Good first half performance from Net Entertainment

Net Entertainment’s chief executive Per Eriksson says he is very happy with the company’s half year performance after an outstanding second quarter that saw year-on-year revenues soar by 38 percent, primarily due to strong development from customers and more setup fees than usual combined with positive currency developments.

Eriksson also revealed the Swedish online gambling software development company’s plans for the United States and Canada, commenting that the time was now right to enter that market, and he underlined the importance of NetEnt‘s deal with William Hill plc, which will see online games used in land betting shops.

Financial and business highlights in the report included:

* Revenues for the second quarter increased by 37.8 percent to SEK 205 (148.7) million
* Operating profit came in at SEK 56.7 (38.7) million, an increase of 46.6 percent
* Operating margin was 27.7 (26.0) percent
* Profit after tax reached SEK 52.5 (39.6) million
* Ten license agreements with new customers were signed, and 13 new customers’ online casinos were launched

The company’s results for H1 included:

* Revenues for the first six months increased by 32.2 percent to SEK 393.4 (297.5) million
* Operating profit was SEK 107.9 (79.7) million, an increase of 35.5 percent
* Operating margin was 27.4 (26.8) percent
* Profit after tax amounted to SEK 98.6 (73.4) million
* 14 new license agreements were signed and 15 new customers’ online casinos were launched

In a statement, Net Entertainment drew attention to important events in the second quarter:

* One agreement was signed with Rational Group for delivery to Full Tilt Poker and one agreement was signed with William Hill for land based gaming machines

* Bet365 and Sky Betting and Gaming were launched

* Six agreements were signed with customers for delivery of mobile games and 10 customers launched mobile games in the quarter

* Five agreements were signed for delivery of Live Casino and nine customers launched Live Casino in the quarter

Chief executive Per Eriksson commented:

“The second quarter showed positive development and revenues increased by 38 percent compared to last year, which was another record.

“The increase was primarily attributable to strong development with NetEnt’s customers but also due to more setup fees than usual in combination with a positive currency development. In addition the 2014 World Cup did not affect revenues negatively which is often the case during larger sport events as it can take attention from casino.

“The operating margin increased to approximately 28 percent which was higher than the previous quarter and the same period last year. Capitalised development costs continued to decrease which I view as positive as it leads to lower depreciation long term. Cash flow is not affected by this but it creates a negative margin effect short term.

“22 agreements were signed in total during the quarter, 10 were new customer agreements, five were for Live Casino, six for mobile games and one agreement, the first of its kind, was signed with William Hill for land based gaming machines (retail) where some of NetEnt’s games will soon be available in William Hill’s 2,300 betting offices across the UK.

“According to the market research company H2 Gambling Capital the retail market is nine times larger than the online casino market in Europe, a market where NetEnt has not had any presence in the past. The launch of William Hill Retail will initially include a limited amount of games. The royalty level is lower compared to online games but long term, the retail segment will contribute positively to the growth.

“NetEnt has been evaluating the developments in North America and believe the prerequisites and timing is right to intensify the preparations for an entry in both the U.S. and Canada. Initially NetEnt will focus on the licensing process in New Jersey in the U.S. followed by additional states as the regulatory landscape evolves.

“The objective is to launch NetEnt’s products in the U.S. during the second half of 2015. Björn Krantz, currently Managing Director of Net Entertainment Malta Ltd. will lead the expansion and will be replaced in Malta by Enrico Bradamante who is currently Head of Account Management and Deputy Head of Malta Operations.

“Revenues from NetEnt’s mobile games have continued to show positive development, now representing 13 percent of the gross gaming yield in the NetEnt’s casino. Live Casino has also developed positively during the quarter and we had a total of 27 customers launched by the end of June compared to 18 launched customers at the end of March.

“I look forward to the rest of the year with a solid underlying growth with our customers and several large growth projects that have been initiated, such as the entry into North America and the retail contract with William Hill. In addition, I expect NetEnt to finalise the licensing process in the UK which is undergoing regulation and we are currently evaluating the regulation in Spain. We are also investigating the opportunities in Asia.”

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