Gambling Industry Financial News — Weekly Round-up for November 10, 2017

Online casino industry news

Gaming Innovation Group Reports Tripled Revenue In Q3-2017

Oslo-listed firm sees B2B revenues up 171 percent.

The Oslo-listed online gambling company Gaming Innovation Group (GIG) has reported another strong quarter in its Q3-2017 results, highlighting:

* Revenues up 112 percent year-on-year at Euro 30.8 million, and 16 percent up sequentially;

* Revenue increases were driven by organic growth in both the B2C and B2B sectors, with organic revenues up y-o-y 54 percent ;

* EBITDA at Euro 3 million on a margin of 10 percent, with growth across all verticals (Q3-2016: Euro 1.1 million in Q3 2016) ;

* B2B revenues of Euro 11.6 million, up 171 percent from Q3 2016;

* B2C revenues of Euro 21.9 million, up 93 percent from Q3 2016;

* Marketing expenses of Euro 11.9 million (39 percent of revenues).

Operational highlights Q3 2017 included:

* Gaming: Organic, sequential growth in underlying core markets of 22 percent. Core markets now 95 percent of gaming revenues;

* Lead Generation (GIG Media): Concluding major acquisitions of STK Marketing Ltd and Rebel Penguin;

* Platform (iGC): 7 brands started operations on the platform in the quarter and new significant contract entered into in October.

Outlook

* The company is expecting total revenues to be around EUR 120 million for 2017, including acquisitions revenue;

* Recent affiliate acquisitions have increased geographical and vertical footprint;

* Rapid expansion of GIG Gaming brands in Nordics, UK and Central Europe;

* Expect Gaming (B2C) segment to contribute with positive EBITDA from Q1 2018 due to operational improvement initiatives and launch of Highroller.com;

* iGamingCloud attracting larger customers through improved BI, infrastructure and architecture.

Group CEO Robin Read reported:

“Through the quarter we continued to expand our market presence both strategically and organically. Near term, we have exciting launches to be made and we are also experiencing increasing interest for our offering in all segments. GIG has a strong position in the iGaming industry and we are confident that the company is set to continue the profitable growth into 2018.”

Sportech Transition Progresses

Following Formal Sale Process implementation, several parties have indicated interest

Sportech PLC released a third quarter trading update Monday, detailing a 7.6 percent revenue increase year-on-year and a steady forecast on anticipated full year results.

Key performance indicators for the three-month period from July 1 2017 to September 30 2017 include:

· Revenue increase of 7.6 percent to reach GBP 18.3 million (Q3/2016: GBP 17.0 million)

· Year to date revenue increased by 5.8 percent to GBP 54.7 million (YTD/2016: GBP 51.7 million)

· Bump 50:50, the sports raffle product, increased revenues by 41.5 percent following further signings

· Other Racing and Digital revenues increased 8.1 percent y-o-y.

· Venues total revenue increased 6.0 percent y-o-y.

· Current assets, less current and longer-term liabilities, of GBP 62.6 million with no debt.

The Group intends making a further, “significant” distribution to shareholders later this year, the timing conditional on the approval of a reduction of the company’s share capital by the Scottish Court which would create a capital reserve of up to GBP 55.6 million.

Richard McGuire, Non-Executive Chairman of Sportech, said:

“The Group has continued to trade well in the first few weeks of the current quarter and the outcome for the full year remains in line with Board expectations.

On a prospective sale, Sportech revealed it had initiated a Formal Sale Process on 19 October 2017, utilizing the services of Canaccord Genuity, and has engaged with several interested parties.

Following the signing of non-disclosure agreements, selected parties will gain access to due diligence information and management in the coming weeks, the statement reveals.

This initial round of discussions is expected to conclude by the end of 2017, with a timetable for seeking offers by the end of January 2018.

Following the resignations of chief financial officer Mickey Kalifa and chief executive officer Ian Penrose (see previous InfoPowa reports), the Board does not intend filling either position rather opting to take advantage of a GBP 2 million per annum cost saving.

Richard McGuire will assume the role of Executive Chairman, effective 4 December 2017 and Sportech will look to appoint an additional independent non-executive director.

