DEQ reports revenue of USD 2.5M for the 2016 first quarter

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," said Joe Bertolone, President and Chief Executive Officer of DEQ.