Analyst Group Comments on the Recent Company Announcements

Trophy Games Development A/S (“Trophy Games” or the “Company”) recently announced new financial goals for the years 2021 and 2022. The Company estimates the revenue of 2021 will reach between DKK 41.0-42.0m which is DKK 3.9m lower than Analyst Groups estimated revenue for 2021E. This is due to the release of Warhammer AoS: Soul Arena being pushed forward to 2022 instead of Q4 2021, subsequently also pushing the revenue to next year. In addition, Trophy Games reported some issues regarding Pro11 which had some mid-year technical issues concerning in-app sales campaigns which caused a drop in performance. The Company estimate revenues in 2022 to be DKK 70.0-80.0m which is in line with Analyst Groups estimates of DKK 79.9m.

Trophy Games also reported that EBITDA for 2021 is estimated in a range of DKK 1.7-2.3m which is DKK 3.9m lower than our Base Scenario, this is mainly due to lower revenue and heavy investments in the transport series following the success of Airline Manager 4. Trophy Games also communicated that EBITDA for the year 2022 is estimated to DKK 4.0-8.0m, which is DKK 1.8m lower than our Base scenario due to continued heavy investments in both current and new games.

All in all, the investment thesis stands, and we iterate our Base scenario of DKK 9.1 per share due to Trophy Games having several interesting games already released and in their current pipeline. The Base scenario is derived by an EV/S multiple of 2.5x why our price has not changed. We see it as a good sign that the Company invests in the current game portfolio, which has proven to be profitable, rather than only acquiring top-line growth by acquiring new titles. Per the latest company announcement, the cash on hand amounted to DKK 42.0mn after the acquisition of Tiny Titan Studios, which gives the Company room to acquire additional titles and studios, which we see as highly probable.

Comments on the acquisition of Tiny Titan Studios

On the 15th of December 23, 2021 Trophy Games Development A/S (“Trophy Games” or the “Company”) entered into an agreement to acquire 100% of the shares in Tiny Titan Studios (“Tiny Titan”). Tiny Titans is a Canadian game development company building games targeted towards mobile devices, including the popular title Tiny Rails. The acquisition is expected to widen Trophy Games’ game portfolio for future growth and is completely in-line with Analyst Groups estimates, we iterate our Base scenario of DKK 9.1 per share.

Analyst Group are positive to see that Trophy Games has announced a new acquisition in line with their growth strategy. Tiny Titan will add DKK 2.8m of revenue to Trophy Games in 2021 but Analyst Group believe that Trophy Games can improve monetization further and use their expertise in Tiny Studios. We also deem that Tiny Titan fits well in the current portfolio of strategy games and that there is a good potential for synergy effects appearing not only long-term but also short-term. The acquisition is paid fully in cash, thus using the money raised in the IPO, as per their plain. We estimate that there will be additional acquisitions in the coming year.

In addition, on the 3rd of December, Trophy Games updated the release date for Warhammer AOS: Soul Arena and expects it to go live in January. The Company has reported that the release in tier 3 countries has progressed well, and the game is ready to be released globally.

Søren Gleie about the acquisition of Tiny Titan: “Tiny Titan has built a strong portfolio of popular arcade games with a positive cash flow which fits perfectly into our growth strategy. On Google Play alone, their games were downloaded organically a total of 796,757 times in the past 3 months. Tiny Titan is estimated to generate DKK 2.8m in revenue for the calendar year 2021. We believe that we can improve the monetization and make use of their assets to provide a solid revenue for years to come as well as it being an extra long-lasting game experience for the players in our game portfolio.”

Interview with CEO Søren Gleie

You have recently published that you will acquire 100 % of Tiny Titan Studios. Could you tell us some more about the company and what caught your interest in Tíny Titan?

With Tiny Titan studios especially the game Tiny Rails caught our eye. They have some quality assets with a very long lifetime getting high ratings and a huge amount of organic downloads but don’t earn very much. We believe we can improve the games KPIs across the board, and got them at a very good price even in the case we cannot.

In regard to future acquisitions, we have seen that both the acquisition of Xombat and Tiny Titan is within the same niche of games, is this what we can expect in the future as well?

We are definitely looking at games and studios with cross promotion potential with our current game portfolio.

What kind of potential do you see in Tiny Titan and what kind of synergy effects do you think will appear after the acquisition?

Integrating Tiny Titans games into our own organization will add some value in terms of having users install more of our games. Rewarded video ads in games give quite a low revenue, so being able to funnel users around in your own games first is of great value. Also just having an efficient organization geared for publishing and running a big game portfolio is something we have, compared to the rather small team that was running Tiny Titan Studios.

How would you summarize this year for Trophy Games?

A very exciting year. We have scaled the organization from 15 to 40 people, expanded our management and went public. We have two huge growth drivers other than acquisitions in terms of the Warhammer AoS: Soul Arena game and the transport manager series, as well as further scaling of Airline Manager. So all in all, we have never had better opportunities for growth than next year.

What can an investor expect of Trophy Games going forward?

Trophy Games has in 2021 been maintaining a very good growth rate and with 42m DKK cash at hand and no debt in a cash generating organization we have a lot of dry powder to pursue continuous growth. I think you can expect us to make good use of this, and actively follow the biggest growth opportunities without taking unnecessary risks.

Trophy Games Development A/S (“Trophy Games” or the “Company”) is a Danish game developer focused on challenging strategy games, currently showing a strong double-digit growth. The Company has had great success with developing so called football manager games and has now broadened its portfolio via the acquisition of Xombat ApS and the Airline Manager 4 (“AM4”) game, as well as the release of FIVE, an esports manager game, and the initiated global launch of the major IP-game Warhammer AoS S.A. In a Base scenario, Analyst Group estimates a revenue of DKK 79.9m in 2022, which based on an applied EV/S multiple of 2.5x yields a potential fair value of DKK 9.1 per share.