Q&A: Pontus Lindwall on black markets, local regulation and share price surprises

Betsson CEO sits down with EGR following the publication on another record-breaking quarter for the Stockholm-listed business
The post Q&A: Pontus Lindwall on black markets, local regulation and share price surprises first appeared on EGR Intel.  

Betsson’s quarterly analyst calls have got into a trend. Management will detail another record-breaking three months, with revenue and EBITDA on the up in a continuous curve for the operator. Then, the lines will open for questions from waiting analysts and CEO Pontus Lindwall will rattle through the questions before signing off in his trademark cheery manner – noting that he will see everyone again in three months.

A quarterly visit from the bespectacled boss championing the operator’s recent success is now into its eight consecutive record quarter. This time, revenue for the last three months of 2023 landed at €251.9m, up 14% year on year, while EBITDA jumped 40% to €71.9m.

EGR caught up with Lindwall following the release of the results to pick his brain on recent success, as well as working closely with shareholders and potential black-market growth in Europe.

EGR: What is making Central and Eastern Europe and Central Asia (CEECA) so strong for Betsson at the minute, given the region is streets ahead of other markets after returning more than €100m in revenue for the quarter?

Pontus Lindwall (PL): It is comprised of many countries and we’re in different positions in different markets. It’s obviously a region where we put in a lot of effort and the total outcome for us has been very successful.

It’s hard to point anything out. In certain markets, we are very strong in casino as we have a pure casino offering and in other markets we are sportsbook driven, but still, we perform well.

I think what the countries have in common is that we have local knowledge in those markets and local people driving those markets and that helps a lot.

EGR: Are there any discernible player behaviour differences in CEECA that could be a driver?

PL: Not really. I think in some countries they are more prone to bet on their own leagues whereas in other countries they prefer to bet on the big leagues like the Premier League or La Liga. Apart from that, I think it is quite similar.

EGR: The report noted some strong improvement in Italy. What has driven growth in the market and what are the concerns, if any, over the potential licence fee increase to €7m?

PL: I think it is the same in Italy. We have a very strong local team. We went in with the casino product a long time ago and we have a very strong position in the casino market. Now, we will try to go more broadly with sports betting as well.

With the new licensing regime, there are higher costs to obtain a new licence. I think there’s an ambition for the government to streamline the market a bit. Maybe to not have as many licences as they have had so far. That could potentially be on the good side for us.

EGR: On the other side of the coin, could that lead to a potential increase in black-market activity?

PL: That’s a very good question. It’s something I have been thinking about, that if you take the players and squeeze them out of the regulated market, I think you can expect that they will attempt to go for the non-regulated offering. That could be problematic. That’s always a balance for any regulator to try and handle.

EGR: Revenue from locally regulated markets shot up to 45.9% from Q4 2022’s 34.2%. Was this an active push to do so, given you’ve been comfortable with having below 40% locally regulated revenue in the past, or is it just how the markets have developed?

PL: It is exactly as you said. We have always said that, in this industry, we’re going to go towards local regulation. If you go back 20 years, there were almost no local regulations. It is bound to happen and it will happen. It will happen for us step by step and when some markets regulate we will see the share increase for that specific quarter.

It may be more or less flat for a while until another market regulates, but eventually, maybe not all, but most markets will be locally regulated.

EGR: Is there any shareholder or investor pressure to increase the revenue share from locally regulated markets?

PL: Not really. Our shareholders are knowledgeable about this. They understand what is going on [in the industry]. They read about Latam which is regulating in many different countries. They know it is good to be there to be in a position once they enter into regulation.

I think they are very happy with where we are. If you started a long time ago with only locally regulated revenue then you would be out of business as it wasn’t possible. But we are now going to end up there with a very high share of regulated revenue.

EGR: Sticking with shareholders, there is the plan to return €88.5m to them as part of the dividend scheme. Will this impact any M&A plans or internal investment moving forward in 2024?

PL: We have a dividend policy stating that we could give out up to 50% of our profits. That policy gives us flexibility, obviously. So, if we would be in a position to make a large acquisition or something like that, we could definitely give out 30% instead or no dividend.

With our dividend policy, our shareholders have appreciated it a lot and we have done internal calculations, looking at what the dividend has meant to shareholders over time, and it’s been hugely successful.

It’s not that we have to sacrifice the M&A track or things like that; we can do that in parallel because of our strong balance sheet.

EGR: The group’s early 2024 trading update has daily revenue up 5.9% compared to the same period in 2023, but noted a lower sports betting margin. Can you shed some light on the performance this year?

PL: The fourth quarter was pretty strong with very high activity, even though it was a challenge with the margin in the first part of the quarter. Into the first quarter this year, we have maintained that activity – there is no change as such.

Sometimes people believe that the market slows down. It doesn’t really. It is only a matter of sports results and how packed the calendar is. Activity remains very high and, in light of that, it is a trading update that should not be worrying.

I expect the trend of high activity to continue. Sports results are very hard to predict and that is the whole beauty of it. That is the basis of our business model. As long as we have high activity and the customers come back, we’re going to be fine.

EGR: The Betsson share price is down more than 10% today, which seems harsh from an outsider perspective, any concerns about this or potential reason why?

PL: It is of course surprising that the share price has gone down a bit, but then again, the share price has been going up for quite some time. It might be that people are relocating some of their funds or maybe taking some profits they have made.

I think we will continue to focus on running our business, scaling the company, increasing the dividend and the share price will follow us upwards when we do that.

The post Q&A: Pontus Lindwall on black markets, local regulation and share price surprises first appeared on EGR Intel.


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