GiG losses widen as Swedish regulation bites
Increased regulation in Sweden and the termination of a large customer contract led to a decline in revenue for Gaming Innovation Group, as the company reported H1 2019 revenue of €63.4m (£58.7m/$70.1m) and a net loss of €9m, up 152% from last year’s net loss of €3.6m.
“It has been a quarter with some headwind, primarily due to a tougher Swedish market,” chief executive Robin Reed noted.
Much of the decline in revenue came from the company’s B2C services, where revenue for the six months to 30 June fell from €49.6m in 2018 to €39.8m. The operator and supplier cited tough operating conditions in the newly regulated Swedish market for the decline. In-house brand Rizk represented 73% of B2C revenue, growing 17% year-on-year.
B2B revenues fell from 30.9m to €27.3m, resulting in a decline in earnings before interest tax depreciation and amortisation from €8.6m to €5.1m. The company attributed most of this decline to the termination of a B2B contract with a large, unnamed, client in the fourth quarter of 2018. In its Q4 2018 report, GiG said the decision to terminate this contract was due to its “priority to grow long-term in regulated and soon-to-be regulated markets,” and stated that the contract could, “potentially harm this development.”
Cost of sales for the company declined 1.5% to €13m. Marketing expenses were also down, driven mostly by a decline in B2C marketing expenses, from €24.8m to €16m.
Marketing expenses related to reevnue share fell to €5.6m, with other marketing expenses dropping from €17.2m to €11.9m.
Other operating expenses also declined, by 13.4% to €26.3m, resulting in slightly increased earnings before interest, tax, depreciation and amortisation, at €6.6m. However, depreciation and amortisation costs increased 36.3% to €13.1m and financial income resulted in a loss of €2.3m, resulting in a pre-tax loss of €8.8m and a net loss of €9m.
For the second quarter of 2019, revenues fell year-on-year from €36.9m to €31m, while costs of sales increased 3.3% to €6.6m.Total operating expenses declined from €28.9m to €21.9m, but again increased depreciation and amortisation costs as well as financial losses of €2m contributed to a net loss of €6.1m.
Despite the decline in revenue, Reed said the company is in a strong position to build for the future.
“Our progress in Q1 and Q2 this year puts us in a more robust position to generate and meet demand,” Reed said. “We find ourselves with the strongest pipeline of potential customers we have had for the last couple of years. SkyCity Entertainment Group, the largest gaming, entertainment and hospitality group in New Zealand, is now online, powered by our full solution.
“We are making strides into the coveted compliance space with GIG Comply having been sold to some of the top 10 operators in the world.”
On 13 August, GiG announced it had reached an agreement to sell its Highroller B2C brand to affiliate and operator Ellmount Gaming for €7m. Reed stated that Ellmount Gaming will become a B2B client of GiG.