Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Better Collective AS (BTRCF, Financial) has experienced significant growth in its audience, expanding from 7 million to over 400 million visits since 2018.
- The company has successfully transitioned a portion of its US business to a revenue share model, which is expected to generate substantial future revenue.
- Better Collective AS (BTRCF) has a strong position in the US market, with strategic acquisitions and partnerships enhancing its presence.
- The company has initiated a cost reduction program to streamline operations and improve profitability, targeting a EUR50 million reduction in operational costs.
- Despite market challenges, Better Collective AS (BTRCF) remains confident in its long-term growth potential, particularly in the US and Brazilian markets.
Negative Points
- Better Collective AS (BTRCF) has downgraded its financial targets for the first time since its IPO in 2018 due to changing market dynamics in the US and Brazil.
- The company has experienced a decline in organic growth, with a 6% decrease reported in Q3 2024.
- There is a significant slowdown in the Brazilian market due to anticipated regulatory changes, impacting revenue share income and new customer acquisition.
- The US market has seen lower-than-expected activity, particularly affecting CPA revenue, leading to a reassessment of expectations.
- Better Collective AS (BTRCF) has had to lay off more than 300 employees, representing over 15% of its workforce, as part of its cost reduction efforts.
Q & A Highlights
Q: Can you provide more details on the lower activity in the US market and its impact on your business?
A: The lower activity relates to commercial developments with partners in the US, where we are experiencing some headwinds. However, we feel confident about our position in the US market, having built a significant audience and strong products over the past few years. Despite current challenges, we are well-positioned to capitalize on future opportunities as more states open up and new entrants join the market. - Jesper Søgaard, CEO
Q: Could you explain the EUR50 million cost reduction program and its relation to the recent layoffs?
A: The cost reduction program includes a mix of salary reductions and cuts in other specific cost items. The Q3 numbers are lower than usual due to variable payments not being made when targets are not met. The EUR50 million target is a combination of these salary reductions and other cost-saving measures. - Flemming Pedersen, CFO
Q: How will the cost reduction program impact your growth and margin profile?
A: We are focusing on growth areas such as esports, media partnerships, and paid media, which are performing well. The US market, despite current headwinds, and the Brazilian market, with its upcoming regulation, are expected to deliver strong growth in the long term. Our long-term guidance aims for an EBITDA margin between 35% and 40%, and we are structuring our operations to meet these targets. - Jesper Søgaard, CEO & Flemming Pedersen, CFO
Q: Can you elaborate on the impact of the Brazilian market slowdown on your revenue share accounts?
A: Throughout the year, we've seen a slowdown in Brazil, which accelerated in Q3, affecting both new depositing customers and revenue share activity. However, we remain excited about the long-term prospects of the Brazilian market, especially with the anticipated regulation and licensing. - Jesper Søgaard, CEO
Q: What is the status of your contracts with Brazilian operators once the market becomes regulated?
A: The contracts we have with Brazilian operators will remain valid even after the market becomes regulated. - Jesper Søgaard, CEO
Q: Can you provide insights into the EUR120 million of unrecognized revenue share revenue in the US?
A: We analyze customer lifetime values across our business, and in the US, we have two years of data from several hundred thousand new depositing customers. This analysis helps us estimate the unrecognized revenue share, which is based on actual player behavior and activity. - Flemming Pedersen, CFO
Q: How does the time lag between customer acquisition and revenue recognition in the US compare to other markets?
A: The US market dynamics result in a longer time lag, typically between 18 and 24 months, before players become profitable. This is due to factors like hybrid contracts and competitive market conditions. We expect pure revenue share to account for EUR10 million to EUR15 million next year. - Flemming Pedersen, CFO
Q: How does the recent acquisition of Playmaker Capital fit into your long-term strategy?
A: Playmaker Capital has significantly improved our position in North and South America, particularly in Brazil. It aligns with our strategy to own market-leading digital sports media brands in high-growth markets, enhancing our long-term growth potential. - Jesper Søgaard, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
