REG - Devolver Digital - Unaudited preliminary results
18/04/2024 07:00
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RNS Number : 1406L Devolver Digital, Inc. 18 April 2024
18 April 2024
The information contained within this announcement is deemed by the company to
constitute inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of the domestic law of the United Kingdom
by virtue of the European Union (Withdrawal) Act 2018 (as amended) ("UK
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public domain.
Devolver Digital, Inc.
("Devolver Digital", "Devolver" or the "Company", and the Company together
with all of its subsidiary undertakings "the Group")
Unaudited preliminary results for year ended 31 December 2023
FY23 revenues in line with expectations
Return to profit in 2H 2023
Return to growth expected in 2024
Devolver Digital, an award-winning digital publisher and developer of
independent ("indie") video games, announces unaudited results for the year
ended 31 December 2023. All figures relate to this period unless otherwise
stated.
'Rebuild' year to drive a return to growth in 2024
· Good progress with the rebuild:
o High quality IP, five new titles with 80+ Metacritic scores.
o Major 4Q releases performed well.
o Decision made to delay high-potential titles to FY24 to ensure the
highest-quality experiences on release. Only three major releases, fewer than
in a typical year.
o Recovery at Good Shepherd following early FY23 restructure.
· Acquisition of System Era increases first-party IP titles to 16,
including 7 franchises:
o System Era performing in line with expectations since acquisition.
· Back catalogue revenue up 25% on strong demand for Cult of the Lamb
and Inscryption.
· Leadership and structures strengthened in January 2024 to support
long-term growth:
o Harry Miller (founder, former Executive Chair) succeeded Douglas Morin as
CEO.
o Kate Marsh (Senior Independent Director) appointed Non-Executive Chair.
o Graeme Struthers (founder) appointed to the Board as COO.
· Declined subscription deals which under-valued our IP and future
revenue opportunity.
Strong recovery in 2H 2023
· Revenues in line with FY23 expectations.
· Unusually quiet release schedule for major titles impacted revenues
and margins:
o FY23 revenues down 31% to US$92m.
o FY23 Adjusted Gross Profit (pre impairments) fell 42% to US$27m.
· Strong recovery in 2H 2023.
o Revenues up 10% 2H 2023 versus 1H 2023.
o 62% growth in Adjusted Gross Profit (pre impairment) versus 1H 2023.
o Return to positive Adjusted EBITDA in 2H 2023.
· Robust balance sheet with net cash of US$42.7m.
o Lower net cash reflects US$6.8m share purchase for the Employee Benefit
Trust and US$18m acquisition of System Era and fees net of acquired cash.
· Adjusted EBITDA excluding one-off non-cash impairments was US$1.7m in
2023 (2022: US$23.2m).
· Statutory net loss for 2023 was US$12.6m (2022: US$91.5m loss),
mainly driven by the non-cash impairments and US$5.5m of non-cash share-based
payments.
Current trading and outlook
· On track for previous guidance of profitable growth in 2024 and
continuation into 2025.
· Healthy pipeline and 2024 release schedule:
o 2024: 10 new titles to be released across Devolver Group.
o 2024: New releases expected to be more evenly balanced through the year.
o 2024-2026: healthy pipeline of more than 30 new titles.
· Back catalogue momentum:
o FY23 strength sustained in 1Q 2024.
o Back catalogue of 120 titles for 2024 provides opportunities for further
monetisation.
· Cost-saving initiatives underway to support margin and strong net
cash position:
o Professional fees (adjusted for exceptionals) fell 28% year-over-year.
o Average cost per title is expected to reduce more than 30% in 2024 versus
2023, while strict focus on quality is maintained.
· System Era to make a full year contribution in 2024.
Harry Miller, Chief Executive Officer of Devolver, said:
2023 was a rebuild year for Devolver. We needed to take long-term decisions
to get us back to growth and profit in 2024 and future years. For example,
we pushed back high potential titles to 2024, we turned down subscription
deals that under-valued our IP and we reduced our cost base. This is all
about doubling down on what we are good at: delivering a strong pipeline of
fun and creative new titles. I'd like to thank our talented team for their
dedication and energy during a challenging year. It's thanks to our people
that we had a strong finish to 2023, with 10% 2H sequential revenue growth and
a return to profit in the second half of the year.
