On A Roll: AGS Plans for More Growth in the New Year

AGS executives show off Double Roulette, one of AGS’ recent table game acquisitions. Pictured from left are Andrew Burke, vice president of slot products; Ken Bossingham, chief operating officer; John Hemberger, vice president of table game products; and David Lopez, president and chief executive officer.
AGS executives show off Double Roulette, one of AGS’ recent table game acquisitions. Pictured from left are Andrew Burke, vice president of slot products; Ken Bossingham, chief operating officer; John Hemberger, vice president of table game products; and David Lopez, president and chief executive officer.
It’s been an eventful year at American Gaming Systems. Already on a trajectory of growth, the company was acquired by affiliates of Apollo Global Management in December 2013, and in February welcomed a new president and CEO.

Since then, the company has been on a roll, growing its portfolio of games and expanding into the table games arena.

“It’s been an exciting year for us,” said President and CEO David Lopez, who worked for SHFL entertainment before joining American Gaming Systems (AGS).

“The goal from the beginning, when I was interviewed by Apollo Global Management, was just create a more diverse gaming supply platform here.”

Before Apollo took over, the company had been transitioning from a distributor to a development company, with most of the development coming out of its Toronto-area game studio. “They wanted the company to be a channel for providing content and machines to platforms in Class II and Class III, but they saw an opportunity to become a more diverse gaming supplier,” Lopez said. “So the thing we focused on first was people. We wanted to focus on getting the right people. We don’t want to run any business where we don’t have the expertise in-house to run them.”

Running the Table
Nowhere is that point better illustrated than in AGS’ move into the live table games segment, for which the company recently acquired Casino War Blackjack, Inc. and its game portfolio.

“A couple of people in particular became available just because of all the consolidation that was happening,” Lopez said. John Hemberger, a former SHFL entertainment executive who, after SHFL was acquired by Bally Technologies, decided he wanted to try something new. “One of the things I was looking for in people was experience and passion, and the one thing about John was that he was passionate enough that he was certain he wanted a new challenge.”

AGS had to wait until his noncompete period was over, but bringing him aboard was well worth the wait. “We’re stoked to have someone with his expertise and passion, not only for table games but for gaming in general,” Lopez said of Hemberger, who ran the proprietary table games business for SHFL entertainment.

Hemberger played an important role in SHFL’s proprietary games growth and has extensive contacts and relationships with table games customers.

AGS also brought on board Ofir Ventura, a table games developer who had consulted with SHFL and had been an advisor to Casino War Blackjack. Ventura heads up table game content development.

Having their expertise will help AGS execute and maximize the potential of its table games strategy. Lopez noted an added benefit: “When you have talent on board and you have good people, they just attract more good people. We’ve been very fortunate.”

Lopez said AGS is on course with its table games strategy.

“We’ve acquired a number of products now and we’ve also got a couple of products that we’re developing internally so we’re pleased that sometime in 2015 we’ll begin to show up as a substantial supplier in the space,” he said. “The good news right now is that when we go in, we’re no strangers to the people that are buying the products.”

For his part, Hemberger, vice president of table game products, is relishing the opportunity to build a table games division from the ground up.

“AGS doesn’t feel like a job, and it’s a privilege to say that, because we come here, we work hard and we love what we do; we make sure that translates to the way that we service our customers and the way we bring products to market,” Hemberger said.

Working with a blank canvas meant it was important to have someone with strong expertise internally to develop content, and Ventura was the perfect choice, he said. “His ability to not only generate ideas on his own but also to take ideas that could be brought from the outside and tweak them a bit is a very unique talent,” Hemberger said. “Ofir has such a great personality, and he’s so easy to work with, which translates into relationships with outside vendors, which is a huge part of it.”

Hemberger noted that when he started with Shuffle Master in 2007, around 85 percent to 90 percent of the games were created internally, but by the time he left in February of this year, that percentage had dropped to 50 percent. “It was a huge shift and that’s where Ofir’s relationship with the external gaming vendors comes in really handy, because they’re such a good source of information, content and ideas, but they want to be treated properly. They want to be compensated for their innovation, so we try to be very transparent with them and approach that relationship as important as it is and it’s competitive,” he said.

