Robust Platform performance driving growth
Highlights of Q3 2024
In Q3 2024 we have not only increased our revenues but also continued to improve and develop our portfolio of clients, technologies and partnerships;
- Increased client spend generated € 124.8 million of revenues, up 22.6% Year on Year.
- Signed 115 new publishers and connected 4 additional SSPs and 6 DSPs to expand our digital audiences across Europe and the Americas.
- Continued delivery on the product roadmap including expanding our CTV, DOOH and Audio advertising offering for brands and publishers whilst enhancing brand safety and control across the Platform.
- Launch of Azerion Podcast Hosting Platform and Audio Adserver, unlocking additional revenue streams in the fast growing digital audio advertising segment.
- Entered a new partnership with Captify in July to accelerate the power of Search Intelligence, accelerating buyers' access to audiences derived from open web search data and empowering brands with cookieless activation in France and Italy.
- Successfully completed the placement of additional bonds for an amount of € 50 million under Azerion's existing Senior Secured Callable Floating Rate Bond framework of € 300 million.
Increasingly favourable market conditions for partnerships and acquisitions provide opportunities for Azerion to continue its growth into 2025.
- We announced the acquisition of Goldbach Austria GmbH in November, one of the foremost digital and linear advertising brokers in the DACH region. Goldbach's expertise in DOOH, linear TV, CTV, and display advertising will amplify Azerion's offerings across the DACH region. Completion of the transaction is subject to regulatory approval by the Austrian Federal Competition Authority. In the 12 months ended September 2024, Goldbach Austria generated advertising revenue of approximately € 26 million.
- We have built a strong pipeline of actionable partnership and acquisition opportunities. In this context, Azerion has mandated Pareto Securities AB and Arctic Securities AB to conduct a series of fixed-income investor meetings and subject to, inter alia, market conditions a subsequent bond issue may follow utilising some or all of the capacity available of up to € 85 million out of the Company's already existing Senior Secured Callable Floating Rate Bond framework of € 300 million with ISIN NO0013017657.
Financial Results - Azerion Group N.V.
in millions of €
| Q3 2024 | Q3 2023 | Growth | YTD 2024 | YTD 2023 | Growth | |
| Platform Segment | ||||||
| Advertising Platform | 92.4 | 73.3 | 26% | 286.0 | 222.6 | 29% |
| AAA Game Distribution (e-commerce) | 18.5 | 17.5 | 6% | 58.1 | 57.1 | 2% |
| Revenue | 110.9 | 90.8 | 22% | 344.1 | 279.7 | 23% |
| Operating profit / (loss) | (0.9) | 4.0 | (123)% | (8.9) | (7.6) | 17% |
| Adj. EBITDA | 13.1 | 13.5 | (3)% | 36.2 | 30.4 | 19% |
| Premium Games Segment1) | ||||||
| Revenue | 13.9 | 17.7 | (22)% | 39.1 | 63.5 | (38)% |
| Operating profit / (loss) | 1.0 | 73.3 | (99)% | (0.6) | 74.3 | (101)% |
| Adj EBITDA | 4.6 | 4.8 | (4)% | 8.8 | 15.1 | (42)% |
| Group (excluding social card games) | ||||||
| Revenue | 124.8 | 101.8 | 23% | 383.2 | 314.9 | 22% |
| Operating profit / (loss) | 0.1 | 2.2 | (96)% | (9.5) | (14.3) | (34)% |
| Adj. EBITDA | 17.7 | 16.2 | 9% | 45.0 | 35.8 | 26% |
| Group (including social card games) | ||||||
| Total Revenue | 124.8 | 108.5 | 15% | 383.2 | 343.2 | 12% |
| Total Operating profit / (loss) | 0.1 | 77.3 | (100)% | (9.5) | 66.7 | (114)% |
| Total Adj. EBITDA | 17.7 | 18.3 | (3)% | 45.0 | 45.5 | (1)% |
| Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | |||
| Adj. EBITDA Margin % | ||||||
| Platform | 12% | 15% | 11% | 11% | ||
| Premium Games | 33% | 27% | 23% | 24% | ||
| Group (excluding social card games) | 14% | 16% | 12% | 11% | ||
| Group | 14% | 17% | 12% | 13% |
"We are pleased with the performance of our business model during Q3, with the Platform and Premium Games segments both delivering revenue growth of over 20% compared to the same period last year, excluding the divested social card games portfolio. Importantly, we strengthened our local connections with advertisers and publishers and delivered significant innovation through our product and technology roadmap, developing new revenue streams and enhancing our ability to reach targeted audiences at scale. We invested further in our cookieless solutions through the partnership with Captify, onboarding their sales teams in France and Italy, whilst expanding our inventory in emerging channels such as DOOH through the partnership with MyAdbooker. Earlier in November, we announced the acquisition of Goldbach Austria GMBH, opening new doors for growth, innovation, and impactful advertising opportunities in Austria and advancing our strategic goals in the wider DACH region.
