NetEnt 2015 Q1 Results and Outlook

NetEnt 2015 Q1 Results and Outlook

NetEnt has for long been regarded as one of the leaders when it comes to online and mobile gambling software. Right from the time it was established in Sweden in 1996, this billion dollar company has earned a reputation for high quality gambling software and is today publicly traded on the Stockholm Stock Exchange. The hallmarks of NetEnt’s gambling software are the excellent interface and the high quality 3D graphics and animations. And it is this pursuit of excellence while maintaining high quality that has helped this online gambling software pioneer into a billion dollar company.

NetEnt’s online casino software offers hundreds of high quality games to casino operators across the world, and its mobile casino software, NetEnt TouchTM retains the same level of quality in all its offerings. Its other offering, the Net Entertainment Live CasinoTM offers live casino games that have the same level of quality. NetEnt has also paid out millions of dollars to players through its massive progressive jackpots.

The following are the highlights of NetEnt’s financials for Q1 of 2015 and the outlook for the remaining year.

Highlights of NetEnt’s Performance for Q1 of 2015

NetEnt scored high in different areas of its operations during the first quarter of 2015. The year 2015 started very well for the company, with a more than healthy show in terms of cash flow, operating profit, and most importantly, revenues that reached record levels. The company was able to approve local licenses for the UK market during this period.

A good indicator of a company’s growth is the number of new customers it is able to sign up over a given period, and NetEnt has done significantly well in this area during the first quarter of 2015. During the first quarter, the company signed on 11 new customers. The names were all high profile, and included in this list were Danske Spil, Gamesys, and Codere. Apart from signing up new customers, NetEnt was also able to launch 7 new customers during this period. One of the standout names in terms of launching is Full Tilt, which happens to be one of the biggest names in the online poker domain.

Financial Details for Q1 of 2015

The signing up of new customers, new launches, and healthy revenues from existing customers together translated into a healthy financial situation for NetEnt. The first quarter of 2015 saw NetEnt recording game transactions to the tune of $6.5 billion, a massive 38.5% increase year-on-year and a 6.1 spike quarter on quarter. More than 20% of game wins during this period came from, interestingly, the mobile games that the company offers through NetEnt TouchTM

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During this period, the company showed a healthy upsurge in revenues and operating profit. Revenues shot up to 258.3 million SEK, a 37.1% rise year-on-year, during Q1 2015. Its EBIT (Earnings Before Interest and Tax) stood at 81.8 million SEK, a 59.8% rise year-on-year, and its EBIT margin was up as well, from 27.2% to 31.7%. See the chart below for more details.

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The revenues and operating profit over the last 12 months showed a healthy growth too. The company accrued revenues of 922 million SEK, a healthy rise from the 548 million SEK it recorded in March 2015, with an EBIT of 292 million SEK and an EBIT margin of 31.7%.

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Costs and Cash Flow Status

Costs and investments also saw some fluctuations during this quarter. The company recorded a 9.8% rise quarter-on-quarter in total costs incurred. While personal costs saw a definite rise, up by 13.2% quarter-on-quarter, investments saw a 8.9% dip during the same period.

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Investments in earlier years seem to be paying off for NetEnt now. This is apparent if you take a look at the status of the company’s cash flow. From 112 million SEK in March 2014, the company’s cash flow reached 271 million SEK in March 2015.

Game Releases and Game Win Breakdown for Q1 2015

NetEnt released 3 brand new games during the first quarter of 2015, in keeping with the company’s commitment to regularly provide new games to its customers. These were all high quality video slots and were released simultaneously on the desktop platform as well as on NetEnt TouchTM, the mobile casino platform. The games are Spinata Grande, Steam Tower, and Tornado – Farm Escape. For mobile casino fans, the good news is that all these games work on the iOS, Android, and Windows platforms. In the first month of Q2, the company has launched casino games with one of its new customers, bwin.party, and also released the new slot, Dracula, in collaboration with Universal Studios.

Coming to revenues from game play, the highest revenues came from slots, at 85%, which was on par with the numbers from the previous quarter. Roulette was the next highest contributor at 8%, up 1% from the 7% in the previous quarter. Other games contributed 2% of the revenue, up by 1% from the previous quarter, while video poker contributed 1%, a 1% drop from the previous quarter.

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Future Outlook

The future outlook seems great for NetEnt, with 22 new customer set to launch towards the end of Q1. The industry is doing well, and the conditions are ripe for continued good growth and profitability for the company. The goal for 2015 is to be able to achieve continued growth in sales, with primary growth drivers being the following markets:

  • UK, Spain, Denmark, mobile platform, and Live Casino platform

The long term growth plans for the company are in the following markets:

  • North American
  • Asia
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