TIDMTBLD
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 EBITDA(1) 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
Alex Nichiporchik - Chief Executive Officer
Giasone (Jaz) Salati - Chief Financial
Officer
Michael Schauble - Chief Commercial Officer
Berenberg (Nominated Advisor and Joint
Broker)
Mark Whitmore, Ciaran Walsh, Milo Bonser +44 (0)20 3207 7800
Numis (Joint Broker)
Hugo Rubinstein, Tejas Padalkar +44 (0)20 7260 1000
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 .
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
-- S AND - 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 6 months Year ended
Note ended 30 ended 30 31 December
June 2023 June 2022 2022
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 6 months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 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 reclassified
to profit and loss 94 - 7
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
2023 2022
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 Share Warrant Translation Retained Total Non-controlling Total
capital premium reserve reserve earnings equity interest equity
attributable
to owners
of the
parent
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Note
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 Share Warrant Translation Retained Total Non-controlling Total
capital premium reserve reserve earnings equity interest equity
attributable
to owners
of the
parent
$'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 10 - - - - - - - -
shares, net of
transaction
costs
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 6 months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 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 PERIODED 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 6 months Year ended
ended 30 June ended 30 June 31 December
2023 2022 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 6 months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022
Unaudited Unaudited Audited
An analysis of the Group's revenue $'000 $'000 $'000
is as follows:
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 6 months Year ended
ended 30 ended 30 June 31 December
June 2023 2022 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 6 months Year ended
ended 30 June ended 30 June 31 December
2023 2022 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 6 months Year ended
ended ended 31 December
30 June 30 June 2022
2023 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 relationships 2,327 1,754 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 6 months Year ended
ended 30 June ended 30 June 31 December
2023 2022 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 Software
Customer intellectual development
Goodwill Brands relationships property costs 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:
Fair value
Book 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 $2.095 per
share. The 2021 RSAs vest over 3 years in a 50:25:25 ratio. Each
instalment has been treated as a separate share option grant
because each instalment has a different vesting period. This plan
is equity-settled. A reconciliation of RSAs is as follows:
30 June 31 December
2023 2022
Opening RSA outstanding 477,327 954,654
RSA granted - -
RSA vested - (477,327)
Closing RSA outstanding 477,327 477,327
Weighted average remaining contractual
life in years 0.92 1.42
The company has an Equity Incentive Plan that provides for the
issuance of non-qualified stock options to officers and other
employees that have a contracted term of 10 years and generally
vest over four years. The stock options are granted on shares
issued by the company. A reconciliation of share option movements
is shown below:
Number Weighted Number Weighted Weighted
of options average of options average average
outstanding exercise exercisable exercise remaining
price ($) price ($) 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
2023 2022
Unaudited Audited
Number Number
Class of share
Ordinary shares of $0.001 each 203,878,238 203,848,987
30 June 31 December
2023 2022
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 Year ended
30 June ended 31 December
2023 30 June 2022 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 Year ended
30 June ended 31 December
2023 30 June 2022 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.
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END
IR PPUUPBUPWGRA
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