Telematic Interactive – 2025 Q4 individual review – profitability hits historic low

Telematic Interactive Bulgaria AD

Profitability reaching historic low

Q4 Individual Results

• Telematic Interactive Bulgaria AD reported 5% operating revenue growth YoY for Q4 2025 reaching EUR 67.1mln. Casino revenues take the lion’s share of EUR 60.2mln or 89.7% of the total operational revenues after 0.2% increase. Sports-betting reached EUR 6.85mln, which marked an increase of 25.7%. The account is 10.2% of the operational revenues. On a Q4 2025 vs Q4 2024 comparison, casino games increased 2.2%, while sports betting decreased 0.4%. This and the overall dynamics suggest that the casino games have hit the plateau, while the growth in sport-betting was due to a favorable period earlier in the year. As such, the management does not put strategic focus on it.
• It is increasingly more difficult to estimate the reasons for TIB’s performance. The active clients increased marginally by 0.2% to 96,499 per month and the average revenue per client increased 2.1% to EUR 57.8. According to the management, this is due to the improved bonus campaigns. However, considering annual inflation was ca. 5% according to the National Statistics Institute, and the salary expense indexations tend to be at least following the inflation figures, that would mean that a lower part of the disposable income of their clients is attracted. Which would question the quality of the results of the CRM system, which they praise so much.
• Conversion rate drops 15% to 60% and the churn rate drops 6% to 6%. These rates are good – the conversion rate is still high and churn rate seeing such drop is great news. However, as discussed before, these are tactical improvements, rather than strategic choices.
• OPEX increased more than sales – by 7.4% to EUR 58.5 mln. The largest contributor is Personnel expense, which jumped more than 31.9% to EUR 7.1mln. They are the result of the increased headcount and the raised salaries.
• The second largest contributor was External services, increasing just 4.4%, but still reaching EUR 34.9mln. In that, Marketing (40.5% of the account) contributed the most when it increased 14.8% to EUR 14.2mln. Suppliers of games stayed at EUR 12.1mln and bank fees dropped 6% to EUR 5.7mln.
• Profitability continued its downfall. EBIT decreased 22.7% to EUR 8.6mln and EBITDA dropped 22.1% to EUR 8.9mln. Both EBIT and EBITDA margin decreased by 4.15%. Net Profit had even stronger effect decreasing by 24.9% to EUR 7.8mln and Net Margin dropping 4.2% to 11.6%.
• Current liabilities increased 26.9% to EUR 10.4mln because of the increase in the Liabilities for Investments account, which is not disclosed further.
• However, from Investments in subsidiaries, we can see that there was bigger spending on Telematic Sport (development of a platform for sportsbetting) for EUR 3mln and the Peruvian subsidiary for EUR 1.75mln.
• The company distributed a dividend on 03.04.2025 in the amount of BGN 0.35 per share, on 24.06.2025 in the amount of BGN 0.35 per share, on 07.10.2025 for BGN 0.28 per share and on 22.12.2025 for BGN 0.25 per share. The total amount for the year would be BGN 1.23 per share (EUR 0.63 per share) and at the last announced date (22.12.2025) that would amount to 6.24% dividend yield.

Commentary:

A year and a half ago we mentioned that there were signs of a sales plateau approaching (Q2 2024 review). It was a logical development considering the existing capabilities and the silence about the upcoming expansion in other countries. 18 months later the main problems are still there:

• No clear expansion strategy for other geographical markets.
• No clear breakdown of activities across markets. No understanding of the revenues / expenses in those markets.
• No focus on expansion of sports booking business.
• No clear breakdown of business in physical locations (casinos) vs virtual (website, games, etc).

Prior to their IPO in 2022, the company made it clear that there were 2 main sales points:

• There would be international expansion, targeting Ukraine at the time.
• There would be a generous dividend policy aiming to distribute up to 40% of the Net Profit.

Clearly, the Ukraine plans had to be altered considering the conflict there. Over the next quarters, the idea of expansion in Peru surfaced, as well as that there were some activities in Kenya. While both locations are very different from the home market Bulgaria, they each offer potential markets that are 1.5x-3x that of Bulgaria (considering population and disposable income per capita). If we assume that TIB is very close to reaching saturation point now (evident by the marginal increase in revenues), those markets could drive the overall revenues from the existing EUR 66mln per year levels to EUR 200mln-EUR 350mln per year depending on how successful they are.

In the absence of sales growth, we noted that the next thing to see would be the erosion of profitability. EBITDA margin went steadily from almost 30% in 2021 to the existing 13.23%. Similarly, Net margin decreased from 26.82% to 11.59% for the same period. 2025 was the first time when Net Profit dropped so significantly in real terms – nearly 25% to EUR 7.8mln.

Needless to say, soon there will be not enough cash to support the dividend policy. Dividend yield fell from the 10-12% levels post IPO to 6.24% in 2025. Surely, one of the reasons was the stock price appreciation as the company was clearly one of the most attractive dividend stocks out there. The stock price, however, decreased over the last year, clearly indicating the lack of trust in the market. The decreasing Net Profit will gradually affect the available cash and the reserves, where both accounts have shown downward trends already.

If no major changes are made, we are likely to witness further drop in the stock price, as much as 25% from current levels. While it sounds very negative, using the data for the previous year and the same approach, it would show downside of 11.5% and a target price of EUR 10.14 for the stock price now. Current stock price is EUR 10.10 and the 52 week price change has been a 11.81% drop. While not perfect, the approach gives good approximation.

It is obvious that something must change. We would like to see concrete steps for expansion – geographical and business-wise, as well as better reporting on the efforts and the results in the different markets. Last quarter there were rumors about pursuing acquisitions in other European markets. So far, no official statements have been released. Instead, we see optimization steps. Cost savings and process optimization is not strategy, it is tactics. As Sun Tzu wrote – Tactics without strategy is the longest path to defeat.

Full report can be downloaded here.