HONG KONG, Nov. 10, 2016 /PRNewswire/ -- Entertainment
Gaming Asia Inc. (NASDAQ: EGT) ("Entertainment Gaming Asia" or "the
Company"), a gaming company focused on growing markets in Pan-Asia,
today reported operating results for the third quarter ended
September 30, 2016 and reviewed
recent corporate progress.
Key Financial Metrics
- Consolidated revenue of $690,000
for the third quarter of 2016
- Adjusted LBITDA (loss from continuing operations before
interest, taxes, depreciation, amortization, gains on disposals and
non-cash charges) of $1.4 million for
the third quarter of 2016
- Net loss from continuing operations of $122,000 for the third quarter of 2016
- Cash balance of $35.0 million and
zero debt as of September 30,
2016
Third Quarter of 2016 Financial Performance
The Company's third quarter of 2016 consolidated revenue was
$690,000 compared to $4.5 million in the third quarter of 2015. The
decrease was primarily due to the expiration of the Company's
electronic gaming machine, or EGM, participation agreement with
NagaWorld on February 29, 2016.
Selling, general and administrative (SG&A) and research and
development (R&D) expenses totaled $1.5
million for the third quarter of 2016 compared to
$1.1 million in the prior year
period. The increase primarily related to the new social gaming
operations.
Operating expenses, excluding capitalized costs, for social
gaming were $561,000 in the third
quarter of 2016 compared to $94,000
in the second quarter of 2016 and $9,000 in the prior year period. In accordance
with relevant accounting standards for software development, the
Company ceased to capitalize software development costs and began
to expense all social gaming costs and amortize the previously
capitalized costs following the initial market test of the platform
in mid-August 2016. Total combined
operating expenses and capitalized costs related to the social
gaming platform were $980,000 in the
third quarter of 2016 compared to $817,000 in the second quarter of 2016 and
$9,000 in the prior year period. The
sequential quarterly increase was primarily due to higher salaries
due to increased head count and higher technology and marketing
expenses associated with the initial test launch.
The Company reported adjusted LBITDA from continuing operations
of $1.4 million in the third quarter
of 2016 compared to adjusted EBITDA of $2.4
million in the third quarter of 2015.
The Company reported a net loss from continuing operations of
$122,000, or $0.01 per share, for the third quarter of 2016
compared to net income from continuing operations of $797,000, or $0.06
per share, for the third quarter of 2015. The weighted average
diluted share count was 14.5 million shares for both periods. The
decline in net income from continuing operations in the third
quarter of 2016 was primarily due to lower gaming operations
revenue and higher operating expenses related to the new social
gaming operations. This was partially offset by lower
depreciation and amortization expenses related to the gaming
operations and a $1.6 million gain on
the disposition of a total of 824 of the Company's EGM seats that
had been placed in NagaWorld in Cambodia and Leisure World VIP Slot Club in
the Philippines in the third
quarter of 2016.
The Company reported a net loss from the discontinued gaming
products operations of $622,000, or
$0.04 per share, in the third quarter
of 2016, which primarily related to factory lease payments and the
lease termination in September 2016.
This compared to net income from discontinued operations of
$649,000, or $0.04 per share, in the third quarter of
2015.
Clarence Chung, Chairman and
Chief Executive Officer of Entertainment Gaming Asia, commented,
"We continue our efforts to refine our business operations and
position ourselves for new opportunities. Following the disposition
of our gaming products assets in May
2016 for cash proceeds of $5.9
million and our EGMs in NagaWorld and Leisure World in
July 2016 for cash proceeds of
$3.3 million, we sold all 71 EGMs
seats in Thansur Bokor in October
2016 for cash proceeds of $250,000. While our reduced base of operations
will have a negative impact on our near-term earnings, these
transactions provide us a total of approximately $9.4 million in cash proceeds, excluding
$765,000 in expense reimbursements
for severance costs and factory lease payments and the potential
for earn outs on certain gaming chip and plaque sales related to
the now discontinued gaming products business. To date, we have
received $7.3 million of the sale
proceeds and have cash resources of approximately $35 million which, we believe, enhances our
ability to pursue and execute on new projects.
