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Betsson AB
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Hi, and welcome to this Presentation of Betsson Third Quarter 2018. I'm going to start with some highlights. We have an all-time high both in revenues and in EBIT. We saw growth in all regions, and we're especially happy about the mobile revenue that were up 42% compared to last year. And as I said, all-time high was in EBIT. The profit is very strong and is due to, of course, higher revenues but also more efficiencies in the company that keep on showing effect. Apart from that, the quarter has been characterized a lot by our application for the Swedish licenses. And we are looking forward to the 1st of January next year, when we will be operational under Swedish license for the Swedish customers. So on the financials. Revenues, up 21%, where 16% was organic. Casino revenue, up 22%; Sportsbook, 23% on a margin of 7.4%. The Sportsbook was affected by the World Cup that ended in the early part of the third quarter, which accounted for 1.8% of group revenues on the Sportsbook side. Again, EBIT, a big all-time high at SEK 340 million, with a margin of close to 24%. And this figure I'm really proud about. It's a showcase of our strong machinery in the organization, and I think it's important for a company like us that we'll over time meet more regulated markets and more tax, then you have to be able to operate at a scalable model and to keep on being profitable even in a taxed environment. So what is behind our efficiencies? We are working still on the back on track plan that was implemented in fourth quarter 2017. And this plan is built around the culture and the organization or our Betssonites out there who strive really hard to reach this effectiveness. And the plan is very detailed and monitored in close detail as well, but there are some corner pillars in it, and that is that we want to get back to growth in all core markets. I think you can see that we are hitting on that one for this quarter. We want to enhance our product and technology further, and that has definitely been happening and it's going to happen even more so. We have the efficiencies that is about changing the way we work to be more efficient and be able to deliver more on a -- with our organization. And in order to be very focused on this plan, we have decided to put M&A on hold for a while and that still applies and concentrate on the company. So again, I want to mention that in the center for all of this is the culture and organization where we have done a huge shift. And I would say like, we are like more than 1,500 competitive employees who work like a soccer team to reach the goal and to win the game. On the product. I am a product nerd and technology nerd. I love the product, and I am convinced that it is important to be competitive on the product in this market. For the past few years, we have not always been there and we are still not really exactly where we want to be because we want to be best. But we are really good and we have improved our product a lot recently. We have rolled out OBG on the mobile on all core brands and we will start to roll out OBG on the desktop by the end of this year. We have the top class sports coverage and we have increased the football offerings and we have a lot of new functionality in the Sportsbook as well. And I think the recent development shows that a lot of the players out there really like the Sportsbook that we offer. On the casino. We have a large offering of games, 2,700 games, out of which 2,000 are applicable on the mobile, and that's fantastic, of course, especially since more and more revenues are going through the mobile channel. We have also increased the offering of Nordic Live Casino tables. So speaking about regions. We see growth across all regions. And looking at the chart here, you can see how we build up the increase from 2017 to 2018, and it's quite a strong growth in the highly competitive Nordic markets. Western Europe, even stronger growth, was quite competitive. CEECA, less strong growth, but still growth which I'm happy about because we have been fighting hard currency headwind there. And the Rest of World is really strong growth as well, building up to the revenue of the fourth quarter. Efficiencies. I talk a lot about efficiencies and this back on track plan is a lot about efficiencies. And I -- again, I want to emphasize that it's -- I find it important for companies like us to be able to really earn money to be profitable, and I think we show that by increasing our margin now to up to close to 24%. And it's really proving that our model and our organization is scalable. Sportsbook. As mentioned, we grow 23%. Small part of that was related to World Cup. We had a 25% growth in the Nordic region, which is very competitive. And I'm really proud that we can deliver a strong product on this highly competitive market. Casino. Again, strong development as well. And if you speak about trend and trend shift, I think we can see a trend shift from last quarter, second quarter, where we did a lot of changes to the product. Growth was 22%. And again, happy to grow also in the Nordic market. Regulatory update. We are licensed in 11 jurisdictions and 23% of our revenue comes from locally taxed markets. That will, of course, over a long time, increase. We have submitted the applications for Sweden in August, and we look forward to be regulated in Sweden from 1st of January next year. We expect the reregulation of the Netherlands market in 2020. And as you all know most likely, our subsidiary, Corona, has appealed the fine in third quarter that it was given. Another thing that has happened in that -- in the U.S., they are open up for online gambling on a state-by-state way. And we will see what kind of, if any, offering we can offer there from Betsson. We have some assets that we think could suit that market. It's not prioritized today, but it's a large and interesting market that opens up. So to summarize this presentation. We see a continued improvement of product and technology. We're going to keep on rolling out OBG for the desktop at the end of this year. That will be interesting. We're going to continue to focus on efficiencies in all areas. We're working really hard with that, and that is across the full organization, across all sites, across all departments and it's an interesting activity that we will continue to enhance even more. Then we will preparing for the reregulation of the Swedish gaming market. We have done a big job there already. But we have more to do. Organization is really hungry, and we are hungry too, coming to the regulated market in Sweden from the 1st of January. And this is actually me submitting the application on the 1st of August this year. And I want to emphasize the work that was behind that. As you can see in the small picture are some Betssonites that spent most of the summer inside preparing those documents to be submitted. So -- and we did it on time and it's going to be fun.So that's it for today. We go to questions. Thank you.
