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Betsson AB
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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. So 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. And we also had an EBIT at an all-time high during this quarter. So the financial summary for the second quarter. Our revenues was up 14%, where 11% was organic. Casino revenues, up 16%; and 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. So the EBIT, all-time high, as I said, SEK 301 million with a margin of 22.3%. Organic EBIT was SEK 311 million. So 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. And of course, that's boosted by the world championship and the activities around that, but still pretty -- I'm still pretty happy to see this activity because it shows that we are on the right track with the products 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. So then into the buildup of this -- 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 effect; and an impressive growth in Rest of World with 65%. And that builds up to the revenues of the second quarter for this year. Sportsbook. The Sportsbook grew 17% and the gross turnover grew 8% and 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. So talking about the World Cup. The revenue related to the World Cup was 3.7% of the total revenues in the second quarter, and the final rounds of the championship will be included in the Q3 report. We saw a good customer intake related to the World Cup, and we saw effects from the product improvements we have done, the launch of BetBuilder, 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 a -- more than 230 pre-match markets, and we had great improvements in speed in the product. All those things together made our world championship 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. And as you can see, on the bar chart, it's a nice trend that will 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. But of course, it's a combination of many, many activities in the company and on the product -- on the casino product. So on the regulatory side, the biggest thing going on right now is the reregulation 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 review -- revive the process of reregulating the gambling market. This process has not been very transparent to us, so it's -- 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 that have on the regulated Italian market. So 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, and this plan is built around 4 areas, where our culture and organization is in the center of everything. These are the people, the Betssonites that create everything that we do and around this, we work with -- 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. And we work with efficiencies. I think you can see a little bit of that as well in the report. You see all the costs -- all the major cost items are on the similar level as the same quarter last year despite the fact that we have a lot higher revenues. So 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. And then 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. So 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. And we are also preparing for reregulation of the Swedish gaming market. This is, of course, for a company with a 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. So with that, it's time for questions.
Martin Arnell 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. And it's as simple as that, that we take away marketing, which is not effective and we move -- we allocate resources to where it's more effective.
Will you cut back your marketing spending in the U.K. this quarter?
Yes, compared to the same quarter last year, yes.
Yes. But it was an increase in your core markets, I guess?
I don't -- 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. And then 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.
And what's the latest with the OBG initiatives on apps and desktop? Has that helped you or...
Yes, it helps a lot, and we have rolled out OBG apps on the core brands that we operate, and 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 will be -- 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, and then 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 tried 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.
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 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. But 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 and I think for the organization of Betsson, it's really important that all this hard work proves to have an effect.
And then -- I mean, you're obviously running a very tight efficiency program now and that -- given that it's the World Cup, if you focus on efficiency, I guess, one would hold back a little bit because it's -- everybody's out there throwing money around. How do you see it going forward? Is it -- was this temporarily low spending? Or is -- 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, and 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 and we're going to continue like that on that path. We will continue to market, but we will not spread money around us.
And for the -- you said -- 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 championship 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, and you may call it running a more tight operation. Yes, maybe we will, but it's -- 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 -- in terms of marketing spend for the third quarter, fourth quarter. Can you shed some light on that?
Yes. 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.
Mika Laséen, Carnegie. I have a few questions. Can you say something about how the quarter developed month-by-month if it's sort of ended? And how World Cup -- your World Cup performance, if you can elaborate on that, please?
Yes, yes. 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 world championship, but 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. And just curious about the warm weather here in the Nordics. Has that impacted your sort of casino side in any way?
It's hard to say. I mean, 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. But 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 and people -- our customers, they win some days and they lose some days and on the days that they win, of course, they can take another chance in the casino. So it has a positive effect also on the casino.
Is it possible to quantify that?
No, it's not. I think it's possible, but 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 difficult. It's a little bit more difficult, maybe, but what I think I can say is that we saw a traction across all the Nordics during the world championship, and we see it as a proof that we have managed to move our products in the right direction to cater for the Nordic markets. So 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.
So is it broad-based? Does it grow about the same in all these 4 countries or...
I won't go into country-specifics, but it's -- we are growing in all the countries in the Nordics.
Okay. And my final question is about the Sportsbook margin over the World Cup. How the World Cup developed. And also how July maybe have started in -- and so given the performance and the event, the outcome of the games, sort of?
During the World Cup, the part in this quarter, it was an interesting start of the championship because there was -- the outcome was not always as expected. So 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. So it was a really good start. The end of the tournament, which is the first part of the third quarter, as you could see in the report, it started out strongly, and that's mainly due to activity in the -- to high activity. So there's no exceptional -- nothing exceptional about the margins. And 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 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 has been released, and 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, but 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. So I'm happy with the outcome of new games in terms of frequency and number of games. And I think the general quality in the industry of the games has gone up too. So yes, I'm happy.
