(Mark One) | |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Nevada | 46-3698600 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
5475 S. Decatur Blvd., Ste #100 Las Vegas, NV 89118 |
(Address of principal executive offices) (Zip Code) |
(702) 722-6700 |
(Registrant’s telephone number, including area code) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x (Do not check if a smaller reporting company) | Smaller reporting company o | Emerging growth company x |
September 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 33,227 | $ | 19,242 | |||
Restricted cash | 78 | 100 | |||||
Accounts receivable, net of allowance of $1,180 and $1,462, respectively | 46,082 | 32,776 | |||||
Inventories | 31,819 | 24,455 | |||||
Prepaid expenses | 4,638 | 2,675 | |||||
Deposits and other | 4,275 | 3,460 | |||||
Total current assets | 120,119 | 82,708 | |||||
Property and equipment, net | 84,323 | 77,982 | |||||
Goodwill | 282,731 | 278,337 | |||||
Intangible assets | 204,801 | 232,287 | |||||
Deferred tax asset | 1,047 | 1,115 | |||||
Other assets | 12,489 | 24,813 | |||||
Total assets | $ | 705,510 | $ | 697,242 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 12,094 | $ | 11,407 | |||
Accrued liabilities | 22,517 | 24,954 | |||||
Current maturities of long-term debt | 6,223 | 7,359 | |||||
Total current liabilities | 40,834 | 43,720 | |||||
Long-term debt | 492,208 | 644,158 | |||||
Deferred tax liability - noncurrent | 678 | 1,016 | |||||
Other long-term liabilities | 25,789 | 36,283 | |||||
Total liabilities | 559,509 | 725,177 | |||||
Commitments and contingencies (Note 13) | |||||||
Stockholders’ equity | |||||||
Preferred stock at $0.01 par value; 100,000 shares authorized, no shares issued and outstanding | — | — | |||||
Common stock at $0.01 par value; 450,000,000 shares authorized at September 30, 2018 and 46,629,155 at December 31, 2017; and 35,305,479 and 23,208,706 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively. | 353 | 149 | |||||
Additional paid-in capital | 359,819 | 177,276 | |||||
Accumulated deficit | (212,058 | ) | (201,557 | ) | |||
Accumulated other comprehensive loss | (2,113 | ) | (3,803 | ) | |||
Total stockholders’ equity | 146,001 | (27,935 | ) | ||||
Total liabilities and stockholders’ equity | $ | 705,510 | $ | 697,242 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | |||||||||||||||
Gaming operations | $ | 50,701 | $ | 42,849 | $ | 152,887 | $ | 125,040 | |||||||
Equipment sales | 24,825 | 13,591 | 60,317 | 29,254 | |||||||||||
Total revenues | 75,526 | 56,440 | 213,204 | 154,294 | |||||||||||
Operating expenses | |||||||||||||||
Cost of gaming operations(1) | 10,494 | 7,344 | 29,062 | 21,794 | |||||||||||
Cost of equipment sales(1) | 12,109 | 6,330 | 28,919 | 14,326 | |||||||||||
Selling, general and administrative | 15,284 | 9,742 | 47,411 | 30,368 | |||||||||||
Research and development | 7,894 | 6,467 | 23,374 | 17,912 | |||||||||||
Write-downs and other charges | 667 | 490 | 3,282 | 2,655 | |||||||||||
Depreciation and amortization | 18,968 | 16,931 | 57,784 | 53,598 | |||||||||||
Total operating expenses | 65,416 | 47,304 | 189,832 | 140,653 | |||||||||||
Income from operations | 10,110 | 9,136 | 23,372 | 13,641 | |||||||||||
Other expense (income) | |||||||||||||||
Interest expense | 8,956 | 12,666 | 28,253 | 42,380 | |||||||||||
Interest income | (89 | ) | (25 | ) | (162 | ) | (80 | ) | |||||||
Loss on extinguishment and modification of debt | — | — | 4,608 | 8,129 | |||||||||||
Other expense (income) | 434 | (467 | ) | 10,121 | (4,805 | ) | |||||||||
Income (loss) before income taxes | 809 | (3,038 | ) | (19,448 | ) | (31,983 | ) | ||||||||
Income tax benefit (expense) | 3,538 | (1,052 | ) | 8,947 | (4,603 | ) | |||||||||
Net income (loss) | 4,347 | (4,090 | ) | (10,501 | ) | (36,586 | ) | ||||||||
Foreign currency translation adjustment | 1,636 | (498 | ) | 1,690 | 707 | ||||||||||
Total comprehensive income (loss) | $ | 5,983 | $ | (4,588 | ) | $ | (8,811 | ) | $ | (35,879 | ) | ||||
Basic and diluted earnings (loss) per common share: | |||||||||||||||
Basic | $ | 0.12 | $ | (0.18 | ) | $ | (0.31 | ) | $ | (1.58 | ) | ||||
Diluted | $ | 0.12 | $ | (0.18 | ) | $ | (0.31 | ) | $ | (1.58 | ) | ||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 35,305 | 23,208 | 34,097 | 23,208 | |||||||||||
Diluted | 36,313 | 23,208 | 34,097 | 23,208 |
Common Stock - Shares | Common Stock - Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||
Balance at December 31, 2016 | 14,932 | 149 | 177,276 | (156,451 | ) | (4,546 | ) | 16,428 | ||||||||||||||
Net loss | — | — | — | (45,106 | ) | — | (45,106 | ) | ||||||||||||||
Foreign currency translation adjustment | — | — | — | — | 743 | 743 | ||||||||||||||||
Balance at December 31, 2017 | 14,932 | 149 | 177,276 | (201,557 | ) | (3,803 | ) | (27,935 | ) | |||||||||||||
Net loss | — | — | — | (10,501 | ) | — | (10,501 | ) | ||||||||||||||
Foreign currency translation adjustment | — | — | — | — | 1,690 | 1,690 | ||||||||||||||||
Stock-based compensation expense | — | — | 9,167 | — | — | 9,167 | ||||||||||||||||
Stock split (1.5543-for-one) and reclassification | 8,277 | 83 | (83 | ) | — | — | — | |||||||||||||||
Reclassification of management shares | 171 | 2 | 1,319 | — | — | 1,321 | ||||||||||||||||
Vesting of restricted stock | 69 | — | — | — | — | — | ||||||||||||||||
Stock option exercises | 70 | 1 | 730 | — | — | 731 | ||||||||||||||||
Issuance of common stock | 11,787 | 118 | 171,410 | — | — | 171,528 | ||||||||||||||||
Balance at September 30, 2018 | 35,305 | $ | 353 | $ | 359,819 | $ | (212,058 | ) | $ | (2,113 | ) | $ | 146,001 |
PLAYAGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) | |||||||
Nine months ended September 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Net loss | $ | (10,501 | ) | $ | (36,586 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 57,784 | 53,598 | |||||
Accretion of contract rights under development agreements and placement fees | 3,412 | 3,459 | |||||
Amortization of deferred loan costs and discount | 1,388 | 2,315 | |||||
Payment-in-kind interest capitalized | — | 7,807 | |||||
Payment-in-kind interest payments | (37,624 | ) | (2,698 | ) | |||
Write-off of deferred loan cost and discount | 3,410 | 3,294 | |||||
Stock-based compensation expense | 9,167 | — | |||||
(Benefit) provision for bad debts | (198 | ) | 902 | ||||
Loss on disposition of assets | 1,383 | 2,896 | |||||
Impairment of assets | 1,199 | 333 | |||||
Fair value adjustment of contingent consideration | 700 | — | |||||
(Benefit) provision for deferred income tax | (205 | ) | 2,147 | ||||
Changes in assets and liabilities that relate to operations: | |||||||
Accounts receivable | (12,277 | ) | (9,649 | ) | |||
Inventories | (3,173 | ) | (453 | ) | |||
Prepaid expenses | (1,958 | ) | (1,119 | ) | |||
Deposits and other | (626 | ) | (276 | ) | |||
Other assets, non-current | 13,574 | (2,010 | ) | ||||
Accounts payable and accrued liabilities | (12,135 | ) | 2,333 | ||||
Net cash provided by operating activities | 13,320 | 26,293 | |||||
Cash flows from investing activities | |||||||
Business acquisitions, net of cash acquired | (4,452 | ) | (7,000 | ) | |||
Purchase of intangible assets | (931 | ) | (565 | ) | |||
Software development | (8,794 | ) | (6,334 | ) | |||
Proceeds from disposition of assets | 21 | 171 | |||||
Purchases of property and equipment | (34,457 | ) | (35,961 | ) | |||
Net cash used in investing activities | (48,613 | ) | (49,689 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from issuance of first lien credit facilities | — | 448,725 | |||||
Repayment of senior secured credit facilities | (115,000 | ) | (410,655 | ) | |||
Payments on first lien credit facilities | (3,864 | ) | (1,125 | ) | |||
Payment of financed placement fee obligations | (2,688 | ) | (2,971 | ) | |||
Payments on deferred loan costs | — | (3,127 | ) | ||||
Repayment of seller notes | — | (12,401 | ) | ||||
Payments on equipment long-term note payable and capital leases | (2,108 | ) | (1,832 | ) | |||
Initial public offering cost | (4,160 | ) | (1,203 | ) | |||
Proceeds from issuance of common stock | 176,341 | — | |||||
Proceeds from employees in advance of common stock issuance | — | 25 | |||||
Proceeds from stock option exercise | 731 | — | |||||
Net cash provided by financing activities | 49,252 | 15,436 | |||||
Effect of exchange rates on cash and cash equivalents and restricted cash | 4 | 8 | |||||
Increase in cash and cash equivalents and restricted cash | 13,963 | (7,952 | ) | ||||
Cash, cash equivalents and restricted cash, beginning of period | 19,342 | 17,977 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 33,305 | $ | 10,125 |
• | We have a contract that has been approved by both the customer and the Company. Our contracts specify the products being sold and payment terms and are recognized when it is probable that we will collect substantially all of the contracted amount; and |
• | Delivery has occurred and services have been rendered in accordance with the contract terms. |
Gaming equipment | 2 to 6 years |
Other property and equipment | 3 to 6 years |
• | Level 1 - quoted prices in an active market for identical assets or liabilities; |
• | Level 2 - quoted prices in an active market for similar assets or liabilities, inputs other than quoted prices that are observable for similar assets or liabilities, inputs derived principally from or corroborated by observable market data by correlation or other means; and |
• | Level 3 - valuation methodology with unobservable inputs that are significant to the fair value measurement. |
Inventories | $ | 354 | |
Property and Equipment | 3,307 | ||
Goodwill | 23,417 | ||
Intangible assets | 30,090 | ||
Total Assets | 57,168 | ||
Other long-term liabilities | (318 | ) | |
Total purchase price | $ | 56,850 |
From December 6, 2017 through December 31, 2017 | |||
Revenue | $ | 1,139 | |
Net income | $ | 203 |
September 30, 2018 | December 31, 2017 | ||||||
Gaming equipment | $ | 138,600 | $ | 125,064 | |||
Other property and equipment | 20,899 | 17,229 | |||||
Less: Accumulated depreciation | (75,176 | ) | (64,311 | ) | |||
Total property and equipment, net | $ | 84,323 | $ | 77,982 |
Gross Carrying Amount | |||||||||||||||
EGM | Table Products | Interactive | Total | ||||||||||||
Balance at December 31, 2017 | $ | 266,868 | $ | 6,641 | $ | 4,828 | $ | 278,337 | |||||||
Acquisition - Interactive | — | — | 3,359 | 3,359 | |||||||||||
Foreign currency adjustments | 925 | — | (90 | ) | 835 | ||||||||||
Purchase accounting adjustment | 200 | — | — | 200 | |||||||||||
Balance at September 30, 2018 | $ | 267,993 | $ | 6,641 | $ | 8,097 | $ | 282,731 |
September 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||
Useful Life (years) | Gross Value | Accumulated Amortization | Net Carrying Value | Gross Value | Accumulated Amortization | Net Carrying Value | |||||||||||||||||||
Indefinite lived trade names | Indefinite | $ | 12,126 | $ | — | $ | 12,126 | $ | 12,126 | $ | — | $ | 12,126 | ||||||||||||
Trade and brand names | 7 | 14,730 | (9,943 | ) | 4,787 | 14,730 | (7,642 | ) | 7,088 | ||||||||||||||||
Customer relationships | 7 | 189,496 | (87,435 | ) | 102,061 | 188,419 | (69,564 | ) | 118,855 | ||||||||||||||||
Contract rights under development and placement fees | 1 - 7 | 17,622 | (13,227 | ) | 4,395 | 16,834 | (9,860 | ) | 6,974 | ||||||||||||||||
Gaming software and technology platforms | 1 - 7 | 148,152 | (78,507 | ) | 69,645 | 141,231 | (67,189 | ) | 74,042 | ||||||||||||||||
Intellectual property | 10 - 12 | 17,205 | (5,418 | ) | 11,787 | 17,180 | (3,978 | ) | 13,202 | ||||||||||||||||
$ | 399,331 | $ | (194,530 | ) | $ | 204,801 | $ | 390,520 | $ | (158,233 | ) | $ | 232,287 |
September 30, 2018 | December 31, 2017 | ||||||
Salary and payroll tax accrual | $ | 9,962 | $ | 9,449 | |||
Taxes payable | 3,238 | 2,655 | |||||
License fee obligation | 1,000 | 1,000 | |||||
Placement fees payable | 2,438 | 4,000 | |||||
Accrued other | 5,879 | 7,850 | |||||
Total accrued liabilities | $ | 22,517 | $ | 24,954 |
September 30, 2018 | December 31, 2017 | ||||||
First Lien Credit Facilities: | |||||||
Term loans, interest at LIBOR or base rate plus 4.25% (6.33% at September 30, 2018), net of unamortized discount and deferred loan costs of $11.7 million and $13.4 million at September 30, 2018 and December 31, 2017, respectively. | $ | 497,071 | $ | 499,173 | |||
Senior secured PIK notes, net of unamortized discount and deferred loan costs of $3.0 million at December 31, 2017. | — | 149,588 | |||||
Equipment long-term note payable and capital leases | 1,360 | 2,756 | |||||
Total debt | 498,431 | 651,517 | |||||
Less: Current portion | (6,223 | ) | (7,359 | ) | |||
Long-term debt | $ | 492,208 | $ | 644,158 |
Three months ended September 30, 2018 | ||||
Numerator: | ||||
Net income | $ | 4,347 | ||
Net income attributable to participating securities | (16 | ) | ||
Net income attributable to common stock | $ | 4,331 | ||
Denominator: | ||||
Weighted average of common shares outstanding | 35,305 | |||
Potential dilutive effect of stock options | 1,008 | |||
Weighted average of common and common equivalent shares outstanding | 36,313 | |||
Basic earnings per share | $ | 0.12 | ||
Diluted earnings per share | $ | 0.12 |
Nine months ended September 30, | |||
2018 | 2017 | ||
Option valuation assumptions: | |||
Expected dividend yield | —% | —% | |
Expected volatility | 50% | 66% | |
Risk-free interest rate | 2.71% | 1.80% | |
Expected term (in years) | 6.3 | 6.2 |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contract Term (years) | Aggregate Intrinsic Value (in thousands) | |||||||||
Options outstanding as of December 31, 2017 | 1,644,212 | $ | 8.81 | |||||||||
Granted | 48,400 | 24.46 | ||||||||||
Exercised | (70,419 | ) | 10.35 | |||||||||
Canceled or forfeited | (100,565 | ) | 10.74 | |||||||||
Options outstanding as of September 30, 2018 | 1,521,628 | $ | 9.11 | 6.9 | $ | 30,976 | ||||||
Exercisable as of September 30, 2018 | 437,258 | $ | 8.53 | 6.5 | $ | 9,155 |
Shares Outstanding | Grant Date Fair Value (per share) | |||||
Outstanding as of December 31, 2017 | 77,715 | $ | 6.43 | |||
Granted | 273,392 | 31.03 | ||||
Vested | (68,772 | ) | 8.16 | |||
Canceled or forfeited | (106 | ) | 31.74 | |||
Outstanding as of September 30, 2018 | 282,229 | $ | 29.83 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues by segment | |||||||||||||||
EGM | $ | 71,784 | $ | 53,331 | $ | 202,361 | $ | 145,747 | |||||||
Table Products | 2,052 | 1,099 | 5,514 | $ | 2,442 | ||||||||||
Interactive | 1,690 | 2,010 | 5,329 | 6,105 | |||||||||||
Total Revenues | $ | 75,526 | $ | 56,440 | $ | 213,204 | $ | 154,294 | |||||||
Adjusted EBITDA by segment | |||||||||||||||
EGM | 34,026 | 29,756 | 105,197 | 81,450 | |||||||||||
Table Products | 428 | (232 | ) | 684 | (721 | ) | |||||||||
Interactive | (877 | ) | (123 | ) | (1,223 | ) | (337 | ) | |||||||
Subtotal | 33,577 | 29,401 | 104,658 | 80,392 | |||||||||||
Write-downs and other: | |||||||||||||||
Loss on disposal of long-lived assets | 363 | 490 | 1,383 | 3,000 | |||||||||||
Impairment of long-lived assets | 204 | — | 1,199 | 285 | |||||||||||
Fair value adjustments to contingent consideration and other items | 100 | — | 700 | (630 | ) | ||||||||||
Depreciation and amortization | 18,968 | 16,931 | 57,784 | 53,598 | |||||||||||
Accretion of placement fees(1) | 1,206 | 1,192 | 3,412 | 3,492 | |||||||||||
Non-cash stock-based compensation expense | 538 | — | 9,167 | — | |||||||||||
Acquisitions and integration related costs including restructuring and severance | 746 | 71 | 3,156 | 899 | |||||||||||
Initial public offering costs | 859 | — | 2,168 | — | |||||||||||
Legal and litigation expenses including settlement payments | (45 | ) | 181 | 789 | 766 | ||||||||||
New jurisdictions and regulatory licensing costs | — | 567 | — | 1,304 | |||||||||||
Non-cash charge on capitalized installation and delivery | 494 | 359 | 1,478 | 1,284 | |||||||||||
Non-cash charges and loss on disposition of assets | — | — | — | 686 | |||||||||||
Other adjustments | 34 | 474 | 50 | 2,067 | |||||||||||
Interest expense | 8,956 | 12,666 | 28,253 | 42,380 | |||||||||||
Interest income | (89 | ) | (25 | ) | (162 | ) | (80 | ) | |||||||
Loss on extinguishment and modification of debt | — | — | 4,608 | 8,129 | |||||||||||
Other expense (income) | 434 | (467 | ) | 10,121 | (4,805 | ) | |||||||||
Income (loss) before income taxes | $ | 809 | $ | (3,038 | ) | $ | (19,448 | ) | $ | (31,983 | ) |
Three months ended September 30, | $ | % | ||||||||||||
2018 | 2017 | Change | Change | |||||||||||
Consolidated Statements of Operations: | ||||||||||||||
Revenues | ||||||||||||||
Gaming operations | $ | 50,701 | $ | 42,849 | $ | 7,852 | 18.3 | % | ||||||
Equipment sales | 24,825 | 13,591 | 11,234 | 82.7 | % | |||||||||
Total revenues | 75,526 | 56,440 | 19,086 | 33.8 | % | |||||||||
Operating expenses | ||||||||||||||
Cost of gaming operations | 10,494 | 7,344 | 3,150 | 42.9 | % | |||||||||
Cost of equipment sales | 12,109 | 6,330 | 5,779 | 91.3 | % | |||||||||
