Welcome to the Raketech Q1 2023 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions- and- answers session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to the speakers, CEO Oskar Mühlbach and CFO Måns Svalborn. Please go ahead.
Good morning, ladies and gentlemen. Welcome to the call. My name is Oskar Mühlbach, and I am Raketech Group CEO. With me is also CFO Måns Svalborn. We're here to present Raketech's financial results for the first quarter of 2023. Once we've done so, we're happy to answer any outstanding questions during the Q&A section at the very end. Once again, welcome. As you can see on this slide, the 1st quarter of 2023 has us off to a good start with total revenues amounting to EUR 15.8 million, corresponding to close to 25% growth, which also worth highlighting is all organic. Taking into consideration that Q1 typically is low season for us, we're very pleased with this number.
As a consequence of the strong revenue number, we also managed to deliver solid EBITDA, both in terms of absolute terms as well as margin, EUR 6.1 million and 39% respectively. The perhaps somewhat stronger margin than expected relates to benefits of scale materializing with increased volumes, but also thanks to a favorable market and product mix. On this note, it is also worth highlighting that our high- margin affiliation marketing in the rest of the world as well as the Nordics, stood out positively. Consequently, our non-Nordic share increased to an all-time high of close to 64%, while the Nordics at the same time in fact grew with almost 7%.
In other news, we saw an expected yet significant uplift in cash flow after making the final earn-out payments to the CasinoFeber founders, a positive effect that will increase even further from Q2 due to it being a full quarter's worth of CasinoFeber cash flow for us. EPS, the number on your right-hand side here on the slide, increased with close to 23% compared to last year to EUR 0.07 per share. Here is a slide with some more details on our three business areas. On your left, you have our core segment, which is high- margin and scalable affiliation marketing. As I mentioned on the previous slide, we've had strong performance here during Q1.
Operationally, we're doing a lot of things right, it seems, at the same time as the demand for our services is high and the underlying markets are showing growth. During Q1, total growth from this area amounted to close to 32%, all of it being true organic growth. Moving on to sub-affiliation, which is the yellow segment in the middle of the slide, I am happy to conclude that this business area delivered exceptional results during the quarter, and there are a few things worth pointing out in this context. First and foremost, we had great success with our network product, which simply put is when we help operators and external affiliates working with paid media to drive new users. By nature, this product is a bit opportunistic, and variations between quarters is expected to be higher than within, for example, affiliation marketing.
The network product originates from an acquisition we did in 2021, which has since long been handed over and is being run by the Raketech central team. Post-acquisition, revenues have increased with approximately 5x and post-handover with approximately 2x . On the other side of the scale, our smallest business area, betting tips and advice, to your far right on this slide, had a softer- than- expected start of the year. Revenue levels are in line with Q3 last year, but it did not manage to beat Q4, which we did expect it to do. Compared to the exceptionally strong Q1 of last year, revenues declined with approximately 31%. This decline in revenues is predominantly relating to the win share component, which is when we are bonused by players based on the accuracy of our predictions.
Before we move on to the financial details, I want to take this opportunity to also quickly revisit our three growth drivers and how we're progressing. Starting from the top with flagships, fundamentally, we believe that long- term it is essential to invest in fewer but better brands, which we then call flagships. This in addition to great SEO to ensure their ability to track and engage users by offering high- quality content and relevant features and functionality. This strategy does not only apply to traditional affiliation, but also of course to betting tips and subscriptions or any other products we might have in the future. Simply put, this means that we are in parallel narrowing down and increasing our investments into fewer but stronger products to ensure our user offering also is sustainable in the long-term.
For competitive reasons, I can't give you our detailed long-term plan, of course, but to give you a flavor, here are some examples of what we have achieved or worked on during Q1. For CasinoFeber, we are beta testing a completely new platform, which we hope to release later this year. The platform will allow additional features and functions, as well as provide a more efficient way of running the product while also collecting more granular and precise data. In parallel, we're working on taking our free-to-play slots product, Slotjava, to the U.S. Which is also planned for later this year. In other parts of the world, our efforts and investments into online cricket betting seems to be paying off, as we managed to beat our old revenue records confidently relating to the IPL.
With regards to our second growth driver, aiming to add traditional affiliation to our betting tips and advice assets in the U.S., we are making progress. However, it is taking slightly longer than initially expected to execute on this strategy. With our new American and locally based managing director in place as of Q1, with increased cross-Atlantic collaboration and iGaming competence transfer being accelerated, I have big hopes that we will be able to see improved results already by the end of this year. Our third growth driver, the AffiliationCloud expansion, is progressing according to plan. We are continuously onboarding new partners and launching new features and functions. During Q1, we launched our very own affiliationcloud.com domain, which will be used to market AffiliationCloud globally.
During Q1, we also recruited key personnel and launched key features, which now makes us ready to accelerate sales efforts in line with previously communicated timeline. Over to Måns with financial details.
