Crypto Shows Quarter-on-Quarter Revenue, Earnings Growth

8 November 2007

CryptoLogic released third-quarter results this morning, highlighting a 7.8 percent increase in revenue to $17.5 million against figures from the second quarter.

The company stressed that quarter-over-quarter comparison was a "more meaningful indicator" of relative performance than year-on-year comparison, given the significant industry-wide impact of the U.S. I-gaming prohibition enacted last October. (Indeed, a year-on-year comparison shows revenue down 36.8 percent, earnings down 66.7 percent and earnings per diluted share down 64.2 percent.)

Net income for the quarter totaled $2.4 million, or $0.19 per diluted share, compared to a post-tax loss of $2.6 million, or $0.19 per diluted share, during the second quarter.

Casino revenue jumped 11 percent to $11.4 million against $10.2 million in Q2 '06, while poker revenue shed 4 percent to $4.8 million versus $5 million last quarter.

Crypto was quick to point to its balance sheet -- calling it one of the industry's strongest -- having ended the quarter with $85.4 million in net cash.

On the release of its second-quarter results in August, Chief Executive Javaid Aziz said the group was planning to spend the majority of the company's then $92 million in cash on Asian acquisitions over the next year -- though an estimated $6.3 million was spent to acquire gaming portal Casino.co.uk in late August, a move the company called "immediately accretive to earnings."

To date, Crypto has acquired a $1.2 million "financial interest" in China-focused casual games distributor 568 Network, and has put in bids to run sports lotteries in Taiwan and Vietnam.

On the release of its results this morning, the company announced it had acquired a "substantial minority stake" in Mikoishi Studios, an Asia-based game development and design company, with options to increase its ownership over time. Crypto will also have representatives on the Mikoishi board.

Of the move, Aziz said it was a "perfect" fit with the group's growth plans but did not provide additional financial details.

Of the results, Aziz observed that the company had "strengthened every part of its business" during the quarter, after " . . . we launched new sites, acquired new assets and strengthened [our] relationships with some of the world's blue-chip gaming and entertainment brands."

"The result is new stability, profitability and sustainability for CryptoLogic's growth in the long term," he added.

Looking ahead, the company expects fourth-quarter revenues of between $17.5 million and $18.5 million, with net earnings between $2 million and $3 million.

On the LSE, shares in the company were up 25p, or 2.77 percent, to 928.50.




Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.