Betsson AB (publ) interim report January – March 2022

"Revenue growth driven by continued good momentum in the sportsbook and through geographic diversification"

QUARTER JANUARY - MARCH 2022

Group revenue was EUR 170.2 (157.4) million, an increase of 8%. Organic increase of 14%.
Casino revenue decreased by 5%. Sportsbook revenue increased by 45% and the sportsbook margin was 8.3% (7.2%).
EBITDA was EUR 33.4 (35.8) million, a decrease of 7%. The EBITDA margin was 19.6% (22.7%).
Operating income (EBIT) was EUR 23.6 (27.3) million, a decrease of 13%. The EBIT margin was 13.9% (17.3%).
Net income was EUR 20.9 (23.7) million, corresponding to EUR 0.16 (0.17) per share.
Operating cash flow was EUR 26.9 (32.3) million.
Active customers increased by 33% to 1,256,449 (948,109).

KEY DATA

MEUR	Q1 2022	Q1 2021	∆	Jan-Dec 2021
Revenue	170.2	157.4	8%	657.7
Gross profit	107.1	102.4	5%	425.6
EBITDA	33.4	35.8	-7%	153.7
EBITDA margin %	19.6	22.7	-	23.4
Operating income (EBIT)	23.6	27.3	-13%	117.6
EBIT margin %	13.9	17.3	-	17.9
Net income	20.9	23.7	-12%	103.9
Earnings per share (EUR)	0.16	0.17	-6%	0.78
Operating cash flow	26.9	32.3	-17%	143.5
Casino revenue	111.0	116.4	-5%	477.1
Sportsbook gross turnover	947.5	863.8	10%	3,532.0
Sportsbook revenue	56.4	38.9	45%	172.1
Sportsbook margin after free bets %	8.3	7.2	-	7.3
Deposits	782.5	720.4	9%	2,991.2
Active customers (number of)	1,256,449	948,109	33%

CEO COMMENT

"Revenue growth driven by continued good momentum in the sportsbook and through geographic diversification"

Some years ago, Betsson conducted an extensive review to capitalise on growth opportunities on the gaming market that would maintain profitability. The review resulted in the following strategic cornerstones: growth in existing markets, growth in new markets, strategic additions and acquisitions and investment in Business to Business, B2B. Thanks to a goal-oriented work from our employees, we have been able to take advantage of the growth opportunities identified, which has resulted in increased revenue and healthy profitability.

Betsson's revenue increased during the first quarter by 8 per cent (14 per cent organic) to EUR 170.2 (157.4) million. Once again, new records were set for sportsbook revenue and in several individual markets. It has been said many times before, geographic diversification makes Betsson's business less sensitive to disruptions in individual markets.

The launch in March of the proprietary sportsbook in the United States was an important milestone in Betsson's continued global expansion. The US investment is primarily focused on presenting the US adapted sportsbook to other operators within the framework of the B2B offering. More specifically, we are initially using the Business to Consumer (B2C) offering in Colorado as a showcase for the sportsbook. Many months of hard work from the product and technology teams were required to create a competitive sports product for the American market.

Starting this quarter, developments in Latin America will be reported as a separate region in our financial reports. The region is developing very satisfactorily. Market presence has also been strengthened in Latin America through the launch of our offering in both the City and Province of Buenos Aires, Argentina. To support the region's growth, Betsson has built up a regional hub with central functions to serve local markets based on their respective conditions. The assessment is that these markets are still in their early stages in many respects and that growth opportunities for the coming years continue to be positive.

Although Betsson has several highlights to celebrate in the past quarter, the geopolitical developments in the surrounding world are concerning. The Russian invasion of Ukraine has led to incredible human suffering and created a high level of uncertainty in many countries. Belarus' active choice to get involved in the conflict on the Russian side led to Betsson's decision to return the local license and completely shut down the operations that was building up in the country. The conflict has also brought that Betsson-contracted developers in Ukraine could in some cases be evacuated to Malta and Budapest, in other cases to less dangerous areas of Ukraine. Betsson sets the safety and health of its employees at the highest priority and is therefore carrying out ongoing efforts to ensure their security.

