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Cryptologic Limited
1999 4th Quarter and Year End Results Conference Call
February 22, 2000 - 3:30 p.m. EST
Operator: Good afternoon ladies and gentlemen, and welcome to the Cryptologic Limited's 1999 fourth
quarter and year ended December 31st, 1999 results conference call. I would now like to turn the meeting over
to Mr. Andrew Rivkin, President and Chief Executive Officer of Cryptologic Limited Please go ahead Mr. Rivkin.
Andrew Rivkin: Thank you everyone for joining us this afternoon. My name is Andrew Rivkin. I'm the President and CEO of
CryptoLogic. Here with me today are Mark Rivkin, COO and Executive Vice-President; Jenny Solursh, Senior
Vice-President; Harvey Solursh, Chief Financial Officer; Nelson Lee, Director of Finance; and Nancy Chan-Palmateer,
Director of Communications.
I'll begin the conference call by first highlighting our 1999 fourth quarter and year end financial results,
then reviewing key developments of the past year as well as giving you a sense of our future outlook.
Afterwards, we'd be happy to take any questions.
We're very proud of our continued strong financial performance. In the fourth quarter period ending
December 31st, 1999 our revenue increased 33 percent to $8.6 million compared with $6.4 million in the
same quarter last year. It's important to note that all our results are reported in U.S. dollars. We
posted net income of $5.5 million versus $6.2 million in 1998, but net income from continued operations
rose nine percent over the same period in 1998. As a result, our basic earnings per share in Q4 1999
were $0.63 compared with $0.73 per share in 1998. On a fully diluted basis, that would be $0.37 per
share for the fourth quarter compared with $0.40 in the same quarter 1998. Just for edification, in
1998, the company had a recovery of a receivable totaling US$2.5 million for the year and $1.9 million
was recovered in the fourth quarter.
For the 1999 year, our total revenue rose 43 percent to $32.7 million and that's up from $22.9 million in 1998.
Net income increased 23 percent to $20.6 million compared with $16.7 million last year, but net income from
continuing operations for the year rose 40 percent over 1998. Therefore our basic earnings per share in
fiscal 1999 were $2.40 up from $1.99 in 1998. Fully diluted earnings per share were $1.35 compared
to $1.10 last year. As you can see, CryptoLogic continued to generate great profit margins, which have
exceeded 62 percent in 1999.
As well, we continue to drive positive operating cash flow generating $21.8 million in 1999 up from $13.3
million last year. This added to our strong cash position, which amounted to $46 million at the end of the year.
As you are all aware, we filed for listing on NASDAQ and we are waiting their response. In 1999, we
further strengthened our global position as a premiere software provider to the Internet gaming industry.
Consistent with our international diversification strategy, our wholly owned subsidiary IOLL added
three new licensees last year. Most notable was William Hill, one of the largest land-based gaming
companies in the U.K. with strong brand recognition and gaming market experience. William Hill went
live on January 12th, 2000 and interest in their virtual casino has exceeded our expectations.
We also began certification of our gaming software in Australia. And as announced on February 15th this
year, we were very excited to sign Jupiters Limited, a major land-based casino operator in Australia.
Our proprietary technologies continue to lead the industry in delivering the best online gaming experience
on the web. Enhancements to our Internet gaming software and new e-commerce technologies are expected for
release in 2000 and will enable CryptoLogic to advance and maintain our leadership position.
With our revenue and earnings growth, processing volumes and user base, it is clear that we have the
largest market share worldwide. Our growth strategy going forward will see us continue to establish
strategic relationships with first-rate brands in large markets including Australia, Asia and Europe.
William Hill and Jupiters are examples of the success we've had to date.
The Internet gaming and e-commerce industries are two of the fastest growing technology sectors in the
world. We believe we have demonstrated a winning formula that will enable us to continue to be a market
leader delivering rewarding results to all our stakeholders. I'm now pleased to open the floor for questions.
Question and Answer Session
Operator: Thank you, Mr. Rivkin. We will poll for questions today using our quick
queue-polling feature. If you have a question, please press one on your touch tone telephone.
If you are using a speakerphone, you may need to lift the handset first followed by pressing one.
