Year-end report 2018: 14% organic growth and improved profitability

Fourth quarter 2018

  • Revenue increased to SEK 48.7 (45.6) million. Revenue from affiliate operations increased to SEK 48.6 (44.1) million.
  • EBITDA increased to SEK 33.9 (30.0) million.
  • Profit after tax declined to SEK 15.7 (21.9) million. 
  • Earnings per share after dilution fell to SEK 0.21 (0.31).
  • Total NDC growth was 13%; largest vertical Casino increased NDCs by 18%.
  • Cash flow from operating activities was SEK 33.6 (32.8) million.

Full year 2018

  • Revenue increased to SEK 192.2 (169.5) million. Revenue from affiliate operations increased to SEK 190.3 (160.3) million.
  • EBITDA increased to SEK 127.1 (106.6) million. 
  • Profit after tax was SEK 78.3 (6.0) million.
  • Earnings per share after dilution increased to SEK 1.08 (0.09).
  • Total NDC growth was 23%; Casino vertical increased NDCs by 35%.
  • Cash flow from operating activities was SEK 115.5 (108.5) million.
  • Net Gaming Europe’s Board of Directors will recommend to the Annual General Meeting that no dividend be paid for the 2018 financial year, as was the case in 2017.

Significant events in the quarter

  • iGaming operations have been discontinued and reshaped into affiliate operations. Net Gaming is now a focused affiliate company.  
  • The EGM on 19 December 2018 decided to change the presentation currency from SEK to EUR with effect from 1 January 2019.  
  • A provision of SEK 6.8 million relating to a potential credit loss was charged to earnings and had a negative impact on net financial items.    

Significant events after the quarter

  • Christian Käfling has been appointed new Head of M&A, strengthening the management team. Christian comes most recently from PwC and brings extensive experience from strategy and commercial due diligence in the iGaming sector.

CEO’s comments: Solid EBITDA growth and strong cash flow

Net Gaming continued to grow in Q4 with improved profitability. Revenue from affiliate operations increased by 10% to SEK 48.6 (44.1) million, while organic growth was 14%. Our organic growth has been negatively affected by our gradual phasing-out of traffic from Paid Media channels. We have also changed our revenue distribution to an increased proportion for revshare; 35% compared with 22% a year ago. While sales growth for Q4 is slightly below our defined target, it is pleasing to note that careful cost control has contributed to an all-time-high EBITDA. Cash conversion corresponded to 88% of EBITDA and the equity ratio strengthened further.

For the full year, revenue from affiliate operations grew by 19% and the EBITDA margin improved to 66% from 63%. Our strong cash flows have enabled us to gradually reduce our debt/equity ratio during the year, and in June we paid the final additional consideration for the highly successful acquisition of HLM Malta Ltd. It also means that since then we have been able to run the Company according to our ambitious growth plan, thereby also adapting the organisation for long-term sustainable growth. In addition, we made a listing change, moving to Nasdaq First North Premier at the end of June 2018.

Key recruitments complement the organisation for continuing expansion

We have made a number of key recruitments, bringing in specialist expertise in various areas, notably in design and product development for continuing expansion. Many of these recruitments have taken place since the end of the year, with a clear focus on strengthening our products and offering by, among other things, further developing our strong CasinoGuide and PokerListings brands. Christian Käfling takes up his position as new Head of M&A in April 2016 and will be responsible for working constantly on potential additional acquisitions to enable us to take a larger market share in iGaming affiliation.

USA, Casino Europe and Betting our three growth pillars

During Q4, we continued to systematically conduct activities in line with our growth strategy. In the US, we continue to build up our long-term assets, and revenue increased by 45%. The number of states wanting to regulate iGaming is increasing, although the exact timing for regulation by additional states is difficult to assess. We continue to develop our new Betting vertical and we expect it to be able to make a clear contribution to our revenues and earnings over time. Within Casino, we already have a strong portfolio of digital brands that generate high revenue growth, and we are convinced that we can continue to grow our revenues in Europe. Launches in January 2019 included new Casino brands in the UK and Germany and a new Betting brand in Germany.

General trends in the iGaming industry

We also note that, for the industry in general, much is happening with regard to regulatory changes, with increased requirements for operators in terms of responsible gaming, gaming limits etc. As would be expected, the market is affected by regulatory changes, but I see the new requirements as a sound contribution to a more sustainable iGaming market in the long term, with better protection for the end consumers.

In the short term, we have seen a sequential decline in our NDC development, but an increase in Q4 2018 compared with Q4 2017.

New vision

The Board has clarified Net Gaming’s vision in order to better reflect our focus and our ambitions over time.

Our vision is:

“To be the World's number 1 in iGaming affiliation.”

As CEO, I believe that a clear direction for the Company is a very good thing, and we are adding specialist expertise in several areas to achieve our vision of becoming number 1. We have launched Betting as a new vertical, which is an obvious step to take, as betting accounts for about 50% of the total iGaming market. In addition, we have defined a clear expansion plan both for the USA and for Casino in Europe, where our market share is scarcely 1%. Economies of scale should give us good potential to significantly increase that market share. In other words, there are many interesting opportunities for us to grow further.

Outlook for 2019

  • In line with our strategy of developing strong digital brands, we will place an increased focus on design, conversion and user-friendliness. 
  • We will further develop and strengthen our organisation by recruiting carefully selected key individuals who fit in well with our corporate culture. 
  • Careful cost control combined with further efficiency measures will continue to be important to us, while we will also invest in important growth projects. 
  • New regulations, economic developments and currency effects will always be difficult to predict and can create short-term volatility, but a leading player like Net Gaming is well-placed to manage this over time. 

Investments for long-term and sustainable growth

We continue to lay the foundation for long-term and sustainable growth through investments in both personnel and technology, having now also completed the transition to a focused affiliate company. I am genuinely looking forward to executing according to our growth strategy and in doing so delivering in line with our financial objectives!

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 

Presentation for investors, analysts and media 

A live conference call will be held on 21 February 2019 at 10.00 a.m. Swedish time. CEO Marcus Teilman and CFO Gustav Vadenbring will present the report in English. You can follow the presentation here https://tv.streamfabriken.com/net-gaming-europe-q4-2018 

To call and take part in the conference call: 

Sweden: +46856642707 
UK: +443333009271
US: +16467224902 

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 21 February 2019 at 08.30 CET.  


About Us

Net Gaming’s business idea is to invest in fast growing iGaming companies primarily within lead generation. Net Gaming’s strategy for value creation is to build on the acquired company’s identity and corporate culture, and to act as a catalyst for change and growth.

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