Betsson AB (publ) interim report July – September 2022

"Betsson's best quarter ever, driven by both sports and casino"

Group revenue was EUR 200.3 (170.0) million, an increase of 18%. Organic increase of 35%.
Casino revenue increased by 8%. Sportsbook revenue increased by 45% and the sportsbook margin was 8.3% (7.8%).
EBITDA was EUR 48.6 (41.0) million, an increase of 19%. The EBITDA margin was 24.3% (24.1%).
Operating income (EBIT) was EUR 38.4 (31.7) million, an increase of 21%. The EBIT margin was 19.2% (18.7%).
Net income was EUR 32.6 (28.2) million, corresponding to EUR 0.24 (0.21) per share.
Operating cash flow was EUR 38.5 (41.4) million.
Net debt was EUR -54.7 (-6.4) million.
Active customers increased by 7% to 1,056,400 (986,429).

QUARTER JULY - SEPTEMBER 2022 THE PERIOD JANUARY – SEPTEMBER 2022

Group revenue was EUR 556.7 (500.2) million, an increase of 11%. Organic increase of 21%.
EBITDA was EUR 121.2 (123.4) million, a decrease of 2%. The EBITDA margin was 21.8% (24.7%).
Koncernens intäkter uppgick till 170,2 (157,4) miljoner euro, en ökning med 8%. Den organiska ökningen var 14%. • Operating income (EBIT) was EUR 91.2 (96.8) million, a decrease of 6%. The EBIT margin was 16.4% (19.4%).
Kasinointäkterna minskade med 5%. Sportboksintäkterna ökade med 45% och sportboksmarginalen var 8,3% (7,2%). • Net income was EUR 82.1 (85.2) million, corresponding to EUR 0.61 (0.62) per share.

• Det operativa kassaflödet var 26,9 (32,3) miljoner euro.

• EBITDA uppgick till 33,4 (35,8) miljoner euro, en minskning med 7%. EBITDA-marginalen var 19,6% (22,7%). • Operating cash flow was EUR 103.1 (130.1) million.

motsvarar 0,16 (0,17) euro per aktie.

• Rörelseresultatet (EBIT) uppgick till 23,6 (27,3) miljoner euro, en minskning med 13%. Rörelsemarginalen var 13,9% (17,3%). • Resultatet efter skatt uppgick till 20,9 (23,7) miljoner euro, vilket • The AGM approved dividend to shareholders of SEK 539.0 (502.9) million, corresponding to SEK 3.94 (3.68) per share. The first of two instalments was distributed to the shareholders in June.

KEY DATA

MEUR	Q3 2022	Q3 2021	∆	Jan-Sep 2022	Jan-Sep 2021	∆	Jan-Dec 2021
Revenue	200.3	170.0	18%	556.7	500.2	11%	657.7
Gross profit	133.8	109.9	22%	359.6	328.0	10%	425.6
EBITDA	48.6	41.0	19%	121.2	123.4	-2%	153.7
EBITDA margin %	24.3	24.1	-	21.8	24.7	-	23.4
Operating income (EBIT)	38.4	31.7	21%	91.2	96.8	-6%	117.6
EBIT margin %	19.2	18.7	-	16.4	19.4	-	17.9
Net income	32.6	28.2	16%	82.1	85.2	-3%	103.9
Earnings per share (EUR)	0.24	0.21	14%	0.61	0.62	-1%	0.78
Operating cash flow	38.5	41.4	-7%	103.1	130.1	-21%	143.6
Casino revenue	135.4	125.1	8%	368.5	362.0	2%	477.1
Sportsbook gross turnover	1,058.1	821.0	29%	2,997.0	2,507.6	20%	3,532.0
Sportsbook revenue	61.9	42.7	45%	179.9	131.9	36%	172.1
Sportsbook margin after free bets %	8.3	7.8	-	8.3	7.8	-	7.3
Deposits	943.2	758.5	24%	2,571.2	2,206.6	17%	2,987.7
Active customers (number of)	1,056,400	986,429	7%