Selling, general and administrative | 15,284 | 9,742 | 5,542 | 56.9 | % | |||||||||
Research and development | 7,894 | 6,467 | 1,427 | 22.1 | % | |||||||||
Write-downs and other charges | 667 | 490 | 177 | 36.1 | % | |||||||||
Depreciation and amortization | 18,968 | 16,931 | 2,037 | 12.0 | % | |||||||||
Total operating expenses | 65,416 | 47,304 | 18,112 | 38.3 | % | |||||||||
Income from operations | 10,110 | 9,136 | 974 | 10.7 | % | |||||||||
Interest expense | 8,956 | 12,666 | (3,710 | ) | (29.3 | )% | ||||||||
Interest income | (89 | ) | (25 | ) | (64 | ) | (256.0 | )% | ||||||
Other expense (income) | 434 | (467 | ) | 901 | 192.9 | % | ||||||||
Income (loss) before income taxes | 809 | (3,038 | ) | 3,847 | 126.6 | % | ||||||||
Income tax benefit (expense) | 3,538 | (1,052 | ) | 4,590 | 436.3 | % | ||||||||
Net income (loss) | $ | 4,347 | $ | (4,090 | ) | $ | 8,437 | 206.3 | % |
Nine months ended September 30, | $ | % | ||||||||||||
2018 | 2017 | Change | Change | |||||||||||
Consolidated Statements of Operations: | ||||||||||||||
Revenues | ||||||||||||||
Gaming operations | $ | 152,887 | $ | 125,040 | $ | 27,847 | 22.3 | % | ||||||
Equipment sales | 60,317 | 29,254 | 31,063 | 106.2 | % | |||||||||
Total revenues | 213,204 | 154,294 | 58,910 | 38.2 | % | |||||||||
Operating expenses | ||||||||||||||
Cost of gaming operations | 29,062 | 21,794 | 7,268 | 33.3 | % | |||||||||
Cost of equipment sales | 28,919 | 14,326 | 14,593 | 101.9 | % | |||||||||
Selling, general and administrative | 47,411 | 30,368 | 17,043 | 56.1 | % | |||||||||
Research and development | 23,374 | 17,912 | 5,462 | 30.5 | % | |||||||||
Write-downs and other charges | 3,282 | 2,655 | 627 | 23.6 | % | |||||||||
Depreciation and amortization | 57,784 | 53,598 | 4,186 | 7.8 | % | |||||||||
Total operating expenses | 189,832 | 140,653 | 49,179 | 35.0 | % | |||||||||
Income from operations | 23,372 | 13,641 | 9,731 | 71.3 | % | |||||||||
Interest expense | 28,253 | 42,380 | (14,127 | ) | (33.3 | )% | ||||||||
Interest income | (162 | ) | (80 | ) | (82 | ) | (102.5 | )% | ||||||
Loss on extinguishment and modification of debt | 4,608 | 8,129 | (3,521 | ) | (43.3 | )% | ||||||||
Other expense (income) | 10,121 | (4,805 | ) | 14,926 | 310.6 | % | ||||||||
Income (loss) before income taxes | (19,448 | ) | (31,983 | ) | 12,535 | 39.2 | % | |||||||
Income tax benefit (expense) | 8,947 | (4,603 | ) | 13,550 | 294.4 | % | ||||||||
Net income (loss) | $ | (10,501 | ) | $ | (36,586 | ) | $ | 26,085 | 71.3 | % |
Three months ended September 30, | $ | % | ||||||||||||
2018 | 2017 | Change | Change | |||||||||||
EGM Segment Revenue: | ||||||||||||||
Gaming operations | $ | 47,109 | $ | 39,767 | $ | 7,342 | 18.5 | % | ||||||
Equipment sales | 24,675 | 13,564 | 11,111 | 81.9 | % | |||||||||
Total EGM revenues | $ | 71,784 | $ | 53,331 | $ | 18,453 | 34.6 | % | ||||||
EGM adjusted EBITDA | $ | 34,026 | $ | 29,756 | $ | 4,270 | 14.4 | % | ||||||
EGM unit information: | ||||||||||||||
Domestic installed base, end of period | 16,068 | 14,544 | 1,524 | 10.5 | % | |||||||||
International base, end of period | 8,116 | 7,471 | 645 | 8.6 | % | |||||||||
Total installed base, end of period | 24,184 | 22,015 | 2,169 | 9.9 | % | |||||||||
Domestic revenue per day | $ | 27.14 | $ | 25.44 | $ | 1.70 | 6.7 | % | ||||||
International revenue per day | $ | 8.52 | $ | 8.33 | $ | 0.19 | 2.3 | % | ||||||
Total revenue per day | $ | 20.95 | $ | 19.65 | $ | 1.30 | 6.6 | % | ||||||
Domestic EGM units sold | 1,332 | 842 | 490 | 58.2 | % | |||||||||
International EGM units sold | — | — | — | — | % | |||||||||
Total EGM units sold | 1,332 | 842 | 490 | 58.2 | % | |||||||||
Total average sales price | $ | 18,051 | $ | 15,890 | $ | 2,161 | 13.6 | % |
Nine months ended September 30, | $ | % | ||||||||||||
2018 | 2017 | Change | Change | |||||||||||
EGM Segment Revenue: | ||||||||||||||
Gaming operations | $ | 142,301 | $ | 116,587 | $ | 25,714 | 22.1 | % | ||||||
Equipment sales | 60,060 | 29,160 | $ | 30,900 | 106.0 | % | ||||||||
Total EGM revenues | $ | 202,361 | $ | 145,747 | $ | 56,614 | 38.8 | % | ||||||
EGM adjusted EBITDA | $ | 105,197 | $ | 81,450 | $ | 23,747 | 29.2 | % | ||||||
EGM unit information: | ||||||||||||||
Domestic installed base, end of period | 16,068 | 14,544 | 1,524 | 10.5 | % | |||||||||
International base, end of period | 8,116 | 7,471 | 645 | 8.6 | % | |||||||||
Total installed base, end of period | 24,184 | 22,015 | 2,169 | 9.9 | % | |||||||||
Domestic revenue per day | $ | 27.22 | $ | 25.73 | $ | 1.49 | 5.8 | % | ||||||
International revenue per day | $ | 8.53 | $ | 8.37 | $ | 0.16 | 1.9 | % | ||||||
Total revenue per day | $ | 21.22 | $ | 19.86 | $ | 1.36 | 6.8 | % | ||||||
Domestic EGM units sold | 3,182 | 1,690 | 1,492 | 88.3 | % | |||||||||
International EGM units sold | 46 | 178 | (132 | ) | (74.2 | )% | ||||||||
Total EGM units sold | 3,228 | 1,868 | 1,360 | 72.8 | % | |||||||||
Average sales price | $ | 18,208 | $ | 15,835 | $ | 2,373 | 15.0 | % |
Three months ended September 30, | $ | % | ||||||||||||
2018 | 2017 | Change | Change | |||||||||||
Table Products Segment Revenue: | ||||||||||||||
Gaming operations | $ | 1,902 | $ | 1,072 | $ | 830 | 77.4 | % | ||||||
Equipment sales | 150 | 27 | 123 | 455.6 | % | |||||||||
Total Table Products revenues | $ | 2,052 | $ | 1,099 | $ | 953 | 86.7 | % | ||||||
Table Products adjusted EBITDA | $ | 428 | $ | (232 | ) | $ | 660 | 284.5 | % | |||||
Table Products unit information: | ||||||||||||||
Table products installed base, end of period | 3,065 | 2,350 | 715 | 30.4 | % | |||||||||
Average monthly lease price | $ | 214 | $ | 151 | $ | 63 | 41.7 | % |
Nine months ended September 30, | $ | % | ||||||||||||
2018 | 2017 | Change | Change | |||||||||||
Table Products Segment Revenue: | ||||||||||||||
Gaming operations | $ | 5,257 | $ | 2,348 | $ | 2,909 | 123.9 | % | ||||||
Equipment sales | 257 | 94 | 163 | 173.4 | % | |||||||||
Total Table Products revenues | $ | 5,514 | $ | 2,442 | $ | 3,072 | 125.8 | % | ||||||
Table Products adjusted EBITDA | $ | 684 | $ | (721 | ) | $ | 1,405 | 194.9 | % | |||||
Table Products unit information: | ||||||||||||||
Table products installed base, end of period | 3,065 | 2,350 | 715 | 30.4 | % | |||||||||
Average monthly lease price | $ | 215 | $ | 111 | $ | 104 | 93.7 | % |
Three months ended September 30, | $ | % | ||||||||||||
2018 | 2017 | Change | Change | |||||||||||
Interactive Segment Revenue: | ||||||||||||||
Gaming operations | $ | 1,690 | $ | 2,010 | $ | (320 | ) | (15.9 | )% | |||||
Total Interactive revenues | $ | 1,690 | $ | 2,010 | $ | (320 | ) | (15.9 | )% | |||||
Interactive adjusted EBITDA | $ | (877 | ) | $ | (123 | ) | $ | (754 | ) | (613.0 | )% | |||
Interactive unit information: | ||||||||||||||
Average MAU(1) | 148,668 | 194,239 | (45,571 | ) | (23.5 | )% | ||||||||
Average DAU(2) | 33,948 | 36,906 | (2,958 | ) | (8.0 | )% | ||||||||
ARPDAU(3) | $ | 0.43 | $ | 0.59 | $ | (0.16 | ) | (27.1 | )% |
Nine months ended September 30, | $ | % | ||||||||||||
2018 | 2017 | Change | Change | |||||||||||
Interactive Segment Revenue: | ||||||||||||||
Gaming operations | $ | 5,329 | 6,105 | $ | (776 | ) | (12.7 | )% | ||||||
Total Interactive revenues | $ | 5,329 | $ | 6,105 | $ | (776 | ) | (12.7 | )% | |||||
Interactive adjusted EBITDA | $ | (1,223 | ) | $ | (337 | ) | $ | (886 | ) | (262.9 | )% | |||
Interactive unit information: | ||||||||||||||
Average MAU(1) | 183,593 | 190,237 | (6,644 | ) | (3.5 | )% | ||||||||
Average DAU(2) | 37,088 | 37,544 | (456 | ) | (1.2 | )% | ||||||||
ARPDAU(3) | $ | 0.46 | $ | 0.58 | $ | (0.12 | ) | (20.7 | )% |
Three months ended September 30, 2018 | |||||||||||||||
EGM | Table Products | Interactive | Total | ||||||||||||
Revenues | |||||||||||||||
Gaming operations | $ | 47,109 | $ | 1,902 | $ | 1,690 | $ | 50,701 | |||||||
Equipment sales | 24,675 | 150 | — | 24,825 | |||||||||||
Total revenues | 71,784 | 2,052 | 1,690 | 75,526 | |||||||||||
Cost of gaming operations(1) | 9,548 | 382 | 564 | 10,494 | |||||||||||
Cost of equipment sales(1) | 12,096 | 13 | — | 12,109 | |||||||||||
Selling, general and administrative | 12,917 | 554 | 1,813 | 15,284 | |||||||||||
Research and development | 6,298 | 694 | 902 | 7,894 | |||||||||||
Write-downs and other charges | 667 | — | — | 667 | |||||||||||
Depreciation and amortization | 17,966 | 701 | 301 | 18,968 | |||||||||||
Total operating expenses | 59,492 | 2,344 | 3,580 | 65,416 | |||||||||||
Write-downs and other | |||||||||||||||
Loss on disposal of long lived assets | 363 | — | — | 363 | |||||||||||
Impairment of long lived assets | 204 | — | — | 204 | |||||||||||
Fair value adjustments to contingent consideration and other items | 100 | — | — | 100 | |||||||||||
Depreciation and amortization | 17,966 | 701 | 301 | 18,968 | |||||||||||
Accretion of placement fees(2) | 1,206 | — | — | 1,206 | |||||||||||
Non-cash stock-based compensation expense(3) | 502 | 19 | 17 | 538 | |||||||||||
Acquisitions and integration related costs including restructuring and severance(4) | 51 | — | 695 | 746 | |||||||||||
Initial public offering(5) | 859 | — | — | 859 | |||||||||||
Legal and litigation expenses including settlement payments(6) | (45 | ) | — | — | (45 | ) | |||||||||
New jurisdictions and regulatory licensing costs(7) | — | — | — | — | |||||||||||
Non-cash charge on capitalized installation and delivery(8) | 494 | — | — | 494 | |||||||||||
Non-cash charges and loss on disposition of assets(9) | — | — | — | — | |||||||||||
Other adjustments(10) | 34 | — | — | 34 | |||||||||||
Adjusted EBITDA | $ | 34,026 | $ | 428 | $ | (877 | ) | $ | 33,577 |
Three months ended September 30, 2017 | |||||||||||||||
EGM | Table Products | Interactive | Total | ||||||||||||
Revenues | |||||||||||||||
Gaming operations | $ | 39,767 | $ | 1,072 | $ | 2,010 | $ | 42,849 | |||||||
Equipment sales | 13,564 | 27 | — | 13,591 | |||||||||||
Total revenues | 53,331 | 1,099 | 2,010 | 56,440 | |||||||||||
Cost of gaming operations(1) | 6,352 | 405 | 587 | 7,344 | |||||||||||
Cost of equipment sales(1) | 6,329 | 1 | — | 6,330 | |||||||||||
Selling, general and administrative | 8,011 | 586 | 1,145 | 9,742 | |||||||||||
Research and development | 5,537 | 524 | 406 | 6,467 | |||||||||||
Write-downs and other charges | 490 | — | — | 490 | |||||||||||
Depreciation and amortization | 16,181 | 185 | 565 | 16,931 | |||||||||||
Total operating expenses | 42,900 | 1,701 | 2,703 | 47,304 | |||||||||||
Write-downs and other | |||||||||||||||
Loss on disposal of long lived assets | 490 | — | — | 490 | |||||||||||
Impairment of long lived assets | — | — | — | — | |||||||||||
Fair value adjustments to contingent consideration and other items | — | — | — | — | |||||||||||
Depreciation and amortization | 16,181 | 185 | 565 | 16,931 | |||||||||||
Accretion of placement fees(2) | 1,192 | — | — | 1,192 | |||||||||||
Non-cash stock-based compensation expense(3) | — | — | — | — | |||||||||||
Acquisitions and integration related costs including restructuring and severance(4) | 65 | 5 | 1 | 71 | |||||||||||
Initial public offering(5) | — | — | — | — | |||||||||||
Legal and litigation expenses including settlement payments(6) | 181 | — | — | 181 | |||||||||||
New jurisdictions and regulatory licensing costs(7) | 556 | 11 | — | 567 | |||||||||||
Non-cash charge on capitalized installation and delivery(8) | 359 | — | — | 359 | |||||||||||
Non-cash charges and loss on disposition of assets(9) | — | — | — | — | |||||||||||
Other adjustments(10) | 301 | 169 | 4 | 474 | |||||||||||
Adjusted EBITDA | $ | 29,756 | $ | (232 | ) | $ | (123 | ) | $ | 29,401 |
Nine months ended September 30, 2018 | |||||||||||||||
EGM | Table Products | Interactive | Total | ||||||||||||
Revenues | |||||||||||||||
Gaming operations | $ | 142,301 | $ | 5,257 | $ | 5,329 | $ | 152,887 | |||||||
Equipment sales | 60,060 | 257 | — | 60,317 | |||||||||||
Total revenues | 202,361 | 5,514 | 5,329 | 213,204 | |||||||||||
Cost of gaming operations(1) | 26,085 | 1,427 | 1,550 | 29,062 | |||||||||||
Cost of equipment sales(1) | 28,884 | 35 | — | 28,919 | |||||||||||
Selling, general and administrative | 41,694 | 1,861 | 3,856 | 47,411 | |||||||||||
Research and development | 19,057 | 2,353 | 1,964 | 23,374 | |||||||||||
Write-downs and other charges | 3,282 | — | — | 3,282 | |||||||||||
Depreciation and amortization | 55,083 | 1,989 | 712 | 57,784 | |||||||||||
Total operating expenses | 174,085 | 7,665 | 8,082 | 189,832 | |||||||||||
Write-downs and other | |||||||||||||||
Loss on disposal of long lived assets | 1,383 | — | — | 1,383 | |||||||||||
Impairment of long lived assets | 1,199 | — | — | 1,199 | |||||||||||
Fair value adjustments to contingent consideration and other items | 700 | — | — | 700 | |||||||||||
Depreciation and amortization | 55,083 | 1,989 | 712 | 57,784 | |||||||||||
Accretion of placement fees(2) | 3,412 | — | — | 3,412 | |||||||||||
Non-cash stock-based compensation expense(3) | 8,200 | 844 | 123 | 9,167 | |||||||||||
Acquisitions and integration related costs including restructuring and severance(4) | 2,461 | — | 695 | 3,156 | |||||||||||
Initial public offering(5) | 2,166 | 2 | — | 2,168 | |||||||||||
Legal and litigation expenses including settlement payments(6) | 789 | — | — | 789 | |||||||||||
New jurisdictions and regulatory licensing costs(7) | — | — | — | — | |||||||||||
Non-cash charge on capitalized installation and delivery(8) | 1,478 | — | — | 1,478 | |||||||||||
Non-cash charges and loss on disposition of assets(9) | — | — | — | — | |||||||||||
Other adjustments(10) | 50 | — | — | 50 | |||||||||||
Adjusted EBITDA | $ | 105,197 | $ | 684 | $ | (1,223 | ) | $ | 104,658 |
Nine months ended September 30, 2017 | |||||||||||||||
EGM | Table Products | Interactive | Total | ||||||||||||
Revenues | |||||||||||||||
Gaming operations | $ | 116,587 | $ | 2,348 | $ | 6,105 | $ | 125,040 | |||||||
Equipment sales | 29,160 | 94 | — | 29,254 | |||||||||||
Total revenues | 145,747 | 2,442 | 6,105 | 154,294 | |||||||||||
Cost of gaming operations(1) | 19,188 | 798 | 1,808 | 21,794 | |||||||||||
Cost of equipment sales(1) | 14,318 | 8 | — | 14,326 | |||||||||||
Selling, general and administrative | 25,490 | 1,424 | 3,454 | 30,368 | |||||||||||
Research and development | 15,652 | 1,277 | 983 | 17,912 | |||||||||||
Write-downs and other charges | 2,655 | — | — | 2,655 | |||||||||||
Depreciation and amortization | 51,603 | 1,012 | 983 | 53,598 | |||||||||||
Total operating expenses | 128,906 | 4,519 | 7,228 | 140,653 | |||||||||||
Write-downs and other | |||||||||||||||
Loss on disposal of long lived assets | 3,000 | — | — | 3,000 | |||||||||||
Impairment of long lived assets | 285 | — | — | 285 | |||||||||||
Fair value adjustments to contingent consideration and other items | (630 | ) | — | — | (630 | ) | |||||||||
Depreciation and amortization | 51,603 | 1,012 | 983 | 53,598 | |||||||||||
Accretion of placement fees(2) | 3,492 | — | — | 3,492 | |||||||||||
Non-cash stock-based compensation expense(3) | — | — | — | — | |||||||||||
Acquisitions and integration related costs including restructuring and severance(4) | 952 | 164 | (217 | ) | 899 | ||||||||||
Initial public offering(5) | — | — | — | — | |||||||||||
Legal and litigation expenses including settlement payments(6) | 766 | — | — | 766 | |||||||||||
New jurisdictions and regulatory licensing costs(7) | 1,293 | 11 | — | 1,304 | |||||||||||
Non-cash charge on capitalized installation and delivery(8) | 1,284 | — | — | 1,284 | |||||||||||
Non-cash charges and loss on disposition of assets(9) | 686 | — | — | 686 | |||||||||||
Other adjustments(10) | 1,878 | 169 | 20 | 2,067 | |||||||||||
Adjusted EBITDA | $ | 81,450 | $ | (721 | ) | $ | (337 | ) | $ | 80,392 |
Three months ended September 30, | $ | % | ||||||||||||
2018 | 2017 | Change | Change | |||||||||||
Net income (loss) | $ | 4,347 | $ | (4,090 | ) | $ | 8,437 | 206.3 | % | |||||
Income tax (benefit) expense | (3,538 | ) | 1,052 | (4,590 | ) | (436.3 | )% | |||||||
Depreciation and amortization | 18,968 | 16,931 | 2,037 | 12.0 | % | |||||||||
Other expense (income) | 434 | (467 | ) | 901 | 192.9 | % | ||||||||
Interest income | (89 | ) | (25 | ) | (64 | ) | (256.0 | )% | ||||||
Interest expense | 8,956 | 12,666 | (3,710 | ) | (29.3 | )% | ||||||||
Write downs and other(1) | 667 | 490 | 177 | 36.1 | % | |||||||||
Loss on extinguishment and modification of debt(2) | — | — | — | — | % | |||||||||
Other adjustments(3) | 893 | 474 | 419 | 88.4 | % | |||||||||
Other non-cash charges(4) | 1,700 | 1,551 | 149 | 9.6 | % | |||||||||
New jurisdictions and regulatory licensing costs(5) | — | 567 | (567 | ) | (100.0 | )% | ||||||||
Legal and litigation expenses including settlement payments(6) | (45 | ) | 181 | (226 | ) | (124.9 | )% | |||||||
Acquisitions and integration related costs including restructuring and severance(7) | 746 | 71 | 675 | 950.7 | % | |||||||||
Non-cash stock based compensation(8) | 538 | — | 538 | 100.0 | % | |||||||||
Total Adjusted EBITDA | $ | 33,577 | $ | 29,401 | $ | 4,176 | 14.2 | % |
Nine months ended September 30, | $ | % | ||||||||||||
2018 | 2017 | Change | Change | |||||||||||
