GigaMedia Limited Q4 2008 and Full Year Financial Results Conference Call
Tuesday, March 31, 2009
8:00 a.m. ET
The recording of the conference call is available here and is transcribed below on a 1st draft best effort basis. You can go directly to the Q&A session transcription here or back to the PokerPulse About GigaMedia page here.
Arthur (A01): Thanks Brad and thank-you all for joining us today. Today we have Thomas Hui our President and COO and Quincy Tang our CFO with me. I will begin with the strategic overview of our business followed by Thomas who will discuss operational highlights and finally Quincy will take us through the numbers in more detail.
Arthur (A02): In 2008 we delivered solid results despite the difficult macro economic environment. Full year revenue was up 25% and full year net income 14% both driven by 22% growth in our poker and casino software and a 39% growth in our Asian online games business.
Arthur (A03): Turning to our 2009, we are highly confident in the fundamental strength of our business and the high quality low cost entertainment value we provide to our millions of players worldwide. On the poker casino side, our top line softness is reflecting the macro economic downturn. But the key player metrics, in particular new player acquisition, remains solid demonstrating the continued appeal and entertainment value of the Everest gaming platform. Players continue to come by they are betting less. So we are increasing cross marketing between our gaming platforms, continuing to release new games to enrich the gaming and entertainment experience and utilizing new marketing partnerships while at the same time implementing an appropriate set of cost reductions and controls all with the goal of maintaining our financial performance inline with last year.
Arthur (A04): In Asia, we have one of the strongest game pipelines in the region and expect to see both strong growth of the top and bottom line in 2009. So of this pipeline are games slated for 2008 release but were delayed meaning we have especially strong 2009 and 2010. Let me turn now to the specific business units and highlight what we are doing to strengthen our business and sustain our momentum.
Arthur (A05): First our poker and casino software business. The challenging operating environment which began in the fall of 2008 has continued into the 1st Q of 2009 where we are now looking at an approximately 10% Q on Q fall in revenue for poker and casino. We believe, however, that our core business is entirely sound and that with proper execution of our 2009 plan and the eventual return of consumer confidence we will be well positioned for a return to strong growth. Everest remains the 4th largest poker site in the world. Everest remains one of the most popular and well known poker rooms in continential Europe according to a recently published player survey. For the last 2 years, Everest Poker has been awarded Poker Operation of the year by independent industry journal eGaming Review. And despite the economic downturn Everest Poker continues to perform as well or better than all of our competitors. We believe our Q1 revenue softness is fundamentally attributable to macro economic issues. The serious economic downturn in Europe and the depreciation of the Euro. Though per player revenue is down our new player acquisition continues to be fine giving us confidence that once consumer confidence returns in the coming months we should see player yields return to historic levels. None the less, as a matter of prudent management, and to protect profitability and cash flow during this downturn, we are making a number of changes to our cost structure which should yield significant cost savings. We estimate between $5M and $6M of savings per year.
Arthur (A06): Please allow me highlight a few of the steps we are taking. First staff reductions. This week executed a layoff of approximately 8% of the staff at our Cambridge Entertainment software unit. We do not expect this cut to material impact the execution of our 2009 plan. Second affiliate partner program. We anticipate additional cost savings from cost per acquisition, cost containment functionality, in our new affiliate management software to be launched next month as well as some improved terms with our affiliates. Naturally we are carefully balancing these cost saving opportunities with our ongoing player acquisition targets but anticipate these savings to begin to occur in mid Q2. Third payment processing costs. We have recently identified new playment processing channels with more competitive rates which should yield significant savings begriming in mid/late Q2.
Arthur (A07): While cost reductions and improved efficencies are an important and prudent management policy we at the same time continue to drive the business with our new products and marketing initiatives. In the first quarter we released a new suite of flash casino games as well as teaser games with no download requirement to attract players and improve conversion of players to real money play. In addition we introduced a new VIP player store which allows players to use VIP and loyalty points to purchase merchandise. The first quarter also saw the launch of the 2009 Everest Poker European Poker Championship and the Everest sponsored Spanish Poker tour as well as promotions and qualifying events for the mother of all events, the world series of poker, for which Everest Poker is the exclusive poker sponsor. For the rest of 2009 we will continue to drive the business hard as a leaner and more efficient operation.
