Raketech Group Holding PLC

Good morning and welcome to Regtech's Q2 2025 presentation. My name is Johan Svensson and I'm the CEO of Regtech. Today, CFO Måns Vanborn and I are here to present our Q2 report. Starting with financial highlights. We came in at 7.8 million euro in revenues in Q2, an organic decrease of 53.8% year on year and negative 47.9% excluding the divested advisory tips to business. vast majority of the revenue decline comes from the kasumba assets the paid publisher segment within sub affiliation and the now full divested us tips to business i will give more details around this on the next slide adjusted ebitda amounted to 2.1 million euro while reported ebitda was 2 million euro during the quarter we divested our non-core us tipster and subscription assets with a transaction closing at the end of the june These assets, along with a related US operation, had a negative EBITDA impact of half a million euro in Q2. Adjusted EBITDA excluding the divested US tips assets was 2.6 million euro in the quarter. As of July 1st, we no longer have any costs related to the divested tips to business, which is expected to result in improved profitability. Going forward, we have additional limits of approximately 150,000 euro per month. Free cash flow over quarter was 1.8 million euro. Excluding publisher cost, we achieved cost savings of 35% in Q2 compared to Q1 of last year. Q1 last year marked the start of a review of our operating model. Next slide. Now let's look at the performance of each business area during the quarter. Starting with affiliation marketing. Affiliation marketing came in at 5.7 million euro in revenue. Our Casumba assets continue to decline and the overall market conditions for these assets continue to be challenging during the quarter. The Casumba founders are still dedicated to the daily operations. Excluding these assets, the remaining affiliation marketing portfolio show a 5% growth quarter on quarter. The four new partnerships with entrepreneurs have all launched according to plan, with a strong operational momentum and a clear focus on product development, content and commercial improvements. This operating model, along with the products operated within the partnerships, now accounts for more than 60% of the total affiliation marketing revenues. We continue to work on developing our business and reducing our dependency on SEO affiliation marketing. A positive development is that we have signed a comprehensive agreement for our TV sports guide with a leading Nordic TV and streaming provider that we haven't worked with before. We are also increasingly leveraging AI tools across the business to streamline and simplify various tasks. Sub-affiliation. Sub-affiliation revenues amounted to 2 million euro and the gross margin for sub-affiliation was 38% in Q2. As we reported in connection with the Q1 report, we saw a marked decline in paid revenues within some affiliation in March as a consequence of structural changes in the advertising ecosystem. We have not seen any notable improvements since then for our paid focus publishers, given that paid has a higher share of upfront payments, what we call CPA-based revenue model. That means the decline in revenue has been greater, while margins have increased due to contributions from our RevChad databases. Organic part of sub-affiliation performed in line with Q1, where we saw a seasonal effect in the US due to fewer sport events. The pipeline of organic publishers remains strong and we are cautiously optimistic ahead of upcoming football season. continues to be a focus market for us. We are also continuing our efforts to sign additional exclusive network agreements with operators for Affiliation Cloud. This model gives us the exclusive rights to offer commercial deals to affiliates who do not work directly with a specific operator. It has proven to be a successful model that creates value for all parties, the operator and the smaller affiliates who not have opportunity to secure directives with larger operators. US betting tips and subscription. During the quarter, we successfully divested our non-core US tipster and subscription assets. The total consideration amounts to 1.25 million. These assets, along with the related US operations, had a negative EBITDA impact of half a million euro in Q2. This is a cost we no longer carry as of July 1st, which will lead to an increase in profitability and cost savings of approximately 150,000 euro per month. Going to the next slide. Affiliation Cloud and our platform-first approach. The development of Affiliation Cloud continues to progress steadily. During the quarter, we successfully launched our proprietary software solution, RayCollect, designed to gather data and performance metrics directly from the operator. This new tool enhances our ability to deliver more accurate data. It's positioning us ahead of our competitors in terms of both efficiency and 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. Previously, we have operated with two separate commercial teams, one focused on selling traffic from assets we own, affiliation marketing, and another team dedicated to monetizing traffic from external publishers within sub-affiliation. We have recently made changes to meet the demand of our commercial operations, allowing us to bundle sales more effectively across all assets on the platform, regardless of whether the assets are owned by us or provided by external publishers using Affiliation Cloud as their commercial platform. The target is to offer operators increased volumes of traffic through a single platform deal by leveraging the scale and synergies across our ecosystem. Next slide. Now I will share an update about our entrepreneurial partnerships for our affiliation marketing portfolio. As previously reported, we signed four new patents for our affiliation marketing portfolio during the first quarter of this year. All of these have launched successfully. The background to what we now refer as entrepreneurial partnerships is the challenges we have experienced in operating our products at scale following the exit of entrepreneurs from whom we acquired the businesses from. 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 RegTech through its central teams manage sales, commercial agreements, finance, reporting, management and parts of the tech. Our partners are responsible for the day-to-day operations, including SEO, content creation and product development. Together we bring complementary expertise to the table, enabling sustainable long-term growth. Operational activity has been very high with the new partner products already relaunched and more scheduled for release during the second half of the year. I would also like to clarify that Raytech still retains full ownership of all assets operated in these type of partnerships. Excluding Kazumba, the rest of the affiliation marketing portfolio grow by 5% in Q2 compared to Q1, with entrepreneurial partnerships contributing to this growth. Now over to Måns and a deeper look into our financials.

