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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 UK domestic law by virtue of the European Union (Withdrawal) Act 2018.  Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

29 March 2022

tinyBuild, Inc

("tinyBuild" or the "Company")

Preliminary Unaudited Results for the year ended 31 December 2021

tinyBuild, a premium video games publisher and developer with global operations, is pleased to announce its full year results for the 12 months ended 31 December 2021, slightly ahead of expectations.

Financial Summary (unaudited):

¹ Excludes share-based compensation expenses, and exceptional items (e.g. IPO cost) includes amortisation of Development costs

Financial highlights:

●     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.

Operational highlights:

●     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.

Outlook

●     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."

Enquiries:

About tinyBuild:

Founded in 2013, tinyBuild (AIM: TBLD) is a global video games publisher and developer, with a catalogue of more than 70 premium titles across different genres. tinyBuild's strategy is to focus on its own intellectual property (IP) to build multi-game and multimedia franchises, in partnership with developers.

tinyBuild is headquartered in the USA with operations stretching across the Americas and Europe. The Group's broad geographical footprint enables the Company to source high-potential IP, access cost-effective development resources, and build a loyal customer base through its innovative grassroots marketing.

tinyBuild was admitted to AIM, a market by the London Stock Exchange, in March 2021.

For further information, visit: www.tinybuildinvestors.com.

Chairman's Statement

Level One complete, here comes the Boss

As tinyBuild (AIM: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.

Henrique Olifiers

Non-Executive Chairman

CHIEF EXECUTIVE'S REVIEW

Over the last 15 years, I am proud to say we've built tinyBuild into a tremendous global entertainment company - against all the odds. Personally, my career started off during a global recession, few industry contacts, and with a passport that didn't allow me any freedom of travel (Sadly, it still does not, hence why I can't make it to the UK to present these results in person).

tinyBuild has gone through the 2014 Orange Revolution in Kyiv, the 2020-2021 global pandemic, and now as I'm writing this we're in the process of extracting people to safety from the biggest war Europe has seen since my grandfather was given a rifle at the age of 17. For me, the last few months has put everything into context. What is really worth fighting for? Whom do you want to surround yourself with? The experience of the last few months - from starting a war room meeting to plan out logistics and routes in different scenarios of a Russian invasion, to hitting the button to actually start moving people.

The only constant here is people. People you want to work with, people you trust - not just with work, but literally with your own life. This is what we built. We built a company where colleagues trust each other with their own lives.

The situation in Ukraine

The team behind Hologryph - who joined us as a first party studio in 2020 - created a shelter location within Lviv in Western Ukraine, renting apartments, setting up work spaces, helping everyone who was fleeing from the war zone, until nobody was left behind. From there people who can - with their elderly parents, kids, dogs, cats - would get support in crossing the border with Poland, and then head out into either our Netherlands or Latvia studios. In both locations I've welcomed everyone to my own home, setting up living spaces and getting people everything they'd need while our HR team searches for more permanent housing.

We are also supporting Russian colleagues who are no longer comfortable staying in Russia. The issue is they, much like me, don't have freedom of travel. They can't even go to the European Union. Nor can they get a visa in today's situation. So we've implemented a complex extraction operation - as flights were getting cancelled in real time - to get people out of Russia. The first stage of this operation is complete, and we are setting up a new tinyBuild location in the Balkans. We're getting an office and helping all team members relocate. This will be a mid-term temporary location (unless everyone loves it there and decides to stay!) for all departments who weren't able to get into the EU. We will be figuring out visas from that location and we are planning a third studio in Western Europe to help more people relocate.

Looking back at 2021

Current events in Ukraine puts last year into perspective. As a business, we achieved record growth, through M&A and organically. We listed on the London Stock Exchange, preparing our business for exponential growth. We have proven success is not about the amount of games you launch but how you treat them once they are launched.

For example, today our top selling game on PC is Deadside, by our studio, Bad Pixel, which we acquihired in September 2021. Since then, Deadside has seen a dramatic rise in concurrent users, sales, and downloadable content (DLC) attachment rates. All of this was delivered through a series of well timed, well designed updates to the game. We're approached Deadside as a game-as-a-service product, an approach we have used on other titles. All of our titles in Early Access on PC (Deadside, Potion Craft, Despot's Game) are seeing meaningful engagements with every single update, and have player communities excited for when those titles get to version 1.0 and launch on more platforms.

