G5 Entertainment Investor Presentation
G5 Entertainment in Brief Developer and publisher of casual free-to-play (F2P) games for tablets and smartphones Global company operating in the global market of mobile games, a $70+ billion market 7 offices worldwide, each serving a strategic purpose and providing a competitive advantage Focused on games for a female audience age 35+ Platforms: ipad, iphone, Android, Amazon Kindle Fire, Windows Listed on Nasdaq Stockholm since June 2014, public since October 2006 (3 SEK IPO price) Total # of Employees: 469
Global Gaming Market is a Growing Market Mobile gaming is the fastest growing segment of the gaming market with global revenues expected to reach $106 Bn USD by 2021, a CAGR of 17.4% With over 2.1 billion gamers worldwide today, and 2.7 billion gamers projected by 2020, mobile gaming has more players than any other gaming segment Mobile games revenue has grown across all regions worldwide in 2017 and is projected to do so again in 2018 Asia is the biggest market, accounting for almost 50% of total revenues for the industry, led by China and Japan Mobile gamers are spending more money than ever before, with Japanese gamers spending the most per player $106 bn
Value Chain GAME DEVELOPMENT DISTRIBUTION RE-ENGAGEMENT & MARKETING Development of own games END USERS Outsourced development 3 rd party licensing UA Organic traffic Social Ect. G5 develops proprietary games based on its own technology Development is made in talented studios with a mix of in-house and 3 rd party contractors G5 sometimes licenses games from independent game studios which reduces financial risk and increases the company s offering to various target audiences and experimental genres G5 uses strong distributors: Apple, Google, Microsoft and Amazon The application stores charge approximately 30% of revenue for which G5 gain access into a global market without the need for its own distribution and payment systems Users are regularly offered new updates for existing games and new games within the portfolio to try Own analysis secures the most efficient marketing efforts The users are linked to G5 through e-mail, social media and G5 s own community, G5 Friends
A Track Record of Growth Gross Revenue, Thousand SEK EBIT, Thousand SEK Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total 1,250,000 100000 1,125,000 1,000,000 85000 875,000 70000 750,000 625,000 500,000 55000 40000 375,000 25000 250,000 125,000 10000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018-5000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
A Healthy Geographic Revenue Mix 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Geographic Revenue Distribution Geographic Revenue Distribution 6% 6% 7% 8% 7% 7% 7% 7% 6% 18% 17% 16% 15% 17% 17% 16% 16% 15% 10% 11% 15% 22% 23% 26% 28% 27% 28% 66% 66% 62% 55% 53% 50% 49% 50% 51% Q2 16' Q3 16' Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1 18 Q2 18 North America Asia Europe ROW Revenue has continued to grow across all regions in absolute terms, creating a healthy revenue mix Finding opportunities in high ARPU countries which has supported both revenue growth and MAGRPPU growth ($46.2 USD) The company will continue to pursue growth opportunities in the regions with the most attractive ROI on marketing spend Global success provides diversified currency revenues & FX stability Games are localized in 10 languages from the initial release date Total Revenue by Region (SEK M) Q2 17 Q2 18 Y-0-Y North America 146.2 201.3 38% Asia 63.5 110.6 74% Europe 46.9 59.2 26% ROW 19.3 23.7 23%
Key Growth Driver: Increase of Average Screen Size The recently released iphone X continues this trend with a 5.8 screen Average smartphone screen size has been increasing over time which has opened up a much larger and fast-growing market for our games The larger the screen, the more enhanced the gameplay experience The increase in device memory capacity and screen quality also helps, as G5 games are high in quality and content heavy
A Focused Company: Game Genre & Target Audience A Unique Market: Women Ages 35+ Hidden City - G5 s leading hidden object game Growing demographic Underserved market Very loyal audience Strong paying audience $ Low Piracy Game Genre: Hidden Object G5 s hidden object games have an immersive storyline and include various features to keep the player engaged for a long period of time G5 s primary, and a quickly growing genre where the company is the market leader Hidden object games are showing strong monetization and retention of players G5 has 2 Hidden Object games that have grossed over $100 M USD lifetime 3 wholly owned games that are in soft launch mode, with new releases in the pipeline for 2018
An Opportunistic Company: Match-3 Match-3 accounts for over $5 Billion annually of global mobile gaming revenues making it one of the largest genres in mobile gaming Match-3 is based on the simple rules of matching 3 objects in a row that create a complex puzzle which is hard to master The games are easy to learn and are possible to play during almost any available time during the day Popular genre with our target audience, also appeals to a wider audience Pirates & Pearls launched August 2017, ongoing game development and optimization with very positive early results More match-3 games in pipeline for release in 2018 Pirates & Pearls - G5 s leading Match-3 game
Audience Metrics and Monetization Sales Q2 18 Q2 17 Change % Revenue growth is supported by two components, the total number of users playing G5 games, and the monetization of these users In recent quarters, increased monetization has had a significant impact on revenue growth as the company has achieved a record average revenue per paying user of $46.2 USD per month (Q2 18) a 21% increase y-o-y The total audience has also grown with over 8.2 million monthly active users (Q2 18) an 11% increase y-o-y and 2.1 million daily active users (Q2 18) a 22% increase y-o-y The company has demonstrated the ability to drive user growth through effective marketing and UA strategies, focusing on quality users and high ARPU countries As the audience grows, positive momentum is created as users can be exposed to more games in the G5 portfolio Revenue (M SEK) 394.8 275.9 43% Audience & Monetization Q2 18 Q2 17 Change % Average MAU (mn) 8.2 7.4 11% Average DAU (mn) 2.1 1.7 22% Average MUU (mn) 7.0 6.5 8% Average MUP (thousands) 321.5 273.0 18% Average MAGRPPU (USD) 46.2 38.1 21%
