Entertainment Gaming Asia Inc. Reports Fourth Quarter And 2016 Fiscal Year Results
HONG KONG, April 10, 2017 /PRNewswire/ -- Entertainment Gaming Asia Inc. (NASDAQ: EGT) ("Entertainment Gaming Asia" or "the Company"), a gaming company focused on markets in Pan-Asia, today reported operating results for the fourth quarter and fiscal year ended December 31, 2016 and reviewed recent corporate developments.
Key Financial Metrics
- Consolidated revenue from continuing operations of $357,000 for the fourth quarter and $2.0 million for the 2016 fiscal year
- Net losses from continuing operations of $2.4 million for the fourth quarter and $5.3 million for the 2016 fiscal year
- Cash balance of $33.6 million and zero debt as of December 31, 2016
In the 2016 fiscal year, the Company sold the principal assets related to the gaming products operations and all the gaming assets in Cambodia and exited both these businesses. As a result, all revenue and expenses associated with the gaming products operations and Cambodia gaming operations have been reclassified as discontinued operations for the periods presented.
Financial Performance
The Company's fourth quarter and 2016 fiscal year consolidated revenue from continuing operations comprised the Philippines gaming operations.
Consolidated revenue was $357,000 for the fourth quarter of 2016, a decrease of 47% compared to $676,000 in the fourth quarter of 2015. Consolidated revenue was $2.0 million for the 2016 fiscal year, a decrease of 26% compared to $2.6 million in the prior year. The decreases were due to a reduced operating base of electronic gaming machines (EGMs) as a result of the expiration of the EGM leasing agreement with Leisure World VIP Slot Club on June 30, 2016 and lower average daily net win per unit due to increased competition.
Selling, general and administrative (SG&A) and research and development (R&D) expenses totaled $2.3 million for the fourth quarter of 2016 compared to $1.4 million in the prior year period. SG&A and R&D expenses totaled $5.6 million for the 2016 fiscal year compared to $4.4 million in the prior year. The increases primarily related to the ramping up of the social gaming operations, which comprised $1.0 million and $2.0 million of the total combined SG&A and R&D expenses for the fourth quarter and 2016 fiscal year, respectively.
In accordance with relevant accounting standards for software development, the Company capitalizes certain software development costs for the social gaming products. Therefore, SG&A and R&D expenses are not indicative of total costs related to social gaming. Total combined cash operating expenses and capitalized costs related to the social gaming operations were $1.1 million for the fourth quarter of 2016, $3.8 million in the 2016 fiscal year and $410,000 in the 2015 fiscal year. The rising costs are primarily due to salaries as a result of the increasing headcount and higher marketing and technology expenses since the test launch of the social gaming app, City of Games, in August 2016.
The Company reported adjusted LBITDA from continuing operations of $2.2 million in the fourth quarter of 2016 compared to $978,000 in the fourth quarter of 2015. Adjusted LBITDA from continuing operations was $4.4 million in the 2016 fiscal year compared to $2.5 million in the 2015 fiscal year.
Net loss from continuing operations was $2.4 million, or $0.17 per share, for the fourth quarter of 2016 compared to a loss of $1.3 million, or $0.09 per share, for the fourth quarter of 2015. The Company reported a net loss from continuing operations of $5.3 million, or $0.37 per share, for the 2016 fiscal year compared to a loss of $3.9 million, or $0.27 per share, for the 2015 fiscal year. The weighted average diluted share count was 14.5 million shares for all periods. The increases in net losses from continuing operations were primarily due to lower gaming operations revenue, higher operating expenses (mainly related to the social gaming operations) and higher taxes due to an income tax provision and movement in the deferred tax assets for the Philippines operations. This was partially offset by lower depreciation and amortization expenses related to the gaming operations. For the 2016 fiscal year, the increase in net loss was also partially offset by a $369,000 gain on the July 2016 disposition of 154 EGM seats that were placed in Leisure World VIP Slot Club in the Philippines.
The Company reported a net loss of $6.7 million for the fourth quarter of 2016 compared to a loss of $2.7 million for the fourth quarter of 2015. The fourth quarter of 2016 net loss included a net loss of $4.3 million from the discontinued Cambodia gaming operations. The fourth quarter of 2015 net loss included a net loss of $1.3 million from the discontinued gaming products and Cambodia gaming operations.
The Company reported a net loss of $9.7 million for the 2016 fiscal year compared to income of $820,000 for 2015 fiscal year. The 2016 fiscal year net loss included a net loss of $4.4 million from the discontinued gaming products and Cambodia gaming operations. The 2015 fiscal year net income included net income of $4.8 million from the same discontinued operations.
