DEQ Reports Revenue of $2.4 Million for the 2016 Second Quarter
LAS VEGAS, NV and LÉVIS, QC, July 28, 2016 /PRNewswire/ - DEQ Systems Corp. (TSXV: DEQ) ("DEQ" or the "Company") announced today the filing of its second quarter financial results for the period ended May 31, 2016. The consolidated financial statements are available on SEDAR (www.sedar.com) and DEQ's website and should be read in conjunction with this press release. A conference call will be held on Monday, August 01, 2016 at 5:30pm EDT to present and discuss these results. Those interested in participating should dial toll free 1 (877) 223-4471 or 1 (647) 788-4922. Please note that the conference call replay will be available until August 15, 2016 by dialing 1 (416) 621-4642 or 1 (800) 585-8367. The conference ID # for the replay is 58303825.
2016 SECOND QUARTER RESULTS AND HIGHLIGHTS:
Financial Metrics
- Revenue
- 2% increase in total revenue to $2,355,000 in Q2-2016 as compared to $2,304,000 in Q2-2015.
- Table systems were flat at $1,469,000 in Q2-2016 as compared to $1,467,000 in Q2-2015.
- 23% increase in proprietary table games to $790,000 in Q2-2016 as compared to $641,000 in Q2-2015.
- Gross profit of $2,142,000 in Q2-2016, was up from $1,817,000 in Q2-2015, an increase of 18%.
- Operating Expenses
- Operating and administrative expenses increased by 19%, to $2,329,000 in Q2-2016 from $1,951,000 in Q2-2015. This increase is substantially a result of higher legal and consulting costs incurred in evaluating strategic alternatives, as announced during the Company's first quarter, higher licensing and compliance fees associated with anticipated product placements in new jurisdictions, incremental legal, compliance, and audit fees, and an increase in salaries for new personnel. The higher operating and administrative expenses were mostly offset by lower amortization expense relative to the expiration of amortization associated with the Company's purchase of distribution rights in 2008.
- Research and development expenses increased by 16% to $316,000 in Q2-2016 from $273,000 in Q2-2015. The quarter-over-quarter expense is consistent with the Company's efforts to expand and enhance its product offerings.
- EBITDA
- DEQ recorded an EBITDA loss of $324,000 in Q2-2016 compared to EBITDA of $273,000 in Q2-2015. The change in EBITDA was a result of higher gross profit of $326,000, offset by:
- $278,000 personnel cost;
- $207,000 professional, consulting and audit fees;
- $165,000 of incremental legal, professional, licensing and compliance fees, related to DEQ's corporate and organizational restructuring;
- $89,000 increase travel and other expenses.
- DEQ recorded an EBITDA loss of $324,000 in Q2-2016 compared to EBITDA of $273,000 in Q2-2015. The change in EBITDA was a result of higher gross profit of $326,000, offset by:
- Liquidity and Cash Flow
- During Q2-2016 DEQ's reported cash position, after effects of functional currency exchange, increased by $127,000, from $1,577,000 to $1,704,000. This increase is primarily attributed to the net collection of $548,000 of trade accounts receivable offset by $378,000 used in operating activities and $178,000 used for property, plant and equipment. Further, cash was favorably impacted by $22,000 during the quarter from conversion to the Canadian dollar for reporting purposes.
- Product Installs Overview
- As of Q2-2016, DEQ had 2,311 installed products worldwide – directly and through global distribution partners. This compares to 2,348 installed products as of Q2-2015.
"As we have discussed over the last several quarters, we continued our planned investments in jurisdictional and product licenses and sales personnel. These increases to operating costs are reflective of the necessary staffing in order to drive a competitive and growing business in regulated marketplaces. The Company is anticipating higher product placements in Macau, however is experiencing delays in casino property openings due to the regulatory approvals process. We do, however, expect these new placements to be forthcoming, and will provide revenue growth in the upcoming quarters. Since March of 2016, the company has continued its corporate and product licensure expansion and investment efforts and has applied for corporate licenses in 6 new North American regulated jurisdictions (5 of those non tribal) and has submitted over 31 approval requests for its recently released and existing products in both new and existing jurisdictions. I am very encouraged as we continue to grow our global and North American footprint, and our presence and reach will be beneficial to our margins in the future," stated Joe Bertolone, President and Chief Executive Officer of DEQ."
