LeoVegas sees 10 percent revenue growth despite regulatory adjustments in Sweden and the UK

"LeoVegas has had a good start to the year – customer loyalty and the inflow of new customers has never been better," Gustaf Hagman, Group CEO stated.

During the period between January 1, and March 31, 2019, revenue increased by 12% to EUR 86.3 m compared to revenue of EUR 77.4 m during Q1 2018. Organic growth in local currencies was 4% and organic growth in local currencies excluding the UK was 19%.

Other financial highlights included:

• EBITDA was EUR 7.2 m (9.5), corresponding to an EBITDA margin of 8.3% (12.3%).
• Net Gaming Revenue (NGR) from regulated markets was 50% (35%) of total NGR.
• The number of depositing customers was 370 209 (302 014), an increase of 23%.
• The number of returning depositing customers was 196 863 (155 951), an increase of 26%.
• Earnings per share were EUR 0.00 (0.02) before and after dilution.

During this quarter, Sweden launched as a regulated market and the assessment is that LeoVegas is taking market shares. The Group's Pixel.bet brand was granted a five-year license for casino and sports betting in Sweden.

The Group is seeing the positive effects of a pronounced internal focus on efficiency and cost control. The company has also launched its proprietary multibrand platform to further complement its brand portfolio. The new GoGoCasino brand was launched at the end of March and has been well-received.
Strategic evaluation of LeoVentures continues. The portfolio company Authentic Gaming is growing strongly and achieved a positive result for the first time in March and is expected to continue generating profits.

Events after the end of the quarter:

• Preliminary revenue in April amounted to EUR 30.5 m (29.1), representing growth of 5%.
• Richard Woodbridge, COO, and Avshalom Lazar, CCLO, has started their employment with the Group, while Mattias Wedar, CPTO, will assume his position during the second quarter. The new Group Management team is thereby complete.
• LeoVegas Annual General Meeting to be held on 29 May 2019.
  Nomination Committee has presented its recommendation for the new Board of Directors. Per Brilioth, Barbara Canales Rivera and Patrik Rosén have declined re-election, while Fredrik Rüden has been nominated to be elected as a new director.
• 14 August 2019 set as new date for the second quarter interim report.

"During the first quarter we once again delivered sequential growth and posted record performance on a number of key performance indicators. This, combined with the fact that our customer base is growing in a sound and sustainable way, has given us a good start to 2019. We are maintaining a high pace of expansion and innovation at the same time as we are focusing on cost efficiency and scalability in the Group. This makes us well positioned for a year of continued profitable growth," Gustaf Hagman added.

First quarter results

Revenue during the first quarter amounted to EUR 86.3 m (77.4), an increase of 12%. Organic growth in local currencies was 4%. Growth during the first quarter continued to be affected by the regulatory tightening that took place in the UK last year. Excluding the UK, organic growth for the Group was 19%, which reflects stable underlying growth in general for the Group. In March we posted the highest revenue and in February the lowest revenue for the period.

EBITDA totaled EUR 7.2 m (9.5), corresponding to an EBITDA margin of 8.3% (12.3%). Our marketing investments remained at a high level during the first quarter, among other reasons to secure our leading position in Sweden. Royal Panda increased its pace of investment following a very low level of marketing during the preceding quarter. We paid EUR 11.5 m in gaming duties during the first quarter, which is an increase of EUR 4.3 m compared with the preceding quarter, which affected the operating margin for the period.

Sweden

Sweden has now been regulated for a quarter. "We are generally satisfied with our performance during the period, where we had record-high customer activity and believe to have taken market shares. Our organic revenue decreased by 16% during the first quarter, adjusted for currency movements, partly owing to short-term effects of the market's regulation in January. At the same time our depositing customer base grew 23% compared with the same period a year ago. Revenue in Sweden during the quarter has been growing month on month, and this trend has continued into the second quarter," Gustaf Hagman continued.

"The new regulation in Sweden entailed a number of changes for our customers and for the industry, resulting in short- as well as long-term effects. I'm referring in particular to changes in the customer experience, competition, gaming duties, and new marketing channels and payment solutions. As is always the case when a market becomes regulated, it will take some time for the industry and customers to adapt, and thereafter we expect a more stable and predictable market."

"Regulation has sparked an intensive debate on the amount of marketing. We also agree that the volume right now is too high, which at the same time is natural in a recently regulated market in which new players, such as the state-run companies, are launching new products. Therefore we are working to diversify our marketing mix to other channels than commercial radio and TV, and we are conveying the responsible gaming message more in our advertising."

"Over time, a regulated market tends to lead to fewer operators. We have already begun to see this trend, as smaller operators are now leaving or reducing their focus in Sweden. This means that the amount of marketing is gradually expected to decrease."

"What makes it difficult for the industry to self-regulate is when the government urges operators to apply for licenses only to shortly after considering major changes in the terms as soon as the license system is in place. In this case, it applies to marketing. We are now awaiting the findings of a study into how marketing is to be handled. The study is expected to be ready by October 2020, and we are looking forward to clearer guidelines. One should keep in mind that it is in the state's interest to protect the license system and its channelization. The greatest benefit for licensed operators, who pay local taxes and adhere to local rules, is the ability to market themselves. A restriction of marketing opportunities would make it challenging to protect the channelization."

UK

"The UK market remains challenging in the near term, but we are gradually making progress, and our customer acquisition is growing at Group level compared with the preceding quarter. In particular, the brands we have gathered under Rocket X are showing clear improvements, with sequential revenue growth paired with good profitability. Royal Panda, on the other hand, had a weaker quarter in the UK, partly coupled to the lower level of marketing in earlier quarters as well as necessary regulatory adaptations in line with the rest of the Group," Gustaf Hagman continued.

"Our acquisitions in the UK have generally resulted in greater complexity coupled to synchronization of databases, routines and processes between the different Group brands. To manage this in the best way and comply with the regulatory requirements, LeoVegas has an action plan that was initiated last year. LeoVegas takes compliance with the utmost seriousness and is working consistently to ensure a safe experience for our customers in all markets, all to uphold our position as a credible, long-term and reliable operator."