Leon Entertainment Corporation encountered regulatory hurdles in Germany and the Netherlands during 2021, hindering its expansion rate, despite successfully mitigating the regulatory obstacles in the final quarter.
Leon Entertainment’s mobile gaming division reported a slight increase in earnings in 2021 compared to the preceding year, but net profit decreased.
Leon Entertainment Corporation encountered regulatory hurdles in Germany and the Netherlands during 2021, slowing its growth rate. Revenue for the twelve months ending December 31, 2021, reached €391.2 million (£329.0 million/$445.1 million), up 1.0% year-over-year. The portion of revenue from locally regulated markets climbed to 74% (€289.5 million) compared to 2020.
For the entire year, the number of new deposit customers (NDC) dropped 3.3% year-over-year to 724,540, but this was offset by a 12.5% increase in returning deposit customers to 1.1 million.
The group stated its progress in 2021 was hampered by regulatory challenges. In Germany, a 5.3% turnover tax on online poker and casinos was introduced from July, which Leon Entertainment claimed was the highest in Europe. As a result, the market accounted for just 2% of the group’s earnings in the final quarter, compared to 15% a year earlier.
The operator also halted operations in the Netherlands after the country opened its regulated online gambling market on October 1, hoping to secure a license in the future. This market alone contributed 6% of Leon Entertainment’s revenue in the third quarter of 2021.
The business also amplified its athletic wagering abilities by purchasing Expekt for €5 million and revived the brand in the Nordic area.
“The relaunch of Expekt has been a significant accomplishment, with sales growing almost fourfold since the acquisition,” stated CEO Gustaf Hagman. “We now intend to expand to additional markets.”
The organization also obtained a 25% interest in shared gaming startup SharedPlay, which permits players to share their gaming encounters with each other.
LeoVegas also forged a deal with Caesars Entertainment to introduce its online casino product in New Jersey in the initial half of 2022, a move that will mark its entrance into the broader US market. The operator also plans to enter the province of Ontario, Canada, when its online gambling market opens on April 4. It already operates in Canada, which accounted for 13% of the group’s income in January 2022.
Spending growth this year has outpaced revenue growth, with marketing expenditures being LeoVegas’ largest expense, increasing by 8.5% year-over-year to €143.8 million.
Personnel costs also climbed by 5.4% to €53.2 million, while other operating expenses rose slightly by 3.7%. Cost of sales decreased by 3.2% to €65.7 million, but gaming taxes increased by 11.7% to €64 million, partly due to the new tax system in Germany.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined by 19.5% to €44.6 million from €55.4 million in 2020.
Depreciation and amortization charges totaled €7 million, plus €13.6 million related to the amortization of acquired intangible assets and asset write-downs, leading to an operating profit of €18 million, a decrease of 21.1% compared to the previous year.
LeoVegas also highlighted that financial expenses were €4 million, and profit before tax was €14.1 million, a decline of 34.4% from €21.5 million in 2020. The company paid €2.3 million in income tax, resulting in a net profit of €11.8 million in 2021, a decrease of 38.9% compared to the previous year.
In the final quarter, revenue for the three months ending December 31 reached €98.2 million, slightly lower than €98.4 million in the same period of 2020. This was primarily due to the challenging operating environment in Germany and LeoVegas’ withdrawal from the Netherlands. Excluding these markets, revenue increased by 26%.
Breaking down the figures, traditional casino games accounted for 74% of total revenue, live casino for 14%, and sports betting for 12%.
The company stated that Nordic countries accounted for 50% of revenue, other European countries for 29%, and the rest of the world for 21%. Hagman pointed out that the company performed exceptionally well in Sweden, becoming the largest commercial operator in the market in the final quarter.
New depositing customers in the final quarter decreased 4.9% to 172,756, the lowest quarterly total since the fourth quarter of 2019, but returning depositing customers increased 1.0% year-on-year.
Marketing expenses decreased 7.9% to €33.8 million, but personnel costs increased 7.85% to €13.9 million, and other operating expenses increased 17.8% to €1.06 million. Cost of goods sold decreased 8.8% to €15 million.
Video game earnings soared by 210% to €17.3 million, while overall earnings reached €6 million.
Modified earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed by 45.0% to €11.6 million, incorporating €3.1 million in depreciation and amortization charges, and €2.4 million in amortization and impairment of acquired intangible assets. Operational profit was €6.1 million, in contrast to a deficit of €833,000 in 2020.
LeoVegas also reported €884,000 in financial expenses and €91,000 in costs associated with activities with related entities, resulting in a profit before taxes of €5.1 million, up from a loss of €1.4 million in the previous year. After paying €926,000 in income tax, LeoVegas’ net profit for the final quarter was €4.2 million, compared to a loss of €1.9 million in 2020.
“I am pleased with our 2021 conclusion and how we have countered the revenue losses linked to the ongoing regulatory adjustments in Germany and the Netherlands,” stated Gustaf Hagman, President and Chief Executive Officer of LeoVegas.
“We have demonstrated significant adaptability even in volatile times and continue to drive innovation,” he added. “More and more European nations are undergoing regulation, and we currently have about 74% of our revenue regulated and/or taxed.
“The external market environment will continue to be volatile in some areas, but we are well-prepared. With all our ongoing growth plans, I am confident about 2022.”
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