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Sunday, January 1, 2023

Cloud Imperium Games' 2021 Financial Report

Cloud Imperium Games released its annual financial report for 2021 on the final Friday of 2022. Usually such a release is called a "Friday news dump", designed to release information when the press is unlikely to pay much attention to the news. Doing so in front of a holiday weekend like New Year's is an extra layer of cover. But does the information warrant such hiding? Let's take a look.

The big news is that Cloud Imperium reached $100 million in total revenue for the first time in its history in 2021.  


The company's sales recorded on the counter on the Roberts Space Industries website increased year-over-year (YoY) 12.2% to $86.4 million. In a change from last year, the description of the bar graph has changed from "Total Pledges and Income" in the 2020 report to "Total Sales, Pledges, And Income" this year. The change possibly is an official change in the use of sales instead of pledges beginning in CIG's 2021 fiscal year.

CGI defines pledges/sales as follows:

This line is taken directly from our daily published Funding Stats Counter, showing the net receipts from our backers and customers. The vast majority of sales are of starter pack sales granting access to the Star Citizen Alpha, as well as space ships and digital items immediately delivered and playable in the game. A smaller fraction of sales came from pledges for concept ships, which all come with an included “loaner” ship for immediate use and playability within Star Citizen Alpha. Due to exchange differences and small items that are not included in the counter, such as shipping costs charged on physical goods, the counter does not completely represent all revenue received. Other than subscriptions (referred below) these differences are included in the final income line, to give an accurate representation of total revenue received.

The total earned from selling subscriptions increased 5.9% YoY to just under $5 million. CIG offers two levels of subscriptions which offer a digital magazine, first-wave PTU access, a monthly stipend to rent ships and weapons, discounted physical merchandise as well as discounted access to live events.

All other income sources increased by 45.2% up to $9.4 million for a total of $100.8 million in revenue. The category is described by CIG as below:

The other income line represents partnership income with various hardware and software vendors, sponsorship income, and various local incentives based upon the nature and location of our development and production activities. It also includes any exchange differences as referred above.

Overall, CIG earned $506.2 million from all revenue sources from the founding of the company in April 2012 to the final day of 2021. The breakdown by category is as follows.

  • Sales/Pledges: $424.2 million
  • Subscriptions: $27.8 million
  • All Other Sources: $54.2 million


While CIG experienced record revenues in 2021, the company also spent more money than ever before in its history. Overall, CIG's spending increased year-over-year by 24.2%, with $98.5 million in trading costs and another $2 million in capital expenditures. The $100.5 million in outgoes in 2021 pushed total spending from 2012-2021 up to $501.3 million. The expenditures are divided into six categories.


Salaries and related costs made up the largest category, with $51.2 million spent in 2021. The 16.5% YoY increase does not include all salaries, as the pay of employees in Publishing, Community, and Marketing fall into that category.

The costs are divided into two categories: the United States and the rest of the world. Salaries for the rest of the world increased 24% to $34 million. CIG explained the large percentage increase, more than double that of the 11% employee growth, was due to "most of the increase in Rest of World headcount was only towards the end of that year and thus the costs did not reflect the headcount numbers shown at the end of 2020." Thus, the increase not only reflected inflationary pressures and wage competition, but the effects of the employees added at the tail end of 2020.

In the U.S., development headcount decreased by 8% as production was transferred from North America to Europe. But since the reduction was accomplished through attrition and not layoffs, much of the savings did not occur until the end of the year. Thus, salary costs were still up by 4% over 2020.

Publishing Operations, Community, Events and Marketing made up the second largest category of expenses. At $25.4 million, expenses associated with the category increased by 65.5%. The report described the line item as follows:

These costs are associated with running the game, deploying online services, and providing customer support. It also includes the costs of running our platform, publishing, data hosting, and server costs. It includes sales collection, customer liaison costs, and the costs of our marketing and community events, although, like 2020, these were curtailed in 2021 due to pandemic restrictions. This cost line correlates closely with income and user engagement, and the growth experienced in 2020 accelerated further in 2021, rising 66% to $25.4M.

Other game development costs (overheads) is defined as "...the costs of operating the various studios and including such expenses as office rental and maintenance, travel and accommodation, IT, and other costs not included elsewhere." Spending on the category increased by 34% to $11.7 million from 2020 to 2021. CIG indicates the increased costs occurred near the end of 2021 as the company began to return to the office and travel restrictions eased.

Contracted game development costs increased 55.9% YoY up to $8.7 million. From the outside looking in, the increase appears was necessitated in part by the shift of operations from the United States to Europe.

These represent the costs of contracted services supporting game development work. For 2021 this increased by 56% to $8.65M. External services used by the Rest of the World dropped by 22% to $2.5M as it continued its trend of internalizing the development resources deployed on the games. However, US spend in this area was up by 161% ($3.8M) mainly arising from managing a growing development team based in Canada. This represents the continuing trend in the US of supplementing its core development specialists with external development talent from elsewhere.

While the increase is large, CIG has spent much more in outside game development in the past. In 2015, the company spent $14.1 million, or 28% of its total budget, on such services. In contrast, the company only spent 8.6% of its budget on the category in 2021.

The final trading cost category is General and Admin Expenditures falling within this category "represent insurances, accountancy, and other professional and legal fees not apportioned directly into the cost areas identified previously." These costs rose 26.5% YoY to $1.5 million.

Also included in total outgoes are the capital expenditures, which fell 67.6% YoY. CIG explains the concept further in the report:

This represents capital expenditure in areas such as hardware and software, fixtures, fittings, and on offices. Whilst it trends with staff numbers, it is also impacted by hardware renewals, server upgrades and other security and infrastructure purchases. It is included in this accounting as it represents an outlay for the materials required to develop and publish the games. Since the total capital expenditure amount is included here, we do not list the depreciation portion of such expenditure subsequently in the cost analysis.

I don't quite fully believe CIG's explanation for the decline in capex in 2021.

Capex spending in 2021 was $2.0M and was mainly concentrated in the Rest of World territories which grew most during the year. This was $4.1M less than 2020, although the prior year was dominated by the one-off strategic purchase of a perpetual worldwide license for use of the CryEngine. Next year, capex will increase as the world-class offices are fitted out and come fully on-line.

Despite the record revenues recorded in 2021, CIG may have pushed some capex spending to 2022 due to budgetary constraints. The company only recorded a profit of $349,000 on $100.8 million earned.

Overall, the company is in decent financial shape, recording 7 months of operating expenses in the bank at the end of 2021. However, the cushion is provided by the minority investment in CIG from the Calders in 2018 and 2019. Once again we see that the sales recorded on the counter on the development page is not enough to fund the project. While CIG did record an average of $7.2 million in sales each month, $8.4 million was spent in developing and operating the games. Subscriptions and other types of income managed to make up the balance.

I'll conclude the post by giving CIG the final word to describe their view of the 2021 financial report.

The 2021 Accounting shows the Group continued to spend its income on the ongoing development and publishing of the games, as has been the intention from the outset in its goal to deliver a world class gaming and unique social experience for its players and community. The minority investment funds sitting on the balance sheet remain earmarked for future marketing activities as we approach the commercial launch of the games. They also serve the additional purpose of providing financial security to allow longer-term strategic planning, evidenced by the substantial long-term commitment to the upgraded office facilities in the Rest of the World locations made in 2021. These upgrades are not just to accommodate the increased headcount but are designed to create a world-class place for collaboration and innovation.

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