BOCA RATON, Fla., May 14, 2008 (PRIME NEWSWIRE) -- Silverstar Holdings, Ltd. (Nasdaq:SSTR), a leading international publisher and developer of interactive entertainment software, reported financial results for the third quarter of fiscal 2008 ended March 31, 2008.
Third Quarter Fiscal 2008 Financial Results
Revenues for the third quarter 2008 totaled $5.9 million, a 27% increase from $4.6 million a year ago. The quarter's results were driven primarily by the release of 14 SKUs, including Ford Racing Off Road (PS2, PSP, and PC), and FlatOut: Head On (PSP) as well as continued momentum from the Animal Paradise DS product released in Europe in November 2007.
Adjusted EBITDA, a non-GAAP measure, totaled $148,000 or $0.01 per share, an increase of 48% from $100,000 or $0.01 per share in the same quarter a year ago. A more detailed discussion and reconciliation of adjusted EBITDA to operating income is included at the end of this release.
Net loss totaled $2.8 million or ($0.14) per share, as compared to a net loss of $2.8 million or ($0.27) per share a year ago.
Quarter-end cash, restricted cash and short-term investments totaled $7.4 million, as compared to $5.0 million at the end of the third quarter of 2007.
Third Quarter Fiscal 2008 Operational Highlights
* Released 14 SKUs, as compared to 11 in the same year-ago period, bringing the total number of releases for the first nine months of fiscal 2008 to 36 SKUs. * Third quarter releases comprised several well-received titles, including FlatOut: Head On (PSP), Ford Off Road (PS2, PSP, PC), and Zoo Tycoon Complete Collection (PC). * Animal Paradise (DS) achieved excellent European sell-through during the quarter, indicating the potential to become a major future franchise. * Signing of Unsolved Crimes for release in second half of calendar 2008 demonstrated accelerated transition to Nintendo DS console. * Individual product sales continue to exceed budgeted expectations across the board.
"This quarter represents the greatest revenue generating third quarter in the history of our company, primarily as a result of the overall increase in year-over-year sales at our subsidiary, Empire Interactive," said Clive Kabatznik, CEO of Silverstar Holdings. "This was due to the success of individual product releases that met or exceeded our expectations, like FlatOut Head On and Ford Off Road. However, the highly anticipated release of Myst on DS, the first product we are to sell directly in North America, has been pushed into Q4 primarily due to the timing of retail placement."
Continued Kabatznik: "The initial sales of Myst in Q4 will help offset our shifting of the release of two major titles, Hello Kitty and Pipemania, to the first quarter of fiscal 2009 due to approval delays. This illustrates how the precise timing of game releases is often difficult to project, as outside factors like third party approvals, retail shelf space and manufacturing lead times can cause delays beyond the control of developers and publishers.
"In our case, the rescheduling of the Hello Kitty and Pipemania franchises does not mean we have lost business. Rather, it now strengthens our fiscal 2009 product line-up, with Hello Kitty in particular shaping up to become a significant international seller. Despite these titles now being released in fiscal 2009, we are maintaining our strong product release momentum in Q4, with 31 SKUs slated for release, as compared to 14 in the third quarter.
"The global interactive entertainment software market also continues to grow at a double digit pace. Silverstar is uniquely positioned as one of the only middle market players that have both European and North American direct sales and distribution networks fully in place which can exploit the many opportunities in this buoyant market."
Fiscal Year 2008 Financial Guidance Update
Management is updating its fiscal 2008 guidance to reflect several factors, including the rescheduling of Hello Kitty and Pipemania franchises, which are to be released in North America and Europe. These titles are now set to launch in the first quarter of fiscal 2009. The rescheduling is due to delays in approvals from rights holders and the current backlog at manufacturers for both approvals and manufacturing. Accordingly, management has updated the financial guidance for fiscal 2008:
* Revenues of approximately $30.0 million, an increase of 52% from $19.8 million in fiscal 2007 * Adjusted EBITDA of at least $2.5 million, a 24% decrease from $3.3 million in fiscal 2007. (Fiscal 2007 included seven months of Empire Interactive's operations and adjusted EBITDA was heavily weighted by the June 2007 success of FlatOut Ultimate Carnage on Xbox 360.)
Said Kabatznik: "We believe our entire line-up is well positioned to capitalize on the rapidly expanding demographic of the growing installed base of the Nintendo Wii and DS. We are excited about the intermediate and long-term opportunities being generated by the industry momentum. This positive macro environment, combined with our strong product portfolio, world-class international sales and distribution network, and large digital catalog, have made us very confident about our prospects for the future."
