7/18/2025

speaker
Martin
Chief Financial Officer

The second quarter was another good quarter with revenue and EBIT growth supported by year-over-year growth in deposits and increased casino turnover, increased casino and sport book revenue and maintained cost control. Number of active customers is more or less flat compared to last year following Betsson's decision in the end of 2024 to pull out the markets without a clear path to local regulation. and a few African markets, such as Kenya and Nigeria, as a consequence of the ongoing evaluation of the group's market strategy for Africa. Another impacting factor is that the second quarter last year included both the Euros and Copa America, where you typically see increased player activity. The gross turnover in Sportbook across all bets on gaming solutions was close to 1.5 billion euro, a decrease of 4% year-over-year. Sportbook margin was 9.5%, which is higher than the 8.6 margin in the second quarter last year, and above the two-year rolling average margin of 7.9%. Sportbook revenue increased by some 15% compared to last year and amounted to 90 million, which is the second highest Sportbook revenue ever, only beaten by Q4 last year by some 1.3 million euro. Casino turnover is slightly up year on year and casino revenue increased by 11%, which is also the second highest casino revenue ever, only beaten by Q4 last year by some 1.5 million euro. Casino revenue represented 70% of the group's total revenue in the quarter and sportbook sum 29%. Reported revenue for the second quarter amounted to 304 million euro, the second highest revenue ever in a single quarter and an increase of 12% year on year and 16% organic growth. Revenue from locally regulated markets increased by 33% compared to last year and now constitutes 66% of total revenue compared to 55% last year. Revenue growth is coming from both the B2C and the B2B business in the quarter, where the B2C business reported all-time high revenue and contributed with 228 million, while some 76 million came from licensed revenue from the B2B customers. Splitting revenue by region, we see growth compared to previous year in all regions except for the Nordics, which is down by 28% compared to last year. All markets in the Nordic region reported decreased revenue in the quarter compared to the corresponding period last year as a consequence of decreased marketing investments in the region. The Nordic region represented 11% of the group's total revenue in the second quarter. Revenue from Western Europe increased by 36% year-on-year or by €60 million and reported the highest revenue ever for the region in a single quarter. The Italian market reported all-time high revenue, mainly driven by the casino product. The Sportbook product reported increased activity and significantly higher revenue, both compared with the corresponding period last year and the previous quarter, but the Sportbook revenue is still relatively smaller than the casino in Italy. Revenue from Belgium is in line with the corresponding period last year, this although lower activity in the Sportbook in this quarter following the big football tournaments in the comparable period last year. The Western Europe region represented 20% of total revenue in the quarter. Revenue from the Central and Eastern Europe and Central Asia region, the Sika region, increased by 4%, driven by Sportbook and Casino. Latvia, Lithuania and Croatia reported increased revenue both quarter on quarter and compared to last year. Georgia and Greece reported increased revenue compared with the corresponding period last year, and Estonia reported decreased revenue driven by lower activity in the casino products. The Sika region represented 39% of the group's total revenue. Revenue in Latin America region increased by 22 million euro, representing an increase of 35% compared to the same period last year. The all-time high revenue is mainly driven by high customer activity with all-time high in both turnover and deposits for the casino products. The Sportbook product benefited from higher Sportbook margin and reported increased revenue compared with the corresponding period last year and also compared to the first quarter this year. Argentina continued to show strong underlying activity in deposits, increased turnover in both the casino product and the Sportbook