- Deploys 1,592 New Revenue Units, Including
Quarterly Record 1,375 for Sale Units and 217 Net Additions to
Installed Base -
Multimedia Games Holding Company, Inc.
(Nasdaq:MGAM) (“Multimedia Games” or the “Company”) today reported
operating results for its fiscal 2014 first quarter ended December
31, 2013, as summarized below:
Summary of 2014 Q1 Results(In
millions, except per-share and unit data)
Three Months EndedDecember
31,
2013 2012
Revenue $ 59.2 $ 44.3 Operating income (1) $ 15.0 $ 11.4 Net income
(1) $ 9.5 $ 7.1 Diluted earnings per share (1) $ 0.31 $ 0.24
Adjusted diluted earnings per share (2) $ 0.33 $ 0.24
EBITDA(1,3) $ 27.9 $ 21.4 Units sold 1,375 644
Domestic participation installed units: Average 12,520 10,942
Quarter-end 12,657 11,188 (1) Operating income, net income,
EBITDA and diluted earnings per share for the three month period
ended December 31, 2013 reflects approximately $0.8 million in
pre-tax insurance claims in excess of the previous 2 year quarterly
average. (2) Adjusted diluted earnings per share represents the
add-back of the insurance claims incurred during the three month
period ended December 31, 2013 in excess of the previous 2 year
quarterly average. (3) EBITDA is defined as net income before net
interest expense, income taxes, depreciation, amortization and
accretion of contract rights. A reconciliation of EBITDA to net
income, the most comparable Generally Accepted Accounting
Principles (“GAAP”) financial measure, can be found attached to
this release.
Patrick Ramsey, Chief Executive Officer of Multimedia Games,
commented, “Our first quarter results represent a strong start to
fiscal 2014, as we generated record revenue of $59 million, EBITDA
growth of over 30% and significant free cash flow (a non-GAAP
measure). Revenue from unit sales increased over 77% from the prior
year quarter as we sold a record 1,375 units to customers across
our expanding addressable market, including 143 units in Nevada and
our first sales in Pennsylvania. In addition, our award-winning
TournEvent® slot tournament system continues to generate demand,
with total first quarter sales of 407 units to 32 casinos in 14
states.
“Gaming operations revenue rose approximately 12% year over year
reflecting 13% year-over-year growth in our installed base or the
addition of 1,469 new units, as well as the addition of 217 new
units on a quarterly sequential basis. Our gaming operations
business continues to benefit from strong acceptance of our premium
participation games which are generating a daily yield that is
twice that of our non-premium units. During the quarter, we added
181 premium participation units to our installed base and these
units now comprise 24% of our total non-Oklahoma installed base
compared to 21% at the end of the prior quarter. This growth in our
installed base was partially offset during the period by weakness
in our daily yield in December, reflecting the decrease in consumer
spending seen industry-wide as well as the impact of severe weather
on our customers’ operations, particularly in Oklahoma. As a
result, daily win per unit declined for the first time in 12
quarters.”
Ramsey concluded, “Multimedia Games continues to make solid
progress in deploying a growing number of exciting new games across
an increasing number of markets. We can now address over 80% of
domestic slot floors and continue to pursue licensing initiatives
that will further expand the universe of slot floors we can
address. As we continue to sell and place units in newer markets
such as Nevada, New Jersey, Illinois and Pennsylvania, we are
simultaneously increasing our floor share in established markets
and believe we can continue to grow our share for the foreseeable
future. Our new game development efforts are resulting in a growing
portfolio of new games and platforms, including our Maximum Player
Experience™ premium participation platform that will debut later
this year. We believe these new offerings will extend our success
in delivering high levels of player satisfaction and strong returns
for our customers, leading to continued top and bottom line
growth.”
