Comment on Trophy Games Annual Report

Today, on February 22, 2022, Trophy Games Development A/S (“Trophy Games” or the “Company”) released its annual report for 2021. The following are our comments and the key highlights from the report.

15 succeeding years of revenue growth 

2021 was the 15th consecutive year of increased revenue, resulting in a revenue growth of 35% from 2020. The number of active users increased by 63% from 65,434 in 2020 to 106,410 in 2021, and the number of total installations increased by 75% to 6.1m, resulting in growth both in installs and paying users exceeding the annual growth in revenue. The sports management series of games accounted for a revenue of DKK 30.1m for 2021, where the acquisitions of Xombat ApS and Tiny Titans Studios accounted for the remaining revenue of DKK 11.4m. Airline Manager is the year’s success story with a monthly revenue that grew 350% to reach DKK 1.2m by December 2021. Considering the postponed launch of the new game Warhammer: Soul Arena, Analyst Group is positive about the development and result of 2021 for the Company. Trophy Games’ strong pipeline of future games includes FIVE and multiple new releases in the transport games segment, enabling the potential for continued top-line growth.

Development of Operating Expenses Enables Long-Term Growth   

The EBITDA decreased from DKK 5.5m in 2020 to DKK 3.3m in 2021, resulting in a margin of 5.8% compared to 17.8% in 2020. A few underlying factors have impacted the EBITDA result. Trophy Games increased the headcount from 23 to 40 in 2021, resulting in an increase of DKK 2.0m in personnel costs, furthermore, the Company relocated to a new office earlier than planned, adding DKK 1.2m in extra costs. Additionally, Trophy Games acquired Xombat in 2021, with a revenue of DKK 0.3m in April. Trophy Games then invested in areas such as marketing, LiveOps, and data tracking, which increased the revenue to 2.2m in January 2021. Analyst Group believes that the development and investments in operating costs are aligned with our long-term growth potential and estimates of Trophy Games.

A Stable Cash Balance of DKK 37.7m Supports Trophy’s Acquisition Strategy

The acquisitions of Xombat and Tiny Titans Studios allow future expansion and create possibilities for Trophy Games to reach new users in new segments. The acquisition of Xombat furthermore allows Trophy Games to develop future titles based on the platform of Airline Manager. Plans include similar games in the transporting segment, which has proven to be an exciting market for future development. Trophy Games’ successful integration process and a strong cash balance give the Company strength to execute additional future acquisitions. Trophy Games estimates that future acquisitions will contribute with DKK 8-10m to the Company’s total revenues of 2022, which is in line with Analyst Group’s estimates.

To summarize, the result of 2021 is in line with our forecast, while successful integrations of acquisitions, combined with a stable cash position, facilitate the continued execution of the acquisition strategy. As the portfolio of games continues to expand into new segments, Analyst Group estimates a total revenue of DKK 79m in 2022, which is aligned with the company’s stated guidance.