Hello, everybody. Welcome to the presentation of Betsson's second quarter report, which we will flick through and then have a session of questions and answers. The highlights for the second quarter, we saw a solid growth in both casino and sportsbook, and casino revenues exceeding SEK 1 billion for the first time ever. We had a high customer activity due to the World Cup. We have continued to follow our Back on Track plan, bringing the company back with improved efficiencies and improved product offering. This plan we will continue to work on. It's not done, but I'm very happy that we can see some outcome of the activities done so far. We also had an EBIT at an all-time high during this quarter. The financial summary for the second quarter. Our revenues was up 14%, where 11% was organic.
Casino revenues up 16%, sportsbook revenue up 17% with a margin of 6.3%, which is not a surprisingly high margin. It's a little bit below the rolling average. Sportsbook revenue related to the World Cup was 3.7% of total revenue for the quarter. The EBIT, all-time high, as I said, SEK 301 million, with a margin of 22.3%. Organic EBIT was SEK 311 million. We saw strong growth in underlying activity, and as you can see here, the active customers was an all-time high with 692,000 players. Of course, that's boosted by the World Championship and the activities around that, but I'm still pretty happy to see this activity because it shows that we are on the right track with the product and the initiatives taken.
Also, a very strong sign of that we are doing the right things is that we see all-time high in deposits for the quarter. Into the buildup of the revenue for the quarter, where it comes from. If you look back on the left-hand bar, you see the revenues for the second quarter of last year. We saw an increase in the Nordics by 11%, a strong increase in Western Europe with 26%, a decline in CEECA with 5%, which is mainly related to currency effects, and an impressive growth in rest of world with 65%. That builds up to the revenues of the second quarter for this year. Sportsbook. The sportsbook grew 17% and the gross turnover grew 8%. Organic gross turnover was growing with 16%. We are hit pretty badly by currency effects for the sportsbook turnover.
Sportsbook margin was at 6.3% and we saw an 18% growth in the Nordic region, which I'm very happy about because this region is very high competition for the sports betting, and I think we can say that during the World Championship, we got a proof that we are on the right direction and the right track with our sportsbook product, and it was working really well all across the World Championship. Growth in rest of world was mainly from Latin America, where there is a big interest in events like World Championship. Talking about the World Cup, the revenue related to the World Cup was 3.7% of the total revenues in the second quarter. The final rounds of the championship will be included in the Q3 report.
We saw a good customer intake related to the World Cup, we saw effects from the product improvements we have done. Launch of Bet Builder, which you can see on the picture here, very interesting product where you can build up betting coupons with very high odds by combining different events. We had more than 230 pre-match markets, and we had great improvements in speed in the product. All those things together made our World Cup very, I would say, a success for the company. On the casino side, the growth was 16%, where organic growth was 12%, 11% growth in the Nordics and 27% in Western Europe. As you can see on the bar chart, it's a nice trend that we start to bounce back on casino as well.
We did this by a number of measures, of course, one of them being improved live casino offering with dedicated Scandinavian tables. Of course, it's a combination of many activities in the company and on the casino product. On the regulatory side, the biggest thing going on right now is the re-regulation of the Swedish gaming market, where we expect to be licensed by the 1st of January 2019. In the Netherlands, the Dutch government has taken initiative to revive the process of re-regulating the gambling market. This process has not been very transparent to us, we're not 100% up to speed what's going on there, but something is going on at least. In Italy, the government has proposed a ban on gambling advertising from next year.
We will see if that comes into effect and what kind of effect that will have on the regulated Italian market. Just to comment on what we do on a daily basis, we work really hard in this company with our Back on Track plan to bring Betsson back to where it belongs. This plan is built around four areas where our culture and organization is in the center of everything. These are the people, the Betssonites that create everything that we do. Around this, we work to improve our products and the performance. I think you can see some of the effects from that, but we are still only halfway through that process. We work with a turnaround of growth trends in our core markets. I think you can see a little bit of that as well in the report. We work with efficiencies.
