Azerion publishes Interim Unaudited Q3 2022 Results
Continued growth and delivery on M&A pipeline
Highlights of Q3 2022
- Revenue of almost EUR 106 million, compared to EUR 84 million in Q3 2021, mainly driven by strong growth in the Platform segment.
- Adjusted EBITDA of over EUR 12 million, down by 30% compared to Q3 2021, primarily due to lower contributions from the Premium Games segment, with Q3 2021 positively impacted by the successful launch of the Habbo NFT project, which impacts comparability versus Q3 2022.
- Completed acquisitions of Madvertise, Vlyby, Takerate and other asset deals, boosting our offerings to advertisers and publishers.
- Launched the new Habbo app on Android and iOS.
- Expanded integration with Googles demand-side platform, enabling Googles Audience targeting, unlocking additional volumes to Azerions advertising auction platform Improve Digital.
- In October and November, completed the acquisitions of [M]media, Hybrid Theory and Adplay, strengthening capabilities and global footprint.
- In November, won the Digital Media Owner Award, surveyed by the Institute of Practitioners in Advertising in the UK, achieving the highest score in the history of the survey.
- In November, announced the results of an independent survey on attention measurement, revealing that Azerions proprietary digital advertising formats can drive up to 20x higher attention compared to standard formats.
Selected Financial KPIs
| Financial results (EURm) | Q3 | YTD | ||
| Azerion Holding B.V. | 2022 | 20211) | 2022 | 20211) |
| Revenue | 105.5 | 83.5 | 303.8 | 181.7 |
| Gross profit | 38.5 | 34.7 | 113.2 | 70.5 |
| Operating expenses | (28.2) | (19.6) | (102.2) | (48.8) |
| Operating profit / (loss) | 0.2 | 4.7 | (28.0) | 2.9 |
| EBITDA | 9.7 | 14.0 | (1.7) | 21.0 |
| Adjusted EBITDA | 12.4 | 17.7 | 30.0 | 27.3 |
| Revenue growth, % | 26.3% | 67.2% | ||
| Gross profit margin % | 36.5% | 41.6% | 37.3% | 38.8% |
| Adjusted EBITDA growth % | -29.9% | 9.9% | ||
| Adjusted EBITDA margin, % | 11.8% | 21.2% | 9.9% | 15.0% |
1) 2021 financial data has been updated to reflect the allocation of head office costs to segments and 2021 audit adjustments. Refer to the "Other information" section for more information.
Co-CEO Umut Akpinar said:
I am pleased with our continued growth on the top line, while increasing the focus on costs and improving efficiencies across our platform. We are on track to deliver at least EUR 450 million revenue this year and we will continue integrating our acquisitions and building volumes in our higher-margin products. In Q3 2021 we had a very successful sale of NFTs in our Habbo metaverse, which makes the numbers less comparable on a year-to-year basis.
Co-CEO Atilla Aytekin said:
This quarter we announced a number of acquisitions that add valuable capabilities to our offerings to advertisers, publishers and consumers. With a focus on profitability, we will expedite integration and related synergies and remain ready to capture opportunities in this market under consolidation. We are also excited to be hosting our first Strategy Deep Dive with the market to share insights into our organic and inorganic growth strategy.
Financial overview
Revenue
Revenue for the quarter amounted to EUR 105.5 million, an increase of EUR 22.0 million, or 26.3%, compared to Q3 2021, boosted by Platform, partly offset by lower revenue from Premium Games.
Earnings
We delivered EUR 12.4 million adjusted EBITDA for the quarter compared to EUR 17.7 million in Q3 2021, a decrease of EUR 5.3 million, mainly due to lower contributions from Premium Games and the NFT pilot successfully executed in Q3 2021.
The operating profit amounted to EUR 0.2 million, compared to a profit of EUR 4.7 million in Q3 2021, primarily reflecting the lower contributions from Premium Games and the NFT pilot successfully executed in Q3 2021.
Cash flow
Our cash flow from operating activities in Q3 2022 was an inflow of EUR 2.8 million. Cash flow from investing activities was an outflow of EUR 11.2 million, due to capital expenditures and acquisitions. Cash flow from financing activities totalled an inflow of EUR 13.7 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 Q3 2022 we capitalized EUR 4.1 million, equivalent to 17.7% of gross personnel costs.
Financial position and financing
Our net interest-bearing debt* amounted to EUR 179.1 million as at 30 September 2022, mainly comprising our outstanding bond loan with a nominal value of EUR 200.0 million (part of an in total EUR 300.0 million framework) and lease liabilities with a balance of EUR 17.9 million less the cash and cash equivalents position of EUR 44.1 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 Selected Financial KPIs
| Financial results (EURm) | Q3 | YTD | ||
| Platform | 2022 | 20211) | 2022 | 20211) |
| Revenue | 84.2 | 57.5 | 238.8 | 133.1 |
| Gross profit | 27.4 | 19.3 | 80.4 | 44.1 |
| Operating expenses | (20.5) | (12.0) | (67.2) | (33.0) |
| Operating profit / (loss) | 0.6 | 1.5 | (14.0) | (0.4) |
| EBITDA | 7.1 | 6.0 | 3.7 | 10.6 |
| Adjusted EBITDA | 8.2 | 8.4 | 18.0 | 14.8 |
| Revenue growth, % | 46.4% | 79.4% | ||
| Gross profit margin % | 32.5% | 33.6% | 33.7% | 33.1% |
| Adjusted EBITDA growth % | -2.4% | 21.6% | ||
| Adjusted EBITDA margin, % | 9.7% | 14.6% | 7.5% | 11.1% |
1) 2021 financial data has been updated to reflect the allocation of head office costs to segments and 2021 audit adjustments. Refer to the "Other information" section for more information.
