RAS Technology Holdings Limited (RTH) Earnings Call Transcript & Summary

Good morning, and welcome to Racing and Sports Investor Webinar to discuss the company's first half FY '26 results. On today's webinar, from the company, we have Managing Director and CEO, Stephen Crispe; CFO, Tim Olive; and Strategic Communications Manager, Eliza Yaxley. [Operator Instructions] I'll now hand it over to Stephen.

Wonderful. Thanks, Ben, and thank you, everyone, for joining the Racing and Sports half year presentation. Look, we'll do questions at the end of the seminar, so we look forward to receiving those, and we'll kick it off. So Racing and Sports is trusted by the world's leading racing and industry brands. We process an eye-watering amount of data every day. And this enables us to reliably serve our global customer base with the most data-rich and credible racing products in the industry globally. Some of the brands we serve are there and also some of the high-level statistics, as you can see on the screen, show the size and quantum of the Racing and Sports enterprise as it stands today. Next slide. So in the first half of FY '26, we sustained strong growth across the first half of '26, which has really been underpinned by the continued momentum in the complete racing solution and data and content products. This has been supported by strategic investment in our core trading platform and technologies as well as the expansion of the global trading team. Our investment in Asia continues to perform well and continues to provide a solid base for continued expansion in the region, and there's good momentum in the conversion of deals from the pipeline through the contracts as well. LeoVegas Group has come online. Fairplay and other trading deals have also been signed and the business continues to leverage strong base, its great global reputation and brand and the ability to deliver sustained strong revenue growth and capitalize on the growth initiatives and investments that have been made across the first half and into the second half of FY '26. So with that, I'll hand over to Tim to talk through some of the first half key financial highlights.

Yes. Thank you, Stephen, and thanks for joining us this morning, everyone, to talk through the results for the first half of FY '26. This slide presents some of our key financial metrics for the first half of the year, and I'll just run through the highlights around those. Revenue for the first half of the year was $13.9 million, which was up 38% on the prior year. And we really saw growth across all sort of functional areas, and we were also aided by the addition of the Hong Kong acquisition, which wasn't there in the first half last year. I'm pleased to say that we're on track for our fifth straight year of 30-plus percent revenue growth, positioning Racing and Sports as an ongoing high-growth company. Moving over to our normalized EBITDA. For the period, it was $1.4 million, which was broadly in line with last year. I should note, with our EBITDA, we've normalized the results to adjust for a couple of nonrecurring items that were a little abnormal and won't continue going forward. So that flows through some of our profit metrics. From an ARR perspective, we reported ARR at the end of the period of $24.6 million, which was up 34% on the prior year, so continuing to grow strongly and up about $3 million on the last reported number. It's also important to note that we have a further $3 million in repeatable revenue from our Asian business around publication sales on a B2C basis. So that really means that our exit rate for recurring revenue at the end of half 1 FY '26 is $27.6 million. From a cash perspective, cash at the end of the period was $4.4 million, down slightly on the last reported period, but reflecting that investment we made in a couple of our major growth areas. From a normalized cash flow from operations perspective, we had an normalized inflow of $800,000, which was slightly better than the prior period. This graph shows a time series of half year results for our key financial metrics. It's pleasing to say we continue to achieve strong sustained growth across our revenue categories across all businesses. Revenue has grown strongly over that period, and we've now had 8 consecutive halves, since listing, of strong revenue growth. From an ARR perspective, the revenue here, it is worth noting that the bar does still include Stake that we've announced will not continue beyond May, but it does not include LeoVegas, which is a really meaningful revenue deal we announced through the half year, which will come on board midyear as well. So that's a couple of notable points there. From our profit metrics perspective, we've made a significant investment in capability building in the first half of FY '26. And despite this, normalized EBITDA has remained stable. From a normalized net profit perspective before tax, we've seen a slight decline in FY '26 to date, and this is due to the significant investments we've made in the business to support future growth. It's also important to note that half 1 includes the Hong Kong racing off-season. So we're probably still looking to educate the market around the seasonality of our Asian business. So Hong Kong racing has an off-season in the first half of the year, which means that revenue and profit will be stronger for our RAS Asia business in the second half of the year. It's valuable to note also that our BAU business made a normalized profit in half 1. And also at a group level, our after-tax profit or our after tax business presented a profit after tax on a normalized basis as well. So still some good profit metrics despite a slight decline in the headline rate. Moving into our key business segments and also a geographic breakdown here. Look, it's pleasing to see that the investments in wagering tech and Asia have continued to drive diversification of revenue by jurisdiction, and also to deliver strong growth in our ARR over prior years. Going through our business units, Enhanced Information Services is our most mature segment. It continued to grow strongly in FY '26, up 17% to reach $14.7 million at the end of the period. From a Wagering Technology perspective, it continues to be our highest growth business segment, and it accelerated further in the first half of FY '26, up 67% on the prior year and now contributes a really meaningful $7.5 million of ARR. From the perspective of Digital Publications, Media and Other revenue, we've seen strong growth in this segment, and that's reflected through the Asian acquisition coming online in '25 and it's also been aided by some revenue from the other area of the MTC deal, which we'll talk more about later on. Regionally, the U.K. continued to grow strongly, up 49% on prior year. And our ARR in Asia has now grown to make up 7% of our total ARR. But again, important to note, that doesn't include $3 million of revenue for repeatable B2C publication sales. Thanks, Eliza. I'll throw back to Steve to talk about some investments for growth.

