Entertainment Gaming Asia Inc. Reports Fourth Quarter And 2015 Fiscal Year Results

- Fourth Quarter Earnings Impacted by $2.6 Million in Non-Cash Impairment Charges -

- Record Gaming Products Performance and Improvements in Gaming Operations Drive Fiscal Year Profitability -

Mar 10, 2016, 08:00 ET from Entertainment Gaming Asia Inc.

HONG KONG, March 10, 2016 /PRNewswire/ -- Entertainment Gaming Asia Inc. (NASDAQ: EGT) ("Entertainment Gaming Asia" or "the Company"), a gaming company focused on emerging gaming markets in Pan-Asia, today reported operating results for the fourth quarter and fiscal year ended December 31, 2015 and reviewed recent corporate progress. 

Key Financial Metrics

  • Consolidated revenues of $7.3 million for the fourth quarter and $31.5 million for the 2015 fiscal year
  • Adjusted EBITDA (earnings from continuing operations before interest, taxes, depreciation, amortization and non-cash charges) of $2.1 million for the fourth quarter and $11.2 million for the 2015 fiscal year
  • Net loss of $2.7 million for the fourth quarter and net income of $820,000 for the 2015 fiscal year, which includes $2.6 million in non-cash impairments taken in the fourth quarter of 2015 in connection with the Company's annual valuation review
  • Cash balance of $30.7 million and zero debt as of December 31, 2015

Fourth Quarter of 2015 Financial Performance The Company's fourth quarter of 2015 consolidated revenue was $7.3 million, a decrease of 12% compared to $8.3 million in the fourth quarter of 2014 due to a decrease in gaming product sales partially offset by an increase in gaming operations revenue.

Gaming operations revenue was $4.7 million for the fourth quarter of 2015, an increase of 15% compared to $4.1 million in the fourth quarter of 2014. Average consolidated daily net win per unit was $131 for the fourth quarter of 2015, an increase of 22% compared to $107 in the fourth quarter of 2014. The increases were primarily due to improvements in the Cambodia operations.

Cambodia average daily net win per unit was $164 for the fourth quarter of 2015, an increase of 27% compared to $129 in the prior year period primarily due to improved performance for NagaWorld and Thansur Bokor.  NagaWorld average daily net win per unit was $234 in the fourth quarter of 2015, an increase of 19% compared to $197 in the prior year period mainly as a result of an increase in VIP player traffic.

Philippines average daily net win per unit was $67 for the fourth quarter of 2015, an increase of 3% compared to $65 in the prior year period primarily due to increased marketing programs. 

Revenue from gaming products was $2.6 million for the fourth quarter of 2015 compared to $4.2 million in the fourth quarter of 2014. The decrease was primarily a result of lower product sales in the fourth quarter of 2015 compared to the prior year period, which benefitted from two significant gaming chip and plaque orders from the Philippines totaling $4.0 million.  Despite the decrease in revenue, the Company achieved a gross profit of $170,000 for this division for the fourth quarter of 2015 compared to a gross margin loss of $570,000 in the prior year period. The gross margin increase was primarily due to improved production efficiencies for gaming chips and plaques in the fourth quarter of 2015 and production inefficiencies related to the plaque operations in the fourth quarter of 2014.

Selling, general and administrative (SG&A) and research and development (R&D) expenses totaled $2.1 million for the fourth quarter of 2015 compared to $2.5 million in the fourth quarter of 2014.

In connection with its annual valuation review, the Company recorded a non-cash impairment charge totaling $2.6 million as of December 31, 2015. The impairment primarily related to the write-down of building infrastructure and related gaming assets for Dreamworld Poipet as the carrying values of these assets were higher than the expected value of the projected future cash flows.  It also included the write-down of certain assets related to historical Cambodia gaming projects that are no longer intended to be pursued. By comparison, the Company recorded an impairment of $121,000 in the fourth quarter of 2014 primarily related to the write-down of obsolete plant and machinery for the gaming products business.

Entertainment Gaming Asia reported adjusted EBITDA of $2.1 million in the fourth quarter of 2015 compared to $370,000 in the fourth quarter of 2014. 

The Company reported a net loss of $2.7 million, or $0.18 per share, on a weighted average diluted share count of 14.5 million shares for the fourth quarter of 2015. This compared to a net loss of $1.5 million, or $0.15 per share, on a weighted average diluted share count of 10.2 million shares for the fourth quarter of 2014. The fourth quarter of 2014 net loss included net income of $90,000 from discontinued operations related to a gain on disposal of Dreamworld Pailin. Excluding the discontinued operations, the Company reported a net loss from continuing operations of $1.6 million, or $0.16 per share, for the fourth quarter of 2014.  

