Multimedia Games Inc. Q1 2008 Earnings Call Transcript

May.26.08 | About: Multimedia Games, (MGAM)

Multimedia Games Inc. (NASDAQ:MGAM)

Q1 2008 Earnings Call

May 7, 2008 10:00 am ET

Executives

Howard Chalmers - SVP for Corporate Communications

Mike Maples - Chairman

Gary Loebig - Interim President and CEO

Randy Cieslewicz - CFO

Analysts

Michael Friedman - Noble Financial

Marsha Yuwon - Dolphin Management

Ryan Worst - Brean Murray

Barry Kaplan - Maple Tree Capital Management

Pat Corcoran - Investment Services

Thomas Lieu - Persistency Capital

Operator

Good day, everyone, and welcome to the Multimedia Games' first quarter 2008 conference call and Web cast. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Multimedia's Senior VP for Corporate Communications, Mr. Howard Chalmers. Please go ahead, sir.

Howard Chalmers

Thank you, operator, on this morning's call, are Michael J. Maple Senior., our Chairman of the Board; Gary Loebig, Multimedia's Interim President and Chief Executive Officer; and Randy Cieslewicz, Chief Financial Officer.

I would like to remind everyone that today's call and simultaneous webcast includes forward-looking statements. These statements are solely based on present information and subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the risk factors section in our recent SEC filings for a description of certain 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 applicable law.

Today's call and webcast may include non-GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of all non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found on our website, www.multimediagames.com in the investor relations section.

And now I would now like to turn the call over to Chairman, Mike Maples.

Mike Maples

Thank you, Howard, and welcome to all of you for joining us on this call and webcast this morning. As Chairman of the Board, I want to take the opportunity to share the Board's view that we strongly believe there is greater value in Multimedia Games than it is reflected in the company's current evaluation, and I'm sure many of you, no doubt, agree.

On the call this morning, we will comment on some of the details in the morning news announcement. We'll also review the actions we are taking or are under consideration to enhance shareholder value.

I joined Multimedia as a Director in August of 2004, and was appointed to serve as Chairman approximately a year and a half later. As this is my first time participating in public discussions of Multimedia Games in such a forum, let me begin with a brief overview of my professional career and ask Gary to do the same.

In reviewing my forty-year plus experience, my sole intention is to help provide some perspective on my background as a means of demonstrating the company as being steered by experienced hands during this time of transition. For over 23 years, I worked for IBM in various capacities in marketing and hardware and software development. My last position was the Director of Software Strategy.

From April of 1988 through July of 1995, I had several management positions at Microsoft, becoming the Executive Vice President for Worldwide Products Group, responsible for all product development and marketing. I was a member of the office of the president, where Steve Ballmer and I reported to the company chairman, Bill Gates.

In addition, I also served on the boards of several public companies, including Motive, Incorporated, Lexmark International, Incorporated and the Sonic Corp. I have served on five other public company boards, and have been involved in four CEO searches, one hostile takeover of PeopleSoft by Oracle, and several M&A activities.

In addition, I currently serve or had previously served on a number of private company and nonprofit boards. Gary, can you give a quick rundown on your experiences and professional activities?

Gary Loebig

Thanks, Mike. I joined Multimedia Games in 1998, and have been responsible for both domestic and international sales, market development and regulatory compliance for our Class II, Class III, Charity Bingo and video lottery products.

Prior to joining Multimedia's management team, I spent 14 years with Stuart Entertainment, where I had similar responsibilities in various divisions of its Bingo King operation, that included serving as president of Precision Games Division based in Council Bluffs, Iowa; and later, General Manager of Bingo King's Littleton, Colorado division.

I also spent nine years in marketing, sales and operations at Director Service Company, a printing and publishing company, where, among other things, I managed a straight commission sales force.

I guess the most important preparation for my current assignment stems from the fact that from the onset, I have been closely associated with all of the aspects of Multimedia Games' development in games, as well as software, gaming platform, and systems development activities.

Mike Maples

Thanks, Gary. Like all of the other Multimedia directors, I'm committed to seeing this company perform to its capabilities and delivering operating results that the financial community can appreciate and fairly value. It is fair to assume that each of us have not only personal stakes in this, but also financial stakes as well. And as you know, some directors hold very substantial financial stakes in Multimedia Games.

