Tapinator Announces Record Q2 2021 Financial Results

– Revenues Increase 21% Year-Over- Year to $1.4 Million

Tapinator, Inc. (OTC: TAPM) (“Tapinator,” the “Company,” “we,” “our” or “us”), a developer and publisher of category leading games for mobile platforms, today announced unaudited financial results for the three and six months ended June 30, 2021, and the filing of its quarterly report for the period ended June 30, 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 its entirety, any guidance or projections previously issued by the Company.

For the three months ended June 30, 2021, Tapinator achieved record revenue of approximately $1.4 million, record bookings^* of approximately $1.4 million, net income of approximately $216,000 and record adjusted EBITDA^* of approximately $374,000.  The Company’s quarterly revenue, bookings^*, net income and adjusted EBITDA^* represent year-over-year improvements of 21%, 13%, 239% and 20%, respectively.  The Company also announced basic and fully diluted net income per share of $0.38 and $0.37 per share, respectively.

For the six months ended June 30, 2021, Tapinator achieved record revenue of approximately $2.6 million, record bookings^* of approximately $2.8 million, record net income of approximately $453,000 and record adjusted EBITDA^* of approximately $574,000.  The Company’s quarterly revenue, bookings^*and adjusted EBITDA^* represent year-over-year improvements of 26%, 23% and 42%, respectively.  The Company also announced record basic and fully diluted net income per share of $0.82 and $0.80 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			Six Months Ended
	June 30			June 30
	2021	2020	% Ch.		2021	2020	% Ch.
GAAP Results:
Revenue	$1,420,437	$1,174,365	21%		$2,636,342	$2,088,220	26%
Operating Income (Loss)	$263,388	$80,543	227%		$364,100	($173,237)	NM(1)
Net Income (Loss)	$215,993	$63,706	239%		$453,446	($203,497)	NM(1)
Net Income (Loss) Per Share – Basic	$0.38	$0.12	217%		$0.82	($0.37)	NM(1)
Net Income (Loss) Per Share – Diluted	$0.37	$0.11	236%		$0.80	($0.37)	NM(1)
Weighted avg. common shares outstanding – basic	563,136	551,005			556,315	550,953
Weighted avg. common shares outstanding – diluted	579,684	560,174			569,596	550,953
Non-GAAP Results:
Bookings:
Category Leading Games	$1,232,152	$986,428	25%		$2,370,335	$1,701,087	39%
Rapid-Launch Games	$187,804	$271,505	-31%		$385,126	$534,155	-28%
Total Bookings	$1,419,956	$1,257,933	13%		$2,755,460	$2,235,241	23%
Adjusted EBITDA	$374,456	$313,158	20%		$574,289	$403,377	42%
Adjusted EBITDA Margin %	26%	27%			22%	19%

Ilya Nikolayev, CEO of Tapinator commented, “We are extremely happy with our record performance in Q2. As we have previously noted, we are proud of the quality, feature set and overall performance of Video Poker Classic (VPC). We continue to incrementally improve the game and, in Q2, we launched a new Unlocks / Avatar feature, added more special events to the game and optimized the experience for our paying players.

We believe that the foundation that we have built out for VPC, including various reengagement and monetization systems, is now ready to be leveraged for a second social casino product. We are currently in design/development of a social casino game that is being built on top of the framework created for VPC. We believe that this approach for building this title will result in a shorter development timeline and a very high quality product, which will translate into strong engagement and monetization metrics.

Also, in Q2, we launched our newest idle game, Idle Industries, globally. The game had a great reception by both players, who rated it an average of 4.7 out of 5.0 stars, and Apple, which featured the title in the United States, Germany, France, the UK and a multitude of other countries. We have since gone live with five updates to the product, through which we have launched significant features such as Special Events as well as made various optimizations. In the coming weeks, we will be rolling out version 1.3 of the game, which includes a number of significant enhancements. We are proud of our team’s work in creating a top quality idle game.

