Earnings out!CryptoLogic Outperforms First Quarter Expectations; ALL DOLLAR AMOUNTS IN US$; Core business stabilizing; International growth & product expansion fuel positive momentum
Business Wire - Wednesday April 30, 2003
TORONTO, Ontario--(BUSINESS WIRE)--April 30, 2003--CryptoLogic Inc. (Nasdaq:CRYP) (TSX:CRY), a leading software developer to the Internet gaming and e-commerce industries, announced today its financial results for the first quarter ended March 31, 2003, ahead of the company's annual meeting scheduled for Thursday, May 1, 2003. Quarterly results exceeded expectations and reflect encouraging signs that the company's core business is stabilizing, and seeing growth momentum from international customers and new products. All financial figures are expressed in U.S. dollars.
"2003 is off to a positive start and continues a favourable trend for CryptoLogic," said Lewis Rose, CryptoLogic's President and CEO. "CryptoLogic is executing well, as evidenced by stronger than expected financial performance and a number of accomplishments in the first quarter. We are pleased with another solid quarter in light of ongoing industry challenges and we continue to be cautiously optimistic."
In the first quarter, CryptoLogic achieved promising results towards its 2003 growth objectives. Highlights included:
-- Signed two new international, brand name customers - Bingo
Entertainment for the company's poker product, and ukbetting
plc for the company's poker and casino products;
-- Extended casino agreement with a major U.K. licensee, William
Hill, and secured a four-year exclusivity for their use of the
online poker product developed by CryptoLogic;
-- Received license approval in Alderney, the company's second
approval from a strictly regulated jurisdiction. This extends
CryptoLogic's market advantage as a regulatory leader; and
-- Surpassed expectations for new poker and bingo products; these
products are on track to exceed 10% of 2003 revenue.
Solid Q1 Performance and Q2 Outlook
For the 2003 first quarter, CryptoLogic topped expectations by recording $8.9 million in revenue, net income of $1.8 million and diluted earnings per share of $0.15. Management's first quarter 2003 forecasts were for revenue of $8.0-$8.3 million, net income of $1.2-$1.4 million and $0.10-$0.11 per diluted share. The first quarter results also compared solidly to revenue of $8.7 million and net income of $2.2 million or $0.16 per share on a diluted basis from the first quarter of 2002.
CryptoLogic's better-than-expected performance in this year's first quarter reflects growth momentum from international customers and new products - particularly poker - along with broad and growing acceptance of the company's alternative payment solutions. Licensees' revenue from international sources is increasing steadily and was approaching 50% by the end of the first quarter of 2003, up from 40% for 2002.
CryptoLogic's balance sheet strength continues to provide a competitive advantage, especially as the industry experiences consolidation and creates attractive opportunities for growth. At March 31, 2003, CryptoLogic remained debt free and total cash reserves grew to $50.7 million (comprising cash and cash equivalents and restricted cash) or US$4.15 in cash per diluted share. This cash balance was unusually high due to operating cash flow of $8.4 million (2002: $2.8 million), which reflected temporary changes in working capital items in the quarter, and much of which is expected to reverse over the balance of the year. Cash flow from earnings was $2.1 million during the first quarter, compared with $2.4 million in the comparable 2002 period.
During the first quarter, CryptoLogic's business continued to stabilize. Notwithstanding these promising results, the company continues to operate in a challenging environment. Earnings in the quarter were affected due to higher investments to support the company's international focus, increasing marketing activities, regulatory efforts, expanding the range of payment methods and ongoing innovation, which continue to be vital for long-term growth. Management forecasts that second quarter revenue will range from $8.8-$9.0 million, with net income between $1.7-$1.9 million and diluted earnings per share of $0.14-$0.16.
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