Betsson

Betsson AB (publ) interim report April – June 2021

All time high profit driven by stable and scalable business model

Group revenue was SEK 1,751.6 (1,532.8) million, an increase of 14%. Organic increase of 24%.
Casino revenue decreased by 5%. Sportsbook revenue increased by 125% and the sportsbook margin was 8.5% (6.9%).
Operating income (EBIT) was SEK 383.4 (217.7) million, an increase of 76%, the EBIT margin was 21.9% (14.2%).
Net income was SEK 337.9 (192.9) million, corresponding to SEK 2.54 (1.40) per share.
Operating cash flow was SEK 570.7 (343.9) million.
Active customers increased by 25% to 1,027,635 (820,512).
Acquired 50% of JDP Tech Ltd and 35% of Strive Platform Ltd.
The Annual General Meeting approved dividend to shareholders of SEK 3.68 per share, corresponding to SEK 502.9 million.

QUARTER APRIL – JUNE 2021 PERIOD JANUARY – JUNE 2021

Group revenue was SEK 3,344.4 (2,950.3) million, an increase of 13%. Organic increase of 25%.
Operating income (EBIT) was SEK 659.5 (478.3) million, an increase of 38%, the EBIT margin was 19.7% (16.2%).
Net income was SEK 577.9 (422.5) million, corresponding to SEK 4.33 (3.08) per share.
Operating cash flow was SEK 898.4 (665.8) million.

KEY DATA

SEK m	Q2 2021	Q2 2020	∆	Jan-Jun 2021	Jan-Jun 2020	∆	Jan-Dec 2020
Revenue	1,751.6	1,532.8	14%	3,344.4	2,950.3	13%	6,389.6
Gross profit	1,173.0	958.5	22%	2,208.9	1,902.3	16%	4,100.9
EBITDA	472.3	304.2	55%	834.1	657.1	27%	1,484.3
EBITDA margin %	27.0	19.8	-	24.9	22.3	-	23.2
Operating income (EBIT)	383.4	217.7	76%	659.5	478.3	38%	1,125.2
EBIT margin %	21.9	14.2	-	19.7	16.2	-	17.6
Net income	337.9	192.9	75%	577.9	422.5	37%	990.8
Earnings per share (SEK)	2.54	1.40	81%	4.33	3.08	41%	7.32
Operating cash flow	570.7	343.9	66%	898.4	665.8	35%	1,384.4
Casino revenue	1,222.1	1,286.3	-5%	2,399.5	2,300.5	4%	4,890.6
Sportsbook gross turnover	8,342.2	4,829.7	73%	17,081.5	11,663.6	46%	28,424.2
Sportsbook revenue	510.1	226.5	125%	904.1	611.3	48%	1,423.0
Sportsbook margin after free bets %	8.5	6.9	-	7.8	7.8	-	7.5
Deposits	7,355.6	6,592.0	12%	14,644.0	12,333.5	19%	27,801.0
Active customers (number of)	1,027,635	820,512	25%

Pontus Lindwall President and CEO Betsson AB

CEO COMMENT

"All time high profit driven by stable and scalable business model"

The second quarter is proof of the strength of our business model. We have achieved an all time high profit based on our scalability and geographic spread, we have strong growth in Latin America, and we have strengthened our B2B-offering through the agreements that have been entered with Strive Platform Limited and Masterpiece Gaming.

During large international sporting events such as the CONMEBOL Copa América in football and the Euro 2020 the group have offered entertaining, competitive, and secure products. The ability to take advantage of these big sporting events is connected to the constant development of functions in the sportsbook to improve customer experience. We have also increased the exposure of Betsson's brand, especially in selected countries in Latin America, which has attracted new customers in the region. The successes connected to both CON-MEBOL Copa América and the Euro 2020 also paving the way for next year's World Cup in football. Important reasons behind us being able to reach an all time high profit are the strong sportsbook activity, primarily driven by the football tournaments, high sportsbook margins, and positive gross margin effect as a result of a larger share of total revenue coming from the sportsbook.

The strength in our business model is coming from a stable and adaptable technology platform enabling economies of scale as our business grows and local knowledge of each market that enables us to quickly adjust our offerings based on changing customer behaviors.

