Next Games Corp.: Financial Statements Bulletin January-December 2018

Next Games Corporation Company Release 15 February 08:00 EET

Next Games Corporation’s Financial Statements Bulletin for 1 January-31 December 2018 contains financial data for H2/2018 and full-year 2018. Next Games’ Financial Statements Bulletin 2018 is attached to this release and available at www.nextgames.com/reports.

January-December 2018 in short:

• Revenue grew 9% to 35.2 million euros (32.5 million euros)
• Gross profit was 60% (59%)
• Operating profit was -16.9 million euros (-5.1 million euros)
• End of 2018 the company employed 143 people (119)

(January-December 2017 comparison in brackets)

July-December 2018 in short:

• Revenue grew 90% to 24.8 million euros (13.0 million euros)
• Gross profit was 62% (62%)
• Operating profit was -12.0 million euros (-4.2 million euros)

(July-December 2017 comparison in brackets)

Key Financial Figures

Gross Bookings is a non IFRS Financial Measure, defined as the total amount paid by our users for virtual items in a given reporting period. It does not include deferrals.

Gross Profit is Revenue less server expenses, expenses and depreciations related to royalties and license fees, as well as platform cut.

Next Games uses adjusted operating profit as a voluntary measurement to EBITDA, as a way of analyzing the operational profitability of the company. Operating profit (EBIT) is adjusted for depreciations for capitalized items relating to product developments and licenses according to IAS 38. However, depreciations of premises, falling under IFRS 16 standard, are not adjusted from EBIT.

Key Operational Metrics

Certain Quarterly Financial Information

Chief Executive Officer Teemu Huuhtanen:

Next Games continued to build future foundations in 2018 as a continuation of its efforts from 2017. The company has furthered its strategic investments into its technology and analytics platforms as well as Google Maps technology integration. Next Games continues to invest into the utilization of machine learning, artificial intelligence and productization of generic game features for fast reutilization in future games. These investments will allow the company to enjoy the benefits of scale in the future, as the existing technology and tools will decrease time to market for the company’s products.

The company also carried out a transition to IFRS accounting standard, which allows Next Games to report comparable financial figures to other games companies, according to international standards. The Company believes that a function based Profit and Loss Statement is more informative for stakeholders.

The first half of the year the company largely focused on preparing for the launch of our second title, the innovative location-based augmented reality game, The Walking Dead: Our World, which launched on July 12, as well as the ongoing development of Blade Runner Nexus and other games in our pipeline.

The company made significant marketing investments into The Walking Dead: Our World on a global scale in pursuit of significant revenue growth. Due to technical challenges, which now have been resolved, the company however had to scale back marketing investments on a much lower level than anticipated as the challenges significantly affected the game’s functionality and therefore also revenue stream.

The fourth quarter of the year we focused on a turnaround project after a challenging third quarter. The company took immediate corrective measures, minimizing expenditure and stabilizing our cash position from 8.8 million euros at the end of the third quarter to 7.3 million euros at the end of the fourth quarter.

After the reporting period, the company initiated consultation proceedings, which were concluded on the 15th of February, and resulted in scaling the company’s headcount down to 117 positions. As a part of the turnaround project and renewed focus, we also reviewed our game development pipeline. After the reporting period in January 2019, Next Games and Universal Games and Digital Platforms came to an agreement over terminating their collaboration on the game project that had proceeded to production. Simultaneously, we will put more focus on the early stages of game concepting and development. Consequently, the company has kicked off a new game project, which does not have an external IP attached to it at the moment.

We will further continue to streamline our operations and costs towards future profitability. This includes a renewed focus on our game development process and related costs and smart reuse of gameplay mechanics and technologies we’ve already built. We have also taken significant steps in improved risk management measures as well as further development of our ways of working. 

Our shared Games-as-a-Service technology platform has matured during the year. During the third quarter, in conjunction with The Walking Dead: Our World launch, we encountered technical challenges. These challenges were largely solved during the third and fourth quarter and the platform was able maintain the level of service expected from it. Towards the end of the year the technology team’s focus shifted to optimizing the costs of the platform and the ability to run multiple games on it in a cost effective way. Some new features were also introduced for supporting upcoming titles such as Blade Runner Nexus.

I expect the company’s turnaround project to be concluded during the first half of 2019, after which we will see much better alignment across projects as well as improved operational efficiency across the company. The investments made in 2018 have been a significant cornerstone to build a solid foundation for the company’s product pipeline. Next Games has an extraordinarily committed staff and I look forward to together continue develop the company, our culture and values further in 2019.

Audiocast and phone conference

Next Games will hold an audiocast and a phone conference both in Finnish and in English. Next Games’ 2018 review will be presented by CEO Teemu Huuhtanen and CFO Annina Salvén. The Finnish audiocast starts at 09:30 a.m. EET and English audiocast at 10:30 a.m. EET.

More information: https://www.nextgames.com/company-release/invitation-next-games-corporations-financial-statements-bulletin-2018-1549894748-5666/

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

Certified Adviser: Danske Bank A/S, Finland branch, tel. +358 10 546 7938

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 games redefines the way franchise entertainment transforms into highly engaging service-based mobile games. In summer 2018, Next Games launched The Walking Dead: Our World, which utilizes cutting edge AR technology and is powered by Google Maps. Currently Next Games is working on multiple new games based on popular entertainment franchises including, Blade Runner Nexus, for the popular Blade Runner franchise. For more information head to www.nextgames.com

Attachment

• Next Games 2018 Financial Statements Bulletin