LeoVegas Reports Strong Revenues and Profit in the Second Quarter of 2017
The Stockholm- listed gambling operator, LeoVegas Gaming Ltd., has recently posted their financial figures for the second quarter of 2017, Q2 of 2017.
The overall company- wide data showed that revenues for the second quarter of the year, Q2 of 2017, had increased year over year by a whopping 60 per cent compared to the same period from last year. Revenues for Q2 of 2017 were reported at EUR €49.7 million, while that from the year before was recorded at EUR €31.0 million.
This increase in income to a great extent was aided by the company’s recent rapid growth in the regulated gambling market in Denmark. This was clearly evident when looking at further breakdown of the numbers from the quarterly report. The revenues from their non- Swedish Nordic initiatives were recorded at EUR €9.8 million for Q2 of 2017. This marked a staggering 141.7 per cent year over year gain compared to the second quarter of 2016, Q2 of 2016. LeoVegas’ Danish offering launched in October of last year. Since then it has grown to capture a 5 per cent share of the local online casino market there. Not only that, this slice of the business went from being a novice enterprise just a few months back to capturing 6 per cent of the company’s overall revenue for the quarter.
The Chief Executive of LeoVegas Gaming Ltd., Gustaf Hagman, was obviously pleased with their performance in Denmark. He credited the success of the sector that was launched rather recently to the quality of their gaming products, the strength of their marketing and branding efforts, and the expertise of the team members in charge.
He said, “This is outstanding performance for a market that was launched roughly six months ago [and] is a prime example of what can be achieved when products, marketing, branding and a strong team work in concert.”
The Nordic region was responsible for 56.6 per cent of the operator’s quarterly revenue in Q2 of 2017. Another region that contributed significantly towards the earnings for the three months of the quarter was the United Kingdom. Revenues from the UK market were responsible for a further 14.3 per cent of their earnings during the period. Income from the rest of the world, excluding other European countries, accounted for 10 per cent of the total revenues for Q2 of 2017. The remaining 19 per cent of their income came from their businesses spotted all over the rest of Europe.
LeoVegas recently acquired the Italian online gambling operator, Winga.it. Winga claims to offer the ideal combination of entertainment and security in the gambling industry. The service provides online casino fans with a suitable platform to enjoy roulette, blackjack, poker, several additional forms of betting and other games. All these services can be accessed through mobile devices such as tablets and smartphones. Players can even use Winga’s television channel to interact with the dealers and other players in real time. The Winga operations saw revenues of EUR €9.3 million over the second quarter of 2017. This marked a year over year increase of 143.8 per cent in their gaming revenues for the three month period compared to the year before.
Moreover, returns from regulated markets across the globe accounted for 25.1 per cent of total revenue for the quarter, Q2 of 2017. The company was pleased to announce that this marked almost a doubling in terms of year over year figures compared to Q2 of 2016.
The mobile platform, as expected, remained LeoVegas’ most important channel during the period. Revenues from mobile gaming, which were reported at EUR €167.9 million, accounted for 67 per cent of total customers’ deposits for Q2 of 2017. This also saw a 67 per cent year over year growth compared to the same time last year in 2016.
Customer Acquisitions and Retention
Revenue growth for LeoVegas Gaming Ltd. came in the second quarter of 2017 despite a drop in the number of customers who made real money deposits to their accounts. The number of customers who made a deposit on their account fell by 2 per cent to 173,034 people during the three month period. New customers, who made deposits in their accounts, were also down to 73,014 members for the period. This marked a 33 per cent year over year decrease for Q2 of 2017 comapared to the second quarter of the year before.
The company claimed that this was not due to any flaws in their 2017 operations but rather because they experienced a particularly strong second quarter in 2016. Last year during the second quarter, LeoVegas Gaming Ltd. launched their LeoVegas Sport and LeoVegas Live Casino offerings. These new products accounted for the transient boost in both their business and customer acquisition figures for Q2 of 2016.
On top of that, in the second quarter of 2016, the operator recorded all their betting activities from The Union of European Football Associations (UEFA) European Championship games. UEFA represents the national football associations of Europe. The organisation runs competition at the club, national and international levels. These include the UEFA European Championship, UEFA Champions League, UEFA Europa League and the UEFA Super Cup. It goes without saying that all of these competitions are very popular in the countries where LeoVegas operates predominantly. Therefore, it is no surprise that last year’s football revenues accounted for a large number of customer bets and acquisitions in the three month window.
However, the number of returning customers to make deposits on their account climbed year over year by 49 per cent to 100,020 members this year. This increase has been attributed to novel marketing activities that the company had introduced in Q2 of 2017. Not only did the promotional offers convince old players to return to the operator, but they actually saw members place higher sums of money in their account from the year before. The growth in depositing customers continued even after the official end of the fiscal period of Q2 of 2017, well into the month of July 2017.
Costs for LeoVegas in Q2 of 2017
While LeoVegas Gaming Ltd. saw an increase in revenues, they also faced many of their associated expenses go up in the second quarter of the year.
Marketing costs for Q2 of 2017 were up to EUR €20.8 million. This is the highest that has been recorded in the history of the company for any single quarter. Last year, in Q2 of 2017, marketing costs were reported at EUR €18.7 million. This marked an 11.2 per cent year over year increase compared to the second quarter of 2016. Despite that, marketing expenses as a percentage of overall revenue fell from 42.9 per cent, which was reported in Q1 of 2017, to 41.9 percent for the following quarter.
Personnel costs for Q2 of 2017 were reported at EUR €7.0 million. This marked a whopping year over year increase of 59.1 per cent. Looking at the numbers as a percentage of overall revenues for the quarter, it was observed that personnel costs increased to account for 14.2 per cent of total revenues for the sector. This was largely due to the consolidation of Winga into the LeoVegas business.