Game Revenue Development G5 games are released worldwide at the time of the initial release The first 6-12 months after release, the games are carefully analyzed and updated to find the correct game balance As revenue grows and the games are optimized, user acquisition is added and games are scaled to higher revenue levels Often during the growth phase, games appear to have peaked, however improvements can be made to the game and/or the marketing strategy to achieve a higher peak level If the game has peaked, cross-selling with the rest of the games portfolio helps extend the long tail of revenue G5 aims to release 2-3 new games per year, creating a healthy portfolio of games that are in different phases of the revenue development cycle Visual representation of revenue from 2 hypothetical games over 4+ years Game 1 Game 2 Year 1 2 3 4 +
EBIT Growth & a Higher EBIT Margin 50,000 45,000 40,000 35,000 30,000 25,000 EBIT, SEK K 16% 14% 12% 10% 8% A key driver of revenue growth is the company s effective user acquisition strategy (UA) With expanding margins, the company can increase UA spend when there is significant opportunity to grow revenues to higher levels, and then lower the UA spend back to normal levels while still growing the business sustainably In 2018 UA costs have been on average 25% of revenues while revenue has grown both year over year and sequentially from quarter to quarter In Q2 18 EBIT margin was 12.7% and EBIT margin before costs for UA was 37% EBIT Margin has grown year over year despite increases in the number of employees and development costs which are areas critical to the company's future success The business has inherent leverage and the company aims to gradually expand the profit margin year over year 20,000 15,000 10,000 5,000 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 6% 4% 2% 0% 160 140 120 100 80 60 40 20 0 EBIT Margin before costs for UA Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 40% 35% 30% 25% 20% 2016 2017 2018 2016 2017 2018 EBIT EBIT margin EBIT UA Ebit Margin before UA
Operational Costs Operational Costs, SEK K 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Administration Research and development Sales and marketing 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Operational Costs as % of revenue 19% 27% 35% 27% 27% 26% 26% 27% 13% 10% 8% 7% 8% 7% 6% 9% 7% 5% 4% 4% 4% 5% 3% 4% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Administration Research and development Sales and marketing
2013-2017 Pivoted from Unlockable to F2P, with 21 F2P releases, 18 of which are still active Revenue grew from SEK 142 M in 2013 to SEK 1,135 M year end 2017 The growth of licensed games continued to be driven by Hidden City, the #1 hidden object game by revenue in the world The Secret Society surpassed $100 M USD in lifetime revenue, the 2 nd game in our portfolio to reach this level Mahjong Journey reached #3 ranking by revenue of all Mahjong solitaire games Launched Pirates & Pearls, the company s first pure match-3 game 450,000 400,000 350,000 300,000 Revenue, Thousand SEK Q2 18 Profitable & cash generating 2018+ Acquired Nightmares from the Deep as the company continues to consolidate the portfolio Increased the number of employees giving the company more development capacity and full control over game development and quality New wholly owned and developed F2P games in the pipeline in key genres of hidden object, puzzle and solitaire Building new games according to the working monetization models of our most successful games Continued focus on What Works as opposed to experiments 250,000 200,000 150,000 100,000 50,000 0 2011 2012 2013 2014 2015 2016 2017 2018
Top G5 Games by Revenue 1 2 3 4 5 6 7 8 Hidden City Licensed February 2014 Mahjong Journey Wholly Owned January 2015 The Secret Society Wholly Owned November 2012 Pirates & Pearls Wholly Owned August 2017 Survivors Wholly Owned January 2015 Homicide Squad Wholly Owned January 2017 Twin Moons Wholly Owned October 2016 Mystery of the Opera Wholly Owned October 2017
The Share - G5EN.ST IPO: October 2006 (3 SEK) Currently Listed: Nasdaq Main Market (June 2014) Outstanding Shares: 8.941.400 600 500 400 300 200 100 0 G5EN.ST Closing Price, SEK Aug 2013 Aug 2014 Aug 2015 Aug 2016 Aug 2017 Aug 2018 CEO: Vlad Suglobov CFO: Stefan Wikstrand Chairman of Board: Petter Nylander Top 10 Ownership as of 3 Aug 2018 # of Shares % Ownership Swedbank Robur Funds 854,876 9.56% Wide Development LTD 600,000 6.71% Purple Wolf LTD 510,000 5.70% Proxima LTD 492,000 5.50% Tommy Svensk 403,000 4,51% Avanza Pension 318,583 3.56% Rite Internet Ventures Holding AB 282,603 3.16% Nordnet Pension Insurance 175,926 1.97% Handelsbanken Funds 121,000 1.35% NBC Global Finance LTD 112,760 1.26%
Why G5 is Interesting Operating in a $70+ billion global market that has projected double digit growth thru 2021 Attractive business model with inherent leverage High end development talent in Russia and Ukraine, top User Acquisition team in San Francisco and company headquarters near Nasdaq OMX listing in Stockholm Focused on the genre (hidden object) and unique audience (women aged 35+) that has proven to work for us New wholly owned F2P games in pipeline for release Strong potential in the Match 3 segment
Contact G5 Entertainment Stockholm Headquarters G5 Entertainment AB Birger Jarlsgatan 18 114 34 Stockholm Sweden Email: Investor@g5e.com www.g5e.com/corporate