7digital : 2021 Half Year Report

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.

30 September 2021

7digital Group plc

("7digital", "the Company" or "the Group")

Interim Results

7digital (AIM: 7DIG), the global leader in B2B end-to-end digital music solutions, announces its interim results for the six months ended 30 June 2021.

Financial Highlights1

• Revenues increased by 6% to £3.3m (H1 2020: £3.1m)
• Gross margin of 62.6% (H1 2020: 65.9%)
• Adjusted2 administrative expenses reduced by 6% to £3.1m
• Adjusted2 EBITDA loss reduced to £1.0m (H1 2020: loss of £1.1m)
• Operating loss of £1.9m (H1 2020: loss of £1.0m)
• Fully diluted loss per share of £0.07 (H1 2020: £0.04 loss)
• Cash and cash equivalents at 30 June 2021 of £0.5m (31 December 2020: £2.8m; 30 June 2020: £0.2m) and £0.2m at 29 September 2021

• The H1 2020 accounts have been restated (see note 1 to the financial statements)

• Adjusted to exclude other adjusting items, amortisation, foreign exchange, depreciation and share-based payments (see note 6 to the financial statements)

Operational Highlights

• Long-termcontracts with seven new licensing customers during the period, and a further two post period, as the Company continued its strategic expansion in its key growth markets of fitness and wellness, social media and artist monetisation
  o Multi-year contracts with fitness companies Barry's, Volava, FORME and others
  o Signed contract with Kuaishou, a leading content community and social platform based in China
  o eMusic Live partnered with further artists, agencies and venues to provide new monetisation opportunities for the music industry
• • • Platform has now hosted 71 performances in total, including livestream and hybrid events from major artists such as Alfie Boe, Tina Arena and Crowded House in the period
    • Became the first and only music livestream platform to offer artist non-fungible tokens (NFTs) alongside ticketed events running on the platform
  • Signed a multi-year renewal with a global technology company across multiple territories - a major validation for the scale and reach of 7digital's platform
  • Four contract extensions or renewals signed during the period and seven post period

Outlook

• 7digital entered the second half of 2021 with a strong pipeline across its core segments as well as a number of prospective contracts in the new segments of gaming and connected-car entertainment
• Company has been working actively with its partners to facilitate the process for prospective customers to secure licensing agreements with music labels
• In some instances, the process has been more protracted than anticipated, accordingly, some contracts the Company had expected to sign in the second half of 2021 are now anticipated to complete in the first half of 2022

• As a result of the above, the Company currently expects its revenue for the full year to be slightly below expectations, with certain H2 2021 forecast revenues now moving into 2022, and that it will not achieve EBITDA positivity for the full 12 months
• The Board is confident that some of the prospective contracts, which represent significant revenue, will be signed in the near-term and that the others in the pipeline will follow in due course. It expects to regain EBITDA positivity for Q4 2021 and is very confident of delivering EBITDA positivity for full year 2022 with significant revenue growth
• The Company is in advanced discussions over a banking facility, which are expected to conclude shortly, and also continues to have the unwavering support of its major shareholders

Paul Langworthy, CEO of 7digital, said: "Our market-leading position and strategic focus on core sectors has enabled us to grow the number of customers licensing our technology as well as the scale and reach of our music platform. 7digital has entered the second half of 2021 with a strong pipeline across fitness and wellness and social media as well as a number of prospective contracts in the new segments of gaming and connected-carentertainment. We are currently in advanced negotiations with multiple new customers representing significant revenue. However, the pace of closing deals is dependent on our clients completing their licensing deals with labels and in some instances we have found this is taking longer than we had hoped.

"In the second half, we plan to accelerate our stated strategic vision to align ourselves, through innovation, with the interests of the artists as well as consumers of their music. Alongside consolidating our leading position in our core segments of fitness and wellness and social media, our aim is for 7digital to become a leading platform providing artist services beyond traditional streaming such as creating direct-to-fan opportunities including NFTs, livestreaming and merchandising on a global scale. As a result, we remain very confident in the outlook for the business in the medium- to long-termand the opportunities ahead."

