DEQ Systems Corp.
TSX VENTURE : DEQ

DEQ Systems Corp.

February 27, 2014 16:01 ET

DEQ Reports Record Revenue of $7.0 Million and EBITDA of $605,000 for the Year Ended November 30, 2013

LEVIS, QUEBEC--(Marketwired - Feb. 27, 2014) - DEQ Systems Corp. (TSX VENTURE:DEQ) ("DEQ" or the "Company") announced today the filing of its annual financial results for the fiscal year ended November 30, 2013. The Consolidated Financial Statements are available on SEDAR (www.sedar.com) and DEQ's website. A conference call will be held on Friday, February 28, 2014 at 11am EST to present and discuss these results. Those interested in participating should dial toll free 1 (877) 223-4471 or (647) 788-4922. A PowerPoint presentation will be available on DEQ's website in the Investors/Financial Reports/Presentation section to support the call content.

2013 ANNUAL RESULTS AND FOURTH QUARTER HIGHLIGHTS:

Financial Metrics

  • Revenue
    • 25% increase in total revenue to $7,004,000 in 2013 as compared to $5,605,000 in 2012.
    • 32% increase in product rental revenue to $5,481,000 in 2013 from $4,149,000 in 2012.
    • 56% compound annual growth rate of product rental revenue over the last three years.
    • For the fourth quarter 2013, DEQ recorded total revenue of $1,927,000, a 19% increase compared to $1,617,000 in the fourth quarter 2012.
  • Operating Expenses
    • Operating expenses before non-cash items were stable, increasing 2%, to $5,375,000 from $5,290,000 in 2012. DEQ expects its operating costs to remain relatively stable for 2014 due to economies of scale and efficiency gains.
    • For the fourth quarter 2013, DEQ recorded operating expenses of $1,320,000, a 12% decrease compared to $1,495,000 in fourth quarter 2012, as a result of cost containment initiatives.
  • EBITDA
    • DEQ recorded positive EBITDA of $605,000 in 2013 compared to $(496,000) in 2012.
    • For the fourth quarter 2013, DEQ recorded EBITDA of $328,000 compared to $(205,000) in the fourth quarter 2012.
  • Liquidity and Cash Flow
    • During fiscal year 2013, DEQ's cash position increased by $815,000 due to positive cash flow from operating activities of $266,000 and share issuance of $1,000,000, partially offset by investment activities in leased equipment and intangible assets of $483,000 which funded DEQ's continued growth.
    • DEQ had a cash position of $1,565,000 as of November 30, 2013.

Operational Highlights

  • Product Installations
    • In 2013 DEQ increased its net installation base by 332 units (67 units during the fourth quarter 2013) at an average lease price of $3,500 per annum, representing an increase of approximately $1,162,000 of new recurring revenue per year.
    • As of November 30, 2013, DEQ had 1,677 directly installed products worldwide and 380 products installed through distributors worldwide for a total installed base of 2,057 products worldwide.

"DEQ delivered excellent financial results in 2013 with a 25% increase in revenue and a 32% increase in product rental revenue," stated François Proulx, Interim Chief Executive Officer and Chief Financial Officer of DEQ. "The Company also reached a turning point by achieving positive EBITDA resulting from management's diligent efforts to control spending and create profitable growth. We will pursue the same goal in 2014 and focus on operational efficiencies while continuing to grow our installed base. With more than 2,050 units currently in operation worldwide, generating an estimated $7 million in annual recurring revenue, we are very encouraged with the pace of our enhanced roll-out strategy. We continue to target robust market opportunities and we are very confident in the potential growth of all of our product lines in 2014."

Statement of Earnings
Fourth Quarter Twelve-Month Period
November 30,
2012
November 30,
2013
November 30,
2012
November 30,
2013
(unaudited) (unaudited) (audited) (audited)
Product rental 1,095,000 1,500,000 4,150,000 5,481,000
Royalties (1) 283,000 302,000 1,157,000 1,170,000
Total recurring revenue 1,378,000 1,802,000 5,307,000 6,651,000
Non recurring revenue 239,000 125,000 298,000 353,000
Total Revenue 1,617,000 1,927,000 5,605,000 7,004,000
Gross Profit (2) 1,290,000 1,648,000 4,794,000 5,980,000
% Gross margin 80 % 86 % 86 % 85 %
Operating expenses (2) 1,495,000 1,320,000 5,290,000 5,375,000
EBITDA (3) (205,000 ) 328,000 (496,000 ) 605,000
Stock based compensation (16,000 ) 7,000 50,000 160,000
Amortization expenses 624,000 708,000 2,727,000 2,791,000
Interest expenses 4,000 3,000 13,000 15,000
Foreign exchange (gain) loss 23,000 7,000 50,000 7,000
Net Income (Loss) (840,000 ) (397,000 ) (3,336,000 ) (2,368,000 )
Net Income (Loss ) per share $ (0.012 ) $ (0.006 ) $ (0.048 ) $ (0.034 )
Note 1: DEK International - Distributor located in Panama that covers mostly South America territories.
Note 2: Gross profit and operating expenses excluded non-cash items such as depreciation, amortization and stock-based compensation.
Note 3: DEQ uses EBITDA (Earnings before stock based compensation, Interest, Taxes, Depreciation and Amortization 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.
Financial Position
Nov. 30, 2012 Nov. 30, 2013
(Audited) (Audited)
Cash and cash equivalents 751,000 1,565,000
Current assets (other than cash) 1,883,000 2,175,000
Long-term assets 8,884,000 6,576,000
Total Assets $ 11,518,000 $ 10,316,000
Current liabilities 1,278,000 1,244,000
Shareholders' equity 10,240,000 9,072,000
Total Liabilities and Equity $ 11,518,000 $ 10,316,000
Number of shares outstanding 69,182,000 71,682,000

ABOUT DEQ

DEQ Systems Corp. (TSX VENTURE:DEQ) is a customer-centric company that delivers best of breed table game technology related products to the global gaming industry that adds value and increases client revenue. DEQ provides table game bonusing technology, table games, table game results tracking and jackpot connectivity solutions to more than 275 casinos in 30 countries. DEQ is an intellectual property focused company that has an extensive patent portfolio of more than 20 patents recognized in 50 countries. For further information, please visit www.deq.com.

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.

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