Where have you been @mushroompanda ?!

I’ve missed your knowledge and insights. On behalf of the SM community, please up your contribution rate!!

c

Hi @JohnnyM & @Wini

You’ve done a good job covering RAS 1H results today – but just though I’d add a few qualitative facts & thoughts I took from the results & subsequent earnings call:

·        While I agree @JohnnyM with your view that the gloss is taken off the impressive revenue growth by the corresponding surge in operating expenses & development costs (and related balance sheet degradation from capitalisation of tech. development expenses) – I personally believe this is a must-do for any serious outfit in the fast-evolving racing technology & betting industry. If let their tech fall behind – I suspect it could quickly create a self-reinforcing spiral of losing tenders/business opportunities to competitors who have the flashier superior tech. Competitor BET released their new generation Apollo & Global Tote tech last year, which have been well received in market judging by early traction. I think it’s this kind of competitive rivalry that RAS rightly has to respond to – investing in improving their own offering & keeping up with the latest content, services & functionality for their customers – or risk falling off the pace. So while it is costing RAS in the short-term, I believe it must be done to capture their fair share of the substantial growth happening across the industry (especially in the UK & other less mature markets).

·        Interesting to note the surge in investment & costs seen in 1H was said likely to flow into the 2H somewhat, but the “growth in costs should moderate”. Provided growth revenue keeps coming in – this should result in the increase in margin/profitability investors are hoping for – especially as we come into FY27.

·        The Hong Kong acquisition looks like a winner – performing above expectations revenue wise, with the seasonally stronger second half yet to come. Interesting comments about it being seen as a bit of a Beachhead in the high-growth Asia region, with lots of opportunities (especially Japan).

·        One really interesting potential sleeping giant of note was the coming commencement of racing in mainland China in October 2026. Could be a massive opportunity – and one would think RAS’ HK business & HK leadership team could potentially put RAS in an excellent position to be part of this over time.

·        As for the coming revenue headwind from the big Stake contract ending in May 26, interesting to note the LeoVegas contract set to launch around the same time (mid-26). Asked whether LeoVegas might be able to plug this revenue hole & be as big as the Stake contract – they were rather non-committal – but the most interesting aspect was his elaborating that under the Stake contract they delivered it with RBHQ as a partner & had to give away a lot of the revenue to them as part of that, whereas under the LeoVegas deal any tech/content revenue will come to them only (i.e. so contract doesn’t need to be as big, to still generate material revenue).

Anyways – if interested to get a broader feel for all that’s happening in the industry & with RAS’ competitors (always informative) – would encourage anyone interested to tune into Betmakers results (due for release tom) & investor webinar scheduled for next Monday morning.

Disc: Hold RTH & BET – IRL & SM.

Discl: Held IRL 2.89% and in SM

Adding some charts and thoughts to the excellent commentary already posted:

SUMMARY

Very robust revenue and ARR growth, but at the expense of a material jump in expenses (pun intended!), leading to a fall back to a slight Loss Before Tax

Gross margins also dropped as margin dilution from RAS Asia kicks in, but this is a small price to pay for the growth opportunities ahead

“RAS undertook a deliberate period of investment across technology, trading capability and Asian leadership during the half. While these investments moderated near-term profitability, they materially expand the Company’s addressable market and establish multiple long-term revenue growth pathways.” - given the solid Tier-1 customers and the momentum from recent wins, I have no issues with this, but will keep a very close watch of the trajectory of expenses vs revenue

The business focus on (1) maturing its proprietary full racing solution (2) expanded technology capability (3) strengthening of RAS’ UK presence and (4) the establishment of the Asian leadership team for growth (5) launching of new products in the UK and Hong Kong, all make good sense as they position RAS for greater revenue momentum going forward.

REVENUE

• Revenue was impressively strong, YoY and HoH and ARR expansion was above trend - very nice!
• ARR was driven by new contracts, expansion of the Managed Trading Services and strong UK performance, RAS also now has over ~$3m in B2C repeatable revenue annually from Asian publications
• As this is before LeoVegas replaces Stake and a seasonally weaker 1H RAS Asia, this appears sustainable through to 2HFY26
• Includes RAS Asia results for the first time in 1H and the first half year in which RAS operated a fully integrated proprietary racing ecosystem - encompasing data and content, trading technology and Managed Trading Services

EXPENSES

• The sharp rise in revenue has come at a cost - expenses have taken a hit YoY, and continued HoH
• “Expenses grew materially over the first half of FY26. This was partly in line with revenue growth but also reflect the significant investments made to support key growth strategies of trading, technology and Asia”
• Have split the costs into “Front-Office” and “Back-Office” to more clearly see the trend - it is clear that the cost increases have been mostly front-end, validating management’s “Investing for Growth” messaging
• Have no issues with the higher expenses as the payback is coming through from higher revenue, plus there is assurance from the CFO that the bulk of these investments are behind them - will be watching the trajectory of the increases more closely in the coming half’s
• Would also like to understand how use of AI comes into play as RTH seems to be hiring when others seem to be firing software engineers - that surprised me

PROFITABILITY

Gross margin % has taken a bit of a hit - management has attributed this to the inclusion of RAS Asia for the first time, with publications currently operating at a lower margin than the rest of the RAS business.

Statutory PBIT has taken a marginal hit as a result - not unsurprising

Not concerned as, based on management commentary, management is acutely aware of the profitability impact and cost discipline measures are under way as flagged in the Outlook slide, but it would be good to see some progress on this front in 2HFY26.

CASH

As has cash, with both Net Cash from Operations and the overall Cash Balance steadily declining, again, unsurprising given the trajectory of expenses but warrants a close watch.

But key to note the the HK acqusition required ~$4.1m cash in 2HFY25, which accounts for the sharp drop from 1HFY25 to 2HFY25 - the extent of the subsequent fall HoH in 1HFY26 is thus not a worrying one and I am comfortable with that.

Cash on hand was $4.4m.