Earnings report 2010 Quarterly report October-December 2010
Fourth quarter 2010
– Revenues for the fourth quarter increased by 16.6 % to SEK 99.6 (85.4) million
– Operating profit amounted to SEK 33.8 (35.4) million
– Operating margin was 33.9 (41.4) %
– Profit after tax amounted to SEK 29.0 (32.4) million
– Earnings per share amounted to SEK 0.73 (0.82) before and after dilution
– Three new license agreements were signed, including JAXX/Mybet, and two new
customers’ casinos were launched
Full year 2010
– Revenues for the full year increased by 22.7 % to SEK 368.3 (300.1) million
– Operating profit increased by 13.5 % to SEK 136.4 (120.2) million
– Operating margin was 37.0 (40.1) %
– Profit after tax amounted increased by 11.9% to SEK 120.5 (107.7) million
– Earnings per share amounted to SEK 3.05 (2.72) before and after dilution
– Eleven new license agreements were signed, including Gioco Digitale/bwin.it,
Interwetten, Intralot, Stan James and JAXX/Mybet, and ten new customers’
casinos were launched
– Proposed transfer to shareholders is SEK 2.00 (2.00) per share
Important events in the fourth quarter
Revenue growth for the fourth quarter was 31.7 percent in local currency
compared tothe fourth quarter 2009 and 10.2 percent compared to the previous
quarter. The strengthened Swedish currency has held back revenue growth in SEK.
The number of game transactions amounted to 1.8 billion in the fourth quarter,
an increaseof 23 percent compared to the previous quarter and 40 percent
compared to thesame period in 2009. This development is a result of a general
increase in activity and is not driven by any particular occurrence.
During 2010 Net Entertainment has made strategic investments across the entire
business. These investments are necessary to strengthen delivery capacity as
the company grows,market matures, new customers are added and customers become
larger. In addition, the reregulation of the online market creates extensive
requirements that must be faced but at the same time creating large business
opportunities. During the fourth quarter development of games and system
solutions for mobile terminals was initiated. This market is estimated to show
rapid growth and is an important step in Net Entertainment’s expansion
strategy.
Stan James was launched in November and has shown a positive development.
Comments from Johan Öhman,President and CEO
Our industry is going through significant change as many countries around the
world are in the process of regulating online gaming which affect both
operators and suppliers. As a systems supplier Net Entertainment has to invest
in adapting its products and offerings to the requirements of each jurisdiction
which is both complex and costly. Long term, it is our opinion that regulated
markets will generate significant business opportunities as they fuel further
market growth and stability.
Revenues for 2010 increased by 23 percent (37 percent in Euro) on a market
which according to H2 Gaming Capital grew 12 percent. The growth was the result
of continued good development for our customers partly driven by the new games
we released during the year. At the same time the business was impacted by
currency effects, lost business in France due to regulation (a market which
represented a significant share of our revenue base) and a delayed launch of
online casino in Italy. We saw a strong increase in gaming activity during the
fourth quarter and 2011 has commenced on a similar level.
The Italian authorities have for some time been working on regulating online
gaming and after several delays the final decree was published at the beginning
of February. It is thereby expected that the market may open around mid-year
2011. Italy holds great business potential for our company as we have signed
agreements with several of the existing online operators. The effect on
revenues is therefore expected to be visible in the second half of 2011.
Extensive investments have been made in adapting our software to the Italian
regulation which has affected the financials, both as capitalized development
but also direct costs. Regulation of online gaming is not isolated to Italy but
a trend across Europe as well as the USA and Asia. Overall, Net Entertainment
is well positioned to benefit from the global market development for online
gaming. We will therefore continue to invest in technology and personnel to
meet regulatory requirements and re-enforce our organization which will have a
short term impact on our profit margin.
As a result of the efforts made in delivering unique games and offer the best
entertainment experience, Net Entertainment is today regarded as one of the
leaders in our industry. To capture the strategic opportunities we see on the
market, the organization was increased with 49 employees during 2010. The
organizational reinforcement is necessary partly for the development of a
solution for mobile devices and a new platform with significantly increased
capacity needed to meet future demands.
The development of our first branded slot game, Frankenstein, is progressing
well and will be released in May. During 2010 we introduced our new ´Smart
Range™´concept which comprise games specifically developed for markets with low
broadband penetration. Thanks to revolutionary technical design we are able to
offer a first class gaming experience despite significant size limitations.
Another addition to our games portfolio was a game featuring the largest
progressive jackpot online. Our continuous focus in research and product
innovationis a key reason why we today are considered the leader within our
industry.
The sales activities remains focused on Tier 1 operators and the outcome has
been very satisfying with four tier one deals signed during 2010. We see a
strong interest in our product and view the chances of closing several
interesting deals during 2011 as very promising. We are also well positioned to
benefit from the opportunities which arise from the regulation of our market.
All in all we have an excellent position for continued strong development.
For additional information please contact;
Johan Öhman, CEO Net Entertainment; Phone +46 8 5785 45 00
johan.ohman@netent.com
or
Bertil Jungmar, CFO Net Entertainment; Phone +46 8 57 85 45 00
bertil.jungmar@netent.com
About NetEntertainment
Net Entertainment is a premium supplier of digitally distributed gaming systems
used by some of the world’s most successful online gaming operators. The Net
Entertainment Casino is a complete gaming solution comprising both a complete
management platform and a full suite of high quality games. Operators are
provided a customized casino that is easily integrated ensuring short time to
market and a cost efficient operation. Net Entertainment is listed on Nasdaq
OMX Stockholm (NET-B). More information about Net Entertainment is available at
www.netent.com.