earnings conference call. My name is Alex, and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star followed by one on your telephone keypad. If you'd like to remove your question, you may press star followed by two. I'll now hand it over to your host, Brad Boyer, SVP, Investor Relations. Please go ahead. Thank you, operator, and good afternoon, everyone. Welcome to the PlayAGS Incorporated Second Quarter 2023 Earnings Conference Call. With me today are David Lopez, CEO, and Kimo Akiona, CFO. A slide presentation reviewing our key operational and financial highlights for the second quarter ended June 30th, 2023, can be found on our Investor Relations website, investors.playags.com. On today's call, we will provide an overview of our Q2 2023 financial performance and offer perspective on our current financial outlook for the business. The first expectations, projections, or other characterizations of future events, including financial projections or future market conditions, is a forward-looking statement based on assumptions today. Actual results may differ materially from those expressed in these forward-looking statements, we make no obligation to update our disclosures from our forward-looking statements. Please refer to the earnings press release we issued today, as well as risks described in our annual report on Form 10-K, particularly in the section of these documents titled Risk Factors. Our commentary today will also include non-GAAP financial measures. We believe the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in our business. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings release issued today. Turn the call over to our CEO, David Lopez. Thanks, Brad. Good afternoon, everyone. Today, I will keep my remarks brief as I believe our record-setting financial performance clear of our business. Over the past several quarters, I have talked about our commitment to recruiting and hiring the best R&D, sales, and product management talent to join our team. The culmination of these efforts is reflected in our second quarter performance as we established 10 new records in the quarter. I will start with total revenues, which increased 17% year-over-year to nearly $90 million, improving sequentially for the 10th consecutive quarter. Adjusted EBITDA grew 16% year-over-year to approximately $40 million. Domestic game ops revenue increased 7% year-over-year to $49.3 million, establishing a new record for the third consecutive quarter. Domestic RPD reached $33.48, surpassing $30 for the ninth consecutive quarter. Our premium EGM installs grew to over 2,700 units, increasing for the 14th consecutive quarter. EGM sales revenue surpassed $28 million, up more than 40% year-over-year, more than 7% ahead of the previous record set in Q3 2019. EGM ASPs eclipsed $20,000 for the first time ever. We sold units to nearly 150 unique customers, 60% higher- record setting, first half performance, and our ability to generate free cash flow over the remainder of the year, we now expect to exit 2023 with net leverage in the range of 3.25x - 3.50x. This equates to a quarter turn reduction at the top end of the range. Before turning the call over to Kimo, I'll highlight a few things in each product segment that I'm most excited about. Starting with EGMs, our new Spectra 43 cabinet continues its hot streak, topping the July Eilers survey for the seventh consecutive month. So far, we have placed over 1,650 Spectra units, and demand for the cabinet remains robust. While our two launch titles, Long Bao Bao and Shamrock Fortunes, continued to deliver exceptional performance, with each averaging over 1.75x house average, the key to Spectra's success extends well beyond our strong games. It has been our R&D expertise, product strategy, and operational execution that has aided in performance that is hands down better than anything I've ever seen. Pax Shuffler continues to take the industry by storm, pushing Q2 sales and recurring table revenues to new records. To date, we have placed over 265 Pax units, with our footprint increasing by approximately 30% since Q1. While some folks may take a successful launch for granted, I cannot overstate what an accomplishment it has been to successfully design, develop, manufacture, sell, and service a competitive shuffler product in an industry long dominated by one company. That said, I would like to congratulate the engineers, software programmers, testers, assemblers, and the service and sales team for their contributions to the success of this product. Looking ahead at our trial activity and the growing operator interest, I'm confident Pax will continue to serve as a growth catalyst for many quarters to come. Finally, I will move to our Interactive segment, where returns on our highly focused talent investments pushed Q2 RMG revenues to a new record.... As the old saying goes, records are made to be broken, and I do not expect our Q2 record to hold up for very long. As just last week, we launched our first new game, leveraging our revamped RMG gaming development team. In addition to benefiting from the first collaboration between our land-based and Interactive teams, the game was the first developed on our