Entertainment Gaming Asia reports losses

Results posted this week by Nasdaq-listed Entertainment Gaming Asia appear to indicate that the company’s 2016 announced strategy to transition from slot machine supply to social games development is proving expensive.

For the last quarter of 2016 the company reported losses of $6.7 million and revenue of only $357,000, with FY-2016 losses rising to $9.7 million on revenue of $2 million for the year, the latter figure representing a 26 percent year-on-year decline.

Management cited lower gaming operations revenue, higher operating expenses and higher taxes in its Philippine operations as the principal attributing factors.

Entertainment Gaming Asia withdrew from operations in Cambodia in 2016, selling all of its EGM seats at NagaWorld Casino in order to lay the groundwork for “new growth opportunities” elsewhere.

In its results release the company observed that “all revenue and expenses associated with the gaming products operations and Cambodia gaming operations have been reclassified as discontinued operations for the periods presented.”

Late last year EGA launched its social gaming ambitions in the form of City of Games; Q4 revenue of $7,000 was achieved, set against losses of $120,000 for the quarter and $196,000 for the full year 2016.

The situation is not as bleak as the figures suggest, bearing in mind that the social games strategy has yet to fully develop. Thanks to its divestment in other areas, EGA has no debt burden and cash reserves in excess of $30 million…plenty of gas in the development tank. The company also has a powerful majority shareholder in the form of Melco International Development Ltd.

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