CHARTWELL TECHNOLOGY INC.
TSX : CWH

CHARTWELL TECHNOLOGY INC.

September 13, 2010 19:09 ET

Chartwell Announces Financial Results for the Three Months Ended July 31, 2010

CALGARY, ALBERTA--(Marketwire - Sept. 13, 2010) - Chartwell Technology Inc. ("Chartwell" or the "Company") (TSX:CWH), a leading provider of games, gaming systems and platform for the regulated online casino gaming industry, announces unaudited financial results for the three months ended July 31, 2010.

Business highlights for the third quarter of 2010:

  • announced the addition of two top tier licensees, Centrebet and Globet, to its client roster;
  • launched a comprehensive third quarter software release, being the second release since moving to a regular quarterly release schedule. The release included five new games; two slot games, two card games, and mini Blackjack;
  • announced the achievement of the E-Commerce and Online Gaming Regulation and Assurance "eCOGRA" accreditation, which certifies that the Company's product meets the stringent international requirements for software development.

Three months ended July 31, 2010

The third quarter of 2010 had total revenue of $3.0 million compared to $3.6 million for the same period a year earlier. The strength of the Canadian dollar against the Euro and GBP continued to contribute towards revenue that is comparably lower to periods of the prior year. This foreign exchange fluctuation represented over three quarters of the revenue decline for the third quarter of 2010 as compared to the prior year's quarter. In addition the increased wagering at the time of the FIFA World Cup tournament was modest and failed to offset continued weakness in the greater European economy in the fiscal third quarter of 2010.

The Company recorded a one-time non-cash impairment charge to goodwill of $3.1 million in the third quarter of 2010, which comes as a result of testing the valuation of goodwill in the quarter. The charge is an accounting adjustment and will not affect the ongoing operations of the Company. The goodwill was primarily acquired through past poker related acquisitions.

Total expenses before income taxes and before the impairment of goodwill declined to $4.0 million from $4.4 million primarily due to a decline in the amortization of deferred software development and stock based compensation costs in the third quarter of the current year as compared to the same period in the prior year.

Net loss for the third quarter before the impairment to goodwill was $1.1 million, a loss per share of $0.06 as compared to a net loss from comparable, continued operations of $475,000 or $0.02 per share in the same quarter of the prior fiscal year. 

"While the goodwill impairment charge has reduced net income and earnings per share, this adjustment is a non-cash item and does not affect our operations in any way. Chartwell continues to invest in providing quality online content as evidenced by our latest software release." said Alan Richter, CFO of Chartwell Technology. "Total revenue for the third quarter of 2010 was only marginally below revenue for the same period in the prior year when considering the impact that foreign exchange has had on our top line. In addition, Chartwell has added two top tier clients to its roster, one of which is a returning client which we believe reaffirms our overall strategic direction." 

Cash flow used in operations was $200,000 in the third quarter of 2010 as compared to cash flow from operations of $170,000 for the same period in the prior year.

Software development and support expense remained consistent at $2.4 million for both the third quarter of the current and prior year. Though costs were comparable between both quarters, the Company has seen a decrease in consulting costs, as the software certification costs incurred for the Alderney infrastructure in the third quarter of the prior year were not repeated in the third quarter of the current year. This decline in the third quarter of the current fiscal year was partially offset by an increase in salaries and related costs.

Balance sheet strength

The Company continued to maintain a strong balance sheet. At July 31, 2010 the Company had $17.0 million of unrestricted cash and short-term investments compared to $19.1 million at October 31, 2009. The Company had working capital of $19.2 million at July 31, 2010 as compared to $21.7 million at October 31, 2009.

About Chartwell

Chartwell specialises in the development of leading-edge games, gaming systems and platform for the regulated online casino gaming industry. Chartwell is certified or licensed to offer a range of services in all of the leading regulated online gaming markets. Chartwell is not a gaming operator; their clients own their own brands and databases entirely and exclusively. Chartwell's team of highly trained professionals is committed to delivering the highest quality software and maintaining its market edge through continuous development and unparalleled customer support.

Chartwell invites you to preview our company and gaming applications at www.chartwelltechnology.com   

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements contained herein may constitute forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements, including those with respect to the addition of new clients and revenue from new games. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. A return to profitability is dependent upon our ability to increase revenue and to maintain current expense levels. We believe that the expectations reflected in the forward-looking statements are reasonable based upon management's current views but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. No assurance can be given that actual results, performance or achievement expressed in, or implied by these forward-looking statements will occur, or if they do, that any benefits may be derived from them. 

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of factors that may include, but are not limited to: actual implementation or delays in the implementation of our products by our customers, our ability to continue to attract new licensees, the financial success and future growth of new and present licensees, delays in development, the impact of government regulation, licensing and laws affecting international operations, the impact of price competition, loss of business or credit risks associated with current and prospective major customers, general industry and market conditions and growth rates, currency rate fluctuations, the impact of consolidations in the online gaming industry and other risks detailed from time to time in Chartwell's Annual Information Form and Management's Discussion and Analysis, both of which may be found at www.sedar.com

The TSX does not accept responsibility for the adequacy or accuracy of this release.

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