Financial Reports and Trading Updates — Weekly Round-up for May 8, 2017

By Brian Cullingworth, Last updated May 8, 2017

Interactive A Major Driver In Scientific Games Latest Results

Q1-2017 growth driven by Interactive and gaming machine sales

Scientific Games Corporation has posted Q1-2017 results, reporting that growth was achieved through good performances by the interactive and machine sales divisions.

First quarter revenue rose 6 percent to $725.4 million, up from $682 million a year ago, led by a 24 percent increase in global new unit shipments of gaming machines and a 33 percent increase in interactive revenue.

However foreign exchange had an $8.1 million, or 1 percent, unfavourable impact on revenue.

Operating income in the first quarter increased 75 percent to $88 million from $50.3 million a year ago as a result of the revenue growth and lower cost structure. Net loss was $100.8 million compared with $92.3 million in the prior-year period, as the increase in operating income was offset by a $29.7 million loss on extinguishment and modification of debt and a $35.9 million increase in the income tax provision.

Attributable EBITDA increased to $286.6 million from $258.8 million a year ago driven by the higher revenue and lower cost structure; and AEBITDA margin improved to 39.5 percent from 37.9 percent in the prior-year period.

Net cash from operating activities rose to $111 million, inclusive of $12.6 million of cash payments related to the business improvement initiatives implemented in the 2016 fourth quarter, from $101.1 million a year ago.

Capex was higher at $61.3 million (Q1-2017: $51.2 million).

The company completed refinancing transactions during the first quarter 2017 that lowered cash interest costs at current rates, reduced exposure to variable interest rates, and extended a substantial portion of its debt maturities.

At March 31, 2017, the company had fully repaid borrowings under its revolving credit facility, and its cash and availability under its revolving credit facility was $657.7 million.

On the Interactive front, SG reported:

Total interactive revenue grew 33 percent to $96.3 million, primarily reflecting a 33 percent increase in social gaming B2C revenue due to the ongoing popularity and growth of Jackpot Party Social Casino coupled with the success of more recent apps, including the most recent introduction of 88 Fortunes.

Operating income increased 50 percent to $17.2 million, primarily reflecting the higher revenue. Selling, general and administrative expense and research and development expense increased primarily due to higher player acquisition and marketing expenditures to support ongoing growth, and pre-launch development expenses for apps not yet launched.

AEBITDA rose to $23 million and AEBITDA margin increased to 23.9 percent, primarily reflecting higher revenue and improved operating leverage, partially offset by increased marketing costs and ongoing development initiatives underlying the rapid growth.

Chief executive officer Kevin Sheehan said in his report:

“This is a great start to the year, with all three of our business segments contributing to growth. We have a tremendous global team firmly focused on unlocking the power of our brands, strengthening our commitment to innovation, and executing a disciplined fiscal approach to enhance long-term shareholder value. We are building for our future.”

Spanish Online Gambling Market Continues To Flourish

Revenues up 32.6 percent year-on-year

The regulated online gambling market in Spain continued to grow in the fourth quarter of 2016, with regulator Dirección General de Ordenación del Juego reporting GGR up 32.6 percent y-o-y at Euro 125.7 million.

Other highlights of the report:

* Deposits in Q4-2016 reached Euro 2.9 billion, up 19.9 percent from the same period in 2015;

* Sports betting again dominated, accounting for 55.52 percent of all revenue at Euro 69.77 million (up 30.6 percent), and 43.82 percent of deposits at Euro 1.3 billion (up 7.7 percent);

* By comparison, online casino operations contributed 28.6 percent of overall revenue; online poker just 2 percent and contests 1.76 percent;

* Online casino deposits accounted for 41.17 percent of all deposits at Euro 1.2 billion; online poker 14.27 percent, Bingo 0.65 percent, and contests 0.1 percent.;

* At Euro 35.95 million, online casino revenue was up an impressive 58.83 percent year-on-year, probably due to slot action, which generated Euro 16.78 million in GGR – a rise of 98 percent;

