Welcome to Betsson Q1 report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. I will hand the conference over to CEO Pontus Lindwall and CFO Martin Öhman. Please go ahead.
Thanks a lot. Good morning, everyone, and welcome to Betsson's results presentation for the first quarter 2023. My name is Pontus Lindwall, and I'm here with I am the CEO of Betsson, and with me today is also CFO Martin Öhman. First, a quick look at the outline for today's presentation. First, we'll give a business update, looking at the key financial highlights for the quarter, as well as some activities in our markets. I will also provide a regulatory update for some of the markets that are relevant for Betsson. Martin will then present our financials in more detail. After that, I will show a trading update for the start of the second quarter 2023, and the end presentation with a summary. After the presentation, we will open up for questions from the audience.
In the past years, we have invested in geographical expansion to new markets and to strengthen the product offering and the competitive position for the group. We can see that these efforts continue to pay off. Betsson started 2023 with yet another record quarter, again delivering all-time high figures for revenue and EBIT, even though the first quarter has historically often had less activity than the other quarters. We saw continued positive development in both sports betting and casino. Geographically, revenue increased in all regions except for the Nordics. On this slide, you can see some key figures for the first quarter, 2023. Total revenue amounted to EUR 222 million, up 30% versus the same quarter last year. Organically, the growth was 38% for the quarter. EBIT was EUR 43 million, which is up 82% year on year. 82%.
This represents an EBIT margin of 19.4%. We also set new quarterly records for both casino turnover, which was up 51% year-on-year, and for casino revenue, which was up 37%. Customer deposits across all gaming solutions were also at new all-time high level for the quarter, well above EUR 1 million and up 47% year-on-year. Sportsbook turnover was up 40% year-on-year, and the Sportsbook margin was 8%, which was below the 8.3% recorded in the first quarter, 2022. This resulted in 19% growth in Sportsbook revenue for the quarter. This slide highlights some of the activities in the past quarter. We are proud that Betsson's involvement in sports is continuing together with clubs, athletes, fans, and customers.
During the quarter, Betsson was the main sponsor of the tennis tournament ATP 250 Chile Open, which took place in February and March in Santiago, Chile. In Italy, we continue to see great activity, and we continue to invest in marketing. During the quarter, a new partnership was signed for our local brand, StarCasinò Sport as the VAR partner for the second Italian Football League, Serie B. Argentina. The new business in Argentina is developing well. Revenue increased strongly during the quarter, and Betsson continues to make significant investments in marketing to build brand awareness in this regulated market. In Colombia, which is a regulated market, the group recently increased its ownership stake in the operator Colbet from 88% to 91%. We view Colombia as an interesting regulated market in the longer term.
During the quarter, ambassador partnership was entered with the TV presenter, Sara Uribe. Betsson continued to invest resources into product and technology development to ensure that the product offering is competitive and that the tech platform is scalable for all its markets. During the quarter, development of native apps continued. In February, Betsafe was launched on the regulated market in Ontario, Canada. The B2C offering, which includes casino and sports betting, is available in native apps for both Android and iOS. Development work has also continued to adapt and further strengthen Betsson's platform and Sportsbook to support a D2D offering. Work to migrate Betsson's brands to the cloud to optimize the proprietary platform also continued during the quarter. Here is a brief regulatory update.
In Norway, the implementation of the cease and desist order by the Norwegian Gambling Authority has been further deferred by the NGA until the 15th of May, considering the changes to its offering that the company has carried out and will continue to carry out. In Peru, the publishing of the new online gambling regulation, which is a step required for the new licensing regime to enter into force, continues to be delayed following the recent political changes in the country. In Brazil, the Ministry of Finance has confirmed a series of recent reports that Brazil's government is finally gearing up to implement the federal law from December 2018 that authorized fixed odds sports betting. In the Netherlands, it was recently announced that an advertising ban for gambling will enter into force on July 1, 2023.
