TORONTO, Aug. 24, 2020 /CNW/ - (TSXV: POPR) – PopReach Corporation ("PopReach" or the "Company"), a free-to-play mobile game publisher focused on acquiring and optimizing proven game franchises, today announced financial results for the three months and six months ended June 30, 2020.
Q2 2020 Highlights
(All figures in US dollars)
- Revenue of $4.9 million, an increase of 4.8% compared to $4.7 million in Q1 2020, and an increase of 12.1% compared to $4.4 million in Q2 2019
- Bookings1 of $4.8 million, an increase of 1.7% compared to $4.7 million in Q1 2020, and an increase of 8.0% compared to $4.4 million in Q2 2019
- Gross profit margin improved to 56.6% from 45.9% in Q1 2020, and 42.5% in Q2 2019, driven by reductions in hosting and other fees as a result of the successful execution of server cost reductions completed in April, 2020
- Operating expenses of $2.3 million, compared to $2.5 million in Q1 2020, and $3.0 million in Q2 2019
- Adjusted EBITDA1 grew to $1.5 million (31.0% of revenue), an increase of $0.6 million from adjusted EBITDA of $0.9 million (18.4% of revenue) in Q1 2020, and an increase of $1.3 million from adjusted EBITDA of $0.3 million (6.0% of revenue) in Q2 2019
- Net loss of $1.8 million, or ($0.05) per basic and diluted share, compared to a net loss of $0.7 million, or ($0.02) per basic and diluted share in Q1 2020, and a net loss of $1.2 million, or ($0.03) per basic and diluted share in Q2 2019
- Concurrent with the completion of the reverse takeover transaction on June 30, 2020, the Company reduced debt through the mandatory conversion of all outstanding convertible debentures
- Cash at the end Q2 2020 was $2.1 million with $7.1 million in debt outstanding consisting of a bank credit facility; subsequent to quarter-end, the bank credit facility was reduced by a further $0.5 million to an outstanding balance of $6.6 million
| 1 | Please refer to "Non-GAAP Measures" section of this press release |
Management Commentary
"PopReach generated year over year revenue growth of 12% in the second quarter of 2020, and saw a 26% increase in monthly active users as our live operations teams drove solid growth for both in-app and advertising revenues," said Jon Walsh, Co-founder and CEO of PopReach.
"We are successfully executing against our strategy of reducing operating costs from acquired assets to increase cash flow while investing in our key franchises to ensure continued profitable growth. The completion of our server cost reductions in the second quarter drove significant gross profit margin improvement. When combined with our revenue growth this led to a $1.3 million increase in Adjusted EBITDA from the prior year's comparable period, or growth of 477%. Our ability to drive higher cash flows from our assets combined with our healthy balance sheet puts us in a strong position to execute against our pipeline of acquisition opportunities."
Selected Quarterly Information
Below is selected quarterly information from the Company's consolidated financial statements for each of the quarterly periods indicated. The Company's functional and presentation currency is US Dollars. Except where indicated, the following financial data is reported in accordance with IFRS.
