Betsson AB

First, a quick look at the outline for today's presentation. First, we'll give a business update, looking at the key financial highlights for the quarter, as well as some activities in our markets. I will also provide a regulatory update for some of the markets that are relevant for Betsson. Martin will then present our financials in more detail. After that, I will show a trading update for the start of the second quarter, 2023, and the end presentation with a summary. After the presentation, we will open up for questions from the audience. So in the past years, we have invested in geographical expansion to new markets and to strengthen the product offering and the competitive position for the group. We can see that these efforts continue to pay off. Betsson started 2023 with yet another record quarter, again, delivering all-time high figures for revenue and EBIT, even though the first quarter has historically often had less activity than the other quarters. We saw continued positive development in both sports betting and casino. Geographically, revenue increased in all regions except for the Nordics. On this slide, you can see some key figures for the first quarter, 2023. Total revenue amounted to 222 million euros, up 30% versus the same quarter last year. Organically, the growth was 38% for the quarter. EBIT was 43 million euros, which is up 82% year on year, 82%. This represents an EBIT margin of 19.4%. We also set new quarterly records for both casino turnover, which was up 51% year on year, and for casino revenue, which was up 37%. Customer deposits across all gaming solutions were also at new all-time high level for the quarter, well above one million euro and up 47% year on year. Sportbook turnover was up 40% year on year, and the Sportbook margin was 8%, which was below the .3% recorded in the first quarter 2022. This resulted in 19% growth in sportsbook revenue for the quarter. So this slide highlights some of the activities in the past quarter. We are proud that Betsson's involvement in sports is continuing together with clubs, athletes, fans, and customers. During the quarter, Betsson was the main sponsor of the tennis tournament ATP250 Chile Open, which took place in February and March in Santiago, Chile. In Italy, we continue to see great activity and we continue to invest in marketing. During the quarter, a new partnership was signed for our local brand Star Casino Sport as the VAR partner for the second Italian football league, Serie B. Argentina, the new business in Argentina is developing well. Revenue increased strongly during the quarter, and Betsson continues to make significant investments in marketing to build brand awareness in these regulated markets. In Colombia, which is a regulated market, the group recently increased its ownership stake in the operator Coolbet from 88 to 91%. We view Colombia as an interesting regulated market in the longer term. During the quarter, the ambassador partnership was entered with the Chile presenter, Sara Uribe. Betsson continued to invest resources into product and technology development to ensure that the product offering is competitive and that the tech platform is scalable for all its markets. During the quarter, development of native apps continued. In February, Betsafe was launched on the regulated market in Ontario, Canada. The B2C offering, which includes Casino and sports betting, is available in the United States. In the quarter, Betson has developed a new platform for the development of native apps for both Android and iOS. Development work has also continued to adapt and further strengthen Betsson's platform and Sportsbook to support the B2D offering. Work to migrate Betsson's brands to the cloud to optimize the proprietary platform also continued during the quarter. So here's a brief regulatory update. In Norway, the implementation of the cease and desist order by the Norwegian gambling authority has been further deferred by the NGA until the 15th of May, considering the changes to its offering that the company has carried out and will continue to carry out. In Peru, the publishing of the new online gambling regulation, which is a step required for the new licensing regime to enter into force, continues to be delayed following the recent political changes in the country. In Brazil, the Ministry of Finance has confirmed a series of recent reports that Brazil's government is finally gearing up to implement the federal law from December 2018 that authorized fixed odds sports betting. In the Netherlands, it was recently announced that an advertising ban for gambling will enter into force on 1st of July, 2023. Gambling operators in the Netherlands will be prohibited from advertising on TV, radio, and in public spaces, both indoor and outdoor. The ban will also apply to sports sponsorships. We continue to monitor the developments in these markets closely. And now I will hand over to Martin, who will take a closer look at the financials in the quarter.