Increased market share in key markets

During the quarter, we gained market share in many important markets, not least in our home market Sweden, but also in the Baltics and Croatia. Establishments in new markets is also bearing fruit, not least in LatAm which has performed strongly thanks to marketing activities in selected markets. Betsson is now the market leader in Peru and in Brazil a marketing campaign has gone viral by a sponsorship of the "world's worst" football team. Betsson was also the official regional sponsor of CONMEBOL Copa América, which contributed to strong growth in new active customers in the region during the quarter. Our overall business is performing well but we see potential challenges coming up, often based on local initiatives to regulate markets.

Continued investments in the United States

Investments in the US market are continuing. In April we invested in a strategic ownership in a new Player Account Management system, the Strive Platform, and Betsson's sportsbook has now been integrated into the platform. In my view, this combination makes the US investment even more exciting. However, choosing to use Strive instead of one of the precertified platforms means that the original schedule for the launch of our B2C offering through Betsafe in Colorado will be slightly postponed. Our assessment now is that the planned launch in the second half of 2021 will be moved to the first quarter of 2022. The background to this is that the platform needs to be tested and certified, which can only happen after all components, such as PAM system, sportsbook, app and more, are fully developed. However, the advantages of being able to launch our offering on a modern platform outweigh the fact that we must postpone our launch.

Successes in our B2B business

The investment in Strive was not the only thing that strengthened our B2B offerings during the quarter. The agreement we entered into with Masterpiece Gaming Limited, a subsidiary of the commerce & ventures segment of German media group ProSieben Sat.1, also shows that we have a competitive and attractive sportsbook. The agreement primarily concerns Masterpiece Gaming's launch of an online gaming offering on the German market and is an important and clear signal that we are following our growth strategy and strengthening our international B2B partnerships.

Founded in

1963

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

Ticker: BETS B

Betsson Group operates 20 brands

Licensed for gaming in 19 jurisdictions

SIGNIFICANT EVENTS AND OUTLOOK

SIGNIFICANT EVENTS DURING THE QUARTER

In April, Betsson acquired 35 per cent of the shares in Strive Platform Limited, a North American facing company with market leading expertise building a modern US-focused platform (PAM) system. The combination of market leading expertise in the US market and technological innovation that Strive stands for, will combined with Betsson's in-house developed sportsbook be a unique product for the American market. The American market consists only of a few PAMs and sportsbooks that are structured so that they can be adapted to different regulatory environments in different states in an effective way. The investment brings together two high-quality and independent iGaming technologies to the American market. The purchase price amounted to USD 6.5 million with the option to increase the ownership share by an additional 5 per cent at the launch of Betsson's B2C brand Betsafe in Colorado.

In mid-April, Betsson acquired 50 per cent of the shares in the software and development company JDP Tech Ltd, which owns a proprietary technical platform for handling payments in Latin America. The purchase price of the shares amounted to EUR 8.8 million, where the first down payment was paid during the second quarter. As a result, Betsson get access to better payment solutions and can better manage customers' payment flows during the continued expansion in Latin America.

Betsson entered into a partnership with a local partner (Big Bola Casino) on the locally regulated Mexican market, where Betsson will offer online gaming on sportsbook and casino.

The Annual General Meeting in May resolved on the dividend of shares and an automatic redemption scheme. The redemption scheme meant that approximately SEK 502.9 million, equivalent to SEK 3.68 per share, were distributed to the company's shareholders.

At the end of May Betsson.gr was launched in Greece after Betsson was granted two of the country's new Hellenic Gaming Commission licenses, one for casino, slots and poker and one for sportsbook. Betsson.gr will offer online gaming with sportsbook, casino, live casino and virtual sports products. Betsson will also establish a tech hub in Greece, creating several local employment opportunities.

In June, Masterpiece Gaming Limited chose Betsson as its supplier for sportsbook and technology platform prior to its launch as an online gaming operator on the German market. The B2B agreement strengthens Betsson's position as a sought-after provider of sportsbook and PAM-systems in international markets.

