Astralis A/S

The Market, Leagues and MediaRightsOver the past decade, the global esportsaudience has been on a steady climb andthe global pandemic only accelerated thisdevelopment. In 2022, esports attractedmore than 500 million viewers, out ofwhich just under half watched esportsonline more than once a month. Over thecoming years, the audience is expected tocontinue growing, surpassing 640 millionin 2024 according to www.newzoo.com.Structured league formats withpermanent participation of the biggestteam brands contribute significantly tothe continued growth in interest andthereby the value of teams, tournamentsand rights.The Astralis brand has reached a position,where participation of our teams isregarded as an asset to the premierleagues in esports. Together with othertop teams and ESL, Astralis is an equalowner of ESL Pro League and a franchisemember of BLAST Premier, both Counter-Strike, where our women’s team holdparticipation rights in ESL Impact League.Likewise, our League of Legends teamholds one of the 10 coveted franchisespots in game developer Riot’s LECleague.As franchise member, Astralis partakesin revenues and profits generated fromleague TV rights, sponsorship, and relatedbusiness. Across the board, leaguerights continued to grow and in 2022, therevenue from these rights grew by 26%compared to 2021.For the leagues we hold franchise rights(LEC, BLAST Premier, Pro League, andESL Impact League), we are not onlyseeing a consistent increase in thecommercial value, but also a notablegrowth in the transaction values of leagueand franchise rights: In the summerof 2021, FC Schalke 04 sold their LECfranchise rights at a reported price of 26.5MEUR, and in early 2022, ESL and FACEITwas traded at a reported 1.5 BLN USD (in2015, the price for the majority of ESL was78 MUSD).Commercial platformOur commercial platform is built on thestrength of our brand and owned media,enabling us to reach and engage agrowing, young, commercially attractive,global fan base. Unlike traditional sports,which can be characterized as asset-ledsales, esports’ digitally native startingpoint has allowed Astralis to take anaudience-led sales approach from dayone. As our audience continues to growand our digital and physical footprintexpands, the value of our commercialoffering scales exponentially. We are notlimited by geographical boundaries oraffiliations and increasingly we are seeingour commercial partners activate theirpartnership with us on a local as well asinternational basis.Highly experienced ManagementManagement of Astralis A/S consistsof the Board of Directors, an ExecutiveManagement Group and SeniorManagement. All are highly skilled,professional managers covering different,specific parts of the overall developmentand day-to-day business operation.The Management in Astralis A/S bringsexperience from top management rolesin relevant areas such as ProfessionalSports, Media, Finance, Communication,Branding and Business Development.The Executive Management Group andSenior Management of Astralis A/S•Anders Hørsholt, CEO•Jakob Hansen, CFO•Kasper Sindt, Commercial Director•Kasper Hvidt, Director of Sports•Steen Laursen, Director ofCommunication•Benjamin Boraghi, Marketing Director•Christian Sørensen, Director BusinessDevelopmentFull curriculum vitae of ExecutiveManagement can be found atwww.astralis.gg/investorLETTER TO SHAREHOLDERSIn 2022, we consolidated our business aroundour strongest growth areas. Our financial resultsconfirm this strategy and meet our expectations.In a year with challenging circumstances in adifficult and ever-changing market, high inflation,supply disruptions, a war in Europe and a periodwith limited success for our teams, the financialresults and development of our business are verysatisfactory.The main contributors to the positivedevelopment and high growth ratesare further increases in the value ofCommercial Partnerships and LeagueRevenues as well as the full effectof Astralis Nexus, which alone saw adoubling of revenue compared to 2021.In a year of varied success for our teams,not only did we continue the growth,meeting our financial guidance, we alsosaw a continued strengthening of ourbrand with a growing digital audienceand media around our main teams. Thisconfirms our strategy around creatinga global gaming brand and media,independent of short-term team results.Through the launch in December 2022 ofBlackbox Media, an independent, modernmedia company, we aim to strengthenour position even further, providing ourexisting and future