Annual Report 2018 Strategic Report · 5
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annual report 2018 gig.com GiG Overview iGaming solutions based on innovative technology VISION Mission “Opening up iGaming to “Have a stake in every make it fair and fun for all” fair online bet” 2012 2015 2019 GiG founded Listed on the Oslo Dual-listing on Stock Exchange Nasdaq Stockholm Offices in Malta, Licences in Malta, UK, ~710 Denmark, Gibraltar, New Jersey, Germany Employees Norway, Spain, US S-H, Sweden, Spain (pending) contents Strategic Report page 4 2018 Highlights page 5 Letter from the CEO page 8 We are GiG page 10 Sustainability Report page 26 Risks page 32 The Share page 34 Words from the Chairman page 35 Board of Directors Report page 36 Corporate Governance Report page 48 Auditor's Report page 53 AGM and Other Information page 57 Consolidated Financial Statements page 58 Glossary page 92 strategic report GiG Annual Report 2018 Strategic Report · 5 2018 Highlights Launch of Sportsbook €151.4m €27.4m One of the milestones that GiG went through in 2018 was Revenues Cost of sales when the in-house-developed sportsbook was launched just +26% Y/Y +34% Y/Y before the 2018 FIFA World Cup in Russia after 30 months of preperations. The sportsbook first went live on the in-house brand Rizk.com. €47.2m €60.7m Marketing Other opex Equal Y/Y +51% Y/Y Entering the US with Hard Rock The Partnership with Hard Rock International is something that has been getting a lot of attention. It has also needed a €16.1m lot of resources in 2018, from the moment the initial contract EBITDA Adj EBITDA for the online casino was signed to the launch of the full +29% Y/Y €18.9m omnichannel solution in January 2019. Games Studio Live and Proprietary Games Launched ISO Certification The first in-house-developed slot game, Wild Reels, was released in October 2018 and was the final piece of the In 2018, GiG's information security processes were tested against puzzle. GiG Games had been in development for the past the highest international standards set by the International year. The games studio develops gaming products including Organization for Standardization, via an ISO 27001:2013 audit. This slots and table games. By adding GiG Games to its range of certification highlights the Company’s ongoing and systematic products, GiG achieved its ambition of becoming a full- approach towards protecting the confidentiality, integrity and service solutions provider to the Gaming industry and now availability of all information GiG controls and processes. covers the whole value chain within iGaming. New Customers on the Platform New Licences In 2018 seven new costumers were signed on to the platform, A sports betting licence was obtained in the German state of bringing the total number of companies operating on the GiG Schleswig-Holstein through the acquisition of Nordbet. Platform up to 39. GiG entered the US online gambling market in New Jersey in June, authorised by The State of New Jersey Division of Gaming Enforcement (DGE) to provide a real-money online casino platform solution to operators in the state. The GiG Comply Company was also granted an affiliate vendor license in the In August GiG launched its monitoring tool GiG Comply. The tool state of New Jersey, US. helps to protect operators from promotions on websites which are not brand-safe and from misleading advertising in their name In December, the Company was awarded two licences in the by crawling through thousands of web pages on a daily basis. Swedish market. One licence is used for GiG's in-house brands and the other licence is offered to its external customers. GiG's expansion in regulated markets included an application for One GiG an online B2C casino and sports betting licence in Spain. During the year, GiG's proprietary Game Studio obtained In late 2017 the consolidation process started what put all licences in Malta, the UK, Estonia, Latvia, Lithuania and Sweden. the verticals under the same name. In order to ensure that all resources were used in the most efficient way, all the companies under the Gaming Innovation Group umbrella unified one GiG. GiG Annual Report 2018 Strategic Report · 6 210 Ext i t i proi ti ies 2018 210 2112 Re i Ne ar iector t ator ever t i 101 outline effective from 21 December 2018 of events 110 1812 i is ontrac i si Ai i ienc p xpi i regulat ets 1210 L i is i- dev 1812 operators Awar i iences 280 008 1210 Licensed to offer to provide L GiG i 012 real-mone i i i G is tomer i i platf i ator Har ernai i i GGG i tat sey proii