Ladies and gentlemen, welcome to the PlayAGS Inc. Q1 2023 Earnings Conference Call. My name is Glenn, and I'll be the operator for today's call. [Operator Instructions] I will now hand you over to your host, Brad Boyer, SVP of Investor Relations to begin. Brad, please go ahead..

Thank you, operator, and good afternoon, everyone. Welcome to the PlayAGS Inc. First 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 first quarter ended March 31, 2023, can be found on our Investor Relations website, investors.playags.com. On today's call, we will provide an overview of our Q1 2023 financial performance and offer perspective on our current financial outlook for the business.

This conference call will include the use of forward-looking statements. Any statement that refers to 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, and we make no obligation to update our disclosures.

For more information about factors that may cause our actual results to differ materially 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. Please refer to our filings with the SEC for more information.

With that, I would like to turn the call over to our CEO, David Lopez..

Thanks, Brad, and good afternoon, everyone. I would like to start off today's call by highlighting 5 of our most noteworthy accomplishments in the first quarter. First, total revenues increased 14% year-over-year to a company record $83 million, with growth achieved across all 3 segments of our business.

Revenues have now increased sequentially for 9 consecutive quarters, supported by a consistent product and operating momentum within the business. Second, adjusted EBITDA approved to a new first quarter record of $36.5 million, up over 11% versus the prior year and ahead of Q1 2019 levels.

Third, domestic EGM recurring revenue increased 10% year-over-year to a record $47.7 million, nicely exceeding the 6% to 7% average rate of growth in market-wide gross gaming revenue. Our domestic recur business has now set revenue records in 3 of the past 4 quarters.

Fourth, global EGM sales topped 1,100 units for the second consecutive quarter, up over 15% versus the prior year and nearly 10% ahead of Q1 2019. Based on the latest Eilers data, we believe our unit sales growth outpaced the level of growth witnessed in the broader sales market during the first quarter.

Finally, Table products revenue increased by nearly 20% versus the prior year, reaching a new record of $4.1 million. Overall, the consistent improvement reflected in our recent financial performance speaks directly to the returns we have realized on the strategic investments in our R&D and operational teams over the past several years.

These investments continue to produce greater resiliency and vibrancy in our operating performance today while also strengthening our foundation for long-term growth. As I look ahead, my level of excitement about the long-term prospects for our company is the same as it was when we last gathered a couple of months ago.

Since that time, our newest cabinet, Spectra 43 hasn't skipped a beat, extending its run at the top of the Eilers Cabinet report to 7 consecutive months. Spectra's 2 launch titles, Long Bao Bao and Shamrock Fortunes continue to support the cabinet's chart-topping performance with each theme achieving a top 10 ranking for Eilers.

We are excited about the buzz Spectra is creating around the AGS brand and continue to consider our most successful new product launch ever.

Looking beyond Spectra, the calculated transformation and expansion of our content creation teams over the past several years has armed the business with the deepest and most diverse game content offering in the company's history.

We currently have 7 game development studios creating over 75 titles per year, nearly doubling our game output compared to just a few years ago. In addition to added breadth of our portfolio, we remain laser-focused on ensuring we maintain our reputation as a provider of high-performing content featuring themes and game mechanics players love.

This focus was prominently reflected in the most recent Eilers Game Performance Report as AGS titles, including one of our initial game themes and the high denomination category accounted for over 10% of the top 50 new core games.

Supported by the teams we have in place today we are now able to deliver new high-performing hardware targeting a variety of market segments and an increasingly diverse content portfolio expanding multiple game category types with greater consistency. This consistency positions us for sustainable market share growth in the quarters and years ahead.

In addition to leveraging very strong R&D organization, we are also benefiting from the work of our sales and product management teams. By carefully investing in our customer-facing teams, we have successfully increased the frequency of our interactions, resulting in better sell-through of our products.

Along with this, we have deployed a stronger go-to-market strategy which better positions our products for success in the field. During the first quarter, we sold games to over 110 different customers, including 5 of our largest corporate customers, representing an increase of more than 45% versus the prior year.

All told, given the diverse array of customer accounts touched, cabinet types sold and market segments penetrated, I consider Q1 2023 the healthiest EGM sales quarter in our company's history.

Moving outside of EGM sales, the initiatives underway to further strengthen our domestic EGM recurring revenue business continue to deliver consistent results as reflected by our record-setting performance in the quarter. During Q1, we successfully grew our premium EGM footprint for the 13th consecutive quarter, pushing our premium mix to over 15%.

