F1 Manager Developer Expects to “Break Even” On 2023

In a recent regulatory stock market filing (quoted below) Frontier Developments, developers of the F1 Manager franchise, have stated that their attempts to branch into different genres of gaming hasn’t worked out as planned and that they will be returning to “creative management simulation” as their main focus. The filing mentions “three future CMS games with one releasing in each of the next three financial years” and then mentions the F1 Manager franchise to be “alongside” those, rather than included within them.

Frontier’s F1 license, announced back in 2020, indicated that there would be four F1 Manager games released beginning 2022, so at this time we should expect 2024 and 2025 releases.

Filing:

27 November 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Frontier Developments plc
Business Update

Frontier Developments plc (AIM: FDEV, ‘Frontier’ or the ‘Company’), a leading developer and publisher of videogames based in Cambridge, UK, provides a business update ahead of the important December trading period.

Warhammer Age of Sigmar: Realms of Ruin

On 17th November 2023 Frontier released real-time strategy game Warhammer Age of Sigmar: Realms of Ruin (‘Realms of Ruin’) on PC via Steam, Epic, Genba and Heybox, and on PlayStation®5 and Xbox Series X|S. We were pleased to see at launch that Realms of Ruin received mostly positive reviews from game critics and from players, however, sales to date have been lower than expected. With the December trading period approaching, and Frontier continuing to evolve and support Realms of Ruin with post-release content, including PDLC (‘paid-downloadable content’), we expect sales to build over time.

Refocusing on CMS (creative management simulation) games

Frontier’s move to diversify its game portfolio during the last five years, including through third-party publishing and new games in ‘adjacent genres’, has not delivered the anticipated success. As a result, the Company has refocussed on CMS games which have delivered stronger and more predictable returns through Frontier’s expertise and leadership in that genre.

The Company’s four CMS games (Planet Coaster, Planet Zoo, Jurassic World Evolution and Jurassic World Evolution 2) continue to perform well and have each achieved over $100 million of gross revenue with a combined total of over $500 million. All four games achieved profitability within one month of release and delivered over 100% return on investment within 12 months of release. The three games which have been in the market for four years or longer – Planet Coaster, Jurassic World Evolution and Planet Zoo – have all achieved a cumulative return on investment of over 250%.

Frontier is therefore pleased to confirm three future CMS games with one releasing in each of the next three financial years – FY25, FY26 and FY27. Alongside this we will continue to develop and support our portfolio of existing games, including Elite Dangerous, our F1® Manager franchise, and Realms of Ruin.

Outlook

Following the lower than expected sales performance of Realms of Ruin, the Board no longer believes that the current market expectation for FY24 revenue of around £108 million is likely to be achieved. Updated guidance is for FY24 revenue in the range of £80-95 million, with the outcome dependent on sales performance across Frontier’s game portfolio during the remainder of the financial year, including the revenue contributions from new platform releases for existing games.

Despite the reduction in revenue guidance, the Board believes that the current market expectation for an Adjusted EBITDA* loss of around £9 million in FY24 remains achievable towards the upper-end of revenue guidance, as a result of the cost savings achieved through the Organisational Review and an improved gross profit margin percentage driven by revenue mix. The Organisational Review continues to make good progress and is delivering cost reductions in line with expectations.

The Board expects Frontier to at least break even in FY25 through the ongoing performance of the existing portfolio of games, revenue contributions from future releases including the CMS game scheduled for FY25, and the 20% operating cost reductions from the Organisational Review.

Frontier continues to be well capitalised, with a cash balance at 31 October 2023 of £20.5 million. That cash figure excludes the fee from Microsoft for F1® Manager 2023 entering the Game Pass subscription service during October.

Board changes

David Wilton, our Chairman over the last twelve months, has decided to step-down from the Board to concentrate on other interests. Ilse Howling, Non-Executive Director, has stepped up to take on the role of Chair, supported by Leslie-Ann Reed’s promotion to Senior Independent Director.

David Braben, President and Founder, said “I’d like to thank David Wilton for his contribution during a turbulent and difficult year for Frontier, and particularly for his help with the complex task of restructuring through the ongoing organisational review. I’d also like to thank Ilse for stepping up to the role of Chair.”

Jonny Watts, Chief Executive Officer, said “I am pleased to confirm a third creative management simulation (CMS) game on our development roadmap. I am confident that our renewed focus on CMS will return Frontier back to profitability, deliver stimulating games to our players, and provide rewarding opportunities for our people. I’d like to thank our people and our shareholders for their patience and support as we go through a challenging period of change.”

* Adjusted EBITDA is earnings before interest, tax, depreciation, and amortisation charges related to game developments and Frontier’s game technology, less investments in game developments and Frontier’s game technology, and excluding impairment charges, share-based payment charges and other non-cash items.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014, as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (as amended). This announcement is issued on behalf of the Company by Alex Bevis, CFO.

About Frontier Developments plc
Frontier is a leading independent developer and publisher of videogames founded in 1994 by David Braben, co-author of the iconic Elite game. Frontier uses its proprietary COBRA game development technology to create innovative genre-leading games, primarily for personal computers and videogame consoles.