Flexion continues its steady growth in the second financial quarter with total quarterly revenue increasing by 46% to GBP 2.3m compared to the same period in the previous year. This represents a quarter-on-quarter growth of 20% and a 38% growth in the last six months. During the quarter, the Company launched its second biggest top-tier title, signed a new mid-tier title and announced a new partnership with Xiaomi.
July 2019 to September 2019 performance
- Total revenue increased by 46% to GBP 2.3m (GBP 1.6m)*
- Gross profit increased by 8% to GBP 0.3m (GBP 0.3m)
- Adjusted EBITDA fell by 7% to GBP -0.4m (GBP -0.4m)
- Operating loss increased by 36% to GBP -0.5m (GBP -0.4m)
- Earnings per share amounted to GBP -1.14 pence (GBP -0.84 pence)
- Operating cash flow decreased to GBP -1.8m (GBP -0.4m)
- Recoverable Minimum Guarantee payments made amounted to GBP 1.9m (nil)
- Cash amounted to GBP 3.1m (GBP 7.0m)
April 2019 to September 2019 performance
- Total revenue increased by 41% to GBP 4.2m (GBP 3.0m)
- Gross profit increased by 1% to GBP 0.5m (GBP 0.5m)
- Adjusted EBITDA fell by 17% to GBP -1.0m (GBP -0.8m)
- Operating loss increased by 47% to GBP -1.0m (GBP -0.7m)
- Earnings per share amounted to GBP -2.30 pence (GBP -1.57 pence)
- Operating cash flow decreased to GBP -2.9m (GBP -0.3m)
* Comparable number for the same quarter of the previous financial year in brackets
Important events during the quarter
- Distribution agreement signed with Xiaomi, the third biggest Android device manufacturer in the world
- New mid-tier title signed with an existing Chinese developer partner
- Launch of the second biggest top-tier title (based on Google Play revenue)
- Extension of Flexion’s biggest distribution agreement for four tier titles
Important events after the quarter
- Partnership agreement signed with Huawei, the second biggest mobile device manufacturer in the world
Notes from the CEO
The September 2019 quarter was the second quarter with real revenue growth from new titles. Total revenue grew steadily by 20% over the quarter and by 38% over the last two quarters even though we saw decline in revenue from older titles. This is in line with how we wish to grow our business: by developing a diversified portfolio of games that will generate long-term stable revenue growth.
The team has secured strong launch plans for our new titles. I am pleased that all titles signed in previous quarters have now been launched using our fast and seamless on-boarding. This means that our portfolio now holds 12 live top-tier and mid-tier titles. I cannot stress enough how important our portfolio is for our market position and our future strategic developments. “Content is king”, is a familiar expression in our industry and Flexion is now managing a leading Android games portfolio in our market. This places us in a perfect position to explore new disruptive strategies and develop services that allow us to further leverage the value and growth potential of our game portfolio.
We continue to see the market moving towards increased competition and more fragmentation. The dominance of Google Play and The App Store is increasingly being challenged. In September, Huawei, the second biggest Android device manufacturer in the world, announced its new flagship device, Mate 30, which will be distributed outside of China without Google services. It will be very interesting to see how this device performs compared to Huawei’s existing devices which use Google services. Huawei is a welcome addition to the alternative distribution market. Huawei App Gallery will be a critical component in its efforts to build a new and more open ecosystem for developers. The company recently said that it shipped more than 185 million smartphones in the first three quarters of 2019, up 26% year-on-year. Through our recently signed Partnership Agreement, Flexion will become an important supplier of mobile games to Huawei.
We are continuously expanding our distribution platform. The Xiaomi partnership is a good example of how we can leverage our games portfolio to secure new distribution. Xiaomi is the third largest Android device manufacturer in the world and they have one of the leading app stores in China. They are now replicating this outside of China with the soft launch of their new app store for overseas markets called GetApps. For Flexion, this is a great opportunity to partner up with Xiaomi and be part of their efforts to monetise a growing user base in the Western markets. Strategically, this partnership is also very interesting as Xiaomi recently announced a marketing partnership with Oppo and Vivo (the fifth and sixth biggest device manufacturers in the world) where they are jointly targeting app developers.
We have spent a lot of effort on performance analysis to understand how we can best optimise game selection and monetisation in our distribution channels. This is a complex art. So far, we can see several real success stories but also a few cases where launched games are yet to fire on all cylinders. Such games require continued optimization to improve.
As part of this exercise we revisited and amended the agreement that we announced in December 2018 for four titles. It became clear that the initial term was too short to fully leverage all marketing opportunities in our expanding distribution channels which, in turn, had a negative impact on the games performance in our channels. Therefore, we agreed with the publisher to extend the initial term until December 2020 for the four titles. We also fixed the minimum guarantee amount reducing the overall risk exposure by USD 0.8m while also simplifying the settlement structure by changing our standard arrears-based payment to quarterly advance minimum guarantee payment. This was a big achievement as it significantly reduces the risk of this transaction and shows the developer’s long term committment to Flexion. In the short term, the net effect was a capital outlay of GBP 1.2m which can be recouped during the extended term. As we continue to add new channels and improve performance of existing channels, we expect the need for Minimum Guarantees to diminish over time.
It has been a very busy quarter, and there is more exciting news lined up. We just announced our partnership with Huawei. More on this next quarter when the channel should be up and running and contributing to the expansion of our growing distribution platform.
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 CET on November 20th, 2019.
About Flexion Mobile Plc:
Flexion offers a distribution service for free-to-play Android games. Using the service games can distribute in multiple channels such as Amazon, Samsung, Huawei, Xiaomi and leading regional distribution channels in India, South Korea and Japan. These are channels that developers are struggling to reach and support. At the core of Flexion's service is the patented enabling and enhancement software that converts developer’s existing Android games into specific game versions for the new stores without any work required by the developers. Flexion Mobile Plc is listed on Nasdaq First North Growth Market, Shortname: FLEXM. Certified Adviser is FNCA Sweden AB, +46(0)8-528 00 399, firstname.lastname@example.org.