Although our premium strategy has come a long way in a relatively short period of time, we continue to see considerable growth opportunities in front of us, supported by new customer activations, game theme launches and hardware introductions.

In addition to our success on the premium game front, we continue to leverage the added depth of our game content portfolio and product management team to further optimize our core unit performance.

The compound benefit of our premium market penetration and optimization initiatives has structurally transformed the composition of our domestic installed base resulting in 8 consecutive quarters of $30-plus domestic RPD performance. Looking beyond EGMs, the momentum building within our Table products business is as strong as it's ever been.

Our PAX S single-deck shuffler footprint grew by more than 40% sequentially topping 200 units at the end of the quarter. The competitively priced shuffler's reliability and our service team's laser focus on ensuring a seamless conversion experience continues to resonate with our customers.

With several multi-site operators currently trialing packs and rebuy momentum amongst early adopters building, we remain in the very early innings of realizing the product's full growth potential.

In addition to PAX, we continue to leverage our commitment to being an innovator of choice to expand the reach of our progressive products and operators' table pits. To that end, our Bonus Spin Xtreme footprint equips 500 units at the end of Q1 with units installed across 20 jurisdictions.

While BSX is off to a hot start, we see considerable growth in front of us as the product was installed at fewer than 50 casinos at quarter end. Finally, our interactive business is quickly approaching launch mode.

Supported by forthcoming introduction of a new platform, expanded game content portfolio and recent new customer and market activations we continue to expect the growth trajectory within the business to improve in the back half of the year. With a record first quarter behind us, our focus now shifts to Q2 and beyond.

While we are acutely aware of the macroeconomic uncertainty in the financial markets today, we believe our ability to leverage the unique growth catalysts I just described, coupled with our outsized recurring revenue mix and strong liquidity position provide a level of resiliency within our business that is grossly underappreciated by investors today.

These same attributes also provide a path to sustainable multiyear growth, in turn, further balance sheet deleveraging, positioning the company to outperform over the longer term. In closing, I would like to thank our AGS team for their continued hard work, focus and execution, which remains the foundation of our record-setting financial performance.

I continue to believe we have the strongest team and the deepest product lineup in my tenure, and I'm encouraged by and look forward to what lies ahead for our company. With that, I will turn the call over to Kimo..

Thank you, David, and good afternoon, everyone. I will start off today's call by reviewing a couple of highlights from the first quarter and providing some perspective on how we see each of our business segments trending as we look ahead into Q2.

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, first quarter revenue increased 10% year-over-year to a record of nearly $48 million.

As we noted on our Q4 call, the first quarter got off to a strong start in January and trends strengthened throughout the quarter with March revenues reaching an all-time monthly record.

During Q1, we expanded our domestic installed base sequentially for the fourth consecutive quarter, supported by our 13th straight quarter of premium unit growth and a relatively stable core unit footprint. Domestic RPD increased 7% year-over-year, topping $30 for the eighth quarter in a row.

Our growing premium unit mix with premium games accounting for over 15% of our installed units at quarter end, further installed base optimization and a generally stable macroeconomic backdrop, all contributed to our improved RPD performance in the quarter.

Looking ahead to Q2, the opportunity to simultaneously activate new premium unit customers and broaden our penetration with existing customers, combined with continued stability in our core unit footprint should allow us to expand our domestic installed base for a fifth consecutive quarter.

Consistent with the expectations we articulated at the start of the year, we continue to believe our ability to 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 comfortably sustain domestic EGM RPD above the $30 level throughout the second quarter.

Shifting to EGM unit sales.

First quarter global unit sales increased by more than 15% year-over-year, topping 1,100 units for the second consecutive quarter, growing customer demand for our chart-topping Spectra cabinet with Spectra sales more than doubling versus Q4 2022 levels and over 45% increase in the number of customers sold to complementary sales into international markets and an increase in market-wide purchasing demand paced our improved unit sales performance in the quarter.

As we look ahead to Q2, the same set of strategic initiatives underpinning our outsized first quarter unit sales growth coupled with an anticipated normal seasonal lift in operator slot capital spending should allow us to deliver global EGM unit sales volumes that exceed Q1 levels. Moving on to EGM pricing.

First quarter global average selling price, or ASP, increased 2% versus the prior year to over 19,500 driven by a greater mix of premium priced Spectra cabinet sales and continued implementation of our price integrity initiatives.

