DEQ Reports Revenue of $2.5 Million for the 2016 First Quarter

LAS VEGAS, NV and LEVIS, QC, April 29, 2016 /CNW Telbec/ - DEQ Systems Corp. (TSXV: DEQ) ("DEQ" or the "Company") announced today the filing of its first quarter financial results for the period ended February 29, 2016. The consolidated financial statements are available on SEDAR (www.sedar.com) and DEQ's website and should be read in conjunction with this press release. A conference call will be held on Monday, May 2, 2016 at 4:30pm EDT to present and discuss these results. Those interested in participating should dial toll free 1 [phone] or 1 [phone]. Please note that the conference call replay will be available until May 16, 2016 by dialing 1 [phone] or 1 [phone]. The conference ID # for the replay is 3068213.

2016 FIRST QUARTER RESULTS AND HIGHLIGHTS:

Financial Metrics

• Revenue
  • 17% increase in total revenue to $2,479,000 in Q1-2016 as compared to $2,122,000 in Q1-2015.
  • 15% increase in table systems to $1,577,000 in Q1-2016 as compared to $1,377,000 in Q1-2015.
  • 44% increase in proprietary table games to $873,000 in Q1-2016 as compared to $606,000 in Q1-2015.
  • Gross profit of $2,063,000 in Q1-2016, was up from $1,809,000 in Q1-2015, an increase of 14%.

• Operating Expenses
  • Operating and administrative expenses increased by 5%, to $2,042,000 in Q1-2016 from $1,946,000 in Q1-2015. This increase is substantially comprised of higher costs related to licensing and compliance, legal and consulting, incremental audit fees, increase in salaries for new personnel, and incremental reserves related to potential sales and/or use tax exposure. These increases were mostly offset by lower amortization expense relative to the expiration of amortization associated with the Company's purchase of distribution rights in 2008.
  • Research and development expenses were essentially flat in Q1-2016 compared to Q1-2015. The quarter-over-quarter expense is consistent with the Company's efforts to expand and enhance its products. 

• EBITDA
  • DEQ recorded an EBITDA loss of $137,000 in Q1-2016 compared to EBITDA of $199,000 in Q1-2015.
  • Q1-2016 EBITDA was impacted by $578,000 of higher Operating and R&D expenses, offset by a higher gross profit of $254,000.  The increase in expenses was primarily attributed to additional sales and corporate personnel, higher professional and audit fees, and other administrative costs as follows:
    • $190,000 personnel cost;
    • $120,000 professional, consulting and audit fees;
    • $77,000 of incremental legal, licensing and compliance fees, related to DEQ's corporate and organizational restructuring;
    • $58,000 associated with a reserve for potential sales and/or use tax related to uncollected sales and/or use tax on lease equipment revenue in certain jurisdictions; and
    • $80,000 increase travel and other expenses.

• Liquidity and Cash Flow
  • During Q1-2016 DEQ's reported cash position, after effects of foreign currency translation, decreased by $973,000, from $2,550,000 to $1,577,000. This reduction is primarily attributed to $267,000 used in operating activities, fluctuations in the Company's working capital (higher accounts receivable and prepaid expenses of $631,000 and lower accounts payable of $44,000), net investment in fixed assets deployed of $57,000 and costs associated with the Company's office relocation of $86,000.  Further, as a result of currency translation, cash was favorably impacted by $116,000.

• Operational Highlights
  • As of Q1-2016, DEQ had 2,295 installed products worldwide – directly and through global distribution partners. This compares to 2,251 installed products as of Q1-2015.

"During the quarter, we continued our planned investments in jurisdictional and product licenses, sales, marketing personnel and additional infrastructure to grow our company. Our ability to maintain and upgrade our installed base is dependent on these additional investments. We are very focused on maintaining our existing market placements and opening new markets, while balancing the additional costs to achieve this growth. We have a solid plan for growth, and our continued investment into DEQ's premium brand recognition positions us well in this competitive marketplace," stated Joe Bertolone, President and Chief Executive Officer of DEQ.

EBITDA*
	Three-Month Period
	February 29, 2016		February 28, 2015
	(unaudited)		(unaudited)
Net Income (Loss)	(477,000)		(154,000)
Add/(Subtract):
Interest Expense	3,000		2,000
Foreign Exchange Loss (Gain)	170,000		(309,000)
Depreciation & Amortization	160,000		652,000
Stock-Based Compensation	7,000		8,000
EBITDA*	(137,000)		199,000

 

*Note:

DEQ uses an adjusted calculation of EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization and stock based compensation and foreign exchange impact), a non-IFRS measure, to evaluate the Company's operating performance. Securities regulators require that issuers caution readers that measures adjusted to a basis other than IFRS do not have standardized meaning under IFRS and are unlikely to be comparable to similar measures used by other companies.

 

Statement of Earnings
	First Quarter
	February 29, 2016		February 28, 2015
	(unaudited)		(unaudited)
Table Systems	1,577,000		1,377,000
Proprietary Table Games	873,000		606,000
Total recurring revenue	2,450,000		1,983,000
Non recurring revenue	29,000		139,000
Total Revenue	2,479,000		2,122,000
Gross Profit	2,063,000		1,809,000
% Gross margin	83%		85%
Operating & Administrative expenses	2,042,000		1,946,000
Research & Development expenses	325,000		324,000
Operating Income (Loss)	(304,000)		(461,000)
FX & other expenses (revenue)	173,000		(307,000)
Net Income (Loss)	(477,000)		(154,000)
Net Income (Loss) per share	$(0.007)		$(0.002)
Financial Position
	Feb. 29, 2016		Nov. 30, 2015
	(unaudited)		(audited)
Cash and cash equivalents	1,577,000		2,550,000
Current assets (other than cash)	2,348,000		1,716,000
Long-term assets	3,327,000		3,302,000
Total Assets	$7,252,000		$7,568,000
Current liabilities	1,957,000		2,001,000
Shareholders' equity	5,295,000		5,567,000
Total Liabilities and Equity	$7,252,000		$7,568,000
Number of shares outstanding	71,682,000		71,682,000

 

ABOUT DEQ

DEQ Systems Corp. (TSXV: DEQ) is one of the market leaders in Table Game Systems, Proprietary Table Games, and Utility solutions. DEQ's systems and games are installed in over 300 casinos, in 30 countries around the world. The combination of our services, industry leading products and revenue generation capabilities make DEQ a leader for innovation in the table game bonusing segment of the global gaming market. For further information, please visit www.deq.com.

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TSX Venture does not accept any responsibility regarding the accuracy of the information contained in this press release.

Forward-looking statements contained in this Press Release involve known and unknown risks, uncertainties and other factors that may cause actual results, performance and achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the said forward-looking statements.

 

SOURCE DEQ SYSTEMS CORP.

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