Betsson AB

Welcome to Betsson's earnings presentation for the second quarter of 2024. My name is Pontus Lindvall and I'm the CEO of Betsson. With me today is also our CFO, Martin Amann. This slide shows some of the key figures for the second quarter. The high customer activity continued throughout the entire quarter and as expected, the Euros and Copa America contributed positively in June. It was great to see the active customers increase by 25% and that the posses increased by 15% year-over-year. We saw continued good revenue growth and improved profitability with new records in both revenue and operating income in the quarter. The growth in the quarter was primarily driven by the B2C operations. Revenue increased by 15% year-over-year to 271 million euros and operating income increased by 18% to 64 million euro. The operating margin strengthened to 23.6%. And worth mentioning is that this was our 10th consecutive quarter with increasing operating income. I'm particularly pleased to report a stronger operating margin in the quarter and the highest ever operating income, given the increased share of revenue subject to local gaining taxes. Revenue from locally regulated markets amounted to 55%, up from 36% last year, and includes Peru for the first time, where local gaming tax was accrued during the entire second quarter. For several years, Betsson has been positioning itself as the leading brand for sports betting in Peru. In June, the group obtained its first local licenses for the newly regulated market in the country, for the Betsson and BetSafe brands, and in July, licenses for the IncaBet brand has also been obtained. Moving on, I'm pleased to say that Betsson's commitment to sports partnerships continues. In July, an agreement was announced with the Italian Serie A champions and last year's Champions League finalists, Inter, which means that for the next four years, the Betsson.sport brand will be displayed on the front of the team's jerseys. Inter is one of the world's most successful football clubs ever, as well as a global brand with hundreds of millions of fans. The club has special ties with Latin America, a key region for us, with a long list of historical club icons, as well as the current star striker and team captain Lautaro Martinez, who scored the winning goal for Argentina in the Copa America finals. We now look forward to following the club's pursuit of new titles together with the team and their fans. Since June last year, BetSmart is the official sponsor of Boca Juniors in Argentina. In April, the club celebrated its anniversary by introducing a new third jersey inspired by the flag of Sweden, which can be seen on the picture on the right hand side of this slide. The main focus during the quarter was the major football tournaments, Euro and Copa America. Substantial resources were invested in various market activities, such as dedicated ad campaigns and PR initiatives. Looking at the strong indicators, such as new customers, deposits, gaming turnover, as well as actual financials, like reported revenue and profits, As I mentioned on the first slide, it's very clear that these activities paid off. This slide shows the growth in sportsbook revenue on a gross basis, including all gaming solutions, isolated for the major football tournaments this summer. Compared to the Euros and Copa America back in 2021, gross sportsbook revenue was up 92%, and compared to the World Cup in 2022, the increase was 19%. This growth demonstrates how Betsson has grown as a company in the past years, entering new markets and attracting new customers, and consequently handing larger betting volumes than ever before. In the second quarter, Betsson hosted a sustainability track at the well-known iGaming event next to Valletta. During the day, topics such as responsible gaming, investor relations, employee experience, climate and social responsibility were discussed. On this picture, you can also see Martin on the left hand side of the top picture. At the end of June, Betsson was awarded an AAA rating by Morgan Stanley Capital International MSCI ESG ratings, an upgrade from the previous AA level. The AAA rating is the highest possible and confirms our dedicated efforts in environmental, social and governance ESG matters, which we see as a prerequisite for running a profitable business long term. Like the rest of the organization, the product and tech team put a lot of effort into the preparations for the major football tournaments, Euro and Copa America in the second quarter. And I'm pleased to say that the platform was up and running and able to handle even the most critical moments during the tournament, with high volumes and betting taking place. Geographical expansion also continued to be a focus area, especially preparations for licensing on the newly regulated market in Peru. As always, strengthening of the product offering continued to be a top priority. For the Sportsbook product, a new bet builder function was launched on all brands, for pre-match and live betting. New native apps were developed and launched during the quarter, for example in Italy. Also new payment and authentication solutions were launched in a few markets. And now I will hand over to Martin for a closer look at the financials.

