NetEnt on the Stockholm Stock Exchange

An Introduction to NetEnt

NetEntertainment AB, popularly known as NetEnt is one of the industry leaders in casino software for the desktop as well as mobile domains. It was launched in 1996 in Sweden, and has since then grown into a billion dollar global business with a presence in multiple locations:

  • Sweden
  • Malta
  • Ukraine
  • Gibraltar
  • Poland
  • USA

The first NetEnt casino launched in 2002 and today its software is used by over 100 reputed operators. The company offers more than 200 exciting games, including 100+ slots. It also has a live casino offering and offers games for mobile casino fans on its NetEnt TouchTM platform. 

NetEnt's Business Performance: Some Numbers

Since its launch in 1996, NetEnt had been growing at a remarkable rate owing to the popularity of its high quality software. A report in 2005 June stated that NetEnt's numbers in that quarter had shown substantial growth:

  • 44% to SEK 12.4 million in terms of revenue
  • 93% to SEK 8.9 million in terms of operating profit

That has consistently been the story of NetEnt, consistent growth driven by high quality products and services steeped in innovation. In 2015 NetEnt was into the US markets as well. The numbers for the first quarter of 2015 also showed only one thing: growth consistent with NetEnt’s positioning.

  • 37.1% increase in revenue to SEK258.3 million
  • 59.8% increase in operating profit to SEK81.8 million
  • 60.9% increase in profit after tax to SEK74.2 million
  • SEK 1.86  earnings per share before dilution; approximately the same after dilution as well

The logical way forward for a company with a vision as global as NetEnt was to launch its own IPO, and get listed on the stock exchange. NetEnt got listed on the Stockholm Stock Exchange in 2009.

Listing on the Stockholm Stock Exchange

NetEnt’s listing on the Stockholm Stock Exchange and its subsequent stay and growth there is confirmation of the company’s good health. It is an indicator of three important things:

  • Sound operational strategy
  • Good business product
  • Growth in sales

The pressure is always on, because everyone – from the industry watchers to operators to players – expects only high quality game releases, significant third-party tie-ups, and other such things that increase the popularity of the brand and give operators and players more to play with.

NetEnt has of course worked continuously to ensure, first of all, player safety, and an overall comfortable, fun, and rewarding player experience. The main thrust, apart from regular releases of high quality games, has been on:

  • Secure payment transfer systems
  • Complete security of player information

A look at the graph below, based on data collated by Bloomberg, gives an indication of how well the company has fared in the past one year.

Stock Price Graph

At the time of writing, the share price of NetEnt stands at SEK402.60, which is a very healthy number compared to the data shown in the chart from a year back, which was below SEK300. The peak numbers were obviously for the Christmas and New Year season, going way over SEK500.

Another indicator of how well NetEnt has done is from the dividends it pays out its shareholders. The following table lists the dividends paid out from the early years.

Dividends

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Dividends (MSEK)

9.9

9.9

29.7

49.4

79.1

79.1

79.1

89.0

118.7

199.5

Dividends (SEK)

0.25

0.25

0.75

1.25

2.00

2.00

2.00

2.25

3.00

5.00

Earnings per Share (SEK)

0.39

0.72

1.16

2.02

2.72

3.07

2.97

3.44

4.23

6.10

Payout ratio (%)

64.1%

34.7%

64.7%

61.9%

73.5%

65.1%

67.3%

65.4%

71.0%

82.0%

NetEnt in the Past Year (2015)

NetEnt has done fairly well in the last financial year, continuing a trend from the previous year. During the first 9 months of 2015, the company posted the following in terms of financial numbers:

  • A 32.5% increase in revenue to SEK809.3 million
  • A 54.3% increase in operating profit to SEK279.8 million
  • An operating margin of 34.6 (29.7)%
  • A 55.5% increase in profit after tax to SEK258.3 million

All of this was possible because of an aggressive push that resulted in:

  • Signing of 29 license agreements with new customer
  • Launching of 21 new customers’ casinos
  • Signing of customer agreements with Gala Coral in the UK and Golden Nugget in New Jersey, USA
  • Grant of transactional waiver by the New Jersey regulator. This paved the way for releasing games with Borgata and bwin.party

In the third quarter of 2015, NetEnt achieved the following financially

  • A 28.8% increase in revenue to SEK279.8 million
  • A 43.5% increase in operating profit to SEK105.3 million
  • An operating margin of 37.6 (33.8)%
  • A 44.5% increase in profit after tax to SEK97.6 million