GigaMedia Ltd (GIGM) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the GigaMedia Ltd. conference call to discuss first quarter 2008 financial results. At this time, all participants are in a listen-only mode. Following the formal presentation instructions will be given for the question and answer session. (OPERATOR INSTRUCTIONS). As a reminder this conference is being recorded today, May 13, 2008.

I would now like to turn the conference over to Mr. Brad Miller. Please go ahead, Mr. Miller.

Thank you, this is Brad Miller, Investor Relations Director of GigaMedia. Welcome to our first quarter 2008 results conference call for GigaMedia Limited. Here again to speak with you and answer your questions today are Arthur Wang, our CEO, and Thomas Hui, President and COO.

Before I turn it over to today's speakers, I would like to remind you that a number of forward-looking statements will be made during this conference call. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of GigaMedia, and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, GigaMedia's actual results could differ materially from these statements. Information about factors that could cause, and in some cases have caused such differences, can be found in GigaMedia's annual report on form 20F filed with the US Securities and Exchange Commission in June 2007.

This presentation is being made on May 13, 2008. The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, GigaMedia will not be reviewing or updating the material that is contained therein.

The agenda for today's call includes first, a review by Arthur Wang of Q1 2008 business activities and financial performance. Thomas Hui will then provide details on our financial results during the period. After the speaker presentations we will go into a question and answer session.

With that I'd like to turn the call over to Arthur, our CEO.

Thanks, Brad. Before proceeding, on behalf of the entire GigaMedia family I would like to say thank you for all the calls and expressions of concern regarding the terrible earthquake in central China yesterday. Fortunately, none of the GigaMedia family were injured and all of our operations are unaffected. Our thoughts and prayers go out to the thousands of victims and their families affected by this tragedy.

Turning now to our business review, we were delighted with our performance in the first quarter. Revenue up 51% to a record $54.6 million, driving the bottom line, non-GAAP net profit that is excluding non-cash share based compensation of $12.8 million, up 46% year-on-year. In our gaming software business, we continue to hit new company records with Everest Poker. Complementing this, we also drove strong growth in our casino software business. And in Asia our casual game platform delivered sharply accelerated growth. Overall, an outstanding quarter, with two points worthy of special attention.

First, operating income. I believe the most important news today is the strong growth in our operating income, which climbed to $12.9 million, a company record and a 39% growth sequentially over the previous quarter. We have concentrated much time and attention on strong execution and are pleased with the progress we are making.

Second, early returns. In past quarters we've invested in new products and platforms for the delivery of many forms of on-line entertainment. I think our first quarter results demonstrate just a little bit of the true potential of our business. We are just beginning to capitalize on these platform investments to drive cross selling and other synergies in our gaming software business. And to launch new products such as traditional Asian games like mahjong and pachinko.

In addition, our Asian casual game platform will see a host of new offerings in the second half. We are committed to continue to drive strong growth, to capitalize on the early results, and turn them into ever increasing shareholder value.

Let me briefly describe to you now our primary growth drivers as well as what we are doing to deliver continued strong growth for 2008 and beyond. Let me begin with our gaming software business. Once again we had a very strong quarter driven by Everest Poker whose revenues grew by 56% year-over-year and by 11% quarter-over-quarter. Most noteworthy, in the first quarter, we increased acting depositing players by 14% over the previous quarter and grew new depositing players by 19%, also sequentially.

For our casino products our cross-selling activities drove casino software revenues up 17% compared with Q4, a number we expect to grow considerably as our full cross-selling functionality is enabled in the second and third quarters. As pleased as we are with our achievements with Everest, we are working hard to do even better, taking things to a new level.

Allow me to briefly share with you now the exciting initiatives we have underway to expand the platform, to build the brand, to continue driving strong growth long-term. First the World Series of Poker, one of our most exciting initiatives is our recent announcement that Everest Poker has secured a key, multi year sponsorship of the legendary World Series of Poker, the world's oldest, largest, richest and most famous poker tournament.

