Better Collective A/S

Good morning, everyone. My name is Mikkel Munch-Jakobsgaard, and thank you for joining us today for our Q4 webcast. I'm joined by our co-founder and CEO Jesper Sökko and CFO Flemming Pedersen, who will provide today's business update in connection with our Q4 report that was disclosed yesterday. Please follow me to the next slide. We ask you to pay attention to this slide where we display our disclaimer regarding any forward-looking statements in today's webcast. Please turn to the next slide. Here you see today's agenda. Jesper will start by providing a business update, including some of the highlights of Q4 and the full year 2024. Whereafter, Flemming will take you through some of the financials before handing the word back to Jesper for key takeaways. As usual, we will end the call with a Q&A session. Let's get going. Please turn to the next page as I hand over the word to you, Jesper. Thank you, Mikkel.

Good morning, all, and thank you for joining us today. was a year of unexpected challenges for Better Collective, shaped by significant external headwinds. After a strong start to the year, we faced several challenges, including the impact of the Google policy update and an accelerating slowdown in Brazil throughout the year due to the anticipation of new online gaming regulations, which has come in place by 1 January 2025. In the US, despite early good momentum, we saw lower than expected activity leading into the NFL season in the second half of the year, influenced by a shift in focus from challenger brands leading to lower marketing activity overall. In response to these market dynamics, we swiftly implemented a cost efficiency program, ensuring our operations are well aligned for 2025. Following the Brazilian regulation, we now anticipate a rebasing of the market and also a financial performance that expectedly will be impacted by new gross gaming tax and added costs on net gaming revenue as well as near-term player churn during the transition and unshoring of the market. Despite this, we remain confident in the long-term potential of the US and Brazilian markets. These are young markets constantly evolving and we need to be ready to constantly adapt. Just as a reminder, Brazil was insignificant for Better Collective a few years ago, while last year contributing almost 20% of revenues, hence a testament to our strong organic growth in past years. Despite market changes in Brazil and the US, we delivered solid growth in Europe and the rest of the world, Canada, and with our global esports assets. Our diversified portfolio of leading sports media brands, combined with strong financial discipline, position us well for returning to growth. Considering the headwinds we faced during 2024, the year ended with good performance after we adjusted our business to the market conditions. I'm very pleased with our ability to adjust and adapt even to external changes. Looking forward, our focus has shifted towards organic growth, safeguarding cash flow, and maintaining financial agility to capitalize on future opportunities. We are confident in our strategic direction and our ability to create long-term value for our shareholders. Thank you once again for joining us today. Please turn to the next page. 2024 showed 14% growth, mainly driven by M&A, as well as solid growth in certain parts of our business, like Europe and the rest of the world, Canada and e-sports. In the US market, we saw flat growth, which impacted the group's organic growth to be flat. However, we continued to build significant deferred revenue share value on top of the reported performance. We gave some flavor to that in connection with our Q3 report. The EBITDA before special items was up 2% by €2 million. Specifically for Q4, our revenues grew 13% with EBITDA growing 14% after seeing revenue in the high end of our expectations and initial effects of our cost efficiency program. Please turn to the next page. Our primary focus remains on expanding the recurring revenue in our business, and I'm pleased to report a 28% growth in Q4 and 21% growth for the full year of 2024. This demonstrates that despite short-term market changes, we have delivered the highest quality of financial performance in the company's history. Moreover, as many of you are aware, a significant portion of the new deposit in customers we provide to our partners are on revenue share contracts. In these cases, we don't recognize any or little value upfront, even though we're delivering the service today. In 2024, we delivered 1.8 million NDCs with 81% or 1.5 million being on revenue share agreements. This implies that we have built significant long-term value towards the future. Please follow me to the next page as we dive deeper into the Brazilian market developments. As mentioned earlier, Brazil's online gambling regulation officially went live on January 1st, 2025. Allow me to spend a few minutes diving into the market, a market I'm very optimistic about. The market launch has been awaited for a long time. I personally first heard about it back in 2016. I'm incredibly proud of how we strategically approach this market opportunity. A few years ago, we noticed growing interest from our partners in Brazil, prompting us to start planting organic seeds in the market. These initial efforts performed exceptionally well, leading us to scale up our paid media and media partnership initiatives, while also leveraging our existing brands in the region. This strategic approach fueled exponential growth in recent years. Last year, we strategically reinvested a large part of the cash flow generated from this growth to acquire the leading sports media group in South America, Playmaker Capital. This positioned us as the largest digital sports media group in the region, putting us in an ideal position to support our partners in what will undoubtedly be a highly competitive market landscape. However, this success story also presents a challenging comparison for 2025. Last year, Brazil generated more than 70 million euros in revenue, primarily from revenue share income piling up during the last few years. From January 1st, 2025, income from gambling and derived revenue share income will be affected by the estimated taxes and added cost on net gaming revenue of around 26%. Additionally, As existing players are required to re-register with sportsbooks, we anticipate extraordinary customer churn within our revenue share databases. These factors will impact not only our revenue, but also our bottom line, given the nature of revenue share income. However, it's also worth noting that the players left after this process will be of very high quality with higher lifetime values. As a result, we expect an EBITDA impact of 35 to 50 million euros for 2025 compared to 2024, making it a challenging year for growth. However, once the business rebases, we anticipate a return to growth in the Brazilian market from 2026 and onward. We remain highly optimistic about our strategic positioning in what is poised to become one of the world's largest gambling markets. A quick highlight from the launch is that all our media inventory sold out rapidly, reflecting strong demand for our offerings. It is still too early to conclude on the player conversion and the related churn. However, for January, the developments are following our expectations. We will likely be able to speak more to that after the first quarter of 2025. To summarize, I'm extremely proud of how we approach this market. Our strategy of driving exponential organic growth followed by acquisition of the leading sports media group in the region has positioned us as a crucial partner for sportsbooks in the years ahead. Please turn to the next slide as I hand it over to Flemming.

