Betsson AB

Thank you, good morning everyone and welcome to Betsson's presentation of the interim report for the third quarter 2023. My name is Pontus Lindvall and I'm the CEO of Betsson AB. With me today I have our CFO Martin Öhman. To start with here's the outline for today's presentation. First I will give an update about the business then we will comment on some regulatory developments in markets that are relevant to Betsson Martin will then present the financials for the quarter in more detail. After that, I will provide a trading update for the start of the fourth quarter, and then we will finish off with the presentation with the summary. After the presentation, we will open up for questions from the audience. So Betsson's third quarter 2023 was about continued high customer activity. Strong financial development and further investments in products and new markets. The third quarter in a row with sequential growth in both revenue and earnings. On this side, you can see some key numbers for the quarter. New quarterly records for group revenue and EBITs. Reported revenue increased by 19%, while EBIT was up 46% year over year. Active customers and deposits increased significantly during the quarter, and turnover was high for both casino and sports betting. Casino revenue was the highest ever in a quarter for Betsson, up 27% year over year. The sportsbook margin was 7.3%, which was a full percentage point lower than in the third quarter last year. Consequently, the high sportsbook turnover did not fully translate into a similar increase in sportsbook revenue. All in all, I'm very pleased to see record revenues and earnings figures for the group, despite the lower sportsbook margin. Betsson's strategy is based on four key areas, existing markets, new markets, business to business, and M&A. This slide highlights some recent commercial activities in our existing markets. Betsson's first ever global ad campaign was launched at the end of the summer. The theme is a bet makes a difference and focuses on the excitement and entertainment that comes from placing a bet on sports or casino rather than the chances of winning. The campaign is part of the group's marketing strategy to achieve economies of scale and competitive advantages for the business through a strong global branding. The Betsson brand was introduced in Denmark which strengthens the group's position on the Danish market, where Nordicbet is already a well-established brand. I'm proud to see that Betsson's involvement in sports continues together with clubs, fans and customers. Our collaboration with the popular Italian Serie A club Roma was recently extended. Next slide, please. Betsson's geographical expansion continues. and several new milestones were passed during the quarter when it comes to new markets. In Serbia, a license was granted and an online casino offering was launched on the locally regulated market. In France, a local license for sports betting was obtained and Go Live is expected to happen in the fourth quarter. France is an important gaming market in Europe with great long-term potential for online gaming and this is the first step for Betsson to be able to offer French players a first-class experience in sports betting. As I mentioned, M&A and B2B are also two key pillars for Betsson's strategy. In the third quarter, the acquisition of BetFirst in Belgium was completed and consolidated into the Betsson Group. After the end of the quarter, a license for online casino, a so-called Category 8 Plus license, was obtained in Belgium within the scope of the partnership with Groupe Partouche. The aim is to launch the new casino offering under the brand BetFirst. We are excited about the growth plans for Belgium going into next year. The addition of Belgium has contributed to a higher share of revenue from locally regulated markets, and this figure was 45% in the third quarter, a big step up from a year ago. On the B2B side, Betsson Sportsbook Solutions was launched with the B2C operator BetHard in September. Betsson continues to focus on investing in product and technology to ensure that the customer offering remains competitive and that the technology platform is scalable for continued global expansion. Work to migrate Betsson's brands to the cloud continued during the quarter, as well as the development of more native apps. The casino offering was strengthened through the launch of several games with a focus on new types of content for Latin America. The sports betting offering also continued to expand with the addition of new events as well as new betting options. Also, the sportsbook platform of Kickitech acquired in 2022 was integrated into Betsson's in-house gaming platform Texon during the quarter. And now a short regulatory update. Regarding Peru, on October the 13th, the local regulator published a decree to implement online gambling and sports betting regulations. And the new regulated market in Peru now looks to set to go live towards February, March next year. In Brazil, the Chamber of Deputies adopted the bill to regulate sports betting and online casino games in September. The bill requires the Senate approval to become law, and the Senate has until November the 11th to consider the bill. In Sweden, as part of the budget proposal 2024, the government announced that it plans to raise the gambling taxes from the current 18% on GGR to 22% from July 2024. In Chile in September, the Supreme Court delivered a judgment in favor of the public lottery operator, where one of the local telecom providers was ordered to block the websites of 12 online gambling operators, including Betsson. In contrast, the Supreme Court denied a similar appeal of the same public lottery operator last year. Even though the judgment is applicable only to the specific telecom provider, the government is using the judgment to try to apply market-wide blocking of foreign online gambling sites. Likewise, the Ministry of Justice ordered the Football Association, ANFP, at the beginning of September to terminate its contracts with online gambling operators within 30 days. And now I will hand over to Martin for a closer look at the financials.