SIGNIFICANT EVENTS AFTER THE END OF THE QUARTER

On July 13, Betsson announced that its presence in Eastern Europe would be expanded through an establishment in the Republic of Belarus. The initial offering includes casino, sportsbook and poker under the Europebet brand and is the first brand to offer poker in the country. Several gaming providers are already on board and a wider portfolio of games by other suppliers will be added shortly.

TRADING UPDATE

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

The average daily revenue in the third quarter 2021 up until and including 17 July was 1.7 per cent higher than the average daily revenue of the full third quarter 2020. Adjusted for currency effects and acquisitions, the average daily revenue until 17 July was 8.1 per cent higher than the average daily revenue of the full third quarter 2020.

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 maneuver 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 successful entry in Croatia creates favorable prerequisites for further expansion in the region. The proprietary sportsbook means substantial opportunities to create new offerings with economies of scale.

During the second quarter, Betsson entered into an agreement with the German company Masterpiece Gaming will offer Betsson's sportsbook and platform in connection with their online gaming launch on the German market.

Betsson has also obtained online gaming licences for sportsbook and casino on the Greek market, making it the 18th regulated market for Betsson. The launch in Greece took place on the day before the start of Euros with an offering specially customized for the Greek market.

In 2021, investments in developing new markets and new technology have been intensified as part of Betsson's long-term growth strategy. During the second quarter, these costs amounted to approximately SEK 52 million and are attributable primarily to Africa and Latin America. In the United States, Betsson will launch its sportsbook as the first supplier on the Strive platform. Certification of Betsson's American sportsbook within Strive will occur on a state-by-state level and the launch is expected to take place during the first quarter of next year through a B2C offering in Colorado, together with Dostal Alley Casino.

Through the investment in a platform for payment solutions for the Latin American market in April, Betsson strengthened its position ahead of continued expansion in the region. The platform will help Betsson smoothly manage customers' payment flows, providing a competitive advantage in the form of opportunities for faster pay-outs.

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, 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. There are extensive initiatives ongoing to simplify the structure and architecture to increase scalability.

More and more brands are being moved to the cloud, resulting in faster downloads, which is core for the customer experience and increases efficiency at the same time. The transformation to cloud-based services continued during the second quarter to secure a high system capacity in connection with the Euro 2020 and CONMEBOL Copa América.

During the quarter, a number of tools intended to strengthen the customer experience were launched, such as customized product views, an improved menu design for StarCasino for the Italian market and automatic language settings based on the user's IP address for certain products. To meet the need of competitive payment solutions, a wide range of new payment providers were integrated into the platforms for Greece, Germany, and Argentina during the quarter.

Playtech Live Casino, which was launched in the first quarter of 2021, has during the second quarter been made available for additional Betsson brands and on more European markets. This has resulted in a more varied customer offering and reduces Betsson's dependency on specific external vendors.

Betsson's investments in its proprietary sportsbook contribute to a solid technical platform and flexible odds-setting that can be optimized based on customer's individual demands and availability of sporting events. The sportsbook is adapted for local markets and is available on both Betsson's brands and on the B2B offering.

Intensive work is underway ahead of the launch of the sportsbook offer in the USA. The integration of Betsson's sportsbook into the Strive platform is almost complete and in parallel work is underway to complete the adaptation of the proprietary sportsbook to the US market, e.g. development of functions, offerings, customer interfaces and adaptations to the requirements of the licensed states. The US-adapted sportsbook is expected to be ready for testing and certification during the third quarter of 2021. The testing and certification process normally takes about 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.

Business compliance

Betsson holds gaming licenses in nineteen countries with largely different legislation. 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.

The Swedish Trade Association for Online Gambling, or BOS (Branschföreningen för Onlinespel), where Betsson is a member, represents more than 20 licensed gambling companies operating in Sweden. BOS works for a sound and safe gambling market characterized by strong consumer protection where all gambling companies have equal rights and responsibilities.

In collaboration with BOS and its members, Betsson launched a new information website, Facts about Gambling (Fakta om spel) during the quarter, to increase awareness about the Swedish gambling market. The ambition for the site is to be a central database for facts and statistics about the licensed Swedish gambling market, be easily accessible and thus encourage a more transparent and fact-based debate, which is fundamental for a sustainable business.

