Gaming operations
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The approximate 8.3%, or 1,004 unit, year-over-year increase in the
Company’s installed base led to a 10.9% increase in revenue.
- The installed base grew 415 units on a quarterly sequential basis.
- The installed base of premium participation games increased 118 units on a quarterly sequential basis to 1,288 units.
- Revenue from the Company’s New York Lottery business decreased 2.9% year over year to $4.4 million.
Gaming equipment and system sales
- Revenue declined 10.3% year over year, reflecting the sale of 616 units to customers in 23 markets, compared to the sale of 647 units in the year-ago quarter.
- Total unit sales included the sale of 214 TournEvent units, bringing the Company’s nationwide TournEvent installed base to over 4,000 units in approximately 275 casinos.
- The top three markets for unit sales were Florida, Ohio and Nevada, which in aggregate accounted for 228 of the units sold during the quarter.
Operating expenses
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The year-over-year increase in total operating expenses was driven by:
- Higher cost of goods sold, including a 7.2% increase in game and system sales cost of goods sold, due primarily to an increase in freight and license costs.
- Increased depreciation and amortization expense largely reflecting the continued expansion of the Company’s installed base of participation units along with higher amortization expense for capitalized labor.
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SG&A expenses increased 5.9% during the quarter.
- SG&A expenses include approximately $2.0 million of non-cash stock-based compensation, $0.6 million of which is related to non-recurring severance related charges, compared to $1.0 million in the prior-year period.
Balance Sheet Review
Multimedia Games ended the fiscal 2014 third quarter with $129.3 million in cash and debt of $26.8 million, versus cash and debt of $92.5 million and $30.5 million, respectively, at June 30, 2013. Capital expenditures in the fiscal 2014 third quarter were $7.9 million compared to $11.1 million in the year ago period.
During the fiscal 2014 third quarter, the Company repurchased 280,000 shares of its common stock at an average price of $28.57 per share, excluding commissions, for total consideration of approximately $8.0 million. As of June 30, 2014, the Company had approximately $21.1 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 3.0 million shares of its common stock at an average of cost of $10.27 per share.
Adam Chibib, President and Chief Financial Officer, commented, “Multimedia Games is successfully developing products that deliver strong returns for our customers as we increase our slot floor market share despite the highly competitive operating environment. The growth in our high-margin gaming operations business, continued strong demand for our ‘must have’ TournEvent slot tournament system and our efficient operating structure are driving strong financial results and a balance sheet that positions the Company to continue investing in long-term growth opportunities. Our high-margin gaming operations business is expected to be a key driver of future results, particularly as we expand the availability of our premium participation products, and we believe that growth in this segment of the slot floor combined with consistent unit sales will support our goal of creating shareholder value.”
Reiterates Fiscal 2014 Outlook
Multimedia Games today reiterated its outlook for fiscal 2014. For the
full year, the Company continues to expect to generate revenue of
$217.0-$223.0 million. In addition, Multimedia Games expects to generate
EBITDA, a non-GAAP financial measure defined below, of $110.0-$114.5
million. 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.
