Multimedia Games Reports Q3 FY '08 Revenue of $30.3 Million and Net Income of $0.2 Million
AUSTIN, Texas--(BUSINESS WIRE)--Multimedia Games, Inc. (Nasdaq: MGAM) today reported operating results for its 2008 fiscal third quarter ended June 30, 2008, as summarized below:
Summary and Review of Q3 Results:
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(In millions, except per-share and player terminal data) |
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| For the Three Months | ||||||
| Ended June 30, | ||||||
| 2008 | 2007 | |||||
| Revenue | $ | 30.3 | $ | 30.9 | ||
| EBITDA(1) | $ | 15.7 | $ | 17.5 | ||
| Net income | $ | 0.2 | $ | 0.7 | ||
| Diluted earnings per common share | $ | 0.01 | $ | 0.02 | ||
| Average installed player terminals: | ||||||
| Class II | ||||||
| (Legacy and Reel Time Bingo(R) games) | 2,352 | 5,110 | ||||
| Oklahoma compact games(2) | 5,305 | 3,846 | ||||
| Mexico | 4,355 | 1,893 | ||||
| Other gaming units(3) | 2,752 | 2,662 | ||||
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(1) |
EBITDA is defined as earnings before interest, taxes, amortization, depreciation, and accretion of contract rights. A reconciliation of EBITDA to net income (loss), the most comparable generally accepted accounting principles ("GAAP") financial measure, can be found attached to this release. |
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(2) |
"Oklahoma compact games" includes stand-alone offerings and server-based games. |
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(3) |
"Other gaming units" includes those gaming units placed in charity halls, Malta, and the Rhode Island lottery. |
For the fiscal 2008 third quarter, Multimedia Games reported revenue of $30.3 million, compared with revenue of $30.9 million in the comparable period of fiscal 2007. The year-over-year revenue decline primarily reflects a 39% decline in Class II revenue and a 24% decline in revenue derived from the charity bingo market, offset in part by a 33% improvement in revenue from games played under the compact in Oklahoma, a 109% increase in revenue derived from the electronic bingo market in Mexico, and a 19% revenue gain related to Multimedia’s New York Lottery operations. In addition, revenue derived from the Oklahoma market, which includes revenue from compact games and from Class II games, improved by 8% compared to the prior year period.
Net income for the 2008 third quarter period was $0.2 million, or $0.01 per diluted share, compared to net income of $0.7 million, or $0.02 per diluted share, in prior year period.
Anthony Sanfilippo, Multimedia’s President and CEO, commented, “Since I joined Multimedia Games in mid-June, I have engaged in a discovery process to understand our Company’s strengths and opportunities. I have met with customers and visited their casinos and facilities. And, I have talked with Multimedia team members and other stakeholders to gain insight into ways we can improve and become a more valuable company. We are carefully assessing our existing organizational structure in terms of our ability to support the products and systems we offer, where we deploy those products, and whether resources are aligned with present commitments and future opportunities.
“First, let me say that we have terrific customers and business partners. In the key markets of Oklahoma and Mexico, these partners are well disciplined and forward-thinking, providing Multimedia with an opportunity to leverage existing relationships and committed floor space at their facilities in ways that should prove to be mutually beneficial. In Oklahoma, our customers are significant players in the future of gaming entertainment, and we will focus talent and resources to assist them with improving the performance of their gaming floors. I am pleased with our year-over-year revenue growth in Oklahoma and look forward to the imminent growth of our installed base which will come with the opening of our customer’s expanded facility north of Dallas. The Chickasaw Nation’s WinStar World Casino will open the first phase of its terrific new facility in early September, and we will have placement of approximately 600 new gaming units on the casino floor.
“In Mexico, we are fortunate to have a relationship with Apuestas Internacionales, S.A., a subsidiary of Televisa, a tremendous company that is committed to making gaming entertainment a viable choice for entertainment in Mexico. We will assist our partners at Televisa, as well as our other customers in Mexico, to work through issues typically associated with the early maturation of new gaming markets. This market provides an opportunity for us to provide insights into a means of unlocking value and creating a long-term business model.
“The review of our products and systems reveals strength and opportunity, as we continue our move into the Class III market. A particular bright spot appears to be our wide body units, as initial deployments are performing well, and growing in popularity among our customers and their players. However, we have significant work to do to ensure that we are providing robust, reliable and relevant technology, content and products to our customers. We are establishing a focused and disciplined process of determining how we approach providing resources for both existing and new products. We are committed to excellence in all that we do and are reviewing current practices to ensure we are focused on doing those things that ultimately increase the value of Multimedia Games.
