REG - Devolver Digital - Preliminary unaudited results
04/04/2022 07:00
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RNS Number : 1077H Devolver Digital, Inc. 04 April 2022
4(th) April 2022
Devolver Digital, Inc.
("Devolver Digital", "Devolver" or the "Company" and the Company together with
all of its subsidiary undertakings is the "Group")
Preliminary unaudited results for the year ended 31 December 2021
Diversified revenues drive strong performance in 2021
Devolver Digital, an award-winning digital publisher and developer of
independent ("indie") video games, announces its preliminary unaudited results
for the year ended 31(st) December, 2021. All figures relate to this period
unless otherwise stated.
Financial highlights
· Strong performance in maiden listed year.
o Strong normalised revenue growth to US$98.2 million (2020: US$71.1
million), up 38% year-on-year
o 2021 growth driven by robust back catalogue sales and successful release
of 8 new titles
o Rapid growth in Normalised Adjusted EBITDA to US$25.7 million (2020:
US$15.8 million), up 63% year-on-year
· Steady improvement in margins
o Gross margins rose to 40% (2020: 32%)
o Normalised Adjusted EBITDA margins increased to 26% (2020: 22%)
o Margin increases reflect high back-catalogue revenues and new title
improvements
· Strong balance sheet supports growth strategy
o Net cash of US$86.2 million at year end, following a successful IPO in
November 2021 and strong internal cash generation.
o Sale of publishing rights to Fall Guys further bolstered balance sheet
Strategic highlights
· Successful IPO supports investment in our unique culture and proven
strategy
o Focus on continued strong core organic growth
o Partnering with developers
o Progressing our pipeline of fun-filled games
o Supporting our back catalogue of interesting and unusual games
· Excellent momentum
o Evergreen business model - back catalogue of over 90 titles
o Bringing the fun - 8 new titles released in 2021 (2020: 10) across varied
platforms and regions
o Diversified revenues - back catalogue revenue of 70% (2020: 61%)
· Industry recognition
o 2021 Publisher of the Year award by GamesIndustry.biz
o Numerous game awards and nominations - Death's Door, Loop Hero and
Inscryption
o Critical acclaim: 77 average Metacritic rating for our titles released in
2021 (2020: 75)
· Senior industry experts added to our Board
o Kate Marsh, Janet Astall, Jo Goodson and Jeffrey Ko appointed as
Independent Non-executive Directors, adding significant experience and
know-how to our Board
Current trading and outlook
· Healthy pipeline
o Diversified pipeline in terms of titles, developers, platforms and geography
o On-track to release 10-15 new titles in 2022, including March 2022 releases
of own-IP Shadow Warrior 3, Tentacular and Weird West
o Total development pipeline of more than 30 titles to 2023 and beyond
· Confident of further progress in 2022
o Momentum, extensive back catalogue, a clear strategy and solid pipeline
Harry Miller, Executive Chairman of Devolver, said:
"2021 was a special year for Devolver Digital, culminating in our IPO in
November. I'd like to thank our talented people and the unique culture they
have built over the past 13 years. Our culture explains why many of the most
creative developers trust us to publish their titles. It also explains our
ability to recruit the most qualified and engaged people to our team. I am
thrilled that this is recognised in the industry by Devolver's numerous awards
and nominations, including Publisher of the Year 2021, and prestigious awards
for titles such as Loop Hero, Inscryption and Death's Door."
Douglas Morin, Chief Executive Officer of Devolver Digital, said:
"Devolver Digital has had an outstanding year. Congratulations to the team,
the developers and our partners. We have a healthy and diverse pipeline in
terms of titles, developers, platforms and geography for 2022 and beyond. We
have good momentum, a clear and proven strategy and an outstanding team with a
unique culture. Combined, these support our confidence in further progress
in 2022."
Enquiries:
Devolver Digital, Inc. ir@devolverdigital.com
Harry Miller, Executive Chairman
Douglas Morin, Chief Executive Officer
Daniel Widdicombe, Chief Financial Officer
Zeus (Nominated Adviser and Sole Broker) +44 (0)20 3829 5000
Richard Darlington, Daniel Harris (Investment Banking)
Ben Robertson (Equity Capital Markets)
FTI Consulting (Financial PR) devolver@fticonsulting.com
Jamie Ricketts / Dwight Burden / Valerija Cymbal / Usama Ali +44 (0)20 3727 1000
Devolver Digital overview
Devolver Digital is an award-winning video games publisher in the indie games
space with a balanced portfolio of third-party and own-IP. The Company has an
emphasis on premium games and has a back catalogue of more than 90 titles,
with more than 30 titles in the pipeline. Through recent acquisitions,
Devolver now has its own-IP franchises, in-house studios developing
first-party IP and two publishing brands. The Company is registered in
Wilmington, Delaware, USA.
Chair statement
A unique culture
2021 was a special year for Devolver Digital. None of our success - great
performance, industry recognition in awards and nominations, exciting talent
joining us, and our IPO at the end of the year - would have been possible
without our talented people and the unique culture they have built in the past
thirteen years.
