Elixir Gaming Technologies, Inc. (NYSE Amex:EGT) (“Elixir Gaming” or “the Company”), a leading provider of electronic gaming machines on a participation basis to the Pan-Asian gaming industry, today reported operating results for the first quarter ended March 31, 2010 and reviewed recent corporate progress.

Highlights:
  • Consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) was $1.3 million for the first quarter of 2010, up 64% sequentially from the prior quarter. This compared to negative adjusted EBITDA of $2.6 million for the same period last year.
  • Total net revenue from gaming machines on participation for the first quarter of 2010 was a record $2.8 million, an increase of 15% on a quarterly sequential basis, reflecting solid performance and the increasing gaming machine installed base at the Company’s operations at NagaWorld.
  • Average consolidated win per unit per day (WUD) for the first quarter of 2010 was $107, an increase of 2% on a quarterly sequential basis on an increasing gaming machine installed base.
  • As of May 1, 2010, total installed gaming machine seats in operation were 1,487 in seven venues, comprised of six venues in the Philippines with a total of 897 seats and one venue in Cambodia with a total of 590 seats.
  • Cash SG&A expense was $1.4 million for the first quarter of 2010, which was below the guidance range of $1.5 to $1.8 million and down 45% from the same period last year.
  • Cash was $5.1 million as of March 31, 2010, after a payment of $2.7 million to NagaWorld in January 2010 under the previously-announced additional machine placement and contract consolidation arrangement and the recovery of $3.5 million in commitment fees from NagaWorld.
  • In April, the Company entered into a machine participation agreement with Grand Golden Co. Ltd. to place approximately 60 gaming machine seats in November 2010 at its new Grand Golden casino in Kampong Cham Province, Cambodia near the Vietnam border.

Clarence Chung, Chairman and Chief Executive Officer of Elixir Gaming, commented, “I am pleased to report that Elixir Gaming posted continued solid gains in sequential gaming machine participation revenue and adjusted EBITDA for the first quarter of 2010. Our operations at NagaWorld were a strong contributor to financial performance for the quarter. Looking forward, we continue to aggressively focus on maximizing gaming participation revenue and average net win results in both our markets and pursue selected expansion opportunities that leverage our operating expertise and relationships. With positive momentum in our core gaming participation operations, the successful refocusing of our operations and execution of our cost reduction initiatives, improved financial flexibility, and attractive expansion opportunities, Elixir Gaming is positioned to grow earnings and shareholder value in the future.”

Continued Improvement in Gaming Participation Revenue

Total net revenue from gaming machines on participation for the first quarter of 2010 was a record $2.8 million, an increase of 15% on a quarterly sequential basis, reflecting a higher installed gaming machine base and slightly improved consolidated average WUD.

During the first quarter of 2010, Elixir Gaming increased its total gaming machine seats in operation by 7% to 1,384 seats in a total of seven venues in operation, comprised of six venues in the Philippines with a total of 833 seats and one venue in Cambodia with a total of 551 seats as of March 31, 2010.

In mid-February 2010, the Company acted quickly on its expansion contract with NagaWorld dated December 30, 2009 and placed 111 seats of the contracted 200 additional gaming machine seats in this venue. In April 2010, the Company placed an additional 39 seats and the remaining gaming machine placements under this contract are on target for installation during the second quarter of 2010. As a result, Elixir Gaming anticipates total machine placements of 640 seats as of June 30, 2010. In the Philippines, as part of the Company’s initiative to reallocate gaming assets in this market, Elixir Gaming closed one under-performing venue in January 2010 and redeployed certain gaming assets to higher-performing venues. The Company incurred a non-cash charge of $116,000 for the write-down of infrastructure costs relating to this under-performing venue. Elixir Gaming continues to refine and redeploy its gaming assets in the Philippines and, in April 2010, increased its installed gaming machine base 8% to 897 seats as of May 1. 2010.

Consolidated average WUD for the first quarter of 2010 was $107, up 2% from the fourth quarter of 2009 and up 73% from the same period last year. The increase was driven by a strong and continuously rising percentage contribution from the Company’s machine placements at NagaWorld, the Company’s sole venue in operation in Cambodia.

Average WUD for the first quarter of 2010 for Cambodia was $194, a modest decline of 1% from $196 in the fourth quarter of 2009 given the addition of 111 units or 20% of the installed base at NagaWorld during the first quarter of 2010. In April 2010, average WUD for Cambodia declined to $183 due to the increasing gaming machine installed base and the typical ramp up period of new placements.

Average WUD for the first quarter of 2010 for the Philippines was $56, down 2% from $57 in the fourth quarter of 2009 and in the same period last year. In April 2010, average WUD in the Philippines improved to $59. The fluctuations in average WUD in this market are due to the Company’s strategic plans to optimize long-term performance, which include the reallocation gaming assets within the Philippines to focus on higher-performing venues.

Continued Success in Cost Reduction Initiatives

While executing measures to improve average WUD and expand the Company’s installed gaming machine base, Elixir Gaming continued to focus on strict cost containment and benefit from the successful implementation of its aggressive cost reduction initiatives over the past year. Selling, general and administrative (SG&A) cash expense for the first quarter of 2010 was $1.4 million, which was below the Company’s guidance range of $1.5 to $1.8 million for the quarter and down 45% from $2.6 million in the same period last year.

