REG - tinyBuild, Inc. - 2023 Half Year Results
26/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230926:nRSZ5927Na&default-theme=true
RNS Number : 5927N tinyBuild, Inc. 26 September 2023
26 September 2023
tinyBuild, Inc
("tinyBuild" or the "Company")
2023 Half Year Results
tinyBuild (AIM:TBLD), a premium video games publisher and developer with
global operations, is pleased to announce its unaudited results for the 6
months ended 30 June 2023.
Financial highlights:
· Revenue of $23.3m (H1 2022: $28.8m), 19% lower primarily due to a
sharp drop in development service revenues and underperformance of Versus Evil
· Adj EBITDA¹ loss of $1.2m (H1 2022: $9.9m), due to lower
proportion of revenues from first party titles and higher development cost
amortisation
· Adj. Operating Loss2 of $4.7m (H1 2022: $6.8m), reflecting higher
G&A costs
· Cash Flow from operating activities dropped to $6.6m (H1 2022:
$8.8m), reflecting lower cash profit partly offset by positive net working
capital contribution
· One-off impairment of development costs ($18.3m) and of
intangible assets ($8.9m) reflecting the cancellation of some titles and lower
revenue prospects for other titles
· Net cash position of $14.3m (Dec 2022: $26.5m), after $16.9m
investment in game development costs (H1 2022: $14.2m). Cash position at the
end of December 2023 expected to be between $10-20m, as previously
announced
(
1) Includes amortisation of Development costs. Excludes one-off impairment of
Development costs ($18.3m), goodwill ($6.1m) and other intangibles ($2.8m),
and share-based compensation expenses (see note 6).
(2) Includes amortisation of Development costs. Excludes one-off impairment of
Development costs ($18.3m), goodwill ($6.1m) and other intangibles ($2.8m).
Operational highlights:
· Release of new titles such as Rhythm Sprout, Farworld Pioneers
and The Bookwalker, plus expansion of catalogue with the launch of VR titles
for Kill It With Fire, Not For Broadcast and Hello Neighbor: Search and
Rescue, alongside platform launches.
· Contribution from own-IP decreased to 65% of group revenue (H1
2022: 83%), due to stronger performance of third-party titles, both from back
catalogue and new releases.
· Strong back catalogue sales representing 93% of total revenues
(H1 2022: 99%), demonstrating the Company's ability to extend games' life
cycles and support investments in new titles.
· Acquisition of NotGames, a UK-based studio, for an upfront cash
consideration of $1.5m plus max contingent consideration of $4.2m, subject to
stretched financial targets. NotGames is the developer studio of Not For
Broadcast, a critically acclaimed full motion propaganda simulator.
Directorate change:
· On 29 March Luke Burtis, Chief Operating Officer (COO) and Board
Member, resigned from his board position and management role to spend more
time with his family. As the Company continues to move towards the more
decentralised structure set out at the Capital Markets Day in June 2022, the
responsibilities of the COO role have been distributed among a wider group of
decision-makers, giving individuals and teams more autonomy and accountability
for their areas of responsibility.
· On 29 June Tony Assenza, Chief Financial Officer (CFO) and Board
Member, resigned from the Company and the Board. On the same date, tinyBuild
announced that Giasone (Jaz) Salati was appointed CFO and Michael Schauble
Chief Commercial Officer. Jaz joined the Board of Directors on 3 August 2023.
Employee Benefit Trust:
● The Employee Benefit Trust continued to purchase ordinary shares
on the market and now holds a total of 1,520,864 ordinary shares as at 25
September 2023. The EBT was set up in 2022 for the benefit of current and
future employees and will continue to act independently of the Company to
satisfy potential future option exercises of vested options granted. The
maximum amount of the loan made available to the EBT at any time will be
capped at $10m.
Post-Period End highlights:
● Released new titles Punch Club 2: Fast Forward and I Am Future, plus
platform launches for Hello Engineer, Black Skylands and Potion Craft.
● New episodes of the Hello Neighbor animated series are planned to
release in the second half of the year, in conjunction with important console
updates to Hello Neighbor 2, which continues to enjoy an improvement in the
review score on PC.
Outlook
● The combination of a weak macroeconomic environment, geopolitical
instability and shifts in the industry dynamics, dampens the Company's growth
potential in the near-term.
● The pipeline for coming months includes a number of new titles
(e.g. Critter Cove, Kill It With Fire 2) and further expansion of the
catalogue (e.g. Cartel Tycoon launch on consoles), but headwinds observed in
the first half of the year will likely continue to weigh on profitability.
● Management is hard at work on two main fronts: 1) to accelerate the
operational transition to the 1000-hour game model, and 2) to provide greater
visibility on financial progress of each project on a continuous basis
● In this context, the Board remains confident the Company has
adopted the right strategy and is on track to deliver results in line with
recently-reset expectations.
Alex Nichiporchik, Chief Executive Officer of tinyBuild, commented:
"The first half of 2023 was a story of two halves, with strong underlying
direct sales to consumers, offset by a sudden drop in development service
revenues. The speed of change in the video games industry is insane and we
know we have to adapt quickly if we want to grow above peers. For this reason,
we have been gradually shifting towards what we call the 1000-hour game."
"In a difficult environment we continue to invest cautiously in higher-budget
games that have the potential to become very large franchises. We are setting
new Company records in terms of wishlists on our new IP and leveraging our
decentralised structure to fit the different reality of each development team,
wherever they are in the world."
