Betsson AB (publ) interim report July – September 2021

Yet another strong quarter driven by the sportsbook

Group revenue was SEK 1,733.3 (1,676.7) million, an increase of 3%. Organic increase of 8%.
Casino revenue decreased by 2%. Sportsbook revenue increased by 24% and the sportsbook margin was 7.9% (7.0%).
Operating income (EBIT) was SEK 323.6 (329.1) million, a decrease of 1.7%, the EBIT margin was 18.7% (19.6%).
Net income was SEK 287.4 (290.6) million, corresponding to SEK 2.22 (2.22) per share.
Operating cash flow was SEK 423.5 (494.6) million.
Active customers increased by 7% to 986,429 (920,045).
Acquisition of Inkabet and investment (28%) in Slapshot Media Inc.

QUARTER JULY – SEPTEMBER 2021 PERIOD JANUARY – SEPTEMBER 2021

Group revenue was SEK 5,077.7 (4,627.0) million, an increase of 10%. Organic increase of 20%.
Operating income (EBIT) was SEK 983.2 (807.4) million, an increase of 21.8%, the EBIT margin was 19.4% (17.4%).
Net income was SEK 865.4 (713.0) million, corresponding to SEK 6.51 (5.30) per share.
Operating cash flow was SEK 1,321.9 (1,160.4) million.
The Annual General Meeting approved dividend to shareholders of SEK 3.68 per share, corresponding to SEK 502.9 million.

KEY DATA

SEK m	Q3 2021	Q3 2020	∆	Jan-Sep 2021	Jan-Sep 2020	∆	Jan-Dec 2020
Revenue	1,733.3	1,676.7	3%	5,077.7	4,627.0	10%	6,389.6
Gross profit	1,120.5	1,085.8	3%	3,329.4	2,988.2	11%	4,100.9
EBITDA	418.5	416.6	0%	1,252.6	1,073.7	17%	1,484.3
EBITDA margin %	24.1	24.8	-	24.7	23.2	-	23.2
Operating income (EBIT)	323.6	329.1	-2%	983.2	807.4	22%	1,125.2
EBIT margin %	18.7	19.6	-	19.4	17.4	-	17.6
Net income	287.4	290.6	-1%	865.4	713.0	21%	990.8
Earnings per share (SEK)	2.22	2.22	-	6.51	5.30	23%	7.32
Operating cash flow	423.5	494.6	-14%	1,321.9	1,160.4	14%	1,384.4
Casino revenue	1,275.7	1,306.5	-2%	3,675.2	3,607.0	2%	4,890.6
Sportsbook gross turnover	8,395.5	7,827.1	7%	25,477.0	19,490.7	31%	28,424.2
Sportsbook revenue	435.7	352.6	24%	1,339.8	963.9	39%	1,423.0
Sportsbook margin after free bets %	7.9	7.0	-	7.8	7.5	-	7.5
Deposits	7,720.3	7,554.0	2%	22,364.4	19,887.5	12%	27,801.0
Active customers (number of)	986,429	920,045	7%

CEO COMMENT

Pontus Lindwall President and CEO Betsson AB

"Yet another strong quarter driven by the sportsbook"

After several records during the previous quarter, we managed to increase revenue by just over 3 per cent during the third quarter, compared with the corresponding quarter last year, which was a very strong quarter. At that time, the strong increase in revenue was driven by a surge in demand for digital entertainment. The further increase in revenue is explained by the successes with our sportsbook in combination with good results in the ending rounds of the EURO 2020 and CONMEBOL Copa América and the return of the domestic football leagues from mid-August. All in all, this has resulted in sportsbook revenue increasing by approximately 24 per cent year-on-year. The increase in revenue has also benefited from successes in new markets such as LatAm, Croatia and Greece.

Against the background of strong development this year, it was unfortunate that the Dutch Gaming Authority unexpectedly published a new policy at the end of September that entails a deviation from the previously communicated guidelines during the cooling off period. The new policy implies that operators who are waiting out the cooling off period is forced to cease operations completely, pending an obtained license. Based on the new policy, Betsson decided to temporarily stop accepting Dutch customers on international websites in order to create good conditions for the upcoming licensing process. Betsson continues to have strong faith in the Dutch market and an ambition to be able to conduct business in the future in accordance with the new regulations. The efforts to prepare the license applications and preparations for certifying our technical platform in the Dutch market are ongoing. The application is expected to be submitted no later than at the end of the first quarter 2022 in connection with the end of the cooling-off period. The outcome of the application process is expected to be communicated after the summer of 2022 and I then hope our position in the Netherlands gradually can be regained thanks to strong brands and an organization with good local knowledge.

