NetEnt Revenue Takes a Nosedive in H1, Executives Point to Nordic Struggles as the Cause

Casino supplier giant, NetEnt, has reported annual decline in operating profit in revenue for the first half of 2019. The main culprit behind the disagreeable result is, in the mind of executives, poor performance in Scandinavia.

Sweden, in particular, is seen as the market of the biggest concern, as six month’s revenue for the period through June 30th totaled $41.3 million, which is a decline of 3.4% from a corresponding period in 2018.

Swedish Troubles

The number of NetEnt players fell in Sweden, along with a reported lower average revenue per ever since new iGaming regulations took hold on January 1st. Outside of this country, however…

…it’s quite a different matter, with revenue from various business activities up 1.7% year-on-year in Q2. From locally regulated markets, the company generated 49% of revenue in this second quarter. In total, 16 new license agreements have been signed in Q1, while casino games were launched with 19 new clients.

The overall spend in first half was cut slightly…

…from SEK584.4m to SEK 581.4m, chiefly owing to personnel expenses decrease (from SEK268.3m to SEK248.5m). Other operating expenses also declined, although depreciation and amortisation costs rose to SEK141m from SEK101m.

Operating Profit Also Going Down

As a consequence of a lower revenue in first half…

…NetEnt also saw a decrease in operating profit: it was down 9.5% from the year before. Profit before tax slipped to SEK 209.7m, and so has the profit for the period, by 15.8% – despite the fact that the supplier paid less tax compared to 2018 H1.

Revenue fell 4.1% year-on-year for the developer’s financial year’s second quarter which ended on June 30th. Amortisation costs and increased depreciation saw operating expenses rise to SEK289.3m, which led to decline of operating profit by 12.6% to SEK130m.

Long-Term Growth is the Objective

Chief Executive Officer, Therese Hillman, has reflected on these results and remarked that both quarters of this year’s first half were similar in the way of operating performance. Revenue and profit were down in each quarter owing to regulatory challenges in the Nordics.

She underlined the importance of long-term growth which makes her optimistic about the brand’s future.

“Now we take the next step in developing our technical platform as we are creating an open platform with new types of functionality and aggregation of third-party content for operators, services that will be launched on a broader scale during 2020,” Hillman said. The transformation of live casino continues at full speed and we added several new functions during the quarter to make our product more competitive. The customer response is positive, and we expect growth in the coming quarters from this segment, but it will take a few more quarters before we can see more meaningful revenues.

“The industry is going through significant changes, and we see opportunities to strengthen our position in all our markets. Through our strategy to invest in increased game production, a technical platform featuring more functionality, and live casino – ed by our brand, global distribution and customer relations – we have the right basis to defend, and over the longer term increase our market shares,” explains Hillman.

Source:

“NetEnt blames Nordic struggles as revenue dips in first half”, igamingbusiness.com, July 12, 2019.