Good afternoon, and welcome to the Azerion Interim Financial Results Q2 and H1 2026. After the speaker's remarks, there will be a question- and- answer session. 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. 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'd now like to turn the call over to Sebastiaan Moesman for welcome remarks.
Yes. Thank you, moderator. Good afternoon, everyone. I'm Sebastiaan Moesman, the Chief Strategy Officer at Azerion. Also, acting CFO of the group at the moment. I'd love to welcome you to Azerion's H1 and Q2 earnings call, where I will take you through the highlights of our first half year, of course, and provide some background on the numbers developments as you're used to from us in these calls. With me today I have Alexander Koks, our Head of Strategic Finance.
Hello.
Kyra Steegs, who's managing our investor relations.
Hello, everybody.
As you also used to, I'll do most of the talking, but they will pitch in whenever that's necessary. Before we start, though, I'd like to take a moment to acknowledge the disclaimer. Next slide, please. Also the forward-looking statements on the following slide. All right, let's start with the next slide. All right. Before we dive into the real financials, let me start with our view on the current market for a couple of minutes. First half of 2026 has been a half year where many companies in our industry have been reorganizing themselves based on circumstances like AI changing the world. Certainly, also having an impact on the advertising business.
Economies in general that are in a questionable state, where the growth, if there is any, is actually often generated by a very small group of global high-tech companies. So what looks solid from the outside often feels very different on a smaller individual level. This certainly also true for, and has impact on the advertising industry. Azerion hasn't so much as had to reorganize itself like that, because of those conditions, but we have been getting ready, if you want, for almost three years now. We've seen the need for efficiency, the opportunities of AI, the fragmentation in Europe, and the speed of the giant global tech companies. We've worked hard these years to create a company that flourishes in these conditions.
That meant cost saving throughout the organization, integrating machine intelligence where possible, divesting from non-core activities, cleaning up the balance sheet, and focusing more and more on the health of the core operating business of advertising. We have been cleaning up and improving many aspects of our business one by one, and that gives us currently an excellent position to grab the opportunities in the market while not being hit too hard by the volatility around us. I will explain further in a minute, but let us start with the group's financial results for the first half year on the next slide. Yes, please, one more slide. We are constantly improving. That, for me, is the bottom line, and a great one at that.
EBITDA, operating profit, net profit, all the profitability metrics are better than they were last year around, and most of that is due to the very disciplined cost control that we have been running. At the same time, our Q2 revenue in the advertising segment contracted a bit year-over-year for the first time. I will explain more around this in the advertising segment overview, but as stated before, market conditions are not easy on most companies, and some of those companies are obviously our clients. Next slide, please. When you look at the results over time, this is the picture. As said, all bottom-line metrics improving compared to the first half year of every previous year, basically. We have been focused solely throughout all of this time to create a healthy platform which would allow us to grow profitably, and we are actually getting very close to that point now.
The EBITDA and the adjustments here warrant a bit of a deep dive. Adjustments are mostly the cost of integrating previous acquisitions into Azerion. As we are doing less acquisitions in recent time and focus more on organic strategic partnerships, we also see the projects of integration slowly coming to an end, and that reduces also the related adjustments every quarter. EBITDA has increased in H1, even with the revenue at a slightly lower mark, and that means we keep improving our efficiency still. This is on the next slide. An important item to call out is FX. If you want to know the underlying improvements of the operation, we should exclude realized and unrealized FX gains and losses, which we have illustrated in this graph here.
Last year, H1 had a positive contribution of that, almost EUR 4.5 million, while this year it is a negative of EUR 4.9. If you normalize for those effects, EBITDA would have grown from EUR 11.2 -EUR 18.9, almost 17% improvement in operational performance. Not that we want to restate or be proud about it like this. We already grew the EBITDA with 20%, but this gives you a bit of an underlying insight into the real operational improvements and the cost saving that we did. Also, on the next slide, we did not just improve the operational performance, we also made quite a bit of movement in some core balance sheet items that also gets us into a much healthier position. Interest costs went down, amortizations went down, and we used our cash generation to lower the short-term factoring debt as well.
