Cryptologic reports Q3 losses, issues Q4 warning

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Online gambling software developer Cryptologic experienced another tough third quarter this (2009) year, posting results which reflected a loss of $3.4 million as predicted in its earlier trading update.

Taking a positive view, the loss is an improvement on Q3,2008, when it was greater at $5.9 million, although this did include a $4.2 million negative due to forex developments. The lower loss has been attributed by management to continued cost savings associated with CryptoLogic's divesting of its poker network and accompanied restructuring, which enabled it to cut quarterly operating expenses by 25% on a year-on-year basis.

For Q3,2009, branded game revenue saw strong growth for the third consecutive quarter, but seasonally sluggish wagering activity and a slower-than-expected rollout of games by new licensees adversely affected the overall result.

The company warned that Q4 would see another loss due to the continued impact of the economic environment and delays in rolling out branded games.

Financial highlights:

  • Revenue of $9.6 million (Q3,2008: $14 million).
  • Branded game revenue increased by 46% to $780,000, up from $530,000 in Q2,2009.
  • Internet casino revenue decreased to $7.1 million (Q3,2008: $10.1 million) following two major progressive jackpot wins.
  • Poker revenue of $500,000 (Q3,2008: $3.2 million).
  • Net loss before minority interest of $3.4 million (Q3,2008: $5.9 million - included a $4.2 mill forex loss).
  • Diluted loss per share of $0.25 (Q3,2008: diluted loss per share: $0.45).
  • Net cash as at September 30, 2009: $28.4 million (Q3,2008: $48.7 million).
  • Dividend of $0.01 per share for the quarter (2008: $0.03 per share).
  • Operating expenses were $9.2 million for the quarter (Q3,2008: $16.5 million).
  • General and administrative expenses were $2.4 million (Q3,2008: $3.1 million).
  • Company remains debt-free.

Operating highlights:

  • 33 branded games on the market by new licensees in Q3, up from 13 in Q2 and three in Q1.
  • Total customer base now at 29 licensees after signing new multi-year deals in Q3 to provide branded slot games to leading operators.
  • Signed a three-year agreement to license CryptoLogic's full Internet casino suite to Betsafe.
  • Expanded relationship with to include five more games for launch later in 2009.
  • Release of new downloadable game lineup including a video slot version of Street Fighter IV, one of the most popular video games of 2009.
  • Continued momentum of signing up new licensees in Q4 through new deals with Rank Interactive and Unibet.

Q4,2009 outlook:

  • Continuing steady roll-out of branded games by licensees with 50 games on the market.
  • More than 80 branded games expected to be live by year end, based on current launch plans by licensees.
  • The continued impact of the economic environment and the delays in rolling out branded games will result in a loss in the fourth quarter.
  • In light of recent performance and the current trading environment, the company is reviewing the carrying value of its assets, which is likely to result in a significant impairment charge in Q4.

Cryptologic's CEO and president, Brian Hadfield, said: "Despite a disappointing third quarter, Cryptologic's business strategy is delivering tangible progress, albeit at a slower pace than anticipated.

"With a lower cost base, the largest customer roster in Cryptologic's history and our third consecutive quarter of increased revenue from branded games, we remain focused on executing our plan - and returning to profitability and long term growth."

The company revealed that its most popular games in the quarter included Cleo-Queen of Egypt, Cubis, Hulk Ultimate Revenge, Millionaires Club III and Spider-Man Revelations.

Source: InfoPowa News