Company presenta-on
March 14, 2013
Agenda
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March 14, 2013 1. INTRODUCTION 2. MARKET OVERVIEW 3. G5 ENTERTAINMENT 4. FINANCIALS 5. SUMMARYMarch 14, 2013 March 14, 2013
G5 Entertainment in brief
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Introduc3onCompany overview
• G5 Entertainment (“G5”) is a publisher and developer of casual and social games for smartphones and computer tablets only
• Founded in 2001 by Vlad Suglobov, Sergey Shultz, and Alexander Tabunov and released first game in 2003
• Headquartered in Moscow and Stockholm with addi3onal presence in San Francisco and Kharkov, Ukraine, the company employs 136 people
• Offers around 65 unique games and over 360 apps across different plaXorms, also via a G5 app
• Own-‐developed technology to effec3vely produce, launch and convert games to different plaXorms (i.e. iOS, Android, etc.)
• Changed business model in 2009 from being a pure developer to become a publisher and developer of games
• Listed in Stockholm (Ak3etorget) since 2006 with a market cap of approximately SEK 450 million
• Lis3ng process on Nasdaq OMX Stockholm has been ini3ated
• Expected lis3ng during second part of 2013
Publisher and developer of games for smartphones and tablets
Distributed through App Stores
G5 game portfolio (~360 apps)
Introduc3on
Why G5 is interes-ng
• Growth in smartphone and tablet usage
• Strong growth in smartphone and tablet usage
• Quick conversion from PC to mobile gaming
• App explosion following growth in hardware
– Expected to grow from USD 2.2 billion in 2010 to USD 37.5 billion in 2015
5
• Focus only on games for smartphones and tablets• Top selling games
– Well-‐recognized brand name and wide user base – Pipeline of more than 60 unique games
• Reputable publisher for 3rd party developers • Highly skilled, low-‐cost developers
• Own-‐developed technology plaXorm for quick game releases
High growth market Well posi3oned to capture further growth
Afrac3ve business model Strong financial track record
• Mix of licensing and in-‐house development to reduce risk
• Extensive porXolio of proven, high-‐quality games
• Mul3ple game types to meet player preferences
• Simple, wide-‐reaching distribu3on channels
• Strong top-‐line growth (3-‐yr CAGR of 103.6%)
• High margin structure combined with long-‐tail revenue stream
• Significant opera3ng leverage and high cash conversion
• Aims to reach SEK 300 million in revenue and SEK 100 million EBIT in the next few years
491 717 898 978 1,066 1,161 71 119 182 230 292 369 562 836 1,080 1,209 1,357 1,530 0 400 800 1,200 1,600
2011 2012e 2013e 2014e 2015e 2016e
Mi lli on u ni ts Smartphones Tablets Market overview
High growth market
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Global mobile app market
2.2 5.6 11.7 18.6 28.2 37.5 0 10 20 30 40 2010 2011 2012 2013 2014 2015 US D b ill io n
Global shipments of smartphones and tablets
• Con3nued strong growth in smartphone/tablet market
– Global shipments of smartphones expected to reach 1,161 million in 2016 (19% CAGR)
– Worldwide tablet shipments expected to reach 119 million in 2012 and grow by 33% per year un3l 2016
• Growth in mobile market is leading to an explosion of the
app market
– Set to grow from USD 2.2 billion in 2010 to USD 37.5 billion by 2015 (CAGR of 76%)
– Number of downloaded apps to grow from 46 billion in 2012 to 205 billion 2015 (up by 345% in three years)
• Gaming apps are the most frequently used and people are
more willing to pay for games than any other app The market place
Source: Carnegie, IDC (September 2011), Gartner (April 2012)
Source: Forrester Research, March 2011
‘Post-PC’ era begins
CAGR 2011-‐2016e: Smartphones 18.8% Tablets 39.1% Total 22.2%
March 14, 2013 March 14, 2013
App gaming is out-‐growing all other game plaXorms
Market overview
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Global mobile app market (million of downloads)
24,936 45,617
81,422
131,695
205,376
309,606
2011 2012 2013e 2014e 2015e 2016e • Total sales of the global mobile app market was es3mated at USD
7.68 billion in 2011
• Growth in the mobile app market is mainly driven by gaming apps
Console games PC games Online games 0 10,000 20,000 30,000 40,000
2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e 2016e
US D mi lli on 3.0% 2012-‐2016e CAGR: -‐1.8% 12.7% 0 1,000 2,000 3,000 4,000 5,000
2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e 2016e
US D mi lli on 0 10,000 20,000 30,000 40,000
2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e 2016e
US D mi lli on
100% of revenue from app gaming
Sources: Carnegie, Gartner (September 2012), and PWC -‐ Global entertainment and media outlook: 2012-‐2016Market overview
G5 well posi-oned to capture further growth
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Posi3oning against peers
Virtual City F2P Top Grossing Ranks
Country Overall Apps Game Apps # of countries -‐ rank 1 reached 32 45 # of countries -‐ rank 5 reached 74 93 # of countries -‐ rank 10 reached 91 103 # of countries -‐ rank 100 reached 108 109
