Acroud AB

STO:ACROUD

Earnings Call Transcript 2022-Q4

[Operator]

Good morning, and welcome to the Q4 2022 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Robert Andersson, CEO. Please go ahead.

[Robert Andersson, executive]

Good morning, everyone, and welcome to this Q4 2022 presentation of Acroud. So today, we will go over the Q4 highlights, some key figures as well as our financial targets and a little bit more about Acroud and then the financial details.

So looking at the Q4 highlights, we had 134% EBITDA growth, and we had 53% revenue growth and 160% growth in NDCs. Going forward and looking at the figures in a little bit more detail, we had revenue that amounted to over EUR 10 million. Our adjusted EBITDA was close to EUR 2.5 million. Profit after tax was a negative EUR 20 million. However, this is relatable to a write-off of assets from Highlight Media acquisition in 2016.

Adjusted profit after tax was EUR 20 million, as I said -- sorry, was negative EUR 500,000 -- I'm sorry again. It's EUR 500,000. And the sales was 84,000 new customers.

Moving on, the 2022 figures revenue amounted to EUR 30.9 million and adjusted EBITDA to EUR 7.5 million. Profit after tax, again, is EUR 18 million as we talked about before. Adjusted profit after tax, EUR 1.5 million. And the sales was a whopping 186,000 during the whole year.

So if we summarize in words, the quarter. First quarter with our new Media Business, as you will see, this has changed the company rather significantly in the numbers.

Optimizing. We have been working on our management team as well as the organization in general. And we have been able to cut some more costs, and this will be reflected in 2023. It's clear that our strategy of diversifying our revenue streams is really paying off, and our risks has been reduced with that. And now with the new acquisition, we have 68% sports book revenue, which is on predominantly revshare. This is a real strength. sports book is not as sensitive to regulation, and on revenue share, we have a secure, steady stream of revenue going forward.

Successful acquisition. What we have done so far is really promising, strong growth for 2023. So with this, we are kind of entering a new era, and we are on the right track to deliver our targets. So the new acquisition of Acroud Media makes us very agile. This is paid media and not SEO, which makes us be able to move into new markets quickly.

We are able to capitalize on opportunities quickly, for example, such as Super Bowl or any other events that comes up. We are diversified. Before, if you look back, we were pretty much an SEO-driven company. Now we are driven by our technology stack, our software and our media buying. It's a nice mix of revenue streams, and we have stable growth from all these revenue streams now.

If we look at comparison compared to our financial targets, it is 40% adjusted EBITDA year-on-year growth. And if we look at what we delivered, we delivered EUR 7.9 million, and we have guided on EUR 8 million to EUR 10 million. And I was actually quite sure we were going to come in over EUR 8 million, but we had some last-minute adjustments and we had some unfortunate results in the end of the year in terms of how the sports book landed. All the favorites teams in Premier League, and that's always really hard on the sports book figures.

If we look at our financial targets and particularly what this will mean for 2023, well, we have said that we are going to come out with an organic growth over 20%, and I just wanted to clarify in this presentation and going forward. When you think about this, the organic growth is of the businesses that we already have in, so we are going to grow those 20%. And then on top, we will have the media business because this is what we consider acquired growth for another year.

So looking at the group's revenue development. As you can see, it's a massive jump from EUR 6.7 million to EUR 10 million, and this is related to the acquisition that we did. We are still a house of brands, so we have a lot of brands, and you can go and check out the different websites. But for example, if you also want the demonstration of Voonix, which is our software. I encourage you to reach out if you're an investor and you want to understand the software. Or if you're a potential customer, please do reach out, it's a market leading software.

If you look at how we have our offer and what we based it on, we have 1 part of our company working on innovative SEO. The other one, as we now have, is the media in-house and buying media. We have the advertisement networks in matching visions, and we have media in-house partnerships that we are building out as we speak as well.

So let's go and look at the financial details a little bit more. And today, I am alone. I don't have the CFO with me, so hopefully I will be able to deliver as much as a good CFO would do, but I might not be able to answer all the questions in detail later on.

But again, looking at the revenue development, you can see a massive jump from EUR 6.7 million to over EUR 10 million. But what I do like even more is the NDC development, where you can see that we have gone from 34,000 to 84,000. And since our media business delivers so much new NDCs and all of it is on revenue share, this is something that gives me great security in the fact that we're going to sustain a really nice growth going forward with this business.

And if we look at the group revenue bridge from Q4, as you can see that we had EUR 6.5 million, and now we have EUR 10 million. And while we have had some small increases and decreases in the different businesses, you can see that the majority of the jump comes from increase in sports book revenue, and this is related to that acquisition that we have kept mentioning so much.

Looking at the cost bridge from the previous quarter, we look at the previous quarter because this is more relevant. You can see that the main increase from the previous quarter is again in other external costs, and this is predominantly media buying. And then you have a slight decrease in cost from the network model payout, and this is simply because you have also had less revenue, and this is directly correlating with each other. So you can see that while the cost bridge has increased, it's predominantly driven by media buying.

If we look at the adjusted EBITDA development, as you can see, if you look at this from a year ago, you can see that we were just above EUR 1 million, and now we're at almost EUR 2.5 million. And you can see that we have had the growth, although Q3, we had an effect of summer. We have had a very steady growth, and obviously, contributing to this is also the new acquisition. But I am confident we are going to continue to deliver growth here.

The revenue development in affiliation. Again, as you can see, this is pretty much what you have seen in the group total as well, but it is continuing to grow, and thankfully a lot with regards to this acquisition that we did. And as you can see, Sports Betting is now a massive part of our company, and something that I'm very happy and proud of to be able to be working mostly in Sports Betting nowadays.

