FinancialNacon
Interim Financial Report for the Six Months Ended 30 September 2022
1 Sept 202232 pages~65 min full read
NACON’s net income rose 123.5% to €8.4 million during the first half of the 2022/23 fiscal year, driven by a strategic shift toward higher-margin software publishing.
See it on page 4Total revenue grew 6.2% to €77.5 million, as a 72.3% surge in video game sales successfully offset a 34.7% decline in the gaming accessories market.
See it on page 4The company abandoned its €250 million full-year revenue target due to supply chain constraints affecting console availability and delays in the game release schedule.
See it on page 7Aggressive expansion efforts, including the acquisitions of Daedalic Entertainment, Big Ant, and Midgar, increased total goodwill to €146.1 million.
See it on page 5Financial liabilities exceeded €100 million following heavy capital deployment into studio acquisitions and €32.7 million in intangible asset purchases for game development.
See it on page 25To prioritize liquidity and the integration of new studio acquisitions, NACON has suspended dividend payments.
See it on page 5North American operations saw a 33.9% increase in sales, reflecting the company’s focus on international growth.
See it on page 16NACON experienced a period of significant structural transformation during the first half of the 2022/23 fiscal year, characterized by a strategic pivot toward software publishing to offset volatility in the hardware sector. While total revenue grew 6.2% to €77.5 million, the internal composition of this growth shifted dramatically. Video game sales surged by 72.3%, driven by a robust back-catalogue and digital momentum, effectively compensating for a 34.7% decline in the gaming accessories market. This transition toward higher-margin software resulted in a 123.5% increase in net income, which reached €8.4 million, and expanded gross margins to 61.4%.
The company’s expansion strategy focused heavily on aggressive international growth and studio acquisitions, particularly in North America, which saw a 33.9% increase in sales. Significant capital was deployed toward the acquisition of Daedalic Entertainment and other studios like Big Ant and Midgar, increasing total goodwill to €146.1 million. These investments, alongside €32.7 million in intangible asset purchases for game development, led to a net cash decrease to €38.1 million. To support this pipeline, NACON increased its financial liabilities to over €100 million, utilizing medium-term loans and complex earn-out structures contingent on future performance and critical reception.
Despite the profitability of the software segment, broader macroeconomic challenges necessitated a downward revision of full-year guidance. Supply chain constraints affecting console availability and delays in the release schedule forced the abandonment of previous revenue targets of €250 million. Management responded by updating accounting estimates to reflect the extended lifespans of digital titles and maintaining a heavy release schedule for the second half of the year. While the company remains focused on scaling its publishing business, it has opted to suspend dividend payments to prioritize liquidity and the integration of its newly acquired development capabilities.
