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Multimedia Games, Inc. (NASDAQ:MGAM)

F4Q 2013 Earnings Conference Call

November 14, 2013 9:00 AM ET

Executives

Todd Mctavish – Senior Vice President, General Counsel, Chief Compliance Officer, and Corporate Secretary

Patrick J. Ramsey – President, Chief Executive Officer and Director

Adam Chibib – Chief Financial Officer

Analysts

Barry Jonas – Wells Fargo Securities

Steve Altebrando – Sidoti & Company

Todd Eilers – Eilers Research

Justin Sebastiano – Brean Capital

David Ehlers – Las Vegas Investment Advisors Inc.

Shawn Boyd – Next Mark Capital

Operator

Good day ladies and gentlemen and welcome to the Multimedia Games Holding Company Inc Fourth Quarter 2013 Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder this conference call is being recorded, I will now like to turn the call over to Todd McTavish, General Counsel. You may begin.

Todd McTavish

Good morning, today’s call webcast contain statements about future events and expectations which are characterized as forward-looking statements within the meaning of securities laws including without limitation the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current beliefs, assumptions and expectations of our future economic performance taking into consideration information currently available to us.

Forward-looking statements involve risks and uncertainties that may cause our actual results, performance or financial conditions to be materially different from our expectations of such results, performance or financial condition. Please refer to the Risk Factors section in our current and recent SEC filings for a description of these risks and uncertainties.

The company does not undertake and expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Today’s call and webcast may include non-GAAP financial measures such as EBITDA within the meaning of Regulation G. A reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found along with today’s earnings release on our website, www.multimediagames.com in the Investor Relations section.

Financial and operating metrics provided during today’s call and webcast maybe approximated. Please refer to the company’s financial statements as provided in today’s SEC filings and earnings release for more definitive numbers.

Now I will turn the call over to our CEO, Patrick Ramsey.

Patrick J. Ramsey

Thank you, Todd and good morning everyone. Thank you for joining us on the call with me here in Austin are Adam Chibib, our Chief Financial Officer; Todd McTavish, our General Counsel and Mick Roemer, our Senior Vice President of Sales.

Fiscal 2013 was another transformational year for the company and this morning’s fourth quarter results show that we finished the year growing and well positioned for 2014. As you likely have read we reported fourth quarter revenues of $50.4 million and diluted earnings per share of $0.32.

Again in fiscal 2013, we saw significant improvements in our key metrics and the last quarter was no different record revenues, strong margins, growing footprint and a strengthened balance sheet, focus has been key to us over the last five years and by staying focused on the goals that we set out last year we’re able to keep our momentum and create significant value this year.

Although all of us are concentrating on 2014 and beyond, I’ll briefly touch on our fiscal 2013 initiatives and summarize where we are with each area. First product has been critical and we continue to invest prudently in R&D to develop new competitive high performing games and technologies to support the core business and drive incremental growth.

As many of you saw Q3 in September MGAM portfolio simply gets wider and deeper as we grow and in addition we are able to produce new creative products like our MPX cabinet which we plan to release in 2014.

We have taken TournEvent to another level hosting the first ever National TournEvent of Champions which was rebounding resounding success for us and our customers and we wrapped up fiscal 2013 with the High Rise footprint that frankly exceeded all of our expectations this past year.

Second, fiscal 2013 was another year where distribution was critical and I believe our entrance in the new markets such as Pennsylvania, Illinois, New Jersey and Nevada paved the way for continued growth for our company, we know that the path to having a full product portfolio available for sale replacement can be long and sometimes grueling but we are optimistic about where we stand in these new markets and we are finally in a position where we have at least some access to almost the entire domestic market.

Finally, last year we wanted to reiterate our focus on profitability and shareholder value, frankly it is amazing to see that despite a completely different tax structure we made more money on the bottom line in Fiscal 2013 versus fiscal 2012.

Despite our size in an industry that could be heavily burdened by fixed expenses we operate at high margins and we have plans to continue to do so. With that high level summary of fiscal 2013 I’ll turn it over to Adam for more detailed financial review. Adam?

