FingerMotion Inc :FNGR-US: Earnings Analysis: Q3, 2018 By the Numbers : July 18, 2018

FingerMotion Inc reports financial results for the quarter ended November 29, 2017.

Highlights

  • Summary numbers: Revenues of USD 0.16 million, Net Earnings of USD -0.47 million.
  • Gross margins narrowed from 54.95% to 22.68% compared to the same period last year, operating (EBITDA) margins now -255.26% from -61.26%.
  • Change in operating cash flow of -1,950,833.33% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-11-29 2017-08-30 2017-05-30 2017-02-27 2016-11-29
Relevant Numbers (Quarterly)
Revenues (mil) 0.16 0.06 0.01 0 0
Revenue Growth (%YOY) 4374.18 1479.22 287.03 -15.7 8.98
Earnings (mil) -0.47 -0.35 -0.05 -0 -0
Earnings Growth (%YOY) -19808.55 -14251.01 -716.37 -67.7 48.57
Net Margin (%) -286.05 -621.77 -378.7 -81.08 -64.29
EPS -0.03 -0.04 -0.01 -0 -0
Return on Equity (%) -59.67 -75.89 N/A N/A N/A
Return on Assets (%) -189.1 -239.7 -13608.03 -389.89 -429.36

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, FNGR-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if FNGR-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 185.67% and earnings by -31.42% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 54.95% to 22.68%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from -61.26% to -255.26% in this time frame. For comparison, gross margins were -110.30% and EBITDA margins were -621.73% in the previous period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

FNGR-US’s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 397.94 days, compared to last year’s level of -1,188.25 days.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company’s cash versus earnings numbers to gauge whether its performance is sustainable.

FNGR-US’s year-on-year change in operating cash flow of -1,950,833.33% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -61.26% to -285.99% and (2) one-time items that contributed to a decrease in pretax margins from -64.29% to -286.05%

EBIT Margin History
PreTax Margin History

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Company Profile

Finger Motion, Inc., formerly Property Management Corporation of America, through its subsidiary Finger Motion Company Limited, is an information technology company. The Company is focused on operating and publishing mobile games. Its has three games licenses. Its games include Action Role Playing Games (ARPG) and Simulated Life Game (SLG). Dragon Samurai is the title of one of the ARPG game. Dragon Samurai is created using real simulation module and players will be able to see it on the game’s background, battlefield, city, character equipment and weapons. Dragon Samurai features four classes: Vanguard, Roque, Samurai and Seer. Pirate Kingdom is an SLG game which embarks on the epic pirate strategy adventure. Pirate Kingdom allows gamers to lead their crew into a grand battle of pirates, monsters and players from around the globe. Three Kingdom is also an ARPG game based on the book written by the traditional folk artist combine with the reference of ancient history documents.

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