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LeoVegas AB: First quarter: 1 January-31 March 2018

George Miller

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LeoVegas AB: First quarter: 1 January-31 March 2018
Reading Time: 8 minutes

Yet another record quarter with greater transparency, acquisitions performing as planned, and new and clear financial targets” – Gustaf Hagman, CEO and co-founder

First quarter: 1 January-31 March 2018

Revenue increased by 76% to EUR 77.4 m (43.9).
Organic growth was 40%.
Organic growth excluding markets closed in 2017 was 61%.
EBITDA was EUR 9.5 m (6.0), corresponding to an EBITDA margin of 12.3% (13.7%).
Adjusted EBITDA totalled EUR 9.0 m (6.2), corresponding to an adjusted EBITDA margin of 11.6% (14.0%).
The number of depositing customers was 302,014 (172,338), an increase of 75%. The number of new depositing customers was 146,063 (75,017), an increase of 95%.
The number of returning depositing customers was 155,951 (97,321), an increase of 60%.
Gross Gaming Revenue from sports betting and live casino were 6.5% and 15.3%, respectively, of total GGR.
Net Gaming Revenue from Royal Panda and Rocket X accounted for 14.3% and 5.2%, respectively, of total NGR.
NGR from regulated markets was 35.4% (18.3%) of total.
Operating profit (EBIT) was EUR 3.8 m (5.5).
Adjusted EBIT was EUR 7.9 m (5.7), corresponding to an adjusted EBIT margin of 10.2% (12.9%).
Earnings per share before and after dilution were EUR 0.02 (0.05).
Adjusted earnings per share were EUR 0.07 (0.05).

Events during the quarter

LeoVegas acquired 51% of the shares in the company behind the streaming network CasinoGrounds.com for SEK 30 m (EUR 3.1 m), with a potential, maximum earn-out payment of SEK 15 m (EUR 1.5 m). LeoVegas completed the acquisition on 1 January 2018. See page 11 for further information.
LeoVegas acquired assets for GBP 65 m (EUR 73.6 m) 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”. LeoVegas completed the acquisition on 1 March 2018. See page 10 for further information.
LeoVegas acquired World of Sportsbetting for EUR 2.6 m, 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.
LeoVegas 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, and to better represent the usage period.
LeoVegas has made a provision of EUR 0.5 m for fines from the UK Gambling Commission (UKGC) for alleged marketing violations in 2016. See page 9 for further information.

Events after the end of the quarter

New financial targets for the full year 2020 were communicated on 19 April. The new targets are to reach at least EUR 600 m in revenue and EBITDA of at least EUR 100 m. See page 9 for further information.
Net Gaming Revenue (NGR) in April amounted to EUR 29.3 m (16.5), representing growth of 77%.
In Norway it has been learned that new legislation is expected to pass during the year which aims to prevent Norwegian residents from accessing foreign gaming sites. Details on the proposed legislation have not yet emerged. Revenue from Norway accounted for 4.6% of the Group’s total during March.
LeoVegas published its annual report for 2018 at www.leovegasgroup.com.

Comment from Gustaf Hagman – Group CEO and co-founder

High pace into the new year

We got off to a flying start to the year with the acquisition of Rocket X, which has a strong footprint in the UK market with a local multibrand strategy and the market’s most effective customer acquisition model. We followed this up with the acquisition of gambling licences in Germany, which will enable better local payment solutions and allow us to market sports betting throughout Germany.

In the autumn of 2017 we set the goal of changing our listing to Nasdaq’s Main Market, and in early February we could once again ring the stock exchange’s bell. The first day for trading on Nasdaq Stockholm was 5 February 2018, where we immediately moved into the Large Cap list.

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

First quarter

Our revenue during the first quarter amounted to EUR 77.4 m (43.9), representing growth of 76%. Our organic growth was 40%. Organic growth excluding markets that we closed in 2017 was 61%. EBITDA adjusted for items affecting comparability was EUR 9.0 m (6.2), corresponding to an adjusted EBITDA margin of 11.6% (14.0%).

KPIs and transparency

Transparency is important for LeoVegas. We have therefore decided to disclose additional Key Performance Indicators as a way to increase transparency and understanding for us as a group.

