NYX Gaming Group Limited Reports Fourth Quarter and Fiscal Year 2016 Results

Q4 Revenue of $54.5 million, up 197% and Adjusted EBITDA of $12.9 million, up 185%

LAS VEGAS, NV, April 25, 2017 – NYX Gaming Group Limited (TSXV:NYX) ("NYX Gaming Group" or the "Company") today announced its financial and operating results for the fourth quarter and fiscal year ended December 31, 2016. All amounts expressed are in Canadian dollars unless otherwise noted.

“This was a transformational year for NYX. With the integration of OpenBet now substantially complete, we are ideally positioned as a leading provider of sportsbook, gaming technology, and NextGen content to the regulated gaming market,” said Matt Davey, CEO of NYX Gaming Group. “Since the beginning of 2017, our new operating model has been delivering an improved cost structure that, combined with our growth strategy, will result in increased operating leverage.”

Fourth Quarter 2016 Highlights

  • Revenue of $54.5 million, or growth of 196.6% year-over-year;
  • Revenue grew 31.2% year-over-year excluding the impact of the OpenBet acquisition;
  • Royalty and license revenue of $26.0 million, or growth of 64.3% year-over-year;
  • Gross profit of $48.1 million, or 88.3% of revenue compared to 86.2% of revenue in Q4 2015;
  • Adjusted EBITDA of $12.9 million, an increase of 185.1% over the prior year period;
  • Signed 16 new agreements for the Open Platform System ("OPS") and Open Gaming System ("OGS");
  • Launched OGS content across 14 new client sites;
  • Granted unconditional registration to deploy gaming content to the heavily regulated British Columbia market; and
  • Signed 11 new deals and launched six new clients during the quarter ended March 31, 2017.

Fiscal Year 2016 Highlights

  • Revenue of $163.7 million, or growth of 213.0% year-over-year;
  • Revenue grew 46.8% year-over-year excluding the impact of the OpenBet and Chartwell and Cryptologic acquisitions;
  • Royalty and license revenue of $90.7 million, or growth of 105.4% year-over-year;
  • Gross profit of $144.2 million, or 88.1% of revenue compared to 85.6% of revenue in 2015;
  • Adjusted EBITDA of $42.7 million, an increase of 305.3% over the prior year; and
  • Completed the acquisitions of OpenBet, the #1 regulated digital gaming supplier globally, and Betdigital, a leading content and technology supplier to the UK gaming market.

Fourth Quarter 2016 Operating Results

In the fourth quarter of 2016, NYX Gaming Group saw strong demand for both the OGS and OPS platforms with 16 new customer agreements signed, including Televisa, NeoGames Sazka, bwin, Evoke and Planetwin365. Additionally, the Company successfully launched their OGS content across 14 new client sites, including Luckia, Evoke, CIE NJ, Casumo and Rank Mecca.

As of December 31, 2016, the development pipeline continued to remain strong as commitments were held with 24 customers that had not yet launched. This included two OPS deals and 22 OGS deals. As of March 31, 2017, NYX Gaming Group has signed 11 new deals and launched six new clients since year end.

In addition, on the content side, the Company’s NYX content studios released 27 new games during the fourth quarter of 2016. This resulted in the number of unique game installations across the Company’s distribution network growing to 29,990 in the fourth quarter of 2016, an increase of 89.6% and 17.3% from the fourth quarter of 2015 and the third quarter of 2016, respectively.

On November 3, 2016, NYX Gaming Group announced that they had been granted unconditional registration as a Class B Supplier from the Gaming Policy and Enforcement Branch in British Columbia. The registration permits the Company to deploy their market-leading content in British Columbia for the first time. The Company’s newly acquired sportsbook technology business, OpenBet, has been certified in Canada since 2012, where they have long-standing partnerships with British Columbia Lottery Corporation ("BCLC"), Loto-Québec and the Atlantic Lottery Corporation. In 2016, BCLC's combined net win grew to $2.36 billion with much of the growth attributed to the expansion of online gaming, which delivered 24.0% year-over-year growth.

Summary of Results

The increase in revenues and gross profit for the three months and full year ended December 31, 2016, compared to the prior year periods, was attributable to a number of factors including new customer launches, the contribution from the newly acquired OpenBet business, and increased gaming revenues from the Company’s existing customers. 

