Iao Kun Group Holding Company Limited (“IKGH”) (IKGH), which operates through its subsidiaries and related promotion entities that act as VIP room gaming promoters and collaborator, today announced unaudited financial results for the fourth quarter and the year ended December 31, 2014. All currency amounts are stated in United States dollars. Please refer to the Annual Report on Form 20-F that will be filed with the Securities and Exchange Commission in April 2015 for the full audited financial statements and related disclosures for the year ended December 31, 2014.
Fourth Quarter 2014 and Subsequent Highlights
Rolling Chip Turnover (a metric used by casinos to measure the aggregate amount of players’ bets and overall volume of VIP gaming room business transacted, which is further defined below) for the three months ended December 31, 2014 was $2.9 billion, a decrease of 34% compared to $4.4 billion for the three months ended December 31, 2013.
Net income, including the change in fair value of contingent consideration of $1.8 million related to the King’s Gaming, Bao Li Gaming and Oriental VIP Room acquisitions, was $5.7 million, or $0.09 per share (fully diluted), for the fourth quarter of 2014 compared to a net loss of $5.5 million, or $(0.09) per share (basic and diluted), for the same period of 2013.
Non-GAAP income, which is operating income before amortization of intangible assets and the change in fair value of contingent consideration related to the acquisitions of King’s Gaming, Bao Li Gaming and Oriental VIP Room, was $8.0 million, or $0.13 per share (fully diluted), for the three months ended December 31, 2014 as compared to a non-GAAP loss of $3.5 million, or $(0.06) per share (basic and diluted), for the three months ended December 31, 2013.
In February 2015, the Hong Kong Stock Exchange declared it was unable to proceed with its review of the Company’s Form A1 application and the Company has elected to not continue with the application process at this time.
Fourth Quarter 2014 Results
For the three months ended December 31, 2014, IKGH recorded revenue of $52.3 million, a 4% increase from the same period of 2013, primarily due to a win rate of 3.95% for the three months ended December 31, 2014 (above the statistical average win rate range), compared to a win rate of 2.39% for the three months ended December 31, 2013. The win rate increase was partially offset by (i) slower revenue growth of VIP baccarat, consistent with the overall decline of gaming revenue in Macau; and (ii) the economic downturn and tightening of credit in mainland China, from where the majority of IKGH’s VIP gaming patrons reside.
The increase in net income for the three months ended December 31, 2014 was primarily due to increased revenue, a net decrease to the contingent consideration liability for Bao Li Gaming and the Oriental VIP Room, due primarily to lower share prices, and lower commissions as a result of lower Rolling Chip Turnover, partially offset by higher commission rates offered to non-credit agents. IKGH also incurred higher selling, general and administrative expenses for the three months ended December 31, 2014, primarily due to additional costs associated with IKGH’s application to list on the Hong Kong Stock Exchange.
“In the fourth quarter, we experienced a win rate above the statistical average, which more than offset the impact of the ongoing VIP baccarat volatility and our Rolling Chip Turnover decline from the prior-year quarter,” said Mr. Man Pou Lam (Mr. Lam), Chairman of IKGH. “Despite current Macau VIP market conditions, we remain committed to expanding our presence and market share in the VIP gaming market while continuing to prudently manage our capital to create long-term value for our shareholders.”
Full Year 2014 Highlights
Rolling Chip Turnover for the year ended December 31, 2014 was $16.6 billion, a decrease of 2% compared to $17.0 billion for the year ended December 31, 2013.
Net loss, including the change in fair value of contingent consideration of $60.9 million related to the King’s Gaming, Bao Li Gaming and Oriental VIP Room acquisitions, was $60.1 million, or $(0.99) per share (basic and diluted), for the year ended December 31, 2014 compared to net income of $5.4 million, or $0.10 per share (fully diluted), for the year ended December 31, 2013.
Non-GAAP income was $17.2 million, or $0.28 per share (fully diluted), for the year ended December 31, 2014 compared to $31.0 million, or $0.58 per share (fully diluted), for the year ended December 31, 2013.
Outlook for 2015
For the first two months of 2015, IKGH’s Rolling Chip Turnover was US$1.44 billion (an average of $0.72 billion per month), down 52% year-over-year, compared to US$3.02 billion (an average of $1.51 billion per month) for the first two months of 2014.
The Company is providing 2015 Rolling Chip Turnover guidance for its five existing VIP rooms in Macau of between US$8.5 billion and US$10.0 billion.
