NetEnt - third quarter 2011

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STRONG QUARTER DRIVEN BY ORGANIC GROWTH


 Revenues for the third quarter increased by 21.7 % to SEK 111.4 (91.6) million

 Operating profit amounted to SEK 34.0 (34.1) million

 Operating margin was 30.5 (37.2) %, 36.5 % excluding costs amounting to SEK 6.7 million related to former senior executives

 Profit after tax amounted to SEK 31.0 (30.0) million

 Earnings per share amounted to SEK 0.78 (0.76) before and after dilution

 Three new license agreements were signed, and five new customers’ casinos were launched



IMPORTANT EVENTS IN THE THIRD QUARTER


Revenue growth for the third quarter was 24.1 percent in local currency compared to the third quarter 2010. The strengthened Swedish currency has held back revenue growth in SEK which was 21.7 percent.

The number of game transactions amounted to 2.2 billion in the third quarter, an increase of 13.5 percent compared to the previous quarter and 53.5 percent compared to the same period in 2010.

In July 2011, a new legislation took effect regarding online gaming in Italy. Net Entertainment has signed agreements with several large operators for the Italian market. Gioco Digitale was first to launch, followed by Unibet and Betclic. Microgame was launched at the end of the quarter.

Net Entertainment’s strategic efforts are progressing well and are necessary to strengthen delivery capacity as the company grows, market matures, new customers are added and customers become larger. In addition, the regulation of the online market creates extensive requirements that must be faced but at the same time creating large business opportunities. The development of mobile games has continued during 2011 and the first games are expected to launch during the fourth quarter.

During the quarter, Johan Öhman left his position as CEO of the company. During the process to recruit a new CEO, Björn Krantz has taken on the position as Acting President and CEO. Björn is currently on leave from his former duties as Sales Director and CEO of Net Entertainment Malta Ltd.


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COMMENTS FROM BJÖRN KRANTZ, ACTING PRESIDENT AND CEO

Taking on the position as Acting President & CEO of Net Entertainment during a strong quarter with several positive events has been very exciting and encouraging. Revenues increased by 21.7 percent compared to last year which is a result of strong casino performance with existing licensees combined with the launch of five new customers in both new and existing markets. In addition, Net Entertainment signed three new customer agreements during the quarter, one of which was G.Matica, focusing on the Italian market.

Net Entertainment launched its first customer on the newly regulated Italian market on July 18, followed by three additional customers later in the quarter. The initial performance has been in line with our expectations and we now start to see results from the investments and efforts we have put into establishing our presence in Italy. I am very excited about the future developments as we launch additional licensees and as the market prepare for commercial launch of slots, which is predicted during first half of 2012.

Local regulation of our industry is ongoing, and we continuously monitor and evaluate each market individually to assess the impact on the company both from a financial, organizational and strategic perspective. As for latest regulatory initiatives in Denmark we are currently working with necessary system, and game compliance planning, with an objective to establish on the local market which is scheduled for opening in the beginning of 2012.
The development of Mobile games has entered its final testing stage and the games are expected to be launched before year-end. Mobile games are a natural complement to our existing product portfolio, which will create a new channel for additional revenue streams. Two of our most successful slot games, Gonzo’s Quest and Jack Hammer, will both be part of the initial launch.

In the end of September, our slot game Mega Fortune paid an 11.7 million euro jackpot to a lucky 20-year old Norwegian, making it the largest ever jackpot in the history of online gaming. We launched a new platinum slot, Robin Hood, during the quarter which holds superior graphics, animations and mathematical design. We continue to push the limits in gaming entertainment and we have a strong commitment to provide our licensees with the most exciting content in order to maximize player experience.

Our strategy to establish a solid footprint in UK remains firm, and as separately announced, we have signed an agreement in October to provide casino games content to Sky Betting and Gaming, which will further strengthen our presence in the UK.

We follow our strategic plan and continue to invest in operational, and portfolio excellence, which will safeguard our competitive edge and long term profitable growth moving forward. I look forward to Net Entertainment’s future which holds great opportunities.



Visit NetEnt.com for a full report.
 
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