Continued investments in the US

The investments in the US market to be able to launch our B2C offerings in Colorado during the first quarter of 2022 continue according to plan. This quarter has been an intense period to secure everything from meeting the authorities' reporting requirements to adapting the platform and technology so that the US-adapted sportsbook can enter a testing and certification process. The sportsbook has also been integrated into the Strive platform, which has now been certified in the state of Colorado. The fact that the Strive platform is certified will benefit us during the testing and certification processes that are initiated now.

Strengthening Betsson through acquisitions

During the quarter, we acquired Inkabet's B2C business. Inkabet is a fast-growing sportsbook and casino business aimed at the western region of South America. The acquisition further strengthens and expands our presence and position in the Latin America region and builds on the previous acquisitions of JDP Tech Ltd, Suaposta, and Colbet. We have also invested in the Canadian startup company Slapshot Media Inc by acquiring 28 per cent of the shares. The investment in Slapshot Media Inc means a partnership with local Canadian expertise that enables Betsson to create a strong position in the Canadian market ahead of the upcoming regulation in Ontario. Strengthening our business through acquisitions is an important component of our strategy and it has been a successful way to create growth but also to build competence in the organization. In this way, a dynamic business is created that also positively impacts existing operations.

A strong team paves the way for future success

An important guiding star for my leadership has always been to drive the company towards the goals set for it, regardless of obstacles along the way and I intend to continue according to that. We have built a very strong and competent team at Betsson and I look forward to continuing to build the company even stronger in the future.

1963

is listed on Nasdaq Stockholm Large Cap

Betsson AB's share

Ticker: BETS B

Betsson Group operates 20 brands

Licensed for gaming in 19 jurisdictions

SIGNIFICANT EVENTS AND OUTLOOK

SIGNIFICANT EVENTS DURING THE QUARTER

In August, SW Nordic Limited, a subsidiary of Betsson AB (publ), signed an agreement to acquire Inkabet's B2C online gambling business, a rapidly growing sportsbook and casino operation targeting the western region of South America. The initial consideration of the acquisition was USD 25 million. Additionally, Betsson will pay up to USD 4 million depending on the performance of Inkabet in reaching the agreed revenue and EBIT targets during the six months following the closing, together with a deferred payment of USD 5 million. The full purchase price is the equivalent of 3.8 times EBIT of the last 12 months ending June 2021. Inkabet's revenue over the last 12 months as of June 2021 was USD 25.2 million and operating income (EBIT) USD 8.8 million. Through this acquisition, Betsson continues to take market share in Latin America, a strategically important region where the company has big ambitions for the future.

Betsson Perch Investments AB, a subsidiary of Betsson AB (publ), acquired 28 per cent of the shares in Canadian start-up Slapshot Media Inc for the purchase price of CAD 3 million (SEK 21 million). The investment is another step in Betsson's continued ambition to grow in the North American market. Through this investment, Betsson strongly positions itself with the help of local expertise on the Canadian market where a re-regulation in Ontario is imminent.

As a result of the Dutch Gambling Authority's (the KSA) publication of a new enforcement policy, Betsson's operational subsidiaries decided to stop accepting Dutch customers on their international websites in furtherance of Betsson Group's long-term goal of obtaining a license in the Netherlands.

In July Betsson expanded its presence in Eastern Europe by launching in the Republic of Belarus. Betsson are now offering casino, sportsbook and poker under the Europebet brand. Europebet.by is the first brand to offer poker in the Belarusian market. Several gaming providers are already committed, and a wider portfolio of games will be added shortly.

In September Betsson AB's board of directors decided to begin the process of finding a replacement for CEO and founder Pontus Lindwall as they had concluded that Pontus Lindwall had completed the assignment "Back on Track", the program for which he was hired to execute as CEO in 2017. Shortly after the board's decision to begin the process of finding a replacement for the CEO, Patrick Svensk, chose to resign from the board of Betsson AB and his assignment as Chairman of the Board with immediate effect, based on the lack of confidence from the company's major shareholders. Following that, Johan Lundberg, currently a member of Betsson AB's Board, was appointed as the new Chairman.

