Interim Report Q1 2018: Strong profit growth and underlying growth
First quarter 2018
- Revenue increased to SEK 43.9 (41.0) million. Revenue from affiliate operations increased to SEK 43.1 (37.5) million.
- EBITDA increased to SEK 30.4 (25.0) million.
- Profit after tax increased to SEK 20.1 (8.0) million.
- Earnings per share amounted to SEK 0.30 (0.14).
- Total NDC growth increased to 28% (8%), largest vertical Casino increased number of NDCs by 55%.
Significant events in the quarter
- Acquisition of affiliate assets in central Europe for a purchase price of EUR 0.45 million.
- Net Gaming launches financial targets, aand clarified strategy
- Recruitments of key personnel for future product launches within the new vertical Sports betting.
- Investments made in selected focus markets in line with growth strategy.
- Divestment of Battle of Malta poker tournament for EUR 0.3 million in order to concentrate operations.
- SEK 12.0 million of the convertible debenture converted into 2,666,665 new shares. Outstanding convertible loans now amount to SEK 21.5 million.
Significant events after the quarter
- Launch of both a Finance and a Sports Betting vertical under NGE Inqubator.
- Acquisition of affiliate assets from Webwiser GmbH for an initial purchase consideration of EUR 2.29 million with an additional consideration of EUR 1.25 million with a total consideration corresponding to approx. 3.5 x EBITDA..
- Gustav Vadenbring recruited as new CFO, taking up his appointment in August 2018.
- Net Gaming plans for a list change to First North Premier.
- Reshaping of iGaming to affiliate operations in 2018 and therefore becoming a focused affiliate company.
- The Board has decided to apply earnings per share as an overall financial target.
CEO’s comments: Strong underlying NDC growth
The first quarter of 2018 started with EBITDA growth of 21% and an EBITDA of SEK 30.4 million, a new all-time high in Net Gaming’s history. Profit after tax was SEK 20.1 million. Revenue growth for affiliate operations was 15%, 10% of which was organic growth.
Part of our strategy going forward is to gradually change our revenue mix to an increased proportion for revshare. This shift gives us slightly lower revenue growth in the short term but favours us in growth and predictability in the long term. Our NDC growth therefore provides a good indication of our underlying growth (NDC stands for first time depositors, i.e. the number of paying end customers Net Gaming has referred to our operators). NDC growth for Q1 was 28% (8%), 19% of which was organic NDC growth. Casino, our largest and most important vertical, increased its NDCs by 55% in the first quarter.
With the divestment of Battle of Malta and reshaping of iGaming to affiliate operations in 2018, our streamlining process will be completed. Net Gaming is becoming a 100% focused affiliate company with clear goals and growth strategy. I believe this clarity and focus to be positive, both internally and externally.
We have also made a strategic additional acquisition of affiliate assets in central Europe. The acquisition was completed in February. After the end of the period we have also completed an acquisition in a future attractive market: DACH (Germany, Austria and Switzerland). The acquisition obtains 75% of its revenue from revshare. We continue to systematically identify qualitative acquisitions that meet our investment criteria at reasonable values.
We have a clear plan for how we want to grow organically in the period ahead. One example of this is our launch of Sports betting as a new vertical and also the launch of a new financial vertical after the end of the quarter. These are two verticals that we believe will be important for our growth and earnings over time.
It is particularly pleasing to see important geographic markets moving towards re-regulation. Perhaps the most recent example is the United States, where online sports betting is moving towards regulation. We see this as a very positive development, as more states are now expected to follow Delaware, Nevada and New Jersey, which are already regulated, while Pennsylvania is in the process of becoming regulated. Net Gaming is well positioned in the US market with several premium domains such as CasinoGuide.com. We currently have hundreds of domains in the US market that we are unable to capitalise on. As more states are regulated and in particular as numbers of operators join the market, we will be able to capitalise significantly on that market. I expect poker to be a product to be reckoned with, and we also have a number of brands to market, including Pokerlistings.com, a world leader in poker.
With new verticals in place, successful streamlining, favourable development of new geographic markets and good underlying growth, I feel that 2018 has begun in a positive way. It will be very interesting to follow continuing developments!
Marcus Teilman, President and CEO