Good afternoon and welcome to the Azerion Q4 and fiscal year 2024 interim results presentation. After the speakers' remarks, there will be a question and answer session. For those of you who are joining us via Zoom, if you would like to ask a question at this time, please raise your hand by clicking the 'Raise Hand' at the bottom of your Zoom window. Once called upon, please unmute your audio to ask your question. If you have joined via a phone line, please press star nine to raise your hand and star six to unmute once called upon. For those of you watching on the webcast page, if you'd like to send a question through, please type it in the 'Ask a Question' tab at the right-hand side of the player. These questions can be sent in at any time during the presentation, and they will be addressed after the live Q&A portion of the event. Thank you. I would now like to turn the call over to Umut Akpinar for welcome remarks.
Thank you very much. Good afternoon, everyone. I am Umut Akpinar, CEO of Azerion. I am here with my colleagues, Mrs. Julie Duong Ferat, our Chief Financial Officer.
Hello everyone.
Mr. Sebastiaan Moesman, our Chief Strategy Officer.
Hello everyone.
We would like to welcome you to today's webinar to present Azerion's full year and Q4 2024 interim results. Before we start, I would like to take a moment to acknowledge the disclaimer and our forward-looking statements. Thank you. Please move on to the presentation. This has been a strong quarter for the company. We have focused on profitability and we delivered our 2024 financial guidance. 2024 was a tough year for many of our peers, and this achievement reflects our commitment to sustainable growth and value creation for our shareholders. We have performed strongly both financially and commercially. Our teams have worked hard to deliver relevant and highly engaging ad campaigns across multiple channels in Europe and America, and we also optimized the monetization of our publishers.
For Q4 2024, this resulted in 16% growth in the group's operating profit compared to last year, leading to 14% growth in Adjusted EBITDA for the group, excluding social card games portfolio. This focus on profitability led to a 21% increase in Adjusted EBITDA for the full year, thanks in part to very strong performance from the platform segment. Commercially, we signed partnerships with over 90 new publishers, SSPs and DSPs, as well as signing major campaigns to promote globally recognized brands such as McDonald's, Adobe, and Jaguar Land Rover. Finally, we successfully completed a subsequent bond issue of EUR 50 million, and I would like to thank the new and existing bond investor for their continued faith in the Azerion business model. I would like to hand over to Julie for a more detailed look at our Q4 and financial performance.
Thank you, Umut. Let's start by looking at group financial highlights. For clarity, full year figures on the following slides exclude the social card portfolio divested in Q3 2023. Q4 revenue was relatively stable at EUR 168 million. In this quarter, we focused on higher margin revenue and driving synergies in eliminating redundant costs in the advertising platform. As a result, Adjusted EBITDA for the quarter was EUR 30 million, up by 14% compared to last year. On a full year basis, revenue amounted to EUR 551 million, an increase of 13% compared to last year. This was mainly driven by the performance of our segment platform that we will see more later in detail. Adjusted EBITDA grew 21% year- on- year to EUR 75 million.
This is driven by three factors: higher advertising spend across the platform segment, improved performance of premium games, specifically strong performance of Habbo Hotel Origins, and product development across the social casino titles, plus cost saving and efficiencies from the integration of previous acquisitions. Moving now to our segment in detail. Platform. Our core platform segment is a combination of advertising platform in dark blue and AAA game distribution business in light blue. The whole platform segment generates revenue mainly by displaying digital advertisement in both game and general content, as well as selling and distributing AAA games. Basically, advertisers are served through two models: one, the direct sales, which involve direct engagement between Azerion's commercial team and advertisers or their agencies in their placement of digital ads; and secondly, automated auction sales, in which advertising inventory is purchased through the open market.
In Q4, the total platform segment delivered EUR 153 million compared to EUR 158 million last year, a decrease of 2.9%, mainly due to slightly lower revenue in our AAA game distribution. You can see AAA game distribution in light blue generated approximately EUR 27 million in Q4 2024 compared to EUR 32 million in Q4 2023, a decrease of 15%. This was mainly driven by, first, a lack of high-profile AAA game releases in Q4 2024, and secondly, optimizing towards profitability rather than revenue-driven business in selling smaller but higher-margin titles. On a full year basis, revenue shows active growth of almost 14% compared to last year at EUR 497 million. This growth was driven by increased advertising platform revenue here in dark blue, and especially in direct sales. In 2024, the advertising platform revenue represents 83% of the total platform segment compared to 80% last year.
