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A Good Bet

As AGS prepares to return to private ownership, stock analysts and industry experts acknowledge that the company’s future is a good bet, private or public.

A Good Bet

Six years after it began trading as a public company on the New York Stock Exchange, slot supplier AGS announced on May 9 that it has signed a definitive agreement to be acquired by Brightstar Capital Partners, a middle-market private equity firm focused on investing in industrial, manufacturing and services businesses.

AGS executives rang the bell to open trading on the NYSE January 26, 2018, to celebrate its listing on the exchange, after a successful IPO was completed by private equity firm Apollo Global Management, its original parent company. Ringing the bell was David Lopez, who had put the company in position for the IPO since becoming the company’s president and CEO in 2013.

Lopez and his team took the reins of the company—then known by its official name American Gaming Systems—that year from then-CEO Bob Miodunski, the former chairman of Bally/Alliance Gaming whom Apollo had tapped to add Class III slots to the company’s Class II library, which mainly was in the Oklahoma market at the time. Miodunski added specialty Class III games to the library, installed a new platform and expanded the company’s licensing footprint.

Lopez began with basically one viable new slot game in the novelty Colossal Reels and built a team that grew the company into one of the top mid-tier slot suppliers in the business, while building a from-scratch division for table games and entering the interactive market.

Now, Lopez looks at the impending return to private ownership as an opportunity to grow the company yet again.

“Joining forces with Brightstar represents an exciting new chapter for AGS and our mission to provide exceptional gaming solutions for our operator partners,” Lopez said in the May 9 announcement of the Brightstar agreement. “With Brightstar’s resources and strategic guidance, we believe AGS will be well-positioned to make targeted investments in R&D, top talent, operations, and industry-leading innovation, which should accelerate our global footprint.”

Brightstar has agreed to pay AGS shareholders $12.50 per share in cash, a 40 percent premium over the May 8 share price, in a deal worth $1.1 billion. Some stakeholders thought the price was too low, but no one is disputing the value of the management team in bringing AGS to this point. While many large manufacturer stocks have had flat results this year, AGS has outperformed the sector, its price soaring by nearly 37 percent by May.

That financial performance is a reflection on the company’s management, and a focus on the products. “The big focus for me has been the performance and consistency,” Lopez says. “If you look at our performance as far as percentage growth over the past year and a half, we’re right there in the thick of things, potentially even in that No. 1 or No. 2 spot (in the Eilers-Fantini performance reports) in some quarters.

“We’ve been focused on consistency and performance, and on cash flow as well over the past year, and we’ve delivered what was promised. So, we’re really pleased with the team, and all the operating departments that have gotten us there.”

R&D Focus

Those departments—slots, table games and interactive—are all evolving with new products and a focus on innovation, thanks to a continuous commitment of resources to R&D.

“It’s all driven by the investments we made even before Covid,” Lopez says. “We made some investments before Covid in R&D. We made some aggressive investments during Covid. We made some real investments in 2020 in the thick of Covid with casinos closed to enhance our R&D department.”

That investment grew the R&D force from two studios pre-Covid to seven studios today. “All seven studios are producing games that are in the field now,” says Lopez, “and the Eilers report speaks for itself. That’s what’s driven everything. It all starts with game development.”

AGS game development involves new technology and innovation not only in slots, but in a continuous stream of new table-game and digital products as well.

In the slot division, AGS used its GameON Customer Summit to preview the latest in the Spectra group of products, led by the jumbo Spectra Slant 75 Plus and Spectra Slant 49 Plus Premium cabinets, both featuring new games in the Rakin’ Bacon series. This is concurrent with the rollout of Revel, the company’s first stepper cabinet, shown for the first time at the recent Indian Gaming Tradeshow.

“We’ve got a lot to be excited about,” says Mark DeDeaux, general manager and senior vice president, slots. “We’ve put together a product lineup for Spectra that gives us a chance to lead the mid-tier level of slot suppliers. We’ve sold more product in the past three quarters than everyone in the segment.”

