Comments from Per Eriksson, President and CEO:
2014 was another fantastic year for NetEnt with revenues, operating profit, cash flow and proposed transfer to shareholders all reaching new record levels. The fourth quarter was strong with revenues increasing by 33.8% compared to last year, while the operating margin was 33.3%. Revenue growth for the full year, even adjusted for currency changes, is the highest ever for the Company, with a continuing strong operating margin. New customers and favorable currency changes contributed positively, but the main driver of the increase in revenues and earnings was solid underlying growth among our customers. The operating margin expanded mainly as a result of growing revenues but also due to previous projects paying off and a constant efficiency focus throughout our operations. The number of game transactions also posted new records. In the fourth quarter, the NetEnt platform handled on average more than 2 billion transactions per month and for the full year 2014 the number of transactions increased by 32% to 21.4 billion.
NetEnt is a digital entertainment company that develops thrilling world-class games and in 2014 we developed as many as 23 new games for desktop and 13 new games for mobile. We received multiple awards during the year for both quality and innovation at International Gaming Awards, eGaming Review Awards and Global Gaming Awards. For the first time ever, we developed a new game entirely in HTML5 for both desktop and mobile, a slot game based on the classic Universal Pictures movie The Invisible Man. Previously, all our games were developed in Flash and this is a change that is expected to bring economies of scale going forward. Mobile gaming continues to grow strongly and during the year we have increased our investments into this channel in order to further strengthen NetEnt´s leading position. In the fourth quarter, mobile games accounted for 17.3% of our total game win, compared to 9% in the same period last year.
From a sales perspective we see good demand for our products and during the year we continued to expand our customer base, signing as many as 31 new customer agreements while 28 new customers launched our online casino product. In Great Britain, the largest gaming market in Europe, we signed new agreements with operators such as Betfair, bwin.party and William Hill (retail). We have started to see some positive effect on revenues and longer term we see great potential in this market. In Italy, NetEnt has developed a close collaboration with the regulator, where both parties actively work on getting unlicensed operators, focused on Italian players, to acquire a local license. Several operators have started this transition and as previously communicated, as of 2015 NetEnt is ceasing deliveries to operators that have not started the license application process in the country. This is a gradual process that has taken somewhat longer time than anticipated. As agreements with unlicensed operators are terminated, our revenues could be negatively impacted in the short term. During the year, NetEnt signed a partnership agreement with platform supplier GameAccount Network, which enabled the launch of our products with large operators such as SNAI, Sisal and Eurobet on the regulated Italian market. We have a positive view on the regulated Italian market.
Live Casino is an exciting product that NetEnt launched in 2013. During 2014, NetEnt signed 24 new customer agreements for Live Casino and 28 customers launched the product. The global market for Live Casino is expected to grow on average by 19% per year until 2018 (source: H2 Gambling Capital, January 2015) and mid to longer term we believe this product will show good, profitable growth for us.
With regards to new markets, we are preparing to enter North America and Spain during 2015 but other new markets could also be of interest, if and when the circumstances are right.
We have an exciting year ahead of us with many projects and challenges. The strong growth trend in online gaming, our growth strategy into new markets and our focus on operational efficiency makes me confident that we will maintain good growth with good profitability next year too.
Fourth quarter 2014:
– Revenues for the fourth quarter increased by 33.8% to SEK 241.1 (180.1) million
– Operating profit amounted to SEK 80.3 (55.6) million, +44.5% y-o-y
– Operating margin was 33.3% (30.9%)
– Profit after tax amounted to SEK 77.1 (53.5) million
– Earnings per share amounted to SEK 1.93 (1.42) before dilution and SEK 1.93 (1.41) after dilution
Full year 2014:
– Revenues for the full year increased by 35.0% to SEK 851.7 (630.7) million
– Operating profit amounted to SEK 261.7 (179.7) million, +45.6% y-o-y
– Operating margin was 30.7% (28.5%)
– Profit after tax amounted to SEK 243.2 (167.1) million
– Earnings per share amounted to SEK 6.10 (4.23) before dilution and SEK 6.09 (4.21) after dilution
– 31 new license agreements were signed and 28 new customers’ casinos were launched
– Proposed transfer to shareholders is SEK 5.00 (3.00) per share
Important events in the fourth quarter:
– Ten new license agreements were signed and six new customers’ casinos were launched.
– For the first time ever, NetEnt developed a new game entirely in HTML5 for both desktop and mobile, a slot game based on the classic Universal Pictures movie The Invisible Man. Previously, our desktop games have been developed in Flash and this is a change that is expected to bring economies of scale going forward.
– Within the partnership with platform supplier GameAccount Network, NetEnt games were launched with Eurobet on the regulated Italian market.
For additional information please contact:
Per Eriksson, President and CEO Net Entertainment: Phone +46 8 57 85 45 00
NetEnt, Net Entertainment NE 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 to stay ahead of the
competition, is listed on NASDAQ Stockholm (NET–B) and employs 600
people in Stockholm, Malta, Kiev, Gothenburg and Gibraltar. www.netent.com