NetEnt posts Q1-2018 report

NetEnt has reported a positive Q1-2018, highlighting the following metrics:

Revenues up 9.3 percent y-o-y at SEK 430 million (Q1-2017: SEK 393 million);

* Operating profit (EBIT) rose to SEK 134 million on margin of 31.2 percent (Q1-2017: SEK127 million on margin of 32.2 percent);

* Profit after tax of SEK 146 million (Q1-2017: SEK 115 million);

* Cash flow for the period amounted to SEK 158 million (Q1-2017: SEK 79 million);

* EPS of SEK 0.61 (0.48) before and after dilution.

The numbers show that the severance package for recently departed former CEO Per Eriksson was SEK 6 million, noting that this has been included under operating profit and commenting that adjusted for this cost the operating profit was SEK 140 million and the operating margin 32.5 percent.

The company lists the following noteworthy events during the reporting period:

* 6 new customer agreements signed, and 8 new customers’ casinos launched;
* Games launched with Caliente in Mexico;
* Five new slot games released, including The Phantom’s Curse, Asgardian Stones and Hotline;
* Live Beyond Live launched with Mr Green;
* Digital marketing service (programmatic) contract signed with Mr Green;
* Therese Hillman appointed acting CEO after Per Eriksson left the company.

Acting CEO Therese Hillman, reported:

“Costs increased in the quarter, mainly due to more staff in Live Casino and higher depreciation, attributable to newly launched products and currency effects. The business continued to generate strong cash flows. In March, we initiated measures to enable margin expansion going forward. Among other things, the company is taking action to reduce costs.

“Growth in NetEnt’s royalty income was nine percent in the first quarter compared to the first quarter of last year.  The share of revenues from locally regulated markets was 34 (31) percent in the quarter. We saw overall solid performance in locally regulated markets and a key contributor to growth was the Italian market.

“Regarding North America, we recently decided to apply for a license in Pennsylvania and intend to launch our games with British Columbia Lottery Corporation in British Columbia (Canada) in the third quarter.

“We phased out deliveries to unlicensed operators in Australia, Poland and the Czech Republic. In the first quarter, the net negative effect from these markets was about two percentage points on royalty revenue growth in euro for the company. The weakness in Norway continued and this also had a negative impact on revenues in the quarter.

“We released five new slot games in the quarter: Twin Spin Deluxe, Phantom’s Curse, Fruit Spin, Asgardian Stones and Hotline. For Live Casino, we launched the new concept called Live Beyond Live for Mr Green.

“For the full year 2018, we plan to release 21 new slot games – an increase from 14 new games in 2017 – and we look to roll out more customised solutions with exclusive tables in Live Casino. We also introduced some new functionality that strengthens our mobile Live offering.

“For the remainder of the year, we see conditions for better growth, supported primarily by regulated markets, more new games and new customers. We continue to work on optimising the organisation and to make sure that revenues grow more than costs.

“We plan to host a capital markets day on May 22 in Stockholm, where we will present our view on products, regulated markets and future growth opportunities for NetEnt.

In related news, NetEnt announced that it will propose that during the Annual General Meeting to be held on April 25, 2018, shareholders elect Fredrik Erbing as new chairman of the board of directors. Erbing has been a member of the Board at NetEnt since 2008.

NetEnt’s current chairman Vigo Carlund has decided to stand down as chairman and member of the Board, for personal reasons.

Fredrik Erbing has been a member of the Board of NetEnt since 2008 and is a member of the Audit Committee. He is Vice President at Acando AB and has a Master of Engineering degree from the Royal Institute of Technology in Stockholm.

NetEnt’s departing chairman, Vigo Carlund, commented:

”During my two board tenures I have been part of the Board of NetEnt for a total of 15 years, 11 of which as chairman. Due to personal reasons not related to the company, I have now decided to leave the Board. Fredrik Erbing has great knowledge about the sector and NetEnt, and he has played an important role for NetEnt’s development during his time at the Board.”

The Board’s Nominating Committee proposes that the rest of the Board be re-elected at the AGM and that the new Board shall consist of the current seven directors.

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