"We are actively pursuing projects that we believe will provide
long-term growth potential for the Company. These potential
projects are in new businesses, such as the film and related
businesses, for the Company and would provide us a new strategic
direction. We are eager to share more information on these
potential opportunities should they become more definitive in
nature.
"In addition, we continue our efforts to develop a free-to-play,
mobile, social games platform for the Pan-Asian market. We are
testing the platform in certain markets to assess its potential as
a provider to long-term earnings."
Entertainment Gaming Asia is hosting a conference call and
simultaneous webcast at 8:30 a.m. ET today, November 10, 2016, both of which are open to the
general public. The conference call number is 800/926-9795 or
212/231-2935. Questions and answers will be reserved for call-in
analysts and investors. Interested parties may also access the live
call on the Internet at www.EGT-Group.com. Please allow 15
minutes to register and download and install any necessary
software. Following its completion, a replay of the call can
be accessed for thirty days on the Internet at
www.EGT-Group.com.
About Entertainment Gaming Asia Inc.
Entertainment Gaming Asia Inc. (NASDAQ: EGT), an indirect,
majority-owned subsidiary of Melco International Development
Limited, is a gaming company engaged in the leasing of
electronic gaming machines to the gaming industry in Cambodia and the Philippines. The
Company is also developing a free-to-play online social gaming
platform for certain Asian markets.
Forward Looking Statements
This press release
contains forward-looking statements concerning Entertainment Gaming
Asia within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Those forward-looking statements include
statements regarding expectations for: the Company's ability to
develop and successfully launch a social gaming platform and fund
this initiative; expectations for the viability of the social
gaming platform, its revenue model and rollout timeline; the
Company's expectations for expanding its business model to new
businesses that will provide growth for the Company; and, the
Company's ability to secure and execute on new projects and fund
those projects. Such statements are subject to certain risks and
uncertainties, and actual circumstances, events or results may
differ materially from those projected in such forward-looking
statements. Factors that could cause or contribute to differences
include, but are not limited to, risks related to the Company's
ability to: identify and implement successful marketing and
promotional strategies for the Company's gaming operations;
identify and successfully develop additional projects; acquire
additional capital as and when needed; adapt to potential changes
in gaming policies and political stability in the countries in
which the Company operates; the ability to successfully launch its
social gaming platform and operate and compete in the social gaming
market; and, those other risks set forth in the Company's annual
report on Form 10-K for the year ended December 31, 2015 filed with the SEC on
March 30, 2016 and subsequently filed
quarterly reports on Form 10-Q. The Company cautions readers not to
place undue reliance on any forward-looking statements. The Company
does not undertake, and specifically disclaims any obligation to
update or revise such statements to reflect new circumstances or
unanticipated events as they occur.
- financial tables follow -
|
Entertainment
Gaming Asia Inc.
