Better Collective targets unchanged despite sports shutdown

Better Collective has said its financial targets remain unchanged despite ongoing postponements and cancellations throughout the world of sport.

The affiliate business said that as of mid-March, its business “has shown strong performance and has not been notably affected by postponements of sports events caused by the Covid-19 outbreak.”

“The Covid-19 has in many instances created an unprecedented situation for societies across the world,” Jesper Søgaard, chief executive of Better Collective, said. “Just as many other companies, Better Collective will expectedly also be affected by the Covid-19, especially following the postponement of major sports events such as Euro 2020.

“Nothing is more important than the health and safety of people and we look forward to the return of the sports we all enjoy, including a safe and exciting EURO 2021. Though visibility is currently limited, we stay optimistic that normal sports betting activity levels will be restored why our guidance remains unchanged.”

Although it acknowledged that these cancellations would lead to reduced sports betting activity to around half of normal levels, it noted that the esports betting and casino verticals remain unaffected and said that it’s business model and “strong balance sheet” allow it to be flexible enough to cope with the crisis.

The business’s revenue for February 2020 came to €6.9m (£6.3m/$7.6m), up 27% year-on-year, with player activity at an all-time high, while revenue for the first two months of the year came to €14.1m, up 37% year-on-year.

However, with the postponement of almost all major sporting events in the first half of 2020, Better Collective said it expects that some of the revenue which it would normally collect will either be lost or postponed until later in 2020 or until 2021.

“Based upon the current activity level, Better Collective estimates that the postponement of EURO 2020 will imply an isolated revenue postponement of €2m-4m from 2020 to 2021, whereas other cancellations/postponements may have a similar negative effect, in particular in the US, where the business is mostly exposed to the major sports leagues,” the business said.

However, it anticipates that lower costs will offset some of the reduced revenue, allowing earnings guidances to stay at the same level.

The business added that its flexibility as an online, revenue-share-based business means it does not expect the effect of lost sports betting revenue to be too severe.

“Better Collective operates in an online business that allows for a high degree of flexibility as operation is highly scalable and can take place almost anywhere,” the update said. This allows the company to continue operations as usual while giving priority to the health and safety of the employees.

“Furthermore, the historical business model has to a high degree been based upon revenue share, where the large databases of players continue to generate revenue as long as betting events take place, thereby providing recurring revenue. In past periods with low activity in the absence of  major sports events, there is normally still betting activity.

“Therefore it can be expected that even though major sports events are not happening, there will still be betting activity.”

Earlier this month, Better Collective finalised the acquisition of esports portal HLTV.org ApS in a deal worth up to €34.5m.

Founded in 2002 in Denmark, HLTV.org provides news from the esports market, specialising in the CS:GO title. Users can access CS:GO match information and player and team rankings, with the website receiving more than 26.5 million visits per month.

Many leading operators have lowered their earnings guidances for 2020 because of the virus. Flutter Entertainment noted that approximately 78% of its total revenue in 2019 was generated by betting on sports events and warned of a £110m revenue loss due to the virus.

GVC Holdings revealed that its earnings before interest, tax, deprecation and amortisation (EBITDA) for the current year could be reduced by up to £150m because of sporting suspensions, before issuing a guidance for a further reduction of up to £25m after the suspension of UK horse racing until the end of April.

William Hill, meanwhile, announced that it expects a material impact on revenue and earnings from the pandemic, and has therefore suspended its 2019 dividend to retain financial resources within the business.