Excapsa Software Inc.
AIM : XCP

Excapsa Software Inc.

August 16, 2006 19:22 ET

Excapsa Software Inc.: Interim Results for the Six Month Period Ended 30 June 2006; Record Revenues and Earnings

TORONTO, ONTARIO--(CCNMatthews - Aug. 16, 2006) - Excapsa Software Inc. (AIM:XCP) which develops, maintains and markets real time internet enabled gaming software and manages the Excapsa Gaming Network today announces record revenues and earnings for the six months ended 30 June 2006.



Highlights

- Financial Results

- Net revenue increased 40% to $54.2 million (2005: $38.7 million
proforma)

- Net income increased 27% to $15.1 million (2005: $11.9 million
proforma)

- Net cash position increased substantially to $46.5 million at
30 June 2006 (31 Dec 2005: $3.0 million)

- IPO on London Stock Exchange (AIM) successfully completed, with
placing proceeds of Pounds Sterling 56.2 million and gross proceeds
of Pounds Sterling 26.1 million for the Company

- Licensing agreement with DevilfishPoker.com signed

- Major platform upgrade from MySQL to Oracle completed

- Major marketing initiative and license agreement with National Lampoon
Inc. (AMEX:NLN) signed

- Single player blackjack successfully launched

- Software development agreement with Callister Development Limited for
proprietary tournament blackjack software and network license deal
signed

- Mobile solution for poker product launched

- Senior industry expert, Chris Welch, appointed as Managing Director
for Loudvision to focus on marketing of UltimateBet.com licensee brand



Key Performance Indicators

H106 H105 Growth
------------------------------------------------------------------------
Net Revenue ($USm) $54.2 $38.7 proforma + 40%
# of Real Money Account
Acquisitions 72,864 64,910 + 12%
Cost Per Player
Acquisition $175 $130 + 34%
Unique Active Real
Money Players 161,583 151,180 + 7%

At 30 June 06 At 30 June 05
# of Customers
(Real and Play) 2,209,965 1,239,401 + 78%
# of Real Money
Customers 388,612 234,163 + 66%


Commenting on today's announcement, Jim Ryan, Chief Executive Officer said:

"The first half of 2006 was a tremendous period for Excapsa as we made progress on the execution of our strategy, including upgrading our network platform and working with our licensees to increase real money customers by 66% over the prior year. We are currently on track to meet our strategic objectives for 2006"

"We continue to take advantage of the opportunities in our industry through product development as evidenced with our successful launch of single player blackjack and a mobile poker solution during the first half of 2006. Geographical expansion also remains a high priority for the Excapsa Gaming Network. The appointment of a new marketing Managing Director headquartered in the UK for licensee brand UltimateBet.com brings stronger focus to international player growth, particularly in the UK, European and Australian markets.

Notes to Editors:

About Excapsa

Excapsa (AIM:XCP) is a leading online gaming software developer. Excapsa develops, maintains and markets multi-player, real time, Internet enabled poker software and manages the Excapsa Gaming Network. Licensee brands include UltimateBet.com, UltimatePoker.com, CardPlayerPoker.com, MagicPalacePoker.com, DV8Poker.com, Bet21.com, GreenTiePoker.com, UpperClassPoker.com DevilfishPoker.com, and NationalLampoonPoker.com.

Interim Results for period ended 30 June 2006

Overview

In the six months ended 30 June 2006, Excapsa continued to make significant progress. Net revenue increased by 40% compared with the same period in 2005 and second quarter trading increased 2% to $27.4 million over the first quarter of 2006. Figures showed normal seasonal influence quarter over quarter, albeit with an additional impact due to the World Cup. However results continue to demonstrate strong growth, year on year, compared with the same period in 2005, with a 66% increase in the number of real money customers. Licensee focus on diversifying player acquisitions has resulted in 25% of new revenue generators for the period coming from outside of the United States and 20% of the Network's revenue for the same period generated from non-US customers.

Network upgrade

Excapsa's platform upgrade from MySQL to Oracle provides the Company with the ability to scale the product to accommodate 75,000 concurrent players, greater software stability and the ability to incorporate new network games. This infrastructure improvement has, and will, continue to allow the Company to focus fully on enhancing its poker applications, introduce new products and grow the business within the international marketplace.

Product development

Taking full advantage of the Network upgrade, the Company has already delivered on two major product initiatives in 2006 with the launch of single player blackjack to the Network in May and the introduction of the mobile poker solution in July. The response to the single player blackjack product from licensee customers has been positive. As one of the first networks to launch a mobile poker solution for licensees, Excapsa is positioned to be at the forefront as the market grows and the technology becomes more sophisticated. Third quarter delivery of the proprietary version of multi-player blackjack to the Network is also on schedule. The launch of this proprietary software coincides with a major strategic marketing campaign initiated by one of the Network's licensees, UltimateBet. UltimateBet.net is a charter member of the Ultimate Blackjack Tour and will host the Aruba leg of the tour. UltimateBet.Net is a free play educational site. UltimateBet.net will be a sponsor of the Ultimate Blackjack Tour which will begin its broadcast season on the CBS network on 16 September 2006 at 2:00 p.m. EST.

