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Guest-Tek announces results for the year ended March 31, 2009

^{Published on 2009-06-11 20:35:41, Last Modified on 2009-06-11 20:40:24 - Market Wire}
 

 CALGARY, June 11 /CNW/ - Guest-Tek Interactive Entertainment Ltd., ("Guest-Tek" or the "Company") (TSX:GTK), a leader in providing broadband technology solutions to the global hospitality industry, announced today that the Company will file its financial statements for the year ended March 31, 2009 ("Fiscal 2009") with SEDAR on June 12th, 2009. Once filed, the financial statements, related management's discussion and analysis, and annual information form can be viewed on SEDAR at [ www.sedar.com ]. Arnon Levy commented, "We are pleased to announce that the Company has had a positive adjusted EBITDA(1) year of $1.58 million, with 5 quarters in a row of increasing positive adjusted EBITDA(1). This is a result of the continuing strong interest in our OneView Internet product offering with both new installations, such as with Center Parcs, and upgrades of previously installed equipment such as with Tharaldson Property Management Inc. We have also completed significant new installations of OneView Media (digital video-on-demand ("VOD") and free-to-guest TV) and expect more traction in Fiscal 2010. We have also continued to improve gross margin as a percentage of revenue, and to reduce operating expenses (before goodwill write off)." The year ended March 31, 2009 ("Fiscal 2009") was a year of continued improvement for Guest-Tek. Revenue increased 7.4% to $40.95 million for Fiscal 2009, compared to $38.14 million for the fiscal year ended March 31, 2008 ("Fiscal 2008"). HSIA recurring revenue and VOD revenue increased over Fiscal 2008, while HSIA installation revenue showed a small decrease. The 8.0% increase in HSIA recurring revenue (to $24.60 million in Fiscal 2009 compared to $22.77 million in Fiscal 2008) was due to the depreciation of the Canadian dollar against the US dollar. The average exchange rate for the fiscal year 2009 changed by 9.22% from that of fiscal year 2008. The increase in HSIA recurring revenue by the increased exchange rate was offset by a management group discontinuing the support of a number of hotels during the year. The Company also saw an increase of 97.6% in its VOD revenue from $1.03 million in Fiscal 2008 to $2.04 million in Fiscal 2009. The increase comes as a result of the increase in the number of VOD customers installed during the year and the cumulative effect of the deferred revenue from previous installations. The decline in the HSIA installation revenue from $14.34 million in fiscal year 2008 to $14.31 million in fiscal year 2009 is due to the revenue recognised for a major installation at the Renaissance Montgomery in fiscal year 2008, offset by the depreciation of the Canadian dollar against the US dollar. Revenue for the year ended March 31, 2007 ("Fiscal 2007") was $35.28 million. The increase in revenue from Fiscal 2007 to Fiscal 2009, was primarily due to an increase in HSIA installation and recurring revenue. HSIA installation revenue increased to $14.31 million in Fiscal 2009 compared to $11.17 million in Fiscal 2007 as installed hotels increased. HSIA recurring increased from $22.23 million in Fiscal 2007 to $24.60 million in fiscal year 2009, as the Company was able to increase HSIA maintenance and support pricing where possible. In addition VOD revenue increased from $682 thousand in 2007 to $2.04 million in Fiscal 2009 as the cumulative effect of the deferred revenue projects from fiscal year 2007 to 2009. Offsetting these increases was the VoIP product revenue that did not record any sales in 2009, compared to $1.19 million in fiscal 2007 as the Company has not invested in the VoIP product. Net loss for Fiscal 2009 was $13.25 million compared to $5.28 million for Fiscal 2008. The increase in the net loss was due to the write down of the goodwill in the company of $11.77 million. This was caused by the sale of 40.6% of the shares Company in April 2009 at a price of $0.23 per common share. Using this share value to value the whole company suggested an impairment in the value of the goodwill to the extent that it was all written off. Deducting the write off of goodwill from net loss in 2009 would make the loss $1.48 million which is a significant improvement from the previous year, that if adjusted for write off of intangibles would have been $4.09 million. This decrease in net loss was due to several factors. The gross margin increased to $14.68 million in Fiscal 2009 from $13.47 million in Fiscal 2008. The increase is due to the increase in revenue and a decrease in cost of revenue as a percentage of revenue. Cost of revenue as a percentage of revenue was 64.2% in Fiscal 2009 compared to 64.7% in Fiscal 2008. The decrease is due to lower call centre costs and the depreciation of the Canadian dollar relative to the US dollar. Offsetting the decreases is a change in tax expense, from a recovery of $605 thousand in 2008 to an expense of $12 thousand in 2009; this is a result of the future tax effect of the reduction in intangibles in the two years. The net loss before income tax was $5.89 million in Fiscal 2008 compared to $13.23 million in Fiscal 2009. Operating expenses, excluding the write-down of intangible assets and goodwill decreased to $16.16 million in Fiscal 2009 compared to $18.20 million in Fiscal 2008. The decrease in operating expenses included a foreign currency loss of $184 thousand compared