NetEnt Q1 2019 revenues stutter as Swedish taxes hit
Revenues down 2.8% as operator cites unforeseen regulatory impact
Online gaming operator NetEnt has revealed a 2.8% year-on-year drop in its revenues for the first quarter of 2019, with revenues falling to SEK418m (£33.9m).
The operator attributed these results to a combination of a point of consumption tax and new regulations in Sweden, which have impacted its customers and players “to an extent that we had not foreseen” and “the combined effect of fewer players and lower average revenue per user has led to a weak start on the new regulated market.”
The point of consumption tax is estimated to have decreased NetEnt revenues by 2% over the quarter.
Company revenues from locally regulated markets excluding Sweden grew by 5% during the period, with growth occurring despite what the company called “market weakness in Italy, caused by changes in regulation regarding marketing and gaming taxes.”
Operating profits fell by 6% y-o-y during the quarter, falling to SEK126m from a previous Q1 2018 high of SEK134m, with margins falling to 30.2% during the period. Net profits also fell by more than 17.8% to SEK120m.
However, company EBITDA rose 7.7% y-o-y to SEK196m during the quarter.
Therese Hillman, NetEnt CEO highlighted the operators focus on organisational improvements as being another reason for the slowdown in revenues.
“It is difficult to predict the long-term market dynamics, but with our investments in new games, Live Casino, new functionality for customers and players, as well as a strong balance sheet, we are in a good position to defend and, longer-term, increase our market shares.” Hillman added.
NetEnt concluded eight new customer agreements during the period, launching new online casinos with nine customers.
It has also received a permanent licence to operate gaming in New Jersey, while being authorised to launch online casino gaming in Pennsylvania. Hillman hailed the potential of these emerging US markets to grow “for many years to come”.
The operator also announced the signing of an online casino supplier agreement with US sports betting operator DraftKings which will see NetEnt games being made available to DraftKings players in New Jersey.
Regulus Partners analyst Paul Leyland commented: “NetEnt is continuing to suffer from mature content exposure to mature markets, without much cutting through in terms of ‘third generation’ growth.
“The business has cut costs to reflect this topline environment, but R&D will be crucial to recovering top-line growth.”