It seems laughable now in hindsight.
Slot machine maker Multimedia Games Inc. was for sale in 2010 and couldn’t attract a buyer.
Today, it’s the hottest commodity for the gaming industry investment community.
“We’re an exciting growth story in gaming, and there aren’t too many of those, to be honest,” said Multimedia Games Chief Executive Officer Patrick Ramsey, 39, who joined the company as chief operating officer in 2008.
A few years ago, Multimedia Games had only a handful of gaming licenses. Now, with licenses in major markets — including Nevada, New Jersey, Pennsylvania, Illinois, Mississippi and Louisiana — Multimedia Games appears on the cusp cracking the manufacturing sector’s upper echelon.
“I think people have looked at us with just 30 percent to 40 percent of the U.S. market and saw our success,” Ramsey said. “They have to figure we’re bound to be successful when we can sell games to 80 percent to 90 percent of the U.S. market.”
Wall Street agreed.
Brean Capital gaming analyst Justin Sebastiano told investors Multimedia Games is on a clear growth trajectory. In a July research note, he said the company should easily crack into new markets as sales efforts increase.
“We visited 34 regional casinos in the past two months and universally, Multimedia Games was named the up-and-coming slot manufacturer by the property managers with whom we met,” Sebastiano said.
Credit Suisse gaming analyst Joel Simkins said this spring he noticed slot machines produced by Multimedia Games were making inroads on casino floors, even as corporate gaming companies continued to limit their budgets for replacing older games.
“As we have heard from casino operators in Atlantic City and tribal gaming, Multimedia Games is amassing low single-digit market share and orders in a number of locations,” Simkins said.
right place, right time
It wasn’t always so easy.
Three years ago, Multimedia Games had between 2,000 and 3,000 slot machines in the U.S. market, primarily concentrated in Indian casinos in Oklahoma and Washington.
The Austin, Texas-based company started out by feeding gaming devices to tribal casinos in Oklahoma. The business in the early 2000s provided the company with a solid revenue stream that increased as gaming in the state quickly expanded.
Eventually, the company branched into other Indian gaming states, including California, but had an eye toward the Strip and the expanding riverboat and regional gaming markets.
When Multimedia Games CEO Anthony Sanfilippo left in March 2010 to become CEO at regional casino operator Pinnacle Entertainment, Ramsey was named interim-CEO. Before joining Multimedia Games, Ramsey had spent six years with Harrah’s (now Caesars) Entertainment in a variety of operational positions.
Multimedia’s board tasked Ramsey with keeping the company in operation while buyers were sought for the business. None surfaced.
“It was the wrong time to be selling and the wrong time for buyers to be buying,” Ramsey said.
Six months later, the board pulled off the interim title and turned Ramsey loose to rebuild and expand the operation.
“We decided to go this independent route and try to build value, take market share and grow,” he said.
Today, Multimedia Games is fast approaching 20,000 slot machines in the U.S. market. The company was licensed in Nevada in September 2011 and launched games on the Strip last year. The company now has slot machines in Atlantic City.
“The Nevada license was important because it sent a message that we’re a real manufacturer that can compete in a major level, especially with some of the big players,” Ramsey said.
The company’s fastest-growing product is TournEvent, a bank of linked slot machines that allows casinos to run multiple slot machine tournaments and competition. Server-based technology personalizes the games for customers.
As of March, Multimedia had installed TournEvent in roughly 170 casinos — an average of 14 to 15 machines per installation. Multimedia’s average selling price was $19,000 per machine.
Simkins said Multimedia executives told him 500 casinos in the U.S. could support the product, but the company’s “realistic goal” was 300 properties.
Janney Montgomery Scott gaming analyst Brian McGill told investors in July that TournEvent could be a “significant driver” for Multimedia Games and could lead to the placement of the company’s other gaming devices.
“This is a unique product that has generated substantial interest from operators,” McGill said. “We think many properties also are more likely to add a bank of Multimedia’s games once they have a positive experience with TournEvent.”
Multimedia Games’ stock price is up 89 percent in the last 12 months on the Nasdaq. Several analysts recently upgraded their views of the manufacturer, mostly to a “buy” recommendation.
One Wall Street researcher predicted the company’s total annual revenues, which grew 22.2 percent to $156.2 million in 2012, will hit $185.8 million this year and top $214.9 million next year.
As of March, the company had cash on hand of $81.5 million and $31.5 million in debt, for net cash of $54 million.
Wells Fargo Securities gaming analyst Barry Jonas, who initiated coverage of the company in July, said Multimedia Games was “in the early innings.” He said the company was evolving from a small manufacturer to “a leading” U.S.-based slot machine provider.
“We are positive on Multimedia’s ability to materially grow earnings as new gaming licenses increase its access to the domestic gaming markets,” Jonas said.
Ramsey said one key to Multimedia’s success was dumping underperforming businesses, especially on the international front. Last year, the company halted its operations in Mexico, where it had 6,000 slot machines, but were operating under “terrible” financial terms.
The company is focused on serving the domestic market.
Multimedia Games has placed some of its slot machine titles into social gaming platforms and the company recently launched an application for free-to-play TournEvent on mobile devices.
Ramsey said the company is keeping its “eye on Internet gaming developments,” especially in New Jersey, which is launching full-scale Internet gaming later this year.
“I just don’t see the traditional slot manufacturing role being profitable on the Internet quite yet,” Ramsey said. “It’s critical for us to focus on land-based casino gaming. The company’s problem in the past was it tried to focus on too many things.”
Ramsey said there aren’t plans to move Multimedia Games from Austin to Las Vegas. The company has two facilities in Austin — a technology development and distribution center and corporate offices — which employ a combined 500 workers.
In Las Vegas, Multimedia maintains a 4,000-square-foot office near Summerlin in Tivoli Village. The offices include a slot machine showroom, sales and marketing space, and service staff.
Austin has an advantage, Ramsey said, because the city is known as a technology hub and the workforce provides Multimedia Games with a “fresh approach” to slot machine game and bonusing design.
Ramsey, who spends four or five days a week in Austin, still lives in Las Vegas. So does longtime slot machine company executive Mick Roemer, who is Multimedia’s senior vice president of sales. Company chairman Steve Greathouse, a former Strip gaming executive, also lives in Las Vegas.
Interest in Multimedia Games has brought Wall Street analysts to Austin.
Slot machine floor managers, who make the ultimate decision on what games end up in front of customers, enjoy testing the products in the Tivoli Village showroom, even executives from Strip casinos.
Most of the slot machine companies — including Bally Technologies, Konami Gaming and WMS Industries — have offices near McCarran International Airport. International Game Technology is on Buffalo Drive off Interstate 215.
“We can show customers our products, add some excitement, and then we can take them downstairs to one of Tivoli’s great restaurants,” Ramsey said. “We took a risk, but it has paid off.”
Contact reporter Howard Stutz at email@example.com or 702-477-3871. Follow @howardstutz on Twitter.