Entertainment Gaming Asia Inc. Reports First Quarter 2017 Results
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 first quarter ended March 31, 2017.
Key Financial Metrics
- Consolidated revenue from continuing operations of $416,000 for the first quarter of 2017
- Net loss from continuing operations of $2.0 million for the first quarter of 2017
- Cash balance of $31.7 million and zero debt as of March 31, 2017
Financial Performance
The Company’s first quarter of 2017 consolidated revenue from continuing operations was $416,000, a decrease of 31% compared to $604,000 in the first quarter of 2016. First quarter of 2017 consolidated revenue comprised $379,000 from the Philippines gaming operations and $37,000 from the commercial testing of the social gaming application, City of Games, which commenced in August 2016. The year-on-year decline in consolidated revenue was primarily due to a reduced operating base of electronic gaming machines (EGMs) for the Philippines gaming operations 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.
Selling, general and administrative (SG&A) and research and development (R&D) expenses totaled $2.0 million for the first quarter of 2017 compared to $1.2 million in the prior year period. The increase primarily related to the ramping up of the social gaming operations, which comprised $1.3 million in combined SG&A and R&D expenses for the first quarter of 2017 compared to $399,000 in the first quarter of 2016.
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 cumulative combined cash operating expenses and capitalized costs related to the social gaming operations were $1.4 million for the first quarter of 2017 and $5.4 million since inception of the social gaming operations in the second half of 2015.
The Company reported adjusted LBITDA (losses before interest, taxes, depreciation, amortization, stock-based compensation and other non-cash operating income and expenses) from continuing operations of $1.8 million in the first quarter of 2017 compared to LBITDA of $649,000 in the first quarter of 2016.
Net loss from continuing operations was $2.0 million, or $0.14 per share, for the first quarter of 2017 compared to a loss of $1.1 million, or $0.07 per share, for the first quarter of 2016. The weighted average number of share count (basic and diluted) was 14.5 million shares for both periods. The increase in net loss from continuing operations was primarily due to lower gaming operations revenue and higher operating costs and expenses mainly related to the social gaming operations. This was partially offset by lower depreciation and amortization expenses related to the gaming operations.
The Company reported a net loss of $2.0 million for the first quarter of 2017 compared to a loss of $1.5 million for the first quarter of 2016. The first quarter of 2017 results included a net loss of $48,000 from the discontinued gaming products and Cambodia gaming operations compared to a net loss of $411,000 in the prior year period.
The Company’s cash position as of March 31, 2017 was $31.7 million, a decline of $1.9 million compared to $33.6 million as of December 31, 2016 principally due to the negative operating cash flow from the social gaming operations and corporate overhead expenses.
Philippines Operations
On May 3, 2017, the Company entered into a non-binding memorandum of understanding to sell its remaining operating assets in the Philippines for cash consideration of approximately $1.9 million, which would provide the Company an estimated pre-tax gain on disposal of approximately $1.3 million. Subject to final contract negotiations and due diligence, the sale is expected to close within the second quarter of 2017. However, there can be no assurance that the Company can conclude the sale for the aforementioned terms, if at all.
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.