Adam Chibib

Thank you, Pat. Our focus in 2013 was to continued our expansion in to new markets, grow our top line and the scale of the business. We are happy to report that we achieved each of our goals for fiscal 2013 and we have a great foundation for furthering our success into fiscal 2014. Some of the highlights for the year include fiscal 2013 revenues total a record $189.4 million which is a $156.2 million in the prior year, we sold 2678 units which represents the year-over-year increase of approximately 37% or 717 units. Our domestic year end recurring revenue installed base was 12,444 units, an increase of 1770 units or 17% year-over-year.

Our premium participation footprint continues to grow and we ended the year with 878 units outside of Oklahoma, a year-over-year increase of 680 units, we ended the year with cash balances of $102.6 million and net cash of $73 million. And finally we recorded revenues from some of the largest U.S. gaming markets including Nevada, New Jersey and Illinois. Revenues for our fiscal fourth quarter were $50.4 million an increase of $9 million or approximately 22% year-over-year and up $2.3 million or approximately 5% on a quarterly sequential basis.

During the fiscal fourth quarter the company sold 807 proprietary units bring our total for the year up to 2678 units, revenues generated from unit sales for the fiscal fourth quarter rose $2.9 million or approximately 25% to $14.3 million. For the full year, unit sales revenues increased $11.7 million or approximately 27% to $54.5 million.

During the quarter, the Company sold 163 units from a recurring revenue installed base at an average price of just over $10,500 bringing our ASPs down to $16,228 per unit for the quarter. Excluding these sales, ASPs were just under $17,700.

Gaming operations revenues for our fiscal fourth quarter were $34.9 million, an increase of $5.3 million or approximately 18% year-over-year and up $632,000 or approximately 2% on a quarterly sequential basis.

Gaming operations revenues for the year totaled $132.6 million, up $20.6 million or approximately 18% year-over-year. The majority of the growth in gaming operations revenues came from California, Florida and Washington. These games are partially offset by lower revenues in Oklahoma, which declined by $778,000 or approximately 1% year-over-year.

Gross margins for the fiscal fourth quarter and for the year were approximately 80.7% and 80.5% respectively versus 79% and 80.1% in the prior year comparable periods. Selling, general and administrative expenses for our fiscal fourth quarter totaled $13.4 million, an increase of $1.3 million or approximately 11%.

The year-over-year increase in SG&A is attributable to higher compensation and benefit costs and higher stock compensation costs. For the full year, SG&A expenses totaled $48.4 million or 26% of total revenues versus $46.5 million or 30% of revenues in the prior year.

The full year increase in total SG&A expenses is primarily related to higher salaries and travel costs as a Company added sales in service resources in newly entered markets, higher commissions associated with higher unit sales and higher stock compensation costs.

Research and development expenses for our fiscal fourth quarter totaled $4.3 million, an increase of $400,000 or approximately 10% over the prior year period. For the year, research and development expenses totaled $16.8 million, an increase of $1.8 million or approximately 12% year-over-year. The year-over-year increase in research and development expenses reflects higher average head count for fiscal 2013 versus 2012 and increased salaries to attract retain engineering personnel.

EBITDA, a non-GAAP financial measure totaled $25.3 million in our fiscal fourth quarter an increase of $7.9 million or approximately 45% year-over-year. For the full fiscal year, EBITDA was $95.7 million, an increase of $24.6 million or approximately 35% from the prior year.

Diluted earnings per share for the fiscal fourth quarter was $0.32, inclusive of non-recurring net tax benefit of $1.1 million or $0.04 per diluted share, related to the release of previously recorded income tax reserve related to the Company’s 2007 income tax audit in Mexico.

For fiscal 2013, the Company reported earnings of $1.14 per diluted share versus $0.96 per share in the prior year. The prior year fully diluted earnings per share results reflect a tax rate benefit of 11% versus the tax rate expense of 32% in fiscal 2013.

Turning to the balance sheet, we ended the year with $102.6 million in cash and $29.6 million in debt leaving us with the net cash position of $73 million.

Turning to our guidance for fiscal 2014, we are forecasting revenues of $217 million to $223 million with unit sales ranging from 3,700 units to 4,000 units. We anticipate that our average selling price will range from $16,500 to $17,500 per unit.

