Raketech Group Holding PLC
STO:RAKE
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
6.64
17.8636
|
Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
PayPal Holdings Inc
NASDAQ:PYPL
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Earnings Call Analysis
Summary
Q2-2024
In Q2 2024, Raketech reported EUR 17 million in revenue, down 3.7% year-on-year, with adjusted EBITDA expected between EUR 17-19 million for the year. The affiliation marketing segment saw a significant decline, primarily due to weaker performance from Casumba assets. However, sub-affiliation revenues grew 29.7%, driven by new partnerships and improved sports segment performance. July revenues were EUR 4.6 million, impacted by operational challenges, but improvement is anticipated. The company divested its manual advisory business for USD 2.25 million to focus on U.S. growth, while free cash flow remains robust, allowing flexibility for future earnout settlements.
Welcome to the Raketech Q2 2024 Report Presentation. [Operator Instructions]
Now, I will hand the conference over to speakers CEO, Johan Svensson; and CFO, Mans Svalborn. Please go ahead.
Good morning, and welcome. My name is Johan Svensson, and I'm the CEO of Raketech. Today, CFO, Mans Svalborn, and I are here to present Raketech's Q2 2024 report.
We will start with our Q2 financials. Raketech delivered EUR 17 million in revenues in Q2, an organic decrease of 3.7%. EBITDA of EUR 4.4 million, a decrease with 20.3% year-on-year, resulting in EUR 9.4 million in adjusted EBITDA for the first half of the year.
Revenues for the month of July were EUR 4.6 million, mainly impacted by weak performance from a lower-margin sub-affiliation business. Some of our larger publishers had operational challenges in July, but we expect the revenue to pick up during the rest of the quarter.
Considering the first half of the year and the current trading for July, we can now more accurately forecast our outlook for the full year. This means we are now able to further specify the full year guidance of around EUR 20 million into a range of EUR 17 million to EUR 19 million in adjusted EBITDA.
Free cash flow before earnout is estimated to come in just below EBITDA. Our cash flow -- our current cash flow gives us the financial flexibility to settle the current Casumba earnout and ensure long-term growth and value creation.
Now let's look at how our different business areas performed during the second quarter, and we will start with affiliation marketing. Affiliation marketing, our in-house operated assets had a slower quarter with revenues of EUR 7.6 million, a decline with 25.9% compared to Q2 last year, mainly impacted weak performance from our Casumba assets and softer Sweden casino performance.
The traffic situation for Casumba has stabilized in the end of the second quarter, but at a lower level compared to the start of the year. We saw a softer performance from our Swedish casino assets by other affiliates promoting non-regulated operators towards the Swedish end users. Our sports assets with high portion of returning users performed well during the quarter, resulting in double-digit growth.
Sub-affiliation. Sub-affiliation revenues amounted to EUR 8.2 million, an increase with 29.7% compared to Q2 last year, after decline in total revenues compared to previous quarter. For the second time, we are now reporting gross profit, and we had a 21.3% gross profit margin in Q2.
Betting tips, our U.S. tipster sales delivered EUR 1.1 million in revenue during Q2, a 15.9% increase compared to Q2 last year. We have during July, divested the manual advisory business. Later on in this presentation, I will give you more details around the divested advisory business and our remaining betting tips and subscription business.
Now I will give you a more detailed update about each business area. Starting with affiliation marketing, our in-house owned and operated assets. The last part of the Casumba earnout was completed in July. Mans will share an update on his section about the final amount of Casumba earnout.
The core at Casumba team, including the founders, are intact. Following the Google Core update, which affected Casumba assets, we quickly mobilized internal resources and made a large business audit of all affected assets. The audit led to several actions of improved content, focused on a broader audience, tech improvements, on-page and off-page SEO and overall a better user experience.
