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Interim Report Q2 2019

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Challenging quarter but operating margin and cash conversion remain good

Second quarter 2019

  •  Revenue declined to EUR 3,497 (4,597) thousand. 
  •  EBITDA declined to EUR 2,024 (2,983) thousand.  
  •  Profit after tax declined to EUR 1,242 (2,088) thousand.  
  •  Earnings per share after dilution fell to EUR 0.016 (0.029). 
  •  Total NDC growth declined by 29%; the largest vertical Casino declined by 33%.  
  •  Cash flow from operating activities fell to EUR 1,983 (2,533) thousand. 

First six months 2019

  •  Revenue declined to EUR 7,550 (8,925) thousand. 
  •  EBITDA declined to EUR 4,577 (6,085) thousand.  
  •  Profit after tax declined to EUR 3,183 (4,232) thousand.  
  •  Earnings per share after dilution fell to EUR 0.042 (0.061). 
  •  Total NDC growth declined by 22%; the largest vertical Casino declined by 24%.  
  •  Cash flow from operating activities fell to EUR 4,824 (5,094) thousand. 

Significant events in the quarter

  •  Acquisition of BettingGuide.se, which was launched in the regulated Swedish gaming market.
  •  Management team strengthened by new Head of M&A from 29 April 2019.
  •  Launch of new design concept for CasinoGuide in the UK and US and Casinospielen.de in Germany to increase user-friendliness and conversion.
  •  A new technical platform has been launched, resulting in faster loading times, increased user-friendliness and scalability in geographical expansion and the launch of new digital brands.

Significant events after the quarter

  • Acquisition of MaxFreeBets.co.uk, a leading betting brand in the regulated UK betting market.

CEO’s comments: Good opportunities for Net Gaming still there despite political regulation effects

As expected, we were affected by continuing political regulation effects in the European market in the second quarter. Revenue declined to EUR 3,479 (4,597) thousand. The EBITDA margin fell to 58% (65%) and cash flow from operating activities amounted to EUR 1,983 (2,533) thousand. Despite a challenging quarter and lower revenue, we are still able to show that our business model and operating margin remain good.

The revshare proportion continued to increase during the quarter and is currently at 47%, compared with 30% a year ago and 12% two years back. The shift to an increased revshare gives us a more stable and predictable revenue base, which benefits us in the long term. As previously communicated, we have faced increased competition in North America, and in Q2 and early Q3, we have launched several important product initiatives in the region. We expect a continuation of the good potential in North America over time.

Thanks to our strong cash conversion, we have the resources to continue expanding our business organically in line with our growth strategy. During Q2, we upgraded our proprietary technology platform, with the aim of increasing scalability and the pace of geographic expansion and improving speed for our digital brands. We have also launched our betting product on the new brand BettingGuide.se. In addition, our CasinoGuide and Casinospielen.de brands have been re-launched in the UK, the US and Germany, with improved design, user-friendliness and user value. In the future, we will maintain the fast pace, with more launches in several geographical markets. 

Our acquisition focus has increased and at the end of Q2, we acquired BettingGuide.se, which will now become our brand in the regulated Swedish market. In addition, after the end of the period, we acquired Maxfreebets.co.uk, a well-established digital brand in the regulated UK market. With the acquisitions, we are increasing the pace within the betting vertical, while adding two new revenue pillars in regulated markets we believe to have good long-term development potential. 

Our ambition is to continue focusing our efforts on increased geographical distribution of our revenue, partly through acquisitions and partly through organic growth in both existing and new geographical markets. Continuous minimisation of the Company’s risk by spreading political risk over several geographical markets is a strategy we will be pursuing going forward. 

Ahead of us, we see attractive business opportunities in a highly fragmented market to make disciplined and reasonably valued acquisitions that meet our investment criteria. Our starting-point is that the acquisitions will be primarily financed through our relatively large existing cash resources and our strong operating cash flows. I am convinced that using existing cash and cash flows in this way creates good value ​​for Net Gaming’s shareholders over time, as our overall financial target is earnings per share growth. 

I am not satisfied with our performance in Q2, but I am hopeful that that we will show improved EBITDA levels in the future.

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 15 August 2019 at 08.30 CET.  


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