Better Collective CEO: Playmaker HQ acquisition has been a “steep learning curve”

Better Collective CEO Jesper Søgaard has admitted the acquisition of Playmaker HQ has “not met expectations” after the affiliate giant announced it had renegotiated the purchase price from $54m to $23m.

Søgaard’s comments came during an earnings call following release of the affiliate’s Q2 results, in which the extent of the acquisition’s underperformance was outlined.

Over the course of the second quarter of the year, Better Collective reached an agreement with the founders and former owners of Playmaker HQ to renegotiate and settle the earn-out fee.

In July 2023, when the deal was finalised, the Danish affiliate agreed to a fee of $54m (£41.1m), $15m of which was to be paid as an upfront cash consideration alongside a performance-related earnout payment of up to $38m over the next three years.

Instead, the final price is now $23m, a $31m drop from the fee agreed just over 12 months ago. 

This restructuring of the deal stems from a disappointing return on Playmaker HQ in its first year under Better Collective’s control.

As part of the firm’s results release, the affiliate explained: “Better Collective remains very optimistic about the future of the brand, with the commercial team being replaced resulting in a ramp up in performance.

“Based upon the current commercial pipeline, the performance is expected to be lifted during the second half of 2024.”

Søgaard echoed a similar sentiment while speaking to industry analysts, conceding: “It is of course unfortunate that it has not met our expectations and forecast.”

The CEO explained that the acquisition has brought plenty of positives, including Playmaker HQ’s “huge following”,  the podcasts and shortform videos it produces as well as staff talent, but shed light on where the issues have arisen with the Florida-based firm.

He remarked: “Our commercial development fell short of our expectations and impacted our North American performance this year. We as a group have been through a steep learning curve and our optimism for Playmaker HQ remains high.

“The issue has been with commercial sales of those content formats. [There were] high expectations on price from the seller, which obviously was based on high expectations on sales from the seller.

“We used that in order to make a very big earn-out so the seller could get the price they wanted, but also [Playmaker HQ] had to deliver on the ambitious sales plans they had and, unfortunately, that has not been the case.

“We have now changed the sales team – it’s sort of steered by Better Collective – we have also inserted a director for the company coming from the Better Collective organisation and now we do believe we can achieve that plan, but it’s going to be with a year’s delay.

“We are really excited about the potential of Playmaker HQ. I would like to stress that I would definitely do this acquisition again,” he added.

Earlier on in the call, Søgaard went into more detail on how the affiliate views the state of the North American market, where Playmaker HQ has failed to make its mark.

After being pressed for comment on what was a mixed Q2 in its North American market, that included revenue share dropping from 29% to 26% and a total revenue figure of €26m, Søgaard issued his assessment on the landscape Stateside.

“Starting on the North American market as a whole, it has been volatile, and we have mentioned before it’s a different animal compared to what we’re used to, given the fewer market participants,” the CEO noted.

“With that said, we work with all major players and thereby, plenty of competition, which is basically what will enable us to thrive in such a landscape.”

Meanwhile, Better Collective’s group revenue was recorded at €99m, a 27% year-on-year (YoY) rise and a €21m increase on the €78m generated in the same period last year.

EBITDA remained flat YoY, meeting internal expectations to sit at €29m alongside a margin of 28% which marks an eight-percentage point decrease when compared to Q2 2023.