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Full year EBITDA 1 growth of 327%, net loss of $6.3 million , gross profit margin improvement to 57.5%, and a 125% increase in cash generated by operating activities
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 twelve months ended December 31, 2020 .
1 Please refer to "Non-GAAP Measures" section of this press release |
(All figures in US dollars, unless otherwise indicated)
2020 Financial Highlights
- EBITDA 1 of $3.0 million (17.0% of revenue), an increase of 327% or $2.3 million from 2019 of $0.7 million (4.0% of revenue)
- Adjusted EBITDA 1 of $3.9 million (21.8% of revenue), an increase of 30% or $0.9 million from 2019 of $3.0 million (16.9% of revenue)
- Gross profit margin increased to 57.5%, from 44.0% in 2019
- Cash generated by operating activities improved to $3.6 million , an increase of 127% or $2 million from $1.6 million generated in 2019
- Revenue of $18.0 million compared to $18.0 million in 2019
- Operating expenses of $10.6 million , compared to $12.1 million in 2019
- Net loss of $6.3 million , or ($0.13) per basic and diluted share, compared to $4.4 million , or ($0.11) per basic and diluted share in 2019; the increase in 2020 net loss was driven by non-cash fair value loss on financial liabilities
- Cash at the end 2020 was $18.1 million , an increase of $17.0 million from the end of 2019, and debt outstanding on the bank credit facility was $6.0 million , a decrease of $1.9 million from 2019
Q4 2020 Financial Highlights
- EBITDA 1 of $0.8 million (18.6% of revenue), compared to $0.9 million (20.8% of revenue) in Q3 2020, and $0.0 million (0% of revenue) in Q4 2019
- Adjusted EBITDA 1 of $0.7 million (18.1% of revenue), compared to $0.8 million (18.7% of revenue) in Q3 2020, and $1.4 million (28.8% of revenue) in Q4 2019
- Gross profit margin of 61.3%, compared to 61.8% in Q3 2020, and 48.0% in Q4 2019
- Revenue of $4.1 million , compared to $4.3 million in Q3 2020, and $4.8 million in Q4 2019
- Operating expenses of $2.9 million , compared to $2.7 million in Q3 2020, and $3.7 million in Q4 2019
- Net loss of $3.3 million , or ($0.05) per basic and diluted share, compared to a net loss of $0.5 million , or ($0.01) per basic and diluted share in Q3 2020, and a net loss of $1.4 million , or ($0.04) per basic and diluted share in Q4 2019; the increase Q4 2020 net loss was driven by non-cash fair value loss on financial liabilities
Q4 2020 Operating Highlights
- On October 2, 2020 , the Company refinanced its long-term debt on materially better terms by securing a $7.5 million bank credit facility with The Bank of Nova Scotia , positioning the company with a growth-oriented lender and materially reducing its projected annual interest expense 2
- On November 5, 2020 , the Company closed a C$5 million strategic investment by Alibaba Group's global investment arm, with Alibaba supporting the Company's global expansion by having its representatives serve as its Special Advisor to Asia
- On November 9, 2020 , the Company announced a C$10 million bought deal public offering, which was subsequently upsized to C$15 million ; the oversubscribed bought deal public offering closed on November 27, 2020 , including the full exercise of the underwriter's over-allotment option, for gross proceeds to the Company of C$17.25 million
- In Q4 of 2020, the Company undertook new investments in the improvement of its growth game franchises, including War of Nations, Kitchen Scramble, and Smurfs' Village, which are expected to begin launching in the back half of 2021
Subsequent Highlights
- On March 18, 2021 , the Company acquired substantially all of the assets relating to the award winning "Peak – Brain Training" app for aggregate cash consideration of $5 million , increasing the number of monthly active users in its portfolio to over 1.9 million
- 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 $250,000 , and entered into a five-year licensing agreement to commercialize the title worldwide
Management Commentary
"2020 was a foundational year for PopReach; we got listed, refinanced our debt with a growth oriented Schedule I bank, secured a strategic investment from Alibaba's global investment arm, capitalized the business with an oversubscribed bought deal, and successfully built out our M&A pipeline" said Jon Walsh , Co-founder and CEO of PopReach. "In the past five weeks we've closed two pivotal transactions; our acquisition of Peak, for which we paid approximately one times trailing twelve month revenue, and an asset purchase and licensing deal that will see PopReach launch the mobile version of the incredibly popular PAYDAY first person shooter franchise. With a strong pipeline of acquisition opportunities and significant updates planned around our key franchises, we are excited about our growth prospects, and are committed to delivering sustainable value for our stakeholders."
