PlayAGS, Inc.
Q1 2020 Earnings Call Transcript

Published: 10 May 2020

[Operator:]

Good day, everyone, and welcome to the AGS Q1 2020 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] Please also note, today's event is being recorded.At this time, I'd like to turn the conference call over to Julia Boguslawski, Investor Relations. Ma'am, please go ahead.

[Julia Boguslawski:]

Thank you, and good afternoon, everyone. Welcome to AGS' first quarter 2020 earnings conference call. With me today are David Lopez, CEO; and Kimo Akiona, CFO. We posted a slide presentation reviewing our key operational and financial highlights for the first quarter 2020, which can be found on our Investor Relations website, investors.playags.com.Today's call is to provide you with information regarding our Q1 2020 performance in addition to our financial outlook. This conference call includes 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 actual results to differ materially from forward-looking statements, please refer to the earnings release that 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 that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. 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'd like to turn the call over to our CEO, David Lopez.

[David Lopez:]

Thanks, Julia, and good afternoon, everyone. We hope everyone is staying healthy during this unprecedented time. Given the circumstances, we will discuss first quarter results shortly, but I want to start by updating you on our response to the COVID-19 pandemic and the measures AGS has and is taking to navigate the crisis. I'd like to start by saying that our top priority of our leadership team, as always, is the health and safety of our employees across the globe.I'm very proud of our AGS team for demonstrating the flexibility, resilience and positivity that's consistent with our core values during this difficult time. We extend sympathy and support to all those suffering health and economic hardship due to the global pandemic.Turning to the business, starting on Slide 2. We began March on a positive note. But as COVID-19 started to shut down nearly all of our customers' properties midway through the month, our business quickly deteriorated, resulting in Q1 revenue being down 26% year-over-year. As casinos began to suspend operations, we proactively began to manage cash outlays to preserve liquidity, implementing a number of initiatives to react to and overcome the escalating crisis. Those measures detailed on Slide 3 included taking immediate action to protect the health and safety of our employees by implementing travel restrictions and work-from-home policies in all of our offices. We established a senior management-led crisis committee and began actively adjusting operating expenses to preserve cash.By holding daily calls, the committee had a real-time platform to stay current with market trends and government mandates as it relates to casino closures and openings on a state-by-state basis. We took a hard look at all operating expenses and have actively reduced all nonessential discretionary spending, including, but not limited to, marketing, trade shows and events, sponsorships and consultants. We froze all promotions, merit increases and hiring activities as well as our 401(k) match program. We enacted a freeze on all growth capital expenditures and optimization efforts. The most difficult decisions we had to make centered around our people. Unfortunately, in addition to a reduction in workforce of approximately 10%, we had to furlough many team members as we manage through our most trying months.We look forward to getting our team back to 100% when the time is right. We implemented company-wide salary reductions with executives and outside directors taking the deepest cuts. On March 19, we borrowed the full amount of $30 million under our revolving credit facility. And just last week, we announced that we closed an incremental term loan of $95 million and received financial covenant relief through 2020 by amending our existing credit agreement.As a result of these actions, we're able to reduce our estimated cash outflows approximately 80% to $4 million per month. This does not include debt service costs of approximately $3.8 million per month. Approximately 60% of the monthly cash outflow is attributed to payroll and related cash costs, while the remaining 40% is related to operating expenses and other costs. Prior to COVID-19, we were seeing some positive indicators in our EGM recurring revenue business. As Kimo will touch on later, we saw continued stabilization in Oklahoma with RPD showing less of a decline year-over-year. The first quarter marked the official launch of both the Orion Rise and Starwall. And although we only had a couple of months of data on limited installed base, both initial performance and the pipeline were very encouraging. The preliminary numbers for both cabinets were above house average with Starwall exceeding two times house average, indicating a very strong start.With these early performance numbers, we feel confident about our product's long-term potential to help penetrate the premium lease space and improve domestic RPD, particularly in Oklahoma. Our Table segment continued its strong run in the first quarter, while the Interactive division achieved positive EBITDA. We believe the online business is approaching the scale and needs to continue to be profitable moving forward and that revenues will continue to ramp as we expand both our content offerings and our digital footprint.Before I turn the call over to Kimo, I will give a brief update as to what we're hearing from our customers, and what we believe the new operating environment may look like. As a number of state but their stay-at-home orders expire, casinos are reopening or actively planning to reopen soon. Our sales team is closely monitoring this. We have information indicating that casinos in at least eight states are scheduling to reopen sometime in mid-May. Although U.S., Canada and Mexico openings will likely occur between the end of May and early to mid-July. As casinos reopen, they are implementing numerous safety and cleaning protocols to reduce the risk of COVID-19 infection in their staff and guests. They're exploring various measures for adequate social distancing between players such as reconfiguring slot machine banks, spacing out tables and reducing the number of players at each table game.Although there will be pent-up demand from serious gamblers, we do not expect that casinos will reach pre-COVID occupancy levels for a while. And therefore, we do not anticipate significant new machine CapEx investments from customers as they focus on adjusting their operations to the post-COVID operating environment. With the likelihood of fewer new game purchases, we will lean on the recurring revenue portion of our business, which is approximately 70% of our total revenues. Nonetheless, seeing casinos reopen is a welcome and positive sign. We know it won't be easy, but we're confident in our ability to navigate this crisis and adapt to the new operating environment, working hard alongside casino operators to regain our prior momentum. As Kimo will touch on, we're adjusting our cost structure and operating model to the new realities of the casino gaming market post-crisis in order to set our organization up for a long-term stability and success.In summary, our quarterly performance prior to disruption indicated positive trends from our new slot products and our emerging cable business as well as the Interactive business, both social and real-money gaming, which leads us to believe that when casinos reopen and people return to work, AGS will be well positioned to perform in the space. Thanks again to all AGS employees for their dedication and hard work during these difficult times. While navigating the financial challenges of the crisis, we've remained steadfast in protecting our people and our culture. In doing this, we will create a unique opportunity to attract new talent and continue to make top-performing products for our customers.Ultimately, we will get through this time by closely partnering with our team members and our customers, exiting the crisis with a goal to be stronger as a result of the remarkable commitment and cooperation from everyone.With that, Kimo will walk you through the financials.

