Enad Global 7 AB (publ)

Hello and welcome to this presentation of EG7's Q4 and our latest acquisition. I want to start to just talk a little bit first to our gamers that I know is watching because you've all told me, very thankfully, in many, many emails. This presentation that I'm going to show you here today is specifically targeting the investors, talking about our Q4 report and also last year and the latest acquisition. But saying that, I do want to tell you something, and that is that we are working in the background really hard on what's coming in the future with the games that all you guys love and that you've been telling me about. I think that I want to confirm the fact that we will support the games. You don't have to be worried. And also that there are going to come news and we are going to have a specific update in not too long future where we will tell you everything about what our plans are and what the pipeline is for the games that you love. But I want to give a little bit, at least something, a little snippet. So I can tell you this, that from January, we have actually had the team evaluating if we can bring back the H1Z1 before Season 3 version of the game. I know you are very excited, but I also want to say that we can't promise that we will be able to bring the game back, but we are looking at it. We have listened to all the fan requests, and this is not only for H1Z1. We've read and listened all around for EverQuest, Planetside, Lord of the Rings, and all of the things that you are telling us. And we are going to look at those things going forward and talk more to you as the fan and the community as we move in to the future of 2021. So now back to, and of course, you're welcome to listen, but back to the investors and what has happened in Q4 and 2020. I want to start with saying that I'm super proud of what the team has delivered. 2020 has been an amazing year for the company. Of course, there's been many challenges due to COVID, but there's also been many great things that I've seen the team pull together in very hard conditions and also the delivery of the total sum of what the company is today. I think the first thing for investors to take care of when they look at our Q4 numbers or 2020 in general is that 75% of the company's revenue, if you take the full group, is not in our Q4 numbers. Why is that? Well, because they're not consolidated yet. So that's why we've been very much looking at our performer numbers to give you a clear picture of what the group would look like 2020 if you had all the numbers from all of the companies that now belong in the group. And on that basis, we would have done a 2 billion SEC revenue, a 652 million SEC EBTA, and a 32% margin. we would have also reached 835 employees. So I think that we can truly say that this has been a transformative year for the company and really setting us up for a beautiful 2021 and a lot of great and exciting new opportunities going forward. EG7 is an ecosystem focusing on gaming companies and trying to make a great platform for these companies to come in to help them with different things like services, everything around, and then utilizing all the knowledge within these companies to further create synergies and growth in these companies. Today, we've been able in 2020 to also deliver great IP into the group that are now both live and in development. And we think that this is super exciting for the future. But we also still have our great platform that is completely unique to our company where we can really deliver something around all the games to make sure that we are the best possible outcome for both gamers and for these companies. And I think that's really truly something that we can see with the latest acquisition that this adds to our strategy in many different ways. We diversify our revenue. We now have even stronger margins than before. We're able to deliver a platform that can really help the games that we have both live and in development into the future and so on. So 2021, really exciting year. 2020, an amazing year. I think that We always talk about how we want to see a full ability around the value chain. And to us, like I said, Innova, our latest acquisition, really shows this. And you might ask, what's the reason that we want to do this? And the reason is that we see that if we can bring a concept all the way to the consumer, we have the best way to deliver the content. to the gamers in full control of the way we deliver content. And we think that this will start showing in 2021 as all of these platforms and all of these things come together. Today, the group has a world-class portfolio of IP, both self-owned and licensed. And we're very proud of this. And we do take very big responsibility and feel that we have a lot to prove and deliver. But we are very excited about the prospects of what this means. We know that there's so many millions and millions of fans out there that are looking to us to deliver great experiences. And this is something that we're very happy about. The fact that we sit in this position, I think, makes the company extremely valuable around these IPs and what we can do with them. But we don't forget about the new games that are coming either. And I think we are as bullish as ever about our coming game pipeline. There's many games that are now live, creating diversified and continuous revenue coming into the group from many different sources. But there's also the possibility of the new games and what they bring as a great option value for the future of the company and the potential both to launch and relaunch IP that people already love. but also new IP into the market and to these consumers that we already have and all the gamers out there that already play our games. On an annual basis, we've grown on a performer basis 302% year over year. And I think that this is an amazing growth. We keep seeing what this can deliver and how big the company can be in the future really determines the ability for us to be a great place for future growth. So let's get into the acquisition that we are presenting here today. Innova is a publishing of MMOs that specializes in bringing Asian MMOs to emerging markets in Europe. We think that this is a great combination with the company that we are today. The company has a 33 million revenue for 2020 and a 13.6 million EBTA, 200 employees and nine live titles that generate these profits and revenue. We see that there's a lot of great synergies with this company and their ability to be a publisher and all of the live MMOs and the games that we run today and also the games that we're going to launch in the future. The company has seen strong growth year over year, 30% on a revenue basis, and then also been increasing their margins quite significantly. And we think that the management team and so on will be a great addition to the company. The games that they're delivering from Korea to these places are all world-renowned brands and we are very proud to be able to now be part of that journey and those games and get an even stronger foot into the Asian market. And also, we want to also point out that as a company, these fans that are playing with Innova are very long-term fans. They've been playing the games on average for five years. And that, we think, is a great sign that Innova is a great company as they deliver this experience on a community basis, talking to their fans. And we think that that is the kind of thing we always want to see around the games and the things that we do. So let's get in a little bit into the acquisition numbers. We acquired Innova at an eight times multiple, but it was with 100% share and no earn out. We think that this is great as this shows that the company truly believes in EG7 as they were willing to take all of their shares and trade it into our shares. They also did this as a premium to yesterday's numbers at the 10%. For 11% dilution, we get 25% or more EBTA uplift. And we think that this is amazing. But also all of the technology, the team, and the very exciting leadership that will come in and join the company and help us become even stronger going forward. We always say that one plus one equals three. But I think that truly you can see that as we add all of these pieces together, we are becoming a stronger and stronger group in the video games industry. And the future is what's really even more exciting than only what is today. But you can see that today we've already become quite a significant player in this industry. And we keep growing and showing that all of this as a platform is exactly what we set out to do and what we told investors as we started. We said we were going to build a platform, and we did. We said that that platform would attract IP and games companies, and it did. And we keep applying this strategy. philosophies that we've been telling investors. We are diversifying revenue, making it possible to invest long term in the games that we see has great option value and great growth potential to be able to deliver great products for the gamers in the right way. And now more than ever, 2021 is looking very good. We've also seen that there's one thing that we told investors is that we're going to see growth in our game side of the business. And so we have exactly to the point. We started with services. We went into games. And you can now see that most of our revenue today on a performer basis are coming straight from the video games that are live and generated from our investments into games. Our company is a global company, just as the video games business. And as we now add even more to this company, we are very happy to have Georgi, who is joining the company from InnovaSight as the main owner, as a new business partner to come in with all of his experience and how to run a great business will make us even stronger. If we're going to look at Q4, in my point of view, it was a great success. There's 245% net revenue growth if you compare to Q4 2019. We transformed the company through some major acquisitions, companies like Daybreak, Piranha Games and Big Blue Bubble. We raised 1.7 billion Swedish crowns. We also saw very hard market conditions around the world and still perform admirably in this environment as a total group. We have a strong pipeline of M&A targets that can further add to this growth story and all the great things that we're doing. And we think that our team did an amazing job of delivering IFRS as fast as they did under very hard conditions. And now we're able to start the new year with IFRS, which will add a 600 million change in positive numbers to EBIT as we don't have to downright our goodwill anymore. We have to instead test it. And for this, we think that it's going to be much clearer to investors what the company is doing starting from January 2021 and going forward and give a really clear picture of our future and how great this company is. We think that also something to note from the Q4 number is that we did a record investment into the games that has been realized in terms of costs and also did some significant costs towards changing the bond from 12% to a loan of 3% that has significantly decreased our interest rates. So what's the future? We will keep going with M&A, but I think that something that we want to point out is that we don't feel that we're in a hurry. We will take the companies when we find them, the great companies, the ones that are good for us and our strategy. We're not just going to buy a bunch of companies to add EBITDA. This is companies that we truly believe that fits into the group and the further vision of our organic growth. But we have a great pipeline and we are constantly talking to great companies and great entrepreneurs. We have several games that are about to be released and we are very bullish on this portfolio, but we will keep making them until they are great and until we know that we can release great content to gamers. We've also completed our ecosystem and now we're just adding on to it all the bonuses and things that we think can further improve. But this puts us in a very strong position. The company is very heavily owned by management and board and with the latest acquisition it will be 51% of the company shares. I think this gives you or any investor a good reason to look at us as a good investment in the gaming space. We have our ecosystem that is quite unique in this world where we have our service platform and all of these elements that truly support entrepreneurs and the way we integrate them. We have a proven track record of great M&A at good prices and adding great companies. You have diversified risk through revenue sources that are constant coming from the games, but also in the great IP that we today own and the many different sources of revenue that comes into the company. And our pipeline gives you a massive upside potential if they do well, but this company will keep making money even if it doesn't. And we have very strong incentive. Me personally and all of the rest of the big shareholders in the company are very incentivized, long-term thinkers about the company, and we truly believe in what the future of VG7 holds. Thank you very much. And with that, we're going to go over to questions.

