Betsson AB (publ) Q2 2025 Earnings | 07/18/2025

The second quarter was another good quarter with revenue and EBIT growth supported by year-over-year growth in deposits and increased casino turnover, increased casino and sport book revenue and maintained cost control. Number of active customers is more or less flat compared to last year following BSON's decision in the end of 2024 to pull out the markets without a clear path to local regulation and a few African markets such as Kenya and Nigeria as a consequence of the ongoing evaluation of the group's market strategy for Africa. Another impacting factor is that the second quarter last year included both the Euros and Copa America where you typically see increased player activity. The gross turnover in Sportbook across all bets and gaming solutions was close to 1.5 billion euro, a decrease of 4% year-over-year.

Sport book margin was 9.5% which is higher than the 8.6 margin in the second quarter last year and above the 2-year rolling average margin of 7.9%. Sport book revenue increased by some 15% compared to last year and amounted to 90 million, which is the second highest sport book revenue ever, only beaten by Q4 last year by some 1.3 million euro. Casino turnover is slightly up year on year and casino revenue increased by 11% which is also the second highest casino revenue ever only beaten by Q4 last year by some 1.5 million euro. Casino revenue represented 70% of the group's total revenue in the quarter and Sport book some 29%.

Reported revenue for the second quarter amounted to 304 million euro, the second highest revenue ever in a single quarter and an increase of 12% year-on-year and 16% organic growth. Revenue from locally regulated markets increased by 33% compared to last year and now constitutes 66% of total revenue compared to 55% last year. Revenue growth is coming from both the B2C and the B2B business in the quarter where the B2C business reported all-time high revenue and contributed with 228 million while some 76 million came from licensed revenue from the B2B customers.

Splitting revenue by region, we see growth compared to previous year in all regions except for the Nordics, which is down by 28% compared to last year. All markets in the Nordic region reported decreased revenue in the quarter compared to the corresponding period last year as a consequence of decreased marketing investments in the region. The Nordic region represented 11% of the group's total revenue in the second quarter. Revenue from Western Europe increased by 36% year-on-year or by 16 million euro and reported the highest revenue ever for the region in a single quarter. The Italian market reported all-time high revenue mainly driven by the casino product. The sportbook product reported increased activity and significantly higher revenue both compared with the corresponding period last year and the previous quarter. But the sport book revenue is still relatively smaller than the casino in Italy. Revenue from Belgium is in line with the corresponding period last year, this although lower activity in the sport book in this quarter following the big football tournaments in the comparable period last year. The Western Europe region represented 20% of total revenue in the quarter.

Revenue from the central and eastern Europe and central Asia region, the Sika region, increased by 4% driven by sportbook and casino. Latvia, Lithuania and Croatia reported increased revenue both quarter-on-quarter and compared to last year. Georgia and Greece reported increased revenue compared with the corresponding period last year and Estonia reported decreased revenue driven by lower activity in the casino products. The Sika region represented 39% of the group's total revenue.

Revenue in Latin America region increased by 22 million euro representing an increase of 35% compared to the same period last year. The all-time high revenue is mainly driven by high customer activity with all-time high in both turnover and deposits for the casino products. The sportbook product benefited from higher sport book margin and reported increased revenue compared with the corresponding period last year and also compared to the first quarter this year. Argentina continued to show strong underlying activity in deposits, increased turnover in both the casino product and the sport book and reported all-time high revenue in the second quarter. Peru reported revenue growth compared to the corresponding period last year and previous quarter driven by the sport products. The Latin America region represented 28% of the group's total revenue in the second quarter.

Explaining the development in operating income. This picture is broken down to display the impact from the different line items in the profit and loss statement. Revenue has increased by some 32 million and following that increased cost of services provided as well. The increase in cost of services provided is apart from revenue growth mainly explained by higher gaming taxes following a 66% share of total revenue coming from locally regulated markets. Gross profit increased by 17 million euro compared to the same period last year and amounts to 194 million euro which corresponds to a gross profit margin of 64% compared to 65% last year. Marketing spend increased by 4 million euros compared to last year and corresponds to 16% of total B2C revenue and to some 22% when including affiliate marketing cost as well. Increased marketing spend is primarily explained by enhanced marketing efforts in Western Europe. Personnel expenses increased by some 8 million euro compared to last year explained by increased number of employees following geographical expansion and acquisitions. This in combination with organic focus on product and tech development explains the bulk of the increased number of headcounts within the group. Depreciation and amortization cost increased by 1.5 million compared to last year. Other items include other external expenses and other operating income and expenses which are more or less flat compared to last year. Decreased other items relates to increased capitalized development cost following increased focus on product and tech development.