Looking ahead to 2024, our recent acquisition System Era is performing well
and gives us opportunities to develop into expandable games. We have a busy
and exciting release schedule of new titles such as Pepper Grinder, The Plucky
Squire, Anger Foot and Neva. Back catalogue sales are expected to continue
to benefit from momentum from Cult of the Lamb and Inscryption which have
continued to perform strongly up to the end of 1Q 2024 and help to offset the
ongoing trend of lower revenues from subscription deals in 2023. This
momentum, allied to our strong balance sheet and net cash of US$43m at year
end, supports our confidence of returning to profitable growth in 2024
continuing into 2025."
About Devolver Digital
Devolver is an award-winning video games publisher in the indie games space
with a balanced portfolio of third-party and own-IP. Devolver has an emphasis
on premium games and has published over 120 titles, with more than 30 titles
in the pipeline scheduled for release over the next three years. Devolver has
in-house studios developing first-party IP titles and a complementary
publishing brand. Devolver is registered in Wilmington, Delaware, USA.
Enquiries
Devolver Digital, Inc. ir@devolverdigital.com
Harry Miller, Chief Executive Officer
Daniel Widdicombe, Chief Financial Officer
Zeus (Nominated Adviser and Sole Broker) +44 (0)20 3829 5000
Nick Cowles, Jamie Peel, Alexander Craig
(Investment Banking)
Ben Robertson (Equity Capital Markets)
FTI Consulting (Communications Adviser) devolver@fticonsulting.com
Jamie Ricketts / Dwight Burden / Valerija Cymbal / Usama Ali +44 (0)20 3727 1000
STRATEGIC AND OPERATING REVIEW
Return to growth in 2H 2023 after a quieter 1H 2023
As we indicated in August 2023, we expected Group Adjusted EBITDA to be at
least break-even in 2023, before a return to growth in 2024 continuing into
2025. It is thanks to our talented team and their dedication that we made this
happen during a challenging year, posting a strong finish to 2023 with 10%
sequential revenue growth and a return to profit in the second half of the
year.
Devolver released 11 new titles in 2023, including three major releases (Terra
Nil, Wizard with a Gun and The Talos Principle 2), with the latter two coming
out at the tail-end of the year. In contrast, Devolver made five major title
releases out of a total of 12 games in 2022. As a result of the quieter
release schedule for major titles in 2023, as expected, revenue and
profitability were lower than 2022. As a consequence, back catalogue titles
accounted for an unusually high 83% of total revenues in 2023 due to the
lighter new release contribution.
During 2023 we took long-term - sometimes tough - decisions to get us back on
track. In particular, we pushed back high potential titles to 2024 that were
supposed to land in 2023, such as The Plucky Squire, Anger Foot, Pepper
Grinder and Stick It to the Stickman. It was the right long-term decision
to increase investment on development, quality control and marketing - and
give them time - to give these titles the best possible chance of success.
After a strong period of growth for subscription deals in 2021 and 2022, we
declined certain subscription deal offers that we considered undervalued the
proposed games' value and revenue opportunity in 2023 and 2024. Partly due
to these strategic decisions, revenues from platform subscription deals halved
in 2023 compared to 2022, accounting for 16% of total revenues compared to
over 23% in 2022. Subscription deals with key platforms remain a part of our
long-term growth strategy, but we expect lower levels of revenue from direct
subscription deals to continue over the coming few years.
There were several positive developments during 2023, including our publishing
subsidiary Good Shepherd ("GSE") posting a steady recovery following the
restructuring it underwent early in the year, greatly reducing EBITDA losses
by the 4Q of 2023. GSE recently announced a significant partnership with
Rebellion (Sniper Elite) to develop and publish video game adaptations based
on stories from the beloved 2000 AD universe, the home of Judge Dredd, Rogue
Trooper, ABC Warrior and more, as well as Rebellion's other comic IP,
including Roy of the Rovers and Battle Action. Cult of the Lamb back catalogue
sales continued to out-perform expectations throughout 2023 and have
maintained good momentum through the 1Q of 2024.
