Frontier Developments (FDEV) , a video game developer and publisher based in Cambridge, UK, published its unaudited interim results for the 6 months to November 30, 2023 (1H24).
Frontier noted good back-catalogue performance, with games released before the start of the period delivering 72% of total revenue in 1H24. Within the back-catalogue, "creative management simulation" (CMS) games achieved £26.3m or 55% of total revenue, representing a sustain rate of 81% vs. 1H23. The revenue contribution from new games was lower than expected.
Revenues decreased to £47.7m from £57.1m in 1H23. Adjusted EBITDA loss widened to £4.9m, reflecting the lower levels of total revenue and a 3% increase in cash operating costs, partially offset by a higher gross profit margin. Frontier said its previously announced Organisational Review was on track, set to reduce annual operating costs by 20% and return the company to profitability by FY25. The measures will be fully in place from the start of FY25.
Cash balance was £17.1m on November 30, 2023.
View from Vox
A challenging first half for Frontier, but it's not all bad news. The video game developer said its move to diversify its portfolio, including through 3rd party publishing and entering new genres, had not delivered its intended success. As a result, Frontier has refocused on CMS games, which have delivered more predictable and recurring returns. Additionally, new measures targeting a 20% cost reduction should help bring the company back to profitability by FY25. Markets cheered Frontier's new direction, driving FDEV shares 17% higher in mid-morning trade.
Frontier confirmed 3 future CMS games, with one releasing each of the next 3 financial years (FY25, FY26, and FY27). The company said it will continue to support its existing portfolio while working on the new titles. Additionally, Frontier has two successful PC games coming to consoles before the end of the financial year. One is Warhammer 40,000: Chaos Gate - Daemonhunters announced for PS5, PS4, Xbox Series X/S, and Xbox One. The second title will be announced in the coming weeks.
Post period-end sales have been in line with the revised expectations set in November, with strong sales performance across Frontier's CMS portfolio since November 30, offsetting lower sales from other titles. Frontier expects FY24 revenue to be within the guidance range of £80-95m.
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