Better Collective reported revenue of EUR95m and EBITDA of EUR29m for Q1 2024 which can be compared to our forecast of EUR93m and EUR29m, respectively. The slightly stronger-than-expected topline was driven by North America which saw revenue of EUR34m while we expected EUR32m. Organic growth in North America was minus 22% in US as the company met tough comps in US owing to the launches of sports betting in Ohio last year coupled with the continued transition to revenue-share based income in US. Europe & Row reported revenue of EUR61m which was in line with our forecast. The segment saw organic growth of 5% despite a soft sport win margin and fewer soccer matches than last year. Overall NDC intake was 450k which was around the average level seen during 2023 and with 77% on revenue-share this supports growth of recurring revenue going forward.

While topline was slightly higher than expected, EBITDA was in line with our forecast. EBITDA-margin was also largely as expected with opex being in line with our estimate. As expected, the margin was down compared to Q1 2023 owing to the transition to revenue-share income in US and the acquisition of Playmaker Capital. Better Collective stated that Playmaker was consolidated from February and contributed with revenue of EUR7m and break-even EBITDA while performance is expected to improve over the year. The table below summarizes Q1-results outcome compared to our forecasts.

The update regarding ranking and traffic on Better Collective’s Media partnerships following the Google policy change on May 5 has created uncertainty for the outlook of this product going forward. Better Collective stated that it is working with all parties to address the changes, but it is unclear if the impacted assets can recover. We expect to understand more of the impact in the coming quarters as Better Collective assesses the longer-term implications. In the short term, the financial impact is likely limited for revenue generation as Better Collective mainly works with revenue-share contracts on Media partnerships. However, with limited disclosure on revenue generation and costs related to Media partnerships, it is difficult to estimate any financial effects. A potential negative effect in the short term could be seen in the NDC intake, as this is correlated with traffic. On the other hand, Better Collective also commented that its owned and operated sports media assets have seen increased traffic following the policy update. We think this exemplifies the strength of having a broad portfolio of assets with traffic from different media channels.

While Q1-results were solid, the update on Media partnership has added uncertainty to the near-term outlook. As stated, traffic and ranking has initially been impacted negatively, however it is more difficult to assess the impact on revenue and earnings. Furthermore, Better Collective reiterated its guidance for 2024 (revenue of EUR395m-EUR425m and EBITDA of EUR130m-140m), which was recently raised in connection with the acquisition of AceOdds on May 16 (previous guidance was revenue of EUR390m-420m and EBITDA of EUR125m-135m). This also suggests limited impact in the short term. The company has a solid track record of achieving its targets which adds credibility to the guidance in our view. However, considering that the company comments that it is working on adapting to the changes related to Media partnerships, we trim our 2024E EBITDA estimate to the lower end of the company’s guidance. We now forecast topline of EUR408m and EBITDA of EUR130m compared to previously EUR407m and EUR133m, respectively. Our 2025-26E remains unchanged as well, although we acknowledge somewhat increased estimate risk given limited visibility on the potential longer-term impact on Media partnerships. The table below summarizes key financials for 2022-26E.

With limited changes to our estimates, our valuation range remains unchanged. The base case stands at SEK400 while the bull case is SEK540 and the bear case SEK210. Our base case implies an EV/EBITDA of 18x 2024E and 15x 2025E. The share currently trades at c12x EV/EBITDA 2024E and 9x EV/EBITDA 2025E while the historical average NTM EV/EBITDA is around 12x. The table below summarizes key assumptions for our valuation scenarios.