Positive performance from growth franchises
led to mobile revenue growing 14% sequentially quarter over
quarter, with ongoing operating cost reductions improving gross
profit margin to 62%
TORONTO, May 31, 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 ended March 31, 2021.
(All figures in US dollars, unless otherwise
indicated)
Q1 2021 Financial Highlights
- Revenue from mobile platforms (Apple, Google and Amazon) was
$3.0 million (72.8% of total
revenue), compared to $2.6 million in
Q4 2020 (63.7%), and $3.2 million in
Q1 2020 (67.6%), driven by the roll out of successful improvements
to growth franchises
- Revenue of $4.1 million, compared
to $4.1 million in Q4 2020, and
$4.7 million in Q1 2020; overall
revenue was impacted by the end of life of Adobe Flash technology
on December 31, 2020, which has led
to an industry wide decline in Facebook Canvas platform game
activity
- Gross profit margin increased to 62.0%, from 61.3% in Q4 2020,
and 48.8% in Q1 2020, driven by the ongoing execution of operating
cost reductions
- Operating expenses of $2.6
million, compared to $2.9
million in Q4 2020, and $2.6
million in Q1 2020
- EBITDA1 of $0.4
million (10.8% of revenue), compared to $0.8 million (18.6%) in Q4 2020, and $0.7 million (14.9%) in Q1 2020
- Adjusted EBITDA1 of $0.9
million (20.9% of revenue), compared to $0.7 million (18.1%) in Q4 2020, and $0.9 million (18.4%) in Q1 2020
- Net income of $2.2 million
($0.03 per basic and diluted share),
compared to a net loss of $3.3
million (($0.05) per basic and
diluted share) in Q4 2020, and a net loss of $0.7 million (($0.02) per basic and diluted share) in Q1
2020
- Cash generated by operating activities in Q1 2021, net of
working capital changes, was $0.4
million, compared to $0.6
million in Q4 2020, and $0.7
million in Q1 2020
- Cash at the end of March 31, 2021
was $14.8 million, compared to
$18.1 million from the end of 2020,
and debt outstanding on the bank credit facility was $5.9 million, compared to $6.0 million from the end of 2020; the decrease
in cash is due to payments relating to the Company's Q1
2021 M&A activities
1 Please refer to "Non-GAAP
Measures" section of this press release
|
Q1 2021 Operating 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 at the end of Q1 2021; although it did not
contribute meaningfully to Q1 2021 due to having closed so late in
the quarter, the Company will recognize a full quarter of Peak
revenue in Q2 2021, which it expects to be material
- In Q4 2020, the Company undertook new investments in the
improvement of its mobile growth game franchises, including War of
Nations, Kitchen Scramble, and Smurfs' Village, which it
successfully started rolling out in Q1 2021, and which will
continue through the back half of the year; these investments are
expected to drive revenue growth in the coming quarters
Subsequent Highlights
- 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 $0.25 million, and entered into a five-year
licensing agreement to commercialize the game worldwide; the
transition of these assets is complete, and the Company is pleased
that it is on target for its soft launch of the only mobile version
of one of the world's most successful first person shooter
franchises later this year
Management Commentary
"We are thrilled to see our investments in growth franchises
begin to yield fruit, with mobile game revenue growing 14%
sequentially from the fourth quarter," said Jon Walsh, Co-founder and CEO of PopReach.
"PopReach continues to be cash and EBITDA positive, and is
committed to executing its growth initiatives on an ROI positive
basis. Although revenue from the Facebook Canvas platform was
down, this reflects industry wide declines attributable to Adobe
Flash technology's end of life at the end of 2020; however, our
Facebook games are expected to continue to be cash positive, and
prove our investment thesis, having already paid back our original
2018 investment on a net cash basis."
Added Christopher Locke,
Co-founder and President of PopReach "Looking to the rest of the
year, we have a number of drivers of growth we're excited about.
The integration of Peak is complete and will contribute
meaningfully to our second quarter numbers. Based on results
to date, we're optimistic that our initiatives around War of
Nations, Kitchen Scramble, and Smurfs' Village, will drive revenue
growth in the second half of the year. Finally, our team is hard at
work on the first ever mobile PAYDAY game, which we expect to soft
launch late this year, while our acquisition pipeline remains
robust with a number of opportunities available."