"Our core strategy hasn't changed: we are building a diversified portfolio of
own-IP, which gives us the best upside with the minimum risk. Once again, I
want to thank our exceptional people for their enthusiasm and dedication - we
have achieved a lot so far and we can look to the future with cautious
optimism."
Enquiries:
tinyBuild, Inc investorrelations@tinybuild.com (mailto:investorrelations@tinybuild.com)
Alex Nichiporchik - Chief Executive Officer
Giasone (Jaz) Salati - Chief Financial Officer
Michael Schauble - Chief Commercial Officer
Berenberg (Nominated Advisor and Joint Broker) +44 (0)20 3207 7800
Mark Whitmore, Ciaran Walsh, Milo Bonser
Numis (Joint Broker) +44 (0)20 7260 1000
Hugo Rubinstein, Tejas Padalkar
SEC Newgate (Financial PR) tinybuild@secnewgate.co.uk
Robin Tozer, Bob Huxford, George Esmond +44 (0)7540 106366
About tinyBuild:
Founded in 2013, tinyBuild (AIM: TBLD) is a leading premium AA-rated and indie
video games publisher and developer. tinyBuild has a strong portfolio of over
80 titles and it strategically secures access to IP and partners with
developers to establish a stable platform on which to build multi-game and
multimedia franchises.
Headquartered in Bellevue, Washington, USA, the Company has key operations
worldwide, with employees, contractors or partners in multiple locations
across five continents. tinyBuild's geographic diversity enables it to source
high-potential IP, cost-effective development resources and a loyal customer
base through innovative grassroots marketing.
tinyBuild was admitted to AIM, a market operated by the London Stock Exchange,
in March 2021.
For further information, visit: www.tinybuildinvestors.com
(http://www.tinybuildinvestors.com) .
OPERATIONAL REVIEW
The first half of 2023 was dominated by macroeconomic issues with the
trade-off between high inflation and slowing growth aggravating seemingly
increased geopolitical tension between US and Europe on one side, and Russia
and China on the other side. Central banks had no choice but to increase
interest rates, which in turn increased pressure on consumers, via higher
mortgage costs among others.
Against this difficult backdrop, global video games sales and the number of
players are expected to grow in 2023, after a mild slowdown in 2022. More than
offsetting this positive trend tinyBuild, alongside some industry peers, saw a
sharp decline in development service revenues as many distribution partners
reduced or paused their investments in content. It is too early to say if some
of the lost revenues will return in the form of lower cannibalisation and
increased sales direct to consumers, so the Company has quickly adopted a
conservative cash management and capital allocation policy.
The Company already identified in 2022 the need to focus on relatively larger,
more recognisable franchises that can command player's attention in a crowded
environment, games with which players can spend over a thousand hours. There
is a direct correlation between long-term sales and system-driven games where
customers immerse themselves for several hours every day for months. We see
this very clearly in our catalogue data. Alongside larger-budget titles we
continue to scout work for indie developers and studios that can grow over
time.
The pipeline of new titles has been realigned to maximise the long-term
revenue potential, while maintaining a well-diversified portfolio. The
progress of every project has also been reviewed and the investments resized
where necessary.
tinyBuild operational model also continued to evolve reflecting industry
trends such as multiplatform development and virtual reality (VR). AI may
offer some productivity gains and in the long it may even improve videogames
engagement, for example through more meaningful interactions with non-player
characters (NPCs).
In the first half, back catalogue and own-IP titles contributed 93% and 65% of
total revenue respectively, broadly in line with the average of the past five
years. New records in terms of playlist count following the announcement of a
new title have been set with a handful of promising higher-budget games under
development, including the already announced Ferocious and SAND.
In an uncertain environment, the Board is pleased with the recent changes to
the executive team and it is confident the company is progressing in line with
expectations for the financial year 2023.
Current portfolio and pipeline
In 2023, tinyBuild release schedule is slightly skewed towards the second half
of the year. New game launches in the first six months performed in line with
expectations and some back-catalogue titles performed strongly as we continue
to invest to strengthen existing franchises.
In the first six months of the year, tinyBuild published three new games and
expanded the back catalogue with version 1.0, downloadable content ("DLC") and
new platforms launches:
● Rhythm Sprout (PC and consoles) - Step to the rhythm and fight to
the beat. A handcrafted rhythm action game with original music and a wacky
story mode
● Farworld Pioneers (PC and consoles) - A vast colony-builder. An
open world, sci-fi sandbox in PVP, PVE, and co-op
● The Bookwalker (PC and consoles) - A narrative adventure. You play
as Etienne Quist, a writer-turned-thief with the ability to dive into books to
steal Thor's Hammer, Excalibur and more.
