Q2 Trading Update – Record quarterly revenues combining B2C and B2B divisions

Nektan plc, the fast growing international gaming technology platform and services provider, is pleased to announce another record quarter for the second three months of the financial year ending 30 June 2019 (Q2 FY19).

The figures stated below are all unaudited.

Group Total (B2C & B2B, excluding US)

*NGR from B2C and GGR from B2B
**adjusted using new GGR

Highlights

KPIs Update:

• Total Gaming Revenue increased 28.4% to £8.6m in Q2 FY19, up from £6.7m in Q1 FY19 (up 83% on Q2 FY18).
• In Q2 FY19 Nektan’s technology generated over £222.5m in Cash Wagers, up from £182.4m in Q1 FY19, representing an increase of £40.1m (22% growth).
• Growth driven by a significant increase in the number of unique players on the B2B platform, helped by 4 new partners going live.
• Premium gaming content added across both B2C and B2B divisions.
• Additional partners signed up across both B2C and B2B divisions, including BetVictor in B2B.

  EBITDA break-even on track:

• Growth trajectory should result in European EBITDA break-even by the end of FY19 (30 June 2019).

  Board:

• Lucy Buckley joined as Chief Executive Officer on 3 December 2018.

Excluding the Company’s US division, the combination of both its B2C and B2B divisions has seen this latest quarter deliver stronger than expected growth, leading to record quarterly revenues. The higher margin B2B division has been a particular standout with significant increases in commercial partnerships, player numbers and cash wagering, with the highlight being Nektan’s new partnership with global tier-one online gaming company, BetVictor.

As a result of the new revenues from the emerging B2B division, the quarterly trading updates will now report the Total Gaming Revenue which includes the industry standard Net Gaming Revenue (NGR) from B2C and, due to the global nature of the B2B business, the Gross Gaming Revenue (GGR) from B2B.

Nektan aggregates and delivers premium casino content from the industry’s leading game providers which, using its proprietary technology, it delivers as either a fully managed white label casino solution to its B2C partners or as a content distributor to its B2B partners. Nektan’s white label solution is delivered via its Evolve platform, while the E-Lite platform distributes cutting-edge content. Both platforms leverage Nektan’s market leading bonusing and business intelligence tools.

B2C White Label Managed Casino Solutions Update

*calculated using underlying, non-rounded figures

• Higher than expected player wins and bonusing led to small decline in B2C NGR.
• Launched new white label casino partners, notably the Shipley Brothers, taking the number of managed global casino brands to a record of 145 across Europe.
• Considerable enhancements to Nektan’s technology platform including new Content Management System tool, New Partner Request Console
• Player and acquisition marketing now managed in-house by Nektan.
• Swedish Gambling Licence application submitted to operate online casinos in the newly regulated market.

 B2B Platform and Distribution Update

*calculated using underlying, non-rounded figures

• Nektan went live with 4 new operators, including BetVictor and 1xBet, taking the total number of B2B partners to 10.
• Two new sheltering deals agreed with Habanero and Spin Games.
• Nektan’s B2B division is benefiting from its speed of integration and breadth of premium gaming content leading to significant global sales pipeline of B2B partners.

 Gaming Content Update

• Nektan’s first co-developed game with Rising Entertainment, Rank Up Dragon launched in December 2018 across Nektan’s 145 B2C white label sites and will be launched across Nektan’s B2B partners in Q3 FY19. It has become a top performing game across Nektan’s B2C network.
• More higher margin co-developed titles expected to be launched in the coming months.
• NetEnt’s new Live Dealer product launched across Nektan’s B2C white label casinos.
• Nektan continues to position itself as a leading distributor of market-leading casino content:
• In Q2 FY19 Nektan signed up new game studios, including Aspect, Probability Jones and The Games Company.
• The total number of available games increased to over 750 (700 in Q1 FY19, an increase of 7%), from a total of 27 games providers.

 North America Update

• Nektan’s US subsidiary, Respin LLC (Respin), continues to make commercial headway in US Class II and Class III markets for mobile ‘On Premise’ gaming:
• Signed an agreement to launch Respin’s on premise digital gaming platform and games with another California based tribal casino, expecting to go live with real money gaming offered on mobile and smart table devices in February 2019.
• Respin secured agreements with Leap Virtual Sports and with Grand Vision Gaming (owned by Century Gaming Technologies), the leading supplier of Keno content in North America, to offer their content via Respin’s mobile platform for Class II and Class III gaming.
• In December 2018 Respin launched a free-to-play version of the Respin platform at a casino based in Oregon.  The platform is powering 4 smart tables and is being marketed to customers as a training tool and way to create interest for an eventual launch of the real money version of the platform.
• Launch of tier-one casino, based in California, now due to go live in January 2019 (previously due to go live in Q2 FY19).
• Nektan recently announced that it is in advanced discussions to sell 57.5 per cent of the issued share capital of its US subsidiary, Respin, to a third party for total consideration of £2.0 million in cash as well as the provision of £300,000 in working capital to Respin by the investing entity. If concluded, this would reduce the cash burden on the wider Group. These developments remain ongoing but are expected to be concluded before the end of Q3 FY19.

 Lucy Buckley, Chief Executive Officer of Nektan, said:

“This record-breaking quarter for the Group has not only highlighted that we have made significant enhancements to our technology, but we are becoming a firmly established business that is on track to be profitable in our core European business by the end of this financial year ending 30 June 2019.

Looking back at this quarter and ahead, we are very excited about the size of partners we are now attracting. Our BetVictor contract win with this tier-one operator is a landmark for Nektan and we are proud to have them believe in the breadth and depth of our offering. The B2B figures continue to demonstrate the huge potential that that division has in fuelling our growth going forward.

Another significant highlight from the end of the last quarter was the announcement of potential external investment in our US business. Once completed, we believe these developments will put Nektan in its strongest and most secure position to date.”

For further information on the Group, please contact:

Further information on Nektan can be found on the Group’s website at www.nektan.com.