REG - tinyBuild, Inc. - AGM Trading Update and Directorate Change

tinyBuildAnnouncement

29/06/2023 07:00

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RNS Number : 3036E  tinyBuild, Inc.  29 June 2023

29 June 2023

 

tinyBuild, Inc

("tinyBuild" or the "Company")

 

AGM Trading Update and Directorate Change

 

 

tinyBuild (AIM:TBLD), a premium video games publisher and developer with
global operations, provides an update on trading ahead of its AGM later today.

 

Highlights

 

● First-half performance below expectations due to lower contribution from
platform deals and the underperformance of Red Cerberus and Versus Evil has
resulted in a material reduction to FY consensus revenue and a more acute
reduction in Adj. EBITDA in 2023 and 2024.

●   Strong reception to new game announcements supports the Company's
refocus on building new large own-IP and the move away from third party
publishing and services.

●  Cash position at the end of December 2023 expected to be between
$10-20m, below the previous expectations of at least $26.5m.

●    Re-evaluation of the future potential of some underperforming
back-catalogue titles may translate in asset impairments and targeted studio
reorganisation.

●   Tony Assenza, Chief Financial Officer (CFO), has resigned for personal
reasons. Giasone (Jaz) Salati to be appointed Chief Financial Officer and
Michael Schauble to be appointed Chief Commercial Officer with immediate
effect.

 

Current trading

As witnessed across the industry, distribution platforms have been
significantly downsizing the amount of investments in non-AAA games. Platform
deals have been an important driver of tinyBuild's growth and profitability
over the past few years, and the Board expects this downward trend to
materially impact revenues.

 

In addition, Versus Evil and Red Cerberus (both acquired in November 2021)
continued to underperform in H1 2023. Strategic options are under
consideration to best deliver the value of the businesses as the Company
focuses on its core strategy of developing long lasting franchises internally.

 

Partly offsetting these headwinds, catalogue titles continue to perform well,
with franchise expansion (i.e. sequels), v1.0 launches and the addition of new
platforms, including VR. Furthermore, the strong reception to recent new game
announcements supports tinyBuild's decision to invest in new larger-budget
own-IP with high replayability. The Game as a Service nature of some of these
titles means the revenue contribution tends to be more evenly distributed over
a longer period of time while development costs are concentrated in the early
years.

 

The reduction of adjusted EBITDA in 2023 and 2024 will be more substantial,
due to a significant increase in development cost amortisation and a slightly
higher percentage of revenues paid out to developers as royalties adding to
the flow through from lower platform deals. As a combination of the above,
cash at the end of December 2023 is expected to be between $10-20m, below the
previous expectations of at least $26.5m.

 

In the current macro environment, the Company is also reviewing a number of
titles, both under development and already launched, to assess the revenue
potential. The reorganisation of some studios and impairment of certain assets
may follow to achieve the optimal cost base.

 

As in 2022, the release schedule for the current year is weighted towards the
second half of the year and the Company will continue to evaluate the progress
of titles currently under development and select the best release window to
maximise the lifetime value of each IP. The Board expects to complete the
transition workstreams, including the impairment, reorganisation and the
ongoing assessment of games, by no later than the Company's FY23 results in
March 2024.

 

 

Portfolio and pipeline

In the first half of 2022, tinyBuild released Rhythm Sprout (PC and Consoles),
Farworld Pioneers (PC and Consoles), and The Bookwalker (PC and Consoles). The
Company is also investing in new technologies having successfully launched new
VR titles in the first half, including Hello Neighbor: Search and Rescue, and
Kill it with Fire VR.

 

Back catalogue titles continue to perform well including platform launches in
the first half (e.g. Not For Broadcast, Despot's Game) and new monetisable
events planned in the second half for Potion Craft, Hello Engineer, Black
Skyland and Cartel Tycoon. Punch Club 2, the anticipated sequel to one of
tinyBuild's classic games, is also scheduled to release in the second half,
adding to new titles like I am Future, a cosy survival game in a flooded
post-apocalyptic city.

 

tinyBuild also recently announced a record number of new titles for future
release, including Critter Cove, Slime 3K, Kill it with Fire 2, FEROCIOUS,
Level Zero and Sand, adding to the previously announced Broken Roads, RAWMEN,
Stray Souls and Pigeon Simulator.

 

Board Changes and People

After a short period of leave for personal reasons, Tony Assenza, CFO, has
resigned from the Company and the Board with immediate effect. Following a
Board process, tinyBuild announces that Giasone (Jaz) Salati has been
appointed CFO with immediate effect and he is expected to join the Board,
subject to customary due diligence checks and a further announcement will be
made in due course. Completing tinyBuild's transition to a more focused
management team, Michael Schauble, previously senior VP of Business
Development, has been appointed Chief Commercial Officer.

 

Jaz has over twenty years' experience as an equity research analyst in the TMT
space previously working at Credit Suisse, Redburn and Macquarie, and was
ranked #1 Stock Picker in 2019. Alongside his career in finance, he worked on
innovation and reorganisation for the CEOs of media and tech companies, more
recently at Ascential (LSE: ASCL). Jaz read economics at La Sorbonne and
attained a master's degree in Finance from LBS.

 

Michael has over 18 years' experience in the video games industry and has a
track record of building successful teams. Prior to joining tinyBuild, in
August 2019, he worked at Microsoft for four years where he helped to
spearhead key initiatives such as Game Pass, Microsoft AR/VR, and backwards
compatibility programmes. In his new senior management role as Chief
Commercial Officer, Michael will leverage his experience in building strong
relationships between tinyBuild's developers and partners and oversee the
expansion of our IP into cross-media.

 

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.

 

Outlook

As reported by other companies in the gaming sector, the market backdrop has
become increasingly challenging with distribution platforms reducing
investment. As a result of this impact and underperformance at Versus Evil and
Red Cerberus, the Board is now expecting to be materially behind revenue
market expectations in 2023 and 2024. This impact becomes more acute at the
Adjusted EBITDA level as a result of increased development costs, amortisation
charges and a less favourable revenue mix.

 

FY23 is expected to be a low point in terms of financial performance and cash
levels and the Board is looking forward to the contribution of new larger
budget games scheduled to launch in 2024 and 2025. Early indicators of
consumer traction across the Company's pipeline, including the reception of
recently announced games, are encouraging and bode well for the future.

 

As previously indicated, tinyBuild continues to carefully review the impact of
the conflict in Ukraine and the fluid macroeconomic situation.

 

Alex Nichiporchik, Chief Executive Officer of tinyBuild, commented:

"As CEO and a major shareholder, I am disappointed with the H1 performance.
What fills me with confidence is that we have an incredibly strong pipeline of
new games under development with the potential to create multiple new
long-lasting franchises.

 

"Our diverse portfolio, strong back catalogue and financial position will
allow us to reposition the Company for growth and capture advantageous
opportunities when peers may be forced to retrench. We are transforming the
Company at speed to adapt to new industry trends."

 

"On a personal note, I am sorry to see Tony leave the team and wish him the
best for the future. At the same time, I am delighted to have Jaz as our new
CFO and Michael as our CCO: their competencies and drive will be key to
accelerate growth, while ensuring financial discipline and maintaining the
positive culture we have built at tinyBuild."

 

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 (Joint Broker and Nominated Adviser)             +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, Harry Handyside, Molly Gretton   +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 strategically secures access to
IP and partners with developers to establish a stable platform on which to
build multi-game and multimedia franchises. tinyBuild has a strong portfolio
of over 40 titles, and its upcoming pipeline includes over 20 new titles
currently in development.

 

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) .

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