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CryptoLogic Inc., a leading software developer to the global Internet gaming industry, today reported financial results for the three months ended March 31, 2007. Revenue and earnings were $19.6 million and $1.5 million, respectively, reflecting CryptoLogic’s strong position within a changing industry. Earnings were $0.11 per fully diluted share.
The first quarter included several special items, including an increase in revenue of $4.0 million ($4.5 million before tax) resulting from a change in the company’s estimate of the future amount to be paid out in casino jackpots; a charge of $1.4 million ($1.6 million before tax) for the establishment of the company’s new global headquarters in Europe; and $0.7 million ($0.8 million before tax) in development costs related to new licensee sites. Excluding these special items, the company would have incurred a loss of $0.4 million, or ($0.03) per diluted share. CryptoLogic ended the quarter with $103.8 million in net cash.
“At CryptoLogic, the first quarter was about investing in the future, and charting a course for global growth,” said Javaid Aziz, CryptoLogic’s new President and CEO. “We’ve launched five new customer sites since December, and have seven more in the queue – including two for Holland Casino, and two for World Poker Tour. With our largest customers on long-term agreements, and modest revenue expected this year from our Asian venture, CryptoLogic is poised for long-term growth in the European markets of today — and the Asian markets of tomorrow.”
CryptoLogic’s results follow a busy quarter in which the company unveiled a series of new games and customer acquisitions, and at a time of significant change for the industry following the United States prohibition on online gaming last fall. Since most of the company’s business came from Europe before the legislation, the financial impact of the U.S. action on CryptoLogic was less serious than it was for many competitors that derived substantially all of their revenue from U.S.-based players. Prior to enactment of the Unlawful Internet Gaming Enforcement Act (UIGEA) passed in October 2006, licensees’ revenue from Europe-based players was approximately 70% of total revenue; now all revenue is from non-U.S. based players. The company is building on this strong base with an aggressive plan to add additional licensee revenue in Europe and the rest of the world.
Since its last quarterly earnings report, CryptoLogic has capitalized on the changed industry landscape with a number of significant actions. These include signing new customers, making a strategic acquisition, entering a memorandum of understanding to launch a joint venture in Asia and obtaining a significant European government owned and regulated operator as an on-line casino and poker licensee.
Highlights:
New customers
* Signed land-based World Poker Tour for exclusive three year contract for on-line poker
* Launched PlayboyGaming.com’s poker site, with the casino site set to launch in the second quarter of 2007
* Launched sites for Betsafe and Parbet, two growing Scandinavian poker brands
New market: Government-owned casino
* Signed an exclusive three-year agreement to provide both poker and casino software for Holland Casino, the Netherlands’ government-owned casino operator. Subject to certain approvals, the new sites are expected to launch in June 2007
New partnership in Asia
* Signed a memorandum of understanding with Brilliance Technology Co. and 568 Network Inc. to penetrate the high-growth Chinese market with CryptoLogic’s existing games and new games for the Chinese diaspora. Subscription-based “play-for-fun” games are planned to be offered over the Internet and mobile phones. “Play-for-money” games are planned to be offered through retail locations licensed by the China Welfare Lottery, the nation’s gaming licensing authority
Strategic acquisition
* Purchased the poker brand and related assets of Parbet.com, a popular Scandinavian online poker room, and licensed them to a third party operator
Game innovation
* Converted major casino games to multi-language basis
* Awarded Gambling Online’s Top Casino Software Award for the second year running. The award is based on the votes of players from around the world
* Extended exclusive brand licensing agreement with Marvel Entertainment Inc. to 2010
Corporate initiatives
* Developed a plan to establish its new executive headquarters in Ireland this year, subject to approval at a special meeting of shareholders on May 24, 2007
* Javaid Aziz joined the company on April 2, 2007 as President and Chief Executive Officer
* On May 9, 2007, declared a quarterly cash dividend US$0.12 per share
Financial Performance
Earnings were impacted in the quarter by $4.0 million from a change in estimate of the future amount to be paid out from the jackpot provision; a non-recurring charge of $1.4 million related to the relocation of the business to Ireland; and costs of $0.7 million related to development of new licensee sites.