With favourable market dynamics, we see increasing opportunities to accelerate our growth through strategic partnerships and acquisitions and have developed a strong pipeline of actionable opportunities to execute on. We therefore intend to conduct a series of investor meetings to explore further funding of those opportunities through the debt markets."
- Umut Akpinar
Financial overview
Revenue
Q3 2024
Revenue for the quarter amounted to € 124.8 million, up 22.6% from € 101.8 million in Q3 2023 excluding the social card games portfolio divested in Q3 2023, mainly driven by higher advertising spend across the Platform Segment, particularly in Direct Sales and the integration of previous acquisitions. Revenue for the quarter was up 15.0% from € 108.5 million in Q3 2023 including the revenue from the social card games portfolio of € 6.7 million in Q3 2023.
YTD Q3 2024
Revenue for YTD Q3 2024 amounted to € 383.2 million, up 21.7% from € 314.9 million in YTD Q3 2023 excluding the social card games portfolio divested in Q3 2023, again mainly driven by higher advertising spend across the Platform Segment, particularly in Direct Sales and the integration of past acquisitions. Revenue was up 11.7% from € 343.2 million in YTD Q3 2023 including the revenue from the social card games portfolio of € 28.3 million YTD Q3 2023.
Earnings
Q3 2024
Adjusted EBITDA for the quarter was € 17.7 million compared to € 16.2 million in Q3 2023 excluding the divested social card games portfolio, an increase of 9.3% mainly driven by improved performance of Premium Games, specifically metaverse titles due to the release of Habbo Hotel Origins and product development across the social casino titles, and cost savings and efficiencies from the integration of previous acquisitions. Adjusted EBITDA for Q3 2024 was down (3.3)% from € 18.3 million in Q3 2023 including the contribution from the social card games portfolio of € 2.1 million in Q3 2023.
The operating profit for the quarter amounted to € 0.1 million, compared to a profit of € 2.2 million in Q3 2023 (excluding gain on the sale and the result of the social card games portfolio of € 75.1 million), mainly due to a one-off increase in operating expenses in Q3 2024 related to the renegotiation of contingent consideration terms for one of the acquisitions (€ 2.9 million) and a fair value gain on contingent consideration for previous acquisitions in Q3 2023 (€ 2.0 million) that is absent in Q3 2024, offset by the improved performance of Premium Games described above, and cost savings and efficiencies from the integration of previous acquisitions.
YTD Q3 2024
Adjusted EBITDA in YTD Q3 2023 was € 45.0 million compared to € 35.8 million in YTD Q3 2023 excluding the divested social card games portfolio, an increase of 25.7% driven by higher advertising spend across the Platform Segment and improved performance of Premium Games, specifically metaverse titles due to the release of Habbo Hotel Origins and product development across the social casino titles, cost savings and efficiencies from the integration of previous acquisitions and a gain on acquisition related earn-outs of € 1.6 million. Adjusted EBITDA in YTD Q3 2024 was down (1.1)% from € 45.5 million in YTD Q3 2023 including the contribution from the social card games portfolio of € 9.7 million in YTD Q3 2023.
The operating loss in YTD Q3 2023 amounted to € (9.5) million, compared to a loss of € (14.3) million in YTD Q3 2023 (excluding gain on the sale and the result of the social card games portfolio of € 81.0 million), driven by increased Platform revenue and contribution from Direct sales, improved performance of Premium Games, specifically metaverse titles due to the release of Habbo Hotel Origins and product development across the social casino titles, efficiencies from optimisation and consolidation efforts, and notwithstanding the one-off increase in operating expenses related to the settlement of a commercial dispute and renegotiation of contingent consideration terms for one of the acquisitions.
