Flexion Mobile - Mobile Game IT Platform Company

Stocks
,
1

Flexion Mobile Plc is a company operating in the mobile gaming industry listed on the Swedish stock exchange. I am not an expert in the field, so someone can correct me if I write something incorrect in the introduction. As I understand it, the company doesn’t actually produce games itself, but rather provides a platform for their development/publishing, etc.

The company focuses on IT and applications for developing/publishing mobile games on multiple platforms/marketplaces.

Nordnet’s description of the company:

“Flexion Mobile operates in the IT sector. The company has developed various technical platforms for customers in game development. The vision is to offer mobile platforms that the company’s customers can use to more easily distribute games in their sales channels. The largest business is established on the European market. Flexion Mobile was founded in 2007 and is headquartered in London.”

Image from the company’s website.

FlexionMobile1
FlexionMobile11878×649 197 KB

Q3

Flexion delivers its sixth consecutive record quarter with revenue growth of 138% and EBITDA of GBP 1.5 million

July-September 2022 performance

  • Total revenue increased by 138% to GBP 18.5m (7.8)*

  • Gross profit increased by 196% to GBP 3.0m (1.0)

  • Adjusted EBITDA[‡] increased to GBP 1.5m (0.1)

  • Adjusted profit before tax[#] increased to GBP 0.3m (0.1)

  • EPS amounted to GBP -1.22 pence (-0.07 pence)

  • Adjusted EPS amounted to GBP 0.51 pence (0.08 pence)

  • Operating cashflow amounted to GBP 1.9m (-0.4)

  • Cash and cash equivalents amounted to GBP 10.5m (15.0)

January-September 2022 performance

  • Total revenue increased by 111% to GBP 46.8m (22.2)*

  • Gross profit increased by 166% to GBP 7.4m (2.8)

  • Adjusted EBITDA[‡] increased to GBP 3.2m (0.04)

  • Adjusted profit before tax[#] increased to GBP 0.8m (-0.1)

  • Operating cashflow amounted to GBP 4.9m (1.4)

Important events during the quarter

  • Launch of King of Avalon from FunPlus

  • Signing and launch of Matchington Mansion from Magic Tavern Inc

  • Signing of Call Me Emperor from Clicktouch Co. on the Japanese market

  • Signing of Kiss of War from tap4fun

  • Completion of USD 500k Liteup Media investment for 20% stake

  • Launch of cost-per-install (CPI) service by Liteup Media to target TikTok users

Important events after the quarter

  • With Amazon-Windows 11 deal, Flexion can help Android games reach PC audiences

In addition, an explanation of the difference between Profits and “Adjusted” profits:

“Over time intangible assets from new acquisitions such as Audiencly will grow and according to IFRS accounting principles we must amortise these. This negatively affects net operating profit and we therefore decided to introduce Adjusted profit before tax alongside Adjusted EBITDA to better reflect the underlying performance of the business. Essentially, we add back amortization of intangible assets from acquisitions and FX effects to get Adjusted profit before tax. This quarter, the adjustment amounted to GBP 0.9m.”

Development after listing (shares listed in Sweden, so price in kronor)

image
image1113×667 53.8 KB

The company is also followed by RedEye. Whether that’s a good or bad thing, at least (revenue) forecasts have been exceeded recently.

Forecasts picked from Marketscreener:

FlexionMobile3
FlexionMobile3975×628 53.5 KB

FlexionMobile4
FlexionMobile4976×622 48.2 KB

10 Likes
2

Interesting stock. Cherry AB had partially similar operations and it was nice to own until it was bought out from the stock exchange.

How long have you been following the company? Can you tell me about its competitive advantages?

Judging by the CEO’s Q3 comments, recent growth has come from last year’s big game sign-ups, which have now reached a mature phase. According to him, new growth drivers should be found. Is there any information on whether growth would primarily come from new games, diversifying the service offering, or both?

According to Redeye’s forecasts, the business is quite nicely scalable, and in that regard, the valuation seems cheap.

3

I only started following around the time of the previous earnings report, so I don’t have a deep understanding of the company.