Consolidated
Statements of Comprehensive Loss/Income
(Unaudited)
|
|
|
|
Three-Month
Period
Ended September
30,
|
|
|
Nine-Month
Period
Ended September 30,
|
|
(amounts in
thousands, except per share data)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
operations
|
|
689
|
|
|
4,483
|
|
|
6,814
|
|
|
13,407
|
|
Social
gaming platform
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Total
revenues
|
|
690
|
|
|
4,483
|
|
|
6,815
|
|
|
13,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
gaming operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming property and equipment Depreciation
|
|
167
|
|
|
751
|
|
|
1,041
|
|
|
2,352
|
|
Casino contract amortization
|
|
—
|
|
|
608
|
|
|
528
|
|
|
1,830
|
|
Other gaming related intangibles amortization
|
|
—
|
|
|
63
|
|
|
96
|
|
|
189
|
|
Other operating costs
|
|
542
|
|
|
927
|
|
|
2,495
|
|
|
2,718
|
|
Cost of social gaming
platform
|
|
77
|
|
|
—
|
|
|
77
|
|
|
—
|
|
Selling, general and
administrative expenses
|
|
1,443
|
|
|
1,073
|
|
|
3,551
|
|
|
3,620
|
|
Gain on disposition of
assets
|
|
(1,632)
|
|
|
—
|
|
|
(1,653)
|
|
|
(24)
|
|
Research and
development expenses
|
|
63
|
|
|
9
|
|
|
548
|
|
|
9
|
|
Depreciation and
amortization
|
|
25
|
|
|
33
|
|
|
79
|
|
|
100
|
|
Total operating costs
and expenses
|
|
685
|
|
|
3,464
|
|
|
6,762
|
|
|
10,794
|
|
Income from
continuing operations
|
|
5
|
|
|
1,019
|
|
|
53
|
|
|
2,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(expenses)/income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense and
finance fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
Interest
income
|
|
2
|
|
|
3
|
|
|
7
|
|
|
9
|
|
Foreign currency
losses
|
|
(34)
|
|
|
(100)
|
|
|
(25)
|
|
|
(129)
|
|
Other
|
|
11
|
|
|
4
|
|
|
22
|
|
|
15
|
|
Total other
(expenses)/income
|
|
(21)
|
|
|
(93)
|
|
|
4
|
|
|
(108)
|
|
(Loss)/income from
continuing operations before income tax
|
|
(16)
|
|
|
926
|
|
|
57
|
|
|
2,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expenses
|
|
(106)
|
|
|
(129)
|
|
|
(314)
|
|
|
(166)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
from continuing operations
|
|
(122)
|
|
|
797
|
|
|
(257)
|
|
|
2,339
|
|
Net (loss)/income
from discontinued operations, net of tax
|
|
(622)
|
|
|
649
|
|
|
(2,729)
|
|
|
1,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
attributable to EGT stockholders
|
$
|
(744)
|
|
$
|
1,446
|
|
$
|
(2,986)
|
|
$
|
3,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
(55)
|
|
|
(64)
|
|
|
(58)
|
|
|
(79)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
(loss)/income attributable to EGT stockholders
|
$
|
(799)
|
|
$
|
1,382
|
|
$
|
(3,044)
|
|
$
|
3,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data (basic
and diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/earnings
|
$
|
(0.05)
|
|
$
|
0.10
|
|
$
|
(0.21)
|
|
$
|
0.24
|
|
(Loss)/earnings from continuing operations
|
$
|
(0.01)
|
|
$
|
0.06
|
|
$
|
(0.02)
|
|
$
|
0.16
|
|
(Loss)/earnings from discontinued operations, net of tax
|
$
|
(0.04)
|
|
$
|
0.04
|
|
$
|
(0.19)
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
14,464
|
|
|
14,460
|
|
|
14,462
|
|
|
14,456
|
|
Diluted
|
|
14,464
|
|
|
14,474
|
|
|
14,462
|
|
|
14,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All historical
revenues and expenses associated with the Company's gaming products
division, the principal assets of which were sold in May 2016, have
been reclassified as discontinued operations for the presented
periods.
|
|
Entertainment
Gaming Asia Inc.
