HONG KONG--(BUSINESS WIRE)--Elixir Gaming Technologies, Inc. (NYSE Amex:EGT) (“Elixir Gaming” or “the Company”), a leading technology and solutions provider to the Pan-Asian gaming industry, today reported operating results for the fourth quarter and fiscal year ended December 31, 2009 and reviewed recent corporate progress.
Clarence Chung, Chairman and Chief Executive Officer of Elixir Gaming, commented, “I am pleased to report that Elixir Gaming posted solid financial results with the achievement of record gaming machine participation revenue for the fourth quarter period and positive adjusted EBITDA for the first fiscal year since our new business model was enacted in September 2007. While the 2009 global economic environment was challenging, it was a year of positive change for Elixir Gaming. We made substantial progress in restructuring our operations and streamlining our cost structure, which is reflected in our recent financial performance. With solid momentum in our core gaming participation operations, the successful refocusing of our operations and execution of our cost reduction initiatives, and improved financial flexibility, Elixir Gaming is better positioned to capitalize on selected expansion opportunities and grow shareholder value in the future.”
Record Gaming Participation Revenue Driven by Strong Average WUD and Selective Machine Installation Growth
Consolidated average WUD for the fourth quarter of 2009 was $105, up 22% from the third quarter of 2009 and up 123% from the prior-year period. The increase was primarily driven by strong contribution from the Company’s machine placements at NagaWorld, the Company’s sole venue in operation in Cambodia, as well as steady gains in its Philippines operations.
Average WUD for the fourth quarter of 2009 for Cambodia was $196, up 5% from $187 in the third quarter of 2009. Since the Company’s initial machine placements at NagaWorld at the end of January 2009, Elixir Gaming has experienced aggressive growth in average WUD on an increasing installed machine base as a result of the benefits of additional marketing programs and a strong machine mix. The Company achieved average WUD in excess of over $200 for the months of November and December 2009 and January 2010. In February 2010, despite the addition of 120 units during the month and factoring in the ramp up period for new machines, average WUD remained strong at $188.
Average WUD for the fourth quarter of 2009 in the Philippines was $57, up 8% from $53 in the third quarter of 2009 and up 12% from $51 in the prior-year period. The increase reflects a return to normal business activities after the severe storms that negatively impacted the third and beginning of the fourth quarter 2009 periods and the Company’s continued focus on implementing more targeted marketing and promotion initiatives. In an effort to optimize long-term operating performance, Elixir Gaming is strategically reallocating gaming assets within the Philippines to focus on higher-performing venues and, as such, could experience minor short-term fluctuations in average WUD in this market.
The improvement in overall WUD was achieved on a growing installed machine base. During the fourth quarter of 2009, Elixir Gaming increased its total machine seats in operation by 14% to 1,299 machine seats in a total of eight venues in operation, comprised of seven venues in the Philippines with a total of 859 installed units and one venue in Cambodia with a total of 440 installed units as of December 31, 2009.
As of March 1, 2010, Elixir Gaming had an operating machine base of 1,393 in a total of seven venues in operation, comprised of six venues in the Philippines with a total of 833 installed units and one venue in Cambodia with a total of 560 installed units. At NagaWorld, in mid-February 2010, the Company executed quickly on its expansion contract dated December 30, 2009 and placed an initial 120 of the contracted 200 additional machine units at this venue. The remaining 80 machine placements under this contract are on target for installation during the second quarter of 2010. In the Philippines, as part of its initiative to reallocate gaming assets in this market, Elixir Gaming closed one under-performing venue in January 2010 and redeployed certain gaming assets to higher-performing venues.
Successful Implementation of Cost Reduction Initiatives
While executing measures to improve WUD and expand the Company’s installed machine base, Elixir Gaming continued to focus on strict cost containment after the successful implementation of its aggressive cost reduction initiatives in the fiscal year 2009. Selling, general and administrative (SG&A) cash expense for the fourth quarter of 2009 was $1.7 million, in line with the Company’s prior guidance range of $1.5 to $1.8 million for the quarter. The Company reduced SG&A cash expense for the fiscal year 2009 to $7.6 million, down 45% from $13.9 million in the prior year.