* Revenue from online roulette topped Euro 12.77 million, and Blackjack Euro 6.4 million;

* Online poker underperformed, with a6.9 percent decline in deposits to Euro 415.6 million, but a 4.6 percent rise in revenue at Euro 12.23 million;

* Tournament activity accounted for 55.9 percent of online poker actionat Euro 8.5 million – up y-o-y by 16.9 percent;

* Cash game revenue dropped 7.6 percent to Euro 6.7 million, contributing Euro 44.1 of all online poker revenue;

Despite poker’s relatively poor performance, the outlook is not all doom and gloom; talks are reportedly at an advanced stage between Spain, France, Italy, Portugal and possibly the UK on shared player pools.

Foxwoods Social Casino Delivers The Goods

FoxwoodsONLINE sees 300 percent increase in database growth, 45 percent Increase in gross revenue, and double digit growth in daily and monthly active users

Powered by Greentube Pro, Foxwoods’ social casino has posted impressive revenue and user growth since its April 2016 revamp and launch, according to a press statement Friday.

Both parties reported significant revenue numbers for the past six-month period as well as a dramatic increase in the number of active daily and monthly users.

FoxwoodsONLINE is a subsidiary of Foxwoods Resort Casino – the largest resort casino in North America. Greentube – a subsidiary of the Novomatic Group – is a developer and provider of iGaming solutions for the Internet, mobile devices and iTV.

The FoxwoodsONLINE report flags the following high points:

* 300 percent increase in user database;

* 45 percent rise in gross revenue;

* 20 percent hike in year-on-year daily active users;

* 51 percent increase in y-o-y monthly active users.

Seth Young, director of online gaming for Foxwoods Resort Casino, said that his company had depended on Greentube to develop a social platform that engages players and extends the same gaming experience enjoyed by guests at the land casino.

“We look forward to another excellent year with our partners at Greentube,” he said.

Greentube’s private-label social casino marketing platform was created by Kenny Huang and his team at BlueBat Games — a Greentube subsidiary. The platform allows for in-game marketing capabilities via multiple channels and tracks with the evolution of modern life including shopping, socializing and more from the convenience of any device, engaging players.

Macau Reports 16.3 Percent Revenue Growth In April

Year-on-year figure meets analyst expectations

Macau’s recovery, now believed by many analysts as firmly established, continued in April with revenues improving year-on-year by 16.3 percent to 20.2 billion patacas ($2.52 billion) according to official government statistics.

Analysts had predicted a bracket between 13 and 17 percent positive, expecting that new resorts would draw high rollers and casual gamblers to the gambling island off the shores of China.

Whilst they are generally positive, analysts remain cautious on the sustainability of revenues after a slump that lasted for two years.

Robust Results From Bet-At-Home’s First Quarter

Report significant increase in gross betting and gaming revenue

bet-at-home AG has reported encouraging results for its first quarter of 2017.

Key performance indictors for the 12-week period ending March 31, 2017 include:

– Gross betting and gaming revenue up 23.0 percent y-o-y to Euro 37.2 million

– Total betting and gaming volume rose 29.7 percent y-o-y to reach Euro 841.4 million.

– Betting fees and gambling levies increased to Euro 5.4 million (Q1/2016: Euro 3.7 million).

– Expenses related to European Union VAT regulations amounted to Euro 2.4 million (Q1/2016: Euro 2.1 million).

– Net betting and gaming revenue increased 20.2 percent to Euro 29.4 million (Q1/2016: Euro 24.5 million).

– EBT amounted to Euro 4.9 million (Q1/2016: Euro 7.9 million).

– EBITDA was Euro 5.0 million (Q1/2016: Euro 7.5 million).

– Cash and cash equivalents and marketable securities of Euro 106.3 million.