We have opted now for the first time to break down our revenue for the Sports book and Live Casino. Sport accounts for 6.5% of Gross Gaming Revenue (GGR), and Live Casino for 15.3%. We show these KPIs based on GGR due to calculations of bonuses, but the figure is basically identical to Net Gaming Revenue (NGR).

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

LeoSafePlay

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 www.LeoSafePlay.com. LeoSafePlay is a portal dedicated to identifying and managing unhealthy gaming behavior.

LeoSafePlay offers self-assessment tests, information for families and a free tool (GamBan) to block one’s own access to all gaming sites.

With upcoming regulations in Europe, including in Sweden, there are a number of regulations on responsible gaming, and we at LeoVegas embrace these as an important part of sustainable gaming, and also as a long-term sustainable business. The fact that gaming companies take responsibility and work with responsible gaming is good for the industry, and LeoVegas has a stated ambition and strategy to be at the forefront. A proof of this is the launch of a new self-exclusion function in the UK, where customers now automatically will be excluded from all our brands when they exclude from one of them. Later in the year we will be able to customize offers and bonuses based on a customer’s risk level.

Acquisitions

Rocket X

The integration work 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.

In connection with the acquisition’s closing, 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. I think this is why it feels like Rocket X has been part of the Group for a longer time than just a few months.

During the quarter Rocket X contributed revenue for only one month. For the first quarter this entailed EUR 4.0 m in revenue and EBITDA of EUR 0.9 m, for an EBITDA margin of 22.5%.

Royal Panda

The work with Royal Panda is also progressing well and is on track. The period for payment of the earn-out expires in December 2018, and we see a great willingness for cooperation and interaction between the various teams.

During the first quarter Royal Panda was fully consolidated and contributed EUR 10.9 m in revenue, with an EBITDA margin of 7.8%. The low margin for Royal Panda is attributable to substantial marketing costs in February and March, which drove large gains in the number of new depositing customers and also NGR.

Company culture and kickoff

LeoVegas’ company culture is a major reason why we today are Sweden’s leading GameTech company. It is therefore imperative to promote this culture within the Group. We are sensitive to the fact that acquisitions require resources, time and commitment. It is for this reason that we invested further in our work with the company culture and gathered our entire Group of more than 700 people to a kickoff event. It was extremely successful and exceeded our high expectations, and we are already seeing positive effects from the event.

Markets

Sweden

Sweden had yet another record quarter for new and returning customers. This shows that we have a strong and loyal customer base in one of our core markets. What we can see, however, is that the value per customer has gone down slightly, which is explained in part by a higher share of sport customers and an unfavourable gaming margin for casino.

Norway

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. The Group’s revenues from Norway were 4.6% in March. Regardless of the outcome, development in Norway does not affect LeoVegas’ financial targets. LeoVegas has long been very clear in welcoming gaming market regulation and the Group’s strategy is to expand in regulated markets and markets that are developing against regulation.

Italy

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, at which time we will be able to fully offer our award-winning mobile gaming experience. This, combined with a strengthening of our commercial team in Milan, gives us favourable conditions to invest on a large scale in Italy.

Canada

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.

UK

Following our recent acquisitions, the UK is our largest market measured by revenue and accounted for 25.6% of NGR during the first quarter. The effectiveness of our marketing in the UK was also the best ever during the 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. This means that I feel great assurance in the work we do, both in the short and long term, but also in the face of continued expansion into new regulated markets. It’s good that UKGC puts increased demands on us in the gaming industry. It is an advantage for serious actors who both have the will and ambition to work in a regulated market.

New financial targets for 2020

In 2015 we set a target to reach EUR 300 m in revenue by 2018. Our new revenue target represents a doubling to EUR 600 m by 2020, not including any major acquisitions. Parallel with this we are aiming for EBITDA of at least EUR 100 m, which implies adjusted earnings per share of at least SEK 8 by 2020.

The new targets confirm our continued focus on strong growth combined with a sound view of profitability. The targets create transparency about where we are headed, both internally and externally.

LeoVegas’ long-term dividend policy remains intact, which is to distribute at least 50% of profit, and the proposal to the Annual General Meeting on 29 May is to pay a dividend of SEK 1.20 per share.