Outside of the operational performance on the group level, also a lot of cleaning up on the balance. Next slide. A slide you will recognize if you have been with us for a while. We use this for many quarters to show the efficiencies and the operation. We now report basically an all-time low on the OpEx as a percentage of revenues, even as the revenue contracted a bit on the LTM basis. The next slide actually highlights that effect even better. The revenue per FTE in Q2 is now the highest it has ever been. The number of people needed for this level of revenues has decreased tremendously since 2022. If you look all the way back, we were close to 1,500 people doing almost, let us say, not half, but 2/3 of that revenue.
Even with the contractions on the revenues, we are in a super healthy position now. Growing from this position will not need excessive investments in OpEx, and therefore most additional revenue has a higher net margin than we are currently reporting. That is why, if you look further down in the outlook, it is also why we still believe the midterm guidance on adjusted EBITDA percentages is still solid. All in all, a very positive quarter where we kept improving the bottom line of the group, even while markets are under pressure and our revenue was slightly lower than last year. On the next slide, to the segment reporting. We previously reported the Premium Games segment next to the advertising, but as you will know, we divested from most all entities in the Premium Games segment and also discontinued that business.
Until now, we tracked the discontinued part in our reporting, but we moved the results of discontinued out of the reporting into the net result of the discontinued operations in the P&L as we are winding down and selling the last pieces of that business. Subsequently, we will report the AAA Game Distribution now as a separate segment, in which I will dive a little bit deeper after we talked about the advertising. Coming up for sure at the end of this presentation. Let us start with the financial highlights of the Advertising Platform in the next slide. The Advertising Platform results, they really show two different angles today. On the one hand, our bottom line metrics are really positive and promising. We adjust less because we are doing less acquisitions, and the previous acquisition integration costs are coming down as we roll off those projects.
EBITDA and operating profit are improving significantly for the half year because we keep reducing OpEx and we keep simplifying the organization. As you can see in the next slide, just as with the group results, of course, our EBITDA grew 20%, but that was still including the FX effects. If you were to normalize it, just as I did a couple of slides before on the group level, the operational performance in the advertising actually went up with 56% year-over-year. All in all, that means that we are extracting more and more from the same revenues. When we grow this revenue, we will do it at a very healthy margin that we have guided to as mid-term margins.
On the other hand, if you look at the next slide, revenue in the segment contracted with EUR 10 million. This is the other side of the segment. We see this as a consequence of the current market conditions. I've tried to set out, let's say, the reasoning behind it in the next couple of slides. First, although advertising in general grows at a healthy rate, it will do this for a long time since marketing is increasingly about the P of promotion. The growth rate is not equally spread around all types of advertising and also not nicely linear through quarters or months. Big brands feel the effects of the economy, wars, changing consumer behavior towards content, AI, and advertising in general. They are looking for ways to optimize their spend, pay less, do less, get more.
This is what the big tech companies are promising them, and the market feels the power of that pull towards these big global wall gardens. AI is also dominated by the same few companies, and so publishers feel their visitors leaving, and agencies feel the pressure of AI creating the ads, building the plans, and operating their campaigns. At the same time, we see the pull for local and authenticity. Consumers trust proximity, they trust authenticity, and more and more budgets will move towards local. We've put, by the way, some public statements from, let's say, colleagues in our industry along the bottom here, just so you get a feel of not just what I'm telling you here as a, I don't know, advertising oracle. You can see that many more in our industry are saying similar things.
