Multimedia Games' CEO Discusses F1Q12 Results - Earnings Call Transcript

Multimedia Games Inc. ( MGAM)

Q1 2012 Earnings Call

February 1, 2012 9:00 am ET


Patrick Ramsey – Chief Executive Officer, President

Adam Chibib – Chief Financial Officer

Jerry Smith – General Counsel


Todd Eilers – Roth Capital Partners

Steve Altebrando – Sidoti & Co.

Barry Kaplan – Maple Tree Capital



Good day ladies and gentlemen and welcome to the Multimedia Games Incorporated First Quarter 2012 conference call and webcast. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. Should anyone require operator assistance on today’s conference, you may press star and then zero on your touchtone telephone. As a reminder, this conference call is being recorded.

I would now like to turn your conference over to your host for today, Mr. Jerry Smith, General Counsel. Sir, you may 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 the applicable securities laws, including without limitation the 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 of 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 risk 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. Direct conciliation 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 at in the Investor Relations section. Financial and operating metrics provided during today’s call and webcast may be approximated. Please refer to the Company’s financial statement as provided in today’s SEC filing and earnings release for more definitive numbers.

Now, I’ll turn the call over to our President and Chief Executive Officer, Patrick Ramsey.

Patrick Ramsey

Thank you, Jerry, and good morning everyone. Thank you for joining us on this call. Joining me this morning in Austin is Jerry Smith, General Counsel; Adam Chibib, our Chief Financial Officer, and Mick Roemer, our Senior Vice President of Sales.

I’m pleased to report that the momentum we had throughout fiscal 2011 has continued into 2012. This morning, we reported first quarter revenues of 34.8 million, up 22% year-over-year, and diluted earnings per share of $0.21 versus a loss of $0.05 last year, a great start to fiscal 2012. There are several items that drove these particularly strong EPS results, which Adam will review in more detail, but I’ll start at the top.

If you recall on our fiscal 2011 year-end conference call in November, I reviewed four key initiatives that would be integral to MGAM’s success in 2012. As our first quarter results indicate, we are off to a successful start in executing against each of these initiatives. First, our top priority is to continue to expand the footprint of MGAM products throughout the country, both through selling our product and expanding our pace in recurring revenue units. In the first quarter, we achieved strong results for both aspects of our business. Recurring revenue grew approximately $3 million year-over-year or 13% despite a million dollar decline in our Mexican business. We achieved good results out of Oklahoma, our largest market, where revenue increased approximately 2% year-over-year or by $300,000. The main drivers of growth in our gaming operation segment came from our central determinant system in New York (inaudible) from our recurring revenue generated by an expanded domestic footprint of both Class II and Class III products outside of Oklahoma. New York Lottery revenues grew over 1.2 million or 60% year-over-year, and domestic recurring revenue outside of Oklahoma and the New York Lottery grew over 2.4 million or 68%.

Unit sales also increased year-over-year as we sold 408 proprietary (inaudible) units in this year’s first quarter versus 201 in last year’s first quarter, and we did so by selling into 10 states, which is important as we continue to diversify our markets and customer base.

The second initiative that we previously discussed was to continue to increase the mix of successful proprietary Class II games in the footprint of our largest customer in Oklahoma. Year-over-year, we replaced over 350 Class III games with our own proprietary Class II games and we have plans to continue this game mix transition throughout the year. Our focus on this initiative and the success we are achieving in the game performance of our proprietary Class II games helps to strengthen our strategic relationship with the Chickasaw Nation.

As you may have read, two weeks ago we came to an agreement with the Nation regarding the extension of placements for over 2,000 units at several of their largest properties and we believe these extensions are a good indication of our alignment and our customers’ increased confidence in our strategic direction. These agreements were originally set to expire in the middle of 2013, and pursuant to our new agreements we have extended the majority of these units for 3.5 years beyond the original expiration date. We also worked together on a staggered re-pricing on our revenue share for our traunch of games at WinStar that was on a higher revenue share than all of the others throughout Chickasaw Nation. Working through these extensions and changes well ahead of the expiration was very important to us as our 2,000 (inaudible) game footprint generated over 25 million in revenue for our company in fiscal 2011.

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