Several market events held in 2023 also built excitement about our future
releases for 2024 and 2025. Sony held its PlayStation Showcase 2023 in May,
featuring 36 games in total including pending Devolver titles The Plucky
Squire and Neva. The Summer Games Fest 2023 included Devolver Direct, in which
several new titles were introduced or updated including Baby Steps and Human
Fall Flat 2, the highly anticipated sequel to Human Fall Flat which sold over
50 million copies worldwide since release in July 2016. In 2023, Devolver
Direct saw its highest viewership ever, with over 400,000 peak concurrent
views, ranking among the top 10 summer game showcases. All these developments
bode well for the outlook in 2024 and beyond.
Our busy release schedule for 4Q 2023 featured major titles Wizard with a
Gun and The Talos Principle 2, among others, which performed well. Our
momentum in the second half of 2023 reflects our high quality IP selection,
with five new titles securing 80+ Metacritic scores.
Hit releases support strong back catalogue performance
Our back catalogue includes all titles released in or prior to the last
financial year (2023 or earlier). As of 31 December 2023, the back catalogue
consists of 120 titles, including numerous indie cult classics, supporting
highly diversified revenues.
Maintaining back catalogue revenue growth at over 15% a year for the last five
years has required considerable effort from members of our Store Team. Keeping
positive sales performance from released titles requires a skilled team and
personal relationships with the platforms to find new and creative ways to
promote titles - and thus extend the revenue profile.
For 2023, the August 2022 hit release Cult of The Lamb provided strong revenue
momentum through the year. The contribution from Cult of The Lamb was the
principal driver for a 25% year-over-year increase in overall back catalogue
revenues in 2023. BAFTA-winning Inscryption, an October 2021 release, also
continued to perform well in 2023. However, some back catalogue titles saw
weaker performance in 2023 compared to 2022, partly as a result of lower
bundled subscription deals from console platforms, a trend identified at the
start of 2023. Devolver continues to work hard to stimulate back catalogue
sales through a combination of new ports, additional DLC, strategic marketing
and strategic pricing strategies.
Acquisition of System Era expands our growth opportunities
Devolver Digital acquired System Era in late October 2023 for an initial
consideration of US$18m net of cash acquired. System Era is an excellent
strategic and cultural fit with Devolver, giving us an opportunity to expand
outside our core strength of indie titles into expandable games. System
Era's team comes with knowledge of expandable game-style development, as well
as live operations technology and existing IP.
Devolver will capitalise on System Era's development expertise in creating
quality, community-centred, long-life titles, which it has proven through the
success of its debut title Astroneer, a game that in 2022 achieved its highest
annual unit sales figures, six years after initial release. We consider
Astroneer to be a high calibre addition to Devolver's portfolio of
high-quality intellectual property.
System Era's founding team comes from AAA backgrounds, having held senior
positions at Ubisoft and Microsoft, working on franchises such as Halo,
Assassin's Creed and Watch Dogs, and have instilled a strong team culture that
aligns with Devolver Digital.
The total cash-free debt-free consideration of up to US$40m includes US$22m
initial consideration, made up of US$20m cash on closing and US$2m of shares
and cash to be issued on the 12-month anniversary of closing. The balance
includes US$10m deferred consideration, and up to US$8m potential earn out
subject to ambitious financial targets, both payable in cash and shares.
Under Devolver's accounting policies, based on an estimated restatement of
System Era management's unaudited numbers, System Era generated revenue of
approximately US$7 million, and adjusted earnings before interest tax
depreciation and amortisation ("EBITDA") of approximately US$3.8 million, in
the preceding 12-months to 30 June 2023. Under Devolver's accounting policies,
the Acquisition is expected to contribute positively to EBITDA in the year
ending 31 December 2024, being the first full year of ownership.
