Q2 Report – 30 June 2021
Flexion hits the USD 10m quarterly revenue milestone as it makes three consecutive monthly revenue records and reports its best ever quarterly performance. Total revenue grows by 19% quarter on quarter, representing growth of 61% year on year.
April 2021 to June 2021 performance
- Total revenue increased by 61% to GBP 7.8m (GBP 4.8m)*
- Gross profit increased by 34% to GBP 0.9m (GBP 0.7m)
- Adjusted EBITDA‡ remained flat at GBP 0.03m (GBP 0.02m)
- Operating loss remained flat at GBP -0.05m (GBP -0.04m)
- Earnings per share amounted to GBP -0.13 pence (GBP 0.01 pence)
- Cash amounted to GBP 15.6m (GBP 3.7m)
Important events during the quarter
- Signing of Legendary Game of Heroes from N3TWORK and Guardians of Cloudia from NEOCRAFT
- Launch of War of Magic from Goat Games, Illusion Connect from Superprism Technology and Clash of Empire from Leme Games
Important events after the quarter
- Launch of Legendary Game of Heroes and Guardians of Cloudia
- Signing of Top Tier title Evony The King’s Return from Top Games Inc.
- Alignment of the financial year with the calendar year by closing the current financial year after 9 months in December 2021
* Comparable number for the same quarter of the previous financial year in brackets
‡ 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
Notes from the CEO
We had a great start to this quarter and the strong momentum continued with three consecutive monthly revenue records. I am of course very pleased that we managed to maintain the strong momentum from last year and hit a new milestone of USD 10 million in quarterly revenue for the first time. This resulted in total revenue growing by 19% quarter on quarter and a very solid 61% year on year, which sets us up nicely for the year ahead. We are maintaining our 40-60% annualised revenue growth guidance on existing services.
Our biggest titles continue to power on in the main channels, but we are also seeing positive trends in most of our portfolio and are expecting more contribution from our newly launched games over the coming quarters. We signed two new games this quarter, Legendary Games of Heroes and Guardians of Cloudia. The first game comes through a new and exciting partnership with the San Francisco based N3TWORK Inc. Legendary Game of Heroes has generated well above USD 100 million in Google Play since its launch and has great monetization KPIs. We think it will be well suited for our biggest channels and have already secured strong promotions for the launch in August. The second title is from the up-and-coming Chinese publisher NEOCRAFT. We have been working with them on Tales of Wind and now received the privilege to distribute Guardians of Cloudia, which is their newly launched top grossing game.
Over the past six months, we have worked on improvements in our delivery process and capacity. The delivery pace last year was too slow. We have therefore made changes to focus on faster execution and improvements in delivery and on-boarding. We have already seen improved output with three titles launched in this quarter - War of Magic from Goat Games, Illusion Connect from Superprism Technology and Clash of Empire from Leme Games. We have also, since quarter-end, launched the two games signed during the quarter, Guardians of Cloudia and Legendary Game of Heroes. This tells me that our work is paying off. To further increase output, we are continuing to develop support tools to increase our capacity going forward.
The strategic position in the marketplace for Flexion continues to improve. I would like to highlight two disruptive events that should benefit Flexion over time. First of all the impact from the deprecation of IDFA (identification for advertisers) on iOS (Apple’s operating system) is starting to have a negative impact for the biggest spending publishers as they can no longer target buying customers in the same way. The immediate impact has been a shift in spend to Android where, at least for now, developers can continue with their user targeting. Prices for user acquisition are likely to continue to increase on Android which means that the value of our distribution is getting increasingly more attractive. It is still too early to say how this will pan out, but it is quite likely that Google will face pressure to follow Apple. If this happens it should make alternative distribution and user acquisition in our channels even more appealing to developers.
Secondly, in parallel, the Chinese regulators are continuing to make it more difficult for Chinese developers with new legislation in their domestic market. This puts further pressure on game developers to focus on overseas distribution and partnerships outside China. We are well positioned to take advantage of this trend. We continue to invest in our Chinese Team.
As we communicated in the past, we have started to explore new traffic sources and business models that are evolving in our market. This involves everything from hybrid stores that do not charge a fee on In-App Purchases and D2C (direct to consumer) distribution to various forms of User Acquisition and marketing models. Our new M&A Team is mapping out and focusing on the Games Services market which is a large growing global market that is highly fragmented. In parallel, our team is developing a product and service strategy that captures and supports these opportunities going forward. We are also hiring specialist sales professionals to our Commercial Sales Team.
We have started this new financial year with some great momentum, and we are looking forward to continue executing our growth strategy over the coming quarters.
Jens Lauritzson – CEO
