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Gameberry booted game company’s profit approaches Rs 110 Cr in FY21

What do Dalgona Coffee, home workouts and online board games have in common? Demand for them increased during COVID lockdowns across the world when people were locked inside their homes and sought to escape the grim reality of rising death tolls and repeated lockdown extensions. Apart from video calls and social media, people around the world have started interacting through a host of multiplayer online games, especially Ludo.

One game publisher that found itself in the right place at the right time was Bengaluru-based Gameberry. Like most mobile game publishers, Gameberry’s revenue is a mix of user in-app purchases and advertising revenue, as games are available for free download from app stores.

The five-year-old company earned 74.4% of its total revenue from the sale of virtual currency used by gamers for in-app purchases. These sales increased 4.3 times to approximately Rs 206 crore in FY21 from Rs 47.6 crore earned in FY20. The company also receives advertising revenue which increased by 4 .7 times to around Rs 70.8 crore in FY21 from Rs 15.2 crore in FY20.

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The booted company also earned non-operating income of Rs 5.62 crore from its financial assets in the fiscal year ending March 2021, indicating very healthy cash flow and tight cost controls.

Going through Gameberry’s expense sheet for the last fiscal year, the biggest eye-opener for us was the Rs 64.9 crore expense recorded under ‘Miscellaneous Expenses’, which accounted for 62.3% of the total expenses incurred by the company as of in FY21. Most likely this is the platform service provider fees paid to Google and Apple in addition to the payment gateway fees.

Additionally, employee benefit payments are the second largest cost center for Gameberry Labs, accounting for 15.4% of its annual expenses. These payments increased by 26.1% to Rs 16.01 crore in FY21 from Rs 12.7 crore paid in FY20.

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It is important to note that around 52.5% of these payouts go to co-founders Afsar Ahmad & Govind Agarwal who each earned Rs 4.18 crore in the last financial year. Gameberry had around 60 employees at the end of FY21, so the average remuneration of the remaining employees is around Rs 13.12 lakh per year.

In FY20-21, the company boosted its customer acquisition processes and as a result, its advertising and promotional spend also increased by 406% year-on-year to Rs 12.65 crore. To tap into the growth in demand, Gameberry increased its spending on IT infrastructure, which rose 166.5% year-on-year to Rs 5.4 crore in FY21.

It paid an additional Rs 2.21 crore for legal and professional fees, pushing annual expenditure to Rs 104.3 crore in FY21, recording a jump of 211.2% from 33.5 In total, Rs 0.38 crores spent in fiscal year 20. Gameberry spent Rs 0.38 to earn a single rupee in revenue in the fiscal year ending March 2021.

The fact that Gameberry has succeeded in growing its operations with sustainable margins is clearly visible in its annual results for fiscal year 20-21. Its EBITDA margins improved from 50.28% in FY20 to 63.18% in FY21, while achieving a 4.4X scale increase.

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As a result, the company’s annual profits also increased by 4.3X to Rs 108.64 crore in FY21 from Rs 25 crore recorded in FY20, while cash inflows from operating jumped 5.2X YoY to Rs 86.45 crore over the same period.

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With the pandemic economy all but gone now, the challenge for the company will now be to stave off the plethora of competitors that have since arisen, who will be battling with it for market share in a possibly contracting market, or du less stagnant. For all of gaming as a whole, investor-backed sports-related games are capturing a lot of that growth. For the Gameberry co-founders, 2022-23 could be the time they finally decide to hedge their bets and do a big fundraiser, because roaring or lukewarm, there’s no doubt this “small” company will have a big punch on valuations.