GiG revenue declines in Q1 as business pivots to B2B

Gaming Innovation Group (GiG)’s combined revenue declined 3.9% to €31.1m for in the first quarter of 2020, with the business divesting its B2C assets and moving towards a purely B2B focus in the period.

GiG’s revenue from continuing operations declined 8.9% to €11.21m. The business said the decline can be explained by the termination of a B2B customer contract worth around €1.0m for the quarter.

However, it brought in an additional €20.0m from the B2C segment of the company. In February, the business agreed to sell its B2C assets, including the Rizk, Guts, Kaboo and Thrills brands, to Betsson for €31m to focus on its B2B and media operations. Upon closing, 63 GiG employees and full time consultants were transferred to Betsson.

“In Q1 we signed an SPA with Betsson Group enabling us to successfully divest the B2C division of the business, which completed in April, which not only paved the way for multiple strategic upsides but also allowed us to strengthen the balance sheet and reduce the company’s debt position significantly,” GiG chief executive Richard Brown said.

“GiG now has a fully focused, end to end B2B organisation, where we are confident we can continue to deliver a leading product offering and excel in the iGaming industry as a multifaceted B2B provider.”

GiG’s continuing costs of sales came to €425,000, up 56.8%, for a gross profit of €10.7m, down 11.6%.

B2C costs of sales came to €6.4m, however, for combined costs up 5% at €6.8m and a gross profit of €24.3m, down 6.7%.

The supplier’s operating expenses came to €9.8m, up 5.4% or €21.4m when B2C is included, down 0.2%. Of this €9.8m, €1.7m came from marketing costs, up 11.9% and €8.1m other operating expenses, up 4.1%.

As a result, earnings before interest, tax, depreciation and amortisation (EBITDA) fell 64.3% to €964,000. EBITDA including discontinued operations came to €2.9m, down 35.6%.

The continuing business incurred an additional €5.3m cost in depreciation and amortisation, resulting in a loss before tax and interest of €4.3m, up 30.0% from Q1 2019’s loss. The business said that of this €5.3m, €2.3million relates to amortisation of intangible assets from affiliate acquisitions completed in between 2015 and 2017.

The business’s loss before interest and tax when including B2C operations came to €2.5m, up 21.7%.

GiG made €350,000 in financial income for a pre-tax loss of €4.0m, up 2.5%. After paying €60,000 in tax, the supplier's final loss from continued operations also came to €4.0m, up 10.0% from its loss in the same quarter of 2019.

When including the B2C segment – which made a €1.8m profit – the business’s combined loss was €2.2m, down 7.9%.

After accounting for exchange rate differences from foreign investments, which resulted in a further loss of €1.3m, GiG loss €3.5m for the quarter, up 47.8%.

Brown said the business has so far started the second quarter of the year with growth despite the uncertainty created by the novel coronavirus (Covid-19).

“We are also seeing that we have started strongly into the second quarter and revenues in the platform services were 40% ahead of the same period last year and 35% over the average of Q1,” Brown said.

“Despite the uncertainty in global markets today, I see this as a strong position entering the quarter. Media Services has so far mitigated losses from closure of sports events via organic growth in Q1 which we expect to continue to pay off through the year. “