Are you creating any own smaller games yourself in the casino?
Not for the time being. Nothing special to announce.
Okay, okay. And then just a question on -- sorry, I've forgotten.
Rasmus has one.
Yes, I'll step in with that. It's Rasmus with Handelsbanken. I was wondering, are you able to say anything about what's your strategy with the Sweden regulator? Are you going to strongly defend your footprint? Are you going to try and -- or are you going to continue to run very efficiently, I guess, initially, probably prices will be a lot more higher, and 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, and we will -- we have the ambition to do that. Of course, we realize that the competition will be quite high with some new actors on the market, like Svenska Spel and ATG. And we will see how we can defend ourself with that. But 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 we -- 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. So -- but it's a -- it will be quite a big job for the authority to go -- to handle that process, and I think we could look forward to get licenses by the end of this period.
Oscar Erixon with Carnegie. A few regional questions to start. First of all, can you shed some light on the development in the Netherlands? What's the latest there? And when can we expect some kind of news out of the country?
The only thing I know is that the authority has lost their CEO or whatever her title was. So there is some kind of change in the structure of the authority and how they're going to run this process going forward. But then, as I mentioned before, it's not much transparency. So I don't know much more than that.
Okay. And then you mentioned Latin America making up the majority of the rest of the world region. Do you think that's temporary? Or will we 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 championship. So of course, it has been boosted, but on the other hand, this is an area where we have been building up our revenues over a long time and we have reached a certain level. So we have the foundation there to capitalize on future events and also on general soccer that will start in the autumn again.
Okay. And 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 currencies. So the only thing we can do is to focus on delivering a competitive product on that market. And if we do that, we will have to see what the future can bring us in terms of revenue.
Mathias Lundberg, SEB. Well, 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, you should deliver stronger margins than H1? Or have they peaked in 2018 now in Q2, do you think?
Now that's hard to answer. Now we go into a seasonality which is a little bit weaker in activity. But then again, in about a month's time, it will pick up again. And when it comes to margin in the sports betting, I think it's less volatile nowadays than it used to be several years ago. So 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. And 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. So this is, of course, a strong contributor to the growth.
Martin Arnell with DNB again. Now I remember my question was on M&A strategy. You mentioned that you're pausing the M&A. What -- 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, but we have decided that this is not a change in strategy in the big strategy. We will do M&As also in the future and we will be opportunistic. But for the time being, we have had a lot of tasks to take care of in the company, and 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.
And looking at your latest, the NetPlay acquisition, it looks like it's still loss making. I guess that's in line with your expectations, but could you see the losses coming down in the coming quarters? Or is this sort of a 2019...
No, I will not comment on the coming quarters and the results there, but 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. Are there any questions from the telephone?
[Operator Instructions] Our first question comes from the line of Lars-Ola Hellstrom from Pareto Securities.
I think most of my questions is already taken. But I noted 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 that we -- like the one we have, there are players that comes in specifically for the events like the World Cup. So 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.
And what will you do, going forward, to defend the activity level?
I didn't really get that. The sound is not 100% perfect here.
I hear. So what will you do, going forward, to defend the activity level?
Yes, now we have managed to get the activity level up, and that's really positive. And 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, but 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 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. But then on the other hand, for those days, there are less games going on. So that kind of evens out if you compare it.
The next question comes from the line of Christian Hellman from Nordea.
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, up to 18.5%. Could you just clarify a bit? If we look forward a couple of quarters, I mean, you're talking about the increased efficiency and so forth but what should we expect there because these levels, we haven't seen them since -- well, since the days of the last CEO, basically.
I won't give any detailed outlook on the marketing spend in [ CEECA ] Per quarter, but 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 ourselves. Big difference is that we will be more cautious, and if we don't see good return on marketing, then we will save the money until we see good return, and then we will do the marketing. So there may be fluctuations. And 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, but we did that in a more efficient manner, and this is what we will try to do in the future as well.
All right. And another question on personnel expenses, which was up quarter-over-quarter, could you elaborate a bit on that? I mean, given the restructuring program that you initiated in Q1, where you cut away 8% to 9% of total staff, why are personnel expenses up?
It's not that we took on more head count, 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 get that -- we will not have that running out of our hands.
Okay. So 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, but -- 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. And finally, on Italy, you mentioned it at the beginning of the presentation, the potential marketing ban that could come into effect next year. It's early days I guess. But could you elaborate a bit on that some more -- to give us some more details on it?
Yes, it's a proposal. It's a little bit a 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's -- it will create obstacles for the licensed and regulated operators, such as ourself, if it happens. Then again, it's going to be the same for all of us, so it's not going to hit bets on especially hard compared to others. But as a general comment, I think it's a dramatic move, which is not positive for the gaming industry in Italy. And then, again, remember, it hasn't happened yet. It's a proposal and 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.
[Operator Instructions]
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.