Full year EBITDA1 growth of
327%, net loss of $6.3 million, gross
profit margin improvement to 57.5%, and a 125% increase in cash
generated by operating activities
TORONTO, April 19, 2021 /CNW/ - PopReach Corporation
("PopReach" or the "Company") (TSXV: POPR) (OTCQX:
POPRF), a free-to-play game publisher focused on acquiring and
optimizing proven game franchises, today announced financial
results for the three months and twelve months ended December 31, 2020.
1 Please refer to "Non-GAAP
Measures" section of this press release
|
(All figures in US dollars, unless otherwise
indicated)
2020 Financial Highlights
- EBITDA1 of $3.0
million (17.0% of revenue), an increase of 327% or
$2.3 million from 2019 of
$0.7 million (4.0% of revenue)
- Adjusted EBITDA1 of $3.9
million (21.8% of revenue), an increase of 30% or
$0.9 million from 2019 of
$3.0 million (16.9% of revenue)
- Gross profit margin increased to 57.5%, from 44.0% in 2019
- Cash generated by operating activities improved to $3.6 million, an increase of 127% or $2 million from $1.6
million generated in 2019
- Revenue of $18.0 million compared
to $18.0 million in 2019
- Operating expenses of $10.6
million, compared to $12.1
million in 2019
- Net loss of $6.3 million, or
($0.13) per basic and diluted share,
compared to $4.4 million, or
($0.11) per basic and diluted share
in 2019; the increase in 2020 net loss was driven by non-cash fair
value loss on financial liabilities
- Cash at the end 2020 was $18.1
million, an increase of $17.0
million from the end of 2019, and debt outstanding on the
bank credit facility was $6.0
million, a decrease of $1.9
million from 2019
Q4 2020 Financial Highlights
- EBITDA1 of $0.8
million (18.6% of revenue), compared to $0.9 million (20.8% of revenue) in Q3 2020, and
$0.0 million (0% of revenue) in Q4
2019
- Adjusted EBITDA1 of $0.7
million (18.1% of revenue), compared to $0.8 million (18.7% of revenue) in Q3 2020, and
$1.4 million (28.8% of revenue) in Q4
2019
- Gross profit margin of 61.3%, compared to 61.8% in Q3 2020, and
48.0% in Q4 2019
- Revenue of $4.1 million, compared
to $4.3 million in Q3 2020, and
$4.8 million in Q4 2019
- Operating expenses of $2.9
million, compared to $2.7
million in Q3 2020, and $3.7
million in Q4 2019
- Net loss of $3.3 million, or
($0.05) per basic and diluted share,
compared to a net loss of $0.5
million, or ($0.01) per basic
and diluted share in Q3 2020, and a net loss of $1.4 million, or ($0.04) per basic and diluted share in Q4 2019;
the increase Q4 2020 net loss was driven by non-cash fair value
loss on financial liabilities
Q4 2020 Operating Highlights
- On October 2, 2020, the Company
refinanced its long-term debt on materially better terms by
securing a $7.5 million bank credit
facility with The Bank of Nova
Scotia, positioning the company with a growth-oriented
lender and materially reducing its projected annual interest
expense2
- On November 5, 2020, the Company
closed a C$5 million strategic
investment by Alibaba Group's global investment arm, with Alibaba
supporting the Company's global expansion by having its
representatives serve as its Special Advisor to Asia
- On November 9, 2020, the Company
announced a C$10 million bought deal
public offering, which was subsequently upsized to C$15 million; the oversubscribed bought deal
public offering closed on November 27,
2020, including the full exercise of the underwriter's
over-allotment option, for gross proceeds to the Company of
C$17.25 million
- In Q4 of 2020, the Company undertook new investments in the
improvement of its growth game franchises, including War of
Nations, Kitchen Scramble, and Smurfs' Village, which are expected
to begin launching in the back half of 2021
Subsequent Highlights
- On March 18, 2021, the Company
acquired substantially all of the assets relating to the award
winning "Peak – Brain Training" app for aggregate cash
consideration of $5 million,
increasing the number of monthly active users in its portfolio to
over 1.9 million
- On April 13, 2021, the Company
acquired all right and title to the existing "PAYDAY Crime War"
source code and game assets for cash consideration of $250,000, and entered into a five-year licensing
agreement to commercialize the title worldwide
Management Commentary
"2020 was a foundational year for PopReach; we got listed,
refinanced our debt with a growth oriented Schedule I bank, secured
a strategic investment from Alibaba's global investment arm,
capitalized the business with an oversubscribed bought deal, and
successfully built out our M&A pipeline" said Jon Walsh, Co-founder and CEO of PopReach.