Update on Gaming Asset Impairment Charge
As previously announced on January 6, 2010, Elixir Gaming recorded an impairment to its gaming assets, representing the write-down to fair market value of certain gaming machines in inventory that were deemed as non-performing for the Company’s current target markets or their customers’ preferences and, to a lesser extent, the write-down of the Company’s Philippines operations’ gaming assets based on the current carrying value of the machines in operation exceeding the expected cash flow generated from the Philippines operations. Based on the Company’s assessment of impairment of gaming machines, including the financial valuation of the Company’s Philippines assets by an independent third-party valuation firm, the total amount of the non-cash impairment was determined to be $13.7 million and was recorded as of December 31, 2009. After the impairment charge, the Company currently has approximately 400 gaming machines in inventory which are suitable for deployment for its potential expansion plans.
Q4 and 2009 Financial Review
Historical revenues and expenses from the Company’s portfolio of automated card verification machines and electronic card shuffling systems, which were sold to Shuffle Master, Inc. in April 2009, have been reclassified as discontinued operations.
Elixir Gaming’s fourth quarter of 2009 consolidated revenue was $4.5 million compared to $3.6 million in the third quarter of 2009 and $2.0 million for the fourth quarter of 2008. Revenue from gaming machines on participation was $2.5 million in the fourth quarter of 2009 compared to revenue of $1.8 million in the third quarter of 2009 and $1.0 million in the fourth quarter of 2008. Total revenue for the fiscal year 2009 increased to $15.6 million from $11.1 million in the fiscal year 2008. The sequential and annual revenue growth was driven by strong performance in the Company’s gaming machines on participation and gaming chip operations offset by declines in its non-gaming business.
Based on the Company’s improving revenue and the successful execution of its cost reduction initiatives, Elixir Gaming posted positive adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) for the fourth quarter of 2009, marking the third consecutive quarter of achieving this important milestone since the Company enacted its new business model in September 2007. Fourth quarter of 2009 adjusted EBITDA was $0.8 million compared to $0.3 million for the third quarter of 2009 and a loss of $3.3 million for the fourth quarter of 2008. Adjusted EBITDA for the fiscal year 2009 was $0.03 million compared to negative $11.4 million for the fiscal year 2008.
Elixir Gaming reported a fourth quarter of 2009 net loss of $16.3 million, or $0.14 per share, on a weighted average share count of approximately 115.0 million shares. Excluding the aforesaid non-cash impairment charge to gaming assets of $13.7 million, or $0.12 per share, during the quarter, the Company reported a net loss of $2.6 million, or $0.02 per share. This compares to a net loss for the third quarter of 2009 of $3.7 million, or $0.03 per share, on a weighted average share count of approximately 115.0 million shares and to a net loss for the fourth quarter of 2008 of $4.8 million, or $0.04 per share, on a weighted average share count of approximately 114.9 million shares. For the fiscal year 2009, Elixir Gaming reported a net loss of $26.4 million, or $0.23 per share, on a weighted average share count of 115.0 million. Excluding the said non-cash impairment charge of $13.7 million in the fourth quarter of 2009, the Company reported a net loss of $12.7, or $0.11 per share. For the fiscal year 2008, Elixir Gaming reported a net loss of $27.0 million, or $0.23 per share, on a weighted average share count of 114.9 million.
Excluding the said non-cash impairment charge in the fourth quarter of 2009, the fourth quarter and the fiscal year 2009 net losses declined significantly compared to the net losses in the prior-year periods. For the fourth quarter of 2009, the reduction in net loss compared to the prior year was primarily due to: higher gaming participation revenues driven by improving average WUD; higher table game products revenue and resulting gross margins due to increased gaming chip orders; substantially reduced operating expenses; and lower foreign currency losses; all of which were partially offset by lower sales and gross margins in the Company’s non-gaming business. For the fiscal year 2009, the reduction in net loss compared to the prior year was primarily due to: higher gaming participation revenues driven by improving average WUD and a higher installed machine base; higher table game products revenue and resulting gross margins due to increased gaming chip orders; substantially reduced operating expenses; and a one-time gain of $0.7 million related to the settlement of a legacy legal suit; all of which were partially offset by the higher depreciation expense of the Company’s gaming machine participation business due to the increase in the number of machines in operation, lower sales and gross margins in the Company’s non-gaming business, reduced interest income, and higher income tax expense.
First Quarter 2010 Guidance and Future Outlook
To date during 2010, Elixir Gaming has continued to make solid progress in building on its operational and financial achievements from the fiscal year 2009. As a result, the Company has the following expectations for its first quarter of 2010.
