|Calgary, Canada, March 3, 2005, Chartwell Technology Inc. (TSX:CWH) a leading provider of gaming software systems and entertainment content to the online and remote gaming industry, is pleased to announce financial results for the first quarter ended January 31, 2005.|
Highlights of the quarter included:
Revenue of $4,815K compared with $2,198K during the same period in fiscal 2004;
Net income of $1,486K or $0.08 per diluted share compared with net income of $386K or $0.03 per diluted share during the same period in fiscal 2004;
Software license fees of $4,622K compared to $1,939K during the same period in fiscal 2004;
Cash flow from operations of $1,236K compared to $821K during the same period in fiscal 2004;
Working capital of $23,323K compared to $10,549K during the same period of 2004;
Nine consecutive quarters of profitability.
Compared to the same period of 2004, total revenue increased 119.1%, operating income increased 418.6%, net income increased 284.9% and earnings per diluted share increased 166.7%.
“Consistent with our objective of delivering continued growth and profitability, I am pleased to report our ninth consecutive profitable quarter,” states Don Gleason, Chief Financial Officer. “I am encouraged by the overall growth of the industry in general and our installed customer base but even more excited that new customer business contributed 18% of our total sales revenue. Through the balance of the year we will continue to focus on expanding our customer base in key markets and driving new business while continuing to strategically invest in our overall growth.”
Total revenue increased to $4,815K from $2,198K in the comparative quarter of 2004. Software license fees, which represent 95.9% of total revenue, increased by 42.7% to $4,622K over the previous quarter and by 138.3% over the same period of 2004. Historically, license fees in the first quarter have been 3% to 5% higher than the previous quarter. This growth is attributable to increased license fees from new customers who began generating revenue in the previous quarter, continued growth from our major, established customers and the promotional program of a major licensee. Management expects that license fees will return to more traditional levels in the second quarter. Software set-up fees decreased by 46.5% to $115K from $215K in the comparative quarter of 2004.
Total operating expenses, which include foreign currency gains and losses, increased by 45.5% to $2,576K compared to $1,770K in the comparative quarter of 2004. The increase in operating expenses reflects the impact of the Company’s investment program which began in fiscal 2004 and is continuing in fiscal 2005. Operating expenses in the first quarter included the expensing of stock options in the amount of $118K. There was no comparative expense in the same period of 2004. Operating expenses as a percentage of sales revenue decreased to 54.4% compared to 82.0% in the comparative quarter of 2004.
Planned personnel additions in the software development and support organizations have contributed significantly to the 32.2% increase in software development and support costs to $1,325K compared to $1,002K in the same period of 2004. Software development and support expenses accounted for 51.4% of the Company’s total costs in the first quarter of 2005 compared to 56.6% in the same period of 2004. Sales and marketing expenses increased by 105.7% to $600K and general and administrative (“G&A”) expenses decreased by 4.6% to $458K compared to $291K and $480K in the same period of 2004. The increase in sales and marketing expenses is directly attributable to additional sales and marketing headcount and the costs relating to the operation of the London, U.K. sales office. The decrease in G & A is solely attributable to a reduction in bad debt expenses to $nil in the current quarter compared to $170K in the same period of 2004.
The increased expenditure level in the first quarter of 2005 is expected to continue in order to sustain and fuel long term growth.
Income from Operations
Despite planned increases in costs associated with investing in the Company’s growth, income from operations increased by 418.6% to $2,239K compared to $431K in the comparative quarter of 2004. The increase is the result of managing expenses relative to the growth in revenue. Operating margins have improved to 46.5% compared to 29.6% in the previous quarter and 19.4% in the comparative quarter of 2004.
Net income increased by 284.3% to $1,486K compared to $387K in the same period of 2004. Net income in the current period is net of a provision for income taxes in the amount of $753K. The Company has used all non-capital tax loss carry forwards and is expected to be cash taxable in the current year.
Liquidity and Capital Resources
Positive cash generation coupled with a financing, continued to strengthen the Company’s balance sheet. At January 31, 2005, Chartwell had an aggregate of $20,899K of cash and short term investments and providing $23,323K of working capital.
Cash flow from operations for the first quarter of 2005 was $1,236K compared to $821K for the same period of 2004. The Company’s cash position was significantly increased by positive net earnings and net proceeds of $10,247K from a private placement financing completed in December of 2004.
Cash used in investing activities was $10,473K resulting from the purchase of $10,366K of short term investments and $107K of property and equipment. For the comparative period of 2004, the Company purchased $1,530K in short term investments and $185K in property and equipment, resulting in a cash utilization of $1,715K.
Chartwell Technology Inc. specializes in the development of gaming applications and entertainment content for the Internet and wireless platforms and other remote access devices. Chartwell’s JAVA and Flash based software products and games are designed for deployment in gaming, entertainment, advertising and promotional applications. Chartwell does not participate in the online gaming business of its clients. Chartwell’s team of highly trained professionals is committed to delivering the highest quality software and maintaining its leading edge through continuous development and unparalleled customer support.
Chartwell invites you to preview and play our games at www.chartwelltechnology.com