[Kimo Akiona:]

Thank you, David, and good afternoon, everyone. With our revenue significantly impacted, as David just mentioned, we are clearly focused on controlling costs and preserving cash. I want to commend our team for rallying together quickly to reshape our cost trajectory in the near term. The current environment calls for rapidly evolving financial forecast and actions, and our team has risen to the occasion every single day.I will cover three areas in my commentary today

[Operator:]

[Operator Instructions] Our first question today comes from Brad Boyer from Stifel. Please go ahead with your question.

[Brad Boyer:]

Yes, thanks for taking the question guys. And for all the information you provided today. The first question is just around the margin trajectory from here. I mean, you clearly articulated the monthly expense burn rate at this point. My question is, as some of these properties and markets start coming back online, how should we think about that 80% reduction in operating expense coming back into the model? I think another way guys are approaching this question is like what percentage of your 2019 run rate revenue do you need to achieve to get to sort of a breakeven level of EBITDA?

[David Lopez:]

Right. So Brian, I'll start off and I can begin to answer that and Kimo will finish up. So as we've been talking about for a while and we've been busy over the last month or so as you saw with the capital raise, one of the things that we know it's going to ramp back up much differently than it shut down. It shut down abruptly and over the course of about a week. The ramp-up's going to take a number of weeks and months. Even when a casino or all casinos are open 100%, that doesn't mean that it's 100% of pre-COVID-19 revenues will be in place. So our job is to match expenses. As each jurisdiction opens up, obviously, we have priorities. Priorities which start with service tax, operations-type people and bringing back those expenses one at a time cautiously.And as we've said, it'll be a day-by-day exercise, no different than it was when the casinos were shutting down. So we want to make sure that our burn rate doesn't waver too much as we're ramping back up, meaning we shouldn't increase too much there at all. We want to keep it the same or we want to reduce the burn rate. So that's sort of our objective when we think about how to ramp expenses, and how we'll match the revenues that are coming in from our casino partners.And then, I think the other part of the question was you were asking what percent of our revenue we have to get to a breakeven on EBITDA there?

[Kimo Akiona:]

I mean, I guess it's funny now we talk monthly, right? We used to, once upon a time, always talk to everyone quarterly, but I'll break it down by the month since that's the burn rate that we published. I guess if you think like EBITDA breakeven, I would say we probably have to be near a six call it, $6 million to $8 million revenue mark based on the burn rate that we that we published and sort of based on the type of overhead or costs that we need to bring back in the business as we scale.So I think that's about the right monthly number to talk about, Brad, if that's helpful.

