Flexion reports another record-breaking quarter. Third quarter revenue up by 176% and gross profit increases by 223%. This is the third consecutive quarter with reported positive adjusted EBITDA[‡].
* 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
The December quarter is a strong quarter for mobile games and this year was no exception for Flexion. We enjoyed a very strong period leading up to Christmas and most of our top titles performed exceedingly well during the holidays. Considering the very high growth rate we have experienced in previous quarters, we are very proud to continue with double digit quarter over quarter growth in the 3[rd] quarter. We are, of course, also pleased to see a healthy growth in gross profit. This was the third consecutive quarter with positive adjusted EBITDA, leaving us in a strong position to reach a positive adjusted EBITDA for this financial year. I am also pleased that we no longer have any exposure on Minimum Guarantees and we are, in fact, expecting to bring back around GBP 100k over the profit & loss in the next quarter.
We started the quarter by preparing for an institutional fund raise to strengthen our shareholder base and raise growth capital. The round was launched in December and attracted strong interest from many renowned international investors. We are very pleased that the round was heavily oversubscribed and included 11 institutional funds in addition to a strategic investor. We now have a shareholder base which can support us in the next phase of our journey and absorb early seed investors exiting after a successful run with Flexion. The gross proceeds from the SEK 114m private placement will support our continued growth through strengthened sales, expanded delivery capability and new customer facing tools. We are also actively reviewing strategic investments and M&A opportunities within the game service segment.
All our channels grew in the 3[rd] quarter which is great given that distribution power is equally important to Flexion as adding new strong titles. We continue to evaluate growing channels such as Aptoide, Oppo and Vivo. In conjunction with our fund raise in December, we announced a strategic three-year partnership agreement with Huawei. As a result, we expect positive impact on growth from this channel. The agreement covers collaboration on game sourcing and marketing. We are hopeful that we will be able to leverage this deeper partnership to attract new top grossing games to our portfolio.
In December, we extended our important Funplus agreement for Z-Day to cover the Huawei AppGallery channel after a successful launch in One Store, Samsung and Amazon. We already work with Funplus on Guns of Glory and it is great to see this partnership expand further. We also launched TapTap Heroes and signed Clash of Empire which is expected to launch in the 4[th] quarter. In addition, we signed an agreement with Embracer's Deca Games who acquired the rights for Gods and Glory from Wargaming. This agreement will go live in the 4[th] quarter too.
Our unique and scalable model will allow us to continue to grow the number of titles but, at the same time, we will introduce stricter performance criteria with a view to improve the overall portfolio performance. This means that we will continue to optimise and maximise our game mix as well as terminating, or not renewing, loss-making agreements. This year we have proven that we can generate well above USD 500k per month from our top performing games and our focus continues to be on top grossing titles rather than the longtail. In other words, quality is more important than quantity when it comes to game sourcing.
The alternative distribution market continues to attract attention with new high-profile lawsuits by Epic Games. The company has now taken its fight from the US to Europe where they have sued Google and Apple in the UK for abuse of dominant position. In November, Microsoft announced plans to support Android apps on Windows 10. The exciting project named "Latte" will launch in the autumn of 2021 and could potentially offer a new channel for our games. We are seeing growing competition in what we call the "over the top" game payments market where companies are offering payment services tailored to gamers independent of platform. This is further evidence of how the market is changing in favour of alternative markets.
Our momentum and sales pipeline remain strong as we move into the traditionally weaker 4[th] quarter. We expect to convert new prospects and reach 27 signed titles at the end of the financial year. We are working hard on launching titles and we expect several new games live in the 4[th] quarter. However, due to some unforeseen delays on the game developers' side we may not have all signed titles live by the end of the financial year. With our increased fire power, we will continue to strengthen the sales, delivery and development teams in order to keep our market leading position while preparing the company for the next growth phase. Overall, it should be a great finish to a game changing year for Flexion.
Finally, I would like to add that it's fantastic to see how well the Flexion team continues to perform considering that most of our staff are living with very tough Covid-19 restrictions.
We are looking forward with excitement to the 4[th] quarter and wish you all a happy and prosperous 2021.
Jens Lauritzson - CEO
This information was distributed by Cision http://www.cisionwire.se/