The increase in net loss from continuing operations was primarily a result of the $2.6 million non-cash impairment charge, a $404,000 loss on the disposition of obsolete gaming equipment for the gaming products division, higher R&D expenses related to new projects and tax expenses compared to benefits in the prior year period.  These factors were partially offset by higher gaming operations revenue and higher gaming products gross margin in the fourth quarter of 2015 and lower SG&A expenses largely due to a $520,000 provision of an uncollectable receivable for a tax refund related to the Philippines operations taken in the fourth quarter of 2014.

2015 Fiscal Year Financial Performance: Consolidated revenue was $31.5 million for the 2015 fiscal year, an increase of 41% compared to $22.4 million for the 2014 fiscal year due to increases in both the gaming operations and gaming products business divisions.

Gaming operations revenue was $18.1 million for the 2015 fiscal year, an increase of 11% compared to $16.4 million in the 2014 fiscal year. Average consolidated daily net win per unit was $122 for the 2015 fiscal year, an increase of 16% compared to $105 in the 2014 fiscal year. The increases were due to improvements in the Cambodia operations partially offset by declines in the Philippines operations.

Cambodia average daily net win per unit was $152 for the 2015 fiscal year, an increase of 24% compared to $123 in the prior year primarily due to improved performance at NagaWorld and a lower machine base at Thansur Bokor. NagaWorld average daily net win per unit was $225 in the 2015 fiscal year, an increase of 19% compared to $189 in the prior year mainly as a result of lower player traffic in the 2014 fiscal year primarily due to political and labor unrest in the first half of the year and NagaWorld renovations of the casino floor that impacted certain areas of the Company's slot operations in the second half of the year. 

Philippines average daily net win per unit was $65 for the 2015 fiscal year, a decrease of 8% compared to $71 in the prior year. The decrease was primarily due to increased competition from the development of integrated casino resorts in Manila over the last several years. 

Revenue from gaming products was $13.4 million for the 2015 fiscal year compared to $6.0 million in the 2014 fiscal year. The increase was primarily a result of higher gaming chip and plaque sales related to both new casino openings and existing customer reorders in the 2015 fiscal year compared to the prior year.  Orders from new casino openings represented $4.8 million and $3.5 million in revenue for the 2015 and 2014 fiscal years, respectively. The Company achieved a gross profit of $2.1 million for this division for the 2015 fiscal year compared to a gross margin loss of $1.8 million in the prior year. The gross margin increase was primarily due to higher production volumes and improved efficiencies for gaming chips and plaques in the 2015 fiscal year and production inefficiencies related to the plaque operations and temporary machinery issues in the 2014 fiscal year.

SG&A and R&D expenses totaled $6.4 million for the 2015 fiscal year compared to $6.9 million in the 2014 fiscal year.

Entertainment Gaming Asia reported adjusted EBITDA of $11.2 million in the 2015 fiscal year compared to $5.1 million in the 2014 fiscal year. 

Income tax expenses were $217,000 in the 2015 fiscal year compared to a benefit of $41,000 in the prior year. The 2015 tax expense was mainly due to a tax provision for the Philippines operations, as its tax loss had been fully utilized in the 2014 fiscal year.

The Company reported net income of $820,000, or $0.06 per share, on a weighted average diluted share count of 14.5 million shares for the 2015 fiscal year. This compared to a net loss of $2.8 million, or $0.35 per share, on a weighted average diluted share count of 8.2 million shares for the 2014 fiscal year. The 2014 fiscal year included a net loss of $325,000 from discontinued operations related to Dreamworld Pailin. Excluding the discontinued operations, the Company reported a net loss from continuing operations of $2.5 million, or $0.31 per share, for the 2014 fiscal year.  

The increase in net income from continuing operations was primarily a result of the significant improvement in gaming products sales and gross margin, an increase in gaming operations revenue and a reduction in SG&A expenses. The increase was partially offset by the $2.6 million non-cash impairment charge and the loss on the disposition of obsolete gaming equipment for the gaming products division in the fourth quarter of 2015, tax expenses compared to benefits in the prior year period and higher foreign currency losses due to the settlement of U.S. dollar denominated payables for the Philippines operations with an appreciated U.S. dollar in the 2015 fiscal year. 