They have indeed published various announcements quite often about new games, etc. Here’s a fairly recent piece of news:

Revenue boost potential for Android games that reach PC users via Amazon

Flexion-published games at the forefront of Windows 11/Amazon partnership

LONDON, 27th of October, 2022 - Flexion Mobile Plc (Nasdaq: FLEXM), the games marketing company today announces that developers whose games are available on the Amazon Appstore just got a PC boost as Microsoft launched Windows 11 with the Windows Subsystem for Android™. This enables PC users to run Android apps.

Flexion already helps developers take their Android games from Google Play to a range of alternative app stores, including Amazon, boosting both revenue and audience numbers. Now those games can be played by PC users with Windows 11, thanks to the deal between Microsoft and Amazon.

“Windows 11 users will have to choose to install the Amazon Appstore and it remains to be seen how many people do that,” says Jens Lauritzson, CEO of Flexion. “But even if only a fraction of PC gamers install, that represents an enormous increase in reach over what Amazon achieves on its own.”

Windows 10 has a staggering 1.4 billion monthly active users and the latest version of the PC operating system is expected to exceed that figure.

Flexion gets Android games from top developers and adapts them for the alternative app stores including Amazon, Huawei’s App Gallery, Samsung, Xiaomi GetApps and the One Store. It then markets those games to maximise audiences and revenue. Developers see significant increases in their revenue on top of what they earn through Google Play. They achieve that without any upfront costs and little effort thanks to Flexion’s technology which takes care of the work involved.

Flexion recommends putting games on all the alternative app stores to get the maximum return and those developers who have already put their games on Amazon are now in a position to reap rewards.

Not every game will be suitable for playing on PC and the Amazon Appstore is curating content to make sure Windows 11 users reach the best content. Already three Flexion games are available on Windows 11 via the Amazon Appstore:

Evony: The King’s Return (Top Games is the developer),

Rise of the Kings (ONEMT is the developer)

Z Day (FunPlus International is the developer)

More games are expected to go live soon, once they have completed the testing and approvals process.

“It’s a win-win,” says Jens. “Microsoft gets great new content for its PC users, while Amazon Appstore, and the developers who are on it, get a much wider reach for their games. That has the opportunity to improve the game’s metrics over time.”

4

This should not be seen purely as a platform for mobile games. The company seems to have made two acquisitions related to social media marketing. One can take that in many ways, whether it is a good or a bad thing, I personally ended up with a rather neutral view. There is certainly a future in social media marketing, it is then a mystery how two different companies can work well together? So far it seems to have gone quite well.

1 Like
5

I’ll have to read this paper with thought Home - Flexion
After that, I might have something to contribute to this discussion.

It seems to be a stock with relatively low trading volume. And ownership is heavily concentrated in the CEO/founder (approx. 30%).

1 Like
6

They published a bulletin about the offering. The size of the offering is quite small compared to the market capitalization (25m/850m, 4% dilution). The reason given in the bulletin is the desire to increase awareness of the company, as the listing apparently did not happen through an offering IPO (well, at least there don’t seem to be significant competing IPOs at the moment). The company has a fairly large cash reserve and the beginning of the year was cash flow positive, so could another reason be to increase the cash for an acquisition?

It remained unclear whether the offering can be participated in from Finland and through other means than Avanza, but it will probably become clear tomorrow.

7

That’s a bit of an odd justification. Information does increase if a profit is made. It’s not a huge deal overall, but in my opinion, it’s slightly negative if they can’t justify it better. Let’s at least hope they make a good profit; at least the numbers have been quite good so far.

8

Once again, the Swedes managed to pull money from investors in other countries. The offering was oversubscribed and priced at a 10% discount. However, the share price is also down 8% today, even though the dilution is only 3.4% and the company is getting more cash for growth investments (or acquisitions, or whatever they end up using it for).

2 Likes
9

Finally had some time to get to know the company. Below is my understanding of the company in a nutshell.