“We’re looking for unique ideas, unique products and when we tie in what Ofir’s doing with that, he can put a special twist on things as well so it’s a really good partnership,” Hemberger explained. “We feel like we’ve been very deliberate, very selective with the things we want to partner on, and it’s important because we then translate that into getting placements out in the market and introduce ourselves out in the table games space as a new brand. If we’re not leading with strong products, we’re going to make that road so much more difficult for ourselves.”

That’s why War Blackjack made a lot of sense. “It’s a game that’s simple, and it’s even a bit nostalgic for players because everyone’s played War as a kid with their grandparents, and the majority of the people know blackjack and so when you’re bridging those games together and yet still keeping the core game of blackjack, it’s a really strong recipe,” Hemberger said. “And that’s why it’s translated so well to players and dealers can pick it up and the game’s been a very natural way for us to move into tables and lead with a strong product and make sure we’re doing everything properly with the customers.”

The game is doing well, with 65 tables out in the market, and AGS has high hopes for it as the sales force ramps up in 2015.

The company also has a distributorship with InBet Gaming that will help move its products in jurisdictions where AGS has yet to be licensed. AGS also acquired three promising games from InBet, CrissCross Poker, the InBet blackjack side bet and Hot Roller Craps.

The message AGS is sending to table games operators is the company is investing in the business, plans to be in it for the long term and has set a goal to become the preferred vendor in the space, Hemberger said. “Right now there’s a real appetite from the customer’s side to have another source. It gives them buying power. It gives them options and those things matter.”

One of Hemberger’s priorities is to make sure table games operators know that “if there’s a product that’s not out there today, they can come to AGS and get that product in the works for the future.”

The importance of table games operators’ input can’t be overstated. He cited as an example the proprietary Double Ball Roulette variation that allows for two balls to be played at the same time on a game with the player controlling the shooting of the balls with a remote controller that AGS has branded The Tornado™. Casino operators shared that they would like to see the Tornado feature on a single ball roulette game as well. “We look at that as a new opportunity for casino operators to refresh roulette and make it more interactive.”

Among the other products Hemberger is excited about includes a new blackjack side bet that gives players the opportunity to win a custom vehicle created by Count’s Kustoms™, the business owned by Danny Koker, star of The History Channel’s popular Counting Cars reality television show.

“The product really has the opportunity to reshape blackjack. Imagine being able to make a side bet on a blackjack game and win the motorcycle that’s sitting right next to the table and, by the way, the motorcycle is a one-of-a-kind because it’s tied to the Count’s Kustoms brand,” he said. “Blackjack is such a great game, and it’s such a pure game. It’s always the holy grail—how do you crack that, how do you add to it, how do you energize blackjack, if you will, and I’m confident that this could be the way to do it.”

The game is not out yet, but Hemberger said it should debut around the new year.

Slots are Big
In addition to launching its table games business, AGS also made a major move in the slot side, acquiring Colossal Gaming, a private Class II and III game development studio that already had a close working relationship with AGS on its slot products.

One of AGS’s most popular products is Colossal Diamonds, a larger-than-life game designed to make a statement on the casino floor.
One of AGS’s most popular products is Colossal Diamonds, a larger-than-life game designed to make a statement on the casino floor.
Colossal Gaming, founded in 2003 by industry veterans Steve Weiss, who was the company’s CEO; Alison Stroh; and Lowell Hansen, has been a pioneer in large-format slot gaming, and has found much success with products such as its Colossal Diamonds™ large-format game.

“This is an ideal partnership,” Weiss said in May when the deal was announced. “Each of our companies is better off when combined as one. The aggressive growth cycle of AGS is very attractive to our developers, and I, along with the team, relish the opportunity to introduce our games to a larger audience.”

For AGS, the Colossal games help expand the company’s product portfolio and will help as the company continues its push into Class III jurisdictions.

