CCP Financial Position

I am introducing a new feature in my Blog which will look at the financial position of CCP, the producer of Eve Online.

I have introduced two new pages:

CCP Financials (as Published) which shows the Profit & Loss Account, Balance Sheet and Cash Flow Statement as published by CCP for 2009 to 2012.

CCP Financials (my forecasts) which shows the last 2 years of the published financials and my efforts at forecasting the next 2, so 2011 to 2014.

All posts on the CCP financial position will come under the label <CCP Financials>

Given CCP issued a $20m convertible bond in July 2012 and listed it on the NASDAQ OMX exchange in July 2013 we have more financial data available to work with.

There will be many more posts on this including discussions on how I arrived at my forecasts and observations into the published CCP financials - my next post on the CCP Financials will look at how I determined the Eve Online revenues forecasts.

For now though, in Summary, we are looking at a profitable company that is spending more cash than it generates to develop new games - hence it is having to borrow money to maintain its spending plans.  2014 will be a key year in proving the profitability of CCP - the company needs EVE Online to continue to grow at the very least through 2013 and into 2014.  It does not need any of its other ventures to come through to be a viable company.

Don't confuse profits with cash - there are differences.  CCP generates profits but it does not generate cash at this stage.  Eventually, a company has to generate cash or it goes insolvent  I expect CCP to generate cash in 2014.  In the last 5 years CCP has only generated cash in one year and that was 2009.  The main difference between cash and profits is the costs of developing new games and expansion packs are not expensed until later but of course the cash has to be paid now.

Net debt at the end of 2012 (i.e. all borrowings less cash) was $12.4m and I expect this to rise to $17.1m in 2013 before falling back in 2014 [in my pages I refer to Net Cash which is the -ve of Net Debt].  I don't see any problem at this stage with refinancing the convertible bond which is due in July 2016.

My forecasts may be a little too high on the revenues though I have nothing in for Dust at this stage.

Revenues in 2012 were $65.3m off 355,000 subscribers and I expect this to rise to $80.7m off 483,100 subscribers in 2013 (includes China).  However, profits after all costs in 2012 were $4.7m and I expect this to fall to $1.9m in 2013 due to rising Development amortisation for the launch of Dust (i.e. once Dust was launched all the Development spending can now be expensed through the Profit & Loss account over 4 years which in the initial years will be higher than the revenues Dust brings in - hence, Dust is loss making in its first year or two).

2012 did not see any growth in the number of subscribers and hence no growth in revenues.  However, a rise in Marketing costs and a rise in amortisation of prior Development costs (poor expansion packs have a cost but little revenue generation!) caused profits to almost halve to $4.7m, and hence net debt rose from $8.9m to $12.4m.

Below the operating profit line the accounts are messy with currency movements and tax credits all over the place.  If I focused on operating profits then in 2012 operating profits fell from $7.8m to $2.8m . . . . . that gives a better idea of the effect of a poor expansion pack and the launch of Dust.

The charts below give a brief summary of the historic and forecasts Profits and Cash Flows:

Free Cash Flow is cash flow after all costs but before payments to shareholders - i.e. it is the cash flow the company generates.  Operating Cash Flow is the cash flow a company generates before spending on expansion programs.  Net Cash is the cash less all borrowings - when it is -ve then the company is carrying net debt.

Items to sell for a beginner

The most common question I get is "What items should I be selling?"

In this post I will talk about a good item to sell and some of the thinking behind finding it.

It is a question I tend not to answer for two reasons.
Firstly, given Eve is all on one server, as soon as I say what item is a good idea then that item will be flooded with sell orders and so come down in price.

Secondly, by telling someone what items to sell I am not helping them.  Given my first point, my advice will only be good for a few days and then they will be back again having learned nothing on how to find good items to sell.

When I started my businesses of making ISK back in May with 4m ISK to invest I found the best sellers to be blueprints.  They are seeded by NPCs, so have a base value that they tend not to fall below.  And, with only 4m ISK, I was dealing in blueprints that the big traders completely ignore given they wont move the dials of their wealth.

The missile Blueprints were good earners.

The Nova Heavy Assault Missile Blueprint can be bought from Jita for 600,000 ISK, seeded by NPCs so the price is fixed.  It can be sold in Dodixie for 1.3m ISK making a nice return, about 2 sell every 3 days.  Small stuff, but a lot if your starting ISK is only 4m.

