Better Collective A/S

Good day and thank you for standing by. Welcome to the Better Collective Q1 2025 presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link at any time during the webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Retro Collective IR, Michael Monk. Please go ahead.

Thank you very much, and good morning, everyone. My name is Michael Monk-Jakobskoll, and thank you for joining us today for our Q1 2025 webcast. I'm joined as always by our co-founder and now co-CEO Jesper Søgaard and CFO Flemming Pedersen who will provide today's business update in connection with our Q1 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 as I hand over the word to Jesper for the first quarter highlights.

Thank you, Mikkel. Good morning, all, and thank you for joining today's webcast. Let's dive into the Q1 highlights. Please follow me to the next slide. Before we dive into the numbers, I want to take a moment to reflect on the journey we've been on over the past year. 2024 was a turbulent year, not just for Better Collective, but for the industry. We faced unexpected external headwinds. from changes to the search landscape for the global publishers to regulatory shifts in Brazil, as well as changing dynamics in the US market. While these challenges tested us, they also pushed us to think bigger, act faster, and ultimately become a leaner, more focused company. As we headed into Q1, visibility into the Brazilian market was extremely limited. And from a player migration standpoint, we started from zero. Despite this uncertainty, we were the only ones to provide guidance on our expectations for the market. And I'm pleased to say that Q1 delivered in line with our expectations. Let's look at the highlights for the quarter. Brazil posed significant challenges for us throughout 2024, as the market participants started preparing for the long-waited local regulations. Following the implementation of the new regulation on January 1st, 2025, we've gained valuable insights as the market has begun to stabilize. It's still early days, particularly as the main soccer season only began at the very end of the quarter, but initial signs are encouraging. In Q1, we were positively surprised by the strength of player migration and post-regulation activity. Churn was lower than expected, and player values remain solid. That said, the absence of welcome bonuses in the new regulated environment has naturally slowed new customer acquisition, which impacted our NDC volumes during the quarter. In the US, performance was also broadly in line with expectations. We faced tough comparables due to last year's North Carolina state launch, combined with lower marketing activity from partners. Nonetheless, we continue to build a solid revenue share foundation in the market. On the cost side, we delivered meaningful savings, reducing costs by approximately 9 million euros year over year in Q1. Our 50 million euros cost efficiency program initiated in October remains fully on track and is expected to deliver its full impact throughout 2025. After the close of the quarter, we made some important strategic changes. I'm really happy to share that my co-founder, Christian Kirk Rasmussen, has joined me as co-CEO. At the same time, we finalized a major organizational restructuring, shifting away from a geographically structured business to three global business units, publishing, paid medium, and esports. This move is designed to reduce complexity, eliminate duplication, and create the scalability we need to unlock the next chapter of growth. Finally, we also launched another new 10 billion euro share buyback program. Please turn to the next page as we dive deeper into the business highlights. I have decided to focus on the two key regions that demand our attention right now, Brazil and the US. First, let's now take a look at Brazil. which officially became a fully regulated market on January 1st, 2025. This first quarter has given us some valuable insights, and I'm happy to say we're seeing encouraging signs. The total amount wagered in our player databases has developed nicely, and the drop in wagering activity was actually less than we had anticipated. This tells us that the players we've historically sent are staying active and that retention and loyalty remain strong, especially in this new regulatory environment. That said, the ongoing ban on welcome bonuses has had an impact. Without those incentives, new customer acquisition has been slower than expected, which has also led to less aggressive competition between sportsbooks in the market. There are several market participants that are working to get welcome bonuses back into the laws. to reduce the channelization towards non-licensed sportsbooks. Our media inventory has continued to be sold out, and our focus is now to increase the product offering to cater to the high demand. We continue to see significant long-term potential in Brazil, and we remain confident in our leading position as the market matures. Turning to North America. The business performed in line with our expectations during Q1. Following the organizational rebasing we implemented back in October, the overall market activity level continued in line with the developments from last fall. What's important to highlight is that we're continuing to strengthen our revenue share foundation in the region as we send more players and revenue share agreements to our partners. The buildup of unrecognized revenue keeps growing. This is a key part of our long-term strategy. Over time, as these deferred earnings begin to materialize, our North American business will become increasingly stable, backed by a solid base of recurring revenue. We remain very excited about the potential in North America and about a strong position in what is expected to become by far the largest regulated market for online sports betting and iGaming globally. Let's go to the next slide. After Q1 closed, Better Collective embarked on an exciting new chapter to ensure our continued success and position us for sustained long-term growth. We've made strategic adjustments. Central to this transformation is our shift from a regional to a global management structure, allowing us to organize around three core business units, publishing, paid media, and esports. This move is designed to simplify operations and optimized for global scalability. Moreover, we have taken decisive steps to streamline our brand portfolio, censoring our efforts on flagship brands such as Action Network, Ace Arts, Bola VIP, Footbin, and HLTV. This refined focus enables us to concentrate our resources and energy more effectively. ensuring we not only maintain but enhance our competitive edge across the global market. In addition to this, I'm pleased to announce that my co-founder, Christian Kirk Rasmussen, has stepped into the role of co-CEO alongside me. With our combined leadership strengths, Christian will drive innovation and operational excellence, while I remain focused on our external strategic initiatives and representing Better Collective to our stakeholders. As part of the leadership transition, I'm also pleased to share that Sophia Eielson has joined Better Collective as our new Chief Operating Officer. Over the past six months, Sophia has worked closely with us in a strategic advisory role, playing a central role in shaping the vision and execution of the new Better Collective. This strategic realignment is about more than just efficiency. It's about positioning Better Collective to achieve focused growth and leverage opportunities in the ever-evolving global landscape. We're excited about this new era and confident that these changes will propel us towards a brighter, more aligned future. Please turn to the next page as I hand over the word to Flemming for a financial update.

