Strategic projects enables a positive future
Third quarter 2012
- Revenues for the third quarter increased by 9.9 % to SEK 122.5 (111.4) million
- Operating profit amounted to SEK 36.1 (34.0) million
- Operating margin was 29.5 (30.5) %
- Profit after tax amounted to SEK 30.8 (31.0) million
- Earnings per share amounted to SEK 0.78 (0.78) before and after dilution
- One new license agreement was signed and five new customers’ casinos were launched
First nine months 2012
- Revenues for the first nine months increased by 24.6 % to SEK 382.0 (306.5) million
- Operating profit amounted to SEK 115.8 (87.5) million
- Operating margin was 30.3 (28.5) %
- Profit after tax amounted to SEK 102.2 (79.0) million
- Earnings per share amounted to SEK 2.58 (2.00) before and after dilution
- Eleven new license agreements were signed and eleven new customers’ casinos were launched
Important events in the third quarter
Revenues increased by 9.9 percent in the third quarter compared to the third quarter 2011. The corresponding growth calculated in Euros was 19.7 percent. The increase is mainly derived from increased volumes which are primarily driven by existing customers’ growth and new customer agreements signed.
Net Entertainment’s revenues are affected by the development of the Swedish currency in relation to other currencies, mainly the Euro. A dominating portion of revenues are invoiced in Euros. All revenues are then accounted for in Euros which is then translated into Swedish Krona for Group reporting purposes. Since the end of the previous quarter the Swedish Krona has strengthened significantly against the Euro which has affected Net Entertainment’s revenues negatively in the third quarter 2012.
During the quarter two new agreements were signed for beta test of Live Casino which is expected to be launched during the fourth quarter 2012.
The number of game transactions amounted to 2.8 billion in the third quarter which is a decrease of approximately 3 percent compared to previous quarter. The decrease is primarily a result of seasonal variations as the summer months traditionally have lower player activity levels in combination with the Olympics, since the Company’s customers, the operators, focused their marketing towards sports betting during the period at which the Olympics was held. The game transactions increased by approximately 27 percent compared to the same period 2011.
Comments from Per Eriksson, President and CEO
The third quarter has been an eventful quarter characterized by larger strategic development projects such as Live Casino, the Great Britain entry and preparations for slot games in Italy, all which are estimated to be completed during the fourth quarter. These projects are expected to gradually start generating noticeable revenues during the first and second quarter 2013.
Revenues were affected by currency effects during the third quarter as the Swedish Krona strengthened by approximately eight percent compared to the corresponding quarter 2011. This resulted in a revenue increase of about 10 percent in SEK but 20 percent in Euros compared to the corresponding period 2011. In addition, the casino activity among several of the Company’s customers was negatively affected by the summer months in combination with the Olympics as many of our customers focused their marketing efforts on sports betting instead of casino.
We see a big interest for the Company’s Live Casino product and agreements for beta testing have been signed with two customers. In addition, several discussions are ongoing with large operators for the Live Casino. Initially, Net Entertainment will offer Roulette and recruitment of studio personnel started during the third quarter which will continue as Live Casino grows and new game types are added.
Discussions with operators based in Great Britain are progressing and there is a great interest for Net Entertainment’s games portfolio. Depending on what customers the Company signs in this market, additional development work may be required.
We continue to see good growth numbers in Italy and Net Entertainment’s mobile solution is growing rapidly. With the new products and games now becoming completed and launched with our customers in combination with several interesting business opportunities, mainly in the Great Britain, the outlook looks very promising for the Company. Short term we will continue to see effects on cost levels due to the necessary strengthening of the organization, support systems and product development to further solidify the Company’s position for the future and long term, the scalability in the Company’s business is expected to become more evident.
Future outlook
The fourth and first quarter normally implies a higher cost level compared to other quarters due to less vacation absence and higher activity for development projects as well as within other areas. As a step in making the Company’s processes and system support more efficient, Net Entertainment has initiated a pre-study of a new ERP-system during the fourth quarter. In addition, the fourth and first quarter is also active periods within for example marketing. The high activity level also implies continued need for recruitment of new personnel as well as consultants.
To conclude, Net Entertainment is thus still in an expanding and a development intense phase where the full revenue potential from these initiatives will not begin until next year. The market potential from Live Casino, Great Britain and mobile games that have only began to be explored by Net Entertainment in combination with regulation of various markets in Europe allows for a positive future outlook.
For additional information please contact;
Per Eriksson, CEO Net Entertainment; Phone +46 8 57 85 45 00
per.eriksson@netent.com
About Net Entertainment
Net Entertainment is a premium supplier of digitally distributed gaming systems used by some of the world's most successful online gaming operators. The Net Entertainment casino is a complete gaming solution comprising both a complete management platform and a full suite of high quality games. Operators are provided a customized casino that is easily integrated ensuring short time to market and a cost efficient operation. Net Entertainment is listed on Nasdaq OMX Stockholm (NET-B). More information about Net Entertainment is available at www.netent.com.