During the quarter, further efforts were made to promote responsible gaming. Through increased training efforts and earlier customer interaction et cetera, the trend of the share of red-flagged customers has decreased during the last years.

Looking ahead, we are seeing more undertakings on the horizon. Our ambition is to further strengthen our presence in North America by operating under a new license in the Ontario region in Canada starting this summer. We also aim to launch in Mexico together with our local partner Big Bola Casino in 2022.

Applications to operate in the Netherlands under the new license model were submitted during the quarter in line with the Group's plan.

All in all, the year has been off to a good start as there are many important activities that we look forward to during the remainder of 2022.

Pontus Lindwall President and CEO Betsson AB

Founded in

1963

Betsson AB's share is listed on Nasdaq Stockholm Mid Cap

Ticker: BETS B

Betsson Group operates 20 brands

Licensed for gaming in 19 jurisdictions

SIGNIFICANT EVENTS AND OUTLOOK

SIGNIFICANT EVENTS DURING THE QUARTER

At the end of March, Betsson launched its sportsbook product via the Betsafe mobile app in the state of Colorado, US, in partnership with Dostal Alley Casino. This B2C offering is an important component of Betsson's B2B strategy and marketing of the proprietary, USadapted sportsbook for new and existing operators.

In January Betsson launched online gambling in the City and Province of Buenos Aires, Argentina. The launches, which took place together with leading land-based operator Casino de Victoria, strengthens Betsson's position on the strategically important Latin American market.

On 20 January Betsson received the ruling in the Court of Appeals in Jönköping in the 2019 case regarding bonus rules. The Court of Appeals denied Betsson's appeal and upheld the Administrative Court's decision of a penalty fee of SEK 14 million (which had been reserved since 2019). Betsson has appealed the case to the Supreme Administrative Court.

On 4 March, BML Group Ltd received a formal cease and desist order from the Norwegian regulator Lotteritilsynet together with a notification of undetermined future fines if the Group does not comply with the order. Should the regulator decide to implement the order, the Group intends to formally object to the same in court.

As a result of Belarus actively taking Russia's side in their attack on Ukraine, Betsson's subsidiary in Belarus chose to cease operations. Operations were launched in mid-2021 and was still in a build-up phase at the time of the decision. Thus the financial impact is limited from the withdrawal. The subsidiary returned the gaming license and began closure of its office in Minsk. Betsson is assisting employees affected by the decision. Since the start of Russia's invasion of Ukraine, Betsson has been closely following the course of events in the region. Betsson has assisted and continues to assist its consultants in Ukraine with practical and humanitarian assistance for those who wished to and had the opportunity to leave Ukraine, and those who wanted to or were required to remain in the country.

The Georgian parliament passed a bill outlining new restrictions for online casinos in the form of higher taxes, a marketing ban and raising the legal age from 21 to 25 years. The changes went into effect on 1 March 2022.

SIGNIFICANT EVENTS AFTER THE END OF THE QUARTER

There have been no significant events to report up until the date of the publication of this report.

TRADING UPDATE

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

The average daily revenue in the second quarter 2022 up until and including 25 April was 13.5 per cent higher than the average daily revenue of the full second quarter 2021. Adjusted for currency effects and acquisitions, the average daily revenue until 25 April was 17.7 per cent higher than the average daily revenue of the full second quarter 2021. During this period, the sportsbook margin has been higher than the average margin over time.

THE GROUP'S OPERATING ACTIVITIES

Betsson's operational subsidiaries offer online casino, sportsbook 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.

During the quarter Betsson implemented several activities in line with its growth strategy. In existing markets, Betsson invested in the infrastructure for its sportsbook in Latin America to further improve player experience. In Colombia, the Colbet brand was rebranded to Betsson to take advantage of Betsson's strong brand recognition in the region and drive further growth.

Betsson achieved an important milestone through the launch of the proprietary sportsbook in Colorado, US at the end of March. The launch of the Betsafe mobile app was completed following significant technological and regulatory preparations that enabled Betsson to receive a GLI 33 certification for the sportsbook, which met the requirements for launching in Colorado and several other states. Betsson also opened an office in Denver, in line with its strategy to further develop the B2B operations focused on the sportsbook in the region.