Regarding the total platform Adjusted EBITDA, it amounts to EUR 26.2 million in Q4 2024, an increase of 15%, largely due to several factors as a mix of advertising platform revenue with an increased share of direct sales, and also an increasingly efficient delivery operation. On a full year basis, total platform Adjusted EBITDA was EUR 62.5 million, an increase of 17%. Moving on, the non-financial KPIs presented in the right side of the slide. Average digital ads sold per month increased a little over 1% to 14.1 billion in Q4 2024, reflecting the platform demand-side growth through the integration of past acquisitions and the consolidation of Azerion monetization technology into a single scalable media buying platform.
The average gross revenue per million processed ad request was EUR 24.3 million in Q4 compared to EUR 34.5 million in Q4 2023, as we onboarded several new high-volume but relatively low-revenue publishing partners in Q4, which we will optimize going forward. Now, let's have a look on our second segment, premium games. Premium games, strong performance of the segment this quarter and also overall in 2024. Indeed, in Q4, total revenue amounted to EUR 15 million, an increase of 5% year on year, and on a full year basis, revenue was circa EUR 54 million, an increase of 9%. Basically, the revenue growth is driven by the increased number of paying users, especially in our title Habbo Hotel Origins, combined with new social casino sales features, improved discount strategies, and an increased partner user acquisition spend.
Adjusted EBITDA for the quarter amounted to EUR 3.9 million compared to EUR 3.6 million last year, an increase of over 8%. Full year, Adjusted EBITDA was close to EUR 13 million compared to EUR 9 million last year, an increase of over 41%. This profitability increase is mainly explained by, as said, strong performance of Habbo Hotel Origins and also consolidation integration efforts, resulting in an improved operational performance. If you look at our operational KPIs on the right-hand side, average daily active users are around 230,000 in Q4 2024, slightly lower than Q4 last year, mainly due to lower user acquisition spend and an increased focus on the greater engagement with higher-paying users. Indeed, as you can see with the ARPU, it increased by 26%, which has been driven by improving game sales mechanics in social casino features and events.
Our average time in game per day continued to be high, with an average of 89 minutes per day in Q4 2024. That is the review of the segments. Now, I would like to make a focus on the realized operational efficiencies. In this chart, the light blue represents our FTE. The black line represents our revenue per FTE. This chart crystallizes our actions and how we continue to integrate our previous acquisitions and optimize our staffing levels. Meanwhile, we increase our revenue per employee year on year. Indeed, the revenue per FTE grew from EUR 152,000 in Q4 2023 to EUR 167,000 in Q4 2024, which again shows our efforts and capacity to optimize our organization. Those figures are highlighted here in these white columns. These operational efficiencies have obviously a meaningful impact in our cost base, which I would like to focus on in the next slide.
Okay, so the primary components of our cost base are service and materials and personnel expenses. This means that we have a highly viable cost structure with flexibility to reduce costs if needed. The cost of service and materials grows as a function of the revenues, but our focus on profitability, and particularly our effort to optimize staffing levels, has resulted in a regular reduction in OpEx as a percentage of revenue. Indeed, you can see here the two positive trends. The orange line represents revenue, where you show the revenue increase. The gray line represents HR costs and other expenses on total revenue, and it shows a reduction. Now, to conclude on my side, let's have a look at the overall financial framework. As said, full year 2024 guidance has been achieved with EUR 551 million revenue and EUR 71.75 million Adjusted EBITDA.
On the 2024 cash flow, we had a net inflow from operating activities of EUR 8 million, a net outflow from investing activities of EUR 37 million, and a net inflow from financing activities of EUR 81 million, mainly coming from the subsequent tap. Regarding the net interest-bearing debt, it amounts to EUR 204 million. After this focus on the figures, I would like to hand over to Seb for a strategy update.
Yes, thank you, Julie. If we had to pick one slide that is going to be in every AdTech earnings call this season, it is probably going to be the one about AI. In order not to disappoint, I'd like to give you an update on our current AI and multi-cloud strategy. These two components are intrinsically linked for Azerion because the sheer volume of data that we process on a daily basis, which is almost 23 billion ad requests, means that we are constantly optimizing our technical infrastructure and have had machine learning and now also generative AI at the heart of our platform for almost 10 years now. Also, as we grow, the reliance and dependence on cloud solutions grows also, and we've been working for the last year to add additional cloud providers into our environment.
We are super happy to announce that we have recently completed the inclusion of Huawei as a partner. They bring both high-quality and low-latency cloud services, but also they allow us to hedge our reliance on other providers and enable us to easily expand the necessary compute power needed for all of the machine learning and AI services we run. Like, for instance, our latest AI-enhanced creative benchmark and outcome intelligence tools. They allow us to produce more engaging ads through AI that also drive more of the results that our customers are looking for. The AI there is able to, much better than humans, see what ads work best and in which environments. It tunes the campaigns again towards those results.