The Nova Heavy Missile Blueprint can also be bought from Jita for 700,000 ISK, seeded also by NPCs so the price is fixed.  It can be sold in Dodixie for 1.9m ISK, about 1 sells every 2 days.

Faster sellers are the Scourge Heavy Assault Missile Blueprint and Scourge Heavy Missile Blueprint.  They can be bought from Jita for 550,000 ISK and 700,000 ISK respectively and sold in Dodixie for 2.6m and 1.8m ISK.  They sell at least one per day but that is good profit for a beginner.

The latter is reasonably stable as shown on the graph below:

The key though is to learn how to find these.

My preferred route is to start with Eve-Central and compare selling prices between two systems.  See my post on how I use Eve-Central.

I found that starting small I then gradually worked my way up to trading in more expensive items and even today I still trade in some of the items I was trading in during my first few weeks.
 

My current income sources

When I started out in making ISK in Eve I focused on Regional Hauling, and that remains the dominant strategy today.

I am starting to diversify into Station Trading and Manufacturing.

For non-Eve players - "station trading" is when you buy and sell items in the same station, acting as a market maker.  In effect, making a return from the spread.

When I look at wealth I don't count assets I use in the course of my business such as ships, fittings etc nor do I add back any expenses such as skills purchased etc.  The wealth I disclose is made up of items that are ISK or are in the process of being converted to ISK.

At the moment, I merely look at how my wealth is distributed between ISK in my wallet, Items in Transit, Items that are in my hangers but will be sold, Items in Production, Buy orders (I.e part of Station Trading), Sell orders (Regional Hauling and Station Trading together) and of course my 20% provision against all sell orders*

The chart below shows how this has trended since I started back in May.

Going forwards I may try and split out the manufacturing sell orders from the trading sell orders to give an idea of what is generating my income - but the numbers are not yet big enough to be meaningful.

I may also try and estimate how much income came from each of my business strategies which are currently Regional Hauling, Station Trading and Manufacturing . . . . . but I suspect that will not be possible.

For me, the main purpose of this chart at the moment is to show the annoyingly high amount of ISK in wallet that I have which is sitting there earning no return!  Also, I can now see a slither of items as Buy Orders (one part of station trading) and items in Production (i.e. manufacturing).

 

 

* I take a 20% provision against the items I am selling.  Eve calculates wealth by adding up the value of the sell orders hence it is possible to increase your wealth by buying an item for 100m ISK and putting a sell order for 120m ISK (in this case your wealth would increase by 20m ISK).  For me, I want my wealth to be calculated at cost until i finally hold it as ISK.  I know that the value of my sell orders will likely fall over time as I update my orders downwards as competition reduces their prices before my items are sold.  Hence the 20% provision is my best guess as to what cost is or at least the maximum reduction I would need to make to my sell orders as a whole before they are sold.

My Eve Spreadsheets

The one thing that every Business needs in Eve is spreadsheets.  To be honest, in my case that probably reflects my personality but in my experience other ISK making players in Eve use spreadsheets profusely.

my current spreadsheet has 11 tabs:

1. Wealth - this one keeps a track of my wealth (sell orders, buy orders, Items in hangers, items in production, ISK in wallet etc).

2. Items to sell in Dodixie - this one keeps a list (which is duplicated on my quickbar) of all the items I can sell in Dodixie and compares the price of each item in Dodixie to the price of the item in Jita.  See my post on How to bring Jita prices into spreadsheets directly from the web.

3. A sheet that downloads from Eve-Central that compares the prices for all items between Dodixie and Jita in the Eve-Central database.  I use this one to find new ideas on items to buy in Jita to sell in Dodixie.

4. Items to sell in Hek - this one keeps a list (which is duplicated on my quickbar) of all the items I can sell in Hek and compares the price of each item in Hek to the price of the item in Jita.  A similar sheet to (2) above.

5. A sheet that downloads from Eve-Central that compares the prices for all items between Hek and Jita in the Eve-Central database.  I use this one to find new ideas on items to buy in Jita to sell in Dodixie.  A similar sheet to (3) above.

6. A summary of the manufacturing data in sheet (7) which lists the profit margins of all items I can manufacture (with the cost data pulled off the web from Eve-Central).  The sheet will also tell me what materials I need to purchase depending on what I select to manufacture.

7. All the manufacturing data (materials required) for all items I can manufacture.

8 to 10. Data sheets that pulls down prices in Jita of items from the web (from Eve-Central) for my trading in Dodixie and Hek, and my manufacturing operations.