Everest Poker will be featured on the [shelf] at every table in the World Series and in particular on the inner [rug] that surrounds the inside of the championship table, most visible during televised game play. The World Series of Poker has a viewership of over 350 million homes from over 2,700 hours of broadcast. In short, the World Series of Poker is the world's greatest gaming event, and we are very excited about leveraging this relationship to continue driving strong growth and to enhance the Everest brand worldwide.

Second, sports betting. As we've announced previously we plan to acquire, to merge or to form a strong strategic alliance with a major European sports book in 2008. By having a sports product to pair with Everest, we will be able to share players and traffic and increase monetization from each player, allowing us to further advance to our brand and player acquisition.

In addition sports betting will allow us to address some of the seasonality of our online poker and casino business, providing a host of popular products and marketing activities during the summer months when many top sporting events take place. We have now entered into discussions with several outstanding firms and are moving forward in due course.

Third, poker and casino integration in cross-selling; we also plan to integrate our poker and casino offerings, opening a window in the poker client to allow players to play black jack and other games while waiting for others in a poker game and improving cross-selling between our products.

As an example of the potential here, during the first quarter we implemented strong cross-selling initiatives of new casino games to Everest poker players, driving strong growth in casino player yields and casino revenues. In the second quarter, we have further integrated our casino and poker offerings to further drive cross-selling and long term growth.

Fourth, launching Everest Poker into the United States. We join many others in the view that the United States will repeal its prohibition on poker and adopt a new system whereby poker offerings by licensed, regulated companies will be allowed. It is our intention to be first in line for such a license, and our belief that we are well positioned to be one of the first recipients as the leading NASDAQ listed, US GAAP filing, Sarbanes-Oxley compliant poker offering.

We believe our multi-year sponsorship of the World Series of Poker will set the stage for our full launch into the United States upon legalization.

In just three years, we have built Everest into on of the world's leading gaming brands. We intend to continue investing in building both the brand and our platform to enhance our entertainment offerings and by doing so to increase our ability to monetize on the platform as revenue and operating leverage increase.

I note that all of our growth thus far has been organic. We continue to explore partnerships, business combinations and acquisitions which would create shareholder value and expand our market position. Indeed, I expect there will be significant developments in this regard in 2008.

Our Asian on-line games business. The Asian on-line games business had a great quarter, more than doubling operating margins and tripling operating income sequentially on record revenues, demonstrating the inherent scalability of the platform. As impressive as this performance was, Q1 results were still but early returns from our strong investments in the business. We achieved this quarter's record results on existing products. Later this year and into 2009, we are rolling out a number of games with the potential to be mega hits in the market and explosive growth drivers for GigaMedia.

In Asia, we are on our way to building an unrivaled gateway to on-line entertainment in the region, a one stop shop for game developers and (inaudible) providers addressing the region's huge and lucrative market. Today we have over 80 million registered users, over 9 million users active last month, and we look to double these numbers then double them again as we grow our pan-Asian platform.

Two points I would like to highlight, first new games. To fuel our growth in this large and rapidly market we've been fortunate to secure a tremendous set of new games. By partnering with top game entertainment firms from around the world, including Electronic Arts, a global leader in digital entertainment with over 200 popular titles, and Flagship Studios, creators of the Diablo and Warcraft games.

In the second half of 2008 and into 2009, we'll be launching the exciting MBA Street on-line game from EA Sports and the epic, multi-player role playing game Warhammer Online from the EA Mythic Studio, as well as Hellgate London from Flagship Studios. We also hope to have some new and exciting announcements on this front very soon.

Second, strategic investments. In 2007 we made equity investments into three top game development studios. Since then we have built strong relationships with several more game studios. We'll be announcing further equity investments of a similar nature soon. Together with our software development projects, and our licensing from top global partners like EA, our investments in talented studios forms the third leg of our content pipeline, a multi-source approach to ensure we have a strong pipeline of on-line entertainment and games to drive growth for years ahead.

Turning now to real money Asian games, we are excited to announce that the formal commercial launch date for our revolutionary suite of Japanese gaming products will be in the middle of June. Our Japan offering will include traditional Asian gaming products such as MahJong, pachinko, pachislo, a Japanese variant of Poker. We have begun pre-launch marketing, I am pleased to say, built on a foundation of hundreds of downloads per day of our games. We are tremendously excited about these growth initiatives given the potential of the large Japanese market.