completely redesigned online platform, and serves as our first title in the popular three-reel slot segment. Looking forward, I believe we have a strong and passionate team in place to consistently deliver a steady supply of great content. In closing, I would like to thank our teams around the globe for staying focused on their specific goals and delivering on the high-level objectives the company has put before them. It truly is our products and our people that have me excited about the remainder of the year and well beyond. With that, I'll turn it over to Kimo. Thank you, David. Good afternoon to everyone on the call. As in prior quarters, I will review a couple of highlights from our reported results and provide a perspective on how we see each of our business segments trending as we look ahead to the current quarter. I will also share some thoughts on our free cash flow outlook for the year and close by addressing a few items related to our balance sheet. Turning first to our domestic EGM gaming operations business, second quarter revenue increased 7% year-over-year, to a record of nearly $50 million, well ahead of the 2%-3% increase in market level gross gaming revenues, or GGR. The growth algorithm driving our relative outperformance in Q2 remained consistent with the past several quarters. Modest installed base growth, led by further expansion of our premium unit footprint and Spectra deployment, and sustained strength in our reported domestic RPD, supported by growing Spectra and premium mix, further capital-efficient optimization, and a relative stable GGR environment. Looking ahead to Q3, we believe the momentum behind our premium products, coupled with the relative stability of our core unit footprint and scheduled new casino openings and expansions, should allow us to grow our domestic installed base for a sixth consecutive quarter. As it relates to RPD, trends observed Q3 to date continue to convey stability in market level GGR. The broader market resiliency, coupled with our ability to further leverage multiple company-specific catalysts, including our high-performing Spectra cabinet, increasingly deep and diverse core content portfolio, and consistent premium game market penetration momentum, should allow us to deliver Q3 domestic RPD that is in line with to slightly ahead of the $31.13 achieved in Q3 of 2022. I would remind everyone, Q2 has historically served as the seasonal high point for our domestic game ops business, and we expect normal seasonal trends to prevail this year. Shifting to EGM equipment sales, we sold over 1,250 units globally in the second quarter, up 35% year-over-year, and 7% ahead of Q2 2019. The momentum building behind the continued strong performance of our Spectra cabinet, a more than 65% increase in the number of customers sold to, the ability to leverage a deeper and more diverse product portfolio, and relative stability in market-level demand trends, all contributed to our outsized unit sales growth in the quarter. As we look ahead to Q3, accelerating demand for Spectra, a continued strategic focus on broadening our customer account penetration, and consistent market-level demand trends should allow us to deliver global EGM unit sales volume that modestly exceeds Q2 levels. Moving on to EGM pricing, as David mentioned earlier, second quarter global average selling price, or ASP, surpassed $20,000 for the first time ever, driven by a greater mix of premium price Spectra cabinet sales and continued implementation of our price integrity initiatives. Looking to Q3, although we expect domestic unit pricing to be relatively consistent with the prior quarter, a modest projected increase in our international market sales is likely to produce a global ASP that is slightly below the level achieved in the second quarter. Turning to our international EGM business, recurring revenue increased nearly 20% year-over-year and improved sequentially for the 12th consecutive quarter. The continued strong performance of several established AGS franchise game themes throughout Mexico, further installed base optimization, stable macroeconomic trends, and favorable FX movements contributed to our improved recurring revenue performance in the quarter. International RPD topped $8 for the second consecutive quarter and surpassed the $8.22 achieved in Q2 of 2019 by more than 8%. As we look ahead to Q3, we believe our stable installed base and resilient market-level revenue trends should allow us to deliver our 13th consecutive quarter of sequential international EGM ops revenue growth. Looking beyond EGMs, our Table Products business delivered another record quarter, with equipment sales and recurring revenue both reaching new highs. A 30% sequential increase in our Pax S Shuffler footprint to over 265 units, over $2 million of high-margin progressive revenue, and growing contribution from our AGS Arsenal site license offering all contributed to our record performance in the quarter. Supported by the consistent momentum we continue to observe across the sales and recurring revenue channels, we should be able to further improve upon our record-setting Q2 performance in the third quarter. Shifting to Interactive, as David