Slot maker says entire gaming industry ‘significantly impacted’

Some gaming suppliers may not survive the COVID-19 pandemic, according to David Lopez, president and CEO of gaming equipment and slot machine manufacturer PlayAGS.

“Things have changed,” Lopez said during a Thursday afternoon earnings call. “Very small gaming suppliers, I think, will begin to roll up and be part of the larger gaming suppliers. … I wouldn’t be surprised to see a little bit of consolidation here and there.”

Lopez added that the entire gaming industry has been significantly impacted by the outbreak and subsequent casino closures, including PlayAGs. The Las Vegas-based company reported $54.3 million in revenue in the first quarter, down 26 percent from the first quarter of last year.

Reducing cash burn

PlayAGS has been largely focused on saving cash amid the crisis.

It reduced monthly cash burn nearly 80 percent to $4 million through company-wide salary reductions, capital expenditure cuts and layoffs and furloughs. The company’s workforce has been reduced by about 10 percent, and it has frozen all promotions, hirings and its 401(k) match program as it waits for the gaming industry to pick up again.

While the company’s “crystal ball isn’t so crystal clear anymore,” Lopez expects the industry’s ramp-up to look much different than the initial shutdowns.

“It shut down abruptly, and over the course of about a week,” he said. “The ramp-up’s going to take a number of weeks and months. Even when a casinos — or all casinos — are open 100 percent, it doesn’t mean 100 percent pre-COVID revenues will be in place.”

Lopez said PlayAGS will focus on matching expenses and making sure its cash burn rate doesn’t waver too much during the ramp-up.

Preparing for the future

As casino operators also work to bolster their balance sheets, Lopez expects PlayAGS’s business will be largely reliant on recurring revenue — which accounted for roughly 79 percent of total revenue last quarter — instead of new machine sales.

“Our plan is just to be a lot smarter than we ever have before with our cash and capital strategy,” Lopez said. “It’s going to be a little more capital conscious, cash conscious, how do we prepare ourselves if this drags out longer than we expect.”

Overall, he said he remains confident in the future of gaming, even if it will take time for occupancy numbers to return to pre-COVID-19 levels.

Lopez said he believes at least eight states are rescheduling to reopen sometime in mid-May — although he did not name which ones — and expects the rest of the gaming markets in North America will reopen sometime by mid-July.

According to the American Gaming Association, 974 of the 989 commercial casinos in the U.S. remained closed as of Thursday afternoon.

“When it’s all done … I think that gaming’s still going to be there,” Lopez said. “The spirit of the gambler’s not going to change. … The way we that manage our businesses, we just have to be better.”

PlayAGS shares closed up 7.8 percent Thursday to $3.89 on the New York Stock Exchange.

Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter.