Entertainment Gaming Asia Inc. (EGT) Q2 2010 Earnings Call August 5, 2010 8:30 am ET Executives Traci Mangini - SVP, Corporate Finance Clarence Chung - Chairman and CEO Andy Tsui - Chief Accounting Officer Analysts James Crabbe - Private Investor Presentation Operator
With that, let me turn the call over to Clarence Chung.Clarence Chung Thank you, Traci, and good morning, everyone. I'm pleased to welcome you to our first conference call under our new name, Entertainment Gaming Asia. As you may know, on July 26, we changed our name to reflect not only the dramatic changes at the company over the past several years, but also our resizing new strategies to expand our gaming business model. In addition to being a leading provider of gaming machines on the participation basis to emerging gaming markets in Pan Asia, our plans are underway to also serve these markets as an owner and operator of regional casinos to capitalize on an attractive growth potential in these underpenetrated and growing markets. We believe this incremental leg to our growth strategies allows us to leverage our existing market presence and relationships and offer us attractive long-term returns and greater operational controls. In furtherance of these strategies, in Cambodia, we obtained a casino license from the Cambodian government and acquired the title of over seven acres of land in the Takeo Province near one of major Vietnam border crossings. We have already assembled a project development team and have been working with architects on the conceptual design. In addition to being very excited about our casino development plan, we're also pleased with the strong performance of our existing operations, particularly our core gaming participation business. I would like to take this opportunity to discuss some of the highlights of our second quarter and more recent performance. Total gaming participation revenues for the second quarter of 2010 was a record $3.5 million, up 24% on a sequential basis and double that of the year-ago period. This impressive growth was driven by improved consolidated average net win of $115 per unit and a higher installed gaming machine base.
We continue to adhere to our strict cost controls. And as a result, cash SG&A was $1.5 million for the second quarter of 2010, at the low end of our prior guidance range of $1.5 million to $1.8 million and down 24% from the prior-year period.Adjusted EBITDA, which we define as earnings before interest, tax, depreciation, amortization and non-cash expenses, was $1.4 million for the second quarter of 2010, which represents our fifth consecutive quarter of positive adjusted EBITDA since our new business was enacted in September 2007. We continue to build our cash position. Our cash balance improved to $6.4 million as of June 30, 2010, up from $4.2 million as of December 31, 2009. Clearly, our core gaming machine participation business, and in particular our operations at NagaWorld has been a strong contributor to our improved performance. At NagaWorld, as of August 1, we had a total of 656 gaming machine seats in operation and expect it to reach 670 seats within the next several weeks. This will fulfill our total contracted machine placements at this venue and represents remarkable growth in our installed base since our first placement of approximately 200 machine seats at NagaWorld in January 2009. Despite the growing installed machine space during the recent quarter, average net win per unit for our operations in NagaWorld had remained very strong. We attribute this to our targeted marketing efforts to build strong customer loyalty, the right machine mix and the benefits of the closures of all slot clubs previously operating in the non-Pan regions earlier in 2009. Average net win per unit for our operations at NagaWorld has continued to post improvement in recent month with average net win reaching $214 for the month of June and $227 for the month of July. Read the rest of this transcript for free on seekingalpha.com