Telematic Interactive – 2025 Q2 individual review – Marginal increase in sales, ambiguity from management

Marginal increase in sales, ambiguity from management

Q2 Individual Results

• Telematic Interactive Bulgaria AD reported 3% revenue growth for Q2 2025 reaching BGN 62.5mln. Casino revenues take the lion’s share of BGN 56mln or 89.5% of the total operational revenues after 3% growth. Sports-betting reached BGN 6.5mln, which marked an increase of 16.7%. The account is 10.3% of the operational revenues. While it is clear that casino games have hit a plateau, Sportsbetting continues to increase its importance in the overall revenue mix and offers the needed growth opportunities.
• The increased revenues are due to a combination of small positive changes in Active clients (3% increase to 97,817), average income per client (1% to BGN 107) and a decrease in the churn rate, dropping from 14% to 9%. The conversion rate, however, dropped slightly from 70% to 68%. The low levels of the churn rate are the result of the implementation of the new CRM system and the education of the staff in effective relationship management.
• OPEX increased more than sales – by 9.4% to BGN 53.2 mln. The largest contributor is Personnel services, which jumped more than 54% to BGN 6.9mln. They are the result of the increased headcount and the raised salaries. The push for Peru, where the setup for a studio for live games also contributed to it.
• The second largest contributor was External services, increasing just 4.8%, but still reaching BGN 31.8mln. In that, Marketing (35% of the account) contributed the most when it increased 25.2% to BGN 10.6mln. Suppliers of games content rose 9.5% to BGN 11.2mln and bank fees increased 15% to BGN 5mln.
• Profitability suffered from the above-mentioned developments. EBIT dropped 8% to BGN 9.6mln, EBITDA dropped 19.2% to BGN 9.8mln and Net Profit tanked 21% to BGN 8.4mln. As a result, the Net Margin decreased from 17.8% to 13.5%.
• Current liabilities dropped in Q2 2025 by 31% to BGN 15mln largely due to the drop in the liabilities for dividends.
• The company distributed a dividend on 03.04.2025 in the amount of BGN 0.35 per share and on 24.06.2025 in the amount of BGN 0.35 per share. At the current price (BGN 22.20), that would be 3.15% dividend yield. They, however, distribute dividends up to 4 times a year, which means that the figure has a chance to pass 6% dividend yield. Note that this is very far from the 10-11% dividend yield enjoyed up to last year.

Commentary:

The sales plateau has been reached and even been mentioned in the report. Sales growth has steadily declined from massive near 20% to low teens to current levels not even covering inflation growth. While this is completely normal and even expected (Bulgaria is not a huge market and saturation point reach is perfectly normal to be expected by a rigorous market player and a sector with steady influx of newcomers), what was not expected last year was the approach of the owners and the management how to deal with the problem.

What Telematic has been doing over the last year has been to take tactical decisions in time when they have to make strategic decisions. Operational optimization, which we see through the CRM system implementation and other minor measures, are tactical steps. Going to another market, geographical or a different gambling activity, would be a strategic step. Those steps, however, require a dedicated budget and effort by both management and staff. Just as the existing business was not built by an accident, but rather a serious and focused effort, the expansion of it to another market, cannot happen by throwing little budgets and waiting to see what happens.

Currently, sportsbetting marks double digit growth, but it is still very small compared to casino games. It is a type of business, which needs completely different staff, which would do customer relations, VIP client treatment, risk management, and most importantly – odds set up by specialists in whatever sport – football, tennis, etc.

Regarding the geographic market expansion – it is entirely unclear what the future plans are. The announcements are that there are some investments in Kenya and Peru, but that is about everything as information. A read through the notes shows that the budget spent for Peru has gone for an increase of the capital of the local company, not for whatever campaign or service. Similarly, the Kenyan operations borrowed USD 300 thousand from a local company. There is no disclosure why the cash was needed or if the company is a subsidiary. All in all, it is impossible to understand how much of the business is due to online gaming and if any of it is done in physical casinos. A geographical breakdown would also be something investors are interested in.

It is understood that in the beginning of the investment cycle a project is not supposed to yield positive results, but it is not clear why there is no information about the revenues – just a note that the activity does not yield positive operational profit. Is it because there are no revenues whatsoever at this point or is it because operational costs exceed sales? The 2 answers would lead to 2 different conclusions about the management and how they have approached international expansion over the last year.

While the company was considered a great investment because of the great capital gain and the superior dividend yield, it is hard to make such statement now. The declining profitability naturally eats the available cash, which eliminates the chances for attractive dividend yield. The lack of a clear expansion vision on the other hand puts the perceived capital gain in question. Additionally, we have noticed a slight shift to less transparency, which is also a warning sign. Once the share buy-back campaign loses steam, considering all other factors equal, stock price is likely to withdraw from current levels. We hope that we see clear signs of improvement in the following quarters.

Full report can be downloaded here.