EUR

CEO COMMENT

Pontus Lindwall President and CEO Betsson AB

Betsson's best quarter ever, driven by both sports and casino

We saw a continued positive development during the third quarter with high growth and profitability for the Group as a whole. Betsson reported new records for revenue and operating profit, driven by both sports betting and casino. The organic growth was 35 percent compared to the corresponding quarter last year, again generated mainly by the regions Latin America and Central and Eastern Europe and Central Asia (CEECA). Another growth factor in the quarter was high sportsbook turnover, partly because of the early start of the European football leagues in August, due to the upcoming FIFA World Cup in November-December. I am particularly pleased with the high growth overall given the fact that we have not had any revenue from the Netherlands, where our license applications are still being processed.

The sportsbook continues to develop into a more important part of the total business for Betsson thanks to investments in the past years to strengthen the product and to expand geographically to markets with structural growth potential. The gross turnover in the sportsbook increased by 29 percent and the margin was 8.3 percent in the quarter. The margin is in line with the previous two quarters this year, but somewhat higher than the average of the last eight quarters of 7.7 percent. To illustrate the momentum that we are experiencing in the sportsbook, it's worth mentioning that eight of the ten best days ever in terms of turnover have occurred since the beginning of the third quarter this year.

Betsson continues to deliver on the growth strategy, which is based on geographic expansion and diversification, and in August an online casino offering was launched on the regulated market in Mexico. This is a soft launch so far, but marketing will increase during the fourth quarter and especially during 2023 and we see considerable potential for this market in the long term given the size of the economy, the population, and the low level of online gaming penetration in the country.

As always, there has been a high level of activity on the product and technology side during the quarter. Our horse race betting product, under the Racebets brand, was strengthened and a new sportsbook app was launched for Betsson on several key markets – just to mention a few things.

Italy continues to be a shining star for us within the region Western Europe, and during the quarter a new sports betting product was launched, and two new sponsorships were entered with the football clubs Salernitana and Palermo. This means that we now have sponsorships with six geographically diverse Italian teams – in addition to the two clubs mentioned also with Milan, Roma, Torino and Sassuolo.

Betsson's business has historically been relatively unaffected by the general business cycle and so far, we have not seen any signs of weaker demand due to the general macroeconomic situation. We are excited as we look forward to the rest of the fourth quarter and the World Cup in football, which has good chances of becoming the biggest sports event ever for Betsson.

Pontus Lindwall President and CEO Betsson AB

SIGNIFICANT EVENTS AND OUTLOOK

SIGNIFICANT EVENTS DURING THE QUARTER

In July, Betsson AB redeemed the remaining SEK 300 million of the 2019/2022 bonds, using the early redemption clause.

In August, a tap bond issue of EUR 10 million was carried out under the Company's existing framework of senior unsecured bonds totaling EUR 250 million. The subsequent bonds were priced at 100.0 percent and run with a floating interest rate of EURIBOR three months plus 650 bps with final maturity in June 2025.

Through subsidiaries, a technical launch on the regulated market in Mexico took place under the Betsson brand. The commercial launch is planned to happen gradually during the fourth quarter and the coming year.

Through subsidiaries, a new sportsbook product was launched for the Italian market, under the local brand StarCasino Bet.

In August, the Group increased its ownership in the operator Colbet, Colombia, from 70% to 88%.

SIGNIFICANT EVENTS AFTER THE END OF THE QUARTER

The second part of the automatic share redemption program was completed by Betsson AB in October. A total of SEK 269.5 million, or SEK 1.97 per share, was paid out. This was the second half of the ordinary cash distribution to shareholders for 2021.