Thank you Jesper and good morning all. On this page here you see the guidance for 2025. We expect revenue of 320 to 350 million euros, which is down versus last year. EBITDA before special items is expected at 100 to 120 million euros, which is at the same level as last year. On the next slide, I will show you how we see the bridge going back from last year to the new guidance for 2025. We have also decided to give a new disclosure of free cash flow guidance of 55 to 75 million euros, highlighting our strong cash conversion. The net debt to EBITDA is to stay below 3x. Please turn to the next slide as I dive more into the guidance. On the slide here that outlines the key components influencing our EBITDA before special items guidance. We closed last year with an EBITDA of 113 million euros, but we are facing a challenging H1 2024 comparison by 20 million euros. This is largely due to a higher US marketing activity from partners in the first half of last year, boosted by the state launch in North Carolina. And in addition, we saw elevated business from the European soccer championships. We don't expect similar large events for 2025. Our cost efficiency program from last year had an early impact on 2024 performance by approximately 15 million euros. Additionally, the recent regulation in the Brazilian market will temporarily affect our revenue growth. As Jesper mentioned, the estimated taxes on gross gaming revenue and added costs on net gaming revenue as well as anticipated player churn are expected to cause a 50 to 70 percent decline in Brazilian revenue share income in the short term, impacting our EBITDA for 2025 by an estimated 35 to 50 million euros. The positives that will counter this is firstly our efficiency program that will contribute 50 million euros in cost savings throughout 2025. I will provide some more details on the program later. Better collectives diverse portfolio positions us for growth in Europe, esports, South America, excluding Brazil, and Canada. We expect the U.S. market to show flat growth while still building added value through revenue share. Collectively, these areas are expected to contribute to an EBITDA before special items increase of 20 to 40 million euros in 2025. As a reminder, and as Jesper highlighted earlier, our ongoing focus on recurring revenue growth means that we will continue to deliver new depositing customers to our partners worldwide, building substantial long-term value. Considering these moving parts, our EBITDA before special items is guided at 100 to 120 million euros for 2025. Please turn to the next slide. I will continue with presenting our updated long-term guidance. When we introduced our long-term guidance in 2023, it factored in both organic growth and M&A, as M&A have and still is a significant part of our strategy. However, given the evolving market conditions, especially in the US and Brazil, and recent share price developments, Better Collective has decided to prioritize other capital allocation strategies in the near term, such as reducing debt, and initiating share buybacks. This short to medium term strategic shift, coupled with a weaker market outlook, has led us to adjust our guidance to emphasize organic growth, which is expected to return to positive territory from 2026 after the Brazilian market has found its new level. Our EBITDA margin target for 2027 is still maintained at 35 to 40%, as well as net debt EBITDA to stay below 3x. Jesper will provide more thoughts behind our capital allocation strategy later. Please turn to the next slide where I will go into more detail with our cost efficiency program. I'd like to add a few words to the program that we launched back in October. We initiated a comprehensive review of our operational cost. This decision was driven by two factors, the integration of 35 acquisitions and the shifting market landscape. making it essential to right-size our business. As previously mentioned, the streamlining process unfortunately required us to let go of over 300 colleagues, representing 15% of our workforce. This difficult but necessary step was completed by the end of October. As shown, the majority of the cost reductions, 65%, stems from the reduction of the 300 positions, Additionally, 10% of cost reductions came from editorial optimizations, 10% from procurement efficiencies, 3% from office closures, and the remaining from various other initiatives. Crucially, we have focused on non-revenue driving cost, ensuring minimal impact on paid media, media partnerships, and esports. The most affected regions are naturally those where the market outlook has shifted. As always, Better Collective remains highly adaptable with a proven track record of adjusting to market dynamics and evolving conditions. Our ability to make strategic recalibrations when needed is a core strength that will enable us to navigate the current landscape while positioning ourselves for future growth. With that, I'll hand the word back to Jesper, so please follow to the next slide.