Raketech Group Holding PLC

Welcome to Raketech's Q1 2025 presentation. My name is Johan Svensson and I'm the CEO of Raketech, today's CFO Mal Svalborn and I am here to present Raketech's Q1 report. I will as well share an update around the new strategic direction with Platform First approach and our new entrepreneurial partnerships. We'll start to look at our financial highlights. We came in at 9.8 million euro in revenues in Q1, an organic decrease of 48.8% year on year and 46.6% decrease for the divestment of advisory tips to business. Adjusted EBITDA of 2.4 million euro, a decrease of 52.6% year on year with an EBITDA of 2.1 million euro. The free cash flow was 1.7 million euro which supports the 8 million euro in H1 earn out payment of which 6 million was settled during the first quarter. We have agreed on an extension of the remaining earn out of 20.6 million euro original due in September 2026. It will now be payable up until March 2028. The option to settle part of the amount in shares has been removed. We saw a significant decline in our US betting tips and subscription business in Q1 compared to Q4. And this business area had a negative EBITDA impact of 0.3 million euro compared to essentially flat EBITDA in the fourth quarter. We are in the final stage of a strategic review of these assets. The outcome of a new operating model has resulted in further cost savings. Our costs were 34% lower compared to Q1 last year. Direct publisher costs excluded. Now let's look at the performance of each business area during the quarter. Starting with affiliation marketing. Affiliation marketing came in at 6 million in revenue in Q1. Q1 is in general a seasonal slower quarter compared to the strong Q4. And we had a somewhat slower start, but activity and revenue picked up in the latter part of the quarter. Kazumba assets continue to decline and if you exclude these assets the quarter was in line with Q4 adjusted for some seasonality. Turning our Kazumba assets from decline to growth remains a key focus and we continue to invest in the product to adapt to the changes in the market and the new competition. The Kazumba founders are still dedicated to the daily operations. The Nordic markets showed stable performance in line with Q4, adjusted for some seasonal effects and a slightly shorter Q1. As previously reported, we signed four new partnerships with entrepreneurs, which all have great experience and track record in managing affiliation assets. All four partnerships were kicked off during the quarter. It is still too early to report any revenue impact from these new partnerships, but we see a strong operational momentum with high operational activity. The entrepreneurial partnerships accounted for approximately 50% of the total affiliation marketing revenue during the first quarter. These entrepreneurs brings expertise in product development, content creation, and SEO strategy and daily execution. While RakeTech focus on the commercial and operational side from our central team who are taking care of commercial agreements, sales, finance, reporting, data management, and tech. Sub-affiliation. Sub-affiliation revenues amounted to 3.4 million euro and the gross margin for sub-affiliation was 21%. The paid publisher network faced a marked decline in March due to additional operational challenges with Google ad campaigns. We don't expect a meaningful recovery in the near future. Our relationships with the paid-focused publishers and operators continue to be strong, and we are standby and ready to scale up if the market conditions improve. Organic sentiment of sub-affiliation deliver organic growth. We have over 80 active revenue generating publishers during the quarter. All organic sub-affiliation operations are fully managed through our proprietary platform, Affiliation Cloud. US betting tips and subscription. We saw a significant incline in our US betting tips and subscription business in Q1 compared to Q4. And this business area had a negative EBITDA impact of 0.3 million euros compared to an essentially flat EBITDA in Q4. As mentioned before, we are in the final stage of a strategic review of these assets. Going to the next slide, I will give you an update on Affiliation Cloud and our platform first approach. Affiliation Cloud is our proprietary platform into which we have intensified our investments over past quarters. The plan is for Affiliation Cloud to serve as the foundation for all sales, data, compliance and business intelligence. whether it is our own affiliation marketing portfolio or any of our sub-affiliation networks. Regardless if we own the asset connected to the platform or if it is published from our sub-affiliation networks, the platform serves the same purpose for all products, focusing on traffic and sales optimization, which creates value for all connected products as well operators receiving leads. For operators, this presents a significant advantage. They benefit from a streamlined process by negotiating with a single trusted partner rather than managing separate agreement with multiple publishers. In terms of platform development, our focus during the first quarter has been on simplifying the onboarding process for publishers, making it easier to get started, include an automated KYC process and compliance reviews of their product. We also worked intensively on improving data quality through a fully custom-built structure, which we plan to launch during the second quarter. This upgrade is expected to improve overall data quality. We have an ambitious roadmap for the remainder of the year, focusing on powerful new features such as automated reporting, improved user experience, and a flexible wallet solution that enables publishers to withdraw their commission on demand. Sub affiliation and exclusive commercial network agreements. The core strength of our offering to both external publishers and operators is what we refer to as exclusive commercial network agreements. These agreements mean that we are the only sub affiliation platform able to offer a commercial deal with a specific operator. These agreements are often established when an operator launches a new brand and seeks rapid distribution through a trusted affiliate network, while still maintaining high standards for traffic quality and compliance. 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 have a clear ambition to onboard additional exclusive agreements with new operators throughout 2025. We see a strong potential in these type of commercial agreements as a complementary approach to the traditional affiliate model. In the traditional affiliate 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. Through 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 KYC and compliance. We pay the affiliates their commission on demand to secure good cash flow for our publishers. Now I will speak about our entrepreneurial partnerships for our affiliation marketing portfolio. As mentioned earlier in the presentation, we have now launched four new partnerships with different entrepreneurs for our affiliation marketing portfolio. The new partnerships are mainly focused in Sweden and Denmark and cover both sport and casino products. The background to what we now refer as to entrepreneurial partnerships is the challenges we have experienced in operating our product at scale following the exit of entrepreneurs from who we acquired these businesses. Each partnership and its exact structure are tailored to match the specific needs, size of investments and expertise involved. What all partnerships have in common is that Raketech through its central teams manage sales, commercial agreements, finance, reporting, data management and some parts of the tech. Our partners are responsible for the day-to-day operations including SEO, content creation and product development. Together with our partners, we bring complementary expertise to the table, enabling sustainable long-term growth. This type of partnership is not a new thing for Raketech. Back since 2015, the company has successfully maintained partnerships with entrepreneurs in the Nordic markets. And in October last year, we entered into a partnership with the founders of the Sloth portfolio, focusing on Southern Europe and Latin. All through the latest partnerships only launched in March, we've already seen a noticeable increase in operational activity, with the various teams actively driving new product development and fresh content creation. In affiliation marketing, approximately 50% of the revenue now comes from these partnerships, and it is a strategic focus for us to grow this further during 2025. Now over to Måns, who will give us a deeper look into our financials.