Because we have been doing cloud infrastructure and machine intelligence for almost a decade now, we're also increasingly able to help our European publisher partners to use our multi-cloud and AI infrastructure together to improve their own services and cost structures. For example, we are currently migrating our partner Nero onto the Azerion multi-cloud, which will save them EUR 1.5 million per year in cost only, but will also open up new opportunities for them to integrate new business models and AI-enhanced services also to their clients in the upcoming 12 months. We are really looking forward to bringing more and more of those services and infrastructure to our partners in Europe. This constant investment in the future of our platform encourages us to look forward with confidence. With that in mind, I'd like to share our latest guidance for 2025 and the midterm.
With our full year 2024 net revenue at just over EUR 551 million, the closing of several partnerships we did in the last months of the year, including Goldbach and Monetize, our subsequent bond issue in December, and the opportunities we see for the coming year, our full year 2025 net revenue is expected to be in the range of approximately EUR 600 million to EUR 650 million, with annual growth thereafter in the medium term expected to be about 10%. Adjusted EBITDA for the full year 2025 is expected to be at least approximately EUR 85 million, with annual Adjusted EBITDA margin thereafter in the medium term expected to be in the range of approximately 14%-16% through further integrations, synergies, and scale effects. That is the guidance. I would like to hand over to our Head of Investor Relations, Andrew Buckman, for the Q&A.
Great. Thank you, Seb. Before I go into the written questions, operator, do you have any questions that are lined up from people on the line?
Thank you. We will now move into our Q&A session. For those of you who are joining us via Zoom, if you would like to ask a question at this time, please raise your hand by clicking the raise hand at the bottom of your Zoom window. Once called upon, please unmute your audio to ask a question. If you have joined via phone lines, please press star nine to unmute. For those of you who are watching on the webcast page, if you would like to send a question through, please type it in the ask a question tab at the right-hand side of the player. To start, we would like to take our first question from Wim Gille at ABN AMRO. Please unmute your line to ask your question.
Yes, a very good afternoon. I hope you can hear me. I would like to zoom in on the performance in the platform segment with revenues down 3%. Can you give us a bit of an indication if at all there was any contribution from the Hawk acquisition you announced in late October 2023? Not quite sure since when you've been including it. Is there any M&A effect there? Likewise, also for the Goldbach acquisition, which you announced obviously late last year, was it already concluded? Is there a contribution in the results there? I.e., can you give us a bit of a split or a feeling on what the organic growth in the platform business was? That would be my first question.
The second question is, if I look at the outlook for revenues for 2025, it's a bit of a range, 8%-18% growth for the coming years. What is the contribution that you expect from Goldbach, and what's the contribution you expect from organic growth, and why should we see an acceleration in organic growth vis-à-vis Q4 that is required to meet the outlook for 2025? Lastly, on the Adjusted EBITDA outlook, do you have any feeling on where the adjustments in the EBITDA for 2025 are going to end up, both in terms of restructuring as well as M&A, taking into account or assuming that we will not see further M&A, which obviously is not likely, but that would be my questions. Thanks.
Great. Thanks, Wim. I think the first two questions, which are really about sort of what is the sort of contribution from our different acquisitions and the organic growth and what the strategy is around that, and probably also linked with what's the outlook for the revenues to that. Maybe Seb, if you could look at that, because I know that's an area that you've been focused on.
Yes, of course. Good to hear you again. Happy to take your question. First, to pair properly, I think good to know that Hawk was in our numbers last year for Q4 as well. There is not a gap in the revenues because it was later in the quarter or so. It was a full quarter-on-quarter comparison. What happens when we acquire a company is that on the one hand, we are integrating, let's say, their business and their technology, but we also always get revenue with that, of course. We are assessing every acquisition's revenue every time we do it to see whether the revenue is also, on the one hand, fitting our business. If it is not profitable enough, we are trying to look for more profitable revenues, for instance.
Sometimes the clients of the acquisition also decide to, after an acquisition, not work with us a little bit anymore. It means that in general, we see a little decrease in the acquisition's revenue after acquisition. Then slowly, we are going to rebuild that again with more profitable revenue that is closer to the Azerion DNA. At the same time, that would mean a decrease. On the other side, we are growing organically. That ended up almost flat on the advertising part in Q4 last year. It is a mix of increased direct sales and, on the other hand, a little bit of the, let's say, removed revenues from last year. That is on that side. In the other part of the platform, it is really in the AA A.
The actual decrease in revenue is mostly coming from AAA. That is because in December, Sony had a very specific title, which they expected a lot of sales from, but that did not come through. Therefore, they declined with 15%, making up for the biggest, let's say, chunk of the decrease in last year, Q4. That is basically the debt comparison on Hawk. We had the part on Goldbach. Goldbach came very late in the year and had a very small contribution back then. For this year, we, of course, expect them to contribute. I do not have those numbers, so I will have to revert that back to Andrew in a second.