“It’s a great company that we acquired and it’s a great name—that’s how big it is to our company,” Lopez said. Not only has the acquisition given the company great products such as Colossal Diamonds, but “we now have a very solid platform to launch from in the slot business.”

In 2015, the company will launch a new version of the software platform. “We’re very confident that it’s going to be best in class. The key to us is to have the technology you need to deliver the games that players want, but also have the stability of a platform that can be trusted by our casino partners,” Lopez said, noting that Weiss and other Colossal top executives remain with the company.

Andrew Burke, vice president of slot products, has seen the company evolve since he first became acquainted with the company after he joined Alpine Investors in 2006, a year after the private firm purchased AGS. The company has always had a strong footprint in the Class II market in Oklahoma, but had no internal content development until 2008 when it acquired its Toronto game studio. Two years ago, the company formed a distribution agreement with Colossal Gaming. That turned out to be a good fit that led to AGS’ purchase of the company in May.

The acquisition brings “not only great technology and expertise, but just the understanding of the regulations in every market,” Burke said.

Having Weiss on board is a major plus for the company, he added. “Steve is one of the best technologists in this space.” In addition, the acquisition allowed AGS to pare its Toronto studio down to the appropriate size and to add more people in Las Vegas, where AGS and Colossal are based. Because of consolidation in the slot sector, he noted, “there are a lot of really talented people out there.”

For AGS, it’s important to steer away from being a me-too company, to present something outside the box, Burke said.

“If operators want a 30-line penny game, there are other manufacturers that are much better suited to deliver that to them than we are. [But] if we can deliver them something additive that nobody else can deliver them today, a true new category or niche, then we can be a value-add,” he said. “And I think we’ve done that with the Colossal Diamonds game, which is our big 8-foot-by-8-foot game and Ripley’s Believe it or Not!® and Are You Smarter than a Fifth Grader?®, which have trivia questions in the games.”

In addition to the Colossal Diamonds games and the It Pays to Know trivia-based games, other new products include Bang for Your Buck and Unireel games.

“Bang for Your Buck is our attempt at bringing a carnival-type attraction to the slot floor,” Burke said. “It’s a purpose-developed box that looks like a crate of dynamite. It has a plunger so players can interact and actually press the plunger and it has a giant mechanical spinning reel up top.”

The game, which is not out yet, holds promise as a unique alternative to mainstream slots, Burke said. “We’re very excited about that. I think that game could be very meaningful if it works. You’ve got to take a shot. I’d rather fail on something like that than fail on trying to be the next somebody else’s game.”

The Unireel games, which offer a unique take on the traditional slot reel, are developed by Crazy Tooth, a third-party game development studio. “They’re a really cool group of guys based in Reno and one of the things they say is ‘We think about evolution not revolution on our games,’ which I think is really smart, because they take things like a spinning reel and just orient it differently,” Burke said. “The Unireel is just one big, long line and it just snakes around. It’s really, really cool. It’s a cool choice for an operator, and it’s something different that they don’t have on their floor.”

Colossal Diamonds already is helping AGS differentiate itself from the pack. Its 8-by-8 footprint stands out on a floor and attracts play way above house average.

“When we start a new casino relationship, which is what so many of our deals are these days, we have a product that we 100 percent know will be successful on their floor,” Burke said. “And to be able to start the relationship off that way makes all the difference in the world.”

AGS Chief Operating Officer Ken Bossingham sees blue sky ahead for the company.

“With everything else going on in the space, I like our chances,” Bossingham said, referring to the burst of consolidation this year among several major slot manufacturers.

“We’re transforming this small company that grew up in the Class II world into a world-class company delivering world-class products across all gaming channels.”

To do that, he said, “I think you have to set the standards very high and then just spend the rest of the time chasing them.”

On the slot side, the company has been making inroads by evolving and expanding its product line and the composition of what it’s offering, he said. “We’ve really looked to identify niche opportunities that maybe other suppliers aren’t focused on.” The first product in its trivia-based product line called It Pays to Know™ is based on Ripley’s Believe it or Not!.