Thanks for that Pontus. I will now give you some more details of the financials of the first quarter, which again was a good quarter in the fifth consecutive quarter with revenue and EBIT growth and the best quarter ever in Betson's history, both in terms of revenue, organic revenue and profit. The result is underpinned by year over year growth of 47% in deposits or by 1.1 billion Euro, which makes it all time high in deposits, as well as all time high in casino turnover and casino revenue. Active customer decreased by 11% year on year and is mainly explained by changes in the offering in the Lattam region. This defines the right customer acquisition strategy and to make the offering more sustainable in the long run, which is part of our ongoing work to improve our operations across the business and especially in new markets. Reported revenue for the first quarter amounted to 221.9 million Euro, an increase of 30% year on year, and organic growth of 38%. Both the B2B and the B2C business contributed to growth with 164.6 million revenue coming from B2C and 57.3 million coming from B2B. Casino turnover increased by 51% year on year and casino revenue was 152 million, an increase of 37% year on year. The gross turnover in Sportbook across all Betson's gaming solutions was 1.3 billion Euro, which is an increase of 40% compared to the first quarter last year. Sportbook margin was 8.0%, which is lower than the .4% margin in the first quarter last year, but slightly higher than the two year rolling average margin of 7.8%. Sportbook revenue increased by 19% compared to last year and amounted to 67.2 million, being the second highest revenue for a single quarter ever after Q4 last year, which was impacted by the World Cup in football. Sportbook revenue represented 30% of the group's total revenue in the quarter and casino sum, 69%. Breaking down revenue by region, we see growth in all regions except for the Nordics. In the Nordics, we see slight decrease of 2.2 million Euro, representing 4% year on year decrease. Finland and Denmark show growth driven by increased Sportbook revenue in the case of Finland and both casino and Sportbook for Denmark. Sweden reported decreased revenue in the quarter explained by decreased casino and Sportbook revenue. Revenue in Norway also declined as a consequence of the changes made to comply with the Norwegian authorities requirements. The Nordic region represented 23% of the group's total revenue in the first quarter. Revenue from Western Europe increased by 5 million Euro, correlating to an increase of 22% year on year. The Italian market is continuing to perform well and reported all time highs in turnover, deposits and revenue during the first quarter. Revenue from the German market is following the same trend as in the past quarters and years and continue to decline for Betsson, driven by the market restrictions that have been implemented in the past years. The Western Europe region represented 12% of the total revenue in the quarter. The Tika region increased by 75% year on year and report new all time high driven by strong underlying activity in both casino and Sportbook operations. Croatia and Greece show continued positive trends in activity and revenue performance. Georgia reported growth compared to the corresponding period last year, driven by the casino products. Lithuania reported all time high revenue in the first quarter, mainly driven by the casino product. Estonia reported decreased revenue in the quarter explained by a lower margin in the casino product compared with the corresponding period last year. The Tika region represented 42% of the group total revenue, making it the largest region by revenue. Reported revenue in the Latin America region amounts to 45.2 million Euro representing an increase of 23% compared to the same period last year, where all countries in the region reported revenue growth, driven by underlying activity with deposits and turnover for both Sportbook and casino grew in the region. The Latin America region represented 21% of the group's total revenue in the first quarter. Revenue from rest of the world increased by 0.5 million or 30% compared to the same period last year and is mainly driven by the Nigerian operations. Revenue from markets with bets and pay local betting duties increased by 31% compared to last year and constituted 36% of total group revenue in the first quarter. Digging into more details of the competition and development of EBIT year on year, we see that revenue has increased by 52 million Euro and following that also cost of services provided. Gross profit increased by 40.4 million Euro compared to the same period last year, corresponding to a gross profit margin of .5% compared to .9% last year. Changes in the margin is a result of increased revenue and a mix of revenue where the affiliate and partner commission marketing costs decreased as percentage to total revenue. Marketing spend was higher in absolute numbers compared to the same quarter last year, this to increase brand awareness on new markets. Focus in the quarter has been toward the Latin region and especially in the new markets such as Argentina. Marketing cost in percent of B2C revenue amounted to some 22% and 26% including affiliate marketing as well, which is in line with previous year. Personal expenses increased by 7.3 million Euro in the first quarter compared to same period last year due to increased number of employees, yearly salary revisions, performance related compensation, geographic expansion and increased investments in product and technology development. Other costs increased by 4 million Euro where the majority relates to other external expenses and is mainly driven by sustained increased investments in product development and technology. Specifically from increased investments in cloud-based environments and from extension of the sports books offering. When breaking out costs related to development on new markets, this sums up to 12.5 million Euro in the quarter, which 2 million Euro was attributed to the US expansion. The remaining 10.5 million Euro consists of 7 million in marketing costs and 3.5 million in other costs where the bulk of the costs relates to external consultants within the tech development. EBIT amounts to 43 million Euro, which is all time high and an increase of 82% compared to the same period last year. The EBIT margin is 19.4%. Moving on to the cashflow and financial position of Betson, we see cashflow from operating activities amounting to 48.8 million Euro driven by operating income and changes in working capital. Negative impact from working capital of some 3 million comes from increased accounts receivable from B2B customers following increased revenue in the quarter. Cashflow from investing activities amounts to 10 million Euro, which the largest part relates to investment in capitalized development costs. Cashflow from financing activities impacted the cashflow by 1.9 million Euro, mainly explained by lease payments. Betson has as of end of March a net cash position of 105 million Euro and an equity ratio of 64%. And by that I hand over to you Pontus again to take us through the trading updates.