Thank you, Johan. We saw total revenues of 9.8 million in Q1. On your left side, we have total revenues split on our three business areas, and on the right side, total revenues distributed on cluster of regions. Starting with affiliation marketing, which accounts for 62% of total revenue in the quarter, While there's been a slight decline compared to last quarter, most of this is due to our consumed assets. Excluding those, the rest of the portfolio is only down slightly compared to Q4. The decrease is mostly in line with expected seasonal trends and the shorter month of February. Sub-affiliation represents approximately 35% of total revenues in Q1. The decrease in revenues, as Johan pointed out, relates primarily to our paid network publishers. The last few quarters, we have seen ongoing challenges for our publishers and the area experienced additional headwinds as from March this quarter. Looking into April and May, we don't see any meaningful pickup and we don't expect volumes to increase in the short term, but we do, however, stand ready should volumes return. As you uncovered as well early in the presentation, we have seen positive momentum within the organic publisher network with a growing number of revenue-generating publishers, which is promising for this area as we move along. This slide shows revenue mix and vertical split. Just a couple of quick points on this slide. First, the variation in CPA is largely driven by the lower activity in sub-affiliation. This area is predominantly CPA heavy, driving the decline from the strong results of previous quarters. Flat fees and rev share in affiliation marketing are, however, reasonably steady and in line with expected seasonal trends. As we highlighted in previous quarters, we've had a continuing review of all our 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 quarters, we are now seeing these initiatives realizing with an overall decrease in total cost, excluding publisher costs of 34% from Q1 of last year. As we move along, we will continue to tweak and fine tune our operating model in line with the overall strategy. Adjusted EBITDA was 2.4 million, somewhat positively offset from realized cost savings that I mentioned on the previous slide. Adjustments relate to restructuring costs as an effect of our strategic shift of working through entrepreneurial partnerships. On the right hand side and free cash flow before earnouts, we will have timing effects between EBITDA and free cash flow, but they will correlate over time. In Q1 specifically, free cash flow is essentially in line with EBITDA considering some CapEx interest payments and lease payments. Furthermore, specifically on earn out payments, we settled 6 million in Q1 and we'll settle an additional 2 million in Q2. This leaves us with the last earn out payment that was originally due in September 2026, of which now the payment period has been extended up until March 2028. And I will cover this on the next slide. We communicated yesterday that we have agreed with the sellers of Kazumba to revise the terms of the payment period. The main points are the following. We have extended the earn out payment from September 26 to March 2028. This relates to the outstanding amount of 20.6 million excluding interest. We previously had an option to settle part of the remaining earn out in shares. This has now been removed. We have an ambition to of course settle the earn out as early as possible and have committed to settle impartial installments on a quarterly basis as from Q3 of this year. Overall, this creates further financial flexibility for us and we have financial headroom to focus on strategic business initiatives. And even though we have the possibility of a rather lengthy extension, we will retain the ambition to settle as soon as possible. Thank you and over to Johan.

