SoftBank-backed Improbable deepened its operating loss to $82 million in 2019 thanks to hiring, R&D spend, and expansion
- SoftBank-backed software startup Improbable deepened its operating loss to $82 million in the year to June 2019, filings show.
- The firm also doubled its revenue and reduced overall pre-tax losses, but remains unprofitable as it focuses on international expansion, acquisitions, R&D spend, and new senior hires.
- The firm's gross margin percentage stood at a whopping -1,332% over the period, meaning the firm is spending a high amount for every pound earned.
- An Improbable spokesman said the firm is a different company in March 2020 than nine months ago, and that it had invested hugely in its ability to develop its services.
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SoftBank-backed software startup Improbable boosted its revenue for the year to June 2019, but its operating loss deepened thanks to acquisitions, new hires, and increased research and development spending.
Improbable has developed cloud software called SpatialOS, intended to create large-scale simulations.
The software is primarily advertised to game developers, but Improbable also counts clients in defence. It is one of the few UK startups backed by Japanese mega-investor SoftBank, which invested $502 million into the company in 2017.
Here are the key numbers for the year to June 2019:
- Revenue: £1.2 million, up from £580,000 in 2018 ($1.5 million, up from $742,000).
- Operating loss: Up 65% year on year from £38.5 million in 2018 to £64 million ($49.2 million to $82 million).
- Pre-tax loss: Down from £50 million to £39 million ($64 million down to $50 million).
By Business Insider's calculations, the firm's gross margin percentage stood at a whopping -1,332% over the period, meaning its spending is high for every pound earned. This is a marginal improvement on the prior year, when it stood at about -1,750%, but nonethless indicates Improbable needs to rein in costs and land more customers before it reaches underlying profitability.
The company was valued at $2 billion at its last fundraise, in July 2018.
Improbable's reduced pre-tax loss is mostly down to foreign exchange gains. The bulk of its revenue came from the US, and mostly through demos and proofs-of-concept, the firm said. Research and development costs increased to £17 million ($22 million), from £11 million ($14 million) the prior year.
A company spokesman said Improbable had focused on growth rather than profitability between 2018 and 2019, boosting headcount by 48%. According to its filings, Improbable's headcount stood at 329 staff in 2019.
The firm also expanded in China, in part thanks to strategic investment from Chinese gaming giant NetEase.
"During this period our strategic focus was growth, including the introduction of our games technology to China," the spokesman said. "We also continued our move into game content creation by expanding our Edmonton studio.
"Seeing early commercial traction in our Defence offering, we also invested in growth in London and Virginia in the US."
The spokesman added that the firm had changed markedly since June 2019, the period reflected by its latest results.
Improbable has made multiple acquisitions to boost its ability to make its own games and to support game developers. The acquisitions mean the company now has more gaming veterans in its senior ranks, and the firm hired a new CTO, Lincoln Wallen, and new chief financial officer Dan Odell in 2019. That's after seeing a roster of high-level exits in 2019.
"This means that Improbable in March 2020 is a very different company," the spokesman said.