ % % 2020 2019 2020 2019 $ Change Change Change Change

EGM segmentrevenues:

Gaming operations $ 35,940 $ 47,586 $ (11,646) (24.5) % $ 114,548 $ 196,101 $ (81,553) (41.6) %

Equipment sales 6,456 26,124 (19,668) (75.3) % 37,241 93,541 (56,300) (60.2) %

Total EGM $ 42,396 $ 73,710 $ (31,314) (42.5) % $ 151,789 $ 289,642 $ (137,853) (47.6) %revenues

EGM Adjusted $ 19,696 $ 36,630 $ (16,934) (46.2) % $ 65,877 $ 144,718 $ (78,841) (54.5) %EBITDA

EGM unitinformation:

VLT - 512 (512) (100.0) % - 512 (512) (100.0) %

Class II 11,794 12,415 (621) (5.0) % 11,794 12,415 (621) (5.0) %

Class III 4,474 5,441 (967) (17.8) % 4,474 5,441 (967) (17.8) %

Domesticinstalled base, 16,268 18,368 (2,100) (11.4) % 16,268 18,368 (2,100) (11.4) %end of period

Internationalinstalled base, 7,985 8,497 (512) (6.0) % 7,985 8,497 (512) (6.0) %end of period

Total installedbase, end of 24,253 26,865 (2,612) (9.7) % 24,253 26,865 (2,612) (9.7) %period

Installed base - 8,871 10,171 (1,300) (12.8) % 8,871 10,171 (1,300) (12.8) %Oklahoma

Installed base - 7,397 8,197 (800) (9.8) % 7,397 8,197 (800) (9.8) %non-Oklahoma

Domesticinstalled base, 16,268 18,368 (2,100) (11.4) % 16,268 18,368 (2,100) (11.4) %end of period

Domestic revenue $ 23.26 $ 24.97 $ (1.71) (6.8) % $ 17.66 $ 25.65 $ (7.99) (31.2) %per day

International $ 2.56 $ 7.65 $ (5.09) (66.5) % $ 2.59 $ 8.13 $ (5.54) (68.1) %revenue per day

Total revenue per $ 16.42 $ 19.52 $ (3.10) (15.9) % $ 12.84 $ 20.10 $ (7.26) (36.1) %day

Domestic EGM unitsales components:

Casino openingand expansion - 52 (52) (100.0) % 200 559 (359) (64.2) %units

Other 283 1,121 (838) (74.8) % 1,043 4,041 (2,998) (74.2) %

Total Domestic 283 1,173 (890) (75.9) % 1,243 4,600 (3,357) (73.0) %EGM units sold

International EGM - 110 (110) (100.0) % 100 279 (179) (64.2) %units sold

Total EGM units 283 1,283 (1,000) (77.9) % 1,343 4,879 (3,536) (72.5) %sold

Domestic average $ 18,035 $ 17,833 $ 202 1.1 % $ 18,068 $ 18,302 $ (234) (1.3) %sales price

EGM Quarterly Results

Domestic Gaming Operations(2)

* Domestic gaming operations revenue totaled $34.1 million, compared to $41.6 million in the prior year's quarter. The year-over-year revenue decline reflects the impact of COVID-19-related capacity restrictions and casino closures and, to a lesser extent, a decline in our installed base compared to the prior year period. * As of December 31, 2020, nearly all our customers' properties in the United States and Canada were reopened, with most operating under some type of capacity limitation. We estimate that more than 14,500, or approximately 90%, of our domestic EGMs were active at the end of the 2020 fourth quarter. * Our domestic EGM installed base decreased by 2,100 units year-over-year, primarily due to the strategic pruning of approximately 1,200 lower-yielding Integrity units. Additionally, approximately 500 lower-yielding IL VLT units were removed from the base in the fourth quarter of 2020 as part of a planned end of lease term sale. Excluding the Integrity and IL VLT removals, our installed base decreased by approximately 350 units year-over-year, predominantly driven by COVID-19-related floor reconfigurations. * Domestic EGM revenue per day ("RPD") decreased to $23.26 compared to $24.97 in the prior year period, reflecting the impact of EGMs that were not active in the quarter and thus did not contribute to EGM revenue, but were included in the calculation of RPD. * Excluding EGMs that were not active during the period, Domestic EGM RPD increased 8% year-over-year to approximately $27, supported by growth within our premium-leased unit installed base, the strategic pruning of lower-yielding units, a resilient core gambling customer, and reduced supply of active EGMs.

