Financial

tinyBuild Annual Report and Consolidated Financial Statements for Year Ended 31 December 2022

1 April 202370 pages33,331 words

Summary

During the 2022 fiscal year, tinyBuild achieved record financial performance, reporting a 21% increase in consolidated revenues to $63.3 million and a 39.7% rise in annual profit to $11.5 million. This growth was underpinned by a strategic shift toward a lower-risk, owned-IP portfolio model, which accounted for 77% of total sales. The company successfully diversified its revenue streams, reducing concentration from its top three titles to 30%, while evolving the "Hello Neighbor" franchise into a multimedia brand with over 70 million downloads. Operations are supported by a global footprint of 12 internal studios and over 400 employees, managed through a decentralized, product-centric structure. The geographic and operational scope of the period was significantly impacted by geopolitical instability in Ukraine and Russia. In response, the company executed a large-scale relocation of over 100 staff members to a new hub in Serbia and other EU locations, incurring $1.7 million in non-recurring costs. Despite these challenges and an $11.2 million impairment charge related to underperforming back-catalogue assets from previous acquisitions, Adjusted EBITDA rose to $24.4 million. The company maintained a disciplined investment approach, focusing on high-margin internal development and selective IP acquisitions, such as the Bossa Studios catalogue, rather than large-scale corporate M&A. Financially, the group transitioned to a more conservative three-year accelerated amortization schedule for software development to better reflect consumption patterns. While net cash decreased to $26.5 million due to $35.8 million in development reinvestment, the balance sheet remains robust with $133.8 million in total assets and an undrawn $35 million credit facility. Governance remains stable under the leadership of CEO Alex Nichiporchik, who holds a 37.8% stake, ensuring a continued focus on a "canon-commercial" strategy aimed at delivering a minimum 2x return on investment across its pipeline of over 80 titles.

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Financial

Annual Report and Consolidated Financial Statements for the Year Ended 31 December 2021

The 2021 fiscal year marked a transformative period for tinyBuild as it successfully transitioned to a public company via a March IPO on the London Stock Exchange’s AIM market. This strategic shift facilitated record financial performance, with consolidated revenue rising 39% to $52.2 million and Adjusted EBITDA growing 46% to $22.2 million. These results were underpinned by an aggressive expansion of the company’s own-IP portfolio, which increased to 81% of total revenue, and a robust back-catalogue that contributed 83% of sales. The company’s "multi-game and franchise" model was further validated by the continued success of the *Hello Neighbor* franchise, which surpassed 70 million downloads and expanded into a multimedia brand. Operational growth was largely driven by a significant M&A program, including seven acquisitions such as Versus Evil and Red Cerberus. These transactions, totaling millions in investment, bolstered publishing, QA, and development capabilities while diversifying the global footprint into high-skill, low-cost regions. Despite these gains, the company faced substantial geopolitical headwinds due to the conflict in Ukraine. Management responded with a large-scale extraction operation to relocate staff to new hubs in the Balkans and Western Europe. While the affected regions account for less than 5% of annual revenues, the company remains focused on mitigating regional instability and reducing revenue concentration among its top titles and platform partners. The company concluded the year in a strong liquidity position, reporting $48.8 million in cash and total assets expanding to $122.4 million. Following the IPO, tinyBuild established formal corporate governance structures and performance-based remuneration policies to align leadership with shareholder interests. With a pipeline of over 30 titles and a data-centric marketing strategy leveraging thousands of influencers, the group is positioned as a multimedia powerhouse. The transition to a public entity has provided the capital necessary to continue its trajectory of organic investment and strategic acquisitions within the global indie gaming market.

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The 2023 fiscal year represented a strategic "reset" for tinyBuild, characterized by a transition from aggressive acquisition-led growth to a leaner, internal-production model. Facing a challenging macroeconomic environment and a sharp decline in large-contract deals, revenues fell 29% to $44.7 million. The period was marked by a comprehensive loss of $62.8 million, primarily driven by $48.1 million in asset impairments related to studio closures, game cancellations, and the write-down of software development costs. Despite these headwinds, the company maintained a strong back-catalogue performance, which accounted for 92% of total sales, and leveraged its owned intellectual property for 68% of revenue. To stabilize its financial position and address a year-end cash low of $2.5 million, the company executed a $12.3 million fundraise in early 2024. This capital injection, which included investment from Atari, resulted in CEO Alex Nichiporchik becoming the majority shareholder with a 57.9% stake. Operational restructuring involved the divestment of several titles and studios, the settlement of a $3.5 million legal claim regarding the Versus Evil acquisition, and a pivot toward "games as a service" and high-potential emergent gameplay titles. The geographic and operational scope remains global, though the company is actively mitigating geopolitical risks associated with its workforce in Ukraine and Eastern Europe. Moving forward, the strategy emphasizes "canon-commercial" multimedia expansions and a data-centric publishing model to reduce dependency on external suppliers. Management expresses optimism for 2024, citing a significantly reduced cost base and a focused pipeline of high-potential franchises designed to deliver more predictable, long-term growth.

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The 2024 fiscal year represented a strategic pivot for tinyBuild, characterized by a transition toward organic growth and a "1,000-hour game" philosophy. Despite a 22% revenue decline to $34.7 million and an operating loss of $20.4 million, the Group significantly narrowed its net loss from the previous year’s $62.9 million. This financial stabilization was supported by an $11.4 million capital raise and a reduction in impairment charges from $48.1 million to $13.7 million. The Group maintains a debt-free position with a net cash balance of $3.1 million, bolstered by the disposal of non-core assets and a streamlined operational footprint. The core of the current strategy is a shift toward "Own-IP," which now accounts for 77% of revenue, and a robust back catalogue that drives 87% of total sales. By focusing on high-potential franchises like Hello Neighbor and Deadside, the Group aims to mitigate risk through portfolio diversification, ensuring no single project exceeds 10% of the development budget. This data-centric approach is complemented by a multimedia expansion strategy and a vast influencer network that has generated over 5 billion YouTube views, providing a cost-effective alternative to traditional marketing. Operational risks remain centered on high revenue concentration, with the top five titles accounting for 42% of sales, and ongoing geopolitical instability in Ukraine and Russia. The Group has addressed these challenges through staff relocations, "anti-crunch" labor policies, and a more cautious M&A stance that prioritizes "acquihires." Looking toward 2025, the Group is positioned as a going concern with a high-potential pipeline including Kingmakers and Streets of Rogue 2. Governance remains tightly held, with CEO Alex Nichiporchik maintaining a 57.9% stake following a $10 million personal investment, ensuring strong alignment between leadership and long-term shareholder value.

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tinyBuild Annual Report and Consolidated Financial Statements for Year Ended 31 December 2022

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