CryptoLogic Limited
TSX : CRY
TSX : CXY
NASDAQ : CRYP
LSE : CRP

CryptoLogic Limited

November 11, 2010 02:01 ET

CryptoLogic Announces Q3 Results

DUBLIN, IRELAND--(Marketwire - Nov. 11, 2010) - 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 third quarter ended September 30, 2010 and an update on its expanded restructuring programme announced on August 12, 2010.

Restructuring Highlights:

Following the management changes announced on August 12, further restructuring measures were taken to reduce costs aggressively.

  • Total expenses declined to $9.9 million (Q2 2010: $20.2 million, including $7.3 million of non- recurring charges)
  • Operating expenses decreased by 20% compared with Q2, reflecting the initial impact of restructuring actions taken during Q3
  • Appointed new operational management team to lead hosted casino business
  • Completed the consolidation of Cyprus operations into Malta
  • Cessation of operations in Cyprus

Management Changes:

  • Senior management appointments were made with Huw Spiers becoming Group Head of Operations and Chief Financial Officer and Ian Price becoming Group Head of Business Development

Results Summary:

  • Total revenue amounted to $6.1 million (Q2 2010: $6.7 million)
  • Hosted casino revenue at $5.6 million (Q2 2010: $5.8 million)
  • Branded games revenue at $1.4 million (Q2 2010: $1.5 million)
  • Net loss of $3.7 million (Q2 2010 Loss: $12.7 million, including $7.3 million of non-recurring charges)
  • Net cash at September 30, 2010: $12.3 million (June 30, 2010: $17.4 million) partly reflecting the cash impact of one-time restructuring costs amounting to $3.5 million

Outlook:

The full impact of additional measures taken during the third quarter to reduce costs will have taken effect by the end of the fourth quarter, resulting in a further significant decrease in the Company's total recurring cost base. Management continues to focus on delivering further efficiencies and improving revenue and operational performance.

Overview

CryptoLogic implemented a further restructuring programme following management changes announced on August 12, 2010. While these measures commenced mid-way through the quarter, they contributed to a significant reduction in costs and will make a full impact in subsequent quarters.

Total expenses decreased to $9.9 million (Q2 2010: $20.2 million, including $7.3 million of non-recurring charges), while operating expenses were down by 20% sequentially to $7.6 million.

The restructuring will result in the total recurring cost base falling significantly in the fourth quarter. While the headcount reduction plan has been executed, the focus on delivering further efficiencies continues.

As part of the restructuring initiatives, a new operational management team to lead the hosted casino business was brought in to stabilise and reinvigorate the revenue base.

The consolidation of the Cyprus operations and most of the London operations into Malta was substantially completed in the quarter.

Operating and Financial Review

Total revenues in Q3 2010 decreased to $6.1 million (Q2 2010: $6.7 million), reflecting seasonality during the historically slow summer period, as well as a lower contribution from a key licensee in branded games.

Hosted Casino

Revenue from fully hosted virtual casino rooms provided to online gaming brand operators was $5.6 million in Q3 2010 (Q2 2010: $5.8 million), reflecting normal seasonal patterns. CryptoLogic's fully hosted casino was launched by Betsafe.com, a leading online gaming operator, during the quarter.

Branded Games

Revenues from this segment decreased to $1.4 million in Q3 2010 (Q2 2010: $1.5 million), due to a decline in revenue contribution from a key licensee. The Company continues to work closely with its licensees to help them maximise revenue from CryptoLogic's portfolio of branded gaming content.

13 new branded games went live in the quarter taking the total number of games rolled out by licensees and generating revenues to date to 156 from 143 at the end of Q2.

Poker and Other

Poker and other revenue amounted to $0.5 million ($0.6 million).

Balance Sheet and Cash Flow

Net cash as at September 30 amounted to $12.3 million (June 30 2010: $ 17.4 million) which consisted of cash and cash equivalents and security deposits, or $0.89 of net cash per diluted share (June 30, 2010: $17.4 million or $1.26 per diluted share). The decrease in net cash during Q3 2010 of approximately $5.1 million is due to the cash impact of operating losses of $2.8 million, a decrease in accounts payable and accrued liabilities of $1.8 million, comprising $3.5 million paid in respect of reorganization costs, partially offset by increased jackpot provision and timing of trade payable payments, a decrease in income taxes payable of $0.1 million, a $0.5 million increase in accounts receivable and purchase of capital assets of $0.2 million. Partially offsetting this is a decrease in prepaid expenses of $0.3 million. The Company continues to be debt free.