International Gaming Operations

* International gaming operations revenue decreased to $1.8 million compared to $6.0 million in the prior year period. The year-over-year decline reflects the impact of measures implemented to slow the spread of COVID-19, such as temporary casino closures and capacity restrictions, on our business. Additionally, in contrast to the United States, Mexico has not provided any type of fiscal stimulus to support its post-COVID-19 economic recovery. * We estimate approximately 36% of our international EGMs were active at the end of the quarter. Mexico continues to require operators to follow strict protocols that include deactivating adjacent machines and cleaning machines after each is played. * Our international installed base decreased by 512 units year-over-year as a result of permanent casino closures in Mexico and COVID-19-related floor reconfigurations.

Equipment Sales

* EGM units sold decreased to 283 units in the fourth quarter of 2020, primarily attributable to business disruptions related to COVID-19 as noted above and reduced customer budgets for EGM purchases. Additionally, we faced a softer new opening and expansion calendar, as compared to the prior year. * Domestic ASP remained stable at $18,035 compared to $17,833 in the prior year period. * We sold units into 17 U.S. states and one Canadian province, with Virginia, Nevada and California emerging as our top three sales markets. * The Orion Curve accounted for 37% of units shipped in the quarter.

Product Highlights

* Installed an additional 246 premium, lease-only Orion Starwall games, increasing our installed base to over 300 games at quarter end. Starwall games continue to perform well and operator interest remains steady. * Installed over 175 Orion Curve cabinets in the quarter, increasing our total footprint to over 370 units as of December 31, 2020. * Completed our first sale of Historical Horse Racing ("HHR") units into the Virginia HHR market.

(2) "Domestic" includes both the United States and Canada.

Table Products

Three Months Ended December 31, 2020 compared to Three Months Ended December31, 2019

(Amounts inthousands, Three Months Ended December 31, Twelve Months Ended December 31,except unitdata)

$ % $ % 2020 2019 2020 2019 Change Change Change Change

TableProductssegmentrevenues:

Gaming $ 2,362 $ 2,653 $ (291) (11.0) % $ 7,353 $ 9,555 $ (2,202) (23.0) %operations

Equipment 189 104 $ 85 81.7 % 616 639 $ (23) (3.6) %sales

Total TableProducts $ 2,551 $ 2,757 $ (206) (7.5) % $ 7,969 $ 10,194 $ (2,225) (21.8) %revenues

TableProducts $ 1,316 $ 1,005 $ 311 30.9 % $ 3,360 $ 3,699 $ (339) (9.2) %AdjustedEBITDA

TableProductsunitinformation:

TableProductsinstalled 4,254 3,766 488 13.0 % 4,254 3,766 488 13.0 %base, end ofperiod

Averagemonthly $ 182 $ 239 $ (57) (23.8) % $ 149 $ 230 $ (81) (35.2) %lease price

Table Products Quarterly Results

* Gaming operations, or recurring, revenue totaled $2.4 million compared to $2.7 million in the prior year's quarter. Capacity limitations and other restrictions implemented at casinos to help combat the spread of COVID-19 negatively impacted the year-over-year comparison. * Continued growth across all product categories, including side bets, premium table games, table equipment and, most notably, progressives, drove a 13.0% year-over-year increase in our installed base. We estimate approximately 80% of our installed base was active at quarter end. * Equipment sales revenue increased 81.7% compared to the prior year period. The year-over-year improvement reflects an increase from sales of protective VisiDeal Shield plexiglass player dividers and other parts to help our casino customers operate safely in the current environment. * Our installed base of table game progressives grew to over 1,500 units, representing a year-over-year increase of 235 units and quarterly sequential growth of 127 units. * Interest in our all-inclusive site license offering, the AGS Arsenal, continues to build as our customers look for additional ways to improve operating efficiency. We were live with six licenses as of December 31, 2020.

