Frontier Developments (FDEV) , a Cambridge-based video game developer and publisher, issued a trading update for the 12 months ended May 31, 2024 (FY24).
Frontier reported unaudited results ahead of expectations, driven by a strong H2 performance of its back catalogue, and the successful release of Planet Zoo: Console Edition in March 2024. In total, FY24 revenues came in at £89m.
Frontier said it was profitable in H2 on an adjusted EBITDA basis, even without factoring in the sale of the RollerCoaster Tycoon 3 (RCT3) publishing rights to Atari in March. This was made possible by a reduction of operating costs by c. 20% through an organisational review completed in March.
Adjusted EBITDA for FY24 is also expected to be in profit, provisionally estimated at £0.5m, up from a £4.6m loss in FY23. The strong H2 performance and cost reductions, as well as abovementioned sale of the RCT3 publishing rights, resulted in an increase in cash during H2 of £12m to £29.5m on May 31, 2024.
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Frontier reports strong FY24 performance with a notable improvement in H2, resulting in an EBITDA profit for the year from a £4.6m loss in FY23, and an increase in the group's cash position. Markets reacted positively, driving FDEV shares 9.5% higher on Wednesday.
The strong performance was enabled by FDEV's cost control initiatives resulting in 20% savings, but mainly driven by its new strategy to refocus on creative management simulation (CMS) games, which have historically delivered more predictable and recurring returns. Frontier had previously confirmed 3 CMS games for release over the next 3 financial years - an unannounced own-IP game on track for FY25, a third Jurassic World game scheduled for FY26, and another unannounced CMS title planned for FY27. Additionally, Frontier expects to launch F1 Manager 2024, its third F1 Manager game, on July 23, 2024 (FY25) on PC, PS5, and Xbox.
Frontier issued revenue guidance aligned with current consensus for FY25 of £87m, and expressed confidence in maintaining profitability in FY25 through continued ROI and cost control. The company's game portfolio continues to perform well, currently led by Jurassic World Evolution 2 and Planet Zoo Console Edition, and the announced release schedule means good revenue visibility over the next 3 years. FDEV's balance sheet is also strong, boosted by the recent sale of the RCT3 publishing rights to Atari for US$7m, enabling an ambitious release schedule.
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