Entertainment Gaming Asia Reports Third Quarter 2012 Results and Provides Market Update

  Entertainment Gaming Asia Reports Third Quarter 2012 Results and Provides
  Market Update

Business Wire

HONG KONG -- November 13, 2012

Entertainment Gaming Asia Inc. (NYSE MKT: EGT) (“Entertainment Gaming Asia” or
“the Company”), a leading gaming company focused on emerging gaming markets in
Pan-Asia, today reported operating results for the third quarter ended
September 30, 2012 and reviewed recent corporate progress.

Highlights:

  *Total consolidated revenue of $7.9 million for the third quarter of 2012
  *Total revenue from gaming operations of $4.5 million for the third quarter
    of 2012
  *Adjusted EBITDA (earnings before interest, taxes, depreciation,
    amortization and non-cash charges) of $2.3 million for the third quarter
    of 2012
  *Net income of $43,000 for the third quarter of 2012
  *Average consolidated win per unit per day (WUD) for the slot operations
    (formerly referred to as the participation business) of $132 for the third
    quarter of 2012
  *Gaming chip and plaque sales of $1.7 million for the third quarter of
    2012, representing 85% of total gaming chip and plaque sales for the full
    year 2011
  *Cash balance of $10.6 million as of September 30, 2012
  *Total debt reduced to $1.6 million as of September 30, 2012
  *Dreamworld Poipet on target to open in the first quarter of 2013
  *Strong pipeline for the Company’s gaming chips and plaques for the fourth
    quarter of 2012 with announced orders totaling $1.9 million from Crown
    Perth in Australia and the new Solaire Resort & Casino in the Philippines

Clarence Chung, Chairman and Chief Executive Officer of Entertainment Gaming
Asia, commented, “We posted top-line growth of 21% for the third quarter of
2012 driven principally by increases in our other products division, namely
gaming chips and plaques. Our gaming chips and plaques business recorded
strong revenue of $1.7 million in the quarter, primarily due to a large order
for an existing customer. Gaming operations benefited from incremental revenue
from our new casino Dreamworld Pailin and improvement for our slot operations
in the Philippines. However, this was partially offset by softness in net wins
per machine for our operations at NagaWorld. In addition, we commenced full
construction of our gaming development project, Dreamworld Poipet, during the
quarter while paying down debt and maintaining a solid cash position of $10.6
million as of September 30, 2012.

“With prime location, quality gaming products and superior customer service,
and targeted marketing efforts, we are dedicated to maintaining strong
performance from our operations at NagaWorld and ramping up our gaming revenue
from Dreamworld Pailin. In addition, we are enthusiastic about the potential
for our gaming chips and plaques with an attractive order pipeline, including
announced orders of $1.9 million in revenue for the fourth quarter. This,
combined with measures in place to enhance profitability, position this
division to be a meaningful contributor to future earnings.

“With quality recurring cash flow from our slot machine operations, the
potential for our casino chips and plaques business and a healthy balance
sheet, we remain focused on the execution our new casino development strategy
and driving long-term growth for the Company.”

Q3 2012 Financial Review

The Company effected a 1:4 reverse stock split of its common shares on June
12, 2012. All historical share amounts and share information presented have
been proportionally adjusted to reflect the impact of this reverse stock
split, including basic and diluted weighted-average shares and shares issued
and outstanding.

Entertainment Gaming Asia’s third quarter of 2012 consolidated revenue was
$7.9 million, an increase of 21% compared to $6.5 million in the third quarter
of 2011. The increase was principally due to growth in the Company’s other
products division.

Revenue from gaming operations was $4.5 million in the third quarter of 2012,
an increase of 2% compared to $4.4 million in the third quarter of 2011. The
increase was attributed to incremental revenue of $340,000 from Dreamworld
Pailin, which opened in May 2012, and improvement in the Company’s slot
operations in the Philippines despite adverse weather conditions. These
results were partially offset by a decline in slot revenue from Cambodia due
to lower average WUD at its operations in NagaWorld during the quarter.

The Company recorded $4.1 million in revenue for its slot operations during
the quarter, a decrease of 5% compared to $4.4 million in the third quarter of
2011. The decline was primarily a result of lower average net wins per machine
for its operations in NagaWorld, which were $216 for the quarter compared to
$233 in the prior year period. Based on its current information and improved
performance for October 2012, we believe that the decline in the third quarter
of 2012 net win from these operations was due to normal fluctuation. The
decrease in gaming revenue for the third quarter of 2012 was partially offset
by improvements in average net wins per machine and revenue sharing for the
Company’s Philippine slot operations as well as incremental revenue
contribution from its new slot operations at Thansur Bokor in Cambodia. The
Company believes that its operations at Thansur Bokor have yet to reach their
potential as the property is not yet fully operational.