Arthur (A08): More over, we invested heavily in numerous initiatives in 2008 and are excited to see the yield on these investments in 2009. Let me highlight some examples. Cross marketing: We will be launching the next phase of our common wallet technology in Q2, a major step in our next generation platform. This will allow us to more effectively cross register players seamlessly between our existing two verticals and as well as our new Everest Bets and future products. We anticipate this phase will material improve the rate of cross registration from poker to casino. Despite some initial steps, our moniterization between poker and casino is still but a fraction of our competitors which suggests we have considerable additional moneterization available here. Local Marketing partnerships: In 2009, we look to expand our brand and our market presence by looking into marketing partnership with strong local media groups and entertainment firms. We are currently in discussions with partners in Italy, France, Germany and Spain and look to finalize our initial deals within the next months. Business Intelligence: We are now starting to get a return on the significant investments made in 2008. We now have dramatically improved visibility into our business and with greater facility and speed. With these tools we look forward to deep, accurate and timely database marketing across the platform based on a refined understanding of customer behavior and profiles all to maximize player life term buy out value.
Arthur (A09): The new generation Everest Poker. We are very excited about our new Everest Poker front end client to be released in the 2nd Quarter. Our customer tests show an 18% lift in download conversions from this new front end client.
Arthur (A10): Sports betting. This remains a young initiative which began at the end of 2008. We are working very closely with our partner Victor Chandler and are bullish about the future. We believe the key driver to 2009 will be a more tightly integrated solution where the players remain on a common wallet, are able to easily move chips and funds between the verticals, obtain and use loyalty points through the Everest portfolio.
Arthur (A11): World Series of Poker. The grand finale and the conclusion of the 2008 World Series of Poker in November 2008, instead of July as in past year, has meant that the television broadcast of the World Series of Poker have only partially begun. Many key markets, including Italy, Spain, Portugal, Sweden, Denmark and Russia have yet to start airing program and most other programs have only completed limited or partial broadcasts. All of this means continuing TV promotion of Everest Poker in our target markets with an addition to ongoing benefits from the 2008 World Series of Poker, we are especially optimistic about the 2009 event which will be of special and improved benefit to Everest Poker.
Arthur (A12): Traditional Asian Games. Our unique platform of Asian games, launched in the fall of last year, and since then has grown double digits month on month. We have concluded, just recently, marketing partnerships with two major entertainment groups in Japan and look forward to accelerate growth from these channels begriming in the 2nd quarter. In addition, two new pachi games will be launched in the 2nd quarter. We continue to believe that traditional Asian games are a huge market opportunity and we are building our business methodically to become a major contributor, ramping up from this year into 2010 and beyond. As with our build-out original with Everest Poker, we plan to release more operational metrics as our business develops. In summary, we look to deliver financial performance inline with our 2008 results for this division.
Arthur (A13): Turning now to our Asian online games division. The 2008 performance of our Asian online games unit, revenue up 39% and operating income up 16% would be fine for some companies, but in truth was a disappointment for us. Our plan launch of several top games was delayed due to development delays and missed deadlines on the part of some of our 3rd party game providers. None the less, the net result is an even strong game pipeline for 2009 and into 2010 with potential mega hits and explosive growth drivers for Gigamedia. Let me just highlight our latest views and leave a fuller discussion to Thomas. We are excited to announce our licensing of Luna Online for our exclusive operation in China. Luna Online is currently one of the hottest games in Asia with strong user numbers and in some markets, revenue even matching even that of World Of Warcraft. As a cute styled MMO, Luna address the large lucrative niche that looks for strong social interaction and charming Japanese anemia style characters and games. Luna's unique mix of social networking and match making allows for greater character interaction and community building making it a great fit for Asian gamers. We are very excited about launching this game in China this summer and expect it to target the market niche previous occupied by <??rronline??>, one of the all time most popular games across Asia. In summary, we are very confident that Luna and other strong games in our lineup will drive very strong top and bottom line growth in Asia, both for 2009 and beyond.
Arthur (A14): Before concluding a word on potential mergers and acquisitions. With a view to maximizing shareholder value, we are now in discussions with several interested parties concerning the possibility of a strategic merger or sale. We have retained a financial adviser. No further information is available at present. If a merger or sales does not proceed, we will seek strategic acquisition targets as well as consider joining poker liquidity with other operators and platforms. As a publicly listed firm with a strong balance sheet, we believe we have a good opportunity to make accretive acquisitions during the course of this challenging year.
Arthur (A15): In conclusion, despite difficult operating conditions, we remain confident in the strength of our business and value of the online entertainment platform we are building. For 2009, our accelerated growth in Asia and careful management of Europe, point to another strong year for Gigamedia with growing shareholder value as its cornerstone. We thank-you for your interest and continued support. With that I would like to hand the call over to Thomas.
