WPT Enterprises, Inc. announced results today for the third quarter ended October 3, 2004. Revenue for the three months ended October 3, 2004 totaled $3.0 million, compared to $0.4 million in the prior year period. Net loss for the quarter was $0.5 million and basic and diluted losses were $0.03 per share. This compares with a net loss of $0.4 million and basic and diluted losses of $0.03 per share for the quarter ended September 28, 2003.
Revenues for the current and prior year quarters were derived primarily from television license fees related to the WORLD POKER TOUR® (WPT) series. The increase in revenue is primarily due to an increase in the number of episodes delivered to the Travel Channel, LLC (TRV) during the third quarter of 2004 compared to the number of episodes delivered to TRV during the third quarter of 2003. The WORLD POKER TOUR airs on Travel Channel Wednesday nights at 9 PM ET/PT. Also contributing to the increase was revenue of approximately $0.6 million related to international television licensing, product licensing, host fees, sponsorship, and merchandise included in total revenue for the three months ended October 3, 2004. In April 2004, TRV exercised its option to broadcast Season Three, the first of a possible five additional seasons of WORLD POKER TOUR covered by the option. WPT Season Three episodes are currently in production, and are scheduled to begin airing in March 2005. WPT receives fixed license payments from TRV subject to satisfaction of production milestones and other conditions. Domestic television license revenue is recognized upon delivery of completed episodes to TRV.
Production costs increased from $0.3 million for the three months ended September 28, 2003 to $1.9 million for the three months ended October 3, 2004. The increase in production costs is primarily due to an increase in the number of episodes delivered to TRV during the third quarter of 2004 compared to the number of episodes delivered to TRV during the third quarter of 2003. Overall gross margins were 35% for the three months ended October 3, 2004 compared to 26% for the three months ended September 28, 2003. The higher gross margins in the current year period were due primarily to higher international television and product licensing revenues in 2004 compared to the same quarter in 2003.
Selling and administrative expenses increased from $0.5 million for the three months ended September 28, 2003 to $1.5 million for the three months ended October 3, 2004. This increase is primarily due to additional legal and consulting fees incurred during the 2004 period associated with business development and an increase in payroll costs resulting from growth related to becoming an independent public company.
WPTE completed its initial public offering on August 13, 2004, at which time WPTE sold 4,000,000 shares of common stock with WPTE receiving proceeds of approximately $28.5 million, net of estimated offering expenses and underwriting discounts. On September 17, 2004, the company's underwriters exercised their over-allotment option to acquire an additional 600,000 common shares, resulting in additional net proceeds of $4.4 million to WPTE. Net proceeds from the offering, other than $0.2 million used to repay amounts outstanding under WPTE's promissory note to its majority stockholder, have been used and are expected to be used for working capital and to expand WPTE's entertainment production business. At the end of the quarter, WPTE had cash, cash equivalents, and short-term investments of $33.6 million.
'We executed well this past quarter,' commented Steve Lipscomb, President of WPT Enterprises, Inc. 'We completed our initial public offering, expanded our international distribution, and introduced branded consumer products to the marketplace in time for the holidays. As the WORLD POKER TOUR continues its strong run with Season Three, we remain equally excited about the extension of the WORLD POKER TOUR brand into new business opportunities outside of the world of television.'