I know from personal experience that all of us at Devolver Digital are
passionate about bringing the most interesting and unusual video games to the
forefront. It is a hobby and a passion rather than a job. Devolver Digital is
a 'flat' organisation that gives talented people the right environment to
innovate, create and partner with developers and platforms.
This culture is deep within the DNA of Devolver Digital. It hasn't changed
since 2009, when five business partners - including Rick Stults, Graeme
Struthers, Nigel Lowrie, Mike Wilson, and me - met in Austin, Texas with a
simple idea. We wanted to build a video games publisher that focussed on the
developer foremost, and with a directive to work with the most creative, and
innovative developers across the globe. To never forget why we came to this
industry in the first place. To treat our partners with respect and
compassion, along with our own good dose of hard work and our own creativity.
We feel that this ethos is why we have enjoyed such long and strong
relationships with the developers and other partners we work with.
Focus on organic growth
Organic growth is our primary driver. Our IPO in November 2021 was the right
move for our strategy to drive organic growth, delivering a stronger platform
for 2022 and in future. Devolver Digital will continue to invest in bringing
even more wonderful games to the forefront, retaining our culture and keeping
and hiring the best talent. We will also stay true to our values and become a
better partner for developers to work with for fun-filled games.
It is in this context that I am proud to present Devolver Digital's maiden
full year preliminary unaudited results as a public company. Being a public
company has given liquidity to the team at Devolver Digital, all of whom have
equity exposure. We begin life as a public company in a position of financial
strength, with an excellent balance sheet and a net cash position. As a quoted
company we will continue to operate with the high level of transparency that
we know our developers, platforms, gamers, partners and investors value.
Board changes and corporate governance
Our executive management team was strengthened in 2021 by the appointment of
Douglas Morin as CEO in August 2021, having joined Devolver in 2020. Our CFO,
Daniel Widdicombe, joined in May 2021 and both Douglas and Daniel joined the
Board as Executive Directors in July 2021. Douglas has a wealth of experience
with over 25 years of experience in leadership positions and in equity capital
markets. Dan has more than 30 years of finance experience, many of which
were spent in senior roles in listed businesses.
I am very pleased to be joined by Kate Marsh, Janet Astall, Jo Goodson and
Jeff Ko as Non-Executive Directors. Devolver Digital now has a board with
significant breadth and depth in terms of knowledge, experience and
geography. Kate has more than 30 years of experience in digital and media
businesses as a senior leader and non-executive director. Janet has more than
20 years of experience working in finance, mainly for consumer-facing
technology businesses. Jo is an accomplished tech entrepreneur with more than
25 years of experience. Jeff specialises in the video games sector and has
held a number of leadership roles in Asian companies and federations.
The Board of Devolver Digital is committed to act in good faith to promote the
success of the company for the benefit of shareholders and a wide range of
stakeholders.
Summary
Devolver Digital begins 2022 with excellent momentum. We have a proven
strategy that has delivered success over a long period. The Board believes
that we are well positioned for future success and we look forward to
reporting on our progress in the year ahead.
Harry Miller
Executive Chairman
4(th) April 2022
CEO report
The "developers' publisher"
Devolver Digital is an award-winning digital video games publisher and
developer with one of the most recognisable labels in the industry.
Built by highly-experienced industry veterans with deep, wide-ranging
relationships in the gaming sector, Devolver Digital has a back catalogue of
approximately 90 games, including numerous indie cult classics.
We have a proven model to curate and publish high-quality games. We do this by
leveraging our renowned brand to enhance the discoverability of partner
studios and their games. Devolver Digital boosts visibility of titles
through our established global network of partners and platforms and by
targeting gamers through original and focused marketing. Devolver Digital
helps developers to scale through its know-how in critical areas, such as
operations and cost management; game production; and development and digital
distribution strategy. Devolver Digital is the highest-rated indie publisher
of scale on Metacritic and continues to rank at the top level in Metacritic's
annual surveys. In 2021, Devolver averaged a 77 Metacritic score, up from 75
in 2020. Many of our most successful titles continue to generate consistent
revenues many years after launch.
IPO to support our proven strategy
Our IPO in November 2021 was the right choice for us to ensure our continued
growth and to support even more wonderful games, while preserving our unique
culture. The IPO will support investment in talent and our clear and proven
organic growth strategy, focused on:
· Partnering with developers, both with existing relationships and
forging new partnerships.
· Building out our pipeline of fun-filled games
· Supporting our back catalogue of interesting and unusual games
In addition, the IPO gives us a platform to enhance our reputation as an
ethical publisher, and provides us with the means to use shares as
consideration for acquisitions where we see a cultural fit.
Momentum and industry recognition
Devolver Digital has an excellent financial track record, with a normalised
revenue Compound Annual Growth Rate ("CAGR") of 33% between 2018 and 2021. Our
recent IPO makes our performance even more visible to our staff, partners and
investors. I am delighted to announce Devolver Digital performed strongly once
again in 2021, with US$98.2 million of normalised revenue, and US$25.7 million
of Normalised Adjusted EBITDA, growing at 38% and 63% respectively. Devolver
Digital has also shown excellent growth in gross profit margins which have
reached 40%.
