NetEnt: Interim report January – September 2016

Regulatory News: 

Quote from Per Eriksson, President and CEO
- ”NetEnt’s growth strategy keeps delivering results – we grow on new markets, with new products and with more customers. During the quarter we launched our games on the regulated market in Romania and we rolled out our live casino product for mobile. The UK continues to be an important growth driver but the weaker pound had an estimated negative effect of about three percentage points on revenue growth compared to the same quarter last year. Our ambition to achieve continued strong sales growth in 2016 remains.”

Third quarter 2016

• Revenues for the third quarter increased by 27.7% to SEK 357.4 (279.8) million
• Operating profit amounted to SEK 129.4 (105.3) million, an increase of 22.9%
• Operating margin was 36.2 (37.6)% 
• Profit after tax amounted to SEK 119.2 (97.6) million, an increase of 22.2%
• Earnings per share amounted to SEK 0.50 (0.41) after dilution 
• 11 new customer agreements were signed, 8 new customers’ casinos were launched

First nine months 2016

• Revenues for the first nine months increased by 30.3% to SEK 1,054.8 (809.3) million
• Operating profit amounted to SEK 380.0 (279.8) million, an increase of 35.8%
• Operating margin was 36.0 (34.6)%
• Profit after tax amounted to SEK 354.5 (258.3) million, an increase of 37.2%
• Earnings per share amounted to SEK 1.48 (1.08) after dilution
• 32 new customer agreements were signed and 22 new customers’ casinos were launched

Important events in the third quarter

• NetEnt launched games with Rank Group in the UK
• NetEnt games were launched with several operators in Romania 
• Mobile live casino was rolled out to customers for the first time

Comments by Per Eriksson, President and CEO

Continued strong growth in the third quarter
The third quarter featured continued large demand for our products and high growth. Revenues amounted to SEK 357 million and operating profit was SEK 129 million. Compared to the same period last year, revenues increased by 28 percent and operating profit rose by 23 percent. The operating margin was 36.2 percent and cash flow generation was strong. Cash flow after investments amounted to SEK 132 million in the quarter, representing an increase of 56 percent compared to last year. We signed eleven new customer agreements and launched our games with eight new customers. The number of gaming transactions in our systems was 8.6 billion in the quarter, an increase of 31 percent compared to last year.

Sustainability and growth on regulated markets
Promoting responsible gaming is fundamental to NetEnt and a condition for the licenses that we hold. We are pleased to see that more countries regulate online gaming. This leads to better sustainability for the entire industry and also gives us a competitive edge over smaller competitors. During the quarter we launched our games with several operators in Romania, which is in line with our growth strategy to expand on regulated markets. Since our market entry in Spain last summer, we have launched our games with more than 10 operators and certified over 60 of our games. The Spanish market has shown strong growth this year, which is starting to be reflected in our revenues. Great Britain continues to be an important growth driver but the weaker pound had an estimated negative effect of about three percentage points on revenue growth compared to the same quarter last year. In August we launched our games with Rank Group, one of the largest operators in the UK. In the US, NetEnt continues to gain market shares on the online casino market in New Jersey and we hope that Pennsylvania will soon be the next state to open up for online casino gaming. We also aim to enter the Canadian market and as a first step we will apply for a license in the province of British Columbia in the fourth quarter.

New innovative products launched
Mobile gaming continues to be an important growth factor. Revenues from mobile increased by 83 percent compared to last year and accounted for 40 percent of revenues in the quarter. In September we rolled out NetEnt Live Mobile, our latest innovative product that really enhances the player experience and improves the way that operators use live casino. We have applied the latest technology in streaming, sound and video, and as a mobile player, this is about the closest you can get to a real-life casino experience. Following successful game releases of Guns N Roses and Jimi Hendrix earlier this year, in September we launched the third game in the trilogy NetEnt Rocks, Motörhead, which is off to a really strong start so far.
Future outlook
We see growing demand for our products and our ambition to achieve continued strong sales growth in 2016 remains. We increase the number of employees, develop our platform, adapt the Company to new regulated markets and integrate more and more customers. As previously communicated, we foresee higher costs and larger investments in 2016 than last year – we keep investing to enable continued strong growth going forward.

Presentation of interim report
On Friday, October 21, 2016, at 9.00 a.m. the interim report will be presented by CEO Per Eriksson live via audio webcast. The presentation can be followed in real-time on NetEnt’s website at https://www.netent.com/en/section/invest/.

This information is information that NetEnt AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 7:30 CET on October 21, 2016.

About NetEnt NetEnt AB (publ) is a leading digital entertainment company, providing premium gaming solutions to the world’s most successful online casino operators. Since its inception in 1996, NetEnt has been a true pioneer in driving the market with thrilling games powered by a cutting-edge platform. NetEnt is committed to helping customers stay ahead of the competition, is listed on Nasdaq Stockholm (NET–B) and employs more than 900 people in Stockholm, Malta, Kiev, Krakow, Gothenburg, Gibraltar and New Jersey. For more information, please visit www.netent.com.

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