Gambling operators in the Netherlands will be prohibited from advertising on TV, radio, and in public spaces, both indoor and outdoor. The ban will also apply to sports sponsorships. We continue to monitor the developments in these markets closely. Now I will hand over to Martin, who will take a closer look at the financials in the quarter.
Thanks for that, Pontus. I will now give you some more details of the financials for the first quarter, which again, was a good quarter and the fifth consecutive quarter with revenue and EBIT growth, and the best quarter ever in Betsson's history, both in terms of revenue, organic revenue, and profit. The result is underpinned by year-over-year growth of 47% in deposits or by EUR 1.1 billion, which makes it all-time high in deposits as well as all-time high in casino turnover and casino revenue. Active customer decreased by 11% year-on-year and is mainly explained by changes in the offering in the LATAM region.
This to find the right customer acquisition strategy and to make the offering more sustainable in the long run, which is part of our ongoing work to improve our operations across the business and especially in new markets. Reported revenue for the first quarter amounted to EUR 221.9 million, an increase of 30% year-on-year, and organic growth of 38%. Both the B2B and the B2C business contributed to growth, with EUR 164.6 million revenue coming from B2C and EUR 57.3 million coming from B2B. Casino turnover increased by 51% year-on-year. Casino revenue was EUR 152 million, an increase of 37% year-on-year.
The gross turnover in Sportsbook across all Betsson's gaming solutions was EUR 1.3 billion, which is an increase of 40% compared to the first quarter last year. Sportsbook margin was 8.0%, which is lower than the 8.4% margin in the first quarter last year, but slightly higher than the two-year rolling average margin of 7.8%. Sportsbook revenue increased by 19% compared to last year and amounted to EUR 67.2 million, being the second highest revenue for a single quarter ever after Q4 last year, which was impacted by the World Cup in football. Sportsbook revenue represented 30% of the group's total revenue in the quarter, and casino some 69%. Breaking down revenue by region, we see growth in all regions except for the Nordics.
In the Nordics, we see a slight decrease of EUR 2.2 million, representing 4% year-on-year decrease. Finland and Denmark show growth driven by increased Sportsbook revenue in the case of Finland and both casino and Sportsbook for Denmark. Sweden reported decreased revenue in the quarter explained by decreased casino and Sportsbook revenue. Revenue in Norway also declined as a consequence of the changes made to comply with the Norwegian authorities' requirements. The Nordic region represented 23% of the group's total revenue in the first quarter. Revenue from Western Europe increased by EUR 5 million, correlating to an increase of 22% year-on-year. The Italian market is continuing to perform well and reported all-time highs in turnover, deposits, and revenue during the first quarter.
Revenue from the German market is following the same trend as in the past quarters and years and continue to decline for Betsson, driven by the market restrictions that have been implemented in the past years. The Western Europe region represented 12% of the total revenue in the quarter. The CEECA region increased by 75% year on year and report a new all-time high, driven by strong underlying activity in both casino and Sportsbook operations. Croatia and Greece showed continued positive trends in activity and revenue performance. Georgia reported growth compared to the corresponding period last year, driven by the casino products. Lithuania reported all-time high revenue in the first quarter, mainly driven by the casino products. Estonia reported decreased revenue in the quarter, explained by a lower margin in the casino product compared with the corresponding period last year.
The CEECA region represented 42% of the group's total revenue, making it the largest region by revenue. Reported revenue in the Latin America region amounts to EUR 45.2 million, representing an increase of 23% compared to the same period last year, where all countries in the region reported revenue growth, driven by underlying activity, with deposits and turnover for both Sportsbook and casino grew in the region. The Latin America region represented 21% of the group's total revenue in the first quarter. Revenue from rest of the world increased by EUR 0.5 million or 13% compared to the same period last year and is mainly driven by the Nigerian operations. Revenue from markets where Betsson pay local betting duties increased by 31% compared to last year and constituted 36% of total group revenue in the first quarter.
