Company Presentation September 2017 - Embracer
Company PresentationSeptember 20171
TODAY’S PRESENTERLARSWINGEFORSCo-Founder & Group CEOGames developer and publisher,focusing on PC and console 23 years experience in gaming industry Entrepreneur since the age of 132
1. INTRODUCTION
LEGACY OF GAMING, ENTREPRENEURSHIP AND DEALMAKINGMail order video gamesGaming retail #1Gaming retail #2Games publishingAcquisition of JoWoodAcquisition of ource: Company information4
GLOBAL FOOTPRINT SUPPORTED BY 40 PUBLISHINGPERSONNEL AND 430 GAME DEVELOPERS Global Video & Computergames publisherGroup HQ-Karlstad, SWE4 personnelGroup CEO/CFOOperational HQ-Vienna, AUT40 personnelOperational CEOFoxgloveStudios1- Stockholm, SWE- 19 personnelMirage GamesPieces interactive- Karlstad, SWE- 4 personnel- Skövde, SWE- 13 personnel Publishing & Ops HQ inVienna HQ in Karlstad Founded 2011 Core Business model:Aquiring IPs andcatalogues of assetsDevelopment studio-Munich, GER35 personnelDevelopment studio-Phoenix, AZ24 personnelDistribution office-Bohemia, NY1 personnelDevelopment studio-Germany50 personnelEXTERNAL STUDIOSExample announced external studiosPiranha BytesWired ProductionsAirship SyndicateWeappy StudioGolem LabsKING ArtsDigital ArrowKaikoUnannounced external studios.Source: Company information 1) Mirage Game Studios and Foxglove Studios are currently under name change (to Mirage Game Studios and Foxglove Studios) at the SwedishCompanies Registration Office Note: “Personnel” may refer to both employees and contractors working either on- or off-site.5
EXPERIENCED, INCENTIVISED AND COMPLEMENTARYMANAGEMENT TEAMOwnership table 30 June 2017ManagementLars WingeforsGroup CEOCo-FounderKlemens KreuzerManaging DirectorCo-FounderErik StenbergCFOCo-FounderReinhard PolliceDir. Business &Product Dev. /Co-FounderNameIndustryexperience50.01%23 years1.55%10 years10.83%16 years1.07%8 years6,501,467 29,523,73250.0161.78Xagonus AB1,407,7246,392,60010.8313.38Swedbank Robur03,985,9285.532.60Handelsbanken dner & Gerge Småbolag02,200,6633.061.44Ram One AB01,796,7452.491.17289,9661,316,7602.232.76Martin Larsson & Co01,316,9441.830.86Avanza Pension01,308,7661.820.86Novobis AB01,250,0001.740.82Gerado ,5241.071.18Knutsson family & Co0600,0000.830.39Other shareholders05,166,4557.183.379,000,000 63,032,500100.00100.00Lumarisimo ABOlson family & foundationGigalomaniacKey skillsand evelopment,marketingTotal no. sharesTotal no. votesSource: Company informationClass Bshares Capital % Votes %Lars Wingefors ABCMB Holding ABOwnershipstake(capital)Class Ashares153,032,5006
STRONG GAMES AND DISTRIBUTION PLATFORMOWNED GAM ESWe acquire, develop, publish and distribute our own gamesPUBLISHING DEALSWe publish and distribute others’ games 85 IPs/FRANCHISES AND 270 GAMES60 TITLES71%29%of 2016net salesof 2016net salesDIGITAL DISTRIBUTION WORLDWIDE51% of sales (2016)PHYSICAL DISTRIBUTION WORLDWIDE49% of sales (2016)
2. Market overview
THQ IS PRESENT IN LARGE, ATTRACTIVE SEGMENTSGaming market future outlook, USDbnGaming market by platform, 2016Gaming market by geography, 2016CAGR6%128Latin America, 4%North America, 25%Other, 42%10164OtherConsole, 31%38PC30-2%28Asia Pacific, 47%EMEA, 24%PC/MMO, 27%3220163%36Console2020E Games market to reach USD 128billion in 2020E PC and Console comprised virtually100% of our net sales in 2016 THQ Nordic’s core geographies areNorth America, EMEA, Australiaand New Zealandsegment presenceSource: NewZoo 2017 Global Games Market Report, Company information9