Net loss | $ | (10,501 | ) | $ | (36,586 | ) | $ | 26,085 | 71.3 | % | ||||
Income tax (benefit) expense | (8,947 | ) | 4,603 | (13,550 | ) | (294.4 | )% | |||||||
Depreciation and amortization | 57,784 | 53,598 | 4,186 | 7.8 | % | |||||||||
Other expense (income) | 10,121 | (4,805 | ) | 14,926 | 310.6 | % | ||||||||
Interest income | (162 | ) | (80 | ) | (82 | ) | (102.5 | )% | ||||||
Interest expense | 28,253 | 42,380 | (14,127 | ) | (33.3 | )% | ||||||||
Write downs and other(1) | 3,282 | 2,655 | 627 | 23.6 | % | |||||||||
Loss on extinguishment and modification of debt(2) | 4,608 | 8,129 | (3,521 | ) | (43.3 | )% | ||||||||
Other adjustments(3) | 2,218 | 2,067 | 151 | 7.3 | % | |||||||||
Other non-cash charges(4) | 4,890 | 5,462 | (572 | ) | (10.5 | )% | ||||||||
New jurisdictions and regulatory licensing costs(5) | — | 1,304 | (1,304 | ) | (100.0 | )% | ||||||||
Legal and litigation expenses including settlement payments(6) | 789 | 766 | 23 | 3.0 | % | |||||||||
Acquisitions and integration related costs including restructuring and severance(7) | 3,156 | 899 | 2,257 | 251.1 | % | |||||||||
Non-cash stock based compensation(8) | 9,167 | — | 9,167 | 100.0 | % | |||||||||
Total Adjusted EBITDA | $ | 104,658 | $ | 80,392 | $ | 24,266 | 30.2 | % |
Nine months ended September 30, | |||||||
2018 | 2017 | ||||||
Cash Flow Information: | |||||||
Net cash provided by (used in) operating activities | $ | 13,320 | $ | 26,293 | |||
Net cash used in investing activities | (48,613 | ) | (49,689 | ) | |||
Net cash provided by financing activities | 49,252 | 15,436 | |||||
Effect of exchange rates on cash and cash equivalents and restricted cash | 4 | 8 | |||||
Net increase in cash and cash equivalents and restricted cash | $ | 13,963 | $ | (7,952 | ) |
Exhibit Number | Exhibit Description | |
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 | ||
31.1 | ||
31.2 | ||
32 | ||
101.IN | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
AP GAMING HOLDCO, INC. | |||||
Date: | November 8, 2018 | By: | /s/ KIMO AKIONA | ||
Name: | Kimo Akiona | ||||
Title: | Chief Financial Officer, Chief Accounting Officer and Treasurer (Principal Financial and Accounting Officer) |
1. | Grant of Shares. |
2. | Vesting. The Shares shall be one hundred percent (100%) vested as of the Date of Grant. |
5. | Compliance with Legal Requirements. |
7. | Restrictive Covenants. |
8. | Miscellaneous. |
10. | Miscellaneous. |
/s/ DAVID LOPEZ |
David Lopez President and Chief Executive Officer (Principal Executive Officer) |
/s/ KIMO AKIONA |
Kimo Akiona |
Chief Financial Officer, Chief Accounting Officer and Treasurer (Principal Financial and Accounting Officer) |
/s/ DAVID LOPEZ |
David Lopez President and Chief Executive Officer (Principal Executive Officer) |
/s/ KIMO AKIONA |
Kimo Akiona |
Chief Financial Officer, Chief Accounting Officer and Treasurer (Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Nov. 05, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | PLAYAGS, INC. | |
Entity Central Index Key | 0001593548 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 35,305,479 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for trade accounts | $ 1,180 | $ 1,462 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 100,000 | 100,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 450,000,000 | 46,629,155 |
Common stock, shares issued | 35,305,479 | 23,208,076 |
Common stock, shares outstanding | 35,305,479 | 23,208,076 |
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | |||||
---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
||||
Revenues | |||||||
Gaming operations | $ 50,701 | $ 42,849 | $ 152,887 | $ 125,040 | |||
Sales Revenue, Goods, Net | 24,825 | 13,591 | 60,317 | 29,254 | |||
Total revenues | 75,526 | 56,440 | 213,204 | 154,294 | |||
Operating expenses | |||||||
Cost of gaming operations | [1] | 10,494 | 7,344 | 29,062 | 21,794 | ||
Cost of equipment sales | [1] | 12,109 | 6,330 | 28,919 | 14,326 | ||
Selling, general and administrative | 15,284 | 9,742 | 47,411 | 30,368 | |||
Research and development | 7,894 | 6,467 | 23,374 | 17,912 | |||
Write-downs and other charges | 667 | 490 | 3,282 | 2,655 | |||
Depreciation and amortization | 18,968 | 16,931 | 57,784 | 53,598 | |||
Total operating expenses | 65,416 | 47,304 | 189,832 | 140,653 | |||
Income from operations | 10,110 | 9,136 | 23,372 | 13,641 | |||
Other expense (income) | |||||||
Interest expense | 8,956 | 12,666 | 28,253 | 42,380 | |||
Interest income | (89) | (25) | (162) | (80) | |||
Loss on extinguishment and modification of debt | 0 | 0 | 4,608 | 8,129 | |||
Other expense (income) | 434 | (467) | 10,121 | (4,805) | |||
Income (loss) before income taxes | 809 | (3,038) | (19,448) | (31,983) | |||
Income tax benefit (expense) | 3,538 | (1,052) | 8,947 | (4,603) | |||
Net income (loss) | 4,347 | (4,090) | (10,501) | (36,586) | |||
Foreign currency translation adjustment | 1,636 | (498) | 1,690 | 707 | |||
Total comprehensive income (loss) | $ 5,983 | $ (4,588) | $ (8,811) | $ (35,879) | |||
Basic and diluted earnings (loss) per common share: | |||||||
Basic (in dollars per share) | $ 0.12 | $ (0.18) | $ (0.31) | $ (1.58) | |||
Diluted (in dollars per share) | $ 0.12 | $ (0.18) | $ (0.31) | $ (1.58) | |||
Weighted average common shares outstanding: | |||||||
Basic (in shares) | 35,305 | 23,208 | 34,097 | 23,208 | |||
Diluted (in shares) | 36,313 | 23,208 | 34,097 | 23,208 | |||
|
Consolidated Statement of Equity (Parenthetical) |
9 Months Ended | |
---|---|---|
Jan. 30, 2018 |
Sep. 30, 2018 |
|
Statement of Stockholders' Equity [Abstract] | ||
Stock split ratio | 1.5543 | 1.5543 |
Description of the Business and Summary of Significant Accounting Policies |
9 Months Ended | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||
Description of the Business and Summary of Significant Accounting Policies | DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business PlayAGS, Inc. (formerly AP Gaming Holdco, Inc.) (the "Company," "PlayAGS," "we," "us," or "our") is a leading designer and supplier of gaming products and services for the gaming industry. We operate in legalized gaming markets across the globe and provide state-of-the-art, value-add products in three distinct segments: Electronic Gaming Machines (“EGM”), which includes server-based systems and back-office systems that are used by Class II Native American and Mexican gaming jurisdictions and Class III Native American, commercial and charitable jurisdictions; Table Products (“Table Products”), which includes live felt table games, side-bets and progressives as well as our newly introduced card shuffler, “DEX S”; and Interactive Social Casino Games (“Interactive”), which provides social casino games on desktop and mobile devices as well as a platform for content aggregation used by real-money gaming (“RMG”) and sports-betting partners. Each segment's activities include the design, development, acquisition, manufacturing, marketing, distribution, installation and servicing of a distinct product line. The Company filed a Registration Statement on Form 10 on December 19, 2013, which went effective under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on December 19, 2013. On January 30, 2018, we completed the initial public offering of 10,250,000 shares of our common stock, at a public offering price of $16.00 per share (the “IPO”). Electronic Gaming Machines Our EGM segment offers a selection of video slot titles developed for the global marketplace, and EGM cabinets which include the Orion Portrait, ICON, Halo, Colossal Diamonds (“Big Red”) and our newly introduced Orion Slant. In addition to providing complete EGM units, we offer conversion kits that allow existing game titles to be converted to other game titles offered within that operating platform. Table Products Our table products include live proprietary table products and side-bets, as well as ancillary table products. Products include both internally developed and acquired proprietary table products, side-bets, progressives, and table technology related to blackjack, poker, baccarat, craps and roulette. We have acquired a number of popular brands, including In Bet Gaming (“In Bet”), Buster Blackjack, Double Draw Poker and Criss Cross Poker that are based on traditional well-known public domain games such as blackjack and poker; however, these proprietary games provide intriguing betting options that offer more excitement and greater volatility to the player, ultimately enhancing our casino customers’ profitability. In addition, we recently introduced a single deck card shuffler for poker tables, “DEX S.” Interactive Our business-to-consumer (“B2C”) social casino games are primarily delivered through our mobile app, Lucky Play Casino. The app contains several game titles available for consumers to play for fun and with coins that they purchase through the app. Some of our most popular social casino games include content that is also popular in land-based settings such as Golden Wins, Royal Wheels and So Hot. We have recently expanded into the business-to-business (“B2B”) space through our core app, Lucky Play Casino, whereby we white label our social casino game product and enable our land-based casino customers to brand the social casino gaming product with their own casino name. With the recent acquisition of Gameiom Technologies Limited (defined below) as described in Note 2, we now offer a platform for B2B content aggregation used by RMG and sports-betting partners. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures required by generally accepted accounting principles (“GAAP”) are omitted or condensed in these condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) that are necessary for a fair statement of the Company's financial position, results of operations and cash flows for the interim periods have been made. The interim results reflected in these condensed consolidated financial statements are not necessarily indicative of results to be expected for the full fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2017. Principles of Consolidation The accompanying condensed consolidated financial statements include the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company to make decisions based upon estimates, assumptions, and factors considered relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of the estimates and assumptions. Accordingly, actual results could differ materially from those anticipated. Revenue Recognition Gaming Operations Gaming operations revenue is earned by providing customers with gaming machines, gaming machine content licenses, back-office equipment and linked progressive systems, which are collectively referred to as gaming equipment, under participation arrangements. The participation arrangements convey the right to use the equipment (i.e. gaming machines and related integral software) for a stated period of time, which typically ranges from one to three years upon which the contract continues on a month-to-month basis thereafter. In some instances, the Company will enter arrangements for longer periods of time; however, many of these arrangements include the ability of the customer to cancel the contract and return the games to the Company, a provision which renders their contracts effectively month-to-month contracts. Primarily due to these factors, our participation arrangements are accounted for as operating leases. In some instances, we will offer a free trial period during which no revenue is recognized. If during or at the conclusion of the trial period the customer chooses to enter into a lease for the gaming equipment, we commence revenue recognition according to the terms of the agreement. Under participation arrangements, the Company retains ownership of the gaming equipment installed at the customer facilities and receives either revenue based on a percentage of the win per day generated by the gaming equipment or a daily fee. Thus, in our consolidated financial statements the Company records revenue monthly related to these arrangements and the gaming equipment is recorded in property and equipment, net on our balance sheet and depreciated over the expected life of the gaming equipment. The majority of the Company’s leases require the Company to provide maintenance throughout the entire term of the lease. In some cases, a performance guarantee exists that, if not met, provides the customer with the right to return the gaming machines to the Company. This performance guarantee is considered a cancellation clause, a provision which renders their contracts effectively month-to-month contracts. Accordingly, the Company accounts for these contracts in a similar manner with its other operating leases as described above. Whether contractually required or not, the Company develops and provides new gaming titles throughout the life of the lease. Certain arrangements require a portion of the win per day to be retained by the customer to fund facility-specific marketing, advertising and promotions. These amounts retained by the customer reduce the monthly revenue recognized on each arrangement. Gaming operations revenue is also earned from the licensing of table product content and is earned and recognized on a fixed monthly rate. Our B2C social casino products earn revenue from the sale of virtual coins or chips, which is recorded when the purchased coins or chips are used by the customer. B2C social casino revenue is presented gross of the platform fees. B2B social casino products earn revenue primarily based on a percentage of the monthly revenue generated by the white label casino apps that we build and operate for our customers. RMG revenue is earned primarily based on a percentage of the revenue produced by the games on our platform as well as monthly platform fees and initial integration fees. RMG revenue is presented net of payments to game and content suppliers. Equipment Sales Revenues from contracts with customers are recognized and recorded when the following criteria are met:
Equipment sales are generated from the sale of gaming machines and licensing rights to game content software that is installed in the gaming machine, parts, and other ancillary equipment. Also included within the deliverables are delivery, installation and training, all of which occur within a few days of arriving at the customer location. Gaming equipment sales do not include maintenance beyond a standard warranty period. The recognition of revenue from the sale of gaming devices occurs as the customer obtains control of the product and all other revenue recognition criteria have been satisfied. Our contracts include a fixed transaction price. Amounts are due from customers within 30 to 90 days of the invoice date and to a lesser extent we offer extended payment terms of 12 to 24 months with payments due monthly during the extended payment period. The Company enters into revenue arrangements that may consist of multiple performance obligations, which are typically multiple distinct products that may be shipped to the customer at different times. For example, gaming equipment arrangements may include the sale of gaming machines to be delivered upon the consummation of the contract and additional game content conversion kits that will be delivered at a later date when requested by the customer to replace the game content on the customer’s existing gaming machines. Products are identified as separate performance obligations if they are distinct, meaning that the customer can benefit from the product on its own and is separately identifiable from other promises in the contract. Revenue is allocated to the separate performance obligations based on relative standalone selling prices determined at contract inception. Standalone selling prices are primarily determined by prices that we charge for the products when they are sold separately. When a product is not sold separately, we determine the standalone selling price with reference to our standard pricing policies and practices. Cash and Cash Equivalents Cash and cash equivalents consist primarily of deposits held at major banks and other marketable securities with original maturities of 90 days or less. Restricted Cash Restricted cash amounts represent funds held in escrow as collateral for the Company’s surety bonds for various gaming authorities. Allowance for Doubtful Accounts Accounts receivable are stated at face value less an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts related to accounts receivable and notes receivable, which are non-interest bearing, deemed to have a high risk of collectability. The Company reviews the accounts receivable and notes receivable on a monthly basis to determine if any receivables will potentially be uncollectible. The Company analyzes historical collection trends and changes in the customers’ payment patterns, customer concentration, and creditworthiness when evaluating the adequacy of the allowance for doubtful accounts. The Company includes any receivable balances that are determined to be uncollectible in the overall allowance for doubtful accounts. Changes in the assumptions or estimates reflecting the collectability of certain accounts could materially affect the allowance for both accounts and notes receivable. Inventories Inventories consist primarily of parts and supplies that are used to repair and maintain machinery and equipment as well as EGMs in production and finished goods held for sale. Inventories are stated at net realizable value. Cost of inventories is determined using the first-in, first-out (“FIFO”) method for all components of inventory. The Company regularly reviews inventory quantities and updates estimates for the net realizable value of inventories. This process includes examining the carrying values of parts and ancillary equipment in comparison to the current fair market values for such equipment (less costs to sell or dispose). Some of the factors involved in this analysis include the overall levels of the inventories, the current and projected sales levels for such products, the projected markets for such products and the costs required to sell the products, including refurbishment costs. Changes in the assumptions or estimates could materially affect the inventory carrying value. As of September 30, 2018 and December 31, 2017, the value of raw material inventory was $24.6 million and $19.9 million, respectively. As of September 30, 2018 and December 31, 2017, the value of finished goods inventory was $7.2 million and $4.6 million, respectively. There was no work in process material as of September 30, 2018 and December 31, 2017. Property and Equipment The cost of gaming equipment, consisting of fixed-base player terminals, file servers and other support equipment as well as other property and equipment, is depreciated over their estimated useful lives, using the straight-line method for financial reporting. The Company capitalizes costs incurred for the refurbishment of used gaming equipment that is typically incurred to refurbish a machine in order to return it to its customer location. The refurbishments extend the useful life of the gaming equipment beyond the original useful life. Repairs and maintenance costs are expensed as incurred. The Company routinely evaluates the estimated lives used to depreciate assets. The estimated useful lives are as follows:
