CryptoLogic Limited (TSX: CRY)(TSX: CXY)(NASDAQ: CRYP)(LSE: CRP), a
developer of branded online betting games and Internet casino
software, announces its financial results for the fourth quarter
and full year ended December 31, 2010.
Fourth Quarter Summary:
-- Additional restructuring, announced in August 2010 following management
changes, completed in fourth quarter
-- Net loss reduced to $0.8 million from $12.7 million in Q2 2010, the last
full quarter before additional restructuring measures
-- Cash burn declined to $1.2 million from $2.3 million in Q2 2010
-- Recurring quarterly cost base lowered to $6.6 million from $12.9 million
in Q2 2010
-- Total expenses down by 69% to $6.3 million (Q2 2010: $20.2 million)
-- Operating expenses decreased by 47% to $5.1 million (Q2 2010: $9.5
million)
-- General and administrative expenses decreased by 59% to $1.1 million (Q2
2010: $2.6 million)
-- Total revenue amounted to $5.5 million (Q2 2010: $6.7 million)
-- Signed licensee deal with bwin with two games already live
Full Year Summary:
-- Total expenses reduced by 39% to $47.5 million (2009: $77.6 million)
-- Total revenue at $26.0 million (2009: $39.8 million)
-- Net loss of $20.4 million (2009: $35.5 million)
-- Cyprus and majority of UK operations consolidated into Malta, while all
other locations reduced significantly
-- Signed several licensing deals for CryptoLogic games with 170 branded
games now live (2009: 66)
-- Launched new gaming package, Instant Click
Outlook:
While the additional restructuring measures taken since August
2010 have significantly reduced the total recurring cost base and
cash outflow, improving revenue performance remains a key
management priority. In addition, the Board continues actively to
examine strategic options both to strengthen the Company's
operations and deliver shareholder value.
Overview
CryptoLogic was affected by continuing competitive trading
conditions in 2010, contributing to disappointing results for the
year. Following senior management changes in August 2010,
additional restructuring measures were implemented to reduce the
annual cost base and stabilise the business. The full impact of
these actions, as expected, was felt in the fourth quarter with a
significant reduction in the Company's cost base and cash
outflow.
Total expenses for the quarter declined by 69% to $6.3 million
from $20.2 million in Q2 2010, the last full quarter before the
additional restructuring measures following management changes.
Total expenses declined by 36% sequentially (Q3 2010: $9.9 million)
and by 39% compared with the previous year. Cash outflow in Q4 2010
amounted to $1.2 million compared with $5.4 million in Q3 2010,
$2.3 million in Q2 2010 and $4.7 million in Q4 2009.
Q4 2010 net loss declined to $0.8 million from $3.7 million in
Q3 2010, $12.7 million in Q2 2010 and $24.8 million in Q4 2009.
The Company's workforce was reduced by 47% to 111 in 2010 from
211 in 2009 through a major streamlining of the Company's offices
in all locations and the consolidation in Malta of the Cyprus
operations and a majority of the UK operations. As a result, the
recurring cost base has been decreased by 49% to $6.6 million per
quarter, when compared with Q2 2010, the last full quarter prior to
the recent restructuring.
Operating and Financial Review
Total revenues in Q4 2010 decreased to $5.5 million (Q3 2010:
$6.1 million; Q2 2010: $6.7 million), primarily due to a lower
contribution from a major licensee. Full year revenues declined to
$26.0 million (2009: $39.8 million) reflecting the lower
contribution from a major licensee and the impact of the loss of a
key customer in 2009.
Hosted Casino
Revenue from fully hosted virtual casino rooms provided to
online gaming brand operators was $4.9 million in Q4 2010 (Q3 2010:
$5.6 million; Q2 2010: $5.8 million), reflecting a lower
contribution from a major licensee.
Branded Games
Revenues from this segment remained flat at $1.4 million in Q4
2010 (Q3 2010: $1.4 million; Q2 2010 $1.5 million), as new
licensees launched CryptoLogic's branded games at a slower pace
than expected. CryptoLogic continues to work with its licensees to
help them increase the frequency of games going live.
14 new branded games went live in the quarter taking the total
number of games rolled out by licensees and generating revenues to
date to 170 from 156 at the end of Q3.
