Tapinator Announces Q3 2022 Financial Results

– Revenue Decreases 14% Year-Over- Year to $1.3 Million 

– Bookings* Decrease 31% Year-Over-Year to $1.2 Million

– Net Income Decreases 73% Year-Over-Year to $144k

– Adjusted EBITDA* Decreases 56% Year-Over-Year to $204k

– Basic and Fully Diluted EPS of $0.05

NEW YORK, Nov. 9, 2022 /PRNewswire/ — Tapinator, Inc. (OTC: TAPM) (“Tapinator,” the “Company,” “we,” “our” or “us”), a developer and publisher of category leading games for mobile platforms and a collector and publisher of fine art NFTs, today announced unaudited financial results for the three and nine months ended September 30, 2022, and the filing of its quarterly report for the periods ended September 30, 2022 and 2021.

The quarterly report and financial statements have been published on OTC Markets and may be found at http://www.otcmarkets.com/stock/TAPM/disclosure.  The results provided below replace, in their entirety, any guidance or projections previously issued by the Company.

For the three months ended September 30, 2022, Tapinator achieved revenue of approximately $1.3 million, bookings* of approximately $1.2 million, net income of approximately $144,000 and adjusted EBITDA^* of approximately $204,000.  The Company’s revenue, bookings^*, net income and adjusted EBITDA^* represent year-over-year declines of 14%, 31%, 73% and 56%, respectively.  For the quarter, the Company also announced basic and fully diluted net income per share of $0.05 per share.

For the nine months ended September 30, 2022, Tapinator achieved revenue of approximately $4.4 million, bookings* of approximately $4.2 million, net income of approximately $877,000 and adjusted EBITDA^* of approximately $990,000.  The Company’s annual revenue represent year-over-year improvement of 5%, while the Company’s bookings^*, net income and adjusted EBITDA^* represent year-over-year declines of 7%, 11% and 4%, respectively.   For the nine-month period ended September 30, 2022, the Company also announced basic and fully diluted net earnings per share of $0.31 and $0.30 per share, 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 adjusted EBITDA (a non-GAAP measure) for the relevant periods.

Financial Highlights

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2022	2021	% Ch.		2022	2021	% Ch.
GAAP Results:
Revenue	$1,306,117	$1,524,983	-14 %		$4,383,148	$4,161,325	5 %
Operating Income	$71,689	$343,599	-79 %		$617,848	$707,699	-13 %
Net Income	$143,864	$528,342	-73 %		$877,088	$981,788	-11 %
Net Income margin %	11 %	35 %			20 %	24 %
Net Income Per Share – Basic	$0.05	$0.19	-74 %		$0.31	$0.35	-11 %
Net Income Per Share – Diluted	$0.05	$0.18	-72 %		$0.30	$0.34	-12 %
Weighted avg. common shares outstanding – basic	2,824,814	2,817,820			2,824,814	2,788,345
Weighted avg. common shares outstanding – diluted	2,831,771	2,958,085			2,933,894	2,882,275
Non-GAAP Results:
Bookings:
Category Leading Games	$1,108,554	$1,147,843	-3 %		$3,642,510	$3,518,177	4 %
Rapid-Launch Games	93,237	158,975	-41 %		333,382	544,101	-39 %
NFT Publishing	12,328	450,612	-97 %		230,054	450,612	-49 %
Total Bookings	$1,214,119	$1,757,430	-31 %		$4,205,946	$4,512,891	-7 %
Adjusted EBITDA	$203,969	$461,410	-56 %		$990,248	$1,035,699	-4 %
Adjusted EBITDA Margin %	16 %	30 %			23 %	25 %

Ilya Nikolayev, CEO of Tapinator commented, “We continue to see a slowdown in our mobile gaming business due to macroeconomic headwinds and an industry wide contraction, stemming from the end of the pandemic era. Although this slowdown is relatively small (a 3% decrease in Category Leading Games during the quarter) and the situation is not unique to our Company, it is important to reverse the trend and return to a period of growth. We have put two strategies in place to help achieve this: (1) systematic investment into game marketing; and (2) focused investment into several social casino games that are complementary to Video Poker Classic. We are starting to see an uplift in metrics based on these initiatives and, later this month, we will be going live with an important update to Keno Vegas. We see Keno Vegas as a particularly scalable property and have put a product roadmap in place that, we believe, will allow us to significantly grow the game. 

With respect to our NFT activities, the industry is experiencing a bear market and, overall, we have slowed down our NFT publishing and collection initiatives. However, we remain long-term believers in the space and will continue to opportunistically publish collections with certain artists as well as buy/sell NFTs. We have accumulated significant expertise in NFTs since we first encountered the technology in 2018 and we will continue utilizing this knowledge as we see opportunities, both present and future.” 