Cash flow
Q3 2024
Cash flow from operating activities in Q3 2024 was an outflow of € (11.4) million, mainly due to movements in net working capital reflecting a decrease in trade and other payables of € (40.9) million and a decrease in trade and other receivables of € 18.9 million, € (7.8) million paid on interest and € (0.8) paid in income tax, partly offset by operating profit after adjustments. Cash flow from investing activities was an inflow of € 2.0 million, mainly due to the receipt of deferred consideration for the sale of the social card games portfolio in amount of € 11.6 million, partly offset by payments for intangible assets of € (4.3) million and net cash outflow on acquisition of subsidiaries of € (5.2) million. Cash flow from financing activities was an inflow of € 45.9 million, mainly due to net proceeds in the amount of € 48.2 million (net of transaction costs) from additional bonds placed under the existing Senior Secured Callable Floating Rate Bond framework offset by repayments of external borrowings and the principal portion of lease liabilities amounting in total to € (2.3) million.
YTD Q3 2024
Cash flow from operating activities in YTD Q3 2024 was an outflow of € (3.0) million, mainly due to movements in net working capital reflecting a decrease in trade and other payables of € (37.3) million and a decrease in trade and other receivables of € 27.4 million, € (18.3) million paid on interest and € (3.0) paid in income tax, partly offset by operating profit after adjustments. Cash flow from investing activities was an outflow of € (18.6) million, mainly due payments for intangible assets of € (13.8) million and net cash outflow on acquisition of subsidiaries of € (16.0) million, partly offset by the receipt of net deferred consideration for the sale of social card games portfolio in amount of € 11.2 million. Cash flow from financing activities was an inflow of € 49.4 million, mainly due to net proceeds from borrowings of € 57.6 million offset by repayments of external borrowings and the principal portion of lease liabilities amounting in total to € (8.0) million.
Capex
Azerion capitalises development costs related to the internal development of assets, a core activity to support innovation in its platform. These costs primarily relate to developers' time devoted to the development of the platform, games and other new features. In Q3 2024 Azerion capitalised € 3.8 million, equivalent to 14.3% (Q3 2023: € 3.9 million, equivalent to 16.2%) of gross personnel costs excluding restructuring provision expense. In YTD Q3 2024 Azerion capitalised € 11.4 million, equivalent to 15.0% (YTD Q3 2023: € 14.1 million, equivalent of 17.5%) of gross personnel costs excluding restructuring provision expense.
Financial position and borrowing
Net interest-bearing debt*) amounted to € 177.7 million as at 30 September 2024, mainly comprising the outstanding bond loan with a nominal value of € 215 million (part of a total € 300 million framework) and lease liabilities with a balance of € 17.1 million less the cash and cash equivalents position of € 68.3 million.
*)As defined in the Terms & Conditions of the Senior Secured Callable Floating Rate Bonds ISIN: NO0013017657. Please also refer to the Definitions section and the notes of this Interim Report for more information.
Platform Segment
Our Platform segment includes our digital advertising activities, AAA Game Distribution (formerly referred to as e-commerce), Casual Game Distribution (being the operation and distribution of casual games) and Azerion Sports. The Platform segment generates Revenue mainly by displaying digital advertisements in both game and general content, as well as selling and distributing AAA games. Advertisers are serviced through two models: i) Direct sales, which involve a direct engagement between Azerion's commercial teams and advertisers or their agencies in the placement of digital advertisements, and ii) Automated auction sales in which advertising inventory is purchased through the open market. Platform is also integrated with parts of our Premium Games segment, leveraging inter-segment synergies.
Selected business highlights in Q3 2024 include:
- Expanded our Digital-Out-of-Home ("DOOH") advertising through the integration of MyAdbooker into Azerion's DSP, through which Azerion will support local advertisers and agencies in France, The Netherlands and Belgium access exclusive high-impact DOOH inventory offering a powerful new dimension to their programmatic media strategies.
- Launched Generative AI Contextual solution in Marketplace, a robust system that provides accurate and reliable classification of web content, enabling more effective campaigns and curated deals for our partners.
- Enhanced our Demand Side Platform adding new CTV and Set-Top Box localised in-home granular targeting for improved geographic audience identification.
- Improved our programmatic open auction capabilities for audio, enabling advertisers greater access to highly engaging podcasts, radio, music and more.
- Brought greater brand safety and control to advertisers and publishers through launch of Child-Safe Marketplace in collaboration with Beeswax and integrated DoubleVerify's verification solutions in Azerion's SSP.
- Our B2B Game Key distributor Genba, expanded its network of AAA and boutique publisher partners averaging 175 connected studios in Q3 2024, an increase of 11% from 157 in Q3 2023 increasing its catalogue of popular games accessible to etailer partners.
- Azerion Sports expanded into a new area of sport signing with the national Premier Hockey League of the Netherlands, signed an additional 3 clubs to its white-label fan engagement app, now totalling 26 clubs (18 in Q3 2023), and launched in-app digital sports collectibles to reward the clubs' most loyal fans.
