Wpt Q1 Reports Net Loss Of $2.8 Million

WPT Q1 REPORTS NET LOSS OF $2.8 MILLION
Plenty of business activity at poker tourney giant, but online gambling and domestic TV license revenues decline

The Nasdaq-listed WPT Enterprises, Inc. has released its Q1 2008 results, showing a 10 percent increase in overall revenues over the same period last year, but a $2.8 million net loss for the quarter.

Business highlights included the delivery of seven episodes of Season VI of the World Poker Tour television series; the premiere of Season VI on the GSN Network; continued progress in the development of the WPT China National Traktor Poker Tour and the launch of ClubWPT.com.

The company also reports its agreement with Cryptologic (see previous InfoPowa report) for the provision of a full suite of online casino games and the development of Spanish and German language online gaming sites, expected to go live by June 2008.

Online gaming revenues sank to $200 000 compared to $600 000 in 2007, reflecting lower levels of player activity on the Cryptologic network in the 2008 period versus the site operated by WagerWorks in the 2007 period.

Revenues overall increased 10 percent in the first quarter of 2008 to $5.0 million, compared to $4.5 million in the same period in 2007. The increase was primarily due to an approximate $900 000 rise in hosting and sponsorship revenues, primarily driven by international television sponsorship revenues that did not exist in the prior year period.

Domestic television license revenues were down at $2.1 million in the first quarter of 2008, (Q1 2007: $2.4 million). The decrease was due to lower per episode license fees under the GSN contract. However, international television licensing revenues increased 69 percent to $800 000 compared to $500 000 in the prior year with the increase due to lower than expected third party distribution costs.

Product licensing revenues decreased to $700 000 (Q1 2007: $900 000).

Cost of revenues increased to $2.7 million in the first quarter of 2008 from $2.2 million in the first quarter of 2007. The increase was primarily a result of the delivery of seven episodes of Season VI in Q1 2008 versus the delivery of five episodes of Season V in the prior year period.

Overall gross margins were 46 percent in the first quarter of 2008 compared to 52 percent in the first quarter of 2007. The lower fees per episode under the GSN contract impacted domestic television licensing margins dramatically, inducing a drop to 6 percent (Q1 2007: 37 percent) The lower domestic television margins in the 2008 period were partially offset by increased margin contribution from international television and sponsorship.

Selling, general and administrative expenses increased to $5.5 million in the first quarter of 2008, compared to $5.3 million in the first quarter of 2007. Higher costs associated with the implementation of WPT’s sales and marketing plans for its online gaming, WPT China and ClubWPT.com businesses were partially offset by a reduction in general and administrative expenses resulting from reduced headcount across the company.

The company reported a net loss for the quarter of $2.8 million (Q1 2007: net loss of $2.3 million.)

The positive news was that, as at March 30, 2008, WPT had no debt, and total cash, cash equivalents and investments in marketable securities of approximately $26.9 million.

“Our first quarter results reflect the delivery of seven Season VI episodes, increased international television and sponsorship revenues, and moderate progress in our online gaming and ClubWPT.com businesses,” said Steve Lipscomb, President and CEO of WPT Enterprises.

“The Company is focused on capitalizing on our three primary growth initiatives: real-money online gaming, ClubWPT.com and WPT China. We are excited about our prospects in 2008 and are confident in our ability to continue to expand the World Poker Tour brand, both in the domestic and international markets, and execute our strategic plan.”

Lipscomb said that revenues in the second quarter of 2008 are expected to be in the range of $5.5–$6.0 million. WPT also expects:

*To deliver the remaining eleven episodes of Season VI of the WPT television series in 2008: eight episodes during the second quarter and three episodes during the third quarter.

* Lower gross margins for domestic television on a year-over-year basis as a result of the terms of the agreement with GSN.

* To realise host fee and sponsorship revenues as WPT domestic episodes are aired during the second and third quarters of 2008.

* To launch Season II of the WPT China National Traktor Poker Tour and begin to reap revenue from China-related activities by the fourth quarter of 2008.

* Higher sales and marketing costs associated with the company’s online gaming, ClubWPT.com and WPT China businesses.