The forecasted year-over-year change in ASPs reflect our expectations that our higher price TournEvent units will comprise a lower percentage of units sold and that we will have more volume orders in fiscal 2014 compared to fiscal 2013. Additionally, we expect to add between 900 and 1,200 net units to our installed base with the slight improvement to our daily yields.

We expect SG&A and research and development cost to increase modestly from fiscal 2013 levels as the Company continues to add head count to support sales and services as well as ongoing research and development efforts. We expect depreciation and amortization for fiscal 2014 to range from $42 million to $44 million. Operating margins are expected to improve slightly. The Company expected to generate EBITDA, a non-GAAP financial measure of $110 million to $114.5 million in fiscal 2014 versus the $95.7 million recorded in fiscal 2013.

Finally, the Company currently expected fiscal 2014 tax rate will be in the range of 36% to 38%, compared to a fiscal 2013 full year effective tax rate of 32.5%. As a result, Multimedia Games expect to report fiscal 2014 dilutive earnings per share of $1.23 per share to $1.27 per share. We are pleased with our fiscal 2013 wrapped up and we remain excited about our future.

I will now turn the call back over to Pat. Pat?

Patrick J. Ramsey

Thanks Adam. Looking ahead to fiscal 2014, our priorities don’t change, but we certainly are different company each and every year. Our products and technology remained the key for 2014 and beyond and we have set goals to continue to expand our outlook.

Our strong top line growth rates that Adam mentioned in our 2014 guidance was simply not be achievable without continuing to release great products in our segment, Standard Video, Mechanical Reel and the Premium segment. Almost all the games that we create can be sold into any domestic market and I’m particularly optimistic about some of the early tailwinds that we are seeing in the tribal Class II segment. In fact our growth in Class II has actually exceeded our growth in Class III revenues over the past several years and we clearly have reestablished ourselves as a leader in that market.

On the distribution front, our story in fiscal 2014 is more about expanding in our current markets than it is about access to new markets. We entered several large commercial markets throughout 2013, so we plan to continue expanding in those states with our key products such as TournEvent and our High Rise series and in our core markets, we plan to continue penetrating of growing share with our expanded portfolio.

I believe that TournEvent would be a lower percentage of our unit sales in fiscal 2014 than it was in 2013, which not only should support that our Trojan horse strategy that the successful one, but the customer acceptance of our other products is high.

We are well aware of the fact that our cash balance continues to grow and we are increasingly looking at opportunities to deploy it effectively. But as we have stated, our priority remains internal investments in the growth of our business, as this have generated the most compelling return opportunities.

We plan to continue with our stock buyback program and keep searching for M&A opportunities that can expand our product offering, expand our geographic scope internationally or ideally do both. And last but not least, we want to continue making strides fostering our company culture that is empower to engage and passionate about continuing to make MGAM a major force in the gaming industry.

There is a great five in Austin now as well as other areas of the country where our employees reside, which is supported by our team, one of the top places to work in the Austin area early last year. And I hope we get that list again this year.

Before I open it up for Q&A, I’d like to thank our employees, our customers and our investors for a great fiscal year. Having said that, I’ll now open it up to Q&A. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) And the first question is from Barry Jonas of Wells Fargo. Your line is open.

Barry Jonas – Wells Fargo Securities

Hi, guys.

Todd Mctavish

Barry.

Barry Jonas – Wells Fargo Securities

Just a couple of questions for the quarter, what percentage of unit shipments were TournEvent?

Todd Mctavish

I believe that’s 39% for the quarter.

Barry Jonas – Wells Fargo Securities

Great, and then I believe [indiscernible] you said 163 units were, was leased to sell?

Todd Mctavish

Yeah, they were leased to sell, that’s correct.

Barry Jonas – Wells Fargo Securities

Okay. So and then in terms of your guidance on the call for the installed base breaking it down that further, how do you see the Premium segments outside of Oklahoma growing in your 2014 guidance?

