Better Collective posts growth despite Covid-19 impact in Q1

15 May 2020

Affiliate marketing giant Better Collective has reported a year-on-year increase in revenue and profit for the first quarter, despite growth slowing towards the end of the period due to the novel coronavirus (Covid-19) pandemic.

Revenue for the three months to 31 March totalled €20.9m (£18.5m/$22.6m), up 40.3% from €14.9m in the same period in 2019 and higher than the group had initially anticipated.

Better Collective put this increase primarily down to strong sports win margins and high activity, up until when sports events worldwide were cancelled or suspended in mid-March due to the Covid-19, which in turn stunted further growth.

The outbreak also meant the number of new depositing customers remained level year-on-year at 116,000, with Better Collective saying the reduction in sporting activity in the latter part of March deterred players from signing up.

In terms of spending during the quarter, total costs excluding special items and amortisations amounted to €12.3m, an increase of 46.4% from €8.4m last year. Staffing costs were the main outgoing in Q1, with total spend up 59.5% to €6.7m, as the average number of employees increased from 268 to 416.

Direct cost relating to revenue also jumped 42.1% year-on-year to €2.7m, while other external spending was up 9.9% to €2.4m. Depreciation and amortisation costs increased by 50.5% to €2.1m, with this mainly attributable to acquisitions.

Better Collective also noted €1.6m in amortisation costs and €401,000 in special items spend during the period.

However, despite the rise in spending, such was the impact of revenue growth in Q1 that operating profit was up 26.9% from €5.2m in 2019 to €6.6m this year.

After accounting for an additional €675,000 in financial income and €897,000 in financial expenses, profit before tax stood at €6.4m, up by 30.6% year-on-year. Better Collective paid €1.7m in taxes, leaving it with €4.7m in profit for Q1, up 27.0% from €4.7m last year.

Reflecting on the results, chief executive Jesper Søgaard said growth in Q1 was strong compared to the same quarter last year, despite the impact of the coronavirus outbreak.

“Despite the lack of major sports events during the second half of March, the quarterly performance was highly satisfactory,” he said. “During the second half of March, sports betting activity was reduced to approximately half of normal levels while esports and casino activities performed stronger than usual.”

Søgaard also noted how Better Collective has taken a number of actions to help mitigate the impact of coronavirus in Q2 and beyond. Last month, the group said its financial targets remains despite the outbreak and had rolled out a series of measures to support these aims.

A new cost saving program has been in effect since 1 April comprising more than 50 individual initiatives, including making over 50 employees redundant or having their salaries partly or fully covered by government support programmes.

Better Collective’s board of directors and founder management have also agreed to waive their fees and salary in Q2, while management and all staff will reduce their salaries for Q2, in combination with national compensation programmes. In addition, both variable and fixed costs will be temporarily reduced through cost avoidance or price reduction measures.

"The situation calls for flexibility and we have redistributed resources internally to focus on business areas that have remained active,” Søgaard said.

“We expect low sports activity throughout most of Q2, though some of the major European sports leagues may resume without physical spectators sometime in the quarter, like the German Bundesliga confirmed to start on May 16, 2020.

“Our Q2 performance is likely to be the exception in an otherwise strong growth story. However, we expect high activity during the second half of 2020.”