We are committed to our promise to keep bringing the fun, with the release of
8 new titles in 2021 including Death's Door, Inscryption, Loop Hero and Olija
across a variety of platforms and geographies. These titles have performed
extremely well since release, most notably Inscryption which sold nearly 1
million units in the short period since its release in October 2021 up to the
end of December 2021.
Devolver Digital titles were recognised by multiple awards and award
nominations in 2021, including the British Academy Games Awards (best debut
game award - Carrion), gamesradar+ (Best Games of 2021 awards - Death's Door,
Loop Hero and Boomerang X) and The Game Awards (Best Indie Game nominations -
Death's Door, Inscryption and Loop Hero). In 2022, Devolver titles have been
nominated for the upcoming Game Developers Choice Awards (Game of the Year
nomination - Inscryption) and Independent Games Festival Awards (Inscryption,
Loop Hero and Death's Door) reflecting high Metacritic and OpenCritic ratings
with an average Metascore of 77 in 2021 for Devolver titles released during
the year.
Devolver Digital itself was named as Publisher of the Year by Shack News,
following recognition as Publisher of the Year 2021 in the Gamesindustry.biz
Indie Publishing Awards.
Our model
Devolver Digital has an attractive business model. This is based on a range of
factors including the longevity and strength of our distributor relationships,
the diversified nature of our revenues and a track record of growth.
Devolver Digital's back catalogue of over 90 titles, including numerous indie
cult classics, supports highly diversified revenues with minimal reliance on
any one title release. Back catalogue revenue accounted for 70% of our
revenues in 2021.
Our back catalogue includes all titles released in or prior to the last
financial year (2021 or earlier). As of 31(st) December 2021, the back
catalogue consists of over 90 titles. From 2018 to 2021, Devolver Digital has
achieved an average normalised back catalogue revenue contribution of 63%,
providing a strong and stable contribution to overall sales. This contribution
has increased from 42% in 2015 to 70% in 2021.
Devolver Digital has partnered with more than 60 developers to publish over 90
indie games since 2009, primarily through third-party publishing agreements.
More recently, the Group has acquired standalone IP and long-term development
partners, which has brought franchises in-house.
Third-party partnerships have been essential to Devolver Digital's success
to-date, and still form the majority of Devolver Digital's published titles.
However, Devolver Digital has also acquired five development studios in the
past 18 months, increasing the Company's own-IP profile. Management considers
that there are advantages to having a balanced business model, both allowing
the Group to work with the newest and most innovative indie developers as
their publisher, as well as owning and developing its in-house stable of
games.
Titles are generally either fully or partially funded by Devolver Digital. In
limited cases, funding is not provided for development if the studio does not
require it. Funding is structured in varying amounts through developer
advances pursuant to a milestone plan. Generally, once costs are recouped,
future revenue is apportioned between Devolver Digital and the developer,
based on mutually agreed and fair sharing agreements.
Devolver Digital's range of services includes project and lifecycle
management; development and production assistance; publishing; and technical
and creative support. Devolver Digital generates pre-release interest through
tailored marketing programmes, PR, promotions, and leveraging digital
distributor platform relationships. The Group's broad offering continues to
attract both established and early-stage developers. Of the numerous
development partners working on pipeline titles, roughly a third are repeat
partners.
Currently the Group has approximately 200 team members spread across the globe
in Europe, North America and Asia. The Group has subsidiaries in the United
Kingdom, the Netherlands, Croatia, Poland and the United States.
Growth strategy
There are four key components to our growth strategy:
1. Execute and build pipeline
Devolver Digital will continue to publish critically-acclaimed and independent
games under the Devolver Digital brand, targeting approximately ten to fifteen
titles per year. Our pipeline for 2022 is healthy and diverse in terms of
titles, developers, platforms and geography. This includes recent launches in
March 2022 of our own-IP Shadow Warrior 3 and third-party title Weird West,
and new titles including Cult of the Lamb, Terra Nil, and other titles
launching in 2022 which we have not yet announced.
Our existing pipeline includes more than 30 titles, many of which are from
repeat developer relationships. These games are scheduled for release over the
next two years and beyond. As a result, the Group has full title visibility
until the third quarter of 2023 with new titles being regularly added to
future years. The pipeline includes third-party titles, acquired IP titles,
such as the Shadow Warrior franchise, and titles from recently-acquired
subsidiary studios. Recent acquisitions have increased the number of own-IP
titles in the pipeline. Devolver currently holds the rights to nine own-IP
franchises, up from one in 2019.
We will also release further titles under the complimentary publishing brand
Good Shepherd, bringing different game styles to a wider audience and adding
licensed IP to the release schedule. Devolver will build upon existing
momentum, identifying and building new franchises. Managing the breakout
success of Fall Guys has elevated Devolver's profile, proving that the Group
can produce hit titles on a grand scale.