And should you wish to cancel your question, please press the number sign. Please press one at this
time if you do have a question. There will be a brief pause while the participants register for their
questions. Thank you for your patience. And our first question will come from Bob Johnson who's a
private investor. Please go ahead.
Bob Johnson: Yeah, hi Andy, how are you doing?
Andrew Rivkin: Good. Thank you.
Bob Johnson: I'm wondering what other products you have in the pipeline, you know,
some of your competitors have sports books and horse racing and you know, coming out with instant
play games, Java games, that type of thing. What does CryptoLogic have that is in the pipeline
that we can expect to see in the future?
Andrew Rivkin: Well I think we've got, you know, even today we've got a very
comprehensive product offer and we actually support lotteries as well. In addition to being the
largest provider of Internet casino gaming software, we support lotteries. We support sports betting.
We support horse racing as the product sits today. You know, we're very excited about the new
functionality that is built into Version 4.0 which includes things like bingo, poker, jackpot games,
tournament, non-casino games. I just think that, there's great new functionality on the horizon for
CryptoLogic and I think, we will continue to maintain our lead in the area of software development
and technology with that release of version four.
Bob Johnson: Okay. Thank you. One more question. What percentage of your revenues
do you believe come from your largest licensee?
Andrew Rivkin: I'm going to ask Harvey Solursh, he's our Chief Financial Officer
to take a look. There's been some disclosures of that in the annual.
Harvey Solursh: Our largest licensee brings in about 30 percent of our revenues.
Bob Johnson: Thirty percent?
Harvey Solursh: Yes.
Bob Johnson: And one more question for you. As you're probably aware, there's a trial
going on right now in the U.S. It's a federal charge against an individual for accepting wagers via
the Internet. How do you anticipate the outcome of that to impact your business and what percentage
of your business is currently from the U.S?
Andrew Rivkin: I don't think that case really will have any impact with respect to
the business of CryptoLogic. I think right now our revenue from the U.S. really from end users of
our licensees is approximately 65 percent, that's obviously dropping. Our strategy of international
diversification, I think, is, you know, it's just in its early stages but I think it will be extremely effective.
Bob Johnson: Yes, so what you're saying then is that you, you're going to continue
to allow bets from your licensees in the U.S. regardless of whether or not the federal government
deems it illegal?
Andrew Rivkin: Are you making reference to the Kyl bill?
Bob Johnson: Well the Kyle bill and/or this current trial going on where they're
attempting to apply the Wire Line Act to the Internet.
Andrew Rivkin: It's very difficult for me to speculate on that area. It's really
up to the licensees to make a determination as to where they will be accepting wagers. My estimation
is, from speaking to our licensees at this stage; this particular case will probably not have an
impact on where they're accepting wagers. This particular case I believe is highly focused on sports betting.
Bob Johnson: Okay. All right. Thank you very much.
Andrew Rivkin: You're welcome.
Operator: Thank you, Mr. Johnson. And our next question will come from Andrew Smith, also a
private investor. Please go ahead.
Andrew Smith: Excellent year in 1999, folks. As an investor, I'm very happy. A quick
question in regards to the recent contracts signed with William Hill and Jupiters. I was just wondering
are there any exclusivity provisions whereby CryptoLogic cannot sign the competitors of both these licensees?
Mark Rivkin: In the case of William Hill, there's a nine-month exclusivity with
approximately seven of their competitors.
Andrew Smith: Okay. And then with Jupiters?
Andrew Rivkin: With Jupiters, there's no exclusivity. The William Hill exclusivity
does not preclude us from getting into the U.K. market because they're basically excluding us from
doing business with their perceived competitors. So there are still relationships to be built in
that part of the world. I think we'll be able to cover the United Kingdom in spite of the fact that
we did grant some exclusivities there. But I don't believe, my expectation is, although we're pursuing
other first-rate brands around the world, probably there will be no future exclusivities granted.
That's my expectation.
Andrew Smith: Okay. And I just wondered if you could further comment on, earlier you
mentioned that the William Hill casino has exceeded your expectations. I just wondered if you could
comment on what the expectations were and by how much they've exceeded in the first month and a half of operation?
Andrew Rivkin: No, I just think that we're optimistic at the number of downloads we've seen,
the number of users using the technology. I can't comment specifically. We never comment specifically on
any of our licensees' businesses.
