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Cryptologic Inc. Releases Financial Results Shows Drop in Profits

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Gaming software producer CryptoLogic Inc. (TSX:CRY) said Thursday its fourth-quarter profit dropped 70.6 per cent to US$1.7 million in its first report reflecting financial performance since the U.S. government declared a ban on online gambling.

For the ended Dec. 31, the company's earnings were equivalent to 12 cents per diluted share, down from $5.8 million or 43 cents per share, in the same period last year.

The quarter was impacted by $1 million in reorganization costs for the shift of its headquarters to Ireland.

Revenue was $19 million, down from $25.1 million in the comparable period.

However, CryptoLogic posted a record annual profit of $24.8 million and revenues of $104 million.

The results come after the U.S. government passed the Unlawful Internet Gambling Enforcement Act into law on Oct. 13, effectively banning online gambling in the U.S.

CryptoLogic said the short-term impact on revenue and earnings was "heightened" by the new law, adding that the fourth quarter is consider its strongest of the year.

But the company added that since its major focus was on Europe, even before laws changed, the impact was "less serious" than for some competitors.

"While 2006 was a challenging year for the industry, it was another record year for CryptoLogic - and we enter 2007 with both focus and momentum," said Lewis Rose, CryptoLogic's president and CEO.

"We've launched five new customer sites since December, and have three more in the queue - including two for Holland Casino, CryptoLogic's first government-owned customer."

Cryptologic shares droped 59 cents to $29.41 in morning trading on the Toronto stock market.

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