PopReach Reports First Quarter 2022 Financial Results

/NOT FOR DISTRIBUTION TO US WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA/

Q1 year-over-year revenue growth of 13.2%, driven by mobile platform revenue growth of 25.5%; positive Net Income and Adjusted EBITDA¹ margin of 18.2% for the quarter

TORONTO, May 30, 2022 /CNW/ - PopReach Corporation  ("PopReach" or the "Company") (TSXV: POPR) (OTCQX: POPRF) today announced financial results for the three months ended March 31, 2022.

¹ Please refer to "Non-IFRS Measures" section of this press release

(All figures in US dollars, unless otherwise indicated)

Q1 2022 Financial Highlights

• Total revenue of $4.6 million compared to $4.3 million in Q4 2021, and $4.1 million in Q1 2021, representing year over year growth of $0.5 million or 13.2%, and sequential growth from Q4 2021 of $0.3 million or 6.5%
• Revenue from mobile platforms (Apple, Google, Amazon) was $3.7 million (80.7% of revenue), compared to $3.4 million in Q4 2021 (79.4%), and $3.0 million in Q1 2021 (72.8%), representing year over year growth of $0.7 million or 25.5%, and sequential growth from Q4 2021 of $0.3 million or 8.2%
• Revenue from Facebook Canvas platform games was $0.9 million (19.3% of revenue), compared to $0.9 million (20.6%) in Q4 2021, and $1.1 million in Q1 2021 (27.2%). The decrease year over year was due to an ongoing industry wide decline in Facebook Canvas platform game activity
• Gross profit margin increased to 66.4%, from 61.7% in Q4 2021, and 62.0% in Q1 2021
• Operating expenses of $3.1 million, compared to $3.5 million in Q4 2021 and $2.6 million in Q1 2021; the increase in year over year operating expenses is due to investments in mobile growth franchises including user acquisition expenses
• Adjusted EBITDA¹ of $0.8 million (18.2% of revenue), compared to $0.5 million (12.0%) in Q4 2021, and $0.9 million (20.9%) in Q1 2021
• Net income of $0.3 million ($0.00 per basic and diluted share), compared to a net loss of $0.6 million (($0.00) per basic and diluted share) in Q4 2021, and net income of $2.2 million ($0.03 per basic and diluted share) in Q1 2021
• Cash at March 31, 2022 was $10.6 million, compared to $11.0 million at December 31, 2021, and debt outstanding on the bank credit facility was $4.6 million, compared to $5.0 million; the decrease in cash is due to debt repayments and investments in mobile growth franchises

Q1 2022 and Subsequent Highlights

• Investments in mobile growth franchises, notably Smurfs Magic Match and PAYDAY Crime War, continued during Q1 2022. Smurfs Magic Match and PAYDAY Crime War are expected to launch worldwide in the first and second halves of 2022, respectively
• On April 18, 2022, the Company entered into a credit agreement with Bank of Montreal for $33 million in senior secured credit facilities in order to consolidate debt, including debt assumed on closing of the Transaction, under a single lender; these new facilities are expected to significantly lower the Company's cost of capital, and support its M&A growth strategy via up to an additional $15 million acquisition line
• On April 28, 2022, the Company completed a business combination with 2810735 Ontario Inc. d/b/a Federated Foundry ("Federated"), pursuant to which the Company and Federated combined to form a leading technology and media enterprise through a reverse takeover of the Company by Federated and its shareholders
• On May 12, 2022, the Company closed its credit facilities with Bank of Montreal, and paid off its prior senior secured credit facilities in their entirety

Management Commentary

"We are off to a strong start in 2022 as the investments we're making in our growth franchises helped drive first quarter mobile platform revenue growth of 25%, total revenue growth of 13%, and 6% sequential revenue growth from the fourth quarter," said Jon Walsh, CEO of PopReach. "These growth investments are being balanced with a disciplined focus on managing our costs, resulting in positive cash flow generation and solid Adjusted EBITDA¹ margins of 18%, a significant improvement from our prior three quarters."

