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Guest-Tek announces results for the three months ended June 30, 2009

^{Published on 2009-08-13 14:42:31, Last Modified on 2009-08-13 14:42:41 - Market Wire}
 

 CALGARY, Aug. 13 /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 results today for the three months ended June 30, 2009, the Company's first quarter of fiscal 2010 ("first quarter, Fiscal 2010", "Q1, 2010" or "Q1, Fiscal 2010"). The Company has recorded its first quarter of net income for 4 years and has also recorded its sixth consecutive quarter of positive adjusted EBITDA(1). Adjusted EBITDA improved to $779 thousand in Q1, 2010 from $146 thousand in Q1, 2009. The Company's interim consolidated financial statements for Q1, Fiscal 2010, along with the related notes and Management's Discussion and Analysis can be found on [ www.sedar.com ]. Arnon Levy commented, "I am very pleased to report net income for the quarter and our sixth consecutive quarter of positive adjusted EBITDA, which is a reflection of our ongoing management of cost of revenue and operating costs." The Company's performance for the three months ended June 30, 2009 ("first quarter, Fiscal 2010," "Q1, 2010" or "Q1, Fiscal 2010") showed significant improvement over the three months ended June 30, 2008 ("first quarter, Fiscal 2009," "Q1, 2009" or "Q1, Fiscal 2009"). Revenue for Q1, 2010 was $10.14 million compared to $9.89 million for Q1, 2009. The Company also saw a slight decrease in gross margin in Q1, 2010 compared to Q1, 2009. Gross margin as a percentage of sales decreased to 39.2% in Q1, Fiscal 2010 compared to 40.6% in Q1, Fiscal 2009. Operating expenses decreased to $3.80 million in Q1, Fiscal 2010 compared to $4.53 million in Q1, 2009. The Company showed net income of $173 thousand for Q1, 2010 compared to net loss of $389 thousand for Q1, 2009. Adjusted EBITDA improved significantly to $779 thousand in Q1, 2010 from $146 thousand in Q1, 2009. Significant events for the quarter include: - Installed OneView Internet and OneView Media VOD and IPTV at Hyatt Siesta Key and The Pierre New York; - Substantially completed a project to upgrade 68 Starwood hotels assumed from Sprint to OneView Internet; - Completed installations of OneView Internet converged networks at the W Washington DC and W Aloft BWI; - New contracts signed to provide OneView Internet and OneView Media VOD and IPTV to St. Regis Deer Crest and Inn at the WAC; - New contract signed to provide The Fantasyland Hotel a high definition in-room entertainment system over Shaw coax lines; - Installation of OneView Internet in 4,938 rooms, with a total supported base of 435,215 rooms; - Installation of 306 OneView Media rooms, with a total service base of 8,399 rooms; - Revenue totaling $10.14 million during the quarter; - Net income of $173 thousand; and - Adjusted EBITDA of $779 thousand. Revenue Overall, revenue increased 2.5% to $10.14 million for Q1, Fiscal 2010 from $9.89 million for Q1, 2009. Revenue decreased 8.0% from $11.02 million recorded in Q4, 2009. The increase in revenue compared to the same quarter a year ago is due to an increase in HSIA recurring revenue and an increase in VOD revenue. The decrease in revenue compared to Q4, 2009 is due to a decrease in HSIA installation revenue. Gross Margin Gross margin decreased 1.1% to $3.97 million in Q1, Fiscal 2010 compared with $4.02 million in Q1, Fiscal 2009, due to an increase in installation costs. Gross margin decreased 1.7% from $4.04 million in Q4, 2009, on decreased revenue due to a large number of low-revenue installations. Key components of cost of revenue include hardware costs, personnel costs for the professional installations team and call center costs such as personnel and telecommunications. Operating Expenses Total operating expenses decreased 16.1% to $3.80 million for Q1, Fiscal 2010, compared to $4.53 million for Q1, Fiscal 2009, and decreased 75.6% from $15.60 million for Q4, 2009. The decrease in operating expenses compared to Q1, Fiscal 2009, is mainly due to a reduction in legal expenses of $409 thousand. This was due to the settlement of a lawsuit in Q1, 2009. There is also an increase in the foreign currency loss of $213 thousand, offset by reductions in all SG&A items, particularly in salaries and benefits and commissions. The significant decrease in operating expenses compared to Q4, 2009, is due to a write off of goodwill of $11.77 million in Q4, 2009. Absent these write-downs, operating expenses for Q4, 2009, were $3.83 million. Operating expenses as a percentage of revenue were 37.5% for Q1, Fiscal 2010 compared to 45.7% for Q1, Fiscal 2009 and compared to 34.8% for Q4, 2009, absent the write off of goodwill. 