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, inspire and 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, Betsson held an extensive training course called Social Responsibility and Interaction specifically tailored for the Responsible Gaming Team. The training was

developed by GamCare, a leading provider of information, advice, and support regarding gambling harm.

A new self-assessment test which was launched in Sweden during Q1 2021 is now being finalized for the Danish brands. This anonymous self-assessment test has been developed in cooperation with Sustainable Interaction, a company which creates research-driven digital products within responsible gaming. The customers fill in a questionnaire about his or her gambling habits and gets an evaluation of the results and recommendations for how to proceed, for example to take a break from gambling or learn more about how to gamble safely.

Also, during the quarter, the annual eCogra gaming platform certifications for Italy, Sweden, and Denmark were completed. eCogra works with testing and certification of online gambling systems. With the certification, the gaming platforms meet Cogra's requirements for security, ethics and responsible gaming.

In Q2 2021, 11 per cent of customers used non-mandatory tools to control their gambling (18.4 per cent) and 30.3 per cent of all new depositing customers during the quarter set a deposit limit (42.3 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.

In the second quarter, 1 per cent, of all customers who contacted customer service were red flagged (2 per cent). This system builds on 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 sent 76,025 interactions with customers manually, automatically and via real-time messages during Q2 (55,396). Betsson significantly increased its interactions with customers during the pandemic, and these have remained on the same level also in 2021.

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 from playing. Betsson also has the possibility to exclude the player from further gambling.

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, it was announced that Betsson will be adopting a hybrid working from home model as soon as it is safe to go back to the office. With a hybrid model, Betsson's employees will be able to work from the office with all of the important benefits of seeing colleagues face-to-face on a regular basis, but also have the flexibility of remote work for parts of the week. The model will be implemented country by country, depending on the local pandemic situation.

Between March and April 2021 Betsson held Lead Remote training sessions focused on increasing remote leadership competence. The training was arranged by the Stockholm School of Economics and HR. 254 Betsson leaders gave the training an overall rating of 4.5/5 and 98 per cent of the respondents found the content relevant and actionable.

During the quarter Betsson continued its work for diversity and inclusion. Within Betsson's global network WIBE – Women in Betsson – Fiona Buckley, a well-known keynote speaker and coach, held a talk for all employees, regardless of gender, with a timely message of empowerment and how to minimize isolation and promote personal visibility in a virtual world.

Social impact

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

In Malta, Betsson supported the first anti-bullying NGO with reused laptops. The company also made a donation to the Malta Women for Women Social Fund, which supports women and their families through difficult times.

responsible gaming

Betsson AB (publ), Interim report April-June 2021 6

Betsson made a donation to a food bank in Lithuania and a number of tandem bikes to LÁSS Egyesület, which is a sport and leisure association for visually impaired people in Hungary. In Georgia, Europebet marked the one-year anniversary of the opening of a rehabilitation center by offering free psycho-rehabilitation courses for gambling addicts and medical staff fighting COVID-19.

Climate impact

Betsson operates in an industry with relatively low CO2 emissions, but nevertheless has a responsibility to help counteract climate changes. Betsson has previously submitted its targets 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 to the Science Based Targets initiative (SBTi). During the quarter SBTi made a thorough assessment of the company's submission against the Call to Action's (Paris Agreement) eligibility criteria, and in June approved the targets. During the autumn, Betsson will develop a climate roadmap for how to reach its climate goals. The SBTi Targets will be followed up on a yearly basis.

SECOND QUARTER DEVELOPMENTS

CUSTOMER ACTIVITY

Customer deposits in all operational subsidiaries' gaming solutions during the quarter were SEK 7,355.6 (6,592.0) million, an increase of 12%.

By the end of the second quarter, the number of registered customers was 20.9 (18.5) million, an increase of 13%.

Active customers during the quarter reached an all time high and were 1,027,635 (820,512), an increase of 25%.