Based on our anticipated Q2 unit sales mix, we expect ASPs to look relatively similar to the level achieved in the first quarter. Turning to our international EGM business. Recurring revenue increased by more than 15% year-over-year and improved sequentially for the 11th 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 first time since Q2 2019 increasing by more than 30% year-over-year on an as-reported basis and by over 20% when adjusted for FX. Exiting Q1, our Mexico recurring revenue business was run rating at approximately 75% of 2019 levels compared to a little over 60% 1 year ago.

Supported by the consistent operating trends we continue to observe throughout Mexico, we believe we should be able to further close the 2019 revenue gap during the second quarter. Looking beyond EGMs, our table products business delivered another record quarter with revenues topping $4 million.

Card shuffler revenues more than doubled year-over-year, driven by growing customer adoption of our PAX S single-deck shuffler. Progressive revenue increased by more than 10% versus the prior year and we activated our second largest AGS Arsenal site license contract during the quarter.

With momentum in the business accelerating, we believe we should be able to improve upon our record-setting Q1 performance in the second quarter. Shifting to Interactive.

Trends within the business once again proved stable throughout the first quarter as revenue exceeded $2.5 million for the fourth consecutive quarter while the segment continued to generate positive adjusted EBITDA.

Real money gaming revenues increased by approximately 5% versus the prior year, supported by continued outsized growth within the North American RMG channel.

Looking ahead, we expect Q2 segment level revenues to look relatively similar to those achieved in Q1 with a more pronounced lift-off occurring in the back half of the year as 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. first quarter adjusted EBITDA margin was approximately 44%, in line with the expectations articulated on our Q4 call.

Although we continue to expect full year adjusted EBITDA margin to land in the 44% to 45% range I would note, seasonal costs associated with our GameOn customer conference are likely to push our second quarter margin slightly below the low end of our targeted full year range. First quarter capital expenditures totaled $14 million.

We continue to expect full year capital expenditures to land in the range of $65 million to $70 million, inclusive of anticipated capitalized R&D expenditures. Cash interest in the quarter was approximately $13 million, a level we believe serves as a good run rate for the remainder of the year, barring any material change in market level rates.

First quarter free cash flow, defined as net operating cash flow less CapEx and was negative $10 million, inclusive of approximately $7 million related to annual employee bonus payments, which we highlighted on our Q4 call.

Additionally, the timing of EGM unit sales in the quarter and an increase in EGM component inventory to allow for timely fulfillment of the demand we see building within the business impacted Q1 free cash flow by a little over $7.5 million. Adjusting for these timing-related items, free cash flow would have been nicely positive for the quarter.

Looking out over the remainder of the year, we expect to neutralize a significant portion of the Q1 working capital related impact.

That said, when coupled with the relative consistency we continue to observe within our day-to-day operations and our organizational focus on capital deployment discipline, we remain confident in our ability to deliver positive free cash flow over the remainder of 2023, with the level of free cash flow building sequentially as we progress throughout the year.

Finally, turning to the balance sheet. Net leverage at quarter end was 3.8x, consistent with the prior sequential quarter.

Supported by our solid first quarter performance, the relative stability we continue to observe across our recurring revenue business channels, the growing demand for our high-performing for-sale products and our confidence in our ability to deliver positive free cash flow over the remainder of the year, we remain on track to exit 2023 with net leverage in the range of 3.25x to 3.75x.

I would remind everyone the assumption underpinning the 3.5x midpoint of our targeted leverage range continue to contemplate a modest pullback in prevailing market level conditions as compared to those encountered in 2022 and the 2023 year-to-date period.

That said, should the 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, it is important to note, we intend to pursue a balanced approach to deleveraging the business supported by a combination of adjusted EBITDA growth and consistent free cash flow generation. Operator, this concludes our prepared remarks. We would now like to open the line up for questions..

[Operator Instructions] Our first question comes from Jeff Stantial from Stifel..

Starting off on the game op business. We've heard some operators this earnings cycle call out some softness in kind of select Southern states kind of later in Q1 and into Q2.

Just curious if you're seeing any sort of interesting dislocations when you look at your game op business, whether that's by geography, by customer, just any sort of bifurcation and kind of patterns..

Thanks. So broadly, we see a lot of consistency, right? As far as you're getting into the specifics of jurisdiction by jurisdiction. I think that we've seen a little bit of that up and down a little bit from time to time. But broadly, across the United States, when we look at the nation as a whole we do see the stability and it's continued.

And there's nothing in sight right now where we see anything changing in particular..

