Scout CEO orders cost review after “unsatisfactory” Q4

Revenue ticked slightly upward to SEK17.1m, after revenue of SEK16.9m in Q4 of 2020.

Expenses, meanwhile, more than doubled to SEK51.0m. 

Personnel expenses grew to SEK13.7m, but most of the growth was in other external expenses, which were up 148.5% to SEK34.3m. Ternström said the increase in other costs was mostly related to marketing, plus a one-off SEK18m cost after expenses for tournament participation tickets had been “wrongly accounted for” in prior periods.

If the errors had been attributed to these previous quarters instead, expenses would have come to SEK33.1m.

Depreciation and amortisation also grew, by 50.2% to SEK3.1m.

As a result, the business made an operating loss of SEK33.9m, which was more than five times its operating loss in 2020.

After a SEK791,000 loss on financial items, Scout’s final loss was SEK34.7m, compared to a SEK13.9m loss the year prior.

“The fourth quarter of the year was challenging for us and we were unable to generate the revenue and growth we have shown historically,” Scout chief executive Ternström said. “This, together with higher marketing costs to increase revenue in the long term, led to an unsatisfactory result for the quarter.

“We are not at all satisfied and have taken several measures, and simultaneously we have initiated a review of the cost structure for the group.”

Ternström did not reveal what the cost review would entail, including whether it would involve layoffs.

Looking at the full year, revenue was up 14.1% to SEK56.6m. Ternström said a major reason for this was that the supplier had increased the number of “unique end users” within its network of operator clients by 182% during the year.

Ternström added that after the difficulties of Q4, Scout had already set about executing a new strategy. Under this strategy, the business would focus more on receiving fixed recurring revenue, rather than variable payments.

“We will continue to grow our network and total number of players but with a partly new business model,” he said. “The model is to increase the recurring part of the monthly fees for our product. This will lead to increased, more stable and more predictable revenues from our operators.

“The result of the new business model is that already at the beginning of 2022 we have contracted operator customers worth SEK500,000 per month. We expect all these customers to be launched in the first half of the year. This is a consequence of continuing to execute on our B2B strategy with three new agreements so far in 2022 and three upcoming launches in the US.

“I would like to clarify that this new model not only generates revenue, but also an increased commitment from operator customers.”

The Scout chief executive said he planned for the business to quickly become profitable with the new strategy.

“The new business model and the review of the expenses for the group aims to become more effective and achieve profitability as quickly as possible,” he said.

While revenue was up, operating expenses grew more rapidly, up by 43.4% to SEK132.9m.

Of this total, personnel expenses made up SEK45.7m, up 31.3%, while other external expenses grew 48.7% to SEK76.3m. Depreciation, amortisation and impairment costs, meanwhile, were SEK10.9m, which was 65.2% more than in 2020.

As a result, Scout made an operating loss of SEK76.3m, which was 66.6% more than it lost in 2020.

The business made a SEK3.3m profit on financial items and tax benefits, however, which meant its final loss was SEK72.9m, which was 33.5% more than its loss in 2020.

During Q4, Scout announced that Billy Degerfeldt would leave his role as chief financial officer of the business after serving a three-month notice period, after taking an unnamed job elsewhere. It then hired Niklas Jönsson to fill this role from 10 January. Jönsson had worked for more than a decade as an accountant with PwC before spells with Global Gaming Group and Evolution Gaming in Malta.

In the results announcement, Ternström said Jönsson would “develop and improve our financial function”.

During the year, the business also launched a North America-focussed social sportsbook platform through a partnership with new sports league, the Masters Cup Series of pool.