The Intertain Group Limited
TSX : IT
OTCQX : ITTNF

The Intertain Group Limited

March 09, 2016 16:31 ET

Intertain Announces Fourth Quarter and Fiscal 2015 Financial Results, Commencement of Review to Enhance Shareholder Value, and Board Renewal

Surpasses Latest 2015 Guidance Across All Metrics; $42.5 Million in Operating Cash Flows Generated in Q4

TORONTO, ONTARIO--(Marketwired - March 9, 2016) - The Intertain Group Limited ("Intertain" or the "Company") (TSX:IT)(OTCQX:ITTNF) today announced its financial results for the three month period and year ended December 31, 2015. All amounts are stated in Canadian dollars unless otherwise noted.

Q4 and Subsequent Financial and Corporate Highlights

  • Increased Guidance Surpassed and Strong Q4 Operating Results Across All Metrics
    • Full year total revenue of $384.5 million vs previously stated guidance of $365 million to $375 million.
    • Full year Adjusted Net Income(1) of $111.6 million vs previously stated guidance of $104 million to $109 million.
    • Full year Diluted Adjusted Net Income per share(1) of $1.72 vs previously stated guidance of $1.60 to $1.67.
    • For the Q4 period, the Company generated $43.2 million of Adjusted Net Income,(1) $0.59 of Diluted Adjusted Net Income per share(1) and $42.5 million of operating cash flow.(2)
  • Increased Q4 Revenue Year Over Year
    • Jackpotjoy generated revenues of $90.7 million in Q4 2014, representing 20% growth year over year on a constant currency basis.
    • Vera&John generated revenues of $22.7 million in Q4 2014, representing 45% growth year over year on a constant currency basis.
    • Mandalay generated revenues of $11.7 million in Q4 2014, representing 7% growth year over year on a constant currency basis.
  • Implemented a Cross Currency Swap
    • Intertain entered into a cross currency swap agreement (the "Currency Swap") on November 23, 2015, whereby 90% of the Company's USD term facility's interest and principal payments will be swapped into GBP.
    • As of December 31, 2015, the Company recognized an unrealized gain on the Currency Swap of $9.7 million. The Currency Swap terminates on March 31, 2017.
(1) Net loss and diluted net loss per share for the year ended December 31, 2015 was $(226.9) million and $(3.71), respectively, and for the three months ended December 31, 2015 was $(134.4) million and $(1.92), respectively. This release contains non-IFRS financial measures, which are noted where used. For additional details, including with respect to the reconciliations from these non-IFRS financial measures, refer to the information under the heading "Adjusted EBITDA and Adjusted Net Income for the Three Months and Year Ended December 31, 2014 and 2015" on pages 3 - 4 of this release.
(2) Does not include $4.4 million from Amaya Inc. relating to Q3 2015 that was received subsequent to the year end.

Intertain Dedicated to Enhancing Shareholder Value

Intertain's Board of Directors (the "Board") believes that the Company's share price is misaligned with its fundamental business results. The Board has therefore initiated a process to identify, examine and consider a range of strategic options available to the Company, with the objective of delivering shareholder value. A Special Committee of three directors, David Danziger, John Fielding and Paul Pathak, has been appointed to lead this process. The Special Committee has retained Canaccord Genuity as its financial advisor and Osler, Hoskin & Harcourt LLP as its legal advisor.

The Company has received many expressions of interest in acquiring all or material parts of its business. The Special Committee will consider a broad range of alternatives, including strategic transactions providing for a sale of the Company, one or more business units or partial offers and recapitalizations. Canaccord Genuity has a mandate to continue discussions with current interested parties and to contact a wide range of parties who could have interest in exploring value-creating alternatives.

"As a company, we have delivered quarter after quarter," said John Kennedy FitzGerald, President and CEO of Intertain. "Business results continue to show growing value from the assets that have been acquired. Q4 again demonstrates the quality and performance of Intertain's business segments, and proves that the fundamentals of our business are strong and our prospects are very encouraging. The results show that our business is sound, that our customer base is stable and growing, and that our market position is unchanged - we are the largest online bingo-led operator in the world."