The traffic performance [Technical Difficulty] at the end of the quarter, but at lower levels than before. A strategic important focus for us is to lower our SEO dependency by increasing CRM activities. We are collecting data from our users when we visit our websites and products. We then use this data by sending them customized offers. An example of it is when a new operator is launched. The purpose of these activities is to increase the value of users and to be able to convert them to our partners when they are not actively visiting our products.
Our internal sport assets had a strong quarter with double-digit growth driven by performance improvements, new content and additional features, plus new types of campaigns. UEFA Euro was a good event for our sports sales, and we have continued to create similar sport packages for upcoming sports events as Premier League and the local Nordic leagues.
Moving on to sub-affiliation. Our sub-affiliation saw year-on-year organic growth in the second quarter for both Raketech Network and AffiliationCloud. Some of our top publishers had operational challenges, which led to a small decrease compared to the previous quarter.
We went [Audio Gap] first full exclusive partnership. The new Swedish operator, Spelklubben gave us the trust to run their entire affiliate acquisition. This means that all affiliates who want to promote their brand need to sign up on AffiliationCloud, where we have a markup on all referred players to the brand.
We have made similar partnerships in the past, including the deal with Svenska Spel and their casino, Momang. But this deal with Spelklubben was the first time that an operator appointed us to run their full affiliation acquisition. These types of partnerships are strategic important for us [Audio Gap] dialog with more operators to establish similar exclusive agreements.
In March, we successfully launched our sub-affiliation business in the U.S. when North Carolina opened up for sports betting. During the second quarter, we have developed the processes and added more operators to our offering. We expect to see an increase in revenues for the upcoming football season.
Betting tips and subscription. In Q2, we finalized the strategic review of the U.S. business, which resulted in a decision to divest our non-core manual high-touch tipster advisory operations. The advisory business was not aligned with our strategic vision and its operations demands outweighed its performance.
In July, we successfully sold our tipster advisory business for USD 2.25 million. And we also secured an exclusive lead generation deal valued $250,000 over the next 12 months. This transaction also included a one-time non-cash impairment charge of EUR 10 million.
With this divest, we are fully focused on enhancing our U.S. flagship assets to drive online conversions of paid picks and predictions, and to increase our affiliation revenue on these assets. We are confident that this strategic focus will deliver positive outcomes.
Our U.S. flagship assets, Winnersandwhiners, Statsalt and PicksandParlays continue to rank strongly, generating more than 50 million sessions annually with users spending several minutes on each website per visit, maximizing the growth opportunity on this platform is paramount.
And now over to CFO, Mans Svalborn.
Thank you, Johan. We saw total revenues of EUR 17 million, which was, as Johan highlighted, a marginal decrease of around 4% from last year. Sub-affiliation was up from last year, but increase [Audio Gap] decline in affiliation marketing. Sub-affiliation represents approximately 45% of total revenues in Q2, an increase with 30% from last year. We did, however, see a sequential decrease from Q1 of this year, which has driven operational limitations for specifically our network publishers, but we expect these revenues to pick up through H2.
Affiliation marketing decreased from last year, driven primarily by a weaker result from the Casumba assets, as we highlighted already in Q1. We have seen a stabilization of performance, but they are at a lower levels compared to last year and previous quarter.
Sweden saw a modest decline, and our other larger assets in other markets show stable to positive performance. Worth highlighting again was the positive effects of our high traffic sport assets driven by a dedicated push for these assets, but also UEFA Euro and IPL.
On the right-hand side under quick note on our revenue mix for revenue share, CPA and flat fees, the development large [Audio Gap] overall revenue development. [Technical Difficulty] I will mention that sub-affiliation is dominantly CPA-driven and is the main reason for any variations between quarters. We are, however, seeing an increasing amount of rev share within sub-affiliation, which is positive to see.
As for the regional split and starting with the Nordics, as I mentioned on the previous slide, Sweden saw a modest decline in Q2 versus Q1 of this year. It's to some extent, performance related but also through increased competition. Importantly, Q2 reflects a seasonally low quarter and specifically for the Nordics. Other regions in the Nordics are stable to growing.