Thomas (T01): Thanks Arthur and thank-you all for joining us. Let me take you through our business and operational highlights now, starting with our gaming software business and following with our Asian online games business. Revenues from our gaming software business in the 4th quarter grew 3% year on year composed of a 50% increase in casino revenue and 10% decline in poker revenues. The record casino results demonstrate continued success in leveraging our investments in the Everest brand. In poker, the results show the results of strong headwind, namely the economic downturn in Europe, the depreciation of Euro against the US dollar and strong competition. Given these factors as Arthur mentioned, we are acting decisively to make the business leaner and taking action to ensure we will whether global macro economic challenges. Overall the Everest brand and our market position remains solid. Poker revenues in the 4th quarter held relatively steady quarter on quarter. During the 4th quarter, our poker platform had approximately 184,000 active real money customers up 4% from the previous quarter. During the quarter we added approximately 44,000 new real money poker players, up 15% quarter over quarter. The poker business continues to attract a strong player basis and remains a healthy business. However, player yields have been negatively affected by two factors. First competition over players increased in 2008 with some sites using profits generated from customers in the United States to market to European players and many operators joining poker networks to improve the liquidity they can offer. This has led to some increases in the number of players playing on multiple sites. Second is clear from our Q4 results that the global economic crisis and the accompanying depreciation of the Euro have had some effect on consumer spending. The net result of these factors has been a downturn in player yields and revenues.
Thomas (T02): Turning to casino, casino revenue in the 4th quarter were again very strong with continued success in cross selling to Everest Poker players offsetting market challenges. As we enhance integration of our poker and casino offerings more and more Everest Poker players are playing on Everest Casino. We also play to launch a suit of flash based games, requiring no download, to further enhance player conversions.
Thomas (T03): Turning now to our Asian online gaming business: Revenues decreased 5% year on year and 15% quarter on quarter with both declines related to decreased 4th quarter contributions from our China based platform T2CN. We experienced a temporary sharp drop in player activity in T2CN game FreeStyle during the 4th quarter due to a hacking incident. This was resolved in December and both player activities levels and revenues have rebound sharply. For the 4th quarter, T2CN monthly active paying account were approximately 336,000 down 16% from the 3rd quarter. An average monthly revenue per active paying account was $3.45 US during the period, down 15% from the previous quarter over quarter. This decline was related to the afore mentioned hacking incident. Peak concurrent users of FreeStyle were approximately 111,000 a decrease of 6% from the 3rd quarter. Funtown average monthly active paying account were approximately 102,000 during the 4th quarter down 6% from the 3rd quarter. An average monthly revenue per active paying account was $19.59 USD during the period, up 2% quarter over quarter. Peak concurrent user were approximately 138,000 an 18% decrease from the 3rd quarter. Overall 4th quarter results of the Asian online gaming business were fundamentally sound with effective cost control and good growth in operating income and net profit. However these results are only a hit at the strength of jour platform and its growth potential. We have invested heavily in this business and are confident in our ability to deliver very strong growth going forward. 4th quarter results did not include any new game launches. We expect to offer new games in each quarter of 2009.
Thomas (T04): Looking ahead we are very excited about the prospect of our new game pipeline. Let me now go over the key developments with regard to our our new game titles. Namely Holic, Warhammer Online, Luna Online and NBA Street Online. We successfully launched Holic in January 2009 in Taiwan. Peak concurrent users of Holic in February were approximately 12,000. We expect launch in China in the 2nd half of 2009 following some additional game development by its developer MGame. Our next launch this year is the exciting new game Warhammer Online. Since its launch, EA have taken what was already a strong game and make it better. Most recently EA Mystic launch version 1.3 of the game in North America and Europe. As part of this, Warhammer gets two new character classes, a number of large event competitions and other new contests. The scope of this expansion is expansive. We will begin limited closed beta testing of Warhammer Online version 1.3 in Taiwan April, open beta in May and look forward to exciting commercial launch in June.
Thomas (T05): Next, as Arthur mention we have just obtain exclusive China rights for Luna Online. Given Luna's success in other Asian markets, we expect it to be a major hit in China when it is launched in Q3 2009. Finally we also plan to launch another game title from EA this year, NBA Street Online. Sports games are all the rage and basketball is one of the most popular in the region. Given this enormous market potential, the global appeal of EA's sports brand and the excitement of NBA stars who appear in the game, we expect NBA Street Online to a major hit in China and Taiwan. EA is taking great care to finalize refinements to the game for Asian markets. We expect that it will be ready for commercial launch in China and Taiwan by Q3/Q4 this year. In summary, we continue to be very confident of our gaming software business and excited about our Asian online games business. In Europe our strategy in 2009 is to continue to leverage the Everest brand and carefully manage cost and in Asia our proven ability to source top content and exciting pipeline for 2009 and our massive bridge give us powerful assets to accelerate our growth strongly.