During the quarter, 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.

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.

During the quarter Betsson launched its online gambling offering in the City and Province of Buenos Aires, Argentina. Betsson was one of the first players to receive a license and go live shortly thereafter. The swift market establishment was achieved largely thanks to an existing local market presence and taking advantage of Betsson's proprietary platform. By operating in the City and Province of Buenos Aires, Betsson is reaching the most active customer bases in Argentina that represent over 50 per cent of the country's gaming activity.

Efforts to migrate Betsson's brands to the cloud to optimize the proprietary platform have taken place over some time. This 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 Betsson made an important regional investment by migrating the Latin America-facing sportsbook from Malta to local cloud-based operations. These efforts will allow for a faster gaming experience for regional customers and in the long term lower costs as the regional platform is optimised further.

During the quarter, Betsson received a certification for Betsson.nl in the Netherlands, adding to the certifications that have already been received for the brands Oranje Casino and Kroon Casino.

At the end of March Betsson launched its American sportsbook via native app Betsafe, available on both Android and iOS. Betsson's proprietary, US-customised sportsbook is fully integrated on Strive's platform.

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

"wrapper apps", apps that are converted from the web into apps that run natively on the operating system of a smartphone, tablet, or desktop computer, in other markets such as Argentina and Greece.

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 gambling and to identify and help customers at risk of problem gambling. 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 gambling. Betsson offers its customers a wide range of tools for responsible gaming, for example deposit limits, self-exclusion, personal time limit for gambling, selfevaluation tests and access to well-trained and professional customer service staff 24 hours a day, 7 days a week.

The full integration of an updated version of the Group's Responsible Gaming Prediction Tool was completed during the first quarter. The tool provides a 360-degree view of the customers' gaming behavior, monitoring player behavior and identifying patterns, and alerts staff to signs of risk for problem gambling.

Through the alerts provided by the system, the dedicated Responsible Gaming team is able to tailor their interactions and support individual customers through the provision of tools for sustainable gambling.

The new version of the tool looks at a customer's profile in an even more holistic manner, focusing on parameters identified in academic studies. The frequency of updates for the Responsible Gaming team has also been upgraded, with new results now being available numerous times per day.

During the first quarter, 9.9 per cent of customers used non-mandatory tools to control their gambling (13.1 per cent) and 36.9 per cent of all new depositing customers during the quarter set a deposit limit (31.9 per cent). The change in these numbers is related to the customer mix during the quarter since customers in some markets are more prone to using non-mandatory tools than others.

Betsson initiated 86,916 (77,990) proactive interactions within responsible gaming with customers manually, automatically and via real-time messages during the first quarter.

Customers who, in various ways, exhibit risky behavior according to certain established parameters can be red-flagged, after interaction with Betsson's customer service. The investigation are made individually and based on the customers' profile and gaming activity. Betsson monitors red-flagged customers to deal with risk behaviors. These efforts range from providing the player with more information about safer gambling 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 gambling. In recent years, a conscious and structured effort has been made at Betsson, where customer service employees have received additional training and updated routines so that they directly can handle more cases. This has led to a decreased need for escalation and increased efficiency and customer satisfaction. As a result of the focused efforts, the proportion of red-flagged customers amounted to 1.1 per cent (1.7 per cent) of all customers who contacted customer service during the first quarter of 2022. Betsson's customer service is continuously evaluated by independent assessors to evaluate the quality of management from a risk perspective. In this context, Betsson has received a number of awards 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.

Proactive interactions for responsible gaming

During the first quarter of 2022, Betsson rolled out a new compliance training program which include additional market specific training in AML, Responsible Gaming, and Marketing, as well as a new training course in anti-corruption. The program will help Betsson deliver relevant training to specific teams and make sure that all employees are trained in compliance issues.

In addition, Betsson launched a new contract review process across the Group. Through this process the submission of contract-related requests to the Legal department is handled via a tool which ensures smooth interaction between stakeholders and an efficient distribution of tasks.