Platform Revenue was EUR 84.2 million in Q3 2022, an increase of 46.4% compared to Q3 2021, mainly due to acquisitions as well as organic growth.
Adjusted EBITDA was EUR 8.2 million in Q3 2022, decreasing by 2.4% compared to Q3 2021. Higher net revenue was offset by lower gross profit margin, mainly driven by market conditions, and increased operating expenses compared to Q3 2021, primarily driven by acquisitions and ongoing investments in the platform.
Results benefited from increased user engagement levels, with users spending more time playing casual games, as well as enhanced monetisation across the portfolio. In addition, we have grown our casual games distribution portfolio during Q3 2022, adding approximately 452 new titles and 415 new publisher partners.
Advertising - Selected Operational KPIs
| Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | |
| Avg. Digital Ads Sold per Month (bn) | 6.9 | 10.9 | 9.9 | 9.5 | 9.6 |
| Advertising auction platform (bn) | 3.7 | 4.5 | 4.1 | 4.3 | 4.3 |
| Publisher monetisation services (bn) | 3.2 | 6.4 | 5.8 | 5.2 | 5.3 |
| Avg. Gross Revenue per Million Accepted Ad Requests from advertising auction platform (EUR) | 9.9 | 12.9 | 8.6 | 9.1 | 11.2 |
- The Average number of digital ads sold per month (paid impressions) increased to 9.6 billion from 6.9 billion in Q3 2021, reflecting significant growth in our advertising business.
- The Average gross revenue per million accepted ad requests was EUR 11.2 in Q3 2022, compared to EUR 9.9 in Q3 2021, demonstrating our ability to manage our advertising auction platform efficiently and profitably, even against the backdrop of challenging macro-economic environment.
The numbers reported in the selected operational KPIs do not include volumes from past acquisitions that are not yet fully integrated. As of this quarter, the reported numbers include the following previous acquisitions: advertising auction platforms Improve Digital, Admoove, Delta Projects and Infinia, as well as publisher monetisation services Headerlift, Pubgalaxy, Sublime, Inskin, Strossle, Keymobile, Madvertise and Quantum.
Average gross revenue per million ad requests has been revised to exclude ad requests that are rejected by our platform without generating any costs. As a result this KPI has been renamed as Average gross revenue per million accepted ad requests.
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 Selected Financial KPIs
| Financial results (EURm) | Q3 | YTD | ||
| Premium Games | 2022 | 20211) | 2022 | 20211) |
| Revenue | 21.3 | 26.0 | 65.0 | 48.6 |
| Gross profit | 11.1 | 15.4 | 32.8 | 26.4 |
| Operating expenses | (7.6) | (7.6) | (21.6) | (15.8) |
| Operating profit / (loss) | 0.7 | 3.2 | 0.3 | 3.4 |
| EBITDA | 3.6 | 8.0 | 8.9 | 10.4 |
| Adjusted EBITDA | 4.2 | 9.2 | 12.0 | 12.4 |
| Revenue growth, % | -18.1% | 33.7% | ||
| Gross profit margin % | 52.1% | 59.2% | 50.5% | 54.3% |
| Adjusted EBITDA growth % | -54.3% | -3.2% | ||
| Adjusted EBITDA margin, % | 19.7% | 35.4% | 18.5% | 25.5% |
1) 2021 financial data has been updated to reflect the allocation of head office costs to segments and 2021 audit adjustments. Refer to the "Other information" section for more information.
Premium Games Revenue was EUR 21.3 million in Q3 2022, a decrease of 18.1% compared to Q3 2021. Revenue in Q3 2021 was positively impacted by the successful launch of the Habbo NFT project, impacting comparability versus Q3 2022. Excluding this impact, Revenue was at a similar level as in Q3 2021, primarily driven by increased average revenue per daily user, partly offset by a decline in the average number of daily users.
Adjusted EBITDA was EUR 4.2 million in Q3 2022, a decrease of 54.3% compared to Q3 2021. The high margin NFT activities were a significant contributor to the Adjusted EBITDA in Q3 2021, affecting comparability. Excluding this impact, Adjusted EBITDA reflected higher operating expenses, partly offset by slightly improved gross profit margin.
Premium Games Selected Operational KPIs
| Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | |
| Avg. Time in Game per Day (min) | 79 | 80 | 81 | 80 | 80 |
| Avg. DAUs (thousands) | 616 | 599 | 607 | 567 | 556 |
| Avg. ARPDAU (EUR) | 0.37 | 0.42 | 0.38 |
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