AGS REPORTS RECORD FOURTH QUARTER 2022 RESULTS.

LAS VEGAS: PlayAGS, Inc. (NYSE: AGS) ("AGS", "us", "we" or the "Company"), a designer and developer of equipment and services solutions for the global gaming industry, today reported operating results for the fourth quarter and full year ended December 31, 2022.

Commenting upon the Company's fourth quarter financial performance, AGS President and Chief Executive Officer David Lopez said, "Our record-setting fourth quarter results reflect the accelerating returns we continue to realize on investments made into our R&D, sales and product management teams over the past several years. Looking ahead to 2023, I see a set of company-specific growth catalysts forming within all three segments of our business that should allow our recent operating momentum to continue."

Kimo Akiona, AGS Chief Financial Officer added, "We exited 2022 with net leverage inside of 4.0x, consistent with the expectations articulated at the start of the year. As we move forward into 2023, our organization remains squarely focused on maximizing free cash flow and further reducing the amount of leverage on our balance sheet."

Summary of the Three and Twelve Months Ended December 31, 2022 and 2021

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

Three Months Ended December 31,

Twelve Months Ended December 31,

2022

2021

% Change

2022

2021

% Change

Revenues:

EGM

$

75,338

$

64,498

16.8

%

$

284,331

$

237,809

19.6

%

Table Products

3,890

3,189

22.0

%

14,920

11,879

25.6

%

Interactive

2,508

2,536

(1.1)

%

10,185

10,008

1.8

%

Total revenues

$

81,736

$

70,223

16.4

%

$

309,436

$

259,696

19.2

%

Income from operations

$

13,447

$

1,849

627.3

%

$

37,969

$

19,703

92.7

%

Net income (loss)

$

2,541

$

(9,090)

(128.0)

%

$

(8,035)

$

(22,572)

(64.4)

%

Income (loss) per share

$

0.06

$

(0.25)

(124.0)

%

$

(0.22)

$

(0.62)

(64.5)

%

Adjusted EBITDA:

EGM

$

34,412

$

29,487

16.7

%

$

127,502

$

112,817

13.0

%

Table Products

2,370

1,951

21.5

%

8,781

6,438

36.4

%

Interactive

498

816

(39.0)

%

2,360

3,332

(29.2)

%

Total Adjusted EBITDA(1)

$

37,280

$

32,254

15.6

%

$

138,643

$

122,587

13.1

%

Total Adjusted EBITDA margin(2)

45.6

%

45.9

%

(30 bps)

44.8

%

47.2

%

(240 bps)

Fourth Quarter 2022 Financial Results

Total revenue increased approximately 16% year-over-year to a record $81.7 million. Table Products revenue advanced 22% versus the prior year, reflecting outsized growth within our progressive installed base, growing demand for our PAX S single-deck card shuffler, further adoption of our AGS Arsenal site license offering, and the Q1 2022 Lucky Lucky side bet acquisition. EGM revenue increased by nearly 17% year-over-year, paced by EGM sales revenue growth of over 40% and the achievement of quarterly record domestic EGM gaming operations revenue. Global EGM sales topped 1,000 units for the second consecutive quarter and reached the highest level achieved since Q4 2019. The continuous improvement in our EGM unit sales performance reflects successful execution of our coordinated strategy to broaden our global customer account penetration; accelerating returns on recent R&D investments intended to strengthen the breadth and diversity of our EGM game content and gaming cabinet portfolios; continued recovery in North American replacement unit demand; and complementary EGM sales into international markets. Interactive revenue was relatively consistent with the prior year at $2.5 million, as outsized growth within our Real Money Gaming ("RMG") business was offset by an anticipated decline in social casino revenue as we continue to strategically orient our Interactive technical and commercial resources around maximizing profitable revenue growth within the RMG channel. Total revenue improved approximately 4% over the $78.3 million delivered in Q3 2022, representing our eighth consecutive quarter of sequential total revenue growth.

Gaming operations, or recurring revenue, increased 8% year-over-year, topping $57 million for the first time in the Company's history. Domestic EGM recurring revenue grew to a record $46.8 million, up 8% year-over-year and approximately 13% ahead of Q4 2019 levels. Our growing premium game mix, improved core content execution, further implementation of fleet optimization initiatives, and a stable domestic gaming macroeconomic backdrop supported our record Q4 2022 Domestic EGM recurring revenue performance. International EGM recurring revenue advanced 12% year-over-year, paced by the consistent recovery trends we continue to observe throughout the Mexico gaming market and further implementation of our continuous installed base optimization initiatives. International EGM recurring revenue has increased sequentially for ten consecutive quarters. Table Products recurring revenue increased by approximately 19% year-over-year to $3.7 million, supported by growth across all product verticals. In aggregate, recurring revenue accounted for over 70% of our consolidated Q4 2022 revenue mix.

We generated record net income of $2.5 million in Q4 2022 compared to a net loss of $9.1 million in the prior year period. The year-over-year increase in our reported net income was predominantly driven by our strong year-over-year revenue growth and continued organizational focus on operating expense efficiency, which were partially offset by slightly higher interest expense resulting from the recent move higher in market-level interest rates. Q4 2022 marked the third consecutive quarter in which we were able to generate positive net income.

Total Adjusted EBITDA (non-GAAP)(1) increased approximately 16% year-over-year to a record $37.3 million compared to $32.3 million in Q4 2021. Year-over-year Adjusted EBITDA growth within the Table Products and EGM segments of approximately 21% and 17%, respectively, was partially offset by a decline within the Interactive segment, as we continued to incur incremental expense in order to strengthen our RMG customer account management capabilities, accelerate the flow of new AGS game content into the North American RMG channel and diversify our online content offering into new game categories, including instant win and table games. Total Adjusted EBITDA increased approximately 8% on a quarterly sequential basis relative to the $34.5 million delivered in Q3 2022 and has now improved sequentially in seven of the past eight quarters.

Total Adjusted EBITDA margin (non-GAAP)(1) was 45.6% compared to 45.9% in Q4 2021. The modest year-over-year Adjusted EBITDA margin compression reflects a greater mix of EGM unit sales revenue, which carries a lower gross margin as compared to EGM gaming operations revenue, further normalization in our discretionary business operating expenses and market-level inflationary cost fluctuations, partially offset by a greater portion of R&D labor costs qualifying for capitalization treatment. Total Adjusted EBITDA margin expanded by over 150 basis points versus the 44.0% achieved in Q3 2022, largely a function of operating leverage realized on the 4% sequential...