Casino suppliers see huge losses in first quarter

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With many of the world’s casinos currently shut down, the trickle effect of hard times had to eventually reach gaming suppliers. PlayAGS, a gaming equipment and slot machine manufacturer, and TransAct Technologies, a casino and food safety equipment supplier, are both reporting huge losses, and worries about their long term prospects.

casino-suppliers-see-huge-losses-in-first-quarterIn an earnings call, PlayAGS president and CEO David Lopez predicted many firms will be closing up shop pretty soon. “Very small gaming suppliers, I think, will begin to roll up and be part of the larger gaming suppliers.” He said. “I wouldn’t be surprised to see a little bit of consolidation here and there.”

The Las Vegas-based company reported $54.3 million in revenue in the first quarter of 2020, down 26 percent from the same time last year. As a result, the company is focused on saving cash. It’s used salary reductions, layoffs and furloughs to get cash burn down by 80 percent, reducing it’s workforce by 10%, and Lopez expected the road to recovery could be long and painful.

“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.”

Thankfully for the supplier, 79% of their total revenue comes from recurring deals, and a lack of new machine sales would only be a deep cut to their business, rather than a fatal blow. “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.”

Similarly, TransAct Technologies fell from a $746,000 net income in the first quarter of 2019 to a $992,000 loss in 2020. “Unfortunately, Covid-19 is still causing massive disruptions across the world with widespread closures, and we expect this to continue to negatively impact our casino and gaming business as well as most restaurant and food service locations for the foreseeable future,” chairman and chief executive Bart Shuldman said in a quarterly filing.

The only part of the business that was up during the quarter was food service technology sales, up 11.3% to $1.4 million. But Total net sales were down 11.3%, falling from $11.6 million to $10.2 million. The company depends on its casino player rewards and player tracking software. Without players, there’s not much need for either of those at the moment. And even those food technology sales happened prior to pandemic disruptions, Shuldman noted, but he’s still pleased with them.

While Macau casinos have reopened, they continue to struggle with almost no tourism coming to the special administrative region. Meanwhile, Las Vegas casinos remain closed, and exactly when they reopen is still a question without an answer.