Entertainment Gaming Asia Inc. (NASDAQ: EGT) (“Entertainment
Gaming Asia” or “the Company”), a leading gaming company focused on
emerging gaming markets in Pan-Asia, today reported operating
results for the third quarter ended September 30, 2013 and reviewed
recent corporate progress.
Highlights:
- Total consolidated revenue of $5.7
million for the third quarter of 2013
- Total revenue from gaming operations of
$4.5 million for the third quarter of 2013
- Average consolidated win per unit per
day (WUD) from slot operations of $108 for the third quarter of
2013
- Revenue from gaming products of $1.1
million for the third quarter of 2013
- Adjusted EBITDA (earnings from
continuing operations before interest, taxes, depreciation,
amortization and non-cash charges) of $1.8 million for the third
quarter of 2013
- Net loss of $309,000 for the third
quarter of 2013
- Cash balance of $4.6 million and zero
debt as of September 30, 2013
- Dreamworld Poipet achieved positive
EBITDA for the third quarter of 2013
- Dolphin gaming chips and plaques
current order pipeline of approximately $1.3 million in
revenue
Clarence Chung, Chairman and Chief Executive Officer of
Entertainment Gaming Asia, commented, “Gaming operations revenue
improved slightly for the third quarter compared to the prior year
period due to incremental revenue contribution from Dreamworld
Poipet and improvement in Dreamworld Pailin, which offset declines
in other slot operations.
“Dreamworld Poipet, a slot hall which we developed in an
established regional gaming market in Cambodia, posted quarterly
sequential improvement and contributed positive EBITDA to the
quarter. Since the opening in May 2013, we have been focused on the
implementation of targeted marketing programs to develop and expand
a quality player base with a goal to capture a meaningful share of
this vibrant market.
“Slot operations performance in the quarter was negatively
impacted primarily by a decrease in revenue for our operations in
NagaWorld and in the Philippines. In NagaWorld, we experienced
lower player traffic levels as a result of events related to the
national Cambodian elections held in July 2013 and, in the
Philippines, we had higher jackpot payouts and increased
competition from a major casino resort which opened in Manila
earlier in the year.
“For Dreamworld Pailin, we have completed the repositioning of
the operations to a leasing model. Under the new operating model,
we have leased 10 gaming tables to a third-party operator. We
believe this will allow us to leverage the operator’s existing
player network in Thailand and provide us with an increase in
quality player traffic. In addition, in early November 2013, we
added semi-live multi-game electronic gaming tables with 30 seats,
increasing the machine base from 58 to 88 seats. We placed these
machines on a revenue sharing basis resulting in minimal capital
investment to us. These changes to the operating model provide us
recurring revenue and a substantially reduced cost structure.
“We believe our gaming products division provides a diversified
revenue stream with attractive earnings potential. With the plant
relocation completed, we booked approximately $1.1 million in
revenue in the third quarter of 2013. Presently, we have a solid
confirmed order pipeline for gaming chips and plaques of
approximately $1.3 million in revenue and we are optimistic about
the potential to secure some major orders in 2014.
“In addition, we recently expanded our gaming products offerings
with several distribution agreements with third-party gaming
suppliers. Adding to the product mix should further deepen our
existing customer relationships and increase marketability to new
customers. With a strong gaming chip and plaque product line and an
expanding product mix, we are preparing to benefit from the
expected growth in Asian gaming over the next several years.
“We believe that our business model offers growth potential and
the ability to generate quality recurring cash flow. We are focused
on building our resources as we actively seek new projects in the
high-growth economies of Indo-China. With our established presence
and strong relationships in our markets, we believe we have a solid
foundation from which to capitalize on the growth opportunities in
our target markets in Asia.”
Q3 2013 Financial Review
On March 28, 2013, the Company sold the portion of its
subsidiary Dolphin Products Pty Limited business dedicated to the
manufacture and sale of non-gaming plastic products, mainly
automotive parts. All historical revenues and expenses associated
with non-gaming plastic products operations for the periods
presented have been reclassified as discontinued operations.
