HONG KONG--(BUSINESS WIRE)--Entertainment Gaming Asia Inc. (NYSE Amex: EGT) (“Entertainment Gaming Asia” or “the Company”), formerly known as Elixir Gaming Technologies, Inc., a leading provider of electronic gaming machines on a participation basis to the Pan-Asian gaming industry, today reported operating results for the second quarter ended June 30, 2010 and reviewed recent corporate progress.
Clarence Chung, Chairman and Chief Executive Officer of Entertainment Gaming Asia, commented, “I am proud to announce that Entertainment Gaming Asia has posted continued gains in sequential gaming machine participation revenue and adjusted EBITDA for the second quarter of 2010. Our operations in both our gaming markets of Cambodia and the Philippines and our continued strict cost control efforts were primary contributors to our financial performance for the quarter. We have made remarkable progress over the last year and a half. With continued improvements in our core gaming participation operations, a leaner and more efficient operating structure, and a new name and exciting expansion plans to become a regional casino owner and operator in select emerging gaming markets in Asia, Entertainment Gaming Asia is better positioned to grow long-term earnings and enhance shareholder value.”
Continued Improvement in Gaming Participation Revenue
Total net revenue from gaming machines on participation for the second quarter of 2010 was a record $3.5 million, an increase of 25% on a quarterly sequential basis, reflecting a higher installed gaming machine base and slightly improved consolidated average WUD.
During the second quarter of 2010, Entertainment Gaming Asia increased its total gaming machine seats in operation by 9% to 1,502 seats in a total of seven venues in operation, comprised of six venues in the Philippines with a total of 878 seats and one venue in Cambodia with a total of 624 seats as of June 30, 2010.
The Company’s machine placements at NagaWorld, the Company’s sole venue in operation in Cambodia, have increased dramatically since its first placements in this venue in January 2009. As of August 1, 2010, Entertainment Gaming Asia had a total of 656 gaming machine seats in operation at NagaWorld. The Company expects to reach 670 seats in operation during the month of August, which will fulfill the total number of gaming machine seats under contract. In the Philippines, the Company continues to refine and redeploy its gaming assets in order to focus on higher-performing venues. As of August 1, 2010, Entertainment Gaming Asia had 888 gaming machine seats in operation in six venues in this market.
Consolidated average WUD for the second quarter of 2010 was $115, up 7% from $107 in the first quarter of 2010 and up 21% from $95 in the second quarter last year. The increase was driven by improvement in WUD in both the Cambodia and Philippines markets and the continuously rising percentage contribution from the Company’s machine placements at NagaWorld.
Average WUD for the second quarter of 2010 for Cambodia was $196, up 1% from $194 in the first quarter of 2010. Average WUD for Cambodia continued to post strong gains in July 2010 reaching $227. The improvement in average WUD was despite an increasing gaming machine installed base and the typical ramp up period of new placements.
Average WUD for the second quarter of 2010 for the Philippines was $59, up 5% from $56 in the first quarter of 2010 and up 2% from $58 in the second quarter last year.
Continued Success in Cost Reduction Initiatives
While executing measures to improve average WUD and expand the Company’s installed gaming machine base, Entertainment Gaming Asia continued to focus on strict cost containment and benefit from the successful implementation of its aggressive cost reduction initiatives over the last one and half years. Cash SG&A expense for the second quarter of 2010 was $1.5 million, which was at the low end of the Company’s guidance range of $1.5 to $1.8 million for the quarter and down 24% from $2.0 million in the same period last year.
Q2 2010 Financial Review
Historical revenues and expenses from the Company’s portfolio of automated card verification machines and electronic card shuffling systems, which were sold to Shuffle Master, Inc. in April 2009, have been reclassified as discontinued operations.
Entertainment Gaming Asia’s second quarter of 2010 consolidated revenue was $5.1 million compared to $4.4 million in the first quarter of 2010 and $5.8 million for the second quarter of 2009. Revenue from gaming machines on participation was $3.5 million in the second quarter of 2010 compared to revenue of $2.8 million in the first quarter of 2010 and $1.7 million in the second quarter of 2009. The year-over-year decline in consolidated revenue was driven by the Company’s table game business due to a large gaming chip order delivered during the second quarter of 2009, which was partially offset by strong performance in its gaming machine participation operations and improvement in non-gaming product sales.
Based on the Company’s solid revenue performance and the successful execution of its cost reduction initiatives, Entertainment Gaming Asia posted positive adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) for the second quarter of 2010, marking the fifth consecutive quarter of achieving this important milestone since the Company enacted its new business model in September 2007. Second quarter of 2010 adjusted EBITDA was $1.4 million compared to $1.3 million for the first quarter of 2010 and $1.5 million for the second quarter of 2009.
