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Cryptologic Releases Q1 Results

By: Joe Valentino, Thursday May 12th 2011
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Normally online casino players would not be much interested in financial results of software providers, particularly quarterly results. However the case of Cryptologic is different. Cryptologic is an industry pioneer that has been going through a bad patch. There has been no new game release since November 2010 when Sushi Express and Noughty Crosses went live. Some Cryptologic powered online casinos like InterCasino are very popular as a number of Cryptologic games at other online casinos. Therefore players are keen to get whatever information they can about Cryptologic.

Hence the press release from Cryptologic following its Q1 2011 results drew a lot of attention. The total revenue increased by 9% to $6.0 million as compared to the Q4 2010 figure of $5.5 million. The increased contribution came from both hosted casino revenue and branded games revenue. Though there was an increase in the total expenses as well, the loss for this quarter was reduced to $0.6 million from the Q4 2010 loss of $0.9 million. The return to revenue growth is encouraging and the report said that "the Board continues to focus on driving revenues further while managing costs tightly".

The report mentioned one area of concern. The deployment of branded games to outside online casinos is not up to expectation. Only nine branded games went live in the quarter taking the total number of games rolled out by licensees to 179 from 170 at the end of the fourth quarter. Cryptologic is working with its licensees to accelerate the deployment of the branded games and to enhance player activity on games launched previously.

In the previous financial report delivered in March 2011 Cryptologic had referred to a dispute with a significant supplier of games leading to a termination of the agreement. The supplier was not named. Fortunately the two have managed to forge an agreement and a new memorandum of understanding was signed that will maintain the two parties' commercial relationship.

Unfortunately Cryptologic has not been as lucky in its dispute with the brand licensor. Again, this brand licensor was not named but reading between the lines it is evident that the party being referred to is Marvel. The current report states that in May 2011 the brand licensor reaffirmed its position that the brand license agreement is terminated. Since an amicable resolution has not been possible Cryptologic intends to pursue litigation in order to protect its rights.

The online casino industry was hoping for an update on the strategic review being conducted by Deloitte Corporate Finance. However no new information was provided. The report merely stated, "The strategic review is ongoing and further announcements will be made as and when appropriate." Online casino players must also have been disappointed in not seeing any mention of Amaya, which has bought a significant volume of Cryptologic stock.

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