“Our financial position remains robust, and will benefit further from annualised cost savings of at least £2 million,” McGuire said.

Bet-At-Home Achieve All Time High In YTD Report

Marketing investment paying off despite Polish block and increase in betting and gambling levies

Bet-At-Home AG has achieved all time highs in both revenue and EBITDA according to its latest fiscal report.

Consolidated results for the first three quarters of 2017, ending September 30 2017, include:

– A 19 percent increase in EBIT to Euro 24.4 million, up Euro 3.9 million year-on-year (Q1-Q3 2016: Euro 20.5 million).

– EBITDA of Euro 25.4 million (Q1-Q3 2016: Euro 21.3 million).

– Betting and gaming volume of Euro 2,393.6 million in the first three quarters 2017.

– An 8.3 percent increase in gross betting and gaming revenue to Euro 108.7 million (Q1-Q3/2016: Euro 100.4 million).

– An increase in betting fees and gambling levies to Euro 14.5 million corresponding with the increase in gross betting and gaming revenue (Q1-Q3/2016: Euro 11.8 million). VAT regulations for electronic service providers in the European Union resulted in an expense of Euro 6.8 million YTD (Q1-Q3/2016: Euro 6.8 million).

– Net betting and gaming revenue increased to Euro 87.4 million (Q1-Q3 2016: Euro 81.8 million).

– Total marketing costs of Euro 32.7 million.

– An increase in registered customers to 4.8 million (30.09.2016: 4.5 million).

– Cash and cash equivalents and marketable securities of Euro 92.8 million (31/12/2016: Euro 91.8 million).

The company has confirmed previous full year guidance and a dividend proposal within the range of Euro 6 and Euro 8 per share.

Bet-At-Home’s Board expects full year gross betting and gaming revenues to reach Euro 144 million during the 2017 fiscal year and EBITDA of between Euro 34 million and Euro 38 million.

Bet365 Revenues Cross The Gbp 2 Billion Mark

Family pockets GBP 32 million in dividends

The Coates’ UK independent online gambling firm bet365 has crossed the GBP 2 billion mark reporting revenues for the year ending March 26, 2017 of GBP 2.15 billion, up from GBP 1.65 billion in the previous fiscal year.

Operating profit increased from GBP 456 million to reach GBP 503 million and pre-tax profits were GBP 514 million, up GBP 55 million over the previous year. Total stakes totaled GBP 46.9 billion.

The company has grown its staff complement by 400 odd to reach around 3,800 full-time employees.

“On behalf of the board I am pleased to report that the Group continued to experience significant growth during the period, with overall revenues and operating profit increasing year-on-year,” Joint chief executive Denise Coates said.

“Sports and gaming activities contributed significantly to the overall growth of the Group, with revenue and operating profit also increasing year-on-year.

“Financial performance in the year was augmented by what was, for the Group, a good 2016 Football European Championships. In addition, the fall in the value of sterling during the period also impacted favourably.”

Peter, John and Denise Coates reportedly distributed GBP 32.4 million in dividends amongst themselves during the reporting period.

Charitable contributions more than doubled to reach GBP 50.7 million, distributed through The Denise Coates Foundation.

Cherry Delivers In Third Quarter Report

Group revenue increase of 165 percent, organic revenue growth of 30 percent and iGaming up 214 percent

Cherry AB reported on its third quarter today (Wednesday), delivering strong growth in group revenues despite a delay in the full integration of the ComeOn! business.

Key performance highlights for the third quarter ending September 30, 2017 include:

Group:

• Revenue increase of 165 percent to SEK 567 million (Q3/2016: SEK 214 million).

• Reported organic revenue growth of 30 percent.

• Profitability improved and EBITDA increased by 263 percent to SEK 112 million (Q3/2016: SEK 31 million) and the EBITDA margin was 20 percent (Q3/2016: 14 percent).

• Profit for the period amounted to SEK 42 million (Q3/2016: SEK 31 million).

• Earnings per share before and after dilution* amounted to SEK 0.22 (0.27) and SEK 0.21 (0.27) respectively.

iGaming:

• Revenue increased 214 percent to reach SEK 448.5 million (Q3/2016: SEK 142.8 million).

