Acroud AB

STO:ACROUD

Earnings Call Transcript 2021-Q3

[Robert Andersson, Chief Executive Officer]

Good morning, everyone, and welcome to this Q3 report of Acroud. So today, we will be taking a look at our last quarter where we've had strong NDC growth and we'll also have an outlook on the Dutch market. So today's agenda, we will have a summary. We will have an overview and financial details as well as a closing comment also. My name is Robert Andersson, I'm the CEO. With me here today, I have Ruben Gräve, who is our CEO for Affiliates, and he will be explaining to us all a little bit about the Dutch market. So moving on. As I said, we've had a strong quarter-on-quarter NDC growth, and we will go into the Dutch reopening of the market. So look at some figures to start with from the quarter. Our revenue amounted to a whole EUR 6.5 million. As you can see, that's up quite a bit over last year, and EBITDA amounted to EUR 1.2 million, and profit was almost EUR 600,000. NDC hit the record level of 40,000 and our cash flow was about EUR 1.2 million. We have moved on and look at the period for the year. Our revenue was almost totaled -- or have totaled EUR 18 million plus where EBITDA has been almost EUR 4 million. Profit is EUR 1 million and NDCs are over 100,000. Cash flow has been a solid EUR 3.5 million. And with that, we move on to overview of some events. Well, we did return to the live scene. Acroud has previously had a live event but we have now restarted that with the festival, which is a series of events that will be ongoing. The idea behind this is, of course, that we are creating a lot of good content to use on our affiliate websites. So this is going to be a bridge between offline and online events. So of course, while we will make money on the actual event, it's also a content generator and a brand builder. And it's the first of its kind where it's a series not only involving poker, but also involving competitive sports betting, roulette, et cetera. Then, of course, we have what we have talked about a lot, which is the Dutch market reopening. And Ruben, who's with me, he will talk about that shortly. We have recently appointed a new CFO and a new CTO. Roderick has been with us for some time already as Head of Finance, and I'm really happy to welcome him as CFO. It's going to be a great addition to my management team. And then we have with us also Axel, who is going to be the CTO of Affiliates, and he comes with us from Gig before. So it is, I feel that we have a really strong team going forward. I did want to highlight a little bit about our SaaS segment in this report as well. First of all, now we are not segment reporting BaaS and SaaS separately, but we only report the SaaS segment now. And what we are seeing is showing really strong growth, and it's been growing 30% year-on-year, which is really nice. In the SaaS segment, we have our little gem called on Voonix, and Voonix has been growing really solidly. And Voonix is a software that is solving a big problem for a lot of affiliates, which is how to track your revenue. Because if you're an affiliate, you are connected to several hundred different operators that show you the revenue in different ways. So with Voonix software, you can go to one place and connect to all of these operators. And it also has the ability to actually track all kinds of revenue models, which is hybrid models, you can track rev share or CPA only, and this is a one of a kind. And what we are seeing is that this software is becoming increasingly popular. It's taking on larger and larger corporations or enterprises. In its history, it was a lot of small affiliates that's using this, but we are seeing that we're having a lot of our larger affiliates actually now also wanting to use this software. So we're very confident with this. And with that, I hand over to Ruben to talk a bit about the Dutch market.

[Ruben Gräve, COO of Affiliation Segment]

A short, but important update on the Dutch market. Since 2013, it's been one of the largest markets for growth, and we have always had a strong presence in a local team based with a lot of knowledge. We have adapted our product offering to the new legal framework and are ready to do business with all the operators. So far Acroud has been continuing building on our strong position, Dutch side, ensuring the right rankings for the keywords that are important. We have been partnering up with the largest media house in Netherlands, ensuring from the get-go, a large exposure in traditional media as well as we have been working on the Dutch affiliate network, together with Matching Visions. Then I would like to touch on our 4 strategic pillars. One is, of course, affiliate. It's ever more geared towards software-based affiliation services, ensuring high-quality content, SCO and cutting-edge technology delivered to our affiliate assets. Then we have the SaaS segment, which is what Robert just explained, our industry-leading data collection and business intelligence service. And we have our live events, which started now in September with the festival and Acroud is trying to bridge the gap between land base and digital space. And finally, we have content, and we are diversificating our traffic sources with rich content. So through the acquisition of TheGamblingCabin, we are now setting a new standard in the streaming and podcast industry and iGaming.