Clarence Chung concluded, “With dramatic improvements to our operations in the fiscal year 2009 and a solid beginning to the fiscal year 2010, we are enthusiastic about our future growth opportunities. We continue to aggressively focus on maximizing gaming participation revenue and average net win results from our growing base of installed units in both our markets. In Cambodia, we continue to work with our venue operator partner, NagaWorld, to develop and implement targeted marketing initiatives, which drive player traffic and stickiness and shorten the ramp up time for new machine installations. In the Philippines, we are focused on improving long-term performance with the benefit of the reallocation of gaming assets to focus on the top-performing venues, targeted marketing initiatives, and the ramp up of several immature venues.
In addition, we are actively pursuing selective placement opportunities in new and existing markets, where we can leverage our expertise and relationships and capitalize on the solid foundation we have built in Cambodia and the Philippines. For such new potential projects, as with NagaWorld, we are seeking an operator role. Key markets of interest are border cities in Cambodia with strong feeder markets from neighboring countries such as Thailand and Vietnam, as well as opportunities in new countries such as Vietnam and Laos. We are encouraged by the pipeline of potential projects in these markets and remain focused on quality and not quantity in an effort to maximize return on our gaming assets.
We intend to augment our existing inventory with the purchase of additional gaming machines to source our 2010 targeted deployment plans. Given our strong current and projected cash flow generation capability from our operations at NagaWorld, the state of the previously-owned gaming machine market, and our relationships with gaming equipment manufacturers, we anticipate funding our existing targeted 2010 expansion plans from cash on hand and expected net cash flow from operations.”
Elixir Gaming is hosting a conference call and simultaneous webcast at 8:30 a.m. ET today, March 9, both of which are open to the general public. The conference call number is 800/758-5606 or 212/231-2900. Questions and answers will be reserved for call-in analysts and investors. Interested parties may also access the live call on the Internet at www.elixirgaming.com. Please allow 15 minutes to register and download and install any necessary software. Following its completion, a replay of the call can be accessed for thirty days on the Internet at www.elixirgaming.com.
About Elixir Gaming Technologies, Inc.
Elixir Gaming Technologies, Inc. (NYSE Amex:EGT) is a provider of gaming technology solutions. The Company secures long-term contracts to provide comprehensive turn-key solutions to 3, 4, and 5 star hotels and other well-located venues in Asia that seek to offer casino gaming products. The Company retains ownership of the gaming machines and systems and receives recurring daily fees based on an agreed upon percentage of the net gaming win per machine and provides on-site maintenance. The Company has established a strategic presence in the Asia Pacific region with a focus on Cambodia and the Philippines markets. For more information please visit www.elixirgaming.com.
Forward Looking Statements
This press release contains forward-looking statements concerning Elixir Gaming, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those forward-looking statements include statements regarding expectations for the business of Elixir Gaming, its working capital requirements and future revenue and profitability. Such statements are subject to certain risks and uncertainties, and actual circumstances, events or results may differ materially from those projected in such forward-looking statements. Factors that could cause or contribute to differences include, but are not limited to, risks related to Elixir Gaming’s inability to place gaming machines at significant levels, whether the gaming machines placed generate the expected amount of net-win, the ability of Elixir Gaming to acquire additional capital as and when needed, the ability of Elixir Gaming to collect revenue and protect its assets and those other risks set forth in Elixir Gaming’s annual report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 30, 2009 and our Form 10-Q for the three months ended September 30, 2009 filed on November 10, 2009. Elixir Gaming cautions readers not to place undue reliance on any forward-looking statements. Elixir Gaming does not undertake, and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.
Elixir Gaming Technologies, Inc.
