CryptoLogic Reports Solid Q4 & Fiscal 2001 Results; High Margin Growth in 2001; Profitable Outlook to Continue in 2002.Business Editors TORONTO--(BUSINESS WIRE)--Feb. 4, 2002 CryptoLogic Inc CryptoLogic Inc. is a Toronto-based online gambling software supplier, one of the four largest in the industry along with Microgaming, Playtech, and Real Time Gaming. CryptoLogic was founded by brothers Andrew and Mark Rivkin in 1995 from the basement of their parent's house. . (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CRYP CRYP Cheyenne River Youth Project (Eagle Butte, SD) )(TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :CRY.), a leading supplier of software to the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the gaming and e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. industries, today announced its financial results for the fourth quarter and year ended December December: see month. 31, 2001. Management also provides profitable targets for the first quarter and 2002 year. All financial figures are expressed in U.S. dollars. "CryptoLogic cryp·tol·o·gy n. The study of cryptanalysis or cryptography. cryp  to·log continues to deliver some of the healthiest
margins and quality earnings on the street - both in the online gaming See gaming. and technology markets," said Jean Noelting, president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. .
"We are pleased to report strong 2001 performance in line with our
preliminary announcement. Even in a challenging year that closed on a
softer note, we exceeded our 20% revenue growth objective and were near
our 45% net margins target."Noelting continued, "2002 will most definitely be another profitable year for CryptoLogic. Although in light of prevailing market conditions in the U.S., Management has taken a very conservative view. Accordingly, we are providing guidance of 10-15% revenue growth. Given lower revenue and high development costs for new products, net margins are expected to be between 35-40% for fiscal 2002. First quarter will reflect the bottom of the growth curve for 2002. Return to stronger momentum will be aggressively phased in the latter half of the year as growth initiatives including Littlewoods This article is about the former company. For the company which exists today that trades under this name, see Littlewoods Shop Direct Group. Littlewoods is the name of a former retail and gambling empire founded in Liverpool, England by Sir John Moores. , new licensees and new Java, bingo bingo Game of chance played with cards having a grid of numbered squares corresponding to numbered balls drawn at random. When a number on the card is drawn, the players cover that number (should they have it); the game is won by covering a certain number of squares in a row and poker poker, card game, believed to have originated in Asia and first played in the United States in the 19th cent. A traditional cutthroat gambling game at first, it is now also an internationally popular social pastime. products roll out and gain traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. . Given CryptoLogic's extensive share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. , 10-20% earnings per share growth year-over-year remain realistic targets." Internet gaming is in its formative formative /for·ma·tive/ (for´mah-tiv) concerned in the origination and development of an organism, part, or tissue. years, therefore will have its ups and downs ups and downs pl.n. Alternating periods of good and bad fortune or spirits. ups and downs Noun, pl alternating periods of good and bad luck or high and low spirits . The reality is that the industry is a multi-billion dollar business and is here to stay. In this developing market, CryptoLogic has continued to grow upward over the long term and thrive with double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. growth, strong margins and positive cash flow as evidenced by its 2001 performance. CryptoLogic has demonstrated clear leadership, continues to diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. in regulated international markets that are embracing online gaming and most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , makes money. While current pressures on the industry will impact the company in the short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. , CryptoLogic starts 2002 on solid ground and will continue to distinguish itself as a fundamentally strong growth organization. Strong 2001 Performance Revenue for the fourth quarter of 2001 increased 15% to $11.2 million compared to $9.7 million in the corresponding 2000 period. This excludes interest income of $0.3 million in 2001 down significantly compared to $0.9 million in the prior year quarter. Interest income was historically part of total revenue, but effective the first quarter of 2001 has been reclassified and is shown below income from operations in the consolidated statements of income. In its year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. review, Management has decided to write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. the $1.3 million associated with the insurance claim arising from the system intrusion, which occurred in 2001. While the claim is subject to ongoing investigation, the company felt a prudent and conservative approach was appropriate. Consequently, net income for