Clarence Chung, Chairman and Chief Executive Officer of Entertainment Gaming Asia, commented, "We are pleased to report a profitable 2015 fiscal year driven by strong gaming operations revenue, record gaming products performance and cost controls.  We accomplished this despite incurring approximately $3.0 million in non-cash charges associated with both impairments of certain gaming operations assets and the loss on disposal of obsolete equipment for the gaming products division in the fourth quarter.

As a result of this solid performance, we have increased our cash position by nearly $13.4 million in the 2015 fiscal year to $30.7 million as of December 31, 2015. We are focused on utilizing these resources to secure projects in new and existing markets with the goal of fueling long-term growth for the Company."    

Entertainment Gaming Asia is hosting a conference call and simultaneous webcast at 8:30 a.m. ET today, March 10, 2016, both of which are open to the general public. The conference call number is 800/768-9711 or 212/231-2922. 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 in Pan-Asia engaged in the leasing of electronic gaming machines on a lease and revenue sharing basis to the gaming industry in Cambodia and the Philippines and the development and operation of gaming venues in Asia under its "Dreamworld" brand.  The Company also manufactures and sells RFID and traditional gaming chips and plaques to major casinos under its "Dolphin" brand.  

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 slot operations business model, growth of the gaming industry in Asia, the Company's ability to secure new projects and fund those projects, expectations for the growth and profitability of the Company's gaming chips and plaques operations and expectations for expanding its business model to new businesses that will provide growth for the Company. 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: place gaming machines at significant levels and generate the expected amount of net win from the gaming machines placed; identify and implement successful marketing and promotional strategies for the Company's gaming projects and identify and successfully develop additional projects; acquire additional capital as and when needed; identify and implement successful marketing and promotional strategies and obtain and fulfill significant purchase orders from the customers for the Company's gaming chips and plaques; successfully improve manufacturing processes and enhance production efficiencies for the Company's gaming chips and plaques; adapt to potential changes in gaming policies and political stability in the countries in which the Company operates and those other risks set forth in the Company's annual report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 26, 2015 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. 

 

Entertainment Gaming Asia Inc.

Consolidated Statements of Comprehensive Income/(Loss)

(Unaudited)

Three-Month Period

Ended December 31,

Year Ended

December 31,

(amounts in thousands, except per share data)

2015

2014

2015

(Audited) 2014

Revenues:

   Gaming operations

4,720

4,096

18,127

16,364

   Gaming products

2,598

4,226

13,382

5,998

Total revenues

7,318

8,322

31,509

22,362

Operating costs and expenses:

   Cost of gaming operations

           Gaming property and equipment 

           Depreciation

720

857

3,073

3,538

           Casino contract amortization

606

610

2,436

2,445

           Other gaming related intangibles amortization

63

63

252

252

           Other operating costs

1,015

926

3,733

3,543

Cost of gaming products

2,428

4,796

11,252

7,781

Selling, general and administrative expenses

1,751

2,425

5,955

6,528

Impairment of assets

2,563

121

2,563

121

Loss on disposition of assets

404

79

382

55

Research and development expenses

305

76

421

387

Depreciation and amortization

53

60

212

219

Total operating costs and expenses

9,908

10,013

30,279

24,869

(Loss)/income from operations

(2,590)

(1,691)

1,230

(2,507)

Other (expenses)/income:

Interest expense and finance fees

(2)

(3)

(4)

Interest income

3

1

13

2

Foreign currency losses

(31)

(6)

(241)

(60)

Other

11

5

38

22

Total other expenses

(17)

(2)

(193)

(40)

(Loss)/income from continuing operations before income tax

(2,607)

(1,693)

1,037

(2,547)

Income tax (expenses)/benefit

(51)

85

(217)

41

Net (loss)/income from continuing operations

(2,658)

(1,608)

820

(2,506)

Net income/(loss) from discontinued operations, net of tax

90

(325)

Net (loss)/income attributable to EGT stockholders

$

(2,658)

$

(1,518)

$

820

$

(2,831)

Other comprehensive income/(loss):

   Foreign currency translation

35

46

(44)

11

Total other comprehensive income/(loss), net of tax

35

46

(44)

11

Comprehensive (loss)/income attributable to EGT stockholders

$

(2,623)

$

(1,472)

$

776

$

(2,820)

Per share data (basic and diluted):

