Revenue of US$4.3
million, Gross Profit margin of 58.1%, and significant
year-over-year improvement in Adjusted EBITDA1
and Net Loss
TORONTO, Nov. 30, 2020 /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 nine months ended September 30, 2020.
Q3 2020 Operating Highlights
(All figures in US
dollars)
- Revenue of $4.3 million, a
seasonal decrease of 11.5% compared to $4.9
million in Q2 2020, but an increase of 3.0% compared to
$4.2 million in Q3 2019
- Gross profit margin improved to 58.1%, from 56.6% in Q2 2020,
and 42.9% in Q3 2019, driven by reductions in hosting fees and
other expenses
- Operating expenses of $2.5
million, compared to $2.3
million in Q2 2020, and $2.7
million in Q3 2019
- Adjusted EBITDA1 of $0.8
million (18.7% of revenue), a decrease of $0.7 million from Q2 2020 Adjusted EBITDA of
$1.5 million (31.0% of revenue), but
an increase of $0.2 million from Q3
2019 Adjusted EBITDA of $0.6 million
(13.7% of revenue)
- Adjusted EBITDA of $3.2 million
(22.9% of revenue) for the first nine months of 2020, doubling the
$1.6M (12.5% of revenue) for the same
nine-month period in 2019
- Net loss of $0.5 million, or
($0.01) per basic and diluted share,
a 72% improvement versus the Q2 2020 net loss of $1.8 million, or ($0.05) per basic and diluted share, and half of
the Q3 2019 net loss of $1.0 million,
or ($0.03) per basic and diluted
share
1
|
Please refer to
"Non-GAAP Measures" section of this press release
|
Highlights Subsequent to Quarter-End
- On October 2, 2020, the Company
entered into a new non-revolving term facility of $6,500,000 with a leading Canadian Schedule I
bank in order to refinance its prior bank credit facility on
significantly improved terms, and entered into an operating line of
credit of $1,000,000 with the same
lender.
- On November 5, 2020, the Company
closed a non-brokered private placement of C$5,000,000 with New Insight Incentive Plan
Company, a 100% owned subsidiary of eWTP Tech Innovation Fund LP,
the global investment arm of Alibaba Group.
- On November 27, 2020, the Company
completed a public offering with Beacon Securities Limited, on
behalf of a syndicate of underwriters, for the purchase on a bought
deal basis, including the exercise of an over-allotment option, of
13,800,000 common shares at a price of C$1.25 per share for aggregate total gross
proceeds to the Company of C$17,250,000.
Management Commentary
"Adjusted EBITDA for the nine months year to date has already
surpassed our 2019 full year total as we successfully executed on
cost reductions against our acquired assets while still investing
profitably in future growth initiatives," said Jon Walsh, Co-founder and CEO of PopReach. "Our
teams have been putting capital to work within our key franchises
with new game prototypes, testing user acquisition campaigns and
metrics, and building a game development leadership team in
Vancouver. All of these
initiatives help to set a strong foundation for revenue, Adjusted
EBITDA and cash flow growth in 2021."
Added Mr. Walsh, "We also achieved a number of key milestones
after the quarter-end to significantly strengthen our balance
sheet, including the refinancing of our debt, a strategic
investment from Alibaba's global investment arm, and the closing of
an oversubscribed bought deal. PopReach is now in a strong position
to continue to execute on our strategy of acquiring proven game
franchises that will bring further accretive cash flows into the
business."
