The all-cash transaction is to be finalised imminently, and falls in line with the casino content developer’s vision “to create the future of gaming”.

NetEnt is to pay approximately £197m for all Red Tiger shares, with the remaining sum potentially becoming payable in 2022 based upon an earn-out basis, subject to financial performance over the coming two years. 

This corresponds to a multiple of approximately 12 times current year EBITDA, with NetEnt’s income for the third quarter of 2019 set to include approximately SEK 55m (£4.6m) of transaction and financing related costs.

Therese Hillman, group CEO of NetEnt, said of the acquisition: “I am very pleased to welcome Red Tiger into the NetEnt Group. The acquisition combines two of the leading and most innovative companies in the online gaming industry. 

“We look forward to working with Red Tiger’s fantastic team to enhance our combined global reach, and to offer further value to operators and players. The transaction will provide significant revenue synergies across our markets worldwide.”

Established five years ago, Red Tiger, which boasts operations across Malta, Isle of Man and Bulgaria, is expected to reach EBITDA of £18m for this year.

Via the purchase NetEnt is striving to utilise the opportunity to capitalise on its scalable technology to support future growth.

Gavin Hamilton, CEO of Red Tiger, commented: “This is an exciting new stage of the Red Tiger story and we are delighted to become part of the NetEnt group. Accessing NetEnt’s unparalleled distribution network and geographic footprint will unlock new opportunities for Red Tiger, and will further accelerate our growth. 

“At Red Tiger we’ll remain focused as always on driving further innovation, and we are looking forward to working with NetEnt on how to leverage our combined capabilities to create new products that wow our customers.”

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Also issuing a H1 update, NetEnt’s report shows that 4.1 revenue decline in Q2 from SEK 437m (£37.1m) to SEK 419m (£35.6m) contributed to a 3.4 percent drop during the year’s first half, with figures falling from SEK 867m (£73.7m) to SEK 837m (£71.2m).

Driven by fewer players and lower ARPU since the new regulation was introduced at the beginning of the year, outside of the Swedish market, in the 23 jurisdictions that the firm has a presence, revenue grew 1.7 per cent, primarily due to a strong performance in New Jersey, Eastern Europe, Spain and Portugal.

Therese Hillman, group CEO of NetEnt, explained: “The weak development in the Nordic countries continued in the second quarter, particularly in Sweden, where we have seen fewer players and lower ARPU since the new regulation was introduced at the beginning of the year. 

“Looking ahead, we continue to invest in increased game production, a technical platform featuring more functionality, and live casino, in order to defend, and over the longer term increase our market shares in all our markets.”

Operating profit for the first half of the year came in at SEK 256m (£21.7m), an almost ten per cent drop from SEK 283m (£24m), with its second quarter 12.7 per cent dip, to SEK 130m (£11m) from SEK 149m (£11.4), said to be impacted by legal costs as the company “took action to defend the IP rights of one of its most important games”.

The number of game transactions amounted to 10.6bn in the second quarter, representing a decrease of 1.3 percent as compared to the same quarter last year, with mobile games accounted for 64 per cent of game win in the period, up from 58.2 per cent.

Slot games accounts for the majority of the figure with 91.8 per cent, table games made up 7.8 per cent, with the rest accounting for the remaining 0.4 per cent.

Taking a peek at long-term growth strategies, Hillman stressed that live casino is very much falling on the radar: “Now we take the next step in developing our technical platform as we are creating an open platform with new types of functionality and aggregation of third-party content for operators, services that will be launched on a broader scale during 2020. 

“The transformation of live casino continues at full speed and we added several new functions during the quarter to make our product more competitive. The customer response is positive, and we expect growth in the coming quarters from this segment, but it will take a few more quarters before we can see more meaningful revenues.”

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This forms part of a strategic move by the company to increase its foothold within the Garden State’s online gambling market, with NetEnt stating it’s “very proud” to unveil the new deal.

Following being granted a permanent Casino Service Industry Enterprise license from the New Jersey Division of Gaming Enforcement earlier this year, NetEnt and DraftKings have entered into a “landmark” igaming agreement.

Last month NetEnt made further headway into the United States, after securing an interactive gaming manufacturer conditional license by state regulator the Pennsylvania Gaming Control Board.

Regarding its new deal, NetEnt states that in the coming weeks a large selection of casino games will be launched and available to Draftkings players.

