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Friday 10 May 2024

Review of the 2023 CCP Report & Accounts

The CCP Report & Accounts for the year to December 2023 came out on 30 April 2024.

I want to do a quick review now and perhaps a more in-depth review at a later date.  So I will risk it and post it now without going much deeper into the Accounts.

But in this post we will review the 2023 Consolidated Financial Statements of Pearl Abyss Iceland.

You can access the Pearl Abyss Iceland 2023 Report & Accounts here and also I have a page on this blog that hosts all the Pearl Abyss Iceland from 2019 / CCP from 2013 to 2018 here.   They can also all be found and downloaded for free from the Iceland Company Register.

Lets first be clear as to what we are looking at in this post

. . . . . . or skip this section if you are happy to go with the flow rather than being taken through a crash course in Companies vs Subsidiaries vs Group Accounting.  Personally, I love it.

In the Icelandic Company Register system there are 3 sets of Accounts that are of interest.

the Accounts for the company CCP.

the Accounts for the company Pearl Abyss Iceland.

the Consolidated Financial statements of Pearl Abyss Iceland Group.

Quick lesson on Group vs Company, (or Consolidated Financial Statements vs Company Accounts).

The company CCP is based in Iceland and sells the game Eve Online globally as well as develops and markets the game.  It also owns other companies based such as CCP North America, CCP Games UK Ltd, CCP Platform ehf and CCP Ad Astra ehf.

The Accounts for the company CCP will only have the revenues and costs of CCP.  The profits and losses of these companies it owns will be include in one summary line.  So we wont get the full picture and indeed the company Accounts of CCP also has revenues and costs between other Pearl Abyss Iceland companies.

We want to look at the combined revenues and costs of CCP, not just the Icelandic entity (though it is the most important).

Pearl Abyss Iceland owns CCP in Iceland since it bought it back in 2019.

Again, the Accounts of Pearl Abyss Iceland will only have the revenues and costs of Pearl Abyss Iceland and a summary line showing the profits of CCP.

However, the Consolidated Financial Statements of Pearl Abyss Iceland has the combined revenues and combined costs of Pearl Abyss Iceland and all the companies its owns (so CCP and all the companies that CCP owns).  It also eliminates any revenues and costs between the companies it owns (I.e any cross border charges).  This is what we are after.

One slight wrinkle, Pearl Abyss Iceland also owns Pearl Abyss Iceland Investment and so its revenues and costs will also be included in the Consolidated Financial Statements.

Therefore, from here on in we are reviewing the Consolidated Financial Statements of Pearl Abyss Iceland.

Bottom line Loss of CCP

There is one note in the Pearl Abyss Iceland Accounts that is of interest though.

Note 2.4 shown below states that CCP ehf (and the combined profits and losses of ifs subsidiaries) made a loss of $16.3m.

But, unlike in 2022, there was no impairment.  Recall that in 2022 the loss was $68.6m which was a $50.9m impairment and therefore an underlying loss by CCP of $17.7m.

In, other words, bottom line is that CCP made a loss in 2023 of $16.3m compared to a loss in 2022 of $17.7m.  The loss that i talk about below of $18.8m is close enough to this number.

  • Revenues were flat at $56m
  • Subscriptions and in-game sales revenues rose 3% to $48.7m
  • Subscriptions and in-game sales revenues rose in all regions
  • Considering the May 2022 30% subs price rise, this suggests paying account numbers have fallen 30% over 2 years
  • The Netease revenues (China) fell 20% to $7.0m
  • Costs rose 9% in an inflationary year with wages up 8% due to more employees and higher wages
  • The overall underlying loss was $18.8m in 2023 vs $19.2m in 2022
  • Because of the ongoing sales of cryptocurrencies cash available rose by $12m
  • Without these crypto sales cash would have fallen $15m


Profit & Loss Account

Revenues were essentially flat at $56.0m vs $56.1m in 2022.

Gross profits rose 1% to $51.8m ($51.1m).

Total Operating Costs were $79.2m vs $123.6m in 2022.  But in 2022 there was an impairment of $51.1m.  Therefore the underlying Operating Costs in 2022 were $72.5m.  Therefore, Operating Costs have risen 9%.