commercial partnersa much larger palette of media channelsand activations.On the team side, we consolidated theefforts and invested in strong playerprofiles and a significant upgrade of theperformance organization with the aim toimprove the results significantly in 2023.In a year of varied success for ourteams, the Astralis brand continuedto strengthen within existing and newaudiences. The fanbase continuedpositive development measured inthe number of followers on our digitalchannels and compared to 2021 weregistered a 10 pct increase across allplatforms, providing a wider commercialplatform for existing and potentialcommercial partners.Leagues and Franchise RightsAstralis holds Franchise Rights in someof the most attractive internationaltournaments and leagues, including LEC(League of Legends), and Pro Leagueand BLAST Premier (both Counter-Strike).These rights contribute with increasing,direct income generated from league TVrights, commercial partnerships, relatedbusiness, as well as continued guaranteedexposure to attractive audiences in keymarkets.The Minimum Guaranteed revenue sharesfrom these league and franchise rightagreements secure a solid base for ourteams, enabling us to budget long termand invest in the brand, organization,players, and facilities.The value of these rights has increasedsignificantly since the leagues wereintroduced and we continue to see veryhigh reported transaction values. Thesevalues far exceed the values reflected inthe financial statements.Brand, Media, and PartnershipsThe Astralis brand continued to grow,even compared to a strong 2021, with highengagement and viewership, and a 10 pctincrease in the number of followers acrossall our media platforms.Our diverse and expanding mediaportfolio and the continued growth inthe global fan base, combined with highengagement rates provides a strongcommercial platform for existing andpotential commercial partners. Acrossteams and Astralis Nexus, on top ofexisting partners, we extended keypartnership agreements and entered 8new, significant partnership agreementsin existing and new markets. includingtwo new partners in China, where wealso launched the Astralis brand on keyregional social media platforms.To further strengthen Astralis’ digitalbusiness and position as a MediaOrganization in the gaming industry, welaunched a new, modern media companyin December 2022, Blackbox MediaApS, together with some of the mostexperienced and creative minds in themedia- and advertising industry. Similar toPIXEL.TV, in which we are majority owners,Blackbox Media will be an independentactor with its own organization. Besidesbeing its own business, the ambition forBackbox Media is to provide Astralis witha much larger palette of media and newopportunities vis-à-vis our existing andfuture commercial partners. Currently,Astralis is the majority owner holding 55%of the shares of Blackbox Media.OrganizationTo support our growing business andstrengthening our position around media,retail and esports performance, in 2022,our organization grew in size, experienceand skills. By the end of 2022 weemployed more than 90 people on threecontinents, including new functions andprofiles around our teams, Astralis Nexus,as well as in the commercial and contentdivisions.The organization around Astralis Nexuswas strengthened, headed by our newHead of Business Development, ChristianSørensen, together with a talented day today management group handling our B2Band B2C business.Teams, performance, anddevelopmentWe have activities and teams in someof the biggest esports titles includingCounter-Strike, League of Legends,Rainbow Six and Fortnite. In 2022 westarted a consolidation of our businessaround the most viable activities in themost viable game titles.This has meant that from November 2022we have discontinued player activitiesin Fortnite, while we have continued thecontent driven media channels aroundthe game. We have discontinued thetalent program in League of Legends,as the league did not create relevantexperience for the players or value forthe organization, and from 2023 wehave moved the main team in Leagueof Legends to Berlin, where the playersare close to the studios where the LECtournament is played.In late 2022, we decided to re-vitalizethe main teams in League of Legendsand Counter-Strike through significantsignings of new players and an investmentin the performance organization aroundthe players, where strong profiles withproven track records within performanceand mental coaching were added to