Interactive

Three Months Ended December 31, 2020 compared to Three Months Ended December31, 2019

(Amounts in Three Months Ended December 31, Twelve Months Ended December 31,thousands)

$ % $ % 2020 2019 2020 2019 Change Change Change Change

Interactivesegmentrevenue:

Social gaming $ 767 $ 713 $ 54 7.6 % $ 3,513 $ 3,319 $ 194 5.8 %revenue

Real-money 908 606 302 49.8 % 3,736 1,559 2,177 139.6 %gaming revenue

TotalInteractive $ 1,675 $ 1,319 $ 356 27.0 % $ 7,249 $ 4,878 $ 2,371 48.6 %revenue

InteractiveAdjusted $ 287 $ (370) $ 657 (177.6) % $ 2,432 $ (2,355) $ 4,787 (203.3) %EBITDA

Interactive Quarterly Results

* Total revenue increased 27.0% year-over-year to $1.7 million, while Adjusted EBITDA totaled $0.3 million, marking a $0.7 million improvement versus the prior year. * Interactive achieved positive Adjusted EBITDA for the fourth consecutive quarter. Continued growth within our real-money gaming ("RMG") business and consistent social gaming performance, coupled with cost savings from the restructuring of our social business in prior periods, helped to drive improved profitability within the segment. * RMG revenue increased 49.8% year-over-year, supported by the continued introduction of our EGM content into the European RMG market, our fourth quarter 2019 launch into the New Jersey market, and our second quarter 2020 launch into Pennsylvania. We also believe COVID-19 stay-at-home measures supported our quarterly performance. * In December 2020 we received our provisional Michigan i-Gaming supplier license and our content is currently live within the state.

Liquidity and Capital Expenditures

As of December 31, 2020, we had $111.7 million in total liquidity compared to $43.2 million at December 31, 2019. The total principal amount of debt outstanding, as of December 31, 2020, was $622.5 million, predominantly comprised of $621.1 million in first lien term loans, which mature in 2024.

As a precautionary measure to increase the Company's cash position and facilitate financial flexibility in light of uncertainty in the gaming industry at the time resulting from the COVID-19 pandemic, in March the Company borrowed $30.0 million under the revolving credit facility and in May issued an additional $95.0 million in term loans. In connection with the new term loans, the Company negotiated a financial covenant relief period through December 31, 2020 related to its net first lien leverage ratio financial covenant and implemented a revised calculation of EBITDA to be used in the net first lien leverage ratio for the first three quarters of 2021. In October, we elected to fully repay the $30.0 million previously drawn down on our revolving credit facility.

Total net debt, which is the principal amount of debt outstanding less cash and cash equivalents, as of December 31, 2020 was $540.8 million compared to $520.6 million at December 31, 2019. Our Total Net Debt Leverage Ratio increased from 3.6 times at December 31, 2019, to 7.5 times at December 31, 2020, see Total Net Debt Leverage Ratio Reconciliation below(3).

Capital expenditures decreased by 19.1% year-over-year to $14.1 million in the current period, in line with our plans to conservatively manage the use of our cash and only invest in those projects that will provide the highest return on our investment. The current quarter capital expenditures were primarily comprised of $3.4 million in intangible capital expenditures, including capitalized internal software development costs, and $8.7 million in growth capital expenditures, which reflects costs associated with the placement of additional units into our leased installed base.

