Interim report January–March 2020
Quote from Therese Hillman, Group CEO
“To further strengthen competitiveness and increase efficiency, we initiated a full integration with Red Tiger during the quarter. Red Tiger keeps performing above our expectations with its award-winning games and the expansion to new markets continues. Combined with a strong product pipeline, new regulated market entries and the Live Casino opportunity for NetEnt, this puts us in a good position to continue delivering profitable growth in 2020.”
First quarter of 2020
- Revenues for the first quarter amounted to 518 (418) SEKm
- EBITDA was 229 (196) SEKm, corresponding to a margin of 44.2 (47.0)%, which includes restructuring costs of 26 SEKm. Adjusted for these costs, EBITDA was 254 (196) SEKm, corresponding to a margin of 49.1 (47.0)%
- EBIT was 119 (126) SEKm, corresponding to a margin of 23.0 (30.2)%. Adjusted for restructuring costs, EBIT was 145 (126) SEKm, corresponding to a margin of 27.9 (30.2)%
- Earnings after tax amounted to 82 (120) SEKm. Earnings per share of SEK 0.34 (0.50) before and after dilution. In addition to aforementioned restructuring costs, earnings were affected by non-recurring financial costs of 40 SEKm, related to changes in net-present-value calculation of the earn-out liability for Red Tiger
Important events in the first quarter
- Full integration with Red Tiger initiated in order to realize further synergies
- Directed equity of issue 6 327 175 B-shares proposed to partly offset earn-out consideration for Red Tiger, resulting in dilution of approximately 2.6 percent
- Several new initiatives presented within Live Casino, e.g. new tables in Malta studio and upgraded user interface for mobile gaming
- 12 new slot games released, six from NetEnt and six from Red Tiger, of which Piggy Riches Megaways was the most successful game
Important events after the period
- CFO Lars Johansson left NetEnt at his own request
Comments by Therese Hillman, Group CEO
The pandemic outbreak of covid-19 has put the world in an exceptional situation, leaving nobody unaffected. The health and safety of our employees has the highest priority in the NetEnt Group, while we continue to work hard to secure a good development for the Company both in the shorter and longer term. It is difficult to predict the effects of the covid 19-situation on the economy in general and our sector in particular, but we believe that the underlying trend of digitalization in gaming will continue and offer growth opportunities for NetEnt in the future. So far, the financial performance of our business has not been negatively affected by the outbreak of covid-19.
Revenues for the first quarter of the year amounted to SEK 518 (418) million, supported by a strong finish in March and a weaker Swedish krona. On a proforma basis (including Red Tiger in the previous year’s figures), the Group’s total gaming revenues increased by 12 percent in euro compared to the same period in 2019. Most of the growth came from the US and the UK, while developments in Sweden and Norway continued to be negative. Locally regulated markets accounted for 50 percent of Group gaming revenus in the quarter. The largest locally regulated markets for the Group were UK (19 percent of gaming revenues), Italy (8 percent) and USA (7 percent). Sweden accounted for only 6 percent of gaming revenues, which is significantly lower than before the re-regulation of the Swedish market.
To further strengthen competitiveness and increase efficiency, we implemented organizational changes and initiated a full integration with Red Tiger during the quarter. The changes lead to a reduction in the workforce by approximately 120 employees, mainly in Stockholm, and are expected to result in cost savings of SEK 150 million starting in the second half of 2020. This means that we are increasing our estimate of potential synergies from the acquisition to around SEK 250 million annually, including revenue synergies.
Earnings before interest, tax, depreciation and amortization (EBITDA) amounted to SEK 229 (196) million in the quarter, corresponding to a margin of 44.2 (47.0) procent. Earnings were negatively affected by SEK 26 million of restructuring costs related to the integration with Red Tiger.
Red Tiger keeps performing above our expectations with its award-winning games and the expansion to new markets continues. During the quarter, Red Tiger games were launched with customers on the regulated markets in Italy and Slovakia, and with large operators like Svenska Spel in Sweden and Sky in the UK.
Within Live Casino we continue our efforts to strengthen the product. For instance, we increased the number of tables in our studio on Malta and upgraded the user interface for mobile gaming in the quarter. We have had new record levels in the number of players every month since December and we see increasing interest for the product by operators and players.
A strong product pipeline, new regulated market entries and the Live Casino opportunity for NetEnt – combined with Red Tiger’s expansion – puts us in a good position to continue delivering profitable growth in 2020.
On Wednesday, 22 April 2020, at 9:00 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-q1-2020
For additional information please contact:
Phone: +46 8 5785 4500
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 April 22, 2020.
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, is listed on Nasdaq Stockholm (NET–B) and employs around 1,100 people in Malta, Stockholm, Sofia, Kiev, Krakow, Gothenburg, Gibraltar, Isle of Man, London and New Jersey. For more information, please visit www.netent.com.