theorganization.Counter-StrikeFollowing a year of less-than-optimalchanges in the roster and coachingteam, we decided to rebuild the teamand modernize the performanceorganization in late 2022. On the playerside, we brought back Nicolai “dev1ce”Reedtz, arguably one of the best playersin Counter-Strike and one of the keyelements in our 4 Major wins, whilealso adding young talent and hunger inChristian “Buzz” Andersen, who is one ofthe biggest talents in Denmark.In September 2022, we launched ourwomen’s Counter-Strike team, withthe aim to become a contender for thebiggest titles, participating in all relevanttournaments, including the global ESLImpact League.In Counter-Strike, we hold Franchiseand participation rights in the two mostvaluable international leagues; BLASTPremier and Pro League. Our women’steam holds participation rights in thebiggest international tournament ESLImpact League, and our talent teamholds participation rights in the mostprestigious international talent leagueWePlay Academy League.EBITDA for Astralis CS was DKK 6.6 millionin 2022 (DKK -7.6 million full year 2021).League of LegendsFollowing a series of seasons ending justoutside the play-off spots, we decided tochange the way we work with our Leagueof Legends team and from 2023 we havemoved the players from the CopenhagenHQ to facilities in Berlin, close to the LECstudios, where the tournament is playedevery weekend throughout the season.This eliminates travel time and increasesthe coach’s, manager’s and players’ timeto practice and to focus on their primaryresponsibility and performance in-game.In League of Legends, we hold Franchiseand Participation rights in LEC, which isthe European leg of the global League ofLegends tournament.EBITDA for Astralis LoL was DKK 1.8million in 2022 (DKK -2.6 million full year2021).Rainbow SixResults were satisfactory during theteam’s first year, which included a GrandFinal in their second ever Major, whichis the biggest, international Rainbow Sixtournament. The league development,however, has not met our expectationswhen it comes to guaranteed revenue andcapitalization and the competitive teamhas been closed in February 2023.EBITDA for Astralis US was in 2022 DKK-2.2 million (DKK -0.6 million Sep-Dec2021).FortniteThe Fortnite scene and digital communityis very active, and the audience isattractive, however competitively ithas proven close to impossible to run asustainable business as a team owner.Hence, in November 2022 we decidedto change the strategy and concentrateour activities in Fortnite around digitalcontent and events, online and live eventsin Astralis Nexus.Fortnite is operated as part of AstralisManagement where the EBITDA was DKK3.7 million in 2022 (DKK 7.7 million full year2021).FIFAFIFA is one of the most played gamesin the world, and our Brazilian unofficialwomen’s world champion, Stephanie“Teca”, continues to grow her popularityand audience in especially SouthAmerica. She has become a very usedand important role model and Astralisambassador for inclusivity and thepositives of esports.EBITDA for Astralis FIFA was DKK -1.1million in 2022 (DKK -0.8 million full year2021).PIXEL.TVEarly 2022, Astralis acquired a majoritystake in PIXEL.TV, a Danish productionhouse and broadcaster. The acquisitionhas significantly strengthened our digitalproduction, presence, and reach tofurther engage a fast-growing audience.EBITDA for PIXEL.TV was DKK -0.6 millionin 2022.Astralis NexusIn the physical world, we have alsoseen a continued, positive developmentthroughout the year with increasedinterest from both the public andcommercial brands around Astralis Nexus,our first physical gaming and eventfacilities in Copenhagen.With its 1,200 sqm facilities of gaming,event, and merchandise shop space,Astralis Nexus has cemented its positionin the Danish gaming industry and hasbecome the center for all gaming relatedactivities including education and schoolactivities, conferences, team building,commercial and social events, as well asgeneral entertainment.Renewed focus on our B2B and B2Cbusiness, events, gaming tournaments,partnership activation, and generalutilization of the gaming space resulted ina doubling of revenue compared to 2021with a very strong growth in especially Q3and Q4.Astralis Nexus is a part of our overallbusiness model with revenue streamsmainly from local and regional commercialpartnerships, hosting of B2B eventsand sold game time, including food andbeverages. The facilities are used foractivation of our global partnerships