Accordingly, the Board is disappointed in our performance, and most certainly in our share price, so I think it is safe to say, in this regard, we are all on the same page. Our focus at the Board level is on maximizing the return to shareholders.

In October 2006, we formed a strategic review committee made up of myself and another independent director, Manny Perlman. And together with outside financial advisers we reviewed a broad range of options to increase the value to shareholders.

At the conclusion of this process in May, 2007, it was determined the best course of action would be to proceed with a $25 million Dutch auction self-tender as an important step in returning to shareholders some of the inherent value of the company.

The Company subsequently bought back 7% of its outstanding shares, or 2 million shares at a price of $12.55 per share. This was last July. So you can see one major reason we are so disappointed with our current share price, particularly as many of the factors that point to improving financial results are closer to coming to fruition today than they were just 12 months ago.

We are cognizant of the downturn in the capital markets over this period of time, the pressures on local economies and the impact this is having in terms of contracting the multiples of the gaming companies. However, taking these factors into consideration, we believe Multimedia's current stock price has suffered disproportionate relative to the company's true value.

We are conducting an active and aggressive search for a permanent CEO. We plan to move on this as quickly in this regard and hope to have a permanent CEO in place in the near future. The qualifications and experience we are looking for in this new CEO include extensive leadership experience and proven management skills.

It is important to add that in appointing Gary as interim CEO, we have the right person in place in terms of customer and employee relationships to keep this company moving forward on its business objectives.

I have been conducting weekly executive committee meetings with Gary and other executives, and it's evident that the company is benefiting from the stability Gary has brought to this role in the past several weeks. Our new CEO will undoubtedly benefit from having Gary ensure a smooth transition as well from his contribution as Executive Vice President of Sales.

The board to senior manage are focused on returning Multimedia Games to a position where it consistently generates net income and free cash flow. Once there, our priority will be to pay down the debt as quickly as possible. We will consider active repurchasing of our stock. Free cash will be used to further support a plan of focus and execution.

Before turning the call over to Gary, I want to reiterate the Board's position that our current share price does not reflect the true value of Multimedia Games. We believe that the company has a brighter future now, than when we authorized our tender offer. You may be assured that we will continue to work to unlock this value as quickly as possible for the benefit of all the shareholders. However, I'm sure you realize that this will take some time.

I will now turn the call over to Gary for brief comments regarding his priorities and activities as interim CEO. Following his comments, Randy will provide a detailed review of the second quarter performance, and then we'll take questions.

Gary Loebig

Thanks again, Mike. My initial priorities since assuming the interim CEO duties have been threefold. First, I have been addressing the predictable organizational issues associated with a change of leadership at the top. I have met with senior managers and various other groups and individuals to address any concerns or questions they might have had about the senior management transition.

Second, I have focused on current ongoing sales and product placement efforts and development efforts surrounding products and systems we are committed to delivering to customers in the near-term future. Finally, I have focused on my additional responsibilities to the Board, shareholders and staff resulting from the interim CEO appointment.

We are encouraged by the reception by both customers and players of our Class III mGAME Gaming Cabinets. While we were hoping to be further along with introduction and the valuation of new content, and while it is still too early in the deployment cycle to verify game performance, based on early results and the fact that our products have historically stood up well against comparable products offered by that same competition across various markets, we are cautiously optimistic about their ability to provide Multimedia a solid competitive presence.

Our Class III products are deployed in two markets, Rhode Island and Oklahoma. In Rhode Island, the market reports indicate that our games are performing well against the competition in comparable denominations and payout percentages, and that player acceptance is high, as evidenced by the fact that our units are experiencing the second highest number of games played per machine among all vendors on the floor.

In Oklahoma, Multimedia's proprietary Class III units are performing well in facilities where we have achieved a good ratio of game themes to the number of player terminals and we are continuing to convert both our own and third-party units to standalone compacted game products in that market.

In summary, in my initial weeks in the CEO position, I continue to be impressed with the level of professionalism of the members of the Multimedia team and of their universal commitment to building the profitability of the company and the credibility of its products across the markets that we serve.

Now, I will ask Randy Cieslewicz, Multimedia's CFO, to review our financial highlights. Randy?

