Releasing its financial results for the second quarter ending June 30, 2009, the company said its new business strategy delivered reduced operating costs, a solid quarter-on-quarter improvement in its Internet casino hosting business, and growing revenue from branded games launched by major Internet gaming operators.
Financial highlights included:
* Revenue of $10.1 million, unchanged from Q1 2009 but down on the same period last year (Q2 2008: $16.8 million) as higher casino and branded games sales offset the previously reported loss of William Hill poker
* Profitable in June
* Casino revenue up 21 percent sequentially to $7.7 million (Q1 2009: $6.4 million)
* Branded games revenue increased sequentially by 70 percent to $500 000 (Q1 2009: $300 000)
* Operating expenses fell to $9.9 million, down 25 percent year-on-year (Q2 2008: $13.2 million)
* The company recorded an operating loss of $2.2 million for the quarter.
* Net loss of $6.2 million, reflecting a non-cash impairment provision of $4 million, booked against long-term Asian investments (Q2 2008 net loss: $1.5 million) The company has also reviewed the carrying value of its long-term Asian investments, and determined that a provision of $4 million is required for certain of these investments. As a result, the company recorded a net loss of $6.2 million for the quarter.
* Net cash at June 30, 2009: $33.8 million (March 31, 2009: $38.7 million). The company continues to be debt-free.
* Dividend of $0.03 per share for the quarter, unchanged from Q1 2009
Operating and governance highlights:
* Operating expenses were up $1.7 million from Q1, of which $625 000 can be attributed to adverse currency movements. Other factors included higher development costs, increased marketing costs and new resources for portals, player acquisition and search engine optimisation.
* 13 branded games on the market in Q2, up from three in Q1
* Signed multi-year agreements to provide top-performing branded slot games to some of the world's top gaming sites, including SportingBet.com, Betfair, PaddyPower and Victor Chandler Group and, in July, Totesport, Britain's state-owned and fourth-largest bookmaker
* Launched Internet casino for The Gaming Network
* Extended relationship with Marvel Entertainment to develop superhero-themed games until 2013
* Expanded relationship with 888.com to include five more games for launch in 2009
* New game releases included a video slot version of Jenga, one of the world's most popular board games, developed in record time at the new CryptoLogic Centre for Innovation
* Appointed David Gavagan as Chairman and James Wallace as Senior Independent Director
CryptoLogic expects to be both profitable and cash generative in Q3, as it gains traction from the rollout of branded games by new customers, with more than 40 scheduled by the end of the quarter and more than 110 in total by the end of the year
"The second quarter of 2009 marked a turning point for CryptoLogic, with significant growth in our two core businesses," said Brian Hadfield, Cryptologic's President and CEO. "With a larger customer base and an aggressive rollout schedule for our new games, CryptoLogic now has the people, the products and the partners to deliver improved performance for our shareholders -- in 2009 and beyond."
The company now has 24 licensees - the largest number in its history - including the "big four" international gaming operators: PartyGaming, SportingBet.com, 888.com and Betfair.
While the rollout of CryptoLogic games by licensees has been slower than anticipated at the beginning of the year, the company exited the quarter with 13 new branded games on the market, up from three in the first quarter. 40 games are scheduled to be live by the end of the third quarter, and over 110 in total by the end of the year.
CryptoLogic saw a significant rise in revenue from its core businesses in the second quarter. The company increased revenue from its hosted casino business by 21 percent, and there was a 70 percent increase in revenue from branded games compared with the first quarter of 2009. These gains helped to offset the loss of more than $1 million in revenue from William Hill Poker, which has taken its business elsewhere.
While the company has reduced its employee complement substantially since 2008, strategic moves were made in the quarter to add talent to manage portals, player acquisitions and search engine optimisation.
The company has completed the strategic integration of its Internet poker network with that of GTech Corporation's International Poker Network, eliminating the cost of operating a standalone poker platform, whilst significantly improving poker room liquidity for players, and paving the way for a profitable poker business.
Despite challenging market conditions, management remains confident that Cryptologic's new business strategy and restructuring program will deliver strong financial performance for shareholders over the long term, and it continues to target a return to profitability and cash generation in the third quarter.
The company continues to expect a net profit for the full year, and to return to positive cash flow for the second half of 2009.
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