indicated, our RMG business set a new revenue record in the second quarter, while our Interactive segment continued to generate positive adjusted EBITDA. Beginning in Q3, we expect to realize a more pronounced lift in our RMG revenues as the payoff from recent investments into our technical and commercial teams, and upside from recent new customer activations become better reflected in our quarterly results. Turning to margins, second quarter adjusted EBITDA margin was slightly above 44%, ahead of the expectations articulated on our Q1 call. A continued organizational focus on operational efficiency, better than expected performance across our higher-margin recurring revenue businesses, and stronger than anticipated product sales gross margins drove the relative upside in our Q2 margin performance. Although we continue to expect our full year adjusted EBITDA margin to land in the 44%-45% range, we believe recurring revenue seasonality and our anticipated EGM unit sales mix could produce a Q3 margin that looks relatively similar to the 44.1% delivered in the second quarter. Second quarter capital expenditures totaled approximately $16 million, bringing our year-to-date capital spend to just under $30 million. While we continue to project full-year capital expenditures, inclusive of anticipated capitalized R&D, to land in the range of $65 million-$70 million, our company-wide commitment to capital deployment discipline has us trending toward the lower end of the targeted full-year range. Cash interest in the quarter was approximately $13 million, increasing our year-to-date cash interest expense to roughly $26 million. Looking to the back half of the year, we believe the recent move higher in market level rates could modestly increase our quarterly cash interest payments relative to the $13 million incurred in the second quarter. Second quarter free cash flow, defined as net operating cash flow plus proceeds from payments on customer notes receivable less CapEx, surpassed $12 million, increasing year-to-date free cash flow to approximately $4 million. Looking out over the remainder of 2023, we believe the combination of our continued operating momentum, capital deployment discipline, and a heightened organizational focus on working capital efficiency should allow us to consistently generate positive quarterly free cash flow, with full year 2023 free cash flow on pace to exceed the approximately $15 million of normalized free cash flow delivered in 2022. Finally, although David stole a little bit of my thunder here, I want to reinforce, we now expect to exit the year with net leverage in the range of 3.25x- 3.5x. Consistent with our prior range and commentary, the assumptions underpinning the midpoint of our revised targeted leverage range continue to contemplate a modest pullback in prevailing market level conditions over the remainder of 2023, as compared to those encountered in 2022 and the 2023 year-to-date period. That said, should broader market trends remain relatively consistent with those we are currently experiencing, we would expect to exit 2023 with net leverage in the bottom half of the range. Finally, our approach to deleveraging remains unchanged, as we continue to target a combination of adjusted EBITDA growth and consistent free cash flow generation. Operator, this concludes our prepared remarks. We would now like to open up the line for questions. Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad. If you'd like to remove your question, you may press star followed by two. Please ensure you're unmuted locally when taking your question. Our first question for today comes from Edward Engel of Roth MKM. Your line is now open. Please go ahead. Hi, thanks for taking my question, and congrats on a nice quarter. Just wondering how you're thinking about leverage here, and I guess for next year. Nice, nice to see progress kind of coming at the low end of your targets range, hopefully within the year. As you look into 2024, is there any opportunity to maybe get some interest rate savings there? I guess, do you kind of have a target leverage ratio in mind you'd like to achieve before you even start to consider something like refinancing? Good question. I mean, it's obviously top of mind for us, right? Like we put out our target for this year. As we look forward, I think definitely top of mind has been, you know, what will be the right leverage target? What's the right market condition, right, to start looking at refinancing our debt and getting something that maybe meets where the business is at, at that time. You know, as far as, like, an exact number, I couldn't give you, like, an exact leverage target where it will make sense, because I think there's a lot of things to consider, right? Including our credit rating and other things like that. What I would say is, you know, as we look into next year, right, like, I think we've always said that, you know, one of our, call it, medium-term targets and a big thing for us would be to get below 3 x leverage. I think, you know, again, that's what we're driving, and I think it kind of permeates through the organization, right, in, in a lot of different decisions that we make. You