Everplay Group (LSE:EVPL) — H1 Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the EVERPLAY GROUP PLC half year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and we'll publish our responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we would just like to

0:32 submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from EVERPLAY GROUP PLC. Frank, good afternoon, sir. Good morning, and welcome to EVERPLAY interim result presentation. I am Frank Sengier, exec chair. I am here with my colleagues, Rashid Varacha, CFO and COO and James Targett, IR. Let's start straight away. We've had a strong we're waiting for a strong full year. The key headline for today, H1 revenue was solid with good performance from new releases and back catalog.

1:19 We expect H2 to be stronger than H1, thanks to more new releases, a stronger back catalog during the Christmas period as you would expect and a number of license deals some of them already signed. In terms of EBITDA, we delivered $19,200,000 thanks to improved margins. This is due to a product mix with packaged goods in a much lower proportion. We are delighted to pay our shareholder the 1p per share dividend for H1. We continue to generate cash, helping our M and A ambitions and allowing deep those dividends. Importantly, we are well positioned for future organic growth, thanks to our doubling down on first party IP, strong back catalog, new revenue streams including more back catalog republishing and we will continue to actively look for accretive M and A to accelerate that growth.

2:24 Operational highlights. We've had quite a few new games this year and we're happy to say that we've had good success. In particular, we date everything, which achieved over 500,000 units to date. We continue to control our cost, improved mix and strong performance of new releases contributed to strong margin improvement. New IP announced for $26.27 At this point, we've announced Hell Lettuce Vietnam, which was announced last week at Gamescom, Ranger's Path, National Park Simulator, Golf With Your Friends two and Bus Simulator 27. We've got more IP in the making, but these are the ones we've announced.

3:11 Good progress against key strategic priority of M and A. Three acquisitions of IP and back catalog publishing rights completed during the period. I'm pleased to say that we've got a few more that have been signed since, which I'll talk to you about in a minute. GOOD Group rebranded to EVERPLAY GROUP, reflecting the evolution of the business following the acquisition of Post Story Toys and Astragon. In terms of 17, we had a strong release performance. We've released four games, Sworn, Nice Death of Fishing, Jumping Jack Cats and Tailed Everything, all with strong review scores. As you can see on the left side, the growth year on year for new releases is sevenfold, so we're excited about that.

3:57 Excellent performance from date everything with a very high user score and a high CCU concurrent user of 14 ks on Steam alone. Back at the Load continued to deliver strong performance in the context of a very strong period last year. CCU increased by an average of 28% across the five titles. Head Let Loose had an outstanding start of the year following its launch on the Epic Store with record concurrent use of 140 healthcare, which is up 200% versus the peak of 2,004 level. The next installment of the franchise, Hell Let Lose Vietnam has been announced. Happy to say that we've already passed 130,000 wish list within ten days.

4:45 Awards during the period for conscripts and multiple wins for EVER I and finally strong momentum going into H2 driving expected revenue growth for FY 2025. Retro of Raven launched in August, early access of Gobind Cleanup in September and Workpoints end of November, early December. Full launch of Scorn on PC and console and first dedicated product for Switch two, I can't name at this point, but it should be soon before I can announce something.

5:18 In terms of ASTRIDON, very much H2 weighted. Revenue decline in H1 due to a reduction of physical sales and the phasing of new release, which is and license deal which are coming in Q2. Despite no new releases during the period, the player numbers have increased significantly. We've launched two add ons, not new games, but existing titles with new platform with Railroads Online and Police Simulator. Police Simulator Patrol Officer debuted on Xbox Game Pass along with firefighting simulator Squad and was renewed on PlayStation Plus.

6:04 Independent Arts Software was renamed Astragon Development as it continues to support Astragon focus on developing first party games. You will know that first party games represent 87% of Astra gun revenue. Two major first IP schedule for release driving strong H2 revenue performance, the first one being firefighting simulator Ignite, the next installment of this very popular franchise and Seafarer, the ship sim, a brand new IP at the end of the year. In terms of StoryToys, very strong performance, H2 and even stronger outlook. We've had a large number of apps, three thirty five app updates. That's significant, but it's the name of the game with StoryToys.