Great. That's helpful. And then for my follow-up, Kimo, I wanted to revisit the capital allocation strategy a little bit. You mentioned several times the deleverage and investment into the business and various growth opportunities as the main priority here.

But with that in mind, is there a certain level I guess, where the yield on your stock is just too compelling kind of warrants revisiting potential share repurchases? Just kind of any thoughts there on how you view the calculus would be helpful..

Yes. I mean, we said it once, twice, three times and we'll say it again, right? Like I think our 100% focus is on deleveraging the business. And I think if you look at our outlook for the year, right? Like we gave a pretty broad range, but we said that the midpoint should come in at, call it, 3.5x.

And with that, we do have an assumption that to hit that range. We do have some moderation in the back half of the year. But bringing it back to your original question, that's our singular focus. I think does the topic come up? Yes.

But I think over and over in our focus is to continue to deleverage the business as opposed to entertaining using free cash flow to do something like buying back stock.

Before, like optionality is great, right? So I think accumulating cash on the balance sheet as we move through the year and moving forward into next year of success, puts us in such a great position to have options as well..

And that question does come up because, obviously, our valuation is where it is, and we think it's extremely undervalued. So we do ask ourselves the question frequently, but we do come back to the same thing, which is our investors largely, and we believe that deleveraging is the way to go..

Our next question comes from Barry Jonas from Truist..

David, we've been hearing trends stable for some time now despite all the stock market volatility I guess -- I don't think we've talked about this, but I'm curious to get your perspective on -- at what point do you think gaming operators start tailing back on their spend? Is there sort of like a 10% reduction in GGR.

I just would love to get your thoughts that at what point does the stock market volatility be justified by -- because it doesn't seem to make sense today..

Sorry, you're asking me to agree with you that it doesn't make sense. I mean, I agree that it doesn't make sense, right? And I think what you're saying is should this thing around the corner show up, right? I mean should things get soft, you're asking when do -- how much do operators pull back on CapEx and other things.

And I think that's very difficult to say. I think it's the scale. Again, stock markets all over the place. If this were to come to fruition, what's the scale of it. And I think based on that scale, they would make decisions. I think they're good true to operators out there.

And -- but to date, you're asking of the hypothetical question, but to date, especially in the CapEx space, that's the one thing that's the barometer for what's happening or what they believe might happening, there's no pullback. So the current scenario is operators have not shown us anything to say they believe things are going to get soft.

So right now, CapEx is strong. I think their beliefs are strong. I've been following the calls, and I think that overall, it's been a positive tone..

Okay. Okay. Great.

And then last quarter, you announced entrance into 3 new states, Colorado, Mississippi, Missouri, just curious if you can give us any update on how that's trending so far?.

Yes. So I mean, I think it's early in the game, but it will go well for us. We're pleased with where we stand there and how things will go. They're [fair] markets for us. It's all greenfield. They're decent sized markets. So we're excited about it and excited to get in there and do some business. Obviously, we've got some great products.

I think that the table games crew is anxious to get in there and start moving product and I'm sure they will. And our slot product with what's going on with the Spectra 43 and our premium business. I think we've got plenty of work to do in there and plenty of progress to pick on. So we're excited about it..

We have our next question comes from Chad Beynon from Macquarie..

Nice quarter. First, just wanted to ask about ASPs. You guys have talked about your price integrity initiatives and ASPs were strong for another quarter particularly in a quarter when you sold record units.

So just wondering what the competitive landscape is like? Is anyone discounting? Or if you're putting up the numbers and strong indexing that warrants your ability to continue to raise prices..

Yes. Yes. I think you answered the question, actually. I think it's a great question and you sort of answered, which is if you're indexing well and you're performing well, like us, you're going to have really good ASPs. If you're not performing that well, I think that there's -- as per usual and any business out there.

I think that you've got to discount a little bit. I have not seen any dramatic discounting at all. I'm sure there's some bundling and packaging that you see across different companies.

But I haven't seen anything that I would refer to as aggressive or excessive so I think everybody is pretty stable, but you can look at ASPs on Eilers and it sort of gives you a good read on who's performing and what way..

Great. And then separately, just on Naskila or Texas in general.

Is there any update there or anything that we should be mindful of from a opportunity or timing standpoint as we think about our model for the next several quarters here?.

Yes. So Texas, in general, you're asking sort of the Texas question there. Texas, in general, we continue to believe that, that's not a 2023 event, if you will bearing in mind even if it was a '23 event, it happens way down the road. But we do not believe it's something that's happening in 2023.

