Q&A: NetEnt CEO on managing a global gambling business through the Covid-19 pandemic

As a business with exposure in jurisdictions all over Europe, NetEnt has long served as the slots supplier of choice for many industry heavyweights. In September, the firm ramped its operations up a notch with the multi-million-pound acquisition of fellow online casino developer Red Tiger.

According to NetEnt CEO Therese Hillman, the acquired brand and games studio has “exceeded expectations” during the first six months, leading NetEnt to speed up the full acquisition and integration of the business. Below, Hillman discusses the rationale for pressing the fast forward button with Red Tiger, as well as managing a business through a global health pandemic.

EGR Intel: What has been your approach to dealing with the coronavirus crisis?

Therese Hillman (TH): First of all, one has to acknowledge that it’s a very sad period overall that we’re all in and how it’s affecting society. It hits all of us on a personal level. Also being in Stockholm, it’s all empty. I guess it’s the same in all big cities right now. But the lockdowns are affecting us.

But I do think it’s about securing business continuity from an operational level. That’s very important but also making sure the employees feel safe and that we take all the actions necessary. And then, of course, look at all the risk mitigation we have to put in place in these difficult times. Short term, it’s about securing business continuity, but then also to start to plan for the long-term effects of what will happen to our revenues.

It’s early days, so now it’s more about the here and now and how we secure the output to fulfil the promises that we have made to our customers. That’s very important. Making sure all employees feel safe and taken care of. It’s challenging to say that at the same time as you lay off 120 staff.

EGR Intel: Are you seeing an uptake in demand for online casino and slots-based games from operators following the reduction in sports betting due to the Covid-19 pandemic?

TH: We’re in a silent period right no, so I can’t comment too much on the revenues. What we guided on in a press release last week was that the revenue are in line with the market expectations. So far, we see the same trends as we were experiencing before the coronavirus. Maybe also the shift over to casino will help us a little bit because that covers the majority of our portfolio. We don’t really see the true effects of the coronavirus. I do think a global operator with business in a lot of countries, but also an operator that has all the different products, is a better barometer of how this is affecting our industry. I can only speak from an online casino point of view.

EGR Intel: You, as a business, have to cater to your operator partners and deal with the internal strife of this outbreak. Have you diverged much from your normal programming?

TH: No, but I do think we’re all in the same situation. So, of course it’s very different not to go and see your customers, but I do think everyone is working from home. They see each other over video instead. Digitalising your normal work as everyone is not travelling. I think the main difference, and this goes for myself, is I’m in Stockholm and work from the Stockholm office, and I don’t travel now. But otherwise, we’ve tried to carry on with all the plans that we have. We have quarterly business reviews with customers over video instead of going and seeing them and we reach out to our operators over video or over the phone.

What’s striking me the most is that I really liked my phone before this but now it’s like my lifeline for everything I do. And you’re pretty much on your phone all the time when you’re awake now because all the business is going through your phone or through your computer. And you have to be really good at communicating.

EGR Intel: Do you think there will be more consolidation and M&A activity within the online casino sector as a result of the downturn in the gambling industry?

TH: If we go into a period with a lower GDP and more challenging economic environment, I’m convinced that it will continue to happen. We have the regulation. We have the headwinds in different markets due to regulation, but also the tax pressure and the margin pressure that everyone is experiencing, so I’m convinced that this will be escalated now.

EGR Intel: Would NetEnt consider dipping its toe into the M&A world again after the Red Tiger acquisition?

TH: We made quite a large acquisition in September, it’s only six months ago and now fully integrated. We also need to look at our financial strengths at the moment. I think there will be opportunities in the mid- to long term. We have our hands full with the opportunities now and I think you should not spread thin. It’s important to deliver on the plan that we now have together.

EGR Intel: You have accelerated the acquisition of Red Tiger, bringing the share buyback forward and bringing Gavin Hamilton in, was that almost entirely down to the current Covid-19 crisis? Or was it always in the plans to bring the acquisition forward based on the good performance of the business?

TH: This has nothing to do with the coronavirus crisis, and a new share issue takes time. So, that was something we have been working on for a long period of time. The discussions about full integration, I think were six months in. After three months, we realised that there was actually more synergies than we expected between the two businesses, and we also had great success with Piggy Riches Megaways, which is built by Red Tiger on NetEnt IP. That together, with the insight of what we can now create when it comes to both revenue and cost synergies, I think is the full rationale.

Those discussions were something we started early this year, and we have just continued to deliver on the plan. So, I think this was the best solution for everyone that we could come up with. I think spending two years on a full integration is the preferable option for everyone.

EGR Intel: In what ways has the acquisition of Red Tiger “exceeded your expectations”?

TH: When you look at something, you have high hopes and you hope that it will over-deliver, but you need to look at it in a more rational way. We always had an idea that bringing two companies together would create something that would be bigger than the standalone numbers. You never know until you have looked under the hood. You can only do so much in the due diligence process. So, I think three months in, that’s when we realised this has more potential than we were thinking during the due diligence period. If you have an earnout, there is still a kind of blocker there where you can’t really get all the synergies in the first year. But now we can.

EGR Intel: How important to the acquisition of Red Tiger was it to integrate and incorporate the company’s existing leadership into the wider NetEnt business?

TH: The cultural fit between two companies comes down to both management and people. When you acquire a company in our industry, it’s mainly people and then it’s the technical product. So, of course, it was important, and we recognised that. Gavin Hamilton is a fantastic CEO for Red Tiger and I always felt like we had a good cooperation. He’s a great asset to have within the group and now he’s a great asset to have as the COO. I do think that we work well together, and we have different backgrounds. I’m in Sweden, he’s in Malta, and I think that this is a great set-up for the NetEnt Group.

EGR Intel: What do you see as the good conditions in which NetEnt will deliver growth in 2020?

TH: As Sweden was in such a decline in 2019, the comparables are easier. I think we have a strong product roadmap planned for this year. We have Starburst Power Pots and we will launch games with multi RTP. And then we have the US and also an improved NetEnt Live product. If we add that up and also add Red Tiger’s performance, we’re well set up and we have an ambition that we need to deliver an improved result this year.

EGR Intel: In what ways does the integration of Red Tiger fit into this process?

TH: Overall, I think it’s the joint product offerings that we now have. And I also think the capacity they add to our overall capacity. The rationale from the acquisition was that we have already invested heavily in regulated markets and we invested in the distribution and now they can benefit from it.

EGR Intel: What’s been the most challenging aspect of integrating Red Tiger?

TH: There are always challenges. You have different systems and use it in different locations. We have our legacy and they have their legacy, etc. Overall, we have a very proactive and very flexible approach, and they have as well. There’s no prestige between us and in that we don’t have any “political” discussion. We’re fairly easy to deal with and I think it helps.

EGR Intel: There are currently only a few female CEOs within the egaming industry; is the industry doing enough to encourage women into C-level industry roles?

TH: I meet a lot of very talented women in senior managerial positions and I do think we have some good role models. We just have to continue to compete with men for the senior roles. At the end, 50% of us will get them and we will get there at some point. I feel like the industry could maybe do more. I work hard and I would like to deliver, and I think if I do that maybe that can help to demonstrate female leaders can also deliver if someone for any reason is questioning that.

EGR Intel: What would you say has been your greatest achievement since becoming NetEnt CEO?

TH: I’m actually not happy with any of the results we have delivered so far. I think the greatest achievement is the accelerated change and the acquisition of Red Tiger and the start of the transformation journey we are now on. We also have an improved live casino product.