7:00 Mecha Builders and Lego Friends, Heartlet Rush Plus launched on Apple Arcade, bringing the number of StoryToys titles onto the platform to now five. Subscriber numbers grew low single digit year on year to now reach over three and thirty thousand. We got awards in Bologna for Season three Make a Builder. For the second year running, STORY TOYS was included in Sunday Time Best Place to Work in Ireland. Most importantly, again, strong outlook for H2 with improved revenue growth expected for fiscal twenty twenty five. LEGO Bluie launched in August with pre orders of over 800,000, reaching number one on the iPad app overall in six countries including U. S. And UK and number one kids app in 117 countries.

7:58 In addition, League of Duplo World by StoryToys will be launching on Netflix games. Expect more deals to be announced for this year in due course. I'll pass on to Rashid for the financials. Brilliant. Thank you, Frank. Okay. So, just moving on to, the group revenues. So group revenues for the period fell, by 10%, to 72,400,000 versus 80,600,000 for the same period in 2024. This is mainly due to timing of licensing revenue and new title launches at Astrogon. Declines in physical distributed sales and a very strong prior year back catalog performance, was also a key factor.

8:47 We were unable to repeat last year's stellar back catalog performance growth of 30% versus H1 twenty twenty three. However, we still managed to achieve a respectable double digit growth when comparing H1 twenty twenty five versus H1 twenty twenty three. And despite the decline in H1, we are forecasting a return to growth for full year FY 2025.

9:12 In terms of the divisions, Team seventeen revenues, despite the excellent new release performance from our four new titles in the period, H1 revenues declined 4%, mainly due to the back catalog. On Astracon, this was, this is where we saw the most significant decline of 35%, some of which is phasing between H1 and H2 for new releases and licensed deals and a reduction in lower margin physical sales revenue. And finally, StoryToys, revenue increased by 2% despite no new releases in the period. In H1 twenty twenty four, we had three. However, they released three thirty five app updates versus two forty two for h two of last year.

10:04 And subscriber numbers increased marginally from 320,000, in 2024 to 330,000 in h one twenty twenty five. Next slide, please. In terms of our revenue split, new release revenue increased, 40% and to £8,900,000 in H1 twenty twenty four, which was £6,300,000 due to an excellent performance at Team seventeen. StoryToys and Astragon new release pipelines are weighted to H2 twenty twenty five and back catalog revenue contributions was from over 140 titles. However, as previously mentioned, we saw a decline of 15% as last year was exceptionally strong.

10:52 The strong performance on first party revenues from Team seventeen offset by no new releases, from ASTRON, which resulted in a decline of 26% for the period versus H1 twenty twenty four. And despite the decline, community engagement remained strong, and we saw double digit growth in concurrent users. Finally, on this slide, third party revenue grew modestly to £47,200,000, with strong contribution from Dread, Blasphemous together with, the StoryToys portfolio. On gross profit, our gross profit increased by 2% to £33,700,000 versus £32,900,000 in H1 twenty twenty four.

11:43 The gross margin increased to 46.5% mainly due to no title impairments in H1 twenty twenty five. And just as a reminder, in H1 twenty twenty four, we booked £4,600,000 of title impairments. And timing of new releases also led to lower expense development costs, lower physical revenues, and finally royalties were flat versus H1 of last year. Just moving on to our adjusted EBITDA and EPS. The adjusted EBITDA remained broadly in line for the same period versus last year, though margins increased from 24.1% to 26.5%, reflecting higher gross margin.

12:30 Admin expenses declined 2% to GBP 20,400,000, driven by lower staff costs, marketing and depreciation and amortization, partially offset by higher FX cost. Acquisition related expense, adjustments declined from £7,200,000 to £5,700,000 due to an end of acquisition related incentive payments. And then finance, income increased to over 1,000,000 as we actively implemented a new treasury policy. The effective tax rate remains at circa 24%, and the adjusted EPS increased to 10.5. Capesize development cost on balance sheet, cash.