"PopReach delivered record results in 2020, with significant improvements to EBITDA, Adjusted EBITDA, and cash generated by operating activities, thanks to the successful execution of two pillars of our playbook; operating cost reductions, and stabilization of our franchises. Our focus in 2021 are investments in our key franchises to increase player retention and monetization, positioning the Company for organic growth in the back half of the year" said Christopher Locke , Co-founder and President of PopReach. "In Q4, we made the right decision to delay paid user acquisition marketing due to short term and highly inflated costs stemming from Apple's announcement regarding IDFA (Identifier for Advertisers); these increased costs drove a negative ROI on user acquisition spend in the context of our portfolio, and we decided to prioritize EBITDA growth over short term revenue gains. As such, we shifted our capital allocation in favour of much higher returning investments in game improvements and acquisitions."
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 | Three months | Three months | ||||
In-app purchases | $ | 3,957,439 | $ | 4,185,045 | $ | 4,568,771 |
Advertising | 137,370 | 150,936 | 239,282 | |||
Other | 377 | 248 | - | |||
Total revenue | $ | 4,095,186 | $ | 4,336,229 | $ | 4,808,053 |
Net Loss | (3,282,834) | (518,459) | (1,394,875) | |||
Comprehensive Loss | (3,354,148) | (485,231) | (1,391,677) | |||
Loss per share (basic and diluted) | (0.05) | (0.01) | (0.04) | |||
Non-GAAP 1 : | ||||||
Bookings | 4,026,525 | 4,156,652 | 4,856,617 | |||
EBITDA | 761,775 | 902,669 | (3,859) | |||
Adjusted EBITDA | 742,536 | 810,899 | 1,383,956 | |||
1 Please refer to "Non-GAAP Measures" section of this press release |
Year ended | Year ended | |||
In-app purchases | $ | 17,300,218 | $ | 16,970,160 |
Advertising | 708,874 | 719,762 | ||
Other | 1,193 | 263,952 | ||
Total revenue | $ | 18,010,285 | $ | 17,953,874 |
Net Loss | (6,301,224) | (4,435,785) | ||
Comprehensive Loss | (6,324,579) | (4,422,335) | ||
Loss per share (basic and diluted) | (0.13) | (0.11) | ||
Non-GAAP 1 : | ||||
Bookings | 17,691,248 | 18,515,763 | ||
EBITDA | 3,062,792 | 717,523 | ||
Adjusted EBITDA | 3,932,790 | 3,033,611 | ||
December 31, | December 31, | |
Cash and cash equivalents | 18,097,649 | 1,126,160 |
Current assets | 20,079,201 | 3,532,277 |
Total assets | 25,934,531 | 12,617,436 |
Current liabilities excluding borrowings | 6,679,391 | 5,952,882 |
Total non-current liabilities including borrowings | 6,734,982 | 9,398,135 |
Conference Call
Management will host a conference call on Tuesday, April 20, 2021 at 8:30 am ET to discuss these fourth quarter and fiscal year 2020 results.
To access the conference call, please dial 416-764- 8659 or 1-888-664-6392 or access the webcast at https://bit.ly/39MZwYL . An archived recording of the conference call will be available until April 27, 2021 and for 90 days on our website at https://www.popreach.com/investor-relations/ . To listen to the recording, call 416-764-8677 or 1-888-390-0541 and enter passcode 736199.
