Multimedia Games' CEO Discusses F4Q 2011 Results - Earnings Call Transcript

Multimedia Games, Inc. (MGAM)

F4Q 2011 Earnings Call

November 18, 2011 09:00 AM ET


Jerry Smith – General Counsel

Patrick Ramsey – President and CEO

Adam Chibib – CFO


Stephen Altebrando – Sidoti & Company

Todd Eilers – ROTH Capital Partners

Ryan Worst – Brean Murray

Russ Silvestri – SKIRITAI


Good day, ladies and gentlemen and welcome to Multimedia Games Fourth Quarter 2011 Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions following at that time. (Operator Instructions) And as a reminder, this conference is being recorded.

And now, I'll turn the call over to Jerry Smith, General Counsel. Please begin.

Jerry Smith

Thank you. Good morning. Today's call and webcast contains statements about future events and expectations which are characterized as forward-looking statements within the meaning of applicable securities laws including without limitation to Private Securities Litigation Reform Act of 1995. These statements are based on management's current beliefs, assumptions and expectations of our future economic performance, taking into account information currently available to us.

Forward-looking statements involve risks and uncertainties that may cause our actual results, performance or financial condition to be materially different from the expectations of such results, performance or financial condition. Please refer to the Risk Factors section in our current and recent SEC filings for a description of certain of these risks and uncertainties. The company does not undertake and expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Today's call and webcast may include non-GAAP financial measures such as EBITDA within the meaning of Regulation G. A reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the company's current and recent SEC filings and can also be found along with today's earnings release on our website, in the Investor Relation section. Financial and operating metrics provided during today's call and webcast may be approximated. Please refer to the company's financial statements as provided in today's SEC filings and earnings release for more definitive numbers.

Now, I'll turn the call over to our President and CEO, Patrick Ramsey.

Patrick Ramsey

Thank you, Jerry, and good morning, everyone. Thank you for joining us on this call. With me here in Austin are Jerry Smith, our General Counsel who recently joined us; and Adam Chibib, our Chief Financial Officer.

This morning we reported fourth quarter revenues of $35.7 million and diluted earnings per share of $0.11 arguably our strongest quarter of the fiscal year and a great lead into fiscal 2012. These strong results are a fitting end to a year in which our company took significant steps forward along many fronts. If you recall, 12 months ago I made out three initiatives that were critical to Multimedia Games in 2011. One, growth in the sale of our own proprietary games; two, increasing the footprint of our own proprietary products with our major customer the Chickasaw Nation; and three, the expansion of our footprint within Oklahoma outside of that major customer. I'd like to provide a bit more detail on each of these initiatives before Adam gets into our detailed financial results.

To begin, this fiscal year we sold 1,150 proprietary MGAM units which represent an increase of 24% year-over-year. This rate of growth seems to indicate that customers are pleased with the product performance of our own games, but there are a few points that are important to discuss regarding that growth. First, those 1,150 units were sold into 13 different states this year as opposed to the 930 units that were sold into only 6 jurisdictions last year. In addition, the State of Washington represented about half of those sales this year versus about 80% last year. Diversification of our revenue base is key for our company so it is important to note that our products are being accepted across many states nationwide.

Additionally, along those same lines, we achieved this sales growth and diversification while only having licenses and approvals to sell into approximately 25% of the United States gaming market. We continue to make great strides on our licensing initiatives and in fact now have 132 licenses and we recently were approved in the State of Nevada the largest market in the country.

Regarding the second initiative, growing our proprietary MGAM footprint within the Chickasaw Nation, we are very pleased with the results we have seen in 2011. Two years ago we only had approximately 680 MGAM Class II games in our Chickasaw footprint. In two short years we have more than doubled the size of our Class II footprint while significantly increasing game performance. The recent extensions that we announced last quarter on agreements with that customer are a strong indication that they are pleased with the product that we are producing out of Austin and we look forward to building on this success.

Finally, I will admit I was a bit off on our third point. Last year I spoke to the importance of expanding our domestic footprint within Oklahoma outside of the Chickasaw Nation and I am happy to report we did have success in expanding this footprint. In fiscal 2011 we added 340 units to our non-Chickasaw Oklahoma installed base, bringing our total Oklahoma installed base up to 7,500 units at year end. However, when I initially discussed this initiative, I was not counting on the fact that our domestic installed base would grow faster outside of Oklahoma than inside Oklahoma. In fact, outside of Oklahoma our domestic installed base grew by over 670 units year-over-year. That growth came from many different jurisdictions literally from Connecticut to California. In fact, our premier tournament product TournEvent is now being played in 13 different states.

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