Randy Cieslewicz

Thanks, Gary. As noted in our press release this morning, total revenue for the March 2008 quarter improved approximately 5% on a year-over-year basis to $32.2 million, and on a quarterly sequential basis, revenues improved by approximately $2 million or 7%. The quarterly sequential revenue increase primarily reflects the fact that Q2 is historically our highest performing quarter of the year in terms of hold per unit.

The year-over-year revenue improvement was achieved despite the fact that last year's second quarter period included 560 Class II units that were installed at a high earning facility for the entire March 2007 quarter, but which were removed in mid-fiscal 2007 to facilitate an expansion at this property. As we have noted before, we will be adding approximately 1,400 units at this facility later this calendar year.

Reflecting the normal historical seasonality of our business, revenues generated from Oklahoma were $19.3 million for the March 2008 quarter compared with $19 million in the March 2007 quarter and $17.2 million for the December 2007 quarter. Revenues from Mexico were $2.5 million for the March 2008 compared with $2.1 million in the December 2007 quarter, reflecting quarterly sequential growth in the installed base in this market of 526 units.

These revenue improvements were partially offset by year-over-year declines in revenues from California and Alabama of $800,000 and $600,000, respectively.

Hold per day for Oklahoma compact units increased on a quarterly sequential basis by 12%, and by 3% on a year-over-year basis. Again, the quarterly sequential improvement primarily reflects the historical seasonality of our business. Hold per day in Alabama increased on a quarterly sequential basis by 20%, but declined 12% on a year-over-year basis.

SG&A expense of $16.6 million for the March 2008 quarter reflect a quarterly sequential increase of approximately $0.5 million due to the inclusion of a CEO transition charge in Q2. SG&A expense in the March 2008 quarter was consistent with the March 2007 quarter. We expect SG&A of approximately $16 million to $16.3 million in Q3, absent any one-time benefits.

The slight uptick in the SG&A range is primarily related to additional headcount. I mention one-time benefits because we have agreed in principle to be reimbursed by our executive liability carrier 60% of the defense costs associated with the Diamond Games litigation.

Depreciation and amortization expense of $12.4 million decreased to $100,000 on a quarterly sequential basis. We expect depreciation and amortization in Q3 to increase approximately $1.1 million, primarily related to the continued Class III conversion in Oklahoma. Our expected Q3 FY '08 capital expenditures of $12 million to $14 million includes CapEx related to the purchase of 500 third-party standalone units, component parts for the mGAME cabinets and maintenance CapEx.

Our CapEx over the next several quarters will remain dependent on the timing of gaming units purchased related to the development agreement expansion in southern Oklahoma. Following the completion of this expansion and the completion of our conversion to Class III units in Oklahoma, we expect our CapEx spending to decline significantly.

Net income in Q2 includes interest income of $1 million, primarily related to imputed interest for capital advances associated with our development agreements. This compares to imputed interest income of $639,000 in the year ago period and $804,000 in the December 2007 quarter. We expect to record imputed interest income of approximately $1.2 million in Q3.

The amount of imputed interest income will start to decline once the expansion is complete and payments start being applied to the note receivable. We're calculating imputed interest on interest-free loans in accordance with FAS 13. We calculate the discount on each note receivable based on our cost of capital. The discount is then booked to contract rights, and is amortized against revenue for the life of the agreement.

Cash flows from operations in the March 2008 quarter were $4.5 million compared to $11 million in both the December 2007 and March 2007 quarters. Cash flows from operations were impacted by an increase in the accounts receivable balance and a decrease in the accounts payable balance.

Cash used by investing activities of $11.2 million includes $5 million of CapEx and $15.4 million in advances on new development agreements, which was offset in part by development agreement notes receivable repayments of $10.3 million. We received $4.5 million from a modification of an existing development agreement with one of our smaller tribal customers. That modification required us to remove approximately 150 Class II units from the site.

As we have noted, our total commitment for our customers' facility expansion in Southern Oklahoma is $65.6 million, and we advanced $59.5 million for this project as of March 31, 2008 with approximately $15.4 million advanced in the March 2008 quarter. We have funded $5.1 million so far in Q3. As such, our fundings in Q3 will be approximately $6.1 million, of which all but $1 million has been advanced.

