UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): August 6, 2015


 

ENTERTAINMENT GAMING ASIA INC.

(Exact Name of Registrant as Specified in Its Charter)

 


 

Nevada   001-32161   91-1696010
(State or Other Jurisdiction of Incorporation)   (Commission File Number)   (I.R.S. Employer Identification Number)

 

Unit C1, Ground Floor, Koon Wah Building

No. 2 Yuen Shun Circuit

Yuen Chau Kok, Shatin

New Territories, Hong Kong SAR

(Address of principal executive offices, including zip code)

 

+ 852-3147-6600

(Registrant’s telephone number, including area code)

 

Not applicable
(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions.

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)
¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)

 

 
 

 

Item 2.02     Results of Operations and Financial Condition

 

On August 6, 2015, we issued a press release announcing our results of operations for the financial quarter ended June 30, 2015. The full text of the press release is furnished as Exhibit 99.1 to this report.

 

Item 9.01     Financial Statements and Exhibits

 

(d) Exhibits  Method Filing

 

The following exhibit is filed with this report:

 

Exhibit 99.1

Press release dated August 6, 2015 regarding the registrant’s financial results for its quarter ended June 30, 2015.

 

Filed Electronically herewith

 

 

 
 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

ENTERTAINMENT GAMING ASIA INC.

   
   
Dated: August 6, 2015 /s/  Clarence Chung
  Clarence (Yuk Man) Chung
  Chief Executive Officer

  

 

 

 

 

 

 

 



Exhibit 99.1

  

 

For Immediate Release

 

 

CONTACTS:

Entertainment Gaming Asia Inc.

Traci Mangini

tracimangini@EGT-Group.com

872/802-4227

 

 

ENTERTAINMENT GAMING ASIA INC. REPORTS SECOND QUARTER 2015 RESULTS

 

- Company Achieves Profitability for the Second Quarter of 2015 Driven by

Improvements in Both Business Divisions –

 

Hong Kong – August 6, 2015 – 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 second quarter ended June 30, 2015 and reviewed recent corporate progress.

 

Key Financial Metrics

·Consolidated revenues of $7.6 million for the second quarter of 2015
·Adjusted EBITDA (earnings from continuing operations before interest, taxes, depreciation, amortization and non-cash charges) of $3.3 million for the second quarter of 2015
·Net income of $1.5 million for the second quarter of 2015
·Cash balance of $24.6 million and zero debt as of June 30, 2015

 

Second Quarter of 2015 Financial Performance

 

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.

 

The Company’s second quarter of 2015 consolidated revenue was $7.6 million, an increase of 54% compared to $4.9 million in the second quarter of 2014 due to increases in both the gaming operations and gaming products business divisions.

 

Gaming operations revenue was $4.9 million for the second quarter of 2015, an increase of 11% compared to $4.4 million in the second quarter of 2014 due to improvement in the Cambodia operations partially offset by a decline in the Philippines operations. Average consolidated daily net win per unit was $131 for the second quarter of 2015, an increase of 17% compared to $112 in the second quarter of 2014 due to the higher revenue and a slight reduction of machine seats in operation during the second quarter of 2015.

 

Cambodia average daily net win per unit was $165 for the second quarter of 2015, an increase of 27% compared to $130 in the prior year period primarily due to improved performance at NagaWorld. NagaWorld average daily net win per unit increased to $248 for the second quarter of 2015 compared to $203 in the prior year period primarily due to an increase in VIP player traffic.

 

– more –

 

 
 

Entertainment Gaming Asia Reports Q2 2015 Earnings Results, 8/6/2015 page 2

 

 

Philippines average daily net win per unit was $65 for the second quarter of 2015, a decrease of 14% compared to $76 in the prior year period. The decrease was primarily due to increased competition from new integrated casino resorts in Manila, one of which opened in March 2013 and another which soft opened in December 2014. While Philippines average daily net win per unit declined on a year-over-year basis, it has remained relatively stable in recent quarters as the Company continues its proactive marketing strategies in efforts to stabilize performance in the increasingly competitive landscape.

 

Revenue from gaming products was $2.7 million for the second quarter of 2015 compared to $524,000 in the second quarter of 2014. The increase was primarily a result of higher sales of gaming chips and plaques due to strong reorder levels from existing customers. The Company achieved a gross profit of $395,000 for this division for the second quarter of 2015 compared to a gross margin loss of $401,000 in the prior year period. The gross margin increase was primarily due to higher production volumes and continued efforts to improve production efficiencies.

 

Selling, general and administrative, or SG&A, expenses were $1.3 million for the second quarter of 2015 compared to $1.1 million in the second quarter of 2014. The lower expenses in the second quarter of 2014 were mainly due to a reversal of a previously accrued one-time other tax liability of $485,000 related to the Philippines operations. Excluding this benefit to the second quarter of 2014, SG&A expenses for the second quarter of 2015 declined $280,000 compared to the prior year period, which was primarily due to cost control efforts.

