Tapinator Reports Q3 2020 Financial Results

·12 min read

- Revenue Increase 41% Year-Over-Year to $1.2mm

- Bookings* Increase 39% Year-Over-Year to $1.1mm

- Net Income of $72,000 and EPS of $0.13

- Adjusted EBITDA* of $279k

- Adjusted EBITDA* Margin of 24%

- Highest Quarterly Earnings Performance in Tapinator History

NEW YORK, Oct. 28, 2020 /PRNewswire/ -- Tapinator, Inc. (OTC: 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 nine months ended September 30, 2020 and 2019, and the filing of its quarterly report for the period ended September 30, 2020. The detailed filings may be found at OTC Markets.com and at https://ir.tapinator.com. The results provided below replace, in its entirety, any guidance or projections previously issued by the Company.

Tapinator Logo (PRNewsfoto/Tapinator, Inc.)
Tapinator Logo (PRNewsfoto/Tapinator, Inc.)

For the three months ended September 30, 2020, Tapinator achieved revenue of approximately $1,156,000, bookings* of approximately $1,097,000, net income of approximately $72,000 and adjusted EBITDA* of approximately $279,000. The Company's revenue and bookings* represent year-over-year changes of 41% and 39%, respectively.

For the nine months ended September 30, 2020, Tapinator achieved revenue of approximately $3,244,000, bookings* of approximately $3,332,000, net loss of approximately $131,000 and adjusted EBITDA* of approximately $683,000. The Company's revenue, bookings* and adjusted EBITDA* represent year-over-year changes of 9%, 31% and 220%, 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




September 30


Change


2020

2019


(%)

GAAP Results:





Revenue

$1,156,210

$818,703


41%

Operating Income (Loss)

$73,557

($571,834)


NM(1)

Net Income (Loss)

$72,410

($571,482)


NM(1)

Net Income (Loss) Per Share, Basic & Fully Diluted

$0.13

($1.04)


NM(1)






Non-GAAP Results:





Bookings:





Category Leading Apps

$875,827

$526,896


66%

Rapid-Launch Games

220,964

261,408


-15%

Total Bookings

$1,096,791

$788,304


39%






Adjusted EBITDA

$279,215

($12,846)


NM(1)

1 Percentage change not meaningful






Nine Months Ended




September 30


Change


2020

2019


(%)

GAAP Results:





Revenue

$3,244,430

$2,977,353


9%

Operating Income (Loss)

($99,680)

($1,498,520)


NM(1)

Net Income (Loss)

($131,087)

($1,496,376)


NM(1)

Net Income (Loss) Per Share, Basic & Fully Diluted

($0.24)

($2.72)


NM(1)






Non-GAAP Results:





Bookings:





Category Leading Apps

$2,576,913

$1,737,637


48%

Rapid-Launch Games

755,119

803,041


-6%

Total Bookings

$3,332,032

$2,540,678


31%






Adjusted EBITDA

$682,592

$213,327


220%

1 Percentage change not meaningful





Andrew Merkatz, President & CFO of Tapinator, commented on the Company's results, "We are extremely pleased with the following accomplishments during the third quarter of 2020:

  • We delivered across-the-board improvement in our P&L including strong growth in revenue, bookings, operating income, net income, earnings per share, and adjusted EBITDA. The improvement was driven by strong performance from our social casino games and the continuation of the significant cost control measures that we implemented at the beginning of this year.

  • We achieved adjusted EBITDA margin of 24% during the quarter, performance we believe compares favorably to much larger publicly traded mobile gaming companies and which is indicative of the strong operating leverage inherent in our business operations.

  • We paid off our revolving line of credit in full during the quarter. While we continue to have access to borrowing capacity under this line, we generally seek to minimize or eliminate the use of debt from our capital structure whenever possible.

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, "From a product perspective, in Q3, we continued to enhance Video Poker Classic and we invested in the development of two new social casino games. We previously communicated our plan to launch Tournaments in Video Poker Classic and this major feature went live in August. We now operate two Tournament events, every week, and distribute virtual currency prizes to thousands of players. We continued to invest in LiveOps - for example, we launched events for each major holiday in 2020 - and we have significantly improved upon our player segmentation capabilities. Finally, just this month, we launched a new profile for each user that showcases various stats and insightful player data, such as number of games played, favorite types of video poker, highest tournament rank and more. We believe that Video Poker Classic is ahead of competing video poker products on mobile, in terms of both features and monetization. Nonetheless, we will continue building upon the product, with a focus on ongoing enhancements to monetization and social functionality.

In terms of new games, we plan to launch one new social casino title later this quarter and another new game in Q1 2021. The product that will launch later this year focuses on the lottery market and, more specifically, scratch-off games. Instant tickets are a massive market, estimated at $50 billion in the US in 2019, within real money gaming yet is underrepresented on mobile (source: LaFleurs.com). We believe that there is an opportunity to create an evergreen, best-in-class scratch off lottery product in the apps stores. We have been working tirelessly to build a game that, we believe, is authentic yet reflective of the best practices and systems of top grossing mobile games. This is a product that, we expect, will be complimentary to Video Poker Classic and is a very exciting launch for us.

Finally, with respect to our second new title, this game will focus on the idle resource management genre and we anticipate providing further information early next year."

Current Outlook
While we are not providing financial guidance at this time, we believe we will again deliver strong revenue and bookings growth in Q4 of 2020 and into 2021. 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 three quarters, the repeatable nature of the Company's Category-Leading App revenues, its strong product portfolio and pipeline, 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 unlock and grow this value in the coming years.

*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


Nine Months Ended


September 30


September 30


2020

2019


2020

2019

Reconciliation of Revenue to Bookings:






Revenue

$1,156,210

$818,703


$3,244,430

$2,977,353

Change in deferred revenue

(59,419)

(30,399)


87,602

(436,675)

Bookings

$1,096,791

$788,304


$3,332,032

$2,540,678







Reconciliation of Net Income (Loss)
to Adjusted EBITDA:






Net income (loss)

$72,410

($571,482)


($131,087)

($1,496,376)

Interest expense (income), net

1,147

(352)


31,407

(2,144)

Amortization of capitalized software development

126,048

153,283


365,856

494,285

Depreciation and amortization of other assets

752

1,331


2,556

4,437

Stock-based expense

78,858

404,374


300,897

1,213,125

One-time financing costs

-

-


112,963

-

Adjusted EBITDA

$279,215

($12,846)


$682,592

$213,327

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 plan to launch one new social casino title later this quarter and another new game in Q1 2021, our belief that there is an opportunity to create an evergreen, best-in-class scratch off lottery product in the apps stores, our expectation that new scratch off lottery product will be complimentary to Video Poker Classic, our belief we will again deliver strong revenue and bookings growth in Q4 of 2020 and into 2021, 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.

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SOURCE Tapinator, Inc.