Next Games Corp. Business Review Q1 2018: Revenue declined, new projects proceeding

NEXT GAMES COMPANY RELEASE 27 APRIL 2018 AT 8.00 EEST

This release is a summary of the Q1/2018 report. The complete report is attached to this release and available at http://www.nextgames.com/ng/reports/

January-March 2018 in short:

• Revenue was 4.8 million euros, a decrease of 56% compared to Q1 2017  (€10.9M)
• Gross margin declined by 4% and was 32% (36%)
• EBITDA was -3.4 million euros (0.8M).
• The organization grew to 124 people (77). 70% off the staff was working on new game projects, 23% of the staff was working on The Walking Dead: No Man's Land and 7% in general administration.
• The company invested in product development, product development costs were 1.7 million euros in Q1 2018.

(January-March 2017 comparison in brackets)

Key Financial Figures

Gross Bookings does not include deferrals related to sales

Adjusted EBITDA is defined as operating profit, adjusted for depreciations, deferrals related to sales, licenses and commissions, as well as adjusted for listing expenses.

Key Operational Metrics

Definitions related to key operational metrics can be found at the end of this document

Chief Executive Officer Teemu Huuhtanen:

The number of active users in The Walking Dead: No Man's Land declined which lead to a decrease in revenue. The main cause for the declined amount of active users was weakened retention of players. The significantly lower revenue coupled with the organization's growth led to a loss in the first quarter. However, in relation to the resource and marketing investments to the Walking Dead: No Man's Land during Q1, further developing the game was still sustainable.

The investments in The Walking Dead: Our World, the Blade Runner game and other upcoming games in the pipeline are reflected in our first quarter numbers. During the end of 2017 and first quarter of 2018, Next Games has shifted resources from the No Man's Land team to the Our World team and other new projects. Next Games has actively recruited new employees during 2017, but during Q1 2018 the staff grew only by five employees, thus the recruitment pace has slowed down considerably.

During the first quarter, our main focus was to advance the soft launch phase of The Walking Dead: Our World game. Following the closed beta tests at the end of 2017, the game was published for technical testing in the Philippines. After this the game was soft launched in Australia, where we have received the first actual metrics and therefore we will be able to analyze the game's player behaviour, marketing performance and business potential. The game has thousands of daily active users in the current soft launch phase, and the preliminary, most important key figures have been promising.

As we gather more player behavior and marketing performance data during the soft launch period, we will be able to estimate a more precise global launch schedule. The estimate of the global launch schedule made before the soft launch has thus been further defined and Next Games estimates the global launch to take place in the beginning of third quarter 2018. The global launch schedule will be further defined during the spring as we gather more information from the test markets. The resources and time used for the soft launch phase are crucially important so that we can be confident that the marketing investments are profitable and the game is working as intended from both content and business perspectives at the time of global launch.

We received a good selection of first reactions from players at the Game Developers Conference (GDC) in San Francisco - the most important game development event of the year, which gathered a record number of visitors, a total of 28 000. Already a week before the conference, we announced our partnership with Google Maps and a demo of the game was prominently displayed at Google's GDC booth.

Next Games is firmly moving on to a new phase, as we publish new games to the market and add more products to our development pipeline. When the operational scale grows, it is necessary to invest in building adequate processes and support functions for game development, as well as continuous investments in commencing new projects. After the reporting period, in April 2018, Next Games has made changes to its management structure and appointed new key personnel to support Next Games' growth.

In February we celebrated the best workplaces at the Great Place to Work Finland gala.
Our investments in our employees' involvement with developing the company has yielded us a significantly improved Great Place to Work ranking. From last year's 28th position we climbed to number 12, up by 16 positions. I am extremely satisfied with this result as this is a good basis to move onwards to launching new games and to a next phase of Next Games.

Upcoming Events

• Annual General Meeting 17 May in Helsinki

            Read more: www.nextgames.com/agm2018

• Half-year review 20 July

Certified Adviser: Danske Bank A/S, Helsinki Branch, tel. +358 10 546 7937

Additional information:
Saara Bergström
CMO
press@nextgames.com
+358 (0)50 483 3896

About Next Games
Next Games (Helsinki Nasdaq First North: NXTGMS) is the first publicly listed mobile game developer and publisher in Finland, specializing in games based on entertainment franchises, such as movies, TV series or books. The developers of the critically acclaimed The Walking Dead: No Man's Land redefines the way franchise entertainment transforms into highly engaging service-based mobile games. The Walking Dead: No Man's Land, based on the popular AMC TV series, has been downloaded over 20 million times, with the game mirroring events as they occur in the show. Currently Next Games is working on four new games based on popular entertainment franchises including a mobile game for the popular Blade Runner franchise and a second The Walking Dead title with AMC, a unique location-based AR game, The Walking Dead: Our World. Next Games employs 119 people and is based in Helsinki, Finland. For more information head to www.nextgames.com