Moreover, Betsson is working on developing the AML Code of Conduct for the Online Gambling Industry, together with the European Gaming and Betting Association (EGBA). This code will set out AML requirements to which all operators agree to adhere within the EU and also clarify industry-specific issues that are important for the proper implementation of AML legal framework in the online gambling industry.

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 relaunched the hybrid working model pilot, with two days in the office and three days working from home, for eligible employees. The hybrid model had been paused due to a rise in Covid-19 cases but is now back on track. The pilot will be followed by an evaluation.

To further support the hybrid model, in January Betsson launched an online learning and development platform with interactive learning courses, which allows employees to build competencies within various areas and to share skills internally.

As a way to strengthen communication whilst working remotely, Betsson's HR department implemented a new live chat service for all HR-related questions during the quarter.

Betsson continues its focus on leaders, with several global leadership trainings ongoing during the first quarter and a new leadership framework in the pipeline. All leadership programmes have been adapted to online arrangements to further support a hybrid working model.

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.

In the first quarter of 2022, Betsson directed its CSR efforts towards humanitarian help for Ukraine. For example, Betsson donated to the gaming industry's GoFundMe initiative supporting Ukraine relief through the registered charity Choose Love and invited employees to also support this or other reputable organisations.

Betsson has long-term business partners in Ukraine and has during the quarter helped them to relocate their employees with families to safer areas and provided support such as transport, housing, food, and financial aid wherever needed.

Betsson also created an Open Application portal with a fast-track application process for anyone who has been affected by the situation in Ukraine and who as a result is looking for new job opportunities in other places where Betsson has offices. Among other benefits, Betsson provides a relocation package, accommodation, and health insurance.

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 per cent for Scope 1 and 2 and by at least 15 per cent for Scope 3 by 2030.

110%

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

Betsson has created a climate roadmap which identifies the main emission sources and how these are intended to be reduced. Action plans within each area are currently being developed and integrated into the Group's processes and policy documents. When it comes to customers electricity consumption when playing on the Group's gaming sites, Betsson already climate compensates for this and will continue to do so.

Betsson climate compensates for its emissions for 2021, i.e., 9,922 tonnes of carbon dioxide equivalent (tCO2e), and for an additional 10 per cent, in total 10,915 tCO2e, by purchasing reduction units in the Gold Standard and VCS certified (Verified Carbon Standard) project Mytrah Wind in India and the VCS certified project Hong Phong Solar in Vietnam. This compensates both for Betsson's direct electricity consumption and for the customers' consumption.

FIRST QUARTER DEVELOPMENTS

CUSTOMER ACTIVITY

Customer deposits in all operational subsidiaries' gaming solutions during the quarter were EUR 782.5 (720.4) million.

By the end of the first quarter, the number of registered customers was 24.2 (20.1) million, an increase of 20%.

Active customers during the quarter were 1,256,449 (948,109), an increase of 33%.

Customer deposits

Active customers

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 licence in Malta. POS or Point of Supply regulation refers to markets that are targeted, based on EU and/or international law principles, without being licenced and taxed in such markets.

Increase of active customers compared to the same period last year

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

Nordics

Revenue from the Nordics was EUR 54.1 (48.1) million, an increase of 12.5%.

Operations in the Swedish market continued to develop well. Revenue increased compared with the corresponding period last year, mainly driven by the sportsbook. The underlying activity continued to develop well with growth in deposits and growth in the sportsbook turnover compared to last year.

Denmark reported an all-time high in both revenue and deposits during the first quarter. Norwegian and Finnish revenue increased both compared to last year and the previous quarter mainly driven by sportsbook operations.

Western Europe

Revenue from Western Europe was EUR 22.2 (39.3) million, a decrease of 43.5%.

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, no revenue from Netherlands was reflected in the first quarter.

In Germany, restrictions were implemented for online casino in the end of 2020, and additional gaming taxes were introduced during the third quarter of 2021 which have contributed to continued low activity as well as a decline in revenue in the first quarter compared to last year and the previous quarter.