2. Drive revenue from the back catalogue
Devolver Digital's back catalogue has contributed impressively to revenues in
recent years. Due to the quality of back catalogue titles and our reputation
in the indie space, management believe that there are significant
opportunities for sustainable revenue growth and margin expansion.
Devolver's rich portfolio of titles may mean that subscription services, such
as Xbox Game Pass and PlayStation Plus, will come to Devolver prepared to pay
one-off fees for titles for their platforms. New entrants into the streaming
market are also looking to Devolver for content for their services. Further
revenue can be generated by including titles in bundles, as well as promoting
publisher specific sales on digital marketplaces.
Porting titles across platforms opens up games to new player bases and can be
released in conjunction with targeted marketing campaigns and bundled deals.
Localising titles in new languages expands the addressable market for a game
and drives back catalogue sales. In franchises such as Hotline Miami, Devolver
has managed to boost unit sales of the initial title when bringing out a
sequel. With targeted promotion, Devolver can continue to capitalise on fresh
interest in new franchise releases rather than cannibalising revenues from
previous releases in the franchise.
3. Improve our craft
Devolver's recent performance has provided the capital for greater investment
of resources and money into games and services. The Group is organically
improving its service offering and abilities, which the Directors believe
should ultimately drive an increased return on investment for titles. Greater
investment in games allows for bigger budgets on certain titles, which when
applied to our own-IP titles can drive significant margin upside. Increased
investment includes better game selection, more gameplay testing, improved
porting and localisation services, and bigger marketing campaigns. 'Improving
our craft' allows the Group to better capitalise on the momentum of initial
releases by simultaneously releasing titles on multiple platforms and in
multiple geographies. The Group has selectively added individual talent as it
has grown, bringing on industry experts with years of relevant experience.
Taking on new industry veterans adds to the already growing breadth of
services and deeper capabilities.
4. Selective studio & IP acquisition and integration
Devolver will continue to strategically acquire development studios,
standalone IP or service providers, with the aim of broadening the Group's
offering and improving its financial profile. Some of these are likely to be
trusted partners, who have existing relationships with the Group. Historical
collaboration lowers the integration risk of bringing these companies on
board, with the prospect of mutual upside. The Group's acquisition strategy
will remain considered and selective, and management will take a prudent
approach to M&A. Alongside trusted partners, the Group will also consider
acquiring non-partner businesses which provide complementary IP, products or
services. The Directors believe that, in cases where Devolver has previously
published titles with developers, bringing them in-house will improve margins
and reinforce successful relationships. In cases where Devolver hasn't
published a studio's titles, acquisitions will provide incremental revenue.
Devolver can energise back catalogues and add value to new releases in
development, production and marketing. The Group can help to accelerate
porting and localisation plans, and include titles in publisher sales, buyout
deals and more.
Acquisitions
Devolver has begun to selectively acquire studios and IP that enhance its
pipeline and support its long-term international growth strategy. Since the
beginning of 2020, Devolver has acquired five of its long-term partner
development studios and a second publishing brand. As a digital-first brand,
the majority of Devolver staff work remotely and have done so since founding.
The cash generated from the huge success of Fall Guys and the subsequent sale
of its publishing rights has provided the Group with additional capital to
accelerate its long-term growth strategy, investing in developer studios and
other initiatives. Devolver has acquired and integrated long-term partners,
formalising relationships that have existed for up to 20 years.
For most of these studios, moving in-house to Devolver has been a natural
evolution, as the length and success of these partnerships has built strong
ties and mutual trust. In welcoming these businesses into the fold, Devolver
will continue to evolve those partnerships. Devolver has also strategically
acquired long-term associates who have not previously had a commercial
relationship with the Group, but whose culture was similar and well
understood.
Familiarity and shared understanding with these partner studios and long-term
contacts lowers integration risk. The Directors believe that bringing these
businesses into the Group will unlock additional sources of revenue and
provide margin enhancement, while continuing to evaluate other opportunities
that could bring accretive benefit.
Croteam
Acquired in October 2020, Croteam is a Croatia-based developer with 32
developers and 38 total team members as at year end 2021. Devolver Digital has
published 12 games with Croteam, the most of any single developer.
Devolver Digital's Founders' relationship with Croteam stretches back to
partnerships with G.O.D. Games and Gamecock Media. Titles in the Serious Sam
franchise were the first games published by the Group, proving to be a
ground-breaking series for Devolver. Croteam will continue to develop Serious
Sam, Talos Principle and new IP games published under the Devolver brand.
Bringing such a key long-term partner in-house will improve margins on some of
the Group's biggest titles.
