AGS’ fourth annual GameON Customer Summit held at WinStar World Casino and Resort last month offered attendees “a look under the hood” of the company, and there was plenty to see.
At the heart of things is the company’s unique culture, which is personified by President and CEO David Lopez, who sets a demanding yet supportive tone for a group of professionals whose cohesion is evident to anyone who has attended these meetings. Underlying the culture is a strong commitment to R&D and to processes that support the company’s slogan, “obsessed with the game.”
“When you think about AGS, the two words that jump out are passion and grit,” said Lopez. “We hope that comes out to our customers every day. Core values include, ‘act and think like a CEO,’ ‘own everything that you are a part of,’ ‘make your mom proud,’ and ‘say what you mean, mean what you say, but don’t say it mean.’ Every now and then we’ll say it mean to one another, but I think in the end you’ll see that our staff is a very tight-knit group, like family. So even when you say it mean, just like with a family, you apologize, lock arms and get back to business together.”
Lopez has seen culture as a key differentiator from the get-go. When AGS started out four years ago it didn’t have much to offer compared with the largest slot manufacturers. “They can offer things that make it difficult for us,” he said. “But we have something else, and that’s our culture. We offered a home, a place where you could feel comfortable, have a voice and be heard. Customers can contact us at any level; just send a text message. If something is working right for you we want you to speak up and let us know because we want to be the best, we want to be the easiest company you deal with.” The point was underscored with a slide displaying all top management cell phone numbers.
This approach is paying off in terms of results. AGS grew 35 percent year-on-tear in FY 2018 to $285.3 million in revenue. AEBITDA was up 27 percent and AEBITDA margins were 48 percent. New markets entered in 2018 included Canada, Massachusetts, Ohio, Pennsylvania, The Philippines and the real-money interactive gaming space where the company generated revenues of $6.6 million. There are now five game development studios in Austin, Atlanta, Australia (2) and one opening up Reno. In FY2018, AGS directed 11.1 percent of revenue to innovational R&D.
“This is an area where you will not see us chintz,” said Lopez. “It’s not good for the company or our customers. They are out there leasing and buying our cabinets. We’re going to put our money right back into the company; year-over-year we’ve grown our R&D staff about 21 percent.”
LOOKING UNDER THE HOOD
AGS gave attendees at this year’s conference a much deeper look into its game development disciplines and how it organizes itself around the principle of “obsessed with the game.”
“One of the things we focus on first is making sure we have the right people in the right roles,” said Sigmund Lee, chief technology officer. “We’re relentless with our desire to make sure the people are right to begin with. Once that’s there, you have to be very clear what it is you want to do and why you’re doing it. So you spend a lot of time making sure people understand that and working with your team to refine your approach. Not every approach works the way you’d like it to, so sometimes you have to work together to figure out how to adapt to get the results that you want.”
Lee added that, for any company, it’s always a challenge to get everybody rolling in the right direction in order to assure quality across functions. Meredith McEvoy, director of engineering operations, and her team is responsible for being a “bonding agent” between all the different parts.
“We make it very clear in the simplest way what we’re here for; we’re here to make great games,” said Lee. “Everybody understands what the mission is and falls in line to support it.”
If product revocations are any guide, the approach is working. AGS has the best record on revocations from independent testing labs—three in the last five years—whereas the next best competitor had 25 in the same timeframe.
“Our approach to quality starts at the beginning and goes all the way through until the product is in the field,” said McEvoy. “We put games on 24/7 testing and we can test up to 25,000 games in one day. Each game is varied based on what the players might do. You have games that are being played slow, games where players hit the buttons as fast as they can; we simulate all of that to make sure the game is operating as it should be. We have another system called Medusa that, visually, with a video camera, tracks it to see if there are any issues. If there’s an issue, Medusa automatically sends an e-mail to the tester on that game and it logs the issue so somebody can address the issue and understand what happened.”
On the development side, Nate McGregor, studio director, said being obsessed with the game is not just playing the game; a lot of people like to play games. It’s about understanding the “hows,” and more important, the “whys;” really looking under the hood, going into the psychology of what players like and what makes a game great versus just good.
