Better Collective A/S (BETCO) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Better Collective First Quarter 2021 Presentation Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jesper Sogaard. Please go ahead.

Thank you very much. Welcome to Better Collective's webcast presentation in connection with the Q1 report covering the period January 1, 2021, to March 31, 2021, which we released today. My name is Jesper Sogaard. I'm the Co-Founder and CEO of the company. And with me today are CFO, Flemming Pedersen; and Head of IR, Christina Thomsen. Thank you for joining in today. I'm very excited to be sharing our Q1 report with you. Following a challenging 2020, Better Collective ended the year with strong performance and proved itself resilient. I'm proud to share with you that Q1 2021 marks yet another strong and exciting quarter with record-high performances and exciting new benches. Now let's get going. Please turn to Page 2, where we display our disclaimer regarding any forward-looking statements in this presentation. I ask you to please pay attention to this. Please turn to Page 3. The agenda for today's presentation is structured so that we start by looking over the business highlights for Q1. Flemming will speak to the financials for the quarter and provide an update regarding our increased financial targets for 2021. Hereafter, we'll take a look at some general business updates, including a sum up of our latest acquisitions, leading to our most recent acquisition of the Action Network and the U.S. growth opportunity. As always, we end the presentation with a Q&A session. Please turn to Page 4. 2021 got off to a strong and accelerating start across the group, Better Collective have continued to perform well, resulting in significant growth throughout our business areas and key performance indicators. Let me give a snapshot overview of the financial and business highlights of Q1. Please turn to Page 5. Looking at the highlights of the financial performance, Q1 ended with a record-high revenue. Revenue increased by 86%, of which 19% was organic growth. Our operational earnings increased by 46% to EUR 13 million. Cash flow from operations before special items was EUR 16 million, an increase of more than 70%. We continue to deliver high numbers of new depositing customers and our increased value due to geography and receiving operators, adding to our bank of players and laying the foundation for continued revenue growth. In the quarter, we sent more than 180,000 NDCs to our partners, which equates a growth of 54% compared to the number of NDCs in the same period the year before. Following the acquisition of The Atemi Group, we continued to invest in changing the Paid Media division more towards revenue share and hybrid deals, and we are already sending an increasing number of NDCs on revenue share. Flemming will revert with more information into the financial performance, both to give a bit more insight into the moving parts of our business and to share some in depth insights into the underlying performance of the business. Please turn to Page 6. Now let's turn to the business highlights of the quarter. At the beginning of the new year, we exercised the option to acquire a further 70% of the shares in Mindway AI for a total price of EUR 2.3 million, bringing the ownership to 90%. Mindway AI specializes in software solutions based on artificial intelligence and neuroscience for identifying, preventing and intervening in at-risk and problem gambling. We are very proud that we have played a road in bringing Mindway's products from academic research into commercial products that are now being sold to operators around the world. On the last day of the quarter, we strengthened our position in the Swedish sports betting media market by acquiring the online sports betting media platform Rekatochklart for EUR 3.8 million. After the disclosure of the quarter, we made our largest acquisition to date. On May 3, we welcomed the Action Network to the BC Group. With this acquisition, we have gained clear market leadership within sports betting media in the U.S., and have added 3 new and very well-positioned U.S. sports media brands to our portfolio. We also welcomed 100 new colleagues who jointly represent an invaluable pool of knowledge and expertise on the U.S. sports betting media market. I'll return with more information on the Action Network acquisition and its significance to Better Collective later in this webcast. I'm also happy to share that following the Annual General Meeting on April 26 this year, Therese Hillman was elected for the Board of Directors. Therese brings with her extensive knowledge about the iGaming universe and has valuable competencies relating to online business modeling and growth journeys, all of which are increasingly relevant for Better Collective, and I'm very pleased to have her on board. I can proudly reveal that April revenue reached a record EUR 13.1 million, a growth of 185% versus last year, of which 51% was organic growth. Organic growth in the Publishing segment was 87% against a weak comparison due to the significant effect on April last year by the hold in sports during the COVID lockdown. In the Paid Media segment, organic growth was 14% against a strong comparison as the hold in sports meant an increase in casino predominant in the acquired Atemi Group. In summary, Better Collective has shown strong performance, and I'm very satisfied with the start of this year. We've been taking new big steps in building our business, while we, at the same time, have showed solid financial performance. Now please turn to Page 7, while I pass on the word to Flemming.