know, next year, I think one of our targets would be to get, get down to that 3x leverage target. Great, that's helpful. Then, again, really good kind of momentum across the business in terms of just market share gains. How do you think about your R&D levels here? Do you think they kind of continue to grow with revenue, or might you need to kind of ramp that up a, a notch to kind of maintain some of your momentum? We think we're in a good spot right now. Obviously, we can be opportunistic from time to time if we see talent on the market. As we said in the prepared remarks, you know, this is a big focus for us. We, we always, we always wanna be better. We always wanna, you know, be top tier as far as talent goes. But I think that right now we're comfortable with where we are as far as studios and bandwidth, and our ability to put out quality content, not just, you know, game content, but also the hardware we put out. I think that's sort of reflected in the performance, but it, it's what we talked about with Spectra 43. It's not just one thing, and I know the, the, the question's specifically about R&D. How we're focused is just infrastructure around product, distribution, service, and obviously game and cabinet creation. That's where we've made our investment, and I think that we're reaping the benefits right now. At the appropriate time, obviously, we can scale up a little bit more, but we're very thoughtful about how we're gonna do that going forward. We know we're in a very good place right now with the number of studios we have, and not just the number, but the quality of the employees that we have on the team. Great. Thanks, [Ed]. Again, congrats. Thank you. Our next question comes from Chad Beynon of Macquarie. Your line is now open, please go ahead. Afternoon, thanks for taking my question, and nice quarter, guys. Wanted to start with your, your premium, premium install base. This appears to be kind of the big segment that everyone's focused on, and it seems like as long as the games are performing and operators are making money from these games, they're gonna continue to, to add the product. Given where some of your competitors', current markets are or their, their, their current percentages are, you know, what, what's kind of a near-term goal for you guys? 'Cause if you're performing well, you know, there's certainly gonna be demand here. Can this, can this continue to move up through 2023 and, and 2024? Thanks. Yeah. Hey, thanks, Chad. Yeah, we could continue to move up, and we really don't. I think we've got some internal aspirational goals. We look at our competition as far as, you know, what their premium base is as a percentage of their entire install base. We know we have some bandwidth still when we look at those numbers, both from a unit standpoint and sort of revenue. Premium revenue is the percentage of all game ops revenue. But that's all, I'd say, aspirational. But yeah, there's upside here, for sure, and sort of we know we've got quite a ways to go, but we don't really give that percentage the way of the year looking for it there. Love to, but we're not there, as far as public statements, we'll say. Okay, safe to assume that it can still move higher? Oh, oh, yeah. No, I mean, we're confident that we've got the right sort of lineup and, and if you look at our pipeline of games that are coming and sort of show up at G2E, you'll see some real fresh, new premium content. Yeah, w- performance is still strong for us, and we anticipate, you know, content to keep flowing for us there. Thanks, David. Kimo, within your guidance, you talked about flat to, to slightly higher EGM unit sales for the third quarter. That kind of goes against what, you know, normal seasonality may be for some others. Clearly, it, it shows that you're taking market share, and given your broader customer penetration, that's certainly shining through. Is it fair to assume that the fourth quarter could still be seasonally the highest quarter, just given, you know, how strong the operators are doing and, and given new product that comes in the fourth quarter? Thanks. Yeah, I mean, I think one of the themes we've talked about, I think last quarter and this quarter, is like normal seasonality across different parts of our business still holds strong, right? I think your assumption about Q4 possibly being the high-water mark for sales is a good assumption. I think, you know, our commentary about our beliefs on Q3 is, yeah, it's definitely driven by Spectra, right? I think if you look where Spectra is in its life cycle, I mean, it's a fairly newly launched product, and with that momentum, game performance, you know, these are just the initial games that are on Spectra, and we have a whole roadmap of games to back up this hardware. You know, we feel really good about where we are and where the product is headed right now. Thanks, Kimo. Appreciate it, guys. Yeah. Thanks, Chad. Thank you. Our next question comes from Barry Jonas of Truist. Your line is now open, please go ahead. Hey, guys, just wanted to follow up on Ed's question. You know, a really nice quarter with free cash flow generation and the deleverage improvement. Just curious at what points do share