Profits surge for Laurence Escalante’s Virtual Gaming Worlds

The social gaming and sweepstakes business is back making big profits after a sharp increase in marketing expenses ate into returns the year prior.

Australian Billionaire and Ferrari sponsor Laurence Escalante is back making big profits.

Billionaire Laurence Escalante’s giant social gaming business Virtual Gaming Worlds has arrested an earnings decline, posting a strong profit result for the first half of the 2024 financial year.

Financial results released to VGW shareholders on Monday evening showed net profit of $207m for the six months to December 31 from revenue of $2.8bn.

VGW is already the sixth biggest private Australian company in revenue terms, growing rapidly since Escalante started the business from shared office space in Perth in 2010.

The profit and revenue figures represented a 23 per cent and 29 per cent increase respectively, compared to the previous corresponding period 12 months earlier.

They also represent a turnaround in performance for VGW, a sponsor of iconic Formula One team Ferrari, after a 2023 financial year which saw a big increase in marketing expenses eat into the company’s profits.

Net profit for the year to June 30, 2023 fell about 17 per cent to $377.6m from $454m in the previous corresponding period, despite revenue surging 40 per cent to a record $4.84bn.

Escalante’s business is now on track to break through the $5bn revenue barrier for the first time.

Mr Escalante appeared in this year’s The List – Richest 250. Picture: Abigail Harman

“Revenue growth of 29 per cent contributed to higher earnings, partially offset by increases in some expenses as we continue to invest in our people, customers and products. But overall, this was a pleasing outcome given the more challenging macroeconomic environment and increased competition,” Escalante said in a statement sent to VGW shareholders.

“We are focused on delivering ongoing growth and disciplined management of expenses, with our strong balance sheet providing optionality through the cycle, including allowing us to reinvest for growth as opportunities arise.”

Escalante’s group derives all of its revenue from customers in North America, but has its headquarters in Perth.

It operates under a model which gives users the chance to win promotional sweepstakes which can be redeemed for cash.

The company’s customers play social casino virtual games such as its Chumba Casino suite of online poker machine, poker and blackjack table games and Luckyland Slots. The customers pay real money to buy virtual coins.

Escalante, 42, has about a 65 per cent shareholding in the privately-held, public unlisted company, which accounts for the bulk of his $3.37bn estimated wealth on this year’s edition of The List – Australia’s Richest 250.

He said VGW’s balance sheet remained strong with a cash balance of about $539m.

“We are focused on delivering ongoing growth and disciplined management of expenses, with our strong balance sheet providing optionality through the cycle, including allowing us to reinvest for growth as opportunities arise,” Escalante said.

He added VGW had experienced a “positive start to 2024”, including “top line growth through January and February” but noted, with an uncertain external operating environment — including the clouded economic outlook and geopolitical tensions — it was difficult to predict financial results for the remaining half of the financial year.

“However, over the long term, our outlook remains bright and we are well positioned to execute.”