Quote from Therese Hillman, Group CEO
“The weak development in the Nordic countries continued in the second quarter, particularly in Sweden, where we have seen fewer players and lower ARPU since the new regulation was introduced at the beginning of the year. Looking ahead, we continue to invest in increased game production, a technical platform featuring more functionality, and Live Casino, in order to defend, and over the longer term increase our market shares in all our markets.”
Second quarter 2019
- Revenues for the second quarter amounted to SEK 419 (437) million
- EBITDA was SEK 201 (202) million, corresponding to a margin of 48.0 (46.3)%
- Operating profit (EBIT) was SEK 130 (149) million, corresponding to a margin of 31.0 (34.0)%
- Net profit was SEK 120 (139) million
- Earnings per share was SEK 0.50 (0.58) before and after dilution
- 8 (8) new customer agreements were signed, and 10 (7) new customers’ casinos launched
First half-year 2019
- Revenues for the first half-year amounted to SEK 837 (867) million
- EBITDA amounted to SEK 397 (384) million, a margin of 47.5 (44.3) %
- Operating profit (EBIT) amounted to SEK 256 (283) million, a margin of 30.6 (32.6)%
- Profit after tax of SEK 240 (285) million
- Earnings per share of SEK 1.00 (1.19) before and after dilution
- 16 (14) new customer agreements signed, and 19 (15) new customers’ casinos launched
Important events in the second quarter
- 7 (5) slot games were released, of which Narcos was the most successful
- Customer agreement signed with Draftkings in New Jersey, USA
- Games launched with the state-owned gambling operator Veikkaus in Finland
- UK subsidiary established
- A commercial decision was taken not to prolong the license in British Columbia (Canada)
- One million shares were repurchased by the company
Comments by Therese Hillman, Group CEO
Continued weak development in Sweden and rest of the Nordics
In the second quarter, NetEnt’s total revenues decreased by 4.1 percent (-6.6 percent in euro) compared to the corresponding period last year. The development resembled that of the first quarter, with weakness in the Nordic countries and primarily in Sweden, driven by fewer players and lower ARPU since the new regulation was introduced at the beginning of the year. We are present in 23 regulated markets, which accounted for 49 percent of total revenues in the quarter. Outside of Sweden revenues from those markets grew by 1.7 percent in euro during the period, with growth coming mainly from the US (New Jersey), Eastern Europe, Spain and Portugal.
We signed eight new customer agreements and launched ten new customers during the quarter. Among the newly launched customers is the Finnish state-owned gambling operator Veikkaus, where our games have been well received since they were launched at the end of June.
We signed an agreement with DraftKings in New Jersey, which is a market where we continue to see solid growth. We now look forward to our launch in Pennsylvania as the market opens next week, having signed yet another customer, Rush Street, after the end of the quarter.
High activity and strengthened presence in the UK
So far this year, we have released twelve new games and we stick to our plan to launch a total of 30-35 new games for 2019, which is a significant increase compared to last year’s 20 new games. During the second quarter, we released seven new slot games: Dead or Alive 2, Wild Worlds, Narcos, Arcane Reel Chaos, Cash-o-Matic, Twin Happiness and Happy Panda. Narcos has been our best revenue-generating game in 2019 and Dead or Alive 2 has also performed well across our entire customer network.
The EBIT margin was 31.0 (34.0) percent in the second quarter. Operating profit was affected by legal costs as NetEnt took action to defend the IP rights of one of its most important games. In May, the dispute was contractually settled to our advantage. NetEnt’s transformation process has continued and the result for the quarter also include severance pay to senior executives that have left the company. During the quarter, we also recruited senior business area directors from the industry and established a UK subsidiary, to strengthen our presence in Europe’s largest and most important gambling market.
Investing in long-term growth
Now we take the next step in developing our technical platform as we are creating an open platform with new types of functionality and aggregation of third-party content for operators, services that will be launched on a broader scale during 2020.
The transformation of Live Casino continues at full speed and we added several new functions during the quarter to make our product more competitive. The customer response is positive, and we expect growth in the coming quarters from this segment, but it will take a few more quarters before we can see more meaningful revenues.
The industry is going through significant changes, and we see opportunities to strengthen our position in all our markets. Through our strategy to invest in increased game production, a technical platform featuring more functionality, and Live Casino – supported by our brand, global distribution and customer relations – we have the right basis to defend, and over the longer term increase our market shares.
Presentation of report
On Friday, July 12th, 2019, at 9.00 a.m. the report will be presented by CEO Therese Hillman live via a telephone conference and webcast. The audiocast can be followed in real-time on NetEnt’s website, the link is: https://tv.streamfabriken.com/netent-q2-2019
For additional information please contact:
Phone: +46 8 5785 4500
This information is information that NetEnt AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 7:30 CET on July 12th, 2019.
NetEnt AB (publ) is a leading digital entertainment company, providing premium gaming solutions to the world’s most successful online casino operators. Since its inception in 1996, NetEnt has been a true pioneer in driving the market with thrilling games powered by a cutting-edge platform. NetEnt is committed to helping customers stay ahead of the competition, is listed on Nasdaq Stockholm (NET–B) and employs around 900 people in Malta, Stockholm, Gothenburg, Gibraltar, Kiev, Krakow and New Jersey. For more information, please visit www.netent.com.