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Wednesday 27 April 2016

Someone has Blundered

. . . . . . namely me, again.

I was putting up a Sell Order for two Drake Blueprints and I fingers literally trip off my mouse onto the Enter key.

I was aiming to sell for somewhere nearer then 699m mark and ended up selling for 10k each.

A nice loss of 1.4bn.  That was annoying, to say the least.

Now, blundering is all part of the game.  I get that.  And these cheeky Buy Orders are set up to catch such blunders.  I get that also.  CCP is not there to protect idiots.  I get that.  Mistakes are made in Ship pvp, so why not on the market also?  I get that.

That said, there can surely be a mechanism where the Sell Order for any item defaults to the last price I posted a similar Sell Order?  I note this happens occasionally but not always.  Heck, there could even be an additional ISK fee to pay to activate such a mechanism.

It would save me a bundle.  Has been a while since I got a blunder in my favour.

Monday 11 April 2016

CCP Financial Statements for 2015 - a review

Summary: Revenues remain in decline, record breaking year for profits, record breaking year for profitability, record breaking year for cashflow, balance sheet very strong.

The CCP 2015 Financial Statements were filed at the Directorate of Internal Revenue on 30 March 2016.  I have a obtained copy (they are available to the Public) and discuss them below.

I have filled in the main numbers on my CCP Financials (as published) page to allow a quick comparison of the Profit & Losses, Balance Sheets and Cash Flows of prior years going back to 2008 (i.e. 8 years of numbers).

I have also created new page "CCP hf. Consolidated Financial Statements for 2015"
 that recreates the 2015 accounts as near as practicable to their original form to allow others to take the information and analyse it themselves.

Discussions on implications for Player numbers (i estimate 396,000 + Trial Players) and Plex all below.

A bit of background

Iceland, much like the UK and other countries, requires all companies (both public and private) to file their Accounts at a central authority within a certain time such that they be kept on record and can be viewed by the public.  There are good reasons for this which are beyond this post - but are mainly to do with the fact that a company is a separate legal entity from its shareholders and management.  For the UK, anyone can go online to Companies House, or private websites, and download a copy of any UK company for £1 (free at the moment) - in fact, you could download the accounts of the UK subsidiary of CCP of you wanted.  In Iceland, to get a copy of the accounts you need to fill out a form in Icelandic and, for the required payment, they email you the accounts.

The 2015 CCP hf. Accounts can be found on the website of Directorate of Internal Revenue, click on the "+" sign beside the phrase "
Gögn úr ársreikningaskrá".

And if you brush up on your Icelandic you can find the right form to fill in and the accounts will be emailed to you for a fee.  Note, you need to navigate the Icelandic version of this site (google translated if required), the English version seems to bypass all the company data pages.

As far as i can tell, there are no half-year accounts though i am not sure what the accounts filed on 22.09.2015 (number 415679) were.  I am tempted to check.

And so onto the 2015 Accounts

For the record, I maintained last year that Eve Online is a very profitable, cash generative and low growth game which is standing the test of time (up their with very few other games).  The 2015 accounts show that Eve Online is indeed a very profitable and cash generative game.  The growth matter though remains to be proven for now.

In 2015 we are largely seeing a cleaned up business and so can get a good idea of what CCP (mainly Eve Online) looks like in real life.  There are only a few one-offs which flattered the numbers: sale of World of Darkness added $5.1m of profits and $5.7m of cash; and an equity raise added $30m of cash.

For 2015 the Revenues (Eve + Eve China + Others) were $65.7m vs $68.6m in 2014.  More below, but i estimate that Eve Online (not including China) were $53.7m vs $63.7m in 2014, a fall of 16%, and brings the Eve Online revenues down from its peak of $71.7m in 2013 back to the 2009 level of $51.8m.

That said, this year CCP made a post tax profit of $20.7m vs a loss of $65.6m in 2014 (i estimate that the underlying profits in 2015 were $15.4m once the World of Darkness profit on sale is excluded and the 2014 underlying profits were $11m once i excluded all the one-off write-offs, so still saw good profit growth).  In fact, i have data going back to 2008 and CCP has never made profits of over $12m - so 2015 is a big record year.

Further good news is that CCP generated free cash flow of $14.9m vs $0.2m in 2014, swapped the expensive $20m Convertible Loan into cheaper bank debt and raised $30m to recapitalise the company.  CCP now has net cash of $33.8m vs net debt of $16.0m in 2014.  CCP has never had a stronger net cash position.

Perhaps where CCP has fallen down is how it uses that cash on other projects - and 2013 and 2014 was all about cleaning up that mess (including raising new equity in 2015) - and therefore its lack of revenue growth.  Eve Online revenues are back to below 2010 levels.