Thank you, Martin. Now let's have a brief look at how the second quarter of 2023 has started. The average daily revenue up to and including the 23rd of April was 26% higher than the average daily revenue of the full second quarter in 2022. Organically, the average daily revenue during the start of Q2 2023 has been 35% higher than the average daily revenue of the full second quarter 2022. During the period in April, the sportsbook margin has been more or less in line with the historical average. And finally, here is the summary of the first quarter 2023. Betson has again reported all time high levels for group revenue and EBIT. The organic revenue growth was 38% per year. We saw strong performance across the business with all time high levels for casino turnover and casino revenue. Revenue increased in all regions except for the Nordics with Latin America and Ceca as key growth drivers. Customer deposits were up 47% year on year, reaching about 1 million euro for the quarter. B2B, 1 billion euro. B2B continues to perform well. This is a sign of strength that reflects the investments made in the past years in product and tech development as well as M&A. Betson keeps investing for future growth. With a scalable business model, such investments can be absorbed with maintained or higher profitability over time. For the first quarter, a significant increase in the EBIT margin was reported compared to the first quarter 2022. Betson's business continues to generate strong cash flows and we ended the quarter with a strong balance sheet and a significant net cash position. Looking ahead, we maintain our focus on profitable growth and the second quarter has started well with average daily revenues up 26% compared to the average daily revenues for the full second quarter 2022. So thanks everyone for listening to the presentation. Now let's move over to Q&A where we welcome your questions.

If you would like to ask a question, Please dial star five again on your telephone keypad. The next question comes from Oscar Ronquist from ABG. Please go ahead.

Morning Pontus and good morning Martin. Thank you for taking my questions. So first of all just had one on or I should start with saying that I mean one of your key perks is that you're quite agile in finding new market opportunities. So which are the new markets that you're most excited about entering to fuel future growth and also in I mean looking at the opposite you are performing as you mentioned a little bit worse in Sweden for example. Is that a result of investment cuts in the market or is that pure underperformance by you if you could elaborate on that please.

Yes to start with the first part of the markets that we are excited about is of course LATAM is very interesting and we are growing in all the different markets that we are active in LATAM and then there are further markets that will come and be added on onto that later on and realizing the fact that LATAM is a market which is in its early stages compared to Western Europe and Nordics it's a very interesting future that we are looking forward to and that's where we put a lot of our efforts and we see great results so far. Looking at the Nordics we have we are still happy with the development in the Nordics but we have pulled down a bit on marketing in Sweden and as Martin spoke about in the presentation we have adopted our offering in the Norwegian market to the to the Norwegian authorities requirements and that has brought down the revenues a bit in that market.

Okay perfect so and in LATAM for example so would Brazil be one of your key regions to to grow in in the future and also are you sort of awaiting the new regulation to maybe enhance your focus towards that market?

Yes we are waiting for the regulation and I think the industry awaited the regulation to come into force for some time already. We are looking forward to that to happen and of course it's being a massively large market so this is something that we are looking forward to.

Okay thank you. Then on just on Latin America again we saw sequential decline in the sports book and also I mean looking year over year that the Latin LATAM sports book revenues are pretty flatish just looking year over year so I mean given that it's a quite a big growth market for you how should we think about the sports book growth in Latin America going forward?

I think that part is something which we are not worried about there was some less packed sports calendar for that region in the first quarter but we still see a huge potential going forward and we see no reason to kind of slow down in the long term for us on that market.

Thank you just one more question just on the B2B side so first of all I just wanted to get a sense of the strong B2B growth is that because your customers are grabbing market shares or is it purely due to the market growth or maybe a mix if you could elaborate on that one and the other question on the B2B side is I know that we have discussed this before but if you could share like any thoughts on how we should think about the contribution margin in the B2B segment?

Yes start with the first part I don't have any specific details on market share etc. for our B2B clients but seeing the strong growth I wouldn't be surprised if they are taking market share and I would be happy if that is the case which it probably is because we have put a lot of efforts into product development and it should pay off over time and I think it does. On the second part of course B2B revenues comes we don't have the same amount of marketing cost and it's a different structure so they are a good contribution to our profitability and that's why we are into B2B and that's why we did the acquisition of Kicke Tech so this is in line with our strategy to strengthen the profitability of the company which I think is a very important part for any company.

Got it thank you very much that was all for me. Thank you.

The next question comes from George Atling from Pareto Securities please go ahead.

Hi Pontus and Martin just a couple of questions from me starting on the B2B side as well. Could you just describe the growth in a bit more detail in terms of have you have you grabbed a higher share of wallets from your customers or is it increased prices or just volumes if you could give some more detail on that.

Yes there have been no adjustments to our pricing towards the customers on the B2B side they have been doing fantastically well not only on the sports side but also on the broad great performance by our customers.