Operating expense containment, selective co-funding on game development
We have taken steps to reduce our cost base to protect our margin and strong
net cash position. A group-wide exercise to reduce overall expenses is
continuing. Rental expenses and other operating and administration fees are
all being optimised for efficiency with continual assessment for cost savings,
and out-sourced professional fees (excluding exceptionals) falling 28%
year-over-year.
In February 2024 Devolver undertook a major headcount reduction in Polish
subsidiary Artificer which will contribute to reduced development expense for
the year. Average cost of released titles in 2024 is expected to be over 30%
lower than 2022 and 2023, reflecting a deliberate recalibration of the mix
between higher cost and lower cost games in 2024.
Separately, as part of the directional move towards more participation in the
live services area, we will introduce co-funding for larger titles where
partners can bring strategic value.
Board and leadership changes
In January 2024 we made the following changes to our leadership and structures
to support our long-term growth plans:
· Harry Miller (founder, former Executive Chair) succeeded Douglas
Morin as CEO
· Kate Marsh (Senior Independent Director) appointed Non-Executive
Chair
· Graeme Struthers (founder) appointed to the Board as COO
Douglas joined Devolver as Chief of Staff in 2020 and was appointed CEO in
2021. He played a key role in Devolver's IPO, strengthened the corporate and
operating structure of the listed company, and championed the acquisition of
System Era Softworks.
Harry is co-founder and former CEO of Devolver, establishing the Company in
2009 with Rick Stults, Graeme Struthers, Nigel Lowrie and Mike Wilson. In
the past 15 years - two of which as Executive Chairman since IPO - Harry has
been instrumental in defining and building Devolver's business and culture
into the award-winning independent video games publisher and developer it has
become. Harry has almost 30 years of video games experience, having
established and managed a number of publishing and development businesses in
the video gaming sector including Ritual Entertainment (co-founder and CEO),
Gathering of Developers (co-founder and President), Hong Kong-based En-Tranz
Entertainment (CEO) and Gamecock Media (President).
Kate Marsh, Senior Independent Director since Devolver's IPO in November 2021,
has been appointed as Non-Executive Chair with effect from January 2024. Kate
stepped down as Chair of the Remuneration Committee to become Chair of the
Nomination Committee and will continue to sit on the Remuneration and Audit
Committees. Kate has more than 30 years of experience in digital and media
industries, having built and managed significant businesses in senior roles
with Sky, GroupM, the BBC, Sony Pictures Television and most recently with
Amazon-owned MGM Studios. Kate serves as a Non-Executive Director on the Board
of FTSE 250 Games Workshop Group plc where she chairs the Remuneration
Committee and has also served at Board level for Mediahuis Ireland (formerly
INM plc).
The Company also announced in January 2024 that Graeme Struthers, Chief
Operating Officer and co-founder of Devolver, joined the Board with effect
from January 2024. Graeme was appointed as Chief Operating Officer in 2022
to oversee a strengthening of the leadership team and operational structures
following the IPO in 2021. Before Devolver, Graeme worked across a number of
games companies, including Virgin Interactive and Electronic Arts.
As part of the board and leadership changes, Jo Goodson (Non-Executive
Director) stepped down as Chair of the Nomination Committee to become Chair of
the Remuneration Committee.
FINANCIAL REVIEW
Unaudited 2023 results to December 31 2023
The unaudited condensed consolidated financial results included in this
announcement cover the Group's combined activities for the year ended 31
December 2023 (prepared in accordance with applicable International Financial
Reporting Standards, "IFRS").
Adjusted results
The following refers to Adjusted results, as presented in the condensed
consolidated financial statements contained within this release. Adjusted
results exclude any one-time exceptional items during the respective periods.
Adjusted EBITDA results are not intended to replace statutory results and are
prepared to provide a more comparable, underlying 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. These results have been presented to provide
users with additional information and analysis of the Group's performance,
consistent with how the Board monitors results. Further details of adjustments
are given in Note 3 to the condensed consolidated financial statements
contained within this annual results release.
