Next Games

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

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) 01-12/2017 01-12/2016
Revenue 32 497 31 112
Gross bookings 30 930 33 593
Gross margin 11 950 8 252
Operating profit (-loss) (EBIT) -6 379 -1 582
EBITDA -4 827 -1 155
Adjusted EBITDA -5 168 -709
Earnings per share, undiluted (€) -0.37 0.06
Earnings per share, diluted (€) -0.35 0.06
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

1-12/2017 1-12/2016
DAU 432 241 438 068
MAU 1 326 318 1 633 052
ARPDAU (USD) 0.22 0.23
ARPDAU (EUR) 0.20 0.21

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 company Next Games Oyj, parent company Next Games Group
2017 2016 2017
EUR thousand (audited) (audited) (audited)
Revenue 32 497 31 112 32 497
Capitalized development for entity’s own use 0 254 0
Other operating income 19 1 238 22
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 tax 450 2 400 468
Profit (loss) for the financial year   -6 100 756 -6 381

 

Next Games Oyj, parent company Next Games Oyj, parent company
 07-12/2017  07-12/2016
EUR thousand (unaudited) (unaudited)
Revenue 13 045 18 326
Capitalized development for entity’s own use 0 206
Other operating income 16 1 236
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) -6 232 1 980
Financial income and expenses -311 50
Profit (loss) before tax and appropriations   -6 542 2 030
Deferred tax 466 2 400
Profit (loss) for the financial year   -6 076 4 430

Balance Sheet (FAS)

Next Games Oyj, parent company Next Games Oyj, parent company Next Games
Group
 31.12.2017 31.12.2016 31.12.2017
EUR thousand (audited) (audited) (audited)
ASSETS        
NON-CURRENT ASSETS
Intangible assets 5 548 611 6 820
Tangible assets 133 143 136
Investments 2 662 1 101 1 074
NON-CURRENT ASSETS TOTAL   8 343 1 855 8 030
CURRENT ASSETS
Long-term debtors
Amounts owed by group undertakings 14
Other debtors 820 258 822
Prepayments and accrued income 480 480 480
Deferred taxes 2 850 2 400 2 850
Long-term debtors total 4 149 3 152 4 152
Short-term debtors
Trade debtors 2 686 4 044 2 686
Other debtors 244 86 245
Prepayments and accrued income 1 560 1 786 1 574
Short-term debtors total 4 490 5 916 4 505
Cash in hand and at banks 26 314 3 638 26 377
CURRENT ASSETS TOTAL   34 953 12 706 35 034
   
ASSETS TOTAL   43 296 14 561 43 064
EQUITY AND LIABILITIES
EQUITY
Share capital 80 3 80
Invested unrestricted equity reserve 53 277 15 783 53 277
Retained earnings (loss) -10 377 -11 133 -10 373
Profit (loss) for the financial year -6 100 756 -6 381
EQUITY TOTAL   36 879 5 408 36 602
LIABILITIES
Non-current liabilities
Loans from credit institutions 691 775 691
Deferred tax liability 74
Non-current liabilities total 691 775 765
Current liabilities
Loans from credit institutions 84 84
Advances received 914 2 482 914
Trade creditors 1 162 1 178 1 162
Other creditors 234 128 205
Accruals and deferred income 3 331 4 591 3 331
Current liabilities total 5 725 8 378 5 697
LIABILITIES TOTAL   6 416 9 153 6 462
EQUITY AND LIABILITIES TOTAL   43 296 14 561 43 064


Cash Flow Statement (FAS)

Next Games Oyj, Next Games Oyj, Next Games
 parent company  parent company Group
1.1-31.12/2017 1.1-31.12/2016 1.1-31.12/2017
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   30 099 356 30 099
Net change in cash and cash equivalents 23 110 -946 23 174
Cash and cash equivalents at beginning of the period 3 638 4 624 3 638
Foreign exchange rate differences -435 -40 -435
Cash flow from the merger
Net change in cash and cash equivalents 22 675 -986 22 739
Cash and cash equivalents at the end of the period 26 314 3 638 26 377

 

Next Games Oyj, Next Games Oyj,
parent company parent company
1.7-31.12/2017 1.7-31.12/2016
EUR thousand (unaudited) (unaudited)
Net cash flows from operating activities   -5 232 1 042
Net cash flows from investing activities   -120 -206
 
Net cash flows from financing activities   21 355
 
Net change in cash and cash equivalents -5 331 1 191
Cash and cash equivalents at beginning of the period 31 939 2 377
Foreign exchange rate differences -294 70
Net change in cash and cash equivalents -5 625 1 261
Cash and cash equivalents at the end of the period 26 314 3 638




Statement of Equity Changes

Parent company’s Equity Changes

EUR thousand Share Capital Invested unrestricted equity reserve Retained earnings (loss) Profit (loss) for the financial year Total equity
Equity 1.1.2016   3 15 776 -11 133 4 646
Option plan based share compensation 7 7
Profit (loss) for the financial year 756 756
Equity 31.12.2016   3 15 783 -11 133 756 5 408
Equity 1.1.2017 3 15 783 -10 377 5 408
Share capital increase 78 -78
Shares issued 37 541 37 541
Option plan based share compensation 30 30
Profit (loss) for the financial year -6 100 -6 100
Equity 31.12.2017   80 53 277 -10 377 -6 100 36 880

Statement of Group’s Equity Changes

EUR thousand Share Capital Invested unrestricted equity reserve Retained earnings (loss) Profit (loss) for the financial year Total equity
Equity 1.1.2017   3 15 783 -10 373 5 412
Share capital increase 78 -78
Shares issued 37 541 37 541
Option plan based share compensation 30 30
Profit (loss) for the financial year -6 381 -6 381
Equity 31.12.2017   80 53 277 -10 373 -6 381 36 602

Certain Quarterly Financial Information
For the three months ended

1 000 euroa   Mar. 31, 2016 Jun. 30, 2016 Sep. 30, 2016 Dec. 31, 2016 Mar. 31, 2017 Jun. 30, 2017 Sep. 30, 2017 Dec. 31, 2017
Revenue, gross bookings and gross Margin  
Revenue 5 586 7 200 6 935 11 390 10 932 8 520 6 385 6 660
Gross bookings 6 852 6 914 7 266 12 562 10 432 7 857 6 162 6 479
Gross Margin 54 1 996 2 421 3 781 3 938 3 141 2 128 2 744
Operating profit, EBITDA and adjusted EBITDA
Operating profit (loss) -3 107 -455 418 1 563 369 -218 -2 271 -4 259
Depreciation and amortisation -99 -107 -110 -110 -170 -328 -330 -724
EBITDA -3 008 -348 528 1 672 539 110 -1 941 -3 535
Adjusted EBITDA -2 283 -519 718 1 375 797 -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, 2016 Jun. 30, 2016 Sep. 30, 2016 Dec. 31, 2016 Mar. 31, 2017 Jun. 30, 2017 Sep. 30, 2017 Dec. 30, 2017
               
DAU 446 483 422 883 350 763 532 276 537 659 458 370 371 437 363 984
MAU 1 944 265 1 581 215 1 225 174 1 781 553 1 613 571 1 325 167 1 102 897 1 195 822

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

Location Phone 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.

Location Phone 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