Earnings Call: Q2 2021

Aug 12, 2021

Earnings release

Good morning, everybody, and welcome to CROWD's Q2 presentation. My name is Robert Anderson Anderson, and I am the CEO. With me, I have Gustaf Waddenring, who is our CFO, who will later go through the details of the financials. But to start off with, I will go through a summary, a quick one, and then we will have an overview. As I said, then Gustav will take over with some financial details and I will round off with some closing comments. This quarter, we have had sequential growth and a strong operational cash flow. And looking more in details at some key figures, Andres, and the adjusted EBITDA amounted to €1,500,000 The profit after tax has been negative, but that is predominantly due to large one off costs this quarter. NDCs, almost €30,000,000 and the cash flow almost €2,000,000 If we go on and we look at The first half year, revenue amounted to almost €12,000,000 and adjusted EBITDA to over €3,000,000 It's really nice to see the NDC figures. If you compare it to last year, it's 3 times as much actually, which is a very strong figure. And going on to the overview, I have said it before, but I will say it again. We had strong cash flow. We have continued management. This means that we have been strengthening the organization where it is needed for future growth. And with that, we also have accelerated investments into future growth. And that goes Into SEO, our technical platform, the use of AI for content writing, etcetera. We have had large one off effects, predominantly relating to the acquisition of the gambling cabin, but also the organizational changes that we have Secuted. Then looking at some key events, well, we did acquire the gambling cabin. I will go into details about what That means for us in a bit later in this presentation. We have strengthened our SaaS offering. We actually launched our software into a new vertical. So it's now not only available in the iGaming vertical, but also in the VPN vertical, where affiliation almost works the same as in the gambling vertical. So with a few adoptions, we were able to enter a completely new vertical. We have broadened our sports betting offering with the launch of our betfootball.com. It has a new prediction tool. It also is AI content driven, which is first for us. We have also got new board members in Jonas and Maria, which I'm very happy about. And if we then move on to some group development figures, We have revenue development. Yes, you can see, we have sequential growth, gone from €5,500,000 to €6,200,000 in revenue. And the NDCs have gone from 32,000 to almost well, short of 30. This is predominantly due to a shift in keyword strategy where we have moved from low value keywords to higher value keywords, which is an investment in the future as well. Then we look at how our different segments have developed. And as you can Undersea. The revenue development in iGaming is showing sequential growth as well as the revenue development in Asset Service. Gustaf will go more into detail regarding all of these figures shortly. So, I want to try and explain at least the position of affiliate company that had just comparison sites within different iGaming verticals, Call it a traditional affiliate in this industry. What we are trying to do and what we are doing is building out our services around this to also entail software solutions for other affiliates, but also servicing business capabilities for other affiliates. This, of course, builds a sum for us where we have very rich from Content, where we have grade A software for us, but also that we offer to others, which is also a risk diversification for us. So going forward, the key here is that we will build out all this together, and there's A significant amount of synergies going forward with all this, with the live event, with the rich content streaming and our normal traditional sites as well as the software we have. So I think we are in the Journey of repositioning this company to something that will definitely stand out compared to other companies in this industry. It's a journey, and we are in the middle of it. I can clearly say where we are going. We just have to really explain it also well. So looking at our base pillar, it is the affiliate pillar. Here we have affiliate sites in poker, sports betting, casino, etcetera. And then in the Business as a Service Segment. We have matching Wisions and Traffic Grid. And in the Software as a Service business, we have especially Vomix. So I will try and explain this a little bit more in detail, but these two together forms our as a service segment. So If we look at the as a service segment that consists of the business as a service segment and the software as a service segment. So what is business as a service? Well, that is basically software as a service, but with the business layer on top of it. And what this means is that Matching Visions provides this to other affiliates. If you are a smaller affiliate, You can sign up with Matching Visions and you get access to hundreds of different iGaming brands to work with without signing up for each and every one of them. And you alone might be sending 10 new players to a single casino, but we together can send Balck, and this gives Matching Visions the power to negotiate really well with all these operators, which means that we get a higher commission. The affiliates that use Matching Visions get a higher commission that they would Get Alone, and we take a small cut in between, plus they get access to all the marketing material, etcetera. So it is really business as a service for a smaller affiliate. Vonex is a data collection tool Andres, and the business intelligence tool that is predominantly used by a bit larger affiliates in order to track the revenue data and where this all comes from. Dreamstream is a version of this adopted and purposely adjusted to fit for streamers. And this gives streamers a better insight into their business as well. If we look at our affiliate