| EBITDA* |
|||||||||||||
| Second Quarter |
Six-Month Period |
||||||||||||
| May 31, 2016 |
May 31, 2015 |
May 31, 2016 |
May 31, 2015 |
||||||||||
| (unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
||||||||||
| Net Income (Loss) |
(459,000) |
(563,000) |
(936,000) |
(718,000) |
|||||||||
| Add/(Subtract): |
|||||||||||||
| Interest Expense |
6,000 |
667 |
8,000 |
3,000 |
|||||||||
| Foreign Exchange Loss (Gain) |
(49,000) |
155,000 |
121,000 |
(154,000) |
|||||||||
| Depreciation & Amortization |
171,000 |
636,000 |
331,000 |
1,287,000 |
|||||||||
| Stock-Based Compensation |
7,000 |
45,000 |
15,000 |
53,000 |
|||||||||
| EBITDA* |
(324,000) |
273,000 |
(461,000) |
471,000 |
|||||||||
| *Note: |
DEQ uses an adjusted calculation of EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization and stock based compensation and foreign exchange impact), a non-IFRS measure, to evaluate the Company's operating performance. Securities regulators require that issuers caution readers that measures adjusted to a basis other than IFRS do not have standardized meaning under IFRS and are unlikely to be comparable to similar measures used by other companies. |
| Statement of Earnings |
|||||||||||||||
| Second Quarter |
Six-Month Period |
||||||||||||||
| May 31, 2016 |
May 31, 2015 |
May 31, 2016 |
May 31, 2015 |
||||||||||||
| (unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
||||||||||||
| Table Systems |
1,469,000 |
1,467,000 |
3,046,000 |
2,845,000 |
|||||||||||
| Proprietary Table Games |
790,000 |
641,000 |
1,663,000 |
1,247,000 |
|||||||||||
| Total recurring revenue |
2,259,000 |
2,109,000 |
4,709,000 |
4,092,000 |
|||||||||||
| Non recurring revenue |
96,000 |
195,000 |
124,000 |
334,000 |
|||||||||||
| Total Revenue |
2,355,000 |
2,304,000 |
4,833,000 |
4,426,000 |
|||||||||||
| Gross Profit |
2,142,000 |
1,817,000 |
4,205,000 |
3,625,000 |
|||||||||||
| % Gross margin |
91% |
83% |
87% |
82% |
|||||||||||
| Operating & Administrative expenses |
2,329,000 |
1,951,000 |
4,371,000 |
3,897,000 |
|||||||||||
| Research & Development expenses |
316,000 |
273,000 |
641,000 |
597,000 |
|||||||||||
| Operating Income (Loss) |
(503,000) |
(408,000) |
(807,000) |
(869,000) |
|||||||||||
| FX & other expenses (revenue) |
(44,000) |
155,000 |
129,000 |
(151,000) |
|||||||||||
| Net Income (Loss) |
(459,000) |
(563,000) |
(936,000) |
(718,000) |
|||||||||||
| Net Income (Loss) per share |
$(0.006) |
$(0.010) |
$(0.013) |
$(0.012) |
|||||||||||
| Financial Position |
|||||||||||
| May 31, 2016 |
May 31, 2015 |
November 30, 2015 |
|||||||||
| (unaudited) |
(audited) |
(unaudited) |
|||||||||
| Cash and cash equivalents |
1,704,000 |
2,221,000 |
2,550,000 |
||||||||
| Current assets (other than cash) |
1,780,000 |
1,964,000 |
1,716,000 |
||||||||
| Long-term assets |
3,368,000 |
4,132,000 |
3,302,000 |
||||||||
| Total Assets |
$6,852,000 |
$8,317,000 |
$7,568,000 |
||||||||
| Current liabilities |
2,042,000 |
1,490,000 |
2,001,000 |
||||||||
| Shareholders' equity |
4,810,000 |
6,827,000 |
5,567,000 |
||||||||
| Total Liabilities and Equity |
$6,852,000 |
$8,317,000 |
$7,568,000 |
||||||||
| Number of shares outstanding |
71,682,000 |
71,682,000 |
71,682,000 |
||||||||
ABOUT DEQ
DEQ Systems Corp. (TSXV: DEQ) is one of the market leaders in Table Game Systems, Proprietary Table Games, and Utility solutions. DEQ's systems and games are installed in over 300 casinos, in 30 countries around the world. The combination of our services, industry leading products and revenue generation capabilities make DEQ a leader for 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.
SOURCE DEQ SYSTEMS CORP.
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