Comments on the second quarter

April has begun strong with Net Gaming Revenue (NGR) of 29.3 MEUR (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%. 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.

I am looking forward to the second quarter, in which 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.

This information is information that LeoVegas AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation 596/2014. The information was submitted for publication, through the agency of the contact person set out below, at 2nd of May 2018 CET on 08:00.

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LeoVegas AB Q4: Year-end report 2020

George Miller

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Invitation to presentation of LeoVegas fourth quarter 2020
Reading Time: 4 minutes

 

“Yet another record year for LeoVegas with a strong close” – Gustaf Hagman, Group CEO

fourth quarter 2020: 1 october–31 december        

  • Revenue increased by 13% to EUR 98.4 m (87.1). Organic growth in local currencies was 14%.
  • Adjusted EBITDA was EUR 11.5 m (9.2), corresponding to an adjusted EBITDA margin of 11.7% (10.6%). Reported EBITDA includes EUR -3.5 m (5.3) in items affecting comparability.
  • The number of depositing customers was 461,983 (372,032), an increase of 24%.
  • Adjusted earnings per share were EUR 0.08 (0.06).

Events during the quarter

  • LeoVegas was the first company in the gaming industry to offer payments via Open Banking.
  • During the quarter the Group’s unique and record-large jackpot was launched under the name LeoJackPot.
  • LeoVegas secured long-term and diversified financing through a combination of a bank credit facility (RCF of EUR 40 m) and a bond issue of SEK 500 m under a total framework of SEK 800 m.
  • During the quarter, LeoVegas repurchased its own shares for approximately EUR 5 million.
  • Ahead of the forthcoming regulation in Germany, a number of changes were implemented. This led to lower revenue during the quarter, with the greatest effect during the month of December.
  • LeoVegas has changed its interpretation of the calculation of gaming taxes in Denmark for earlier periods. This resulted in a self-correction, and a one-off cost of EUR 3.5 m has been charged against EBITDA.
  • Decision has been taken to migrate the Royal Panda brand to the Group’s proprietary technical platform.

Events after the end of the quarter

  • Preliminary revenue in January amounted to EUR 32.5 m (29.9), representing growth of 9%.
  • The Board of Directors proposes a raised dividend totalling SEK 1.60 per share (1.40), an increase of 14%, to be paid out on four occasions during the year.

 

COMMENT FROM GUSTAF HAGMAN – GROUP CEO

STRONG CLOSE TO 2020
LeoVegas concluded the record year 2020 with its strongest fourth quarter ever. And we did this despite frequent changes to the gaming requirements in our markets in addition to finding ourselves in the midst of a global pandemic. I am proud of our ability to quickly adapt to changed conditions through a high capacity for innovation at the same time as we are building an increasingly solid and diversified business. It is a demonstration of strength that LeoVegas delivered adjusted EBITDA growth of 25% for the full year while the operating cash flow increased almost 90 %. This was achieved despite maintaining a high investment pace with launches of new brands, new markets and product improvements.

During the fourth quarter we increased our revenue organically by 14%. Growth was mainly driven by a continued rise in depositing customers, which grew 24% to a new record level. Adjusted EBITDA increased by 25% during the quarter to EUR 11.5 m.  Reported EBITDA was charged with a one-off provision of EUR 3.5 m related to a changed interpretation of the calculation of gaming taxes in Denmark for earlier periods.

MarkETS
With the exceptions of Sweden and the UK, our core markets showed high double-digit growth during the quarter. Above all I want to highlight Italy, which has now become one of our five biggest markets. During the quarter we launched the Pink Casino brand in Canada. The launch is part of our multibrand strategy, where we are utilising existing resources and our technical platform to expand through scale.

In the German market, LeoVegas has implemented a number of changes ahead of the forthcoming licence system in July 2021. As expected, this affected revenue during the period. Operators in the market are acting differently with respect to the new restrictions, and at present necessary clarity is lacking in the ongoing transitional period, which unfortunately has led to a skewed competitive situation until the licence system has been fully implemented.

TECHNOLOGY AND PRODUCTS
During the quarter we carried out and launched several major projects and innovations. In particular I want to highlight our new exclusive jackpot – LeoJackpot – where our customers can win over SEK 50 m directly from their smartphones. We were also first in the industry to offer payments via Open Banking. This will benefit LeoVegas and our customers in many ways, including through more secure and faster payments and lower transaction costs.