10 minutes. That's long.
Okay. Thanks, Pontus. This is Martin Arnell with DNB Markets in Stockholm. I want to start off with question on the revenue growth, where you were at 16% organic revenue in the quarter. And despite, it looks like your cost base is fairly flat on the OpEx level. How are you able to achieve revenue growth without sort of increasing the investments? Can you just elaborate a little bit more about that mix and the balance?
Yes. I think the most single important factor is the changes we have done to the product. We have really changed hundreds of details on the product that altogether makes up big changes in customer experience for the end user. And then we have also further structured the way how we work with CRM and how we take care of the customers. So these are 2 important activities that we have done to increase the revenues without spending more money on marketing.
Is your customer acquisition cost trending down? Is that the way we should see it?
I would say, yes. I would say that this quarter, we had lower acquisition costs than we have seen in some previous quarters. Maybe I would not like to speak about a trend. I don't think it's a line that will continue straight down and cross 0 at some point of time. But what I want to mention is that the fact that we are working so hard with attribution models on the marketing side and working hard on efficiencies in how we get our customers, of course, this is activity that we will continue to monitor closely.
The level you're at now, 16% organic growth, is that the level that you would be sort of happy with going forward and into 2019?
I can't comment on that. I am proud of this growth, and I'm happy that we see growth from all different regions. As the CEO of the company, I would, of course, like even higher growth in all regions. But what I want to say is that I'm happy with the way we have reached these good results because it's really a team effort from the whole organization.
And this trend with you at the tight cost base and revenues keep growing, is that something that you expect also into the next coming 2, 3 quarters?
I don't want to elaborate on giving estimates for the future. But I can ensure that we will keep on working on a very close control of costs. Because as I said during the presentation, I think it's essential looking at this industry 5, 10 years down the road. You need to have an effective organization to meet higher taxes in order to be profitable, and I think we are really good -- geared up for that.
And where are you in the back on track plan? In the last quarter, you said you're in the middle of it and there's more to come. Where are you now?
Now we are between the middle and the end. So we have come a little bit further. The plan is really detailed. We work with it and we monitor it every single day in different parts of the organization. And we want to close that project by the end of the first quarter next year. It doesn't mean that we will stop working on efficiencies. But as a program, you have an idea of what you want to achieve and you start the program. And I think it's fair to say that at some point of time, you should end the program and then you may start new programs. But this program will last until the end of the first quarter next year.
And on your trading statement which was slight negative, I found in the report, you're growing 6% so far in October. Is that a trend shift? Or how should we view that?
No, I didn't even think that is -- at that as negative actually. It's a few days in the start of the fourth quarter. I think the trend lines on the bars in this report are quite strong and there are no signs of any trend shifts in our operation. Then of course, we're in the gaming company. Some days are positive, some days are positive for the players and that's how it should be. So we don't look at certain days and how they perform. We look at the long-term trend for the company, and that is still trending good.
Okay. And looking at your marketing costs. If you combine the marketing from affiliates in the cost of services and then the marketing from OpEx, where do you end up in growth of marketing costs year-over-year roughly?
I don't know if I can answer that question because, of course, with the work we have done in the program to become more efficient, obviously we have managed to bring down the acquisition cost per customer. And I expect that we will continue to grow -- we have the ambition to continue to grow the company, so we will eventually grow marketing investments as well. But the main important part for me is that we do it in an efficient way, and that we will continue to monitor and even be more efficient in the future, I hope.
And just a final question for me before I let someone else in here maybe. In Sweden, the regulation next year, do you expect that sort of that you will have a license here in time? I mean, it's -- the start of 1st January, but you will have to receive your license before that.
Yes, we definitely expect that. We expect that we will have the license well ahead of 1st of January. We do not expect that authorities are fully done with everything, with their organization, with how they're going to monitor everything. But I think -- I'm quite sure that we will start operating under the new legislation from 1st of January. And I expect things to get in order as we go.