Andrew Merkatz, President of Tapinator, also commented on the Company’s results, “Overall market conditions within both the mobile gaming and crypto markets continued to decline in Q3 2022.  According to research firm Sensor Tower, mobile spending declined at a rate of 4.8% year-over-year during the third quarter of 2022.  The 3% decrease in our Category Leading Games Bookings during the quarter would indicate that our top-line performance in our core business was in-line to slightly above the market overall.  As discussed previously we are no longer investing in our Rapid Launch Games thus we would expect continued degradation of that revenue stream over time. Furthermore, we have reduced our focus on NFT publishing given the continued contraction and volatility of those markets.  Accordingly, Q3 reflects significant decline in NFT publishing bookings, and we expect such decline to repeat in both Q4 of 2022 and Q1 of 2023.

Given these factors and the continued challenging macro conditions, we would expect to see at least two more quarters of year-over-year company-wide contraction.  We continue to believe that our historic focus on maintaining a lean cost structure has positioned us well to withstand such contraction and that continued investments in our franchise games, combined with our more recent investments in game marketing will begin to yield meaningful results for the Company as we look out to 2023 and beyond.  We are not providing financial guidance at this time.”

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 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 Bookings and adjusted EBITDA to the most directly comparable GAAP financial measures below.  Some limitations of Bookings and adjusted EBITDA are as follows:

• Bookings do 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, share settlement expense, 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, interest income or expense, and gain on extinguishment of debt;
• 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), Basic and Diluted Net Income (Loss) Per Share, Cash Flow from Operations, Operating Income (Loss), and our other financial results presented in accordance with GAAP.

NFT500 Supplemental Information – Summary Collection Metrics

	Totals as of 12/31/2021	Q1 2022	Q2 2022	Q3 2022	Cumulative Totals as of 9/30/2022
# of NFTs Collected	360	53	67	57	537
# of NFTs Sold	-9	-5	-18	-12	-44
# of NFTs Held, Cumulatively	351	399	448	493	493
Cost of NFTs Collected	$1,198,761	$   431,117	$   767,831	$   217,795	$2,615,504
Proceeds from Sale of Collected NFTs	(179,028)	(303,565)	(411,750)	(167,180)	(1,061,523)
Proceeds from Sale of Digital Asset      Dividends & Airdrops	–	(42,600)	(143,216)	–	(185,816)
Cost of NFTs Collected, Net of Sales Proceeds	$1,019,733	$     84,952	$   212,865	$     50,615	$1,368,165

Reconciliation of GAAP to Non-GAAP Results

	Three Months Ended			Nine Months Ended
	September 30			September 30
	2022	2021		2022	2021
Reconciliation of Revenue to Bookings:
Revenue	$1,306,117	$1,524,983		$4,383,148	$4,161,325
Change in deferred revenue	(91,998)	232,447		(177,202)	351,566
Bookings	$1,214,119	$1,757,430		$4,205,946	$4,512,891
Reconciliation of Net Income to Adjusted EBITDA:
Net income	$143,864	$528,342		$877,088	$981,788
Interest expense, net	–	303		(322)	2,554
Income tax benefit	–	(57,080)		–	(131,560)
Impairment of digital assets	–	–		452,846	–
Standstill agreement, non-recurring	–	–		–	93,555
Gain on digital asset dividends & airdrops	–	–		(145,682)	–
Amortization of capitalized software development	92,299	96,302		247,474	264,156
Gain on extinguishment of debt	–	–		–	(109,231)
Depreciation and amortization of other assets	3,420	1,224		10,680	2,989
Gain on sale of digital assets	(72,175)	(127,966)		(560,991)	(129,407)
Gain on sale of investments	–	–		(5,091)	–
Stock-based expense	36,561	20,285		114,246	60,855
Adjusted EBITDA	$203,969	$461,410		$990,248	$1,035,699

About Tapinator

Tapinator Inc. (OTC: TAPM) develops and publishes category leading games for mobile platforms. 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, Crypto Trillionaire and Keno Vegas.  Through our NFT500 platform, we have amassed a significant collection of fine art NFT’s.  We generate revenues from our mobile games via consumer transactions, including in-app purchases and subscriptions, and through the sale of branded advertisements. We also generate revenue from publishing and selling NFTs in partnership with select artists. Founded in 2013, we are headquartered in New York, with product teams located in North America and Europe.

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,” “seek,” “plan,” “feel,” “opinion,” “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 that Keno Vegas is a particularly scalable property and that the product roadmap we have implemented will allow us to significantly grow the game, our continued belief in the long-term growth possibilities of the NFT industry, our expectation that we will continue to see a degradation of our Rapid Launch Games revenue stream over time, our expectation that we will continue to see a significant decline in our NFT publishing booking in both Q4 of 2022 and Q1 of 2023, our expectation that we will see at least two more quarters of year-over-year company-wide contraction, our belief that our historic focus on maintaining a lean cost structure has positioned us well to withstand such contraction and our expectation that our continued investments in our franchise games combined with our more recent investments in game marketing will begin to yield meaningful results for us as we look out to 2023 and beyond.  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 as filed with the OTC Markets on October 20, 2021 and as updated from time to time.

CONTACT:

Tapinator Investor Relations

investor.relations@tapinator.com

914.930.6232

 

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SOURCE Tapinator, Inc.