Next Games Corporation Company Release February 28, 2020 08:00 EET
Next Games Corporation’s Financial Statements Bulletin for January-December 2019 contains financial data for H2/2019 and full-year 2019. Next Games’ Financial Statements Bulletin 2019 is attached to this release and available at www.nextgames.com/reports
January-December 2019 in short
- Revenue was EUR 34.7 (35.2) million
- Gross Profit declined by three percentage points and was EUR 19.7 million, 57% of revenue (21.3; 60%)
- EBIT was EUR -7.4 (-16.9) million
- Adjusted Operating profit improved EUR 9.8 million and was EUR -4.0 (-13.8) million
- EBITDA was EUR -3.5 (-14.8) million
- The group's publishing operations turned profitable with an EBITDA of EUR 3.8 (-4.5)million
- Product development costs were EUR 6.6 (7,5) million, 19% (21%) of revenue
- The company had 107 (140) employees at the end of 2019
- Successful rights offering raised gross proceeds of EUR 8 million
- Business Finland awarded a EUR 2 million grant for a project to develop Next Games’ machine learning and AI (Artificial Intelligence) capabilities
July-December 2019 in short
- Revenue was EUR 15.5 (24.8) million
- Gross profit declined by eight percentage points and was EUR 8.4 million, 54% (15.3; 62%)
- EBIT was EUR -3.9 (-12.0) million
- Adjusted Operating profit improved EUR 7.6 million and was EUR -2.2 (-9.7) million
- EBITDA was EUR -2.0 (-10.0) million
- The Groups’ publishing operations was profitable, generating an EBITDA of EUR 1.5 (-5.0) million
- Product development costs were EUR -3.3 (-4.1) million, 21% (16.5%) of revenue
(Numbers in brackets refer to the corresponding year-on-year period unless otherwise mentioned)
|Revenue||7,665||11,333||-48 %||15,477||24,768||-60 %||34,701||35,245||-2 %|
|Gross Profit||4,082||7,850||-92 %||8,418||15,260||-81 %||19,668||21,294||-8 %|
|EBITDA||-837||-623||26 %||-1,958||-9,936||-407 %||-3,468||-14,750||-325 %|
|Operating Result (EBIT)||-1,828||-1,619||11 %||-3,941||-11,961||-203 %||-7,436||-16,914||-127 %|
|Adjusted Operating Profit||-962||-508||47 %||-2,156||-9,706||-350 %||-3,965||-13,778||-248 %|
|Gross Profit %||53 %||69 %||16 ppt||54 %||62 %||8 ppt||57 %||60 %||3 ppt|
|EBITDA %||-11 %||-5 %||6 ppt||-13 %||-40 %||27 ppt||-10 %||-42 %||32 ppt|
|Operating Result Margin %||-24 %||-14 %||10 ppt||-25 %||-48 %||23 ppt||-21 %||-48 %||27 ppt|
|Adjusted Operating Profit %||-13 %||-4 %||9 ppt||-14 %||-39 %||25 ppt||-11 %||-39 %||28 ppt|
Chief Executive Officer Teemu Huuhtanen
At Next Games, 2019 was a year of transformation and renewal. The year kicked off with the start of our three-phase turnaround plan aimed at reaching a new and lower operating cost level, renewal of our operating and product development processes, and finally securing additional funding.
I am very pleased with the swift and efficient execution of stabilizing our baseline operating cost level and the successful conclusion of the turnaround plan. This is an important achievement that enables our strategy execution and future investments. Another highlight of the year was the trust Netflix – one of the most significant companies in the entertainment business – showed us as we commenced our collaboration on the Stranger Things mobile game.
Next Games' operating profit (EBIT) improved by EUR 9.5 million from 2018, although revenues declined by 1.6%. Revenues amounted to EUR 34.7 million in 2019 and we have succeeded in consistently achieving over EUR 30 million revenue levels for four consecutive years. During 2019 we did not publish new games as the testing and development of Blade Runner Nexus continued to 2020.
Our publishing operations, i.e. revenues from published games adjusted by all expenses related to the further development of the games, marketing and customer service, turned profitable during 2019. The EBITDA of the publishing operations was EUR 3.8 million. In accordance with our strategy Next Games continued to invest in developing its technology and new, unpublished products. Due to the level of research and development costs, the returns from the company’s published games did not cover all costs of product development and group-wide EBITDA was EUR -3.5 million.
In the fall, 2,015 of our existing shareholders participated in our successful rights offering and we raised EUR 8 million towards the company’s future investments. I am very pleased about the commitment of our current shareholders to developing the company and the full subscription undertakings from Jari Ovaskainen and AMC Networks. I would like to thank our new and existing shareholders for their confidence in the future of the company.
At the end of 2019, Business Finland awarded in total a grant of EUR 2 million to Next Games for a project to develop its machine learning and AI capabilities. The project directly contributes to the company’s strategic priorities of improving efficiency with the help of AI, among other things.
We also continued to develop both of our published The Walking Dead titles, Our World and No Man’s Land. We will continue to optimize investments and resources to match the returns from these games. The combined number of daily active users for both games decreased 23.5% from 2018, whereas the average revenue per daily active user grew by 24%.
Additionally, during 2019 we further developed Blade Runner Nexus, a game based on the Blade Runner movie franchise. In the summer of 2019, we announced our collaboration with Netflix to develop a mobile game based on the hit series Stranger Things. According to our plans, we estimate the launch of the game to take place in 2020. We have continued to put effort into building a renewed product portfolio, and have succeeded in kickstarting new game projects thanks to the new product development process.
In order to decentralize the company’s risk profile, we will investigate diversifying our agreement framework. Within our existing licensing agreements, the company carries a relatively high risk over a game’s commercial success, which also yields the highest possible return to the company provided the product is successful. It makes sense for us to investigate adding projects with a lower risk profile or more guaranteed returns, such as so called co-development arrangements, and building our business operations on the basis of a combination of different agreement structures.
In the future, we will focus developing our business on the foundations of our work in the past few years. Strengthening our strategic partnerships, expanding and actively managing our portfolio will play an important role. We will continue to enhance our operational efficiency through shared infrastructure. Player experience, especially tailored purchase experiences, will play a significant role in our strategy so that our solutions meet and exceed customer expectations.
I would like to extend a warm thank you to our partners, shareholders and employees for the last year. I am excited about 2020 as we are in a good position to continue executing our strategy through our improved product development model.
In 2020, Next Games expects to achieve moderate revenue growth. The potential growth will be weighed towards the end of 2020. The company believes its publishing operations EBITDA will continue to be profitable. The company expects the revenues from already published games to continue on a flat or declining trend.
Basis for outlook
The outlook is based on an estimate that the company publishes one or two games during 2020. The revenue growth forecast is based on the company’s estimate on the success of its new products.
Audiocast and phone conference
We will hold an audiocast and a phone conference in English. Next Games’ 2019 review will be presented by CEO Teemu Huuhtanen and CFO Annina Salvén. The English audiocast starts on 28, February, 2020 at 11.00 EET. You can join by using the following link: https://nextgames.videosync.fi/2019-q4-results or by phone.
Phone conference details:
Dial in by calling your location’s phone number a couple of minutes before the start. Confirmation code: 68485030#
Finland: +358 981 710 310
Sweden: +46 856 642 651
United Kingdom: +44 333 300 0804
United States: +1 631 913 1422
+358 (0) 40 588 3167
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 and a mobile game based on Netflix’s Stranger Things. For more information head to www.nextgames.com