Flexion operates in a small niche market and provides a platform that allows game developers to bring their games from Google Play to other app stores, such as Samsung and Amazon, using the same code without additional work. Through the platform, it is also possible to, among other things, add new features to game marketing, test and modify games, and facilitate payments. Flexion also benefits app stores, as it helps them get more content because developers can port games to them practically without extra work or increased fixed costs.

Flexion’s platform revenue consists of a share of the games’ sales revenue (revenue sharing). Growth comes from, for example, adding new app stores to the platform (the same game in more stores), increasing the number of games on the platform, and through the revenue growth of existing games.

The thing I don’t quite understand is why an end-user would go to, for example, the Samsung app store instead of Google Play? Is it cheaper there, or are there exclusive apps that aren’t available on Google Play? As I understand it, all games ported to other stores via Flexion’s platform are also on Google Play. For this reason, I see the attractiveness of other app stores as important for Flexion as well.

In the midst of the rights issue chaos, I decided to open a position.

10

Apple to Allow Outside App Stores in Overhaul Spurred by EU Laws
Apple is preparing to allow alternative app stores on its iPhones and iPads, part of a sweeping overhaul aimed at complying with strict European Union requirements coming in 2024.

Nyt olisi saumaa laajentaa IOS:ään Euroopassa.

11

New partnership announcement.

“LONDON, 24 January 2023 - Flexion (Nasdaq: FLEXM), the games marketing company has signed an agreement with Fingersoft (https://fingersoft.com/) to publish the developer’s worldwide hit mobile casual games Hill Climb Racing and Hill Climb Racing 2 on the alternative app stores. Flexion will distribute the games on the Amazon Appstore, ONE store, Samsung Galaxy Store and Huawei’s AppGallery, in Q2 2023.
Hill Climb Racing and Hill Climb Racing 2 combined have accumulated over two billion installs and over €180M in net revenue across all its mobile platforms. Flexion’s distribution services will add revenue and new players from the alternative app stores through monetisation, platform relations and new user acquisition. There will be little upfront cost or work being required of the Fingersoft team. For Fingersoft, the partnership represents an opportunity to improve its brand and product recognition, and reach new users outside existing distribution channels.”

2 Likes
12

New game release deal, looks quite good. Q4 coming on March 22nd.

As a quick recap, the Q3 report was good, the CFO bought shares worth 3.1m SEK in December, and there have been several deal announcements and other positive news updates since Q3. The prerequisites for good development in 2023 are therefore in place despite the circumstances.

2 Likes
13

Q4 is out. The figures look absolutely good again. Compared to RedEye’s forecasts, a beat on the top line for the full year and a slight miss on the bottom line? So, nothing unexpected.

October-December 2022 performance

  • Total revenue increased by 108% to GBP 21.7m (10.5)*

  • Gross profit increased by 147% to GBP 3.7m (1.5)

  • Adjusted EBITDA[‡] increased to GBP 1.6m (0.4)

  • Adjusted profit before tax[#] increased to GBP 1.1m (0.6)

  • EPS amounted to GBP 2.78 pence (1.28 pence)

  • Adjusted EPS amounted to GBP 1.88 pence (1.32 pence)

  • Operating cash flow amounted to GBP 1.2m (0.5)

  • Cash and cash equivalents amounted to GBP 13.8m (14.5)

January-December 2022 performance

  • Total revenue increased by 110% to GBP 68.5m (32.6)*

  • Gross profit increased by 159% to GBP 11.1m (4.3)

  • Adjusted EBITDA[‡] increased to GBP 4.8m (0.4)

  • Adjusted profit before tax[#] increased to GBP 1.8m (0.5)

  • Operating cash flow amounted to GBP 6.1m (1.9)

Important events during the quarter

  • Signing of Age of Apes from tap4fun

  • Launch of Kiss of War from tap4fun

  • Closed a directed issue of shares to the public with proceeds of SEK 25.3m from more than 2,300 subscribers.