Our original franchise, Hello Neighbor, continues to grow and expand into new channels. We have a team of world-class writers working on the Hello Neighbor Animated Series and the new video game, Hello Neighbor 2. Our goal is to elevate the franchise with both interactive and linear products that fans would love, so that both complement each other with the aim to create a pop culture phenomenon. We're pushing boundaries on the animation front - because we don't have the restrictions typically imposed by a mainstream TV network. The series will be dark, funny, thought provoking, and touches the very core of human relationships. How far would you go to save your loved ones? That's the theme of Hello Neighbor, explored deeper in Hello Neighbor 2 and in the upcoming Animated Series.

Finally in 2021, we increased our publishing capability, as well as our game development expertise. As of today, we have two publishing labels (tinyBuild, Versus Evil), plus Bad Pixel will keep its own operations and self-publish Deadside, since 'games as a service' doesn't fit well into a traditional publishing pipeline. We anticipate that more of our studios will become their own publishing labels as they gradually build up internal publishing capacity tailored to their genre, platform, or specific community.

Growth Strategy

tinyBuild has a dual approach to generating long-term shareholder value through organic growth and M&A. On the one hand, the Company develops franchises that will potentially live for generations, independent of the medium. On the other hand, tinyBuild continues to diversify its portfolio, its geographic presence, its revenue sources and its business model to reduce dependencies on any single factor and increase visibility on future revenue.

Organic growth

tinyBuild focuses on three main avenues to drive organic growth. First, the Company leverages existing partnerships and in-house developers to:

●    Increase the quality and diversity of its pipeline, by signing new titles with particular focus on genre-defining ideas (e.g. Tinykin)

●    Invest in and support acquired studios to fully realize the potential of the wider portfolio (e.g. Deadside).

●    Empower acquired publishing labels to consolidate their reach in new genres (e.g. Versus Evil in RPG and strategy)

●    Create new IP by enabling creative teams to realize their full potential by exploring new directions (e.g. Potion Craft)

●    Capitalize on the symbiotic relationship with influencers while expanding our presence on new social media channels, to retain tinyBuild's strategic marketing advantage.

Second, tinyBuild follows a multi-game and Game as a Service franchise model expansion to:

●    Use the success of the Hello Neighbor IP as a blueprint for expanding a game into a multi-title franchise (e.g. Streets of Rogue 2 and Totally Reliable Adventure Park)

●    Extend IP lifespan by regularly adding new content to existing titles (e.g. Graveyard Keeper's DLCs)

●    Port successful titles onto different platforms using mobile primarily as a marketing tool (e.g. Secret Neighbor on iOS)

●    Add cross-play options to further extend the audience for the most established franchises (e.g. Hello Neighbor 2) 

Lastly, tinyBuild works specifically on its own-IP portfolio to:

●    Pursue multimedia opportunities such as books and graphic novels, providing off-screen extension (e.g. Hello Neighbor)

●    Produce TV series of successful titles while retaining ownership of it's IP opening the door to potentially larger revenue streams

●    Use merchandise as marketing and customer engagement tools which can also generate, albeit modest, revenues.

M&A strategy

The Group's M&A strategy is evolving, reflecting tinyBuild's growing success and ambitions. Since 2013, tinyBuild has completed seven acquihires including DogHelm, Animal and Bad Pixel in the second half of 2021. As a result of these transactions, tinyBuild expanded its own-IP portfolio to include Streets of Rogue (June 2021), Rawmen (August 2021) and Deadside (September 2021).

In the acquihire model, the consideration typically consists of cash and tinyBuild shares to help align the goals of tinyBuild with those of the key developers. While the acquihire model will remain an important part of the inorganic growth strategy, tinyBuild will utilise other models too, as it looks to increase its access to in-house development talent, games services, publishing labels and diversify its business model. The growing in-house capability in terms of development talent, games services, and publishing gives the Group greater visibility on the whole process and protects the business against potential delays caused by lack of access to third-party resources.

More opportunities for acquihires and larger-scale acquisitions may arise in the future, to further scale and diversify the business.

Outlook

Our pipeline is growing strongly, year after year. However, for us quality comes above quantity. We take a portfolio approach about how many games we will launch in a given year and focus on the lifetime of each title. When titles like Streets of Rogue (launched into 1.0 in 2017, developed by Doghelm, a 1st party studio) break the top10 portfolio daily revenue, you know it's a great title with phenomenal potential for the upcoming sequel. We're not in the launch-and-forget business, we're in the plant a seed and see-it-grow business.

Perspective is everything. With all the challenges we're facing, work doesn't actually stop. Everyone at tinyBuild loves video games. There are many more jobs out there with better hours, more security, and less stress. We're here because we love what we do. And we're being bonded by a - albeit absolutely terrible - unique experience that we believe will enable us to grow into the strongest, most resilient entertainment company in the world.