the 2001 fourth quarter was $3.7 million or $0.28 per share ($0.25 per share on a fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis), compared to $4.1 million or $0.29 per share ($0.27 per share on a fully diluted basis) last year. Without this one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. expense, CryptoLogic would have posted net income in line with preliminary results of $4.2 million or $0.32 per share ($0.29 per share on a fully diluted basis). For fiscal 2001, revenue rose 27% to $43.6 million compared to $34.4 million last year. Net income was up 17% to $18.1 million or $1.33 per share ($1.21 per share on a fully diluted basis) versus $15.5 million or $1.18 per share ($1.03 per share on a fully diluted basis). As a result, net margins for fiscal 2001 were 42%. Again excluding the one-time expense, net income would have been up 20% to $18.6 million or $1.37 per share ($1.25 per share on a fully diluted basis) and translating into net margins of 43%. CryptoLogic remains well funded with $59.6 million in total cash at the end of 2001, which the company will continue to leverage for share repurchases, future acquisitions and growth plans. Cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. continue to be well deployed in the company's stock buy backs as a means to enhancing shareholder value. During fiscal 2001, 1,377,603 shares were repurchased at a cost of $17.3 million through the company's normal and substantial issuer bids. Subsequent to year-end, CryptoLogic completed a second Dutch auction Dutch Auction An auction where the price on an item is lowered until it gets its first bid, and then the item is sold at that price. Notes: The U.S. Treasury (and other countries) uses a Dutch auction when it sells securities. and bought back another 1 million shares at a cost of $17.5 million. CryptoLogic continues to take advantage of its regular buy back program in 2002. Since the resumption RESUMPTION. To reassume; to promise again; as, the resumption of payment of specie by the banks is general. It also signifies to take things back; as the government has resumed the possession of all the lands which have not been paid for according to the requisitions of the law, and the of the normal plan on January January: see month. 12 up to January 31, 2002, the company has repurchased 90,000 shares of the remaining 381,000 shares available in the program until expiry on May 17, 2002.
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FINANCIAL HIGHLIGHTS
(in millions of US dollars, except per share disclosure)
---------------------------------------------------------------------
Fourth Quarter Ended Years Ended
December 31, December 31,
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% %
2001 2000 Change 2001 2000 Change
---------------------------------------------------------------------
Revenue $11.20 $9.70 15% $43.60 $34.40 27%
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Interest income $0.30 $0.90 (62%) $2.20 $3.20 (32%)
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Net income $3.70 $4.10 (10%) $18.10 $15.50 17%
---------------------------------------------------------------------
Earnings per share $0.28 $0.29 (3%) $1.33 $1.18 13%
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Fully diluted EPS $0.25 $0.27 (7%) $1.21 $1.03 17%
---------------------------------------------------------------------
Average number
of shares 13.3 14.2 13.6 13.1
---------------------------------------------------------------------
Avg. fully diluted
number of shares 14.6 15.4 14.9 15.1
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Internet gaming is a major business, but market dynamics continue to change. The industry is getting broader, more sophisticated and competitive. As a result, CryptoLogic's objectives emphasize marketing, consumer-oriented development, regulatory compliance and brand name, land-based customers as the keys to sustainable, profitable growth. Against these business goals, CryptoLogic is making important strides. In the third quarter of 2001, CryptoLogic signed Littlewoods Leisure, another top UK gaming brand fitting CryptoLogic's criteria - a trusted name, an established customer base of 1.6 million households, and priority focus in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). . Littlewoods' online
casino Online casinos, also known as virtual casinos or internet casinos, are online versions of traditional ("brick and mortar") casinos. Online casinos enable gamblers to play and wager on casino games through the Internet. will be one of the world's first highly regulated sites and
