2013 2nd Quarter Financial Results

By Shara Tamagi

press release generic feature image

Revenue grows 156% on a year-over-year basis

press release generic feature imageMONTREAL, Canada, August 29, 2013 – Amaya Gaming Group Inc. (“Amaya” or the “Corporation”) (TSX.V: AYA), an entertainment solutions provider for the regulated gaming industry, today announced its financial results for the three and six months ended June 30, 2013. All amounts are stated in Canadian dollars unless otherwise noted.

FINANCIAL HIGHLIGHTS

3 and 6 MONTH PERIODS ENDED JUNE 30

Q2 2013

$

Q2 2012

$

YTD 2013

$

YTD 2012

$

Revenues 37,254,390 14,539,518 75,307,637 20,923,556
Adjusted EBITDA 10,169,349 2,086,051 20,433,366 1,553,649
Adjusted EBITDA1 margin (as % of revenue) 27% 14% 27% 7%
Adjusted net earnings (loss)2 (1,175,585) (589,344) 577,050 (282,527)
Basic and diluted adjusted net earnings (loss)2 per share (0.01) (0.01) 0.01 (0.01)

Adjusted EBITDA as defined by the Corporation means earnings before interest and financing costs (net of interest income), income taxes, depreciation and amortization, stock-based compensation, restructuring and other non-recurring costs, and non-controlling interests. Adjusted EBITDA is a non-IFRS measure.

2 Adjusted Net Earnings (loss) as defined by the Corporation means Net earnings before interest accretion, amortization of Intangible assets resulting from purchase price allocation following acquisitions, stock-based compensation, foreign exchange, and other non-recurring costs. Adjusted Net Earnings (loss) is a non-IFRS measure.

Q2 2013 AND SUBSEQUENT HIGHLIGHTS

  • On August 7, 2013, Amaya announced that it had received conditional approval from Toronto Stock Exchange (“TSX”) to graduate from TSX Venture Exchange and list its securities, including its common shares, all common share purchase warrants and unsecured non-convertible subordinated debentures on TSX. Upon its listing on TSX, Amaya’s Common Shares will continue to trade under the symbol “AYA.”
  • On July 11, 2013, Amaya announced that it had closed a private placement of common shares in Amaya at a price of $6.25 per common share for total gross proceeds of approximately $40.0 million (the “Private Placement”). The Private Placement was conducted through a syndicate of underwriters led by Canaccord Genuity Corp. and including Cantor Fitzgerald Canada Corporation, Cormark Securities Inc., BMO Capital Markets, Clarus Securities Inc. and Global Maxfin Capital Inc. The net proceeds from the Private Placement will be used for general corporate purposes and working capital to assist in the implementation of Amaya’s growth strategy and the expansion of its international activities.
  • On June 25, 2013, Cadillac Jack Inc. (“Cadillac Jack”), a wholly owned subsidiary of Amaya, announced that it had entered into an agreement with the California Nations Indian Gaming Association (CNIGA) to become the provider of Wide Area Progressive gaming products to CNIGA’s gaming tribal members.
  • On June 12, 2013, the Corporation entered into a definitive purchase agreement to acquire 100% of the issued and outstanding securities (the “Transaction”) of a private, arms-length company Diamond Game Enterprises (“Diamond Game”) for USD$25 million, subject to customary price adjustments. Diamond Game is a designer and manufacturer of gaming related products for the global casino gaming and lottery industries. Closing of the Transaction will be subject to Amaya receiving all necessary licensing and regulatory approvals and is expected to occur during the fourth quarter of 2013. Concurrently with the execution of the definitive purchase agreement, Amaya agreed to make available to Diamond Game credit facilities of up to USD$2.5 million dollars to support equipment acquisition to fulfill existing contracts by Diamond Game until closing of the Transaction.
  • On May 28, 2013, Amaya announced that its company Cadillac Jack had executed a multi-year agreement with one of its largest customers in Mexico to expand Cadillac Jack’s leased install base by 890 gaming units across 13 locations throughout Mexico.
  • On May 13, 2013, Amaya announced that it had expanded its agreement with mybet to include Amaya’s Ongame Poker Platform and Live Dealer offering on mybet websites.
  • On May 6, 2013, Amaya announced that Cogetech S.p.A had chosen Amaya’s Ongame Poker to power Izipoker.it. Cogetech is one of Italy’s largest sportsbetting company and is both a leading gaming provider for the Italian land-based market as well as an online operator with the site IZIPlay.it, which includes betting, poker, skill games, bingo and casino games.
  • On May 2, 2013, the Corporation announced that it had entered into an MOU with Aristocrat Technologies Inc. (“Aristocrat”) whereby Aristocrat will offer Amaya’s leading Ongame poker platform to Aristocrat’s U.S. customers through its award-winning nLive™ online gaming platform.

