Enad Global 7 AB (publ)

STO:EG7

Earnings Call Transcript 2021-Q2

[Joakim Båge]

All right. Hello, and thank you for tuning into this live Q2 presentation with EG7. With us today, we have CEO and Co-Founder, Robin Flodin. So with no further ado, I'm going to hand it over to you, Robin.

[Robin Flodin, Chief Executive Officer]

Thank you very much. And I also want to say a big thank you to everyone who has chosen to listen in or will listen later to this video of EG7's Q2 presentation. Something I always mentioned in the beginning of this presentation is for all of you gamers out there or maybe other people watching, this presentation is specifically targeting investors, shareholders or anyone interested in the performance of EG7 as a business, but you're very welcome to join us along. But be reminded that if you're very interested in news about the latest games and the things that we do, you should always seek up those gaming companies or the publisher those directly working with the products. Q2 has both been, in some ways for the world, a challenging time. And for us, both good and some things that have been hard. But we still have come up with a really good quarter, beating our last quarter and by far beating the quarter of last year, the second quarter of last year by 160% in net revenue and 360% in EBITDA. So I want to start this presentation, but just giving a big thank you to all of those that work really hard over at EG7 and all of the companies that we own in the group because you have really been the part of delivering this during the challenging times. And some of the challenging times, there's been 8 games, for example, for a company like Sold Out that has been pushed to release date of into Q3 and Q4. And even with that, they still performed quite well. But now we're also seeing that still going to come, which is very exciting for the coming part of the year and the second half of the year. EG7 is an ecosystem for video games companies. We are the little thing that helps all of these different pieces become a bigger and greater hole. We find different companies in the video game space that we think can help each other become better at what they do, enhance each other's abilities or be in some way addictive. In the portfolio today, we have a big part of live games, world-class titles and IPs that are currently generating revenue. We have games that are on their way out in our games segment. We also have our own proprietary platforms where we sell directly to consumers, and we have our world-class services where we both do marketing for some of the biggest games in the world and also publish some of the greatest games in the world around the globe. EG7's history is one of amazing growth, and it's gone quite fast. And that's why the second quarter has also been a big focus on putting together and consolidating all of these big acquisitions that we have done lately. And now we're really ready to set up for the future and further growth. And it's definitely a very exciting time in the company's history. Especially if you look at the reported numbers, you can see the massive growth that has happened and is still to be happening in the company. And this is, once again, something I just want to say thank you to all of those working in the team because this is your delivery. Something that a lot of people have asked us about and investors is how are the games performing and so on? And I think that this slide can very easily show you that we have a very stable performance of the games and good growth in the business as well. So we're very excited that, that part is also something we cannot show in numbers, and going to be able to continue in the numbers as the year continues and we report further quarters.What we set out very early with all investors when we went public as a company that we wanted to control the value chain. The reason for this, we think, is that long term, it creates very strong values when you are able to create a concept and bring it all the way to the consumers. And this is, of course, something that we have achieved throughout our M&A. And over the coming time in the future, you will see that these things play out as very positive for the company. And the fact that we can directly distribute games to consumers instead of just having to go through Steam and other platforms to always have that tax come on to the game launches. Those are still great platform, and we still use them, but our own distribution really helps and the fact that we can directly interact with our gamers. We think it's very important to the future of the company and our ability to really deliver the best types of services. Something that we are extremely proud of is also the many great brands that we both own and are attached to and get to work with every day as a business. And these brands are known all around the world. From EverQuest, is, of course, a legendary MMO to Lord of the Rings, one of the most read books and a great movie for those of you who have watched it and of course, DC Universe and Dungeons and Dragons. But not to forget things like My Singing Monsters and H1Z1. And all of these games together create a very diversified portfolio of strong currently revenue-generating games. And this, we think, also creates diversification of the business, security for investors that, that stability of revenue can persist even though it goes a bit up and down sometimes, it's very stable and very reliable for the business and creates a great platform for us to be able to keep investing in new products that can further increase our revenue and our profits. 4Game is a proprietary distribution platform, and this will still to see any of the big potential that is to come. But it is something that we're working on underneath and the teams are working very hard on to be able to link the games together, better within the 4Game software and work on it on a global scale. And we think that this is definitely going to do some great things in the future and be very important for our future prospects in terms of other game launches and so on to be able to have that uplift of the different marketing we do into the games and the way that consumers can commit to the games. One question that many have asked, does this mean that you're not going to be on other platform are going to force me to stop being able? And that's not our view at the moment that we would stop you being able to consume games in the way you want. This will just be an alternative and will hopefully really make it worth it for the gamers so that they choose to go through this platform. And if they don't, we will still, of course, support any other way that you want to consume the games. World-class services was something that many in the industry when we acquired Petrol, which was one of our first big acquisition, really looked at us and said what is going on there. Something