FORM 6-K

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of November 2008

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F....x..... Form 40-F...o..

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Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): __

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Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

 

 

FOR IMMEDIATE RELEASE

Symbol: TSX: CRY, CXY; NASDAQ: CRYP; LSE: CRP

ALL FINANCIAL FIGURES ARE IN US$

 

CRYPTOLOGIC ANNOUNCES Q3 RESULTS,

EXECUTES NEW STRATEGY FOR GROWTH

Company implements strategy to continue to win new casino customers, develop and distribute
branded games, reduce costs by outsourcing poker, and grow profitability

 

November 13, 2008 (Dublin, IRELAND) – CryptoLogic Limited, a world leader in Internet gaming software, today reported its financial results for the three months ending September 30, 2008. The company posted revenue of $14.0 million and a net loss of $5.9 million, including a foreign exchange loss of $4.2 million. CryptoLogic also projected a favourable outlook for 2009 following significant new customer wins and yesterday’s announcement of a new strategic poker partnership with GTECH Corporation that will help reduce operating expenses and increase profitability.

 

By partnering with GTECH’s International Poker Network in 2009, CryptoLogic will give its licensees and players access to a larger network, while helping to reduce annual operating expenses by $12-15 million. This move is part of CryptoLogic’s strategy to achieve revenue growth and profitability by focusing exclusively on its very popular branded games and its Internet casino business. The shift will enable the company to build on its fast-growing list of major casino customers and its leadership in the branded gaming space.

 

“In a challenging year for our company and our industry, we recognize that we must do better — and that is why CryptoLogic is aggressively implementing its strategy to achieve profitability and growth in 2009,” said Brian Hadfield, CryptoLogic’s President and CEO. “CryptoLogic’s proven casino offering is attracting new customers more swiftly than ever before, and our branded games have earned the confidence of some of the world’s biggest gaming operators. And we have already begun reducing our operating costs — a trend that will continue as we implement our new poker partnership.”

 

As announced in September, the company also booked a significant foreign exchange loss in the quarter due to the rapid and unexpected appreciation of the U.S. dollar against the U.K. sterling and the euro. CryptoLogic has since moved substantially all of its cash and marketable securities into U.S. dollars to minimize the impact of further currency market volatility.

 

In light of the results, the company’s board of directors has declared a quarterly dividend of $0.03 per common share, a reduction from the previous level of $0.12. The continuing payment of a dividend, even in a challenging year, reflects the board’s confidence in CryptoLogic’s strategy to return to growth and profitability in 2009.

 

 

OPERATIONAL HIGHLIGHTS:

 

New distribution channels

 

Internet casino: licensing & launches

 

Innovation and branded games

 

New markets

 

 

FINANCIAL PERFORMANCE

 

Total revenue: CryptoLogic’s revenue for Q3 2008 was $14.0 million, a decrease of 16.4% from the second quarter and 19.7% when compared with the same period of 2007. The company’s Internet casino revenue was slightly over $10.1 million, compared with $10.8 million in the second quarter. Poker revenue was $3.2 million, down from $3.6 million in Q2. The company attributes these decreases to a combination of reduced Internet gaming in the summer months and reduced marketing activity by one of its major licensees.

 

Revenue for the nine months ended September 30, 2008 was $50.2 million, a decrease of 5.9% when compared with the same period of 2007 (September 30, 2007: $53.3 million). However, after adjusting for certain non-recurring benefits recorded in the first nine months of both 2008 and 2007, revenue was essentially flat when compared to the same period of last year.

 

Expenses: Operating expenses for the quarter ended September 30, 2008 were $16.5 million, or 117.5% of revenue (Q3 2007: $11.8 million or 67.3% of revenue). For the nine months ended September 30, 2008, operating expenses were $44.1 million or 87.9% of revenue (September 30, 2007: $36.7 million or 68.9% of revenue). Operating expenses increased primarily due to a $4.2 million loss on foreign exchange recorded during the quarter as the U.S. dollar appreciated by approximately 10% against both the U.K. pound and the euro during a period where the company had significant net asset positions in these currencies. CryptoLogic has since moved substantially all of its cash and marketable securities into U.S. dollars, the company’s reporting currency, to minimize the reported impact of further currency market volatility. Operating expenses in Q3 2008 were favorably affected by reduced compensation costs, reduced costs recorded in connection with the company’s long-term incentive plan, and e-cash processing fees.