| | | | | | | | | |
| | | | | Three months
ended June 30,
2020 | | Three months
ended March
31, 2020 | | Three months
ended June 30,
2019 |
| | | | | | | | | |
| In-app purchases | | | $ | 4,706,106 | $ | 4,451,628 | $ | 4,138,811 |
| Advertising | | | | 195,894 | | 224,675 | | 109,203 |
| Other | | | | 326 | | 242 | | 124,046 |
| Total revenue | | | $ | 4,902,326 | $ | 4,676,544 | $ | 4,372,060 |
| Net Loss | | | | (1,822,189) | | (677,742) | | (1,181,278) |
| Comprehensive Loss | | | | (1,848,562) | | (636,638) | | (1,148,491) |
| Loss per share (basic and diluted) | | | | (0.05) | | (0.02) | | (0.03) |
| | | | | | | | | |
| Non-GAAP1: | | | | | | | | |
| Bookings | | | | 4,793,186 | | 4,714,885 | | 4,439,375 |
| EBITDA | | | | 702,487 | | 695,861 | | 62,832 |
| Adjusted EBITDA | | | | 1,519,290 | | 860,065 | | 263,283 |
| | | | | | | | | |
| | | | | | | | | |
| 1 | Please refer to "Non-GAAP Measures" section of this press release |
| | | | | | | | | |
| | | | | | | Six months
ended June 30,
2020 | | Six months
ended June 30,
2019 |
| | | | | | | | | |
| In-app purchases | | | | | $ | 9,157,734 | $ | 8,431,256 |
| Advertising | | | | | | 420,568 | | 319,950 |
| Other | | | | | | 568 | | 183,108 |
| Total revenue | | | | | $ | 9,578,870 | $ | 8,934,314 |
| Net Loss | | | | | | (2,499,931) | | (2,039,247) |
| Comprehensive Loss | | | | | | (2,485,200) | | (2,063,098) |
| Loss per share (basic and diluted) | | | | | | (0.06) | | (0.06) |
| | | | | | | | | |
| Non-GAAP1: | | | | | | | | |
| Bookings | | | | | | 9,508,071 | | 9,410,907 |
| EBITDA | | | | | | 1,398,348 | | 373,354 |
| Adjusted EBITDA | | | | | | 2,379,355 | | 1,074,165 |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | |
| | | | | June 30, 2020 | | December 31,
2019 |
| | | | | | | |
| Cash and cash equivalents | | | | 2,071,552 | | 1,126,160 |
| Current assets | | | | 4,742,101 | | 3,532,277 |
| Total assets | | | | 12,447,851 | | 12,617,436 |
| Current liabilities excluding borrowings | | | | 4,394,250 | | 5,952,882 |
| Total non-current liabilities including borrowings | | | | 7,754,538 | | 9,398,135 |
| | | | | | | |
| | | | | | | |
Financial Statements and MD&A
PopReach's Financial Statements for the second quarter ended June 30, 2020, and Management's Discussion and Analysis (the "MD&A") for the three and six months ended June 30, 2020, are available on the Company's website at www.popreach.com/investor-relations/ under "Financial Information" and under the company profile on SEDAR at www.sedar.com.
Non-GAAP Measures
The Company prepares its financial statements in accordance with IFRS. However, the Company considers certain non-GAAP financial measures as useful additional information to assess its financial performance. These measures, which it believes are widely used by investors, securities analysts and other interested parties to evaluate its performance, do not have a standardized meaning prescribed by GAAP and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to financial measures determined in accordance with IFRS. Non-GAAP measures include "Bookings", "EBITDA" and "Adjusted EBITDA".
EBITDA and adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization ("EBITDA") and consolidated adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") are non-IFRS measures of financial performance. The presentation of these non-IFRS financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with IFRS, and may be different from non-IFRS financial measures used by other companies. Company management defines EBITDA as follows: IFRS Net income (loss) adding back accretion and interest expenses, income taxes, amortization, gain/loss on disposal of assets, and fair value gain/loss on financial liabilities. Adjusted EBITDA is calculated as EBITDA and excludes discontinued operations and the effects of significant items of income and expenditure which may have an impact on the quality of earnings, such as restructuring costs, legal expenses, and impairments where the impairment is the result of an isolated, non-recurring event. It also excludes the effects of equity-settled share-based payments, and changes in deferred revenues.
Management believes EBITDA and Adjusted EBITDA are useful financial metrics to assess its operating performance on a cash basis before the impact of non-cash items.
