INVESTOR PRESENTATION December 2020 AGENDA
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INVESTOR PRESENTATION December 2020 AGENDA Section A: Introduction to EG7 Section B: Introduction to Daybreak Section C: The new group Appendix: Additional material 2 Introduction to EG7 EG7 at a glance ▪ EG7 is a group of companies that develops, markets, publishes and distributes video games for PC, console and mobile on a global market ▪ The group comprises EG7 Studios, Petrol, Sold Out, Big Blue Bubble, Piranha Games and Antimatter Games among others ▪ Covers the entire gaming industry value chain. Where work-for-hire, marketing and publishing has predictive and stable revenue streams and development with great option value ▪ Has undergone rapid growth, both organically and through acquisitions including the most recent acquisitions Big Blue Bubble and Piranha Games SEK 657M SEK 156M PRO FORMA REVENUE YTD PRO FORMA EBITDA YTD Source: Company Information. 3 Acquisition of Piranha Games Piranha Games at a glance Transaction structure ▪ Video game developer and publisher founded in 2000 with c. 65 EV/Adj. EBITDA Purchase price table CADm employees, based in Vancouver, Canada LTM Q3’20 ▪ Operated on a work-for-hire basis until 2009. Made games for big-name Upfront consideration shares 10.5 franchises, including AAA licensed title Need for Speed: Undercover ▪ In 2009 the company entered an agreement with Microsoft for the Upfront cash consideration 20.9 MechWarrior license Upfront consideration 31.4 3.7x ▪ MechWarrior Online is an online free-to-play game officially launched in Maximum deferred consideration 63.4 2013. The game is monetized via in-game purchases ▪ MechWarrior 5 Mercenaries was launched in 2019 and is currently under an exclusivity agreement with Epic Games Store. The game will be available for full release in 2021 and the company is also developing downloadable content for MW5 Financial highlights Net revenue of EBITDA of CAD 22.7m CAD 8.6m (LTM Q3’20) (LTM Q3’20) 4 Buy-and-build strategy Revenue, SEKm 876 Q2 2018 Q2 2019 Q2 2019 Q4 2019 Q3 2020 Q4 2020 EV: 1 NOKm EV: 18 USDm EV: 1.6 SEKm EV: 16 + 5.2 GBPm EV: 16 + 60 CADm EV: 31 + 63 CADm 512 76 8 11 11 2015-081) 2016-081) 2017-081) 2018-122) 2019-123) 2020 PF annualised Source: Company Information. 1) 12 months from September to August 2) Changed to calendar year. 2018 figures referring to 2017/09/01 2018/12/31, i.e. 16 months. Including Artplant pro forma. 3) Including Petrol, Sold Out and Antimatter pro forma. 5 Two divisions with strong synergies GAMES SERVICES ▪ Development of own titles ▪ Creative marketing studio with 40+ ongoing marketing projects. ▪ Five independent studios with unique expertises Previous projects – Call of Duty Warzone, Far Cry 6 and Assasins ▪ 10 fully owned IPs Creed Valhalla ▪ 13 current projects ▪ 17 current projects in Publishing, distribution and Work-For-Hire of PC and console video games ▪ Toadman Studios ▪ Toadman Work-For-Hire ~63% ~37% TOTAL REVENUE 1) TOTAL REVENUE 1) Source: Company Information. Note: 1) YTD pro forma revenue figures. 6 EG7’s value chain VALUE CHAIN – WE CONTROL THE VALUE CHAIN DEVELOPING MARKETING PUBLISHING DISTRIBUTING WE TAKE THE COMPANIES WE ACQUIRE TO A NEW LEVEL Source: Company Information. 7 Solid track record and pipeline 160+ 25+ 40+ ONGOING MARKETING PREVIOUS GAME PROJECTS CURRENT GAME PROJECTS CAMPAIGNS Source: Company Information. 8 Titles to be released in 2020-2022 Source: Company Information. 9 AGENDA Section A: Introduction to EG7 Section B: Introduction to Daybreak Section C: The new group Appendix: Additional material 10 Introduction to Daybreak Daybreak at a glance DAYBREAK’S KEY PERSONNEL AND HIGHLIGHTS ▪ Leading MMORPG developer and publisher ▪ “THE” pioneer of online games with the release of EverQuest in 1999 Jason Epstein Ji Ham Jack Emmert ▪ Expertise in free-to-play and game as a service business model Executive Chairman CEO CEO Daybreak Games Daybreak Games Dimensional Ink & Standing Stone ▪ Extremely popular original IPs and iconic third-party IPs, i.e. ▪ Serial entrepreneur with over ▪ 22 years of experience across ▪ Over 20 years of making EverQuest, Planetside, Lord of the Rings and DC 25 years of investing and investment banking, games and operating GaaS operating across gaming and investments and operations products other industries ▪ CEO of Daybreak since 2015 ▪ Co-founder and former CEO ▪ License agreement with Marvel ▪ Past track record include of Cryptic studios purchasing and turning around Harmonix ▪ ~178m total registered users, with potential to leverage for marketing and reactivation Bookings of Net Revenue of Adj. EBITDA of USD 71m USD 63m USD 26m1) (YTD Q3’20) (YTD Q3’20) (YTD Q3’20) ~41% Margin 6 ~301 24 live online games Employees years in business (Nov 20) Source: Company information, management accounts. Note: 1) Management accounts are adjusted for elimination of dormant / non-core games, estimated cost savings to reflect the run-rate effect of recent operating expenses optimization and capitalization of development expenses. 