Thanks, Jesper. Now look at the financials for Q1, starting on the next page. So please follow me to Page 8. Revenue growth in Q1 was strong compared to the same quarter last year and marks a record-high. Total revenue for Q1 was EUR 38.8 million, which is an 86% growth compared to the same period last year. The organic growth was 19% and the revenue split was 61% coming from Publishing and 39% from the Paid Media division. Revenue share accounted for 45% of the total revenue with 43% coming from CPA, 5% from subscriptions and 8% from other income. Overall, the income from revenue share increased 22% to EUR 17 million in Q1 2021, up from EUR 14 million in the same quarter last year. We saw an all-time high number of NDCs with more than 180,000 in quarter, a growth of 54%. An increasing number of NDCs are sent on revenue share and hybrid deals, including NDCs from the Paid Media division, in line with our preference for the revenue share model. We also provided the April revenue figures in the Q1 report. It was a record-high with 185% growth compared to last year. However, as Jesper mentioned on a weak comparison as April last year was heavily affected by the COVID closedowns. Please turn to Page 9. Operational earnings in Q1 on EBITDA increased 46% to EUR 13.1 million. The group EBITDA margin was 34%, which is satisfactory. Zooming in on the segments, the EBITDA margin was high at 51% in Publishing and 7% in Paid Media. We made a significant EUR 2 million investment in the quarter by changing the Paid Media business model more towards revenue share than CPA and also in new market openings, especially the U.S. market. This means that the margin in the Paid Media segment was significantly impacted by the switch from pure CPA to hybrid revenue models, affecting revenue and costs. If we exclude these impacts then the Paid Media margin would have been 19%. In the Publishing segment, we managed to keep the cost base almost unchanged, except for the added cost basis in the newly acquired companies, HLTV and Mindway. For Q1, the effective tax rate was 24% in Q1 -- against Q1 2020, where the effective tax rate was 26.4%. Earnings per share increased by 76% to EUR 0.18 per share. This is a result of solid performance, including value-adding acquisitions that have been financed at relatively low cost. Please turn to page 10. Looking at the cash flow and balance sheet. In Q1, operating cash flow before special items was EUR 16 million, which equates an increase of 70%, while acquisitions and other investments reduced cash flow with EUR 8.4 million in the quarter. The cash conversion was 121% due to an improvement of accounts receivables and other short-term debt. By the end of Q1, Better Collective's capital reserves stood at EUR 48 million, including cash of EUR 35 million and unused bank credit facilities of EUR 13 million. Please turn to Page 11. Now coming back to revenue and growth. Let's take a look at some of the internal key performance indicators, i.e., sports wagering, which is the growth in the underlying betting volume in our revenue share counts. While we also have back added historical numbers from the acquired companies and indexed them all back to 100 starting in Q1 2018. Please note that these figures represent Better Collective's aggregated data sources accounting historically for certain percentages of Better Collective's annual commission earnings. As can be seen from the graph, the underlying betting volume in these revenue share-based accounts increases over time with growth in the recent quarters that we mainly attribute to the many indices that we have sent in previous years. The COVID effect is notable in Q2 last year. In Q3 and Q4 in 2020, we saw a record-high performance in terms of sports wagering in our European revenue share counts. In Q1 2021, we see a continuation of the upgoing curve landing Q1 at all-time high index of 205, which is very encouraging, as this is a strong indicator for the increase of value in the player databases that we have built over time. Please turn to Page 12. In addition to the betting volume, we're looking at the average sports win margin on revenue share counts, i.e., what percentage is paid out on the betting volume. We have used the same indexing as you saw in the graph before and what can be seen is that the margins fluctuate over the quarters. And Q1 was indexed 80.9 against an average index number shown in the graph of 84.2, so a bit lower. The volatility in sports win margin is something we view as being transient, but it can, of course, affect short-term financial performance of up or downwards. Please turn to Page 13. Looking at the financial targets that we have updated for full year 2021. As announced in our full year report, the Board of Directors has decided on the targets for the financial year 2021. However, following the acquisition of the Action Network, and contingent on the closing of the transaction anticipated in Q2, the financial targets for the full year have been increased. The group revenue is now expected to exceed EUR 180 million, previously more than EUR 160 million. And operational profit is now expected to exceed EUR 55 million against previously EUR 50 million. We have also updated the organic growth targets, which is now expected to exceed 25% previously more than 20%. The acquisition of the Action Network will bring Better Collective's estimated debt leverage net interest-bearing debt against EBITDA above the company's financial target of 3.0. However, due to the strong operating cash flow, the Board of Directors has decided that for the time being, it's acceptable for the company's debt leverage to exceed the financial target. However, the target remains in place for the full year. The Board will, therefore, decide upon any potential changes to the company's long-term capital structure in due course. The earnings target maintains the focus on high earnings with an implied combined margin above 30% and an EBITDA exceeding EUR 55 million in the full year. This is a reflection of continued high earning margins in the Publishing segment as seen throughout 2018 to 2020, and generally lower margins in the Paid Media segment, where we are continuously investing in changing the business model more towards rev share and new markets. The earning margins in Paid Media will, as mentioned, expected to be affected by these changes as we are, you can say, changing this business model. However, from 2021, we expect the earnings margin in the Paid Media segment to increase again. Please turn to page 14, and I hand back the word to Jesper. Thank you.

