Better Collective Q3 results: Revenue reaches €81.2m; profit down 64%
Operating loss before depreciation and amortization in North America came to €1.6m, compared to a profit of €2.6m last year.
Key Points
- Revenue was up 8% to €81.2m, though organic growth was down 6%
- Profit was down 64%, with particularly sharp declines reported from North America
- Better Collective has initiated a €50m cost reduction program, which has included the termination of >300 staff
Better Collective has reported its financial results for the third quarter of 2024. In total, the affiliate reported revenue of €81.2m ($85.6m), up 8% year-over-year, though organic growth dropped 6%, particularly driven by a 24% decrease in organic growth in North America. Recurring revenue accounted for €52.8m of this, up 14%.
EBITDA reached €21.9m, also up 14%, while operating profit came in at €8.9m, down 22.3% year-over-year, on account of an amortization and impairment of €10.7m. Profit after tax totaled €1.1m, down a sizeable 64%.
This decline in profit and other verticals, which the affiliate explains as being due to ‘lower-than-expected partner activity in the US, and an accelerated slowdown in Brazil heading into the expected regulation,’ has resulted in lowered 2024 FY guidance and the introduction of a €50m cost reduction program.
Cost reduction program
Plans to introduce measures to reduce costs were announced in late October by Co-Founder and CEO Jesper Søgaard on LinkedIn. His post, which included mention of downgraded financial targets, also noted the decision to let go of some Better Collective staff, calling the decision-making “emotional days for Better Collective.”
Indeed, of Better Collective’s €81.2m revenue, direct costs related to revenue for the quarter totaled €24.9m, while staff costs totaled €25.9m, with an additional €8.1m going towards other eternal expenses – all increases from this time last year.
The program will see Better Collective adapt to market developments and recognizing M&A synergies – something that, the affiliate may hope, negates declines in organic revenue – and lower other operating costs, while also terminating >300 staff, which came into effect at the end of October.
Revenue by vertical: Publishing and paid media
Breaking revenue down by vertical, publishing generated €56.4m in revenue, up 16% year-over-year and accounting for 73% of the revenue total – 12% more than last year. Operating profit before depreciation and amortization reached €15.9m, up 40% year-over-year, though organic growth, similarly to the business as a whole, was down 5%.
Paid media, however, saw revenue dip 8% to €24.8m, with operating profit before depreciation and amortization coming to €6m, down 23%. Organic growth was down 9% year-over-year.
Q3 2023
Q3 2024
Revenue by geo: North America
Looking at Better Collective’s revenue by geo, its North America segment made €19m, down 12% year-over-year, with operating profit before depreciation and amortization coming out at a loss this quarter, at – €1.6m, compared to last year’s profit of €2.6m. Organic growth was down 24%.
Overall partner activity was pointed to as a reason for this decline, with new sports betting and iGaming regulation causing much of this segment’s revenue to be generated through one-time payments (CPA), which was down 13% year-over-year.
Revenue by geo: Europe and the rest of the world
The majority of Better Collective’s revenue – 77%, in fact – came from Europe and Rest of World (RoW) operations, coming to €62.2m, up 15% year-over-year. Costs were up 7%, compared to a more stagnant 1% growth in North America, though in spite of this operating profit before depreciation and amortization was up 42% year-over-year, totaling €23.5m. Organic growth was up, albeit only slightly, growing 1% year-over-year.
Brazil accounted for 20% of the group’s revenue in Q3 2024, which may in part explain the reason for slow organic growth in this segment. However, other revenues, which include M&A and advertising, were up 32%, offsetting this slowdown.
FY24 guidance
Following these results, Better Collective has reduced its FY24 revenue guidance to €355m – €375m, from €395m – €425m. EBITDA has also been reduced, from €130m – €140m to €100m – €110m, with a midpoint decline of 11% and 22.2% respectively.
Comments
In his CEO letter, Co-Founder and CEO Jesper Søgaard said, “Better Collective has been on a strong path of growth for over two decades both financially as well as organizationally, expanding the team significantly across many geographies… However, sometimes, in the pursuit of growth, it’s necessary to pause, reassess and adapt, to prepare for the next chapter of growth.
“During Q3 we have experienced changing dynamics in the US market, which has changed the outlook. Further, Brazil has seen an increasing slowdown all year heading into the expected regulation. The impact on Q3 and the outlook led us to lower our financial targets for the year, marking the first downgrade since becoming a listed company in 2018…
“I have been asked whether the changes we have encountered represents a structural shift to our business model. I want to assure you it does not.”
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