- Azerion strengthened its casual games distribution portfolio during Q3 2024, adding 419 new games and 15 new publisher partners.
Financial results - Platform
In millions of €
| Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | |
| Advertising Platform | 92.4 | 73.3 | 286.0 | 222.6 |
| AAA Game Distribution (formerly e-commerce) | 18.5 | 17.5 | 58.1 | 57.1 |
| Total Revenue | 110.9 | 90.8 | 344.1 | 279.7 |
| Operating profit / (loss) | (0.9) | 4.0 | (8.9) | (7.6) |
| Adj. EBITDA | 13.1 | 13.5 | 36.2 | 30.4 |
| Revenue growth % - Advertising Platform | 26.1% | 28.5% | ||
| Revenue growth % - AAA Game Distribution | 5.7% | 1.8% | ||
| Total Revenue growth % | 22.1% | 23.0% | ||
| Adjusted EBITDA growth / (decrease) % | (3.0%) | 19.1% | ||
| Adjusted EBITDA margin % | 11.8% | 14.9% | 10.5% | 10.9% |
Advertising Platform Revenue of € 92.4 million in Q3 2024, an increase of approximately 26.1% compared to € 73.3 million in Q3 2023, mainly driven by increased Direct sales due to integration and consolidation benefits from past acquisitions. In Q3 2024, Azerion's Direct sales contributed approximately 70% of Platform advertising revenue, as compared to approximately 60% in Q3 2023, with the balance provided by Automated auction sales.
In Q3 2024, AAA Game Distribution generated Revenue of € 18.5 million as compared to € 17.5 million in Q3 2023, an increase of approximately 5.7% due to strong performance of B2B sales of high-profile AAA game releases driven by promotional sales increase and new eTailer partners added in Q3 2024. Strong revenue performance was driven by the new releases and promotional sales of popular titles. In Q3 2024, AAA Game Distribution Revenue represented 16.7% of total Platform Revenue, as compared to 19.3% in Q3 2023.
Total Platform Operating Loss of € (0.9) million in Q3 2024, compared to Operating Profit of € 4.0 million in Q3 2023, a decrease largely due to a one-off increase in operating expenses in Q3 2024 related to the renegotiation of contingent consideration terms for one of the acquisitions (€ 2.9 million) and a fair value gain on contingent consideration for previous acquisitions in Q3 2023 (€ 2.0 million) that is absent in Q3 2024. Total Platform Operating Loss of € (8.9) million in YTD Q3 2024, compared to € (7.6) million in YTD Q3 2023, a decrease largely due to a one-off increase in operating expenses related to the settlement of a commercial dispute in Q2 2024 (€ 3.0 million) and renegotiation of contingent consideration terms for one of the acquisitions, offset by increased Platform revenue and contribution from Direct sales and efficiencies from optimisation and consolidation efforts.
Total Platform Adjusted EBITDA of € 13.1 million in Q3 2024, compared to € 13.5 million in Q3 2023, a decrease of (3.0)% largely due to the mix of Advertising Platform Revenue, increased share of Direct Sales offset by the lower-margin revenue from Hawk acquisition. Total Platform Adjusted EBITDA of € 36.2 million in YTD Q3 2024, compared to € 30.4 million in YTD Q3 2023, an increase of 19.1% mainly as a result of growth in advertising revenue from Direct sales and the integration of previous acquisitions.
Advertising - Selected Operational KPIs
Advertising - Operational KPIs
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | |
| Avg. Digital Ads Sold per Month (bn) | 12.3 | 13.0 | 11.9 | 13.9 | 11.9 | 12.1 | 12.6 |
| Avg. Gross Revenue per Million Processed Ad Requests across the Azerion Platform (EUR)1) | 25.1 | 30.3 | 25.4 | 34.5 | 25.4 | 29.0 | 23.4 |
Note: Both Advertising Operational KPIs now include data relating to the Hawk acquisition as of Q4 2023.
The Average Digital Ads sold per Month increased to 12.6 billion in Q3 2024 from 11.9 billion in Q3 2023, an increase of 5.9%, reflecting the Platform's demand side growth due to the integration of past acquisitions and the consolidation of Azerion's monetisation technology into a single scalable media buying platform.
The Average Gross Revenue per Million Processed Ad Requests across the Azerion Platform in Q3 2024 was € 23.4, compared to € 25.4 in Q3 2023, reflecting a small decline year on year as we continue to balance and optimise between volume and efficiency.
