Entertainment Gaming Asia Inc. (NASDAQ:EGT) a gaming company focused on growing markets in Pan-Asia, today reported operating results for the third quarter ended September 30, 2016 and reviewed recent corporate progress.
Key Financial Metrics
| · | Consolidated revenue of $690,000 for the third quarter of 2016 |
| · | Adjusted LBITDA (loss from continuing operations before interest, taxes, depreciation, amortization, gains on disposals and non-cash charges) of $1.4 million for the third quarter of 2016 |
| · | Net loss from continuing operations of $122,000 for the third quarter of 2016 |
| · | Cash balance of $35.0 million and zero debt as of September 30, 2016 |
Third Quarter of 2016 Financial Performance
The Company’s third quarter of 2016 consolidated revenue was $690,000 compared to $4.5 million in the third quarter of 2015. The decrease was primarily due to the expiration of the Company’s electronic gaming machine, or EGM, participation agreement with NagaWorld on February 29, 2016.
Selling, general and administrative (SG&A) and research and development (R&D) expenses totaled $1.5 million for the third quarter of 2016 compared to $1.1 million in the prior year period. The increase primarily related to the new social gaming operations.
Operating expenses, excluding capitalized costs, for social gaming were $561,000 in the third quarter of 2016 compared to $94,000 in the second quarter of 2016 and $9,000 in the prior year period. In accordance with relevant accounting standards for software development, the Company ceased to capitalize software development costs and began to expense all social gaming costs and amortize the previously capitalized costs following the initial market test of the platform in mid-August 2016. Total combined operating expenses and capitalized costs related to the social gaming platform were $980,000 in the third quarter of 2016 compared to $817,000 in the second quarter of 2016 and $9,000 in the prior year period. The sequential increase was primarily due to higher salaries due to increased head count and higher technology and marketing expenses associated with the initial test launch.
The Company reported adjusted LBITDA from continuing operations of $1.4 million in the third quarter of 2016 compared to adjusted EBITDA of $2.4 million in the third quarter of 2015.
The Company reported a net loss from continuing operations of $122,000, or $0.01 per share, for the third quarter of 2016 compared to net income from continuing operations of $797,000, or $0.06 per share, for the third quarter of 2015. The weighted average diluted share count was 14.5 million shares for both periods. The decline in net income from continuing operations in the third quarter of 2016 was primarily due to lower gaming operations revenue and higher operating expenses related to the new social gaming operations. This was partially offset by lower depreciation and amortization expenses related to the gaming operations and a $1.6 million gain on the disposition of a total of 824 of the Company’s EGM seats that had been placed in NagaWorld in Cambodia and Leisure World VIP Slot Club in the Philippines in the third quarter of 2016.
The Company reported a net loss from the discontinued gaming products operations of $622,000, or $0.04 per share, in the third quarter of 2016, which primarily related to factory lease payments and the lease termination in September 2016. This compared to net income from discontinued operations of $649,000, or $0.04 per share, in the third quarter of 2015.
Clarence Chung, Chairman and Chief Executive Officer of Entertainment Gaming Asia, commented, “We continue our efforts to refine our business operations and position ourselves for new opportunities. Following the disposition of our gaming products assets in May 2016 for cash proceeds of $5.9 million and our EGMs in NagaWorld and Leisure World in July 2016 for cash proceeds of $3.3 million, we sold all 71 EGMs seats in Thansur Bokor in October 2016 for cash proceeds of $250,000. While our reduced base of operations will have a negative impact on our near-term earnings, these transactions provide us a total of approximately $9.4 million in cash proceeds, excluding $765,000 in expense reimbursements for severance costs and factory lease payments 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 $7.3 million of the sale proceeds and have cash resources of approximately $35 million which, we believe, enhances our ability to pursue and execute on new projects.
“We are actively pursuing projects that we believe will provide long-term growth potential for the Company. These potential projects are in new businesses, such as the film and related businesses, for the Company and would provide us a new strategic direction. We are eager to share more information on these potential opportunities should they become more definitive in nature.
“In addition, we continue our efforts to develop a free-to-play, mobile, social games platform for the Pan-Asian market. We are testing the platform in certain markets to assess its potential as a provider to long-term earnings.”
Entertainment Gaming Asia is hosting a conference call and simultaneous webcast at 8:30 a.m. ET today, November 10, 2016, both of which are open to the general public. The conference call number is 800/926-9795 or 212/231-2935. 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 engaged in the leasing of electronic gaming machines to the gaming industry in Cambodia and the Philippines. The Company is also developing a free-to-play online social gaming platform for certain Asian markets.