Important events after the quarter

  • Signing of Hill Climb Racing and Hill Climb Racing 2 from Fingersoft

  • Signing and launch of Vikingard from NetEase Games

  • Strategic partnership announcement with Digital Turbine

  • The 2022 audit is still ongoing and presented 2022 numbers are therefore unaudited

  • Comparison figures for the year-earlier period in brackets

RedEye’s forecasts:

FlexionEnnusteet
FlexionEnnusteet1504×820 30 KB

1 Like
14

They guided for 20-40% growth in 2023. No guidance on profitability. There didn’t seem to be even a mention of, for example, the development of wage costs. Their rise in 2022 caught RedEye by surprise.

Q4 is apparently the strongest on the advertising (Audiencly) side, which is why the Q4 profit of 1.6m GBD cannot be annualized into a 6.4m GBD profit. But if one were to use that as a rough “current run rate,” the cash-adjusted P/E is around 10, even though costs haven’t even properly started to scale (Q4 EBITDA 6.5%).

The acquisition of Audiencly is also starting to bear fruit in the form of the first cross-selling customer (NetEase).

It came as a surprise to me that 6m GBD (equal to Q4 operating cash flow) was spent on game distribution rights. I wonder how often such lumps can be expected?

15

Microsoft is getting really serious about investing in its app store. In addition to Android phones, they are also targeting iPhones. This will inevitably play into Flexion’s hands.

16

Let’s post this here as well, even though the thread seems quiet. A couple of new big games are coming to the platform; the names of the games will be released in Q2.

# Flexion expands framework deal

Two new blockbusters will be launched in Q2

LONDON, 23rd of March, 2023 – Flexion (Nasdaq: FLEXM), the games marketing company is expanding its collaboration with an important game partner. Two new blockbusters have been added to the framework deal announced in September 2021. The expanded deal that now includes 9 titles will run until at least March 2025 and is estimated to be worth approximately USD 45m in gross revenues over its lifetime. If required, Flexion will have the right to extend the term until the project has reached an agreed minimum level of return. The new games will be officially announced when launched during Q2 2023. Both games are major game brands and one is still in soft launch. Flexion has secured the right to distribute the new games in all its channels including DT Hubs - the newly announced service by Digital Turbine. Flexion will reinvest USD 4million already generated from the deal signed in 2021.

17

Q1

Flexion reports continued strong growth. Quarterly revenue grows by 54% and adjusted EBITDA up by 125%.

January-March 2023 performance

  • Total revenue increased by 54% to GBP 16.3m (10.6)*

  • Gross profit increased by 72% to GBP 2.5m (1.5)

  • Adjusted EBITDA[‡] increased by 125% to GBP 0.7m (0.3)

  • Adjusted loss before tax[#] amounted to GBP -0.1m (0.1)

  • EPS amounted to GBP -0.97 pence (0.51 pence)

  • Adjusted EPS amounted to GBP -0.28 pence (0.19 pence)

  • Operating cash flow amounted to GBP -1.1m (1.9)

  • Cash and cash equivalents amounted to GBP 12.0m (10.4)

Important events during the quarter

  • Signing and launch of Vikingard from NetEase Games

  • Signing of Hill Climb Racing and Hill Climb Racing 2 (soft launched) from Fingersoft

  • Strategic partnership with Digital Turbine

  • Signing of new extended and improved framework deal for 8 big titles

  • Launch of 3[rd] title from ONEMT

I couldn’t find any forecasts on MarketScreener, and I can’t log in to RedEye right now, so I can’t compare with their numbers either. In absolute terms, the figures look quite good again, even though the bottom line went in the wrong direction, but I don’t know if there was something one-off / what the impact of seasonality / growth investments, etc. was.

Edit.

" I am very pleased with our overall growth of 54% compared with last year, considering that Q1 is our weakest quarter of the year, due to the seasonal effects of app store promotions. We also continued our strong organic revenue growth related to Distribution, reporting an increase of 37%. This is in line with our market guidance which is 20-40% for 2023. Gross profit grew by 72% and adjusted EBITDA by 125%."

"Q You mention cyclical effects on your revenue growth, but we did not see any of these effects last year?

