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Howard Stutz

Multimedia Games sees profits decline in third quarter

31 July 2014

LAS VEGAS -- Slot machine maker Multimedia Games, Inc. suffered a decline in profits during the third quarter despite a slight revenue increase.

The company, which is headquartered in Austin, Texas, but has a sales and marketing office in Las Vegas, said Wednesday its net income for the quarter that ended June 30 was $7.6 million, or earnings of 25 cents per share. A year ago, Multimedia Games reported net income of $8.4 million, or 28 cents per share.

The company blamed a $600,000 pre-tax, nonrecurring charge for the earnings decrease.

Multimedia Games grew revenue 4 percent to $50.3 million.

Multimedia Games, which analysts tout as one of the industry’s fastest-rising slot machine manufacturers, said its installed base of slot machines in which the company shares in revenues with casinos reached 13,167 games in the quarter.

“Our gaming operations business continues to be a source of strength for Multimedia Games,” CEO Patrick Ramsey said in a statement.

Buckingham Research gaming analyst Brian McGill said the company stands out among other slot machine manufacturers.

“We think Multimedia Games can outperform others in the space because of its stable game operations business and net cash position,” McGill said.

During a conference call with analysts, Ramsey said the company hopes to create a buzz at the upcoming Global Gaming Expo in Las Vegas by unveiling several news games and titles at the tradeshow.

However, he noted sales margins could be low because of discounted prices from G2E specials. Smaller deals could elevate shipping expenses.

Ramsey said the company’s third-quarter results were “in-line with our previously stated expectations.”

Multimedia CFO Adam Chabib told analysts the company might be undervalued by Wall Street. Earlier this year, the company completed $13 million dollar purchase of PokerTek, Inc., an electronic table game company.

“As our balance sheet gets healthier, we want to find ways to deploy it,” Chabib said. “We have good momentum and we have a good story, and we’ll continue to grow.”

Eilers Research founder Todd Eilers told investors the PokerTek deal will boost Multimedia Games’ 2015 earnings. He said investors will take a closer look at the company after recent deals announced by rival gaming equipment manufacturers, such as GTECH Corporation’s $6.4 billion purchase of IGT - International Game Technology.

“Recent merger and acquisition deals in the space should provide a floor in terms of valuation for suppliers,” Eilers said.

Shares of Multimedia Games closed at $23.99 Wednesday on the Nasdaq, down $3.82 or 13.74 percent.
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