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



    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.
    





For further information:

For further information: Arnon Levy, President & CEO, Guest-Tek, (403)
444-8488, arnon.levy@guest-tek.com; David Simpson, Interim CFO, Guest-Tek,
(403) 444-8486, david.simpson@guest-tek.com

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