888 revenue grows in 2019 but regulatory costs hit profits

Revenue for 888 Holdings increased to a record high of $560.3m in 2019, but profits fell as gaming taxes and other expenses increased.

The operator made $560.3m (£447.6m/€512.5m) in revenue, up 5.7% year-on-year. 888 said that revenue from regulated and taxed markets represented a record $414.6m of this total in 2019.

The vast majority of its revenue – $530.5m – came from B2C operations as the operator signed up more than 1m new customers during the year.

The remaining $29.8m came from B2B solutions, down 41.1% year-on-year. Much of this decline was due to the fact that Costa Bingo games were counted as B2B revenue in 2018, but became part of B2C revenue after 888 acquired JPJ Group's Mandalay business, including the Costa Bingo brand, for £18m (€20.6m/$23.3m), in February 2019.

Of the $530.5m in B2C revenue, casino was by far the largest source, contributing $359.3m, up 13.1%. Sport followed with $90.0m, up 12.2%, while poker revenue declined 12.9% to $42.7m . Bingo revenue, thanks to the Costa acquisition, rose 18.8% to $38.5m, though revenue in this vertical fell 3% on pro-forma, if the acquired business' contribution was not counted.

The UK was the largest market in terms of revenue, at $204.1m, up 20.4%. Spain contributed $60.9m in revenue, down 10.3%. The rest of Europe brought in $231.2m, up 1.0%, while the Americas brought in $51.7m, up 7.0%. Revenue from other markets around the world fell 12.9% to $12.4m.

888 noted noted “outstanding growth” in Italy, including a 181% increase in poker revenue from the market. In the UK, sport revenue grew 44% year-on-year, while customer acquisition rose 41% in Romania and 15% in Denmark.

888’s operating expenses came to $147.5m, up 7.0%. 888 said that this was largely due to streaming costs for sports, and new regulatory requirements in customer screening, though it said that personell costs fell, offsetting some of this increase.

Gaming taxes and duties rose 36.4% to $95.5m, with the increase in Remote Gaming Duty in the UK, from 15% to 21% from April 2019, accounting for $15.3m of this increase.

Sales and marketing expenses increased 4.4% to $161.8m, though 888 noted cost per acquisition declined, while research and development expenses grew 8.5% to $35.6m, mostly due to acquisition of the BetBright Sport platform in March. Administrative costs grew 25.6% to $34.3m.

This resulted in earnings before interest, tax, depreciation and amortisation (EBITDA) of $85.6m, down 20.1%.

“Despite the headwinds of significantly increased gaming duties and challenging conditions in some of our global markets, 888 delivered a resilient financial performance during 2019 reflecting the strength of our unique combination of technology, compliance and diversification across regulated markets,” 888 chief executive Itai Pazner said.

After adjusting for reporting differences due to International Financial Reporting Standard (IFRS) 16, EBITDA came to $92.1m, down 14.0%.

The operator incurred $12.6m in depreciation charges, up 137.7%, $19.6m in amortisation costs, up 30.1% and a further $6.7m through financial costs. This resulted in post-tax profit of $53.2m, down 38.7%.

After paying out $5.4m in share benefits, down 39.4% and adjusting for a $2.3 loss in exceptional items and a $10.7m VAT refund in 2018 and a $9.3m gain the same year due to re-measurement of 888’s interest in joint ventures.

This resulted in a net profit of $45.3m, down 58.3%.

On 24 March, 888 issued an update on the effects of the novel coronavirus (Covid-19) on its revenue in 2020, noting that it had seen a rise in customer activity across its casino and poker services, but warning that its sports betting business is likely to suffer as a result of cancelled events worldwide.

The operator said average daily revenue grew 18% on the comparable prior year period. Casino and sport verticals both saw average daily revenue increase 24% on the previous year. New customer acquisition across the group’s B2C business was 20% higher year-on-year, while B2C average daily deposits climbed 32%.

“We entered 2020 with a record level of customers and the trends reported in our update on 24 March 2020 have continued in the year to date,” Pazner said. “The Board is closely monitoring the impact of COVID-19 on 888 and its customers.

“We continue to recognise that with people spending more time at home and with increased levels of stress and economic uncertainty, 888’s unwavering commitment to preventing gambling related harm is even more important than ever. We are proactively communicating with our customers to provide information on safer gambling and, where necessary, offer support.”