Todd Mctavish

We added probably close to 600 units in fiscal 2013 obviously that was a very strong showing for that product given the late launch of MTX in fiscal 2014, we’re not going to add 600 units in 2014 but at least, my guess is at least 200 units should grow High Rise in fiscal 2014?

Barry Jonas – Wells Fargo Securities

Great, and then just lastly the technical trials in Nevada concluded and when exactly did that conclude and when should we start seeing it reflected in the financials?

Todd Mctavish

You mean for High Rise technical trials?

Barry Jonas – Wells Fargo Securities

Yeah, I’m sorry for High Rise.

Todd Mctavish

They concluded probably in the past quarter.

Barry Jonas – Wells Fargo Securities

Yes.

Todd Mctavish

Last 30 days, you will see revenue in our fiscal first quarter, most likely towards the end of the fiscal first quarter.

Barry Jonas – Wells Fargo Securities

Gotcha, okay, thanks a lot guys.

Todd Mctavish

Thanks, Barry.

Operator

Thank you, the next question is from Steve Altebrando of Sidoti & Company. Your line is open.

Steve Altebrando – Sidoti & Company

Good morning, guys given the pretty sharp build with inventory and guidance that includes a pretty sharp increase in unit shipments and is it safe to say you have a pretty significant order book right now?

Todd Mctavish

I’ll speak first about the first question about inventory right now inventory looks slightly higher in the fourth quarter for two reasons. One is our G2E units, we should message you to bring it back as they stay in inventory and then they get put out in the fields. So that’s one reason it’s higher than normal because of G2E had about a 120 units in there.

Secondly, we’re in the process of testing a new CPU, which we’ll launch probably in the second half of fiscal 2014 and so part of the inventory is just test units for that products. So those are the two reasons that artificially higher in the September quarter versus normal.

And then your third question was, “Do you have a good order book for Q1?” And the answer to that is, yes. Obviously, we’ve got G2E momentum behind us and so Q1 should be a strong unit sale quarter maybe one of the higher ones of the year.

Steve Altebrando – Sidoti & Company

Okay, that’s helpful. And then in terms of the unit shipment forecast is there anyway you could get kind of breakdown what you’re expecting from newer markets that were approved in fiscal 2013 if not quantify, but maybe qualify it a bit?

Patrick J. Ramsey

I think in general some of the newer markets will drive the majority of the lion’s share of fiscal 2014 sales and most speaking sales. We do expect Nevada to be pretty strong in fiscal 2014 probably over 500 units. Pennsylvania should be strong as well and New Jersey. So it is definitely going to be at least 25% of our units sold in fiscal 2014 will come from some of those newer markets.

Steve Altebrando – Sidoti & Company

Okay. That is helpful and then lastly the gross profit margins held up fairly well given the change in ASPs, would you suspect that would continue as it looks like the mix is going to change a bit 2014?

Patrick J. Ramsey

Yes, so that’s a good question, the reason the margins held up, even the ASPs were lower because obviously when someone buys something from your recurring revenue footprint that unit has been depreciating. So even though the ASPs were lower. My net book value on that unit was lower as well. So that pint margins weren’t impacted at all.

So going forward we’ve had historically extremely high ASPs and end margins relative to our peers but I do think they should be in the 52% to 58% range in fiscal 2014 even with some lower ASPs, but maybe towards the lower end of that range versus the higher end of the range where we’ve ben historically.

Steve Altebrando – Sidoti & Company

$0.80, 52% to 58%?

Patrick J. Ramsey

Yeah I think that has historically been and my guess is $0.55 is right in the middle and that’s probably a decent stock to land on.

Steve Altebrando – Sidoti & Company

Okay, thank you.

Operator

Thank you. The next question is from Todd Eilers of Eilers Research. Your line is open.

Todd Eilers – Eilers Research

Hey guys, thanks for taking my questions. First off, I want to ask on the gaming op side, your revenue yields were pretty healthy in the quarter, which is a bit better than we expect, especially given the rate reduction on I guess it was about a 1,000 Chickasaw units and also just given the regional market trend. Can you maybe talk a little bit about how are you able to drive growth there? Is that just placement and higher earning markets? Is it placements of increased mix of High Rise, I guess relative to the overall mix, anything else going on there?

