The world\’s largest online gaming company announced its interim results for the six months ended June 30, which saw group revenue up 51% to $661.9m, driven by continued growth in poker and very strong growth in casino, and earnings before exceptional items (share option and IPO related expenses) up 47% to $380.0m over the same period in 2005.
In the first half of 2006, particularly positive was the strong growth in international markets with non-US revenues up 151% to $149.8m, meaning that 23% of total revenue was generated outside the US compared with 14% in the first half of 2005.
A total of 519,532 new real money customers were added during the first six months of 2006 (2005: 435,157), of which 43% came from outside the US compared to 20% in the first half of 2005. The total active player base across all countries increased by 47% to 1.3 million. The number of active non-US players grew by 193% year on year to 380,775. Europe performed particularly strongly with a 250% increase to 226,200 players. The total registered player base as at 30 June 2006 was over 19 million players, up from 9 million a year ago.
During the first half, customers gambled a total of $36.4 billion on the group’s sites (2005: $20.8bn), having deposited $1.7 billion and redeemed $1.1 billion in the period. Active player days increased by 27% versus the same period in 2005 driven by continued growth in the size of the active player base, partially offset by a reduction in the average frequency of play. Yield per active player day increased by 23% to $22.9 reflecting the positive impact from cross-selling higher yielding casino games to PartyPoker players. As a result, average daily revenue increased sharply to $3.7m per day, up from $2.3m in 2005. In June 2006, 25% of PartyGaming\’s active players in the month played at least two games on the integrated platform.
The group’s poker business, PartyPoker.com, delivered another strong performance and maintained its leading position in online poker. Despite the dilutive impact of many of the group’s poker players now playing other PartyGaming products, net poker revenues were up by 22% year on year to $502.7m. Clean EBITDA for the poker business rose by 12% to $274.3m. Clean EBITDA margin of 54.6% was lower than the previous year (2005: 59.4%), reflecting increases in administration expenses and marketing costs in territories such as Scandinavia and the UK.
Real money sign-ups were up 24% to 495,700 and the number of unique active players was up 48% to 1,249,229. Even in the US, which is probably the most mature online poker market, the group’s number of active players increased by 23% year on year to 888,190. The US remain the group’s largest market, but countries outside the US represented 42% of total real money sign-ups in the first half 2006 versus 19% in the comparable period in 2005. The yield per active player day increased marginally to $17.9 compared with $17.8 in the first half of 2005. Total active player days in poker increased by 25% to almost 28m despite a reduction in the average frequency of play reflecting the increasing proportion of recreational players.
The year on year growth of the casino business has been particularly strong. The introduction of blackjack onto PartyPoker.com in October 2005, combined with the launch of PartyCasino.com in February 2006, delivered a 527% increase in net revenue to $159.2m. Clean EBITDA for the casino business was also up strongly to $107.4m (2005: $13.7m). The Clean EBITDA margin increased to 67.5% (2005: 53.9%), reflecting the fact that the majority of the increase in revenue has come from existing PartyGaming players and therefore there was no associated customer acquisition cost and also reflecting the lower bonus rates versus the prior year (10.6% of gross revenue versus 23.4% in the first half of 2005). All of the casino activity metrics such as active player days, daily average players and unique active players showed a substantial increase compared with the prior year reflecting the impact of blackjack and PartyCasino.com. The yield per active player day fell to $36.9 from $76.4 in the previous year due to the popularity of blackjack which tends to have a lower yield than other casino games.
Commenting on the interim results, CEO Mitch Garber, said: “PartyGaming has delivered a strong first half performance. These results demonstrate the strength of our business model and also the potential to grow our business through investment in the development of new products and new territories outside North America.”
“Our ability to adapt and innovate has ensured that we remain the clear market leader. The recent additions of backgammon and an exclusively non-US facing sportsbook should add momentum to our expanding international revenue base, assisted by the forthcoming launch of multi-lingual versions of our games and marketing initiatives in a number of new territories,” he added.
Trading since June 30 has been in line with management’s expectations with over 3,000 new player sign-ups per day, a level seen in the first quarter, and an average gross daily poker revenue of $2.9m in July 2006 and $3.0m in August 2006. Casino continues to perform well and Backgammon has made a promising start with average gross revenue of over $30,000 per day.
Whilst regulatory uncertainties continue, the Board of PartyGaming remains confident about the group’s full year prospects.
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