What we see, and that was your second question, is that for the full year, our outlook, as we have it now, is mostly the combination of the already, let's say, transacted acquisitions and partnerships that we did at the far end of the year, and then taken into account their performance over to full 2025 into the current outlook. I think that's, yeah, you could call it organic again because they're acquired now, so they're part of the business. Let's say, for instance, Goldbach in Austria is a digital out-of-home publisher. They have a lot of outdoor screens in Austria. They're now part of our sales network. Basically, the DACH team is selling audio, digital out-of-home, classic digital advertising as well as a package. That also then partly goes into the Goldbach business, which is now part of our organic. Those are the two questions. Andrew?
Yes, thank you, Seb. I think your third question, Wim, was about the Adjusted EBITDA and what that's looking for over 2025. I think I'll hand over to Julie for that one.
Yeah. Hi, Wim. Thank you for your question. Regarding the adjustment, basically, those costs are part of our ongoing integration programs that need to be managed carefully, as you can imagine, to ensure long-term shareholder value. There is no fixed model to manage these programs precisely because of the varied nature of the cost and the people and the business that come into that group through acquisition and partnership. What Sebastiaan said, we see an increased number of opportunities to accelerate our growth next year, this year, 2025. Those strategic partnerships and acquisitions in 2025, we will still be active to reduce our cost basis. I would say that the best example is the slide that I showed on the cost-based development, where you saw that the OpEx percentage on the total revenue is decreasing year after year. It is really how we demonstrate that our integration program, yeah, is basically for the moment a success. We will continue to do that. We'll not stop trying to make it more efficient at the group.
Yeah, maybe I can add a few words, Julie, because those integrations, as Julie says, are not like a straight-line mathematical model of integration. This goes over time. Sometimes you need to integrate the technology first. Sometimes it's about people and the commercial teams that you're merging for synergies. We did quite a few acquisitions, let's say, since 2022, 2023. Those are all in various stages of, let's say, ending the integration. Even at the end, there can be quite a significant adjustment as you move from, let's say, cloud provider or sunset-specific technologies or no need for development teams in a certain area anymore. We still see the effect of that. Of course, Goldbach and anything we do in 2025 will also bring their own adjustments as we are integrating them into the company. It is a mix of the, let's say, the long tail of the acquisitions of 2022 and later and the new acquisitions that we did recently.
Great. Thanks.
Can you put anything? Can you put any specific number on what you expect for 2025 in terms of restructuring costs?
We do not have a specific number for that one because basically, as I said, it really depends about each acquisition or partnership that we continue. There is no specific amount that we have in mind.
All right. Thank you.
Great. Thanks, Wim. Any more questions from you?
There are no further questions at this time. I'll hand back over to Andrew for written questions.
Great. Thank you. We have had one question that has come in really looking about our M&A strategy for 2025. I think, Seb, if you could sort of talk to what is our M&A strategy for this year going forward?
Yes, of course. This is going to be an extension, of course, of what we said quite recently, end of November, when we tapped our latest EUR 50 million bond issue. In that communication, in that raise, we already said our investments are always going to be in the area of, on the one hand, publishing, so owning the advertising supply that we help our advertisers be successful with. Technology is the second area of interest. Of course, if there are new channels that we can advertise, then technology to allow for that is super interesting. We recently did this digital out-of-home, of course, with Goldbach, but previously also Targetspot and the audio platform. Every time there is a new and upcoming channel, we will be looking for technologies there. The last part is geographic.
If we were to start in a new European country, for instance, probably we would acquire a company to do so and not start from scratch. This has always been the strategy. In November, we highlighted about eight very concrete potential partnerships to raise the bond and to the bond investors. We also executed since then a few of them, Quantum in Belgium. We had Monetize in Paris. We have Goldbach, of course, in Austria. We did already a few there. That list, and the list is always growing and also changing at the same time as we are assessing the value add of these companies. Of course, we'll be continuing the investment in that space through this year, making the most out of that bond raise that we did end of last year.
It is going to be a continuation of what we said last year and trying to accelerate our growth specifically in these areas where we also see the high growth in the market, like digital out-of-home, like the audio platform, like the connected TV, etc. There is a lot still to do. The market is still very good for us. Yeah, we are looking forward to capitalize on those opportunities in the next few quarters.
Great. Thanks, Seb. I think we had one more question, which was about what is the biggest opportunity for growth, but I feel that you've answered that one in your question. That is all the questions that we have for today.