Five things we learned from Betsson’s Q2 results

“If there are no more questions, we will see you in three months’ time. Bye-bye,” chimed Betsson AB CEO Pontus Lindwall at the end of yet another short analyst call following the release of the firm’s Q2 report. A common theme is arising for the Stockholm-listed operator, in that the story is the company is doing well. Better than well in fact. The bloodlust among analysts and bankers to dive into mishaps or issues isn’t forthcoming. And as much as this industry is a fan of rocking the boat, Betsson under Lindwall’s stewardship is arguably the definition of smooth sailing.

Continued success in Central and Eastern Europe and Central Asia (CEECA) and Latam, borne out of the business’ dedication to geographic diversity, once again helped the financials look rosy. CEECA is now the group’s largest region by revenue, with performance in Croatia and Greece noted as shining lights.

Elsewhere, a boom in the firm’s B2B operations saw licensing revenue jump from €31.4m to €65m, while casino and sportsbook continued to return impressive results.

In what was yet another record quarter for the firm, EGR spoke to Lindwall and Betsson Group CEO Jesper Svensson to dig into the past three months. The duo lift the lid on facing up regulatory challenges, as well as M&A and a surprising share price dip after the results were announced. “Really good. It’s such a strong quarter. We’re proud of it,” beams Lindwall over Teams. And in the Swede’s eyes, things are only going to get better.

No to the Netherlands

As part of the group’s quarterly report, Betsson disclosed it had withdrawn its licence application in the Netherlands.

The operator blamed “significant delays in the licensing process and resource allocation consideration” as the core reason for dropping the U-turn, but noted it had not ruled out applying for a licence again in the future. Betsson has been locked out of the regulated Dutch market since it went live in October 2021.

With the business focusing on geographic spread, and Western Europe accounting for just 11% of total group revenue, Lindwall seemed relaxed at the thought of not being in the Dutch market. Given there are now 25 B2C licensees in the Netherlands, with LeoVegas the latest to receive approval from the Netherlands Gambling Authority (KSA) earlier this week, it appears the remounting of a challenge for market share in the future may be difficult.

Lindwall reveals: “We applied for a licence quite some time ago, and we would have been happy to receive the licence earlier. We’ve had resources working on that topic for a very long time.

“We want to reprioritise those resources to other projects. It’s nothing we feel sad about. We are an active global company; we see so many markets with great potential.

“This is not that we are pulling out of the Netherlands forever, its just that we have withdrawn our licence application for the time being and we will see when we get back to that.”

Revenue reach

Despite being a heavily gaming-led operator, with casino accounting for 70% of revenue by product ahead of sportsbook with 29%, Betsson’s B2B arm has gone from strength to strength in recent quarters. As detailed, revenue from the segment jumped from €31.4m to €65m year on year (YoY), driven by its acquisition of 80% of shares in KickerTech in Q4 2022.

Betsson noted “adaptations and further development of Betsson’s tech platform and sportsbook are also being made to support a B2B offering” as part of its report. The group has also ramped up resources dedicated to the division to support its growth, with a core focus on sportsbook tech.

Lindwall says the company is reaping the rewards of its diversification strategy in seeing growth in the B2B arm.

The CEO notes: “The traction we see now in the company stems out of business decisions we made back in 2017 and 2018. It has taken a long time to implement but one of those decisions was to put more focus into B2B and increase the resources into products that we serve to customers. That is really paying off now.”

On where the B2B arm is delivering, Lindwall adds: “It is part of the CEECA revenues. We have a long-term client there that has been active for a very long time and has built up considerable business. That is one area that is growing stronger.”

Elsewhere, while casino (35.1%) and sportsbook (12.7%) revenues leapt YoY, there was an 8.9% decrease in the group’s ‘other products’ arm, which includes poker and bingo, down to €2.3m. The vertical accounts for just 1% of total group revenue, although the decline isn’t weighing too heavy on the execs’ minds.

