Entertainment Gaming Asia, Inc. ( EGT)

Q3 2011 Earnings Call

November 10, 2011, 08:30 a.m. ET


Traci Mangini - SVP, Corporate Finance

Clarence Chung - Chairman and CEO

Andy Tsui - CAO




Welcome to the Third Quarter 2011 Earnings Conference Call. During the presentation all participants will be in a listen-only mode, afterwards we will conduct a question-and-answer session. (Operator Instructions) As a reminder this conference is being recorded today Thursday, November 10, 2011.

It is now my pleasure to turn the conference over to Traci Mangini. Please go ahead.

Traci Mangini

Thank you, operator and good morning everyone. My name is Traci Mangini and I’m the Senior Vice President of Corporate Finance for Entertainment Gaming Asia. With me today on the call are Clarence Chung, our Chairman and Chief Executive Officer; and Andy Tsui, our Chief Accounting Officer.

Before we start, let me review our Safe Harbor Statement. Some of the statements that the company will make on this conference call, such as statements of 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 risk 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. Entertainment Gaming Asia assumes no obligation to publicly update or revise any forward-looking statement.

Now, the agenda for today’s call will be as follows: First, Clarence will discuss the highlights of our third quarter 2011 financial performance and corporate developments. Following that, Andy will review in more detail our financial results for the quarter. Clarence will then conclude our prepared remarks with an update on our growth plans for our gaming operations including the status of our existing casino project. We would then be pleased to take your questions.

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

Clarence Chung

Thank you, Traci, and good morning everyone. I’m pleased to report that Entertainment Gaming Asia has reported another solid quarter of operating results with strong EGM participation revenues and consolidated average net win in our gaming participation operation and another quarter of positive GAAP earning.

With the healthy EBITDA run rate, we have maintained a solid cash positions while investing in our strategic growth plan and strengthening our balance sheet. Further, we remain focused in enhancing overall returns of our core existing operation and executing our casino development growth strategies within emerging gaming market in the Indo-China region.

Before we discuss an update of our casino growth trend, I’d like to take this opportunity to highlight some of our key financial results during the third quarter of 2011 and recent corporate development.

Total gaming participation revenues for the third quarter of 2011 was $4.4 million, this represent 7% growth from the same period last year. This growth was driven by consolidated average net win of $145 proceeds due primarily by our operations at NagaWorld, which achieved average net wins of $233 for the quarter. As a result of positive marketing to customers as well as machine mix improvement.

Adjusted EBITDA was $2.8 million for the third quarter, essentially in line with our current run rate of approximately $1 million for the month. We achieved another quarter of positive GAAP earnings with net income of $647,000. We have stronger flow from operations. We have maintained a cash possessions of approximately 14 million as of September 30, 2011, up from $10.2 million as of December 31, 2010, while we are using our debt and investing in our growth trend. While we are focused on our casino development plan, we also maintained committed to and hunting our key existing operation.

As recently announced, we entered into an agreement pertaining to one of our best performing venues under participation in the Philippines, to help improve performance of our gaming participation operation in this market. This agreement enables us to work directly with the government operator PAGCOR, and serves to increase the company’s revenue sharing rights to 35% from 17% of net win and its control over marketing strategies in this venue.

With regard to gaming chips and plaques, we are pleased to report that we have added several new customers which should provide incremental benefit in future quarters. This includes one new customers in Indo-China which is expected to provide revenues of approximately $350,000 in the first quarter of 2012. Further, we continue to pursue additional new customers in our current and new market as well as a deeper penetration of our existing customer base.

We will discuss our casino development plans in a moment. But first I’d like to turn the call over to Andy, to review the financial results in more detail. Andy?

Andy Tsui

Thank you, Clarence, and good morning everyone. Before we discuss the detail of the third quarter 2011 financial results, I’d like to remind investors that effective in the beginning of 2011, we reclassify our reported operating segment into two divisions. Gaming operations which include our gaming participation business and future casino development operations and other products which consist of our Dolphin operating division, formerly called table game and non-gaming products. These changes do not reflect any change in focus of the company. And new reporting segment information have been applied retroactively to all periods discussed.

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