(3) Total Adjusted EBITDA and total net debt leverage ratio are non-GAAPmeasures, see non-GAAP reconciliation below.

Conference Call and Webcast

On March 4, 2021, at 5 p.m. EST, AGS leadership will host a conference call to present the company's fourth quarter and full year 2020 financial 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 U.S./Canada toll-free call-in number is +1 (844) 746-0637 and the call-in number for participants outside the U.S./Canada is +1 (412) 317-5261. The conference ID/confirmation code is "AGS Q4 2020 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, 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 at playags.com.

AGS Investor & Media Contacts:

Brad Boyer, Vice President of Investor Relations, Corporate Development and Strategybboyer@playags.com

Julia Boguslawski, Chief Marketing Officerjboguslawski@playags.com

(c)2021 PlayAGS, Inc. Products referenced herein are sold by AGS LLC or other subsidiaries of PlayAGS, Inc. Solely for convenience, marks, trademarks and trade names referred to in this press release appear without the (r) and TM and SM symbols, but such references are not intended to indicate, in any way, that PlayAGS, Inc. will not assert, to the fullest extent under applicable law, its rights or the rights of the applicable licensor to these marks, trademarks and trade names.

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, the effects of COVID-19 on the Company's business and results of operations 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. 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, December 31,

2020 2019

Assets

Current assets

Cash and cash equivalents $ 81,689 $ 13,162

Restricted cash 20 20

Accounts receivable, net of allowance of $2,077 41,743 61,224and $723 respectively

Inventories 26,902 32,875

Prepaid expenses 4,210 2,983

Deposits and other 4,704 5,332

Total current assets 159,268 115,596

Property and equipment, net 81,040 103,598

Goodwill 286,042 287,049

Intangible assets 187,644 230,451

Deferred tax asset 6,762 4,965

Operating lease assets 9,763 11,543

Other assets 10,259 9,176

Total assets $ 740,778 $ 762,378

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable $ 9,547 $ 15,598

Accrued liabilities 26,325 34,840

Current maturities of long-term debt 7,031 6,038

Total current liabilities 42,903 56,476

Long-term debt 601,560 518,689

Deferred tax liability - non-current 2,254 1,836

Operating lease liabilities, long-term 9,497 11,284

Other long-term liabilities 30,781 40,309

Total liabilities 686,995 628,594

Commitments and contingencies

Stockholders' equity

Preferred stock at $0.01 par value; 50,000,000shares authorized, no shares issued and - -outstanding

Common stock at $0.01 par value; 450,000,000shares authorized at December 31, 2020 andDecember 31, 2019; 36,494,002 and 35,534,558 364 355shares issued and outstanding at December 31, 2020and 2019, respectively.

Additional paid-in capital 379,917 371,311

Accumulated deficit (321,412) (235,474)

Accumulated other comprehensive loss (5,086) (2,408)

Total stockholders' equity 53,783 133,784

Total liabilities and stockholders' equity $ 740,778 $ 762,378

PLAYAGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(amounts in thousands, except per share data)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Revenues

Gaming operations $ 39,977 $ 51,558 $ 129,150 $ 210,534

Equipment sales 6,645 26,228 37,857 94,180

Total revenues 46,622 77,786 167,007 304,714

Operating expenses

Cost of gaming operations(4) 8,331 10,234 32,087 40,955

Cost of equipment sales(4) 3,438 12,607 16,789 45,513

Selling, general and 15,352 15,442 46,463 61,785administrative

Research and development 7,444 9,163 26,786 34,338

Write-downs and other charges 523 53 3,329 6,912

Depreciation and amortization 19,369 22,472 85,722 91,474

Total operating expenses 54,457 69,971 211,176 280,977

(Loss) Income from operations (7,835) 7,815 (44,169) 23,737

Other expense (income)

Interest expense 11,369 8,494 41,935 36,248

Interest income (336) (51) (1,179) (163)

Loss on extinguishment and - - 3,102 -modification of debt

Other expense (income) (767) (486) 3,226 4,622

Loss before income taxes (18,101) (142) (91,253) (16,970)

Income tax benefit 859 1,565 5,875 5,449

Net loss (17,242) 1,423 (85,378) (11,521)

Less: Net income attributable - - - (231)to non-controlling interests

Net loss attributable to (17,242) 1,423 (85,378) (11,752)PlayAGS, Inc.