Poker and Other
Poker and other revenue amounted to $0.4 million (Q3 2010: $0.4
million; Q2 2010: $0.6 million).
Balance Sheet and Cash Flow
Cash and cash equivalents as at December 31, 2010 amounted to
$10.6 million (September 30, 2010: $11.8 million; June 30, 2010:
$17.2 million). The decrease in net cash during Q4 2010 of $1.2
million is largely due to the cash impact of operating losses of
$0.8 million. The Company continues to be debt free.
Update on Commercial Agreements
Following receipt of notice of arbitration from a significant
supplier of games, the Company served notice of termination of its
agreement with the supplier in February 2011, to take effect from
March 2011. Notwithstanding this termination, discussions are
ongoing with the aim of reaching a commercially acceptable solution
prior to the commencement of significant arbitration proceedings.
In the absence of achieving such a solution, arbitration hearings
are likely to proceed later in 2011.
In February 2011, a brand licensor delivered to the Company a
notice purporting to terminate the brand license agreement between
the two companies, claiming that the Company had breached such
agreement. The Company believes there is no breach that warrants
termination of the agreement and, accordingly, considers the
agreement remains in force.
About CryptoLogic® (www.cryptologic.com)
Focused on integrity and innovation, CryptoLogic Limited is a
leading developer and supplier of Internet gaming software. With
more than 300 games, CryptoLogic has one of the most comprehensive
casino suites on the Internet, with award-winning games featuring
some of the world's most famous action and entertainment
characters. The Company's licensees include many top Internet
gaming brands. CryptoLogic's leadership in regulatory compliance
makes it one of the few companies with gaming software certified to
strict standards similar to land-based gaming. The CryptoLogic
Group licenses gaming software and services to blue-chip customers
that offer their games to non-U.S. based players around the
world.
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:
This press release contains forward-looking statements within
the meaning of applicable securities laws. Statements in this press
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. The words "believe",
"expect", "anticipate", "estimate", "intend", "may", "will",
"would" and similar expressions and the negative of such
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. Forward-looking statements are based on certain
factors and assumptions including expected growth, results of
operations, performance, business prospects and opportunities,
foreign exchange rates and effective income tax rates. While the
Company considers these factors and assumptions to be reasonable
based on information currently available, they may prove to be
incorrect. Forward-looking statements involve known and unknown
risks and uncertainties that may cause actual results, performance
or achievements of the Company to differ materially from the
anticipated results, performance or achievements expressed or
implied by such forward-looking statements. Risks related to
forward-looking statements include, without limitation, risks
associated with the Company's financial condition, prospects and
opportunities, 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 and risks associated with competition.
Additional risks and uncertainties can be found in the Company's
Form 20-F for the fiscal year ended December 31, 2009 under the
heading "Item 3 - Key Information - Risk Factors" and in the
Company's other filings with the US Securities and Exchange
Commission and Canadian provincial securities commissions. Given
these risks and uncertainties, readers are cautioned not to place
undue reliance on such forward-looking statements. Forward-looking
statements are given only as at the date of this release and the
Company disclaims any obligation to update or revise the
forward-looking statements, whether as a result of new information,
future events or otherwise, except as otherwise required by
law.