SIGNIFICANT EVENTS AFTER THE END OF THE QUARTER

The acquisition of Inkabet's online gambling business was completed on October 1, 2021. Betsson expects the acquisition to increase scale in the business and to unleash synergies, being both revenue and earnings accretive from the fourth quarter 2021 onwards.

On October 20, 2021, Jan Nord informed the Board that he is resigning from the Board with immediate effect.

The Extra General Meeting (EGM) on October 25 resolved on to re-elect Fredrik Carlsson, Johan Lundberg and Eva Leach as board members, and to elect Peter Hamberg and Pontus Lindwall as new board members until the end of the next AGM. The EGM also resolved that the instructions for the Nomination Committee adopted should be adjusted so that the Chairman of the Board of Directors shall not be part of that Committee.

The new Board of Directors of Betsson AB has decided to withdraw the decision to replace Betsson AB CEO Pontus Lindwall.

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 2021 up until and including 17 October was 17.6 per cent lower than the average daily revenue of the full fourth quarter 2020. Adjusted for currency effects and acquisitions, the average daily revenue until 17 October was 12.9

per cent lower than the average daily revenue of the full fourth quarter 2020. During this period, the sportsbook margin has been 4.2% which is extra ordinary low compared to the average over a longer period of time. The strongest reason behind the decrease in revenue is the low sportsbook margin, but the decision to close down international gaming sites for customers from Netherlands also had a negative effect on revenue.

THE GROUP´S OPERATING ACTIVITIES

Betsson's operational subsidiaries offer online casino, sportsbook and other 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 three growth areas: growth in existing markets, expansion into new markets and development of the B2B offering with focus on the in-house developed sportsbook.

Betsson sees opportunities to grow in these three areas, both organically through in-house development but also 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 will strengthen its position in existing markets and will evaluate new markets by prioritising countries where the Group has the best conditions to offer market leading products. 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 means substantial opportunities to create new offerings with economies of scale.

In the United States Betsson will launch its US-adapted sportsbook during the first quarter of 2022 through a B2C offering in Colorado together with Dostal Alley Casino. The Strive platform was certified in Colorado during the third quarter and is paving the way for the testing and certification of Betsson's sportsbook that will begin during the fourth quarter. By combining two leading iGaming technologies, Betsson will be able to offer a modern product in Colorado. The goal is to offer Betsson's proprietary sportsbook as a B2B solution after the B2C offering has been launched in Colorado.

As a further step in growing on the North American market, Betsson acquired 28 per cent of the shares in the Canadian start-up Slapshot Media Inc. The investment is in line with Betsson's strategy of partnering locally in order to position itself in locally regulated markets and markets soon to be regulated.

Examples of new markets include the successful establishment in Croatia and the swift startup in Greece after the launch in early June, which create a good foundation for further expansion in the region. Another strategically important area for Betsson is Latin America. To strengthen the Group's presence in the region, Inkabet's B2C operations and their rapidly growing sportsbook were acquired in September and the transaction was closed in October. Inkabet will contribute positively to both revenue and earnings in the region from the fourth quarter of 2021 and onwards.

TECHNOLOGY DEVELOPMENT

Betsson has a solid technical position through its subsidiaries. Investments in innovation and technology are always done with the customer experience in focus. The gaming sites are largely run on a proprietary platform, a PAM, (Techsson), which makes up the core of the offering and user experience, covering games, transactions, payments, customer information and account management. By owning its technology, the Group is flexible and can adapt rapidly to market changes. It also enables fast integrations across jurisdictions and brands. The products offered mainly consist of casino and sportsbook.

Betsson is dedicated to developing its proprietary gaming platform Techsson, through which around 90 per cent of the Group´s current revenue is generated. During the third quarter the focus was to maintain a continued high system capacity, despite a high activity, linked

to the ending rounds of Euro 2020 and CONMEBOL Copa América. This was achieved by continued migration of brands to the cloud, which allowed for scaling to meet high demand (through improved capacity and efficiency) as well as overall improved customer experience (through efforts to improve performance of sites and apps).