“I am particularly pleased with two recent additions to our senior management team. Ginny Shanks, our new Chief Marketing Officer, is widely recognized as a leader in marketing and branding in the gaming entertainment industry. Among other responsibilities, she will oversee efforts to support the appeal and performance of Multimedia’s products on our customers’ gaming floors, in addition to being involved in all phases of product development from inception to deployment. Uri Clinton, our new General Counsel, will head up a newly created Legal Affairs Department, utilizing his considerable experience to bring both improved efficiencies and cost savings to the organization, while also allowing us to expand our product licensing opportunities.”
Randy Cieslewicz, Multimedia’s Chief Financial Officer, added, “Moving forward, Multimedia will closely evaluate and monitor the value of all aspects of our operations, including staff size and resource allocation as well as third-party vendor, supplier and consulting relationships, to ensure that each element contributes to operational or financial improvements and growth in shareholder value. In addition, as Multimedia pursues growth opportunities in new gaming markets, we will continuously review every market we currently serve to be certain each of these opportunities generates, or will generate, an appropriate return on the investment the Company has made in people, products and technology.”
Mr. Sanfilippo, concluded, “As we complete our management team’s internal review process and further assess market opportunities, we will be able to reveal more specific plans and initiatives. Our collective goal at Multimedia Games is to be a company that may be counted upon to consistently deliver value to our shareholders.”
The table below sets forth Multimedia’s end-of-period installed player terminal base by product line or market for the fiscal quarters ended June 30, 2008, March 31, 2008, and June 30, 2007.
|
Quarter |
Reel |
Legacy |
Total |
Class III |
Mexico |
Charity |
Total |
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| 6/30/2008 | 2,132 | 555 | 2,687 | 5,375 | 4,294 | 2,362 | 14,718 | |||||||
| 3/31/2008 | 2,223 | 563 | 2,786 | 5,169 | 4,039 | 2,469 | 14,463 | |||||||
| 6/30/2007 | 4,624 | 519 | 5,143 | 3,973 | 2,426 | 2,569 | 14,111 |
| (1) | Includes 252 traditional electronic bingo games installed in certain international markets for the quarters ended June 30, 2008 and March 31, 2008 and 166 units for the quarter ended June 30, 2007. | |
| (2) | The "Class III Units" totals as of 6/30/2008 and 3/31/2008 include 50 units that were installed in Rhode Island compared to no Class III units installed in Rhode Island at 6/30/2007. "Class III Units" totals for all three above noted periods also reflects installations of games pursuant to the approved gaming compact between Native American tribes, racetracks and the State of Oklahoma, including Multimedia's and other vendors' stand-alone games. |
The table below breaks out by product line Multimedia’s end-of-period, Oklahoma installed player terminal base for the fiscal quarters ended June 30, 2008, March 31, 2008 and June 30, 2007.
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Quarter |
Total |
Stand-Alone |
Other |
Total |
Total |
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| 6/30/2008 | 1,104 | 5,248 | 77 | 5,325 | 6,429 | |||||
| 3/31/2008 | 1,183 | 4,902 | 217 | 5,119 | 6,302 | |||||
| 6/30/2007 | 2,194 | 3,448 | 525 | 3,973 | 6,167 |
| (1) |
“Other Compact Units” represents server-based games. |
On or about August 15, 2008, Multimedia will provide an update on its total installed base and product mix as of July 31, 2008.
Research and development expense in both the June 30, 2008 and June 30, 2007 quarters was $4.0 million. During the quarters ended June 30, 2008 and March 31, 2008, Multimedia capitalized $0.9 million in costs related to the internal development of software for its gaming products and systems. Approximately $0.8 million of the capitalized costs in the June 2008 quarter were related to the development of new content, and approximately $0.1 million was for systems. For the three months ended June 30, 2008, capital expenditures were $13.4 million, of which $13.3 million was for gaming equipment and license purchases, and $0.1 million was for all other capital expenditures. Included in the gaming equipment purchases was $6.8 million related to gaming equipment and licenses purchased under the third party vendor agreements. The remaining equipment purchases relate primarily to the hardware associated with the development of our proprietary Class III products and maintenance capital expenditures.
Conference Call
Multimedia Games, Inc. is hosting a conference call and webcast today, August 6, beginning at 9:00 a.m. EDT (8:00 a.m. CDT). Both the call and the webcast are open to the general public. The conference call number is 719-325-4850 (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 www.shareholder.com/mgam/medialist.cfm. Approximately two hours after the call has concluded, an archived version of the webcast will be available for replay at the same location or at www.multimediagames.com/Investors/Index.htm.
