Nevada Gold & Casinos, Inc. (UWN)

UWN 
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Nevada Gold & Casinos (UWN)

Q1 2014 Earnings Call

September 13, 2013 4:30 pm ET

Executives

Kenneth Maciora

Michael P. Shaunnessy - Chief Executive Officer and President

James J. Kohn - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Secretary and Treasurer

Analysts

Vincent Staunton - WEDBUSH

David Luebke

Presentation

Operator

Good day, everyone, and welcome to the Nevada Gold First Quarter Fiscal 2014 Earnings Conference. As a reminder, today's presentation is being recorded. At this time, I would like to turn the conference over to Mr. Ken Maciora of Empire Relations Group. Please go ahead, sir.

Kenneth Maciora

Good afternoon, everyone, and thank you for joining Nevada Gold & Casino's Fiscal 2014 First Quarter Financial Results Conference Call. With us today from management are Michael Shaunnessy, President and Chief Executive Officer; and Jim Kohn, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that today's webcast and call will be archived on the company's website at www.nevadagold.com. If you have not already received a copy of today's press release or the 10-Q, they're available on the company's website.

I would also like to remind everyone that part of today's call includes forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed on them. The company undertakes no obligation to update these forward-looking statements. We refer all of you to the company's filings with the Securities and Exchange Commission for a more detailed discussion of the risks that can impact the company's future operating results and financial condition. The company's earnings release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the SEC. Included in this afternoon's release is a reconciliation of these non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP.

With that introduction, I'd now like to turn over the call to Mr. Shaughnessy. Go ahead please, Mike.

Michael P. Shaunnessy

Thank you, Ken. Good afternoon, and thanks for joining our call today. The financial results we announced today were affected by the unusual favorable weather in the Seattle area during the months of June and July. It's important to note that this revenue shortfall is not reflective of the underlying business fundamentals but is really a weather-related anomaly.

Overall, revenues were down by $1.1 million, almost 7%, totally attributable to our Seattle properties during June and July. And our significant operating leverage resulted in the majority of that revenue shortfall impacting EBITDA. As we have discussed before, during the May to September period, rainy weather works to our benefit while sunshine and warm temperatures present our customers with many other outdoor entertainment alternatives.

During the month of May and also the month of August, with more normal weather patterns, our revenues have tracked consistent with prior year periods. Last year, June and July were unusually rainy, with about 21 days of rain; while this year, those 2 months were unusually dry, with only 9 days of rain. By contrast, in the first quarter, our 2 properties in the Eastern Tri-City areas produced increases in both revenue and EBITDA year-over-year. However, not nearly enough to offset the performance in Seattle due to the weather anomaly.

Turning to South Dakota. Our South Dakota properties generated revenues of $2.9 million compared to $3 million in the prior year. The revenue decline is consistent with expectations given the decrease in our slot units due to the Bourbon Street location closure on June 30. But as we previously noted, we expect that the annual impact of this closure will benefit EBITDA by approximately $120,000 as the reduced revenue during the peak's months is more than offset by the expense savings over the balance of the year.

Also in South Dakota, this weekend, the Miss Kitty's location on the Main Street, where we route approximately 80 games, is being closed by the owner. At the same time, we began, yesterday, installing approximately 30 games in the newly remodeled, reopened Deadwood Station hotel at the northern entrance to town. We also expect to add an additional 20 to 25 games at another hotel location on the southern end of town within the next several weeks. Although these changes will be a net reduction in units, having a greater concentration of games in locations with hotel rooms and a reduced presence on the Main Street actually improves our diversification and strengthens our slot portfolio because in general, hotel locations perform better than non-hotel Main Street locations during the off season because they actually have an in-house customer base available, as opposed to depending upon tourists wandering the streets downtown.

On the corporate and administrative side, we continue to maintain tight controls on the cost side of our business. And in keeping with that philosophy and approach, the recent departure of our Vice President of Development. We do not intend to replace that position, but rather, I will be assuming those responsibilities. I've been intimately involved in those efforts since joining the company, and with my many years in the gaming business and the extensive contracts I've developed, we are confident we won't miss out on any opportunities by having that position unfilled for at least the time being, if not permanently.

We continue to use the company's cash flow to pay down debt and strengthen our balance sheet and are now further along in the process of refinancing our debt with the intention of reducing rates, extending maturities and improving our overall financial flexibility. Our social gaming initiative, Gold Star Slots, which has been available on Facebook since January, is now available in the App Store for a free download to iPhones and iPads. Although this enables us to reach a broader market of the mobile gaming user base, our efforts to monetize this venture continue, but this remains a relatively immaterial market for us, and we continue to explore avenues to make it better.

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