Sport iGi series 002 208 00 010 Gi vai G enter 10 i is xt 012 regulat e i i i e contrac i G 11 i Grant ii 2 partneri i mone i Sport i Lai sport ti i i et Internai dev Gi ealms br i.com FEB APR JUN AUG OCT DEC JAN MAR M AY JUL SEP NOV 2018 101 00 10 20 0111 Celebrates grand opening Celebrates its 5th anniversary Partner i Gi Awar 2001201 GiG G eci ov of new H in Malta ciiai i GiG 2 ator i platform 20 201 20 Strengthens sports offering Obti ti ience in 011 through agreement with the German state Schleswig-Hol- i is xt GiG G i i is ontrac RunningBall stein through the acquisition of agr i ioker Nordbet i xt egator 280 211 i deal with games Gi vai G i development si sport ontrac i Gi R ernai 2019 001 20 Powers Hard Rock’s St ii with GiG share omnichannel sportsbook launch being dual-listed on Oslo Bors in New ersey and at NASDA Stockholm GiG Annual Report 2018 Strategic Report · 7 210 Ext i t i proi ti ies 2018 210 2112 Re i Ne ar iector t ator ever t i 101 outline effective from 21 December 2018 of events 110 1812 i is ontrac i si Ai i ienc p xpi i regulat ets 1210 L i is i- dev 1812 operators Awar i iences 280 008 1210 Licensed to offer to provide L GiG i 012 real-mone i i i G is tomer i i platf i ator Har ernai i i GGG i tat sey proii Sport iGi series 002 208 00 010 Gi vai G enter 10 i is xt 012 regulat e i i i e contrac i G 11 i Grant ii 2 partneri i mone i Sport i Lai sport ti i i et Internai dev Gi ealms br i.com FEB APR JUN AUG OCT DEC JAN MAR M AY JUL SEP NOV 2018 101 00 10 20 0111 Celebrates grand opening Celebrates its 5th anniversary Partner i Gi Awar 2001201 GiG G eci ov of new H in Malta ciiai i GiG 2 ator i platform 20 201 20 Strengthens sports offering Obti ti ience in 011 through agreement with the German state Schleswig-Hol- i is xt GiG G i i is ontrac RunningBall stein through the acquisition of agr i ioker Nordbet i xt egator 280 211 i deal with games Gi vai G i development si sport ontrac i Gi R ernai 2019 001 20 Powers Hard Rock’s St ii with GiG share omnichannel sportsbook launch being dual-listed on Oslo Bors in New ersey and at NASDA Stockholm GiG Annual Report 2018 Strategic Report · 8 Letter from the CEO Robin Reed iGaming V3.0 1. Increased taxation, restrictions in marketing, mandatory loss limits and affordability and KYC Dear Shareholders, checks, are clearly having an impact on short and mid-term performance. The obligation is at large The New Year countdown of 2018 marked the start of what put on the operators who own the relationship might have been the most transformative year of the iGaming with the end users, driving an increased focus on industry. 20 years ago, the first offshore bets were accepted creating sustainable business models. To succeed, during the FIFA World Cup in France. By 1st of January 2019, you need to operate like a Swiss clockwork. The many operators would find themselves with the majority of ones who will manage, will sit on a much larger revenues from locally regulated markets. share of a larger market. This wave of regulation, iGaming V3, which started in 2018 In GiG, we have developed all the major products is very different from previous regulation we have seen. and services on our proprietary technological Whilst initial regulation sought to create frameworks for tax stack. Most staff have been recruited and trained collection, and the second wave was about channelisation in-house with a low degree of outsourcing. of companies and customers to a regulated environment, Combined, this means we have a large degree this wave seeks to improve the social impact and regulatory of in-house control and subsequently are well standing of online gambling. positioned to foster the operational excellence and agility required to produce the sustainability The industry has long called for regulation and the general model needed to win in iGaming V3. sentiment in the stock market towards regulation has been positive. Historically, regulation has unlocked new 2. With a sharp focus on sustainability models, the opportunities such as new marketing channels and payment operators' product development roadmaps are infrastructure. iGaming V3 regulation is having a different increasingly focused on compliance and code effect: Early trends are showing an adverse revenue impact refactoring. The increased complexity of a regulated and a higher cost burden on the industry, with subsequent operation, coupled with increased taxation, will caution from the investment community to invest in gambling create a need amongst operators for further related companies.