1X2 Network unveils AD LUNAM: New brand, new direction, new experiences.

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No. 06/2023

Flash Highlights Q4 2020

  • Revenue: 86.1 million EUR; growth of 63% YoY, organic growth 44%
  • Recurring revenue 41.3 mEUR; growth 94% YOY
  • Revenue share income: 30.2 MEUR; growth of 81% YoY
  • EBITDA before special articles: 35.2 mEUR, growth of 115% YoY; margin 41%
  • New Depositing Customers: Highest ever with >580.000; growth 117%, 78% of which were sent on revenue-share contracts
  • January trading update: Record-breaking month with revenues of >37 million EUR; >40% YoY growth

Flash Highlights 2022

  • Revenue: 269.3 million EUR; growth of 52% YoY, organic growth 34%
  • Recurring revenue 123.3 mEUR, growth of 54% YoY
  • Revenue share income 96.4m EUR, growth of 42% YoY
  • EBITDA before special articles: 85.1mEUR; growth rate of 53% YOY; margin 32%
  • New Depositing Customers: Highest ever at 1.680.000; growth 96%, 76% of which were revenue share contracts
  • Earnings per Share (EPS) rose >150% YoY

Highlights Q4 2022

  • Financial targets for 2022 included 20-30% organic growth, 85 mEUR in operational earnings and a net debt to EBITDA of 3. A guidance upgrade was issued on February 6th. 34% organic revenue growth was achieved with 85.1 million EUR in EBITDA after special items and a net deficit to EBITDA of 3.
  • Q4 Group revenue increased 63% to 86.1 million EUR, with recurring revenues increasing 94% to 41.3 millionEUR and organic revenue growing 44%.

    • Europe and ROW revenue increased 59% to 52.2mEUR, driven by an exceptional performance at the men’s soccer World Cup. More than 300.000 NDCs were sent. The tournament also saw strong underlying business performance through Paid Media partnerships and media partnerships.
    • US revenue increased 71% to $33.9 million, driven by a busy sporting calendar and a successful Maryland state launching.
  • As the affected European markets returned to normal, the sports win margin continued its recovery. Additionally, sports betting continued at an all-time high.
  • Q4 Group EBITDA (before special items) grew 115% YoY to 35.2 MEUR.

    • Europe & ROW generated 20.7 mEUR of EBITDA before special articles, which is a growth rate of 149% YOY with a margin 40%.
    • In EBITDA before special articles, the US delivered 14.5 million EUR. This translates into 81% growth and 43% margin.
  • Cash flow before special items was 21.0 million EUR, an increase of 55%. Due to the extraordinary revenue, the cash conversion before special item was 58%. The quarter saw a total of 11 mEUR in taxes and 10.7 mEUR in Danish taxes. Capital reserves were at 76mEUR by 2022. 31mEUR cash and 44mEUR unused bank credit facilities made up the remainder.
  • With >580,000 new depositing customers, the quarter saw an 117% increase in customer growth. NDCs received on revenue share contracts accounted for 78%. The Group shipped 1.7 million NDCs in 2022.
  • Initiation a share buyback programme for up to 5 million EUR. The buyback program was intended to pay future payments for acquisitions completed and LTI programs.
  • Petra Zackrisson was named SVP Growth and joined the management staff.