"In the past five weeks we've closed two pivotal transactions; our
acquisition of Peak, for which we paid approximately one times
trailing twelve month revenue, and an asset purchase and licensing
deal that will see PopReach launch the mobile version of the
incredibly popular PAYDAY first person shooter franchise.
With a strong pipeline of acquisition opportunities and significant
updates planned around our key franchises, we are excited about our
growth prospects, and are committed to delivering sustainable value
for our stakeholders."
"PopReach delivered record results in 2020, with significant
improvements to EBITDA, Adjusted EBITDA, and cash generated by
operating activities, thanks to the successful execution of two
pillars of our playbook; operating cost reductions, and
stabilization of our franchises. Our focus in 2021 are investments
in our key franchises to increase player retention and
monetization, positioning the Company for organic growth in the
back half of the year" said Christopher
Locke, Co-founder and President of PopReach. "In Q4, we made
the right decision to delay paid user acquisition marketing due to
short term and highly inflated costs stemming from Apple's
announcement regarding IDFA (Identifier for Advertisers); these
increased costs drove a negative ROI on user acquisition spend in
the context of our portfolio, and we decided to prioritize EBITDA
growth over short term revenue gains. As such, we shifted our
capital allocation in favour of much higher returning investments
in game improvements and acquisitions."
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
December 31
2020
|
|
Three months
ended
September 30
2020
|
|
Three months
ended
December 31
2019
|
|
|
|
|
|
|
|
In-app
purchases
|
$
|
3,957,439
|
$
|
4,185,045
|
$
|
4,568,771
|
Advertising
|
|
137,370
|
|
150,936
|
|
239,282
|
Other
|
|
377
|
|
248
|
|
-
|
Total
revenue
|
$
|
4,095,186
|
$
|
4,336,229
|
$
|
4,808,053
|
Net Loss
|
|
(3,282,834)
|
|
(518,459)
|
|
(1,394,875)
|
Comprehensive
Loss
|
|
(3,354,148)
|
|
(485,231)
|
|
(1,391,677)
|
Loss per share (basic
and diluted)
|
|
(0.05)
|
|
(0.01)
|
|
(0.04)
|
|
|
|
|
|
|
|
Non-GAAP1:
|
|
|
|
|
|
|
Bookings
|
|
4,026,525
|
|
4,156,652
|
|
4,856,617
|
EBITDA
|
|
761,775
|
|
902,669
|
|
(3,859)
|
Adjusted
EBITDA
|
|
742,536
|
|
810,899
|
|
1,383,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Please refer to "Non-GAAP Measures"
section of this press release
|
|
|
Year ended
December 31,
2020
|
|
Year ended
December 31,
2019
|
|
|
|
|
|
In-app
purchases
|
$
|
17,300,218
|
$
|
16,970,160
|
Advertising
|
|
708,874
|
|
719,762
|
Other
|
|
1,193
|
|
263,952
|
Total
revenue
|
$
|
18,010,285
|
$
|
17,953,874
|
Net Loss
|
|
(6,301,224)
|
|
(4,435,785)
|
Comprehensive
Loss
|
|
(6,324,579)
|
|
(4,422,335)
|
Loss per share (basic
and diluted)
|
|
(0.13)
|
|
(0.11)
|
|
|
|
|
|
Non-GAAP1:
|
|
|
|
|
Bookings
|
|
17,691,248
|
|
18,515,763
|
EBITDA
|
|
3,062,792
|
|
717,523
|
Adjusted
EBITDA
|
|
3,932,790
|
|
3,033,611
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
December 31,
2019
|
|
|
|
Cash and cash
equivalents
|
18,097,649
|
1,126,160
|
Current
assets
|
20,079,201
|
3,532,277
|
Total
assets
|
25,934,531
|
12,617,436
|
|
|
|
Current liabilities
excluding borrowings
|
6,679,391
|
5,952,882
|
Total non-current
liabilities including borrowings
|
6,734,982
|
9,398,135
|
|
|
|
|
|
|
Conference Call
Management will host a conference call on Tuesday, April 20, 2021 at 8:30 am ET to discuss these fourth quarter and
fiscal year 2020 results.
