“Tapinator continued to show healthy top-line growth in the first quarter of 2017,” stated Tapinator President, Andrew Merkatz. “While our first quarter revenues declined 4% year-over-year, our bookings (a non-GAAP measure) grew 14% during the same comparative period to approximately $969,000, representing our eleventh consecutive quarter of at least double-digit year-over-year bookings growth. The growing contribution of in-app purchases to our overall revenue mix necessitated our adoption of a new revenue recognition policy during the fourth quarter of 2016, resulting in the deferral of meaningful GAAP revenue during the most recent period. While this new policy is explained in greater detail within the notes to our 2016 audited financial statements, it is important to note that bookings, as opposed to revenue, is the fundamental top-line metric that we use to manage our business, as we believe that it is the most useful indicator of our sales activity in a given period. Over the long term, the factors impacting our bookings and revenue are the same. However, in the short term, there are factors that may cause revenue to exceed or be less than bookings in any period.
Our bookings expansion in the first quarter can be attributed primarily to our Full-Featured Games business, an area that, as we have previously communicated, is becoming increasingly meaningful to the Company as we move forward. While our Rapid-Launch Games portfolio continues to play an important role within our overall business, the long-term strategy that we have communicated is rooted in our continued investment into a select number of full-featured gaming titles that we believe have significant franchise potential. Tapinator also recorded adjusted EBITDA (a non-GAAP measure) of approximately $41,000 in the first quarter of 2017, a decrease of 81% year-over-year, but representing our twelfth consecutive quarter of positive adjusted EBITDA.”
Reflecting on the first quarter performance, Tapinator’s CEO Ilya Nikolayev stated, “We previously anticipated that, due to increased saturation within certain game categories, the growth of our Rapid-Launch business would slow. This is consistent with what we have seen in Q1. We have also anticipated that the most significant opportunity in the mobile gaming industry is the creation of a select number of best-in-class Full-Featured Games. Accordingly, in Q1, we launched our horse-racing themed solitaire product, Solitaire Dash, and have ramped up marketing for both this title as well as our Video Poker Classic game. With our continued investment into these evergreen products, as well the Full-Featured releases that we have scheduled for later this year, we are laying the groundwork for a sizeable and sustainable business characterized by strong long-term player retention and in-app purchase monetization.
- Quarterly bookings of $968,844; up 14% year-over-year*
- Quarterly revenue of $812,794; down 4% year-over-year
- Quarterly adjusted EBITDA of $41,337; down 81% year-over-year*
- $479,565 in cash and cash equivalents as of March 31, 2017
* 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 loss, resulting in positive adjusted EBITDA (a non-GAAP measure) for the relevant periods.
The Company ended Q1 with 319 active games, of which 22 were released in the quarter. As of March 31, 2017, Tapinator had 88 titles in its portfolio that had each achieved at least one million downloads, up from 86 games that had reached this milestone at the end of Q4 2016.
The Company continues to invest significant resources into its Full-Featured Games business. The Company’s goal in terms of its Full-Featured business is to create franchise-type games that have product lifespans of at least five years. In order to accomplish this, the Company believes that it needs to achieve average player lifetime values (LTVs) that exceeds the customer acquisition cost, at scale. The Company has been able to achieve this, at certain download volumes, for two products: ‘Video Poker Classic‘ and ‘Solitaire Dash’. The Company believes that, in 2017, it will be able to scale both of these products as well as launch new games that can achieve these coveted metrics. In particular, the Company is enthused about the significant potential of the following 2017 game releases:
1. Big Sport Fishing 2017: Sequel to a fishing game portfolio with over 15 million installs on mobile devices worldwide. It has been in soft launch for eight months, which has provided us with live operations data to improve the product before global release.
2. Dice Mage 2: Sequel to a unique RPG game with an Apple “App Store Editors’ Note.” The original has very strong average revenue per daily active user (ARPDAU) metrics but below our long-term player retention standards. With this sequel, our goal is to make ARPDAU even stronger while solving for long term retention.
3. Shadowborne: Console-quality, hard-core action based role-playing game. This game is a first of its kind release on mobile and will appeal to console players seeking a similar experience on mobile devices. Monetization model is freemium with 100+ upgrade options across categories such as armor, weapons, and visual customization.
4. Divide & Conquer: an arena-style synchronous, multiplayer strategy game. This game offers a unique combination of fast, synchronous multiplayer battles and long-term progress via upgrades and unlocks. The systems built around the latter, we believe, will enable best-in-class monetization.