Thanks, Tim. And look, as Tim has touched on that the first half of FY '26 has had a key thematic around the investment for growth and this is really important. So we've done a lot of heavy lifting in the first half in terms of investing for sustained growth within the Racing and Sports global business. Obviously, we bought on Asia, invested significantly there in management, technology and operations. We've obviously included the U.K. team and expansion into the trading, the global trading team in that region as well as here in Australia as well as many other technological advances in terms of our core platforms, our products and other services within the business. So some of those high-growth initiatives have been really prioritized to set the business up for future scale and future growth to really support the revenue road map that the business is committed to, to drive automation and platform enhancements. These are really important in terms of taking some of the inefficiencies that are growing into the business out and replace those with technology advancements, automation, artificial intelligence. Right-sizing the business for scale is really important that we -- as we continue to grow, we make sure that we have the right people, the right expertise and the right skills in the right areas within the business globally. And of course, that strategic resource alignment so making sure the right people are in the right places at all times to enable and facilitate that growth. So I'll hand to Tim to talk about some of the more tangible and visible outcomes of these initiatives that we've had over the past 6 months. Over to you, Tim.

Thanks, Stephen. So with our investment in wagering technology, as you can see here, that's driven revenue growth from an ARR perspective of $3 million or 67% year-on-year. So we're seeing a really strong return on that investment. And we're now in a position where we have our own proprietary full trading suite, including our MTS, our trading platforms and our BetBridge products. So we go forward with a full suite of products that we can sell to the market in that high-yielding wagering technology sector. From an Asian perspective, the investment in the business resulted in a new international simulcast product, which we'll talk more about later, which will be an accelerant of revenue going forward. We've also invested in high-growth digital assets and modernizing our IT platforms. So we think we're really well positioned now to drive revenue and growth going forward for Asia. I'll pass back to Stephen to talk about our business update.