 

Entertainment Gaming Asia reported adjusted EBITDA of $3.3 million in the second quarter of 2015 compared to $2.1 million in the second quarter of 2014.

 

The Company reported net income of $1.5 million, or $0.10 per share, on a weighted average diluted share count of 14.5 million shares for the second quarter of 2015. This compared to a net loss of $22,000, or breakeven per share, on a weighted average diluted share count of 7.5 million shares for the second quarter of 2014. The second quarter of 2014 net loss included a net loss of $239,000 from discontinued operations related to Dreamworld Pailin. Excluding the discontinued operations, the Company reported net income from continuing operations of $217,000, or $0.03 per share, for the second quarter of 2014.

 

Clarence Chung, Chairman and Chief Executive Officer of Entertainment Gaming Asia, commented, “We are pleased to report that the strong top and bottom-line year-over-year improvement achieved in the first quarter continued in the second quarter of 2015. The primary drivers of our performance were the significant improvements in gaming products sales and gross margin as well as the growth in gaming operations revenue. Gaming products benefitted from an attractive reorder pipeline from existing customers and our efforts to improve profitability while growth in gaming operations was largely due to strong performance from NagaWorld.

 

“We are focused on continuing to improve our operating performance. Through proactive marketing and machine management, we aim to maximize performance and return potential for our slot operations. For gaming products, we continue efforts to expand our market presence and build on our present confirmed order pipeline of $4.5 million for the second half of 2015.

 

“In addition, we are actively pursuing new projects that would drive long-term growth for the Company. With over $24.0 million in net cash and the benefits of being an indirect, majority-owned subsidiary of Melco International Development Limited, we believe we have greatly improved our ability to secure new projects that could enhance our existing operations and provide the opportunity to expand into new businesses and markets.”

 

– more –

 

 
 

Entertainment Gaming Asia Reports Q2 2015 Earnings Results, 8/6/2015 page 3

  

 

Entertainment Gaming Asia is hosting a conference call and simultaneous webcast at 8:30 a.m. ET today, August 6, 2015, both of which are open to the general public. The conference call number is 800/734-8582 or 212/231-2906. 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 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 gaming projects and fund those projects, expectations for the increasing profitability of the Company’s gaming chips and plaques operations and expectations for expanding its business model to new gaming platforms and markets. 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.

 

- financial tables follow -

 

 
 

Entertainment Gaming Asia Reports Q2 2015 Earnings Results, 8/6/2015 page 4

  

Entertainment Gaming Asia Inc.

Consolidated Statements of Comprehensive Income/Loss

(Unaudited)

                 
  

Three-Month Periods
Ended June 30,

   Six-Month Periods
Ended June 30,
 
(amounts in thousands, except per share data)  2015   2014   2015   2014 
Revenues:                    
   Gaming operations   4,914    4,420    8,924    8,303 
   Gaming products   2,723    524    6,995    1,335 
Total revenues   7,637    4,944    15,919    9,638 
                     
Operating costs and expenses:                    
   Cost of gaming operations                    
           Gaming property and equipment                    
           Depreciation   782    908    1,601    1,789 
           Casino contract amortization   611    612    1,222    1,222 
           Other gaming related intangiblesamortization   63    63    126    126 
           Other operating costs   969    895    1,791    1,740 
   Cost of gaming products   2,328    925    5,990    2,413 
   Selling, general and administrative expenses   1,323    1,167    2,935    2,720 
   Gain on disposition of assets   (17)   (8)   (22)   (8)
   Impairment of assets       19        19 
   Product development expenses   34    101    69    156 
   Depreciation and amortization   52    50    106    99 
Total operating costs and expenses   6,145    4,732    13,818    10,276 
Income/(loss) from operations   1,492    212    2,101    (638)
                     
Other (expenses)/income:                    
   Interest expense and finance fees   (2)       (3)   (2)
   Interest income   3        6     
   Foreign currency (losses)/gains   (25)   16    (54)   1 
   Other   10    4    19    12 
Total other (expenses)/income   (14)   20    (32)   11 
Income/(loss) from continuing operations before income tax   1,478    232    2,069    (627)
                     
Income tax expenses   (17)   (15)   (37)   (30)
                     
Net income/(loss) from continuing operations   1,461    217    2,032    (657)
Net loss from discontinued operations, net of tax       (239)       (395)
                     
Net income/(loss) attributable to EGT stockholders  $1,461   $(22)  $2,032   $(1,052)
                     
Other comprehensive (loss)/income:                    
   Foreign currency translation   (16)   99    (15)   58 
Total other comprehensive (loss)/income, net of tax   (16)   99    (15)   58 
                     
