Net Entertainment enjoys a good fourth quarter

The Swedish online gambling software provider Net Entertainment has enjoyed another successful quarter, with president and chief executive officer, Per Eriksson, observing:

“Again, Net Entertainment reached a new sales record during the quarter. Among other things, we launched Live Casino, signed agreements with several tier one customers and launched slot games on the Italian market. We will continue with significant initiatives in systems, products and the organisation.”

Q4-2012 highlights included:

* Revenues for the fourth quarter increased by 19.5 percent to SEK 144.7 (121.1) million
* Operating profit amounted to SEK 37.2 (42.2) million
* Operating margin was 25.7 (34.9) percent
* Profit after tax amounted to SEK 31.1 (36.6) million
* Five licence agreements with new customers were signed and two new customers’ online casinos were launched

And for the full year 2012:

* Revenues for the full year increased by 23.2  percent to SEK 526.7 (427.6) million
* Operating profit amounted to SEK 153.1 (129.7) million
* Operating margin was 29.1 (30.3)  percent
* Profit after tax amounted to SEK 133.3 (115.6) million
* 16 license agreements were signed with new customers and 13 new customers’ casinos were launched
* Proposed transfer to shareholders is SEK 2.25 (2.00) per share

Important events in the fourth quarter included:

* Agreement was signed with Paddy Power.
* Boylesports and Paddy Power were launched
* Net Entertainment launched slot games on the Italian market
* Live Casino was launched with two beta customers
* The Swedish Tax Agency announced its decision to impose additional taxes on Net Entertainment, amounting to a total of 92.1 MSEK. Net Entertainment finds that the Tax Agency’s view is unfounded and will appeal the decision

CEO Eriksson commented:

Revenues up

“Yet again Net Entertainment reached a new sales record during the fourth quarter. Revenues increased by 19.5 percent (25.9 percent in Euros) during the fourth quarter and the activity among the company’s customers also reached an all-time high with 3.6 billion gaming transactions, an increase of approximately 38 percent compared to last year.

“The fourth quarter is traditionally the strongest compared to other quarters and the revenues were also positively affected by the jackpot game Mega Fortune, which reached a new world jackpot record of Euro 17.8 million.

Margins down

“Despite this, the operating margin was lower in the fourth quarter compared to previous quarters. This is a result of the significant initiatives the company is making within the organisation, new products and markets. In addition, several initiatives are still in the early stages, such as Live Casino and the UK entry.

“From an operational perspective the fourth quarter was a milestone as several of the largest projects to date were completed and launched with our customers.

Live Casino

“One of the largest projects was Live Casino where beta testing started with two customers during November. Initially Roulette is offered; however, development of Blackjack has already started and is planned to be completed around mid-2013. So far, the company has signed eleven agreements for delivery of Net Entertainment’s Live Casino and launch is expected to occur gradually during the year. Another significant project was the final certification of the Danish market.

Mobile up 37 percent

“Mobile games have proved to be a successful initiative and the demand from the market continues to be high. On average, the gross gaming yield for mobile games increased by approximately 37 percent per month during 2012; however, starting from low levels as only ten games have been launched to date. At the end of 2013 the number of mobile customers is expected to amount to approximately 40.

Market share up 5 percent

“Net Entertainment has a strong position on the market, particularly in Europe where the market share increased from 22 percent to 27 percent in 2012 despite the fact that the company has only just started to penetrate the UK market where the company today has a low market share. We launched two new Tier-1 customers during the fourth quarter, Boylesports and Paddy Power Games, both with a high presence in the UK. During January 2013 we also signed an agreement with 888, also a Tier-1 customer with a focus on the UK.

Regulated markets

“Regulated markets are something we focus on and several countries in Europe are moving towards regulation. To date, Net Entertainment has adjusted the company’s platform and games for the Italian and Danish regulations and we are carefully monitoring the potential in other markets that are looking at regulation.

“We believe regulation creates opportunities for increased volumes for Net Entertainment as our customers reach more players. Moreover, regulation also presents challenges for smaller companies trying to establish themselves due to the high investments that are required in each country. This benefits Net Entertainment as we have both the knowledge and financial strength to meet the challenges of regulated markets.

“2013 will be an intense year. We will continue to make significant investments in systems, products and the organisation. Sales activities will continue to be focused towards operators in the UK but also towards existing customers for mobile games and Live Casino.”

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