Important events following the closing of the period

  • The positive momentum built from 2022 continued into 2023 when the state of Ohio launched. January 2023 saw record-breaking monthly revenue of >37 million euros and a 40% YOY increase. The Ohio state’s launch was the main driver. This growth is strong compared to last year, when New York launched.
  • Goal.com and Wirtualna Polska have new media partnerships. Better Collective has many large global partnerships, including those with The Telegraph, The New York Post and Wirtualna Polska, as well smaller ones.
  • The share buyback program for 5 mEUR was concluded on January 20, 2023 with 394 645 shares. Better Collective holds 1.1% of all outstanding shares.
  • The board decided to start a new share purchase program worth 10 million euros. The buyback program will cover future payments related to acquisitions completed and LTI programs.
  • A smaller deal was done for a sports media company in an emerging market for 4.3 million USD with an upfront payment for 3 million USD.
  • Better Collective announced that Catena Media acquired 6,093,381 shares from Catena Media and an 8.5% position.
  • The HLTV Esports community hosted the annual HLTV Awards Show 2022 in Stockholm, Counter Strike:Global Offensive.
  • The Better Collective Group’s key employees were eligible for a 2023 Long-Term Incentive Plan (LTI) from the board of directors. The 2023 LTI grant will consist of performance share units or share options, which vest after three years.
  • Better Collective Headquarters in Copenhagen will be moving ‘around the corner’ to a larger office space. The lease agreement is for five years with a total rent obligation of 12 mEUR.
  • Jesper Sogaard, founder of Better Collective and Christian Kirk Rasmussen received a lifetime achievement award from the iGB Affiliate Award.

Financial targets for 2023

The Better Collective Group’s financial targets have been set by the board of directors for 2023.

  • Revenues in the range of between 290 and 300 mEUR
  • EBITDA before special articles of 90-100 EUR
  • Before special items of 2., net debt to EBITDA.

Better Collective invests in organic growth and will pay one-off costs to make 2023 investments in LATAM and other emerging market countries where regulations are or are expected to facilitate operations. A capital investment will be made in the creation of a proprietary platform for display advertising (“Adtech Marketplace”) These initiatives will result in an estimated 10 million EUR in additional costs for 2023, on top of the existing cost base. The Group will continue to push revenue share in the US and points out that 2023’s calendar isn’t as compressed as 2022’s due to state launches and a men’s soccer World Cup. These considerations were built into the 2023 targets and don’t include M&A impact.

CEO Letter

We had a record-breaking fourth quarter. Our strong diversification was evident, and we also consolidated the synergies possible when we combine efforts across the group.

Record-breaking performance

It has been thrilling to see the progress made towards becoming the Leading Digital Sports Media Group over the past year. Our sport communities have proven to be both a “go-to” place for millions of sports fans and a strategic asset for our business partners. Additionally, I am humbled at the performance of our employees. This performance resulted in an increase in our financial targets which were set in 2022.

Both in terms of revenue growth and operational earnings, the Group performed strongly. This was possible because several US contracts were converted from upfront payments to revenue share. Therefore, implicitly, the Group could have achieved an EBITDA of 100 million EUR, which would have amounted to 80% growth. Undoubtedly, Better Collective’s future goals will be based on the ability to generate high-profitable growth.

Men’s soccer World Cup: Outstanding performances

We saw a lot of activity during the men’s soccer World Cup, which was a major driver. We began preparing for the World Cup several months in advance, and we saw tremendous benefits from it across all geographies. In my previous CEO letter, you could see that I was excited about the delivery of + 1.1million NDCs between Q1 and Q3. This makes me even more proud to say that we delivered close to 1,7 millions NDCs in Q4. 76% of the nearly 1.7 million NDCs were sent under revenue share contracts. Around 300,000 NDCs were delivered during Q4’s men’s World Cup. The 300,000. is more than all four men’s World Cups combined. Comparing to the 2018 men’s World Cup, our key figures have increased tenfold. This is a testament to how far we’ve come in four years.

We have been working closely with our business partners over the past decade. Most of our revenue share contracts are revenue share agreements. Better Collective only benefits if we create long-term value to our partners. We have built up a substantial “snowball”, of revenue share accounts. This was especially evident during the men’s World Cup when our revenue share income surpassed all records by 30 mEUR. The normalization of the sports win margin made this record possible. Noting that 300,000 NDCs were sent during the men’s World Cup had a temporary dampening effect on performance. Many NDCs were part of revenue share agreements, it is important to note. This move, however, has been repeatedly stated, is a long-term win and builds for the future. This is why it’s so remarkable that we managed to exceed our organic revenue target.