Enquiries
7digital	c/o [phone]
Paul Langworthy
Arden Partners (Nominated Adviser and Broker)	[phone]
Richard Johnson
Luther Pendragon (Financial PR)	[phone]
Harry Chathli, Joe Quinlan	[e-mail]

About 7digital

7digitalis the global leader in B2B end-to-end digital music solutions, providing a scalable cloud-based platform that enables companies and brands to connect to its global music catalogue and rights management system to launch and manage unique and engaging music experiences. Operating worldwide in over 80 markets and integrated with more than 300,000 labels and publishers, 7digital's platform automates the complex and time-consuming processes of music management, making it easier to access and use music in streaming services, social media, home fitness, gaming, retail and more. With best-in-class infrastructure, deep industry expertise and intelligence tools, 7digital empowers their clients to innovate, grow and serve tomorrow's music consumer. For more information, visit http://www.7digital.com/.

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Operational Review

7digital made strong operational progress in the first half of the year and continued to grow revenues from its high-margin music technology offering. By focusing on strategic growth markets - fitness and wellness, social media and artist monetisation - 7digital has increased the number of customers with licensed access to its leading B2B music platform, signing seven new deals during the period and a further two post period. Many of these new customers were signed on long-term contracts, while the Company also maintained its high retention rate and secured multiple contract renewals or extensions during the period. The eMusic Live virtual concert and artist monetisation platform that 7digital launched last year in collaboration with its eMusic sister company has continued to grow, entering partnerships with further artists, agencies and venues as the music industry increasingly seeks new engagement and monetisation opportunities. In addition, 7digital has enhanced its music as a service platform by establishing integrations with several providers that enable the Company to enhance its service offering to customers.

The Company has also been actively working with its partners to facilitate the licensing process for customers. 7digital's music-as-a-service platform provides customers with access to pre-approved music in its global catalogue based on the licensing agreements held by those customers with music labels. By seeking opportunities to streamline this process, the Company can enhance its offering to customers and reduce the sales cycle for securing its own contracts.

Fitness and Wellness

7digital's solution for fitness brands enables them to seamlessly incorporate music into their offering and is designed to make it easy for them to maximise the benefits of music. Based on the Company's music-as-a-service platform, it provides features such as end-to-end global rights and reconciliation management, access to the Company's global catalogue and an easy-to-use playlisting tool. The Company believes that it has established a dominant position in this global market.

The Company has converted multiple sales leads into long-term contracts - adding several fitness companies to its customer base. During the period, this included signing 24-month contracts with premium home fitness innovator FORME and another new customer in the home fitness sector serving the US market. Post period, the Company secured a contract with Barry's, the global fitness brand, which is using 7digital's instructor playlisting tool in the US and Canada to access a fully cleared catalogue of music to power Barry's X, a new digital product offering a fully integrated, many-to-manycamera-on experience. In addition, the Company signed a contract post period with Volava, a European interactive fitness platform that is using 7digital's solution for its bike-based online fitness offering in Spain and, soon, other locations such as Germany.

The Company expanded its offer into the wider health and wellness market post period with the signing of 24-month contracts with MedRhythms, a US-headquartered digital therapeutics company that uses sensors, music and software to measure and improve walking, and a second company that is creating a music-based health application for people with dementia. Both customers will use 7digital's music-as-a-service platform to access the Company's licensed catalogue and playlisting tool to design their interactive and therapeutic experiences.

Social Media

7digital is helping to shape how fans discover, share and create music by powering rights-cleared music on social media platforms. During the period, the Company signed a contract, with an expected two-year term, with Kuaishou, a leading content community and social platform based in China. This

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contract bolstered the Company's position as one of the largest providers of licensed music to global social media giants and tech-driven consumer brands.

Artist Monetisation

7digital continues to drive new sources of growth in the music industry through its eMusic Live venture. This advanced live streaming platform enables artists, venues and brands to host live concerts while providing range of commercial and fan engagement tools, offering new ways to monetise performances and engage with global audiences. eMusic Live has now hosted 71 events ion the platform. During the period this included performances by multiple-awardwinning artist Tina Arena in Australia and Ivri Lider in Israel who became among the first artists globally to host live-digitalhybrid events where fans can stream a concert in real time. Also during the period, eMusic Live hosted Crowded House and was the exclusive livestream platform for Alfie Boe & Friends: Live at the Savoy, which was performed to audiences worldwide. In addition to music performances, the livestream made use of a range of commercial and engagement tools available through eMusic Live, such as exclusive merchandise, fan live chat and VIP experiences including a meet-and-greet with Alfie Boe.

