Q3 2016

GUSTAF HAGMAN

VIKTOR FRITZÉN

Group CEO and Co-founder

Group CFO

2

Presenters

The greatest gaming experience

Number one in mobile gaming

3

Vision

4

Agenda

•  Quarterly report highlights •  Business update •  Business KPIs •  Financials •  Targets & Summary •  Q&A

Quarterly report

Highlights and events  

5

Revenue since start

39.7 MEUR

-

 5.0

 10.0

 15.0

 20.0

 25.0

 30.0

 35.0

 40.0

2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2 2015-Q3 2015-Q4 2016-Q1 2016-Q2 2016-Q3

Revenue:

39.7 MEUR +17.3 MEUR  

EBITDA:

9.8 MEUR 24.7 % margin

 

Deposits:

123.7 MEUR +87 %

 

Organic growth:

+76 %  

Mobile deposits:

67 %      

7

Q3 2016 Highlights

8

Drivers behind Q3’16 development

Mobile focus

Technology leadership

Effective marketing

Customer growth from previous quarter

LEOVEGAS NUMBER 1 IN ONLINE GAMBLING QUARTERLY

•  In the latest edition of Online Gambling Quarterly, an industry publication that focuses on strategy and financials, LeoVegas was the company expected to be the number 1 winner in the next twelve months based on a survey of 42 individuals that are executives in the gaming industry and finance professionals that invest in the gaming space

•  In the same survey Mobile Casino was expected to be the fastest growing segment in our industry

COMMENTS

10

Expansion strategy   Continue to enter regulated

markets or markets that are soon to be regulated

Denmark   License granted

  Live during the autumn

  Local and experienced team

  No one have taken the mobile position

Expansion overview

11

  Live casino vertical continues to deliver strong growth

  First with portrait mode

LeoVegas Sport and LeoVegas Live Casino

  Continuous product development

  Continuous focus on superior speed in the user experience

12

compared to October last year

Current Trading – Start of Q4

12.8 MEUR

63 %

NGR in October

an increased of

Business updates

13

14

The next step in the Casino evolution – portrait mode

15

  LeoVegas’ offering is based on gaming as a fun and attractive form of entertainment

  Responsible gaming is a fundamental principle in all we do

A Continuous Focus on Responsible Gaming

  Responsible gaming training and certification for all

employees

  Sophisticated player tools and measures for limiting deposits, time, wagering, losses etc.

  Information and tests for both

players and relatives

  Self exclusion measures and forced exclusion by us when

gaming related problems

discovered

16

  Holding company based in Malta part of LeoVegas Mobile Gaming Group

  New business prospects can be driven in separate entrepreneurial companies, independent of LeoVegas’ other operations

  Continuously evaluating new opportunities and promote innovation within mobile gaming

  Is not expected to have any material impact on growth and earnings in the short term

  Two investments to date: Authentic Gaming and 21 Heads Up

Independent Mobile Productions - IMP

17

  Authentic Gaming delivers an innovative live casino solution with streaming from land-based casinos

  Targets the fastest growing segment of the online casino market

  Live with LeoVegas, more operators expected in Q4

IMP – Authentic Gaming

18

Regulated and soon to be regulated markets for LeoVegas

Markets where LeoVegas has a gaming license

Country Tax structure

0.5% on Sports turnover and 1.5

KEUR per license

15% on GGR

20% on GGR

Markets LeoVegas pays gaming taxes or VAT but without license*

Country Tax structure

23% VAT

19% VAT

40% on GGR

Soon to be regulated markets where LeoVegas has presence

Country Expectation

Expected Q3’18

Expected Q1’18

35% on GGR Expected Q1’17

*No local license regime is in place

Gaming taxes

Less competition

Local monopoly

Decreased bonus costs

Decreased marketing clutter

Market increases in size

More marketing channels

Tax pushed onto supply chain

0 10 20 30 40 50 60 70 80 90 100

Pos

itiv

e /

Neg

ativ

e eff

ect

Probability

19

Local gaming regulations have pros and cons

Positive effects when market regulates

Negative effects when markets regulate

Marketing clutter

Positive and negative effects assessed against probability of occurring

More channels

Less competition

Supply chain

Bonus costs

Market size

may decrease as competitors scale back marketing to protect margins

in marketing open up

as smaller competitors may leave

absorbs its share of the gaming tax just as in the UK market

may decrease as competitors scale back to protect margins

may increase

Gaming taxes will decrease profitability

Local monopoly may enter into casino market (e.g. Danske Spil)