I think you can see a little bit of that as well in the report. You see all the major cost items are on a similar level as the same quarter last year, despite the fact that we have a lot higher revenues. We have managed to be much more efficient in the way we do marketing than we used to be, and other things as well. It's all across the board in the company. M&A on hold. This is not a change in our long-term strategy, but we have put the M&A activities on hold while we have a lot to work on with the company and get the company back to be a high performer again. To summarize this, continued improvements of product and technology.
This is something we are in the middle of, but we have a lot of more work to do there, which I think is very interesting and challenging. We will keep on focusing on efficiencies in all areas. We have seen the outcome of some of them, and we will keep on working in a tight way with marketing and follow up. We are also preparing for re-regulation of the Swedish gaming market. This is, of course for a company with the Swedish roots, this is a very exciting process that is going on, and we are really on our toes to be ready on the 1st of January to make an impact on the Swedish market, which we have already made an impact, of course, but even more in the future. With that, it's time for questions.
Hi, Martin.
Hi.
Martin with DNB Markets. My first question is on this change in marketing and your better efficiency. Can you elaborate a little bit more what's new here and what you've done in order to be more successful with the return on investment?
I don't want to go too deep into it, but we work more with analyzing the marketing and trying to predict, not trying, but working with the tools to predict marketing. It's as simple as that we take away marketing which is not effective, and we allocate resources to where it's more effective.
You cut back your marketing spend in the U.K. this quarter?
Yeah, compared to the same quarter last year, yes.
It was an increase in your core markets, I guess.
I can't answer that. I don't know exactly if it was an increase compared to the same quarter last year in the core markets.
Okay, thanks. A question on casino. If you could elaborate a little bit more on the drivers in casino. Is the growth sort of mostly explained by live casino, or are you growing in slots revenue as well?
Live casino is the product niche which is growing more strongly, but we grow across the line, and the growth is driven by the fact that we improve our product to the end user, and there is more to come in that area.
What's the latest with OBG initiatives on apps and desktop? Has that helped you or?
Yeah, it helps a lot, and we have rolled out OBG apps on the core brands that we operate. We look forward to go to OBG also on desktop, which will happen later.
Will that be in Q3, or?
I can't answer, but it's a part of this ongoing program that we work on. It will take some time, but it will happen, and it will be good when it happens.
Okay, a question on the CEECA region, which looks still quite weak. What are you doing there to improve?
It's mainly a question about currency, and we can't do much about that. We try to work on the product to enhance that so that it's really competitive, and that's about the only thing we can do as a technical supplier to the operator.
Okay. Thank you.
Good morning, Rasmus Engberg with Handelsbanken. Congratulations on a very strong set of numbers. Were you a bit pleasantly surprised by this, or was it in line with what you had anticipated earlier?
I was a little bit surprised, actually, that we could see outcome from all the initiatives taken this quickly. As I said, by the end of the first quarter, I was more expecting it to happen during the second half of the year. Now we start to see some glimpse of light here and there in the figures, and I'm happily surprised that I start to see it already. I think for the organization of Betsson, it's really important that all this hard work proves to have an effect.
You are obviously running a very tight efficiency program now, and given that it's the World Cup, if you focus on efficiency, I guess one would hold back a little bit because everybody's out there throwing money around. How do you see it going forward? Is this temporarily low spending, or are we still in an efficiency improvement?
I wouldn't say that we are in a low spending situation. It's not that we hold back. It's rather that we are more sharp in where we put the money. It's not a competition in throwing money away. It's a competition about getting customers for your money, and I think we have really improved in that area. We're going to continue on that path. We will continue to market, but we will not spread money around us.
You have said before that you expect to have a first step of this restructuring or efficiency by the end of the year. Do you think you will continue to see sort of a significant difference between cost and revenues going forward as well, or was this very temporary here?
The revenues in this quarter is, of course, impacted by the World Cup in a positive way. We will continue to work on the products and with the organization, and that should cater for better revenues long term in the future. Also, I think we have a better grip of the costs in the company, and we will hold on to that. You may call it running a more tight operation. Yes, maybe we will, but that is the way we will do it, but we will keep on growing the company with a tighter control.
