CryptoLogic (TSX: CRY)(TSX: CXY)(NASDAQ: CRYP)(LSE: CRP), a world
leader in Internet casino and branded gaming software, today
announced its financial results for the first quarter ending March
31, 2009. The results reflect challenging economic conditions and a
continuing transition in the company's revenue base, coupled with
better-than-forecasted cost reductions in line with CryptoLogic's
strategy to return to profitability and cash generation in 2009.
Financial highlights:
- Revenue of $10.1 million (Q1 2008: $19.3 million), primarily
reflecting lower wagering activity due to global economic
conditions and the adverse impact of a strong U.S. dollar
- Operating expenses decreased to $8.2 million (Q1 2008: $14.4
million)
- Net loss of $1.3 million, improved from the last three
quarters (Q1 2008 net profit: $0.6 million)
- Diluted loss per share of $0.10 (Q1 2008 diluted earnings per
share: $0.06)
- Total reorganization costs amounted to $0.53 million (Q4 2008:
$20.6 million)
- Net cash at March 31, 2009: $38.7 million (December 31, 2008:
$43.8 million)
- Announced a dividend of $0.03 per share for the quarter,
unchanged from Q4 2008
Operating highlights:
- Completed integration of poker customers with GTECH
Corporation's network on schedule in March, substantially reducing
costs while improving liquidity for players
- Formed strategic partnership with Gaming Technology Solutions
PLC to make CryptoLogic games available to customers on GTS
platform
- Signed exclusive casino deal with The Gaming Network (TGN) to
provide Internet casino software to some of the U.K.'s most popular
gaming sites
- Signed an exclusive licensing agreement for 10 games with Gala
Coral in March 2009
- Announced multi-year licensing agreements with Paramount
Digital Entertainment, Warner Bros. and DC Comics to bring
characters such as Batman, Superman and Braveheart to leading
Internet casinos
- Launched new three-game lineup featuring Marvel's legendary
Spider-Man
- Won industry's major honour - Gambling Online Magazine's Top
Casino Software Award - for fourth consecutive year
Outlook:
- Revenue outlook expected to improve gradually as four
licensees plan to launch 19 CryptoLogic-powered games in Q2 2009,
with more than 50 games to follow in Q3 and 30 in Q4
- Restructuring program remains on track as CryptoLogic enjoys
initial benefit of cost reductions in Q2, following March move to
shared poker network
- Management expects return to profitability and cash
generation, in line with previous guidance
"In very challenging times, CryptoLogic continues to control
what we can: containing costs, accelerating innovation and focusing
on execution," said Brian Hadfield, CryptoLogic's President and
CEO. "With our revenue base still in transition, we accelerated
CryptoLogic's cost-reduction program and continued to sign and
support deals to bring the world's best games to the world's
leading Internet casinos. It is a solid foundation for a return to
profitability and cash generation this year."
Overview
In the first quarter of 2009, CryptoLogic made good progress in
executing its strategy to focus on Internet casino hosting and the
licensing of its branded gaming and associated software.
These activities provide the company with a competitive
advantage by leveraging its position as a leading designer of
exciting, character-rich betting games for gaming operators. In
PartyGaming, 888.com and Betfair, the company now has three of the
world's largest legal gaming operators on its roster of customers -
as well as many of Europe's other top brands.
As announced in March, the company has completed the integration
of its poker network with that of GTECH Corporation. This enables a
significant reduction in CryptoLogic's cost base, the full benefit
of which will be realized from the second quarter. The company will
continue to manage its costs carefully in the light of global
economic conditions, which led to reduced wagering in both the
casino and poker markets.
New customers to drive revenue growth
CryptoLogic continued to expand its customer base in the first
quarter, signing new licensing deals with various major online
gaming brands. The company announced a strategic partnership with
Gaming Technology Solutions PLC to make CryptoLogic games available
to the many leading gaming operators that use the GTS platform.