Thomas (T06): Thank-you. That concludes my remarks and I will now turn the call over to Quincy for a review of our financial performance.
Quincy (Q01): Thanks Thomas. Let me now take a few minutes to review our Q4 consolidated financial results. Following that I will highlight some key factors affecting Q4 results in each of our core business units. There will then be an opportunity for you to ask questions.
Quincy (Q02): Overall, 4th quarter was very challenging. Beginning with revenues, full year over year and quarter over quarter consolidated revenues were relatively steady growing 1% year over year and declining 2% quarter over quarter to $44.6M. During both periods small growth in our gaming software business was offset by revenue decrease in our Asian online game business. Revenue decline in the Asian online game business were related to a 4th quarter hacking incident in T2CN which Thomas mentioned earlier. Our gross profit margin in Q4 was 80.7%, which was steady quarter over quarter and down slightly from last year. Our Q4 2008 consolidated operating income decreased year over year by 16% to $7.9M and increased quarter over quarter up 36%. The year-over-year decrease was due to a decline in our operating margins to 17.7% from 21.3% a year ago. This reflect a margin decline in the gaming software business from amortization of expenses related to sponsorship of the World Series of Poker as well as increases in general and administrative and product development and engineering expenses. This more than offset a increase in the Asian online games business where we tightened cost controls and increased efficiency.
Quincy (Q03): The quarter over quarter increase in consolidated income from operations was primarily a result of a sequential consolidating operating margin in the Asian online game business which more than offset the offset the aforementioned margin decrease in the gaming software business. Last quarter certain non cash charges in our Asian online game business result in the negative income from operation in that business unit.
Quincy (Q04): For more insight into our period results lets look now at key line items. On a year over year basis we have lower G&A expenses and higher selling and marketing expenses with product development expenses remaining flat. Total G&A expenses decreased approximately by $648,000 or 30% lead by a strong 30% reduction in the Asian online game business. The decline in the G&A helped offset the year over year increase of approximately 1.4M or 7% in total selling and marketing expense. This increase was mainly due to amortization of expenses in our online poker software business for sponsorship of online World Series of Poker. On a quarter over quarter basis we had lower G&A expenses as well as product and development expenses with higher selling and market expenses. Total G&A expenses decreased by approximately $1.2M or 22% led by a 39% reduction in our Asian online game business. Total product development cost decreased by $1.4M or 35% largely less due to a 22% reduction in gaming software business. The quarterly sequential reduction in G&A and product and development and engineering expenses help offset a quarter over quarter increase of about $3.3M or 90% in selling and marketing expenses which relate again to the initial amortization expenses of the World Series of Poker.
Quincy (Q05): Turning now to net income. GAAP consolidated net income declined 15% to $9.1M from the 4th quarter of 2007 reflecting the period decline in operating income and the net impact of a higher minority interest income and benefit of income from discontinued operations. Net income declined by 25% from the 3rd quarter of 2008 as a result of weaker performance in our gaming software business. We continue to maintain a very strong balance sheet in the 4th quarter. Cash, cash equivalent and current marketable security at the end of Q4 were $99.4M with total debt decreased by $15.2M with quarter over quarter decrease in our cash position attributable to loan repayment of about $14.3M.
Quincy (Q06): Overall full year 2008 result demonstration our ability to deliver solid top and bottom line growth while continuing to build a leading online entertainment company. Revenue growth 25% to $190.49M lead by 22% growth in our gaming software business and 39% in our Asian online game business. Gross profit margin remain solid at 81.5%. Consolidated operating income grew 2% and operating margin was 20% inline with our expectations. Net income grew 14% to a record $44.4M. In sum, we execute well delivering a solid year while continuing to invest heavily and build out our core business. We face a tough operating environment and a number of delays in scaling up our business but as a result of our work we expect much greater success going forward.
Quincy (Q07): Next lets look in greater detail at the performance of our core business units.