“We’re quite pleased with the continued progress we made in the second quarter in our land-based, interactive, and lottery solutions,” said David Baazov, President and Chief Executive Officer of Amaya Gaming Group. “Cadillac Jack’s agreement with one of its largest customers in Mexico for an additional 890 gaming machines will increase our install base of revenue producing units in the country by close to 13% and almost 10% in North America. Additionally, its agreement with CNIGA in California, a state Cadillac Jack has only recently entered, represents a positive step in a very large market. Tribal gaming gross gaming revenues in California and northern Nevada were $7 billion in 2012, more than a quarter of total tribal gaming revenues in the U.S. We anticipate that we will start to see the impact from these agreements in our revenues in the back half of 2013. As well, we have completed most of the integration of Ongame and Cadillac Jack, both of which we acquired in late 2012. This will result in a positive impact on our operating expenses going forward.

“Within our interactive solutions, during the second quarter we continued to prepare ourselves to participate in real money online gaming in the United States including filing our application for a licence in New Jersey, a state which expects to launch regulated online poker and casino gaming late this year,” Mr Baazov added. “Additionally, we are seeing progress from our partnership with SHFL Entertainment, which is the exclusive distributor of our online poker platform, Ongame Network, in the U.S.

“Finally, during the quarter we also announced our acquisition of Diamond Game. We anticipate the company’s lottery technology, on which we can integrate our extensive game library, will increase our lottery footprint in North America while being accretive to our adjusted EBITDA,” concluded Mr. Baazov. “We expect the acquisition to close in the fourth quarter of this year.”

FINANCIAL RESULTS
Revenue for the three month period ended June 30, 2013 was $37.25 million compared to $14.54 million for the three month period ended June 30, 2012, representing an increase of 156%. The increase is primarily attributable to the acquisitions of Ongame Network Limited (“Ongame”) on November 1, 2012 and Cadillac Jack Inc. (“Cadillac Jack”) on November 5, 2012. Revenue for the six month period ended June 30, 2013 was $75.31 million compared to $20.92 million for the six month period ended June 30, 2012, representing an increase of 260%. The increase is primarily attributable to the acquisitions of CryptoLogic Limited (“CryptoLogic”) on April 2, 2012, Ongame and Cadillac Jack. On a regional basis, revenue in 2013 has been primarily concentrated in North America and Europe.

Gross profit, measured as revenue minus the cost of products, represented 98% of total revenues (“gross profit percentage”) for the three months ended June 30, 2013 and 97% for the three month period ended June 30, 2012. Gross profit percentage was 99% for the the six months ended June 30, 2013 and 97% for the six month period ended June 30, 2012. The increase in gross profit percentage for the six month period ended June 30, 2013 is primarily attributable to consolidating CryptoLogic’s software licensing and hosted casino revenue, consolidating Ongame’s software licensing revenue and consolidating Cadillac Jack’s participation agreement revenue.

Total expenses, comprised of sales and marketing, general and administrative, and financial expenses as well as acquisition-related costs, were $17.67 million for the three month period ended June 30, 2012, compared to $44.45 million for the three month period ended June 30, 2013, an increase of 160%. The percentage increase was slighly higher than the year-over-year growth rate in revenue partially due to a negative impact of $(3.28) million from foreign exchange in the second quarter of 2013 versus a positive impact of $0.28 million in the same quarter in 2012. Total expenses for the six month period ended June 30, 2012 were $29.67 million compared to $89.07 million for the six month period ended June 30, 2013, an increase of 200%, significantly less than the year-over-year growth rate in revenue. There was a negative impact of $(3.76) million from foreign exchange in the first six months of 2013 versus a positive impact of $0.09 million in the same period in 2012.

