GDEV Inc. — FY2023 Form 20-F
Reporting period: Year ended December 31, 2023; filed April 29, 2024. This is an annual report, not a standalone 2023 fourth-quarter report. Financial statements are audited and prepared under IFRS.
Business context
GDEV develops and publishes free-to-play mobile, web and social games. Hero Wars remains the core franchise; the company also has Island Hoppers, Pixel Gun 3D and other titles. Hero Wars generated 90% of 2023 revenue, down from 96% in 2022. Revenue is primarily from in-game purchases, with advertising providing a smaller share.
Key financial and operating metrics
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $464.5 million | $479.7 million | Down 3% |
| Bookings | $421.6 million | $449.4 million | Down 6% |
| Operating profit | $38.4 million | $18.8 million | Up $19.5 million |
| Net profit | $46.1 million | $7.4 million | Up $38.7 million |
| Net cash from operating activities | $18.0 million | $116.1 million | Down $98.1 million |
| Cash at year-end | $71.8 million | $86.8 million | Down $15.0 million |
| Basic and diluted EPS | $0.23 | $0.04 | Higher |
Operating margin was approximately 8.3% versus 3.9% in 2022; net margin was approximately 9.9% versus 1.5%. These improved despite lower revenue, partly reflecting the absence of 2022 impairment charges and improved results from associates. The 2023 net profit also included a $10.9 million fair-value gain on warrants and other financial instruments.
In-game purchase revenue fell 6% to $434.3 million, while advertising revenue rose 51% to $30.2 million. Selling and marketing expense increased 48% to $225.7 million as the company substantially increased investment in acquiring players. Platform commissions fell 16% to $109.0 million, partly reflecting lower in-game purchase revenue and a shift toward desktop, which carries lower commissions.
Average DAUs increased to 1.431 million from 1.186 million, and average MAUs rose to 11.4 million from 7.6 million. Average MPUs increased to 377,000 from 335,000, while monthly payer conversion declined to 3.3% from 4.4% and ABPPU fell to $86 from $107. For Hero Wars specifically, average MPUs were 264,000 and ABPPU was $120.30 per month, down from $138.00.
Cash from operations fell substantially, which management attributed mainly to $73.1 million of increased user-acquisition investment and lower Bookings. Investing activities used $32.5 million, including purchases of investments partly offset by redemptions; financing activities used $1.9 million, mostly lease payments. The company reported $174.1 million of cash and investments at year-end, including $102.3 million of current and non-current investments. It reported no borrowings; lease liabilities were $2.4 million.
Total assets were $320.6 million and total liabilities were $420.4 million, leaving negative equity of $99.8 million. Reported working capital was negative $88.9 million, largely because of deferred revenue; excluding current deferred revenue, management reported a working-capital surplus of $145.3 million. The company stated that cash and liquid investments could cover approximately twice annual fixed expenses even in a scenario with no Bookings or revenue.
Material changes and unusual items
- Bookings continued the prior-year decline, falling 6% in 2023 after a 20% decline in 2022. Management cited difficult market conditions, post-pandemic normalization, inflation and challenges in targeting players.
- Operating profit improved, while 2022 included $62.8 million of goodwill and associate impairment and $30.0 million of impairment losses on loans and receivables. No goodwill or associate impairment was recorded in 2023; receivable and loan impairment charges were $5.9 million.
- Operating cash flow weakened markedly as the company stepped up marketing. The company also ended 2023 with lower cash than the prior year, despite holding substantial liquid investments.
- The company recorded $28.995 million of put-option liabilities at year-end, including obligations connected with acquisition arrangements. Its investments in equity-accounted associates had a zero carrying value. Related-party loans to associates were substantially impaired; total loans receivable were $148,000.
- In January 2024, after year-end, GDEV accepted 16.554 million shares in its tender offer at $2.00 per share, for an aggregate cost of approximately $33.1 million before fees. The shares are held as treasury shares; the company said it may reintroduce some or all into the market to increase public float.
Outlook, risks and contingencies
No specific revenue, earnings or Bookings guidance is provided. Management expects to continue investing in player acquisition, improve existing games and monetization, develop new offerings and selectively consider acquisitions. Management concluded that available cash, liquid investments and expected operating cash flows support the going-concern basis for at least 12 months from approval of the financial statements, and said there was no material going-concern uncertainty.
- Concentration and monetization: Hero Wars supplied 90% of revenue. Payer conversion was 3.3%; the top 10% of annual paying users generated 86% of Bookings.
- Platform and market exposure: Distribution and payments depend heavily on third-party platforms and payment providers. The United States contributed 35% of revenue, Asia 24% and Europe 25%. The former Soviet Union represented 8% of Bookings.
- Acquisition and credit risk: The company has recognized full expected credit losses on certain associate loans. An MX Capital arbitration and related Cyprus court claim, filed in 2023, remain at an early stage; the outcome and financial effect cannot be reliably estimated.
- Regulatory and technology risks: The filing highlights privacy and data-protection requirements, changing platform rules, loot-box regulation, cybersecurity, use of generative AI and possible tax claims. GDEV said no known cybersecurity incident had materially affected operations or financial results.
- Geopolitical and trading risks: GDEV completed its exit from Russian subsidiaries and operations in 2023, but says regional conflict, sanctions, payment restrictions and historical association with Russia may still affect revenue, reputation or operations. Trading had been suspended in 2022 and resumed in March 2023; the filing describes the securities as volatile.
- Other contingencies: The company disclosed possible indirect-tax exposures whose potential financial effects cannot presently be reliably estimated. It also disclosed a $1.354 million provision for non-income-tax risks, offset by an indemnification asset.
Management reported effective disclosure controls and internal control over financial reporting at December 31, 2023, and said prior material weaknesses and significant deficiencies had been remediated. The auditor did not provide an internal-control attestation because GDEV is an emerging growth company.
Important facts for investors to verify
- Whether higher player-acquisition spending can stabilize or grow Bookings and operating cash flow, given lower payer conversion and ABPPU.
- How dependent future results remain on Hero Wars, and whether newer titles can become material revenue contributors.
- The recoverability and terms of associate-related loans and acquisition options, including the MX Capital dispute and the $29.0 million put-option liability.
- The post-year-end tender-offer cash impact, treasury-share treatment and any subsequent share reissuance or change in shares outstanding.
- Whether the reported liquidity position, including the nature, maturity and accessibility of investments, adequately addresses the working-capital deficit and negative equity.