DEQ Reports its 2012 Annual Results

LEVIS, QC, March 7, 2013 /PRNewswire/ - DEQ Systems Corp. (TSX-V: DEQ) ("DEQ" or the "Company") announced today the filing of its annual financial results for the fiscal year ended November 30, 2012. The Consolidated Financial Statements are available on SEDAR (www.sedar.com) and DEQ's website. A conference call will be held on Friday, March 8, 2013 at 11am EST to present and discuss these results. Those interested in participating should dial toll free 1 (800) 743-4304 or (416) 981-9000. A PowerPoint presentation will be available on DEQ's website in the Investors/Financial Reports/Presentation section to support the call content.

2012 ANNUAL RESULTS HIGHLIGHTS:

Financial Metrics

  • Revenue
    • 59% increase in product rental revenue from $2,615,000 in 2011 to $4,150,000 in 2012.
    • 76% compound annual growth rate of product rental revenue over the last three years.
    • 20% increase in total revenue from $4,647,000 in 2011 to $5,605,000 in 2012
  • Operating Costs
    • 23% increase in operating expenses before non-cash items from $4,317,000 in 2011 to $5,290,000 in 2012. This increase is due to the addition of commercialization resources in North America and Asia to adequately accommodate the expected level of sales and service of DEQ's installed base of products. DEQ expects its operating expenses to remain stable for 2013 compared to 2012 as it establishes the infrastructure to support its expected growth for 2013.
    • Operating costs in fourth quarter 2012 include $165,000 for one-time professional fees related to a corporate project and a special payment to independent directors of $100,000 ($20,000 to each independent director) to compensate for the compliance and licensing expenses incurred during the last five years.
  • EBITDA
    • Negative EBITDA of $(496,000) in 2012 compared to $(536,000) in 2011.
    • Adjusted EBITDA, accounting for the one-time items mentioned above, was $(231,000) for 2012.
  • Cash Flow
    • During fiscal year 2012, DEQ's cash position decreased by $1,092,000 due primarily to investment activities in leased equipment and intangible assets for a total of $715,000 to continue DEQ's growth and the negative cash flow loss from operating activities of $387,000.
    • DEQ had a cash position of $750,000 as of November 30, 2012.
    • DEQ achieved cash flow breakeven in December 2012.

Operational Highlights

  • Product Installations
    • In 2012 DEQ increased its net installation base by 354 units at an average lease price of $3,500 per annum, representing an increase of approximately $1,240,000 of new recurring revenue per year.
    • As of November 30, 2012, DEQ had 1,370 directly installed products worldwide and 355 products installed through distributors worldwide for a total of 1,725 products in operation worldwide.

"Our fiscal year ended November 2012 was a year of continued double digit growth and an emergence on a global scale" said Earle G. Hall, President and Chief Executive Officer of DEQ. "DEQ has achieved critical mass in many international and domestic markets and despite volatility in certain market segments, DEQ has thrived to produce growth and increase its market share. Real LinkTM has established itself as the market leader in table game jackpot linking and the Hawk baccarat shoe is doing remarkably well in its initial field testing phase. We are very proud of the market penetration achieved in 2012 despite uneven market conditions and our primary goal was achieved in December 2012: a cash flow neutral position. With positive EBITDA expected going forward, we now have the tools and the balance sheet to continue to grow and build on our strong base."

             
Statement of Earnings            
    Fiscal year ended November 30,
    2010   2011   2012
             
Product rental   1,436,000   2,615,000   4,150,000
Royalties from our distributor (1)   1,176,000   1,366,000   1,157,000
Total recurring revenue   2,612,000   3,981,000   5,307,000
Other revenue (2)   2,242,000   667,000   298,000
Total Revenue   4,854,000   4,648,000   5,605,000
             
Gross Profit (3)   4,031,000   3,781,000   4,794,000
% Gross margin   83 %   81 %   86 %
             
Operating Costs (3)   3,840,000   4,317,000   5,290,000
             
EBITDA (4)   191,000   (536,000)   (496,000)
             
Stock based compensation   349,000   432,000   50,000
Depreciation and Amortization expenses   2,318,000   2,738,000   2,727,000
Interest (revenue) expenses   77,000   10,000   13,000
Foreign exchange (gain) loss   (8,000)   (64,000)   50,000
Other items   (296,000)   (161,000)   -
Net loss   (2,249,000)   (3,491,000)   (3,336,000)
Net Income (Loss ) per share   $(0.032)   $(0.050)   $(0.048)

     
Note 1:     DEK International - Distributor located in Panama that covers mostly South America territories.
Note 2:     Other revenue included revenue from the Severn Project that was terminated on February 28, 2011. The revenue from the Severn Project included in other revenue was $922,000 in 2010 and $218,000 in 2011.
Note 3:     Gross profit and operating expenses excluded non-cash items such as depreciation, amortization, stock based compensation and gain on balance of purchase price.
Note 4:     We use EBITDA (Earnings before stock based compensation, Interest, Taxes, Depreciation and Amortization and foreign exchange impact), a non-IFRS measure, to evaluate the Company's operating performance. Securities regulators require that issuers caution readers that measures adjusted to a basis other than IFRS do not have standardized meaning under IFRS and are unlikely to be comparable to similar measures used by other companies.

             
Financial Position            
    Dec. 1, 2010   Nov. 30, 2011    Nov. 30, 2012 
    (Audited)   (Audited)   (Audited)
             
Cash and cash equivalents   3,933,000   1,843,000   751,000
Current assets (other than cash)   2,001,000   2,001,000   1,883,000
Long-term assets   12,533,000   10,901,000   8,884,000
Total Assets   $18,467,000   $14,745,000   $11,518,000
             
Current liabilities   1,852,000   1,243,000   1,278,000
Shareholders' equity   16,615,000   13,502,000   10,240,000
Total Liabilities and Equity   $18,467,000   $14,745,000   $11,518,000
             
Number of shares outstanding   69,182,000   69,182,000   69,182,000

ABOUT DEQ

DEQ Systems Corp. (TSXV: DEQ) is a customer centric company that delivers best of breed table game technology related products to the global gaming industry that adds value and increases client revenue. DEQ provides table game bonusing technology, table games, table game results tracking and jackpot connectivity solutions to more than 275 casinos in 30 countries. DEQ is an intellectual property focused company that has an extensive patent portfolio of more than 20 patents recognized in 50 countries.  For further information, please visit www.deq.com.

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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.

SOURCE DEQ SYSTEMS CORP.



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