U.S. Markets open in 42 mins

Edited Transcript of UWN earnings conference call or presentation 14-Sep-17 8:30pm GMT

Thomson Reuters StreetEvents

Q1 2018 Nevada Gold & Casinos Inc Earnings Call

Houston Sep 20, 2017 (Thomson StreetEvents) -- Edited Transcript of Nevada Gold & Casinos Inc earnings conference call or presentation Thursday, September 14, 2017 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* James D. Meier

Nevada Gold & Casinos, Inc. - VP, CFO & Secretary

* Michael P. Shaunnessy

Nevada Gold & Casinos, Inc. - CEO & President

* Preston Graham

Stonegate Capital Partners - IR

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

And good afternoon, and welcome to this Nevada Gold & Casinos First Quarter Earnings Conference Call. (Operator Instructions)

I would now like to turn the presentation over to your host for today's call, Preston Graham, Investor Relations.

--------------------------------------------------------------------------------

Preston Graham, Stonegate Capital Partners - IR [2]

--------------------------------------------------------------------------------

Thank you, and good afternoon. We appreciate you joining us today. With me on the call is Mike Shaunnessy, Chief Executive Officer; and Jim Meier, Chief Financial Officer.

The purpose of today's call is to review the company's financial results for the first quarter ended July 31, 2017. Following the company's remarks, there will be an opportunity to ask questions.

This call contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We use words such as anticipate, believe, expect, future, intend, plan and similar expressions to identify forward-looking statements. Forward-looking statements include, without limitation, our ability to increase income streams, to grow revenue and earnings and to obtain additional gaming and other project. These statements are only predictions and are subject to certain risks, uncertainties and assumptions, which are identified and described in the company's public filings with the Securities and Exchange Commission.

With that, I'd like to turn the call over to Nevada Gold's CEO, Mike Shaunnessy. Mike?

--------------------------------------------------------------------------------

Michael P. Shaunnessy, Nevada Gold & Casinos, Inc. - CEO & President [3]

--------------------------------------------------------------------------------

Thank you, Preston. Good afternoon, and welcome to our call today. While our typical seasonally soft first quarter was just that, weather usually plays a role, and this year was no exception. Seattle set a new record for consecutive days without a trace of rain at 55, 44 of which were during Q1. In addition, they set a new record for 72 consecutive days above 70 degrees. These 2 weather factors contributed to approximately 3% lower volumes at our Seattle properties. Two properties in the Tri-Cities, however, saw volumes increase about 8%.

Our table games hold percent quarter was normal compared to last year's somewhat low hold percent. This contributed about $300,000 in additional casino revenue for the quarter compared to last year. However, the overall lower volumes, coupled with higher costs, primarily payroll, offset this hold percentage improvement. Spent additional marketing dollars in an attempt to combat the softness in the weather, but without much success. The new $11 an hour minimum wage continues to have a meaningful impact.

The pricing mitigation initiatives were somewhat hampered by the decreased volumes, including beverage, this quarter, but nevertheless, we were still able to offset approximately 70% of the cost, reducing the net negative impact to only $100,000 for the quarter.

Fortunately, the novelty of the beautiful weather in Seattle began to wear off by late August, and volumes have now started to improve as we move into September, despite not having seen much rain in Seattle. But once we're through the summer, the beautiful weather is not such a great attraction because kids are back at school, and it's a little bit different. And I think they finally enjoyed all the outdoor activities they can. So we look forward to the next quarter being nice, solid and strong, like it usually is.

In Nevada, we also faced some extreme weather with heat warnings multiple times during the year -- or during the quarter with temperatures in excess of 110 degrees on multiple occasions for multiple consecutive days. This led to rather inconsistent volume patterns at Club Fortune as we literally saw the volumes move inversely with the daily temperature. However, the continuing impact of our marketing and operational initiatives instituted over the last year were able -- enabled us to drive significant EBITDA improvement from only some slight revenue growth. August continued to be hot, and the first consecutive days below 100 here in Las Vegas just occurred last week. Early September begins the migration of the snowbirds back to Nevada, and we're glad to see them returning, and the 100-plus degree heat leaving.

South Dakota, we weren't affected at all by weather. And remarkably, our market -- the market slot revenues stabilized for the quarter, and our first quarter revenues and EBITDA were comparable to the prior year, a win for us considering how this has been trending. Unfortunately, moving into next quarter, we recently had another partner location close. Midnight Star owned by Kevin Costner, where we had 53 units, ceased operations at the end of August. We continue to focus on controlling costs in South Dakota to maintain positive cash flow and continue to look for any potential opportunities to deploy additional units into the market.

