* Sports margin flat y-o-y as FIFA World Cup...
* ...did not aid the operations as much as we had expected
* Trading 30-35% below peers at 3.8x '26e EV/EBITDA
World Cup did not aid Q2
Q2 was a bit softer than we had anticipated on both revenue and adj. EBITDA, as these were roughly 10% below our estimates. As such, the company also cut its revenue, adj. EBITDA and cash flow guidance. The sports margin was flat y-o-y, and Gentoo's customers were relatively active in terms of offering incentives and bonuses to players. While this is likely to benefit turnover in Q3, it puts some risk on the sports margin for the quarter. That said, we continue to expect a return to growth in H2, but it is likely that growth will be held back by the ongoing deleveraging work.
Estimate revisions
We cut '26e-'28e revenue and adj. EBITDA by 3% and 5%, respectively. This means that our '26e revenue of EUR 100m is in line with the upper end of the updated guidance range, while our '26e adj. EBITDA is just below the mid-point of the guidance. Our new estimates reflect a somewhat more cautious growth outlook, as the deleveraging focus will likely shift the focus from growth to cash flow even more. That said, the comps are becoming easier, and we believe that Gentoo could return to growth if the underlying iGaming market turns more favourable.
Trading at 3.8x '26e EV/EBITDA
Gentoo is trading at 3.8x '26e EV/EBITDA, below Better Collective (7.5x) but in line with Gambling.com (3.8x). This means that Gentoo is trading 30-35% below the average of Better Collective and Gambling.com. Moreover, we highlight that Gentoo is trading at a '26e lease-adj. FCF yield excl. M&A of roughly 25%, as it should be noted that the company is largely focused on deleveraging.