Better Collective´s revenues came in at EUR 17.1m, which was 6% below our estimates (estimated EUR 18.3m). It seems like the seasonality in the third quarter has been unusually weak, having a large effect on the FTDs, which dropped considerable Q/Q. However, we view this effect as isolated to the third quarter and expect that the seasonality effect will be strong in the fourth quarter. The US acquisitions also enter a strong season with the start of the NFL season in September. We do, however, expect that the changed revenue model will offset some of the positive seasonality effects in the coming quarters.
On the cost side, both the staff costs and other external expenses came in above our estimates. As a result of this and the lower revenues, the EBITDA came at 41% (estimated 46%). The EPS came in at EUR 0.08, which was 21% below our estimates of EUR 0.10. The EPS growth was, however, close to 30%, Y/Y.
A long-term case
The third quarter came in below our expectations. However, we don´t see that the deviation in the Q3 performance does affect the long-term case of Better Collective. The company has acquired a strong position in the US market and is reinforcing it with strategic partnerships as well as improved products. The company has communicated that the profit margins will be low for the US acquisitions at the start, but we expect this to improve much during 2020. The full potential of the huge US market lies 5-10 years ahead.
The European market was somewhat challenging for several operators as well as peers to Better Collective in the third quarter. However, Better Collective seems to perform rather well in Europe. We believe the company's focus on quality content and sports betting will continue to be a success formula.
In addition, Better Collective states that its acquisition pipeline is strong. We believe that the company´s current financial position provides financial space for further acquisitions.
Following the Q3 report, we will review the case and follow-up with a research update.
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