Revenues of these non-gaming products and gaming chips and plaques
were previously consolidated under the reporting segment “Other
Products.” After the sale, the Company renamed “Other Products” as
“Gaming Products,” which comprises its gaming chips and plaques
operations.
Entertainment Gaming Asia’s third quarter of 2013 consolidated
revenue was $5.7 million, a decrease of 9% compared to $6.2 million
in the third quarter of 2012 primarily due to lower sales of gaming
products. Gaming operations revenue was relatively unchanged at
$4.5 million for the third quarter of 2013, up 1% from the prior
year period.
The Company recorded $4.1 million in revenue for slot operations
in the third quarter of 2013, essentially unchanged with the third
quarter of 2012. Incremental revenue from Dreamworld Poipet, which
officially opened in May 2013, offset declines in other slot
operations during the quarter.
In Cambodia, the NagaWorld operations contributed $3.0 million
in revenue and $201 in average WUD for the third quarter of 2013,
down from $3.2 million and $216, respectively, in the prior year
period. The decrease was due to lower player traffic levels
primarily as a result of events related to the national Cambodian
elections held in July 2013. Cambodia average WUD declined for the
third quarter of 2013 compared to the prior year period primarily
due to the addition of machines in Dreamworld Poipet, which have a
lower average net win, and lower average WUD at NagaWorld.
In the Philippines, slot operations revenue declined due to
higher jackpot payouts and increasing competition in the market.
Despite the revenue decline, Philippine average WUD remained
relatively stable compared with the prior year quarter due to a
lower installed base with higher performing machines.
Slot Operations Net Revenue to EGT (in millions)
Q3:13 Q3:12 Y/Y ∆
Cambodia (1) $3.3 $3.2 2% Philippines
$0.8 $0.9 -10% Consolidated
$4.1 $4.1 -1%
WUD (2)
Q3:13 Q3:12 Y/Y ∆ Cambodia (1)
$126 $175 -28% Philippines
$73 $74 -1% Consolidated $108
$132 -18%
EGM Seats in Operation
9/30/13 9/30/12 Y/Y ∆ Cambodia
(1) 1,133 839 35% Philippines
565 581 -3% Consolidated 1,698
1,420 20% (1)
Includes Dreamworld Poipet, which operates under a machine
operation and participation agreement. (2) Represents WUD for the
Company’s slot machine operations. It excludes EGM seats in
operation during venue soft open periods and applies revenue
recognized on a cash basis in the calculation of WUD for venues for
which revenues are recognized on a cash basis. During the third
quarter of 2012, one venue in the Philippines recognized revenue on
a cash basis. There were no material differences to average WUD
figures for this period had these seats been included in the WUD
calculations.
Casino operations, which comprised Dreamworld Pailin,
contributed $432,000 to total gaming revenue for the third quarter
of 2013, up from $340,000 in the prior year period and down from
$907,000 in the second quarter of 2013. The quarterly sequential
decline was due to lower player traffic levels as the Company
decreased the use of high-cost tour group promoters during the
period. Operating expense for Dreamworld Pailin was $703,000 for
the third quarter of 2013, down from $1.2 million in the second
quarter of 2013 due to cost reduction initiatives and lower player
traffic. The full impact of these cost reduction initiatives is
expected to be realized late in the fourth quarter of 2013.
Revenue from gaming products, which comprised the manufacture
and sale of gaming chips and plaques, was $1.1 million in the third
quarter of 2013, down from $1.7 million in the third quarter of
2012. The third quarter of 2013 was comprised solely of reorders
from the Company’s growing customer base compared to the prior year
period, which primarily included a $1.6 million order for a large
rebranding for an existing customer. Given the ramping up of the
new production facilities and further efforts to enhance production
capacity and response time for large orders, the third quarter of
2013 results were not representative of the new cost structure for
the Dolphin operations. The Company expects to achieve full
efficiencies and a normalized cost structure for these operations
in the next one to two quarters.
