Annual Revenue Growth of 66% at Chartwell Technology
By staff
Calgary, Canada, January 10, 2005, Chartwell Technology Inc. (TSX:CWH), a leading provider of gaming software systems to the online and remote gaming industry, is pleased to announce audited financial results for the fourth quarter and year ended October 31, 2004.

Highlights of the year included:

Revenue of $12.2M compared to $7.3M in 2003;

Operating income of $3.6M and net income of $4.0M compared to operating income of $1.1M and net income of $1.7M in 2003;

Earnings per diluted share of $0.24 compared to $0.12 in 2003;

Recurring software license fees $11.3M compared to $6.3M in 2003;

Cash flow from operations of $4.2M compared to $1.4M in 2003;

Remained debt-free with working capital of $10.5M compared to $6.5M in 2003;

Two consecutive years of profitability.

Highlights of the fourth quarter included:

Revenue of $3.5M compared to $2.1M in the comparative quarter of 2003;

Operating income of $831K and net income of $1.5 million compared to operating income of $744K and net income of $1.4 million in the comparative quarter of 2003;

Earnings per diluted share of $0.08 compared to $0.06 in the comparative quarter of 2003(prior to restatement) and $0.10 following restatement;

Recurring software license fees of $3.2 million compared to $1.8 million in the comparative quarter of 2003;

Cash flow from operations of $1.8M compared to $919K in the comparative quarter of 2003;

Eighth consecutive quarter of profitability.

“We are very pleased with our fourth quarter and fiscal year 2004 results”, states Don Gleason, CFO. “We ended the year with significant revenue growth, increased our profitability by 139%, doubled our earnings per share and generated in excess of $4.0M in cash flow from operations. Our investment in product development, sales, marketing and business development gives us confidence in our ability to drive continued growth in the expanding market for our products. We are extremely proud of the hard work and accomplishments of the entire Chartwell team and we look forward to 2005 and carrying this momentum throughout the year.”

Twelve Months Ended October 31, 2004

Compared to the same twelve-month period of 2003, total revenue increased 66%, net income increased 139% and earnings per diluted share increased 100%.

Total revenue increased to $12.2 million compared to $7.3M in fiscal 2003. Recurring software license fees increased 79% to $11.3 compared to $6.3 million in fiscal 2003. Recurring revenue represented 92% of total revenue in fiscal 2004 compared to 86% in fiscal 2003.

Total operating expenses, including foreign exchange, increased 37% to $8.6 million compared to $6.3 million in fiscal 2003. As a percentage of total revenue, operating expenses have decreased to 70% from 86% in fiscal 2003. Compared to the same twelve-month period of 2003, software development and support expenses increased 34% to $4.4 million compared to $3.2 million; sales, general and administrative expenses increased 80% to $3.5 million compared to $1.9 million and foreign exchange losses decreased 71% to $233K from $795K. In fiscal 2004, the Company opened a sales office in the United Kingdom, moved to a larger facility in Calgary to accommodate additional personnel and upgraded its listing to the TSX Exchange from the TSX Venture Exchange. All of these factors contributed to the increase in expenses as noted above.

Income from operations increased 243% to $3.6 million compared to $1.1 million in fiscal 2003.

Net income after tax increased 139% to $4.0 million compared to $1.7 million in fiscal 2003. Basic and diluted earnings per share increased to $0.28 and $0.24 compared to $0.12 and $0.12 in fiscal 2003.

Three Months Ended October 31, 2004

Compared to the same period of 2003, total revenue increased 65%, net income increased 6% and earnings per diluted share decreased 20%. The decrease in diluted EPS is attributable to the significant increase in the weighted average share count resulting from the addition of in the money options.

Total revenue increased to $3.5 million compared to $2.1 million in the comparative period of 2003. Recurring software license fees increased 75% to $3.2 million compared to $1.8 million.

Total operating expenses, including foreign exchange, increased 94% to $2.7 million compared to $1.4 million in the comparative period of 2003. Overall, operating expenses as a percentage of total revenue increased to 76% from 65% in the comparative period of 2003. Compared to the same period in 2003, software development and support expenses increased 206% to $1.2 million compared to $405K; sales, general and administrative expenses increased 45% to $960K compared to $661K and foreign exchange losses increased 17% to $247K compared to $211K. The percentage increase in total expenses in the comparative quarters is primarily due to $103K of stock based compensation expense recorded in the current quarter and the deferral of $531K of software development expense recorded in the fourth quarter of fiscal 2003. Without the stock based compensation expense in the 4th quarter 2004 and software development deferral expense in the 4th quarter 2003, the increase in operating expenses would have been limited to 34%.

Income from operations increased 12% to $831K compared to $744K in the comparative period of 2003.

Net income after tax increased 6% to $1.5 million compared to $1.4 million in the same period of 2003. Net income is net of the future tax recovery of $631K in fiscal 2004 compared to $630K in the comparative period of 2003. Basic and diluted earnings per share were $0.10 and $0.08 compared to $0.10 and $0.10 in the comparative quarter of 2003. The decrease in diluted earning per share is solely attributable to the increase in the number of shares resulting from options that are in the money.

The fourth quarter of 2004 represents Chartwell’s eighth consecutive quarter of profitability.

Balance Sheet

Chartwell continues to maintain a solid financial base from which to execute its growth strategy. In fiscal 2004, the Company realized $4.2 million in cash flow from operations compared to $1.4 million in fiscal 2003. Cash at October 31, 2004, including short term investments, increased to $9.3 million from $5.2 million and working capital increased to $10.5 million compared to $6.5 million at October 31, 2003. The Company’s balance sheet has been further strengthened by its recent private placement of $11.0 million completed in the first quarter of fiscal 2005.

Audited Consolidated Financial Statements

Audited 2004 consolidated financial statements may be accessed through www.sedar.com or on the Chartwell website at www.chartwelltechnology.com. In addition, copies of the filed statements will be available upon request by contacting Chartwell Investor Relations by e-mail at investor@chartwelltechnology.com. The audited 2004 consolidated statements will also be published in the Company’s 2004 Annual Report that will be mailed to shareholders along with meeting materials for the 2005 Annual General Meeting.

Forward Looking Statements

This news release and the documents referred to herein may contain forward-looking statements that involve risks and uncertainties, which may cause actual results to differ materially from the statements made. Such statements reflect the Company’s current views with respect to future events and are subject to risks and uncertainties. Many factors could cause our actual results to differ materially from the statements made including, but not limited to, certain delays in testing and evaluation of products, regulation of the online gaming industry, and other factors and risks detailed from time to time in filings made by the Company with

 
 
 
 
 
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