LeoVegas AB: Second quarter: april 1 — June 30, 2018

«

A quarter with record earnings and new initiatives in sustainability and technology lays the foundation for continued strong growth»

— Gustaf Hagman, CEO and co-founder

Second quarter: 1 april — 30 June 2018

[1]

  • Revenue increased by 76% to 87,4 MILLION (49,7).

  • EBITDA amounted to eur 15.0 MILLION (6,1), corresponding to an EBITDA margin of 17.2 percent (to 12.4).

  • Organic growth, excluding the markets that have been closed down in 2017 was 38 per cent.

  • Gaming income, net (NGR) from the regulated markets was 38.8 per cent (25,1) of total NGR.

  • Gaming income, net (NGR) from Royal Panda and Rocket X[2] was 15.6 percent, respectively, 12.8 per cent of total NGR and strong margins.

  • The number of depositing customers amounted to 309 987 (173 034), an increase of 79 per cent.

  • Adjusted earnings per share amounted to EUR 0.13 (0,05).

             

Events during the quarter

  • New financial objectives for the year 2020 was presented on 19 april. The goal is to achieve at least eur 600 MILLION in revenues and an EBITDA of at least eur 100 MILLION.

  • It was announced on 7 may that Stefan Nelson will be the new CFO starting August 22, 2018.

  • LeoVegas took a step further in the area of responsible gaming with the implementation of the GAMSTOP, which is a central system for the uk market where the customers can limit their games on any licensed gaming operators in the Uk. LeoVegas has also integrated all of the group’s brands to LeoSafePlay.

  • LeoVegas launched a new front-end platform. The technology creates new and improved opportunities for LeoVegas continue to offer the best, fastest and most innovative gaming experience on the mobile phone.

  • Sportbok 2.0 was launched with a new design and a new improved gaming experience on the LeoVegas.com.

  • On 7 June 2018, the Swedish parliament decided on the new spellagstiftningen. The new legislation comes into force on 1 January 2019, and is in line with the previous proposal.

Events after the end of the quarter

  • Gaming income, net (NGR) amounted to sek 26.4 MILLION (18.3 million) in July, corresponding to a growth rate of 45 per cent.

  • LeoVegas carried out changes in the management team with the aim to optimize the work of the company’s strategic agenda on sustainability, and the continued tillväxtresan. This leads to a further focus on responsible gaming and LeoSafePlay.

  • The coalition government in Italy has proposed a ban on the marketing of the game and if it is approved, it shall enter into force in June 2019. The situation is currently unclear, and the expectation is that the situation may be further amended.

Comment from Gustaf Hagman, CEO and co-founder

A quarter with a focus on sustainability and technology

The second quarter has been one of the company’s most intense quarter ever. Not only have we launched a new sportbok and design in time for the world CUP, we have also adapted ourselves to the GDPR, the increased demands in compliance and the upcoming regulation in Sweden. These are just a few examples of projects it jobbats intensively. In addition, we have worked hard and completed a number of initiatives which will be the long term key for the company’s continued growth; in sustainability and a new technology platform.

Developments during the quarter

During the second quarter, revenues amounted to 87,4 MILLION (49,7), which corresponded to an increase of 76 percent. The organic growth was 27 per cent. Organic growth, excluding the markets that have been closed down in 2017 was 38 per cent. The EBITDA result amounted to eur 15.0 MILLION (6,1), corresponding to an EBITDA margin of 17.2 percent (to 12.4).

Royal Panda and Rocket X is developing according to plan with strong EBITDA margins at 30.0 per cent for the Royal Panda and 21.8 per cent for the Rocket X.

The quarter generated a record result and the main reason is lower marketing costs. Our data-driven marknadsföringsmodell works so that we invest only if we see enough high yields in our market channels. During the world CUP increased, many gaming companies with Sports betting as the main focus significantly on their budgets, which is why the customer value in the long term was uncertain. Here, our models indicated that we should not advertise in certain channels, and then we simply abstained, which, in turn, resulted in a slightly lower growth and at the same time, a significantly higher EBITDA earnings. I am very pleased with the strong results in the quarter.

Furthermore, the launch of our new Front-end platform, for example, made some links with marketing partners have been needed to be done. Exactly the same thing happened when we changed our Back-end platform three years ago. This was a conscious risk and affected kundinflödet for a limited period.