I noticed that there is no comment at all about what you intend in terms of marketing spend for the third quarter or fourth quarter. Can you shed some light on that?
Yeah, as I said, there has been no change in the way we spend marketing money or in the strategy of how much of the revenues we put into marketing. It's rather that we have higher ambitions to make sure that the marketing is effective, and that will, of course, impact how we allocate money over time.
Is part of that more affiliate marketing?
I wouldn't say so necessarily. It's rather that we work with tighter models to make sure that we are efficient in the acquired marketing.
Good morning. Mikael Sandgren, Carnegie. I have a few questions. Can you say something about how the quarter developed month by month.
Yeah
if you can elaborate on that, please.
Yeah. As we said in the first quarter report, the quarter started relatively soft, and then it was a little bit better, and of course it was boosted by the end, by the World Cup. That was according to plan, and that was expected, so there was no surprises to us in there. It was rather that we were really well prepared for the World Cup from A to Z, so that we could really harvest on the situation.
Okay. Just curious about the warm weather here in the Nordics. Has that impacted your casino side in any way?
It's hard to say. Normally you would expect that it would have a negative impact. Now, of course, the casino was boosted by the World Cup for the first part of this quarter, which you could also see in our report. Let's see how the rest of the summer plays out. It's too early to say.
Can you say something about how the World Cup affected the casino side?
It has a spillover effect because there is a lot more activity on the site. People, our customers, they win some days and they lose some days. On the days that they win, of course, they can take another chance in the casino. It has a positive effect also on the casino.
Is it possible to quantify that?
No, it's not. I think it's possible. I can't do it here and now.
Okay. Can you talk about the Nordic region, maybe in a bit more detail? We heard things from Norway that it's a bit more difficult to operate there, and if you can comment on the Nordic countries, please.
It's a little bit more difficult maybe. What I think I can say is that we saw traction across all the Nordics during the World Cup, and we see it as proof that we have managed to move our products in the right direction to cater for the Nordic markets. We're really happy about that. We saw, as you could see in the sportsbook, quite a strong uplift during this quarter in the activity, even in the Nordics.
Is it broad-based that you grow about the same in all these four countries, or
I won't go into country specifics, but we are growing in all the countries in the Nordics.
Okay. My final question is about the sportsbook margin over the World Cup, how the World Cup developed, and also how July maybe have started, given the performance and the events, the outcome of the games.
During the World Cup, the part in this quarter, it was an interesting start of the championship because the outcome was not always as expected. It was back and forth, which is very good for this kind of activity, good for the players and good for the gaming companies. We don't like the situation where we win all the time, and we don't like the situation where the client win all the time. It was a really good start. The end of the tournament, which is the first part of the third quarter, as you can see in the report, it started out strongly, and that's mainly due to high activity. There's nothing exceptional about the margins.
I was actually really happy that the favorite won in the finals because that means that the clients went out of the tournament with a big win and we with a little bit of a loss, but that's how it is in gaming, and that's what the clients appreciate.
Okay, I can have a follow-up from me, Martin, with DNB. Just a question on your products in the casino delivered to you by third party. Are you happy with the new game releases this year so far?
There are so many new games that have been released. It's such a high frequency now that there are so many suppliers. Maybe, I think there has not been any kind of blockbusters so far. On the other hand, I think it's not as easy to get a blockbuster today as it used to be. It wasn't easy before, but now it's more or less impossible because it's such a high flow of new games. I'm happy with the outcome of new games in terms of frequency and number of games. I think the general quality in the industry of the games has gone up, too. Yeah, I'm happy.
Are you creating any own smaller games yourself in the casino?
Not for the time being, nothing special to announce.
Okay. Thanks. Just a question on-- I'm sorry, I forgot.
Rasmus Engberg.
Yes, I'll step in with that. It's Rasmus with Handelsbanken. I was wondering, are you able to say anything about what your strategy will be as Sweden regulates? Are you going to strongly defend your footprint? Are you going to continue to run very efficiently? I guess initially, probably prices will be a lot more higher. What's the end game here? Is it still on narrowing, more efficient, or is it more very important to defend the footprint here as we go into next year?
