Elixir Gaming Technologies Reports 2009 Third Quarter Results and Provides Market Update

Achieves Positive Adjusted EBITDA for Second Consecutive Quarter Driven by Solid Gaming Participation Performance and Strict Cost Control

Chairman & CEO Clarence Chung Extends Employment Contract Through 2012

• Press Release
• Source: Elixir Gaming Technologies, Inc.
• On 7:30 am EST, Tuesday November 10, 2009

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 third quarter ended September 30, 2009 and reviewed recent corporate progress.

Related Quotes

Symbol	Price	Change
EGT	0.28	0.00

{"s" : "egt","k" : "c10,l10,p20,t10","o" : "","j" : ""}

Recent Highlights:

• Consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) was $0.3 million for the third quarter of 2009.
• Total net revenue from gaming machines on participation for the third quarter 2009 was $1.8 million, an increase of 5% on a quarterly sequential basis reflecting solid performance at NagaWorld and despite the challenges from severe adverse weather in the Philippines.
• Average consolidated win per unit per day (WUD) for the third quarter 2009 was $86, a decrease of 9% on a quarterly sequential basis due to severe adverse weather conditions in the Philippines and the ramp up of additional machine placements at NagaWorld during the quarter. Average consolidated WUD for the month of October improved to $92.
• As of October 31, 2009, total installed units in operation were 1,286 in eight venues, comprised of seven venues in the Philippines with a total of 902 installed units and one venue in Cambodia with a total of 384 installed units.
• Continued progress on initiatives to reduce recurring operating costs with third quarter 2009 cash SG&A expense down 20% from the prior quarter and 61% from the year-ago period.
• $4.7 million in cash as of September 30, 2009, after an advance payment of $5.84 million paid to NagaWorld under the previously announced additional machine placement arrangement.
• Chairman and Chief Executive Officer, Clarence Chung, extends employment contract through 2012.

Clarence Chung, Chairman and Chief Executive Officer of Elixir Gaming, commented, “I am pleased to report that Elixir Gaming posted solid financial results for our third quarter period with the achievement of quarterly sequential participation revenue growth from record second quarter 2009 levels and the second consecutive quarter of positive adjusted EBITDA since our new business model was enacted in September 2007. This performance was a direct reflection of our accomplishments over the last 12 months to restructure our operations and streamline our cost structure and, importantly, was achieved despite challenges due to severe weather conditions in one of our markets during the quarter. 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.”

Solid Net Win per Unit per Day (WUD) for Gaming Machine Participation Operations

Consolidated average WUD for the third quarter 2009 was $86, down 9% from the second quarter 2009 and up 83% from the prior-year period. The sequential quarterly decline was primarily driven by severe adverse weather conditions in the Philippines and the ramp up of additional machine placements at NagaWorld during the quarter.

Average WUD for the quarter for Cambodia was $187, down 5% from $197 in the second 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. From May through August 2009, the Company achieved average monthly WUD in excess of $200 on a stable average operating machine base of approximately 240 units. In September, average WUD for the Company’s operations in Cambodia declined to $129 mainly due to the addition of approximately 170 machines, which became operational on September 9, 2009. In October, the average WUD improved 19% from September to $153 on a total of 384 installed units, reflecting the benefit of additional marketing programs and the normal ramp up time needed for new machine installations.

Average WUD for the quarter in the Philippines decreased to $53, down 9% from the second quarter 2009 and up 10% from $48 in the prior-year period. The quarterly sequential decline reflects the severe adverse weather conditions due to tropical storms, including Tropical Storm Ondoy which resulted in 40-year record flooding in certain areas of the country including Metro-Manila. With a return to normal business activities after the recent storms, the Company’s continued focus on implementing more targeted marketing and promotion initiatives, and routine machine floor mix shifts, Elixir Gaming has improved average WUD in the Philippines to $60 for the month of October, up 13% from the third quarter 2009 level.

The strength of the Company’s operations in NagaWorld and overall growth in gaming machine placements have served to more than offset the softness in the Philippine operations early in the fourth quarter due to the storms. As a result, Elixir Gaming projects quarterly sequential improvement in total gaming machine participation revenue in the fourth quarter of 2009.

Clarence Chung continued, “Elixir Gaming’s successful and recently expanded operations at NagaWorld demonstrate our expertise in slot management. We continue to work with our partners there to develop and implement marketing strategies aimed at maximizing gaming participation revenue and average net win results from our growing base of installed units.

“In the Philippines, we continue to be proactive in our efforts to improve net wins and are working closely with our venue partners in this market on the implementation of additional marketing and promotional initiatives. While we had experienced some disruption due to the effects of the severe weather, we continue to expect to realize the full benefits of these initiatives in several quarters time. In addition, with the incremental benefit of several new, well-located venues that have recently become operational, we remain confident that we can improve participation revenue and net wins per machine derived from our venues in the Philippines over the long term.”

Gaming Machine Installation Growth

Elixir Gaming’s operating machine base as of October 31, 2009 was 1,286, up 24% from the end of the second quarter of 2009. As of October 31, 2009, the Company had a total of eight venues in operation, comprised of seven venues in the Philippines with a total of 902 installed units and one venue in Cambodia with a total of 384 installed units. This compares to a total of six venues in operation, comprised of five venues in the Philippines with a total of 797 installed units and one venue in Cambodia with a total of 240 installed units as of June 30, 2009.