Government Grants added $6.2m to income in 2023 vs $5.1m in 2022.

Therefore the Operating Loss came in at $21.2m vs $16.2m in 2022.  (technically the Operating Loss in 2022 was $67.3m if we include the one-off impairment).

And then interest costs, currency movements and taxes take the overall loss to $18.8m in 2023 vs an underlying loss of $19.2m in 2022.

Revenues were flat at $56.0m.

First point to note that in a Game Development business the Revenues and Costs are not all relating to the same thing.  Most of the costs of this business will be to develop new games vs costs to market Eve Online and create new content.

So, yes, the Revenues were are all Eve Online, Eve Echoes etc but the costs are likely going into other ventures.

Second point is that a game that is seeing flat revenues after 20 years is not bad.

Looking at the make up the Revenues is interesting:

This shows that Revenues from subscriptions and in-game sales rose 3% to $48.7.

For reference, in 2021 this came to $53.8m.

In May 2022 the subs price rose 30%.  Therefore, if I used the 2021 base of $53.8m and inflate it by 30% that would suggest that paying account numbers have fallen 30%. [48.7 / (53.8 x 1.3)].

Royalties and licences declined from $8.8m to $7.0m that resulted in overall revenues being flat and that is likely to be NetEase (China) revenues (that is suggested else where in the Statements in note 4.2).  In 2021 this was $10m.

I assume the Revenue from the sale of goods is the hats et all you all buy in Fanfest . . . . .

Looking at Revenues by geography:

The NetEase revenues re in the Asia line and we can strip then out to rewrite this table as:

This shows that subscriptions and ingame sales revenues rose in every region.  North America by +1%, Europe by +4%, Asia by +21% and Other Regions by +10%.

I am being sloppy by missing out on currency movements so I am letting this % increases stand.

But again, assuming the 30% price rise in every region, paying account numbers have therefore fallen in every region biased to North America and Europe.

Gross Profit

The cost of actually running the game (as opposed to creating new code, marketing et al) is very low at around $4m in 2023 and $5m in 2022.  Nothing really to add here.

Operating Expenses

CCP now expense all their development costs (historical costs are still being held on the Balance Sheet and reduced over time).  This is a much cleaner way to account for these costs.

It could be considered better to hold costs spent on developing new games on the Balance Sheet as traditionally was the case and then release the costs as the new game is launched and brining in revenues.  But this relies on the new game being successful which is not always the case.

Ignore the impairment cost in 2022.  That was a 2022 event and a one-off (we hope).

Costs have risen everywhere.  Overall, costs are up 9% (or $6.7m).

But we must remember that 2023 was the year of inflation in both wages and non-wages.

There is one other cost analysis we need to look at to make sense of this:

Employee costs are 58% of all costs (in 2023 and 2022) - so the most important cost in the business.  They will be spread out over the other cost lines when disclosed (i.e some in Research and Development, some in Marketing etc).  They have risen by 8% driven by a 5.5% rise in the number of employees and a 2.8% rise in average employee costs.

We can therefore see what the non-employee costs were.

I guess I am not surprised that non-employee costs rose 10% - 2023 was a vicious year for inflation.

Also, in 2022 costs were down 2% which was a strong result.

But, the same conclusion as last year – it is revenues which are the problem, not costs.

Other Income

There was $5m-$6m of Other Income in each year which is Government Grants

Finance Costs

The Group had a $50m bank loan from The Korea Development Bank which is due for repayment in 2024.  It looks like this loan was repaid and a new loan taken out from the parent company Pearl Abyss in Korea.

Interest rates were on the rise in 2023 so interest costs rose from $2.4m to $3.9m.

The good news is that the old $50m loan was at an interest rate of 5.53%, the new loan is at 4.6%.

The bad news is that the loan is due for repayment in 2026 though I expect it will be rolled into a new loan with (hopefully) lower interest rates at the time.

Currency movements were a positive $1.7m vs a cost $1.6m in 2022.