Svensson says: “We are leading in most markets with either sports or casino and I would say those offerings [poker etc] are more complementary to those products rather than leading with them. It is good to be able to have them where we can, but they are a supporting function to the rest of our business.”

Headwinds a coming

With the Nordics posting a flat 0.9% increase in revenue, despite record results in Denmark, the regulatory headwinds coming out of Norway and Finland have had to be battled in recent months. Betsson removed all Norway-facing marketing and language from its offerings in the market to comply with new regulations while challenges from the Finnish Police Board regarding its BML subsidiary have rumbled on. Those challenges have had an impact on operations, the duo candidly tell EGR.

Svensson notes: “Given that we have adapted our offerings in line with what local authorities want to see in Norway and Finland, that is having an impact on growth but we’re still standing strong in the region overall. I think if we compare regions, we see stronger growth potential in Latam and CEECA. But we also expect to remain stable in the Nordics and be able to keep operating at the levels we are today.”

Lindwall also shares his thoughts on potential regulatory changes in the region, including Finland’s aims to pivot from a monopoly to a multi-licence commercial market by 2026.

He says: “We see Finland heading towards regulation, which we’re optimistic about. We hope that they will put a piece of reasonable legislation into place so that we can keep serving market, and for it to become a nice, regulated market like Denmark and Sweden. Norway hasn’t really shown an interest in creating a locally regulated market so they are a bit different in that regard.”

Belgian bound

After parting with €117m in cash plus a further €3m in earnout payments to acquire Belgian operator betFIRST, Betsson has once again leaned on its M&A pipeline to deliver inorganic growth.

Betsson has, for now, kept the executive team in situ, led by former Ladbrokes head Alexis Murphy as CEO. The firm is sports betting-led, due to the fact it does not possess an online casino licence, which Lindwall confirms should be in place before the end of the year.

While not a market leader in Belgium, betFIRST delivered revenue of €51.2m and EBITDA of €10m in 2022, with Lindwall confident on the operator’s ability to push on following the acquisition.

He says: “They are one of the largest on the sports betting side but they haven’t had the internet casino licence, which they will be able to have by the end of the year. This will give betFIRST a more complete toolbox to address the market.

“To put some pressure on betFIRST, yes, we have high expectations for them. That is why we acquired them. They have a very competent team and high capacity as a company so we expect to make some noise in Belgium moving forward.”

Touching on keeping that “competent” team in place, Lindwall adds that strategic decisions such as bringing the brand onto Betsson’s in-house tech stack are pencilled in to be chewed over, although he insists there is no rush.

Lindwall explains: “We took the company on around 10 days ago, so its way too early [to be discussing tech migration]. We’ve discussed the future and what we should do on a daily basis.

“These are big decisions, and none have been made yet. Compared to other companies, betFIRST is very complete and competent, which means we don’t have to mess around with it to make it functional.”

Strange share price

Last week, Eilers & Krejcik Gaming’s Alun Bowden described the gambling stock market as “one of the most consistently disconnected from reality markets that exist”. Those comments came following a 25% plunge in 888’s share price after discussions to install Kenny Alexander as CEO were cut off due to his, and other former GVC execs’, proximity to an ongoing investigation into GVC’s (now Entain) historical Turkish operations.

This disconnect is not confined to London-listed firms it seems after Betsson’s share price dipped 3% following the release of yet another record set of results.

The company’s share price has since recovered, and, at the time of writing, is trading above its pre-results announcement level. The dip may well be seen as immaterial, given the group’s share price is up some 90% over the last 12 months, but it does pose the question: what are investors looking for, and why the seemingly strange slip?

Lindwall is bullish, and points to this fact over sustained growth over the last year. He says: “You can see that the developments of our share price in the past six to 12 months is extraordinary compared to the stock market and compared to the industry. We are in a really good position.”

When pushed on why the dip had appeared in early morning trading, Lindwall adds: “Maybe there are some people harvesting a bit from good investments right now. But we have been in talks with people from the market and everybody appreciates our report, and they are impressed.

“I think we are in a good spot, and I think investors will realise that as well.”