Acroud AB

STO:ACROUD

Earnings Call Transcript 2023-Q2

[Robert Andersson, executive]

Good morning, everyone, and welcome to this Q2 presentation. My name is Robert Andersson, and with me, I have Tricia, our CFO. And if we look at today's agenda, I will be going through some Q2 highlights, Q2 key figures, and then we will summarize where our company is at the moment. Tricia will then follow with financial details and in the end, we will have a Q&A.

So if we look at the highlights. We had record revenues of EUR 10.3 million. That's a revenue growth of 43%. And we have record NDCs of 117,000. That's a massive increase of 234%. So I repeat, revenues at 10.3% (sic) [ EUR 10.3 million ], and we had the adjusted EBITDA of EUR 1.6 million. This is a bit lower than where we necessarily had wanted to be. However, we did decide to really invest in paid media and that is why we have those record NDCs.

The profit after tax was minus EUR 21 million. This is predominantly due to the write-down of the old legacy business. Adjusted profit after tax was minus EUR 931,000. And as I've said, NDCs was record-breaking, and this is also then kind of reflected in our lower EBITDA because we invested heavily in acquiring these NDCs, and they are all on revenue share. So this is going to come back in our growth later on, but this is needed to hit our long-term targets.

And we are moving on. So I keep repeating it, record revenues and record NDC numbers. This is something we are really, really proud of. But what Q2 was, was a very active quarter when it comes to restructuring. And what happened is, a few years ago, we bought 2 companies.

We bought PMG Group, which consists of Voonix and Matching Visions predominantly; and we bought TGC. And what has happened is that all of these companies have outperformed our wildest expectation. So this is really good. We managed to do some really successful acquisitions.

What this did lead to though is that we have very high earn-outs and we had to initiate a written procedure related to the bond in order to cope with this cash outflows that were supposed to happen according to all the contracts, and we had also to amortize on the bond, et cetera. So we did renegotiate all of these deals.

This led to our contingent liabilities going down from EUR 26 million to EUR 6.5 million. That's a massive figure to be able to reduce in a contingent liability, 26 to 6.5. And we also changed our cash outflow in the company from EUR 6 million to EUR 2.5 million, which is also a huge achievement. And all of this figures will be reflected in the Q3 report because these were closed after the end of the quarter.

So we also took steps to move our core business, the legacy business, which we did the write-down on to Serbia. This is due to the fact that we haven't been able to create the growth we need in that business. We tried different strategies, different management, et cetera, but it had so much legacy issues that we couldn't get past. So it was really time now to make clean slate and no holy cows and give it a team to really do what's needed.

And I worked with them in the past. So I'm really hopeful about this, and we have also structured the deal so that they are incentivized for quick growth. So what we have done now is that I feel with this quarter past, we have really set up the company for future success. It's a really clean company that doesn't carry risks in the balance sheet, et cetera. So I'm very, very happy with what we have achieved.

So if you -- as you can see here, our revenues keeps pretty much being record breaking. The trend is clear, and this trend is something that we expect to keep going, especially considering how heavy we have invested in all these NDCs lately.

And if we then look at how our group looks or as I like to call it, a crowd of companies. So we have Voonix, which is a leading SaaS offering for affiliate software in order to track your own business and your own performance. We have Matching Visions, which is a super affiliate network, which pretty -- it means that we aggregate smaller affiliates up into operators. So we have maybe 1,000 different smaller affiliates using Matching Visions and the deals we provide for the smaller affiliates.

We have PokerListings, which is a global poker news site. It's one of the most renowned poker news sites and poker affiliate sites out there. We have TheGamblingCabin, which is probably Sweden's largest sports betting community. Its largest client is [indiscernible] and if you are interested in sports, I urge you to check out their broadcasts and take part in the really active community there.

We have something I like to call a core. This is the traditional SEO and casino and sports affiliation that's pretty much what the affiliation of the past was based on. There is still business to be made there, but the industry has changed significantly. And this is now what we have given to the team in Serbia to turn around and grow.

Then we have our major buying business. We are going to start calling that fairgrounds, and it is a little bit of a funny story behind that name. But for that, you're going to have to tune into our Q3 presentation when we will be presenting this a little bit more in detail.

And with that said, we are moving on to the financial details, and Tricia.

[Tricia Vella, executive]

Thank you, Robert, and welcome to the Q2 presentation. My name is Tricia, and I will be going through the financial details of quarter 2. So starting off with revenue, as Robert said, revenue kept increasing and has now reached to EUR 10.3 million. If we had to look at the split in between our 2 segments, so the iGaming Affiliation contributes for EUR 6.8 million of this revenue, and our SaaS segment contributes to EUR 3.5 million of the total group revenue.