Summary of Financial Information

 
 
Three Months Ended
 
Twelve Months Ended
 
 
 
December 31,
 
December 31,
 
CAD$ (in 000s, except per share)
 
2016
2015
 
2016
2015
 
Total revenue
 
54,508
 
18,377
 
 
163,733
 
52,309
 
 
Gross profit
 
48,142
 
15,838
 
 
144,211
 
44,798
 
 
Gross profit margin
 
88.3%
 
86.2%
 
 
88.1%
 
85.6%
 
 
Adjusted EBITDA
 
12,920
 
4,532
 
 
42,735
 
10,544
 
 
Adjusted EBITDA margin
 
23.7%
 
24.7%
 
 
26.1%
 
20.2%
 
 
Net loss
 
(61,120)
 
(10,739)
 
 
(57,936)
 
(8,403)
 
 
Basic and diluted loss per share
 
(0.57)
 
(0.21)
 
 
(0.77)
 
(0.20)
 
 
Total assets
 
752,376
 
291,812
 
 
752,376
 
291,812
 
 
Total non-current liabilities
 
472,017
 
97,633
 
 
472,017
 
97,633
 
 

Revenue

Revenue for the three months ended December 31, 2016 increased to $54.5 million, or 196.6%, from $18.4 million for the three months ended December 31, 2015. All revenue categories grew significantly as a result of a full quarter contribution, $30.4 million, from the Company’s recently acquired OpenBet business, and 14 new customer launches on OGS during the fourth quarter of 2016.

Royalty and license revenue for the current quarter increased $10.2 million, or 64.3%, to $26.0 million from $15.8 million in the prior year period. Professional services revenue for the quarter increased $23.9 million to $25.1 million from $1.2 million for the same period in the prior year, due primarily to the acquisition of OpenBet in May 2016.

Revenue for the twelve months ended December 31, 2016 increased $111.4 million, or 213.0%, to $163.7 million from $52.3 million in the prior year. As was the case above, all revenue categories grew significantly as a result of the OpenBet acquisition during the current year, as well as the Company’s prior year acquisition of Chartwell Technology Inc. ("Chartwell") and CryptoLogic Limited, NYX ("Cryptologic"). Revenue from Chartwell/Cryptologic and OpenBet was $8.8 million and $78.4 million, respectively, for the twelve months ended December 31, 2016. Additionally, 50 new customers launched on OGS during 2016.

Royalty and license revenue for the twelve-month period increased $46.5 million, or 105.4%, to $90.7 million from $44.2 million for the prior year. Professional services revenue for the twelve-month period increased $60.7 million to $63.2 million from $2.5 million for the same period in the prior year.

Gross Profit

Gross profit for the three months ended December 31, 2016 increased by $32.3 million, or 204.0%, to $48.1 million, compared to $15.8 million in the prior year period. Gross profit margin was 88.3% for the three months ended December 31, 2016, compared to 86.2% for the prior year period. The increase in gross profit was a result of a revenue increase from the underlying core casino business and the revenue impact from acquisitions of $31.8 million.

Gross profit increased by $99.4 million, or 221.9%, for the twelve months ended December 31, 2016 to $144.2 million, compared to $44.8 million for the prior year. Gross profit margin was 88.1% for 2016, compared to 85.6% for the prior year. The increase in gross profit was a result of a revenue increase from the underlying core casino business and the revenue impact from acquisitions of $81.1 million.

Net Loss

The Company’s net loss for the three months ended December 31, 2016 was $61.1 million, compared to $10.7 million in the prior year period. The decrease in net income was primarily the result of intangible asset impairments of $21.4 million and goodwill impairments of $65.9 million, partially offset by $46.2 million of gains on fair value adjustments to derivatives, and a full quarter positive contribution from OpenBet operations.

The Company’s net loss for the twelve months ended December 31, 2016 was $57.9 million, compared to $8.4 million for the prior year. The decrease in net income was primarily the result of intangible asset impairments of $27.9 million and goodwill impairments of $66.1 million, as well as $19.7 million of acquisition and restructuring costs, partially offset by $93.2 million of gains on fair value adjustments to derivatives, and seven and a half months of positive contribution from OpenBet operations.

During 2016, it was determined that goodwill associated with the acquisitions of Sportech NYX Gaming, Game360 and Chartwell and Cryptologic was impaired. A contributing factor to the impairment was the performance of the reporting units and changes made by management to the plans for future operations. Additionally, intangible assets related to the Company's customer relationships from the Chartwell and Cryptologic acquisition, game catalog from the Side City Studios, Inc. acquisition, and OnGame/eGaming Consulting poker product were determined to be impaired.

