Pinned straw:
Thanks to all those that shared their thoughts on todays announcement. I think you all covered it pretty well. In particular I appreciate @Wini sharing his conversation with management - another benefit of being a member of Strawman.
I'm wondering if todays announcement justifies a 20% lower market cap so like @jcmleng I topped up my RL and SM holdings.
Looking forward to February's report.
Discl: Held IRL 2.25% and in SM
My thoughts, after digesting all other posts. Not a great update at all but posts from @Wini's and @reddogaustin were very helpful.
Topped up at 0.77 as my thesis still remains intact and Mr Market has offered a good top up price.
What Is Not Great
It Does Not Break The Thesis
RTH has been around for a long 25 years, so it has a long track record and reputation.
@Wini's clarification was very important - very reassured by that as it looks like a product gap issue vs a problem-with-the-solution issue - a big difference from my perspective. The clarification around the materiality was also important. Any revenue loss will hurt, but it was not as much as I expected. The bigger impact is reputational rather than financial I think.
The original Stake deal was for 2 years - might be clutching at straws, but this may be a data point vs a 3 or 5 year deal as 2 years feels neither here-nor-there (whenever I was in doubt whether a solution would fly previously, I would mitigate the risk and keep my options by not going full-on with contract duration). This 2 year duration may have indicated that Stake was not 100% sure of RTH. This was my thinking pre-@Wini’s post, the clarification was thus very helpful as it provided good context to back up this thinking.
Am not overly concerned with the timing of management’s selldown - it was done after the LeoVegas deal, both Bet and RTH made the same announcement around Stake today, the reasons and exit do not look illogical. Given RTH’s track record of integrity etc, it would be reasonable to assume non-disclosure requirements were adhered to.
I didn’t have an issue with the lack of FY27 commentary - as this exit happens in FY26, it is right to comment on FY26. But clearly, there is no Stake contract thereafter, so the commentary around other contracts contributing to its confidence in growth trajectory in FY27 was entirely fair I thought. I did not see this to be misleading at all. I thought it was a good pragmatic compromise in words so that unreasonable trading algorithms do not hurt the share price more than is needed.
So RTH lost the Stake contract to BET.
When RTH announced the contract with Stake in 2024 it was the 'most significant to date' and yet in RTH's announcement today it is 'not expected to have a material impact on RAS's financial performance in FY26.' My interpretation is that the Stake provided plenty of opportunity but it never eventuated into the significance revenue it promised. My guess is 1-3m of revenue impact.
Negotiations for the stake deal might have been going on a while, should the recent management share sales been seen in a more sinister light?
Most importantly, does this customer loss signal a weakening of RTH's products or competitive position? I think it's too soon to tell. Non-traditional racing customers like Stake becoming RTH customers and using the full turnkey solution is part of the bull thesis.
Still digesting this one. Interested in other takes.
EDIT: after digesting, my main takeaway is a reduced impression of management quality