Todd Mctavish

I think the key drivers are exactly that as higher yielding markets, more units there. And then secondly and maybe equally as important is more High Rise relative to our total installed base. Those two things are as you know are up I think yields are up year-over-year every quarter for 12 consecutive quarters and that’s something that we’re extremely proud of. But those two reasons are the predominantly or the primary reason why yields are increasing. Obviously we’ll replace older units in certain jurisdictions, but I think the first two are why yields are improving.

Patrick J. Ramsey

Yeah, I think the third is given our game development team credit, they get smarter and better as we continue to build our portfolio. So our games performed better and that is obviously regardless of market.

Todd Eilers – Eilers Research

Okay, great. And then not sure if you gave this or not, but with respect to Nevada, can you say how many units were sold in that market in the quarter?

Patrick J. Ramsey

So for the year, we always anticipated about 100 units for the year and we actually exceeded that plans and we didn’t have a big unit sales in the quarter, but we did certainly exceed our fiscal 2013 plans for Nevada.

Todd Eilers – Eilers Research

Okay. And can you maybe also give us a sense for did you have any in terms of units sales for the overall market. Did you have any new and expansionary unit sales in the quarter?

Patrick J. Ramsey

I think we had some in Pennsylvania and make it whispering in my ear, Pennsylvania, New Jersey were some of the expansionary markets for us.

Todd Eilers – Eilers Research

Okay. But you guys didn’t record any of the grant or entry of new opening, I guess up in California, would that be next quarter?

Patrick J. Ramsey

Yeah, that will be our fiscal Q1.

Todd Eilers – Eilers Research

Gotcha, okay. And then I guess my other question was on the other revenue side, you guys mentioned something related to TournEvent profits, can you maybe talk a little bit more about that and it’s kind of what that is and is there something we should expect each year assuming you guys continue to run the National TournEvent of Champions?

Patrick J. Ramsey

Our goal was that National TournEvent of Champions is to break-even. So we essentially every dollar of entry fees that we collect, we usually put back to work in marketing in some form of fashion. We did entry fees did exceed expenses in fiscal 2013 to the tune of about $300,000. We don’t expect that to happen in the future, but certainly it was a nice price to be profitable something that we expected to break-even on.

Todd Mctavish

And I’ll clarify we don’t expect that to happen in the immediate future, but we’re very early adding creating a brand that’s pretty existing and obviously pretty powerful just from year one. So years three, four and five that we can’t speak to it, I think there will be a good opportunity there, but right now we are building a brand and so that’s where we expected to be break-even.

Todd Eilers – Eilers Research

Okay, all right. Thanks guys.

Operator

Thank you. (Operator Instructions) And the next question is from Justin Sebastiano, Brean Capital. Your line is open.

Justin Sebastiano – Brean Capital

Thanks, good morning guys. As far as new markets in fiscal 2014, what are we looking at the sites Pennsylvania?

Patrick J. Ramsey

Oregon, Colorado, maybe some Canada as well, Ontario, but those are the three new markets that we are working right now.

Justin Sebastiano – Brean Capital

Okay. And then you mentioned that TournEvent is going to likely be a lower percentage of the unit sold, but your unit sold look to be increasing and I guess you spoke about a lot of the growth in fiscal 2014 will come from market that you already in or that you’ve just gotten into in other words Nevada, New Jersey, is that why would we think though that TournEvent would be coming down considering how, well it’s been accepted in the other new market. I mean do you think perhaps Oregon or Colorado, PA won’t necessarily take that or could you just kind of take us through your thinking please?

Patrick J. Ramsey

Well, I think it’s more of the absolute unit of TournEvent may not change or go down. It’s just – it’s percentage relative to the entire pool of units that are going to be sold. So I think in absolute units, it’s going to hold – it’s going to be lower percentage, because we’re going to sell more of the other stuff to that.

Justin Sebastiano – Brean Capital

Gotcha, okay. And then selling out of the lease base, is this sort of a one-off thing or do you think I mean I know it’s not your business to sell out of the lease base, but when it happens, it happens but is this sort of a one-off or should we sort of think about this as maybe a quarterly thing that you’ll do?