20

20

1

3

1

1

3

1

10

10

0

2

4

6

8

10

12

14

16

18

20

Gaming tax Increased market size

Marketing clutter

decrease

More marketing channels

Changes in competition

Supply chain

absorb share of tax

Bonus costs Offsetting factors total

Impact on EBITDA

Per

cent

age

poi

nt im

pac

t on

EB

ITD

A m

arg

in

EBITDA impact in country where 20% tax is implemented

Example of potential EBITDA impact in market with 20% tax on revenue

•  This is a hypothetical example of the EBITDA impact when a country regulates its gaming market based on analysis of other markets that have regulated

•  An increased market size has the potential to have a very large impact on the absolute EBITDA level even though margins will be lower and has therefor been shaded in this example

•  We expect that roughly half of the tax will naturally be offset and half will impact profitability – assuming that marketing investments are not scaled back

•  If marketing investments were scaled back this would further mitigate the impact of the tax on margin, but would then decrease the growth potential

COMMENTS

Business KPI’s

21

22

“LeoVegas’ strategy is to prioritise growth.” “The launch of LeoVegas Sport in parallel with new marketing channels contributed to strong growth in new customers." “A return to a lower level of marketing in relation to revenue is expected in Q3.” – LeoVegas Q2 2016 report

From Q2 report

Q2’16 efforts Q3’16 results

Q3’16 drivers

18.7 MEUR in marketing

Record number of NDCs 109 718 in Q2’16

RDCs 22% Q-Q growth

Deposits 23% Q-Q growth

Revenue 28% Q-Q growth

Lower bonus costs

High marketing effectiveness

-

20 000

40 000

60 000

80 000

100 000

120 000 New depositing customers (NDCs)

Returning depositing customers (RDCs)

-

100 000

200 000

300 000

400 000

500 000

600 000 Actives customers

Returning depositing customers (RDCs)

New depositing customers (NDCs)

•  New depositing customers (NDCs) are down from Q2’16, but are back on trend from the previous quarters

•  The NDCs mix in Q3’16 is better than in Q2’16; despite fewer NDCs in Q3’16 they contributed more to NGR in Q3’16 than the NDC group from Q2’16 did in Q2’16

•  Sequential growth in Returning depositing customers (RDCs) was the highest in 7 quarter at 22%

•  The conversion from NDCs to RDCs from Q2’16 to Q3’16 was lower than usual but still high enough to fuel the strong development in Q3’16

•  The number of active

customers, which includes customers making bets only with bonus money, decreased materially due to LeoVegas offering fewer potential customers freespins without a deposit

Depositing customers, new and returning Active customers and depositing customers COMMENTS

24

Customer base

81 751

74 638

338 861

•  Average deposit per depositing customer in Q3’16 increased by 39% compared to Q2’16

•  Average NGR per depositing customer increased by 50%

•  Both average spend metrics in Q3’16 were back to historical levels

•  The increase should be seen against the background that average spend in Q2’16 was unusually low driven by the high proportion of NDCs, which on average spend less, in combination with higher bonus costs that arose from the NDCs, as new customers get more bonuses, and higher bonus costs in combination with the the launch of LeoVegas Sports

25

Average spend per customer

COMMENTS Deposits EUR per depositing customer NGR EUR per depositing customer

-

 100

 200

 300

 400

 500

 600

 700

 800

 900

Deposits per depositing customer

-

 50

 100

 150

 200

 250

 300

NGR per depositing customer

2015-Q3 2016-Q3

Marketing Indexed to Q3'15

NDCs Indexed to Q3'15

Marketing / NDC (CAC)

•  Marketing spend increased by 20% from Q3’15 to 14.3 MEUR in Q3’16

•  During the same period NDCs increased by 76%

•  The Customer Acquisition Cost (CAC), illustrated in the chart as marketing in relation to NDCs, in Q3’16 decreased 32% compared to Q2’16 and is at a historically low level