The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The Company groups long-lived assets for impairment analysis at the lowest level for which identifiable cash flows can be measured independently of the cash flows of other assets and liabilities. This is typically at the individual gaming machine level or at the cabinet product line level. Impairment testing is performed and losses are estimated when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets’ carrying amount. When the estimated undiscounted cash flows are not sufficient to recover the asset’s carrying amount, an impairment loss is measured to the extent the fair value of the asset is less than its carrying amount. The Company measures recoverability of assets to be held and used by comparing the carrying amount of an asset to future cash flows expected to be generated by the asset. The Company’s policy is to impair, when necessary, excess or obsolete gaming machines on hand that it does not expect to be used. Impairment is based upon several factors, including estimated forecast of gaming machine demand for placement into casinos. While the Company believes that the estimates and assumptions used in evaluating the carrying amount of these assets are reasonable, different assumptions could affect either the carrying amount or the estimated useful lives of the assets, which could have a significant impact on the results of operations and financial condition. Intangible Assets The Company reviews its identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses are recognized for identifiable intangibles, other than goodwill, when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets’ carrying amount. When the estimated undiscounted cash flows are not sufficient to recover the intangible asset’s carrying amount, an impairment loss is measured to the extent the fair value of the asset is less than its carrying amount. Certain trade names have an indefinite useful life and the Company tests these trade names for possible impairment at least annually, on October 1, or whenever events or changes in circumstances indicate that the carrying value may be impaired. We perform a qualitative assessment to determine if it is more likely than not that the fair value of the asset is less than its carrying amount. If we believe, as a result of our qualitative assessment, that it is more likely than not that the fair value of the asset is less than its carrying amount, the quantitative impairment test is required. Costs of Capitalized Computer Software Internally developed gaming software represents the Company’s internal costs to develop gaming titles to utilize on the Company’s gaming machines. Internally developed gaming software is stated at cost and amortized over the estimated useful lives of the software, using the straight-line method. Software development costs are capitalized once technological feasibility has been established and are amortized when the software is placed into service. The computer software we develop reaches technological feasibility when a working model of the computer software is available. Any subsequent software maintenance costs, such as bug fixes and subsequent testing, are expensed as incurred. Discontinued software development costs are expensed when the determination to discontinue is made. Software development costs are amortized over the expected life of the title or group of titles, if applicable, to amortization expense. On a quarterly basis, or more frequently if circumstances warrant, the Company compares the net book value of its internally developed computer software to the net realizable value on a title or group of title basis. The net realizable value is determined based upon certain assumptions, including the expected future revenues and net cash flows of the gaming titles or group of gaming titles utilizing that software, if applicable. Goodwill The excess of the purchase price of an acquired business over the estimated fair value of the assets acquired and the liabilities assumed is recorded as goodwill. The Company tests for possible impairment of goodwill at least annually, on October 1, or when circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company has the option to begin with a qualitative assessment, commonly referred to as “Step 0”, to determine whether it is more likely than not that the reporting unit’s fair value of goodwill is less than its carrying value. This qualitative assessment may include, but is not limited to, reviewing factors such as the general economic environment, industry and market conditions, changes in key assumptions used since the most recently performed valuation and overall financial performance of the reporting units. If the Company determines that it is more likely than not that a reporting unit’s fair value is less than its carrying value, the Company performs a quantitative goodwill impairment analysis, and depending upon the results of that measurement, the recorded goodwill may be written down and charged to income from operations when the carrying amount of the reporting unit exceeds the fair value of the reporting unit. As of September 30, 2018, there were no indicators of goodwill impairment. Acquisition Accounting The Company applies the provisions of ASC 805, “Business Combinations” (ASC 805), in accounting for business acquisitions. It requires us to recognize separately from goodwill the fair value of assets acquired and liabilities assumed on the acquisition date. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. Significant estimates and assumptions are required to value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable. These estimates are inherently uncertain and subject to refinement and typically include the calculation of an appropriate discount rate and projection of the cash flows associated with each acquired asset. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. Fair Value of Financial Instruments The Company applies the provisions of ASC 820, “Fair Value Measurements” (ASC 820) to its financial assets and liabilities. Fair value is defined as a market-based measurement intended to estimate the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs when measuring fair value. These inputs are categorized as follows:
The carrying values of the Company’s cash and cash equivalents, restricted cash, receivables and accounts payable approximate fair value because of the short term maturities of these instruments. The fair value of our long-term debt is based on the quoted market prices for similar issues (Level 2 inputs). The estimated fair value of our total debt balance as of September 30, 2018 and December 31, 2017 was $513.0 million and $675.7 million, respectively. Accounting for Income Taxes We conduct business globally and are subject to income taxes in U.S. federal, state, local, and foreign jurisdictions. Determination of the appropriate amount and classification of income taxes depends on several factors, including estimates of the timing and probability of realization of deferred income taxes, reserves for uncertain income tax positions and income tax payment timing We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Taxes on income of our foreign subsidiaries are provided at the tax rates applicable to the tax jurisdictions in which they are located. Future tax benefits are recognized to the extent that realization of those benefits is considered more likely than not and a valuation allowance is established for deferred tax assets which do not meet this threshold. The recoverability of certain deferred tax assets is based in part on estimates of future income and the timing of temporary differences, and the failure to fully realize such deferred tax assets could result in a higher tax provision in future periods. We apply the accounting guidance to our uncertain tax positions and under the guidance, we may recognize a tax benefit from an uncertain position only if it is more likely than not that the position will be sustained upon examination by taxing authorities based on the technical merits of the issue. The amount recognized in the financial statements is the largest benefit that we believe has greater than a 50% likelihood of being realized upon settlement. We are required to make significant judgments when evaluating our uncertain tax positions and the related tax benefits. We believe our assumptions are reasonable; however, there is no guarantee that the final outcome of the related matters will not differ from the amounts reflected in our income tax provisions and accruals. We adjust our liability for uncertain tax positions based on changes in facts and circumstances such as the closing of a tax audit or changes in estimates. We adjusted our liability in the quarter ended September 30, 2018, which is described in Note 12. On December 22, 2017, President Trump signed H.R. 1, originally known as the “Tax Cuts and Jobs Act” (the “Tax Act”) into law, which significantly reformed the Internal Revenue Code of 1986, as amended. The new legislation, among other things, changed the U.S. federal tax rates (including permanently reducing the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate), allowed the expensing of capital expenditures, and put into effect the migration from a “worldwide” system of taxation to a territorial system. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company has recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the period ended December 31, 2017. The ultimate impact of the Tax Act on our consolidated financial statements may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. For the nine months ended September 30, 2018, there was no change to the provisional Transaction Tax recorded in the prior period. The Company expects to complete its analysis within one year from the Tax Act’s enactment in accordance with SAB 118. Under U.S. GAAP, the Company must make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to Global Intangible Low-Taxed Income ("GILTI") as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method). The Company has elected the period cost method and has considered the estimated 2018 GILTI impact in its 2018 tax expense which we currently deem to be immaterial on the consolidated financial statements. Contingencies The Company assesses its exposures to loss contingencies including claims and legal proceedings and accrues a liability if a potential loss is considered probable and the amount can be estimated. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, if the actual loss from a contingency differs from management’s estimate, there could be a material impact on the results of operations or financial position. Operating expenses, including legal fees, associated with contingencies are expensed when incurred. Foreign Currency Translation The financial statements of the Company’s foreign subsidiaries are translated into U.S. dollars at the period end rate of exchange for asset and liability accounts and the weighted average rate of exchange for income statement accounts. The effects of these translations are recorded as a component of other accumulated comprehensive loss in stockholders’ equity. Recently Issued Accounting Pronouncements Adopted in the Current Year In May 2014, the FASB issued an accounting standards update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which clarifies the principles for recognizing revenue from contracts with customers. The amendment outlines a single comprehensive model for entities to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled in exchange for those goods or services. The amendment also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 to annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. The ASU may be adopted using either a full retrospective transition method or a modified retrospective transition method and was adopted by the Company on January 1, 2018. The Company used the modified retrospective application approach and the adoption of the new revenue standards did not have a material impact on its consolidated financial statements as the majority of our revenue is recognized under lease accounting guidance. Related disclosures of the Company’s revenue recognition policy have been updated above under Revenue Recognition to reflect the adoption of the new standards. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). ASU 2016-15 intends to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this ASU in the current year and it did not have a material effect on our financial condition, results of operations or cash flows. The FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash in 2016. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted the guidance retrospectively at the beginning of the first quarter of 2018. The adoption of this guidance resulted in immaterial increases to the cash, cash equivalents and restricted cash beginning-of-period and end-of period line items in the statement of cash flows to include the balance of restricted cash. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new guidance clarifies the definition of a business in order to allow for the evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We adopted this ASU in the current year and it will be effective for acquisitions that are consummated in the current and future periods. To be Adopted in Future Periods In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 intends to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The adoption of this guidance is expected to result in a significant portion of our operating leases, where we are the lessee, to be recognized on our consolidated balance sheets. The FASB also issued ASU 2018-11, Leases (Topic 842) Targeted Improvements in July 2018. These ASUs allow lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach or at the adoption date with recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with earlier adoption permitted. The Company is currently evaluating the provisions of the amendment and the impact on its future consolidated financial statements. In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 requires the remeasurement of deferred tax assets and liabilities as a result of a change in tax laws or rates to be presented in net income from continuing operations. Adjusting temporary differences originally recorded to Accumulated Other Comprehensive Income (“AOCI”) through continuing operations may result in disproportionate tax effects ultimately being lodged in AOCI. