Thank you, and good morning, everyone, and thank you for joining us at such short notice. The purpose of today's call is straightforward. We want to provide some context around the developments in Brazil and the decisions we announced this morning, and then use the majority of the call to answer your questions. These developments are very recent, unprecedented in nature, and continue to evolve. As a result, there are still important areas where visibility is limited and where we simply do not yet have all the answers.
We are navigating the situation as carefully and responsibly as possible, based on the information available to us today, while remaining prepared to adapt as the legal, regulatory, and commercial picture develops. As outlined in our announcement, on Friday, the Brazilian government introduced a provisional measure imposing a nationwide ban on fixed-odds betting, covering both sports betting and online gaming.
This is an abrupt and significant change to a market that had spent the past years transitioning into a federally licensed, taxed, and supervised framework. The ban is in force today, and we are acting on that basis. At the same time, it is important to recognize that this is not necessarily the final regulatory outcome. The measure must subsequently be considered by Congress and can be approved, materially amended, rejected, or ultimately cease to have an an effect.
We are therefore dealing with a situation where the immediate impact is clear, while the short, mid, and longer-term outcome remains highly uncertain. Against that background, we have taken a prudent approach. Before Friday's announcement, our Brazilian business was trending toward approximately EUR 45 million of revenue in 2026, or around 12% of expected group revenue. We have estimated the revenue impact to be approximately EUR 15 million during the remainder of the year.
This includes the full impact from the measures implemented on Friday as well as Q4. Furthermore, it includes all other associated effects. The Brazilian operations currently have an annual cost base of approximately EUR 10 million. In addition, Better Collective has incurred substantial costs and investments related to establishing and adapting the business in Brazil, including bringing operations onshore, market establishment and regulatory compliance, product development, and other initiatives required to operate in the local market.
Should the current restrictions remain in place for an extended period, Better Collective will assess and implement appropriate mitigating measures across the Brazilian operations as well as indirect functions to reduce the financial impact and adapt the cost base to the changed market environment. Our revised 2026 guidance assumes no further betting and casino revenue from Brazil following the implementation of the measure.
Importantly, we are therefore not relying on a political, legislative, or judicial reversal in our 2026 outlook. For 2027 and 2028, we currently do not have sufficient visibility to provide financial targets that we can stand behind. The outcome will depend on the legislative process, how our partners respond, and the extent to which we can adapt our operations and cost base. We have therefore decided to suspend our 2027-2028 guidance.
We have also suspended the execution of our share buyback program. This is a precautionary capital allocation decision intended to preserve financial flexibility while visibility remains limited. Operationally, we are currently focusing on adapting to the new regulation and living up to the regulation and supporting our partners. We remain strong supporters of a licensed and regulated betting market in Brazil. In our view, removing licensed operators does not remove consumer demand.
It risks moving demand toward illicit offshore operators, where player protection and regulatory oversight are significantly weaker. Brazil is an an important market for Better Collective, and we are not underestimating the significance of these developments. At the same time, we believe we have taken a transparent and correct approach to the financial implications while preserving flexibility as the situation develops. Flemming and I will now take your questions.
To ask a question, please press star one one on your telephone and wait for a name to be announced. To withdraw your question, please press star one one again. If you wish to ask a question via the webcast, please type it into the box and click submit. There may be a short pause as participants register their questions. We will now proceed to take our first question. Our first question comes from the line of Sebastian Grave from Nordea. Please go ahead, Sebastian, your line is open.
Good morning, Jesper and Flemming. Sebastian here from Nordea. Thank you for stepping up on such short notice and standing here to take questions. My first question would be around the Brazilian operation as of today. Maybe, if possible, you can talk around some of the overall revenue mix in the market, stating the new guidance that you expect no further betting and casino revenue from Brazil. On that formulation, I suspect that you have other streams of revenue currently in the Brazilian markets. Could you talk around sort of the overall revenue mix as of now in the Brazilian market, that would be helpful to hear.
Yeah. Flemming here. I think for the vast majority, you can assume that the Brazilian revenue is related to the betting activities. Also the temporary ban also goes for advertising towards betting. We have minor other revenue streams, but I think for the context, it is mainly related from our, you can say, affiliate marketing operations in Brazil.
Okay. With that, Flemming, I guess the message is also that if the regulation remains as it is as per today, then you will have no future in the Brazilian markets. That is correct?