Player & Game Metrics
- Average DAUs – 890,000 in Q1 2017; up 20% year-over-year
- Average MAUs – 15.9 million in Q1 2017; up 35% year-over-year
- Average New Daily Downloads – 391,000 in Q1 2017; down 18% year-over-year
- Cumulative Downloads – 398 million as of March 31, 2017; up 90% year-over-year
- Game Library – 319 titles as of March 31, 2017; up from 214 year-over-year
- Game Diversification – No single game accounted for more than 22% of total revenues during the three-month period ended March 31, 2017
Mar. 31, 2017 Mar. 31, 2016
Revenue $812,794 $848,613
Operating Income (Loss) ($178,341) $6,893
Net Income (Loss) ($554,256) ($402,820)
Diluted Net Income (Loss) Per Share ($0.01) ($0.01)
Weighted average common shares outstanding:
Diluted 57,100,044 57,081,281
Bookings $968,844 $848,613
Adjusted EBITDA $41,337 $220,510
Quarterly Summary of Results
Tapinator recorded bookings of $968,844, gross revenues of $812,794 and a net loss of $554,256 for the three-month period ended March 31, 2017. This compares to bookings and gross revenue of $848,613 and a net loss of $402,820 for the same period in 2016. The bookings increase can be attributed to strong growth in our Full-Featured Games that launched in 2016 and early 2017, offset by a decline within our Rapid-Launch Games. The revenue decrease can be attributed to the growing contribution of durable virtual goods (primarily from our Full-Featured Games) to our overall revenue mix, resulting in a $156,051 increase in net deferred revenue during the quarter.
For the three-month period ended March 31, 2017, the Company incurred an operating loss of $178,341, as compared to operating income of $6,893 for the comparable three-month period in 2016. The operating loss increase was primarily due to increased game marketing costs associated with our Video Poker Classic and Solitaire Dash products. The net loss increase was primarily due to increased game marketing costs associated with our Video Poker Classic and Solitaire Dash products. For the three-month period ended March 31, 2017, the Company achieved adjusted EBITDA (a non-GAAP measure of earnings discussed below) of $41,337, as compared to adjusted EBITDA of $220,510 for the comparable three-month period in 2016. The decrease in adjusted EBITDA is primarily due to increased game marketing costs associated with our Video Poker Classic and Solitaire Dash products.
Tapinator’s cash balance decreased to $479,565 as of March 31, 2017 from the period ended December 31, 2016 when the cash balance was $590,461. The cash decrease can be attributed to an increase in capital expenditures related to game development and a reduction in cash generated by operating activities (primarily due to increased game marketing expenditures), offset by proceeds received from the sale of common stock during the quarter.
Tapinator (OTC: TAPM) develops and publishes mobile games on the iOS, Google Play, and Amazon platforms. Tapinator’s portfolio includes over 300 mobile gaming titles that, collectively, have achieved over 400 million player downloads, including games such as ROCKY™, Combo Quest, Video Poker Classic, Solitaire Dash and Dice Mage . Tapinator generates revenues through the sale of branded advertisements, paid downloadable games and premium in-game content. Founded in 2013, Tapinator is headquartered in New York, with product development teams located in the United States, Germany, Pakistan, Indonesia, Russia and Canada. Consumers can find high-quality mobile entertainment wherever they see the ‘T’ character logo, or at Tapinator.com.
Key Operating Metrics
We manage our business by tracking several operating metrics: ‘DAUs’, which measure daily active users of our games, ‘MAUs’, which measure monthly active users of our games, ‘Downloads’, which measure non-unique downloads of our games, each of which is recorded by third-party systems and our internal analytics system. The numbers for these operating metrics are calculated using internal company data, based on tracking of user account activity. We believe that the numbers are reasonable estimates of our user base for the applicable period of measurement; however, factors relating to user activity and systems may impact these numbers.
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,” “feel,” “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements. Forward-looking statements in this release involve substantial risks and uncertainties that could cause the development and monetization of our mobile games, future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, the uncertainties inherent in the hits nature of the mobile gaming business. 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 Market Group’s OTC Link quotation system 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 Market Group’s OTC Link quotation system is not a stock exchange, and trading of securities on it is often more sporadic than trading of securities listed on the NASDAQ Stock market or another 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, see Tapinator’s Risk Factors which are available within the disclaimers section of Tapinator.com.
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 consolidated financial statements, 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 and liquidity. 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 Bookings and adjusted EBITDA in assessing our performance and when planning, forecasting and analyzing future periods. We believe Bookings and adjusted EBITDA is useful to investors because it allows for greater transparency with respect to key financial metrics we use in making operating decisions and because our investors and analysts use them to help assess the health of our business. 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 durable virtual goods;
- Adjusted EBITDA does not include the impact of stock-based expense, impairment of intangible assets previously acquired, acquisition-related transaction 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. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized 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 adjusted EBITDA along with other financial performance measures, including revenue, net income (loss), diluted net income (loss) per share, cash flow from operations, GAAP operating expense, GAAP operating margin and our other financial results presented in accordance with GAAP. See the GAAP to non-GAAP reconciliations below for further details:
Reconciliation of GAAP to Non-GAAP Results(unaudited)
Three Months Ended
Mar. 31, 2017 Mar. 31, 2016
Reconciliation of Revenue to Bookings:
Revenue $812,794 $848,613
Change in deferred revenue $156,051 $0
Bookings $968,844 $848,613
Three Months Ended
Mar. 31, 2017 Mar. 31, 2016
Reconciliation of Net Income (Loss) to Adjusted
Net income (loss) ($554,256) (402,820)
Interest expense, net $144,674 $81,495
Income taxes $2,150 $4,376
Amortization of capitalized software development $195,412 $188,910
Depreciation and amortization of other assets $5,878 $19,162
Amortization of debt discount $229,091 $323,843
Stock-based expense $18,388 $5,544
Adjusted EBITDA 41,337 220,510
Tapinator Investor Relations
SOURCE Tapinator, Inc.