The following table presents the Company's calculation of EBITDA and Adjusted EBITDA for each period:
| | | | | | | |
| | | Three months
ended June
30, 2020 | | Three months
ended March
31, 2020 | | Three months
ended June
30, 2019 |
| | | | | | | |
| Net loss | $ | (1,822,189) | $ | (677,742) | $ | (1,181,278) |
| Add: | | | | | | |
| Interest and accretion expenses | | 323,219 | | 345,492 | | 273,059 |
| Income taxes | | 34,092 | | 24,091 | | 47,817 |
| Amortization | | 734,124 | | 734,794 | | 889,611 |
| Amortization of deferred financing fees | | 31,207 | | 31,206 | | 31,169 |
| Fair value gain/loss on financial liabilities | | 1,402,034 | | 238,020 | | 2,454 |
| | | | | | | |
| EBITDA | | 702,487 | | 695,861 | | 62,832 |
| | | | | | | |
| Add: | | | | | | |
| Share-based compensation expense | | 38,946 | | 32,141 | | 45,158 |
| Change in deferred revenue | | (109,140) | | 38,341 | | 67,315 |
| Reverse takeover listing expense | | 886,997 | | 93,722 | | – |
| RTO and acquisition legal expenses | | – | | – | | 87,978 |
| | | | | | | |
| Adjusted EBITDA | | 1,519,290 | | 860,065 | | 263,283 |
| | | | | |
| | | Six months
ended June 30,
2020 | | Six months
ended June 30, 2019 |
| | | | | |
| Net loss | $ | (2,499,931) | $ | (2,039,247) |
| Add: | | | | |
| Interest and accretion expenses | | 668,711 | | 462,057 |
| Income taxes | | 58,183 | | 102,146 |
| Amortization | | 1,468,918 | | 1,778,804 |
| Amortization of deferred financing fees | | 62,413 | | 62,959 |
| Fair value gain/loss on financial liabilities | | 1,640,054 | | 6,635 |
| | | | | |
| EBITDA | | 1,398,348 | | 373,354 |
| | | | | |
| Add: | | | | |
| Share-based compensation expense | | 71,087 | | 89,292 |
| Change in deferred revenue | | (70,799) | | 476,593 |
| Reverse takeover listing expense | | 980,719 | | – |
| RTO and acquisition legal expenses | | – | | 134,926 |
| | | | | |
| Adjusted EBITDA | | 2,379,355 | | 1,074,165 |
The increase in EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019 was largely related to the acquisition of the Smurfs Portfolio in September 2019, along with large server cost reductions.
Decreases in amortization was due to the impairment charge recorded at the end of the year December 31, 2019. As a result of the impairment charge, the carrying values of the intangible assets were decreased, resulting in a lower amortization per period. Increases in interest and accretion expenses were related to the financing of the RockYou Acquisition. Increases in the fair value loss was related to the additional convertible debenture raises, and the fair value of the warrants associated with the convertible debentures which increased on the completion of the public listing. Legal expenses also increased due to the Company's Qualifying Transaction, which closed on June 30, 2020, and resulted in the Company's public listing on July 8, 2020 as a TSX Venture Exchange Tier 1 Technology Issuer.
Bookings
Bookings is a financial measure, commonly used in the mobile games industry, that is equal to revenue recognized plus or minus the change in deferred revenue during the period. As such, it is representative of the actual gross revenue paid by paying players in the Company's games. The following table is the reconciliation from revenue to bookings for each period:
| | | | | | | |
| | | Three months
ended June 30,
2020 | | Three months
ended March
31, 2020 | | Three months
ended June 30,
2019 |
| | | | | | | |
| Revenue | $ | 4,902,326 | $ | 4,676,544 | $ | 4,372,060 |
| Add: Change in deferred revenue | | (109,140) | | 38,341 | | 67,315 |
| | | | | | | |
| Total bookings | | 4,793,186 | | 4,714,885 | | 4,439,375 |
| | | | | |
| | | Six months
ended June 30,
2020 | | Six months
ended June 30,
2019 |
| | | | | |
| Revenue | $ | 9,578,870 | $ | 8,934,314 |
| Add: Change in deferred revenue | | (70,799) | | 476,593 |
| | | | | |
| Total bookings | | 9,508,071 | | 9,410,907 |
The increase in bookings for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019 is related to an increase in both in-app and advertising revenues across the games portfolio including the impact of the Smurfs Portfolio of games acquired in September 2019.
About PopReach Corporation
PopReach, a Tier 1 Technology Issuer on the TSX Venture Exchange, is a free-to-play mobile game publisher focused on acquiring and optimizing proven game franchises. The Company has acquired 12 successful game franchises competing mainly in the North American game market, including Smurfs' Village (IP under license), Kitchen Scramble, Gardens of Time, City Girl Life, War of Nations and Kingdoms of Camelot. The Company's franchises are enjoyed by over 1.2 million unique players a month. PopReach, headquartered in Toronto, employs a team of over 120 experts in Toronto, and Bangalore.