Operating income amounts to 69 million euro an increase of 8% compared to last year. The EBIT margin was 22.7% compared to 23.6 last year. Operating income has increased steadily over time. This although we have continued to invest in growth through investments in both marketing and product development. We have also seen an increased percentage of revenue coming from locally regulated markets which comes with higher gaming taxes and impacts the gross profit margin. Still we have absorbed the higher tax cost and managed to increase the operating profit and maintain a high EBIT margin. Operating cash flow amounts to 41 million euro compared to 76 million in the same period last year. Operating cash flow is driven by increased operating income but negatively impacted by changes in working capital by some 50 million euro in opposite to a positive working capital contribution by some 14 million euro in the same period last year. The negative contribution from working capital comes from decreased debt to players and increased accounts receivable. Operating cash flow is also negatively affected by increased pay taxes in the quarter due to seasonality and increased revenue from high tax countries such as Argentina and Croatia. Cash from investing activities sums up to 13.9 million and relates to investments in own product and technology development. Cash flow from financing activities impacted the cash flow by 66 million mainly driven by paid dividend to shareholders including the first half of the ordinary dividend distribution and an extra dividend payout of 13.7 million. We have also repurchased bonds amounting to 3.6 million in the 2023-2026 bond series. BSON has as end of June a net cash position of 152 million euro and an equity rate of 60%.

On a yearly basis operating cash flow has increased over time although we have seen fluctuations intraquarters mainly from changes in working capital and from paid taxes but on a year-to-date basis operating cash flow is slightly up compared to the same period last year. When it comes to earnings per share, we can also conclude an increasing trend over time, somewhat negatively affected in 2024 by increased taxes following the implementation of the pillar 2 framework. However, this year has come to a good start with EPS growth compared to the same period last year and compared to the previous quarter. And now back to you Pontus to present a trading update and to summarize the quarter.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Gayorg Atling from Paro Securities. Please go ahead.

Good morning, Pontus and Min. I have a couple of questions. So starting with the B2B growth here, a bit softer down 16% sequentially. Could you add any more color on the drivers for this and maybe point out the sports book margin in B2B if that's impacting at all?

Yeah, fair enough. Second question on the trading update also looks a bit soft and you point out the comps here from Copa America and the Euros. Just wondering if you view the comps tougher in Q3 compared to Q2 because obviously most of the tournaments were in Q2. So it surprises me that it's only 5% growth here in the trading update.

Yeah, makes sense. And just final question here on M&A now that this acquisition and the Netherlands fell through, what's your current objectives in terms of M&A? Where are you looking? How close are you? How does the pipeline look like? If you just add some more color there.

Yeah, that's helpful. Thank you. And just a follow up on that. When you speak about acquisitions, have your view on opportunities in Brazil changed at all now with taxes looking to increase?

Okay, thank you very much.

Next question comes from Martin Arnold from DNB Carnegie. Please go ahead.

Hi and good morning guys.

I have my first question is can we discuss the OPEC situation a little bit Martin? Perhaps your personnel expenses are up quite a lot. I think it's like 20% year on year and it's a bit rare to see being up more than the revenues. Will it slow from here or the growth or is this a trend that will continue throughout the year?

Fair enough. Thanks. And I want to ask you on the SIA region. It's been fantastic performance. It's still growing good but if you look on a sequential basis, it seems to be down a little bit. Is there any reason you can point out for explaining?

Yes. And in a normal period without you guiding or anything but it's normal to assume a bigger second half than a first half also in the SEA region right?

No no sorry I meant that like in a normal year underlying growth in the sector and in these SA markets it would be fair to assume a bigger second half than a first half given seasonality and underlying growth in these markets.

Perfect. Thanks. And that then my final question is on um I mean um you have always been really strong on and resilient with your margins and now it looks like gross margin is down, EBIT margin is down a little bit and there are good explanations here but how should we think about the factors that you can use to mitigate the effect from higher gaming taxation because that's basically what it looks like now. Betting duties are up and then you're in a period here maybe temporarily with personal costs up so margin is down. How and how should we think about your mitigation areas what you're working with to protect the margins.

Okay. It sounds like a good balance and thanks for a thorough answer. Thank you.

Okay, thank you Pontus and Martin, that's all from me.

There are no more questions at this time. So, I hand the conference back to the speakers for written questions and any closing comments.