As far as Naskila goes, no news at the moment, we continue to track it. Obviously, we have very good relationship with them. And so we're just waiting on them to make their final decisions. And I mean just a note as Naskila continues to perform amazingly from at least our side of the business, and I'm sure they're packed to the gills there as usual..

Okay.

So there's nothing really kind of baked into that 3.25 to 3.75 leverage guide at this point?.

No, no, no. Yes, no, we didn't do that..

Nice quarter guys..

Thanks, Chad. Appreciate it..

Our next question comes from Edward Engel from ROTH MKM..

Really nice quarter on the unit sales. It sounds like 2Q is going to be even stronger. Is there any kind of lumpy items in either of these quarters in terms of expansions or anything? And then typically, 4Q is kind of your biggest quarter of the year.

Is 2Q the high watermark? Or do you actually expect a similar seasonality as the past?.

So I'll start with the lumpy and then I'll turn it over to Brad, so he can sort of fine-tune the rest of those questions there. So nothing terribly lumpy within the quarter. I think you're looking for, hey, did someone come in with a huge buy and no, that is not the case.

Again, we sold to a record number of customers for us, right? And we anticipate not only was that a record, but we anticipate that, that will expand going forward into Q2. I think the way to look at that is, again, very little lumpiness going forward as well and sort of going wider and deeper into the customer base.

So I think that we can feel comfortable with that, not only in the quarter but going forward. As far as the rest of your question, I'll let Brad talk those through..

Yes, Ed. I think it's a little bit early to be thinking too far out as far as what Q4 may or may not look like. I think, as David said, overall demand trends in the market are remarkably consistent on the purchasing side. And obviously, it helps to be in the market with a relation on performing product.

As it relates to Q4, a decent factor in Q4 is sort of year-end capital spends of user [indiscernible] capital budgets with the operator. So sometimes you don't get some color on that until we get closer to Q4 where we could talk about that a little bit more concretely.

But I think from a high level right now, we like what we're seeing out there from a demand perspective, both from the market level and as it relates to the momentum that we have on the product side..

Helpful. And then it looks like your gross margin on EGM sales was the best it has been within a while.

Are you starting to see some of these supply chain issues kind of in the real view mirror?.

Yes. So there's two factors in there. We talked about this a little last quarter. From a high level, as it relates to supply chain, things are definitely largely speaking, back on track. Prices have not obviously just like in the broader economic sense, not like completely round trip back to, say, pre COVID-type levels.

But a lot of the craziness in the market has moderated. Lead times are relatively back to normal. So we're obviously benefiting from that trend. And then the other thing that you really see from a sequential perspective is that Spectra, as we've said before, is a value-engineered product.

And so it has very strong gross margins attached to it as a result. And so as Spectra grows to account for a greater portion of our mix, there will be continued gross margin benefit there. So it's really a factor of those 2 things, Spectra mix and then just continued normalization on supply chain broadly..

Got it. And yes, congrats on that next quarter..

Thanks, Ed..

Our next question comes from David Katz from Jefferies..

Thanks for working again. Just from a little longer-term perspective, I mean, you're obviously getting a lot of traction with Spectra. And I guess, I apologize, I missed the first 10 to 12 minutes of the call, if you've talked about it.

But what's next, right? Is there the sort of Spectra 2.0? Is there some new version, right? What does your pipeline look like so that you can sort of build on the success that you've had so far?.

So I'm going to -- I'll give a little bit on this, David. But so unless we sort of show our product, we don't -- until we see the lights of their eyes, right? Because with our rollout of all our products, one of the things that we have to manage very closely is sort of like that pipeline and that road map.

And so at the moment, we always have something coming, right? There's always something that works. We have a specific road map. I think we've been pretty consistent in how we release our products but at this point, we haven't announced anything. That's sort of the official end of that there.

So -- but obviously, with every cabinet line, we come out with -- we continue to expand and do new things..

Yes. David, I would just add, as we've said in the prepared remarks, and as you're aware, we have really made some considerable investments in our R&D team over the last 2 to 3 years. And we really feel like both on the content and hardware side, where we need to be.

We're in a position now to bring 70, 75 plus games to the market every year across a variety of different channels. And at the same time, we feel like we're in a position to be able to consistently bring some new hardware to the market on an annual basis.

So really like where we are from a resource perspective, and I think that sort of puts the pillars in place to support really a nice constant long-term growth trajectory..

Got it. And can we just talk a bit more about the international opportunities. So many of us, as you're aware, feel like we have our intellectual arms around what goes on in North America relatively well. But the international stuff is just harder, right, in that respect.