● Kill It With Fire, Not For Broadcast and Hello Neighbor (VR version)
And after the end of the period, tinyBuild published:
● Punch Club 2 - A fighter management sim
● I Am Future - a base-building game set on the ruins of a former
civilisation
● Hello Engineer, Black Skylands and Potion Craft (platform
launches)
Looking at the rest of 2023 and beyond, we announced a number of new titles,
including:
● Critter Cove - a cozy life sim adventure that takes places across a
string of islands in a colorful and mysterious open world
● Tamarak Trail - A deck-building roguelike, with customisable dice as
you battle through randomly generated trails
● Lil' Gardsman - A deduction adventure. Lil - an unlikely 12-year-old
hero - is tasked with deciding the fate of over 100 unique characters
● Kill It With Fire 2 - An interdimensional action comedy game about
murdering spiders. As The Exterminator, you'll travel across the multiverse
● Slime 3K - a rogue-lite shooter starring a big blob of jelly
● RAWMEN - a light hearted, third person, food fighter. Battle
alongside or against your taste buds (2-8 players), pitting average cooks with
a talent for hurling fiery feasts against one another
● Streets of Rogue 2 - an immersive RPG sandbox set in a vast
randomly generated open world that gives you maximum freedom to fight, sneak,
hack, farm, build, steal, or talk your way to power
● Stray Souls - an immersive action-horror game about terrifying
creatures, mind-bending puzzles, and family secrets
● Pigeon Simulator - a 'physics sandbox roguelite about the world's
most notorious birds. and their quest for world domination
● Broken Roads - a narrative-driven RPG set in Australia with a very
distinct look
● Ferocious - a survival shooter in which you will discover a lost
prehistoric world full of deadly creatures under the control of hostile forces
● SAND - A multiplayer sandbox shooter from the developers of Secret
Neighbor
Investing and innovating for growth
In a period of uncertainty in the industry, the Company continuously reviews
the quantum and allocation of investments into new higher-budget and
higher-potential titles, with lower-risk investment in catalogue expansion.
Since before the IPO, tinyBuild's mantra has been to build a well-diversified
portfolio of own-IP that can be scaled into cross-media franchises, and we
remain loyal to that.
Our increasingly nimble and decentralised structure is capable of handling
larger projects, delivering them across platforms, on time, quality and
budget. Recent launches like Punch Club 2 and I am Future are good examples of
how our sophisticated marketing strategy can attract a large audience for a
well-known franchise and for a new IP alike.
In the first half of 2023, the executive team has become even more selective
about signing up new titles, while we continue to take advantage of
opportunities created by an uncertain macroeconomic environment. We adopted
the same cautious approach to develop our first animated series, which will
see new episodes launching in October.
In 2023, M&A multiples still appear anchored to unrealistic expectations,
so we stepped away from some potential acquisitions and preferred to invest
more directly in studios we already have a good working relationship with
(e.g. Not Games), and in titles spawned from our internal studios.
People
After enjoying an extended paternity leave during the first part of the year,
on 29 March, Luke Burtis (COO) announced his resignation from the post of COO
and the Board of tinyBuild to spend more time with his family and work on
exciting new projects. Luke has been with the Company since the beginning and
his contribution to strategy and operations has been invaluable.
On 29 June, after a short period of leave for personal reasons, Tony Assenza,
CFO, resigned from the Company and the Board. Following a Board process,
tinyBuild appointed Giasone (Jaz) Salati as CFO. On the same day, completing
tinyBuild's transition to a more focused management team, Michael Schauble,
previously senior VP of Business Development, was appointed Chief Commercial
Officer. On 3 August, Jaz joined the Board of Directors.
Company-wise, tinyBuild continues to support all its staff (employees and
independent contractors) and their families affected by the war in Ukraine and
it continues to carefully monitor the situation. Having helped staff move out
of the riskiest areas, the Company is now focusing on mental health and
administrative support so everybody can settle in their preferred location
across Europe.
Position and strategy
tinyBuild is well-positioned with a strong pipeline of new titles and a proven
ability to attract, screen and market high-quality game franchises. Our
balanced investment strategy aims at building a diversified portfolio of
high-potential own-IP, and our multimedia franchise model allows us to extend
the life of our IP, maximising our return on investment.
Our medium-term strategy is to expand our position as a leading global video
games developer and publisher, focussing on IP ownership while creating
long-term scalable franchises across multiple media formats. 2023 has seen
significant progress towards that ambition, and I would like to thank all of
our shareholders for their support.
Alex Nichiporchik
Chief Executive Officer
26 September 2023
FINANCIAL REVIEW
Results for the six months ended June 2023 were in line with recently-reset
expectations, and the Company closed one acquisition in the period.
Revenue
In the six months to June 2023, tinyBuild revenues were $23.3m, a 19% decrease
compared to the previous year (H1 2022: $28.8m), primarily attributable to the
$5.9m drop in development services revenues and to continued underperformance
of Versus Evil, only partly offset by the resilient performance of
direct-to-consumer sales. Excluding development services and events, revenues
were flat at $17.5m, highlighting a stronger underlying performance. Back
catalogue performed strongly in the first half, supported by over 80 titles
and by well-established franchises such as Graveyard Keeper. Revenue from
events, primarily DevGAMM, increased to $0.6m from $0.2m as a result of events
reboot in Central and Western Europe.
Adjusted EBITDA and Operating Profit
Adjusted EBITDA is presented net of amortisation of development costs,
excluding impairment of development costs, share-based compensation expenses
and exceptional costs (e.g. legal costs related to M&A), giving a clear,
yet conservative, picture of the business progression. Adjusted EBITDA was
negative $1.2m ($9.9m in H1 of 2022), reflecting a significantly lower revenue
base, a less favourable revenue mix (higher share of third and second party
titles) and an increase in amortisation of development costs ($5.0m in H1 2023
vs $3.8m in H1 2022).