13:21 So there was an increase of, 2,700,000 predominantly driven by team seventeen, new titles, titles which we've already announced, which are sequels, for example, with Golf With Friends two and Hell Let Loose, Vietnam. That was the main driver behind the increase in cap debt, and then smaller much smaller increases on Ashtagon and Team seventeen. From a cash position, our closing cash, was 59,400,000, And I'm pleased to say there's been no significant change since post year end. And finally, as mentioned, earlier in the presentation, we are pleased to announce a 1p per share interim dividend. And with that, I'm going to pass back to Frank.

14:08 Thank you, Rashid. Before getting into the strategic progress, I thought I'd give you a few words on the market itself.

14:19 The 25% to '28 growth is expected to be at a 3% CAGR according to Newzoo overall. PC is actually growing 3.3%, a lot of that driven by China. And the console business is expected to grow by 4.7% CAGR over the next three years due to the recent successful launch of Switch two, the upcoming launch of Rogue Alive for Microsoft and the Unhealth sorry, and of course, the game everybody is expecting next year, which is GTA six. The indie market continues to perform well, and we see more indie games in the top top 50 sales, which means that there are some unbelievable return on investment for the winners.

15:12 I was at Gencom a couple of weeks ago, and you could feel an air of hope. Hope. That's my French. Okay. Fresh of hope. I've been around the industry for a few years. I've seen many ups and downs, and it generally felt like the industry were cautiously on the up again. So excited about the prospect of the industry overall because we're part of this, and we want everybody to win to be able to win ourselves. Now in terms of where we're heading in terms of our progress, next slide, we have, as we mentioned earlier, a number of first party product that we've already announced. We've got two from Astragon with Fire Fighting Ignite and Seafarer this year. In '26, we've got Hell Let's Loop Vietnam.

16:06 We've got Ranger's Path, Golf With Your Friends two. Bus Simulator '27 is the year after as the name indicates. And we're going to have more surprises for you coming soon. We're building a three year SKU plan and all our first party franchise are being scrutinized in order to increase visibility. It's really important for us. And as you're well aware, first party game generate better margin and the biggest long term value for the company. I would like to show you the, if you haven't seen it yet, the announced trailer for Hell Let Who's Vietnam. Product not yet rated.

18:21 Very excited about Hell Let Loose Vietnam. As

18:24 you know, Hell Let Loose was a very big successful game for us. We will make sure that we do not release at the time of GTA and before the craziness of the winter, so you can expect a release probably around the summer. In terms of new revenue stream providing levers for growth, in addition to our existing portfolio back catalog and republishing acquisition, we've got a number of opportunities. We've got a new label from Story Toys for kids slightly older. We haven't announced any games yet, but it should be pretty soon, and we're very excited about the potential. We have new platforms that we have recently announced, whether it's mobile streaming or next gen console.

19:16 We recently discussed

19:19 a Netflix deal that we did for StoryToys. I think you will think you will see quite a bit more of those in the next few months and years. In terms of M and A, we are actively looking for acquisition, whether it's quality IP or bigger, more scaled companies. We obviously are extremely cautious. There's a lot happening at the moment on the market. Activities is starting to show up heat up again, but we are very disciplined and we'll make sure that those acquisitions, if they take place, are accretive and they add value to the overall company. In terms of publishing rights, we continue to double down on this. It's a very secure way

20:10 to build predictability with strong ROI and a very strong leader for growth with a number of developers knocking at doors. In fact, you're going to see in a few seconds a video from Harley Hurwood, who is our Head of Product, who will discuss briefly with you what Packetalog strategy is. Hi. I'm Harley Homewood. I joined EVERPLAY back in 2024 as group director of product acquisition. My role is to evaluate interesting opportunities, not only for full acquisition, but also for publishing and any other opportunity to collaborate with great teams and exciting content.

21:01 EVERPLAY's acquisition strategy is focused on great content and talented teams. You know, we look for products and games that have not only been successful in their own right, but also that we believe have the potential to become, you know, long running, beloved, evergreen franchises. We have a strong track record with acquisitions from The Escapist, Golf With Your Friends, and Howl Let Loose in the IP space, to acquiring Storytoys and Astrogon, who are key businesses within the EVERPLAY GROUP. Things kicked off in half one this year with an IP acquisition of a franchise named Hammer Watch from a small indie studio called Crackshell who are based in Sweden. We bought Hammerwatch because not only had it been successful in the past, but we thought it was the kind of title that aligned very much with our values of small indie studios that have worked hard to create something sustainable.

