Acroud AB (publ) has had another quarter characterized by intensive change management where a more offensive growth strategy has been implemented. The strategy entails an increased focus on acquisitions and partnerships to increase the growth rate and enable Acroud to become a major challenger in Sports Betting and in markets such as the US.
THIRD QUARTER 2020
- Revenue amounted to EUR 2,376 (3,467) thousand.
- EBITDA amounted to EUR 961 (1,867) thousand.
- Profit after tax was EUR 327 (1,141) thousand. Adjusted profit after tax (before currency effects) was EUR 162 (816) thousand.
- Earnings per share after dilution amounted to EUR 0.004 (0.015). Adjusted earnings per share (before currency effects) was EUR 0.002 (0.011).
- New Depositing Customers (NDC) declined by -57% (-14%).
- Cash flow from operating activities amounted to EUR 738 (1,567) thousand
PERIOD 1 JANUARY – 30 SEPTEMBER 2020
- Revenue amounted to EUR 9,133 (11,017) thousand.
- EBITDA amounted to EUR 4,199 (6,444) thousand.
- Profit after tax was EUR 1,941 (4,324) thousand. Adjusted profit after tax (before currency effects) amounted to EUR 2,898 (3,027) thousand.
- Earnings per share after dilution amounted to EUR 0.026 (0.057). Adjusted earnings per share (before currency effects) was EUR 0.038 (0.040).
- New Depositing Customers (NDC) declined by -24% (-19%).
- Cash flow from operating activities amounted to EUR 4,806 (6,392) thousand.
SIGNIFICANT EVENTS IN THE QUARTER
- The Company adapted and took measures to create a strong long-term position in the Dutch market. The measures involved an adjustment of the product offering to ensure compatibility with the rules in the Dutch market until the new gambling act enters into force in the first quarter of 2021.
- Net Gaming Europe was renamed to Acroud. The name change was part of the extensive change management initiated when Robert Andersson took over as CEO, which involves an intensified focus on organic growth and entrepreneurship. In connection with the name change, the Company has also changed its ticker symbol on Nasdaq to “ACROUD” with effect from 17 July.
- During the quarter, the Company drew up a growth strategy with the aim of ensuring a more proactive response to future growth and acquisition opportunities.
- The Company has been awarded licences in the American states of West Virginia, Colorado, Indiana and Iowa during the quarter. This is in line with Company’s growth strategy and expansion plan for the USA, with gradual roll-outs in new states.
SIGNIFICANT EVENTS AFTER THE QUARTER
- In October, the Company issued an update on the results for Q3 and also announced the signing of a Letter of intent (LOI) regarding the acquisition of a fast-growing lead generation company within Sports Betting, well positioned for emerging markets such as Latin America, Africa and Asia,
- The Company’s board decided to accelerate the implementation of the growth strategy with the aim of responding more proactively to future growth and acquisition opportunities. The Company is currently engaged in several active acquisition dialogues and its two largest shareholders are in favour of the growth strategy.
- After the end of the period, the Company has also been granted a permit to operate in Michigan, which is expected to be regulated at the end of Q4 2020 and includes Sports Betting, casino and poker.
- At the beginning of November, Acroud signed another letter of intent regarding an acquisition in the United States in order to further accelerate growth plans in Sports Betting. The target company offers betting tips directly to consumers - a business which is not covered by regulations and can therefore be offered throughout the American market.
- After the end of the quarter, the majority of the Company’s sites have been migrated to one and the same platform. This enables more efficient operations and stronger NDC growth, while significantly improving the Company’s opportunities to deal with new acquisitions
CEO’s comments: A Challenger on a Quest
This quarter has also been characterised by a fast pace and extensive change management within the organisation to prepare us for strong growth in the coming years. We are in a time that is challenging in many ways for the whole world, but also a time when opportunities are being created. At the same time, Acroud is in a process of change, which involves all the Company’s sites being managed on one and the same platform. This will create conditions for more efficient operations, while improving the Company’s ability to integrate acquisitions. Looking at the last quarter, with revenue of EUR 2,376 thousand and EBITDA of EUR 961 thousand, this is obviously a disappointment, but at the same time an effect of the change management and the adjustment of the product offering to ensure compatibility with the Dutch market. Ever since I took on the role of CEO of Acroud, I have seen the “rough diamond” and been aware that the first year will be primarily focused on transforming and adapting the Company for high and sustainable growth. The transformation takes time and the impact will not come until 2021.
As previously communicated, the Company’s third quarter has been challenging, which is due to the fact that the previous sharp increase in poker and casino traffic in the period March to May has slowed to a level similar to that before the outbreak of COVID-19. Also, Sports Betting’s recovery is proceeding a little more slowly than expected, and the adjusted product offering for the Dutch market has resulted in a larger decline in revenue than expected. Regarding NDC development, we see a considerable decline in Q3, which is partly due to regulatory effects and partly due to a strategic shift to “higher value key words”. Through this transformation, together with a unanimous platform, we are laying the foundation for future growth.
We are now accelerating growth in other markets and expect to have offset the decline in revenue by about the end of Q4 2020. In connection with the strategy work, further efficiency measures have been implemented, which will bring cost reductions from Q4 2020.