2022 US Revenue exceeded 100 mUSD

We estimated that we could surpass 100 million USD in US revenue by 2022, as part of the 2021 acquisition, of Action Network, the US’s leading sports betting media. It was ambitious because Action Network was a relatively new business and there were many market uncertainties ahead. However, Better Collective is driven by ambition and strong visions. Our US business saw a 71% increase in revenue YOY, reaching a record-breaking 34 mEUR. This brought total US revenues to 2022 above the 100 million USD mark. Even though we moved 15 million USD – an increase of the >10 million USD in Q3 – from revenue share-based contracts (CPA) to upfront payment (CPA).

The 2022 US revenue increased 102% YoY. It is also worth noting that this growth was on top of the 370% increase from 2020-2021. I am proud to report that great results were achieved in the US, despite having had to guide the Group through the shifting climate where the focus of sportsbooks was on profitability and growth. All of our US-based media, as well as the launch in New York and Maryland, drove this performance. Paid Media also played a significant role. I want to comment on the Paid Media business. It has really taken off.

Amazing Paid Media performance

We made a strategic investment in Paid Media in 2020 by purchasing the Atemi Group. This group specializes in the paid advertising sector of major search engines and social networks. Better Collective has made a significant financial investment in this acquisition, which brings many synergies to the table.

Paid Media offers flexibility and scalability in entering new markets or during special sporting events, such as the recent men’s World Cup.

This business also provides deep insight into how we improve our organic rankings on major search engines. It gives insights into which keywords offer the most value, click through, and conversion rate benchmarks.

We also invest heavily in business intelligence. Paid Media provides deep insight into the return on investments as well as market potential before making any investment. This is critical for our decision-making and long-term strategy planning.

Finally, Atemi was acquired and efforts were made to convert many of our CPA contracts into revenue share in Paid Media. This has proven to be an important investment. While profitability was slowing as we worked towards the future, it had a temporary dampening effect on 2021. The stable revenue share income has a self-accelerating effect and will likely grow over time. The Paid Media business will be able to tap into a greater pool of revenue when investing in advertising. This will allow us to continue growing the margin and accelerate our revenue share “snowball”.

Paid Media saw a 94% increase in revenue. We have also invested heavily in certain geographies, where we expect the greatest return on our investment. The Q4 Paid media margin was 23% due to the huge topline growth. Paid Media’s performance is another indicator that the “revenue share ball”, which has been steadily growing, is strong. The large pool of US revenue share income and the solid CPA income were key contributors to the record-breaking Paid Media margin. We expect lower CPA income as the US moves towards revenue share. This will be offset by a higher revenue share “snowball”.

Despite securing many NDCs at the World Cup, it had a temporary dampening effect on both the Group and the Paid Media margin. This was due to the extremely high number of NDCs that were sent on revenue share agreements. It is therefore even more remarkable that we achieved our 85 mEUR Group EBITDA target while achieving a 23% Paid Media Margin. Paid Media was still in its infancy when we bought the Atemi Group. It has now grown into its youth. While we have a lot of work ahead of us to make it mature, we are fully prepared for the challenge. These developments will be explored further at the Capital Markets Day, March 23rd 2023.

Looking ahead

After an incredibly positive start to January, I am looking forward to even greater things in 2023. The Ohio launch was the catalyst for January’s best month. We had revenues of more than 37 million euros in January, which is a growth rate of 40 percent. This compares well to January 2022 when we doubled our revenue. The main events for this year are the New Zealand and Australia summer women’s World Cups and the Massachusetts launch of sports betting. We will continue to grow in LATAM, and we will keep our eyes open for new markets. The macroeconomic environment has not affected us in any significant way, but we will continue to monitor developments. We will continue to focus on preparing our business for the future. This includes investing in an AdTech platform, moving more US revenue into revenue share contracts, and all of this is included in our 2023 guidance. To close out another amazing year, I want to thank all my partners and colleagues. Without you, we wouldn’t be where we are today.

Jesper Sogaard

Co-Founder and CEO

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