The above-mentioned reasons together with the GDPR and the overall increased focus on compliance, where we closed of the many affiliates in the uk market has affected the kundinflödet and the growth during the quarter. When we enter the third quarter, we are well prepared. Our new platform is launched, the compliance work has come a long way and the world CUP is past. In the future we will have a focus on long-term growth and to further drive our core business, Casino, forward.

The second quarter also offered three prestigious awards at the EGR M&I awards: «Brand of the Year», «Affiliate marketing of the year» and «Innovation in Mobile & Tablet». We are proud and happy over all three rates, but above all, with the «Brand of the Year» that demonstrate our willingness and momentum to work with innovation and the development of our brand.

Sustainability

LeoVegas Mobile Gaming Group pursues a responsible and sustainable operations. Part of this is to increase the transparency about the procedures and regulations that we and other operators in the industry live by. LeoVegas has a vision to change the point of view on the gaming industry. We have the ambition to come collect the industry to initiate a long-term joint work for a change of outlook on the industry’s operations. A responsible business will mean sustainable growth, and this is the clear objective for the LeoVegas Mobile Gaming Group.

Compliance With Regulations (Compliance)

The online gaming industry in Europe is changing fundamentally. An increased number of markets choosing to settle locally. Regelefterlevnadskraven for the operator both to increase and to become more complex. The increased focus on regulatory compliance has a short-term effect on growth as the industry need to act in line together with its partners to ensure that the necessary requirements are met. In the long term, however, we see this as an opportunity — then only the professional and responsible operators will be able to operate in this environment.

LeoVegas has for some time had discussions with the UK Gambling Commission, UKGC, regarding the improvements that LeoVegas that the group can perform within compliance. It is a fruitful discussion that is now being conducted, and a partnership with clear guidelines how we are going to take the next step and improve performance in compliance with regard to certain areas of the uk market.

GDPR

GDPR was introduced on the 25th of may and the biggest influence for us is within our retention work. GDPR has made to some customers no longer receive offers from us. We can’t communicate as broadly with our customers is a new reality we need to relate to. Here, we are confident that our award-winning product and investment in our brand gives us a good position for continued growth.

Responsible gaming and LeoSafePlay

Responsible gaming is one of the LeoVegas the most important areas and we have now laid the foundation for creating the next generation of systems for responsible gambling. The foundation of our approach is our datadrivenhet and the system is based on machine learning. The combination makes it possible, in a structured and sophisticated way to discover players who have or are on the way to develop an unhealthy behavior.

New financial targets — by the year 2020

During the quarter, we presented new financial targets, which confirms our continued focus on strong growth in combination with a healthy view of profitability. The goal is to achieve revenues of at least eur 600 MILLION and EBITDA of at least eur 100 MILLION.

Technology

During the second quarter we launched our new Front-end platform. The benefits of the new platform are many, and shows that LeoVegas is the leading GameTech the company. The technology improves the ability for us to continue to offer the best, fastest and most innovative gaming experience in the mobile phone. The new platform also means that we will become more efficient in technology and product development, then the speed to put new features into production increases.

The new platform also improves the LeoVegas work in keyword optimization (SEO). The value of improved SEO is that customers will find the directly to Leovegas.com via search engines instead of going through a third party. LeoVegas has an expectation that gradually increase organic customer traffic and thus be less dependent on affiliates for customer acquisition via search engines.

Sportbok 2.0, and the new design on the LeoVegas.com

Our new sportbok is our biggest release in sportvertikalen ago we launched the sport in the spring of 2016. We have taken technical ownership of major parts of the sportklienten and introduced a completely new design that is more intuitive and more attractive. With efficient filtration and high focus on relevance, our clients receive the right range presented in a simple way.

Our new design is a modern interpretation of our brand and highlights all produktvertikaler.

In parallel with the bet on Sports for LeoVegas.com will also Rocket X to launch the Sport on its brand Bet UK. Rocket X has chosen the supplier SB Tech. The group will therefore work with three different suppliers in the field of sports; Kambi, Betconstruct and SB Tech. This gives us a flexibility to be able to offer the best experience and adapt the offering to local preferences. In the long term, we see that it is possible to use several providers at the same brand to achieve the best possible sportupplevelse for our customers.

Changes in the management team

In order to optimize the efforts to drive the company’s strategic agenda of responsible gaming and growth, we have changed the management team.