In October, Betsson acquired 80% of the shares in KickerTech Malta Limited from TG Holdings Limited. KickerTech owns a business-to-business (B2B) sportsbook operation. KickerTech has a team of 50 professionals building advanced odds models, trading technology and sportsbook features. The team is based in Vilnius, Lithuania. In the last 12 months, ending on 30 September 2022, the acquired business generated revenue of approximately EUR 2.6 million and EBIT of approximately EUR 1.3 million. The total consideration for 80% of the shares amounts to EUR 14 million on a cash and debt free basis. The consideration will be paid in three instalments, with EUR 6 million in cash immediately, EUR 4 million in cash in six months with an additional EUR 4 million in twelve months, either in cash or shares issued by Betsson. The cash portion of the acquisition will be financed with Betsson's existing funds. The acquisition will support Betsson's B2B growth strategy by expanding its client base and providing additional scalable technology as well as strengthening the existing sportsbook with advanced trading and modelling tools and added sportsbook features for players.

TRADING UPDATE

This trading update is an indication of how the fourth quarter has started, however it is not a revenue forecast for the quarter.

The average daily revenue in the fourth quarter 2022 up until and including 24 October was 38.1 percent higher than the average daily revenue of the full fourth quarter 2021. During the start of the fourth quarter, the sportsbook margin has been somewhat higher than the average margin over time. The sportsbook margin in the full fourth quarter last year was 6.0%, which is significantly lower than the historical average. The fourth quarter last year was also the first quarter without any revenue from the Netherlands. Adjusted for currency effects and acquisitions, the average daily revenue until 24 October was 44.4 percent higher than the average daily revenue of the full fourth quarter 2021.

THE GROUP'S OPERATING ACTIVITIES

Betsson's operational subsidiaries offer online casino, sports betting and other types of gaming. In the following sections, we comment on the development of the operational business as well as the financial developments of the Group.

STRATEGIC DIRECTION FOR GROWTH

Betsson's long-term ambition is to outgrow the market, which should be done in a profitable and sustainable manner with local adaptations. Based on its strengths and thorough market analysis, Betsson has identified the following growth areas: growth in existing markets, expansion into new markets and development of the B2B offering with focus on the proprietary sportsbook.

Betsson sees opportunities to grow in these areas, both organically through in-house development and through acquisitions when the right opportunities are identified. Betsson's financial position allows room for manoeuvre to take advantage of good opportunities that supplement existing offerings with new geographical markets, products, and brands.

Betsson shall strengthen its position in existing markets and shall evaluate new markets by prioritising countries where the Group has the best conditions to offer competitive products profitably. Betsson's broad brand portfolio, as well as its own technology and proprietary platforms, create opportunities to quickly and flexibly establish a presence in new markets. The proprietary sportsbook entails substantial opportunities to create new offerings with economies of scale.

Operations in existing markets have continued to primarily focus on adapting and developing Betsson's offerings to changing player behaviour, regulatory requirements and the competitive landscape.

During the quarter, Betsson continued to allocate resources on growth initiatives in Latin America and parts of CEECA, as well as the B2B sportsbook offering.

PRODUCT AND TECHNOLOGY DEVELOPMENT

Betsson's gaming sites are largely run on the proprietary platform Techsson, a so-called Player Account Management System (PAM), which makes up the core of the offering and user experience. Techsson manages payments, customer information and account management and games. The proprietary platform provides flexibility and enables rapid adaptation to new market conditions or as part of preparing for launches in new jurisdictions and of new brands. Betsson also works continuously to meet authorities' rising demands for data and background information and has developed a tool to automate a large share of these deliverables.

A new sportsbook app was introduced on several markets in the Nordic region and Latin America. Adaptations and further development of Betsson's tech platform and sportsbook are also being made to support a B2B offering.

Work to migrate Betsson's brands to the cloud to optimize the proprietary platform continued during the quarter. The cloud migration provides both improved system capacity and an overall improved customer experience in the form of faster and more responsive websites and mobile apps.

During the quarter, development and launch of native apps (apps specifically built to perform on iOS or Android) have continued in several markets.

In the third quarter, the horse race betting product on the Racebets brand was strengthened. New payment solutions were integrated for the German market and live streaming was introduced for South Africa.

