LEOVEGAS AB Q3: QUARTERLY REPORT 1 JULY – 30 SEPTEMBER 2021

“Record quarter in Sweden!” – Gustaf Hagman, Group CEO

THIRD QUARTER 2021: 1 JULY – 30 SEPTEMBER

• Revenue increased by 12% to EUR 99.4 m (88.9). Organic growth in local currencies was 8%.
• Excluding Germany, growth was positive 31%.
• EBITDA was EUR 11.5 m (11.9), corresponding to an EBITDA margin of 11.6% (13.4%).
• The number of depositing customers was 469,721 (438,691), an increase of 7%.
• Adjusted earnings per share were EUR 0.07 (0.08).

EVENTS DURING THE QUARTER

• LeoVegas repurchased shares for EUR 2.5 m and paid out the second dividend (EUR 3.9 m) of a total of four quarterly dividends to the Parent Company’s shareholders.
• LeoVegas expanded its existing bond issue by SEK 200 m.
• LeoVegas launched new AI-powered functionality to scale up the Group’s efforts surrounding responsible gaming. Customers in the UK were the first to receive product-integrated and personalised messages based on their own behaviours and gaming history.
• Following recent policy changes in the Netherlands, LeoVegas decided to stop providing its services in the country as from 30 September 2021. The Netherlands accounted for 6% of the Group’s total revenue during the third quarter, with higher profitability than for the Group average. LeoVegas will apply for a licence in the Netherlands during the fourth quarter.

EVENTS AFTER THE END OF THE QUARTER

• Preliminary revenue in October amounted to EUR 31.1 m (32.8), corresponding to negative growth of 5%. Excluding Germany and the Netherlands, revenue increased by 21%. The sportsbook margin was abnormally low in October, which had a negative impact on revenue, while underlying customer activity has remained strong.
• The Swedish government has confirmed that the restrictions for online casino remain in effect through 14 November 2021 and will not be extended thereafter.

COMMENT FROM GUSTAF HAGMAN – GROUP CEO

THIRD QUARTER
We are satisfied with our performance during the third quarter and increased our revenue by 12% compared with the same period a year ago. Excluding Germany, which has been dramatically affected by the ongoing re-regulation, consolidated revenue increased by 31%.

All key markets performed well during the quarter, where our home market in Sweden was the brightest star. The favourable revenue growth for the Group confirms that the strategy to simultaneously scale up a number of markets and relaunch the Expekt brand has been a success. The company today is more diversified than ever, and we have succeeded in compensating for the sharp drop in revenue in Germany.

During the quarter we delivered a stable operating profit compared with a year ago, despite a sharp increase in paid gaming taxes and higher marketing investments in relation to revenue compared with a year ago. In pace with growing revenue, the share of marketing investment is expected to gradually decrease from the current levels. At the same time, we have continued to invest in product and technology ahead of forthcoming market expansions, including the upcoming US launch. We are seeing some normalisation of office and travel-related costs as the pandemic is hopefully nearing its end, while general cost control in the Group continues to be good. All in all, we expect – through the economies of scale provided by a larger revenue base – to be able to deliver good earnings growth going forward.

MARKETS
Sweden had a good quarter in which both revenue and the customer base reached new, record levels. The acquisition of Expekt has exceeded our expectations, and the strong growth since its re-launch at the end of May confirms that the brand’s sport profile is appreciated by customers. The LeoVegas brand has also performed well, which shows the power of well-known brands combined with a competitive product. It is positive that the company can show strong performance in one of the world’s most competitive and strictly regulated gaming markets. Other markets that performed extra well during the quarter included Italy, Spain and Canada, all of which grew between 40% -70% during the third quarter.

REGULATION
It is an intensive re-regulation period with simultaneous implementation of local regulations in the Netherlands, Germany, and the Canadian province of Ontario. Internal preparation work is going full throttle to make us ready for the new regulations. In parallel we are conducting development work to adapt our proprietary technical platform ahead of our expansion to the USA next year.

Re-regulation processes can be turbulent and arbitrary. Such has been the case in the Netherlands, when the authorities changed their policies with short notice at the end of September, entailing that all gaming operators that had not yet been granted a gaming licence were forced to stop providing their services in the country. The company’s sales and earnings will thus be negatively affected starting with the month of October. The Netherlands accounted for 6% of the Group’s total revenue during the third quarter, with higher profitability than the Group’s average. LeoVegas will apply for a licence in the Netherlands later this year.

Developments in the market, with numerous re-regulation processes in progress and a number of regulated markets that are implementing new laws and new interpretations of regulations, are creating a somewhat turbulent and difficult to navigate current situation in the gaming industry. However, as the conditions gradually clear, we have a firm positive view on the outlook, as regulated markets create a more sustainable environment to work in, while the long-term growth potential in the online segment of the industry is enormous. The new regulatory environment favours established and well-invested operators like LeoVegas with competitive products, well-known brands and focus on responsible gaming.

COMMENTS ON THE FOURTH QUARTER
Revenue for the month of October amounted to EUR 31.1 m (32.8), representing negative growth of 5%. Excluding Germany and the Netherlands, revenue increased by 21%. The sportsbook margin was abnormally low in October, which had a negative impact on revenue, while underlying customer activity has remained solid.