The report revealed that NetEnt’s operating revenues have enjoyed a 9.3% increase – from SEK 393 million (US$46.25 million) to SEK 430m (US$50.6 million) – since the start of the year. Moreover, improvement in earnings before interest, taxes, depreciation and amortisation (EBITDA) resulted in an operating profit increase from SEK 126.8 million (US$14.92 million) to SEK 134.1m (US$15.78 million).
This successful result is despite the fact that the company recently parted with its long-time CEO and had to invest considerable capital into its expansion into new markets and introduction of new games. These challenges explain the only real negative of the report – a slight decrease in NetEnt’s operating margin.
Market Regulation Boosts Profits
NetEnt’s Acting President and CEO, Therese Hillman said that improved growth was chiefly supported by the strength of the regulated markets in which the company operates. This is in addition to the continual introduction of new games and acquisition of new customers. These are elements that Hillman expects will continue to foster growth in the year ahead.
The top performer of NetEnt’s various regulated markets was that in Italy, which the developer credited with much of its success in the first quarter of this year.
Increased Expenses a Challenge
Of course, as any company’s operations escalate, so does its expenses. The Quarter 1 interim report revealed that NetEnt’s operating expenses increased from SEK 266 million (US$31.3 million) to SEK 295 million (US$34.72 million) over the period in question. This was primarily as the result of currency issues and the cost of launching new products.
The NetEnt market with the poorest first quarter performance was Norway, which had a generally negative impact on revenues.
The company also reported that its operating revenue increase would have been even higher at 10.4%, were it not for the SEK 6 million (US$710 000) severance package that it paid to former CEO, Per Eriksson, who left NetEnt last month. NetEnt said that this also accounted for the slight decrease in its operating margin – from 32.2% to 31.2% – between 2017 and 2018.
Hillman said the company looked forward to continued favourable conditions in the year ahead, during which work would be done to optimise the organisation, thereby ensuring that the growth of revenues continues to outstrip that of expenses.