Didn’t Think of That. Should Have.
Thanks to yesterday’s ANON posting the link to some more current financials.
Ok so CCP’s cash situation is a little weird. Quite a bit weird actually. CCP took about 40 million in loans and bond issues (the bonds at a 7% for a 5 year note) 8 million of which they haven’t touched. At the end of the year they were down 18 million from where they started in cash. That’s not fun.
I understand why they are at where they are. They are spending a bunch on R&D for existing products, and a bunch MORE on development for other products, (in 2012 this would have been Dust and WoD) and they have a lot overhead on their admin expenses, but they aren’t out of line for the number of employees they have. The problem is they are trying to become a bigger company, and borrowing money to get there.
The problem is I still don’t like their cash situation. Last year Dec 31 they had 3.6 million. This year they borrowed 32 million, had an operating profit of 2.8 million, and ended up with 20 million in cash. A lot of the other 18.4 million probably went into Dust. That amount *should* be dropping off some, and will be tempered somewhat by the 5 people now paying for Dust. The problem is CCP is putting themselves in a bind. The note rate is hardly friendly, and they will have to have 20 million on hand when they come due to pay them off, not to mention the 7% per annum. That hit will come in 2017. In 2016 they have to pay back the rather friendlier 20 million (of which they haven’t touched 8 mill) which they should be current on in interest.
So where they stand right now is problematic. They have to cut costs quite a bit, mostly in R&D, which limits future growth, in Admin expenses, which just seem high when laid against the revenue they are generating, and in development costs, which ran them another $24 million this year. At the bottom line they lost 1.5 million dollars a month in 2012. If they hadn’t borrowed money in 2012 they’d have been out of money before the end of March. I’m guessing they actually spent a lot less in the first half of the year, and put up some big bills towards the end of the year after figuring out their financing, but still, averaging at a loss of 1.5 million a month before figuring in the money you borrowed isn’t a good way to pay your bills. Especially when gross profit for the YEAR came up only $800,000.
CCP has to begin operating at a profit without relying on financing. And they have to do it soon. They need to come up with a way to increase cash on hand quite a bit in the next 4 years, they also have to operate, and decide how they will operate in the future, and frankly it looks like they stink at it. They have to either get Dust working at a profit or put it out of its misery. They have to take a serious look at WoD and decide if they can do it without killing what they have right now. I’ll say again what I said a couple years ago. EvE makes money. It doesn’t make a lot, it isn’t terribly sexy, but it makes money. It would make more even on paper with a reduced staff (I imagine a lot of the overhead goes away without the teams working on Dust and WoD) and while I don’t doubt that these are good people doing their best, the company doesn’t look like it can afford them. Not unless they can get Dust making money NOW and/or get WoD out the door and making money before 2016.