Foreign currency translation 3,556 1,769 (2,678) 1,366adjustment

Total comprehensive (loss) $ (13,686) $ 3,192 $ (88,056) $ (10,386)income

Basic and diluted loss percommon share:

Basic $ (0.49) $ 0.04 $ (2.40) $ (0.33)

Diluted $ (0.49) $ 0.04 $ (2.40) $ (0.33)

Weighted average common sharesoutstanding:

Basic 35,760 35,448 35,639 35,424

Diluted 35,760 35,766 35,639 35,424

(4) Exclusive of depreciation and amortization.

PLAYAGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

Year Ended December 31,

2020 2019

Cash flows from operating activities

Net loss $ (85,378) $ (11,521)

Adjustments to reconcile net loss to net cash providedby operating activities:

Depreciation and amortization 85,722 91,474

Accretion of contract rights under development 7,421 6,378agreements and placement fees

Amortization of deferred loan costs and discount 3,656 1,917

Stock-based compensation expense 8,457 9,001

Provision (benefit) for bad debts 2,694 294

Loss on disposition of long-lived assets 2,399 1,068

Impairment of assets 134 5,343

Fair value adjustment of contingent consideration 796 501

Benefit from deferred income tax (1,671) (1,927)

Changes in assets and liabilities related tooperations:

Accounts receivable 16,469 (15,033)

Inventories 10,099 490

Prepaid expenses (1,264) 715

Deposits and other 517 (449)

Other assets, non-current 3,367 6,565

Accounts payable and accrued liabilities (17,248) (6,827)

Net cash provided by operating activities 36,170 87,989

Cash flows from investing activities

Customer notes receivable (4,690) (2,382)

Proceeds from payments on customer notes receivable 1,087 -

Business acquisitions, net of cash acquired - (54,935)

Purchase of intangible assets (1,756) (6,295)

Software development and other expenditures (11,017) (14,350)

Proceeds from disposition of assets 32 450

Purchases of property and equipment (22,939) (50,420)

Net cash used in investing activities (39,283) (127,932)

Cash flows from financing activities

Proceeds from incremental term loans 92,150 -

Borrowing on revolver 30,000 -

Repayment of first lien credit facilities (5,387) (5,387)

Repayment of incremental term loans (475) -

Repayment of revolver (30,000) -

Payments on finance leases and other obligations (1,185) (1,396)

Payment of deferred loan costs (5,744) -

Payment of financed placement fee obligations (6,933) (8,215)

Payment of previous acquisition obligation (381) (1,748)

Proceeds from stock option exercise 158 685

Repurchase of stock (560) (1,320)

Distributions to non-controlling interest owners - (302)

Net cash provided by (used in) financing activities 71,643 (17,683)

Effect of exchange rates on cash, cash equivalents and (3) 4restricted cash

Increase (decrease) in cash, cash equivalents and 68,527 (57,622)restricted cash

Cash, cash equivalents and restricted cash, beginning 13,182 70,804of period

Cash, cash equivalents and restricted cash, end of $ 81,709 $ 13,182period

Supplemental cash flow information:

Cash paid during the period for interest $ 37,749 $ 33,567

Cash paid during the period for taxes $ 423 $ 1,548

Non-cash investing and financing activities:

Intangible assets obtained under placement fee $ - $ 40,338arrangements

Leased assets obtained in exchange for new finance $ 425 $ 1,326lease liabilities

Leased assets obtained in exchange for new operating $ 84 $ 13,048lease liabilities

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 Twelve Months Ended(Amounts in thousands) December 31, December 31,

2020 2019 2020 2019

Net loss attributable to $ (17,242) $ 1,423 $ (85,378) $ (11,752)PlayAGS, Inc.

