LeoVegas reports Q1-2018 results

Online gambling operator Leo Vegas has posted its Q1-2018 results, highlighting:

* Revenue up by 76 percent y-o-y to Euro 77.4 million (43.9);
* Organic growth of 40 percent – excluding markets closed in 2017 – 61 percent;
* EBITDA Euro 9.5 million (6.0), corresponding to an EBITDA margin of 12.3 percent (13.7 percent);
* Adjusted EBITDA totalled Euro 9 million (6.2), corresponding to an adjusted EBITDA margin of 11.6 percent (14.0 percent);
* Number of depositing customers up 75 percent at 302,014 (172,338);
* New depositing customers up 95 percent 146,063 (75,017);
* Returning depositing customers up 60 percent at 155,951 (97,321);
* Gross Gaming Revenue from sports betting and live casino were 6.5 percent and 15.3 percent, respectively, of total GGR;
* Net Gaming Revenue from Royal Panda and Rocket X accounted for 14.3 percent and 5.2 percent, respectively, of total NGR.
* NGR from regulated markets was up at 35.4 percent (18.3 percent) of total;
* Operating profit (EBIT) was Euro 3.8 million (5.5);
* Adjusted EBIT was Euro 7.9 million (5.7), corresponding to an adjusted EBIT margin of 10.2 percent (12.9 percent).
* Earnings per share before and after dilution were Euro 0.02 (0.05) or adjusted EPS of Euro 1.07 (0.05).

Activity highlights during the quarter included:

* The company acquired 51 percent of the shares in the company behind the streaming network CasinoGrounds.com for SEK 30 million (Euro 3.1 million), with a potential, maximum earn-out payment of SEK 15 million (Euro 1.5 million);
* LeoVegas acquired assets for GBP 65 million (Euro 73.6 million) from Intellectual Property & Software Limited along with related assets from another two companies that operate several brands including 21.co.uk, slotboss.com, Bet UK and UK Casino, which are now jointly referred to as “Rocket X”;
* The World of Sportsbetting was acquired for  for Euro 2.6 million, which holds a sports betting licence and a casino licence in the German state of Schleswig-Holstein, and an approved application for a sports betting licence through the state of Hessen;
* LeoVegas carried out a change in listing to Nasdaq Stockholm on 5 February;
* The company is updating the amortisation rate for intangible assets related to the acquisition of customer databases in Royal Panda. The rate of amortisation of customer relationships in Royal Panda is being changed to harmonise it with the Group’s other acquisitions;
* The group has made a provision of Euro 500,000 for fines from the UK Gambling Commission (UKGC) for alleged marketing violations in 2016;

Current events:

* New financial targets for the full year 2020 are to reach at least Euro 600 million in revenue and EBITDA of at least Euro 100 million.
* Net Gaming Revenue (NGR) in April amounted to Euro 29.3 million (16.5), representing growth of 77 percent;
* Concerns over legislative moves in Norway to prevent Norwegian residents from accessing foreign gaming sites. Revenue from Norway accounted for 4.6 percent of the Group’s total during March;

CEO and co-founder Gustaf Hagman reported:

“We are continuing our hard work and are accelerating into 2018 on the momentum we built up last year.

“We have opted to separately report on LeoVentures. LeoVentures today has an adjusted EBITDA of Euro -0.3 m, which is due to the fact that several of its companies are in the investment phase.

“Responsible gaming is one of LeoVegas’ foundations since the start of 2011. Over the past year, LeoVegas has made a push in Responsible Gaming, which has resulted in more staff and improved tools based, among other things, on machine learning combined with the launch of the site LeoSafePlay, a portal dedicated to identifying and managing unhealthy gaming behavior.

“The integration work (at Rocket X) is moving forward very well. We have quickly been able to work together on a number of matters and are identifying synergies in our knowledge-sharing and ways of working.

“Rocket X was put on the same gambling licence as LeoVegas. This was an extensive process, and already there we saw proof that we work very well and effectively together between the teams.

“During the quarter Rocket X contributed revenue for only one month. For the first quarter this entailed Euro 4 million in revenue and EBITDA of Euro 900,000 for an EBITDA margin of 22.5percent.

“During the first quarter Royal Panda was fully consolidated and contributed Euro 10.9 million in revenue, with an EBITDA margin of 7.8 percent. The low margin for Royal Panda is attributable to substantial marketing costs in February and March.

“Sweden had yet another record quarter for new and returning customers. What we can see, however, is that the value per customer has gone down slightly.

“Norway has historically and periodically blocked payment solutions that are linked to gaming sites. Now there is also a proposal to introduce additional barriers to using game sites. There are still no details when and how this will be introduced. Norway currently has no local licensing system, and instead of banning, I hope Norway will move towards a local regulation similar to the developments we see in Sweden.

“It was roughly one year ago that we acquired Winga.it and its gambling licence for the Italian market. During the autumn of last year we switched out the Winga brand to LeoVegas. The next step in our expansion for LeoVegas is to migrate the technical platform in Italy to our proprietary platform, Rhino. This will take place during the second quarter.

“Canada is a market of great interest and is showing strong growth for LeoVegas. During the quarter we began using our ambassador, hockey legend Mats Sundin, in our market communication in Canada.

“Following our recent acquisitions, the UK is our largest market measured by revenue and accounted for 25.6 percent of NGR during the first quarter. LeoVegas has high ambitions for compliance with laws and regulations and we have continuously improved our procedures and processes. We have had discussions with the UK Gambling Commission, UKGC, on suspected cases of breaches of the British gaming rules. A clear majority of cases are attributable to affiliate marketing. Our assessment is that the UKGC will issue fines for these violations and we have made a provision for the full amount. We have also improved our routines, which has led us to close off non-compliant affiliates.”

Looking ahead, Hagman said:

“April has begun strong with Net Gaming Revenue (NGR) of Euro 29.3 million (16.5), corresponding to a growth rate of 77 percent. Marketing in relation to revenue for the Group in the second quarter of 2018 will be higher than the average for 2017, which was 42.3 percent. Due to the marketing opportunities surrounding the World Cup, the total amount of marketing is more difficult than usual to anticipate in advance. LeoVegas will act opportunistically with marketing on the opportunities we see.

“Rocket X will be included for the entire quarter and an exciting summer of sport will get under way with the World Cup in June followed by the Swedish Open tennis tournament in Båstad, for which we are now a Principal Partner.”

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