Q1 2024: Sustained Revenue Growth Despite Unexpected Challenges

QUOTE FROM JOHAN SVENSSON, ACTING CEO
“In the first quarter of 2024, we delivered EUR 19.0 million in revenues, representing an organic increase of 20.1%, primarily driven by Sub-affiliation. Adjusted EBITDA came in at EUR 5.1 million, while EBITDA was EUR 4.3 million, consistent with our trading update published on 1 May. We remain confident in our market-leading product offerings and see promising growth opportunities through our strategic initiatives in sports offerings, exclusive partnerships, and media deals. These efforts will position us well for continued growth in the coming years, and we remain committed to maximizing shareholder value.”

Q1 2024 FINANCIAL HIGHLIGHTS

• Revenues in Q1 of 2024 totaled EUR 19.0 million (EUR 15.8 million), reflecting an organic growth increase of 20.1% (24.4%), driven by continued strong performance from sub-affiliation partially offset by weaker-than-expected results within affiliation marketing.
• EBITDA, adjusted for restructuring costs, was EUR 5.1 million (EUR 6.1 million), impacted by a weaker performance in Sweden compared to the previous year and soft performance of the Casumba assets following the Google Core update during the quarter. Other regions and products performed well, with sub-affiliation delivering a strong quarter in terms of EBITDA contribution.
• Operating profit, adjusted for costs related to re-structuring, amounted to EUR 2.0 million (EUR 3.8 million).
• Free cash flow before earnouts increased to EUR 6.5 million (EUR 5.6 million) with a positive working capital development from trade receivables.
  • Earnouts settled during the quarter amounted to EUR 13.0 million.

OPERATIONAL REVIEW
We have concluded a thorough operational review, reaffirming our strategic priorities and aligning resources with our long-term growth objectives. Additionally, we have implemented efficiency measures and cost-cutting initiatives designed to optimize our operations and enhance profitability.

FULL-YEAR OUTLOOK
Current trading, including April, implies an adjusted EBITDA of around EUR 20.0 million for the full year. Free cash flow before earnouts for the full year is estimated to come in just below adjusted EBITDA.

SUBSEQUENT EVENTS AFTER THE END OF THE PERIOD

WITHDRAWAL OF DIVIDEND PROPOSAL
On May 14, 2024, the board decided to withdraw its previously announced proposal to distribute dividends in 2024, in line with its commitment to maintaining financial flexibility and supporting the company’s long term growth ambitions. The primary focus is delivering value to shareholders and continuing to evaluate opportunities to enhance shareholder returns in a way that aligns with the Company’s long-term value-creation objectives.

CURRENT TRADING
Revenues in April 2024 amounted to EUR 5.9 million (EUR 5.9 million).

CEO COMMENT
In the first quarter of 2024, we delivered EUR 19.0 million in revenues, representing an organic increase of 20.1%, primarily driven by Sub-affiliation. Adjusted EBITDA came in at EUR 5.1 million, while EBITDA was EUR 4.3 million, consistent with our trading update published on 1 May. Although these results are below expectations, they were largely influenced by the softer performance within affiliation marketing due to the unexpected magnitude of the Google update completed at the end of April.

Performance by business area
Affiliation Marketing: Our revenue declined by 18.5%, mainly due to the impact of Google's core update, particularly on our Casumba assets. Combined with a weaker Q1 from our Swedish assets and steady performance elsewhere, this led to overall weaker Q1 revenues. Completion of the Google update in April prompted a revision of our full-year guidance. Drawing from past experience, we are actively addressing this challenge. Working closely with Casumba’s committed founders, we have implemented SEO recovery strategies and improved content quality.

Sub-affiliation: Our lower margin Sub-affiliation business area, encompassing Raketech Network and AffiliationCloud, demonstrated a year-on-year revenue increase. The EBITDA contribution remained strong, driven by an increased revenue share with our partners. We are enhancing our platform capabilities to improve partner performance and satisfaction, expanding to new markets, and onboarding new publishers. These initiatives are expected to drive sustained growth in the coming quarters.

Betting tips and Subscription: This area experienced a slight decline post the US sports high season. We are actively reviewing our strategy for this area, with a continued focus on our subscription-based digital platform.

Operational review and strategic initiatives
In Q1, we concluded an operational review aimed at refocusing our strategic priorities, ensuring our resources are aligned with our primary objectives, and maintaining our financial strength and stability. Our analysis resulted in a number of strategic initiatives aimed at repositioning the current Affiliation Marketing model to ensure we prioritize our long-term organic growth drivers. Additionally, we implemented efficiency measures, including cost-cutting initiatives that will result in increased profitability, improved execution and a sharper focus on our prioritized products and markets.

We are prioritizing the following strategic initiatives to help drive growth and innovation:

Lower our SEO Dependency:
- Leverage our strong portfolio of high direct traffic products to boost monetization opportunities.
- Enhance our current marketing strategies with content partnerships and increased paid marketing for both our casino and sports assets, with the goal of building a more resilient and adaptable marketing ecosystem.
- Intensify our CRM efforts to deliver personalized experiences and automated marketing campaigns that are designed to increase user retention and enhance lifetime value.

Grow our Sports Vertical:
- Increased focus and monetization on our existing high-quality sports assets will continue the positive momentum in engagement and sales and maximize the opportunity from the strong demand we see for the upcoming UEFA Euro 2024.
- Our ongoing efforts to grow affiliation revenues on our US tipster assets have yielded the best quarterly performance to date, albeit from low levels. Thanks to a strong team and targeted efforts, we are pleased to see positive development from this initiative.

Increase our Customized Partnerships
- We have continued to expand our successful partnership programme, as evidenced by our recent three-year media partnership with Danske Spil, the Danish state-owned operator. This marks our second major partnership in Denmark, following the agreement with VBET earlier this quarter. Additionally, we have signed an exclusive partnership with a newly launched brand in Sweden.

Broaden Reach
- As part of the operational review, we will prioritize and focus our efforts by expanding into new geographies with our already well-established brands.

Outlook
April revenues were EUR 5.9 million, reflecting the impact of the Google update and normal seasonal trends. Current trading, including April, implies an adjusted EBITDA of around EUR 20 million for the full year. Free cash flow before earnouts is estimated to be just below adjusted EBITDA.

We remain confident in our market-leading product offerings and see promising growth opportunities through our strategic initiatives in sports offerings, exclusive partnerships, and media deals. These efforts will position us well for continued growth in the coming years, and we remain committed to maximising shareholder value.

Johan Svensson, Acting CEO

LINK TO REPORT
The full Interim Report is available on https://raketech.com/investors/

REPORT PRESENTATION
Acting CEO Johan Svensson and CFO Måns Svalborn will present the report in a conference call on Wednesday, May 15, 2024, at 09:00 CEST.

The presentation can be followed via both a conference call and an online audio cast, including a Q&A session open to all listeners at the end of the presentation.

If you wish to participate via webcast, please use the link below. Via the webcast you are able to ask written questions.

https://ir.financialhearings.com/raketech-q1-report-2024

If you wish to participate via teleconference, please register on the link below. After registration, you will be provided with phone numbers and a conference ID to access the conference. You can ask questions verbally via teleconference.

https://conference.financialhearings.com/teleconference/?id=50048908