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Better Collective hailed another record quarter in Q1 2023 as revenue grew 30.4% year-on-year.

Topline numbers

Q1 revenue grew 30.4% year-on-year to €87.9m, of which €40.9m was considered recurring revenue, up 74.8%.

Of the total revenue, €50.8m came from Europe and the Rest of the World amid 40% growth, while North America delivered a further €37.1m, up 19.4%.

EBITDA for the quarter totalled €33.3m, up 44.2%. After the deduction of depreciation, amortisation and other special items, the business was left with profit after tax of €20.9m, up 52.3%.

Earnings per share for the quarter came to €0.38, up 52% from €0.25.

Those figures represented a record-breaking quarter for Better Collective.

News nugget

While the business said it continued to see growth in its legacy European markets during Q1, its upward trajectory in both North America and Latam were undoubtedly the headline focus of the report.

In North America, where the firm saw 19% year-on-year growth, of which 18% was organic, Better Collective noted that this came in spite of a tough comparative period, which saw the launch of New York’s regulated sports market and the associated high level of cost-per-acquisition (CPA) payments.

In addition, Q1 growth in North America came in spite of a continued transition away from CPA deals towards rev share agreements, helping drive sustainable, recurring revenues for Better Collective.

The business confirmed that globally, 71% of all new depositing customers (NDCs) referred during the quarter were sent on rev share contracts.

New state launches in Ohio and Massachusetts also helped the business continue to grow in North America.

Better Collective said Ohio’s launch had been “perfect” from a regulatory perspective, with the business performing “extremely well” in the state’s opening period.

Massachusetts, meanwhile, “also generated good activity,” although its performance was not as strong as Ohio due to “regulatory wavering” and the fact it launched after the end of the NFL season.

Meanwhile Latam, which is reported together with Europe in the ‘Europe and Rest of World’ business segment, also saw significant growth during Q1 as the business continued to work on establishing a strong local presence in different markets across the region.

The company has established a strong foundation of traditional affiliation there, it said, as well as several local media partnerships, of which it plans to sign several more in the near future.

This, Better Collective said, is its “blueprint for success” already developed in European markets and executed in North America.

Latam markets share more in common with Europe than with North America, the firm said, given local preferences for football (soccer) over any other sport, in addition to the collection of diverse, independent cultures which make up the region.

Best quote

“We are not excluding the idea of potentially doing an iGaming acquisition, it’s just not our primary focus and it would have to be for very specific reasons. Ultimately, for sports betting, casino will be a complementary product.”

– Better Collective CEO Jesper Søgaard considers whether the business will pivot to online casino

Best question

ABGSC analyst Oscar Rönnkvist asked management on today’s earnings call how the company’s transition towards rev share contracts would impact its paid media margin and earnings in the future.

In response, CEO Jesper Søgaard explained: “We have been building rev share and the effect of that is that we are more dependent on the sports win margin, meaning that for quarters where we see a strong sports win margin for the sportsbooks, we’ll have some tailwinds in the paid media and also in the publishing part of our business. 

“I think this is what we’ve seen in both Q4 last year and in this quarter – that we had a strong sports win margin and that had a direct effect on the margin for the paid media business. 

“And if you take the opposite, let’s assume we’d had a weak sports win margin, then you would also have seen a lower margin for the paid media business. Obviously it will fluctuate, so it’s just the nature of the business that some quarters will see a high sports win margin, and others will see a lower margin.”

Current trading and outlook

Better Collective said its momentum had continued into April, with revenue for the month up 40% year-on-year.

However, it added: “It is worth remembering that our business is reliant on sports activity and thereby fairly seasonal. This means that the sports activity is expected to slow down during the low season in the summer period as usual.”

For the full year 2023, the business expects to generate revenue of between €305m and €315m, with EBITDA of between €95m and €105m.

Its net debt to EBITDA ratio is expected to fall under 2x by the end of the year, excluding any potential further acquisitions taking place.

Up to 2027, the business is aiming to generate a revenue CAGR of 20%, an EBITDA margin before special items between 30% and 40%, and a net debt to EBITDA ratio of under 3x.

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