repurchases get interesting given where valuation's at? It's always a fun question, right? I mean, you know, again, we'll come back to leverage targets and where we feel good about where the company can get to. You know, when you talk about something like refinancing our debt and the type of savings we could realize from that event, like, I think for me personally, and I think for the company, we get more excited about that. I think our focus is really going to be on, again, just deleveraging. You know, I mean, your question about this magic number of where does the equity get to, where it makes sense. I mean, I'm not ready to give that number either, but I'll say we're just 100% focused on, I think, deleveraging and, and deleveraging and accumulating cash on the balance sheet right now. Again, that refi event, I think, will be potentially a good event for the company, and that will yield some great cash savings at some point. I think, you know, again, that's 100% of our focus. Great. Then just for a follow-up, you know, we're, we're not modeling anything in Texas, but I think investors are very excited about the potential there. Just curious if there are any updates, you, you can share there? Thanks, Barry. Naskila primarily is probably your question, there's a couple others as well. But at the moment, you know, we're sort of standing fast, as I've said, waiting for any sort of news on that front. Nothing to report on at this time. I think the good news is, since things have obviously settled in after the Supreme Court decision, we're starting to see some marketing activity at Naskila. We, you know, we are, you know, leasing machines down there, participating, so we can see the results of that in the numbers, as that market seems to be maintaining and improving its strength. It's good news on that front. But as far as any expansionary measures, we're waiting, we're waiting patiently. Great. Thanks, and, nice quarter. Thanks, Barry. Thank you. Our next question comes from Jeff Stantial from Stifel. Your line is now open. Please go ahead. Hey, good afternoon, everyone. Thanks for taking our questions. Maybe starting out here on, on the EGM business, gross margins, you know, really nice performance in the quarter by my math, up over 500 basis points versus Q1 and well ahead of 2019 levels. Kimo, could you just expand a bit more on the drivers here? Is there any reason to think why this won't be a sustainable level moving forward? Yeah, I mean, I think, you know, if you look at one of the themes again, we've been talking about is Spectra, right? I think the power of the way Spectra was built and designed and the type of margins we were expecting even before we launched it, I think it's holding true. You can see Q2 is definitely a testament to, you know, when we have a strong quarter of Spectra sales as far as a mix, right? Like, we want to emphasize mix too, because we definitely don't want to de-emphasize Curve. Like, Orion Curve is still an active, great product in our portfolio, but it does carry a different margin. When we have a quarter that is a strong Spectra quarter, that's where I think you'll see that sales margin come on, you know, even stronger. Like this quarter, I think gross margin on a slot product sales was near 55%, right? I think if you look at where it goes going forward, it probably will always have a five handle in the front of it, so it'll be within the 50%-55% range. Again, we'll highlight it will be dependent on mix. I think as we move forward as well, I think one thing, you know, we've been focused on as well is capturing a little more international sales, right? If there's a quarter where we get a little more international sales, generally, those carry slightly lower gross margins, you know, so that could affect gross margin as well. I'd only add a, a little bit to that, Barry, in that, you know, as far as margins go, looking to the future, you know, we look at the- these cabinets. Spectra 43 is our current release. We sort of refer to it as a working name, as next gen cabinets. The thing that we've done is... Excuse me, yep, Jeff's on. Sorry, Barry is gone now. Thanks. Jeff, the, the one thing to keep in mind here is that, as we talked about that R&D, and in particular our hardware teams, you know, we've made sure that our, our development of these cabinets have a lot of shared parts. It seems like every iteration we come out with, when, when we you know, we're at Orion and now we're in the Spectra, we get better at this every, every sort of next generation of cabinet that comes out. As the next versions of Spectra or next gen come out, I think you'll continue to see those efficiencies there. That's helpful and encouraging. Thanks. Thanks for that color. Moving over to the Interactive business, you know, you called out in the release and during the prepared remarks, some investments into growth impacting margins during the quarter. You know, Kimo, could you just provide some color on, on sort of how you see these investments phasing out, and, and when do you expect to see maybe some more typical operating leverage for that type of business start to come back? Yeah. Sorry, just to be clear, your question is