Total Revenue: Total revenue for the quarter was $19.6 million, 27.5% lower than Q1 2006. Poker revenue was down mainly due to the loss of Betfair in Q4 2006. Casino revenue was enhanced by an adjustment to amounts provided to cover future jackpot payouts of $4.5 million.
EBITDA(1) was $1.9 million in the quarter. The company’s EBITDA(1) margin in the quarter was 9.7%, compared to 32.1% in Q1 2006. The decrease was due (A) reduced revenue due mainly to the industry-wide impact of the UIGEA; (B) $4.5 million from a change in estimate of the future amount to be paid out from the jackpot provision (C) $1.6 million in charges incurred in Q1 2007 (Q1 2006: $0.2 million) related to relocation of the business to Ireland; and (D) development costs of $0.8 million related to new licensee sites. Excluding the latter three items, EBITDA(1) would have been ($0.2) million and the EBITDA(1) margin would have been (1.3%).
Earnings and Earnings per Diluted Share: Earnings were $1.5 million and diluted earnings per share were $0.11. Excluding the change in estimate of the future amount to be paid out from the jackpot provision; the charge for the relocation of the business to Ireland; and development costs related to new licensee sites, the company would have incurred a loss of $0.4 million, or ($0.03) per diluted share.
Balance Sheet and Cash Flow: CryptoLogic’s financial strength continued to be reflected in its strong balance sheet. At March 31, 2007, net cash was $103.8 million (comprising cash and cash equivalents, short term investments and security deposits), or $7.43 per diluted share (December 31, 2006: $128.4 million, or $9.35 per diluted share). The decrease in net cash of $24.6 million reflects mainly amounts paid for the January 2007 purchase of Parbet, purchase of capital assets and increases in non-cash operating assets. The Company continues to be debt-free.
CryptoLogic’s working capital at March 31, 2007 was $83.9 million, or $6.01 per diluted share (December 31, 2006: $93.8 million, or $6.83 per diluted share). Cash flow used in operating activities was ($11.1) million in Q1 2007 (Q1 2006: $11.5 million provided by operating activities). The decrease in cash flow from operating activities of $22.6 million from Q1 2006 is explained mainly by: (A) lower earnings from operations after non-cash items ($5.4 million); (B) higher receivables ($7.2 million) due to timing of collection of receivables from certain licensees now collected; (C) lower accounts payable and accrued liabilities ($8.6 million) due to a lower jackpot provision; and (D) lower income taxes payable due to lower earnings ($1.0 million).
Outlook
For Q2 2007, CryptoLogic estimates revenue of $15.5-$16.5 million. The company expects earnings in Q2 2007 to be break-even, before the deduction of $1.5 million in pre-tax costs related to the new European headquarters. After those costs are deducted, the company forecasts a loss of $1.5 million, or ($0.11) per diluted share. This represents an additional quarter of investment in new licensee relationships to build for future earnings growth.
Approximately $0.5 million in development costs which will be included in the second quarter relate to new customer sites expected to be launched in the second quarter.
CryptoLogic expects 2007 to be a year of transition, with growth expected in both Europe and Asia. The company has signed its largest customers to long-term agreements, launched five new customer sites since December, and expects to launch three more in the second quarter (Playboy Gaming’s Internet casino, and Holland Casino’s poker and casino sites). Later this year, CryptoLogic expects to benefit from modest revenue from its new venture in China.
Beyond 2007, industry analysts continue to expect strong growth from the European market, which has been CryptoLogic’s core focus for the last five years. In addition, rapid online growth in Asia is expected in the years to come. Accordingly, the company has the following long-term financial objectives in future years for its continuing business in Europe and Asia:
* Grow revenue and earnings at 20% year-over-year for Europe and Asia combined
* Achieve net margin and return on equity of 20%
* Achieve double-digit revenue growth in casino and poker
* Exceed industry growth rates in key online casino and poker markets
(1) Management believes that EBITDA (earnings before interest, taxes, and amortization) is a useful supplemental measure of performance. However, EBITDA is not a recognized earnings measure under generally accepted accounting principles (GAAP) and does not have a standardized meaning. Therefore, EBITDA may not be comparable to similar measures presented by other companies. |
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发表于 2007-5-11 01:32