Andrew Smith: Any idea what your expectations are in terms of user base growth? I mean, you
had some impressive growth from 1998 to 1999 where we're sitting at almost half a million users. I wondered
what you expect to grow that over the next year or two years?
Andrew Rivkin: Well I think that the growth rates that we've managed to support of 40 percent
year over year are the types of numbers that we think are reasonable and those are the kinds of numbers we're
looking to achieve in future years. William Hill, Jupiters and future relationships with first tier international
brands could help further our ability to bring growth to CryptoLogic.
Andrew Smith: Okay. And one last question. In the FAQ's on the web site, you've mentioned
consolidation in the industry. I was wondering if you could elaborate on that.
Andrew Rivkin: Well I think we're definitely seeing some of that. We eluded a little bit
in 1999 to possibilities for consolidation. I think that we will definitely see some consolidation in
the year 2000. The Bear Sterns' report indicated that there are 550 brands out there in the Internet
gaming world. I don't think that many of the smaller ones, at the sort of the end of the spectrum of
the 550 brands that are out there will be able to survive in the long run. I don't think they're
generating positive returns. And I think that there will be good opportunities for consolidation.
And I think CryptoLogic has a very good opportunity, first of all because we've got cash, second of
all because we've got a low cost operating structure. Perhaps the lowest cost of all of providers
there is a very good opportunity to be the consolidator at the end of the day.
Andrew Smith: Okay. And just one more follow-up. In regards to the normal course issuer
bid, I'm wondering where that's at. I didn't see anything in the press release.
Andrew Rivkin: It's still in place. We did purchase stock in..45,000 shares were
purchased in 1999. Nothing in 2000 as of yet. But it's still in place and we still have opportunity
to purchase more stock on a go forward basis.
Andrew Smith: Okay, thank you very much.
Andrew Rivkin: Thank you.
Operator: Thank you, Mr. Smith. Our next question is from Orin Hirshman from Adam,
Smith and Company. Please go ahead.
Orin Hirshman: Thanks. Congratulations on the year's progress.
Andrew Rivkin: Thank you.
Orin Hirshman: Can you talk about, for example, two items? The competition a little bit.
Whether you're seeing more than you have over the last year or two. And also what's making the, what's the
decisive factor in terms of winning the competition for example at William Hill?
Andrew Rivkin: Well I think that there's actually a number of factors that come together to
enable CryptoLogic to secure these types of relationships. First of all, we've got a history, a long history
of being able to handle very large volumes of transactions and that's what these major operators are looking
for. We've got the financial resources to be able to do business on this scale. We believe we've got a
significant lead on the technology side and when a first class brand looking to get into the Internet gaming
business, are looking to use the best software that's available. That's very important to their strategy to
maintain and sort of improve upon their land-based brands. And that's what CryptoLogic brings to the table.
Obviously there are other companies that are going out to make proposals to these companies but we've been
very successful so far in bringing in these relationships that I think are perhaps the best in the areas that
we've chosen to do business. So Australia, the United Kingdom and the European market, I think we're very
well covered by the two licensees we've selected so far. And I think we'll continue to be able to bring in
the first and best operator in the other important jurisdictions around the world. Like Asia, for example.
Orin Hirshman: And my last question and a general question on Australia, the qualification
process there, the approval process. How long for example, do you estimate between let's say signing up
Jupiters and actually being able to (inaudible) because of their process?
Andrew Rivkin: Well that process actually we will be putting a version of software up for
Jupiters in probably four weeks. And that'll be a play for fun version. And that version, that's actually
subject to regulatory approval as well, but I think we'll be able to get the regulatory approval for the
play for fun version fairly quickly. They will be able to start capturing customers immediately upon
releasing that version just like William Hill did when they released their first version of CryptoLogic
software in December of, of 1999. Probably they will be operating under the play for fun regime for six
months while the software is certified and the license applications are reviewed. I just can't give you
a better estimation of time because again, it's another process that the agenda is really driven by the
regulators and not by CryptoLogic and Jupiters. Although, Jupiters has a great reputation in Australia
and will be able to facilitate that I think better than any party down there.