Adjusted EBITDA

To supplement the Company’s consolidated financial statements presented in accordance with International Financial Reporting Standards ("IFRS"), the Company uses Adjusted EBITDA, a measure they believe is appropriate to provide meaningful comparison with, and to enhance an overall understanding of, their past financial performance and prospects for the future. The Company believes Adjusted EBITDA provides useful information to both management and investors by excluding specific expenses and gains that they believe are not indicative of their core operating results. Further, Adjusted EBITDA is a measure of operating performance used by management, as well as industry analysts, to evaluate operations and operating performance and is widely used in the technology and gaming industry. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with IFRS. In addition, other companies in NYX Gaming Group’s industry may calculate Adjusted EBITDA differently than the Company does. A reconciliation of net loss to Adjusted EBITDA is provided in the table below.

The Company defines “Adjusted EBITDA” as earnings before interest and other non-operating income (expense), income taxes, depreciation and amortization, impairment charges, share-based payments, gains and losses on the revaluing of contingent consideration, foreign currency gains and losses, acquisition and restructuring costs and other gains and losses.  

 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
CAD$ (in 000s)
2016
2015
 
2016
2015
Net loss
(61,119)
 
(10,739)
 
 
(57,936)
 
(8,403)
 
 
Net tax expense
(5,660)
 
(727)
 
 
(8,849)
 
(1,157)
 
Loss before tax
(66,779)
 
(11,466)
 
 
(66,785)
 
(9,560)
 
 
Depreciation and amortization
12,289
 
4,559
 
 
31,577
 
10,357
 
 
Interest expense, net
11,594
 
2,066
 
 
30,218
 
4,060
 
EBITDA
(42,896)
 
(4,841)
 
 
(4,990)
 
4,857
 
 
Impairment of intangibles and goodwill
87,387
 
4,687
 
 
94,038
 
4,687
 
 
Fair value adjustment to derivative
(46,214)
 
(1,115)
 
 
(93,218)
 
(6,621)
 
 
Loss on exchange of debt
8,474
 
 
 
23,856
 
 
 
Revaluing contingent consideration
(3,367)
 
 
 
(9,444)
 
 
 
Other expense
5,389
 
 
 
4,831
 
30
 
 
Foreign currency loss
745
 
1,571
 
 
229
 
3,554
 
 
Share-based payments
491
 
136
 
 
1,759
 
276
 
 
Acquisition and restructuring costs
2,911
 
1,202
 
 
19,724
 
9,839
 
 
Gain on acquisition
 
 
 
 
(17,395)
 
 
European poker business sale/closure
 
2,891
 
 
5,950
 
11,317
 
Adjusted EBITDA
12,920
 
4,532
 
 
42,735
 
10,544
 

Adjusted EBITDA was $12.9 million and $42.7 million for the three and twelve months ended December 31, 2016, respectively, compared to $4.5 million and $10.5 million for the three and twelve months ended December 31, 2015, respectively. During the fourth quarter, EBITDA was positively impacted by strong growth in revenues from organic growth in the Company’s real-money casino business and the contribution of an entire quarter of OpenBet operations.

Financial Position as of December 31, 2016

  • Cash and cash equivalents (including restricted cash) of $42.4 million;
  • Total assets of $752.4 million;
  • Total liabilities of $561.2 million;
  • Total equity of $191.1 million; and
  • Total borrowings of $327.9 million.

Outlook

Based on preliminary financial information, NYX Gaming Group expects the following results for the quarter ended March 31, 2017:

  • Revenue to be in the range of $57.0 - $61.0 million; and
  • Adjusted EBITDA in the range of $15.0 - $17.0 million.

Investors are cautioned that such preliminary financial information is unaudited and subject to change, reconsideration and/or modification. Such financial information is based on management’s current beliefs, intentions or expectations based on certain assumptions and estimates, which could prove to be significantly incorrect. Any preliminary financial information should not be viewed as a substitute for full interim and annual financial statements that have been reviewed and/or audited by the Company's auditors.

Fourth Quarter and Fiscal Year 2016 Conference Call & Webcast

A conference call and webcast to discuss NYX Gaming Group's fourth quarter and fiscal year 2016 results will be held on April 25, 2017, at 8:30 a.m. E.T. Matt Davey, CEO of NYX Gaming Group, and Eric Matejevich, CFO, will host the call. A question and answer session will follow the presentation. To participate, interested parties are asked to dial (647) 427-7450 or (888) 231-8191 prior to the scheduled start of the call. A replay of the conference call will be available by dialing (855) 859-2056 and using the reference number 86894990. The replay of this call will be available until May 2, 2017.