Good Shepherd
Acquired in January 2021, Good Shepherd is a Netherlands-based publisher that
also majority owns a Polish development studio, Artificer. The combined
business has 56 total team members as at year end 2021, of which 35 are
developers working at Artificer. Established in 2011 with independent
investment from some of the Devolver founders, Good Shepherd will continue
publishing third party and licensed IP titles, as well as Artificer's own-IP
titles. Good Shepherd brings a complementary publishing brand to the Group
with a more selective and streamlined pipeline with niche titles, a focus on
strategy and simulation games and partnerships with large IP owners such as
Disney, Lionsgate and Metro Goldwyn Mayer.
Nerial
Acquired in May 2021, Nerial is a UK-based development studio with 16
developers and 17 total team members as at year end 2021, creating
story-focused strategic games. Nerial has six titles published or in
production with Devolver with a combined cumulative revenue of over US$10
million. Devolver published Nerial's first major title Reigns, released in
2016, and has proceeded to publish their titles since then. Devolver Digital
will continue to publish Nerial's titles, benefiting from the margin
enhancement of bringing IP in-house.
Firefly Studios
Acquired in June 2021, Firefly is a UK-based video games studio with 26
developers and 36 total team members as at year end 2021, who create
historical real-time strategy (RTS) titles for PC, best known for the
Stronghold franchise. Whilst Devolver has never published a Firefly title,
earlier Stronghold instalments have been published by the founders at G.O.D
Games and Gamecock Media. Firefly have since used a variety of publishers and
also self-published their titles. The acquisition of Firefly will expand
Devolver Digital's presence in the RTS space and free-to-play games. Firefly
brings additional titles to the back catalogue, which will continue to
generate revenue for the Group.
Dodge Roll
Acquired in July 2021, Dodge Roll is a US-based video games studio with four
team members as at year end 2021, who are all developers. Dodge Roll's first
major partnership with Devolver was Enter the Gungeon in 2016, which was a
breakout hit, selling over four million units and making more than US$25
million of revenue. This was followed by Exit the Gungeon, which launched on
Apple Arcade in 2019. Acquiring Dodge Roll has brought a key piece of IP
in-house, which the Directors believe will improve margins. Dodge Roll will
continue to develop games published by Devolver, building on existing
franchises and generating new concepts.
Current trading and outlook
2021 ended well for Devolver Digital with excellent momentum for titles such
as Death's Door, Loop Hero and Inscryption, all of which rated highly on
Metacritic with ratings between 82 and 89. All three titles received multiple
nominations for Best Game of the Year award.
Devolver Digital has a healthy and diverse pipeline in terms of titles,
developers, platforms and geography. We remain on track to release 10-15 new
titles in 2022, including the recently-launched Shadow Warrior 3 (an own-IP
title) and Weird West, and upcoming releases such as Trek To Yomi and others.
Our total pipeline for 2022 and beyond comprises an exciting line-up of 30
titles, with a balanced mix of third-party IP and own-IP.
Devolver Digital's momentum, pipeline and strong contribution from its
extensive back catalogue support confidence of further progress in 2022.
Douglas Morin
Chief Executive Officer
4th April 2022
Financial review
This is the first annual results announcement published by Devolver Digital
following admission to trading on AIM on 4(th) November, 2021 (the "IPO").
IPO Outcome
Devolver Digital successfully raised US$49.6 million of net funds for the
Company as part of a total gross fund raise at the IPO of US$261
million. This leaves us with a healthy cash position at the end of 2021 of
US$86.2 million. The IPO introduced a roster of high-quality institutional
investors as well as the introduction of Sony Interactive Entertainment as a
strategic shareholder.
Preliminary unaudited full year 2021 results
The preliminary unaudited financial results included in this 2021 release
cover the Group's combined activities for the twelve months ended 31st
December 2021 (prepared in accordance with applicable International Financial
Reporting Standards, "IFRS").
Our results reflect the revenues attributable in 2020 and 2021 to the
publication of the Fall Guys title in August 2020. They also reflect the gain
from the sale of the Fall Guys' publishing rights to Epic Games and the gain
on sale of an IP owned by a subsidiary game development studio in 2021, both
of which are reflected as Other Income.
Normalised Adjusted results
The following narrative refers to Normalised Adjusted results, as presented in
the financial statements contained within this release. Normalised Adjusted
results exclude revenue outside budget from the Fall Guys title released in
August 2020, as well as one-time exceptional costs related to the November
2021 IPO.
Significant revenue growth with improved margins and strong cash generation
Devolver Digital delivered a full year 2021 performance slightly ahead of
market expectations set at the time of our IPO in November 2021. This included
strong normalised revenue growth of 38% to US$98.2 million and Normalised
Adjusted EBITDA growth of 63% to US$25.7 million. This growth was driven by
strong performances from new titles released in 2021, robust back catalogue
sales including within bundled special deals, and a solid contribution from
newly acquired subsidiaries.
In 2021, Devolver Digital delivered a rapid improvement in normalised gross
profit with a 70% annual increase to US$39.2 million, up from US$23.1 million
in 2020. Gross margins grew to 40% in 2021 from 32% in 2020, due to a
combination of: 1) a higher percentage of own-IP game sales in part due to the
acquisition during the year of game development studios whose games we
publish; 2) an increase in bundled deals, including back catalogue titles,
with the major distribution platforms, and; 3) an increased focus on same
day-date releases across multiple platforms with inherent efficiencies in
marketing and launch costs.
