LeoVegas AB: Third quarter: 1 July-30 September 2017

"Acquisition of Royal Panda and a third quarter with continued strong organic growth and profitability"
Gustaf Hagman, Group CEO and co-founder

Third quarter: 1 July-30 September 2017[1]

  • Revenue increased by 40% to EUR 55.6 m (39.7). Organic growth was 33%.
  • Revenue from regulated markets accounted for 25.3% (13.2%) of total revenue.
  • Mobile deposits were 70% (67%) of total deposits, which increased by 56% to EUR 193.1 m (123.7).
  • The number of depositing customers was 202,980 (156,389), an increase of 30%. The number of new depositing customers was 97,210 (74,638), an increase of 30%. The number of returning depositing customers was 105,770 (81,751), an increase of 29%.
  • EBITDA was EUR 7.6 m (9.8), corresponding to an EBITDA margin of 13.7% (24.7%). EBITDA adjusted for items affecting comparability was EUR 8.4 m (9.8), corresponding to an EBITDA margin of 15.1% (24.7%).
  • Operating profit (EBIT) was EUR 6.9 m (9.4). EBIT adjusted for items affecting comparability was EUR 7.6 m (9.4), corresponding to an adjusted EBIT margin of 13.7% (23.8%).
  • Earnings per share before and after dilution were EUR 0.06 (0.09).

Events after the end of the quarter

  • Net Gaming Revenue (NGR) totalled EUR 14.9 m (8.8) during the first 23 days of October, representing growth of 70%.
  • LeoVegas acquired the group that operates the Royal Panda brand. The acquisition of Royal Panda is in line with the strategy to continue to grow in regulated markets. More than half of Royal Panda's revenue comes from the UK. The purchase price was EUR 60 m with a maximum earn-out of an additional EUR 60 m within one year.
  • The Group has arranged debt financing of EUR 100 m.
  • Due to the acquisition of Royal Panda, the Board has decided to adjust the financial targets. LeoVegas is removing the short-term financial targets for 2018 since they were organic targets.
  • LeoVegas aims to carry out a change in its listing to Nasdaq Stockholm during the first half of 2018.
  • The subsidiary company IMP (Independent Mobile Productions) changes its name to LeoVentures.
  • Co-founder Robin Ramm-Ericson is taking on the role as Managing Director of LeoVentures, leaving the CXO role in the executive management team, and remains as senior executives in the Group.
  • The Chief Product Officer (CPO) role has been added in the executive management team. At the moment, this role is occupied by Jarl Modén, our former Head of Product, who is now acting CPO.

Comment from Gustaf Hagman - Group CEO and co-founder

Strategic acquisition
After the end of the quarter we carried out a strategic acquisition. During the past two years we have combed the gaming market in search of companies that fit in with our overall expansion strategy, which is to grow in regulated markets and markets that will soon become regulated. We made our first acquisition earlier this year, of Winga in the Italian market. We are now taking the next step with our acquisition of Royal Panda, which is a great fit with our strategy to establish a strong presence in the UK - plus they have a great brand!

We have worked hard to carry out this acquisition and will now focus on integrating it in our operations and make sure that we are all working towards the same goals. When working with acquisitions, culture and people are key pieces of the puzzle. We are convinced that this is a major success factor. This match exists, and we thus have very good conditions to unite in our common strategy and continue our development.

Royal Panda - a new global brand
Royal Panda has in a short time built up an exciting and strong brand in one of our most important regulated markets - the UK. This is a major acquisition we are carrying out following a carefully executed process. 

Backed by the strong symbolic value of the Panda, the company has built a premium brand among players that will serve as a good complement to LeoVegas. With the acquisition we now have two great brands that are both global, which makes the scalability in our continued growth enormous.

Royal Panda is run by people with a long record of experience in the gaming industry, and what they have achieved is impressive. The team is strong and very effective, which can be seen in the company's highly effective marketing.

Royal Panda works with a proprietary technical platform and recently launched Sportsbook. The launch looks very promising, and the Royal Panda brand also works well with sports customers.

