Playside Studios Ltd (ASX: PLY) shares are being hammered on Wednesday morning.
At the time of writing, the ASX All Ords stock is down over 37% to 45 cents.
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Why is this ASX All Ords stock being hammered?
Investors have been rushing to the exits this morning after the game developer released a trading update ahead of its annual general meeting.
Firstly, let's take a look at what's going on for the company in FY 2025.
Management advised that it has a strong focus this year on development and investment. This includes progressing towards the launches of shooter game MOUSE, a multiplayer title for its wholly owned Dumb Ways to Die intellectual property (IP) on PC/console, and the real-time strategy game based on the Game of Thrones IP.
It notes that these represent the largest project investments in PlaySide's history, and having commenced the financial year with a cash balance of $37 million, it stresses that it is fully funded to bring these titles to launch.
The company also believes that after delivering a five-year revenue compound annual growth rate (CAGR) of 67% through to FY 2024, these games could be the catalyst to another step change in the revenue trajectory of the business when they launch in the 2025 calendar year.
However, the ASX All Ords stock certainly won't be growing its revenue by 67% in FY 2025. It may not even be growing its revenue at all this financial year, which explains why its shares are being sold off today.
FY 2025 guidance
According to the release, FY 2025 revenue is expected to be between $62 million and $68 million. This range represents a 4% decline to a 5.2% increase on FY 2024's revenue of $64.6 million.
Things will be even worse for the ASX All Ords stock's earnings before interest, tax, depreciation, and amortisation (EBITDA).
For the 12 months, management is guiding to FY 2025 EBITDA in the range of $0 million to $5 million. This will be a sharp decline on the $17.5 million it recorded in FY 2024.
Finally, the company revealed that it will be burning through significant cash during the year because of its investments. This is expected to lead to Playside Studios ending the period with a cash balance of $15 million to $20 million. This represents a decline of up to $22.1 million on the $37.1 million it had at the end of June.