Added Christopher Locke, President of PopReach "Consolidating the results of PopReach with Federated Foundry beginning in the second quarter will take us from strength to strength, as we combine businesses with strong organic growth profiles, positive cash flow, and meaningful Adjusted EBITDA¹ margins. Our increased financial scale and cash flow generation better protects us through business cycles, and provides the engine to drive our accretive M&A strategy to build shareholder value at a faster rate."

Selected Quarterly Information

Below is selected quarterly information from the Company's consolidated financial statements for each of the quarterly periods indicated. The Company's functional and presentation currency is US Dollars. Except where indicated, the following financial data is reported in accordance with IFRS.

				Three months ended March 31 2022		Three months ended December 31 2021		Three months ended March 31 2021
In-app purchases			$	4,329,050	$	4,089,195	$	3,938,807
Advertising				283,177		235,316		137,722
Other				2,811		9,392		1,371
Total revenue			$	4,615,038	$	4,333,903	$	4,077,900
Net Income (Loss)				270,990		(577,337)		2,161,299
Comprehensive Income (Loss)				282,684		(582,246)		2,184,484
Earnings (loss) per share (basic and diluted)				0.00		(0.01)		0.03
Non-IFRS^1:
Bookings				4,455,297		4,405,570		4,115,915
EBITDA				707,477		(2,967)		440,276
Adjusted EBITDA				840,885		519,978		851,647

¹ Please refer to "Non-IFRS Measures" section of this press release

								March 31 2022			December 31 2021
Cash and cash equivalents					$			10,632,533		$	11,028,381
Current assets								12,869,361			13,183,030
Total assets								26,567,397			26,932,959
Current liabilities								6,449,212			6,737,954
Non-current liabilities								5,327,709			5,738,364

				Three months ended March 31 2022		Three months ended December 31 2021		Three months ended March 31 2021
Apple			$	2,467,005	$	2,353,027	$	1,779,882
Facebook				888,261		886,155		1,110,453
Google				865,933		748,686		970,001
Amazon				53,058		49,219		65,655
Other mobile				54,793		52,108		12,816
Total in-app purchases				4,329,050		4,089,195		3,938,807

Financial Statements and MD&A

PopReach's Financial Statements for the three months ended March 31, 2022, and Management's Discussion and Analysis (the "MD&A") for the three months ended March 31, 2022, are posted on the corporate website at www.popreach.com and available on the company's profile on SEDAR at www.sedar.com.

Non-IFRS Measures

The Company prepares its financial statements in accordance with IFRS. However, the Company considers certain non-IFRS financial measures as useful additional information to assess its financial performance. These measures, which it believes are widely used by investors, securities analysts and other interested parties to evaluate its performance, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to financial measures determined in accordance with IFRS. Non-IFRS measures include "Bookings", "EBITDA" and "Adjusted EBITDA".

EBITDA and Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization ("EBITDA") and consolidated adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") are non-IFRS measures of financial performance. The presentation of these non-IFRS financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with IFRS, and may be different from non-IFRS financial measures used by other companies. Company management defines EBITDA as follows:  IFRS Net income (loss) adding back accretion and interest expenses (including amortization of deferred financing fees), income taxes, amortization, gain/loss on disposal of assets, and fair value gain/loss on financial liabilities.  Adjusted EBITDA is calculated as EBITDA and excludes discontinued operations and the effects of significant items of income and expenditure which may have an impact on the quality of earnings, such as restructuring costs and impairments where the impairment is the result of an isolated, non-recurring event. It also excludes the effects of equity-settled share-based payments, changes in deferred revenues, and other extraordinary one-time expenses.  See reconciliation of EBITDA and Adjusted EBITDA under "Adjusted EBITDA" below.

Management believes EBITDA and Adjusted EBITDA are useful financial metrics to assess its operating performance on a cash basis before the impact of non-cash and extraordinary one-time items.

