Q3 2022: Continuous positive momentum going into high season

QUOTE FROM OSKAR MÜHLBACH, CEO
“As expected, activity picked up during the third quarter, driven by seasonality and a continuous positive momentum within our core affiliation segment as well as additional growth from our new business segment, AffiliationCloud. Revenues totalled EUR 13.0m, corresponding to 35% growth year over year, and 15% growth compared to previous quarter. Despite the annual comparison still being affected by this years’ regulatory headwinds on the Finnish and Dutch markets, as well as by tough comparison with Covid-boosted numbers last year, Raketech Group delivered organic growth of 14.2%.”

Q3 2022 FINANCIAL HIGHLIGHTS

• Revenues totalled EUR 13.0 million (EUR 9.6 million) as the core portfolio of affiliation marketing assets saw positive development as an effect of seasonality and improved performance. Activity furthermore increased within sub-affiliation.
• Organic growth amounted to 14.2% (25.6%), driven by an increase of revenues for affiliation marketing assets as well as sub-affiliation.
• US revenues amounted to EUR 1.5 million (EUR 0.3 million), as US sports entered its high season towards the end of Q3.
• Sports revenues totalled EUR 3.2 million (EUR 1.5 million), corresponding to 24.8% (16.0%) of total revenues.
• Adjusted EBITDA amounted to EUR 4.8 million (EUR 4.4 million), as expected stronger than the comparative period but due to changes in market mix, in combination with continued investments, the adjusted EBITDA margin of 37.1% (46.0%) was lower than last year.
  

Q3 2022 OPERATIONAL HIGHLIGHTS

• Several new sub-affiliates were onboarded onto AffiliationCloud, totalling 20 partners at the end of the quarter. To accelerate this growth even further, investments have increased to shorten the time to full launch.
• Preparations ahead of Q4, which is expected to be full of activity within US sports as well as the FIFA world cup and a generally high casino season.
• Successful handover of the previously acquired Infinileads assets to central Raketetch operations.

SUBSEQUENT EVENTS AFTER THE END OF THE PERIOD

• Revenues in October 2022 amounted to EUR 5.0 million (EUR 3.8 million).

CEO OSKAR MÜHLBACH COMMENTS ON THE QUARTER

As expected, activity picked up during the third quarter, driven by seasonality and a continuous positive momentum within our core affiliation assets as well as additional growth from our new business area, AffiliationCloud. Revenues totalled EUR 13.0m, corresponding to 35% growth year over year, and 15% growth compared to the previous quarter. Despite the annual comparison still being affected by regulatory headwinds on the Finnish and Dutch markets, as well as by tough comparison with Covid-boosted numbers last year, Raketech Group delivered organic growth of 14.2%.

The US business mix, in combination with higher share of sub-affiliation has naturally had a somewhat dampening effect on the EBITDA margin in the quarter. With that said, our EBITDA grew 17% year over year totalling EUR 4.8m representing an EBITDA margin of 37%. This is as expected stronger than the previous quarter, but due to the previously mentioned changes in market and product mix, in combination with continuous investments, lower than last year.

Traffic and engagement on our products were in many markets showing record levels, with the US standing out positively. As expected though, the main uplift started to show at the end of the quarter which is promising for the rest of the US sports season but potentially less significant for Q3.

We continued to invest in our US business and have during the first nine months of the year been focusing on adding affiliation offerings, exchanging best practice and technical infrastructure between our US assets. The effects from this will be shown long term, meaning that a large part of today’s revenues originate from Betting Advice and Subscriptions, which by nature is a bit more volatile compared to Affiliation while also having lower margins.

During Q3 we furthermore onboarded several new subaffiliates onto AffiliationCloud, totalling 20 partners at the end of the quarter. To accelerate this growth, we have decided to increase investments further to shorten the time to full launch. We aim to have a great product ready to be significantly accelerated during Q1 2023.

While many industries currently are suffering from negative impact from supply chain problems, fuel price increases and general inflation, iGaming has up until now been reasonably resilient. As a matter of fact, when the world is volatile, performance-based marketing services typically become the preferred choice for advertisers, as the investment decision is data-driven and the return on investment is more predictable. Additionally, the iGaming industry, where our customers are present, has been less affected by macro swings, partly driven by the ongoing digital transformation.

OUTLOOK
October revenues amounted to EUR 5.0 million, demonstrating a continuation of the strong momentum at the end of Q3. With the FIFA World Cup around the corner, casino approaching its high season and a busy sports schedule in the US, all factors are pointing at a strong end of the year.

With high expectations on the market development during the remaining part of the quarter we reiterate our revenue guidance of full year revenues in the interval of EUR 50-55m. With current run rate taken into consideration we expect to deliver within the lower to mid-range of this interval.

Considering our current product mix of low versus high margin business areas and with continued investments into the US and AffiliationCloud we expect margin for the full year to come in slightly under 40%.

Worth pointing out is that the margin in the short perspective has little to no relation to operational or commercial efficiency but is rather a result of the current market and product mix, which is the share of Affiliation, Betting Advisory and Sub-affiliation on each market respectively.

With that said, also taking the dynamics of our industry into consideration, we believe that the best way to create shareholder value is to allow ourselves to be adaptable in terms of investments, markets, business areas and acquisitions. And with our strong and stable cash generation, I am very happy to be able to make long term important investments into such areas such as the US market and the AffiliationCloud. Both are examples of strategically important initiatives where we have adapted ourselves to new realities to secure that Raketech continues to thrive also in the future.

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

REPORT PRESENTATION
CEO Oskar Mühlbach and CFO Måns Svalborn will present the report in a conference call and webcast today November 10 at 09:00 CET. The presentation will be held in English and 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-q3-2022

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

https://conference.financialhearings.com/teleconference/?id=5008640