Digging into more details of the composition and development of EBIT year-on-year, we see that revenue has increased by EUR 52 million, and following that, also cost of services provided. Gross profit increased by EUR 40.4 million compared to the same period last year, corresponding to a gross profit margin of 66.5% compared to 62.9% last year. Changes in the margin is a result of increased revenue and the mix of revenue, where the affiliate and partner commission marketing costs decreased as % to total revenue. Marketing spend was higher in absolute numbers compared to the same quarter last year. This to increase brand awareness on new markets. Focus in the quarter has been towards the LATAM region and especially in the new markets such as Argentina.
Marketing cost in percent of B2C revenue amounted to some 22% and 26% when including affiliate marketing as well, which is in line with previous year. Personnel expenses increased by EUR 7.3 million in the first quarter compared to the same period last year due to increased number of employees, yearly salary revisions, performance-related compensation, geographic expansion, and increased investments in product and technology development. Other costs increased by EUR 4 million, where the majority relates to other external expenses, and is mainly driven by sustained increased investment in product development and technology, specifically from increased investments in cloud-based environments and from extension of the Sportsbook's offering. When breaking out costs related to development of new markets, this sums up to EUR 12.5 million in the quarter, of which EUR 2 million was attributed to the US expansion.
The remaining EUR 10.5 million consists of EUR 7 million in marketing costs and EUR 3.5 million in other costs, where the bulk of the cost relates to external consultants within the tech development. EBIT amounts to EUR 43 million, which is all-time high, an increase of 82% compared to the same period last year. The EBIT margin is 19.4%. Moving on to the cash flow and financial position of Betsson, we see cash flow from operating activities amounting to EUR 48.8 million, driven by operating income and changes in working capital. Negative impact from working capital of some EUR 3 million comes from increased accounts receivable from B2B customers following increased revenue in the quarter. Cash flow from investing activities amounts to EUR 10 million, of which the largest part relates to investment in capitalized development costs.
Cash flow from financing activities impacted the cash flow by EUR 1.9 million, mainly explained by lease payments. Betsson has, as of end of March, a net cash position of EUR 105 million and an equity ratio of 64%. By that, I hand over to you, Pontus, again, to take us through the trading updates.
Thank you, Martin. Let's have a brief look at how the second quarter of 2023 has started. The average daily revenue up to and including the 23rd of April was 26% higher than the average daily revenue of the full second quarter in 2022. Organically, the average daily revenue during the start of Q2 2023 has been 35% higher than the average daily revenue of the full second quarter 2022. During the period in April, the Sportsbook margin has been more or less in line with the historical average. Finally, here is the summary of the first quarter 2023. Betsson has again reported all-time high levels for group revenue and EBIT. The organic revenue growth was 38% per year. We saw strong performance across the business with all-time high levels for casino turnover and casino revenue.
Revenue increased in all regions except for the Nordics, with Latin America and CEECA as key growth drivers. Customer deposits were up 47% year-on-year, reaching above EUR 1 million for the quarter. B2B, EUR 1 billion. B2B continues to perform well. This is a sign of strength that reflects the investments made in the past years in product and tech development, as well as M&A. Betsson keeps investing for future growth. With a scalable business model, such investments can be absorbed with maintained or higher profitability over time. For the first quarter, a significant increase in the EBIT margin was reported compared to the first quarter 2022. Betsson's business continues to generate strong cash flows, we ended the quarter with a strong balance sheet and significant net cash position.
Looking ahead, we maintain our focus on profitable growth, and the second quarter has started well with average daily revenues up 26% compared to the average daily revenues for the full second quarter 2022. Thanks everyone for listening to the presentation. Now let's move over to Q&A, where we welcome your questions.
If you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Oscar Rönnkvist from ABG. Please go ahead.
Morning, Pontus, and good morning, Martin. Thank you for taking my questions. First of all, just had one on. Or I should start with saying that, I mean, one of your key perks is that you're quite agile in finding new market opportunities. Which are the new markets that you're most excited about entering to fuel future growth? Also, I mean, looking at the opposite, you are performing, as you mentioned, a little bit worse in Sweden, for example. Is that a result of investment cuts in the market or is that pure underperformance by you? If you could elaborate on that, please.