2016 Full Year Financial Guidance

The following represents forward-looking information and users are cautioned that actual results may vary.

  • Total revenue of $460 million to $500 million.(3)
  • Total Adjusted EBITDA(1) of $175 million to $195 million.(3)
  • Total Adjusted Net Income(1) of $140 million to $160 million.(3)
  • Diluted Adjusted Net Income Per Share(1) of $1.87 to $2.13.(3) Assumptions include:
    • Estimated diluted weighted average shares outstanding is 74.9 million shares.
(3) USD/CAD exchange rate of 1.33, GBP/CAD exchange rate of 1.90, and EUR/CAD exchange rate of 1.46 as at 6 p.m. EST on March 7, 2016.
Adjusted EBITDA and Adjusted Net Income for the Three Months and Year Ended December 31, 2014 and 2015(4)
3 month period ended Dec 31 2015
($000's)
3 month period ended Dec 31 2014
($000's)
Year ended 2015
($000's)
Year ended 2014
($000's)
Total revenue and other income 136,954 18,281 384,465 40,766
Net income (loss) for the period (134,398 ) (12,286 ) (226,873 ) (26,068 )
Interest expense, net 15,782 5,088 47,481 7,937
Taxes 806 90 1,084 382
Amortization 29,266 4,187 100,320 14,831
EBITDA (88,544 ) (2,921 ) (77,988 ) (2,918 )
Share-based compensation 816 254 5,624 1,117
Debt settlement expense - - 5,692 -
Fair value adjustments for contingent consideration(5) 113,937 3,381 120,779 3,381
Goodwill impairment(6) 36,670 - 36,670 -
Gain on cross currency swap (9,661 ) - (9,661 ) -
Gain on sale of intangible assets - - (430 ) -
Acquisition related costs(7) 1,370 8,859 57,343 19,780
Foreign exchange (1,328 ) 1,193 1,423 2,084
Adjusted EBITDA(8) 53,260 10,766 139,452 23,444
Net income (loss) for the period
(134,398
)
(12,286
) (226,873 )
(26,068
)
Share-based compensation
816

