Q1’18 report May 2018
Stillfront – market leader in online strategy games Stillfront at a glance Global presence • Market leader in the genre free to play browser and mobile strategy games, with very loyal customer base and long game life cycles • Well-diversified game portfolio with established blockbuster IPs and Europe 60% many small to mid-sized growing and profitable IPs North Am 25% Asia 11% • 5 million monthly users, MAUs, and 1 million daily users, DAUs, with Africa 0.5% main markets by revenue in US, Germany, France, MENA and UK South Am 2.1% Oceania 1.8% • Group of nine studios operating in Germany, Sweden, Romania, United States, Jordan, and Malta, with a total of 430 professionals. Sales Headquartered in Stockholm Offices • ~35% of the whole Group is owned by active key individuals Massive track record All time marketing spend 400m €200m with high ROI consumers to date Empire € >1bn 5m MAU is one of the biggest strategy games in lifetime deposits avg. # of MAUs of all time 2
Selected highlights Q1 report Stillfront portfolio shows strengthand stability The threereallysuccessfulQ4 launchescontinueto grow War and Peace, Big Farm Mobile Harvest & Nida Harb Revenue growth Monetization metrics are very strong ü QoQ + 11 % Q1 Strong ü Big Farm Mobile Harvest has 7.5m registered users margins* of m SEK 315 proforma** 34% EBITDA ü These products have total Q1 deposits of 51 mSEK net revenues Revenues 24% EBIT High payback on investments and ‘capital efficiency’ ü 949% Big Farm Mobile Harvest and Nida Harb are ü higher Q1 over Q1 currently on par in revenues Investments and User Acquisitions Costs (UAC) Goodgame Studios delivers Product investments and UAC are performance based i.e. ü ü Revenue QoQ growth of 8% data driven and evaluated on fROI ü Empire and Big Farm show YoY growth from Feb´17 Total investments (own work capitalized) amounted to 31 mSEK ü corresponding to 9.8% (long term target is ’at around 10%’) Goodgame has a strong pipeline for 2H’18 ü ü UAC for Goodgame amounted to 71 mSEK (guidance were 70-75) World-class marketing and distribution ü Group’s total UAC amounted to 85 mSEK, equal to 27% in ü The strategic fit is very strong, creating synergies ü relation to net revenues * Adjusted for non-recurring items 3 ** Stillfront Group’s and Goodgame’s revenues Q4 combined
Business Overview Portfolio Financials Outlook 2018
The gaming market is exciting and contains some specific opportunities A clear and well-executed strategy… … is key Stillfront’s high predictability strategy • The largest entertainment market globally exceeding USD 100bn and still growing by ~8% • Addresses basic human need of playing and Thrilling Less volatility means lower risk competing, which is non-cyclical market • Dynamic changes with many new areas evolving • Digital products and digital distribution opens for strong leverage on global growth Revenues Manage title risks: fuel stars and kill darlings • Attract and retain super fast moving consumers • Critical Master challenging tech with fast shifts • success factors Excel in marketing and distribution • Possess top knowledge and experience • Blockbuster option Blockbuster Revenues option • Business model Stillfront works systematically to form a sound and predictable • • Product portfolio management Strategic • Go-to-market efficiency business by utilizing the opportunities in the market main areas • Product life-cycle optimization • Agility and execution power through high degree of de-centralization • Growth model including M&A Stillfront targets high predictability through an attractive position in the gaming industry 5
Business strategy based on three pillars The strategy pillars have different purposes Product strategy Growth strategy Market strategy 1 2 3 P P H Publishing Portfolio of Hi Growth studios & games by leveraging L u i Long life cycle & games Scalability, E B Engines for G Structure of Brands scalability organization and X S 3 X (cross) platform Systematic M&A Use our massive brands for more products Untapped potential in 3 rd party Publishing Improve risk/reward Grow to higher profitability through • • Improve risk/reward • • Create scalability reusing product assets scalability Improve barriers of competition • Efficient go to market model reusing Increase relevance for investors and partners • • • Efficient go to market model reusing brands products • Efficient ways to leverage existing assets Stillfront’s strategy has proven to be a powerful tool for reaching new targets and achieving progress 6
