Flexion continues to grow its portfolio and revenue. In the fourth quarter, revenue increased by 78% to GBP 1.7m and total annual revenue increased by 150% to GBP 6.4m. The Company continued its success in signing world class mobile games and added two top-tier and one mid-tier title to its portfolio. At the end of the quarter four top-tier titles and five mid-tier titles were live in the expanding distribution channels.
January 2019 to March 2019 performance
- IAP (In App Purchase) revenue increased by 83% to GBP 1.7m (GBP 0.9m*)
- Total revenue increased by 78% to GBP 1.7m (GBP 0.9m)
- Gross profit increased by 50% to GBP 0.2m (GBP 0.1m)
- Adjusted EBITDA improved by 20% to GBP -0.5m (GBP -0.6m)
- EBIT decreased to GBP -0.5m (GBP -0.4m)
- Earnings per share amounted to GBP -1.12 pence (GBP -1.27 pence)
- Operating cash flow decreased to GBP -0.9m (GBP 0.0m)
- Cash amounted to GBP 6.0m (GBP 7.4m)
April 2018 to March 2019 performance
- IAP (In-App Purchase) revenue increased by 204% to GBP 6.3m (GBP 2.1m)
- Total revenue increased by 150% to GBP 6.4m (GBP 2.6m)
- Gross profit increased by 36% to GBP 0.9m (GBP 0.7m)
- Adjusted EBITDA fell by 37% to GBP -2.1m (GBP-1.5m)
- EBIT decreased to GBP -1.9m (GBP -0.9m)
- Earnings per share fell to GBP -4.42 pence (GBP-2.47 pence)
- Operating cash flow decreased to GBP -1.4m (GBP -0.9m)
- Cash amounted to GBP 6.0m (GBP 7.4m)
Important events during the quarter
- Flexion signed its first top ten US grossing game to be distributed in most of its main stores
- Flexion signed a top grossing game with a major film studio based on a USD 2m minimum guarantee over 2 years
- Flexion announced its Unity plugin with the launch of a strong mid-tier game
- Flexion adopted the full retrospective approach and restated revenue and cost of sales information to comply with accounting standard IFRS 15 – Revenue from Contracts with Customers
Important events after the quarter
- Flexion signed its second biggest title
- Flexion signed a new mid-tier title
- Flexion partnered up with ONE Store to bring top games to the store
* Comparable number for the same quarter of the previous financial year in brackets
Notes from the CEO
In closing this fourth quarter of the year, I would like to reflect on what has been an amazing twelve months. We listed the company on Nasdaq First North, we patented our technology in the US and we recruited some new key members to our fantastic team. In addition, we completed the development phase of our full service offering and started the global platform roll-out last summer. We shifted focus from product development to sales and managed to sign up several world class games in a relatively short period of time
The success of the platform roll-out continued into this fourth quarter. In February, we signed a title from a major film studio with IP that most game developers could only dream of. Later in the same month, we signed our first ever title which will use our new Unity plug-in. This is strategically very significant as developers using the Unity framework (approx. 50% of all mobile games are developed in Unity) can now choose to integrate Flexion already during development. To top this up, in March, we signed a US top-10 grossing title with global Android net revenue of some USD 15m per month. This title, which we will distribute in most of our stores, is of course highly important for our revenue growth but it is also of strategic importance. We have gained considerably higher market acceptance especially in the Chinese market from where this Top-tier title originates and from where many of our future opportunities will come. We are now seeing early signs of real network effects and this will benefit our growth.
Even though the real revenue effects of the signed portfolio are yet to come, we saw a healthy 150% revenue growth during the year. It can take one to three months to launch a title and thereafter six months to organically build up the user base and the revenue for a title. I am also pleased that we managed to keep the strong momentum we had during Christmas period in this normally weaker quarter, without any help from new game launches.
In March, we attended the Game Developer Conference in San Francisco where we met most of our strategic channel partners: Amazon, Samsung, One Store as well as many new and existing game partners. It was a record-breaking week in terms of attendance which reflects the high level of interest in gaming. Stadia, Google’s new game streaming service, made the headlines. We are often asked how streaming will impact us and the short answer is that anything that creates more fragmentation in the mobile games market is good for us as it increases the demand of our services. Personally, I think the impact of streaming will mostly be visible in the console space, where expensive gaming hardware is prohibitive to growth.
With streaming, the challenge will instead be to address bandwidth limitation and patchy internet coverage. For streaming to take off on mobile, 5G networks need to be fully rolled out, all devices upgraded, and price plans become generally affordable. This will take a few years and 5G speeds will make it quicker and easier to install mobile games, but we are not convinced that streaming will necessarily become the de facto standard for mobile gaming. Mobile gamers already have access to cheap and improving hardware and they will want to continue to play their mobile games on the move and not be limited to full speed network access.
We are seeing continued strong demand from Chinese developers who are looking to expand outside China, the biggest games market in world. This trend will continue, and we will capitalise on it by adding more Chinese games to our portfolio. We are continuing to add staff with Chinese market experience to further develop this massive opportunity.
We are also seeing renewed interest from fast growing Chinese mobile device manufacturers who are in the process of launching their own app stores and services outside China. These are all players with extensive knowledge in running leading app stores in China. Huawei, Xiaomi, OPPO, Vivo are currently shipping approx. 42% of the world’s new mobile phones. This is one of many driving forces of our ever-expanding market.
It is also great to see that Samsung Galaxy App Store is further improving its traction with developers and consumers since the launch of the S10 and the exclusive Fortnite launch. Samsung has also announced the launch of Pokemon Go and Harry Potter from Niantic. This is good news since it will help their store grow quicker, something that will benefit Flexion who is their main partner for games. We are working closely with Samsung on both games and services that will help strengthen their position over the coming quarters. We have also focussed on developing a content strategy for One Store in Korea, a channel that has great potential for us.
We are now set up for a very exciting new year where we will continue to grow our game portfolio and add new channels. This will take us to the next level.
For more information
Niklas Koresaar CFO, Email: email@example.com. Tel: +44 207 351 5944
This is information that Flexion Mobile Plc is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 08:00 on June 19th, 2019.
About Flexion Mobile Plc:
Flexion offers a distribution service for free-to-play Android games. Using the service developers can distribute their games in multiple channels like Amazon, Samsung, One Store and leading regional distribution channels. These are channels that the developers are struggling to reach and support. At the core of Flexion's service is the patented enabling and enhancement software that converts developers' existing Android games into specific game versions for the new stores without any work required. Flexion estimate that developers can generate an incremental 10% Android revenues from the service. Flexion Mobile Plc is listed on Nasdaq First North, Ticker: FLEXM. Certified Adviser is FNCA Sweden AB, +46(0)8-528 00 399 firstname.lastname@example.org.
Flexion’s go-to-market strategy is to grow its game portfolio to 100 tier titles of which one third is top-tier titles with a potential to generate more than USD 140,000* per month in gross revenue for Flexion. The remainder will be mid-tier titles with a revenue potential exceeding USD 40,000* per month for Flexion. (* Numbers have been updated to reflect changed revenue reporting in accordance with IFRS 15. The numbers now include channel fees deducted at source whereas the numbers in the past were reported net of channel fees deducted at source).