11. A data sheet that lists the type Ids of all items in Eve.  I is used as a reference for sheets 8 to 10 and 6 to pull down data from Eve-Central.

My entire Eve business is run from this spreadsheet.

Looking at "Increase in Wealth per day"

At the moment, the main number I look at to determine the health and momentum of my business is the "increase in wealth per day", which is nothing more than the increase in wealth per month divided by the number of days in the month.

But, in many ways it gives me a good snap shot as to how I am doing and how I should be doing in the future.  At some stage my "increase in wealth per day" will flatten out and so my percentage increase in wealth each month will start to decline (i.e. my wealth will increase each month by the same amount but my total wealth will be rising, so a declining percentage increase each month . . . . . the curse of large businesses).

At present my "increase in wealth per day" is 245m ISK which therefore drives the 7.4bn increase in wealth per month.  The chart below shows how this has trended since I started back in May - the good news is that it is on a rising trend.  The bad news is that if work takes me away from the game for longer than 2 days at a time then it can suffer.

October will be a very slow month given I am away for most of it but I am hoping that my increase in wealth per day will continue to rise as I break into station trading and manufacturing.

My goal is to eventually get to 550m ISK per day which would mean I would be earning a Plex a day from my business.  (for non-Eve players, a Plex can be bought in game for ISK and used to extend your game time by 30 days).  I am a long way off that goal.

As ever, I restrict my time in Eve to 30 - 45 minutes per week day and so I am looking for low maintenance income generating strategies which generally pushes me into slow moving but high margin markets.  My fear is that one day I will discover the limit of how far this will take me and my increase in wealth will start to flatten out before I reach my goal of 550m ISK per day.

When I talk about wealth, I don't count assets I use in the course of my business such as ships, fittings etc nor do I add back any expenses such as skills purchased etc.  The wealth I disclose is made up of items that are ISK or are in the process of being converted to ISK.

Furthermore, I take a 20% provision against the items I am selling.  Eve calculates wealth by adding up the value of the sell orders hence it is possible to increase your wealth by buying an item for 100m ISK and putting a sell order for 120m ISK (in this case your wealth would increase by 20m ISK).  For me, I want my wealth to be calculated at cost until i finally hold it as ISK.  I know that the value of my sell orders will likely fall over time as I update my orders downwards as competition reduces their prices before my items are sold.  Hence the 20% provision is my best guess as to what cost is or at least the maximum reduction I would need to make to my sell orders as a whole before they are sold.

My Daily Routine

The two most frequent emails are: how long does my daily routine take; and what do i sell.

So, to answer the first of these.

And recall that I restrict my play time to 30 – 45 minutes on a weekday.  My rl employer works me like a dog.

On any given day when i log in i will have the option of:

 

1.       Updating the sell orders for my alts in Dodixie and Hek, and posting any items hauled from Jita.  That takes me 20 minutes in total.  Between the alt in Dodixie and the alt in Hek I have about 200 orders up of which about 50% get undercut on a daily basis, if that.

2.       Determining what to buy with my Jita alt and what Skillbooks to be bought which are to be sold by my trading alts in Dodixie and Hek, and also buying the items in Jita + skillbooks, and setting up the hauling contracts.  That takes me 15 minutes.

3.       Updating my “station trading” orders for my alt in Dodixie.  That takes me 3 minutes.

4.       Updating my manufacturing alt sell orders, and adding sell orders for manufactured items delivered to Jita.  That takes me 2 minutes.  I only have about 10 items up for sale at any one time.

5.       Delivering finished manufacturing jobs to Jita to sell.  That takes me 3 minutes.

6.       Determining what to manufacture, buying the raw materials, delivering to the manufacturing station and setting up the manufacturing.  That takes me 15 minutes.

7. Look for new items to haul from Jita to Dodixie / Hek.  Can take 30 minutes and involves me researching prices and trends.

8. Look for new items to manufacture.  Can take 30 minutes and involves me researching prices and trends.

 

In all the day to day operations (1 to 6) can take about 60 to 70 minutes once i have logged alts in and out – and i would be working flat out.

Hence, on one day i will typically do (1), (2), (4) and on another day (3), (5) and (6).  At the weekends I will look into (7) and (8).

