INTERIM RESULTS - H1 FY19 (6 months to 30 November 2018) RECORD RESULTS February 2019 Frontier Overview • Success over three decades as a work-for-hire developer has created a proven track record over a variety of genres and platforms • Rise of digital distribution was a catalyst to transition to a self-publishing model, focusing on PC and console • We are creating franchises, providing sustained income streams and step-up earnings potential: • Elite Dangerous (December 2014 – FY15) • Planet Coaster (November 2016 - FY17) • Jurassic World Evolution (June 2018 - FY19) • Our fourth franchise is planned for release later in calendar year 2019 • We are scaling up to deliver roughly one major launch per year and achieve our long term ambition of becoming a global leader in entertainment • In January 2019 Frontier celebrated 25 years of creativity, quality and innovation • We have external opportunities to further accelerate scale-up through publishing and/or acquisition 2 Highlights • Our strategy of launching and then nurturing franchises continues to deliver: • Jurassic World Evolution, our biggest launch to date, released in June 2018 on PC, PS4 and Xbox alongside the film launch of Jurassic World: Fallen Kingdom. 1 million base game units sold in 5 weeks and 2 million within 7 months. • Planet Coaster continues to perform well through games sales and a growing PDLC model; there are currently 9 separate products. 2 million base game units sold in just over 2 years. • Elite Dangerous continues to expand and develop; the major Beyond series of updates completed in December 2018. 3 million base game units sold in just over 4 years. • Our fourth franchise is on track for release later in calendar year 2019. • We delivered record financial performance in H1 FY19: • Revenue £65 million (H1 FY18: £19 million) • Operating profit £17 million (H1 FY18: £3 million) • Cash increased to £39.5 million (31 May 2018: £24.1 million) 3 Income Statement £m H1 FY19 H1 FY18 % change Revenue 64.7 19.0 241% Cost of sales (25.4) (5.8) 338% Gross profit 39.3 13.2 198% GM% 61% 69% (8%) Gross R&D 10.4 6.8 53% Capitalised costs (5.6) (5.0) 12% Amortisation 4.0 2.8 43% Net R&D 8.8 4.6 91% S&M 5.5 2.8 96% G&A 7.7 2.8 175% Total Opex 22.1 10.2 117% Operating profit 17.2 3.0 473% Op. margin % 27% 16% 11% Interest & tax (1.8) - n/a Profit after tax 15.4 2.9 431% Basic EPS (pence) 40.2 8.0 403% 4 Cash Flow £m 50.0 45.0 4.5 5.7 1.2 4.7 5.0 0.7 40.0 0.3 0.1 39.5 35.0 17.2 30.0 25.0 24.1 20.0 15.0 10.0 5.0 - Cash Op. Profit Depn & Amort. Intangible assets Tangible assets Working EBT share Share option Share Other Cash 31May18 capital purchases exercises charges 30Nov19 5 Balance Sheet £m 30 Nov’ 2018 31 May 2018 30 Nov’ 2017 Intangible and tangible assets 36.6 34.2 28.0 Receivables & other short term assets 7.1 7.2 3.9 Deferred tax asset 0.8 - - Cash 39.5 24.1 29.1 Total Assets 83.9 65.5 61.0 Payables (10.9) (5.9) (5.1) Deferred income (3.5) (4.3) (1.1) Tax creditor (0.9) - (0.7) Provisions - - (0.3) Total Liabilities (15.3) (10.2) (7.3) Net Assets 68.6 55.3 53.7 6 The Games Industry • Biggest entertainment sector – growing to $148 Bn globally in 2019 (2018: $138 Bn) newzoo • 2018 Global entertainment industry $380 Bn Futuresource • 2018 Film box office - $42 Bn (2017: $41 Bn) Statista • 2018 Music - $19 Bn (2017: $17 Bn) IFPI • Games forecast to grow to $174 Bn by 2021 newzoo • Sectors: PC, Console, Mobile, Tablet • PC + Console - $67.5 Bn • Good quality & discoverability, global multiplayer online • Smartphone - $56.4 Bn • Low quality & discoverability, poorly perceived • Tablet - $ 13.9 Bn • Growth challenged by portable (Nintendo Switch). Newzoo 2018 forecast • Market Changes: • Near 100% digital distribution on PC, Tablet & Mobile • Console digital sales increase but slowed in 2018 by major releases (RDR2) & Switch • China forecast growth of 25% YoY at $37 Bn in 2019 newzoo 7 Players in Games As at 28 January 2019 Games companies Value Portal Hardware Dev. & Pub. Services Non-game Example titles Microsoft US $828bn Xbox Xbox, PC Y Y Publisher of many titles Tencent CN $420bn WeGame Y Y League of Legends, Clash of Clans, Clash Royale, publisher of many titles Sony JP $63bn PS4 PS4 Y Y Publisher of many titles Nintendo JP $43bn Switch Switch Y Mario, Zelda, publisher of many titles Activision Blizzard US $35bn Battle.net Y Call of Duty, Destiny, Skylanders, Candy Crush, Warcraft, Overwatch Electronic Arts US $27bn Origin Y Battlefield, FIFA, Star Wars: Battlefront, NBA, The Sims, Mass Effect: Andromeda Valve US <private> Steam Y Y Dota, CS:GO, Half Life, Portal Take Two US $11.5bn Y GTA, Civilization, Red Dead Redemption Ubisoft FR $10.0bn Uplay Y Assassin’s Creed, Far Cry, Just Dance, Tom Clancy Konami JP $6.6bn Y PES, Metal Gear Solid CD Projeckt PL $4.9bn Store Y The Witcher, Cyberpunk Zynga US $4.1bn Y Mobile and web games Square Enix JP $4.0bn Y Final Fantasy, Hitman, Tomb Raider Sega Sammy JP $3.7bn Store Y Y Football Manager, Total War, Alien Isolation, Sonic the Hedgehog, Warhammer Capcom JP $2.8bn Y Y Street Fighter, Resident Evil, Devil May Cry, Monster Hunter THQ Nordic SE $1.7bn