Good morning. We are pleased to see that total revenues in Q1 surpassed those of Q4 and marks a record quarter for Raketech. Affiliation marketing, our core revenue stream, represents 68% of revenues in Q1 and increased from Q4, even though Q4 is normally the strongest quarter from a seasonality perspective. We saw significant growth from our previous acquisition, Casumba, fueled by general market growth as well as high performance from these assets. Furthermore, our Swedish assets continued to perform well, somewhat impacted by expected seasonality, but growing from last year as performance has been improving. We also had yet another strong quarter for sub-affiliation, which amounts to 23% of total revenues. This area continues to perform well, and as we have highlighted before, it enables us to quickly and efficiently enter into new markets, and consequently, we continue to grow our LATAM revenues in this area.
Our smallest revenue stream being betting tips and subscriptions, saw a decline in Q1, ending up at 9% of total revenues. This is, as Oskar highlighted below, our expectations impacted somewhat by unfavorable outcome for betting predictions, given it represents a smaller portion of our total revenues, it however, had a limited impact on the period. As for the regional split, starting with the Nordics, this region is normally affected by seasonality in the first quarter compared to Q4, we did see an expected decline from Q4. We are, however, growing from last year, as I mentioned, our Swedish assets are contributing positively to this growth. Finland and Norway are generally stable compared to last year, with Finland more in a flattish development and Norway so far developing well.
The significant growth in Q1 compared to last quarter and year- on- year comes primarily from rest of world. Casumba contributes significantly to this growth, and these assets have yet again come in above our expectations with top rankings and a generally high investment appetite from operators in this market. Additionally, the significant growth in LATAM from a sub-affiliation offering through network sales also impacts Rest of World growth positively during the quarter. Lastly, our online cricket betting site showed positive sign towards the end of the quarter. The vertical split on the right-hand side shows casino revenues growing from last year and also Q versus Q, and amounts to 76% of total revenues in Q1.
One point to make here is that sub-affiliation revenues, specifically network sales and its contribution to either sport or casino revenues, will vary between the quarters as it depends on which markets and publishers grow in each respective quarter. In Q1 specifically, the share of casino revenues increased in relative terms. Our MDC intake have in the last quarters continued to increase and continues to grow in Q1. It is a reflection of our organic growth within affiliation marketing, but also substantial growth from a sub-affiliation. As we mentioned before, MDC is one of the metrics we're looking at when evaluating performance, but needs to be assessed in combination with product, market, and sales mix, as well as overall estimated player values. The variations of MDC will not perfectly correlate with overall revenue development.
Q1 came in at an EBITDA of EUR 6.1 million, just slightly below Q4 with a margin of 38.7%. As I mentioned previously, we did see growth from our high- margin area of affiliation marketing, which maintained a high margin in the quarter. This was marginally offset by slightly higher operational cost as we're continuing to build up the operations within sub-affiliation, specifically for AffiliationCloud, but also some one-off consultancy fees. Generally, however, we are relatively stable with regards to our cost base. Again, worth pointing out is that we have a relatively big share of direct costs that naturally will vary with performance, primarily within sub-affiliation. However, with a stable overall margin. Lastly, this slide illustrates our cash flow bridge in Q1. Overall, we saw strong operational cash flow with 100% in cash conversion.
We settled EUR 4.3 million in earn-outs in Q1 for partial settlement of Casumba and ATS, as well as the final settlement for CasinoFeber, marking the start of this product fully integrated in Raketech. With regards to our full- year guidance of free cash flow of EUR 11 million-EUR 13 million, we can reiterate this for the full- year. We expect the remaining quarters to improve from here as only relatively minor earn-outs are to be settled for the rest of the year. Looking ahead past this year, we have, as a consequence of the exceptional growth for Casumba, revised the earn-out in the quarter. As a reminder, this earn-out is performance-based, and it runs up until July 2024.
From a cash flow perspective, part of the earn-out will be settled with up to EUR 50 million in 2024, and any remaining co-part can be settled up until September 2026, which gives us a lot of flexibility in terms of managing cash, as well as do acquisitions and pay out dividends in line with the current dividend policy. That was it from me, and back to you, Oskar.
Thank you, Måns. With those words, we've come to the end of the presentation. To recap on what's been said, we've had a strong start to the year with revenue records and EBITDA scale, scaling nicely. This despite a somewhat soft delivery from our betting tips and advice area. All growth, 24.4% is organic, with rest of the world taking leads, the for us so important non-Nordic share amounted to 63.5%, which I'm very happy to see. Worth highlighting is that this share would have been even higher if we did not in parallel also experienced strong results from the Nordics with close to 7% growth. Besides the market mix looking healthy, I'm also glad to see healthy sports versus casino mix, with 24% of revenues originating from sports betting.
Operationally, we're in good shape, we continue to invest into our growth drivers, from which we have already started to see positive signals, while also doubling down on the U.S. with reinforced management as of Q1. With the last earn-out settled for CasinoFeber, it is great to see cash flow increasing as expected, with more to come as from Q2 and onwards. Looking ahead, April revenues amounted to EUR 5.9 million, which is strong, with particularly strong performance from network sub-affiliation. Compared to April last year, this could be considered as even being exceptionally strong. Important to keep in mind here is that last year's April was a bit soft, making the comparison favorable for us.