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of adopting this guidance. We do not expect that any other recently issued accounting guidance will have a significant effect on our financial statements. |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | ACQUISITIONS AGS iGaming During the quarter ended June 30, 2018, the Company acquired all of the equity of Gameiom Technologies Limited (formerly known as “Gameiom”, currently known as “AGS iGaming”). AGS iGaming is a licensed gaming aggregator and content provider for real-money gaming (“RMG”) and sports betting partners. The acquisition was accounted for as an acquisition of a business and the assets acquired and liabilities assumed were measured based on our preliminary estimates of their fair values at the acquisition date. The estimated fair values of assets acquired and liabilities assumed and resulting goodwill are subject to adjustment as we finalize our fair value analysis. The significant items for which a final fair value has not been determined as of the filing of this report include the fair value of intangible assets. We expect to complete our fair value determinations no later than one year from the acquisition date. We attribute the goodwill acquired to our ability to utilize AGS iGaming’s existing RMG platform to distribute our existing EGM game content into many markets, diversification of our Interactive segment’s product portfolio that now includes a real-money gaming solution and other strategic benefits. Total consideration of $5.0 million included cash paid of $4.5 million and $0.5 million of deferred consideration that is payable within 18 months of the acquisition date. The consideration was preliminarily allocated primarily to goodwill that is not tax deductible for $3.4 million and intangible assets of $2.4 million, which will be amortized over a weighted average period of approximately 6.8 years. The intangible assets consist primarily of customer relationships and a technology platform. The customer relationships were valued using the excess earnings method (level 3 fair value measurement), which is a risk-adjusted discounted cash flow approach that determines the value of an intangible asset as the present value of the cash flows attributable to such asset after excluding the proportion of the cash flows that are attributable to other assets. The contribution to the cash flows that are made by other assets - such as working capital, workforce and other intangible assets - was estimated through contributory asset capital charges. The value of the customer relationships is the present value of the attributed post-tax cash flows, net of the post-tax return on fair value attributed to the other assets. The technology platform was valued using the royalty savings method (level 3 fair value measurement), which is a risk-adjusted discounted cash flow approach. The royalty savings method values an intangible asset by estimating the royalties saved through ownership of the asset. The royalty savings method requires identifying the future revenue that would be impacted by the technology platform (or royalty-free rights to the assets), multiplying it by a royalty rate deemed to be avoided through ownership of the asset and discounting the projected royalty savings amounts back to the acquisition date. The royalty rate used in such valuation was based on a consideration of market rates for similar categories of assets. Rocket Gaming Systems On December 6, 2017, the Company acquired an installed base of approximately 1,500 Class II EGMs across the United States that were operated by Rocket Gaming Systems (“Rocket”) for total consideration of $56.9 million that was paid at the acquisition date. This asset acquisition was accounted for as an acquisition of a business. The acquisition expanded the Company’s Class II footprint in primary markets such as California, Oklahoma, Montana, Washington and Texas and is expected to provide incremental revenue as the Company upgrades the EGMs with its game content and platforms over the next several years. In addition, the acquisition expanded the Company’s product library and included a wide-area progressive and standalone video and spinning-reel games and platforms, including Gold Series®, a suite of games that feature a $1 million+ progressive prize that is the longest-standing million dollar wide-area progressive on tribal casino floors. We have recorded the Rocket assets acquired and liabilities assumed based on our estimates of their fair values at the acquisition date. The determination of the fair values of the assets acquired and liabilities assumed (and the related determination of estimated lives of depreciable and amortizable tangible and identifiable intangible assets) requires significant judgment and estimates. The estimates and assumptions used include the projected timing and amount of future cash flows and discount rates that reflect risk inherent in the future cash flows. The estimated fair values of the Rocket assets acquired and liabilities assumed and resulting goodwill are subject to adjustment as we finalize our fair value analysis. The significant items for which a final fair value has not been determined as of the filing of this report on Form 10-Q include the fair value of property and equipment and intangible assets. We expect to complete our fair value determinations no later than one year from acquisition date. We do not currently expect our fair value determinations to change; however, there may be differences compared to those amounts reflected in our consolidated financial statements as we finalize our fair value analysis and such changes could be material. The preliminary allocation of the purchase price to the estimated fair values of the assets acquired and the liabilities assumed was as follows (in thousands):
Based on our preliminary estimates, the total consideration exceeded the aggregate estimated fair value of the acquired assets and assumed liabilities at the acquisition date and has been recorded as goodwill. We attribute this goodwill to our opportunities for synergies through our ability to leverage our existing service network to service the acquired assets, the opportunity to derive incremental revenue through upgrading the EGMs with the Company’s existing game content and platforms and other strategic benefits. The goodwill associated with the acquisition is deductible for income tax purposes. Our preliminary estimates of the fair values of identifiable intangible assets include $21.9 million customer relationships, $7.2 million gaming software and technology platforms, and $0.9 million trade names. The intangible assets have a weighted average useful life of 6.4 years. The fair value of property and equipment assets as well as the fair value of gaming content software was primarily determined using cost approaches in which we determined an estimated reproduction or replacement cost, as applicable. The estimated fair value of customer relationships was determined using the excess earnings method, which is a risk-adjusted discounted cash flow approach that determines the value of an intangible asset as the present value of the cash flows attributable to such asset after excluding the proportion of the cash flows that are attributable to other assets. The contribution to the cash flows that are made by other assets - such as fixed assets, working capital, workforce and other intangible assets - was estimated through contributory asset capital charges. The value of the acquired customer relationship asset is the present value of the attributed post-tax cash flows, net of the post-tax return on fair value attributed to the other assets. The estimated fair values of acquired trade names and gaming technology platforms were primarily determined using the royalty savings method, which is a risk-adjusted discounted cash flow approach. The royalty savings method values an intangible asset by estimating the royalties saved through ownership of the asset. The royalty savings method requires identifying the future revenue that would be impacted by the trade name or intellectual property (or royalty-free rights to the assets), multiplying it by a royalty rate deemed to be avoided through ownership of the asset and discounting the projected royalty savings amounts back to the acquisition date. The royalty rate used in such valuation was based on a consideration of market rates for similar categories of assets. The revenue and net loss of Rocket from the acquisition date through December 31, 2017, are presented below and are included in our consolidated statements of operations and comprehensive loss. These amounts are not necessarily indicative of the results of operations that Rocket would have realized if it had continued to operate as a stand-alone company during the period presented, primarily due to the inclusion of amortization on purchased intangible assets and short term transition services expenses that the Company incurred in December 2017.
It is not practicable to provide pro forma statements of operations giving effect to the Rocket acquisition as if it had been completed at an earlier date. This is due to the lack of historical financial information sufficient to produce such pro forma statements given that the Company purchased specific assets from the sellers that were not segregated in the seller’s financial records and for which separate carve-out financial statements were not produced. In Bet Gaming During the quarter ended September 30, 2017, the Company acquired certain intangible assets related to the purchase of table games and table game related intellectual property from In Bet. The acquisition was accounted for as an acquisition of a business and the assets acquired and liabilities assumed were measured based on our final estimates of their fair values at the acquisition date. We attribute the goodwill acquired to our ability to commercialize the products over our distribution and sales network, opportunities for synergies, and other strategic benefits. Total consideration of $9.6 million included an estimated $2.6 million of contingent consideration that is payable upon the achievement of certain targets and periodically based on a percentage of product revenue earned on the purchased table games. The consideration was allocated primarily to tax deductible goodwill for $3.2 million and intangible assets of $5.5 million, which will be amortized over a weighted average period of approximately 9 years. The contingent consideration was valued using scenario-based methods (the Company used level 3 of observable inputs in this valuation) that account for the expected timing of payments to be made and discounted using an estimated borrowing rate. The borrowing rate utilized for this purpose was developed with reference to the Company’s existing borrowing rates, adjusted for the facts and circumstances related to the contingent consideration. The intangible assets consist of a primary asset that includes the intellectual property acquired, which asset represents the majority of the intangible asset value. This intellectual property was valued using the excess earnings method (the Company used level 3 of observable inputs in this valuation), which is a risk-adjusted discounted cash flow approach that determines the value of an intangible asset as the present value of the cash flows attributable to such asset after excluding the proportion of the cash flows that are attributable to other assets. The contribution to the cash flows that are made by other assets - such as working capital, workforce and other intangible assets - was estimated through contributory asset capital charges. The value of the acquired intellectual property is the present value of the attributed post-tax cash flows, net of the post-tax return on fair value attributed to the other assets. |
Property and equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | PROPERTY AND EQUIPMENT Property and equipment consist of the following (in thousands):
Gaming equipment and other property and equipment are depreciated over the respective useful lives of the assets ranging from two to six years. Depreciation expense was $8.0 million and $7.1 million for the three months ended September 30, 2018 and 2017, respectively. Depreciation expense was $23.7 million and $19.9 million for the nine months ended September 30, 2018 and 2017, respectively. |
Goodwill and Intangibles |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangibles | GOODWILL AND INTANGIBLES There were no accumulated impairments of goodwill as of September 30, 2018. Changes in the carrying amount of goodwill are as follows (in thousands):
Intangible assets consist of the following (in thousands):
Intangible assets are amortized over their respective estimated useful lives ranging from one to twelve years. Amortization expense related to intangible assets was $11.0 million and $9.9 million for the three months ended September 30, 2018 and 2017, respectively. Amortization expense related to intangible assets was $34.1 million and $33.7 million for the nine months ended September 30, 2018 and 2017, respectively. The Company enters into development agreements and placement fee agreements with certain customers to secure floor space under lease agreements for its gaming machines. Amounts paid in connection with the development agreements are repaid to the Company in accordance with the terms of the agreement, whereas placements fees are not reimbursed. For development agreements in the form of a loan, interest income is recognized on the repayment of the notes based on the stated rate or, if not stated explicitly in the development agreement, on an imputed interest rate. If the stated interest rate is deemed to be other than a market rate or zero, a discount is recorded on the note receivable as a result of the difference between the stated and market rate and a corresponding intangible asset is recorded. The intangible asset is recognized in the financial statements as a contract right under development agreement and amortized as a reduction in revenue over the term of the agreement. Placement fees can be in the form of cash paid upfront or free lease periods and are accreted over the life of the contract and the expense is recorded as a reduction of revenue. We recorded a reduction of gaming operations revenue from the accretion of contract rights under development agreements and placement fees of $1.2 million for the three months ended September 30, 2018 and 2017. We recorded a reduction of gaming operations revenue from the accretion of contract rights under development agreements and placement fees of $3.4 million and $3.5 million for the nine months ended September 30, 2018 and 2017. |
Accrued Liabilities |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities | ACCRUED LIABILITIES Accrued liabilities consist of the following (in thousands):
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Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | LONG-TERM DEBT Long-term debt consists of the following (in thousands):
