Five things we learned from LeoVegas’ Q4 2021 results

LeoVegas posted a flat year-on-year (YoY) revenue for Q4 2021 on Friday, recording revenue of €98.2m compared to €98.4m in Q4 2020. The Stockholm-listed operator noted difficulties it faces in key European markets as core reasons for its static revenue, although discounting Germany and the Netherlands revenue rose by more than a quarter. Elsewhere, the firm also posted a flat rise in adjusted EBITDA of just 1% from €11.5m in Q4 2020 to €11.6m in Q4 2021 while also noting a 64% downturn in cashflow to €7.5m. However, CEO Gustaf Hagman remains positive and speaking to EGR, he explains how he plans to tackle regulatory issues in Europe, success in Sweden, sportsbook growth and his M&A masterplan. Netherlands nether LeoVegas confirmed it lost around 6% of its revenue year-on-year in Q4 2021 due to its departure from the Netherlands following the regulation of the market on 1 October last year. Hagman described the figure as a “substantial amount” and will be sorely disappointed to have not been one of the first set of operators to secure a licence to offer services in the market. Despite operators that are already live in the market moving to sweep up customers, Hagman remains positive that LeoVegas can make a triumphant return to the market. He said: “What is happening right now is that the 12 operators already with a licence are achieving the nice position of bringing on all the customers right now. We believe that we will have to start from the beginning more or less but on the other hand we do have two great brands in LeoVegas and Expekt. “It will take some time before we have the same level of revenue as before,” he added. Difficult Deutschland Germany, much like the Netherlands, proved a difficult battleground for LeoVegas in Q4 as a combination of the 5.3% turnover tax on slots and no table games sending consumers towards the grey market meant the firm lost around 80% of its revenue from the market. LeoVegas did note that when excluding Germany and the Netherlands when comparing YoY revenue growth, the group posted an increase of 26%. Hagman said there was alternative hopes in Germany by looking towards the free-to-play market while he conceded some of the group’s previous customers would have been sucked in by grey market operators. He said: “The customer base that we had in Germany, I think unfortunately those guys have turned to the grey/black market with cryptocasinos. It is a huge country and there are plenty of players using F2P casino and they could be a new customer group. Swede success While the Netherlands and Germany dampened the mood in Q4, back in the firm’s Swedish heartlands there were plenty of reasons to cheer. LeoVegas became the top operator in the market and posted its revenue derived from the Nordics to 50%. Hagman praised both LeoVegas and its Expekt sportsbook brand for supplying a strong product mix in the market, and also welcomed new regulations from the Swedish government due to come into effect next year. These regulations, including further advertising limits and a B2B licence requirement for suppliers, are part of Minister for Social Security Ardalan Shekarabi’s plans to clamp down on the industry. Praising the way the brand achieved top position in Sweden, Hagman said: “We have a strong brand with LeoVegas and a great product. We also introduced a couple of innovations like the Leo Jackpot. What we are seeing right now is a testimony to these things. “With Expekt I think we are going head-to-head with Unibet and Betsson and with LeoVegas we are attracting and retaining casino players. We have a good segmentation with our product mix in the Swedish market,” he added. Hagman said Shekarabi’s proposals would help with channelisation and that moves from payment providers deciding not to support grey market operators was an “extremely positive” move. High Expektations. Hagman was full of praise for LeoVegas’ most recent acquisition Expekt and said the product was moving from strength to strength. Acquired in May 2021, the sportsbook is currently live in the Nordics and helped return 12% of the group’s total revenue for the quarter. Pushed on whether sportsbook could eventually overtake live casino as the second biggest revenue vertical (Q4: 16%), Hagman said: “In some markets live casino is quite large at 25% of revenue. It depends on what markets we open in. When we open in New Jersey we won’t have any sports. I think sports will increase and maybe be on par with live casino in a few quarters. “We have Expekt in Sweden and Finland but we are looking into more markets with the brand. It has been a very interesting first year for the brand. It had been ‘sleepy’ for a couple of years and lost some traction so we put a lot of effort into advertising,” he added. M&A masterplan M&A continues to be a key strategy for growth in the industry and LeoVegas remains no exception to the case. Hagman openly muses over the make-up of potential acquisition targets and following the success of Expekt is ready to take the plunge on another target. LeoVegas’ M&A roadmap appears to follow that of operators like Entain, by targeting leading operators in markets to bolt-on to the group. Hagman said: “We are looking for regional or local champions. Brands that have a strong heritage in the market. We are constantly looking for brands and companies we could acquire and migrate onto our platform quickly. “We are looking in markets where we already have a presence: Spain, Italy, Denmark and a few other European markets. “If we already have a presence in a market, we already have the organisation, we have the customer support in that language, payment providers and etc. We could therefore quickly gain traction if we acquired a local champion in those markets,” he added.