20 November 2023
The Management Board of Ten Square Games S.A., headquartered in Wrocław, Poland (the “Company”, the “Issuer”) informs that on November 20, 2023, after analyzing the final year’s asset impairment tests, it decided to create write-downs on the value of assets held.
In the consolidated statements, the write-down relates to goodwill resulting from the acquisition of Rortos S.r.l. and amounts to EUR 9.4 million [cost]. At the same time, the estimated amount to be paid out as earnout payments changed with the update of the financial forecasts of the acquired company. The decrease in the liability from the value previously presented in the report was estimated at EUR 4.5 million [income]. Together, the above actions will result in a €4.9 million reduction in the Group’s result in the fourth quarter of 2023.
In the standalone report, the write-down relates to the value of the acquired shares of Rortos S.r.l. and amounts to EUR 11.6 million [cost]. At the same time, the estimated amount to be paid out as earnout payments changed with the update of the financial forecasts of the acquired company. The decrease in the liability from the value previously presented in the report was estimated at EUR 4.5 million [income]. Together, the above actions will result in a EUR 7.1 million decrease in the Parent Company’s result in the fourth quarter of 2023.
At the same time, the Management Board of Ten Square Games notes that the final amount of write-downs may change both due to the occurrence of unforeseen events until the end of 2023, but also additional factors affecting the financial model of the acquired company may be taken into account during the preparation of the final annual report. The final amount of the write-down, and thus the impact on both consolidated and standalone results, will be reported in the annual reports published customarily in late March/early April of the following year.
The Management Board would like to emphasize that the posting of the above write-down is strictly non-cash in nature and, in the opinion of the Management Board, does not affect the running of the business and does not in any way imply a change in strategy. The write-down is due to the need to re-estimate the financial model for the coming years, which is characterized by very high uncertainty in the mobile gaming industry, hence the Group has assumed a very conservative development model for the Italian company. Rortos S.r.l has 3 major games in its portfolio, which generate ongoing cash flow, and several smaller projects. The main games are Real Flight Simulator, Airline Commander and Wings of Heroes. The level of cash flow in the first two titles has been relatively constant over the past few years and is the studio’s main source of income. The latest production, i.e. the Wings of Heroes game, is under intensive rebuilding, with a team of outstanding specialists from both Poland and Italy working on it, and a significant improvement in the game’s performance seems to be the prospect of time. The original models for recognizing the acquisition of the company were based on stable flows for the Real Flight Simulator and Airline Commander games, which is indeed the case, and a significant impact on the results of the new title as early as 2023 and 2024. Given the nature of the industry, this model is clearly fraught with enormous uncertainty. Today, the Parent Company’s Management Board believes that further implementation of Rortos’ plans and growth in the value of Wings of Heroes are possible, but their pace is slower and is due to the specifics of F2P product development. However, wanting to reflect the state of the Group’s assets as closely as possible, the Management Board decided to write down the value of the assets held in accordance with IAS 36.