Licensee update

During the first half of 2006 the Excapsa Gaming Network signed three new licensees bringing the total number of licensees in the Network to nine. New licensees include:

- DevilfishPoker.com which is backed by one of the UK's most well-known poker players, David "Devilfish" Ulliott and focuses on the European market, a key target audience as the Network continues to focus on geographic diversification.

- NationalLampoonPoker.com, an established brand with a significant following that focuses on the college market, providing the Network with a strategic partnership that broadens its marketing reach. National Lampoon's free online poker room will be the first stop for college students at 600 colleges and universities in the NationalLampoonPoker.com National College Poker Tournament, a nationally televised intercollegiate poker tournament designed to play on the natural rivalry between schools.

- Bet21.com will focus on growing the tournament blackjack market alongside the poker market as they, along with licensee UltimateBet, will have exclusive use of the tournament blackjack software when it releases in the third quarter.

97% of revenue in the Network continues to be generated from the Network's largest licensee, UltimateBet. The 20 year license agreement with eWorld Holdings Limited, the operator of UltimateBet.com, mitigates against risks associated with loss of this significant revenue stream as a result of margin erosion or the loss of the customer base, a unique position in the industry.

Market review

The online gaming market continues to offer growth potential and the Excapsa Gaming Network is positioned to take advantage of significant opportunities in the sector. Excapsa's current share price has been adversely impacted by the much publicized concerns in the US with regards to recent developments concerning online gaming legislation. Excapsa advocates regulating the online gaming market as the best method of addressing the US legislative issues. Excapsa continues its focus in growth on international markets including the UK, Continental Europe and Australia in addition to North America.

As the Network moves away from being a pure poker network it is uniquely positioned to leverage new revenue streams from product development such as single player blackjack, mobile and tournament blackjack. The Company also remains focused on potential strategic acquisitions to incorporate casino into the network offerings.

Current Trading

Excapsa's performance in the first half of 2006 was very encouraging with strong network growth and financial results in line with expectations albeit with difficult trading conditions in June as a result of the World Cup and unseasonably warm weather. Trading in July was flat due to the extraordinary attendance at the World Series of Poker. We have seen a return to positive momentum in August. With the completion of several major corporate initiatives in the second quarter including the successful launch of real money single player blackjack; the release of wireless technology that gives players the opportunity to play real money poker on mobile phones; and the signing of a long-term partnership with Callister Development to develop proprietary elimination style tournament blackjack and multi-player blackjack software products, the company continues to broaden the licensee player base and network product offerings. Excapsa remains focused on international growth in order to geographically diversify the Network player base. Headquartered in the UK, industry expert Chris Welch, new Managing Director overseeing marketing for licensee UltimateBet, will continue to focus on diversifying the customer base by targeting the UK, European and Australian markets. Furthermore, a strong, debt free balance sheet with a cash and working capital position of $46.5million and $37.5million respectively allows the Company to continue to focus on product development and acquisitions to meet strategic goals.

In the second half of 2006 the Company plans to invest aggressively in the marketing of its new proprietary blackjack offerings. This investment of $3.0 million in the second half, which is outside of the original scope for the financial forecast, will ensure the impact of this product launch is maximised as marketing funds are used to target new player demographics and support increased global advertising and player acquisition strategies.

As Excapsa continues to develop in the ever-changing online gaming market the Company remains confident in its future prospects and looks to capitalize on its strong first half year.

$ refers to US Dollars throughout

Definitions

- Proforma results have been prepared on the basis that the 28 July 2005 purchase of intellectual property and the terms of the 29 July 2005 re-negotiated eWorld license agreement had occurred on 1 January 2004

- Net revenue is defined as gross revenue less bonus dollars, affiliate expenses, host costs and licensee share of revenues

- Unique active real money player is defined as a unique player who has generated revenue in the period

- Real money account acquisition is defined as a player that has made a real money deposit for the first time during the reporting period

- Cost per player acquisition is defined as all online and offline marketing spend, including bonuses and affiliate expenses, that relates to player acquisitions divided by the number of new revenue generators in the period

- Real money customers is defined a player who has generated any form of revenue since signup

- Number of customers is the total number of Network customers - both real and play

Visit www.excapsa.com to view unaudited consolidated income statements and notes for the period.

Contact Information

  • Excapsa Software Inc.
    Jim Ryan
    CEO
    +1 (416) 640-1556 ext 5100
    or
    Excapsa Software Inc.
    Gail Gleed
    CFO
    +1 (416) 640-1556 ext 5102
    or
    Excapsa Software Inc.
    Melissa Gaddis
    Director, Investor Relations
    +1 (416) 640-1556 ext 5116
    or
    Buchanan Communications
    Charles Ryland/Suzanne Brocks/Amy Rajendran
    +44 (0) 207 466 5000