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.
‡ 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
This information was distributed by Cision http://www.cisionwire.se/