Overall, we start 2008 with a great quarter, a demonstration of both sound strategy and strong execution. We are thrilled with our progress thus far but even more excited by a heartfelt belief that today's results are but the early returns for our many investments into building a dominant on-line entertainment business. As has been our commitment from the beginning, we are building a new GigaMedia, with growing shareholder value as its cornerstone. We thank you for your interest and continued support.

Thanks, Arthur, and thank you all for joining us. Simply put GigaMedia's first quarter 2008 financial results were outstanding. Let me now take a few minutes to review with you what we achieved in the period, and what we expect going forward.

In the first quarter we grew consolidated revenues 51% year-over-year or 15% sequentially to $54.6 million. While in absolute terms our poker and casino software business continued to be the main driver of our revenue growth, in terms of percentage growth, the Asian on-line game business was our fastest growing business in the first quarter, highlighting the increasingly diversified nature of our revenue stream.

I will share more with you on growth in the Asian on-line game business in a moment.

Consolidated operating income was a record $12.9 million in the first quarter, which represented a 49% increase year-over-year and a 39% jump sequentially. We achieved strong quarterly sequential growth in our operating income on the back of strong margin expansion, with our consolidated operating margin growing to 23.6% from 19.5% in the fourth quarter of 2007. Consolidated operating margin expansion was a result of the combined effect of significant revenue growth, and effective cost control especially in the areas of selling and marketing, and demonstrated the inherent scalability of our core businesses. Net income in the first quarter grew 43% year-over-year and 13% sequentially to $12.1 million.

As noted in our press release today, net income was impacted by an increase in tax expense in the quarter as a portion of our tax loss carried forward was either utilized or [expand] in 2007. Our effective tax rate was approximately 3.9% in the first quarter. Looking ahead, we expect our effective tax rates for the full year 2008 to be in the mid to high single-digits. We continue to maintain a robust balance sheet in the first quarter. Cash, cash equivalent, and current marketable securities at the end of Q1 were $79.9 million, and total debt was $32.2 million. In Q1, we generated $9 million in operating cash flow. In sum, we delivered a very strong result in all key metrics.

Let's now look into the performance of our core business units. Beginning, software business. During the first quarter, the business unit generated a record $38.3 million in revenue, up 46% over last year, and 12% over the previous quarter. Revenue from our poker software products were $29.7 million, an increase of 11% sequentially. (inaudible) with our award-winning Everest Poker offering, approximately 208,000 active depositing real money customers played Everest Poker during the first quarter, up 14% sequentially. And during the quarter, Everest Poker added approximately 68,000 new depositing real money players, up 19% quarter-over-quarter. Complementing this, our casino software business delivered exceptional results as well. First quarter revenues on the casino software business were $8.6 million. This represented a 17% increase sequentially. The launch of highly successful new video slot games and the cross-selling of casino games to Everest Poker players were the main factors contributing to our first quarter success in the casino vertical.

While we show strong revenue increases in poker and casino, selling and marketing expenses actually decreased in absolute dollar terms by 3% sequentially to $15.9 million in the first quarter. As stated in our press release today, the sequential decline of selling and marketing expenses primarily reflect a strong mass media promotional campaign in the fourth quarter of last year, which resulted in higher than normal selling and marketing expenses in that period. Operating income in our gaming software business increased 17% sequentially to $11.5 million in the first quarter, driven by revenue growth and an increase in the unit operating margin to 30.1% from 28.7% in the fourth quarter of 2007.

In sum, our gaming software business is continuing to deliver and drive growth and derive benefits from our investment in building the Everest Poker brand. Looking ahead, we face the traditional seasonal decline in on-line gaming activities in Q2 and Q3. However, we believe our cross-selling and new product initiatives, as outlined by Arthur earlier, could partly mitigate the impact of such seasonality.

