29 June 2023

tinyBuild, Inc 

("tinyBuild" or the "Company")

AGM Trading Update and Directorate Change

tinyBuild (AIM:TBLD), a premium video games publisher and developer with global operations, provides an update on trading ahead of its AGM later today.

Highlights

● First-half performance below expectations due to lower contribution from platform deals and the underperformance of Red Cerberus and Versus Evil has resulted in a material reduction to FY consensus revenue and a more acute reduction in Adj. EBITDA in 2023 and 2024.

●   Strong reception to new game announcements supports the Company's refocus on building new large own-IP and the move away from third party publishing and services.

●  Cash position at the end of December 2023 expected to be between $10-20m, below the previous expectations of at least $26.5m.

●    Re-evaluation of the future potential of some underperforming back-catalogue titles may translate in asset impairments and targeted studio reorganisation.

●   Tony Assenza, Chief Financial Officer (CFO), has resigned for personal reasons. Giasone (Jaz) Salati to be appointed Chief Financial Officer and Michael Schauble to be appointed Chief Commercial Officer with immediate effect.

Current trading

As witnessed across the industry, distribution platforms have been significantly downsizing the amount of investments in non-AAA games. Platform deals have been an important driver of tinyBuild's growth and profitability over the past few years, and the Board expects this downward trend to materially impact revenues.

In addition, Versus Evil and Red Cerberus (both acquired in November 2021) continued to underperform in H1 2023. Strategic options are under consideration to best deliver the value of the businesses as the Company focuses on its core strategy of developing long lasting franchises internally.

Partly offsetting these headwinds, catalogue titles continue to perform well, with franchise expansion (i.e. sequels), v1.0 launches and the addition of new platforms, including VR. Furthermore, the strong reception to recent new game announcements supports tinyBuild's decision to invest in new larger-budget own-IP with high replayability. The Game as a Service nature of some of these titles means the revenue contribution tends to be more evenly distributed over a longer period of time while development costs are concentrated in the early years.

The reduction of adjusted EBITDA in 2023 and 2024 will be more substantial, due to a significant increase in development cost amortisation and a slightly higher percentage of revenues paid out to developers as royalties adding to the flow through from lower platform deals. As a combination of the above, cash at the end of December 2023 is expected to be between $10-20m, below the previous expectations of at least $26.5m.

In the current macro environment, the Company is also reviewing a number of titles, both under development and already launched, to assess the revenue potential. The reorganisation of some studios and impairment of certain assets may follow to achieve the optimal cost base.

As in 2022, the release schedule for the current year is weighted towards the second half of the year and the Company will continue to evaluate the progress of titles currently under development and select the best release window to maximise the lifetime value of each IP. The Board expects to complete the transition workstreams, including the impairment, reorganisation and the ongoing assessment of games, by no later than the Company's FY23 results in March 2024.

Portfolio and pipeline

In the first half of 2022, tinyBuild released Rhythm Sprout (PC and Consoles), Farworld Pioneers (PC and Consoles), and The Bookwalker (PC and Consoles). The Company is also investing in new technologies having successfully launched new VR titles in the first half, including Hello Neighbor: Search and Rescue, and Kill it with Fire VR.

Back catalogue titles continue to perform well including platform launches in the first half (e.g. Not For Broadcast, Despot's Game) and new monetisable events planned in the second half for Potion Craft, Hello Engineer, Black Skyland and Cartel Tycoon. Punch Club 2, the anticipated sequel to one of tinyBuild's classic games, is also scheduled to release in the second half, adding to new titles like I am Future, a cosy survival game in a flooded post-apocalyptic city.

tinyBuild also recently announced a record number of new titles for future release, including Critter Cove, Slime 3K, Kill it with Fire 2, FEROCIOUS, Level Zero and Sand, adding to the previously announced Broken Roads, RAWMEN, Stray Souls and Pigeon Simulator.

Board Changes and People

After a short period of leave for personal reasons, Tony Assenza, CFO, has resigned from the Company and the Board with immediate effect. Following a Board process, tinyBuild announces that Giasone (Jaz) Salati has been appointed CFO with immediate effect and he is expected to join the Board, subject to customary due diligence checks and a further announcement will be made in due course. Completing tinyBuild's transition to a more focused management team, Michael Schauble, previously senior VP of Business Development, has been appointed Chief Commercial Officer.

Jaz has over twenty years' experience as an equity research analyst in the TMT space previously working at Credit Suisse, Redburn and Macquarie, and was ranked #1 Stock Picker in 2019. Alongside his career in finance, he worked on innovation and reorganisation for the CEOs of media and tech companies, more recently at Ascential (LSE: ASCL). Jaz read economics at La Sorbonne and attained a master's degree in Finance from LBS.

Michael has over 18 years' experience in the video games industry and has a track record of building successful teams. Prior to joining tinyBuild, in August 2019, he worked at Microsoft for four years where he helped to spearhead key initiatives such as Game Pass, Microsoft AR/VR, and backwards compatibility programmes. In his new senior management role as Chief Commercial Officer, Michael will leverage his experience in building strong relationships between tinyBuild's developers and partners and oversee the expansion of our IP into cross-media.

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.

Outlook

As reported by other companies in the gaming sector, the market backdrop has become increasingly challenging with distribution platforms reducing investment. As a result of this impact and underperformance at Versus Evil and Red Cerberus, the Board is now expecting to be materially behind revenue market expectations in 2023 and 2024. This impact becomes more acute at the Adjusted EBITDA level as a result of increased development costs, amortisation charges and a less favourable revenue mix.

FY23 is expected to be a low point in terms of financial performance and cash levels and the Board is looking forward to the contribution of new larger budget games scheduled to launch in 2024 and 2025. Early indicators of consumer traction across the Company's pipeline, including the reception of recently announced games, are encouraging and bode well for the future.

As previously indicated, tinyBuild continues to carefully review the impact of the conflict in Ukraine and the fluid macroeconomic situation.

Alex Nichiporchik, Chief Executive Officer of tinyBuild, commented: 

"As CEO and a major shareholder, I am disappointed with the H1 performance. What fills me with confidence is that we have an incredibly strong pipeline of new games under development with the potential to create multiple new long-lasting franchises.

"Our diverse portfolio, strong back catalogue and financial position will allow us to reposition the Company for growth and capture advantageous opportunities when peers may be forced to retrench. We are transforming the Company at speed to adapt to new industry trends."

"On a personal note, I am sorry to see Tony leave the team and wish him the best for the future. At the same time, I am delighted to have Jaz as our new CFO and Michael as our CCO: their competencies and drive will be key to accelerate growth, while ensuring financial discipline and maintaining the positive culture we have built at tinyBuild."

Enquiries:

About tinyBuild:

Founded in 2013, tinyBuild (AIM: TBLD) is a leading premium AA-rated and indie video games publisher and developer. tinyBuild strategically secures access to IP and partners with developers to establish a stable platform on which to build multi-game and multimedia franchises. tinyBuild has a strong portfolio of over 40 titles, and its upcoming pipeline includes over 20 new titles currently in development. 

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.