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Battle Road IPO Review, independent internet stock research, Independent IPO Research, Recent Consumer IPOs, recent IPO research

PlayAGS: Enabling the High Tech Casino

PlayAGS (NYSE: AGS), a recent addition to our Battle Road IPO Review Consumer sector coverage, is based in Las Vegas, Nevada. Founded in 2003, PlayAGS sells electronic gaming machines, including slot machines, video bingo machines, as well as back office systems to casinos and various gaming entities. Consensus estimates call for revenue of $259 million and a loss of $0.21 in 2018.

PlayAGS made its debut on the NYSE on January 25, 2018 in a 10.3 million share IPO priced at $16 per share, with all proceeds going to PlayAGS, raising over $150 million in net proceeds. The IPO was led by large underwriting team, consisting of Credit Suisse, Deutsche Bank, Jeffries, Macquarie Capital, BofA Merrill Lynch, Citigroup, Nomura, Stifel, SunTrust Robinson Humphrey, and others.

Historically focused on the Native American gaming market, in which it estimates that it holds a 20 percent market share of all Class II electronic gaming machines (EGMs), PlayAGS has expanded into new segments, after having been acquired with funds provided by Apollo Global in 2013. While revenue from EGMs accounts for 94 percent of revenue, the company has expanded into other North American gaming markets, and introduced interactive and table game products that account for the remainder. The company estimates that it has over 22,000 recurring revenue EGMs, and over 38,000 daily active users for its mobile games.

We note that two geographic markets accounted for roughly 36 percent of total revenue in the 12 months ended September 30, 2017. Oklahoma comprised 24 percent of EGM revenue, with the Chickasaw Nation, a Native American gaming operator in Oklahoma, accounting for 11 percent of revenue, while the Poarch Band of Creek Indians, a Native American gaming operator in Alabama, accounted for 12 percent.

Through the first nine months of 2017, PlayAGS recorded revenue of $154 million, with operating income of $68 million, excluding depreciation and amortization, up 24 percent from $124 million during the same period in 2016, when it recorded $45 million in operating income, excluding depreciation and amortization. Having raised over $150 million in its IPO, PlayAGS has dramatically improved its balance sheet, which featured just $10 million in cash and $580 million in debt prior to its IPO.

Cardlytics
Cardlytics IPO, Cardlytics Research, consumer stock research, Consumer Stocks, IPO Research

Cardlytics

CardlyticsPurchase Intelligence for Retailers

Cardlytics (NASDAQ: CDLX) is a recent addition to our Battle Road IPO Review Software sector coverage. Founded in 2008 by Scott Grimes and Lynne Laube, who serve as the company’s CEO, and COO, respectively, Cardlytics has created a data platform based on consumer purchase data, which it provides to retailers and banks. Consensus estimates call for revenue of $159 million and a loss of $1.70 per share in 2018, followed by revenue of $228 million and a loss of $0.85 in 2019.

Cardlytics made its debut on the NASDAQ on February 8, 2018 in a 5.4 million share IPO priced at $13 per share, with all proceeds of roughly $65 million going to the company. The deal was led by BofA Merrill Lynch, J.P. Morgan, Wells Fargo Securities, SunTrust Robinson Humphrey, Raymond James and KeyBanc Capital Markets. At a recent share price of $14, Cardlytics’ current market cap is roughly $280 million.

Cardlytics has created a purchase intelligence platform, which aggregates and analyzes customer purchase data provided by over 2,000 banks and credit unions. The data is then sold to retailers, including restaurant chains, retailers, cable and satellite TV and wireless providers, so that they can target online ads to banking customers logging into their phones for account update information. The company’s marketer customers include 20 of the top 25 U.S. restaurant chains, according to Nation’s Restaurant News, 23 of the top 50 US retailers, according to the NRF, three of the top five cable and satellite TV providers, and three of the top four wireless carriers, as measured by subscriber counts.

Cardlytics’ top five marketers accounted for 24 percent of revenue during the nine month period ended September 30, 2017, and a similar amount in the prior two years. As part of its business model, Cardlytics pays fees to banks and credit unions for access to their customer information, which has been anonymized to prevent a compromise of identity. Fees paid to banks accounted for 53 percent of revenue through the nine months ended September 30, 2017, down from 59 percent of revenue during the prior nine month period.

Under the terms of a General Services Agreement (GSA) signed with Bank of America in 2010, Cardlytics provides Bank of America with access to its Cardlytics Direct platform, as well as the ability to customize the underlying software in Cardlytics Direct. The GSA terminates on November 4, 2021, and may be extended by Bank of America for additional one year periods. As part of the agreement Bank of America has the right to approve or disapprove of any marketer offers presented to Bank of America customers on Cardlytics Direct. Bank of America has accounted for an average of 63 percent of Cardlytics Financial Institution share in each of the last three years.

Cardlytics’ business model remains a work in progress: for the nine months ended September 30, 2017, Cardlytics posted revenue of $91 million, with an operating loss of $15 million. This compared to $76 million in revenue for the prior year period, during which the company recorded a $27 million operating loss, exclusive of a non-cash $26 million expense for the termination of a U.K. agreement. An encouraging sign is that revenue grew by 19 percent, a faster rate than the company’s Financial Institution Share and other third-party costs, which grew by 13 percent during the same period.

Having raised roughly $65 million in IPO proceeds, Cardlytics has dramatically improved its balance sheet, which now features roughly $93 million in cash and $55 million in pre-IPO debt for a net cash position of $38 million. To learn more about how Cardlytics is valued relative to its IPO peers, please contact Battle Road Research at info@battleroadipo.com.