Erik Nyman, managing director NetEnt Americas, said of the new manoeuvre: “We are very excited to have landed a deal with DraftKings. As the world leader in fantasy sports, with a large player base they will add a new dimension to the market, and we are confident that their players will enjoy our popular games.”

Earlier today NetEnt released its latest financial report, covering the first quarter of this year, in which it aligned a 2.8 per cent drop in first quarter revenues to the Nordic markets, and Sweden in particular, which “accounted for almost the entire slowdown”.

Therese Hillman, group CEO of NetEnt, said this was “mainly due to lower volumes in Sweden as the new regulation was introduced at the start of the year”.

Adding: “The new rules have impacted our 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.

“As expected, the new gaming tax lowered our revenues by about 2 per cent in the period. Around 50 percent of total revenues came from locally regulated markets, and excluding Sweden, our revenues in these markets grew by about five percent in the quarter.”

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The company, which also secured significant US moves after obtaining the green light to deliver games in Pennsylvania, securing a permanent New Jersey licence and signing a customer agreement with Parx Casino in the former, saw its Q1 revenues come in at SEK 418m (£344.1m), contrasted to SEK 430m (£354m) the previous year.

Stressing that investments in new games, live casino and new functionality for customers and players places the company in a “good position to defend and, longer-term, increase our market shares,” EBITDA for the January to March period reached SEK 196m (£161.3m) from SEK 182m (£149.8m).

Signing eight new customer agreements during the quarter, as compared to six, operating profit also saw a 5.9 per cent dip to SEK 126m (£103.7m) compared to SEK 134m (£110.3m) compared to 2018.

Commenting on the performance, Therese Hillman, group CEO of NetEnt, commented on the organisations Nordic performance, as well as taking a closer look at Sweden: “In the first quarter, NetEnt’s total revenues decreased by 2.8 percent (-7 per cent in euro) compared to the corresponding period in the previous year.

“The Nordic countries accounted for almost the entire slowdown, mainly due to lower volumes in Sweden as the new regulation was introduced at the start of the year. The new rules have impacted our 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.

“As expected, the new gaming tax lowered our revenues by about 2 per cent in the period. Around 50 percent of total revenues came from locally regulated markets, and excluding Sweden, our revenues in these markets grew by about five percent in the quarter.

“This occurred despite a backdrop of some market weakness in Italy, caused by changes in regulation regarding marketing and gaming taxes. In the second quarter, we are set to launch our games with the Finnish state-controlled operator Veikkaus, and to distribute more games to Norsk Tipping in Norway.”

Before giving a brief US insight: “In the US, we see continuing strong growth in New Jersey, a market that still has much lower online penetration than the Nordic markets and hence the potential to grow for many years to come. For Pennsylvania, the latest estimate is that the market will open in July.”

Furthermore, NetEnt has also vowed to stick to its previous plan of new game releases during 2019, as it was revealed that Scudamore’s Super Stakes, which debuted in March, has been one of its most successful new titles released in the UK: “The new organisation is in place since the start of the year, and we keep working to improve the efficiency and speed of our product development.

“The plan to release 30 – 35 new games this year remains and we continue to develop our new initiatives within affiliate marketing and social casino, which supports our strategy to move closer to the players and should generate new revenues over time.”

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The gaming software giant has been granted a casino service industry enterprise license from the New Jersey Division of Gaming Enforcement, after operating within the Garden State under a transactional waiver from the NJDGE since 2015.

NetEnt, through its subsidiary NetEnt Americas, applied for the casino service industry enterprise licence in the US state four years ago, with the company being granted its  transactional waiver in September, 2015, granting the right to supply online casino games in New Jersey while the full licence application was being reviewed.

The announcement by the organisation sees the granting of its first online gaming licence in the US.

Erik Nyman, managing director of NetEnt Americas, commented: “We are very pleased to obtain our first permanent online gaming license in the US. We have been present in New Jersey since 2015 and have supported the regulator throughout the licensing process.

“The license marks yet another step in our US expansion, as we hope to enter additional states if and when they regulate online casino.”