During Q2 FY '08, we had net borrowings under our credit facility of approximately $6 million, and we had total outstanding borrowings under our credit facility of approximately $101 million at March 31, 2008. As of today, we have approximately $105 million outstanding on our credit facility.

Reflecting the higher level of outstanding borrowings offset by lower rates, we expect the Q3 interest expense to be slightly lower than Q2 levels. We now anticipate that our total outstanding borrowings will not exceed $110 million.

As previously disclosed, we entered into contracts for the sale of player terminals in Washington State for the sale of approximately 1,270 units. Except for the 714,000 recognized in Q1 for the sale of 50 units, revenue will be recognized over the terms of the various contracts.

The deferral of revenues related to revenue recognition and fair value for the new products allowed under the expanded compacts. In the future, revenue from this market will be deferred until all products are installed and revenue will be recognized ratably over the terms of the agreements for contracts in which these new products exist. In Q2, we did not recognize any deferred revenue from previous sales in Washington State because certain products have not yet been delivered.

I will now turn the call back over to Mike.

Mike Maples

Operator, we're now open. Would you please open the call for questions?

Question-and-Answer Session

Operator

(Operator Instructions). And we'll go first to Michael Friedman, Noble Financial.

Michael Friedman - Noble Financial

Hi, guys. Randy, I had a couple of quick questions for you. Did you say the charge related to the senior management transition on the P&L, is that in SG&A?

Randy Cieslewicz

Yes. It was $675,000 pretax, and after tax it was about $0.014 after tax.

Michael Friedman - Noble Financial

Okay. And then on the other income line, is the 872.

Randy Cieslewicz

Right.

Michael Friedman - Noble Financial

Can you just refresh my memory, what is that due to, is that an ongoing income stream?

Randy Cieslewicz

Right now we're projecting that to go through the end of this calendar year. It's from an investment that we made years ago in California and we have a small partnership interest from a management deal out there from about 2004.

So we got paid back, if you recall, last year, we received a balloon payment from that thing of about $1.1 million; and we've been getting trailers of about $100,000 to $200,000 a month. This particular quarter, we got one additional payment. That's why it's a little bit higher. But I would project it to be about $200,000 a month for the remaining balance of the calendar year.

Michael Friedman - Noble Financial

Great, thanks. And then as far as Mexico goes, how many facilities were you in by the end of March? And how many customers did you have in that market by the end of March?

Randy Cieslewicz

We still have two customers and we were in 16 facilities I believe. But was disclosed in our mid-month update, I can tell you exactly, but it was 16, I believe.

Michael Friedman - Noble Financial

Okay, great. And then as far as Mexico, is there a seasonality in that market or is it strong all the way through?

Randy Cieslewicz

Well, I wouldn't say it's strong. I think it's too early to tell as far as the seasonality. We've certainly seen fluctuations in the hold per day, but it's really early for us to tell anything with regards to seasonality.

Michael Friedman - Noble Financial

Okay. And then you mentioned Washington State. If you were to pull out some of Washington State sales, would that have a material effect on EPS and EBITDA? Do you know?

Randy Cieslewicz

Well, we didn't report any revenues from Washington State in the quarter, so that wasn't impacted. The Washington State sales that we've been talking about, and in the release we say $15.5 million, we're deferring those revenues until we get all the products installed. And so, because of the fact that there is new software that we are installing that's allowed under the compact which is a unified currency system, software that we are offering, we don't have fair value for that product.

We're going to have to defer revenue over the periods of the contract. So once we get that software installed, we will start recognizing revenue ratably. And we will continue to do that, most likely with all the sales that we have in Washington state on a going forward basis, that have this new product or new software included in the sale.

Michael Friedman - Noble Financial

Great, okay. And then as far as the repayment from development agreements, can you give us a sense for how much you expect to recoup in fiscal '08 and fiscal '09?

Gary Loebig

Well, a lot of it depends on when our expansion property gets opened up. But absent that property, I would say we should figure about $3 million to $5 million a quarter, excluding the expansion property on a go-forward basis. On a gross basis, we're sitting in the upper 70s in terms of gross note receivable. The note receivable that is on the balance sheet is net of the discounts for acute interest.

