TORONTO, ONTARIO–(Marketwired – May 1, 2017) – Tangelo Games Corp. (“Tangelo” or the “Company“) (TSX VENTURE:GEL) reports its financial results for the fourth quarter and year-end of 2016 (the three and twelve month periods ended December 31, 2016).
HIGHLIGHTS
All figures CAD
- Tangelo generated revenue of $9.4 million and $39.6 million for the three and twelve months ended December 31, 2016 compared to revenue of $8.4 million and $24.1 million for the three and twelve months ended December 31, 2015. The Operating Loss was $3.1 million and $4.6 million for the three and twelve months ended December 31, 2016 compared to $30.1 million and $35.3 million for the three and twelve months ended December 31, 2015. Adjusted EBITDA of $3.1 million and $11.9 million was realized for the three and twelve months ended December 31, 2016 compared to $2.6 million and $5.3 million for the three and twelve months ended December 31, 2015 (see Non-IFRS measures).
- In October 2016 Tangelo was included as best ‘Social Slots Operator’, ‘Affiliate Programme’ and ‘Slots Operator’ in the shortlist of nominees of the EGR Operator
Awards 2016, one of the most prestigious recognitions in the online gaming industry.
| Fourth Quarter Financial Summary in $000,000 Canadian Dollars except for shares and per share amounts |
||||||||||||
| For the three months ended | For the twelve months ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||
| REVENUE | 9.35 | 8.35 | 39.57 | 24.05 | ||||||||
| Adjusted EBITDA* | 3.14 | 2.63 | 11.86 | 5.30 | ||||||||
| Due diligence and transaction costs, Severance and restructure costs, Depreciation of equipment, Amortization of intangibles and Stock based compensation |
3.15 |
9.16 |
13.32 |
16.14 |
||||||||
| Impairment of goodwill | 3.09 | 24.45 | 3.09 | 24.45 | ||||||||
| OPERATING (LOSS) | (3.10 | ) | (30.98 | ) | (4.55 | ) | (35.29 | ) | ||||
| FINANCING AND OTHER NON-OPERATING EXPENSES | ||||||||||||
| Interest and accretion, Changes in value of long-term debt, Foreign exchange | 7.23 | 4.75 | 14.70 | (9.29 | ) | |||||||
| LOSS, CONTINUING OPERATIONS, BEFORE INCOME TAX | (10.33 | ) | (35.73 | ) | (19.24 | ) | (26.00 | ) | ||||
| NET LOSS, CONTINUING OPERATIONS | (9.59 | ) | (34.76 | ) | (17.96 | ) | (25.72 | ) | ||||
| NET INCOME/(LOSS), DISCONTINUED OPERATIONS | 0.01 | (0.11 | ) | 0.04 | (5.94 | ) | ||||||
| TOTAL NET LOSS FOR THE PERIOD | (9.58 | ) | (34.88 | ) | (17.92 | ) | (31.66 | ) | ||||
| Basic and diluted loss per share, continuing operations | $ | (0.05 | ) | $ | (0.22 | ) | $ | (0.10 | ) | $ | (0.17 | ) |
| Basic and diluted income/(loss) per share, discontinued operations | $ | 0.00 | $ | (0.00 | ) | $ | 0.00 | $ | (0.04 | ) | ||
| Weighted average number of shares: basic and diluted | 179,820,105 | 160,879,299 | 176,896,032 | 153,330,020 | ||||||||
| * see Non-IFRS Measures | ||||||||||||
Tangelo Q4 results can be found on its website (www.tangleo.com) or SEDAR (www.sedar.com).
James Lanthier, Chief Executive Officer of Tangelo, commented:
“In 2016 Tangelo management addressed the operational and corporate issues which it determined were the necessary predicates to a successful resolution of its indebtedness. These included:
- A favorable resolution of the open-ended earn-out obligations with the founders of its Israeli subsidiary, which enabled Tangelo management to assume full operational and strategic control of that subsidiary while ensuring business and revenue continuity.