Thank you, Flem. Now let me walk you through some general business updates for the quarter. In the following, we have decided to focus on our products and brands, regulatory update and our M&A performance and future strategy. Please turn to Page 15. Following the AGM on April 26, this year, Therese Hillman was elected member of the Board of Directors. Therese Hillman, a Swedish national, is CEO of Network of Design and was until recently group CEO of NetEnt, a premium game supplier to online casino operators and listed on nasdaq.com. In this role, Therese has steered the company during a turnaround phase in a time of changing regulation and market conditions., U.S. market expansion and a large acquisition of the fast-growing competitor, Red Tiger. Therese is a Board member of Actic since 2018 and a former Board member of Unibet. Additionally, Jens Bager, Todd Dunlap, Klaus Holse, Petra von Rohr and Leif Nørgaard were all reelected and will continue their work as members of the Board of Directors. I have no doubt that such a diverse and competent Board of Directors made up of experienced executives from across business sectors will continue to fuel Better Collective's ambitions, improve our decisions and help us in focusing our efforts. Please turn to Page 16. Onto a brief look at the regulatory development in key markets. With the U.S. as one of the main drivers these years, we are off to a strong start in the newly regulated states of Michigan and Virginia, underlining the value of having strong brands and assets in place when the new market opens. Collectively, the Americas offer high potential in the additional US. states regulating, and we also see promising developments in both Canada and LATAM countries. In Europe, we are following the general regulatory process closely. Germany implemented an interim regime to govern gambling from October 2020. In this connection, unlicensed operators needed to withdraw from the market. Several years ago, we decided to only work with operators, which we knew would be part of a regulated German market. Therefore, our performance on the German market stays strong and more permanent regulation is expected to be implemented from July 2021. We believe that the value of the German market will remain, at least, the same for Better Collective and continue to be an attractive market. However, as we have seen in other markets going through a regulatory process, there is increased uncertainty. We look forward to a regulated market in the Netherlands expected by October 2021 and can inform that Sweden is expected to lift its temporary restrictions in light of the COVID pandemic in November 2021. Please turn to Page 17. The M&A strategy was a cornerstone of our decision to IPO Better Collective in 2018. And we have been a key player in the consolidation of the market since 2017. For the first part of this year, we've completed additional 3 acquisitions, including the most recent and the largest acquisition to date. M&A continues to shape our business and performance, striving to become the leading sports betting aggregator in the world. With 23 acquisitions completed so far for around EUR 450 million, we believe we have the right setup for acquiring and integrating companies. Our M&A pipeline is stronger than ever, and therefore -- and there are so many interesting companies that we could see fit well into the Better Collective group. Due to our strong technological the platform and scale benefits, we believe we can improve the offering of acquisition targets and add value through both revenue and cost synergies. Once the target has been integrated, we can utilize a broad range of relevant content and other technical features to accelerate the growth of the acquired target. On the back of the Action Network acquisition, we've decided to briefly guide you through our growth journey by highlighting the most recent large acquisitions and sum up their performances after being adopted into the BC Group. Please turn to Page 18. In March last year, we welcomed HLTV.org to the Better Collective group, adding esports to our portfolio just prior to the lockdown of sports. HLTV.org is the world's largest community site within Counter Strike: Global Offensive, CS:GO. Traffic to the HLTV website has increased significantly in the past year, not least during the lockdown of regular sports and the overall interest in esports betting is still growing. HLTV is a very strong medium with global reach in an emerging sport that is the largest of the esports when it comes to betting. Since the acquisition, we have added a betting section to the site and experienced a 40% revenue growth. HLTV is mainly run as a stand-alone operation with founders still on board in managing positions. Best practices are shared between HLTV and Better Collective, along with alignment on long-term ambitions. Our aspiration is to continue building on the strong CS:GO community that was built by Per and Martin more than a decade ago and continue to be the go-to place for CS:GO enthusiasts. Please turn to Page 19. In October 2020, we completed the acquisition of The Atemi Group, which is one of the world's largest company specialized within lead generation for iGaming through paid media