[Brad Boyer:]

Yes, that's extremely helpful, Kimo. And then my second question is just around Oklahoma. You guys kind of gave us the heads up on this that there were going to be some more units coming out of the market there in the first quarter. Now we have two back-to-back quarters with over 300 units coming out there. I guess kind of with everything that's going on in the market today, how should we think about your Oklahoma install base from here?And any sort of selective pruning that you guys may undertake from this point?

[David Lopez:]

Thanks. So as we've talked about, like you said, we're looking to become more efficient in Oklahoma, right? And what you're seeing there in the install base, and you'll continue to see a little bit of it throughout the remainder of the year or we're maybe with this crisis, it might drag into 2021 a little bit is to pair back the install base in Oklahoma, so essentially have a smaller install base. And long term, once we thin down the base, we'll improve the quality of what's there with much many of our new units that we're releasing. As you know, we have the Curve, the Rise and the Starwall that are all new products that were coming out over the last couple of months and going forward.So once we do that, pair down the base, get the quality improved, we'll be more efficient operationally and also on RPD basis, when we actually believe we can be more profitable in the state of Oklahoma if we manage that correctly.

[Brad Boyer:]

Okay. That's helpful. And then -- and my last question is just a bigger picture question. And I think we're all kind of pretty close to the daily news flow and sort of the predicament that a number of the operators are in today from a cash burn and balance sheet perspective. That said, I think it would be helpful on this call, David, if you could just provide some perspective on sort of your strategic vision for the company on the other side of COVID. Clearly, there's going to be some distressed balance sheets for the operators and limited capital spend in the interim. How are you positioning AGS today to make sure and ensure that you guys succeed on the other side of COVID?

[David Lopez:]

Yes. Our plans rather to just be a lot smarter than we've ever been before with our cash and capital strategy. We have to be more efficient, no different than Kimo and I talked about sort of in the remarks, we're going to be efficient in the way we wind this business back up. It's going to be a day-by-day drill. And on the other side, I don't know about big picture strategy change, but when you get down into it a little bit more, with we know where the operators are, we know where the challenges will be. We know how they'll be strapped a bit for CapEx for quite a while for new machine CapEx. We need to keep that in mind. So we're going to focus on our recurring revenue businesses, that slot tables online, of course, and we want to be very efficient in there; so focusing on content more than anything else.We do a lot of things, we have some great hardware out there. We have great new products that come out, but if we focus and continue to invest in our content strategy, that's truly what drives every segment in our company, be it online, brick-and-mortar slots or brick-and-mortar tables. So that's really what we're going to be focused on, and how we plan on attacking it.

[Brad Boyer:]

That's all from me. Thanks guys.

[David Lopez:]

Thanks, Brad.

[Kimo Akiona:]

Thank you.

[Operator:]

Our next question comes from Barry Jonas from SunTrust Robinson Humphrey. Please go ahead with your question.

[Barry Jonas:]

Hey guys, good afternoon, David, I think at a high level, maybe any thoughts you have on what the longer-term impact to the overall gaming supplier industry could be once we emerge from this crisis?

[David Lopez:]

Barry, that's a big question. I'll probably paraphrase a writer from the '90s that said, our crystal ball isn't so crystal clear anymore, right? It's things have changed. And I think that we certainly hope. We say when to get back to pre-COVID-19 levels and we get back to pre-COVID-19 everything, I think that some things are going to change. I think you might see a little bit of consolidation in sort of the microgaming-type companies. That's not a name of a company, by the way. Just to be specific, like very small gaming suppliers, I think, will begin to roll up and be part of the larger gaming suppliers. I wouldn't be surprised to see a little bit of consolidation here or there. I think that everyone, as I was saying in my response to Brad's question, is going to be a little bit more capital conscious, cash conscious.How do we prepare ourselves if this drags out a little longer than we expect? But when it's all done and we settle in and forgetting about coming up with a cure or a vaccine or any of the above, I think the gaming's still going to be there. We've had some nice indicators early on with some openings in Washington, Idaho and Oklahoma. The spirit of a gambler's not going to change, Barry, we know that much. I think the way that we manage our businesses, we just have to be better. And I think that, that's our goal as an industry, be it operators or suppliers.When we come out on the other side of this, knowing what we just went through, our job is just to be better at everything we do. And a big part of that, obviously, will be our capital, cash, CapEx strategies and how we look at all of that.

[Barry Jonas:]

Really helpful. And I guess just as a follow-up to you or maybe as you talk to Sigmund, do you think we'll start seeing new form factors emerge as a result of this?

