DEQ Systems Corp. (TSX VENTURE: DEQ) ("DEQ" or the "Company")
announces today the filing of its annual financial results for the
year ended November 30, 2010. The Consolidated Financial Statements
are available on SEDAR (www.sedar.com) and DEQ's website. A
conference call will be held on Friday, March 18, 2011 at 10am EST
to present and discuss these results. Those interested in
participating should dial toll free 1 (800) 909-4571 or (416)
981-9000. A PowerPoint presentation will be available on DEQ's
website in the Invest/Financial Reports/PowerPoint section to
support the call content.
2010 ANNUAL RESULTS HIGHLIGHTS:
Financial Metrics
-- Revenue
-- 90% increase in recurring revenue from $757,000 in 2009 to
$1,436,000 in 2010.
-- 10% increase in total revenue $4,419,000 in 2009 to $4,854,000 in
2010.
-- 6% increase in gross profit from $3,796,000 in 2009 to $4,031,000 in
2010.
-- 83% gross margin in 2010 which was comparable to previous year.
-- Loss of $210,000 of royalties explained by Station Casinos'
bankruptcy.
-- Termination of the Paltronics revenue recognition in 2010 that
affected our revenue by $120,000.
-- Settlement agreement on the Severn Project concluded on March 3,
2011 that will affect our recurring revenue by approximately
$200,000 starting on March 1, 2011.
-- Operating Costs
-- Operating costs increased to $3,840,000 in 2010 compared to
$3,263,000 in 2009. This is explained by the Asian commercialisation
and the increased number of products installed in North America,
mostly from G3 systems in California.
-- EBITDA
-- EBITDA of $191,000 in 2010 compared to $533,000 in 2009. This is
explained by the loss of $575,000 of royalties in 2010 from Station
Casinos and Paltronics as well as the revenue recognized in 2009
before the Russian casino closures.
-- Cash Flow
-- In 2010, DEQ generated $423,000 of cash flow from operating
activities before change in non-cash working capital items.
-- During the fiscal year, our cash position decreased by $1,896,000
explained mostly by our $698,000 payment to DEK International on our
balance of territorial exclusivity purchase price and the change in
non-cash working capital items for an amount of $929,000, explained
by the late payment of Severn Enterprises for an amount of $469,000
as well as an increase in inventory of $250,000 to meet our new
level of projected quarterly installations.
Operational Highlights
-- Product Installations
-- In 2010 DEQ directly installed 341 new products in North America.
-- As of November 30, 2010, DEQ had 533 directly installed products in
North America, 81 products installed in Asia and 389 products
installed through distributors worldwide for a total of 1,003
products in operation worldwide.
-- Operating Costs
-- DEQ's operating costs have increased over the course of the past 12
months due to:
-- Many G3 installations in California
-- Asia and Australia commercialization and new jurisdictional
licenses
"DEQ's products have proven acceptance and viability in 2010",
stated Earle G. Hall, President & CEO of DEQ. "With over 340
new installations this year and our first major installation in
Asia we are more than confident in the potential growth of all of
our product lines. 2010 was a turbulent year with the Station
Casinos bankruptcy, the end of the Paltronics royalties and the
Severn project. That being said when we look at the 141
installations in our first quarter of 2011, we are very encouraged
by the speed at which DEQ's core business is growing and we believe
that our accelerated growth will offset these lost royalty streams
in the near term. As we look to the future, we are very excited
with not only our geographical growth but our product penetration
per casino and the new products we are launching in 2011."
Statement of Earnings
Fiscal year ended November 30,
2008 2009 2010
(audited) (audited) (audited)
---------------------------------------
---------------------------------------
Direct leasing 370,000 757,000 1,436,000
Royalties (excluding Severn
Enterprises)(1) 1,632,000 2,155,000 1,462,000
Royalties (Severn Enterprises) 614,000 801,000 922,000
---------------------------------------
Total recurring revenue 2,616,000 3,713,000 3,820,000
Non recurring revenue 1,470,000 706,000 1,034,000
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Total Revenue 4,086,000 4,419,000 4,854,000
Gross Profit 3,296,000 3,796,000 4,031,000
% Gross margin 81% 86% 83%
Operating Costs 3,537,000 3,263,000 3,840,000
---------------------------------------
EBITDA (2) (241,000) 533,000 191,000
Stock based compensation 817,000 490,000 349,000
Amortization expenses 1,133,000 2,229,000 2,318,000
Interest (revenue) expenses (614,000) 69,000 77,000
Foreign exchange (gain) loss 542,000 (409,000) (8,000)
Future income taxes (29,000) (276,000) (85,000)
Other items (581,000) (2,000) (210,000)
---------------------------------------
Net Income (Loss) (1,509,000) (1,568,000) (2,249,000)
---------------------------------------
---------------------------------------
Net Income (Loss ) per share $(0.022) $(0.023) $(0.032)
___________________________________________________________________________________________________
Note 1: Our royalties have decreased by $575,000 explained by
the closure of Russian casino in July 2009 for which royalties of
$245,000 were recognized in 2009, Station Casinos filed bankrupt
which affected our 2010 royalties by $210,000 and by the
termination of Paltronics five-years agreement that affected our
royalties by $120,000 in 2010 compared to previous year.
Note 2: We use EBITDA (Earnings before Stock option based
compensation, Interest, Taxes, Depreciation, Amortization and
Foreign exchange) as performance measurements in our financial
disclosure. This measure is not recognized under generally accepted
accounting principles. The reconciliations above demonstrate how we
calculate such measurements from our financial statements.
Balance Sheet
Nov. 30, 2008 Nov. 30, 2009 Nov. 30, 2010
(Audited) (Audited) (Audited)
---------------------------------------------
---------------------------------------------
Cash and cash equivalents 6,593,000 5,829,000 3,933,000
Current assets (other than
cash) 1,920,000 1,696,000 2,001,000
Long-term assets 17,080,000 14,433,000 12,700,000
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Total Assets $25,593,000 $21,958,000 $18,634,000
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Current liabilities 2,734,000 2,176,000 1,852,000
Long-term liabilities 2,726,000 964,000 0
Shareholders' equity 20,133,000 18,818,000 16,903,000
---------------------------------------------
Total Liabilities and Equity $25,593,000 $21,958,000 $18,634,000
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Number of shares outstanding 70,416,000 69,590,000 69,302,000
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ABOUT DEQ
DEQ Systems Corp. (TSX VENTURE: DEQ) is a global provider of
gaming technology in over 30 countries. Protected by more than 20
patents in 50 countries, DEQ specializes in progressive and random
bonusing systems for table games. DEQ's innovation and ingenuity
has been to replace the single dollar coin slot and sensor with its
internationally award winning G3™ technology. The G3 incorporates
multiple credit betting, dealer hand betting and mystery bonusing.
DEQ also commercializes technology and patents including the award
winning baccarat revolution, EZ Baccarat™ and related auxiliary
products such as EZ Trak™. DEQ is and will continue to lead
innovation in the table game bonusing segment of the global gaming
market. For further information, please visit www.deq.com.
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.
Contacts: DEQ Systems Corp. Earle G. Hall President & CEO
418-839-3012 earle.hall@deq.com DEQ Systems Corp. Francois Proulx
Chief Financial Officer 418-839-3012 francois.proulx@deq.com