Devolver Digital Inc (AIM:DEVO), a video game publisher, has had its 2023 full-year forecast slashed by Liberum following 2022 results that US$93mln of impairments.
TLiberum noted that US$23mln of the write-downs came from development costs on video games that hadn’t performed as well as expected.
Of this, US9.3mln related to poor-performing games: Shadow Warrior 3, Weird West, Trek to Yomi and Hard West – the latter of which was published by its subsidiary Good Shepard.
Revenue is predicted by Liberum to decrease by 6% in 2023, reflecting some cancellations and Anger Foot being pushed back to 2024.
The UK analysts expect underlying earnings to drop by 19% in 2023, having previously forecast a 22% fall.
This was largely down to the “lower amortisation expense given the write-down of capitalised development assets,” the investment bank revealed.
Pushing into 2024, Liberum remains confident that Devolver Digital will return to growth in both its top and bottom-line numbers.
“New titles released in 2H in particular Cult of the Lamb and Return to Monkey Island performed extremely well, with the former being nominated for three BAFTA’s,” the UK investment company stated.
“This speaks to the quality of the Devolver brand.”
The Texan company’s management had stated that in its history it only delivered seven games which did not recover its cost, with the three poor-performing games potentially falling into this category.
Devolver Digital also noted that it was no longer working with the developers of Trek to Yomi and Shadow Warrior 3.
Liberum believes that mergers and acquisitions will also feature in 2023, despite a drop in earnings in 2022, due to sellers dropping valuations and Devolver’s strong balance sheet.
The investors concluded: “We do not believe that the business model has changed and believe that Devolver will still be able to execute on future titles, driving strong growth in revenues post-2023.”