Summary of Fiscal 2014 First Quarter
Operating Results
$ millions except unit, margin and per-share data
Three Months EndedDecember
31,
2013 2012
Revenue Total revenue $ 59.2 $ 44.3 Gaming operations
$ 33.6 $ 30.0 Gaming equipment and system sales $ 24.9 $
14.0 Sales of units 23.9 12.7 Parts and equipment 1.0 1.3
Other $ 0.7 $ 0.3
Revenue Metrics Gaming operations
Quarter-end installed base 12,657 11,188 Quarter-end premium units
installed outside Oklahoma 1,059 318 Approximate daily win per unit
$ 25.64 $ 25.87 Gaming equipment and system sales Units sold
1,375 644 Average selling price $ 17,366 $ 18,703
Operating Expenses Total operating costs and expenses $ 44.1
$ 32.9 Cost of goods sold 15.7 9.5 Gaming operations gross margin
88.5 % 89.1 % Gaming equipment and system sales gross margin 52.5 %
55.8 % Selling, general & administrative 13.7 11.3 Research and
development 4.3 4.1 Amortization & depreciation 10.4 8.0
Operating income $ 15.0 $ 11.4 Operating margin 25.4 % 25.8 %
Effective income tax rate 35.8 % 37.2 % Net income $
9.5 $ 7.1 Earnings per diluted share $ 0.31 $ 0.24 Adjusted
earnings per diluted share $ 0.33 $ 0.24
Key highlights from the Company’s fiscal 2014 first quarter
operating results include:
- Gaming operations
- Revenue rose 12.1% year over year
driven by a 1,469 unit year-over-year increase in the Company’s
installed base of participation units, which was partially offset
by a year-over-year decline in win per unit per day, largely
reflecting a significant decline in December performance due to the
impact of severe weather on customer facilities in Oklahoma.
- The installed base grew by 217 units on
a quarterly sequential basis despite the sale of 251 units out of
the installed base.
- Added 74 new High Rise Games® units in
Nevada.
- The installed base of premium
participation games increased by 181 units on a quarterly
sequential basis to 1,059 units.
- Revenue from the Company’s New York
Lottery business rose 7.0% year over year to $4.1 million.
- Gaming equipment and system sales
- Revenue rose 77.7% year over year
driven by the sale of a quarterly record 1,375 units to customers
in 21 markets, including initial sales to casinos in Pennsylvania,
compared to the sale of 644 units to customers in 17 markets in the
year-ago quarter.
- Recorded a large sale of 499 units to a
single customer in Alabama, of which 221 units were previously on a
revenue share arrangement.
- Total unit sales include 407 TournEvent
units at 32 casinos, bringing the Company’s TournEvent installed
base to approximately 3,529 units in 231 casinos.
- The top three markets for unit sales
were Alabama, Nevada and Ohio, representing a total of 788
units.
- Operating expenses
- The increase in selling, general &
administrative (“SG&A”) expenses as well as total operating
expenses was primarily driven by approximately $0.8 million in
insurance claims above the previous two year quarterly average
which impacted diluted earnings per share by approximately
$0.02.
- The increase in cost of goods sold
primarily reflects the higher number of units sold during the
fiscal 2014 first quarter compared with the year-ago period.
- SG&A expenses include approximately
$1.3 million of non-cash stock-based compensation compared to $0.9
million in the prior year period.
- Depreciation and amortization reflects
continued increases in the installed base and higher amortization
expense for capitalized labor.
Balance Sheet Review
Multimedia Games ended the 2014 first fiscal quarter with $112.5
million in cash and net cash (a non-GAAP measure, which we define
as total cash in excess of total debt) of $83.8 million, versus net
cash of $40.9 million at December 31, 2012. Capital expenditures in
the fiscal 2014 first quarter were $10.4 million compared to $12.7
million in the year ago period. The Company generated free cash
flow of $14.4 million in the quarter ended December 31, 2013,
compared to $1.9 million in the quarter ended December 31, 2012.
Please see the reconciliations to non-GAAP measures included in
this release.
During the fiscal 2014 first quarter, the Company repurchased
approximately 76,000 shares of its common stock at an average price
of $29.30 per share, excluding commissions, for total consideration
of approximately $2.2 million. As of December 31, 2013, the Company
had approximately $33.0 million remaining under its existing $40.0
million share repurchase authorization which was announced in
November 2012. Since December 2010, the Company has repurchased
approximately 2.6 million shares of its common stock.