Thank you, Jesper, and good morning to you all. Please follow me to the next slide as we dive into the financials. As Jesper highlighted, the past 12 months brought a number of external headwinds, which means we entered 2025 facing a challenging comparison base. As shown on this slide, revenue declined by 14% compared to the previous quarter and 13% year over year. Much of this was driven by revenue share impact, which has a direct impact on earnings. Naturally, this also affected our margin development both quarter over quarter and year over year. Despite this, our fundamentals remain strong, and we are confident in the underlying momentum across our key markets. Let's turn to the next slide. A key focus of the business continues to be the expansion of our recurring revenue base, which provides a solid foundation for our business. While Q1 was naturally impacted by the regulation transition in Brazil, we still enter the remainder of the year with a solid foundation of recurring revenue. Importantly, we continue to deliver a steady flow of players on revenue share agreements, particularly in the U.S., where a significant portion of the revenue is still unrecognized and will materialize over time, further strengthening our long-term earnings potential. Let's move to the next slide, where we'll take a closer look at the key drivers for Q1. On this slide, you can see a revenue bridge that outlines the key building blocks from Q1 last year to Q1 this year. Let's walk through the main drivers. First, the regulatory changes in Brazil had a €7 million negative impact on both revenue and EBITDA, primarily due to the database attrition from increased taxation and basically starting the year from zero when it comes to player migration. The North Carolina launch in Q1 last year created a tough comparison resulting in a 5 million euro headwind in this quarter. Third, as we highlighted in previous quarters, lower marketing activity from our US partners continued into Q1, contributing to an additional 5 million euro impact. Four, the sports wind margin was lower than in the same period last year, reducing both revenue and EBITDA by approximately 2 million euros. Finally, we saw positive contributions from the underlying growth in the business, combined with the full quarter effects of the ASOTs and PlayMaker acquisitions and Forex, adding combined €7 million. Putting all this together, it reduces our revenue of €12 million, bringing us to a Q1 revenue of €83 million. Let's now move on to the next slide, where we break down the building blocks behind the EBITDA development. Please turn to the next slide. EBITDA decreased by €7 million in the quarter, and here you can see the key components behind this development. The revenue-related impacts outlined on the previous slide, primarily from Brazil and U.S. and the lower wind margin, accounted for €12 million negative effect. On the positive side, our cost efficiency program launched in October contributed €9 million in savings for the quarter. The program remains on track to deliver its full €50 million impact from the program launched in October. Finally, M&A effects from the full quarter, consolidating of ASOS and Playmaker Capital combined with forex exchange movements, had a net impact of €4 million. Altogether, this brings us to a Q1 EBITDA of €22 million. And with that, please turn to the next slide. This slide outlines the key components influencing our EBITDA before special items guidance from 2024, bridging to 2025. I presented this also in connection with our Q4 webcast. And following Q1, the guidance remains unchanged. Please turn to the next slide. Earlier this year, we initiated a €10 million share buyback program, which was completed on April 16. At our annual general meeting, shareholders approved the cancellation of 1.1 million shares, representing approximately 1.8% of the share capital. Yesterday, the Board of Directors has decided to launch a new share buyback program of an additional €10 million. Please turn to the next slide. Following Q1, our 2025 and 2027 guidance remains unchanged and can be seen here. With this, please turn to the next page and I hand back the word to Jesper for some highlights.