“We’ve done very well in putting that product out. Now we’re following that success with Are You Smarter Than a Fifth Grader?,” he said. “There are not that many products being offered by the manufacturers that have a skill-based component to them.”­

AGS continues marching forward, moving into new jurisdictions. “We look for new opportunities in new markets, and that’s going to provide us a natural opportunity to expand our reach and be more successful,” Bossingham said. “The composition of products beyond slots with our foray into table games really just changes the company’s standing in the space.”

AGS is focused on North American growth for now, Lopez said. “There’s a lot of road ahead of us for opportunities.”

The company is approved in most major jurisdictions, including most recently Nevada. The company is seeking product approvals over the next three or four months to help drive the company forward in the Silver State. “We don’t have a lot of products approved yet. I think it’s really going to show itself in the first quarter of 2015.”

Lopez said he’s been pleasantly surprised when he’s been approached by customers in states where AGS has yet to receive licenses. “They’ll say, ‘When you get your approval call me personally, we want to start getting your product.’ They know what’s working for us, and they know that we have other product that we’re trying out that’s new and that might be unproven, but they’ll give it the opportunity to prove itself.”

Lopez noted that a recent Eilers-Fantini Slot Survey indicated AGS was among the top 5 companies for net installations of games. “That wasn’t happening a few years ago, so I think that we’re just trying to be consistent and persistent in our strategy.”

Consolidation Effects
Asked how consolidation has affected the gaming space in 2014, Lopez said, “It changed the gaming space, and it’s going to change rather dramatically all over again.”

Consolidation has played a role in the way casino operators buy games for their floors. “There’s a lot of churn on the floor,” he said. Consolidation is causing companies to spread the number of units on the floor among more and smaller suppliers. Seeing what is occurring “assures me that everything that we believe in is true—that it’s become a more diverse supplier space, that operators are willing to try new companies and new things and that they’re giving everyone a fair shake.”

Smaller suppliers also are more focused on growing their share, Lopez added. “They’re not satisfied with where they are in the marketplace right now. They want more.”

Secondarily, he said, consolidation has created a shake up in the industry, and it will likely take a while for the companies that are consolidating to find their balance after an acquisition. “It presents a period of time and an opportunity for us and other companies like us, the smaller suppliers in the space, to step up and into some vacancies that are created by consolidation.”

Asked about the importance of reaching out to the millennial generation, Lopez said he understands the concern among some suppliers and operators about reaching that demographic, and it’s on the company’s radar.

“In our mind we believe that diversifying into table games also helps us diversify into this conversation about millennials. [As an industry,] we don’t really know where they’re eventually going to land,” he said. “My belief is they’re going to land in front of a table game with a live dealer or they’re going to land in front of a multiplayer product, whatever that may be, a multiplayer slot or multiplayer table game.”

While noting the issue “probably isn’t our number one focus,” Lopez said it’s something the industry must explore. “You’re going to have to take that Michael Jordan approach to scoring. You’re going to have to put the ball up a lot of times if you want to put points on the board.”

Future Acquisitions
Regarding the potential for AGS to acquire another company or product, Lopez cited something he has learned from the Apollo group. “The one thing about the Apollo philosophy that we’ve bought into is that we’ll look at anything; we don’t want to be the guys that are too smart to look at something,” he said. “We are sort of agnostic in terms of products. We’ll always be looking at [acquisition]. That is part of growth. It’s no different than jurisdictional licenses product approvals, hiring employees—they’re all widening the bandwidth of the company’s distribution and part of that, just tagging along like a caboose is M&A.”

The AGS mantra is “G-R-O-W,” Lopez said. “When we look at our budget for 2015, we’re focused on hiring, we’re focused on growing, we’re focused on investing in new jurisdictions for our products and we’re investing in new product lines to fill out the portfolio. I think our growth is potentially attractive to employees in this industry that are observing the challenge of some companies cutting tens of millions dollars.”

When Lopez considers the future of the company, he seems pretty confident in the team in place. “It comes down to three things,” he said. “If we have the knowledge, energy and passion to get things done, we’ll be successful.”

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