The Spectra 43 cabinet has been a big part of that success. Spectra 43 was the No. 1 cabinet in the Eilers-Fantini performance report for nine months of last year, and the Spectra 43 Premium launch title Panda Empire debuted on the Eilers Top 20. DeDeaux predicts the giant Spectra Slant 75 Plus, a huge but easy-to-play, dual-bash-button experience, and the sleek Spectra Slant 49 Plus Premium are likely to generate similar performance.

And of course, the cabinets are being launched with new games in what arguably is the most popular AGS slot brand, Rakin’ Bacon. The new games in the series feature the well-known game play of all in the series, including the signature pig character “Cornsquealius” (DeDeaux calls the character “our Mickey”), as well as new spins on the most popular mechanics of the day.

“The new Rakin’ Bacon titles have different mechanics than the original,” says DeDeaux. “We’re starting to introduce the brand to players who like the three-pot metamorphic style of game. We have some Rakin’ Bacon games that have the traditional free-game feature, but we’ve added hold-and-re-spin features to the games, and we have new Rakin’ Bacon themes that are three-reel formats with a wheel feature. So, Rakin’ Bacon fits all different player demographics and is implementing a lot of the newest features in the marketplace.”

“We’re in a position now with the studios and the diversity of cabinets, and the number of areas of the casino that we can sell into for slots,” says Lopez. “That layering effect can be seen in our unit sales. It can be seen in the success of our premium product and our momentum there. Some companies struggled with premium product in that Q4-to-Q1 transition this year, and we did not.”

Meanwhile, John Hemberger, general manager and senior vice president, tables, comments that AGS is two months from the 10th anniversary of the table-game division. “We started the division with one product, a side bet,” he says. “Over 10 years, we’ve added progressives, shufflers and more.”

Hemberger notes that the AGS Pax S single-deck shuffler is now in 70 casinos, with over 400 units. This year, the company will add the MAX 8 multi-deck shuffler, to be featured at the Global Gaming Expo and in casinos by the second half of 2025.

This business is added to a core group of specialty table games and side bets, as well as what has been perhaps the most notable achievement on the table side, table-game progressive systems.

AGS first offered the STAX progressive system, which applied unique must-hit-by progressives to several table games. But the real hit has been Bonus Spin Xtreme, a progressive jackpot system that works on all table games, up to an entire floorwide jackpot. The system most recently added tables that had not been conducive to progressives, including craps, roulette and poker.

Each game has its own trigger to activate the Bonus Spin Xtreme wheel, an event with a similar probability—11 on the come-out roll in craps, zero or double zero in roulette, etc.

Hemberger says one of his division’s fastest-growing sales areas is the addition of Bonus Spin Xtreme to poker rooms, particularly in California, where the tribal casinos are competing with commercial card rooms.

“It’s a continued expansion of everything we’ve done in Bonus Spin Xtreme,” says Lopez. “That’s really making us successful, and others copy us. I don’t want to sound snarky, but this is what the industry does. I’m not mad if others ‘fast-follow’ us, as others are inspired by the success of some of our products. What’s very interesting is that we’re quickly able to pivot. John’s team continues to innovate, to make improvements, to find success.”

Zoe Ebling, vice president of interactive, says that division, the company’s newest, is growing quickly. One new development is the establishment of an in-house studio in which designers are now producing interactive-first content. “Our in-house studio has some of the best game designers in the online space,” Ebling says, adding that the company recently launched the first AGS online table game.

Ebling notes that growth on the interactive side is accelerating, with growth in gross gaming revenue expected to grow significantly in 2024. The online game library has risen from 437 games last year to 919 games this year.

“If you look at interactive in Q1 over Q1 of last year, we are up over 65 percent in revenue,” Lopez says. “When we were trying to find our sea legs with interactive, we were making some changes to our platform and to the way we did business. We were retooling our R&D team.

