Hi, and welcome to Rede ye. With me today I have Jens Lauritzson, founder and CEO of Flexion Mobile. Welcome, Jens.
Thank you. Hi.
To kick off, I mean, can you give us a brief overview of Flexion Mobile's business model and your value proposition?
Of course. We work with some of the biggest game publishers in the market. You're probably familiar with Candy Crush and Monopoly GO and so on. We have, over the years, signed up a portfolio that has tremendous value, IP value, in the billions of dollars. What we do with these game companies is we help them make more money from their games in alternative markets. These are markets outside of Google's Play Store and Apple's App Store. Since we IPO'ed, we built a business that's turning over about $100 million a year. That's a 50-time increase since IPO. From that $100 million, we take a revenue share. That's how we fund our business.
What type of channels are we talking about? Can you give some examples?
These are very well-known app stores. Samsung has their own app store. They are still the biggest device manufacturer in the world and have big ambitions in this space. Amazon, you are very familiar with. Huawei, Xiaomi, and a few others, like some of the carrier stores, ONE Store for instance.
What are the main growth drivers for Flexion in the coming years, would you say?
Yeah. To continue to sign bigger and bigger games. Basically, we want to corner the market for alternative distribution. It is very important that we continue to sign big titles. At the same time, and that's equally important, is that we sign new distribution channels so that we can continue to grow the revenue for those games and grow our distribution power. There are the ones we're already working with, but there are new channels coming, like Epic Games Store, you've probably heard of. Microsoft also have big ambitions for Xbox on mobile now that they've finalized their acquisition of Activision a few years ago. Those are the two probably most important growth drivers. The third one is, of course, that the mobile games market overall continue to grow. That is going to be driven very much by margin increase for developers, also improvements in user acquisition.
We believe that the D2C market is going to have a positive impact on the market growth over the next year. We're investing heavily in the D2C space.
Yeah. We will talk about that shortly. You mentioned some titles, Candy Crush. Can you give some more examples here that you have in your portfolio?
Of titles we have, yeah. We have, over the years, we've signed up a portfolio of about 30-plus titles. We're really focusing on a top segment in the market. Those titles, sort of our minimum criteria is that they make more than $1 million per month in Google Play. That's roughly a target market of 250 to 300 titles or so. There's a very well-targeted market. In our portfolio, we have, as I said, Candy Crush. Monopoly GO is a big one. World of Tanks and a few other big titles.
Good. You recently released your Q report. How would you like to summarize the quarter?
For our core distribution business, in dollar terms, we were flat compared to the year before. In pounds, we're slightly down. I think it was a good quarter. We didn't have any massive new titles going into the quarter, so I'm quite happy with how well we performed. On the influencer marketing side, we also performed well. There was one project that didn't perform as well as we expected, but still a pretty decent performance. For the year, it was our best year ever. I mean, of course, I'm happy with it. Where everyone else in the industry is suffering, we're still growing. We grew top line. We grew gross profits. Most importantly, our cash flow and cash balance is going up by $2 million over the year. I'm happy with that. Good.
As you mentioned here about some investments into your D2C offering, can you give some more details on this?
Yeah. I think it's important to know where the market is going. Game developers are being squeezed in many different ways. Their margins are coming down. It's more and more difficult for them to do their user acquisition with a positive return on ad spend. What's happening is, and this is kind of one of the latest trends, they're launching their own web stores, basically to bypass Google and Apple's 30% fee. That's a strong trend. The problem with that is that it's only targeting existing paying customers. It doesn't really help with new user acquisition. What we're looking at is to invest in D2C direct distribution using third-party payments that have higher payout than Google and Apple. You're getting in the region of 90% to 95% instead of 70% payout. Also helping these developers with new user acquisition.
Basically turning the web stores into a store that can monetize existing users and attract new users and monetize those.
Good. If we broaden our view, I mean, how does the competitive landscape look like in your space?
We are the clear leader after many years of focused investment. It is very, very difficult to compete. It would take years to develop technology services. I think most importantly, our portfolio of games is unprecedented in the market. That is hard. We do have some competition. That is probably most common that developers, for various reasons, decide to do it themselves. They try and often fail. The failure is due to lack of focus and very high opportunity costs. Going after a smaller, fragmented market comes at a high cost for these developers who need to be 100% focused on developing strong games. We are often called in and asked to help them out and take over games that have been launched, for instance, on Amazon or Samsung. We make a success of it most of the time.
I would say that's probably the most common scenario.
You were recently at D2C in San Francisco, one of the largest game conferences. What are your main takeaways from the event?