- Following this resolution, the operational integration of its Spanish and Israeli businesses reduced headcount at the operating business by 25%.
- The successful kick-off and progress towards the migration of the substantial majority of its Tangelo Spain-based games from Flash to Unity. It is expected that the migration of games representing the majority of the revenue from Tangelo Spain will be complete by June 2017.
- The extension of its obligations under its term loan facility with Third Eye Capital (“Third Eye”) to give management the time to execute on the alternatives made available to the Company via a strategic review.
Reviewing our business in 2016 underscores how critical these initiatives are to the ongoing success of the business.
Tangelo’s revenue grew significantly during the year with the addition of Tangelo Spain to $39.57 million from $24.05 million. Tangelo’s fundamentals improved and stabilized compared to the prior quarter of 2016. Tangelo’s revenue grew slightly during the quarter up to $9.35 million from $9.31 million. The average monthly paying users were stable from the prior quarter at approximately 59,000. While revenue declined from Q2 to Q3 2016 due to the reallocation of development resources to the Flash migration, management was able to compensate for the slowdown in its new content releases with the application of analytics- based marketing programs to its Israeli-based business, which it was not able to do prior to the settlement of its earn-out obligations.
Adjusted EBITDA grew significantly year over year to $11.86 million from $5.30 million due to the addition of Tangelo Spain and Adjusted EBITDA margin grew to 30% for the full year of 2016, up from 22% in 2015.
While our Net Loss from Continuing Operations increased from Q2 due to a goodwill impairment and non-cash charges, integration savings drove sequential Adjusted EBITDA growth to $3.14 million, up from $2.96 million in Q3 2016. In this second straight quarter of Adjusted EBITDA improvement, Tangelo achieved an Adjusted EBITDA margin of 34%, inclusive of its public company expenses. Management believes that its Adjusted EBITDA margin benchmarks favorably against the broader social casino market. The savings which made this margin improvement possible were, once again, enabled by the operational control of Tangelo’s Israeli subsidiary achieved through the settlement of its earn-out obligations (see Non-IFRS measures).
The Company’s Operating Loss decreased to $4.55 million in 2016 from $35.29 million in 2015 due primarily to reduced transaction and severance costs, a lesser impairment charge of $3.09 million in 2016 compared to $24.45 million in 2015 offset by increased amortization of intangibles of $11.45 million in 2016 compared to $8.12 million in 2015 with the addition of Tangelo Spain.”
Status of the Strategic Review
In light of the Company’s debt obligations, and in light of the interest and corporate activity in the casual gaming space, in 2016, the Company initiated discussions with a number of strategic third parties around a potential transaction. The discussions included a potential sale of the Company or an acquisition of another complementary business. Many of the potential scenarios have involved the potential participation of third-party equity investors and a partial pay-down of the Company’s debt obligations. The Company is in active due diligence with a number of parties and continues to make progress towards its goal of a transaction that will improve the Company’s capital structure and benefit all stakeholders. The Company cannot, however, give any assurances that a definitive agreement will be reached with any party, or that a transaction of any kind of will be completed, nor can it give any assurances on the timing or nature of such a transaction, at this stage.
We appreciate investors’ desire for more information on the outcome of the strategic review. At this point, however, no definitive agreements have been reached, and accordingly, any specific announcement regarding a potential transaction would be premature and potentially harmful to the Company’s interest.
The Company maintains an active dialogue with Third Eye Capital Corporation (“Third Eye”), the administrative agent of Tangelo’s credit facility, regarding all transaction opportunities. While the Company’s annual financial statements include a going concern note related to the maturity of its debt facility, which is due January 31, 2018 and which has been reflected as a current liability in its December 31, 2016 financial statements, Third Eye has been an active and supportive partner of management in their common goal of achieving a beneficial strategic transaction.
Vicenc Marti, President of Tangelo, commented: “Tangelo’s performance in Q4 2016 shows that the Company is a player in the social casino market, with a top tier EBITDA Margin, a very resilient revenue profile and unique geographical diversification. Tangelo is now in a position to leverage its Company-wide Unity platform which will result in faster development cycles and more frequent mobile game launchings during the second half of 2017.”