EBITDA margins
Normalised Adjusted EBITDA margins increased to 26% in 2021 compared to 22%
the previous year, reflecting the flow-through from higher gross profit
margins but offset by the higher relative administrative costs of the acquired
subsidiaries with established offices.
Normalised Adjusted EBITDA
Normalised results are prepared to provide a more comparable indication of the
Group's core business performance by removing the impact of certain items
including exceptional items (material and non-recurring), and other,
non-trading, items that are reported separately.
Normalised results are not intended to replace full year results. These have
been presented to provide users with additional information and analysis of
the Group's performance, consistent with how the Board monitors results.
Normalised results exclude the benefit from the substantial returns from the
Fall Guys title, (the publishing rights were sold in April 2021), as well as
one-time expenses related to the IPO.
Normalised Adjusted EBITDA makes the following adjustments: it excludes 1)
US$142 million of Fall Guys revenue that exceeded budget in 2020; 2) the net
gain from the sale of Fall Guys publishing rights; 3) stock compensation
(share-based payment) expenses; 4) one-time expenses related to the November
2021 IPO, and; 5) amortisation of acquired IP (but does not exclude
amortisation of capitalised software development costs).
Further details of adjustments are given in Note 13 to the financial
statements contained in our annual report which will be published in April
2022.
Cash
Net cash at year end 2021 was US$86.2 million (2020: net cash of US$43.5
million) following the receipt of the net proceeds of the IPO. The Group's
current cash reserves provide sufficient capital to fund our growth strategy.
Capital expenditure
The Group's ongoing capital expenditure requirements are primarily expected to
be focused on game development advances and the costs associated with
publishing new titles. In addition, there is ongoing internal investment into
new HR and accounting systems to better integrate the subsidiaries across the
group. We may use cash holdings as part of the total consideration for any
future selective acquisitions that the Group may undertake.
Capital and Reserves
Total equity for the year increased by US$174.0 million to US$245.5 million
(2020: US$71.5 million), reflecting cash generation from operations, the sale
of the Fall Guys publishing rights to Epic Games in April 2021, and the issue
of new shares at the IPO in November 2021.
Dividend policy
The Directors intend to re-invest a significant portion of the Company's cash
reserves and earnings to facilitate plans for further growth. Accordingly, the
Directors do not expect to declare any dividend in respect of the current
financial year ending on 31 December 2021 or in the foreseeable future.
Over the longer term, should the Group generate a sustained level of
distributable profits above assessed capital needs at the time, then the Board
would consider introducing a progressive dividend policy. Declaration of
dividends will always remain subject to all applicable legal and regulatory
requirements and recommendations of final dividends and payments of interim
dividends will be at the discretion of the Board. The Board will exercise such
discretion where it is commercially prudent to do so, taking into account the
policy set out above.
Whilst the Board considers dividends as the primary method of returning
capital to Shareholders, it may, at its discretion, consider share purchases,
when advantageous to Shareholders and where permissible. The Board may revise
its dividend policy from time to time.
Principal risks and uncertainties
The Group is exposed to a variety of risks and actively manages them through
risk management procedures. While risk cannot be eliminated altogether,
actions are taken to mitigate risk wherever possible.
Details of the Group's financial risk management objectives and policies of
the Group and exposure to risk will be laid out in detail in note 23 to the
consolidated financial statements in our 2021 Annual Report due to be released
in mid-April 2022.
Post Balance Sheet Events
In late February 2022, Russia invaded Ukraine, leading to substantial economic
sanctions being levelled upon Russia by the international community. Revenues
from the Russia/Ukraine/CIS region have accounted for less than 3% of total
Group annual revenues in each of 2020 and 2021. Less than 1% of royalty and
other expenses are payable into the affected countries in the conflict region.
It has not been possible to pay some royalties to Russia-based developers
since several Russian banks were barred from SWIFT, the international banking
system. Any outstanding royalties payable have been recorded as accounts
payable and will be paid when circumstances permit. The Company currently
believes that the impact from the conflict will not materially affect its
operations, revenue or expenses. The Company has no full-time employees in the
affected geographies.