On July 12, the company announced the purchase of 755,644 shares of stock at $2.15 a share, which completed the initial $2 million authorization. This represented approximately 6% of our outstanding shares. The Board has subsequently approved an additional $2 million share buyback as we continue to believe that there is still value in our shares at the current trading levels.

I appreciate you joining us today, and at this point, I'll have Jim take you through the details of our financial performance.

--------------------------------------------------------------------------------

James D. Meier, Nevada Gold & Casinos, Inc. - VP, CFO & Secretary [4]

--------------------------------------------------------------------------------

All right. Thank you, Mike. For the first quarter of fiscal 2018, net revenues increased $0.3 million or 1.4% over the prior year to $18.5 million. Operating expenses were $18.2 million in the first quarter for both years. Operating income increased to $0.3 million compared to the prior year's operating income of $0.1 million, and net income was $0.1 million or $0.01 per share.

During the first quarter, net revenues from Washington increased to $13.2 million from $13.1 million in the prior year's quarter while Washington's adjusted EBITDA decreased to $1.2 million compared to $1.4 million in the prior year. Club Fortune's net revenues were $3.4 million compared to $3.2 million in the prior year, a 6% increase, and adjusted EBITDA increased to $0.5 million from the $0.1 million in the prior year.

South Dakota route operation revenues were relatively unchanged from prior year at the $1.9 million, and EBITDA also remained at the $0.1 million despite the temporary loss of 79 [receivers] during the quarter, as Mike mentioned, for repair and renovation. Corporate expenses decreased to a more normal $0.6 million as the prior year's quarter included expenses related to the purchase of Club Fortune.

On a consolidated basis, adjusted EBITDA was $1.1 million for the first quarter for both the current and prior year. During the quarter, we borrowed and repaid $0.7 million so our outstanding loan balance remained at $12.3 million. We borrowed the $0.7 million to fund our $1.6 million treasury stock purchase. Our borrowing availability is $6.3 million, and our leverage ratio for the price point, 1.9. And finally, we issued 36,689 shares of our stock in May as a result of the cash flow's warrant exercises. Any remaining warrants expired as of May 7.

And now I'll turn it over to the operator to open the call up for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And gentlemen, there are no questions in the queue at this time. I'd like to turn the conference back over to you for closing remarks.

--------------------------------------------------------------------------------

Michael P. Shaunnessy, Nevada Gold & Casinos, Inc. - CEO & President [2]

--------------------------------------------------------------------------------

Okay, thank you. Thank you all for joining us today.

I guess just in closing, I'd just like to make mention, particularly, of some of the management in our particular locations. In Washington, the guys have done a tremendous job of trying to mitigate this minimum wage impact and if you'll recall, we forecasted about 1 year ago maybe. It was going to be about $1.2 million-plus in incremental payroll costs, and they have done an excellent job of identifying opportunities to try and mitigate that incremental cost. And now we've got the last 2 full quarters where the minimum wage was in effect, and in each of those quarters, we were able to reduce that impact to barely $100,000 through -- $200,000 through 6 months. So they've done a great job, and I'd just kind to like to shout out to them. Great job and thank you.

Club Fortune. We went through some challenges in the early period of our acquisition there and took some opportunities to close and remodel the restaurant and the bar at the time, looking for opportunities to improve operational efficiency and customer service. We have a very, very good management team in place there now, and consequently, we're able now to begin driving much better margins and increase EBITDA and cash flow and basically similar to slightly increased revenue, because they're paying much more attention, being much more strategic and doing a much better job of utilizing the marketing dollars to drive profitable revenues through the system.

So going forward, I think we've got things really in very good shape in both of our major operating divisions. I also guess I should commend the guys in South Dakota for at least a flat quarter, despite some challenges there. They were aided by the market revenue slightly being flat year-over-year. But as Jim mentioned, with a couple of our facilities, one doing some renovation from some flooding earlier in the year and one doing a little bit of remodeling during the quarter, we actually had a little bit less coverage units in service and, nevertheless, generated about same amount of revenue and EBITDA.

All around, I think all of our management teams are doing a great job operating their particular segments and look forward to the next 9 months of the year. Getting through the first quarter is always a relief for me because we never know what it's going to look like because weather usually does play a factor, and it could all -- it can be good or bad.

So thank you, again, for joining us, look forward to talking to you in a couple of months.

--------------------------------------------------------------------------------

Operator [3]

--------------------------------------------------------------------------------

Thank you, ladies and gentlemen. That does conclude today's conference. We thank you for your participation. You may now disconnect.