About the Company
Multimedia Games is a leading developer and supplier of comprehensive systems, content, electronic games and player terminals for the Native American gaming market, as well as for the casino, charity and international bingo, video lottery, and sweepstakes markets. The Company's ongoing development and marketing efforts focus on gaming systems and products for use by Native American tribes throughout the United States, the commercial casino market, video lottery systems and other products for domestic and international lotteries, and products for charity and international bingo and emerging markets, including sweepstakes, promotional, amusement with prize, and coupon gaming opportunities. Additional information may be found at www.multimediagames.com.
Cautionary Language
This press release contains forward-looking statements based on Multimedia’s current expectations. The words “will,” “expect,” “believe,” and similar words and phrases as they relate to Multimedia are intended to identify such forward-looking statements. These forward-looking statements reflect the current views and assumptions of Multimedia, and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. These risks and uncertainties include, but are not limited to: (i) the risk that Multimedia does not generate anticipated revenue growth in the Oklahoma market through the opening of the Chickasaw Nation’s WinStar World Casino or otherwise, or does not increase the percentage of its installed base in the state operating under long-term, revenue share agreements due to delays or difficulties in the Company’s planned conversion to Class III stand-alone games in Oklahoma, or there is a lack of market acceptance of the Class III stand-alone games or delays in the opening of the key customer property in southern Oklahoma; (ii) the risk that Multimedia’s installed base in Mexico will not grow as expected due to delays in the opening of new facilities in Mexico or the placement of fewer units than anticipated at Mexican facilities; and, (iii) the continuing risks to the Company’s financial condition and operations from regulatory developments, ongoing competitive pressures, the failure of customers to place terminals and units into operation, the removal of terminals from facilities of existing customers and the failure of one or more of our projected revenue sources or significant development opportunities to generate anticipated revenues. Other important risks and uncertainties that may affect the Company’s business are detailed from time to time in the “Certain Risks” and “Risk Factors” sections and elsewhere in Multimedia’s filings with the Securities and Exchange Commission. Multimedia disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
| CONSOLIDATED BALANCE SHEETS | ||||||||
| As of June 30, 2008 and September 30, 2007 | ||||||||
|
(In thousands, except share and per-share amounts) |
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| (Unaudited) | ||||||||
| June 30, | September 30, | |||||||
| ASSETS | 2008 | 2007 | ||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 4,193 | $ | 5,805 | ||||
|
Accounts receivable, net of allowance for doubtful accounts of $1,138 and $854, respectively |
25,209 | 22,176 | ||||||
| Inventory | 2,445 | 3,602 | ||||||
| Deferred contract costs | 212 | — | ||||||
| Prepaid expenses and other | 2,226 | 2,906 | ||||||
| Notes receivable, current portion | 20,499 | 12,248 | ||||||
| Federal and state income tax receivable | 511 | — | ||||||
| Deferred income taxes | 3,950 | 1,932 | ||||||
| Total current assets | 59,245 | 48,669 | ||||||
| Restricted cash and long-term investments | 868 | 928 | ||||||
| Leased gaming equipment, net | 35,829 | 38,579 | ||||||
| Property and equipment, net | 73,055 | 75,332 | ||||||
| Notes receivable, net | 54,663 | 36,797 | ||||||
| Intangible assets, net | 39,802 | 35,884 | ||||||
| Other assets | 5,248 | 3,497 | ||||||
| Deferred income taxes | 19,081 | 16,583 | ||||||
| Total assets | $ | 287,791 | $ | 256,269 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current portion of long-term debt | $ | 1,259 | $ | 563 | ||||
| Accounts payable and accrued expenses | 21,455 | 22,021 | ||||||
| Federal and state income tax payable | 2,021 | 2,444 | ||||||
| Current deferred revenue | 2,177 | 1,020 | ||||||
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Total current liabilities |
26,912 | 26,048 | ||||||
| Revolving line of credit | 34,171 | 7,000 | ||||||
| Long-term debt, less current portion | 69,262 | 74,484 | ||||||
| Other long-term liabilities | 1,168 | 928 | ||||||
| Deferred revenue, less current portion | 4,146 | — | ||||||
| Total liabilities | 135,659 | 108,460 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock: | ||||||||
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Series A, $0.01 par value, 1,800,000 shares authorized, no shares issued and outstanding |
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| -- | -- | |||||||