The most visible thing was Xbox and Microsoft's big presence at this year's Game Developer Conference. They have acquired Activision. They have Xbox. They have made some announcements around what their focus is. I think the main thing there is that they want to cater for all players on all platforms. They do not have anything on mobile. Now they have a strong portfolio through King, Activision, but they have no distribution. I think it would be quite exciting to see what they are going to do in this space. That was, for me, one of the biggest takeouts. The other one is web stores, we talked a little bit about, new payment providers, but also AI-driven game development. It was quite at the top of the agenda for this conference. It was a very focused, less sort of visionary, very business-focused conference this year.
I mean, how is the sentiment among developers right now?
I think most are finding it tough. They're getting squeezed. There's a lot of redundancies in the market. I think it was quite a positive show, I think. People are looking to the future. I think we're coming out of a tough period. I think most developers are excited about the future.
I mean, you work with, as you mentioned, the major game developers in the world. How do you attract and remain these partnerships?
I mean, continuing to invest in our leading services, that's an obvious one. We're providing these to, I mean, we just announced EA as a new partner. King, I mentioned. Scopely is one important one. To keep delivering market-leading services is obviously a number one thing for us to continue with. Delivering increased revenue. I think in tough markets, the EBITDA contribution from our service is important for even the biggest of developers because they're all looking for profits. What we offer these game developers is not only revenue, but since they don't have to invest so much in user acquisition, it comes with a fairly high profit margin for them.
Are there any specific markets or regions where you see the most growth potential going forward?
In my opinion, with increased regulatory pressure, I would say that the U.S., North America, and the European markets, because that's where you can really take market share from Google and Apple. I think the more challenging growth regions like South East Asia, Latin America, they're more difficult to penetrate. You have seen some pretty successful web store players like Coda Payments, for instance, in South East Asia. They have really helped game developers monetize their user base with alternative payments. We have actually integrated Coda Payments now. They are one of our partners for our D2C offering, which is coming this year.
You continue to accumulate cash, and you have no debt on your balance sheet. You mentioned this in your Q report also about the dividend and so on. Can you give some more flavor on your capital allocation strategy?
Yes. I mean, we have a strong cash flow, and we produce free cash. It is important to know that we continue to invest. We do it from our own cash. That is important, right? We have added, if you look at year- over- year, we have added about $2 million since last year in cash. We have taken some considerable investment and also some less interesting technical accounting adjustments on our books. Unfortunately, at the moment, the way that the U.K. law is, we cannot do share buybacks. I have written a little bit about that in the report. We are looking into that. The same goes for dividends. We will continue to invest in services as long as the market is as poor as it is at the moment, the financial markets.
Unfortunately, we won't be able to do much M&A, at least not any larger transactions. For us, we have survived a tough period. Most companies probably would have struggled in these markets. Having a big cash balance is important and helps us. We are looking into how we can improve the situation. It's a fairly simple matter if we wanted to do share buybacks.
If we broaden our view, I mean, what is your long-term vision for Flexion Mobile?
Our vision is to be integrated with every top game in the market. That has always been the vision for us. One single SKU is what most developers talk about. We say, "Build once and distribute everywhere." That is kind of our motto. I think that remains our main vision for the company. With that, we can take a very strong strategic position as the ecosystem continues to grow. It will continue to grow. For us, it is more about how quickly this will happen. I am pretty certain that Google and Apple will have to give away some of their market share over time. We look to the regulators to help us bring the market to a little bit more fair state than it is at the moment.
What are the biggest challenges that you're facing today, would you say?
I would say keeping up with demand. We have more requests than we can serve. That's, I would say, is because we, as I said, we're looking at our minimum requirement is $1 million per month in Google Play. It doesn't really make much sense for us to go below. We are looking at, it's kind of, it's partly a market problem, a short-term market problem. As the market continues to grow, I think that will improve. We are also looking at exploring new ways how we can adjust our business model, where the developers are less reliant on us to do the sort of user acquisition and marketing of the game. We help them do it with our tools instead. That's something we're exploring. We have a few projects with developers on that.
Good. Lastly, is there anything else you would like to add?
No. I mean, we're looking forward to 2025 now, coming out of another record year. We're launching our new service proposition with a new brand. We're looking forward to that. We've signed some fairly big partnerships. It's been our most hectic launch period ever, I would say. That puts us in a really strong position for continued growth. Yeah, I mean, D2C, we'll see where we end up with that this year. It's still a build year for us. I think we shouldn't really expect much until next year. We're making good progress there. Everything is good. We're super excited about the future.
Good. Thank you for coming.
Thanks.