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Edited Transcript of DDE earnings conference call or presentation 27-Apr-17 1:30pm GMT

Thomson Reuters StreetEvents

Q1 2017 Dover Downs Gaming & Entertainment Inc Earnings Call

DOVER May 2, 2017 (Thomson StreetEvents) -- Edited Transcript of Dover Downs Gaming & Entertainment Inc earnings conference call or presentation Thursday, April 27, 2017 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Denis L. McGlynn

Dover Downs Gaming & Entertainment, Inc. - CEO, President and Director

* Timothy R. Horne

Dover Downs Gaming & Entertainment, Inc. - CFO, SVP of Finance, Treasurer and Director

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Presentation

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Operator [1]

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Welcome, and thank you for standing by. (Operator Instructions) This call is being recorded. If you have any objections, you may now disconnect at this point. Now I would turn the meeting over to your host, Mr. Denis McGlynn. Sir, you may begin.

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Denis L. McGlynn, Dover Downs Gaming & Entertainment, Inc. - CEO, President and Director [2]

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Thank you, very much, and good morning, everyone. As usual, I am joined by Ed Sutor, our Executive Vice President; Tim Horne, our CFO, and Klaus Belohoubek, our General Counsel. Tim will read our forward-looking statement disclaimer, and then we will get underway.

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Timothy R. Horne, Dover Downs Gaming & Entertainment, Inc. - CFO, SVP of Finance, Treasurer and Director [3]

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In order to help you understand the company and its results, we may make certain forward-looking statements. It is possible the company's actual results might differ from any predictions we make today. Additional information regarding factors that could cause such differences appear in the company's SEC filings.

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Denis L. McGlynn, Dover Downs Gaming & Entertainment, Inc. - CEO, President and Director [4]

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Thanks, Tim. Well, as you can see, we experienced another loss this quarter for all the same reasons we have reported on in previous quarters. I'll spare everyone my quarterly rant about the distribution of gaming revenues in Delaware, and reassure all of you of our continuing of efforts to reset the distribution formula between the casinos and the state. We have met with newly elected legislators and members of the new administration, who seem to exhibit a better understanding of the casino situation in the state. However, Delaware's current budget deficit means that state programs are going to be cut, and many taxes are going to be raised, and it may be difficult in such an environment to achieve the much-needed long-term solution that ensures the health of our industry and preserves both the critical jobs and an important and significant revenue stream for the state. Given the successes being enjoyed by casinos in neighboring jurisdictions with appropriately structured tax rates, there really is no better time to fix what may prove to be unfixable in a few years, and we hope that short-term political considerations do not stand in the way of sustainable change. That's as much of a report as I can give you at this time, so I'm going to turn it over to Tim now for his review for his review on the first quarter financially.

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Timothy R. Horne, Dover Downs Gaming & Entertainment, Inc. - CFO, SVP of Finance, Treasurer and Director [5]

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Thanks. Well as Denis mentioned, our first quarter results were a loss, but they were slightly improved compared to last year. If you look at the first quarter statement of earnings, you'll see our total revenues of $44.1 million were down just over 1%, compared to the first quarter of 2016. Gaming revenues consisting of slot win, tables game win, and to a lesser extent horse racing and sports betting commissions and iGaming win decreased 1.8%, compared to last year to about $38.6 million. Largely the result of lower hold percentages for table games and lower horse racing revenue compared to last year. Our slot win was fairly close to the first quarter of last year, down about 0.5%. MGM opened in the national harbor on December 8, but it's still too early to assess what impact they may have on us going forward. But all in all, our slot performance was fairly close to the state as a whole, which was essentially same as last year. Our table win was down a little more than 4%, but that was all hold driven. Our table drop was up almost 10%, but our hold percentage was down about 3 points compared to last year. With this year's a little lower than normal, our last year's a little higher than normal, leading to the revenue decline. Adding to that, our horse racing revenue was down about $300,000 for the quarter, and that's both from fewer live racing days and lower export handle on the days we did race as we deal with the reduction in available horses. Regarding our operating profits, margins were fairly consistent at 4.6% versus 4.7% last year, but the continued effect of the extremely high gaming taxes on even slightly lower volumes and the lower table hold percentage led to the slight compression of our gaming operating margins. Other operating revenues, which are net of promotional allowances of about $4.5 million in both periods consist of our cash hotel, food and beverage, and other miscellaneous revenues, they were up just under 3% compared to last year at just over $5.5 million, with small increases in each area from year-to-year. Slightly higher revenue combined with slightly lower cost this year led to improved gross profit and margins for our non-Gaming activities compared to last year. Our hotel occupancy was about 74% in both periods and our pure cash rate was $131 for the first quarter which is a little higher than last year. G&A expenses were almost identical from year-to-year. So our EBITDA for the quarter increased 4% to about $2 million versus $1.9 million for the first quarter of 2016. That increase is basically from better non-Gaming results partially offset by the lower horse racing results and lower table hold percentage. Interest was $209,000, which is a little lower than the first quarter of last year, from lower average borrowings offset by slightly higher interest rates. As you can see, our net loss was $184,000 or $0.01 per diluted share compared with a net loss of $239,000 or $0.01 per share last year. Regarding the attached balance sheet, the only thing I'll mention is that our total debt was $24 million at March 31, and was reduced by $1.25 million this year, and the debt remains classified as current year as the facility which we extended last September, currently expires on September 30, 2017. Cash flow statement is also included here. Our operating cash for the quarter was just over $1 million, which is lower than last year, but primarily from the timing of lottery, office suites and other payments. We had $574,000 of capital expenditures for the quarter, and as I mentioned, we paid down $1.25 million of debt. That concludes our prepared remarks in our first quarter call. Thank you for your interest.

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Operator [6]

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Thank you, for calling the digital (inaudible)