– An increased marketing push, particularly in Germany and Austria, during the first quarter of 2017 saw a significant marketing spend rise to Euro 14.9 million (Q1/2016: Euro 8.8 million)

– As at 31 March 2017, the bet-at-home.com AG Group had 4.7 million registered customers (31/03/2016: 4.3 million).

– Other operating expenses of Euro 5.6 million (Q1/2016: Euro 4.4 million) were attributed to higher gross betting and gaming revenues.

– Total bet-at-home.com AG group result was Euro 0.3 million (Q1/2016: Euro 0.6 million), a consequence of the gradual repayment of loans granted.

– Group equity increased to Euro 112.9 million (31/12/2016: Euro 109.6 million), resulting in a Group equity ratio of 75.3 percent (31/12/2016: 75.4 percent).

– Liquid assets and current securities in the amount of Euro 106.3 million

– Short-term loans issued to the majority shareholder in the amount of Euro 21.0 million were declared, as Euro 34.0 million have already been repaid.

Looking ahead, the group expects gross betting and gaming revenues to reach Euro 144 million and EBITDA of Euro 34 million and Euro 38 million during the 2017 fiscal year.

Amaya Whittles Away Deferred Purchase Price For Rational Group

Outstanding amount sits at $47.5 million

Amaya Inc. has paid an additional $75 million on its outstanding deferred purchase price for the Rational Group, acquired in August 2014.

The company paid $200 million in November 2016, a further $75 million in February 2017, which together with this $75 million payment, leaves an outstanding obligation of $47.5 million.

Gig Hails Record First Quarter Results

Focus on marketing drives all time revenue high but impacts EBITDA

OSX-listed Gaming Innovation Group (GIG) has reported strong progress with revenues up 193 percent year-on-year in its first quarter 2017 report.

Increased investment in marketing, however, while driving expansion, has negatively affected EBITDA margins.

Key performance indicators for the 12-week period ending March 31 2017, include:

– Operating revenues of Euro 23.1 million, up 7 percent (Q4/2016: Euro 21.5 million).

– EBITDA of Euro (0.4) million (Q4/2016: Euro 3.9 million).

– B2C revenues of Euro 18.5 million, up 3 percent (Q4/2016: Euro 17.9 million).

– B2B revenues of Euro 6.3 million, up 24 percent (Q4/2016: Euro 5.1 million).

– Marketing expenses of Euro 11.1 million (48 percent of revenues) compared to Euro 7.0 million in Q4 (34 percent of revenues)

“Results for the first quarter of 2017 reflect our focus on building business volumes. We invested extensively in marketing, acquired the largest affiliate to date, signed 7 new brands and contracts to the iGaming Cloud (iGC) platform and continued to develop the next generation online casino,” Robin Reed, chief executive officer of GIG, said.

“Our vision is to make the iGaming industry an open and connected eco-system for the benefit of all. The recent development and acquisitions contributes to the realization of this strategy.”

GIG expects full year 2017 revenues to reach Euro 120 million, excluding revenues from acquired operators, saying the company is well positioned for organic and acquired growth across all three major business areas.

Paddy Power Betfair Trading Update

Q1-2017 a good one for Paddy Power Betfair – operating profits doubled

The Paddy Power Betfair online gambling grouip posted Q1-2017 results Wednesday, highlighting:

* Revenue up 23 percent to GBP 416 million (up 15 percent in constant currency);

* Growth driven by sports, with sportsbook stakes up 18 percent at GBP 2,999 million and margins up 1.3 ppts;

* Underlying EBITDA up 87 percent to GBP 111 million and underlying operating profit up 114 percent to GBP 91 million;

* Sports revenue up 28 percent at GBP 326 million;

* At 31 March 2017, the Group had £133m of net cash, excluding customer balances;

* Gaming revenue up 6 percent at GBP 90 million.

CEO Breon Corcoran reported to shareholders:

“Reversing the trend of the past two years, results at Cheltenham 2017 favoured bookmakers and this contributed to good revenue growth. Combined with the annualisation of merger-related cost savings and continued focus on operating efficiency, this resulted in a doubling of operating profits in the first quarter.