So David, what can you sort of help us paint a picture of where you're trying to enter, where you think you can penetrate. If you could just give us some continence, we could maybe drill down a little deeper and do some more work around it..

Yes. So for now, we're definitely, as you know, focused on North America, which is pretty much domestic. Canada, U.S., Mexico is considered domestic in my eyes. So Latin America, all of Latin America, South America, if you will, and the Caribbean is our "international focus" at the moment.

And then from there, I don't know if it's going to be Europe or it's going to be Asia or it's going to be in Australia and New Zealand or something of the like. The good news is we have development teams in Australia, they know the market very well. So should we choose to expand into Australia, we're in pretty good position.

But we really haven't talked about or made a firm decision on after Latin America what direction we're going to go. We do get some pretty good inquiries out of Europe as far as our product goes. But we haven't made a decision to enter that market yet.

But Latin America/South America and then you can look at, obviously, Europe, Asia and Australia are all optionality for us with Australia maybe being one of the good ones. I guess when you say Australia, you should really say all of Asia Pac, but our teams dial into that, of course, because that's where they reside..

Understood. I appreciate it. And nice quarter..

Thanks, David..

[Operator Instructions] With our next question comes from David Bain from B. Riley..

Great. Thanks so much and echoing the nice quarter. I know you have a lot of runway, but I was hoping to follow up on David Katz's question regarding maybe not new cabinets coming out this year or anything like that.

But if you could help us think about new categories that could come out in the next 12 to 18 months, I mean there seem to be a lot that are still white space for AGS like [Macrios] LAP, VLTs, et cetera.

Can those be 2024 events? And then can you remind us for Colorado, Missouri and [Minnesota], are those kind of back half of this year? Or are we already starting to see some benefit there?.

So I'll start with the categories. Again, I haven't announced anything on the category front either. I think that with the way we're set up as an R&D team and the investments that we made, I think that some of those categories are optionality for us.

Nothing to report on at the moment, but we're pretty well positioned, if you will, to pick a new category if we go that route. And then I'll turn it over to Brad on the new jurisdiction front..

Yes, David, as it relates to the new jurisdictions, just a reminder, in aggregate, Colorado, Missouri and Minnesota are about 40,000 units as a market opportunity. We are currently underway with some of our product testing and would expect to have our initial installs into those markets in the back half, as you said.

I think it is important to remember that in the case of 2 of those markets, Colorado, Missouri, they are very heavily dominated by multi-jurisdiction operators who know our product well and with whom we already have existing relationships. So we think we'll be able to hit the ground running in those markets.

So really excited about the opportunity there, both on the slot and table side of the business..

Okay. Awesome. And then if I could -- and I don't know if you already covered this, but given the momentum that you have, and sometimes we've seen this with suppliers in the past when they really start to move higher. It kind of builds on itself. I know Spectra is a big category, high denom, obvious success there.

Are you beginning to see customers say kind of what else you got? Or like how does that sort of work towards other products? Is there some sort of add-on effect?.

I think that -- I mean I think you nailed it. This is something we've seen in the industry. I think it also, David exists in the table game space.

This isn't just restricted to the slot space like table games, where we started with a little bit of content, and we had some takers and then we got into progressives and progressives became a very dominant product. And clearly, we had some takers there. So we got had takers on progressive and content. And now we have shufflers.

And so as you know, that momentum, you're referring to in a very accurate way. Momentum starts to build much more than when you have one successful thing within a category, for example, tables. So that's worked for us very well on tables. You can see it in the results.

Yes, on the slot side, I think that -- with everything that we've done prior to Spectra, we had a lot of success in various categories, products, titles, et cetera. But I think Spectra is now taking us to another level. And it's our expansion into most customers we sold to ever has to do with obviously some approvals.

It has to do with having a better constructed sales team, geography and the quality of the team. And of course, I think that as you roll out something like Spectra and it has the success that it had so far, yes, you now have the synergistic momentum from a number of different things. Core products doing very well.

Historically, the Orion Portrait being the cabinet that it was then you go Orion Curve with our premium product that's been successful. And last but not least, what you mentioned, which is Spectra 43. So I think there's that synergistic momentum there for sure.

And I think it's helping us sell not just to more customers, but getting a little wider and deeper into each customer. And then, of course, we've picked up some corporates that have been a little bit more of a challenge and now we're breaking into those as well..

[Operator Instructions] We have no further questions on the line. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines..