DEQ Systems Corp. (TSX VENTURE: DEQ) announced today the filing of
its annual financial results for the year-ended November 30, 2008.
A conference call will be held on Thursday, February 26th at 11am
EST to present and discuss these results. Those interested in
participating should dial (416) 915-5762 or toll free 1 (800)
814-4861. A visual presentation (Powerpoint) will be available on
DEQ's website (www.deq.com) in the Invest/Financial
Reports/PowerPoint section to support the call content. The
Consolidated Financial Statements are available on SEDAR
(www.sedar.com) and DEQ's website.
2008 ANNUAL HIGHLIGHTS:
Financial
- 95% growth in recurring revenue in United States in 2008
- 16% increase in total recurring revenue from $2.25 M to $2.62
M in 2008
- 16% increase in gross profit from $2.75 M to $3.21 M in
2008
- 79% gross margin compared to 77% in 2007 due to increase in
recurring revenue
- 27% average annual growth in recurring revenue over the last
three years
- Positive adjusted cash flows from operations of $362,000
comparable to previous year
- Stable operating costs at $3.45 M
- Solid cash position of $6M
Operational
- Acquisition of DEK International exclusive distribution
license
- EZ Baccarat(TM) and EZ Trak(TM) products had successfully been
introduced in more than 10 casinos during the year with more than
45 units of each products in the field
- Nevada Gaming Control Board Approval for the G3(TM) and the
successful deployment of the G3 in Nevada in reputed casinos such
as the Wynn, the Bellagio, the Venetian, Harrah's and MGM
- DEQ added key international industry and financial board
members in the course of the year
- DEQ ranks among TOP 10 Best Technology Companies for 2008 on
TSX Venture
"2008 was a year of license applications and approvals, trial
tests and initial product rollout in the USA", stated Earle G.
Hall, President & CEO of DEQ. "We have successfully broadened
our product base with the new EZ Baccarat/EZ Trak product line that
is now operational in its first 10 casinos that include the Wynn in
Las Vegas. The G3 is installed in the Wynn, the Venetian and
Palazzo, the Bellagio as well as many other world class casinos.
2008 was the year where we applied to more than 18 jurisdictions
for operating licenses and product licenses to begin our expansion
in Las Vegas as well as in the rest of the United States. 2008 was
a year of uncertainty, economic crisis and many obstacles. DEQ has
thrived during this year of constant turbulence and obstacles and
we have laid the framework for widespread commercialization in
2009. At the same time, we have undertaken a very cautious approach
to spending and have revised our entire cost base to ensure that we
are creating the maximum amount of value for our shareholders. Our
focus is on our core business; leasing systems in target rich
markets and controlling cost to ensure we create the maximum value
possible for our shareholders in these times of economic
uncertainty."
Statement of Earnings
November 30, November 30, November 30,
2006 2007 2008
(Audited) (Audited) (Audited)
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Revenues
Royalties (1) 1,230,971 1,961,816 2,245,604
Sale of equipment 1,375,194 1,223,886 677,310
Equipment rental (1) 539,695 288,288 369,540
Patents rights 503,602 107,160 794,300
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3,649,462 3,581,150 4,086,754
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Gross Margin 2,018,153 2,754,610 3,208,901
% Gross Margin 55% 77% 79%
% Annual Growth 17% 36% 16%
Operational Costs (2,755,630) (3,204,744) (3,450,253)
EBITDA (2) (737,477) (450,134) (241,352)
Interest income,
net of expenses 149,203 370,754 369,019
Deferred revenue variation 285,550 381,812 234,253
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Adjusted cash flow
from operations (2) (302,724) 302,432 361,920
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Additional information
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Recurring Revenue 1,770,666 2,250,104 2,615,144
Lease Table Equivalent (LTE)
(Recurring Rev. / $3,000) 590 750 871
% Annual Growth 15% 27% 16%
Net Income (2,343,281) (1,706,441) (1,509,617)
Net income per share $(0.060) $(0.030) $(0.022)
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Note 1: Recurring revenue is comprised of Royalties and Equipment rental.
Note 2: We use EBITDA (Earnings before interest, taxes, depreciation and
amortization) and Adjusted Cash Flow from Operations as performance
measurements in our financial disclosure. These measurements are
not recognized under generally accepted accounting principles. The
reconciliations above demonstrate how we calculate such
measurements from our financial statements.