Orin Hirshman: Okay. Thank you very much.
Operator: Thank you, Mr. Hirshman. Our next question comes from Tom Catlett from Salomon,
Smith and Barney. Please go ahead.
Tom Catlett: Yes, did the company incur any unusual expenses in the fourth quarter and
the reason I'm asking is I'm wondering about the difference in operating income growth from continuing
operations versus the growth we saw in the top line?
Andrew Rivkin: Yes, I think that in the fourth quarter, there were a number of growth
oriented expenses which we incurred. They relate to professional fees, NASDAQ, software development
fees for version 4.0 and some related to securing these new licenses. So I think that there's a part
of the increased expense in the fourth quarter which we may not see in 2000. But I believe that the
dividends that we will see as a result of incurring those expenses will be great.
Operator: Thank you, Mr. Catlett. Did you have a further question?
Tom Catlett: No, that's it. Thank you.
Operator: Thank you, sir. And our next question comes from Ross Peterson who's a shareholder.
Please go ahead.
Ross Peterson: Hello Mr. Rivkin. Congratulations once again on a great quarter and a great year.
If I could just follow up on a couple of specific points. One, if you could just follow up from the last
conference call on the 26th of October around the NASDAQ listing where you mentioned back in October that
you had received another deficiency list and you would be responding to that. I was just wondering where
that whole process is at this point?
Andrew Rivkin: The last deficiency list we received in December. It has been responded
to in the ordinary course. We're just awaiting their response. We've got very little control over the
time frame as you know. NASDAQ actually drives the schedule. But we have proceeded in the ordinary course
and NASDAQ has not come back and highlighted anything out of the ordinary.
Ross Peterson: Good. Okay. And if I may just as well follow up on the matter of a stock
split or the potential for stock split. I believe that the company has the authority on a four for one
stock split and I was just wondering if you could offer any comments around the possibilities or the desirability
of going that route?
Andrew Rivkin: We actually don't have any immediate plans for doing a stock split. The share
price is now showing some good strength and the board will, I believe, continue to review that issue, you know,
as time goes by. But at this time, there are no immediate plans for a split.
Ross Peterson: Good. Good. And one other, I guess I'm not sure if it's a comment or if you
can comment on it, is just I see that the company is generating a very nice stash of cash here, something in
the range of $2 million a month and I was just wondering if the company had any thoughts as to what it might
want to do with this nice accumulating asset?
Andrew Rivkin: I probably talked about this in the conference call last quarter. There are
perceived opportunities for consolidation within the industry. Also for other strategic investments,
I think we've been very successful in the investments we've made so far. There are other opportunities
for strategic investments which would leverage our core businesses so we're going to basically, at this
stage hold on to that and use it as those opportunities present itself. We just think that there's some
really good potential on the horizon and we want to be ready with that cash when the time comes.
Ross Peterson: Great. Thank you very much for your time and the best of luck for the next quarter.
Andrew Rivkin: Thank you.
Operator: Thank you, sir. And our next question comes from Mark Matuschka from NGM. Please go ahead.
Mark Matuschka: Yes hello. So thank you very much for the opportunity to ask some questions.
I had the chance to meet Mr. Mark Rivkin and Ms. Jenny Solursh two weeks ago in London. So best regards.
I have two questions I'd like to ask. First question is, is it correct if I would say that if I deduct the
sales of these Gamesmania company from the fourth quarter's turnover that there's rather few improvement at
all in the turn over.
Andrew Rivkin: In terms of what are we talking about here? The fourth quarter versus the third quarter?
Mark Matuschka: The fourth quarter of '99 to the fourth quarter of 1998.
Andrew Rivkin: No, the Gamesmania, there is actually a line on the press release that talks
about Gamesmania which amounted to $800,000 in the fourth quarter. That is not the total revenue in the
fourth quarter '99 was $8.6 million. The total revenue in '98 in fourth quarter was $6.4 million. Those
numbers are exclusive. They don't include any Gamesmania related revenue. There was a 33 percent increase
year over year in the fourth quarter exclusive of any Gamesmania related revenue.
