H2 – Gambling maintains its growth profile, as sector prepares for critical summer trading

Q1 analysis undertaken by H2 Gambling Capital has observed that the industry has maintained B2C and B2B growth despite continued trading against volatile lockdown conditions and regulatory headwinds in Germany and the Nordics.  

Recording a year-on-year revenue increase of 42%, global gambling tracked a ‘weighted average EBITDA’ growth of 119%, as H2 noted that the sector’s primary growth driver was its B2B vertical, recording 55% year-on-year growth.

The substantial revenue upturn was attributed largely to the performance of Evolution Gaming, as the M&A enlarged casino games supplier returned high growth rates for strong take-up of its live casino inventory. 

B2C operations also saw revenue increase by 38%, as sports betting incumbents registered a core drive of growth due to a year-on-year revenue increase of 51%, whilst igaming income also rose by 28%.

Sequentially, B2B revenue increased by 9% on Q4 2020, in comparison to B2C earnings, which decreased by 1% on figures from the previous quarter. Sports betting revenue fell by 7% following ‘a very strong Q4’, although igaming income increased by 6% on the same time period.

H2 Identified Germany as ‘one of the major drags on operator revenues’ during the Q1 2020 – noting that some operators in the country saw revenue declines of between 50% and 70% year-on-year due to the implementation of new regulations during the fourth quarter of last year.

Additionally, the sector encountered challenges with regards to payment processing in Norway, whilst COVID-19 restrictions in Sweden and a tax raise in Denmark further added to Nordic difficulties.

Western European headwinds run in contrast to continued growth recorded in the US, Australia and Asian markets, which  all registered strong revenue growth during the period – a factor which sees European gambling operators revise their commercial make-up beyond 2021 dynamics. 

Additionally, the majority of companies researched by H2 reported a slightly lower Q1 2021 EBITDA Margin when compared to very strong Q4 earnings. Although almost every operator that reported full Q1 earnings showed an improved year-on-year margin, the group attributed this ‘in part due to the headwinds on sports betting operations at the end of Q1 2020’.

Looking ahead to the second quarter, operators have reported current trading ‘broadly in-line with that seen in Q1’, but H2 expects further challenges with regards to igaming as well as ‘some caution about the impact of the end of lockdowns on levels of customer spend’.

However H2 maintains that these challenges may be offset by sports betting earnings, which are predicted to increase due to a resumption of sporting events, as well as the UEFA 2020 European Championships and Copa America tournaments taking place towards the end of the second quarter.

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