Let me now turn to our Asian on-line game business, which delivered outstanding results in the first quarter. Total revenues from the Asian on-line game business surged to a record $12.9 million, more than double last year's result, or 28% up sequentially. I would like to highlight that the sequential 28% growth was all organic, generated from existing game offerings with no new game launches in the first quarter. This impressive sequential growth was driven by effective marketing campaigns, timely game content updates, seasonally strong Chinese New Year holiday period, and the appreciation of the renminbi and the NT dollar against the US dollar in the first quarter.

Let's take a more detailed look at the revenues from this business unit. First, in Taiwan and Hong Kong, FunTown had a strong first quarter, with revenues growing 15% quarter-over-quarter to $7 million. The sequential growth was due to a significant increase in ARPU as a result of strong contribution from Tales Runner, a successful game promotion run during the Chinese New Year, targeting the existing customer base of FunTown casual games. Monthly ARPU increased 21% sequentially to $21 in the first quarter.

Added to this, we began to see the initial result of ongoing restructuring and integration of T2CN. Total first quarter revenues for T2CN were $5.9 million, up an impressive 48% sequentially, driven by a significant increase in the number of players on T2CN's platform. T2CN's total active paying accounts jumped 43% sequentially to 514,000 in the first quarter, due to strong performance of FreeStyle. FreeStyle remains the number one online sports game in China, and a sequential pickup in the games performance was related to the following. First, the addition of new content to the game via new game patches in January and March, allowing players to enhance their skills, and offering dozens of new in-game items. Second, new promotional activities during the period, in conjunction with a hit movie in China. And third, increased on-line game activity around and during the Chinese New Year as a result of severe snowstorms during the period.

Operating income surged 353% from a year ago to $3.7 million, and more than tripled from the previous quarter. Operating margin in the first quarter climbed sharply to 28.8% from 13% in 2007 and from 12.1% in the previous quarter, reflecting the scalability of our Asian on-line game business. Year-over-year, we executed well, driving strong revenue growth and effectively controlling increases in sales and marketing expenses, which offset the pure decline in gross margin and higher G&A expenses related to platform expansion and integration. Quarter-over-quarter, we continue to increase player numbers and monetization, driving operating margin expansion by growing our gross profit margin and controlling sales and marketing expenses. Overall, Q1 results for the Asian on-line game business were excellent, demonstrating that the business is highly scalable, and that even on the basis of existing portfolio of games alone, the business is on track to drive strong growth in 2008.

Looking ahead, we expect revenues to climb in the second half of 2008 as we begin to more fully leverage our unique regional platform and launch certain major new games in Q3 and Q4. We have licensed a very strong set of exciting new games, including NBA Street Online, Holic, Warhammer, and Hellgate-London, which have enormous profit potentials. We have also complemented this by investing in leading games studios, giving us preferential access to future hot titles.

In conclusion, in Q1 we again executed well, we continue to drive strong growth, and we expanded margins in our core businesses, resulting in record profitability. Both our gaming software business and our Asian on-line game business are on track for a very exciting 2008. Thank you.

Thanks, Thomas. We will now move into a question-and-answer session. Operator, at this point we would like to open the call up to questions.

(OPERATOR INSTRUCTIONS).

Our first question comes from the line of Alicia Yap with Citigroup. Please proceed.

Hi, good evening, Arthur and Thomas. Congratulations on a really strong quarter. I have a few questions.

Number one, on your poker business, we do see significant benefit from the sales and marketing spend in the fourth quarter as the active paying accounts increase and other double-digit growth this year. Should we assume your slight declining in ARPU is due to the new users who usually paid a little bit less in the early stage, or in other words, should we expect the ARPU to track back to $49 range, or will that maintain at $47 range?

Alicia, this is Thomas here, thank you very much for the questions. The ARPU, or revenue per active players count into one for the entire quarter is about $143. That is slightly less than the Q4, but roughly in line with the historical variation. So we did not see the dilution effect you just mentioned because of the coming up of the new players, the 68,000 we recruited, so this is actually within the normal fluctuations statistically for the previous quarters.

We therefore would not probably expect a significant pickup of this ARPU in the coming quarters as these players mature.

