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How inflation and currency risks affect profitability
Introduction: profitability "melts" if not indexed
Inflation reduces real returns, and currency volatility changes the face value. For iGaming, this is critical: revenue is often multi-currency (USD/EUR/local), expenses are a mixture of salaries, royalties, marketing and payment commissions. Without trident rules, any progress in LTV/CAC and approval/MDR is easily "eaten up" by rates and price increases.
1) P&L impact mechanics
Inflation:- Revenue: If pricing/bonuses are not indexed, the ARPU/player drops in real terms.
- COGS/OPEX: salaries, hosting, creatives, royalties (if in hard currency), the cost of payment services are growing.
- Taxes/levi: often nominated in%, but the base is growing → absolute payments ↑.
- Transactional: rate difference between the trade date and the effective clearing/disbursement date.
- Economic: long-term shift in GEO demand/expenditure and currencies.
- Translational: conversion of reporting into presentation currency (for holdings).
[
\Delta \text{EBITDA} \approx \Delta \text{NGR} - \Delta \text{COGS} - \Delta \text{OPEX} - \Delta \text{Levies} \pm \Delta \text{FX}
]where (\Delta\text {FX}) is the net effect of stream/residue revaluation.
2) Where exactly "hurts" the operator
1. Unpaired currencies: revenue in local currency, and royalties/content/hosting in USD/EUR.
2. Lagged settlements: delay of 3-14 days between GGR and receiving cache → FX loss.
3. Marketing and creativity: purchased in USD, while ARPU in the local does not grow as quickly.
4. PSP/APM fees: linked to USD or floating rates.
5. Salaries: inflationary pressure in the regions of development/support.
6. Taxes/levi: are fixed in the local currency → the rate changes their weight in the reporting one.
3) Formulas "on a napkin"
Real revenue:[
\text{Real NGR}_t = \frac{\text{NGR}_t}{(1+\pi)^{t}}
]where (\pi) is the monthly/annual inflation in the respective currency.
FX exposure by month:[
\text{FX Exposure} = (\text{Revenue}{\text{LCY}\to \text{HCY}} - \text{Costs}{\text{LCY}\to \text{HCY}}) + (\text{Assets} - \text{Liabilities})
]HCY - reporting currency (for example, USD).
Loss on the lag of the settlement:[
\ Delta _ {\text {FX} }\approach\text {TPV }\times\Delta\text {course }\times\text {share of non-hedged flow}
][
\ Delta\text {OPEX }\text {wage }\approach\text {PHY }\times\pi\text {salaries} -\text {indexing in pricing}
]4) Pricing and bonus policies in inflation
Index "hidden prices": minimum deposits, betting tickets, VIP status thresholds.
Offset from the "cache" in the mission/point: the hold is maintained, the monetary bonus load falls.
Regional ARPU management: increase effective ARPU through content mix (mid-volatility, live events), and not just through face value.
5) Trezzori and FX hedge: tools
Cash principles:- Natural hedge: matching currencies of income and expenses (pay-in = pay-out in the same currency/stables).
- Lags reduction: accelerated PSP settlements, on-ramp to stables (where allowed), T + 1/T + 2 clearing.
- Forwards/NDF: fix the rate on the forecast volume (rolling 30/60/90 days).
- Option corridors (collars): protection against extremes at a moderate premium.
- Stablecoins (when resolved): hedge to the USD index on short windows, auto-swapping local revenue into stables.
- Multicurrency accounts: distribution of balances for payment schedules.
- Share of unlisted position ≤ 10-20% of monthly OPEX.
- 60-120 days key flow hedge rolling window.
- Separation of on/off-ramp providers and bank correspondent accounts.
6) KPI and control dashboards
1. Inflation Impact: real ARPU/MAU, real NGR, salary index vs price index.
2. FX Health: exposure by currency, P&L variations due to FX, share of hedged flows, FX-slippage (difference between indicative and actual rates).