In summary, CCP has been cleaned up and has plenty of cash to invest in new projects (fingers crossed!).

A key debate will be if CCP can put Eve Online back onto a growth path, what is CCP going to be spending its cash on and how will Valkyrie do.


Full year revenues fell 4.2% from $68.6m to $65.7m.  That is on top of the decline in 2014 of 10.6% from $76.7m to $68.6m.

Eve splits out its Revenues in a number of ways and the trick is to determine the Eve Online part - somewhat easier this year given CCP only had one game in operation:

Very broadly, i believe there are four parts to the 2015 Revenues: Eve Online; Eve China; Other Games and Others.

Given that Eve Online was the only game this year then that would indicate that the Eve Online Revenues were the $53.3m vs $63.7m in 2014.

I have no idea what "Other revenues" of $7.1m are and this did a lot to bail out the overall revenue decline.  It is made up of "Revenue from sale of goods" of $1.1m and "Other Revenue" of $6.0m.  I am reasonably sure this does not relate to the sale of World of Darkness given i suspect the "Profit on Sale" of that business is included in "General and Administration".  That said, i can't for now think what this $6.0m revenues would be - if it proves to be a one-off then we should exclude this $6m revenues and associated profits from our view of the underlying business of CCP.

Within the geographic distribution of Revenues "Other regions" is defined as the Southern Hemisphere hence i believe Eve China is mostly Asia / Royalties & Licenses.  So anywhere between $4.9m and $5.3m.

To make life easier i have assumed that Asia is China and that Asia is included in the "Royalties and Licenses" line, the remaining $0.4m of Royalties & Licenses i classed as "Other Games".  Hence, stripping out "Other revenues" of $7.1m and remaining Royalties of $0.4m leads me to conclude that Eve Online was indeed the $53.3m of revenues in 2015.

No hiding from it, this was a tough year for Eve Online revenues in 2015, worse than in 2014.

In 2015, Eve Online Revenue therefore fell 16%, and that is on top of a fall of 11% in 2014.  Eve Online Revenues peaked at $71.7m in 2013 and now are $53.3m.

I suspect the only growth came from China - all other regions were in decline, a similar story to 2014.

Subscriber / Player numbers

The accounts themselves do not state the number of subscribers or player in Eve Online.

But that is not going to stop us having a shot:

Remember t
hat Players = Paying Subscribers + Plexed Accounts + Free Trial Players.

Also, remember that Plex is only counted as Revenues when it is used - and i am assuming that Plex is only used for game time when it is activated (dangerous assumption, i know).

In 2012 we were told that Plex sales make up 20-25% of revenues and 1 months subscription was $15 vs a Plex of $20.

We were also told in 2012 that there are about 30,000 - 40,000 Trail Players at any one time.

Subscriber numbers (including China) were last disclosed as at 31 December 2012 at 490,000 (351,502 2011, 360,000 2010).  That included China which in February 2013 had 85,959 subscribers and about 84,000 in December 2012.  So lets assume as at 31 December 2012 Eve Online (not including China) had about 406,000 subscribers.

Eve Online Revenues in 2012 were $64.1m vs $53.7m at the end of 2015.  That is a fall of 16%.  If we dangerously assumed that the proportion of Plexed accounts stayed constant then that would indicate that Subscriber numbers have fallen 16% to 340,000 and that they still represented 75% of revenues leaving the Plexed accounts to represent 25% (=$53.7 x 25% = $13.4m).  At $20 a shot per month that would indicate 56,000 Plex accounts and so total players at the end of 2015 of 396,000.  And then add in however many Trial Players there are were.

Alternatively, we could merely observe that in 2009 Eve Online Revenues were $51.8m and in 2010 Eve Online Revenues were $57.4m.  We know that the Subscribers in 2010 were 360,000 (China was not around back then) so that indicates that the above 340,000 subscriber number is in the right area.

As an aside, in the 2013 prospectus to raise the bond money CCP included a chart on "The development of monthly subscribers to EVE (excluding Eve China), as shown below.  I can only assume this is the average monthly subscriber numbers in each year given it does not really reconcile to anything else.

There is one more clue.  In the accounts for Deferred Revenues we have the following:

Now, Deferred Revenues are cash that has been received during the year but relates to sales for future periods.  In other words, subscriptions paid in advance.

The subscriptions paid in advance as at 31 December 2015 were $3.7m vs $4.0m in 2014.  If we assumed that there was no mix change (i.e. the average payment in advance per player was the same in 2015 as 2014) then we can say that the subscriber base fell 7.5%.