Adam Chibib, President and Chief Financial Officer, commented,
“Our fiscal 2014 first quarter results demonstrate the strong
momentum for our product portfolio across the Company’s growing
total addressable market despite the continued challenges in the
regional gaming markets throughout the U.S. We believe our ability
to successfully enter new markets and increase our penetration in
existing markets, combined with our disciplined fiscal management,
will drive further increases in revenue, operating income, EBITDA,
diluted EPS and free cash flow in fiscal 2014. With a solid balance
sheet and an attractive business model that emphasizes free cash
flow generation, we believe we have the financial flexibility to
invest in our business to drive long-term results while
simultaneously returning capital to shareholders.”
Reiterates Fiscal 2014 Outlook
Multimedia Games today reiterated its outlook for fiscal 2014
which was provided on November 14, 2013. The Company expects to
generate revenue of $217.0-$223.0 million, representing
year-over-year growth of approximately 15%-18%. In addition,
Multimedia Games expects to generate EBITDA, a non-GAAP financial
measure defined below, of $110.0-$114.5 million, representing
approximately 15%-20% year-over-year growth. Finally, the Company
expects its fiscal 2014 tax rate to be in the range of 36%-38%,
compared with its fiscal 2013 tax rate of 32.5%. As a result,
fiscal 2014 diluted EPS are expected to be $1.23-$1.27,
representing year-over-year growth of approximately 8%-11% from
reported fiscal 2013 EPS of $1.14 and year-over-year growth of
approximately 16%-20% from adjusted fiscal 2013 EPS of $1.06 as
described below.
Comparison of Fiscal 2014 Guidance to
Fiscal 2013 Results(In millions, except per-share and unit
sales)
Twelve Months Ended September
30, 2014
Guidance(1)
2013 Revenue $ 217.0 – 223.0 $ 189.4 EBITDA $
110.0 – 114.5 $ 95.7 Depreciation and Amortization $ 42.0 – 44.0 $
34.8 Diluted earnings per share $ 1.23 – 1.27 $ 1.14
Pro-forma diluted earnings per share(2) $ 1.23 – 1.27 $ 1.06
Unit sales 3,700 – 4,000 2,678 (1) Represents Company
guidance for fiscal 2014 as previously provided on November 14,
2013, with the forecasted diluted EPS range reflecting an expected
full year tax rate of 36%-38%, versus a 32.5% tax rate in fiscal
2013. (2) Pro-forma diluted earnings per share for the fiscal 2013
period reflect a 37% tax rate applied to the reported income before
income taxes for both periods.
Fiscal 2014
Guidance
Fiscal
2013
EPS Reconciliation:
Low
High
As reported $ 1.14 Pro-forma at 37% tax rate
(0.08) Pro-forma EPS $
1.23 $
1.27 $
1.06
Multimedia Games cautions that market dynamics are constantly
changing and as such, actual results could vary materially from the
expectations noted above based on various factors, such as changes
in the Company’s markets, operations, regulatory requirements, and
its estimates and assumptions. See the risk factors in our
publicly-filed Form 10-K’s and subsequent filings and other items
as more fully described in the section below titled “Cautionary
Language.”
2014 First Quarter Conference Call and Webcast
Multimedia Games is hosting a conference call and webcast today,
January 30, 2014, beginning at 9:00 a.m. ET
(8:00 a.m. CT). Both the call and the webcast are open to
the general public. The conference call number is 720-545-0001
(domestic or international). Please call five minutes prior to the
presentation to ensure that you are connected.
Interested parties may also access the conference call live on
the Internet at http://ir.multimediagames.com/events.cfm.
Approximately two hours after the call has concluded, an archived
version of the webcast will be available for replay at the same
location.
Non-GAAP Financial Measures
See definitions of EBITDA, net cash, free cash flow, adjusted
diluted earnings per share, and pro-forma diluted earnings per
share included in the discussion of Non-GAAP financial measures
below.
About Multimedia Games Holding Company, Inc.
