The online gambling group announced its third quarter Key Performance Indicators and trading update, revealing a 53% increase in group revenue up to $337.2m. Excluding Gamebookers that generated net revenue of $3.2m in the period since its acquisition on August, group revenue increased by 52% year on year and by 5% versus the second quarter.
PartyGaming, which was forced to shut its website to American customers after the effective outlawing of online gambling in the US, said it will incur a one-off charge in the second half of the year of $250m and predicted a substantial retraction in full year earnings.
Chief Executive Mitch Garber commented: “The impact of the recently passed legislation in the US has changed the shape of our business fundamentally. On 13 October 2006, following the SAFE Port Act being passed into law, the Group suspended all of its real money gaming operations with players located in the US, thereby becoming an exclusively non-US online gaming business. Whilst the US has historically represented the majority of the Group’s revenues and profits, I am pleased to report that our non-US business continued to deliver strong growth in the quarter with revenues up 158% year on year to $92.0m, active player days up 141% to 4.1m and the number of unique active players up 161% to 331,520.”
“Given the change in our business environment, the Group has already moved swiftly to reduce its cost base. Notwithstanding this, it is expected that the Group’s Clean EBITDA margin for the full year will be significantly lower than it was in the first half of 2006, reflecting the one-off costs of rationalising our business as well as the fixed nature of certain costs that were previously absorbed by a much larger revenue base.”
“PartyGaming is a highly dynamic business, one that has proved time and again its ability to adapt to new challenges and new environments. The Group has some of the most talented people in online gaming and we are determined to play to our strengths: offering consumers online brands they can trust, using the very best technology and supported by outstanding customer service.”
Average daily poker revenue grew by 24% year on year to $2,685,791. Average daily casino revenue increased substantially year on year to $915,533, which also represents an increase of 10% versus the second quarter. The total number of unique active players in the third quarter increased by 45% over the previous year and by 2% versus the previous quarter to 1,024,204, of which 613,477 were active in September. Total active player days in the third quarter also grew strongly year on year to over 14 million, representing an increase of 20% versus the same quarter in 2005. A softer performance by the US business in the third quarter meant that overall active player days were just 1% ahead of the second quarter. Yield per active player day at $22.7 was 3% ahead of the second quarter reflecting the normal seasonal upturn. It was also 32% ahead of the third quarter of 2005, reflecting the impact from cross-selling higher yielding casino games such as blackjack to the group’s poker customers.
Given the changes to the group’s business, PartyGaming has broken down the KPIs in more detail providing information for the non-US facing operations.
In the third quarter of the year, non-US revenue, excluding Gamebookers that was acquired in August 2006, increased by 149% year on year and by 17% versus the second quarter to $88.8m. The number of unique active players outside the US increased by 161% year on year and by 14% versus the previous quarter to 331,520, 60% of which were active in the month of September. Driven by strong player growth, active player days also grew strongly outside the US, up by 141% year on year and by 13% versus the previous quarter. Yield per active player day at $21.9 was 3% ahead of the second quarter and 18% ahead of the previous year. This was slightly lower than for the group as a whole, primarily due to a lower level of cross-sell into casino games and also reflecting a lower average frequency of play.
PartyGaming also reported that since it had moved out of the US, the average daily gross revenue of the non-US facing business fell 2% below that seen in the third quarter. However, it cautioned that it was too early to comment on the impact there will be going forward, if any, on the group’s non-US operations.
The company said its sports betting operation Gamebookers had exceeded expectations since it was bought in August, and it was on track to launch PartyBets by the year end, while PartyGaming\’s first multi-lingual poker will be launched this month and it will be followed by other versions over the next few months with a multi-currency offering expected in 2007.
Speaking to the journalists, Chief Executive Mitch Garber conceded PartyGaming had been overtaken as the world’s largest poker site by rival PokerStars, but he played down concerns that lower player numbers on PartyGaming’s poker site were likely to prompt an exodus of non-US players.
Garber also revealed he was looking at several merger and acquisitions opportunities.
“We have entered a new and distinct era. You can expect to see us push aggressively into new territory, including Asia,” he said. “Chaos breeds opportunity. I believe this is a golden consolidation opportunity for PartyGaming. We are the online gaming company with the most firepower.”
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