The following table presents the Company's calculation of EBITDA and Adjusted EBITDA for each period: 

		Three months ended March 31 2022		Three months ended December 31 2021		Three months ended March 31 2021
Net income (loss)	$	270,990	$	(577,337)	$	2,161,299
Add:
Interest and accretion expenses		188,022		285,709		138,140
Current taxes		27,938		35,715		31,392
Deferred tax recovery		1,300		(8,703)		(1,198)
Amortization		559,871		540,856		400,576
Fair value (gain) on financial liabilities		(340,644)		(279,207)		(2,289,933)
EBITDA		707,477		(2,967)		440,276
Add:
Share-based compensation expense (gain)		51,151		(7,135)		73,939
Change in deferred revenue		(159,741)		71,667		38,015
Change in deferred cost of sales		(44,676)		(16,736)		(35,973)
Extraordinary one-time expenses		286,674		475,149		335,390
Adjusted EBITDA		840,885		519,978		851,647
Adjusted EBITDA/Revenue %		18%		12%		21%

Adjusted EBITDA was $840,885 for the three months ended March 31, 2022 compared to $851,647 for the three months ended March 31, 2021, which represents a decrease of $10,762 or 1%.

Non-operating items

Fair value gain on financial liabilities was $340,644 for the three months ended March 31, 2022 compared to a fair value gain of $2,289,933 for the three months ended March 31, 2021.

For the three months ended March 31, 2022 and 2021, the full amount of the gain was related to the change in fair value of the warrant liability. As the share price of the Company increases, the fair value of the warrant liability increases. Conversely, if the share price of the Company decreases, the fair value of the warrant liability decreases.

Bookings

Bookings is a non-IFRS financial measure that is equal to revenue recognized plus or minus the change in deferred revenue during the period. The following table is the reconciliation from revenue to bookings for each period:

				Three months ended March 31 2022		Three months ended December 31 2021		Three months ended March 31 2021
Revenue			$	4,615,038	$	4,333,903	$	4,077,900
Add: Increase (decrease) in deferred revenue				(159,741)		71,667		38,015
Total bookings				4,455,297		4,405,570		4,115,915

About PopReach Corporation

PopReach, a Tier 1 Issuer on the TSX Venture Exchange, with shares also trading on OTCQX® Best Market, is a multi-platform technology company focused on acquiring, optimizing and growing companies and assets that provide services, technology or products within the digital media ecosystem. The Company's portfolio includes: PopReach Games, a free-to-play mobile game publisher with over 25 games enjoyed by millions of players; notifyAI, a push notification subscription and monetization platform; Q1Media, a digital media advertising services provider; and Contobox, an award-winning personalization, eCommerce and creative advertising technology platform.

Additional information about the Company is available at www.sedar.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. 

Cautionary Statement Regarding Forward-Looking Information

This news release contains "forward-looking information" within the meaning of Canadian securities legislation. Forward- looking information generally refers to information about an issuer's business, capital, or operations that is prospective in nature, and includes future-oriented financial information about the issuer's prospective financial performance or financial position.

PopReach made certain material assumptions, including but not limited to: prevailing market conditions; general business, economic, competitive, political and social uncertainties; delay or failure to receive board, shareholder or regulatory approvals; and the ability of the resulting issuer to execute and achieve its business objectives, to develop the forward-looking information in this news release. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Actual results may vary from the forward-looking information in this news release due to certain material risk factors. These risk factors include, but are not limited to: adverse market conditions; the unavailability of exemptions from prospectus requirements for the issuance of PopReach common shares; the risks associated with the marketing and sale of PopReach common shares; refusal of the proposed directors or officers to act for any reason, including conflicts of interest; reliance on key and qualified personnel; and regulatory and other risks associated with the technology, media and digital gaming industries in general. The foregoing list of material risk factors and assumptions is not exhaustive.

PopReach assumes no obligation to update or revise the forward-looking information in this news release, unless it is required to do so under Canadian securities legislation.

SOURCE PopReach Corporation

PopReach Corporation, Dennis Fong, Investor Relations, [phone], [email protected]; Christopher Locke, [email protected]