Yeah, I think if this, you can say, situation comes to a total ban, it will not be legal to operate with licensed operators. As you know, we only work with licensed operators and according to local regulations. So that is correct.
Sure. Then on the 2026 guidance, I note a more or less 100% drop-through from revenue to EBITDA, meaning sort of no offsetting measures in the short term at least. What should we read into that? More broadly, can you talk around what sort of offsetting measures do you have to sort of adjust the cost base here in the short, medium term?
Yeah. I think first of all, there will be many or there are many possible outcomes of this. Clearly we are also working towards, you can say, and also expect and hope that there will be a future market for betting once the election has been completed, and that is not within our hands. Clearly we want to, you can say also, be present in that market when, if that comes back. Right now, we have just given the numbers, and of course, if this becomes a permanent situation, then we need to both, you can say, adjust our business in Brazil, but we also need to adjust our business in general as we have done in other similar situations where market conditions have changed.
But I guess the follow-up question is, Flemming, how patient are you on this development? Because today, as I read the announcement here, it is a EUR 45 million revenue market with EUR 10 million of annual cost, meaning a EUR 35 million EBITDA market. In a scenario where you all of a sudden have no revenue whatsoever but still a cost base, this could even be a negative EBITDA market for a period of time. So question is, how patient are you to get more clarity on the development? And when is enough, and when will you pull the plug, so to say?
Sebastian, Jesper here. I think it is important to stress that this came out Friday night and we have then spent the weekend to basically react and send out what you have seen to give some clarity toward the shareholders of Better Collective. Let me just allude to the fact that there are multiple outcomes of this. We have an election on Sunday, October 4th, so very near term. I cannot help also to view this move by President Lula in light of that election.
And you can be assured that obviously we will take swift action for whatever happens and how it pans out. I think we have demonstrated that in the past, that we do take action when market condition changes. But it is also very, very recent, and we have an election on Sunday. So we are monitoring this situation carefully now. We will of course, make appropriate actions and decisions along the way. But for now, it is very, very recent.
Obviously we are also focused on being in close contact with partners and supporting them in a decision which we think is or is completely unprecedented, where you are removing the option for operators who have complied fully with legislation, paid millions in order to get a license to prepare them for this market, had acquired five years licenses, and now all of a sudden just being removed. As I also stated just before, clearly there is demand for this industry, and that demand is not going away. So it is a very unfortunate situation. We will monitor it very, very closely and take necessary actions as we get more knowledgeable about the outlook for the future.
Yeah, no, thank you. Yes, I understand. That was it for me. Thank you, guys. And a big kudos to the transparency here. It is really appreciated. Thank you.
Thank you. We will now move to our next question, and our next question comes from the line of Poul Jessen from Danske Bank. Please go ahead, Poul, your line is open.
Yes. Thank you. I do not think I have more questions to the operation. I was just thinking about what could happen to your balance sheet. You have lots of intangibles, and you made investments in the Brazilian market. So how much risk is there in case that or the worst case? How much could we see on the write downs of goodwill and other intangibles?
Yeah. Again, Flemming here. Thanks for the question, Poul. I think we, you can say again, we will repeat, there are so many outcomes of this and it is very recent, so it is way too early to get that, you can say, consideration. We will of course come back on that if pending developments in the market. But for now, we cannot give any further guidance to that.
No, it is just to get an indication on, you have to lose something on the EBITDA level, but there must be a reduction on cost in case you make a write-down of intangibles, seeing how much you have to, how much is, or depreciate.
There are many factors going into that. I think, I understand the question, but I think for today it is just too early to make that assessment.
Okay. Thank you.
Thank you. We will now take our next question. Our next question comes from Hjalmar Ahlberg from Redeye. Please ask your question, Hjalmar, your line is open.
Morning, thank you. Maybe just a few follow-ups. First on the cost base there, EUR 10 million, is that kind of the fixed cost that you have there, or is there any variable cost included in that or is that on top of that, if there are any?
Yeah, I think, the cost base we gave in the statement, approximately EUR 10 million, that is a combination of variable cost and fixed cost. In Brazil, I don't have the exact split at hand, but you can say both cost groups are important if the market is live. Right now, as Jesper also alluded to, there are multiple outcomes and some may, you can say, give directional measure very soon around the election.