During the quarter we began the migration of Royal Panda to our joint technical platform. As a result, in 2021 all brands will be operated on the same platform. The migration will lead to cost synergies such as lower platform and product costs and a more efficient organisation. The decision has also resulted in impairment of intangible assets attributable to Royal Panda’s platform, which was charged against EBIT in the amount of EUR 1.9 m.

FINANCING AND INVESTMENTS
At the end of the year we secured the Group’s long-term financing needs through the combination of a renewed bank credit facility of EUR 40 m and a newly issued corporate bond of SEK 500 m.

Stable financing combined with a strong balance sheet gives us a solid base for continued expansion, both through organic initiatives and potential acquisitions. During the fourth quarter we carried out share repurchases for approximately EUR 5 m. In addition, the Board of Directors proposes an increase in the dividend to SEK 1.60 per share.

COMMENTS ON FOURTH QUARTER
Revenue for the month of January amounted to EUR 32.5 m (29.9), corresponding to annual growth of 9%. In January revenue was fully impacted by the changes carried out in Germany ahead of the forthcoming regulation.

On the tailwinds of a strong 2020 we are now looking forward to a year with many exciting growth initiatives and an even stronger customer offering.

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Invitation to presentation of LeoVegas fourth quarter 2020

George Miller

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Invitation to presentation of LeoVegas fourth quarter 2020
Reading Time: < 1 minute

 

LeoVegas report for the fourth quarter 2020 will be published at 08:00 CET on February 11, 2021. A webcast telephone conference will be held at 09:00 CET the same day, where Gustaf Hagman, CEO, and Stefan Nelson, CFO, will present the results.

A possibility will be given to ask questions via the webcast and follow the presentation live. The webcast will be accessible at:

  • https://edge.media-server.com/mmc/p/hr4rjg4u

To participate in the conference call by phone, please call one of the following numbers:

  • SE: +46 (0) 8 50 69 21 80
  • UK: +44 (0) 20 71 92 80 00
  • US: +1 63 15 10 74 95
  • Confirmation code: 6385386

The webcast, which afterwards also will be available on demand, and presentation material will be published on LeoVegas website, www.leovegasgroup.com under Investor Relations.

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LeoVegas Press Releases

LeoVegas contemplates to issue a senior unsecured bond and communicates a leverage target

George Miller

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LeoVegas contemplates to issue a senior unsecured bond and communicates a leverage target
Reading Time: < 1 minute

 

LeoVegas AB has mandated SEB and Swedbank as joint bookrunners to arrange investor meetings commencing on 30 November 2020 to explore the conditions to issue a senior unsecured bond with an expected volume of SEK 500m, within a framework of SEK 1,200m with a tenor of three years. Subject to market conditions, a capital markets transaction may follow. The proceeds from the potential bond issue will be used to facilitate LeoVegas’ expansion strategy, refinance existing debt and for potential acquisitions. In conjunction with the transaction, LeoVegas also enters into a new three-year revolving credit facility agreement of EUR 40m.

Financial targets – leverage target introduced
In conjunction with the transaction, LeoVegas publishes that the leverage ratio (net debt to adjusted EBITDA) shall not, over the long term, exceed 1.0x. However, LeoVegas may, under certain circumstances, choose to exceed this level during short time periods in connection with, for instance, larger acquisitions or other strategic initiatives.

LeoVegas’ existing long-term financial targets are unchanged which include:

  • Long-term organic growth that outperforms the online gaming market
  • Long-term EBITDA margin of at least 15 percent, under the assumption that 100% of the revenue is generated in locally regulated markets where gaming tax is paid
  • To pay dividend, over time, of at least 50 percent of the profit after tax

“With this, we ensure a long-term and stable financing for LeoVegas. We strengthen the company’s financial flexibility and diversify our financing with the combination of a bond and new bank loans. This enables us to continue to deliver on our expansion strategy where we focus on regulated markets and markets soon to become regulated. Further, we continuously evaluate strategic and complementary acquisitions that may fit into the LeoVegas Group”, Gustaf Hagman, Group CEO

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