CHARTWELL ANNOUNCES FISCAL YEAR END RESULTS
By Press Release
Calgary, Canada, January 30, 2006, Chartwell Technology Inc. (“Chartwell” or the “Company”) (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, 2005.

Highlights of the year included:

 Revenue of $17.8M compared to $12.2M in 2004;

 Net income before income taxes (“income from operations”) of $6.4M and net income of $4.0M compared to income from operations of $3.6M and net income of $4.0M in 2004;

 Earnings per diluted share of $0.20 compared to $0.24 in 2004;

 Software license fees $16.4M compared to $11.3M in 2004;

 Cash flow from operations of $3.5M compared to $4.0M in 2004;

 Remained debt-free with working capital of $20.9M compared to $10.5M in 2004; and

 Three consecutive years of profitability.

Highlights of the fourth quarter included:

 Revenue of $4.6M compared to $3.5M in the comparative quarter of 2004;

 Income from operations of $1.4M and net income of $850K compared to income from operations of $829K and net income of $1.5M in the comparative quarter of 2004;

• Earnings per diluted share of $0.04 compared to $0.08 in the comparative quarter of 2004 ;

 Software license fees of $4.1M compared to $3.2M in the comparative quarter of 2004;

 Cash flow from operations of $656K compared to $1.6M in the comparative quarter of 2004; and

 Thirteenth consecutive quarter of profitability.

“Fiscal 2005 was a year of significant growth for Chartwell, both financially and operationally,” states Don Gleason, CFO. “Financially, we achieved record revenue, maintained quarterly profitability, increased our EBITDA and operating margins, strengthened our balance sheet and increased our working capital. Operationally, we extended the capabilities of our product development, deployment and support teams through a staged investment program which included the acquisition of Micropower Corporation. These investments are essential to enabling the Company to drive continued growth in the expanding market for our products.”

Twelve Months Ended October 31, 2005

Compared to the same twelve-month period of 2004, total revenue increased 46% and income from operations increased 77.0%.

Total revenue increased to $17.8 million compared to $12.2 million in fiscal 2004. Software license fees increased 45% to $16.4 million compared to $11.3 million in fiscal 2004. Software license fees represented 92% of total revenue in fiscal 2005 compared to 92% in fiscal 2004.

Total operating expenses, including foreign exchange, increased 34% to $11.5 million compared to $8.6 million in fiscal 2004. As a percentage of total revenue, operating expenses decreased to 64% from 70% in fiscal 2004. Compared to the same twelve month period of 2004, software development and support expenses, net of deferred software development expense, increased 37% to $6.0 million compared to $4.4 million; sales and marketing expenses increased 66% to $2.2 million compared to $1.3 million, general and administrative expenses decreased 25% to $1.6 million compared to $2.1 million and foreign exchange losses increased 61% to $376 thousand compared to $233 thousand. Depreciation, amortization of intangible assets and amortization of deferred software development costs increased 75% to $600 thousand compared to $342 thousand in fiscal 2004. Stock-based compensation expense increased by 518% to $637 thousand compared to $103 thousand in fiscal 2004.

EBITDA (defined as net income less interest, plus taxes, depreciation and amortization) increased by 71% to $6.5 million compared to $3.8 million in fiscal 2004.

Income from operations increased 77% to $6.4 million compared to $3.6 million in fiscal 2004.

Income tax expense for fiscal 2005 was $2.4 million compared to an income tax recovery of $415 thousand in fiscal 2004.

Net income after taxes was $4.0 million compared to $4.0 million in fiscal 2004.

Earnings per diluted share decreased to $0.20 compared to $0.24 in fiscal 2004. The decrease in diluted EPS is attributable to the increase in the weighted average share count resulting from the private placement financing in December, 2004.

Generally, expenses increased in fiscal 2005 due to the Company’s staged investment program which added personnel in the key areas of product development, customer deployment and support and which required the Company to expand the infrastructure to support this growth.

Three Months Ended October 31, 2005

Compared to the same period of 2004, total revenue increased 33% and income from operations increased 67%.

Total revenue increased 33% to $4.6 million compared to $3.5 million in the comparative period of 2004. Software license fees increased 27% to $4.1 million compared to $3.2 million. Software license fees represented 88% of total revenue in the three months ended October 31, 2005 compared to 93% in the comparative period of 2004.

Total operating expenses, including foreign exchange, increased 22% to $3.3 million compared to $2.7 million in the comparative period of 2004. Overall, operating expenses as a percentage of total revenue decreased to 70% from 76% in the comparative period of 2004. Compared to the same period in 2004, software development and support expenses, net of deferred software development expense, increased 33% to $1.6 million compared to $1.2 million; sales and marketing expenses increased 83% to $555 thousand compared to $303 thousand, general and administrative expenses decreased 21% to $522 thousand compared to $657 thousand and foreign exchange losses decreased 71% to $72 thousand compared to $247 thousand. Depreciation, amortization of intangible assets and amortization of deferred software development costs increased 120% to $246 thousand compared to $112 thousand in fiscal 2004. Stock-based compensation expense increased by 123% to $230 thousand compared to $103 thousand in fiscal 2004.

EBITDA increased by 69% to $1.5 million compared to $897 thousand in fiscal 2004

Income from operations increased 67% to $1.4 million compared to $829 thousand in the comparative period of 2004.

Income tax expense was $535 thousand compared to an income tax recovery of $631 thousand in the comparative period of 2004.

Net income after taxes decreased 42% to $850 thousand compared to $1.5 million in the same period of 2004.

Earnings per diluted share were $0.04 compared to $0.08 in the comparative quarter of 2004.

The fourth quarter of 2005 represents Chartwell’s thirteenth consecutive quarter of profitability.

Balance Sheet

Chartwell continues to maintain a solid financial base from which to execute its growth strategy. In fiscal 2005, the Company realized $3.5 million in cash flow from operations compared to $4.0 million in fiscal 2004. Cash at October 31, 2005, including short term investments, increased to $19.1 million from $9.3 million and working capital increased to $20.9 million compared to $10.5 million at October 31, 2004.

Audited Consolidated Financial Statements

Audited 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 2005 audited consolidated financial statements will be mailed to shareholders along with meeting materials for the 2006 Annual General and Special Meeting.

Conference Call

A conference call for analysts and shareholders is

 
 
 
 
 
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