Newgioco returns to profit in first quarter

24 July 2020

Newgioco Group has reported a year-on-year rise in revenue for the first quarter, while the betting and gaming operator and supplier was also able to return to a net profit during the period.

Publication of the quarterly results comes after Newgioco was earlier this month issued a warning by the Listing Qualifications Department of the Nasdaq stock exchange after it failed to file the results in time.

Net gaming revenue for the three months through to 31 March amounted to $10.2m (£8.0m/€8.8m), representing an increase of 9.7% from $9.3m in the corresponding period last year.

Newgioco put this growth primarily down to the ongoing conversion of players from more traditional land-based venues to online and mobile channels, as well as the market adoption of its proprietary sportsbook solution.

Players wagered a total of $92.4m via Newgioco’s digital platforms during Q1, up 6.7% on last year, with punters winning $86.1m. Gross gaming revenue – before Agenzia delle Dogane e dei Monopoli (ADM) tax in Italy – totalled $6.3m for web-based operations, up 46.5% year-on-year.

In contrast, land-based player spend fell 53.2% to $23.6m though this area of the business was impacted by the closure of retail locations in a number of countries due to the novel coronavirus (Covid-19) pandemic.

Players won $18.2m at Newgioco’s retail locations, which led to the operator and supplier posting $5.4m in gross gaming revenue for this area of the business, down 10.0% from last year.

Across the two business segments, Newgioco paid $1.5m in total ADM taxes, and after also taking into account $9,804 in betting platform software and services revenue, this left the operator with $10.2m in net gaming revenue.

Looking at spending during the quarter, operating expenses amounted to $9.0m, down 15.1% on last year. Selling expenses were reduced from $7.4m to $6.2m, while general and administrative cost were cut from $3.2m to $2.8m.

This led to Newgioco posting $1.1m in profit from operations, compared to a loss of $1.3m in the same period last year. When taking into account other expenses that amounted to $448,405, this left the operator with $685,647 in profit before income tax, a significant improvement on a loss of $2.9m in 2019.

Newgioco paid $528,038 in income tax during the period, leaving the operator with $157,609 in profit after tax, compared to a loss of $3.1m last year. After a foreign currency translation adjustment of negative $112,030, this meant compressive profit totalled $45,579, a stark improvement on a $3.2m loss in 2019.

“Essentially this quarter reflects our commitment to return Newgioco operations to profitability after we made strategic changes to our board and executive management in June 2019,” Newgioco chief executive Michele Ciavarella said, “These necessary changes were the early building blocks for the execution of our US go-to-market plans.

“Newgioco has one of the most modern and innovative sports betting value propositions in the market and we are now preparing to obtain GLI certification of our US facing products.

“Our state-of-the-art technology stack is driving the innovation of managing risk on sports books and we expect to launch this unique alternative wagering system to U.S. operators in 2020.”

At the time, Newgioco explained that the) pandemic, and the travel restrictions imposed by the government in its core Italian market, had hindered its ability to meet filing deadlines. This prevented company officers, management and staff of its independent accountants from travelling to Italy.

Newgioco added that the Securities and Exchange Commission had provided extended conditional exemptions from reporting requirements for businesses affected by Covid-19. This had prompted it to notify the Nasdaq that it would take advantage of this 45-day extension to file its quarterly report, which had originally been due on May 15.

Also this month, Newgioco reported an increased loss in 2019, despite seeing a year-on-year rise in revenue for the year. Revenue for the 12 months through to 31 December 2019 amounted to $35.6m, up 2.9% from $34.6m in the previous year, while turnover also climbed 9.9% to $454.1m.

However, increased spending meant Newgioco posted a loss from its operations totalling $3.0m, compared to $155,175 in 2018. After accounting for $5.7m in other expenses, this left the company with a loss before income taxes of $8.7m, higher than $2.4m last year.

Taking into account $598,176 in tax payments, as well as $119,289 in the form of foreign currency translation adjustments, this meant Newgioco ended the year with a comprehensive loss of $9.4m, compared to $3.8m in 2018.