P&L results and margins
Full year comparison
Devolver Digital's 2023 performance was muted due to a quieter release
schedule including only three major titles out of a total of 11 games,
compared to five major titles in 2022 out of 12 total releases. As a result,
revenues of US$92.4 million fell 31% year-over-year. Adjusted Gross profit was
US$27.0 million, a greater decline of 42% year-over-year, reflecting: (i) the
overall fall in revenue year-over-year, and; (ii) the greater proportion of
revenues from third party games in 2023.
Adjusted EBITDA before impairments was US$1.7 million compared to US$23.2
million in 2022. Post impairments, 2023 Adjusted EBITDA loss was US$0.5
million, compared to a profit of US$13.9 million in 2022. Devolver recorded a
US$1.5 million impairment to a Good Shepherd title, Hellboy: Web of Wyrd in 2H
2023, reflecting a below-expectation performance since release in October
2023. Total impairments recorded in 2023 were US$2.5 million including US$0.9
million recorded in 1H 2023.
Adjusted Gross Profit margin (pre-impairments) decreased to 29.2% in 2023,
down from 34.4% in the previous year. Gross margin was compressed principally
due to the royalty pay-out mix being heavily weighted towards third party
titles during the year. This compares to 2022 when new first-party IP and
other releases were cushioned while the titles were still in recoup (before
royalties are usually paid out).
Adjusted EBITDA margins (post-impairments) were depressed at negative 0.5% in
2023, compared to a positive margin of 10.3% the previous year. The
compression in 2023 Gross Profit had a direct flow through effect to impact
Adjusted EBITDA, despite successfully containing cash operating expenses at
similar levels as that of full year 2022 (excluding the impact of the System
Era acquisition).
2H 2023 v 1H 2023 comparison
The 2H of 2023 saw a sequential improvement in all major indicators compared
to the trough of 1H 2023. Revenues grew 10% half-over-half, Adjusted Gross
Profit (pre-impairment) rose 62%, and Adjusted EBITDA pre impairments swung to
a US$1.7 million profit, a delta of over US$4 million compared to the 1H 2023
pre impairment loss of US$2.5 million.
Cash Balances
Cash holdings at end of December 2023 were US$42.7 million, a reduction of
US$36.8 million compared to the 2022 year-end balance of US$79.5 million. The
reduction in cash balances during the period was primarily due to: 1) lower
operating cash generation during the period combined with a US$28.0 million
investment in ongoing game development; 2) US$6.8 million provided to the EBT
for the market purchase of c.19m shares, and; 3) US$18 million paid for the
purchase of System Era in late October 2023 including fees, net of acquired
cash.
Employee Benefit Trust (EBT)
Devolver established an Employee Benefit Trust (EBT) in May 2022 to facilitate
stock option exercise by employees and contractors who were awarded 2017 Stock
Option plan stock options and stock units vesting under the 2022 Long Term
Incentive Plan (LTIP). The EBT is a Jersey-incorporated Trust enabling option
exercise and share settlement off-market without impacting market liquidity.
Share purchases by the EBT are funded by way of a loan from Devolver which can
request settlement of the loan at any time in future. The shares held by the
EBT are consolidated within Devolver's capital redemption reserve.
OUTLOOK
We have a proven strategy that has delivered success for the last 15 years.
Looking ahead to 2024, our recent acquisition System Era is performing well
and provides opportunities to move into expandable games. We have a busy and
exciting release schedule of new titles such as Pepper Grinder, The Plucky
Squire, Anger Foot and Neva. Back catalogue sales are expected to continue
to benefit from momentum from Cult of the Lamb and Inscryption which have
continued to perform strongly up to the end of 1Q 2024 and help to offset the
ongoing trend of lower revenues from subscription deals in 2024. This
momentum, allied to our net cash balance of US$43m at 2023 year-end, supports
our confidence of returning to profitable growth in 2024. We expect further
progress in 2025, although Human Fall Flat 2, the anticipated sequel to the
global hit, will not now be released in 2025. We remain very excited about
this title which we believe will set us up for an even stronger 2026. The
Board considers that we are well positioned for future success, and we look
forward to reporting on progress in the year ahead.
