BETTER COLLECTIVE A/S 
Door 
Better Collective (hereafter "Better") connects sports enthusiasts with betting operators such as the likes of Unibet through the news and community platforms it owns. Its core offer is built upon engaging content and click-to-action technologies.
This targeted user acquisition strategy works because bettors actively seek Better's outlets to read and share news about their favorite sports. Designed to channel trafic and revenue towards bookmakers, the group's media properties thus become an important part of the online betting ecosystem.
The latter is growing at double-digit rates across all segments, of course, whereas traditional casinos remain challenged. That makes Better ideally positioned to benefit from the sports betting and iGaming’s strong outlooks. Even though the group targets only regulated markets, those prove highly lucrative.
Better operates several community-based digital platforms — among which bettingexpert.com, Speltips.se, or SpilXperten.dk — and medias. On some of these, users generate informational content by themselves, lowering creation and publishing expenses. This portfolio of websites and apps drives a monthly average of +50 million visitors.
The Danish group also draws on partnerships with prominent media franchises, such as The Daily Telegraph, through which it can leverage its trafic acquisition know-how and drive larger pools of readers towards bookmakers. In this case, the minimal operating expenses make up for the sharing of fees.
As most media groups, Better is a roll-up, growing from acquisitions as it adds new bolt-on properties and their audiences to its portfolio. The group has already completed up to 20 takeovers since 2017, and intends to keep going full steam ahead with M&A during the next quarters.
The objectives are to diversify beyond sports betting — for instance, just a few weeks ago, Better has signed a Letter of Intent for the acquisition of a leading iGaming company for €45 mil — and to develop its presence on the U.S. market, which should surpass Europe within five to ten years.
The good news is that the U.S. operations are kicking off nicely so far. Better succeeded at absorbing the two businesses it newly acquired there, while meeting targets in terms of EBITDA margin. Management has admitted that regulation processes have shown difficult to carry out, however.
At the consolidated level, revenue grew sevenfold between 2015 and 2020, from €11mil to €73mil, while operating margins remained firmly anchored above the 30% threshold. The business requires exceptionally low amounts to capital to function — hence a net working capital of only €6mil — but will require additional financing to pursue fresh acquisitions.
As often with acquisitive companies, Better's income statements understate its true earning power. This is because high amortization costs inherited from takeovers depress accounting earnings. Compare for instance net income of €14mil in 2019 against cash earnings ("free cash-flow") of €19mil before acquisitions.
The group has raised €68mil through its IPO in 2018, then €51mil through two equity issues over the last two years. Debt also went up by €20mil, although leverage remains under control with net debt equaling to just one year of EBITDA. Investors should expect that the totality of earnings will be redirected towards acquisitions for the foreseeable future.
Growth came to a halt in 2020 as the COVID crisis hit. This, in turn, compressed valuation to an attractive multiple of only x9 EBITDA — on an enterprise value basis. Some would argue that no justice is being made to the great business prospects ahead. In that respect, the setback in price action may offer a compelling entry point to growth-oriented investors.
Founders Jesper Søgaard and Christian Kirk Rasmussen — respectively CEO and COO — have jointly sold 3.1 million shares at a price of SEK 131 last month. Per the corresponding press release, their motive was "to spread their personal holdings" while at the same time "further diversifying the shareholder base."
The two of them still own 21 million shares, equaling to 44% of equity capital. As part of the transaction, they have also decided to undertake a voluntary lock-up of at least 360 days as a testament to their "long-term" commitment. It will be interesting to follow the next insiders' transactions, in particular if the share price rises.
Finally, management apparently thought fitting to take advantage of the depressed share price, as they completed a share buyback program last summer. 1.4% of equity capital was bought back for an amount of €4.8mil, or SEK 84 per share.
The purpose of the program is "to cover debt related to prior acquisitions", as Better has rights to partially make settlements in shares if it deems it attractive. The move a priori indicates high lenders' interest for equity, which is comforting.
Better Collective is the most recent addition within the Europa One investment fund MarketScreener advises on an exclusive basis.
