NetEnt’s 2019 Online Casino Profits Take a Knock

Tia Winter | 13 February 2020

Highly respected iGaming development studio NetEnt have released their online casino earnings report for 2019. A first glance reveals that revenue is up from the previous year, coming in at a total of SEK1.79 billion ($186.1 million.) This increase can largely be attributed to the acquisition of Red Tiger games, which was a strategic move made in order to offset weaknesses. In particular, the company stated that the Swedish and Norwegian markets had been challenging.

But, a closer look indicates that the acquisition was not enough to turn the tables entirely. The SEK1.79 billion was largely the sum total of royalties, which was to be expected. Setup fees brought in around SEK56.2 million, which was up 10.2% from the previous year, while other forms of revenue increased 700% from the previous year. The Red Tiger Acquisition added an additional SEK 126 million in online casino revenue.

Operational Costs

Chief executive at NetEnt, Therese Hillman, accompanied the earnings report with a few words. She was quick to point out that although United States revenue had grown rapidly over the course of 2019, that the overall amount was dragged down by the Swedish and Norwegian online casino markets. She also elaborated more on the Red Tiger Games acquisition, stating that the company had exceeded expectations on all fronts, now forming a vital part of the studio as a whole.

 So the question is, how were profits in decline? For this, eyes had to turn to operating costs. The overall operating cost expenses rose by a total of 7.1%, pushing the total number to a blistering SEK1.26 billion. Some effort had clearly been made to reduce personnel expenses from the previous year, with a decline of 8.4% to SEK491.1 million. But personnel costs were still the biggest drain on the company’s profit margin.

Profit Plummet

The studios profit margin for the whole year of 2019, which stood at SEK428.9 million, was down by a whopping 25.7%. The enormous plummet may seem like the company would throw up red flags, but Hillman was not phased.

Instead, she said that the studio was in a stronger position than ever before, heading into the New Year. She stated that a massive focus would be on efficiency, and further reducing costs, which would help boost profits in the coming year. She again also drew attention to Red Tiger Games, which was one of two strong brands she said would drive online casino expansion around the world.

If 2020 is the year that NetEnt turns things around remains to be seen, but shareholders are likely feeling the heat.