LeoVegas generated record profits during the second quarter of this year, crediting lower marketing costs as a driving factor.
Revenues were up to €87.4m for Q2, an increase of 76 per cent year-on-year. Organic growth was at 27 per cent, down 13 per cent on the previous quarter, with changes in marketing strategies cited as the main reason for the slow-down.
Organic growth excluding markets that were closed in 2017 was 38 per cent. EBITDA totalled €15m, compared to €6.1m 12 months earlier and corresponding to an EBITDA margin of 17.2 per cent (12.4 per cent).
The acquisitions of Royal Panda and Royal X are “developing according to plan”, with EBITDA margins of 30 per cent and 21.8 per cent respectively.
For 2020, LeoVegas has set financial targets of hitting revenue of at least €600m and EBITDA of at least €100m.
Gustaf Hagman, LeoVegas’ CEO and co-founder, said: “We generated a record profit during the quarter, and the main explanation is lower marketing costs. Our data-driven marketing model works in such a way that we invest only if we see a sufficiently high return in our marketing channels. During the FIFA World Cup, many gaming companies that work primarily with sports betting significantly increased their advertising budgets, and as a result the long-term customer value of our marketing was deemed to be uncertain. Our models indicated not to advertise in certain channels, and accordingly we quite simply refrained. This in turn resulted in slightly lower growth but at the same time significantly higher EBITDA.
“In addition, owing to the launch of our new front-end platform, certain links to our marketing partners needed to be redone. The same thing happened when we upgraded our back-end platform three years ago. This was a known risk and affected our customer inflow for a limited period.
“This – together with the enactment of the GDPR and a generally stronger focus on compliance, where we stopped working with a large number of affiliates in the British market – affected our customer inflow and growth during the quarter. As we now enter the third quarter, we are well prepared. Our new platform has been launched, we have made good progress with our compliance efforts, and the World Cup is over. The third quarter will thereby be a quarter with focus on growth and on further driving our business forward.”
LeoVegas also stated that it "believes strongly in" the Italian market which features more than 3m players each month. The firm said that it believes the proposed gambling ad ban would "benefit unlicensed actors" and that the company is attempting to educate politicians as to the work done by licensed operators in the areas of sustainability and responsible gaming.
"The outcome of the proposal is highly uncertain at present, and we are monitoring developments closely," said Hagman.