Given the business makes a loss, in Accounting the loss is reduced by a tax rebate (in actual cash flows tax is still paid given this is a global business making sales across the world – somewhere there will be profits to tax).  This accounting rebate was$2.9m vs $1.4m in 2022.

Underlying operating loss

Add all that up and the underlying operating loss of the business fell from $19.2m to $18.8m.

This year it was driven by inflation pushing costs up whilst revenues stayed flat.

Therefore, if costs were somehow held flat in 2024, revenues would need to rise 39% to $78m for a profit to be made.

Balance Sheet

Normally I would look at cashflows first but there are interesting items on the Balance Sheet.

Aggregate CCP losses since acquisition by Pearl Abyss

Firstly, CCP has been aggregate losses of $87m since it was acquired by Pearl Abyss = underlying losses of around $37m and an impairment of $50m.  Not quite the plan, I suspect.

Deferred Revenues (Plex, Omega and Tokens!!??)

When CCP sells Plex and Omega time to players it can only recognise this as revenues as they are used up.  For example, if in September someone bought 12 months of Omega then in the year to end December only 3 months of that Omega is counted as revenues with 9 months sitting on the balance sheet as Deferred Revenues.  But all the cash inflow is taken as happening in the year it is received - so we get a mismatch between cash and profits.

Deferred Revenues in Current Liabilities (i.e. that will be used up this year) have risen from $6.7m to $8.5m.

Deferred Revenues in Non-Current Liabilities (I,e. will be used up in later years) has increased from $10m to $37.5m.

The notes give more detail on all this:

The near term deferred revenues are Subscriptions paid in advance which were $3.4m in 2023 and In-game purchases not yet consumed which is likely to be Plex derived which was $5.0m.

In any case, we can see the effect of the Omega / Plex sales had in 2023 with players buying $8.5m of advance subs / plex vs $6.7m in 2022.

I will deal with the Tokens / crypto currencies at the end.

Non-Current asset

I,e, buildings and intangible assets.

Nothing to note here other than the crypto currencies (tucked away in the notes to "Other intangible assets") which I will deal with at the end.

Current assets

Again, nothing to note here other than the cash whish is related to the crypto currencies which I will deal with at the end.

Current and non-Current liabilities

Nothing to note here either other than the crypto currencies which I will deal with at the end.


The business has an underlying cash outflow of $15.4m vs $15.0m in 2022.

The three reasons why the cash outflow is less than the loss made is because tax is paid somewhere to the tune of $2.9m in 2023 ($1.4m in 2022)  where as it is an income items in the profits; the business is slowly reducing the development cost of Eve on its Balance Sheet (i.e. all the historic development costs that were put on the Balance Sheet are now being expensed off to the tune of $6m pa); and in 2023 there were more sales of Plex / Omega for use in 2024 (i.e. so not revenues in 2023, only cash inflows).

But, at the end of the day despite a cash outflow of $15.4m the Cash still went up?  How was that?

Meet the crypto sales

The crypto sales
In summary, the sale of tokens generated cash inflows of $27.5m and so the cash balance actually rose $12m despite a cash loss of $15m.

As far as I can tell what is going on here is that the business generated $27.5m of Tokens out of thin air and sold them.  So I see in Fixed Assets the Tokens being created and then being sold and in the cashflow statement I see $27.5m flow in.  and I see the $27.5m Tokens go to Deferred Revenues to one day be recognised as revenues in the Profit & Loss.

So, for all us Accountants out there I think the accounting entries are:

The creation is: Dr Fixed Assets $27.5m / Cr Deferred Revenues $27.5m
The disposal is: Dr Cash $27.5m / Cr Fixed Assets $27.5m

Basically, if this was not happening then CCP would be needing cash injections from Pearl Abyss.

CEO Salary?

I am not here to speculate on someone’s remuneration so I will just put the item below with a few lines of text.

So, $1.2m paid to the Directors.  I don’t think the Korean Board members will be taking any pay.  So this is the CEO and whoever else is not Korean on the Board.

1 comment:

  1. When you do your deeper dive into the filings, could you go into what Angelice Prime Foundation is? You seem to have better resources than I do.