Good morning, ladies and gentlemen, and welcome to this live Q&A session. My name is Fredrik Olsson from Handelsbanken Capital Markets, and I'm here to moderate this session. I'm really happy to be here. I'd like to remind everyone that is listening in that if you have any questions, you're more than welcome to ask them through the email of ir.enadglobal7.com. There is plenty to discuss today, seeing as the report itself is really an interesting one, and we're looking at multiple integration processes across the group, as well as a newly announced acquisition, which are important for us to understand in detail, I believe. So let's kick off. Let's do so by looking into possible COVID impacts and the aftermath of the ongoing unfortunate pandemic. Could you dig into what you're seeing now in terms of consumer behavior? What is your view on these newly established baselines we're seeing? I mean, 2020 offered us a really interesting uptick in terms of net inflow. Have people just started to buy their first game and are continuing to sort of build their game portfolio so we should see increased monetization going forward?

For sure. I think, I mean, what we've seen in the COVID effect is that it was not very long term in terms of this sort of very much bump in many numbers, but what it was that was added a lot of new users and also higher numbers in terms of how much they're paying, which was quite interesting in general. But I think that also, of course, it has had other effects. I think one big effect that, you know, in the gaming industry at large, that of course we see is the you know, consoles have been moved forward in terms of the fact that they haven't been able to produce at the speed that we were expecting. So something that was probably going to be the big launch in December are now seeming to be more sort of waiting for a lot of content coming out at the end of the year. So I think that that's very positive for gaming because in this short chance now when many people have been playing sort of games that are live, When the pandemic is over, there's going to come a lot of great content bringing people back at the end of the year. So I think that generally we've moved forward. There's more people playing today than before. Are they going to give you different effects? Definitely. But I think for us, it's generally very positive going forward. That's very clear. Thank you.