Updates to the technological platform during the third quarter resulted in an improved user experience (UX) in games lobbies including improved views allowing for faster game selection, integration of additional payment providers and solutions, and speed and performance improvements for mobile apps, customer registration and the sportsbook product.

Technological updates also enabled the upgrade of BetBuilder, a digital tool that enables customers to combine odds themselves. The most important upgrades were an expanded offering of sports, tiers and results to set odds on, as well as an improved customer experience. These upgrades are also necessary to adapt Betsson's products ahead of the sportsbook launch in the United States. In August, Betsafe for iOS and Android were launched in Peru and Sweden, a milestone in Betsson's initiative to develop Next Generation Native Apps (apps adapted for a specific operating system) that are scalable and can support additional brands and markets. This development lays the groundwork for future expansion in additional brands and markets.

In Colombia, the Colbet brand was migrated from the Sirplay platform to Tecnalis, a sportsbook platform that was already certified in the market and appreciated by customers. This change entails a richer customer offering supported by a technology that Betsson already uses in several other markets.

Efforts to launch the sportsbook offering in the United States continue. The third quarter has been an intensive period with focus on securing everything from fulfilling agency reporting requirements to ensuring a high quality of the platform and technology. Among other things, Betsson's U.S. sportsbook has been integrated into the Strive platform. Currently, 120 people are working on the sportsbook technology targeted for U.S. audiences. From a customer perspective several preparations have been made to ensure that Betsson has an attractive product for the U.S. market and development of so-called native apps for the market is one example.

During the third quarter the Strive platform became certified in the state of Colorado which is an important milestone. Betsson's sportsbook adapted for the US market will go through a testing and certification phase during the fourth quarter of 2021, which is expected to take approximately 3-4 months.

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: Business compliance, Responsible Gaming, Employee Impact, Social Impact and Climate Impact. For a more detailed description of the areas, see the Annual and Sustainability Report for 2020.

During the third quarter Betsson established a new governance model for how to coordinate and drive its sustainability work. The model is comprised of a Sustainability Council and a Sustainability Task Force. Both the Council and the Task Force had their first meetings during the quarter.

The Sustainability Council, which consists of the CEOs and elected members from the management team in Betsson AB and the operational management team for Betsson Operations, has the responsibility, on behalf of the respective management teams, to ensure that the sustainability framework is kept up to date and delivered on through-out the organization.

The Sustainability Task Force is comprised by employees from relevant parts of the operational organization and is responsible for driving and coordinating work around the sustainability framework, as well as continuously keeping track of and evaluating sustainably KPIs and activities. Task force members report on KPIs and activities on a quarterly basis to the Sustainability Council and also in connection with the annual sustainability report.

Business Compliance

Betsson holds gaming licenses in 19 jurisdictions and works in several countries 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 July, the European Gaming and Betting Association (EGBA), of which Betsson Group is a member, published its first-ever annual Sustainability Report, in which the CEOs of member companies commit to taking the lead in fostering a stronger culture of safer gambling across Europe's online gambling sector. Data in the report also confirms that EGBA members are significantly stepping up their safer gambling efforts towards their customers, including through the greater deployment of safer gambling tools and increased communications to promote safer gambling.

During the quarter, the Compliance Team provided specifically tailored training for the Information Security Team and Legal Team, including in relation to recent data protection regulatory developments. The Compliance Team is also currently developing automated processes which will optimize existing data privacy procedures and controls.

The Compliance Team also worked with an existing third-party training platform provider in order to improve compliance training platform functionalities, including working with the provider in relation to AML and Responsible Gaming trainings material for new markets.

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 prerequisites 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.

During the quarter, the Responsible Gaming Team continued to work on the updated version of the company's Responsible Gaming Prediction Tool. Preliminary modelling and analysis have been successful so far and Betsson is aiming to launch by end of Q4 2021 and complete the full integration in Q1 2022.

As the quarter saw the return of major football events such as the UEFA Euro 2020 and the CONMEBOL Copa América, the Responsible Gaming teams were supporting the influx of new players. Betsson ensured staff availability and that increased attention was paid to sportsbook players, although it should be noted that these high-profile tournaments attract mostly recreational players with low risk of problem gambling.

In the third quarter, 10.6 per cent of customers used non-mandatory tools to control their gambling (17.8 per cent) and 35.7 per cent of all new depositing customers during the quarter set a deposit limit (36.0 per cent). The decrease 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. Also, as more markets introduce mandatory tools, this consequently brings down the usage of non-mandatory tools.

