Tinybuild is cutting jobs after an "incredibly challenging year"

Hello Neighbor publisher Tinybuild is accelerating a cost reduction plan that will result in an unknown number of layoffs.

The company broke the news in a trading update and explained it has been performing "below expectations" and must therefore take "accelerated cost action to re-align investments with expected revenues."

Tinybuild added that "unusually weak trading in October" and a subpar performance in Q4 means full-year revenues will likely stumble, ranging between $40 million to $50 million. It also noted that its Versus Evil subsidiary continues to underperform and has delayed three of four upcoming titles until 2024.

"Since the publication of the Company's interim results in September 2023, the market has deteriorated further and negotiations of certain large contracts have extended into the final month of the year," reads the trading update.

"These remain under negotiation and may not be signed by year end, or at all. The continued underperformance of Versus Evil which delayed into 2024 three out of four games originally planned for release in H2 2023, including the widely anticipated Broken Roads, also weighed on group performance."

As of November 2023, Tinybuild had around $5.7 million in cash but expects that stockpile to "decline further due to limited cash inflow from October sales, one-off charges as part of the cost reduction plan and underlying software development investments due in December."

Tinybuild's "incredibly challenging year"

Tinybuild CEO Alex Nichiporchik explained a combination of those factors has turned 2023 into an "incredibly challenging year" for the publisher, and conceded the company ultimately failed to overcome some significant hurdles.

"The whole team at Tinybuild worked tirelessly to release our best products, despite the impact of the war in Ukraine that deeply affected most of us. We couldn't overcome weak demand for video games and the sudden reversal of market dynamics that had favored us over the previous years. We innovated in marketing, refocused our catalogue, and adjusted the cost base as quickly as possible, and, despite these actions, it wasn't enough in such a rapidly evolving market," he said.

Confirming the layoffs, Nichiporchik said it's "physically painful to part ways with colleagues" who have worked tirelessly for Tinybuild, but indicated the cuts are essential if the company hopes to bounce back during a "pivotal stage."

"I am committed to do everything I can to ensure we get through this tough period. We owe it to all our stakeholders now to bounce back and deliver on what Tinybuild can achieve," he added. 

Looking ahead, Tinybuild said the outlook for the next fiscal year remains "cautious" due to the likelihood of "continued pressure on discounting in a crowded market for new releases."

"The planned launch of certain promising games in 2024 gives reason for optimism and this coupled with a leaner cost base could translate into strong operating leverage in the event of a recovery in video games sales," concludes the update.