Q1 2010 Financial Review

Historical revenues and expenses from the Company’s portfolio of automated card verification machines and electronic card shuffling systems, which were sold to Shuffle Master, Inc. in April 2009, have been reclassified as discontinued operations.

Elixir Gaming’s first quarter of 2010 consolidated revenue was $4.4 million compared to $4.5 million in the fourth quarter of 2009 and $1.7 million for the first quarter of 2009. Revenue from gaming machines on participation was $2.8 million in the first quarter of 2010 compared to revenue of $2.5 million in the fourth quarter of 2009 and $0.9 million in the first quarter of 2009. The slight quarterly sequential decline in consolidated revenue was driven by a decline in the Company’s gaming chip business largely offset by strong performance in its gaming machine participation operations.

Based on the Company’s solid revenue performance and the successful execution of its cost reduction initiatives, Elixir Gaming posted positive adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) for the first quarter of 2010, marking the fourth consecutive quarter of achieving this important milestone since the Company enacted its new business model in September 2007. First quarter of 2010 adjusted EBITDA was $1.3 million compared to $0.8 million for the fourth quarter of 2009 and negative adjusted EBITDA of $2.6 million for the first quarter of 2009.

Elixir Gaming reported a net loss of $1.7 million for the first quarter of 2010, or $0.01 per share, on a weighted average share count of approximately 115.0 million shares compared to a net loss for the first quarter of 2009 of $6.2 million, or $0.05 per share, on a weighted average share count of approximately 115.0 million shares. This compared to a fourth quarter of 2009 net loss of $16.3 million, or $0.14 per share, on a weighted average share count of approximately 115.0 million shares. The fourth quarter of 2009 net loss included a non-cash impairment charge to gaming assets of $13.7 million. Excluding the aforesaid non-cash impairment charge, the Company incurred a net loss for the fourth quarter of 2009 of $2.6 million, or $0.02 per share, on a weighted average share count of approximately 115.0 million shares.

The first quarter net loss declined significantly compared to the net loss in the same period last year primarily due to: higher gaming participation revenues driven by a higher number of operating gaming machines at NagaWorld and improving consolidated average WUD; substantially reduced operating expenses; lower depreciation expense as a result of the above-mentioned impairment charge incurred in the fourth quarter of 2009; and lower restructuring expenses, all of which were partially offset by higher income tax expense.

Second Quarter 2010 Guidance and Future Outlook

To date during 2010, Elixir Gaming has continued to make solid progress in building on its operational and financial achievements from the 2009 fiscal year. As a result, the Company has the following expectations for its second quarter of 2010.
  • Quarterly sequential improvement in both total gaming machine participation revenue and consolidated adjusted EBITDA for the second quarter of 2010 driven by the continued strength of its NagaWorld operations, an increasing gaming machine installed base, and strict cost controls.
  • Based on its cost containment initiatives and current scale of operations, quarterly SG&A cash expense in the range of $1.5 to $1.8 million.
  • Consolidated gaming machine installed base of approximately 1,500 seats as of June 30, 2010, including the remaining gaming machine seats at NagaWorld under the December 2009 expansion contract.

Clarence Chung concluded, “With solid momentum in our gaming participation business and a refocused and leaner operating structure, our focus is on capitalizing on the expansion opportunities that exist in emerging gaming markets in Pan-Asia. For potential new projects, we are seeking an operator role and targeting markets such as border cities in Cambodia with strong feeder markets from neighboring countries such as Thailand and Vietnam, as well as opportunities in new countries such as Vietnam and Laos. An example is our recently-announced contract with Grand Golden Co. Ltd. to place approximately 60 electronic gaming machine seats on a participation basis at its new Grand Golden casino in the Kampong Cham Province, Cambodia near the Vietnam border. We are actively pursuing other possible projects with high-potential return in these markets and look forward to providing more details to investors as these projects develop.”

Elixir Gaming is hosting a conference call and simultaneous webcast at 8:30 a.m. ET today, May 12, both of which are open to the general public. The conference call number is 800/954-0685 or 212/231-2939. Questions and answers will be reserved for call-in analysts and investors. Interested parties may also access the live call on the Internet at www.elixirgaming.com. Please allow 15 minutes to register and download and install any necessary software. Following its completion, a replay of the call can be accessed for thirty days on the Internet at www.elixirgaming.com.

About Elixir Gaming Technologies, Inc.

Elixir Gaming Technologies, Inc. (NYSE Amex: EGT) is a leading provider of electronic gaming machines on a participation basis to the Pan-Asian gaming industry. The Company secures long-term contracts to provide electronic gaming machines and related systems to premier hotels and other well-located gaming venues in Asia. The Company retains ownership of the gaming machines and systems and receives recurring daily fees based on an agreed upon percentage of the net gaming win per machine and provides on-site maintenance. The Company has established a strategic presence in the Asia Pacific region with a focus on the Philippines and Cambodia markets. For more information please visit www.elixirgaming.com.