We believe that Betsson deserves a solid footprint on the Swedish market. We have the ambition to do that. Of course, we realize that competition will be quite high with some new actors on the market, like Svenska Spel and ATG. We will see how we can defend ourselves for that. Definitely, we have a strong position on the Swedish market. We have good brands here. We have the ambition to be strong in the Swedish market.
Actually, when will the licenses be awarded?
I don't know, but I hope it is before the 1st of January, and it should be sometime between 1st of August, when we can apply, and 1st of January. It will be quite a big job for the authority to handle that process, and I think we could look forward to get licenses by the end of this period.
Yes. Oscar Erixon with Carnegie. A few regional questions to start. First of all, can you shed some light on the development in Netherlands? What's the latest there, and when can we expect some kind of news out of that country?
The only thing I know is that the authority has lost their CEO or whatever her title was. There is some kind of change in the structure of the authority and how they're going to run this process going forward. As I mentioned before, it's not much transparency, so I don't know much more than that.
Okay. You mentioned Latin America making up the majority of the rest of the world region. Do you think that's temporary, or we will see sort of a lasting effect there that revenues will be on this level?
That part is very much into soccer and also the World Cup. Of course, it has been boosted, on the other hand, this is an area where We've been building up our revenues over a long time, and we have reached a certain level. We have the foundation there to capitalize on future events and also on general soccer that will start in the autumn again.
Okay. Similarly for the CEECA region, and I guess primarily Turkey, some organic growth there in this quarter. Is there a similar story there where you expect revenues to come down in the second half of the year?
I have no comment on that because the revenues, it's so hard for us to predict, especially the reported revenues, where we have to consider the currency. The only thing we can do is to focus on delivering a competitive product on that market. If we do that, we will have to see what the future can bring us in terms of revenue.
Okay. Thank you.
Mathias Lundberg, SEB. I have a question regarding seasonality this year. This was a very strong set of figures. Do you think there's scope to follow the normal seasonality where H2 usually deliver stronger margins than H1, or have they peaked in 2018 now in Q2, do you think?
That's hard to answer. Now we go into seasonality, which is a little bit weaker in activity. Again, in about a month's time, it will pick up again. When it comes to margin in the sports betting, I think it's less volatile nowadays than it used to be several years ago. If you look at it has been since we have more live betting, it has stabilized more. We don't see that big swings anymore.
Okay, great. Looking at the different regions, Western Europe was a big contributor this quarter. Could you say something about the different countries which went better than others? Have Spain had an impact in this quarter?
Spain is a newcomer for us, and we are a newcomer in Spain, so that hasn't had any material impact. We have talked a lot about Italy before, and we are still doing really well in Italy. We have a strong organization working towards that market, and we have probably the strongest casino on that market. This is, of course, a strong contributor to the growth.
Great. Thanks.
Martin here with DNB again. I remember my question was on M&A strategy. You mentioned that you're pausing the M&A. If you look a little bit further out, will you sort of resume the M&A search already next year?
We haven't planned that, we have decided that this is not a change in strategy, in the big strategy. We will do M&As also in the future, we will be opportunistic. For the time being, we have had a lot of tasks to take care of in the company. I think we have proved to ourselves that we are doing the right things, and we will continue doing that before we go out buying more companies.
Looking at your latest, the NetPlay acquisition, it looks like it's still loss-making. I guess that's in line with your expectations.
Yeah, but-
Would you see the losses coming down in the coming quarters?
No, I will not comment on the coming quarters and the results there. Of course, this is one of the things which is like an internal matter that we work with and deal with and that we want to improve further before we go out and acquire other companies.
Thank you.
Are there any questions from web or telephone?
Yes. Ladies and gentlemen, if you have a question, please press 01 on your telephone keypad and you'll enter a queue. Our first question comes from the line of Lars-Ola Hellström from Pareto Securities. Please go ahead. Your line is now open.