If someone could tell me the average payment in advance per subscriber then we could get another estimate of the subscriber base.  

Gross Profits

This is revenues less the direct costs of running the game (servers, employees who run the game such as security, customer support etc).

Gross profits were $61.4m which is 93.5% of Revenues and a healthy level.  Eve Online should cost next to nothing to actually run (there are more costs in coding updates, marketing, publishing etc elsewhere).  Infact, 93.5% is the highest proportion of revenues that Gross Profits have ever been.

Staff Numbers

The number of staff at CCP at the end of 2015 was 330 vs 338 at the end of 2014.  At the end of 2013 it was 508.  2014 was the year of the big layoffs - hence 2014 still carries the cost of those staff.  A far cry from the 603 staff employed in December 2010.

In total, CCP paid $23.8m in salaries (or $29.5m once we add in all the salary related expensions like pension contributions etc) vs $33.1m in 2014 (or $42.5m).

Operating Costs

In total, operating costs came to $40.9m with declines in R&D, publishing, Marketing and General & Admin given no more Dust514 and World of Darkness, and the associated cut backs in staff.

However, CCP states that General & Admin costs were $11.2m vs $19.8m in 2014.  That feels like too big a decline on its own.  Indeed, I suspect that the profit in the sale of World of Darkness in October 2015 of $5.2m is included in here and the actual General & Admin costs are in fact higher at $16.3m.  It would be very unlikely if General & Admin was as low as $11.2m, a level not seen since 2008.

Hence, it is likely that the underlying operating costs were $46.1m which still compares favourably to the $95.8m in 2014 and is right back at the 2010 level of $46.6m.

If i assume this to be the case then operating profits (profits before interest and tax = revenues - cost of sales - operation costs) were $15.4m 
- a new record for CCP - and an operating margin (operating profits as a % of revenues) was 23.4% - another record for CCP.

Worth remembering that this 23.4% operating margin is the Eve Online margin less costs of developing Valkyrie.  That makes the 23.4% quite respectable.  Activision Blizzard generates operating margins of 28.3%.  Hence, for 2015 at least, CCP is within range of the leaders on profitability.

As an aside, i suspect CCP wrote off most of the carrying value of World of Darkness in 2014, so the $5.2m profit on sale ($5.7m proceeds less $0.5m costs) is perhaps quite flattering.

Finance Costs

The $20 convertible bond, requiring interest payments of 7%, was repaid in April and replaced by a new $24m bank loan with interest of LIBOR +4.7%.  So a good saving there: interest costs will go from $1.4m pa to $1.1m.  When comparing to the 2014 Finance Costs, don't forget that there was an accelerated $3m charge to reflect the early redemption of the Convertible Bond.


The company still has loads of losses to offset against tax, so CCP is not yet paying any corporation tax of note.  I am not sure when CCP will start paying corporation tax (at 20% of pre tax profits).


After some small currency movements that all gives post tax profits of $20.7m (that includes the one-off profit on sale of World of Darkness of $5.2m).  CCP has not has not seen post tax profits over $10m, let alone $20m, since i have records going back to 2008.  Even if i was to exclude the profit on sale of World of Darkness it would still be a new CCP record.


CCP itself generated cash of $14.9m (free cash flow of $20.6m less the $5.7m sales proceeds of World of Darkness) - again a record based on the data i have going back to 2008.

One-off cash inflows were: World of Darkness was sold in October, it looks like the sale price was $5.7m; $30m new equity was raised in November.

Hence, the $14.9m cash generated by the business + $5.7m sales proceeds + $30m equity - financing costs, put the company into a strong net cash position of $33.8m vs net debt of $16.0m at the end of 2014.  That is the strongest CCP has ever been in.  If anything, CCP may have raised too much equity in November unless they have some grand spending plans for 2016 onwards.

Balance Sheet

Other than what has been said above:

Development costs carried on the Balance Sheet - i.e. costs (mainly salaries) spent in developing Valkyrie and Eve Online releases - were $14.6m vs $13.6m in 2014.  Peaked at $88.0m in 2012, we saw a huge right offs in 2013 and 2014 of $21.5m and $29.4m respectively.  Of last years $13.6m, some $9.3m was expended through the P&L and replaced by $10.1m of new development.  In other words, unlike prior years, the Development cost on the Balance Sheet is being quickly and prudently expended.


As ever, to get an idea of how much Plex is sitting in hangers we look at the Deferred Income line in the balance sheet.