•  The quality of the NDCs in Q3’16 was about the same as in Q3’15, which indicates that the marketing ROI increased substantially in Q3’16 compared to Q3’15

•  The overall marketing mix was broadly similar in both periods

26

Marketing and customer acquisition cost

COMMENTS Marketing spend and NDCs indexed to Q3’15 in relation to marketing per NDCs

+20%

+76%

-32%

74 638

14.3 MEUR

•  The increase in deposits in Q3’16 in euro terms was the highest of any quarter both on a sequential and annual basis

•  Deposits in Q3’16 grew by 23% compared to Q2’16, which is the third fastest sequential growth rate since Q4’13, which follows Q2’16 that was the second fastest

•  On an annual basis deposits in Q2’16 for the group grew 87%

•  Growth rates per regions: •  Nordics 63% •  UK 59% •  Rest of Europe 329% •  Rest of World 244%

•  Deposits increased by 57.4 MEUR from Q3’15 to Q3’16 of which the regions accounted for:

•  Nordics 29.8 MEUR •  UK 7.1 MEUR •  Rest of Europe 12.0 MEUR •  Rest of World 8.5 MEUR

27

Deposits

COMMENTS Deposits MEUR and Q-Q growth in deposits % Deposits MEUR by region

-

 10.0

 20.0

 30.0

 40.0

 50.0

 60.0

 70.0

 80.0

 90.0

Nordics UK Rest of Europe Rest of World

0%

5%

10%

15%

20%

25%

30%

-

 20.0

 40.0

 60.0

 80.0

 100.0

 120.0

 140.0

Deposits Growth in deposits Q-Q %

28

•  The Nordics remained at 62% of total deposits in Q3’16

•  Rest of Europe and Rest of World both increased their share of total deposits by 2 percentage points to 13% and 10% respectively

•  The UK saw a significant decrease in its share of deposits to 15% from 19%

•  NGR shares shifted from Q2’16 to Q3’16 in a different way as the Nordics decreased its share to 58% on the back of lower margin in the casino

•  Rest of Europe increased its share of NGR at about the proportion of deposits

•  Rest of World increased NGR proportionally to deposits but remained at an unusually high NGR to deposits ratio

•  The UK stayed at 13% of NGR, which is just lower than the deposits share would suggest

•  The deposit mix, however, is a better gauge of the development of the regions on a more fundamental level

Regional split

COMMENTS

Nordics 62%

United Kingdom

15%

Rest of Europe

13%

Rest of World 10%

Deposits 2016-Q3

Nordics 62%

United Kingdom

19%

Rest of Europe

11%

Rest of World

8%

Deposits 2016-Q2

Nordics 58%

United Kingdom

13%

Rest of Europe

14%

Rest of World

15%

NGR 2016-Q3

Nordics 62%

United Kingdom

13%

Rest of Europe

13%

Rest of World

12%

NGR 2016-Q2

•  Deposits from mobile devices continued to grow its share of total deposits in the second quarter of 2016

•  Mobile devices accounted for 67% of deposits in the quarter

•  Deposits from mobile devices grew 114% year on year, while the same for desktop grew 48%

29

Mobile share of deposits

COMMENTS

50%

52%

54%

56%

58%

60%

62%

64%

66%

68%

2015-Q1 2015-Q2 2015-Q3 2015-Q4 2016-Q1 2016-Q2 2016-Q3

Mobile deposits as a % of total

30

FINANCIALS

 30.0

 31.0

 32.0

 33.0

 34.0

 35.0

 36.0

 37.0

 38.0

 39.0

 40.0

Revenue in constant currency

Currency movement Reported Revenue

39.9 39.7

31

•  Revenue in constant currency would have been 39.9 MEUR

•  Negative currency effect from strengthening euro was 212 KEUR, decreasing revenue by 0.5%

Constant Currency Revenue

COMMENTS MEUR

-0.2

- 0.5 - 2.5

 9.1  10.8  11.9

 13.3  12.5  18.7

 14.3

 1.4  1.8

 2.7  3.1

 2.9

 3.6

 2.8

 1.4  1.8

 2.2

 2.4  3.3

 3.7

 4.1

 3.8

 4.5

 4.7

 5.6

 6.9

 7.4

 8.6

- 5.0

-

 5.0

 10.0

 15.0

 20.0

 25.0

 30.0

 35.0

 40.0

 45.0

Cost of sales Personnel costs net of capitalised development costs Operating expenses including other income Marketing expenses EBITDA