Daniel Widdicombe
Chief Financial Officer
4th April 2022
Consolidated Unaudited IFRS Full Year Results:
Year ended Year ended
Unaudited Income Statement
31 December 2020 31 December 2021
US$'000 US$'000
REVENUES
Revenues 212,738 98,152
TOTAL REVENUES 212,738 98,152
COST OF SALES
Royalty expense (103,034) (46,573)
Development expense (6,243) (4,384)
Marketing (5,466) (4,275)
Amortisation of development costs (6,302) (3,688)
TOTAL COST OF SALES (121,045) (58,920)
GROSS PROFIT 91,694 39,232
ADMINISTRATIVE EXPENSES
Payroll (6,346) (14,468)
Stock compensation expense (2,747) (55,150)
Professional fees (3,559) (9,455)
Travel and entertainment (233) (271)
Office (329) (342)
Insurance (95) (202)
Administration and other costs (601) (17,895)
Amortisation of intellectual property (623) (5,651)
TOTAL ADMINISTRATIVE EXPENSES (14,533) (103,434)
Other income - 116,081
OPERATING PROFIT 77,161 51,879
Interest receivable income 101 10
Interest payable and similar charges (104) -
PRE-TAX PROFIT 77,157 51,889
Income tax expense (13,064) (19,438)
Profit for the year 64,093 32,451
Equity holders of the parent 64,093 32,374
Non-Controlling Interests - 77
PROFIT FOR THE FINANCIAL YEAR 64,093 32,451
Statement of Financial Position Year ended Year ended
31 December 2020 31 December 2021
US$'000 US$'000
NON-CURRENT ASSETS
Goodwill 159 65,570
Intellectual property 23,254 53,382
Capitalised development costs 28,319 44,441
Total intangibles 51,732 163,393
Tangibles 52 225
Investments 1,294 -
Deferred tax assets 362 2,413
TOTAL NON-CURRENT ASSETS 53,440 166,030
CURRENT ASSETS
Accounts receivable 15,846 17,811
Prepaid and other current assets 361 1,544
Cash at bank and in hand 43,529 86,239
Prepaid income tax - 7,512
TOTAL CURRENT ASSETS 59,737 113,106
TOTAL ASSETS 113,177 279,136
CURRENT LIABILITIES
Trade, other payables & Accrued Expenses 18,952 17,835
Deferred revenue 599 4,481
Amounts due to shareholder 20,837 -
Total trade and other payables 40,388 22,316
Loans 240 -
Current and deferred tax payable 116 9,787
TOTAL CURRENT LIABILITIES 40,744 32,103
NON-CURRENT LIABILITIES
Contingent consideration 920 1,567
TOTAL NON-CURRENT LIABILITIES 920 1,567
TOTAL LIABILITIES 41,664 33,670
CAPITAL AND RESERVES
Common stock 1 44
Additional paid-in capital - 120,033
Retained earnings 71,513 126,203
Translation reserve - (737)
CAPITAL AND RESERVES TO OWNERS 71,514 245,543
Non-controlling interest - (77)
TOTAL EQUITY 71,514 245,466
TOTAL EQUITY AND LIABILITIES 113,177 279,136
Condensed Unaudited Statement of Cash Flows
Year ended Year ended
31 December 2020 31 December 2021
US$'000 US$'000
Operating activities
Net income 64,093 32,374
Amortisation & Depreciation 6,978 9,338
Gain on sale of Publishing Rights & IP - -115,576
Share based payments 2,747 55,150
Working capital movement -1,030 813
Other operating activity movement -533 1,997
Net cashflow from operating activities 72,255 -15,904
Investing activities
Purchase of intangibles -22,175 -34,345
Sale of Publishing Rights & Intellectual Property - 127,500
Acquisitions -3,278 -33,911
Other 65 1,218
Net cashflow from investing activities -25,387 60,462
Financing activities
Net change in Borrowings 240 -
Share capital issuance including option exercise -6,000 48,989
Repayment of Shareholder Loan - -20,837
Dividend -10,000 -30,000
Net cashflow from financing activities 15,761 -1,848
Net cashflow 31,107 42,710
Closing cash 43,529 86,239
Basis of preparation and consolidation
The Directors are confident that the Group will remain cash positive and will
have sufficient funds to continue to meet its liabilities as they fall due for
a period of at least a period of 12 months from the date of the full year 2021
announcement and have therefore prepared this preliminary unaudited full year
announcement on a going concern basis.
The financial presentation in this release should be read in conjunction with
the Group's annual consolidated financial statements as at and for the year
ended 31 December 2021, due to be released in mid-April 2022. These condensed
financial statements have been prepared in accordance with the recognition and
measurement requirements of International Financial Reporting Standards
(IFRS).
These preliminary unaudited financial statements were approved by the board of
directors on April 3 2022.