That discount is sitting in intangible assets. But the gross note receivable balance is in the upper $70 millions. And a large percentage of that, as you know, is associated with the expansion north of Dallas.

We probably got about $15 million outside of that or $15 million to $20 million outside of that. So I would say $3 million to $5 million excluding the North Dallas property. Once that gets opened up, we expect it to be about $1 million a month.

Michael Friedman - Noble Financial

Okay.

Gary Loebig

So I guess, Mike, for '09, I would just say $3 million to $5 million a quarter would be a good number to use.

Michael Friedman - Noble Financial

Great. And that's for fiscal '09?

Gary Loebig

Right.

Michael Friedman - Noble Financial

Great, okay. And then one last question, as far as depreciation and amortization, have you changed the way you're accounting for depreciation of the machines? And what the average depreciation period for a participation machine?

Randy Cieslewicz

We have not changed the accounting policies associated with the depreciation. We use a three-year life for our machines.

Michael Friedman - Noble Financial

Great. Thank you very much.

Randy Cieslewicz

Thanks, Mike.

Operator

And we'll take our next question from Marsha Yuwon of Dolphin Management.

Marsha Yuwon - Dolphin Management

Hey, good morning.

Randy Cieslewicz

Hi, good morning.

Marsha Yuwon - Dolphin Management

I'm looking at '09 cash flows here and you said CapEx could decline significantly. Can you give me a sense of what that run rate might be?

Randy Cieslewicz

Well, fiscal '09 begins on obviously October 1. We've got a commitment to one of our third-party suppliers to buy 500 more machines between July 1 and December 31. If those 500 machines get purchased in the last quarter, that's going to affect the fiscal '09 CapEx.

But absent those machines, we're probably looking at $7 million a quarter. I would say that $30 million a year should be sufficient to operate our business without having a substantial amount of new Class III products that we are buying.

Marsha Yuwon - Dolphin Management

I got you. Okay, thank you.

Randy Cieslewicz

Okay. Thanks.

Operator

And we'll take our next question from Ryan Worst of Brean Murray.

Ryan Worst - Brean Murray

Thank you. Hey, Randy or Gary, could you guys talk about the delay at Windstar? What's causing t? And is there going to be any change in budget there for the facility?

Gary Loebig

The weather-related construction issues are primarily the reason for the delay.

Ryan Worst - Brean Murray

Okay.

Randy Cieslewicz

And I will add on the budget. In the $150 million total budget, there was about a $7 million contingency that was for unexpected construction costs. We are being told that that still remains intact. So I think the budget is still good. It's just been a little delayed.

Ryan Worst - Brean Murray

Okay. So the most additional you would have to finance would be 40% of that $7 million?

Randy Cieslewicz

No, no. The $7 million was included in the $150 million. So the budget was really $143 million with a $7 million contingency that made up the $150 million. So we funded our percentage of the $150 million.

Ryan Worst - Brean Murray

Okay. And then, Mike, maybe you could talk about what you are seeing in terms of any potential changes in strategic direction and maybe if any kind of technology that this company has that may be underutilized at the present time, and maybe you have a chance to better monetize going forward?

Mike Maples

I think we have a very broad portfolio of products and both hardware and software. And to a great extent, the first task of a new CEO will be to assess the markets and the products and decide what modifications need to be made to our strategy. So we're not in the process right now of trying to do that. That, we believe, would be the purview of the next CEO.

Ryan Worst - Brean Murray

Okay fair enough. And then Randy, just as far as the unit purchases, you said 500 in the fiscal third quarter, and then 500 more sometime through December 31?

Randy Cieslewicz

500 more, that was for one of our third-party suppliers. We will buy a couple hundred from the others. So we probably have 700 more after this quarter we're in.

Ryan Worst - Brean Murray

So 1,200 altogether?

Randy Cieslewicz

Yes.

Ryan Worst - Brean Murray

Okay. And then with that expansion at Windstar, has that schedule changed? Obviously it's changed, but is there still going to be a phased-in expansion?

Gary Loebig

Ryan, it's Gary. Yes, they still plan to have a phased expansion.

Ryan Worst - Brean Murray

Okay. And then what do you guys expect to put in there in terms of your own proprietary product?