[David Lopez:]

Yes. So we've gotten those questions quite a few times. So the industry was there was a few things that were happening. Number one, machines were getting bigger to begin with. For quite some time, there's they haven't really exceeded for the mass floor. They haven't exceeded the normal slot stand, but we were beginning to see slot machines grow in size. Maybe that's a trend that we'll see going forward, but again, that's new machine CapEx purchases. I think that'd be something we'd see two to three years down the road, but I don't think that form factors will change so much, but keep in mind, even just using a carousel versus a slot bank changes social distancing and distancing from your neighbor that's playing on slot machine in general. That also is something that we see in casinos today, but it does take a little bit away from the essence of the game as you're playing on a bank of five or six machines, and you see all the wins. You're not going to see as much of that.So, I don't think it's going to be every machine on the floor, but you could see configuration changes more likely than huge form factor changes going forward.

[Barry Jonas:]

Great. And then just last one for me. This could be too soon, but maybe any initial discussions with operators or maybe going off with the lessons of '08, '09, is there sort of a mix of operators who are just completely pulling back their budgets versus those who maybe see this as an opportunity to gain market share by keeping their floors fresh? Just curious about the dynamic there and your from your perspective.

[David Lopez:]

I think that as we look at it, we believe there will be some operators that will jump out with some capital spend. But overall, I think the industry's probably going to be conservative in the early going here. Maybe there'll be the one-off operator per jurisdiction that wants to be aggressive, and we applaud that obviously because we believe in the industry, and I think that's a sign that they're saying they would, too. But I don't think we'll see any dramatic difference in how people handle things. In the tribal world, where we're likely to see activity earlier on in CapEx than perhaps the corporate world, but I think that's rather consistent in what we've seen through all the crisis that we've been through, whether you go back to 9/11, or you go back to the 2008 through '10 crisis, it's been a very similar pattern that we've seen.

[Barry Jonas:]

Great, thank you so much, and hope everyone staying safe.

[David Lopez:]

Thanks, Barry

[Operator:]

Our next question comes from David Katz from Jefferies. Please go ahead with your question.

[David Katz:]

Hi. Afternoon, everyone, good to hear everyone's voices. I wanted to ask, as you go through this current period, are there sort of tributaries of the business or specific business lines that you may consider growing or shrinking to perhaps focus as a potential strategy a bit more? Or is there some geographic focus that may occur as you go through it?

[David Lopez:]

So it's probably a little early for us to know precisely what we would do. Obviously, right now, we're going to lean on the recurring revenue business. Again, new machine purchases will be affected, no doubt, going forward. So we're going to lean on our lease businesses very heavily. Hey, we'll follow the money, if you will, right? The jurisdictions that are doing the best, are places that we'll certainly focus our efforts. And I think that once we begin to see when these casinos are open, the performance of each region and casino, that'll help guide us, David, in the future as to what our focus should be. Right now, I think there's, from what I know, somewhere between four to eight casinos that are truly open and running right now. If you look at those very few casinos, demand seems unlimited.We know that's not a long-term scenario, but with very few casinos open in Idaho, Washington and Oklahoma, so far, so good, right? But once they all get open, we'll wait and see how RPDs look. What revenue levels look like, what business looks like. And we'll use that to guide ourselves going forward.

[David Katz:]

Right. And I know that this is a similar version of a prior question about new form factors, etc. But is there any technology that can advance coming out of this, that may make games more usable under the current set of circumstances that probably endure for an extended period?

[David Lopez:]

Yes. So obviously, we've since this whole thing has happened, we've explored a number of different things, I haven't settled on anything in particular. I think that long term, there will be technology improvements and maybe some solutions to things like what we've just experienced that might allow casinos to stay open a little bit longer in some cases. I go back to when I was traveling to Hong Kong and Macau, and you'd land or you'd get off the ferry, and you'd walk under the thermal grid pretty much. No matter where you were going for a while. And I understand that was a sign of the times. I think it was SARS at the time. But I think technology, you've heard it from Wynn, Venetian and others that are going to be used to keep patron safe.And just as we've explored a few things, I think vendors in the space and folks outside the space will be introducing some technology to, we'll say, keep us safe or to just let us all be a lot smarter about how we're operating and doing things going forward should this ever happen again.

[David Katz:]

Got it. And if I can ask one last detail, and I'm expecting more of a qualitative answer because it's kind of out in the future. As we think about CapEx rolling beyond this year and beyond some new normal on the other side that may roll into 2021, are there any qualitative thoughts you can share about sort of where you might want to set things or sort of what kind of outputs you're looking for? This is more of a Kimo question?

