Elixir Gaming Technologies Reports Fourth Quarter and Fiscal Year 2009 Results and Provides Market Update

- Achieves Positive Adjusted EBITDA for Third Consecutive Quarter and for Fiscal Year 2009 Driven by Record Gaming Participation Performance and Strict Cost Control –

HONG KONG--()--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.

Highlights:

  • Consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) was $0.8 million for the fourth quarter of 2009, representing three consecutive quarters of positive adjusted EBITDA. Consolidated adjusted EBITDA for the fiscal year 2009 was $0.03 million compared to negative $11.4 million for the fiscal year 2008.
  • Total net revenue from gaming machines on participation for the fourth quarter of 2009 was a record $2.5 million, an increase of 34% on a quarterly sequential basis reflecting solid performance at NagaWorld.
  • Average consolidated win per unit per day (WUD) for the fourth quarter of 2009 was $105, an increase of 22% on a quarterly sequential basis.
  • As of March 1, 2010, total installed units in operation were 1,393 in seven venues, 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.
  • Continued progress on cost reduction and containment initiatives with fourth quarter of 2009 cash SG&A expense of $1.7 million, in line with the target range of $1.5 to $1.8 million. Cash SG&A expense for the fiscal year 2009 was down 45% from 2008 levels.
  • $4.2 million in cash as of December 31, 2009, after a payment of $2.7 million paid to NagaWorld on December 30, 2009 under the previously-announced additional machine placement and contract consolidation arrangement.
  • Net loss in the fourth quarter of 2009 includes a $13.7 million non-cash impairment charge to gaming assets recorded as of December 31, 2009.

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.

  • Quarterly sequential improvement in both total gaming machine participation revenue and consolidated EBITDA for the first quarter of 2010 driven by continued strength of its NagaWorld operations, an increasing installed machine base, and strict cost controls.
  • Based on its cost containment initiatives and current scale of operations, quarterly SG&A cash expense in the range of $1.6 to $1.8 million.
  • Solid cash flow from the Company’s operations at NagaWorld. As of March 1, 2010, Elixir Gaming had recouped $5.4 million of the $5.8 million commitment fee from the 200 gaming machines placed under the July 2009 expansion contract. Based on the continued strong performance of these machines, the Company estimates an impressive payback period of approximately six months since the initial machines under this contract were placed during September 2009.
  • Anticipated cash position of $4.0 to $5.0 million as of March 31, 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

(Unaudited)

   

Three Months Ended
December 31,

Years Ended
December 31,

2009   2008 2009   2008
Revenues:
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
Non-gaming products 1,390,423   925,204   4,108,960   7,071,611  
4,535,743 2,014,973 15,622,659 11,113,493
Operating costs and expenses:
Cost of sales gaming machine participation:
Machine depreciation 2,705,071 2,648,889 10,054,265 8,292,578
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
Restructuring charges 31,260   381,387   622,935   549,663  
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 )
Interest income 10,544 76,946 85,273 706,552

Foreign currency gains/(losses)

(10,680 ) (385,873 ) (89,533 ) 252,554
Loss on disposition of assets (13,013 ) 112,100 (106,711 ) 89,324
Legal settlement gain 655,506
Other 226,070   22,648   368,424   291,275  
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 )
Net loss $ (16,315,842 ) $ (4,785,707 ) $ (26,359,450 ) $ (26,955,208 )
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
2009   2008
(Unaudited)
ASSETS
Current assets:
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
Other receivables 194,812 78,082
Inventories 621,074 1,096,046
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

105,689
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
Goodwill 84,210 84,210
Contract amendment fees 687,500
Deposits and other assets 407,824   1,284,679  
Total assets $ 48,456,510   $ 76,413,722  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:

Accounts payable

$ 1,125,204 $ 806,538
Amount due to a related party 45,558 27,672
Accrued expenses 2,325,030 2,712,758
Short-term debt 29,372
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

11,255,329

 
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
Other liabilities 603,913 525,986
Deferred tax liability 877,356   495,560  
Total liabilities 15,049,165 18,930,387
 
Stockholders’ equity:
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
Additional paid-in-capital 414,863,618 413,987,828
Accumulated other comprehensive loss (645,124 ) (2,107,842 )
Accumulated deficit (380,926,107 ) (354,511,609 )
Total stockholders’ equity 33,407,345   57,483,335  
Total liabilities and stockholders’ equity $ 48,456,510   $ 76,413,722  
 

Elixir Gaming Technologies, Inc.

Adjusted EBITDA

(Unaudited)

   

Three Months Ended
December 31,

 

Years Ended
December 31,

 
2009   2008 2009   2008
 
Net loss $ (16,315,842 ) $ (4,785,707 ) $ (26,359,450 ) $ (26,955,208 )
(Income)/loss from discontinued

operations

6,485 1,096,697 (1,540,251 ) 1,360,128
Interest expense 142,794 172,152 536,805 737,028
Interest income (10,544 ) (76,946 ) (85,273 ) (706,552 )
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    
Adjusted EBITDA $ 808,066   $ (3,309,654 ) $ 32,860   $ (11,389,487 )

Note: The Company defines adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, and non-cash charges.

Contacts

Elixir Gaming
Traci Mangini, 312-867-0848
SVP, Corporate Finance

Contacts

Elixir Gaming
Traci Mangini, 312-867-0848
SVP, Corporate Finance