These market conditions in the next slide also mean that our primary partners in markets are looking for the next step, for solutions, for alternatives. They are redefining how to add value to their customers in the AI era. We see big giants like WPP reorganizing and centralizing activities. We see big agencies like Omnicom Media Group and IPG merging to create scale and to find synergies. We also see smaller agencies struggling to remain relevant while also trying to make a living, of course. Again, our peers confirming these observations in their own client bases at the top. At the bottom here of the slide, sorry. This is not new per se. AI is there now for quite a couple of years or so.
At Azerion, this is why we said end of last year that although volatile markets are a threat in a sense, they also come with lots of opportunities. In our Q1 earnings call, we discussed our strategy to reach out to four specific partner types to see if we could work closer with them and provide them with the backbone to run their companies more efficiently on our platform. In the next slide, we see that supporting smaller agencies and specialists is really a great opportunity because these companies are struggling, and they're looking for partners that can help them clean their organization from expensive tech overhead.
We also see the opportunity to provide our products for an SMB market, where we broaden the product and the service from, on the one hand, the biggest agencies, but now also all the way to the other end, to very small agencies and even SMB companies. That, in total, hedges the effect a little bit of one client group like big agencies affecting us much. On the publisher side, we see the opportunity to bring similar efficiencies on technology and hosting to them as well, of course, as they see the traffic to their publications reduce because of AI. In all four areas, we are making good progress. We have contracted Candid and Venatus on the agency and specialist verticals. We have already prepared our Eniro participation through Flavus to support the SMB, and our multi-cloud offering has been steadily growing, adding more and more publishers to our infrastructure.
Venatus is a specialist in gaming advertising. They will build their entire business on the Azerion platform going forward. Similarly, together with Candid, which is a Dutch-based media agency, we will expand and grow their hyperlocal and trading offering to the markets. Both companies can now focus on their core business of selling their products to advertisers, and we take care of all the technology and clearing. These partnerships are not acquisitions. They are basically new customers, albeit significant ones, as they move their entire annual revenues through our platform and start building their business on it. This is the way that we anticipate significant growth will be achieved in the next 12 months. There really is a lot of interest from the market in our solutions, and we are keen on partnering with those kind of companies to make both our businesses better.
On the next slide, in the meantime, we also see that momentum is coming back with the current client base. We have improved our product, launching more AI-integrated tools. We partnered with the likes of Spotify and Westfield Rise, and we struck exclusive deals with suppliers in the digital out-of-home space. We are increasingly recognized as a solid partner in digital advertising, and the new release of our AI-enabled SMB tools are getting traction from France and big publishers find their way to us to integrate our advertising and gaming solutions in their publications. We see the agencies coming back to us in Q3 as well with renewed interest, and our direct client offering is also picking up.
All in all, we believe Q3 is recovering and Q4 will be very positive and will make up for the revenue shortfall in the second part, while the previous cost savings in the end still will boost the full-year bottom line. Even though we are a little bit more careful on the revenue side, the same revenue will generate a much higher bottom line for us than it did in 2025. That is on the advertising. Next slide, we move on to our new segment, AAA Game Distribution. It has been with Azerion for many years. As an investor, you will very likely know what it is all about. Let me take this opportunity to summarize again what business this is and how it works. AAA Game Distribution is the business of selling PC game keys to resellers and consumers.
That means we acquire the right to sell a key for a big game from, for instance, Sony or Microsoft. Our platform allows the distribution of those keys to resellers in markets that sell to consumers, such as Amazon or PlayStation or App Store or our own Voodoo store. A consumer goes to a shop like that, they buy a game key, and without them knowing, it is Azerion powering that transaction, by the way. They activate the key on their PC through a platform like Steam. We make sure the keys are safe from fraud, and the publishers and the retailers can enjoy the transaction as a service, rather than that they have to go strike deals one-to-one between a game developer and online retailer. This is the core business of our GENBA platform. As I said, we also own one of these retailers.