and social media advertising. We believe that by adding this traffic channel to our platform provides for many synergies and a strong value proposition to our partners. We have successfully integrated the acquired Paid Media business, which has brought Better Collective in the absolute leading position when it comes to premium customer acquisition for the online operators. However, it is noteworthy that the earning margin within paid media typically is lower than within organic traffic due to direct payments to the company's providing platforms for online advertising. At the time of the acquisition, the outlook for 2020 implied earnings margin in Atemi was around 20% and only 6 months after having acquired the Atemi Group, we have experienced a 60% revenue growth. However, given the plans for expansion of the Paid Media business to new markets, including the U.S. and a gradual change of business model towards revenue share, investments will affect the earnings margin short term, resulting in an expected earnings margin of above 10%, and focus will be on absolute growth and long-term value creation. Please turn to page 20. In 2019, we added a strong portfolio of brands, namely Vegas Insider, RotoGrinders, Scores and Odds and SportsHandle through acquisitions. Our brands span across sports betting and fantasy sports offering subscription services and pick sales, along with quality content. Our U.S. business and leading brands have developed successfully with high-growth and a rapid increase in profitability. Following the acquisitions of Vegas Insider and Scores and Odds, their business models were changed to affiliate marketing within sports betting, still continuing the user subscriptions, sale of picks and brand advertising. The brands, content and marketing strategies were remodeled to meet the standards of the regulated online sports betting. The revamp of Vegas Insider is progressing well, and the strong U.S. brand acquired June 2019 placed Better Collective in a strategically strong position, allowing us to capitalize on the massive U.S. growth potential. As with most other markets, the U.S. was also significantly impacted by the COVID-19 pandemic during 2020. Conversely, the pandemic seems to have led to a shift in the readiness to regulate online betting and gambling in a number of states with a view to increase tax revenues to restore the economy. Looking at U.S. revenue -- the U.S. revenue, the year-on-year growth for Q1 has been approximately 120%. Additionally, the U.S. market expectations for 2021 is a year-on-year growth in online sports betting of 80%, which Better Collective is well positioned to take part in. The growth expectations in the U.S. are significant, as we'll come back to in the next couple of slides. Please turn to page 21. Looking at the last 4 years revenue development. Better Collective has grown revenue with an annual average of above 50%. And in 2021, we are looking to double year-on-year. And growth rates in operational earnings and cash flow has fallen while still allowing room for new acquisitions and investments in brands, products and new market openings. As said, we remain committed to continuing the industry consolidation through M&A activities. And our current pipeline is strong. Now this brings me to our most recent acquisition. Please turn to page 22. Building on our U.S. success and the large potential in the continued regulation, we've completed our largest acquisition to date. The acquisition of Action consolidates Better Collective's leading position in the sports betting media landscape in the U.S. and customer delivery verticals within online sports betting, enabled through these strong product platforms and their market-leading reach. In a highly competitive landscape and with the vast growth scenarios that we are looking into, adding a content-rich household media brand gives us a unique and market-leading position. Please turn to page 23. As mentioned earlier, the U.S. is a key market for Better Collective to expand our geography in the coming years and to establish a base from which to grow organically. Most of our business is based on the affiliate marketing model. And in recent years, we've started adding new revenue streams, making us a broader-based media group. This transition signifies an increased focus on our branded products and ongoing changes in how we interact with our users. Adding Action, which we deem to be the absolute best and most complete product for the U.S. market, clearly strengthens our position and secures market leadership. Since our foundation, we have aimed to make sports betting and gambling entertaining, transparent and fair for the global network of online betters, which aligns very well with Action's mission to make sports fans smarter about betting through credible sports betting products and information. Please turn to page 24. Founded in 2017 and launched in 2018, Action is uniquely positioned in the U.S. market as a premium sports content and product destination for U.S. sports betters. A trusted source for sports fans, Action's media platforms provide an enhanced experience for its users through our original sports news content, premium insights, deep menus of arts and proprietary betting