Regulatory and operational update on the impact of COVID-19

2020-04-05

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On March 22, 2020 Latvian government passed a law “On Measures for the Prevention and Suppression of Threat to the State and Its Consequences Due to the Spread of COVID-19”. The law was what refers to the gaming industry controversial as it included two completely opposing sections in relation to online gaming, while it was clear that land-based operations must be temporary suspended. Enlabs chose to wait for clarifications regarding online operations from the Latvian gaming authority and remained operational to date.

Regulatory update

On April 5, 2020 Latvian government released the amended version of the law “On Measures for the Prevention and Suppression of Threat to the State and Its Consequences Due to the Spread of COVID-19”. None of the sections regarding online gaming had been amended. It is Enlabs assessment that the Latvian gaming authority will officially send out written orders temporary suspending all online gaming licenses in the country during next week. Until this order comes into effect Enlabs Latvian online operations remain open without risk of breach of any regulation. Temporary license suspension will remain effective as long as a state of emergency is declared by the government of Latvia. Currently state of emergency is until April 14, 2020.

Potential impact from the temporary suspension of the Latvian online gaming license and COVID-19

Enlabs gaming operations originated from Latvia and it remains a significant market for group’s operations. Enlabs is an online regulated market leader in the country. Financial impact will depend on the time span of the temporary license suspension. Enlabs can manage its cost base efficiently as 50% of costs are direct meaning will not occur without revenue. Fixed costs can be temporarily minimized without losing any of the staff members thanks to the various cost cutting efforts and available state subsidies. Enlabs expects that it can operate during this period on a break-even level on its bottom line. Both online and land-based gaming license suspension in Latvia will create strong pressure on competitors which are not geographically diversified. Enlabs expects that it will present market consolidation opportunities on favorable terms. Enlabs has a very strong financial position to withstand and in the longer-term benefit from this temporary turbulence. Operations without losses on consolidated level coupled together with strong cash balance and zero debt put us in a winning position to overcome the challenge and return faster and stronger.     

Operational update

Operations in Estonia, Lithuania and Finland are performing in accordance to our plans and will get accelerated. During the time of Latvian online license suspension, Enlabs will perform a critically important technology migration of its Latvian business from the old to the new gaming platform. This migration will bring significant user experience and operational improvements. Operational improvements will result in shortened time to market of any new product and content release as well as estimated cost savings of approximately 1.0 Meur annually. Essential part of Enlabs team effort will be to retain an open and consistent communication with Latvian customers to inform about the ongoing situation, progress with technology migration and keeping the promise of returning back better than ever. Work on launch of online gaming operations in Belarus is proceeding as planned. Enlabs expects to make significant progress on this project during Q2 2020. The aim is to be among top 3 first operators to launch in this newly regulated market. Enlabs main priority is to keep the team intact and safe.

CEO comment

“We did not expect such a political development in Latvia. It is clear that governments all over the world aim to demonstrate care of their people. Main argument of Latvian parliament voting for temporary suspension of online gaming operations was to protect the financially vulnerable people from excessive expenditure. In our opinion this goal will not be achieved as suspension of regulated market will only open doors for illegal operators. Customers received significantly higher protection with us in the business offering a vast set of gaming behavior controlling tools and integration to the central self-exclusion registry. But in these unprecedented times common sense sometimes is not an argument and we think that globally, other countries might follow this trend if the corona virus situation does not improve soon. Our goal is to create entertainment and do it in a safe manner. This adverse regulatory development will demonstrate to the politicians that the real threat to the financially vulnerable people are the illegal operators. Hopefully our voice about balanced regulation and market protection will get heard after the COVID-19 crisis. This is a temporary lockdown which we will easily survive. Upon return our Latvian customers will see an enhanced product and we will achieve new heights. Meanwhile we get back to work. This time will require even more effort from the team than before. We will take care of each other and will come out strong.“ Says CEO and Group president George Ustinov.

 

For more information, please contact:

Enlabs AB

George Ustinov, CEO and Group president

[email protected] / +371 2 9424175

Niklas Braathen, Chairman of the Board

[email protected] / +46 70-525 27 77

Om ENLABS

ENLABS står för Entertainment Laboratories. Vi är ett bolag som skapar underhållning genom nytänkande inom tre affärsområden: Gaming, Media och Solutions. Bolagsgruppen har kontor i Tallinn, Riga, Vilnius, Malta, Marbella och Stockholm. De operativa dotterbolagen innehar nationella licenser och tillstånd för sina verksamheter och koncernen sysselsätter omkring 200 anställda. Enlabs AB (NLAB) är listat på Nasdaq First North Growth Market med Redeye AB som Certified Adviser: [email protected], +46 (0)8 121 576 90. 

Mer information finns tillgänglig via enlabs.se

Denna information är sådan information som ENLABS AB är skyldigt att offentliggöra enligt EU:s marknadsmissbruksförordning. Informationen lämnades, genom ovanstående kontaktpersons försorg, för offentliggörande den 5 april 2020 kl. 23:45 CET.

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