NetEnt enjoyed a positive increase in its revenue and operating profit despite paying an incredibly large severance pay to its previous CEO, Per Eriksson, as well as other expenses that affected the company’s bottom line.
As NetEnt’s Q1 2018 interim report indicates, the company still enjoys high revenue from locally regulated markets, generating figures higher than last year. To maintain the strong momentum, the company will launch over 20 games this year to surpass the 14 titles released in 2017.
Results of NetEnt’s Q1 2018 Performance
One of the key figures of the interim report is NetEnt’s revenue of 430 million kr for the first three months of 2018. This is an improvement from Q1 2017 393 million kr which is a growth of 9.3 percent.
While the growth is significantly high, the rate is lower than the expected at 10.4 percent. One of the reasons for missing the expected revenue increase is the payment of Per Eriksson’s severance pay package, which totals to 6 million kr or approximately US$710,000. The severance pay brought down the company’s operating margin to 31.2 percent in 2018 from 32.2 percent in 2017.
NetEnt’s operating expenses have also increased to 295 million kr in 2018 from 266 million kr in 2017. This is likely the costs of NetEnt’s live dealers’ salary and the relocation of the company’s offices to Malta.
Another reason for the missed revenue projection is NetEnt’s forced exit from Australia, Poland, and the Czech Republic because of new gambling restrictions. The three exits brought down the company’s revenue by three percent in Q4 2017.
In spite of the costs of the severance pay, new expenses, and departure from three markets, NetEnt managed to have a positive growth rate. The sustainable growth is attributed to the performance of NetEnt’s regulated markets with Italy being the highest contributing market.
NetEnt’s Focus on Company Growth
There will be several key factors that will help NetEnt’s growth. These include cutting down costs, release of new games, and signing new deals.
Therese Hillman, acting president and CEO of NetEnt, said:
“While NetEnt continues to focus on growth, measures were initiated in March to enable margin expansion going forward. Among other things, the Company is taking action to reduce costs. For the remainder of the year, we see conditions for better growth, supported primarily by regulated markets, more new games and new customers. For the remainder of the year, we see conditions for better growth, supported primarily by regulated markets, more new games and new customers. We continue to work on optimizing the organization and to make sure that revenues grow more than costs”.
NetEnt announced many upcoming slots early this year, like Narco and Vikings slots, which are based on two Netflix original shows. NetEnt already released several new slots this year which includes Archangels: Salvation, the company’s first 100 pay lines slot.