is different for this company. And our view is very clear from the beginning. To be able to have some great video games company who want to join the group, you also have to have a platform of services and this benefits that it is to come into the group. And this has really shone out and started to work together in the group, and we really see that these businesses really like to work together. And we see this as a great potential, not only is it diversification of revenue that comes into the business but it's also a great uplift for potential and creates a lot of energy within the staff and the people who get to work together with the different businesses. EG7 was always meant to be a global business, even though our headquarters are here in Stockholm, and we were founded here in Stockholm. We have expanded globally, and that's our intention to keep doing as the business is a global business. Video games are consumed globally and becoming more and more so that games are transcending the territories. And we believe that it's very important to be able to understand the nuances in those areas and being able to have offices, not only creates stability for us to have lower costs on some developers, being able to shift development around much more easy, hire when it's hard in areas where it's more easy to hire talent, which this gives us stability to do, but also really understand the gamers on the local level, which can sometimes be very hard, and this will add value over time as we learn from this and establish it in our framework. We always said that aligned incentives are very important. And I think it's quite clear by looking at this picture that you can see that a big part of those who are the Board, who are founders, who are working in the business day-to-day have a huge incentive and ownership in the business, and I'm very much looking forward to the future of the business prospects. We really see 4 things as the main things that we are looking at for future growth. What are the things that's going to not only have the stable revenue, profit generation that we see today from the business, but really how do we grow? And we see that there are these 4 things. 4Game, we see as a big potential. We're hoping this can really help us be able to launch into territories that we don't exist in today, do a better job in those territories, but also have that direct link with the consumer. And we think that it's also very important into a big part of our portfolio exists within the free-to-play game space. And free-to-play games generally have their own launches. This is something that I think is very common to most people who play video games. And the reason for this is just that it is more efficient to be able to do your marketing and the way you operate towards your own -- launch your system. You're not marketing someone else's way to sell to the consumer, have the consumer come into your game, you're marketing directly to the consumer to get into your game. And I mean, many gamers might ask, okay, this is quite a horrible system. Why is it like this? But I would say it's good because, of course, this also generates more money directly to the developers that can be reinvested in the game instead of stopping the platform. So it's good for investors and gamers alike. EG7 really also see the geographical expansion with demand of the games is something both being able to understand these territories, but also the fact that we see in the data that many of our games are not transcending the territories as well as they should. They're delivering really well in some territories and not at all as well in other territories. And we think that this is a low-hanging fruit for the company and something that we are looking forward to exploit in the future. Of course, it's not something you do overnight. But over time, we will be able to get really closer to the communities in different territories and therefore, expand the games, both in terms of players and our ability to serve those gamers. Something else that, of course, is very exciting to me as a developer myself originally and someone who loves playing video games and still do a lot -- this is the future with the new games, which we also see have a big uplift. So we have the stable revenues. We have diversified revenue. We have growth and part of the business that are very exciting. But then we also have games that we have been investing in for quite a while and new games that we are investing in that are coming out and not in such a far future. We are seeing, of course, some of these games will be launched very soon. Games like EvilvEvil and Block'n'Load 2, for example. And then not so far after, of course, in the future as well '83 and I.G.I. and [ Nimble Effect ]. So this is very exciting. And also, of course, one of the things that we haven't talked about is one of our big MMOs that we haven't announced yet, but we are very much looking forward to talk more about when it's there. And in this, I don't want to also forget we are going to do more with the games requests and the Lord of the Rings and so on, and we have many plans for what that could look like, both in terms of what's coming day-to-day in the games already from the teams, but what could there be more to expand on these games, and that which is underneath for those gamers who play them today. And then last but not least, of course, is our M&A strategy. And many of you might say, oh, you have not done an M&A very recently. We have been consolidating. We've been working really hard on making sure that all these businesses fit into the business. And we think that we've also focused very much on the core operations of the company. But we have been actively talking. We have had many conversations with M&A targets, and we still see that there's a lot of opportunities out there to do deals in the M&A market. And this is something that we are looking forward to do in the future, and we are seeing that there will be more M&A coming up. There are, in my opinion, personally, of course, many reasons why you should invest in EG7. But in front of you, there are 7 strong reasons, in our opinion, that you could want to invest in the company. I just want to say a big thank you to all of you who have listened through the presentation to all those gamers that play our games and the reason we can be here today and investors who have supported us through the journey and of course, all the employees who do all the hard work every day at the company. Thank you very much.

[Joakim Båge]

All right. Thank you, Robin. That was great. But I'm afraid that's all the time we have today. If you're watching this, if you have any questions, you can always e-mail them in to the Investor Relations inbox on the website, right? Thank you, everyone, who tuned in, and we'll see you next time.

[Robin Flodin, Chief Executive Officer]

Thank you very much.