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
September 30
2020
|
|
Three months
ended
June 30
2020
|
|
Three months
ended
September 30
2019
|
|
|
|
|
|
|
|
|
|
In-app
purchases
|
|
|
$
|
4,185,045
|
$
|
4,706,106
|
$
|
3,970,133
|
Advertising
|
|
|
|
150,936
|
|
195,894
|
|
160,530
|
Other
|
|
|
|
248
|
|
326
|
|
80,844
|
Total
revenue
|
|
|
$
|
4,336,229
|
$
|
4,902,326
|
$
|
4,211,507
|
Net Loss
|
|
|
|
(518,459)
|
|
(1,822,189)
|
|
(1,001,663)
|
Comprehensive
Loss
|
|
|
|
(485,231)
|
|
(1,848,562)
|
|
(967,560)
|
Loss per share (basic
and diluted)
|
|
|
|
(0.01)
|
|
(0.05)
|
|
(0.03)
|
|
|
|
|
|
|
|
|
|
Non-GAAP1:
|
|
|
|
|
|
|
|
|
Bookings
|
|
|
|
4,156,652
|
|
4,793,186
|
|
4,248,239
|
EBITDA
|
|
|
|
902,669
|
|
702,487
|
|
348,028
|
Adjusted
EBITDA
|
|
|
|
810,899
|
|
1,519,290
|
|
575,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Please refer to
"Non-GAAP Measures" section of this press release
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30,
2020
|
|
Nine months
ended
September 30,
2019
|
|
|
|
|
|
|
|
|
|
In-app
purchases
|
|
|
|
|
$
|
13,342,779
|
$
|
12,401,389
|
Advertising
|
|
|
|
|
|
571,505
|
|
480,480
|
Other
|
|
|
|
|
|
815
|
|
263,952
|
Total
revenue
|
|
|
|
|
$
|
13,915,099
|
$
|
13,145,821
|
Net Loss
|
|
|
|
|
|
(3,018,390)
|
|
(3,040,910)
|
Comprehensive
Loss
|
|
|
|
|
|
(2,970,431)
|
|
(3,030,658)
|
Loss per share (basic
and
diluted)
|
|
|
|
|
|
(0.07)
|
|
(0.08)
|
|
|
|
|
|
|
|
|
|
Non-GAAP1:
|
|
|
|
|
|
|
|
|
Bookings
|
|
|
|
|
|
13,664,723
|
|
13,659,146
|
EBITDA
|
|
|
|
|
|
2,301,017
|
|
721,382
|
Adjusted
EBITDA
|
|
|
|
|
|
3,190,254
|
|
1,649,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
2020
|
|
December 31,
2019
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
1,914,969
|
|
1,126,160
|
Current
assets
|
4,075,616
|
3,532,277
|
Total
assets
|
11,088,570
|
12,617,436
|
|
|
|
Current liabilities
excluding borrowings
|
4,360,133
|
5,952,882
|
Total non-current
liabilities including borrowings
|
|
|
|
6,805,868
|
|
9,398,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements and MD&A
PopReach's Financial Statements for the third quarter ended
September 30, 2020, and Management's
Discussion and Analysis (the "MD&A") for the three and nine
months ended September 30, 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
September 30
2020
|
|
Three months
ended
June 30
2020
|
|
Three months
ended
September 30
2019
|
|
|
|
|
|
|
|
Net loss
|
$
|
(518,459)
|
$
|
(1,822,189)
|
$
|
(1,001,663)
|
Add:
|
|
|
|
|
|
|
Interest and accretion
expenses
|
|
207,941
|
|
354,426
|
|
358,368
|
Loss on disposal of
assets
|
|
6,750
|
|
–
|
|
(62,285)
|
Current taxes
(recovery)
|
|
(13,058)
|
|
34,092
|
|
44,561
|
Deferred tax
recovery
|
|
(37,846)
|
|
–
|
|
954,637
|
Amortization
|
|
743,314
|
|
734,124
|
|
54,410
|
Fair value loss on
financial liabilities
|
|
514,027
|
|
1,402,034
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
902,669
|
|
702,487
|
|
348,028
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
–
|
Share-based
compensation expense
|
|
59,692
|
|
38,946
|
|
27,211
|
Change in deferred
revenue
|
|
(179,577)
|
|
(109,140)
|
|
36,732
|
Reverse takeover
listing expense
|
|
28,115
|
|
886,997
|
|
163,519
|
Acquisition legal
expenses
|
|
–
|
|
–
|
|
–
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
810,899
|
|
1,519,290
|
|
575,490
|
|
|
|
|
|
|
|
Adjusted
EBITDA/Revenue %
|
|
19%
|
|
31%
|
|
14%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30
2020
|
|
Nine months
ended
September 30
2019
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
$
|
(3,018,390)
|
$
|
(3,040,910)
|
Add:
|
|
|
|
|
|
|
|
|
Interest and accretion
expenses
|
|
|
|
