LeoVegas shares slump 15%

Business News

LeoVegas shares were down 15% today after the operator reported revenues lower than expected.

Revenue totalled EUR 87.4 m (49.7) during the second quarter, an increase of 76%. Organic growth was 27%. Organic growth excluding markets that were closed in 2017 was 38%. EBITDA totalled EUR 15.0 m (6.1), corresponding to an EBITDA margin of 17.2% (12.4%).

Comment from Gustaf Hagman – Group CEO and co-founder. The second quarter was one of LeoVegas’ most intense quarters ever. We not only launched a new sports book and design in time for the FIFA World Cup – we also adapted to the GDPR, stricter demands for compliance, and the forthcoming regulation in Sweden. These are just a few examples of projects that we have been working intensively with. On top of this, we have worked hard and completed a number of initiatives that will be important over the long term for the Company’s continued growth, for sustainability, and for a new technical platform.

Royal Panda and Rocket X are developing according to plan, with a strong EBITDA margin of 30.0% for Royal Panda and 21.8% for Rocket X.

We generated a record profit during the quarter, and the main explanation is lower marketing costs. Our data-driven marketing model works in such a way that we invest only if we see a sufficiently high return in our marketing channels. During the FIFA World Cup, many gaming companies that work primarily with sports betting significantly increased their advertising budgets, and as a result the long-term customer value of our marketing was deemed to be uncertain. Our models indicated not to advertise in certain channels, and accordingly we quite simply refrained. This in turn resulted in slightly lower growth but at the same time significantly higher EBITDA. I am very happy about the strong earnings in the quarter.

In addition, owing to the launch of our new front-end platform, certain links to our marketing partners needed to be redone. The same thing happened when we upgraded our back-end platform three years ago. This was a known risk and affected our customer inflow for a limited period.

This – together with the enactment of the GDPR and a generally stronger focus on compliance, where we stopped working with a large number of affiliates in the British market – affected our customer inflow and growth during the quarter. As we now enter the third quarter, we are well prepared.

Our new platform has been launched, we have made good progress with our compliance efforts, and the World Cup is over. The third quarter will thereby be a quarter with focus on growth and on further driving our business forward.