[Kimo Akiona:]

This is Kimo. Yes, yes. I think I think you started it off right that it's qualitative, right? Because I think, like Dave has mentioned and we had in our prepared remarks that we need to manage the business even more prudent. And I think when we make investment decisions, I want to say in the short to medium-term, the hurdle got higher, right? I think we're going to need a better, quicker returns and more data, right? To make those decisions, but so I think the answer to your question is specific to 2020. I think you're obviously going to see our CapEx come down pretty dramatic.I would say in a better, good-case scenario, if we see opportunities in the back half of the year or Q4, if casino start to open and there's not a big second wave of COVID and we see opportunities, you might see us start to spend some growth CapEx again, but short of that, I think you're going to see our CapEx come down pretty significantly to the tune of like 60% down from what original guidance was for the year. And that probably is on a good-case basis. And then as we get into next year, if I have to be anecdotal as it relates to next year because that's even further out, right?

[David Katz:]

Got it. Thank you very much. It's helpful.

[David Lopez:]

Yes. Thanks, David.

[Operator:]

Our next question comes from John DeCree from Union Gaming. Please go ahead with your question.

[John DeCree:]

Hi, everyone. Thanks for all the detail, so far all the insights. Question, maybe, David, on your views on pricing on the other side of this. And again, the crystal ball is fairly opaque right now, but when we think about slot floors being reconfigured and spacing of slot machines, we've talked about CapEx budgets being down, but maybe even on the recurring side, what's your anticipation on your customer or your competitors, I should say, being more aggressive on pricing? Given there's maybe a little bit more a little bit less floor space to go around and just get your views on how you think pricing will pan out on the other side of this.

[David Lopez:]

Good question. Thanks, John. So I think it'll be in the early going, I think we might see a little bit of concessions here and there on pricing. I think long term, the lease business will be what it was, right? I think 80-20 is beneficent. It's been around since folks have really been doing any form of participation. It's been a way it really shines a bright light on the way that we partner with our customers as we get 20%, they get 80% roughly. And it seemed to work for a very long time. So we anticipate that will stay intact. Obviously, there's some flat fee jurisdictions out there where you cannot participate. But that said, I mean, getting into it's going to be a question, I think, what you're saying is, are people going to be aggressive to try to grab floor space? We have strategies in place. We're prepared to see what our competitors will do. We'll wait and see, but we have some countermeasures and some ideas of our own, none of which we didn't want to talk about specifically on a call, but we're ready for what you're discussing, and what might happen. As far as floor size or the footprint of the slot machines being reduced because of spacing, that's another wait and see.It's too early to tell how exactly operators will change their floors or take machines off the floor. That said, over the years, I have been an advocate, and I've said it many times, going all the way back to our IPO and even our debt raise when we acquired Cadillac Jack. I don't think this industry would be in too much pain if 5% to 8% of the machines came off the floor because I think 5% to 8% or even more are extremely old and don't get the level of play that's needed. They're often out there sort of as window dressing in some casinos. And I think that the spacing would be better, sidelines would be better, but the amount of business that we're going to do won't be terribly different. If anything, I think thinning the number of slots out there might help the companies that are out there doing business right now.So it's not something that we're sure is going to happen or to what degree, but should it happen to a sort of mid- to low single-digit number, I don't think it would be too painful for us. And I think it might actually be a good thing for the industry long term.

[John DeCree:]

That's helpful, David. I appreciate your thoughts on that. And one other question, and I apologize if you addressed this in your prepared remarks, but we're kind of all paying attention to the news here domestically. I was wondering if you could give us an update on your international business in Mexico and kind of recovery time lines that you expect there? And anything that you could kind of give us a little bit of color would be helpful.

[David Lopez:]

Sure. I mean, if you've been watching the news, it's hard to catch what exactly is happening in Mexico. I think, sadly, they were a little bit behind us on their reaction. I don't know that they were very far behind us on the spread of COVID-19, but I think that generally, the government down there had reacted a little bit slower than we did in the U.S. and Canada. And so what we'll probably see is reopenings lagging a few weeks to a month behind the U.S. most likely. It really depends on how they manage. I would say, the next 30 to 45 days will really lead to when those casinos begin to reopen again.Obviously, we have our folks on the ground down there, where we pay attention to that daily. We talk about weekly. And it's part now of our daily, if we I think we call it our wind up meetings. As we wind up the business, again, we get reports on that on a daily basis.

