Interim Report Q1 2019

Negative impact from regulation effects in Europe, while North America continues to grow

First quarter 2019

• Revenue from operations declined to EUR 4,053 (4,328) thousand.
• EBITDA declined to EUR 2,553 (3,102) thousand. Adjusted for a one-time effect related to the divestment of the Battle of Malta, EBITDA for Q1 2018 was EUR 2,801 thousand.
• Profit after tax declined to EUR 1,941 (2,144) thousand. 
• Earnings per share after dilution fell to EUR 0.026 (0.031).
• Total NDC growth declined by -15%; NDCs for largest vertical Casino declined by -14%.
• Cash flow from operating activities increased to EUR 2,835 thousand (EUR 2,562 thousand excl. gaming operations).

Significant events in the quarter

• Management team strengthened by new Head of M&A with effect from 29 April.
• On 1 January 2019, Net Gaming changed its presentation currency from SEK to EUR to provide a clearer picture of operating activities in the currency in which they are primarily conducted.

Significant events after the quarter

• Shareholders representing 62.5% of the shares and the capital have submitted proposals for the 2019 Annual General Meeting with regard to Net Gaming’s Board. Fredrik Rüdén and Peter Åström, with broad industry experience within iGaming, are nominated as new Board members.
• Notice of AGM on 23 May 2019.
• Publication of 2018 Annual Report.
• Net Gaming has entered into an agreement with ABG Sundal Collier (“ABG”) whereby ABG will act as liquidity provider for the Net Gaming share. The purpose is to promote the share’s liquidity, and the assignment commences on Monday 13 May 2019.

CEO’s comments: Increased political uncertainty in European markets, positive development continues in North America

Revenue declined by 6% in the first quarter. Revenue excluding “paid media” was unchanged compared with the same period the previous year. Our gaming operations have been discontinued and Battle of Malta has been divested, which affects the comparative figure. The political regulatory effects in Europe and the transition to an increased revshare proportion are two main factors that explain why we have not shown better revenue growth during the first quarter. We face a period ahead in which these two factors will continue to have a negative impact on our revenue. Positive factors that stand out during the first quarter are revenue growth of 42% for North America and the continuation of re-regulation in the US.

Political uncertainty
As already mentioned, several national markets in Europe are in the process of major legal and political changes. The higher political activity during the quarter has created short-term turbulence among iGaming operators, which has repercussions for companies like us who are engaged in affiliate marketing. The Netherlands has just voted to regulate online gambling in the second half of 2020 and the bill will be presented in June 2019. Sweden became a regulated market on 1 January 2019. In Italy, they are still debating a gambling advertising ban, although affiliate marketing now appears to be exempt. It is our assessment that the ongoing restructuring of the gaming market in Europe will continue to have an adverse effect on our revenue in the period ahead. The short-term uncertainty does not change the long-term market conditions, but at present it is too early to say when there will be a lasting recovery in Europe. Increased political risks lie ahead and are something we have to live with.

Revshare’s proportion of revenue increases
In line with our operational strategy, we have continued to increase the revenue share proportion, which is now 40% (23%) of total revenue. The rapid transition to revshare has had a negative impact on our Q1 revenue, but will benefit us over time.

Continued growth in North America
During the quarter, we continued to develop and invest in our assets in North America. North American revenue grew by 42% and the region now accounts for 26% of our total revenue. Net Gaming has launched, and will continue to launch, growth projects for both national and local brands for the American market. Pennsylvania will be regulated later this year and we expect more states to follow this trend in the coming years. We see good opportunities for long-term growth in North America, although we now also see increasing competition.

New digital brands launched
We have also launched new brands on our scalable technical platform during the quarter. New launches include Slotsbot, Bettingonline in the UK and Wettfieber. A focus area in 2019 is also to improve design and user value. We have seen positive effects of this already in the first quarter, and we also expect to see them in the future when all revenue-generating sites have been upgraded.

Increased acquisition focus for more revenue diversification
In order to cope with the political regulatory effects in Europe, we will increase our focus on selectively making qualitative acquisitions with the aim of creating an increased geographical distribution of revenue. This work has been intensified through the appointment of Christian Käfling, Head of M&A. 

Let me conclude by saying that we continue to have strict cost control, with cost levels in line with the previous year. We show a strong operating cash flow compared with the previous year and a clearly improved equity ratio, which is in line with how we want to drive Net Gaming forward. We work hard every day to implement our long-term growth plan step by step.

Marcus Teilman, President and CEO

For further information, please contact 

Marcus Teilman, President and CEO
Mobile: +356 9936 7352 
E-mail: marcus.teilman@netgaming.se

Gustav Vadenbring, CFO
Mobile: +356 9967 6001 
E-mail: gustav.vadenbring@netgaming.se

The appointed Certified Adviser is FNCA Sweden AB, info@fnca.se, +46 8 528 00 399. 

This information is information that Net Gaming Europe AB (publ) is required to disclose under the EU Market Abuse Regulation. The information was provided by the contact person above for publication on 23 May 2019 at 08.30 CET.