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 March
31 2021
|
|
Three months
ended
December 31
2020
|
|
Three months
ended March
31 2020
|
|
|
|
|
|
|
|
In-app
purchases
|
$
|
3,938,807
|
$
|
3,957,439
|
$
|
4,451,628
|
Advertising
|
|
137,722
|
|
137,370
|
|
224,674
|
Other
|
|
1,371
|
|
377
|
|
242
|
Total
revenue
|
$
|
4,077,900
|
$
|
4,095,186
|
$
|
4,676,544
|
Net Income
(Loss)
|
|
2,161,299
|
|
(3,282,834)
|
|
(677,742)
|
Comprehensive Income
(Loss)
|
|
2,184,484
|
|
(3,354,148)
|
|
(636,638)
|
Earnings (loss) per
share (basic and diluted)
|
|
0.03
|
|
(0.05)
|
|
(0.02)
|
|
|
|
|
|
|
|
Non-GAAP1:
|
|
|
|
|
|
|
Bookings
|
|
4,115,915
|
|
4,026,525
|
|
4,714,885
|
EBITDA
|
|
440,276
|
|
761,775
|
|
695,861
|
Adjusted
EBITDA
|
|
851,647
|
|
742,536
|
|
860,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Please refer to "Non-GAAP Measures"
section of this press release
|
|
|
|
|
|
|
|
March
31, 2021
|
|
December 31,
2020
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
14,736,180
|
$
|
18,097,649
|
Current
assets
|
|
17,229,062
|
|
20,079,201
|
Total
assets
|
|
29,033,708
|
|
25,934,531
|
|
|
|
|
|
Current
liabilities
|
|
8,737,884
|
|
7,879,809
|
Non-current
liabilities
|
|
5,463,780
|
|
5,534,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended March
31 2021
|
|
Three months
ended
December 31
2020
|
|
Three months
ended March
31 2020
|
|
|
|
|
|
|
|
Apple
|
$
|
1,779,882
|
$
|
1,639,606
|
$
|
2,005,458
|
Facebook
|
|
1,110,453
|
|
1,485,551
|
|
1,517,493
|
Google
|
|
970,001
|
|
781,622
|
|
854,970
|
Amazon
|
|
65,655
|
|
50,660
|
|
73,707
|
Other mobile
|
|
12,816
|
|
-
|
|
-
|
|
|
|
|
|
|
|
Total in-app
purchases
|
|
3,938,807
|
|
3,957,439
|
|
4,451,628
|
Conference Call
Management will host a conference call on Monday, May 31, 2021 at 8:30 am ET to discuss these first quarter 2021
results.
To access the conference call, please dial 416-764- 8659 or
1-888-664-6392 or access the webcast at https://bit.ly/3ttVxHJ. An
archived recording of the conference call will be available until
June 3, 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 589988.
Financial Statements and MD&A
PopReach's Financial Statements for the three months ended
March 31, 2021, and Management's
Discussion and Analysis (the "MD&A") for the three months ended
March 31, 2021, 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
March 31
2021
|
|
Three months
ended
December 31
2020
|
|
Three months
ended
March 31
2020
|
|
|
|
|
|
|
|
Net loss
|
$
|
2,161,299
|
$
|
(3,282,834)
|
$
|
(677,742)
|
Add:
|
|
|
|
|
|
|
Interest and
accretion expenses
|
|
138,140
|
|
477,959
|
|
376,698
|
Current taxes
(recovery)
|
|
31,392
|
|
81,951
|
|
24,091
|
Deferred tax
recovery
|
|
(1,198)
|
|
(21,638)
|
|
-
|
Amortization
|
|
400,576
|
|
682,556
|
|
734,794
|
Fair value
loss (gain) on financial liabilities
|
|
(2,289,933)
|
|
2,823,781
|
|
238,020
|
|
|
|
|
|
|
|
EBITDA
|
|
440,276
|
|
761,775
|
|
695,861
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
73,939
|
|
49,422
|
|
-
|
Change in
deferred revenue
|
|
38,015
|
|
(68,661)
|
|
32,141
|
Change in
deferred cost of sales
|
|
(35,973)
|
|
-
|
|
38,341
|
Extraordinary
one-time expenses
|
|
335,390
|
|
-
|
|
93,722
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
851,647
|
|
742,536
|
|
860,065
|
|
|
|
|
|
|
|
Adjusted
EBITDA/Revenue %
|
|
21%
|
|
18%
|
|
18%
|
Adjusted EBITDA was $851,647 for
the three months ended March 31, 2021
compared to $860,065 for the three
months ended March 31, 2020, which
represents a decrease of $8,418 or
1%.
The decrease in amortization was due to certain intangible
assets being fully amortized during 2020. Decreases in interest and
accretion expenses were due to the restructuring of the credit
facility mentioned in "Summary of Significant Developments" in the
MD&A.
Non-operating items
Fair value gain on financial liabilities was $2,289,933 for the three months ended
March 31, 2021 compared to a fair
value loss of $238,020 for the three
months ended March 31, 2020. The full
amount of the fair value gain of $2,289,933 for the three months ended
March 31, 2021 related to the change
in fair value of the warrant liability. As the share price of the
Company increases, the fair value of the warrant liability
increases. Conversely, if the share price of the Company decreases,
the fair value of the warrant liability decreases. The entire
$238,020 loss for the three months
ended March 31, 2020 also related to
the fair value loss of the conversion feature and warrant
liability. As the probability of the Transaction mentioned in
the "Summary of Significant Developments" increased, along with the
valuation of the Company, the fair value of the conversion feature
and warrants also increased.
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
March 31
2021
|
|
Three months
ended
December 31
2020
|
|
Three months
ended
March 31
2020
|
|
|
|
|
|
|
|
Revenue
|
$
|
4,077,900
|
$
|
4,095,186
|
$
|
4,676,544
|
Add: Increase
(decrease) in deferred revenue
|
|
38,015
|
|
(68,661)
|
|
38,341
|
|
|
|
|
|
|
|
Total
bookings
|
|
4,115,915
|
|
4,026,525
|
|
4,714,885
|
The decrease in bookings for the three months ended March 31, 2021 compared to the three months ended
March 31, 2020, are due to the
industry wide decline of the Facebook Canvas platform, as discussed
in the Growth Platforms section of "Summary of Significant
Developments" in the MD&A. The company also continues to
experience 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.
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 successful game 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
130 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