Company Release
NEXT GAMES CORP FINANCIAL STATEMENTS BULLETIN AND ANNUAL REPORT 2017: Focus on building future portfolio, 4 new games in development

Published January 30, 2018

Next Games Corp Company Release January 30, 2018 at 08:00 a.m. (EET)

Next Games Corporation's Financial Statements Bulletin for 1 January - 31 December 2017 contains financial data for H2/2017 and full-year 2017. Next Games' Financial Statement and Annual Report 2017 has been published. Financial Statement is attached to this release and Annual Report 2017 is available at www.nextgames.com/reports

January - December 2017 in brief (*):

  • Revenue grew 4.5% to 32.5 million euros (31.1 million euros)
  • Gross margin improved and was 37% (27%)
  • EBIT was -6.4 million euros (-1.6 million euros).
  • EBIT was impacted by investments in new game development, business development and scaling the organization in addition to listing expenses.
  • Product development costs were 3.4 million euros (0.5 million euros), of which 2.3 million euros were employee expenses and purchased outsourced services amounted to 1.1 million euros. Next Games does not capitalize its R&D expenses related to game development.
  • Listing expenses amounted to 1.3 million euros
  • The company has succeeded in recruiting new talent. The organization grew to 119 people (66)

(January-December 2016 comparison in brackets)

July - December 2017 in brief (*):

  • Revenue from the period was 13.0 million euros (18.3 million euros)
  • Gross margin improved and was 37% (34%)
  • EBIT was -6.5 million euros (2.0 million euros). EBIT was impacted by investments in new game development, business development and scaling the organization in addition to depreciations of listing expenses 0.5 million euros.

(July-December 2016 comparison in brackets)

* 2017 Key Financial Figures are calculated based on Next Games Group figures. In 2016, Next Games was not required to prepare consolidated financial statement and figures presented are Next Games Oyj parent company figures.

Key Financial Figures (*)

(EUR 1000)01-12/201701-12/2016
Revenue32 49731 112
Gross bookings30 93033 593
Gross margin11 9508 252
Operating profit (-loss) (EBIT)-6 379-1 582
EBITDA-4 827-1 155
Adjusted EBITDA-5 168-709
Earnings per share, undiluted (€)-0.370.06
Earnings per share, diluted (€)-0.350.06
As percentage of revenue
Gross margin (%)37%27%
EBITDA margin (%)-15%-4%
Operating result (%)-20%-5%
As percentage of gross bookings
Adjusted EBITDA margin (percent)-17%-2%

* 2017 Key Financial Figures are calculated based on Next Games Group figures. In 2016, Next Games was not required to prepare consolidated financial statement and figures presented are Next Games Oyj parent company 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

1-12/20171-12/2016
DAU432 241438 068
MAU1 326 3181 633 052
ARPDAU (USD)0.220.23
ARPDAU (EUR)0.200.21

CEO, Teemu Huuhtanen:

2017 has been a year of building the foundations for our future growth and we have successfully reached many milestones we set for ourselves this year.

An incredibly important milestone for us, but also for the whole Finnish games industry, was our IPO in March, making us the first publicly listed games company in Finland. Our listing plays a key role in supporting Next Games' growth into an even stronger mobile game company. The success of our IPO is a clear indication of the credibility of our growth strategy amongst both international and Finnish investors, as well as among our pre-IPO VC investors, all of them deciding to firmly stay onboard with Next Games.

We had two major focus areas in 2017, both directly contributing to building a strong foundation for our future growth. We focused on strengthening our product pipeline and invested in building our Games-as-a-Service technology platform, which all our games will rely on.

In 2017 we signed a second The Walking Dead title with AMC to create the unique location-based AR game, The Walking Dead: Our World and commenced development of a mobile game based on the Blade Runner movie franchise with Alcon Entertainment. In addition in 2017, we signed a brand new license with a new partner, and another one in January 2018 after the reporting period, both projects we are thrilled to be working with. In total, we now have four games in our product development pipeline. To support the business development operations, we started preparing a more permanent presence in the United States and decided to set up an office in Los Angeles during the first quarter of 2018.