FAVOURABLE MARKET TRENDS AND FEATURES(Quality) contentis kingDedicated fansDigital distributionincreasing butphysical lidationGlobal gamesmarket, bnNewzoo dataStatista data80400n/a06 07 08 09 10 11 12 13 14Source: Statista, NewZoo 2016 Global Games Market Report, Company estimates 1) Market data between 2006 and 2009 has been retrieved from Statista, market data from 2012 to2014 has been retrieved from NewZoo 2016 Global Games Market Report. Two data sets are combined in the chart above for data availability reasons.10
3. Company overview andgrowth strategy
KEY INVESTMENT HIGHLIGHTS14Proven business model2Diversified games portfolio with quality content available on all major platforms3Strong and well-invested pipelineRobust financial performance12
1CORE BUSINESS MODEL then we increasethe value of the gamesthrough multiple initiativesWe acquiregames atattractivemultiples Value of gamesafter our initiativesSEQUELSAttractiveprice ofgamesat acquisitionSource: Company informationASSET CARED I S TR I B U TI O N E X P AN S I O N13
1HOW WE INCREASE THE VALUE OF AN ACQUIREDGAMED I S TR I B U TI O N E X P AN S I O N Add digital channelsSEQUELSASSET CARE Port to new platforms Release sequelsFirst Game Sequel I Sequel II Sequel III Release remasters, newversions and patchesVersion Remaster IIVersionVersion Remaster IIAdd and reactivatephysical channels Release DLCs (downloadablecontent)Value of gamesafter our initiativesSwords, helmets etc.Attractiveprice ofgamesat acquisitionSource: Company information14
1MX VS. ATV CASE STUDYD I S TR I B U TI O N E X P AN S I O N Add digital channels Add physical channels Port to new platforms Release sequelsNo sequelsannounced todate 5 portings Digital channels addedSEQUELSASSET CARERelease remasters 2 releases Since acquisition:(Jun 2013–Jun 2017)Sales: 30MGross profit:Release DLCs (downloadable 20Mcontent) Physical channelsaddedAcquired for 0.6min 2013Step 1: MX vs. ATV acquiredfrom THQ for 0.6m in 2013Investments in released contentsince acquisition(Jun 2013–Jun 2017) 3.6MStep 2: Since acquisition we have invested 3.6m in remasters, DLCs, portings, etc.Result: Significant cash flow fromand value increase of MX vs. ATVSource: Company information Summary of the figures: During the period June 2013–June 2017: Sales 30m, gross profit 20m, investments made in released content 3.6m,amortization of capitalized development 3m, amortization of IP right 0.4m. Acquisition price 0.6m15
1GROWTH STRATEGYExplore IPlicensingand mobileAcquiresmallerpublishersCore business modelFurtherIP acquisitionsAccelerateAsset Care andsequel releases Focus on sequelreleases on ourwell-establishedfranchises Distressedcompaniesunable to developthe game furtherAddingstudios Acquire smallerpublishers Adding moreinternal andexternal studios,both organicallyand throughacquisitions Exploreopportunities forlicensing ofgames into newgeographies Responsiblyexplore venturinginto mobile A seller unwillingto develop thegame further(non-core title)NowFuture We will leverage our growth strategy on 1) our recent complete rebranding and 2) our IPOSource: Company information16
2GAMES PORTFOLIO OVERVIEWOwned contentPublishing deals 85 270F R AN C H I S E SG AM E S 3 0 R EM AST E R SSource: Company information (1) Most of our titles are owned 100% but not all e.g. ELEX is owned 70% 330 DLCs 60G AM E S(publishing)17