 

Earnings and Earnings per Diluted Share: Due to the reduced revenue and higher expenses noted above, the company recorded a loss for the quarter of $5.9 million, or $0.45 per fully diluted share. The increased loss was due primarily to the $4.2 million loss on foreign exchange recorded during the period, as well as increased operating, general and administrative costs, and decreased interest income in Q3 2008. The loss for the nine months ended September 30, 2008 was $6.8 million, or $0.50 per fully diluted share.

 

Balance Sheet and Cash Flow: CryptoLogic’s working capital at September 30, 2008 was $52.9 million or $3.82 per diluted share (June 30, 2008: $63.3 million or $4.54 per diluted share.). Net cash (comprised of cash, cash equivalents and short-term investments) was $48.7 million (June 30, 2008: $64.4 million). The decrease in working capital during the three and nine months ended September 30, 2008 is primarily due to purchases of capital assets, purchase of long term investments, primarily in Asia, shares repurchased under our normal course issuer bid and payments of dividends.

 

STRATEGIC UPDATE

 

On October 20, 2008, CryptoLogic announced a new strategy that features a change to its business model:

 

 

 

OUTLOOK

 

2008 is proving to be a challenging year, due to the combination of a business slowdown and necessary transitions in the company’s management and business model.

 

However, CryptoLogic’s management remains cautiously optimistic for 2009, due to the company’s new business strategy, lower anticipated costs, recent and pending implementations of sites for new customers, and positive responses to the company’s newest branded casino games. In particular:

 

 

As a result, management is working toward a return to growth and profitability in 2009.

 

2008 Third Quarter Analyst Call

CryptoLogic’s CEO and CFO will report on the company’s Q3 earnings in a conference call scheduled for today at 8:30 a.m. Eastern time (1:30 p.m. GMT).

 

To participate, please call five to ten minutes prior to the 8:30 a.m. 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 (EST time) November 20, 2008. To listen to the replay, please dial 416-695-5800 or 1-800-408-3053, passcode 3272805#. A transcript of the call will also be made available on CryptoLogic’s website at www.cryptologic.com under Investor Information.

 

 

About CryptoLogic⁽ (www.cryptologic.com)

Focused on integrity and innovation, CryptoLogic Limited is a world-leading, blue-chip public developer and supplier of Internet gaming software. Its leadership in regulatory compliance makes it one of the very few companies with gaming software that has been certified to strict standards similar to land-based gaming.

 

WagerLogic Limited, a wholly-owned subsidiary of CryptoLogic, is responsible for the licensing of CryptoLogic software and services to licensees that offer their games around the world to non-U.S. based players. For information on WagerLogic⁽, visit www.wagerlogic.com. CryptoLogic’s common shares trade on the Toronto Stock Exchange (CRY, CXY), the NASDAQ Global Select Market (CRYP) and the Main Market of the London Stock Exchange (CRP).

 

For more information, please contact:

 

CRYPTOLOGIC FORWARD LOOKING STATEMENT DISCLAIMER:

Statements in this news release which are not historical are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, risks associated with the company’s financial condition and prospects, legal risks associated with Internet gaming and risks of governmental legislation and regulation, risks associated with market acceptance and technological changes, risks associated with dependence on licensees and key licensees, risks relating to international operations, risks associated with competition and other risks detailed in the Company’s filings with securities regulatory authorities. These risks may cause results to differ materially from those projected in the forward-looking statements.

 

 

CRYPTOLOGIC LIMITED

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars)

 

 

 

 

 

CRYPTOLOGIC LIMITED

CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE INCOME

(In thousands of US dollars, except per share information)

(unaudited)

 

 

 

CRYPTOLOGIC LIMITED

CONSOLIDATED STATEMENTS OF CASHFLOWS

(In thousands of US dollars)

(Unaudited)

 

 

 

 

 

 

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