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 licence in Malta. POS or Point of Supply regulation refers to markets

25% Increase of active customers

compared to the same period last year

that are targeted, based on EU and/or international law principles, without being licenced and taxed in such markets.

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

Nordics

Revenue from the Nordics was SEK 550.4 (485.0) million, an increase of 13.5%.

Revenue by region

ROW (17%)

Operations in the Swedish market continued to develop well and showed the highest revenues since the reregulation of the Swedish gaming market in January 2019. Betsson has increased its market share in Sweden compared with the previous year, mainly driven by Jalla Casino and new customers in the sportsbook during the Euro 2020. The sportsbook also grew strongly in Denmark following the Euro 2020, and in Finland both the Ice Hockey World Cup and the Euro 2020 contributed to an increased intake of new customers. Betsson's commercial adaptations and its own technical solutions has enabled the integration of new payment solutions, which resulted in that the Norwegian revenues recovered during the quarter.

Western Europe

Revenue from Western Europe was SEK 402.9 (550.2) million, a decrease of 26.8%.

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

In Germany, revenues were in line with the low levels during the last quarter as a consequence of the restrictions on online casinos introduced in October and December 2020. The process for casino licensing on the German market opened on 1 July. During the quarter, Betsson entered into an agreement with the German company Masterpiece Gaming. Masterpiece Gaming intends to establish itself within online gaming on the German market under the brand name JackOne with Betsson's sportsbook and platform.

Italy's strong growth slowed somewhat as a result of the gradual reopening of society after the pandemic and increased competition from land-based operators that have improved their online offerings.

CEECA

Revenue from Central & Eastern Europe and Central Asia (CEECA) was SEK 501.9 (363.6) million, an increase of 38.0%.

The Georgian operations continued to develop well, and the business reported increased revenues in relation to the corresponding quarter in 2020.

The operations in the Baltics are developing well. In Lithuania the development was driven by both sportsbook and the casino operations. The Lithuanian sportsbook was positively affected by Eurovision song contest, Euroleague in basketball and the Euro 2020. The operation in Estonia shows high activity level and noted all time high deposits during the second quarter. Revenues in Latvia increased due to the World Cup in ice hockey.

The high level of activity continues in Croatia and the market was able to show the highest level of revenue to date during the second quarter. In the middle of July Betsson reported that the company was launching in Belarus.

ROW, Rest of the world

Revenue from RoW was SEK 296.5 (133.9) million, an increase of 121.3%.

Betsson's revenues grew in ROW primarily due to new customers in Latin America, where the largest customer growth is occurring in Peru and Chile, resulting in all time high revenues in both countries. During the second quarter, Betsson became the official regional sponsor of CONMEBOL Copa América, which resulted in increased exposure of Betsson's brand and in an increased number of active customers in the region. In Peru, Betsson is the market leader via the Betsson and Betsafe brands.

Betsson is currently establishing a service hub in Colombia's capital Bogotá. Colombia, the only completely regulated market for online gaming in Latin America, will act as the region's contact center and support expansion to the other countries in the region. Betsson's investment in JDP Tech Ltd, owner of a proprietary platform for payment solutions in Latin America, will further support the expansion.

Pending a regulation of the sportsbook market in Brazil, most of the revenue came from betting on horse racing via the license under which Betsson operates. Another initiative in the efforts to establish a customer database and increase brand awareness has been the launch of fantasy football. Betsson's sponsorship of Íbis Sports Club, who call themselves the worst team in the world, became a viral campaign, which is another initiative to increase the brand exposure in the wait for a market reregulation.

In April, Betsson entered into an agreement with a local partner (Big Bola Casinos) in the locally regulated Mexican market, where Betsson will offer sportsbook and online casino.

In Kenya, covid-related marketing bans continued during the second quarter. Given that the marketing ban was lifted on 12 July, activities are underway to be able to launch full-scale marketing efforts towards the end of July as a preparation for the start of the European football leagues in mid-August.

In April, Betsson took the step into the licensed Nigerian market, through the acquisition of 25 per cent of the local gaming operator Betbonanza.

