Better Collective preview Q4 2024: Continued challenging market, focus on outlook
Research Note
2025-02-06
07:51
Redeye updates on Better Collective ahead of Q4-results (due February 19) where we expect a slight sequential improvement supported by positive seasonality, albeit with continued soft performance in North America.
Hjalmar Ahlberg
We have slightly trimmed our 2024E estimates (EBITDA down 1%) ahead of the Q4-results where we expect topline of EUR87m and EBITDA of EUR24m (previous EUR88m and EUR25m, respectively). This would yield full year revenue of EUR362m and EBITDA of EUR104m, which is in the mid-end of the company’s 2024 guidance (revenue of EUR355m-375m and EBITDA of EUR100m-110m). We expect North America to see continued negative topline growth on the back of the lower partner activity in US, although we expect revenue to increase QoQ supported by seasonality. For Europe & RoW we expect YoY growth driven by the acquisition of Playmaker Capital. We expect limited effect from the announced cost savings of EUR50m in Q4 (full effect expected in 2025E) and that EBITDA-margin should be largely in line with Q3 2024.
We expect focus in the report will be on the outlook for 2025 where we have lowered our estimates ahead of the report (2025-26E EBITDA down 7%) reflecting continued challenging markets in US and Brazil. We now forecast topline of EUR361m and EBITDA of EUR116m for 2025E (previously EUR377m and EUR124m, respectively) implying that we expect no topline growth for the year. The company will experience headwinds in both US and South America where it will meet tough comps in H1 2025. While we expect limited topline growth, we expect the cost reductions to support margin and we forecast an EBITDA-margin of 32% for 2025E. Looking into 2026E, we expect growth to improve with support from revenue-share income in US and as the negative effects from regulation of the Brazilian market have been absorbed. We also expect profitability to improve with an EBITDA-margin of 34%, supported by operating leverage. The table below summarizes our updated estimates and key financials for 2022-26E.
| Better Collective: Financial forecasts | |||||||||
| EURm | 2022 | 2023 | Q1 24 | Q2 24 | Q3 24 | Q4 24E | 2024E | 2025E | 2026E |
| Revenue | 269 | 327 | 95.1 | 99.1 | 81.2 | 87.0 | 362 | 361 | 412 |
| Growth, % | 52% | 21% | 8% | 27% | 8% | 2% | 11% | 0% | 14% |
| Ow organic, % | 34% | 13% | -6% | 5% | -6% | -8% | -4% | 0% | 14% |
| North America | 99 | 110 | 34.0 | 25.8 | 19.0 | 22.0 | 101 | 93 | 108 |
| Europe & RoW | 171 | 217 | 61.0 | 73.3 | 62.2 | 65.0 | 262 | 267 | 304 |
| North America Y/Y (%) | 110% | 11% | -8% | 12% | -16% | -19% | -8% | -7% | 16% |
| Europe & RoW Y/Y (%) | 31% | 27% | 20% | 33% | 17% | 12% | 20% | 2% | 14% |
| Direct costs | -92 | -99 | -27.9 | -29.2 | -24.9 | -26.1 | -108 | -105 | -124 |
| Staff costs | -69 | -89 | -28.7 | -31.0 | -25.9 | -28.2 | -114 | -108 | -115 |
| Other costs | -23 | -27 | -9.4 | -10.4 | -8.1 | -8.5 | -36 | -32 | -34 |
| EBITDA adj | 85 | 111 | 29.0 | 28.5 | 22.3 | 24.2 | 104 | 116 | 139 |
| EBITDA adj (%) | 32% | 34% | 31% | 29% | 28% | 28% | 29% | 32% | 34% |
| Non-recurring | 0 | -2 | -2.5 | -0.5 | -0.4 | 0.0 | -3 | 0 | 0 |
| EBITDA | 85 | 109 | 26.5 | 28.1 | 21.9 | 24.2 | 101 | 116 | 139 |
| EBITDA (%) | 32% | 33% | 28% | 28% | 27% | 28% | 28% | 32% | 34% |
| EBIT | 70 | 81 | 16.8 | 18.6 | 8.9 | 12.1 | 56 | 69 | 92 |
| EBIT (%) | 26% | 25% | 18% | 19% | 11% | 14% | 16% | 19% | 22% |
| Net income adj. | 48 | 42 | 10.1 | 10.8 | 1.5 | 6.8 | 29 | 45 | 69 |
| Net income | 48 | 40 | 7.6 | 10.3 | 1.1 | 6.8 | 26 | 45 | 69 |
| EPS adj, EUR | 0.9 | 0.8 | 0.16 | 0.17 | 0.02 | 0.11 | 0.5 | 0.7 | 1.1 |
| EPS, EUR | 0.9 | 0.7 | 0.12 | 0.16 | 0.02 | 0.11 | 0.4 | 0.7 | 1.1 |
| Source: Redeye Research |
We have also updated our valuation on the back of the lowered estimates. Furthermore, our rating has been updated following changes in the methodology and reflecting an increased uncertainty in Better Collective on the back of the development in US. The discount rate applied has increased from 8.5% to 9.5% and coupled with the estimate changes, we lower our base case to SEK240 (SEK290) while the new bull case is SEK380 (SEK430) and the bear case SEK100 (SEK130). The base case implies an EV/EBITDA of 13x 2025E and 11x 2026E, while the share currently trades at 6x 2025E EBITDA and has historically traded at average NTM EV/EBITDA of around 11x The table below summarizes key assumptions for our valuation scenarios.
| Better Collective: Fair Value Range | |||
| SEK | Bear Case | Base Case | Bull Case |
| Value per share | 100 | 240 | 380 |
| Revenue CAGR 2025-2029 | 5% | 12% | 14% |
| Revenue CAGR 2030-2039 | 3% | 5% | 6% |
| Growth Terminal | 2% | 2% | 2% |
| EBITDA-margin 2025-2039 | 26% | 32% | 36% |
| EBITDA Terminal | 25% | 28% | 33% |
| Source: Redeye Research |
Disclosures and disclaimers