Similar to previous quarters, the main variations within rest of world relates to Casumba and sub-affiliation. The decrease compared to last year is a reflection of lower performance in Casumba. U.S. saw a slight increase from last year, positively impacted by the launch of the sub-affiliation in the U.S., but also positive effects from affiliation revenues from our tipster assets as well as increased revenues from our online digital subscription platform on these assets.
The vertical split on the right-hand side, I will make one point. As highlighted before, we did see improved performance from a high traffic sport sites during the quarter, an effect of the dedicated efforts, but also again, driven by increased sports activity.
This positive development was to some extent offset by lower sports revenues within sub-affiliation compared to last year. These variations are to be expected within sub-affiliation as it depends on which region and vertical our publishers focuses their efforts.
EBITDA amounted to EUR 4.4 million, mainly impacted by the lower performance for Casumba compared to last year. This was somewhat positively offset by continued strong contribution to EBITDA for sub-affiliation, and with the gross profit margin within this area very much in line with the last quarter at around 23%.
Additionally, we see somewhat of a positive impact from the initiated cost saving efforts we highlighted in the Q1 report. These initiatives will continue as we progress in the year.
On the right-hand side, free cash flow is lower than reported EBITDA. This relates to timing effects and is expected between quarters, and it's an effect of when we settle payments to publishers within sub-affiliation, but also related to timing of settlements from operators, and we expect this to catch up during H2.
As Johan mentioned, the last part of the Casumba earnout was finalized at the end of July, meaning the final amount is now essentially fully fixed. For the next 12 months, we have upcoming earnouts to be settled of about EUR 12 million in cash. The remaining EUR 20 million, and I mentioned this in the previous quarter as well, can be settled at any point in time up until September 2026. Meaning, there is a lot of financial flexibility for us.
Another point to make here is that the option to settle part of the earnout in shares is also at our own full discretion, adding even more flexibility.
So in conclusion, given our current cash flow estimate for the year, our free cash flow is well above upcoming earnout settlements.
Thank you and back to Johan.
Thank you, Mans. To conclude, affiliation marketing, I would like to emphasize our dedication to turning around the assets that lost rankings and traffic in the latest Google Core updates.
These assets have now stabilized, but on lower levels compared to before. During the quarter, we have proven that parts of our product portfolio, especially [Audio Gap] showed good organic growth even if increase from this product is not on par with the larger the products that lost traffic and revenue from the latest Google updates.
Sub-affiliation, as mentioned before, first, full exclusive operator deal was signed and launched during the quarter with a brand -- Swedish brand Spelklubben. And this type of partnerships is something we will continue to expand.
Betting tips and subscription, strategic review done, and we have now divested the non-core ATS advisory business to be able to focus and grow on our U.S. [Audio Gap] where we see good potential.
Outlook. Looking at July, the revenues came in at EUR 4.6 million, impacted by weak performance within sub-affiliation, which we expect to recover during the rest of the quarter.
Guidance for 2024. We have now also [Audio Gap] coming in the range of EUR 17 million to EUR 19 million in adjusted EBITDA. Free cash flow before earnout is estimated to come in just below EBITDA, which gives us financial flexibility to settle the current Casumba earnout.
With this work, we now open up for Q&A.
[Operator Instructions] The next question comes from Hjalmar Ahlberg from Redeye.
Maybe first a question on Casumba. I hear you say that traffic is stabilizing end of the quarter, and you're confident that you can return to growth. Do you have some kind of concrete indications? Or how do you feel about that?
We are confident that we're doing the right things and that [Audio Gap] we practice to return to growth, but we can't comment on when we expect that to happen.
And also interesting to see sub-affiliation launch here in U.S. How quick do you think you can ramp up revenue? And I mean what is the potential of this market? And can you say if there's any differences between maybe Europe and doing this in the U.S.?