So the $49 in the fourth quarter is actually exceptional, right?

If you look at it again, each quarter has some variations, but if you look at a long enough period of time, and I think most of the quarters, including the Q1, falls within the variation standard that we see as normal. So yes, we don't expect that to pick up significantly from the current level in Q1.

I see. Okay, and then the second question is on your casino business. You seem to gain tremendous benefit from the cross-selling from the Everest Poker. Given that you also plan to get into the spot betting business, how should we be thinking of the casino business in the rest of the year, excluding the seasonality?

We expect to continue to benefit from the cross-selling. The cross-selling effects come in different stages, from what we have implemented into one, which is to make it easier for our players on our poker sites, when they want to play casino products, we facilitate easier transfer of their personal and payment information onto our casino product. And in future stages, we will have shared common wallet and ultimately we will have, obviously, a launch of the poker client, sorry, the casino client on our poker platform.

So this will all be rolled out gradually, and as we roll out each of the steps, we continue to expect the cross-selling effect to increase and benefit us as we roll that out. So it will be something that we think will have benefit effects for the next couple quarters.

I see. I think what I was trying to get is that the $8.6 million that you got in the first quarter, will that set a base for the future quarters, let's say the second and third quarter seasonality, so let's say in the fourth quarter we should also see, it will be like the high $8 million or $9 million, right? Almost near the $9 million range?

Sure, Alicia, I think that we have not been giving out specific numerical guidance on specific revenue benefits from such cross-selling assets. But if you look at some of our, as we discussed before, if you look at some of our other competitors who have rolled out similar kinds of cross-selling initiatives, EA Poker embedded casino client, you will see that they are quite a bit of statistics. They're poised to have anywhere from 15% to 20% of the poker players would play these casino games. Now the monetization of these players is obviously different for each site, that depends on your game offering and so on and so forth, and your demographics. But from a comparable perspective, there is a pretty strong cross-selling case to be made here.

I see. Okay. And then my third question is, you stated on your qualitative business outlook session that you expect the Asian on-line games business to climb sharply in the second half due to the launching of new games. Could you give us some color in terms of the magnitude of the revenue (inaudible)? Should we expect an almost double-digit sequential growth for the rest of the year, like you did in the first quarter? Or if not, how should we be thinking about that?

I think, Alicia, we would prefer, I think it's prudent for us to not provide too much in the way of specifics or by way of scale or range at this point in time, because we're -- at this point we have yet to finalize exact launch dates, but we're very excited about some of the new titles we have coming on line, and we think market response is going to be very strong. So we'll, as we get closer to, we'll see if we can provide a little bit more guidance there.

Okay. And then just one last question, on the ARPU for FunTown of $31 is really strong this quarter. Will that be trending down to the historical level, about $17 to $18 range?

(inaudible) we certainly want to keep this level. I think this brings up, Alicia, this brings up a very important point we keep emphasizing in our past courses, our ability to build community effect and monetize on the casual game platform of FunTown, which are board and chess games, not proprietary by any means, obviously our products are different and we believe they offer more attractiveness then some of the other similar products, but by and large, there are other mahjong and board and chess products out there. But our ability to monetize at this level and continue to increase the monetization speak to the strengths of our community expertise here.

Do we expect a coming down? We don't necessarily think that this is anomaly, we were more successful in this quarter than in Q1 in some of our initiatives than in some of the initiatives that were tried before, but we continue to do our best and try to maintain our very high monetization.

I see. Okay, great! Thank you. I'll get back to the queue!

Our next question comes from the line of Todd Eilers, with Roth Capital. Please proceed.

Hi, guys. Thanks for taking my call, and congratulations on a very strong quarter. Just a few questions. Arthur, could you maybe talk a little bit, you had very impressive revenue growth, especially coming from the real money business. Can you maybe, and I know you don't, in the past, haven't talked a lot about what markets you guys are in specifically, but can you, to the most that you can, can you maybe talk about where you're seeing a lot of the growth right now, and maybe about what markets are most attractive to you going forward, so we can maybe get a sense of what to look for through the remainder of '08?