To access the conference call, please dial 416-764- 8659 or
1-888-664-6392 or access the webcast at https://bit.ly/39MZwYL.
An archived recording of the conference call will be available
until April 27, 2021 and for 90 days
on our website at
https://www.popreach.com/investor-relations/ . To listen to
the recording, call 416-764-8677 or 1-888-390-0541 and enter
passcode 736199.
Financial Statements and MD&A
PopReach's Financial Statements for the year ended December 31, 2020, and Management's Discussion
and Analysis (the "MD&A") for the three and twelve months ended
December 31, 2020, are available on
the company's 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 (including amortization of deferred financing
fees), 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
December 31
2020
|
|
Three months
ended
September 30
2020
|
|
Three months
ended
December 31
2019
|
|
|
|
|
|
|
|
Net loss
|
$
|
(3,282,834)
|
$
|
(518,459)
|
$
|
(1,394,875)
|
Add:
|
|
|
|
|
|
|
Interest and
accretion expenses
|
|
477,959
|
|
207,941
|
|
382,710
|
Gain on
disposal of assets
|
|
–
|
|
6,750
|
|
(22,415)
|
Current taxes
(recovery)
|
|
81,951
|
|
(13,058)
|
|
44,562
|
Deferred tax
recovery
|
|
(21,638)
|
|
(37,846)
|
|
–
|
Amortization
|
|
682,556
|
|
743,314
|
|
986,736
|
Fair value
loss on financial liabilities
|
|
2,823,781
|
|
514,027
|
|
(577)
|
|
|
|
|
|
|
|
EBITDA
|
|
761,755
|
|
902,669
|
|
(3,859)
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
Impairment of
goodwill and other
|
|
–
|
|
–
|
|
994,525
|
Share-based
compensation expense
|
|
49,422
|
|
59,692
|
|
84,681
|
Change in
deferred revenue
|
|
(68,661)
|
|
(179,577)
|
|
48,564
|
Reverse
takeover listing expense
|
|
–
|
|
28,115
|
|
–
|
Acquisition
legal expenses
|
|
–
|
|
–
|
|
78,764
|
Restructuring
costs
|
|
–
|
|
–
|
|
181,281
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
742,536
|
|
810,899
|
|
1,383,956
|
|
|
|
|
|
|
|
Adjusted
EBITDA/Revenue %
|
|
18%
|
|
19%
|
|
28%
|
|
|
Year ended
December 31,
2020
|
|
Year ended
December 31,
2019
|
|
|
|
|
|
Net loss
|
$
|
(6,301,224)
|
$
|
(4,422,335)
|
Add:
|
|
|
|
|
Interest and
accretion expenses
|
|
1,417,024
|
|
1,123,108
|
Loss (gain) on
disposal of assets
|
|
6,750
|
|
(84,700)
|
Current
taxes
|
|
127,076
|
|
191,269
|
Deferred tax
recovery
|
|
(59,484)
|
|
–
|
Amortization
|
|
2,894,788
|
|
3,720,177
|
Fair value
loss on financial liabilities
|
|
4,977,862
|
|
60,468
|
Amortization
of deferred financing fees
|
|
–
|
|
142,986
|
|
|
|
|
|
EBITDA
|
|
3,062,792
|
|
717,523
|
|
|
|
|
|
Add:
|
|
|
|
|
Share-based
compensation expense
|
|
180,201
|
|
201,184
|
Change in
deferred revenue
|
|
(319,037)
|
|
561,889
|
Reverse
takeover listing expense
|
|
1,008,834
|
|
–
|
Acquisition
legal expenses
|
|
–
|
|
377,209
|
Impairment of
goodwill and other
|
|
–
|
|
994,525
|
Restructuring
costs
|
|
–
|
|
181,281
|
|
|
|
|
|
Adjusted
EBITDA
|
|
3,932,790
|
|
3,033,611
|
|
|
|
|
|
Adjusted
EBITDA/Revenue %
|
|
22%
|
|
17%
|
Adjusted EBITDA was $3,932,790 for
the year ended December 31, 2020.
Compared to the year ended December 31,
2019 of $3,033,611, the
increase was $899,179 or 30%.
The increase in Adjusted EBITDA for the year ended December 31, 2020 compared to the year ended
December 31, 2019 was largely related
to the successful execution of operating cost reductions, as
mentioned in the "Summary of Significant Developments" in the
MD&A, as well as lower research and development salaries and
benefits expenses as a result of a restructuring at PopReach
Technologies Private Limited ("PR Tech"), in Bangalore, India in Q4 of 2019.
