Karmine corp: a look back at the club's first 3 financial years

Since the inception of the project that has become the KCORP phenomenon, we've mainly only had fragments of information about the Karmine's financial health, leaving fans in a state of uncertainty and even speculation. This speculation has now come to an end, as Sheep Esports presents the financial data for the last three years.

You probably haven't followed esport in 2023 without encountering some of the club's news, whether it's KCX3, the announcement of the Arena or the fundraising to finance the acquisition of the LEC slot. Arthur Perticoz, CEO of the Blue Wall, spoke of this during his visit to Zack Nani, describing the year as exceptional in terms of both sporting success (LFL and EMEA Masters champion of the summer split on League of Legends, winner of the Winter Major on Rocket League, winner of the Trackmania Worlds, European titles on Teamfight Tactics...) and the club's entrepreneurial development.

Arthur Perticoz mentioned, for example, the merchandising redesign or the entry into the VCT EMEA. All these challenges have to be managed in an uncertain global economic climate. But how has "La Prestigieuse" managed to come out on top? Analysis. Landing in 2023 with €7,01 million in revenue, representing 323% growth since 2021, and without including revenues linked to KCX, which are entirely managed by the event's production.

It took Karmine Corp just three years of operation to find their way to profitability and announce a break-even result at the end of 2023. A real feat compared to many organizations in the esports ecosystem, KC have managed to combine strong growth with controlled financial ratios in record time, thus joining the very restricted circle of profitable organizations in Europe.

Another key factor is the distribution of revenue. Merchandising is estimated to account for around 40% of the revenue, or €2.5M in 2023, representing more than 40 000 jerseys. This volume is higher than for some Ligue 1 soccer clubs, and four to ten times higher than for European esports rivals. Forecasts for 2024 should see the club approaching €4M in annual revenues from this segment alone.

The club's unique business model, based on fan engagement, allows KCORP to shake up the financial lines of the esport sector, whether through merchandising or events such as KCX.

However, the club's financial structure suffered in 2021 and 2022. With a negative capital stock, the club had to rebuild its financial foundations to limit direct impacts, such as "traditional" refinancing possibilities, and reassure stakeholders of the sustainability of the model. "Over the last few years, every project has been a big risk: a sponsor who doesn't pay or an event that doesn't work out could sink the club," reveals Arthur Perticoz.

At the close of 2023, the positive turnaround in key indicators should convince traditional financial actors of the viability of the business model, and open up new and less demanding sources of financing. In terms of cash flow, the company started the year with €760k, but will be able to count on the inflow of over €1 million in trade receivables and potential micro-investments to finance the strong growth in operations in the short term.

Asked about the relatively low level of cash flow in relation to growth and managed flows, Arthur Perticoz replies: "Our expenses are monthly, but our income is periodic, which creates a strong imbalance in cash flow and makes short-term management a daily challenge. We are fortunate to be able to count on certain sponsors, who, strengthened by their confidence in our club, pay the full amount of the sponsorship deal at the start of the year."

The club's sponsorship strategy is clear: renew and enhance the value of its historical partners. However, the estimated annual amount of €2.3 million seems low in relation to the club's reputation, especially when compared with other major European clubs. There are two reasons for this:

Recently announced, the stadium will be a major challenge and a major growth driver for the club, particularly through its societal impact, a real lever of extra-financial value. Financially, assuming full operation by 2027/2028, annual revenues generated by the stadium are estimated at around €1.5M/year, spread over a maximum of twenty events. These forecasts are conservative, given the club's determination to keep prices as accessible as possible.

Looking ahead to 2024, revenue is expected to be in the region of €11 million, with an expected valuation range of between €40 million and €50 million (representing an increase of 100 to 150% since the 2023 valuation), depending on the current economic situation. In particular, this will enable the club to move towards their second ever fundraising round, with one notable difference: to raise the same amount of money, the club will have to dispose of much fewer shareholdings.

On Tuesday 25 June 2024, Arthur Perticoz announced to the public the addition of new investors in the club. They include family offices of well-known French families such as the Houzé family (owners of Galeries Lafayette) and private investors, specialised or not, such as Mathieu Carré, who took part in the first round of financing.

The aim of this second segment of the fundraising will be to support the club's strong growth and substantial working capital requirements in the first half of 2024. In addition to setting an intermediate valuation - which will limit the dilution of the historic shareholder base - this will provide a seed phase for the club's new stakeholders with a view to a new round of financing planned for the fourth quarter of 2024. This will notably be aimed at paying the annual instalment of the LEC slot.

However, Karmine, which until then had a healthy financial structure, was exposed to the risk of rising expenses and, more generally, financial imbalance, particularly due to the operational costs of the LEC team. To avert this risk, the club opted for a cautious salary management strategy, operating one of the lowest budgets in the LEC.

Aware of the stakes involved in this strategy, and in particular its impact on the club's attractiveness, Arthur Perticoz announces: "For players who come to Karmine, there's a before and an after. Yes, we won't be the ones who pay the best or offer the best financial conditions, but the players who leave the club will have a brand image that will never leave them and that sells very well".

The Karmine, whose French-speaking identity is still too entrenched, also needs to strengthen their internationalization. A more cosmopolitan positioning is needed to continue to grow, both in terms of fanbase and business partners. The 2024 horizon will close with KCX4, announced for November 9, with this year's event focused on the rivalry with KOI, the club of Spanish influencer Ibai Llanos.