Harry Miller
Chief Executive Officer
Notes
1. Financial numbers contained in this release are based on preliminary
unaudited 2023 results. Further details are contained in the 2023 Annual
Report which is available on the Devolver Investor website.
2. January 31, 2024 guidance was for not less than $90 million of revenues
and breakeven Adjusted EBITDA (excluding impairments).
3. Adjusted EBITDA is a non-IFRS measure and is defined as earnings before
interest, tax, depreciation, amortisation (but does not exclude amortisation
of capitalised software development costs), share-based payment expenses,
foreign exchange gains or losses, any one-time non-recurring items and
non-trading items such as revaluation of contingent consideration. In prior
periods, the Group distinguished between Adjusted EBITDA and Normalised
Adjusted EBITDA. This distinction has been removed in the current year
reporting for a simpler, clearer presentation in line with industry peers, and
therefore the Adjusted EBITDA for the year ended 31 December 2022 as
previously reported is no longer presented, and the Adjusted Normalised EBITDA
previously reported is presented as Adjusted EBITDA.
Consolidated Statement of Profit or Loss
Year ended Year ended
31 December 31 December
2023 2022
$'000
$'000
Revenue 92,356 134,565
COST OF SALES
Royalty expense (42,151) (61,448)
Development expense (4,278) (4,520)
Marketing (7,320) (9,148)
Amortisation of software development costs (11,634) (14,124)
Impairment of software development costs (2,455) (22,822)
Total Cost of Sales (67,838) (112,062)
Gross Profit 24,518 22,503
ADMINISTRATIVE EXPENSES
Employee costs (17,499) (14,189)
Stock compensation expense (5,528) (19,621)
Professional fees (4,873) (6,322)
Travel, insurance & other (6,524) (4,848)
Foreign exchange gain/(loss) (9) (673)
Amortisation of intellectual property (3,918) (5,293)
Depreciation of property, plant and equipment (150) (164)
Depreciation of ROU asset (36) -
Impairment of goodwill and intellectual property - (69,973)
Total Administrative Expenses (38,537) (121,083)
Other income / (expenses) 1,011 (549)
Operating loss (13,008) (99,128)
Finance costs (58) ‑
Finance income 1,361 364
Loss before taxation (11,705) (98,764)
Income tax (expense) / benefit (1,019) 7,264
Loss for the year (12,724) (91,500)
Loss for the year is attributable to:
Equity holders of the parent (12,742) (91,475)
Non-controlling interests 18 (25)
Loss for the year (12,724) (91,500)
Non-IFRS measures
Adjusted EBITDA before performance-related impairments
Adjusted EBITDA 1,677 23,210
(458) 13,914
Consolidated Statement of Comprehensive Income
Year ended Year ended
31 December 2023 31 December 2022
$'000
$'000
Loss for the year (12,724) (91,500)
Other comprehensive (loss) / income: Items that may be reclassified
subsequently to profit or loss
1,577 (477)
Exchange differences on translation of foreign operations:
Total comprehensive loss for the year (11,147) (91,977)
Total comprehensive loss is attributable to:
Equity holders of the parent (11,165) (91,952)
Non-controlling interests 18 (25)
Total comprehensive loss for the year (11,147) (91,977)
Consolidated Statement of Financial Position
As at As at
31 December 31 December
2023 2022
$'000 $'000
ASSETS
Non-current assets
Intangible assets
- goodwill 31,963 19,153
- other intangible assets 95,936 65,918
Property, plant and equipment 266 174
Right of use asset 953 -
Employee loans 320 463
Deferred tax assets 8,100 10,088
Total non-current assets 137,538 95,796
Current assets
Trade and other receivables 13,778 16,813
Cash and cash equivalents 42,651 79,493
Employee loans 487 532
Prepaid income tax 2,354 2,185
Total current assets 59,270 99,023
Total assets 196,808 194,819
EQUITY AND LIABILITIES
Equity
Share capital 45 45
Share premium 146,106 146,044
Retained earnings 47,092 54,618
Translation reserve (594) (2,267)
Capital redemption reserve (34,531) (27,707)
Equity attributable to owners of the parent 158,118 170,733
Non-controlling interest (84) (102)
Total equity 158,034 170,631
Non-current liabilities
Trade and other payables 10,361 3,043
Deferred tax liabilities 259 1,045
Lease liability 873 -
Deferred revenue 1,309 -
Total non-current liabilities 12,802 4,088
Current liabilities
Trade and other payables 24,457 17,747
Lease liability 155 -
Deferred revenue 634 2,091
Current tax payable 726 262
Total current liabilities 25,972 20,100
Total liabilities 38,774 24,188
TOTAL EQUITY AND LIABILITIES 196,808 194,819
Consolidated Statement of Financial Position (continued)
The Group revised the reported financials for the year ended 31 December 2022
to reflect an immaterial correction to the tax liability. See Note 1 for
additional information.
