Net profit dips at NeoGames after higher spending in 2021

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Revenue for the 12 months to 31 December 2021 amounted to $50.5m (£38.3m/€45.6m), up 2.6% from $49.2m in the previous financial year.

Turnkey contracts remained NeoGames’ primary source of revenue, generating $29.9m for the year, though this was 7.4% lower than in 2020. 

Revenue from the use of intellectual property rights increased 19.4% to $8.0m, while its joint operation in Michigan with Pollard Banknote experienced the most growth after reporting $7.6m in revenue, up 72.7% year-on-year.

Shortly after the end of the year, NeoGames made a major growth announcement in that it had commenced a public offer worth SEK4.3bn to acquire 100% of the shares in Aspire Global.

At the time, NeoGames said Aspire Global shareholders holding a combined 67.0% of Aspire Global’s outstanding shares have elected to accept the offer and will elect to receive up to 100% of the 7.6 million offered NeoGames shares.

A bid committee of independent Aspire Global directors, formed in response to the offer, also unanimously recommended shareholders accept the offer.

Looking at costs for the full year and total operating expenses reached $51.6m, up 37.2% from $37.6m in the previous year. 

General and administrative costs were the main outgoing at $12.3m, up 64.0%, but the provider also reported higher spend across distribution, development and sales and marketing. NeoGames also noted $3.8m in prospective acquisition expenses, as well as $14.6m worth of depreciation and amortisation costs.

When removing certain costs, adjusted earnings before interest, tax, depreciation and amortisation (EBTIDA) was 16.4% higher at $33.4m, though higher spend overall led to an operating loss of $1.2m, compared to a profit of $11.6m in 2020.

However, NeoGames was able to counter this with additional profit from its share in the Pollard Banknote joint venture, with the $12.4m generated here offsetting $4.8m in interest expenses and $1.5m in finance costs, as well as partially higher operating costs.

This meant pre-tax profit reached $5.0m, though this was down 37.5% year-on-year. The provider paid $325,000 in income tax, resulting in a net profit of $4.7m, down from $6.5m in 2021.

Looking at the fourth quarter, revenue for the three months to 31 December was 12.1% lower than the year before at $12.3m. Operating costs increased 60.7% to $18.0m, while adjusted EBTIDA slipped 14.1% to $7.9m.

After accounting for $3.2m in joint-venture profit share, as well as $1.2m in interest costs and $1.1m in finance expenses, this left a pre-tax loss of $4.9m, compared to a profit of $3.2m in the previous year.

NeoGames received $1.3m in income tax benefit, but posted a net loss of $3.6m, in contrast to a $2.5m profit in Q4 of 2021.

 “Sound commercial execution and unrivalled innovation in iLottery are continuing to drive growth for our customers,” NeoGames chief executive Moti Malul said. “During the fourth quarter we saw growth in all of our key accounts with particular strength in our US accounts. Our combined revenues and share in NPI Revenues grew 5% sequentially, and over 40% for the full year.”

Malul also referenced the proposed Aspire Global acquisition, saying it remains on track to complete before the end of the first half of this year.

“More and more we find our iLottery customers require a broad range of integrated gaming verticals,” Malul said. “We firmly believe that combining NeoGames and Aspire Global will drive our strategy to be a leader in providing digital solutions to lotteries globally.

“We are already successfully collaborating with Aspire to launch their Pariplay content in Alberta and the early results are very encouraging. We remain focused capitalising on an expanding market opportunity and continuing to create value for our shareholders.”

Meanwhile, NeoGames also published guidance for its 2022 financial year, during which it expects revenue to amount to between $90m and $97m, representing an approximate 11.0% increase year-over-year at the midpoint. 

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