Cryptologic Reports Annual Results

Published on: March 22, 2011 

The leading online gaming software provider Cryptologic announced its financial results for the full year 2010. The losses have reduced from the 2009 level of $35.5 million but are still significant at $20.4 million for 2010. The main reason for the reduction in losses has been given as severe cost cutting and restructuring measures adopted by the company during the year. Cryptologic pointed out that these cost cutting measures were put in place only in August 2010 and therefore their effect is only partial. Costs would decline very significantly in the full year working of 2011. The competitive trading conditions in 2010 also contributed to the poor results.

Cryptologic also highlighted some of its non financial achievements, which would be of greater interest to online casino players. Cryptologic has shifted its Cyprus and a majority of its United Kingdom operations to Malta. In 2010 Cryptologic has signed several licensing deals for its branded games. The number of branded games now covered by such deals stands at 170 against 66 at the end of 2009. Cryptologic also launched a new gaming package - Instant Click.

The report gives a breakdown of the revenue sources. The hosted casino segment continues to be the most important. This comprises operators who run online casinos on dedicated Cryptologic platforms without offering games from other software providers. The revenue from this segment has been declining in 2010. It was $5.8 million in Q2 and reduced to $4.9 million in Q4. Cryptologic reported that this was on account of a lower contribution from a major licensee.

The second revenue segment is branded games. This consists of revenue from the games licensed to online casinos operating on other software. Revenues from this segment remained flat at about $1.4 million a quarter throughout the year. The reason given is that new licensees launched Cryptologic branded games at a slower pace than expected. Efforts are on to help them increase the frequency of games going live. The contribution from the poker segment was nominal.

The report also refers to two issues with significant legal potential without naming the parties involved. A significant supplier of games to Cryptologic had served a notice of arbitration and the agreement with this supplier stands terminated. However, discussions are going with the aim of reaching reconciliation. If the reconciliation does not take place then arbitration hearings are likely to proceed later in 2011. In February 2011, a brand licensor terminated the agreement between the two companies, claiming that Cryptologic had breached the agreement. Cryptologic management believes there is no breach that warrants termination and considers the agreement to be in force.

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