The implication of the conflict in Ukraine and the fluid macroeconomic situation impose caution and vigilance. Our priority remains staff's safety and well-being. Once again, despite the odds, we look forward with determination and we are confident that we will deliver results at least in line with expectations, plus accretive acquisitions.

Alex Nichiprochik

CEO and Founder
 

Chief Financial Officer's Review

2021 saw another strong financial performance for tinyBuild, ahead of ambitious targets set by management, both in terms of back catalogue and in terms of new games. Nine new titles were released, all of them being own-IP from tinyBuild, and the company closed the year with over thirty games in pipeline. In addition to game releases and new games in the pipeline, the tinyBuild's family grew with seven acquisitions, including the complimentary publisher Versus Evil.

Revenue

tinyBuild saw total revenues increase 39% (2020: 35%) from $37.6m to $52.2m. tinyBuild's revenue is generated mainly from game's sales on various platforms, a variety of platform deals (e.g. subscription programs, development partnerships and exclusivity agreements). The addition of Red Cerberus starting from November 2021 also adds fast-growing service revenues from QA and testing. Last but not least, events include primarily revenues from DevGAMM, our Eastern Europe game developers conference, which was held both, in person and online in 2021.

Revenue generated from own-IP (1st and 2nd party games) increased to 81% of gaming revenues (2020: 70%). Our strategy is to continue to expand own-IP portfolio, which will also support underlying adj. EBITDA margin expansion in the long term.

Adjusted EBITDA and Operating Profit

Adjusted EBITDA is presented net of amortisation of development costs, and excluding share-based compensation expenses, giving a clear picture of the business progression. It increased from $15.3m to $22.2m in 2021, a growth of 45%, largely driven by strong 2021 revenue and relative stability with tinyBuild's operating expenses. The increase in margins to 42.5% in FY 2021 (2020: 40.6%) is consistent with a higher share of revenues from own-IP titles and the inherently higher profitability attached to back catalogue sales that increased to 83% of group sales in 2021 (2020: 75%).

Operating profit increased to $12.6m (2020: $7.6m) mostly as a result of lower charges relating to share-based compensation which were unusually high in 2020 due to accelerated vesting of options held by management in 2020.

Interest income and taxation

Interest income was $0m (2020: $0.1m) and taxation $4.3m (2020: $2.8m).

Financial Position

In 2021, the net cash position increased from $26.3m to $48.8m, mainly driven by a successful IPO on the AIM in the LSE, while the company accelerated investments in new titles and focused on acquisitions. Capitalized software development costs, mainly consisting of porting, localization and developer salaries, increased from $10.0m to $15.4m reflecting the increase in spend for upcoming pipeline releases. Goodwill of $13.2m appears for the first time, due to strategic acquisition of Versus Evil and Red Cerberus in November of 2021. IP has increased from $5.1m in 2020 to $18.6m in 2021 because of identifiable assets from the aforementioned acquisition. tinyBuild currently still holds the 25 million USD credit line with Bank of America.

Cash Flow

Cash flows from operating activities decreased from $16.4m to $13.3m as tinyBuild receivables and prepaids increased ($6.1m). Accrued expenses and other current liabilities saw an increase in 2021 of $1.9m. It's important to note that said timing issues can fluctuate year over year and variability here is to be expected especially during the Holiday season and partners' payment terms. Cash generated from operations include an add back of $2.5m for share based payments in the current year (2020: $5.8m)

Acquihires and Acquisitions

In 2021 tinyBuild made seven acquisitions for a total upfront payment of $25.5m (cash and shares). In February of 2021, tinyBuild acquired We're Five (TRDS) and Hungry Couch (Black Skylands). In June of 2021, tinyBuild elevated Streets of Rogue from 3^rd party to 1^st party via acquisition of DogHelm. In August 2021, tinyBuild acquired the studio Animal (Rawmen). In September of 2021 tinyBuild acquired Bad Pixel (Deadside). Finally, in November of 2021, tinyBuild completed its acquisition of Versus Evil, a US based publisher and Red Cerberus gaming services provider.

Events after the reporting date

In early 2022, in response to the sudden invasion of Ukraine, tinyBuild enacted contingency plans to move staff and their families out of risky areas in East Ukraine and Kyiv. In addition, tinyBuild has also helped staff relocating away from sanctioned nations providing logistic and financial support. tinyBuild's people resilience and cohesiveness has been nothing short of incredible and allowed the Company to secure production lines for upcoming titles with minimal disruption.