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With the Q1 2021 reporting season now finished, H2 Gambling Capital has released its analysis of the industry’s performance through its new corporate research service. The company focussed service covers 15 online gaming operators / suppliers, providing analysis of company results / news flow, conference call notes and financial models for each company.

Q1 2021 – Key Takeaways

Q1 2021 was another strong quarter of growth, benefitting from the continued lockdowns and closure of retail gambling venues. The key takeaways from the quarter are:

• Continued strong year-on-year growth for both B2B and B2C operations
• Sequentially a slight decline for B2C revenues compared to a very strong Q4 2020
• Headwinds in Germany and the Nordics, with strong growth in the US, Australia and Asia
• Current trading going well, but tough comps in gaming, easier comps in sportsbetting, and potential headwinds from the end of lockdowns

B2C Revenue Performance

Following the publication of Q1 results, analysis of the companies under coverage shows average Q1 online B2C revenue growth of 38% year-on-year.

This has been driven by very strong growth in sportsbetting, up 51% YoY, and continued strong growth in iGaming revenues, up 28% YoY. However, this is a slight slowdown on the growth reported in Q4, and sequentially Q1 revenues are down 1% versus Q4 2020. Sportsbetting revenues are down 7% sequentially after a very strong Q4, while iGaming is up 6% sequentially.

 One of the major drags on operator revenues in Q1 has been Germany, where some operators are seeing revenue declines of 50-70% year on year due to the implementation of new regulations in Q4. Operators have also seen weakness in the Nordics, where operations have been impacted by payment processing issues in Norway, a tax increase in Denmark, and COVID-related restrictions in Sweden. By contrast, operators with exposure to the US, Australia and Asia have seen strong revenue growth in the period.

B2B Revenue Performance

In terms of online gaming suppliers, B2B revenues have performed better than that of B2C operations, with B2B revenue growth of 55% year on year in Q1 2021. This has been driven by Evolution, which continues to return very high growth rates for its live casino product.

On a sequential basis, B2B revenues increased by 9% compared to Q4 2020, compared to B2C revenues down slightly quarter on quarter. This is a particularly robust performance, given the strong growth in Q4 2020.

Earnings Growth

Despite the slight slowdown in top line growth compared to Q4, company earnings have increased substantially year on year. Analysis of the companies that report full quarterly earnings has shown an average revenue growth of 42% year on year, which has translated to a weighted average EBITDA growth of 119% year on year.

The combined EBITDA margin for these companies has come in at a record high of 35.4% in Q1 2021, compared to 32.5% in Q4 2020 – however this has been inflated by the strong growth from Evolution in both revenue and EBITDA.

On a year-on-year comparison, almost every company that reported full Q1 earnings has shown an improved EBITDA margin, although this is in part due to the headwinds on sportsbetting operations at the end of Q1 2020. By contrast, the majority of companies reported a slightly lower Q1 2021 EBITDA margin compared to very strong Q4 2020 earnings.

Outlook

Looking ahead to Q2, operators have reported current trading broadly in-line with that seen in Q1, but note tough comps with regards to iGaming, which started to accelerate in Q2 2020. By contrast, sportsbetting is expected to perform strongly, with sports largely cancelled for first few weeks of Q2 2020, and the European Championships and Copa America football tournaments taking place towards the end of Q2 2021. There also remains some caution about the impact of the end of lockdowns on levels of customer spend.

H2 Gambling Capital Corporate Research Service

H2’s new add-on corporate research service covers 15 online gaming operators / suppliers, providing analysis of company results / newsflow, conference call notes and financial models for each company. This analysis is aggregated to provide further insight on industry trends and combined operator financial performance.

The new service also includes market share analysis of major markets such as the UK and Australia, as well as monthly state by state market share for the US sportsbetting and iGaming markets.

For more details on the product, please contact companies@h2gc.com

About H2 Gambling Capital

H2 Gambling Capital is the leading supplier / aggregator of data regarding the global gambling sector. Its subscribers include many of the leading sector operators, suppliers and regulators across the gambling industry as well as in the banking and investment sector. H2 has also worked with 100’s of clients from every continent on a bespoke basis under its H2 Premium service.