   (Loss)/earnings

$

(0.18)

$

(0.15)

$

0.06

$

(0.35)

   (Loss)/earnings from continuing operations

$

(0.18)

$

(0.16)

$

0.06

$

(0.31)

   Earnings/(loss) from discontinued operations, net of tax

$

$

0.01

$

$

(0.04)

Weighted average common shares outstanding:

    Basic

14,460

10,223

14,457

8,188

    Diluted

14,460

10,223

14,485

8,188

All historical revenues and expenses associated with Dreamworld Pailin, which ceased operation in June 2014, have been reclassified as discontinued operations for the presented periods. Historical share amounts have been proportionally adjusted to reflect the impact of the Company's 1:4 reverse stock split effected on February 26, 2015 for the presented periods.

 

Entertainment Gaming Asia Inc.

Consolidated Balance Sheets

December 31,

  2015

December 31, 2014

(amounts in thousands, except per share data)

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

30,681

$

17,301

Accounts receivable, net

724

830

Amounts due from related parties

257

2,112

Other receivables

78

316

Inventories

2,378

2,617

Prepaid expenses and other current assets

295

1,447

Contract amendment fees

18

Total current assets

34,431

24,623

Gaming equipment, net

2,985

5,624

Casino contracts

528

2,982

Property and equipment, net

5,919

8,895

Goodwill

332

351

Intangible assets, net

391

595

Contract amendment fees

126

Deferred tax asset

274

142

Prepaids, deposits and other assets

425

1,316

Total assets

$

45,285

$

44,654

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

288

$

645

Amounts due to related parties

239

47

Accrued expenses

1,755

2,009

Income tax payable

2

Deferred revenues, current portion

9

Customer deposits and other current liabilities

529

306

Total current liabilities

2,822

3,007

Other liabilities

880

845

Deferred tax liability

29

107

Total liabilities

3,731

3,959

Stockholders' equity:

Common stock, $.001 par value, 38,000,000 shares authorized;14,464,220 and 14,471,095 shares issued and outstanding, respectively

14

14

Additional paid-in-capital

47,763

47,680

Accumulated other comprehensive income

709

753

Accumulated losses since January 1, 2011 ($386.1 million accumulated deficit eliminated)

(6,933)

(7,753)

Total EGT stockholders' equity

41,553

40,694

Non-controlling interest

1

1

Total stockholders' equity

41,554

40,695

Total liabilities and stockholders' equity

$

45,285

$

44,654

 

Entertainment Gaming Asia Inc.

Adjusted EBITDA from Continuing Operations

(Unaudited)

Three-Month Period Ended December 31,

Year Ended

December 31,

(Audited)

(amounts in thousands)

2015

2014

2015

2014

Net (loss)/income from continuing operations – GAAP basis

$

(2,658)

$

(1,608)

$

820

$

(2,506)

Interest expense and finance fees

2

3

4

Interest income

(3)

(1)

(13)

(2)

Income tax expenses

51

(85)

217

(41)

Depreciation and amortization

1,731

1,861

7,100

7,289

Stock-based compensation expenses

15

1

83

160

Impairment of assets

2,563

121

2,563

121

Loss on disposition of assets

404

79

382

55

Adjusted EBITDA from continuing operations

$

2,103

$

370

$

11,155

$

5,080

Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, stock-based compensation, and other non-cash operating income and expenses. Adjusted EBITDA 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 EBITDA 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 EBITDA 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 EBITDA as a supplement to financial measures in accordance with generally accepted accounting principles in the United States ("GAAP"). Adjusted EBITDA 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 EBITDA 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 EBITDA 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 EBITDA. Entertainment Gaming Asia's calculation of Adjusted EBITDA 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 December 31,

Year Ended

December 31,

(Audited)

2015

2014

2015

2014

Net Revenue to EGT (in thousands)

   Cambodia

$

3,887

$

3,204

$

14,614

$

12,442

   Philippines

667

648

2,585

2,912

   Service revenue(1)

166

244

928

1,010

Consolidated

$

4,720

$

4,096

$

18,127

$

16,364

Average Daily Net Win (per unit)

   Cambodia

$

164

$

129

$

152

$

123

   Philippines

67

65

65

71

Consolidated

131

107

122

105

EGM Seats in Operation

   Cambodia

993

1,062

   Philippines

550

557

Consolidated

1,543

1,619

(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.

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SOURCE Entertainment Gaming Asia Inc.



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