Mark Matuschka: Okay. Thank you. The second question is so what I appreciate a lot is that over
the years, your general cost increased by about 24 percent whereas the turnover increased by 43 percent which
is quite excellent. Just one question I have especially for the last quarter in 1999. This is a bit high,
this $608,000 in comparison to the last quarter in 1998. Were there special expenses in this last quarter?
Andrew Rivkin: Yeah those were the growth related expenses that we talked about. There was
a bulk of that of one-time expenses related to professional fees, NASDAQ, and software development related
to version 4.0 and the new licenses. Those things happened in the fourth quarter. They were one time, but
I believe that they'll pay significant dividends in the future. We may obviously if we're going to get the
opportunity to sign new licenses of the quality of Jupiters and William Hill, we may be making investments
of that kind over the year 2000. But I believe that those investments are very small with respect to the
potential that those relationships bring to the table.
Mark Matuschka: Okay. So thank you very much for your comments.
Operator: Thank you, Mr. Matuschka. And our next question will come from John Britton from
Select Equity. Please go ahead.
John Britton: Yes. Hello. Good afternoon. I had a couple of questions. I wonder if you
could give some quarterly number of users as you did for the year end amounts. Do you have those available
for the first, second or third quarters, the number of users that you have?
Andrew Rivkin: No, I'm sorry I don't have that information. Actually we don't really disclose
that information.
John Britton: Okay. Of the $2.8 million of development expense, can you break out what was
related to version 4.0?
Andrew Rivkin: Again, it's actually impossible for us to really separate what's related to
version 4.0 and what's related to ongoing development. There's some version four functionality that has
appeared even in our version 3.0 technologies. Some of the stuff that we've been able to separate and
release is out there in version 3.0. So it's impossible for us to break down.
John Britton: Okay. Okay. When is version 4.0 going to be released?
Andrew Rivkin: I think that probably we're looking at April as the target date for that.
John Britton: Okay. Were there any other specific, I think you mentioned that there were.
Can you quantify what the specific expenses related to ramping up for William Hill were in the quarter?
Andrew Rivkin: No, I can't. I can't break down the amounts. Just in general what the
strategies were.
John Britton: Fair enough. What about the revenue side? What do you have an expectation
of William Hill's contribution for the first quarter? Do you expect that to make that a notable contribution or not?
Andrew Rivkin: It's actually impossible to tell because William Hill is the first brand
with the kind of credibility that they have to get into the Internet gaming business. You know, we just
don't know. We're optimistic when we sign the deal that land-based brands and Internet gaming would be a
winning combination and I think our expectations have been exceeded. Where it's going to go from here is
very difficult to predict.
John Britton: Okay. As you guys model your business over the next couple of quarters,
do you expect the operating profitability to be about flat with what it was in the fourth quarter or was
that a one time lower number? Do you have a sense.
Andrew Rivkin: No, I think that we talked about this a little bit before. I think the
fourth quarter was a one-time blitz. We've managed to maintain operating margins of 62 percent.
I believe we managed that in 1998 and 1999 as well. And I think that is what we're striving to continue
to achieve on an ongoing basis. So I think you'll see the fourth quarter with respect to margins was a
sort of one time down turn and I think that will strengthen in 2000 again. Just, there were things that
we felt were important strategically and would pay big dividends in 2000 we felt we needed to do in the
fourth quarter.
John Britton: Thank you.
Operator: Thank you, Mr. Britton. And our next question is a follow up question from
Andrew Smith who's a private investor. Please go ahead.
Andrew Smith: In the press release you mentioned here under innovation at its best,
that CryptoLogic has expanded the concept and functionality of its next generation of e-cash technology.
I wonder if you could sort of let the shareholders know what the strategy is moving forward for that application.
Andrew Rivkin: Well we expect a version to be released, the new version of e-commerce
to be released in 2000. Right now an independent board committee is pursuing the best way to spin out
this wholly owned subsidiary. They are also taking into account how much money they may raise as an
independent company and what type of interest CryptoLogic could retain. So all these question are being
considered by an independent board committee and I expect that we'll have the answers in the very near future.
Andrew Smith: So who are going to be the target users for the e-cash technology?
Andrew Rivkin: You're talking about the target customers?
Andrew Smith: Yeah, the target customers, sorry.
Andrew Rivkin: I think you'd say sort of medium sized Internet businesses.