and reported all-time high revenue in the second quarter. Peru reported revenue growth compared to the corresponding period last year and previous quarter driven by the Sportbook product. The Latin America region represented 28% of the group's total revenue in the second quarter. Explaining the development in operating income, this picture is broken down to display the impact from the different line items in the profit and loss statement. Revenue has increased by some 32 million and following that increased cost of services provided as well. The increasing cost of services provided is, apart from revenue growth, mainly explained by higher gaming taxes, following a 66% share of total revenue coming from locally regulated markets. Gross profit increased by 17 million euro compared to the same period last year and amounts to 194 million euro, which corresponds to a gross profit margin of 64% compared to 65% last year. Marketing spend increased by 4 million euros compared to last year and corresponds to 16% of total B2C revenue and to some 22% when including affiliate marketing costs as well. Increased marketing spend is primarily explained by enhanced marketing efforts in Western Europe. Personnel expenses increased by some 8 million euros compared to last year, explained by increased number of employees following geographical expansion and acquisitions. This, in combination with organic focus on product and tech development, explains the bulk of the increased number of headcounts within the group. Depreciation and amortization costs increased by 1.5 million compared to last year. Other items include other external expenses and other operating income and expenses, which are more or less flat compared to last year. Decreased other items relates to increased capitalized development cost following increased focus on product and tech development. Operating income amounts to 69 million euro, an increase of 8% compared to last year. The EBIT margin was 22.7% compared to 23.6% last year. Operating income has increased steadily over time. This although we have continued to invest in growth through investments in both marketing and product development. We have also seen an increased percentage of revenue coming from locally regulated markets. which comes with higher gaming taxes and impacts the gross profit margin. Still, we have absorbed the higher tax cost and managed to increase the operating profit and maintain a high EBIT margin. Operating cash flow amounts to 41 million euro compared to 76 million in the same period last year. Operating cash flow is driven by increased operating income but negatively impacted by changes in working capital by some 50 million euro in opposite to a positive working capital contribution by some 40 million euro in the same period last year. The negative contribution from working capital comes from decreased debt to players and increased accounts receivable. Operating cash flow is also negatively affected by increased pay taxes in the quarter due to seasonality and increased revenue from high tax countries such as Argentina and Croatia. Cash flow from investing activities sums up to 13.9 million and relates to investments in own product and technology development. Cash flow from financing activities impacted the cash flow by 66 million, mainly driven by paid dividend to shareholders, including the first half of the ordinary dividend distribution and an extra dividend payout of 13.7 million. We have also repurchased bonds amounting to 3.6 million in the 2023-2026 bond series. Betsson has, as end of June, a net cash position of 152 million euro and an equity ratio of 60%. On a yearly basis, operating cash flow has increased over time, although we have seen fluctuations in track quarters, mainly from changes in working capital and from paid taxes. But on a year-to-date basis, operating cash flow is slightly up compared to the same period last year. When it comes to earnings per share, we can also conclude an increasing trend over time, somewhat negatively affected in 2024 by increased taxes following the implementation of the Pillar 2 framework. However, this year has come to a good start with EPS growth compared to the same period last year and compared to the previous quarter. And now back to you Pontus to present a trading update and to summarize the quarter.