Randy Cieslewicz

Well, we're going to provide the right mix based on what availability we have at the time when it gets opened. So I think we've always said before we would like to have a mixture of third-party titles and our titles. And the number of our titles is going to be dependent upon how many we have through the labs in Oklahoma and how many titles we have available.

Ryan Worst - Brean Murray

Okay. Thanks, that's all for now.

Randy Cieslewicz

All right, thanks Ryan.

Operator

And we'll take our next question from Barry Kaplan of Maple Tree Capital.

Barry Kaplan - Maple Tree Capital Management

Thanks, just a couple of things for Randy. I just to clarify on the EBITDA, the $17 million number is after the management transition costs, so axe that, EBITDA would be $17.7 million?

Randy Cieslewicz

Actually it would not have been $17.7 million because the $7 million was gross; that's pretax. So it would've been about $17.4 million.

Barry Kaplan - Maple Tree Capital Management

But the EBITDA is pretax also.

Randy Cieslewicz

Yeah, I'm sorry. Yes. There you go; there you go.

Barry Kaplan - Maple Tree Capital Management

So it would be $17.7 million. So okay. So you're really sort of the real kind of ongoing number is recurring number if you will is more like $17.7 million?

Randy Cieslewicz

That's correct.

Barry Kaplan - Maple Tree Capital Management

And then another question is just on the CapEx. You mentioned in response to an earlier question that you thought the sort of longer-term rate was about $30 million a year. But I was under the impression that once the current development agreements were completed, that it dropped to about $5 million a quarter, which is obviously more like $20 million. And I was wondering what you were kind of assuming when you gave that $30 million figure I guess about additional business? Just some color on that.

Randy Cieslewicz

Yeah. And the maintenance CapEx number versus the $20 million. I would say the maintenance CapEx number could be the $20 million, but we're certainly going to have to make continued investments in our products. So for example, in Alabama, we're certainly working on upgrading our product portfolio to respond to the declining revenues there.

So it's not just maintenance in terms of -- the $20 million would make up just maintenance in terms of keeping the units in revenue. Any additional amount over that $20 million ran rate would be considered the improvements to our systems and hardware in the field.

Barry Kaplan - Maple Tree Capital Management

Got you. Thank you.

Randy Cieslewicz

Thank you.

Operator

And we'll take our next question from Pat Corcoran of Investment Services.

Pat Corcoran - Investment Services

Hi, guys. Can you tell me on your balance sheet, what the intangible assets are?

Randy Cieslewicz

The intangibles, largest portion of that is the contract rights from the development agreements. Of the $40 million, it's roughly 75% of that, I believe.

Pat Corcoran - Investment Services

All right. Now, let me ask you one other question. On your equipment, when you bring the equipment back from like the Pachangas and stuff like that and you put it back in the property, is that depreciated at fair value or what?

Randy Cieslewicz

Once the property has been deployed in the field, it continues depreciating, regardless of whether or not we bring it back into the warehouse. The question also becomes, we leave it depreciating and then the question becomes, ultimately, whether or not we need to get that equipment as impaired, or we have a future home for it.

Right now, we have a home for all the used equipment that we're sending down to Mexico. So we're looking at the equipment we're pulling out; from a class II conversion perspective, we're taking all of the Bingo units and Class II product down to Mexico.

Pat Corcoran - Investment Services

Okay, great. Well, thank you very much.

Randy Cieslewicz

Thank you.

Operator

(Operator Instructions). We'll go next to Thomas Lieu of Persistency Capital.

Thomas Lieu - Persistency Capital

Hi, good morning, guys.

Randy Cieslewicz

Good morning.

Thomas Lieu - Persistency Capital

Just a couple of quick questions I guess. In Mexico last quarter, I think you said that in one of the newer units that you opened, that you guys were seeing a significant improvement there. Has that sort of continued? And have their plans evolved or where are they in terms of going forward in terms of better emulating that one new facility?

Gary Loebig

This is Gary. Every property is unique. Generally, we are looking forward to the continued openings of their properties, and we think it's going in the right direction, and we are assisting them whenever we can with their marketing efforts, which we think are going in the right direction.

Thomas Lieu - Persistency Capital

Okay. And there's also been sort of talk about continuing to seek for additional partners. Any progress on -- I take it those discussions are still going?