Thanks Flemming. Please turn to the next page. We are happy with the way the year has started with revenue and EBITDA in line with our expectations and the cost efficiency program. is on track to deliver our expected 50 million euros in annual cost reductions. We've seen a promising start in Brazil compared to our expectations, although it's still being early days. And North America performed in line. Our strategic focus has shifted to a global structure with three key business units, publishing, paid media, and e-sports. This realignment includes a new co-CEO structure. Our dedication to refining our house of brands continues, aimed at strengthening our market position and delivering greater value. A new buyback program has been launched and guidance remains unchanged. And with that, let's move to the Q&A. Thank you very much for showing interest in Better Collective.

Thank you. We will now begin the question and answer session. As a reminder, To ask a question, please press star, one, one on your telephone and wait for your name to be announced. To withdraw your question, please press star, one, and one again. We will now take the first question. One moment, please. From the line of Sebastian Grace from Nordea, please go ahead.

Good morning, guys, and thank you for taking my questions. First one is on Brazil, where you are trending significantly better than what you reflected in your guidance, also considering the fact that comparisons, all is equal, should ease during the year, at least to my understanding. So what is keeping you from revising the underlying assumptions in the Brazilian market? That'll be my first question.

Thanks a lot, Sebastian. Well, heading into Q1, we almost had no clarity on Brazil. And as we just mentioned, we decided to provide concrete guidance on the expectation for this market and the group despite this uncertainty. Our performance has been in line with our expectations. And really, we are proud of the performance in Q1. There is still uncertainty, as we alluded to. The soccer season just started at the end of the quarter, and we have, when you consider the lacking welcome bonuses, so no offers there, there is the overall challenge with the market of the offshore market actually still offering bonuses. So the channelization of the market can still be affected by this regulatory environment, which is Also why we really think it's important that there are market participants continuing to have the dialogue around welcome bonuses, which with a change there could impact the competitiveness of the market and ultimately also our ability to drive new deposit customers to our partners. So we think that they're still moving parts in this market.

Sure, I fully understand. And as you say, it's early days. But it's fair to say that I mean all else equal comparisons from the Brazilian activity last year should ease as we go and go towards Q4, right?

I think I will simply just refer to that uncertainty and what I just described with like no welcome bonuses and the challenge of channelization. We of course pleased with Q1 in line with our expectations and again I really want to emphasize it was not easy to guide, and we are just proud that we actually fairly right in the guidance we gave.

Oh, sure, that's fair. And if we could zoom a bit in on the bonusing thing that you alluded to here. So the consequence, is it overall activity that you see or down, or is it more like players are migrating to offshore operators rather than staying within the licensed playing field?

I think you see sort of a couple of dynamics in play here. So obviously without the welcome bonuses, the migration for the biggest partners and strongest brands in the market is of course more efficient and there's less competition and incentive to switch to a new partner. But then we have the challenge that there is the offshore market where you have that incentive. And of course, from us operating in that regulated market in order to drive new customers to different partners, we would welcome the welcome bonuses for sure. But it probably has been sort of a positive effect for the migration of databases for the biggest brands in the market.

Okay, very nice. And then just my last question. A quick update on the US. I saw Penn is starting to turn back to performance marketing after a quarter of mainly leaning on ESPN and other lower CAC channels. So what is your reading into the US sportsbook environment at this point?

Well, as we commented, it's again in line with our expectations. We rebased the business and adjusted the organization in the fall. in order to cater to the market landscape as we saw it and also have seen it in Q1. So it has been in line with the expectations. We still feel we have this really strong position in US and are certain that opportunities will arise with more states coming eventually and iGaming being added in some states and overall potential changes to the competitive landscape. We really focus on securing that strong market position with the brands and the audience we own.

Okay. Perfect. Thank you so much, Jesper.

Thank you.

Thanks a lot.

As a reminder, if you wish to ask a question, please press star 1 and 1 on your telephone. That's star 1 and 1 if you wish to ask a question. And the next question comes from the line of Oscar Rogvist from ABG Sandal Collier. Please go ahead.

Thank you. Good morning, Jesper and Flemming. Thanks for taking my questions. So my first one would be on the NDC development. I think it's down 22% quarter of a quarter and 30% year over year. And just wondered if you could elaborate a little bit on the sort of underlying trend. Just wanted to hear your thoughts. I mean, is it the Brazil impact with, you know, a little bit lower value players that is impacting this. And also if you're, you know, targeting more high value NDCs or if it's just, you know, the underlying trend that has been a little bit weaker in the quarter. Thanks.

