Tapinator Reports Q2 2020 Financial Results

  • Highest Quarterly Bookings,* Adjusted EBITDA* and Earnings Performances in Tapinator History
  • Bookings* Increase 60% Year-Over-Year to $1.3mm
  • Company Records Q2 Net Income of $64,000 and Earnings Per Share of $0.12
  • Adjusted EBITDA Increases 7% Year-Over-Year to $314k

 

New York, NY – August 10, 2020Tapinator, Inc. (OTCPK: TAPM) (“Tapinator,” the “Company,” “we,” “our” or “us”), a developer and publisher of category leading apps for mobile platforms, today announced unaudited financial results for the three and six months ended June 30, 2020 and 2019, and the filing of its quarterly report for the period ended June 30, 2020.  The quarterly report and financial statements may be found at http://www.otcmarkets.com/stock/TAPM/disclosure.  The results provided below replace, in its entirety, any guidance or projections previously issued by the Company.

 

For the three months ended June 30, 2020, Tapinator achieved revenue of approximately $1,174,000, bookings* of approximately $1,258,000, net income of approximately $64,000, and adjusted EBITDA* of approximately $313,000.  The Company’s revenue, bookings* and adjusted EBITDA* represent year-over-year changes of (13%), 60% and 7%, respectively.

 

For the six months ended June 30, 2020, Tapinator achieved revenue of approximately $2,088,000, bookings* of approximately $2,235,000, net loss of approximately $204,000, and adjusted EBITDA* of approximately $403,000.  The Company’s revenue, bookings* and adjusted EBITDA* represent year-over-year changes of (3%), 28% and 78%, respectively.

 

*A table has been included in this press release with non-GAAP adjustments to the Company’s revenue resulting in bookings (a non-GAAP measure) and non-GAAP adjustments to the Company’s net income (loss), resulting in positive adjusted EBITDA (a non-GAAP measure) for the relevant periods.

 

Financial Highlights

 

Three Months Ended
June 30 Change
2020 2019 (%)
GAAP Results:
Revenue $1,174,364 $1,345,595 -13%
Operating Income (Loss) $80,543 ($268,755) NM(1)
Net Income (Loss) $63,706 ($265,191) NM(1)
Diluted Net Income (Loss) Per Share $0.12 ($0.48) NM(1)
Non-GAAP Results:
Bookings:
   Category Leading Apps $986,428 $566,462 74%
   Rapid-Launch Games 271,505 219,236 24%
Total  Bookings $1,257,933 $785,698 60%
Adjusted EBITDA $313,156 $293,237 7%
 
Six Months Ended

June 30

 

Change

2020 2019 (%)
GAAP Results:
Revenue $2,088,220 $2,158,650 -3%
Operating Income (Loss) ($173,237) ($926,686) NM(1)
Net Income (Loss) ($203,497) ($924,894) NM(1)
Diluted Net Income (Loss) Per Share ($0.37) ($1.68) NM(1)
Non-GAAP Results:
Bookings:
   Category Leading Apps $1,701,087 $1,210,741 40%
   Rapid-Launch Games 534,155 541,633 -1%
Total  Bookings $2,235,242 $1,752,374 28%
Adjusted EBITDA $403,377 $226,172 78%
 
1 Percentage change not meaningful.

 

Andrew Merkatz, President & CFO of Tapinator, commented on the Company’s results, “We are very pleased with the following accomplishments during the second quarter of 2020:

 

  • We delivered our best bookings, net income, earnings per share, and adjusted EBITDA in Tapinator history, driven by our LiveOps which performed well throughout the quarter.
  • We reported quarterly bookings* of approximately $1.3mm, representing year-over-year growth of 60%.
  • We reported, within our core Category Leading Apps business, quarterly bookings* of approximately $1.0mm, representing year-over-year growth of 74%.
  • We continued the significant cost control measures that we implemented in the first quarter of this year. These measures contributed to our achievement of quarterly net income of approximately $64,000 and adjusted EBITDA* of approximately $313,000, which compare, respectively, to a net loss of approximately ($265,000) and adjusted EBITDA* of approximately $293,000 recorded in Q2 2019.
  • We achieved adjusted EBITDA margin of 27% during the quarter, performance that we believe is indicative of the strong operating leverage inherent in our business.

 

The mobile game industry is expected to generate $100 billion in revenue in 2020, up from $86 billion in 2019, according to App Annie, the mobile data and analytics researcher.  Based on the report, games are now 72% of all spending in the app stores. Mobile games saw 25% more spending than all other games combined in 2019. Mobile game spending was 2.4 times the spending for PC and Mac games, and 2.9 times spending for home game consoles in 2019.  The growth rate of the social casino market, the subset of the market that Tapinator focuses on, is estimated at 5% over the next four years and is projected to reach $6.8 billion by 2023, according to market research firm Eilers & Krejcik. Tapinator has become a seasoned operator in this massive and lucrative market, and we believe we are well positioned to continue to deliver strong growth and product leadership in the coming years.”

