Telematic Interactive – TIB – 2024 individual review

Efficiency with clients improves, profitability decreases

• Telematic Interactive Bulgaria AD reported 8% revenue growth for 2024 reaching BGN 128.3mln. Casino revenues take the lion’s share of BGN 117.6mln or 91.6% of the total operational revenues after 10.5% growth. Sports-betting reached BGN 10.6mln, which marked an increase of 61.8%. The account is 8.3% of the operational revenues. Тhe growth was due to the Euro cup (in Q2) and the implementation of the new betting platform (Q3 and Q4). Sportsbetting continues to increase its importance in the overall revenue mix and hopefully the management will continue to consider it an important revenue source as it can give them a significant boost if developed properly.
• The main reason behind the increasing revenues is the increased average income per client, the increased active clients per month and that is primarily due to the more than doubled conversion rate. The average income per client went up by 4.3% from BGN 106 to 111 and the conversion rate shot up from 35% to 75%. This was due to the improved product and the more effective marketing targeting specific client segments.
• The churn rate grew to 8% which is attributable to the effect of aggressive seasonal campaigns, which attract, among others, clients which would be unlikely to spend. The churn rate had shot up to 10% by Q3 as a result of many new clients who used single promotions. The implementation of the new CRM system in the later months, however, had a significantly positive impact and it was down to around 3% for each of the last 3 months. This gives confidence that the company has found ways to be more efficient with each client and it would be interesting to see the development in 2025.
• OPEX increased significantly more than sales – by 24% to BGN 106.2 mln (not considering the reevaluation of financial assets of BGN 346,000, which is the reevaluation related to their Peru investments, where Palmsbet Curacao B.V. gave its rights to organize online casino to another subsidiary TIB Consult Sociedad Anonima). The largest contributor is External services, which increased by 13.5% to BGN 65.5 mln but represents 61.5% of OPEX. In that, the 3 largest sub accounts, responsible for 91.6% of the account value are Fees for gaming content, which increased 9.7% to BGN 24 mln (22.5% of OPEX), Marketing, which increased over 12% to BGN 24.1 mln (22.7% of OPEX) and Bank fees, which increased 10.8% to BGN 11.9mln (11.2% of OPEX).
• Personnel expense increased 52.6% to BGN 10.6mln. It was driven by the increased overall compensation to employees, as well as the additional compensation for the started business in Peru.
• Current liabilities decreased in 2024 by 6% to BGN 16mln. The largest contributors for that were the decrease in commercial liabilities from BGN 4.9mln to BGN 3.2mln, which represents the liabilities to the provider of the gaming content, i.e. a company within the group. Additionally, the drop in the liabilities for dividends from BGN 5.2mln to BGN 3.6mln helped the decrease in liabilities. The last announced dividend was from 03.04.2025 for BGN 0.35 per share. It is noticeable that the dividends per share have been decreasing following the decreasing Net Profit and the declining margins – EBITDA margin, Operating margin and Net margin have decreased by roughly 3% and one explanation is that it is due to the investments in foreign markets.Commentary:

  The company faced 2 major problems in 2024 – the enactment at the end of May of which forbids gambling companies from online and TV advertising and the implementation of the new law in Macedonia in October, which allows only one company with at least 51% state ownership to organize gambling games meaning they would be essentially kicked out of the market.

  The first one was weathered easily by the company as they did not rely as much on TV advertising. The implementation of the CRM system showed its positive effect in Q4 and it looks like we can be positive on their ability to target the right clients and target them properly. The second one was supposed to be a strategic problem. However, the size of the Macedonian market (estimated to be at best 10% of the Bulgarian) cannot be a strategic interest by default as the change could only be marginal. They are currently in a legal limbo waiting for an approval for gambling/gaming activity.

  Additionally, the opportunities ahead in Peru remain. As mentioned in previous reports, this market is estimated at 3x that in Bulgaria, so a growth there would have a significant impact on the income statement. Unfortunately, we do not hear specific news about the move there, which is why it is hard to estimate how serious the company is. They have invested in recapitalization of the subsidiary there, but have not disclosed anything further than that.

  Sports-betting, which we mentioned was a great way to diversify and expand the income as people who would be interested in casino games and sport-betting are likely to be different, has shown progress in 2024. While the progress is significant in terms of percentage change (61.8%), it is still BGN 10.6mln. The hope is that they will dedicate staff to these operations and will find the way to increase it significantly.

  Despite the problems, the stock is still one of the best picks on the market so far. It has appreciated 35.85% over the last 52 weeks and the dividend yield they offer is unmatched so far, making it a prime pick among high-dividend yield stocks. The eroded EBITDA and Net Margin are likely to affect the portion distributed for dividends in 2025, but in terms of operations, it still remains a cash rich enterprise with very low debt, operating at 15.8% margin. As we have praised them in the past about their transparency, they continue to have the same superior investor relations practices not shying away from disclosing events and performances in details.

  Full report can be reviewed here.