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  
  September 30,   December 31,  
  2010     2009  
  (Unaudited)     (Audited)  
   
ASSETS            
Current assets:            
  Cash and cash equivalents $ 11,789   $ 23,447  
  Security deposits   522     250  
  Accounts receivable and other   5,124     7,972  
  Income taxes receivable   547     681  
  Prepaid expenses   9,177     9,426  
    27,159     41,776  
   
  User funds held on deposit   6,923     7,929  
  Future income taxes   4,386     1,549  
  Capital assets   1,311     7,774  
  Intangible assets   97     4,342  
  $ 39,876   $ 63,370  
   
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current liabilities:            
  Accounts payable and accrued liabilities $ 13,689   $ 13,156  
  Income taxes payable   345     2,157  
    14,034     15,313  
   
  User funds held on deposit   6,923     7,929  
  Future income taxes   12     384  
    20,969     23,626  
   
Minority interest   1,302     2,948  
   
Shareholders' equity:            
Share capital   34,111     33,916  
Stock options   7,794     7,633  
Deficit   (24,300 )   (4,753 )
    17,605     36,796  
  $ 39,876   $ 63,370  
   
   
CRYPTOLOGIC LIMITED  
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS  
(In thousands of U.S. dollars, except per share data)  
(Unaudited)  
                         
    For the three months     For the nine months  
    ended September 30,     ended September 30,  
    2010     2009     2010     2009  
                         
Revenue $ 6,095   $ 9,591   $ 20,475   $ 29,865  
Expenses:                        
  Operating   7,565     9,211     25,159     27,305  
  General and administrative   1,655     2,380     6,470     7,704  
  Reorganization   209     240     1,908     927  
  Impairment of intangible assets           3,566      
  Impairment of capital assets           2,058      
  Impairment of long–term investments               3,961  
  Finance   17     19     49     66  
  Amortization   478     1,241     1,957     3,745  
    9,924     13,091     41,167     43,708  
Loss before undernoted   (3,829 )   (3,500 )   (20,692 )   (13,843 )
Interest income   14     87     73     380  
Loss before income taxes and minority interest   (3,815 )   (3,413 )   (20,619 )   (13,463 )
Income taxes:                        
  Current   169     178     160     (565 )
  Future   (54 )   (163 )   220     (1,783 )
    115     15     380     (2,348 )
Loss before minority interest   (3,930 )   (3,428 )   (20,999 )   (11,115 )
Minority interest   (280 )   (224 )   (1,452 )   (424 )
Loss and comprehensive loss $ (3,650 ) $ (3,204 ) $ (19,547 ) $ (10,691 )
Loss per common share                        
  Basic $ (0.28 ) $ (0.25 ) $ (1.52 ) $ (0.81 )
  Diluted $ (0.28 ) $ (0.25 ) $ (1.52 ) $ (0.81 )
   
   
CRYPTOLOGIC LIMITED  
CONSOLIDATED STATEMENTS OF (DEFICIT)/RETAINED EARNINGS  
(In thousands of U.S. dollars)  
(Unaudited)  
    For the nine months ended  
    September 30,  
    2010     2009  
(Deficit)/Retained earnings, beginning of period $ (4,753 ) $ 32,032  
Loss   (19,547 )   (10,691 )
Dividends paid, excluding those paid to CEC shareholders       (1,148 )
(Deficit)/Retained earnings, end of period $ (24,300 ) $ 20,193  
                         
                         
CRYPTOLOGIC LIMITED  
CONSOLIDATED STATEMENTS OF CASHFLOWS  
(In thousands of U.S. dollars)  
(Unaudited)  
   
    For the three months     For the nine months  
    ended September 30,     ended September 30,  
    2010     2009     2010     2009  
Cash flows from/(used in):                        
Operating activities:                        
  Loss $ (3,650 ) $ (3,204 ) $ (19,547 ) $ (10,691 )
  Adjustments to reconcile loss to cash provided by/(used in) operating activities:                        
    Amortization   478     1,241     1,957     3,745  
    Unrealized loss/(gain) on forward contract   91     (39 )   45     (175 )
    Reorganization costs to be paid   714     240     714     927  
    Impairment of intangible assets           3,566      
    Impairment of capital assets           2,058      
    Impairment of long–term investments               3,961  
    Future income taxes   (54 )   (163 )   220     (1,783 )
    Minority interest   (280 )   (224 )   (1,452 )   (424 )
    Stock options   (109 )   183     161     778  
    (2,810 )   (1,966 )   (12,278 )   (3,662 )
  Change in operating assets and liabilities:                        
    Accounts receivable and other   (496 )   (203 )   2,645     (1,531 )
    Prepaid expenses   254     (215 )   205     (2,152 )
    Accounts payable and accrued liabilities   (1,826 )   (2,403 )   (181 )   (4,844 )
    Income taxes payable   (69 )   31     (1,176 )   (884 )
    (4,947 )   (4,756 )   (10,785 )   (13,073 )
Financing activities:                        
  Dividends paid including those to CEC shareholders       (416 )       (1,245 )
        (416 )       (1,245 )
Investing activities:                        
  Purchase of capital assets   (166 )   (227 )   (622 )   (534 )
  Increase in security deposits   (272 )       (272 )    
  Disposal of capital assets   21         21      
  Purchase of other investments               (477 )
  Decrease in restricted cash       5,000         7,175  
    (417 )   4,773     (873 )   6,164  
Decrease in cash and cash equivalents   (5,364 )   (399 )   (11,658 )   (8,154 )
   
Cash and cash equivalents, beginning of period   17,153     28,593     23,447     36,348  
Cash and cash equivalents, end of period $ 11,789   $ 28,194   $ 11,789   $ 28,194  

Contact Information

  • CryptoLogic
    David Gavagan
    Chairman and Interim CEO
    +353 1 234 0400
    or
    CryptoLogic
    Huw Spiers
    CFO
    +353 1 234 0400
    www.cryptologic.com
    or
    Corfin Public Relations
    Neil Thapar, Alexis Gore or Harry Chathli
    +44 207 596 2860