Garber: 'PartyGaming Is Strong'

PartyGaming CEO Mitch Garber says his company is thriving--and will continue to thrive--despite fears of industry instability following last week's arrest of BetonSports CEO David Carruthers.

PartyGaming on Friday released a trading statement for the second quarter and first half of 2006, revealing figures that beat most forecasts. And while the company is among the many publicly listed online gambling firms whose shares suffered a beating last week following the arrest, Garber indicated that they are not threatened by recent events and continue to conduct business usual.

The group attained revenue of US$319.3 million and gained 245,254 new real-money sign-ups in the three months to June 30, 2006. The second quarter is traditionally the slowest of the year for most online gambling companies, and operators without sports book offerings faced the added difficulty in June of competing with World Cup betting for revenue.

Although PartyGaming's net poker revenue of $243.2 million in Q2 2006 was 6 percent lower than that of Q1 2006, the figure was still a 21 percent improvement over Q2 2005. Over 27 percent of poker revenues came from outside the United States, compared to 15 percent in Q2 2005, and 24 percent in Q1 2006.

The company acquired 232,446 new real-money poker accounts compared to 186,560 over the same period last year. The number of unique active poker players increased strongly in the quarter due to the reactivation of a number of inactive players. The addition of players from newly acquired EmpirePoker.com also helped drive the number of new active players. Unique active poker players for the quarter reached 972,228, an improvement over 630,539 in Q2 2005.

PartyGaming reports that its poker yield per active player day was $17.4 compared to $18.5 in the previous quarter but was 2 percent ahead of the same period in 2005, which reflects a reduced amount of time spent playing online during the quarter. While higher player numbers did not offset the impact of the lower yield, resulting in average daily revenue (excluding skins) in the quarter to $2.7 million, this was over 25 percent ahead of that achieved in the second quarter of 2005.

Compared to the same quarter last year, the group's overall casino revenue increased 481 percent to $76.1 million on the back of the introduction of blackjack to PartyPoker.com in October 2005 and the addition of PartyCasino.com to the integrated platform in February 2006. A total of $4.13 billion was gambled with PartyGaming's casino business in Q2 2006, a significant increase over $460 million in Q2 2005, but a decrease compared to last quarter's $4.47 billion, reflecting the traditionally quieter second quarter and a reduction in the amount gambled on blackjack as the novelty of the new offering wore off.

PartyCasino.com now offers 39 proprietary games. Despite a minimal amount of marketing support the casino attracts an average of over 23,000 real money players per day. British newspaper The Independent reported yesterday, however, that the company intends to soon launch a major advertising campaign for PartyCasino in the United States, reflecting the company's seemingly lack of worry about recent developments in the country.

Garber told The Independent that the arrest of Carruthers will not deter his company from "legally marketing in the U.S." through a variety of channels, including Internet, television, radio, newspapers and sponsorships. Ads for PartyPoker.net are already prominent in the United States, and PartyPoker remains the most recognizable online poker brand in the country. PartyPoker.net is also a sponsor of tables at the 2006 World Series of Poker, which should provide a huge amount of exposure. PartyCasino's marketing upcoming marketing campaign will also target European consumers.

It has been generally estimated that I-gaming shares lost more than $1 billion in combined market value in the first five days following the arrest of Carruthers, but Garber has indicated that PartyGaming could stand to benefit from an opportunity to make cheap acquisitions.

"I've had a very strong M&A focus in my previous life, and Martin (Finance Director Margin Weigold) and I have been looking at companies," he told Reuters. "Anytime price becomes more attractive, I guess deals become more attractive."

Over a conference call to discuss the latest trading results, Garber stated that PartyGaming is looking to expand in Asia and is working on a number of "very advanced initiatives" in Europe and South America. Earlier this month the company arranged a $500 million loan with house broker Dresdner Kleinwort Wasserstein and Royal Bank of Scotland to fund the purchase of a non-U.S.-facing online sports book. The company has for the last several weeks been believed to be in negotiations for the purchase of a privately owned European sports book operator. Gamebookers has been tipped as PartyGaming's first takeover target, but nothing relating to any sort of potential deal between the two companies can be verified. Should it acquire an online sports book, PartyGaming would not accept wagers from American customers.

PartyGaming's overall number of unique active players now stands at more than 1 million. In Q2 2006 there was a 237 percent increase in the number of unique active European players to 171,531.

PartyGaming is preparing to unveil its new multi-million dollar "Party Poker Monster" online tournament which it says will have the largest ever online prize pool. The firm says that this, combined with the marketing launch of PartyCasino.com, should lead to continued growth in the second half of 2006.

At the close of the day Tuesday, PartyGaming's share price stood at 105.75p. The shares stood around 110p last Monday as the news of Carruthers' arrest circulated and reached a low point of 85p on Wednesday before steadily rebounding.

Click here to view PartyGaming's Second Quarter Key Performance Indicators and Trading Update.