• 100% of revenue from smartphone and tablet users
– In contrast to compe3tors, such as Zynga, Gamelom, Glu Mobile, Big Fish, who suffer from the conversion of users from PC and feature phones to smartphones and tablets
• Afrac3ve posi3on rela3ve to peers
– G5 is a pure smartphone/tablet gaming company with first-‐mover advantage
• Published a number of successful games:
– Virtual City (City simula3on), Special Enquiry Detail (Hidden Object/Adventure), Supermarket Mania (Time Management), and Stand O’Food (Time Management)
– Top-‐seller Virtual City is a blend of the classic PC games Sim City and Transport Tycoon
• Shiming focus from casual games to Free-‐to-‐play (F2P) games Comments Development -me Underlying growth Casual
games Hardcore games
Smartphones /Tablets Online/ Feature Phones PC/ Console
Source: App Annie
Mid-‐core games
G5 Entertainment
A[rac-ve business model
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3rd party licensing End use rs In-‐house development Unlockable(”pay as you go”)
Outsourced development
Publishing
Development Distribu-on
• G5 uses a mix of in-‐house and 3rd
party developers
• By using 3rd party licensing, G5 can scale business much faster to fuel further growth
• Large porXolio of more than 360 apps that appeal to both genders and all ages
• Given the large number of games, G5’s revenue is stable and does not dependent solely on a single game • Two types of games:
– Casual games are free to try, but users
have to pay an upfront fee amer a trial period
– Free-‐to-‐play games (F2P) offer users
the op3on to make in-‐game purchases to unlock premium items, adventures, levels, etc.
• Channels users/visitors into a G5 app in which they select a game to play
• Games are conven3ently stored in the G5 app with easy access to other games in the game porXolio • By asking users to join a G5
community, the company strives to increase s3ckiness
• In addi3on, G5 users are exposed to the G5 game porXolio in the start menu of each game
• Few large distributors, such as Apple and Google
– Easy to maintain clients
– Worldwide reach requires minimum effort
• Greater importance of content has pushed compe33on among app stores, resul3ng in more favorable terms for publishers
• App stores keep 30% of total proceeds as a distribu3on fee and the remaining 70% goes to G5 as revenue
1 2 3
Game porXolio (“try before you buy”)
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Scalable set-‐up in place
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G5 Entertainment3rd party licensing
In-‐house game development
Outsourced game development In-‐house game crea3on
• G5 develops ideas in-‐house that they can choose to either develop
themselves, in-‐house, or outsource to a 3rd party developer
Development
• Highly skilled developers in low-‐cost Kharkov, Ukraine
• G5 can outsource development of games when needed
• 3rd party licencing allows G5 to effec3vely scale its business and facilitate strong growth • Lower development cost and royalty commission in direct propor3on to volume (30-‐70% of
revenue)
• G5 currently uses a network of around 80 trusted external developers
Game porXolio
1
A
Publishing
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G5 EntertainmentG5 adds value to developers
• Help developers gain independence from PC/Web portals
• Experienced producers
• Financing (royalty advances)
• Cross-‐plaXorm technology (Talisman technology)
• Cross-‐selling with over 360 exis3ng apps
• Network of over 100 million downloads, millions of monthly ac3ve users
• G5’s revenue share is in 30-‐70% range depending on the deal/game
3.85 4.74 6.35 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Dec '11 May '12 Dec '12
Number of monthly active users,
millions
Growth in number of monthly ac3ve users
CAGR: 64.9%
§ Brand name
§ Cross promo3on
§ User base
§ Fan community
§ Number of ac3ve users
Extensive game porXolio Growing user base and increased brand recogni-on
Strong brand name a[racts 3rd
party developers With more 3rd party developers, G5 can scale business faster 2
March 14, 2013 March 14, 2013
Product porXolio
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G5 Entertainment
Development of sales upon release
• Over 360 high quality apps, one new release every week and more than 60 unique games in pipeline
• Game revenue peaks instantly following release, but instead of fading out, sales are recurring
– Users are kept within the G5 community
– Regular updates push sales
• With a large game porXolio, G5 can build mul3ple layers of “long-‐ tails” to con3nue its strong growth
– Not dependent on success of a single game
Addi3onal games push long-‐tail upwards
Game porXolio
Long-tail sales pattern for G5 games
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1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 Number of months in download
Game 1 Game 3 Game X … Game 2
Product porXolio (cont.)
