Better Collective (BETCO.ST SEK 127.50) released its Q1 2025 earnings yesterday after the market closed. The company’s stock endured heightened volatility over the last year. Here are the key takeaways from the company’s financial performance and the outlook for the shares.
The affiliate media company generates its revenue through deals with online casinos and online sportsbooks. During Q1, those revenues totaled €83 million, which were in line with estimates. However, the figures were a 13% year-over-year decline. Furthermore, organic sales fell even more with an 18% dip.
The fall wasn’t a “reach problem.” Instead, it was a proactive traffic hardening. Company executives said they were focused on the quality, not quantity, of traffic to their platforms.
In the past, BETCO has blamed “algorithmic turbulence” for lower traffic. Conversely, the company announced that its digital sports audience increased by over 10% to 450 million.
Better Collective’s Revenue Fall Was Expected
Better Collective faced three key headwinds in Q1. Firstly, the company was battling stronger comps as it launched in North Carolina in early 2024. As a result, Q1 2024 boosted revenues, making a year-over-year decline more likely. It’s a normal trend in sports betting as revenues spike around the launch of a new market. Then, they settle down to a more sustainable level.
Secondly, the regulatory changes in Brazil were a hit of €7 million in the quarter. It was the first regulated quarter for Better Collective in Brazil, and while the shift is a short-term headwind, it will help it build a more sustainable business in the country. As co-CEO Jesper Søgaard said, “Short-term pain in Brazil, long-term gain as the ‘New BC’ scales globally.”
Finally, the company saw a fall in marketing activity from US partners, which negatively impacted its revenues by €5 million.
Better Collective reported EBITDA before special items of €22 million at a 27% margin in Q1. While the company has been working on cost cuts, its adjusted EBITDA margin was four percentage points lower than the corresponding quarter last year and the lowest since Q3 2023. The company attributed the fall in its EBITDA to lower revenues, costs from mergers and acquisitions, and adverse currency movements.
However, its operating costs fell 8% in the quarter, thanks to continued cost cuts. However, other negative factors more than offset the cost cuts, resulting in a compression of margins.
Better Collective Changes Revenue Model
BETCO reported 316,000 New Depositing Customers during the first quarter. Better Collective’s NDCs fell 30% year-over-year in the quarter, which the company attributed to a lack of US launches. Additionally, the company faced headwinds in Brazil and tougher comps due to the Q1 2024 North Carolina launch.
Better Collective has pivoted from upfront to recurring income model. The transition helps it grow its sales in a more stable and sustainable way as compared to big bumps around a new launch. The company said that 80% of NDCs in Q1 were under revenue share agreements. During Q1, recurring revenues accounted for 59% of its revenues, which, while higher than the corresponding quarter last year, was 5 percentage points lower than Q4 2024 due to regulatory changes in Brazil.
During the earnings call, the company harped on how Brazil’s regulations prohibiting betting companies from offering welcome bonuses are impacting its business, especially as the same is being done in offshore markets. The regulatory arbitrage puts licensed operators like Better Collective at a competitive disadvantage.
BETCO Maintained Its Guidance
BETCO announced a €50 million cost savings program last year to streamline its cost structure. The bulk of these savings is attributed to lower outlay towards staff costs. The company achieved cost savings to the tune of €15 million in Q4 2024 and another €9 million in Q1. It reaffirmed its cost-cut targets in its Q1 call with CFO Flemming Pedersen, stressing that the company is “absolutely on track” on the projected cuts.
Better Collective maintained its full-year guidance and still expects revenues to be between €320–350 million and EBITDA between €100–120 million. While Better Collective’s organic revenues have sagged, the company is optimistic about delivering positive organic growth in the next year. It also expects its adjusted EBITDA margins to rise to between 35%-40% by 2027.
In the US, the company said that its growth would be driven by more states allowing iGaming, and it entering more states gradually. The company is particularly bullish on its prospects next year when the FIFA world cup takes place. It highlighted that the world cup is the biggest betting event for the year whenever it is played and expects next year to be no different.
