TransGaming Inc.

TransGaming Inc.

November 26, 2012 08:30 ET

TransGaming Corporate Update

TORONTO, ONTARIO--(Marketwire - Nov. 26, 2012) - TransGaming Inc. (TSX VENTURE:TNG), would like to address the concerns evident in the marketplace regarding the current state of the business. The company's management, board, and employees are all committed and focused on ensuring the ongoing growth of TransGaming. We recognize and hear the questions and concerns raised by our shareholders regarding our cash flow and we have taken steps to restructure the company towards achieving an even more streamlined organization, with a reduced cost base. A number of alternatives remain under consideration, but for now we believe these steps will allow us to reach our goal of break-even by Q3 or Q4 of this fiscal year.

The business itself has demonstrated ongoing strength with a compounded annual growth rate in revenue in excess of 30% in the past 5 years. Even our detractors have cited significant revenue growth projections for this current fiscal year (2013), which we are on target to achieve.

As part of the effort to streamline the company, we have recently completed a major internal restructuring that has now organized the business into two P&L verticals: i) The Graphics & Portability Group (GPG) which handles all of our licensing of core IP related to Cider and SwiftShader; ii) The Digital Media Group (DMG) which handles all of our in-home content and digital distribution. We have integrated our acquired iTV business unit and our GameTree TV business unit together into a single unified division to leverage common resources and talent pool. Both groups operate as their own P&Ls and are being measured against internal budgets and forecasts. Additionally, over the last 2-3 quarters, we have implemented a 30% reduction in headcount to reduce expenses along with other cost constraining measures.

We have strong growth prospects ahead of us, which are outlined below.

For our Graphics and Portability Group:

  • This business segment has not received attention from shareholders but continues to grow and generates high margin revenues.
  • We are working on a number of new Mac titles, on an ongoing basis, and these titles are generating both upfront revenues as well as back-end revenue shares.
  • Our MMO games are performing well and gaining traction. The recently announced Guild Wars 2 online game is exceeding user targets and will drive revenues in the coming quarters.
  • We have a long-term business relationship with companies like EA and Disney that bring a continual flow of new titles.
  • We have major licensing negotiations underway for our core IP with both Cider and SwiftShader that we expect to close within Q3.
  • Overall, we expect our GPG group to generate strong revenues in FY2013 and to be profitable as a business unit.

For our Digital Media Group:

  • We recognize that GameTree TV deployments have taken considerably longer then originally anticipated. The slower pace arises from the current economic slowdown being experienced globally that has caused major operators to become more conservative with their CapEx spending. That said, TransGaming continues to negotiate new agreements and has seen the level of activity increase.
  • Our SelecTV deployment is moving forward positively, albeit behind schedule. The initial deployment plan was with a series of hotels in Asia. However, SelecTV now has major hotels within the Toronto and the broader Canadian market and both parties deemed it to be more effective and efficient to begin deployments in TransGaming's home territory instead of Asia. More information about the specific hotels will be released early in the new year.
  • We are in active negotiations on the commercial agreement with a major European service provider. We expect to execute an agreement early in 2013 and commence integration with a new operator towards launch with H1 calendar 2013.
  • We are actively working with the East Asian operator deployment (announced June, 2012) and expect them to be ready to launch within the second quarter of calendar 2013.
  • Our Asian partner relationship is now entering the negotiation stage of full commercial terms. We are actively reviewing business terms and legals and expect to execute a definitive agreement early in the new calendar year.
  • We are imminently releasing a major update to Free which includes a complete overhaul on the GameTree TV client and transitions the service to a subscription only model at EUR4,99. This will improve the overall ARPU for the GameTree TV service and this updated client will be deployed on all upcoming new service providers.
  • We released a major update with DISH Network in October that has been received very well and will provide increased revenues with higher ARPU.
  • Overall, and to reiterate, the GameTree TV business has taken longer to materialize then projected. However, TransGaming today has 5 service providers that we are actively working with or striving to launch by Q2 of calendar 2013. We are also front-loading our payment schedule with new launches so that the service providers cover development and integration fees. Between existing customers and new agreements being signed, TransGaming has the largest Connected TV distribution footprint in the world.

Finally, to strengthen the balance sheet, TransGaming is working with our investment bankers and financial institutions to evaluate a range of options that will provide the markets with the comfort that the company's current liquidity risk will be reduced.

We delivered a record FY13 Q1 and we expect continued strength in Q2, and the following quarters, towards a fiscal year that will be marked by the greatest year-over-year growth to-date. Therefore, we remain bullish about the company's future prospects.

About TransGaming Inc.

TransGaming Inc. (TSX VENTURE:TNG) is the global leader in the multiplatform deployment of interactive entertainment. TransGaming works with the industry's leading developers and publishers to enable and distribute games for Smart TVs, next-generation set-top boxes, Mac computers, and Linux/CE platforms. TransGaming is headquartered in Toronto, Canada.

Forward-Looking Statements

This news release contains forward-looking statements. Actual events or results may differ materially from those described in the forward-looking statements due to a number of risks and uncertainties, including changes in financial and product market conditions. Forward-looking statements are based on management's estimates, beliefs, and opinions. The Company assumes no obligation to update forward-looking statements, other than as may be required by applicable law.

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.

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