Cryptologic Introduces Restructuring Changes in Q3

Software provider cuts costs

According to online gambling software developer Cryptologic, the company is planning to conduct restructuring and cost cutting. This announcement came after the software provider veteran released its Q3 results, including an update on its expanded restructuring program announced on August 12, 2010.

Restructuring highlights where the following:

* Aggressive restructuring measures taken to reduce costs, following the management changes announced on August 12. The management changes applied include: Huw Spiers becoming Group Head of Operations and Chief Financial Officer, and Ian Price becoming Group Head of Business Development.

* Expenses totaled to $9.9 million (Q2 2010: $20.2 million, including $7.3 million of non- recurring charges)

* A 20 percent drop in operating expenses compared to Q2, which resulted from the initial restructuring impact in Q3

* Appointment of a new operational management team, which will deal with hosted casino business

* Consolidation of Cyprus operations into Malta has been completed. The operations on the former have been abandoned.

Regarding third quarter figures, those involve:

* A drop in total revenue to $6.1 million (Q2 2010: $6.7 million)

* Another, slight decrease in hosted casino revenue to $5.6 million (Q2 2010: $5.8 million)

* The trend continues with branded games revenue, which went down to $1.4 million (Q2 2010: $1.5 million)

* $3.7 million of net loss (Q2 2010 Loss: $12.7 million, including $7.3 million of non-recurring charges)

* YTD on September 30, 2010: net cash at $12.3 million (June 30, 2010: $17.4 million), which somewhat results from the cash effect of one-time restructuring costs amounting to $3.5 million.

The company thinks that the effects of the new measures taken in Q3 will be noticeable by the end of the fourth quarter, adding that its total recurring cost base will be further decreased, and efficiency improvements as well as cost-cutting will continue.

Another novelty in the quarter includes fully hosted casino launched by Betsafe.com.

Expressed in figures, the Q3 looks as follows: total expenses dropped to $9.9 million (Q2 2010: $20.2 million, including $7.3 million of non-recurring charges), and operating expenses decreased by 20 percent sequentially to $7.6 million. Branded games revenues went down to $1.4 million in Q3 2010 (Q2 2010: $1.5 million), which was caused by a drop in key licensee’s revenue contribution. However, poker and other revenue amounted to $500 000 ($600 000).

The quarter saw 13 new branded games launched, which increased the number of games to 156 compared to Q2, when the suite consisted of 143 games.

Regarding YTD up to Sept. 30, the net cash, which included cash and cash equivalents and security deposits, reached $12.3 million (June 30 2010: $ 17.4 million). The fact that net cash dropped by around $5.1 million in Q3 can be owed to the cash impact of operating losses of $2.8 million, a decrease in accounts payable and accrued liabilities of $1.8 million, comprising $3.5 million paid in respect of reorganization costs, partially offset by increased jackpot provision and timing of trade payable payments, a decrease in income taxes payable of $0.1 million, a $0.5 million increase in accounts receivable and purchase of capital assets of $0.2 million.

The company’s debt-free trend is continued.