Through its wholly owned subsidiary, Multimedia Games, Inc.,
Multimedia Games Holding Company, Inc. (“Multimedia Games”)
develops and distributes gaming technology. The company is a
creator and supplier of comprehensive systems, content and
electronic gaming units for Native American and commercial casinos.
Revenue is primarily derived from gaming units in operation on
revenue-sharing arrangements. The company also offers and generates
revenue from the sale of gaming units and systems that feature
proprietary game content and game themes licensed from others.
Multimedia Games also supplies the central determinant system for
the video lottery terminals (“VLTs”) installed at racetracks in the
State of New York. The company is focused on pursuing market
expansion and new product development for commercial and tribal
casinos and VLT markets. Please visit www.multimediagames.com,
twitter.com/MultimediaGames or facebook.com/MultimediaGames, where
Multimedia Games discloses important information about the company,
its sales, and its business.
Cautionary Language
This press release contains forward-looking statements based on
Multimedia Games' current expectations and projections, which are
intended to qualify for the safe harbor from liability established
by the Private Securities Litigation Reform Act of 1995. The words
“believe”, “expect”, “continue”, “intend”, “plan”, “seek”,
“estimate", “project”, “may”, “should”, or the negative or other
variations thereof or comparable terminology as they relate to
Multimedia Games and its products, plans, and markets are intended
to identify such forward-looking statements. These forward-looking
statements include, but are not limited to, expectations regarding
financial performance; expectations regarding entry into new
markets and expansion in our existing markets; beliefs regarding
market yields; opportunities for future expansion and expected
growth in our floor share in new or existing markets; expectations
regarding our future installed base of participation units;
expected liquidity and capitalization; expectations regarding tax
rates; expectations regarding the share repurchase program and
returning capital to shareholders; drivers of revenue growth;
management’s plans and objectives for future operations;
expectations regarding future investments; expenditures and product
development; business prospects; expectations regarding recent and
potential future products; expectations regarding the popularity of
new offerings; anticipated sales performance; industry trends;
market conditions; and other statements that are not historical
facts. All forward-looking statements are based on current
expectations and projections of future events.
These forward-looking statements reflect the current views,
models, and assumptions of Multimedia Games, and are subject to
various risks and uncertainties that cannot be predicted or
qualified and could cause actual results in Multimedia Games’
performance to differ materially from those expressed or implied by
such forward looking statements. These risks and uncertainties
include, but are not limited to, the ability of Multimedia Games to
expand and maintain its addressable markets; maintain strategic
alliances; increase unit placements, installations or its
installed-base; grow its revenue, gaming operations or game sales
businesses; garner new market share; secure new licenses and game
approvals in new and current jurisdictions; successfully develop or
place proprietary product such as premium games; comply with
regulations; have its games met with approval by customers or
players; reinvest capital; or repurchase shares of its common
stock. Please refer to the Company’s most recent Form 10-K and
subsequent filings with the Securities and Exchange Commission for
a further discussion of risks and uncertainties. All
forward-looking statements made herein are qualified by these
cautionary statements and there can be no assurance that the actual
results, events or developments referenced herein will occur or be
realized. Readers are cautioned that all forward-looking statements
speak only to the facts and circumstances present as of the date of
this press release. Multimedia Games expressly disclaims any
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
CONDENSED CONSOLIDATED BALANCE
SHEETSAs of December 31, 2013 and September 30, 2013(In
