Azerion publishes Interim Unaudited Q1 2022 Results
May 31, 2022
Strong growth and delivery while going public
Highlights of Q1 2022
- Net Revenue of over EUR 94 million, more than doubling Q1 2021, mainly driven by strong growth in the Platform segment.
- Adjusted EBITDA of nearly EUR 6 million, up 118% compared to Q1 2021, primarily boosted by the Premium Games segment.
- Expanded the partnership with Ubisoft, adding 10 exclusive titles, following the successful development, release and distribution of Hungry Shark Arena
- Completed the integration of Habbo Avatars collection, offering unique playable Avatars in the Habbo metaverse.
- Announced the acquisition of digital marketing company Infinia, bolstering our media platform capabilities, sales force and volumes in Spain and Latin America.
- In May, we won the Digital Media Owners Spring Award as number one media owner, surveyed by the Institute of Practitioners in Advertising in the UK.
Financial Overview
| Financial results (EURm) | Pro forma | ||
| Azerion Holding B.V. | Q1 2022 | Q1 2021 | LTM |
| Net Revenue | 94,4 | 45,5 | 403,2 |
| COGS | (61,5) | (30,6) | |
| Gross profit | 32,8 | 15,0 | |
| Operating & Other Expenses | (44,9) | (18,1) | |
| Operating profit / (loss) | (12,1) | (3,1) | |
| EBITDA | (3,9) | 1,7 | |
| Adjusted EBITDA | 5,9 | 2,7 | 53,5 |
| Revenue growth, % | 107,3% | ||
| Gross margin, % | 34,8% | 32,9% | |
| Adjusted EBITDA growth, % | 117,6% | ||
| Adjusted EBITDA margin, % | 6,2% | 5,9% | 13,2% |
Co-CEO Umut Akpinar said:
“This quarter demonstrated our capacity to deliver results while completing our listing on Euronext Amsterdam. Our financial performance continued to improve and, despite macroeconomic volatility, we remain confident in our guidance to deliver at least EUR 450 million revenue this year. We will continue integrating our acquisitions and further drive volumes across our owned and operated platform.”
Co-CEO Atilla Aytekin said:
“Listing Azerion was an important milestone for our company, welcomed by our clients and partners, who increasingly approach us with business propositions. Our market continues to consolidate and we remain actively working on our acquisition funnel to complement our organic growth with more volume, capabilities and technology. As we continue to mature our M&A pipeline, we will consider a variety of options to fund acquisitions, including raising equity.”
Financial overview Q1 2022
Revenue
Revenue for the quarter amounted to EUR 94.4 million, an increase of EUR 48.9 million, or 107.3%, compared to Q1 2021. This reflects higher revenue from both the Platform and Premium Games segments.
Earnings
We delivered EUR 5.9 million adjusted EBITDA for the quarter compared to EUR 2.7 million in Q1 2021, an increase of EUR 3.2 million.
The loss before tax amounted to EUR 17.6 million compared to a loss of EUR 5.1 million in Q1 2021. Non-recurring items amounted to a net charge of EUR 9.8 million, mostly related to early exercise of share appreciation rights.
Cash flow
Our cash flow from operating activities in Q1 2022 was an inflow of EUR 6.5 million. Cash flow from investing activities was an outflow of EUR 8.2 million, mainly due to capital expenditures. Cash flow from financing activities totalled an inflow of EUR 9.0 million, mainly reflecting a capital contribution from Azerion Group N.V.
Capex
We capitalize development costs related to asset development, a core activity to support innovation in our platform. These costs primarily relate to developers’ time devoted to the development of games, platforms, and other new features. In Q1 2022 we capitalized EUR 3.9 million, equivalent to 17.5% of personnel costs.
Acquisitions
During Q1 2022 we announced the acquisition of Infinia, which completed in April 2022.
Financial position and financing
Our net interest-bearing debt amounted to EUR 185.3 million as at 31 March 2022, mainly comprising our outstanding bond loan with a nominal value of EUR 200 million (part of an in total EUR 300 million framework) and lease liabilities with a balance of EUR 19.0 million less the cash and cash equivalents position of EUR 42.6 million.
