Losses widen at Scout despite Q1 revenue growth

31 May 2019

Fantasy sports provider Scout Gaming Group has reported increased losses in the first quarter of the year, despite operating revenue more than doubling to SEK3.5m (£290,992/€328,368/$366,196).
 
Total operating revenue for the three months through to March 31, 2019 was up significantly on SEK1.5m in the same period last year.
 
Scout saw increases in activity among existing customers, as well as the launch of new customers, and this had a direct impact on income.

During the quarter it signed new agreements with Mexican casino operator Logrand Entertainment, which launched a fantasy offering via its Strendus brand, and India’s Scoring11, its second customer in the country. An agreement was also signed to deliver Scout’s platform to Brazilian operator Jogaja.

“Our strategy has been to increase the number of large customers and as a consequence, increase the liquidity of the network to make an even more attractive product,” chief executive Andreas Ternström (pictured) said. “We have also accelerated the process of signing distribution agreements with larger distributors, to expand the network.
 
“Furthermore, we are actively working with launching additional fantasy sports related games to increase player volumes.”

Revenue from clients’ end users, or sales, accounted for €1.9m of the total, with a further €1.6m coming from Scout’s B2C brand, Fanteam.
 
This revenue increase was accompanied by growth in costs, with total quarterly spend at SEK20.5m, almost double SEK10.4m incurred in the same period last year. This rise was primarily down to higher personnel expenses, which jumped from SEK6.1m to SEK11.5m, while other external costs increased from SEK3.2m to SEK6.7m.
 
As a result, Scout’s operating loss widened from SEK8.9m in the first quarter of 2018 to SEK17.0m this year. Loss before tax jumped from SEK9.1m to SEK16.12m, with the operator benefitting from financial income of €859,000.

After tax of €22,000, Scout ended the quarter with a loss of SEK16.10m, compared to SEK9.1m in the prior year.
 
Despite this increased loss, CEO Ternström said he was pleased with the performance, noting that the business was successfully diversifying into a range of new markets.
 
“As the fantasy vertical outside the US still is at an early stage, the typical customer development is strong growth from a small base, with a sharp growth gradually increasing,” he said.
 
“During the quarter, we have continued to roll out our products in new markets and are now live, albeit small-scale, in both North and South America, Asia and Europe.”

Since the end of the first quarter, Scout has launched its new Fantasy Match-up game, a form of head-to-head fantasy contests. As the game is partially odds-based, Scout has applied for a sports betting licence in Malta.
 
The post-quarter end has also seen Scout strike a partnership with La Francaise des Jeux’s FDJ Gaming Solutions division, which will see its fantasy games rolled out as a retail solution. It has also struck distribution deals with platform providers Inplaynet and Ultraplay and Digitain.
 
“As markets mature, new products are being demanded and we quickly get on the radar as an attractive alternative for companies wanting a broader sports offering,” Ternström said.