Okay. Anyone else?
We have some questions on the telephone, I guess.
[Operator Instructions] The first question comes from Bile Daar from Keel Capital.
I have 2 questions. The first one, when do you plan to migrate the Swedish customers in the Betsafe brand?
We don't have a firm plan on that.
Okay, but do you -- have you planned on to which brand you intend to migrate those customers?
I'm not sure we're going to migrate them at all. Did we write in the presentation that we should migrate Betsafe? I don't think so.
No. I was more thinking about -- because you haven't applied for license for Betsafe. Is that correct?
We're about to apply for Betsafe as well.
Okay. And then the second question, on the -- your -- you said that your M&A plans are on hold. But could you update us a bit on the development of the most recent acquisitions, NetPlay and the Spanish acquisition?
Yes, of course. NetPlay is still not delivering profits. And as we said when we did the acquisition, we're going to see increased -- we're going to do -- see better figures from that when we migrate to our platform, and that is still our ambition. So there's no changes to that. Spain, we are not on our platform yet and we are developing not that strongly. We are not putting too much emphasis on the Spanish sites right now because we want to wait until we have our product in better shape there to be more efficient. So -- but we -- I look -- I really look forward to go a little bit harder in Spain in the future because it's fantastic market, it's huge and the sports interest is big. So that's going to be good.
[Operator Instructions] The next question comes from Hjalmar Ahlberg from Kepler Cheuvreux.
Just a question I had with the regulation. I mean, we've seen in the U.K. that they have been tough in the regulation when it comes to customer compliance and so on. Do you see the Swedish regulator looking at U.K. and doing similar things there? Or is this already being implemented in the rules that are coming or is it becoming tougher in Sweden as well when we come into regulation? Or are you already fully prepared for that?
We are prepared for that and for what the Swedish regulations says right now. I think, over time, the authorities will get used to this Internet gaming market and maybe raise the bars higher on those questions. But we are well prepared, we are present in the U.K. and we are well geared up to meet those high standards. And that will, of course, be beneficial for us on all other regulated markets.
Okay, I see. And just one more question on Q4 and the growth in October. Can you compare this to last Q4? What was that? If you like look at the quarter, was it strong in the beginning last year? Was it strong in the end? Or if you could do some comparison to that, if you have that in your head.
I don't have that. I had other things in my head at that point of time, I can tell you. But -- so I don't remember how it started, really. But as a quarter, it was really strong. The full quarter had a really strong Sportsbook margin. So that helped us a lot in that quarter. Then again, the first few days of this quarter which we're in now is a little bit short of a time span to make any hard judgments on, in my view.
There appear to be no further audio questions. I'll return the conference back to you.
Thank you. We have a few questions from the web I guess, from world wide web.
Yes. The first question is this. I'm just reading straight off here. The straightforward plan to capitalize on The Netherlands is, of course, through the licensing process through Corona. But can you elaborate a little on the different alternatives in order to continue to capitalize on The Netherlands? And also elaborate a little on the options to capitalize on The Netherlands if you don't succeed through Corona?
If we don't succeed through Corona, Corona is one of our subsidiaries we have many operational subsidiaries. I don't think this is the right forum to go through all the details of the plans that we have. But the main thing is that the ambitions that the Dutch state has expressed is that they want to protect the consumers, they want to get the consumers under local regulations. And if you shut out all the operators from abroad from that market, then you will not achieve your goals. So that's not going to happen, in my view.
Thank you. And the next question is what about China?
China is still in sleep mode. We don't have any visibility of what's going on there with the legislation. But there's still a ban of operating sports betting online. So we have brought down our costs there and we have decreased our organization quite strongly. And we are in like wait and see mode for the time being.
The third question is the growth was really strong in the business in Europe-Bet up to the M&A of that business. After that, growth seemed to go down. Can you elaborate a little on how the business in that operation is evolving now? And how do you look at the future in that region?
Yes, that -- it's a highly competitive market and our operation is one of the biggest in that market. There has been changes in the regulation in the tax, which has changed the dynamics of the business a bit. But we are very optimistic, and we have a strong organization in place. So we -- at least we look for future growth in that market.
No further questions from the web.
No further questions. Now we have Martin again.
Yes, I would like to continue with some more questions. Firstly, on the Swedish regulation next year. I remember 2.5 years ago at your Capital Markets Day, you went through -- the old management went through details about the upcoming mitigating factors to the duties. Where are you now? When we are sort of just a couple of months ahead of the regulation. How do you view these mitigating factors next year in Sweden that could offset the effect from the duties?