Operating profit for H1 2023 was negative $31.9m (H1 2022: positive $6.8m),
after accounting for the $18.8m impairment of development costs, $2.8m
impairment of intangibles, and $6.1m impairment of goodwill. Excluding the
$27.7m one-off impairment charges, Adjusted Operating Profit was negative
$4.7m, reflecting a lower EBITDA and higher general and administrative
expenses ($13.6m in H1 2023 vs $12.0m in H1 2022), only partly offset by lower
share-based compensation ($0.4m in H1 2023 vs $0.9m in H1 2022).
Finance costs and taxation
Finance costs were immaterial in H1 2023, and taxation credit was $6.4m (H1
2022: $2.3m charge) reflecting the lower taxable income.
Impairment
In H1 2023, tinyBuild incurred substantial charges relating to the impairment
of development costs ($18.8m in H1 2023 vs $0m in H1 2022), M&A-related
intangibles ($2.8m in H1 2023 vs $0m in H1 2022) and goodwill ($6.1m in H1
2023 vs $0m in H1 2022). These non-cash charges reflect the adjustment of
expectations for future revenues of some titles due to the industry-wide
changes and therefore are not expected to recur.
Cash Flow
Cash flows from operating activities was $6.6m ($8.8m in H1 2022), a
relatively modest drop despite the sharper decline in revenues and increase in
costs thanks to more careful cash management and also due to a normalisation
of timing differences that impacted results in the second half of 2022.
Software development costs, mainly consisting of developer salaries, advances,
localisation and porting, was at $16.9m ($14.2m in H1 2022), reflecting a
stabilisation in investment for upcoming pipeline releases.
Financial Position
The net cash position at the end of June 2023 was $14.3m ($26.5m at the end of
December 2022), with the majority of the variation driven by lower revenues
and higher organic investments. tinyBuild has zero debt and a completely
undrawn revolving credit facility of up to $35m.
Events after the reporting date
Giasone (Jaz) Salati was appointed to the Board of Directors on 3 August 2023.
Giasone (Jaz) Salati
Chief Financial Officer
26 September 2023
TINYBUILD INC.
CONSOLIDATED CONDENSED INCOME STATEMENT
6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended 31 December 2022
Note
Unaudited Unaudited Audited
$'000 $'000 $'000
Revenue 4 23,295 28,750 63,295
Cost of sales:
- Cost of sales (13,832) (9,058) (20,592)
- Impairment of development costs 7 (18,288) - (95)
Total cost of sales (32,120) (9,058) (20,687)
Gross (loss)/profit (8,825) 19,692 42,608
Administrative expenses:
- General administrative expenses (13,561) (12,000) (23,328)
- Impairment of intangible assets 7 (8,908) - (11,075)
- Share-based payment expenses (367) (887) (1,726)
- Ukraine/Russia conflict related costs (281) - (1,678)
Total administrative expenses (23,117) (12,887) (37,807)
Other operating income - - 11,122
Operating (loss)/profit (31,942) 6,805 15,923
Finance costs (16) (24) (73)
Finance income 261 8 80
Profit before tax (31,697) 6,789 15,930
Income tax credit/(expense) 6,414 (2,306) (4,417)
(Loss)/profit for the year (25,283) 4,483 11,513
Attributable to:
Owners of the parent company (25,523) 4,457 11,545
Non-controlling interests 240 26 (32)
(25,283) 4,483 11,513
Basic earnings/(loss) per share ($) 5 (0.126) 0.022 0.057
Diluted earnings/(loss) per share ($) 5 (0.126) 0.022 0.056
Adjusted EBITDA 6 (1,249) 9,882 24,355
Adjusted total comprehensive income attributable to the owners per share ($) 6 0.010 0.023 0.066
TINYBUILD INC.
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
$'000 $'000 $'000
(Loss)/Profit for the year (25,283) 4,483 11,513
Other comprehensive income net of taxation
Exchange differences on translation of foreign operations - may be 94 - 7
reclassified to profit and loss
Total comprehensive (loss)/income for the year (25,189) 4,483 11,520
Attributable to:
Owners of the parent company (25,429) 4,457 11,552
Non-controlling interests 240 26 (32)
(25,189) 4,483 11,520
TINYBUILD INC.
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
30 June 31 December 2022
2023
Unaudited Audited
ASSETS Note $'000 $'000
Non-current assets
Goodwill 7 29 3,746
Other intangible assets 7 65,180 76,638
Property, plant and equipment:
- owned assets 846 794
- right-of-use assets 282 342
Deferred tax assets 4,934 -
Trade and other receivables 405 406
Total non-current assets 71,676 81,926
Current assets
Trade and other receivables 16,173 25,382
Cash and cash equivalents 14,338 26,496
Total current assets 30,511 51,878
TOTAL ASSETS 102,187 133,804
EQUITY AND LIABILITIES
Equity
Share capital 10 204 204
Share premium 65,593 65,593
Warrant reserve 1,920 1,920
Translation reserve 101 7
Retained earnings 18,754 43,910
Equity attributable to owners of the parent company 86,572 111,634
Non-controlling interest 197 (43)
Total equity 86,769 111,591
LIABILITIES
Non-current liabilities
Lease liabilities 47 97
Contingent consideration 705 -
Deferred tax liabilities - 1,800
Total non-current liabilities 752 1,897
Current liabilities
Trade and other payables 13,862 20,046
Contingent consideration 531 -
Lease liabilities 273 270
Total current liabilities 14,666 20,316
Total liabilities 15,418 22,213
TOTAL EQUITY AND LIABILITIES 102,187 133,804
TINYBUILD INC.
