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CryptoLogic CEO resigns after rough quarter12 August 2010DUBLIN, Ireland -- (PRESS RELEASE) -- CryptoLogic, a global developer of Internet casino and branded gaming software, announces its financial results for the second quarter ended June 30, 2010. Additionally, the Company announces further restructuring and management changes. Overview Q2 2010 results were disappointing as slow progress was made amid continued challenging trading conditions to turn round the Company's performance. Overall revenues declined to $6.7 million (Q1 2010: $7.6 million). The Company amortized the cost of certain prepaid royalties on a straight line basis, reducing overall revenues by $0.6m in the quarter. In addition, some licensees experienced a decline in contribution from higher margin slot games and some negative impact from the World Cup. Excluding the impact of the change in accounting estimate for prepaid royalties, revenues from both the hosted casino and branded games licensing business were up sequentially. The Company incurred $7.3 million non recurring costs, comprising a non-cash impairment of intangible assets of $3.6 million, impairment of capital assets of $2.1 million and reorganization costs, including an additional provision of $1.7 million in respect of a further restructuring to reduce its cost base. Further restructuring In the light of continuing difficult trading conditions, a further restructuring is being implemented to reduce significantly the cost base including a reduction in the total workforce by the end of Q4 2010. Following a review by a leading firm of industry consultants announced previously, a number of measures are being implemented to improve the performance of the hosted casino business. Management Changes After working with the Board on the restructuring plan, Brian Hadfield, Chief Executive Officer, has decided to leave the Company and resign as a Director. David Gavagan, the Chairman, assumes the role of CEO on an interim basis. As announced previously, Huw Spiers has joined the Company and will assume the role of Chief Financial Officer from August 15. Operating Review Hosted Casino Revenue from fully hosted virtual casino rooms provided to online gaming brand operators was $5.8 million in Q2 2010 (Q1 2010: $5.8 million). Amortization of royalties and games now reported separately and no longer charged against casino revenues. CryptoLogic's fully hosted casino suite was launched recently by Betsafe.com under a multi-year licensing deal signed last year. Betsafe is a leading online gaming operator with a customer base of over 400,000 players. Branded Games Branded casino games delivered further growth as operators continued their rollout of CryptoLogic games. Revenues from this segment increased to $1.5 million in Q2 2010 (Q1 2010: $1.3 million), despite some licensee sites being impacted by lower wagering activity caused by the World Cup. 51 new branded games were launched in the quarter taking the total number of games rolled out by licensees and generating revenues to date to 150, with a further backlog of approximately 41games expected to go live in 2010. CryptoLogic's games are licensed to many of the world's leading online gaming operators such as 888.com, Betfair, GalaCoral, and PartyGaming. Since June 30, three clients have been signed for CryptoLogic's new casino offering, Instant Click. They are Tain AB, SkillonNet and Nyx Interactive. This product is aimed at expanding the Company's addressable market and shortening the time required to implement these new games on customers' networks. Amortization of Royalties The Company licenses various royalty rights from several owners of intellectual property rights for use in the Hosted Casino and Branded Games. Generally the arrangements require material prepayments of minimum guaranteed amounts which have been recorded as prepaid expenses. These prepaid amounts are amortized over the life of the arrangement as gross revenue is generated or on a straight line basis if the underlying games are expected to have an effective royalty rate greater than the agreed amount. The amortization of these amounts is recorded as a reduction in revenue. In Q2 2010 the Company revised its accounting estimate in respect of the amortization of certain prepaid royalties so that substantially all royalties are now being amortized on a straight line basis. Amortization of royalties and games now reported separately and no longer charged against casino revenues. Balance Sheet and Cash Flow At June 30, 2010, the Company ended the quarter with $17.4 million of net cash, which consists of cash and cash equivalents and security deposits, or $1.26 of net cash per diluted share (March 31, 2010: $19.7 million or $1.42 per diluted share). The decrease in net cash during Q2 2010 of approximately $2.3 million is due to the cash impact of operating losses of $3.1 million and purchase of capital assets of $0.4 million, and a decrease in trade accounts payable of $1.2 million, partially offsetting this is a decrease in accounts receivable of $2.0 million, decrease in prepaid expenses $0.2 million and a $0.2 million increase in income taxes payable. The Company continues to be debt free. Outlook: Outlook remains challenging and the Board continues to pursue avenues to enhance the Company's strategy in the interests of stakeholders.
CryptoLogic CEO resigns after rough quarter
is republished from Online.CasinoCity.com.
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