Income tax (benefit) (859) (1,565) (5,875) (5,449)expense

Depreciation and 19,369 22,472 85,722 91,474amortization

Other expense (income) (767) (486) 3,226 4,622

Interest income (336) (51) (1,179) (163)

Interest expense 11,369 8,494 41,935 36,248

Write-downs and other(5) 523 53 3,329 6,912

Loss on extinguishment - - 3,102 -and modification of debt

Other adjustments(6) 1,825 206 6,477 909

Other non-cash charges(7) 2,245 2,537 9,712 9,078

Legal and litigationexpenses including 1,441 96 1,830 1,844settlement payments(8)

Acquisitions andintegration related costs - 394 311 3,338including restructuringand severance(9)

Non-cash stock-based 3,731 3,692 8,457 9,001compensation

Total Adjusted EBITDA $ 21,299 $ 37,265 $ 71,669 $ 146,062

(Amounts in thousands, Three Months Ended Twelve Months Endedexcept Adjusted EBITDAmargin) December 31, December 31,

2020 2019 2020 2019

Total revenues $ 46,622 $ 77,786 $ 167,007 $ 304,714

Adjusted EBITDA $ 21,299 $ 37,265 $ 71,669 $ 146,062

Adjusted EBITDA margin 45.7 % 47.9 % 42.9 % 47.9 %

(5) Write-downs and other includes items related to loss on disposal orimpairment of long-lived assets, fair value adjustments to contingentconsideration, and acquisition costs.

(6) Other adjustments primarily composed of costs and inventory and receivablevaluation charges associated with the COVID-19 pandemic, professional feesincurred by the Company for projects, corporate and public filing compliance,contract cancellation fees and other transaction costs deemed to benon-recurring in nature.

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

(8) Legal and litigation expenses including settlement payments consist ofpayments to law firms and settlements for matters that are outside the normalcourse of business. These costs related to litigation and matters that were notsignificant individually.

(9) Acquisition and integration costs primarily relate to costs incurred afterthe purchase of businesses, such as the purchase of Integrity, to integrateoperations and obtain costs synergies. Restructuring and severance costsprimarily relate to costs incurred through the restructuring of the Company'soperations from time to time and other employee severance costs recognized inthe periods presented.

Total Net Debt Leverage Ratio Reconciliation

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

(Amounts in thousands, except net debt leverage ratio) December 31, December 31,

2020 2019

Total principal amount of debt $ 622,509 $ 533,727

Less: Cash and cash equivalents 81,689 13,162

Total net debt $ 540,820 $ 520,565

LTM Adjusted EBITDA $ 71,669 $ 146,062

Total net debt leverage ratio 7.5 3.6

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. 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 Nine Months Three Months

(Amounts in thousands) December 31, Ended September Ended December

2020 30, 2020 31, 2020

Net cash provided by operating $ 36,170 $ 19,719 $ 16,451activities

Purchase of intangible assets (1,756) (1,414) (342)

Software development and other (11,017) (8,004) (3,013)expenditures

Purchases of property and (22,939) (12,196) (10,743)equipment

Free Cash Flow $ 458 $ (1,895) $ 2,353

Year Ended Nine Months Three Months

(Amounts in thousands) December 31, Ended September Ended December

2019 30, 2019 31, 2019

Net cash provided by operating $ 87,989 $ 62,481 $ 25,508activities

Purchase of intangible assets (6,295) (4,926) (1,369)

Software development and other (14,350) (9,957) (4,393)expenditures

Purchases of property and (50,420) (38,760) (11,660)equipment

Free Cash Flow $ 16,924 $ 8,838 $ 8,086

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SOURCE AGS