Revenue growth helps Scout reduce first quarter loss

20 May 2020

Daily fantasy sports provider Scout Gaming Group has revealed that a 148.6% year-on-year increase in revenue during the first quarter helped to reduce its losses for the period.

Total revenue for the three months through to 31 March amounted to SEK8.7m (£734,998/€823,280/$900,810), up from SEK3.5m in the same period last year.

Scout’s revenue primarily relates to gaming related services that it provides to clients, and the group said the rise was down to launching with new partners in Q1 and higher activity within its existing client base compared to 2019.

Scout’s chief executive Andreas Ternstrom said revenue would have been higher for the quarter, but progress was slightly stunted by the novel coronavirus (Covid-19) pandemic, with the cancellation of sporting events slowing revenue growth.

However, with the sports calendar set to return to normal later in the year, Ternstrom does not expect the virus to have a long-term impact on the business.

“We had previously stated that the reduced sports calendar was expected to have had a negative impact on revenue in the first quarter, estimated between SEK1m to SEK1.5m, he said.

“However, with the recent week’s positive signals from most of the European football leagues, our assessment remains that the sports calendar will be gradually normalised during the summer, hence we do not expect any long-term negative effects of Covid-19.

Spending in the quarter was up 6.3% year-on-year to SEK21.8m, despite Scout lowering personnel costs – its main outgoing – from SEK11.5 in Q1 of 2019 to SEK10.7m this year.

Other external expenses jumped 44.8% from SEK6.7m to SEK9.7m, which Scout said was mainly due to guaranteed prize pools and associated marketing costs, but spend related to depreciation, amortisation and impairment of property, plant and equipment was down 39.1% to SEK1.4m.

Such was the impact of the revenue increase that, despite higher spending in the quarter, Scout’s operating loss fell from SEK17.0m to SEK13.1m.

After taking into account SEK3.3m worth of financial items, loss before tax stood at SEK9.8m, compared to SEK 16.1m last year, while loss after tax was reduced from SEK16.1m to SEK9.8m.

“Since we control the entire production chain ourselves, from the technical platform, statistics, pricing to graphic design, we have succeeded in providing a competitive product even though the sports calendar has appeared very different in recent months,” Ternstrom said.

“In addition, with a dedicated team, we have continued to deliver lots of playable events where most of our volume since the beginning of April originates from esports-related markets.”

Since the end of the quarter, Scout announced number of esports developments, including the launch of a new esports wagering offering across its network of partners. Scout also agreed a B2B esports deal with the GLHF.gg platform.

Ternstrom also referenced some of the measures Scout took to help limit the impact of coronavirus on the business. These included employee furloughs and wage reductions, as well as renegotiating supplier agreements, as well as cancelling all business travel.

“The balance between saving and investing is carefully made, as retained partners, business-critical employees and functionality are a prerequisite for a long- term successful company,” Ternstrom said.

In addition, Ternstrom noted two heavily oversubscribed directed share issues in Q2, through which Scout was able to generate a total of SEK36m, bolstering its financial position as a result.

“As Scout is currently in a strong growth phase, we expect to maintain higher revenues at group level during the second quarter compared to the previous year,” Ternstrom said.

“However, due to some uncertainties regarding the restart of sports, it is too early to make any further commitments, as about half of the second quarter remains.”