tools and data. Action is the premier content and product destination for U.S. sports betters and does this in 2 ways through award-winning content and media assets built across audio, video and award-winning apps and platforms, technology with assets around informing U.S. sports betters and allowing them to track their picks, follow us and engage in content. Combined, these 2 ankles produce the most qualified and highest intense sports betters in the United States. Action's diverse revenue model includes a rapidly growing affiliate marketing business, focused on customer acquisition for betting operators in the U.S. as well as subscription products, anchored by Action Pro, Action Labs and Fantasy Labs. Please turn to Page 25. Now let me briefly run through the terms of the transaction and the financial aspects. The purchase price of $240 million is for 100% of the share capital in Action Network on a cash and debt-free basis. It will be settled by $228 million in cash of which $10 million is payable on deferred basis as settlement of unvested share options; and two, $12 million in newly issued BC shares to Action's management, key employees and certain other individuals. The transaction will be financed through bank financing. The acquisition is subject to customary regulatory approvals and is expected to be completed in Q2 this year. We will consolidate Action into the Better Collective group from the time of closing, and it will operate as a separate business unit led by Action CEO, Patrick Keane. Please turn to page 26. The combination of Better Collective and Action creates the leading sports betting media in the U.S., Only the user is joining from first information on a potential bet or sportsbook to the actual bet placement. Across products, we are in the position to be top of mind for sports betters with informative and entertaining content for our users. Action will become an integral part of Better Collective U.S. and will continue to operate as a separate business unit with its current brands, management team and employees led by CEO, Patrick Keane, who will report to group management through U.S. CEO, Marc Pedersen. Action will integrate with Better Collective's current organization, where relevant, in order to generate efficiencies. Please turn to Page 27. Elaborating on market's projections, we are looking at 50% CAGR for online sports betting from 2020 to 2025. While the U.S. sports betting market has grown rapidly since the repeal of the PASPA Act, this growth is based on only 13 states, which gradually have legalized online gambling. Many more are expected to follow in the coming years with the addressable market significantly expanding as a result. Total online sports betting revenues in the U.S. are forecasted to reach $4.2 billion in 2022, which is a growth of 70% year-on-year. Looking at the longer term, online sports betting is projected to nearly $40 billion in 2033, underlying a massive potential worth building for. Please turn to Page 28. While the U.S. sports betting market has grown rapidly since repeal of the Professional and Amateur Sports Protection Act, PASPA, removed a federal ban on online gambling, only 13 states have legalized online gambling at this point. Many more are expected to follow in the coming years with the addressable market significantly expanding as a result. As mentioned on the previous slide, the total online sports betting revenues in the U.S. are forecasted to reach $4 billion in 2022, growing to $40 billion in 2033. This is why we have decided to make these big investments in order to secure market leadership. And currently, we expect our U.S. revenues to surpass $100 million by 2020 with positive and increasing operational earnings. As of now, we have many strong U.S. brands, and the recent Atemi acquisition is expected to power paid media efforts and growing in the U.S. business, while the acquisition of Action has placed Better Collective in a market-leading position in the U.S. We remain highly dedicated to taking part in the emerging U.S. market, where more and more states are opening for online gambling, either just sports betting or in some states also online casino games. Please turn to Page 29. I'll finalize this presentation by highlighting the key takeaways for Q1. Q1 delivered strong performance with a record-high revenue and a record high number of NDCs. 2021 will be a busy and action-packed year filled with big sports events, including EURO 2020. I'm particularly proud of welcoming Action to the BC group. Following the acquisition of Action, we have also increased our 2021 financial targets, strong growth and opportunities in the U.S. affiliate business. I would like to express a sincere thanks to all Better Collective's employees for their continued hard work while I would also like to welcome all new employees to the BC group. I look forward to the knowledge sharing and joint efforts. Q1 has indeed laid the foundation for a promising and exciting 2021 filled with captivating games, new business endeavors and big sports events. This concludes our webcast presentation for this quarter, and I will now pass the word back to the operator and open for questions from the audience. Thanks for listening in.