“Since then, however, at high profile events such as the Grand National, Premier League football and the US Masters, results favoured customers, and overall gross win margins were weak in April.

“A key strategic focus for 2017 is the integration of our technology platforms. This project is on track and we expect both our European brands to be operating on a common platform by the end of the year, at which point customers will start to benefit from increased pace of new product delivery.”

Corcoran noted that revenue benefitted by GBP 23 million in the quarter due to the weakness of Sterling and on a constant currency basis revenue was up 15 percent.

Online revenue increased by 15 percent to GBP 224 million (cc +12 percent), primarily driven by a 33 percent increase in sportsbook revenue. Sportsbook growth was driven by both improved sports results and 13 percent growth in online stakes. Net revenue margin improved by 1.3ppts to 6.7 percent.

Gaming revenues were up 2 percent, and Corcoran noted that although the group was continuing to focus on improving the performance of its gaming products, revenue remains below expectations.

Turning to Australia, Corcoran revealed that said that Australia revenue increased by 21 percent in local currency, driven by a 17 percent increase in total stakes. This growth was notwithstanding a reduced contribution from in-play betting, which represented 8 percent of stakes in the quarter versus 14 percent in the prior year.

In the United States, revenue was up 12% in local currency, with TVG revenue up 5 percent and the online casino operation in New Jersey up 68 percent.

Corcoran said that in retail operations revenue increased by 23 percent to GBP 82 million (cc +18percent).

Excluding the impact of new shops and currency movements, like-for-like revenue increased by 16 percent, comprising a 20 percent increase in sportsbook revenues, driven by 3 percent stakes growth and improved sports results, and machine gaming growth of 7 percent. We opened four shops in the UK and one in Ireland during the quarter, taking the group’s total estate to 618 shops.

Ladbrokes Coral Group Update

Negatively impacted by volatile sporting results and retail but boosted by digital and Australian ops

A trading update from the Ladbrokes Coral Group delivered a mixed bag of results for the year to date with a solid performance from digital but a decline in the retail sector.

Overall the company remains confident it will meet full year expectations.

Key performance highlights for the period 1/1/17 to 23/4/17 include:

– Group net revenues up 5 percent.

– Total Digital net revenues up 22 percent.

– A 40 percent increase in Sportsbook net revenue.

– Gaming net revenue increase of 7 percent.

– UK Retail net revenues declined 2 percent.

– European Retail declined 3 percent.

“Trading in the period was in-line with our expectations,” Ladbrokes Coral Group CEO, Jim Mullen said.

“We see encouraging trends in Digital sportsbook and gaming with continued enthusiasm for our multi-channel products in all our major markets and over a million customers now signed up in the UK alone.

“UK Retail OTC stakes continue to exhibit the negative trends reported since the middle of 2016, driven by the challenging UK High Street environment and our own focus on the multi–channel opportunity.

“We remain confident in the opportunities ahead for the business and in our ability to deliver the year in-line with our expectations.”

Merger integration progress is progressing well, the company said, with the successful completion of the transfer of all key Digital systems to one unified platform and the consolidation of offices underway.

GVC Annual Report Shows Positive Momentum

Momentous year delivers, Board reports

LSE-listed betting and gaming group GVC Holdings PLC delivered its 2016 Annual Report Thursday, describing the period as a momentous year which delivered both strong growth and substantive returns to its shareholders exceeding Board expectations.

The company reported results in Proforma format believing they provide a more accurate reflection of the company’s performance.

– Group Net Gaming Revenue increased 9 percent to Euro 894.6 million (2015: Euro 822.2 million) and by 12 percent in constant currency.

– Clean EBITDA increased 26 percent to Euro 205.7 million (2015: Euro 163.2 million), reflecting an increase in margin to 23 percent from 20 percent.

– Sports wagers reached Euro 4,553 million (2015: Euro 4,389 million), up 4 percent.