First Lien Credit Facilities On June 6, 2017 (the “Closing Date”), AP Gaming I, LLC (the “Borrower”), a wholly owned indirect subsidiary of the Company, entered into a first lien credit agreement (“the First Lien Credit Agreement”), providing for $450.0 million in term loans and a $30.0 million revolving credit facility (the “First Lien Credit Facilities”). The proceeds of the term loans were used primarily to repay the senior secured credit facilities (the “Existing Credit Facilities”), the notes issued by the Company to AGS Holdings, LLC (the “AGS Seller Notes”) and the promissory note issued by the Company to Amaya Inc. (the “Amaya Seller Note”), to pay for the fees and expenses incurred in connection with the foregoing and otherwise for general corporate purposes. On December 6, 2017, AP Gaming I, LLC (the “Borrower”), a wholly owned indirect subsidiary of the Company, entered into incremental facilities for $65.0 million in term loans. The net proceeds of the incremental term loans were used to finance the acquisition of electronic gaming machines and related assets operated by Rocket as described in Note 2, to pay fees and expenses in connection therewith and for general corporate purposes. On February 7, 2018, the Company entered into an Incremental Assumption and Amendment Agreement (the “Incremental Agreement”), which amended and restated the First Lien Credit Agreement, dated as of June 6, 2017, as amended by the incremental facilities dated as of December 6, 2017, to reduce the applicable margin for the term loans thereunder by 1.25%. The Incremental Agreement also provides that any refinancing of the term loans through the issuance of certain debt or any repricing amendment resulting in a lower yield occurring at any time during the first six months after February 7, 2018 will be accompanied by a 1.00% payment premium or fee. Prior to entering into the Incremental Agreement, net deferred loan costs and discounts totaling $13.3 million were capitalized and were being amortized over the term of the agreement. In conjunction with the Incremental Agreement approximately $0.4 million of these deferred loan costs and discounts was written off as a portion of the loss on extinguishment and modification of debt and the remainder of these cost will be amortized over the remaining term of the First Lien Credit Facilities. An additional $1.2 million in third party fees was incurred related to the Incremental Agreement. Given the composition of the lender group, certain lenders were accounted for as a debt modification and, as such, $1.2 million of these costs were expensed and included in the loss on extinguishment and modification of debt. The term loans will mature on February 15, 2024, and the revolving credit facility will mature on June 6, 2022. Starting with the first full quarter after the Closing Date, the term loans require scheduled quarterly payments in amounts equal to 0.25% of the original aggregate principal amount of the term loans, with the balance due at maturity. Borrowings under the term loans bear interest at a rate equal to, at the Borrower’s option, either LIBOR or the base rate, subject to an interest rate floor plus an applicable margin rate. Borrowings under the revolving credit facility bear interest at a rate equal to, at the Borrower’s option, either LIBOR or the base rate plus an applicable margin rate. In addition, on a quarterly basis, the Borrower is required to pay each lender under the revolving credit facility a commitment fee in respect of any unused commitments thereunder at a rate of 0.50% per annum. The First Lien Credit Facilities are guaranteed by AP Gaming Holdings, LLC, the Borrower’s material, wholly owned domestic subsidiaries (subject to certain exceptions), and are secured by a pledge by AP Gaming Holdings, LLC of the Borrower’s equity interest directly held by AP Gaming Holdings, LLC and a pledge of substantially all of the existing and future property and assets of the Borrower and the subsidiary guarantors, subject to certain exceptions. The First Lien Credit Facilities require that the Borrower maintain a maximum net first lien leverage ratio set at a maximum of 6.0 to 1.0. The First Lien Credit Facilities also contain customary affirmative covenants and negative covenants that limit our ability to, among other things: (i) incur additional debt or issue certain preferred shares; (ii) create liens on certain assets; (iii) make certain loans or investments (including acquisitions); (iv) pay dividends on or make distributions in respect of our capital stock or make other restricted payments; (v) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; (vi) sell assets; (vii) enter into certain transactions with our affiliates; (viii) enter into sale-leaseback transactions; (ix) change our lines of business; (x) restrict dividends from our subsidiaries or restrict liens; (xi) change our fiscal year; and (xii) modify the terms of certain debt or organizational agreements. The new senior secured credit facilities also contain customary events of default included in similar financing transactions, including, among others, failure to make payments when due, default under other material indebtedness, breach of covenants, breach of representations and warranties, involuntary or voluntary bankruptcy, and material judgments. On October 5, 2018, the Borrower, entered into an Incremental Assumption and Amendment Agreement No. 2 (the “Incremental Agreement No. 2”) with certain of the Borrower’s subsidiaries, the lenders party thereto from time to time and Jefferies finance LLC, as administrative agent, (the “Administrative Agent”). For more information on the Incremental Agreement, see Note 15 - Subsequent Events. Amended and Restated Senior Secured PIK Notes On January 30, 2018, the Company used the net proceeds of the IPO and cash on hand to redeem in full its 11.25% senior secured PIK notes due 2024 (the “PIK Notes”). On the redemption date, the aggregate principal amount of the PIK Notes outstanding was $152.6 million (comprised of the original principal amount of $115 million and the remaining principal amount comprised of capitalized interest) and the amount of accrued and unpaid interest was $1.4 million. In connection with the redemption, the Company repaid all of the outstanding obligations in respect of principal, interest and fees under the PIK Notes and net deferred loan costs and discounts totaling $3.0 million were written off and included in the loss on extinguishment and modification of debt. Concurrently with the redemption of the PIK notes, the Company terminated its amended and restated note purchase agreement (the “A&R Note Purchase Agreement”), dated May 30, 2017, among the Company, AP Gaming Holdings, LLC, as subsidiary guarantor, Deutsche Bank AG, London Branch, as holder, and Deutsche Bank Trust Company Americas, as collateral agent, which governed the PIK Notes. Equipment Long Term Note Payable and Capital Leases The Company has entered into a financing agreement to purchase certain gaming devices, systems and related equipment and has entered into leases for vehicles and equipment that are accounted for as capital leases. |
Stockholders' Equity |
9 Months Ended |
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Sep. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | STOCKHOLDERS’ EQUITY Common Stock Prior to the completion of the IPO, the Company’s common stock consisted of two classes: class A voting common stock (“Class A Shares”) and class B non-voting common stock (“Class B Shares”). In connection with the IPO, we (i) reclassified Class B Shares into a new class of voting common stock, which is the class of stock investors received in the IPO, and (ii) canceled the Class A Shares. Concurrent with this reclassification, and immediately prior to the consummation of the IPO, we effected a 1.5543-for-1 stock split of the Company’s new voting common stock such that existing stockholders each received 1.5543 shares of the new voting common stock described above in clause (i) for each share of Class B Shares they held at that time. Accordingly, all share and per share amounts for all periods presented in these financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the stock split. On January 30, 2018, the Company completed the IPO, in which it issued and sold 10,250,000 shares of common stock at a public offering price of $16.00 per share. On February 27, 2018 the Company sold an additional 1,537,500 shares of its common stock, pursuant to the underwriters’ exercise in full of the over-allotment option. The aggregate net proceeds received by the Company from the IPO were $171.5 million, after deducting underwriting discounts and commissions and offering expenses directly related to issuance of the equity. Prior to the consummation of the IPO, 170,712 shares of common stock were held by management. Pursuant to the Securityholders Agreement dated April 28, 2014 (the “Securityholders Agreement”), these shares were outstanding, but were not considered issued for accounting purposes as they contained a substantive performance condition, a “Qualified Public Offering”, as defined in the Securityholders Agreement, which had to be probable for the holders of these shares to benefit from their ownership. The IPO satisfied the substantive performance condition and as a result the shares and related proceeds of $1.3 million were reclassified from other long-term liabilities to additional paid-in capital and considered issued for accounting purposes. During the three and nine month period ended September 30, 2018, the Company recognized stock-based compensation expense for stock options and restricted stock awards, which is further described in Note 11. As further clarification of the foregoing, prior to the IPO, shares that were held by management that were subject to repurchase rights as outlined in Section 6 of the Securityholders Agreement, that were contingent on the holder’s termination. The repurchase rights enabled the Company to recover the shares issued to management without transferring any appreciation of the fair value of the stock to the holder upon certain terminations of the holder’s employment prior to a “Qualified Public Offering”, as defined in the Securityholders Agreement. If a holder’s employment was terminated by the Company prior to the consummation of a Qualified Public Offering for “Cause”, as defined in the Securityholders Agreement, or was terminated by such holder without “Good Reason”, as defined in the Securityholders Agreement, then the Company had the right to repurchase all or any portion of the shares held by the holder for the lesser of original cost or fair market value. If a holder’s employment was terminated by the Company prior to the consummation of a Qualified Public Offering other than as described above and in the Securityholders Agreement, then the Company had the right to repurchase all or any portion of the shares held by the holder for fair market value. |
Write Downs and Other Charges |
9 Months Ended |
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Sep. 30, 2018 | |
Write Downs And Other Charges [Abstract] | |
Write Downs and Other Charges | WRITE-DOWNS AND OTHER CHARGES The Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) include various non-routine transactions or consulting and transaction-related fees that have been classified as write-downs and other charges. During the three months ended September 30, 2018, the Company recognized $0.7 million in write-downs and other charges driven by losses from the disposal of assets of $0.4 million, impairment of intangible assets related to game titles of $0.2 million (level 3 fair value measurement based on projected cash flows), and a $0.1 million fair value adjustment to contingent consideration (level 3 fair value measurement based on projected cash flows). During the nine months ended September 30, 2018, the Company recognized $3.3 million in write-downs and other charges driven by losses from the disposal of assets of $1.4 million, the impairment to intangible assets of $1.2 million related to game titles and a development agreement (the Company used level 3 of observable inputs in conducting the impairment tests), and a fair value adjustment to contingent consideration of $0.7 million (the Company used level 3 fair value measurements based on projected cash flows). During the three months ended September 30, 2017, the Company recognized $0.5 million in write-downs and other charges driven by losses from the disposal of assets. During the nine months ended September 30, 2017, the Company recognized $2.7 million in write-downs and other charges, driven by losses from the disposal of assets of $2.9 million and the impairment to intangible assets of $0.3 million related to game titles (the Company used level 3 fair value measurement based on projected cash flows for the specific game titles), offset by a fair value adjustment to an acquisition contingent receivable of $0.6 million (the Company used level 3 fair value measurements based on projected cash flows). The contingency was resolved within the quarter ended March 31, 2017. |
Basic and Diluted Income (Loss) Per Share |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and Diluted Income (Loss) Per Share | BASIC AND DILUTED INCOME (LOSS) PER SHARE The Company computes net income (loss) per share in accordance with accounting guidance that requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss). Basic EPS is computed by dividing net income (loss) for the period by the weighted average number of shares outstanding during the period. Basic EPS includes common stock weighted for average number of shares issued during the period. Diluted EPS is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period, increased by potentially dilutive common shares that were outstanding during the period. Diluted EPS excludes all potential dilutive shares if their effect is anti-dilutive. Potentially dilutive common shares include stock options and restricted stock, see Note 11. The weighted average number of common and common equivalent shares used in the calculation of basic and diluted EPS consisted of the following (in thousands, except per share amounts):
There were no potentially dilutive securities for the nine months ended September 30, 2018. Included within the calculation of diluted EPS for the three months ended September 30, 2018 was 1,007,988 stock options, as such securities were dilutive. Excluded from the calculation of diluted EPS for the nine months ended September 30, 2018 was 70,744 restricted shares and 840,815 stock options, as such securities were anti-dilutive. Excluded from the calculation of diluted EPS for the three months ended September 30, 2017 was 77,715 restricted shares and 386,424 stock options, as such securities were anti-dilutive. Excluded from the calculation of diluted EPS for the nine months ended September 30, 2017 was 77,715 restricted shares and 412,058 stock options, as such securities were anti-dilutive. |
Benefit Plans |
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Sep. 30, 2018 | |
Retirement Benefits [Abstract] | |
Benefit Plans | BENEFIT PLANS The Company has established a 401(k) plan (the “401(k) Plan”) for its employees. The 401(k) Plan allows employees to contribute a portion of their earnings, and the Company may match a percentage of the contributions on a discretionary basis. The expense associated with the 401(k) Plan for the three months ended September 30, 2018 and 2017, was $0.3 million and $0.2 million, respectively. The expense associated with the 401(k) Plan for the nine months ended September 30, 2018 and 2017, was $0.9 million and $0.8 million, respectively. On April 28, 2014, the board of directors of the Company approved the 2014 Long-Term Incentive Plan (“LTIP”). Under the LTIP, the Company is authorized to grant nonqualified stock options, rights to purchase common stock, restricted stock, restricted stock units and other awards settleable in, or based upon, common stock to persons who are directors and employees of and consultants to the Company or any of its subsidiaries on the date of the grant. The LTIP will terminate ten years after approval by the board. Subject to adjustments in connection with certain changes in capitalization, the maximum number of shares of common stock that may be delivered pursuant to awards under the LTIP is 2,253,735. As of September 30, 2018, approximately 423,468 shares remain available for issuance. On January 16, 2018, our board adopted and our stockholders approved the 2018 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) pursuant to which equity-based and cash incentives may be granted to participating employees, directors and consultants. The Omnibus Incentive Plan provides for an aggregate of 1,607,389 shares of our common stock. As of September 30, 2018, 1,285,597 shares remain available for issuance. |
Share-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | SHARE-BASED COMPENSATION Stock Options The Company has granted stock awards to eligible participants under its incentive plans. The stock awards include options to purchase the Company’s common stock. These stock options include a combination of service and market conditions, as further described below. Prior to the Company’s IPO, these stock options included a performance vesting condition, a Qualified Public Offering (see Note 7), which was not considered to be probable prior to the consummation of the IPO and as a result, no share-based compensation expense for stock options was recognized prior to 2018. For the three months ended September 30, 2018, the Company recognized $0.3 million in stock-based compensation for stock options and $0.2 million for restricted stock awards. For the nine months ended September 30, 2018, the Company recognized $8.4 million in stock-based compensation for stock options and $0.8 million for restricted stock awards, the majority of which was recognized upon the consummation of the IPO. We recognize stock-based compensation on a straight line basis over the vesting period for time based awards and we recognize the expense immediately for awards with market conditions. The amount of unrecognized compensation expense associated with stock options was $2.2 million and with restricted stock was $8.1 million at September 30, 2018, which is expected to be recognized over the a 2.5 and 3.9 yearly weighted average period, respectively. The Company calculated the grant date fair value of stock options that vest over a service period using the Black Scholes model. For stock options that contain a market condition related to the return on investment that the Company’s stockholders achieve, the options were valued using a lattice-based option valuation model. The assumptions used in these calculations are noted in the following table. Expected volatilities are based on implied volatilities from comparable companies. The expected time to liquidity is based on management’s estimate. The risk-free rate is based on the U.S. Treasury yield curve for a term equivalent to the estimated time to liquidity.
