UK gaming software company Improbable saw losses balloon to £50m last year and revenue dive as it spent big on international expansion and research & development (R&D).
Losses leapt from £4.8m in the 12 months to May 2017 to £50.4m in same period to May 2018, accounts filed with Companies House this week show.
London-headquartered Improbable builds simulation software that allows games developers to create massive “virtual worlds.” The company was founded in 2012 by Cambridge University computer science graduates and is one of Britain’s “unicorns” — a private tech business worth over $1bn.
The big rise in losses came as Improbable invested in expansion and R&D. Headcount grew by 64% in the year to May 2018 and the company opened new offices in Virginia, Canada, China, and Singapore. R&D spending also rose from £7.2m to £10.7m. The company said it spent the period investing in its core software platform, SpatialOS.
“Improbable is making major investments to develop our technology. We are spending money in order to build the team and the technology required to realise success in the future. We are where we expect to be at this stage of our growth phase,” a spokesperson for Improbable told Yahoo Finance UK.
The spending spree followed a huge cash injection into the seven-year-old company from SoftBank. The Japanese telecoms giant, which has been investing in next-generation technologies, pumped $502m into Improbable in May 2017. At the time, it was the largest-ever investment in a European tech startup.
While investment rose, Improbable’s turnover dived from £7.8m in 2017 to just £579,859 the next year. The revenue came from proof of concepts and demonstrations of the technology’s capabilities. Directors acknowledged in the accounts that the business is not generating “self-sustaining profitability.”
“Our revenue will be driven by games built on SpatialOS entering the market,” the Improbable spokesperson said. “As such, our commercial progress is not reflected by our revenues. Spikes in revenue will occur along the way related to specific contracts, but our core business is connected to game releases.”
World’s Adrift, a game developed by London-based Bossa Studios, was the first game to launch using Improbable’s technology. It opened to early access in May 2018, just as the accounting period ended.
Despite mounting losses and falling revenues, Improbable is in no danger of running into trouble, thanks to the huge cash injection from SoftBank. Improbable had £255.4m of cash in the bank at the end of the accounting period and £360m of assets, including a £97m portfolio of bonds and treasury notes.
“Our investors understand and are aligned with our objectives,” the Improbable spokesperson said. “They understand that we are building for a sustainable future and for extremely ambitious goals, which will take time to achieve, and our capitalisation reflects that.”
Improbable faced crisis at the start of this year after one of its key partners, Unity, changed its terms of software in a way that shut out the SpatialOS software, which depended on Unity’s graphics engine to run SpatialOS in finished games. Improbable licenses have since been reinstated and Unity has revised its terms.
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.