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G5 Entertainment• Play several levels for free, pay to con3nue
• Fire and forget, almost no support needed
• Significant opera3ng leverage, as no incremental cost to keep the game selling
Unlockable (”casual”) games Free-‐to-‐play (F2P) games
• Free-‐to-‐play (F2P)
• Play for free, pay for virtual goods
• Game as a service, regular updates
• Higher earnings poten3al
Free-‐to-‐Play: Increasing usage with updates
Version 1 Version 2 Version 3 Version 4
The Secret Society Virtual City F2P Nightmares from the Deep Supermarket Mania
Income paferns: Free-‐to-‐play vs Unlockable
2
1 2 3 4 5 6 7 8
Number of months amer release
F2P
Unlockable
Pricing: $1.99 to $6.99 ac3va3on cost per game No addi3onal cost amer purchase Pricing: No ac3va3on cost In-‐app currency packages priced at between $0.99 and $99.99
March 14, 2013 March 14, 2013
Distribu-on channels
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G5 EntertainmentG5 App and ’New Games’-‐sec3ons expose users to new G5 games and updates
• G5 has a strong rela3onship with distributors, games are regularly promoted by App Stores
• G5 can ride on extensive reach of major distributors
Promoted by distributors Wide user base
PR and marke-ng efforts
Brand recogni-on G5
newsle[ers
G5 Community App Stores Smartphones and tablets
PR/ Online media App Store
promo-ons
G5 Entertainment
Management & Board of Directors
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Partner at Fides Services and Director of Russian Chinese Financial Center Managing a number of interna3onal investment vehicles with focused on Russia and CIS
Officers Board of Directors
Johan Wrang
Chairman of the board
Management consultant at Connecta, and former CEO and Member of the Board of an online gambling company
Ein Stadalninkas
Jeffrey W. Rose
Aforney specializing in intellectual property licensing
20 years of experience serving clients in the interac3ve media and technology indistries
Pär Sundberg
Co-‐owner and Board member at Buzzador AB
Board member in AB Trac3on, co-‐ founder and former CEO of OTW, a content marke3ng services company
Vlad Suglobov CEO, Co-‐Founder
CEO since 2001 Born: 1977
Educa3on: Graduated from Lomonosov Moscow State University with a degree in Computer Science
Larissa McCleary Director of Marke3ng
Alexander Tabunov COO, Co-‐Founder
COO since 2001 Born: 1974
Educa3on: M.Sc. Degree in Computer Science from Moscow State Ins3tute of Electronics and Mathema3cs
Ta-ana Timoshenko Director of Licensing
Sergey Shultz CFO, Co-‐Founder
CFO since 2001 Born: 1976
Educa3on: Holds an M.Sc. degree in Physics from Moscow State Ins3tute of Engineering and Physics. He also has an ACCA Diploma in Interna3onal Financial Repor3ng
Management
Julia Palatovska Business Dev. Director Nikita Gerasimov
Director of Development
Leyla Aslanova Technical Director Mike Zakharov
Execu3ve Producer Alisher Yakubov Senior Producer
Vladimir Davidovich
Lead Somware Architect
Vsevolod Chernushevich
March 14, 2013 March 14, 2013
Organiza-on
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G5 Entertainment Organiza3onal chart Legal structure Top management Vlad Suglobov, CEOAlik Tabunov, COO Sergey Shoolts, CFO
Marke3ng 19 (employees) PR & Communica3ons 2 Business development 1 Licensing 3 Customer support 14 Development 83 Financial department 6 G5 Entertainment AB (Sweden) G5 Holdings
