Q4 2019 Earnings Call

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Thank you for calling May have the name as the conference you're calling to join please.

Yes, I'd like to start axle and our scope. Please.

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The company.

Okay.

Yes axle and earnings call. Please.

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Excellent.

Yes.

Paul and.

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Axle and.

Excellent entertainment.

Yes.

And Matt.

First and last night.

And David D. H E B, I'd and the Brown B R O W and.

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And then your company.

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Yeah.

At this time, it's difficult to predict the full impact could grow to buyers. We're monitoring the situation closely and we're glad financial guidance for 2020, once we have more visibility.

Fortunately, we are dot high fixed cost business and as a result, we're well positioned to whether this disruption.

Thank you Andy.

Thank you Brian.

I'm excited about the opportunities in front of us and our position to capitalize on though.

In summary, we have a great pipeline of future organic and inorganic growth.

A strong balance sheet to make smart investments and a differentiated business model that should allow us to maintain strong growth rates and provide excellent service quality to our customers.

I'm, particularly excited about Ryan and Michael joining our team.

The already the fastest growing company in the gaming space and we look to further accelerate our expansion with their additional bandwidth and expertise.

I've been very pleased to see the investor interest in itself and we will endeavor to continue our investor outreach and education to allow for greater understanding of our unique position in the gaming sector and how we intend to drive returns for our shareholders.

Obviously at this time it is tough to handicap, the duration and severity of Corona virus.

I continue to be focused on the well being of our stakeholders, which our employees partners customers and suppliers.

And I'm not trying to minimize the challenges that this current environment presents.

We continue to present.

But we as a company are well positioned we will now take your questions.

Ladies and gentlemen, if he would like to ask a question. Please go ahead Im Press Star then the number one on your telephone keypad.

Again that Star then one to ask a question.

Your first question today comes from the line of Greg give us of Northland Securities. Your line is open.

I want to guys. Thanks for taking my questions first when we spoke about the method criminals Grand River typically having those lower holds per day looks like the blended over 800 comes around 122.

So I guess as we implement your strategy how to maximize the performance of those terminals.

Acquired locations how long you think it takes the maybe you can see those.

You're closer to that 130 range that you've had with kind of the legacy terminal.

So the sandy.

We don't expect it to get to the 130 level.

Their performance.

It is handicapped by the types of location there they're in Andy.

The demographics of those areas there more rural.

Yeah and lower income.

Municipalities.

Also.

Are in places where.

They have a very.

Limited exposure to gaming parlors, because there is not the concentration the population so.

We're expecting.

The the optimization of the equipment to help our performance.

But.

Nowhere near.

The per the performance of the rest of perform the portfolio I would say there what the expectation is to get more.

The good that performance closer to par.

Oh comps in the areas that that those that there are several elements are located and that's probably up.

A 5% to 7% left is would be our guess, we're seeing we're seeing some performance improvement already but it's going to take awhile for a variety the players to understand to to know that there's the same quality of machines in the right machines in there what are those players may have left.

Their locations or or or play elsewhere to ER to come to their locations.

Got it I appreciate that color and.

And then secondly, roughly what stage, our yet with respect to the installation of the additional six VDC establishment that already have.

Well, just beginning January but when we think about installing six machines coming too.

You know about 1000 locations by the end of Q3. This year like you said, how should we think about those being weighted would be pretty equally across the quarters or would you expect maybe a majority come earlier.

So.

As we focus we tried to.

Get those machines out as quickly as possible, where the where there was the greatest demand in terms of.

Performance for those machines.

We were slowed initially because again, we're just kinda strong it on us and didn't give us the rules of how we're going to do it. So we've continued to increase the the velocity that we're deploying these.

Jeans, so I would expect.

That will.

And we will easily.

Most of the equipment out there sooner rather than later and on a good week now, we're probably deploying in excess of 60.

VCTS, where in the past it was probably less than half that amount. So it's it's rapidly increasing.

And I wouldn't be surprised if we put up a 100.

VCTS in one week on a good week so.

We're making progress.

I think you'll you'll see that when the VCTS get turned out.

Okay, great good though.

Evan you or maybe can you break down the backlog is in terms of what would be competitive conversions versus maybe the ones that are just installing a sick BGT and then maybe just new establishment.

Breakdown that backlog.

So.

Competitive conversions.

We really don't.

Wanted to get in detail on that.

As far as the six VCTS.

We have at least the six 600 locations in the backlog will probably exceed that number I don't know by what amount.

As you get.

Deep as the number gets closer to 1000 the quality.

Of those locations and the performance of that six speech BGT, we'll probably decline because there's a lot lower part of our portfolio and what was the last question.

Well I guess, just the breakdown in terms of.

The backlog that is competitive conversions versus maybe.

Have you broken though.

Yes, there's there's far more new establishment always then can pet competitive conversions we have.

You can kind of see on the game boards website.

The depending locations and.

And you can see the trends of of.

Of new licenses that will that were getting.

We're working.

Pretty consistently.

