Q2 Report – 30 September 2020

Flexion continues its strong growth with total revenue up by 168% and gross profit up by 190% resulting in positive adjusted EBITDA^‡ on IAP revenue for the first time.

July 2020 to September 2020 performance

• Total revenue increased by 168% to GBP 6.2m (GBP 2.3m)*
• Gross profit increased by 190% to GBP 0.8m (GBP 0.3m)
• Adjusted EBITDA^‡ improved by 125% to GBP 0.1m (GBP -0.5m)
• Operating result improved by 110% to an operating profit of GBP 0.05m (GBP -0.5m)
• Earnings per share amounted to GBP 0.08 pence (GBP -1.14 pence)
• Cash amounted to GBP 3.7m (GBP 3.1m)

April 2020 to September 2020 performance

• Total revenue increased by 161% to GBP 11m (GBP 4.2m)
• Gross profit increased by 201% to GBP 1.5m (GBP 0.5m)
• Adjusted EBITDA^‡ increased by 113% to GBP 0.1m (GBP -1.0m)
• Operating result improved by 101% to an operating profit of GBP 0.01m (GBP -1.0m)
• Earnings per share amounted to GBP 0.09 pence (GBP -2.30 pence)

Important events during the quarter

• Generating positive adjusted EBITDA on IAP revenue for the first time in the company’s history
• Signing of Z Day (Fun Plus), Dragon Raja (Archosaur Games), and Taptap Heroes (Ajoy Lab Games) **
• Launch of Dragon Raja, Z Day, Battle Warship (Special Games) and Tabou Stories (Nanobit)
• Legacy of Discord and Saint Seiya (YOOZOO) will not be distributed going forward
• Reclassification of one non-qualifying game as mid-tier game due to a performance well above minimum threshold

‡ The Company defines adjusted EBITDA as earnings before interest, tax, depreciation, amortisation, finance costs, impairment losses and other income. Adjusted EBITDA (adjusting operating profit for several non-cash items) is used by the Company for internal performance analysis to assess the execution of our strategies. Management believe that this adjusted measure is a more appropriate metric to understand the underlying performance of the Company
* Comparable number for the same quarter of the previous financial year in brackets
** Taptap Heroes was signed in September 2020, but press released in October 2020 after completion of technical review

Notes from the CEO

We just closed another record quarter in which we hit positive adjusted EBITDA on IAP revenue for the first time.

In the last two quarters we have grown our revenue organically by 123%, and by 168% over the last four quarters. Since we listed two and a half years ago top line has grown by 559%. I think this is a great achievement!

I am also very pleased that we achieved positive adjusted EBITDA on IAP revenue two quarters earlier than set out in our financial targets. This really shows the power of our distribution model.

We have also seen our top games generate more than USD 500k in monthly average gross revenue during this quarter. Some of our games now generate more than 20% of the developers’ android revenue on markets outside China. This really demonstrates Flexion’s distribution capacity and why developers should take the alternative market seriously and work with us.

The main growth driver this quarter was Huawei’s App Gallery.  During the quarter it became our biggest channel for the first time. The quality of their devices and app store is high, and so is their commitment to continue to develop AppGallery with very strong promotions to ensure that its content is performing well. Huawei has seen its fair share of political turbulence on its 5G network side but as an app distributor they start to be a real force. We are of course continually assessing Huawei’s situation.

Generally, the mobile games market is currently in a transition phase, moving towards alternative distribution. The market is being under increased pressure from both market participants and regulatory bodies, resulting in changes that should support Flexion’s long-term growth potential. Epic Games, together with amongst others Spotify, have challenged Google and Apple for monopolistic behaviour in the US courts. Just a few days ago, the US Justice Department decided to sue Google for market abuse. The regulatory pressure to break up and open markets across the world is evident. India is the latest example where developers have responded negatively to the new Google Play payment terms for all apps. Google has met some of the criticism with promises of making third party stores more accessible on the next Android update. This is the first time Google openly acknowledges the important role of other stores on Android. In parallel, Apple has decided to implement new policies, restricting the way advertisers may track users on Apple’s latest operating system iOS 14. This is a big blow to the advertising ecosystem. It will confine heavy-spending game developers as well as the largest providers of advertising inventory, including Facebook. Following the implementation of Apple’s new policies early next year, we expect Android to gain importance for developers and organic traffic from alternative app stores to increase.  It is hard to predict how the future will turn out, but the current trends are pointing in favour of alternative distribution.

We continue to invest in the development of our platform and services, further improving the tools that help us scale faster. One newly developed service is our game submission portal which allows developers to submit everything needed in order to prepare the distribution of a game. The portal is currently in beta launch with some of our closest partners. This is one of the first customer facing self-service tools and stands as a great example of how we can automate the delivery process.

Our sales pipeline is strong, and we are expecting to hit our live game target of 27 titles and positive adjusted EBITDA on IAP revenue by the end of the year. We continue to focus on growing our newly launched titles, signing new games and adding new channels. We have a strong positive momentum in our business, which we expect to continue.

We are now entering the busy Christmas quarter with a few game launches and many promotions planned.  We expect a relatively stable period before we gear up for the Christmas rush. With large parts of the western world in lockdown we expect new devices and games to be high on the wish lists this year.

We are looking forward with excitement and wish you all a happy ending to a very eventful but good year for Flexion.

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 November 5th, 2020.

About Flexion Mobile Plc: Flexion offers a distribution service for free-to-play Android games. The service allows developers to distribute their games in multiple channels such as Huawei, Amazon, Samsung, ONE store and Xiaomi. These are channels that developers are struggling to reach and support without Flexion. At the core of the service is Flexion's patented enabling and enhancement software that converts existing Android games into specific game versions for each store 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.