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What have been the biggest breakthroughs at CryptoLogic over the past year?
It has been a year full of positive change for CryptoLogic, where we have refined our strategy and positioned the company for future success within the industry. We have become much more active in terms of announcing to the gaming world that we are “open for business” and offer a number of flexible solutions to allow customers to access our best-in-market casino software.
It’s our goal to have as many of our best-in-class games live at as many top-tier operators in the industry as possible, and in 2008 we demonstrated that we could achieve this goal through flexibility and numerous channels of distribution. While our primary business model is still to offer a full turnkey casino solution, this year we proved our flexibility by offering sets of games to the likes of 888 and PartyGaming that could be integrated directly into their proprietary software, and also by reaching agreements with Orbis and GTS to offer our top games through their platforms. This flexibility and the unmatched quality of our casino software have resulted in our signing more than 10 new customers, which will generate significant results for the company in 2009.
What has been the biggest hurdle to overcome?
It has been a slow process for the company to move from an organization that focused on offering full turnkey casino and poker solutions to a very small number of customers, to an organization that is focussed on the provision of casino and branded games to as many top-tier operators as possible. This strategic redirection has resulted in significant changes within the organization but has left us exceptionally well placed to grow in this challenging economic time. It also took quite a shift in mindset for the organization to become comfortable cooperating with companies that have traditionally been competitors, such as 888, PartyGaming, and GTECH, but we believe that such progressive collaborations will be of fundamental importance to us moving forward. CryptoLogic has taken radical steps to focus on our core strengths as a developer of exciting online gaming content. Our streamlined operations, lower operating costs and commitment to creating compelling customer experience, together with a highly profitable build-once-sell-often model, provides a solid springboard for long-term growth.
As much as you can disclose, what milestones are you striving for in 2009?
We are hugely excited at the prospects for CryptoLogic in 2009. We intend to:
- Reduce total operating costs approximately $13 million on an annualized basis by the end of Q2 2009.
- Outsource our poker network through a strategic partnership with the GTECH Corporation. This partnership will improve poker-room liquidity for CryptoLogic customers, while eliminating the costs of operating a stand-alone network.
- Grow through our Internet casino business, and through the development and licensing of branded games. Recently contracted customers including 888.com, PartyGaming and GigaMedia are expected to generate new revenues of at least $8 million in 2009.
- Continue aggressive expansion of our casino business through licensing contracts, with a robust new business pipeline for 2009.
- Return to profitability and cash generation from Q2 2009.
- Generate full-year cash generation post restructuring of $11-$13 million.
- Generate net profits in the range of $9-$10 million.
- Leverage our industry leadership in the development and deployment of casino games by introducing the CryptoLogic Centre for Innovation, where customers, partners, universities and others can participate in defining and guiding the future of e-gaming.
- Unveil our new branding program and logo based around “extraordinary e-gaming innovation” with the production of the new annual report due in May.
What sets CryptoLogic apart from its competition?
Simply speaking, CryptoLogic offers the best casino games in the industry. The fact that we have won Gambling Online Magazine’s award for top casino software for four consecutive years is a testament to this fact. We offer the best collection of branded games in the industry, from our Marvel slots, to casual game favourites such as Bejeweled and Cubis, to iconic characters like King Kong and video game legends like Street Fighter II; our branded games offering is unmatched and will grow dramatically in 2009. When one adds to this the fact that we offer over 20 new and unique games per year, and a fantastic collection of jackpot games such as Millionaires Club, which paid out the highest jackpot win in online gaming history, you can see why we have decided to focus on online casino as our core business. Further, we are hugely flexible in the ways that we can deliver games to potential partners. We can offer a full turnkey solution in download and non-download, we can integrate a full solution into a customer’s back office, or we can provide individual sets of games—we will adapt our offering to ensure that we meet the unique business needs of our customers.
Are there any plans to get into poker again?
Our new strategy is to achieve long-term growth, sustained profitability and strong cash generation by adopting a radically new business model that focuses on CryptoLogic’s successful casino business and the development and licensing of the company’s highly acclaimed software. In November 2008, the company announced the outsourcing of our hosted poker business by entering into a strategic partnership with GTECH Corporation’s International Poker Network. The move gives CryptoLogic’s poker licensees and players access to a larger network with a combined average of 15,000 active players. The transfer of poker licensees and systems to the GTECH network is expected to be completed by the end of the first quarter. The company will continue to provide a full-service offering for its licensees through the GTECH network and receive ongoing revenues from its transferred customers.
Justin Thouin, VP, Product Management and Business Development, CryptoLogic
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