LeoVegas Q1 Revenue Grows by 8.2%

Leading mobile gaming and sportsbook provider LeoVegas has reported an 8.2% year-on-year increase in revenue during the first quarter of 2021. Overall revenue for the three months leading up to March 31st amounted to €96.7 million, despite smaller gains than normal in the German market due to new regulations.

A game of roulette being played on a table in a casino.

iGaming and sportsbook operator LeoVegas has seen an 8.2% year-on-year increase in revenue during the first quarter of 2021, largely fueled by classic casino games. Revenue for the three months leading up to March 31st amounted to €96.7 million. ©whekevi/Pixabay

Overall Revenue Gains Punctuated by €9 Million Loss in German Revenue

The highly popular mobile gaming operator LeoVegas has reported encouraging revenue results for Q1 2021, generating €96.7 million (£83.6m/$116.2m) in overall revenue for the three months leading up to March 31st, 2021.

These results are up from the €89.4 million generated during the same period last year, thereby representing an 8.2% year-on-year overall increase in revenue for the provider. When excluding its results in Germany, however, the increase rises to a 19% gain year-on-year.

In its latest quarterly report, LeoVegas revealed how the German market made up 6% of its revenue in Q1 2021, likely bringing in approximately €5.8 million in revenue. The simultaneous 19% increase in revenue from non-German sources means that the German market likely generated €13.1 million in revenue in 2020, which means that Q1 2021’s results represent a 55.7% drop, or a €7.3 million decrease.

The operator’s recent report also showed how Germany made up 15% of its overall revenue during Q4 2020, earning them €14.8 million in revenue, which shows that the German market’s revenue sank by €9 million during the first quarter of 2021, by 60.9%.

When breaking down LeoVegas’ overall revenue activity by global regions, the “rest of the world” stood as the operator’s highest-earning region during Q1 of this year, making up 42% of its total revenue.

38% of LeoVegas’ revenue was generated in the Nordic regions, before the remaining 20% was linked to the group’s operations across Europe, including Germany.

Q1 2021 Saw Full Effects of Changes in German Market, Says LeoVegas CEO

Significant changes to the regulation of the German gambling market passed in March 2020 have already begun to have major effects on operators such as LeoVegas’ performances in the region.

In a press release accompanying its latest quarterly report, LeoVegas CEO Gustaf Hagman accounted for how changes in the market affect operators’ activities: 

“During the first quarter we saw the full effect of the changes taking place in the German market. Operators in the market are acting differently with respect to implementing the new restrictions, which unfortunately has led to a skewed competitive situation. The assessment is that up to 70%-80% of the German market for casino has temporarily been shifted over to operators that have chosen to not adapt to the coming market regulation.”Gustaf Hagman, CEO, LeoVegas Group

Hagman expressed hope that German authorities would soon resolve such issues, citing the importance of player protection and channelization: “Our hope is that this will soon be sorted out by the German authorities, which is a prerequisite for the licence system’s success, with a high level of channelisation and consumer protection.”

Nevertheless, Hagman reassured observers that LeoVegas continues to grow despite changes to the German betting landscape:

“Our growth has been driven mainly by our loyal customer base, which reached a new record level during the period,” Hagman said. “We have maintained a high pace of investment, and despite this we achieved adjusted EBITDA growth of 22%, driven by our scalability and good cost control.”

Classic Casino Remains Main Source of Income; Marketing Was Main Expense

In terms of specific verticals, LeoVegas’ latest quarterly report proved that classic casino games still remained the operator’s main source of income, accounting for 74% of its overall revenue during Q1 2021 and coming ahead of live casino at 17% and sports betting at 9%.

When looking at total customer deposits with LeoVegas, these increased by 2.8% during the quarter, up to a total of €295.8 million. A 3.6% drop in new depositing customers was offset by a 25.5% increase in returning players.

LeoVegas’ largest operating cost during Q1 2021 by a significant margin was marketing, with overall spend increasing by 15.3% to a total of €36.1 million. This was followed by staff costs, up 9.9% to €13.3 million, and then capitalization development expenses — increasing by 33.3% to €3.2 million.

The operator was able to offset this higher spending with increased revenue, with earnings generated before interest, tax, depreciation and amortization (EBITDA) up 15.6% to €10.4m.

Recent Acquisitions and New Game Studio Will Fuel Q2 Growth

In charting LeoVegas’ future growth amid the ongoing Covid-19 global pandemic, as well as regulatory changes which have upended the German gambling market, CEO Gustaf Hagman cited a recent acquisition as an encouraging prospect:

“During the first quarter we acquired the well-known sports betting brand Expekt. The acquisition gives us one more leg to grow on and complements the Group’s brand portfolio and product offering in a strategically good way. We are looking forward to Expekt once again becoming a leading sports betting brand in Sweden and thereafter also in other markets.”

Hagman also revealed that LeoVegas is making moves to start its very own game development studio:

“For a long time we have created successful, exclusive games with the help of external providers. We are now taking the next step by starting our own game studio – Blue Guru Games. This venture will give us full control and greater flexibility in developing new games, a unique offering to our players, and also a new revenue stream for the Group.”

As for the future, LeoVegas’ revenue declined by 13% in April, however this was due in large part to particularly strong revenue performance the previous year in April 2020. When excluding Germany from its results, LeoVegas’ revenue was in fact up 4% here.

German State Treaty on Gambling Finally Set to Come into Force July 1st

Following the approval from the state parliament of Nordrhein-Westfalen, Germany’s Fourth State Treaty for Gambling is finally set to come into effect starting from July 1st, 2021.

The federal state was the sixteenth and final German state to approve the landmark, and often controversial, piece of legislation, meaning that the treaty is now able to be implemented across all sixteen German federal states.

Many parts of the treaty will be a hard pill to swallow for numerous operators currently working in Germany, such as slot stakes being limited to €1 per spin and sports betting being restricted to betting only on a game’s final result — the latter of which has caused German operator association the Deutscher Sportwettenverband to speak out against.

Yet most controversial is perhaps the 5.3% turnover tax set to be applied to online slots and poker games, which a recent online study conducted by consulting and research group Goldmedia suggests could lead up to 49% of players to play with unlicensed operators.

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