We are excited for the upcoming The Walking Dead: Our World launch as the game has entered the first stage of soft launch in December 2017, continued by opening it for testing in one market in January 2018. The game is expected to launch globally during Q2 2018. The Blade Runner game will enter soft launch phase during the first half of 2018. The two yet unannounced games are in concepting and pre-production phases.

In October, our first IP-based game, The Walking Dead: No Man's Land turned two years old and continued delivering an immersive tie-in with the TV show for season 8. This game continues to spearhead how big entertainment IP transforms into a mobile game and plays a key role in creating a direct, day-to-day connection in between the franchise fans and the game. AMC also announced the renewal of The Walking Dead TV show for season 9, already during the mid-season break of season 8. The continuation of the show will provide strong support for our The Walking Dead games in the future as well.

The Walking Dead: No Man's Land has been our only product generating significant revenue in 2017, and it has sustained itself and the team developing it during the year. The Walking Dead: No Man's Land will continue to generate revenue, but currently Next Games prioritizes new games over this product when allocating the company resources in between projects. At the end of 2017 approximately 24% of our staff was working on The Walking Dead: No Man's Land (approx. 64% in 2016), the rest of the company was working on the four new projects, except for approximately 7% of staff in general administration (approx. 7% in 2016).

As resources and focus shifted towards our future projects, as a consequence, there were fewer impactful updates in The Walking Dead: No Man's Land during 2017 in comparison to 2016. This shows as a decline in our key performance indicators. Our daily active users number was down by 1.33% and monthly active users by 18.7% from 2016. The investments in our future projects is reflected as a slowing down of our year-on-year revenue growth to 4.5% and -6.4 million euro EBIT, thus Next Games is willing to forgo short term gains over long term profit.

During 2017, we've also seen major developments in what goes under the hood in our games. Our Games-as-a-Service (GaaS) platform has been further iterated as we've gathered learnings from The Walking Dead: No Man's Land, and it will help secure a solid operational stability going forward. Our proprietary analytics platform has been another major technology investment in 2017. This robust analytics platform allows us to have full ownership of our data, enabling a rapid feedback loop to our game development process and keeps player feedback at the core of our decision-making.

I'm pleased that our hard work has been recognized by esteemed industry organizations both on our home turf and internationally. To name a few, we received the international Webby Award and International Licensing Award (LIMA) for The Walking Dead: No Man's Land. I'm confident we can continue delivering authentic, fans-first gaming experiences, appreciated by the players with our future products too.

Finally, personally I was extremely happy to see how well we did in this year's Great Place to Work survey, being the only games company on the list from Finland. By building an environment of trust and sharing our potential success by including our employees into stock-option programs and bonus plan, we believe we can attract the best talent in the industry. We take building the company culture and values very seriously.

Income Statement (FAS)

Next Games Oyj, parent companyNext Games Oyj, parent companyNext Games Group
201720162017
EUR thousand(audited)(audited)(audited)
Revenue32 49731 11232 497
Capitalized development for entity's own use02540
Other operating income191 23822
Raw materials and services-20 547-22 860-20 547
Personnel expenses total-6 679-4 802-6 656
Depreciation, amortisation and write-offs total-1 232-427-1 552
Other operating expenses-10 138-6 096-10 143
Operating profit (loss)-6 080-1 582-6 379
Financial income and expenses-470-62-470
Profit (loss) before tax and appropriations  -6 550-1 644-6 849
Deferred tax4502 400468
Profit (loss) for the financial year -6 100756-6 381
 
