Interim report January – June 2017

Quote from Per Eriksson, President and CEO
- ”The quarter featured continued solid growth, higher profitability and a strong cash flow. The most important growth drivers were mobile games, Great Britain and Italy. During June, mobile games contributed more than half of our revenues while Britain was our largest geographic market for the quarter. For the second half of 2017, we see conditions for continued solid growth.”

Second quarter 2017

• Revenues for the second quarter increased by 15.5% to SEK 407 (352) million
• Operating profit amounted to SEK 145 (122) million, an increase of 18.5%
• Operating margin was 35.7 (34.8)% 
• Profit after tax amounted to SEK 134 (113) million, an increase of 17.9%
• Earnings per share amounted to SEK 0.56 (0.47) before and after dilution 
• 6 new customer agreements were signed and 8 new customers’ casinos were launched

First six months 2017

• Revenues for the first six months increased by 15.4% to SEK 805 (697) million
• Operating profit amounted to SEK 281 (251) million, an increase of 12.2%
• Operating margin was 35.0 (35.9)% 
• Profit after tax amounted to SEK 258 (235) million, an increase of 9.6%
• Earnings per share amounted to SEK 1.07 (0.98) before and after dilution 
• 21 new customer agreements were signed and 14 new customers’ casinos were launched

Important events in the second quarter

• A supplier license was obtained in British Columbia, Canada 
• Games were launched on the regulated market in Serbia
• Table games were introduced for customers in Spain
• Cash distribution of SEK 540 million (2.25 kr/share) to shareholders

Comments by Per Eriksson, President and CEO:

Solid revenue growth and higher operating profit
NetEnt’s revenues increased by 15.5 percent and the operating profit increased by 18.5 percent compared to the same quarter last year. The operating margin in the quarter was higher than in the same period last year, mainly driven by growth in revenues. We signed agreements with six new customers and launched our games with eight new customers. The number of gaming transactions in our systems amounted to 10.1 billion during the quarter, corresponding to an increase of 14.4 percent compared to the second quarter of last year. At the same time, the royalty level for our products remained stable. Mobile gaming continues to contribute to our growth and accounted for more than half of our revenues in June. NetEnt continues to generate strong cash flows – in the second quarter free cash flow after investments amounted to 131 SEKm, an increase of 39.8 percent compared to Q2 2016. At the end of May, 540 SEKm of cash was distributed to shareholders through an automatic redemption program. The cash flow generation of our business gives us financial flexibility to invest in future growth while we continue to aim for significant cash returns to our shareholders.

Expansion on regulated markets
Regionally, Great Britain and Italy contributed the most to our growth in the quarter. Overall, Great Britain was our largest market in the quarter and we continue to see great potential for market share gains in the coming years as we are working even harder to expand in this market. In Italy, all our game traffic now takes place through licensed operators. Revenue growth in Sweden was relatively slower, which can be explained by our high market share and the maturity of the market. I am very pleased that we continue to see fast growth in regulated markets such as Denmark, Belgium, Spain and New Jersey. The launch of table games in Spain during the quarter will support continued solid growth for us in this promising market. In the US, our operations in New Jersey continue at full speed while we also closely monitor developments in other states that could potentially open up for online casino, such as Pennsylvania and Illinois.

Awards and new popular games
The key to our growth is our attractive product offering with new thrilling games and innovative gaming solutions for online casinos. In June, we won several prestigious awards at the EGR B2B Awards in London, in the categories Mobile supplier, RNG casino supplier and Innovation in RNG casino software. Four new games released in the quarter are Hansel and Gretel, Copy Cats, Butterfly Staxx and Scruffy Duck. At the end of August we will release emoji planet™, the much-awaited branded game that is based on the popular emoji symbols used in digital communication globally by people across all age categories. Like we have said before, we will step up the pace of new game releases going forward. This will be seen in the second half of this year, when we will also launch three branded games. Live Casino remains an interesting area for us and our ongoing mobile product enhancements – with live player rewards being the latest added feature – have been much appreciated by our customers.

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 a large number of 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 Thursday, July 13, 2017, at 9.00 a.m. the interim report will be presented by CEO Per Eriksson live via webcast. The presentation can be followed in real-time on NetEnt’s website at https://www.netent.com/en/section/invest/.

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 July 13, 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, Kiev, Krakow, Gothenburg, Gibraltar and New Jersey. For more information, please visit www.netent.com.