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Interim report January – September 2020

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Quote from Therese Hillman, Group CEO
"During the quarter we continued to invest in our strategic growth areas USA, Red Tiger and Live Casino, while driving cost and revenue synergies from the ongoing integration between NetEnt and Red Tiger. Underlying EBITDA amounted to SEK 313 (221) million, corresponding to a record margin of 60% (50%). Given our new lower cost base, the operating leverage of our business and our strong product pipeline, we expect continued strong growth in earnings and cash flow for the rest of the year and beyond."

Third quarter 2020 

  • Revenues for the third quarter amounted to 521 (443) SEKm
  • EBITDA was 310 (196) SEKm, corresponding to a margin of 59.4 (44.3)% 
  • EBIT was 204 (112) SEKm, corresponding to a margin of 39.2 (25.3)%
  • Excluding non-recurring costs, EBITDA was 313 (221) SEKm and EBIT was 207 (137) SEKm
  • Earnings after tax amounted to 167 (76) SEKm, earnings per share was 0.68 (0.32) SEK after dilution

First nine months 2020 

  • Revenues for the first nine months amounted to 1,611 (1,281) SEKm
  • EBITDA was 838 (594) SEKm, corresponding to a margin of 52.0 (46.4)% 
  • EBIT was 517 (368) SEKm, corresponding to a margin of 32.1 (28.7)%
  • Excluding non-recurring costs, EBITDA was 880 (619) SEKm and EBIT was 559 (393) SEKm
  • Earnings after tax amounted to 338 (316) SEKm, earnings per share was SEK 1.38 (1.32) after dilution

Important events in the third quarter 

  • Continued focus on integration with Red Tiger
  • Several important customer contracts were signed with operators for the US market
  • 16 new slot games were released, 5 from NetEnt and 11 from Red Tiger

Comments by Therese Hillman, Group CEO
Revenues for the third quarter of the year amounted to SEK 521 (443) million. On a proforma basis, including Red Tiger fully in the previous year’s figures, the Group’s total revenues increased organically by 9% Y/Y in euro compared to the same period in 2019. The return of sports betting and the general easing of lockdowns in key markets resulted in a normalization of revenue growth to pre Covid-19 levels. Our continued focus on costs started to have a notably positive effect on profitability in the quarter. Underlying earnings before interest, tax, depreciation and amortization (EBITDA) amounted to SEK 313 (221) million, corresponding to a record margin of 60% (50%). 

Gross gaming revenues (GGR) from the US market increased by 313% Y/Y and accounted for more than 10% of total Group GGR in the quarter. We remain very excited about the US opportunity and have continued to expand our footprint by signing important customer deals with operators such as DraftKings, William Hill, Tipico, Wind Creek, BetMGM and The Cordish Companies. 
Red Tiger had its best quarter ever with continued strong revenue growth and several great game releases. 
Of the 16 new slot titles released during the quarter for the Group, Gonzo’s Quest Megaways stood out as an exceptionally strong game launch. Three months after its release, the game is by far the best performing new game ever launched for the NetEnt Group in terms of gross gaming revenues (GGR). Our second new game collaboration this year, Piggy Riches Megaways, was recently recognized by Slot Catalog Awards as the most popular slot game in the UK so far in 2020. 
Our continuous product improvements in Live Casino resulted in continued growth, albeit at a slower pace than in the second quarter, with GGR up 109% Y/Y. Growth with existing customers continued at a high pace, while we noticed a slowdown in new sales.  

During the quarter we continued to invest in our strategic growth areas USA, Red Tiger and Live Casino, while driving cost and revenue synergies from the ongoing integration between NetEnt and Red Tiger. A number of important activities in the third quarter are expected to have a positive effect on earnings in Q4 and onwards, including:
•    Market entry in West Virginia in October as the first third-party supplier.
•    Expected early entry in Michigan when the market opens. 
•    Launching Red Tiger’s games in Pennsylvania under NetEnt’s license. Go-live is expected in November. 
•    Red Tiger’s games are now available through NetEnt’s platform at Veikkaus, further expanding Red Tiger’s reach into regulated markets and Tier 1 customers. 
•    Launch in December of Roulette Max, an innovative high-volatility game version for Live Casino. 
•    Further expansion of our Live studio in Malta.

The revenue outlook for Q4 remains positive, supported by the list of actions mentioned above. Further, our product pipeline looks very promising with Megaways versions of such classic titles as Kulta Jaska, Twin Spin and Divine Fortune. Given our new lower cost base, the operating leverage of our business and our strong product pipeline, we expect continued strong growth in earnings and cash flow for the rest of the year and beyond.

Presentation of report
On Thursday, 22 October 2020, at 10:30 a.m. (CET) the report will be presented by CEO Therese Hillman live via an audiocast and telephone conference. The audiocast can be followed in real-time on NetEnt’s website, the link is: https://tv.streamfabriken.com/netent-q3-2020
Dial-in numbers for participants are the following: 
Sweden: +46 8 566 42707. UK: +44 3333 009 263. USA: +1 833 249 8404

This information is information that NetEnt AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation (MAR). The information was submitted for publication, through the agency of the contact person set out above, at 7:30 CET on October 22, 2020.

For additional information please contact:
Therese Hillman
Group CEO
Phone: +46 8 5785 4500
therese.hillman@netent.com

About NetEnt 
NetEnt AB (publ) is a global gaming company, providing premium gaming solutions to the world’s most successful online casino operators. The product portfolio includes the NetEnt and Red Tiger brands. Since the start in 1996, NetEnt has been a true pioneer in driving the market with innovative games powered by a cutting-edge platform. NetEnt is committed to creating the future of gaming and employs around 1,100 people in Malta, Stockholm, Sofia, Kiev, Krakow, Gothenburg, Gibraltar, Isle of Man, London and New Jersey. The NetEnt share is listed on Nasdaq Stockholm (NET–B). For more information, please visit www.netent.com.

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