254
5,624
1,117
Debt settlement expense - - 5,692 -
Fair value adjustments for contingent consideration(5) 113,937 3,381 120,779 3,381
Goodwill impairment(6) 36,670 - 36,670 -
Gain on cross currency swap (9,661 ) - (9,661 ) -
Gain on sale of intangible assets - - (430 ) -
Acquisition related costs(7) 1,370 8,859 57,343 19,780
Foreign exchange (1,328 ) 1,193 1,423 2,084
Amortization of acquisition related purchase price intangibles 29,084 4,155 99,974 14,778
Interest accretion 6,716 415 21,023 1,493
Adjusted Net Income(9) 43,206 5,971 111,564 16,565
Diluted Net Loss per share $ (1.92 ) $ (0.50 ) $ (3.71 ) $ (1.46 )
Diluted Adjusted Net Income per share(10) $ 0.59 $ 0.21 $ 1.72 $ 0.80
(4) This release contains non-IFRS financial measures, which are noted where used. These non-IFRS financial measures are used because management believes that they provide additional useful information regarding ongoing operating and financial performance. Readers are cautioned that the non-IFRS financial measures are not recognized measures under IFRS, do not have standardized meanings prescribed by IFRS, and should not be considered in isolation or construed to be alternatives to revenues and net income (loss) and comprehensive income (loss) for the period determined in accordance with IFRS or as indicators of performance, liquidity or cash flows. Our method of calculating these measures may differ from the method used by other entities. Accordingly, our measures may not be comparable to similarly titled measures used by other entities or in other jurisdictions.
(5) Fair value adjustments for contingent consideration relates to the Jackpotjoy, Mandalay and InterCasino business segments.
(6) Goodwill impairment relates to the InterCasino business segment.
(7) Acquisition related costs consist of legal, professional, bonuses paid to management, underwriting, due diligence, and other direct costs/fees associated with transactions contemplated or completed by Intertain. The decrease in acquisition related costs in comparison with the same period in 2014 relates to the fact that the Company did not complete a transaction in the fourth quarter of 2015.
(8) Adjusted EBITDA, as defined by the Company, is income before interest expense (net of interest income), income taxes, amortization, share-based compensation, impairment charges, debt settlement expense, fair value adjustments on contingent consideration, gain on sale of intangible assets, gain on cross currency swap, acquisition related costs and foreign exchange. Management believes that Adjusted EBITDA is another important indicator of the issuer's ability to generate liquidity through operating cash flow to service outstanding debt and fund acquisition earn-out payments and uses this metric for such purpose. The exclusion of amortization, share-based compensation, and impairment charges eliminates the non-cash impact and the exclusion of debt settlement expense, fair value adjustments on contingent consideration, gain on sale of intangible assets, gain on cross currency swap, acquisition related cost and foreign exchange eliminates items which management believes are non-operational.
(9) Adjusted Net Income, as defined by the Company, means net income plus or minus items of note that management may reasonably quantify and believes will provide the reader with a better understanding of the Company's underlying business performance. For the purposes of this release, Adjusted Net Income is calculated by adjusting Net Income for share-based compensation, amortization on acquisition related purchase price intangibles, gain on cross currency swap, acquisition related costs, foreign exchange, interest accretion, impairment charges, debt settlement expense, fair value adjustments on contingent consideration, and gain on sale of intangible assets. The exclusion of amortization, share-based compensation, interest accretion and impairment charges eliminates the non-cash impact and the exclusion of debt settlement expense, fair value adjustments on contingent consideration, gain on sale of intangible assets, gain on cross currency swap, acquisition related cost and foreign exchange eliminates items which management believes are non-operational. Management believes that Adjusted Net Income is an important indicator of the issuer's ability to generate liquidity through operating cash flow to service outstanding debt and fund acquisition earn-out payments and uses this metric for such purpose. Adjusted Net Income is also considered by some investors and analysts for the purpose of assisting in valuing a company.
(10) Diluted Adjusted Net Income per share, as defined by the Company, means Adjusted Net Income divided by the diluted weighted average number of shares outstanding for the applicable period. Management believes that Diluted Adjusted Net Income per share assists with the Company's ability to analyze Adjusted Net Income on a diluted weighted average per share basis.

Board Renewal

Further to the Board renewal process announced in the Company's press release dated February 22, 2016, the Company is pleased to announce the appointment of Jim Ryan as an independent director, effective immediately. Mr. Ryan is currently CEO of Pala Interactive, LLC and brings extensive experience in the online gaming industry, having previously served as Co-CEO of bwin.party digital entertainment plc and as CEO of PartyGaming plc. Mr. Ryan also sits on the boards of Gaming Realms plc and Duke Royalty plc. Mr. Ryan obtained professional qualifications as a Chartered Accountant from the Canadian Institute of Chartered Accountants and a degree in business from the Goodman School of Business at Brock University.

In addition, Intertain is pleased to announce that David Danziger has been appointed Chairman of the Board, effective immediately. "Jim brings a wealth of industry experience and professional qualifications to the Board. This is a strong step in fulfilling our commitment to Board renewal, with highly qualified candidates. We will continue to strengthen the Board with additional new directors before or in connection with our Annual Meeting," said Mr. Danziger.

Stan G. Dunford and Mark Redmond have stepped down as directors of the Company, effective immediately. Intertain would like to thank Messrs. Dunford and Redmond for their hard work and substantial contributions to the Company over the past two years.

Intertain to Allow Shareholder Rights Plan to Lapse

The Board has determined to allow the Company's shareholder rights plan agreement dated September 22, 2015 to expire, in accordance with its terms, at the close of business on March 22, 2016.

2015 Fourth Quarter and Year End Financial Statements and Management's Discussion and Analysis

The financial statements, notes to the financial statements and Management's Discussion and Analysis for the three month period and year ended December 31, 2015 will be available on SEDAR at www.sedar.com as well as Intertain's website at www.intertain.com.