 

Ilya Nikolayev, CEO of Tapinator also commented, “We are proud of Video Poker Classic and remain confident in the game’s status as the best-in-class video poker product on mobile, from both a feature and quality perspective. We continue to enhance the game and, in Q2, we introduced Daily Goals and Rewards, a Stamp Card (Loyalty) System, Player Statistics and other features. Also, we launched additional LiveOps events and IAP offers, which we will continue to do on an ongoing basis. Later this quarter, we will be introducing a Tournaments feature, which we are very excited about. Every week, we will run two Tournaments, each for a different variant of video poker, and will reward virtual currency prizes to top leaderboard players. This feature is grounded in video poker tournaments that occur in a real money setting and, we believe, will be well received by both serious and casual players alike. Events are a proven mechanism to increase engagement and monetization within top grossing games and, we believe, will contribute meaningfully to an uptick in DAUs for Video Poker Classic.

 

Outside of Video Poker Classic, we would like to provide an update on two other products: SPEED – Heads Up Solitaire and our upcoming new social casino product. SPEED launched at the end of April, was featured by Apple and was well received by players with a 4.5 out of 5.0 review score. However, we believe that we need to achieve higher player lifetime values in order to scale the product from a paid marketing perspective. With the next version of the game, launched late last week, we have introduced in-depth systems for Chests, Premium Items, and a Secondary Currency. Collectively, we believe this will improve the game’s ARPDAU and will allow us to bring more players into the game via paid marketing.

 

Finally, we will launch a new social casino product later this year. This product follows our overall thesis of targeting areas of the social casino space that are evergreen and proven outside of mobile yet are underrepresented within the major mobile platforms. This product targets an audience with similarities to our Video Poker Classic demographic and, accordingly, we believe that there will be cross promotion opportunities with our existing high-value userbase.”

 

Current Outlook

 

It is too early to quantify and distinguish the long-term impact of the coronavirus pandemic for our business.  In our games, we saw an increase in the number of downloads as well as user engagement and also saw an uptick in revenues in March and April.  Despite this uptick, we believe the pandemic creates significant uncertainty regarding the longer term impact on consumer and advertising spending within mobile apps.  Despite this uncertainty, we continue to have strong conviction regarding our Category Leading Apps business, and specifically our focus on social casino games. The strategic changes we implemented in 2017-2018, shifting from Rapid-Launch Games to Category Leading Apps, and the initiatives we began in 2019 to focus on LiveOps both continue to pay off. We have also seen positive results from the cost containment measures that we undertook during the first quarter of 2020 that we believe will continue to yield improved operating results moving forward.

 

While we are not providing financial guidance at this time, we continue to believe we are well positioned to again deliver strong company-wide revenue and bookings growth in 2020. We also anticipate recording significantly improved adjusted EBITDA and significantly narrowed net loss in 2020 as compared to 2019.   Based on the Company’s strong financial performance over the past two quarters, the repeatable nature of the Company’s Category-Leading App revenues, its strong product portfolio, its significant operating leverage, and its attractive market positioning at the intersection of mobile entertainment and online casino style gaming, we continue to believe Tapinator is currently fundamentally and deeply undervalued.  The Company’s management and independent board of directors remain committed to working diligently and prudently on behalf of all of its shareholders to both grow and unlock this value in the second half of 2020 and beyond.

 

*Non-GAAP Financial Measures

 

We have provided in this release the non-GAAP financial measures of bookings and adjusted EBITDA, as a supplement to the measures of Revenue and Operating Income, which are prepared in accordance with United States generally accepted accounting principles (“GAAP”). Management uses bookings and adjusted EBITDA internally in analyzing our financial results to assess operational performance. The presentation of bookings and adjusted EBITDA is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. We believe that both management and investors benefit from referring to adjusted revenue, bookings and adjusted EBITDA in assessing our performance and when planning, forecasting and analyzing future periods.