3STRONG AND WELL-INVESTED PIPELINEOur 3 largest development projects to date,with an estimated development budget of SEK 65–125m eachOur first majorbrand-new gamedevelopmentMajor sequelbased on keyfranchiseLarge-scale projectbased on existingfranchise339MSEKMajor sequelbased on keyfranchiseMajor sequelbased on keyfranchiseBalanced investmentas of Jun 2017(Intangible assets)126MSEK“Elex is definitely themost ambitious gamethat we saw at E3 thisyear”– NewGameNetworkOwned, 70%Investments madeJan-Jun 2017(Investments in intangible assets)Owned, 100%Owned, 100%Owned, 100%In total,Owned, 100%13announcedand 17unannouncedwe haveBrand new Openworld Kung-Fu fableRPGBrand-new gamesbased on bestselling comic bookBrand new gamewith unique racingexperienceAdd weMajorsingsequelorbased on keyAquanofranchisex 21moreprojects in our pipeline,as of Jun 2017Strong platform presencesOriginal studios and/orwell-suited quality studiosPlus 21 otherpipeline projectsPublishingSource: Company informationPublishingPublishingOwned, 100%18
3SIGNIFICANT INVESTMENTS IN GAMES DEVELOPMENTGame development & royalty advances, SEKmGame development & royalty advances, % of 016Q22016Q32016Q42017Q168%2017Q2 The increase in investment levels is linked to the many attractive investment opportunities which arose from the THQ IPacquisitionsSource: Company information19
4HIGH TOPLINE GROWTH WITH STABLE MARGINSNet sales, SEKmGross profit margin, %EBIT margin, %962014201520162016 H1 2017 H1 Sales growth has more thandoubled in H1 2017 compared toH1 2016Source: Company information2014201520162016 H1 2017 H1 Strong growth in both gross profitand gross profit margin, H1 2017compared to H1 201620142016 H1 2017 H1 EBIT has more than doubled in H12017 compared to H1 201620
4. 2017 Q2 highlights
PROMOTIONS AND SCALABILITY DRIVES PROFITApr-Jun2016Apr-Jun2017var /-Net rofit after tax10.623.2119%2.021.6980%EBITDA Margin44%46%EBIT Margin27%35%In MSEKCash flow from operations 5 owned and 2 publishing titles releases in the second quarter The Darksiders-series is the notable contributor in Q2 Increased EBIT margin due to lower amortizationSource: Company information22
DIGITAL SHARE A RECORD 69% OF NET an-Mar2017Apr-Jun2017Gross Margin (Net sales-COGS)29.834.641.277.557.461.3Gross Margin, %69%66%53%60%70%72%Owned titles, %86%73%64%68%67%77%Publishing titles, %14%27%36%32%33%23%Owned titles37.138.549.987.254.965.9Publishing titles6.014.228.041.027.019.7New releases sales by each quarter, sical sales, %48%39%49%58%49%31%Digital sales, %52%61%51%42%51%69%Physical sales20.720.638.274.440.126.5Digital sales22.432.139.753.841.859.0In MSEKNet sales splitBackcatalogue, %New releases sales by each quarterSource: Company information23
The Darksiders-series is the notable contributor in Q2 Increased EBIT margin due to lower amortization In MSEK Apr-Jun 2016 Apr-Jun 2017 var /- Net Sales 52.7 85.6 62% EBITDA 23.2 39.7 71% EBIT 14.2 30.3 113% Profit after tax 10.6 23.2 119% Cash flow from operations 2.0 21.6 980% EBITDA Margin 44% 46% EBIT Margin 27% 35%
Destroy All Humans! EMBRACER GROUP AB -PUBL( APRIL)JUNE 2021 5 SEK million Net sales Gross margin 0 1,000 2,000 3,000 4,000 Apr-Jun 2021 Jan-Mar 2021 Oct-Dec
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