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Fourth quarter revenue up 33%, earnings up 25%
Focused strategy delivers "blue-chip" results, global strength in online casino
CryptoLogic Inc., a leading software developer to the global Internet gaming
market, announced today its financial results for the fourth quarter and year
ended December 31, 2004. Record revenue, excellent earnings and healthy
operating cash flow in 2004 are evidence of the company's focused strategy and
growth momentum in both the casino and poker segments of the global online
"CryptoLogic continues to be the blue-chip e-gaming software company, with a
winning hand in both the thriving online casino and poker markets," said Lewis
Rose, CryptoLogic's President and CEO. "2004 marked another year of revenue
growth, profitability and cash generation for CryptoLogic. In 2005, we will
continue to capitalize on our strong financial performance to invest for the
future, build on our market strength and continue to drive profitable returns."
(in millions of US dollars, Three months ended Years ended
except per share data) December 31, December 31,
2004 2003 2004 2003
Revenue $17.9 $13.5 $63.7 $44.2
Earnings $3.8 $3.0 $13.7 $9.4
Earnings per diluted share $0.27 $0.23 $1.01 $0.75
Highlights for the fourth quarter included:
- Fourth quarter earnings grew to $0.27 per diluted share, ahead of analysts'
average forecast and the 2003 fourth quarter of $0.23. Fiscal 2004 full year
earnings were also strong at $1.01 per diluted share on a 44% increase in
revenue to a record $63.7 million;
- Consistent cash generation led to the previously announced 67% increase in
the quarterly dividend to $0.05 per share;
- Online poker fees rose by more than 165% over the same previous year quarter,
and accounted for over 20% of Q4 2004 revenue. Internet casino revenue grew 15%
from the fourth quarter of 2003;
- International diversification remained strong, with overseas markets
exceeding 60% of licensees' revenue for the year, up from over 55% in 2003; and
- Subsequent to year-end, the company renewed and extended its multi-year,
exclusive agreement with an existing UK licensee, The Ritz Club London Online,
for both online casino and poker solutions developed by CryptoLogic.
Strong 2004 Financial Performance (All figures are expressed in US dollars)
CryptoLogic posted record revenue and excellent earnings for the fourth quarter
ended December 31, 2004. The first and fourth quarters are typically the
strongest periods as players tend to spend more time indoors during the winter
and fall seasons. Revenue rose 33% to $17.9 million (Q4 2003: $13.5 million).
EBITDA(1) for the quarter grew 25% to $4.7 million (Q4 2003: $3.8 million).
EBITDA(1) margin for the quarter was 26% as a percentage of revenue, despite
higher investments to drive long term returns (Q4 2003: 28%). Earnings for Q4
2004 rose 25% to $3.8 million or $0.27 per diluted share (Q4 2003: $3.0 million
or $0.23 diluted share).
The fourth quarter results reflected strong organic growth from existing
customers, recently launched poker licensees, new casino games and product
enhancements. The introduction of poker tournament capabilities, an expanding
poker clientele, and increased system scalability translated into rising online
poker fees. The company's poker customers also benefited from the success of
their first land-based poker tournament, the Caribbean Poker Classic(, which
was televised and a great marketing draw for players. An expanded casino game
portfolio, particularly in the popular slot category, helped growth in Internet
Revenue for the year ended December 31, 2004 increased by 44% to $63.7 million
(2003: $44.2 million). EBITDA(1) for fiscal 2004 rose by 51% to $17.3 million
(2003: $11.5 million). This translated into EBITDA(1) margin for the year
rising to 27% (2003: 26%) despite increased investments, which are already
producing early returns. Earnings for the full year improved by 45% to $13.7
million or $1.01 per diluted share (2003: $9.4 million or $0.75 per diluted
In the second half of 2004, CryptoLogic announced and embarked upon a major
investment program, which is over and above its normal course expenditures, to
support long term growth. Approximately 70%, or $7.1 million, of this program
was invested in 2004. Most of the remaining 30% balance will be completed in
the first half of 2005. In 2004, these expenditures included $2.6 million in
operating costs and $4.5 million in capital expenditures (comprising $3.2
million for the purchase of capital assets and $1.3 million in capitalized
software development costs related to the investment program).
Balance Sheet Strength
CryptoLogic continued to add to its strong balance sheet. At December 31, 2004,
the company had no debt, and total cash grew to $86.0 million or a cash value
of $6.33 per diluted share (comprising cash and cash equivalents, short term
investments, and including security deposits of $7.0 million). Working capital
grew to $62.8 million or $4.62 per diluted share.
Operating cash flow for the fourth quarter of 2004 was $9.0 million (Q4 2003:
$7.7 million). For fiscal 2004, operating cash flow was $18.9 million (2003:
$38.7 million). The year-over-year decline related primarily to increased
receivables in 2004 resulting from two licensees assuming responsibility for
their own e-cash processing. In addition, cash generated from operations was
exceptionally high in 2003 due to more favourable security deposit arrangements
beginning that year and the timing of accounts payable.
Increased Quarterly Dividend
On November 4, 2004, CryptoLogic's Board approved a 67% increase in the
company's quarterly dividend to US$0.05 per common share or an annual rate of
US$0.20 (up from US$0.03 per share each quarter), reflecting the company's
consistent earnings and cash generation. The increased rate began with the
quarterly dividend paid on December 15, 2004.