Sure, Todd. I'm afraid I'm going to have to speak generally because we, for competitive as well as for other reasons, have not as a matter of policy spoken to our specific activities in any given country. In the first quarter, we were very active. We were in mass media markets in six different countries. We held a very interesting Live The Dream campaign, which was a chance for you to become a poker star and live the life of a professional poker player, and this campaign was well underway during the first quarter. We also had launched our Everest Avalanche set of tournaments throughout Europe. We continue to concentrate, as one might expect, upon the larger economies and larger countries in continental Europe, but some of our mass marketing efforts extended during the first quarter to some newer and less medium-sized countries and included some of the smaller countries. So we are expanding, seeking to expand our base beyond our traditional areas of strength, which are of course the larger countries, into some of the new marketplaces.

So, I'm not sure if this specifically addresses what you're speaking to, Todd, but these are the types of things that I think are drivers in Q1.

That's very helpful. Also, if I could ask more on the expense side. Last quarter, obviously, on a consolidated basis, in the fourth quarter selling and marketing has ticked up to the $20 million range and you guys had taken advantage of some mass media marketing opportunities, and that really drove, looks to have driven some growth here, strong growth in the first quarter of the year. Your consolidated selling and marketing dipped back down as a percent of revenue to 34.9%. But my question is, I guess going forward, should we assume kind of that mid 35% to 37% of revenue range for total sales and marketing expenses, and also, are you currently looking at any sort of mass media marketing opportunities that might take that number up a little bit in the remaining quarters of this year?

Right, Todd. That's a very good question, thank you very much for that. The simple answer to your question is that, yes, as we have explained before, on a consolidated basis, we do look at our operating margin to be around the 20% to 25% ranges, and that would necessarily imply a certain maximum -- over a long period of time a maximum amount of marketing, selling a marketing expense as a percentage of revenue that would expand and your math is spot on, it's basically that percentage ranges. And if you look at this -- the breakdown of the selling and marketing the 19 million we spent in Q1, we broke it down for you between the two business units and the bulk of this was obviously coming from the main revenue generator, the casino and poker side of it, and it's that side we also talk about operating margin target at about 30% which is what also we achieved in Q1. So, yes, over the course of this year, on a full-year basis, we do expect this kind of level. As we have mentioned before the bulk of the selling and marketing expense are composed of the discretionary and promotional expense which we have quite a bit of control of.

At this stage, to your second question, we do not see any major unannounced mass marketing promotions (inaudible) that would take us beyond the outlines I just explained to you.

Okay, great. And then just one last question, another expense item, G&A increased sequentially. Can you maybe talk a little bit about what drove that increase and what your expectations are going forward? Is that a good run rate on a quarterly basis?

Sure. First of all I'd like to say on the G&A side that if you look at the sequential growth, it's quite a lot, $2.4 million. But that's partly because the Q4 number, the $5.4 million in Q4 2007 was an artificially low number because of a lot of adjustment at the year-end process. If you look at Q3 G&A, on a consolidated basis this was actually $6.6 million, so part of the reason why you see such a big jump is because as part of the year-end process the Q4 number was depressed. And also there are increases, actually increases in the first quarter, in primarily some professional expenses and also personnel expenses as we continue to build up the platform and increase headcount. So we do expect G&A to churn up, but again not at the expense of the overall consolidated margin levels I explained in your previous question.

Okay, perfect. Thanks, guys.

(OPERATOR INSTRUCTIONS).

We have a follow up from Alicia Yap with Citigroup. Please, proceed.

Hi, yes. Thanks for taking my follow-up questions on (inaudible). Do you expect any impact on the Olympics on your Asian on-line games business, especially your T2CN unit?

I think the most direct impact, Alicia, that we have most control of is we will -- it's going to be unlikely that we will launch any new games during or around the Chinese -- sorry, the Olympics, for reasons that the whole media, the whole China, will be flooded with news of the Olympics, and for us to launch a game at that time would be dropping water in the ocean and unable to have our games' noise be heard. So that would certainly have impact on our game launch schedule. As to whether or not it would impact on player numbers, player activities or revenue for our existing games, for example, FreeStyle, that is a little harder question. We have different -- all sorts of models out there because it is Olympics-themed so our sport game could be benefited, but at the same time people may have less time to play games. So at this stage we don't expect significant impact on the existing games.