“AGS games are perfect for gamblers because all of our game designers are avid gamblers,” said McGregor. “They’re well-versed in the balancing act that takes place to make more volatile games. They all understand the relationship between return-to-player and the volatility of various jackpot bonuses and the base game.”
The reason AGS targets “true gamblers” is that 80 percent of the coin-in is driven by 20 percent of the gamblers. The company specifically focuses on games that have done well with avid gamblers in the past, tries to put some new life in them and match the presentation to player types. Avid gamblers betting max coin-in “don’t need a lot of fanfare,” according to McGregor.
“We put the presentation where it belongs and make sure we give them a math ride that you can get behind as a gambler,” said McGregor, “The math definitely plays a huge role in how you feel about the ride. If I have a game that’s kind of dribbly with a lot of small pays that might make you feel like you’re winning, but if you’re a more affluent gambler you might feel like that’s wasted RTP—you’d rather wait a while and get bigger wins. Everything that goes into a slot machine is important, whether it’s art, sound, sequencing of events; but math is paramount. We focus on a lot of metrics that I don’t think are commonly looked at. We focus on average money spent to win a jackpot; sustainability of the base game; RTP splits between the base game and bonus. We look at billions and billions of simulations of session analysis. We’ll look at things like how often do they reach a cashout goal before they go to zero. We try to maximize key performance indicators that we’ve seen from the field.”
MAPPING THE FUTURE
In a subsequent session, Andrew Burke, senior vice president of slot products, brought the conversation back to R&D. “We invest significantly in our R&D base, and we do it so much that we run very lean in every other department… 30 percent of our employees are focused in some way on R&D,” said Burke. By way of example, he mentioned that when AGS went to Sydney to open a studio, it didn’t go with the idea of opening two. “We went there because there’s a great opportunity to find talented folks who know how to build fantastic games. And then we found more talent, so we moved quickly and added a studio. As we continue to identify and attract talent, we’re going to continue to add studios and build processes around them that result in great games. Without studios and investment in R&D, we can’t build the great products that we have.”
As it evolves, AGS is conscious of where it stands in the slot business and how others have travelled a similar route. As such, it is determined to clear some of the stumbling blocks that have been classic impediments to growth.
“As we study the history of this business, we see that a lot of small companies go on a run and hit a wall, and the number one factor why they hit that wall is they were focused on one product,” said Burke. “They didn’t have that future-looking road map that said what we are doing beyond this one hot product. We’re very cognizant of that; it’s why we invest so much time and energy into our R&D.”
Every year since 2016, AGS has rolled out a new product: In 2016, Icon, 4,000 of which are installed today. In 2017, Orion Portrait, which now has over 6,000 units in the field and counting. Last year, AGS, rolled out the Orion Slant product, and there are now over 2,000 in the field with a very healthy content pipeline behind it. This year, Orion Upright. Each product is something AGS works on for at least 18 to 24 months prior to release.
“We’re already looking down the road—we know what the product is going to be next year and 18 months from now,” said Burke. “We’re developing a portfolio strategy; we’re not hanging our hat on any one product. We’re very mindful as we do that to support the products we have. Every one of our product lines has a robust road map. We have historically not shared road maps with customers, but it is going to be something going forward that you will get from us. We will be able to look out 12 months and show customers the best we can. Things are always subject to change, but you’ll know where we’re going based on everything we know today.”
AGS has also developed a wealth of titles for some of its best performing products. “As I talk to some of our different customers, you hear about competitive products that are doing very well but they have maybe 10 titles available,” said Burke. “Our Orion Portrait today has 25 titles available, and a significant number of those are performing well above 1.3-1.4X house average. As you get to March of next year, we’re going to have 46 titles available on that platform. Our Slant product now has 33 titles available. We made a decision that all games that are dual-screen will be available across all of our dual-screen platforms. So things that work on Slant will work on the Orion Upright and Icon.
“That allows us to do a couple of things. You’ve already invested in our product, you know that you have an ongoing development path for it, and if you haven’t invested in it you know that you can get some of our best content and have that sense of success right out the gate. We have a number of titles on our Icon platform—Golden Winds, Jade Winds, Gold Dragon, Red Dragon—that have done really well for us and they’re now going to be on some of our brand new platforms including the Slant and the Upright.”