LTD (Malta) RUS LLC (RU) G5 Holding UKR LLC (UA) G5 Holding
G5 Entertainment,
Inc (USA)
• G5 Entertainment AB – Holding and distributor, investment vehicle
• G5 Holdings Limited – Publisher and owner of IP rights, licensing, por3ng, subcontrac3ng to developers inside and outside the group
• G5 Holdings RUS LLC – Development studio in RU under contract from G5 Holdings Limited
• G5 Holdings UKR LLC – Development studios in UA under contract from G5 Holdings Limited
• G5 Entertainment, Inc – Marke3ng subsidiary in USA
Office management 8
The share
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G5 EntertainmentShare price development Top 15 shareholders
Share informa3on
Owner name Number of shares Capital %
Försäkringsak3ebolaget Avanza Pension 1,066,577 12.1% Nordnet Pensionsförsäkring AB 811,669 9.2% Wide Development Ltd 571,000 6.5% Swedbank Robur Ny Teknik 550,000 6.3% Proxima Ltd 525,000 6.0% Purple Wolf Ltd 510,000 5.8% Länsförsäkringar Småbolagsfond 500,197 5.7% Tommy Svensk 387,000 4.4% ABN Amro Bank NV 338,390 3.9% AB Trac3on 301,135 3.4% Fondita Nordic Micro Cap SR 222,547 2.5% Torbjorn Liljedal 126,359 1.4% Altraplan Bermuda Ltd 97,353 1.1% Dennis Svahn 92,000 1.0% B2PS Luxembourg Funds 85,000 1.0% Top 15 owners 6,184,227 70.3% Other owners 2,615,773 29.7% Total 8,800,000 100.0% 0 100 200 300 400 500 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Trading volume, ‘000 Share price, SEK
Share name G5 Entertainment
Ticker G5EN
Number of outstanding shares 8,800,000 Market capitaliza3on (SEK million) 450 Avg. daily turnover (number of shares) 85,340
Investment afrac3ons
Strong financial track record
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Sales and EBIT margins
Quarterly sales and EBIT margins
9.5 22.8 46.6 80.0 20% 45% 38% 31% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 0 10 20 30 40 50 60 70 80 90
Dec '09 Dec '10 Dec '11 Dec '12
EBIT margin SEK m illion 3.8 4.4 6.5 8.1 9.5 9.6 12.1 15.4 17.4 18.7 24.2 19.8 34% 36% 57% 41% 41% 39% 28% 43% 33% 19% 28% 44% 0% 10% 20% 30% 40% 50% 60% 0 5 10 15 20 25 30 Mar
'10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12 Jun '12 Sep '12 Dec '12
EBIT margin
SEK
m
illion
• G5 has a proven financial track record of profitable growth since 2009
• Amer becoming a game publisher, G5 generates higher margins
• Relies on many successful games, which makes it possible to repeatedly deliver strong growth
• G5’s revenue is split almost equally across Europe, North America, and Asia and the rest of the world
• Management believes G5 will con3nue its strong, profitable growth and, in the next few years, reach a turnover of SEK 300 million and EBIT of SEK 100 million
• Key success factors to achieve historical growth rates include:
– Maintain growth in casual games
– Scale produc3on of free-‐to-‐play games
– Maximize average revenue per user across the porXolio
• Although Q4 sales were down compared to Q3, daily sales grew by 60% during the holiday period and the increased level of sales has con3nued in January 2013
CAGR 103.6%
Cum. quarterly growth 16.3%
Summary
Summary
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HIGH GROWTH MARKET
WELL POSITIONED FOR FURTHER GROWTH
ATTRACTIVE AND SCALABLE BUSINESS MODEL
STRONG FINANCIAL TRACK RECORD