Next Games Oyj, parent companyNext Games Oyj, parent company
 07-12/2017 07-12/2016
EUR thousand(unaudited)(unaudited)
Revenue13 04518 326
Capitalized development for entity's own use0206
Other operating income161 236
Raw materials and services-8 173-12 124
Personnel expenses total-3 712-2 237
Depreciation, amortisation and write-offs total-734-220
Other operating expenses-6 674-3 207
Operating profit (loss)-6 2321 980
Financial income and expenses-31150
Profit (loss) before tax and appropriations  -6 5422 030
Deferred tax4662 400
Profit (loss) for the financial year -6 0764 430

Balance Sheet (FAS)

Next Games Oyj, parent companyNext Games Oyj, parent companyNext Games
Group
 31.12.201731.12.201631.12.2017
EUR thousand(audited)(audited)(audited)
ASSETS    
NON-CURRENT ASSETS
Intangible assets5 5486116 820
Tangible assets133143136
Investments2 6621 1011 074
NON-CURRENT ASSETS TOTAL 8 3431 8558 030
CURRENT ASSETS
Long-term debtors
Amounts owed by group undertakings-14
Other debtors820258822
Prepayments and accrued income480480480
Deferred taxes2 8502 4002 850
Long-term debtors total4 1493 1524 152
Short-term debtors
Trade debtors2 6864 0442 686
Other debtors24486245
Prepayments and accrued income1 5601 7861 574
Short-term debtors total4 4905 9164 505
Cash in hand and at banks26 3143 63826 377
CURRENT ASSETS TOTAL 34 95312 70635 034
  
ASSETS TOTAL 43 29614 56143 064
EQUITY AND LIABILITIES
EQUITY
Share capital80380
Invested unrestricted equity reserve53 27715 78353 277
Retained earnings (loss)-10 377-11 133-10 373
Profit (loss) for the financial year-6 100756-6 381
EQUITY TOTAL 36 8795 40836 602
LIABILITIES
Non-current liabilities
Loans from credit institutions691775691
Deferred tax liability74
Non-current liabilities total691775765
Current liabilities
Loans from credit institutions84-84
Advances received9142 482914
Trade creditors1 1621 1781 162
Other creditors234128205
Accruals and deferred income3 3314 5913 331
Current liabilities total5 7258 3785 697
LIABILITIES TOTAL 6 4169 1536 462
EQUITY AND LIABILITIES TOTAL 43 29614 56143 064


Cash Flow Statement (FAS)

Next Games Oyj,Next Games Oyj,Next Games
 parent company parent companyGroup
1.1-31.12/20171.1-31.12/20161.1-31.12/2017
EUR thousand(audited)(audited)(audited)
Net cash flows from operating activities -6 766-879-6 746
Net cash flows from investing activities -223-423-179
Net cash flows from financing activities 30 09935630 099
Net change in cash and cash equivalents23 110-94623 174
Cash and cash equivalents at beginning of the period3 6384 6243 638
Foreign exchange rate differences-435-40-435
Cash flow from the merger---
Net change in cash and cash equivalents22 675-98622 739
Cash and cash equivalents at the end of the period26 3143 63826 377
 
Next Games Oyj,Next Games Oyj,
parent companyparent company
1.7-31.12/20171.7-31.12/2016
EUR thousand(unaudited)(unaudited)
Net cash flows from operating activities -5 2321 042
Net cash flows from investing activities -120-206
 
Net cash flows from financing activities 21355
 
Net change in cash and cash equivalents-5 3311 191
Cash and cash equivalents at beginning of the period31 9392 377
Foreign exchange rate differences-29470
Net change in cash and cash equivalents-5 6251 261
Cash and cash equivalents at the end of the period26 3143 638




Statement of Equity Changes

Parent company's Equity Changes

EUR thousandShare CapitalInvested unrestricted equity reserveRetained earnings (loss)Profit (loss) for the financial yearTotal equity
Equity 1.1.2016 315 776-11 133-4 646
Option plan based share compensation77
Profit (loss) for the financial year756756
Equity 31.12.2016 315 783-11 1337565 408
Equity 1.1.2017315 783-10 377-5 408
Share capital increase78-78-
Shares issued37 54137 541
Option plan based share compensation3030
Profit (loss) for the financial year-6 100-6 100
Equity 31.12.2017 8053 277-10 377-6 10036 880