2015 Fourth Quarter Conference Call

A conference call to discuss Intertain's fourth quarter 2015 results will be held on March 9, 2016, at 5:30pm ET. John Kennedy FitzGerald, President and CEO of Intertain, and Keith Laslop, CFO of Intertain, will host the call. A question-and-answer session will follow the presentation.

To participate, interested parties are asked to dial (647) 788-4919 or (877) 291-4570 10 minutes prior to the scheduled start of the call. A replay of the conference call will be available until March 23, 2016 by dialing (800) 585-8367 or (416) 621-4642 and using reference number 65286941. A transcript will also be made available on Intertain's website.

About The Intertain Group Limited

Intertain is an online gaming holding company that, through its operating subsidiaries, provides entertainment to global consumer base in which such subsidiaries operate. Intertain currently offers bingo-led gaming and casino to its customers using the InterCasino www.intercasino.com, Costa www.costabingo.com, Vera&John www.verajohn.com, Jackpotjoy www.jackpotjoy.com and jackpotjoy.se, and Botemania www.botemania.es brands. For more information about Intertain, please visit www.intertain.com.

Cautionary Note Regarding Forward-Looking Information

This release contains certain information and statements that may constitute "forward-looking information" within the meaning of Canadian securities laws. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "estimates", "projects", "predicts", "targets", "seeks", "intends", "anticipates", or "believes" or the negative of such words or other variations of or synonyms for such words, or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause actual results, performance, achievements or developments to be materially different from those anticipated by the Company and expressed or implied by the forward-looking statements. Forward-looking information contained in this release includes, but is not limited to, statements with respect to the Company's future financial performance (including guidance regarding revenues, adjusted EBITDA, adjusted net income and diluted adjusted net income per share), the future prospects of the Company's business and operations, the strategic review process, the Company's growth opportunities and the execution of its growth strategies.
These statements reflect the Company's current expectations related to future events or its future results, performance, achievements or developments, and future trends affecting the Company. All such statements, other than statements of historical fact, are forward-looking information. Such forward-looking information is based on a number of assumptions which may prove to be incorrect, including, but not limited to, the ability of the Company to secure, maintain and comply with all required licenses, permits and certifications to carry out business in the jurisdictions in which it currently operates or intends to operate; governmental and regulatory actions, including the introduction of new laws or changes in laws (or the interpretation thereof) related to online gaming; general business, economic and market conditions; the competitive environment; the expected growth of the online gaming market and potential new market opportunities; anticipated and unanticipated costs; the protection of the Company's intellectual property rights; the Company's ability to successfully integrate and realize the benefits of its completed acquisitions; and the ability of the Company to obtain additional financing, if, as and when required. Such statements could also be materially affected by risks relating to the lack of available and qualified personnel or management; stock market volatility; taxation policies; competition; foreign operations; the Company's limited operating history; and the Company's ability to access sufficient capital from internal or external sources. The foregoing risk factors are not intended to represent a complete list of factors that could affect the Company. Additional risk factors are discussed in the Company's annual information form dated March 31, 2015 under the heading "Risk Factors".
Although the Company has attempted to identify important factors that could cause actual results, performance, achievements or developments to differ materially from those described in forward-looking statements, there may be other factors that cause actual results, performance, achievements or developments not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results, performance, achievement or developments are likely to differ, and may differ materially, from those expressed in or implied by the forward-looking information contained in this release. Accordingly, readers should not place undue reliance on forward-looking information. While subsequent events and developments may cause the Company's expectations, estimates and views to change, the Company does not undertake or assume any obligation to update or revise any forward-looking information, except as required by applicable securities laws. The forward-looking information contained in this release should not be relied upon as representing the Company's expectations, estimates and views as of any date subsequent to the date of this release. The forward-looking information contained in this release is expressly qualified by this cautionary statement.

Contact Information

  • The Intertain Group Limited
    Amanda Brewer
    Vice President, Corporate Communications
    +1 416 720-8150
    abrewer@intertain.com