That is our Voodoo business. That is the actual store that you go to buy the game keys. Together with GENBA, they form our AAA Game Distribution segment. Revenue in this segment is largely reported net, by the way, as we pass through the keys and recognize only the margin as revenue. Therefore, you can imagine the significant volume we are representing in the game key market as Azerion. Financially, on the next page, the segment has grown both in the second quarter and the first half-year with a steady 7-ish % point increase. Growth and volumes in AAA are very dependent on big game publisher releasing title, of course. You can imagine if a big game comes out for the PC, that that drives sales. Quarter on quarter or year on year comparisons are a little bit less constant than they are in advertising.
On the next slide, we do again the bottom line EBITDA and operating profit display here. It goes down a little bit, but it is, in this case, almost all related to the FX effects that we described twice now. Especially in this AAA Game Distribution, the EUR 1.4 drop in EBITDA. Of that, actually EUR 1.3 was attributable to that FX effects balance. The underlying business actually performed almost identical year over year if you normalize for that effect. Just to show that steady performance over time, this is the multiyear revenue and EBITDA. On the next slide, advertising. Maybe you think now after this little AAA conversation, advertising and AAA Game Distribution, are they not very disconnected? But they are not. Game developers have significant advertising budgets, which they deploy also with Azerion to promote those new titles. On the rebound, many games nowadays feature advertising in them.
If you think about a Formula 1 or a soccer game, the ads that you see around the tracks and the pitches are displayed and sold with the same technology that Azerion uses to distribute other digital advertising. We are each other's clients, you could say, the game developers and the advertising business. Therefore, as a reseller platform, we are even more interesting to those partners than just delivering the infrastructure to distribute the keys. So there you have it, increasing bottom line for the group, and even more so if you normalize for FX effects. At the same time, a decrease in Q2 revenues in the advertising segment, which we are confident we can make up for in H2. At the same time, we are careful not to overestimate our top line in the current markets.
That brings us to the next slide, the outlook and the last slide. And it's why we are a little bit more careful for the second half of the year in the guidance. We see momentum returning. We see the strategic deals picking up. But we still need to make up for Q2's shortfall first in a market that's still very volatile. Therefore, we reduced our guidance on revenue from the 10% that we communicated beginning of the year to stable versus 2025 now. As said before, our cost-saving programs will still improve the bottom line results even if the revenue is stable, and it will be a significant improvement at that. Yes. With that, I think this was the last slide. I hope the presentation has helped you understand our numbers a little bit better, and we will now open it up for questions.
We will now move into our Q&A session. 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. I will now hand over to Sebastiaan Moesman for written questions.
Yes. Let's dive into that. We got a couple of questions. One is that Meta just reported a 28% ad revenue growth driven entirely by massive AI investments. How can Azerion possibly compete with Big Tech's AI war chest? It's a good question. I think the big Americans, as we said, they have for quite a couple of years now invested heavily in the performance game, if you want. You can see also that their PR states that their conversion of the ads has increased by 15%, meaning more people click on the ads that they show. That is all in a performance space. Azerion is not really in the performance marketing business.
We are more in the branding business, and I think there is a big opportunity and future there, because if you think about it, big brands will have to be known in the market by consumers for them to buy it. AI will increasingly provide, let's say, also the procurement for individuals. I don't think if you let the agent that runs your procurement, if you let the agent buy, let's say, your sports shoes or your groceries, then the AI will not click on performance ads. I think in the future, this whole focus on cost per click and conversion will move slowly back into branding, and branding is more about audio advertising. It's more about out-of-home advertising, and this is where we are strong and also improving and growing. The outdoor ads that are increasing in digital, and we represent more and more of that space.
That's why we are very proud with this Westfield malls partnership that we struck in France, where we exclusively represent all of the shopping malls, the physical shopping malls, screen and audio inventory for sales, because that's where I think in the future, a lot of the opportunity lie, local and branding. We're not trying to compete with Meta in that space. What's driving the accelerated factoring pay down, and is it discretionary or lender driven? I think when we published our annual accounts, we found that at the end of the year, and also the auditor came into that point, that we had a significant, I think it was close to EUR 50 million, short-term borrowing there.