3. Settlements: middle lag of the settlement, cash conversion cycle, T + 1 share.
4. Treasury Mix: Share of stables/base currency, position limits, cash-plus returns.
5. Unit-Economics: LTV/CAC in HC Y and LCY, royalties/NGR by currency,% bonus in real terms.
7) Stress tests (quarterly)
Inflation + 5 pp in key GEO → impact on real NGR and salary OPEX.
FX shock ± 5-10% for the top three currencies → margin and cash.
Prolongation of settlements by 3-5 days → working capital requirement.
MDR + 30-50 bp growth (often comes with FX turbulence).
Currency travel scenario: revenue in LCY↑, royalties/hosting in USD↑.
Results → adjustment of hedge limits, PSP/provider agreements and bonus policies.
8) Mini case (simplified)
Base (quarter): NGR = $20 million, bonus% = 26%, royalties = 18% NGR, OPEX = $6. 2 million, revenue 60% LCY/40% USD, lag of the settlement for 7 days, 50% of LCY flows are not hedged.
Shock: inflation 10% per annum (≈2. 4 %/sq.) and LCY weakening by 8% to USD.
No measures: real NGR − 2. 4%; FX loss ≈ $20 million × 60% × 8% × 50% ≈ $480k; salary/hosting growth − another $220k → − $700k to EBITDA.
With measures: T + 1 settlement (share of non-inventory. 20%), forward 40% LCY, indexing pricing/tickets + 2%. Loss ≈ $170k, savings ~ $530k/sq.
9) Negotiation and Contract Practices
PSP: fixed conversion spreads, SLA for T + 1, multi-currency calculations, "migration" of flows at FX peaks without fines.
Studios/aggregators: royalties in the currency of income on GEO (natural hedge), floating discounts at extreme FX.
Hosting/clouds: partial indexing to CPI, credits/commit plans in base currency.
Affiliates: multicurrency payments/stables so as not to inflate FX costs.
10) 90-day yield protection plan
Days 0-30 - Diagnosis
Flow map by currencies/lags, exposure calculation; dashboards FX Health and Inflation Impact.
Trezzori policy: hedge limits, reporting currencies, T + 1/T + 2 regulations.
Days 31-60 - Implementation
Forwards/NDF for 30-60 days on key LCYs; connecting the second on/off-ramp; multicurrency accounts.
Indexing of tickets/deposit thresholds, transfer of part of bonuses to missions/points.
Negotiations with PSP/providers: FX spreads, SLA settlements, royalties in income currency.
Days 61-90 - Scale and Control
Rolling hedge for 90-120 days; auto swap LCY→steybly (where allowed).
Stress tests (inflation/FX/MDR/settlement lags), limits update.
"Profit & Treasury Report" for the board: effect of measures on EBITDA/FCF.
11) CFO checklist
- Reporting currency and income-expense pairs are defined.
- Unhedged position shares ≤ 20% of monthly OPEX.
- The middle lag of the settlement ≤ T + 2, on-/off-ramp ≥ 2 providers.
- Indexing of "hidden prices" and bonus caps is implemented.
- KPI: real ARPU/NGR, FX-slippage, hedge share, cash conversion cycle.
- Legal/tax model for stables/multicurrency payments agreed.
12) Typical errors
1. Count deposits as income - ignores inflation/FX in Net Revenue.
2. No natural hedge: revenue in LCY, expenses in USD - "file" at the exchange rate.
3. Long settlements - the growth of FX losses and cash gaps.
4. Index only prices, not tickets/thresholds and not bonus policy.
5. Single provider on/off-ramp, no exposure limits.
6. There are no stress tests - the budget "flies" at the very first shocks.
Inflation and FX are not backgrounds, but active P&L drivers. By managing pricing and bonuses, reducing the lags of settlements, leveling the currencies of income and expenses and applying trezzori discipline (forwards/NDF, stables, position limits), the operator retains real margins and a stable FCF. Built-in KPIs and stress tests turn macro volatility into manageable risk - and therefore protect business valuation and growth rates.