Execution of the growth strategy drove 17% sequential growth
in mobile platform revenue from the first quarter of 2021 with
positive Adjusted EBITDA and cash flow generation
TORONTO, Aug. 30, 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 and six months ended June 30, 2021.
(All figures in US dollars, unless otherwise
indicated)
Q2 2021 Financial Highlights
- Revenue from mobile platforms (Apple, Google and Amazon) was
$3.5 million (78.3% of total
revenue), compared to $3.0 million in
Q1 2021 (72.8%), and $3.1 million in
Q2 2020 (63.6%)
- Revenue of $4.4 million, compared
to $4.1 million in Q1 2021, and
$4.9 million in Q2 2020; overall
revenue was impacted by an industry wide decline in Facebook Canvas
platform game activity
- Gross profit margin increased to 65.3%, from 62.0% in Q1 2021,
and 59.0% in Q2 2020, driven by the ongoing execution of operating
cost reductions
- Operating expenses of $3.1
million, compared to $2.6
million in Q1 2021, and $2.4
million in Q2 2020; the increase in operating expenses is
due to higher marketing of $0.6M
compared to Q1 2021, including user acquisition investments late in
the quarter, which are expected to drive revenue growth in
subsequent periods
- EBITDA1 of $0.4
million (9.4% of revenue), compared to $0.4 million (10.8%) in Q1 2021, and $0.7 million (14.3%) in Q2 2020
- Adjusted EBITDA1 of $0.6
million (13.3% of revenue), compared to $0.9 million (20.9%) in Q1 2021, and $1.5 million (31.0%) in Q2 2020
- Net income of $1.1 million
($0.01 per basic and diluted share),
compared to a net income of $2.2
million ($0.03 per basic and
diluted share) in Q1 2021, and a net loss of $1.8 million ( ($0.05) per basic and diluted share) in Q2
2020
- Cash generated by operating activities in Q2 2021, net of
working capital changes, was $0.5
million, compared to $0.4
million in Q1 2021, and $1.3
million in Q2 2020
- Cash at the end of June 30, 2021
was $12.6 million, compared to
$18.1 million at the end of 2020, and
debt outstanding on the bank credit facility was $5.7 million, compared to $6.0 million at the end of 2020; the decrease in
cash is due to payments relating to the Company's Q1 and Q2
2021 M&A activities
1 Please refer to "Non-GAAP
Measures" section of this press release
|
Q2 2021 Operating 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 title worldwide; the
transition of these assets was successfully completed in Q2 2021,
and the Company is targeting its closed beta of the only mobile
version of the PAYDAY franchise in Q4 2021
Subsequent Highlights
- On August 16, 2021, the Company
entered into a letter of intent ("LOI") with Federated Foundry
("Federated"), an acquirer and operator of digital technology
companies, for a proposed business combination, pursuant to which
the Company and Federated will combine to form a leading,
publicly-listed Canadian technology and media enterprise through a
reverse takeover of the Company by Federated and its
shareholders
Management Commentary
"The investments we have made in our key growth franchises are
starting to pay dividends as we posted another quarter of
double-digit sequential growth in mobile platform revenue, which
more than offset the decline in revenue from Facebook Canvas games
that are now in sunset mode," said Jon
Walsh, Co-founder and CEO of PopReach. "We expect our core
game franchises, which includes War of Nations, Kitchen Scramble,
Smurfs' Village and Peak – Brain Training, have the potential to
drive meaningful growth in H2 2021, and we are excited for our
plans to release Payday Crime War in H1 2022. The breadth of growth
opportunities we have generated across our portfolio while
continuing to deliver positive cash flow is a testament to the
strength of our business model. We have also begun investing in new
user growth, and have seen encouraging results to date."
Added Christopher Locke,
Co-founder and President of PopReach "At the same time, we fully
recognize that our playbook really starts to work well when we
reach a critical mass. That's why we're very excited about the
proposed business combination with Federated – it provides
necessary scale, more positive cash flow generation, and broadens
our pool of acquisition opportunities across the digital media and
technology landscape, with the potential to drive meaningful
synergies across the businesses."