1.0%

-2.6% 4.9% 6.7%

13.5%

-7.9%

24.7%

57.4% 58.6% 52.6% 50.9%

42.3%

60.4%

36.1%

8.8% 9.9%

12.0% 11.8% 9.9%

11.7%

7.1%

8.8% 9.6% 9.7% 9.1%

11.0% 11.9%

10.4%

24.0% 24.5%

20.7% 21.6% 23.2%

23.9%

21.7%

-20%

0%

20%

40%

60%

80%

100%

Cost of sales Personnel costs net of capitalised development costs Operating expenses including other income Marketing expenses EBITDA

•  In Q3’16 EBITDA was 9.8 MEUR, a 24.7% margin

•  The increase in EBITDA is dominated by lower marketing spend in relation to revenue

•  Marketing was lower in Q3’16 compared to Q2’16 in lieu of a launch campaign for Sports and there was a lot of focus on optimization, e.g. the UK marketing was refocused towards digital channels

•  The marketing to revenue ratio in Q2’16 and Q3’16 combined was 46.7%, which is close to LeoVegas’ historical average

•  Cost of sales decreased as a percentage of revenues on the back of lower bonus costs in Q3’16 compared to Q2’16 where bonus costs were unusually large

•  The strong revenue growth brought with it good operating leverage leaving both personnel expenses and operating expenses as a percentage of revenue lower than in Q2’16

32

P&L per quarter adjusted

COMMENTS P&L MEUR adjusted* P&L ratios adjusted*

*Adjusted for IPO-related expenses in Q4’15 and Q1’16

•  The EBITDA margin in Q3’16 was 32.6 percentage points higher than in Q2’16

•  The lower marketing to revenue ratio was the main driver, which added 24.3 percentage points

•  Operating expenses contributed 4.6 percentage points as Q3’16 has an unusually low ratio of operating expenses to revenue driven by lower costs for new office space and IT infrastructure

•  Personnel expenses in relation to revenue decrease 2.2 percentage points, which was expected as revenue increased at a much faster pace than personnel

•  Cost of sales decreased 2.2 percentage points mainly driven by a normalisation of cost of sales in relation to revenue since Q2’16 was unusually high due to the large amount of bonus costs

33

EBITDA in Q3

COMMENTS EBITDA margin bridge from Q2 2016 to Q3 2016

-7.9%

2.2%

2.2%

4.6%

24.3%

-0.7%

24.7%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Q2'16 EBITDA margin

Cost of sales Personnel Opex Marketing Other items Q3'16 EBITDA margin

•  The marketing to revenue ratio is the key determinant of the profit margin development at LeoVegas

•  The marketing to revenue ratio in Q3’16 of 36% is the lowest level in any quarter to date, which is down from the highest level to date of 60% in Q2’16

•  However, looking at the marketing to revenue ratio and EBIT margin year to date in 2016, they are both more normalised

•  LeoVegas’ margins have been, and can likely continue to be, volatile between quarters, but will average out at levels that are consistent with LeoVegas’ 2018 financial targets

•  Q4’16 marketing spend will be larger than Q3’16 both in value-terms and as a percentage of revenue

34

Marketing spend and margin

COMMENTS Marketing to revenue % (negative scale) and Adjusted* EBIT margin %, quarterly

*Adjusted for IPO-related expenses in Q4’15 and Q1’16

-65.0%

-60.0%

-55.0%

-50.0%

-45.0%

-40.0%

-35.0%

-30.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16

Mar

keti

ng e

xpen

se, %

of

reve

nues

, neg

ativ

e sc

ale

Ad

just

ed E

BIT

mar

gin

%

Adjusted EBIT margin %

Marketing expenses % of revenues 23.8% EBIT margin

-58.0%

-56.0%

-54.0%

-52.0%

-50.0%

-48.0%

-46.0%

-44.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2014 2015 Jan - Sep 2016