CryptoLogic also signed an exclusive agreement with The Gaming
Network to provide Internet casino software to some of the U.K.'s
top gaming sites.
Subsequent to the quarter-end, the company announced two more
deals licensing its most popular slot games to blue-chip European
customers: Gala Coral is a large U.K.-based company that operates
four of Europe's most popular gaming sites, and Betfair is the
world's largest online betting community with over two million
customers. SkyBet, who deploy games in the second quarter, will
become the first licensee to launch CryptoLogic games through Orbis
Technology's Open Bet Fixed Odds Games platform. The move signals
the successful integration of CryptoLogic games on the Orbis
platform following a partnership struck in October 2008.
CryptoLogic has built a large and diversified licensee base,
featuring 18 customers compared with 11 a year ago. BetJacks began
offering CryptoLogic-powered games to its subscribers in the first
quarter, and PartyGaming launched its first CryptoLogic games
earlier this week. CryptoLogic's customers are planning to roll out
some 19 games in the second quarter, which creates significant
revenue potential later this year. Recognizing the significant
impact of reduced discretionary spending by consumers, CryptoLogic
is strengthening support services to its larger licensees for
marketing and player acquisition.
E-gaming innovation
CryptoLogic has also been very active in releasing new games,
and in striking deals with owners of more top brands that will
appear in future CryptoLogic games.
In January, the company released a three-game pack headlined by
Spider-Man Revelations, a very popular new game featuring Marvel's
most famous Super Hero. In April, CryptoLogic released a new
downloadable game line-up featuring Call of Duty 4: Modern Warfare,
based on one of the world's most widely played video games, and the
eagerly anticipated Millionaire's Club III.
The company announced multi-year licensing agreements with
Paramount Digital Entertainment, Warner Bros. and DC Comics to
bring characters such as Batman, Superman and Braveheart to leading
Internet casinos.
The first quarter also featured the unveiling of the CryptoLogic
Centre for Innovation, which brings together industry leaders and
gaming innovators to create new games and Internet gaming concepts.
As announced on May 5, 2009, the first game from this new centre,
Jenga, launched in April.
Financial performance
Total revenue: CryptoLogic saw a moderate decline in revenue
from $11.4 million in the fourth quarter of 2008 to $10.1 million
in the first quarter of 2009. This included casino revenue of $6.5
million and poker revenue of $2.0 million. Revenue was affected by
lower spending from the most avid players, coupled with the
continued impact of the strong U.S. dollar. As noted above,
CryptoLogic is responding not just by signing new customers, but
also by strengthening support services to its larger customers for
marketing and player acquisition.
Earnings and Earnings per Diluted Share: The company recorded a
loss of $1.3 million for the quarter, or $0.10 per fully diluted
share (based on a weighted average of 13,820,000 outstanding
shares), an improvement on the three prior quarters. Operating
expenses were down substantially, from $13.3 million in the fourth
quarter of 2008 to $8.2 million in Q1. The company also recorded
$0.5 million in reorganization charges in the first quarter.
Balance Sheet and Cash Flow: CryptoLogic continues to have a
strong balance sheet, ending the quarter with $38.7 million in net
cash (comprising cash and cash equivalents, restricted cash and
security deposits), or $2.80 per diluted share (December 31, 2008:
$43.8 million, or $3.15 per diluted share). The decrease in net
cash was due largely to movements in working capital and funds paid
to secure the royalty rights of DC Comics including Superman and
Batman. The company continues to be debt-free. CryptoLogic's
working capital at March 31, 2009 was $39.8 million or $2.88 per
diluted share (December 31, 2008: $41.2 million or $2.97 per
diluted share).
Dividend: On May 5, CryptoLogic declared a dividend of $0.03 per
share for the quarter, unchanged from the fourth quarter of 2008.
The dividend will be paid on June 15, 2009 to shareholders of
record of CryptoLogic Limited and CryptoLogic Exchange Corporation
as at June 8, 2009.