SUSTAINABILITY AT BETSSON

Sustainability is an integrated part of Betsson's business strategy and a prerequisite for generating shareholder value and at the same time taking long-term responsibility for customers, employees, and the communities in which the Group operates. Betsson's Sustainability Framework establishes five focus areas: Responsible Gaming, Business Compliance, Employee Impact, Social Impact and Climate Impact. For a more detailed description of these areas, see the Annual and Sustainability Report for 2021.

Responsible gaming

Betsson has a responsibility to support customers in controlling their gaming and to identify and help customers at risk of problem gaming. Betsson's ambition is to be a role model in the industry and to create conditions for players to always have a healthy relationship to gaming. Betsson offers its customers a wide range of tools for responsible gaming, for example deposit limits, self-exclusion, personal time limit for gaming, self-evaluation tests

and access to well-trained and professional customer service staff 24 hours a day, 7 days a week.

During the quarter, Betsson launched a responsible gaming themed campaign in Greece with the message "Athletes should go all in. Maybe you shouldn't." where Betsson encourages customers to set boundaries and reminds them that the game is only fun when played responsibly.

Betsson has also further strengthened its commitment to responsible gaming in Greece with the creation of the Betsson Foundation. The Foundation's website https://betssonfoundation.gr promotes tips on safe and responsible gaming and also lists the many social impact initiatives that Betsson organises in Greece. Through the Betsson Foundation, donations will be given to non-profit organizations in the fields of education, health, and sports.

In Q3, Betsson had a visit from the European Gaming and Betting Association (EGBA) where Betsson is a member. Betsson presented its approach when it comes to the close connection between responsible gaming, anti-money laundering and customer service to EGBA.

In October, Betsson participated in several seminars on responsible gaming organised during the yearly European Safer Gambling Week.

Betsson always offers its customers various tools to control their gaming. During the third quarter, 9.8 percent of customers used non-mandatory tools to control their gaming (10.6 percent) and 42.2 percent of all new depositing customers during the quarter set a deposit limit (35.7 percent). The change in these numbers is related to the customer mix during the quarter since customers in some markets are more prone to using control tools than others.

Betsson initiated 72,382 (74,475) interactions within responsible gaming with customers manually, automatically and via real-time messages during the third quarter. The number of interactions continue to be high as Betsson works actively to interact frequently with customers and raise awareness about responsible gaming.

Customers who exhibit risky behaviour according to certain established parameters can be red-flagged after interaction with Betsson's customer service. These customers are assessed individually, based on the customers' profile and gaming activity. Betsson has a wide spectrum of follow-up actions to deal with risk behaviour. These efforts range from providing the player with more information about safer gaming or asking the customer for feedback to a set of questions, to encouraging the customer to set deposit limits or to take a timeout. Betsson can also exclude customers from continued gaming.

The proportion of red-flagged customers in the quarter amounted to 1.15 percent (1.2 percent) of all customers who contacted customer service during the period. Betsson's customer service is continuously evaluated by independent assessors on the quality of management. In this context, Betsson has received a number of awards over the years for its efforts in the field.

Business compliance

Betsson holds gaming licenses in 19 jurisdictions with largely different legislations. The sustainability framework states that Betsson must comply with laws, regulations, and ethical standards in the countries where Betsson operates. This is a prerequisite for ensuring long-term sustainable operations and profitability for Betsson.

In Q3, Betsson rolled-out the supplier due diligence process to enhance the management of potential risks coming from the relationship with third-party suppliers. With the introduction of an automated, data-driven software, Betsson aims to ensure that due diligence checks on third parties are carried out in a holistic and comprehensive manner.

Betsson finalised a new whistleblowing framework in accordance with local and European requirements to ensure the highest standards of professionalism, integrity, and ethical behaviour as well as to prevent or reduce the risks of unlawful or improper practices by granting a safe and confidential way to report any wrongdoings. The new whistleblowing framework will be introduced shortly.

An industry AML Code of Conduct is being prepared by the European Gaming and Betting Association (EGBA) and its members, including Betsson. Following a period of public consultation, EGBA will adopt the Code and make it binding for its members.

