Betsson CEO on a strong Q1 and fighting European headwinds

Despite a solid run of impressive financial results, Betsson has yet to be viewed as a darling in the stock market’s eyes. That all changed last week after record EBIT and a 15% spike in active customers sent the Stockholm-listed firm’s shares up by 12% in early trading.

Revenue for the first three months of the year landed at €248.2m (£212.2m), up 12% on the €221.9m return in Q1 2023, as casino continued its march as the dominant vertical for the group with 73% of revenue coming from the segment.

Elsewhere, Argentina’s firebrand president Javier Milei was namechecked in the report after his economic policy has seen the country’s currency plummet in value since he took office in December. Latam continues to be a key investment market for Betsson, with the group having secured its Córdoba licence to take its presence to 50% of TAM in Argentina.

Elsewhere, headwinds in Sweden and Netherlands continue to loom, but Lindwall is feeling relaxed against the pressure. A parliamentary motion in the Netherlands approving blanket bans for advertising and online slots was approved, but not yet law, while the GGR tax hike in Sweden could result in black-market leakage, according to the CEO.

Here, Lindwall talks EGR through yet another strong quarterly performance for the brand, his expectations in Europe and Latam and how Q2 has got off to a flying start

EGR Intel: Betsson’s stock jumped up by almost 12% following the results announcement, although a share price jump reflecting results hasn’t always been the case for the group. Is there a sense of vindication here?

Pontus Lindwall (PL): We’ve had strong underlying activity and we’re doing good stuff. This report was pretty clean with good high activity and a little bit lower sports betting margin. What really comes out of the report, when the revenue goes up according to the higher activity, the costs do not move along and that creates the effect you want to see from growth companies like us.

I think that is what is being rewarded now by the stock market, which could have been rewarded earlier. It is very hard to comment on the stock market’s reaction but it is a solid report without any strange surprises.

EGR Intel: In terms of actives, the metric was up 15% year on year (YoY). Is that because of a post-World Cup hangover in Q1 2023 or a continuation of performance for the group?

PL: It’s hard to say really. Of course, the figure could go up during big tournaments and you could have some kind of drawback after that as a result. But what really impacts the figure is what kind of marketing activities we do in certain quarters in order to reactivate [customers] and what kind of campaigns we do.

We shouldn’t draw big conclusions from every single quarter like that. Rather, the long-term trend of actives is more important.

EGR Intel: There was also a large reduction in debt from €104.5m in Q1 2023 to €68.1m in this quarter. Are there any internal goals in regard to reducing this by a certain point?

PL: Not really. If you look at where we stand, we have a stronger balance sheet than maybe we expected. If we go back two years and were looking ahead, then we are in a stronger position today than we expected. It gives us a strong position to do M&A.

[When we acquired Holland Gaming Technology] this quarter, we just paid it out of the cash box and hardly noticed it, so that’s a nice position to be in. It’s not that I wake up in the middle of the night and worry about what to do with [a strong balance sheet]. I think it’s very good for us.

EGR Intel: Speaking of the acquisition, you are set to go into the Netherlands with Holland Gaming Technology. How are you feeling about that market given the news of the potential ad and online slot ban?

PL: We follow that news flow pretty thoroughly, but there was a decision to regulate online gambling in the first place and the reason for that hasn’t changed. You want to have online gaming in control. You want to have tax revenue from it. It’s very unlikely that you regulate a whole industry and you build up a set of regulations and the next day you ban it. Its unpredictable as an industry actor. Secondly, I think it would go against the whole goal of regulation. We don’t believe that will happen and that’s our stance.

EGR missing Intel: The note on Milei’s impact on the peso was interesting. Have you spoken to other operators or even companies outside of the sector on operating in Argentina given the policies there?

PL: We haven’t talked to anybody else about it. This is a new experience for us. We have had revenues from countries where we had changes in FX, but this is something different when you have this kind of devaluation from one day to the next. Of course it has an immediate impact on the figures but, for us, it doesn’t change the view we have on the market. We would be happy if Argentina managed to get their situation under control, and we keep believing in the market for us as a gaming company. We will keep on investing there. We hope that it will be a more stable situation going forward.

EGR Intel: What are you expecting in Italy given the launch of the Betsson brand there and the fact casino is the major player for the group? Is it a case of shifting those players across to the StarCasinò brand as an acquisition funnel?

PL: We went into Italy a long time ago when the sports betting arena was already quite crowded, so we decided to go with a casino brand and we have built up quite solid position in the market.

We have a strong sports betting brand in Betsson and we think it’s the right time [to launch]. We have learned and we have proven that we know how to operate in the Italian market and that’s another thing that gives us confidence to go in there and take a share of the Italian market. We see Betsson being the sports betting; parallel with StarCasinò.

EGR Intel: In Sweden, the plans for a tax hike to 22% could come into effect in July. What is your opinion on differentiated tax brackets for different verticals?

PL: It’s a stupid proposition because it would put further pressure on the casino part of the business. And you don’t want to see any less channelisation in that sector. The right thing to do would be to raise taxes on horseracing betting. That should be the [vertical] with higher taxes because they enjoy a de facto monopoly. The 22% proposal, as it stands, will not help regulated businesses in the country and would further fuel unregulated businesses. Any increase from 18% would harm the regulated sector.

EGR Intel: CEECA continues to be the lion’s share of revenue but as that market begins to bring in new restrictions, such as potentially Lithuania, what’s the state of play? Is it about spreading out to find other untapped markets?

PL: We keep putting efforts into that region. On a higher level, we have put even more efforts into Latam for the past few years. This is not something we do because we are deviating from CEECA but because we are finding out other ways to deploy our investments.

EGR Intel: A strong start to Q2, according to the trading update section. Is this solely being driven by the higher sports betting margin or are there other factors at play?

PL: If you look at the activity in the first quarter in general, it hasn’t changed going into the second quarter. We just keep on riding on the good activity that we have. We’ve seen somewhat different results in the sportsbook for this first part of Q2. That’s making an effect on the revenues so far of course, but it’s 22 days out of the full quarter. You can’t draw any conclusions yet.