 

We believe bookings and adjusted EBITDA are useful to investors and analysts because it allows for greater transparency with respect to key financial metrics we use in making operating decisions and allows comparability to other businesses within the mobile gaming sector. Below, we have provided reconciliations between our historical bookings and adjusted EBITDA to the most directly comparable GAAP financial measures below.  Some limitations of bookings and adjusted EBITDA are as follows:

 

  • Bookings does not reflect that we defer and recognize online game revenue over the estimated life of our durable virtual goods;
  • Adjusted EBITDA does not include the impact of stock-based expense, impairment of previously capitalized software or intangible assets previously acquired, acquisition-related transaction expenses, one-time financing expenses, contingent consideration fair value adjustments and restructuring expense;
  • Adjusted EBITDA does not reflect income tax expense;
  • Adjusted EBITDA does not include other income or expense, which includes foreign exchange gains and losses and interest income or expense;
  • Adjusted EBITDA excludes depreciation and amortization of intangible assets and impairment of capitalized software.  Although depreciation and amortization and impairment of capitalized software are non-cash charges, the assets being depreciated and amortized or impaired may have to be replaced in the future; and
  • Other companies, including companies in our industry, may calculate adjusted EBITDA differently or not at all, which will reduce their usefulness as a comparative measure.

 

Because of these limitations, you should consider bookings and adjusted EBITDA along with other financial performance measures, including Revenue, Net Income (Loss), Diluted Net Income (Loss) Per Share, Cash Flow from Operations, Operating Income (Loss) and our other financial results presented in accordance with GAAP.

 

Reconciliation of GAAP to Non-GAAP Results

 

Three Months Ended Six Months Ended
June 30 June 30
2020 2019 2020 2019
Reconciliation of Revenue to Bookings:
Revenue $1,174,364 $1,345,595 $2,088,219 $2,158,650
Change in deferred revenue 83,568 (559,897) 147,023 (406,276)
Bookings $1,257,932 $785,698 $2,235,242 $1,752,374
 

 

Reconciliation of Net Income (Loss)                                         to Adjusted EBITDA:
Net income (loss) $63,706 ($265,191) ($203,497) ($924,894)
Interest expense (income), net 16,837 (3,565) 30,260 (1,792)
Income tax
Amortization of capitalized software development 123,728 156,303 239,808 341,002
Depreciation and amortization of other assets 879 1,316 1,804 3,106
Stock-based expense 91,437 404,374 222,039 808,750
One-time financing costs 16,571 0 112,963 0
Adjusted EBITDA $313,158 $293,237 $403,377 $226,172

 

About Tapinator

 

Tapinator Inc. (OTC: TAPM) develops and publishes category leading apps for mobile platforms, with a focus on social casino games. Tapinator’s library includes more than 300 titles that, collectively, have achieved over 500 million mobile downloads, including notable properties such as Video Poker Classic and Solitaire Derby. Tapinator generates revenues through the sale of branded advertising and via consumer transactions, including in-app purchases and subscriptions. Founded in 2013, Tapinator is headquartered in New York, with product development and marketing teams located in North America, Europe and Asia. Consumers can find high-quality mobile entertainment wherever they see the ‘T’ character logo, or at http://tapinator.com.

 

Forward Looking Statements

To the extent that statements contained in this press release are not descriptions of historical facts regarding Tapinator, they are forward-looking statements reflecting the current beliefs and expectations of management made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “goal,” “plan,” “feel,” “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “target,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements. These forward-looking statements include, among other things, our belief we are well positioned to continue to deliver strong growth and product leadership in the coming years, our belief that the new Tournaments feature of Video Poker Classic will be well received by both serious and casual players and that it will contribute meaningfully to an uptick in DAUs for Video Poker Classic, our belief that the next version of SPEED – Heads Up will improve the game’s ARPDAU and will allow us to bring more players into the game via paid marketing, our belief that our to be launched social casino product will benefit from cross promotion opportunities with our existing high-value userbase, our belief that we will continue to yield improved operating results, our belief we are well positioned to again deliver strong company-wide revenue and bookings growth in 2020, our anticipation that we will record significantly improved adjusted EBITDA and significantly narrowed net loss in 2020 as compared to 2019 and our belief that we are currently fundamentally and deeply undervalued. Forward-looking statements are subject to risks and uncertainties that could cause our future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements. Except as required by law, Tapinator undertakes no obligation to update or revise any forward-looking statements. The quoting and trading of the Company’s common stock on the OTC Marketplace is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with the Company’s operations or business prospects. As a result, there may be volatility in the market price of the shares of the Company’s common stock for reasons unrelated to operating performance. Moreover, the OTC Marketplace is not a stock exchange, and trading of securities on it is often more sporadic than trading of securities listed on a national securities exchange. Accordingly, stockholders may have difficulty reselling any of their shares. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of the Company, please see the Company’s Supplemental Information Report filed with the OTC Markets as provided here: https://backend.otcmarkets.com/otcapi/company/financial-report/241817/content.

 

CONTACT:

Tapinator Investor Relations

investor.relations@tapinator.com

914.930.6232

 

SOURCE:  Tapinator

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