As I wrote in my previous CEO’s Comments, the focus is on building a fast and flexible company with a strong organisation permeated by entrepreneurial spirit and a growth focus.
What I can say is that we have put several important building blocks in place during Q3, both organisationally and strategically, which is expected to drive profitable growth going forward. During Q3, we diversified our revenue streams by actively working on up-selling and value-adding services, which resulted in +10% of our Q3 revenue being generated through these revenue streams which is also scalable via acquisitions. At the same time, in Q4 it is expected that we will have completed a 2-year-long process of migrating all the Company’s sites to one and the same platform. All in all, this makes us feel geared up for the future and ready to “nail” successful acquisitions.
New strategic direction and intensified acquisition strategy
During Q3, the Company has implemented a more offensive strategy, which the Company’s main owners support. The new strategy involves an increased focus on acquisitions and partnerships to increase the growth rate and enable Acroud to become a larger challenger in the market. During the last two years, we have built a scalable infrastructure adapted to an acquisition strategy, and our management team has extensive M&A experience from acquisitions and integrations - we are ready!
In summary, the new strategy means a focus on the growing US market and Sports Betting. At the same time, we will continue to build volume in the present core business. The strategy will be implemented both organically and through acquisitions.
In order to create conditions for future growth and free up capital for operating activities, it is also a priority to ensure continuous optimisation of the Company’s capital structure. We are looking at opportunities to strengthen the Company’s balance sheet in order to increase the Company’s flexibility and create conditions for acquisitions.
In October, we signed a Letter of intent (LOI) regarding the acquisition of a fast-growing lead generation company within Sports Betting, well positioned for emerging markets such as Latin America, Africa and Asia. The transaction is expected to be finalised in mid-November. This is a transformative acquisition, in which we strengthen our underlying operations, and it accelerates growth in strategic focus areas such as Sports Betting and emerging markets
”Intensified focus on the North American market”
We have signed a further letter of intent at the beginning of November regarding the acquisition of fast-growing company within Sports Betting, which is well positioned for the American market. What is interesting about this company is that it generates a completely new type of revenue stream for us. The company charges its users for betting tips via a number of sites and has no affiliate traffic at present. It is noteworthy that this business does not require a licence and can be conducted legally in all American states.
We see several opportunities to refine the company’s current business model. The potential acquisition will further strengthen us in Sports Betting and gives us a more attractive position in the American market, which is important to us. The acquisition is expected to be completed during the fourth quarter and will be settled partly in cash and partly in shares.
USA status and future growth plans
In line with the growth strategy and the Company’s expansion plan for the USA, Acroud has been awarded five new licences in the American states of Michigan, West Virginia, Colorado, Indiana and Iowa. We also expect to be granted licences shortly in Pennsylvania and Illinois.
Driven by our dedicated USA team, we see an increased traffic flow in North America, and at the same time we have intensified work on licence applications, which together create the conditions for a growth journey with our present assets as more states “open up”.
We are heading for an exciting 2021
I would like to emphasise that, even though our third quarter has been challenging in financial terms, my assessment is that we have put central building blocks in place for the “Acroud journey”. Based on previous experience and positions at growth companies in the industry, we have a lead time before shareholder value is created. Our team is forward-looking and with a combination of organic growth and really good strategic acquisitions, we are ready to take Acroud to the next level during 2021.
We now continue writing an important new chapter in the Company’s history. I look forward to continuing Acroud’s growth journey together with a world-class team. Together we will build a stronger and more profitable company with a strong culture, which will benefit our customers, end users, suppliers and shareholders.
Join the Ride!
Acroud’s CEO Robert Andersson and CFO Gustav Vadenbring will present the report at 10:00, followed by a Q&A session. The presentation will be held in English and can be followed at www.acroud.com or via https://tv.streamfabriken.com/acroud-q3-2020
To join the presentation by phone, please dial in using one of the following numbers:
From Sweden: +46856642695
From the UK: +443333009031
From the USA: +18335268384
After the presentation, the webcast and the presentation slides will be published on www.acroud.com where they can be listened to and viewed on demand.
This information constitutes inside information that Acroud AB (publ) is required to disclose under the EU Market Abuse Regulation 596/2014. The information in this press release has been published through the agency of the contact persons below, at the time specified by Acroud AB’s (publ) news distributor Cision for publication of this press release. The persons below may also be contacted for further information.
For further information, please contact:
Robert Andersson, President and CEO
+356 9999 8017
Gustav Vadenbring, CFO
+356 9967 6001
About ACROUD AB
ACROUD owns, operates and develops high-quality comparison sites, mainly in iGaming affiliation, for the purpose of helping our partners by channelling high-quality users to the Company’s customers – primarily iGaming operators. Through the sites, ACROUD generates high-quality users, primarily to global iGaming operators. The Company, which was founded in 2003, has just over 70 employees and is headquartered in Malta. The share (ACROUD) is listed on Nasdaq First North Growth Market. Certified Adviser: FNCA Sweden AB, [email protected], +46 8 528 00 399