Flexion Mobile Plc - Q3 Report 31 December 2019

Thu, Feb 13, 2020 08:00 CET

Flexion hits new quarterly revenue record during the busy Black Friday and Christmas period. The third financial quarter recorded total revenue of GBP 2.5m representing 41% growth (YoY). The Company signed two new titles and announced a partnership with Huawei’s App Gallery.

October 2019 to December 2019 performance

Total revenue increased by 41% to GBP 2.5m (GBP 1.8m)*
Gross profit increased by 26% to GBP 0.3m (GBP 0.2m)
Adjusted EBITDA improved by 26% to GBP -0.5m (GBP -0.7m)
Operating loss reduced by 22% to GBP -0.6m (GBP -0.7m)
Earnings per share amounted to GBP -1.33 pence (GBP -1.73 pence)
Recoverable MG payments amounted to GBP 1.6m (nil)
Cash amounted to GBP 2.4m (GBP 7.0m)

April 2019 to December 2019 performance

Total revenue increased by 41% to GBP 6.7m (GBP 4.8m)
Gross profit increased by 8% to GBP 0.8m (GBP 0.7m)
Adjusted EBITDA stable at GBP -1.5m (GBP -1.5m)
Operating loss increased by 11% to GBP -1.6m (GBP -1.4m)
Earnings per share amounted to GBP -3.63 pence (GBP -3.29 pence)

* Comparable number for the same quarter of the previous financial year in brackets

Important events during the quarter

Hitting USD 1m monthly revenue run-rate
Partnership agreement signed with Huawei, the second biggest mobile device manufacturer in the world
Two more titles signed; Saint Seiya Awakening by YOOZOO Games and Dragon Champions by AppQuantum

Important events after the quarter

One more title signed; Chapters: Interactive Stories by Crazy Maple Studios Inc

Notes from the CEO

Our third quarter is always very busy with Black Friday and the Christmas holidays offering great marketing opportunities for our mobile games. We started the quarter by hitting the important milestone of USD 1 million monthly revenue run rate. This gave us strong momentum and was followed by several sizeable promotions from our partners: Amazon, Samsung, Huawei and One Store. These campaigns drove our user growth and revenues. In USD terms (our main trading currency) we saw another steady growth of approximately 15% quarter on quarter. However, the significant strengthening of the GBP (post Brexit withdrawal agreement) reduced this growth in GBP terms.

I am pleased that we signed two new titles in December and a third title in January. As of December 2019, we have twelve titles live in our portfolio and three games pending launch. This means that we have signed seven titles during the last twelve months. It is a great achievement that I am very proud of. With this world leading portfolio and increasing distribution power I am expecting more inbound developer leads but also stronger partnerships with existing developers. Our games portfolio currently generates more than USD 30m per month in Google Play for the developers we work with, this indicates that we have room for long-term growth. The positive effects of the busy Christmas quarter helps keep the momentum high as we move into the slower fourth quarter.

We announced our new partnership with Huawei and launched our first set of games in their app store, AppGallery. It is still early, but we are very excited about this long-term opportunity. There are currently no signs that Huawei will get access to Google Mobile Services (GMS) on their upcoming devices, which means that they will rely on their own version of Android and Mobile Services (HMS) in the future. AppGallery, is an alternative to Google Play on new devices sold outside of China and will be the main source for apps and games during 2020. The media have portrayed this as a big loss for Huawei, but we think it is a great opportunity for Flexion. As a reference, we are already providing games for Amazon’s Fire devices which also run Android without GMS but the Huawei opportunity could potentially be much bigger for us. Huawei has allocated billions of USD to build their developer ecosystem and if successful, Huawei will be the only device manufacturer besides Apple that controls their own ecosystem. To succeed, they need to continue to produce great devices but more importantly also provide customers with games and apps that they are accustomed to. We are well-positioned to become a strategic partner to Huawei and help them achieve this.

We completed a significant technical platform improvement project during the quarter. As a result, Flexion now offers developers a single secure server connection for purchase validation to all our app stores. Developers can therefore avoid costly server integrations for each store without compromising on security. This is an unique offering and another example of how we are using our technical capabilities to further strengthen our market position

During the last twelve months, our focus has been on developing strong partnerships with the leading alternative app stores and rolling out our portfolio of games in these stores. This has put us in a leading position in our market and I am very proud of how quickly we managed to do this. So far, we have mainly built our business on organic traffic from promotions by our app store partners. This is a successful model as it is offering an alternative to what the developers can achieve in their two main stores, Google and Apple. It is a powerful model that leverages the strength of our portfolio of games. The stronger the portfolio, the easier it is for us to secure promotions. This will continue to be a very important model for us.

Now starts the next phase!

We are excited about the emerging opportunity to enter and lead the efforts in user acquisition (UA) within our market. This is an expected and natural next step for our market driven by improved developer payouts (lower stores fees than offered by Goggle and Apple). Given the tight margins for most developers, improved payouts could potentially shift significant UA budgets into our market. We are now preparing ourselves technically and commercially for this and we are ready to start trials with some of our strategic partners in the next quarter. We also experience an increasing fragmentation in the market with more new channels being established to reach the end consumer, both in terms of more traditional appstores like for example Huawei but also more non-traditional channels.

We aim to be a first mover and leader in this new space. More on this over the coming quarters.

We wish all our shareholders, partners and employees a happy and successful 2020!

Jens Lauritzson - CEO

For more information

Niklas Koresaar CFO, Email: ir@flexionmobile.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 February 13th, 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, info@fnca.se.