Doubled Down On Buybacks
Meanwhile, in a sign of optimism towards its outlook, Better Gaming announced a new €10 million buyback. It completed a buyback of the same magnitude last month and holds 3.3% of its outstanding shares in treasury.
Companies usually buy back shares when they find their shares attractive as compared to other investment opportunities. In BETCO’s case, the company has signaled a preference for share buybacks over mergers and acquisitions, which is not surprising given its depressed stock price and the issues with integrating the multiple companies that it acquired over the last few years.
The stock saw a stellar rally after bottoming in March 2020, before rising to around SEK 270 in mid-2021. However, a global market sell-off from high inflation and rising interest rates cut the stock’s value in half by the end of 2022.
Better Collective Suffered From Inorganic Growth
Merger and acquisitions were a key driver of the company’s revenue and stock price. Better Collective has a long history of acquisitions. For example, in 2019, it acquired sports betting brands VegasInsider.com and ScoresAndOdds.com for a cash consideration of $20 million. The transaction received an upvote from the markets and BETCO stock soared over SEK 100 for the first time.
The stock saw a stellar rally after bottoming in March 2020, before rising to around SEK 270 in mid-2021. However, a global market sell-off from high inflation and interest rates cut the stock value in half by the end of 2022.
BETCO’s next major acquisition was in October 2020 when it acquired Atemi Group for €44 million. It was a strategic move as Atemi was a specialist in social media and paid advertisements and added to Better Collective’s capabilities in these domains.
In May 2021, Better Collective acquired Action Network for $240 million. The acquisition, which still remains the biggest deal by the company, was welcomed by markets and the stock rallied to over SEK 200 following the acquisition.
In April 2022, BETCO expanded its esports business with the acquisition of FUTBIN. The deal was valued at up to €105 million, of which €75 million was paid in a combination of cash and shares, and the remaining in earn-out payments. BETCO shares hit $250 following that acquisition.
South America Expansion Didn’t Go As Planned
Last year, the company completed the acquisition of Playmaker Capital for around €176 million, which helped expand its presence in South America.
While the shares rose to their all-time high of SEK 315 in May last year, troubles in Brazil and the resultant guidance cut triggered a sell-off in the back half of 2024.
BETCO fell to as low as SEK 95 last month amid the market sell-off following US President Donald Trump’s “reciprocal tariffs” but aggressive buyback, improvement in broader markets, and now a positive Q1 print has helped drive the stock’s recovery.
Reorganizing Better Collective’s Management
Last month, Better Collective embarked on a “transformative journey” that it said would “align our organizational structure with our long-term strategic objectives.” As part of that transformation, the company elevated co-founder and COO Christian Kirk Rasmussen as Co-CEO. Under the new role, Rasmussen will focus on “innovation, business development, and operational execution.” At the same time, Jesper Søgaard would focus on external strategic initiatives.
While previously the company had a geography-based structure, the restructuring focuses on three global business units, namely Publishing, Paid Media, and Esports. “This new setup is designed to reduce complexity, eliminate duplication, and allow us to scale best practices more efficiently across all markets,” said Better Collective in its release.
As part of the transformation, Better Collective would report Esports as a separate business segment beginning second quarter. Given the flurry of M&A activity (35 acquisitions in 7 years to be precise), an overhaul of reporting structure makes sense for BTECO as it would help consolidate these companies efficiently under Rasmussen while Jensen Søgaard scouts external strategic opportunities.
Are Goals Achievable?
While Better Collective managed to grow its revenues nine-fold between 2018 and 2024 on the back of acquisitions, it also saw a margin compression, among others due to integration issues. The company is looking to expand its margins to 40% over the long term, which would depend on its ability to cut down on costs.
Meanwhile, the Q1 report shows that the company’s turnaround is progressing in the right direction. A combination of recurring revenues from NDCs, launch in new markets, 2026 FIFA world cup, and relentless cost cuts could help drive gains in BETCO shares over the next year.
