Overview of CryptoLogic's Earnings and Call

| About: CryptoLogic Limited (CRYP)

CryptoLogic (NASDAQ:CRYP), an online gaming software provider, announced earnings last Wednesday night that topped estimates by 5 cents a share, although they missed the top line revenue estimate. For the first time in several quarters, they stopped draining cash at an alarming pace due to cost cuts which should continue to play out for the rest of the year -- ending the quarter with $38 million in cash.

CRYP investors weren't happy, and cut the shares by 19% in Thursday's trading.

I listened to the earnings call Thursday morning and was impressed that the company has cut back on its large costs in response to the drop in revenues they've seen in the last year as they moved to more of a licensing model. The company has no debt and, a few quarters ago, it looked like it was trading below its cash. That was deceiving because they were seeing that cash drop an an unsustainable rate.

Thankfully, that has changed and they now expect to be profitable by the month of June and moving forward. So, you have a company with a $6.37 stock price and $2.80 of that made up of cash with no debt.

The CEO and CFO were a little cryptic on the call about the specific numbers they would put out over the course of the rest of the year. They kept repeating that the results would be in line with previous guidance. I think the lack of clarity led to a sell-off in the stock.

But here's what they did say. They would generate between $0.65 - $0.71 in EPS for the year. (This would be a big jump in growth, as the current quarter saw an EPS loss of $0.10.) With 13.8 million shares outstanding, and the previous cash balances mentioned, that means CRYP -- at its closing price Thursday -- trades at 4.8x current year's projected earnings (excluding cash).

If the management can truly deliver the revenues and earnings to hit this guidance, the stock is cheap.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider CRYP to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Position: Long CRYP.

Originally published in RealMoney.com

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