Thanks for the question, Oskar. So, yeah, we already spoke to Brazil and no welcome bonuses there. And that is That's a quite important trigger for consumers when they make that decision of opening a new book. So we have seen a development in Brazil where there's fewer NDCs being sent. If we go to North America and the U.S., obviously we have not had any new state launches that in actually the previous three years in Q1 has been a a strong driver of NDCs for us. To the value point, obviously, we always aspire to attract the most valuable customers, and you're absolutely right. You will see very big degrees of value with the NDCs that you deliver. That being said, we will always strive to get as many NDCs as possible, but when we look at the underlying health of our revenue-shared databases and the quality of players At the end of the day, that is what we care about and we are pleased with the recurring revenue development in our business.

All right, thanks. And just, I mean, comparing to, let's say, Q4, down 22%. So it was, you know, even though it was kind of easy company in Brazil, the NDC number declined even further from the latter part of 2024.

Well, there are actually a couple of elements. Again, I've already spoken to Brazil. There's also, if you look at the U.S., with activity of sports, Q4 is the biggest quarter. And since we did for the first time in a Q1 for several years, did not have a state launch, that did affect also the NDC performance.

All right. I just need to follow up. Just looking at Q3 also, I think it was 396,000. So would you say that Q1 is generally a seasonally slower quarter than Q3? Obviously with the NFL season starting in Q3, but also I think you have Super Bowl and March Madness and so on in Q1. Yeah. Do you see, you know, still happy with the underlying trend in the NDC think you want?

Well, again, back to Brazil, we are really hoping that we'll see a change for the welcome offers there for several reasons where from the success of this regulation and the ability to also collect tax, we think it's really important to see welcome bonuses being introduced. and that will be an important driver for our business. Overall, we basically just continue to work hard on securing NDCs from all our markets, but there will be effects as described with Brazil and the US that can reduce for periods of time.

Perfect. That's very fair. All right, just jumping on to my next question on the cost savings. I just wondered, I mean, you have a full run rate of the efficiency program or it's on track to deliver, you know, 50 million in annual savings. Costs down 9 million year over year, but I think at least around 3 million or something is related to direct costs there. Just wondered, I mean, especially on the staff costs, which I think you alluded in the Q4 report that that's going to account for 67% of the 50 million annual savings and staff costs has been, you know, not down at least as much as I thought on the net impact. So just wondered, are you targeting more savings in absolute terms relative to the Q1 run rate or... Is it, you know, underlying cost increases maybe, you know, related to Brazil that is offsetting this?

Yeah, thank you for the question, Oskar, and it's a good question. The cost program was launched in October, so basically that's the starting point for us when looking at the 50 million dollars. If you look at our cost development last year, cost increased in Q2 up to basically 10 million above where we are today, just on the quarter. So that is all in publishing, if you look at that. And that's the first quarter where we have a fully loaded, almost fully loaded quarter with the acquisitions missing a bit on ASOS. Cost continued to increase up until October. a bit, you can say, hidden by us reversing a lot of bonuses and variable costs in Q3. But to cut it short, we are absolutely on track with the 50 million euro program. We will likely see, I expect to see a bit more reduction in cost, but we are very close to be at the benchmark.

All right, perfect. Thank you. Then maybe another one for you, Flemming, just on the other intangible investments. So I believe it is related to media partnership payments. So just wondered if you're entering new contracts or if it's deferred payments to previous media partnership investments.

Yeah, I think we also discussed that in previous quarters. It is a mix of both because some we have to capitalize and hence it ends up in the cash flow statement. And that was also why we decided to give a cash flow guidance, basically. So including that so you can have a clear traction of it.

Perfect. Yeah. And I just wanted to double check again. So free cash flow, according to your free cash flow guidance metric, was that 3.7 million in Q1? I don't know if you have the numbers.

I'm not sure, but you can say we have just been sticking to our free cash flow guidance for the full year, and that remains unchanged.

All right, perfect. All right, I think that was all for me. Thank you very much. Thank you.

There are no further questions on the phone at this time. I would like to hand over for any webcast questions now.

Yes, thank you. We have a few here, so I'll just start from one end. A couple of new players, Calchi, Robinhood, and others have entered the US market based on the new technological platform predictive markets. What does that mean for dynamics competition in the US? Are there any signs of increased promotion? And it seems that some of the new players are becoming more aggressive. Have you seen any positive or negative impacts on your business in the start of Q2?