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 2,668 properties and 443,614 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 (Unaudited) June 30, 2009 and March 31, 2009 ------------------------------------------------------------------------- June 30, 2009 March 31, 2009 ------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 3,444,485 $ 2,155,523 Accounts receivable 5,436,246 7,763,457 Installations in progress 1,249,334 1,526,987 Inventory 916,999 1,005,453 Prepaid expenses and deposits 923,809 1,024,083 ----------------------------------------------------------------------- 11,970,873 13,475,503 Property and equipment 3,202,144 3,461,605 Deferred costs 6,770,673 6,686,554 Intangible assets 3,693,751 3,807,750 Goodwill - - ------------------------------------------------------------------------- $ 25,637,441 $ 27,431,412 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 3,972,145 $ 5,125,927 Customer deposits 1,863,959 2,474,822 Deferred revenue 2,247,410 2,121,226 Current portion of notes payable 1,516,442 1,771,644 ----------------------------------------------------------------------- 9,599,956 11,493,619 Deferred revenue 5,250,750 5,391,314 Deferred leasehold inducement 17,863 5,932 Notes payable - - Future tax liability 1,077,306 1,066,815 ------------------------------------------------------------------------- 6,345,919 6,464,061 ------------------------------------------------------------------------- 15,945,875 17,957,680 ------------------------------------------------------------------------- Shareholders' equity: Share capital 53,779,555 53,779,555 Contributed surplus 3,127,238 3,081,968 Deficit (47,215,227) (47,387,791) ----------------------------------------------------------------------- 9,691,566 9,473,732 ----------------------------------------------------------------------- ----------------------------------------------------------------------- ------------------------------------------------------------------------- $ 25,637,441 $ 27,431,412 ------------------------------------------------------------------------- ------------------------------------------------------------------------- GUEST-TEK INTERACTIVE ENTERTAINMENT LTD. Consolidated Statements of Operations, Comprehensive Loss and Deficit (Unaudited) Three months ended June 30, 2009 and 2008 ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Revenue (note 6) $ 10,139,764 $ 9,893,255 Cost of revenue 6,164,944 5,874,867 ------------------------------------------------------------------------- Gross margin 3,974,820 4,018,388 Operating expenses: Selling, general and administrative 2,772,402 3,739,087 Research and development 247,476 201,155 Amortization of property and equipment 175,914 165,944 Amortization of intangible assets 143,931 170,285 Amortization of internally developed software 93,403 75,327 Foreign currency loss 282,300 70,697 Stock based compensation 45,270 57,490 Interest expense 37,709 45,524 ----------------------------------------------------------------------- 3,798,405 4,525,509 ------------------------------------------------------------------------- Income (Loss) before interest income and income taxes 176,415 (507,121) Interest income 464 2,564 ------------------------------------------------------------------------- Income (Loss) before income taxes 176,879 (504,557) Income tax expense (recovery) 4,315 (115,908) ------------------------------------------------------------------------- Net income (loss) and comprehensive income (loss) 172,564 (388,649) Deficit, beginning of period (47,387,791) (34,142,021) ------------------------------------------------------------------------- Deficit, end of period $ (47,215,227) $ (34,530,670) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) per share: Basic $ 0.01 $ (0.02) Diluted 0.01 (0.02) Weighted average number of shares: Basic 15,825,852 15,825,852 Diluted 16,951,859 15,825,852 ------------------------- (1) Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, gain or loss on sale 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 net income, 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 included in the Company's MD&A for the period ended June 30, 2009.