Patrick J. Ramsey

I think we don’t consciously do it, we do it because the customer ask, so the good news is that they like the product enough to essentially take on all the risk themselves by buying from us. We don’t like to do it, because we like recurring revenue, but that’s something that has happened every quarter for the last several years.

It just was a bigger unit order sales this quarter versus some of the previous quarters. I do expect that to happen going forward. It’s not something that we encourage, but it is an endorsement of our products, because our customers are taking on all the risk.

Justin Sebastiano – Brean Capital

Okay, was that out of one of the tribal casinos or what market was that in?

Patrick J. Ramsey

No it was a commercial, big commercial casino and then it was across multiple markets.

Justin Sebastiano – Brean Capital

Okay, it was one owner with multiple properties?

Patrick J. Ramsey

Correct.

Justin Sebastiano – Brean Capital

Okay. All right, thanks guys.

Patrick J. Ramsey

Thank you. Thanks Justin.

Operator

Thank you and the next question is from David Ehlers of Las Vegas Investment Advisors, you may begin, your line is open.

David Ehlers – Las Vegas Investment Advisors Inc.

Good morning, gentlemen.

Patrick J. Ramsey

Hi, David.

David Ehlers – Las Vegas Investment Advisors Inc.

In the past you’ve produced an excellent investor presentation, shortly after the conference call you intend to do that again and if so what would be the timing on that?

Adam Chibib

We absolutely plan on doing it again. I think we are pretty quiet from an IR front for the next couple of weeks or so, so my guess is that we will produce one probably right after Thanksgiving.

David Ehlers – Las Vegas Investment Advisors Inc.

Okay and do you have any indication when you might be approved in Colorado yet?

Patrick J. Ramsey

Probably in the next four or five months, or so but it’s hard to tell because we were at the mercy of the regulators, so it’s somewhat out of our hands.

David Ehlers – Las Vegas Investment Advisors Inc.

Okay, that’s all I have, thanks fellows.

Patrick J. Ramsey

Thanks, David

Operator

Thank you and the next question is from Will Conley of Gellos Capital. Your line is open.

Will Conley – Gellos Capital

Hey, guys how are you?

Patrick J. Ramsey

Good.

Will Conley – Gellos Capital

Hey, so I just want to ask about, how you guys are thinking about the buyback going forward and clearly the purchases you made have been really accretive but there is still a lot left on the current authorization and you can generate another $40 million -- call it free cash flow next year?

Patrick J. Ramsey

Well I guess the good or bad news is that our methodology for our buyback is exactly the same as it’s been for the last several programs that we’ve initiated, so we will set up pricing grids, those pricing grids keep us in the market literally no matter what the share price is but certainly we are more aggressive the lower the share price. So we intend to be in the market obviously to the range of that grid, the grids typically last six months to 12 months and we will be buying shares every day in the open market.

Will Conley – Gellos Capital

And just to be clear, so that the last grid I mean obviously the average purchase price for the shares you bought last year, I think was 15 and change according to the press release?

Patrick J. Ramsey

Yes.

Will Conley – Gellos Capital

So what was that original range for that, for those set of purchases just curious?

Patrick J. Ramsey

I believe the high-end of the range, probably tapped out at $21 or $22 a share but I’m pulling that from memory so.

Will Conley – Gellos Capital

So, you’re obviously well north of that, you’re going to have to kind of re-calibrate given where the stock has settled?

Patrick J. Ramsey

Exactly, that’s why you saw no purchases over the last couple of months that’s exactly.

Will Conley – Gellos Capital

Okay, and then when do you expect kind of the new range to be I guess authorized and approved?

Patrick J. Ramsey

Implemented.

Will Conley – Gellos Capital

Yes.

Patrick J. Ramsey

It will probably it was approved by our board yesterday, so it should go into effect sometime next week.

Will Conley – Gellos Capital

Okay just, just that’s perfect. All right thanks so much.

Patrick J. Ramsey

Thank you.

Operator

Thank you. (Operator Instructions) And the next question is from Alex Andrade of Bulle Rock Capital. Your line is open.