side of things. I would like to highlight a few brands here. Poker Listings is one of the largest affiliates in poker in the world. It's one of the strongest brands we have. We also have Bet Footwall that we just launched. We have Gambling Cabin. I will go into more detail shortly about what Gambling Cabin is. And we also have the newly launched the festival series, which I will also explain in more detail shortly. But first, let's talk about the new market, The Dutch market, we have had really strong presence in the Dutch market historically. However, there has been a grace period where we have been not doing any business Waiting for the market to open up, and this is now set to happen 1st October. And considering that it has been one of our largest markets In the past, we are really looking forward to this opening. We have sites that have been now not shut down, but I hasn't been serving any business over the last year and a half. And now we will from this up again. And for us, this is going to be like opening up a little bit of a tap, if you will, because we already have the sites. Already ranking. We're just waiting for it to be able to do business again. So we are excited to say the least about this Market opening, that's due 1st October. The Dutch market is expecting to grow somewhere around 20% annually. And, yeah, what can I say, this will be good for us? Going forward, we are having also the festival here in September to look forward to. Launching the festival is a physical event. It's not just a tournament, but this is a way for us also to create content and drive traffic digitally. It is, though, taking its form in a physical event. So, the first event will be in Bratislava in September. And It is an event not just focused at poker, but also roulette, blackjack and competitive sports betting. So This is actually the first event of its kind where you will have like a track and field in gambling or maybe you could call it a triathlon. And we are expecting over 650 participants with a guaranteed price pool of over €300,000 And of course, since we are offering a wide array of different genres of of gambling in this event. It's been quite easy for us to sign up partnerships with big operators. So we have over 10 operators signed up as partners in this. And there is also now an app available in App Store. If you want to go and download it, you just Google or you in app store search for the festival app. And also in the beginning of April, we did acquire the Gambling Cabin, which is a True Success Story. This is a company that I would say have 2 strong verticals. They have their software side of things They have the content production. They are by far one of the best content production houses out there. But also their software is quite unique in the way that it helps you bet better. So what do they have? Well, they have live streams. Within football, they also have live streams for poker. They have podcasts about horse racing and Rig, Tipset in Sweden as well as many other things. They also have sport betting tips. They have pool betting. And they also have their software for reduction, which means that if you go there, you can improve your bets with using their software. It's a little bit hard to explain. I would encourage anyone that listens to this to go to the gambling cabin and look at the video tutorials on how to use their software. Hopefully, it will also make you win a little bit more when you gamble on sports. Also sign up for some of the communities on the sites. You'll probably get some really interesting information. And with that, I will hand over to Gustaf to go through some financial details. And after that, I will do some closing comments. And after Thurdat. We will open up for Q and A. Thank you very much. Thank you, Robert. I'll give you a flavor of the financial development, a little bit more detail here for the Q2. And I'll switch side to the revenue development. So the Q2 has been characterized by integration of The acquisition is done like Power Media Group and the Gamel cabin, etcetera. But we also have been working since last year and intensified now to improve our revenue diversification to decrease the risk profile of the company. So from Q1 2021, we have included the SaaS and the Bus solutions in our business, like Robert said, and that means that we're running 2 separate segments. We will repeat this in the coming quarters, so everybody gets into it. And we see that both the segments on the graph to the left is increasing revenues and growing sequentially, which we are happy to see. We see also that NDC development in both segments are increasing sequentially. Looking on the revenues year on year compared to the quarter Q2 2020, we have some movements. The revenue increase mainly quarter year on year is related to the Asset Service segment revenues that has been added. Robert told you about the SaaS and Buzz and also the increase in the sports betting we derive gaming affiliation. And that is important for us. It's both through the gambling cabin and it's also through our new launch sites. The decrease in the casino revenues you see on €800 and €3,000 is mainly related to that we adapted our business and our product offerings on the Dutch market in July last year. And that market is reopening 1st October this year. Looking on the costs and the development there on the group level, Our key message is that the cost base in the iGaming affiliation and The central cost actually is decreasing somewhat between Q1 and Q2 this year. The increase in the cost that we see in Q2 is mainly related, as you see to the left of this graph for the bridge, It's related to the as a service segment, which is normal course of business when we increase revenues in our with our streaming and matching business, etcetera. And the other increase in the cost base is natural food acquisition in gambling cabin as well. So key message is that we are working with our costs and we are actually keeping them somewhat