Online and mobile gaming operator LeoVegas has reported a revenue decrease of 12.5% year-on-year in its Q2 2021 results, ended 30 June.
Revenue amounted to €96.8m, a drop from €110.7m. This was also a significant drop from its Q1 2021 revenue, which amounted to €110.7m.
However, the operator said that if not for Germany, LeoVegas would have seen 3% revenue growth. Gustaf Hagman, president and CEO of LeoVegas addressed the effects of Germany’s State Treaty on Gambling (Glücksspielneuregulierungstaatsvetrag), which mandates a €1 per spin stake limit on online slots, on the quarter. While the Treaty came into effect on 1 July, Germany is currently in a transition period wherein operators can provide poker and slots games as long as they comply with all the Treaty’s terms by October 15.
“The changes introduced in Germany during the end of the preceding year, coupled with the ongoing regulation process, have had a strongly negative impact on NGR during the last two quarters.”
NGR in Germany decreased by 81% during Q2 2021, and the German market now comprises only 4% of the operator’s total revenue compared to 18% in the previous year. This suggests a drop in revenue from around €19.9m to roughly €3.9m.
A total of 41% of LeoVegas’ net gaming revenue (NGR) was generated from the Nordic region, while 39% came from the rest of Europe. A total of 20% was made up from the rest of the world.
Costs during this quarter were higher than Q2 2020. Cost of sales and gaming duties totaled €32.4m, bringing the gross profit to €64.3m.
Sweden performed successfully this quarter, with revenue at a record high.
Sweden’s gaming market is currently under several restrictions due to the novel coronavirus (Covid-19) pandemic, including a SEK5,000 deposit limit on spending. The restrictions will be in place until November 14th 2021, a date that was extended controversially.
Marketing expenses were also higher year-on-year, totaling at €37.5m, a rise of 14.8%. Hagman put this down to a number of expansions in new markets.
“Marketing costs in relation to revenue were higher than the historic average, coupled among other things to the relaunch of Expekt and investments in a number of key markets in which we see high customer growth.”
Personnel costs came to €13.5m, while other operating expenses amounted to €7.4m. Capitalised development costs and other expenses came to $4.0m, leaving earnings before interest, tax, depreciation and amortisation (EBITDA) at €9.8m, a decrease of €13.2m compared to Q2 2021.
Depreciation and amortisation costs brought earnings before interest and tax (EBIT) to €2.7m, a decrease of 82.9% year-on-year.
Financial costs took €877,000 from the EBIT, while shares of profit after tax generated €196,000. Income tax at €1.0m left the final net profit for the period at €1.0m, a substantial decrease of €13.8m compared to Q2 2020.
“Our operating profit decreased compared with the same period a year ago, while we achieved stable earnings compared with the preceding quarter,” added Hagman.
Hagman also commented on the effects of LeoVegas’ Expekt acquisition in March, which was consolidated during the Q2 period.
“It was a successful start, and in a short time we nearly doubled Expekt’s revenue and
market share in Sweden since completion of the acquisition.”