As a reminder, Plex sales only appear in Revenues once the Plex is used up.  Until then, it sits in Deferred Income.  Also potentially sitting in Deferred Income is any Aurum bought from the Store - but I assume that the purchase of Aurum is used immediately.  See my reasoning in this post i wrote back in September 2014 for linking Deferred Income to Plex price movements.

Looking at the "In-game purchases not yet consumed" line indicates that the US$ value of Plex sitting in hangers has risen from $3.0m to $3.3m.  If we assume each Plex costs $15 then that indicates the number of Plex sitting in hangers has risen from 197.7k to 219.8k (using the same methodology in December 2012 there was 71k Plex sitting in hangers and in 2013 there was 140.5k Plex sitting in hangers).

That indicates quite a slow down in the growth of Plex being bought by players as an investment though still indicates that there is net buying pressure on Plex from those players.

Thursday 7 April 2016

March Economic Report - a review

The monthly Economic Report for March is out.

In summary: Activity is up, Trading is down


General activity was higher in March as seen by 11% higher Bounty Prizes, 7% higher Mining and 6% higher Production but Trading activity was down by 14%.  Worth noting that there are 2 more days in March vs February, so we would expect to see everything be about 7% bigger.

Trading fell in all major Trade Hubs by about 15% (except the Hek which fell 8% - more on Hek later).  We can see this also in the 15% fall in Transaction Tax to 8.3 trillion ISK and 19% fall in Brokers Fees to 4.8 trillion.  I suspect that is entirely down to Skill Point trading which burst onto the scene in February and lessened during March.

The amount of ISK sitting in players and corporation wallets rose from 949 trillion to 972 trillion - which was a 33.6 trillion inflow offset by 10.3 trillion leaving the game (players leaving).  There is a decent chance we get to over a quadrillion by the end of March.

The overall numbers to keep everything in perspective for March, all in Trillions: Mining rose 7% to 25.2; Destruction rose 5% to 34.7; Trade fell 14% to 843.0; Production rose 6% to 108.5.

Items of note from Regional Activity


1 The Forge 595.8
2 Domain 97.8
3 Sinq Laison 35.6
4 Heimatar 19.1
5 Lonetrek 14.8
6 Metropolis 14.4
7 Essence 6.3
8 The Citadel 4.8
9 Providence 4.7
10 Tash-Murkon 4.0

No big ranking changes from February.  Business as normal really, Trade Hubs dominating, just at lower levels of ISK.

Perhaps worth noting that Lonetrek (a region next to The Forge) moved higher than Metropolis (Hek) - worth watching that.  I am starting to suspect that Hek may be losing its position as a major Trade Hub.

As a reminder to new players, the main 5 Trade Hubs in the order we know: The Forge (i.e. Jita); Domain (i.e. Amarr); Sinq Laison (i.e. Dodixie); Heimatar (i.e. Rens); Metropolis (i.e. Hek).

In the next 5: the expected Essence and Tash-Murkon are there, known secondary trade hubs.  But also Lonetrek and Citadel (both Regions that are one jump out of Jita) and Providence (null sec space that borders several highsec Regions: Domain / Tash-Murkon / Devoid / Derelik).

The dominance of The Forge reigns supreme though - Jita shows no sign of losing its dominance.  It would be interesting to see how many players have never left the station in the last 3 months!


1 The Forge 19.2
2 Lonetrek 13.0
3 The Citadel 12.3
4 Domain 7.2
5 Sinq Laison 4.6
6 Deklein 4.0
7 Providence 3.3
8 Geminate 2.3
9 Vale of the Silent 2.2
10 Metropolis 2.2

In terms of Production The Forge is top slot - makes sense, many people will produce near where they buy the raw materials and/or intend to sell.  I suspect Lonetrek and The Citadel benefit from being next to The Forge and so less jumps to transport raw materials from Jita or produced items to Jita.

Noteworthy that Deklein (home of the CFC) saw a rise in Production from 3.2 trillion in February to 4.0 trillion in March, became the largest non-high sec producer.  I guess gearing up for war or replacing lost assets.

Metropolis (Hek) in danger of falling out of the top 10 - another warning sign for Hek.


1 The Forge 1.7
2 Lonetrek 1.3
3 Domain 1.2
4 Providence 1.1
5 Deklein 1.0
6 Metropolis 1.0
7 Malpais 0.9
8 Cobalt Edge 0.9
9 Everyshore 0.9
10 Oasa 0.8

Nothing of note in the mining - Oasa and Cobalt Edge are new top 10s, displacing Tash-Murkon and The Kalevala Expanse.

The Forge and Domain at the top given being major Trade Hubs - so people mining near where they intend to sell and Lonetrek being next to The Forge and itself a major production Region.