I tend to work out what i need to buy in Jita and what skillbooks I need to buy when i get back from work and get the items bought and set up the Rush Job contracts with Pushx Industries.  And then before i go to bed they have normally been delivered so that i can post them to sell in Dodoxie and Hek, and update all my sell orders in those regions at that stage.

The one thing that being away from home on business for a few days in a row at times is that i don’t need to update my sell orders every day.  Now that i am out of the competitive sub-system market, my other items for sale just sell naturally over time over 2 to 3 days before losing momentum.

September Update

Wealth increased by 7.4bn ISK to 23.3bn ISK.  Which is an average of 245m ISK per day.

This has been a good month despite me being away on business for a third of it - reminds me of July.  In fact, my best month so far.

Given I took advantage of having 51 days on my new account - I did not buy a Plex this month to finance my second account.  I will need to spend c550m ISK in October on my second account.

My main account is financed to the end of the year through players taking advantage of the Buddy Programme link to the right >>>>

Hence, come January I will be funding my playtime on Eve with 2 Plex per month, or 1.1bn ISK per month.

The Highlights was the start to move into Station Trading, increasing my penetration into the Skill Book market and my Manufacturing alt ramping up.  I am now almost totally out of the sub-system regional hauling market - perhaps the most competitive I have witnessed.

I have not been playing Eve long enough to understand the seasonality of pre and post expansion effects on the Eve economy and so I don't make any ISK from speculating around content expansions.

My main constraint to growing my wealth, other than only spending 30 to 60 minutes online per weekday, is the amount of ISK sitting in my wallet.  It is often over 3bn ISK and it is earning a nil return.

An effort to deploy this ISK was the reason I entered the Station Trading market and increased my penetration into the Skill Book market.  For non-Eve players - "station trading" is when you buy and sell items in the same station, acting as a market maker.  In effect, making a return from the spread.

The Skillbook market is a low margin market (c8 to 10% after all costs including hauling costs) but it is a steady income with less competition.


Dodixie Trader: business as normal really, still feels like this alt is gaining momentum, using about 127 of its 141 active order slots, has about 11.4bn ISK of sell orders active which is up on the 7.4bn in the prior month (and 5.5bn in the month before that) and mainly driven by the entry into the skillbook market and the move into selling some higher value items.  The core trading (i.e. non-skillbooks) is holding the 20% operating margin after all costs.

This alt has also entered the Station Trading market,  Currently has c0.9bn of Buy orders up - which is increasing as I find new items to station trade.

Pays 0.80% broker fees to post an order and a further 0.90% sales tax on a successful sale.  No longer training.


Hek Trader: now that it has almost completely exited the sub-system market its regional trading has slowed considerably and a key focus is to find new items to sell – hence this alt is expanding the fastest into the Skillbook market which does have the effect of depressing the profit margins.  Has about 9.5bn of sell orders, up from the 6.8bn ISK in the prior month, driven by the expansion into the Skillbook market.  Pays 0.80% broker fees to post an order and a further 0.90% sales tax on a successful sale.  No longer training.

I think it is fair to say I still have someway to go to crack the Hek market to its full potential.  At present this alt is using 82 of its potential 129 trading slots.


Manufacturing alt: This alt remains based one jump out of Jita in Ikuchi.  Eventually I plan on setting up base elsewhere - but this location serves me well to learn the ropes and is a good source of raw materials with Jita just one jump away.

In my first month I estimate that I made profits after production costs + broker fees + sales taxes of 1bn ISK.  I was not constrained by ISK, my main constraint is that I am still learning this business.

I am now manufacturing and selling 10 items on a regular basis.  All Tech 1.  I manufacture the items as I need them, I don't yet keep a stock of items to sell.

I started selling Industrial Ships before the Odyssey expansion started - that was good profits but they have now falling back to become loss making, hence I no longer manufacture these.  I am now manufacturing mostly Rigs - making some good profits for now.

Part of the excitement in manufacturing is designing the spreadsheets - my current spreadsheet keeps an eye on the profit margins of 28 items I could manufacture by pulling the prices of the raw materials from Eve Central.  See my post here on how I do that - automatically pulling prices from Eve Central.