Hi, congrats on a strong report. I think most of my questions is already taken, but I noticed on customer registrations and active customers, there is about 200,000 new registrations, but active is up almost 90,000. Is it mostly an effect of the World Cup or have you been working with reactivations of customers?
It's mostly both actually, which is kind of a boring answer, but that's the truth. We work a lot with reactivation as well when it comes to the World Cup and in a big customer base like the one we have, there are players that comes in specifically for the events like the World Cup. It's a little bit of both. We have done a lot of activities to reactivate all our customer base, but also it's a big intake of new customers, of course, for the World Cup.
What will you do going forward to defend the activity level?
I didn't really get that. The sound is not 100% perfect here.
What will you do going forward to defend the activity level?
Yeah, now we have managed to get the activity level up, and that's really positive. I think the fact that we have improved our products a bit helps to keep the activities up. We will keep on doing CRM, of course, towards the customer base. More than that, we will keep on working on the product, and that is something which we discuss every day, and every little change that we do will have a positive effect on the activity.
Okay. A question about the sportsbook volume related to the World Cup. Would it be fair to say that the finals is of equal size or higher than the group phases?
Normally, the final games have a higher volume of bets on them. On the other hand, for those days, there are less games going on, so that kind of evens out if you compare it.
Okay, thank you. That was it for me.
Thank you.
The next question comes from the line of Christian Hellman from Nordea. Please go ahead. Your line is now open.
Hi, thanks. There's been a few questions on it already, but I just want some clarification on the marketing spend, which was at least lower than expected in the quarter, at 18.5%. Could you just clarify a bit, if we look forward a couple of quarters, you're talking about increased efficiency and so forth, but what should we expect here? Because these levels, we haven't seen them since the days of the last CEO, basically.
I won't give any detailed outlook on the marketing spend in SEK per quarter. The takeaway is that there has been no major change in how we allocate marketing in relation to our revenues on a high level. We are a growth company in a growing industry. We will keep on marketing ourself. Big difference is that we will be more cautious. If we don't see good return on marketing, then we will save the money until we see good return. Then we will do the marketing. There may be fluctuations. As you can see in this quarter, it's not that we backed off and didn't acquire customers. It's actually the other way around. We did that in a more efficient manner, and this is what we will try to do in the future as well.
All right. Another question on personnel expenses, which was up quarter-over-quarter. Could you elaborate a bit on that? Given the restructuring program that you initiated in Q1 where you cut away 8%-9% of total staff.
Yeah.
Why are personnel expenses up?
It's not that we took on more headcount. It's actually mostly a matter of currency effects in that figure, and we will continue on a strict path forward with the personnel expenses. We will not have that running out of our hands.
Okay, it's just a currency effect.
It's a currency effect, and it's some other minor effects and costs that came into this quarter, which we maybe didn't foresee, but I don't think the deviation is big, and it shouldn't be interpreted as a sign that we have lost control of personnel costs. I think you can rest assured about that.
Okay. Finally, on Italy, you mentioned it in the beginning of the presentation, the potential marketing ban that could come into effect next year. It's early days, I guess, could you elaborate a bit on that, to give us some more details on it?
Yeah, it's a proposal. It's a little bit part of a big political question in Italy, where different people and parties try to gain votes and popularity. I think the proposal is not very good because it will create obstacles for the licensed and regulated operators such as ourselves, if it happens. Again, it's going to be the same for all of us, so it's not going to hit Betsson especially hard compared to others. As a general comment, I think it's a dramatic move which is not positive for the gaming industry in Italy. Then again, remember, it hasn't happened yet. It's a proposal, we will see which way it goes.
It sounds rather populistic. Do you think it will happen in this shape and form, or is it likely to be sort of changed before it becomes a law?
Given the information I have, I would say I think it is actually likely to happen.
Okay. All right. Well, that's it for me. Thanks.
Thank you.
Just as a reminder, if you do wish to ask a question, please press 01 on your telephone keypad. There will just be a further brief pause while your question is being registered.
No further questions. Okay, no further questions, so with that, I want to thank all my employees, all Betssonites out there, and I want to thank you and see you next quarter. Bye