Telematic Interactive – 2025 Q3 ind review – Further decline of profitability

Further decline of profitability

Q3 Individual Results

• Telematic Interactive Bulgaria AD reported 5% operating revenue growth YoY for Q3 2025 reaching BGN 94.9mln. Casino revenues take the lion’s share of BGN 85.2mln or 89.8% of the total operational revenues after 0.6% decline. Sports-betting reached BGN 9.6mln, which marked an increase of 40.5%. The account is 10.1% of the operational revenues. It is obvious that casino games have hit the plateau and Sportsbetting increases its share in the revenue mix, which can be the source of future growth.
• It is increasingly more difficult to estimate the reasons for TIB’s performance. The active clients increase of 4% to 98,219 per month definitely played a role, as well as the decrease of the churn rate from 10% to 6%. Both of these can be the result of the new CRM system. In the same time, the average revenue per client dropped slightly from BGN 109 to BGN 107 which they attribute to the decreased income of each client. The conversion rate, however, dropped from 74% to 62%. It could also be the result of the widely spread negative sentiment of the general public towards gambling activities, but still it indicates inefficiencies in the marketing strategy to target clients appropriately.
• OPEX increased more than sales – by 7.9% to BGN 81.5 mln. The largest contributor is Personnel services, which jumped more than 47% to BGN 10.5mln. 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 3.6%, but still reaching BGN 49.2mln. In that, Marketing (41% of the account) contributed the most when it increased 14.7% to BGN 20.1mln. Suppliers of games content dropped 2% to BGN 16.9mln and bank fees dropped 9.3% to BGN 8mln.
• Profitability continued its downfall. EBIT dropped even more than in Q2, plunging 23.2% (19.8% in Q2) to BGN 13.7mln, EBITDA sank 22.5% (12% in Q2) to BGN 14mln and Net Profit tanked 23.9% (21% in Q2) to BGN 12mln. As a result, the Net Margin decreased from 17.2% to 12.7%.
• Current liabilities increased in Q3 2025 by 7% to BGN 20.4mln largely due to the drop in the liabilities for investments, which is not disclosed further.
• 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 and on 07.10.2025 for BGN 0.28 per share. At the current price (BGN 21.60), that would be 4.54% dividend yield. They, however, distribute dividends up to 4 times a year, which is not clear if it is going to happen this year.

Commentary:

It is evident that sales plateau has been reached. The casino games revenues marked an actual decline and the growth was due entirely to the growth of the “baby” business line of sportsbetting. We have covered the problem in previous reviews criticizing the management on their lackadaisical approach to rely on a single business line and put the major expansion options on hold.

While substantial effort was made to present the company with large plans to expand both in terms of business lines (increase the importance of sportsbetting) and in terms of geographies (plans were made for Macedonia, Peru and Kenya), the reality is that we see little effort in either of these directions. The negative sentiment in the society in Bulgaria towards gambling institutions is increasing on social media and TV shows and this cannot have positive impact on the business. On the contrary, it should be telling the management that novel solutions should be searched for, not perfecting the existing operations.

The tactical decisions to implement a new CRM system or experiment with new casino style approaches have had mixed results. They, by definition, cannot offer significant changes – i.e. expected improvement of tens of percentage points (e.g. 10%-20%). Telematic Interactive needs an approach, which can offer radically new opportunities, which have the potential to expand revenues several times. Sadly, even profitability has suffered, which begs the question whether the measures or the organization of the processes is adequate.

Sportsbetting has reached for the first time relative share of ca. 10%, which is a rather significant increase compared to the nascent volumes a year or two ago. The problem with this business line is that it requires an entirely separate and different organization and using the same people, who maintain the casino games will likely result in ineffective operation. Furthermore, if the approach is to look in Bulgaria as the only market, this would also put a significant cap on the opportunities.

This is why the expansion in foreign markets is so vital. Countries with populations that are several times that of Bulgaria can offer the opportunities. The communication with the investors about those plans, however, is far from ideal, to the point that one asks the question whether those plans are real or they are just talk. It has been a year an no clear announcement of the performance on those markets has been made, only sporadic notes about capital increases and increased labor costs.

On the other hand, the attractiveness of Telematic came from the perspective that it was a high-yield stock. So far they have distributed dividends 3 times this year and at the 3rd one in June the cumulative dividend yield stood at 4.37%. While this looks fine for the Bulgarian market, it is far from the 10%-12% band last year. The reality is that with the decreased EBITDA they cannot afford to support such dividend yields. The even sadder reality is that if no changes are made, 2026 will be a year with even lower dividend yield where maybe even 2% will be impossible to reach. Also, looking at the Expenses for external services in the Income Statement, one might wonder if the presence of related IT companies, which are responsible for the IT and gaming solutions, is not a way for the majority owners to extract additional cash from the operations.

The share price has been fairly stable over the last few quarters to a great degree because of the share buyback programme. Its mandate, however, ends in Q4 2025. What are the investors going to get after that? Is this share buyback programme going to be renewed if there are no opportunities for capital gain? Since dividend yield will likely decrease, then what is going to be attracting investors to this stock? Clearly, Telematic Interactive needs to review its strategy and create a story through its actions to make itself again the hot pick it once was.

On a positive note, latest talks with management and rumors have indicated that management is pursuing acquisitions of companies in European countries. Such move can solve both the business line problem (should they have greater expertise and developed functionalities in sportsbetting) and open the company to larger markets. The CRM system could possibly bring greater value to a larger pool of clients and we will certainly be looking forward to read about these developments in the following quarters.

Full report can be downloaded here.