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Press Release Source: WPT Enterprises, Inc.
WPT Enterprises, Inc. Reports First Quarter 2006 Financial Results
Thursday May 4, 4:05 pm ET
LOS ANGELES, May 4 /PRNewswire-FirstCall/ -- WPT Enterprises, Inc. (Nasdaq: WPTE - News) today announced financial results for the first quarter ended April 2, 2006. Business highlights for the quarter included delivery of six episodes of Season IV of the World Poker Tour® (WPT) television series, one episode of Season I of the Professional Poker Tour(TM) (PPT) television series, continued expansion of the WPT television show internationally, and further contribution from the Company's online gaming division, WPTonline.com.
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Financial Results. Revenues for the first quarter of 2006 were $6.5 million, compared to $4.1 million in the same period in 2005, a 57% increase. The increase was primarily a result of the delivery in the first quarter of six episodes of Season IV of the WPT television series versus the delivery of five episodes of Season III in the same period in 2005, and the delivery of one episode of Season I of the PPT television series in the first quarter versus no episodes of the PPT delivered in the same period in 2005. The Company reported net earnings for the quarter of $3.6 million, or $0.17 per fully diluted share, compared to a net loss of $1.6 million, or $0.08 per share (without dilution), in the 2005 period. Net earnings in the first quarter of 2006 includes a realized pre-tax capital gain of $5.7 million associated with the sale of a portion of the Company's PokerTek investment, and reflects $1.6 million in share-based compensation expense recognized in accordance with Statement of Financial Accounting Standards No. 123 (SFAS No.123R) adopted in the first quarter.
"We are pleased with the progress we made in the first quarter. We continue to aggressively build the World Poker Tour brand, and during the quarter delivered the first episode of our new show, the Professional Poker Tour, an extension of WPT poker branded entertainment," said Steve Lipscomb, President and CEO of WPT Enterprises. "In addition, we delivered six episodes of Season IV of the World Poker Tour, which continues to be well received. We also further strengthened the international distribution of our show, and are now licensed to broadcast in more than 150 countries and territories. Our online gaming business is moving forward, albeit a bit more slowly than we had hoped as we address some technology issues, but we are pleased with the progress we are making in improving the website's technology platform. We are excited about WPTE's prospects in 2006, and are confident in our ability to continue to successfully execute our strategic plan."
Domestic television license revenues were $3.0 million in the first quarter of 2006, an increase from $2.0 million in the first quarter of 2005. The increase was due to the delivery of more television episodes during the quarter compared to the prior year period. International television licensing revenues increased to $0.9 million in the first quarter of 2006 from $0.4 million in the first quarter of 2005. The increase was due to having a greater number of international television distribution agreements in place during the quarter than in the prior year. Product licensing revenues decreased to $0.7 million in the first quarter of 2006 compared to $1.1 million in the first quarter of 2005. The decrease was due, in part, to lower license revenues from our lottery game partner, MDI, which were partially offset by increased mobile gaming sales from Hands-On Mobile (formerly Mforma). Online gaming, the Company's newest division, generated revenues of $0.9 million in the first quarter of 2006 compared to $0.7 million in the fourth quarter of 2005.
Cost of revenues decreased to $2.4 million in the first quarter of 2006 from $3.2 million in the first quarter of 2005. The decrease was primarily due to lower recognized PPT production costs, as the Company began capitalizing these costs in the first quarter of 2006 versus previously expensing them. During the quarter, cost of revenues associated with the PPT was $0.1 million compared to $1.4 million in the prior year quarter. Cost of revenues associated with the WPT series was $1.6 million in the first quarter of 2006 compared to $1.5 million in the first quarter of 2005. Additionally, cost of revenues in the first quarter of 2006 included approximately $0.2 million of non-cash compensation expenses related to consultant stock options compared to $0.4 million in the first quarter of 2005, due primarily to changes in the Company's stock price.
Overall gross margins were 63% in the first quarter of 2006 compared to 22% in the first quarter of 2005. Domestic television licensing margins were 44% in the first quarter compared to negative 60% in the same period of 2005, primarily due to the expensing of PPT production costs in 2005. Increased revenues from international television distribution and the Company's online gaming operations helped contribute to the higher overall gross margins in 2006. Selling and administrative expenses increased to $5.1 million in the first quarter of 2006 compared to $2.8 million in the first quarter of 2005. The increase was primarily due to an additional $1.5 million of share-based compensation expense resulting from the implementation of SFAS No. 123R, with the remaining difference due to increased headcount and legal fees incurred during the first quarter of 2006 associated with development, growth and regulatory compliance costs. For the balance of 2006, excluding future stock grants, the Company expects charges for share-based compensation under SFAS No. 123R to be approximately $0.7 million each quarter.
At April 2, 2006, the Company had no debt, and total cash, cash equivalents and short-term investments available of approximately $39.6 million.
Revenues for the second quarter of 2006 are expected to be in the range of $10.5 - $11.0 million. The Company expects to deliver the final ten episodes of Season IV of the WPT and nine episodes of Season I of the PPT in the second quarter of 2006. Additionally, the Company expects to deliver the first four episodes of Season V of the WPT and the remaining fourteen episodes of Season I of the PPT during the second half of 2006. Margins for the PPT will be higher in 2006 than in subsequent years as certain production costs have already been expensed. The Company expects to continue to maintain the current level of sales and marketing expenses related to its online gaming website, WPTonline.com, until it transitions to an improved technology platform.