Andrew Smith: Okay.
Andrew Rivkin: There's also a lot of tremendous end user functionality that I think will
allow end users to just sort of the average individual to get great benefit out of using the technology as well.
So but we market it to sort of medium sized Internet businesses as well directly to the end user.
Andrew Smith: Okay. Thank you.
Operator: Thank you, Mr. Smith. And our next question comes from Jamie Rome from Wellington
Management. Please go ahead.
Jamie Rome: Hi. I guess the question was somewhat posed by the previous question, but if we
could elaborate a little bit more on the e-cash products. I'd be interested in hearing maybe who you perceive
as a top couple of competitors or if you could illustrate where we might look to see a company that you would
look to emulate in this area, something that has done very well, if not directly as, at least involved in this space.
Andrew Rivkin: That's a bit difficult to point to, you know, sort of a competitor who's
done well in the areas that we're going to be attacking. I believe one of the strength that we believe we've
got with our e-commerce technology is that we have some unique functionality that doesn't exist in the market
place. So the benefits that we think this technology brings is there's things there that can't be done
elsewhere. And we're hoping that the market will have a great need for that functionality. So that's
sort of what we're looking for.
Jamie Rome: Could you elaborate a little bit on what the unique functions that nobody else
have and how unduplicable they might be? And does it really make sense for you to partner with somebody
stronger in order to deliver the product and distribute the product?
Andrew Rivkin: Well I think what we're looking at now, because our interests are in Internet
gaming and we were a market leader there. We've got this great technology which is sitting in a wholly owned
subsidiary. We're looking for our independent board committee to effectively separate these two entities and
really, it will be the new entity which will have access to its own capital to really move forward with this
technology.
Jamie Rome: Highlight timing on that?
Andrew Rivkin: You know, we're hoping in the next three or so months that we'd be able to
have a structure in place to go ahead and do this.
Operator: Thank you, Mr. Rome. Did you have a further question?
Jamie Rome: No, that's all. Thanks.
Operator: Thank you, sir. And our next question will come from Rob Pitts from Steadfast
Financial. Please go ahead.
Rob Pitts: Hi. I'm going to try another William Hill question. I wonder if you could
tell us about the first month for William Hill as it compares to the first month in the ramp up rate of
revenues at your current largest customer?
Andrew Rivkin: Yeah, I just can't, we're supporting both those licenses. They're
competitive entities. I just can't go into specific details on what are individual licensees do. We're
actually precluded from doing that as part of the relationship we have with all our licensees. So we never
really comment on the individual success. In general terms, I'm very optimistic as to what they'll be able
to achieve. I just can't be anymore specific than that.
Rob Pitts: Okay. I wonder if you could then tell us as William Hill ramps up over the
course of the next year, if they're going to have an effect on the 63 or 62 percent operating margin?
In other words, is the contract with them at similar margins to existing customers.
Andrew Rivkin: The contract is effectively the same business model that we've been
accustomed to with our existing licensees. I don't think it's going to have any negative impact on our
operating margins at all. It's potentially, if they do big numbers, it might have positive impact on our
operating margins.
Rob Pitts: Okay. Thank you.
Operator: Thank you, Mr. Pitts. And our next question is also a follow-up question from
Bob Johnson who's also a private investor. Please go ahead.
Bob Johnson: Hi. Can you tell me if your next version of the software is going to have any
Java or software games?
Andrew Rivkin: Not the next version of the software, but I believe version 4.0 is pure
client server application. After version 4.0 is released, we have a number of Java projects which are sort
of a sub-set to version 4.0, which I believe will be released in the year 2000 as well. So it won't be a
specific sort of Java release of the whole application but sporadically throughout the year 2000. My belief
is we will be releasing components in Java as well.
Bob Johnson: Hm hm. As a shareholder, I was kind of disappointed to hear that you did not
win the Liberia contract. Did you have any insight as to why that occurred?
Andrew Rivkin: Yeah. I think we've got a very specific strategy on a go forward basis and
that is to do business with the absolute first best-in-the-class land-based gaming operators. We did not
make an application to the Liberian government. They're just not an existing operator, an existing gaming
operator with a brand name that fits into our model.