Great, thanks Pontus. The combination of a company showing revenue growth over time and at the same time constantly increasing the profit margin is a rare combination. When reviewing the bets on performance in a longer perspective, we can conclude that the temporary step down in revenue in the first quarter in 2024 is now back to growth with a stable growth trend over time. EBIT is now the highest EBIT ever, and the second quarter is the 10th consecutive quarter with EBIT growth. On top of that, the EBIT margin in this quarter is the highest since 2018. This, although the percentage of locally regulated revenue has increased significantly in the quarter, and following that, materially higher costs for gaming taxes. The scalable business model that is now the foundation of the Betsson operation is based on a dedicated strategic approach, focusing on sustainable and long-term profitable growth through the geographic diversification and supported by our in-house technology. The second quarter was yet another record quarter with growth and all-time highs in total revenue, support book revenue, as well as casino revenue. The Q2 result is supported by year-over-year growth of 15% in deposits, which is also the highest deposit levels ever for a single quarter, and growth of 25% in active customers. Reported revenue for the second quarter amounted to 271 million euro, an increase of 15% year-on-year and 38% organic growth. Growth is mainly coming from the B2C business in the quarter, which contributed to the growth with 201 million in revenue, while some 70 million came from the B2B operations. Revenue from locally regulated markets increased by 75% compared to last year and now constitutes 55% of total revenue in the second quarter. The gross turnover in Sportbook across all Betsson gaming solutions was almost 1.5 billion euro and represents an increase of 17% compared to the second quarter last year. Sportbook margin was 8.6%, which is higher than the 8.2% margin in the second quarter last year, and also higher than the two-year rolling average margin of 7.5%. The combination of high turnover and somewhat higher margin resulted in increased Sportbook revenue by some 13% compared to last year and amounted to 78 million, which is the highest Sportbook revenue ever. The graph on the top right corner displays that the Sportbook margin has somewhat fluctuated from quarter to quarter, but regardless of that, the Sportbook revenue has increased steadily over time. Casino turnover increased by 7% year-on-year, and casino revenue increased by 16%, which is the highest revenue for an individual quarter. Casino revenue represented 70% of the group's total revenue in the quarter, and sport books some 29%. Categorizing revenue by region, we see growth compared to previous year in all major regions, except for the Nordics. The decline in the Nordics in this quarter compared with last year is primarily driven by lower activity in the casino products. However, the Nordic region has showed quarter-on-quarter growth for the past three quarters. The Nordic region represented 17% of the group's total revenue in the second quarter. Revenue from Western Europe increased by 62% year-on-year or by 17 million euro, where the addition of the Betfors revenue as from beginning of July 2023 contributes to the growth. Revenue from Belgium increased compared with previous quarter, mainly driven by the updated casino offering launched on the back of the A-plus license in the end of the first quarter. The Italian market is also contributing to the growth in the Western Europe region, driven by both the sportsbook and the casino products. The Western Europe region represented 16% of total revenue in the quarter. The Sika region increased by 11% year-on-year, driven by strong underlying activity in both sportbook and casino. Croatia, Estonia, Lithuania reported all-time high revenue in the second quarter, driven by the casino product. Greece and Latvia reported growth compared with the corresponding period last year, also driven by the casino product. Georgia reported decreased revenue compared to last year, following a lower sport book margin and lower activity in the casino product. The SICA region represented 42% of the group's total revenue. Revenue in the Latin America region amounts to 63 million euro, which is a new all-time high, representing an increase of 22% compared to the same period last year. The increase is mainly driven by the casino product in Argentina and Colombia, this although a strong currency headwind in Argentina. The Peruvian market is now a locally regulated market where Betsson has received licenses for the Betsson brand, the Betsafe brand and Incabet and pays local betting duties as from April. The Latin American region represented 23% of the group's total revenue in the second quarter compared to 18% in the first quarter this year. Changes in EBIT year on year is impacted by increased revenue by some 35 million euro and following that also increased cost of services provided. The increase in cost of sales and decrease in gross profit margin is mainly explained by higher gaming taxes following increased revenue from locally regulated markets. However, gross profit increased by 14 million euro compared to the same period last year and amounts to 177 million euro, which corresponds to a gross profit margin of 65.1%. Marketing spend is in line with past quarters and also in line with the same quarter last year. Marketing cost in percent of B2C revenue amounted to some 16% and 22% when including affiliate marketing as well. Personnel expenses increased by some 5 million euro in the second quarter compared to the same period last year due to increased number of employees, yearly salary revisions, geographic expansion, and increased investments in product and technology development. Depreciation and amortization costs increased by 0.5 million, driven by increased depreciation from the acquisition of BetFirst that was consolidated as of July 2023. Other items consist mainly of sportbook-related costs for consultants, software licenses costs, and effects from foreign currency fluctuations. EBIT amounts to 64.1 million euro, which is all-time high, and an increase of 18%. EBIT margin was 23.6% compared to 23% last year and 22% in previous quarter. Operating cash flow amounts to 76 million euro, which is an increase of 52% compared to previous quarter. Operating cash flow is driven by EBIT of 64 million euro and positively impacted by changes in working capital and negatively impacted by increased paid taxes. Compared to previous year, the positive impact on working capital is lower due to temporary build-up of payment provider balances in the end of the second quarter, following the increased volumes from Euros and the Copa America. Cash flow from investing activities sums up to 14 million, where the majority relates to investments in home technology and product development. Cash flow from financing activities impacted the cash flow by almost 36 million, where the first of the two dividend payouts had an impact of almost 46 million, which was somewhat counteracted by a release of a guarantee related to the intersponsorship. Betsson has, at the end of June, a net cash position of 93 million euro and an equity ratio of 61%. And now back to you, Pontus, to present the trading update. Thank you, Martin.

Now let's have a look at how the third quarter has started. The average daily revenue in the third quarter of 2024, up until and including the 15th of July, has been 20.5% higher than the average daily revenue of the full third quarter of 2023. The football tournaments, Euros and Copa America have contributed to the high activity during this period. So now let's summarize the Q2 report. Customer activity continued to be high throughout the entire quarter, supported by Euros and Copa America in June. This resulted in strong KPIs, such as growth in active customers and deposits. The main growth driver was the B2C operations. New all-time highs were recorded for group revenue and EBIT. This was the 10th quarter in a row with sequentially growing EBIT. The business continues to generate solid cash flows and the balance sheet remains robust with the net cash position. And as shown on the previous slide, the start of the third quarter has been positive with average daily revenue up 20% in the first 15 days of the quarter compared to the entire third quarter last year. Thanks everyone for listening to the presentations. We can now move on to Q&A. We welcome your questions.