Yes. To start with the first part of the markets that we are excited about is of course LATAM is very interesting, and we are growing in all the different markets that we're active in LATAM. Then there are further markets that will come and be added on, onto that later on. Realizing the fact that LATAM is a market which is in its early stages compared to Western Europe and Nordics, it's a very interesting future that we are looking forward to. That's where we put a lot of our efforts and we see great results so far. Looking at the Nordics, We are still happy with the development in the Nordics, but we have pulled down a bit on marketing in Sweden.
As Martin spoke about in the presentation, we have adopted our offering in the Norwegian market to the Norwegian authorities' requirements, and that has brought down the revenues a bit in that market.
Okay, perfect. In LATAM, for example, would Brazil be one of your key regions to grow in the future? Also, are you sort of awaiting the new regulation to maybe enhance your focus towards that market?
Yes, we are waiting for the regulation. I think the industry awaited the regulation to come into force for some time already. We are looking forward to that to happen. Of course it's being a massively large market, this is something that we are looking forward to.
Okay, thank you. On just on Latin America again, we saw sequential decline in the sports book and also, I mean, looking year-over-year that LATAM's sports book revenues are pretty flat-ish, just looking year-over-year. I mean, given that it's a quite a big growth market for you, how should we think about the sports book growth in Latin America going forward?
I think, that part is something which we are not worried about. There was some less packed sports calendar for that region in the first quarter. We still see a huge potential going forward, and we see no reason to kind of slow down in the long term for us on that market.
Thank you. Just I have one more question, just on the B2B side. First of all, I just wanted to get a sense of the strong B2B growth. Is that because your customers are grabbing market shares, or is it purely due to the market growth or maybe a mix, if you could elaborate on that one? The other question on the B2B side is, I know that we have discussed this before, but, if you could share like any thoughts on how we should think about the contribution margin in the B2B segment?
Yes. Start with the first part. I don't have any specific details on market share, et cetera, for our B2B clients, but seeing the strong growth, I wouldn't be surprised if they are taking market share and I would be happy if that is the case, and which it probably is, because we have put a lot of efforts into product development, and it should pay off over time, and I think it does. On the second part, of course, B2B revenues comes. We don't have the same amount of marketing costs, and it's a different structure. They are a good contribution to our profitability. That's why we are into B2B, and that's why we did the acquisition of Kickertech.
This is in line with our strategy to strengthen the profitability of the company, which I think is a very important part for any company.
Got it. Thank you very much. That was all for me.
Thank you.
The next question comes from Georg Attling from Pareto Securities. Please go ahead.
Hi, Pontus and Martin. Just a couple of questions from me, starting on the B2B side, as well. Could you just describe the growth in a bit more detail in terms of, have you grabbed a higher share of wallet from your customers, or is it increased prices or just volumes? If you could give some more detail on that.
Yes. There have been no adjustments to our pricing towards the customers on the B2B side. They have been doing fantastically well, not only on the sports side, but also on casino. It's a broad, great performance by our customers in that area.
It's also reflecting the kind of investment, both in internal organization and through M&A that we have done in the past, that is paying off now in the, on the B2B side.
Okay. The enhanced performance of your product that you're speaking about, could you just describe that in more detail, what sort of improvements that you've done?
It's, I can't describe that in detail, but, you know, we have a huge product development department and we're launching so many new parts of our offerings all the time on a constant basis. That brings the product to higher and higher competitiveness and that's should pay off and we are happy to see that it does.
Okay. Could you comment on Kickertech's contribution to the B2B revenues?
Can't really comment on that. Kickertech is a part of our company which is on strong growth, so it's a good contributor.
I think we also mentioned in the first release that the acquisition of Kickertech added some 10 plus customers in relation to that.
Yeah. Yeah. The next one is on LATAM, on the sports revenues in LATAM. I'm just wondering how much of the fluctuations we've seen in the last two, 3 quarters is due to the margin and how much is volumes?