to a loss of $995 thousand and was achieved despite a loss on disposal of assets of $505 thousand in Fiscal 2009. Net loss for Fiscal 2009 also decreased from the $13.90 million net loss recorded in Fiscal 2007. After adjusting for the write offs for goodwill and intangibles the net loss would have decreased from $10.85 million in 2007 to $1.48 million in 2009. This was due to an increase in gross margin and a decrease in other operating expenses. Gross margin increased from $10.53 million in Fiscal 2007 to $14.68 million in Fiscal 2009. The increase is a result of increased revenue resulting from an increase in the HSIA recurring and installation revenue as a result of larger value installations and the increase in VOD revenue as new properties add to the existing deferred revenue base the company is recognising. Operating expenses increased from $21.54 million in Fiscal 2007 to $27.9 million in Fiscal 2009, resulting from the write-down of goodwill. Offsetting these amounts is a reduction in the amortization of long term assets of $2.52 million and a reduction in the research and development and selling, general and administrative costs of $1.19 million as the company has implemented cost reductions. Adjusted EBITDA(1) was positive $1.58 million for Fiscal 2009, an improvement over the negative $1.32 million recorded in Fiscal 2008, and the negative $2.92 million recorded in Fiscal 2007. Other highlights for the year include: - 86 properties upgraded under an agreement with Tharaldson Property Management Inc. to upgrade networks and install OneView Internet at 371 properties; - Installed OneView Internet at Centre Parcs Elveden Forest and Longleat in the UK; - Installed OneView Internet at The Lodge at Pebble Beach, The Inn at Spanish Bay, and Casa Palmero at Pebble Beach in California; - Completion of OneView Media VOD and IPTV at the The Water Club, A Signature Hotel By Borgata in Altantic City, New Jersey; - Commencement of help desk capability based in Guatemala, in an effort to reduce cost and align working hours with busy times at the majority of Guest-Tek's room base; - Installation of OneView Media VOD at five properties within the Real Hotels and Resorts Group (Real Intercontinental Costa Rica, Real Intercontinental San Salvador, Real Intercontinental Guatemala Real Intercontinental Managua, and the Real Intercontinental San Pedro Sula); - Completion of a major installation of HSIA, VOD, VoIP, and IPTV at Renaissance Montgomery, operated by PCH resorts; - Installation of OneView Media VOD at the Loden Hotel in Vancouver, the first Canadian VOD installation; - Completion of VOD installation at 16 properties; - Assumption of 68 Starwood properties from Sprint, added 32,627 rooms to our service and support base; - completion of a high speed internet access upgrade at 26 White Lodging Services properties with new networks; - Installation of a beta site at Radisson Saskatoon providing a high definition in room entertainment system over Shaw coax lines; this is the Company's first one in Canada; Highlights for the Fourth Quarter The Company's performance for the three months ended March 31, 2009 ("fourth quarter, Fiscal 2009," "Q4, 2009" or "Q4, Fiscal 2009") showed some improvement over the three months ended March 31, 2008 ("fourth quarter, Fiscal 2008," "Q4, 2008" or "Q4, Fiscal 2008"). Revenue for Q4, 2009 was $11.02 million compared to $11.09 million for Q4, 2008. The Company saw a significant improvement in gross margin in Q4, 2009 compared to Q4, 2008. Gross margin as a percentage of sales increased to 36.7% in Q4, Fiscal 2009 compared to 31.6% in Q4, Fiscal 2008. Operating expenses increased to $15.60 million in Q4, Fiscal 2009 compared to $5.40 million in Q4, 2008, primarily due to a write-down in goodwill of $11.77 million. As a result, net loss increased significantly, to $11.53 million for Q4, 2009 compared to $1.87 million for Q4, 2008. Adjusted EBITDA improved to $850 thousand in Q4, 2009 from $86 thousand in Q4, 2008. Significant events for the quarter include: - Assumption of 68 Sprint properties, 32,627 rooms to add to our service and support base; - Completion of a high speed internet access upgrade at 26 White Lodging Services properties with new networks. - Completion of VOD installation at 6 properties including Ace Palm Springs, Quechan Casino resort and JW Marriot Guanacaste in Costs Rica; - New contract signed to provide OneView Internet and OneView Media to Ritz-Carlton Chicago,; - Installation of a beta site at Radisson Saskatoon providing a high definition in room entertainment system over Shaw coax lines; this is the Company's first one in Canada; - Installation of OneView Internet in 13,840 rooms, with a total supported base of 446,619 rooms; - Installation of 3,721 OneView Media rooms, with a total service base of 11,495 rooms; About Guest-Tek Guest-Tek is the world's largest provider of IP based technology solutions for the hospitality industry. Guest-Tek's OneView platform provides hotels with converged data, video and telephony services. Guest-Tek is a preferred vendor to major hotel brands, providing services including network design, procurement, implementation, and post sales customer support to 2,696 properties and over 445,000 rooms. Guest-Tek's common shares trade on The Toronto Stock Exchange under the trading symbol "GTK". The company's head offices are in Calgary, Alberta, and it has major support facilities in Irvine, California, and Warsaw, Poland as well as Sales offices located throughout North America