Better Collective: Solid recurring revenue growth and positive message for Media Partnerships
Research Update
2024-08-23
07:44
Analyst Q&A
Closed
Hjalmar Ahlberg answered 2 questions.
Redeye updates on Better Collective following its Q2-results which were in line with our expectations. The company also reiterated its guidance for 2024E, and we have made limited changes to our estimates. Furthermore, Better Collective provided a positive message for Media Partnerships which has lowered the estimate risk in our view.
HA
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Hjalmar Ahlberg
Anton Hoof
Better Collective’s Q2-results were overall in line with our forecasts, albeit with stronger than expected revenue in Europe & RoW while North America saw lower topline than expected. Opex was slightly higher than expected resulting in an EBITDA-margin just below our estimate.
The company continues to generate strong growth of recurring revenue which was up 26% YoY, supported by revenue-share income but also increasing CPM income which provides diversification to the recurring revenue stream. There is potential for continued growth of CPM income in the coming years as Better Collective has started to roll out its ad-tech platform, AdVantage.
A key topic in the Q2-report was the development of Media Partnership where Better Collective stated that most Media Partnerships continue to perform well and that the impact from the Google policy change in May has been mitigated. This lowers estimate risk in our view, and with Q2-results in line with expectations, we have made limited estimate changes while our valuation range is unchanged with a base case of SEK400.
| EURm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Revenues | 269.3 | 326.7 | 411.0 | 475.7 | 535.1 |
| Revenue Growth | 52.1% | 21.3% | 25.8% | 15.7% | 12.5% |
| EBITDA | 85.1 | 111.1 | 129.9 | 160.5 | 190.2 |
| EBIT | 70.4 | 82.8 | 89.6 | 118.5 | 147.7 |
| EBIT Margin | 26.2% | 25.4% | 21.8% | 24.9% | 27.6% |
| Net Income | 48.1 | 39.8 | 51.8 | 82.9 | 110.8 |
| EV/Sales | 3.6 | 4.9 | 3.4 | 2.7 | 2.1 |
| EV/EBITDA | 11.5 | 14.5 | 10.7 | 8.0 | 6.0 |
| EV/EBIT | 13.9 | 19.5 | 15.5 | 10.8 | 7.7 |
Better Collective reported revenue of EUR99.1m and EBITDA of EUR28.5m while we forecasted EUR97.4m and EUR28.9m, respectively. Topline was stronger than expected in Europe & RoW which reported revenue of EUR64.7m while we estimated EUR64.7m. Better Collective saw strong performance during the EURO 2024, which yielded an NDC intake of over 100k while total NDC delivered for the quarter were 501k. North America reported revenue of EUR25.8m (we forecasted EUR32.6m) with and organic decline of 18%, owing partly due to a media partnership being impacted by the Google policy change and an increase of NDC’s sent on revenue-share contracts. Overall, the company’s costs were slightly higher than we expected with the main deviations seen in staff costs and other costs while direct costs were in line with our estimate. As such, EBITDA-margin was slightly softer than expected at 28.8% compared to our estimate of 29.7%. The company also recorded an impairment of EUR20m following softer than expected performance from Playmaker HQ. However, as the final consideration for Playmaker HQ was also adjusted due to weaker-than-expected development and the net effect was negative EUR2m. The table below summarizes Q2-results outcome compared to our forecast.
Disclosures and disclaimers