Proactive interactions for responsible gaming

Employee Impact

Betsson's ambition is to be the best workplace in the gaming industry and the Employer of Choice – the first choice for both current and potential employees. Diversity and equal opportunities are natural parts of the business and Betsson aims to offer top-class competence development and career opportunities.

During the quarter, Betsson hosted its second Diversity and Inclusion Conference, held in London and highlighting women in gaming. The half day focused on actionable steps to take to attract and retain women in the gaming industry and heard from subject-matter experts, industry leaders and HR professionals.

Betsson also hosted its third Diversity and Inclusion Conference during the quarter, this time in Valletta. The agenda covered a wide spectrum of topics such as inclusive leadership, Diversity and Inclusion best practices, unconscious bias, gender stereotypes, transinclusivity, and neurodiversity.

During the quarter, Betsson also celebrated Pride with among other participation in the Malta Pride Parade and an external speaker who held a global online session for all employees titled 'Creating an LGBTQ+ Inclusive Workplace'.

Betsson won three awards at the Women in Gaming Diversity and Employee Wellbeing Awards 2022: Company of the Year, Best Diverse Place to Work and Innovation in Employee Engagement.

To be the Employer of Choice, a welcoming and functional office space is one important component. In Q3, Betsson opened a new, modern office in Colombia which serves as the Group's hub for Latin America. The Betsson office in Tallinn also moved to new premises while the office in Stockholm was redesigned in the quarter.

Social Impact

Betsson defines Social Impact as taking action to have a positive impact in the locations where we operate. Through direct donations to charity and employees donating their time to volunteer in various projects, Betsson gives back and influences society in a positive direction.

During the quarter, Betsson's Social Impact Strategy was finalised. The strategy introduces the umbrella brand Betsson Impact which will be used for Betsson's social impact activities to strengthen communication efforts.

The strategy also sets out three main focus areas: Sports, Diversity and Environment. An example of an activity covering both Sports and Diversity, is the donation made during the quarter of training equipment to the Szent Margit Day Care centre in Budapest, which is a facility for people with intellectual disability.

Beyond the focus areas in the strategy, Betsson adopts to world events and directs its support where it is most needed. Consequently, in Q3, the Group continued its support to humanitarian aid to Ukraine with a fund raising among employees in the Stockholm office which the company then matched with an equal sum.

Climate Impact

Betsson operates in an industry with relatively low CO2 emissions, but nevertheless has a responsibility to help counteract climate change. Betsson has set climate targets according to science-based targets (SBT) of reducing greenhouse gases by at least 55 percent for Scope 1 and 2 and by at least 15 percent for Scope 3 by 2030.

Betsson has a standalone tool for internal reporting on the Group's global electricity consumption, waste, business travel etc in a transparent and continuous way. During the quarter, improvements were made to the tool which will facilitate follow-up of emissions going forward.

Betsson has established a climate plan which identifies the main emission sources and how these will be reduced. This work continued during the quarter, for example through moving on-premises data servers to a cloud solution which will lead to decreased emissions. Also, employees in Malta participated in several clean-ups during the quarter, organised by the iGaming European Network iGen.

Betsson climate compensates for its emissions, including those of customers playing on Betsson brands, by investing in climate positive projects.

110%

Betsson compensates for all emissions and adds an additional 10% to be climate positive

THIRD QUARTER DEVELOPMENTS

CUSTOMER ACTIVITY

Customer deposits in all operational subsidiaries' gaming solutions during the quarter were EUR 943.2 (758.5) million, an increase of 24.3%.

By the end of the third quarter, the number of registered customers was 25.6 (21.6) million, an increase of 18.8%.

Active customers during the quarter were 1,056,400 (986,429), an increase of 7.1%.

Customer deposits

MARKET DEVELOPMENT BY REGIONS

Betsson's long-term ambition is to outgrow the market, both organically and through acquisitions. This should be done in a profitable and sustainable manner with various local adaptations. Betsson operates in locally regulated markets, as well as in POS-regulated markets via the MGA license in Malta. POS or Point of Supply regulation refers to markets that are targeted, based on EU and/or international law principles, without being licensed and taxed locally in such markets.