Product Release Outlook
Silverstar released 36 SKUs across multiple platforms in the first nine months of fiscal 2008. Of these, 10 were frontline console and handheld releases. Management currently expects to increase console and handheld releases by more than 75% year-over-year in fiscal 2009, focusing on the fast growing Nintendo Wii and DS markets. The outlook estimates below are subject to adjustment over time, due to the many factors involved in development, sales, and distribution, particularly those involving third parties.
FY 08 FY 09
Est Planned
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Consoles
--------
PS2 4 4
Wii 2 6
Xbox 360 -- 1
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Total Consoles SKUs 6 11
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Handhelds
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DS 4 10
PSP 4 4
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Total Handhelds SKUs 8 14
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PC SKUs 35 35
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Total Retail SKUs 49 60
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Digital SKUs 19 TBD
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Fourth Quarter Fiscal 2008 Significant Product Titles Planned for
Release
Title Platform Distribution
---------------------------------------------------------------
Ford Off Road Wii Retail
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Jack Keane PC Retail + Digital
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Jackass DS Retail
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Myst DS Retail
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Ultimate Board Games PS2, PSP, Wii Retail
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FlatOut Ultimate Carnage PC Retail
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Conference Call
Silverstar management will host a conference call today at 4:30 p.m. Eastern Time. A brief presentation by management will be followed by a question and answer period. To participate in the call, dial the appropriate number 5-10 minutes prior to the start time, request the Silverstar Holdings conference call and provide the conference ID.
Domestic callers: 1-800-894-5910 International callers: 1-785-424-1052 Conference ID#: 7SILVERSTAR Internet Simulcast: http://viavid.net/dce.aspx?sid=00004F91
The call will be available for replay starting at 7:30 p.m. Eastern Time until June 14, 2008:
Toll-Free Replay number: 1-800-283-4595 International Replay number: 1-402-220-0873
If you have any difficulty connecting with the conference call or webcast, please contact the Liolios Group at 949-574-3860.
About Silverstar Holdings
Silverstar Holdings Ltd. is an international publisher and developer of interactive entertainment software that operates primarily through two wholly-owned subsidiaries: Empire Interactive, PLC and Strategy First, Inc. Empire Interactive, http://www.empireinteractive.com, is an award-winning developer and publisher of interactive entertainment software games, including Starsky & Hutch, Big Mutha Truckers, Ford Racing and FlatOut series. Empire's products are delivered on both console and PC platforms. Strategy First, http://www.strategyfirst.com, is a worldwide publisher of entertainment software for the PC, including the award winning Disciples, Jack Keene, Jagged Alliance, and Space Empires series. For more information about Silverstar Holdings, go to http://www.silverstarholdings.com.
The statements which are not historical facts contained in this press release are forward-looking statements that involve certain risks and uncertainties, including but not limited to risks associated with the uncertainty of future financial results, additional financing requirements, development of new products, regulatory approval processes, the impact of competitive products or pricing, technological changes, the effect of economic conditions and other uncertainties detailed in the company's filings with the Securities and Exchange Commission. Key assumptions underlying the company's guidance for future periods include continued consumer acceptance of the Wii and DS from Nintendo, Xbox 360 from Microsoft, and PSP from Sony; the ability to develop and publish products that capture market share for these next generation systems, while continuing to leverage opportunities on legacy platforms; as well as the timely delivery of the titles detailed in this release.