Thank you, Johan. We saw total revenues of 7.8 million in Q2. On your left side, we have total revenues split on our three business areas. And on the right side, total revenues distributed on cluster regions. Starting with affiliation marketing, which now accounts for 73% of total revenue in the quarter. And similar to previous quarters, the consumed assets have underperformed. What's positive to see is that excluding these assets, the remaining portfolio is, as Johan pointed out, growing with 5% from Q1. And this growth is largely stemming from our Nordic assets. Sub affiliation represents approximately 25% of total revenues in Q2. The decrease in this area is largely the driving factor behind the overall decrease in revenues. And we have highlighted this in prior quarters and that this relates primarily to our paid paid network publishers. The last few quarters, we have seen ongoing challenges for our publishers and the area experienced additional headwinds as from March last quarter. This continued through Q2 and so far we don't see any meaningful recovery in the near term. The focus rather for this area is as Johan highlighted, the organic publisher network with a positive momentum for the number of revenue generating publishers. which is promising as we move along. Next slide, please. This slide shows revenue mix and vertical split. Just a couple of quick points on this slide. So first, the variation in CPA is largely driven by the lower activity in sub-affiliation. This area is predominantly CPA heavy and driving decline from strong results of previous quarters. Flat fees and revenue share in affiliation marketing are, however, reasonably steady. The decrease in rev share is again primarily an effect of the software development for Kazumba. And again, disregarding these assets, rev share is relatively stable and flat fees is growing. Next slide, please. And as highlight in previous quarters, we've had a continuing review of all products in business areas to ensure that we are operationally efficient. From a high point in Q1 of last year with regards to cost, we initiated a review and cost cutting initiative. And similar to last quarters, we're now seeing this initiatives realizing with an overall decrease in total costs, excluding publisher cost of about 35% from Q1 of last year. And furthermore, we expect to have additional cost savings of about 150K per month as we head into Q3 as an effect of the disposal of the US tipster assets. Next slide, please. This slide, last slide from me illustrates EBITDA quarterly and free cash flow in relation to EBITDA. It also illustrates accumulated numbers of the last 12 months, and these should correlate reasonably well on a quarterly basis, but more so over a 12-month period, and they do. The difference we do see is as expected tax, lease, and interest payments, as well as some capex, but these are minor items, as you can see. Furthermore, specifically on the earn-out payments, we settled 2 million in Q2 as planned. 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 of 2028, as we communicated in connection with Q1. And this will be partially settled in installments up until 2028. Thank you, and over to Johan.

