Quote from Therese Hillman, Group CEO
“Overall, the second quarter was strong for both NetEnt and Red Tiger, resulting in record revenues, earnings and cash flow for the Group. On a proforma basis, the Group’s total revenues increased by 15% in euro compared to the same period in 2019. Supported by revenues from the US market, NetEnt (excluding Red Tiger) returned to solid organic growth in the quarter. The US accounted for 10% of total Group gross gaming revenue (GGR), with GGR growth in New Jersey at 148% Y/Y and in Pennsylvania at +100% Q/Q. The underlying EBITDA margin was 54.6% and important steps were taken to fully integrate Red Tiger and to support profitability going forward.”
Second quarter 2020
- Revenues for the second quarter amounted to 573 (419) SEKm
- EBITDA was 299 (201) SEKm, corresponding to a margin of 52.3 (48.0)%
- EBIT was 194 (130) SEKm, corresponding to a margin of 33.8 (31.0)%
- Excluding 13 SEKm of transaction costs related to the public offering from Evolution Gaming, EBITDA was 312 (201) SEKm and EBIT was 207 (130) SEKm, corresponding to adjusted EBITDA margin of 54.6 (48.0)% and adjusted EBIT margin of 36.1 (31.0)%
- Earnings after tax amounted to 88 (120) SEKm and fully diluted earnings per share was SEK 0.36 (0.50)
- Excluding non-recurring items, earnings after tax was 157 (120) SEKm and fully diluted earnings per share was SEK 0.64 (0.50)
First half-year 2020
- Revenues for the first half year amounted to 1,090 (837) SEKm
- EBITDA was 528 (397) SEKm, corresponding to a margin of 48.4 (47.5)%
- EBIT was 313 (256) SEKm, corresponding to a margin of 28.7 (30.6)%
- Excluding non-recurring items, EBITDA was 567 (397) SEKm and EBIT was 352 (256) SEKm, corresponding to adjusted EBITDA margin of 52.0 (47.5)% and adjusted EBIT margin of 32.3 (30.6)%
- Earnings after tax amounted to 170 (240) SEKm and fully diluted earnings per share was SEK 0.70 (1.00)
- Excluding non-recurring items, earnings after tax was 264 (240) SEKm and fully diluted earnings per share was SEK 1.09 (1.00)
Important events in the second quarter
- On June 24, 2020, Evolution Gaming announced a public offer to the shareholders of NetEnt. The Board of NetEnt has unanimously recommended shareholders to accept the offer
- A record of 19 new slot games were released, 9 from NetEnt and 10 from Red Tiger
- NetEnt entered new regulated markets in Switzerland, Croatia and Colombia
More from Therese Hillman, Group CEO
On June 24th, 2020, Evolution Gaming announced a public offer to the shareholders of NetEnt. NetEnt’s Board of Directors has unanimously recommended shareholders to accept the offer. I share the view that there are significant synergies in combining the two businesses to create a best-in-class B2B provider that can drive the digitalization of the gaming industry worldwide.
The coronavirus pandemic continues to impact people and companies around the world. There are signs that the rapid changes in consumer behavior caused by the pandemic will further speed up the digitalization of a number of industries, including entertainment such as gaming. Just like in other online industries, the major lockdowns in some of our big markets (UK, US, Italy and Germany) led to a positive effect on revenues in April and May, followed by a more normal pattern in June as those economies gradually opened up.
Revenues for the second quarter of the year increased by 37% Y/Y to SEK 573 (419) million. On a proforma basis, including Red Tiger in the previous year’s figures, the Group’s total revenues increased by 15% in euro compared to the same period in 2019. Most European markets performed well except for the Nordic countries, which continued to underperform for the Group as a whole.
Supported by revenues from the US market, NetEnt (excluding Red Tiger) returned to solid organic growth in the quarter. The US accounted for 10% of total Group gross gaming revenue (GGR), with GGR growth in New Jersey at 148% Y/Y and in Pennsylvania at +100% Q/Q. We now see a greater likelihood that more US states will introduce online casino legislation in the coming years. Importantly, we expect to launch our games in both Michigan and West Virginia as the online casino markets in those states are expected to open in the second half of this year, which is earlier than previously expected. During the quarter, NetEnt also continued to strengthen its regulated markets footprint by entering three regulated markets in Switzerland, Croatia and Colombia.
Red Tiger continued to grow at a very fast pace in the quarter and delivered several successful game releases such as Reel Keeper, Bounty Raid and The Wild Hatter. Red Tiger’s daily jackpots are loved by players in all markets and I am excited about our upcoming release in July of Gonzo’s Quest Megaways with daily jackpot functionality. Further, I am convinced that Red Tiger’s games will be much appreciated by players in the US, and we are focusing to secure market entry into the US for Red Tiger later on this year.
Excluding transaction costs, earnings before interest, tax, depreciation and amortization (EBITDA) amounted to SEK 312 (201) million in the quarter, corresponding to a margin of 54.6% (48.0%). Overall, reported EBITDA, EBIT and operating cash flow were the highest ever in a single quarter for NetEnt. I am pleased to see that we managed to deliver such record earnings and more games content than ever, while at the same time executing a major restructuring and integration with Red Tiger. We remain on track to lower our annual cost base by 150 SEKm starting in 2021 and expect 50 SEKm of cost savings in the second half of this year compared to the run-rate this year to date. The integration with Red Tiger has clearly served as a catalyst to transform NetEnt into a more productive and fast-paced company than before.
Within Live Casino we continued to strengthen our product and gain traction with operators and players as GGR increased by 230% Y/Y in the quarter. Soon we will be expanding our offering of physical tables in our Malta studio and we also expect to roll out the Network Branded Casino product to more operators.
Hard work and transformational steps taken in the past year are now starting to create value. We remain fully committed to continue on this path and with growth engines such as USA, Red Tiger and Live Casino, I feel that we are well positioned to continue delivering profitable growth and strong cash flows for the rest of this year and onwards.