PartyGaming shares fell 7 percent after the company said it will not meet analysts estimates due to a lower profit margin on new player sign-ups. However higher than expected active players and sign-ups should improve prospects for 2008 and future periods.
Overall, net revenue per day in the first quarter of 2007 averaged $1,053,400 compared with $857,100 in the fourth quarter of 2006. Average net daily poker revenue was $750,900 versus $632,200 in the previous quarter with strong growth in the number of unique active players to over 448,000 being partially mitigated by a drop in yield per active player day to $11.4, reflecting increased play on PartyCasino as well as the increasingly casual nature of new player sign-ups in the quarter.
The sharp drop in yield year-on-year reflects the loss of a number of high value players to competitor sites that are able to offer greater liquidity at high stakes at certain times of the day because of their decision to continue accepting players from the US following enactment of the UIGEA. However, Partygaming believes that as payment solutions continue to close, these sites will find it increasingly difficult to operate in contravention of US law.
Mitch Garber, PartyGaming CEO said: “Our decision to aggressively pursue new sign-ups in order to rebuild our liquidity following the enactment of the UIGEA has resulted in a substantial increase in player numbers to a record 538,000 non-US unique active players in the first quarter. While this front-loading of marketing expense will affect our profit performance in the short-term, I believe that the prospects for the longer term will be materially enhanced, particularly as we move towards a more even playing field with competitor sites who continue to take bets from US players."
Garber also added that PartyGaming has made changes to it's affiliate program to reflect the lower profit margin on new players: "Following changes to our affiliate programme it is expected that for the second half of 2007 new player sign-ups from affiliates will resume a more balanced mix between CPA and revenue share deals with a consequent positive impact on Clean EBITDA margins.”