With several new projects underway, including the operator’s re-entry into the Dutch market, its sportsbook launch in Colorado, and subsequent plans to launch a B2B offering in the US market, Lindwall said he couldn’t really understand the decision that was taken.
However, the company’s new board, which was elected at yesterday’s shareholder meeting, decided Lindwall should stay on as Betsson’s chief executive, a decision he said he was “very happy” about.
The situation was humbling, Lindwall said, and the election of the right chief executive is perhaps the board’s biggest responsibility, but that now the decision has been made he is “100% aligned with the new chairman of the board”, Johan Lundberg.
Lindwall’s view on Betsson’s Q3 interim report
Betsson’s Q3 results showed a 3.3% year-on-year rise in revenue for the business, totalling SEK1.73bn compared to SEK1.68bn in Q3 2020.
The growth was driven primarily by an increase in sportsbook revenue, which climbed 23.6% to SEK435.7m, and represented around 25% of total group revenue for the quarter.
Casino remained the operator’s largest revenue generator, bringing in around 74% of the total, despite a year-on-year decrease of around 2.4% for the vertical. Betsson said this was due to difficulties in the German market caused by regulations introduced at the launch of its regulated igaming market in July.
While the business’ share price remained unchanged, Lindwall said he thought the report was “pretty strong”, and that besides difficulties in the German and Dutch markets, growth for the business has been very good.
Looking at the big picture, he said, the business showed good profitability with an earnings before interest and tax (EBIT) margin of around 19%.
Looking to the future – Q4 2021 and beyond
What’s more encouraging, Lindwall said, is that the company has seen this growth at a time when it is investing heavily into new markets, including its B2B launch in the US for which it is building an almost brand-new product, with such investments laying the foundation for the future growth of the business.
Betsson indicated in its report that it does not expect Q4 to bring the same level of profitability as previous quarters, due to the impact of its withdrawal from the Dutch market, and unusually low margins in the sports betting vertical.
The operator’s relatively weak trading update for the first few weeks of Q4 due to low sportsbook margins is not a bad sign for the company in the long run, Lindwall said, but simply a natural element of the sports betting vertical, whose margins swing back and forth.
The business has recently seen an unusually long period of favourable outcomes for players, he said, but activity in sports betting is “amazingly high”, he added, and much of the winnings taken by players will be played again, eventually returning to the business.
Overall this is a positive, according to Lindwall, and a natural part of the dynamic of the sports betting industry.
Going Dutch: Betsson’s return to the Netherlands
Lindwall said that the decision from the Netherlands’ regulator, Kansspelautoriteit, to force Betsson to withdraw from the market was unforeseen just a few months ago, but that operations were closed in the jurisdiction within a week of receiving notice of this at the end of September.
This meant the business lost its revenues and EBIT from the Dutch market, and Lindwall said this will continue to be the case until it’s able to open again in the jurisdiction – hopefully in the second half of 2022.
Lindwall said the business is currently underway with the Netherlands’ licensing process, and that it is currently on schedule for next year’s relaunch.
Newly introduced regulations in the market will pose a challenge, however, as after the so-called ‘cooling off’ period, Betsson will not be able to use the database it built in the market in previous years.
It will therefore essentially have to approach the Netherlands as a brand-new market, meaning its launch will be followed by a negative EBIT impact.
On the positive side though, Lindwall said Betsson understands the local market and benefits from an experienced team and well-known brands, so will return to profitability in the Netherlands over time.
Trouble in paradise: recent “headwinds” in European markets
Lindwall said that restrictive regulations in Europe have been taking place for some time, and with recent changes in Sweden, Germany, Netherlands and the UK, among others, some parts of the industry are drifting towards over-regulation.
By introducing harsh restrictions on players, he said, regulators run the risk of decreasing channelisation rates and therefore pushing customers to unregulated operators offering no consumer protection.
Over time, he said, this tendency may “swing back” as regulators come to understand iGaming in more detail.
Despite restrictions, he said, Betsson is still doing well in several European jurisdictions, as it continues to take market share in Sweden and see strong growth in Italy, for example, and having seen strong growth in the Baltics throughout the last quarter.
Looking further afield: the importance of geographical diversification
Lindwall said Betsson has global ambitions, and has been operating cautiously in Latin American markets for a long time, ramping up its ambitions in the region in recent years.
Geographical diversity is very favourable for the business, he said, as with ongoing activity in some 20 markets, the business can overcome difficulties presented in any of them due to its diverse footprint.
While the business is optimistic about its prospects in Africa, and particularly in Kenya, a jurisdiction with some 200 million potential customers, at present the region is not contributing significantly to Betsson’s revenue since it launched there last year.
Given difficulties relating to the Covid-19 pandemic and marketing restrictions, its start in Kenya has been slower than expected, but the business is up and running and gaining new customers every day, he said.
It is still too early to say whether African markets will contribute a substantial part of Betsson’s EBITDA in the future, he concluded.
Corporate responsibility and consumer protection
Lindwall applauded Betsson’s competitor, Kindred, on its Journey to Zero initiative to eliminate revenues coming from harmful gambling.
Betsson takes responsible gambling very seriously, he said, but the industry needs to better work together to align itself on goals for responsible gambling. A more standardised set of KPIs to be used across the industry would contribute significantly towards this, he said.
Going stateside: Betsson’s B2B ambitions
Lindwall said he is “really excited to see in the coming years how the US will play out.”
He said North America will be a very big market and continue to build up as more states regulate online gambling, and that there are several years of development still to come.
While he sees other companies investing a great deal of money on acquiring customers in US markets, Lindwall said Betsson is currently focused on investing in other markets where there is a greater return on investment.
However, this does not mean Betsson is discounting the US as an area of focus, and it aims to find its way in the market by opening its sportsbook first in Colorado, starting from zero and learning along the way, as a means to developing its US-facing B2B sportsbook product.
The future’s bright
Lindwall concluded by saying that iGaming has proven itself to be an industry of the future. The continuing shift from land-based to online gaming is a strong basis for growth, he said, and there are so many more markets which remain 10-20 years behind Europe and the Nordics on this journey.
Even though Betsson is considered a large, well-established company, for this reason Lindwall still considers the business to be at the beginning of its journey, with “so much more to come”.
What he and Lindh discussed as “headwinds” in the industry, he said, have more to do with rumours and investor sentiment, but the base case for the future of iGaming “remains very, very strong.”[/vc_column_text][/vc_column][/vc_row]
