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After “unsatisfactory Q4”, Scout’s CEO ordered a cost review

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Andreas Ternstrom is the chief executive officer of the fantasy gaming company Scout Gaming Group. He said that the firm would conduct a review on its costs after being “not satisfied” by the slow growth rate and the rising expenditures in the Q4 period.

The revenue grew slightly to SEK17.1m after SEK16.9m for Q4 2020.

The expenses, however, have more than doubled, to SEK51.0m.

The increase in personnel costs was SEK13.7m. However, the majority of growth came from other external expenses which grew by 148.5%, to SEK34.3m. Ternstrom explained that the rise in costs in general was mainly due to an increase in marketing and a SEK18m one-off cost, after tickets for participation in tournaments had been incorrectly recorded in previous periods.

The expenses would be SEK33.1m if the mistakes had instead been attributable to previous quarters.

The depreciation and amortization also increased, up by 50.2% at SEK3.1m.

The business suffered an operating loss exceeding five times that of 2020.

Scout lost SEK34.7m after a SEK791,000 financial loss, as opposed to SEK13.9m the previous year.

Ternstrom, Scout’s chief executive officer, said that the fourth quarter was a challenging one for the company. “We were not able to achieve the growth and revenue we had shown in the past,” Ternstrom added. This, along with increased marketing costs in order to increase revenues on a long-term basis, resulted in an unsatisfactory quarter.

We aren’t satisfied at all and we have implemented several measures. At the same time, we started a cost review for the entire group.

Ternstrom didn’t reveal the details of this cost review, such as whether layoffs would be involved.

The revenue for the entire year was up by 14.1%, to SEK56.6m. Ternstrom attributed this to the fact that Ternstrom had grown the number of unique end users within the network of its operator clients during the past year by 182%.

Ternstrom said that Scout has already implemented a new strategic plan after experiencing difficulties in Q4. This strategy would see the company focus on getting fixed revenue recurring rather than receiving variable payments.

He said: “We’ll continue to expand our network, and the total number of participants. But with a new model that is partly different.” The model will be to increase the monthly fee recurring portion. The operators will see increased revenues that are more stable, predictable and consistent.

The new model has resulted in us having operator clients worth SEK500,000 a month at the start of 2022. All these new customers are expected to launch in the first six months of 2019. The fact that we have three agreements signed in 2022 so far and are launching three more in the US is due to our B2B Strategy.

I would like to make it clear that the new model does not just generate revenue but also a greater commitment by operator customers.”

Scout’s chief executive stated that he hoped to make the company profitable quickly with a new strategy.

He said that the new business model, as well as the revision of expenses in the group’s budget aims at becoming more efficient and achieving profitability as soon as possible.

Operating expenses increased by 43.4%, or SEK132.9m, despite the revenue growth.

Personnel expenses were SEK45.7m (up 31.3%), while external expenses increased by 48.7%, to SEK76.3m. The cost of depreciation and amortisation was SEK10,9m. This is 65.2% higher than the 2020 figure.

Scout lost SEK76.3m in operating losses, which is 66.6% higher than what it did in 2020.

The company made SEK3.3m in profit from financial items and taxes, but its total loss came to SEK72.9m. This was 33.5% higher than the loss of 2020.

In Q4, Scout revealed that Billy Degerfeldt, the Chief Financial Officer of Scout’s business would be leaving his position after a notice period of three months and taking a job in an unknown company. Niklas Johansson was hired to take over this position from 10th January. Jonsson worked as an accountant for PwC and Global Gaming Group before he joined Evolution Gaming Malta.

Ternstrom stated that Jonsson will “develop and enhance our financial functions” in the announcement of results.

The business launched its social sportsbook in North America through a new pool league.

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