Y Darksiders, Elex, MX vs ATV Paradox SE $1.7bn Store Y City Skylines, Stellaris, Crusader Kings, Europa Universalis, Hearts of Iron, Tyranny Keyword Studios UK $951m Y Frontier UK $461m Store Y Elite Dangerous, Planet Coaster, Jurassic World Evolution Team 17 UK $385m Y Escapists, Worms, Overcooked, Lethal VR Codemasters UK $329m Y F1, DiRT, GRID, ONRUSH Sumo Digital UK $257m Y Starbreeze SE $29m Y 8 Enclave, Riddick, Syndicate, Brothers: A Tale of Two Sons Sources of IP for top-selling games PC 2017 PC 2018 Console 2017 Game Film Sports Book Sources: - Steam 100 Top Sellers 2017 and 2018: store.steampowered.com - 100 best-selling UK boxed games of 2017: GamesIndustry.biz 9 Strategy Goal: To be the most respected and highest quality entertainment company in the world • We are building a diverse, world-class portfolio • Our business plan is based on a demonstrable track record of successful, on-time, on-budget launches and substantial multi-year franchise revenues, always with potential for a break-out hit • Continue to extend and manage Elite Dangerous, Planet Coaster and Jurassic World Evolution • We base new franchise decisions on a proven formula • Our 4th Franchise, which is based on our own un-announced IP, is in full development and planned for release later in calendar year 2019 • Multiple other projects are in various stages of development • Franchises will be a mix of licensed and original IP • We will use licenses where there is a good fit and it adds value to the game 10 December 2014 November 2016 June 2018 In 4 years we have: • Launched 3 successful franchises • Sold over 7 million base game units • Generated over £180 million of revenue 11 Launching and sustaining a game franchise Our approach; to develop and launch a game with the full intention of supporting it over many years, in order to stimulate our target audience over the long term, delivering sustainable multi-year revenue and earnings. 12 Historic revenue & analyst projections Financial performance will continue to exhibit “stepped” characteristics as new franchises are released 120.0 100.0 80.0 60.0 £m 40.0 20.0 - FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Self-published launches Revenue from self-publishing Revenue from work-for-hire Analyst projected revenue* 13 * Average of projections from Liberum, finnCap, Citi, Peel Hunt, Jefferies and Berenberg Future Opportunities • Franchise announcements will be made at the best time for the franchise • Announcements may be made some time after the start of a particular project • Not at the time of the signature of an agreement with an IP or development partner • Core model is to use internal resources supplemented by outsourced services • Moving to an internal game every year • We are also exploring other models to accelerate scale-up: • Third party publishing (promotion and distribution of other developers’ games) • Commissioning (outsourcing development of Frontier games to other developers) • Acquisitions 14 Summary and Outlook • Proven our ability to deliver over three decades – Frontier celebrated 25 years of creativity, quality and innovation in January 2019 • Successful transition to self-publishing with three successful franchises, Elite Dangerous, Planet Coaster and Jurassic World Evolution • Jurassic World Evolution released in June 2018 - our biggest launch to date • All three franchises continue to perform well through both game sales and PDLC as we continue to support and nurture each one • Record financial performance in H1 FY19 – revenue of £65 million • We are well placed to continue to grow a broad portfolio of franchises, each different to the last • Franchise 4, based on our own un-announced IP, is in full development and planned for release later in calendar year 2019 • Scaling up to deliver roughly one major launch per year and achieve our long term ambition of becoming a global leader in entertainment 16 Questions? 17 Appendix 18 Our history (1) - Work-for-hire Proven Track Record over Three Decades: • 1984: Elite launched; Frontier founded 1994 by David Braben • 1994-2013: very successful “work-for hire” developer • Proven track record over a variety of genres, many platforms • Including Microsoft launch titles for Kinect, Xbox One • Use our own ‘COBRA’ software technology 19 Our history (2) - Self-publishing • The rise of digital distribution was the catalyst to transition to self-publishing • Self-publishing gives best financial (and creative) RoI for our expertise • ‘Kickstarter’ funding for Elite sequel led to July 2013 IPO • No change to our successful development process • Online digital distribution removed physical retail barrier-to-entry • Use our own store plus key 3rd party stores; Steam & others (PC), Xbox, PS4 • Added marketing and customer support • Engage with our player communities directly • We are now over 430 people, all based in Cambridge 20 The Games Industry 1985-2010 • Route to market controlled by publishers • Publishers: marketing, owned brand, owned customer relationship, funding • Developers: development, design, production • Development and Publishing fundamentally separate.