LeoVegas Q2 revenue drops 13% as German pain outweighs Swedish gains

LeoVegas has reported an 13% year-on-year slump in revenue for the second quarter of 2021 to €96.8m (£83.4m). The online operator confirmed Q2 2021 revenue would have grown by 3% were it not for the negative effect of regulations in Germany. Company adjusted EBITDA plunged 54% to €10.6m during Q2, with a corresponding fall in EBITDA margin to 10.9%. Q2 gross profit also dropped by 13% annually, with gross profit margin decreasing to 66.5% over the same period. In the Nordics, LeoVegas NGR rose by 4% compared to Q2 2020, with the firm highlighting a “good quarter” in Sweden and the addition of the Expekt sports betting brand to its operations there. LeoVegas suggested the addition of the former Betclic Group subsidiary had doubled its market share in Sweden during Q2. Norwegian and Finnish operations grew during the quarter, while Danish NGR declined.

In the firm’s Rest of Europe operating segment, NGR dropped by 35%, with growth in Italy and Spain offset by an 81% annual NGR decline in Germany. LeoVegas has revealed that German NGR accounts for just 4% of total NGR, compared to 18% just 12 months ago. Rest of World NGR grew by 17% during Q2 as LeoVegas reported double-digit growth in its Canadian operations. At a group level, total revenue generated from locally regulated markets decreased to 65% during Q2, down from 75% a year prior. NDCs increased by 6% during Q2 to 460,697, while marketing costs increased by 15% to €37.6m. Addressing the firm’s German travails, LeoVegas Group CEO Gustaf Hagman said: “The situation in Germany coupled to re-regulation, with strict product limitations, an extremely high gaming tax and a skewed competitive situation, is having a negative effect on the group. “We believe it will take time to create a balanced and fair market climate and have therefore chosen to shift our investments to other, more profitable markets. “Over the long-term, we still believe that Germany, with Europe’s largest population, offers great opportunities for the group,” Hagman added. Assessing the wider Q2 results, Hagman added: “Our operating profit decreased compared with the same period a year ago, while we achieved stable earnings compared with the preceding quarter. “This is despite a high level of investments and a number of important strategic ventures, including our forthcoming launch in the US, a stronger focus on sports with the acquisition of Expekt and our new game studio.” Referencing the increase in marketing spend, Hagman continued: “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. “Investments in marketing during the quarter weighed down earnings short-term but are driving value long-term and will also enable us to accelerate out of the revenue drop in Germany. “As revenues increase, the share of marketing investment will decrease. At the same time, we have maintained good cost control, and our operating expenses have more or less been unchanged over the last three-year period,” the LeoVegas CEO added. LeoVegas has also revealed July 2021 revenue increased by 7% year-on-year to €32.8m, adjusted to 23% growth excluding Germany.