Decreases in amortization was due to the impairment charge
recorded in Q4 2019, relating to certain advertising engines that
the RockYou Acquisition seller was operating that were shut down
due to the seller's bankruptcy, resulting in lower actual revenues
compared to forecasted revenues during the year. As a result of the
impairment charge, the carrying values of the intangible assets
were decreased, resulting in a lower amortization per period moving
forward. Increases in interest and accretion expenses were due to
the increase in convertible debt during the first half of 2020.
Bookings
Bookings is a non-GAAP financial measure that is equal to
revenue recognized plus or minus the change in deferred revenue
during the period. The following table is the reconciliation from
revenue to bookings for each period:
|
|
Three months
ended December 31
2020
|
|
Three months
ended
September 30
2020
|
|
Three months
ended December
31 2019
|
|
|
|
|
|
|
|
Revenue
|
$
|
4,095,186
|
$
|
4,336,229
|
$
|
4,808,053
|
Add: Increase
(decrease) in deferred revenue
|
|
(68,661)
|
|
(179,577)
|
|
48,564
|
|
|
|
|
|
|
|
Total
bookings
|
|
4,026,525
|
|
4,156,652
|
|
4,856,617
|
|
|
Year ended
December 31,
2020
|
|
Year ended
December
31, 2019
|
|
|
|
|
|
Revenue
|
$
|
18,010,285
|
$
|
17,953,874
|
Add: Change in deferred
revenue
|
|
(319,037)
|
|
561,889
|
|
|
|
|
|
Total
bookings
|
|
17,691,248
|
|
18,515,763
|
The decrease in bookings for the three months ended December 31, 2020 compared to the three months
ended December 31, 2019 was due to
COVID-19 related delays in the launch of growth game features
designed to increase engagement and monetization, delayed content
updates and bug fixes relating to the live operations of the
Company's entire portfolio of games, and the delay of planned new
user growth marketing initiatives due to inflated user acquisition
costs resulting from Apple's IDFA policy change, as mentioned in
the "Summary of Significant Developments" in the MD&A.
Bookings for the year ended December 31,
2020 compared to the year ended December 31, 2019 are lower as monthly average
users were lower over the same comparative period along with the
absence of revenues related to a revenue share agreement, which was
terminated on July 31, 2019.
About PopReach Corporation
PopReach, a Tier 1 Issuer on the TSX Venture Exchange, with
shares also trading on OTCQX® Best Market, is a free-to-play game
publisher focused on acquiring and optimizing proven franchises.
The Company has to date acquired 14 successful franchises enjoyed
by over 1.9 million unique players a month, including Smurfs'
Village (IP under license), PAYDAY Crime War (IP under
license), Peak - Brain Training, Kitchen Scramble,
Gardens of Time, City Girl Life, War of
Nations and Kingdoms of Camelot. PopReach, headquartered
in Toronto, employs a team of over
125 experts in Toronto,
Vancouver, London, UK, and Bangalore, India.
Additional information about the Company is available at
www.sedar.com
Forward-looking Information
Certain information in this news release constitutes
forward-looking statements and forward-looking information under
applicable Canadian securities legislation (collectively,
"forward-looking information"). Forward-looking information
include, but are not limited to, statements with respect to and the
business, financials and operations of the Company. Statements
containing forward-looking information are not historical facts but
instead represent management's expectations, estimates and
projections regarding future events. Forward looking information is
necessarily based on a number of opinions, assumptions and
estimates that, while considered reasonable by the Company as of
the date of this news release, are subject to known and unknown
risks, uncertainties, assumptions and other factors that may cause
the actual results, level of activity, performance or achievements
and future events to be materially different from those expressed
or implied by such forward-looking information, including but not
limited to the factors described in greater detail in the public
documents of the Company available at www.sedar.com. Although the
Company has attempted to identify important risks, uncertainties
and factors which could cause actual results to differ materially,
there may be others that cause results not to be as anticipated,
estimated or intended. Investors are cautioned undue reliance
should not be placed on any such information, as unknown or
unpredictable factors could have material adverse effects on future
results, performance or achievements of the Company. The Company
does not intend, and does not assume any obligation, to update this
forward-looking information except as otherwise required by
applicable law.
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE PopReach Corporation