Thank you Måns. To summarize before we open up for Q&A. Financials revenues in Q1 of 9.8 million euro, adjusted EBITDA of 2.4 million euro representing a margin of 24.5% and an EBITDA of 2.1 million euro. Excluding publisher costs, our cost savings resulted in a 34% reduction in expenses compared to Q1 2024. Key takeaways per business area. Affiliation marketing with four new partnerships with entrepreneurs who have a strong track record and experience from affiliation marketing have now been launched. These type of partnerships generated approximately 50% of affiliation marketing revenue in Q1 and we expect it to grow. Kastumba assets are still on a negative revenue trend and turning these assets from decline to growth remains a key focus. Excluding these assets, Q1 performance for the remaining portfolio was in line with Q4 adjusted for some seasonal effects. Sub-affiliation. Organic publisher network delivered organic growth and the number of active unique publishers generating revenue exceeded 80 during the quarter. The paid publisher network faced a marked decline in March due to additional operational challenges with Google ad campaigns. US betting tips and subscription. We saw a significant decline in our US betting tips and subscription business in Q1 compared to Q4. And this business area had a negative EBITDA impact of 0.3 million euros compared to an essentially flat EBITDA in Q4. We are in the final stage of the strategic review of these assets. Business outlook. Our focus going forward is clear, to continue developing Affiliation Cloud into a leading commercial platform that delivers value across our own affiliation marketing assets, our external publishers, and our operators. We see strong potential to create long-term value in our affiliation marketing portfolio through our entrepreneurial partnerships, where we're already seeing increased activity. Revenues for our affiliation marketing assets in April remains consistent with Q1. Sub-affiliation, the lower margin paid network continues to face headwinds while we see continued good activity from organic publisher network. And now we open up for Q&A.

To ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Riker Dangberg from Carnegie Investment Bank. Please go ahead.

Good morning, guys. Hi, Rickard. Good morning. Good morning. Can you hear me? Good. So I have a question regarding the resub affiliation segment. So given that you have increased the number of active publishers from 50 last year to 80 this year, how much is basically organic versus paid in this segment given the decline year on year?

We are not disclosing the split yet between paid and organic. But we see an organic growth in the organic side.

Okay, good. And also on the affiliation marketing side, Have you seen the assets that are operating in partnership? Have you seen a good momentum in these during the quarter and the end of 2024?

Yes, we see. In Q4 last year, we did the one, four of us, the slot portfolio, where we have seen a good momentum. And the latest one, they were launched during the Q1 here and most of them in March. So we see a good operational momentum with very high operational activity, but it's too early to see any revenue impact.

Okay. Thank you. That was all for me.

Thank you, Richard.

There are no more questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.

Yes, let's look at the written questions. We have a first one here from Hampus. How does the Brazilian market look so far this year? The Brazilian market is not a huge market for us, but we have some revenue from it. And we saw a slow start in January, but the revenue picked up through Next one from Hampus, can inferences from different platform use affiliation cloud? Yeah, inferences is, I don't know exactly what you refer to here, but we have different inferences and in-app, different type of in-app products using the platform already. And we're constantly working on developing the platform for new type of, yeah, So the answer is yes on that question.

There is one question around what is the EBITDA profitability of affiliation at current revenue levels? I take this as you mean affiliation marketing, and we don't split that separately, but what we've said previously is that the EBITDA margin for affiliation marketing in general is between 60 to 80%, and that still stands. Another one, KASUMBA is the interest charge of 5-6% plus the arrival of a new clause or did it exist in the original earn-out agreement? Yes, it did exist in the original earn-out agreement, so the rate of 5% that is actual up until September 2026 is in line with the old agreement.

good and yeah thank you all for listening in and hope to see you again in in july thank you