21:51 We saw the the hard work that Crackshell had and the team had put into a fantastic game and a really strong community that they've built, and they created that over a number of years. And we believe that we can build on that success going forward. This year, we've also acquired distribution rights for three new titles, Settlement Survival, Operation Tango, and Heavenly Bodies. These are not only great games, but we believe they are a fantastic opportunity to bring in new revenue streams and, you know, build on our already substantial back catalog of high quality titles. And this just helps to maintain, you know, sustainable long term revenues and growth.

22:32 So the acquisition of Hammer Watch, Harley touched on it, very strong product with positive reviews generated already quite good revenue. We have a very disciplined capital deployment. We know that the strongest suit of EVERPLAY is its ability to manage lifetime cycle, cycle management, and we believe that we are going to be able to have a strong return on this IP. We also want to port this IP to console at some point, hopefully next year.

23:18 And we would, obviously, if it's a success as we expect, look into developing a Hammer Watch three for the future. So you could see how by acquiring an IP that is strong to start with at a very reasonable price, we can get a very strong return on investment. In terms of back catalog publishing rights, I'm not going to go into the details, but, again, it's additional revenue with a very predictable ROI and and margin accretion. Since Harley's video, we've acquired another five titles last week that you could see on the following slides. Storage Hunter, Underground Garage, Biker and Garage, Let's Go Nuts, and the other one is shipwreck.

24:15 So we are continuing to acquire a back catalog. We obviously have to make a choice at some point between acquiring IP and acquiring back catalog because our cash is only what it is. But we feel confident there's a lot of opportunity which are very strong way to secure our future. So the outlook, a few key messages here. Mid term, we're already excited delivering against our strategy. We continue to build our portfolio strategy by maximizing new games opportunity and minimizing risk with existing and newly acquired back catalog and cost control.

25:08 We have doubled down on our first IP strategy with 10 of them in development. We look for further growth both organically and through M and A, which started with the HammerWatch IP acquisition in H1. We continue to generate cash to support both our acquisition strategy and our progressive dividend policy. As for the full year, we are confident we will deliver based on the continued good performance to date. We expect new release revenue to be significantly higher in H2 and the same is true for license deals and the contribution from recent acquisitions. Our margin expansion from a more favorable mix sales mix should further boost EBITDA growth, hence our slight upgrade for the year.

25:58 Well, just thank you very much. As you could see, we are I think we're in a really good shape. More importantly, we are very much aware and we've got quite strong visibility for the years to come. So I feel very positive and I hope I've shared the excitement with you guys. Perfect, guys. If I may just jump back in there. Thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that have been submitted already, just like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can all be accessed via your investor dashboards. Guys, you can see that we have received a number of questions throughout your presentation, and thank you to all of those on the call for taking the time to submit their questions.

26:50 But, James, at this point, if I may just hand over to you just to share the q and a with the team. And if I pick up from you at the end, that'd be great. Thank you. Thanks, Jake, and thank you for everyone for submitting your questions. We'll kick off with a couple of kind of long term questions. What is the long term growth ambition of the business, And could you explain the long term competitive positioning? Hi, Ken. Good afternoon this time. The long term growth ambition is we want to continue to grow in a predictable manner steadily, I e, we do not want peaks and troughs, so we want to grow every year.

27:36 We would like to grow organically, but we will add and accelerate that growth through the right, m and a when it comes on. And the idea is to build scale, predict predictability, and we believe that both scale and credibility will bring additional goodwill and will make the company more valuable. That that's really where we are in terms of the ambitions. I I I would not I will not hide that. I would like to think that we could reach a 100,000,000 e adjusted EBITDA. And you can imagine, given that it's a bit more than double the consensus of this year, it's gonna have to be a mix of organic and m and a.