The margin has fluctuated a bit in the last past few quarters, but not that much. I mean, in general, we are on a strong growth trend in sports betting in LATAM. That's the main thing to think about. It will always be fluctuations between quarters, depending on Sportsbook margins, depending on the calendar, what it looks like for different games, and depending on the outcome of the games in certain territories. The general trend is that we are in a strong sports growth in LATAM.
Okay. Would you say that the sporting schedule in LATAM was more quiet than in your other regions, or roughly similar?
In some of the markets in the first quarter, there was a bit in at least one of the markets, there were a few games canceled due to political turmoil in the country, which of course had a little impact. Not entirely, but it should be considered.
Okay. The final question on the, on the trading update, just wondering it looks very strong. Is it the same drivers as in Q1 or could you give some more color on that?
I would say so. As I said, the Sportsbook margin is in line with a normal Sportsbook margin. That's, you know, nothing that stands out. It's a general strong performance across the board.
Okay. Perfect. Thanks. That's it for me.
Thank you.
Okay.
The next question comes from Martin Arnell from DNB Markets. Please go ahead.
Good morning, guys.
Morning.
Morning. A lot of questions have been asked there. In Brazil, can you just elaborate a little bit on how you prepare for the upcoming sports betting regulation there?
I mean, we are prepared in all kinds of ways. We of course, we are preparing, you know, marketing, we are preparing the organization. It's very hard to tell exactly when the regulation should come into place. We still don't know that yet, so we can't do too much of the detailed planning. You know, we are putting ourselves in a position to be in a good place when the regulation happens.
We have people on ground there. We've been operating that market through our acquisition that we did in 2019 for some years now. We have kind of all available setups in place already, which is a good start when the sports betting kicks off.
Are you in a commercial partnership stage, or how should we think about that?
This is nothing that we can comment on right now. I think you can see from historical activities that we always try to find good partnerships and good exposure for the brand, and there is no reason to change that in the case of Brazil.
When it comes to LATAM, overall, it looks like you have a good contribution already from this market in an early stage. Do you expect that to continue or are you ramping up? You did some big partnerships there in the past. How should we think about your investment levels in that market going forward?
Yeah, I think first of all, we have to conclude that it's a massively large market, and we have high ambitions for that market. That means that we will invest in the market going forward. At the same time, that's nothing to be very afraid of. We have invested up until now, and we have created good revenues on those investments with pretty decent payback times. I think we'll just continue as we have done so far and, you know, invest carefully. Then again, it's not a small country. It's not one small country. There are many countries. It's not a small market, so it will take investments to keep on growing. We believe this growth from LATAM is beautiful, so we will keep on investing in it.
Just two more questions from me. On North America, the B2B potential case here, how should we think about that now? You're still in the finding partnership phase. How do you think about it?
Yes, we are, and we are in discussions with potential customers. It's very hard to say when we can come to the next level and take the next step there. Obviously, we would have been more happy if we had already had one agreement or two, but things take time. These are big decisions, we are looking forward to establishing the first B2B contract in the U.S. market, in the North American market, I would say.
Are you still as certain about this case as you were, like, one or two year ago?
The case as such is a moving target. It changes on a daily basis. We are always evaluating all our different business streams that we have. For the time being, yes, market is going to be huge. There will be need for diversity on the product side. We think we are in a good spot still.
Just a final one, maybe to you, Martin. The margin development this year, do you think Q1 is a good indicator for the full year on the EBIT margin?
That's a very hard one, Martin, to answer. You know that we try to stay away from giving guidance of what will happen. I think we're up to a good start, as Pontus said. The trading update shows that we have started off well, and we have a scalable business model, so we can manage to continue increase revenue. I think that's a good start.
Okay. Thanks, guys.
Thanks a lot.
Thank you.
As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad. There will be a brief pause while questions are being registered. There are no more questions from the telco at this time. I hand the conference back to Pontus and Martin for written questions or closing comments.
Thanks a lot, and thank you everybody for listening in. We are looking forward to talk to you again when we present the second quarter in a couple of months' time. Thanks a lot for today. Bye-bye.
This concludes today's call. Have a nice Thursday.