Typically, the end of Q4 is a slightly slower season, and as there are no major sports events during this time, we consequently anticipate the somewhat softer markets during the last part of Q2. Operationally, we are confident, and judging from how our internal operational KPIs are looking, I wish to reiterate our full-year guidance on revenues between EUR 60 million and EUR 65 million, EBITDA of EUR 20 million to EUR 24 million, and free cash flow of EUR 11 million to EUR 13 million. With those words, let's move over to Q&A.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Rikard Engberg from Erik Penser Bank. Please go ahead.
Morning, guys.
Good morning.
Good morning.
Great numbers. A couple of questions, if I may? First of all, looking at the gross margin, it increased from Q4 in Q1. Going forward, given the mix with sub-affiliation and traditional affiliation, how do you think it will develop during the rest of the year?
Yep, you're correct. We did see a slight increase in Q1, and we actually had a slightly higher margin primarily within network sales for Q1. It's slightly difficult to predict how that will play out by the end, rest of the year, but it's going to be in line with what we've seen so far.
Okay, great. My next question is regarding the earn-outs. Can you please specify if there are any to be paid out this year, and how has they been developed during the quarter?
Yep. For rest of 2023, it's smaller amount of earn-outs being paid out. There's one related to the older Infinileads acquisition that's due to paid out in 2023, that's basically it to go along.
Okay, thank you. That was all for me.
The next question comes from Marlon Värnik from Nordea. Please go ahead.
Yeah, thank you. Good morning, Måns and Oskar. A couple of questions from my end here. Firstly, I mean, can you give some more color on the affiliation marketing performance here in the quarter? You talk about rest of the world as a driver, but can you give, or dig into a bit more specifically what markets are performing well and why? Yeah, any comments here would be appreciated. Thanks.
Yeah, sure. Relevant question. We have historically not guided on the single market specifically, so I don't think it's a good opportunity to do that this time. But there are revenues from predominantly three areas which I can talk about. So we have the Indian market, the Japanese market, but of course also South America. Those three are all showing positive signs and good underlying growth.
Fair enough. How should we view the Indian market here in Q2? I mean, we have the Indian Cricket Premier League started, 30th of March, I think. Should we expect that the RF rest of world trend to continue here in Q2, or how should we view the April trading update of EUR 5.9 million? Maybe if you can touch a bit on the U.S. outlook for Q2 and Q3, what churn can we expect in the tipster business, for example, and so on.
Yeah. Should we start with the IPL? Our assets in online cricket betting is not only targeting the Indian market, even though that's of course, an important market for that website. IPL is a major event within that sport. Consequently, we see lots of activity on our assets and a high demand for from operators to advertise. I'm not sure if I can guide any more specific than that, but I think Måns said in his part of the presentation that we saw a solid end of Q1 when it comes to that specific asset, and that is very much relating to the IPL. I'm sorry, can you repeat the second part of the question, please?
Yeah, sure. The second part on the U.S. outlook, how should we view Q2 and maybe Q3, and what churn can we expect, for example, for the tipster business?
Yeah. I don't think you could use the outcome from the tipster business from Q1 as an extrapolation for the rest of the quarters. We've pointed out previously that this particular business area is expected to vary a little bit more than the more stable affiliation marketing segment, for instance, between the quarter. A predominant part of that business is relating to the revenue share component. Our strategy in the U.S, where we expect to see the majority of the growth coming mid to long-term, is from adding affiliation to the strong assets we have in the U.S. This is something we are working full speed ahead with dedicated resources in the U.S.
That's what I tried to mention in the presentation, that we hope to see significant results from this by the end of this year and hopefully continue throughout the years to come.
Yeah, fair enough. Can you give any color on the tipster business performance here in April related to the trading update you gave of EUR 5.9 million?
I can't. Yeah. Måns, do you want to go ahead or?
I think just a general comment is, and this was typical from last year as well, that we are entering into a slower season, definitely from a U.S. sport perspective, just simply because of seasonality. As a general comment, we can give that, I think. As you know as well, the NFL season picks up again towards September. It is a slower season for sure, just from a calendar perspective.
Yeah, got it. And just lastly here, I mean, strong set of numbers here for Q1, also strong start for Q2. How should we understand your 2023 guidance here? Is it reasonable to assume that you are trending above initial expectations and towards maybe the upper end of the guidance? Or are you expecting a more softening market here in the Q2, Q3, and second half of 2023? Any comments on the guidance here and the range? Thank you.
Yeah, it's a, it's a relevant question. We've chosen at this point not to use the strong start to change the guidance. We're reiterating it, and we reiterate it with confidence. Then, if there's a reason for us to update the guidance as we move along, we will of course, come back and address that to the market. At this point, we're settling with being confident about the guidance.
Perfect. Okay. Thank you. All for me.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
All right. Let us just double-check here if there are any other questions through the chat. There are no other questions. With those words, thank you so much for joining the call today, we look forward to talking to you again in connection with the Q2 report in August.