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

Good morning, everyone, and thank you for joining us at such short notice. The purpose of today's call is straightforward. We want to provide some context around the developments in Brazil and the decisions we announced this morning and then use the majority of the call to answer your questions. These developments are very recent, unprecedented in nature and continue to evolve. As a result, there are still important areas where visibility is limited and where we simply do not yet have all the answers. We are navigating the situation as carefully and responsibly as possible based on the information available to us today, while remaining prepared to adapt as the legal, regulatory and commercial picture develops. As outlined in our announcement, on Friday, the Brazilian government introduced a provisional measure imposing a nationwide ban on fixed-odds betting covering both sports betting and online gaming. This is an abrupt and significant change to a market that has spent the past years transitioning into a federally licensed taxed and supervised framework. The ban is enforced today, and we are acting on that basis. At the same time, it is important to recognize that this is not necessarily the final regulatory outcome. The measure must subsequently be considered by Congress and can be approved, materially amended, rejected or ultimately cease to have an effect. We are, therefore, dealing with a situation where the immediate impact is clear, while the short, mid- and longer-term outcome remains highly uncertain. Against that background, we are taking a prudent approach. Before Friday's announcement, our Brazilian business was trending towards approximately EUR 45 million of revenue in 2026 or around 12% of expected group revenue. We have estimated the revenue impact to be approximately EUR 15 million during the remainder of the year. This includes the full impact from the measures implemented on Friday as well as Q4. Furthermore, it includes all other associated effects. The Brazilian operations currently have an annual cost base of approximately EUR 10 million. In addition, Better Collective has incurred substantial costs and investments related to establishing and adapting the business in Brazil, including bringing operations onshore, market establishment and regulatory compliance, product development and other initiatives required to operate in the local market. Should the current restrictions remain in place for an extended period, Better Collective will assess and implement appropriate mitigating measures across the Brazilian operations as well as indirect functions to reduce the financial impact and adapt the cost base to the changed market environment. Our revised 2026 guidance assumes no further betting and casino revenue from Brazil following the implementation of the measure. Importantly, we are therefore not relying on a political, legislative or judicial reversal in our 2026 outlook. For 2027 and 2028, we currently do not have sufficient visibility to provide financial targets that we can stand behind. The outcome will depend on the legislative process, how our partners respond and the extent to which we can adapt our operations and cost base. We have, therefore, decided to suspend our 2027, 2028 guidance. We have also suspended the execution of our share buyback program. This is a precautionary capital allocation decision intended to preserve financial flexibility while visibility remains limited. Operationally, we are currently focusing on adapting to the new regulation and living up to the regulation and supporting our partners. We remain strong supporters of a licensed and regulated betting market in Brazil. In our view, removing licensed operators does not remove consumer demand. It risks moving demand towards illicit offshore operators where player protection and regulatory oversight are significantly weaker. Brazil is an important market for Better Collective, and we are not underestimating the significant of these developments. At the same time, we believe we have taken a transparent and correct approach to the financial implications while preserving flexibility as the situation develops. And with that, Flemming and I will now take your questions.

[Operator Instructions] We will now proceed to our first question. And our first question comes from the line of Sebastian Grave from Nordea.

Jesper, Flemming, Sebastian here from Nordea. Thank you for stepping up on such short notice and standing here to take questions. My first question would be around the Brazilian operation as of today. Maybe if possible, you can talk around sort of the overall revenue mix in the market, stated in the new guidance that you expect no further betting and casino revenue from Brazil. But on that formulation, I suspect that you have other streams of revenue currently in the Brazilian market. So could you talk around sort of the overall revenue mix as of now in the Brazilian market, that would be helpful.

Yes, Flemming here. I think for the vast majority, you can assume that the Brazilian revenue is related to the betting activities. And also the temporary ban also goes for advertising towards betting. We have minor other revenue streams. But I think for the context, it is mainly related from our -- you can say, affiliate marketing operations in Brazil.

Okay. And with that Flemming, I guess, the message is also that if the regulation remains as it is as per today, then you will have no future in the Brazilian market. That's correct?

Yes. I think if this -- you can say situation comes to a total ban, it will not be legal to operate with the licensed operators. And as you know, we only work with licensed operators and according to local regulations. So that's correct.

Sure. And then on the '26 guidance, I note a more or less 100% drop-through from revenue to EBITDA, meaning sort of no offsetting measures here in the short term at least. What should we read into that? And more broadly, can you talk around what sort of offsetting measures do you have to sort of adjust the cost base here in the short, medium term?

I think, first of all, there will be many or there are many possible outcomes of this. So clearly, we are also working towards, you can say, and also expect that and hope that there will be a future market for betting once the election has been completed, and that is not within our hands. But clearly, we want to can say, also be present in that market when if that comes back. Right now, we have just given the numbers. And of course, if this becomes a permanent situation, then we need to both, if you can say, adjust our business in Brazil, but we also need to adjust our business in general as we have done in other similar situations where market conditions have changed.

But I guess the follow-up question is, Flemming, how patient are you on this development? Because I mean, today, as I read the announcement here, it's a EUR 45 million revenue market with EUR 10 million of annual cost, meaning a EUR 35 million EBITDA market. In a scenario where you all of a sudden have no revenue whatsoever, but still a cost base, this could even be a negative EBITDA market for a period of time. So the question is, how patient are you to get more clarity on the development? And when is enough is enough, and when will you pull the plug, so to say?

Sebastian, Jesper here. I think it's important to stress that this came out Friday night, and we have then spent the weekend to basically react and send out what you have seen to give some clarity towards the shareholders of Better Collective. And let me just allude to the fact that like there are multiple outcomes of this. We have an election on Sunday, 4th of October, so very near term. I cannot help also to view this move by President Lula in light of that election. And I think -- and you can be assured that, obviously, we will take swift action for whatever happens and how it pans out. I think we have demonstrated that in the past that we do take action when market condition changes. But it's also very, very recent, and we have an election on Sunday. So we are monitoring this situation carefully now and we'll, of course, make appropriate actions and decisions along the way. But for now, it's very, very recent. And obviously, we are also focused on being in close contact with partners and supporting them in a decision which we think is or is completely unprecedented, where you are removing the option for operators who have complied fully with legislation, paid millions in order to get a license to prepare them for this market, had acquired 5 years licenses and now all of them just being removed. As I also stated just before, clearly, there's demand for this industry, and that demand is not going away. So it's a very unfortunate situation. We will monitor it very, very closely and take necessary actions as we get more knowledgeable about the outlook for the future.

And our next question comes from the line of Poul Jessen from Danske Bank.

I don't think I have more question to the operation. I was just thinking about what could happen to your balance sheet. You have lots of intangibles and you made investments in the Brazilian market. So how much risk is there in case that -- the worst case, how much could we see on the write-downs of goodwill and other intangibles?

Yes. Again, Flemming here. Thanks for the question, Poul. I think we -- you can say, again, we'll repeat, there are so many outcomes of this, and it's very recent. So it's way too early to get that, you can say, consideration. So we will, of course, come back on that if pending developments in the market. But for now, we cannot give any further guidance to that.

It's just to get an indication on you have to lose something on the EBITDA level, but there must be a reduction on cost inflation, make a write-down of intangibles, seeing how much you to -- how much is or depreciated?

There are many, many factors going into that. So I think -- I understand the question, but I think for today, it's just too early to make that assessment.

And our next question comes from Hjalmar Ahlberg from Redeye.