LeoVegas revenue rises 8% in Q1 as German regulations bite
Share price slumps 14% as Gustaf Hagman suggests up to 80% of German online casino market has shifted towards non-conforming operators
LeoVegas has reported an 8% year-on-year rise in revenue for the first quarter of 2021 to €96.7m (£83.5m).
The Malta-headquartered operator confirmed an organic growth rate in local currencies of 8%, rising to 19% when excluding the firm’s German operations, which have been severely impacted by transitional operating restrictions before the regulated market goes live on 1 July.
Company adjusted EBITDA rose to €10.9m during Q1, with a corresponding increase in EBITDA margin at 11.3%.
The percentage of company revenue generated from regulated markets dropped by 9% during the quarter, accounting for 65% of total revenue.
The number of NDCs dropped 4% year-on-year, although the number of returning depositing customers increased 25% over the same period.
In respect of net gaming revenue (NGR) per region, the operator’s Rest of Europe segment accounted for 42% of Q1 NGR, down 1% on the same period of last year.
Nordic NGR made up 38% of total in Q1, down 3% annually. Rest of World NGR rose by 69% to account for a fifth of overall Q1 NGR.
Meanwhile, online casino generated the lion’s share of LeoVegas NGR during Q1 at 74%, with sports betting and live casino accounting for 9% and 17% respectively.
Addressing the Q1 financial results, LeoVegas CEO Gustaf Hagman highlighted progress in the firm’s Swedish operations during March, which marked the first period of growth since the introduction of temporary Covid-19 regulations affecting online casino deposits and bonuses.
Hagman also confirmed LeoVegas would complete its €5m acquisition of Swedish sportsbook brand Expekt later this month, with the group targeting an increase in sports betting market share in Sweden and elsewhere.
Highlighting an estimated 45% year-on-year drag on German revenue, Hagman said: “Operators in the market are acting differently with respect to implementing the new restrictions, which unfortunately has led to a skewed competitive situation.
“The assessment is that up to 80% of the German market for casino has temporarily been shifted over to operators that have chosen not to adapt to the coming market regulation.
“Our hope is that this will soon be sorted out by the German authorities, which is a prerequisite for licence system success, with a high level of channelisation and consumer protection,” he added.
The operator’s German operations generated 6% of total NGR in Q1, down 15% quarter-on-quarter, while a 5.3% turnover tax on slots is still to be implemented.
The opening quarter of this year proved a busy period for LeoVegas, which migrated the last remaining brand onto its in-house technology platform Rhino.
LeoVegas also unveiled a new proprietary games development studio, Blue Guru Games, after LeoVentures purchased an 85% controlling stake in the business.
Addressing these developments, Regulus Partners analyst Paul Leyland said: “The platform migration is complete, enhancing control, efficiency and development potential and the acquisition of Expekt provides a much needed betting-led brand to broaden mass-market reach.
“Investment into games content, both directly and as an incubator, should also drive a broader based level of product innovation and differentiation than the old business models of horizontal commoditisation or vertical inefficiency have previously delivered,” he added.
LeoVegas’ share price dropped by more than 14% to SEK43.12 (£3.66) in early trading on Nasdaq Stockholm.