Akazoo Reports Third Quarter 2019 Results
NEW YORK and LONDON, Dec. 9, 2019 /PRNewswire/ -- Akazoo S.A. (NASDAQ: SONG) ("SONG" or "Company"), a leading global music streaming platform and media technology company with a strong international market position focused on emerging markets, today announced improved financial results for the three month and nine month periods ending September 30, 2019. Highlights include:
-- 5.5 Million Premium Subscribers end of Q3, Up 28% Year-over-Year ("YoY")
-- Q3 Revenue of EUR35.0 Million, Up 24% YoY
-- Nine Month 2019 Adjusted EBITDA of EUR11.3 Million - Ahead of FY 2019
Guidance of EUR11m
-- Raising FY 2019 Revenue Guidance from EUR134 Million to EUR136.5 Million
- up 30% YoY with QoQ revenue growth accelerating in Q4
SUMMARY USER AND FINANCIAL METRICS
FINANCIALS (EUR'000) Q3 2018 Q2 2019 Q3 2019 % change 9 months 9 months % change
YoY 2018 2019 YoY
Total Revenue 28,095 33,804 34,959 24% 74,550 99,480 33%
Adjusted Gross Profit 11,362 13,995 14,466 27% 30,317 41,070 35%
Adjusted Gross Margin 40% 41% 41% 41% 41% -
Adjusted EBITDA (1) 2,965 4,220 2,945 -1% 7,696 11,261 46%
Adjusted EBITDA Margin 11% 12% 8% 10% 11% -
USERS (m)
Subscribers (eop) 4.3 5.3 5.5 28% 4.3 5.5 28%
Registered Users (eop) 37.8 43.3 44.4 18% 37.8 44.4 18%
(1): Transaction related costs of
EUR0.49 million for Q2 2019, EUR0.39
million for Q3 2019 and EUR1.26
million for the nine months ended
September 2019 have been excluded
from operating expenses in
calculating Adjusted EBITDA.
Reconciliations of adjusted EBITDA to
net income and adjusted gross profit
are presented elsewhere in this
earnings release.
Third Quarter Financial Highlights:
Revenues increased 24% to EUR35.0 compared to EUR28.1 million in the third quarter of 2018, driven principally by ongoing user acquisition spending with Eastern European and select LATAM territories leading growth trends. Customer acquisition efforts were tempered early in the quarter prior to receiving the $55 million of gross proceeds from the equity financing in September, a trend that reversed following receipt of the proceeds. Average revenue per user (ARPU) for premium subscribers remained stable at EUR2.05, representing a relatively equal growth in subscribers across regions.
Adjusted gross margin of 41.4% in Q3 improved from the 40.4% in Q3 2018. The adjusted gross margin excludes media costs, which are costs incurred to acquire and retain subscribers. Contributing to the increased margin was a deceleration in the growth in media spending prior to the closing of the equity financing. Operating expenses increased as a percentage of revenue in Q3 due to higher costs following the listing in addition to increased content delivery and bandwidth spending. Adjusted EBITDA, which excludes transaction related costs, for the quarter was EUR2.9 million bringing nine-month Adjusted EBITDA to EUR11.3 million, ahead of full year 2019 guidance of EUR11 million.
Balance Sheet Highlights:
Cash and cash equivalents totaled EUR45.5 million at September 30, 2019. The balance sheet was strengthened due to the receipt of gross proceeds of $54.9 million generated from the equity financing in September 2019, referred to above. There were no short- or long-term borrowings at the end of Q3.
Management Commentary:
"We are pleased with the solid revenue and subscriber growth in the third quarter and first nine months of the year. Additionally, we are excited about being well capitalised following the closing of the equity financing late in Q3. As we deploy new growth proceeds, our quarter-over-quarter revenue growth has accelerated in the fourth quarter. In 2020, we expect to see the initial benefits from increased user acquisition initiatives and spending and new partnerships such as our recently announced Rakuten Viber global strategic partnership," said Apostolos Zervos, Founder & CEO.