speaker
Pontus Lindwall
Chief Executive Officer

Okay, thank you Martin. Now let's have a look at how the third quarter has started. The average daily revenue for the period 1st of July to the 13th of July has been 5.2% higher than the average daily revenue for the entire third quarter last year. Now let's quickly sum up the highlights of the second quarter 2025. We saw continued profitable growth and strengthened market positions in the second quarter. Reported revenue was up 12% year-over-year and EBIT increased 8% year-over-year. Earnings per share, EPS, increased 9% year-over-year. The growth figures should be seen against the backdrop of the comparative figures for second quarter last year, which included the European Football Championship and the Copa America. Also, we faced FX headwinds in the second quarter, both on our B2C and B2B businesses. During the quarter, we continue to strengthen our market positions in Peru and Argentina. Revenue from LATAM was up 35% year over year. The share of revenue from locally regulated markets was at an all-time high of 66%, up from 55% last year. The higher share of revenue from locally regulated market means that we are absorbing more gaming taxes than a year ago. The business continue to generate significant cash flows and we have a very strong balance sheet with room for continued investments going forward. So that's all we had to say today. So now it's time for Q&A and we welcome your questions.

speaker
Operator
Conference Operator

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Georg Atling from Pareto Securities. Please go ahead.

speaker
Georg Atling
Analyst, Pareto Securities

Good morning Pontus and Martin. I have a couple of questions. So starting with the B2B growth here, a bit softer down 16% sequentially. Could you add any more color on the drivers for this and maybe point out the sportsbook margin in B2B if that's impacting at all?

speaker
Pontus Lindwall
Chief Executive Officer

It always fluctuates between quarters where growth comes from. And for this quarter, the B2B was a little bit weaker. I remind myself about the first quarter of 2024, then we had no growth. hardly in Latam and now it's 35-ish percent. So it's very hard to, not every quarter are on a straight line. There are fluctuations between quarters. So that's the only thing I can say about that.

speaker
Georg Atling
Analyst, Pareto Securities

Yeah, fair enough. uh second question on the uh on the trading update uh also looks a bit soft and you point out the uh the comps here from uh copa america and the euros just wondering uh if you view the the comps tougher in the q3 compared to q2 because obviously most of the tournaments were in in q2 so it surprises me that it's uh it's only five percent growth here in the trading update uh

speaker
Pontus Lindwall
Chief Executive Officer

I haven't compared the comps for the second and third quarter like that. So it's hard to comment upon. But if you look at the full quarter of last year, obviously there was high activity in the beginning and there was also high activity in the end of the quarter because that's when the leagues kick off. So it's a bit of seasonality also within the quarter.

speaker
Martin
Chief Financial Officer

Q2 is always a tough quarter in that sense, because normally it's more quiet in the beginning and then picks up leagues, et cetera, in the end of the, sorry, Q3, in the end of the quarter. So looking at the very short period in the beginning of this period is maybe not the best to kind of build your forecast on.

speaker
Georg Atling
Analyst, Pareto Securities

Yeah, makes sense. And just final question here on M&A now that this acquisition in the Netherlands fell through. What's your current objectives in terms of M&A? Where are you looking? How close are you? How does the pipeline look like? If you just add some more color there.

speaker
Pontus Lindwall
Chief Executive Officer

Yeah, we can comment on a few parts of that question. uh we have a pipeline which we assess uh as always and it's uh we have some interesting opportunities uh secondly we are in a very very strong position better than ever to be able to do m a in in the sense that we have a very solid balance sheet uh i can't comment on any timings but on kind of what we are looking for. I think it's obvious that the regions that we focus on and has done for some time, which we have communicated is mainly Western Europe and Latam. And these are the regions where we mainly look for acquisitions. It can be in existing markets where we want to strengthen our presence, or it can be acquisitions to buy into new markets.

speaker
Georg Atling
Analyst, Pareto Securities

Yeah, that's helpful. Thank you. And just a follow up on that when you speak about Latin acquisitions, have your view on opportunities in Brazil changed at all now with taxes looking to increase?

speaker
Pontus Lindwall
Chief Executive Officer

Our view hasn't on Brazil as a market hasn't changed anything. We remain with our view that in any newly regulated market, it's a little bit shaky initially in terms of competition, marketing spending, potentially regulatory changes when the framework is brand new. So we are a careful company. We don't jump in. We don't buy the first one we see there. We want things, the dust to settle a bit, and then we will, of course, be ready for both our own expansion and M&A in Brazil.

speaker
Georg Atling
Analyst, Pareto Securities

Okay, thank you very much, Ponce and Martin.

speaker
Operator
Conference Operator

Next question comes from Martin Arnold from DNB Carnegie. Please go ahead.

speaker
Martin Arnold
Analyst, DNB Carnegie

Hi, and good morning, guys.

speaker
Pontus Lindwall
Chief Executive Officer

Good morning.

speaker
Martin Arnold
Analyst, DNB Carnegie

My first question is, can we discuss the OPEC situation a little bit, Martin, perhaps? Your personnel expenses are up quite a lot. I think it's like 20% year on year and it's a bit rare to see being up more than the revenues. Will it slow from here or the growth or is this a trend that will continue throughout the year?