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Warrant reserve Translation reserve Retained Total equity attributable to owners of the parent Non-controlling interest Total
earnings equity
Note $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2022 203 63,546 1,920 - 30,639 96,308 137 96,445
Profit and total comprehensive income for the year - - - - 4,457 4,457 26 4,483
Transactions with owners in their capacity as owners:
Issue of shares, net of transaction costs 1 1,569 - - - 1,570 - 1,570
Issue of shares on exercise of options - 28 - - - 28 - 28
Dividends paid - - - - - - (148) (148)
Share-based payments - - - - 887 887 - 887
Total transactions with owners 1 1,597 - - 887 2,485 (148) 2,337
Balance at 30 June 2022 204 65,143 1,920 - 35,983 103,250 15 103,265
Share capital Share premium Warrant reserve Translation reserve Retained Total equity attributable to owners of the parent Non-controlling interest Total
earnings equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2023 204 65,593 1,920 7 43,910 111,634 (43) 111,591
Loss for the period - - - - (25,523) (25,523) 240 (25,283)
Other comprehensive income:
Foreign exchange differences on translation of foreign operations - - - 94 - 94 - 94
Total comprehensive loss for the period - - - 94 (25,523) (25,429) 240 (25,189)
Transactions with owners in their capacity as owners:
Issue of shares, net of transaction costs 10 - - - - - - - -
Share-based payments - - - - 367 367 - 367
Total transactions with owners - - - - 367 367 - 367
Balance at 30 June 2023 204 65,593 1,920 101 18,754 86,572 197 86,769
TINYBUILD INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
Note $'000 $'000 $'000
Cash flows from operating activities
Cash generated from operations 11 6,289 8,811 19,188
Interest received 261 - 80
Net cash generated from operating activities 6,550 8,811 19,268
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (1,234) - -
Software development (16,925) (14,245) (35,789)
Purchase of intellectual property - - (4,150)
Purchase of property, plant and equipment (287) (554) (1,180)
Interest received - 8 -
Net cash used in investing activities (18,446) (14,791) (41,119)
Cash flows from financing activities
Proceeds on exercise of share options - - 28
Payment of principal portion of lease liabilities (262) (92) (365)
Dividends paid to non-controlling interests - (148) (148)
Net cash used in financing activities (262) (240) (485)
Cash and cash equivalents
Net (decrease)/increase in the year (12,158) (6,220) (22,336)
At beginning of period 26,496 48,832 48,832
At end of period 14,338 42,612 26,496
TINYBUILD INC.
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
1 GENERAL INFORMATION
tinyBuild Inc. ("the Company") is a public company limited by shares, and is
registered, domiciled and incorporated in Delaware, USA. The address of the
registered office is 1100 Bellevue Way NE, STE 8A #317, Bellevue, WA 98004,
United States.
The Group ("the Group") consists of tinyBuild Inc. and all of its
subsidiaries. The Group's principal activity is that of an indie video game
publisher and developer.
The Board of Directors approved this interim financial information on 26
September 2023.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These condensed, consolidated financial statements for the interim half-year
reporting period ended 30 June 2023 have been prepared in accordance with IAS
34 'Interim Financial Reporting'. These interim financial statements do not
constitute full financial statements and do not include all the notes of the
type normally included in annual financial statements. Accordingly, these
financial statements are to be read in conjunction with the annual report for
the year ended 31 December 2022.
The annual financial statements of the Group are prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB"). The Annual Report and
Financial Statements for 2022 have been issued and are available on the
Group's investor relations' website:
https://www.tinybuildinvestors.com/documents-and-presentations.
The Group has applied the same accounting policies and methods of computation
in its interim consolidated
financial statements as in its 31 December 2022 annual financial statements,
except for those that relate to new standards and interpretations effective
for the first time for periods beginning on (or after) 1 January 2023 and have
been adopted in the 2023 financial statements. There are no new and amended
standards and/or interpretations that will apply for the first time in the
next annual financial statements that will have a material impact on the
Group.
Tax charged within the 6 months ended 30 June 2023 has been calculated by
applying the effective rate of tax which is expected to apply to the Group for
the year ending 31 December 2023 as required by IAS 34.
The financial statements have been prepared on the historical cost basis
except for, where disclosed in the accounting policies, certain financial
instruments that are measured at fair value. The financial statements are
prepared in US Dollars, which is the functional currency and presentational
currency of the Company. Monetary amounts in these financial statements are
rounded to the nearest thousand US Dollars (US$'000).
Going concern
The Group has cash and cash equivalents of $14.3m, which is sufficient to
cover its current trade and other payables balance of $13.9m. Furthermore, the
Group has access to a currently undrawn loan facility of up to $35m. In light
of this, the Directors confirm that they have a reasonable expectation that
the Group will have adequate resources to continue in operational existence
for at least twelve months beyond the issuance of these financial statements
and accordingly these financial statements are prepared on a going concern
basis, with no material uncertainty over going concern.
3 SEGMENTAL REPORTING
IFRS 8 'Operating Segments' requires that operating segments be identified on
the basis of internal reporting and decision-making. The Group identifies
operating segments based on internal management reporting that is regularly
reported to and reviewed by the Chief Executive Officer, which is identified
as the chief operating decision maker. Management information is reported as
one operating segment, being revenue from self-published franchises and other
revenue streams such as royalties, licensing, development and events.