As previously communicated, LeoVegas CFO Viktor Fritzén take up a new role as Senior Advisor. Viktor will focus its work on strategic issues relating to growth and value creation. The new CFO will be Stefan Nelson, who comes most recently from a role as Director, SEB Corporate Finance, and take the 22:nd of August. Stefan has an extensive background with 20 years of experience including as an equity analyst of the gambling sector. This, combined with a broad experience in M&A will make Stefan a key player in the future.

Louise Nylén may a newly appointed role as vice-PRESIDENT. Louise has previously served as Chief Marketing Officer for LeoVegas. Richard Woodbridge is hired as the new Chief Operation Officer and will have overall responsibility for the operational work at LeoVegas office in Malta. Current COO, Marcus Nylén, will remain in the role until Richard joins and will then leave the management team to have dedicated focus on LeoVegas expansion. Rikard Ljungman is leaving his role as Chief Commercial Officer and step out to the management team to be able to focus entirely on responsible gaming and LeoSafePlay.

Market

NGR from locally regulated markets was 39% of the total and is the highest figure ever. We are very pleased that the share from regulated markets is growing and is in line with our expansion strategy.

Sweden

Sweden is one of our major markets, and 7 June was finally the decision to introduce a licensing system in Sweden. The law shall enter into force on 1 January 2019, and is something that we really welcome.

Italy

Italy is one of Europe’s biggest markets when it comes to casino games and sports betting. Over 3 million italians play online each month and it is an emerging market we very much believe in. During the quarter, we migrated over to the Italian business at LeoVegas technical platform Rhino which will give our Italian customers the real LeoVegas experience! The coalition government in Italy has proposed a ban on the marketing of the game. We are convinced that such a ban would benefit unlicensed operators and there is now a debate on this where LeoVegas is involved and trying to educate the politicians what we, as licensed operators in sustainability and responsible gaming. The outcome of the proposal is very uncertain at the moment but we are following developments very closely.

Comment on the third quarter

July has begun with the gambling revenues, net (NGR) of eur 26.4 MILLION (eur 18.3 million), corresponding to a growth rate of 45%, which is lower than we expected against the background of the customer base continued to be developed well.

In the third quarter, we expect that the marketing in relation to revenue will be at a similar level as the second quarter.

The work in the second quarter has given us a solid foundation to stand on as we continue to improve. It gives us good opportunities to create long-term growth and working towards our financial goals.

Presentation of the report — today at 09:00

In order to participate in the telephone conference and thereby be able to ask questions, please call one of the following numbers: +46 (0) 8 5664 2753, UK: +44 (0) 330 336 9128, US: +1 646 828 8144 use confirmation code: 5362090 or via https://edge.media-server.com/m6/p/zupwii5n

This information is such information that LeoVegas AB (publ) is obliged to publish under the EU marknadsmissbruksförordning 596/2014 and the law (1991:980) regarding trade with financial instruments. The information was submitted, by nedanståendes contact person in the government, for publication on August 1, 2018 there is a 08:00 CET.

For further information, please contact:

Gustaf Hagman, Group CEO: +46 (0) 8 410 367 66, gustaf.hagman@leovegas.com

Viktor Fritzén, Group CFO: +46 73-612 26 67, viktor.fritzen@leovegas.com

Philip Doftvik, Head of Investor Relations and Corporate Finance: +46 73 512 07 20, philip.doftvik@leovegas.com

If mobilspelsbolaget LeoVegas

LeoVegas passion is «Leading the way into the mobile future».

LeoVegas is Sweden’s foremost GameTech companies and is in the forefront with the latest technology for mobile games. 2017 passed the company boundary to count as a unicorn — that is to say, a startup valued at over a billion USD. A large part of the success is an extreme product and technology as well as the effective and data-driven marketing. Technology development takes place in Sweden, while the operational business is based in Malta. LeoVegas offers games in Casino, Live casino and Sportsbook, as well as operating two global and scalable brands — LeoVegas Royal Panda, and a local multibrand operator, with the name Rocket X. the Company’s share is listed on Nasdaq Stockholm.

More about LeoVegas on

www.leovegasgroup.com

.

[1]

Figures in brackets are comparative figures with the same period a year earlier. This applies throughout the entire report.

[2]

Rocket X was consolidated from 1 march 2018 and the Royal Panda from november 1, 2017.

LeoVegas — Second quarter 1 april — 30 June 2018

This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: LeoVegas AB via Globenewswire

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