Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RAS Technology Holdings Ltd (ASX:RTH, Financial) reported a 38% increase in total revenue for FY24, reaching $16.2 million.
- The company's EBITDA grew by nearly $2 million, totaling $1.9 million for FY24.
- Annualized recurring revenue reached nearly $19 million by the end of FY24, showing a 43% growth.
- The company achieved its first before-tax profit of $187,000, a significant improvement from the prior year.
- Strong growth in digital advertising and key strategic deals, such as those with stake.com and Playbook Engineering, have bolstered the company's momentum.
Negative Points
- Despite the positive financial metrics, the company only saw a slight reduction in cash balance, ending the year with $8.3 million.
- The company's operating cash flow, although improved, still indicates a need for better cash management.
- The integration and impact of new deals like stake.com and Playbook Engineering have yet to fully materialize in the financials.
- The company faces challenges in maintaining and growing its market share in a highly competitive industry.
- There is uncertainty around the need for potential equity raises to fund future acquisitions.
Q & A Highlights
Q: IRR accelerated into year end and this new partnership took off. Could you provide a bit of a feel for how this helps leverage in the current half and next?
A: Tim Olive, CFO: It certainly helps the business considerably. Obviously, that flows to ongoing revenue and all of our deals are mostly in core areas, so they're generally high margin producing. The market will assign that term profitability at year end was quite a bit better than the first half results. That's a fairly good indicator of that momentum. We expect with that higher revenue base running off of a cost base that is growing at a lower rate should help us deliver improving revenue and profits into FY25. So we see it as very positive.
Q: How does the Tom Waterhouse deal impact the race book HQ supply deal? Is it a long-term commitment or something you would tend to bring in-house?
A: Stephen Crispe, CEO: In terms of Racing and Sports and RBHQ, they are still good partners of ours, and we will continue to work closely on site deals. Waterhouse VC offers several opportunities, covering data content, trading services, digital media, and potentially other services. MTS is a hot product globally, and it may feature in future deals. We have built our own capability internally for our SaaS platform and trading manager platform, and we will work with our partners to deliver the best service to our customers.
Q: How does the deal with Tom Waterhouse differ from other deals, especially reflecting on the performance of that market over the last 24 months?
A: Tim Olive, CFO: The Tom Waterhouse deal is very much a performance-based deal. The value creation comes through revenue milestones and business outcome milestones. We have modeled extensively the value creation from each of those achievements for our existing shareholders, and it is highly favorable. The Tom Waterhouse VC fund has grown considerably over the last five years, and they now have a very extensive global network. We think that allows them to enable quite a lot of value for us.
Q: Do you expect to be free cash flow positive in FY25?
A: Tim Olive, CFO: We don't tend to provide guidance, but there are a lot of data points here that tell you we are very much on that trajectory. We got very close to that in FY24, and certainly the last part of the year when that deal flow came online, in isolation, showed far better results than what we're talking about on an annualized basis. So, there's every reason to expect that would be the case in FY25.
Q: Regarding the acquisition, what has driven the envelope to require an equity raise completed?
A: Tim Olive, CFO: It's quite early stages of that acquisition, so we'll be fairly light on detail. At this stage, we're not expecting that it would require an equity raise. But, as I said, it's early days. We'll work with the target to explore that opportunity. But certainly at this stage, we're not expecting to have to go to an equity raise.
Q: How does the partnership with pragmatic play and other deals impact your growth?
A: Stephen Crispe, CEO: Pragmatic play is a very new deal, and we have been working on integrating and implementing our racing product for quite some time. Given their stature as a premium provider of services to the wagering industry globally, it will be a positive growth story for them and for us. Playbook engineering has grown larger than expected, reflecting the value add of our racing product in the UK market. We expect continued growth and upsell opportunities in data services and digital media.
Q: How do you reconcile the opportunity in crypto sportsbooks with your role as a rights provider?
A: Stephen Crispe, CEO: Crypto sportsbooks are growing in number and prominence. Racing and Sports, as a provider to the industry for over 20 years, will work with any operator or sportsbook willing to sign appropriate agreements with rights holders. The industry is evolving, and rights holders are embracing change. Crypto is a mature form of currency, regulated in several markets, and we aim to play a pivotal role in educating and growing the market.
Q: What is the nature of the commercial agreement with Tom Waterhouse?
A: Tim Olive, CFO: The Tom Waterhouse deal is performance-based, with value creation coming through revenue milestones and business outcomes. We have modeled the value creation extensively, and it is highly favorable. The Tom Waterhouse VC fund has grown considerably, and they have an extensive global network. We believe this will enable significant value for us. The deal is balanced, providing a win-win for each party and rewarding significant value creation.
Q: How does the Tom Waterhouse deal impact your existing partnerships?
A: Stephen Crispe, CEO: We will continue to work closely with our existing partners, including RBHQ. The Waterhouse VC deal offers several opportunities, covering data content, trading services, digital media, and potentially other services. MTS is a hot product globally, and it may feature in future deals. We have built our own capability internally for our SaaS platform and trading manager platform, and we will work with our partners to deliver the best service to our customers.
Q: What are your expectations for the UK market?
A: Stephen Crispe, CEO: The UK remains a massive growth area for us. We are disrupting the market with our value add, and we have a great team on the ground. We are working with rights holders, partners, platform providers, and customers. We expect a lot of growth coming out of the UK and Europe, and we are executing strategies to drive fast and strong margin growth in those markets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