thousands, except share and per-share amounts)
December 31,
September 30, ASSETS 2013
2013 CURRENT ASSETS: (unaudited) Cash and cash
equivalents $ 112,464 $ 102,632
Accounts receivable, net of allowance for
doubtful accounts
of $342 and $342, respectively
32,869 26,566 Inventory
10,913 12,429 Notes receivable, current 2,839 2,093 Deferred tax
asset 7,818 7,818 Prepaid expenses and other 2,710 2,423 Federal
and state income tax receivable
57
2,855 Total current assets
169,670 156,816 Property and equipment and leased
gaming equipment, net 79,124 77,458 Intangible assets, net 33,256
34,723 Notes receivable, non-current 4,115 4,814 Deferred tax
asset, less current portion 2,690 2,690 — Value added tax
receivable, net of allowance of $707 and $707, respectively 2,884
2,862 Other assets
1,865
2,135 Total assets $
293,604 $
281,525 LIABILITIES AND
STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Current
portion of long-term debt 3,700 3,700 Accounts payable and accrued
liabilities 29,687 29,129 Deferred revenue
665
520 Total current
liabilities 34,052 33,349 Long-term debt, less
current portion 24,975 25,900 Long term deferred tax liability
12,824 12,824 Other long-term liabilities
487
511 Total liabilities
72,338
72,584 Commitments and contingencies
Stockholders’ equity:
Preferred stock:
Series A, $0.01 par value, 1,800,000
shares authorized,
no shares issued and outstanding
— —
Series B, $0.01 par value, 200,000 shares
authorized,
no shares issued and outstanding
— —
Common stock, $0.01 par value, 75,000,000
shares authorized,
38,090,707 and 37,802,950 shares issued,
and 29,598,548
and 29,386,870 shares outstanding,
respectively
381 378 Additional paid-in capital 136,241 131,232
Treasury stock, 8,492,159 and 8,416,080,
respectively, common
shares at cost
(69,116 ) (66,886 ) Retained earnings
153,760
144,217 Total stockholders’
equity 221,266
208,941 Total liabilities and
stockholders’ equity $ 293,604
$ 281,525
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31,
2013 and 2012
(In thousands, except per-share
amounts)
(Unaudited)
Three Months EndedDecember
31,
2013 2012
REVENUES: Gaming operations $ 33,608 $ 29,974 Gaming equipment and
system sales 24,891 14,004 Other
660
324 Total revenues
59,159 44,302
OPERATING COSTS AND EXPENSES: Cost of gaming
operations revenue(1) 3,850 3,274 Cost of equipment and system
sales 11,825 6,185 Selling, general and administrative expenses
13,718 11,343 Research and development 4,308 4,093 Amortization and
depreciation
10,436
7,964 Total operating costs and expenses
44,137
32,859 Operating income
15,022 11,443 OTHER INCOME (EXPENSE): Interest
income 91 170 Interest expense (258 ) (296 ) Other income
15 10 Income
before income taxes 14,870 11,327 Income tax
benefit (expense)
(5,327 )
(4,214 ) Net income $
9,543 $ 7,113
Basic earnings per common share $
0.32 $
0.25 Diluted earnings per common share $
0.31 $
0.24 Shares used in
earnings per common share: Basic 29,618 28,330 Diluted 31,047
30,017 (1) Cost of gaming operations revenue
excludes depreciation and amortization of gaming equipment, content
license rights and other depreciable assets, which are included
separately in the amortization and depreciation line item.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWSFor the Three Months Ended December 31, 2013 and
2012
(Unaudited)
2013
2012 CASH FLOWS FROM OPERATING
ACTIVITIES: (In thousands) Net income $ 9,543 $ 7,113
Adjustments to reconcile net income to
cash provided by
operating activities:
Amortization and depreciation 10,436 7,964 Accretion of contract
rights 2,415 1,953 Share-based compensation 1,270 860 Other
non-cash items (15 ) 1,175 Interest income from imputed interest
(55 ) (146 ) Changes in operating assets and liabilities 1,254
(3,479 ) Tax benefit from exercise of stock options
(2,521 ) (872
) NET CASH PROVIDED BY OPERATING ACTIVITIES
22,327
14,568 CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisitions of property and equipment
and leased gaming equipment
(10,414 ) (12,654 ) Acquisition of intangible assets (2,725 )
(2,066 )
Advances under development and placement
fee
agreements
— (3,262 ) Repayments under development agreements
57 3,607 NET CASH
USED IN INVESTING ACTIVITIES (13,082
) (14,375
) CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 1,221 1,425 Tax benefit
from exercise of stock options 2,521 872 Principal payments of
