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Bwin.party Financials Show Stability Despite Ongoing Poker Decline

Bwin.party, the parent company of PartyPoker and bwin Gaming, has released third-quarter financials that show the company posting small single-digit gains in overall company revenue despite continuing to suffer significant declines in its online poker fortunes.

bwin-party-logoAccording to bwin.party corporate financials released this week, “Total revenue increased by 2% driven by a strong performance in sports betting and other revenue. Net revenue declined by 1% with a decline in poker that also impacted casino and which together offset double digit growth in sports betting. If Greece is excluded, total revenue would have increased by 4% and net revenue by 1%.”

The sports betting numbers pointed to in the report show reasonable growth, an overall 11% gain year-to-year, boosted by revenue from the final stages of the FIFA World Cup.  Whether or not the company can maintain similar numbers in 2015, a non-World Cup year, remains uncertain, though the company also attributed a share of its success in the sector to an increased emphasis and promotion on combination [parlay] betting, which provides the company a higher return per unit bet.

As for poker, the company’s fortunes weren’t anywhere as promising.  The marked decline in play for the company’s two offerings on the PartyGaming poker platform, PartyPoker and bwin Poker, added up to a 25% loss in total revenue compared to the same three-month period in 2013.  For the last three months (July, August and September), PartyGaming garnered €17.5 million in revenue compared to €23.3 million for the same period in 2013.

The report tried to paint as pleasing as picture as possible on the continuing poker decline, saying, in part:

[S]ince the end of July 2014, poker trends have improved, driven by a series of product upgrades with the focus on mobile as well as measures to improve the overall player mix and a more attractive tournament schedule. More recently, revenues have benefited from the integration of our technology platforms in France during September. The integration was accompanied by the launch of the latest version of our poker software for bwin customers as well as the launch of new mobile extensions on both Android and iOS. Approximately 7% of poker’s gross gaming revenue came through mobile and touch in September 2014 versus 3% a year earlier and whilst we have seen good growth through this channel, year-on-year declines elsewhere meant that average net daily revenues fell by 25% in the third quarter to €190,200 (2013: €253,300).

The more-than-doubling in revenue attributable to mobile users is encouraging, though the company’s overall numbers continue to sag in comparison with its primary competitors, who likewise are expanded into the mobile-gaming space.  Two years ago, PartyPoker battled for second place in overall market share as tracked by unofficial reporting site PokerScout, though it has sagged to sixth place in daily traffic numbers in the independent site’s latest estimates.

The future, according to independent analysts, is likely to leave the status quo in place.  Bwin.party also quietly released an “analyst consensus” compiled by independent consultant, Citigate Dewe Rogerson, which assembles projections from major banking and investment analysts.  Nine separate analyses of bwin.party’s projected 2014 and 2015 numbers have been averaged in this report, which in sum offers little financial-industry belief that bwin.party will reverse its sagging online poker fortunes any time soon.

The report indicates that when 2014 is complete, bwin.party’s poker revenues will total between €76.0 million and €82.4 million, with an average of €78.1 million, meaning most of the experts believe the company’s fortunes will continue trending lower.  Bwin.party had already reported €44.1 million in poker-related revenue through the first six months of 2014.

For 2015, the estimates are wider ranging but even lower on average, distributed from €56.0 million to €79.2 million, with an average of €65.4 million, or a consensus loss of another 15% or so in player share.  Since revenue per player is expected to hold nearly steady or drop only slightly, the majority of the projected decline is expected to come from a continuing shrinkage in bwin.party’s global player pool.

The nine investment houses whose independent analyses were compiled into the Citigate Dewe Rogerson report are BofAML, Canaccord Genuity, Credit Suisse, Citi, Deutsche Bank, Goodbody, Morgan Stanley, Numis, Peel Hunt.  The exact methodologies for each projection were beyond the scope of the report, and bwin.party declined to speak to whether it believed in the numbers.  According to bwin.party’s corporate disclaimer, “Bwin.party has not commented on any individual forecasts, nor does it intend to do so in the future. CDR has had no access to bwin.party’s internal budgets, forecasts or, to bwin.party’s knowledge, any information concerning bwin.party’s eventual results. It should also be noted that past performance cannot be relied on as a guide to future performance.”

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