Clarence Chung, Chairman and Chief Executive Officer of Entertainment Gaming Asia, commented, "During 2016, we disposed of all of our gaming assets in Cambodia, certain gaming assets in the Philippines and the principal assets of the gaming products business. These sales have provided cash proceeds of $10.3 million and the potential for earn-outs on certain gaming chip and plaque sales related to the now discontinued gaming products business. To date, we have received $8.1 million of the sales proceeds and no earn-outs on gaming chip and plaque sales.
"Our reduced base of operations coupled with the expenses related to the social gaming operations, which remain in the testing phase, and corporate overhead, presently have a negative impact on our cash flow. We currently have approximately $32 million in cash and are exploring avenues to apply these resources in ways to enhance value for our shareholders."
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 engaged in the leasing of electronic gaming machines to the gaming industry in the Philippines. The Company is also developing a free-to-play online social gaming platform focused on Asian markets.
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 ability to develop and successfully launch a social gaming platform and fund this initiative; expectations for the viability of the social gaming platform and its revenue model; and the Company's expectations for deploying its resources to improve enhance shareholder value. 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 identify and successfully develop new projects; acquire additional capital as and when needed; adapt to potential changes in gaming policies and political stability in the countries in which the Company operates; the ability to successfully commercialize its social gaming platform and operate in the social gaming market; and, those other risks set forth in the Company's annual report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 30, 2016 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. |
|||||||||||||
| Three-Month Period Ended December 31, |
Year Ended December 31, |
||||||||||||
| (amounts in thousands, except per share data) |
Unaudited |
Unaudited |
2016 |
2015 |
|||||||||
| Revenue: |
|||||||||||||
| Gaming operations |
350 |
676 |
1,951 |
2,641 |
|||||||||
| Social gaming |
7 |
— |
8 |
— |
|||||||||
| Total revenue |
357 |
676 |
1,959 |
2,641 |
|||||||||
| Operating costs and expenses: |
|||||||||||||
| Cost of gaming operations |
|||||||||||||
| Gaming property and equipment depreciation |
69 |
113 |
351 |
452 |
|||||||||
| Casino contract amortization |
— |
94 |
187 |
387 |
|||||||||
| Other gaming related intangibles amortization |
— |
63 |
96 |
252 |
|||||||||
| Other operating costs |
177 |
182 |
762 |
696 |
|||||||||
| Cost of social gaming |
120 |
— |
197 |
— |
|||||||||
| Selling, general and administrative expenses |
1,998 |
1,175 |
4,710 |
4,098 |
|||||||||
| Gain on disposition of assets |
— |
— |
(369) |
— |
|||||||||
| Research and development expenses |
340 |
263 |
887 |
271 |
|||||||||
| Depreciation and amortization |
22 |
24 |
88 |
94 |
|||||||||
| Total operating costs and expenses |
2,726 |
1,914 |
6,909 |
6,250 |
|||||||||
| Loss from operations |
(2,369) |
(1,238) |
(4,950) |
(3,609) |
|||||||||
| Other (expenses)/income: |
|||||||||||||
| Interest expense and finance fees |
— |
— |
— |
(3) |
|||||||||
| Interest income |
22 |
3 |
29 |
13 |
|||||||||
| Foreign currency losses |
(47) |
(53) |
(86) |
(147) |
|||||||||
| Other |
5 |
4 |
20 |
15 |
|||||||||
| Total other expenses |
(20) |
(46) |
(37) |
(122) |
|||||||||
| Loss from continuing operations before income tax |
(2,389) |
(1,284) |
(4,987) |
(3,731) |
|||||||||
| Income tax expenses |
43 |
51 |
357 |
217 |
|||||||||
| Net loss from continuing operations |
(2,432) |
(1,335) |
(5,344) |
(3,948) |
|||||||||
| Net (loss)/income from discontinued operations, net of tax |
(4,317) |
(1,323) |
(4,391) |
4,768 |
|||||||||
| Net (loss)/income attributable to EGT stockholders |
$ |
(6,749) |
$ |
(2,658) |
$ |
(9,735) |
$ |
820 |
|||||
| Other comprehensive (loss)/income: |
|||||||||||||
| Defined benefit pension plan |
(5) |
3 |
(5) |
3 |
|||||||||
| Foreign currency translation |
(61) |
32 |
(119) |
(47) |
|||||||||
| Total other comprehensive (loss)/income, net of tax |