In its latest financial report, which saw NetEnt report that total operating revenues increased a little over nine per cent to SEK 465m for 2018’s fourth quarter, from 2017’s SEK 425m, Therese Hillman, group CEO, explained that, despite a degree of uncertainty within the US due to recent developments, the company is, at this stage, not reviewing its current expansion strategy: “In the US, we follow the developments closely after the Office of Legal Counsel of the US Department of Justice issued its opinion about online gambling in January.

“This has created some uncertainty, but at this stage we do not see any reason to reconsider our US growth plans, which include growing on the regulated markets in New Jersey and Pennsylvania. With regards to timing, however, we see that the launch in Pennsylvania will be delayed due to changes in the regulatory requirements.”

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This in turn helped boost full year figures to SEK 1.78bn (SEK 1.63bn), with EBITDA finishing at SEK 204m and SEK 601m for Q4 and FY respectively, a figure adjusted for reorganisation-related costs and severance pay in the fourth quarter.

Operating profit for the quarter saw a slight tumble from SEK 153m to SEK 146m, with previous aforementioned costs added to by a VR-project that was written down by SEK 5m, with its total for 2018 boosted 3.2 per cent to SEK 601m (2017: SEK 582m).

Addressing the firm’s performance, and offering a slight outlook into 2019, Therese Hillman, group CEO, stated: “In the fourth quarter, several of our six newly launched games performed well and revenues increased by 9.5 percent (3.9 percent in euro) to SEK 465m.

“Adjusting for restructuring-related costs and the write down of a VR-project, the EBIT margin improved to 37.3 (35.9) percent, supported by higher volumes, the weaker Swedish krona, and better cost control.

“In a number of our markets, we are facing higher expectations than ever as a supplier; we have to deliver more and faster, while we continue to offer innovative products and entertaining gaming experiences to customers and players.

“To better meet such expectations and to drive efficiency and commercial focus, we continued to make changes in the company. In December, we announced a re-organisation that leads to a more decentralised structure with clearer areas of priority and accountability.

“We have strengthened key management positions across the group and recruited a new head of live casino, which continues to be an area that we invest in. We also communicated that we are increasing the pace of development and aim to release 30-35 new games in 2019, compared to 21 games in 2018.”

“At this stage we do not see any reason to reconsider our US growth plans”

Before explaining that a reduction in staff numbers was necessary to help manage costs: “In order to keep costs under control and to allow for continued investments into increased production, we also announced staff reductions affecting 55 full-time positions, mainly within corporate support functions in Stockholm.”

With locally regulated markets accounting for 37 per cent of NetEnt revenues during Q4, up from 33 per cent, that figure shifts to over half if including the newly re-regulated Swedish jurisdiction.

Meaning new rules and requirements for all participants, Hillman, who has seen NetEnt secure deals with ATG and Svenska Spel, commented: “We have launched our games with most of our existing customers in Sweden, as well as the new WLA customers ATG and Svenska Spel. So far this year, our total game win in euro terms is approximately five percent lower than it was in the corresponding period of 2018, mainly due to lower volumes in Sweden.

“While it is still too early to predict the mid to long-term effects of the Swedish regulation, we expect the key customer signings in Q4 2018 and our upcoming game releases to contribute to new revenues in 2019. When it comes to organic earnings growth, we have clearly higher ambitions than the pace we saw in 2018.”

Before adding that, despite a degree of uncertainty within the US due to recent developments, the company is, at this stage, not reviewing its current expansion strategy: “In the US, we follow the developments closely after the Office of Legal Counsel of the US Department of Justice issued its opinion about online gambling in January.

“This has created some uncertainty, but at this stage we do not see any reason to reconsider our US growth plans, which include growing on the regulated markets in New Jersey and Pennsylvania. With regards to timing, however, we see that the launch in Pennsylvania will be delayed due to changes in the regulatory requirements.”

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Johansson had held the position of interim CFO since September 3, 2018, and now takes the reins permanently after what NetEnt said had been a “thorough search”.

The new CFO has more than 30 years of experience from a range of management positions in various sectors, in both public and private companies. Most recently he was senior investment director at Swedish private equity company Ratos, where he had also held the position of acting CEO.

Therese Hillman, NetEnt group CEO, said in a statement: “I am very pleased to appoint Lars Johansson as chief financial officer.

“He brings significant experience to the role and has already played an important part in the ongoing change process of NetEnt.”

The news comes after NetEnt announced it is making cuts at its head office in Stockholm, with 55 employees set to lose their positions as the company shelves a VR project and continues its programme of reorganisation and restructuring.