In the third quarter, 1.2 per cent of all customers who contacted customer service were red flagged (1.4 per cent). This is a result of a conscious effort by Betsson, where Betsson has provided its Customer Service Agents with enhanced training and updated procedures so that the agents can deal with certain matters directly themselves. This has led to a decreased need for escalation and increased efficiency and customer satisfaction.

Betsson had 74,475 interactions with customers manually, automatically and via real-time messages during the third quarter (91,833). Betsson significantly increased its interactions with customers during the pandemic.

Red flagged customers are assessed individually, based on the customer's profile and gambling activity. Betsson has a wide spectrum of follow-up actions, ranging from providing more information about safer gambling to the player 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 also has the ability to shut-out players from continued gambling.

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 launched a Hybrid Working from Home Model pilot in five locations: Malta, Sweden, Hungary, Estonia, and Lithuania. The model allows eligible employees to work from home three days per week, with the remaining two days mandatory in the office. This combines the flexibility of working remotely with the added benefits of seeing colleagues face to face on a regular basis. The pilot will run for three months and will be followed by an evaluation in December 2021.

Social impact

During the quarter, Betsson continued to support the local communities in which the Group operates.

As an example, a donation to the Women for Women Social Fund in Malta was granted. The fund is run by the Women for Women foundation and caters for the emergency financial needs of women with children.

The donation is in line with Betsson's approach to support female empowerment and gender equality and will go towards buying baby products as well as women's personal care items. To build employee engagement, employees will during Q4 be asked to donate similar items.

Climate impact

Betsson operates in an industry with relatively low CO2 emissions, but nevertheless has a responsibility to help counteract climate changes.

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.

During the third quarter, Betsson has started work on a climate roadmap for how to reach its climate goals. A number of qualitative interviews with internal stakeholders have been held, which is followed by an internal workshop facilitated by an external agency. The roadmap will be presented in the Annual and Sustainability report 2021.

THIRD QUARTER DEVELOPMENTS

CUSTOMER ACTIVITY

Customer deposits in all operational subsidiaries' gaming solutions during the quarter were SEK 7,720.3 (7,554.0) million, an increase of 2%.

By the end of the third quarter, the number of registered customers was 21.6 (19.1) million, an increase of 13%.

Active customers during the quarter were 986,429 (920,045), an increase of 7%.

Customer deposits

Active customers 0 200 400 600 800 1,000 1,200 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2018 2019 2020 2021 000's

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.

The reported revenue for each region include 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 SEK 544.9 (558.9) million, a decrease of 2.5%.

Operations in the Swedish market continued to develop well. Betsson increased its market share in Sweden compared with the previous year thanks to both Jalla Casino and the sportsbook contributing strongly to the revenue growth.

In Finland, revenue increased both compared to last year and compared with the previous quarter. The year-on-year increase is driven by a higher sportsbook activity while the increase compared to last quarter is explained by a higher casino activity. In Denmark casino contributed to increased revenue compared to the corresponding period previous year. The Norwegian revenue decreased compared with previous year due to payment challenges in the market.

Western Europe

Revenue from Western Europe was SEK 352.9 (486.5) million, a decrease of 27.5%.

Revenue in the UK decreased compared to last year, in line with Betsson's expectations and as a result of Betsson's strategy to consolidate its operation to only one brand (Rizk) as a result of the changes in the UK market regulation.

In Germany, restrictions were implemented for online casino in October and December 2020, which contributes to continued low activity and a decline in revenue. Compared with the previous quarter revenue declined further due to implementation of gaming taxes.

In Italy, revenue increased in relation to the corresponding period of the previous year mainly driven by a strong growth in active customers and casino turnover.

CEECA

Revenue from Central & Eastern Europe and Central Asia (CEECA) was SEK 543.0 (447.1) million, an increase of 21.4%.

The region as well as the majority of countries within the region reported all time high revenue for the quarter. Croatia and the new market Greece, where Betsson launched in June, showed positive trends in activity and revenue performance. Poland was the only country that reported a decrease in revenue.