Statement of Group's Equity Changes

EUR thousandShare CapitalInvested unrestricted equity reserveRetained earnings (loss)Profit (loss) for the financial yearTotal equity
Equity 1.1.2017 315 783-10 373-5 412
Share capital increase78-78-
Shares issued37 54137 541
Option plan based share compensation3030
Profit (loss) for the financial year-6 381-6 381
Equity 31.12.2017 8053 277-10 373-6 38136 602

Certain Quarterly Financial Information
For the three months ended

1 000 euroa Mar. 31, 2016Jun. 30, 2016Sep. 30, 2016Dec. 31, 2016Mar. 31, 2017Jun. 30, 2017Sep. 30, 2017Dec. 31, 2017
Revenue, gross bookings and gross Margin 
Revenue5 5867 2006 93511 39010 9328 5206 3856 660
Gross bookings6 8526 9147 26612 56210 4327 8576 1626 479
Gross Margin541 9962 4213 7813 9383 1412 1282 744
Operating profit, EBITDA and adjusted EBITDA
Operating profit (loss)-3 107-4554181 563369-218-2 271-4 259
Depreciation and amortisation-99-107-110-110-170-328-330-724
EBITDA-3 008-3485281 672539110-1 941-3 535
Adjusted EBITDA-2 283-5197181 375797-274-2 076-3 614
As percentage of revenue
Gross Margin (%)1 %28 %35 %33 %36 %37 %33 %41 %
EBITDA margin (%)-54 %-5 %8 %15 %5 %1 %-30 %-53 %
Operating profit margin (%)-56 %-6 %6 %14 %3 %-3 %-36 %-64 %
As percentage of gross bookings
Adj. EBITDA margin (%)-33 %-8 %10 %11 %8 %-3 %-34 %-56 %
 
  Mar. 31, 2016Jun. 30, 2016Sep. 30, 2016Dec. 31, 2016Mar. 31, 2017Jun. 30, 2017Sep. 30, 2017Dec. 30, 2017
        
DAU446 483422 883350 763532 276537 659458 370371 437363 984
MAU1 944 2651 581 2151 225 1741 781 5531 613 5711 325 1671 102 8971 195 822

Audiocast and phone conference:
We will hold an audiocast and a phone conference both in Finnish and in English. Next Games' 2017 review will be presented by CEO Teemu Huuhtanen and CFO Annina Salvén.

The Finnish audiocast starts at 09:30 a.m. EET. You can join the audiocast using the following link: http://nxtg.ms/2BkwefT

The Finnish telephone conference can be joined by calling your location's phone number couple of minutes before the start and using confirmation code: 3037817

LocationPhone Number
Finland+358 (0)9 7479 0404
Germany+49 (0)69 2222 2018
Sweden+46 (0)8 5065 3942
United Kingdom+44 (0)330 336 9411

The English audiocast starts at 10:30 a.m. EET. You can join the audiocast using the following link: http://nxtg.ms/2F30WN0

The English telephone conference can be joined by calling your location's phone number couple of minutes before the start and using confirmation code: 9927238.

LocationPhone Number
Finland+358 (0)9 7479 0361
Germany+49 (0)69 2222 13420
Sweden+46 (0)8 5033 6574
United Kingdom+44 (0)330 336 9105

Upcoming events:


  • Business Review for January-March 2018 on Friday 27 April 2018
  • Next Games' Annual General Meeting on 17 May 2018

Additional info:

Saara Bergström
CMO
saara.bergstrom@nextgames.com
+358 (0)50 483 3896

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

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 an innovative location-based augmented reality game, The Walking Dead: Our World. Next Games employs over 100 people and is based in Helsinki, Finland. www.nextgames.com