Concerns over PartyGaming's Third Quarter Overshadow First-Half Results
Last week PartyGaming, the online gaming firm, announced first-half year results that were well above analysts' expectations. The company's EBIDTA (earnings before interest, depreciation, taxes and amortization) came in at $64.9 million, up 76% from the same period a year ago. Growth was primarily driven by a 38% increase in casino revenues; poker revenues were up 6%.
But PartyGaming shares traded down on the news, when the company also disclosed that things were not looking quite as rosy for the third quarter. While summer is traditionally a slow period, analysts were concerned with Party's results to date for the third quarter. The average number of active daily poker players in July and August was 19% lower than the first half of 2008, while gross revenue was off 9% in August when compared to July.
Chief Executive Jim Ryan blamed Party's softening poker results on competition from sites that accept players from the United States. "This represents a continuing competitive threat to listed businesses like PartyGaming that immediately stopped customers in the U.S. from playing or making deposits on any of the group's real money sites following the enactment of the UIGEA (Unlawful Internet Gambling Enforcement Act)," Ryan said.
Ryan also used this opportunity to announce that Rod Perry, previously a senior independent director, would take on a new roll as non-executive Chairman to oversee the continuing talks with the U.S. Department of Justice. Ryan said Perry "will be taking over the day-to-day management of the DoJ process freeing me up and allowing me to focus my efforts on daily operations," Ryan also said the company is still targeting for a resolution with the DOJ sometime this year.
Ryan's focus on operations will involve an "imminent" re-launch of Party Poker which will also potentially reopen the door for skins and licensees. Ryan stated that the new initiative on Party should "foster further growth of our existing franchise, whilst greater licensing of our technology will create new, and I believe, significant opportunities to grow revenue and profit."