Slot Operations
WUD *                                    
                       Q3:12    Q3:11    Y/Y ∆
Cambodia                $175     $233     -25%
Philippines             $74      $68      9%
Consolidated            $132     $145     -9%
EGM Seats in Operation                  
                       9/30/12  9/30/11  Y/Y ∆
Cambodia                839      715      17%
Philippines             581      780      -26%
Consolidated            1,420    1,495    -5%

* Represents WUD for the Company’s slot machine operations. It excludes EGM
seats in operation during venue soft launch opening periods and includes cash
payments for venues for which revenue is recognized on a cash basis. During
the third quarter of 2012, one venue in the Philippines recognized revenue on
a cash basis. Including revenue recognized on an accrual basis from this venue
would not have had a material impact on the WUD for the period. During the
third quarter of 2011, one venue in Cambodia operated during a soft launch and
one venue in the Philippines recognized revenue on a cash basis. Had these
seats been included and revenue recognized on an accrual basis, WUD would have
been $215 for Cambodia, $66 for Philippines and $137 for the consolidated
average for the period.

Revenue from other products was $3.4 million in the third quarter of 2012, an
increase of 60% compared to $2.1 million in the third quarter of 2011. The
increase was a result of higher sales of gaming chips and plaques, which were
$1.7 million for the third quarter of 2012 compared to $241,000 in the prior
year period. The third quarter of 2012 gaming chip and plaque revenue included
a large order for $1.6 million from a prominent long-time customer. Given the
relatively short lead time for this order and inefficiencies related to the
first time utilization of in-house plaque production processes that were
previously outsourced, the Company incurred higher than normal expenses
related to this order. This negatively impacted the gross profit for these
operations for the quarter.

Adjusted EBITDA was $2.3 million for the third quarter of 2012 compared to
$2.8 million for the prior year period. The decrease was primarily a result of
lower slot revenue from the Company’s operations at NagaWorld and higher
gaming division expenses related to the new casino operations, which are still
ramping up.

Entertainment Gaming Asia reported net income of $43,000, or breakeven per
share, on a weighted average diluted share count of approximately 31.1 million
shares for the third quarter of 2012. This compared to net income of $647,000,
or $0.02 per share, on a weighted average diluted share count of approximately
30.0 million shares for the third quarter of 2011. The decrease in net income
was primarily the result of lower slot revenue from the Company’s operations
at NagaWorld and higher gaming division costs partially offset by lower
stock-based compensation and interest expenses and foreign currency gains
compared to losses in the same period of the prior year.

Improving Potential for Gaming Chips and Plaques Operations

Over the last several years, the Company has made a strategic shift in focus
of its other products division toward the manufacture and sale of gaming chips
and plaques. With investment in product development and targeted marketing
programs, the Company has made significant progress in improving the top-line
performance of these operations and further strengthening its existing
customer relationships in its core markets of Australia and Macau and
broadening its customer base in existing and new geographies.

The Company recorded strong gaming chip and plaque revenue of $1.7 million for
the third quarter of 2012, representing approximately 85% of the total annual
gaming chip and plaque sales for 2011. While order flow is expected to remain
lumpy on a quarterly basis, the Company believes the future prospects are
attractive. This pipeline includes announced orders for $1.9 million in
revenue for the fourth quarter of 2012, including $600,000 to complete the
Crown Perth order and $1.3 million to supply the new Solaire Resort & Casino
in the Philippines. Further, the Company believes its expanded market presence
and the growth plans for its existing customer relationships, offers strong
potential for meaningful future orders for this division.

In addition, the Company is focused on enhancing profitability of these
operations. Through continued investment in expanding production capacity and
efficiency, acquired experience and enhanced efficiencies in new in-house
processes and planned cost reduction initiatives, the Company expects to
increase operating efficiencies and automation that will drive long-term
earnings improvement for these operations.

Continuing Efforts to Ramp Up Dreamworld Pailin

In May 2012, the Company opened the mass market floor of its first casino
development project, Dreamworld Pailin. Dreamworld Pailin is located at the
Cambodia-Thailand border on a growing trade route connecting the two
countries. It currently houses 26 popular table games such as baccarat and
dice games and an attractive suite of 50 slot machines. Dreamworld Pailin will
also include VIP facilities, which are not yet open.

The Company has recently improved and expanded its senior operations team at
Dreamworld Pailin and implemented a number of new marketing initiatives to
ramp up operations of the mass market floor. In addition, the Company
continues to actively pursue opportunities to partner with local gaming
promoters for its VIP rooms and expects to open these facilities in the next
several months. By utilizing gaming promoters, it expects to improve high net
worth player traffic in the VIP rooms while minimizing the downside risk and
volatility as the promoters typically share in wins and losses and assume the
credit risk.

