Losses widen at Scout in Q1 as restructure continues

| By Robert Fletcher
Scout Gaming Group reported a 10.4% year-on-year drop in revenue for the first quarter of its 2022 financial year, a period in which the fantasy gaming provider began a restructure of its business.

Total revenue for the three months through to 31 March 2022 amounted to SEK12.0m (£975,986/€1.1m/$1.2m), down from SEK13.4m in the corresponding period last year.

Revenue from gaming operations and gaming-related services was 20.2% lower at SEK6.7m, with a 26.3% rise in B2B operations revenue to SEK2.4m being offset by a 33.9% decline in B2C revenue to SEK4.3m.

Scout noted the drop in B2C revenue was primarily due to the situation in Ukraine, saying a significant proportion of customers in this area of the business are from Eastern Europe and Russia. 

Meanwhile, capitalised expenditure was 7.7% higher at SEK4.2m, while other revenue also increased by 7.2% to SEK1.1m for the quarter.

As a result, total revenue was SEK12.0m.

The provider also said its switch to a new business model with fixed monthly revenue means that at the end of the year, Scout will have SEK1.3m in fixed monthly revenues. During the first quarter, none of the agreements with the fixed revenues were live, though launches are scheduled for the second quarter onwards. 

In March, Scout chief executive Andreas Ternström said the business would initiate a cost review after he was “not at all satisfied” with the supplier’s slow growth and rising expenses in Q4 of 2022.

“As communicated in the previous report, we have taken a number of measures to increase the revenue and decrease the expenses,” Ternström said. “Our new model with more fixed income has been received well and also decreases the risk for our operation and increases the transparency.”

When looking at costs for the quarter, total operating expenses were 9.5% higher at SEK33.5m, with the cost reduction strategy having only been announced towards the end of Q1. 

This left an operating loss of SEK21.5m, compared to SEK17.3m in the previous year. Scout did note SEK1.9m in income from financial items, which left a pre-tax loss of SEK19.6m, far wider than SEK9.8m last year after significant income from financial items that year.

Scout did not pay any tax in the period, nor did it receive any tax-related benefits, meaning that it ended the quarter with a net loss of SEK19.6m, compared to the SEK9.8m loss at the end of Q1 2021.

In addition, Scout said its loss before interest, tax, depreciation and amortisation (EBITDA) doubled from SEK15.0m in 2021 to SEK30.2m this year.

“During the first quarter we focused on restructure of the company with decreasing the expenses and strengthening our B2B operations,” Ternström said.

“We have also been strengthened by the fact that our B2B customers now clearly see the value of our product, in terms of low acquisition costs for end customers and the high loyalty that our products deliver, which strengthens our business model.

“Concerning the expenses during the second quarter with around 40% and within our B2C operations we have decreased the marketing spend significantly. With this, in combination with the fact that we are launching new B2B customers, we will be able to uphold our prize pools at attractive levels and that our B2C operation can be adapted towards our B2B operations and therefore receive less focus.

“Our new focus – in restructuring and in the new customers we have signed in combination with the aggressive cost-cuts which we are now doing – is to create prerequisites which are required to meet our goal of showing a positive cash flow from operations during the fourth quarter of 2022. 

“The effects of the actions will partly be seen already during the second quarter but primarily during the second half of the year.”

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