Yes. Now we've got a kickstart with North Carolina here in -- launching in March. And -- but U.S. is more as acquisition-driven during [Audio Gap] and especially where the football -- the U.S. football season. We expect to grow during the football season which kicks off here in end of August, beginning of September. We do definitely.
And you mentioned there North Carolina. How -- I mean, does it take a lot of time to enter new state? Or do you think you could be able to add more states quickly? Or will that come gradually?
No. We -- in our current offering, we -- yes, we have more states already ready on top of North Carolina.
All right. And regarding the Euro 2024, can you give some flavor on -- I mean, did you see the big kind of positive impact from that in June and less impact in July, maybe?
We saw a good traffic increase [Audio Gap] games played in June and then July. But overall, it was, yes, a positive traffic trend and we had good sales efforts related to the event.
Okay. And you mentioned for sub-affiliation that some operators saw operational challenges. Can you comment anything more on that? And do you expect that to improve in the coming quarters?
We've seen it before that our publishers have had, yes, operational challenges, especially on the Raketech Network side [Audio Gap] traffic, we've seen it. We have had a fantastic year for Raketech Network and sub-affiliation with high growth. And now when they have these challenges, it has a larger impact on the top line. But yes, we've seen it before, and we've seen that they've been recovering before as well.
And regarding your guidance here and the revenue you gave for July, can you give some flavor on kind of the ramp-up? I mean, I guess you said that you expect to recover some upside for the rest of Q3. But then, I guess, I mean, Q4 will kind of be the seasonally strong quarter. If you can give any additional flavor on that?
Yes, we came in on EUR 9.4 million in adjusted EBITDA for the first 6 months, and we expect to land between EUR 17 million and EUR 19 million during adjusted EBITDA for the rest of the year. And as you said, we -- Q4 is historically a strong quarter for us.
The next question comes from Rikard Engberg from Carnegie Investment Bank.
So I have a question regarding the development of gross margin in the quarter. We saw a strong Q1 given gross margin and now in Q2 as well. Have you achieved a higher gross margin on the sub-affiliation in this quarter than usually?
Yes. It's the levels this quarter were similar to Q1 as well. And I think we indicated in Q1 that it was on the higher end, and then we managed to maintain that in Q2. To some extent, it relates a little bit on the relative share of -- rev share within sub-affiliation. And particularly for rev share, we can see some variation. So we don't really necessarily have a target for the gross margin within sub-affiliation.
The most important point for us is to try to grow profitability within that area. So it's -- it does depends on rev share, as I pointed out. So we might see variations as we go along, but it's not a target sort of gross margin, we have to keep it at this fixed level.
Okay. So is it possible to say that the Q1 and Q2 numbers were quite high value for gross margin compared to historical numbers?
Compared to historical numbers, they are at the higher end, yes.
There are no more questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.
Good, let's go to the written questions. And I think you can start, Mans.
Yes. So we had a question around the guidance. I think we covered that to the most extent from Hjalmar's question. I don't know if you want to add something additional to that one, Johan?
No. Nothing more to add.
Then there's a couple of questions on the approved share buybacks and when and how this will be executed on?
And this is obviously a decision by the Board. So we can't really comment on this at this point.
There's another question, if it's possible to repurchase own stocks over the market and use this repurchased stock as payments for the Casumba earnout?
And this is possible. But again, it's the decision, if and when, that's an alternative for the Board.
Yes.
It's one -- also one question about -- on what basis do you [Audio Gap] in sub-affiliation.
I just like to highlight here that we have still very strong relations with these publishers who have had operational challenges during July here. So -- and yes, historically, we've see them recovering. So -- but we base it on that.
And then there's a question around the decision that we did actually issue just under [ one point million ] new shares to pay part of their earnouts now in July for the Casumba earnout. And this made financial sense to do it now given the current share price development. So this was a good opportunity the Board and management felt at this point in time. So that was the reason for that.
Yes. And I think that was actually all of the written questions.
And yes, with his word, thank you for listening in, and we see you again in November. Thank you.