Given the early stage of these operations and the fact that the casino is not
yet fully operational, the Company believes that results have not yet
normalized. However, with the recent implementation of broader marketing
programs and upcoming plans to open the casino’s VIP facilities, the Company
expects to establish normalized operating results within the next two to three
quarters.

Dreamworld Poipet Update

The Company continues to make progress in the development of Dreamworld
Poipet, a stand-alone slot hall in the established gaming market of Poipet at
the Cambodia-Thailand border. This $7.5 million project will be constructed as
a stand-alone extension to an existing casino owned by a local Cambodian
company and will house approximately 300 premium quality EGM seats. The
Company and casino owner will share the daily net win generated by the EGMs in
the Company’s slot hall and certain operating costs on a 40%/60% respective
basis.

The Company commenced full construction efforts in August 2012. Based on the
current timeline, the Company remains on target to open Dreamworld Poipet in
the first quarter of 2013, in time for the Thai New Year.

Clarence Chung, Chairman and Chief Executive Officer of Entertainment Gaming
Asia, concluded, “We are focused on the execution of our plans to develop and
operate regional casinos and gaming venues under our Dreamworld brand in the
Indo-China region. We are pleased to have our first project, Dreamworld
Pailin, open and are implementing marketing programs to improve operating
performance. In addition, the development of our next project, Dreamworld
Poipet, in the more established gaming market of Poipet is moving at a steady
pace. With our focus on professional management, quality gaming products, and
superior customer service, we believe our Dreamworld properties will be
quality leaders in their respective markets and will be meaningful
contributors to the Company’s long-term growth.”

Entertainment Gaming Asia is hosting a conference call and simultaneous
webcast at 8:30 a.m. ET today, November 13, 2012, both of which are open to
the general public. The conference call number is 800/734-8592 or
212/231-2923. 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 MKT: EGT) is a leadinggaming company in
Pan-Asia engaged inthe development and operation of casinos and gaming venues
in the Indo-China region under its “Dreamworld” brand as well as the leasing
of electronic gaming machines on a revenue sharing basis to the gaming
industry. The Company also manufactures and sells RFID and traditional gaming
chips and plaques to major casinos through its wholly-owned subsidiary Dolphin
Products in Australia. For more information please visit www.EGT-Group.com.

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 slot operations business model, the
timeline and working capital requirements for the Poipet gaming project, the
earnings of the Thansur Bokor, Pailin and Poipet gaming projects, growth of
the gaming industry in the Indo-China region, the Company’s ability to secure
new casino and gaming projects and fund those projects and the prospects for
the expanded customer base for the Company’s Dolphin gaming chips and plaques.
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 Entertainment
Gaming Asia’s ability to place gaming machines at significant levels and
generate the expected amount of net win from the gaming machines placed,
obtain the gaming license and building permits for the casino projects on a
timely basis or at all, complete construction and development of the casino
and gaming projects on budget and in a timely manner, identify and implement
successful marketing and promotional strategies at each of the Company’s
casino projects and identify and successfully develop additional such projects
in the Indo-China region, acquire additional capital as and when needed,
adverse weather conditions that cause delays to casino and gaming projects
timelines, obtain and fulfill significant purchase orders from the new
customers for the Company’s gaming chips and plaques and those other risks set
forth in Entertainment Gaming Asia’s annual report on Form 10-K for the year
ended December 31, 2011 filed with the SEC on March 30, 2012 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.

Entertainment Gaming Asia Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
                                                   
                             Three-Month Periods         Nine-Month Periods
                             Ended September 30,         Ended September 30,
(amounts in thousands,       2012        2011           2012         2011
except per share data)
Revenues:                                                         
Gaming, gross              $ 4,480      $ 4,379        $ 14,634     $ 13,097
Less: Promotional            —           —             —           —      
allowances
Gaming, net                  4,480        4,379          14,634       13,097
Other products               3,371       2,113         7,904       6,348  
Total revenues               7,851        6,492          22,538       19,445
                                                                      
Operating costs and
expenses:
Cost of gaming:
Gaming equipment             1,228        1,253          3,516        3,641
depreciation
Casino contract              617          616            1,847        1,841
amortization
Other gaming related         63           —              189          —
intangibles amortization
Other operating costs        1,051        240            2,526        809
Cost of other products       3,101        1,922          7,359        5,584
Selling, general and         1,491        1,492          4,712        3,860
administrative expenses
Stock-based compensation     123          215            675          1,237
expenses
(Gain)/loss on               (2     )     —              (31    )     152
dispositions
Impairment of assets         42           —              114          —
Product development          87           89             273          302
expenses
Depreciation and             77          27            168         86     
amortization
Total operating costs        7,878       5,854         21,348      17,512 
and expenses
                                                                      
