Frontier lowers financial expectations after F1 Manager underperformance

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Frontier Developments is lowering its revenue projections for the current financial year, and the next, following poor performance of F1 Manager 2022 and mixed results from its third-party publishing label.

In a trading update issued to investors yesterday, the Elite Dangerous firm said it expects to report revenues of around £57 million for the six months ended November 30, 2022, the first half of its FY23.

While this is 16% up on the revenues reported during the same period the year before, Frontier detailed a few disappointments it had observed ahead of it publishing the interim results on January 19.

First, it said F1 Manager 2022 – the debut title in a new annual sports franchise – had underperformed, with over 600,000 units sold so far across PC, PlayStation and Xbox (encompassing both physical and digital).

"Sales during key holiday season price promotions fell materially below original expectations"

Frontier trading update

"Player engagement at release in August 2022 and during the initial period after release was strong, and broadly in line with original expectations," the company wrote.

"Unfortunately, sales performance during key holiday season price promotions fell materially below original expectations, potentially due in part to increased player price sensitivity related to worsening economic conditions."

Frontier maintained that F1 Manager 2022 was "a good first game in an important new annual franchise" but the underperformance means the company's board of directors has lowered revenue projections for both FY23 and FY24.

Forecasts previously put revenue at £135 million, but this has now been lowered to £100 million. VGC reports the firm's share price dropped 40% after the news.

Frontier made a similar revision to its financial forecasts in the previous year when Jurassic World Evolution 2 did not perform as expected.

The board "believes it is still possible" to top last year's record performance of £114 million, but it will depend on whether an upcoming title from its third-party publishing label Foundry becomes "a conspicuous success."

On that note, the company said it was reconsidering how it handles Foundry going forwards. The developer stressed that it remains "committed to and excited by" the titles currently lined up for the rest of the financial year from this label.

But it added there are currently no plans to release any Foundry titles in FY24.

Since forming in 2020, Foundry has supported eight games, six of which have been released with another two to follow in the coming months.

"Given our mixed experience of third-party publishing in terms of financial success to date, we are assessing our strategy for Foundry in light of such experiences and competitive trends in the market," Frontier wrote.

"In particular, we are reviewing the return on investment achieved by Foundry."

"It is very disappointing to be resetting our financial expectations"

Jonny Watts, Frontier

Frontier also reported that catalogue titles – including Elite Dangerous, Planet Coaster, Planet Zoo and the Jurassic World Evolution series – performed in line with expectations during the first half of the financial year, but failed to do so during key price promotions in December.

"It is very disappointing to be resetting our financial expectations," said CEO Jonny Watts, who took over from founder David Braben after he stepped down in August.

"As CEO, I am driving a change in emphasis to increase focus on our core strengths and skills, with particular attention to increasing the return on investment that we achieve from our world-class teams. We intend to grow the number of our development teams to increase the cadence of new releases, whilst continuing to nurture our existing portfolio, to achieve sustainable growth.

"We have created a strong portfolio of games and we continue to learn and respond to challenges as we expand and nurture our portfolio. I am grateful to our talented people for their continued hard work."

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