The strong underlying growth in NDC is expected to continue to drive growth, especially as 72% of the revenue was generated from rev-share in Q1’19. The rapid increase from 76k NDCs in Q4’18 to 116k NDCs in Q1’19 lowered the Rev/NDC ratio to EUR 128, which is very low. Under a more mature phase, with stable low double-digit Y/Y growth, we would expect this ratio to be closer to EUR 200. However, the weak Q2 performance from several sports betting focus operators may hamper the Rev/NDC ratio and lower it further in Q2.
We expect a Y/Y growth of 66% and a Q/Q growth of 8%. We expect that increased personnel and M&A expenses will lower the profit margins slightly compared to Q1’19. Compare to Q2’18, we expect that the EBIT margin before special items will remain at 35%.
Weak Q2 for betting focused operators
The weak Q2 reports are mainly related to the lack of major football events (The FIFA World Cup or the UEFA European Championship). This was, for example, shown in the Swedish tax data where we saw a decrease of over 20%, May to June, for the sports betting focused operators Svenska Spel, Kindred and Bet365. Moreover, Kindred decrease its affiliate marketing with 14% in Q2 compared to Q1. Better Collective main markets are, however, the UK and Germany, but we would assume that the effect would be similar for these markets as well.
The REV/NDC ratio is affected by several factors and can fluctuate much quarter to quarter. It does, however, still indicate a large potential revenue increase with the current NDC level for Better Collective.
The outlook for Better Collective, beyond Q2, is promising with underlying strong organic growth in both NDCs and revenue. The US acquisitions are expected to impact the PnL from H2 2019, and the potential for the US market is huge. Moreover, we expect Better Collective to continue finding value-adding acquisitions.
We will get back with a comment following the release of the report.
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