PartyGaming first quarter: casino, bingo strong; poker suffering
PartyGaming has released its first quarter results, showing casino, bingo and sports betting performing strongly, but poker suffering at the hands of competition from American rivals Full Tilt and PokerStars.
PARTYGAMING has released its first quarter results, showing casino, bingo and sports betting performing strongly, but poker suffering at the hands of competition from American rivals Full Tilt and PokerStars.
Group revenue increased by 27% year on year (YoY) to $127.1m (99.5m, £84.4m).
This was enabled in party by strong performance in casino up 25% to $51.2m, made possible by a 43% increase in yield per active player and a new casino marketing strategy.
Also contributing was a surge in bingo revenue following PartyGaming’s July 2009 acquisition of UK bingo business Cashcade, from just $1.0m in Q1 2009 to $17.7m; and a 58% increase in revenue from the company’s small sports arm, to $7.1m.
However poker fell 11% YoY to $47.8m; despite active players increasing by 22%, as the yield per active user fell 27% under pressure from poker sites that take US bets, of which Full Tilt and PokerStars dominate.
Earnings before interest tax depreciation and amortisation (EBITDA) margin in Q1 are stated to be ahead of expectations, although chief executive Jim Ryan indicated that the company expects the full-year margin to be in line with guidance at 28%.
Ryan said: “Total revenue was up by 27% year-on-year with strong increases in all product verticals except poker, which fell due to competition from US-facing sites”¦ While Clean EBITDA margins for the year to-date were ahead of our expectations in the first quarter of 2010, we are maintaining our previous full year guidance for 2010 Clean EBITDA margins of approximately 28%.”
Analyst reaction to the figures was mixed. James Hollins of brokerage Daniel Stewart concluded that “the shares offer solid long-term upside from continued penetration of the European online gaming markets, possible US re-entry and likely M&A activity. We have a Buy recommendation”.
However Paul Leyland of Collins Stewart argued that “Party’s organic growth potential is limited, with the Q1 results bearing this out. Moreover, as casino becomes increasingly supported by better marketing and content, margins are likely to come under pressure”¦ As well as revenue and margin pressure, we remain concerned that the increasing tax and competition implied by regulated markets, combined with the likelihood of onerous product restrictions”¦ will significantly reduce Party’s revenue and operational flexibility.”
The update coincided with PartyGaming striking a deal with card room operator Aviation Club de France and confirming that it will apply for a French licence.