And it's also reflecting the kind of investment both in our organization and through M&A that we have done in the past that is paying off now on the B2B side.

Okay and the enhanced performance of your product that you're speaking about could you just describe that in more detail what sort of improvements that you've done.

I can't describe that in detail but you know we have a huge

product development department

we're launching so many new parts of our offerings all the time on a constant basis and that brings the product to higher and higher competitiveness and that should pay off and we are happy to see that.

Okay and could you comment on Kikertek's contribution to the B2B revenues?

I can't really comment on that but Kikertek is the part of our company which is on strong growth so it's a good contributor.

I think we also mentioned in Kikertek added some 10 plus customers in relation to that.

And the next one is on LATAM on sports revenues in LATAM. I'm just wondering how much of the fluctuations we've seen in the last two three quarters is due to the margin and how much is following?

The margin has fluctuated a bit in the last past two quarters but not that much so I think I mean in general we are on a strong growth trend in sports betting in LATAM. That's main thing to think about then it will always be fluctuations between quarters depending on sportsbook margins, depending on the calendar what it looks like for different games and depending on the outcome of the games in certain territories. But the general trend is that we are on a strong sports

growth in

LATAM.

Okay and would you say that the sporting schedule in LATAM was more quiet than in your other regions or roughly similar?

In some of the markets in the first quarter there was a bit in at least one of the markets there were a few games cancelled due to political turmoil in the country which of course had a little impact not entirely but it should be considered.

Okay and then the final question on the on the trading update just wondering the subjects very strong. Is it the same drivers as in Q1 or if you give some more color on that?

I would say so. As I said the sportsbook margin is in line with the normal sportsbook margin so that's you know nothing that stands out so it's a general strong performance across the board.

Okay perfect thanks that's it for me.

Thank you.

The next question comes from Martin Arnell from DNB markets. Please go ahead.

Good morning guys.

Good

morning.

Morning so I know a lot of questions have been asked there but in in Brazil can you just elaborate a little bit on how you you prepare for the upcoming sports betting regulation there?

We are prepared in all kinds of ways. Of course we are preparing you know marketing, we are preparing the organization. Then again it's very hard to tell when the exactly when the regulation should come into place. We still don't know that yet so we can't do too much of the detailed planning but you know we are putting ourselves in a position to be in a good place when the regulation happens.

And we have a people on ground there so and we've been operating that market through our acquisition that we did in 2019 for some years now. So we have kind of all available setups in place already which is a good start when the sport betting kicks off.

Are you in a commercial partnership stage or how should we think about that?

This is not nothing that we can comment on right now but I think you can see from historical activities that we always try to find good partnerships and good exposure for the brand and there's no reason to change that in the case of Brazil.

And when it comes to Latam overall it looks like you have a good contribution already from this market in an early stage. Do you expect that to continue or are you ramping up? You did some big partnerships there in the past. How should we think about your investment levels in that market going forward?

I think first of all we have to conclude that it's a massively large market and we have high ambitions for that market. That means that we will invest in the market going forward and at the same time that's nothing to be very afraid of. We have invested up until now and we have created good revenues on those investments with pretty decent payback times. I think we will just continue as we have done so far and invest carefully but then again it's not one small country. There are many countries, it's not a small market so it will take investments to keep on growing but we believe this growth from Latam is beautiful so we will keep on investing in

it. Just two more questions from me. On North America, the B2B potential case here, how should we think about that now? You're still in the finding partnership phase. How do you think about it?

Yes we are and we are in discussions with potential customers. It's very hard to say when we can come to the next level and take the next step there and obviously we would have been more happy if we had already had one agreement or two but things take time. These are big decisions and we are looking forward to establishing the first contract in the US market or in the North American market I would say.

Are you still as certain about this case as you were like one or two years ago?

The case as such is a moving target and it changes on a daily basis and we are always evaluating all our different business streams that we have but for the time being yes, the market is going to be huge. The need for diversity on the product side so we think we are in a good spot still.

Just a final one maybe to you Martin. The margin development this year, do you think Q1 is a good indicator for the full year on the EBIT margin?

That's a very hard one Martin to answer. You know that we try to stay away from giving guidance of what will happen but I think we are up to a good start as Pontus said. The trading update shows that we have started off well and we have a scalable business model so we can manage to continue to increase revenue. I think that's a good start. Okay,

thanks guys. Thanks a lot.

Thank you.

As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad. There will be a brief pause while questions are being registered. There are no more questions from the telco at this time so I hand the conference back to Pontus and Martin for written questions or closing comments.

Thanks a lot and thank you everybody for listening in and we are looking forward to talk to you again when we present the second quarter in a couple of months time. Thanks a lot for today. Bye bye.

Bye bye. This concludes today's call. Have a nice day.