licensed in the Isle of Man Noun 1. Isle of Man - one of the British Isles in the Irish SeaMan British Isles - Great Britain and Ireland and adjacent islands in the north Atlantic . In fiscal 2001, CryptoLogic expanded regulatory compliance into multi-jurisdictions. CryptoLogic leveraged its multi-million dollar investment in strict Australian Australian pertaining to or originating in Australia. Australian bat lyssavirus disease see Australian bat lyssavirus disease. Australian cattle dog a medium-sized, compact working dog used for control of cattle. certification to pursue compliance in the Isle of Man and Alderney - major new markets recently opened by the British government for regulated online gaming and adhering ADHERING. Cleaving to, or joining; as, adhering to the enemies of the United States. 2. The constitution of the United States, art. 3, s 3, defines treason against the United States, to consist only in levying war against them or in adhering to their enemies, to strict regulations consistent with land-based gaming standards. CryptoLogic's development strategy has shifted from a technical focus to player-oriented functionality. New features introduced in 2001 focused on increasing customer loyalty and included: progressive games that offer some of the world's largest jackpots on the Web; the convenience of a new pound sterling casino casino or cassino (both: kəsē`nō). 1 Card game played with a full deck by two to four players. Its origins are obscure though it probably traces back to the Italian game of Scopa. offering for a growing European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. player base; continuing investment in customer relationship management software for sophisticated licensee licensee n. a person given a license by government or under private agreement. (See: license, licensor) LICENSEE. One to whom a license has been given. 1 M. Q. & S. 699 n. user analysis; and 5th generation software release with new tournaments and VIP features. CryptoLogic's acquisition of WinnerOnLine, a well-regarded provider of player-focused gaming content with more than 350,000 unique visitors A count of how many different people access a Web site. For example, if a user leaves and comes back to the site five times during the measurement period, that person is counted as one unique visitor, but would count as five "user sessions. each month, is providing licensees an excellent marketing channel to attract new users. As well, new bingo and poker products will be released in the next few months, further contributing to revenue growth in 2002. Profitable Targets for First Quarter and 2002 Year CryptoLogic forecasts continued profitability with a stronger growth trend expected in the second half of 2002. The financial impact of certain credit card issuers no longer accepting online gaming transactions - primarily in the U.S. - and the delayed launch of Littlewoods and new verticals are expected to continue in the short term. While growth initiatives offer exciting potential to offset current revenue pressures, Management has tempered its 2002 targets until further assessment. The first quarter will be profitable, but expected to be the weakest period in 2002. This year's first quarter will be affected by reduced revenue due to the credit card situation, higher expenses associated with the development of bingo and poker and a significant drop in interest income because of declining interest rates and substantial buy back of shares. Expenses will remain high in the first half of 2002 due to the launch of new bingo and poker products and the addition of a Java development team. Offsetting revenue growth is anticipated to contribute materially in the latter half of the year. Management will control expenses to commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with revenue to ensure healthy margin levels. -- First quarter 2002: Revenue projected between $8.5-$9.5 million; net profits ranging $2.0-$2.5 million; net margins at 24-26%; fully diluted earnings per share of $0.15-$0.19. -- Fiscal 2002: Revenue projected between $45.0-$50.0 million; net income between $17.0-$20.0 million; net margins at 38-40%; fully diluted earnings per share of $1.27-$1.49. -- Expenses: Reduce expenses by $2.0-$3.0 million on an annualized basis, implemented by first half of 2002. The current market adjustment from primarily credit cards to cash-funded payment methods will not stem the growing global demand for Internet gaming - an estimated $2.5 billion market today and forecasted to grow to $5.0 billion by 2003. In the short term, CryptoLogic continues to expand non-credit card payment choices for its licensees' players. Recent additions include cash incentives to use checks, instant credit approval for preferred clients and PayPal, a popular electronic payment form used by 12 million consumers. As more users migrate to these cash-funded alternatives, CryptoLogic continues to see weekly improvements. CryptoLogic's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. strategy stays focused on increasing its global reach, particularly in Europe - a thriving thrive intr.v. thrived or throve , thrived or thriv·en , thriv·ing, thrives 1. To make steady progress; prosper. 2. and well-regulated marketplace. The company's international business continues to grow strongly, which has contributed to CryptoLogic's increasing European revenue mix. Littlewoods' pound sterling online casino will further strengthen CryptoLogic's international diversification International diversification The attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns. . The above forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. are based on the company's current expectations and are subject to risks and uncertainties. Actual results may differ materially. Analyst Call A conference call is scheduled for 8:30 a.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ) on Monday, February 14, 2002. Interested parties should call either 1-800-478-9326 or 416-695-5801. Instant replay will be available until February 11, 2002 by calling 1-800-408-3053 or 416-695-5800, passcode 1064286.