Stock option awards represent options to purchase common stock and are granted pursuant to the Company’s incentive plans, and include options that the Company primarily classifies as Tranche A or time based, Tranche B and Tranche C. Tranche A or time based options are eligible to vest in equal installments of 25% or 20% on each of the first four or five anniversaries of the date of the grant, subject to continued employment with the Company or its subsidiaries. In the event of a termination of employment without cause or as a result of death or disability, any such time based options which would have vested on the next applicable vesting date shall become vested, and the remaining unvested time based options shall be forfeited. In addition, upon a Change in Control (as defined in the incentive plans), subject to continued employment through the date of the Change in Control, all outstanding unvested time based options shall immediately vest. An IPO does not qualify as a Change in Control as it relates to the vesting of stock options. All other option awards are eligible to vest upon the satisfaction of certain performance conditions (collectively, “Performance Options”). On January 16, 2018, we amended our option agreements to add additional vesting provisions to our Performance Options. Tranche B options are eligible to vest based on (a) achievement of an Investor IRR equal to or in excess of 20%, subject to a minimum cash-on-cash return of 2.5 times the Investor Investment (as such terms are defined in the Company’s 2014 Long-Term Incentive Plan) or (b) on the first day that the volume-weighted average price per share of our common stock for the prior 60 consecutive trading days exceeds $19.11 (provided that such 60-day period shall not commence earlier than the 181st day after the completion of our IPO). Tranche C options are eligible to vest based on (a) achievement of an Investor IRR (as defined in the incentive plans) equal to or in excess of 25%, subject to a minimum cash-on-cash return of 3.0 times the Investor Investment or (b) on the first day that the volume-weighted average price per share of our common stock for the prior 60 consecutive trading days exceeds $22.93 (provided that such 60-day period shall not commence earlier than the 181st day after the completion of our IPO). In the event of a termination of employment without cause or as a result of death or disability, any Performance Options which are outstanding and unvested will remain eligible to vest subject to achievement of such performance targets (without regard to the continued service requirement) until the first anniversary of the date of such termination. As a result of the modification, the Company measured the incremental fair value of Tranche B and Tranche C options, which resulted in $2.9 million of incremental fair value. As of September 30, 2018, the Company had 667,565 Performance Options outstanding. A summary of the changes in stock options outstanding during the nine months ended September 30, 2018 is as follows:
Restricted Stock A summary of the changes in restricted stock shares outstanding during the nine months ended September 30, 2018 is as follows:
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Income Taxes |
9 Months Ended |
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Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES The Company determines our provision for income taxes for interim periods using an estimate of our annual effective tax rate. This estimate requires us to forecast pre-tax book income and loss. This forecast is subject to adjustment in subsequent quarterly periods as our estimates of pre-tax income and loss for the year fluctuate, including changes in the geographic mix of pre-tax income and loss. The Company's effective income tax rate for the three months ended September 30, 2018, was a benefit of 437.3%. The difference between the federal statutory rate of 21% and the Company's effective tax rate for the three months ended September 30, 2018, was primarily due to our valuation allowance on deferred tax assets and changes in our annual forecasted pretax book losses, all of which had a significant rate impact due to the nominal pretax book income recognized for the three months ended September 30, 2018. The Company's effective income tax rate for the three months ended September 30, 2017, was an expense of 34.6%. The difference between the federal statutory rate of 35% and the Company's effective tax rate for the three months ended September 30, 2017, was primarily due to changes in our valuation allowance on deferred tax assets. The Company's effective income tax rate for the nine months ended September 30, 2018, was a benefit of 46.0%. The difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the nine months ended September 30, 2018, was primarily due to changes in our valuation allowance on deferred tax assets, various permanent items and lapse in the applicable statute of limitations for certain uncertain tax positions. The Company's effective income tax rate for the nine months ended September 30, 2017, was an expense of 14.4%. The difference between the federal statutory rate of 35.0% and the Company's effective tax rate for the nine months ended September 30, 2017, was primarily due to changes in our valuation allowance on deferred tax assets. The Company entered into an indemnification agreement with the prior owners of Cadillac Jack whereby the prior owners have agreed to indemnify the Company for changes in tax positions by taxing authorities for periods prior to the acquisition. As of September 30, 2018, an indemnification receivable of $9.5 million has been recorded in other assets in the financial statements. This amount includes the indemnification of the original pre-acquisition tax positions along with any related accrued interest and penalties and is offset by a corresponding liability for unrecognized tax benefits in other long-term liabilities. When the related unrecognized tax benefits are favorably resolved, a corresponding charge to relieve the associated indemnification receivable would be recognized in our Consolidated Statements of Operations and Comprehensive Loss. During the nine months ended September 30, 2018, the Company recognized a $9.4 million reduction in the indemnification receivable and related charge in our Consolidated Statements of Operations and Comprehensive Loss. Under U.S. GAAP, The Company must make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to Global Intangible Low-Taxed Income ("GILTI") as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method). The Company has elected the period cost method and has considered the estimated 2018 GILTI impact in its 2018 tax expense which we currently deem to be immaterial on the consolidated financial statements. |
Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES The Company is subject to federal, state and Native American laws and regulations that affect both its general commercial relationships with its Native American tribal customers, as well as the products and services provided to them. Periodically, the Company reviews the status of each significant matter and assesses the potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. If a potential loss from any claim or legal proceeding is considered reasonably possible, the Company discloses an estimate of the possible loss or range of possible loss, or a statement that such an estimate cannot be made. There are no matters that meet the criteria for disclosure outlined above. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to their pending claims and litigation and may revise their estimates. Such revisions in the estimates of the potential liabilities could have a material impact on the results of operations and financial condition. |
Operating Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Segments | OPERATING SEGMENTS We report our business segment results by segment in accordance with the “management approach.” The management approach designates the internal reporting used by our chief operating decision maker (“CODM”), who is our chief executive officer (the “CEO”), for making decisions and assessing performance of our reportable segments. See Note 1 for a detailed discussion of our three segments. Each segment’s activities include the design, development, acquisition, manufacturing, marketing, distribution, installation and servicing of its product lines. We evaluate the performance of our operating segments based on revenues and segment adjusted EBITDA, which is defined in the paragraph below. Segment revenues include leasing, licensing, or selling of products within each reportable segment. Segment adjusted EBITDA includes the revenues and operating expenses from each segment adjusted for depreciation, amortization, write-downs and other charges, accretion of placement fees, non-cash stock-based compensation expense, as well as other costs such as certain acquisitions and integration related costs including restructuring and severance charges; legal and litigation expenses including settlement payments; new jurisdictions and regulatory licensing costs; non-cash charges on capitalized installation and delivery; contract cancellation fees; and other adjustments primarily composed of professional fees incurred by the Company for projects, corporate and public filing compliance and other costs deemed to be non-recurring in nature. Revenues in each segment are attributable to third parties and segment operating expenses are directly associated with the product lines included in each segment such as research and development, product approval costs, product-related litigation expenses, sales commissions and other directly-allocable sales expenses. Cost of gaming operations and cost of equipment sales primarily include the cost of products sold, service, manufacturing overhead, shipping and installation. Segment adjusted EBITDA excludes other income and expense, income taxes and certain expenses that are managed outside of the operating segments. The following provides financial information concerning our reportable segments for the three and nine months ended September 30, (amounts in thousands):
(1) Non-cash item related to the accretion of contract rights under development agreements and placement fees. The Company’s CODM does not receive a report with a measure of total assets or capital expenditures for each reportable segment as this information is not used for the evaluation of segment performance. The CODM assesses the performance of each segment based on adjusted EBITDA and not based on assets or capital expenditures due to the fact that two of the Company’s reportable segments, Table Products and Interactive, are not capital intensive. Any capital expenditure information is provided to the CODM on a consolidated basis. Therefore, the Company has not provided asset and capital expenditure information by reportable segment. |
Subsequent Events (Notes) |
9 Months Ended |
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Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS Term Loan Repricing On October 5, 2018 (the “Closing Date”), the Borrower entered into the Incremental Agreement No. 2 with certain of the Borrower’s subsidiaries, the lenders party thereto from time to time and the Administrative Agent. The Incremental Agreement amended and restated that certain First Lien Credit Agreement, dated as of June 6, 2017, as amended on December 6, 2017 and as amended and restated on February 7, 2018 (the “Existing Credit Agreement”), among the Borrower the lenders party thereto, the Administrative Agent and other parties named therein (the “Amended and Restated Credit Agreement”), to (a) reduce the applicable interest rate margin for the Term B Loans (as repriced, the “Repriced Term B Loans”) under the Credit Agreement by 0.75% (which shall increase by an additional 0.25% if at any time on or after the Closing Date the Borrower receives a corporate credit rating of at least B1 from Moody’s, regardless of any future rating) and (b) provide for the incurrence by the Borrower of incremental term loans in an aggregate principal amount of $30 million (the “Incremental Term Loans” and together with the Repriced Term B Loans, the “Term B Loans”). In connection with the Incremental Agreement No. 2, the Company incurred third-party and lender of $1.5 million. The net proceeds of the Incremental Term Loans are expected to be used for general corporate purposes and additional capital to accelerate growth. The Amended and Restated Credit Agreement also provides that any refinancing of the Term B Loans through the issuance of certain debt or any repricing amendment, in either case, that constitutes a “repricing event” applicable to the Term B Loans resulting in a lower yield occurring at any time during the first six months after the Closing Date (i.e. until April 5, 2019) will be accompanied by a 1.00% prepayment premium or fee, as applicable. The Incremental Term Loans have the same terms as the Borrower’s Repriced Term B Loans. Other than as described above, the Term B Loans continue to have the same terms as provided under the Existing Credit Agreement. Additionally, the parties to the Amended and Restated Credit Agreement continue to have the same obligations set forth in the Existing Credit Agreement. Other than as described above, the provisions of the Term B Loans and the obligations under the Existing Credit Agreement. |
Description of the Business and Summary of Significant Accounting Policies (Policies) |
9 Months Ended | ||||||||||||
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Sep. 30, 2018 | |||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures required by generally accepted accounting principles (“GAAP”) are omitted or condensed in these condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) that are necessary for a fair statement of the Company's financial position, results of operations and cash flows for the interim periods have been made. The interim results reflected in these condensed consolidated financial statements are not necessarily indicative of results to be expected for the full fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2017. |
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Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements include the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company to make decisions based upon estimates, assumptions, and factors considered relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of the estimates and assumptions. Accordingly, actual results could differ materially from those anticipated. |
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Revenue Recognition | Revenue Recognition Gaming Operations Gaming operations revenue is earned by providing customers with gaming machines, gaming machine content licenses, back-office equipment and linked progressive systems, which are collectively referred to as gaming equipment, under participation arrangements. The participation arrangements convey the right to use the equipment (i.e. gaming machines and related integral software) for a stated period of time, which typically ranges from one to three years upon which the contract continues on a month-to-month basis thereafter. In some instances, the Company will enter arrangements for longer periods of time; however, many of these arrangements include the ability of the customer to cancel the contract and return the games to the Company, a provision which renders their contracts effectively month-to-month contracts. Primarily due to these factors, our participation arrangements are accounted for as operating leases. In some instances, we will offer a free trial period during which no revenue is recognized. If during or at the conclusion of the trial period the customer chooses to enter into a lease for the gaming equipment, we commence revenue recognition according to the terms of the agreement. Under participation arrangements, the Company retains ownership of the gaming equipment installed at the customer facilities and receives either revenue based on a percentage of the win per day generated by the gaming equipment or a daily fee. Thus, in our consolidated financial statements the Company records revenue monthly related to these arrangements and the gaming equipment is recorded in property and equipment, net on our balance sheet and depreciated over the expected life of the gaming equipment. The majority of the Company’s leases require the Company to provide maintenance throughout the entire term of the lease. In some cases, a performance guarantee exists that, if not met, provides the customer with the right to return the gaming machines to the Company. This performance guarantee is considered a cancellation clause, a provision which renders their contracts effectively month-to-month contracts. Accordingly, the Company accounts for these contracts in a similar manner with its other operating leases as described above. Whether contractually required or not, the Company develops and provides new gaming titles throughout the life of the lease. Certain arrangements require a portion of the win per day to be retained by the customer to fund facility-specific marketing, advertising and promotions. These amounts retained by the customer reduce the monthly revenue recognized on each arrangement. Gaming operations revenue is also earned from the licensing of table product content and is earned and recognized on a fixed monthly rate. Our B2C social casino products earn revenue from the sale of virtual coins or chips, which is recorded when the purchased coins or chips are used by the customer. B2C social casino revenue is presented gross of the platform fees. B2B social casino products earn revenue primarily based on a percentage of the monthly revenue generated by the white label casino apps that we build and operate for our customers. RMG revenue is earned primarily based on a percentage of the revenue produced by the games on our platform as well as monthly platform fees and initial integration fees. RMG revenue is presented net of payments to game and content suppliers. Equipment Sales Revenues from contracts with customers are recognized and recorded when the following criteria are met:
Equipment sales are generated from the sale of gaming machines and licensing rights to game content software that is installed in the gaming machine, parts, and other ancillary equipment. Also included within the deliverables are delivery, installation and training, all of which occur within a few days of arriving at the customer location. Gaming equipment sales do not include maintenance beyond a standard warranty period. The recognition of revenue from the sale of gaming devices occurs as the customer obtains control of the product and all other revenue recognition criteria have been satisfied. Our contracts include a fixed transaction price. Amounts are due from customers within 30 to 90 days of the invoice date and to a lesser extent we offer extended payment terms of 12 to 24 months with payments due monthly during the extended payment period. The Company enters into revenue arrangements that may consist of multiple performance obligations, which are typically multiple distinct products that may be shipped to the customer at different times. For example, gaming equipment arrangements may include the sale of gaming machines to be delivered upon the consummation of the contract and additional game content conversion kits that will be delivered at a later date when requested by the customer to replace the game content on the customer’s existing gaming machines. Products are identified as separate performance obligations if they are distinct, meaning that the customer can benefit from the product on its own and is separately identifiable from other promises in the contract. Revenue is allocated to the separate performance obligations based on relative standalone selling prices determined at contract inception. Standalone selling prices are primarily determined by prices that we charge for the products when they are sold separately. When a product is not sold separately, we determine the standalone selling price with reference to our standard pricing policies and practices. |
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Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist primarily of deposits held at major banks and other marketable securities with original maturities of 90 days or less. |
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Restricted Cash | Restricted Cash Restricted cash amounts represent funds held in escrow as collateral for the Company’s surety bonds for various gaming authorities. |
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Allowance for Doubtful Accounts | Allowance for Doubtful Accounts Accounts receivable are stated at face value less an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts related to accounts receivable and notes receivable, which are non-interest bearing, deemed to have a high risk of collectability. The Company reviews the accounts receivable and notes receivable on a monthly basis to determine if any receivables will potentially be uncollectible. The Company analyzes historical collection trends and changes in the customers’ payment patterns, customer concentration, and creditworthiness when evaluating the adequacy of the allowance for doubtful accounts. The Company includes any receivable balances that are determined to be uncollectible in the overall allowance for doubtful accounts. Changes in the assumptions or estimates reflecting the collectability of certain accounts could materially affect the allowance for both accounts and notes receivable. |
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Inventories | Inventories Inventories consist primarily of parts and supplies that are used to repair and maintain machinery and equipment as well as EGMs in production and finished goods held for sale. Inventories are stated at net realizable value. Cost of inventories is determined using the first-in, first-out (“FIFO”) method for all components of inventory. The Company regularly reviews inventory quantities and updates estimates for the net realizable value of inventories. This process includes examining the carrying values of parts and ancillary equipment in comparison to the current fair market values for such equipment (less costs to sell or dispose). Some of the factors involved in this analysis include the overall levels of the inventories, the current and projected sales levels for such products, the projected markets for such products and the costs required to sell the products, including refurbishment costs. Changes in the assumptions or estimates could materially affect the inventory carrying value. |
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Property and Equipment | Property and Equipment The cost of gaming equipment, consisting of fixed-base player terminals, file servers and other support equipment as well as other property and equipment, is depreciated over their estimated useful lives, using the straight-line method for financial reporting. The Company capitalizes costs incurred for the refurbishment of used gaming equipment that is typically incurred to refurbish a machine in order to return it to its customer location. The refurbishments extend the useful life of the gaming equipment beyond the original useful life. Repairs and maintenance costs are expensed as incurred. The Company routinely evaluates the estimated lives used to depreciate assets. The estimated useful lives are as follows:
The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The Company groups long-lived assets for impairment analysis at the lowest level for which identifiable cash flows can be measured independently of the cash flows of other assets and liabilities. This is typically at the individual gaming machine level or at the cabinet product line level. Impairment testing is performed and losses are estimated when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets’ carrying amount. When the estimated undiscounted cash flows are not sufficient to recover the asset’s carrying amount, an impairment loss is measured to the extent the fair value of the asset is less than its carrying amount. The Company measures recoverability of assets to be held and used by comparing the carrying amount of an asset to future cash flows expected to be generated by the asset. The Company’s policy is to impair, when necessary, excess or obsolete gaming machines on hand that it does not expect to be used. Impairment is based upon several factors, including estimated forecast of gaming machine demand for placement into casinos. While the Company believes that the estimates and assumptions used in evaluating the carrying amount of these assets are reasonable, different assumptions could affect either the carrying amount or the estimated useful lives of the assets, which could have a significant impact on the results of operations and financial condition. |