(66) |
35 |
(124) |
(44) |
|||||||||
| Comprehensive (loss)/income attributable to EGT stockholders |
$ |
(6,815) |
(2,623) |
$ |
(9,859) |
$ |
776 |
||||||
| Per share data (basic and diluted): |
|||||||||||||
| (Loss)/earnings |
$ |
(0.47) |
$ |
(0.18) |
$ |
(0.67) |
$ |
0.06 |
|||||
| Loss from continuing operations |
$ |
(0.17) |
$ |
(0.09) |
$ |
(0.37) |
$ |
(0.27) |
|||||
| (Loss)/earnings from discontinued operations, net of tax |
$ |
(0.30) |
$ |
(0.09) |
$ |
(0.30) |
$ |
0.33 |
|||||
| Weighted basic and diluted average common shares outstanding |
14,464 |
14,460 |
14,464 |
14,457 |
|||||||||
| Entertainment Gaming Asia Inc. |
||||
| December 31, 2016 |
December 31, |
|||
| (amounts in thousands, except per share data) |
||||
| ASSETS |
||||
| Current assets: |
||||
| Cash and cash equivalents |
$ |
33,599 |
$ |
30,681 |
| Accounts receivable, net |
128 |
724 |
||
| Amounts due from related parties |
- |
257 |
||
| Other receivables |
1,051 |
78 |
||
| Inventories |
21 |
2,378 |
||
| Prepaid expenses and other current assets |
235 |
295 |
||
| Contract amendment fees |
- |
18 |
||
| Total current assets |
35,034 |
34,431 |
||
| Gaming equipment, net |
389 |
2,985 |
||
| Casino contracts |
- |
528 |
||
| Property and equipment, net |
915 |
5,919 |
||
| Goodwill |
315 |
332 |
||
| Intangible assets, net |
1,512 |
391 |
||
| Deferred tax asset |
59 |
274 |
||
| Prepaids, deposits and other assets |
1,204 |
425 |
||
| Total assets |
$ |
39,428 |
45,285 |
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||
| Current liabilities: |
||||
| Accounts payable |
$ |
79 |
$ |
288 |
| Amounts due to related parties |
160 |
239 |
||
| Accrued expenses |
1,118 |
1,755 |
||
| Income tax payable |
161 |
2 |
||
| Deferred revenues, current portion |
2 |
9 |
||
| Customer deposits and other current liabilities |
54 |
529 |
||
| Total current liabilities |
1,574 |
2,822 |
||
| Other liabilities |
441 |
880 |
||
| Deferred tax liabilities |
5,654 |
29 |
||
| Total liabilities |
7,669 |
3,731 |
||
| Stockholders' equity: |
||||
| Common stock, $.001 par value, 250,000,000 (2015: 38,000,000) shares authorized;14,464,220 shares issued and outstanding |
14 |
14 |
||
| Additional paid-in-capital |
47,827 |
47,763 |
||
| Accumulated other comprehensive income |
585 |
709 |
||
| Accumulated losses |
(16,668) |
(6,933) |
||
| Total EGT stockholders' equity |
31,758 |
41,553 |
||
| Non-controlling interest |
1 |
1 |
||
| Total stockholders' equity |
31,759 |
41,554 |
||
| Total liabilities and stockholders' equity |
$ |
39,428 |
$ |
45,285 |
| Entertainment Gaming Asia Inc. |
|||||||||||||
| Three-Month Period |
Year Ended |
||||||||||||
| (amounts in thousands) |
2016 |
2015 |
2016 |
2015 |
|||||||||
| Net loss from continuing operations – GAAP basis |
$ |
(2,432) |
$ |
(1,335) |
$ |
(5,344) |
$ |
(3,948) |
|||||
| Interest expense and finance fees |
— |
— |
— |
3 |
|||||||||
| Interest income |
(22) |
(3) |
(29) |
(13) |
|||||||||
| Income tax expenses |
43 |
51 |
357 |
217 |
|||||||||
| Depreciation and amortization |
188 |
293 |
883 |
1,184 |
|||||||||
| Stock-based compensation expenses |
3 |
16 |
64 |
83 |
|||||||||
| Gain on disposition of assets |
— |
— |
(369) |
— |
|||||||||
| Adjusted LBITDA from continuing operations |
$ |
(2,220) |
$ |
(978) |
$ |
(4,438) |
$ |
(2,474) |
|||||
Adjusted LBITDA is losses before interest, taxes, depreciation, amortization, stock-based compensation, gain on disposition of assets and other non-cash operating income and expenses. Adjusted LBITDA 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 LBITDA 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 LBITDA 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 LBITDA as a supplement to financial measures in accordance with generally accepted accounting principles in the United States ("GAAP"). Adjusted LBITDA 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 LBITDA 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 LBITDA 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, taxes and other non-recurring charges, which are not reflected in Adjusted LBITDA. Entertainment Gaming Asia's calculation of Adjusted LBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
SOURCE Entertainment Gaming Asia Inc.
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