I guess Providence is up there given it is nullsec space that is very connected to several High Sec Regions.


1 The Citadel 2.5
2 The Forge 2.2
3 Lonetrek 2.2
4 Domain 1.4
5 Tribute 1.3
6 Black Rise 1.3
7 Vale of the Silent 1.2
8 Querious 1.2
9 Metropolis 1.1
10 Providence 1.1

Vale of the Silent is new in Destruction top 10.  No surprises there given the battle reported upon.

Otherwise, at the top of the table we see that Destruction follows Trade - for that, read ganking.

For The Forge, during March there was 786 trillion ISK of goods imported into the Region and 671 trillion ISK of goods exported.  Out of all that, a mere 2.5 trillion was destroyed.  A drop in the ocean really, only 0.2% of all traffic value.  Though annoying if you happen to be amongst the drop.

In fact, all the major Trade Hubs don't see more than 0.2% of their import+export traffic destroyed in March (or February).  Ganking is clearly there but just not the threat it is made out to be.

Vale of the Silent

The numbers of a war:
  • Notable that Vale of the Silent saw 242 trillion of exports out of the region vs 94 trillion exports in February.  Someone was moving stuff out as quick as you like!
  • Destruction value doubled from 674 billion to 1.2 trillion.
  • Mining halved from 637 billion ISK to 307 billion.
  • Trade fell 23% to 2.2 trillion ISK.
I guess that is what a war looks like.  People leaving, trading falling, mining falling, destruction rising.

Items of note in the Sinks and Faucets

Buying Skill books fell from 13.6 trillion to 9.8 trillion, a massive fall of 28%.  In part i suspect that is a related fall off in Skill Trading from February.

Net insurance payments (payments to players less premiums paid to NPCs) rose by a massive 21% to 3.4 trillion ISK.  We would expect rising net payments given the 11% rise in Bounty Payments but this also smells of additional destruction.  However, the Destruction values only rose by 5% - which indicates that a lot more of the ships destroyed were insured in March.

The NPC Commodity market generated a net ISK inflow into the economy of 17.7 trillion in February and 19.9 trillion in March.  Strip this out (which is essentially buying from one NPC and shipping to sell to another NPC) and we would have had a much lower ISK inflow to the Eve economy in both February and March!  In fact, if CCP wanted to reduce the ISK coming into the game to almost nothing then getting rid of this faucet would be a good start.

On the Sinks and Faucets data there is a Sink called "Other".  Not sure what it is but in February it had an ISK inflow of 13.7 trillion and an ISK outflow of 47.4 trillion vs March inflow of 15.3 trillion and an outflow of 51.1 trillion . . . . i am guessing it is the sum of odds and ends.

Project Discovery generated 340 billion of ISK in March.

Items of note in the Money Supply

The greatest inflow of ISK into the game as a % of the prior day's ISK was on 17 October 2014 when 4.9 trillion ISK came into the game (=0.66% of the prior day's ISK in the game).  And indeed 18 October 2014 was the third largest day with 4.1 trillion ISK coming into the game.  Not sure why this would be: Plex went over 800m though that itself would not cause ISK to flow into the game; may also relate to SOMER Blink reimbursing prior deposits (see paragraph below).

The greatest outflow of ISK from the game occured on 20 August 2014 when a massive 32.7 trillion ISK left the game (=4.3% of the prior day's ISK in the game).  Most likely to do with the banning of SOMER Blink from the game on that day.  To put this in perspective, the next largest outflow of ISK was on 8 January 2016 when 4.8 trillion left the game (=0.52% of the prior day's ISK in the game) - again, most likely due to a banning event: The Latest IWANTISK Ban Wave.  Seems at least to be a pattern to the major outflow days = banning days.

Items of note in Imports and Exports

As we would expect the major 5 Trade Hubs and the Regions next to them see the greatest Imports and Exports.  No surprise there, all traffic heading for Jita / Amarr / Dodixie / Hek / Rens.

Looking for some notable items:

  • As noted above, Vale of the Silent saw a sharp rise in exports in March
  • Branch saw a big rise in both imports and Exports.  If i follow the rise in Imports and Exports from connecting Regions then the trail would suggest these imports and exports were coming and going from Venal (not Deklein or Tenal) which in turn looks like it came from Tribute (not Perrigen Falls).  From there it was either imported and exported to Vale of the Silent of Lonetrek (and so onto The Forge).
  • Looking closer at Branch - mining rose by 26%; Destruction rose by 33%; Trading rose by 15%; and Production rose by 21%.  Looks like someone is setting up in Branch (which is right next to Deklein).