I see. Talking about that, have you actually planned on from, let's say, the expansion pack that will tailor towards the Olympics, let's say, in putting (inaudible) or whoever figures into the expansion pack or the China team shirts or the China brand into FreeStyle?

Yes, Alicia, as we've done in the past, for example with the World Cup and other major events, we intend to capitalize on them. We're not an official Olympic sponsor but we try to get our avatars, and the clothes our avatars are wearing and basically we do piggyback them on the event, and we've enjoyed some good success with this in the past. So definitely it's part of our marketing campaign.

Alicia Yap. Okay. And then can you lastly just remind us on the launching schedule for (inaudible)? I think I missed that. And also the Hellgate-London, is that 2009, right?

We're looking to launch Holic in China in Q4, and Holic in Taiwan in end of Q3, beginning of Q4 and NBA Street Online in Taiwan in Q4, and Warhammer is most likely going to be next year. And Hellgate, it depends on, as we explained before, it depends on the new update patches before we decide on the exact launch date.

I see, okay. Thank you.

Our next question comes from the line of Andrey Glukhov with Brean Murray. Please proceed.

Yes, thanks. Congrats on the quarter, guys. Couple of questions. First of all it looks like, as you outlined, your initial efforts to cross sell casino into poker were very successful in the quarter. Can you talk us through in these initial efforts kind of ballpark, what is the cross-pollination rate that you've seen between your poker players and casino players?

Thank you. In terms of specific numbers, we are probably hesitant to give out the details now. As we have explained before the cross-selling efforts come in different stages and right now is just a very initial stage which allows players of Everest Poker who wish to sign up for our casino games have an easy translation of their personal information and payment information on to the casino clients and on that basis we have seen actually quite a successful migration or cross-selling, if you will, of the player base. And we prefer probably at this stage to reserve comment until we have more part of this initiative rolled out at which point we can play more specifically to some of the cross-pollination statistics you're asking for. And I would, at this stage, point to again some of our competitors who have launched such similar efforts. They are stating public sources that 15% to 20% of their poker player base actually played casino products under their platform.

Okay. And would it be fair to assume that you guys are thinking that once the sports book -- the sports betting move is done that you would expect a comparable sort of peak attach rates between the poker and the sports betting population?

The rate 15% to 20% I gave you was specifically talking about between poker player to casino product and the single wallet, common finance, and one click to a blackjack kind of platform. Now sports betting is different. Sports betting depends on whether we're talking about the same markets or we're talking about different markets. Then the cross-pollination could be quite different because, as you know, we focus on continental Europe, and if we were to do a deal hypothetically with someone who has a very strong UK customer base, then it's probably likely it's new clients, new customers as opposed to monetization of existing customers. So it depends on how you define that and ultimately what deal we can (inaudible). So at this stage it will be hard to pin down a specific cross-selling rate, here.

That's fair. And as far as Asian Games are concerned, in Q1 you had a very strong quarter with T2CN which I think was helped by some corporate motions with some of the movies there. Can you talk us through some of the specific measures that -- or sales and marketing activities you're putting in place in Q2 to sustain that kind of revenue rate?

Yes, I mean we would think obviously in the content business of some of these marketing events are not necessarily that completely (inaudible) by our own plan here. As we talked about in Q1, one of the very successful ones was the core marketing with the hit movie that is run by a very famous movie (inaudible)/singer in Asia, Taiwan and China, and the theme of the movie is actually basketball. So that is a very, very good opportunity for us to market that. We obviously are continuously looking for such initiatives, basically small dollar, high impact kind of marketing opportunities but did again, you would understand the nature of this is not something that we could necessarily dictate. But at the same time, you would notice that we have in this quarter, because of our sponsorship with -- co-working relationship with Nike, MB Nike, and Kobe Bryant was featured as a trainer on our games, FreeStyle, and that also has marketing effect. Now whether or not it's going to have the singular, more successes in Q1 we will have to see. But we do also have a small, a game update and patches surrounding the effort that has been rolled out already.