Additionally, eMusic Live became the first livestream service to offer artist NFTs (non-fungible tokens) alongside ticketed events running on the platform. This allows fans to own authentic digital merchandise while substantially increasing artists' monetisation ability. The Company is very excited about how this market is going to develop.

Other Key Contracts

Outside these target verticals, the Company secured and renewed contracts with multiple customers. This includes a 36-month contract with new customer Viihdeväylä Oy, a Finnish company that provides background music and playlisting curation to restaurants, and renewals with existing customers such as media company Global Radio, owner of the largest commercial radio company in Europe, and an extension with a fast-growing B2B music streaming service.

Post period, 7digital signed an extended contract continuing into 2023 with its global technology company customer. This is a highly significant deal and represents a major validation of the scale and reach of 7digital's platform.

New Integrations and Partnerships

7digital has continued to enhance its platform and increase its offer to global brands through establishing pre-built integrations that enable customers to easily access complementary services from other providers.

The Company has established new integrations and partnerships with:

• Super Hi-Fi, an audio technology company using AI-based technologies to deliver next- generation music listening experiences. The integration of Super Hi-Fi's audio stitching and automated content curation technology allows customers to add a critical layer of differentiation and customised listening features to their music services when they access their music catalogue via 7digital's platform.
• Muzooka, the world's largest verified artist asset database, so that content delivered via 7digital's music-as-a-service platform is pre-mapped with Muzooka's pre-approved database of artist images, links, and other media assets.
• ACRCloud to produce a solution around User Generated Content ("UGC") monitoring. The partnership pairs 7digital's catalogue with ACRCloud's leading fingerprint database of over 100

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million tracks to create a simpler, more accurate and cost-effective process for companies wishing to monitor and report on UGC.

Financial Review

Revenue for the first half of 2021 increased by 6% to £3.3m compared with £3.1m for the first half of the prior year, reflecting growth in licensing and content revenue. Licensing revenue continued to be the largest contributor to Company revenue, accounting for 52% (H1 2020: 53%), with 32% provided by Content (H1 2020: 34%) and 16% by Creative (H1 2020: 13%).

Gross margin for the first half of 2021 was 62.6% (H1 2020: 65.9%), reflecting the slightly higher cost of sales associated with securing some of the Company's major contracts. Gross profit for the period was £2.0m (H1 2020: £2.0m), with the increase in revenue being offset by the reduction in gross margin.

The Company continued to streamline its operations, with adjusted administrative expenses being reduced by 6% to £3.1m (H1 2020: £3.3m) as a result of cost efficiencies. The Company also continued to focus on credit management, achieving a reduction in debtor days to 33 (H1 2020: 52).

On an unadjusted basis (see note 6 for details on adjustments), administrative expenses were £3.9m

(H1 2020: £3.1m), with the difference primarily reflecting:

• £0.3m related to the issue of share options pursuant to the Company's 2014 Employee Share Plan;
• £0.1m related to exceptional legal and corporate restructuring costs;
• £0.1m related to the impairment of a historic debt;
• the prior period benefitting from £0.5m exceptional gains from the disposal of a right-of-use asset relating to a former property lease and a release relating to a business disposal; and
• the net amount being partly offset by a £0.2m reduction in underlying costs in H1 2021.

Operating loss was £1.8m (H1 2020: £1.0m loss), reflecting the higher administrative expenses, and

loss before tax was £1.9m (H1 2020: £1.0m loss).

Adjusted EBITDA loss was reduced to £1.0m (H1 2020: £1.1m loss). On an unadjusted basis, EBITDA

loss was £1.5m (H1 2020: £0.9m loss).

Loss per share was 0.07 pence (H1 2020: 0.04 pence loss).

The Company had cash and cash equivalents of £0.5m as at 30 June 2021 (31 December 2020: £2.8m;

30 June 2020: £0.2m) and £0.2m as at 29 September 2021. The Company is in advanced discussions over a banking facility, which are expected to conclude shortly. The Company also continues to have the unwavering support of its major shareholders.

At the period end, the Directors determined there were adjustments required to restate the H1 2020 results as disclosed in 'Correction to prior period' in note 1 to the financial statements. The adjustments related to derivative liability and other reserves.

Outlook

7digital entered the second half of 2021 with a strong pipeline across its core segments of fitness and wellness and social media as well as a number of prospective contracts in the new segments of gaming and connected-car entertainment. As noted above, the Company is actively working with its partners

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