Affiliate group Better Collective referred a record 580,000 new depositing customers (NDCs) to its operator partners in Q4 2022, helped by the popularity of the FIFA World Cup.
Topline numbers
In Q4 2022, Better Collective generated revenue of €86.1m, a 63.2% year-on-year increase demonstrating organic growth of 44%.
Of the total, €41.3m was considered recurring revenue, an increase of 81% compared to Q4 2021.Q4 EBITDA before special items totalled €35.2m, up 115.4% at an EBITDA margin of 41%.
The number of NDCs referred to operators by Better Collective during the quarter was an all-time high of more than 580,000, up 117% on the comparative period.
Of those NDCs, some 78% were sent on rev share contracts.
Those figures brought Better Collective’s full-year 2022 revenue to €269.3m, up 52.1% year-on-year, or 34% on an organic basis.
EBITDA before special items for the year was €85.1m, up 52.5%, on an EBITDA margin of 32%.
NDCs for the full year hit more than 1.68 million, up 96%, with 76% of those being referred on rev share contracts.
Geographical breakdown
Driven principally by Action Network, Better Collective achieved its previously stated target of exceeding $100m of revenue from the US during 2022.
The business achieved this milestone in spite of moving some $15m of revenue from upfront cost-per-acquisition (CPA) contracts to rev share deals, it said.
The US figure represents an annual growth rate of 102% in the region, helped along by revenue of €34m (up 71% year-on-year) in Q4.
US revenue therefore represented around 38% of the group’s total during the quarter.
In Europe and the Rest of the World, meanwhile, Q4 revenue hit €52.2m, up 59%, and accounting for some 62% of total group revenue.
News nugget
The FIFA World Cup played no small part in driving Better Collective’s record Q4 results.
The tournament helped to grow revenue in Europe and the Rest of the World by 59% to €52.2m, as more than 300,000 NDCs were referred to operators as a result of the tournament alone.
The performance exceeded the company’s expectations revealed CEO Jesper Søgaard, with the number of NDCs referred exceeding more than the last four men’s World Cups and European Championships combined.
Indeed, compared to the 2018 World Cup, the firm’s performance improved tenfold, “a true testament to how far we have come in just four years,” according to Søgaard.Given that the majority of customers were referred on a rev share basis, there was a “short-term dampening effect” on performance, but the CEO insisted this would bring the business a long-term benefit for the future.
The launch of legalised sports betting in Maryland, meanwhile, helped grow US revenue by 71% to €33.9m, together with a busy North American sports calendar in Q4.
Best question
As Better Collective increases the number of partners it works with on a rev share basis, Hjalmar Ahlberg of Swedish investment bank Redeye asked whether operators in the US are becoming more open to striking that kind of deal with affiliates.
In response, Søgaard said: “We now have six partners in the US we are working with on rev share agreements, up from four in Q3.
“We do see progress with more partners where we are working in a very aligned way and also in more of a strategic partnership way, with the aim of us being closer to the partner and ultimately able to to integrate better with them.
“So I think it’s a good development we see, and we sense that it’s also an acknowledgement of the position we have in the American market, with the brands we own becoming must-have brands for these partners to be featured.
“We’ve even seen the Action brand being highlighted in one of the big sportsbook’s reporting in their webcast, so it is really a testament to the quality of the brands we own.”
Best quote
CFO Flemming Pedersen on the possibility of more M&A activity at Better Collective:
“Right now there’s a mismatch between public valuation and private price expectations, to be honest. So, until that gets into sync again, I think in general there will be more muted activity. It’s not the interest rates, as such. It’s more the public valuations – the multiples that we’re trading at are basically below the expectations of the targets we’re looking at.”
Current trading and outlook
January 2023 was a record breaking month for the affiliate, with revenue in excess of €37m, up more than 40% year-on-year.
Those figures were helped by the statewide launch of sports betting in Ohio, while the growth recorded came on top of a strong comparative period in January 2021, during which New York state launched its own legalised betting market.
The business has a revenue target of between €290m and €300m for the full year 2023, with EBITDA before special items between €90m and €100m, and a net debt to EBITDA before special items ratio of under 2x.
Following the end of the reporting period, Better Collective signed new media partnerships with football-focused online news portal Goal.com and Polish media business Wirtualna Polska.It also signed a smaller asset deal for a sports media in an emerging market, for which the price was $4.3m including an upfront payment of $3m.
The firm said it will undertake one-off costs for investments in 2023 to help it establish a stronger presence in Latam and other emerging markets where regulation is in place or expected in the future.
Including an investment to be made in building a proprietary technology platform for display advertising, the initiatives are expected to add around €10m in additional costs in 2023.