tinyBuild Inc (LON:TBLD), a premium video games publisher and developer with global operations, has announced its full year results for the 12 months ended 31st December 2021, slightly ahead of expectations.
Financial Summary (unaudited):
|(12 months ended December, $’000)||2020|
|Profit before tax||7,700||12,524||63%|
|Basic earnings per share ($ cent)||2.8||4.4||57%|
|Operating cash flow||16,470||13,290||-19%|
|Net cash, at 30 December||26,313||48,832||86%|
|Adj. EBITDA margin||40.6%||42.6%|
1 Excludes share-based compensation expenses, and exceptional items (e.g. IPO cost) includes amortisation of Development costs
● Strong revenue growth of 39% to $52.2m (2020: $37.7m), slightly ahead of expectations, reflecting a strong performance in the last part of the year from new titles including Potion Craft and back catalogue sales.
● Record Adj. EBITDA of $22.2m (2020: $15.3m) up 45% y-o-y growth, slightly ahead of expectations. Margin increased to 42.5% (2020: 40.6%) primarily due to the ongoing shift towards own-IP versus third party IP.
● Operating profit increased by 64% to $12.5m (2020: $7.7m), as a result of lower share-based payment expenses. Profit before tax and basic EPS also grew by a similar amount to $12.5m and 4.3c, respectively.
● Operating cash flow was $13.3m, below the previous year record of $16.5m, as a result of $5.5m IPO costs .
● Net cash as of 31 December 2021 was $48.8m compared to $26.3m as at 31 December 2020), after accounting for gross proceeds of £36.2m ($50m) from the IPO, acquisitions, and a significant increase in development costs.
● Portfolio increased to over 70 titles (30 at the time of the IPO), thanks to addition of Versus Evil publishing label and nine new titles launched by tinyBuild during FY 2021.
● Contribution to revenues from first-/second-party games increased to 81% of Group revenues (2020: 70%), supporting long-term margin expansion.
● Robust back catalogue sales represented 83% of total revenue (2020: 75%), demonstrating the Company’s ability to extend the life cycle of games, while adding new titles.
● Five acquihires of games studios completed (We’re Five, Hungry Couch, Doghelm, Animal and Bad Pixel) for a total upfront consideration of $12.7m (cash and shares).
● Major acquisition of Versus Evil, a US-based publisher focused on RPG and strategy games, and of Red Cerberus, a QA and testing services provider based in Sao Paolo, Brazil. The upfront consideration was $12.5m, with a maximum consideration of up to $31.3m.
Post Period End highlights:
● tinyBuild has been working hard to support staff (employees and independent contractors) and their families in areas affected by the war in Ukraine. At the time of print, all employees and independent contractors have moved out of the riskiest areas and plans are in place to welcome anybody fleeing the conflict in our studios across Europe. We continue to monitor the situation carefully and have further contingency plans in place.
● Versus Evil signed four new titles, all own-IP, since the acquisition closed in November 2021. Red Cerberus is looking to expand its capacity to fulfil a growing pipeline of potential new contracts.
● Deadside development team grew to ten people and accelerated its growth plans. The latest update 0.2.7 (re-spawn beacons) was released from Kyiv on 4th March. A combination of more content and renewed marketing efforts means Deadside has been the best-selling game in the tinyBuild portfolio for the past few weeks.
● Potion Craft (early access released in September 2021), continued to perform strongly after topping the Steam Global Sales charts at launch and it has now crossed 600,000 downloads.
● Not for Broadcast released its last episode and moved to version 1.0 in January 2022, recording over 300,000 downloads since its launch in 2019.
● The pipeline for 2022 and beyond is strong and includes the closed Beta pre-orders (7 April 2022) for Hello Neighbor 2, that has seen a constant increase in the number of followers for over a year now.
● The implication of the conflict in Ukraine and the fluid macroeconomic situation impose caution and vigilance in the medium and long term. In particular, tinyBuild continues to carefully assess the position of its staff, its exposure in terms of revenues and any other factor that may have an impact on the business.
● All considered, the Board remains confident the Company is on track to deliver results at least in line with expectations, plus accretive acquisitions.
Alex Nichiporchik, Chief Executive Officer of tinyBuild, commented:
“Last year has been an incredible ride, from the IPO to our largest deal ever with Versus Evil and Red Cerberus opening up new avenues of growth. Our back catalogue has performed strongly, and we have an even more diverse revenue mix in terms of titles, genres, geography and audience. Our strategy to accumulate owned-IP has resulted in a strong financial performance and has translated into an improved profitability.
