REG - Bidstack Group PLC - Trading and Operational Update

BidstackAnnouncement

13/02/2023 07:00

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RNS Number : 6964P  Bidstack Group PLC  13 February 2023

Certain information contained within this Announcement is deemed by the
Company to constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014 ("MAR") as applied in the United Kingdom. Upon
publication of this Announcement, this information is now considered to be in
the public domain.

 

13 February 2023

Bidstack Group Plc

("Bidstack" or the "Company" or the "Group")

Trading and Operational Update

Bidstack Group Plc (AIMS: BIDS), the native in-game activation platform, is
publishing a trading and operational update.

Azerion Update

 

Following a preliminary hearing in the District Court in Amsterdam, Azerion
has provided Bidstack security in respect of the initial part of Bidstack's
claims. The Company has been advised that a full hearing in Amsterdam on the
merits of its case and wider claims against Azerion will likely take place in
late Q3 2023.

Given Azerion's purported termination of the agreement with Bidstack, the
Company does not expect to recognise any amounts ultimately paid by Azerion in
respect of its FY23 and FY24 obligations as revenue.

Financial Update

●     Unaudited revenue for FY22 up +103% to c.£5.3m* (FY21: £2.6m)

●     Unaudited gross margin for FY22 at c.70%** (FY21: 36%)

●     Unaudited cash balance at 31 December 2022 up 21% at £8.7m (31
December 2021: £7.1m)

*Unaudited gross billings, including all revenues and Azerion minimum revenue
guarantee invoiced for FY22, were c.£9.3m (FY21: £2.6m), which is in line
with its contractual arrangements previously indicated. However, as a result
of the net accounting treatment under IFRS 15 of revenues and corresponding
costs of sales towards servicing the Azerion contract, the Board believes that
Bidstack's unaudited reported revenues for FY22 will be approximately £5.3m.

** Unaudited gross margin has risen significantly as a result of the net
accounting treatment under IFRS 15 of revenues.  Excluding this impact the
Board believes that the unaudited adjusted gross margin would be closer to
40%.  Nevertheless, the Board currently believes that unaudited gross profit
will be in line with FY22 market expectations.

 

In the Group's audited accounts for the year ended 31 December 2022, revenue,
gross margin and consequent profit or loss are likely to be subject to a
provision based on the Board's assessment of the outcome of the Company's case
against Azerion.  This has no impact on the cash position at the year end.

 

FY22 Operational Highlights

●     Successful placing raising proceeds of c.£10.5m in October 2022,
including a significant investment by Irdeto B.V., a world leader in digital
platform cybersecurity, taking a 13.5% stake in the Company;

●     Growing global network of premium developers and publishers with
over 250 titles (FY21: 58) across in-game, in-menu and rewarded video.  This
includes an addition of two further titles with a AAA game publisher and a
multi-year renewal with Sports Interactive's Football Manager;

●     Increased focus on the US market following the recruitment of Jude
O'Connor (CRO) and Camila Franklin (COO) in September 2022, both former
executives with AdColony.  The commercial team in the US now comprises 10
people;

●     Onboarding of additional resellers with MMP Worldwide (MENA),
AdScholars (India), Totally Awesome (APAC), TNK Factory (South Korea) and
Omega Media (Vietnam);

●     Expansion in Asia-Pacific through the appointment of Motoki Kikuta
(Regional Lead) in Japan to capture the opportunity with local game
developers, enterprise customers and media agencies;

●     Partnership with Unity as a Unity Verified Solution recommended
monetisation solution for game developers across all platforms;

●     Internet Advertising Bureau (IAB)/The Media Rating Council (MRC)
have recognised standards for in-game advertising.  Advertisers now have
clear benchmarks on how to measure campaign success; and

●     Early success with enterprise customers licensing Bidstack's
technology such as mobile ad-tech company Adways and metaverse franchise
SimWin Sports.

 

Outlook

●     As a result of momentum from existing business in UK and
resellers, and driven by the recently hired US in-house sales team,
approximately £1.2m of revenue has already booked for Q1 2023, which is
typically the smallest quarter of the year;

●     Strong pipeline of premium publishers, such as recently signed
two-year exclusive in-game advertising agreement in Ubisoft's successful
mobile franchise Hungry Shark Evolution which also includes rewarded video on
a non-exclusive basis;

●     Signed enterprise customers with Status PRO's NFL PRO ERA 23, the
first ever licensed NFL virtual reality game.  Bidstack's technology will
power all marketing and advertising placements across the in-game digital
stadiums; and

●     Acceleration of DSP connections to drive open marketplace and
access points to Bidstack's gaming inventory platform.