Thank you Måns. To summarize before we open up financials revenues in Q2 of 7.8 million euro adjusted EBITDA of 2.1 million euro representing a margin of 27% and an EBITDA of 2 million euro. Adjusted EBITDA excluding the divested US tipster asset was 2.6 million euro in the quarter Excluding publisher costs, we achieved cost savings of 35% in Q2 compared to Q1 of last year. Some key takeaways per business area, starting with affiliation marketing, excluding the Kazumba assets, the remaining portfolio grow by 5% compared to Q1, with strong contributions from the entrepreneurial partnerships. These partnerships now account for more than 60% of the total affiliation marketing revenues, and we are seeing strong operational momentum. Sub-affiliation. Paid sub-affiliation has not recovered following the significant decline in March and current volumes remain very low. Meanwhile, organic sub-affiliation performed in line with Q1 as expected given the low season in US sports. The pipeline of new organic publishers remains strong. u.s betting tips and subscription we divested the non-core u.s tipster and subscription assets for a million euro these assets and related operations had a negative ebitda impact of half million euro in q2 from july 1st related costs to these assets are eliminated improving profitability by approximately 150 000 euro per month business outlook and trading update Our focus going forward is clear to continue developing Affiliation Cloud into the leading commercial affiliate platform in the iGaming industry. By enabling bundled sales across our internal assets and external publishers on the platform, we create commercial synergies. At the same time, we deliver value to operators through tailored exclusive agreements that support and strengthen their affiliate operations. We have had a strong start to our new entrepreneurial partnerships with several new product launches planned for the remainder of the year. In parallel with ongoing optimization for our casino assets, we are also working intensively to ensure we are well prepared for the FIFA World Cup next summer. Preliminary data on July revenues for affiliation marketing assets indicate performance in line with typical seasonal trends as expected. reflecting a somewhat softer activity during the early summer period and the absence of major sports events. Activity is anticipated to pick up toward the end of the summer. The lower margin pay network in sub-affiliation continues to face headwinds, consistent with Q2 and previous quarter, while the organic network is performing as expected. With these words, we're now opening up for Q&A.

If you wish 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.

Good morning, guys. Richard from D&B Carnegie here.

Good morning.

Hi, Richard. I have one question regarding the from affiliation segments. You're quite clear that the paid publisher network is down and in low activity, but when do you think that the organic publisher network can compensate for the lack of sales in the paid publisher network? Is it near term or is it more in long term?

you're right the paid was down in Q2 and we saw on the organic side we saw revenues in line with Q1 given that yeah it also was some seasonal effects from lower sports events we are not We are not disclosing the exact split between these areas, but we have a strong pipe on organic site and remains confident to grow organic site going forward.

Okay, thank you. And also looking on your affiliation marketing assets. If you exclude Kazumba, what do you say is the main reason for the quite strong momentum you have seen in the Nordics and Vitalin markets then?

We have changed our operating model here with these new entrepreneurial partnerships and we have seen a strong operational momentum. These guys, many of them is entrepreneurs which we acquired businesses from in the past and they have a very good track record and a good strategy for operating these type of assets. So we're happy to see that we are seeing a 5% growth quarter on quarter excluding Kazumba. Kazumba assets still remains very important and the founders are still on board in the daily operations.

Okay, thank you. And looking at the rest of the world, if we exclude Japan where you have the Kazumba assets, Do you see any change in activity in Q2 compared to Q1 in, for example, Latin America?

On sub-affiliation side, we saw in Q1, but Brazil had a slower start and we have seen a bit higher activity in Q2. It's still a big market for us, but we saw a bit higher activity in Q2 versus Q1.

Okay, thank you. That was all for me.

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

All right. We have a couple of written questions as well. There's one around our thoughts of potential future buyback of shares. And this typically is more of a board discussion. It's not something we normally comment on unless you have something specific you want to highlight, Johan.

Regarding the buybacks, no. Our plan now is to use the free cash flow to pay down Verona payments. That's the top priority.

There's another question around ChatGPT. Do you have any ongoing plan to gain users from ChatGPT and Google Overview for your affiliate website?

Yes, it's still early days and we haven't seen any impact on the Google search yet for gambling related keywords. working towards the rank four. But definitely it's a part of our business development to be relevant for AI bots, but it's still early days.

Yeah. And then there's a specific question around affiliation cloud. Can you say anything about the growth numbers of the affiliation cloud platform? And so far we haven't disclosed the split with, at least not between paid and organic publishers. We might do so going forward, but as of not now, what we can say around the number of revenue generating publishers is that it's in line in Q2, Q2 and Q1 are in line.

it was one question will the tv commercial deals be possible to reach for affiliation cloud customers so far i gaming commercial deals in for affiliation cloud customers but yeah if there is a demand we have good relations with with a nordic tv and streaming providers so it could be an option in the future

Okay, that was actually the last question.

Okay, thank you all for listening in and hopefully we see you again in November.