|
|
939,065
|
|
883,384
|
Loss (gain) on
disposal of assets
|
|
|
|
|
|
6,750
|
|
(62,285)
|
Income
taxes
|
|
|
|
|
|
45,125
|
|
146,707
|
Deferred tax
recovery
|
|
|
|
|
|
(37,846)
|
|
–
|
Amortization
|
|
|
|
|
|
2,212,232
|
|
2,733,441
|
Fair value loss on
financial liabilities
|
|
|
|
|
|
2,154,081
|
|
61,045
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
|
|
|
2,301,017
|
|
721,382
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
|
|
|
|
130,779
|
|
116,503
|
Change in deferred
revenue
|
|
|
|
|
|
(250,376)
|
|
513,325
|
Reverse takeover
listing expense
|
|
|
|
|
|
1,008,834
|
|
–
|
Acquisition legal
expenses
|
|
|
|
|
|
–
|
|
298,445
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
3,190,254
|
|
1,649,655
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA/Revenue %
|
|
|
|
|
|
23%
|
|
13%
|
The increase in Adjusted EBITDA for the three months ended
September 30, 2020 compared to the
three months ended September 30, 2019
was largely related to the acquisition of the Smurfs Portfolio,
along with efforts to reduce server cost expenses as mentioned in
the "Summary of Significant Developments" in the MD&A.
The decrease in Adjusted EBITDA for the three months ended
September 30, 2020 compared to the
three months ended June 30, 2020 was
related to a decrease in MAU, resulting in lower revenues, as well
as increased professional fees relating to the Company's public
listing.
The increase in Adjusted EBITDA for the nine months ended
September 30, 2020 compared to nine
months ended September 30, 2019 was
largely related to the acquisition of the Smurfs Portfolio, along
with efforts to reduce hosting and other fees 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 the restructuring efforts at PR Tech during Q4 2019.
Decreases in amortization was due to the impairment charge
recorded in Q4 2019. 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 September
30 2020
|
|
Three months
ended June
30 2020
|
|
Three months
ended September
30 2019
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
|
4,336,229
|
$
|
4,902,326
|
$
|
4,211,507
|
Add: Increase
(decrease) in deferred revenue
|
|
|
|
(179,577)
|
|
(109,140)
|
|
36,732
|
|
|
|
|
|
|
|
|
|
Total
bookings
|
|
|
|
4,156,652
|
|
4,793,186
|
|
4,248,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30
2020
|
|
Nine months
ended
September
30 2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
$
|
13,915,099
|
$
|
13,145,821
|
Add: Change in
deferred revenue
|
|
|
|
|
(250,376)
|
|
513,325
|
|
|
|
|
|
|
|
|
Total
bookings
|
|
|
|
|
13,664,723
|
|
13,659,146
|
The decrease in bookings for the three months ended September 30, 2020 compared to the three months
ended September 30, 2019 is related
to a decrease in average monthly users relative to the same period
in the prior year, along with the absence of other revenues in the
current year related to a revenue share agreement, which was
terminated on July 31, 2019.
The decrease in bookings for the three months ended September 30, 2020 compared to the three months
ended June 30, 2020 was due to
seasonality.
Bookings for the nine-month period ended September 30, 2020 compared to the nine-month
period ended September 30, 2019 are
slightly higher as monthly average users were higher over the same
comparative nine-month period offset by 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 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 games are
enjoyed by over 1.2 million unique players a month. PopReach,
headquartered in Toronto, employs
a team of over 120 experts in Toronto, Vancouver, and Bangalore.
Subscribe to PopReach news alerts.
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