Raketech Group Holding PLC

Good morning and welcome to RakeTech's Q4 2024 presentation. My name is Johan Svensson and I'm the CEO of RakeTech. Today, CFO Måns Wahlborn and I are here to present RakeTech's Q4 report and the full numbers of 2024. We will as well share an update regarding your new strategic direction when it comes to our affiliation marketing vertical. But first, we will start with our Q4 financial highlights. We came in at 12.3 million euro in revenues in Q4, an organic decrease of 45.9% year on year and 42.6% adjusted for the divestment of advisory tips to business. Adjusted EBITDA of 3.2 million euro, a decrease of 46.2% year on year with an EBITDA of 3 million euro. Total revenue for the full year of 61.2 million euro with an adjusted EBITDA of 15.7 million euro and an EBITDA of 14.7 million euro. Free cash flow for the full year of 14.7 million euro in line with EBITDA. which provide financial headroom to settle our earn-out commitments, including the €8 million due in H1 and the remaining €20.6 million payable at our discretion until September 2026. But outcome of assessment of our operating model has resulted in further cost savings. In Q4, our costs were 29% lower compared to Q1 2024. Direct publisher costs excluded. Fourth of February, we announced a non-cash impairment of 48.5 million euro relating primarily to reduction in the internal book value of non-core assets acquired pre-IPO. As from this year, we will start and report our quarterly figures earlier than before and we will as such adapt our trading update accordingly. Now let's look at the performance of each business area during the quarter. Starting with affiliation marketing, revenue in Q4 came in at 6.5 million euro, a decline of 32% year on year and 4% lower than Q3. Kazumba assets continue to decline while remaining affiliation marketing portfolio grow with 3% compared to previous quarter. Turning our Kazumba assets from decline to growth is a key focus and we have invested in the team and the products to adapt to the changes in the market and the new competition. We saw a stable traffic performance in Sweden in line with previous quarter. The increased local taxes from 1st of July continued to impact our revenue share contract and the new investment from the operators, which led to a slight decline in revenue from the Swedish market compared to previous quarter. Denmark. Denmark has developed into a growth market for us. It's a relatively small market in relation to other regulated markets in Europe. However, we have a strong position when it comes to sports traffic. And during the last six months, our casino traffic has increased significantly. Our sports assets in total grow with 7% compared to previous quarter. We have had a good momentum for our sports assets and we plan to launch a handful new sports products during the first half of 2025. We have started to see positive traffic trends from the Slots portfolio and the Italian market after we in October entered into a strategic partnership with the founders of these assets. We have recently signed another four strategic partnerships for our affiliation marketing portfolio, which I will speak more about on the next slide. Sub-affiliation. Sub-affiliation revenues amounted to 5.2 million euro, a decrease of 54% compared to the strong Q4 last year and 5% lower compared to the third quarter this year. Sorry, 2024. The gross margin for sub-affiliation was 20% in Q4. The paid revenue at RakeTech Network continued to grow month for month during the quarter after hitting an annual low in September. As we have previously reported, our paid publishers, they have had operational challenges with Google Ads campaigns during the last quarters and we expect this to continue to be volatile. Our relationship with the publishers and operators are strong and we are standby and ready to scale up the business further when the market conditions improve. Affiliation Cloud, our in-house developed sub-affiliation platform, continued to deliver a 74% organic growth compared to Q4 last year. Betting tips and subscription. Following the sale of our land-based tipster business in the US, we have been focused on improving conversion rates and monetization for our digital tipster platforms. While traffic volumes remain strong, we have not yet fully realized our expected outcomes. Given the relatively small size of the US tipster and subscription business and that we did not achieve the results we hoped for, we have now started a strategic review of the remaining tipster business and we aim to take a decision about the future for this vertical before the end of this quarter. Going to the next slide, I will update you on our new strategic partnerships for our affiliation marketing vertical and the background for these partnerships. Given the performance development of the Kazumba portfolio, we have continued to evaluate the entire affiliation marketing portfolio to identify the most promising opportunities for profitability and long-term organic growth. RakeTech completed more than 25 acquisitions between 2015 and 2021. Some of these assets have had very good development, while other assets have had a tough time competing after the assets been migrated and operated fully in-house. We have continued to maintain good relations with many of the founders and entrepreneurs of these assets we previously acquired. These relationships and through our network in the iGaming industry have resulted in four additional strategic partnerships with entrepreneurs who have a successful track record of operating affiliation marketing products. Each partnership is unique, but what is common for all of them is that Rake take care of sales, commercial agreements, finance, reporting, data management, and some tech services. The strategic partner is responsible for day-to-day operations of a product, including SEO, content, and product development. These type of partnerships is not a new thing for Raketech. Since 2015, the company has successfully maintained operating strategic partnerships in the Nordic markets. And in October last year, we entered into a partnership with the founders of the Slot portfolio, focusing on Southern Europe and Latin. The new strategic partnerships include both sport and casino products in several different markets. With these new partners on board, almost 50% of our affiliation marketing revenue will come from products operated in strategic partnerships, which has and will result in continued streamline of our in-house operations. Additionally, centralizing more resources at our headquarters in Malta has created a more efficient organizational structure. Looking ahead, this strategic partnership will ensure a sharper focus and stronger performance while benefiting from retaining ownership. This should result in improved growth and sustained margin performance. Moving on to sub-affiliation and exclusive commercial agreements. The development of Affiliation Cloud continues. We have a clear vision for the product and we are launching new functionality and improvements every month. Until now, we have mostly had publishers with organic products on the platform. But we plan to start migrating paid publishers from RakeTech Network to the platform during the second half of Q1. A strong contributor factor to organic growth is the exclusive commercial agreements with operators where we are the only sub-affiliation platform that can offer a commercial deal with a specific operator. We have now been the exclusive sub-affiliation platform for four operator launches, three of which were in 2024, both for the Swedish and the US market. we believe will often be set up instead of a traditional affiliation model. In the traditional affiliation model, each operator needs to negotiate and agree a deal with each affiliate to secure exposure and distribution. The operator must have its own affiliate team with local expertise for each market to secure compliance. At Affiliation Cloud, the operators get access to multiple affiliates through one agreement. Our publisher team take care of the commercial negotiations and secure the distribution, including compliance. We pay the affiliates their commission on demand to secure good cash flow for our publishers. Now over to Måns and a deeper look into our financials.