On February 16, 2005, the Board declared the company's quarterly dividend of
US$0.05 per share, payable on March 15, 2005 to shareholders of record as at
March 8, 2005. CryptoLogic continues to be one of the few software companies
with a regular dividend policy - a sign of its financial strength.
CryptoLogic has established an internationally diversified business. In 2004,
more than 60% of licensees' revenue was derived from international players, up
from over 55% in 2003 and 40% in 2002 . The UK and Continental Europe remain
the company's key geographic focus, having grown to more than 30% and 20%
respectively of licensees' overall revenue.
CryptoLogic continues to work with some of the most prominent international
gaming brands. Subsequent to the year-end, in February 2005, The Ritz Club
London Online renewed and extended a multi-year contract with CryptoLogic's
subsidiary, WagerLogic Limited, to continue to use the company's online casino
and poker offerings exclusively during the term of the agreement.
CryptoLogic continued to deliver profitable growth in both its core casino and
the burgeoning online poker areas. The company further expanded its online
casino suite - launching more than 30 new choices of the most popular table and
slot games in 2004, which helped grow Internet casino revenue by 15% in Q4 2004 over a year ago. CryptoLogic continued to demonstrate its reputation for
innovation by being the first to bring "Fruit Machine" style slots, a UK pub
favourite, to the Internet.
CryptoLogic is also building a strong presence in the global online poker
segment. Enhanced tournament capabilities, increased system scalability and the
growing momentum of brand name poker licensees have all contributed to a more
than 165% rise in online poker fees in Q4 2004 over a year ago. Online poker
accounted for over 20% of total Q4 revenue, ahead of CryptoLogic's target of
15% for the year. Today, CryptoLogic-developed software powers one of the top
five revenue-generating poker rooms on the Web, according to PokerPulse, an
independent industry research website.
During the fourth quarter, CryptoLogic appointed Andrew Goetsch as Vice
President of Poker Software Development. As a senior executive with more than
20 years experience in strategic planning, technology, finance and mergers and
acquisitions, Goetsch helped increase sales and profits for consumer goods and
manufacturing companies. He obtained his Certified Public Accountant
Designation at one of the big accounting firms. As a seasoned executive and
accomplished poker player - including several final table appearances, and more
than 200 "in the money" finishes in poker tournaments held both online and
around the world, including the main event in the 2004 World Series of Poker -
Goetsch's extensive expertise will help the company continue the growth and
development of its software product plans in Internet poker.
CryptoLogic's focused strategy and investment in key markets and fast-growing
product segments have continued to translate into revenue growth, solid
earnings and positive cash flow, notwithstanding a competitive online gaming
industry marked by US regulatory uncertainty. By remaining disciplined in its
execution, CryptoLogic will build on its positive momentum into 2005. Revenue
in the traditionally strong first quarter is forecast to range from $19.0-$19.4
million, with earnings of $4.1-$4.3 million or $0.29-$0.30 per diluted share.
Given CryptoLogic's revenue generation and financial strength, Management
believes this is the best time to invest for growth in both its core casino and
poker businesses. CryptoLogic will continue its major capital investment
program largely in the first half of 2005, substantially enhancing its game
offerings, infrastructure, scalability, customer care and back-office systems -
all to secure continued global leadership in the major segments of the online
gaming market, and intended to enhance returns in the near and long term.
2004 Fourth Quarter and Year End Analyst Call
A conference call is scheduled for 8:30 a.m. (EST) (1:30 p.m. GMT) on Friday,
February 18, 2005. Interested parties should call either 416-695-5259,
1-877-888-3490 (North America) or international toll free number at (Country
Code) 800-4222-8835. Instant replay will be available until February 25, 2005
by calling 416-695-5275 or 1-866-518-1010.
About CryptoLogic(R) (www.cryptologic.com)
Focused on integrity and innovation, CryptoLogic Inc. is the world's largest
public online gaming software developer and supplier. Its leadership in
regulatory compliance makes it one of the very few companies with gaming
software that is certified to strict standards similar to land-based gaming.
WagerLogic Limited, a wholly-owned subsidiary of CryptoLogic, is responsible
for the licensing of its gaming software and services to customers worldwide.
For information on WagerLogic(R), visit www.wagerlogic.com.
CryptoLogic's common shares trade on the Toronto Stock Exchange (symbol: CRY),
on the Nasdaq National Market (symbol: CRYP), and on the Main Market of the
London Stock Exchange (symbol: CRP).
(1) Management believes that EBITDA (earnings before interest, taxes,
depreciation and amortization) is a useful supplemental measure of performance.
However, EBITDA is not a recognized earnings measure under generally accepted
accounting principles (GAAP) and does not have a standardized meaning.
Therefore, EBITDA may not be comparable to similar measures presented by other
CRYPTOLOGIC FORWARD LOOKING STATEMENT DISCLAIMER:
Statements in this press 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.
FOR FURTHER INFORMATION PLEASE CONTACT :
Director of Communications
Phone: (416) 545-1455
Interim Chief Financial Officer
Phone: (416) 545-1455
Phone: (416) 968-7311 ext. 223
Phone: (416) 968-7311 ext. 228
INDUSTRY : SOF
SUBJECT : ERN
Published on: 12:00AM on 18th February 2005