Financial Results and Non-IFRS Measures
The Company has included certain Non-IFRS performance measures, namely EBITDA and adjusted EBITDA and working capital, within this press release. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, we and certain investors and securities analysts use this information to evaluate the Company’s performance and ability to generate cash, profits and meet financial commitments. These Non-IFRS measures do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. These Non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
EBITDA is defined as “Earnings Before Interest, Tax, Depreciation and Amortization”. Adjusted EBITDA adjusts EBTIDA for due diligence and transaction costs and restructure and severance expenses as these are generally non-recurring. The Company removes stock based compensation in calculating Adjusted EBITDA as it is a non- cash expense that can vary significantly depending on the timing of option grants. EBITDA does not include the discontinued operations of Vast and Tech Channel. The following tables provide a reconciliation to Operating Loss/Income on the Statements of Consolidated Income and Comprehensive Loss for the three months and years ended December 31, 2016 and 2015 as reported in the Company’s audited annual consolidated financial statements.
| Adjusted EBITDA – Consolidated | ||||||||||||
| For the Three Months Ended | For the Years Ended | |||||||||||
| December 31, 2016 |
December 31, 2015 |
December 31, 2016 |
December 31, 2015 |
|||||||||
| Operating loss, in 000,000’s | $ | (3.10 | ) | $ | (30.98 | ) | $ | (4.55 | ) | $ | (35.29 | ) |
| Add back: | ||||||||||||
| Due diligence and transaction costs | 0.17 | 0.84 | 0.53 | 3.99 | ||||||||
| Restructure and severance | 0.03 | 0.23 | 0.83 | 1.04 | ||||||||
| Depreciation of equipment | 0.03 | 0.02 | 0.11 | 0.06 | ||||||||
| Amortization of intangibles | 2.87 | 8.12 | 11.45 | 8.12 | ||||||||
| Stock-based compensation | 0.05 | (0.05 | ) | 0.40 | 2.93 | |||||||
| Impairment of goodwill | 3.09 | 24.45 | 3.09 | 24.45 | ||||||||
| Adjusted EBITDA | $ | 3.14 | $ | 2.63 | $ | 11.86 | $ | 5.30 | ||||
About Tangelo
Tangelo Games Corp., the parent company of Tangelo Israel and Tangelo Spain, is a developer of social and mobile gaming for desktop, iOS and Android platforms. Tangelo Israel and Tangelo Spain design, develop and distribute their top ranked social casino-themed games within online social networks (such as Facebook) and mobile platforms (such as Android and iPhone). All of the Tangelo Israel and Tangelo Spain games are free to play and generate revenue primarily through the in-game sale of virtual coins.
Caution Regarding Forward-Looking Information:
Certain statements in this press release may constitute “forward-looking statements” which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this press release, such statements may use such words as “may”, “will”, expect”, “believe”, “plan” and other similar terminology. These statements include, but are not limited to, statements with respect to the future business and operations of the Company, the ability of the Company to release new and successful games, the financial results of the Company and its subsidiaries, negotiations with the Company’s lenders to extend or amend terms of the credit facility, the potential to enter into a strategic or financing transaction with a third party or receive approval from the Company’s lenders to enter into such transaction, and the future prospects of the Company. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this press release. The forward-looking statements involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, general economic, market or business conditions and future developments in the sectors of the economy in which the businesses of Tangelo operate. The foregoing list of factors is not exhaustive. Please see the Company’s short form prospectus dated March 27, 2015, the Company’s Annual Information Form dated November 11, 2015 and other documents available under the Company’s profile on www.sedar.com, for a more detailed description of the risk factors. The Company undertakes no obligation to update publicly or revise any forward-looking statements, whether a result of new information, future results or otherwise, except as required by law.
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.
Pinnacle Capital Markets LTD.
President & CEO
Mobile/Office:416-433-5696
[email protected]
www.pinnaclecapitalmarkets.ca /Skype: spyros.karellas