Bob Johnson: That's it. Thank you very much.
Operator: Thank you, Mr. Johnson. And our next question is also a follow-up question from
Andrew Smith who's also a private investor. Please go ahead.
Andrew Smith: My last question, I promise. In regards to a press release issued by Jupiters,
one of the individuals mentioned that Jupiters would be akin to a 50/50 partnership with CryptoLogic. I wonder
if you could comment on that.
Harvey Solursh: Actually, it said joint venture.
Andrew Rivkin: I'm not sure that that relates to the contract or the agreement that's in place
between the two parties. I think that is basically our business philosophy is to work together with the land-based
brand and help build their Internet brand. That is, we're working together to build these terrific brands on the
Internet. And that's where I believe that comment came from.
Andrew Smith: Okay. Thank you.
Operator: Thank you, Mr. Smith. Once again, if anyone else does have a question, please press
one at this time. And our next question comes from Larry Glaser from Scotia McLeod. Please go ahead.
Larry Glaser: Good afternoon. Are you considering any acquisitions with other companies that
are in the same industry that you're serving right now?
Andrew Rivkin: Yeah, I think that at this particular moment, we're not. We have in the past
looked at other entities in the same industry. We will, as I said, I believe there will be consolidation
opportunities in the year 2000. That's one of the reasons why we've got that cash sitting around. I think
that there will be opportunities within both the industry for our licensees and also for us with potential
software suppliers. So although we're not looking this instant, I believe there will be opportunities that
will present themselves.
Larry Glaser: Thank you.
Operator: Thank you, Mr. Glaser. And our next question is from Richard Chaffe from Chaffe
Research Capital. Please go ahead.
Richard Chaffe: My question is could you update us on the status of the Kyl legislation and
how you see it going through this year?
Andrew Rivkin: Yeah, right now the future is uncertain. There continues to be strong
opposition to its passage. Both the Senate and the House of Representatives have to approve the bill before
it can become law. The Senate has approved the bill. In the House the bill is still awaiting action by the
Judiciary Committee before it can be voted on. The Judiciary Committee is not expected to review the legislation
until mid-March. The bill may change significantly or be dropped before it becomes law so it's really difficult
to determine the outcome of the bill or the incumbent, the impact that the bill might have on an on-going basis.
So basically that's where it stands. In the Senate it's been passed. It's still waiting for review by the
Judiciary Committee in the House. So it can't go to the House floor until the Judiciary Committee is done with it.
Richard Chaffe: Thanks very much. In other words, it's more of the same probably for the rest
of the year.
Andrew Rivkin: Well I, I mean it's been around, you know, it was in a similar state last year.
I don't know, again, I can't predict the future. I don't know what's going to happen this year. But the answer
is it is sort of spinning around in the House now at the committee level and until they're done with it,
you won't see it on the House floor.
Richard Chaffe: Thanks very much.
Operator: Thank you. And our next question is a follow-up question from Mark Matuschka
from NGM London. Please go ahead.
Mark Matuschka: Yes, sorry, I have one more question to ask. Yeah. Actually you
said that you're very happy about the performance of the share price so it's improving. It's actually
improving. But just in figures, if I look through the P/E ratio, it rather stays quite stable. It's
improving due to your nice performance and profits, but to improve the P/E ratio which is actually about 11,
I noticed in Europe companies are about 150, so you rather perform P/E wise like a steel industrial company.
Andrew Rivkin: Yeah, I think that there's a number of things that we've done recently
including hired a PR firm, set up investor relations within CryptoLogic. We, again, as you know, we're
awaiting a NASDAQ listing. There's a number of things that I think can help to strengthen that in the
future. Including I guess the difference, the major difference between us and our competitors, we are
close to the North American market and the competitor that you're speaking of is in Sweden. I think the
investors have less interest in what happens in the U.S. in that part of the world.
Mark Matuschka: Thank you.
Operator: Thank you. And at this time, Mr. Rivkin we're showing no further questions from
the phone lines, sir. I would like to turn the meeting back over to you.
Andrew Rivkin: That's great. I'd just like to thank everybody once again for joining us
today and I look forward to hearing everybody's voices again on the first quarter conference call in April.
Thanks very much.
End of the Conference Call
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