Financial Tables
SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS March 31, June 30,
------ 2008 2007
---- ----
Current Assets: (Unaudited)
Cash and cash equivalents, includes
restricted cash of $756,370 and $590,990
respectively $7,408,235 $3,693,149
Cash restricted for foreign tax estimated
liability 658,373 1,064,040
Accounts receivable, net 2,240,510 6,908,846
Inventories, net 808,022 900,128
Current portion of long-term notes
receivable 294,147 256,982
Prepaid expenses and other current assets 430,376 669,730
Assets available for sale -- 505,650
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Total current assets $11,839,663 $13,998,525
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Property, plant and equipment, net 526,085 488,031
Software development costs, net 7,832,701 5,183,033
Investments in non-marketable securities 1,131,066 1,143,566
Long-term notes receivable -- 214,222
Goodwill, net 921,440 890,038
Intangible assets, net 15,588,953 20,611,189
Deferred tax asset 622,471 625,217
Deferred charges and other assets 1,047,021 631,843
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Total assets $39,509,400 $43,785,664
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Lines of credit $2,203,292 $2,875,472
Notes payable - acquisition 2,665 5,475,179
Earn out notes payable - acquisition 3,953,887 3,847,426
Accounts payable 3,519,416 6,959,835
Accrued royalty expense 1,655,577 2,937,887
Accrued expenses 2,281,038 3,355,852
Deposit on July 2007 private placement -- 630,403
Estimated liability for foreign tax 271,685 616,458
----------- -----------
Total current liabilities 13,887,560 26,698,512
Convertible secured debentures 7,246,238 4,790,779
Other long-term liabilities 419,024 412,363
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Total Liabilities $21,552,822 $31,901,654
----------- -----------
Commitments, contingencies and other matters
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000
shares authorized; no shares issued and
outstanding -- --
Common stock, Class A, $.01 par value,
50,000,000 shares authorized; 19,806,177
(1,496,700 shares in treasury) and
9,621,891 shares issued and outstanding,
respectively 198,061 96,218
Common stock, Class B, $.01 par value;
2,000,000 shares authorized; 0 shares and
835,260 share issued and outstanding,
respectively -- 8,353
Common stock, FSAH Class B $.001 par value;
10,000,000 shares authorized;0 and
2,671,087 shares issued and outstanding,
respectively -- 600
Additional paid-in capital 82,720,580 67,843,919
Accumulated deficit (65,525,174) (56,796,978)
Accumulated comprehensive income 563,111 731,898
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Total stockholders' equity 17,956,578 11,884,010
----------- -----------
Total liabilities and stockholders'
equity $39,509,400 $43,785,664
=========== ===========
SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
2008 2007
---- ----
Net Revenues $5,861,240 $4,603,017
Operating expenses:
Cost of sales 2,370,810 1,782,905
Development costs and royalties 327,017 399,609
Selling, general and administrative 3,147,412 2,689,716
Amortization of software development costs 1,246.772 53,617
Amortization of acquired intangibles 1,054,426 1,929,917
Depreciation 50,238 62,458
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8,196,675 6,918,222
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Operating loss (2,335,435) (2.315,205)
Other income (expense) 2 (426)
Foreign currency loss (280,448) (88,212)
Amortization of convertible debt discounts
and issuance costs (63,073) (172,990)
Interest expense (129,100) (254,155)
Interest income 41,487 89,697
----------- -----------
Loss before income taxes (2,766,567) (2,741,291)
Provision for income taxes (821) (9,737)
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Net Loss ($2,767,388) ($2,751,028)
=========== ===========
Loss per share:
Basic and diluted ($.14) ($.27)
Weighted average common stock outstanding:
Basic and diluted 19,806,117 10,119,834
=========== ===========
Reconciliation of Operating Income to Adjusted EBITDA
In addition to other measures, management evaluates operating results based upon an adjusted "EBITDA," which is defined as operating income before depreciation and amortization, interest expense, income taxes, and stock based compensation, each of which is presented on the company's Consolidated Statements of Operations. The company's presentation of adjusted EBITDA, a non-GAAP measure, may not be comparable to similarly titled measures used by other companies. Any of these items could be significant to the company's financial results. The following table reconciles adjusted EBITDA to operating income for the periods indicated.
Three Months Ended
March 31,
----------------------
Adjusted EBITDA Reconciliation 2008 2007
---------- ----------
Operating Loss $(2,335.4) $(2,315.2)
Depreciation 50.2 62.5
Amortization of Acquired Intangibles 1,054.4 1,929.9
Amortization of Software Development Costs 1,246.8 53.6
Stock Based Compensation 111.7 119.2
Shares Issued for Services 20.7 250.0
========== ==========
Adjusted EBITDA $ 148.4 $ 100.0
Adjusted EBITDA per Share $ 0.01 $ 0.01
========== ==========
Weighted Avg. # of Shares Outstanding 19,806 10,120
Q3 FY2008 Revenue by Platform and Geographic Area
Beginning this quarter, the company will begin to report unaudited supplemental financial information, including platform revenue mix and geographic revenue mix.
Platform Revenue Mix
---------
Consoles Q3 2008
---------
Microsoft Xbox 360 1.8%
Microsoft Xbox 0.4%
Nintendo Wii 0.0%
Sony Playstation 2 (PS2) 22.8%
---------
24.9%
---------
Handheld
Nintendo Dual Screen (DS) 5.7%
Sony Playstation Portable (PSP) 38.0%
---------
43.7%
---------
PC
Boxed Goods 19.1%
Licensing 5.4%
---------
24.5%
---------
Online/Digital Download/Arcade
PC Based 0.6%
XBLA 1.4%
Arcade 0.5%
Turner 1.1%
Other 3.3%
---------
6.9%
---------
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Total 100.0%
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Geographic Revenue Mix
North America 5.4%
Europe 94.6%
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100.0%
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