Italy reported an all-time high in revenue, deposits, casino turnover and active customers during the first quarter.

CEECA

Revenue from Central & Eastern Europe and Central Asia (CEECA) was EUR 53.4 (53.5) million, a decrease of 0.2%.

Croatia and the new market Greece, where Betsson launched in June 2021, showed continued positive trends in activity and revenue performance.

Estonia reported all-time high in revenue in the first quarter, driven by the sportsbook operations. Lithuania also reported all-time high in revenue during the first quarter, driven by the sportsbook operations which developed strongly during the quarter. Georgia reported slightly decreased revenue in the quarter, driven by the casino operations. In March, new restrictions were introduced in Georgia, which included tax increases and marketing bans.

Latin America

Revenue from Latin America was EUR 36.8 (13.4) million, an increase of 174.0%.

The region reported an all-time high in revenue and in deposits during the first quarter. Most of the countries in the region reports growth both compared to the previous quarter and compared to the corresponding period last year. Levels of activity remained high in the first quarter, especially within the sportsbook segment. The quarter had high profile events such as World Cup qualifying games in football, which Betsson sponsors.

ROW, Rest of the world

Revenue from RoW was EUR 3.7 (3.1) million, an increase of 19.3%.

The growth in Rest of the world was mainly driven by the Canadian operations during the first quarter.

Revenue by region

Nordic (32%)

Latin America (22%)

Western Europe (13%)

CEECA (31%) ROW (2%)

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 543 new casino games, 11 of which came with a period of exclusivity for Betsson's brands.

At the beginning of the first quarter Betsson had a total of 4,073 games available. Betsson has a strong and regionally diverse live casino offering on the market and continuously invests in improvements of the customer experience to strengthen the market position in live casino.

Casino revenue was EUR 111.0 (116.4) million, a decrease of 4.6%. The decrease was mainly driven by the fact that Betsson stopped accepting Dutch customers and the regulatory changes in Germany. Casino represented 65% (74%) of Group revenue.

Mobile Casino revenue was EUR 87.1 (85.8) million and accounted for 78% (74%) of total casino revenue.

Sportsbook

The first quarter of 2022 resulted in all-time high sportsbook revenue driven by a high sportsbook turnover and an above-average margin. Contributing factors to the high margin were, among other things, strong returns from domestic football leagues, particularly strong returns from the Champions League and Europa League competitions while the World Cup Qualifying results were more challenging.

Gross turnover in sportsbook in all Betsson's gaming solutions, was EUR 947.5 (863.8) million, an increase of 9.7% compared to the first quarter last year.

Sportsbook revenue in the first quarter was EUR 56.4 (38.9) million, an increase of 45.0%. Sportsbook represented 33% (25%) of Group revenue.

The sportsbook margin was 8.3% (7.2%). The eight-quarter rolling average margin was 7.4%.

Mobile sportsbook revenue was EUR 45.0 (31.7) million, representing 80% (81%) of total sportsbook revenue.

Other products

Revenue from other products (poker, bingo and other) was EUR 2.7 (2.1) million, an increase of 29%, representing 2% (1%) of total revenue.

FINANCIAL DEVELOPMENT

Group revenue

Group revenue was EUR 170.2 (157.4) million, an increase of 8%, and with an increase of 14% being organic.

Revenue development

Revenue by product

Sportsbook (33%)

Other (2%)

Locally taxed revenue from markets where Betsson pays local betting duties increased by 13% and was EUR 61.3 (54.2) million, corresponding to 36.0% (34.4%) of total Group revenue.

License revenue for system delivery to B2B-customers amounted to EUR 25.8 (31.7) million and corresponded to 15% (20%) of Group revenue. The decrease is largely affected by exchange rates effects.

Mobile revenue was EUR 131.9 (117.7) million, representing 78% (75%) of total revenue.

Expenses

Cost of services provided was EUR 63.1 (55.0) million. The cost increase is mainly driven by higher cost of betting duties from increased share of locally regulated revenue and increased payment provider costs.

