ANNUAL RESULTS 2020/2021
A pivotal year characterized by a shift in strategy integrating premium gaming, the Atari VCS, blockchain/NFT initiatives, and licensing. In a press release from Paris, Atari SA’s Board of Directors convened on August 16, 2021, to evaluate preliminary financial figures for the fiscal year concluding on March 31, 2021. While the audit of consolidated accounts is nearing completion, it still awaits final verification from statutory auditors, particularly concerning transactions involving digital assets, NFTs, and tokens. Additionally, as part of the ongoing strategic transition, the budget for 2021/2022 is currently under assessment. This budget’s finalization could influence the valuation of research and development expenditures for free-to-play mobile games recorded on the balance sheet, contingent upon the continued operation, discontinuation, or potential sale of these games. All these possibilities are presently being investigated. Consequently, the annual financial report is set to be released in September 2021, following the auditors’ completion of their work and the verification of the management report and its associated notes.
With Wade Rosen’s appointment as CEO in April 2021, the Group has engaged in a comprehensive review of its operations. This has led to the adoption of a renewed strategy concentrating on the creation of premium games and enhancing cash flow. This strategic pivot has necessitated greater selectivity in project approvals, the cessation of investments in certain free-to-play games while exploring potential divestitures, and the winding down of Atari’s operations in Africa. These decisions have ultimately resulted in substantial write-downs that significantly affected the fiscal results for the year ending March 31, 2021. Wade J. Rosen, CEO and principal shareholder of the Atari Group, stated that the decline in financial outcomes for the fiscal year was attributed to several factors, including diminished licensing revenues due to the pandemic, increased user acquisition costs for free-to-play titles, unprofitable project pursuits, and the absence of successful new game launches. In light of these challenges, the Group has opted to undertake significant strategic shifts: moving focus from free-to-play mobile games towards premium games, prioritizing investments in revitalizing existing Atari intellectual properties, establishing a blockchain division to seize opportunities in NFTs and blockchain gaming, and seeking licensing partners that align more closely with the brand’s ethos. “By adopting this new strategic path, we are returning to our origins: crafting exceptional games using core Atari IP, while the Atari VCS, blockchain, and licensing divisions will enhance this strategy by broadening the Atari ecosystem, aimed at delivering enjoyment and innovation to the gaming community,” he added.
CONSOLIDATED FINANCIAL RESULTS AS OF MARCH 31, 2021
The consolidated revenue for Atari as of March 31, 2021, stands at €21.4 million, down from €24.0 million the prior year. This represents a decrease of 10.9% at current exchange rates and 6.9% at constant exchange rates, primarily due to a nearly 45% decline in licensing revenues significantly impacted by the COVID-19 pandemic, coupled with a slowdown in the video game sector. In response to rising user acquisition costs, the decision was made to optimize marketing expenditures to improve the profitability of the video game division. These developments overshadow the initial deliveries of the Atari VCS that began in December 2020 and the commencement of blockchain activities, which contributed approximately 12% to the revenue during this period. The operations linked to NFTs and the Atari Token initiated this year generated €2.5 million in revenue.
OPERATIONS AND RESULTS
The gross margin has decreased from 90.0% in the previous year to 75.5% of revenue, reflecting the initial deliveries of the Atari VCS, a product line with lower margins compared to other segments of the Group. Research and development costs have seen a significant reduction due to decreased amortization of previously capitalized R&D expenses, along with reduced investments in new game development. Marketing expenses were notably lowered as a result of focusing on profitability within the video games division by refining user acquisition strategies. An increase in general and administrative costs was noted, attributed to legal expenses from successful copyright infringement litigation amounting to €0.5 million, and a non-cash expense of €1.1 million from the allocation of Atari Tokens to selected Group members. Consequently, the current operating income reflected a loss of €0.6 million, with -€0.8 million tied to the terminated African casino operations, compared to an operating profit of €2.9 million from the previous year. Other operating income and expenses amounted to -€4.6 million, highlighting the financial impact of write-downs stemming from the strategic review conducted by the Group. The cost of debt remains negligible as the Group is free of debt, mainly relating to the IFRS 16 adjustments for the financing component of lease agreements. Other financial income and expenses are primarily associated with value adjustments of non-current financial assets and administrative fees of the company’s securities. Pending the completion of the budget review regarding the fair value of R&D costs for games recorded on the balance sheet, the consolidated net income (Group share) for the year is reported at -€5.5 million, compared to €2.0 million in the previous year.
KEY BALANCE SHEET AND CASH FLOW ITEMS
The complete balance sheet, prepared following IFRS standards, is available in the appendix. As of March 31, 2021, consolidated shareholders’ equity reached €30.6 million, an increase from €28.1 million the prior year, bolstered primarily by a €5.6 million capital increase in December 2020 and by the exercise of stock options by certain employees during the fiscal year. Total fixed assets were valued at €35.0 million, comprising €13.3 million in capitalized R&D for games and €14.3 million in long-term receivables. As the current strategy evolves, the budget for 2021/2022 is under scrutiny, with its finalization potentially affecting the valuation of capitalized R&D costs based on whether games continue to be exploited, discontinued, or sold. All these scenarios are currently undergoing evaluation. As of March 31, 2021, the Group’s net cash position was €2.5 million. It is noteworthy that on April 1, 2020, the Group redeemed its last OCEANE bonds totaling €0.6 million.
