Frontier Developments (FDEV) H2 2024 earnings summary

Executive summary

• FY2024 featured a challenging first half, followed by a strategic reset focusing on creative management simulation (CMS) games, a 20% reduction in annual costs, and a return to profitability on an adjusted EBITDA basis before exceptional items.

• H2 performance exceeded expectations, driven by strong CMS back catalogue sales and successful new releases, notably Planet Zoo: Console Edition.

• Adjusted EBITDA profit for FY24 was £0.9 million, including a £4.9 million gain from the sale of RollerCoaster Tycoon 3 publishing rights.

• Cash position improved to £29.5 million by year-end.

Financial highlights

• FY24 revenue was £89.3 million, a 15% year-over-year decline, but gross margin improved to 69% from 64%.

• Cost of sales fell 25% to £28.0 million; total OpEx reduced 9% to £65.3 million, with H2 OpEx down to £27 million.

• CMS games contributed 62% of total revenue, with PDLC accounting for about 35% of portfolio revenue.

• IFRS net loss widened slightly to £21.5 million from £20.9 million year-over-year.

• Tax credits contributed over £10 million in cash inflow, supporting the improved cash position.

Outlook and guidance

• Confident in delivering profit in FY2025 on both adjusted EBITDA and IFRS bases, with a sustainable cost base.

• Analyst consensus revenue for FY2025 is £88 million, with ambitions to surpass £100 million in the future.

• Strongest-ever pipeline with Planet Coaster 2 launching in autumn, a new Jurassic World game for FY26, and another unannounced CMS game in development for FY27.