• Organic growth was 14 percent.

• Profit improved significantly and EBITDA increased by 269 percent to SEK 67.0 million (Q3/2016: SEK 18.1 million). EBITDA margin for the period increased from 13 percent to 15 percent.

• Assuming ComeOn was reported as fully consolidated for Q3 2016, the business area’s proforma revenue for Q3 2016 was estimated at SEK 404 million, compared to SEK 448 million for Q3 2017, an increase of 11 percent.

• Deposits increased by 270 percent and amounted to SEK 1,375 million (Q3/2016: SEK 371 million).

• Mobile share of the business area’s surplus from gaming amounted to 59 percent (Q3/2016: 36 percent). Casino Share was 83 percent (Q3/2016: 98 percent). Sportsbook share was 17 percent.

Highlights for the first nine months of the year to 30 Sepember 2017 include:

• Group revenue increase of 182 percent y-o-y to SEK 1,644 million (9M/2016: SEK 583 million).

• Organic revenue growth amounted to 36 percent.

• Profitability improved and EBITDA increased by 304 percent to SEK 288 million (9M/2016: SEK 71 million) and an EBITDA margin of 17 percent (9M/2016: 12 percent).

• Profit for the period amounted to SEK 93 million (9M/2016: SEK 57 million).

• Earnings per share before and after dilution amounted to SEK 0.49 (9M/2016: SEK 0.49) and SEK 0.49 (9M/2016: SEK 0.48) respectively.

Commenting on the results, Anders Holmgren, chief executive officer of Cherry AB (Publ) said:

“Cherry’s operations continue to develop strongly. As the industry’s most complete gaming company, our offering has a broad base and we are able to respond quickly when we perceive opportunities.

Strong development in the third quarter offset the loss in momentum of Cherry’s online gaming business (see previous InfoPowa report). Holmgren is confident a return to performance is imminent following the appointment of a new management team for the ComeOn! business, some of whom served at the company pre-acquisition.

“We are continuing to grow with good profitability and, in Online Marketing (previously Performance-based Marketing) in particular, we continue to note strong development due to effective solutions. In Online Gaming, we are now in a new phase and, with the right conditions, we will be able to increase both growth and profitability,” Holmgren said.

Cherry is pleased with progress from its Yggdrasil and Highlight Games subsidiary saying they have both developed strongly.

Sky Betting & Gaming On A Roll

Investment in product, technology and brand paying off

In a recent industry update, Sky Betting & Gaming (SBG) has detailed impressive progress over the past twelve months delivering strong growth across the board and increasing its customer base by 31 percent.

Key highlights for the period ending June 30 2017 include:

Group revenue increase of 38 percent to GBP 516 million (2015/16: GBP 374 million)

EBITDA increased 38 percent to GBP 146 million (2015/16: GBP 105 million)

Sky Bet up 46 percent to GBP 314 million (2015/16: GBP 214 million)

Sky Gaming up 27 percent to GBP 202 million (2015/16: GBP 160 million)

Total customers increased 31 percent to reach 2.6 million(2015/16: 1.95 million)

Over 80 percent of revenues were derived from the mobile channel.

40 percent growth in headcount with continued investment in the company’s Yorkshire base

First international expansion, with the launch of skybet.it

Richard Flint, CEO of Sky Betting & Gaming, commented:

“The business performed very well in 2016/17, with further investments in product, technology and brand delivering strong financial results.

“We enter our 2017/18 financial year with strong momentum, and will maintain our focus on investment in Yorkshire, delivering innovative and quality products and offers to our customers, leaving us confident that we can deliver further growth.”

Yggdrasil Q3 Revenue And Ebitda More Than Doubles

Strong growth continues at Swedish online gambling games developer

Cherry Group subsidiary and online gambling games developer Yggdrasil has released its detailed Q3-2017 results, showcasing continued growth and strong financials.

