World Poker Tour (WPT) Reports 1st Quarter Net Loss of $2.3 Million

WPT Enterprises Inc., owner of World Poker Tour online poker room, just announced financial results for their first quarter ending April 1, 2007, reporting a net loss of $2.3 million for the quarter compared to net income of $3.6 million in the same 2006 period.

Highlights for the quarter include the delivery of five episodes of Season V of the World Poker Tour (WPT) television series and the signing of a Professional Poker Tour (PPT) Season I agreement in Finland, which represents the first executed agreement under the PartyGaming sponsorship agreement. Subsequent to the quarter end, the Company signed a new broadcast-rights agreement for WPT Season VI with GSN, The Game Show Network, for the broadcast of twenty-three individual episodes. Accordingly, WPT will begin taping Season VI in May 2007, which is expected to debut on GSN in early 2008.

Furthermore, the Company announced a three-year agreement with a wholly-owned subsidiary of CryptoLogic in connection with the re-launch of WPT's new online poker room and online casino (click here to read related article), which is scheduled to occur in June 2007. The site will only be available for real-money play outside the United States in jurisdictions where online gaming is permitted.

Revenues were down in the first quarter of 2007 at $4.5 million, compared to $6.5 million in the same period in 2006. The decrease was primarily a result of the delivery of fewer episodes. Specifically, five episodes of Season V of the WPT television series were delivered in the first quarter of 2007 versus the delivery of six episodes of Season IV of the WPT and one episode of the PPT in the 2006 period. This resulted in the net loss reported for the quarter of $2.3 million compared to net income of $3.6 million in the 2006 period.

"We are excited about our prospects in 2007 and are confident in our ability to continue to successfully build the World Poker Tour brand and execute our strategic plan," said Steve Lipscomb, President and CEO of WPT Enterprises.

Domestic television license revenues were $2.4 million in the first quarter of 2007, a decrease from $3.0 million in the first quarter of 2006 due to the delivery of fewer episodes of the company's television series in the first quarter of 2007 versus a year ago.

Online gaming, sponsorship and international television license revenues were also down at $1.1 million in the first quarter of 2007 compared to $2.6 million in the prior year period. The decrease of $0.4 million in online gaming revenue during 2007 was primarily due to lower levels of player activity versus the prior year period.

Sponsorship and event revenues decreased $0.7 million, which was primarily due to not airing any Season V episodes in the first quarter of 2007 versus the airing of five episodes of Season IV in the prior year period.

International television licensing revenues decreased by $0.5 million as a result of fewer distribution agreements in the international marketplace. Product licensing revenues increased to $0.9 million in the first quarter of 2007 compared to $0.7 million in the first quarter of 2006. The increase was due primarily to higher revenues from Hands-On Mobile.

Overall gross margins were 52 percent in the first quarter of 2007, compared to 63 percent in the first quarter of 2006. Domestic television licensing margins were 37 percent in the first quarter of 2007 compared to 44 percent in the same period in 2006. This decrease was principally because of the delivery of an episode of the Professional Poker Tour series in 2006 for which the production costs had been expensed in an earlier period. The lower margin contribution from online gaming in the first quarter of 2007, a result of the amended agreement with the service provider that significantly increased the percentage of revenues paid to that party, also contributed to the overall lower margin.

An unsuccessful strategy whereby WPT tried develop its own online gaming software and support led to increased selling, general and administrative expenses to $5.3 million. The company subsequently stopped its own development and entered into an agreement with CryptoLogic for its online poker room and casino.

At April 1, 2007, the company had no debt, and total cash, cash equivalents and investments in marketable securities of approximately $37.0 million.

Looking ahead, the report suggests:

For the second quarter of 2007, revenues are expected to be in the range of $7.0-$7.5 million.

Regarding the outlook for 2007, WPT expects:

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