Consolidated Statements of Operations
Three Months Ended
|Gaming machine participation||$||2,470,400||$||1,036,423||$||6,997,776||$||3,433,096|
|Table game products||674,920||53,346||4,515,923||608,786|
|Operating costs and expenses:|
|Cost of sales gaming machine participation:|
|Write-down of gaming assets||99,104||―||595,435||―|
|Other operating costs||165,425||123,495||1,051,161||778,861|
|Cost of table game products||403,055||(192,758||)||2,550,724||477,978|
|Cost of non-gaming products||1,264,987||896,559||4,220,174||6,159,292|
|Selling, general and administrative||2,165,759||562,302||8,829,432||17,401,765|
|Impairment of assets||13,666,588||749,831||14,091,088||2,118,660|
|Flood damage losses/(reversal)||(15,398||)||―||83,052||―|
|Research and development||75,490||119,231||276,781||678,047|
|Depreciation and amortization||234,722||300,536||1,036,661||1,063,728|
|Total operating costs and expense||20,796,063||5,589,472||43,411,708||37,520,572|
|Loss from operations||(16,260,320||)||(3,574,499||)||(27,789,049||)||(26,407,079||)|
|Other income /(expense):|
|Interest expense and finance fees||(142,794||)||(172,152||)||(536,805||)||(737,028||)|
Foreign currency gains/(losses)
|Loss on disposition of assets||(13,013||)||112,100||(106,711||)||89,324|
|Legal settlement gain||―||―||655,506||―|
|Total other income/(expense)||70,127||(346,331||)||376,154||602,677|
|Loss before income tax and discontinued operations||(16,190,193||)||(3,920,830||)||(27,412,895||)||(25,804,402||)|
|Income tax (expense)/benefit||(119,164||)||231,820||(486,806||)||209,322|
|Net loss from continuing operations||(16,309,357||)||(3,689,010||)||(27,899,701||)||(25,595,080||)|
|Net profit/(loss) from discontinued operations, net of tax||(6,485||)||(1,096,697||)||1,540,251||(1,360,128||)|
|Loss per share:|
|Income /(loss) from continuing operations||$||(0.14||)||$||(0.03||)||$||(0.24||)||(0.22||)|
|Income /(loss) from discontinued operations||$||(0.00||)||$||(0.01||)||$||0.01||(0.01||)|
|Basic and diluted loss per share||$||(0.14||)||$||(0.04||)||$||(0.23||)||$||(0.23||)|
|Weighted average common shares outstanding||114,956,667||114,946,667||114,956,667||114,945,602|
Elixir Gaming Technologies, Inc.
Consolidated Balance Sheets
|As of December 31|
|Cash and cash equivalents||$||4,189,740||$||14,504,433|
|Accounts receivable, trade, net of allowance for uncollectibles of $4,806 in 2009 and $923,603 in 2008||2,670,056||1,336,261|
|Due from a related party||12,286||531,109|
|Assets held for resale||930,000||―|
|Prepaid commitment fees||4,838,151||―|
|Deferred tax assets||89,789||―|
|Prepaid expenses and other current assets||770,125||1,299,487|
|Total current assets||14,316,033||18,845,418|
Accounts receivable, trade, net of current portion
|Gaming equipment and systems, net of accumulated depreciation of $16,742,710 in 2009 and $7,081,817 in 2008||26,506,966||48,351,545|
|Property and equipment, net of accumulated depreciation of $3,841,318 in 2009 and $2,917,153 in 2008||3,322,092||3,724,467|
|Intangible assets, net of accumulated amortization of $1,740,405 in 2009 and $2,356,271 in 2008||3,026,196||4,123,403|
|Contract amendment fees||687,500||―|
|Deposits and other assets||407,824||1,284,679|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Amount due to a related party||45,558||27,672|
|Notes payable to a related party, current portion||3,127,657||5,884,049|
|Capital lease obligations, current portion||187,637||269,371|
|Customer deposits and others||77,962||1,525,569|
|Total current liabilities||6,889,048||
|Notes payable to a related party, net of current portion||6,265,247||6,185,088|
|Capital lease obligations, net of current portion||413,601||468,424|
|Deferred tax liability||877,356||495,560|
|Common stock, $.001 par value, 300,000,000 shares authorized; and 114,956,667 and 114,956,667 shares issued and outstanding||114,958||114,958|
|Accumulated other comprehensive loss||(645,124||)||(2,107,842||)|
|Total stockholders’ equity||33,407,345||57,483,335|
|Total liabilities and stockholders’ equity||$||48,456,510||$||76,413,722|
Elixir Gaming Technologies, Inc.
Three Months Ended
(Income)/loss from discontinued
|Income tax expense/(benefit)||119,164||(231,820||)||486,806||(209,322||)|
|Depreciation and amortization||3,014,828||3,014,785||11,348,858||9,671,784|
|Stock option expense||100,887||(3,248,646||)||875,790||2,593,995|
|Impairment/ write-down of gaming assets||13,765,692||749,831||14,686,523||2,118,660|
|Flood damage losses/(reversal)||(15,398||)||―||83,052||―|
Note: The Company defines adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, and non-cash charges.