Consolidated Statement of Changes in Equity
Equity
attributable to equity holders of the parent
Share Share Capital redemption reserve Translation Retained earnings Attributable to owners of the parent Non- Total
capital
reserve
$'000
$'000
equity
$'000 premium $'000
$'000 controlling interest
$'000
$'000
$'000
Balance at 31 December 2021 44 121,588 - (986) 124,543 245,189 (77) 245,112
Loss for the period - - - (91,475) (91,475) (25) (91,500)
Currency translation differences - - - (1,281) - (1,281) - (1,281)
Other movements - 383 - - (1) 382 - 382
Transactions with owners in their capacity as owners:
Issue of shares - 165 - - - 165 - 165
Exercise of share options 1 630 - - - 631 - 631
Reclassification of treasury shares b/f - 25,837 (25,837) - -
Treasury share repurchase transactions - - (2,500) - - (2,500) - (2,500)
Share-based payments - - - - 19,622 19,622 - 19,622
Transfers - (2,559) 630 - 1,929 - - -
Total transactions with owners 1 24,073 (27,707) - 21,551 17,918 - 17,918
Balance at 31 December 2022 45 146,044 (27,707) (2,267) 54,618 170,733 (102) 170,631
Loss for the period - - - - (12,742) (12,742) 18 (12,724)
Currency translation differences - - - 1,673 - 1,673 - 1,673
Transactions with owners in their capacity as owners:
Treasury share repurchase transactions - - (6,824) - - (6,824) - (6,824)
Exercise of share options 0 62 - - (312) (250) - (250)
Share-based payments - - - - 5,528 5,528 - 5,528
Total transactions with owners 0 62 (6,824) - 5,216 (1,546) - (1,546)
Balance at 31 December 2023 45 146,106 (34,531) (594) 47,092 158,118 (84) 158,034
The Group revised the reported financials for the year ended 31 December 2022
to reflect an immaterial correction to the tax liability. See Note 1 for
additional information.
Consolidated Statement of Cash Flows
Year ended Year ended
31 December
31 December
2023 2022
$'000 $'000
Cash flows from operating activities
Cash inflow from operations 12,319 31,217
Taxation paid (778) (2,076)
Taxation received 2,416 14
Net cash inflow from operating activities 13,957 29,155
Cash flows from investing activities
Purchase of intangible assets (27,883) (32,641)
Purchase of tangible assets (51) (66)
Acquisitions of businesses, net of cash acquired (18,033) -
Net cash outflow from investing activities (45,967) (32,707)
Cash flows from financing activities
Share capital issuance 62 795
Share repurchase transactions (6,824) (2,514)
Interest received 1,338 362
Interest paid (58) (2)
Repayment of lease liabilities (22) -
Net cash (outflow) from financing activities (5,504) (1,359)
Cash and cash equivalents
Net decrease in the year (37,514) (4,911)
Foreign exchange movements 672 (1,835)
At 1 January 79,493 86,239
At 31 December 42,651 79,493
Note 1: Basis of Preparation and Consolidation
After reviewing the Group's forecasts and projections and taking into account
current net cash balances, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the
foreseeable future, which is defined as period of not less than 12 months from
the date of publication of this Annual Report. The Group has therefore adopted
the going concern basis in preparing the Annual Report.
