Acroud warns of difficult second half following H1 struggles

13 August 2020

Acroud - the affiliate marketing business formerly known as Net Gaming -  saw revenue drop by 10.5% to €6.8m (£6.2m/$8.1m) in the first half of 2020 as casino declines offset poker growth while profits were halved by currency fluctuations.

This prompted chief executive Robert Andersson (pictured) to warn that the business faced a tricky second half of the year, after upticks in poker and casino traffic during the novel coronavirus (Covid-19) lockdown normalised.

Of Acroud’s €6.8m in revenue for the six months to 30 June, €4.9m came from casino, down 23.5%. Poker revenue grew by 34.8% to €1.3m, thanks to a strong performance from its Pokerlistings.com site.

Meanwhile, sports betting revenue jumped to €420,000, thanks to initiatives including Pokerlistings launching a separate sports betting section.

Revenue from other verticals declined by 23.8% to €109,000.

Acroud’s personnel expenses came to €2.0m, stable from 2019, while its other operating expenses also totalled €2.0m, up 48.1%.

This resulted in earnings before interest, tax, depreciation and amortisation (EBITDA) of €3.2m, down 29.3%. After depreciation and amortisation expenses of €809,000, up 127.8%, Acroud's operating profit came to €2.4m, a 42.4% decline.

Although the affiliate received €584,000 in interest income and other financial items of €177,00, it also incurred interest costs of €1.4m, resulting in a pre-tax loss of €1.8m.

After taxes of €139,000, Acroud’s profit for the half-year totalled €1.6m, down 49.3%.

Turning to the second quarter of 2020, Acroud made €3.6m in revenue, up 2.0% year-on-year, with Andresson noting the US market as one reason for the revenue growth. The number of new depositing customers grew by 8.0%.

Europe brought in 73% of Acroud’s revenue, North America 15% and the rest of the world 12%. By comparison, in Q2 of 2019, Europe brought in 69% of revenue, North America 18% and the rest of the world 13%.

Casino revenue remained the largest vertical, bringing in €2.6m, down 11.8%.

Sports betting, meanwhile, contributed €157,000 in revenue, more than nine times 2019’s total, despite many sports being cancelled for a large portion of the quarter due to the Covid-19 crisis.

Poker revenue grew 60.3% to €747,000 and other revenue fell 7.5% to €61,000.

Acroud then paid €1.1m in personnel expenses, up 6.4%, €1.3m in other external expenses, up 71.8% and €32,000 in other operating expenses, up 94.4%. The growth in expenses was mostly due to restructuring costs of €550,000, which Acroud president and chief executive Robert Andersson said would save the affiliate money in the long term.

EBITDA of €1.5m, down 25.1%.

Acroud faced a further €658,000 in depreciation and amortisation costs, up 289.6%, resulting in an operating profit of €841,000, down 54.7%.

The business received €16,000 in interest income, but paid €786,000 in interest expenses, up 8.7%.

Acroud incurred a further €1.2m expense because of other financial items, due to exchange rate fluctuations affecting financial receivables and liabilities. This resulted in a pre-tax loss of €1.1m. After paying €56,000 in tax, Acroud’s loss for the quarter totalled €1.1m. This, however, was lower than expected, with the business having projected a €1.2m loss for the quarter.

Andersson said it would be important going forward for the business to focus on a smaller number of areas.

“One thing that has become clear to me during my first half year is that the company has had a lack of focus, with people trying to achieve too many things at the same time, which makes it difficult to produce something really good,” he said.

“This has now changed and we are allocating more resources to a smaller number of focus areas.”

Andersson also noted that any increase in poker and casino traffic from March to May has now slowed down to pre-Covid-19 levels.

“All in all, we therefore expect the third and fourth quarters to be more challenging,” he added.