Finally, we are in development on NFT500, our NFT art collection and casting platform, and we expect to go live with the first version of the product in September of this year. To date, we have acquired over 100 NFT artworks and collectibles from more than 50 different artists and brands.  Examples of such artists and brands include XCopy, Pak, Sarah Zucker, Art Blocks, Hackatao, Bored Ape Yacht Club, Larva Labs, Slime Sunday and Playboy. When we first conceptualized this product, it was our belief that displaying/casting NFTs will be an important direction for the NFT industry. Today, we are even more convinced that this is the case.

Unfortunately, our public company valuation does not, in our opinion, reflect the fundamental value of the products that we have built, not to mention the potential value of future products such as NFT500. We are unfazed by this. We will continue to focus on improving existing games and launching exciting new products and, eventually, we believe our public company valuation will catch up to our fundamentals.”

Andrew Merkatz, President of Tapinator, also commented on the Company’s results, “We are especially proud of the following operating accomplishments in the second quarter of 2021:

• We achieved record revenue and bookings of approximately $1.4mm, representing growth of 21% and 13% year-over-year, respectively.  This growth was achieved in the context of a previous record Q2 2020 comp resulting from a historic year ago quarter when widespread lockdowns drove significant consumer engagement with our mobile games.  Our growth compares quite favorably to mobile game industry growth estimated at 5% in Q2, 2021, according to market research firm Sensor Tower.
• Through a combination of top-line growth and continued aggressive cost management, we delivered net income of approximately $216k in the quarter, representing growth of approximately 239% year-over-year.
• We reported record basic and fully diluted EPS of $0.38 and $0.37, respectively, up 217% and 236%, respectively from basic and fully diluted earnings per share of $0.12 and $0.11 in Q2 2020, respectively.
• We reported adjusted EBITDA^* of approximately $374k, representing growth of 20% year-over-year.
• Our adjusted EBITDA^* margin was 26% during the quarter, down nominally from 27% in Q2, 2020.
• We successfully published our newest idle tapper game, Idle Industries, on the iOS App Store during the quarter, a game that was predominantly featured at launch by Apple in both the U.S. and Tier 1 international markets.
• We continued development of NFT500, our mobile NFT collection and casting platform which is slated to launch in September.  Within the NFT500 collection, we acquired more than 100 NFT artworks and collectibles from more than 50 premier artists and brands whose works we believe, in general, are well positioned to yield significant long term capital appreciation. 
• We initiated product development on a new social casino title slated to launch in Q4 of this year.

Current Outlook

We continue to have strong conviction regarding our mobile games business, and specifically our Category Leading Games.  Our investments within our Revolution Blockchain subsidiary are more speculative, but we believe there are significant long-term opportunities for the Company within the nascent market representing the intersection of NFTs and mobile gaming.  While we are not providing financial guidance currently, we continue to expect to deliver another full year of strong company-wide revenue and bookings growth along with adjusted EBITDA margins of at least 15% in 2021. 

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 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.

Reconciliation of GAAP to Non-GAAP Results

	Three Months Ended			Six Months Ended
	June 30			June 30
	2021	2020			2021	2020
Reconciliation of Revenue to Bookings:
Revenue	$1,420,437	$1,174,365			$2,636,342	$2,088,220
Change in deferred revenue	($481)	$83,568			$119,118	$147,021
Bookings	$1,419,956	$1,257,933			$2,755,460	$2,235,241
Reconciliation of Net Income (Loss) to Adjusted EBITDA:
Net income (loss)	$215,993	$63,706			$453,446	($203,497)
Interest expense, net	$629	$16,837			$2,251	$30,260
Income tax benefit	($45,348)	$0			($74,480)	$0
Amortization of capitalized software development	$89,770	$123,728			$167,854	$239,808
Stand-still agreement, non-recurring	$93,555	$0			$93,555	$0
Depreciation and amortization of other assets	$1,013	$879			$1,765	$1,804
Realized gains on sale of digital assets, net	($1,441)	$0			($1,441)	$0
One-time financing costs	$0	$16,571			$0	$112,963
Stock-based expense	$20,285	$91,437			$40,570	$222,039
Gain on extinguishment of debt	$0	$0			($109,231)	$0
Adjusted EBITDA	$374,456	$313,158			$574,289	$403,377

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