Thanks very much, Tim. So Racing and Sports has continued deploying its complete racing and fully integrated services to clients around the globe over the past half. And some of these include the likes of QuinnBet in the U.K. who are on the Pragmatic Play platform, and they've been expanding the racing offering, which has been a pleasing relationship and deal for us going forward. Stakemate, who are a next-generation proprietary sportsbook platform, who are very much in the social betting and social experience space, Racing and Sports has formed a very meaningful and productive relationship with the Stakemate Group. We've onboarded Bestodds. We've expanded a global Tier 1 client for trading services. And of course, the Stake deal which will be coming to an end in May this year. So going forward, LeoVegas -- this is one of the big announcements in our business update over the past number of months. And this deal is due to go live in 2026 towards the middle of the year. And it really is a milestone international agreement. It's a qualified-for-racing sports data content and managed trading services, which was proven in a global competitive tender process where Racing and Sports was chosen above other competitors within the global marketplace. So it really does establish Racing and Sports as a credible Tier 1 global racing MTS provider. We will be developing and delivering the full integrated racing service for BetMGM UK and BetUK and other brands amongst the group, which is an exciting and lifestyle implementation and deployment process. So something we're all excited about, seeing as it comes live later on in the year. And it really does strengthen Racing and Sports as an independent alternative to incumbent providers and a real disruptor to the established U.K. and global industry for delivery of these fully integrated complete racing services and solutions. Excitingly, we've launched BetBridge into the market, which is our fully managed embedded racing product. And this really targets customers who are after something which is complete turnkey and out of the box, who may not have racing experience or expertise that's required to run a racing product within their business, who also have a short time to get a product in the market. This is a rapidly deployable product that's embedded in a customer sportsbook or platform of any size, whether it be a small Tier 3 all the way up to a Tier 1 operator. It integrates seamlessly on their platform. Racing and Sports manages everything from cradle to the grave with that platform, everything from the front-end UX/UI all the way through to accepting bets, managing liabilities, trading, resulting and all those services that you'd expect. Custom UX/UI can be tailored very quickly. This is all configurable within the platform and the product. And it really does provide an exciting new product in the Racing and Sports armory for customers who really want to get accelerated on racing very quickly that have no expertise or experience in that space. And excitingly Fairplay Exchange in the U.K. are our first customer on the platform, and they've now been operational for several months, and they continue to evolve and grow with them and for their customers as well. So BetBridge is a very exciting product, and you'll see more about BetBridge as we continue to onboard clients according to the pipeline of customers. And the Mauritius Turf Club, so again, this is an industry-based solution which is a new product within the Racing and Sports business that we've been working on for quite some time and sort of builds on work we've done with the GBGB, which we've covered off in many previous presentations. So the MTC had the successful first season, which has gone very well and obviously coming into the second season commencing shortly. The tech platform continues to evolve and mature. The MVP obviously delivered for the first season, but that wasn't the finish line. The finish line certainly continues as we work with the Mauritius Turf Club, creating new features and functionality for their race day office system, their database management, their handicapping framework and ecosystem. We're working on retail solutions, so visual retail solutions and engagement solutions for enhanced fan engagement. We're working on tote systems and vision feeds as well as fixed odds trading capabilities. And also looking at working with the Mauritian turf club around the syndication of their product externally, internationally, as well as import of international racing into Mauritius as well. So there's a lot of work to do for the Mauritius Turf Club project and opportunity, and this will continue over the coming half and years to come. In the U.K. market, strong growth has continued, pleasingly. Some of the key activities, obviously, we've signed the LeoVegas Group deal. The operator managed trading platform previously known as our SaaS platform has continued to be deployed, with the Arkin Group going live in '25. The MTS clients -- yes, clients continue to grow and our MTS capability continues to become sought after as best-in-class and best in market in the region. There are other customers who are continuing to evolve their offerings that we've delivered to them through our MTS and our operator managed platform as well, and the integrations with Altener, which is ongoing for additional work, trading, content, data and digital. So with that, I'll hand over to Tim to talk about some of the key drivers within the U.K. market going forward.