long-term debt (925 ) (925 ) Purchase of treasury stock
(2,230 ) (2,025
) NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 587
(653 ) Net increase
(decrease) in cash and cash equivalents 9,832 (460 ) Cash and cash
equivalents, beginning of period
102,632
73,755 Cash and cash equivalents, end of
period $
112,464 $
73,295
Reconciliation of U.S. GAAP to Non-GAAP measures:
This press release and accompanying schedules provide certain
information regarding (i) EBITDA, (ii) net cash, (iii) free cash
flow, (iv) adjusted diluted earnings per share, and (v) pro-forma
diluted earnings per share, all of which may be considered non-GAAP
financial measures under the rules of the Securities and Exchange
Commission. The non-GAAP financial measures included in the press
release are reconciled to the corresponding GAAP financial measures
below, or above in this release for pro-forma diluted earnings per
share, as required under the rules of the Securities and Exchange
Commission regarding the use of non-GAAP financial measures. We
define (i) EBITDA as net income before net interest expense, income
taxes, depreciation, amortization and accretion of contract rights,
(ii) net cash as cash and cash equivalents less long-term debt,
(iii) free cash flow as cash flow from operating activities less
the acquisition of property and equipment and leased gaming
equipment, (iv) adjusted diluted earnings per share reflects an
add-back for excessive insurance claims, and (v) pro-forma diluted
earnings per share reflects a tax expense rate adjustment. EBITDA,
net cash, free cash flow, adjusted diluted earnings per share and
pro-forma diluted earnings per share are not recognized financial
measures under GAAP, but we believe that each is useful in
measuring our operating performance. We believe that the use of the
non-GAAP financial measure EBITDA enhances an overall understanding
of the Company’s past financial performance, and provides useful
information to the investor by comparing our performance across
reporting periods on a consistent basis and the use of EBITDA by
other companies in the gaming equipment sector as a measure of
performance. We believe that the non-GAAP measures of net cash and
free cash flow provide useful information to investors as each
enhances the overall understanding of our operating performance. We
present adjusted diluted earnings per share in order to allow
investors to evaluate how we would have performed had above average
insurance claims not been incurred during the three month period
ended December 31, 2013 and we present pro-forma diluted earnings
per share in order to allow investors to evaluate how we would have
performed had our effective tax rate for fiscal 2013 been 37%.
Investors should not consider these measures in isolation or as a
substitute for net income, operating income, or any other measure
for determining the Company’s operating performance that is
calculated in accordance with GAAP. In addition, because these
measures are not calculated in accordance with GAAP, they may not
necessarily be comparable to similarly titled measures employed by
other companies.
(in thousands)
For the Three Months
EndedDecember 31,
2013 2012 Net
income $ 9,543 $ 7,113 Add back: Amortization and depreciation
10,436 7,964 Accretion of contract rights(1) 2,414 1,953 Interest
expense, net 167 126 Income tax expense
5,327
4,214 EBITDA $
27,887 $
21,370 1) “Accretion of contract rights”
relates to the amortization of intangible assets for development
projects. These amounts are netted against revenues in the
Consolidated Statements of Operations.
Net Cash
(in thousands)
As of December
31, September 30, 2013
2013 Cash and cash equivalents $ 112,464 $
102,632 Less: Long-term debt
(28,675
) (29,600 ) Net cash
$
83,789 $
73,032
Free Cash Flow
(in thousands)
For the Three Months
EndedDecember 31,
2013 2012 Net
cash provided by operating activities $ 24,848 $ 14,568 Less: Net
capital expenditures
(10,414 )
(12,654 ) Free cash flow $
14,434 $
1,914
Adjusted Diluted Earnings Per
Share
For the Three Months Ended
December 31, EPS Reconciliation:
2013
2012 As reported $ 0.31 $ 0.24 Add-back
excessive insurance claims
0.02
- Adjusted Diluted EPS $
0.33 $
0.24
Multimedia Games Holding Company, Inc.Adam Chibib,
512-334-7500Chief Financial OfficerorJCIRRichard Land or James
Leahy212-835-8500mgam@jcir.com
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