speaker
Martin
Chief Financial Officer

Good question, Martin. We try to stay away from giving forecasts of what's going to happen, but rather comment on the history. In this case, I think you can see a bit of the acquisitions we have done. We have added more than 500 new employees from acquisitions and new ventures. So I think this will will set the we always work on on getting our costs in a good manner. So hopefully we will we will be able to continue in in the way we have done in the past with good cost control.

speaker
Pontus Lindwall
Chief Executive Officer

Yeah, I think I can add to that, Martin. OK. Looking over a very long time, And even historically, of course, we don't want the personal costs to be at a higher growth rate than our revenues over time. So that's in general our objective.

speaker
Martin Arnold
Analyst, DNB Carnegie

Fair enough. Thanks. I want to ask you on the Seca region. It's been a fantastic performance. It's still growing good, but if you look on a sequential basis, it seems to be down a little bit. Is there any reason you can point out for explaining?

speaker
Pontus Lindwall
Chief Executive Officer

No, not that we can point out. As such, I believe, but as I said previously, there are always fluctuations between quarters and regions and growth happens in steps in all the regions. And sometimes it's more flattish and sometimes it's more upwards. So that's how it goes. It will always be like that, that certain markets and regions will perform better some quarters and others will perform less good.

speaker
Martin Arnold
Analyst, DNB Carnegie

Yes and in a normal period without you guiding or anything but it's normal to assume a bigger second half than the first half also in the SEKA region right?

speaker
Pontus Lindwall
Chief Executive Officer

You mean on the third quarter, is that how you think?

speaker
Martin Arnold
Analyst, DNB Carnegie

No, sorry, I meant that in a normal year, given the underlying growth in the sector and in these SEKA markets, it would be fair to assume a bigger second half than the first half, given the reality and the underlying growth in these markets. Yes, that's correct. Perfect, thanks. then my final question is on I mean you have always been really strong on and resilient with your margins and now it looks like gross margin is down EBIT margin is down a little bit and there are good explanations here but how should we think about the factors that you can use to mitigate the effect from higher gaming taxation because that's basically what it looks like now betting duties are up and then you're in a period here maybe temporarily with personal costs up so margin is down and how should we think about your mitigation areas what you're working with to protect the margins

speaker
Pontus Lindwall
Chief Executive Officer

Yeah, first of all, my personal view is that margins is not down that much. That's one thing to mention. Secondly, our margins are strong in this business compared to comparable companies. I think we have good margins and everybody knows that as we take on more and more regulated markets we will carry more tax burden and the increase of regulated revenues is quite high year over year in this quarter. It's a strong increase if you may call it that and it has an impact on the margin. Yes we have taken on employees in the quarter but these are investments that cater for future growth possibilities and we will harvest from those investments in the future for sure and that will of course you know mitigate any further impact on the margin from tax so yeah that I think that's what I can say on this one but obviously we hope to be even stronger in regulated markets in the future that will come with some more tax but on the other hand we hope to be able to grow our business a lot more and that will mitigate okay it sounds like a good balance and uh thanks for a thorough answer thank you yeah yeah and uh i i just want to to add on you know uh We are really cost cautious in the company, but we also we are very optimistic about our situation and about our future. And when we have that kind of view of the future, it's our responsibility to keep on investing and make sure that we can grow. And that's what we do with this when we take on the stuff like this.

speaker
Martin Arnold
Analyst, DNB Carnegie

OK. Thank you, Pontus and Martin. That's all from me. Thank you. Thank you.

speaker
Operator
Conference Operator

There are no more questions at this time, so I hand the conference back to the speakers for written questions and any closing comments.

speaker
Pontus Lindwall
Chief Executive Officer

Okay, let's see. There are no questions. I guess the report was clear and understandable, i'm happy about so we will get back to work and thank you everybody for listening in thank you bye

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This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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