Consolidated
Balance Sheets
|
|
|
|
September
30,
2016
|
|
December 31,
2015
|
|
(amounts in
thousands, except per share data)
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
35,021
|
$
|
30,681
|
|
Accounts receivable,
net
|
|
367
|
|
724
|
|
Amounts due from
related parties
|
|
—
|
|
257
|
|
Other
receivables
|
|
1,049
|
|
78
|
|
Inventories
|
|
57
|
|
2,378
|
|
Prepaid expenses and
other current assets
|
|
490
|
|
295
|
|
Contract amendment
fees
|
|
—
|
|
18
|
|
Total current
assets
|
|
36,984
|
|
34,431
|
|
|
|
|
|
|
Gaming equipment,
net
|
|
685
|
|
2,985
|
|
Casino
contracts
|
|
—
|
|
528
|
|
Property and
equipment, net
|
|
1,242
|
|
5,919
|
|
Goodwill
|
|
325
|
|
332
|
|
Intangible assets,
net
|
|
1,485
|
|
391
|
|
Deferred tax
assets
|
|
268
|
|
274
|
|
Prepaids, deposits
and other assets
|
|
1,279
|
|
425
|
|
Total
assets
|
$
|
42,268
|
$
|
45,285
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
|
558
|
$
|
288
|
|
Amounts due to related
parties
|
|
93
|
|
239
|
|
Accrued
expenses
|
|
1,884
|
|
1,755
|
|
Income tax
payable
|
|
271
|
|
2
|
|
Deferred
revenue
|
|
—
|
|
9
|
|
Customer deposits and
other current liabilities
|
|
41
|
|
529
|
|
Total current
liabilities
|
|
2,847
|
|
2,822
|
|
|
|
|
|
|
Other
liabilities
|
|
821
|
|
880
|
|
Deferred tax
liability
|
|
29
|
|
29
|
|
Total
liabilities
|
|
3,697
|
|
3,731
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common stock, $.001
par value, 38,000,000 shares authorized;14,464,220 shares issued
and outstanding
|
|
14
|
|
14
|
|
Additional
paid-in-capital
|
|
47,824
|
|
47,763
|
|
Accumulated other
comprehensive income
|
|
651
|
|
709
|
|
Accumulated
losses
|
|
(9,919)
|
|
(6,933)
|
|
Total EGT
stockholders' equity
|
|
38,570
|
|
41,553
|
|
Non-controlling
interest
|
|
1
|
|
1
|
|
Total stockholders'
equity
|
|
38,571
|
|
41,554
|
|
Total liabilities and
stockholders' equity
|
$
|
42,268
|
$
|
45,285
|
|
Entertainment
Gaming Asia Inc.
Adjusted
(LBITDA)/EBITDA from Continuing Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
Three-Month
Period
Ended September 30,
|
|
|
Nine-Month
Period
Ended September 30,
|
|
(amounts in
thousands)
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net (loss)/ income
from continuing operations – GAAP basis
|
$
|
(122)
|
|
$
|
797
|
|
$
|
(257)
|
|
$
|
2,339
|
|
Interest expense and
finance fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Interest
income
|
|
(2)
|
|
|
(3)
|
|
|
(7)
|
|
|
(9)
|
|
Income tax
expenses
|
|
106
|
|
|
129
|
|
|
314
|
|
|
166
|
|
Depreciation and
amortization
|
|
256
|
|
|
1,455
|
|
|
1,808
|
|
|
4,472
|
|
Stock-based
compensation expenses
|
|
40
|
|
|
17
|
|
|
61
|
|
|
67
|
|
Gain on dispositions
of assets
|
|
(1,632)
|
|
|
—
|
|
|
(1,653)
|
|
|
(24)
|
|
Adjusted
(LBITDA)/EBITDA from continuing operations
|
$
|
(1,354)
|
|
$
|
2,395
|
|
$
|
266
|
|
$
|
7,014
|
Adjusted (LBITDA)/EBITDA from continuing operations is
(losses)/earnings before interest, taxes, depreciation,
amortization, stock-based compensation, gains on disposals and
other non-cash operating income and expenses. Adjusted
(LBITDA)/EBITDA from continuing operations is presented exclusively
as a supplemental disclosure because management believes that it is
widely used to measure the performance, and as a basis for
valuation, of gaming companies. Management uses Adjusted
(LBITDA)/EBITDA from continuing operations as a measure of the
operating performance of its segments and to compare the operating
performance of its operations with those of its competitors. The
Company also presents Adjusted (LBITDA)/EBITDA from continuing
operations because it is used by some investors as a way to measure
a company's ability to incur and service debt, make capital