28:29 In terms of our long term competitive positioning, I think what we're building today is, first of all, the rebranding of EVERPLAY and the the three labels under EVERPLAY now with team seventeen, ASTRON and and STORY TOYS is making it very clear that we are present in different sectors of the business, reaching sometimes different audiences. But it importantly, each of the category we're in, we are kind of best in class and either leader or in the top leadership of each of these segments. So this is a a particular positioning where we are made of several verticals, and each of the verticals are doing very well and and and puts us in a position where you're quite quite unique within within the industry.

29:19 I I I can't see today many certainly in the indie business who've got this sort of positioning, and that's as clear as that. Thanks, Frank. Rashid, maybe one for you here. Given the pace of publishing rights acquisitions, should we expect a step up in CapEx and m and a spend in h two and FY twenty six? Thanks, Shane. So, yes, I mean, we have got plans for further, acquisitions in h two. So as Frank mentioned, during the presentation, there's a number of opportunities, and we are reviewing all of those opportunities. And we are expected to sign, hopefully, new things in h two, which will result in an increase in CapEx spend.

30:10 Again, just to remind everyone, last year, it was particularly low, especially as we went through an impairment, but, we are looking to increase this year, with a forecasted normalization, I would say, in terms of cap dev, around about 30,000,000 going forward. Thanks, Rashid. One on on the pipeline. Team seventeen's new release pipeline looks much stronger this year, particularly with Sworn and the upcoming switch two products. How do you see this team seventeen's division mix between premium titles and ongoing live service franchises evolving?

30:59 They're not mutually exclusive, obviously. Yes. We have a strong lineup and excited about that. Our own franchises and now franchisees that have a a life cycle that is way longer than it used to be in the part a few years ago. Big licenses today can last for ten years. In fact, 60% of our back catalog are sales represented by games that are five years old or plus. So it shows you how long the tail is and how important having live services where we can bring additional content or or downloadable, you know, or or new iteration is so important.

31:47 It's very expensive and risky to to to launch new games or and certainly, retention is always cheaper than acquisition. So nurturing our existing game is very important. We're happy that we got 10 of our of our own I first party IP in development, and therefore, we've got a strong visibility and ability to continue to grow over the next few years just by via first party alone. Thanks, Frank. Question and excuse me. Question on AI. How are we using how actively are we using AI to drive growth and efficiency at EVERPLAY? So AI is actually being used in many different parts of the business, more or less rapid speed.

32:40 But, you know, we usually you could use it for content creation, for design and gameplay, for testing and QA. There's many, many areas. We are probably more spending more time at the beginning in terms of workflow and productivity. So we're making sure until the these AI tools are refined sufficient you know, sufficiently refined that we know they are a 100% right, we're using it to basically be much more productive. We can do things in record time now. And as I said, it's whether it's in the legal department, in live ops, in monetization, in player relationship, QA is playing a more not QA.

33:27 AI is playing a more important role every day, and it's growing at the speed of light. I expect that it's going to allow us to make a lot of more content at at a for the same, you know, for for the same money, we'll be able to do a lot more, which means that we are gonna be capable of making better games, and we're still gonna be able to control the cost because of AI helping us in that direction. Thank you. Do you, do you does does the company have any, ambitions to move to the main market? Yeah. So, obviously, it's something that we have discussed as a board, but we have a a varied shareholder base.

34:19 Some of that shareholder base is, you know, IHT. So we have to be, I think, cautious. But from an you know, from we also need to be optimistic in terms of our own ambitions in terms of growing the business. So, absolutely, we'll continue to review, and maybe it's something that we'll consider at some point. But it's an active discussion, an open discussion, but no immediate plans to move to the main market. Thanks, Rashid. Well, actually, those are all the questions we have at this stage. So I will hand back to Frank for any closing remarks. About this year, but we're excited about the future in general, and we're excited about the industry.

35:15 And I just would like to thank you for your support. And, you know, if you've got any more questions going forward, don't hesitate. Feel free to write to us, and it will be a pleasure to answer. So yeah. On that note, I wish you a good weekend. Perfect, guys. That's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session? You will now be automatically redirected for the opportunity to provide your feedback in order the management team can only better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of management team of EVERPLAY GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.