E-service provider Aqua Online has signed a worldwide distribution agreement with International Merchant Services (IMS) to distribute its online casino software.
The company will participate in both the upfront and ongoing licence fees generated by the IMS software. Aqua says the software has been adopted as the operating platform for two of the world`s largest gaming portals, and expects the agreement to significantly expand its value-add solutions offering to the online gaming sector.
However, Aqua says the agreement is a deliberate re-alignment of Aqua`s online gaming activities with the consequence that "short-term earnings have temporarily been sacrificed in favour of anticipated higher, more predictable and sustainable long-term earnings".
In order to facilitate the migration of some of Aqua`s existing clients to the new IMS software platform, trading volumes of their online businesses were scaled down. This will temporarily impact Aqua`s revenue linked service fees. Aqua believes once the migration has been completed, contributions from these businesses will be restored and exceeded.
Investors can expect to see the effects of this in the financial year ending June 2002, but the company was quick to point out that it has sufficient cash reserves to support the business until such time as the benefits of the deal could be seen in the 2003 financial year.
"These medium- to long-term strategic benefits strongly offset the impact on earnings in the short-term," says CEO Brent Shahim.
"While interim earnings to December 2001 are likely to decline materially compared with the previous quarter, management is confident that June 2001 earnings levels will be restored and exceeded in the following financial period," says UK-based joint-CEO Tal Harpaz.
"We will need to reinvest short-term earnings to build an infrastructure in support of our longer term contractual obligations. We will also need to dedicate both time and resources to service the anticipated expansion of our client base as a result of this move.
"We believe that the IMS software distribution, despite its adverse consequences for short-term earnings, is crucial to enhance and sustain our medium- to long-term growth prospects," he concludes.
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