But that cost base is, of course, you can say, directly in Brazil. Then clearly we also have group functions that are supporting the market. But to repeat, we are, you can say currently it's very fresh. We will adapt to any permanent market condition whether the market reopens or whether this is a permanent measure.
Understood. Then you also stated that you are in discussion with your partners. I don't know how much you can say, but how are they kind of viewing this? Do you feel that they are kind of shutting down immediately or are they like you taking a kind of a wait-and-see approach to see the final outcome? If you can give any indication, that would be interesting.
Obviously they are clearly focused on complying with the law, and being responsible in that manner. We know they are now putting a lot of force in multiple ways like, we suspect that there will be legal action regarding this provisional measure in the Supreme Court that they will likely take. We know since they are big sponsors in the sports world in Brazil and on many fronts, obviously a lot of conversation is happening there. Again, I want to mention that this is a huge loss for everyone in the market.
On the consumer side, player protections are in place in a regulated market, unfortunately very, very limited in a black market. From a tax revenue perspective, it's also significant tax revenue that is now being lost in the Brazilian market, and with the activity happening in the black market. The operators are clearly stating that fully compliant with law, but also taking action to protect this market. I think they will be very active and obviously we're supportive of these actions.
Okay. Thank you. I don't know if you can assist, but the kind of the timeline there, like you said, the Congress will then meet and vote on this. Is that something that, do you know? I saw that it has to be either between 30 days or 60 days. Do you have any indication when such a meeting or Congress vote can take place?
No, I cannot speak specifically to this, but there are procedures in place for how this will play out, which we also reference with a set number of days where it has to be approved in Congress. Obviously those dates will be important to how this will develop. As so will the actions by the Supreme Federal Court likely be, as well as the election on Sunday. Again, sort of why there are many potential outcomes in this and why we decided to share information today, but at the same time, we simply cannot predict how this will play out in the future.
Okay. Thank you very much.
Thank you. As a reminder, if you wish to ask a question, please press star one one on your telephone. If you wish to ask a question via the webcast, please type into the box and click submit. I will now hand the call back to the room for questions from the webcast.
Thank you. I think we will move over to the questions now from written questions here. The first question is that we have a few around our leverage ratio and if this ends out in a ban, what is our expectations for next year? Flemming?
I think the last one I can start with, the expectations next year. We have suspended our guidance for next year and the long-term guidance, so we will need to come back on that. On the leverage part, this is not something that has, you can say, any concerns of mine on this basis. It is something we always have navigated, and we have what we need for that. So on that part, we are managing and, of course, also part of that is also reason why we suspend our share buyback today to navigate that.
Thank you, Flemming. Then we have another question, and there are a few of these, so I will try and combine it into one. But given the many different outcomes that can happen here, why have we decided to come out with a message now despite waiting, I guess?
Yeah. The measure is taken on Friday. That is a fact we need to relate to, so we simply have a legal obligation to inform the market about this. There is no doubt about that. So hence we are here with the outcome, even though there are significant uncertainties how this may fall out long term.
Thank you, Flemming. Then we have a question related to the different outcomes that Bolsonaro is in favor of only banning casino and whether we would be interested in a market in Brazil that only has sports betting.
Yes, indeed. That would be a good outcome as the majority of our revenue does stem from sports betting. So yes, that would be a positive outcome for us.
Thank you, Jesper. With that, I will hand it over to you again, Jesper, for closing remarks.
Thank you all, and thanks for the questions. I would like to leave you with three points. First, we have taken a conservative approach to 2026 and are planning on the basis of no further betting and casino revenue from Brazil. We are not relying on a favorable regulatory outcome to deliver our revised guidance. Second, the longer-term outcome is not yet determined. There are several possible paths through the legislative process, and we will continue to adapt the business as greater clarity emerges.
Finally, while Brazil is an important part of Better Collective, these developments do not change our conviction in the broader business, our strategy, or the long-term opportunities across the group. Our immediate priority is to manage the situation responsibly, protect the financial strength of Better Collective, and remain transparent with our shareholders as the situation develops. We have navigated significant changes in our industry before, and we will navigate this one as well. The underlying quality of the business, the strength of our assets, and our conviction in Better Collective's long-term potential remain intact. Thank you for joining us this morning.
For your participation in today's conference and webcast, this does conclude the program. You may now disconnect your lines.