The reported revenue for each region includes both gaming revenue from the B2C business as well as license revenue for system delivery to Betsson's B2B customers.

24%

Increase of customer deposits compared to the same period last year

Nordics

Revenue from the Nordics was EUR 53.8 (53.4) million, an increase of 0.7%.

Finland reported revenue growth both compared to the previous quarter and the corresponding period last year, mainly driven by the sportsbook operations. Denmark reported all-time high revenue in the third quarter, where the casino product continued to drive growth in the market. Revenue declined in Sweden and Norway compared to the corresponding period last year, mainly driven by the casino product.

Western Europe

Revenue from Western Europe was EUR 25.0 (35.5) million, a decrease of 29.7%.

Revenue by region

Nordics (27%) Latin America (19%)

Western Europe (13%)
CEECA (39%) ROW (2%)

Starting from the end of the third quarter 2021, Betsson decided to temporarily stop accepting Dutch customers on international websites in order to create good conditions for the licensing process in the country. The decision was made in accordance with the Dutch Gaming Authority's new policy implying that operators who are waiting out the cooling off period are forced to cease operations completely, pending an obtained license. Hence, there was no revenue from the Netherlands in the third quarter of 2022.

In Germany, revenue declined both compared to the corresponding period last year and the previous quarter, mainly driven by the market restrictions that have been implemented in the past.

The business in Italy continues to develop well and reported all-time high levels in revenue and deposits during the third quarter. A new sports betting product was launched in Italy and two new sponsorships were entered with the football clubs Salernitana and Palermo during the quarter. This broadens the customer offering and strengthens the local brand StarCasino on the Italian market.

CEECA

Revenue from Central & Eastern Europe and Central Asia (CEECA) was EUR 78.8 (53.2) million, an increase of 48.0%.

The region reported an all-time high in revenue in the third quarter, driven by strong underlying activity in both casino and sports betting. Croatia and Greece showed continued positive trends in activity and revenue performance.

Georgia reported growth both compared to the previous quarter and the corresponding period last year, mainly driven by the casino product. The Baltics continued to perform well during the third quarter, where Lithuania and Estonia reported growth for both the casino and sports betting products. Latvia reported decreased revenue in the quarter, mainly driven by a lower casino margin compared to the corresponding period last year.

Latin America

Revenue from Latin America was EUR 38.8 (24.4) million, an increase of 58.9%.

All of the countries in the region reported revenue growth compared to the corresponding period last year driven by a strong underlying activity where deposits, active customers, turnover in both casino and sportsbook grew in the region. Revenue declined compared to the previous quarter due to a lower sportsbook margin.

During the third quarter the Betsson brand was launched in Mexico, where the offer includes casino, live casino and sports betting. Mexico is a locally regulated market and Betsson has a partnership with the local land-based operator Big Bola Casinos, which holds a local gaming license in the country. During the quarter the Group increased its ownership in the Colombian operator Colbet, from 70 to 88 percent.

ROW, Rest of the world

Revenue from RoW was EUR 3.9 (3.3) million, an increase of 14.5%.

At the end of the second quarter Betsson increased its ownership from 25 to 60 percent in the Nigerian gaming operator Betbonanza. The reported revenue increase for the region compared to the corresponding period last year is mainly explained by the revenue from Nigeria.

MARKET DEVELOPMENT BY PRODUCT

Casino

Betsson's casino product includes a wide range of suppliers and diverse content, customised for a growing global portfolio of markets and brands. The aim is to provide relevant content for each individual region through using off-the-shelf games, as well as the Group's exclusive titles.

During the quarter, Betsson released 260 new casino games, 25 of which came with a period of exclusivity for Betsson's brands.

Betsson has strong, regionally customized live casino offerings on the market and continuously invests in improvements of the customer experience to strengthen the market position in live casino.

The casino product reported all-time highs in gross turnover and revenue in the third quarter, despite the fact that Betsson stopped accepting Dutch customers at the end of the third quarter 2021. Casino gross turnover in all of Betsson's gaming solutions was EUR 6,274.1 (5,488.6) million, an increase of 14.3% compared to the third quarter last year.