Gross profit was EUR 107.1 (102.4) million, corresponding to a gross profit margin of 62.9% (65.0%).

Operating expenses were EUR 83.5 (75.1) million.

Marketing expenses were EUR 27.3 (28.1) million, corresponding to a marketing to B2Crevenue ratio of 19 (22) per cent. During the first quarter, the focus of marketing initiatives was on the Latin America region, while investments were reduced somewhat in some of the more expensive European markets where Betsson, for the time being, see lower future returns.

Personnel expenses were EUR 26.0 (22.9) million. The average number of full-time employees in the Group during the first quarter was 1,957 (1,819) of which 1,153 (1,105) were based in Malta. The increase in personnel expenses comes from geographic expansion and increased investments in technology.

The Group had 210 (235) 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 licences, were EUR 25.5 (21.8) million. The increased costs are mainly driven by sustained increased investments in product development and technology, specifically from increased investments in cloud-based environments.

Costs related to new market entries in the first quarter amounted to EUR 10.3 million, of which EUR 2.4 million was attributed to the US expansion divided by personnel costs and other external expenses. The remaining EUR 7.9 million consist of marketing costs constituting EUR 4.6 million, personnel costs of EUR 0.7 million and remaining other costs of EUR 2.6 million.

Capitalised development costs were EUR 6.1 (6.2) million. Amortisation of capitalised development costs was EUR 5.6 (5.0) million. Total amortisation and depreciation for the quarter was EUR 9.8 (8.5) million.

Other operating income/-expenses was EUR -1.0 (0.0) million. The cost increase is driven by foreign currency effects, mainly realised, on current assets and liabilities.

28.6% 32.4% 33.4% 35.0% 37.1% 20.2% 18.1% 17.4% 17.9% 16.0% 17.3% 14.9% 14.9% 14.6% 15.3% 5.9% 6.8% 6.5% 5.4% 5.8% 10.6% 8.2% 9.3% 9.9% 12.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Cost of services Marketing expenses Personnel expenses Depr & Amort Other

Expenses as a percentage of revenue

EBIT (MEUR) -13%

Operating income and net income

Operating income (EBIT) decreased by 13% to EUR 23.6 (27.3) million. The EBIT margin was 13.9% (17.3%). Organically, EBIT increased by 40% to EUR 38.2 million.

Operating income development (EBIT)

Net financial items were EUR -1.3 (-1.3) million and are primarily related to interest costs.

Net income was EUR 20.9 (23.7) million, corresponding to EUR 0.16 (0.17) per share.

The reported corporate tax for the first quarter was EUR -1.4 (-2.3) million, corresponding to 6.3% (8.9%) 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.

Financial position

Cash and cash equivalents at the end of March 2022 were EUR 111.8 (109.0) million. Customer liabilities, including reserves for accumulated jackpots, were EUR 48.8 (45.9) 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 62.0 (47.1) million. The balance varies as a result of activity depending on when deposits are made, and at the same time payment terms differ depending on which payment providers are used.

Cash flow

Cash flow from operating activities during the first quarter was EUR 26.9 (32.3) million including an impact of EUR -2.9 (0.5) million related to changes in working capital. Negative effect on working capital is mainly driven by decreased accounts payable. Cash flow from investing activities was EUR -9.4 (-7.7) million and consists mainly of investments in own development. Cash flow from financing activities was EUR -1.2 (-1.2), mainly driven by lease payments.

External financing

As of 31 March 2022, total available bank credit facilities were SEK 500.0 (880.0) million, of which SEK 0.0 (73.9) million were utilized.

Credit facility	Amount	Utilised	Unutilised	Maturity date
RCF (SEK m)	500.0	0.0	500.0	May, 2022
Bond (MEUR)	96.5	96.5	0.0	Sep, 2022

Equity

Equity in the Group was EUR 591.8 (530.2) million, corresponding to EUR 4.33 (3.88) 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 2021 annual report.

REGULATORY UPDATE

Betsson has gaming licenses in 19 countries 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 2021 annual report. Below is a summary of the latest implemented or planned changes in gaming legislation in markets relevant to the Group.