[Operator Instructions] The first question from the line comes from the line of Erik Moberg, ABG.

In regard to the U.S., could you perhaps elaborate a bit more on the performance during the quarter? And obviously, get a little bit of a one-off effect from both Michigan and Virginia as these states just launched. But could you perhaps give some flavor on how much this inflated the U.S. business?

We did see a strong traction in both Michigan and Virginia, but also basically all other states. I think you're right, there's probably been an effect of a bit of sort of unusual extra demand in those states. But what is very encouraging for us in the U.S. is that we can see both on the traffic side and in the Google search results that we are gradually improving our performance. So we definitely feel that we have momentum in the U.S. And I think we have seen that in the performance in Q1. But we definitely expect that to continue going forward.

Understood. And just in regards to New Jersey and Pennsylvania, which are 2 states that's been up and running for a bit longer, would you say that the underlying affiliate market is still achieving growth year-over-year?

It is a bit difficult for me to speak for the entire market. But what we can see is that we experienced growth there, and being a bit more specific, we also -- we have our media partnership with NJ.com. That has also been performing very well this quarter.

And in regard to the margins, especially within paid, you're switching to hybrid from pure CPA, which obviously has a toll on the margin, as you pointed out in the report. But how should we think in regard to the development for the remainder of the year?

Well, we have maintained the target for the Paid Media division to be above 10% for the full year, meaning that we expect to, say, increase margins, in particular in the following quarters. So we have not changed that outlook. Clearly, we will go for new opportunities as they also emerge, especially in the U.S. where we are constantly also working on getting better and better partner deals in place for the Paid Media level. So -- but plans are unchanged in that.

And I can add a bit there, Erik. Just to give an example and some flavor to this shift. We actually -- we have some operators where we completely dropped the CPA or a very, very small CPA and take the full revenue share for those players going forward. And then considering sort of the high cost of direct traffic from Google AdWords, you can, of course, see that has a pretty big impact, just rough figures, say, GBP 150 to get the customer, but we actually don't see any revenue or very, very little revenue in the first month after that. So it does affect quite a lot.

Got it. That's a good flavor right there. And just on April revenues of EUR 13 million, you were up 185%. Could you give some flavor on the drivers behind this, both in terms of sportsbook margins as well as whether or not the growth is partly driven by spillover effects from the March mandate in the U.S.

I wouldn't highlight any specific elements to our April performance. I think it's very much in line with what we expect and sort of good performance across markets. On the margin, again, I wouldn't say anything unusual there. So neither very high nor very low. So all in all, April was pretty much in line with what we expected.

