Interim report January – September 2018

“The third quarter was marked by a strong start thanks to the successful release of the game Jumanji. We continue to make efforts to lower overhead costs and to optimize the organization for commercial drive and increased pace of output, and I see room for improvement next year in several areas. Our net cash position provides us with financial flexibility and allows for continued solid cash returns to shareholders.”

Third quarter 2018

• Revenues for the third quarter amounted to SEK 449 (405) million
• EBITDA of SEK 227 (195) million, a margin of 50.6 (48.1)%
• Operating profit (EBIT) of SEK 172 (155) million, a margin of 38.3 (38.3)%
• Profit after tax of SEK 155 (142) million
• Earnings per share of SEK 0.65 (0.59) before and after dilution
• 9 (8) new customer agreements signed, and 14 (10) new customers’ casinos launched

First nine months 2018

• Revenues for the first nine months amounted to SEK 1,317 (1,211) million
• EBITDA of SEK 612 (545) million, a margin of 46.5 (45.0)%
• Operating profit (EBIT) of SEK 455 (429) million, a margin of 34.6 (35.4)%
• Profit after tax of SEK 441 (393) million
• Earnings per share of SEK 1.83 (1.63) before and after dilution
• 23 (29) new customer agreements signed, and 29 (24) new customers’ casinos launched

Important events in the third quarter

• Games launched with British Columbia Lottery Corporation in Canada and Norsk Tipping in Norway
• Beta launch of NetEnt’s affilitate business
• First customer launched on regulated market in Lithuania
• Games launched with Hard Rock in New Jersey
• Lars Johansson appointed CFO (acting)

Comments by Therese Hillman, Group CEO

The third quarter was marked by a strong start thanks to the successful release of the game Jumanji. We have remained focused on strengthening our customer offering, cutting lead times, and freeing up resources for new commercial activities.

In September, we beta-launched our own affiliate business. The idea is to create a place where players can enjoy the complete portfolio of NetEnt games for free, while operators can offer bonuses to players that are interested in playing for real money. This new service is a great way for us to strengthen our relationship with both operators and players. Our move into social casino proceeds according to plan and we recently introduced a desktop version of our Facebook app in the US. Both these new intiatives are well aligned with our strategy to move closer to the end users in the value chain. We need to keep delivering the best casino games from a player perspective and make our brand visible, at the same time as we develop even closer partnerships with operators through new types of collaborations. Customers and players wish to have more games from us, and we aim to release a significantly higher number of new games in 2019 and going forward.

Expansion in locally regulated markets continues to be an important part of NetEnt’s business and sustainability strategy. These markets accounted for 35 (32) percent of revenues in the quarter. With new customers in the important WLA segment, such as Norsk Tipping, ATG, Svenska Spel, Veikkaus and British Columbia Lottery Corporation, we can reach a larger player base and generate additional revenues in the years to come. We welcome the re-regulation in Sweden next year, as the new gaming law means that all qualified operators have to obtain a license. This creates a better environment for both players and gaming companies.

Revenues from Live Casino keep growing gradually from low levels and we plan to go live with additional tables this year and in 2019. During the quarter we formed a plan to strengthen our offering together with our customers, and to accelerate growth in this attractive market segment.

Summing up the third quarter, we see that the operating margin was unchanged at 38.3 percent and that EBIT increased by 10.9 percent compared to the corresponding period in 2017, thanks to higher volumes, the weaker Swedish Krona and improved efficiency. We have higher ambitions for organic earnings growth than the current pace. Therefore, we continue to make efforts to lower overhead costs and to optimize the organization for commercial drive and increased pace of output, and I see room for improvement next year in several areas. The business generates strong cash flows and at the end of the period, we had a net cash position of 362 SEK million. Our net cash position provides us with financial flexibility and allows for continued solid cash returns to shareholders.

Now I look forward to the last quarter of the year, as we have a full release schedule with five new slot games, including our largest game production this year, Vikings, which is based on the well-known HBO series.

Presentation of interim report

On Thursday, October 25th, 2018, at 9.00 a.m. the interim report will be presented by CEO Therese Hillman live via a webcast. The presentation can be followed in real-time on NetEnt’s website, the link to the webcast is: https://tv.streamfabriken.com/netent-q3-2018

For additional information please contact:

Therese Hillman
Group 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 October 25th, 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 1,000 people in Malta, Stockholm, Gothenburg, Gibraltar, Kiev, Krakow and New Jersey. For more information, please visit www.netent.com.