Royal Panda's core market is the UK, which accounted for 50% of its revenue in Q3 2017. If the company had been part of LeoVegas during the third quarter, it would have added EUR 4.9 m in revenue from the UK, thereby increasing the Group's total revenue from the UK market by 73%.

During the third quarter, Royal Panda had EUR 9.8 m in revenue (6.1) and an EBITDA margin of 32%. The acquisition is being made for a purchase price of EUR 60 m. If certain financial thresholds are met after 12 months, Royal Panda is entitled to an earn-out payment up to an additional EUR 60 m. In order to receive the maximum, earn-out, the company must achieve at least EUR 50 m in Net Gaming Revenue (NGR), of which EUR 34 m from the UK, and EBITDA of EUR 15 m. The total purchase price may thus amount to a maximum of EUR 120 m.

On the back of the acquisition of Royal Panda, the LeoVegas Group will remove its short-term 2018 financial targets as these did not consider larger acquisitions.

Financing
LeoVegas has a strong cash position that has been used for the initial purchase price. In addition, the Group has raised loan financing of EUR 100 m from the bank in order to have continued capacity to act on future acquisition opportunities. Of these EUR 100 m, EUR 40 m is a Revolving Credit Facility (RCF). The financing has a maturity of three years and amortization begins in the second quarter of 2019 with EUR 10 m per quarter. The interest rate on financing is approximately 2 %.

LeoVegas has a strong balance sheet and positive cash flow. The financing ensures that LeoVegas is in a strong position take part in further consolidation within the industry.

Our position - GameTech
Ever since LeoVegas was founded we have been extremely product- and technology-focused. Our innovative and data-driven marketing has been instrumental to our success. Everything emanates from technology, and we therefore see ourselves not only as a gaming company, but as a tech company in the gaming industry.

Explaining LeoVegas for investors and others with respect to identity, culture and work approach is expressed best with the term GameTech. I am proud of our passion - "Leading the way into the mobile future" - and ability to say that we are leading development in this part of the industry - GameTech.

Third quarter
Revenue totalled EUR 55.6 m (39.7) during the third quarter, an increase of 40%. Organic growth was 33%. EBITDA adjusted for items affecting comparability pertaining acquisitions and work with the listing on Nasdaq Stockholm was EUR 8.4 m (9.8), corresponding to an adjusted EBITDA margin of 15.1% (24.7%). Revenue from regulated markets accounted for 25.3% (13.2%) of total revenue during the quarter.

Australia closed
As communicated in connection with the second quarter interim report, we have decided to close our operations in Australia due to legal changes that have been made. We closed Australia on 10 September. During the third quarter Australia contributed EUR 3.2 m in revenue. The fourth quarter will thus be the first quarter in which Australia is excluded entirely. During the fourth quarter of 2016 Australia contributed EUR 5.8 m in revenue.

Focus on LeoVentures and Management changes
The LeoVegas Mobile Gaming Group strives to be the most innovative, entrepreneurial and fastest growing company in our industry. To strengthen this momentum, we give increased focus to our venture business IMP (Independent Mobile Productions), and at the same time change the name to LeoVentures.

My co-founder Robin Ramm-Ericson now takes the role of Managing Director for LeoVentures, leaving the CXO role in LeoVegas' executive management team, and remains as senior executives in the Group.

In addition to growing existing investments, we will expand the portfolio over time with other strategically important opportunities for the group that are in line with our passion "Leading the Way into the Mobile Future". At present, this is a part of LeoVentures:
   · Authentic Gaming (Live Casino Provider)
   · 21 Heads-Up (Provider of unique and innovative card games)
   · LiveCasino.com (affiliate and community activities in Live Casino)

New investments within LeoVentures include internal and external entrepreneurs who come to us with innovative ideas, industry knowledge or identify an early market trend, as well as external companies that we see the potential to scale up further.

At the same time, the Chief Product Officer (CPO) position is added to the executive management team. At the moment, it is our former Head of Product Jarl Modén who will hold the role. Recruitment to the CPO is ongoing and we look at both internal and external for candidates

Nasdaq Stockholm's main list
Since our listing on Nasdaq First North Premier we have been preparing ourselves for a change in listing to Nasdaq Stockholm's main list. A listing change will strengthen the company and give us an even more distinct quality seal in our communication and cooperation with authorities, licensors and partners. For institutional investors - both in Sweden but even more so abroad - we will become more accessible and attractive as a company. Our plan for the listing change is that it will be completed during the first half of 2018.