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Intangible Assets | Intangible Assets The Company reviews its identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses are recognized for identifiable intangibles, other than goodwill, when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets’ carrying amount. When the estimated undiscounted cash flows are not sufficient to recover the intangible asset’s carrying amount, an impairment loss is measured to the extent the fair value of the asset is less than its carrying amount. Certain trade names have an indefinite useful life and the Company tests these trade names for possible impairment at least annually, on October 1, or whenever events or changes in circumstances indicate that the carrying value may be impaired. We perform a qualitative assessment to determine if it is more likely than not that the fair value of the asset is less than its carrying amount. If we believe, as a result of our qualitative assessment, that it is more likely than not that the fair value of the asset is less than its carrying amount, the quantitative impairment test is required. |
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Costs of Capitalized Computer Software | Costs of Capitalized Computer Software Internally developed gaming software represents the Company’s internal costs to develop gaming titles to utilize on the Company’s gaming machines. Internally developed gaming software is stated at cost and amortized over the estimated useful lives of the software, using the straight-line method. Software development costs are capitalized once technological feasibility has been established and are amortized when the software is placed into service. The computer software we develop reaches technological feasibility when a working model of the computer software is available. Any subsequent software maintenance costs, such as bug fixes and subsequent testing, are expensed as incurred. Discontinued software development costs are expensed when the determination to discontinue is made. Software development costs are amortized over the expected life of the title or group of titles, if applicable, to amortization expense. On a quarterly basis, or more frequently if circumstances warrant, the Company compares the net book value of its internally developed computer software to the net realizable value on a title or group of title basis. The net realizable value is determined based upon certain assumptions, including the expected future revenues and net cash flows of the gaming titles or group of gaming titles utilizing that software, if applicable. |
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Goodwill | Goodwill The excess of the purchase price of an acquired business over the estimated fair value of the assets acquired and the liabilities assumed is recorded as goodwill. The Company tests for possible impairment of goodwill at least annually, on October 1, or when circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company has the option to begin with a qualitative assessment, commonly referred to as “Step 0”, to determine whether it is more likely than not that the reporting unit’s fair value of goodwill is less than its carrying value. This qualitative assessment may include, but is not limited to, reviewing factors such as the general economic environment, industry and market conditions, changes in key assumptions used since the most recently performed valuation and overall financial performance of the reporting units. If the Company determines that it is more likely than not that a reporting unit’s fair value is less than its carrying value, the Company performs a quantitative goodwill impairment analysis, and depending upon the results of that measurement, the recorded goodwill may be written down and charged to income from operations when the carrying amount of the reporting unit exceeds the fair value of the reporting unit. As of September 30, 2018, there were no indicators of goodwill impairment. |
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Acquisition Accounting | Acquisition Accounting The Company applies the provisions of ASC 805, “Business Combinations” (ASC 805), in accounting for business acquisitions. It requires us to recognize separately from goodwill the fair value of assets acquired and liabilities assumed on the acquisition date. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. Significant estimates and assumptions are required to value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable. These estimates are inherently uncertain and subject to refinement and typically include the calculation of an appropriate discount rate and projection of the cash flows associated with each acquired asset. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company applies the provisions of ASC 820, “Fair Value Measurements” (ASC 820) to its financial assets and liabilities. Fair value is defined as a market-based measurement intended to estimate the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs when measuring fair value. These inputs are categorized as follows:
The carrying values of the Company’s cash and cash equivalents, restricted cash, receivables and accounts payable approximate fair value because of the short term maturities of these instruments. The fair value of our long-term debt is based on the quoted market prices for similar issues (Level 2 inputs). |
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Accounting for Income Taxes | Accounting for Income Taxes We conduct business globally and are subject to income taxes in U.S. federal, state, local, and foreign jurisdictions. Determination of the appropriate amount and classification of income taxes depends on several factors, including estimates of the timing and probability of realization of deferred income taxes, reserves for uncertain income tax positions and income tax payment timing We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Taxes on income of our foreign subsidiaries are provided at the tax rates applicable to the tax jurisdictions in which they are located. Future tax benefits are recognized to the extent that realization of those benefits is considered more likely than not and a valuation allowance is established for deferred tax assets which do not meet this threshold. The recoverability of certain deferred tax assets is based in part on estimates of future income and the timing of temporary differences, and the failure to fully realize such deferred tax assets could result in a higher tax provision in future periods. We apply the accounting guidance to our uncertain tax positions and under the guidance, we may recognize a tax benefit from an uncertain position only if it is more likely than not that the position will be sustained upon examination by taxing authorities based on the technical merits of the issue. The amount recognized in the financial statements is the largest benefit that we believe has greater than a 50% likelihood of being realized upon settlement. We are required to make significant judgments when evaluating our uncertain tax positions and the related tax benefits. We believe our assumptions are reasonable; however, there is no guarantee that the final outcome of the related matters will not differ from the amounts reflected in our income tax provisions and accruals. We adjust our liability for uncertain tax positions based on changes in facts and circumstances such as the closing of a tax audit or changes in estimates. We adjusted our liability in the quarter ended September 30, 2018, which is described in Note 12. On December 22, 2017, President Trump signed H.R. 1, originally known as the “Tax Cuts and Jobs Act” (the “Tax Act”) into law, which significantly reformed the Internal Revenue Code of 1986, as amended. The new legislation, among other things, changed the U.S. federal tax rates (including permanently reducing the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate), allowed the expensing of capital expenditures, and put into effect the migration from a “worldwide” system of taxation to a territorial system. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company has recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the period ended December 31, 2017. The ultimate impact of the Tax Act on our consolidated financial statements may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. For the nine months ended September 30, 2018, there was no change to the provisional Transaction Tax recorded in the prior period. The Company expects to complete its analysis within one year from the Tax Act’s enactment in accordance with SAB 118. Under U.S. GAAP, the Company must make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to Global Intangible Low-Taxed Income ("GILTI") as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method). The Company has elected the period cost method and has considered the estimated 2018 GILTI impact in its 2018 tax expense which we currently deem to be immaterial on the consolidated financial statements. |
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Contingencies | Contingencies The Company assesses its exposures to loss contingencies including claims and legal proceedings and accrues a liability if a potential loss is considered probable and the amount can be estimated. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, if the actual loss from a contingency differs from management’s estimate, there could be a material impact on the results of operations or financial position. Operating expenses, including legal fees, associated with contingencies are expensed when incurred. |
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Foreign Currency Translation | Foreign Currency Translation The financial statements of the Company’s foreign subsidiaries are translated into U.S. dollars at the period end rate of exchange for asset and liability accounts and the weighted average rate of exchange for income statement accounts. The effects of these translations are recorded as a component of other accumulated comprehensive loss in stockholders’ equity. |
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Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements Adopted in the Current Year In May 2014, the FASB issued an accounting standards update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which clarifies the principles for recognizing revenue from contracts with customers. The amendment outlines a single comprehensive model for entities to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled in exchange for those goods or services. The amendment also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 to annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. The ASU may be adopted using either a full retrospective transition method or a modified retrospective transition method and was adopted by the Company on January 1, 2018. The Company used the modified retrospective application approach and the adoption of the new revenue standards did not have a material impact on its consolidated financial statements as the majority of our revenue is recognized under lease accounting guidance. Related disclosures of the Company’s revenue recognition policy have been updated above under Revenue Recognition to reflect the adoption of the new standards. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). ASU 2016-15 intends to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this ASU in the current year and it did not have a material effect on our financial condition, results of operations or cash flows. The FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash in 2016. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted the guidance retrospectively at the beginning of the first quarter of 2018. The adoption of this guidance resulted in immaterial increases to the cash, cash equivalents and restricted cash beginning-of-period and end-of period line items in the statement of cash flows to include the balance of restricted cash. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new guidance clarifies the definition of a business in order to allow for the evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We adopted this ASU in the current year and it will be effective for acquisitions that are consummated in the current and future periods. To be Adopted in Future Periods In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 intends to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The adoption of this guidance is expected to result in a significant portion of our operating leases, where we are the lessee, to be recognized on our consolidated balance sheets. The FASB also issued ASU 2018-11, Leases (Topic 842) Targeted Improvements in July 2018. These ASUs allow lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach or at the adoption date with recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with earlier adoption permitted. The Company is currently evaluating the provisions of the amendment and the impact on its future consolidated financial statements. In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 requires the remeasurement of deferred tax assets and liabilities as a result of a change in tax laws or rates to be presented in net income from continuing operations. Adjusting temporary differences originally recorded to Accumulated Other Comprehensive Income (“AOCI”) through continuing operations may result in disproportionate tax effects ultimately being lodged in AOCI. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of adopting this guidance. We do not expect that any other recently issued accounting guidance will have a significant effect on our financial statements. |
Description of the Business and Summary of Significant Accounting Policies (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment |
Property and equipment consist of the following (in thousands):
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Acquisitions Acquisitions (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||
Allocation of purchase price | The preliminary allocation of the purchase price to the estimated fair values of the assets acquired and the liabilities assumed was as follows (in thousands):
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Results since acquisition |
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Property and equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment |
Property and equipment consist of the following (in thousands):
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Goodwill and Intangibles (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the carrying amount of goodwill | Changes in the carrying amount of goodwill are as follows (in thousands):
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Schedule of intangible assets (indefinite-lived) | Intangible assets consist of the following (in thousands):
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Accrued Liabilities (Tables) |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accounts payable and accrued liabilities | Accrued liabilities consist of the following (in thousands):
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Long-Term Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | Long-term debt consists of the following (in thousands):
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Share-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of grant date fair value and related assumptions of Options granted | The assumptions used in these calculations are noted in the following table. Expected volatilities are based on implied volatilities from comparable companies. The expected time to liquidity is based on management’s estimate. The risk-free rate is based on the U.S. Treasury yield curve for a term equivalent to the estimated time to liquidity.
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Schedule of Share-based Compensation, Stock Options, Activity | A summary of the changes in stock options outstanding during the nine months ended September 30, 2018 is as follows:
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Restricted Stock Shares Activity | A summary of the changes in restricted stock shares outstanding during the nine months ended September 30, 2018 is as follows:
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Operating Segments (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | The following provides financial information concerning our reportable segments for the three and nine months ended September 30, (amounts in thousands):
(1) Non-cash item related to the accretion of contract rights under development agreements and placement fees. |
Description of the Business and Summary of Significant Accounting Policies - Property and Equipment (Details) |
9 Months Ended |
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Sep. 30, 2018 | |
Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 2 years |
Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 6 years |
Gaming Equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 2 years |
Gaming Equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 6 years |
Other Property and Equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 3 years |
Other Property and Equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 6 years |
Description of the Business and Summary of Significant Accounting Policies - Narrative (Details) $ / shares in Units, $ in Millions |
9 Months Ended | |||
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Feb. 27, 2018
$ / shares
shares
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Jan. 26, 2018
$ / shares
shares
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Sep. 30, 2018
USD ($)
segment
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Dec. 31, 2017
USD ($)
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Number of segments | segment | 3 | |||
Stock Issued During Period, Shares, New Issues | shares | 1,537,500 | 10,250,000 | ||
Shares Issued, Price Per Share | $ / shares | $ 16.00 | $ 16.00 | ||
Raw material inventory | $ 24.6 | $ 19.9 | ||
Finished goods inventory | 7.2 | 4.6 | ||
Fair value of long-term debt | $ 513.0 | $ 675.7 |
Acquisitions - Purchase Price Allocation (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
Dec. 06, 2017 |
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Business Acquisition [Line Items] | |||
Goodwill | $ 282,731 | $ 278,337 | |
Rocket Gaming Systems [Member] | |||
Business Acquisition [Line Items] | |||
Inventories | $ 354 | ||
Property and Equipment | 3,307 | ||
Goodwill | 23,417 | ||
Intangible assets | 30,090 | ||
Total Assets | 57,168 | ||
Other long-term liabilities | (318) | ||
Total purchase price | $ 56,850 |
Acquisitions - Pro Forma Information (Details) - Rocket Gaming Systems [Member] $ in Thousands |
1 Months Ended |
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Dec. 31, 2017
USD ($)
| |
Business Acquisition [Line Items] | |
Revenue | $ 1,139 |
Net income | $ 203 |
Property and equipment (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
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Property, Plant and Equipment [Line Items] | ||
Less: Accumulated depreciation | $ (75,176) | $ (64,311) |
Total property and equipment, net | 84,323 | 77,982 |
Gaming Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 138,600 | 125,064 |
Other Property and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 20,899 | $ 17,229 |
Property and equipment - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Property, Plant and Equipment [Line Items] | ||||
Depreciation expense | $ 8.0 | $ 7.1 | $ 23.7 | $ 19.9 |
Minimum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Useful lives of gaming equipment and other equipment | 2 years | |||
Maximum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Useful lives of gaming equipment and other equipment | 6 years |
Goodwill and Intangibles - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense related to intangible assets | $ 11,000 | $ 9,900 | $ 34,100 | $ 33,700 |
Impairment of assets | 200 | 1,199 | 333 | |
Accretion of contract rights under development agreements and placement fees | $ 1,200 | $ 1,200 | $ 3,412 | $ 3,459 |
Minimum [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-lived intangible assets, useful life (years) | 1 year | |||
Maximum [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-lived intangible assets, useful life (years) | 12 years |
Accrued Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Schedule of accrued liabilities | ||
Salary and payroll tax accrual | $ 9,962 | $ 9,449 |
Taxes payable | 3,238 | 2,655 |
License fee obligation | 1,000 | 1,000 |
Placement fees payable | 2,438 | 4,000 |
Accrued other | 5,879 | 7,850 |
Total accrued liabilities | $ 22,517 | $ 24,954 |
Stockholders' Equity - Narrative (Details) |
9 Months Ended | ||||
---|---|---|---|---|---|
Feb. 27, 2018
$ / shares
shares
|
Jan. 30, 2018 |
Jan. 26, 2018
USD ($)
$ / shares
shares
|
Sep. 30, 2018
USD ($)
shares
|
Dec. 31, 2017
class
shares
|
|
Class of Stock [Line Items] | |||||
Number of classes of common stock | class | 2 | ||||
Stockholders' Equity Note, Stock Split, Conversion Ratio | 1.5543 | 1.5543 | |||
Stock Issued During Period, Shares, New Issues | 1,537,500 | 10,250,000 | |||
Proceeds from Issuance Initial Public Offering | $ | $ 171.5 | ||||
Shares Issued, Price Per Share | $ / shares | $ 16.00 | $ 16.00 | |||
Common stock, shares issued | 35,305,479 | 23,208,076 | |||
Long-term liability from the proceeds from the sale of the Class B Shares | $ | $ 1,300,000 | ||||
Management [Member] | |||||
Class of Stock [Line Items] | |||||
Common stock, shares issued | 170,712,000 |
Write Downs and Other Charges - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Business Acquisition [Line Items] | ||||
Write-downs and other charges | $ 667 | $ 490 | $ 3,282 | $ 2,655 |
Gain (Loss) on Disposition of Assets | (400) | (1,383) | (2,896) | |
Impairment of assets | 200 | 1,199 | 333 | |
Contingent consideration | $ 100 | $ 700 | $ 600 |
Basic and Diluted Income (Loss) Per Share - Narrative (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Earnings Per Share [Abstract] | ||||
Potentially dilutive securities (in shares) | 0 | |||
Restricted Stock [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 78,000 | 71,000 | 78,000 | |
Stock Option [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 1,008,000 | 386,000 | 841,000 | 412,000 |
Basic and Diluted Income (Loss) Per Share - Earnings Per Share Reconciliation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
Numerator: | |||||
Net income | $ 4,347 | $ (4,090) | $ (10,501) | $ (36,586) | $ (45,106) |
Net income attributable to participating securities | (16) | ||||
Net income attributable to common stock | $ 4,331 | ||||
Denominator: | |||||
Weighted average of common shares outstanding (in shares) | 35,305 | 23,208 | 34,097 | 23,208 | |
Potential dilutive effect of stock options (in shares) | 1,008 | ||||
Weighted average of common and common equivalent shares outstanding (in shares) | 36,313 | 23,208 | 34,097 | 23,208 | |
Basic earnings per share (in dollars per share) | $ 0.12 | $ (0.18) | $ (0.31) | $ (1.58) | |
Diluted earnings per share (in dollars per share) | $ 0.12 | $ (0.18) | $ (0.31) | $ (1.58) |
Benefit Plans (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Apr. 28, 2014 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Jan. 16, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
401(k) defined contribution plan expense | $ 0.3 | $ 0.2 | $ 0.9 | $ 0.8 | ||
Long-Term Incentive Plan [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Incentive plan period | 10 years | |||||
Number of shares authorized under incentive plan | 2,253,735 | |||||
Shares available for issuance | 423,000 | 423,000 | ||||
2018 Omnibus Incentive Plan [Member] | Stock Options [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Shares available for issuance | 1,285,597 | 1,285,597 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 1,607,389 |
Share-Based Compensation - Assumptions (Details) - Class B common stock issued to management holders [Member] - Stock Option [Member] |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected dividend yield (as a percent) | 0.00% | 0.00% |
Expected volatility (as a percent) | 50.00% | 66.00% |
Risk-free interest rate (as a percent) | 2.71% | 1.80% |
Expected term | 6 years 3 months | 6 years 2 months |
Income Taxes - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Business Acquisition, Contingent Consideration [Line Items] | ||||
Reduction of contingent consideration receivable | $ 0.1 | $ 0.7 | $ 0.6 | |
Effective income tax rate | (437.30%) | 34.60% | 46.00% | 14.40% |
Federal statutory income tax rate | 21.00% | 35.00% | 21.00% | 35.00% |
Cadillac Jack [Member] | Indemnification Receivable [Member] | ||||
Business Acquisition, Contingent Consideration [Line Items] | ||||
Indemnification receivable | $ 9.5 | $ 9.5 | ||
Reduction of contingent consideration receivable | $ 9.4 |
Subsequent Events - Narrative (Details) - First Lien Credit Facilities [Member] - Term Loans [Member] - USD ($) $ in Millions |
Oct. 05, 2018 |
Feb. 07, 2018 |
Dec. 06, 2017 |
Jun. 06, 2017 |
---|---|---|---|---|
Subsequent Event [Line Items] | ||||
Debt Instrument, Decrease in Basis Spread on Variable Rate | 1.25% | |||
Debt issuance cost, including third party fees | $ 1.2 | |||
Debt Instrument, Premium Fee, Percent | 1.00% | |||
AP Gaming I, LLC [Member] | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, face amount | $ 65.0 | $ 450.0 | ||
AP Gaming I, LLC [Member] | Subsequent Event [Member] | ||||
Subsequent Event [Line Items] | ||||
Debt Instrument, Decrease in Basis Spread on Variable Rate | 0.75% | |||
Debt Instrument, Conditional Increase in Basis Spread on Variable Rate | 0.25% | |||
Debt instrument, face amount | $ 30.0 | |||
Debt issuance cost, including third party fees | $ 1.5 | |||
Debt Instrument, Premium Fee, Percent | 1.00% |
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