Casino revenue amounted to EUR 135.4 (125.1) million, an increase of 8.2%. Casino represented 68% (74%) of Group revenue.

Mobile casino revenue was EUR 109.4 (102.8) million and accounted for 81% (82%) of total casino revenue.

Sportsbook

The third quarter of 2022 resulted in all-time high sportsbook revenue driven by all-time high sportsbook turnover and an above-average margin. The European football leagues and cups started two weeks earlier than usual, because of the upcoming World Cup in November and December, which also contributed to the increased activity in the quarter.

Sportsbook gross turnover across all Betsson's gaming solutions, was EUR 1,058.1 (821.0) million, an increase of 28.9% compared to the third quarter of last year.

Sportsbook revenue in the third quarter was EUR 61.9 (42.7) million, an increase of 44.9%. Sportsbook represented 31% (25%) of Group revenue.

The sportsbook margin was 8.3% (7.8%). The eight-quarter rolling average margin was 7.7%.

Mobile sportsbook revenue was EUR 47.4 (34.6) million, representing 77% (81%) of total sportsbook revenue.

Other products

Revenue from other products (poker, bingo and other) amounted to EUR 3.0 (2.2) million, an increase of 40.9%, representing 1% (1%) of total revenue.

Revenue by product

Casino (68%) Sportsbook (31%)

Other (1%)

FINANCIAL DEVELOPMENT

Group revenue

Group revenue was EUR 200.3 (170.0) million, an increase of 17.8%. In constant currencies and adjusted for acquisitions (organic), revenue growth was 34.8%.

Revenue development

Revenue from locally regulated markets where Betsson pays local betting duties increased by 31% and was EUR 71.5 (54.7) million, corresponding to 35.7% (32.2%) of total Group revenue.

License revenue for system delivery to B2B-customers amounted to EUR 45.1 (28.6) million and corresponded to 22% (17%) of Group revenue. The increase is mainly due to enhanced performance in the products delivered by Betsson, within both casino and sportsbook.

Mobile revenue was EUR 156.3 (137.2) million, representing 78% (81%) of total revenue.

Expenses

Cost of services provided was EUR 66.5 (60.1) million in the quarter. The cost increase is mainly driven by higher cost of betting duties from increased share of locally regulated revenue and increased costs for payment services.

Gross profit was EUR 133.8 (109.9) million, corresponding to a gross profit margin of 66.8% (64.6%). In relation to revenue, cost of services is down, mainly due to a mixed effect on revenue where also the share of sportsbook revenue has increased in relation to total revenue.

Operating expenses were EUR 95.4 (78.2) million.

Marketing expenses were EUR 34.1 (27.5) million, corresponding to a marketing to B2Crevenue ratio of 22% (19%). During the third quarter, the focus of marketing initiatives was on the Latin America region and other new markets. Betsson increased marketing investments during the quarter to increase brand awareness ahead of the World Cup in football that takes place in the fourth quarter.

Personnel expenses were EUR 30.8 (23.6) million. The average number of full-time employees in the Group during the third quarter was 1,938 (1,933) of which 1,143 (1,164) were based in Malta. The increase in personnel expenses come from yearly salary revisions, performance related compensation, geographic expansion and increased investments in product and technology development.

The Group had 222 (231) full-time consultants engaged by the end of the quarter, mainly within product development. This cost is recognised under other external expenses.

Other external expenses, which primarily include sportsbook related costs, consultants and software licenses, were EUR 26.5 (23.6) million. The increased costs are mainly driven by sustained increased investments in product development and technology, specifically from increased investments in cloud-based environments and from extension of the sportsbook offering.

Costs related to new market entries in the third quarter amounted to EUR 11.8 million, of which EUR 1.5 million was attributed to the US expansion, divided between personnel costs and other external expenses. The remaining EUR 10.3 million consist of marketing costs constituting EUR 7.9 million and other costs of EUR 2.4 million, of which the latter mainly consists of external consultants.