Entertainment Gaming Asia reported adjusted EBITDA of $1.8
million in the third quarter of 2013 compared to $2.1 million in
the prior year period.
The Company reported a net loss from continuing operations of
$309,000, or $0.01 per share, on a weighted average diluted share
count of approximately 30.0 million in the third quarter of 2013.
This compared to a net loss from continuing operations of $103,000
on a weighted average diluted share count of approximately 29.9
million for the third quarter of 2012.
The increase in net loss from continuing operations was
primarily the result of lower slot operations revenue from
NagaWorld, lower revenue and ramping up of production efficiencies
for the gaming products division and foreign currency losses
compared to gains in the prior year period. This negative
differential in foreign exchange of approximately $94,000 was due
to the strengthening of the U.S. dollar compared to foreign
currencies in the markets in which the Company operates. The
increase in net loss from continuing operations was partially
offset by higher gross profit for the Company’s Philippine slot
operations primarily due to an increase in fully depreciated gaming
assets and slightly lower operating expenses in the third quarter
of 2013.
Entertainment Gaming Asia is hosting a conference call and
simultaneous webcast at 8:30 a.m. ET today, November 5, 2013, both
of which are open to the general public. The conference call number
is 800/734-4208 or 212/231-2919. 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) is a
leading gaming company in Pan-Asia engaged in the
development and operation of casinos and gaming venues in the
Indo-China region under its “Dreamworld” brand as well as the
leasing of electronic gaming machines on a revenue sharing basis to
the gaming industry. The Company also manufactures and sells RFID
and traditional gaming chips and plaques to major casinos under its
“Dolphin” brand. For more information please visit
www.EGT-Group.com.
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, the
earnings of the Pailin and Poipet gaming projects, the ability to
reduce operating expenses for its casino operations in Pailin and
otherwise realize the intended benefits of the strategic refocusing
of its operations in Pailin, growth of the gaming industry in Asia,
the Company’s ability to secure new casino and gaming projects and
fund those projects, expectations for the Company’s gaming chips
and plaques operations, the expected benefits from the relocation
of the gaming chips and plaques operations to Hong Kong, the
ability to expand its gaming products offerings and the prospects
for the expanded customer base for the Company’s gaming chips and
plaques. 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 at the Company’s casino and gaming projects and identify
and successfully develop additional projects in the Indo-China
region, acquire additional capital as and when needed, ability to
obtain the needed approval by certain customers from local gaming
authorities to continue their purchase of gaming chips and plaques
from the Hong Kong facility on a timely basis or at all, 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, 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, 2012 filed with the SEC on March 28, 2013 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.
- financial tables follow -
Entertainment Gaming Asia Inc. Consolidated
Statements of Comprehensive Income (Unaudited)
Three-Month Periods Nine-Month Periods Ended Ended
September 30, September 30, (amounts in thousands,
except per share data) 2013 2012
2013 2012 Revenues: Gaming operations, gross $
4,546 $ 4,480 $ 15,505 $ 14,634 Less: promotional allowances — — —
— Gaming operations, net 4,546 4,480 15,505 14,634 Gaming products
1,106 1,718 2,695 3,228 Total revenues 5,652 6,198 18,200 17,862
Operating costs and expenses: Cost of gaming operations
Gaming equipment depreciation 1,175 1,228 3,580 3,516 Casino