Understood. And obviously, May have some negative seasonality effects. But based upon what you've seen so far in May, how much of a step-down sequentially from April level should we expect?

I think we cannot really speak to May performance. We have a few days into the month. So I think we will refrain from that, Erik, if you understand.

Got it. Fair enough. And looking into June, you have a pretty good sports schedule there. Do you expect June to be a stronger month than April?

Again, it's -- we continue to expect a high organic growth throughout the year. In particular, for the Q2, we will see the start of the EURO 2020. Of course, we are prepared for that for months. So -- actually more than a year since the shift that was made from last year. So yes, we expect those months to be strong and with a lot of NDCs coming from these big sports events.

Understood. And just one final question for me. In regards to the M&A pipeline and your strategy going forward, will you continue to be eyeing larger targets? And also in regards to geographic regions, are there any regions that you find specifically interesting as of right now?

I think on a general note, yes, we -- as we have said many times, we believe very much in sort of the consolidation of this market, and we also believe that we can be the consolidator in the market. So we will continue to be very interested in both large target and those where there's a very interesting strategic fit. And then following that logic, any market that has sort of developments in regards of regulation coming and general environment that welcomes sports betting and where the market is of a certain size, that would, of course, be interesting to us and of strategic importance.

Got it. And in regards to Latin America, are there any interesting targets within that region, would you say?

I think it's a less mature market than what we've actually seen in both Europe. And if you look to the states, I think there's also been simply more innovation and more ambitious businesses built than what you would see in LATAM. So from an M&A perspective there, I think there is less to go and buy. But having said that, it's obviously an area of interest to us. So we do monitor that market -- or those markets.

The next question comes from the line of Erik Lindholm from Nordea.

So you mentioned some promising developments in Canada and LATAM. I mean, what sort of time line do you expect here for Canada and Brazil, for example, regulating? And do you expect sort of an immediate impact from this?

Yes. It's always hard to sort of be very concrete, but we do expect that end of this year, Canada could become an option, so say December 2021. Brazil has been postponed a few times. But again, we do believe that we will see regulation there this year. But since it has been promised so many times, I really don't dare saying exactly when it's going to happen. But they have been quite vocal about the ambition of regulating and have been so for now some years. So we could expect that to happen later this year.

And looking at the organic growth upgrade here to your targets to 25%. Can you talk a bit what is driving this stronger organic growth outlook for 2021?

I think we have seen a very strong start to the year. And of course, also, as mentioned previously, the U.S. has performed strongly. So that is why we take a step up on that as well.

All right. And finally here, so do you expect the Paid Media margin to improve sort of to the 10% target level here already in Q2? Or is this more of a H2 target?

Yes, again, difficult to say. We are -- we have taken a quite bold approach to make these investments because we can really see it paying off for specific operators. The customer lifetime values are extremely high. So without going too far, I think we -- of course, we will see the best effect and highest effect from the new built rev share databases in H2 due to the time until they are breakeven. So -- but whether we strike the same target in Q2, I think it's a bit early to tell. It is not very important for us. We monitor the customer lifetime very closely and the absolute growth in the rev share databases. And that is really what we are focused on, but, of course, maintaining the 10% target for the full year.

Right. Just one final question. But I mean, in the long-term here, you just said the adjusted sort of Paid Media margin would have been 19% in the quarter. I mean -- I guess it's fair to assume that you can reach 20% EBITDA margin longer term for the Paid Media segment.

[Operator Instructions]

And we also have some questions coming in online. The first one from Carlos [indiscernible]. Question. How big is the U.S. business for BC going forward with Action included in percentage of revenues for Better Collective? We have given a bit of guidance on that with the announcement of the acquisition that for 2022, we expect revenues of more than $100 million from the U.S. business. And -- so that's what we have commented so far. Next question from Eddy [ Ponting. ] Were your U.S. operations profitable in Q1 or in April? They've been profitable for both Q1 and April.

Yes. I think, perhaps, I can add to that. And we have been speaking to that also in the annual report. Since we acquired the U.S. companies, the first ones in 2019, we have changed the -- turned the business model. And if we go back, there actually was a bit of a drag to the group margin when we acquired. Now they are on par with group margin in our Publishing division. so that has developed quite nicely since we acquired the companies and even through the COVID period.