CRYPTOLOGIC LIMITED
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
As at As at
December 31, December 31,
2010 2009
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ASSETS
Current assets
Cash and cash equivalents $ 10,584 $ 23,447
Security deposits 515 250
Accounts receivable and other 5,046 7,972
Income taxes receivable 730 681
Prepaid expenses 8,942 9,426
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25,817 41,776
User funds held on deposit 6,069 7,929
Future income taxes 864 1,549
Capital assets 4,713 7,774
Intangible assets 95 4,342
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$ 37,558 $ 63,370
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 13,060 $ 13,156
Income taxes payable 359 2,157
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13,419 15,313
User funds held on deposit 6,069 7,929
Future income taxes 29 384
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19,517 23,626
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Minority interest 1,226 2,948
Shareholders' equity
Share capital 34,129 33,916
Stock options 7,826 7,633
Deficit (25,140) (4,753)
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16,815 36,796
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$ 37,558 $ 63,30
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CRYPTOLOGIC LIMITED
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands of U.S. dollars, except per share data)
For the three
months ended For the year
December 31, ended December 31,
2010 2009 2010 2009
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Revenue $ 5,513 $ 9,930 $ 25,988 $ 39,794
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Expenses
Operating 5,071 12,563 30,230 39,867
General and administrative 1,091 2,477 7,561 10,181
Reorganization 27 6,184 1,935 7,111
Impairment of capital assets (295) 2,689 1,763 2,689
Impairment of long-term
investments - 2,337 - 6,298
Impairment of goodwill and
intangible assets - 6,545 3,566 6,545
Finance 16 17 65 83
Amortization 415 1,111 2,372 4,856
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6,325 33,923 47,492 77,630
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Loss before undernoted (812) (23,993) (21,504) (37,836)
Interest income 7 66 80 446
Non-operating income 185 - 185 -
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Loss before income taxes and
minority interest (620) (23,927) (21,239) (37,390)
Income taxes (recovery)/charge
Current (187) 1,229 (27) 664
Future 464 2,202 684 419
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277 3,431 657 1,083
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Loss before minority interest (897) (27,358) (21,896) (38,473)
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Minority interest (57) (2,539) (1,509) (2,963)
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Loss and comprehensive loss $ (840) $ (24,819) $ (20,387) $ (35,510)
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Loss per common share
Basic $ (0.06) $ (1.98) $ (1.58) $ (2.78)
Diluted $ (0.06) $ (1.98) $ (1.58) $ (2.78)
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CRYPTOLOGIC LIMITED
CONSOLIDATED STATEMENTS OF (DEFICIT)/RETAINED EARNINGS
(In thousands of U.S. dollars)
For the year
ended December 31,
2010 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Deficit)/Retained earnings, beginning of period $ (4,753) $ 32,032
Loss (20,387) (35,510)
Dividends paid, excluding those paid to CEC
shareholders - (1,275)
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Deficit, end of period $ (25,140) $ (4,753)
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CRYPTOLOGIC LIMITED
CONSOLIDATED STATEMENTS OF CASHFLOWS
(In thousands of U.S. dollars)
For the three
months ended For the year
December 31, ended December 31,
2010 2009 2010 2009
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Cash flows (used in)/from
Operating activities
Loss $ (840) $ (24,819) $ (20,387) $ (35,510)
Adjustments to reconcile loss
to cash provided by/(used in)
operating activities
Amortization 415 1,111 2,372 4,856
Unrealized gain on forward
contract (45) (75) - (252)
Impairment of capital assets (295) 6,709 1,763 6,709
Impairment of long-term
investments - 2,337 - 6,298
Gain on long-term investments (185) - (185) -
Impairment of goodwill and
intangible assets - 6,545 3,566 6,545
Future income taxes 464 2,166 684 419
Minority interest (57) (2,539) (1,509) (2,963)
Stock options 32 (1) 193 777
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(511) (8,566) (13,503) (13,121)
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Change in operating assets and
liabilities
Accounts receivable and other 281 (236) 2,926 (1,766)
Prepaid expenses 279 (458) 484 (2,610)
Accounts payable and accrued
liabilities (629) 1,631 (96) (2,287)
Income taxes
receivable/payable (374) 2,932 (1,550) 2,011
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(954) (4,697) (11,739) (17,773)
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Financing activities
Dividends paid including those
paid to CEC shareholders - (139) - (1,381)
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- (139) - (1,381)
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Investing activities
Purchase of capital assets (443) 89 (1,065) (445)
(Increase)/decrease in security
deposits 7 - (265) -
Disposal of capital assets - - 21 -
Purchase of long-term
investments - - - (477)
Cash received from long-term
investments 185 - 185 -
Decrease in restricted cash - - - 7,175
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(251) 89 (1,124) 6,253
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Decrease in cash and cash
equivalents (1,205) (4,747) (12,863) (12,901)
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Cash and cash equivalents,
beginning of period 11,789 28,194 23,447 36,348
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Cash and cash equivalents, end of
period $ 10,584 $ 23,447 $ 10,584 $ 23,447
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Contacts: CryptoLogic David Gavagan Chairman and Interim CEO
+353 1 234 0400 CryptoLogic Huw Spiers CFO +353 1 234 0400 Corfin
Public Relations Neil Thapar +44 207 596 2860 Corfin Public
Relations Alexis Gore +44 207 596 2860
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