Elixir Gaming Technologies, Inc. (EGT)

Q1 2010 Earnings Call

May 12, 2010 8:30 am ET


Traci Mangini – SVP, Corporate Finance

Clarence Chung – Chairman and CEO

Andy Tsui – Chief Accounting Officer


Paul Sonz – Paul Sonz Partners

[Jim Crabb] – No company listed

P resentation


Welcome to the Elixir Gaming Technologies, Inc. first quarter 2010 earnings conference call. (Operator instructions) As a reminder, this conference is being recorded today, Wednesday, May 12, 2010. I would now like to turn the conference over to Ms. Traci Mangini. Please go ahead.

Traci Mangini

Thank you, operator. Good morning, everyone. I am Traci Mangini, Senior Vice President, Corporate Finance for Elixir Gaming Technologies. With me today on the call are Clarence Chung, Chairman and Chief Executive Officer, and Andy Tsui, Chief Accounting Officer.

Before we start, let me review the Safe Harbor Statement. Some of the statements that the company will make on this conference call such as statements about the company’s plans and expectations are forward-looking. While forward-looking statements reflect the company’s good faith beliefs they are not guarantees of future performance and involve risks and uncertainties. The company’s actual results could differ materially from those discussed on this phone call.

Some of these risks and uncertainties are described in today’s news announcement and in the company’s filings with the Securities and Exchange Commission, including the company’s reports on forms 8-K, 10-K and 10-Q. Elixir Gaming assumes no obligation to publicly update or revise any forward-looking statements.

Now, the agenda for today’s call will be as follows. First, Clarence will provide the highlights of our first quarter earnings and recent corporate developments. Following that, Andy will review in more detail our financial results for the quarter. Clarence will then conclude our prepared remarks with our second quarter guidance and future outlook. We will then take questions from investors and analysts.

With that, let me turn the call over to Clarence Chung. Clarence?

Clarence Chung

Thank you, Traci, and good morning, everyone. Elixir Gaming posted continued solid improvement in both gaming participation revenues and consolidated adjusted EBITDA for the first quarter 2010. Our performance marks strong progress following the refocusing of our operations and streamlining of our cost structure since 2009.

Andy will go through the financials in more detail, but here are some of the highlights on our performance. Total gaming participation revenues for the first quarter improved 15% sequentially to a record $2.8 million largely driven by a higher installed gaming machine base and slightly improved consolidated average net win of $107. We continue to adhere to our strict cost controls and as a result cash SG&A was $1.4 million for the first quarter of 2010, below our prior guidance range of $1.5-1.8 million and down 45% from the prior-year period.

Adjusted EBITDA which we define as earnings before interest, tax, depreciation, amortization and non-cash expenses was $1.3 million for the first quarter 2010 which represents a sequential gain of 64% from the prior quarter and this is our fourth consecutive quarter attaining positive adjusted EBITDA.

I would now like to take this opportunity to highlight some recent operational achievements and corporate developments that provide me confidence in our future success. Our core gaming machine participation operations continue to gain positive momentum. In mid-February 2010 we executed quickly on our December 2009 expansion contract with NagaWorld and placed approximately 110 units out of the total contracted 200 additional machine units.

In April we had approximately 40 machines and the remaining approximately 50 gaming machine placements under these contracts are on target for installation before the end of the second quarter 2010. As a result, we anticipate 640 gaming machines in operations at NagaWorld by the end of June 2010 which represents remarkable growth since our first placement at NagaWorld approximately 15 months ago.

Also despite the growing installed machine base during the recent quarters the average net win per unit for our operations at NagaWorld have remained strong. We attribute it to our targeted marketing efforts to build strong customer loyalty, the right machine mix and the benefit of the closure of all Slot Clubs previously operating in the Phnom Pehn area in early 2009. In fact, average net wins for our operations at NagaWorld went over $200 for the months of November and December 2009 and January 2010, and despite the addition of approximately 110 machines in mid-February and 40 machines in April we are pleased to say the net wins held strong at $194 per unit per day for the first quarter and $183 in April.

We attribute the slight decline to the decrease in machine placements in the early months of this year and the typical ramped up period associated with new machine placements. The strong results at NagaWorld has resulted in attractive cash flows for the company. As you may recall, under our July 2009 expansion contract we placed 200 additional machine seats for which we pay a commitment fee to NagaWorld of $5.84 million.

For these 200 units we are entitled to collect on a daily basis 100% of the net win per unit per day starting from the first day of operations until we have received the total cumulative amount of $7.3 million which is $5.84 million commitment fee, our share of the net earnings and winnings. As of March 31, 2010 we had collected the full $5.84 million commitment fee in cash from these additional machines representing an impressive payback period of approximately 6 months on our commitment fee.

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