Outlook
As indicated previously, the company continues to take a
conservative view of its revenue outlook, as economic conditions
remain volatile and consumer spending remains sluggish. CryptoLogic
is focused on the factors it can control: its operating costs,
robust new business activity, customer service and marketing
support, and the company's innovation pipeline.
Management believes the combination of new customers and lower
costs positions the company for a return to profitability and cash
generation in 2009, in line with previous guidance.
CryptoLogic will hold its annual general meeting in Toronto on
Wednesday June 3, 2009. Details are available on the company's
website.
Investor/analyst conference call
CryptoLogic will hold a conference call today at 8:30 a.m.
Eastern time (1:30 p.m. BST) to update investors on the company's
earnings in Q1 2009. The details of the call are as follows:
Toll Free North America: 1-800-766-6630
Toll Free UK: 00 800-4222-8835
Toll Free International (Country Code) 800-4222-8835
Toronto Dial-In Number: 416-340-8410
To participate, please call five to ten minutes prior to the
start of the teleconference. This conference call will be recorded
and available for replay approximately one hour after the
completion of the call, up until midnight May 14, 2009. To listen
to the replay, please dial 416-695-5800 or 1-800-408-3053, passcode
6303411#. A transcript of the call will also be made available on
CryptoLogic's website at www.cryptologic.com under Investor
Information.
About CryptoLogic� (www.cryptologic.com)
Focused on integrity and innovation, CryptoLogic Limited is a
leading public developer and supplier of Internet gaming software.
Its leadership in regulatory compliance makes it one of the very
few companies with gaming software that is certified to strict
standards similar to land-based gaming. WagerLogic� Limited, a
wholly-owned subsidiary of CryptoLogic, is responsible for the
licensing of its gaming software and services to blue-chip
customers who offer their games to non-U.S. players around the
world. For information on WagerLogic, please visit
www.wagerlogic.com.
CryptoLogic's common shares trade on the Toronto Stock Exchange
(CRY, CXY), the NASDAQ Global Select Market (CRYP) and the Main
Market of the London Stock Exchange (CRP).
CRYPTOLOGIC FORWARD LOOKING STATEMENT DISCLAIMER:
Statements in this news release which are not historical are
forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward-looking statements involve
risks and uncertainties including, without limitation, risks
associated with the company's financial condition and prospects,
legal risks associated with Internet gaming and risks of
governmental legislation and regulation, risks associated with
market acceptance and technological changes, risks associated with
dependence on licensees and key licensees, risks relating to
international operations, risks associated with competition and
other risks detailed in the Company's filings with securities
regulatory authorities. These risks may cause results to differ
materially from those projected in the forward-looking
statements.