Leo Safe Play
Responsible gaming is an important area that we are working tirelessly to improve. For example, we now have an automated system that proactively alerts us about customers who show tendencies toward unsound gaming. This enables us to more swiftly and effectively address these customers in a responsible manner.

All aids and tools can be found on Leo Safe Play's website - www.leosafeplay.com. Lifting this out to a separate website makes it more visible and easier for our customers to find the information.

LeoVegas is now also a member of the Swedish Standards Institute (SIS), which will be setting uniform European standards for reporting surrounding online gaming. This will contribute to safer and more secure gaming, which we welcome. It is also further proof that regulation is the way to a more mature and sustainable market.

Markets
In Italy we are planning and working to migrate LeoVegas Italy to our proprietary technical platform, Rhino, next year. We see economies of scale in this, and it will reduce the complexity in our daily work. In recent months we have successively phased in the LeoVegas brand and phased out Winga, and we now market only LeoVegas in Italy.

Denmark has continued to grow strongly and represented 8% of revenues in the quarter.

Comments on fourth quarter
The first 23 days of October have begun with Net Gaming Revenue (NGR) of EUR 14.9 m (8.8), representing growth of 70%. This fine start to the fourth quarter shows that even though we have closed Australia for business, it has not had an appreciable impact on our revenue. The percentage growth rate of 70% is somewhat boosted by that October last year was a comparatively weak month in the fourth quarter and that October this year has had an exceptionally strong start.

During the fourth quarter, we expect marketing in relation to revenue to be higher than in the third quarter. We will most likely reach the highest level during the year as we plan to invest ahead of the Christmas holiday season.

With a great acquisition, a good start to the fourth quarter and a continued strong cash position, we continue to have tremendous opportunities going forward, and we are all looking forward to an exciting fourth quarter.

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 5352 6408, UK: +44 (0) 20 3427 1914, US: + 1646 254 3364 code: 35 35 667 or join at the web https://edge.media-server.com/m6/p/4pk3b55e

This information is information that LeoVegas AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation 596/2014. The information was submitted for publication, through the agency of the contact person set out below, at 25th of October 2017 CET on 08:00.

For further information, please contact:

Gustaf Hagman, Group CEO co-founder: +46 70-880 55 22, gustaf.hagman@leovegas.com
Viktor Fritzén, Group CFO: +46 73-612 26 67, viktor.fritzen@leovegas.com
Philip Doftvik, Head of Investor Relations: +46 73-512 07 20, philip.doftvik@leovegas.com
Visitors address: Sveavägen 59, Stockholm
Corporate identity number: 556830-4033

About the LeoVegas mobile gaming group
LeoVegas' vision is to create the ultimate mobile gaming experience and be number one in mobile casino. The business is distinguished by award-winning innovation and strong growth. LeoVegas' technical development is conducted in Sweden, while operations are based in Malta. The Swedish parent company LeoVegas AB (publ) invests in companies that offer gaming via mobile devices and desktop computers along with companies that develop related technologies. LeoVegas has attracted major international acclaim and has won numerous awards, including "Nordic Operator of the year", "Mobile Marketing Campaign of the year", and "Innovation in Mobile and Tablet of the Year" at the international EGR Awards. LeoVegas bases its development on "Mobile First" and is at the forefront of using state-of-the-art technology in the mobile gaming market. With a foundation in a great gaming experience, long-term customer relationships and establishment of a strong brand, the company has attracted a steadily growing customer base through innovative, effective and data-driven marketing. Since its start, the mobile gaming company LeoVegas has shown strong quarter-on-quarter growth. LeoVegas' shares are listed on Nasdaq First North Premier. Avanza Bank AB is the company's Certified Adviser. For more about LeoVegas, visit www.leovegas.com and www.leovegasgroup.com.




[1] Throughout this report, figures in parentheses pertain to the same period a year earlier.