Comprehensive income/(loss) attributable to EGT stockholders  $1,445   $77   $2,017   $(994)
                     
Per share data (basic and diluted):                    
   Earnings/(loss)  $0.10   $   $0.14   $(0.14)
   Earnings/(loss) from continuing operations  $0.10   $0.03   $0.14   $(0.09)
   Loss from discontinued operations, net of tax  $   $(0.03)  $   $(0.05)
                     
Weighted average common shares outstanding:                    
    Basic   14,458    7,503    14,454    7,500 
    Diluted   14,477    7,537    14,474    7,500 

 

-more-

 

 
 

Entertainment Gaming Asia Reports Q2 2015 Earnings Results, 8/6/2015 page 5

  

Entertainment Gaming Asia Inc.

Consolidated Balance Sheets

 

  

June 30,

2015

   December 31, 2014 
(amounts in thousands, except per share data)  (Unaudited)     
ASSETS          
Current assets:          
Cash and cash equivalents  $24,638   $17,301 
Accounts receivable, net   493    830 
Amounts due from related parties   1,686    2,112 
Other receivables   128    316 
Inventories   3,731    2,617 
Prepaid expenses and other current assets   592    1,447 
Total current assets   31,268    24,623 
           
Gaming equipment, net   4,872    5,624 
Casino contracts   1,755    2,982 
Property and equipment, net   8,782    8,895 
Goodwill   346    351 
Intangible assets, net   441    595 
Contract amendment fees   72    126 
Deferred tax asset   140    142 
Prepaids, deposits and other assets   1,061    1,316 
Total assets  $48,737   $44,654 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
Accounts payable  $1,282   $645 
Amounts due to related parties   108    47 
Accrued expenses   1,378    2,009 
Income tax payable   8     
Customer deposits and other current liabilities   2,229    306 
Total current liabilities   5,005    3,007 
           
Other liabilities   863    845 
Deferred tax liability   107    107 
Total liabilities   5,975    3,959 
           
Stockholders’ equity:          
Common stock, $.001 par value, 18,750,000 shares authorized;14,464,220 and 14,471,095 shares issued and outstanding, respectively   14    14 
Additional paid-in-capital   47,730    47,680 
Accumulated other comprehensive income   738    753 
Accumulated losses   (5,721)   (7,753)
Total EGT stockholders’ equity   42,761    40,694 
Non-controlling interest   1    1 
Total stockholders’ equity   42,762    40,695 
Total liabilities and stockholders’ equity  $48,737   $44,654 

 

-more-

  

 
 

Entertainment Gaming Asia Reports Q2 2015 Earnings Results, 8/6/2015 page 6

  

Entertainment Gaming Asia Inc.

Adjusted EBITDA from Continuing Operations

(Unaudited)

 

   Three-Month Periods
Ended June 30,
   Six-Month Periods
Ended June 30,
 
(amounts in thousands)  2015   2014   2015   2014 
Net income/(loss) from continuing operations – GAAP basis  $1,461   $217   $2,032   $(657)
Interest expense and finance fees   2        3    2 
Interest income   (3)       (6)    
Income tax expenses   17    15    37    30 
Depreciation and amortization   1,796    1,824    3,605    3,570 
Stock-based compensation expenses   20    69    50    141 
Impairment of assets       19        19 
Gain on dispositions of assets   (17)   (8)   (22)   (8)
Adjusted EBITDA from continuing operations  $3,276   $2,136   $5,699   $3,097 
                     

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.

 

-more-

 

 
 

Entertainment Gaming Asia Reports Q2 2015 Earnings Results, 8/6/2015 page 7

 

 

Entertainment Gaming Asia Inc.

Gaming Operations Performance Metrics

 

Slot Operations
Net Revenue to EGT (in thousands)          
  Q2:15 Q2:14 Y/Y   1H:15 1H:14 Y/Y
Cambodia $3,992 $3,350 19%   $7,110 $6,280 13%
Philippines $650 $787 -17%   $1,320 $1,515 -13%
Service revenue(1) $272 $283 -4%   $494 $508 -3%
Consolidated $4,914 $4,420 11%   $8,924 $8,303 7%
Average Daily Net Win Per Unit          
  Q2:15 Q2:14 Y/Y   1H:15 1H:14 Y/Y
Cambodia $165 $130 27%   $147 $124 19%
Philippines $65 $76 -14%   $67 $73 -8%
Consolidated $131 $112 17%   $120 $107 12%
EGM Seats in Operation          
          6/30/15 6/30/14 Y/Y
Cambodia         1,018 1,126 -10%
Philippines         540 568 -5%
Consolidated         1,558 1,694 -8%

 

 

(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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