– Sports margin was 9.6 percent (2015: 8.5 percent)

– Statutory loss before tax of Euro 138.6 million reflects one-off costs in the year of Euro 117.8 million, largely related to the acquisition of bwin.party.

– Net debt as at 31 December 2016 was Euro 131.5 million.

GVC remains on target to secure Euro 125 million in synergies by the end of 2017, the report details, while annual capital expenditure is expected to be around Euro 20 million lower per annum than the combined Group spent in 2015.

The bwin sports label proved to be a star performer across its core European markets with first time deposits rising 37 percent and overall sports label revenues increasing 26 percent.

Although pro forma net gaming revenues from Games Labels for the full year declined to Euro 203.5 million (2015: Euro 211.8 million), GVC said it reversed the trend in the second half of 2016 achieving 4 percent growth in constant currency terms.

The party poker and party casino brands showed an improved performance directly attributed to a change in management and a more focused approach, the report reveals.

As GVC began 2017 with positive momentum and the integration of bwin.party largely complete, the group will focus on further M&A opportunities and continue to evolve its proprietary technology.

Trading to date has delivered a 15 percent increase in pro forma daily group net gaming revenues. Sports labels are up 18 percent and Games labels, up 6 percent.

The detailed report can be read here: http://www.gvc-plc-ir.co.uk/archive/pdf/GVC_Annual_Reports_2016.pdf

Leovegas Airs Strong First Quarter Report

Returns to profit

Mobile gaming operator LeoVegas has returned to profit with strong growth and a confident start to its Danish operations, first quarter 2017 results report.

Key performance indicators for the 12 week period ending March 31, 2017 – include:

– Revenue increase of 49 percent to Euro 43.9 million (Q1/2016: Euro 29.5 million). Organic growth was 46 percent.

– Revenue from regulated markets accounted for 18.3 percent (Q1/2016: 17.6 percent) of total revenue.

– Mobile deposits accounted for 67 percent (Q1/2016: 61 percent) of total deposits.

– Total deposits increased by 86 percent to Euro 149.6 million (Q1/2016: Euro 80.5 million).

– The number of depositing customers was 172,338 (Q1/2016: 121,615), an increase of 42 percent. New depositing customers amounted to 75,017 (Q1/2016: 60,989), an increase of 23 percent. Returning depositing customers reached 97,321 (Q1/2016: 60,626), an increase of 61 percent.

– EBITDA was Euro 6.0 million (Q1/2016: Euro -1.3 million), corresponding to an EBITDA margin of 13.7 percent (Q1/2016: -4.4 percent).

– EBITDA adjusted for items affecting comparability was Euro 6.2 million (Q1/2016: Euro 4.0 million), corresponding to an adjusted EBITDA margin of 14.0 percent (Q1/2016: 13.5 percent).

– Operating profit (EBIT) was Euro 5.5 million (Q1/2016: Euro -1.6 million). EBIT adjusted for items affecting comparability was Euro 5.7 million (Q1/2016: Euro 3.7 million), corresponding to an adjusted EBIT margin of 12.9 percent (Q1/2016: 12.6 percent).

– Earnings per share before and after dilution were Euro 0.05 (Q1/2016: Euro -0.02).

The geographical split of net gaming revenue over the quarter was Nordics – 56 percent, UK – 14 percent, Rest of Europe – 17 percent and Rest of the World – 13 percent.

A trading update from the end of the first quarter to date revealed a 79 percent increase in net gaming revenue during April 2017, of which Denmark accounted for 5 percent and regulated markets 26 percent.

“The tremendous launch in Denmark shows the strength in LeoVegas when we deliver at our best: a combination of technological and product excellence combined with effective marketing that we quickly scale,” Gustaf Hagman, group CEO and co-founder of LeoVegas, remarked.

“In summary, the first quarter was stable and represents yet another step on the path to our financial targets of EUR 300 m in revenue and a 15% margin by 2018”.

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