The growth in the Company’s operating machine base since the end of the second quarter of 2009 was driven by the opening of three new venues in the Philippines with a total of 330 machine placements and the addition of 168 machine placements at NagaWorld under its expansion contract. These additional machine placements were offset by the removal of a total of 249 machines as a result of the closure of one under-performing venue in the Philippines and routine machine mix shifts driven by Elixir Gaming’s strategic initiatives to optimize WUD.

The Company continues to focus on growing its installed machine base. Based on its current rollout plans, Elixir Gaming anticipates it will end the year with a total installed base of 1,300 to 1,400 machines. In addition, the Company is evaluating the exercise of its option under its July 2009 expansion contract with NagaWorld to add up to 200 more machines in prominent locations on the casino floor at NagaWorld with an initial commitment of at least 100 additional machines. Elixir Gaming’s option expires on December 31, 2009 and the Company has a first right of refusal option on the designated casino floor space until February 28, 2010.

Elixir Gaming currently has approximately 1,000 gaming machines in inventory. In an effort to formulate its future deployment plans, the Company is commencing an assessment of the usability of these machines with a view to optimize machine performance and will determine if a potential adjustment to the valuation of these machines is needed.

Mr. Chung added, “We remain focused on selectively growing our installed base and we continue to explore expansion opportunities in our existing and new markets for potential deployment as early as the first half of 2010.”

Successful Implementation of Cost Reduction Initiatives

While executing measures to improve WUD and expand the Company’s installed base, Elixir Gaming has continued to successfully execute against its expense reduction initiatives and materially streamline its cost structure. Elixir Gaming reduced selling, general, and administrative (SG&A) cash expense for the third quarter to $1.5 million representing a dramatic decline of 20% from the second quarter 2009 and 61% from the year-ago period.

Based on the Company’s successful execution of its cost reduction initiatives and its current scale of operations, Elixir Gaming expects to maintain quarterly SG&A cash expense in an approximate range of $1.5 to $1.8 million. Maintaining quarterly SG&A cash expense within this range would represent annualized savings of 53% to 60% in this metric compared to 2008 levels, and would provide further flexibility to pursue growth.

Chairman & Chief Executive Officer Renews Employment Contract

The Company also announced today that Chairman and Chief Executive Officer, Clarence Chung, renewed his employment contract as the Company’s Chief Executive Officer for a term of three years commencing from January 1, 2010 to December 31, 2012 and may be renewed thereafter subject to further agreement between the parties. His annual salary remains $1.00 and he will be entitled to a discretionary performance bonus to be determined by the Company’s Compensation Committee payable upon achievement of certain objectives set by the Compensation Committee. Mr. Chung’s existing contract is set to expire December 31, 2009.

Mr. Chung commented, “I am very pleased to have the opportunity to serve the Company and our shareholders for the next three years. We have made good progress over the last year, which I believe provides a strong foundation for future growth.”

Q3 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 on March 16, 2009, have been reclassified as discontinued operations.

Elixir Gaming’s third quarter 2009 total revenues were $3.6 million compared to $5.8 million in the second quarter of 2009 and $3.4 million for the third quarter of 2008. Revenue from gaming machines on participation was $1.8 million in the third quarter of 2009 compared to revenue of $1.7 million in the second quarter of 2009 and $1.1 million in the third quarter of 2008. Revenue from gaming machines on participation was favorably impacted in the quarter by strong WUD and additional machine installations at NagaWorld, which more than offset softness in our Philippines operations due to the severe adverse weather conditions during the quarter.

In Cambodia, the Company recorded revenue from gaming machines on participation of $1.1 million, up 6% from the second quarter of 2009 and up 133% from the year-ago period. In the Philippines, revenue from gaming machines on participation for the third quarter of 2009 was $0.8 million, up 4% from the second quarter of 2009 and up 18% from the year-ago period.

During the third quarter of 2009, the Company continued to recognize revenue from 164 machines at one venue in the Philippines on a cash basis. However, the Company recently finalized a settlement agreement with the owner and therefore Elixir Gaming expects to recognize revenue on an accrual basis for this venue in the fourth quarter 2009 period.

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) was $0.3 million for the third quarter of 2009 compared to $1.5 million in the second quarter of 2009, which included $3.0 million in revenue from a large RFID gaming chip order to the new City of Dreams casino in Macau, and a loss of $2.9 million in the third quarter of 2008.

Elixir Gaming reported a third quarter 2009 net loss of $3.7 million, or $0.03 per share, on a weighted average share count of approximately 115.0 million shares compared to a net loss for the third quarter of 2008 of $7.3 million, or $0.06 per share, on a weighted average share count of approximately 115.0 million shares. The third quarter 2009 net loss declined significantly compared to the net loss in the prior-year period due to: higher gaming participation revenues driven by improving average WUD; substantially reduced operating expenses; and reduced interest expense; all of which were partially offset by the higher depreciation impact on the Company’s gaming machine participation business as it continues to ramp up net win results, lower sales and resulting gross margins in the Company’s non-gaming business, an impairment loss related to the write-down of an intangible asset associated with the Company’s chip washer patents, reduced interest income, and higher income tax expense compared to the prior-year period.

Elixir Gaming is hosting a conference call and simultaneous webcast at 8:30 a.m. ET today, November 10, both of which are open to the general public. The conference call number is 800/915-4586 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 the Philippines and Cambodia 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 to be 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.

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

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