Thank you, Johan. We saw total revenues of 12.3 million in Q4, which represent a slight decrease for both affiliation marketing and sub-affiliation from Q3. On your left hand side, we have total revenues split on our three business areas, and on the right side, total revenues distributed on cluster obedience. Starting with affiliation marketing, which constitutes 53% of total revenue, Although this area is down somewhat from last quarter, the decline is primarily due to our consumed assets and excluding these assets, the remaining portfolio of assets increased with 3%. We saw some improvements for primarily our major sites in the Nordics through better performance, but also an effect of the expected positive seasonality effects. Sub-affiliation represents approximately 42%. of total revenues, as we highlighted in Q3, activity slowed down quite significantly and hit a low point at the end of that quarter. But as we indicated, activity picked up in Q4 and increased month over months throughout the quarter. Not at the same levels we saw during the first half of the year, but still positive to see. This slide shows revenue mix and vertical split. Just a couple of quick points on this slide. First, the variations in CBA is largely driven by the lower activity in sub affiliation. This area is predominantly CBA heavy, driving the decline from a very strong Q4 of last year. And secondly, the flat fees compared to previous quarter. So a slight decline again relating primarily to lower traffic for the XUMBA assets, while As highlighted in the previous quarter, we had continuing review of all products and business areas to ensure that we are operationally efficient. From a high point in Q1 with regards to cost, we initiated a review and cost cutting initiative. And similar to last quarter, we are now seeing these initiatives realizing with an overall decrease in total cost, excluding publisher cost of about 29% from Q1. And as we move along, we will continue to tweak and fine tune our operating model in line with overall strategy. Adjusted EBITDA was 3.2 slightly ahead of last quarter, positively impact from the realized cost saving that I mentioned on the previous slide. On the right hand side and free cash flow before earnouts, as I've noted before, there will be timing effects between EBITDA and free cash flow between the quarters. However, looking over a longer period of time, they will correlate. And for the full year of 2024, free cash flow is very much in line with EBITDA. With regards to outstanding earners, up until the first year of this year, 2025, we will settle 8 million. This will be settled in cash. using our current net cash position, expected free cash flow and the existing facility we have in place. One point to make here is that we already settled 3 million out of 8 million now in January 2025. And as Johan pointed out in the beginning, the remaining 20.6, as we have communicated previously, can be settled at any point in time up until September 2076 at our discretion. And we also have at our discretion the possibility to settle part of this in shares. And post-September 2026 there are no other outstanding commitments related to any other acquisitions.

That's me and over to you Leon. Thank you Måns. To summarize before we open up for Q&A. Revenues in Q4 of 12.3 million euro, EBITDA of 3.2 million euro and sorry adjusted EBITDA of 3.2 million euro and EBITDA of 3 million euro. Total revenue for the full year, 61.2 million euro with an adjusted EBITDA of 15.7 million euro and an EBITDA of 14.7 million euro. Free cash flow for the full year of 14.7 million euro in line with EBITDA, which provide financial headroom to settle our earn-out commitments, including the 8 million euro due in H1 2025 and the remaining 20.6 million euro payable at our discretion until September 2026. Affiliation marketing. Today we are pleased to announce the four new strategic partnerships for our affiliation marketing product Vertical. While Kazumba Recovery remains an in-house priority with the founders still dedicated to the business and much involved in the daily operations. Sub-affiliation. Affiliation Cloud delivered a 74% organic growth year on year. RakeTech Network, our paid sub-affiliation business, show month-to-month improvement during the quarter after the annual low in September. And we will start and migrate to the first publishers from RakeTech Network to Affiliation Cloud during Q1. US tipster and subscription. We have started a strategic review of the remaining US tipster business, and we aim to take a decision about the future for this vertical before the end of this quarter. Outlook. As mentioned at the beginning of this call, we will start a report earlier this year. The Q1 report will be published 7th of May and the Q2 report 23rd of July. We will as such adapt our trading update accordingly. Looking at the start of 2025, the affiliation marketing performance is in line with Q4, but with somewhat overall lower revenues due to seasonality and lower marketing budgets from the operators. Sub affiliation had a slow start in January compared to the end of the fourth quarter, but it's gradually picking up in February. Today we talked about our new strategic partnerships within affiliation marketing, which is a part of a transformation that is currently underway within Raketech. In connection with the Q1 report in May, we will present a more comprehensive strategic update and give you a financial outlook for the rest of the year. With this word, we open up for Q&A.