“Once we were in position to start banging out games, we knew the games that we had out there were successful. Anything we put out worked. Now, as we start rolling out all the new games, you’re starting to see the success that we’re having in the interactive space.”

AGS has extended its online footprint to all major jurisdictions. “You can see we’re growing in leaps and bounds,” Lopez says. “The number of jurisdictions is growing, and the customers within the jurisdictions are really the key now. It’s a volume game, but it’s also a quality game. And we’re seeing that our games resonate online.”

The interactive division was an outgrowth of the acquisition in 2018 of Gameiom Technologies, a U.K. and Gibraltar-licensed iGaming aggregator and content provider with a proprietary remote gaming server providing a variety of content worldwide.

“We knew then that online gaming was going to be big, and it’s only going to continue to grow,” says Lopez. “It’s going to be a very dynamic growth curve. When we made the purchase and there was some broader criticism of it, I said to pass it would be like sitting at a bus station and watching buses keep coming and going. We had to get on the bus, and I’m glad we did.”

Lopez says the company is watching the supplier market, and particularly at pending mergers in the sector like that of IGT and Everi, which, he says, always provide ancillary opportunities as the merged companies divest divisions.

“At the end of the day, we think that AGS is in a great position to capitalize on any disruption in the space—any uncertainty that essentially creates an opportunity for us and other small companies to get in there and mix it up a bit.”

The next level of success for AGS will be on display at October’s Global Gaming Expo, and Lopez says the company’s R&D commitment will ultimately bear fruit at the annual event.

“G2E will be our greatest product lineup ever, as it should be,” he says. “That’s not marketing rhetoric. That’s just the absolute truth. And it bears out in every metric that you look at for the company.”

GameON Rocks Boston

The seventh edition of the unique AGS GameON Customer Summit offers compelling sessions, networking in an intimate setting, and the amenities or Encore Boston Harbor

Many suppliers have staged customer conferences and user summits over the years, but in the slot sector, no such conference is quite like the GameON Customer Summit staged by gaming supplier AGS.

For one thing, selling product is not the goal. While there are summaries of the latest developments in the company’s three divisions—slots, table games and interactive—and a small showroom display, the conference sessions and keynotes offer a unique mix of discussions on issues vital to the casino industry and presentations by experts in various fields showing how anyone in any business can perform more effectively.

The educational program is mixed with tours, social events and party events that allow AGS executives to interact with their customers, and develop relationships that would not be possible in a seller-buyer atmosphere. The attendance is kept to a relatively small group of invitees, to maintain the intimacy of the gathering—allowing supplier and customer to get to know each other beyond what can be gathered from a sales pitch.

GameON 2024, the seventh edition of the user summit, was held last month at the Encore Boston Harbor resort. All three AGS divisions presented business updates, but the main stage was dominated by a series of compelling presentations on our reactions to political issues, the neuroscience behind what makes us respond to social media, and a definitive look at how the emerging Gen Z generation differs from previous demographic groups.

Panel discussions included subjects ranging from the future of sports betting to the evolution of casino content, the emergence of cashless systems, and developing agility in executive leadership.

Social activities included a self-guided sightseeing tour of Historic Boston, a “Party Trolley” trip to Fenway Park for a Boston Red Sox game, and cocktail events including a “Downtown Boston Rooftop Social Hour” at Sam Adams Taproom and a welcome reception with a wealth of local cuisine on the South Lawn at Encore Boston Harbor.

“GameON is about education, enrichment, and getting to know people,” AGS President and CEO David Lopez told customers in remarks kicking off the summit. “We don’t often get a chance to just sit down and talk to people. The culture is important, and you’re part of our culture.”

Day One of the conference began with product summaries from each of the three AGS divisions. It was the only session in which the subject was AGS products. The remainder of the program included a now-familiar parade of thought-provoking sessions on non-gaming topics mixed with panels examining industry issues.