Great, thanks Pontus. I will go into some more details of the financials of the third quarter, which again was a good quarter and the seventh consecutive quarter with revenue and EBIT growth and the best quarter ever in Betssons history. This in terms of revenue, casino revenue and operating profit, which all shows all time highs in the quarter. The result is underpinned by year over year growth of 31% in deposits and an increase in active customer by 17% year on year. Active customers are also increasing quarter on quarter. Reported revenue for the third quarter amounted to 238 million euro, an increase of 19% year on year and organic growth of 39%. Both the B2B and the B2C business contributed to the growth with 182 million in revenue coming from B2C and 56 million coming from B2B. Casino turnover increased by 32% year on year and shows the second highest turnover ever. Casino revenue was 172 million, an increase of 27% year on year, which is all time high. The gross turnover in Sportbook across all Betssons gaming solutions was more than 1.3 billion euro, which is an increase of 24% compared to the third quarter last year. Sportbook margin was 7.3%, which is lower than the 8.3% margin in the third quarter last year, and also lower than the two-year rolling average margin of 7.7%. Although the lower margin, the sport book revenue increased by 2% compared to the same period last year and amounted to 63 million. Sport book revenue represented 27% of the group's total revenue in the quarter and casino sum 72%. Breaking down revenue by region, we see growth in all major regions except the Nordics where we see a decrease of 14%. Sweden reported decreased revenue coming from the decreased activity in both the sport book and the casino product. Denmark reported increased revenue driven by growth in both the sport book and the casino product. During the third quarter, as Pontus mentioned, the Betsson brand was also launched in Denmark in addition to the Nordic Bet brand. The Nordic region represented 19% of the group's total revenue in the quarter. Revenue from Western Europe increased by 57% year-on-year and sums up to 39 million euro. The main reason for the increase is the addition of BetFirst revenue from the Belgian market as from beginning of July. The performance of BetFirst in the third quarter is in accordance with expectations. The Italian market is continuing to perform well and reported all-time high again in deposits and showed revenue growth compared to the same period last year. Revenue from the German market is following the same trend as in the past quarters and years and continues to decline for Betsson. The Western Europe region represented 16% of total revenue in the quarter. The Sika region increased by 23% year on year driven by strong underlying activity in revenue growth in casino. The Sportbook activity was strong compared to the same period last year, but the Sportbook margin was significantly lower, which impacted Sportbook revenue in the quarter. Croatia and Greece showed continued positive trends in activity and reported all-time high revenue. This is mainly driven by the casino products. Georgia reported growth compared to the corresponding period last year, also driven by the casino products. The Baltics continued to develop well and Estonia and Latvia reported growth in revenue explained by the casino product. Lithuania reported decreased revenue compared to the previous year explained by lowest portfolio margin. The Sika region represented 41% of the group's total revenue. Reported revenue in the Latin America region amounts to 52 million Euro representing an increase of 33% compared to the same period last year. Argentina and Colombia reported growth both year-on-year and compared to the previous quarter. The growth in Argentina is mainly driven by the casino product, whilst both the casino and the sportbook product drive the Colombian growth in the quarter. Revenue from Peru decreased due to lower activity in the casino product and a lower sportbook margin. The Latin America region represented 22% of the group's total revenue in the third quarter. Revenue from the rest of the world decreased by 7% and is mainly driven by lowest port book margin in Nigeria compared with the corresponding period last year and lower activity in the Canadian operations. Revenue from locally regulated markets increased by 48% compared to last year and now constitutes 45% of total revenue. Fokus on the composition and development of EBIT year on year, we see that revenue has increased by some 37 million euro and following that also cost of services provided. Gross profit increased by 23 million