Well, it is a very interesting development that we have actually, you could say, operators from the financial system stepping into what is dubbed the sports prediction markets, which essentially, when you consider the audience of potential customers for that, is exactly the same audience as we have on all our brands in the US. And another exciting feature of that regulatory framework is that it's obviously accessible for all states in the US, whereas the sports betting regulation is currently a little more than half of the states that have implemented that. So it is something we really appreciate to see new players that are entering this market and it's early days, but we do believe that it can have an effect on the dynamic in the market.

Thank you. Then in your report, you cite lower marketing activity as a reason for this lower quarter. Can you please elaborate on how we should see this? Do you see it as structural, i.e. market consolidation, or how should we interpret it also in the light of the upcoming 2026 FIFA World Cup?

Well, we spoke to the US business where we experienced sort of the low activity in the fall and a more or less similar picture in Q1. But you actually, this question points to what I mean by we have some potential developments in the future that I really believe will change this. The World Cup next year, I think, will be a significant driver of of increased competition in the market. Other factors, as I have also alluded to, potential new state launches, iGaming being allowed in more states than the current ones. So we think there will be changes in the market where it can be driven by events, it can be driven by regulation, it can also be driven by new market interests, which I just spoke to with with the prediction markets. So no, we don't expect that the current landscape will stay like that. We believe there will be, you can say, pushes to that and changes in that landscape.

Then I think the question ended on the 2026 FIFA World Cup, and maybe you can share a bit of your thoughts around that.

Yes, the World Cup in football, whenever it's played, is the biggest betting event ever. And we definitely also expect next year's World Cup to be the biggest betting event ever. And what is even more exciting about that opportunity is that it will happen in North America. So Mexico, US and Canada are the host countries. So when we consider our core markets being Europe, North America and South America, You know, Europe and South America, they are naturally very, very interested in the World Cup in football. North America, not to as big an extent, but because they are hosting it, we do expect significant activity in that region as well. So the World Cup next year is really, yeah, probably the most exciting World Cup we've ever faced. So that we are really looking forward to.

Thank you. Then if we stay a bit over there, now a question for Brazil. You have elaborated a bit on it already on the call, Jesper, but you state the restrictions in welcome bonuses. Do you see it as structural or temporary?

Of course, I cannot predict the development of Brazilian regulation, but an overall sort of development or at least issue with regulated markets not having bonuses is that you do see a big drop towards the offshore market. So basically the channelization of how big a percentage of the gambling activity will happen in the regulated market is reduced in such a scenario because it's more from a consumer perspective, it's more attractive to get a bonus in the offshore market. And especially for our line of business where we are the first touch point for consumers when they consider where to bet, it's of course a challenge for us being up against, unfortunately, other companies that are navigating players into the offshore market using bonus offers. We really take part in communicating about this, that it's important that you have a competitive regulated market so you secure as high channelization as possible and Better Collective does play an important role in delivering that message to consumers. Thank you.

Does the expected performance in forthcoming quarters provide flexibility for potential further share buybacks beyond the initial 10 million euros you have just launched? And I guess with In this show, it's also worth remembering that we already did a buyback of 10 million earlier this year, so this is an additional 10 million, but Flemming, please go ahead.

Yeah, we are guiding or informing about the decisions as they are taken, and our board has decided to move on with a new program for running through the next quarter of 10 million euros. As Jesper alluded to, we are still seeing some market uncertainty with the Brazilian transition. So we basically take it as we go and can, of course, not provide any further guidance on this.

Thank you. Then you highlighted a record 450 million monthly visits across all of your platforms. What are your views in relation to alternative monetization of the significant audience that you have?

Yes, it's... monetization where we historically have been relying on the performance marketing, i.e. affiliation for our audience. But as we grow and really achieve scale, we believe that there's an opportunity in unlocking also a bigger traditional advertising revenue in our company. And therefore, it's basically internally we are working on developing and optimizing the way we are able to segment the audience, the way we're able to present relevant ads so we can grow the CPM rates towards the audience. But it's also something where it's work in progress and comes down to the segmentation and understanding of the different customer segments. So it's something where we will expect sort of incremental development over time in our advertising revenue segment.

Thank you. And I think that was the last question. So that concludes the Q&A. Thank you very much for showing interest in Better Collective and have a nice day.

This concludes today's conference call. Thank you for participating. You may now disconnect.