Betsson, under the leadership of CEO Pontus Lindwall, continues to tick up and up each quarter. This year’s Q3 earnings report was no different, with revenue rising 18% year on year (YoY) to €280.1m (£233.1m). The market reacted extremely positively, sending the Rizk parent company’s stock spiking by 9%.
Within that €280.1m topline figure, there were record revenue performances for the casino vertical, as well as Latam, Italy and Central and Eastern Europe and Central Asia (CEECA). The records continued to roll as Betsson also reported all-time high customer deposits for the quarter.
And Q3 was busy away from fiscal performance, too. The operator acquired Sporting Solutions from La Française des Jeux (FDJ) in August while it ramped up its ownership stake in Betsson France from 49% to 67%. Betsson runs Betsson France with Group Partouche, and with the French government revealing plans to legalise online casino, the business could be set for another boon.
Speaking to EGR, Lindwall also discusses how Q4 could shape up for the Stockholm-listed operator, as well as touching on tax troubles in Sweden, and why he won’t be going all in on Brazil.
EGR: There were record performances across the board, including revenue for casino, CEECA and Latam. Is Betsson in its strongest ever position right now?
Pontus Lindwall (PL): I think so, but it’s not only for this quarter. For the last one to two years now we’ve been really strong. So, yes, we’ve never been in a better position than this. It’s a continuation.
We’ve put a lot of effort into product and localisation. This is something we decided a long time ago and then it’s been a long-term work to reach that. We’re now harvesting from decisions made several years ago. So, we need to make sure that we make new, good decisions that we can harvest a few years from now as well.
EGR: Revenue from locally regulated markets spiked 54% in the quarter to €163m and the share of locally regulated revenue rose from 44.6% to 58.2%. Can you give more colour on this?
PL: Peru is a big one and Italy is still growing quite strongly. We have a few countries in the CEECA region with Greece and Croatia doing well. So, there were a couple of markets but I think the big step was Peru.
EGR: Betsson increased its ownership in the Betsson France JV from 49% to 67%. Why was this decision made and what are your thoughts on the potential legalisation of online casino in France?
PL: We believe France is an interesting market with great potential. Obviously, the general opinion has been, which we share, is that the regulations there haven’t been the easiest to cope [with]. But the flip side of that is there are not as many operators in France as other markets.
I think the discussion in the industry about potential casino regulation has been there for a couple of years, and it’s so logical because the country needs tax revenues. Everybody agrees there’s the big grey market or black market in France, and if that could be channelled into the regulated market with tax revenue, it’s 100% logical.
It was part of our plan to step up the ownership of this partnership as well.
EGR: Betsson acquired Sporting Solutions in August from FDJ. You were using it on a third-party basis for the sportsbook so what will change bringing it in-house?
PL: Not much initially. For everybody who is a client of Sporting Solutions, we have the intention to let the company be standalone and continue to develop its services. It will form an important part of our future sportsbook offering and the way we develop our sportsbook services to market going forward.
EGR: Looking at tax rates, ATG and Svenska Spel have made noise this week in earnings reports about the new 22% tax rate in Sweden. How has Betsson coped with the hike?
PL: When you listen to the figures on the tax increase, it doesn’t sound that bad, but it is quite a lot because you shave off a couple of percentage units and that has to be taken somewhere, and it goes all the way through the P&L.
To just stay profitable, or even to stay where you are, you have to cut other things like marketing, so it opens up more competition from the unregulated businesses.
We believe it’s not a smart move to do this. I mean, it’s really like putting a stick into the wheel for the regulated operators. There’s a bunch of us in Sweden and we all try to be very responsible. We pay a lot of tax and we comply with everything. Then you get this [tax hike] that just pushes customers out to the non-regulated [sector]. It’s not an attractive move by the government.
EGR: Brazil got a mention in Betsson’s earnings report, with you noting you would “carefully evaluate” the market. Could Brazil end up being the like the US with just a handful of operators coming out on top and at a huge cost?
PL: I think so. We can see what’s going on. It’s going to be a rush initially. We’re going to be in the market but we are not going to put all of the money we have in our cash box and just throw it into the market. That’s not how we do it. Let’s see how it plays out. We believe it’s going to be a little bit of a marketing war initially, and we will wait and see how it plays out.
EGR: Betsson pulled out of the US at the end of September. The Betsafe brand in Colorado had been used as a shop window for B2B capabilities. Was the pipeline for deals in the US not forthcoming?
PL: We had the Colorado option to showcase our sportsbook and we had no intention to be a big B2C operation there – it would only be competition for our potential clients. If you compare the money we have put into the US, its coffee money compared to many others, so it’s not something we regret in any way.
The US market has played out differently than we and many other expected. For that reason, we have lowered our ambitions there and are aiming for other markets with our resources.
EGR: Finally, a Q4 update was included in the earnings report that noted average daily revenue is up 13.9% YoY up to 20 October. Are you expecting more records to be made in the final three months of the year?
PL: It’s very hard to say today how the fourth quarter will end, but it is a good start. The calendar is packed on the sports side and there’s lots of events going on. The fourth quarter is a generally strong quarter, so we are optimistic about continued strong growth.
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