DEQ Systems Corp. ("DEQ") (TSX VENTURE:DEQ) announced today the filing of its
financial results for the second quarter that ended on May 31, 2010. The
Consolidated Financial Statements are available on SEDAR (www.sedar.com) and
DEQ's website. A conference call will be held on Monday, July 12, 2010 at 11am
EST to present and discuss these results. Those interested in participating
should dial toll free: 1 (800) 681-8606 or (416) 981-9090. A PowerPoint
presentation will be available on DEQ's website in the Invest/Financial
Reports/PowerPoint section to support the call content.
2010 SECOND QUARTER RESULTS HIGHLIGHTS:
Financial Metrics
-- Revenue
-- 28% increase in total revenue for the second quarter from $1.07 M in
2009 to $1.37 M in 2010
-- 15% increase in gross profit to $1.11 M in the second quarter 2010
compared with 2009
-- 81% gross margin in second quarter 2010
-- Operating Costs
-- Operating costs increased to $0.97 M in second quarter of 2010
compare to $0.79 M in 2009 but stable when compared to first quarter
2010 which were $0.95 M
-- The increase is attributable to our important commercialization
efforts ongoing in the United States and Asia as well as the
installation costs required to complete important installations,
including 33 G3 Systems installed at Marina Bay Sands in Singapore
-- EBITDA and Net Loss
-- Positive EBITDA of $0.14 M in the second quarter and a net loss of
$0.42 M attributable to amortization of $0.57 M
-- For the six-month period, DEQ had a positive EBITDA of $0.21 M and a
net loss of $0.94 M which is attributable to amortization of $1.14 M
-- Cash Flow
-- In the second quarter 2010, DEQ generated $0.2 M of cash flow from
operating activities before change in non-cash working capital
items. For the six-month period, DEQ has generated $0.4 M from
operating cash flow before change in non-cash working capital items.
-- During the second quarter, our cash position has decreased mostly
attributable to accounts receivable due from some major clients that
were received after the end of quarter as well as a significant
increase in inventory needed for upcoming installations that will be
done in third and fourth quarter
-- In the second quarter, DEQ has repurchased a total of 227,000 shares
at an average price of $0.34 as part of the normal course issuer
bid.
Operational Highlights
-- Product Installations
-- During second quarter 2010, DEQ installed directly 70 new products
in North America and Asia.
-- As of May 31, 2010, DEQ has 364 products directly installed in North
America and 330 installed through distributors worldwide for a total
of 694 products currently in operation worldwide.
-- Station Casinos bankruptcy
-- The 2010 annual royalty payment due in April 2010 by Station Casinos
was not received. This will affect our monthly royalties by $35,000.
DEQ is currently exploring options in this situation.
"Our second quarter is a continuation of our increased commercialization efforts
both in Asia and the USA. Even through these tough economic times, we are
increasing our new clients as well as expanding our footprint with existing
clients," stated Earle G. Hall, President & CEO of DEQ. "Our increased
commercialization costs will translate into results as we capture new
territories all over the world and we are 100% convinced that these investments
are sound and the ROI will be there."
Statement of
Earnings
Second Quarter Six-Month Period
May. 31, 2009 May 31, 2010 May 31, 2009 May 31, 2010
(unaudited) (unaudited) (unaudited) (unaudited)
-----------------------------------------------------------
-----------------------------------------------------------
Direct leasing 180,000 308,000 334,000 605,000
Royalties 757,000 628,000 1,568,000 1,284,000
-----------------------------------------------------------
Total recurring
revenue (1) 937,000 936,000 1,902,000 1,889,000
Non recurring
revenue 139,000 432,000 479,000 621,000
-----------------------------------------------------------
Total Revenue 1,076,000 1,368,000 2,381,000 2,510,000
Gross Profit 966,000 1,107,000 2,118,000 2,129,000
% Gross margin 90% 81% 89% 85%
Operating Costs 794,000 967,000 1,604,000 1,920,000
-----------------------------------------------------------
EBITDA (2) 172,000 140,000 514,000 209,000
Stock based
compensation 71,000 64,000 163,000 142,000
Amortization
expenses 554,000 572,000 1,105,000 1,139,000
Interest expenses 23,000 23,000 30,000 41,000
Foreign exchange
(gain) loss (496,000) (30,000) (373,000) (33,000)
Future income
taxes (7,000) (69,000) (14,000) (138,000)
-----------------------------------------------------------
Net Income (Loss) 27,000 (420,000) (397,000) (942,000)
-----------------------------------------------------------
-----------------------------------------------------------
Net Income (Loss)
per share $0.000 $(0.006) $(0.006) $(0.014)
Note 1: Recurring revenue is comprised of Royalties and Equipment rental (Direct
leasing)
Our recurring revenue was stable in the second quarter due to the Russian casino
closures that occurred on July 1, 2009. This impacted our quarterly recurring
revenue by $115,000. As well, the average exchange rate during the second
quarter decreased by 16% from 1.22 to 1.02, which affected our recurring revenue
by $110,000.
Note 2: We use EBITDA (Earnings before Stock option based compensation,
Interest, Taxes, Depreciation, Amortization and Foreign exchange) as performance
measurements in our financial disclosure. This measure is not recognized under
generally accepted accounting principles. The reconciliations above demonstrate
how we calculate such measurements from our financial statements.
Balance Sheets
May 31, 2009 Nov. 30, 2009 May 31, 2010
(Unaudited) (Audited) (Unaudited)
-----------------------------------------------
-----------------------------------------------
Cash and cash equivalents 6,567,000 5,829,000 4,413,000
Current assets (other than
cash) 2,269,000 1,696,000 2,568,000
Long-term assets 15,716,000 14,817,000 13,969,000
-----------------------------------------------
Total Assets $24,552,000 $22,342,000 $20,950,000
-----------------------------------------------
-----------------------------------------------
Current liabilities 2,332,000 2,176,000 1,830,000
Long-term liabilities 2,557,000 1,348,000 1,200,000
Shareholders' equity 19,663,000 18,818,000 17,920,000
-----------------------------------------------
Total Liabilities and
Equity $24,552,000 $22,342,000 $20,950,000
-----------------------------------------------
-----------------------------------------------
Number of shares
outstanding 69,590,000 69,590,000 69,302,000
-----------------------------------------------
-----------------------------------------------
ABOUT DEQ
Founded in 1998, DEQ Systems Corp. (TSX VENTURE:DEQ) is a leader in the table
game bonusing technology field. DEQ's patents, products and features include
side bet bonusing games with progressive and random jackpot prizes, slot machine
style mystery bonusing, multiple credit and denomination betting flexibility,
dealer hand betting, electronic credit bank, electronic rake, baccarat hand
tracking, 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 250 casinos in over 30 countries. For further information, please visit
www.deq.com
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.
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