DEQ Systems Corp. ("DEQ") (TSX VENTURE:DEQ) announced today the filing of its
financial results for the third quarter that ended on August 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, October 25, 2010 at
11am EST to present and discuss these results. Those interested in participating
should dial toll free: 1 (800) 669-4993 or (416) 981-9070. A PowerPoint
presentation will be available on DEQ's website in the Invest/Financial
Reports/PowerPoint section to support the call content.
2010 THIRD QUARTER RESULTS HIGHLIGHTS:
Financial Metrics
-- Revenue
-- 80% increase in direct leasing revenue in third quarter from $0.19 M
in 2009 to $0.35 M in 2010.
-- 24% increase in total revenue in third quarter from $0.92 M in 2009
to $1.14 M in 2010.
-- 24% increase in gross profit in third quarter from $0.84 M in 2009
to $1.05 M in 2010.
-- 92% gross margin in third quarter 2010 which was comparable to
previous year.
-- Operating Costs
-- Operating costs increased to $964,000 in the third quarter of 2010
compared to $679,000 in 2009 but stable when compared to first and
second quarter 2010. Please see explanation below.
-- EBITDA and Net Loss
-- Positive EBITDA of $84,000 in the third quarter and a net loss of
$270,000 attributable to amortization of $589,000 but offset by a
gain on a balance of purchase price of $210,000.
-- For the nine-month period, DEQ had a positive EBITDA of $293,000 and
a net loss of $1.2 M which is mostly attributable to amortization of
$1.7 M.
-- Cash Flow
-- In the third quarter 2010, DEQ generated $292,000 of cash flow from
operating activities before change in non-cash working capital
items. For the nine-month period, DEQ has generated $688,000 from
operating cash flow before change in non-cash working capital items.
-- During the third quarter, our cash position has decreased by
$333,000 explained by our annual payment on our balance of purchase
price of $698,000.
Operational Highlights
-- Product Installations
-- During the third quarter 2010, DEQ installed directly 111 new
products in North America.
-- As of August 31, 2010, DEQ has 463 products directly installed in
North America, 45 products directly installed in Asia and 336
installed through distributors worldwide for a total of 844 products
currently in operation worldwide.
-- Operating Costs
-- DEQ's operating costs have increased over the course of the past
12 months due to:
-- Major installations completed in California for the G3
Systems.
-- New market penetration in commercialization in Asia and
Australia regions.
-- Direct commercialization effort in recently obtained
jurisdictions licenses as well as the important roll out of
our recent new product EZ Pai Gow(TM).
-- We expect these costs to stabilize at approximately the same
level for the next twelve months as we have achieved a new level
of economy of scale.
"The third quarter was tangible proof of the results of our investments over the
past three quarters in sales and commercialization" stated Earle G. Hall,
President & CEO of DEQ. "With more than 100 new installations generating long
term recurring revenue, our sales efforts are finally paying off. The team has
reacted in an incredible way to this sharp increase in the popularity of our
products and we do not see this as a surge or a peak in business but more as a
trend. With all the recent contracts signed recently that have not been
installed at this time, our fourth quarter looks very promising as all our
products are gaining momentum in the USA and abroad."
Statement of Earnings
Third Quarter Nine-Month Period
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
2009 2010 2009 2010
(unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------
----------------------------------------------------
Direct leasing 193,000 347,000 527,000 952,000
Royalties 688,000 543,000 2,256,000 1,826,000
Total recurring
revenue (1) 881,000 890,000 2,783,000 2,778,000
Non recurring revenue 39,000 252,000 519,000 873,000
----------------------------------------------------
Total Revenue 920,000 1,142,000 3,302,000 3,651,000
Gross Profit 842,000 1,048,000 2,960,000 3,177,000
% Gross margin 92% 92% 90% 87%
Operating Costs 679,000 964,000 2,282,000 2,884,000
----------------------------------------------------
EBITDA (2) 163,000 84,000 678,000 293,000
Stock based
compensation 83,000 54,000 246,000 197,000
Amortization expenses 556,000 585,000 1,661,000 1,723,000
Interest expenses 24,000 23,000 55,000 64,000
Foreign exchange
(gain) loss 27,000 (29,000) (346,000) (62,000)
Gain on balance
purchase price - (210,000) - (210,000)
Future income taxes (7,000) (69,000) (21,000) (207,000)
----------------------------------------------------
Net Income (Loss) 520,000 (270,000) (917,000) (1,212,000)
----------------------------------------------------
----------------------------------------------------
Net Income (Loss ) per
share $0.007 $(0.004) $(0.013) $(0.017)
Note 1: Recurring revenue is comprised of Royalties and Equipment rental
(Direct leasing).
Our recurring revenue was stable in the third quarter due to
Station Casinos bankruptcy and the Canadian dollar appreciation
that affected our revenue by $105,000 and $40,000 respectively.
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 Sheet
Aug. 31, 2009 Nov. 30, 2009 Aug. 31, 2010
(Unaudited) (Audited) (Unaudited)
---------------------------------------------
---------------------------------------------
Cash and cash equivalents 6,070,759 5,829,000 4,080,000
Current assets (other than
cash) 1,670,315 1,696,000 2,144,000
Long-term assets 15,269,528 14,817,000 13,619,000
---------------------------------------------
Total Assets $23,010,603 $22,342,000 $19,843,000
---------------------------------------------
---------------------------------------------
Current liabilities 2,160,610 2,176,000 1,885,000
Long-term liabilities 1,624,600 1,348,000 254,000
Shareholders' equity 19,225,393 18,818,000 17,704,000
---------------------------------------------
Total Liabilities and Equity $23,010,603 $22,342,000 $19,843,000
---------------------------------------------
---------------------------------------------
Number of shares outstanding 69,589,815 69,590,000 69,302,000
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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
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.
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