Expansion costs push earnings down at Aspire Global in Q3

Online gaming solutions provider Aspire Global has reported a year-on-year rise in revenue for the third quarter, but also saw operating income slip 23.3% due to higher costs associated with expansion into new markets.

Revenue for the three months through to 30 September totalled €33.2m (£28.7m/$37.0m), up 16.2% on the corresponding period last year.

B2B was Aspire’s main source of income during the quarter, with revenue from this area of the business up 37.9% year-on-year to €21.0m, representing 63.0% of total revenue for the period.

However, in contrast, B2C revenue slipped 8.4% to €12.3m, with Aspire putting this down to a lower contribution from sports compared to 2018 when the Fifa World Cup boosted B2C performance.

In terms of geographical performance, Aspire saw declines in revenue across the Nordics and the UK and Ireland. Nordics revenue slipped 16% to €7.7m, while UK and Irish revenue was down 19%, due in part to regulatory changes in the UK market.

Aspire fared better elsewhere, with revenue from the rest of Europe rising 46% year-on-year to €20.9m, making the region responsible for 50% of all revenue in the quarter. There was also a 33% climb in rest-of-world revenue to €1.2m as Aspire expanded into several new markets.

However, with Aspire having committed additional funds to these expansion efforts, this led to a 23.3% increase in spending from €21.9m in Q3 of 2018 to €27.0m this year.

Aspire’s main outgoing in the quarter was distribution, with associated costs up 28.1% from €17.7m to €22.7m. Administrative costs were also up from €3.0m to €3.3m, but there was a slight decline in gaming duties, which was down from €1.2m to €1.0m.

Aspire said this higher spending, coupled with higher EU VAT outgoings (€1.1m) and amortisation and depreciation costs (€948,000), meant operating income fell from €5.7m in Q3 of 2018 to €4.3m this year.

Income before tax slipped from €5.6m to €4.6m, while net income for the period was down 8.2% to €4.4m. Aspire also noted a 16.0% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to €5.2m.

Aspire’s performance in the third quarter meant that total revenue for the nine months to the end of September stood at €99.2m, up 38.4% from €71.7m at the same point last year.

Despite a year-on-year decline in income and EBITDA in Q3, results for the year to date show growth across the board. Operating income was up by 10.0% to €14.6m, while net income increased from €11.6m to €12.5m and EBITDA by 18.5% to €17.4m.

“We are pleased to report the two years of sustained growth, where B2B continued to boost our overall quarterly performance to €33.2m, despite lower activity in the UK and other markets as well as the fact that, unlike 2018, there was no World Cup affecting sports revenues,” chief executive Tsachi Maimon said.

Maimon also noted a number of key events after the end of the quarter, including the closing of its acquisition of Pariplay last month and Pariplay’s expansion into the US market through an agreement with 888casino in New Jersey.

“Despite the ongoing transformation of the igaming industry and the various regulatory changes that tend to affect activity in the short-term, for instance in the UK, Aspire Global continues to sustain a strong and profitable growth,” Maimon said.

“We are able to do so thanks to a wide market presence, a differentiated partner portfolio and a broad offering – most recently through the acquisition of Pariplay, the integration of which will help us to capitalise further on our game assets.”