CRYPTOLOGIC INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of U.S. dollars, except per share disclosure)
For the
three months ended Years ended
December 31 December 31
2001 2000 2001 2000
-------------------------------------------------------------------
Revenue $11,185 $9,701 $43,550 $34,390
-------------------------------------------------------------------
Expenses:
Software development
and support 6,670 4,714 21,978 16,367
General and
administrative 1,086 844 3,818 3,024
Finance 106 73 332 201
Amortization 136 86 353 227
-------------------------------------------------------------------
7,998 5,717 26,481 19,819
-------------------------------------------------------------------
Income from operations 3,187 3,984 17,069 14,571
Interest income 342 895 2,215 3,254
-------------------------------------------------------------------
Income before income
taxes 3,529 4,879 19,284 17,825
Income taxes (135) 802 1,206 2,340
-------------------------------------------------------------------
Net Income $3,664 $4,077 $18,078 $15,485
-------------------------------------------------------------------
-------------------------------------------------------------------
Basic Earnings per Share $0.28 $0.29 $1.33 $1.18
Fully Diluted Earnings
Per Share $0.25 $0.27 $1.21 $1.03
Weighted average number
of shares 13,262 14,188 13,567 13,103
Weighted avg. fully
diluted no. of shares 14,624 15,398 14,944 15,070
CRYPTOLOGIC INC.
CONSOLIDATED BALANCE SHEETS
As at December 31, 2001 and 2000
(in thousands of U.S. dollars)
2001 2000
ASSETS
Current assets
Cash and cash
equivalents $42,822 $42,696
Restricted cash 16,800 14,000
Reserve with a credit
card processor 144 1,217
Accounts receivable 697 1,435
Income taxes recoverable 408 --
Prepaid expenses and other 768 839
---------------------------------------------------------------------
61,639 60,187
Investments 2,480 1,430
Capital assets 2,949 839
Intangible assets 337 --
Goodwill 1,040 --
---------------------------------------------------------------------
$68,445 $62,456
---------------------------------------------------------------------
---------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $2,704 $2,154
Accrued liabilities 1,389 876
Income taxes payable -- 2
Funds held on deposit 3,263 1,814
---------------------------------------------------------------------
7,356 4,846
---------------------------------------------------------------------
Shareholders' equity
Capital stock 8,720 6,477
Retained earnings 52,369 51,133
---------------------------------------------------------------------
61,089 57,610
---------------------------------------------------------------------
$68,445 $62,456
---------------------------------------------------------------------
---------------------------------------------------------------------
CRYPTOLOGIC INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 2001 and 2000
(in thousands of U.S. dollars)
2001 2000
----------------------------------------------------------------------
Number Stated Number Stated
of shares value of shares value
(000's) (000's)
Common shares:
Balance, beginning of
year 14,079 $6,455 8,974 $3,643
Repurchase of shares (1,377) (444) (490) (162)
Exercise of stock
options 275 1,908 195 1,143
Exercise of Class A
purchase warrant -- -- 5,400 1,831
Exercise of Class C
purchase warrant 160 529 -- --
----------------------------------------------------------------------
13,137 8,448 14,079 6,455
----------------------------------------------------------------------
Series C warrants:
Balance, beginning of
year 160 22 160 22
Exercise of Series C
warrants (160) (22) -- --
----------------------------------------------------------------------
Balance, end of year -- -- 160 22
----------------------------------------------------------------------
Series F warrants:
Issued during the year 30 272 -- --
----------------------------------------------------------------------
Total capital stock 8,720 6,477
----------------------------------------------------------------------
Retained earnings,
beginning of year 51,133 42,175
Net income 18,078 15,485