Alex Andrade - Bulle Rock Capital

Hi, good morning can you talk just generally about pricing trends in the industry, obviously you’re guiding to your mix changing next year and not affecting your ASP but just like for like pricing what you guys are seeing?

Patrick J. Ramsey

Yes, I think our pricing situation is little bit different just because of what we said about TournEvent in the concentration but I would say high level, I am going to speak out of both sides of my mouth. I mean it gets more and more competitive. If you walk around the G3 floor you see that. And that therefore pricing becomes, it just becomes more and more competitive but at the same time there is a lot of new technologies and a lot of expensive cabinets also beginning shown, you’re hearing some pretty high prices on those, so it’s a mix right now, but I think our situation is just a little bit different as we enter new market. We deal with larger customers and we sort of deal with the shift with TournEvent.

Alex Andrade - Bulle Rock Capital

And just remind us the TournEvent ASP versus the other products non-TournEvent?

Patrick J. Ramsey

It’s generally for a TournEvent unit fully enabled, it’s north of $20,000 per unit for our standard cabinets, all-in dual video and again it depends on configuration, my guess is that between where the rest of the industry is which is between 15.5 and 16.5 per unit.

Alex Andrade - Bulle Rock Capital

Okay. And just my last question, it seems like TournEvent is such a great product for the regional market. Is the reason you’re just guiding as a lower percent of mix is it not as appropriate for Vegas strip market maybe just a different type of market?

Patrick J. Ramsey

No, I wouldn’t say that, actually I think TournEvent has incredible implications for a Las Vegas strip property if you think about the convention business and the way to drive non-gamers down to the casino floor. I think it can be really powerful. It’s just a little unproven right now in that market.

But I think it really goes down at this point. We’re projecting 35%, 45% increase in unit sales year-over-year that’s pretty strong and that’s pretty high and so we planned to sell a decent amount of TournEvent’s obviously within that number.

Alex Andrade - Bulle Rock Capital

Okay. Thank you.

Patrick J. Ramsey

Okay.

Operator

Thank you. And the next question is from Shawn Boyd of Next Mark Capital. Your line is open.

Shawn Boyd – Next Mark Capital

Thanks. Just going back to an earlier question regarding the new units and TournEvent sales in the new units; is there anything in the new markets -- is there anything about some of these markets and this is away from Nevada for a second that it just makes them less applicable to the TournEvent sales?

Patrick J. Ramsey

No, I don’t think so.

Shawn Boyd – Next Mark Capital

Okay. And also in terms of this guidance with the high growth in unit sales, you’ve mentioned earlier that you’ve probably – it appears that you’re going into the year with a fairly strong book. Is there a possibility that your mix in this early part of the year as a high number of non-TournEvent units right now?

Todd Mctavish

As far as our booked unit sales, the mix of those?

Shawn Boyd – Next Mark Capital

Correct.

Patrick J. Ramsey

Yes, my guess is what happens in Q1 will be consistent with what happens for the rest of the year. So I don’t think it’s any different from a mix perspective. I think the more salient point is that, we’ve got a lot of, we know what our backlog is going into the first quarter, and we know what is going to be strong unit sale quarter.

Shawn Boyd – Next Mark Capital

Got it, okay. And last question for you, in terms of ASP on TournEvent unit in sales, has that changed at a much different rate versus the rest of your games?

Patrick J. Ramsey

No, it’s held up very consistently. We did two G3 specials across our entire product line, which every manufacturer does, which also probably impacted our fourth quarter ASPs and it will also impact Q1 ASP, but beyond that it’s held up very well, the pricing on that product.

Shawn Boyd – Next Mark Capital

Got it, thanks so much.

Patrick J. Ramsey

Thank you.

Operator

Thank you. I now like to turn the call back over for closing remarks.

Todd Mctavish

All right, well thank you. Thank you operator and thanks for those who joined us in the call. This concludes our fiscal 2013 fourth quarter earnings update and we’ll talk to you again in the late, after our Q1. Thanks.

Patrick J. Ramsey

Thank you.

Operator

Ladies and gentlemen, this concludes today’s conference. You may now disconnect. Good day.

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