specific to Interactive and the investments we've been making there? Correct. Yeah. Some of the, some of the investments you made in the Interactive side of things. Yeah, I mean, you know, we started sort of, I'll say, our, our, our incremental investment journey last year, right? Related to Interactive. We sort of, you know, basically built another, you know, game studio, built up our commercial team, and did some, we'll call it restructuring there. As we move through this year, we're excited about H2, right? If you look at where we are now, we're just starting to release, we'll say, some new content from our, our new studio, and there's some original content coming out as well. I think as we move forward, you know, looking to next year, I think is when you'll start to see, call it some operating leverage from that business. Again, equally important to emphasize, right, like we... I think we've been in the business long enough to know that, you know, you need to keep incrementally investing at a certain rate to ensure, you know, the long-term success of that business. We would expect some operating leverage starting maybe next year for Interactive. Jeff, this, this is David again, but I, I think this is an area where we're very excited going forward. It's, you know, we always talk about volume and sort of velocity of putting games out there, but I think what's equally as important, is that our game selection from brick-and-mortar, the way that we interact with our teams that are, that are porting that content over, you know, user interface and all that. Then, as I've said, in the past, Kimo coming in, like, original content for online, like unique original content for online gaming. We anticipate some really good things are gonna happen here over the next 12 months, and obviously, some operating leverage will come out of that, but, we're super excited about this one. Great. Thanks again. Nice quarter. Thanks. Thanks, David. Thank you. Our next question comes from David Katz of Jefferies. Your line is now open. Please go ahead. Hi, thank you for working me in. Look, I, I wanted to just get a little more color on the pipeline. Obviously, you know, we don't wanna, you know, steal any thunder that may be coming from G2E, but, you know, just give us a sense of the scale and scope and, you know, what, what magnitude of, of, you know, what you're following up, obviously, on the strong momentum that you already have. Yeah. Thanks, David. I... Yeah, we don't like to spoiler alert the situation at G2E. What I like to say is always, "Hey, just everyone show up at G2E, see what we have to show there." We've got a lot of interesting things that we'll, you know, we'll show at G2E and in the coming, I'll call it six to nine months. This is, again, a reflection of the investment that we've made. We got the question earlier about, Hey, are we comfortable where we sit in R&D right now? I'd say, you know, we're really pleased with where we're at, not just productivity from a games point of view, but I think that you're talking mainly about cabinets, we think we're sitting in a good place. You know, there, there will be some really nice things coming down the road here, but I don't wanna upset R&D and product management by spoiling their, their big reveals, you know? Okay. Can we talk then perhaps about... Sorry, sorry. I want, I know- sort of shared targets or- We both want to, you and I, but Okay. No, I realize I just sounded disappointed, and I didn't mean to tip that. Look, I'd like to just get a little more sense of your kind of medium-term aspirations in terms of scale and market share, et cetera, and where you think you can take this. What's your vision? A little bit like we said earlier, we, we know there's a lot of upside, David. I, I think that, both on the premium side, which was a specific question we got earlier, like, "Hey, do we have a, do we have a specific target there?" You know, on just ship share being another figure. I think there's a whole bunch of KPIs, and I, I, I also think, and as we look at, it's always good to look at some of our competition, and as we do in the future, open up some new swim lanes for ourselves, in the product categories, you know, underneath EGM specifically. I think that that's gonna help us pick up additional ship share. Not so long ago, you know, we were, we were really only in, really selling Portrait only. Now, you know, we're selling Portrait on the Spectra 43, and we're selling Curve on the Orion side. We'll continue to sort of, like, probe into new, as we like to say, the swim lanes in the EGM space. And I think as you see that unfold, you know, over the next, we'll say one year or so, you'll see sort of where the potential is for market share gains and just improvements overall. I really think it's gonna be exciting times over the course of the second half of this year and moving into a good chunk of 2024. There, there's some, there's some good upside here for us. Okay, I'll take that, and our rating speaks for itself. Thank you. Thank you. Thank you. We currently have no further questions for today, so that concludes today's conference call. Thank you all for joining. You may now disconnect your line.