Year-end report 2017 and quarterly report October – December 2017

Quote from Per Eriksson, President and CEO 
- ”2017 was another eventful year with profitable growth for NetEnt, even though we had expected a much better outcome. In 2018, we are increasing our commercial focus and optimizing our organization to make sure that revenues grow more than costs. I look forward to a new year with more game releases and product news than ever for NetEnt.”

Fourth quarter 2017

  • Revenues for the fourth quarter increased by 4.7% to SEK 419 (400) million
  • Operating profit amounted to SEK 150 (156) million, a decrease of 3.9%
  • Operating margin was 35.8 (39.0)% 
  • Profit after tax amounted to SEK 152 (150) million, an increase of 1.5%
  • Earnings per share amounted to SEK 0.63 (0.62) before and after dilution 
  • 8 new customer agreements were signed and 11 new customers’ casinos were launched

Full year 2017

  • Revenues for the full year increased by 11.7% to SEK 1,625 (1,455) million
  • Operating profit amounted to SEK 587 (536) million, an increase of 9.5%
  • Operating margin was 36.1 (36.8)% 
  • Profit after tax amounted to SEK 552 (504) million, an increase of 9.5%
  • Earnings per share amounted to SEK 2.30 (2.10) before and after dilution 
  • 37 new customer agreements signed and 35 new customers’ casinos launched
  • Proposed cash distribution to shareholders of SEK 2.25 (2.25) per share

Important events in the fourth quarter

  • Customer agreement signed with Caliente in Mexico
  • New digital marketing service launched with Ve Global
  • The games Planet of the ApesTM and Finn and the Swirly SpinTM were released 
  • Live Casino Black Jack for mobile was launched

Comments by Per Eriksson, President and CEO
2017 was another eventful year with profitable growth for NetEnt, even though we had expected a much better outcome. Revenues for the full year 2017 increased by 11.7 percent to SEK 1,625 million and the operating profit increased by 9.5 percent to SEK 587 million. The operating margin was 36.1 (36.8) percent. Our strategy to grow on regulated markets remains in place and during 2017 we terminated deliveries of games to operators in Australia, Poland and Czechia, which affected revenues negatively by three percentage points in the fourth quarter.
In the fourth quarter, revenues increased by 4.7 percent in SEK compared to the fourth quarter in 2016 and the operating profit amounted to SEK 150 million, corresponding to a margin of 35.8 (39.0) percent. The lower-than-expected revenue growth in Q4 resulted in a lower operating margin compared to the previous year as we continued to make growth-enabling investments to strengthen our product and sales organization, enhance our Live Casino offering and moved to new, larger offices in Malta. In 2018, we are increasing our commercial focus and optimizing our organization to make sure that revenues grow more than costs.
In the fourth quarter we signed license agreements with eight new customers and launched online casinos for 11 new customers. The business continues to generate solid cash flows and the proposed cash return to shareholders for 2017 is SEK 540 million, or SEK 2.25 per share.
We continued to invest in market-leading mobile games for online casino and in November we released Finn and the Swirly SpinTM, a ground-breaking game with a new type of game mechanic, developed to offer the ultimate mobile gaming experience. So far the game has been very well received by players. Further, we introduced a mobile version of Black Jack Live Casino. Mobile games accounted for 54 percent of our revenues in the fourth quarter.
Having just returned from the annual gaming exhibition ICE in London I can say that our roadmap for new games in 2018 looks very exciting. We are planning to release at least 20 new games, compared to 14 in 2017, including two branded games, JumanjiTM and VikingsTM. A third branded game that was unveiled at ICE is based on the popular Netflix-series NarcosTM and expected to be released in Q1 2019. For Live Casino we presented a new concept based on exclusively branded, customized solutions that use innovative 3-D graphics to create a fully immersive live casino experience where players can see other tables and players. The first such bespoke Live product is available with our customer Mr Green and is called Live Beyond Live.
The global market for online gaming continues to grow, supported by digitalization and the mobile development. We are challenging the traditional gaming industry with our digital business model and see that the migraton to online from offline continues unabated. Only five percent of all casino gaming globally takes place online, the rest still occurs in land-based gaming environments. The online casino penetration is higher in our core markets in Europe where we have high market shares and we have experienced slower growth in the Nordics, especially in Norway, while growth has remained strong in re-regulated markets like Italy, Spain, Britain and New Jersey.
At NetEnt we believe in corporate social responsibility and are committed to promoting a sustainable development of our business. An important area within sustainability is diversity and gender equality. We see that diversity and gender equality are important factors to drive innovation and strengthen the culture at NetEnt. A key part of our employee strategy is the objective to achieve a 50/50 gender balance in the Company. For the third year in a row, NetEnt was among the finalists when the Allbright foundation rated all companies listed on the Stockholm Stock Exchange based on gender equality.
For 2018, we see conditions for profitable growth, supported by a large pipeline of new games, growing revenues from regulated markets, the mobile channel and new customers to be launched. I look forward to a new year with more game releases and product news than ever for NetEnt.

Presentation of earnings report
On Thursday, February 15, 2017, at 9.00 a.m. the earnings report will be presented by CEO Per Eriksson 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-q4-2017.

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 February 15, 2018

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