contract amortization 613 617 1,851 1,847 Other gaming related
intangibles amortization 63 63 189 189 Other operating costs 1,182
1,051 4,672 2,526 Cost of gaming products 1,131 1,526 3,172 2,756
Selling, general and administrative expenses 1,558 1,491 4,614
4,712 Stock-based compensation expenses 109 123 554 675 Gain on
dispositions of assets — (2) — (31) Impairment of assets — 42 — 114
Product development expenses 51 87 206 273 Depreciation and
amortization 51 77 128 168 Total operating costs and expenses 5,933
6,303 18,966 16,745 (Loss)/income from continuing operations (281)
(105) (766) 1,117 Other (expense)/income: Interest expense
and finance fees (1) (20) (5) (109) Interest income — 4 4 32
Foreign currency (losses)/gains (39) 55 (228) 269 Other
income/(expense) 1 (3) 11 22 Total other (expense)/income (39) 36
(218) 214 (Loss)/income from continuing operations before
income tax expense (320) (69) (984) 1,331 Income tax
benefit/(expense) 11 (34) (38) (124) Net (loss)/income from
continuing operations (309) (103) (1,022) 1,207 Net income/(loss)
from discontinued operations, net of tax — 146 (2,080) 292
Net (loss)/income $ (309) $ 43 $ (3,102) $ 1,499 Basic and
diluted earnings per share: (Loss)/earnings from continuing
operations $ (0.01) $ — $ (0.03) $ 0.04 (Loss)/earnings from
discontinued operations, net of tax
$
— $ —
$
(0.07) $ 0.01 (Loss)/earnings $ (0.01) $ — $ (0.10) $ 0.05
Weighted average common shares outstanding Basic 30,025 29,926
30,024 29,915 Diluted 30,025 29,926 30,024 30,793
Entertainment Gaming Asia Inc. Consolidated Balance
Sheets September 30, December 31,
2013 2012 (amounts in thousands, except per share
data) (Unaudited) ASSETS Current assets: Cash and
cash equivalents $ 4,640 $ 10,365 Accounts receivable, net 1,390
1,841 Other receivables 461 112 Inventories 1,443 2,047 Prepaid
expenses and other current assets 310 387 Total current assets
8,244 14,752 Gaming equipment, net 9,275 9,724 Casino
contracts 6,068 7,982 Property and equipment, net 9,170 6,170
Goodwill 362 380 Intangible assets, net 990 1,253 Contract
amendment fees 261 342 Deferred tax assets — 201 Prepaids, deposits
and other assets 2,646 2,914 Total assets $ 37,016 $ 43,718
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 557 $ 3,636 Amount due a related party 20 —
Accrued expenses 1,749 2,619 Income tax payable (26) — Customer
deposits and other current liabilities 853 656 Total current
liabilities 3,153 6,911 Other liabilities 750 1,078 Deferred
tax liability 137 137 Total liabilities 4,040 8,126
Stockholders’ equity: Common stock, $.001 par value, 75,000,000
shares authorized; 30,024,662 and 29,974,662 shares issued and
outstanding, respectively 30 30 Additional paid-in-capital 32,922
32,224 Accumulated other comprehensive income 717 929 (Accumulated
losses)/retained earnings since January 1, 2011 ($386.1 million
accumulated deficit eliminated upon quasi-reorganization) (694)
2,408 Total EGT stockholders’ equity 32,975 35,591 Non-controlling
interest 1 1 Total stockholders’ equity 32,976 35,592 Total
liabilities and stockholders’ equity $ 37,016 $ 43,718
Entertainment Gaming Asia Inc. Adjusted EBITDA
from Continuing Operations (Unaudited)
Three-Month Periods Ended Nine-Month Periods Ended
September 30, September 30, (amounts in
thousands) 2013 2012 2013
2012 Net (loss)/income from continuing operations – GAAP $
(309) $ (103) $ (1,022) $ 1,207 Interest expense and finance fees 1
20 5 109 Interest income — (4) (4) (32) Income tax
(benefit)/expense (11) 34 38 124 Depreciation and amortization
2,008 2,014 5,974 5,783 Stock-based compensation expenses 109 123
554 676 Impairment of assets — 42 — 114 Gain on dispositions of
assets — (2) — (31) EBITDA from continuing operations, as adjusted
$
1,798
$
2,124
$
5,545
$
7,950
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, interest payments, debt principal repayments, 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.Traci
Manginitracimangini@EGT-Group.com312/867-0848
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