The financial presentation in this release should be read in conjunction with
the notes to the consolidated financial statements as at and for the full year
ended 31 December 2023, as contained within this release.
The Group has revised the reported financials for the year ended 31 December
2022 to reflect an immaterial correction to the tax liability. Due to the
identification of additional tax liability for prior periods relating to state
income taxes, the reported financials for the year ended 31 December 2022 have
been adjusted for a US$1.6m increase in the non-current Trade and other
payables and a US$1.6m decrease in opening Retained earnings.
These preliminary unaudited financial statements were approved by the Board of
Directors on April 17(th), 2024.
Note 2: Earnings per Share
Year ended Year ended
31 December 31 December
2023 2022
$'000
$'000
Loss for the year attributable to the owners of the company (12,742) (91,475)
Weighted average number of shares 444,825,531 443,090,183
Dilutive effect of share options - -
Weighted average number of diluted shares 444,825,531 443,090,183
Basic and diluted loss per share ($) (0.029) (0.206)
Note 3: Adjusted Gross Profit and Adjusted EBITDA (Non-IFRS)
Year ended Year ended
31 December 2023 31 December 2022
$'000
$'000
Reported Gross Profit 24,518 22,503
Reported Gross Profit margin 26.5% 16.7%
Performance-related impairments 2,455 22,822
Costs accrued for cancelled titles - 1,007
Adjusted Gross Profit (pre-impairment) 26,973 46,332
Adjusted Gross Profit margin (pre-impairment) 29.2% 34.4%
Year ended Year ended
31 December 2023 31 December 2022
$'000
$'000
Operating loss (13,008) (99,128)
Share-based payment expense 5,528 19,621
Amortisation of purchased intellectual property 3,918 5,292
Depreciation of property, plant and equipment 150 164
Depreciation of ROU asset 36 -
Loss / (gain) on foreign exchange differences 9 673
Exceptional income from IP disposal & sale of publishing rights - (214)
Non-recurring, one-time expenses 2,589 1,616
Revaluation of contingent consideration - 763
Impairment of intellectual property and goodwill - 69,973
Impairment of capitalised software development costs 2,455 22,822
Costs accrued for cancelled titles - 1,007
IPO-related employer social security - 621
Adjusted EBITDA before performance-related impairments 1,677 23,210
Released title capitalised development cost impairments (2,135) (9,296)
Adjusted EBITDA (458) 13,914
Adjusted EBITDA before performance-related impairments margin 1.8% 17.2%
Adjusted EBITDA margin -0.5% 10.3%
Note 4: Intangible Assets
Purchased intellectual property Royalty Software Subtotal Goodwill Total
rights
development costs
$'000
$'000 other $'000 $'000
$'000
intangible assets
$'000
Cost:
As at 31 December 2021 59,817 2 61,396 121,215 66,820 188,035
Additions - business combinations - - - - - -
Additions - - 32,641 32,641 - 32,641
Disposals - (2) - (2) - (2)
As at 31 December 2022 59,817 - 94,037 153,854 66,820 220,674
Additions - - 27,883 27,883 - 27,883
Additions - business combinations 20,142 - - 20,142 12,810 32,952
Disposals - - - - - -
As at 31 December 2023 79,959 - 121,920 201,879 79,630 281,509
Amortisation and impairment:
As at 31 December 2021 6,435 2 16,955 23,392 - 23,392
Amortisation charge for the period 5,293 - 14,788 20,081 - 20,081
Impairment charge for the period 22,307 22,158 44,465 47,667 92,132
Disposals - (2) - (2) - (2)
As at 31 December 2022 34,035 - 53,901 87,936 47,667 135,603
Amortisation charge for the period 3,918 - 11,634 15,552 - 15,552
Impairment charge for the period - - 2,455 2,455 - 2,455
As at 31 December 2023 37,953 - 67,990 105,943 47,667 153,610
Carrying amount:
As at 31 December 2021 53,382 - 44.441 97,823 66,820 164,643
As at 31 December 2022 25,782 - 40,136 65,918 19,153 85,071
As at 31 December 2023 42,006 - 53,930 95,936 31,963 127,899
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