Highlights of the report include:

* Revenues up 110 percent year-on-year at SEK 44.1 million (Q3 2016: 21 million);

* EBITDA up at SEK 18.7 million (SEK 9.2 million) on margin of 42 percent;

* EBIT for the period increased to SEK 15.3 million (5.8);

* Number of player transactions up 132.6 percent year-on-year to 1,019 million;

* Contribution from mobile gaming has now grown to 59 percent of total gross game win:

* 10 new licence agreements, including Betfred and SkillOnNet;

* Three new games were released in the quarter: Rainbow Ryan, Valley of the Gods and Jungle Books;

* Four games went live in the UK and Gibraltar;

* Yggdrasil’s largest ever jackpot of Euro 5.2 million fell on the Empire Fortune progressive jackpot slot;

Notable events after the quarter included:

* Entered Danish market with Jackpotjoy Group deal;

* Yggdrasil games went live with another operator, Gaming Realms;

* Signed a commercial agreement with Pinnacle;

* A Euro 3.5 million jackpot paid out on Joker Millions;

* Released new game Pumpkin Smash;

* Three games, including Vikings Go Berzerk, released in Italy; one game went live in the UK and Gibraltar.

CEO Fredrik Elmqvist, reported:

“Once again, we have delivered an all-time high result, with EBITDA for the period hitting MSEK 18.7. This growth has been driven by an increase in traffic to our games. During the third quarter the number of rounds has increased by 132.6 percent versus last year, while we have also added 10 new licensees, including Betfred.

“Our focus remains on laying solid foundations to ensure we can continue our growth trajectory off the back of these extremely strong results. Recruitment has also stayed at the top of the agenda during the quarter. Across the business we recruited or contracted 27 people during Q3, taking the Yggdrasil team to 170 by the end of September. I am looking forward to welcoming more over the coming months.

“Due to our growing workforce, we have secured additional office space in Krakow and in Malta, are looking to move to a bigger space in Gibraltar, and have a new office operational in Stockholm.

“Expansion has been achieved in a cost-efficient manner. As is natural for a fast-growing company, costs will continue to grow, but we remain focused to ensure additional spend helps spur further growth.”

Stars Group Report A Strong Third Quarter

CEO says strong growth will be maintained by continuing reinvestment in marketing and products

The Stars Group has released its third quarter and nine months results, reporting improved revenues and EBITDA over both metrics and strong growth.

Highlights of the report include:

* Q3 revenues up 21.7 percent year-on-year at US$ 329.44 million;

* Q3 EBITDA up 26.5 percent at $ 155.76 million;

* Nine months ended September revenue up 12.7 percent at $ 952 million;

* EBITDA over first nine months of 2017 up 20.4 prcent at $ 453,3 million;

* Corporate net earnings of $75 million;

* Real-money online poker revenues and real-money online casino and sportsbook combined revenues represented approximately 67.2 percent and 28.9 percent of total revenues for the quarter, respectively, compared to approximately 72.7 percent and 23.7 percent for the prior year period;

* Real-money online poker revenues for the quarter were $ 221.4 million, or an increase of approximately 12.5 percent year-over-year, primarily driven by the implementation of the Stars Rewards loyalty program;

* Online Casino and Sportsbook revenues for the quarter were $ 95.2 million, or an increase of approximately 48.3 percent year-over-year;

* Total long-term debt outstanding at the end of the quarter was $2.45 billion with a weighted average interest rate of 4.7 percent. The Stars Group prepaid without penalty an additional $75 million under its second lien term loan using cash on its balance sheet and cash flow from operations. The principal balance of the second lien term loan is currently $95 million;

* Total Q3 active unique players were approximately 2.1 million, an increase of 2.1 percent year-over-year led by the re-launch of PokerStars in Portugal in late 2016 and the growth and expansion of The Stars Group’s real-money online casino and sportsbook offerings. Approximately 2.0 million of such QAUs played online poker during the quarter, which remained virtually flat year-over-year;

* The Stars Group’s online casino offerings had approximately 553,000 QAUs, an increase of 20.1 percent year-over-year, which The Stars Group continues to estimate is one of the largest casino player bases among its competitors, while its emerging online sportsbook offerings had approximately 273,000 QAUs, a 14.8 percent increase year-over-year;

* Quarterly Net Yield was $150 per player, an increase of 18.8 percent;

* Customer Registrations increased by 2 million during the quarter to approximately 115 million;

* New cross-group Stars Rewards program launched in July 2017 seen as a success, with 85 percent of active customers electing to participate, and nearly $45 million in prizes awarded. The Stars Group believes the program has positively impacted the overall product ecosystem across verticals and continues to receive positive feedback from most players.

