Devolver Digital revenue in line, but earnings disappoint

The AIM-traded firm said it saw “strong” year-on-year revenue growth from continuing operations in the 12 months ended 31 December, of greater than 30%.

Trading recovered in the second half, the board explained, with normalised adjusted EBITDA expected to be “significantly greater” than the first half.

However, it said the ongoing cost impact of three underperforming titles, and “weaker than forecast” sales volumes in December, resulted in lower-than-expected performance in the second half.

As a result, it updated its normalised adjusted EBITDA range for the 2022 financial year to between $20m and $22m.

In addition, the company said it was performing a group-wide assessment of the carrying value of balance sheet items relating to capitalised development costs, and acquisition of intellectual property and goodwill.

It said it expected that those could be “material”, and that some of the adjustments would impact normalised adjusted EBITDA.

However, the directors said they would be non-cash adjustments that were non-recurring in nature, adding that it would release further details in due course.

Looking ahead, Devolver Digital said its pipeline for 2023 was “healthy and diverse” in terms of titles, developers, platforms and geography.

That includes announced titles including Terra Nil, Gunbrella, Wizard With a Gun and Anger Foot, as well as new titles still to be named.

The company said its confidence in its 2023 outlook was reinforced by the “strong” wish-list interest in the first planned title of the year, Terra Nil, due for release in the first quarter.

However, it said it expected the negative global economic outlook and reduction in consumer spending to continue into 2023, which could affect sales volumes.

The firm said it expected full-year profitability to be “heavily weighted” towards the second half, reflecting the release schedule of new titles.

“Devolver Digital will have posted annual revenue growth of over 30% in 2022,” said executive chairman Harry Miller.

“Second half EBITDA was significantly higher than the first half, although the performance for the year was constrained by three underperforming titles and difficult market conditions in December, which contributed to a disappointing result for profitability for full year 2022.

“The second half featured the success of Cult of the Lamb, Return to Monkey Island and other released titles, which have re-established our record of releasing high quality and popular Indie games.”

Miller noted that Metacritic scores had risen to a “historical high” on the back of its “strong slate” of releases in 2022.

“Moving into 2023, we believe market conditions will remain difficult for our industry, however we believe we are well placed to consolidate our greater scale of revenues and focus on improving margins as we move through the year.”

Devolver Digital said it would provide further details in its full-year results for 2022, which it expected to publish in early April.

At 1122 GMT, shares in Devolver Digital were down 13.39% at 55p.

Reporting by Josh White for Sharecast.com.