To kind of maintain those levels.

And as far as the competitors like I said before.

We're we have.

A good pipeline, but we don't want to go into detail.

On it.

Fair enough thanks, guys.

A big.

Thank you.

Your next question comes from the line of Stephen Grambling of Goldman Sachs. Your line is open.

Hey, Thanks for taking the question.

Sorry for being a little bit myopic here, but it seems to be the topic is your and most of our investor conversations can you walk through some of the measures you're taking to mitigate some cost pressures amidst the coated 19 outbreak and maybe talk through what your different levers of liquidity, our and also any thoughts.

That you may have on on your customers balance sheets as well keep you have any insight under that thanks.

Total of address the first when we don't have visibility to our customers balance sheets.

Like.

Our customers.

We have.

Much more variable costs than fixed costs, so we're pretty well positioned to absorb.

This situation for a significant amount of time.

We were still.

Operating.

Today, just like we were yesterday, our revenue was was pretty good yesterday.

We expect it to be decent today and then we go into the period, where we'll have no revenue for 14 days.

The reality of our situation is we're very local business and we are the place where people are most comfortable to get their entertainment because they know that people were who are most of the people who are patronizing their establishment.

It's kind of I use the kind of phrase where the place where everybody knows your name and that that will be it and it has been the sanctuary, where people have gone for entertainment and our numbers have not done.

Felt significant.

Strain.

During this period and a lot of our.

That was cements our in towns that have very little communication with the big cities.

And they have seen almost no impact so we believe it will really well positioned.

We have.

The ability to to turn off a lot of our variable cost is our as our people aren't traveling and.

We don't have the the normal expenses related to two.

Mobility around the state.

And.

One of our hourly employees.

Work part time or such will will be engaging in.

Activities in the interim too.

Prepare us to relaunch and what that involves as we're initiating a sanitation Senate Sanitization project that we think we'll be very effective.

Thats helpful and I guess, one other follow up on that are there things that you're consciously thinking about as you look at the situation.

And think about different contingencies, how you could change your sales or marketing or general strategy to ensure that you can gain share coming out or is there any.

Prior examples that you can think of where there was maybe some.

No changes to any local.

Areas that could have driven the opportunity for market share gains on the back end business. Thanks.

Yes, we're very conscious of of not trying to.

Utilize this situation to create a competitive advantage.

We're trying to be good partners for existing businesses.

And we believe by doing the right things and helping them sanitize.

There there are establishment.

We're going to demonstrate that.

That we are good business partner and when people make the selection in the future we'll be able to point to this is what we've done.

And time and time again.

Establishments choose excel because we are the best business partner for small business owner.

Understood. Thanks, so much.

Thank you.

And again, ladies and gentlemen, if he would like to ask a question. Please press Star then one on your telephone keypad.

Your next question in queue comes from the line of John to Craig.

The Union gaming.

Your line is open.

Hey, everyone. Thanks for taking the questions.

Paul Jive, Andy if you've already addressed this I was out of it will lead to hop on.

But I wanted to ask about the software updates for taking higher bats.

Having the higher payout I wasn't sure if you provided a status update on that.

And if if you've seen it if it's out and operating if you've seen any noticeable uptick in play on on games that have that that update.

Yes, so there's been a limited deployment of them because many of the manufactures software has not been fully approved.

Through the testing process with the Illinois Gaming Board.

And.

The ones that we have deployed we've seen a we've seen an uptick but its such limited numbers that.

We can't project based on one of the things that we should be aware of.

Is the there's two major manufacturers in this industry really in Illinois.

She and scientific games.

As you see we will be able to deploy their software.

Through.

Through our central system directly to the machine so it should be a barry.

A rapid deployment.

Unfortunately.

Scientific games.

Software upgrades are not compatible with this with the central system and we will have to go load them.

On each.

Individual machine throughout the state.

The ITC product mix up call it.

Oh 46, 47% of our equipment.

And the balance is a beside games.

There is about.

1%.

Or less everyone else's equipment.

Okay. That's helpful. I appreciate that that update Andy and again forgive me if you've already discussed this.

But Missouri a target.

New market potentially with some legislation hopping around the house.

Would you.

Update on kind of what you're seeing legislatively.

Sorry.

Yes, I mean.

The house.

As very positive on I think its house Bill 2088.

But it's going to have to get through the Senate and.

Well, there's some optimism you don't mean, it's really hard to predict whether or not that legislation is going to make it through.

Fair enough. Thanks for the questions guys I appreciate it.

Thank you.

Yes.

And at this time there are no further questions in queue.

Turn the call back to the presenters for any final remark.

Yeah, I just want to thank everyone for joining the call and appreciate your understanding and patience during.

During this difficult period.

Excel is doing everything we can to be good partners to.

Make sure the safety and health of our employees and we look forward to coming out of this.

A stronger than we have ever been so thank you for calling and we look forward to.

The next time with better news thanks.

Ladies and gentlemen, this concludes today's conference call. Thank.

Thank you for participating.

You may now disconnect.

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