Entertainment Gaming Asia reported a net loss of $1.5 million for the second quarter of 2010, or $0.01 per share, on a weighted average share count of approximately 115.9 million shares compared to a net loss for the first quarter of 2010 of $1.7 million, or $0.01 per share, on a weighted average share count of approximately 115.0 million shares. This compared to a second quarter of 2009 net loss of $133,000, or $0.00 per share, on a weighted average share count of approximately 115.0 million shares. The second quarter of 2009 net loss included non-recurring items such as net income from discontinued operations of approximately $1.8 million, or $0.02 per share, related to the sale of the shuffler business and a one-time gain of $656,000 related to the settlement of a legacy legal suit.
The second quarter increase in net loss over the net loss in the second quarter last year was primarily due to a substantial decline in table game products revenue and gross profit and the non-recurring items discussed above, which provided a total benefit of $2.4 million, or $0.02 per share, to the second quarter 2009 period. These factors were partially offset by higher gaming participation revenues driven by a higher number of operating gaming machines and improving consolidated average WUD, substantially reduced operating expenses, and lower depreciation expense as a result of impairment charges incurred in the fourth quarter of 2009.
Expanded Gaming Operations
On May 27, 2010, the Company announced its intention to expand its gaming operations to include the ownership and operation of its own casinos under the Dreamworld brand in emerging gaming markets in Pan Asia with a focus on Indo-China. This is an incremental leg to the Company’s gaming growth strategy, which provides the long-term potential for higher returns and greater operational control.
In furtherance of this strategy, in May 2010 the Company was granted a casino license by the Cambodian government and in June 2010 acquired title of over seven acres (30,000 square meters) of land in the Takeo Province of Cambodia strategically located near the Vietnam border upon which to build and operate a casino resort. Total consideration was $1.76 million, which was paid in installments of $850,000 in May and $910,000 in July. Entertainment Gaming Asia has assembled a project management team for its casino development operations and begun conceptual project design discussions with architects.
The Company continues to actively pursue additional casino development projects with a focus on the Indo-China market where it can leverage it existing market presence and relationships and capitalize on the attractive economic and socio-demographic trends in these markets. In the event Entertainment Gaming Asia were to commit to additional and concurrent projects, it could require the Company to reallocate resources and adjust project timelines in order to give priority to the highest potential return project.
Second Half of 2010 Guidance and Future Outlook
The Company has the following expectations for its second half of 2010.
Clarence Chung concluded, “We are excited about our future growth plans. With an improved operating structure, strong cash flow from our core gaming participation business, and enhanced financial flexibility due to the deferment of principal repayments on our outstanding note until July 2011, Entertainment Gaming Asia is rapidly building cash resources which can be deployed for future expansion and we are focused on selectively pursuing gaming projects that offer the potential to maximize the Company’s long-term returns. We aim to leverage our strong market presence, relationships, and the Dreamworld brand name with the goal of becoming the leading regional casino operator in select emerging gaming markets in Asia. We look forward to providing more details to the market as these projects develop.”
Entertainment Gaming Asia is hosting a conference call and simultaneous webcast at 8:30 a.m. ET today, August 5, both of which are open to the general public. The conference call number is 800/908-1487 or 212/231-2926. 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. (NYSE Amex: EGT), formerly known as Elixir Gaming Technologies, Inc., is a leading provider of electronic gaming machines on a participation basis to the Pan-Asian gaming industry. The Company secures long-term contracts to provide electronic gaming machines and related systems to premier hotels and other well-located gaming venues in Asia. The Company retains ownership of the gaming machines and systems and receives recurring daily fees based on an agreed upon percentage of the net gaming win per machine and provides on-site maintenance. Entertainment Gaming Asia Inc. also holds a casino license in Cambodia and intends to build and operate Dreamworld Casino and Resort, a casino hotel in the Takeo Province near the Vietnam border. For more information please visit www.EGT-Group.com.