Segment information
Platform
Our Platform segment includes casual games distribution, advertising and e-Commerce, which are fully integrated through our technology. It generates revenue mainly by displaying digital advertisements in both game and non-game content, as well as selling and distributing AAA games through our e-commerce channels. Platform is also integrated with our Premium Games segment, leveraging inter-segment synergies.
Platform Financial Highlights
| Financial results (EURm) | ||
| Platform | Q1 2022 | Q1 2021 |
| Net Revenue | 72,5 | 34,2 |
| COGS | (50,2) | (24,3) |
| Gross profit | 22,3 | 9,9 |
| Operating & Other Expenses | (33,8) | (13,2) |
| Operating profit / (loss) | (11,5) | (3,3) |
| EBITDA | (6,4) | 0,7 |
| Adjusted EBITDA | 2,0 | 1,2 |
| Revenue growth, % | 111,8% | |
| Gross margin, % | 30,8% | 29,1% |
| Adjusted EBITDA growth, % | 64,6% | |
| Adjusted EBITDA margin, % | 2,7% | 3,5% |
Financial data for Q1 2021 has been revised to reflect reporting segments adopted as of Q3 2021
Platform revenue was EUR 72.5 million in Q1 2022, an increase of 111.8% compared to Q1 2021, mainly due to acquisitions. Gross margin remained at a similar level as in Q1 2021. Adjusted EBITDA was EUR 2.0 million in Q1 2022, an increase of 64.6% compared to Q1 2021.
Besides the impact of acquisitions, the improved financial performance reflects increased quality and quantity of the casual games distribution portfolio, achieved through exclusive partnerships and organic influx of content providers. New quality content and continuous adaptation of existing titles contributed to an increase in revenue compared to Q1 last year. During Q1 2022 we added approximately 745 new titles to our casual games distribution portfolio. In addition, we added 20 new publisher partners to our network to facilitate growth in key markets.
Advertising - Selected KPIs
| Advertising Selected KPIs | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 |
| Avg. Digital Ads Sold per Month (bn) | 4.4 | 4.9 | 4.3 | 3.2 | 2.9 |
| Avg. Gross Revenue per Million Ad Requests (EUR) | 6.10 | 9.73 | 7.14 | 6.72 | 3.66 |
- Avg. Digital Ads Sold per Month: the average number of paid impressions per month increased to 4.4 billion from 2.9 billion in Q1 2021, reflecting significant growth in the advertising business.
- Avg. Gross Revenue per Million Ad Requests: Average gross revenue per million ad requests was EUR 6.10 in Q1 2022, compared to EUR 3.66 in Q1 2021.
Premium Games
Our Premium Games segment includes social games and metaverse, comprising nine premium game titles. The segment generates revenue mainly by offering users the ability to make in-game purchases for extra features and virtual goods to enhance their gameplay experience. The aim of this segment is to stimulate social interaction among players and build communities.
Premium Games Financial Highlights
| Financial results (EURm) | ||
| Premium Games | Q1 2022 | Q1 2021 |
| Net Revenue | 21,8 | 11,3 |
| COGS | (11,3) | (6,3) |
| Gross profit | 10,5 | 5,0 |
| Operating & Other Expenses | (11,0) | (4,8) |
| Operating profit / (loss) | (0,6) | 0,1 |
| EBITDA | 2,5 | 1,3 |
| Adjusted EBITDA | 3,9 | 1,5 |
| Revenue growth, % | 93,7% | |
| Gross margin, % | 48,0% | 44,2% |
| Adjusted EBITDA growth, % | 151,9% | |
| Adjusted EBITDA margin, % | 17,7% | 13,6% |
Financial data for Q1 2021 has been revised to reflect reporting segments adopted as of Q3 2021
Premium Games revenue was EUR 21.8 million in Q1 2022, an increase of 93.7% compared to Q1 2021. Gross margin increased to 48.0% from 44.2% in Q1 2021. Adjusted EBITDA was EUR 3.9 million in Q1 2022, an increase of 151.9% compared to Q1 2021.