Also, NDCs has reached an all-time high of 117,000, which represents a year-on-year increase of 234%. So moving on to the revenue bridge, which is showing us the movement in revenue from Q1 2023 and the main movement, as you can see, is an increase in the Sports Betting revenue of EUR 1.2 million.

You can also see an increase of 210 in our SaaS business coming from the network model. And this is [indiscernible] by decrease in casino and poker of 261 and 150, which gets us to a revenue of EUR 10.3 million.

Also, the cost, so starting off with EUR 7.2 million in Q1, as well as Robert said, we invested in our Paid Media business and thus, we had an increase of EUR 1.3 million in other external costs and in line with also the increase in revenue of -- in the network model of the SaaS segment, we also had slight increase in cost of 73.

The increase in our payroll costs of 110 is also coming from the investment in our Paid Media business and that gets us to a total cost base of EUR 8.7 million in Q2. So looking at the adjusted EBITDA, which stands at EUR 1.6 million in Q2. Again, the decrease is because there was an investment in costs in the Paid Media business, which has lowered the EBITDA.

So right now, the group is operating at a blended EBITDA margin of 16%, which is coming from an EBITDA margin of 13% in our SaaS business, and an EBITDA margin of 18% in our iGaming segment.

So specifically focusing on the iGaming Affiliation and starting with revenue, which stood at EUR 6.8 million. As you can see, the majority of our iGaming revenue is coming from our sports betting vertical, which contributes to 83% of the total iGaming Affiliation revenue and then you have poker and sports betting, which contributes to -- poker and casino, which contributes to [ 33% and 20% ], respectively, of the total iGaming Affiliation revenue.

Okay, looking at the revenue model. So 77% of our iGaming revenue is coming from rev share deals. We can see a movement from last which was only 41%, but this moment is mainly coming from the introduction of the Paid Media business, which is focused on rev share deals.

Then we have CPA deals, which contributed 11%; and other fees, which contribute to 12% of our revenue. Also, the revenue by type. So the largest part of our revenue is 74% coming from our Paid Media business; 21% coming from our SEO, which is the traditional website business; and 5 percentage, which is coming from our social and media business.

NDCs in the iGaming affiliation stood at 101. So as you can see, the total group's NDCs increase is mainly coming from the iGaming Affiliation. And EBITDA is EUR 1.2 million. Again, the decrease since Q1 is mainly because of the investment in our Paid Media to ensure that revenue grows in the near future.

Adjusted cost base of EUR 4.9 million of costs, other external costs, again, the increase here is the Paid Media investment; and personnel costs 627 in Q2 which is also represented -- the increase is also represented by the Paid Media business in this segment.

Moving on to our Other segment, which is the SaaS segment. So total revenues of EUR 3.5 million in Q2, mostly coming from our network model, which has also seen an increase of 6% over quarter 1, and whereas the subscription model has remained pretty stable from Q1 and also year-on-year.

EBITDA at 463, which is also very much in line with Q1. You can see a slight decrease since last year, and this is mainly represented by an increase in costs and a slight decrease in revenues since last year. And I repeat that the EBITDA margin of this segment is now standing, operating at 13%.

RGUs, which are our revenue-generating units, stood at 428. These are increasing slowly but pretty much stable as well in this segment.

Okay. So moving on to the gross debt, which is now standing at EUR 20.1 million in Q2. You can see a slight decrease from Q1, and this is mainly represented by a higher cash and cash equivalents at the end of Q2, which reduces the gross debt. And also, we had [indiscernible] SEK FX during Q2, which converts the euro equivalent of our SEK-denominated bond to a lower amount.

And may I also remind that the bond also moves with the amortized bond redemption and amortized bond discount. Net debt, which is standing at EUR 2.2 million at the end of Q2, which you can see a slight improvement also when we compare it to Q1.

Moving on to the last slide, which is our cash flow development. So operating cash flow stood at EUR 1.7 million in Q2, which is -- which compares to a cash conversion of 145%, which is a very good conversion. This comes after we had 2 quarters of low cash conversion. But as we had explained, this would be simply timing differences.

And cash flow from investments, very minimal, 42, and these represent the additions in our intangible assets. Cash flow from financing, 863, which is mainly represented by the bond interest, but also includes finance lease payments and some minority dividends. And yes, and cash position of EUR 3 million at the end of quarter 2.

And with that, I hand over back the presentation to Robert.

[Robert Andersson, executive]

So for me, this has been an amazing quarter looking at all the things that we have achieved and kind of set in motion, all the record NDCs and the revenue. The only thing that one could look at in this presentation is the lower EBITDA that we achieved. But this is something that we have to do in order to continue towards our aggressive financial targets. So this all comes back in Q3 and Q4. And now with a really, really clean balance sheet, I think the sky is the limit.

And with that, I am handing over to Q/A.

[Operator]

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Robert Andersson, executive]

Okay. So that brings us to the end of this presentation, and I look forward to our Q3 presentation. And thank you.