Free to play - a data driven business model (1/2) The life cycle of consumers –tracking performance is key to scale user acquisition with positive ROI User acquisition Active users Paying Users Lifetime Value Retention* (%) Conversion* (%) Time Time ARPMPU* (SEK) Stickiness* % Time Time Store featurings and partners drives High quality data and predictive • • • Continuous work on improving retention large volumes of traffic models matched with… and stickiness of the game – particularly onboarding and early game levels Predictive models of Lifetime Value …a skilled performance marketing • • guides user acquisition spending team ensures… • Pricing strategies, expansion of content and user-tailored offers are ways to improve Buying traffic at scale while keeping …predictable payback times and • • conversion and revenue per user cost per user down is the goal consistent good marketing ROI Skillful user acquisition and data driven improvements can drive high margin profits for years beyond initial payback time *) Retention: Share of users that are still active *) Conversion: Share of active users that are paying 7 *) Stickiness: Daily active users (DAU) as a share of monthly active users (MAU) *) ARPMPU: Average Revenue Per Monthly Paying User
Free to play - a data driven business model (2/2) The life cycle of a game –performance guides investments over the different phases Develop + Test Launch Refine Grow Earn Legacy • Free to play games can sustain healthy revenue levels for years and even decades from launch • Post-launch spendings - including marketing - are decided upon continously based on ROI-analysis • Improve user life cycle • Big marketing push… • Less marketing spend Development Costs • High marketing spend • No marketing invest • metrics based on data • …or smaller budgets… • Content expansion • DAU, MAU growth • Technical Launch • Profitability • LTV vs. UAC • …or pivot resources Retention, ARPPU • • Revenue grows quickly • Soft Launch • Declining revenues Content expansion • DAU, MAU decline • • High profitability Negative margins Metrics support launch? • • (userbase matures) • Platform extension Balancing risk and reward to optimise ROI over the full portfolio, from smaller titles to large hits 8
World-class marketing... Marketing power and experience are instrumental for success ● €200M+ all-time adspend for ROI-positive, sophisticated Return on Marketing Spend, Q1 2013 Cohort 1 performance marketing ● Hundreds of thousands of TV spots aired 4.5x ROI Marketing investment ● 25+ dedicated marketing specialists recovered after 6 months ● Frequent and high-scale app store promotions Breakeven The dynamics of successful performance marketing Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Q1 Q1 Q2 Q2 Q3 Q3 is that spending comes first, 2013 3 201 2013 2013 2013 2014 2014 2017 and after ~6 months comes pure profits Marketing spend Cumulative Net proceeds M Marketing spend Cumulative Net proceeds Performance marketing is key to large-scale success Return on Marketing, breakeven after six months 1 160% Potential revenues: 116% 140% 106% 105% € Millions 100% Launch 120% monthly promotion Breakeven 100% Stable Lifetime registrations 80% performance 60% Regular app store marketing 40% promotion 20% € Hundred- 0% thousands Months after Limited performance marketing 1 2 3 4 5 6 7 8 9 10 monthly acquisition Q1 2014 Q1 2015 Q1 2016 Q1 2017 From Management Accounts 9 1: Includes marketing spend net proceeds from all games. Net proceeds = Net revenue – Transaction Costs
… and world-class distribution #1 Global web distribution network Web distribution of Empire & Big Farm: • Strong distribution channel for web games Active management and continuous expansion of Partner Network • +350,000 +€1,000,000 via specialized team Registrations/month Bookings/month Strong potential to be applied to all web games in Stillfront portfolio • €137,000,000 BOOKINGS Generated from revenue 147,000,000 share model REGISTERED USERS 16,000 PARTNER WEBSITES: Free integration of games NO UPFRONT COST HUGE REVENUE STREAM 10
Business Overview Portfolio Financials Outlook 2018
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