Quincy (Q08): Lets begin with gaming software business. 4th quarter grew 3% year over year. As expected revenue was up 2% over the 3rd quarter. In poker revenue declined 10% year over year and held steady quarter over quarter. Offsetting this were outstanding performance of our casino software business. We continue to drive excellent growth here by cross selling casino games with Everest poker players. Casino revenues were $11M in the 4th quarter up 50% year over year and relatively steady quarter over quarter. As Thomas mentioned we expect on going cross selling initiated to continue to drive user growth and strong performance. Gross profit margin in Q4 was 83.3% down from 87% in 2007 and steady quarter over quarter. The year over year decrease result from increased payments processing cost and depreciation of office equipment during the period. Operating income in our gaming software business decreased 47% to $5.2M year over year and decreased 45% sequentially. Operating margin decreased year over year to 14.7% from 28.7% percent in 2007 and from 27% in the 3rd quarter of 2008. The year over year decrease was primarily due to the increases in selling and marketing, G&A and product development and engineering expenses. The quarter over quarter decline in operating margin mainly reflect increased sales and marketing expenses as we begin to record the amortization in the 4th quarter on the multi-year sponsorship of the World Series of Poker. This increase as well as increased G&A expenses during the period more than offset decreased product development and engineering expenses. In sum it was a challenging quarter for the poker business and another strong quarter for casino business. We anticipate that the operating environment will continue to be challenging as the time for the recovery of the global economy is uncertain and market competition in online gaming continues to be strong. We are taking actions to reduce our operating costs during these critical times.
Quincy (Q09): Let me turn to Asian online gaming business. Overall result for the business was solid. Operating margins grow year over year and quarter over quarter as did net income. As Thomas note revenue in the 4th quarter were negatively impacted by a hacking incident in China of T2CN's game FreeStyle making year over year and quarter over quarter revenues comparison of Asian online gaming business somewhat distorted. Revenues in the Asian online gaming business declined 5% year over year and by 15% quarter over quarter. Breaking down revenues by business unit, revenues from T2CN our China platform declined 12% year over year to $3.5M. On a sequential basis revenue decreased 29% in Q4 from Q3. As Thomas mentioned revenues for FreeStyle for the first quarter of 2009 have rebound sharply. Revenues from Funtown, our Taiwan and Hong Kong online gaming platform, was steady year over year and quarter over quarter at $6M as we did not launch any new games during the period. Gross profit margin for Q4 was 71.4% up slightly from 68% last year and comparable with 73.2% in 3rd quarter of 2008. We are very pleased to report that the operating income jumped 167% from the same period last year driven by a strong margin expansion to 34.2% from 12.1% in 2007. Margin expansion resulted from effective cost controls with a 36% decrease in sales and marketing and a 30% decrease in G&A expenses. Quarter over quarter operating income grew sharply from a lose of $2.4M as described in our announcement 3rd quarter results were distorted by several non cash items. Excluding such items to obtain a more meaningful comparison to obtain a more meaningful comparison operating income for Asian online gaming business grew approximately 100% quarter over quarter from $1.6M and operating margin more than doubled from 14.6%. Looking ahead we expect the revenue to grow significantly in the first quarter and accelerate in 2009 as we begin to more fully leverage our unique regional platform and launch some of the outstanding set of new games. Thomas mentioned earlier including Warhammer Online, Luna Online and NBA Street Online. In conclusion in Q4 we faced strong operations challenges but we again delivered solid results. We continue to build and strengthen our business and we are committed to control our operating costs in order to sustain momentum against economic headwinds.
Brad: Thank-you Quincy. We will now move into a question and answer session. So operator...
Operator: Our first question comes from the line of Atul Bagga at Thinkequity. Atul you may proceed.
Atul (QA01): Good morning. Thank you for taking my call. Arthur, can you give us some update on the proposed bill to legalize online gaming in the US and <inaudible>. Thank-you guys.
Arthur (A16): Thanks Atul. The fiscal crisis in the United States will certainly be an impetus for the repeal of the prohibition act that was pasted a couple of years ago. It now looks like there will be two bills moving through Congress and the list of supporters is continuing to grow. At the same time there is also movement in California for a state bill to legalize poker in California. We believe that as the only United States written, born and bred software, the only Sarbane Oxley compliant, the only US corporate governance compliant firm that we will not only be the first in-line to receive a US license but also the first to receive actual US operating license. Naturally this is an enormous opportunity for us and combined with sponsorship of the US World Series of Poker we believe represents the huge upside for our business.
Atul (QA02): And can you talk a little bit about what would be your strategy if and when the US opens up? And how big an opportunity it could be and also you know you talked about some consolidation opportunity that you might be working on. Is that something that hinges on this? Or is that a part of your strategy for the US opening up online gambling?