(Loss)/income from           (27    )     638            1,190        1,933
operations
                                                                      
Other income/(expense):
Interest expense and         (20    )     (105   )       (109   )     (305   )
finance fees
Interest income              4            20             32           61
Foreign currency             55           (42    )       269          (66    )
gains/(losses)
Other income                 65          65            241         192    
Total other                  104         (62    )       433         (118   )
income/(expense)
                                                                      
Income before income tax     77           576            1,623        1,815
                                                                      
Income tax                   (34    )     71            (124   )     (169   )
(expense)/benefit
                                                                      
Net income                 $ 43        $ 647         $ 1,499     $ 1,646  
                                                                      
Basic and diluted          $ —         $ 0.02         $ 0.05       $ 0.06
earnings per share
                                                                      
Weighted average common
shares outstanding
Basic                        29,926       29,688         29,915       29,350
Diluted                      31,129       29,982         30,793       29,631
Other comprehensive
income, net of tax
Foreign currency             87          (214   )       167         (64    )
translation adjustments
Comprehensive income       $ 130        $ 433          $ 1,666      $ 1,582
Less: Comprehensive
income attributable to
non controlling interest     —           —             —           —      


Comprehensive income
attributable to EGT        $ 130       $ 433         $ 1,666     $ 1,582  
stockholders
                                                                             

Entertainment Gaming Asia Inc.
Consolidated Balance Sheets
                                                              
                                                September 30,     December 31,
                                                2012              2011
(amounts in thousands, except per share data)   (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents                     $ 10,630          $ 12,759
Accounts receivable, net                        2,360             2,691
Other receivables                               189               114
Inventories                                     2,123             1,894
Prepaid expenses and other current assets       719               841
Total current assets                            16,021            18,299
                                                                  
Gaming equipment, net                           7,160             8,889
Casino contracts                                8,575             10,340
Property and equipment, net                     5,101             2,558
Goodwill                                        357               357
Intangible assets, net                          1,273             1,227
Contract amendment fees                         369               450
Deferred tax assets                             93                91
Prepaids, deposits and other assets             3,145             1,893
Total assets                                  $ 42,094          $ 44,104
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                              $ 1,568           $ 1,316
Amount due to a related party                   —                 14
Accrued expenses                                1,998             2,228
Income tax payable                              31                68
Notes payable to a related party                1,582             6,211
Capital lease obligations                       —                 322
Customer deposits and other current             706               357
liabilities
Total current liabilities                       5,885             10,516
                                                                  
Other liabilities                               1,087             869
Deferred tax liability                          208               207
Total liabilities                               7,180             11,592
                                                                  
Stockholders’ equity:
Common stock, $.001 par value, 75,000,000
shares authorized; 29,937,162 and 29,709,848    30                30
shares issued and outstanding, respectively
Additional paid-in-capital                      32,016            31,280
Accumulated other comprehensive income          726               559
Retained earnings since January 1, 2011
($386.1 million accumulated deficit             2,141             642
eliminated upon quasi-reorganization)
Total EGT stockholders’ equity                  34,913            32,511
Non-controlling interest                        1                 1
Total EGT stockholders’ equity                  34,914            32,512
Total liabilities and stockholders’ equity    $ 42,094          $ 44,104
                                                                  

Entertainment Gaming Asia Inc.
Adjusted EBITDA
(Unaudited)
                               
                                   Three-Month Periods     Nine-Month Periods
                                   Ended September 30,     Ended September 30,
(amounts in thousands)             2012       2011       2012       2011
Net income – GAAP basis          $ 43        $ 647       $ 1,499     $ 1,646
Interest expense and finance       20          105         109         305
fees
Interest income                    (4    )     (20   )     (32   )     (61   )
Income tax expense/(benefit)       34          (71   )     124         169
Depreciation and amortization      2,052       1,958       5,884       5,737
Stock-based compensation           123         215         675         1,237
expenses
Impairment of assets               42          —           114         —
(Gain)/loss on dispositions        (2    )     —          (31   )     152   
EBITDA, as adjusted              $ 2,308    $ 2,834    $ 8,342    $ 9,185 

Adjusted EBITDA is earnings before interest, taxes, depreciation,
amortization, stock-based compensation, and other non-cash operating income
and expenses. Adjusted EBITDA 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 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 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 as a supplement to financial
measures in accordance with generally accepted accounting principles in the
United States (“GAAP”). Adjusted EBITDA should not be considered as an
alternative to operating income/(loss) 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 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 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. Entertainment Gaming
Asia’s calculation of Adjusted EBITDA may be different from the calculation
methods used by other companies and, therefore, comparability may be limited.

Contact:

Entertainment Gaming Asia Inc.
Traci Mangini, 312-867-0848
tracimangini@EGT-Group.com
 
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