Yes. Thanks, Stephen. Look, it's pleasing to say we've still got a really strong pipeline in the U.K. And we've also got our established deals with our pipeline or our platform provider partners that provide us a sort of continuous range of opportunities to onboard new wagering brands. And we're really strengthening our product to be a real next-gen racing product, including a range of derivative markets, which are very high margin for wagering operators. So it gives us another point of differentiation. From a financial perspective, it's been a real success story for us. ARR is continuing to grow strongly, reaching $8.5 million at the end of the half and with LeoVegas and other deals still to come, and we think we've got really strong growth momentum ahead. Moving over to talk about our Asian business. It's been a big 6 months of strengthening the net foundations for RAS Asia and also progressing the strategy for a sustained period of growth in revenue and profit for the region. As I said earlier, the Hong Kong racing off-season runs from around mid-July to early September, meaning that half 1 is much quieter in terms of revenue and profit outcomes. So we should see that strengthening in the back half of the year. But pleasing to say we're tracking ahead of expectations in the first half of the year despite that off-season. We've put in place a highly credentialed leadership team to drive our RAS Asia business, led by Ronnie Tay. Ronnie is a very well-known executive in the region with very strong knowledge in the space and deep networks across Asia. So we think he's the right person to lead our growth strategy in Asia. Pleasingly, in the first half of the year, we introduced a new international simulcast product ahead of time. This is a completely new revenue source for our RAS Asia business. And this is a multichannel strategy to promote international racing that's imported into Hong Kong, and it's very lucrative to the turnover in Hong Kong. So a very significant revenue source for rights holders. So Racing and Sports provides a new opportunity for them to really promote their product in Hong Kong and hopefully in Asia more broadly to drive revenue growth for them and monetize that opportunity for us. We're also progressing with a tech uplift around our core systems, which will provide enhanced product and also a more efficient business and will allow us to be more agile. So that's a really positive sort of strategy as well. And we've launched some new digital assets in the region, most notably the HKDNForm.com. And I'm pleased to say that traffic is growing very rapidly there, and that will be a real asset for the business going forward and give us an omnichannel strategy that also hits first-time audience and more digital native clients. From an outlook perspective for RAS Asia, racing is set to commence in Mainland China in October '26, and we think this presents an opportunity for us to really access a much broader market and also benefit from the additional race fees that come into Hong Kong. So the Mainland China race meetings will go on top of the existing Hong Kong meetings. So there will be an underlying unitary driver there. Also with the international simulcast, we'll have a full year of selling that new product going forward into FY '27 and the Hong Kong Jockey Club have committed to increasing the number of race meetings they import from international jurisdictions. So we expect this to be a trend going forward for multiple years and will be another unitary growth driver for that business. We've got a really strong pipeline in Asian markets for opportunities around digital, media, data and also sort of promoting for partners in the region. So we remain very positive about our Asian acquisition and are looking forward to a really strong growth going into FY '27 and beyond in both revenue and profit. I'll throw over to Steve to talk through the outlook going forward.

Excellent. Thanks, Tim. The business is still positioned excellently for global expansion and product growth. The global expansion has -- is very well underway now with operations across U.S., U.K., Europe, Asia and emerging territories. It's something we're working very hard on and obviously, the investment in capabilities from platform to personnel, skills and experience within the business will yield results across our global expansion ambition. Accelerating growth through our BetBridge product. This is obviously the newest product within the Racing and Sports enterprise, but takes advantage of all of our assets, everything from our trading capabilities, digital, media, content and UX/UI. This product is sort of a culmination of all those things to enable operators to come on board quickly and rapidly onto the Racing and Sports ecosystem. So we're very excited about that going forward into the future. There's strong commercial momentum around the managed trading services that we've really established ourselves as a credible and desirable operator, whether it be for our operator managed service or our managed trading service, depending on which modality the customer wants to operate. It's really being sought after now across all the features, functionality and information that's available to our customers in those spaces. And obviously, as Tim has touched on, Asia and Hong Kong are obviously continuing to grow and evolve and as we continue to invest in those markets, we'll see more returns and more opportunities that come from those. So again, very exciting. And the range of expenditure initiatives that we put in place over the first half will continue to yield results across the second half of FY '26, and to ensure cost discipline within the business and making sure we're making the right bets for the business growth and also to create shareholder value. So again, something we're going to be taking a very keen eye on going forward. So with that, I'll hand back to Ben to get into questions.

[Operator Instructions] So Stephen, a question for you. So this person noticed you sold some shares recently following the issuance of shares under the company's LTI plan. Could you please provide some color on this?

Sure thing. Thanks, Ben. So the shares were disposed under the company's LTI plan and no other shares were actually disposed of. And this was done to manage tax liability. All executives and myself within Racing and Sports remain highly committed to the growth and the direction of the company.

Is the LeoVegas deal potentially as big as the state contract?

Look, the LeoVegas deal has the capacity to be as big. It's an excellent group. It's a large group of customers. And certainly, they've been operating at a very efficient run rate in the current business, and we believe we can enhance that and scale that through the quality of our products and services and digital assets. So yes, absolutely, it's a customer we're all very excited about, and we can't wait for them to get live.

I might just add to that as well, Stephen, I think important to note that the Stake deal was delivered with RBHQ as a trading partner. So we did pay away a lot of the revenue for the Stake deal through RBHQ, with the LeoVegas deal as delivered fully by Racing and Sports. So we'll retain basically all of that revenue. So from a bottom line perspective, we feel that, that will be likely equal to or greater than the impact of the loss of the Stake deal once it gets to run rate.