Net loss was $11.44 million, or $0.14 per basic and diluted share, in the second quarter of 2013 versus $2.72 million, or $0.05 per basic and diluted share, in the same quarter of 2012, an increase of 320%. The increase was higher than the growth rate in revenue in the corresponding periods primarily due to the impact from foreign exchange noted above and the Corporation recording a combined $3.53 million provision for current and deferred income taxes in the second quarter of 2013 versus $0.04 million in the same quarter in 2012. Net loss for the six months ended June 30, 2013 was $18.88 million, or $0.22 per basic and diluted share, compared to $7.28 million, or $0.14 per basic and diluted share, in the same period in 2012, an increase of 159%. The Corporation recorded a combined $4.29 million provision in current and deferred income taxes in the first half of 2013 versus a recovery of $1.27 million in the same period in 2012. Despite the negative impact from foreign exchange and income taxes, the year-over-year increase in net loss in the first half of 2013 was significantly below the growth rate in revenue.

Adjusted EBITDA was $10.17 million in the second quarter of 2013, or 27% of total revenue, compared to $2.09 million, or 14% of total revenue, in the second quarter of 2012, and $10.26 million, or 27% of total revenue, in the first quarter of 2013.

Q2 2013 Adjusted EBITDA Reconciliation $

Net Income

-11,441,570

Financial expenses

7,782,676

Current income taxes

3,032,259

Deferred income taxes

500,717

Depreciation of property and equipment

2,932,219

Amortization of deferred development costs

287,806

Amortization of intangible assets

4,317,904

Stock-based compensation

493,778

EBITDA

7,905,789

One-time costs

2,263,560

Adjusted EBITDA

10,169,349

Adjusted Net Income Reconciliation $

Q2 2013

Q2 2012

YTD 2013

YTD 2012

Net Income

-11,441,570

-2,724,440

-18,882,411

-7,282,495

One-time costs

2,263,560

1,025,735

4,918,577

4,642,183

Foreign Exchange

3,281,517

-279,480

3,764,908

-90,157

Amortization of purchase price allocation Intangibles

3,438,313

183,846

6,939,152

1,035,520

Interest Accretion

788,817

1,037,936

2,911,424

1,072,186

Stock-Based Compensation

493,778

167,059

925,400

340,236

Adjusted Net income

-1,175,585

-589,344

577,050

-282,527

2013 SECOND QUARTER FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS
The financial statements, notes to financial statements and Management’s Discussion and Analysis for the three and six months ended June 30, 2013, will be available on the SEDAR website at www.sedar.com.

CONFERENCE CALL
Amaya will host a conference call on Friday, August 30, 2013 at 9:00 a.m. ET to discuss its 2013 second quarter financial results. David Baazov, CEO of Amaya Gaming Group Inc., will chair the call. To participate in the call, please dial 647-427-7450 or 1-888-231-8191 ten minutes prior to the scheduled start of the call. A replay of the conference call will be available until Friday, September 6, 2013 by calling 416-849-0833 or 1-855-859-2056, reference number 36290520. The conference call will be webcast live at http://bit.ly/173CUu8.

ABOUT AMAYA GAMING GROUP INC.
Amaya provides a full suite of gaming products and services including casino, poker, sportsbook, platform, lotteries and slot machines. Some of the world’s largest gaming operators and casinos are powered by Amaya’s online, mobile, and land-based products. Amaya is present in all major gaming markets in the world with offices in North America, Latin America and Europe. Amaya recently acquired Cryptologic, a pioneer within online casino, Ongame, a leader within online poker, and Cadillac Jack, a successful slot machine manufacturer. For more information please visit www.amayagaming.com.

DISCLAIMER IN REGARDS TO FORWARD-LOOKING STATEMENTS
Certain statements included herein, including those that express management’s expectations or estimates of our future performance constitute “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Investors are cautioned not to put undue reliance on forward looking statements. Except as required by law, the Corporation does not intend, and undertakes no obligation, to update any forward-looking statements to reflect, in particular, new information or future events.

“Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.”

For investor or media inquiries, please contact:
Tim Foran
TMX Equicom
Tel: 416-815-0700 ext. 251
NA toll free: 1-800-385-5451 ext. 251
tforan@tmxequicom.com

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