CryptoLogic Delivers Record Results in Q2 2006

Revenue for the first half of 2006 increased 43% to $57.3 million (Q2 2005 YTD: $40.2 million). EBITDA(1) for the first six months in 2006 rose by 59% to $18.1 million (Q2 2005 YTD: $11.4 million). EBITDA(1) margin for the first six months in 2006 grew to 32% of revenue (Q2 2005 YTD: 28%). Earnings for the first half of 2006 improved by 66% to $15.9 million, or $1.15 per diluted share (Q2 2005 YTD: $9.6 million, or $0.67 per diluted share). Cash flow from operating activities was $29.7 million in the six months ended June 30, 2006 (Q2 2005 YTD: $9.2 million).

Product Diversification and Innovation

CryptoLogic grew its Internet casino software licensing revenue by 53% to $17.9 million in the quarter, and by 32% to $32.9 million for the six months ending June 30, 2006 (Q2 2005: $11.7 million; Q2 2005 YTD: $24.9 million). The Q2 2006 result was significantly ahead of expectations and 19% higher than in Q1 2006. Internet casino remains CryptoLogic's largest revenue contributor at 59% of Q2 2006 revenue and 57% of year-to-date revenue.

Internet casino fees in the quarter were ahead of the company's expectations principally because of the popularity of its expanding, high-margin online slot portfolio. The company released 11 new games in the quarter, including successful slot titles such as Sweet Thing, an updated version of Rags to Riches, and the new Marvel Super Hero-themed games based on Thor and Silver Surfer. The industry's first-ever online version of the popular land-based casino game, Texas Hold'Em Bonus Poker, was also a stand-out. Other games, such as Bejeweled and Millionaires Club(TM), also continued to be popular. At $3.7 million, CryptoLogic's Millionaires Club(TM) jackpot continues to set online records.

CryptoLogic increased its Internet poker software licensing revenue by 41% to $9.3 million in Q2 2006, and by 56% to $18.9 million for the first six months of the year (Q2 2005: $6.6 million; Q2 2005 YTD: $12.1 million). The increase in Q2 2006 resulted from organic growth among its poker licensees. Poker fees were 4% lower than in Q1 2006. As expected, the reduced player activity was due to competition for players' attention from the FIFA World Cup (June 9 to July 9). Poker fees represented 31% of total Q2 2006 revenue and 33% of year-to-date revenue.

Geographic Diversification

CryptoLogic's record results reflect the company's global strategy to diversify across jurisdictions known for their strongest growth opportunities. Revenue generated from international players continued to exceed 65% of licensees' revenue. The UK and other European markets remained strong contributors, together accounting for more than 60% of overall revenue in the quarter.

CryptoLogic focuses on geographic markets that embrace online gaming. The company develops software for the Internet casino and Internet poker markets. CryptoLogic does not offer its software and services to the sports betting market. None of its customers accept sports bets from the United States. CryptoLogic has long advocated regulation for the protection of players and the integrity of the industry. This is why the company has earned government approval in those jurisdictions with the strictest regulation for online gaming, and has focused on blue-chip international customers operating in licensed jurisdictions.