There was just a lot of focus on it, and it was the result of, let's say, the operational and also very manual relationship between us and the bank on the non-recourse factoring. We just simply said, Okay, let's pay attention to this and clean it up, basically. Over the course of the next couple of months, we simply reduced that number heavily by paying a lot of attention to it, and we used the money that we generated in the first half year to finance that pay down. I think it's good. It's healthy, and we should. Now it's back down to a very reasonable number. What's your view on the Q2 advertising market softness? Is this temporary or a real dynamic that will continue? Yes, so this is exactly why we are a little bit careful right now.
I think on the one hand, we see temporary elements of it where we see that everybody's sort of adjusting to the situation, but it also means that once adjusted, they come back and start spending and working again. So that's a temporary side. There's also maybe a longer-term side where, as Meta said, if we're talking about performance marketing and AI, they get better and better at it. That means that those kind of budgets might be for, let's say, in for a real dynamic that is out of play for a longer time. We're not in a particular space, but there's parts in there which are structurally affected by AI, and there's parts that are not. For us, it's not that we are affected. We are using the AI to really get more efficient.
But if you think about an agency that earns its money by selling hours to create the media advice for a big client, you can imagine just as within lawyers, et cetera, that those advice hours are going to be worth less when the AI are capable of bringing in similarly good advice. So it's a mix. AI will disrupt every industry and all markets but some more than others. I think our business itself is not really hit but helped, but our clients are really finding a new way into that whole area. Someone is asking if we can say anything about Q3, but of course we cannot. We do, as I said in the presentations, we do see the big agencies coming back to us for, let's say, the rally towards the end of the year in spending.
And we also see these strategic deals that we struck with Venatus and Candid, they start now. So we did not enjoy any effect of that in Q2, but for sure, these revenues and margins on those deals will come into effect in the second half of the year. So we are looking really forward to that. Let's see. Right then. What is the commercial rationale for holding a 35% stake in Flavus? Well, maybe do you want to take it, Alex?
Yeah. So here we still fundamentally believe in the value proposition and strategic alignments of being involved in SMB publishers such as Eniro. However, direct ownership no longer aligns with our current corporate structure. You can see we are cleaning up quite recently. So with the Flavus transaction, we can still remain involved with agreements to provide technology, AI, and advertising solutions to their portfolio in future. And then obviously, as we work with Flavus, it is our hope that they grow from strength to strength. And as their portfolio expands, so too does our associate benefit, both through providing the services, advertising and AI, as well as through our ownership stake. So it is a restructuring and still maintaining the benefits.
Good. Thank you. Then, I think Daniel posted a question on AAA Game Distribution margin. Can management provide the FX-adjusted apples to apples? I think that is what we did with the slides, if I am not mistaken. The question on the delayed completion of Premium Games disposal. So, we discontinued it, expecting to sell it within the last 12 months, and we are actually, let us say, so close to completing that we also find And that is what is in the numbers, that we also find that we needed to impair the current book value with 3.6?
3.6.
EUR 3.6 million because we are so close to divesting from the rest that we are more and more clear on the valuation of that. So it is happening, but it was slower than expected because last year we had a very clear buyer lined up, but he ultimately couldn't complete the transaction. So we had to find a new buyer, but we did. So it should be close, but it is between not being signed, so it is not sure. On the other hand, we do see the valuation in the market going down, and therefore, we impaired the book value on that a bit. Let's see. Others here. I think most of the other ones are duplicates. So I think with that we covered most of it. So yeah, I think that is it then. Thanks everybody very much for taking the time.
Again, we'll probably see you in another quarter, then I can present to you how we moved from the shortfall in Q2 and how we're doing in recovering that revenue. Looking forward to talking to you then. In the meantime, I wish you all a very good afternoon. Thank you.