Investments in the US market continue unabated. In April, Betsson deepened its partnership with Strive Platform Limited by acquiring 35 per cent of their shares. The company has developed a modern platform (PAM) based on its market-leading expert knowledge of the US market. Betsson's main business in the US market is the sportsbook offer towards B2B and the Strive platform will create a scalability. Betsson's proprietary sportsbook can thus be offered together with a modern PAM providing a strong offering for this market.

MARKET DEVELOPMENT BY PRODUCT

Casino

Betsson's casino product includes a wide range of suppliers and a diverse content library, built to suit 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, as well as the Group's own exclusive titles. During the quarter, Betsson released 240 new casino games, 17 of which came with a Period of Exclusivity for Betsson's brands. Betsson has a total of over 5,000 game titles available from over 100 different suppliers. More than 4,000 games are available on mobile casino.

Playtech Live Casino was launched during the second quarter for additional brands and in additional countries in Europe. This means that Betsson is further diversifying its Live Casino portfolio and offering a more varied Live Casino selection. Tournaments were integrated into a number of different brands.

Betsson processed circa 3.8 billion game rounds on the in-house platform in the second quarter, an increase of 7 per cent compared to the second quarter previous year.

Casino revenue was SEK 1,222.1 (1,286.3) million, a decrease of 5%. The decrease was driven by the boosted Casino activity in the second quarter 2020 from cancelled sport events and by the decreased activity in Germany and in the UK. Casino represented 70% (84%) of Group revenue.

Mobile Casino revenue was SEK 899.0 (925.6) million and accounted for 74% (72%) of total casino revenue.

Sportsbook

The second quarter of 2021 returned above average margin following strong returns from both live and pre-match. This was in particular driven by performance from football. The quarter saw the conclusion of major domestic football leagues and European competitions, followed by the group stages of Euro 2020 and the CONMEBOL Copa América tournaments. The overall football margin was healthy despite relatively challenging results at the end of the Premier League and La Liga seasons. The final stages of the Champions League returned strong margins as did the Euro 2020 following favorable results, for example, in the round of 16-finals. In other sports, the conclusion of the NBA Basketball season and start of the playoffs proved popular, as did the NHL and World Championships in Ice Hockey.

Success factors for the high level of customer activity were strong marketing, primarily in LatAm where Betsson entered a number of sponsorship activities and was, among other things, the official regional sponsor for CONMEBOL Copa América

Betsson's sportsbook continued to be improved with multiple important functions during the quarter and especially in connection with the Euro 2020 and CONMEBOL Copa América

Casino (70%)

Sportsbook (29%)
Other (1%)

in June. In April, a new B2B brand (Rexbet) within the Realm offering of Betsson's sportsbook was launched and improvements to the user interface have been implemented along with improvements in the scalability of the technology.

Gross turnover in sportsbook in all Betsson's gaming solutions, was SEK 8,342.2 (4,829.7) million, which is an increase of 73% compared to the second quarter last year.

Sportsbook revenue in the second quarter reached an all time high and was SEK 510.1 (226.5) million, an increase of 125%. Sportsbook represented 29% (15%) of Group revenue.

The sportsbook margin was 8.5% (6.9%). The eight-quarter rolling average margin was 7.4%.

Mobile sportsbook revenue was SEK 419.4 (174.4) million, representing 82% (77%) of total sportsbook revenue.

Other products

Revenue from other products (poker, bingo and other) was SEK 19.4 (20.1) million, a decrease of 3%, representing 1% (1%) of total revenues.

FINANCIAL DEVELOPMENT

Group revenue

Group revenue was SEK 1,751.6 (1,532.8) million, an increase of 14,3%, of which 24% was organic.

Revenue development

Locally taxed revenue from markets where Betsson pays local betting duties, decreased by 7% compared to the second quarter last year and was SEK 557.0 (596.3) million, corresponding to 31.8% (38.9%) of total Group revenue. Reduced share of locally taxed revenues is explained by strong sportsbook growth in LatAm and decreased revenues in UK and Germany during the quarter.

License revenue for system delivery to B2B-customers amounted to SEK 272.8 (208.9) million and corresponded to 16% (14%) 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 1,330.9 (1,106.4) million, representing 76% (72%) of total revenue.

