Azerion publishes Interim Unaudited Q2 and H1 2022 Results
August 31, 2022
Resilient business model reflected in revenue and gross margin expansion
The summary provided below relates to the Q2 and H1 2022 results of Azerion Holding B.V., which is the main operational holding subsidiary of Azerion Group N.V.
Highlights of Q2 2022
- Net Revenue of EUR 104 million, nearly doubling Q2 2021, driven by acquisitions and organic growth.
- Adjusted EBITDA approaching EUR 12 million, up by 70% compared to Q2 2021, primarily boosted by improved net revenue and gross profit margin.
- Accelerated the integration of acquisitions, pointing to further synergies and productivity upside; increased focus on operational efficiencies and costs to strengthen our resilience.
- Partnership with ITV studios, with Love Island opening a virtual villa in Hotel Hideaway.
- Partnerships with Cyberkongs, Metaverse HQ and Metakey to increase the utility of NFTs within Habbo.
- In July, completed the acquisition of Madvertise’s subsidiaries in Germany and France, bolstering in-app digital advertising capabilities.
Highlights of H1 2022
- Net Revenue of over EUR 198 million, more than doubling H1 2021, mainly driven by acquisitions and organic growth.
- Adjusted EBITDA approaching EUR 18 million, up by more than 83% compared to H1 2021, primarily boosted by improved net revenue and gross profit margin.
Selected Financial KPIs
| Azerion Holding B.V. | Q2 | H1 | ||
| EURm | 2022 | 2021 | 2022 | 2021 |
| Net Revenue | 103.9 | 52.7 | 198.3 | 98.3 |
| Gross profit | 41.9 | 20.8 | 74.8 | 35.8 |
| Operating expenses | (46.5) | (15.9) | (74.0) | (29.3) |
| Operating profit / (loss) | (16.1) | 1.3 | (28.1) | (1.8) |
| EBITDA | (7.4) | 5.6 | (11.3) | 6.9 |
| Adjusted EBITDA | 11.7 | 6.9 | 17.6 | 9.6 |
| Revenue growth % | 97.1% | 101.7% | ||
| Gross profit margin % | 40.3% | 39.5% | 37.7% | 36.4% |
| Adjusted EBITDA growth % | 69.6% | 83.3% | ||
| Adjusted EBITDA margin % | 11.3% | 13.1% | 8.9% | 9.8% |
As of Q2 2022, proforma metrics are reported directly to the agent as per terms and conditions of the senior secured callable fixed rate bonds ISIN: SE0015837794.
Co-CEO Umut Akpinar said: “This quarter our delivery remained strong and we are increasing our focus on costs to strengthen our resilience in the evolving macroeconomic environment. At the same time, our priority remains to offer the best service and products to our customers, continuously improving our operational efficiency and excellence. With a focus on value over volume, we are also growing direct sales from our local offices to advertisers and high-grading our publisher inventory. As we accelerate the integration of acquisitions, we expect more value to be unlocked for Azerion. We remain on track to deliver at least EUR 450 million revenue this year.”
Co-CEO Atilla Aytekin said: “In the second quarter we continued actively working on our acquisition funnel to complement our organic growth with a strong forward visible pipeline, which is demonstrated by the acquisitions we have completed so far this year. We also raised capital and will continue exploring options to fund acquisitions, including raising more equity.”
Azerion Holding B.V. - Financial overview Q2 2022
Revenue
Q2 2022 Net Revenue amounted to EUR 103.9 million, compared to EUR 52.7 million in Q2 2021. This reflects higher revenue from both the Platform and Premium Games segments, driven by acquisitions and organic growth.
Earnings
Adjusted EBITDA was EUR 11.7 million in Q2 2022, compared to EUR 6.9 million in Q2 2021, reflecting improved net revenue and gross profit margin.
The operating loss amounted to EUR 16.1 million, which includes a charge of EUR 16.1 million related to De-SPAC expenses, compared to an operating profit of EUR 1.3 million in Q2 2021.
