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