Premium Games Segment
From Q4 2023, the Premium Games segment consists of social casino games and metaverse games. Azerion completed the sale of its social card games portfolio to Playtika Holding Corp. on 28 August 2023 and its contribution to the Premium Games segment ceased at that date. 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. This segment aims to stimulate social interaction among players and build communities, offering an extended value proposition to advertisers and generating cross-selling opportunities with the Platform segment.
Selected Q3 2024 business highlights
- Partnered with Everi, one of the largest suppliers of technology solutions for casinos, to empower their Social Casino Brand Super Jackpot Slot offering with Whow's established technology and game mechanics bringing innovative gaming to the casino industry.
- Test launch of new mobile portrait social casino application to further engage audiences on the go increasing daily active users and in-game purchases.
- Created new immersive quests and rolled out second hand store in Hotel Hideaway, encouraging social journey gameplay and allowing users to purchase their favourite add-ons at a discount further monetising the game.
Financial results - Premium Games
In millions of €
| Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | |
| Revenue (excluding social card games) | 13.9 | 11.0 | 39.1 | 35.2 |
| Social card games portfolio | - | 6.7 | - | 28.3 |
| Total Revenue | 13.9 | 17.7 | 39.1 | 63.5 |
| Operating profit / (loss) (excluding social card games) | 1.0 | (1.8) | (0.6) | (6.7) |
| Social card games portfolio | - | 75.1 | - | 81.0 |
| Total Operating profit / (loss) | 1.0 | 73.3 | (0.6) | 74.3 |
| Adjusted EBITDA (excluding social card games) | 4.6 | 2.7 | 8.8 | 5.4 |
| Social card games portfolio | - | 2.1 | - | 9.7 |
| Total Adjusted EBITDA | 4.6 | 4.8 | 8.8 | 15.1 |
| Revenue growth % (excluding social card games) | 26.4% | - | 11.1% | - |
| Adjusted EBITDA growth % (excluding social card games) | 70.4% | - | 63.0% | - |
| Adjusted EBITDA margin % (excluding social card games) | 33.1% | 24.5% | 22.5% | 15.3% |
Adjusted EBITDA of € 4.6 million in Q3 2024, compared to € 2.7 million in Q3 2023 (excluding social card games), an increase of 70.4%, mainly driven by improved performance from metaverse titles due to the release of Habbo Hotel Origins, consolidation and integration efforts resulting in improved operational performance and product development across the social casino and other metaverse titles. Adjusted EBITDA of € 8.8 million in YTD Q3 2024, as compared to € 5.4 million (excluding social card games), an increase of 63.0% compared to YTD Q3 2023 reflecting the increased performance of our metaverse titles due to the launch of Habbo Hotel origins, consolidation and integration efforts resulting in improved operational performance and product development across the social casino and other metaverse titles offset by the shift in new user generation to mobile in Azerion's social casino environment which has higher growth potential over time, but also higher transaction costs as compared to web.
Operating Profit of € 1.0 million in Q3 2024, compared to Operating Loss of € (1.8) million in Q3 2023 (excluding social card games), an increase mainly driven by the reasons outlined in the preceding paragraph. Operating Loss of € (0.6) million in YTD Q3 2024, compared to € (6.7) million in YTD Q3 2023 (excluding social card games), an improvement once again reflecting the developments described for Adjusted EBITDA above.
Premium Games - Selected Operational KPIs
Premium Games - Operational KPIs
| Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | |
| Avg. Time in Game per Day (min) | 81.0 | 80.0 | 95.0 | 87.0 | 81.0 | 84.7 |
| Avg. DAUs (thousands) | 274.1 | 252.0 | 255.4 | 251.2 | 252.9 | 239.4 |
| Avg. ARPDAU (EUR) | 0.42 | 0.44 | 0.47 | 0.42 | 0.53 | 0.57 |
- The Average Time in Game per Day (min) increased by 6% in Q3 2024 to 84.7 minutes per day as compared to 80.0 minutes per day in Q3 2023 due to the ongoing development of new features and events in social casino and metaverse titles.
- The Average Daily Active Users (DAUs) decreased by (5)% in Q3 2024 to 239.4 compared to Q3 2023 of 252.0, mainly due to lower user acquisition spend and increased focus on greater engagement with higher paying users.
- The Average Revenue per Daily Active User (ARPDAU) increased by 30% in Q3 2024 to € 0.57 compared to Q3 2023 of € 0.44, driven by improved in-game sales mechanics in social casino, features and events and continued benefits from the successful launch of Habbo Hotel Origins in Q2 2024 which progressively normalised during the quarter.