Cash flow
Cash flow from operating activities in Q2 2022 was EUR 10.9 million, excluding the impact of employee SARs related cash outflows associated with the De-SPAC transaction, which amounted to EUR 5.9 million. Including those employee SARs related cash outflows, cash flow from operating activities was EUR 5.0 million. Cash flow from investing activities was an outflow of EUR 41.6 million, mainly due to acquisitions. Cash flow from financing activities totalled EUR 33.3 million.
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 Q2 2022 we capitalized EUR 4.2 million, which is equivalent to 17.0% of gross personnel costs.
Financial position and financing
Our net interest-bearing debt1 amounted to EUR 183.7 million as at 30 June 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 17.5 million less the cash and cash equivalents position of EUR 39.0 million.
Azerion Holding B.V. - Segment information Q2 2022
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 – Selected Financial KPIs
| Q2 | H1 | |||
| EURm | 2022 | 2021 | 2022 | 2021 |
| Net Revenue | 82.0 | 41.4 | 154.6 | 75.6 |
| Gross profit | 30.7 | 14.8 | 53.1 | 24.8 |
| Operating expenses | (26.0) | (11.3) | (46.8) | (21.0) |
| Operating profit / (loss) | (3.1) | 1.3 | (14.5) | (2.0) |
| EBITDA | 3.0 | 4.3 | (3.5) | 4.5 |
| Adjusted EBITDA | 7.8 | 5.2 | 9.8 | 6.4 |
| Revenue growth % | 98.0% | 104.5% | ||
| Gross profit margin % | 37.4% | 35.7% | 34.3% | 32.8% |
| Adjusted EBITDA growth % | 50.0% | 53.1% | ||
| Adjusted EBITDA margin % | 9.5% | 12.6% | 6.3% | 8.5% |
Financial data for Q2 and H1 2021 has been revised to reflect reporting segments adopted as of Q3 2021. 2021 comparative information has been updated to include the allocation of head office costs to segments.
Platform Net Revenue was EUR 82.0 million in Q2 2022, an increase of 98.0% compared to Q2 2021, mainly due to acquisitions and organic growth.
Adjusted EBITDA was EUR 7.8 million in Q2 2022, increasing by 50.0% compared to Q2 2021. This reflected higher net revenue and stronger gross profit margin, mainly driven by increased direct sales from our local offices to advertisers, which accounted for approximately 47% of total Platform revenue in Q2 2022, compared to some 35% in Q2 2021.
Results also benefited from increased user engagement, with users spending more time playing casual games. In addition, we have grown our casual games distribution portfolio during Q2 2022, adding approximately 790 new titles and 36 new publisher partners.
Advertising - Selected Operational KPIs
| Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | |
| Avg. Digital Ads Sold per Month (bn) | 8.3 | 8.8 | 9.9 | 6.1 | 5.3 |
| Advertising auction platform (bn) | 3.8 | 3.9 | 4.4 | 3.6 | 3.2 |
| Publisher monetisation services (bn) | 4.5 | 4.9 | 5.5 | 2.5 | 2.1 |
| Avg. Gross Revenue per Million Ad Requests from advertising auction platform (EUR) | 6.2 | 6.1 | 9.8 | 7.2 | 6.7 |
- The Average number of digital ads sold per month (paid impressions) increased to 8.3 billion from 5.3 billion in Q2 2021, reflecting higher user engagement from our owned and operated content, as well as increased audiences for non-game content. This was partly offset by a deliberate reduction in certain impressions, driven by the continuous high-grading of our publisher inventory and margin optimisation of digital advertisements.
- The Average gross revenue per million ad requests was EUR 6.2 in Q2 2022, compared to EUR 6.7 in Q2 2021, showing relative stability in efficiency and profitability of our advertising auction platform, which is continuously managed for value.
Premium Games
Our Premium Games segment includes nine game titles of social card games and metaverse, stimulating social interaction among players and building communities. 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.