With Bidstack's improving revenue visibility and growing client list, the
Board is confident in Bidstack's ability to operate independently of the
Azerion relationship over time.  While Bidstack intends to continue pursuing
Azerion in respect of its claims for unpaid invoices and breach of contract,
the Board believes Bidstack's strategy positions the Company's for future
growth in the US and success in its growing licensing business.

For FY23, the Company had been expecting its revenue to grow from its US sales
team and its additional resellers, alongside its agreement with Azerion.  The
Board currently expects this FY23 revenue to increase more than previously
expected, for the Group's revenue to be significantly greater than FY22 and
materially weighted to the second half of the year.  The Company expects to
be able to update shareholders on progress at the time of its final results
and throughout the year as appropriate.

James Draper, CEO of Bidstack, said

"In 2022, Bidstack achieved operational growth as the business aims for a $100
million revenue opportunity over the next three to five years.

"The attraction to Bidstack for signing the Azerion partnership in 2021 was
Azerion's sales footprint into the advertising agencies, initially across
Europe and their companies' plans for a global reach thereafter. This allowed
Bidstack to focus our resources on building out our technology, continue to
work with the IAB and MRC to standardise the in-game advertising market,
deepen our relationships on the gaming side and for our strategic teams to
explore different use cases for our proprietary native SDK and gaming SSP.

"This focus allowed us to launch our first licensing technology deal with the
DSP Adways out in Japan, where Bidstack provides our SSP infrastructure,
integrating their DSP into our platform. Adways onboard the games and bring
the advertising demand, Bidstack takes a revenue cut for providing the SSP
infrastructure. This is a low touch, high margin solution.

"The Company recently launched Bidstack Sports, where game studios can grant
access to sports teams or leagues through our platform, where they can control
the advertising within their IP, including stadium, shirt and car
sponsorships. SimWin Sports is a perfect launch product for this technology,
but we are already mapping our technology across sports stadia in multiple
high profile officially endorsed gaming franchises, where we can see a clear
route for Bidstack's technology to underpin the world of virtual sports
rights.

"In territories outside of the Azerion contract we've welcomed in new reseller
partnerships, where in-game advertising specialist companies have been formed
to sell our gaming inventory, in addition to geo-specialist existing agencies,
across MENA, India and APAC. We are seeing campaigns trafficked across our
global network from these partnerships and are looking to grow these
relationships further through 2023. We are seeing strong demand from new
resellers wanting to capitalise on the in-game advertising opportunity.

"In Q1 2022 the first IAB Playfronts event was held in New York, with a
follow-up at the back half of 2022 added to the published measurement
standards for in-game advertising, through the IAB and MRC. This is a
significant moment in this new categories' journey to becoming a thriving
advertising format and industry. Revenues through the space will continue to
grow as the format is becoming widely adopted, with all advertising agency
holding groups forming dedicated 'gaming' divisions to service their clients
globally.

"In 2022 we made the strategic decision to work alongside Azerion in tackling
the US market, where Bidstack took the opportunity to hire-in a US commercial
lead. We attracted world class talent, bringing in a sales and operational
team who had taken reward-video specialists AdColony to a $400 million exit to
Digital Turbine in 2021.

"Attracting Jude O'Connor (CRO) and Camila Franklin (COO), as well as a number
of the key performers from the team they had worked with through their time at
AdColony and beyond, gave the company a media footprint in the US.

"Only four to six months in, we are seeing impactful results. Our Q1 is
already multiples of our previous best revenues for this period, this while
only in mid-February.

"When it became clear that Azerion and Bidstack were in dispute surrounding
our contracted relationship, I'm proud of how our internal teams had adapted
immediately to the situation.

"The Company has attracted proven adtech talent, secured strategic
investments, executed campaigns across the globe from the world's leading
advertisers from all industry verticals. Our contracted games count has pushed
past 250 and I'm delighted we're now working with a number of the world's
biggest game studios, with exponentially growing campaign sizes.

"Although we will continue with our claims against Azerion in the coming year,
we remain extremely confident for the future and are excited with the quality
of the people we are now attracting to join us at Bidstack, and as the
business momentum grows we look forward to keeping our shareholders informed
on our progress throughout the year."

 

-ENDS-

 

Contacts

 

Bidstack Group Plc

 

James Draper, CEO

 

SPARK Advisory Partners Limited (Nomad)

 

Mark Brady / Neil Baldwin / James Keeshan

 

+44 (0) 203 368 3550

 

Stifel Nicolaus Europe Limited (Broker)

 

Fred Walsh / Tom Marsh

 

 +44 (0) 20 7710 7600

 

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