Canada's premier gambling software developer and turnkey provider,
Cryptologic scored a thumping second quarter profit despite unsettled
political conditions in the USA and the traditionally slower gambling
market usually experienced at this time of the year.
Releasing the company's second quarter statistics this week, CEO Lewis Rose said that company's global reach and constantly diversifying portfolio of games was responsible for a big jump in second-quarter profit.
"CryptoLogic went head-to-head with warm weather and the World Cup of soccer and won," he told analysts. "In what is typically a slower quarter for the online gaming industry, we achieved record financial results that exceeded our own expectations. We're coming up aces on all financial measures."
CryptoLogic stock shot up $2.63, more than 11 per cent on the news, to $25.58 with a modest 75,756 shares trading hands on the Toronto stock market.
The Toronto-based company, which reports in U.S. dollars, posted a profit of US$8.2 million or 59 cents a share for the quarter ended June 30, up from $4.7 million or 33 cents for the same period last year. It surpassed analysts' average expectations of 49 cents a share, according to Thomson Financial.
Revenue jumped 52 percent to $30.4 million US from $19.9 million.
Rose revealed that Cryptologic's better-than-expected performance was due to strong organic growth in online poker software fees and a particularly strong quarter in online casino software fees. That was driven by the release of new casino games and CryptoLogic's expanded high-margin slot software offerings.
The spring quarter is usually a slow one for online gaming and this was aggravated because the company's licensees had to compete for players' attention with the World Cup in June and early July, particularly in Britain and continental Europe. Online poker and World Cup soccer share similar audience demographics, Rose added.
CryptoLogic's operations in Europe, especially the United Kingdom, have been particularly important considering the adverse anti-regulatory atmosphere in the United States, where 11 people, including the CEO of a big offshore gambling website, were charged in July with conspiracy, racketeering and fraud.
No quick resolution is expected to attempts by the U.S. House of Representatives to introduce legislation prohibiting Internet gambling, Rose noted. Despite that, he said CryptoLogic has no reason to fear U.S. authorities and he has not felt - as have some top executives at Canadian online gaming companies - concern about legal problems on entering the U.S.
"Let's be clear on CryptoLogic's position. We develop software for the Internet casino and poker markets," Rose said. "We do not provide software or services related to sports betting. We do not accept betting transactions by telephone and none of our customers accept sports bets from the United States.
"The ongoing ambiguity in the United States validates CryptoLogic's product focus, global diversification and regulatory compliance, particularly as we invest in initiatives that position our company and our customers for a regulated U.K. market."