Capitalised development costs were EUR 6.2 (6.0) million. Amortisation of capitalised development costs was EUR 6.0 (5.5) million. Total amortisation and depreciation for the quarter was EUR 10.2 (9.3) million.

Other operating income/-expenses was EUR 0.0 (-0.2) million.

Expenses as a percentage of revenue

Operating income and net income

Operating income (EBIT) increased by 21.0% to EUR 38.4 (31.7) million. The EBIT margin was 19.2% (18.7%). Organically, EBIT increased by 131.0% to EUR 73.2 million.

EBIT (MEUR)

Operating income development (EBIT)

Net financial items were EUR -3.3 (-1.3) million and are primarily related to interest expenses and results of associated companies.

Net income was EUR 32.6 (28.2) million, corresponding to EUR 0.24 (0.21) per share.

The reported corporate tax for the third quarter was EUR -2.5 (-2.2) million, corresponding to 7.1% (7.2%) of profit before taxes. The effective tax rate may fluctuate between quarters depending on the tax base in the countries where Betsson has subsidiaries. For example, corporate taxes in certain countries are based on dividend distribution which may result in a difference between the effective and statutory rate.

Earnings for the period

Operating income (EBIT) for the first nine months 2022 amounted to EUR 91.2 (96.8) million. Net income amounted to EUR 82.1 (85.2) million, corresponding to EUR 0.61 (0.62) per share.

Financial position

Cash and cash equivalents at the end of September 2022 were EUR 142.9 (127.0) million. Customer liabilities, including reserves for accumulated jackpots, were EUR 53.9 (42.7) million. Gaming regulations require the Group to reserve a certain share of cash to cover player liabilities and accumulated jackpots. Current receivables related to payment

providers for unsettled customer deposits were EUR 73.2 (47.4) million. The balance varies as a result of activity and depending on when deposits are made. In the third quarter, the deposits and turnover both reached all-time high, which contributes to the increased balance. Net debt amounted to EUR -54.7 (-6.4) million at the end of the period. The positive change in net debt is mainly driven by increased cash and cash equivalents amounting to EUR 142.9 (127.0) million and no revolving credit facility (RCF) in the third quarter, which amounted to EUR 13.5 million in the third quarter 2021.

Cash flow

Cash flow from operating activities during the third quarter was EUR 38.5 (41.4) million including an impact of EUR -6.8 (2.0) million related to changes in working capital. The negative effect on working capital is mainly driven by increased receivables related to payment providers. Cash flow from investing activities was EUR -9.1 (-14.8) million and consists mainly of investments in own development and acquisition of shares in subsidiaries. Cash flow from financing activities was EUR -17.7 (11.2), mainly driven by early redemption of bonds.

External financing

In July, the clause on early redemption was exercised of the outstanding bonds in the 2019/2022 series to a value of SEK 300 million, corresponding to 100.0 percent of the nominal amount per bond.

In August, additional senior unsecured bonds of EUR 10 million were issued under the Company's existing framework of a total of EUR 250 million. The bonds have a tenor of three years and a floating interest rate of 3 months EURIBOR plus 650 basis points and final maturity in 2025.

Credit facility	Amount	Utilised	Unutilised	Maturity date
Bond 2022/2025 (MEUR)	98.5	98.5	0.0	june, 2025

Equity

Equity in the Group was EUR 646.0 (548.2) million, corresponding to EUR 4.75 (4.01) per share.

RISKS

The risk areas that Betsson has identified as most significant, and that can significantly affect the Group's operations, earnings, and position, are strategic risks, operational risks, compliance risks and financial risks. These risk areas are described in more detail in the latest annual report.

REGULATORY UPDATE

Betsson has gaming licenses in 19 jurisdictions and operates in additional countries and is thus affected by gaming laws that largely differ between different jurisdictions. For an overall description of the gaming legislation in the jurisdictions in which the Group operates, please refer to the latest annual report. Below is a summary of the latest implemented or planned changes in gaming legislation in markets relevant to the Group.