Hello, welcome to the presentation of Betsson first quarter 2019. I'm going to start off with some highlights for the quarter. We have a revenue growth of 10%, with revenues of SEK 1.3 billion, We see growth across all the regions where we operate. We have a EBIT growth of 21%, EBIT of SEK 255 million, The efficiencies that we have implemented during the last year continue to show effect on our profits. Our OPEX has decreased organically by 5% compared to the same period last year, Our EBIT margin was 19.2%. This was the first quarter with new regulation in Sweden. We now have revenue share from regulated markets increased to 31.7% of our total revenues. Looking into the financial summary, we have a total revenue growth of 10%, casino growth of 10%, sportsbook revenue growth of 13%.
This is despite the sportsbook showing a margin which is a little bit lower than our rolling average margin, which is 7%. Sportsbook margin was 6.3% during the quarter. Our EBIT was SEK 255 million, which is an increase by 21% compared to the last year. EBIT margin at 19.2% and earnings per share SEK 1.66, a growth of 22%. We have some impact from the IFRS 16 in the P&L. It's not massive due to the fact that, how our P&L looks, There are costs that has been moved in the P&L, It has minimal impact on the EBIT and no impact on net cash. We see it as a solid quarter with increased customer activity. The margin, as I said, was up despite challenging first quarter from the Swedish regulation.
Our EBIT increased by 21%, betting duties increased by 49%, Our operational costs decreased organically by 5%. Number of active clients in the first quarter was 686,000, which is an increase by 13%. It's actually a little bit higher than the fourth quarter last year, which is a seasonally very strong quarter too. My favorite topic, product and technology. We have made major improvements in product offering. To mention a few, site speed improvements, daily jackpot widget in the casino, OVG live stream calendar, match results in bets history, live score in open bets, to mention a few. We have Betsson Mastercard launched with exclusivity for the Swedish customers, Swish is launched as a payment solution in Sweden. Betsson operate in several regions, I'm really happy and proud to see that we show growth in all the operational regions in this quarter.
If we start off with the Nordics, it's a relatively smaller growth than we had the last quarter, That is due to the Swedish regulation. Still, there's growth in the Nordics. Western Europe growth, CECA growth, Rest of world growth, That adds up to the 10% growth that we see. On casino, Betsson offer 2,700 casino games, of which 2,000 on the mobile. The growth was 10% in the quarter. Organically, the growth was 7%, Casino was accounting for 76% of total revenues. We saw growth on the casino in Western Europe, CECA, Rest of world. We saw some negative impact, of course, from the Swedish regulation. Mobile casino revenues increased 25%, We see an increase from proprietary games that we have. As a product segment, the live casino continued to grow in the quarter.
On the sportsbook, Betsson operates its own sportsbook. It is a proprietary product that we own ourselves, and it has a really competitive offering. More than 230 pre-match markets, 100+ live markets, and 46,000 live betting events in the first quarter. Sportsbook turnover grew 10% with 18% organic growth. Sportsbook revenue grew 13% with 14% organic growth. The sportsbook accounted for 22% of our total revenues, and we saw growth in all the regions from the sportsbook. Mobile sportsbook grew 31% and now accounts for 80% of total sportsbook revenue. This was all achieved with the sportsbook margin, as I mentioned, on 6.3%, which is a little bit lower than the average sportsbook margin that we see. Sweden is now a regulated market since 1st of January 2019. This means we pay 18% betting duties.
We have a 5-year license for 4 brands on the market. Of course, it is a new situation. We see some impact from the regulation with the betting duties, of course, in the P&L. The welcome bonus that we did initially in the first quarter had an impact on the revenues. We have seen self-exclusion by a number of players through Spelpaus, and there are, as we all know, ongoing discussions in media and elsewhere about the marketing situation in Sweden, which I personally think will change during the latter part of this year. Betsson, we see Sweden as a long-term important market, and we aim to grow here sustainably. We have a good position in the market. We have a good and broad product offering, which is very attractive, so we are in a good position for the Swedish market.
On the regulatory side, we have licenses in 12 jurisdictions, and changes that have happened in the first quarter or are about to happen are betting duties increase in Italy from 1st of January on casino games and in the U.K. from 1st of April, so in the beginning of the second quarter. There is also a new gaming law adopted in the Netherlands, happened in February, and it is estimated to come into force in this third quarter of 2020. Market is expected to open in the first quarter 2021. Betsson has made several adjustments to its offering in the Netherlands, such as rebranding and payment solutions and other things to be in the best possible position for license at the earliest possible date. This ensures a sustainable outlook for the Dutch business.
