Better Collective: Short term uncertainty, positive long-term outlook
Research Update
2024-11-18
07:27
Analyst Q&A
Closed
Hjalmar Ahlberg answered 3 questions.
Redeye updates on Better Collective post Q3-results, where we have made limited changes to our estimates while the near-term outlook remains uncertain on the back of weakness in US and Brazil. However, the company reiterates its 2023-27 financial targets suggesting potential for improved growth and profitability in the coming years.
Hjalmar Ahlberg
Anton Hoof
While the Q3-results outcome was in line with the preliminary announcement, it was significantly lower than our estimates ahead of the preliminary results. The main deviation comes from US, where the company has experienced lower partner activity and Brazil which has seen larger than expected negative impact from the ongoing regulation of the market.
The short-term outlook for Better Collective remains uncertain on the back of the development in US and Brazil. We expect earnings visibility to improve in the coming quarters as the new normal for US is established and as the final effects of the Brazilian market regulation becomes known. On the positive side, the company also reiterated its 2023-27 financial targets (revenue CARGR of 20% and EBITDA of 35-40%) suggesting a positive long-term outlook where the financial targets imply upside of around 40% to our 2026-27E EBITDA estimates.
We make limited estimate changes on the back of the Q3-report, although we have slightly lowered 2025-26E EBITDA by c3% to reflect continued short-term uncertainty for US and Brazil. Our valuation range remains unchanged with a base case of SEK290 which implies 12-15x 2025-26E EBITDA. The share currently trades at 7x 2025E EBITDA, while is has historically traded at average NTM EV/EBITDA of around 11x.
| EURm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Revenues | 269.3 | 326.7 | 363.3 | 377.4 | 431.7 |
| Revenue Growth | 52.1% | 21.3% | 11.2% | 3.9% | 14.4% |
| EBITDA | 85.1 | 111.1 | 104.8 | 124.2 | 149.2 |
| EBITDA Margin | 31.6% | 34.0% | 28.9% | 32.9% | 34.6% |
| EBIT | 70.4 | 82.8 | 60.4 | 76.7 | 101.6 |
| Net Income | 48.1 | 39.8 | 26.3 | 51.5 | 76.2 |
| EV/Sales | 3.6 | 4.9 | 2.7 | 2.3 | 1.7 |
| EV/EBITDA | 11.5 | 14.5 | 9.3 | 7.0 | 5.1 |
| EV/EBIT | 13.9 | 19.5 | 16.1 | 11.3 | 7.4 |
Better Collective reported topline of EUR81.2m and EBITDA of EUR22.3m which was in line with the preliminary announcement from 24 October. Comparing the outcome with our estimates prior to the preliminary announcement, the outcome was significantly weaker than our estimates where we expected revenue of EUR103m and EBITDA of EUR32m. Looking at the final outcome compared to our updated estimates after the preliminary announcement, revenue mix was largely as expected with very soft performance in North America as indicated in connection with the announcement of the preliminary results. The company reported lower than expected staff costs, while direct costs were higher than expected. Cash flow from operations was strong, coming in at EUR32m with support from changes in working capital, while FCF was limited owing to payments of earnouts and an acquisition of a North American social media asset. The table below summarize Q3-results outcome compared to our forecast.
Disclosures and disclaimers