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Multimedia Games’ First Quarter Revenue Increases 27% To $44.3 Million; EBITDA Rises 31% To $21.4 Million

Stocks in this article: MGAM

These forward-looking statements reflect the current views, models, and assumptions of Multimedia Games, and are subject to various risks and uncertainties that cannot be predicted or qualified and could cause actual results in Multimedia Games' performance to differ materially from those expressed or implied by such forward looking statements. These risks and uncertainties include, but are not limited to, the ability of Multimedia Games to maintain strategic alliances; increase its unit placements, installations or installed-base; grow revenue; garner new market share; secure new licenses in new jurisdictions; successfully develop or place proprietary product; comply with regulations; or have its games approved by relevant jurisdictions. Please refer to the Company’s most recent Form 10-K and subsequent filings with the Securities and Exchange Commission for a further discussion of risks and uncertainties. All forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. Readers are cautioned that all forward-looking statements speak only to the facts and circumstances present as of the date of this press release. Multimedia Games expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



As of December 31, 2012 and September 30, 2012

(In thousands, except share and per-share amounts)

  December 31,   September 30,
ASSETS 2012 2012
Cash and cash equivalents $ 73,295 $ 73,755

Accounts receivable, net of allowance for doubtful accounts of $303 and $266, respectively

23,895 17,503
Inventory 8,105 7,083
Current portion of notes receivable, net 5,904 8,024
Deferred tax asset 8,248 8,248
Prepaid expenses and other   5,032     6,837  
Total current assets 124,479 121,450
Property and equipment and leased gaming equipment, net 63,912 57,924
Intangible assets, net 36,738 37,664
Long-term portion of notes receivable, net 5,217 733
Deferred tax asset, less current portion 2,235 2,418 —
Value added tax receivable, net of allowance of $714 and $722, respectively 2,728 3,511
Other assets   2,140     2,275  
Total assets $ 237,449   $ 225,975  


Current portion of long-term debt $ 3,700 $ 3,700
Accounts payable and accrued liabilities 33,488 30,192
Federal and state income tax payable 849
Deferred revenue   268     483  
Total current liabilities 38,305 34,375
Long-term debt, less current portion 28,675 29,600
Long term deferred tax liability 6,320 6,320
Other long-term liabilities   555     660  
Total liabilities   73,855     70,955  
Commitments and contingencies
Stockholders’ equity:
Preferred stock:

Series A, $0.01 par value, 1,800,000 shares authorized, no shares issued and outstanding

Series B, $0.01 par value, 200,000 shares authorized, no shares issued and outstanding

Common stock, $0.01 par value, 75,000,000 shares authorized, 36,595,010 and 36,296,027 shares issued, and 28,337,541 and 28,183,549 shares outstanding, respectively

366 363
Additional paid-in capital 110,905 107,751
Treasury stock, 8,257,469 and 8,112,478, respectively, common shares at cost (64,073 ) (62,048 )
Retained earnings 116,396 109,283
Accumulated other comprehensive loss, net       (329 )
Total stockholders’ equity   163,594     155,020  
Total liabilities and stockholders’ equity $ 237,449   $ 225,975  

For the Three Months Ended December 31, 2012 and 2011

(In thousands, except per-share amounts)


  Three Months Ended

December 31,

2012   2011
Gaming operations $ 29,974 $ 24,901
Gaming equipment and system sales 14,004 9,593
Other   324     301  
Total revenues   44,302     34,795  

Cost of gaming operations revenue (1)

3,186 2,926
Cost of equipment and system sales 6,185 4,158
Selling, general and administrative expenses 11,343 10,748
Research and development 4,181 3,478
Amortization and depreciation   7,964     9,690  
Total operating costs and expenses   32,859     31,000  
Operating income 11,443 3,795
Interest income 170 453
Interest expense (296 ) (372 )
Other income   10     919  
Income before income taxes 11,327 4,795
Income tax benefit (expense)   (4,214 )   987  
Net income $ 7,113   $ 5,782  
Basic earnings per common share $ 0.25   $ 0.21  
Diluted earnings per common share $ 0.24   $ 0.21  
Shares used in earnings per common share:
Basic 28,329,996 27,265,844
Diluted 30,016,924 28,108,576

Cost of gaming operations revenue excludes depreciation and amortization of gaming equipment, content license rights and other depreciable assets, which are included separately in the amortization and depreciation line item.



For the Three Months Ended December 31, 2012 and 2011

2012 2011
Net income $ 7,113 $ 5,782
Adjustments to reconcile net income to cash provided by operating activities:
Amortization and depreciation 7,964 9,690
Accretion of contract rights 1,953 1,896
Share-based compensation 860 554
Other non-cash items 1,175 447
Interest income from imputed interest (146 ) (418 )
Deferred income taxes 183
Changes in operating assets and liabilities   (4,534 )   (4,028 )

Acquisitions of property and equipment and leased gaming equipment

(12,654 ) (8,012 )
Acquisition of intangible assets (2,066 ) (1,404 )
Advances under development and placement fee agreements (3,262 )
Repayments under development agreements   3,607     2,361  

Proceeds from exercise of stock options, warrants and related tax benefit

2,297 3,098
Principal payments of long-term debt (925 ) (925 )
Purchase of treasury stock   (2,025 )   (1,884 )


  (653 )   289  
Net increase (decrease) in cash and cash equivalents (460 ) 7,035
Cash and cash equivalents, beginning of period   73,755     46,710  
Cash and cash equivalents, end of period $ 73,295   $ 53,745  

Reconciliation of U.S. GAAP to Non-GAAP measures:

This press release and accompanying schedules provide certain information regarding (i) EBITDA, (ii) net cash position and (iii) pro-forma diluted earnings per share, all of which may be considered non-GAAP financial measures under the rules of the Securities and Exchange Commission. The non-GAAP financial measures included in the press release are reconciled to the corresponding GAAP financial measures below, or above in this release for pro-forma diluted earnings per share, as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures. We define (i) EBITDA as net income before net interest expense, income taxes, depreciation, and amortization and accretion of contract rights, (ii) net cash position as cash and cash equivalents less long-term debt, and (iii) pro-forma diluted earnings per share reflects the following adjustments: a tax expense rate of 37.2%; the elimination of the one-time benefit related to the sale of used equipment to the original manufacturer; and, the Company’s estimated impact of the change in depreciable lives of its gaming operations equipment. EBITDA, net cash position and pro-forma diluted earnings per share are not recognized financial measures under GAAP, but we believe that each is useful in measuring our operating performance. We believe that the use of the non-GAAP financial measure EBITDA enhances an overall understanding of the Company’s past financial performance, and provides useful information to the investor by comparing our performance across reporting periods on a consistent basis and the use of EBITDA by other companies in the gaming equipment sector as a measure of performance. We believe that the non-GAAP measures of net cash position and pro-forma diluted earnings per share provide useful information to investors as each enhances the overall understanding of our operating performance.

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