euro compared to the same period last year and amounts to 157 million euro, which corresponds to a gross profit margin of 65.9% compared to 66.8% last year. Erik Sundell, Changes in cost of sale and in gross profit margin is mainly explained by higher gaming taxes following increased revenue from locally regulated markets. Erik Sundell, Marketing spend was lower than both last year and previous quarter. Marketing restrictions in Finland and some other countries in combination with the resell of prepaid marketing assets in the Netherlands as a result of the group's decision to withdraw the license application in the country explains the lower marketing spend in the quarter. Personnel expenses increased by 4 million in the third quarter compared to the same period last year due to some 130 more employees, yearly salary revisions, performance-related compensations, geographic expansion, and increased investment in product and technology development. Depreciation and amortization increased by 2.7 million, explained by increased depreciation following the acquisition of Kikitech Multilimited and BetFirst that was acquired in the fourth quarter 2022 and in July 2023, respectively. Other costs increased by 6 million euro, where half of the increase is explained by unrealized currency effects mainly on intercompany balances, and the remaining increase is driven by increased investment in product and technology developments. EBIT amounts to €56 million, which is all-time high, and an increase of 46%. EBIT margin is 23.6% compared to 19.2% last year, and the increase is explained by increased revenue and at the same time maintained operating costs when excluding unrealized currency effects. Organically, EBIT increased by 129% to €88 million. Turning towards the cash flow and financial position, we can conclude that operating cash flow amounts to €45 million. Operating cash flow is driven by operating income of €51 million and change in working capital. Negative impact from working capital of €17 million is explained by increased payment provider balances, increased accounts receivable, and the addition of the BetFirst operations. Cash flow from investing activities amounts to 119 million euro, where 109 million relates to the acquisition of BetFirst and some 10 million euro relates to the tech investments in the form of capitalized development costs. Cash flow from financing activities impacts the cash flow by 71 million euro and is mainly explained by two things apart from leasing costs. We have issued a new senior unsecured bond of 75 million euro under the framework of 250 million euro with a floating interest rate of Euribor three months plus 460 basis points. And the bond has a final maturity date in September 2026. Secondly, loans of 2.5 million euros have been granted to associated companies to fuel their growth. Betsson has at the end of September a net cash position of 66 million euro and an equity ratio of 62%. And by that, I hand over to you Pontus again to present the trading update for the start of the fourth quarter.

Thank you, Martin. Now let's have a brief look at how the fourth quarter of 2023 has started. The average daily revenue up until including the 20th of October was 12% higher than the average daily revenue of the full fourth quarter in 2022. During this period, the sportsbook margin has been significantly lower than the average historical margin. Organically, adjusting prepositions and currency changes, the average daily revenue during the start of fourth quarter has been 37% higher than the average daily revenue of the full fourth quarter last year. So finally, here's a short summary of the third quarter of 2023. Betsson reported all time high levels for revenue and EBIT in the third quarter. This was the seventh quarter in a row with sequential growth in revenue and earnings. Underlying customer activity was high, with solid increases in active customers and deposits. Casino was the key growth driver in terms of product, with new record revenue reported for the product category. Geographically, the revenue increase was broad-based, with strong growth across SEKA, Latin America, and Western Europe. Betsson's scalable business model continues to support stronger profitability on the back of the higher revenue. Our 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 sustainable value creation for our shareholders. The fourth quarter has started well. with average daily revenues up 12% compared to the average daily revenues for the full fourth quarter of last year, despite a low sportsbook margin. Thank you everyone for listening to the presentation, so now we can move over to Q&A.