Whilst the chief operating decision maker assessed there to be only one
segment, the Company's portfolio of games is split between those based on IP
owned by the Group and IP owned by a third party and hence to aid the readers'
understanding of our results, the split of revenue from these two categories
is shown below.
Game and merchandise royalties 6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
$'000 $'000 $'000
Owned IP 12,765 13,107 26,915
Third-party IP 4,690 4,359 13,105
17,455 17,466 40,020
Three customers were responsible for approximately 51% of the Group's revenues
(30 June 2022: three - 70%, 31 December 2022: three - 67%).
The Group has nine right-of-use assets located overseas with a carrying value
of $272,000 (30 June 2022: six - $374,000, 31 December 2022: seven -
$342,000). The Group also has tangible fixed assets located overseas with a
total carrying value of $687,000 (30 June 2022: $212,000, 31 December 2022:
$623,000). All other non-current assets are located in the US.
4 REVENUE 6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
An analysis of the Group's revenue is as follows: $'000 $'000 $'000
Revenue analysed by class of business
Game and merchandise royalties 17,455 17,466 40,020
Development services 5,224 11,134 22,744
Events 616 150 531
23,295 28,750 63,295
5 EARNINGS PER SHARE
The Group reports basic and diluted earnings per common share. Basic earnings
per share is calculated by dividing the profit attributable to common
shareholders of the Company by the weighted average number of common shares
outstanding during the period, which excludes any treasury shares held by the
Group.
Diluted earnings per share is determined by dividing the profit attributable
to common shareholders by the weighted average number of common shares
outstanding, taking into account the effects of all potential dilutive common
shares, including options.
6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended
31 December 2022
Unaudited Unaudited Audited
$'000 $'000 $'000
Total comprehensive (loss)/income attributable to the owners of the company
(25,523) 4,457 11,545
Weighted average number of shares 203,284,429 203,119,680 203,421,359
Basic earnings/(loss) per share ($) (0.126) 0.022 0.057
6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended
31 December 2022
Unaudited Unaudited Audited
$'000 $'000 $'000
Total comprehensive (loss)/income attributable to the owners of the company
(25,523) 4,457 11,545
Weighted average number of shares 203,284,429 203,119,680 203,421,359
Dilutive effect of share options - 2,135,640 1,481,621
Dilutive effect of warrants - 149,130 -
Dilutive effect of restricted stock awards - 954,654 954,654
Weighted average number of diluted shares 203,284,429 206,359,104 205,857,634
Diluted earnings/(loss) per share ($) (0.126) 0.022 0.056
Pursuant to IAS 33 'Earnings per Share', options whose exercise price is
higher than the value of the Company's security were not taken into account in
determining the effect of dilutive instruments. The calculation of diluted
earnings per share does not assume conversion, exercise, or other issue of
potential ordinary shares that would have an antidilutive effect on earnings
per share.
6 ALTERNATIVE PERFORMANCE MEASURES
The Directors of the Group have presented the performance measures 'Adjusted
EBITDA' and 'Adjusted total comprehensive income attributable to the owners
per share' as they monitor these performance measures at a consolidated level
and they believe this measure is relevant to an understanding of the Group's
financial performance. The Group does not present a 'Diluted Adjusted total
comprehensive income attributable to the owners per share'. Adjusted EBITDA is
calculated by adjusting profit from continuing operations to exclude the
impact of taxation, net finance costs, share-based payment expenses,
depreciation, impairment of intangible assets, amortisation of purchased
intellectual property, acquisition costs, legal and professional costs
associated with the purchase of subsidiaries and intellectual property,
Ukraine related expenses and fair value gains on contingent consideration
liabilities. Adjusted total comprehensive income attributable to the owners
per share is calculated by adjusting total comprehensive income attributable
to the owners of the company to exclude the impact of impairment of intangible
assets, legal and professional costs associated with the purchase of
subsidiaries and intellectual property, Ukraine related expenses and fair
value gains on contingent consideration liabilities. Adjusted EBITDA and
Adjusted total comprehensive income attributable to the owners per share are
not defined performance measures in IFRS. The Group's definition of Adjusted
EBITDA and Adjusted total comprehensive income attributable to the owners per
share may not be comparable with similarly titled performance measures and
disclosures by other entities.
Amortisation of $5.0m (30 June 2022: $3.8m, 31 December 2022: $5.8m) of
software development costs has been included in arriving at Adjusted EBITDA
and Adjusted total comprehensive income attributable to the owners per share
as they are a primary cost in the company's ordinary course of business.
