Flexion sees very strong performance towards the end of the quarter and accelerating growth in April and May driven by a surge in the gaming market. Total revenue grows by 66% and gross profit improves by 70% significantly reducing the negative adjusted EBITDA.
January 2020 to March 2020 performance
- Total revenue increased by 66% to GBP 2.8m (GBP 1.7m)*
- Gross profit increased by 70% to GBP 0.4m (GBP 0.2m)
- Adjusted EBITDA improved by 54% to GBP -0.2m (GBP -0.5m)
- Write down of GBP 1.1m in recoverable MG payments
- Operating loss increased by 175% to GBP -1.3m (GBP -0.5m)
- Earnings per share amounted to GBP -3.20 pence (GBP -1.13 pence)
- Cash amounted to GBP 2.7m (GBP 6.0m)
April 2019 to March 2020 performance
- Total revenue increased by 48% to GBP 9.5m (GBP 6.4m)
- Gross profit increased by 23% to GBP 1.2m (GBP 0.9m)
- Adjusted EBITDA improved by 15% to GBP -1.7m (GBP -2.0m)
- Operating loss increased by 54% to GBP -2.9m (GBP -1.9m)
- Earnings per share amounted to GBP -6.83 pence (GBP -4.42 pence)
* Comparable number for the same quarter of the previous financial year in brackets
Important events during the quarter
- Covid-19 related lock-down has fueled market growth and Flexion’s revenue especially during the end of the quarter
- Guns of Glory experienced strong growth and became our top grossing title
- Signing of Top-tier title Chapters Interactive Stories from Crazy Maple
- Launch of non-GMS support for Huawei’s AppGallery
Important events after the quarter
- The strong growth in the second half of the quarter has continued well into the next quarter. Early indications for the quarter ending 30 of June 2020 points to +100% growth in total revenue compared to same period last year. This equates to +50% growth during the quarter (QoQ)
- Signing of Top-tier title Tales of Wind from Neocraft
- Launch of Chapters Interactive Stories
- Signing of Tabou Stories, the third title from Nanobit
Notes from the CEO
The last quarter of our financial year is usually quite slow but this year things were very different!!!
January started with the normal post-Christmas dip and this doldrum usually continues well into February. Instead, February became our best-ever month and the start of a very strong momentum powered by increased numbers of users and a higher spend per user. This occurred as many global economies went into lockdown creating a strong, and widely published, positive impact on the games industry. The short month of February grew by 11% compared to January and March was up 20% compared to February. This momentum continued into the new quarter and early indications show that we will have a record-breaking quarter with +50% growth compared with current quarter.
During the pandemic consumers have been forced to challenge traditional delivery methods in favour of digital services. For us it means that more gamers explore alternative distribution, driving users into the stores we are supporting. We will certainly see a long-term increase in alternative distribution as a result.
It is great to see that we get this positive impact on top of the general growth we built up over the previous quarters. On the channel side, we saw both One Store and Huawei’s AppGallery going from strength to strength. Our highest-ranking title, Guns of Glory, drove our performance in One Store which will help us grow our footprint in the very important South Korean market. We also started to see positive effects of our rollout in AppGallery. This is a channel that I am very excited about and especially thanks to Huawei’s non-Google flagship devices hitting the market this year. We now consider AppGallery one of our core channels and we will continue to support it with new games.
We also expanded our partnership with YOOZOO Games and launched Saint Seiya during the quarter. The game picked up pace already in its first quarter and made a material contribution to our revenue and gross margin. This strong title will continue to grow as it ramps up next quarter. We signed Chapters Interactive Stories from Crazy Maple Studios and we are now busy launching this game while also preparing the newly signed Tales of Wind for launch. We have a healthy pipeline of new games and our goal is to launch one new title per month for the remaining period of the financial year ending March 2021. This effectively means that we plan to more or less double the number of games in our portfolio compared to March 2020 by the end of this financial year.
We continue to invest in developer sales activities and are actively recruiting in key markets such as China and Russia where we have not had the bandwidth to process all sales leads in the past.
I am very pleased to see that our margin grew by 70% compared to the same quarter last year and the cash position improved by GBP 0.3m compared to previous quarter while our (ordinary) cost base stayed flat. This is, of course, very positive as it reduces our negative EBITDA and cash burn. The positive trend should continue over the next quarters supported by growing revenue and higher margin contribution from newly launched games.
I also want to comment on the two contracts with minimum guarantees (MGs) that we have on our books. Back in 2018, we raised USD 10m in marketing funds in conjunction with our IPO to fund our sales activities and sign big titles. We signed two contracts with revenue guarantees to secure five leading titles. This put us firmly on the map and gave us the credibility we wanted for distribution of games in Alternative channels. It has been instrumental in building our market leading position. One of the two contracts has performed as planned. In the other contract, especially one of the five titles has not responded to our continued marketing efforts, neither do we now feel we can achieve a meaningful extension of this contract. As a result, we deem it unlikely that we will recover the full amount of MGs already paid to the developer. The impairment review has therefore resulted in a GBP 1.1m write down of recoverable MG payments as recorded under other receivables on the balance sheet. This represents 20% of guarantees originally committed and is something we consider to be part of our roll-out marketing cost. We don’t expect any further write downs on these contracts. With our current position and strong momentum, it is unlikely that we will do more deals of this character in the future.
Finally, I am proud to see how this company has performed during the terrible pandemic. We already had a remote work policy in place so we could almost effortlessly shift and adapt to the new situation. On a personal level it has been tough for the staff to be in such a long lock-down but I must say that absolutely everyone has stepped up and continued their work as before the crisis. For this, I am very grateful.
It is with great excitement that we enter the new quarter.
I wish you all a safe and good summer.
Jens Lauritzson – CEO
For more information
Niklas Koresaar CFO, Email: firstname.lastname@example.org. 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 June 11th, 2020.
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, email@example.com.