Mar

keti

ng e

xpen

ses,

% o

f re

venu

e,s

neg

ativ

e sc

ale

Ad

just

ed E

BIT

mar

gin

Adjusted EBIT margin

Marketing to revenue ratio 10.3% EBIT margin

Marketing to revenue % (negative scale) and Adjusted* EBIT margin %, annually and year to date

35

•  The main item on the asset side is cash, which increased its proportion of the balance sheet in Q3’16 on the back of high cash flow generation

•  Current assets are dominated by receivables at payment service providers

•  Intangible assets consist of capitalized development costs

•  On the equity and liabilities side equity is the largest item

•  Payables and accrual had small movements compared to Q2’16

Balance sheet

Balance sheet total 62.9 MEUR

COMMENTS Assets MEUR 30 September 2016 Equity and liabilities MEUR 30 September 2016

Cash and cash

equivalents,  48.1

Current assets,  8.3

Property, plant and

equipment,  1.1

Intangible assets,  

5.4

Equity,  40.9

Payables and

accruals,  17.5

Other current

liabilities,  3.5

Other liabilities,  

0.9

 39.2

 9.8

 0.4  0.2  -0.1  -0.8  -0.6

 48.1

-

 10.0

 20.0

 30.0

 40.0

 50.0

 60.0

Cash and cash equivalents at beginning of

period

EBITDA Adjustments for non-cash items

Change in working capital

Investments in tangible assets

Investments in intangible assets

Effects from exchage rate movements

Cash and cash equivalents at end of period

Cash flow from operating activities 10.3 MEUR

Cash flow from investing activities -0.9 MEUR

36

Cash flow

•  Cash increased by 8.9 MEUR in the quarter

•  Cash flow from operating activities increased predominantly from the EBITDA result

•  Investing cash flow mainly consisted of capitalized development costs

COMMENTS Cash flow MEUR Q3 2016

Total increase in cash 8.9 MEUR

37

Targets & Summary

  LeoVegas targets to reach EUR 300 million in revenue by 2018   Long-term organic growth above online gaming market

  LeoVegas targets to reach an EBITDA margin of approximately 15% in 2018   Long-term at least 15% EBITDA margin assuming 100% regulated markets

  LeoVegas dividend policy is to distribute a minimum of 50% of net profit over time   No dividend in 2016

38

Financial targets

39

Financial targets 2018

16 37

83 100

300

2013 2014 2015 2016 Jan-Sep

2017 2018

?

?

-2%

6%

3%

11%

15%

2013 2014 2015 2016 Jan-Sep

2017 2018

?

Revenue MEUR EBITDA margin %

Revenue on track towards 2018 target EBITDA margin 2016 YTD ahead of trend

Organic growth of 76% and EBITDA of 9.8 MEUR a 25% margin

  LeoVegas considered most likely to succeed among industry executives

  Strong growth in returning customer driving deposits and revenue Expected start to Q4, October NGR of 12.8 MEUR, 63% growth

40

Summary Q3 2016

41

Technology leadership

Mobile First

Expansion Opportunities

Execution

Data driven

Drivers behind LeoVegas’ success

Q&A

42

APPENDIX

43

 35.0

 35.5

 36.0

 36.5

 37.0

 37.5

 38.0

 38.5

 39.0

 39.5

 40.0

NGR Corrections Movements in local Jackpots

Other movements Revenue

0.3 39.7

“Underlying” NGR

44

•  In Q3’16 the difference between NGR and revenue was minimal

•  Corrections of 0.3 MEUR in Q3’16 is at a normal level, which compares to Q1’16 and Q2’16 where they were unusually high

•  Movements in local jackpots and other movements combined reduced revenue by 0.1 MEUR

From NGR to Revenue

COMMENTS MEUR

39.6

0.1 -0.2

€0

€20

€40

€60

€80

€100

€120

€140

€M

Deposited amount per quarter €M

0 €

5 €

10 €

15 €

20 €

25 €

30 €

35 €

40 €

45 €

€M

NGR €M

-

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

RDCs

45

4 MAIN KPIS QUARTERLY NDCs 74 638 (last quarter 109 718) RDCs 81 751 (last quarter 66 917)

Deposits €123.7M (last quarter €100.1M) NGR €39.2M (last quarter €29.8M)

-

20 000

40 000

60 000

80 000

100 000

120 000

NDCs