Financial Statements and MD&A
PopReach's Financial Statements for the year ended December 31, 2020 , and Management's Discussion and Analysis (the "MD&A") for the three and twelve months ended December 31, 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 | Three months | Three months | ||||
Net loss | $ | (3,282,834) | $ | (518,459) | $ | (1,394,875) |
Add: | ||||||
Interest and accretion expenses | 477,959 | 207,941 | 382,710 | |||
Gain on disposal of assets | – | 6,750 | (22,415) | |||
Current taxes (recovery) | 81,951 | (13,058) | 44,562 | |||
Deferred tax recovery | (21,638) | (37,846) | – | |||
Amortization | 682,556 | 743,314 | 986,736 | |||
Fair value loss on financial liabilities | 2,823,781 | 514,027 | (577) | |||
EBITDA | 761,755 | 902,669 | (3,859) | |||
Add: | ||||||
Impairment of goodwill and other | – | – | 994,525 | |||
Share-based compensation expense | 49,422 | 59,692 | 84,681 | |||
Change in deferred revenue | (68,661) | (179,577) | 48,564 | |||
Reverse takeover listing expense | – | 28,115 | – | |||
Acquisition legal expenses | – | – | 78,764 | |||
Restructuring costs | – | – | 181,281 | |||
Adjusted EBITDA | 742,536 | 810,899 | 1,383,956 | |||
Adjusted EBITDA/Revenue % | 18% | 19% | 28% |
Year ended | Year ended | |||
Net loss | $ | (6,301,224) | $ | (4,422,335) |
Add: | ||||
Interest and accretion expenses | 1,417,024 | 1,123,108 | ||
Loss (gain) on disposal of assets | 6,750 | (84,700) | ||
Current taxes | 127,076 | 191,269 | ||
Deferred tax recovery | (59,484) | – | ||
Amortization | 2,894,788 | 3,720,177 | ||
Fair value loss on financial liabilities | 4,977,862 | 60,468 | ||
Amortization of deferred financing fees | – | 142,986 | ||
EBITDA | 3,062,792 | 717,523 | ||
Add: | ||||
Share-based compensation expense | 180,201 | 201,184 | ||
Change in deferred revenue | (319,037) | 561,889 | ||
Reverse takeover listing expense | 1,008,834 | – | ||
Acquisition legal expenses | – | 377,209 | ||
Impairment of goodwill and other | – | 994,525 | ||
Restructuring costs | – | 181,281 | ||
Adjusted EBITDA | 3,932,790 | 3,033,611 | ||
Adjusted EBITDA/Revenue % | 22% | 17% |
Adjusted EBITDA was $3,932,790 for the year ended December 31, 2020 . Compared to the year ended December 31, 2019 of $3,033,611 , the increase was $899,179 or 30%.
The increase in Adjusted EBITDA for the year ended December 31, 2020 compared to the year ended December 31, 2019 was largely related to the successful execution of operating cost reductions, 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 a restructuring at PopReach Technologies Private Limited ("PR Tech"), in Bangalore, India in Q4 of 2019.
Decreases in amortization was due to the impairment charge recorded in Q4 2019, relating to certain advertising engines that the RockYou Acquisition seller was operating that were shut down due to the seller's bankruptcy, resulting in lower actual revenues compared to forecasted revenues during the year. 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 | Three months | Three months | ||||
Revenue | $ | 4,095,186 | $ | 4,336,229 | $ | 4,808,053 |
Add: Increase (decrease) in deferred revenue | (68,661) | (179,577) | 48,564 | |||
Total bookings | 4,026,525 | 4,156,652 | 4,856,617 |
Year ended | Year ended | |||
Revenue | $ | 18,010,285 | $ | 17,953,874 |
Add: Change in deferred revenue | (319,037) | 561,889 | ||
Total bookings | 17,691,248 | 18,515,763 |
The decrease in bookings for the three months ended December 31, 2020 compared to the three months ended December 31, 2019 was due to COVID-19 related delays in the launch of growth game features designed to increase engagement and monetization, delayed content updates and bug fixes relating to the live operations of the Company's entire portfolio of games, and the delay of planned new user growth marketing initiatives due to inflated user acquisition costs resulting from Apple's IDFA policy change, as mentioned in the "Summary of Significant Developments" in the MD&A.
Bookings for the year ended December 31, 2020 compared to the year ended December 31, 2019 are lower as monthly average users were lower over the same comparative period along with 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 game publisher focused on acquiring and optimizing proven franchises. The Company has to date acquired 14 successful 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 125 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
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