About Akazoo
Akazoo is a global, on-demand music and audio streaming and media and A.I. technology company, founded 2010, with a focus on emerging markets and a presence in 25 countries. Akazoo's premium service provides subscribers with unlimited online and offline high-quality music streaming access to a catalogue of over 45 million songs on an ad-free basis. Akazoo uses patented A.I. for music recommendations and offers online and offline listening. Akazoo's free, ad-supported radio service consists of over 80,000 stations and exists as a separate services and application. As consumers across the globe continue to shift their media consumption to mobile devices, Akazoo is equipped with a world-class mobile application and user experience which works seamlessly across a multitude of mobile devices and provides a high-quality user experience across a range of mobile networks from 2g to 4g LTE and soon 5g.
Use of Non-IFRS Measures
We define EBITDA as Net Income before Net finance costs, Income tax expense and Depreciation and amortization. We define adjusted EBITDA as EBITDA excluding one-off transaction costs of EUR0.49 million for Q2 2019, EUR0.39 million for Q3 2019 and EUR1.26 million for the nine-months ended September 2019 incurred in connection with our equity financing and business combination transaction in 2019. We believe Adjusted EBITDA is useful to our management and investors as a measure of comparative operating performance from period to period and among companies as it is reflective of changes in pricing decisions, cost controls, and other factors that affect operating performance, and it removes the effect of items not directly resulting from our core operations. We believe that Adjusted EBITDA also is useful to investors because this metric is frequently used by securities analysts, investors, and other interested parties in their evaluation of the operating performance of companies in the technology industry and other industries similar to ours. Our management also uses Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections. Adjusted EBITDA has limitations as an analytical tool. Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, Adjusted EBITDA is not intended to be a measure of discretionary cash to invest in the growth of our business, as it does not reflect tax payments, debt service requirements, capital expenditures, and certain other cash costs that may recur in the future. Management compensates for these limitations by relying on our results reported under IFRS as issued by IASB in addition to using Adjusted EBITDA supplementally.
We define "Free Cash Flow" as net cash from operating activities less capital expenditures. We believe Free Cash Flow is a useful supplemental financial measure for us and investors in assessing our ability to pursue business opportunities and investments. Free Cash Flow is not a measure of our liquidity under IFRS and should not be considered as an alternative to net cash from operating activities.
Akazoo defines Adjusted Gross Profit as Gross Profit plus Media Costs added back, which are costs incurred to acquire customers, consistent with reporting of public peers.
Adjusted EBITDA, Adjusted Gross Profit and Free Cash Flow are non-IFRS measures and are not a substitute for IFRS measures in assessing our overall financial performance. Because Adjusted EBITDA, Adjusted Gross Profit and Free Cash Flow are not measurements determined in accordance with IFRS, and are susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies. You should not consider Adjusted EBITDA, Adjusted Gross Profit and Free Cash Flow in isolation, or as a substitute for an analysis of our results as reported on our consolidated financial statements appearing elsewhere in this proxy statement/prospectus.
Forward Looking Statements
This release contains certain forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on the current expectations, estimates and projections of the Company about its operations, industry, financial condition, performance, results of operations, and liquidity. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Statements containing words such as "may," "could," "believe," "anticipate," "expect," "intend," "plan," "project," "projections," "business outlook," "guidance," "estimate," or similar expressions constitute forward-looking statements. Forward-looking statements represent management's current expectations or predictions of future conditions, events or results. These forward-looking statements include, but are not limited to, statements about, or are based upon assumptions regarding, the Company's strategies and future financial performance; expectations or estimates about future business plans or objectives, prospective performance and opportunities and competitors, including revenues; customer acquisition and retention; operating expenses; market trends, including those in the markets in which the Company competes; liquidity; cash flows and uses of cash; capital expenditures; the Company's ability to invest in growth initiatives and pursue acquisition opportunities; the Company's products and services; pricing; marketing plans; the sources and uses of cash; and the continued listing of the Companies' securities on the Nasdaq Capital Market. You are cautioned not to place undue reliance on these forward-looking statements, which reflect management's good faith beliefs, assumptions and expectations only as of the date hereof. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that may cause actual performance and results to differ materially from those predicted, many of which are beyond the Company's control. Reported results should not be considered an indication of future performance. Except as required by law, we undertake no obligation to publicly release the results of any revision or update to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Financial Statements
The results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the full fiscal year. These statements do not include all information or the footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with IFRS. These statements should be read in conjunction with the Company's consolidated financial statements for the fiscal year ended December 31, 2019, incorporated by reference in the Company's Shell Company Report on Form 20-F filed on September 17, 2019 with the U.S. Securities and Exchange Commission.
