January-March 2024 performance
- Total revenue increased by 13% to GBP 18.3m (16.3)*
- Total gross profit increased by 58% to GBP 4.0m (2.5)
- Adjusted EBITDA‡ increased by 121% to GBP 1.6m (0.7)
- Operating loss increased to GBP 0.4m (0.2m)
- EPS amounted to GBP -0.94 pence (-0.97 pence)
- Operating cash flow amounted to GBP 2.7m (-1.1)#
- Cash and cash equivalents increased to GBP 13.8m (12.0)#
Important events during the quarter
- Signing of agreement with Big Fish Games
- Launch of Klondike Adventures from Vizor Games
- Launch of Immortal Awakening and Chronicle of Infinity from Neocraft
Important events after the quarter
- Launch of EverMerge from Big Fish Games
- Signing of agreement with Kabam
- Signing of agreement with Jam City
Other items
- Companies House has given the Company another 28 days (until 10 June 2024) to file the 2022 accounts. The Company is working with Grant Thornton to conclude their work
- The company will hold its 2024 AGM on 26 June 2024
* Comparison figures for the year-earlier period in brackets
# Due to the extended bank holiday (Easter) at the end of the quarter, net cash payments of GBP 0.9m were made directly after the bank holiday
‡The Group defines adjusted EBITDA as earnings before interest, tax, depreciation, amortisation, finance costs, impairment losses, foreign exchange gains/losses, corporate acquisitions costs, fair value gains/losses and other extraordinary costs (Insolvency related provisions/write-backs & costs)
Comments from the CEO
I am pleased to say that following our record quarter in Q4-23 we are maintaining our strong momentum in 2024. With quarterly revenue up 13% YoY at almost USD 23m, we hit the higher end of our Q1-24 revenue guidance (USD 21m - 24m). I am also happy to see our gross profit growing 58% YoY resulting in a gross margin of 22% for Q1-24.
Cash conversion remains strong in both business areas (Distribution & Influencer Marketing) with GBP 2.7m in operating cashflow resulting in a cash position of GBP 13.8m at end of Q1-24. Our strong net cash position enables us to negotiate favourable contracts with game developers, invest in strategically important initiatives and selectively pursue acquisition opportunities. We have no interest-bearing debt.
We have already signed several big new games and partnerships this year, including Big Fish, Kabam and Jam City, which will positively impact our performance in the second half of the year and beyond. Signing top grossing games is part of our strategy, which in turn will generate higher revenue and gross profit with limited impact on costs. Our recent success is the result of focus and hard work, and I am pleased that our efforts are paying off. Last year, we strengthened our sales team and while this is nowgenerating positive results, I think it also reflects an underlying increase in demand for our services. In a market where most of the large game publishers are struggling with useracquisition due to lower returns on ad spend, alternatives to their traditional programmaticadvertising are becoming increasingly attractive. This clearly favours Flexion as the leader in alternative game distribution and marketing, and it explains why we continue toexperience a significant increase in high-quality inbound sales inquiries in both business areas, as game developers adapt to the new reality of mobile gamesmarketing.
The results of Flexion’s participation in the industry’s leading conference, GDC, which I reported from in March, was our best to date and we closed several deals at the show. A highly noticeable and interesting trend during the conference is thegrowingweb store market. Virtually all big developers now have their own web stores or are in the process of developing one. Aside from regulatory pressure such as the Digital Markets Act, the underlying market driver is that developers are chasing higher margins and closer ties with their player communities. Web stores allow paying customers to top up their player accounts, independently of Google and Apple, through third-partypayment services. These stores offer higher margins fordevelopers, and consumers receive better value. Even if this is a win-win for developers and consumers, it is important to point out that this type of service is not for the mainstream. Web stores are not very intuitive as they require consumers to leave the game and make payments through a separate service. It is hard to say how big this market is as it is not officially reported on but some of the biggest developers are already talking about approximately 20% of transactions happening outside the two main app stores. The dominance of Google and Apple is going to decline over time, which leaves more space for Flexion and others to grow faster.
The web store trend is important and relevant to Flexion for several reasons. We believe it is the first step in a shift towards more direct-to-consumer (D2C) lead marketing, which is less dominated by the two big app stores. It is a highly exciting area of the gaming market that is currently being disrupted and weare right at thecentre of it. Flexion’sleadingposition and strong game partnerships make us a natural choice for developers who want to explore direct distribution opportunities sincethey are already integrated with us and use ourservices to grow revenue and audiences in alternative markets. We make gamedevelopers’ lives a lot easier as they continue to explore new distribution opportunities. D2C is a strategic project for us and our work on product development and strategic partnerships is progressing well.
We are currently planning theofficial launch of our new SDK (software development kit), which will make it easier for developers to support new distribution including support for D2C. As part of this package, we are adding support for alternative payment providers such as Coda Payments who is a market leader in game payments and web stores. This partnership will provide us access to their global payment coverage as well as high margin payment methods, which will benefit game developers that work with us on D2C.
In parallel, it is also exciting that Epic Games and Microsoft are finally confirming their intention to compete in the alternative app store space. Microsoft have confirmed that they will initially launch a web store for first-party titles including Candy Crush before later adding support for third-party titles. It won’t happen overnight,but Flexion is well-positioned and in talks with most new app stores toensure that we evaluate these opportunities. A good recent example of a new promising channel is the SamsungInstant Play service, which we now support with a handful of our top games. This is a new offering from Samsung where end-users can play mobile games instantly from the cloud. We are noting large traffic growth in this channel even thoughit has not been fully launched. Not all new stores and initiativeswill succeed, but our value to developers increases as their opportunity cost to serve the more fragmented distribution market keeps rising, thereby increasing the attraction of Flexion as a single partner.
Audiencly has experienced a very strong start to the year with several important contract renewals for 2024 such as 7vsWild. Quarterly revenue has grown considerably YoY, and we are also starting to note stronger marketing synergies between distribution and influencer marketing as we continue to integrate our services. Overall, I am happy with how our marketing teams are delivering and growth is our priority for 2024.
Our targeted social media PR strategy is also having a positive impact. Our profile is improving with every new game partnership we announce. In the last quarter, all our new game partners announced their Flexion partnerships through their own marketing channels. To get mentioned by some of the biggest game developers in the world through their strongsocial media channels is the best form of marketing and it drives awareness, which benefits new sales and recruitment. Recruitment and retention of key staff is of increasing importance for us as we continue to grow, and having a strong brand and social media profile really helps. It is highly gratifying to see how well our growing teams are developing. We are now 151 staff, and I just visited the opening of our awesomenew offices in Budapest where we have 58 people. It is our biggest office, and I am proud of how well our local management team has executed and contributed to thesuccess of the business.
Our outlook for Q2-24 is positive when compared to the same period last year. We expect revenue to be in the range of USD 20m - 23m.
Jens Lauritzson – CEO
