Tapinator Announces Q1 2020 Financial Results

Tapinator, Inc., a developer and publisher of category leading apps for mobile platforms, today announced unaudited financial results for the three months ended March 31, 2020, and the filing of its quarterly report for the periods ended March 31, 2020 and 2019.  The quarterly report and financial statements may be found at http://www.otcmarkets.com/stock/TAPM/disclosure. The results provided below replace, in its entirety, any guidance or projections previously issued by the Company.

For the quarter ended March 31, 2020, Tapinator achieved revenue of approximately $914,000, bookings^* of approximately $977,000, net loss of approximately $267,000, and adjusted EBITDA^* of approximately $90,000. The Company’s revenue and bookings^* represent year-over-year improvements of 12% and 1%, 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 loss, resulting in positive adjusted EBITDA (a non-GAAP measure) for the relevant periods.

Financial Highlights Advertisement
	Quarter Ended
	March 31			Change
	2020	2019 Advertisement		(%)
GAAP Results:
Revenue	$913,855	$813,055 Advertisement		12%
Net Loss	$(267,203)	$(659,703)		NM(1) Advertisement
Diluted Net Loss Per Share	$(0.48)	$(1.20)		NM(1)
Non-GAAP Results: Advertisement
Adjusted EBITDA	$90,220	$(67,067)		NM(1)
Bookings: Advertisement
Category Leading Apps	$714,658	$644,278		11%
Rapid-Launch Games Advertisement	$262,650	$322,397		-19%
Total Bookings	$977,308 Advertisement	$966,675		1%
1 Percentage change not meaningful

Ilya Nikolayev, CEO of Tapinator commented, “During the first quarter of 2020, we continued to grow our Category Leading Apps business and, in particular, we are proud of the additional strides that we have made with our Live Operations (or “Live Ops”) capabilities. These LiveOps initiatives have resulted in strong improvements to the monetization of our daily active users and increases to our average revenue per daily active user. We are continuing to invest in LiveOps in 2020 with daily goals and customized stats that will soon launch in Video Poker Classic as well as new upcoming limited time events including Cinco de Mayo, Mothers’ Day and Memorial Day Offers and Jackpots.

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With regards to new launches, we are very excited about the recent global launch of our new game, SPEED – Heads Up Solitaire. SPEED is a synchronous, heads-up card game where users compete with real players around the globe, in real time. The gameplay is based on a game that is proven in the real world and we believe that the metagame, social functionality, and virtual currency system that we have built will translate into strong retention and monetization metrics. We are also very excited that SPEED is currently featured by Apple, within a number of countries, in its “New Games We Love” category.

Given the continued uncertainty surrounding the current coronavirus situation, we believe that people are increasingly seeking entertainment that they can experience from the safety of their home. Our mobile game offerings fill this need. In fact, our mission is to offer players social casino entertainment anytime, anywhere. We believe that “social” play from the user’s mobile device will become increasingly compelling given the current climate. Our upcoming game, SPEED, is a great example of a product that is traditionally played between friends and family in the real world yet can now be played anytime, anywhere as a truly heads-up, social game.”

Andrew Merkatz, President & CFO of Tapinator, also commented on the Company’s results, “We are pleased with the following accomplishments during the first quarter of 2020:

• We achieved quarterly revenue of approximately $914,000 representing year-over-year growth of 12%
• We reported quarterly Bookings^* of approximately $715,000 within our core Category Leading Apps business, representing year-over-year growth of 11%
• We implemented significant cost containment measures during the most recent quarter.  These measures contributed to quarterly adjusted EBITDA* of approximately $90,000, which compares to an adjusted EBITDA* loss of approximately ($67,000) recorded in Q1 2019.  These measures also contributed to a significant reduction in our net loss which narrowed to approximately ($267,000) in the first quarter of 2020 which compares to a net loss of approximately ($660,000) recorded in Q1 2019.
• We made continued investment in our LiveOps capability yielding further monetization improvements in certain core games, an investment we believe crucial to the long-term success of our Category Leading Apps strategy.

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.  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.”

Current Outlook
It is too early to quantify and distinguish the impact of the coronavirus pandemic for our business.  In our games, we have seen an increase in the number of downloads as well as user engagement and also some uptick in revenues in March and April. Despite this uptick, we believe the pandemic creates significant uncertainty regarding the longer term impact on consumer and advertising spending within mobile apps. Despite this uncertainty, we continue to have strong conviction regarding our Category Leading Apps business, and specifically our focus on social casino games. The strategic changes we implemented in 2017-2018, shifting from Rapid-Launch Games to Category Leading Apps, and the initiatives we began in 2019 to focus on LiveOps both continue to pay off. We have also seen positive early results from cost containment measures that we undertook during the first quarter of 2020 that we believe will continue to yield improved operating results moving forward.

While we are not providing financial guidance at this time, we continue to believe we are well positioned to again deliver strong company-wide revenue and adjusted bookings growth in 2020. This growth is expected to be derived from our seasoned franchises such as Video Poker Classic and Solitaire Derby, combined with recent game launches such as SPEED. We also anticipate significantly improved adjusted EBITDA and significantly narrowed net loss in 2020. Based on the Company’s strong financial performance over the past twelve months, the repeatable nature of the Company’s Category-Leading App revenues, its strong product portfolio, 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 grow and unlock this value in 2020 and beyond.

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*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 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 are 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. Below, we have provided reconciliations between our historical and projected 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 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
	Quarter Ended
	March 31
	2020 Advertisement	2019
Reconciliation of Net Loss to Adjusted EBITDA:
Net loss	$(267,203)	$(659,703) Advertisement
Interest expense, net	13,423	1,773
Tax expenses	– Advertisement	–
Amortization of capitalized software development	116,080	184,699
Depreciation and amortization of other assets Advertisement	925	1,790
Stock-based expense	130,602	404,375 Advertisement
One-time financing costs	96,393	–
Adjusted EBITDA	$90,220 Advertisement	$(67,067)
Reconciliation of Revenue to Bookings:
Revenue	$913,855	$813,055 Advertisement
Change in deferred revenue	63,453	153,620
Bookings	$977,308 Advertisement	$966,675

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.