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Casinos> 2009
- Real Casinos News Archive> CryptoLogic Expects to Deliver Net Income of $9-$10
Million in 2009
Branded e-gaming software pioneer on track with new growth strategy
to generate cash, reduce costs and deliver profits from expanding
its casino business
DUBLIN, IRELAND, Jan 15, 2009 (MARKET WIRE via COMTEX) -- CryptoLogic
(TSX: CRY)(TSX: CXY)(NASDAQ: CRYP)(LSE: CRP), a world leader in
Internet casino and branded gaming software, today provided an update
on its new growth strategy and restructuring program that positions
the company for a return to profitability and cash generation in
2009, and further growth in the years to come.
Highlights
Restructuring program
Under the plan announced in October 2008, the company is on track
to achieve:
- Reduced total operating costs of approximately $13 million on
an annualized basis by the end of Q2 2009.
- Restructuring to result in $3.5 million cash costs and up to
$20 million in further non-cash charges.
- Outsourcing of poker network through strategic partnership with
GTECH Corporation to be completed by the end of Q1 2009. Partnership
will improve poker-room liquidity for CryptoLogic customers, while
eliminating the costs of operating a standalone network.
- Rationalization includes reconfiguration of network, a 75% reduction
in servers and office rental costs.
New strategy for growth
- Growth to be driven by Internet casino business, and by development
and licensing of branded online games to leading gaming and entertainment
brands.
- Recently contracted customers including 888.com, PartyGaming
and GigaMedia expected to generate new revenues of at least $8 million
in 2009.
- Continued aggressive expansion of casino business through licensing
contracts, with a robust new business pipeline for 2009.
- Yesterday signed a new licensing contract with Gaming Technology
Solutions plc, whose customers include Unibet, bwin and many other
top brands.
2009 outlook
Based on no significant further deterioration in economic conditions
and stabilization of currency rates, the company expects:
- Return to profitability and cash generation from Q2 2009.
- Full year cash generation post restructuring of $11-$13 million.
- Net profits in the range of $9-$10 million.
- Diluted earnings per share of 65-71 cents.
"CryptoLogic has taken radical steps to focus on its core
strengths as a developer of exciting online gaming content,"
said Brian Hadfield, CryptoLogic's President & CEO. "We
are on track to return to profitability and generate cash from the
second quarter of 2009."
"Our streamlined operations, lower operating costs and commitment
to creating compelling customer experience, together with a highly
profitable build-once-sell-often model, provides a solid springboard
for long-term growth and shareholder value."
Overview
CryptoLogic is making significant progress in executing its new
growth strategy and restructuring program, first outlined in October
2008. These plans were developed after a fundamental review of the
business by the company's management under Brian Hadfield, following
his appointment as President & CEO at the end of February 2008.
This new strategy is to achieve long-term growth, sustained profitability
and strong cash generation by adopting a radically new business
model that focuses on CryptoLogic's successful Internet casino business
and the development and licensing of the company's highly acclaimed
software.
Restructuring for profitability
As announced previously, the company is implementing a plan to
reduce annual operating costs by $13 million through various initiatives.
Approximately $8.5 million of the savings are attributable to a
reduction in employee expenses; about $2.5 million are from infrastructure
and facilities downsizing; and some $2.0 million in savings are
expected from operational efficiencies across the business.
Poker partnership cuts costs, adds liquidity
In November 2008, the company announced the outsourcing of its
hosted poker business by entering into a strategic partnership with
GTECH Corporation's International Poker Network. The move gives
CryptoLogic's poker licensees and players access to a larger network
with a combined average of 15,000 active players.
The transfer of poker licensees and systems to the GTECH network
is expected to be completed by the end of the first quarter. The
company will continue to provide a full-service offering for its
licensees through the GTECH network and receive ongoing revenues
from its transferred customers.
New customers to drive revenue growth
CryptoLogic significantly increased its customer acquisition activities
in 2008, resulting in 10 new contracts for both hosted Internet
casinos and the licensing of branded games. Yesterday the company
further expanded its channel to market with a strategic partnership
with Gaming Technology Solutions plc, a leading global supplier
of platform solutions for online gaming operations. Under the agreement,
CryptoLogic's top performing games will be made available to GTS
customers, which include Unibet, bwin, Expekt and Betclick among
many other top brands.
Going forward, the "build-once-license-often" model offers
excellent revenue potential at low cost and will be the major driver
of growth. The company's new customers include 888.com, PartyGaming,
GigaMedia, SkyBet (part of BskyB Group), Orbis, The Poker Channel
and Betjacks. These agreements offer significant revenue potential
for 2009 and beyond.
Investing for future
In order to leverage its industry leadership in the development
and deployment of casino games, the company is introducing the CryptoLogic
Centre for Innovation where customers, partners, universities and
others can participate in defining and guiding the future of e-gaming.
As part of the new strategy and image, the company will also unveil
its new branding program and logo based around "extraordinary
e-gaming innovation" with the production of the new annual
report due in May.
Outlook
The company is in the process of finalizing its results for the
fourth quarter and full year 2008. While trading levels were broadly
in line with management expectations in the fourth quarter, revenues
were affected by the continued strengthening of the US dollar, the
company's reporting currency, against the Euro, Canadian dollar
and the British pound. As a result, reported revenues are expected
to be approximately 14% lower than the previous quarter. Against
that, recurring operating expenses will also be lower due to currency
fluctuations. Net cash at the year end was between $42-$43 million.
Given difficult global economic conditions, the company is taking
a cautious view of top line growth in 2009. Nevertheless, CryptoLogic's
actions to reduce operating costs and execute its new growth strategy
will enable the company to return to profitability and cash generation
from Q2 2009. In addition, the company expects full year cash generation
post restructuring of $11-$13 million, net profits in the range
of $9-$10 million, and diluted earnings per share of 65-71 cents.
The above guidance assumes no significant further deterioration
in economic conditions and stabilization of currency rates.
Investor/analyst conference call
CryptoLogic will hold a conference call today at 8:30 am Eastern
time (1:30 p.m. GMT) to update investors on the progress of its
plan to return to growth and profitability in 2009. The details
of the call are as follows:
Toll Free North America: 1-877-677-0837
Toll Free UK: 00 800-6578-9898
Toll Free International (Country Code) 800-6578-9898
Toronto Dial-In Number: 416-695-6616
To participate, please call five to ten minutes prior to the start
of the teleconference. This conference call will be recorded and
available for replay approximately one hour after the completion
of the call, up until midnight January 22, 2009. To listen to the
replay, please dial 416-695-5800 or 1-800-408-3053, passcode 3277967#.
A transcript of the call will also be made available on CryptoLogic's
website at www.cryptologic.com under Investor Information.
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