Interim report January–March 2018

”While NetEnt continues to focus on growth, measures were initiated in March to enable margin expansion going forward. Among other things, the Company is taking action to reduce costs. For the remainder of the year, we see conditions for better growth, supported primarily by regulated markets, more new games and new customers.”

First quarter 2018

• Revenues for the first quarter amounted to SEK 430 (393) million
• Operating profit (EBIT) amounted to SEK 134 (127) million, a margin of 31.2 (32.2)%
• Severance pay for previous CEO of 6 SEK million included in operating profit. Adjusted for this cost, the operating profit was 140 (127) MSEK and the operating margin was 32.5 (32.2)%
• Profit after tax of SEK 146 (115) million
• Earnings per share of SEK 0.61 (0.48) before and after dilution

Important events in the first quarter

• 6 new customer agreements signed, and 8 new customers’ casinos launched
• Games launched with Caliente in Mexico
• Five new slot games released, including The Phantom’s Curse, Asgardian Stones and Hotline
• Live Beyond Live launched with Mr Green
• Digital marketing service (programmatic) contract signed with Mr Green
• Therese Hillman appointed acting CEO, Per Eriksson left the Company

Comments by Therese Hillman, Acting CEO

Total revenues for NetEnt in the first quarter increased by 9.3 percent (4.3 percent in euro) to SEK 430 million. Excluding a one-off severance pay for the previous CEO, operating profit increased by 10.4 percent to SEK 140 million, representing a margin of 32.5 (32.2) percent. Costs increased in the quarter, mainly due to more staff in Live Casino and higher depreciation, attributable to newly launched products and currency effects. The business continued to generate strong cash flows. Cash flow for the period amounted to SEK 158 (79) million. In March, we initiated measures to enable margin expansion going forward. Among other things, the Company is taking action to reduce costs.

Growth in NetEnt’s royalty income was nine percent in the first quarter (four percent in euro) compared to the first quarter of last year. During the quarter, we signed six new customer agreements and launched eight new customers’ casinos. The share of revenues from locally regulated markets was 34 (31) percent in the quarter. We saw overall solid performance in locally regulated markets and a key contributor to growth was the Italian market. Regarding North America, we recently decided to apply for a license in Pennsylvania and intend to launch our games with British Columbia Lottery Corporation in British Columbia (Canada) in the third quarter.
As we have communicated before, in 2017 we phased out deliveries to unlicensed operators in Australia, Poland and the Czech Republic. In the first quarter, the net negative effect from these markets was about two percentage points on royalty revenue growth in euro for the Company. The weakness in Norway continued and this also had a negative impact on revenues in the quarter.
We released five new slot games in the quarter: Twin Spin Deluxe, Phantom’s Curse, Fruit Spin, Asgardian Stones and Hotline. For Live Casino, we launched the new concept called Live Beyond Live for Mr Green. For the full year 2018, we plan to release 21 new slot games – an increase from 14 new games in 2017 – and we look to roll out more customized solutions with exclusive tables in Live Casino. We also introduced some new functionality that strengthens our mobile Live offering.

For the remainder of the year, we see conditions for better growth, supported primarily by regulated markets, more new games and new customers. We continue to work on optimizing the organization and to make sure that revenues grow more than costs. We plan to host a capital markets day on May 22 in Stockholm, where we will present our view on products, regulated markets and future growth opportunities for NetEnt. A separate invite with more details will be sent out shortly. We look forward to seeing you in May.

Presentation of interim report

On Tuesday, April 24, 2018, at 9.00 a.m. the interim report will be presented by acting CEO Therese Hillman live via webcast. The presentation can be followed in real-time on NetEnt’s website, the link to the webcast is: https://tv.streamfabriken.com/netent-q1-2018.

For additional information please contact:

Therese Hillman
Acting CEO
Phone: +46 8 5785 4500
therese.hillman@netent.com

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 April 24, 2018.

About NetEnt

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 more than 1,000 people in Malta, Stockholm, Gothenburg, Gibraltar, Kiev, Krakow and New Jersey. For more information, please visit www.netent.com.