As you can see in the trading update, it has a short-term negative impact on the revenues from the Netherlands, but it is a focus on the long-term business that we see in the Netherlands, and we have high ambitions for a solid long-term business there. This small negative impact on the revenues is to be seen as an investment for the future. To summarize all this, we see revenue growth across all regions, and we see a really solid profitability where we have this big and great company in full control on the cost side. We see some impact from the Swedish regulation and the upcoming Dutch legislation, but with the size that we have and the broad geographical spread, we do not suffer too much from that. We are going to work with continued improvements of the products and technology to offer our customers fun and secure entertainment.
We're going to continue to work on efficiencies to be able to absorb betting duties and still be profitable. We're going to continue to work on and develop our geographical spread, which is a very strong backbone of Betsson, as you can see in this report. Our long experience and our considerable size gives us a solid foundation for continued profitable growth. Thank you. Now we have questions. We're going to start with questions from the room here. I see Martin Arnell there waving for a microphone.
Thank you. Martin with DNB. Could you share some more color on this start to Q2? I know it's only a month, but you went from 8% organic growth to 6% decline. Can you just share some more color on if it's sportsbook margin impact, Sweden? I know you mentioned the Netherlands, but any more color on that would be helpful.
Yeah. Sweden is at a lower run rate as in the first quarter. That's obvious to everybody. The business decisions that we have made and implemented regarding the Netherlands also has an impact. Then again, we are doing well on a lot of markets, we have to remember in this comparison, we look at the short period of the second quarter, but we compare it to the full second quarter last year because that's how we normally do it. That second quarter last year contained also the world championship, which was a high active thing. It's a little bit comparing apples with pears in this relation, but this is how we usually present it and we stick to that.
Sure. Given that you comment on these adjustments in the Netherlands, do you expect that the effect from that will gradually be higher in the remaining quarters this year?
It's hard to tell. We don't know that. We know that we have made adjustments to be compliant with the stated wishes from the Dutch authorities, and we have put ourselves in a position where we are well-positioned to get the license as soon as it's possible, and that's important to us. That is the reason. The fact that we have a little bit lower revenues from that, we see that as a long-term investment, and I'm sure it's a good investment.
Okay, thanks. On your cost outlook, you've been on this Back on Track plan now for a year. Is there more to do going forward? How should we view the cost outlook going forward?
Actually, the Back on Track program was finalized by the end of the first quarter. That doesn't mean that we stop thinking about costs. We're going to continue to work on the cost side. It's a really central part of our company is to be in cost control in order to be effective on all the markets where we operate.
Okay, thank you. My final question is on this discussion about marketing in Sweden. Could you just elaborate a little bit why you expect that discussion to change later on this year?
Yes. When we went into regulated situation in Sweden, I said that it's like a black box. Nobody knows what Sweden will look like in the first quarter when it opens up. That turned out to be true. Most companies went very hard on marketing. People in general kind of suffered from all this marketing. It became a media discussion and some political involvement in future marketing in Sweden. I think when the market settles a bit, I think the dynamics on the marketing side will change. I expect that marketing intensity will go down. I think we will see that already by the end of this year. We have to remember that we are only now four months into regulations, so it's really fresh, but I definitely expect to see changes for the latter part of this year.
What about you? Are you lowering your intensity?
I can't comment on the short-term strategic decisions that we make. No, I can't comment more on that.
Thank you.
Hi, Christian Hellman from Nordea Markets. Just a question on the Netherlands. You expect it to be a short-term impact, you say in the report and presentation from these measures that you have taken to be compliant.
Yeah.
The market is expected to open up in Q1 2020. Could you elaborate a bit on what you mean by short-term?
Yeah. A short-term impact, I mean that we will see a little bit lower revenues going forward until we are in the licensed situation. Then what happens, we don't know. It's another new regulated market, and we don't know the behavior of that market. We have made this decision to be fully compliant and to be ready to get the license as soon as possible, that's an important decision taken, it's like we are present on so many regulated markets, we have been in place on these markets from early stage, and we intend to do the same in the Netherlands.
A question on Sweden. The share of taxed markets has increased by 9 percentage points quarter-over-quarter. Is that roughly the size of Sweden now, or has that been severely impacted by high bonusing costs in Q1? Could you just give us some sort of hint on the size of Sweden for your business?
I can't do that. We don't go into the size of the market in detail. Of course, the first quarter was impacted by the bonusing that we did early in the quarter.
All right. Yeah, that's it from me. Thanks.
Thank you.
