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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