inconnection with content production for allour teams.In early 2022 we entered the first strategicpartnership, exclusively focused onactivation in Astralis Nexus, and we havesince added an additional commercialpartner generating additional revenuewith the aim to contribute positively toour bottom line by 2025 the latest.EBITDA for Astralis Nexus was DKK -6.0million in 2022 (DKK -4.5 million Jun-Dec2021).Treasury sharesAs a result of reverse vesting of sharesunder the Group’s warrant program,Astralis A/S holds treasury shares of456,002 of nominally DKK 0.01 eachcorresponding to 0.8% of the sharecapital. No treasury shares have beenacquired or sold in 2022.ResultsIn the context of the difficulties inthe market and our teams’ generalperformance in 2022, the result for 2022with a first-ever positive EBITDA confirmsour business strategy and -model, andrevenue grew by 17 %.The full year net revenue for the Groupwas DKK 87.5 million in 2022 – comparedto DKK 75.0 million in 2021 - which was inthe middle of the financial guidance givenin corporate announcement no. 2-2022 ofDKK 85-90 million.A positive EBITDA of DKK 2.6 million -compared to DKK -7.9 million in 2021 - wasin line with the guidance given with arange between DKK 0 to 5 million.The result before tax for the year wasDKK -9.7 million which is in line withexpectations.Loss for the year-9668-35195-52975-34643FINANCIAL REVIEWThe Management of Astralis A/S has preparedand presents herein the statutory consolidatedfinancial statements as of 31 December 2022 forAstralis A/S and its subsidiaries which providesconsolidated information about Astralis A/S’financial performance for the period 1 January2022 – 31 December 2022.'RevenueTotal revenue for 2022 was DKK 87.5million (DKK 75.0 million in 2021) whichwas in line with expectations. Theincrease in revenue was driven by AstralisCS with DKK 44.7 million, Astralis LoL withDKK 15.3 million, Astralis FIFA with DKK0.4 million, Astralis Nexus with DKK 7.4million, Astralis US with DKK 2.2 million,Astralis Management with DKK 16.1million and PIXEL.TV with DKK 2.2 million.The increase in revenue was primarilydriven by League Revenue, CommercialPartnerships and Astralis Nexus.External costs, staff costs and depreciation and amortizationExternal costs were DKK 24.0 million (DKK25.2 million in 2021) which was in line withexpectations for the period. Staff costswere DKK 61.6 million (DKK 64.4 million in2021). Depreciation and amortization wereDKK 12.1 million (DKK 25.2 million in 2021).Amortization in 2022 was DKK 16.1 millionlower than in 2021 attributable to highvalue player rights with contract expiryend 2021 was amortized down to DKK 0(zero) by end 2021.'EBITDAEBITDA for 2022 were DKK 2.6 million(DKK -7.9 million in 2021) which was in linewith expectations. EBITDA for AstralisCS were DKK 6.6 million (DKK -7.6 million.in 2021), for Astralis LoL DKK 1.8 million.(DKK -2.6 million in 2021), for Astralis FIFADKK -1.1 million (DKK -0.8 million in 2021),for Astralis Nexus DKK -6.0 million (DKK-4.5 million in Jul-Dec 2021) for AstralisUS DKK -2.2 million (DKK -0.6 million inSep-Dec 2021) and for PIXEL.TV DKK-0.6 million (Acquired 1. January 2022). Inaddition, non-allocated revenue and costsaccounted for DKK 4.1 million (DKK 8.2million in 2021).'Net financialsIn 2022, net financials amounted to aloss of DKK -0.1 million (DKK -2.2 million in2021).'Income taxIncome tax in 2022 was DKK 0 (DKK0.0 million in 2020). The Group has anunrecognized deferred tax asset primarilyfrom tax loss carry forward of DKK 24.2million which is not recognized in thefinancial statements.'Loss for the periodThe result for 2022 was DKK -9.7 million(DKK -35.2 million in 2021).'Balance Sheet'Intangible assetsIntangible assets amount to DKK 55.0million as of 31 December 2022 (DKK 61.3million in 2021) which is related to thefranchise slot in the European Leagueof Legends franchise league DKK 35.8million, Player rights DKK 4.3 million,Goodwill 9.5 million and Trademarks DKK5.4 million.'Current AssetsCurrent assets at the end of 2022 wereDKK 34.8 million (DKK 55.8 million in 2021)of which DKK 9.9 million was in cash andDKK 20.6 million in trade receivables.'Non-current liabilitiesNon-current liabilities at the end of 2022were 1.2 million (DKK 9.4 million in 2021) .'Current liabilitiesCurrent liabilities at the end of 2022 wereDKK 24.2 million (DKK 34.1 million in 2021)of which DKK 9.0 million were relatedto the European League of Legendsfranchise league.'EquityThe Group’s equity amounts to DKK 