expenditures and meet working capital requirements. Gaming
companies have historically reported (LBITDA)/EBITDA as a
supplement to financial measures in accordance with generally
accepted accounting principles in the
United States ("GAAP"). Adjusted (LBITDA)/EBITDA from
continuing operations should not be considered as an alternative to
operating income as an indicator of the Company's performance, as
an alternative to cash flows from operating activities as a measure
of liquidity, or as an alternative to any other measure determined
in accordance with GAAP. Unlike net income/(loss), Adjusted
(LBITDA)/EBITDA from continuing operations does not include
depreciation or interest expense and, therefore, does not
reflect current or future capital expenditures or the cost of
capital. The Company compensates for these limitations by using
Adjusted (LBITDA)/EBITDA from continuing operations as only one of
several comparative tools, together with GAAP measurements, to
assist in the evaluation of operating performance. Such GAAP
measurements include operating income, net income/(loss), cash
flows from operations and cash flow data. The Company has
significant uses of cash flows, including capital expenditures,
taxes and other non-recurring charges, which are not reflected in
Adjusted (LBITDA)/EBITDA from continuing operations. Entertainment
Gaming Asia's calculation of Adjusted (LBITDA)/EBITDA from
continuing operations may be different from the calculation methods
used by other companies and, therefore, comparability may be
limited.
|
Entertainment
Gaming Asia Inc.
Gaming Operations
Performance Metrics
(Unaudited)
|
|
|
|
Three-Month
Period
Ended September 30,
|
|
Nine-Month
Period
Ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net revenue to EGT
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Participation operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambodia
|
$
|
207
|
|
$
|
3,618
|
|
$
|
3,024
|
|
$
|
10,727
|
|
Philippines
|
|
362
|
|
|
597
|
|
|
1,574
|
|
|
1,917
|
|
Service
revenue(1)
|
|
120
|
|
|
268
|
|
|
458
|
|
|
763
|
|
Consolidated participation total
|
|
689
|
|
|
4,483
|
|
|
5,056
|
|
|
13,407
|
|
Fixed
fee operations
|
|
—
|
|
|
—
|
|
|
1,758
|
|
|
—
|
|
Consolidated total
|
$
|
689
|
|
$
|
4,483
|
|
$
|
6,814
|
|
$
|
13,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average daily revenue
(per unit)
|
|
|
|
|
|
|
|
|
|
|
|
|
Participation operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambodia
|
$
|
18
|
|
$
|
152
|
|
$
|
85
|
|
$
|
148
|
|
Philippines
|
$
|
41
|
|
$
|
59
|
|
$
|
56
|
|
$
|
64
|
|
Consolidated participation total
|
$
|
30
|
|
$
|
120
|
|
$
|
70
|
|
$
|
120
|
|
Fixed
fee operations
|
$
|
—
|
|
$
|
—
|
|
$
|
22
|
|
$
|
—
|
|
Consolidated total
|
$
|
30
|
|
$
|
120
|
|
$
|
59
|
|
$
|
120
|
|
EGM seats in
operation (period end) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Participation operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Cambodia
|
|
|
|
|
|
|
|
350
|
|
|
1,008
|
|
Philippines
|
|
|
|
|
|
|
|
398
|
|
|
556
|
|
Consolidated participation total
|
|
|
|
|
|
|
|
748
|
|
|
1,564
|
|
Fixed
fee operations
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
Consolidated total
|
|
|
|
|
|
|
|
748
|
|
|
1,564
|
|
|
|
(1)
|
Service revenue
represents reimbursements of certain expenses, which for accounting
purposes, are included in the revenue and grossed up in the cost of
gaming operations.
|
|
(2)
|
In July 2016, the
Company sold 670 and 154 EGMs placed in NagaWorld and Leisure
World, respectively.
|
Logo - http://photos.prnewswire.com/prnh/20140508/85655
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/entertainment-gaming-asia-inc-reports-third-quarter-2016-results-300360553.html
SOURCE Entertainment Gaming Asia Inc.