G2 Esports, sporting and financial champion

G2 Esports is one of the most popular clubs in the world. Since its creation in 2013, the organisation has established and maintained its place in Europe's ‘Big Five’, thanks to its strategy based on a blend of esports and entertainment. With a total workforce of around 100 employees, including 76 administrative staff and 33 players, G2 operates on most of the major licences in the ecosystem, such as League of Legends, Counter Strike, Rocket League, VALORANT and Rainbow Six.

2022 was marked by a difficult macroeconomic climate for the sector as a whole. The end of Twitch contracts, for example, resulted in a €1.5m shortfall for the Samurai. And yet, despite this gloomy situation, G2 has established itself as a European leader by managing to adapt and grow in a changing environment. First of all, the company managed to increase its turnover by 8% to reach €27m. This performance was mainly driven by sponsorship, which accounts for around 60% of the club's revenue.

The value of these sponsorship contracts reached around €16m in 2022, compared with €11.1m the previous year. This reflects the attractiveness of the brand and is driven in particular by non-endemic partners. G2 points out that the risk of over-dependence on its commercial partners has been anticipated by the structure: according to the club, the types of contracts are diversified (one-off or event-based activations, visual sponsors, partners, etc.) and no brand represents more than 15% of consolidated revenues.

The club also points out that revenue from publishers accounts for 30% of its overall turnover, or €7m according to our estimates. "We are seeing a strong trend towards the diversification of publishers’ revenues, which are no longer linked solely to competitive performance, but increasingly to sharing revenues, particularly via digital items", said Alban Dechelotte, CEO of G2 Esports, in an interview with Sheep Esports. Other sources of growth contributed to the year's revenues, including the sale of players for €791,000 and merchandising, which accounted for around €200,000.

Thanks to the increase in its revenues, the club has announced a negative EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) of €-670,000 for the 2022 financial year, which is close to breakeven given the volume of its turnover. Although this amount adds €17.9m to the club's overall deficit, G2 remains the only profitable club in Europe with annual turnover in excess of €20m.

The balance for the 2022 financial year has in fact suffered from a model that is probably too dependent on sporting performances on games such as Rainbow Six or CS:GO, where the company is lamenting a shortfall of almost €1m due to early eliminations in tournaments. The year's investments also weighed heavily on the balance sheet, notably the launch of G2 USA (partly for VCL North America on VALORANT) and a €526,000 investment in new premises.

These losses have a direct impact on the company's equity. This has fallen from €29m when the club was founded to €8.4m today, reflecting the fragility of the holding company's financial structure. In terms of cash flow, the company will start 2023 with €2.1m, €3m less than 2022. But G2's coffers must be bailed out by a considerable €5m in trade receivables, including :

- Blast €1m

- ESL €645K

- Redbull €171k

- Riot €169k

The "G2 LoL" entity, which runs the League of Legends section, is also a key issue for the Samurai, as it has been in profit since 2020. This is a direct consequence of the team's multiple sporting successes in the LEC - G2 is the most successful team in history on the Old Continent - which have generated €3m in revenue in 2022, with a positive operating result of €2.2m.

According to Alban Dechelotte, the club's strategic and shareholding orientations are clear: "We are currently in a phase of controlled growth in which we are managing to be profitable while pursuing strong international development, particularly in the United States and Asia [...] We are prioritising a shareholding made up of private funds, essentially quality family offices, which provide relevant business connections for G2. We want to maintain this sporting performance positioning with a touch of entertainment."

This strategy of international expansion recently led to an agreement with the Wilf family, owners of the Minnesota Rokkr team in the Call of Duty League. This partnership will enable G2 to exploit the team's rights, in exchange for an entry into the capital of Version1's historic shareholders.

For 2023, G2 is expecting a net loss of €2m and controlled growth in turnover, which will exceed €30m. In 2024, the club plans to pursue aggressive international expansion, particularly in the US and China, with entry into new games such as Call of Duty and Dota2. These initiatives will require significant investment, which will result in a bigger loss of €3.7m for the year, according to the structure's forecasts. Above all, however, these decisions will generate significant growth potential beyond 2024.