reduced in Q2. We're operating with EBITDA level in the 1st and second quarter 2021, around €1,500,000 that's our underlying trading. And also if you look on Q3 2020, you see the effect when we adapt our product offering on the Dutch market temporarily during the coming quarters. So that's the decrease Between Q2 and Q3, Maile. Then turning to our iGaming affiliation segment where we run and operate Comparision and News Sites. You can see the quarter by quarter increase in revenues from Q3 'twenty And we reached our total growth of 5% on sequential level between Q1 and Q2 2021. And that is mainly driven by the gambling cabin. Also mentioned that we have seasonal effects, specifically in the iGaming affiliation, which is related to poker since poker is usually going down in Q2. So that's a natural effect which will increase in Q3 and Q4 when the world series of poker Anders. NSE development also increasing year on year quite significantly. The peak in Q1 2021 within the iGaming affiliation, it's related to horse racing events in Q1 and also that we had some paid media. But the level compared to 2020 has increased significantly, which is a strong message from us. Looking on the revenue diversification in the iGaming affiliation, which we worked with For almost 1 year is that we have stabilized. We have a stable level of revenue share, which we're happy to see around 50% to 60%. And we also have increased our flat fee and banner fees, which you see on the 25% in the other revenues in iGaming affiliation. And that's an effect of both Synergous together with the asset service segment, which Robert told you about. But it's also that we have Employed a really strong key account team, which is working towards the operators. Our American assets are performing well as well, and we reached almost 90% of our revenues in North America in the second quarter. EBITDA in the iGaming affiliation is trading around €1,500,000 to €1,500,000 in EBITDA, relatively stable. And we see that our cost base goes up a little bit, and that's mainly related to gambling cabin I mentioned earlier. Turning to the as a service segment. As Robert said, we are increasing step by step the revenues by quarter. The asset service is performing well. We see that in the underlying KPIs, both revenue generating units and also in the NDC development. And the 2 different parts of the as a service, which is the SaaS and BaaS we have, the SaaS Revenues are relatively limited still, but they are around €200,000 on a quarterly basis. They have a high margin and a subscriber base with sticky revenues. So we're really happy to see that RGUs within the SaaS is increasing month by month. NSE development mainly driven by the matching visions and the Dreamstreams networks, which is very nice to see. EBITDA in the Asset Service segment, stable around €300,000 during 2021. And the most important for us is that we see that our revenue generating units is increasing step by step, reaching SEK 380,000,000 in the Q2. Turning to financing and cash flow on group level. We have been working quite intensely with decreasing our gross debt last year. We have repurchased bonds during last year, but we also amortized every quarter. So our wash debt has decreased step by step, which we are happy to see. And our business model enables us to deleverage Quite fast. We have a cash conversion of +80 percent and we have high margins, which makes it possible. Our net debt to adjusted EBITDA level reaching around SEK 3.5 billion in the external reporting then in Q2, and we will see that decrease during the second half year next this year. To round off with our cash flow development, we're happy to see that operating cash flow was very in Q2 reaching €1,900,000 There are a few drivers behind that. Of course, it's the EBITDA, but it's also that we've been working very hard With being close to our debtors and collecting cash, which you can see in the change in net working capital, generating a very strong operating cash flow, reaching a cash conversion almost 99% in Q2. The cash flow from the investments To explain that, it's €2,500,000 mainly related to the acquisition of Gamlin Cabin. And for the ones who has listened Earlier quarters as well, the cash flow from the finance activities is mainly related to the interest payments of the bond and amortization we have. So all in all, we had a very strong operating cash flow and very high cash conversion, which we're looking forward to keep for the coming quarters. And by that, I leave over to Robert for some closing comments. All right. Hello again. So let's just wrap this up before we go into Q and A. So In summary, we are investing in our future. We have been doing so and we will keep doing so, but we are really now looking forward to new markets opening in the second half of this year, especially then the Dutch markets which we have talked about. We are increasing our SEO focus to even more, I would say. I mean, it's always been a focus, but we are now increasing our investments in that as well simply because that will drive organic growth more than before. We are working heavily on integration to create this synergies, to create this beautiful flower of synergies that I did show you before. But we do so with always having shareholder value in focus. And the final message here is that It is with great optimism that we are looking forward to the second half of this year and also even more so to the full year next Andersjier. It feels like now our time is coming and we will be able to show all the shareholders the results of the strategic journey that we have been on and moving us towards more software based affiliation company. So with that, I say thank you for today, and we open up for Q and A. Thank you very much. No question by phone. Okay. Everything is crystal clear then. Yes. So no question by phone. Back to you for the conclusion. Okay. So thank you for today's presentation. And if you should have any questions after this, when you view the presentation