6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
$'000 $'000 $'000
Profit/(loss) for the period (25,283) 4,483 11,513
Income tax expense (6,414) 2,306 4,417
Finance costs 16 24 73
Finance income (261) (8) (80)
Share-based payment expenses 367 887 1,726
Amortisation of purchased intellectual property, brands and customer 1,754
relationships
2,327 3,999
Depreciation of property, plant and equipment 496 224 747
Impairment of intangible assets 27,195 - 11,075
Ukraine/Russia conflict related costs 281 - 1,678
Acquisition costs 27 212 329
Other operating income - - (11,122)
Adjusted EBITDA (1,249) 9,882 24,355
6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended
31 December 2022
Unaudited Unaudited Audited
$'000 $'000 $'000
Total comprehensive (loss)/income attributable to the owners of the company
(25,523) 4,457 11,545
Impairment of intangible assets 27,195 - 11,075
Ukraine/Russia conflict related costs 281 - 1,678
Acquisition costs 27 212 329
Other operating income - - (11,122)
Adjusted total comprehensive income attributable to the owners of the company 1,980 4,669 13,505
Weighted average number of shares 203,284,429 203,119,680 203,421,359
Adjusted total comprehensive income attributable to the owners per share ($) 0.010 0.023 0.066
7 INTANGIBLE ASSETS Purchased intellectual property Software development costs
Goodwill Brands Customer relationships Total
$'000 $'000 $'000 $'000 $'000 $'000
Cost:
As at 1 January 2022 13,202 1,815 4,261 21,320 30,160 70,758
Additions - internally generated - - - - 35,789 35,789
Additions - separately acquired - - - 8,395 - 8,395
Transfers - - - 251 (251) -
As at 31 December 2022 13,202 1,815 4,261 29,966 65,697 114,941
Additions - internally generated - - - - 16,926 16,926
Additions - business combinations 2,418 - - - - 2,418
As at 30 June 2023 15,620 1,815 4,261 29,966 82,623 134,285
Amortisation and impairment:
As at 1 January 2022 - 10 51 2,687 10,853 13,601
Amortisation charge for the year - 121 609 3,269 5,787 9,786
Impairment charge for the year 9,456 675 - 944 95 11,170
As at 31 December 2022 9,456 806 660 6,900 16,735 34,557
Amortisation charge for the period - 36 304 1,987 4,996 7,323
Impairment charge for the period 6,135 - 2,773 - 18,288 27,196
As at 30 June 2023 15,591 842 3,737 8,887 40,019 69,076
Carrying amount:
As at 30 June 2023 29 973 524 21,079 42,604 65,209
As at 31 December 2022 3,746 1,009 3,601 23,066 48,962 80,384
Impairment of goodwill relates to acquisitions made in 2021 and 2023, and
impairment of customer relationships relates to a 2021 acquisition. The
impairment of software development costs reflects lower than expected sales
and future projections, as well as a number of games for which development has
ceased. The recoverable amounts of the consolidated entity's goodwill and
intangible assets have been determined by a value-in-use calculation using a
discounted cash flow model, based on an annual projection period approved by
management and extrapolated for a further 4 years, together with a terminal
value. Where the value in use recoverable amount of the cash-generating units
(CGU's) was not sufficient to support the carrying value, the assets were
impaired. The impairment recognised during the financial period was due to
lower than expected sales and future projections. The following key
assumptions were used in the discounted cash flow model:
● 13% pre-tax discount rate;
● 5.4% to 5.5% per annum projected revenue growth rate;
● 3.0% to 4.7% per annum increase in operating costs and overheads.
8 BUSINESS COMBINATIONS
On 6 April 2023, the Group acquired 100% of the issued share capital of
NotGames Ltd, a private company domiciled and incorporated in the United
Kingdom. NotGames is the development studio of Not For Broadcast, a critically
acclaimed full motion propaganda simulator. The goodwill of $2,418,000
represents our bolstered development capabilities in propaganda genres.
Consideration for the acquisition comprised $1,500,000 initial cash
consideration and a further $1,236,000 of contingent consideration has been
recognised in respect of cash and a variable number of equity instruments
which will be issued in the event of the acquired company meeting certain
financial targets in the future. The fair value of the contingent
consideration has been calculated by estimating the probability of targets
being met and discounting the corresponding liability to its present value.
The potential outcome of the undiscounted contingent consideration ranges
between $Nil and $4,200,000. Acquisition related costs totalling $27,000 have
been recognised in profit or loss within general administrative expenses. The
acquired business contributed revenues of $nil and losses after tax of
$207,000 to the Group. If the business combination took place on 1 January
2023, the contribution would have been $nil revenue and $187,000 losses after
tax.
The fair values of the identifiable assets acquired, and liabilities assumed
at the date of acquisition were:
Book value Fair value adjustments Total
$'000 $'000 $'000
Property, plant and equipment 40 - 40
Trade and other receivables 42 - 42
Cash and cash equivalents 266 - 266
Trade and other payables (30) - (30)
318 - 318
Goodwill 2,418
2,736
Consideration:
Cash 1,500
Fair value of contingent consideration liability 1,236
Total consideration 2,736
As disclosed in note 7, intangible assets including goodwill have been subject
to impairment testing due to lower than expected sales and future projections.
Impairments recognised are disclosed in note 7. The contingent consideration
liability is categorised within level 3 of the fair value hierarchy as one or
more inputs are not based on observable market data, including forecasts.
There has been no change in the fair value of the contingent consideration
from the date of initial recognition up to the reporting date which requires
adjustment, therefore there is no impact on the income statement for the
period. The key unobservable input in the valuation of the contingent
consideration and the recoverable amount of the goodwill is the discount rate,
which management have estimated to be 13%.