Hi, it's Lars-Ola from Pareto Securities. I can follow up on Christian's on Sweden. I think you probably have read what Kindred wrote in their report about the bonus dynamics. Can you say, had you seen similar kind of bonus dynamics in Sweden? Because it was really excessive levels that we saw from Kindred. Have Betsson seen similar pattern? Has the bonus level normalized in March, and is it lower in Q2 compared to 2018? Three questions in one.
Yeah. The first one, was the bonusing excessive? I think I can answer yes to that one, because most of the operators on the Swedish market decided to give that one option welcome bonus to the clients, and that was done on a broad scale at one point of time. That was kind of different from normal business. Of course, that was consumed early in the quarter, and it turned to more normal levels by the end of the quarter.
Okay. Also to follow up on the Netherlands, I think you said now when you answered Christian that you will see lower revenues from the Netherlands. Would it be fair to assume that total revenue from the Netherlands in 2019 will be on the same level as in 2018? Will you be able to grow on an annual basis?
That remains to be seen. I don't know, and I can't comment on it.
Is it mostly due to the absence of an ID solution that you are seeing so much slower growth in the Netherlands? Is it that you have stopped with affiliation as well?
We have made several adjustments. All together they have a small negative impact on our revenues. I can't comment more on that. We will see how it plays out for the rest of the year. The important thing is that we are in a good position for the licensing procedure in the future.
One final from me right now. One really good thing here is the sportsbook turnover growth of 10%, 18% organically. Can you say which regions is above and below the 10% growth?
I can't say that. What I can say is that I'm happy to see this growth in the sportsbook. That the product has made several great steps as a product, and we have so much more to come for that product. I'm really looking forward to see how it will perform in the future.
Hi, Oscar Eriksson with Carnegie. A few questions on the Netherlands from me as well. First of all, when were the changes made? Was it the start of April?
There is several changes made, and they have been done as soon as possible. I don't know the dates exactly, but they didn't happen on one single date. Important thing is that changes have been made as soon as possible for us. Yeah.
Okay. What do you think is the biggest thing that you have changed? Is it the change of the brand for the website? I think I noticed that you changed brand name twice for Oranje, for example.
I don't know what the biggest change and which change had the biggest impact. We see it as a number of changes that we decided to do at a very early stage, and we made those changes as soon as we could. All together they have an impact, and that impact we will live with for a while, but it will take us to a good position in the licensing procedure.
Okay. I suppose that these changes, they're done in close discussions with the regulators, so this is what they actually want you to change ahead of a cooling off period.
I don't want to go into details on how the communication has been done. Obviously, as a company, we have done everything that we deemed necessary and that we understand that we are expected to do.
Okay. Thank you. A final question on the Netherlands for me. This cooling off period, you discussed it a bit in the report, what you think it entails. Could you just elaborate on that a little bit? What is permitted? How long could it be?
I think there will be more regulations coming up and discussions even with the regulator in the future. I think we will get more deep understanding on that in the future. I see no reason to. I don't know enough to comment on it at this point of time.
Okay. Thank you. One final question on Sweden. Operating conditions can change quite a lot, which we've seen in other markets. What, in terms of marketing limitations, do you think would severely impact the channelization in Sweden?
I think big changes to the possibility to communicate to the market would definitely hurt the channelization. Yeah.
Okay. Thank you.
Hi, Lars-Ola again. I just can follow up on the Netherlands. Has the cooling-down period started? Are we in the cooling-down period?
It depends who you ask, I think we pass on that one, we let the future tell the answer to that question when the answer is more solid.
On the Western Europe, as the Netherlands has seen a slowdown, is Spain and Italy, Germany continue to perform strong?
I don't want to go into the different markets one by one, but as a region, Western Europe is performing strongly. I usually mention Italy as a good example of where I see a very strong momentum, very strong growth there.
I was speaking about Italy, how do you view your growth opportunities after the 1st of July when the marketing ban goes effective?
We think we have solid plans on how to operate there even after the change of marketing opportunities. We have a team with a very good understanding of the market and very good knowledge. We are lined up to work under these new conditions. I'm sure we're going to continue to grow there.
Martin Arnell with DNB, just a follow-up from me as well. On these Western Europe markets, are you focused on Germany? Can you tell us anything about other markets than the Netherlands?
No, not really. Western Europe is quite a large region, contains many countries, and we don't have any specific focus on anything. Of course, the markets which are already regulated, such as Italy, are prioritized in terms of where we invest.
Okay, a similar question on the Nordics. Looks like you were stable in the Nordics overall, despite assuming a decline in Sweden. That must be the case that you were growing quite well in the other Nordic markets, excluding Sweden. Any comments on that? What was driving that?
