Interim report January – September 2017

Quote from Per Eriksson, President and CEO

– ”The third quarter was another solid quarter for NetEnt. Revenues increased by 12 percent and the operating margin was significantly better than in the third quarter of last year. Mobile games and regulated markets such as the UK, Italy and Spain contributed the most to our growth.”

Third quarter 2017

• Revenues for the third quarter increased by 12.3% to SEK 401 (357) million
• Operating profit amounted to SEK 156 (129) million, an increase of 20.5%
• Operating margin was 38.9 (36.2)%
• Profit after tax amounted to SEK 142 (119) million, an increase of 19.4%
• Earnings per share amounted to SEK 0.59 (0.50) before and after dilution
• 8 new customer agreements were signed and 10 new customers’ casinos were launched

First nine months 2017

• Revenues for the first nine months increased by 14.3% to SEK 1,206 (1,055) million
• Operating profit amounted to SEK 437 (380) million, an increase of 15.0%
• Operating margin was 36.3 (36.0)%
• Profit after tax amounted to SEK 400 (355) million, an increase of 12.9%
• Earnings per share amounted to SEK 1.67 (1.48) before and after dilution
• 29 new customer agreements were signed and 24 new customers’ casinos were launched

Important events in the third quarter

• Retail deal signed with Eurogames in Italy for land-based gaming machines
• Live Rewards launched for Live Casino
• New game functionality was introduced as part of NetEnt Engage™
• Free-round functionality was launched with first customer in New Jersey

Comments by Per Eriksson, President and CEO:

Continued growth and higher profitability

The third quarter was another solid quarter for NetEnt. Revenues increased by 12 percent and operating profit rose by 20 percent compared to the same quarter of last year. The operating margin was significantly better than in the third quarter of last year, thanks to growing revenues and economies of scale in the business. Mobile games continued to be an important growth factor and accounted for 52 percent of total revenues in the quarter. Our systems managed 10.2 billion gaming transactions during the quarter, representing an increase of 18 percent compared to the corresponding period of last year. The royalty level for our products remained unchanged. We signed agreements with eight new customers and launched ten new customers’ casinos.

Making our offering more attractive

We launched three new games during the quarter – Wolf Cub, Emoji Planet and Legend of Shangri-La. In the last quarter of the year, we are releasing some new thrilling games such as Planet of the Apes and Finn and the Swirly Spin, the latter of which has been developed to provide the ultimate mobile gaming experience. We also unveiled new free-round functionality as part of NetEnt Engage™, to support our customers in boosting player activity and loyalty.
Live Casino is showing solid growth, especially the mobile product, which has been very well received by our customers. In the third quarter, we continued to roll out Live Rewards, which is an innovative set of bonus functions that make our games more thrilling for players and operators. We have also expanded our Live studio in Malta and going forward, we will be offering more exclusive tables to our customers. In the fourth quarter we are making our Live Casino offering more complete by launching Standard Black Jack for mobile, which has been on our customers’ wish list for some time.
We are developing our professional services business and in October, we launched a new digital ad buying service for gaming operators together with our partner Ve Global, so called programmatic marketing. Competition is toughening among operators and we are convinced that our customers need to use gaming data in a better way to be able to optimize their marketing spend. Looking ahead, we will continue to develop new services that support our customers to drive growth.

Strong growth outside of the Nordics

Great Britain and Italy contributed the most to our growth in the quarter, but strong growth was also seen in other regulated markets such as Spain and Denmark. We continue to grow fast in New Jersey and in the third quarter, we introduced free-round functionality with the first customer there. However, developments in Pennsylvania have been disappointing, with persistent delays in the political process, but after yesterday’s news it is highly likely that a new gaming legislation will be implemented shortly. The potential tax income from regulated gaming offers an important source of future funding for many US states and longer-term, we continue to see great potential in the US when other states follow New Jersey to re-regulate online casino. We also see interesting future opportunities in Latin America, and in early October we signed our second customer agreement for the regulated market in Mexico, with Caliente, which is one of the leading operators in that market.

Future outlook

The future outlook remains bright and for the remainder of 2017, we see conditions for continued solid growth supported by new games, increasing market shares in the UK, mobile growth, many new customers to launch and our expansion in North America. We continue to hire more employees and develop our platform. We strengthen the organization to increase our output capacity, enter more regulated markets and integrate many new customers. With this in mind, we foresee an ongoing need to invest during the rest of 2017. We do this to enable continued solid growth with increasing economies of scale for NetEnt going forward.

Presentation of earnings report

On Friday, October 27, 2017, at 10.30 a.m. the interim report will be presented by CEO Per Eriksson live via webcast. The presentation can be followed in real-time, the link to the webcast is https://tv.streamfabriken.com/netent-q3-2017

For additional information please contact:

Per Eriksson
President and CEO
Phone: +46 8 5785 4500
per.eriksson@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 27, 2017.

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