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In a short statement, NetEnt said it is “taking action to optimise its operations” amid plans to scale up its game production line.

“Now, the company streamlines and restructures the organisation, which leads to staff reductions in Stockholm. The reorganisation is expected to result in non-recurring costs of approximately SEK25m (€2.42m), which will be booked in the fourth quarter of 2018.”

The 55 full-time jobs to go are mostly in Stockholm, the company said, and within corporate support functions.

“The changes are taking place during December and will lead to a reallocation of resources to increased game production.”

The company is also axing a virtual reality project – NetEnt said that SEK5m (€480,000) of the loss related to a “write-down of intangible assets regarding a development project in the area of virtual reality”.

Therese Hillman, Group CEO of NetEnt, said: “By decentralising our operations we take another step towards a new NetEnt, where customers and players are in focus.

“The new organisation will have clearer responsibilities and more emphasis on value-creating initiatives. We are pleased to see the performance of our new game releases so far in the fourth quarter as we continue to diversify our game portfolio.

“Going forward, we increase the pace of output and expect to release 30 to 35 new games in 2019,” said Hillman

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The title is to utilise the image rights of Scudamore, whose voice will be used during the game’s free spin feature, whilst also including actual racing footage and themed in-game content.

Bryan Upton, director of game products at NetEnt, commented: “As one of the most revered jockeys and horse racing personalities of all time, Peter Scudamore is the perfect personality for us to partner with to launch our first sports-themed branded title.

“This is a landmark product for NetEnt, and we are sure slots players and racing fans will be thrilled with the results when the game launches next year.”

Due for release during the 2018/19 National Hunt season, the new title aims to capitalise on the excitement of the peak of the jumps season, as well as its world-famous highlights, the Cheltenham Festival and Grand National at Aintree.

Following Scudamore’s 15-year riding career, during which he recorded 1,678 winners, he became a trainer and is now one of the sport’s best-known and well-respected racing experts.

“From our first conversation, NetEnt’s commitment to innovation and passion for creating fantastic products was clear. I am delighted we are joining forces to launch a new slots game that will capture the unbeatable, exhilarating racing experience,” added Scudamore.

This development comes a short time after the organisation’s CEO Therese Hillman stressed that NetEnt is to look to drive forward its number of launches next year, as an increase of over 10 per cent in its third quarter revenues was revealed.

“The idea is to create a place where players can enjoy the complete portfolio of NetEnt games for free, while operators can offer bonuses to players that are interested in playing for real money,” said Hillman.

“This new service is a great way for us to strengthen our relationship with both operators and players. Our move into social casino proceeds according to plan, and we recently introduced a desktop version of our Facebook app in the US.

“Customers and players wish to have more games from us, and we aim to release a significantly higher number of new games in 2019 and going forward.

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A selection of titles from the online gaming content developer are now available for players, via the British Columbia Lottery Corporation (BCLC) and a further agreement with International Game Technology (IGT).

NetEnt’s first entry into the regulated Canadian market builds upon an existing relationship with IGT, which most recently saw its games go live with Norwegian operator, and World Lottery Association (WLA) member, Norsk Tipping.

After having previously agreed to supply the BCLC through its IGT link-up, integration is now complete and a range of the NetEnt portfolio “of world-leading games” is available to BCLC’s players through the IGT Connect integration layer, that the organisation is providing to the lottery.

The BCLC, like Norsk Tipping, is also a member of the WLA, the industry organisation for state-authorised lotteries around the world.

Therese Hillman, Group CEO of NetEnt, commented: “Launching our games to players in British Columbia is an important milestone for us in our expansion in North America.

“Entering regulated markets is a vital part of our strategy going forward, especially within the WLA segment. I am sure that our exciting games will be much appreciated by BCLC’s players.”

The gaming software giant has also made further moves into regulated markets this week, building upon the global strategy Hillman addresses.

NetEnt inked an agreement with Lithuanian operator TOP Sport, hailed as the “largest betting and gaming company in the country,” with a number of games now live as the firm continues to develop its interests on a worldwide scale.

”We follow our growth strategy by strengthening our position on regulated markets and we are very pleased that our popular games are now also available for players in Lithuania,” said Henrik Fagerlund, managing director of NetEnt Malta and chief product officer of NetEnt.

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