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 June
30 2021
|
|
Three months
ended March
31 2021
|
|
Three months
ended June
30 2020
|
|
|
|
|
|
|
|
In-app
purchases
|
$
|
4,177,682
|
$
|
3,938,807
|
$
|
4,706,106
|
Advertising
|
|
263,109
|
|
137,722
|
|
195,894
|
Other
|
|
295
|
|
1,371
|
|
326
|
Total
revenue
|
$
|
4,441,086
|
$
|
4,077,900
|
$
|
4,902,326
|
Net Income
(Loss)
|
|
1,080,290
|
|
2,161,299
|
|
(1,822,189)
|
Comprehensive Income
(Loss)
|
|
1,084,270
|
|
2,184,484
|
|
(1,848,562)
|
Earnings (loss) per
share (basic and diluted)
|
|
0.01
|
|
0.03
|
|
(0.05)
|
|
|
|
|
|
|
|
Non-GAAP1:
|
|
|
|
|
|
|
Bookings
|
|
4,667,189
|
|
4,115,915
|
|
4,793,186
|
EBITDA
|
|
419,453
|
|
440,276
|
|
702,487
|
Adjusted
EBITDA
|
|
589,587
|
|
851,647
|
|
1,519,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Please refer to "Non-GAAP Measures"
section of this press release
|
|
|
|
|
|
|
|
June 30
2021
|
|
December 31
2020
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
12,589,024
|
$
|
18,097,649
|
Current
assets
|
|
15,208,846
|
|
20,079,201
|
Total assets
|
|
28,823,844
|
|
25,934,531
|
|
|
|
|
|
Current
liabilities
|
|
6,130,799
|
|
7,879,809
|
Non-current
liabilities
|
|
6,690.565
|
|
5,534,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended June
30 2021
|
|
Three months
ended March
31 2021
|
|
Three months
ended June
30 2020
|
|
|
|
|
|
|
|
Apple
|
$
|
2,240,569
|
$
|
1,779,882
|
$
|
2,022,115
|
Facebook
|
|
961,767
|
|
1,110,453
|
|
1,786,368
|
Google
|
|
864,454
|
|
970,001
|
|
822,833
|
Amazon
|
|
53,498
|
|
65,655
|
|
74,790
|
Other mobile
|
|
57,394
|
|
12,816
|
|
--
|
Total in-app
purchases
|
|
4,177,682
|
|
3,938,807
|
|
4,706,106
|
Financial Statements and MD&A
PopReach's Financial Statements for the three and six months
ended June 30, 2021, and Management's
Discussion and Analysis (the "MD&A") for the three and six
months ended June 30, 2021, are
posted on the corporate website at
https://www.popreach.com/financial-information/ and 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 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, changes in deferred revenues, and other
extraordinary one-time expenses.
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 June
30 2021
|
|
Three months
ended March
31 2021
|
|
Three months
ended June
30 2020
|
|
|
|
|
|
|
|
Net loss
|
$
|
1,080,290
|
$
|
2,161,299
|
$
|
(1,822,189)
|
Add:
|
|
|
|
|
|
|
Interest and accretion
expenses
|
|
145,734
|
|
138,140
|
|
354,426
|
Loss (gain) on disposal
of assets
|
|
(4,212)
|
|
|
|
-
|
Current taxes
(recovery)
|
|
21,936
|
|
31,392
|
|
34,092
|
Deferred tax
recovery
|
|
(4,495)
|
|
(1,198)
|
|
-
|
Amortization
|
|
491,663
|
|
400,576
|
|
734,124
|
Fair value loss (gain)
on financial liabilities
|
|
(1,311,463)
|
|
(2,289,933)
|
|
1,402,034
|
|
|
|
|
|
|
|
EBITDA
|
|
419,453
|
|
440,276
|
|
702,487
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
73,469
|
|
73,939
|
|
38,946
|
Change in deferred
revenue
|
|
226,103
|
|
38,015
|
|
(109,140)
|
Change in deferred cost
of sales
|
|
(139,560)
|
|
(35,973)
|
|
-
|
Extraordinary one-time
expenses
|
|
10,122
|
|
335,390
|
|
886,997
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
589,587
|
|
851,647
|
|
1,519,290
|
|
|
|
|
|
|
|
Adjusted
EBITDA/Revenue %
|
|
13%
|
|
21%
|
|
31%
|
Adjusted EBITDA was $589,587 for
the three months ended June 30, 2021
compared to $1,519,290 for the three
months ended June 30, 2020, which
represents a decrease of $929,703 or
61%.
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 $1,311,463 for the three months ended
June 30, 2021 compared to a fair
value loss of $1,402,034 for the
three months ended June 30, 2020. The
full amount of the fair value gain of $1,311,463 for the three months ended
June 30, 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
$1,402,034 loss for the three months
ended June 30, 2020 also related to
the fair value loss of the conversion feature and warrant
liability. As the probability of the completion of the Qualifying
Transaction 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 June
30 2021
|
|
Three months
ended March
31 2021
|
|
Three months
ended June
30 2020
|
|
|
|
|
|
|
|
Revenue
|
$
|
4,441,086
|
$
|
4,077,900
|
$
|
4,902,326
|
Add: Increase
(decrease) in deferred revenue
|
|
226,103
|
|
38,015
|
|
(109,140)
|
|
|
|
|
|
|
|
Total
bookings
|
|
4,667,189
|
|
4,115,915
|
|
4,793,186
|
The decrease in bookings for the three months ended June 30, 2021 compared to the three months ended
June 30, 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 uncertainties around the impact of COVID-19 in general
but particularly in India, which
has resulted in delayed content updates and bug fixes relating to
the live operations of the Company's entire portfolio of games, and
the ongoing uncertainty around paid user acquisition costs
resulting from Apple's IDFA policy change. Additionally, management
now believes that Q2 2020 was subject to an industry wide "COVID
lift", as discussed in "Seasonality" section in the MD&A.
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