CRYPTOLOGIC LIMITED
CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars)
As at As at
March 31, December 31,
2009 2008
----------------------------------------------------------------------------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 33,491 $ 36,348
Restricted cash 5,000 7,175
Security deposits 250 250
Accounts receivable and other 6,752 6,002
Prepaid expenses 7,854 7,217
----------------------------------------------------------------------------
53,347 56,992
User funds held on deposit 6,737 10,833
Future income taxes 3,208 1,930
Capital assets 17,674 18,703
Long term investments 6,021 5,821
Intangible assets 4,822 4,982
Goodwill 6,545 6,545
----------------------------------------------------------------------------
98,354 105,806
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities 13,110 15,356
Income taxes payable 420 413
----------------------------------------------------------------------------
13,530 15,769
User funds held on deposit 6,737 10,833
Future income taxes 318 382
----------------------------------------------------------------------------
20,585 26,984
----------------------------------------------------------------------------
Minority interest 6,262 6,382
Shareholders' equity:
Share capital 33,594 33,552
Stock options 7,177 6,856
Retained earnings 30,736 32,032
----------------------------------------------------------------------------
71,507 72,440
$ 98,354 $ 105,806
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CRYPTOLOGIC LIMITED
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(In thousands of US dollars, except per share data)
(Unaudited)
For the three months
ended March 31,
2009 2008
----------------------------------------------------------------------------
Revenue $ 10,134 $ 19,317
----------------------------------------------------------------------------
Expenses
Operating 8,199 14,437
General and administrative 3,124 2,853
Reorganization 532 -
Finance 21 173
Amortization 1,305 1,396
----------------------------------------------------------------------------
13,181 18,859
----------------------------------------------------------------------------
Earnings (loss) before undernoted (3,047) 458
Interest income 171 794
Non operating income - 102
----------------------------------------------------------------------------
Net earnings (loss) before income taxes and
minority interest (2,876) 1,354
Income taxes:
Current (160) 555
Future (1,342) 28
----------------------------------------------------------------------------
(1,502) 583
----------------------------------------------------------------------------
Net earnings (loss) before minority interest (1,374) 771
----------------------------------------------------------------------------
Minority interest (78) 162
----------------------------------------------------------------------------
Net earnings (loss) and comprehensive income
(loss) $ (1,296) $ 609
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings (loss) per common share
Basic $ (0.10) $ 0.06
Diluted $ (0.10) $ 0.06
CRYPTOLOGIC LIMITED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In thousands of US dollars)
(Unaudited)
For the three months ended
March 31,
2009 2008
----------------------------------------------------------------------------
Retained earnings, beginning of period $ 32,032 $ 70,855
Earnings (loss) (1,296) 609
----------------------------------------------------------------------------
Retained earnings, end of period $ 30,736 $ 71,464
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CRYPTOLOGIC LIMITED
CONSOLIDATED STATEMENTS OF CASHFLOWS
(In thousands of US dollars)
(Unaudited)
----------------------------------------------------------------------------
For the three months
ended March 31,
2009 2008
----------------------------------------------------------------------------
Cash flows from (used in):
Operating activities:
Net earnings (loss) $ (1,296) $ 609
Adjustments to reconcile earnings to cash provided
by (used in) operating activities:
Amortization 1,305 1,396
Unrealized (gain) on forward contract (127) (243)
Reorganization expense 532 -
Future income taxes (1,342) 28
Minority interest (78) 162
Stock options 321 690
----------------------------------------------------------------------------
(685) 2,642
----------------------------------------------------------------------------
Change in operating assets and liabilities:
Accounts receivable and other (750) 445
Prepaid expenses (300) 267
Accounts payable and accrued liabilities (2,778) 1,283
Income taxes payable (203) 464
----------------------------------------------------------------------------
(4,716) 5,101
----------------------------------------------------------------------------
Financing activities:
Issue of capital stock, net - 67
----------------------------------------------------------------------------
- 67
----------------------------------------------------------------------------
Investing activities:
Purchase of capital assets (116) (664)
Purchase of other investments (200) (1,019)
Decrease in restricted cash 2,175 14,976
Decrease in security deposits - 900
----------------------------------------------------------------------------
1,859 14,193
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (2,857) 19,361
----------------------------------------------------------------------------
Cash and cash equivalents, beginning of period 36,348 55,428
----------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 33,491 $ 74,789
----------------------------------------------------------------------------
Supplemental cash flow information:
Non cash portion of options exercised $ - $ 29
Contacts: CryptoLogic Stephen Taylor Chief Financial Officer 353
(0) 1 234 0415 Argyle Communications Jason Graham (North American
and gaming industry media) (416) 968-7311, ext 229
jgraham@argylecommunications.com Argyle Communications Daniel Tisch
(North American and gaming industry media) (416) 968-7311, ext 223
dtisch@argylecommunications.com Corfin Communications Neil Thapar
(UK media only) +44 207 977 0020 Corfin Communications Harry
Chathli or Alexis Gore (UK media only) +44 207 977 0020
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