The Conference Call will also be webcast live at  

http://event.on24.com/r.htm?e=1385855&s=1&k=2F5B5598D987968E135BFBB6E953E0EA

Financial Statements and Management's Discussion and Analysis

NYX Gaming Group's audited consolidated financial statements, notes thereto and Management's Discussion and Analysis for the twelve months ended December 31, 2016 will be available on SEDAR at www.sedar.com. Additional information relating to NYX Gaming Group and its business may also be found on SEDAR at www.sedar.com and the Company's website at www.nyxgaminggroup.com.

Disclaimer

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.

Caution Regarding Forward-Looking Statements and Non-IFRS Financial Measures

Certain statements included herein, including those that express management's expectations or estimates of the Company’s future performance, constitute "forward-looking statements" within the meaning of applicable securities laws. Any statements that are contained in this news release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "potential" or the negative of these terms or other similar expressions. Forward-looking statements are based on certain assumptions regarding the Company's expected growth, results of operations, performance, industry trends and growth opportunities. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management at this time, are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies that could cause actual results to differ materially from those expressed or implied in such statements. Investors are cautioned not to put undue reliance on forward-looking statements. Applicable risks and uncertainties include, but are not limited to: credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, interest rates or tax rates, the impact of government regulation on the online gaming industry and the risk that such regulation is subject to change, competition from other providers of online gaming services, the possibility that the Company may be unable to successfully integrate the acquired businesses, the risks associated with international and foreign operations, the impact of consolidations in the online gaming industry and the other risks identified under the heading "Risk Factors" in the Company's final long form prospectus dated December 18, 2014 and final short form prospectuses dated July 9, 2015 and July 14, 2016, each as filed on SEDAR at www.sedar.com, and in other filings that NYX Gaming Group may make with applicable securities authorities in the future. The forward-looking statements contained herein reflect NYX Gaming Group's current views with respect to future events, and except as required by law, NYX Gaming Group does not intend, and undertakes no obligation, to update any forward-looking statements to reflect, in particular, new information or future events, or otherwise.

Certain statements in this news release may also constitute future-oriented financial information and financial outlooks, within the meaning of applicable securities laws. Forward-looking information may relate to NYX’s future outlook and anticipated events or results and may include statements regarding NYX’s financial results, future financial position, projected EBITDA or Adjusted EBITDA growth, projected revenue, taxes, plans and objectives. Forward-looking information contained in this presentation is based on certain assumptions regarding expected growth, results of operations, performance, industry trends and growth opportunities. While management considers these assumptions to be reasonable, based on information available, they may prove to be incorrect.

This release contains Non-IFRS financial measures and are noted where used. These financial measures are used by many investors to compare companies and management believes they are important measures in evaluating NYX Gaming Group. However, they are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. Therefore, they may not be comparable to similar measures presented by other issuers. Investors are cautioned that such measures should not be construed as alternatives to comparable IFRS measures determined in accordance with IFRS.

Neither the 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.

For media inquiries please contact:

Huw Thomas
Chief Corporate Development and Marketing Officer
NYX Gaming Group
E: huw.thomas@nyxgg.com

For investor relations inquiries please contact:

Dennis Fong
Investor Relations
NYX Gaming Group
E: investor.relations@nyxgg.com

About NYX Gaming Group

NYX Gaming Group Limited is a leading digital gaming provider headquartered in Las Vegas, USA with a staff of more than 1,000 employees globally across Europe, North America, Asia, and Australia. The Company provides one of the world’s largest portfolios of leading content and technology to some of the foremost gaming operators, lotteries and casinos across the globe. NYX also has one of the broadest distribution bases in the industry with over 200 unique customers and the widest portfolio of content available from their own global studios and broad partner network. The diversified game catalogue delivers content across web and mobile formats, focusing on Bingo, Casino, Lottery and Sportsbook verticals.

NYX Gaming Group was honoured in one of the most competitive categories with the 2016 Best Platform Supplier award at the iGaming North America Awards (iGNA) – a testament to NYX’s commitment to innovation and product development. NYX’s Open Gaming System (OGS™) was also recently named 2016 Platform of the Year in acknowledgement of its position as the industry’s market-leading gaming offering, which allows licensees to leverage the best-of-breed multi-vendor casino content from around the world.

NYX Gaming Group Limited is listed on the TSX Venture Exchange under the symbol (TSXV: NYX).

www.nyxgaminggroup.com