[Robert Andersson, Chief Executive Officer]

All right. So now over to some financial details. And this is the first time that I will try and present the financial details myself as we don't have our new CTO with us here. So bear with me if I get anything wrong, it's entirely going to be my fault. So if we look at it on a group level revenue, we see that we have grown significantly over the last year. That's because the addition of the SaaS segment. So we almost hit EUR 6.5 million in revenue. I think also what is very impressive, if you look at this slide is that you can see how much more volume we've managed to build through these acquisitions and through building this, we are now sending almost 40,000 new players through our systems to our partners. And if we look how this has been bridged, how did we go from EUR 2.4 million in revenue to almost EUR 6.5 million in revenues. Well, as you can see here, the SaaS segment event is a very important milestone for us to add to the company group. We did increase revenues in poker as well as increase in sports betting revenues. However, we had a decrease in the casino revenues and decrease in some other areas, but still then totaling almost EUR 6.5 million. If we do the same bridge over cost. It's only relevant to do over last quarter as we 1 year ago didn't have the SaaS segment, right? So last quarter, we had the cost base of EUR 4.7 million. And we can see that the largest increase we have seen is the payout from the SaaS segment. That is basically Matching Visions paying out commissions, which means, obviously, that they have grown. So in general, it's not necessarily a bad cost that's increased. What you can see also is that we have our strong cost control. So we have a decrease in cost person -- in personnel cost. But what we have also done is increased investment in external investments such as content and link building, et cetera. And we have increased some capitalized work but not much. So looking at the EBITDA level, I mean the obvious here is that you can say that the EBITDA level has been decreasing over the last 3 quarters. This is something that has happened because we are taking aggressive investments to get EBITDA levels back to growth in 2021, we needed to really turn the ship around and keep having the guts to invest heavy in order to really get the explosive growth that we are aiming for next year. And looking at the iGaming segment, here, you can see broken down. Casino is our largest revenue maker, while poker is a very good second and then you have sports betting. If you look at the NDC development, it's really nice to see that we actually broke a record and we reached over 18,000 NDCs in the affiliate segment. If we look how this is split, we say that we have 53% on rev share, and we have 26% on others and 21% on CPA. And obviously, NDCs on rev share takes longer time to recuperate. So what we see is the more NDCs we build up now on rev share, the revenue will come later, obviously. So the investment is taken now and the revenue comes later. If we look at it by market, we have 68% in Europe, and we have 21% in North America, and we have 11% from other markets. Looking at EBITDA development in affiliation, you can see the same trend here. It has been going down while investment is going up. You can also see that the personnel cost has been going down and investment in external other costs have been going up, and this is simply because we need to invest ourselves back to growth, and I'm really happy with the progress that we have made so far. So I am not at all concerned with these graphs. It's just going to be a lot more fun next year. In the SaaS segment, you can see that our revenue development remains really strong. Our NDC also remains very strong. Nice solid growth on both sides, but you can see the same trend here is that we have invested in future growth, and we are doing so. And if you watch instead, the RGUs in the SaaS segment, you also say that they keep growing, which is very nice. And to round things off a little bit. We have a few more slides. The financing and cash flow, we can say that we have been reducing our net debt, our gross debt, I mean. So we are down to EUR 20 million, and this is because, obviously, we are amortizing our bond, but we have also historically been buying back our bond. Our net debt to adjusted EBITDA is around 3, and has been stable around 3 for a while now. Lastly, just looking at the cash flow development a little bit. As you can see, we had an operating cash flow of EUR 664,000. It is, though, really important to note here that we had the tax payment of EUR 566,000. That's a one-off payment whereas EUR 5,600 will be paid back by the Malta government later. So in total, the adjusted cash flow would be EUR 1.2 million, and that gives us a very strong cash conversion of 93%. So with that, we do some closing comments. What we are seeing in the way we work and the way we adapt our organization,is that we are moving towards a much more modern organization, which is flexible. Talent comes from everywhere and adjusting to the new normal very much so. We keep cost efficiency and focus around personnel and office, et cetera, but we are not scared of investing in our future growth at all. And when we do something that is successful, we duplicate success internally. And of course, since we have done those acquisitions in the past, we are working with synergies in duplicating what works in one company into the other one, and we are seeing good effects from that. But always, always with shareholder focus and value for the shareholders in focused. So with that, I think we open up for questions and answers. Thank you.

[Operator]

[Operator Instructions] And our first question comes from the line of Johan Bizet from Nordic Investments.

[Unknown Analyst]

I have 2 questions. One is your owned bonds. How many bonds do you hold today? And have you reduced your holdings since last quarter? And what are your thoughts about the refinancing?

[Robert Andersson, Chief Executive Officer]

I do not know by heart how much bonds we own ourselves. I think the outstanding bond to start with was EUR 375 million or something like that. And I mean, we have a gross debt of EUR 20 million now. But exactly how many bonds we have in our possession. I have to get back to you with. In terms of refinancing, that's obviously something that we will work on, but not something that I can comment now.

[Operator]

[Operator Instructions] And there are no more questions registered, I hand back to our speakers.

[Robert Andersson, Chief Executive Officer]

Okay. Well, if there are no more questions, I'd like to thank Ruben for coming by and talking a little bit about the Dutch market. And I hope to see you all again at the Q4 presentation. Thank you very much.

[Ruben Gräve, COO of Affiliation Segment]

Thank you.