Balance Sheets
November 30, November 30, November 30,
2006 2007 2008
(Audited) (Audited) (Audited)
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Cash and cash equivalents 3,591,367 11,364,112 6,593,357
Current assets
(other than cash) 2,783,913 2,180,534 1,860,176
Long-term assets 7,329,713 9,187,762 17,139,836
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Total Assets $13,704,993 $22,732,408 $25,593,369
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Current liabilities 1,581,378 1,716,162 2,734,291
Long-term liabilities 655,896 577,073 2,725,668
Shareholders' equity 11,467,719 20,439,173 20,133,410
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Total Liabilities and Equity $13,704,993 $22,732,408 $25,593,369
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Number of shares outstanding 53,241,149 69,350,794 70,416,315
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Statement of Cash Flows
November 30, November 30, November 30,
2006 2007 2008
(Audited) (Audited) (Audited)
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Operating Activities
Operating cash flows (602,344) (244,199) 452,970
Change in receivable
of l-t sales (142,213) 458,154 (1,072,264)
Change in working capital (510,741) 500,614 (167,916)
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(1,255,298) 714,569 (787,210)
Investing Activities (107,112) (2,647,420) (4,370,381)
Financing Activities 4,822,309 9,705,596 386,836
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Increase (decrease) in cash 3,459,899 7,772,745 (4,770,755)
Cash at beginning 131,468 3,591,367 11,364,112
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Cash at end 3,591,367 11,364,112 6,593,357
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Additional Information
- Royalties and Patent rights: Please note that an amount of
royalties recognized in second quarter for $222,000 and in third
quarter for $87,000 was reclassified as patent rights in our
audited financial statements. This reclassification has no impact
on the amount of total revenue disclosed in our second and third
quarter of 2008. This revenue is related to US$1M cash inflow
received from Station Casinos in May 2008. Therefore, the number of
LTE disclosed in second quarter was readjusted to 737 (instead of
1,025) and at 905 in the third quarter (instead in 1,021). The
number of LTE disclosed in the fourth quarter was 1,029, an
increase of 14% compare to the third quarter of 2008.
- Sale of equipment: Low margin (under 10%) as this is not core
business related. As mentioned in previous years, sales of
equipment are being reduced as much as possible.
- Operating Costs: Travel and commercialization costs were
higher than previous years as R&D as initial product approvals
and rollout was commenced. These costs were reduced at the end of
the year now that product momentum has started.
- Cash Flow: The change in the cash position in DEQ was positive
in 2008 for the operations at $361,920. Major fluctuations in our
cash position are attributable to acquisition of licensing rights
from DEK International ($4.0M) and an investment project ($1.1M)
that will yield a 25% IRR (Internal rate of return). Outside of
these two events totalling more than $5.1M, our cash position has
been stable.
- Share Buyback Program: As of February 24th , 2009, DEQ has
purchased a total of 656,000 shares at an average weighted price of
$0.297 as part of the approved normal course issuers bid.
ABOUT DEQ
Founded in 1998, DEQ Systems Corp. (TSX VENTURE: DEQ) is a
leader in the table game bonusing technology field. DEQ's patents
and products include side bet bonusing with progressive and random
jackpot prizes and slot machine style mystery bonusing, multiple
credit betting on the player's and dealer's hand, denomination
betting flexibility, electronic credit bank, electronic rake, as
well as baccarat and blackjack hand tracking. All DEQ solutions are
enhanced by multimedia animation and sound effects. DEQ has an
extensive patent portfolio that is recognized in more than 50
countries such as the USA, Macau, Australia and Canada. DEQ's
bonusing solutions and products are present in more than 200
casinos in over 30 countries.
DEQ Systems Corp. has been selected in the TSX Venture 50 in
2008. "2008 Venture 50" is a trademark of TSX inc. and is used
under license. TSX Venture does not accept any responsibility
regarding the accuracy of the information contained in this press
release.
Forward-looking statements contained in this Press Release
involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance and achievements of the
Company to be materially different from any future results,
performance or achievements expressed or implied by the said
forward-looking statements.
Contacts: DEQ Systems Corp. Earle G. Hall President & CEO
418-839-3012 418-839-5956 (FAX) earle.hall@deq.com DEQ Systems
Corp. Francois Proulx Chief Financial Officer 418-839-3012
418-839-5956 (FAX) francois.proulx@deq.com www.deq.com
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