Forward Looking Statements
This press release contains forward-looking statements concerning Entertainment Gaming Asia, formerly known as Elixir Gaming Technologies, 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 business of Entertainment Gaming Asia, its working capital requirements and future revenue and profitability, the project schedule for its Dreamworld Casino and Resort and Entertainment Gaming Asia’s ability to fund the Dreamworld Casino project. 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 costs incurred by Entertainment Gaming Asia in defending shareholder litigation and the outcome of any judgment or settlement with respect to such litigation, Entertainment Gaming Asia’s inability to place gaming machines at significant levels, whether the gaming machines placed generate the expected amount of net win, Entertainment Gaming Asia’s ability to successfully execute its plans to build and operate a casino hotel, the ability of Entertainment Gaming Asia to acquire additional capital as and when needed, the ability of Entertainment Gaming Asia to collect revenue and protect its assets and those other risks set forth in Entertainment Gaming Asia’s annual report on Form 10-K for the year ended December 31, 2009 filed with the SEC on March 30, 2010 and subsequently filed quarterly reports on Form 10-Q. Entertainment Gaming Asia cautions readers not to place undue reliance on any forward-looking statements. Entertainment Gaming Asia 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.|
|Consolidated Statements of Operations|
Three Months Ended
Six Months Ended
|(amounts in thousands, except per share data)||2010||2009||2010||2009|
|Gaming machine participation||$||3,539||$||1,743||$||6,374||$||2,689|
|Table game products||232||3,191||353||3,269|
|Operating costs and expenses:|
|Cost of gaming machine participation:|
|Write-off of gaming assets||75||—||191||379|
|Other operating costs||206||175||432||515|
|Cost of table game products||173||1,891||263||1,873|
|Cost of non-gaming products||1,320||995||2,721||1,751|
|Selling, general and administrative||1,762||2,075||3,477||4,873|
|Product development expenses||372||75||456||129|
|Depreciation and amortization||229||255||458||565|
|Total operating costs and expenses||6,317||7,980||12,102||15,489|
|Loss from operations||(1,252)||(2,207)||(2,670)||(8,014)|
|Interest expense and finance fees||(84)||(112)||(206)||(248)|
|Foreign currency (loss)/gain||(69)||64||(60)||(63)|
|Legal settlement gain||—||656||—||656|
|Gain/(loss) of disposition of assets||5||(94)||4||(94)|
|Total other (expense)/income||(62)||610||(72)||398|
|Loss before income tax and discontinued operations||(1,314)||(1,597)||(2,742)||(7,616)|
|Income tax expense||(220)||(296)||(455)||(299)|
|Net loss from continuing operations||(1,534)||(1,893)||(3,197)||(7,915)|
|Net profit from discontinued operations, net of tax||—||1,760||—||1,542|
|Loss per share:|
|Loss from continuing operations||$||(0.01)||$||(0.02)||$||(0.03)||$||(0.07)|
|Income from discontinued operations||—||0.02||—||0.01|
|Basic and diluted loss per share||$||(0.01)||$||(0.00)||$||(0.03)||$||(0.06)|
|Weighted average common shares outstanding||115,879||114,957||115,426||114,957|
|Entertainment Gaming Asia Inc.|
|Consolidated Balance Sheets|
|June 30, 2010||December 31, 2009|
|(amounts in thousands, except per share data)||(Unaudited)|
|Cash and cash equivalents||$||6,364||$||4,190|
|Accounts receivable, trade, net||2,003||2,670|
|Due from a related party||7||12|
|Assets held for sale||805||930|
|Prepaid commitment fees||2,082||4,838|
|Deferred tax assets||90||90|
|Prepaid expenses and other current assets||888||770|
|Total current assets||13,209||14,316|
|Accounts receivable, trade, net of current portion||27||106|
|Gaming equipment and systems, net||24,114||26,507|
|Property and equipment, net||4,775||3,322|
|Intangible assets, net||2,823||3,026|
|Contract amendment fees||1,299||688|
|Prepaids, deposits, and other assets||410||408|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Amount due to a related party||15||46|
|Notes payable to a related party, current portion||458||3,128|
|Capital lease obligations, current portion||145||187|
|Customer deposits and other current liabilities||389||78|
|Total current liabilities||4,746||6,889|
|Notes payable to a related party, net of current portion||9,164||6,265|
|Capital lease obligations, net of current portion||328||414|
|Deferred tax liability||1,063||877|
|Common stock, $.001 par value, 300,000,000 shares authorized; 115,879,394 and 114,956,667 shares issued and outstanding||116||115|
|Accumulated other comprehensive losses||(715)||(645)|
|Total stockholders’ equity||30,681||33,408|
|Total liabilities and stockholders’ equity||$||46,741||$||48,457|
|Entertainment Gaming Asia Inc.|
Three Months Ended
Six Months Ended
|(amounts in thousands, except per share data)||2010||2009||2010||2009|
|Net loss – GAAP||$||(1,534)||$||(133)||$||(3,197)||$||(6,373)|
|Income from discontinued operations||—||(1,760)||—||(1,542)|
|Interest expense and finance fees||84||112||206||248|
|Income tax expense||220||296||455||299|
|Depreciation and amortization||2,316||2,745||4,546||5,556|
|Stock option expense||246||244||540||446|
|Write down of gaming assets||75||—||191||379|
|EBITDA/(LBITDA), as adjusted||$||1,382||$||1,478||$||2,703||$||(1,051)|
Adjusted EBITDA/(LBITDA)” is earnings before interest, taxes, depreciation, amortization, stock-based compensation, and other non-cash operating income and expenses. Adjusted EBITDA/(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 EBITDA/(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 EBITDA/(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 EBITDA/(LBITDA) as a supplement to financial measures in accordance with generally accepted accounting principles in the United States (“GAAP”). Adjusted EBITDA/(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 EBITDA/(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 EBITDA/(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, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA/(LBITDA). Entertainment Gaming Asia’s calculation of Adjusted EBITDA/(LBITDA) may be different from the calculation methods used by other companies and, therefore, comparability may be limited.