11 Daybreak – a unique journey Daybreak acquires Turbine and Standing Planetside 2 is Stone Games, bringing launched, receiving LOTRO and DDO Sony Online several accolades, onboard, since Entertainment is Successful launch including Best contributing with $72m founded as a of Planetside 1 and Launch of Clone Shooter and Best of bookings and $39m of subsidiary to Sony Starwars Galaxies Wars Adventures MMO in 2012 Game level EBITDA 1997 1999 2003 2004 2010 2011 2012 2015 2016 2020 Everquest launches Everquest 2, the The major hit DC H1Z1 is launched in Introduces 3 new indie to critical acclaim sequel to the Universe Online is January 2015, and studios: DarkPaw as the first fully 3D MMORPG pioneer launched Sony Online Games, Rogue Planet MMORPG and Everquest is Entertainment is Games and attracts hundreds launched spun-off, creating Dimensional Ink Games of thousands of Daybreak as it is users known today Source: Company information. 12 Globally recognized third party IP portfolio… Daybreak boasts one of the best 3rd party IP portfolios in the world Source: Company information. 13 …combined with valuable original IPs Released in 1999 Released in 2015 Released in 2012 1st fully 3D MMORPG game that Very first standalone battle royale The one and only First Person Shooter pioneered the genre game that inspired PUBG and Fortnite MMO in the world Numerous awards, i.e. “Top 50 PC Over 40m LTD downloads Numerous awards, i.e. “Best Shooter”, Games ever” “Best Free to Play” and “Best PC Globally recognized original IP exclusive” by GameSpy “Fortnite of its generation” – featured in The Simpsons, cover of TV guide Guinness World Record for most players in a single battle with 1,158 ~$1bn lifetime bookings players in a single session Source: Company information. 14 Strong portfolio of games… Live game portfolio Experience a high-fantasy world “Parallel universe” to EQ set 500 Build a hero from the classic D&D races ▪ Evergreen live service based on epic quests and dungeons years after the first game’s events and experience 100+ hours of adventures game portfolio with Fantasy Release in Fantasy Release in Fantasy Release in strong brand and MMORPG Mar 1999 MMORPG Nov 2004 MMORPG Feb 2006 community association YTD Bookings1) MAU / Members2) YTD Bookings1) MAU / Members2) YTD Bookings1) MAU / Members2) $11.5m 82K / 66K $6.5m 29K / 21K $6.9m 46K / 22K ▪ Mainly monetize via in- game purchase, membership subscription and DLC / expansion pack An ongoing series of adventures Create a new original character and Experience enormous battles in territory brimming with action and intrigue interact with iconic heroes and villains control open-world gameplay ▪ Average 80+ Fantasy Release in Superhero Release in Sci-Fi Release in MMORPG Apr 2007 MMORPG Jan 2011 MMOFPS Nov 2012 YTD Bookings1) MAU / Members2) YTD Bookings1) MAU / Members2) YTD Bookings1) MAU / Members2) $9.9m 108K / 41K $26.7m 419K / 40K $7.9m 198K / 25K Source: Company information. Note: 1) YTD bookings as of 30th September 2020. 2) As of September 2020. Members defined as customers who have purchased a monthly membership. 15 …leads to diversification Bookings by game1) EBITDA by game2) 9% 13% 10% 28% 38% 10% 11% 6% 15% 14% 30% 17% Source: Company information. Note: 1) YTD bookings as of 30th September 2020. 2) YTD Game level EBITDA as of 30th September 2020. 16 Loyal user base and industry leading monetization Growing and loyaluser base Average Continuing Users (‘000) ~40% 411 367 of Monthly Active Users are Continuing Users 60%-80% Retention Rate for Continuing Users 96 116 Up to 5 Q3-19 Q3-20 Average Session Hours Deep monetizationmodeland industryleadingmetrics Average Monthly ARPPU1) Average Monthly Payer Conversion1) $65.2 $52.3 $51.9 42% 13% $47.5 $37.5 $35.7 41% 21% 17% 10% Source: Company information. Note: Continuing users defined as customers who have logged into a game at least once every month. 1) As of Q3 2020. 17 Highly tenured user cohorts Bookings by user cohort1) 7.3% 7.0% 6.5% 3.9% 6.2% 2.7% 11.2% 3.0% 3.5% 4.5% 6.4% 6.3% ▪ Daybreak’s user 5.1% 3.7% 7.5% 6.6% 6.6% cohorts show 8.3% 5.6% 7.8% 6.1% extremely long-term 12.2% engagement and 11.3% 11.6% stickiness ▪ 65%+ of bookings for each game comes from players who have been playing for 80.5% 80.2% 3 years or more 75.8% 69.4% 67.5% 65.7% ▪ New players continue to join communities with increasing monetization potential as they stay longer 3+ years 1-3 years 3-12 months 1-3 months Less than 1 month Source: Company information. Note: 1) Q3 2020. 18 Robust growth opportunities Q4’21 2022 TBA New project DCUO Upgrade LOTRO Upgrade New Project Summary: Summary: Summary: Modernize visuals, upgrade Planning visual and technical Unannounced project key game systems and add updates for LOTRO for PC brand new large content and nextgen consoles to update to capitalize on the capitalize on Amazon’s highly nextgen consoles growth publicized large investment cycle for significant growth (~$500mm) in LOTR TV series opportunity Source: Company information.