Swedish affiliate and software as a service (SaaS) company Acroud AB achieved 53.2% year-on-year revenue growth in Q4 2022, largely thanks to the performance of recent acquisitions.
Topline numbers
Total revenue for the quarter came in at €10m, up from €6.5m in the prior-year comparative period.
Although that represents a growth rate of some 53%, on an organic-only basis, revenue was down 3.3% compared to the previous year.Adjusted EBITDA in Q4 came to €2.5m, more than double the €1.1m posted in Q4 2021.
The firm’s overall loss after tax was €20.3m, compared to a €356,000 loss in the prior-year period.
When adjusted for items affecting comparability and currency effects, however, the firm declared an adjusted profit after tax of €564,000, compared to a €264,000 adjusted loss in Q4 2021.
Items affecting comparability included an impairment charge of €18m (related to the writing down of asset values from the firm’s acquisition of Highlight Media in 2016) and an earn-out revaluation costing €2.9m.
Those figures brought Acroud’s full-year 2022 revenue to €30.9m, up 24.8%, or 6.9% on an organic-only basis.
Adjusted EBITDA for the year was €7.6m, up 40.4%, while the firm posted a loss after tax of €18.4m, compared to a €719,000 profit after tax in 2021.
When adjusted for items affecting comparability, including the €18m impairment charge, adjusted profit after tax for the year was €1.5m, up 42.5%.
News nugget
Acroud’s recently acquired affiliation business – now known as Acroud Media – helped the company grow its number of new depositing customers (NDCs) by 160% to 84,086 during the quarter.
Q4 was the first quarter incorporating the new business segment, which is now “firing on all cylinders,” according to Acroud CEO Robert Andersson.
The business segment comprises mainly sports betting revenue driven by rev share deals with operators, which Andersson said gives it “a very stable and secure long-term revenue stream.”
The acquisition of Acroud Media helped the company’s iGaming affiliation division overtake the SaaS segment as its largest earner.
The acquisition also introduced sports betting revenue as the biggest vertical within that division.
While Acroud did generate some sports betting revenue prior to the acquisition, it remained below the amount earned from both the casino and poker verticals.
Overall, the affiliation segment generated €6.3m in revenue (up 134.8%) – or 63% of all revenue – while the SaaS segment generated the remaining 37% at €3.7m, down 4.2% year-on-year.
Best quote
“I would lie if I said it did not annoy me.” Acroud CEO Robert Andersson on rev share being negatively impacted by unfavourable sports results.
The disadvantage of Acroud’s rev share agreements with operators is that they are negatively impacted by unfavourable sports results.
“This happened to us towards the end of December when all favourite teams in the English Premier League won,” Andersson commented.
“I would lie if I said it did not annoy me. However past results show that such hits occur only a few times during a calendar year and that revenue always comes back over time.”
Best question
Equity research analyst at Erik Penser Bank, Rikard Engberg, asked Andersson to explain a year-on-year reduction in sales via Acroud’s network model SaaS offering.
The network model offers SaaS products built for affiliates and content creators to track their operational KPIs, in addition to providing access to a large pool of clients, deals and campaigns that would otherwise be out of their reach.
Andersson said in response: “We have had a slight shift in focus and model there, and we are working a little bit more on lower volume but higher quality, trying to help those that deliver higher quality NDCs rather than just bulk.
“We’re kind of promoting them and this is all on revenue share, so it takes a little bit of time for this to have an effect. With that said, also some of the bigger clients will move on and these are normal fluctuations in the business.
“We do foresee continued growth going forward over time. With the network, it’s also quite a low margin business and costs directly correlate to payouts to the sub-affiliates. So that’s why you will see that when revenue decreases quite a bit, costs will also go down and the impact on EBITDA is not that great.”
Current trading and outlook
Positive momentum in Q4 has positioned the company to achieve its goals in 2023, Andersson said.
Those objectives include achieving 20% organic EBITDA growth and optimising the company’s capital structure by lowering its net debt/EBITDA ratio and lowering its gross debt.
Acroud’s net debt/EBITDA ratio fell to 2.5x as of December 2022, which Andersson said meets the target the business had set to reach by December 2025.
The company has a new management team in place, which aims to further strengthen the cooperation between Acroud’s subsidiaries and create a smaller, optimised organisation.
Changes to the company’s structure have led to a one-off restructuring cost of €98,000 in Q4 2022 but will lead to annual cost savings of €660,000, according to Andersson.Looking to the company’s preliminary results from 2023, revenue in January totalled €2.3m, an increase of 35% year-on-year.
In February, Acroud appointed Tricia Vella as interim CFO following the resignation of Roderick Attard.
The recruitment process for a permanent CFO is still in progress, the company said.