So looking at that, our revenue model, as I said, we now have a lot more on revenue share. Revenue share brings stability to the company because if we were to stop taking in new players at all tomorrow, we would still generate a lot of money over a very long time together with this. Our CPA now just stands for 12% and others, which is fixed base, pretty much selling advertisement space for other companies, is 13%.

If you split this up, we have now -- revenues are 59% from paid media again. This is really good because we can be very agile, and you can adjust this as pretty much the world around you happens. Instead of SEO, which is still very important. The upside of SEO is that you don't need to spend money on media per se, but it takes a long time to ranking Google, and it is actually quite expensive to get to the top positions of Google. So -- but I think we have a really good mix now, and the 9% of community base, that is pretty much The Gambling Cabin.

And if we go to the NDC development in affiliation, you can see that we are closing in almost 70,000 compared to 21,000. And again, I feel a little bit like a broken record, but this is a lot correlating to the Media acquisition that we did. EBITDA development in affiliation, you see the same trend here as in the group total, where we have had a huge jump in Q4 compared to Q4 in 2021.

And the adjusted cost base, if we look at -- what's interesting here is the personal costs are flat. But in Q4 this year, we have taken steps to reduce this further. And in Q1, now you will see a change in the cost base in personnel. And the big jump in cost is other external costs. Again, this is actually predominantly bought Media. So this is something you will see going forward now in our companies that we spend a lot of money on buying Media.

Okay. So let's look at the SaaS segment and the revenue development there. As you can see, it's been fairly flat. The network model is -- has decreased somewhat, and this is where we are, call it, a super affiliate. Other affiliates send their traffic into our matching division, where we send it onwards to the operator. The subscription model keeps growing steadily, which is really nice to see, and that's our Voonix software. We have landed some very nice, big clients lately, so I'm really looking forward to 2023 with these new clients.

When it comes to the adjusted EBITDA development, in the SaaS segment, as you can see, we have had a quarter -- the quarter 4 of 2021 to now, we have had a very significant growth and we can see that the growth will continue going forward. In terms of the RGU development, we have a steady increase in RGUs, EUR 419 million compared to EUR 398 million. This is both in our network model as well as our subscription model.

Looking at financing and cash flow, our gross debt is stable. We did refinance the bond earlier this year, and we are at EUR 21 million in gross debt now. What's really good to say and what the bond investors should feel very happy and safe about is that our net debt to adjusted EBITDA keeps decreasing, and we are now pretty much at exactly 2.5x net debt towards adjusted EBITDA.

When it comes to the cash position and operating cash flow, we have -- we closed the year at EUR 2.4 million in cash position. Cash conversion was a bit lower. It's 78% compared to 89%. We are constantly working on cash position, and it can fluctuate a little bit between the quarters. We also had -- during the year, we had a payout in relation to the acquisition, so network capital was negatively influenced by this acquisition.

And with this, we are ready for closing comments and Q&A.

[Operator]

[Operator Instructions] The first question comes from Rikard Engberg from Erik Penser Bank.

[Rikard Engberg, analyst]

I have a couple of questions, if I may. So my first question is regarding the growth in NDCs. I guess they are quite driven by the World Cup.

[Robert Andersson, executive]

Yes. Yes. You have -- yes, go ahead.

[Rikard Engberg, analyst]

Yes. And going forward, looking at 2023, would you say that it would be better to look at the numbers from earlier in the year in terms of NDCs rather than looking at Q4 this year?

[Robert Andersson, executive]

Yes. I mean, we had a very solid boost from the World Cup. That is correct. And I -- it would be prudent to assume that the indices to go down somewhat. So, yes.

[Rikard Engberg, analyst]

Okay. Great. And my next question is regarding the network sales and looking at them quarter-on-quarter and year-on-year, as they were down a bit. Can you please elaborate a bit about the development in NDCs in the network out of the business?

[Robert Andersson, executive]

Yes. So 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 and try and help those that deliver higher quality, so to say, than just bulk, and we are kind of let's say, 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 ones, they will move on, so this is normal fluctuations in that business. We do foresee a continued growth going forward over time. And with the network also, as you can say, like revenue, since the -- it's quite a low margin business and cost directly correlates to pay out to the sub affiliates, so that's why you will say that when revenue decreases quite, cost will also go down and the impact on EBITDA is not that great.

[Rikard Engberg, analyst]

Okay. And 1 follow-up question on that segment. It's -- if you then -- as I say, you are going to focus more on qualities in leads. If you then would look at, let's say, revenue per NDC, would you say that, that could come up from the levels of today?

[Robert Andersson, executive]

That is something we are aiming to do. Yes.

[Rikard Engberg, analyst]

Okay. And 1 last question, if I may. Looking at the revenues from subscriptions, and that's the quite strong growth in RGUs, I also noticed a quite strong in total revenue for RGU. Would you say that -- can you please describe what is driving this development?

[Robert Andersson, executive]

Yes. So if you look historically with Voonix, it's -- I would say it was a small enterprise software solution. But what we are seeing now is if you look at it from an affiliate standpoint, we are now onboarding the giants of this industry, if you will. And obviously, they deliver a lot more revenue for 1 RGU, if you will, for 1 subscription. So what's happening is that while the subscription, we're not adding a tremendous amount of new subscriptions but we are moving into what you can call at least, within this industry, the larger corporations. So like mid-sized enterprises, if you will, instead. So we are climbing up the value chain quite clearly.

[Operator]

[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Robert Andersson for closing comments. Thank you, and over to you, sir.

[Robert Andersson, executive]

Okay. Thank you. So with that and those questions, we wrap this up, and I look forward to presenting you the first quarter of this year in 3 months. So with that, thank you very much for today's time.