Arthur (A17): Ok. We continue to look at all times for accretive, strategic M&A opportunities that will accelerate our business. The opportunities I mentioned during the call are not specifically related to opening in the United States. Our strategy for the United States would be a very aggressive strategy. The market size of the United States is considerably larger than the market in Europe and is a well developed and well known market place. A lot of this market place began and developed because of the World Series of Poker which has been going for many many years and was the original source of popularity of Texas Holdem poker. So we believe as the sole poker sponsor of the World Series of Poker, plus with our presence in the United States, our software developed in Cambridge Massachusetts and our knowledge of the US market place that we would be in a very strong position and compete very strongly.
Atul (QA03): Ok. Thanks then. Ah, switching gears, so you guys talked about ESP guidance and targets for 2009. For Q1 you are expecting gaming software to be down about 10% sequentially and for the year you are expecting it flat year over year which implies that in the next 3 quarters you could be doing about $37, $38M per quarter. Do you expect this growth to be even in all the next three quarters? I am just trying to understand what is the catalyst that you are seeing or what is giving you the confidence for this strong growth in the next three quarters of 2009?
Arthur (A16): Thomas do you want to speak to this?
Thomas (T07): Ah, sure. Atul, I think what we are expecting is the combination of the initiatives on the revenue side but also more importantly new to this quarter we have announced and introduced the concept on the core side that will give a financial performance in 2009 that is inline with 2008. So the core side has a big part to do with as we have demonstrated even in Q4, in the Q4 whereby the seasonal rebound was not as strong as in previous year because of all the factors we mentioned we were able to continue course to deliver a satisfactory set of results in terms of bottom line and that will be another key way for us to deliver the financial performance we think that we target ourselves to in the gaming software business in 2009.
Atul (QA04): Makes sense. And for these cost initiatives that you highlighted so these will start impacting, will have some impact from Q3 onward or can we expect to see some impact in Q2 as well?
Thomas (T08): Definitely the cost controls and cost cutting measures so of them begin to take effect right a way and some in the middle or some time during Q2.
Atul (QA05): Gotcha. And the last question for you guys, so for Q1 you guys guided gaming software business down 10% sequentially, a couple of your competitors when they talked about performance in Q1, they highlighted that Q1 revenue has rebounded in poker. Can you talk a little about why that might be different?
Arthur (A17): <inaudiable>, Atul we are not familiar with anyone giving aggressive guidance on Q1. We follow market quite close and believe that are tracking almost directly inline with our competitors, so it would surprise me quite considerably if anyone was going to doing very much different. There could be aberrations in certain markets, for example, maybe vestiges of bingo doing well in England or a couple of anomalies here or there but the general market position would not allow very much different there.
Operator: To as a question... And our next question comes from the line of the Adam Kottke of Roth Capital. Adam, you may proceed.
Adam (QA06): Thanks. Thanks for taking my question guys. Going back to the full year guidance on the real money business and what Atul was referring to, does that include any revenue contribution from online sports betting and also real money online games in Japan?
Arthur (A18): Yes, the 4 year forecast does include contributions from both. Both are very very small numbers and now almost immaterial at present but wrapping up, as we mentioned, with the traditional Asian gambling games going double digits month on month growth. With the implementation of the common wallet and our improved platform cross over features we expect the EverstBets to also be an ever growing contributor.
Adam (QA07): Ok. So I take it more in the back half of the year instead of the 1st Q 09.
Arthur (A19): Yes.
Adam (QA08): Ok. And then in terms of operating margins in the past you have always guided to about 20 to 25%. You were below that range in this 4th quarter. Do you think you can get back into this long term guidance range given some of these cost initiatives and then perhaps 1st Q 09 and given your goal is for the full year.
Quincy (Q10): This is Quincy. Not withstanding the challenging operating environment, I think, combined with the new initiative and cost cutting measures we still targeting to achieve operating margin within 20 to 25%.
Adam (QA09): Ok. For the 1st quarter or for the full year? Or just
Quincy (Q11): I think it is more for the full year picture. Because we have seasonal fluctuation and also bear in mind that in each quarter we have a new games to be launched in the Asian online gaming and while the sales will pickup in sequential quarters. So we have more up front marketing expenses. So we are looking it in a 12 month to 24 month basis on this.
Adam: Ok. Thanks a lot guys.
Operator: To ask a question... At this time we are showing no more questions available. Mr. Miller you may proceed.