Do you foresee additional increases in costs from this point? Or should we see additional operating leverage come through?

Yes. Look, it has been a period of significant investment in the first half of the year. Look, some of that will flow through to the second half, but we are -- as Steve said in the last title of the outlook, we are focused on looking for measures to, I guess, find efficiencies. There's a number of projects in train already, which we think will put downward pressure on costs. So we think that will moderate in the back half of FY '26 and the growth rate should slow significantly going forward in future periods.

I had a similar question here. So just regarding you will obviously need to continue investing in the team and product, but is that expansion undertaken in the first half largely done?

Yes. Look, like I said, it will slow over the second half of the year, but we do think we're through the bulk of the investment uplift in expenditure. So as I said, there'll be -- we'll continue to invest in the business because it's important that we have the best products available to drive growth in the business, but we're also mindful of balancing that with the range of efficiency initiatives as well, which will moderate that growth rate.

It sounds as though your investment in Hong Kong has really fast-tracked the development in this business. Do you see an opportunity to take a similar style acquisition model throughout other areas of Asia?

Look, I think the RAS Asia business, the Hong Kong acquisition gave us a real beachhead in the region. So we think that gives us good access to, I guess, Singapore, Malaysia and other areas. We probably also feel that it is a high-value region with lots of growth opportunities ahead. So we remain open and proactive around other opportunities. Japan particularly is another really high-value market for racing. So we do see the region as a major growth driver. So we're open to both organic and inorganic growth strategies there. But we do feel like we've got a great beachhead and that presents a lot of value and a lot of growth in the medium to long term.

This one has got a few parts to it. So momentum in the business looks good, but can you talk through how you fund the business while it continues to scale? A comment here on additionally is that annualized cash burn for the half of over $2 million doesn't leave a lot of headroom. Are you expecting an inflection point in cash flow after recent acquisitions and new contract wins? How close is the business to achieving meaningful operating leverage and earnings growth? Or should we expect continued reinvestment to restrain earnings growth for some time here?

Yes, there's a few elements to that question. Look, yes, I think we certainly did see, I guess, the impact of investments on cash in the first half of the year. As I mentioned a number of times through the presentation, there's a little bit more seasonality that's been introduced to the business. So we probably expect half 2 to be a stronger result than half 1. So I think that's noteworthy in terms of the cash burn rate. It's not appropriate just to double what you saw in the first half. Look, we think we've got, I guess, a good base of working capital. We do need to continue to invest. We're open to strategic opportunities. And if the right strategic opportunity comes, we'll look to consider our capital management considerations as part of that. But we're comfortable with where we're at, at the moment. But as I said, we are looking for strategic opportunities to grow and we'll package capital into that decision as and when that opportunity arises.

Just a question that's a little -- probably tough to answer, but obviously, that's going to be skewed to the second half. Could you please provide a rough guide on revenue differences from Hong Kong in each half, given seasonality?

Look, we've probably done about 40% of the race meetings in the first half of the year, okay? And 60% of the Hong Kong race meetings in the second half of the year from our international simulcast product. We didn't really kick that off until late in Q1. So I'd expect that to be stronger in the back half of the year. So I think, probably on a ratio basis, that gives you a bit of an indication of what the split might be, although noting that, that international product didn't come on board until late Q1. And hopefully, there will be some other initiatives late in FY '26 and certainly into FY '27. So that gives you a bit of a flavor.

That concludes the Q&A segment of the webinar. I'll now hand back to Stephen for closing remarks.

Thanks, Ben. And look, thank you, everyone, for joining the half -- presentation for Racing and Sports. As you can see, there's been a lot of activity in the first half of the year, particularly around our investment and investment for growth and scale, but also bringing on new customers, releasing new products and managing the pipeline and opportunities through the contract opportunities. So we see a lot of great momentum within the business as it stands today across all regions, the U.K., Asia, Australia and obviously, emerging opportunities around our partnerships and into the U.S. So I guess stay tuned for the next 6 months, and we look forward to speaking with you at the full year and probably sometime in between. Thanks very much.