Group CEO Rafi Ashkenazi reported:

“Our operations and management continued to perform in the third quarter, delivering strong year-over-year growth bolstered by the launch of Stars Rewards.

“Not only did we see improvement in our poker business, but our casino continues to grow with a significant active player base and our online sportsbook continues to see meaningful growth in turnover.

“To build upon these achievements, we plan to focus on reinvesting in our core products and increasing our investment in marketing for the remainder of 2017 and into 2018 while continuing to explore further growth opportunities.”

The group issued its final Full Year guidance, reconfirming its 2017 full year financial guidance ranges previously announced on September 15 and continues to expect the following:

Revenues of between $1,285 and $1,315 million;
Adjusted EBITDA of between $590 and $610 million;
Adjusted Net Earnings of between $445 and $469 million; and
Adjusted Net Earnings per Diluted Share of between $2.17 and $2.31.

Italian Gambling Market Continues To Impress

Revenue on a year-to-end October basis up 5.4 percent at Euro 975.5 million as handle soars 22.4 percent y-o-y

October’s overall revenue of Euro 180.4 million boosted Italy’s land and online YTD gambling numbers, enabling the regulator to report that up to end October overall betting handle soared 22.4 percent, with revenue up 5.4 percent at Euro 975.5 million.

Other noteworthy metrics include:

* Online casino revenue in October up over 30 percent y-o-y at Euro 51.9 million, with Lottomatica and Stars Group leading in market share at 8.73 percent and 8.51 respectively, chased by Sisal (8.42 percent);

* Online tournament poker in October up 27.3 percent at Euro 7 million with Pokerstars leading the operators with a 67.5 market share;

* Online poker cash games up 3.4 percent in October, reaching Euro 6 million, again with Pokerstars dominant ona market share of 43 percent;

* Online sports betting turnover of Euro 561 million, with Planetwin365 leading in market share at 16.3 percent, chased by bet365 on 14.5 percent. Revenue of Euro 72.2 million was recorded in October, with bet365 accruing almost 30 percent of that;.

Fortuna Entertainment Reports Impressive Nine Month Results

Betting handle at land and online gambling group rose 69.1 percent year-on-year

Eastern and Central European land and online betting group Fortuna Entertainment has posted impressive nine months results, noting that between January and end September this year betting handle rose 69.1 percent to Euro 1.3 billion, with growth across all key financial indicators.

Key performance indicators included:

* Total gross win over the nine month period rose 54.1 percent to Euro 185.3 million. The improvement was driven primarily by the growth in online operations, particularly in fixed-odds betting in all countries where Fortuna operates, by online casino in the Czech Republic and partially by consolidation of Hattrick Sports Group and Fortuna Romania;

* Gross win from fixed odds betting online (excl. Hattrick Sports Group and Fortuna Romania) amounted to Euro 98.9 million in the first nine months 2017, up 32 percent year-on-year;

* Total EBITDA reached Euro 28.3 million, up 77.9 percent y-o-y;

* Amounts staked from the Hattrick Sports Group consolidation reached Euro 209.6 million in the first nine months of 2017;

* Amount staked from the consolidation of Fortuna in Romania for the month of September 2017 reached Euro 34.4 million;

* EBITDA recorded by the Hattrick Sports Group from the acquisition date was Euro 7.9 million and EBITDA recorded by Fortuna Romania for the month of September 2017 Euro 300,000;

* However net profit declined 18 percent at Euro 7.9 million, impacted by discontinued lottery, M&A and integration costs;

“If we adjust for one-off costs related to M&A and integration, the EBITDA increased 105.6 percent y-o-y,” said CEO Per Widestrom, who confirmed that the full guidance issued earlier this year remains achievable.