TF Bank AB (publ)

Hello and welcome to today's webcast with FlexiMobile where CEO Jens Lauritsen will present the first quarter of 2024. And with that said I hand over the word to you Jens. Thank you so much and welcome to our earnings call for Q1. The last time I reported to you I was in San Francisco at the Game Developer Conference. I will cover a little bit of of the trends and my impressions from the conference later on in the presentation. But I will go through some of the financials and also a little bit of an outlook for the rest of the year. So if we Dive into the highlights of Q1. We like to break records. In Q4, it was our best ever quarter. Q1 isn't bad. It was our best first quarter ever. We had revenues were up about 13%. We reached $23 million in revenue. It's really nice to see growth in all business areas, particularly proud of the the growth in gross profit, almost 60%, 58% up. And there it's worth mentioning that Audiencely is representing or we're up 39% in revenue year on year and representing about 25% of our gross profit this quarter. So that's really nice. It's also worth highlighting that our gross margins are up considerably. If we go back a year ago, we were about 13% margin. Now we're at 22, which is quite remarkable, really. And of course, it helps when your adjusted EBITDA keeps growing. This quarter was up 121%. So very pleased with that. In terms of our cash position, I did mention that last quarter, it continues to get stronger and stronger. We're adding free cash flow on a quarterly basis. And that in turn, of course, helps us continue to grow. not only our revenues, but also, as you can see, our margins are going up, which is great, because we can, without cash, we can strike better deals, get better terms, we can invest in strategic projects and so on. And it's also here worth mentioning that we still have no debt, which puts us in a very strong position. In terms of GDC, I just want to mention a few words on that. It was a Slightly different conference this year. We were extremely focused, had very, very good meetings. And it was a... We were in sort of deal-making mode rather than running around and having introduction meetings. And I think that's kind of a sign of the times here. The market is in a place which is really favorable for us. And as you can see, we've done three major deals with really, really large U.S. developers in the last four months or so. developers we've been kind of chasing for many years and that the deals happening all in one quarter more or less is quite interesting. And it just shows us that the market is really ready for further growth and activity in our space. So that's great. Audiently, strong quarter. I did mention last time the 7vsWild project, which has been renewed for 2024. I believe the project generated about 6 million or so in 2023. We're in a good position to actually grow that project this year because we can now start selling advertising a little bit earlier. Audiently have been very successful as you can see in terms of their revenues going up 39% but they keep adding new big gaming clients and overall I'm very happy to see how the teams are working much better together now. The synergies are really starting to be more and more apparent. We're joining pitches together and have several large clients that we're talking to together, which is great. In terms of our media profile, I often forget to talk about marketing and our B2B marketing and how we strengthen our profile in media. We're, of course, we're fortunate to have a strong deal flow, a regular deal flow, as opposed to many others, which means, of course, that we have a lot of news coming out regularly. But we were focused on over the last couple of years in terms of raising our profile. And I think when we look back at the last four deals we've done with significant players in the market, global game companies, and the fact that they are now starting to post news about the deals, the partnership with Flexion, and they put that on their social media channels and push it out to their hundreds of thousands of users is really, really amazing. It's probably the best marketing we can ever get. So very good. And not only in terms of awareness, in terms of getting more deals and so on, it's also important for us as a growth company We're recruiting people. We want to retain key staff and so on. So a strong media profile helps and that's really starting to happen now. I don't know if you follow our channel on LinkedIn, but you should and you'll see some of that. In terms of the rest of the year then, we've got Q1 is behind us now. So what's in store for the rest of the year? We We have strong momentum, as I've talked about, and that's in both business areas, which is great. The pipeline is strong, so I'm quite confident about that. I just want to take a few minutes on the sort of general market, the market dynamics and what's driving the trends in the market right now that's that favors us and other players in this space. So I think it's important to remember that the large game companies are all dependent on user acquisition. So that's paid user acquisition. Now, a couple of years ago, changes were made by the platforms to make it more difficult to target users with the paid advertising. That in turn has led to kind of the mod user acquisition that was tested and proven before was kind of broken. So the big game developers cannot do their user acquisition with positive return on their ad spend anymore. And it's getting more and more challenging every day. At the same time, we have game development becoming more and more costly and game developers need to support more and more platforms so their costs are going up at the same time it's more difficult to acquire users which in turn means that their margins are going down so we're perfectly placed to help the game developers with both the distribution but also to some extent helping them with a margin And one really interesting trend at the