and Europe. For more information about Guest-Tek, go to [ www.guest-tek.com ]. The above disclosure contains certain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Guest-Tek's control, including: the impact of general economic conditions, industry conditions, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to the announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Guest-Tek's actual results, performance or achievement could differ materially from those expressed in, or implied by these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that Guest-Tek will derive therefrom. GUEST-TEK INTERACTIVE ENTERTAINMENT LTD. Consolidated Balance Sheets March 31, 2009 and 2008 ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 2,155,523 $ 2,956,869 Accounts receivable 7,763,457 8,665,885 Installations in progress 1,526,987 1,801,107 Inventory 1,005,453 1,257,983 Prepaid expenses and deposits 1,024,083 1,495,486 ----------------------------------------------------------------------- 13,475,503 16,177,330 Property and equipment 3,461,605 4,412,159 Deferred costs 6,686,554 4,566,026 Intangible assets 3,807,750 4,371,999 Goodwill - 11,768,224 ------------------------------------------------------------------------- $ 27,431,412 $ 41,295,738 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 5,125,927 $ 6,527,165 Customer deposits 2,474,822 6,085,687 Deferred revenue 2,121,226 592,800 Current portion of notes payable 1,771,644 128,895 ----------------------------------------------------------------------- 11,493,619 13,334,547 ----------------------------------------------------------------------- Deferred leasehold inducement 5,932 121,843 Notes payable - 1,743,276 Deferred revenue 5,391,314 2,496,438 Future tax liability 1,066,815 1,049,660 ------------------------------------------------------------------------- 6,464,061 5,411,217 ------------------------------------------------------------------------- 17,957,680 18,745,764 ------------------------------------------------------------------------- Shareholders' equity: Share capital 53,779,555 53,779,555 Contributed surplus 3,081,968 2,912,440 Deficit (47,387,791) (34,142,021) ----------------------------------------------------------------------- 9,473,732 22,549,974 ----------------------------------------------------------------------- ------------------------------------------------------------------------- $ 27,431,412 $ 41,295,738 ------------------------------------------------------------------------- ------------------------------------------------------------------------- GUEST-TEK INTERACTIVE ENTERTAINMENT LTD. Consolidated Statements of Operations, Comprehensive loss and Deficit ------------------------------------------------------------------------- Three months ended Twelve months ended March 31 March 31 --------------------------- --------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- Revenue $ 11,020,803 $ 7,965,534 $ 40,949,395 $ 38,135,328 Cost of revenue 6,593,593 5,512,968 25,884,044 24,666,219 ------------------------------------------------------------------------- Gross margin 4,427,210 2,452,565 15,065,351 13,469,109 Operating expenses: Selling, general and administrative 3,090,830 2,169,596 12,517,898 13,082,266 Research and development 306,701 133,064 962,878 1,205,010 Amortization of property and equipment 160,451 134,000 625,163 1,160,233 Amortization of intangible assets 159,062 201,748 654,212 1,181,739 Write down of goodwill 11,768,224 - 11,768,224 - Write down of intangible assets - - - 1,189,566 Amortization of internally developed software 103,794 61,064 360,775 327,932 Loss on disposal of assets - (147) 504,614 - Stock based compensation 32,247 45,094 169,528 220,120 Interest expense 45,886 2,507 184,224 27,785 Foreign currency loss (gain) (65,540) (639,198) 183,849 994,820 ----------------------------------------------------------------------- 15,601,655 2,107,727 27,931,365 19,389,471 ------------------------------------------------------------------------- Loss from operations (11,174,446) 344,838 (12,866,014) (5,920,362) Interest income 12,879 15,123 18,278 34,841 ------------------------------------------------------------------------- Loss before income taxes (11,161,567) 359,962 (12,847,736) (5,885,521) Income tax expense (recovery) (15,252) 12,261 11,534 (605,226) ------------------------------------------------------------------------- Net loss and comprehensive loss (11,146,315) 347,700 (12,859,270) (5,280,295) Deficit, beginning of period (35,854,977) (32,272,118) (34,142,021) (28,861,726) ------------------------------------------------------------------------- Deficit, end of period $(47,001,291) $(31,924,418) $(47,001,291) $(34,142,021) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net loss per share basic and diluted: $ (0.73) $ 0.02 $ (0.81) $ (0.33) ------------------------------- (1) Adjusted EBITDA is earnings or loss before interest, income taxes, depreciation, amortization, gain or loss on sale or disposal of assets and stock based compensation expense and is provided to assist investors in assessing the Company's performance. Adjusted EBITDA has no standardized definition in Canadian GAAP and therefore may not be comparable to similar measures presented by other companies. Management believes that Adjusted EBITDA, in addition to earnings (loss), is a useful indication of performance and the Company's ability to generate cash from operations. Please see the reconciliation of Adjusted EBITDA to net income on page 9 of this MD&A.