GDEV Inc. — FY2022 Form 20-F
Reporting period: Year ended December 31, 2022; filed June 26, 2023. This is an annual report, not a standalone 2022 Q4 report, and the supplied filing text does not provide clear fourth-quarter financial results. Statements are prepared under IFRS as issued by the IASB and presented in U.S. dollars.
Business context
GDEV develops and publishes free-to-play mobile, web and social games. Hero Wars remained the core franchise, accounting for 96% of FY2022 revenue and 96% of Bookings. The company acquired interests in game studios and titles including Pixel Gun 3D, Puzzle Breakers, Dawn of Zombies and Shelter War, seeking to diversify beyond Hero Wars.
Financial and operating performance
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Revenue | $479.7 million | $434.1 million | Up 11%; the filing attributes the increase primarily to a smaller decrease in deferred revenue, despite lower Bookings. |
| Bookings | $449.4 million | $562.0 million | Down 20%. |
| Operating profit (loss) | $18.8 million | $(123.3) million | 2021 included a $125.4 million non-cash share-listing expense. |
| Net profit (loss) | $7.4 million | $(117.4) million | Basic and diluted earnings per share were $0.04 versus a loss per share of $0.64. |
| Operating cash flow | $116.1 million | $105.5 million | Up $10.6 million, mainly reflecting lower marketing cash outflows. |
| Investing cash flow | $(171.8) million | $(2.7) million | Included acquisitions, associate investments, loans and securities purchases. |
| Cash and cash equivalents | $86.8 million | $142.8 million | Declined $56.0 million; net cash decreased $57.6 million during 2022. |
Approximate FY2022 operating and net margins were 3.9% and 1.5%, respectively, based on reported revenue and profit. Management EBITDA, a non-IFRS measure, was $113.1 million, or about 23.6% of revenue; it excludes specified items and should not be equated with operating cash flow. Total comprehensive income was $10.7 million, compared with a $117.4 million loss in 2021.
Liquidity and obligations: Current assets were $188.9 million versus current liabilities of $332.4 million, including $295.6 million of current deferred revenue. Total liabilities were $470.8 million and equity was negative $148.8 million. The filing reports no material conventional borrowings at year-end; lease liabilities were $1.2 million. It also reports a $27.5 million put-option liability and $13.0 million warrant obligation. Cash plus investments totaled approximately $155.0 million, although investments include securities measured at fair value and with differing maturities. Management said cash and operating cash flows should cover ordinary operating needs for at least the next 12 months and foreseeable future.
Other metrics: Revenue from in-game purchases rose 13% to $459.7 million; advertising revenue fell 27% to $20.0 million. DAUs averaged 1.186 million, MAUs 7.6 million, and MPUs 335,000. Monthly payer conversion fell to 4.4% from 6.1%, while ABPPU declined to $107 from $123. Hero Wars MPUs fell 24% year over year and DAUs fell 25%; its ABPPU increased to $131.9 per month from $127.4. Approximately 63% of Bookings came from mobile and 37% from desktop. Platform commissions were 28.2% of in-game purchase revenue.
Material changes versus FY2021
- Bookings fell 20%, alongside reduced marketing investment and a post-pandemic industry slowdown; Hero Wars payer counts also contracted.
- Reported revenue rose despite lower Bookings, reflecting revenue recognition timing: $361.0 million was recognized over time, and year-end deferred revenue was $392.4 million, down from $422.7 million.
- Selling and marketing expense fell 43% to $152.7 million. Game operating costs increased to $44.0 million, reflecting acquisitions, expanded operations and relocation costs.
- GDEV recorded $62.8 million of goodwill and associate impairment, including $46.9 million for Lightmap and $15.9 million for MX Capital, plus $30.0 million of impairment losses on receivables and loans, including $28.5 million of expected credit losses on associate loans.
- The company disposed of its Russian subsidiaries and recorded a $5.0 million disposal loss. Cash used in investing activities increased substantially, while cash declined to $86.8 million.
Outlook, risks and unusual items
No quantified revenue, profit or Bookings guidance is provided. Management describes plans to improve existing games, develop new titles, expand in Asia and pursue selective acquisitions. It acknowledges that industry weakness, inflation, reduced user-acquisition effectiveness and lower marketing spend may continue to pressure activity and spending. The company said its Russia-related relocation program was largely complete, but higher labor costs were expected to persist.
- Concentration: Hero Wars generated 96% of revenue; 10% of annual paying users generated 87% of Bookings in 2022.
- Platform and monetization exposure: Distribution and payments rely substantially on third parties, whose fees, policies, access and data practices may change.
- Acquisition and credit exposure: Acquisitions and associate investments produced substantial impairment charges and expected credit losses; related-party transactions include the MX Capital investment and loans.
- Russia, Ukraine and market access: Geopolitical developments, sanctions, payment restrictions and the company’s historical Russia association remain risks. Nasdaq trading in the shares and warrants was suspended from February 2022 until March 2023.
- Accounting estimates: Revenue depends on estimates of durable versus consumable virtual items and payer lifespans. Management’s sensitivity analysis indicates that a 10% change in estimated player lifespan could change 2022 revenue by roughly $33.8 million to $38.7 million.
- Controls: Management concluded disclosure controls were ineffective at year-end due to material weaknesses in financial-reporting oversight and goodwill-impairment valuation review; an IT log-retention issue was a significant deficiency. Remediation was underway but not yet complete.
- Audit and valuation: KPMG issued an unqualified opinion on the 2022 IFRS financial statements, but did not attest to internal-control effectiveness. Public warrants were valued using Level 3 models while trading was halted. The filing also notes prior-period correction/restatement matters for 2020.
Key facts investors should verify
- Whether Bookings, payer counts and Hero Wars engagement stabilized after their FY2022 declines, and how subsequent performance compares with reported revenue affected by deferred-revenue accounting.
- The recoverability of associate loans and investments, the assumptions behind the Lightmap and MX Capital impairments, and any further impairment or credit-loss exposure.
- Progress in remediating the disclosed material weaknesses and significant deficiency, including whether controls operated effectively for a sufficient period.
- Current unrestricted liquidity, investment maturities and fair values, and the obligations and dilution potential associated with put options, warrants and share awards.
- Ongoing exposure to platform policies, data-privacy and loot-box regulation, geopolitical restrictions, and the company’s dependence on Hero Wars and high-spending users.