9 SHARE-BASED PAYMENTS
The Group operates two share-based payment plans, the Equity Incentive Plan
and a Stock Restriction Agreement, which are detailed as follows:
The Stock Restriction Agreement is a plan that provides for grants of
Restricted Stock Awards (RSA) for the founders of the company and acquired
employees. The awarded shares are made in the Company's ordinary share
capital. The fair value of the RSAs is estimated by using the Black-Scholes
valuation model on the date of grant, based on certain assumptions, and is
charged on a straight-line basis over the required service period, normally
two to three years. The fair value of the 2021 grant is $2.095 per share. The
2021 RSAs vest over 3 years in a 50:25:25 ratio. Each instalment has been
treated as a separate share option grant because each instalment has a
different vesting period. This plan is equity-settled. A reconciliation of
RSAs is as follows:
30 June 2023 31 December
2022
Opening RSA outstanding 477,327 954,654
RSA granted - -
RSA vested - (477,327)
Closing RSA outstanding 477,327 477,327
Weighted average remaining contractual life in years 0.92 1.42
The company has an Equity Incentive Plan that provides for the issuance of
non-qualified stock options to officers and other employees that have a
contracted term of 10 years and generally vest over four years. The stock
options are granted on shares issued by the company. A reconciliation of share
option movements is shown below:
Number of options outstanding Weighted average exercise price ($) Number of options exercisable Weighted average exercise price ($) Weighted average remaining contractual life (years)
At 1 January 2023 3,547,217 1.02 1,812,394 0.94 7.58
Exercised during the period - -
Forfeited during the period (403,685) 0.80
At 30 June 2023 3,143,531 1.06 1,728,204 1.11 7.17
During the period covered by the financial statements, no options were granted
or exercised and no options expired. A total of 403,685 options were
forfeited.
10 SHARE CAPITAL 30 June 31 December 2022
2023
Unaudited Audited
Number Number
Class of share
Ordinary shares of $0.001 each 203,878,238 203,848,987
30 June 31 December 2022
2023
Unaudited Audited
$'000 $'000
Class of share
Ordinary shares of $0.001 each 204 204
204 204
On 17 January 2023, 29,251 Ordinary shares of $0.001 each were issued to
employees for nil consideration. The shares are subject to a 12 month lock-up
period.
11 CASH GENERATED FROM OPERATIONS 6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
$'000 $'000 $'000
Profit/(loss) for the year (25,283) 4,483 11,513
Adjustments for:
Share-based payments 367 887 1,726
Amortisation of intangible assets 7,323 5,577 9,777
Impairment of goodwill 6,135 - 9,456
Impairment of intangible assets 21,061 - 1,714
Gain on contingent consideration - - (11,129)
Depreciation of tangible fixed assets 496 224 747
Loss on disposal of tangible fixed assets 39 - -
Finance costs 16 24 73
Finance income (261) (8) (80)
Income tax (credit)/expense (6,414) 2,306 4,962
(Decrease)/increase in deferred tax liability - 371 (545)
Movements in working capital:
Decrease/(increase) in receivables 9,250 (737) (13,778)
(Decrease)/increase in payables (5,075) (3,914) 5,887
Income tax paid (1,365) (402) (1,135)
Cash generated from/(used in) operations 6,289 8,811 19,188
12 RELATED PARTY TRANSACTIONS
An analysis of key management personnel remuneration is set out below:
Key management personnel remuneration 6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
$'000 $'000 $'000
Aggregate emoluments 1,559 802 2,217
Equity-settled share-based payments 15 61 88
1,574 863 2,305
Transactions with other related parties
The wife of the Company's CEO is a member and manager of DevGAMM LLC. During
the period, DevGAMM LLC paid dividends totalling $Nil (30 June 2022: $148,000,
31 December 2022: $148,000) to this related party. There were no other related
party transactions during the period which require disclosure.
13 CONTINGENT LIABILITIES
In November 2021, tinyBuild acquired Versus Evil LLC ("Versus Evil") and Red
Cerberus LLC ("Red Cerberus") from third parties ("claimants"). The claimants
allege that tinyBuild breached three material obligations under the relevant
Membership Interest Purchase Agreement (the "MIPA"). First, the claimants
allege that tinyBuild was obligated and failed to make timely capital
contributions to Versus Evil during fiscal years 2022 and 2023. Second, the
claimants allege that tinyBuild was obligated and failed to release to the
claimants certain funds that were held back under the terms of the MIPA.
Third, the claimants allege that tinyBuild was obligated and failed to provide
material support to Versus Evil that was promised under the MIPA.
In May 2020, a third party contracted with Red Cerberus to provide consulting
services. tinyBuild acquired Red Cerberus in November 2021 along with the
rights and obligations under the relevant Consulting Agreement and
Nondisclosure Agreement with the third party. The third party alleges that in
2022, a Red Cerberus employee misappropriated the claimant's confidential
information while employed by Red Cerberus and asserts potential losses in
both the United States and Brazil. The third party has submitted a demand for
indemnification against such losses to Red Cerberus.
The Group has obtained professional legal advice and considers that it had
strong and convincing arguments for disputing the claims. At 30 June 2023,
management considered probability of payment to be remote and no provision had
been recognised.
14 SUBSEQUENT EVENTS
Subsequent events have been reviewed and evaluated up to the date that these
financial statements were approved and authorised for issue by the Directors,
and there are no material events to be disclosed or adjusted for in these
financial statements.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR PPUUPBUPWGRARecent news on tinyBuild
See all newsREG - tinyBuild, Inc. tinyBuild Inc - TBLS - Preliminary Unaudited Results to YE 31 Dec 2023
AnnouncementRCS - tinyBuild, Inc. - Investor Presentation via Investor Meet Company
AnnouncementREG - tinyBuild, Inc. tinyBuild Inc - TBLS - Notice of Results
AnnouncementREG - tinyBuild, Inc. tinyBuild Inc - TBLS - Holding(s) in Company
AnnouncementREG - tinyBuild, Inc. tinyBuild Inc - TBLS - Holding(s) in Company
Announcement