Interim Condensed Consolidated Statement of Operations
(Unaudited)
(in EUR thousands, except share and per share data)
Three months ended Nine months ended
September 30, September 30,
--- ---
2019 2018 2019 2018
Revenues 34,959 28,095 99,480 74,550
Cost of revenues -26,716 -21,842 -75,548 -57,865
Media costs -6,223 -5,109 -17,138 -13,632
Other direct costs -20,493 -16,733 -58,41 -44,233
Gross profit 8,243 6,253 23,932 16,685
Operating expenses -5,497 -3,288 -12,869 -8,989
Transaction costs -394 0 -1,257 0
Other Operating Income 198 0 198 0
Depreciation and amortisation -2,144 -1,786 -5,984 -3,677
Operating profit 407 1,179 4,020 4,019
Finance income 1,293 12 790 12
Finance costs -53 -187 -53 -199
Finance income/(costs) -net 1,240 -175 737 -187
Profit before income tax 1,647 1,004 4,757 3,832
Income tax(expense)/benefit -2 7 -2 -13
Net Income 1,645 1,011 4,755 3,819
Profit/(loss) attributable to
non-controlling interest 0 0 0 0
Net income attributable to owners
of the parent 1,645 1,011 4,755 3,819
Weighted-average ordinary shares
outstanding
Basic and Diluted 49,735,210 49,735,210 49,735,210 49,735,210
Income per share attributable to
owners of the parent
Basic and Diluted 0.03 0.02 0.10 0.07
Interim Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
(in EUR thousands)
Three months ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
Net income attributable to
owners of the parent 1,645 1,011 4,755 3,819
Other comprehensive
(loss)/income:
Items that may be subsequently
reclassified to condensed
consolidated statement of
operations (net of tax): 0 0 0 0
Translation differences -5 248 18 1
Items not to be subsequently
reclassified to condensed
consolidated statement of
operations (net of tax): 0 0 0 0
Income tax relating to items
that will not be reclassified
to profit or loss 0 0 0 0
Other comprehensive
(loss)/income for the period
(net of tax) 0 0 0 0
Total comprehensive
(loss)/income for the period
attributable to owners of the
parent 1,640 1,259 4,773 3,820
Interim Condensed Consolidated Statement of Financial Position
(9 months September, 2019, Unaudited)
(in EUR thousands)
9 months 12 months
September, December,
2019 2018
ASSETS
Non-Current Assets
Intangible assets 34,496 27,582
Property, plant and equipment 1,021 1,266
Trade and other receivables 30 30
Deferred tax 0 4
Total Non-Current Assets 35,547 28,882
Current Assets
Trade and other receivables 48,562 34,683
Cash and cash equivalents 45,481 501
Total Current Assets 94,043 35,184
Total Assets 129,590 64,066
Equity and Liabilities
Equity
Share capital 497 58
Share premium 95,653 46,765
Other reserve -1,395 -1,413
Retained earnings 5,067 312
Total Stockholders' Equity 99,822 45,722
Non-controlling interests -9 -9
Total Equity 99,813 45,713
LIABILITIES
Non-Current Liabilities
Pension liability 31 31
Current Liabilities
Trade and other payables 29,746 16,005
Interest bearing loans and
borrowings 0 2,317
Total Current Liabilities 29,746 18,322
Total Liabilities 29,777 18,353
Total Equity and Liabilities 129,590 64,066
Interim Condensed Consolidated Statement of Changes in Equity
(Unaudited)
(in EUR thousands)
Share Retained Share Other Total Minority Total
Capital Earnings Premium Reserves Interest Equity
---
Balance at January 1, 2018 58 -4,555 46,765 -1,413 40,855 -10 40,845
Changes in Equity