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Series B, $0.01 par value, 200,000 shares authorized, no shares issued and outstanding |
— | — | ||||||
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Common stock, $0.01 par value, 75,000,000 shares authorized, 32,491,238 and 32,134,614 shares issued, and 26,587,821 and 26,231,197 shares outstanding, respectively |
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| 325 | 321 | |||||||
| Additional paid-in capital | 82,448 | 80,112 | ||||||
| Treasury stock, 5,903,417 common shares at cost | (50,128 | ) | (50,128 | ) | ||||
| Retained earnings | 119,024 | 117,498 | ||||||
| Accumulated other comprehensive income | 463 | 6 | ||||||
| Total stockholders’ equity | 152,132 | 147,809 | ||||||
| Total liabilities and stockholders’ equity | $ | 287,791 | $ | 256,269 | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| For the Three Months Ended June 30, 2008 and 2007 | ||||||||
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(In thousands, except share and per-share amounts) |
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(Unaudited) |
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| 2008 |
20072 |
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| REVENUES: | ||||||||
| Gaming revenue: | ||||||||
| Class II | $ | 6,239 | $ | 10,269 | ||||
| Oklahoma Compact | 14,562 | 10,909 | ||||||
|
Charity |
3,332 |
4,368 |
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| All other(1) | 5,467 | 3,679 | ||||||
| Gaming equipment, system sale and lease revenue | 314 | 1,181 | ||||||
| Other | 338 | 492 | ||||||
| Total revenues | 30,252 | 30,898 | ||||||
| OPERATING COSTS AND EXPENSES: | ||||||||
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Cost of gaming equipment and systems sold and royalty fees |
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| 336 | 1,023 | |||||||
| Selling, general and administrative expenses | 16,102 | 15,376 | ||||||
| Amortization and depreciation | 13,605 | 14,771 | ||||||
| Total operating costs and expenses | 30,043 | 31,170 | ||||||
| Operating income (loss) | 209 | (272 | ) | |||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest income | 1,342 | 924 | ||||||
| Interest expense | (2,031 | ) | (1,003 | ) | ||||
| Other | 828 | 1,607 | ||||||
| Income before income taxes | 348 | 1,256 | ||||||
| Income tax expense | (184 | ) | (571 | ) | ||||
| Net income | $ | 164 | $ | 685 | ||||
| Basic earnings per share | $ | 0.01 | $ | 0.02 | ||||
| Diluted earnings per share | $ | 0.01 | $ | 0.02 | ||||
| Common Shares used in earnings per share calculation: | ||||||||
| Basic | 26,338,774 | 27,911,379 | ||||||
| Diluted | 27,153,313 | 29,746,543 | ||||||
| (1) |
Gaming revenue: “All other” includes recurring revenue from Class III Washington State, lottery, and Mexico markets. |
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| (2) | Certain amounts have been reclassified to conform to the current period presentation. |
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| For the Nine Months Ended June 30, 2008 and 2007 | ||||||||
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(In thousands, except share and per-share amounts) |
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|
(Unaudited) |
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| 2008 |
2007(2) |
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| REVENUES: | ||||||||
| Gaming revenue: | ||||||||
| Class II | $ | 21,825 | $ | 38,499 | ||||
| Oklahoma Compact | 40,261 | 25,494 | ||||||
| Charity |
11,585 |
13,570 | ||||||
| All other(1) | 15,367 | 9,203 | ||||||
| Gaming equipment, system sale and lease revenue | 2,463 | 2,208 | ||||||
| Other | 1,188 | 1,700 | ||||||
| Total revenues | 92,689 | 90,674 | ||||||
| OPERATING COSTS AND EXPENSES: | ||||||||
|
Cost of gaming equipment and systems sold and royalty fees |
1,540 | 1,739 | ||||||
| Selling, general and administrative expenses | 48,836 | 50,521 | ||||||
| Amortization and depreciation | 38,561 | 44,209 | ||||||
| Total operating costs and expenses | 88,937 | 96,469 | ||||||
| Operating income (loss) | 3,752 | (5,795 | ) | |||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest income | 3,612 | 3,573 | ||||||
| Interest expense | (6,662 | ) | (3,534 | ) | ||||
| Other | 2,038 | 2,718 | ||||||
| Income (loss) before income taxes | 2,740 | (3,038 | ) | |||||
| Income tax (expense) benefit | (919 | ) | 917 | |||||
| Net income (loss) | $ | 1,821 | $ | (2,121 | ) | |||
| Basic earnings (loss) per share | $ | 0.07 | $ | (0.08 | ) | |||
| Diluted earnings (loss) per share | $ | 0.07 | $ | (0.08 | ) | |||
| Shares used in earnings per share calculation: | ||||||||
| Basic | 26,270,676 | 27,708,412 | ||||||
| Diluted | 27,241,722 | 27,708,412 | ||||||
| (1) |
Gaming revenue: “All other” includes recurring revenue from Class III Washington State, lottery, and Mexico markets. |
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| (2) | Certain amounts have been reclassified to conform to the current year presentation. |
Reconciliation o