[John DeCree:]

Thanks, Dave and I appreciate the color. Glad to hear everyone on the call is doing well.

[David Lopez:]

Thanks.

[Operator:]

[Operator Instructions] Our next question comes from Chad Beynon from Macquarie. Please go ahead with your question.

[Chad Beynon:]

Hi. Afternoon, and thanks for taking my question. Wanted to focus on some of the cabinets, the product rollouts. Last quarter, I believe you accelerated the rollout of the Starwall or at least the planned rollout of the Starwall, given customer demand. Does it still make sense to stick with the same delivery schedule? Or could you potentially push back some of the product a little further out? Like what we're seeing with the movie theater industry, some big titles that are just being pushed into next year because there might be more of a logjam of product from you and your competitors when things open up?

[David Lopez:]

Thanks, Chad. So I think it's hard to say like that we have some hard and fast strategy that we'll follow. I'd love to say that we're going to pick up right where we left off, right? And we're going to get right back to it, but we have to wait for those casinos to open. Again, we have to wait and see what revenue levels are. Going into the crisis, we I think we had maybe four to six weeks or so under our belt on the Starwall. It could have been a little bit less. The returns on that were fantastic, doing so well. It sort of became a daily conversation to sort of bet internally on what the numbers will be the next day. So the product is doing fantastic.Anywhere where levels of business are high enough and RPDs are healthy, clearly, that's a place where even under a capital-efficient strategy, we go in there and put machines in. Until we see how casinos are doing, we won't know exactly how we'll handle that, but we'll react we'll read and react to what's going on in the industry to know how we're going to strategize and what tactics we'll take forward.

[Chad Beynon:]

Okay. David, my last question is a theoretical one that I think you probably touched on a little bit here during the call. So in the situation that a casino opens up with, let's just call it, half of their machines and some of yours get left out of the reopening there, did they ask you to take the machine back? Did they just not turn it on? And if they don't turn it on, Kimo, just kind of a nuance question on that, can you still report that in your leased install base? Just trying to understand how the contracts work on that.And then from an accounting standpoint, how that might appear in the financials.

[Kimo Akiona:]

Yes. We were actually talking about how we would help bring clarity to that. I mean, the installed base is our metric. So we can call it, report it, how we want to. I'll say our goal is to be consistent, right? So the installed base, if the machine is installed and with the customer, we might leave it in our installed base number, but maybe we have another metric as well that would be something that like maybe we adjust the performance metrics so that RPD is truly apples-to-apples for machines that are turned on.So I think we're going to do our best to have an apples-to-apples number, but you're not going to see a dramatic change in the installed base just because the machine is turned off. I hope that makes sense. We don't...

[David Lopez:]

Yes. And otherwise, like yes. And otherwise, it's 80-20 is a great mechanism for this, right? In the period of time that they want to shut down every other machine, it's just very straightforward. Your machines that are shutdown it's 20% of 0, right? And for the machines that are turned on, it's 20% of the win per day, right? So I think that the good news is that those 80-20 jurisdictions, it's very efficient. In the flat fee jurisdictions, we'll manage that and partner with our customers appropriately. And I think that it's been a mixed bag so far. There are strategies where you go out, you leave every machine on, and they let the gaming player make their choice about what they're going to play and social distance as appropriate.Other folks have turned off every other machine in one casino, in particular, but that casino actually turned off every other machine because they had removed every other chair or stool as you might imagine, Chad. And so folks that wanted to play a game just stood there and play next to a stranger. And the casino decided that they want to enforce some social distancing and force the issue, so they turned off every other machine. So that again speaks to the spirit of the gaming player, right? I want to play that machine, there's no stool there? I'm going to play anyways. So that casino decided to force the issue. Other casinos have said, hey, whatever the max capacity is on the floor, we're reducing it by a certain percentage, and we're only allowing a percent of the people in the building at any particular time.But that said, the good news so far is that the demand has been there and that lever or that governor that they're putting on the business helps keep people safe and enforce effectively, in some way, shape or form, social distancing.

[Chad Beynon:]

Thank you very much guys. Appreciate it.

[Operator:]

Ladies and gentlemen, at this time, I'd like to turn the conference call back over to management for any closing remarks.

[David Lopez:]

Well, we appreciate everybody calling in, and I hope everyone stays safe and healthy, and we will talk to you after the during the next quarterly call. Appreciate it.

[Operator:]

Ladies and gentlemen, that does conclude today's conference call. We do thank you for joining. You may now disconnect your lines.