Right now, one thing that we know is different, is certainly the Q1 holiday, Chinese New Year holiday was longer and also it was negatively effected by this severe snowstorm. Q2 we have Labor Day week, but this the Labor Day week is shorter, relative to a previous year and relative to the Chinese New Year holiday and also obviously the weather was not as acute and therefore play activity was not as strong because of the holiday either.

Okay, thank you. Congrats on the quarter again.

Thank you.

Our next question comes from the line of William Lee with Martin Currie. Please proceed.

Hello. I got two questions, one is in terms of your pre-curve, could you give us your geographic breakdown in terms of your language or country or (inaudible) estate and I want to know your geographic breakdown.

And the second (inaudible). I want to know that -- is it possible for -- what sites could be accessed in China, i.e., because I tried to access to your web site because I'm in Shanghai but it is blocked by the Internet? Thank you.

Hi, I'm not sure I heard the questions correctly. I believe your first question was geographic breakdown and again, for competitive reasons as well as because our desire to continue to grow new market places, we do not release country-by-country data.

Or you could do it breakdown in terms of language because you provide it in different languages. I think it will help.

Well, I'm afraid we also not release to the marketplace language breakdown.

Okay.

I can tell you that the overwhelming majority of our business is constantly Europe focused and with countries such as Japan being an important target marketplace.

With respect to China, yes, gambling in China is not allowed and so, yes, our web site is not accessible in China.

Okay, okay, I see. Thank you.

Thank you.

Our next question comes from the line of Chang Qui with (inaudible) Capital. Please proceed.

Right, good evening, Tom and Arthur.

Hi, Chang, how are you, long time.

Yes, I'm fine, thanks. Yes, regards your application for launching Everest Poker in US. Could you give us some idea when that will be, or what is the situation for US equalization of the product?

Sure. This is going to be, as with everything in the political sector, somewhat speculative. We don't know of course when Congress will act or when the Justice Department will act, but we do know that Congressman Barney Frank has convened hearings, and there has been substantial outcry against the Prohibition Act. The bill is criticized by the financial services industry, by the civil libertarians, by the poker fans, by many, many groups and it's probably viewed as bad policy. Bad policy because it crimalizes an activity that's very popular. It's still very common in the United States. It prevents regulations so that there's no possibility of ensuring a fair game for American citizens. And finally, there is no collection of any tax monies, so unlike other forms of gambling in other states, there is no social good derived from this. So, our view is that very strong, very compelling policy arguments as well as many defects in the current legislation will lead ultimately through to appeal and replacement by a license-regulated environment.

My personal estimation and again this is merely a personal -- I guess here that in the next couple of years we will see something happen. Maybe sooner, maybe later.

I see, okay. The second thing is regarding your intention to do a sports pageant. I just wonder, in terms of risk assessment, what's the risks -- characteristics for sports betting here?

You're absolutely correct. Sports betting, unlike casino game where the house has a guaranteed arithmetic advantage, sports betting if not properly managed can have a naked and open risk. Our efforts will definitely be to partner with or to acquire or merge with a firm that has a proven competence in risk management in managing their sports betting book. So that there should be, we should be able to see a relatively stable house edge.

I see. And also for clarification, your efforts for sports betting will be in our continental Europe, right?

Yes, we have a leading gaming brand. That is the Everest brand in Europe. We think by joining that brand with another brand, or working together with other top brands will only strengthen our market position, and allow us to join strength with strength and create a more powerful offering.

Okay, okay, thanks.

Thanks, Chang.

This concludes the final (inaudible) for today's Q&A session. I would now like to turn the call back over to Brad Miller for closing remarks.

Thank you, operator, and thank you all for joining us today. For further information about GigaMedia or if you have questions and would like to contact the company, please visit our web site at www.gigamedia.com.tw. Thank you.

That concludes the presentation. You may now disconnect, and have a great day.