“A growing pipeline of high-quality titles set for release in the next two years, the majority of which are first and second-party, means we can build more multi-game franchises and emulate the success of Hello Neighbor. It is great to see an enlarged fanbase engaging with Hello Neighbor 2, and we look forward with confidence to the closed Beta pre-orders. With books, graphic novels, and early work for a potential animated TV series, Hello Neighbor provides a template of how we might for many of our future games.
Our goal is to expand our position as a leading global developer and publisher, focusing on IP ownership while creating long-term scalable franchises that will survive for generations regardless of the media. 2021 has seen significant progress towards that ambition, and we look to the future with confidence.”
Level One complete, here comes the Boss
As tinyBuild (LON: TBLD) enters its second year as a publicly traded company, I’m honoured to update shareholders on the success of our strategy, games and teams during a period marked by very difficult events.
Looking back to tinyBuild’s listing in March 2021, the macro question lurking on the horizon was how much of the pandemic’s tailwinds we would shed in the course of the year, given the significant bump the games industry sales experienced during the lockdowns prior. Despite the logical rationale that such exceptional growth couldn’t prove permanent, it was a longstanding belief held by game developers and publishers alike that, once a gamer, always a gamer – thus privately most of us expected to retain the attention of these newfound audiences.
The games industry, much like every other sector, has had to contend with many recent setbacks, particularly the global chip shortage. This affected the manufacturing of consoles, mobiles and PC gaming GPUs, limiting the games industry’s full potential. Despite this challenge, last year saw 1.4% sales growth for the whole industry and 5.3% growth in the number of players, corroborating our expectations: not only did we retain the lockdown audience we gained, we expanded our reach through the excellence of our content.
At tinyBuild, we executed our M&A strategy aimed at expanding our capabilities in IP generation, games development and publishing, while continuing to invest organically to launch more games on more platforms. The industry’s growth corroborated our approach of boldly investing in our future.
In November, the acquisition of Versus Evil (USA) and Red Cerberus (Brazil) bolstered our publishing capabilities in RPG and Strategy genres. The acquisitions also added Quality Assurance functions to the Group, and improved our in-house porting facilities. This has helped make our titles as widely available as possible from day one.
With Bad Pixel and Animal studios joining the group, we continued our venture into GaaS (Games as a Service). GaaS offers higher long tail revenue and longer life cycles for games thanks to titles that are played over and over as a hobby, translating into greatly improved ROI.
And with DogHelm we bring into the Group a critically acclaimed IP – Streets of Rogue – and a development partner whose historic relationship with tinyBuild made the acquisition an obvious move. Added to the studios acquired pre-IPO (We’re Five Games and Hungry Couch), tinyBuild can execute on its strategy for the foreseeable future. Now we aim to improve our internal management processes to ensure the seamless integration of the new studios, team members and operational units. We are aware that scaling up creative and technical teams is a big undertaking in its own right.
Furthermore, new monetisation models are being considered to adapt in light of increasing inflation and its effect on our players around the world. We continue to pursue opportunities for IP expansion in order to maximise our engagement with our growing audiences.
2022 is going to be yet another exciting year for our teams. The mindset of thriving in change is a defining aspect of tinyBuild’s culture, a key element that should prove particularly useful in the short to medium term global entertainment landscape.
Finally, the appalling situation in Ukraine which directly impacts many colleagues. Management’s unique understanding of the region means contingency plans had already been prepared and could be executed promptly to relocate teams to safer locations, from both Ukraine and Russia. Critically, this ensured the safety of our staff, and to their great credit, projects remained on track.
In our second public annual report, we’re proud to once again announce record revenue and EBITDA, and a performance that exceeded the market’s expectations. This is testimony to the Executive team’s strategic and delivery capabilities. These results will add to our standing in the games industry and puts us in a stronger position to deliver the Group’s plans for FY 2022, and helps with M&A.
Above everything, our focus remains on people, as demonstrated by one of the lowest staff turnover in the industry. We recognise that an appropriate share-based awards plan is important to retain key employees and to align staff incentives with shareholders value creation for the long term. For that reason, during FY22 we intend to implement a formal share-based incentive plan and look forward to providing more details soon.
We hope the following pages provide valuable insight into our strategy and validation of our strategy, building confidence in our ability to deliver an exciting future for tinyBuild, its games, players and investors alike.