Premium Games – Selected Financial KPIs
| Q2 | H1 | |||
| EURm | 2022 | 2021 | 2022 | 2021 |
| Net Revenue | 21.9 | 11.3 | 43.7 | 22.7 |
| Gross profit | 11.2 | 6.0 | 21.7 | 11.0 |
| Operating expenses | (7.3) | (4.6) | (14.0) | (8.3) |
| Operating profit / (loss) | 0.2 | 0.0 | (0.4) | 0.2 |
| EBITDA | 2.8 | 1.3 | 5.4 | 2.4 |
| Adjusted EBITDA | 3.9 | 1.7 | 7.8 | 3.2 |
| Revenue growth % | 93.8% | 92.5% | ||
| Gross profit margin % | 51.1% | 53.1% | 49.7% | 48.5% |
| Adjusted EBITDA growth % | 129.4% | 143.8% | ||
| Adjusted EBITDA margin % | 17.8% | 15.0% | 17.8% | 14.1% |
Financial data for Q2 and H1 2021 has been revised to reflect reporting segments adopted as of Q3 2021. 2021 comparative information has been updated to include the allocation of head office costs to segments.
Premium Games Net Revenue was EUR 21.9 million in Q2 2022, an increase of 93.8% compared to Q2 2021, primarily due to the acquisition of Whow Games and organic growth.
Adjusted EBITDA was EUR 3.9 million in Q2 2022, increasing by 129.4% compared to Q2 2021, mainly reflecting higher contributions from Governor of Poker 3, which was primarily driven by new features and events that enhanced the user gameplay experience. This was partly offset by lower average daily users.
Premium Games – Selected Operational KPIs
| Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | |
| Avg. Time in Game per Day (min) | 80 | 81 | 80 | 79 | 79 |
| Avg. DAUs (thousands) | 567 | 607 | 599 | 616 | 693 |
| Avg. ARPDAU (EUR) | 0.40 | 0.38 | 0.42 | 0.37 | 0.34 |
Note: Whow Games included for the full historical period for comparability purposes
- The Average time in game per day from our Premium Games players was at a similar level as in Q2 2021.
- The Average daily active users (DAUs) decreased by almost 18% compared to Q2 2021, reflecting the reset in the number of users post Covid-19 elevated levels, partly offset by new users in France, following a user acquisition campaign.
- The Average revenue per daily active user (ARPDAU) increased by over 17% compared to Q2 2021, primarily driven by new features and events that enhanced the user gameplay experience.
Other
Reporting segment Other only contains EUR 13.2 million De-SPAC related expenses not allocated to the Platform or Premium Games segments. Those costs impact the reported operating profit/loss, but are removed from Adjusted EBITDA.
Azerion Holding B.V. – Other information
| Interest Bearing Debt (EURm) | 30 June 2022 | 31 December 2021 |
| Total non-current indebtedness | 229.8 | 213.3 |
| Total current indebtedness | 10.6 | 11.5 |
| Total financial indebtedness | 240.4 | 224.8 |
| Deduct Zero interest bearing loans | (0.4) | (0.7) |
| Interest Bearing Debt | 240.0 | 224.1 |
| Less: Cash and cash equivalents | (39.0) | (35.3) |
| Net Interest Bearing Debt | 201.0 | 188.8 |
| Of which permitted Net Interest Bearing Debt under the bond terms | 183.7 | 188.8 |
Interest Bearing Debt
References to the bond terms in the table above refer to the senior secured callable fixed rate bond ISIN: SE0015837794
Financial indebtedness increased by EUR 15.6 million from 31 December 2021, mainly due to the reclassification of subordinated convertible loans from other equity instruments to borrowings. These subordinated convertible loans include an equity redemption option of outstanding loan balances, in addition to a cash redemption option. Under the modified terms, the discretion to redeem the loans in equity or cash lies with Azerion Holdings B.V. Following the De-SPAC transaction, the loans are redeemable by issuing shares in the capital of Azerion Group N.V. Since these loans are no longer redeemable by issuing shares in the capital of Azerion Holding B.V., they have been reclassified from other equity instruments.
Reconciliation of net income to Adjusted EBITDA