Enlabs sees revenue growth in "rollercoaster" Q1

6 May 2020

Baltic-facing operator Enlabs has reported a year-on-year increase in revenue for the first quarter, with growth across all major gaming segments.

Total revenue in the three months through to 31 March amounted to €10.5m (£9.1m/$11.4m), up 16.7% from €9.0m in the same period last year.

Gaming revenue increased 8.4% from €8.3m to €9.0m and accounted for 94.0% of the group total. Casino was the primary source of gaming income, with revenue amounting to €6.2m, up 24.0% year-on-year.

Sports betting revenue also increased slightly from €2.9m to €3.0m, despite novel coronavirus (Covid-19) leading to sporting events being suspended from mid-March. Poker revenue jumped 75.0% to €700,000, while bingo remained flat.

Media revenue slipped 25.0% to €300,000, while other revenue was level at €300,000.

Enlabs said it drew 94.0% of total revenue from its operations in Baltic markets, namely Estonia, Latvia and Lithuania, while 6% of revenue came from its rest of world segment, through its licences in Belarus, Malta and Sweden. Incidentally, Enlabs was warned over its lack of activity in Sweden by national regulator Spelinspektionen earlier this year.

Revenue in Q1 was boosted by an increase in deposits, which climbed by 25.7% year-on-year to €33.3m, while total active customers also jumped 22.1% from 35,219 to 43,003.

Looking at spending during the quarter, total direct operating costs were up by 33.3% from €2.4m to €3.2m. Costs of services sold climbed from €1.5m to €2.1m, while gaming taxes increased from €880,000 to €1.0m.

Operating expenses also increased by 18.4% to €4.5m, as Enlabs spent more across a number of areas. Staff costs edged up 4.8% to €2.2m, while marketing expenses were up 28.6% to €1.8m. Capitalised development costs were down slightly to €536,000, but other income and expenses climbed from €825,000 to €1.1m for the quarter.

However, as a result of higher spending, this pushed operating profit down year-on-year, though the decline was only marginal, falling 5.7% to €2.2m.

Profit before tax also slipped 6.4% to €2.1m, while profit after tax was down by 6.1% from €2.3m to €2.2m. Earnings before interest, tax, depreciation and amortisation (EBITDA) was down marginally to €2.8m for the quarter.

Reflecting on the results, George Ustinov, who was appointed as chief executive in February after spells as chief operating officer and chief financial officer, paid tribute to Enlabs in what he said was a "rollercoaster" quarter for the operator.

“We recorded €10.5m revenue and €2.8m EBITDA; revenue declined 6% quarter-on-quarter but grew 16% year-over-year,” Ustinov said. “EBITDA was maintained at a reasonable level considering the evolving operating environment at the end of March.

“Customer activity was at an all-time high with 43,000 unique active players, up 4% from Q4 record highlighting demand for our products and services.”

Ustinov also referenced the ongoing situation regarding coronavirus, saying that Enlabs suspended our land-based betting operations in Latvia and Lithuania in the second part of March in line with government measures. Enlabs was also forced to suspend online activities in Latvia, and has criticised the country’s government for taking this approach.

“While online gaming operations have no risk related to the virus spread, various governments propose restrictive matters to avoid excessive expenditure on gaming during the financially uncertain times,” Ustinov said. “These restrictions range from gaming limits to an advertisement ban, and full suspension of licenses.

“While the idea initially sounds noble, it amplifies the problem with unlicensed gaming and pushes players into a less controlled and irresponsible environment. We encountered the toughest of these measures in Latvia where the regulator temporarily suspended all online licenses in the country as of 8 April until the state of emergency is ended.”

Looking to Q2, Ustinov said Enlabs has five key operational priorities, namely keeping its team safe, keeping customers informed, executing the migration of Latvian business to the NPL, developing new markets, and minimising financial damage.

“To sum everything up, by the end of 2020 I want the Enlabs team to look back, pat ourselves on the shoulder for staying united, staying socially responsible, improving the regulatory landscape in our core markets, executing the tech migration, gaining operational efficiencies for coming years, and retaining the trust of all our stakeholders, and their confidence in our business potential.” Ustinov said.