Better Collective

Regulatory release no. 25/2023

Flash Highlights

• Revenue: 88 mEUR, growth of 30%, organic growth of 23%
• Recurring revenue: 41 mEUR, growth of 75%, 46% of Group revenues versus 35% Q1 last year
• EBITDA before special items: 33 mEUR, growth of 44%
• April trading update: Revenue of 27 mEUR; 40% growth
• Financial targets are maintained

Q1 Highlights

• Q1 Group revenue grew by 30% to 88 mEUR, which is another record quarter (Q1 2022: 67 mEUR). Organic revenue growth was 23%.
• Recurring revenue was 41 mEUR, implying 75% growth. Equal to 46% of Group revenue versus 35% Q1 last year.
• Q1 Group EBITDA before special items was 33 mEUR, a growth of 44% (Q1 2022: 23 mEUR). The Group EBITDA-margin before special items was 38%.
• Cash flow from operations before special items was 33.4 mEUR (Q1 2022: 13.1 mEUR). The cash conversion was 100%. By the end of Q1, capital reserves stood at 91.6 mEUR of which cash of 28.1 mEUR, other current financial assets of 17.1 mEUR and unused bank credit facilities of 45.6 mEUR.
• New Depositing Customers were 488K in the quarter implying growth of 35%. NDCs sent on revenue share contracts were 71%.
• On November 22, 2022, Better Collective initiated a share buyback program for up to 5 mEUR, which was completed on January 20, 2023.
• Better Collective acquired a position of >5% in Catena Media.
• In connection with the release of its annual report 2022, Better Collective announced new long-term financial targets for the period 2023-2027:
  • Revenue CAGR of +20%
  • EBITDA-margin before special items of 30-40%
  • Net debt to EBITDA below 3
  • The targets assume M&A solely financed by own cash flow and debt

• The Group signed its first global media partnership with the digital soccer platform Goal, while also signing with the well-established Polish news portal Wirtualna Polska. Better Collective also established a media partnership with Nigeria’s leading news media, PUNCH, and in doing so entered a new continent with a growing population of sports enthusiasts.
• Ohio launched online sports betting, which from a regulatory perspective was a perfect state launch. The state of Massachusetts regulated online sports betting. With a population of seven million and a strong sports legacy, the state holds the potential to become one of the biggest sports betting markets in the US.
• An asset deal for a sports media in an emerging market for 4.3 mUSD was made.
• The Group hosted its first ever Capital Markets Day in March reflecting on the performance since the IPO in 2018 as well as laying out the strategy for the future. The presentation can be found here.
• On February 21, a share buyback program was initiated for up to 10 mEUR, to be executed during the period from February 22 to April 24, 2023.
• Better Collective’s esport community HLTV hosted the world’s largest esport award show, watched by more than 250.000 Counter Strike: Global Offensive fans. 
• The Board of Directors implemented a new Long Term Incentive Plan for key employees. The total value of the 2023 LTI grant program is 2.9 mEUR (Black-Scholes value).

Significant events after closure of the period

• April revenue of 27mEUR implying 40% growth.
• The Group acquired Skycon Limited and in doing so expanded its efforts within digital display advertising. With the acquisition the financial targets for 2023 were upgraded to: Revenue of 305-315 mEUR (previously 290-300 mEUR), EBITDA before special items of 95-105 mEUR (previously 90-100 mEUR), and Net debt to EBITDA before special items <2 (unchanged).
• The AGM 2023 was held electronically on April 25, 2023.
• On April 27, the UK Government published a “White Paper” as part of a Gambling Act review. Better Collective welcomes the long-awaited proposed initiatives with a stronger focus on safer gambling. Given the proactive compliance measures sportsbooks had already taken, the Group estimates the proposed measures to have zero to limited financial impact on the Group.
• The share buyback program initiated on February 21, was complete on April 25. 

CEO letter

Another record-breaking quarter and big strategic ambitions

Q1 proved to be another record-breaking quarter. The performance was driven by Latin America and state launches in the US as well as general strong underlying organic growth across the Group. The last couple of years, Better Collective has been on a transformational journey developing itself from a performance-based marketing business into a digital sports media group. In Q1, the Group hosted its first Capital Markets Day where the framework for Better Collective’s vision was presented.

Record breaking quarter continuously absorbing US revenue share transition
In Q1 we continued last year’s strong momentum. Revenue grew 30% YOY, while operational leverage proved its worth as EBITDA grew 44% YOY. In itself, this growth is impressive, yet even more impressive when considering the strong growth, we saw last year. Additionally, last year’s US revenue was positively impacted by one-time payments (CPA), while this year we are continuing the transition towards recurring revenue share.

At our Capital Markets Day (CMD), it was highlighted that 63% of all NDCs sent during February were on revenue share. I am happy to inform you that this trend has continued. I am especially proud that we yet again delivered a record quarter with the North American market contributing with 19% growth, while absorbing the revenue share transition. During the Ohio launch in January, our US business did extremely well, and from a regulatory framework and operational perspective it was a perfect state launch. The Massachusetts launch in March also generated good activity, however, due to regulatory wavering and the NFL season being over, this was not as strong as Ohio’s. As seen in the past quarters, Latin America continued its strong growth trajectory during Q1, and we have strengthened our presence and efforts in the region significantly. Furthermore, Media Partnerships continue to be a strong driver of growth in Europe & ROW. This combined with a strong underlying growth in Europe we managed to grow 40% in this region during Q1. It is worth mentioning the strong development in our Paid Media business as well, which grew 51% YOY on topline and more importantly 174% on operational earnings with the margin going from 15% to 27% YOY. Truly a strong sentiment to our operational development and our investment in transitioning to recurring revenue share. Our Group’s momentum continued into April where revenues grew 40% YOY. It is worth remembering that our business is reliant on sports activity and thereby fairly seasonal. This means that the sports activity is expected to slow down during the low season in the summer period as usual.

