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

The Board of Directors of LeoVegas has decided to exercise the authorisation to repurchase own shares granted to it by the company’s Annual General Meeting on 8 May 2020. LeoVegas intends to repurchase shares for an amount up to EUR 10,000,000. The share repurchases will be conducted on one or more occasions before the Annual General Meeting on 11 May 2021. The purpose is to optimise the company’s capital structure and create shareholder value by reducing the number of shares outstanding. The repurchased shares may also be used as payment for potential future acquisitions.

The share repurchase programme is being initiated in accordance with the authorisation granted by the shareholders at the Annual General Meeting (AGM) on 8 May 2020 to repurchase up to 10% of the total number of shares in the company before the 2021 AGM. This entails that a maximum of 10,165,297 shares may be repurchased. However, the company intends during the prescribed period of time to repurchase shares for a maximum amount of EUR 10,000,000. LeoVegas today owns no treasury shares. The repurchase program will be carried out in accordance with Nasdaq Stockholm’s regulation for issuers and the following conditions:

1. Repurchases may be conducted on one or more occasions before the AGM on 11 May 2021.
2. Repurchases shall be made at a price within the range of the highest purchase price and lowest selling price for the shares on Nasdaq Stockholm at any given time.
3. A maximum of 25%, with the exception of block trades, of the average daily trading volume in the shares on Nasdaq Stockholm may be repurchased on any given trading day.
4. Payment for the shares shall be made in cash.

LeoVegas shall report to Nasdaq Stockholm all repurchases of own shares that have taken place during the program no later than within seven trading days after the date of repurchase.

THIRD QUARTER 2020: 1 julY–30 september

• Revenue increased by 1% to EUR 88.9 m (88.2). Organic growth in local currencies was 2%.
• EBITDA was EUR 11.9 m (12.7), corresponding to an EBITDA margin of 13.4% (14.4%).
• The number of depositing customers was 438,691 (347,464), an increase of 26%.
• Earnings per share were EUR 0.04 (0.05) before and after dilution, while adjusted earnings per share were EUR 0.08 (0.09).

Events during the quarter

• GoGoCasino and Livecasino.com launched in Finland. An international launch of both brands is in progress.
• Operations in Sweden have been affected by the temporary restrictions that were introduced on 2 July as a result of Covid-19
• LeoVegas increased its ownership in the e-sports betting operator Pixel.bet to 85% from 51% previously.
• Operating profit for the quarter includes costs of EUR 0.5 m in organisational streamlining and optimisation measures. Yearly net savings from these measures is expected to total EUR 1.5 m starting next year.

Events after the end of the quarter

• Preliminary revenue in October amounted to EUR 33.0 m (26.0), representing growth of 27%.
• Royal Panda has relaunched in Finland on the Group’s proprietary technical platform.
• LeoVegas has launched Bingo as new product category.
• Ahead of the forthcoming regulation of the German market, effective 15 October a number of changes have been made that affect the customer offering. This had a slight negative impact on revenue in October. LeoVegas expects to receive nationwide licences for the German market once they are available.

COMMENT FROM GUSTAF HAGMAN – GROUP CEO

THIRD QUARTER 2020
Once again, we have shown our ability to quickly adapt to new, external circumstances, such as those related to the continuing pandemic and the constant regulatory changes in our various markets. During the third quarter we maintained a high pace of innovation and investment, which is strengthening our long-term position and growth prospects.

During the quarter our customer base again reached a new record level. The number of depositing customers grew 26% compared with the same period a year ago, which confirms the strong development of our business. This is partly attributable to the ongoing structural shift from land-based gaming to online, but above all to our focus on creating the best product and experience for our customers. We continue to optimise scalability and reduce complexity in the organisation. During the quarter, among other measures we realised synergies from previous acquisitions and instituted a clearer organisational and Group structure. This has led to a slight level of staff redundancy, and operating profit was charged with EUR 0.5 m for measures coupled to this. At the same time, we estimate that yearly net savings from these measures will amount to roughly EUR 1.5 m starting with next year. Our efficiency improvement work equips us for continued profitable growth and makes us – combined with greater diversification of the revenue base – more resilient to rapid fluctuations in individual markets.

MARKETS
We had a favourable development in most of our markets during the quarter, with our growing customer base as the main driver. Many markets had double-digit growth compared with the same period a year ago.

In Sweden we are seeing a troubling development in which the unlicensed market continues to grow unhindered. A growing number of operators without licences are actively targeting Swedish players, including those who have been barred by the self-exclusion tool Spelpaus. This has been confirmed by, among others, several organisations that provide help to people with a gambling problem. These organisations have noted that the majority of those seeking help are playing with the unlicensed operators. The problem is big and is shaking the foundation of the entire Swedish licence system. Quick and strong measures are now needed by Swedish politicians and authorities to ensure a well-functioning Swedish gaming market.

In Germany the federal states have agreed to introduce a licence system for gaming, which is expected to be implemented during the second half of 2021. We are looking forward with confidence to Europe’s largest market finally being regulated. Ahead of implementation of the licence system, it is expected that operators will carry out certain limitations in their respective customer offerings in advance. LeoVegas has already begun implementing such limitations, which will initially have a negative impact on revenue. Details on regulation of the German market are provided in the Legal update section in this report. LeoVegas today has a licence in the German state of Schleswig-Holstein and expects to receive nationwide licences once they are available. Germany generated approximately 17% of the Group’s total revenue during the third quarter.

technology and products
The quarter was intense for our technology and product organisation, with the completion of a number of major projects. For example, we implemented the German regulatory requirements on short notice and launched the GoGoCasino and Royal Panda brands in Finland on our proprietary platform. We also are seeing higher demand for broader entertainment games among our players and therefore recently launched our Bingo product.

comments on fourth quarter
Preliminary revenue for the month of October amounted to EUR 33.0 m (26.0), corresponding to annual growth of 27%. The changes introduced in the German market on 15 October have had a slightly negative impact on revenue.

With a positive start to the fourth quarter, a record-large customer base and many exciting initiatives I am looking forward to a strong end to the full year.

Presentation of the report – today at 09:00 CET

• To participate in the conference call, and thereby be able to ask questions, 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: 2874453 or join at the web https://edge.media-server.com/mmc/p/budae7ar