73.9million as of 31 December 2022 (DKK83.2 million in 2021). No dividends will bedistributed for 2022.'Cash Flow'OperationsIn 2022, the cash flow from operatingactivities was DKK 3.0 million (DKK -19.4million in 2021).'InvestmentsIn 2022, the cash flow used forinvestments were DKK -6.6 million(DKK -1.8 million in 2021), of which DKK-1.6 million were related to leaseholdimprovements, DKK -4.5 million wererelated to contractual rights and DKK -0.5million were related to the acquisition ofPIXEL.TV ApS.'FinancingIn 2022, the cash flow from financingactivities was DKK -9.3 million related todeferred repayment of payables to leaguetournament rights.OUR RESULTSAstralis consists of teams and activities in thegaming titles of Counter-Strike, League of Legends,Fortnite, Rainbow Six, and FIFA, as well as ourgaming and entertainment center Astralis Nexus,the Management company Astralis Management,and majority ownership of Pixel TV and BlackboxMedia.Counter-StrikeAstralis Counter-Strike holds franchiseand participation rights in BLAST Premierand Pro League, where we are part ownerstogether with 15 other team owners andESL. Astralis Talent holds participationrights in WePlay Academy League and ourWomen’s team hold participation rights inESL Impact League. The teams competein all relevant international and nationaltournaments, including the bi-annualMajor (World Championships).Net revenue in Counter-Strike was DKK44.7 million in 2022, which was DKK 8.2million lower than 2021. The main reasonfor the lower revenue was a decrease indigital item sales and prize money due tothe team’s performance in 2022.Total operating expenses for 2022 wereDKK 38.1 million which was DKK 22.4million lower than 2021 due to lower digitalitem sales and less prize money paid outto players. EBITDA for 2022 was DKK 6.6million (DKK -7.6 million in 2021).League of LegendsAstralis League of Legends hold franchiserights in Riot’s LEC, the European leg ofthe premier global league tournament inLeague of Legends.Net revenue in League of Legends wasDKK 15.3 million in 2022 DKK 1.1 millionlower than 2021. Total operating expensesfor 2022 were DKK 13.6 million which wasDKK 5.4 million lower than 2021. EBITDAfor 2022 was DKK 1.7 million (DKK -2.6million in 2021).FIFAAstralis FIFA is represented by theworld’s best female FIFA player, BrazilianStephanie “Teca”, who competes inrelevant regional and global tournaments.Net revenue in FIFA was DKK 0.4 millionin 2022 which was DKK 3.2 million lowerthan 2021. Total operating expenses for2022 were DKK 1.5 million which was DKK2.8 million lower than 2021. EBITDA for2022 was DKK -1.1 million (DKK -0.8 millionin 2021).Other activitiesAstralis NexusAstralis Nexus is our first gamingand entertainment facility. The 1,200square-meter, two-story facility incentral Copenhagen includes a largeMerchandise Store, 130 pro-gamingstations, four VIP gaming rooms, threefully equipped streaming studios forcontent creators, an auditorium, ashow room and the possibility for ourCommercial Partners to display and selltheir products.Total income in Astralis Nexus was DKK7.4 million in 2022 (DKK 1.7 million in Jun-Dec 2021) of which DKK 6.8 million wasrelated to revenue and DKK 0.6 millionto COVID-19 compensation. AstralisNexus was closed in January 2022 dueto COVID-19 restrictions. Total operatingexpenses for 2022 were 13.4 million whichwas DKK 6.6 million higher than 2021 (onlyJun-Dec 2021). EBITDA for 2022 was DKK-6.0 million (DKK -4.5 million in Jun-Dec2021)PIXEL.TVWith an ownership of 51% Astralis holdsthe majority ownership of the gamingand gadget streaming and cable TVchannel PIXEL.TV. PIXEL.TV was acquired1. January 2022 and is operated fullyindependently.Net revenue in Pixel TV was DKK 2.2million in 2022. Total operating expensesfor 2022 were DKK 2.9 million. EBITDA forthe period was DKK -0.7 million.BlackBox MediaFounded in December 2022 and startedoperating in January 2023. Astralis holdsan ownership of 55% in BlackBox Mediawhich is operated fully independently.Astralis ManagementThe performance, brands, andorganization of Astralis’ teams andphysical assets are managed by AstralisManagement. Astralis Management isresponsible for the performance teamsupporting the teams, commercialagreements and the backoffice functions.Total income in Astralis Management wasDKK 48.3 million in 2022 (DKK 36.2 millionin 2021) of which DKK 32.5 million wasrelated to management fee and DKK 15.8million to non-allocated revenue. Totaloperating expenses for 2022 were DKK44.6 million (DKK 