Regulatory release 38/2024

Flash highlights

• Revenue of 99 mEUR, growth of 27%
• Recurring revenue of 62 mEUR; growth of 26%
• EBITDA flat at 29 mEUR with a 29% margin, mirroring exceptional performance last year and as expected limited near-term margin contribution from recent acquisitions
• Net debt to EBITDA of 2.0
• Media partnership changes have been fully mitigated and had a net zero impact for the group
• Secured proof of concept and first operational success for AdVantage
• Full year financial targets were upgraded following the acquisition of AceOdds – and remain unchanged

Co-founder & CEO of Better Collective, Jesper Søgaard comments: “Thanks to a great team effort, we managed to deliver a strong Q2 in a time of changing market conditions. Our existing business is back to organic growth, and I am pleased to see that our diversified strategy has performed as envisioned”.

Q2 highlights

• Following the acquisition of AceOdds during Q2, the financial targets for the Better Collective group for the year 2024 were upgraded and remain unchanged:
  • Revenue of 395-425 mEUR, implying 21-30% growth (previously 390-420 mEUR)
  • EBITDA of 130-140 mEUR implying 17-26% growth (previously 125-135 mEUR) 
  • Net/debt to EBITDA stay below 3x (unchanged)

• Group revenue increased 27% to 99 mEUR of which 5% was organic growth. The growth comes on top of extraordinary performance last year with 37% growth of which 29% was organic growth during Q2.

• Recurring revenue was 62 mEUR, up 26% implying higher quality revenue. Recurring revenue makes up 62% of total group revenue. The recurring revenue growth comes from a good development in revenue share income, an above expected sports win margin, as well as acquisitions adding recurring advertising revenue. During the quarter, there was a boost in June due to the European Championship. However, with clubs taking an earlier break ahead of the tournament and the 2022 World Cup shifting games into early 2023, more than 20% fewer matches were played in major European leagues during Q2 2024.

• Group EBITDA before special items was 29 mEUR, with a margin of 29%. This is as expected given the recent acquisitions of Playmaker Capital and Playmaker HQ with limited near-term contribution. Furthermore, there has been an increase in investments into building out adtech competencies and sales competencies for AdVantage as well as other AI investments. This compares to EBITDA growth of 135% and a margin of 37% last year, aided by the extraordinary performance from North America including heavy upfront payments both for CPA and hybrid contracts. The sports win margin was above expectations for Q2 this year, just like last year.

• The increase in costs in North America stems from the acquisitions of Playmaker Capital and Playmaker HQ. Playmaker Capital is known for its backend loaded seasonality, hence the EBITDA contribution during the first half has expectedly been low. The margin contribution will increase during the second half of the year. Further, the acquisition came with overhead costs in Canada, all of which has been incorporated in the North American cost base. Additionally, the Playmaker HQ acquisition came with additional costs as well as underperformance. Excluding the two acquisitions, costs are down versus last year for North America.

• Cash flow from operations before special items was 27 mEUR. The cash conversion was 93%. By the end of Q2, capital reserves stood at 127 mEUR of which cash of 49 mEUR, and other current financial assets of 1 mEUR and unused credit facilities of 78 mEUR. 

• New depositing customers (NDC) numbered 501,000 where 82% was sent on revenue share contracts. The Men’s European Championship in soccer was, as expected, a good contributor during the quarter. A new content strategy on Better Collective’s European sports media proved effective and delivered strong growth in audience. The group sent more than 100.000 NDCs attributed to the tournament.

• The technical development of AdVantage has progressed successfully, and it is now gradually being rolled out across the Better Collective network. A dedicated commercial team has been established, and we have delivered the first proof of concept on a small brand, making the group confident to continue to roll out on larger brands in the coming quarters. The platform performed as planned and we have seen incremental revenue growth - although small - on a brand that historically only did performance marketing. As previously mentioned, financial impact for 2024 will be insignificant.

• Better Collective closed the acquisition of Playmaker Capital in early February. The integration has proceeded according to schedule, while the implementation of performance marketing in South America on Futbol Sites is – despite being early days - moving ahead of plans with performance marketing revenue more than 100% ahead of the schedule, although on small numbers. Furthermore, the overall Futbol Sites audience is up by approximately 20% since closing. Q2 remains a low season for the North American brands.

• Better Collective acquired UK sports betting media AceOdds for a total consideration of 43 mEUR implying 4x last twelve months EBITDA. Following the acquisition Better Collective upgraded its 2024 full-year financial targets. In connection with the acquisition, Better Collective announced a share buyback of up to 2.4 mEUR which was finalized during Q2. The integration of AceOdds has been seamless and swift and the brand is outperforming expectations, as it has benefitted from better rankings following the change in the search landscape.

• On May 5, Google activated a new policy focusing on third-party content across a variety of commercial categories. This impacted the rankings and thereby audience to some of Better Collective’s media partnerships. However, the media partnership business has continued to deliver good performance for the Group. The North American business has been impacted negatively by one specific media partnership which was affected by the changes, while the Europe & ROW media partnership portfolio overall has seen a positive impact. Consequently, some of Better Collective’s owned and operated sports media portfolio has seen an increase in traffic and rankings. Lastly, as sportsbook partners are looking for new customer acquisition channels, Better Collective has received increased budgets from partners within its Paid Media business. This proves the value of a diversified business strategy. Since the changes were announced, Better Collective has delivered group revenues, EBITDA and NDCs as expected prior to these changes, and the impact has been fully mitigated on a Group basis resulting in a net zero financial impact. Better Collective continues to believe that media partnerships will deliver good growth to the group.
  
• Due to underperformance from the acquisition of Playmaker HQ, Better Collective, Playmaker HQ’s founders, and former owners have agreed to renegotiate and settle the earn out. The initial acquisition price of Playmaker HQ was 54 mUSD of which 15 mUSD was upfront cash. The final price agreed is 23 mUSD; 31 mUSD lower than initially agreed. The net impact on special items is negative 2.4 mEUR, resulting from a goodwill write-down and the recognition of the remaining earn-out as income. Better Collective remain very optimistic about the future of the brand with the commercial team being replaced resulting in a ramp up in performance. Based upon the current commercial pipeline the performance is expected to be lifted during the second half of 2024. All future expectations for the brand are intact, however postponed by approximately one year.
  
• On June 24, Better Collective announced a share buy-back program for up to 20 mEUR to be executed during the period 24 June 2024 to 5 September 2024. The purpose of the buy-back program is to cover future obligations relating to acquisitions and LTI programs.

Significant events after the close of the quarter

• Google has decided to retract its plan to phase out third-party cookies. This extension presents several advantages for Better Collective. Primarily, the core performance marketing operations will maintain the use of established tracking methods, thereby mitigating associated risks keeping business as usual. Furthermore, the rollout of Advantage will be more seamless and potentially faster, as Better Collective can integrate zero, first, second, and now also third-party data to construct and segment its audiences more effectively.
  
• On July 5 Better Collective reestablished its three-year financing agreement with Nordea, Nykredit Bank and Citibank with a total committed facility of 319 mEUR and a new 100 mEUR accordion option.