Total Comprehensive Income 0 1,446 0 -123 1,323 0 1,323
Balance at March 31, 2018 58 -3,109 46,765 -1,536 42,178 -10 42,168
Changes in Equity
Total Comprehensive Income 0 1,362 0 -124 1,238 0 1,238
Balance at June 30, 2018 58 -1,747 46,765 -1,660 43,416 -10 43,406
Changes in Equity
Total Comprehensive Income 0 1,011 0 248 1,259 0 1,259
Balance at September 30, 2018 58 -736 46,765 -1,412 44,675 -10 44,665
Balance at December 31, 2018 58 312 46,765 -1,413 45,722 -9 45,713
Balance at January 1, 2019 58 312 46,765 -1,413 45,722 -9 45,713
Changes in Equity
Total Comprehensive Income 0 1,801 0 -63 1,738 1,738
Balance at March 31, 2019 58 2,113 46,765 -1,476 47,46 -9 47,451
Changes in Equity
Total Comprehensive Income 0 1,308 0 86 1,394 0 1,394
Balance at June 30, 2019 58 3,421 46,765 -1,390 48,854 -9 48,845
Changes in Equity
Total Comprehensive Income 0 1,646 0 -5 1,641 0 1,641
Additional Paid Capital 439 0 48,888 0 49,327 0 49,327
Balance at September 30, 2019 497 5,067 95,653 -1,395 99,822 -9 99,813
Interim Condensed Consolidated Statement of Cash Flows
(Unaudited)
(in EUR thousands)
9 months ended September 30,
2019 2018
Cash Flows from Operating Activities
Profit before income tax 4,757 3,832
Adjustment to reconcile net income (loss) to net cash used in
operating activities
Depreciation 5,984 3,677
Provisions 9,705 7,119
Finance (income)/expenses net -736 187
Changes in operating assets and liabilities
Decrease / (increase) in trade and other receivables -13,738 -15,335
(Decrease) / increase in trade and other payables -4,126 6,467
Net cash used in operating activities 1,846 5,947
Cash Flows from Investing Activities
Purchase of intangible and tangible fixed assets -4,647 -8,535
Net cash used in investing activities -4,647 -8,535
Cash Flows from Financing Activities
Net proceeds from share capital increase 47,717 0
New loans in the period 0 2,012
Net cash used from financing activities 47,717 2,012
Net Change in Cash 44,915 -576
Cash and cash equivalents at beginning of the period 501 2,107
Effect of foreign exchange rate changes 65 -3
Cash at the end of the period 45,481 1,528
Supplemental Information
Set forth below are reconciliations of EBITDA to net income and Free Cash Flow and adjusted gross profit to gross profit (in thousands EUR).
Three months ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
EBITDA:
Net Income 1,645 1,011 4,755 3,819
Finance costs/(income)-net -1,240 175 -737 187
Income tax expenses
/(benefit) 2 -7 2 13
Depreciation and
amortization 2,144 1,786 5,984 3,677
EBITDA (1) 2,551 2,965 10,004 7,696
Revenues 34,959 28,095 99,480 74,550
EBITDA Margin 7% 11% 10% 10%
Gross Profit 8,243 6,253 23,932 16,685
Gross Margin 24% 22% 24% 22%
add back: Media Costs 6,223 5,109 17,138 13,632
Adjusted Gross Profit 14,466 11,362 41,070 30,317
Adjusted Gross Margin 41% 40% 41% 41%
(1): Transaction related costs
of EUR0.39 million are included
in operating expenses for Q3
2019 and EUR1.26 million for the
nine month period ended
September 2019.
Nine months ended
September 30,
2019 2018
Free Cash Flow:
Net cash from
operating
activities 1,846 5,947
Capital expenditures -4,647 -8,535
Free Cash Flow -2,801 -2,588
View original content to download multimedia:http://www.prnewswire.com/news-releases/akazoo-reports-third-quarter-2019-results-300971055.html
SOURCE Akazoo S.A.