Gary Loebig

Yes.

Thomas Lieu - Persistency Capital

Okay. I guess while we're talking about discussions, in terms of New York, there's definitely been more talk about Belmont. Can you comment at all on that? And sort of associated with that, you guys have also talked about sort of perhaps approaching them about an extension to your contract in regards to how slow it sort of developed, any progress on either front, or any comments that you guys can give?

Randy Cieslewicz

Well, I think you're referring to the Aqueduct. There's been obviously news out there, there's three proposals out there about Aqueduct

Thomas Lieu - Persistency Capital

Right. I'm sorry. I misspoke.

Randy Cieslewicz

Okay. Well, we're certainly pleased to see the advancement that's evolved with respect to Aqueduct. I mean, obviously, that's the prized property of all the properties that we would like to get the system operating. So that's good news for us.

With respect to the contract extension, obviously, the legislation allows the New York Lottery to extend them in their contracts. We are working towards getting our contract extended, but that's something that we're going to have to work with the lottery on. And we don't have any development for you at this time. All we can say is that we are working, and we hope to have that done.

Thomas Lieu - Persistency Capital

Okay. Just one last question. A lot of the gaming companies have talked about some weakness in the first quarter. I was just wondering how you guys were seeing your markets? And also, perhaps some detail on January, February and March and how that sort of progressed and maybe perhaps into April.

Randy Cieslewicz

Okay, that's a good question. Because obviously we saw year-over-year improvements and I mentioned in my remarks just a minute ago that we saw increasing Oklahoma compact win per day. We've seen the Oklahoma market remain real strong. The unemployment numbers for Oklahoma were actually lower in '08 than they were in '07. I think that's largely due to the oil and gas economy.

In various pockets, the unemployment was up a little bit in Alabama. And our revenues in Alabama are probably more affected by competitive factors than economic factors. But we have seen softening in March and April, and so the question is, is really how much of the spike in gas prices increasing does it have an impact on our results.

We saw a really good early part of the quarter. January and February were outstanding. March was just a little bit softer than we expected. And April was softer than we expected, so we're just trying to assess whether or not the spike in gas prices is a factor. And usually, historically, what happens is March, if January and February sort of increase, and then April there's always a drop-off and then May and June come back a little bit.

So we will be watching May and June closely to see if we see that rebound from April. But April was a little bit softer than we expected.

Thomas Lieu - Persistency Capital

Okay. Great, thank you.

Randy Cieslewicz

Thanks.

Operator

(Operator Instructions).

Gary Loebig

I just started to say that hopefully your monthly updates will let you in on that as we know it.

Operator

Thank you, sir. (Operator Instructions).

And we do have a follow-up from Ryan Worst of Brean Murray.

Ryan Worst - Brean Murray

Thanks. Yeah, just a couple of follow-ups. One, Randy, could you provide some further detail on that modification to a prior development agreement, where you guys were paid back $4.5 million? Were those machine removals included in the fiscal first quarter? And do you expect any additional modifications?

Randy Cieslewicz

They were removed in April. We actually received the money last quarter and we removed the machines in April. So you will see that on our unit count that comes out next week. With respect to your second question, we don't expect any more modifications.

Ryan Worst - Brean Murray

Okay. And then in Mexico you guys said in the press release that you expect eight facilities to open. Is that an acceleration from prior plans, or is that pretty much the same?

Gary Loebig

Well, this is Gary, Ryan. The eight, I think, is what they have indicated in their last press releases. So they consider that a I believe a somewhat of an acceleration the commitment side of it, from where they're looking at.

Ryan Worst - Brean Murray

Okay, thanks.

Gary Loebig

Thanks, Ryan.

Operator

And gentlemen, we have no further questions at this time. Mr. Maples, I would like to turn the call back over to you for any additional or closing remarks.

Mike Maples

Thank you. On behalf of the Board of Directors and the entire Multimedia management team, I would like to thank you for your continued support of our company. Rest assured, we're working diligently to improve Multimedia's performance and unlock the inherent value of our stock. We look forward to reporting our progress going forward. This concludes our call.

Operator

And again, that does conclude today's conference call. Thank you for your participation. You may disconnect at this time.

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