28.5 million in 2021) andEBITDA for 2022 was DKK 3.7 million (DKK7.7 million in 2021).LEAGUE AND FRANCHISE STRUCTURESFor our teams, a large part of the revenue streamsstems from league and tournament activities, andwe hold participation and holding rights in the pre-mier Franchise Leagues in both League of Legendsand Counter-Strike.As evidenced from the traditional USsports industry (NFL, NBA, MLB), scarceleague franchise rights are historicallyamong the best performing asset classeswith large and consistent financialappreciation. For the leagues where wehold franchise rights, we see immediatecommercial value as well as boundlesslong-term equity growth potential. Theformer is already proving economicgrowth above the industry standards,while the latter has been documented bya series of franchise slot trades, drivenby significant demand in a market with alimited number of franchise slots.Holding franchise rights secures a directincome generated from league mediarights, league sponsorships, and relatedbusiness, as well as continued guaranteedexposure to global and regional leagueaudiences, a strengthening of our brand,fan base, and commercial valueDifferent ModelsLeague of LegendsIn League of Legends, Astralis is one ofonly 10 organizations holding FranchiseRights in Riot Games’ LEC, which is theEuropean regional leg of the global leaguestructure owned and operated by thegame developer Riot Games. There are 4regional leagues with 10 teams each, allcompeting to win their respective leaguesand to qualify for the annual WorldChampionship, “Worlds”.The league shares revenue fromsponsorships and media rights throughthe League Revenue Pool and guaranteesFranchise holders vast exposure on theirglobal media platforms broadcastingall matches between the best and mostpopular teams in the region and in theworld.Each organization pays a buy-in fee tosecure the Franchise Rights and in 2018,Origen Esports ApS (from 2019 part of thecurrent Astralis group structure) paid abuy-in fee of 10.5 MEUR for these rights.In the summer of 2021, FC Schalke 04,who joined LEC the year before Astralis,sold their Franchise Rights for 26,5 MEUR– a value increase of more than 250pct.As holders of the LEC Franchise Rights,Astralis is guaranteed a permanent spot inLEC, massive media exposure and a shareof revenues from growing sponsorshipsand media rights.Counter-StrikeCounter-Strike is owned by Valve,who allows independent TournamentOperators to build their own leagues andtournaments. Still, Valve is a major part ofthe eco system in tournaments, as theyarrange 1-2 Majors (World Championships)a year, which - besides on the media right-holders’ channels online and on TV - isbroadcasted via a function inside thegame itself. Valve also creates and sellsdigital team and player stickers inside thegame, of which the revenue is shared withthe respective team organizations andplayers.Pro LeaguePro League is the longest running andmost prestigious league in Counter-Strikewith 15 permanent Franchise teams andopen qualification for all other teamsthrough a range of different qualificationtournaments. The bi-annual Pro Leagueseasons culminate in the Pro LeagueFinals, which are traditionally among themost watched events of Counter-Strike.In Pro League, the Franchise teams aresecured a Minimum Guarantee paymentand a share of the Prize Money, whichdepends on the team’s performance.Astralis is a Founding Member of ProLeague. In 2021, a total of 3 Franchiseslots was sold to new member teams, whoeach paid a buy-in fee of just below 20MUSD across the three teams.Pro League is distributed and can bewatched online via multiple differentlanguage channels on Twitch, plus a rangeof TV Networks across the world.BLAST PremierAstralis is one of 12 founding memberteams of BLAST Premier also in Counter-Strike. Blast Premier is a premier globaltournament series with Spring and FallSeasons, culminating in the World Finals,held in December of each year.As a rights holder, Astralis is guaranteed aspot in the bi-annual Group Stage of thetournament, and depending on results,in the Spring/Fall Finals or the BLASTShowdown, which is an open qualificationtournament for the Spring/Fall Finals.Rights holders are secured a MinimumGuarantee payment and a share of thePrize Money, depending upon the team’sperformance.BLAST Premier is distributed and can bewatched online via Twitch and Youtubeon more than 20 different languagechannels. BLAST Premier also sold themedia rights to a number of TV Networksaround the globe.