Forward Looking Statements

This press release contains forward-looking statements concerning Elixir Gaming, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those forward-looking statements include statements regarding expectations for the business of Elixir Gaming, its working capital requirements and future revenue and profitability. Such statements are subject to certain risks and uncertainties, and actual circumstances, events or results may differ materially from those projected in such forward-looking statements. Factors that could cause or contribute to differences include, but are not limited to, risks related to the costs incurred by Elixir Gaming in defending shareholder litigation and the outcome of any judgment or settlement with respect to such litigation, Elixir Gaming’s inability to place gaming machines at significant levels, whether the gaming machines placed generate the expected amount of net-win, the ability of Elixir Gaming to acquire additional capital as and when needed, the ability of Elixir Gaming to collect revenue and protect its assets and those other risks set forth in Elixir Gaming’s annual report on Form 10-K for the year ended December 31, 2009 filed with the SEC on March 30, 2010. Elixir Gaming cautions readers not to place undue reliance on any forward-looking statements. Elixir Gaming does not undertake, and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

- financial tables follow -

 

Elixir Gaming Technologies, Inc.Consolidated Statements of Operations(Unaudited)
 
Three Months Ended March 31,
(in thousands, except per share data) 2010   2009
Revenues:

 
Gaming machine participation $ 2,836 $ 946
Table game products 121 78
Non-gaming products 1,411   678  
4,368 1,702
Operating costs and expenses:
Cost of gaming machine participation:
Machine depreciation 1,886 2,390
Write-down of gaming assets 116 379
Other operating costs 226 341
Cost of table game products 90 25
Cost of non-gaming products 1,401 713
Selling, general and administrative 1,716 2,799
Research and development 85 55
Depreciation and amortization 229 309
Restructuring charges 37   499  
Total operating costs and expense 5,786   7,510  
 
Loss from operations (1,418 ) (5,808 )
 
Other income /(expense):
Interest expense and finance fees (122 ) (136 )
Interest income 12 38
Foreign currency gain/(loss) 9 (127 )
Other 91   13  
Total other expense (10 ) (212 )
 
Loss before income tax and discontinued operations (1,428 ) (6,020 )
 
Income tax expense (235 ) (3 )
 
Net loss from continuing operations (1,663 ) (6,023 )
Net loss from discontinued operations, net of tax   (218 )
 
Net loss $ (1,663 ) $ (6,241 )
 

Loss per share:
Loss from continuing operation $ (0.01 ) $ (0.05 )
Loss from discontinued operations (0.00 )
Basic and diluted loss per share (0.01 ) (0.05 )
 
Weighted average common shares outstanding 114,967 114,957
 

Elixir Gaming Technologies, Inc.Consolidated Balance Sheets
   

March 31,2009

December31, 2009
(in thousands) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 5,094 $ 4,190
Accounts receivable, trade, net 2,122 2,670
Due from a related party 12 12
Other receivables 167 195
Inventories 956 621
Assets held for sale 905 930
Prepaid commitment fees 3,359 4,838
Deferred tax assets 90 90
Prepaid expenses and other current assets 1,059   770  
Total current assets 13,764 14,316
 

Accounts receivable, trade, net of current portion
68 106
Gaming equipment and systems, net 25,750 26,507
Property and equipment, net 3,164 3,322
Intangible assets, net 2,925 3,026
Goodwill 84 84
Contract amendment fees 1,356 688
Prepaids, deposits and other assets 293   408  
Total assets $ 47,404   $ 48,457  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,162 $ 1,125
Amount due to a related party 32 46
Accrued expenses 1,762 2,325
Notes payable to a related party, current portion 4,721 3,128
Capital lease obligations, current portion 173 187
Customer deposits and others 72   78  
Total current liabilities 7,922 6,889
 
Notes payable to a related party, net of current portion 4,786 6,265
Capital lease obligations, net of current portion 389 414
Other liabilities 762 604
Deferred tax liability 1,019   877  
Total liabilities 14,878 15,049
 
Stockholders’ equity:
Common stock, $.001 par value, 300,000,000 shares authorized; and 115,879,394 and 114,956,667 shares issued and outstanding 116 115
Additional paid-in-capital 415,156 414,864
Accumulated other comprehensive loss (157 ) (645 )
Accumulated deficit (382,589 ) (380,926 )
Total stockholders’ equity 32,526   33,408  
Total liabilities and stockholders’ equity $ 47,404   $ 48,457  
 

Elixir Gaming Technologies, Inc.Adjusted EBITDA(Unaudited)
 
Three Months Ended March 31,
(in thousands) 2010   2009
Net loss ― GAAP basis $ (1,663 ) $ (6,241 )
Loss from discontinued operations 218
Interest expense 122 136
Interest income (12 ) (38 )
Income tax expense 235 3
Depreciation and amortization 2,231 2,753
Stock option expense 294 202
Impairment/write-down of gaming assets 116   379  
EBITDA/(LBITDA), as adjusted $ 1,323   $ (2,588 )
 

Note: The Company defines adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, and non-cash charges.

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