Strategy shift requires building new capabilities
Venturing into the digital sports media market means that we have expanded Better Collective’s addressable market significantly, but it has also required that we as a group adapt new capabilities. A core strength of Better Collective is its ability to employ performance-based marketing when referring new customers to sportsbooks through SEO and CRO expertise to maximize traffic and conversion rates. As such, our focus has been to provide trustworthy and clear content with moderate depth. However, with our vision to become the leading digital sports media group, focus has expanded to also include the maximization of viewers, engagement, time on site, and monthly active users combined with efforts to provide the best user experiences through innovative products. Consequently, our content has and will continue to become deeper, more frequent, newsworthy, as well as investigative with the objective of engaging as many sports fans as possible. This shift in focus is not meant to take precedence but should build on top of Better Collective’s legacy and expertise - after all it is thanks to our strong legacy that we find ourselves in a highly attractive spot in the sports media industry. Better Collective excels at maximizing the value of large readerships because we can utilize our unique skills and diversified business models, and these capabilities will continue to ensure organic growth.

Risk mitigation; a positive side effect from growth and strategic focus
Better Collective has progressed from being ”a business” to being an “integrated collective of businesses' with an increased reach and a more diversified offering, which in recent years has proven its worth. We have decreased the dependency on search engine traffic from around 60% to less than 35% by mainly acquiring strong brands with heavy direct traffic. Previously, our largest business partner accounted for 50% of the Group’s revenue. Today, the same and still largest partner accounts for less than 20%, though we have grown the partnership significantly in absolute terms. Five years ago, 85% of revenues were generated from Europe. In 2022, 40% of revenues stemmed from the US alone, and we have only just recently dipped our toes into the Latin American and Canadian markets. As such, working to mitigate the risks in our business benefits not only Better Collective but also our partners and shareholders.

M&A will remain a core part of our strategy
Combining a focus on organic growth and M&A has proven beneficial in the digital sports media industry. Since the IPO in 2018, Better Collective has made 29 acquisitions, which undeniably makes M&A a core part of the business strategy. However, the overarching shift in strategy also affects our M&A approach. Until recently, acquisition targets only consisted of “traditional” performance-based marketing companies with a user database on recurring revenue share agreements. The strategy and objective were to roll-up enough assets to gain critical scale - like we have now. The past year and onwards, our M&A strategy is to acquire strong local and global sports media with a large and loyal readership, preferably with revenue mainly generated from a single business model in regular advertising. By acquiring such assets, we establish a unique chance for the Group to leverage its legacy expertise in optimization while utilizing our business models to grow reach and revenue. If you wish to dive more into our M&A strategy, I urge you to watch our Capital Markets Day as CFO, Flemming Pedersen, walked through the Group’s strategic M&A objectives.

Our massive reach deserves an in-house AdTech platform
In the Q4 report, we announced a strategic investment in a new AdTech platform. An AdTech platform is a technology platform using advanced data analytics and machine learning algorithms that analyze user behavior in order to provide valuable and engaging advertising targeting specific needs. Put simply, by building an in-house AdTech platform Better Collective will be able to offer targeted marketing ads directly to the millions of sport fans that visit the Group’s broad portfolio of sports brands. Several third-party platforms already exist, and as Better Collective has been highly acquisitive, we have managed to accumulate several AdTech platforms. However, by building our own platform we can now streamline the process and maximize the yield.
So, why now? As also highlighted at the CMD, Better Collective’s reach has grown significantly from +7m monthly visits in 2018, to +150m monthly visits in 2022. We have truly gained critical scale in our reach and see an increasing demand from our business partners wanting to market their products in the advertising space on our sports media. These partners range from long-standing sportsbook partners to global payment providers, companies in the energy drink market, and many more.

Revenue diversification mitigates risk and makes us more relevant to our partners
By building an AdTech platform, Better Collective will add to its legacy in performance-based marketing and venture into brand marketing (cost per mille, cost per engagement, cost per view). Not only will this move further diversify our revenue streams, but it will also make us more attractive to our business partners. Large synergies can be achieved across our Group, e.g., for our media partnerships we now also have the capabilities to serve the general sports sections with advertisement instead of just the sports betting sections.

Q1 was the development, testing, and ramp up phase of our AdTech platform. I have already received initial positive feedback from various business partners, who acknowledge that there is a big demand for our offering. The investment will elevate Better Collective to become an even stronger AdTech machine which aligns perfectly with our vision of becoming the Leading Digital Sports Media Group.

Jesper Søgaard
Co-founder & CEO

Q1 Webcast

A telephone conference will be held at 10.00 am CET tomorrow on May 17th, by Co-Founder & CEO, Jesper Søgaard, CFO, Flemming Pedersen and Senior Director of Group Strategy, IR & Corporate Comms, Mikkel Munch-Jacobsgaard. The presentation will simultaneously be webcasted, and both the telephone conference and the webcast offer an opportunity to ask questions.

Webcast link: https://edge.media-server.com/mmc/p/ucyqyoym