moment that was very, very visible during the game developer conference is the web store trend. And I wrote a little bit about that in the report, and I just want to explain a little bit more what that actually means. So a web store is basically a... a store on the web where game developers can sell game currency directly to existing users. What they do is they connect their game servers to a third-party wallet, which pays out much better than Google and Apple. So here's a reminder that Google and Apple are paying out 70%. and these wallets pay out north of 90%, which of course leaves more margin to the game developer. So this is a very strong trend at the moment. We see this as a kind of first phase in D2C, but it's not really D2C yet, because the game developers still rely on Google and Apple to serve those customers with the games and the download platforms. So I think it's inevitable that at some point in time, the developers will need to be serving their users end to end with the game and the payments. And that's really where we're sort of positioning ourselves now. Of course, Google and Apple will not just sit back and let game developers move their business away from their platform. So there will be a little bit of challenges coming in that space as well, of course. Both in the first phase, our influencer marketing is well positioned to help game developers drive traffic to the web stores. If you imagine you have an influencer on YouTube that communicates a value proposition to a gamer and explains why they should go to the web store, jump out of the game, go to the web store and top up their game. It's not... 100% intuitive in terms of user experience. So you need something to a better way of explaining what the customer should be doing and influences are a great way of doing that. In the second phase, when we get to a point where developers realize that they need to take care of the whole service themselves independently of Google and Apple, so meaning that they can't really rely on Google and Apple to serve the installs and so on, Flexion's distribution service will come in and help them take care of both those issues. So we're perfectly positioned to help with distribution, and later on with D2C, the direct distribution as we call it, which will then help developers increase their margin. Other interesting things is that Microsoft and Epic have confirmed that they're launching their own app stores later this year. If you've followed our reporting, we've been talking about Microsoft and Epic for a few years now, and it's finally happening. Microsoft have acquired Activision recently, so they have a very strong footprint in gaming and mobile with King that's coming as well as part of that acquisition. So they're well positioned and they have actually announced that they're moving into the web store space to start with before going full app store mode. Epic, of course, is known for Fortnite. They've been fighting Apple and Google for a long time. And they finally now that iOS, Apple have agreed to open up in Europe, thanks to the regulatory pressure in Europe. they've announced that they will launch their own App Store platforms later this year. So that's super exciting. And this, of course, drives a lot of activity and awareness in the market. And what are we doing then? Well, of course, we have to invest in these opportunities. So direct distribution is a strategic project for us where we're We're integrating with third-party wallets. We're lining up strategic distribution partners. We talked a little bit about Digital Turbine in the past. They're one of our partners on the distribution side. There are companies like Applovin, Unity, and so on that also are very active in this direct distribution space. And that basically means you can bypass Google and Apple's stores for installing your game. And if you have... a third-party wallet integrated inside the game, then you don't have to go to a web store. And that's really what we see as the future. So we've been working for the last couple of years on our new SDK, And that's going to be sort of the future product and future-proofing our business. The new SDK will include support for D2C through third-party payment providers, as well as, of course, all the app stores that we already support. So it will be a unique product. One integration will be able to serve all the alternative channels, including Microsoft and Epic stores when they come online later this year, but also the D2C market. So we're uniquely positioned there and it's super exciting to be right in the middle of this market while it's being disruptive. Just a quick reminder, we introduced our three-year target in the last quarter. For three years, we're expecting to grow our revenues by 100%. We're on target. Of course, it helps to keep growing revenue on a quarterly basis, and we're doing that. We have a positive outlook for Q2. Q2 is generally a slightly slower quarter because you're getting into the sort of summer months, but we're positive about what's happening. We've signed new games that will start having impact uh already q2 but probably more so in the second half of the year so we're guiding in a range of 20 to 23 million dollars for for q2 revenues some final comments then before we close we have been given until 10th of june to file our 22 accounts And we are together with Grand Thornton working hard to finish this work. We're at the final stretch now, so it shouldn't be too long. And hopefully at our annual general meeting on the 26th of June, we'll be able to give more update on that. So to summarize them, we're in a really strong position. We have great momentum in terms of deal signing, really exciting stuff happening on the product and service side, new entrance into the market like Epic and Microsoft really make it a super exciting rest of the year. And I'm excited to come back in Q2, 21st of August and report back to you guys. Thanks for today and for watching this presentation.