I think the product offering that we have is really compelling, and we have been pretty strong in the Nordics for a very long time. We have a solid brand position and a solid market position, and I think that helps us to grow.
Okay, a question on CECA as well. You were at 30% growth, I think, from Realm. Anything new there that you've done?
As you can see in the report, the sportsbook is performing really well. That region is mainly driven by sportsbook. Of course, when the sportsbook offering is so strong and competitive, then it has a bigger effect in that market, where the sportsbook is a really important product.
The final question from me on where are you in the consolidation phase here in the industry on both ends? What do you look for and what do you expect going forward?
We always look for opportunities. You know that up until the first quarter, we were in this project Back on Track, where we said we kind of put everything on pause in terms of M&A. Now we have started to evaluate different options again. We can see that there's an increased activity in the industry, probably triggered by different new market conditions. Companies are up for sale, companies that have Swedish exposure. International companies are also looking at Swedish companies, of course, with Swedish exposure and other regulated markets. I think we will see some consolidation going on in the future.
Thank you.
Yeah, just another question on the trading update, Oscar from Carnegie here again. Maybe a strange question, the start of Q2 last year didn't contain the World Cup, of course. How are the comparisons from April last year compared to the full quarter, if you understand what I mean?
Without giving you the figures, it's of course, a situation where the second quarter last year started in a certain way, but the second half of the second quarter was a lot stronger due to the World Championship. This is the full quarter that we compare with. If we would have compared this quarter up till now with the same period as the last year, we would have another different figure from what's in the report.
Perhaps more similar to your run rate in Q1. Organic growth, at least.
I can't go into that. We would see another figure, then you have to elaborate on that yourself.
Okay. Thank you.
Hi. I can rephrase that question. The sportsbook margin in April, has that been normal, or weak, or strong?
The sportsbook margin?
In total, casino and sportsbook.
It's no deviations which is worth commenting on, I would say.
Speaking about the sportsbook margin, I noticed there was a downtick in the CECA region from Realm, compared to Q4. Is that mainly because there was a weak sportsbook margin in Turkey?
That contributed. I can't say that it's only because of that, the more important thing, in my view, is to look at how the region performs in general. We see this really strong uptake in the first quarter. We're definitely on a good track in that region.
One final question from me. How do you see on Germany and casino, is there a risk that casino will be banned in a few years' time? What's Betsson's view?
That is a very unclear situation, and I'm not in a position to comment on it at this point of time. Okay, it seems we have no further questions from the room right now, at least. Let's see if we have any questions. Should we start with telephone or on the telephone. Do we have any questions from the phone?
Thank you. Ladies and gentlemen, if you have a question for the speakers, then please press 01 on your telephone keypad, and you enter a queue. After you are announced, please ask your question. Our first question comes to the line of Erik Moberg from ABG. Please go ahead. Your line is now open.
Hi. Good morning. A couple of questions, if I may. In regard to receivables, they have trended upwards lately. Could you perhaps give some more insight into what's been driving this?
Yeah. That figure is depending on which markets perform strongly and which markets perform less strongly. It's also been changes in conditions by some third parties. That's the reason for that.
Is it fair to assume that Norway has been growing quite strongly?
In line with what Martin asked before, assuming that Sweden has gone down, other countries in Nordics have gone up. Yeah, that could be one assumption. We have always been strong in the Nordics, and they are growing strongly. Yeah, that's true.
Okay. Got you. In terms of the Dutch market, my understanding is that you stopped with all the affiliate marketing towards the later stages of February. This should, in extension, have more of a negative headwind for the Q2 performance. Affiliate on a standalone basis, what sort of negative impact do you expect from this?
It's the same answer as I gave before. We now see the impact, what it looks like today. It's very hard to predict what it would look like for the rest of the year. It's a small downturn. It's not severe for us as a company, of course. It's a great investment for us that ensures a Dutch license once it's time to get that.
Okay. Got you. In terms of Oranje Casino and Kroon Casino, as you mentioned, you rebranded both of those sites. I'm just trying to understand it better. This had nothing to do with the risk of not obtaining a license once the market regulates. To me, it seems a tad odd you throw away brand value like this if there were no other aspects involved. If I recall correctly, you explicitly stated during the Q4 report that there were no risk whatsoever that you would not be able to obtain a license, and now you just simply decide to change the brand. To me, it seems a little bit contradicting.
No, I don't think so. We have made adjustments that we find proper, which we have understood from the Dutch authorities that they would appreciate. I think that puts us in a great position for getting a license. There is no reason to speculate what would happen if we wouldn't have done the changes of brands. We have done the changes of brands many times before. We know how to do it without losing a lot of traction for the business.