And next question is also from Eddy [ Ponting. ] 40% revenue growth in HLTV. How is the profitability? And what are your expectations going forward? In general, I'm very, very excited about HLTV and the potential that, that site has because of its very big reach in audience and very loyal and engaged audience. Actually, when we look at -- on a run rate, it's more close to 50% that we see in growth for that business. It's a highly profitable business. So what we are considering right now is what type of investments should we make in HLTV to both cement the current position, but obviously, also to grow it further. So it's a site where we really have big ambitions and where we believe there will be a big opportunity going forward. So what we have looked at so far has been pretty obvious synergies, but we still -- there's still a lot to do and many opportunities with that business. And next question comes from Lars [indiscernible]. Regarding your acquisition of Action Network. As I heard, as I heard it your Board has accepted that your debt-to-EBITDA can be higher than 3.0 for a shorter period. Is it then correctly understood that you can manage your acquisition without a share issue in the market?

Yes, it's Flemming here. I can take that one. We can, of course, not speak to any future financing events should there be any. What we have done for the Action Network is that we have secured bank financing to complete the transaction. So that's as far as I can go. We will always look at the financial -- the long-term financial planning, as we have done in the past. And in the recent AGM, we also renewed our authorizations for issuing -- potential issue of shares. And we've also built in an option to use the convertible bond market, which we also have been advised is available to us. So we look at -- we have a variety of financing options, and we will, of course, always seem to look for the best option and more shareholder-friendly option for building further.

And the next question comes from Eddy [ Ponting. ] You have an impressive M&A record. Still, any examples of acquisitions not reaching expectations and lessons learned from those? Yes, we -- now we have done 23 acquisitions. And of course, not all of them has been developed as well as we hoped and planned for. But fortunately, the net effect has been very, very good. To be slightly concrete, what we have learned is that smaller acquisitions, if they don't fit neatly into our existing operations, can be too much of a hassle to make perform, and therefore, simply not worthwhile. That has led to us, in general, looking for targets larger. Another part is specifically on brands and the longevity of the websites we have acquired. So how sustainable are these sites in 5 years' time, that is -- that relates very much to the brand and user engagement on the site. And there, we have also seen historically that we have made some acquisitions that, actually, from a financial perspective, have been fine and okay. But with the mindset of sort of long-term ambition of building brands and loyal users to the site doesn't really fit that well. And therefore, probably acquisitions we wouldn't do today. But having said that, financially, they have performed quite well. So it's, of course, nice that even where we feel that they haven't been as good as we hoped, it's not a disaster. We can definitely live with the performance of those businesses, but it has just directed our search sort of going ahead when we're looking at targets. And I think Action is a very good example of of the aspiration of only a very strong brand, a fantastic product, where I believe that in 5 years' time, it's going to be much stronger and even better positioned than it is today. Another question from Eddy [ Ponting. ] You raised the organic growth target to 25% from 20% for this year, but keep the same sales target as after the Action acquisition. How should we interpret this?

Yes. I will try to answer that. Good question. We -- it's actually a position from the action acquisition. When we acquire companies, they will -- to the extent that they are included from the day they included, if they grow from there compared to previous periods, we will actually also include them in the organic growth calculation. So that's the way we have done it in the past also. So it's a fine-tuning of the guidance we gave in connection with Action. So no changes there.

And then the last question is from Douglas [indiscernible]. What is the main reason for the new financial targets? Due to the acquisition of Action? Or due to the better performance?

Again, Flemming here, I will answer that. We have not -- we gave the new targets in connection with the Action acquisition. So it's basically a result of that. And we have not changed the underlying assumptions for the targets.

All right. That concludes the Q&A part. So all that's left is just to say thank you very much for listening in. And I hope you are excited about the upcoming years as I am, both from a personal perspective and a business perspective. Have a very nice day. Bye.

And that concludes our conference for today. Thank you for participating. You may all disconnect. Have a nice day.