Nordic (32%) Western Europe (20%) CEECA (31%) ROW (17%)

In Estonia, casino operations reported all time high revenue driven by cross sales from the Euro 2020. In Latvia, all time high revenue were also reported within casino. In Lithuania, deposits increased and casino operations had a strong development in addition to the sportsbook that benefited from the local basketball league and conclusion of the NBA season.

ROW, Rest of the world

Revenue from RoW was SEK 292.6 (184.2) million, an increase of 58.8%.

In ROW, Chile together with Peru were the main contributors to the growth for the region. Activity levels continued to be high in the region and deposits were at all time high.

In Peru, all time high revenue were reported for the quarter. Betsson operates two brands in Peru, Betsson, which is the market leading brand and the challenger Betsafe. Through the acquisition of Inkabet's B2C online gaming operations, Betsson is strengthening and expanding its business in the western region of South America.

In Brazil, the highest revenue since the acquisition of Suaposta in 2019 were reported. During the quarter, Betsson continued its efforts to strengthen the brand awareness before the upcoming market reregulation, including the activation of Betsson's ambassadors. Another initiative in the efforts to increase brand awareness has been the launch of fantasy football.

MARKET DEVELOPMENT BY PRODUCT

Casino

Betsson's casino product includes a wide range of suppliers and a diverse content library, custom made for a growing global portfolio of markets and brands. The aim is to provide relevant content for each individual region through using 'launch ready' off-the-shelf games from the central platform Techsson, as well as the Group's own exclusive titles.

Revenue by product

Casino (74%)

Sportsbook (25%)

Other (1%)

During the quarter, Betsson released 294 new casino games, 16 of which came with a Period of Exclusivity for Betsson's brands. This corresponds to an average of four new games per day and an increase of 54 games compared with the previous quarter.

At the beginning of the third quarter Betsson had a total of 3,300 games available; taking into account variations connected to regions, markets and brands this means that the company manages over 5,600 game titles on Techsson including 145 poker games and 300 live casino games. With a solid base of technical platforms and local partnerships Betsson has a strong and regionally diverse live casino offering on the market and continuously invests in improvements to the customer experience to strengthen the market position in Live Casino.

Casino revenue was SEK 1,275.7 (1,306.5) million, a decrease of 2.4%. The change was largely driven by decreased activity in Germany as a result of the changed regulations which affected customer offerings, as well as decreased activity in the UK as a result of Betsson's consolidation and focus on only one brand. Casino represented 74% (78%) of Group revenue.

Mobile Casino revenue was SEK 1,046.9 (984.1) million and accounted for 82% (75%) of total casino revenue.

Sportsbook

The quarter saw the final rounds of the Euro 2020 and Copa América tournaments impacted the quarter, followed by friendlies, club-level and International qualification football matches and then the return of the domestic football season from mid-August.

Gross turnover in sportsbook in all Betsson's gaming solutions, was SEK 8,395.5 (7,827.1) million, which is an increase of 7.3% compared to the third quarter last year.

Sportsbook revenue in the third quarter was SEK 435.7 (352.6) million, an increase of 23.6%. Sportsbook represented 25% (21%) of Group revenue.

The sportsbook margin was 7.9% (7.0%). The eight-quarter rolling average margin was 7.5%.

Mobile sportsbook revenue was SEK 352.9 (281.1) million, representing 81% (80%) of total sportsbook revenue.

Other products

Revenue from other products (poker, bingo and other) was SEK 21.9 (17.6) million, an increase of 24%, representing 1% (1%) of total revenue.

FINANCIAL DEVELOPMENT

Group revenue

Group revenue was SEK 1,733.3 (1,676.7) million, an increase of 3%, with 8% being organic.

Revenue development

Locally taxed revenue from markets where Betsson pays local betting duties decreased by 8% compared to the third quarter last year and was SEK 558.1 (607.0) million, corresponding to 32.2% (36.2%) of total Group revenue. Reduced share of locally taxed revenue is explained by strong sportsbook growth in LatAm and decreased revenue in UK and Germany during the quarter.

License revenue for system delivery to B2B-customers amounted to SEK 291.9 (260.8) million and corresponded to 17% (16%) of Group revenue. The increase is mainly due to enhanced performance in the products delivered by Betsson, new customers and successful brand launches.

Mobile revenue was SEK 1,398.9 (1,271.5) million, representing 81% (76%) of total revenue.