A: Q1 is generally the weakest quarter of the year for games. In 2022, we managed to avoid a quarter-on-quarter revenue dip in Q1 thanks to successful launches of three large titles. The cyclicality was therefore not obvious, but we did see a drop in the rest of the portfolio. As with most advertising services, influencer marketing is also generally affected by slower performance in Q1/Q2. The second half of the year is normally the strongest period for marketing services when budgets are spent on bigger campaigns. Combined, these effects were much clearer this year. Revenue dropped by 25%, following our record-breaking Q4 2022, which was boosted by strong game performance and a weak GBP to USD rate.

In terms of the remainder of 2023, we expect the second half of the year to be stronger, thanks to some major game launches, ramping up of new distribution and positive cyclical momentum in our market."

Edit2. Some press release appeared on Nordnet’s site, but I haven’t heard of that before, so let’s wait for RedEye’s comments. Does the company really have 42 analysts following it, or are they “analysts” :thinking::

!Pinpoint consensus ahead of Flexion Mobile’s Q1 report is based on 42 estimates. The summary is in millions of GBP.
Net sales

Pinpoint Consensus: 21.93

Outcome: 16.27

Diff: -25.8%

Adjusted EBITDA

Pinpoint Consensus: 1.69

Outcome: 0.74

Diff: -56.0%

Pinpoint Estimates is an open platform that compiles estimates from investors for listed companies’ quarterly and full-year reports."

If the forecasts really were that high, they must have been quite bullish forecasts, or the analysts failed to take into account the seasonality/last year’s special situation explained by the company.

3 Likes
18

The market is looking for guidance on cost scalability this year, which could explain the share price reaction. I must admit I’m expecting it too, and that’s what the numbers show.

Distribution’s

  • revenue rose 37.5%
  • gross profit rose 34%
  • personnel costs rose only 23%

Furthermore, “Other overheads” increased by over 200% due to foreign exchange losses (190kGBP => 630kGBP). The company aims to mitigate this volatility in the future. Amortization related to customer relationships also grew by 250%/500kGBP.

For a moment, I wondered about the outrageously low 13% gross margin of the Distribution business, but it seems the company records all in-app purchases as revenue and records the payouts on the cost-of-sales line. In practice, that gross profit could be considered the revenue, as I don’t think pass-through billing is “real revenue.”

With this calculation method, a P/S (i.e., P/gross profit) of 5.2 starts to look more typical for a platform company (mcap 63mGBP and r12m gross profit 12mGBP).

2 Likes
19

Small insider purchase

20

USA:ssakin ollaan kiinnostuneita:

LONDON, 22th of June 2023 - Flexion Mobile Plc (Nasdaq: FLEXM), the games marketing company today welcomes Alta Fox Capital from Texas US as a new shareholder in Flexion. The firm’s flagship fund, the Alta Fox Opportunities Fund, was launched in 2018 by Connor Haley. The strategy seeks to invest in overlooked and under-the-radar opportunities and have deep experience from investments in the game industry and Nasdaq First North.

Conner Hailey, tweeted this message after completing the transaction “Alta Fox is excited to have recently bought a large block of stock at Flexion Mobile PLC $FLEXM. We believe $FLEXM is an underappreciated growth story in the market and our opportunistic purchase cleaned up 100% of shares from what we would categorize as a distressed seller”. (https://twitter.com/AltaFoxCapital/status/1671548814686056452?ref_src=twsrc^google|twcamp^serp|twgr^tweet)

“It is great to have such an experienced and long term investor onboard. We look forward to working with the team at Alta Fox Capital, says Jens Lauritzson CEO of Flexion Mobile PLC”.

Redeye takes a positive view regarding the entrance of Alta Fox, a respected US-based investment firm, into Flexion Mobile, where it has bought a significant position in the company.

According to Holdings, Alta Fox becomes the third largest shareholder with 4.6% of total shares in the company. Notably, Alta Fox acquired these shares from a distressed seller, which sheds light on the recent weakness in the stock price. We assume that the distressed seller is an institutional fund with liquidity problems.

1 Like