Okay. Got you. In terms of the cooling-off period, you didn't really want to comment on it before, but from what I understand, some people claim that their cooling-off period is basically from once you are compliant with the regulator and towards onwards. In this case, it should then mean that you would be able to apply for a license then in May 2021. You would essentially be almost six months behind the rest of your competitors when it comes to starting to marketing your brands, et cetera. What sort of your thoughts on this?
I can't comment on the details. It's too early to say how that process will be run by the authorities. I just know that we are licensed in a big number of jurisdictions, and we've got licenses early stage in all those jurisdictions. I know that the intention with the Dutch regulation is mainly consumer protection, and I think in order to achieve that, it's good to get as many of the operators on that market as soon as possible. I think that is a great starting position for that procedure.
Okay, got you. Thanks. That's all from me. Thank you very much, guys.
Thank you.
Thank you. Just as a reminder, if you want to ask a question, then please press 01 on your telephone keypad. Our next question comes from the line of Peter Testa from One Investments. Please go ahead. Your line is now open.
Hi, thank you very much. I had a couple of financial questions. The first one was just on the marketing, which was relatively flat in an intensive quarter for Sweden. I was wondering if you could give a sense as to what impact the Italian advertising ban had and maybe the switch between above-the-line bonusing and below-the-line marketing in Sweden might have had on this number.
I can't elaborate on those details, unfortunately.
Okay.
I can't.
Is it fair to say that there was a negative impact on the marketing spend line or it was lower than normal because of the Italian ban? Just to be clear.
On the Italian ban?
Yeah, the advertising ban.
It's not implemented yet.
Okay, that's to come. On the OpEx post the end of the cost plan, when we look at the personnel cost and other OpEx excluding the IFRS change, is that roughly a base number from which you think it will grow now? Or is this a base level you're going to try and hold?
I think the personnel cost has been quite stable since the middle of last year or second quarter last year. We are not planning any extensive additions to make that increase. We will continue to be a growth company, and we will grow, and eventually we will have to add on more staff to cater for that growth. I think it's fair to say that you shouldn't expect any strong increases in the near future.
Okay. The last thing is just on Sweden, if you could give some understanding of how active customers and behavior may have changed post the consumption of all the bonusing earlier on, so we could just kind of get some sort of understanding of how the market really looks once this bonus bonanza has settled down.
Yeah. This bonus offering that was done by all operators, I guess, created a little bit of a hassle where customers was moving between different sites, and it kind of raised the active clients figures for most operators, I guess. Now that has settled. I think we will go into a more normal state for the rest of the year. Probably, number of active clients will be a little bit lower in the near future than it was in the first quarter because the first quarter was a very odd thing with heavy bonusing on all the sites which had an impact, of course.
Yeah. If you looked at what you regard as your active customers now at the end of the quarter versus, say, Q4 prior to the whole changeover, can you give any sense as to how, jumping over the distorting impact of the bonusing bonanza, can you give any sense as to how that looks, please?
I can't really, but I think we will be back to more stable situation, and we will possibly be able to comment on that after the second quarter.
Yeah. Okay. Thank you very much.
Thank you.
Thank you. As there seems to be no further questions from the phone lines, I hand the word back to the speakers.
Okay. There is no further
We have a couple of questions from the webcast. I think we already touched base on one which refers to the growth of receivables. I think you answered that
Yeah
a bit earlier. One question about the gaming tax base in Sweden. What is it based on, NGR, GGR or what else?
It's based on NGR.
We have a couple of other questions. First of all, do you have an outlook for revenue and margin for the remaining part of the year compared to full year 2018?
No, we don't give such outlooks. We have never done that. It's very hard to give such outlooks, and we work in a very dynamic industry. It's dynamic from the regulators' angles, but also from competitors' angles. It's very hard to tell.
Okay. We have another question from Frederick about Holland. Could you elaborate a little bit on the potential negative impact on profitability in Q2, considering that margins in Holland probably are higher than average?
I can't elaborate on that. As I said, it's early stage in the quarter, and it's hard to tell how the remaining part of the quarter, and for that sake, the remaining part of this year will turn out. We will have to wait and see. Important takeaway is that we are active on a broad number of markets, and we have a solid, strong operation in all those markets. Being quite a big company with a lot of pretty large markets helps us, of course, to consume any issues on certain markets.
We have no further questions from the webcast either.
Finally, are there any more questions from this room? If not, then I say to all of you participants in this meeting on the phone, on the web, in this room, and all others watching the broadcast, thanks to you, and thanks to all Betssonites out there who made this possible. It was a great quarter. Now we go to work with the second quarter. Thank you.