I don't know, because the way I look at it is that it's the whole company that should mitigate towards regulation and regulation and taxes that we will face on most of our revenues in the mid- to long-term future. And the -- regarding that, we will definitely benefit from all the work we do now in this back on track program and increase the company's efficiency. So in my view, we are one of the most slimmest and fit organization. We will be fully prepared to handle any kind of taxes and -- I mean taxes will hit all companies, so it's like the ones who are most fit will be -- will come out better.
Okay. And then on to The Netherlands again. Have you had any contact with the KSA since last time we heard about it?
No, I can't comment on that.
Okay. And then on the U.S. You mentioned it in your presentation. Can you elaborate a bit more on what kind of sort of partnership or product that could be fit for -- fitted for that market?
Yes. As we have been focusing on the company itself and our efficiencies for the past year now, we have worked a lot on the inside and we haven't really scouted too much in the U.S., which I think was a wise decision from us. But looking at the assets we have, we have the Sportsbook, which is proprietary and which is doing really, really well. We have an operational excellence in how to operate this kind of business. So we have some assets that certainly could be of value for an operator in the U.S. And that is about as far as I want to go today. But of course, we recognize the market, it's interesting and it's really in the early days. So we will see if something materialize from there in the future.
Have you had any discussions? Can you mention anything on that? Or...
Not that I can mention anything about here.
Okay. And just a final question. When I look at Realm numbers, it looks like they were at growth at -- in local currencies in this quarter. What's changed there? Because it's been in decline for quite some time.
Yes, it's been declining in local currency as well. I think they -- I know they benefit from our -- the changes we have done in the product recently, and they have turned into growth in local currency, so that's really encouraging. And we see a lot of positive figures from them, so they are in a good trend. Unfortunately, currency has not been in a good trend. But eventually, one day, it will. But most importantly, we impact what we are able to impact, and that is the product. And that is another sign that we are definitely moving in the right direction of that. So we have a few more questions from the web.
Yes. First one. With respect to the coming regulation of the Swedish market, do you see any major differences compared to the Danish regulation a few years ago? And can we expect a similar development post-regulation as Denmark?
All regulations that we have adapted to local regulations are different and even the Swedish and the Danish are different. Then again, they have some similarities, maybe more similarities than differences. But it's -- what is hard to predict is how the market will behave when we go into the regulated period because there are new actors that will act on the same scene. So I think we have to look at Sweden from -- as its own and it's hard to say that it will behave exactly like Denmark. I don't think so. What I do know is that Betsson is a company with Swedish heritage, we have strong ambitions for the Swedish market and we have a big confidence in the Swedish customer base. So I look forward to go into this market.
Thank you. And the next question is actually a few in one, so we'll take one at a time. The later part of Q4 -- is the later part of Q4 in general stronger than the start of the quarter?
It's hard to tell. Activity wise, the whole quarter is strong. It depends pretty much on the outcome of sports margins and stuff like that. So -- but in general, Q4 is quite a strong quarter.
Next question. Q3 was really strong in most areas. Would you see that developing -- see that developing in the same trends?
I can't predict really how the fourth quarter is going to behave and comment on it as a quarter. But what I can comment on is our ambition to keep growing in the future. So if that's a long-term trend, that's of course where we want to be. And we want to be able to grow the company and still be profitable and show that we have the machinery in place to be even more efficient so that we can maintain this good profitability.
And the last question is, how much further would you see that you can increase your margins? Or how much more is there to do in that area?
It's not -- my goal is not to optimize or to peak the margin at a high level, but to be able to return good profits over a long time, and that is what we're optimizing for. So I think that is the only comment I can give on that. I mean, if I should elaborate, of course, it's easy to get really, really high margin short term. But then again, that's not very smart long term. We are in it for the long term, and that's what we are optimizing for. And what you see now this few -- these past couple of quarters is on the road to that.
And next one. Could you give some color on the U.K. market during the quarter? And whether or not Betsson is developing in line with the rest of the market?
I don't know exactly how the rest of the market is developing. I would say we're doing okay in the market compared to what I expect and what I want. It's a highly competitive market. We see ups and downs. But we're doing okay.
And last one for now. Would you say that you're back on track program is developing according to your plan? Is there any area developing better than you were expecting?
The back on track plan is going according to my expectations, and it's going really well. When we started the program, we didn't really know the outcome of all the different measures that we took. Some measures has given results quicker than I expected. Some are slower. But as a whole, the program is delivering according to my expectations, and it's doing really well.
No further questions from the web.
Okay. Anymore here? No more questions? Okay. Thanks to all of you who came here to see this, this big, great audience here. And thanks to all you Betssonites for this quarter. It's been a wild journey, and now we head for the next quarter. Thank you.