Enlabs, a Latvian company that provides online gaming services, experienced a decrease in earnings and profits during the initial six months of 2020, despite maintaining profitability. Their Latvian operations were temporarily halted for a period of two months during this time due to the global health crisis.
The temporary closure of their Latvian operations resulted in a reduction in Enlabs’ first-half profits.
Income for the period ending on June 30th decreased by 9.9% to €16.6 million (£15 million/$19.6 million), with gaming activities contributing €15.3 million, a decrease of 9.5%. The primary reason for this decline was the Latvian government’s decision to suspend all forms of gambling across all channels from April 8th to June 10th, meaning Enlabs did not generate any income in its largest market for two months during this period.
The company attempted to lessen the impact of the Latvian closure by offering quiz games on their platform, which were played over 40,000 times during the suspension. They also used this time to expedite the development of Laimz, their second Latvian-facing brand, which was launched in June as part of their multi-brand strategy, which aims to introduce localized products in key markets.
Enlabs, a gaming firm, encountered difficulties in the initial six months of the year due to the global health crisis. Their physical operations in Lithuania were closed in March, and although online gaming continued, promotional and advertising activities were temporarily restricted.
To compensate for the effect of suspended athletic events, Enlabs collaborated with EveryMatrix to provide esports wagering. Their poker brand, Bestpoker, helped lessen the financial losses from the closure of their Latvian operations.
Enlabs’ income from affiliate marketing declined by 10% to €880,000 in the first half of the year compared to the same period last year. Other revenue also decreased from €5.7 million in the first half of 2019 to €441,000.
Direct expenses, including service fees and gambling taxes, rose by 3.8% to €5.2 million. Gross profit for the first half of the year was €11.4 million, down 15%.
Enlabs’ EBITDA (earnings before interest, taxes, depreciation, and amortization) dropped 39% to €3.2 million due to a slight reduction in operating expenses to €8.2 million.
After accounting for depreciation and amortization of €976,000, finance charges of €16,000, and income tax benefits of €21,000, the company’s net profit for the period decreased by 54.1% to €4.3 million.
The influence of the Latvian business closure was most noticeable in the second quarter, with revenue falling 35% to €6.1 million in the three months ending June 30.
During this time, Enlabs expanded beyond its primary Nordic and Eastern European markets, launching Optibet in Peru and Chile, marking its entry into the Latin American market.
Enlabs is forming a small, regional group to explore more possibilities in the area.
In the second quarter, Enlabs also purchased a 29.9% share in Global Gaming, the operator of Ninja Casino, making them the largest individual stakeholder.
Dainis Niedra, Enlabs’ Head of Central and Eastern Europe, stated: “We consider this a strategic investment and a significant step in our progress.” “Enlabs and Global Gaming complement each other as we both operate in the same markets in Finland and Estonia. Global Gamings’ brand NinjaCasino is one of the most recognized brands in the gaming industry and a pioneer in pay-and-play technology.
“The brand has unlimited international growth potential. Here, Enlabs brings our proprietary gaming platform, various gambling licenses, regional sales expertise, and our own sports betting products. Together, we will solidify our leadership position in the Baltic region.”
In terms of costs for the quarter, direct expenses decreased slightly to €2 million, while gross profit was €4.1 million, down 40.2%. After a 16.1% decrease in operating costs to €3.6 million, EBITDA in the second quarter fell 81.8% to €457,000.
Depreciation and amortization amounted to €717,000, resulting in a loss from operations of €259,000. However, income from financial items of €735,000 and income tax benefits of €5,000 resulted in the company turning a profit for the quarter, albeit €480,000, down 76.3% year-on-year.
The chief executive, George Ustinov, reported that gambling earnings in July increased by 11% compared to the same period last year. Ustinov is optimistic about robust growth in the third quarter of 2020, driven by the return of sporting events and plans to expand into various markets.
Enlabs will prioritize its entry into Belarus, launching its leading brand Optibet in Sweden due to political turmoil in the nation.
“Enlabs believes that entering the market in 2021 is more sensible,” Ustinov stated. “Currently, three online gambling licenses have been granted under the new legislation, and Enlabs aims to be among the top five companies operating legally online in Belarus.”
Ustinov added that the company would enter the Ukrainian market “as soon as possible” after gambling was legalized there, noting that its online gambling market is valued at €300 million.
The company has also established financial objectives for 2021, aiming to achieve annual EBITDA exceeding €20 million with a profit margin ranging from 20% to 30%. It aims to achieve at least 25% organic growth, complemented by mergers and acquisitions activity.
“Enlabs is interested in well-considered acquisitions that can create synergies with the existing business,” the company explained. “The potential scale of acquisitions may vary depending on the circumstances, but the model considered will be built using a combination of cash and stock-based payments.”
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