The improved financial results reflect the acquisition of Whow Games and lower user acquisition costs. Results were also positively impacted by stronger performance of Governor of Poker 3 and Hotel Hideaway driven by a combination of new features, virtual goods and improved events in Hotel Hideaway. We also promoted our Premium Games with TV commercials in France for Governor of Poker 3, integrated Teletubbies-branded avatars in Hideaway and Habbo, and improved first-time user experience in Governor of Poker 3.
Results also benefited from the expansion of Web 3.0 with the integration of the Habbo Avatars NFT collection, which offers unique playable Avatars, airdrops towards owners and the feature to sell unique in-game usable NFT furniture, in the Habbo metaverse.
Premium Games – Selected KPIs
| Premium Games Selected KPIs | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 |
| Avg. Time in Game per Day (min) | 82 | 80 | 79 | 79 | 79 |
| Avg. DAUs (thousands) | 604 | 599 | 616 | 693 | 696 |
| Avg. ARPDAU (EUR) | 0.38 | 0.42 | 0.37 | 0.34 | 0.33 |
Note: Whow Games included for the full historical period for comparability purposes
- Avg. Time in Game per Day: time spent playing our Premium Games continued to grow steadily, mainly due to improved first time user experience and continuous improvement of live operations.
- Avg. DAUs: Daily Active Users increased by 1% compared to Q4 2021, following the reset of number of users post Covid-19 elevated levels.
- Avg. ARPDAU: Average Revenue per Daily Active User decreased compared to Q4 2021, due to seasonality. Compared to Q1 2021, ARPDAU increased from EUR 0.33 to EUR 0.38, primarily driven by improved live operations with better events and promotions.
Background information: Azerion Holding B.V. and Azerion Group N.V.
Azerion Holding B.V. is the main holding subsidiary of Azerion Group N.V., formerly known as EFIC1. The Azerion Holding B.V. Interim Unaudited Financial Results Q1 2022 are released as required by the terms and conditions of the listed Senior Secured Callable Fixed Rate Bonds (ISIN: SE0015837794).
The first consolidated financial results for the post business combination Azerion Group N.V. will be the half year 2022 interim financial results, further details for which will follow closer to the time.
Condensed Consolidated financial statements (unaudited)
The condensed consolidated financial statements have been prepared in accordance with IFRS.
| Condensed consolidated statement of profit or loss and other comprehensive income (EURm) | Q1 2022 | Q1 2021 | ||||||
| Revenue | 94,4 | 45,5 | ||||||
| Costs of services & materials | (61,5) | (30,6) | ||||||
| Gross profit | 32,8 | 15,0 | ||||||
| Personnel costs | (18,6) | (8,9) | ||||||
| Depreciation | (1,6) | (1,0) | ||||||
| Amortization | (6,5) | (3,5) | ||||||
| Impairment of non-current assets | - | - | ||||||
| Other gains and losses | (9,3) | (0,3) | ||||||
| Other expenses | (8,9) | (4,5) | ||||||
| Operating profit / (loss) | (12,1) | (3,2) | ||||||
| Finance income | 0,4 | 0,7 | ||||||
| Finance costs | (5,9) | (2,7) | ||||||
| Net finance costs | (5,5) | (2,0) | ||||||
| Share in profit / (loss) of joint venture | - | - | ||||||
| Profit / (loss) before tax | (17,6) | (5,1) | ||||||
| Income Tax expense | (0,7) | (0,1) | ||||||
| Profit / (loss) for the period | (18,3) | (5,2) | ||||||
| Attributable to: | ||||||||
| Owners of the company | (18,0) | (4,7) | ||||||
| Non-controlling interest | (0,2) | (0,4) | ||||||
| Profit / (loss) for the period | (18,3) | (5,2) | ||||||
| Exchange difference on translation of foreign operations | (0,4) | 4,5 | ||||||
| Remeasurement of net defined benefit liability | 0,0 | 0,1 | ||||||
| Total comprehensive income for the period | (18,6) | (0,6) | ||||||
| Total comprehensive (loss) / income attributable to: | ||||||||
| Owners of the company | (17,9) | 0,2 | ||||||
| Non-controlling interest | (0,7) | (0,8) | ||||||