Operating Expenses for the second quarter of 2017 were reported at EUR €4.9 million compared to the year before. This marked a 32.4 per cent year over year change in comparison to the equivalent period from the year before, Q2 of 2016.
Cost of Sales
Cost of sales, which refers to the direct costs that are attributable to the production of the goods and the supply of their services, was also up last quarter when compared to a year ago. The cost of sales for LeoVegas was reported at EUR €8.9 million for Q2 of 2017. This was a 43.5 per cent year over year increase compared to Q2 of 2016, when cost of sales were recorded at EUR €6.2 million.
Gaming duties, which refers to the variable taxes in each of LeoVegas’ jurisdictions, cost the company EUR €2.9 million this year in the second quarter. This was more than twice of what they paid for in the comparable time period from last year. The company saw a 141.7 per cent year over year increase in gaming duty charges in Q2 of 2017, when compared to Q2 of 2016. The company forked out EUR €1.2 million in gaming duties in the second quarter of 2016. Gambling taxes accounted for 5.8 per cent of total revenues in Q2 of 2017, while in Q2 of 2016, it made up 3.9 per cent of their entire income.
Other operating expenses for the quarter were reported at around EUR €1 million. This was adjusted for costs that were associated with the company’s change in listing to Nasdaq Stockholm and accounted for 9.8 per cent of overall revenues.
Gross profits, which refers to the amount the company collected less what is paid out in the form of winnings, was up in Q2 of 2017 compared to the year before. The company reported gross profits of EUR €37.9 million in the second quarter of the year. This marked a 60.6 per cent year over year increase compared to Q2 of 2016, when gross profits of EUR €23.6 million were reported for the company overall.
Operating profits, which is made up of the gross profits less their operating costs, was up from being EUR €2.8 million in the red last year in Q2 of 2016 to EUR €5.5 million in Q2 of 2017. This marked almost a three- fold year over year increase.
Net profits, which accounts for total earning less expenses for a given period, were reported at EUR €5.0 million for Q2 of 2017. This again marked almost a three- fold year over year gain.
Earnings before interest, tax, depreciation and amortization (EBITDA), which is a measure of a company’s operating performance, is a way of evaluating a company’s financial performance. EBITDA for the quarter increased from negative EUR €2.5 million in Q2 of 2016 to EUR €6.1 million in Q2 of 2017.
Half Year Fiscal Evaluations
Data from the second quarter of the year also allows us to work out the fiscal data for the company for the first half of 2017, H1 of 2017. The company reported revenues of EUR €93.6 million for the six month period. This was up year over year by 55 per cent compared to the first half of 2016.
During the same period, EBITDA increased to EUR €12.2 million. The operator posted a loss in H1 2016 that was caused due to costs associated with the launch of their LeoVegas Sport and Live Casino products. However, the company recovered and posted operating profits of EUR €11.0 million and a net profit of EUR €10.2 million for the six month period.
Third Quarter Predictions
Looking ahead to Q3 of 2017, LeoVegas Gaming Ltd. mentioned that they have so far enjoyed a strong start to the period. The company posted revenues of EUR €18.3 million for the month of July 2017. This marked a 42 per cent year over year rise from July of 2016. However, in light of changes in the gambling laws in Australia, this growth may soon be hit pretty hard. The company has agreed to withdraw from the Australian marketplace once the Interactive Gambling Amendment Bill 2016 comes into force. The new Australian law bans online poker and casino games from offshore companies being offered to their residents. In Q2 of 2017, Australia accounted for 7.6 per cent of LeoVegas’ total revenue. The loss of this sector from LeoVegas’ portfolio of the business should be reflected in fiscal figures in the next few months, once they are released.
Hagman also said that the company currently holds around EUR €60 million in cash and has no debts to their name. He added that despite the loss of their business in Australia, with these available funds, the company would be able to continue with investments and acquisitions in other profitable gambling markets in the world.
He said, “We have resources to carry out acquisitions and investments going forward and that we see favourable opportunities in the market.”
LeoVegas Gaming Ltd.
LeoVegas Gaming Ltd. is a Swedish mobile gaming company. They provide online casino and sports betting services such as table games, video slots, progressive jackpots, video poker and live betting options. LeoVegas casino provides world- class entertainment and offers more than 700 games on the mobile, tablet and desktop platform.
The company was founded in 2011 with the vision to create the ultimate mobile gaming experience. They have since experienced rapid growth. This has mainly been fueled by the exponential increase in smartphone and mobile device usage across the board. The company saw rapid growth both in 2014 and 2015. On the 13th of May 2016, a month before the UEFA Euro 2016 football tournament, they launched their sports betting product – LeoVegas Sport.
While the company – LeoVegas.com is headquartered in Stockholm, Sweden, the online casino and sports betting products are licensed and regulated under the service of the Maltese Lottery and Gaming Authority (MGA). The company also provides their services in the UK andare in compliance with the UK Gambling Commission requirements. Technical developments for LeoVegas are conducted by a further subsidiary, which is also based in Sweden.
LeoVegas mainly serves the United Kingdom and Nordic countries, namely Sweden, Norway and Finland. However, the company has a presence in many other countries around the world.
LeoVegas has become internationally recognised as a leader in mobile gaming and has won several prestigious industry awards over the last few years. These include EGR’s ‘Slot Operator of the Year 2015’, ‘Marketing Campaign of the Year’, ‘Innovation in Mobile and Tablet’, ‘Innovation in Casino’, ‘Affiliate Program of the Year’ and the International Gaming Award for ‘Casino Operator of the Year 2016’. EGR Power 50 List also ranks LeoVegas as the most influential mobile gaming operator.