Nektan expects Q4 improvement after Q3 struggles

Gaming platform and services provider Nektan has reported a 5.9% year-on-year increase in revenue for the third quarter of its financial year, though noted that performance in the period was impacted by a number of factors.

While revenue for the three months ended March 31 was up from £5.1m (€5.9m/$6.7m) in the prior year to £5.4m, this represented a 15.6% decline from the second quarter of the current financial year. The supplier only released figures on revenue, staking and customer numbers in its trading update, meaning there was no update on its bottom-line performance.

As Nektan mentioned in its results for six months ended December 31, 2018, this was down to factors such as seasonality, tighter UK regulations around player marketing and verifications and a delay in its Swedish operating licence being granted.

These issues impacted its core white label operation, with B2C net gaming revenue down 17.7% year-on-year and flat sequentially at £5.1m. First time depositors were down 12.2% from the prior year at 31,914, and down from the 36,328 reported in Q2, while customer stakes fell 1.0% from FY2018 to £141m, a 16.0% month-on-month drop.

A further 10 white label clients were signed up during the quarter, with 152 sites currently live.

Despite the B2C division’s struggles, Nektan’s board said that it expects to see an improvement in trading in the final quarter of its financial year.

“As reported in our interim results announcement on 25 March 2019, whilst the headlines revenue figures are slightly down on Q2, our growing portfolio of partners means that we do not expect a repeat of what was a quiet period by historical standards,” the supplier’s chief executive Lucy Buckley said.

While B2C struggled, Nektan’s nascent B2B arm reported another record quarter of growth, albeit from a low base. B2B revenue was up 322% year-on-year to £0.4m, a 75% quarter-on-quarter improvement.

The supplier currently has 10 B2B partners live, and distribution deals signed with seven additional partners, including Bede Gaming. All of these are set to launch over the three months ended June 30, 2018. It has also struck a platform and content distribution deal with Addison Global’s MoPlay brand, with Nektan noted that the division was growing rapidly as a result of its integration speed and breadth of premium third party content it offers.

The range of content across both B2B and B2C division has continued to increase, with 834 games available by the end of Q3, up from 750 in Q2, from 38 games providers.

“Q3 has been another record quarter of growth for our rapidly emerging B2B business. We continue to see strong demand for our award-winning casino technology as evidenced by the signing of 7 significant B2B partners during Q3 FY19,” Buckley said. “Having achieved EBITDA break-even in H1 of this financial year, a key achievement for Nektan, we remain on track to be break-even in FY19.”

Nektan’s US subsidiary Respin LLC soft-launched its Class II and III mobile on-premises product with a major, unnamed, operator at one of its properties in California, with a deal also struck with another venue in the state.

The division is currently in the process of being sold, with an unnamed investor working towards acquiring a majority stake in Respin.
 
“Developments on the sale of our majority stake in the US division Respin are progressing and we expect to conclude this shortly and before 30 April 2019,” Buckely said. “This transaction will mean us maintaining a material stake in the emerging US market while removing the cash burn of this business.

“As a result of that deal, the other inter-conditional transactions, namely the fund raising and CLN conversion, are due to complete as well, putting Nektan in a very strong position to capitalise on our global growth prospects.”