Expenses

Cost of services provided was SEK 612.8 (590.9) million. The cost increase is mainly driven by increased payment provider fees, but is partly offset by lower cost of affiliates and partner's commission.

Gross profit was SEK 1,120.5 (1,085.8) million, corresponding to a gross profit margin of 64.6% (64.8%).

Operating expenses were SEK 796.9 (756.7) million.

Marketing expenses were SEK 280.5 (282.5) million, corresponding to a marketing to revenue ratio of 16.2 (16.8) per cent. The Group continues to capitalise on the increased investments made during the second quarter in connection with Copa América and Euro 2020.

Personnel expenses were SEK 240.4 (232.3) million. The average number of full-time employees in the Group during the third quarter was 1,933 (1,710) of which 1,164 (1,070) were based in Malta. The increase in personnel expenses comes from geographic expansion, and increased investments in technology (mainly from development and adaptation of the sportsbook for the US market).

The Group had 231 (217) full-time consultants engaged by the end of the quarter, mainly within product development. This cost is recognized under other external expenses.

Other external expenses, which primarily include sportsbook related costs, consultants and software licences, were SEK 240.3 (214.4) million. The increased costs are mainly driven by sustained increased investments in product development and technology, also connected with the Group's plans for the US.

Costs related to new market entries in the third quarter amounted to SEK 105 million, of which SEK 15 million is attributed to the US expansion divided by personnel costs and other

Gross Profit (msek) 1085.8 1120.5 +3%

external expenses (consultants). The remaining SEK 90 million consist of SEK 51 million related to marketing costs, and other costs of SEK 31 million, of which the latter mainly consist of costs for external consultants, and SEK 8 million of personnel costs.

Capitalised development costs were SEK 60.9 (60.7) million. Amortisation of capitalised development costs was SEK 56.0 (52.8) million. Total amortisation and depreciation for the quarter was SEK 94.9 (87.5) million.

Other operating income/-expenses was SEK -1.7 (-0.7) million. The cost increase is driven by foreign currency effects, mainly realised, on current assets and liabilities.

Cost of services Marketing expenses Personnel expenses Depr & Amort Other

Q3 2020 Q3 2021

Operating income and net income

Operating income (EBIT) decreased by 1.7% to SEK 323.6 (329.1) million. The EBIT margin was 18.7% (19.6%). EBIT was negatively impacted by currency exchange differences of SEK -51.2 million. Organically, EBIT increased by 14% to SEK 374.8 million.

Operating income development (EBIT)

Net financial items were SEK -13.3 (-15.1) million and are primarily related to interest costs.

Net income was SEK 287.4 (290.6) million, corresponding to SEK 2.22 (2.22) per share.

The reported corporate tax for the third quarter was SEK -23.0 (-23.4) million, corresponding to 7.4% (7.5%) 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 September 2021 was SEK 1,295.8 (962.5) million. Customer liabilities, including reserves for accumulated jackpots, were SEK 435.5 (495.1) million. Gaming regulations require the Group to reserve a certain share of cash to cover player liabilities and accumulated jackpots. Current receivables from payment providers for unsettled customer deposits were SEK 483.4 (533.8) 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 third quarter was SEK 423.5 (494.6) million including an impact of SEK 21.3 (99.0) million related to changes in working capital. Positive effect on working capital is mainly driven by declined balances on Payment providers. Cash flow from investing activities was SEK -153.4 (-107.6) million and consists mainly of investments in own development and acquisition of shares in associated companies (Slapshot Media and second installment of JDP Tech Ltd.). Cash flow from financing activities was SEK 114.4 (-401.5), mainly driven by usage of the RCF. Last year, the share redemption program was performed during the third quarter to Betsson's shareholders.

External financing

As of 30 September 2021, total available bank credit facilities were SEK 500.0 (880.0) million, of which SEK 137.5 (248.1) million were utilized.

Credit facility	Amount	Utilised	Unutilised	Maturity date
RCF (SEK m)	500.0	137.5	362.5	May, 2022
Bond (SEK m)	995.0	995.0	0.0	Sep, 2022

Equity

Equity in the Group was SEK 5,592.0 (5,079.6) million, corresponding to SEK 40.93 (37.17) 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 2020 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 annual report. Below is a summary of the most recent implemented or planned changes in gaming legislation in markets relevant to the Group.