Next Games Corp. Q1 2019: Positive developments - Cost savings materializing, revenue develops as expected, Our World makes record ARPDAU in March

NEXT GAMES CORPORATION COMPANY RELEASE 26 APRIL, 2019 AT 08:00 EEST

This release is a summary of the January-March 2019 Business Review. The full report is attached to this release and available at www.nextgames.com/ng/reports

January-March 2019 in short

• Revenue grew 104% to 9.8 million euros (4.8 million)
• Gross profit was 5.6 million euros (2.8 million), 57% of revenue (58%)
• Adjusted Operating Result was -1.3 million euros (-2.1 million)
• EBIT was -2.4 million euros (-2.5 million)
• Product development costs were 2.7. million euros (1.8 million)
• Number of employees was 119 at the end of the quarter (124)
• Resulting from the successful cost savings program, the company aims to achieve monthly savings of approximately 550 thousand euros in salaries, administrative and product development costs, totaling approximately 6.5 million euros annually, compared to the monthly average level of second half of 2018 
• At the end of the review period, the company’s cash balance was 4.8 million euros, with the addition of a fully unused credit limit of 5 million euros. The company’s cash position has started to stabilize as of February 2019 according to plans. The company aims to grow its revenues year on year in 2019 compared to 2018, and due to the renewed cost structure, strives towards remaining cash flow neutral on a continuous basis

(January-March 2018 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.

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

Combined Operational Metrics

Game Specific Operational Metrics*

*Includes operational metrics from games that have been globally launched and have a significant impact on the company's financial reporting

Chief Executive Officer Teemu Huuhtanen

The first quarter of 2019 can be described as a beginning of a new era for Next Games as we successfully continued to carry out our turnaround plan by decreasing operating costs and renewing our product development model. The company succeeded in doubling year-on-year revenue, significantly growing both ARPDAU (average revenue per daily active user) and daily active users (DAU), in comparison to Q1 2018, due to the addition of Our World.

Simultaneously as we reduced costs the company’s cash position has started to stabilize as of February 2019, according to plans. The company seeks revenue growth year-on-year during 2019 compared to 2018 and as a result from the changes in our operational model, aims to achieve cash flow neutrality and estimates fixed costs, excluding marketing costs, to stabilize on a 1.1 -1.2 million monthly range during the second quarter of 2019.

Our new operating model focuses on reusing existing technology and code, which has the potential to significantly reduce product development times. According to the company’s view, it’s a priority to stabilize the foundations of the business operations to a new level, followed by negotiating additional financing directed towards future product development needs as well as product launch investments.

The Walking Dead: Our World team has focused on improving technical and monetization performance and the game has played a central role in the company’s ARPDAU development. The team has tested a wide range of sales strategies, which has led to an upward trend in sales conversion and revenue. In an effort to explore additional revenue streams for the game, the company has started piloting location-based ads in as well as exploring the opportunity to integrate regular video ads in to the game.

The game made a new 0.31 Euro record in average ARPDAU in March as a result of the new sales strategy. Our World’s profitability improved throughout the first quarter due to improved gross margin, optimization of product development costs as well as implementing the new operational model. Marketing investments have remained on a level customary to the product and scaling activities have not yet been started during the review period. The game’s long term retention will still need some improvements before growing the game is possible.

Blade Runner Nexus continued in soft launch and the focus has been on optimizing the game’s first time user experience and early retention. The Walking Dead: No Man’s Land key metrics have remained on  a stable level and the game as an independent project has continued to operate profitably. Simultaneously the team size has been slightly reduced as the company has directed resources to new projects.

Thanks to adapting our cost structure to a new level and renewing our operational model, Next Games is settling to a new stable foundation. We are in a good position to reconstruct our product portfolio with the help of our more agile product development model.

January-March 2019 Audiocast

Today, Next Games will hold an audiocast and a phone conference both in Finnish and in English.

The Finnish audiocast starts at 09:30 EEST. You can join the audiocast using the following link: https://qsb.webcast.fi/n/nextgames/nextgames_2019_0426_q1_fi/

The English audiocast starts at 10:30 EEST. You can join the audiocast using the following link: https://qsb.webcast.fi/n/nextgames/nextgames_2019_0426_q1/

More info about the audiocast and phone conference

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 Business Review Q1 2019 ENG