Revenue was slightly down year-on-year in Q3 at Scout, but a reduction in spending helped its bottom line. Scout said this improved its year-to-date performance, allowing it to edge closer towards profitability.
Lower costs came after Scout in August completed its transformation programme, with some staff being let go as a result. Scout said this effort will allow it to become a leaner business and more efficient in the delivery of services to B2B partners.
The cost-cutting initiative kicked off last year under former CEO Andreas Ternström, who left the business in June 2022. Efforts continued after his departure and then concluded in August this year.
Current CEO Niklas Jönsson said while Scout is starting to see the impact of this initiative, the full effects will not be realised until Q1 2024. He added that this will support its long-term goal of becoming profitable.
“To reach a sustainable balance between our revenue and our cost we announced a new reorganisation package in August,” Jönsson said. “Since then the expenses have decreased but the full effect will not be seen until first quarter 2024. We are positive to the outcome so far and will continue to monitor them until we reach a stable profitability.
“We are confident in the choices that we have made and believe to increase the activity on our B2C operations in the coming months by pushing the product, but this will be done cautiously with a high return on investment focus.”
B2B revenue growth not enough to offset B2C decline at Scout
Looking at Q3, group revenue during the three months to 30 September was 4.6% lower at SEK6.3m (£479,525/€548,232/$595,678).
B2B operations revenue increased by 15.9% to SEK5.4m, which Scout put down to an increased focus on this vertical.
In contrast, B2C revenue dropped 47.4% to SEK1.0m. Scout attributed this to a continued decrease of its previous non-profitable marketing campaigns.
However, Scout also said management’s assessment is the B2C operation has the potential to generate profitable growth under controlled measures. The group added that it is aiming to realise these in the remainder of the year.
Costs go down, net loss shortens in Q3
Scout’s wider cost-cutting plan meant operating expenses were 27.8% lower at SEK12.2m in Q3. This was primarily due to lower staff expenses, which were almost halved to SEK5.0m after the reduction in headcount.
After accounting for SEK104,000 in finance-related costs, pre-tax loss reached SEK5.8m. This was an improvement on SEK14.3m last year. As Scout did not pay any income tax in Q3, this meant net loss was also SEK5.8m, compared to SEK14.3m in 2022.
In addition, adjusted EBITDA improved from a loss of SEK10.2m to negative SEK5.9m.
Year-to-date figures suggest brighter future
Cost-saving also had an impact on Scout’s year-to-date results. Revenue for the nine months to 30 September was SEK22.3m, up 26.7%. B2B revenue more than doubled to SEK18.0m, but B2C revenue fell 48.4% to SEK4.4m.
Operating costs were 23.6% lower at SEK75.0m, again mainly due to lower staff expenses. Finance costs hit SEK2.8m, leaving a pre-tax loss of SEK60.2m, compared to a SEK64.4m loss last year.
Lack of tax payments also meant a net loss of SEK60.2m, an improvement on SEK64.4m in 2022. In addition, adjusted EBITDA loss was cut from SEK57.2m to SEK21.8m for the period.
“We are now halfway through the fourth quarter and it is encouraging the way which all my colleagues within Scout really are pushing forward to make our group profitable,” Jönsson said.
“I want to thank all partners, shareholders and employees of the group for all the support and belief in us.”
Scout’s cost-saving journey
It has been more than 18 months since former CEO Ternström initiated the cost review at Scout. This came after he expressed concern over slow growth and rising expenses in Q4 of 2021.
Ternström then left Scout amid talk of “major reorganisation” and was replaced by Jönsson.
In the weeks that followed, Scout announced plans to cut half its workforce, including staff in Ukraine. This came after Scout discovered SEK17.0m in previously unknown financial commitments for its 2021 financial year. Scout said cutting staff would save approximately SEK32.0m per year.
The wider strategy also included a share issue to dilute existing holdings in the business by 90%. In September, the business said it was able to raise SEK101.0m through the scheme.
As 2022 drew to a close, Scout announced that it had finalised the restructure of its B2B operations. This led to the closure of 11 partnerships. By the end of Q2 2023, Scout had 10 integrated and active B2B partners.
Into 2023, Jönsson was appointed CEO on a full-time basis in March. This came after he was able to improve Scout’s fortunes during several months in the interim role.
However, despite further reducing operating costs and posting a net profit in Q1, Jönsson warned of additional spending cuts. The conclusion of the transformation programme then followed in August.
Original article: https://igamingbusiness.com/finance/quarterly-results/scout-targets-profitability-losses-shorten-in-q3/
