Updated financial objectives with increased focus on organic revenue growth

The Board of Net Gaming Europe AB (publ.) has decided to clarify the Company’s financial objectives in order to better reflect the main emphasis for the future, which will involve an even greater focus on organic revenue growth with strong cash flows combined with low financial and operational risk.

Financially flexible and prepared

Net Gaming’s operations will be conducted at low financial risk over time by continuously reducing net debt and maintaining good liquidity. A good financial position and strong liquidity are highly prioritised, ensuring that the Company is flexible and prepared for grasping opportunities and dealing with possible future challenges.

Operational objectives with reduced operational risk

The Board of Net Gaming has decided to conduct operations at low operational risk, by focusing on quality content that users appreciate, thereby creating added value. We develop digital services and products that create user value and provide us with returning users, which in turn reduces operational risk. The Company’s growth initiatives are primarily focused on regulated, or soon to be regulated, markets. Net Gaming works to be data and process driven, which creates predictability, good governance and reduced key person dependency.

The Company’s operational risk also decreases over time by:

  • Revenue diversification: Increasing the proportion of revenue by means of revenue share with our partners. 
  • Market diversification: Reducing dependence on individual geographic markets, including through expansion in the US. 
  • Product diversification: Increasing the number of products and verticals. The recently launched Sports betting and Finance verticals are one example. 

New financial objectives

Net Gaming’s new financial objectives set out below should not be considered as a forecast, but rather as an ambition that the Board and management consider to be reasonable long-term expectations for the Company. The Board of Net Gaming has established the following new financial objectives.

Growth in earnings per share
Net Gaming’s target is to, over time, increase earnings per share with an average of at least 20% per year. Annual growth in earnings per share is the overall financial objective. It is Net Gaming’s assessment that strong growth in earnings per share is the best measure for creating shareholder value over time. 

There has not previously been any communicated target for growth in earnings per share.

In 2017, earnings per share increased by 46661%. 

Organic revenue growth
Net Gaming’s long-term target is organic revenue growth in the range of 15 to 25%.
Net Gaming will continuously invest in the core business and new internal growth initiatives to ensure strong and sustainable organic growth. The time when growth initiatives bear fruit may vary, which means that organic growth may fluctuate over time.

It should be noted that Net Gaming’s definition of organic growth in the future will be based solely on net sales compared with the previous period, excluding acquisitions (last 12 months) and divestments, and exchange rate movements. 

The previous financial objective was to show faster organic growth than comparable players.

Organic revenue growth was 14% in 2017.

Capital structure
Net Gaming’s long-term target is a maximum net debt/EBITDA ratio of 2.0 over time.

Net Gaming will conduct operations at low financial risk over time by means of low net debt. The Board is entitled to derogate from this objective during periods when this is considered best for the Company and for shareholder value. 

The previous financial objective for net debt/EBITDA was a maximum of 3.0 over time.  

The net debt/EBITDA ratio was 2.77 at the end of 2017.

Over the next few years, Net Gaming will prioritise lower net debt, good liquidity and internal growth investments above dividends.

The dividend policy is unchanged. 

 Historically, the Company has also made a number of successful acquisitions which have been migrated to the proprietary scalable platform, thereby also contributing to underlying growth and earnings capacity. It is important to emphasise that Net Gaming will continue to develop M & A activities and take part in the ongoing consolidation of the market when the right opportunity is presented – however, priority will be given to a stronger focus on organic growth and capitalisation of the underlying profitability of the business.

Key assumptions for Net Gaming’s updated financial objectives

  • The iGaming market is expected to continue to grow at an average annual growth rate of 7.8% in the period 2018-2023. The share for online gambling (iGaming) is currently about 12% and is expected to amount to 15% by 2023. Net Gaming sees a continuation of long-term sustainable underlying growth in the iGaming market. 
  • Sports betting currently accounts for about 50% of the iGaming market’s revenue. Net Gaming has just launched a betting product and expects to be able to generate significant growth from this vertical in the long term, exceeding the average for the overall iGaming market. 
  • In the US, more states are moving towards re-regulation and betting is now also permitted. Net Gaming has had assets in the US market since 2003, and we will be able to capitalise on these as more and more states allow iGaming. At present, Net Gaming is growing by more than 100% in the US market. 
  • Net Gaming is currently a leading player in the affiliate segment and has many years of relationships with our partners. Net Gaming expects to maintain these partnerships and enter into new partnerships as more players establish themselves in the market. 
  • Competition among affiliates remains unchanged, with new players entering the market, while consolidation will continue to take place. 

In establishing long-term financial objectives, the Company has assumed that no significant negative effects will arise due to significant changes in areas including but not limited to the following: 

  • The regulatory climate, laws and regulations to which the Company, the iGaming affiliate market, the Company’s customers and the broad iGaming market are subject.  
  • Predictions regarding our partners’ (the operators) views on the use of affiliates in acquiring customers. 
  • Existing political, fiscal, market or economic conditions, and the administrative, regulatory or tax-related treatment of the Group.  

For further information, please contact:
Marcus Teilman, President and CEO
+356 9936 7352

Net Gaming Europe AB (publ)
Telephone: +46 8-410 380 44
E-mail: [email protected]
Website: www.acroud.com

About Net Gaming 
Net Gaming owns, operates and develops high-quality online comparison sites for the purpose of channelling user traffic to the Company’s customers – primarily iGaming operators. Within the Group, approximately 130 comparison sites are operated in 30 countries. Net Gaming generates valuable user traffic through the sites, mainly to global iGaming operators. The Company was founded in 2005, has just over 80 employees and is headquartered in Malta. The share (NETG) is listed on Nasdaq First North Premier. FNCA Sweden AB is the appointed Certified Adviser.