Revenue, earnings and earnings per share grow more than
20 percent despite challenging fourth quarter
Top online gambling software developer and turnkey provider
Cryptologic has released strong 2006 results showcasing
eight new customer sites, 40 new games, new acquisitions and
some impressive Asian expansion moves.
The company grew both revenue and earnings by 21 percent to
$104.0 million and $24.8 million, respectively. Earnings
rose to $1.81 per fully diluted share, a 24 percent increase
over 2005, and the company ended a successful year with
$128.4 million in total cash.
Cryptologic's strong results and new customer acquisitions
follow a time of significant change for the industry, in
which the US market was severely impacted by US anti-online
gambling legislation and the activities of the US
CryptoLogic had already ensured that its licensees would not
take wagers from U.S.-based players by the time the
legislation was enacted, but the short-term impact of this
event on the company's revenue and earnings was heightened
as it occurred in the fourth quarter, which is historically
the strongest quarter of the year.
Since the company's business was substantially focused in
Europe before the legislation, the impact of its passage on
CryptoLogic was much less serious than it was for many
"While 2006 was a challenging year for the industry, it was
another record year for Cryptologic - and we enter 2007 with
both focus and momentum," said Lewis Rose, Cryptologic's
President and CEO.
"We've launched five new customer sites since December, and
have three more in the queue - including two for Holland
Casino, Cryptologic's first government-owned customer. With
our largest licensees on long-term agreements, and modest
revenue expected this year from our new Asian venture,
Cryptologic is poised for long-term growth in the European
markets of today - and the Asian markets of tomorrow."
CryptoLogic's quarter 4 2006 results were in line with the
company's estimates for the quarter with $19.0 million of
revenue and $1.7 million in earnings, or $0.12 per share
(after deducting an after-tax $1.0 million non-recurring
charge, or $0.07 per share, related to reorganisation costs
for the proposed establishment of CryptoLogic's new
executive headquarters in Ireland).
Since its last quarterly earnings report, Cryptologic has
capitalised 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 major European government operator as a casino
and poker licensee.
Highlights for 2006
- Renewed contract with William Hill for three years
with exclusive provisions until 2009 under similar
financial terms, and launched William Hill's Spanish
- Launched PlayboyGaming.com's poker site, with
the casino site set to launch in the second quarter of
- Launched sites for Betsafe and Parbet, two growing
Scandinavian poker brands.
- Launched DTDPoker, under an exclusive 3-year
contract. DTDPoker is the online home of the new UK
land-based poker club, DUSKTILLDAWN, expected to be the
largest in the UK when it opens in April 2007.
- 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.
- 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.
- Purchased the poker brand and related assets of
Parbet.com, a popular Scandinavian online poker room,
and licensed them to a private Maltese online gaming
- 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.
- Launched 16 innovative new download casino games,
including slots based on Cubis, the popular casual game,
and on the Marvel characters Elektra, Ghost Rider and
- Launched 24 new non-downloadable casino games for
William Hill, including popular CryptoLogic slot titles
such as Bejeweled, the Marvel Jackpot Slot games, and
Millionaires Club, which currently offers the largest
online jackpot in the world at over $5 million.
- Redesigned Cryptologic's poker software, including
enhancements to the main lobby, game tables and
tournament lobby that make it easier than ever for
players to navigate, select their game and stake levels,
and access key statistics on the game and their play.
The company plans to establish its new executive
headquarters in Ireland in 2007, subject to approval from a
special meeting of shareholders in the second quarter. The
company continues to plan for a new CEO to take office after
the establishment of the new headquarters.
Cryptologic achieved record results in 2006. The company
reported record revenue of $104.0 million (20.5 percent
growth), record EBITDA(1) of $27.2 million (21.8 percent
growth), record earnings of $24.8 million (20.9 percent
growth) and record diluted earnings per share of $1.81 (24.0
percent growth) for the year ended December 31, 2006.
This was accomplished notwithstanding the U.S.
prohibition of Internet gaming in the fourth quarter, and
the non-recurring charge of $3.7 million in costs related to
establishing the new European headquarters. The strong
performance of the first three quarters of the year was
partially offset by the impact of the new US legislation in
the fourth quarter.
Looking ahead, CEO Rose says that for Quarter 1 2007,
CryptoLogic estimates revenues of $18-$19 million. The
company expects earnings between $2.5 - $3 million, or $0.18
- $0.21 per diluted share, 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 earnings of $1-$1.5 million, or $0.07 -$0.11 per
Approximately $0.6 million in development costs which will
be included in the first quarter relate to three new
customer sites expected to be launched in the second
Cryptologic expects 2007 to be a year of transition and
growth in both Europe and Asia. 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 set the following long-term
financial objectives in future years for its continuing
business in Europe and Asia:
- Grow revenue and earnings: 20 percent
- Achieve net margin and return on equity: 20 percent.
- Achieve double-digit, above-market revenue growth in
casino and poker.