Excess of repurchase
price of common shares
over stated value
(16,842) (6,527)
----------------------------------------------------------------------
Retained earnings, end
of year 52,369 51,133
----------------------------------------------------------------------
Total shareholders'
equity $61,089 $57,610
----------------------------------------------------------------------
----------------------------------------------------------------------
CRYPTOLOGIC INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001 and 2000
(in thousands of U.S. dollars)
2001 2000
Cash flows from (used in) operating activities:
Net income $18,078 $15,485
Amortization which does
not involve cash 353 227
Changes in operating assets and liabilities:
Restricted cash (2,800) (8,960)
Reserve with a credit
card processor 1,073 (586)
Accounts receivable 813 (1,487)
Income taxes (477) (775)
Prepaid expenses and
other 71 181
Accounts payable 499 591
Accrued liabilities 513 587
Funds held on deposit 1,449 722
---------------------------------------------------------------------
19,572 5,985
Cash flows from (used in) financing activities:
Issue of capital stock 2,415 2,974
Repurchase of common
shares (17,286) (6,689)
---------------------------------------------------------------------
(14,871) (3,715)
---------------------------------------------------------------------
Cash flows from (used in) investing activities:
Purchase of domain name (20) --
Purchase of capital
assets (2,420) (551)
Acquisition, net of cash
acquired of $181 (1,085) --
Investments (1,050) --
---------------------------------------------------------------------
(4,575) (551)
---------------------------------------------------------------------
Increase in cash and
cash equivalents 126 1,719
Cash and cash
equivalents, beginning
of year 42,696 40,977
---------------------------------------------------------------------
Cash and cash
equivalents, end of year $42,822 $42,696
---------------------------------------------------------------------
---------------------------------------------------------------------
Supplemental cash flow
information:
Income taxes paid $1,616 $3,115
Interest received 2,331 3,641
Supplemental disclosure relating to non-cash financing and investing
activities:
Acquisition of
investments -- $350
Issuance of warrants on
business acquisition $272 --
About CryptoLogic CryptoLogic Inc. is the leading software development company serving the Internet gaming market. The company's proprietary technologies enable secure, high-speed financial transactions over the Internet. CryptoLogic continues to innovate in·no·vate v. in·no·vat·ed, in·no·vat·ing, in·no·vates v.tr. To begin or introduce (something new) for or as if for the first time. v.intr. To begin or introduce something new. and develop state of the art Internet software applications for both the electronic commerce and Internet gaming industries. CryptoLogic's common shares trade on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. under the symbol CRY and on the Nasdaq National Market under the symbol CRYP. There are currently 12.1 million common shares outstanding (14.5 million shares fully diluted). For information on CryptoLogic and WagerLogic, the licensing subsidiary of CryptoLogic, please visit www.cryptologic.com and www.wagerlogic.com. CRYPTOLOGIC FORWARD LOOKING STATEMENT DISCLAIMER (networking) disclaimer - Statement ritually appended to many Usenet postings (sometimes automatically, by the posting software) reiterating the fact (which should be obvious, but is easily forgotten) that the article reflects its author's opinions and not necessarily those of the : Statements in this press release which are not historical are forward-looking statements made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , risks associated with competition and other risks detailed in the Company's filings with securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities . These risks may cause results to differ materially from those projected in the forward-looking statements. |
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