Earnings Per Share
US$'000 unless stated Year ended 31 December 2020 Year ended 31 December 2021
Total comprehensive income attributable to the equity holders of the parent 64,093 32,374
Weighted average number of shares (shares) 349,344,281 376,034,064
Basic earnings per share (US$) 0.183 0.086
Total comprehensive income attributable to the owners of the company 64,093 32,374
Weighted average number of shares (shares) 349,344,281 376,034,064
Dilutive effect of share options (shares) 18,368,860 32,367,003
Weighted average number of diluted shares (shares) 367,713,141 408,401,067
Diluted earnings per share (US$) 0.174 0.079
Operating profit
Year ended Year ended
US$'000 31 December 2020 31 December 2021
The operating profit is arrived at after charging / (crediting)
Royalty expense 103,034 46,573
Development expense 6,243 4,384
Amortisation of intangible assets 6,978 9,288
Depreciation of PPE * 43 51
Employee benefit expenses 6,346 14,468
Share-based payment charge 2,747 55,150
Fair value uplift to contingent consideration - 13,610
Other 10,187 18,830
Total admin expenses and cost of sales 135,578 162,354
* PPE - Property, Plant and Equipment
Adjusted EBITDA
Unaudited Normalised Adjusted Results*
Year ended Year ended
US$'000 31 December 2020 31 December 2021
Revenue
Reported Revenue 212,738 98,152
Reported Revenue Growth 262% (54%)
Normalised revenue adjustment (141,634) -
Normalised Revenue 71,104 98,152
Normalised revenue growth 21% 38%
Gross Profit
Reported gross profit 91,694 39,232
Reported gross profit margin 43.1% 40.0%
Normalised gross profit adjustment (68,613) -
Normalised gross profit 23,080 38,439
Normalised gross profit margin 32.5% 40.0%
Adjusted EBITDA
Reported Adjusted EBITDA 80,573 112,679
Reported Adjusted EBITDA margin 37.9% 114.8%
Normalised Adjusted EBITDA adjustment (64,791) (86,950)
Normalised Adjusted EBITDA 15,782 25,729
Normalised Adjusted EBITDA margin 22.2% 26.2%
* Normalised Adjusted EBITDA makes the following adjustments: it excludes 1)
US$142 million of Fall Guys revenue that exceeded 2020 budget; 2) a net gain
from the sale of Fall Guys publishing rights; 3) stock compensation
(share-based payment) expenses and revaluation of contingent consideration; 4)
one-time expenses related to the IPO; and 5) amortisation of IP (but does not
exclude amortisation of capitalised software development costs).
Reconciliations to Adjusted EBITDA
US$'000 Year ended 31 December 2020
Year ended 31 December 2021
Operating profit 77,160 51,879
Share-based payment expenses 2,747 55,150
Amortisation of purchased intellectual property 623 5,599
Depreciation of property, plant and equipment 43 51
Adjusted EBITDA 80,573 112,679
US$'000 Year ended 31 December 2021
Year ended 31 December 2020
Adjusted EBITDA 80,573 112,679
Net Exceptional income from IP disposal & sale of publishing rights - (99,971)
Non-recurring, one-time expenses related to November 2021 IPO 623 7,857
Exceptional bonus payment relating to sale of publishing rights - 5,164
Outperformance of Fall Guys (64,864) -
Normalised Adjusted EBITDA 15,782 25,729
Intangible Assets Goodwill Intellectual Property Royalty Rights Development Total
Cost
Cost
As at 31 December 2019 - 770 2 21,889 22,661
Additions - business combinations 159 23,414 - - 23,573
Additions - - - 22,175 22,175
As at 31 December 2020 159 24,184 2 44,064 68,409
Additions - business combinations 65,410 35,780 - - 101,190
Additions - - - 34,381 34,381
Disposals - - - (14,570) (14,570)
As at 31 December 2021 65,569 59,964 2 63,875 189,410
Amortisation and impairment
As at 31 December 2019 - 308 - 9,391 9,699
Amortisation charge for the period - 623 - 6,355 6,978
As at 31 December 2020 - 931 - 15,746 16,677
Amortisation charge for the period - 5,651 2 3,688 9,341
As at 31 December 2021 0 6,582 2 19,434 26,018
Carrying amount
As at 31 December 2019 - 462 2 12,498 12,962
As at 31 December 2020 159 23,253 2 28,318 51,732
As at 31 December 2021 65,569 53,382 - 44,441 163,392
Consolidated Statement of Changes in Equity
US$ '000s Share capital Share premium Translation reserve Retained earnings Total Devolver Equity Non- Controlling interest Total equity
1 2,927 - 17,714 20,642 - 20,642
Balance at 31 December 2019
Profit for the period - - - 64,093 64,093 - 64,093
Currency translation differences - - - - - - -
Transactions with owners in their capacity as owners
Dividends - - - -10,000 -10,000 - -10,000
Issue of shares - 20,867 - - 20,867 - 20,867
Exercise of share options - -6,000 - - -6,000 - -6,000
Shareholder share buy-back - -17,794 - -3,042 -20,836 - -20,836
Share-based payments - - - 2,747 2,747 - 2,747
Total transactions with owners - -2,927 - -10,295 -13,222 - -13,222
1 - - 71,512 71,513 - 71,513
Balance at 31 December 2020
- - - 32,451 32,451 -77 32,374
Profit for the period
Currency translation differences - - -737 - -737 - -737
Other -2,246 -2,246 - -2,246
Transactions with owners in their capacity as owners
Dividends - - - -30,000 -30,000 - -30,000
Issue of shares 43 120,033 - -664 119,412 - 119,412
Share-based payments - - - 55,150 55,150 - 55,150
Total transactions with owners 43 120,033 - 24,486 144,562 - 144,562
Balance at 31 December 2021 44 120,033 -737 126,203 245,543 -77 245,466
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