Of course, when I said I made 1bn ISK I did somewhat fail to mention what I have spent on skill books and, more importantly, in Blueprints.  I estimate that I have spend c500m ISK on Blueprints which does somewhat reduce my profits in manufacturing to c500m ISK this month.  On one hand saying 1bn ISK profits is valid because blueprint purchases are one-off (I do purchase blueprint copies at times which are included in the profit numbers given they are a running cost of manufacturing).  However, at any time the items I am manufacturing could fall to loss making and hence these Blueprints would no longer be making me any money (just sitting in my hanger gathering dust) so I think it is correct to view them as a real expense.  I am unlikely to ever sell them.  Also, at this stage I don't want to view the Blueprints as an asset in my business - how do I value them?  For sure, there are NPC values - but, again, I am never likely to sell them.

I often have to make the trip to Jita and back hauling raw materials to undertake the manufacturing – but that is a 5 minute job at most, and low risk given i don’t haul much, certainly under 100m ISK at a time.  If I need to haul more then I outsource the hauling to Pushx Industries.

Relevant Skills trained:

·         Advanced Mass Production level 4 – allows one extra manufacturing slot per level

·         Industry level 5 – reduces manufacturing time by 4% per level though as importantly is a pre-requisite for learning further skills

·         Mass Production level 5 – allows one extra manufacturing slot per level

·         Production Efficiency level 5 – reduces the manufacturing materials required by 5% per level

·         Supply Chain Management level 4 – remote manufacturing control within 20 jumps in a region.  Now training to level 5 for full region control

·         Industrial Construction level 2 – allows the construction of advanced industrials

·         Capital Ship Construction Level 1 – allows the construction of capital ships

·         Frigate Construction Level 4 - allows the construction of Frigates and needed for other skills

·         Cruiser Construction Level 4 - allows the construction of Cruisers and needed for other skills

·         Battleship Construction Level 4 - allows the construction of Battleships

·         Science Level 5 – needed for many other skills

·         Mechanics Level 5 – needed for many other skills

·         CPU Management Level 5 – needed for many other skills

·         Power Grid Management Level 4 – needed for many other skills

·         Cybernetics level 4 – allows me to plug in implants that speed up the time it takes to learn skills (given this alt will be learning for several months i should have done this right from the start).

·         And also other specific skills that required to manufacture the items, such as various Rigging skills.

  

I have also trained up some Trade skills given my alt is doing the selling of the manufactured items for now.  The original plan was for the traders in Hek or Dodixie to do the selling but that is on hold whilst I learn this business near Jita.

Hence I have trained Trade level 4 and Retail level 4 to get 53 active trading slots, and Marketing Level 3 + Daytrading Level 3 to allow me to post sell orders remotely and modify them remotely.

The new account:  I started a new account last month which will cost me a plex a month to maintain, i.e. 560m ISK per month at todays prices.  I also used the “buddy invite” system and upgraded the account when i bought the plex.  That gives me 51 days of play time and rewards me with a plex – more details in the linked post.

I am training this character up in Research skills.  Whilst it is doing this it will be my new buyer in Jita – so he buys the items for the traders to sell in Dodixie and Hek.  As ever, the items are hauled there by Pushx Industries.  Therefore, i copied over all the market quickbar information from the main account to this new account – the details of how i did this can be seen in the linked post.

Relevant Skills trained:

·         Science level 5 – needed for many further skills and gives a 5% speed to blueprint copying per skill level

·         Research level 4 - needed for further skills and gives a 5% speed to blueprint manufacturing time research per skill level

·         Scientific Networking level 3 – allows me to run research operations remotely (i.e. not be in the same station)

·         Laboratory Operation level 4 – allows me to run one additional research job per skill level

·         Metallurgy level 3 - needed for further skills and gives a 5% speed to blueprint material efficiency research per skill level

Currently training Scientific Networking level 4



I suspect October will not be a good month given I am away for two thirds of it.

Current wealth:

Expected business purchases in the next 30 days

Plex 530,000,000 ISK


I don't count assets I use in the course of my business such as ships, fittings etc nor do I add back any expenses such as skills purchased etc.  The wealth I disclose is made up of items that are ISK or are in the process of being converted to ISK.

* I take a 20% provision against the items I am selling.  Eve calculates wealth by adding up the value of the sell orders hence it is possible to increase your wealth by buying an item for 100m ISK and putting a sell order for 120m ISK (in this case your wealth would increase by 20m ISK).  For me, I want my wealth to be calculated at cost until i finally hold it as ISK.  I know that the value of my sell orders will likely fall over time as I update my orders downwards as competition reduces their prices before my items are sold.  Hence the 20% provision is my best guess as to what cost is or at least the maximum reduction I would need to make to my sell orders as a whole before they are sold.