Two presentations in the former style were on Day One, when Jim VandeHei, co-founder and CEO of Axios and co-founder and former CEO of Politico, gave a keynote presentation relating his decades working to build those two news services and as a political reporter for the Wall Street Journal and Washington Post, covering the presidency and Congress, to what is happening today. He offered his views on both the current presidential candidates, and how his dealings with both over the years have revealed positive as well as negative attributes of both.

game-onThe Q&A session after VandeHei’s presentation was one of the highlights of the conference, as attendees sought his opinion on a wide range of issues affecting the U.S. today.

In other first-day presentations, Apply Digital Chief Product Officer Scott Michaels drew parallels between sports and the gaming industry, and how the advent of sports betting has combined the two industries into a single new ecosystem.

Another first-day highlight was a presentation by Dr. Sahar Yousef, a cognitive neuroscientist from the University of California, Berkeley, who offered a fascinating look at how science was used to cause cognitive responses in consumers’ brains to keep people on their mobile devices longer. She said that notifications built into cellphones are “carefully crafted to foster an addiction that will keep you on your device longer.” Citing the examples of the “swoosh” sound when sending an email and the frequency of the vibrations in alert sounds, she called notifications the “secret sauce” of behavior modification techniques.

“The mere presence of a smartphone reduces brain power, even if it’s turned over and even if it’s off,” Yousef said.

A second-day presentation by Dr. Robert Rippee, executive director of the Black Fire Innovation group at the University of Nevada, Las Vegas, presented the latest research on how different generations decide what’s important, and how the changes in what’s important to each group can affect the ability to communicate with them. Rippee concentrated on the emerging Gen Z group, currently in their mid- to late-20s, and the differences from the millennials, or Gen Y, or from the oldest group examined, the baby boomers.

Highlights of the conference roundtable discussions included a Day One panel on casino-wide systrms technology moderated by AGS Game Development VP Steve Walther, and featuring Marker Trax President Charlie Skinner, TransAct Chief Revenue Officer Tracey Winslow and Table Trac CEO Chad Hoehne. The discussion outlined the present and future of cashless payment systems.

A highlight of Day Two was a panel covering the growth and future of sports betting in the U.S. It was moderated by Geoff Freeman, the current president and CEO of the U.S. Travel Association who, during his tenure as president and CEO of the American Gaming Association, led the ultimately successful campaign to repeal the Professional and Amateur Sport Protection Act, which led to the 2018 U.S. Supreme Court decision that created today’s growing legal sports betting business.

The panel included executives of the largest sports betting operators in the U.S.—DraftKings Chief Revenue Officer Greg Karamitis, FanDuel Senior Vice President of Business Development Jonathan Edson, and Chris Rogers, chief strategy officer of Penn Entertainment, which has doubled down on its commitment to sports betting with its ESPN BET platform. The panel provided a snapshot of the sports betting sector. Karamitis commented that the size of the sports betting business, thanks to a parlay-heavy player-focused strategy, is far larger than anticipated back in 2018. Edson estimated the market is double what they thought it would be at the outset.

The conference wrapped up with a session featuring executive coach Tim Furlong and Jenny Holaday, president of Encore Boston Harbor, who discussed what is essential to leadership in a large operation such as Encore.

Julia Boguslawski, the AGS chief marketing officer who created GameON, closed the event by noting that her team will immediately begin planning for GameON 2025. Location to be determined.

Frank Legato is editor of Global Gaming Business magazine. He has been writing on gaming topics since 1984, when he launched and served as editor of Casino Gaming magazine. Legato, a nationally recognized expert on slot machines, has served as editor and reporter for a variety of gaming publications, including Public Gaming, IGWB, Casino Journal, Casino Player, Strictly Slots and Atlantic City Insider. He has an B.A. in journalism and an M.A. in communications from Duquesne University in Pittsburgh, PA. He is the author of the books, How To Win Millions Playing Slot Machines... Or Lose Trying, and Atlantic City: In Living Color.  

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