NetEnt Q1 revenue rises 24% as Red Tiger integration boosts figures
UK position strengthens on Red Tiger growth as market provides 19% of regulated revenue
NetEnt has revealed that Q1 2020 revenue grew by 24% year-on-year, with first quarter figures reaching SEK518m (£41.2m).
Company EBITDA increased to SEK229m (£18.4m) during Q1, an annual rise of just under 17%, however the corresponding EBITDA margin decreased to 44.2%. NetEnt highlighted company restructuring costs of SEK26m as negatively affecting its EBITDA figures.
The supplier revealed locally regulated markets accounted for 50% of group gaming revenues during Q1, with the UK being the largest regulated market for the group, contributing 19%.
Revenue from Italy accounted for 8% of group gaming revenue, while the US accounted for 7%.
Company revenue from the supplier’s native Swedish market amounted to just 6% of group gaming revenue after NetEnt highlighted the market as being “significantly lower” than before re-regulation in 2019.
NetEnt CEO Therese Hillman said the supplier’s performance had not been negatively affected by the coronavirus pandemic.
“It is difficult to predict the effects of the Covid-19 situation on the economy in general and our sector in particular, but we believe that the underlying trend of digitalisation in gaming will continue and offer growth opportunities for NetEnt in the future,” Hillman said.
During the quarter, NetEnt instituted an accelerated integration of the Red Tiger brand. NetEnt revealed Red Tiger games were launched with operators including Svenska Spel in Sweden and Sky Betting & Gaming in the UK.
As part of the accelerated integration process, NetEnt reduced its Stockholm employee headcount by 120, measures which are expected to save the business SEK150m (£12m) in costs from H2 2020.
Regulus Partners analyst Paul Leyland said the strong continued momentum arising from the Red Tiger business, together with its Q4 revenue contribution, suggests that NetEnt’s core business was broadly flat.
“From a geographic standpoint, NetEnt has improved its position in the UK (19% revenue, largely acquisition-led) and held its own in Italy (8%); the US market now represents 7% of revenue (€14m run-rate and growing), now a material contributor to the group and while a clear strategic positive in its own right, it also demonstrating NetEnt’s struggles in core markets pre-Red Tiger (especially Sweden and Norway),” Leyland said.
“Despite attempting improvements in Live, the group is still 90% slots – potentially a regulatory issue given that the UK is now so important,” Leyland added.
In addition to revealing its Q1 results, NetEnt has confirmed that CFO Lars Johannsson has left the business at his own request.