STRATEGY & OUTLOOK 2021-2022
The Atari Group’s strategy for a diverse entertainment offering will be supported by its four main business units, which have strong synergies. The video games division is actively broadening its portfolio, which includes the publishing of premium games for the VCS, PC, and console, re-releasing classic intellectual properties, and focusing on the most profitable and high-potential free-to-play games within its portfolio. Recently, the company announced the upcoming launch of a new version of the classic game Food Fight in early 2022, alongside several other new titles slated for release over the next year. The first of these new games is expected to debut in September of this year. As Atari approaches its 50th anniversary since the inception of the video game industry, the company aims to fully leverage its extensive catalog of over 200 titles. Classic games originally released in the 70s, 80s, and 90s will be optimized and re-issued on platforms including PC, PlayStation, Switch, Xbox, and the new Atari VCS. The flagship mobile title, Rollercoaster Tycoon Touch, celebrated its four-year anniversary in March and continues to attract a dedicated player base worldwide. Player engagement has surged with the introduction of new, ongoing seasonal events and attractions inspired by classic Atari games. Two new free-to-play games are set for full release in the fourth quarter of this calendar year, including a new entry in the Rollercoaster Tycoon franchise titled Rollercoaster Tycoon Idle, and an RPG game called Mob Empire.
ATARI VCS
The Atari VCS began delivering to original backers at the end of 2020 for pre-orders made through the Indiegogo platform. Direct sales from preorders commenced in the first quarter of 2021, with the retail launch taking place in June 2021 through several retailers, including GameStop, Best Buy, and Micro Center in the USA, as well as JB Hi-Fi and other distributors in Australia and New Zealand. The team is focused on facilitating additional Atari VCS deliveries in preparation for the holiday season of 2021, while also assessing opportunities to expand into additional retail markets in 2022. In the coming months, Atari will continue to enhance the content offerings and functionalities of the VCS, including the reimagined Food Fight, which will be the first to debut on the Atari VCS with exclusive features. Additional indie publishers and developers are expected to contribute innovative and original games to the platform, including Graffiti Games and Akupara. Furthermore, more Atari franchise ports are planned, such as Tempest 4000 and Rollercoaster Tycoon. The VCS will also feature native retro emulation, starting with titles from the Atari 7800 and DOS PC games, along with the Atari VCS Homebrew Initiative, which will provide community sharing tools for amateur game creators. Cloud gaming capabilities will include direct access to popular services like Stadia, GeForce Now, Luna, and Xbox, along with enhanced productivity through direct access to Google’s G-Suite applications. Additionally, streamlined access to PC Mode will be facilitated with user-friendly USB thumb drive accessories.
LICENSING
The Atari Group has successfully launched several new business lines in recent years and aims to continue pursuing these initiatives. The successful launch of Atari arcade gaming machines by Arcade 1 Up / Tastemakers, LLC has proven to be a lasting success. The partnership has recently been expanded, adding new games, models, and even home casual slot machines, with the licensing agreement extended through 2029. The development of skill-based games has also become a focal point, with existing agreements in place with Gametaco and G3 Esports, LLC. Additionally, Atari is intensifying efforts to create specific products to commemorate its upcoming 50th anniversary in June 2022. The company remains vigilant in protecting its trademark and intellectual property rights, with several significant cases currently underway, resulting in cash settlements exceeding $2.8 million over the last three years, after deducting legal fees.
ATARI BLOCKCHAIN
Established on April 1, 2021, the Atari Blockchain division consolidates all blockchain-related activities for games and digital assets developed by Atari or third parties. Atari Blockchain aims to expand this ecosystem, particularly by enhancing the adoption and use of the Atari Token. The burgeoning popularity of NFTs and blockchain-based games has reinforced Atari’s strategic positioning in this emerging market. The company has formed robust partnerships with leading entities such as Animoca Brands, Sandbox, Decentraland, and Zed Run. So far, sales of Atari NFTs through licensing partners have generated over $1 million. In the months ahead, Atari plans to bolster its commitment to NFTs by launching a dedicated marketplace for curated video game-related NFT releases. The goal is to onboard the vast community of Atari enthusiasts and gamers to the realm of genuine digital ownership facilitated by blockchain technology, with NFTs serving as a gateway to unlocking an expansive array of games and experiences.
ANNUAL SHAREHOLDERS MEETING 2021
The Annual Shareholders Meeting will be held concurrently with the release of the Universal Registration Document, which will include the management report, the annual financial report, and the corporate governance report.
Disclaimer
The realization of the outlined plans, along with their operational budget and funding strategy, remains uncertain, and the failure to achieve these projections may affect their value.
About Atari
Atari, encompassing Atari SA and its subsidiaries, is a worldwide interactive entertainment and multiplatform licensing organization. As a pioneering force in the video game industry since its founding in 1972, Atari manages a portfolio of over 200 games and franchises, featuring renowned brands like Asteroids®, Centipede®, Missile Command®, and Pong®. Drawing from this extensive collection of intellectual properties, Atari provides engaging online games for smartphones, tablets, and other connected devices, while also developing and distributing interactive entertainment for Microsoft, Sony, and Nintendo consoles. Furthermore, Atari leverages its brand and franchises through licensing deals across various media, derivative products, and publishing avenues.