Expenses

Cost of services provided was SEK 578.6 (574.3) million. The cost increase is mainly driven by increased payment provider fees and somewhat lower cost of license fees and lower gaming taxes.

Gross profit was SEK 1,173.0 (958.5) million, corresponding to a gross profit margin of 67.0% (62.5%). In relation to revenues, the cost of services is down, mainly due to a mixed effect on revenues where the share of sportsbook revenue has increased in relation to total revenues.

Operating expenses were SEK 789.6 (740.8) million.

Marketing expenses were SEK 322.9 (256.8) million. The increase is driven by marketing activities during Euro 2020 and CONMEBOL Copa América, where Betsson was the official regional sponsor of the latter. The cost increase is also related to marketing expenses in acquired companies, and as a result of expansions into new markets. The marketing ratio was 18.4 (16.8) per cent of revenues.

Gross Profit (msek) +22%

Personnel expenses were SEK 247.6 (219.9) million. The average number of full-time employees in the Group during the second quarter was 1,852 (1,642) of which 1,133 (1,027) were based in Malta. The increase in personnel expenses is due to geographic expansion, additional 87 employees in total, and increased investments in technology (mainly from development and adaptation of the sportsbook for the US market).

The Group had 237 (216) 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 197.9 (223.0) million. The decreased costs are mainly driven by a reversal of a provision for a sanction fee of SEK 20 million to the Swedish Gambling Authority that the Swedish Administrative Court overruled in June 2021.

Capitalised development costs were SEK 65.7 (62.4) million. Amortisation of capitalised development costs was SEK 53.8 (52.3) million. Total amortisation and depreciation for the quarter was SEK 88.9 (86.5) million.

Other operating income/-expenses was SEK 2.1 (-17.0) million. The increased income is driven by foreign currency effects, mainly unrealised, on current assets and liabilities.

Expenses as a percentage of revenues

Q2 2020 Q2 2021

Operating income and net income

Operating income (EBIT) increased by 76,1% to SEK 383.4 (217.7) million. The EBIT margin was 21.9% (14.2%), mainly due to a mixed effect on revenues where the share of sportsbook revenue has increased in relation to total revenues. EBIT was negatively impacted by currency exchange differences of SEK -94.8 million. Organically, EBIT increased by 120% to SEK 478.4 million.

Operating income development (EBIT)

Net financial items were SEK -13.8 (-11.0) million and are primarily related to interest costs. Net income was SEK 337.9 (192.9) million, corresponding to SEK 2.54 (1.40) per share.

The reported corporate tax for the second quarter was SEK -31.8 (-13.8) million, corresponding to 8.6% (6.7%) 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 June 2021 was SEK 902.7 (980.5) million. Customer liabilities, including reserves for accumulated jackpots, were SEK 440.8 (450.0) 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 540.6 (582.3) 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 second quarter was SEK 570.7 (343.9) million including an impact of SEK 131.9 (33.5) million related to changes in working capital. Positive effect on working capital is mainly driven by collection of a VAT receivable. Cash flow from investing activities was SEK -198.4 (-388.5) million and consists of investments in own development and acquisition of shares in associated companies (JDP Tech Ltd. and Strive Platform Ltd.). Cash flow from financing activities was SEK -579.6 (159.6), mainly driven by paid dividends to shareholders.

External financing

As of 30 June 2021, total available bank credit facilities were SEK 580.0 (880.0) million, of which SEK 0.0 (248.1) million were utilized. During the second quarter Betsson's RCF was renewed. From previously covering 800 million to now cover 500 million, maturity date set to 1 year, from previously 3 years.

Credit facility	Amount	Utilised	Unutilised	Maturity date
RCF (SEK m)	500.0	0.0	500.0	May, 2022
Bank overdraft (SEK m)	80.0	0.0	80.0	July, 2021
Bond (SEK m)	993.8	993.8	0.0	Sep, 2022

Equity

Equity in the Group was SEK 5,232.9 (5,215.9) million, corresponding to SEK 38.43 (38.17) 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 holds 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 annual report. Below is a summary of the most recent implemented or planned changes in gaming legislation in markets relevant to the Group.